Registration No. 33-______________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
RESIDENTIAL ASSET SECURITIES CORPORATION
(Exact name of registrant as
specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
51-0362653
(I.R.S. employer identification number)
8400 Normandale Lake Boulevard
Minneapolis, Minnesota 55437
(612) 832-7000
(Address, including zip code, and
telephone number, including area
code, of registrant's principle
executive offices)
Keenen W. Dammen, President
Residential Asset Securities Corporation
8400 Normandale Lake Boulevard
Minneapolis, Minnesota 55437
(612) 832-7000
(Name, address, including zip code,
and telephone number, including
area code, of agent for service)
Copies to:
Robert L. Schwartz, Esq.
General Counsel
GMAC Mortgage Corporation
3031 West Grand Boulevard
Detroit, Michigan 48232
Katharine I. Crost, Esq.
Orrick, Herrington & Sutcliffe
1285 Avenue of the Americas
New York, New York 10019
Stephen S. Kudenholdt, Esq.
Paul D. Tvetenstrand, Esq.
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
Approximate date of commencement of proposed sale to
the public: From time to time on or after the effective
date of this Registration Statement.
If the only securities being registered on this Form
are being offered pursuant to dividend or interest
reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this
Form are to be offered on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act of 1933,
other than securities offered only in connection with
dividend or interest plans, please check the following
box. [X]
CALCULATION OF REGISTRATION FEE
Proposed
Title of Maximum Proposed
Securities Offereing Maximum Amount of
being Amount to be Price Per Aggregate Registration
Registered Registered Unit Price Fee
Mortgage and $2,000,000,000 100% $2,000,000,000 $689,660
Manufactured
Housing
Contract
Pass-Through
Certificates
The Registrant hereby amends this Registration Statement
on such date or dates as may be necessary to delay its
effective date until the Registrant shall file a further
amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date
as the Commission, acting pursuant to said Section 8(a), may
determine.
SUBJECT TO COMPLETION, DATED DECEMBER 16, 1994
Version I-A
Prospectus Supplement
(to Prospectus dated _______ __, 199_)
RESIDENTIAL ASSET SECURITIES CORPORATION
Company
[Name of [Master] Servicer[s]]
[Master] Servicer
[Mortgage][Manufactured Housing Contract] Pass-Through
Certificates, Series [199_-_]
$______ ____% Class A-1 Certificates
$______ ____% Class A-2 Certificates
$______ 0% (1) Class A-4 Certificates
$ 0 Variable Rate(2) Class A-5 Certificates
$______ ____% Class R Certificates
$______ ____% Class M Certificates
______________________
(1) The Class A-4 Certificates will be Principal
Only Certificates and will not be entitled to received
distributions of interest.
(2) Based on the Notional Amount (as described
herein). The Class A-5 Certificates will be Stripped
Interests Certificates and will not be entitled to
receive distributions of principal.
______________________
The Series [199_-_] [Mortgage] [Manufactured Housing
Contract] Pass-Through Certificates (the
"Certificates") will include (i) six classes of senior
certificates (collectively, the "Senior Certificates"):
Class A-1, Class A-2, Class A-3 (the "Accrual
Certificates"), Class A-4 (the "Principal Only
Certificates"), Class A-5 (the "Stripped Interests
Certificates") and Class R (the "Residual
Certificates"); and (ii) two classes of subordinate
certificates: the Class M Certificates and the Class B
Certificates (collectively, the "Subordinate
Certificates"). Only the Senior Certificates (other
than the Accrual Certificates) and the Class M
Certificates (collectively, the "Offered Certificates")
are being offered hereby.
(continued on following page)
______________________
PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE
SOURCE OF PAYMENTS ON THE OFFERED CERTIFICATES. THE
OFFERED CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR
OBLIGATION OF THE COMPANY, THE [MASTER] SERVICER[S],
GMAC MORTGAGE CORPORATION ("GMAC MORTGAGE") OR ANY OF
THEIR AFFILIATES. NEITHER THE OFFERED CERTIFICATES NOR
THE UNDERLYING [MORTGAGE LOANS] [CONTRACTS] ARE INSURED
OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY [(EXCEPT IN THE CASE OF FHA [LOANS]
[CONTRACTS], AND VA [LOANS] [CONTRACTS])] OR BY THE
COMPANY, THE [MASTER] SERVICER[S], GMAC MORTGAGE OR ANY
OF THEIR AFFILIATES.
______________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
______________________
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT
PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
______________________
___________________________ (the "Underwriter") intends
to make a secondary market in the Offered Certificates
(other than the Residual Certificates and Class M
Certificates), but has no obligation to do so. There
can be no assurance that a secondary market for the
Offered Certificates will develop or, if it does
develop, that it will continue. The Offered
Certificates will not be listed on any securities
exchange.
The Offered Certificates will be purchased from the
Company by the Underwriter and will be offered by the
Underwriter from time to time to the public, directly
or through dealers, in negotiated transactions or
otherwise at varying prices to be determined at the
time of sale. The proceeds to the Company from the
sale of the Offered Certificates will be equal to ____%
of the initial aggregate principal balance of the
Offered Certificates, plus accrued interest thereon
from __________ 1, 19__ (the "Cut-off Date"), net of
any expenses payable by the Company to the Underwriter
and any dealer. The Offered Certificates are offered
by the Underwriter subject to prior sale, when, as and
if delivered to and accepted by the Underwriter and
subject to certain other conditions. The Underwriter
reserves the right to withdraw, cancel or modify such
offer and to reject any order in whole or in part. It
is expected that delivery of the Offered Certificates
will be made on or about __________, 199_ [at the
office of ________________________________________]
[through the facilities of The Depository Trust
Company] against payment therefor in immediately
available funds.
[The Principal Only Certificates, Stripped Interests
Certificates, Residual Certificates and Class M
Certificates may be offered by the Company from time to
time to the public, either directly or through an
underwriter or agent, in negotiated transactions or
otherwise at varying prices to be determined at the
time of sale[, except that a de minimis portion of the
Residual Certificate will be held by Residential
Funding and such portion is not offered hereby].
[Proceeds to the Company from the sale of the Principal
Only Certificates, Stripped Interest Certificates,
Residual Certificates or Class M Certificates will be
equal to the purchase price paid by the purchaser
thereof, net of any expenses payable by the Company and
any compensation payable to any underwriter or agent.]
[Name of Underwriter]
The date of this Prospectus Supplement is _________ __,
199_.
<PAGE>
(continued from previous page)
It is a condition to the issuance of the Offered
Certificates that the Senior Certificates and the Class
M Certificates be rated "___" and "___", respectively, by
____________ and "___" and "___", respectively, by
____________.
The Senior Certificates in the aggregate and the Class M
Certificates will evidence initial undivided interests of
approximately ____% and ____%, respectively, in a trust
fund (the "Trust Fund") consisting primarily of a pool of
[[fixed] [adjustable] rate [conventional] [FHA-insured]
[VA-guaranteed] one- to four-family, first lien mortgage
loans (the "Mortgage Loans")][manufactured housing
conditional sales contracts and installment loan
agreements (the "Contracts")] to be deposited by
Residential Asset Securities Corporation (the "Company")
into the Trust Fund. See "Description of the Trust Fund"
herein. As described herein and in the Prospectus, the
rights of the holders of the Class M Certificates and the
Class B Certificates to receive distributions with
respect to the [Mortgage Loans] [Contracts] will be
subordinate to the rights of the holders of the Senior
Certificates; in addition, the rights of the holders of
the Class B Certificates to receive distributions with
respect to the [Mortgage Loans] [Contracts] will be
subordinate to the rights of the holders of the Class M
Certificates. See "Description of the Offered
Certificates--Allocation of Losses; Subordination" herein.
As described herein, a "real estate mortgage investment
conduit" (a "REMIC") election will be made in connection
with the Trust Fund for federal income tax purposes.
Each class of Offered Certificates (other than the Class
R Certificates) will constitute "regular interests" and
the Class R Certificates will constitute "residual
interests" in the REMIC. See "Certain Federal Income Tax
Consequences" herein and in the Prospectus.
Distributions on the Offered Certificates will be made on
the 25th day of each month (or, if such day is not a
business day, the next business day), commencing on
__________, 199_. As described herein, interest
distributions on the Offered Certificates will be based
on the Certificate Principal Balance or the Notional
Amount thereof and the then-applicable Pass-Through Rate
thereof, which will be variable for the Stripped
Interests Certificates and fixed for all other classes of
Certificates. Distributions in respect of principal will
be allocated among the various classes of the Offered
Certificates as described herein under "Description of
the Offered Certificates."
The yield to maturity on the Offered Certificates will
depend on the rate of payment of principal (including
prepayments, defaults and liquidations) on the [Mortgage
Loans] [Contracts]. The yield to maturity on the Class
M Certificates will be extremely sensitive to losses due
to defaults on the [Mortgage Loans] [Contracts] (and the
timing thereof), to the extent losses are not covered by
the Class B Certificates. The yield to investors on the
Offered Certificates will be adversely affected by any
shortfalls in interest collected on the [Mortgage Loans]
[Contracts] due to prepayments, liquidations or
otherwise. Shortfalls in interest collected on the
[Mortgage Loans] [Contracts] due to prepayments in full
will be offset by the [Master] Servicer[s] to the extent
described herein. The yield to investors on the Stripped
Interests Certificates will be [extremely] sensitive to
the rate and timing of principal payments (including
prepayments, defaults and liquidations) on the [Mortgage
Loans] [Contracts], which rate may fluctuate
significantly over time. A rapid rate of principal
payments on the [Mortgage Loans] [Contracts] could result
in the failure of investors in the Stripped Interests
Certificates to recover their initial investments.
Because amounts payable with respect to the Principal
Only Certificates are derived only from principal
payments on the [Mortgage Loans] [Contracts] with Net
Mortgage Rates that are lower than ____%, the yield on
the Principal Only Certificates will be adversely
affected by slower than expected payments of principal on
such [Mortgage Loans] [Contracts]. See "Summary--Special
Prepayment Considerations" and "--Special Yield
Considerations," and "Certain Yield and Prepayment
Considerations" herein and "Yield Considerations" in the
Prospectus.
______________________
THE CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT
CONSTITUTE PART OF A SEPARATE SERIES OF CERTIFICATES
BEING OFFERED BY THE COMPANY PURSUANT TO ITS PROSPECTUS
DATED __________ __, 199_, OF WHICH THIS PROSPECTUS
SUPPLEMENT IS A PART AND WHICH ACCOMPANIES THIS
PROSPECTUS SUPPLEMENT. THE PROSPECTUS CONTAINS IMPORTANT
INFORMATION REGARDING THIS OFFERING NOT CONTAINED HEREIN
AND PROSPECTIVE INVESTORS ARE URGED TO READ THE
PROSPECTUS AND THIS PROSPECTUS SUPPLEMENT IN FULL. SALES
OF THE OFFERED CERTIFICATES MAY NOT BE CONSUMMATED UNLESS
THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS.
______________________
UNTIL [_____ __, 199_ (90 DAYS AFTER THE DATE OF THIS
PROSPECTUS SUPPLEMENT)], ALL DEALERS EFFECTING
TRANSACTIONS IN THE OFFERED CERTIFICATES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO
WHICH IT RELATES. THIS DELIVERY REQUIREMENT IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS
OR SUBSCRIPTIONS.
______________________
[IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR
MAINTAIN THE MARKET PRICE OF THE OFFERED CERTIFICATES AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET, SUCH STABILIZATION, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.]
<PAGE>
SUMMARY
The following summary is qualified in its entirety
by reference to the detailed information appearing
elsewhere herein and in the Prospectus. Capitalized
terms used herein and not otherwise defined herein have
the meanings assigned in the Prospectus.
Title of
Securities [Mortgage] [Manufactured Housing
Contract] Pass-Through Certificates,
Series [199_-_] (the "Certificates").
Company. . . . . . . . Residential Asset Securities Corporation,
a corporation organized under the laws of
the State of Delaware, an affiliate of
Residential Funding Corporation
("Residential Funding"), which is an
indirect wholly-owned subsidiary of GMAC
Mortgage. See "The Company" in the
Prospectus.
[Master]
Servicer[s] [Residential Funding (the "Master
Servicer")] [__________, a __________,
organized under the laws of __________
(the "Servicer[s])]. See "Pooling and
Servicing Agreement--The [Master]
Servicer[s]" herein [and "Residential
Funding Corporation" in the Prospectus.]
Trustee. . . . . . . . , a [national bank]
[[state bank] [trust company] organized
under the laws of __________] (the
"Trustee").
Cut-off Date ____________ 1, 199_ (the "Cut-off
Date").
Delivery Date On or about ____________, 19__ (the
"Delivery Date").
Distribution
Date The 25th day of each month (or, if such
day is not a business day, the next
business day), beginning on ________ __,
199_, (each, a "Distribution Date").
The [Mortgage]
[Contract]
Pool The Certificates, in the aggregate, will
evidence the entire beneficial interest
in the Trust Fund which consists of a
pool of [Mortgage Loans secured by first
liens on one- to four-family residential
properties] [Contracts secured by
manufactured homes] (the "Mortgaged
Properties") and related property
(collectively, the "Mortgage Collateral")
with an aggregate principal balance of
$__________. The Mortgage Collateral
will be conveyed to the Trust Fund by the
Company pursuant to the Pooling and
Servicing Agreement (as defined herein).
The [Mortgage Loans] [Contracts] are
[fixed] [adjustable] rate [conventional]
[FHA-insured] [VA-guaranteed] [fully
amortizing] [balloon] loans. [The
Mortgage Loans are ARM Loans (as
described in the Prospectus under "The
Trust Fund--The Mortgage Loans") with
Mortgage Rates based on __________ (the
"Index").]
The Mortgage Properties have individual
principal balances at origination of at
least $__________, but not more than
$__________, with an average principal
balance at origination of approximately
$__________. The [Mortgage Loans]
[Contracts] have terms to maturity from
the date of origination or modification
of not more than ____ years, and a
weighted average remaining term to
maturity of approximately ____ months as
of the Cut-off Date. The [Mortgage
Loans] [Contracts] will bear interest at
Mortgage Rates that ranged of from ____%
to ____% per annum as of the Cut-off
Date, with a weighted average Mortgage
Rate of approximately ____% per annum as
of the Cut-off Date. [Approximately
____% of the [Mortgage Loans] [Contracts]
will be refinance [Mortgage Loans]
[Contracts].] The [Mortgage Loans]
[Contracts] were purchased by the
Company[, through [Residential Funding]
[affiliates,]] from [____ sellers
unaffiliated with the Company] [GMAC
Mortgage, an indirect parent of the
Company, and its affiliates].
[[All][____%] of the [Mortgage Loans]
were purchased by the Company indirectly
through [Residential
Funding][affiliates], from [___ sellers]
[_______] ([each, a] [the] "Mortgage
Collateral Seller") under the AlterNet
Mortgage Program (such Mortgage Loans,
the "AlterNet Program Loans"). [INSERT
OTHER CHARACTERISTICS AS APPROPRIATE]
See "Description of the [Mortgage]
[Contract] Pool" herein and "The Trust
Funds" in the Prospectus.
The Offered
Certificates The Senior Certificates in the aggregate
and the Class M Certificates will
evidence initial undivided interests of
approximately ____% and ____%,
respectively, in the Trust Fund. The
Offered Certificates will have the
following Pass-Through Rates and
Certificate Principal Balances as of the
Cut-off Date:
Class A-1 Certificates ____% $_______ Senior
Class A-2 Certificates ____% $_______ Senior
Class A-4 Certificates 0% $_______ Principal Only
Class A-5 Certificates Variable Rate $ 0 Stripped
Interests
Class R Certificates ____% $_______ Residual
Class M Certificates ____% $_______ Mezzanine
Pass-Through
Rates on the
Offered
Certificates The Pass-Through Rates on all classes of
the Offered Certificates (other than the
Principal Only Certificates, which are
not entitled to distributions of
interest, and the Stripped Interests
Certificates) are the fixed rates set
forth above.
On each Distribution Date, the
Pass-Through Rate on the Stripped
Interests Certificates will equal the
weighted average of the Pool Strip Rates
on each [Mortgage Loan] [Contract] with a
Net Mortgage Rate in excess of ____% per
annum. The "Pool Strip Rate" on each
[Mortgage Loan] [Contract] is equal to
the Net Mortgage Rate thereon minus
____%. The "Net Mortgage Rate" on each
[Mortgage Loan] [Contract] is equal to
the Mortgage Rate thereon minus the rate
per annum at which the related servicing
fee accrues (the "Servicing Fee Rate").
The Pool Strip Rates on the [Mortgage
Loans] [Contracts] range from ____% to
____% per annum. The initial
Pass-Through Rate on the Stripped
Interests Certificates is approximately
____% per annum. The Stripped Interests
Certificates have no Certificate
Principal Balance and will accrue
interest at the then-applicable Pass-
Through Rate on the Notional Amount. The
"Notional Amount" of the Stripped
Interests Certificates as of any date of
determination will be equal to the
aggregate Certificate Principal Balance
of the Certificates of all classes as of
such date.
[The Pass-Through Rate applicable to the
Offered Certificates for any Distribution
Date will equal the weighted average of
the Net Mortgage Rates on the [Mortgage
Loans] [Contracts] as of the Due Date in
the month preceding the month in which
such Distribution Date occurs. The Net
Mortgage Rate with respect to each
[Mortgage Loan] [Contract] as of the Cut-
off Date will be set forth in the
[Mortgage Loan] [Contract] Schedule
attached to the Pooling and Servicing
Agreement. As of the Cut-off Date, the
weighted average Net Mortgage Rate is
[______]% per annum. The Net Mortgage
Rate on each [Mortgage Loan] [Contract]
will be adjusted on each Adjustment Date
to equal the Index (rounded to the
nearest multiple of [_____]%) plus a
fixed percentage per annum for each
[Mortgage Loan] [Contract] as set forth
in the [Mortgage Loan] [Contracts]
Schedule attached to the Pooling and
Servicing Agreement (the "Gross Margin"),
subject to the Periodic Rate Cap, Maximum
Net Mortgage Rate and Minimum Net
Mortgage Rate (each as defined herein)
for such [Mortgage Loan] [Contract]. The
Gross Margins for the [Mortgage Loans]
[Contracts] will be at least [____]% per
annum but not more than [____]% per annum
as of the Cut-off Date, with an initial
weighted average Gross Margin of
[______]% per annum. The Net Mortgage
Rate on each Converted [Mortgage Loan]
[Contract] remaining in the [Mortgage]
[Contract] Pool will equal the Mortgage
Rate thereon less [____]% per annum.]
[The Pass-Through Rate on the Offered
Certificates on the first Distribution
Date will be [______]% per annum, and is
expected to change thereafter because the
weighted average of the Net Mortgage
Rates is expected to change for
succeeding Distribution Dates.]
The Class B
Certificates The Class B Certificates have an
aggregate initial Certificate Principal
Balance of approximately $__________,
evidencing an initial undivided interest
of approximately ____% in the Trust Fund,
and a Pass-Through Rate of ____% per
annum. The Class B Certificates are not
being offered hereby. [The Company
expects that the Class B Certificates
will be privately placed directly or
indirectly with one or more institutional
investors.]
Accrual
Certificates The Accrual Certificates have an initial
Certificate Principal Balance of
$___________ and a Pass-Through Rate
equal to ____% per annum. The Accrual
Certificates are not being offered
hereby.
Interest
Distributions Holders of each class of Offered
Certificates (the "Certificateholders")
(other than the holders of the Principal
Only Certificates) will be entitled to
receive distributions in an amount equal
to the Accrued Certificate Interest on
such class on each Distribution Date (i)
in the case of each class of Senior
Certificates, to the extent of the
Available Distribution Amount (as defined
herein) for such Distribution Date except
as otherwise set forth herein (in the
aggregate, the "Senior Interest
Distribution Amount") and (ii) in the
case of the Class M Certificates, to the
extent of the Available Distribution
Amount for such Distribution Date after
(a) distributions of interest and
principal to the holders of the Senior
Certificates and (b) reimbursement of
certain Advances (as defined herein) to
the [Master] Servicer[s].
With respect to any Distribution Date,
"Accrued Certificate Interest" will be
equal to (a) in the case of each class of
Offered Certificates (other than the
Principal Only Certificates and the
Stripped Interests Certificates), one
month's interest accrued on the
Certificate Principal Balance of such
class, at the Pass-Through Rate on such
class, and (b) in the case of the
Stripped Interests Certificates, one
month's interest accrued on the Notional
Amount thereof at the Pass-Through Rate
on such class for such Distribution Date;
in each case less any interest shortfalls
not covered with respect to such class by
Subordination (as defined herein) or by
the [Master] Servicer[s] (as described
below), including any Prepayment Interest
Shortfall (as defined herein), to the
extent allocated thereto for such
Distribution Date. The Principal Only
Certificates are not entitled to receive
any distribution of interest.
Principal
Distributions On each Distribution Date, to the extent
of the portion of the Available
Distribution Amount remaining after the
Senior Interest Distribution Amount is
distributed, holders of the Principal
Only Certificates will be entitled to
receive a distribution allocable to
principal (the "Class A-4 Principal
Distribution Amount") that will include
(i) the applicable Discount Fraction (as
defined below) of scheduled principal
payments due on or, after the Credit
Support Depletion Date, received with
respect to each item of Discount Mortgage
Collateral (as defined below), (ii) the
applicable Discount Fraction of the
principal portion of any unscheduled
collections (other than those received in
connection with a Final Disposition
described in clause (iii) below) on each
item of Discount Mortgage Collateral,
including prepayments, repurchases,
Liquidation Proceeds and Insurance
Proceeds, to the extent applied as
recoveries of principal, and (iii) in
connection with the Final Disposition (as
defined herein) of an item of Mortgage
Collateral that occurs prior to the
Credit Support Depletion Date and that
did not result in any Excess Special
Hazard Losses, Excess Bankruptcy Losses,
Excess Fraud Losses or Extraordinary
Losses (each as defined herein), an
amount equal to the applicable Discount
Fraction of the Stated Principal Balance
of such item of Discount Mortgage
Collateral, subject to the limitations
set forth herein.
"Discount Mortgage Collateral" is any
[Mortgage Loan][Contract] with a Net
Mortgage Rate less than [____]%. With
respect to each item of Discount Mortgage
Collateral, the "Discount Fraction"
thereof is equal to a fraction the
numerator of which is [____]% minus the
Net Mortgage Rate for such [Mortgage
Loan][Contract] and the denominator of
which is [____]%. The [Mortgage Loans]
[Contracts] that do not constitute
Discount Mortgage Collateral are referred
to herein as the "Non-Discount Mortgage
Collateral."
On each Distribution Date, to the extent
of the portion of the Available
Distribution Amount remaining after the
Senior Interest Distribution Amount and
Class A-4 Principal Distribution Amount
are distributed, holders of the Senior
Certificates (other than Principal Only
Certificates and the Stripped Interests
Certificates) will be entitled to receive
a distribution allocable to principal in
the manner and priority set forth herein.
See "Description of the
Certificates--Principal Distributions"
herein.
Distributions in respect of principal of
the Senior Certificates on any
Distribution Date will be allocated to
the classes then entitled to such
distributions, as described herein. See
"--Special Prepayment Considerations" and
"--Special Yield Considerations" and
"Certain Yield and Prepayment
Considerations" herein. The Stripped
Interests Certificates will not receive
any principal distributions.
On each Distribution Date, holders of the
Class M Certificates will be entitled to
receive a distribution of principal to
the extent of the portion of the
Available Distribution Amount remaining
after (i) distributions in respect of
interest and principal to the holders of
the Senior Certificates, (ii)
reimbursements for certain Advances to
the [Master] Servicer[s], and (iii)
distributions in respect of interest to
the holders of the Class M Certificates.
Such principal distributions will be made
to the Class M Certificates in the
respective amounts described herein.
[Advances. . . . . . . The [Master] Servicer[s] [is] [are]
required to make advances ("Advances") in
respect of delinquent payments of
principal and interest on the [Mortgage
Loans] [Contracts] subject to the
limitations described herein. See
"Description of the
Certificates--Advances" herein.]
Allocation of Losses;
Subordination Subject to the limitations set forth
below, Realized Losses (as defined
herein) on the [Mortgage Loans]
[Contracts] will be allocated as follows:
first, to the Class B Certificates;
second, to the Class M Certificates
until, in each case, the Certificate
Principal Balance of each such class has
been reduced to zero; and thereafter, if
any such Realized Loss is on Discount
Mortgage Collateral, to the Principal
Only Certificates in an amount equal to
the related Discount Fraction of the
principal portion of such Realized Loss,
and the remainder of such Realized Losses
and the entire amount of such Realized
Losses on Non-Discount Mortgage
Collateral to the remaining classes of
Senior Certificates on a pro rata basis,
as described herein. The Subordination
provided to the Senior Certificates by
the Class B Certificates and Class M
Certificates and the Subordination
provided to the Class M Certificates by
the Class B Certificates will cover
Realized Losses on the [Mortgage Loans]
[Contracts] that are Defaulted Mortgage
Losses, Fraud Losses, Bankruptcy Losses
and Special Hazard Losses up to the
limits set forth below. The aggregate
amounts of Realized Losses which may be
allocated by means of Subordination to
cover Fraud Losses, Bankruptcy Losses and
Special Hazard Losses Defaulted Mortgage
Losses, are initially limited to
$[_________], $[________] and
$[_________], respectively.] [All of the
foregoing amounts are subject to periodic
reduction as described herein and may be
further reduced.]
If the Certificate Principal Balances of
the Class B Certificates and Class M
Certificates are reduced to zero, all
additional losses (including, without
limitation, all Defaulted Mortgage
Losses, Special Hazard Losses, Fraud
Losses and Bankruptcy Losses) will be
allocated among the Senior Certificates
pro rata, as more fully described herein.
In addition, any Special Hazard Losses,
Fraud Losses and Bankruptcy Losses in
excess of the respective amounts of
coverage therefor and any Extraordinary
Losses on any items of Non-Discount
Mortgage Collateral will be allocated on
a pro rata basis among the Senior
Certificates (other than the Principal
Only Certificates), Class M Certificates
and Class B Certificates. The principal
portion of such losses on items of
Discount Mortgage Collateral will be
allocated to the Principal Only
Certificates in an amount equal to the
related Discount Fraction thereof, and
the remainder of such losses on Discount
Mortgage Collateral will be allocated
among the remaining Certificates on a pro
rata basis as described above. See
"Description of the
Certificates--Allocation of Losses;
Subordination" herein.
Neither the Offered Certificates nor the
[Mortgage Loans] [Contracts] are insured
or guaranteed by any governmental agency
or instrumentality [(except in the case
of [FHA] [VA] [Loans [Contracts])] or by
the Company, the [Master] Servicer[s],
GMAC Mortgage or any affiliate thereof.
[Optional
Termination At its option, on any Distribution Date
when the aggregate principal balance of
the [Mortgage Loans] [Contracts] is less
than ___% of the aggregate principal
balance of the [Mortgage Loans]
[Contracts] as of the Cut-off Date, the
[Master] Servicer[s] or the Company may
(i) purchase all remaining Mortgage
Collateral from the Trust Fund and other
assets thereof, and thereby effect early
retirement of the Certificates or (ii)
purchase in whole, but not in part, the
Certificates. See "The Pooling and
Servicing Agreement--Termination" herein
and "The Pooling and Servicing
Agreement--Termination; Retirement of
Certificates" in the Prospectus.]
Special Prepayment
Considerations The rate of principal payments on the
Offered Certificates, collectively, will
depend on the rate and timing of
principal payments (including
prepayments, defaults and liquidations)
on the Mortgage Collateral. As is the
case with mortgage-backed securities
generally, the Offered Certificates are
subject to substantial inherent cash-flow
uncertainties because any of the
[Mortgage Loans] [Contracts] may be
prepaid at any time. Generally, when
prevailing mortgage interest rates are
increasing, prepayment rates on [mortgage
loans] [manufactured housing contracts]
tend to decrease, resulting in a reduced
return of principal to investors at a
time when reinvestment at such higher
prevailing rates would be desirable.
Conversely, when prevailing mortgage
interest rates are declining, prepayment
rates on [mortgage loans] [manufactured
housing contracts] tend to increase,
resulting in a greater return of
principal to investors at a time when
reinvestment at comparable yields may not
be possible.
[Certain types of [Mortgage Loans]
[Contracts] included in the [Trust Fund]
have characteristics that may make them
more likely to default than other
[mortgage loans] [manufactured housing
contracts]. [CHARACTERISTICS OF MORTGAGE
COLLATERAL THAT MAY POSE INCREASED RISKS
OF DEFAULT TO BE INSERTED AS NECESSARY.]
[Such [Mortgage Loans] [Contracts] pose a
greater risk of default and liquidation
than might otherwise be expected by
investors in the Certificates. See
"Special Considerations" herein.]
The multiple class structure of the
Offered Certificates results in the
allocation of prepayments among certain
classes as follows [TO BE INCLUDED AS
APPROPRIATE]:
[Sequentially paying classes: [All]
classes of the Senior Certificates are
subject to various priorities for payment
of principal as described herein.
Distributions on classes having an
earlier priority of payment will be
immediately affected by the rate of
prepayment of the [Mortgage Loans]
[Contracts] early in the life of the
[Mortgage] [Contract] Pool.
Distributions on classes with a later
priority of payment will not be directly
affected by the rate of prepayment until
such time as principal is distributable
on such classes; however, the timing of
commencement of principal distributions
and the weighted average lives of such
classes will be affected by the rate of
prepayment experienced both before and
after the commencement of principal
distributions on such classes.]
[PAC Certificates: Principal
distributions on the PAC Certificates
will be payable in amounts determined
based on schedules as described herein,
provided that the rate of prepayment of
the [Mortgage Loans] [Contracts] each
month remains between approximately ____%
SPA (as defined herein) and ____% SPA.
However, as discussed herein, actual
principal distributions may be greater or
less than the described amounts. If the
rate of prepayment of the [Mortgage
Loans] [Contracts] is consistently higher
than ____% SPA, then the Companion
Certificates will be retired before all
of the PAC Certificates are retired, and
the rate of principal distributions and
the weighted average lives of the
remaining PAC Certificates will become
significantly more sensitive to changes
in the rate of prepayment of the
[Mortgage Loans] [Contracts] and
principal distributions thereon will be
more likely to deviate from the described
amounts.]
[TAC Certificates: Principal
distributions on the TAC Certificates
would be payable in amounts determined
based on schedules as described herein,
if the rate of prepayment of the
[Mortgage Loans] [Contracts] were to
remain at a constant level of
approximately ____% SPA. However, as
discussed herein, actual principal
distributions are likely to deviate from
the described amounts, because it is
unlikely that the actual rate of
prepayment of the [Mortgage Loans]
[Contracts] each month will remain at or
near ____% SPA. If the Companion
Certificates are retired before all of
the TAC Certificates are retired, the
rate of principal distributions and the
weighted average lives of the remaining
TAC Certificates will become
significantly more sensitive to changes
in the rate of prepayment of the
[Mortgage Loans] [Contracts], and
principal distributions thereon will be
more likely to deviate from the described
amounts.]
[Companion Certificates: Because of the
application of amounts available for
principal distributions among the Senior
Certificates in any given month, first to
the [PAC] [TAC] Certificates up to the
described amounts and then to the
Companion Certificates, the rate of
principal distributions and the weighted
average lives of the Companion
Certificates will be extremely sensitive
to changes in the rate of prepayment of
the [Mortgage Loans] [Contracts]. The
weighted average lives of the Companion
Certificates will be significantly more
sensitive to changes in the rate of
prepayment than that of either the [PAC]
[TAC] Certificates or a fractional
undivided interest in the [Mortgage
Loans] [Contracts].]
[Subordination features: As described
herein, during certain periods all or a
disproportionately large percentage of
principal prepayments on the [Mortgage
Loans] [Contracts] will be allocated
among the Senior Certificates, and during
certain periods no such prepayments or,
relative to the related Class M
Percentage, a disproportionately small or
large percentage of such prepayments will
be distributed to the Class M
Certificates. To the extent that no such
prepayments are distributed on the Class
M Certificates, the Subordination
afforded to the Senior Certificates by
the Class M Certificates (together with
the Class B Certificates), in the absence
of offsetting Realized Losses allocated
thereto, will be increased.]
See "Description of the
Certificates--Principal Distributions on
the Senior Certificates," "--Principal
Distributions on the Class M
Certificates" and "Certain Yield and
Prepayment Considerations" herein, and
"Maturity and Prepayment Considerations"
in the Prospectus. For further
information regarding the effect of
principal prepayments on the weighted
average lives of the Offered Certificates
(other than the Stripped Interests
Certificates), see the table entitled
"Percentage of Initial Certificate
Balance Outstanding at the Following
Percentages of SPA" herein.
Special Yield
Considerations The yield to maturity on each respective
class of the Offered Certificates will
depend on the rate and timing of
principal payments (including payments
due to prepayments, defaults and
liquidations) on the [Mortgage Loans]
[Contracts] and the allocation thereof
(and of any losses on the [Mortgage
Loans] [Contracts]) to reduce the
Certificate Principal Balance or Notional
Amount of such class, as well as other
factors such as the Pass-Through Rate
(and, in the case of the Stripped
Interests Certificates, any adjustments
thereto) and the purchase price for such
Certificates. The yield to investors on
any class of Offered Certificates may be
adversely affected by any allocation
thereto of Prepayment Interest Shortfalls
on the [Mortgage Loans] [Contracts],
which shortfalls are expected to result
from distribution of interest to the date
of prepayment only (rather than a full
month's interest) in connection with
prepayments in full and the lack of any
distribution of interest on the amount of
any partial prepayments. Prepayment
Interest Shortfalls resulting from
principal prepayments in full in a
calendar month will not adversely affect
the yield to investors in the Offered
Certificates to the extent such
Prepayment Interest Shortfalls do not
exceed the Servicing Fee for such month.
In general, if a class of Offered
Certificates is purchased at a premium
and principal distributions thereon occur
at a rate faster than anticipated at the
time of purchase, the investor's actual
yield to maturity will be lower than that
assumed at the time of purchase.
Conversely, if a class of Offered
Certificates is purchased at a discount
and principal distributions thereon occur
at a rate slower than that assumed at the
time of purchase, the investor's actual
yield to maturity will be lower than that
originally anticipated.
The Senior Certificates were structured
based on a number of assumptions,
including a prepayment assumption of
____% SPA and weighted average lives
corresponding thereto as set forth herein
under "--Special Prepayment
Considerations." The yield assumptions
for the respective classes that are to be
offered hereunder will vary as determined
at the time of sale.
The multiple class structure of the
Offered Certificates causes the yield of
certain classes to be particularly
sensitive to changes in the rate of
prepayment of the [Mortgage Loans]
[Contracts] and other factors, as follows
[TO BE INCLUDED AS APPROPRIATE]:
[Principal Only Certificates: Generally,
the amounts payable with respect to the
Principal Only Certificates are derived
only from principal payments on the
Discount Mortgage Collateral. As a
result, the yield on the Principal Only
Certificates will be adversely affected
by slower than expected payments of
principal (including prepayments,
defaults and liquidations) on the
Discount Mortgage Collateral. Because
the Discount Mortgage Collateral have
lower Net Mortgage Rates than the
Non-Discount Mortgage Collateral, and
because the Mortgage Collateral with
lower Net Mortgage Rates are likely to
have lower Mortgage Rates, the Discount
Mortgage Collateral are generally likely
to prepay at a slower rate than the
Non-Discount Mortgage Collateral. See
"Certain Yield and Prepayment
Considerations," especially "--Principal
Only Certificate and Stripped Interests
Certificate Yield Considerations"
herein.]
[Interest strip and inverse floater
classes: The yield to investors on the
Class [_] Certificates will be extremely
sensitive to the rate and timing of
principal payments on the Mortgage
Collateral (including prepayments,
defaults and liquidations), which may
fluctuate significantly over time. A
rapid rate of principal payments on the
[Mortgage Loans] [Contracts] could result
in the failure of investors in the Class
[_] Certificates to recover their initial
investments, and a slower than
anticipated rate of principal payments on
the [Mortgage Loans] [Contracts] could
adversely affect the yield to investors
on the Class [_] Certificates.]
[Stripped Interests Certificates: In
addition to the foregoing, the yield on
the Stripped Interests Certificates will
be materially adversely affected to a
greater extent than the yields on the
other Senior Certificates if the
[Mortgage Loans] [Contracts] with higher
Mortgage Rates prepay faster than the
[Mortgage Loans] [Contracts] with lower
Mortgage Rates, because holders of the
Stripped Interests Certificates generally
have rights to relatively larger portions
of interest payments on the [Mortgage
Loans] [Contracts] with higher Mortgage
Rates than on [Mortgage Loans]
[Contracts] with lower Mortgage Rates.]
[Adjustable rate (including inverse
floater) classes: The yield on the Class
[_] Certificates will be sensitive, and
the yield on the Class [_] Certificates
will be extremely sensitive, to
fluctuations in the level of the Index.
The Pass-Through Rate on the Class [_]
Certificates will vary inversely with,
and at a multiple of, the Index.]
[Inverse floater companion classes: In
addition to the foregoing, in the event
of relatively low prevailing interest
rates (including the Index) and
relatively high rates of principal
prepayments over an extended period,
while investors in the [identify inverse
floater companion classes] may then be
experiencing a high current yield on such
Certificates, such yield may be realized
only over a relatively short period, and
it is unlikely that such investors would
be able to reinvest such principal
prepayments on such Certificates at a
comparable yield.]
[Certificates with Subordination
features: The yield to maturity on the
Class M Certificates will be extremely
sensitive to losses due to defaults on
[Mortgage Loans] [Contracts] (and the
timing thereof) after the Certificate
Principal Balance of the Class B
Certificates has been reduced to zero,
because the entire amount of such losses
will be allocable to the Class M
Certificates, as described herein.
Furthermore, as described herein, the
timing of the receipt of principal and
interest by the Class M Certificates may
be adversely affected by losses on the
[Mortgage Loans] [Contracts] even if such
class does not ultimately bear such
loss.]
[Residual Certificates: Holders of the
Residual Certificates are entitled to
receive distributions of principal and
interest as described herein; however,
holders of such Certificates may have tax
liabilities with respect to their
Certificates during the early years of
their term that substantially exceed the
principal and interest payable thereon
during such periods. In addition, such
distributions will be reduced to the
extent that they are subject to United
States federal income tax withholding.]
See "Certain Yield and Prepayment
Considerations" herein.
Certain Federal
Income Tax
Consequences [An election will be made to treat the
Trust Fund as a "real estate mortgage
investment conduit" (a "REMIC") for
federal income tax purposes. Upon the
issuance of the Offered Certificates,
[Orrick, Herrington & Sutcliffe] [Thacher
Proffitt & Wood], New York, New York,
counsel to the Company, will deliver its
opinion generally to the effect that,
assuming compliance with all provisions
of the Pooling and Servicing Agreement,
will each qualify as a REMIC under
Sections 860A through 860G of the
Internal Revenue Code of 1986 (the
"Code").]
[Additional Tax Consequences to be
included as Appropriate]
For further information regarding the
federal income tax consequences of
investing in the Offered Certificates,
see "Certain Federal Income Tax
Consequences" herein and in the
Prospectus.
ERISA
Considerations [ERISA CONSIDERATIONS TO BE INCLUDED AS
NECESSARY] See "ERISA Considerations"
[herein and] in the Prospectus.
Ratings. . . . . . . . It is a condition of the issuance of the
Senior Certificates and the Class M
Certificates that they be rated "___" and
"___", respectively, by
________________________ and "___" and
"___", respectively, by
_________________________. A security
rating is not a recommendation to buy,
sell or hold securities and may be
subject to revision or withdrawal at any
time by the assigning rating
organization. A security rating does not
address the frequency of prepayments of
the [Mortgage Loans] [Contracts], or the
corresponding effect on yield to
investors. The rating of the Stripped
Interests Certificates does not address
the possibility that the holders thereof
may fail to fully recover their initial
investment. See "Certain Yield and
Prepayment Considerations" and "Ratings"
herein and "Yield Considerations" in the
Prospectus.
Legal
Investment
Matters. . . . . . . . The [Senior] Certificates will constitute
"mortgage related securities" for
purposes of the Secondary Mortgage Market
Enhancement Act of 1984, as amended
("SMMEA"), for so long as they are rated
in one of the two highest rating
categories by at least one nationally
recognized statistical rating
organization, and, as such, will be legal
investments for certain entities to the
extent provided in SMMEA. [The Class M
Certificates will not constitute
"mortgage related securities" for
purposes of SMMEA.] Institutions whose
investment activities are subject to
legal investment laws and regulations or
to review by regulatory authorities
should consult with their legal advisors
in determining whether and to what extent
the Offered Certificates constitute legal
investments under SMMEA or are subject to
restrictions on investment, capital
requirements or otherwise. See "Legal
Investment Matters" herein and in the
Prospectus.
<PAGE>
[SPECIAL CONSIDERATIONS]
[Prospective Certificateholders should consider,
among other things, the items discussed under "Special
Considerations" in the Prospectus and the following
factors in connection with the purchase of the
Certificates:]
[APPROPRIATE SPECIAL CONSIDERATIONS REGARDING MORTGAGE
COLLATERAL TO BE INSERTED AS NECESSARY]
DESCRIPTION OF THE [MORTGAGE] [CONTRACT] POOL
General
The Offered Certificates will evidence ownership
interests in the Trust Fund created by the Company, which
will consist of a pool of [fixed] [adjustable] rate
[conventional] [FHA-insured] [VA-guaranteed] [Mortgage
Loans][Contracts] and certain other property. The
Mortgage Collateral will be conveyed by the Company to
the Trust Fund pursuant to a pooling and servicing
agreement, dated as of ______ __, 199_ (the "Pooling and
Servicing Agreement"), by and among the Company, the
[Master] Servicer[s] and the Trustee. A copy of the
Pooling and Servicing Agreement will be filed with the
Securities and Exchange Commission as an exhibit to a
Current Report on Form 8-K to be filed within 15 days
after the issuance of the Certificate (the "Form 8-K").
The Mortgage Collateral will be assigned to the
Trustee pursuant to the Pooling and Servicing Agreement
together with all principal and interest due on or with
respect to the [Mortgage Loans] [Contracts] after the
Cut-off Date. The Trustee will, concurrently with such
assignment, authenticate and deliver the Certificates.
[Residential Funding] [__________] will act as
[Master] Servicer[s] for the Trust Fund (in such
capacity, [each a] [the] "[Master] Servicer"). The
[Master] Servicer[s] will service the [Mortgage Loans]
[Contracts] [directly] [through one or more Sub-
Servicers] [who will provide customary servicing
functions with respect to the [Mortgage Loans]
[Contracts] pursuant to the terms set forth in the
[Pooling and Servicing Agreement] [respective Sub-
Servicing Agreements].
The [Mortgage Loans] [Contracts] were acquired
[directly] [indirectly through Residential Funding] by
the Company [on _________ __, 199_] [from time to time]
from [NAME OF SELLER] [[___] unaffiliated Mortgage
Collateral Sellers] [that are participants in the
AlterNet Mortgage Program]. [See "--The AlterNet Mortgage
Program" below.]
None of the [Mortgage Loans] [Contracts] were
originated prior to _______ __, 19__ or will have a
maturity date later than _______ __, ____. No [Mortgage
Loan] [Contract] will have a remaining term to maturity
as of the Cut-off Date of less than ____ months. The
weighted average remaining term to maturity of the
[Mortgage Loans] [Contracts] as of the Cut-off Date will
be approximately ____ months. The weighted average
original term to maturity of the [Mortgage Loans]
[Contracts] as of the Cut-off Date will be approximately
____ months. All of the [Mortgage Loans] [Contracts]
have principal and interest payable monthly [on the
______ day of each month] (the "Due Date") [on a level
debt service basis] [subject to change due to adjustment
in the Mortgage Rate]. [As of the Cut-off Date, no
[Mortgage Loan] [Contract] will be one month or more
delinquent in payment of principal and interest.]
[In connection with each Mortgage Loan that is
secured by a leasehold interest, the related Mortgage
Collateral Seller will have represented to the Company
that, among other things: (i) the use of leasehold
estates for residential properties is an accepted
practice in the area where the related Mortgaged Property
is located; (ii) residential property in such area
consisting of leasehold estates is readily marketable;
(iii) the lease is recorded and no party is in any way in
breach of any provision of such lease; (iv) the leasehold
is in full force and effect and is not subject to any
prior lien or encumbrance by which the leasehold could be
terminated or subject to any charge or penalty; and (v)
the remaining term of the lease does not terminate less
than ten years after the maturity date of each such
Mortgage Loans.]
[Mortgage Rate Adjustment]
[The Mortgage Rate on each Mortgage Loan will adjust
semi-annually on the Adjustment Date specified in the
related Mortgage Note to a rate equal to the sum (rounded
to the nearest multiple of ___%) of the Index described
below and a fixed percentage set forth in the related
Mortgage Note (the "Note Margin"), subject to certain
limitations described herein. The amount of the monthly
payment on each Mortgage Loan will be adjusted semi-
annually on the first day of the month following the
month in which the Adjustment Date occurs to equal the
amount necessary to pay interest at the then-applicable
Mortgage Rate and fully amortize the outstanding
principal balance of the Mortgage Loan over its remaining
term to stated maturity. As of the Cut-off Date, ___% of
the Mortgage Loans will have reached their first
Adjustment Date. The Mortgage Loans will have different
Adjustment Dates, Note Margins and limitations on the
Mortgage Rate adjustments, as described below.]
[Each Mortgage Note contains an interest rate
adjustment cap (the "Periodic Rate Cap") which limits the
adjustment of the Mortgage Rate to not more than ___%
above or below the previous Mortgage Rate. The Mortgage
Rate on a Mortgage Loan may not exceed the maximum
Mortgage Rate (the "Maximum Mortgage Rate") or be less
than the minimum Mortgage Rate (the "Minimum Mortgage
Rate") specified for such Mortgage Loan in the related
Mortgage Note. The Minimum Mortgage Rate for each
Mortgage Loan will be equal to the Note Margin. The
Minimum Mortgage Rates will range from ___% to ___%, with
a weighted average Minimum Mortgage Rate as of the Cut-
off Date of ___%. The Maximum Mortgage Rates will range
from ___% to ___%, with a weighted average Maximum
Mortgage Rate as of the Cut-off Date of ___%. No
Mortgage Loan provides for payment caps on any Adjustment
Date which would result in deferred interest or negative
amortization.]
[The Index applicable to the Mortgage Loans will be
a per annum rate equal to the average of interbank
offered rates for six-month U.S. dollar-denominated
deposits in the London market based on quotations of
major banks ("LIBOR") as published by FNMA and as most
recently available as of the date forty-five days prior
to the Adjustment Date, or, with respect to _____
Mortgage Loans, representing approximately ___% of the
Mortgage Loans, the Index shall be LIBOR as published in
The Wall Street Journal and as most recently available as
of the first business day of the month immediately
preceding the month in which the Adjustment Date occurs.
In the event that the Index is no longer available, an
index reasonably acceptable to the Trustee that is based
on comparable information will be selected by the Master
Servicer.]
[Listed below are levels of LIBOR as published by
FNMA that are or would have been applicable to mortgage
loans having the following adjustment dates for the
indicated years. Such average yields may fluctuate
significantly from month to month as well as over longer
periods and may not increase or decrease in a constant
pattern from period to period. There can be no assurance
that levels of LIBOR published in The Wall Street Journal
for the corresponding periods would have been at the same
levels as those set forth below. The following does not
purport to be representative of future levels of LIBOR
(as published by FNMA or The Wall Street Journal). No
assurance can be given as to the level of LIBOR on any
Adjustment Date or during the life of any Mortgage Loan.]
LIBOR
Adjustment Date 1990 1991 1992 1993 1994
January 1 8.438% 8.063% 5.359% 3.641% 3.500%
February 1 8.313 8.375 4.938 3.891 3.516
March 1 8.313 7.563 4.250 3.641 3.500
April 1 8.438 7.125 4.250 3.438 3.391
May 1 8.438 6.891 4.375 3.328 4.000
June 1 8.688 6.531 4.547 3.375 4.250
July 1 9.000 6.313 4.266 3.313 4.625
August 1 8.500 6.188 4.250 3.438 5.000
September 1 8.438 6.563 4.125 3.563 5.250
October 1 8.047 6.313 3.625 3.563 5.328
November 1 8.188 5.875 3.625 3.438 5.328
December 1 8.422 5.688 3.313 3.375 5.688
[The initial Mortgage Rate in effect on a Mortgage
Loan generally will be lower, and may be significantly
lower, than the sum of the Index that would have been
applicable at origination and the Note Margin.
Therefore, unless the Index declines after origination of
a Mortgage Loan, the related Mortgage Rate will generally
increase on the first Adjustment Date following
origination of such Mortgage Loan subject to the Periodic
Rate Cap. The repayment of the Mortgage Loans will be
dependent on the ability of the Mortgagors to make larger
monthly payments following adjustments of the Mortgage
Rate. Mortgage Loans that have the same initial Mortgage
Rate may not always bear interest at the same Mortgage
Rate because such Mortgage Loans may have different
Adjustment Dates (and the Mortgage Rates therefore may
reflect different Index values), Note Margins, Maximum
Mortgage Rates and Minimum Mortgage Rates. The Net
Mortgage Rate with respect to each Mortgage Loan as of
the Cut-off Date will be set forth in the Mortgage Loan
Schedule attached to the Pooling and Servicing Agreement.
The Net Mortgage Rate on each Mortgage Loan will be
adjusted on each Adjustment Date to equal the sum of the
Index as specified in the related Mortgage Note (rounded
to the nearest multiple of ___%) and a fixed percentage
per annum for each Mortgage Loan as set forth in the
Mortgage Loan Schedule attached to the Pooling and
Servicing Agreement (the "Gross Margin"), provided that
the Net Mortgage Rate on any Mortgage Loan on any
Adjustment Date may not increase or decrease by more than
the Periodic Rate Cap. The Gross Margins for the
Mortgage Loans will be at least ___% per annum but not
more than ___% per annum as of the Cut-off Date. The Net
Mortgage Rate on any Mortgage Loan may not exceed the
maximum Net Mortgage Rate (the "Maximum Net Mortgage
Rate") or be less than the minimum Net Mortgage Rate (the
"Minimum Net Mortgage Rate") for such Mortgage Loan.]
Mortgage Pool Characteristics
[The Mortgage Pool will have the following
characteristics as of the Cut-off Date:]
[Number of Mortgage Loans ____
Initial Pass-Through Rate on
the Certificates (1) ____%
Range of Net Mortgage Rates (2) ____% - ____%
Mortgage Rates:
Weighted Average ____%
Range ____% - ____%
Note Margins:
Weighted Average ____%
Range ____% - ____%
Gross Margins:
Weighted Average ____%
Range ____% - ____%
Minimum Mortgage Rates:
Weighted Average ____%
Range ____% - ____%
Minimum Net Mortgage Rates:
Weighted Average ____%
Range ____% - ____%
Maximum Mortgage Rates:
Weighted Average ____%
Range ____% - ____%
Maximum Net Mortgage Rates:
Weighted Average ____%
Range ____% - ____%
Weighted Average Months to
next Adjustment Date after
October 1, 1994 (3) 3]
____________________
(1) The Pass-Through Rate on the Certificates will be
equal to the weighted average of the Net Mortgage
Rates on the Mortgage Loans.
(2) The Net Mortgage Rates are calculated as described
under "Description of the Certificates--Interest
Distributions" herein, and the Net Mortgage Rate as
to each Mortgage Loan on and after its initial
Adjustment Date will be generally equal to the
Index plus the Gross Margin, rounded as described
herein, subject to the Periodic Rate Cap, Maximum
Net Mortgage Rate and Minimum Net Mortgage Rate.
The Net Mortgage Rates may be less than or greater
than the sum of the Index and the Gross Margin
during certain periods as a result of the Periodic
Rate Caps and Maximum Net Mortgage Rates and
Minimum Net Mortgage Rates.
(3) The Weighted Average Months to next Adjustment Date
will be equal to the weighted average of the number
of months until the Adjustment Date next following
__________, 199__.
<PAGE>
[The following table sets forth the number,
aggregate principal balance and percentage of Mortgage
Loans as of the Cut-off Date having their next Adjustment
Dates in the months and years set forth below.]
[Month and Year
of Next Adjustment Number of Aggregate Percentage
Next Adjustment Mortgage Principal of Mortgage
Dates Loans Balance Mortgage Loans
January 199_ --- $___ _____%
February 199_ ___ ___ _____
March 199_ ___ ___ _____
April 1994_ ___ ___ _____
Total ___ $ ___ _____%]
[All percentages of the Mortgage Loans described
herein are approximate percentages (except as otherwise
indicated) by aggregate principal balance as of the Cut-
off Date.]
[None of the Mortgage Loans will have been
originated prior to __________, 199_ or will have a
maturity date later than ___________, ____. No Mortgage
Loan will have a remaining term to stated maturity as of
the Cut-off Date of less than ___ months. The weighted
average remaining term to stated maturity of the Mortgage
Loans as of the Cut-off Date will be ___ months. The
weighted average original term to maturity of the
Mortgage Loans as of the Cut-off Date will be ___
months.]
[As of the Cut-off Date, no Mortgage Loan will be
___ month [s] or more delinquent in payment of principal
and interest.]
[The Mortgage Loans are generally assumable pursuant
to the terms of the related Mortgage Note. See "Maturity
and Prepayment Considerations" in the Prospectus.]
[No Mortgage Loan provides for deferred interest or
negative amortization.]
[None of the Mortgage Loans will be Buydown Mortgage
Loans.]
[Set forth below is a description of certain
additional characteristics of the Mortgage Loans as of
the Cut-off Date (except as otherwise indicated). All
percentages of the Mortgage Loans are approximate
percentages by aggregate principal balance as of the Cut-
off Date (except as otherwise indicated). Unless
otherwise specified, all principal balances of the
Mortgage Loans are as of the Cut-off Date and are rounded
to the nearest dollar.]
[Set forth below is a description of certain
additional characteristics of the [Mortgage Loans]
[Contracts] as of the Cut-off Date (expressed as a
percentage of the outstanding aggregate principal balance
of the [Mortgage Loans] [Contracts] having such
characteristics relative to the outstanding aggregate
principal balance of all [Mortgage Loans] [Contracts]).
Unless otherwise specified, all principal balances of the
[Mortgage Loans] [Contracts] are as of the Cut-off Date
and are rounded to the nearest dollar.]
Mortgage Rates
Percentage of
[Mortgage]
Mortgage Principal [Contract]
Rates Number Balance Pool
$ . . %
Total $ . . %
As of the Cut-off Date, the weighted average
Mortgage Rate of the [Mortgage Loans] [Contracts] was
approximately _________% per annum.
Original [Mortgage Loan] [Contract] Principal Balances
Principal Principal Percentage of [Mortgage]
Balance Number Balance [Contract] Pool
$ $ . . %
Total $ . . %
As of the Cut-off Date, the average unpaid principal
balance of the [Mortgage Loans] [Contracts] will be
approximately $_______.
<PAGE>
Original Loan-To-Value Ratios
Loan-to- Percentage of
Value Principal [Mortgage] [Contract]
Ratio Number Balance [Contract] Pool
$ . . %
Total $ . . %
The weighted average Loan-to-Value Ratio at
origination of the [Mortgage Loans] [Contracts] will have
been approximately __.__%.
Geographic Distributions of Mortgaged Properties
Percentage of
Principal [Mortgage]
State Number Balance [Contract] Pool
$ . %
Total $ . . %
[(1) "Other" includes states that contain less than [__]%
of the [Mortgage] [Contract] Pool.]
[No more than _____% of the [Mortgage Loans]
[Contracts] will be secured by Mortgaged Properties
located in any one zip code area.]
<PAGE>
Mortgaged Property Types
Property Percentage of
[Mortgage]
Principal [Contract]
Property Number Balance Pool
Single-family
detached $ . . %
Planned Unit
Developments
(detached)
Two- to
four-family units
Condo Low-Rise
(less than 5 stories)
Condo Mid-Rise
(5 to 8 stories)
Condo High-Rise
(9 stories or more
Townhouse
Planned Unit
Developments
(attached)
Total $ . . %]
[[Mortgage Loan] [Contracts] Purposes
Number Percentage of
of [Mortgage]
Mortgage Principal [Contract]
Loan Purpose Loans Balance Pool
Purchase
Rate/Term
Refinance
Equity
Refinance
Total $ . . %]
[The weighted average Loan-to-Value Ratio at
origination of equity refinance [Mortgage Loans]
[Contracts] will have been _____%. The weighted average
Loan-to-Value Ratio at origination of rate and term
refinance [Mortgage Loans] [Contracts] will have been
_____%.]
[Mortgage Loan] Documentation
Percentage of
[Mortgage]
Principal [Contract]
Type of Program Number Balance Pool
Full Documentation $ . . %
Limited Documentation
No Documentation
Total $ . . %]
[The weighted average Loan-to-Value Ratio at
origination of equity refinance [Mortgage Loans]
[Contracts] will have been _____%. The weighted average
Loan-to-Value Ratio at origination of rate and term
refinance [Mortgage Loans] [Contracts] will have been
_____%.]
<PAGE>
Occupancy Types
Occupancy
Percentage of
[Mortgage]
Principal [Contract]
Occupancy Number Balance Pool
Primary Residence $ . %
Second/Vacation
Non Owner-occupied
Total $ . %
[Specific information with respect to the [Mortgage
Loans] [Contracts] will be available to purchasers of the
Certificates on or before the time of issuance of such
Certificates (the "Closing Date"). If not included in
the Prospectus Supplement, such information will be
included in the Form 8-K.]
Representations and Warranties
[Pursuant to the terms of the Pooling and Servicing
Agreement, the Company will assign the representations
and warranties made by the Mortgage Collateral Seller[s]
to the Trustee for the benefit of the Certificateholders.
These representatives and warranties include: [LIST OF
SPECIFIC REPRESENTATIONS AND WARRANTIES].
[In addition, [the Company] [Residential Funding]
will make certain limited representations and warranties
regarding the [Mortgage Loans] [Contracts], as of the
date of issuance of the Certificates. [DISCLOSE
DEVIATIONS FROM LIST OF SPECIFIC REPRESENTATIONS AND
WARRANTIES IN "THE TRUST FUNDS - REPRESENTATIONS WITH
RESPECT TO MORTGAGE COLLATERAL"].
[To the extent that the related Mortgage Collateral
Seller[s] does not repurchase a [Mortgage Loan][Contract]
in the event of a breach of its representations and
warranties with respect to such [Mortgage
Loan][Contract], neither the Company nor Residential
Funding will be required to repurchase such [Mortgage
Loan][Contract] unless such breach also constitutes a
breach of one of the Company's or Residential Funding's
representations and warranties with respect to such
[Mortgage Loan][Contract] and such breach materially and
adversely affects the interests of the Certificateholders
in any such [Mortgage Loan][Contract]. See "The Trust
Funds--Repurchases of Mortgage Collateral" and "--Limited
Right of Substitution" in the Prospectus. In addition,
neither the Company nor Residential Funding will be
required to repurchase any [Mortgage Loan][Contract] in
the event of a breach of its representations and
warranties with respect to such [Mortgage Loan][Contract]
if the substance of any such breach also constitutes
fraud in the origination of such affected [Mortgage
Loan][Contract]. A limited amount of losses on [Mortgage
Loans][Contracts] as to which there was fraud in the
origination of such [Mortgage Loans][Contracts] will be
covered by the Subordination (as defined herein) provided
by the Class M Certificates and Class B Certificates as
described herein under "Description of the
Certificates--Allocation of Losses; Subordination."]
[The AlterNet Mortgage Program]
[All][____%] of the Mortgage Loans are AlterNet
Program Loans (as defined in the Prospectus) originated
under the AlterNet Mortgage Program. The AlterNet
Mortgage Program was developed to originate mortgage
loans for borrowers and/or mortgaged properties that
would not qualify for other first mortgage purchase
programs such as those run by Fannie Mae or FHLMC or by
Residential Funding, in connection with securities issued
by the Company's affiliate, Residential Funding Mortgage
Securities I, Inc. The Program Loans were underwritten
in conformity with the standards described below. The
AlterNet Mortgage Program is administered by Residential
Funding on behalf of the Company.
Qualifications of AlterNet Program Sellers. Each
AlterNet Program Seller is required to be a HUD-approved
mortgagee or a financial institution supervised by a
federal or state authority with a minimum net worth of
$[500,000]. [OTHER QUALIFICATIONS TO BE LISTED AS
APPLICABLE.]
AlterNet Underwriting Standards. [INSERT APPLICABLE
UNDERWRITING STANDARDS].
[Underwriting Standards]
[DESCRIBE MORTGAGE COLLATERAL SELLER'S UNDERWRITING
STANDARDS FOR [MORTGAGE LOANS] CONTRACTS]]
[Delinquency and Foreclosure Experience.]
[INSERT MORTGAGE COLLATERAL SELLER'S PORTFOLIO
DELINQUENCY AND LOSS EXPERIENCE IF APPROPRIATE.]
DESCRIPTION OF THE OFFERED CERTIFICATES
General
[The Offered Certificates, together with the Accrual
Certificates and the Class B Certificates] will evidence
the entire beneficial ownership interest in the Trust
Fund. The Trust Fund will consist of (1) the [Mortgage
Loans] [Contracts]; (2) such assets as from time to time
are identified as deposited in respect of the [Mortgage
Loans] [Contracts] in the Custodial Account and in the
Certificate Account and belonging to the Trust Fund; (3)
property acquired by foreclosure of such [Mortgage Loans]
[Contracts] [or by a deed in lieu of foreclosure]; and
(4) any applicable Primary Insurance Policies and all
proceeds thereof (collectively, the "Mortgage
Collateral").
The Principal Only Certificates will be entitled to
payments based on the Discount Fraction of the Discount
Mortgage Collateral. "Discount Mortgage Collateral" is
any [Mortgage Loan] [Contract] with a Net Mortgage Rate
less than [___]%. With respect to each item of Discount
Mortgage Collateral, the "Discount Fraction" is equal to
a fraction, expressed as a percentage, the numerator of
which is [___]% minus the Net Mortgage Rate for such
Discount Mortgage Collateral and the denominator of which
is [___]%. The Mortgage Collateral other than the
Discount Mortgage Collateral are referred to herein as
the "Non-Discount Mortgage Collateral."
Available Distribution Amount
The "Available Distribution Amount" for any
Distribution Date is equal to (i) the aggregate amount of
scheduled payments on the [Mortgage Loans][Contracts] due
on the related Due Date and received on or prior to the
related Determination Date, after deduction of the
related servicing fees and any subservicing fees
(collectively, the "Servicing Fees"), (ii) certain
unscheduled payments, including Mortgagor prepayments on
the [Mortgage Loans][Contracts], Insurance Proceeds,
Liquidation Proceeds and proceeds from repurchases of and
substitutions for the [Mortgage Loans][Contracts]
occurring during the preceding calendar month and (iii)
all Advances made for such Distribution Date, in each
case net of amounts reimbursable therefrom to the
[Master] Servicer[s] [and any Subservicer]. In addition
to the foregoing amounts, with respect to unscheduled
collections, not including Mortgagor prepayments, the
[Master] Servicer[s] may elect to treat such amounts as
included in the Available Distribution Amount for the
Distribution Date in the month of receipt, but is not
obligated to do so. With respect to any Distribution
Date, (a) the Due Date is the first day of the month in
which such Distribution Date occurs and (b) the
Determination Date is the 20th day of the month in which
such Distribution Date occurs (or, if such day is not a
business day, the next business day).
Interest Distributions
Holders of each class of Offered Certificates (other
than Principal Only Certificates) will be entitled to
receive interest distributions in an amount equal to the
Accrued Certificate Interest on such class on each
Distribution Date, to the extent of the Available
Distribution Amount (as defined below) for such
Distribution Date, commencing on the first Distribution
Date in the case of all classes of Senior Certificates
[other than the Accrual Certificates and commencing on
the Accretion Termination Date (as defined below) in the
case of the Accrual Certificates]. Holders of the Class
M Certificates will be entitled to receive interest
distributions in an amount equal to the Accrued
Certificate Interest on each Distribution Date, to the
extent of the Available Distribution Amount for such
Distribution Date after distributions of interest and
principal to the Senior Certificates [and reimbursements
for certain Advances to the [Master] Servicer[s]].
With respect to any Distribution Date, "Accrued
Certificate Interest" will be equal to (a) in the case of
each class of Offered Certificates (other than the
Principal Only Certificates and the Stripped Interests
Certificates), one month's interest accrued on the
Certificate Principal Balance of the Certificates of such
class at the Pass-Through Rate on such class and (b) in
the case of the Stripped Interests Certificates, one
month's interest accrued on the Notional Amount of the
Certificates of such class at the then-applicable
Pass-Through Rate on such class. In each case less
interest shortfalls, if any, for such Distribution Date
not covered by the Subordination, including in each case
(i) any Prepayment Interest Shortfall (as defined below)
to the extent not covered by the [Master] Servicer[s], as
described below, (ii) the interest portions of Realized
Losses including Special Hazard Losses in excess of the
Special Hazard Amount ("Excess Special Hazard Losses"),
Fraud Losses in excess of the Fraud Amount ("Excess Fraud
Losses"), Bankruptcy Losses in excess of the Bankruptcy
Amount ("Excess Bankruptcy Losses") and losses occasioned
by war, civil insurrection, certain governmental actions,
nuclear reaction and certain other risks ("Extraordinary
Losses") not covered by the Subordination, (iii) the
interest portion of any Advances that were made with
respect to delinquencies that were ultimately determined
to be Excess Special Hazard Losses, Excess Fraud Losses,
Excess Bankruptcy Losses or Extraordinary Losses and (iv)
any interest shortfalls not covered by Subordination,
including interest shortfalls relating to the Relief Act
or similar legislation or regulations, all allocated
among all the Certificates in proportion to the
respective amounts of Accrued Certificate Interest for
such Distribution Date on each such class. In the case
the Class M Certificates, Accrued Certificate Interest
will be further reduced by the allocation of the interest
portion of certain losses thereto, if any, as described
below under "--Allocation of Losses; Subordination."
Accrued Certificate Interest is calculated on the basis
of a 360-day year consisting of twelve 30-day months.
The distributions of interest on any Distribution Date
for all classes of Certificates will reflect interest
accrued, and receipts with respect thereto, on the
[Mortgage Loans][Contracts] for the preceding calendar
month, as may be reduced by any Prepayment Interest
Shortfall and other shortfalls in the collections of
interest as described below.
[The Accretion Termination Date for the Accrual
Certificates is the earlier to occur of (i) the
Distribution Date on which the Certificate Principal
Balances of the Class A-1 and Class A-2 have been reduced
to zero and (ii) the Credit Support Depletion Date (as
defined herein). On each Distribution Date preceding the
Accretion Termination Date, an amount equal to the amount
of Accrued Certificate Interest on the Accrual
Certificates for such date will be added to the
Certificate Principal Balance thereof, and such amount
will be distributed to the holders of the then
outstanding Senior Certificates (other than the Principal
Only Certificates) in reduction of the Certificate
Principal Balances thereof, as described herein. On each
Distribution Date on or after the Accretion Termination
Date, the entire amount of Accrued Certificate Interest
on the Accrual Certificates for such date will be payable
to the holders of the Accrual Certificates, to the extent
not required to fully retire the remaining Senior
Certificates on the Accretion Termination Date; provided,
however, that if the Accretion Termination Date is the
Credit Support Depletion Date, the entire amount of
Accrued Certificate Interest on the Accrual Certificates
for such Distribution Date will be payable to the holders
of the Accrual Certificates.]
The "Prepayment Interest Shortfall" for any
Distribution Date is equal to the aggregate shortfall, if
any, in collections of interest (adjusted to the related
Net Mortgage Rates), resulting from Mortgagor prepayments
on the [Mortgage Loans] [Contracts] during the preceding
calendar month. Such shortfalls will result because
interest on prepayments in full is distributed only to
the date of prepayment, and because no interest is
distributed on prepayments in part, as such prepayments
are applied to reduce the outstanding principal balance
of the related [Mortgage Loans] [Contracts] as of the Due
Date in the month of prepayment. [With respect to any
Distribution Date, any Prepayment Interest Shortfalls
resulting from prepayments in full for such Distribution
Date will be offset by the [Master] Servicer[s], but only
to the extent such Prepayment Interest Shortfalls do not
exceed an amount equal to [one-twelfth of 0.___% of the
Stated Principal Balance of the [Mortgage
Loans][Contracts] immediately preceding such Distribution
Date]. Prepayment Interest Shortfalls will be offset by
the Master Servicer first, by a reduction in the
Servicing Fee and second, by a reduction in other
servicing compensation of the [Master] Servicer[s].
If on any Distribution Date the Available
Distribution Amount is less than Accrued Certificate
Interest on the Senior Certificates for such Distribution
Date, the shortfall will be allocated among the holders
of all classes of Senior Certificates (other than the
Principal Only Certificates) in proportion to the
respective amounts of Accrued Certificate Interest for
such Distribution Date on each such class. In addition,
the amount of any interest shortfalls that are covered by
Subordination (specifically, interest shortfalls not
described in clauses (i) through (iv) in the third
preceding paragraph) will be unpaid Accrued Certificate
Interest and will be distributable to holders of the
Certificates of such classes entitled to such amounts on
subsequent Distribution Dates, to the extent of available
funds after interest distributions as required herein.
Such shortfalls could occur, for example, if
delinquencies on the [Mortgage Loans][Contracts] were
exceptionally high and were concentrated in a particular
month and Advances by the [Master] Servicer[s] did not
cover the shortfall. Any such amounts so carried forward
will not bear interest.
[Prior to the Accretion Termination Date, interest
shortfalls to be allocated to the Accrual Certificates
will be so allocated by reducing the amount that is added
to the Certificate Principal Balance of the Accrual
Certificates in respect of Accrued Certificate Interest
on such Distribution Date. This reduction will
correspondingly reduce the amount distributed in respect
of principal on the applicable Distribution Date to the
holders of the Senior Certificates (other than the
Principal Only Certificates) and will cause the
Certificate Principal Balances of the outstanding Senior
Certificates (other than the Principal Only Certificates)
to be reduced to zero later than would otherwise be the
case.]
The Pass-Through Rates on each class of Offered
Certificates, other than the Principal Only Certificates
(which are not entitled to distributions of interest) and
the Stripped Interests Certificates, are fixed and are
set forth on the cover hereof. The Pass-Through Rate on
the Stripped Interests Certificates on each Distribution
Date will equal the weighted average, as of the Due Date
in the month preceding the month in which such
Distribution Date occurs, of the Pool Strip Rates on each
[Mortgage Loan][Contract] with a Net Mortgage Rate in
excess of [___]% per annum. The "Pool Strip Rate" on each
[Mortgage Loan][Contract] is equal to the Net Mortgage
Rate thereon minus [___]%. The "Net Mortgage Rate" on
each [Mortgage Loan][Contract] is equal to the Mortgage
Rate thereon minus the Servicing Fee Rate. The Pool Strip
Rates on the [Mortgage Loans][Contracts] range from
[___]% to [___]% per annum. The initial Pass-Through
Rate on the Stripped Interests Certificates is
approximately [___]% per annum.
[The Pass-Through Rate on each class of the Offered
Certificates for any Distribution Date will equal the
weighted average of the Net Mortgage Rates on the
outstanding [Mortgage Loans] [Contracts] for the month
preceding such Distribution Date, determined as of the
close of business on the Due Date occurring in such month
(or, with respect to the first Distribution Date, as of
the Cut-off Date). The Net Mortgage Rate with respect to
each [Mortgage Loan] [Contract] as of the Cut-off Date
will be set forth in the [Mortgage Loan] [Contract]
Schedule attached to the Pooling and Servicing Agreement.
As of the Cut-off Date, the weighted average Net Mortgage
Rate will be [______]% per annum. Accordingly, the
initial Pass-Through Rate on the Offered Certificates
will be [______]% per annum.]
[On each Adjustment Date applicable to each
[Mortgage Loan] [Contract], the Net Mortgage Rate on such
[Mortgage Loan] [Contract] will be adjusted to a rate
equal to the sum of the Index (rounded to the nearest
multiple of [_____]%) and a fixed percentage per annum
for each [Mortgage Loan] [Contract] as set forth in the
[Mortgage Loan] [Contract] Schedule attached to the
Pooling and Servicing Agreement; provided that the Net
Mortgage Rate on any [Mortgage Loan] [Contract] on any
Adjustment Date may not increase or decrease by more than
[____]% (the "Periodic Rate Cap"), except with respect to
one [Mortgage Loan] [Contract], constituting [___]% of
the [Mortgage Loans] [Contracts], on the first Adjustment
Date thereof the Net Mortgage Rate thereon may not adjust
to a rate lower than the related Gross Margin. The Net
Mortgage Rate on any [Mortgage Loan] [Contract] may not
exceed the Maximum Net Mortgage Rate or decrease below
the Minimum Net Mortgage Rate applicable to such
[Mortgage Loan] [Contract] as specified in the Pooling
and Servicing Agreement. The Gross Margins for the
[Mortgage Loans] [Contracts] will be at least [_____]%
per annum but not more than [_____]% per annum as of the
Cut-off Date, with an initial weighted average Gross
Margin of [______]% per annum. The Net Mortgage Rate on
each Converted [Mortgage Loan] [Contract] remaining in
the [Mortgage] [Contract] Pool will be equal to the
Mortgage Rate thereon less [_____]% per annum.]
As described herein, the Accrued Certificate
Interest allocable to each class of Offered Certificates
is based on the Certificate Principal Balance thereof or,
in the case of the Stripped Interests Certificates, on
the Notional Amount. The Certificate Principal Balance
of any Offered Certificate, as of any date of
determination is equal to the initial Certificate
Principal Balance thereof, reduced by the aggregate of
(a) all amounts allocable to principal previously
distributed with respect to such Certificate and (b) any
reductions in the Certificate Principal Balance thereof
deemed to have occurred in connection with allocations of
Realized Losses in the manner described herein; provided
that, after the Certificate Principal Balance of the
Class B Certificates has been reduced to zero, the
Certificate Principal Balance of the Class M Certificates
shall equal the excess, if any, of (a) the then aggregate
Stated Principal Balance (as defined herein) of all of
the [Mortgage Loans][Contracts] over (b) the then
aggregate Certificate Principal Balance of all classes of
Senior Certificates then outstanding. The "Notional
Amount" of the Stripped Interests Certificates as of any
date of determination is equal to the aggregate
Certificate Principal Balance of the Certificates of all
classes as of such date. Reference to the Notional
Amount of a Stripped Interests Certificate is solely for
convenience in certain calculations and does not
represent the right to receive any distributions
allocable to principal.
Principal Distributions on the Senior Certificates
Except as otherwise provided below, holders of the
Senior Certificates (other than the Stripped Interests,
which are not entitled to receive any principal
distributions, and the Principal Only Certificates) will
be entitled to receive on each Distribution Date, to the
extent of the portion of the Available Distribution
Amount remaining after the Senior Interest Distribution
Amount is distributed to such holders and the Class A-4
Principal Distribution Amount (as described below) is so
distributed, a distribution allocable to principal in the
following amount:
(i) the product of (a) the then-applicable
Senior Percentage and (b) the aggregate of the
following amounts:
(1) the principal portion of all scheduled
monthly payments on the [Mortgage Loans]
[Contracts] (other than the related Discount
Fraction of the principal portion of such
payments, with respect to each item of Discount
Mortgage Collateral due on the related Due
Date, whether or not received on or prior to
the related Determination Date, less the
principal portion of Debt Service Reductions
(as defined below) which, together with other
Bankruptcy Losses, are in excess of the
Bankruptcy Amount;
(2) the principal portion of all proceeds
of the repurchase of a [Mortgage Loan]
[Contract] (or, in the case of a substitution,
certain amounts representing a principal
adjustment) (other than the related Discount
Fraction of the principal portion of such
proceeds, with respect to each item of Discount
Mortgage Collateral) as required by the Pooling
and Servicing Agreement during the preceding
calendar month;
(3) the principal portion of all other
unscheduled collections received during the
preceding calendar month (other than full and
partial Principal Prepayments made by the
respective Mortgagors and any amounts received
in connection with a Final Disposition (as
defined below) of a [Mortgage Loan] [Contract]
described in clause (ii) below), to the extent
applied as recoveries of principal (other than
the related Discount Fraction of the principal
portion of such proceeds, with respect to each
item of Discount Mortgage Collateral);
(ii) in connection with the Final Disposition
of a [Mortgage Loan] [Contract] (a) that occurred
in the preceding calendar month and (b) that did
not result in any Excess Special Hazard Losses,
Excess Fraud Losses, Excess Bankruptcy Losses or
Extraordinary Losses, an amount equal to the lesser
of (1) the then-applicable Senior Percentage of the
Stated Principal Balance of such [Mortgage Loan]
[Contract] (other than the related Discount
Fraction of the principal portion of such proceeds,
with respect to each item of Discount Mortgage
Collateral) and (2) the then-applicable Senior
Accelerated Distribution Percentage (as defined
below) of the related collections, including
Insurance Proceeds and Liquidation Proceeds, to the
extent applied as recoveries of principal (other
than the related Discount Fraction of the principal
portion of such proceeds, with respect to each item
of Discount Mortgage Collateral);
(iii) the then-applicable Senior Accelerated
Distribution Percentage of the aggregate of all
full and partial Principal Prepayments made by the
respective Mortgagors (other than the related
Discount Fraction of the principal portion of such
proceeds, with respect to each item of Discount
Mortgage Collateral) during the preceding calendar
month;
(iv) any Excess Subordinate Principal Amount
(as defined below) for such Distribution Date;
(v) if such Distribution Date is on or prior
to the Accretion Termination Date, the Accrued
Certificate Interest on the Accrual Certificates
for such Distribution Date, to the extent added to
the Certificate Principal Balance thereof; and
(vi) any amounts allocable to principal for
any previous Distribution Date (calculated pursuant
to clauses (i) through (iii) and (v) above) that
remain undistributed to the extent that any such
amounts are not attributable to Realized Losses
which are allocated to the Subordinate
Certificates.
With respect to any Distribution Date, "Senior
Principal Distribution Amount" is equal to the lesser of
(a) the Available Distribution Amount remaining after the
Senior Interest Distribution Amount and the Class A-4
Principal Distribution Amount are distributed and (b) the
sum of the amounts described in clauses (i) through (vi)
of the immediately preceding paragraph. With respect to
any Distribution Date on which the Certificate Principal
Balance of the most subordinate class or classes of
Certificates then outstanding is to be reduced to zero
and on which Realized Losses are to be allocated to such
class or classes, the "Excess Subordinate Principal
Amount" is equal to the amount, if any, by which (1) the
amount that would otherwise be distributable in respect
of principal on such class or classes of Certificates on
such Distribution Date is greater than (2) the excess, if
any, of the aggregate of the Certificate Principal
Balance of such class or classes of Certificates
immediately prior to such Distribution Date over the
aggregate amount of Realized Losses to be allocated to
such class or classes of Certificates on such
Distribution Date.
Holders of the Principal Only Certificates will be
entitled to receive on each Distribution Date, to the
extent of the portion of the Available Distribution
Amount remaining after the Senior Interest Distribution
Amount is distributed, a distribution allocable to
principal equal to the Class A-4 Principal Distribution
Amount. The Class A-4 Principal Distribution Amount is
equal to the aggregate of:
(i) the related Discount Fraction of the
principal portion of the scheduled monthly payment
on each item of Discount Mortgage Collateral due on
the related Due Date, whether or not received on or
prior to the related Determination Date, less the
Discount Fraction of the principal portion of any
related Debt Service Reductions (as defined below)
which together with other Bankruptcy Losses are in
excess of the Bankruptcy Amount;
(ii) the related Discount Fraction of the
principal portion of all unscheduled collections on
each item of Discount Mortgage Collateral received
during the preceding calendar month (other than
amounts received in connection with a Final
Disposition of an item of Discount Mortgage
Collateral described in clause (iii) below),
including full and partial Principal Prepayments,
repurchases of Discount Mortgage Collateral (or, in
the case of a substitution, certain amounts
representing a principal adjustment) as required by
the Pooling and Servicing Agreement, Liquidation
Proceeds and Insurance Proceeds, to the extent
applied as recoveries of principal;
(iii) in connection with the Final Disposition of
an item of Discount Mortgage Collateral that did
not result in any Excess Special Hazard Losses,
Excess Fraud Losses, Excess Bankruptcy Losses or
Extraordinary Losses, an amount equal to the
applicable Discount Fraction of the Stated
Principal Balance of such Discount Mortgage
Collateral immediately prior to such Distribution
Date net of the principal portion of any related
Realized Loss allocated to the Principal Only
Certificates on such Distribution Date; and
(iv) any amounts, allocable to principal for any
previous Distribution Date (calculated pursuant to
clauses (i) through (iii) above), that remain
undistributed.
A "Final Disposition" of a defaulted [Mortgage Loan]
[Contract] is deemed to have occurred upon a
determination by the [Master] Servicer[s] that it has
received all Insurance Proceeds, Liquidation Proceeds and
other payments or cash recoveries which the [Master]
Servicer[s] reasonably and in good faith expects to be
finally recoverable with respect to such [Mortgage Loan]
[Contract].
The "Stated Principal Balance" of a [Mortgage Loan]
[Contract] as of any date of determination is equal to
the principal balance thereof as of the Cut-off Date,
after application of all scheduled principal payments due
on or before the Cut-off Date, whether or not received,
reduced by all amounts allocable to principal that have
been distributed to Certificateholders with respect to
such [Mortgage Loan] [Contract] on or before such date,
and as further reduced to the extent that any Realized
Loss thereon has been allocated to one or more classes of
Certificates on or before the date of determination.
The "Senior Percentage," which initially will equal
approximately [____]% and will in no event exceed 100%,
will be adjusted for each Distribution Date to be the
percentage equal to the aggregate Certificate Principal
Balance of the Senior Certificates (other than the
Principal Only Certificates) immediately prior to such
Distribution Date divided by the aggregate Stated
Principal Balance of the aggregate amount of all the
[Mortgage Loans] [Contracts] (other than the Discount
Fraction of the Discount Mortgage Collateral) immediately
prior to such Distribution Date. The "Subordinate
Percentage" as of any date of determination is equal to
100% minus the Senior Percentage as of such date. The
initial Senior Percentage is less than the initial
percentage interest in the Trust Fund evidenced by the
Senior Certificates (including the Principal Only
Certificates) in the aggregate, because the Senior
Percentage is calculated without regard to either the
Certificate Principal Balance of the Principal Only
Certificates or the Discount Fraction of the Stated
Principal Balance of each item of Discount Mortgage
Collateral.
The Senior Accelerated Distribution Percentage for
any Distribution Date occurring prior to [__________ __,
____] Distribution Date will equal 100%. Thereafter, the
Senior Accelerated Distribution Percentage will be
subject to gradual reduction as described in the
following paragraph. This disproportionate allocation of
certain unscheduled payments in respect of principal will
have the effect of accelerating the amortization of the
Senior Certificates while, in the absence of Realized
Losses allocated to the Subordinate Certificates,
increasing the proportionate interest in the Trust Fund
evidenced by the Subordinate Certificates. Increasing
the proportionate interest of the Subordinate
Certificates relative to that of the Senior Certificates
is intended to preserve the availability of the
Subordination provided by the Subordinate Certificates.
The "Senior Accelerated Distribution Percentage" for
any Distribution Date occurring after the [__________ __,
____] Distribution Date will be as follows: for any
Distribution Date falling in the [__________] year after
the Delivery Date, the Senior Percentage for such
Distribution Date plus [__]% of the Subordinate
Percentage (as defined below) for such Distribution Date;
for any Distribution Date falling in the [__________]
year after the Delivery Date, the Senior Percentage for
such Distribution Date plus __% of the Subordinate
Percentage for such Distribution Date; for any
Distribution Date falling in the [__________] year after
the Delivery Date, the Senior Percentage for such
Distribution Date plus __% of the Subordinate Percentage
for such Distribution Date; for any Distribution Date
falling in the [__________] year after the Delivery Date,
the Senior Percentage for such Distribution Date plus __%
of the Subordinate Percentage for such Distribution Date;
and for any Distribution Date after the [__________] year
after the Delivery Date, the Senior Percentage for such
Distribution Date (unless on any such Distribution Date
the Senior Percentage exceeds the initial Senior
Percentage, in which case the Senior Accelerated
Distribution Percentage for such Distribution Date will
once again equal 100%). Any scheduled reduction to the
Senior Accelerated Distribution Percentage described
above shall not be made as of any Distribution Date
unless either (a)(i) the outstanding principal balance of
[Mortgage Loans][Contracts] delinquent [____] days or
more averaged over the last [____] months, as a
percentage of the aggregate outstanding principal balance
of all [Mortgage Loans][Contracts] averaged over the last
[____] months, does not exceed [____]% and (ii) Realized
Losses on the [Mortgage Loans][Contracts] to date for
such Distribution Date if occurring during the [____],
[____], [____], [____] or [____] year (or any year
thereafter) after the Delivery Date are less than [___]%,
[___]%, [___]%, [___]% or [___]%, respectively, of the
sum of the initial Certificate Principal Balances of the
Subordinate Certificates or (b)(i) the outstanding
principal balance of [Mortgage Loans][Contracts]
delinquent [___] days or more averaged over the last
[___] months, as a percentage of the aggregate
outstanding principal balance of all [Mortgage
Loans][Contracts] averaged over the last [___] months,
does not exceed [___]% and (ii) Realized Losses on the
[Mortgage Loans][Contracts] to date are less than [___]%
of the sum of the initial Certificate Principal Balances
of the Subordinate Certificates. Notwithstanding the
foregoing, upon reduction of the Certificate Principal
Balances of the Senior Certificates (other than the
Principal Only Certificates) to zero, the Senior
Accelerated Distribution Percentage will equal 0%.
Distributions of principal on the Senior
Certificates (other than the Stripped Interests
Certificates) on each Distribution Date will be made
(after distribution of the Senior Interest Distribution
Amount as described herein under "--Interest
Distributions"), as follows:
(i) Prior to the occurrence of the Credit
Support Depletion Date (as defined below):
(a) the Class A-4 Principal Distribution
Amount shall be distributed to the Principal
Only Certificates, in reduction of the
Certificate Principal Balance thereof, until
such Certificate Principal Balance is reduced
to zero;
(b) the Senior Principal Distribution
Amount shall be distributed to the Residual
Certificates, in reduction of the Certificate
Principal Balance thereof, until such
Certificate Principal Balance is reduced to
zero; and
(c) the balance of the Senior Principal
Distribution Amount remaining after the
distributions described in clauses (i) and
(ii) above shall be distributed in reduction
of the Certificate Principal Balances of the
classes set forth below as follows:
(1) first, [____.___]% and
[___.______]% of such amount,
concurrently, to the Class A-1
Certificates and Class A-2 Certificates,
respectively, until the Certificate
Principal Balances thereof are reduced to
zero; and
(2) second, to the Class A-3
Certificates until the Certificate
Principal Balance thereof is reduced to
zero.
(ii) On or after the occurrence of the Credit
Support Depletion Date, all priorities relating to
distributions as described above in respect of
principal among the various classes of Senior
Certificates (other than the Principal Only
Certificates) will be disregarded, an amount equal
to the Discount Fraction of the principal portion
of scheduled payments and unscheduled collections
received or advanced in respect of Discount
Mortgage Collateral will be distributed to the
Principal Only Certificates, and the Senior
Principal Distribution Amount will be distributed
to all classes of Senior Certificates (other than
the Principal Only Certificates) pro rata in
accordance with their respective outstanding
Certificate Principal Balances and the Senior
Interest Distribution Amount will be distributed as
described under "--Interest Distributions."
(iii) If the Certificate Principal Balances
of the Senior Certificates (other than the
Principal Only Certificates) have been reduced to
zero prior to the occurrence of the Credit Support
Depletion Date, the Senior Certificates (other than
the Principal Only Certificates) will be entitled
to no further distributions of principal thereon
and the Available Distribution Amount will be paid
solely to the holders of the Principal Only
Certificates, the Stripped Interests Certificates
and the Subordinate Certificates, in each case as
described herein.
The "Credit Support Depletion Date" is the first
Distribution Date on which the Senior Percentage equals
100%.
The [Master] Servicer[s] may elect to treat
Insurance Proceeds, Liquidation Proceeds and other
unscheduled collections (not including prepayments by the
Mortgagors) received in any calendar month as included in
the Available Distribution Amount and the Senior
Principal Distribution Amount for the Distribution Date
in the month of receipt, but is not obligated to do so.
If the [Master] Servicer[s] so elects, such amounts will
be deemed to have been received (and any related Realized
Loss shall be deemed to have occurred) on the last day of
the month prior to the receipt thereof.
Principal Distributions on the Class M Certificates
Holders of each class of the Class M Certificates
will be entitled to receive on each Distribution Date, to
the extent of the portion of the Available Distribution
Amount remaining after (A) the sum of the Senior Interest
Distribution Amount and the Senior Principal Distribution
Amount is distributed to holders of the Senior
Certificates, (B) reimbursement is made to the [Master]
Servicer[s] for certain Advances remaining unreimbursed
following the final liquidation of the related [Mortgage
Loan] [Contract] to the extent described below under
"--Advances," (C) the aggregate amount of Accrued
Certificate Interest and principal required to be
distributed to holders of Class M Certificates and (D)
the aggregate amount of Accrued Certificate Interest
required to be distributed on such class of Class M
Certificates on such Distribution Date is distributed to
such Class M Certificates, a distribution allocable to
principal in the following amounts:
(i) the product of (a) the then-applicable
Class M Percentage and (b) the aggregate of the
following amounts:
(1) the principal portion of all scheduled
monthly payments on the [Mortgage Loans]
[Contracts] due on the related Due Date,
whether or not received on or prior to the
related Determination Date, less the principal
portion of Debt Service Reductions together
with other Excess Bankruptcy Losses;
(2) the principal portion of all proceeds of
the repurchase of a [Mortgage Loan] [Contract]
(or, in the case of a substitution, certain
amounts representing a principal adjustment)
as required by the Pooling and Servicing
Agreement during the preceding calendar month;
and
(3) the principal portion of all other
unscheduled collections received during the
preceding calendar month (other than full and
partial Principal Prepayments made by the
respective Mortgagors and any amounts received
in connection with a Final Disposition of a
[Mortgage Loan] [Contract] described in clause
(ii) below), to the extent applied as
recoveries of principal;
(ii) such Class M Certificate's pro rata
share, based on the Certificate Principal Balance
of the Class M Certificate relative to the
aggregate Certificate Principal Balance of the
Class M and Class B Certificates then outstanding,
of all amounts received in connection with the
Final Disposition of a [Mortgage Loan][Contracts]
(other than the related Discount Fraction of such
amounts with respect to any item of Discount
Mortgage Collateral) (1) that occurred during the
preceding calendar month and (2) that did not
result in any Excess Special Hazard Losses, Excess
Fraud Losses, Excess Bankruptcy Losses or
Extraordinary Losses, to the extent applied as
recoveries of principal and to the extent not
otherwise payable to the Senior Certificates;
(iii) the portion of full and partial
Principal Prepayments (other than the Discount
Fraction of such Principal Prepayments with respect
to any item of Discount Mortgage Collateral) made
by the respective Mortgagors during the preceding
calendar month allocable to the Class M
Certificates, as described below;
(iv) an amount equal to the Excess
Subordinate Principal Amount; and
(v) any amounts allocable to principal for
any previous Distribution Date (calculated pursuant
to clauses (i), (ii) and (iii) above) that remain
undistributed to the extent that any such amounts
are not attributable to Realized Losses which were
allocated to the Class B Certificates.
As to the Class M Certificates, on any Distribution
Date, any Accrued Certificate Interest thereon remaining
unpaid from any previous Distribution Date will be
distributable to the extent of available funds.
Notwithstanding the foregoing, if the Certificate
Principal Balances of the Class B Certificates have been
reduced to zero, on any Distribution Date, with respect
to the Class M Certificates outstanding on such
Distribution Date, Accrued Certificate Interest thereon
remaining unpaid from any previous Distribution Date
(except in the limited circumstances provided in the
Pooling and Servicing Agreement) will not be
distributable.
As to the Class M Certificates, on any Distribution
Date, any Accrued Certificate Interest thereon remaining
unpaid from any previous Distribution Date will be
distributable to the extent of available funds.
Notwithstanding the foregoing, if the Certificate
Principal Balances of the Class B Certificates have been
reduced to zero, on any Distribution Date, with respect
to the Class M Certificates outstanding on such
Distribution Date, Accrued Certificate Interest thereon
remaining unpaid from any previous Distribution Date
(except as in the limited circumstances provided in the
Pooling and Servicing Agreement) will not be
distributable.
From the Distribution Date occurring in [__________
____] (or if the Certificate Principal Balances of the
Senior Certificates (other than the Principal Only
Certificates) have been reduced to zero prior to such
Distribution Date, the Distribution Date on which such
reduction occurred) to, but not including the later to
occur of the Distribution Date occurring in [__________
____] and the Distribution Date on which the Class B
Percentage first equals or exceeds [____]% (approximately
twice the sum of the initial Class B Percentages) before
giving effect to distributions on such Distribution Date,
the Class M Certificates (if outstanding) will be
entitled to receive 100% of any Principal Prepayments not
otherwise distributable to the Senior Certificates.
Thereafter, all Principal Prepayments not otherwise
distributable to the Senior Certificates will be
allocated to the Class M Certificates and Class B
Certificates for which certain loss levels established
for such Subordinate Certificates in the Pooling and
Servicing Agreement have not been exceeded. The related
loss level on any Distribution Date would be satisfied as
to the or Class B Certificates, only if the sum of the
current percentage interests in the Trust Fund evidenced
by such class and each class, if any, subordinate thereto
were at least equal to the sum of the initial percentage
interests evidenced by such class and each class, if any,
subordinate thereto.
As stated above under "--Principal Distributions on
the Senior Certificates," the Senior Accelerated
Distribution Percentage will be 100% during the first
[___] years after the Delivery Date (unless the
Certificate Principal Balances of the Senior Certificates
(other than the Principal Only Certificates) are reduced
to zero before the end of such period), and will
thereafter equal 100% whenever the Senior Percentage
exceeds the initial Senior Percentage. Furthermore, as
set forth herein, the Senior Accelerated Distribution
Percentage will exceed the Senior Percentage during the
[___] through [___] years following the Delivery Date,
and scheduled reductions to the Senior Accelerated
Distribution Percentage are subject to postponement based
on the loss and delinquency experience of the [Mortgage
Loans] [Contracts]. Accordingly, the Class M
Certificates will not be entitled to any prepayments for
at least the first [___] years after the Delivery Date
(unless the Certificate Principal Balances of the Senior
Certificates (other than the Principal Only Certificates)
are reduced to zero before the end of such period), and
may receive no prepayments or a disproportionately large
or small portion of prepayments (relative to the Class M
Percentage) during certain periods thereafter. See
"--Principal Distributions on the Senior Certificates"
herein.
Allocation of Losses; Subordination
The Subordination provided to the Senior
Certificates by the Class B Certificates and Class M
Certificates and the Subordination provided to the Class
M Certificates by the Class B Certificates will cover
Realized Losses on the [Mortgage Loans] [Contracts] that
are Defaulted [Mortgage] [Contract] Losses, Fraud Losses,
Bankruptcy Losses (each as defined in the Prospectus) and
Special Hazard Losses (as defined herein), to the extent
described herein. Any Realized Losses which do not
constitute Excess Special Hazard Losses, Excess Fraud
Losses, Excess Bankruptcy Losses or Extraordinary Losses
will be allocated first, to the Class B Certificates;
second, to the Class M Certificates, in each case until
the Certificate Principal Balance of the Class M
Certificates have been reduced to zero; and third, if any
such Realized Losses are on any item of Discount Mortgage
Collateral, to the Principal Only Certificates in an
amount equal to the related Discount Fraction of the
principal portion of such Realized Losses, and the
remainder of such Realized Losses and the entire amount
of such Realized Losses on Non-Discount Mortgage
Collateral will be allocated to the remaining classes of
Senior Certificates on a pro rata basis. Any allocation
of a Realized Loss (other than a Debt Service Reduction)
to a Certificate will be made by reducing the Certificate
Principal Balance thereof, in the case of the principal
portion of such Realized Loss, and the Accrued
Certificate Interest thereon, in the case of the interest
portion of such Realized Loss, by the amount so allocated
as of the Distribution Date occurring in the month
following the calendar month in which such Realized Loss
was incurred. In addition, any such allocation of a
Realized Loss to a Class M Certificate may also be made
by operation of the payment priority to the Senior
Certificates set forth under "--Principal Distributions on
the Senior Certificates" and the Class M Certificates.
As used herein, "Debt Service Reduction" means a
reduction in the amount of the monthly payment due to
certain bankruptcy proceedings, but does not include any
permanent forgiveness of principal. As used herein,
"Subordination" refers to the provisions discussed above
for the sequential allocation of Realized Losses among
the various classes, as well as all provisions effecting
such allocations including the priorities for
distribution of cash flows in the amounts described
herein.
Allocations of the principal portion of Debt Service
Reductions to the Class M Certificates and the Class B
Certificates will result from the priority of
distributions of the Available Distribution Amount as
described herein, which distributions shall be made first
to the Senior Certificates and then to the Class M
Certificates. An allocation of the interest portion of
a Realized Loss as well as the principal portion of Debt
Service Reductions will not reduce the level of
Subordination, as such term is defined herein, until an
amount in respect thereof has been actually disbursed to
the Senior Certificateholders or the Class M
Certificateholders, as applicable. The holders of the
Offered Certificates will not be entitled to any
additional payments with respect to Realized Losses from
amounts otherwise distributable on any classes of
Certificates subordinate thereto (except in limited
circumstances in respect of any Excess Subordinate
Principal Amount and, in the case of the Principal Only
Certificates, because an amount equal to the Discount
Fraction of the Stated Principal Balance of an item of
Discount Mortgage Collateral will be paid to the
Principal Only Certificates as described in clause (3) of
the definition of "Class A-4 Principal Distribution
Amount"). Accordingly, the Subordination provided to the
Senior Certificates (other than the Principal Only
Certificates) and to the Class M Certificates by the
Class B Certificates with respect to Realized Losses
allocated on any Distribution Date will be effected
primarily by increasing the Senior Percentage or the
Class M Percentage of future distributions of principal
of the remaining [Mortgage Loans] [Contracts]. Because
the Discount Fraction of the Discount Mortgage Collateral
will not change over time, the protection from losses
provided to the Principal Only Certificates by the
Subordinate Certificates is limited to the prior right of
the Principal Only Certificates to receive distributions
in respect of principal as described herein. Furthermore,
principal losses on the [Mortgage Loans] [Contracts] that
are not covered by Subordination will be allocated to the
Principal Only Certificates only to the extent they occur
on any item of Discount Mortgage Collateral and only to
the extent of the related Discount Fraction of such
losses. Such allocation of principal losses on the
Discount Mortgage Collateral may result in such losses
being allocated in an amount that is greater or less than
would have been the case had such losses been allocated
in proportion to the Certificate Principal Balance of the
Principal Only Certificates. Thus, the Senior
Certificates (other than the Principal Only Certificates)
will bear the entire amount of losses that are not
covered by Subordination other than the amount allocable
to the Principal Only Certificates, which losses will be
allocated among all classes of Senior Certificates other
than the Principal Only Certificates on a pro rata basis
in proportion to their respective Certificate Principal
Balances.
Any Excess Special Hazard Losses, Excess Fraud
Losses, Excess Bankruptcy Losses, Extraordinary Losses or
other losses of a type not covered by the Subordination
on Non-Discount Mortgage Collateral will be allocated on
a pro rata basis among the Senior Certificates (other
than the Principal Only Certificates), Class M
Certificates and Class B Certificates (any such Realized
Losses so allocated to the Senior Certificates (other
than the Principal Only Certificates) or Class M
Certificates will be allocated without priority among the
various classes of Senior Certificates (other than the
Principal Only Certificates) or Class M Certificates).
The principal portion of such losses on Discount Mortgage
Collateral will be allocated to the Principal Only
Certificates in an amount equal to the related Discount
Fraction thereof, and the remainder of such losses on
Discount Mortgage Collateral will be allocated among the
remaining Certificates on a pro rata basis. An allocation
of a Realized Loss on a "pro rata basis" among two or
more classes of Certificates means an allocation to each
such class of Certificates on the basis of its then
outstanding Certificate Principal Balance prior to giving
effect to distributions to be made on such Distribution
Date in the case of an allocation of the principal
portion of a Realized Loss or based on the Accrued
Certificate Interest thereon in the case of an allocation
of the interest portion of a Realized Loss.
With respect to any defaulted [Mortgage Loan]
[Contract] that is finally liquidated, through
foreclosure sale, disposition of the related Mortgaged
Property if acquired on behalf of the Certificateholders
by deed in lieu of foreclosure, or otherwise, the amount
of loss realized, if any, will equal the portion of the
Stated Principal Balance remaining, if any, plus interest
thereon through the last day of the month in which such
[Mortgage Loan] [Contract] was finally liquidated, after
application of all amounts recovered (net of amounts
reimbursable to the [Master] Servicer[s] [or the
Subservicer] for Advances and expenses, including
attorneys' fees) towards interest and principal owing on
the [Mortgage Loan] [Contract]. Such amount of loss
realized and any Special Hazard Losses, Fraud Losses and
Bankruptcy Losses are referred to herein as "Realized
Losses."
In order to maximize the likelihood of distribution
in full of the Senior Interest Distribution Amount, the
Class A-4 Principal Distribution Amount and the Senior
Principal Distribution Amount, on each Distribution Date,
holders of Senior Certificates have a right to
distributions of the Available Distribution Amount that
is prior to the rights of the holders of the Subordinate
Certificates, to the extent necessary to satisfy the
Senior Interest Distribution Amount, the Class A-4
Principal Amount and the Senior Principal Distribution
Amount. Similarly, holders of the Class M Certificates
have a right to distributions of the Available
Distribution Amount prior to the rights of holders of the
Class B Certificates.
The application of the Senior Accelerated
Distribution Percentage (when it exceeds the Senior
Percentage) to determine the Senior Principal
Distribution Amount will accelerate the amortization of
the Senior Certificates (other than the Principal Only
Certificates) relative to the actual amortization of the
[Mortgage Loans] [Contracts]. The Principal Only
Certificates will not receive more than the Discount
Fraction of any unscheduled payment relating to any item
of Discount Mortgage Collateral. To the extent that the
Senior Certificates (other than the Principal Only
Certificates) are amortized faster than the [Mortgage
Loans] [Contracts], in the absence of offsetting Realized
Losses allocated to the Certificates, the percentage
interest evidenced by the Senior Certificates (other than
the Principal Only Certificates) in the Trust Fund will
be decreased (with a corresponding increase in the
interest in the Trust Fund evidenced by the Subordinate
Certificates), thereby increasing, relative to their
respective Certificate Principal Balances, the
Subordination afforded to the Senior Certificates by the
Subordinate Certificates collectively.
The aggregate amount of Realized Losses which may be
allocated in connection with Special Hazard Losses (the
"Special Hazard Amount") through Subordination shall
initially be equal to $[__________]. As of any date of
determination following the Cut-off Date, the Special
Hazard Amount shall equal $[__________] less the sum of
(i) any amounts allocated through Subordination in
respect of Special Hazard Losses and (ii) the Adjustment
Amount. The "Adjustment Amount" will be equal to an
amount calculated pursuant to the terms of the Pooling
and Servicing Agreement. As used in this Prospectus
Supplement, "Special Hazard Losses" has the same meaning
set forth in the Prospectus, except that Special Hazard
Losses will not include and the Subordination will not
cover Extraordinary Losses, and Special Hazard Losses
will not exceed the lesser of the cost of repair or
replacement of the related Mortgaged Properties.
The aggregate amount of Realized Losses which may be
allocated in connection with Fraud Losses (the "Fraud
Loss Amount") through Subordination shall initially be
equal to $[__________]. As of any date of determination
after the Cut-off Date, the Fraud Loss Amount shall equal
(i) prior to the first anniversary of the Cut-off Date an
amount equal to [____]% of the aggregate principal
balance of all of the [Mortgage Loans] [Contracts] as of
the Cut-off Date minus the aggregate amounts allocated
through Subordination with respect to Fraud Losses up to
such date of determination and (ii) from the [__________]
to the [__________] anniversary of the Cut-off Date, an
amount equal to (a) the lesser of (1) the Fraud Loss
Amount as of the most recent anniversary of the Cut-off
Date and (2) [____]% of the aggregate principal balance
of all of the [Mortgage Loans] [Contracts] as of the most
recent anniversary of the Cut-off Date minus (b) the
aggregate amounts allocated through Subordination with
respect to Fraud Losses since the most recent anniversary
of the Cut-off Date up to such date of determination. On
and after the [__________] anniversary of the Cut-off
Date the Fraud Loss Amount shall be zero and Fraud Losses
shall not be allocated through Subordination.
The aggregate amount of Realized Losses which may be
allocated in connection with Bankruptcy Losses (the
"Bankruptcy Amount") through Subordination will initially
be equal to $[__________]. As of any date of
determination on or after the [__________] anniversary of
the Cut-off Date, the Bankruptcy Amount will equal the
excess, if any, of (i) the lesser of (a) the Bankruptcy
Amount as of the business day next preceding the most
recent anniversary of the Cut-off Date (the "Relevant
Anniversary") and (b) an amount calculated pursuant to
the terms of the Pooling and Servicing Agreement, which
amount as calculated will provide for a reduction in the
Bankruptcy Amount, over (ii) the aggregate amount of
Bankruptcy Losses allocated solely to the Subordinate
Certificates through Subordination since the Relevant
Anniversary.
Notwithstanding the foregoing, the provisions
relating to Subordination will not be applicable in
connection with a Bankruptcy Loss so long as the [Master]
Servicer[s] [has] [have] notified the Trustee in writing
that the [Master] Servicer[s] [is] [are] diligently
pursuing any remedies that may exist in connection with
the representations and warranties made regarding the
related [Mortgage Loan] [Contract] and either (i) the
related [Mortgage Loan] [Contract] is not in default with
regard to payments due thereunder or (ii) delinquent
payments of principal and interest under the related
[Mortgage Loan] [Contract] and any premiums on any
applicable Primary Hazard Insurance Policy and any
related escrow payments in respect of such [Mortgage
Loan] [Contract] are being advanced on a current basis by
the [Master] Servicer[s] or a Subservicer.
[The Special Hazard Amount, Fraud Amount and
Bankruptcy Amount are subject to further reduction with
consent of the Rating Agencies.]
[Advances]
[Prior to each Distribution Date, the [Master]
Servicer[s] [is] [are] required to make Advances (out of
its own funds[, advances made by a Subservicer] or funds
held in the Custodial Account (as described in the
Prospectus) for future distribution or withdrawal) with
respect to any payments of principal and interest (net of
the related Servicing Fees) which were due on the
[Mortgage Loans] [Contracts] on the immediately preceding
Due Date and delinquent on the business day next
preceding the related Determination Date.]
[Such Advances are required to be made only to the
extent they are deemed by the [Master][Servicer[s] to be
recoverable from related late collections, Insurance
Proceeds, Liquidation Proceeds or amounts otherwise
payable to the holders of the Subordinate Certificates.
The purpose of making such Advances is to maintain a
regular cash flow to the Certificateholders, rather than
to guarantee or insure against losses. The [Master]
Servicer[s] will not be required to make any Advances
with respect to reductions in the amount of the monthly
payments on the [Mortgage Loans] [Contracts] due to Debt
Service Reductions or the application of the Relief Act
or similar legislation or regulation. Any failure by the
[Master] Servicer[s] to make an Advance as required under
the Pooling and Servicing Agreement will constitute an
Event of Default thereunder, in which case the Trustee,
as successor [Master] Servicer[s], will be obligated to
make any such Advance, in accordance with the terms of
the Pooling and Servicing Agreement.]
[All Advances will be reimbursable to the [Master]
Servicer[s] on a first priority basis from either (a)
late collections, Insurance Proceeds and Liquidation
Proceeds from the [Mortgage Loans] [Contracts] as to
which such unreimbursed Advance was made or (b) as to any
Advance that remains unreimbursed following the final
liquidation of the related item of [Mortgage Loans]
[Contracts], from amounts otherwise distributable on the
Subordinate Certificates; provided, however, that only
the Subordinate Percentage of such Advances are
reimbursable from amounts otherwise distributable on the
Subordinate Certificates in the event that such Advances
were made with respect to delinquencies which ultimately
were determined to be Excess Special Hazard Losses,
Excess Fraud Losses, Excess Bankruptcy Losses or
Extraordinary Losses and the Senior Percentage of such
Advances which may not be so reimbursed from amounts
otherwise distributable on the Subordinate Certificates
may be reimbursed to the [Master] Servicer[s] out of any
funds in the Custodial Account or Certificate Account
prior to distributions on the Senior Certificates. In
the latter event, the aggregate amount otherwise
distributable on the Senior Certificates will be reduced
by an amount equal to the Senior Percentage of such
Advances. In addition, if the Certificate Principal
Balance of the Subordinate Certificates has been reduced
to zero, any Advances previously made which are deemed by
the [Master] Servicer[s] to be nonrecoverable from
related late collections, Insurance Proceeds and
Liquidation Proceeds may be reimbursed to the [Master]
Servicer[s] out of any funds in the Custodial Account or
Certificate Account prior to distributions on the Senior
Certificates.]
CERTAIN YIELD AND PREPAYMENT CONSIDERATIONS
General
The yields to maturity and the aggregate amount of
distributions on the Offered Certificates will be
affected by the rate and timing of principal payments on
the [Mortgage Loans] [Contracts] and the amount and
timing of Mortgagor defaults resulting in Realized
Losses. Such yields may be adversely affected by a higher
or lower than anticipated rate of principal payments on
the [Mortgage Loans] [Contracts] in the Trust Fund. The
rate of principal payments on such [Mortgage Loans]
[Contracts] will in turn be affected by the amortization
schedules of the [Mortgage Loans] [Contracts], the rate
and timing of principal prepayments thereon by the
Mortgagors, liquidations of defaulted [Mortgage Loans]
[Contracts] and repurchases of [Mortgage Loans]
[Contracts] due to certain breaches of representations.
The timing of changes in the rate of prepayments,
liquidations and repurchases of the [Mortgage Loans]
[Contracts] may, and the timing of Realized Losses will,
significantly affect the yield to an investor, even if
the average rate of principal payments experienced over
time is consistent with an investor's expectation. Since
the rate and timing of principal payments on the
[Mortgage Loans] [Contracts] will depend on future events
and on a variety of factors (as described more fully
herein and in the Prospectus under "Yield Considerations"
and "Maturity and Prepayment Considerations"), no
assurance can be given as to such rate or the timing of
principal payments on the Offered Certificates.
The [Mortgage Loans] [Contracts] may be prepaid by
the Mortgagors at any time without payment of any
prepayment fee or penalty. The [Mortgage Loans]
[Contracts] contain due-on-sale clauses. As described
under "Description of the Certificates--Principal
Distributions on the Senior Certificates" and "--Principal
Distributions on the Class M Certificates" herein, during
certain periods all or a disproportionately large
percentage of principal prepayments on the [Mortgage
Loans] [Contracts] will be allocated among the Senior
Certificates (other than the Principal Only Certificates)
and, during certain periods, no principal prepayments or
a disproportionately small or large portion of principal
prepayments on the [Mortgage Loans] [Contracts] relative
to the Class M Percentage will be distributed on the
Class M Certificates. Prepayments, liquidations and
purchases of the [Mortgage Loans] [Contracts] will result
in distributions to holders of the Offered Certificates
of principal amounts that would otherwise be distributed
over the remaining terms of the [Mortgage Loans]
[Contracts]. Factors affecting prepayment (including
defaults and liquidations) of [mortgage loans]
[manufactured housing contracts] include changes in
borrowers' housing needs, job transfers, unemployment,
borrowers' net equity in the mortgaged properties,
changes in the value of the mortgaged properties,
mortgage market interest rates, solicitations and
servicing decisions. In addition, if prevailing mortgage
interest rates fell significantly below the Mortgage
Rates on the [Mortgage Loans] [Contracts], the rate of
prepayments (including refinancings) would be expected to
increase. Conversely, if prevailing mortgage interest
rates rose significantly above the Mortgage Rates on the
[Mortgage Loans] [Contracts], the rate of prepayments on
the [Mortgage Loans] [Contracts] would be expected to
decrease.
The rate of defaults on the [Mortgage Loans]
[Contracts] will also affect the rate and timing of
principal payments on the [Mortgage Loans] [Contracts].
In general, defaults on [mortgage loans] [manufactured
housing contracts] are expected to occur with greater
frequency in their early years. The rate of default on
[Mortgage Loans] [Contracts] which are refinance or
limited documentation mortgage loans, and on [Mortgage
Loans] [Contracts] with high Loan-to-Value Ratios, may be
higher than for other types of [Mortgage Loans]
[Contracts]. Furthermore, the rate and timing of
prepayments, defaults and liquidations on the [Mortgage
Loans] [Contracts] will be affected by the general
economic condition of the region of the country in which
the related Mortgaged Properties are located. The risk of
delinquencies and loss is greater and prepayments are
less likely in regions where a weak or deteriorating
economy exists, as may be evidenced by, among other
factors, increasing unemployment or falling property
values. See "Maturity and Prepayment Considerations" in
the Prospectus.
After the Certificate Principal Balances of the
Class B Certificates have been reduced to zero, the yield
to maturity on the class of Class M Certificates will be
extremely sensitive to losses on the [Mortgage Loans]
[Contracts] (and the timing thereof) because the entire
amount of losses that are covered by Subordination will
be allocated to such Class M Certificates. Furthermore,
because principal distributions are paid to certain
classes of Senior Certificates before other classes,
holders of classes having a later priority of payment
bear a greater risk of losses than holders of classes
having earlier priorities for distribution of principal.
Because the Mortgage Rates on the [Mortgage Loans]
[Contracts] and the Pass-Through Rates on the Offered
Certificates (other than the Stripped Interests
Certificates) are fixed, such rates will not change in
response to changes in market interest rates. The
Pass-Through Rate on the Stripped Interests Certificates
is based on the weighted average of the Pool Strip Rates
on the [Mortgage Loans] [Contracts] and such Pool Strip
Rates will not change in response to changes in market
interest rates. Accordingly, if market interest rates or
market yields for securities similar to the Offered
Certificates were to rise, the market value of the
Offered Certificates may decline.
[Although the Mortgage Rates on the [Mortgage Loans]
[Contracts] will adjust annually, such increases and
decreases will be limited by the Periodic Rate Cap, the
Maximum Mortgage Rate and the Minimum Mortgage Rate, if
applicable, on each [Mortgage Loan] [Contract], and will
be based on the Index (which may not rise and fall
consistently with prevailing mortgage rates) plus the
related Note Margin (which may be different from the
prevailing margins on other mortgage loans). As a
result, the Mortgage Rates on the [Mortgage Loans]
[Contracts] at any time may not equal the prevailing
rates for other adjustable-rate loans and accordingly,
the rate of prepayment may be lower or higher than would
otherwise be anticipated. In addition, because all of
the [Mortgage Loans] [Contracts] have Maximum Mortgage
Rates, if prevailing mortgage rates were to increase
above the Maximum Mortgage Rates, the rate of prepayment
on the [Mortgage Loans] [Contracts] may be expected to
decrease, and the yield to investors may be less than
prevailing mortgage rates. In general, if prevailing
mortgage rates fall significantly below the Mortgage
Rates on the [Mortgage Loans] [Contracts], the rate of
prepayments (including refinancings) will be expected to
increase. Conversely, if prevailing mortgage rates rise
significantly above the Mortgage Rates on the [Mortgage
Loans] [Contracts], the rate of prepayment on the
[Mortgage Loans] [Contracts] will be expected to
decrease.]
As described above under "Description of the
Certificates--Allocation of Losses; Subordination" and
"--Advances," amounts otherwise distributable to the Class
M Certificates may be made available to protect the
holders of the Senior Certificates against interruptions
in distributions due to certain Mortgagor delinquencies,
to the extent not covered by Advances. Such delinquencies
may affect the yields to investors in the Class M
Certificates, and, even if subsequently cured, may affect
the timing of the receipt of distributions by the holders
of the Class M Certificates. Furthermore, the Principal
Only Certificates will share in the principal portion of
Realized Losses on the [Mortgage Loans] [Contracts] only
to the extent that they are incurred with respect to
Discount Mortgage Collateral and only to the extent of
the related Discount Fraction; thus, after the Class B
Certificates and the Class M Certificates are retired or
in the case of Excess Special Hazard Losses, Excess Fraud
Losses, Excess Bankruptcy Losses and Extraordinary
Losses, the Senior Certificates (other than the Principal
Only Certificates) may be affected to a greater extent by
losses on Non-Discount Mortgage Collateral than losses on
Discount Mortgage Collateral. In addition, a higher than
expected rate of delinquencies or losses will also affect
the rate of principal payments on the Class M
Certificates if such delinquencies or losses cause the
scheduled reduction of the Senior Accelerated
Distribution Percentage to be delayed.
The amount of interest otherwise payable to holders
of the Offered Certificates will be reduced by any
interest shortfalls to the extent not covered by
Subordination or by the [Master] Servicer[s] as described
below, including Prepayment Interest Shortfalls and, in
the case of each class of the Class M Certificates, the
interest portions of Realized Losses allocated solely to
such class of Certificates. See "Yield Considerations"
in the Prospectus and "Description of the
Certificates--Interest Distributions" herein for a
discussion of the effect of principal prepayments on the
[Mortgage Loans] [Contracts] on the yields to maturity of
the Offered Certificates and certain possible shortfalls
in the collection of interest. [Prior to the Accretion
Termination Date, interest shortfalls allocated to the
Accrual Certificates will reduce the amount added to the
Certificate Principal Balance thereof in respect of
Accrued Certificate Interest and will result in a
corresponding reduction of the amount available for
distributions in respect of principal on the Senior
Certificates. Furthermore, because such interest
shortfalls will result in the Certificate Principal
Balance of the Accrual Certificates being less than it
would be in the absence of such interest shortfalls, the
amount of interest that will accrue in the future on the
Accrual Certificates and be available for distributions
in respect of principal on the Senior Certificates will
be reduced. Accordingly, the weighted average lives and
assumed final Distribution Dates of the Senior
Certificates will be extended.]
With respect to any Distribution Date, Prepayment
Interest Shortfalls resulting from prepayments in full
for such Distribution Date will be offset by the [Master]
Servicer[s] to the extent such Prepayment Interest
Shortfalls do not exceed [one-twelfth of _____% of the
Stated Principal Balance of the [Mortgage Loans]
[Contracts] immediately preceding such Distribution
Date]. Thus, the yield to investors in the Offered
Certificates generally will not be affected by Prepayment
Interest Shortfalls allocable thereto resulting from
prepayments in full in the month preceding any
Distribution Date to the extent that such shortfalls do
not exceed the amount offset by the [Master] Servicer[s].
The yield to maturity on each class of the Offered
Certificates will depend on the prices paid by the
holders of the Offered Certificates and the related Pass-
Through Rate. The extent to which the yield to maturity
of an Offered Certificate is sensitive to prepayments
will depend, in part, upon the degree to which it is
purchased at a discount or premium. In general, if a
class of Offered Certificates is purchased at a premium
and principal distributions thereon occur at a rate
faster than anticipated at the time of purchase, the
investor's actual yield to maturity will be lower than
that assumed at the time of purchase. Conversely, if a
class of Offered Certificates is purchased at a discount
and principal distributions thereon occur at a rate
slower than that assumed at the time of purchase, the
investor's actual yield to maturity will be lower than
that assumed at the time of purchase. For additional
considerations relating to the yield on the Certificates,
see "Yield Considerations" and "Maturity and Prepayment
Considerations" in the Prospectus.
[A number of factors affect the performance of the
Index and may cause the Index to move in a manner
different from other indices. To the extent that the
Index may reflect changes in the general level of
interest rates less quickly than other indices, in a
period of rising interest rates, increases in the yield
to Offered Certificateholders due to such rising interest
rates may occur later than that which would be produced
by other indices, and in a period of declining rates, the
Index may remain higher than other market interest rates
which may result in a higher level of prepayments of the
[Mortgage Loans] [Contracts], which adjust in accordance
with the Index, than of [mortgage loans] [contracts]
which adjust in accordance with other indices.]
The assumed final Distribution Date with respect to
each class of the Offered Certificates is [_____ __,
____] which is the Distribution Date [immediately] [___
months] following the latest scheduled maturity date for
any [Mortgage Loan] [Contract]. No event of default,
change in the priorities for distribution among the
various classes or other provisions under the Pooling and
Servicing Agreement will arise or become applicable
solely by reason of the failure to retire the entire
Certificate Principal Balance of any class of
Certificates on or before its assumed final Distribution
Date.
"Weighted Average Life" refers to the average amount
of time that will elapse from the date of issuance of a
security to the date of distribution to the investor of
each dollar distributed in reduction of principal of such
security (assuming no losses). The Weighted Average Life
of the Offered Certificates will be influenced by, among
other things, the rate at which principal of the
[Mortgage Loans] [Contracts] is paid, which may be in the
form of scheduled amortization, prepayments or
liquidations.
[Prepayments on [mortgage loans] [manufactured
housing contracts] are commonly measured relative to a
prepayment standard or model. The model used in this
Prospectus Supplement, the standard prepayment assumption
("SPA"), represents an assumed rate of prepayment each
month relative to the then outstanding principal balance
of a pool of new [mortgage loans] [manufactured housing
contracts]. A prepayment assumption of 100% SPA assumes
constant prepayment rates of [___]% per annum of the then
outstanding principal balance of such mortgage loans in
the first month of the life of the mortgage loans and an
additional [___]% per annum in each month thereafter
until the thirtieth month. Beginning in the thirtieth
month and in each month thereafter during the life of the
[mortgage loans] [manufactured housing contracts], 100%
SPA assumes a constant prepayment rate of [___]% per
annum each month. As used in the table below, "0% SPA"
assumes prepayment rates equal to 0% of SPA (no
prepayments). Correspondingly, "[___]% SPA" assumes
prepayment rates equal to [___]% of SPA, and so forth.
SPA does not purport to be a historical description of
prepayment experience or a prediction of the anticipated
rate of prepayment of any pool of [mortgage loans]
[manufactured housing contracts], including the [Mortgage
Loans] [Contracts].]
Modeling Assumptions
The table set forth below has been prepared on the
basis of certain assumptions (the "Modeling Assumptions")
as described below regarding the weighted average
characteristics of the [Mortgage Loans] [Contracts] that
are expected to be included in the Trust Fund as
described under "Description of the [Mortgage] [Contract]
Pool" herein and the performance thereof. The table
assumes, among other things, that: (i) as of the date of
issuance of the Offered Certificates, the aggregate
principal balance of the Discount Mortgage Collateral is
$[__________] and each item of Discount Mortgage
Collateral has a Mortgage Rate of [___]% per annum, an
original term to maturity of [___] months, a remaining
term to maturity of [___] months and a related Servicing
Fee Rate of approximately [___]% per annum, and the
aggregate principal balance of the Non-Discount Mortgage
Collateral is $[___________] and each item of
Non-Discount Mortgage Collateral has a Mortgage Rate of
[___]% per annum, an original term to maturity of [___]
months, a remaining term to maturity of [___] months and
a related Servicing Fee Rate of approximately [___]% per
annum; (ii) the scheduled monthly payment for each
[Mortgage Loan] [Contract] has been based on its
outstanding balance, interest rate and remaining term to
maturity, such that the [Mortgage Loan] [Contract] will
amortize in amounts sufficient for repayment thereof over
its remaining term to maturity; (iii) none of the
Mortgage Collateral Sellers, the [Master] Servicer[s] or
the Company will repurchase any [Mortgage Loan]
[Contract] and neither the [Master] Servicer[s] nor the
Company exercises any option to purchase the [Mortgage
Loans] [Contracts] and thereby cause a termination of the
Trust Fund; (iv) there are no delinquencies or Realized
Losses on the [Mortgage Loans] [Contracts], and principal
payments on the [Mortgage Loans] [Contracts] will be
timely received together with prepayments, if any, at the
respective constant percentages of SPA set forth in the
table; (v) there is no Prepayment Interest Shortfall or
any other interest shortfall in any month; (vi) payments
on the Certificates will be received on the 25th day of
each month, commencing [________ 25, 199_]; (vii)
payments on the [Mortgage Loans] [Contracts] earn no
reinvestment return; (viii) there are no additional
ongoing Trust Fund expenses payable out of the Trust
Fund; and (ix) the Certificates will be purchased on
[_____ __, 199_].
SOME OF THE FOREGOING MODELING ASSUMPTIONS REGARDING
THE CHARACTERISTICS OF THE [MORTGAGE LOANS] [CONTRACTS]
AND THE CERTIFICATES DIFFER FROM ACTUAL CHARACTERISTICS
THEREOF.
The actual characteristics and performance of the
[Mortgage Loans] [Contracts] will differ from the
Modeling Assumptions used in constructing the table set
forth below, which is hypothetical in nature and is
provided only to give a general sense of how the
principal cash flows might behave under varying
prepayment scenarios. For example, it is unlikely that
the [Mortgage Loans] [Contracts] will prepay at a
constant level of SPA until maturity or that all of the
[Mortgage Loans] [Contracts] will prepay at the same
level of SPA. Moreover, the diverse remaining terms to
maturity of the [Mortgage Loans] [Contracts] could
produce slower or faster principal distributions than
indicated in the table at the various constant
percentages of SPA specified, even if the weighted
average remaining term to maturity of the [Mortgage
Loans] [Contracts] is as assumed. Any difference between
such Modeling Assumptions and the actual characteristics
and performance of the [Mortgage Loans] [Contracts], or
actual prepayment or loss experience, will affect the
percentages of initial Certificate Principal Balances
outstanding over time and the weighted average lives of
the classes of Offered Certificates.
Subject to the foregoing discussion and assumptions,
the following table indicates the Weighted Average Life
of each class of Offered Certificates (other than the
Stripped Interests Certificates [and Residual
Certificates]) and sets forth the percentages of the
initial Certificate Principal Balance of each such class
of Offered Certificates that would be outstanding after
each of the dates shown at various percentages of SPA.
<PAGE>
Percent of Initial Certificate Principal Balance
Outstanding at the Following Percentages of SPA
<TABLE>
<CAPTION>
Distribution
Date
Class A-1 Class A-2 Class A-4 Class M
<S> <C><C> <C> <C> <C> <C><C> <C> <C> <C> <C><C> <C> <C> <C> <C><C> <C> <C> <C>
0% 100% 250% 350% 500% 0% 100% 250% 350% 500% 0% 100% 250% 350% 500% 0% 100% 250% 350% 500%
Initial
Percentage
Weighted
Average
Life
Years**
</TABLE>
* Indicates a number that is greater than zero but less
than 0.5%.
** [The Weighted Average Life of a Certificate of any
class is determined by (i) multiplying the amount of
each distribution in reduction of Certificate
Principal Balance by the number of years from the
date of issuance of the Certificate to the related
Distribution Date, (ii) adding the results, and (iii)
dividing the sum by the initial Certificate Principal
Balance of the Certificate.]
This table has been prepared based on the Modeling
Assumptions (including the assumptions regarding the
characteristics and performance of the [Mortgage Loans]
[Contracts], which differ from the actual characteristics
and performance thereof) and should be read in
conjunction therewith.
<PAGE>
Principal Only Certificate and Stripped Interests
Certificate Yield Considerations
The amounts payable with respect to the Principal
Only Certificates derive only from principal payments on
the Discount Mortgage Collateral. As a result, the yield
on the Principal Only Certificates will be adversely
affected by slower than expected payments of principal
(including prepayments, defaults and liquidations) on the
Discount Mortgage Collateral.
The yield to maturity on the Stripped Interests
Certificates will be extremely sensitive to both the
timing of receipt of principal prepayments and the
overall rate of principal prepayments and defaults on the
[Mortgage Loans] [Contracts], which rate may fluctuate
significantly over time. Investors in the Stripped
Interests Certificates should fully consider the risk
that a rapid rate of principal prepayments on the
[Mortgage Loans] [Contracts] could result in the failure
of such investors to fully recover their investments.
The following tables indicate the sensitivity of the
pre-tax yield to maturity on the Principal Only
Certificates and Stripped Interests Certificates to
various constant rates of prepayment on the [Mortgage
Loans] [Contracts] by projecting the monthly aggregate
payments on the Principal Only Certificates and Stripped
Interests Certificates and computing the corresponding
pre-tax yields to maturity on a corporate bond equivalent
basis, based on the assumptions described in clauses (i)
through (ix) of the Modeling Assumptions, including the
assumptions regarding the characteristics and performance
of the [Mortgage Loans] [Contracts], which differ from
the actual characteristics and performance thereof and
assuming the aggregate purchase prices set forth below
and assuming further the Pass-Through Rate and Notional
Amount of the Stripped Interests Certificates are as set
forth herein. Any differences between the Modeling
Assumptions and the actual characteristics and
performance of the [Mortgage Loans] [Contracts] and of
the Certificates may result in yields being different
from those shown in such tables. Discrepancies between
assumed and actual characteristics and performance
underscore the hypothetical nature of the tables, which
are provided only to give a general sense of the
sensitivity of yields in varying prepayment scenarios.
Pre-Tax Yield to Maturity of the Principal Only
Certificates at the Following Percentages of SPA
Assumed
Purchase
Price 0% [ ]% [ ]% [ ]% [ ]% [ ]%
$[_____] [_]% [_]% [_]% [_]% [_]% [_]%
Pre-Tax Yield to Maturity of the Stripped Interests
Certificates at the Following Percentages of SPA
Assumed
Purchase
Price 0% [ ]% [ ]% [ ]% [ ]% [ ]%
$[_____] [_]% [_]% [_]% [_]% [_]% [_]%
Each pre-tax yield to maturity set forth in the
preceding tables was calculated by determining the
monthly discount rate which, when applied to the assumed
stream of cash flows to be paid on the Principal Only
Certificates or Stripped Interests Certificates, as
applicable, would cause the discounted present value of
such assumed stream of cash flows to equal the assumed
purchase price listed in the related table. Accrued
interest is included in the assumed purchase price of the
Stripped Interests Certificates and is used in computing
the corporate bond equivalent yields shown in the table
relating to the Stripped Interests Certificates. These
yields do not take into account the different interest
rates at which investors may be able to reinvest funds
received by them as distributions on the Principal Only
Certificates and Stripped Interests Certificates, and
thus do not reflect the return on any investment in such
Certificates when any reinvestment rates other than the
discount rates are considered.
Notwithstanding the assumed prepayment rates
reflected in the preceding tables, it is highly unlikely
that the [Mortgage Loans] [Contracts] will be prepaid
according to one particular pattern. For this reason,
and because the timing of cash flows is critical to
determining yields, the pre-tax yields to maturity on the
Principal Only Certificates and Stripped Interests
Certificates are likely to differ from those shown in the
tables, even if all of the [Mortgage Loans] [Contracts]
prepay at the indicated constant percentages of SPA over
any given time period or over the entire life of the
Certificates. A lower than anticipated rate of principal
prepayments on the Discount Mortgage Collateral will have
a material adverse effect on the yield to maturity of the
Principal Only Certificates. The rate and timing of
principal prepayments on the Discount Mortgage Collateral
may differ from the rate and timing of principal
prepayments on the [Mortgage] [Contract] Pool. In
addition, because the Discount Mortgage Collateral have
Net Mortgage Rates that are lower than the Net Mortgage
Rates of the Non-Discount Mortgage Collateral, and
because [Mortgage Loans] [Contracts] with lower Net
Mortgage Rates are likely to have lower Mortgage Rates,
the Discount Mortgage Collateral is generally likely to
prepay under most circumstances at a lower rate than the
Non-Discount Mortgage Collateral. In addition, holders
of the Stripped Interests Certificates generally have
rights to relatively larger portions of interest payments
on [Mortgage Loans] [Contracts] with higher Mortgage
Rates; thus, the yield on the Stripped Interests
Certificates will be materially adversely affected to a
greater extent than on the other Offered Certificates if
the [Mortgage Loans] [Contracts] with higher Mortgage
Rates prepay faster than the [Mortgage Loans] [Contracts]
with lower Mortgage Rates. Because [Mortgage Loans]
[Contracts] having higher Pool Strip Rates generally have
higher Mortgage Rates, such [Mortgage Loans] [Contracts]
are generally more likely to be prepaid under most
circumstances than are [Mortgage Loans] [Contracts]
having lower Pool Strip Rates.
There can be no assurance that the [Mortgage Loans]
[Contracts] will prepay at any particular rate or that
the yields on the Principal Only Certificates and
Stripped Interests Certificates will conform to the
yields described herein. Moreover, the various remaining
terms to maturity of the [Mortgage Loans] [Contracts]
could produce slower or faster principal distributions
than indicated in the preceding tables at the various
constant percentages of SPA specified, even if the
weighted average remaining term to maturity of the
[Mortgage Loans] [Contracts] is as assumed. Investors
are urged to make their investment decisions based on
their determinations as to anticipated rates of
prepayment under a variety of scenarios. Investors in
the Stripped Interests Certificates should fully consider
the risk that a rapid rate of prepayments on the
[Mortgage Loans] [Contracts] could result in the failure
of such investors to fully recover their investments.
For additional considerations relating to the yields
on the Certificates, see "Yield Considerations" and
"Maturity and Prepayment Considerations" in the
Prospectus.
Additional Yield Considerations Applicable Solely to the
Residual Certificates
The Residual Certificateholders' after-tax rate of
return on their Residual Certificates will reflect their
pre-tax rate of return, reduced by the taxes required to
be paid with respect to the Residual Certificates.
Holders of Residual Certificates may have tax liabilities
with respect to their Residual Certificates during the
early years of the REMIC's term that substantially exceed
any distributions payable thereon during any such period.
In addition, holders of Residual Certificates may have
tax liabilities with respect to their Residual
Certificates the present value of which substantially
exceeds the present value of distributions payable
thereon and of any tax benefits that may arise with
respect thereto. Accordingly, the after-tax rate of
return on the Residual Certificates may be negative or
may otherwise be significantly adversely affected. The
timing and amount of taxable income attributable to the
Residual Certificates will depend on, among other things,
the timing and amounts of prepayments and losses
experienced with respect to the [Mortgage] [Contract]
Pool.
The Residual Certificateholders should consult their
tax advisors as to the effect of taxes and the receipt of
any payments made to such holders in connection with the
purchase of the Residual Certificates on after-tax rates
of return on the Residual Certificates. See "Certain
Federal Income Tax Consequences" herein and in the
Prospectus.
POOLING AND SERVICING AGREEMENT
General
The Certificates will be issued pursuant to the
Pooling and Servicing Agreement. Reference is made to
the Prospectus for important information in addition to
that set forth herein regarding the terms and conditions
of the Pooling and Servicing Agreement and the Senior
Certificates. [The Trustee will appoint
______________________ to serve as Custodian in
connection with the Certificates.] The Senior
Certificates will be transferable and exchangeable at the
corporate trust office of the Trustee, which will serve
as Certificate Registrar and Paying Agent. The Company
will provide a prospective or actual Certificateholder
without charge, on written request, a copy (without
exhibits) of the Pooling and Servicing Agreement.
Requests should be addressed to the [__________] of
Residential Assets Securities Corporation,
[____________________]. In addition to the circumstances
described in the Prospectus, the Company may terminate
the Trustee for cause under certain circumstances. See
"The Pooling and Servicing Agreement--The Trustee" in the
Prospectus.
[The Servicer[s]]
[_________] [Various Servicers approved by the
Master Servicer] will provide customary servicing
functions with respect to the [Mortgage Loans]
[Contracts] pursuant to [a] [the Pooling and] Servicing
Agreement[s]. [Among other things, the Servicer[s] are
obligated, under certain circumstances, to advance
delinquent payments of principal and interest with
respect to [Mortgage Loans] [Contracts].]
[Approximately _______% of the [Mortgage Loans]
[Contracts] will be serviced by _________.] [The
following information was obtained from the Servicer[s].
[Insert tables relating to mortgage loan or
manufactured housing conditional sales contracts, as
appropriate, delinquency and foreclosure experience for
the Servicer[s]]
[The Master Servicer]
[Residential Funding, an indirect wholly-owned
subsidiary of GMAC Mortgage and an affiliate of the
Company,] [___________] will act as master servicer for
the Certificates pursuant to the Pooling and Servicing
Agreement. For a general description of the Master
Servicer and its activities, see "The Pooling and
Servicing Agreement" in the Prospectus.]
Servicing and Other Compensation and Payment of Expenses
The Servicing Fees for each [Mortgage Loan]
[Contract] are payable out of the interest payments on
such [Mortgage Loan] [Contract]. The Servicing Fees in
respect of each [Mortgage Loan] [Contract] will be at
least [____]% and not more than [____]% per annum of the
outstanding principal balance of each [Mortgage Loan]
[Contract]. The Servicing Fees consist of (a) servicing
compensation payable to the [Master] Servicer[s] in
respect of [its master] servicing activities, and (b)
subservicing and other related compensation payable to
the subservicer (including such compensation paid to the
[Master] Servicer[s] as the direct servicer of a
[Mortgage Loan] [Contract] for which there is no
subservicer]. The primary compensation to be paid to the
[Master] Servicer[s] in respect of its servicing
activities will be [____]% per annum (the "Servicing Fee
Rate") of the outstanding principal balance of each item
of Mortgage Collateral. As described more fully in the
Prospectus, a Subservicer is entitled to servicing
compensation in a minimum amount equal to [____]% per
annum of the outstanding principal balance of each item
of Mortgage Collateral serviced by it. The [Master]
Servicer[s] is obligated to pay certain ongoing expenses
associated with the Trust Fund and incurred by the
[Master] Servicer[s] in connection with its
responsibilities under the Pooling and Servicing
Agreement. See "Description of the
Certificates--Servicing and Administration of Mortgage
Collateral" in the Prospectus for information regarding
other possible compensation to the [Master] Servicer[s]
and subservicers and for information regarding expenses
payable by the [Master] Servicer[s].
Voting Rights
Certain actions specified in the Prospectus that may
be taken by the Certificateholders evidencing a specified
percentage of all undivided interests in the Trust Fund
may be taken by holders of Certificates entitled in the
aggregate to such percentage of the Voting Rights. [__]%
of all Voting Rights will be allocated among all holders
of the Certificates (other than the Stripped Interests
Certificates and Residual Certificates) in proportion to
their then outstanding Certificate Principal Balances,
and [_]% and [_]% of all Voting Rights will be allocated
among holders of the Stripped Interests Certificates and
the Class R Certificates, in proportion to the percentage
interests evidenced by their respective Certificates.
[Termination]
[The circumstances under which the obligations
created by the Pooling and Servicing Agreement will
terminate in respect of the Offered Certificates are
described in "Pooling and Servicing
Agreement--Termination; Retirement of Certificates" in the
Prospectus. The [Master] Servicer[s] or the Company will
have the option on any Distribution Date on which the
aggregate principal balance of the [Mortgage Loans]
[Contracts] is less than [__]% of the aggregate principal
balance of the [Mortgage Loans] [Contracts] as of the
Cut-off Date either (i) to purchase all remaining
[Mortgage Loans] [Contracts] and other assets in the
Trust Fund, thereby effecting early retirement of the
Offered Certificates or (ii) purchase in whole, but not
in part, the Certificates. Any such purchase of
[Mortgage Loans] [Contracts] and other assets of the
Trust Fund shall be made at a price equal to the sum of
(a) 100% of the unpaid principal balance of each item of
[Mortgage Loans] [Contracts] (or, the fair market value
of the related underlying Mortgaged Properties with
respect to defaulted [Mortgage Loans] [Contracts] as to
which title to such underlying Mortgaged Properties has
been acquired if such fair market value is less than such
unpaid principal balance) (net of any unreimbursed
Advance attributable to principal) as of the Distribution
Date on which the purchase proceeds are to be distributed
plus (b) accrued interest thereon at the Net Mortgage
Rate to, but not including, the first day of the month of
repurchase. Distributions on the Certificates in respect
of any such optional termination will be paid, first, to
the Senior Certificates and the Class M Certificates, pro
rata, based on their respective Certificate Principal
Balances, second, to the Class B Certificates. The
proceeds of any such distribution may not be sufficient
to distribute the full amount to each class of
Certificates if the purchase price is based in part on
the fair market appraised value of any underlying
Mortgaged Property and such appraised value is less than
100% of the unpaid principal balance of the related
[Mortgage Loan] [Contract]. Any such purchase of the
Certificates will be made at a price equal to 100% of the
Certificate Principal Balance thereof plus the sum of one
month's interest thereon at the applicable Pass-Through
Rate and any previously unpaid accrued Certificate
Interest. Upon the purchase of the Certificates or at
any time thereafter, at the option of the [Master]
Servicer[s] or the Company, the [Mortgage Loans]
[Contract] may be sold, thereby effecting a retirement of
the Certificates and the termination of the Trust Fund,
or the Certificates so purchased may be held or resold by
the [Master] Servicer[s] or the Company.]
Upon presentation and surrender of the Offered
Certificates in connection with the termination of the
Trust Fund or a purchase of Certificates, the holders of
the Offered Certificates will receive an amount equal to
the Certificate Principal Balance of such class plus one
month's interest thereon at the then-applicable Pass-
Through Rate and any previously unpaid Accrued
Certificate Interest.
[Upon presentation and surrender of the Offered
Certificates in connection with the termination of the
Trust Fund or a purchase of Certificates under the
circumstances described above, the holders of the Offered
Certificates will receive an amount equal to the
Certificate Principal Balance of such class plus one
month's interest thereon (or with respect to the Stripped
Interests Certificates, one month's interest on the
Notional Amount) at the applicable Pass-Through Rate plus
any previously unpaid Accrued Certificate Interest.]
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Upon the issuance of the Offered Certificates,
______________________, counsel to the Company, will
deliver its opinion generally to the effect that,
assuming compliance with all provisions of the Pooling
and Servicing Agreement, for federal income tax purposes,
the Trust Fund will qualify as a REMIC under the Code.
For federal income tax purposes, the Class R
Certificates will be the sole class of "residual
interests" in the Trust Fund and the Offered Certificates
(other than the Residual Certificates) and Class B
Certificates will represent ownership of "regular
interests" in the Trust Fund and will generally be
treated as representing ownership of debt instruments of
the Trust Fund. See "Certain Federal Income Tax
Consequences--REMICs" in the Prospectus.
The
Certificates will not
be treated as having been issued with original issue
discount for federal income tax reporting purposes. The
Certificates will, be treated as having been issued with
original issue discount for federal income tax reporting
purposes. The prepayment assumption that will be used in
determining the rate of accrual of original issue
discount, market discount and premium, if any, for
federal income tax purposes will be based on the
assumption that subsequent to the date of any
determination the [Mortgage Loans] [Contracts] will
prepay at a rate equal to ___% SPA. No representation is
made that the [Mortgage Loans] [Contracts] will prepay at
that rate or at any other rate. See "Certain Federal
Income Tax Consequences--REMICs--Taxation of Owners of
REMIC Regular Certificates--Original Issue Discount" in
the Prospectus.
The OID Regulations suggest that original issue
discount with respect to securities such as the Stripped
Interests Certificates that represent multiple
uncertificated REMIC regular interests, in which
ownership interests will be issued simultaneously to the
same buyer and which are required under the Pooling and
Servicing Agreement to be transferred together, should be
computed on an aggregate method. In the absence of
further guidance from the IRS, original issue discount
with respect to the uncertificated regular interests
represented by the Stripped Interests Certificates will
be reported to the IRS and the Certificateholders on an
aggregate method based on a single overall constant yield
and the prepayment assumption stated above, treating all
such uncertificated regular interests as a single debt
instrument as set forth in the OID Regulations.
If the method for computing original issue discount
described in the Prospectus results in a negative amount
for any period with respect to a Certificateholder (in
particular, the Stripped Interests Certificateholders),
the amount of original issue discount allocable to such
period would be zero and such Certificateholder will be
permitted to offset such negative amount only against
future original issue discount (if any) attributable to
such Certificates. Although the matter is not free from
doubt, a Stripped Interests Certificateholder may be
permitted to deduct a loss to the extent that his or her
respective remaining basis in such Certificate exceeds
the maximum amount of future payments to which such
Certificateholder is entitled, assuming no further
prepayments of the [Mortgage Loans] [Contracts]. Any
such loss might be treated as a capital loss.
Although they are unclear on the issue, in certain
circumstances the OID Regulations appear to permit the
holder of a debt instrument to recognize original issue
discount under a method that differs from that used by
the issuer. Accordingly, it is possible that the holder
of a Certificate may be able to select a method for
recognizing original issue discount that differs from
that used by the [Master] Servicer[s] in preparing
reports to the Certificateholders and the IRS.
Certain classes of the Offered Certificates may be
treated for federal income tax purposes as having been
issued at a premium. Whether any holder of such a class
of Certificates will be treated as holding a certificate
with amortizable bond premium will depend on such
Certificateholder's purchase price and the distributions
remaining to be made on such Certificate at the time of
its acquisition by such Certificateholder. Holders of
such classes of Certificates should consult their own tax
advisors regarding the possibility of making an election
to amortize such premium. See "Certain Federal Income Tax
Consequences--REMICs--Taxation of Owners of REMIC Regular
Certificates" and "--Premium" in the Prospectus.
The Offered Certificates will be treated as
"qualifying real property loans" under Section 593(d) of
the Code, assets described in Section 7701(a)(19)(C) of
the Code and "real estate assets" under Section
856(c)(5)(A) of the Code generally in the same proportion
that the assets of the Trust Fund would be so treated. In
addition, interest on the Offered Certificates will be
treated as "interest on obligations secured by mortgages
on real property" under Section 856(c)(3)(B) of the Code
generally to the extent that such Offered Certificates
are treated as "real estate assets" under Section
856(c)(5)(A) of the Code. Moreover, the Offered
Certificates (other than the Residual Certificates) will
be "qualified mortgages" within the meaning of Section
860G(a)(3) of the Code. However, prospective investors in
Offered Certificates that will be generally treated as
assets described in Section 860G(a)(3) of the Code should
note that, notwithstanding such treatment, any repurchase
of such a Certificate pursuant to the right of the
[Master] Servicer[s] or the Company to repurchase such
Offered Certificates may adversely affect any REMIC that
holds such Offered Certificates if such repurchase is
made under circumstances giving rise to a Prohibited
Transaction Tax. See "The Pooling and Servicing
Agreement-Termination" herein and "Certain Federal Income
Tax Consequences--REMICs--Characterization of Investments
in REMIC Certificates" in the Prospectus.
For further information regarding the federal income
tax consequences of investing in the Offered
Certificates, see "Certain Federal Income Tax
Consequences-REMICs" in the Prospectus.
Special Tax Considerations Applicable to Residual
Certificates
The IRS has issued regulations under the provisions
of the Code related to REMICs (the "REMIC Regulations")
that significantly affect holders of Residual
Certificates. The REMIC Regulations impose restrictions
on the transfer or acquisition of certain residual
interests, including the Residual Certificates. In
addition, the REMIC Regulations contain restrictions that
apply to: (i) thrift institutions holding residual
interests lacking "significant value" and (ii) the
transfer of "noneconomic" residual interests to United
States persons. Pursuant to the Pooling and Servicing
Agreement, the Residual Certificates may not be
transferred to non-United States persons.
The REMIC Regulations provide for the determination
of whether a residual interest has "significant value"
for purposes of applying the rules relating to "excess
inclusions" with respect to residual interests. Based on
the REMIC Regulations, the Residual Certificates do not
have significant value and, accordingly, thrift
institutions and their affiliates will be prevented from
using their unrelated losses or loss carryovers to offset
any excess inclusions with respect to the Residual
Certificates, which will be in an amount equal to all or
virtually all of the taxable income includible by holders
of the Residual Certificates. See "Certain Federal
Income Tax Consequences--REMICs--Taxation of Owners of
REMIC Residual Certificates--Excess Inclusions" in the
Prospectus.
The REMIC Regulations also provide that a transfer
to a United States person of "noneconomic" residual
interests will be disregarded for all federal income tax
purposes, and that the purported transferor of
"noneconomic" residual interests will continue to remain
liable for any taxes due with respect to the income on
such residual interests, unless "no significant purpose
of the transfer was to impede the assessment or
collection of tax." Based on the REMIC Regulations, the
Residual Certificates may constitute noneconomic residual
interests during some or all of their terms for purposes
of the REMIC Regulations and, accordingly, unless no
significant purpose of a transfer is to impede the
assessment or collection of tax, transfers of the
Residual Certificates may be disregarded and purported
transferors may remain liable for any taxes due with
respect to the income on the Residual Certificates. All
transfers of the Residual Certificates will be subject to
certain restrictions under the terms of the Pooling and
Servicing Agreement that are intended to reduce the
possibility of any such transfer being disregarded to the
extent that the Residual Certificates constitute
noneconomic residual interests. See "Certain Federal
Income Tax Consequences--REMICs--Taxation of Owners of
REMIC Residual Certificates--Noneconomic REMIC Residual
Certificates" in the Prospectus.
The Residual Certificateholders may be required to
report an amount of taxable income with respect to the
earlier accrual periods of the Trust Fund's term that
significantly exceeds the amount of cash distributions
received by such Class Residual Certificateholders from
the Trust Fund with respect to such periods.
Furthermore, the tax on such income may exceed the cash
distributions with respect to such periods.
Consequently, Residual Certificateholders should have
other sources of funds sufficient to pay any federal
income taxes due in the earlier years of the Trust Funds'
term as a result of their ownership of the Residual
Certificates. In addition, the required inclusion of
this amount of taxable income during the Trust Fund's
earlier accrual periods and the deferral of corresponding
tax losses or deductions until later accrual periods or
until the ultimate sale or disposition of a Residual
Certificate (or possibly later under the "wash sale"
rules of Section 1091 of the Code) may cause the Residual
Certificateholders' after-tax rate of return to be zero
or negative even if the Residual Certificateholders'
pre-tax rate of return is positive. That is, on a present
value basis, the Residual Certificateholders' resulting
tax liabilities could substantially exceed the sum of any
tax benefits and the amount of any cash distributions on
such Residual Certificates over their life.
[[Residential Funding[] will be designated as the
"tax matters person" with respect to the Trust Fund as
defined in the REMIC Provisions (as defined in the
Prospectus), and in connection therewith will be required
to hold not less than 0.01% of the Residual
Certificates.]
Purchasers of the Residual Certificates are strongly
advised to consult their own tax advisors as to the
economic and tax consequences of investment in such
Residual Certificates.
For further information regarding the federal income
tax consequences of investing in the Residual
Certificates, see "Certain Yield and Prepayment
Considerations--Additional Yield Considerations Applicable
Solely to the Residual Certificates" herein and "Certain
Federal Income Tax Consequences--REMICs--Taxation of Owners
of REMIC Residual Certificates" in the Prospectus.
[FOR TRUSTS TREATED AS GRANTOR TRUSTS]
[Upon the issuance of the Offered Certificates
[Orrick, Herrington & Sutcliffe] [Thacher Proffitt &
Wood], counsel to the Company will deliver its opinion
generally to the effect that, assuming compliance with
all provisions of the Pooling and Servicing Agreement,
for federal income tax purposes the Trust Fund will be
classified as a grantor trust under subpart E, part I of
subchapter J of the Code and not as a partnership or as
an association taxable as a corporation. Accordingly,
each holder of a Certificate generally will be treated as
the owner of an interest in the Mortgage Collateral
included in the Trust Fund.
For purposes of the following discussion, the [Class
____ and Class ____] Certificates, a Grantor Trust, which
represent an undivided equitable ownership interest in
the principal of the Mortgage Collateral, together with
interest thereon at the Applicable Pass-Through Rate,
will be referred to as a "Grantor Trust Fractional
Interest Certificate." The [Class ___ and Class ___]
Certificates, which represent ownership of all or a
portion of the difference between interest paid on the
Mortgage Collateral (net of Servicing Fees and any
Spread) and interest paid to the holders of Grantor Trust
Fractional Interest Certificates will be referred to as
a "Grantor Trust Strip Certificate." A Grantor Trust
Strip Certificate may also evidence a nominal ownership
interest in the principal of the Mortgage Collateral.
Characterization of Investments in Grantor Trust
Certificates
Grantor Trust Fractional Interest Certificates. In
the case of Grantor Trust Fractional Interest
Certificates[, subject to the discussion below with
respect to Buy-Down Loans], counsel to the Company will
deliver an opinion upon issuance of the offered
certificates that, in general, Grantor Trust Fractional
Interest Certificates will represent interests in (i)
"qualifying real property loans" within the meaning of
Section 593(d) of the Code [(except to the extent
representing a Contract secured by a Manufactured Home
that is not permanently fixed to real property)]; (ii)
"loans . . . secured by an interest in real property"
within the meaning of Section 7701(a)(19)(C)(v) of the
Code [(except to the extent representing a Contract
secured by a Manufactured Home used on a transient
basis)]; (iii) "obligation[s] (including any
participation or certificate of beneficial ownership
therein) which . . . [are] principally secured by an
interest in real property" within the meaning of Section
860G(a)(3)(A) of the Code; and (iv) "real estate assets"
within the meaning of Section 856(c)(5)(A) of the Code.
In addition, counsel to the Company will deliver an
opinion that interest on Grantor Trust Fractional
Interest Certificates will be considered "interest on
obligations secured by mortgages on real property or on
interests in real property" within the meaning of Section
856(c)(3)(B) of the Code.
[The Mortgage Collateral includes Buy-Down Loans.
The characterization of an investment in Buy-Down Loans
will depend upon the precise terms of the related Buy-
Down Agreement, but to the extent that such Buy-Down
Loans are secured by a bank account or other personal
property, they may not be treated in their entirety as
assets described in the foregoing sections of the Code.
No directly applicable precedents exist with respect to
the federal income tax treatment or the characterization
of investments in Buy-Down Loans. Accordingly, holders
of Grantor Trust Fractional Interest Certificates should
consult their tax advisors with respect to the
characterization of investments in Grantor Trust
Fractional Interest Certificates.].
Grantor Trust Strip Certificates. Even if Grantor
Trust Strip Certificates evidence an interest in a
Grantor Trust Fund consisting of [Mortgage Loans]
[Contracts] that are "loans . . . secured by an interest
in real property" within the meaning of Section
7701(a)(19)(C)(v) of the Code, "qualifying real property
loans" within the meaning of Section 593(d) of the Code,
and "real estate assets" within the meaning of Section
856(c)(5)(A) of the Code, and the interest on which is
"interest on obligations secured by mortgages on real
property" within the meaning of Section 856(c)(3)(B) of
the Code, it is unclear whether the Grantor Trust Strip
Certificates, and the income therefrom, will be so
characterized. The policies underlying such sections
(namely, to encourage or require investments in mortgage
loans by thrift institutions and real estate investment
trusts), however, may suggest that such characterization
is appropriate. Counsel to the Company will not deliver
any opinion on these questions. Prospective purchasers
to which such characterization of an investment in
Grantor Trust Strip Certificates is material should
consult their tax advisors regarding whether the Grantor
Trust Strip Certificates, and the income therefrom, will
be so characterized.
The Grantor Trust Strip Certificates will be
"obligation[s] (including any participation or
certificate of beneficial ownership therein) which . . .
[are] principally secured by an interest in real
property" within the meaning of Section 860G(a)(3)(A) of
the Code.
Taxation of Owners of Grantor Trust Fractional
Interest Certificates
Holders of a Grantor Trust Fractional Interest
Certificates generally will be required to report on
their federal income tax returns their shares of the
entire income from the Mortgage Collateral (including
amounts used to pay reasonable servicing fees and other
expenses) and will be entitled to deduct their shares of
any such reasonable servicing fees and other expenses.
Because of stripped interests, market or original issue
discount, or premium, the amount includible in income on
account of a Grantor Trust Fractional Interest
Certificate may differ significantly from the amount
distributable thereon representing interest on the
Mortgage Collateral. Under Section 67 of the Code, an
individual, estate or trust holding a Grantor Trust
Fractional Interest Certificate directly or through
certain pass-through entities will be allowed a deduction
for such reasonable servicing fees and expenses only to
the extent that the aggregate of such holder's
miscellaneous itemized deductions exceeds two percent of
such holder's adjusted gross income. In addition,
Section 68 of the Code provides that the amount of
itemized deductions otherwise allowable for an individual
whose adjusted gross income exceeds a specified amount
will be reduced by the lesser of (i) 3% of the excess of
the individual's adjusted gross income over such amount
or (ii) 80% of the amount of itemized deductions
otherwise allowable for the taxable year. The amount of
additional taxable income reportable by holders of
Grantor Trust Fractional Interest Certificates who are
subject to the limitations of either Section 67 or
Section 68 of the Code may be substantial. In addition,
Certificateholders (other than corporations) subject to
the alternative minimum tax may not deduct miscellaneous
itemized deductions in determining such holder's
alternative minimum taxable income. [If multiple classes
of Grantor Trust Certificates] [Although it is not
entirely clear, it appears that such fees and expenses
should be allocated among the classes of Grantor Trust
Certificates using a method that recognizes that each
such class benefits from the related services. In the
absence of statutory or administrative clarification as
to the method to be used, it currently is intended to
base information returns or reports to the Internal
Revenue Service (the "IRS") and Certificateholders on a
method that allocates such expenses among classes of
Grantor Trust Certificates with respect to each period
based on the distributions made to each such class during
that period.]
[The IRS has ruled that an unreasonably high
servicing fee retained by a seller or servicer will be
treated as a retained ownership interest in mortgages
that constitutes a stripped coupon. For purposes of
determining what constitutes reasonable servicing fees
for various types of mortgages the IRS has established
certain "safe harbors." The servicing fees paid with
respect to the Mortgage Collateral are higher than the
"safe harbors" and, accordingly, may not constitute
reasonable servicing compensation. [Information
regarding servicing fees paid to the Master Servicer, the
Certificate Administrator, any Servicer, any Sub-Servicer
or their respective affiliates necessary to determine
whether the preceding "safe harbor" rules apply].
[If Certificates subject to the "stripped bond"
rules of Section 1286 of the Code.] [Each Grantor Trust
Fractional Interest Certificate will be treated as having
been issued with "original issue discount" within the
meaning of Section 1273(a) of the Code, subject, however,
to the discussion below regarding the treatment of
certain stripped bonds as market discount bonds and the
discussion regarding de minimis market discount. See
"Market Discount" below. Under the stripped bond rules,
the holder of a Grantor Trust Fractional Interest
Certificate (whether a cash or accrual method taxpayer)
will be required to report interest income from its
Grantor Trust Fractional Interest Certificate for each
month in an amount equal to the income that accrues on
such Certificate in that month calculated under a
constant yield method, in accordance with the rules of
the Code relating to original issue discount.
Application of Strip Bond Rules. The original issue
discount on a Grantor Trust Fractional Interest
Certificate will be the excess of such Certificate's
stated redemption price over its issue price. The issue
price of a Grantor Trust Fractional Interest Certificate
as to any purchaser will be equal to the price paid by
such purchaser for the Grantor Trust Fractional Interest
Certificate. The stated redemption price of a Grantor
Trust Fractional Interest Certificate will be the sum of
all payments to be made on such Certificate, as well as
such Certificate's share of reasonable servicing fees and
other expenses[, other than payments of fixed interest
payable periodically (not less than annually)]. In
general, the amount of such income that accrues in any
month would equal the product of such holder's adjusted
basis in such Grantor Trust Fractional Interest
Certificate at the beginning of such month (see "Sales of
Grantor Trust Certificates") and the yield of such
Grantor Trust Fractional Interest Certificate to such
holder. Such yield would be computed at the rate
(assuming compounding based on the regular interval
between payment dates) that, if used to discount the
holder's share of future payments on the Mortgage
Collateral, would cause the present value of those future
payments to equal the price at which the holder purchased
such Certificate. In computing yield under the stripped
bond rules, a Certificateholder's share of future
payments on the Mortgage Collateral will not include any
payments made in respect of any ownership interest in the
Mortgage Collateral retained by the Company, the Master
Servicer, the Certificate Administrator, any Servicer,
any Sub-Servicer or their respective affiliates, but will
include such Certificateholder's share of any reasonable
servicing fees and other expenses.
Section 1272(a)(6) of the Code requires (i) the use
of a reasonable prepayment assumption in accruing
original issue discount and (ii) adjustments in the
accrual of original issue discount when prepayments do
not conform to the prepayment assumption with respect to
certain categories of debt instruments, and regulations
could be adopted applying those provisions to the Grantor
Trust Fractional Interest Certificates. It is unclear
whether those provisions would be applicable to the
Grantor Trust Fractional Interest Certificates or whether
use of a prepayment assumption may be required or
permitted in the absence of such regulations. It is also
uncertain, if a prepayment assumption is used, whether
the assumed prepayment rate would be determined based on
conditions at the time of the first sale of the Grantor
Trust Fractional Interest Certificate or, with respect to
any subsequent holder, at the time of purchase of the
Grantor Trust Fractional Interest Certificate by that
holder. Certificateholders are advised to consult their
tax advisors concerning reporting original issue discount
in general and, in particular, whether a prepayment
assumption should be used in reporting original issue
discount with respect to Grantor Trust Fractional
Interest Certificates.
In the case of a Grantor Trust Fractional Interest
Certificate acquired at a price equal to the principal
amount of the Mortgage Collateral allocable to such
Certificate, the use of a prepayment assumption would not
ordinarily have any significant effect on the yield used
in calculating accruals of interest income. In the case,
however, of a Grantor Trust Fractional Interest
Certificate acquired at a discount or premium (that is,
at a price less than or greater than such principal
amount, respectively), the use of a prepayment assumption
would increase or decrease such yield, and thus
accelerate or decelerate, respectively, the reporting of
income.
If a prepayment assumption is not used, then when an
item of Mortgage Collateral prepays in full, the holder
of a Grantor Trust Fractional Interest Certificate
acquired at a discount or a premium generally will
recognize ordinary income or loss equal to the difference
between the portion of the prepaid principal amount of
the item of Mortgage Collateral that is allocable to such
Certificate and the portion of the adjusted basis of such
Certificate that is allocable to such Certificateholder's
interest in the Mortgage Collateral. If a prepayment
assumption is used, it appears that no separate item of
income or loss should be recognized upon a prepayment.
Instead, a prepayment should be treated as a partial
payment of the stated redemption price of the Grantor
Trust Fractional Interest Certificate and accounted for
under a method similar to that described for taking
account of original issue discount on REMIC Regular
Certificates. See "Certain Federal Income Tax
Consequences -- Taxation of Owners of REMIC Regular
Certificates--Original Issue Discount" in the Prospectus.
It is unclear what other adjustments would be required to
reflect differences between an assumed prepayment rate
and the actual rate of prepayments.
In the absence of statutory or administrative
clarification, it is currently intended to base
information reports or returns to the IRS and
Certificateholders in transactions subject to the
stripped bond rules on a prepayment assumption (the
"Prepayment Assumption") that will be disclosed in the
related Prospectus Supplement and on a constant yield
computed using a representative initial offering price
for each class of Certificates. However, neither the
Company, the Master Servicer nor the Certificate
Administrator will make any representation that the
Mortgage Collateral will in fact prepay at a rate
conforming to such Prepayment Assumption or any other
rate and Certificateholders should bear in mind that the
use of a representative initial offering price will mean
that such information returns or reports, even if
otherwise accepted as accurate by the IRS, will in any
event be accurate only as to the initial
Certificateholders of each series who bought at that
price.
Under Treasury regulation Section 1.1286-1T, certain
stripped bonds are to be treated as market discount bonds
and, accordingly, any purchaser of such a bond is to
account for any discount on the bond as market discount
rather than original issue discount. This treatment only
applies, however, if immediately after the most recent
disposition of the bond by a person stripping one or more
coupons from the bond and disposing of the bond or coupon
(i) there is no original issue discount (or only a de
minimis amount of original issue discount) or (ii) the
annual stated rate of interest payable on the original
bond is no more than one percentage point lower than the
gross interest rate payable on the original mortgage loan
(before subtracting any servicing fee or any stripped
coupon). [Specify if interest payable on a Grantor Trust
Fractional Interest Certificate is more than one
percentage point lower than the gross interest rate
payable on the Mortgage Collateral disclose that fact.]
If the original issue discount or market discount on a
Grantor Trust Fractional Interest Certificate determined
under the stripped bond rules is less than 0.25% of the
stated redemption price multiplied by the weighted
average maturity of the Mortgage Collateral, then such
original issue discount or market discount will be
considered to be de minimis. Original issue discount or
market discount of only a de minimis amount will be
included in income in the same manner as de minimis
original issue and market discount described in "If
Stripped Bond Rules Do Not Apply" and "Market Discount."]
[If Stripped Bond Rules Do Not Apply. Subject to
the discussion below on original issue discount, [if the
stripped bond rules do not apply to a Grantor Trust
Fractional Interest Certificate,] the Certificateholder
will be required to report its share of the interest
income on the Mortgage Collateral in accordance with such
Certificateholder's normal method of accounting. The
original issue discount rules will apply to a Grantor
Trust Fractional Interest Certificate to the extent it
evidences an interest in Mortgage Collateral issued with
original issue discount.
The original issue discount, if any, on the Mortgage
Collateral will equal the difference between the stated
redemption price of such Mortgage Collateral and its
issue price. Under the OID Regulations, the stated
redemption price is equal to the total of all payments to
be made on such Mortgage Collateral other than "qualified
stated interest." "Qualified stated interest" includes
interest that is unconditionally payable at least
annually at a single fixed rate, or at a "qualified
floating rate," an "objective rate," a combination of a
single fixed rate and one or more "qualified floating
rates" or one "qualified inverse floating rate," or a
combination of "qualified floating rates" that generally
does not operate in a manner that accelerates or defers
interest payments on such Mortgage Collateral. In
general, the issue price of a Mortgage Loan or Contract
will be the amount received by the borrower from the
lender under the terms of the Mortgage Loan or Contract,
less any "points" paid by the borrower, and the stated
redemption price of a Mortgage Loan will equal its
principal amount, unless the Mortgage Loan or Contract
provides for an initial below-market rate of interest or
the acceleration or the deferral of interest payments.
[Describe the manner in which such rules will be
applied with respect to those Mortgage Collateral by the
Trustee in preparing information returns to the
Certificateholders and the IRS.]
Notwithstanding the general definition of original
issue discount, original issue discount will be
considered to be de minimis if such original issue
discount is less than 0.25% of the stated redemption
price multiplied by the weighted average maturity of the
Mortgage Collateral. For this purpose, the weighted
average maturity of the Mortgage Collateral will be
computed as the sum of the amounts determined, as to each
payment included in the stated redemption price of such
Mortgage Collateral, by multiplying (i) the number of
complete years (rounding down for partial years) from the
issue date until such payment is expected to be made by
(ii) a fraction, the numerator of which is the amount of
the payment and the denominator of which is the stated
redemption price of the Mortgage Collateral. Under the
OID Regulations, original issue discount of only a de
minimis amount (other than de minimis original issue
discount attributable to a so-called "teaser" rate or
initial interest holiday) will be included in income as
each payment of stated principal is made, based on the
product of the total amount of such de minimis original
issue discount and a fraction, the numerator of which is
the amount of each such payment and the denominator of
which is the outstanding stated principal amount of the
Mortgage Collateral. The OID Regulations also permit a
Certificateholder to elect to accrue de minimis original
issue discount into income currently based on a constant
yield method. See "Market Discount" below.
If original issue discount is in excess of a de
minimis amount, all original issue discount with respect
to the Mortgage Collateral will be required to be accrued
and reported in income each month, based on a constant
yield. The OID Regulations suggest that no prepayment
assumption is appropriate in computing the yield on
prepayable obligations issued with original issue
discount. In the absence of statutory or administrative
clarification, it currently is not intended to base
information reports or returns to the IRS and
Certificateholders on the use of a prepayment assumption
in transactions not subject to the stripped bond rules.
Section 1272(a)(6) of the Code, however, may require that
a prepayment assumption be used in computing yield with
respect to all mortgage-backed securities.
Certificateholders are advised to consult their tax
advisors concerning whether a prepayment assumption
should be used in reporting original issue discount with
respect to Grantor Trust Fractional Interest
Certificates. [Describe manner by which the original
issue discount rules will apply to Mortgage Collateral in
such series.]
A purchaser of a Grantor Trust Fractional Interest
Certificate that purchases such Grantor Trust Fractional
Interest Certificate at a cost less than such
Certificate's allocable portion of the aggregate
remaining stated redemption price of the Mortgage
Collateral will also be required to include in gross
income such Certificate's daily portions of any original
issue discount with respect to such Mortgage Collateral.
However, each such daily portion will be reduced, if the
cost of such Grantor Trust Fractional Interest
Certificate to such purchaser is in excess of such
Certificate's allocable portion of the aggregate
"adjusted issue prices" of the Mortgage Collateral,
approximately in proportion to the ratio such excess
bears to such Certificate's allocable portion of the
aggregate original issue discount remaining to be accrued
on the Mortgage Collateral. The adjusted issue price of
an item of Mortgage Collateral on any given day equals
the sum of (i) the adjusted issue price (or, in the case
of the first accrual period, the issue price) of such
item of Mortgage Collateral at the beginning of the
accrual period that includes such day and (ii) the daily
portions of original issue discount for all days during
such accrual period prior to such day. The adjusted
issue price of an item of Mortgage Collateral at the
beginning of any accrual period will equal the issue
price of such Mortgage Collateral, increased by the
aggregate amount of original issue discount with respect
to such Mortgage Collateral that accrued in prior accrual
periods, and reduced by the amount of any payments made
on such Mortgage Collateral in prior accrual periods of
amounts included in its stated redemption price.
The Trustee will provide to any holder of a Grantor
Trust Fractional Interest Certificate such information as
such holder may reasonably request from time to time with
respect to original issue discount accruing on Grantor
Trust Fractional Interest Certificates. See "Grantor
Trust Reporting" below.]
Market Discount. If the stripped bond rules do not
apply to the Grantor Trust Fractional Interest
Certificate, a Certificateholder may be subject to the
market discount rules of Sections 1276 through 1278 of
the Code to the extent an interest in Mortgage Collateral
is considered to have been purchased at a "market
discount," that is, in the case of Mortgage Collateral
issued without original issue discount, at a purchase
price less than its remaining stated redemption price (as
defined above), or in the case of Mortgage Collateral
issued with original issue discount, at a purchase price
less than its adjusted issue price (as defined above).
If market discount is in excess of a de minimis amount
(as described below), the holder generally will be
required to include in income in each month the amount of
such discount that has accrued (under the rules described
in the next paragraph) through such month that has not
previously been included in income, but limited, in the
case of the portion of such discount that is allocable to
any Mortgage Collateral, to the payment of stated
redemption price on such Mortgage Collateral that is
received by (or, in the case of accrual basis
Certificateholders, due to) the Trust Fund in that month.
A Certificateholder may elect to include market discount
in income currently as it accrues (under a constant yield
method based on the yield of the Certificate to such
holder) rather than including it on a deferred basis in
accordance with the foregoing. If made, such election
will apply to all market discount bonds acquired by such
Certificateholder during or after the first taxable year
to which such election applies. In addition, the OID
Regulations would permit a Certificateholder to elect to
accrue all interest, discount (including de minimis
market or original issue discount) and premium in income
as interest, based on a constant yield method. If such
an election were made with respect to Mortgage Collateral
with market discount, the Certificateholder would be
deemed to have made an election to include market
discount in income currently with respect to all other
debt instruments having market discount that such
Certificateholder acquires during the taxable year of the
election and thereafter, and possibly previously acquired
instruments. Similarly, a Certificateholder that made
this election for a Certificate acquired at a premium
would be deemed to have made an election to amortize bond
premium with respect to all debt instruments having
amortizable bond premium that such Certificateholder owns
or acquires. See "Certain Federal Income Tax
Consequences--Taxation of Owners of REMIC Regular
Certificates--Premium" in the Prospectus. Each of these
elections to accrue interest, discount and premium with
respect to a Certificate on a constant yield method or as
interest is irrevocable.
Section 1276(b)(3) of the Code specifically
authorizes the Treasury Department to issue regulations
providing for the method for accruing market discount on
debt instruments, the principal of which is payable in
more than one installment. Until such time as
regulations are issued by the Treasury Department,
certain rules described in the Conference Committee
Report (the "Committee Report") accompanying the Tax
Reform Act of 1986 will apply. Under those rules, in
each accrual period market discount on the Mortgage
Collateral should accrue, at the Certificateholder's
option: (i) on the basis of a constant yield method, (ii)
in the case of Mortgage Collateral issued without
original issue discount, in an amount that bears the same
ratio to the total remaining market discount as the
stated interest paid in the accrual period bears to the
total stated interest remaining to be paid on the
Mortgage Collateral as of the beginning of the accrual
period, or (iii) in the case of Mortgage Collateral
issued with original issue discount, in an amount that
bears the same ratio to the total remaining market
discount as the original issue discount accrued in the
accrual period bears to the total original issue discount
remaining at the beginning of the accrual period. The
prepayment assumption, if any, used in calculating the
accrual of original issue discount is to be used in
calculating the accrual of market discount. The effect
of using a prepayment assumption could be to accelerate
the reporting of such discount income. Because the
regulations referred to in this paragraph have not been
issued, it is not possible to predict what effect such
regulations might have on the tax treatment of a Mortgage
Collateral purchased at a discount in the secondary
market.
Since the Mortgage Collateral will provide for
periodic payments of stated redemption price, such
discount may be required to be included in income at a
rate that is not significantly slower than the rate at
which such discount would be included in income if it
were original issue discount.
Market discount with respect to Mortgage Collateral
generally will be considered to be de minimis if it is
not greater than or equal to 0.25% of the stated
redemption price of the Mortgage Collateral multiplied by
the number of complete years to maturity remaining after
the date of its purchase. In interpreting a similar rule
with respect to original issue discount on obligations
payable in installments, the OID Regulations refer to the
weighted average maturity of obligations, and it is
likely that the same rule will be applied with respect to
market discount, presumably taking into account the
prepayment assumption used, if any. The effect of using
a prepayment assumption could be to accelerate the
reporting of such discount income. If market discount is
treated as de minimis under the foregoing rule, it
appears that actual discount would be treated [in a
manner similar to original issue discount of a de minimis
amount. See "If Stripped Bond Rules Do Not Apply."]
Further, under the rules described in "Certain
Federal Income Tax Consequences -- Taxation of Owners of
REMIC Regular Certificates--Market Discount" in the
Prospectus, any discount that is not original issue
discount and exceeds a de minimis amount may require the
deferral of interest expense deductions attributable to
accrued market discount not yet includible in income,
unless an election has been made to report market
discount currently as it accrues.
Premium. If a Certificateholder is treated as
acquiring the underlying Mortgage Collateral at a
premium, that is, at a price in excess of their remaining
stated redemption price, such Certificateholder may elect
under Section 171 of the Code to amortize such premium
using a constant yield method. Amortizable premium is
treated as an offset to interest income on the related
Mortgage Collateral rather than as a separate interest
deduction. Premium allocable to Mortgage Collateral for
which an amortization election is not made should be
allocated among the payments on the Mortgage Collateral
representing stated redemption price and be allowed as an
ordinary deduction as such payments are made (or, for a
Certificateholder using the accrual method of accounting,
when such payments are due).
It is unclear whether a prepayment assumption should
be used in computing amortization of premium allowable
under Section 171 of the Code. If premium is not subject
to amortization using a prepayment assumption and an item
of Mortgage Collateral prepays in full, the holder of a
Grantor Trust Fractional Interest Certificate acquired at
a premium should recognize a loss, equal to the
difference between the portion of the prepaid principal
amount of the Mortgage Collateral that is allocable to
the Certificate and the portion of the adjusted basis of
the Certificate that is allocable to the Mortgage
Collateral. If a prepayment assumption is used to
amortize such premium, it appears that such a loss would
be unavailable. Instead, if a prepayment assumption is
used, a prepayment should be treated as a partial payment
of the stated redemption price of the Grantor Trust
Fractional Interest Certificate and accounted for under
a method similar to that described for taking account of
original issue discount on REMIC Regular Certificates.
See "Certain Federal Income Tax Consequences - Taxation
of Owners of REMIC Regular Certificates--Original Issue
Discount" in the Prospectus. It is unclear what other
adjustments would be required to reflect differences
between an assumed prepayment rate and the actual rate of
prepayments.
Taxation of Owners of Grantor Trust Strip
Certificates
The "stripped coupon" rules of Section 1286 of the
Code will apply to the Grantor Trust Strip Certificates.
Except as described above in "Taxation of Owners of
Grantor Trust Fractional Interest Certificates--If
Stripped Bond Rules Apply," no regulations or published
rulings under Section 1286 of the Code have been issued
and some uncertainty exists as to how it will be applied
to securities such as the Grantor Trust Strip
Certificates. Accordingly, holders of Grantor Trust
Strip Certificates should consult their tax advisors
concerning the method to be used in reporting income or
loss with respect to such Certificates.
The OID Regulations do not apply to "stripped
coupons," although they provide general guidance as to
how the original issue discount sections of the Code will
be applied. In addition, the discussion below is subject
to the discussion under "Possible Application of Proposed
Contingent Payment Rules" below, and assumes that the
holder of a Grantor Trust Strip Certificate will not own
any Grantor Trust Fractional Interest Certificates.
Under the stripped coupon rules, it appears that
original issue discount will be required to be accrued in
each month on the Grantor Trust Strip Certificates based
on a constant yield method. In effect, each holder of
Grantor Trust Strip Certificates would include as
interest income in each month an amount equal to the
product of such holder's adjusted basis in such Grantor
Trust Strip Certificate at the beginning of such month
and the yield of such Grantor Trust Strip Certificate to
such holder. Such yield would be calculated based on the
price paid for that Grantor Trust Strip Certificate by
its holder and the payments remaining to be made thereon
at the time of the purchase, plus an allocable portion of
the servicing fees and expenses to be paid with respect
to the Mortgage Collateral. See "Taxation of Owners of
Grantor Trust Fractional Interest Certificates--If
Stripped Bond Rules Apply" above.
As noted above, Section 1272(a)(6) of the Code
requires that a prepayment assumption be used in
computing the accrual of original issue discount with
respect to certain categories of debt instruments, and
that adjustments be made in the amount and rate of
accrual of such discount when prepayments do not conform
to such prepayment assumption. Regulations could be
adopted applying those provisions to the Grantor Trust
Strip Certificates. It is unclear whether those
provisions would be applicable to the Grantor Trust Strip
Certificates or whether use of a prepayment assumption
may be required or permitted in the absence of such
regulations. It is also uncertain, if a prepayment
assumption is used, whether the assumed prepayment rate
would be determined based on conditions at the time of
the first sale of the Grantor Trust Strip Certificate or,
with respect to any subsequent holder, at the time of
purchase of the Grantor Trust Strip Certificate by that
holder.
The accrual of income on the Grantor Trust Strip
Certificates will be significantly slower if a prepayment
assumption is permitted to be made than if yield is
computed assuming no prepayments. In the absence of
statutory or administrative clarification, it currently
is intended to base information returns or reports to the
IRS and Certificateholders on the Prepayment Assumption
disclosed in the related Prospectus Supplement and on a
constant yield computed using a representative initial
offering price for each class of Certificates. However,
neither the Company, the Master Servicer nor the
Certificate Administrator will make any representation
that the Mortgage Collateral will in fact prepay at a
rate conforming to the Prepayment Assumption or at any
other rate and Certificateholders should bear in mind
that the use of a representative initial offering price
will mean that such information returns or reports, even
if otherwise accepted as accurate by the IRS, will in any
event be accurate only as to the initial
Certificateholders of each series who bought at that
price. Prospective purchasers of the Grantor Trust Strip
Certificates should consult their tax advisors regarding
the use of the Prepayment Assumption.
It is unclear under what circumstances, if any, the
prepayment of an item of Mortgage Collateral will give
rise to a loss to the holder of a Grantor Trust Strip
Certificate. If a Grantor Trust Strip Certificate is
treated as a single instrument (rather than an interest
in discrete mortgage loans or contracts) and the effect
of prepayments is taken into account in computing yield
with respect to such Grantor Trust Strip Certificate, it
appears that no loss may be available as a result of any
particular prepayment unless prepayments occur at a rate
faster than the Prepayment Assumption. However, if a
Grantor Trust Strip Certificate is treated as an interest
in discrete Mortgage Collateral, or if the Prepayment
Assumption is not used, then when an item of Mortgage
Collateral is prepaid, the holder of a Grantor Trust
Strip Certificate should be able to recognize a loss
equal to the portion of the adjusted issue price of the
Grantor Trust Strip Certificate that is allocable to such
Mortgage Collateral.
Possible Application of Proposed Contingent Payment
Rules
The coupon stripping rules' general treatment of
stripped coupons is to regard them as newly issued debt
instruments in the hands of each purchaser. To the extent
that payments on the Grantor Trust Strip Certificates
would cease if the Mortgage Collateral were prepaid in
full, the Grantor Trust Strip Certificates could be
considered to be debt instruments providing for
contingent payments. Under the OID Regulations, debt
instruments providing for contingent payments are not
subject to the same rules as debt instruments providing
for noncontingent payments, but no final regulations have
been promulgated with respect to contingent payment debt
instruments. Proposed regulations were promulgated in
1986 regarding contingent payment debt instruments, but
have not been made final and are likely to be
substantially revised before being made final. Moreover,
like the OID Regulations, such proposed regulations do
not specifically address securities, such as the Grantor
Trust Strip Certificates, that are subject to the
stripped bond rules of Section 1286 of the Code.
If the contingent payment rules under the
regulations proposed in 1986 were to apply, the holder of
a Grantor Trust Strip Certificate would be required to
include as interest income in each month a portion of the
periodic payment (the "Accrued Periodic Payment") due on
the Grantor Trust Strip Certificate. That portion (the
"Periodic Income Amount") would equal the product of (i)
the adjusted issue price of the Grantor Trust Strip
Certificate at the beginning of the period and (ii) a
specified yield (as further described below). The excess
of the Accrued Periodic Payment over the Periodic Income
Amount first would reduce the adjusted issue price of the
Grantor Trust Strip Certificate and, to that extent,
would be treated as a return of capital and not as
interest income; after the adjusted issue price had been
reduced to zero, the entire Accrued Periodic Payment
would be treated as interest income.
The specified yield referred to in clause (ii) above
would equal the "applicable federal rate" (expressed as
a monthly rate) in effect at the time of purchase of the
Grantor Trust Strip Certificate by that holder, which
rate is computed monthly by the IRS. It is unclear
whether a prepayment assumption should be made in
determining which Treasury securities (short-term,
mid-term or long-term) should be used to determine the
"applicable federal rate" for this purpose.
Income accrual with respect to a Grantor Trust Strip
Certificate will generally be slower if the foregoing
contingent payment rules apply than if they do not.
However, as noted above, there is substantial doubt that
the contingent payment rules of the proposed regulations
in their current form will be permitted to be applied to
instruments such as the Grantor Trust Strip Certificates
and revised contingent payment regulations are expected
to be proposed. Certificateholders should consult their
tax advisors concerning the possible application of the
contingent payment rules to the Grantor Trust Strip
Certificates.]
Sales of Grantor Trust Certificates
Except as described below, any gain or loss
recognized on the sale of a Grantor Trust Certificate
generally will be capital gain or loss, and will be equal
to the difference between the amount realized on the sale
of a Grantor Trust Certificate and its adjusted basis.
The adjusted basis of a Grantor Trust Certificate
generally will equal its cost, increased by any income
(including original issue discount and market discount
income) recognized by the seller and reduced (but not
below zero) by any previously reported losses, amortized
premium and distributions with respect to such Grantor
Trust Certificate. The Code currently provides for a top
marginal tax rate applicable to ordinary income of
individuals of 39.6% while maintaining a maximum marginal
rate for the long-term capital gains of individuals of
28%. No such rate differential exists for corporations.
In addition, the distinction between a capital gain or
loss and ordinary income or loss remains relevant for
other purposes.
Gain or loss from the sale of a Grantor Trust
Certificate may be partially or wholly ordinary and not
capital in certain circumstances. Gain attributable to
accrued and unrecognized market discount will be treated
as ordinary income, as will gain or loss recognized by
banks and other financial institutions subject to Section
582(c) of the Code. Furthermore, a portion of any gain
that might otherwise be capital gain may be treated as
ordinary income to the extent that the Grantor Trust
Certificate is held as part of a "conversion transaction"
within the meaning of Section 1258 of the Code. A
conversion transaction generally is one in which the
taxpayer has taken two or more positions in Certificates
or similar property that reduce or eliminate market risk,
if substantially all of the taxpayer's return is
attributable to the time value of the taxpayer's net
investment in such transaction. The amount of gain
realized in a conversion transaction that is
recharacterized as ordinary income generally will not
exceed the amount of interest that would have accrued on
the taxpayer's net investment at 120% of the appropriate
"applicable federal rate" (which rate is computed and
published monthly by the IRS) at the time the taxpayer
enters into the conversion transaction, subject to
appropriate reduction for prior inclusion of interest and
other ordinary income items from the transaction.
Finally, a taxpayer may elect to have net capital gain
taxed at ordinary income rates rather than capital gains
rates in order to include such net capital gain in total
net investment income for that taxable year, for purposes
of the limitation on the deduction of interest on
indebtedness incurred to purchase or carry property held
for investment to a taxpayer's net investment income.
Grantor Trust Reporting
The Trustee will furnish to each holder of a Grantor
Trust Certificate with each distribution a statement
setting forth the amount of such distribution allocable
to principal on the underlying [Mortgage Loans]
[Contracts] and to interest thereon at the related
Pass-Through Rate. In addition, within a reasonable time
after the end of each calendar year, based on information
provided by the Master Servicer or the Certificate
Administrator, as applicable, the Trustee will furnish to
each Certificateholder during such year such customary
factual information as the Trustee deems necessary or
desirable to enable holders of Grantor Trust Certificates
to prepare their tax returns and will furnish comparable
information to the IRS as and when required by law to do
so. Because the rules for accruing discount and
amortizing premium with respect to the Grantor Trust
Certificates are uncertain in various respects, there is
no assurance the IRS will agree with the Trustee's
information reports of such items of income and expense.
Moreover, such information reports, even if otherwise
accepted as accurate by the IRS, will in any event be
accurate only as to the initial Certificateholders who
bought their Certificates at the representative initial
offering price used in preparing such reports.
Backup Withholding
In general, the rules described in "Certain Federal
Income Tax Consequences - Backup Withholding with Respect
to REMIC Certificates" in the Prospectus will also apply
to Grantor Trust Certificates.
Foreign Investors
In general, the discussion with respect to REMIC
Regular Certificates in "Certain Federal Income Tax
Consequences - Foreign Investors in REMIC Certificates"
in the Prospectus applies to Grantor Trust Certificates.
To the extent that interest on a Grantor Trust
Certificate would be exempt under Sections 871(h)(1) and
881(c) of the Code from United States withholding tax,
and the Grantor Trust Certificate is not held in
connection with a Certificateholder's trade or business
in the United States, such Grantor Trust Certificate will
not be subject to United States estate taxes in the
estate of a non-resident alien individual.]
[ERISA CONSIDERATIONS]
[A description of whether there will be any
exemption from "plan asset" treatment will be available
with respect to the Series to be included as
appropriate.]
[A statement of whether the Series will be an Exempt
or a Nonexempt Series to be included if appropriate]
[To qualify for exemption under PTCE 83-1 (see
"ERISA Considerations--Prohibited Transaction Class
Exemptions" in the Prospectus), a Certificate of an
Exempt Series must entitle its holder to pass-through
payments of both principal and interest on the Mortgage
Loans. Because the Subordinate Certificates are
subordinated to the Senior Certificates, PTCE 83-1 will
not provide an exemption from the prohibited transaction
rules of ERISA for Plans that acquire Subordinate
Certificates. Any Plan fiduciary who proposes to cause
a Plan to purchase Certificates should consult with its
counsel with respect to the potential consequences under
ERISA and Section 4975 of the Code of the Plan's
acquisition and ownership of Certificates. However, the
other PTCEs or the Underwriter's PTE may be applicable.
See "ERISA Considerations" in the Prospectus.]
[A Description of PTE 90-23 to be included if
appropriate.]
LEGAL INVESTMENT MATTERS
The [Senior] Certificates will constitute "mortgage
related securities" for purposes of SMMEA for so long as
they are rated in one of the two highest rating
categories by at least one nationally recognized
statistical rating organization, and, as such, will be
legal investments for certain entities to the extent
provided in the SMMEA. [The Class M Certificates will
not constitute "mortgage related securities" for purposes
of SMMEA.] Institutions whose investment activities are
subject to legal investment laws and regulations or to
review by regulatory authorities should consult with
their own legal advisors in determining whether and to
what extent the Offered Certificates constitute legal
investments under SMMEA or are subject to restrictions on
investment, capital requirements or otherwise. See
"Legal Investment Matters" in the Prospectus.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the
underwriting agreement dated [_______ __, 199_], (the
"Underwriting Agreement") the Underwriter has agreed to
purchase, and the Company has agreed to sell to the
Underwriter, each class of the Offered Certificates
[except that a de minimis portion of the Residual
Certificates will be retained by Residential Funding and
such portion is not offered hereby].
The Underwriting Agreement provides that the
obligation of the Underwriter to pay for and accept
delivery of the Offered Certificates is subject to, among
other things, the receipt of certain legal opinions and
to the conditions, among others, that no stop order
suspending the effectiveness of the Company's
Registration Statement shall be in effect, and that no
proceedings for such purpose shall be pending before or
threatened by the Securities and Exchange Commission.
The distribution of the Offered Certificates by the
Underwriter may be effected, from time to time, in one or
more negotiated transactions, or otherwise, at varying
prices to be determined at the time of sale. Proceeds to
the Company from the sale of the Offered Certificates,
before deducting expenses payable by the Company, will be
[______]% of the aggregate Certificate Principal Balance
of the Offered Certificates plus accrued interest thereon
from the Cut-off Date. The Underwriter may effect such
transactions by selling the Offered Certificates to or
through dealers, and such dealers may receive
compensation in the form of underwriting discounts,
concessions or commissions from the Underwriter for whom
they act as agent. In connection with the sale of the
Offered Certificates, the Underwriter may be deemed to
have received compensation from the Company in the form
of underwriting compensation. The Underwriter and any
dealers that participate with the Underwriter in the
distribution of the Offered Certificates may be deemed to
be underwriters and any profit on the resale of the
Offered Certificates positioned by them may be deemed to
be underwriting discounts and commissions under the
Securities Act of 1933.
The Underwriting Agreement provides that the Company
will indemnify the Underwriter, and under limited
circumstances the Underwriter will indemnify the Company,
against certain civil liabilities under the Securities
Act of 1933 or contribute to payments required to be made
in respect thereof.
There can be no assurance that a secondary market
for the Offered Certificates will develop or, if it does
develop, that it will continue. The primary source of
information available to investors concerning the Offered
Certificates will be the monthly statements discussed in
the Prospectus under "Description of the
Certificates--Reports to Certificateholders," which will
include information as to the outstanding principal
balance of the Offered Certificates and the status of the
applicable form of credit enhancement. There can be no
assurance that any additional information regarding the
Offered Certificates will be available through any other
source. In addition, the Company is not aware of any
source through which price information about the Offered
Certificates will be generally available on an ongoing
basis. The limited nature of such information regarding
the Offered Certificates may adversely affect the
liquidity of the Offered Certificates, even if a
secondary market for the Offered Certificates becomes
available.
LEGAL OPINIONS
Certain legal matters relating to the Offered
Certificates will be passed upon for the Company by
[Orrick, Herrington & Sutcliffe] [Thacher Proffitt &
Wood], New York, New York and for the Underwriter by
[______________________________].
RATINGS
It is a condition to the issuance of the Senior
Certificates (other than the Accrual Certificates) and
the Class M Certificates that they be rated not lower
than "[___]" and "[___]", respectively by
[____________________________ ("_______")] and "[___]"
and "[___]", respectively, by [________________________
("_______")].
The ratings of [_______] on mortgage pass-through
certificates address the likelihood of the receipt by
Certificateholders of all distributions on the underlying
[mortgage loans] [manufactured housing contracts] to
which they are entitled. [_______] ratings on
pass-through certificates do not represent any assessment
of the likelihood that principal prepayments will be made
by borrowers or the degree to which such prepayments
might differ from that originally anticipated. The
rating does not address the possibility that
Certificateholders might suffer a lower than anticipated
yield.
[_________________] ratings on mortgage pass-through
certificates also address the likelihood of the receipt
by Certificateholders of payments required under the
Pooling and Servicing Agreement. [_________________]
ratings take into consideration the credit quality of the
[Mortgage] [Contract] Pool, structural and legal aspects
associated with the Certificates, and the extent to which
the payment stream in the [Mortgage] [Contract] Pool is
adequate to make payments required under the
Certificates. [_________________] rating on the
Certificates does not, however, constitute a statement
regarding frequency of prepayments on the [Mortgage
Loans] [Contracts]. See "Certain Yield and Prepayment
Considerations" herein.
The Company has not requested a rating on the
Offered Certificates by any rating agency other than
[__________] and [__________]. However, there can be no
assurance as to whether any other rating agency will rate
the Offered Certificates, or, if it does, what rating
would be assigned by any such other rating agency. A
rating on the Certificates by another rating agency, if
assigned at all, may be lower than the ratings assigned
to the Offered Certificates by [_________] and
[__________].
A security rating is not a recommendation to buy,
sell or hold securities and may be subject to revision or
withdrawal at any time by the assigning rating
organization. Each security rating should be evaluated
independently of any other security rating. The rating
of the Principal Only Certificates, Stripped Interests
Certificates or the Class M Certificates does not address
the possibility that the holders of such Certificates may
fail to fully recover their initial investment. In the
event that the rating initially assigned to the Offered
Certificates is subsequently lowered for any reason, no
person or entity is obligated to provide any additional
support or credit enhancement with respect to the Offered
Certificates.
<PAGE>
No dealer, salesman or other person has been
authorized to give any information or to make any
representations not contained in this Prospectus
Supplement and the Prospectus and, if given or made, such
information or representations must not be relied upon as
having been authorized by the Company or by the
Underwriter. This Prospectus Supplement and the
Prospectus do not constitute an offer to sell, or a
solicitation of an offer to buy, the securities offered
hereby to anyone in any jurisdiction in which the person
making such offer or solicitation is not qualified to do
so or to anyone to whom it is unlawful to make any such
offer or solicitation. Neither the delivery of this
Prospectus Supplement and the Prospectus nor any sale
made hereunder shall, under any circumstances, create an
implication that information herein or therein is correct
as of any time since the date of this Prospectus
Supplement or the Prospectus.
TABLE OF CONTENTS
Prospectus Supplement Page
Summary S-
Description of the
[Mortgage] [Contract] Pool S-
Description of the Certificates S-
Certain Yield and Prepayment
Considerations S-
The Pooling and Servicing
Agreement S-
Certain Federal Income
Tax Consequences
Method of Distribution S-
Legal Opinions S-
Ratings S-
Legal Investment S-
ERISA Considerations S-
Prospectus
Summary of Prospectus
Special Considerations
The Trust Funds
Description of the
Certificates
Subordination
Description of Credit
Enhancement
Insurance Policies
on Mortgage Loans
or Contracts
The Company
Residential Funding
Corporation
The Pooling and Servicing
Agreement
Yield Considerations
Maturity and Prepayment
Considerations
Certain Legal Aspects
of Mortgage Loans
and Contracts
Certain Federal Income
Tax Consequences
State and Other Tax
Consequences
ERISA Considerations
Legal Investment
Matters
Use of Proceeds
Methods of
Distribution
Legal Matters
Financial Information
Additional Information
Index of Principal
Definitions
<PAGE>
Residential Asset Securities Corporation
[Mortgage] [Manufactured Housing Contract] Pass-
Through Certificates, Series [199_-___]
Class A-1 Certificates ____% $
Class A-2 Certificates ____% $
Class A-4 Certificates 0% $
Class A-5 Certificates Variable Rate $ 0
Class R Certificates ____% $
Class M Certificates ____% $
[Name of [Master] Servicer[s]]
PROSPECTUS SUPPLEMENT
________________, 199_
<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 16, 1994
Version I-B
Prospectus Supplement
(To Prospectus dated [_______ __, 199_])
$[____________]
Residential Asset Securities Corporation
Company
[Name of Certificate Administrator]
Certificate Administrator
Mortgage Pass-Through Certificates, Series [199_-_]
$[__________] [____]% Class A-1 Certificates
$[__________] [____]% Class A-2 Certificate
$[__________] [____]% Class A-3 Certificates
$[__________] [____]% Class R Certificates
$ 0 [____]%(1) Class S Certificates
______________________
(1) Based upon the related Notional Amount,
(as described herein). The Class S
Certificates will be Fixed Strip
Certificates and will not be entitled
to receive distributions of principal.
The Series [199_-_] Mortgage Pass-Through Certificates
offered hereby will include the following five classes
(the "Offered Certificates"): (i) Class A-1
Certificates, Class A-2 Certificates and Class A-3
Certificates, (ii) Class S Certificates (the "Fixed Strip
Certificates") and (iii) Class R Certificates (the
"Residual Certificates"). The Offered Certificates in
the aggregate will represent the entire beneficial
ownership interest in a trust fund (the "Trust Fund")
consisting primarily of GNMA Certificates (the
"Underlying Agency Securities"). Each Underlying Agency
Security is a ["fully modified pass-through" mortgage-
backed certificate] [issued and serviced by a mortgage
banking company or other financial concern approved by
GNMA (a "GNMA Issuer")] based on and backed by a pool
(each, a "Mortgage Pool") of [FHA-insured] [or] [VA-
guaranteed], [fixed] [adjustable]-rate, [level]
[graduated] payment one- to four-family first lien
mortgage loans with terms to maturity of not more than
[30] years (collectively, the "Mortgage Loans"). Certain
characteristics of the Underlying Agency Securities are
described herein under "Description of the Underlying
Agency Securities."
(Continued on following page)
PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE
SOURCE OF PAYMENTS ON THE OFFERED CERTIFICATES. THE
OFFERED CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR
OBLIGATION OF THE COMPANY, THE CERTIFICATE ADMINISTRATOR,
GMAC MORTGAGE CORPORATION ("GMAC MORTGAGE") OR ANY OF
THEIR AFFILIATES. ALTHOUGH PAYMENT OF PRINCIPAL AND
INTEREST ON THE UNDERLYING AGENCY SECURITIES IS
GUARANTEED BY GNMA, THE OFFERED CERTIFICATES ARE NOT
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY OR BY THE COMPANY, THE CERTIFICATE
ADMINISTRATOR, GMAC MORTGAGE OR ANY OF THEIR AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. THE ATTORNEY GENERAL OF THE STATE OF
NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS
OFFERING. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT
PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
[Name of Underwriter] (the "Underwriter") intends to make
a secondary market in the Offered Certificates, but has
no obligation to do so. There can be no assurance that
a secondary market for the Offered Certificates will
develop or, if it does develop, that it will continue.
The Offered Certificates will not be listed on any
securities exchange.
The Offered Certificates will be purchased from the
Company by the Underwriter, and will be offered by the
Underwriter from time to time to the public, directly or
through dealers, in negotiated transactions or otherwise
at varying prices to be determined at the time of sale.
The proceeds to the Company from the sale of the Offered
Certificates, before deducting expenses payable by the
Company, will be equal to approximately [____]% of the
initial aggregate principal balance of the Offered
Certificates, plus accrued interest thereon from
[__________ __, 199_] (the "Reference Date"). The
Offered Certificates are offered by the Underwriter
subject to prior sale, when, as and if delivered to and
accepted by the Underwriter and subject to certain other
conditions. The Underwriter reserves the right to
withdraw, cancel or modify such offer and to reject any
order in whole or in part. It is expected that delivery
of the Offered Certificates will be made on or about
[__________ __, 199_], [at the offices of [
], [through the facilities of The Depository Trust
Company], against payment therefor in immediately
available funds.
[Name of Underwriter]
[__________ __, 199_]
<PAGE>
(Continued from previous page)
It is a condition to the issuance of the Offered
Certificates that the Class A-1, Class A-2, Class A-3,
Fixed Strip and Class R Certificates be rated "[__]" by
[_______] and "[__]" by [________].
As described herein, a "real estate mortgage
investment conduit" (a "REMIC") election will be made in
connection with the Trust Fund for federal income tax
purposes. Each class of the Offered Certificates (other
than the Residual Certificates) will represent ownership
of "regular interests" in the REMIC and the Residual
Certificates will be the sole class of "residual
interests" in the REMIC. See "Certain Federal Income Tax
Consequences" herein and in the Prospectus. [Transfers
of the Residual Certificates may be made only to
"qualified institutional buyers" as defined in Rule 144A
under the Securities Act of 1933, as amended, and will be
prohibited to any non-United States person, and will be
subject to certain additional transfer restrictions
described under "Certain Federal Income Tax
Consequences--Special Tax Considerations Applicable to
Residual Certificates" herein and in the Prospectus under
"Certain Federal Income Tax Consequences--REMICs--Tax and
Restrictions on Transfers of REMIC Residual Certificates
to Certain Organizations" and "--Taxation of Owners of
REMIC Residual Certificates--Noneconomic REMIC Residual
Certificates."]
Distributions on the Offered Certificates will be made
on the third business day following each distribution
date for the Underlying Agency Securities (each, a
"Distribution Date"), commencing on [__________ __, 199_]
for the Offered Certificates other than the Class A-3
Certificates, and commencing on the Accretion Termination
Date (as defined herein) for the Class A-3 Certificates.
With respect to any of the Underlying Agency Securities,
the distribution date is the [15th day of each calendar
month in the case of a GNMA I Certificate] [the 20th day
of each calendar month in the case of a GNMA II
Certificate] (or, if such day is not a business day, the
next business day) (each, an "Underlying Security
Distribution Date"). As described herein, interest
distributions on the Offered Certificates will be based
on the Certificate Principal Balance thereof (or the
Notional Amount (as defined herein) in the case of the
Fixed Strip Certificates) and the applicable Pass-Through
Rate thereof, which will be fixed for all classes of
Offered Certificates. Distributions in respect of
principal of the Offered Certificates will be allocated
among the various classes of the Offered Certificates
(other than the Fixed Strip Certificates), as described
herein under "Description of the Offered
Certificates--Principal Distributions on the Offered
Certificates."
The yield to maturity on the Offered Certificates will
depend on the rate and timing of principal payments on
the Underlying Agency Securities, which in turn will be
affected by the rate and timing of principal payments on
the Mortgage Loans. The yield to investors on the Fixed
Strip Certificates will be extremely sensitive to the
rate and timing of principal payments on the related
Underlying Agency Securities, which in turn will be
affected by the rate and timing on the Mortgage Loans
which may fluctuate significantly over time. An
extremely rapid rate of principal payments on the
Mortgage Loans could result in the failure of investors
in the Fixed Strip Certificates to recover their initial
investments. See "Summary--Special Prepayment
Considerations," "--Special Yield Considerations" and
"Certain Yield and Prepayment Considerations" herein and
"Yield Considerations" in the Prospectus.
THE CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT
CONSTITUTE PART OF A SEPARATE SERIES OF CERTIFICATES
BEING OFFERED BY THE COMPANY PURSUANT TO ITS PROSPECTUS
DATED [__________ __, 199_], OF WHICH THIS PROSPECTUS
SUPPLEMENT IS A PART AND WHICH ACCOMPANIES THIS
PROSPECTUS SUPPLEMENT. THE PROSPECTUS CONTAINS IMPORTANT
INFORMATION REGARDING THIS OFFERING NOT CONTAINED HEREIN
AND PROSPECTIVE INVESTORS ARE URGED TO READ THE
PROSPECTUS AND THIS PROSPECTUS SUPPLEMENT IN FULL. SALES
OF THE OFFERED CERTIFICATES MAY NOT BE CONSUMMATED UNLESS
THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS.
UNTIL [__________ __, 199_] (90 DAYS AFTER THE DATE OF
THIS PROSPECTUS SUPPLEMENT), ALL DEALERS EFFECTING
TRANSACTIONS IN THE OFFERED CERTIFICATES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO
WHICH IT RELATES. THIS DELIVERY REQUIREMENT IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS
OR SUBSCRIPTIONS.
[IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR
MAINTAIN THE MARKET PRICE OF THE OFFERED CERTIFICATES AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET, SUCH STABILIZATION, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.]
SUMMARY
The following summary is qualified in its entirety
by reference to the detailed information appearing
elsewhere herein and in the Prospectus. Capitalized
terms used herein and not otherwise defined herein have
the meanings assigned in the Prospectus.
Title of
Securities Mortgage Pass-Through Certificates,
Series [199_-_] (the
"Certificates").
Company Residential Asset Securities
Corporation (the "Company"), a
corporation organized under the laws
of the State of Delaware which is an
affiliate of Residential Funding
Corporation ("Residential Funding"),
and an indirect wholly-owned
subsidiary of GMAC Mortgage. See
"The Company" in the Prospectus.
Certificate
Administrator [Residential Funding] [ ] in
its capacity as certificate
administrator (the "Certificate
Administrator").
Trustee [Name of Trustee], a [national bank]
[[state bank] [trust company]
organized under the laws of
__________] (the "Trustee").
Reference Date [__________ 1, 199_] (the "Reference
Date").
Delivery Date On or about [__________ __, 199_]
(the "Delivery Date").
Distribution Date The third business day following
each distribution date for the
Underlying Agency Securities
commencing on [__________ __, 199_]
(each, a "Distribution Date"). With
respect to any of the Underlying
Agency Securities, the distribution
date is the [15th day of each
calendar month in the case of a GNMA
I Certificate] [the 20th day of each
calendar month in the case of a GNMA
II Certificate] (or, if such day is
not a business day, the next
business day) (each, an "Underlying
Security Distribution Date").
The Trust Fund The Trust Fund, in which the Offered
Certificates in the aggregate
represent the entire beneficial
ownership interest, consists
primarily of the Underlying Agency
Securities. The Offered
Certificates will be issued pursuant
to a Trust Agreement (the "Trust
Agreement"), dated as of the
Reference Date, among the Company,
the Certificate Administrator and
the Trustee.
The Underlying
Agency Securities The Underlying Agency Securities are
[GNMA] [I] [II] Certificates. Each
Underlying Agency Security is a
["fully modified pass-through"
mortgage-backed certificate] [issued
and serviced by a mortgage banking
company or other financial concern
approved by GNMA (a "GNMA Issuer")]
based on and backed by a pool of
[FHA-insured] [or] [VA-guaranteed]
[fixed] [adjustable]-rate [level]
[graduated] payment mortgage loans
(the "Mortgage Loans"). Information
relating to the Underlying Agency
Securities is provided as of the
Reference Date.
The Underlying Agency Securities
will have an aggregate outstanding
principal balance of approximately
$[ ], pass-through rates of [
]% and a weighted average remaining
term to stated maturity of
approximately [ ] months as of the
Reference Date.
The Underlying Agency Securities are
guaranteed as to full and timely
payment of principal and interest by
GNMA. The guaranty of GNMA is
backed by the full faith and credit
of the United States. For a further
description of the underlying Agency
Securities, see "Description of the
Underlying Agency Securities"
herein.
The Offered
Certificates The Offered Certificates in the
aggregate will represent the entire
beneficial ownership interest in the
Trust Fund. The Offered
Certificates will have the following
Pass-Through Rates, Certificate
Principal Balances and other
features as of the Reference Date:
Class A-1 Certificates [____]% $[_________] Fixed
Class A-2 Certificates [____]% $[_________] Fixed
Class A-3 Certificates [____]% $[_________] Fixed/Accrual
Class S Certificates [____]% $ 0 Fixed Strip
[Class R Certificates [____]% $[_________] Residual]
Residual
Certificates The Class R Certificates are
designated as the "Residual
Certificates." [The Residual
Certificates have no Certificate
Principal Balance and no
Pass-Through Rate. The Residual
Certificates represent the right to
receive certain distributions, if
any, of amounts which are in excess
of the amounts required to be
distributed to all other classes of
Offered Certificates following the
retirement of all of the Offered
Certificates.] [The Residual
Certificates are not being offered
hereby.]
[Residential Funding initially will
retain [a de minimis portion of] the
Residual Certificates; however, the
Residual Certificates held by
Residential Funding may be sold at
any time in accordance with the
terms of the Trust Agreement.]
Denominations The Class A-1, Class A-2 and Class
A-3 Certificates will be offered in
registered form, in minimum
denominations of $[ ] and
integral multiples of $[ ]
in excess thereof [, with one Class
[____] Certificate evidencing the
sum of an authorized denomination
thereof plus the remainder of the
aggregate initial Certificate
Principal Balance of such class].
The Fixed Strip Certificates and
Residual Certificates will be
offered in registered form in
minimum denominations of a [____]%
Percentage Interest [, except, in
the case of the Residual
Certificates, as otherwise set forth
herein under "Certain Federal Income
Tax Consequences."]
Pass-Through Rates
on the Offered
Certificates The Pass-Through Rates on all
classes of the Offered Certificates
are the fixed rates set forth above.
The Fixed Strip Certificates have no
Certificate Principal Balance and
will accrue interest at the
applicable Pass-Through Rate on the
related Notional Amount (as defined
herein).
Interest Distributions
on the Offered
Certificates Holders of each class of Offered
Certificates (the
"Certificateholders") will be
entitled to receive interest
distributions in an amount equal to
the Accrued Certificate Interest on
such class on each Distribution
Date, (i) in the case of the Class
A-1 Certificates, Class A-2
Certificates, Fixed Strip
Certificates and Residual
Certificates, to the extent of the
amount available for interest
distributions (as described herein)
for such Distribution Date and (ii)
in the case of the Class A-3
Certificates, to the extent of the
Available Distribution Amount for
such Distribution Date after
distributions of interest and
principal to the Class A-1
Certificates, Class A-2
Certificates, Fixed Strip
Certificates and Residual
Certificates, commencing on the
first Distribution Date in the case
of all classes of Offered
Certificates (other than the Class
A-3 Certificates) and commencing on
the Accretion Termination Date (as
defined below) in the case of the
Class A-3 Certificates.
With respect to any Distribution
Date, "Accrued Certificate Interest"
will be equal to (a) in the case of
each class of Offered Certificates
(other than the Fixed Strip
Certificates), one month's interest
accrued on the related Certificate
Principal Balance of such class, at
the Pass-Through Rate on such class
and (b) in the case of the Fixed
Strip Certificates, one month's
interest accrued on the related
Notional Amount thereof at the Pass-
Through Rate set forth below; [in
each case less the class's pro rata
portion of any Prepayment Interest
Shortfall (as defined herein)
allocated to any of the Underlying
Agency Securities].
The "Notional Amount" of the Fixed
Strip Certificates with respect to
any Distribution Date is equal to
the aggregate Certificate Principal
Balance of the Underlying Agency
Securities immediately prior to the
most recent Underlying Security
Distribution Date.
The Accretion Termination Date is
the first Distribution Date to occur
on which the Certificate Principal
Balance of the Residual, Class A-1
and Class A-2 Certificates have been
reduced to zero. On each
Distribution Date preceding the
Accretion Termination Date, an
amount equal to the Accrued
Certificate Interest on the Class A-
3 Certificates will be added to the
Certificate Principal Balance
thereof (the "Accretion Amount") and
will thereafter accrue interest at
the applicable Pass-Through Rate.
On each Distribution Date on or
after the Accretion Termination
Date, Accrued Certificate Interest
will generally be payable to the
holders of the Class A-3
Certificates, as described herein.
See "Description of the Offered
Certificates--Interest Distributions
on the Offered Certificates" herein.
Principal Distributions
on the Offered
Certificates Holders of the Offered Certificates
(other than the Fixed Strip
Certificates) will be entitled to
receive, in the aggregate, on each
Distribution Date, to the extent of
the portion of the Available
Distribution Amount (as defined
herein) remaining after the
aggregate amount of Accrued
Certificate Interest to be
distributed to the holders of the
Offered Certificates is distributed,
a distribution allocable to
principal which will be equal to the
sum of (i) the aggregate amount
distributed in respect of principal
on all of the Underlying Agency
Securities on the immediately
preceding Underlying Security
Distribution Date and (ii) the
Accretion Amount. Distributions of
principal on the Offered
Certificates will be made first to
the Residual Certificates, second to
Class A-1 Certificates, third to the
Class A-2 Certificates and fourth to
the Class A-3 Certificates, in each
case until the Certificate Principal
Balance thereof is reduced to zero.
The Fixed Strip Certificates have no
Certificate Principal Balance and,
accordingly, will not be entitled to
any principal distributions. See
"Description of the Offered
Certificates--Principal Distributions
on the Offered Certificates" herein.
As to each of the Underlying Agency
Securities, principal distributions
will be made thereon on each
Underlying Security Distribution
Date in the respective amounts
described herein under "Description
of the Underlying Agency
Securities."
Optional
Termination At its option, the Certificate
Administrator or the Company may
repurchase from the Trust Fund all
of the Underlying Agency Securities
remaining in the Trust Fund, and
thereby effect early retirement of
the Offered Certificates, at such
time as the aggregate Certificate
Principal Balance of the Underlying
Agency Securities is less than
[____]% of the aggregate Certificate
Principal Balance thereof as of the
Delivery Date, as described herein.
See "Trust Agreement--Termination"
herein and "The Pooling and
Servicing Agreement-Termination;
Retirement of Certificates" in the
Prospectus.
Special Prepayment
Considerations The rate and timing of principal
payments on the Offered Certificates
will depend, among other things, on
the rate and timing of principal
payments on the Underlying Agency
Securities, which in turn will be
affected by the rate and timing of
principal payments on the Mortgage
Loans. As is the case with
mortgage-backed securities
generally, the Underlying Agency
Securities and, as a result, the
Offered Certificates are subject to
substantial inherent cash-flow
uncertainties because the Mortgage
Loans may be prepaid at any time.
Generally, when prevailing interest
rates increase, prepayment rates on
mortgage loans tend to decrease,
resulting in a slower return of
principal to investors at a time
when reinvestment at such higher
prevailing rates would be desirable.
Conversely, when prevailing interest
rates decline, prepayment rates on
mortgage loans tend to increase,
resulting in a faster return of
principal to investors at a time
when reinvestment at comparable
yields may not be possible.
The allocation of prepayments among
certain classes of the Offered
Certificates will be affected by
certain other factors, as follows:
Distributions of principal to the
Offered Certificates will be made
first to the Residual Certificates,
second, to the Class A-1
Certificates, third, to the Class
A-2 Certificates and fourth, to the
Class A-3 Certificates, in each case
until the Certificate Principal
Balance thereof is reduced to zero.
The timing of commencement of
principal distributions and the
weighted average lives of the Class
A-2 Certificates and Class A-3
Certificates will be affected by the
rates of prepayment experienced both
before and after the commencement of
principal distributions on such
classes.
See "Description of the Offered
ertificates--Principal Distributions
on the Offered Certificates,"
"Description of the Underlying
Agency Securities" and "Certain
Yield and Prepayment Considerations"
herein and "Maturity and Prepayment
Considerations" in the Prospectus.
For further information regarding
the effect of principal prepayments
on the weighted average lives of the
Offered Certificates (other than the
Fixed Strip Certificates and
Residual Certificates), see the
table entitled "Percent of Initial
Certificate Principal Balance
Outstanding at the Following
Percentages of SPA" herein.
Special Yield
Considerations The yield to maturity on each class
of the Offered Certificates will
depend, among other things, on the
rate and timing of principal
payments on the Underlying Agency
Securities, which in turn will be
affected by the rate and timing of
principal payments on the Mortgage
Loans and the allocation thereof to
reduce the Certificate Principal
Balance or Notional Amount of such
class. The yield to maturity on
each class of Offered Certificates
will also depend on the Pass-Through
Rate and the purchase price for such
class. [The yield to investors on
any class of Offered Certificates
will be adversely affected by any
allocation thereto of Prepayment
Interest Shortfalls on the Mortgage
Loans, which are expected to result
from the distribution of interest
only to the date of prepayment
(rather than a full month's
interest) in connection with
prepayments in full, and the lack of
any distribution of interest on the
amount of any partial prepayments.]
In general, if a class of Offered
Certificates is purchased at a
premium and principal distributions
thereon occur at a rate faster than
anticipated at the time of purchase,
the investor's actual yield to
maturity will be lower than that
assumed at the time of purchase.
Conversely, if a class of Offered
Certificates is purchased at a
discount and principal distributions
thereon occur at a rate slower than
that assumed at the time of
purchase, the investor's actual
yield to maturity will be lower than
that assumed at the time of
purchase.
The Offered Certificates were
structured assuming, among other
things, a prepayment assumption of
[____]% SPA (as defined herein) and
corresponding weighted average lives
as described herein. The
prepayment, yield and other
assumptions to be used for pricing
purposes for the respective classes
that are to be offered hereunder may
vary as determined at the time of
sale.
The yield of certain classes of the
Offered Certificates will be
particularly sensitive to changes in
the rates of prepayment of the
Mortgage Loans and other factors, as
follows:
The yield to investors on the Fixed
Strip Certificates will be extremely
sensitive to the rate and timing of
principal payments on the Underlying
Agency Securities, which in turn
will be affected by the rate and
timing of principal payments on the
Mortgage Loans included in the
related Mortgage Pools, which rate
may fluctuate significantly over
time. [In addition, Prepayment
Interest Shortfalls allocated to the
Underlying Agency Securities, will
be allocated to the Fixed Strip
Certificates and each other class of
Offered Certificates on a pro rata
basis based on the aggregate Accrued
Certificate Interest thereon,
regardless, in the case of the Fixed
Strip Certificates, of whether such
Prepayment Interest Shortfalls are
attributable to those Underlying
Agency Securities used for purposes
of determining the related Notional
Amount.] An extremely rapid rate of
principal payments on the Underlying
Agency Securities could result in
the failure of investors in the
Fixed Strip Certificates to recover
their initial investments.
Because the Class A-3 Certificates
do not receive any distribution of
interest until the Accretion
Termination Date, the Class A-3
Certificates will likely experience
greater price and yield volatility
than would mortgage pass-through
certificates which are otherwise
similar but that are entitled to
current distributions of interest.
Investors should consider whether
such volatility is in accordance
with their investment needs.
Holders of the Residual Certificates
are entitled to receive
distributions of principal and
interest as described herein;
however, holders of such
Certificates may have tax
liabilities with respect to their
Certificates during the early years
of the term of the Trust Fund that
substantially exceed the principal
and interest payable thereon during
such periods.
See "Certain Yield and Prepayment
Considerations," especially "-Fixed
Strip Certificate Yield
Considerations" and "--Additional
Yield Considerations Applicable
Solely to the Residual Certificates"
herein, "Certain Federal Income Tax
Consequences" herein and in the
Prospectus and "Yield
Considerations" in the Prospectus.
Certain Federal
Income Tax
Consequences A "real estate mortgage investment
conduit" (a "REMIC") election will
be made with respect to the Trust
Fund for federal income tax
purposes. Upon the issuance of the
Offered Certificates, [Orrick,
Herrington & Sutcliffe] [Thacher
Proffitt & Wood], New York, New
York, tax counsel to the Company,
will deliver its opinion generally
to the effect that, assuming
compliance with all provisions of
the Trust Agreement, the Trust Fund
will qualify as a REMIC under
Sections 860A through 860G of the
Internal Revenue Code of 1986 (the
"Code").
[ADDITIONAL TAX CONSEQUENCES TO BE
INCLUDED AS APPROPRIATE.]
For further information regarding
the federal income tax consequences
of investing in the Offered
Certificates, see "Certain Federal
Income Tax Consequences" herein and
in the Prospectus.
ERISA
Considerations [ERISA CONSIDERATIONS TO BE INCLUDED
AS NECESSARY.] See "ERISA
Considerations" [herein and] in the
Prospectus.
Ratings It is a condition to the issuance of
the Offered Certificates that the
Class A-1, Class A-2, Class A-3,
Fixed Strip and Class R Certificates
be rated "[__]" by [__________] and
"[__]" by [________]. A security
rating is not a recommendation to
buy, sell or hold securities and may
be subject to revision or withdrawal
at any time by the assigning rating
organization. A security rating
does not address the frequency of
prepayments of Mortgage Loans, or
the corresponding effect on yield to
investors. The rating of the Fixed
Strip Certificates does not address
the possibility that the holders of
such Certificates may fail to fully
recover their initial investments.
See "Certain Yield and Prepayment
Considerations" and "Ratings" herein
and "Yield Considerations" in the
Prospectus.
Legal Investment
Matters The Offered Certificates will
constitute "mortgage related
securities" for purposes of the
Secondary Mortgage Market
Enhancement Act of 1984, as amended
("SMMEA"), for so long as they are
rated in one of the two highest
rating categories by at least one
nationally recognized statistical
rating organization, and, as such,
will be legal investments for
certain entities to the extent
provided in SMMEA. Institutions
whose investment activities are
subject to legal investment laws and
regulations or review by regulatory
authorities should consult with
their legal advisors in determining
whether and to what extent the
Offered Certificates constitute
legal investments under SMMEA or are
subject to restriction on
investment, capital requirements or
otherwise. See "Legal Investment
Matters" herein and in the
Prospectus.
<PAGE>
[SPECIAL CONSIDERATIONS]
[Prospective Certificateholders should consider,
among other things, the items discussed under "Special
Considerations" in the Prospectus and the following
factors in connection with the purchase of the
Certificates:]
[APPROPRIATE SPECIAL CONSIDERATIONS REGARDING MORTGAGE
COLLATERAL TO BE INSERTED AS NECESSARY]
DESCRIPTION OF THE OFFERED CERTIFICATES
General
The Series [199_-_] Mortgage Pass-Through
Certificates will include the following five classes (the
"Offered Certificates"): (i) Class A-1 Certificates,
Class A-2 Certificates and Class A-3 Certificates, (ii)
the Class S Certificates (the "Fixed Strip Certificates")
and (iii) the Class R Certificates (the "Residual
Certificates").
The Offered Certificates in the aggregate will
represent the entire beneficial ownership interest in the
Trust Fund. The Trust Fund will consist of: (i) the
Underlying Agency Securities, including all distributions
thereon payable after the Delivery Date; and (ii) such
assets as from time to time are identified as deposited
in respect of the Underlying Agency Securities in the
Certificate Account and belonging to the Trust Fund.
Available Distribution Amount
The "Available Distribution Amount" with respect to
the Offered Certificates for any Distribution Date will
be equal to the aggregate amount of distributions on the
Underlying Agency Securities on the immediately preceding
Underlying Security Distribution Date, after deduction of
the related Servicing Fee (as described herein under "The
Trust Agreement--Compensation of Certificate
Administrator").
Interest Distributions
Holders of each class of Offered Certificates will
be entitled to receive interest distributions in an
amount equal to the Accrued Certificate Interest on such
class on each Distribution Date, (i) in the case of the
Class A-1 Certificates, Class A-2 Certificates, Fixed
Strip Certificates and Residual Certificates, to the
extent of the Available Distribution Amount for such
Distribution Date and (ii) in the case of the Class A-3
Certificates to the extent of the Available Distribution
Amount for such Distribution Date after distributions of
interest and principal on the Class A-1 Certificates,
Class A-2 Certificates, Fixed Strip Certificates and
Residual Certificates, commencing on the first
Distribution Date in the case of all classes of Offered
Certificates (other than the Class A-3 Certificates) and
commencing on the Accretion Termination Date in the case
of the Class A-3 Certificates. Notwithstanding the
foregoing sentence, the amount available for interest
distributions on the Offered Certificates on any
Distribution Date shall not exceed the aggregate amounts
distributed on the Underlying Agency Securities on the
preceding Underlying Security Distribution Date in
respect of interest, reduced by the Servicing Fee (as
defined herein), which is calculated at a rate of [____]%
per annum.
With respect to any Distribution Date, "Accrued
Certificate Interest" will be equal to (a) in the case of
each class of Offered Certificates (other than the Fixed
Strip Certificates) one month's interest accrued on the
Certificate Principal Balance of such class at the Pass-
Through Rate set forth on the cover hereof and (b) in the
case of the Fixed Strip Certificates, one month's
interest accrued on the Notional Amount at the applicable
Pass-Through Rate[; in each case minus the aggregate
amount of Prepayment Interest Shortfalls for such
Distribution Date as described in the following sentence,
which shall be allocated among the Offered Certificates
(including the Fixed Strip Certificates and, in the case
of such Certificates, without regard to the source of
such Prepayment Interest Shortfalls in proportion to the
total amount of Accrued Certificate Interest that would
have been paid thereon absent such reductions]. [For
purposes of the foregoing, the aggregate amount of
Prepayment Interest Shortfalls for any Distribution Date
will be equal to the aggregate amount of Prepayment
Interest Shortfalls, if any, allocated to each of the
Underlying Agency Securities for the immediately
preceding Underlying Security Distribution Date.] [Any
Prepayment Interest Shortfalls will not be offset by a
reduction of the servicing compensation of the
Certificate Administrator or otherwise.] Accrued
Certificate Interest is calculated on the basis of a 360-
day year consisting of twelve 30-day months.
The "Accretion Termination Date" for the Class A-3
Certificates is the first Distribution Date on or after
the Certificate Principal Balances of the Residual
Certificates, Class A-1 Certificates and Class A-2
Certificates have been reduced to zero. On each
Distribution Date preceding the Accretion Termination
Date, an amount equal to the amount of Accrued
Certificate Interest on the Class A-3 Certificates for
such date will be added to the Certificate Principal
Balance thereof (the "Accretion Amount"), and such amount
will be distributed to the holders of the Offered
Certificates, other than the Class A-3 Certificates, as
described herein, in reduction of the Certificate
Principal Balances thereof, as described herein. On each
Distribution Date on or after the Accretion Termination
Date, the entire amount of Accrued Certificate Interest
on the Class A-3 Certificates for such Distribution Date
will be payable to the holders of the Class A-3
Certificates, to the extent not required to fully retire
the remaining Offered Certificates (other than the Class
A-3 Certificates) on the Accretion Termination Date.
The Pass-Through Rates on all classes of Offered
Certificates are the fixed rates set forth on the cover
hereof. The Fixed Strip Certificates have no Certificate
Principal Balance and will accrue interest at the
applicable Pass-Through Rate on the Notional Amount.
As described herein, the Accrued Certificate
Interest allocable to each class of Offered Certificates
is based on the Certificate Principal Balance thereof or,
in the case of the Fixed Strip Certificates, on the
Notional Amount. The "Certificate Principal Balance" of
any Offered Certificate as of any date of determination
is equal to the initial Certificate Principal Balance
thereof, reduced by the aggregate of all amounts
allocable to principal previously distributed with
respect to such Offered Certificate and, in the case of
the Class A-3 Certificates, increased by the amount of
any Accrued Certificate Interest added to the Certificate
Principal Balance of such class. The "Notional Amount"
of the Fixed Strip Certificates is initially
$[__________] and with respect to any Distribution Date
is equal to the aggregate Certificate Principal Balance
of the Underlying Agency Securities immediately prior to
the most recent Underlying Security Distribution Date.
Principal Distributions
Holders of the Offered Certificates (other than the
Fixed Strip Certificates, which are not entitled to
receive any principal distributions) will be entitled to
receive, in the aggregate on each Distribution Date, to
the extent of the portion of the Available Distribution
Amount remaining after Accrued Certificate Interest has
been distributed to the holders of the Class A-1
Certificates, Class A-2 Certificates, Fixed Strip
Certificates and Residual Certificates for such
Distribution Date (and, in the case of any payments of
principal to the Class A-3 Certificates, after Accrued
Certificate Interest has been distributed to the holders
thereof for such Distribution Date), a distribution
allocable to principal which will be equal to the sum of
(i) the aggregate amount distributed in respect of
principal on all of the Underlying Agency Securities on
the immediately preceding Underlying Security
Distribution Date and (ii) the Accretion Amount
(together, the "Principal Distribution Amount").
On each Distribution Date, the Principal
Distribution Amount shall be distributed as follows:
(i) first, to the holders of the Residual
Certificates, until the Certificate Principal
Balance thereof is reduced to zero;
(ii) second, to the holders of the Class A-1
Certificates, until the Certificate Principal
Balance thereof is reduced to zero;
(iii) third, to the holders of the Class
A-2 Certificates, until the Certificate Principal
Balance thereof is reduced to zero; and
(iv) fourth, to the holders of the Class A-3
Certificates, until the Certificate Principal
Balance thereof is reduced to zero.
DESCRIPTION OF THE UNDERLYING AGENCY SECURITIES
The Underlying Agency Securities relating to the
Series [199___-___] Certificates are [GNMA] [I][II]
Certificates [(as referred to by GNMA)]. Each Underlying
Agency Security is [a "fully modified pass through"
mortgage-backed certificate issued and serviced by a
mortgage banking company or other financial concern
approved by GNMA (a "GNMA Issuer")] and based on and
backed by a pool (each, a "Mortgage Pool") of [FHA-
insured] [or] [VA-guaranteed] [fixed] [adjustable]-rate
[level] [graduated] payment one- to four-family first
mortgage loans with original terms to maturity from the
date of origination or modification of not more than [30]
years.
The full and timely payment of principal and
interest on each Underlying Agency Security will be
guaranteed by GNMA, which obligation is backed by the
full faith and credit of the United States. See "The
Agency Securities--Government National Mortgage
Association" and "--GNMA Securities" in the Prospectus.
Each Underlying Agency Security will have an original
maturity of not more than [30] years. Each Underlying
Agency Security will be based on and backed by a Mortgage
Pool and will provide for the payment by or on behalf of
the [GNMA Issuer] to the registered holder of such
Underlying Agency Security of fixed monthly payments of
principal and interest equal to the aggregate amount of
the scheduled monthly principal and interest payments on
the Mortgage Loans relating to such Underlying Agency
Security, [less a servicing and guarantee fee of 0.5% and
up to 1.5% per annum of the outstanding principal balance
for such GNMA I Certificates and GNMA II Certificates,
respectively]. In addition, each payment will include
any prepayments of principal of the Mortgage Loans
relating to such Underlying Agency Security and
liquidation proceeds in the event of a foreclosure or
other disposition of any such Mortgage Loans.
[GNMA has approved the issuance of each Underlying
Agency Security in accordance with a guarantee agreement
(a "Guarantee Agreement") between GNMA and the GNMA
Issuer. Pursuant to its Guarantee Agreement, a GNMA
Issuer will be required to advance its own funds in order
to make timely payments of all amounts due on each
Underlying Agency Security, even if the payments received
by the GNMA Issuer on the Mortgage Loans relating to each
Underlying Agency Security are less than the amounts due
on each such Underlying Agency Security.]
[No GNMA Issuer will insure or guarantee the Offered
Certificates or the Underlying Agency Securities. Each
GNMA Issuer will perform the routine functions required
for servicing of Mortgage Loans, including mortgagor
billings, receipt and posting of payments, payment of
property taxes, hazard insurance premiums, remittance,
collections and customer service. Each GNMA Issuer will
be obligated under its Guarantee Agreement with GNMA to
service the pooled Mortgage Loans in accordance with
[FHA] [and VA] requirements and with generally accepted
practices in the mortgage lending industry. Each GNMA
Issuer's responsibilities with respect to the pooled
Mortgage Loans will include collection of all principal
and interest payments and payments made by borrowers
toward escrows established for taxes and insurance
premiums; maintenance of necessary hazard insurance
policies; institution of all actions necessary to
foreclose on, or take other appropriate action with
respect to, loans in default; and collection of [FHA
insurance] [and VA guarantee benefits].]
[If a GNMA Issuer is unable to make the payments on
an Underlying Agency Security as it becomes due, it must
promptly notify GNMA and request GNMA to make such
payment. Upon notification and request, GNMA will make
such payments directly to the registered holder of such
Underlying Agency Security. In the event no payment is
made by a GNMA Issuer and the GNMA Issuer fails to notify
and request GNMA to make such payment, the holder of such
Underlying Agency Security will have recourse only
against GNMA to obtain such payment. The Trustee or its
nominee, as registered holder of the Underlying Agency
Security, will have the right to proceed directly against
GNMA under the terms of the Guaranty Agreement relating
to such Underlying Agency Security for any amounts that
are not paid when due.]
Regular monthly installment payments on each
Underlying Agency Security will be comprised of interest
due as specified on such Underlying Agency Security plus
the scheduled principal payments on the related Mortgage
Loans due on the first day of the month in which the
scheduled monthly installment on such Underlying Agency
Security is due. Such regular monthly installments on
each such Underlying Agency Security will be [paid to the
Trustee as registered holder by the 15th day of each
month in the case of a GNMA I Certificate] [and will be
mailed to the Trustee by the 20th day of each month in
the case of a GNMA II Certificate] (each, an "Underlying
Security Distribution Date"). Any principal prepayments
on any Mortgage Loans underlying an Underlying Agency
Security or any other early recovery of principal of such
loans will be passed through to the Trustee as the
registered holder of the Underlying Agency Security.
The Underlying Agency Securities had an aggregate
outstanding principal balance of approximately
$[___________], pass-through rates of [___]% and a
weighted average remaining term to stated maturity of
approximately [_____] months as of the Reference Date.
[INSERT ADDITIONAL DESCRIPTION OF UNDERLYING AGENCY
SECURITIES AS APPROPRIATE]
A Current Report on Form 8-K will be available to
purchasers of the Offered Certificates and will be filed,
together with the Trust Agreement, with the Securities
and Exchange Commission within fifteen days after the
initial issuance of the Offered Certificates.
CERTAIN YIELD AND PREPAYMENT CONSIDERATIONS
General
The yield to maturity and the aggregate amount of
distributions on the Offered Certificates will be
affected by the rate and timing of principal payments on
the Underlying Agency Securities, which in turn will be
affected by the rate and timing of principal payments on
the Mortgage Loans. Such yield may be adversely affected
by a higher or lower than anticipated rate of principal
payments on the Mortgage Loans in the Trust Fund. The
rate of principal payments on such Mortgage Loans will in
turn be affected by the amortization schedules of the
Mortgage Loans, the rate and timing of principal
prepayments thereon by the Mortgagors and liquidations of
defaulted Mortgage Loans. The timing of changes in the
rate of prepayments and liquidations of the Mortgage
Loans may affect the yield to an investor, even if the
average rate of principal payments experienced over time
is consistent with an investor's expectation. Since the
rate and timing of principal payments on the Mortgage
Loans will depend on future events and on a variety of
factors (as described more fully herein under "Yield
Considerations" and "Maturity and Prepayment
Considerations" and in the Prospectus), no assurance can
be given as to such rate or the timing of principal
payments on the Offered Certificates.
The Mortgage Loans generally may be prepaid by the
Mortgagors at any time without payment of any prepayment
fee or penalty. The Mortgage Loans generally contain
due-on-sale clauses. Prepayments (to the extent of
distributions thereof on the related Underlying Agency
Securities) and liquidators of the Mortgage Loans will
result in distributions to holders of the Offered
Certificates of principal amounts which would otherwise
be distributed over the remaining terms of the Mortgage
Loans. Factors affecting prepayment of mortgage loans
include changes in mortgagors' housing needs, job
transfers, unemployment, mortgagors' net equity in the
mortgaged properties, changes in the value of the
mortgaged properties, mortgage market interest rates,
solicitations and servicing decisions. In addition, if
prevailing mortgage rates fall significantly below the
Mortgage Rates on the Mortgage Loans, the rate of
prepayments (including refinancings) would be expected to
increase. Conversely, if prevailing mortgage rates rise
significantly above the Mortgage Rates on the Mortgage
Loans, the rate of prepayment on the Mortgage Loans would
be expected to decrease.
[The aggregate amount of interest otherwise payable
to holders of the Offered Certificates will be reduced by
any Prepayment Interest Shortfalls with respect to the
Underlying Agency Securities.] [In addition, Prepayment
Interest Shortfalls allocated to the Underlying Agency
Securities, will be allocated to the Fixed Strip
Certificates and each other class of Offered Certificates
on a pro rata basis based on the aggregate Accrued
Certificate Interest thereon, regardless, in the case of
the Fixed Strip Certificates, of whether such Prepayment
Interest Shortfalls are attributable to those Underlying
Agency Securities used for purposes of determining the
notional amount.] Such Prepayment Interest Shortfalls
will not be offset by a reduction in the Servicing Fee
payable to the Certificate Administrator or otherwise.
See "Yield Considerations" in the Prospectus and
"Description of the Offered Certificates--Interest
Distributions" and "Description of the Underlying Agency
Securities" herein for a discussion of the effect of
principal prepayments on the Mortgage Loans on the yield
to maturity of the Offered Certificates.
The yield to maturity of the Offered Certificates
will depend on the price paid by the holders of the
Offered Certificates and the related Pass-Through Rate.
The extent to which the yield to maturity of an Offered
Certificate is sensitive to prepayments will depend, in
part, upon the degree to which it is purchased at a
discount or premium. In general, if a class of Offered
Certificates is purchased at a premium and principal
distributions thereon occur at a rate faster than
anticipated at the time of purchase, the investor's
actual yield to maturity will be lower than that assumed
at the time of purchase. Conversely, if a class of
Offered Certificates is purchased at a discount and
principal distributions thereon occur at a rate slower
than that assumed at the time of purchase, the investor's
actual yield to maturity will be lower than that assumed
at the time of purchase. For additional considerations
relating to the yield on the Offered Certificates, see
"Yield Considerations" and "Maturity and Prepayment
Considerations" in the Prospectus.
The yield to maturity on the Offered Certificates
will be less that the yield that would otherwise be
produced by the applicable Pass-Through Rate and the
applicable purchase price because, while interest on the
Mortgage Loans will accrue monthly and will be payable of
the first day of each month, distributions on the
Underlying Agency Certificates will be made on the
[15th][20th] day of each month (or, if such day is not a
business day, the next business day) and distributions on
the Offered Certificates will not be made until the third
business day following such distribution date.
Weighted average life refers to the average amount
of time that will elapse from the date of issuance of a
security to the date of distribution to the investor of
each dollar distributed in reduction of principal of such
security (assuming no losses). The weighted average life
of the Offered Certificates will be influenced by, among
other things, the rate at which principal of the Mortgage
Loans is paid, which may be in the form of scheduled
amortization, prepayments or liquidations.
The assumed final Distribution Date with respect to
each class of the Offered Certificates is [__________ __,
20__] which is the Distribution Date [immediately] [____
months] following the latest scheduled maturity date for
any Mortgage Loan. No event of default, change in the
priorities for distribution among the various classes or
other provisions under the Trust Agreement will arise or
become applicable solely by reason of the failure to
retire the entire Certificate Principal Balance of any
class of Offered Certificates on or before its assumed
final Distribution Date.
Prepayments on mortgage loans are commonly measured
relative to a prepayment standard or model. The model
used in this Prospectus Supplement, the standard
prepayment assumption ("SPA"), represents an assumed rate
of prepayment each month relative to the then outstanding
principal balance of a pool of new mortgage loans. A
prepayment assumption of 100% SPA assumes constant
prepayment rates of 0.2% per annum of the then
outstanding principal balance of such mortgage loans in
the first month of the life of the mortgage loans and an
additional 0.2% per annum in each month thereafter until
the thirtieth month. Beginning in the thirtieth month
and in each month thereafter during the life of the
mortgage loans, 100% SPA assumes a constant prepayment
rate of 6% per annum each month. As used in the table
below, "0% SPA" assumes prepayment rates equal to 0% of
SPA (i.e., no prepayments). Correspondingly, "[___]%
SPA" assumes prepayment rates equal to [___]% of SPA, and
so forth. SPA does not purport to be a historical
description of prepayment experience or a prediction of
the anticipated rate of prepayment of any pool of
mortgage loans, including the Mortgage Loans.
As described herein under "Certain Federal Income
Tax Consequences," the prepayment assumption with respect
to the Underlying Agency Securities that will be used in
determining the rate of accrued original issue discount,
market discount and premium, if any, on the Offered
Certificates for federal income tax purposes will be
[____]% SPA. The original prepayment assumption for each
series of the Underlying Security is indicated in the
corresponding Term Sheet.
Modeling Assumptions
The table set forth below entitled "Percent of
Initial Certificate Principal Balance Outstanding at the
Following Percentage of SPA" has been prepared on the
basis of certain assumptions as described below (the
"Modeling Assumptions") regarding the weighted average
characteristics of the Mortgage Loans that are included
in the Mortgage Pools and the performance thereof.
Modeling Assumptions include among other things, that as
of the Reference Date, the characteristics of the
Mortgage Loans in each respective Mortgage Pool and the
Pass-Through Rate for the related Underlying Agency
Securities are as set forth in the following table:
Aggregate
Oustanding Pass-
Principal Weighted Weighted Through
Balance Weighted Weighted Average Average Rate on the
of the Average Average Original Term to Underlying
Mortgage Mortgage Service Term to Scheduled Agency
Series Loans Rate Fee Maturity(1) Maturity(1) Securities
$ % %
Aggregate $
__________________
(1) In months.
In addition, the Modeling Assumptions, among other
things, assume that: (i) the Underlying Agency Security
Principal Balance is $[_______________]; (ii) the
scheduled monthly payment for a Mortgage Loan in each
respective Mortgage Pool has been based on its
outstanding balance, interest rate and term to scheduled
maturity, such that the Mortgage Loan will amortize in
amounts sufficient for repayment thereof over its
remaining term to maturity; (iii) the [GNMA Issuer] will
not repurchase any Mortgage Loan or exercise any option
to purchase the remaining Mortgage Loans in any Mortgage
Pool, and neither the Certificate Administrator nor the
Company will exercise any option to purchase the
Underlying Agency Securities and thereby cause a
termination of the Trust Fund; (iv) there are no
delinquencies on the Mortgage Loans, and principal
payments on the Mortgage Loans will be timely received
together with prepayments, if any, at the respective
constant percentages of SPA set forth in the table; (v)
there is no Prepayment Interest Shortfall or any other
interest shortfall in any month; (vi) as of the date of
issuance of the Offered Certificates, the Underlying
Agency Securities are as described herein under
"Description of the Underlying Agency Securities" and in
the corresponding Term Sheet; (vii) payments on the
Offered Certificates will be received on the 28th day of
each month, commencing [__________ __, 199_]; (viii)
payments on the Mortgage Loans earn no reinvestment
return; (ix) there are no additional ongoing Trust Fund
expenses payable out of the Trust Fund; and (x) the
Offered Certificates will be purchased on [__________ __,
19__].
The actual characteristics and performance of the
Mortgage Loans differ from the Modeling Assumptions used
in constructing the table set forth below, which is
hypothetical in nature and is provided only to give a
general sense of how the principal cash flows might
behave under varying prepayment scenarios. For example,
it is very unlikely that the Mortgage Loans will prepay
at a constant level of SPA until maturity or that all of
the Mortgage Loans will prepay at the same level of SPA.
Moreover, the diverse remaining terms to maturity of the
Mortgage Loans could produce slower or faster principal
distributions than indicated in the table at the various
constant percentages of SPA specified, even if the
weighted average remaining term to maturity of the
Mortgage Loans is as assumed. Any difference between the
Modeling Assumptions and the actual characteristics and
performance of the Mortgage Loans, or actual prepayment
or loss experience, will affect the percentages of
initial Certificate Principal Balances outstanding over
time and the weighted average lives of the classes of
Offered Certificates.
Subject to the foregoing discussion and the Modeling
Assumptions, the following table indicates the weighted
average lives of the Class A-1, Class A-2 and Class A-3
Certificates, and sets forth the percentages of the
initial Certificate Principal Balance of each such Class
A-1, Class A-2 and Class A-3 Certificate that would be
outstanding after each of the dates shown at various
percentages of SPA.
<PAGE>
Percent of Initial Certificate Principal Balance
Outstanding at the Following Percentages of SPA
Class A-1 Class A-2 Class A-3
Distribution
Date 0% % % % % 0% % % % % 0% % % % %
Initial
Percentage
Weighted
Average
Life in
Years**
* Indicates a number that is greater than zero but
less than 0.5%.
** The weighted average life of a Certificate of any
class is determined by (i) multiplying the amount
of each net distribution in reduction of
Certificate Principal Balance by the number of
years from the date of issuance of the Certificate
to the related Distribution Date, (ii) adding the
results, and (iii) dividing the sum by the
aggregate of the net distributions described in
clause (i) above.
This table has been prepared based on the Modeling
Assumptions (including the assumptions regarding the
characteristics and performance of the Mortgage Loans,
which differ from the actual characteristics and
performance thereof) and should be read in conjunction
therewith.
<PAGE>
Fixed Strip Certificate Yield Considerations
The yield to maturity on each class of the Fixed
Strip Certificates will be extremely sensitive to the
rate and timing of receipt of principal payments on the
Underlying Agency Securities, which in turn will be
affected by the rate and timing of principal payments
(including prepayments, defaults and liquidations) on the
Mortgage Loans included in the corresponding Mortgage
Pools, which rate may fluctuate significantly over time.
The following table indicates the sensitivity of the
yield to maturity on each class of the Fixed Strip
Certificates to various constant rates of prepayment by
projecting the monthly aggregate payments of interest on
the Fixed Strip Certificates and computing the
corresponding pre-tax yields to maturity on a corporate
bond equivalent basis, based on the Modeling Assumptions
including the assumptions regarding the characteristics
and performance of the Mortgage Loans included in the
corresponding Mortgage Pools which differ from the actual
characteristics and performance thereof, and assuming
further that the Pass-Through Rate and Notional Amount on
the Fixed Strip Certificates are as set forth herein.
Any differences between the Modeling Assumptions and the
actual characteristics and performance of the
corresponding Mortgage Loans may result in yields being
different from those shown in such table. Discrepancies
between assumed and actual characteristics and
performance underscore the hypothetical nature of the
table, which is provided only to give a general sense of
the sensitivity of yields in varying prepayment
scenarios.
Pre-Tax Yield to Maturity of the Fixed Strip
Certificates at the Following
Percentages of SPA
Assumed
Purchase
Price 0% [___]% [___]% [___]% [___]%
$[_____] [___]% [___]% [___]% [___]% [___]%
Each pre-tax yield to maturity set forth in the
preceding table was calculated by determining the monthly
discount rate which, when applied to the assumed stream
of cash flows to be paid on the Fixed Strip Certificates,
would cause the discounted present value of such assumed
stream of cash flows to equal the assumed purchase price
listed in the table for such class of Fixed Strip
Certificates. Accrued interest is included in the
purchase prices shown and is used in computing the
corporate bond equivalent yields shown. These yields do
not take into account the different interest rates at
which investors may be able to reinvest funds received by
them as distributions on the Fixed Strip Certificates,
and thus do not reflect the return on any investment in
the Fixed Strip Certificates when any reinvestment rates
other than the discount rates are considered.
Notwithstanding the assumed prepayment rates
reflected in the preceding table, it is highly unlikely
that the Mortgage Loans included in the corresponding
Mortgage Pools will be prepaid according to one
particular pattern. For this reason, and because the
timing of cash flows is critical to determining yields,
the pre-tax yields to maturity on the Fixed Strip
Certificates are likely to differ from those shown in the
table, even if all of the corresponding Mortgage Loans
prepay at the indicated constant percentages of SPA over
any given time period or over the entire life of the
Offered Certificates.
There can be no assurance that the corresponding
Mortgage Loans will prepay at any particular rate or that
the yield on the Fixed Strip Certificates will conform to
the yields described herein. Moreover, the various
remaining terms to maturity of the corresponding Mortgage
Loans could produce slower or faster principal
distributions than indicated in the preceding table at
the various constant percentages of SPA specified, even
if the weighted average remaining term to maturity of the
corresponding Mortgage Loans is as assumed. Investors
are urged to make their investment decisions based on
their determinations as to anticipated rates of
prepayment under a variety of scenarios. Investors in
the Fixed Strip Certificates should fully consider the
risk that a rapid rate of prepayments on the Mortgage
Loans could result in the failure of such investors to
fully recover their investments.
For additional considerations relating to the yield
on the Offered Certificates, see "Yield Considerations"
and "Maturity and Prepayment Considerations" in the
Prospectus.
Additional Yield Considerations Applicable Solely to the
Residual Certificates
The Residual Certificateholders' after-tax rate of
return on their Residual Certificates will reflect their
pre-tax rate of return, reduced by the taxes required to
be paid with respect to the Residual Certificates.
Holders of Residual Certificates may have tax liabilities
with respect to their Residual Certificates during the
early years of the Trust Fund's term that substantially
exceed any distributions payable thereon during any such
period. In addition, holders of Residual Certificates
may have tax liabilities with respect to their Residual
Certificates the present value of which substantially
exceeds the present value of distributions payable
thereon and of any tax benefits that may arise with
respect thereto. Accordingly, the after-tax rate of
return on the Residual Certificates may be negative or
may otherwise be significantly adversely affected. The
timing and amount of taxable income attributable to the
Residual Certificates will depend on, among other things,
the timing and amounts of prepayments and losses
experienced with respect to the Mortgage Loans underlying
the Underlying Agency Securities.
The Residual Certificateholders should consult their
tax advisors as to the effect of taxes and the receipt of
any payments made to such holders in connection with the
purchase of the Residual Certificates on after-tax rates
of return on the Residual Certificates. See "Certain
Federal Income Tax Consequences" herein and in the
Prospectus.
THE TRUST AGREEMENT
General
The Certificates will be issued pursuant to a Trust
Agreement (the "Trust Agreement"), dated as of
[__________ __, 199_], among the Company, the Certificate
Administrator, and [ ], as Trustee.
Reference is made to the Prospectus for important
information in addition to that set forth herein
regarding the terms and conditions of the Trust Agreement
and the Offered Certificates. The Offered Certificates
will be transferable and exchangeable at the corporate
trust office of the Trustee, which will serve as
Certificate Registrar and Paying Agent. The Company will
provide a prospective or actual Certificateholder without
charge, on written request, a copy of the Trust Agreement
(without exhibits) . Requests should be addressed to the
[__________], Residential Asset Securities Corporation,
[_________________________________________________].
The Certificate Administrator
[Residential Funding, an indirect wholly-owned
subsidiary of GMAC Mortgage and an affiliate of the
Company], [__________] will act as certificate
administrator with respect to the Offered Certificates
pursuant to the Trust Agreement. [For a general
description of Residential Funding and its activities,
see "Residential Funding Corporation" in the Prospectus.]
Assignment of the Underlying Agency Securities
On the Delivery Date, the Company will deliver to
the Trustee, with respect to each class of Underlying
Agency Securities, the Certificate for such class
registered in the name of the Trustee, evidencing the
entire interest in such class. The Trustee will be
entitled to receive distributions in respect of each
Underlying Agency Security beginning with the
distributions thereon in [__________, 199_]. A
Certificate Account will be established as part of the
Trust Fund, which shall be an Eligible Account as
described in the Prospectus under "Description of the
Certificates--Payments on Mortgage Collateral," into which
the Trustee shall deposit all amounts received as
distributions on the Underlying Agency Securities (net of
the Servicing Fee described below), pending distributions
on the Offered Certificates on each Distribution Date.
Compensation of Certificate Administrator
The primary compensation to be paid to the
Certificate Administrator in respect of its certificate
administration activities in respect of the Offered
Certificates pursuant to the Trust Agreement will be
[____]% per annum of the aggregate outstanding
Certificate Principal Balance of the Underlying Agency
Securities (the "Servicing Fee"), payable monthly out of
the interest distributions on such Underlying Agency
Securities. The Certificate Administrator is obligated
to pay certain ongoing expenses associated with the Trust
Fund and incurred by the Certificate Administrator in
connection with its responsibilities under the Trust
Agreement. See "Description of the
Certificates--Servicing and Administration of Mortgage
Collateral" in the Prospectus for information regarding
other possible compensation to the Certificate
Administrator and for information regarding expenses
payable by the Certificate Administrator.
Actions in Respect of the Underlying Agency Securities
If at any time the Trustee, in its capacity as the
registered holder of the Underlying Agency Securities, is
requested to take any action or to give any consent,
approval or waiver, the Trust Agreement provides that the
Trustee, in its capacity as holder of the Underlying
Agency Securities, may take action in connection with the
enforcement of any rights and remedies available to it in
such capacity with respect thereto, will promptly notify
all of the holders of the Offered Certificates and will
act only in accordance with the written directions of
holders of the Offered Certificates evidencing at least
51% of the voting rights.
Voting Rights
Certain actions specified in the Prospectus that may
be taken by holders of Offered Certificates evidencing a
specified percentage of all undivided interests in the
Trust Fund may be taken by holders of Offered
Certificates entitled in the aggregate to such percentage
of the voting rights. [____]% of all voting rights will
be allocated among all holders of the Class A-1, Class A-
2 and Class A-3 Certificates in proportion to their then-
outstanding Certificate Principal Balances and [____]%
and [____]% of all voting rights will be allocated among
holders of the Class S Certificates and Residual
Certificates, respectively, in proportion to the
Percentage Interests (as defined in the Prospectus)
evidenced by their respective Certificates. The Trust
Agreement will be subject to amendment without the
consent of the holders of the Residual Certificates in
certain circumstances.
Termination
Either the Certificate Administrator or the Company
may, at its option, repurchase from the Trust Fund all of
the Underlying Agency Securities remaining in such Trust
Fund and other assets thereof, and thereby effect early
retirement of the Offered Certificates at such time as
the aggregate of the Certificate Principal Balances of
such Underlying Agency Securities is less than [____]% of
the aggregate of the Certificate Principal Balances of
the Underlying Agency Securities as of the Closing Date.
In the event such option is exercised, the purchase price
distributed with respect to each of the Offered
Certificates will be 100% of its then outstanding
Certificate Principal Balance plus interest thereon at
the Pass-Through Rate.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Upon the issuance of the Offered Certificates,
[Orrick, Herrington & Sutcliffe] [Thacher Proffitt &
Wood], counsel to the Company, will deliver its opinion
generally to the effect that, assuming compliance with
all provisions of the Trust Agreement, the Trust Fund
will qualify as a REMIC under Sections 860A through 860G
of the Code.
For federal income tax purposes, the Residual
Certificates will be the sole class of "residual
interests" in the Trust Fund and the Offered Certificates
(other than the Residual Certificates) will represent
ownership of "regular interests" in the Trust Fund and
will be generally treated as debt instruments of the
Trust Fund. See "Certain Federal Income Tax Consequences"
in the Prospectus.
[ADDITIONAL TAX CONSIDERATIONS TO BE INCLUDED AS
APPROPRIATE]
For further information regarding the federal income
tax consequences of investing in the Offered
Certificates, see "Certain Federal Income Tax
Consequences" in the Prospectus.
ERISA CONSIDERATIONS
[A description of whether there will be any
exemption from "plan asset" treatment will be available
with respect to the Series to be included as
appropriate.]
[A statement of whether the Series will be an Exempt
or a Nonexempt Series to be included if appropriate]
[To qualify for exemption under PTCE 83-1 (see
"ERISA Considerations--Prohibited Transaction Exemption"
in the Prospectus), a Certificate of an Exempt Series
must entitle its holder to pass-through payments of both
principal and interest on the Mortgage Loans. Any Plan
fiduciary who proposes to cause a Plan to purchase
Offered Certificates should consult with its counsel with
respect to the potential consequences under ERISA and
Section 4975 of the Code of the Plan's acquisition and
ownership of Offered Certificates. See "ERISA
Considerations" in the Prospectus.]
[A Description of PTE 90-23 to be included if
appropriate.]
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the
Underwriting Agreement dated [__________ __, 199_] (the
"Underwriting Agreement"), the Underwriter has agreed to
purchase and the Company has agreed to sell to the
Underwriter the Offered Certificates. It is expected that
delivery of the Offered Certificates will be [made at the
offices of [___________________]] [through the book-entry
facilities of The Depository Trust Company] on or about
[____________ __, 199_], against payment therefor in
immediately available funds.
The Underwriting Agreement provides that the
obligation of the Underwriter to pay for and accept
delivery of the Offered Certificates is subject to, among
other things, the receipt of certain legal opinions and
to the conditions, among others, that no stop order
suspending the effectiveness of the Company's
Registration Statement shall be in effect, and that no
proceedings for such purpose shall be pending before or
threatened by the Securities and Exchange Commission.
The distribution of the Offered Certificates by the
Underwriter may be effected, from time to time, in one or
more negotiated transactions, or otherwise, at varying
prices to be determined at the time of sale. Proceeds to
the Company from the sale of the Offered Certificates,
before deducting expenses payable by the Company, will be
approximately [ ]% of the aggregate Certificate
Principal Balance of the Offered Certificates plus
accrued interest thereon from the Reference Date. The
Underwriter may effect such transactions by selling its
Certificates to or through dealers, and such dealers may
receive compensation in the form of underwriting
discounts, concessions or commissions from the
Underwriter for whom they act as agent. In connection
with the sale of the Offered Certificates, the
Underwriter may be deemed to have received compensation
from the Company in the form of underwriting
compensation. The Underwriter and any dealers that
participate with the Underwriter in the distribution of
the Offered Certificates may be deemed to be underwriters
and any profit on the resale of the Offered Certificates
positioned by them may be deemed to be underwriting
discounts and commissions under the Securities Act of
1933, as amended.
The Underwriting Agreement provides that the Company
will indemnify the Underwriter, and under limited
circumstances the Underwriter will indemnify the Company,
against certain civil liabilities under the Securities
Act of 1933, as amended, or contribute to payments
required to be made in respect thereof.
There can be no assurance that a secondary market
for the Offered Certificates will develop or, if it does
develop, that it will continue. The primary source of
information available to investors concerning the Offered
Certificates will be the monthly statements provided to
the Certificateholders as of each Distribution Date,
which will include information as to the Certificate
Principal Balance or Notional Amount, as applicable, of
the Offered Certificates. There can be no assurance that
any additional information regarding the Offered
Certificates will be available through any other source.
In addition, the Company is not aware of any source
through which price information about the Offered
Certificates will be generally available on an ongoing
basis. The limited nature of such information regarding
the Offered Certificates may adversely affect the
liquidity of the Offered Certificates, even if a
secondary market for the Offered Certificates becomes
available.
LEGAL OPINIONS
Certain legal matters relating to the Offered
Certificates will be passed upon for the Company by
Orrick, Herrington & Sutcliffe] [Thacher Proffitt &
Wood], New York, New York and for the Underwriter by
[____________________], [____________________].
RATING
It is a condition to the issuance of the Offered
Certificates that the Class A-1, Class A-2, Class A-3,
Fixed Strip and Class R Certificates be rated "[__]" by
[____________] and "[__]" by [________].
The ratings of [_______] on mortgage pass-through
certificates address the likelihood of the receipt by
Certificateholders of all distributions on the Mortgage
Loans to which they are entitled. [_______] ratings on
pass-through certificates do not represent any assessment
of the likelihood that principal prepayments will be made
by borrowers or the degree to which such prepayments
might differ from that originally anticipated. The
rating does not address the possibility that
Certificateholders might suffer a lower than anticipated
yield.
[_________________] ratings on mortgage pass-through
certificates also address the likelihood of the receipt
by Certificateholders of payments required under the
Trust Agreement. [_________________] ratings take into
consideration the credit quality of the Mortgage Pool,
structural and legal aspects associated with the
Certificates, and the extent to which the payment stream
in the Mortgage Pool is adequate to make payments
required under the Certificates. [_________________]
rating on the Certificates does not, however, constitute
a statement regarding frequency of prepayments on the
Mortgage Loans. See "Certain Yield and Prepayment
Considerations" herein.
The Company has not requested a rating on the
Offered Certificates by any rating agency other than
[__________] and [__________]. However, there can be no
assurance as to whether any other rating agency will rate
the Offered Certificates, or, if it does, what rating
would be assigned by any such other rating agency. A
rating on the Certificates by another rating agency, if
assigned at all, may be lower than the ratings assigned
to the Offered Certificates by [_________] and
[__________].
A security rating is not a recommendation to buy,
sell or hold securities and may be subject to revision or
withdrawal at any time by the assigning rating
organization. Each security rating should be evaluated
independently of any other security rating. The rating
of the Fixed Strip Certificates does not address the
possibility that the holders of such Certificates may
fail to fully recover their initial investment. In the
event that the rating initially assigned to the Offered
Certificates is subsequently lowered for any reason, no
person or entity is obligated to provide any additional
support or credit enhancement with respect to the Offered
Certificates.
LEGAL INVESTMENT MATTERS
The Offered Certificates will constitute "mortgage
related securities" for purposes of the Secondary
Mortgage Market Enhancement Act of 1984, as amended
("SMMEA"), for so long as they are rated in one of the
two highest rating categories by at least one nationally
recognized statistical rating organization, and, as such,
will be legal investments for certain entities to the
extent provided in SMMEA. SMMEA provides, however, that
states could override its provisions on legal investment
and restrict or condition investment in mortgage related
securities by taking statutory action on or prior to
October 3, 1991. Certain states have enacted legislation
which overrides the preemption provisions of SMMEA.
The Company makes no representations as to the
proper characterization of any class of the Offered
Certificates for legal investment or other purposes, or
as to the ability of particular investors to purchase any
class of the Offered Certificates under applicable legal
investment restrictions. These uncertainties may
adversely affect the liquidity of any class of Offered
Certificates. Accordingly, all institutions whose
investment activities are subject to legal investment
laws and regulations, regulatory capital requirements or
review by regulatory authorities should consult with
their own legal advisors in determining whether and to
what extent any class of the Offered Certificates
constitutes a legal investment or is subject to
investment, capital or other restrictions.
See "Legal Investment Matters" in the Prospectus.
<PAGE>
No dealer, salesman or other person has been
authorized to give any information or to make any
representations not contained in this Prospectus
Supplement and the Prospectus and, if given or made, such
information or representations must not be relied upon as
having been authorized by the Company or by the
Underwriter. This Prospectus Supplement and the
Prospectus do not constitute an offer to sell, or a
solicitation of an offer to buy, the securities offered
hereby to anyone in any jurisdiction in which the person
making such offer or solicitation is not qualified to do
so or to anyone to whom it is unlawful to make any such
offer or solicitation. Neither the delivery of this
Prospectus Supplement and the Prospectus nor any sale
made hereunder shall, under any circumstances, create an
implication that information herein or therein is correct
as of any time since the date of this Prospectus
Supplement or the Prospectus.
TABLE OF CONTENTS
Page
Prospectus Supplement
Summary S-
Description of the
Offered Certificates S-
Description of the
Underlying Agency
Securities S-
Certain Yield and
Prepayment
Considerations S-
The Trust Agreement S-
Certain Federal Income
Tax Consequences S-
ERISA Considerations S-
Method of Distribution S-
Legal Opinions S-
Rating S-
Legal Investment
Matters S-
Prospectus
Summary of Prospectus
Special Considerations
The Trust Funds
Description of the Certificates
Subordination
Description of Credit Enhancement
Insurance Policies on Mortgage
Loans or Contracts
The Company
Residential Funding Corporation
The Pooling and Servicing Agreement
Yield Considerations
Maturity and Prepayment Considerations
Certain Legal Aspects of Mortgage
Loans and Contracts
Certain Federal Income Tax Consequences
State Tax Consequences
ERISA Considerations
Legal Investment Matters
Use of Proceeds
Methods of Distribution
Legal Matters
Financial Information
Additional Information
Index of Principal Definitions
<PAGE>
Residential Asset
Securities Corporation
$[__________]
Mortgage Pass-Through
Certificates
Series [199_-_]
Class A-1 Certificates [____]% $[________]
Class A-2 Certificates [____]% $[________]
Class A-3 Certificates [____]% $[________]
Class S Certificates [____]% $ 0
Class R Certificates [____]% $[________]
__________________________________________
Prospectus Supplement
[__________ __, 199_]
_______________________________________________
[Name of Underwriter]
<PAGE>
BASE PROSPECTUS
Mortgage and Manufactured Housing Contract Pass-Through
Certificates
Residential Asset Securities Corporation
The Mortgage and Manufactured Housing Contract
Pass-Through Certificates (the "Certificates") offered
hereby may be sold from time to time in series, as
described in the related Prospectus Supplement. Each
series of Certificates will represent in the aggregate
the entire beneficial ownership interest, excluding any
interest retained by Residential Asset Securities
Corporation (the "Company") or any other entity specified
in the related Prospectus Supplement, in a trust fund
consisting primarily of a segregated pool of one- to
four-family, residential first mortgage loans (the
"Mortgage Loans"), manufactured housing conditional sales
contracts and installment loan agreements (the
"Contracts") or interests therein (which may include
Agency Securities, as defined herein) (collectively with
the Mortgage Loans and Contracts, the "Mortgage
Collateral"), acquired by the Company from one or more
affiliated or unaffiliated institutions. See "The Trust
Funds."
The Mortgage Collateral and certain other assets
described herein and in the related Prospectus Supplement
will be held in trust (collectively, a "Trust Fund") for
the benefit of the holders of the related series of
Certificates pursuant to a pooling and servicing
agreement (each, a "Pooling and Servicing Agreement") or
a trust agreement (each, a "Trust Agreement") as
described herein and in the related Prospectus
Supplement. Unless otherwise specified in the related
Prospectus Supplement, each Trust Fund will consist of
one or more types of the various types of Mortgage
Collateral described under "The Trust Funds."
Information regarding each class of Certificates of a
series, and the general characteristics of the Mortgage
Collateral to be evidenced by such Certificates, will be
set forth in the related Prospectus Supplement.
Each series of Certificates will include one or more
classes. Each class of Certificates of any series will
represent the right, which right may be senior or
subordinate to the rights of one or more of the other
classes of the Certificates, to receive a specified
portion of payments of principal or interest (or both) on
the Mortgage Collateral in the related Trust Fund in the
manner described herein and in the related Prospectus
Supplement. A series may include one or more classes of
Certificates entitled to principal distributions, with
disproportionate, nominal or no interest distributions,
or to interest distributions, with disproportionate,
nominal or no principal distributions. A series may
include two or more classes of Certificates which differ
as to the timing, sequential order, priority of payment,
pass-through rate or amount of distributions of principal
or interest or both.
The Company's only obligations with respect to a series
of Certificates will be pursuant to certain limited
representations and warranties made by the Company,
except as provided in the related Prospectus Supplement.
The related Prospectus Supplement may identify one or
more entities as servicers (each, a "Servicer") for a
series of Certificates secured by Mortgage Loans or
Contracts or, if specified in the related Prospectus
Supplement, an entity may act as master servicer with
respect to the Certificates (the "Master Servicer"). If
specified in the related Prospectus Supplement, a series
of Certificates may have a certificate administrator (the
"Certificate Administrator") in addition to, or in lieu
of, a Servicer or a Master Servicer. The principal
obligations of a Servicer or the Master Servicer, if any,
will be its contractual servicing obligations (which may
include its limited obligation to make certain advances
in the event of delinquencies in payments on the Mortgage
Loans or Contracts). The principal obligations of the
Certificate Administrator, if any, will be to perform
certain obligations with respect to the Certificates
under the terms of the Pooling and Servicing Agreement or
Trust Agreement, as applicable. See "Description of the
Certificates."
If so specified in the related Prospectus Supplement, the
Trust Fund for a series of Certificates may include any
one or any combination of a mortgage pool insurance
policy, letter of credit, bankruptcy bond, special hazard
insurance policy, reserve fund, certificate insurance
policy, surety bond or other form of credit support. In
addition to or in lieu of the foregoing, credit
enhancement may be provided by means of subordination.
See "Description of Credit Enhancement."
The rate of payment of principal of each class of
Certificates entitled to a portion of principal payments
on the Mortgage Collateral will depend on the priority of
payment of such class and the rate and timing of
principal payments (including prepayments, defaults,
liquidations and repurchases) on the Mortgage Collateral.
A rate of principal payment lower or higher than that
anticipated may affect the yield on each class of
Certificates in the manner described herein and in the
related Prospectus Supplement. See "Yield
Considerations."
For a discussion of significant matters affecting
investments in the Certificates, see "Special
Considerations."
One or more separate elections may be made to treat a
Trust Fund as a "real estate mortgage investment conduit"
(a "REMIC") for federal income tax purposes. The
Prospectus Supplement for a series of Certificates will
specify which class or classes of the related series of
Certificates will be considered to be regular interests
in the related REMIC and which class of Certificates or
other interests will be designated as the residual
interest in the related REMIC, if applicable. See
"Certain Federal Income Tax Consequences."
PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE
SOURCE OF PAYMENTS ON THE CERTIFICATES. THE CERTIFICATES
DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE
COMPANY, THE MASTER SERVICER, THE CERTIFICATE
ADMINISTRATOR, GMAC MORTGAGE CORPORATION ("GMAC
MORTGAGE") OR ANY OF THEIR AFFILIATES. NEITHER THE
CERTIFICATES NOR THE MORTGAGE COLLATERAL WILL BE
GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY (EXCEPT IN THE CASE OF FHA LOANS, FHA
CONTRACTS, VA LOANS, VA CONTRACTS AND GINNIE MAE
SECURITIES) OR BY THE COMPANY, THE MASTER SERVICER, THE
CERTIFICATE ADMINISTRATOR, GMAC MORTGAGE OR ANY OF THEIR
AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Offers of the Certificates may be made through one or
more different methods, including offerings through
underwriters, as more fully described under "Methods of
Distribution" and in the related Prospectus Supplement.
There will be no secondary market for any series of
Certificates prior to the offering thereof. There can be
no assurance that a secondary market for any of the
Certificates will develop or, if it does develop, that it
will continue. The Certificates will not be listed on
any securities exchange.
Retain this Prospectus for future reference. This
Prospectus may not be used to consummate sales of
securities offered hereby unless accompanied by a
Prospectus Supplement.
The date of this Prospectus is December 16, 1994.
No dealer, salesman, or any other person has been
authorized to give any information, or to make any
representations, other than those contained in this
Prospectus or the related Prospectus Supplement and, if
given or made, such information or representations must
not be relied upon as having been authorized by the
Company or any dealer, salesman, or any other person.
Neither the delivery of this Prospectus or the related
Prospectus Supplement nor any sale made hereunder or
thereunder shall under any circumstances create an
implication that there has been no change in the
information herein or therein since the date hereof.
This Prospectus and the related Prospectus Supplement are
not an offer to sell or a solicitation of an offer to buy
any security in any jurisdiction in which it is unlawful
to make such offer or solicitation.
TABLE OF CONTENTS
Caption Page
SUMMARY OF PROSPECTUS. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SPECIAL CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Risks Associated with the
Mortgage Collateral. . . . . . . . . . . . . . . . . 10
Yield and Prepayment
Considerations . . . . . . . . . . . . . . . . . . . 11
Limited Representations
and Warranties . . . . . . . . . . . . . . . . . . . 11
Limited Liquidity . . . . . . . . . . . . . . . . . . . . . . . 11
Limited Obligations . . . . . . . . . . . . . . . . . . . . . . 11
Limitations, Reduction
and Substitution of
Credit Enhancement . . . . . . . . . . . . . . . . . 12
THE TRUST FUNDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
The Mortgage Loans. . . . . . . . . . . . . . . . . . . . . . . 13
The Agency Securities . . . . . . . . . . . . . . . . . . . . . 20
Mortgage Collateral
Sellers. . . . . . . . . . . . . . . . . . . . . . . 21
Representations with
Respect to Mortgage
Collateral . . . . . . . . . . . . . . . . . . . . . 22
Repurchases of Mortgage
Collateral . . . . . . . . . . . . . . . . . . . . . 23
Limited Right of Substitution. . . . . . . . . . . . . . . . . . . . . . . 24
DESCRIPTION OF THE
CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . . . . . 24
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Form of Certificates. . . . . . . . . . . . . . . . . . . . . . 25
Assignment of Mortgage
Loans. . . . . . . . . . . . . . . . . . . . . . . . 26
Assignment of Contracts . . . . . . . . . . . . . . . . . . . . 27
Review of Mortgage Loan
or Contract
Documents. . . . . . . . . . . . . . . . . . . . . . 27
Assignment of Agency
Securities . . . . . . . . . . . . . . . . . . . . . 27
Spread. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Payments on Mortgage
Collateral . . . . . . . . . . . . . . . . . . . . . 28
Withdrawals from the
Custodial Account. . . . . . . . . . . . . . . . . . 30
Distributions . . . . . . . . . . . . . . . . . . . . . . . . . 31
Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Prepayment Interest
Shortfalls . . . . . . . . . . . . . . . . . . . . . 34
Reports to
Certificateholders . . . . . . . . . . . . . . . . . 35
Servicing and
Administration of
Mortgage Collateral. . . . . . . . . . . . . . . . . 36
Realization Upon
Defaulted Property . . . . . . . . . . . . . . . . . 39
SUBORDINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
DESCRIPTION OF CREDIT
ENHANCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 42
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . 43
Mortgage Pool Insurance
Policies . . . . . . . . . . . . . . . . . . . . . . 44
Special Hazard Insurance
Policies . . . . . . . . . . . . . . . . . . . . . . 45
Bankruptcy Bonds. . . . . . . . . . . . . . . . . . . . . . . . 46
Reserve Funds . . . . . . . . . . . . . . . . . . . . . . . . . 46
Certificate Insurance
Policies . . . . . . . . . . . . . . . . . . . . . . 47
Surety Bonds. . . . . . . . . . . . . . . . . . . . . . . . . . 47
Maintenance of Credit
Enhancement. . . . . . . . . . . . . . . . . . . . . 47
Reduction or Substitution
of Credit
Enhancement. . . . . . . . . . . . . . . . . . . . . 48
INSURANCE POLICIES ON MORTGAGE
LOANS OR CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . 49
Primary Mortgage
Insurance Policies . . . . . . . . . . . . . . . . . 49
Standard Hazard Insurance
on Mortgaged
Properties . . . . . . . . . . . . . . . . . . . . . 50
Standard Hazard Insurance
on Manufactured
Homes. . . . . . . . . . . . . . . . . . . . . . . . 50
FHA Mortgage Insurance. . . . . . . . . . . . . . . . . . . . . 51
VA Mortgage Guaranty. . . . . . . . . . . . . . . . . . . . . . 51
THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
RESIDENTIAL FUNDING
CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . 52
THE POOLING AND SERVICING
AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Servicing and
Administration . . . . . . . . . . . . . . . . . . . 52
Events of Default . . . . . . . . . . . . . . . . . . . . . . . 53
Rights Upon Event of
Default. . . . . . . . . . . . . . . . . . . . . . . 53
Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Termination; Retirement
of Certificates. . . . . . . . . . . . . . . . . . . 54
The Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 55
YIELD CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
MATURITY AND PREPAYMENT
CONSIDERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . 58
CERTAIN LEGAL ASPECTS OF
MORTGAGE LOANS AND
CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
The Mortgage Loans. . . . . . . . . . . . . . . . . . . . . . . 61
The Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 67
Environmental
Legislation. . . . . . . . . . . . . . . . . . . . . 69
Soldiers' and Sailors'
Civil Relief Act of
1940 . . . . . . . . . . . . . . . . . . . . . . . . 70
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES. . . . . . . . . . . . . . . . . . . . . . . . . . 70
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
REMICs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
STATE AND OTHER TAX
CONSEQUENCES. . . . . . . . . . . . . . . . . . . . . . . . . . 86
ERISA CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Plan Asset Regulations. . . . . . . . . . . . . . . . . . . . . 86
Prohibited Transaction
Exemption. . . . . . . . . . . . . . . . . . . . . . 87
Tax-Exempt Investors. . . . . . . . . . . . . . . . . . . . . . 89
Consultation with
Counsel. . . . . . . . . . . . . . . . . . . . . . . 89
LEGAL INVESTMENT MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . 89
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
METHODS OF DISTRIBUTION. . . . . . . . . . . . . . . . . . . . . . . . . . 91
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 92
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 92
INDEX OF PRINCIPAL
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 93
SUMMARY OF PROSPECTUS
The following summary is qualified in its entirety
by reference to the detailed information appearing
elsewhere in this Prospectus and by reference to the
information with respect to each series of Certificates
contained in the Prospectus Supplement to be prepared and
delivered in connection with the offering of such series.
Capitalized terms used in this summary that are not
otherwise defined shall have the meanings ascribed
thereto in this Prospectus. An index indicating where
certain terms used herein are defined appears at the end
of this Prospectus.
Securities Offered . . . . . . . . . . . . .
Mortgage and Manufactured Housing
Contract Pass-Through Certificates.
Company. . . . . . . . Residential Asset Securities Corporation.
See "The Company."
Servicer or Master Servicer
The related Prospectus Supplement may
identify one or more entities as
Servicers for a series of Certificates
evidencing interests in Mortgage Loans or
Contracts or an entity may act as Master
Servicer. The Master Servicer may be
Residential Funding Corporation, an
affiliate of the Company ("Residential
Funding"). See "Residential Funding
Corporation" and "Description of the
Certificates--Servicing and Administration
of Mortgage Collateral."
Certificate Administrator
An entity may be named as the Certificate
Administrator in the related Prospectus
Supplement, if required in addition to or
in lieu of the Master Servicer or
Servicer for a series of Certificates.
The Certificate Administrator may be
Residential Funding. See "Residential
Funding Corporation" and "Description of
the Certificates--Servicing and
Administration of Mortgage Collateral."
Trustee. . . . . . . . The Trustee for each series of
Certificates will be specified in the
related Prospectus Supplement.
Certificates . . . . . . . . . .
Each series of Certificates will
represent in the aggregate the entire
beneficial ownership interest, excluding
any interest retained by the Company or
any other entity specified in the related
Prospectus Supplement, in a trust fund
(the "Trust Fund") consisting primarily
of a segregated pool of one- to
four-family residential first mortgage
loans (the "Mortgage Loans"),
manufactured housing conditional sales
contracts and installment loan agreements
(the "Contracts") or interests therein
(which may include Agency Securities, as
defined herein) (collectively with the
Mortgage Loans and Contracts, the
"Mortgage Collateral") acquired by the
Company from one or more affiliated or
unaffiliated institutions. Each series
of Certificates will be issued pursuant
to a pooling and servicing agreement
(each, a "Pooling and Servicing
Agreement") or a trust agreement (each, a
"Trust Agreement") among the Company, the
Trustee and one or more of any Servicer,
the Master Servicer and the Certificate
Administrator.
As specified in the related Prospectus
Supplement, each series of Certificates, or
class of Certificates in the case of a series
consisting of two or more classes, may have a
stated principal balance, no stated principal
balance or a notional amount and may be
entitled to distributions of interest based on
a specified interest rate or rates (each, a
"Pass-Through Rate"). Each series or class of
Certificates may have a different Pass-Through
Rate, which may be a fixed, variable or
adjustable Pass-Through Rate, or any
combination of two or more of such Pass-
Through Rates. The related Prospectus
Supplement will specify the Pass-Through Rate
or Rates for each series or class of
Certificates, or the initial Pass-Through Rate
or Rates and the method for determining
subsequent changes to the Pass-Through Rate or
Rates.
A series may include one or more classes of
Certificates (each, a "Strip Certificate")
entitled to (i) principal distributions, with
disproportionate, nominal or no interest
distributions, or (ii) interest distributions,
with disproportionate, nominal or no principal
distributions. In addition, a series may
include classes of Certificates which differ
as to timing, sequential order, priority of
payment, Pass-Through Rate or amount of
distributions of principal or interest or
both, or as to which distributions of
principal or interest or both on any class may
be made upon the occurrence of specified
events, in accordance with a schedule or
formula, or on the basis of collections from
designated portions of the Trust Fund. In
addition, a series may include one or more
classes of Certificates ("Accrual
Certificates"), as to which certain accrued
interest will not be distributed but rather
will be added to the principal balance thereof
in the manner described in the related
Prospectus Supplement. One or more classes of
Certificates in a series may be entitled to
receive principal payments pursuant to an
amortization schedule under the circumstances
described in the related Prospectus
Supplement.
If so provided in the related Prospectus
Supplement, a series of Certificates may
include one or more classes of Certificates
(collectively, the "Senior Certificates")
which are senior to one or more classes of
Certificates (collectively, the "Subordinate
Certificates") in respect of certain
distributions of principal and interest and
allocations of losses on the Mortgage
Collateral. See "Subordination." In
addition, certain classes of Senior (or
Subordinate) Certificates may be senior to
other classes of Senior (or Subordinate)
Certificates in respect of such distributions
or losses. The Certificates will be issued in
fully-registered certificated or book-entry
form in the authorized denominations specified
in the related Prospectus Supplement. See
"Description of the Certificates."
Neither the Certificates nor the underlying
Mortgage Collateral will be guaranteed or
insured by any governmental agency or
instrumentality (except in the case of FHA
Loans, FHA Contracts, VA Loans, VA Contracts
and Ginnie Mae Securities (each as defined
herein)) or by the Company, the Master
Servicer, any Servicer, the Mortgage
Collateral Seller, the Certificate
Administrator, GMAC Mortgage or any of their
affiliates.
Interest Distributions . . . . . . . . . . . . . . . .
Except as otherwise specified herein or
in the related Prospectus Supplement,
interest on each class of Certificates of
each series, other than Strip
Certificates or Accrual Certificates
(prior to the time when accrued interest
becomes payable thereon), will be
remitted at the applicable Pass-Through
Rate on the outstanding principal balance
of such class, on the 25th day (or, if
such day is not a business day, the next
business day) of each month, commencing
with the month following the month in
which the Cut-off Date (as defined in the
applicable Prospectus Supplement) occurs
(each, a "Distribution Date"). If the
Prospectus Supplement so provides,
interest distributions on any class of
Certificates may be reduced on account of
negative amortization on the Mortgage
Collateral, with the Deferred Interest
(as defined herein) allocable to such
class added to the principal balance
thereof, which Deferred Interest will
thereafter bear interest at the
applicable Pass-Through Rate.
Distributions, if any, with respect to
interest on Strip Certificates will be
made on each Distribution Date as
described herein and in the related
Prospectus Supplement. Strip
Certificates that are entitled to
distributions of principal only will not
receive distributions in respect of
interest. Interest that has accrued but
is not yet payable on any Accrual
Certificates will be added to the
principal balance of such class on the
related Distribution Date, and will
thereafter bear interest at the
applicable Pass-Through Rate. Unless
otherwise specified in the related
Prospectus Supplement, distributions of
interest with respect to any series of
Certificates (or accruals thereof in the
case of Accrual Certificates), or with
respect to one or more classes included
therein, may be reduced to the extent of
interest shortfalls not covered by
advances or the applicable form of credit
support, including any Prepayment
Interest Shortfalls. See "Description of
the Certificates" and "Maturity and
Prepayment Considerations."
Principal Distributions
Except as otherwise specified in the
related Prospectus Supplement, principal
distributions on the Certificates of each
series will be payable on each
Distribution Date, commencing with the
Distribution Date in the month following
the month in which the Cut-off Date
occurs, to the holders of the
Certificates of such series, or of the
class or classes of Certificates then
entitled thereto, on a pro rata basis
among all such Certificates or among the
Certificates of any such class, in
proportion to their respective
outstanding principal balances or the
percentage interests represented by such
class, or in the priority and manner
otherwise specified in the related
Prospectus Supplement. Strip
Certificates with no principal balance
will not receive distributions in respect
of principal. Distributions of principal
with respect to any class of Certificates
may be reduced to the extent of certain
delinquencies not covered by advances or
losses not covered by the applicable form
of credit enhancement. See "The Trust
Funds," "Maturity and Prepayment
Considerations" and "Description of the
Certificates."
Trust Fund
The Trust Fund for a series of
Certificates will consist primarily of
Mortgage Loans, Contracts, whole or
partial participations in Mortgage Loans
or Contracts and/or Agency Securities,
together with certain accounts, reserve
funds, insurance policies and related
agreements specified in the related
Prospectus Supplement. The Trust Fund
for a series of Certificates will also
include the Certificate Account and a
Collection Account, if applicable, and
may include various forms of credit
enhancement, all as specified in the
related Prospectus Supplement. See "The
Trust Funds" and "Description of Credit
Enhancement."
The Mortgage Collateral will be purchased
by the Company from affiliates, including
GMAC Mortgage, an indirect parent of the
Company, or directly or indirectly from
sellers unaffiliated with the Company
(each, a "Mortgage Collateral Seller").
Mortgage Loans The Trust Fund for a series of
Certificates may include a pool of
Mortgage Loans, or whole or partial
participations in Mortgage Loans (a
"Mortgage Pool"), secured by first liens
on one- to four-family residential
properties (the "Mortgaged Properties").
Such Mortgage Loans may, as specified in
the related Prospectus Supplement,
include conventional loans, FHA Loans, VA
Loans, Balloon Loans, GPM Loans, Buy-Down
Loans, Bi-Weekly Loans or Mortgage Loans
having other special payment features, as
described herein and in the related
Prospectus Supplement. See "The Trust
Funds--The Mortgage Loans." The Mortgage
Loans may have fixed or adjustable
interest rates. A Mortgage Pool may
include Mortgage Loans that have been
modified prior to their inclusion in a
Trust Fund. The Mortgage Loans may
include either (i) Mortgage Loans secured
by mortgages, deeds of trust or other
security instruments creating a first
lien on the Mortgaged Properties or (ii)
loans secured by an assignment by the
borrower of a security interest in shares
issued by a private cooperative housing
association and the related proprietary
lease or occupancy agreement on a
cooperative dwelling ("Cooperative
Loans"). The Mortgaged Properties may be
owner occupied or non-owner occupied and
may include vacation and second homes.
See "The Trust Funds--The Mortgage Loans."
Contracts The Trust Fund for a series of
Certificates may include a pool of
Contracts, or whole or partial
participations in Contracts (a "Contract
Pool") originated by one or more
manufactured housing dealers, or such
other entity or entities described in the
related Prospectus Supplement. The
Contracts may be conventional
manufactured housing contracts or
contracts insured by the FHA or partially
guaranteed by the VA. Each Contract will
be secured by a manufactured home (each,
a "Manufactured Home," which shall also
be included in the term "Mortgaged
Property"). Generally, the Contracts
will be fully-amortizing and will bear
interest at a fixed rate unless otherwise
specified in the related Prospectus
Supplement. See "The Trust Funds--The
Contracts."
Agency Securities
The Trust Fund for a series of
Certificates may include a pool of
Freddie Mac Securities, Fannie Mae
Securities or Ginnie Mae Securities
(collectively, the "Agency Securities"),
or a combination of Agency Securities.
Such Agency Securities may represent
whole or partial interests in pools of
(1) Mortgage Loans or Contracts or (2)
Agency Securities. Unless otherwise set
forth in the related Prospectus
Supplement, all Ginnie Mae Securities
will be backed by the full faith and
credit of the United States. None of the
Freddie Mac Securities or Fannie Mae
Securities will be backed, directly or
indirectly, by the full faith and credit
of the United States. Agency Securities
may be backed by fixed or adjustable rate
Mortgage Loans or other types of Mortgage
Loans or Contracts specified in the
related Prospectus Supplement. See "The
Trust Funds--The Agency Securities."
Yield and Prepayment Considerations
The Mortgage Collateral supporting a
series of Certificates will have unique
characteristics that will affect the
yield to maturity and the rate of payment
of principal on such Certificates. See
"Yield Considerations" and "Maturity and
Prepayment Considerations" herein and in
the related Prospectus Supplement.
Credit Enhancement . . . . . . . . . . . . .
If so specified in the related Prospectus
Supplement, the Trust Fund with respect
to any series of Certificates may include
any one or any combination of a letter of
credit, mortgage pool insurance policy,
special hazard insurance policy,
bankruptcy bond, reserve fund,
certificate insurance policy, surety bond
or other type of credit support to
provide partial coverage for certain
defaults and losses relating to the
Mortgage Loans. Credit support also may
be provided in the form of subordination
of one or more classes of Certificates in
a series under which losses are first
allocated to any Subordinate Certificates
up to a specified limit. Any form of
credit enhancement typically will have
certain limitations and exclusions from
coverage thereunder, which will be
described in the related Prospectus
Supplement. Losses not covered by any
form of credit enhancement will be borne
by the holders of the related
Certificates (or certain classes
thereof). To the extent not set forth
herein, the amount and types of coverage,
the identification of any entity
providing the coverage, the terms of any
subordination and related information
will be set forth in the Prospectus
Supplement relating to a series of
Certificates. See "Description of Credit
Enhancement" and "Subordination."
Advances . . . . . . . Unless otherwise specified in the related
Prospectus Supplement, the Master
Servicer (or, if there is no Master
Servicer for such series, the related
Servicer) will be obligated to make
certain advances with respect to
delinquent scheduled payments on the
Mortgage Loans or Contracts, but only to
the extent that the Master Servicer or a
Servicer believes that such amounts will
be recoverable by it. Any advance made
by the Master Servicer or a Servicer with
respect to a Mortgage Loan or a Contract
is recoverable by it as provided herein
under "Description of the
Certificates--Advances" either from
recoveries on the specific Mortgage Loan
or Contract or, with respect to any
advance subsequently determined to be
nonrecoverable, out of funds otherwise
distributable to the holders of the
related series of Certificates.
Optional Termination . . . . . . . . . . . . . . . . .
The Master Servicer, the Certificate
Administrator, the Company, a Servicer
or, if specified in the related
Prospectus Supplement, the holder of the
residual interest in a REMIC may at its
option either (i) effect early retirement
of a series of Certificates through the
purchase of the assets in the related
Trust Fund or (ii) purchase, in whole but
not in part, the Certificates specified
in the related Prospectus Supplement; in
each case under the circumstances and in
the manner set forth herein under "The
Pooling and Servicing
Agreement--Termination; Retirement of
Certificates" and in the related
Prospectus Supplement.
Legal Investment . . . . . . . . . . . . . .
At the date of issuance, as to each
series, each class of Certificates
offered hereby will be rated, at the
request of the Company, in one of the
four highest rating categories by one or
more nationally recognized statistical
rating agencies (each, a "Rating
Agency"). Unless otherwise specified in
the related Prospectus Supplement, each
class of Certificates offered hereby that
is rated in one of the two highest rating
categories by at least one Rating Agency
will constitute "mortgage related
securities" for purposes of the Secondary
Mortgage Market Enhancement Act of 1984,
as amended, for so long as it sustains
such a rating. See "Legal Investment
Matters."
ERISA Considerations . . . . . . . . . . . . . . . . .
A fiduciary of an employee benefit plan
and certain other retirement plans and
arrangements, including individual
retirement accounts and annuities, Keogh
plans, and collective investment funds
and separate accounts in which such
plans, accounts, annuities or
arrangements are invested, which is
subject to the Employee Retirement Income
Security Act of 1974, as amended
("ERISA"), or Section 4975 of the
Internal Revenue Code of 1986 (the
"Code"), and any other person
contemplating purchasing a Certificate
with Plan Assets (as defined herein),
should carefully review with its legal
counsel whether the purchase or holding
of Certificates could give rise to a
transaction that is prohibited or is not
otherwise permissible either under ERISA
or Section 4975 of the Code. See "ERISA
Considerations" herein and in the related
Prospectus Supplement.
Certain Federal Income Tax
Consequences Certificates of each series offered
hereby will constitute "regular
interests" or "residual interests" in a
Trust Fund, or a portion thereof, treated
as a REMIC under Sections 860A through
860G of the Code, unless otherwise
specified in the related Prospectus
Supplement. See "Certain Federal Income
Tax Consequences" herein and in the
related Prospectus Supplement.
SPECIAL CONSIDERATIONS
Investors should consider, among other things, the
following factors in connection with the purchase of the
Certificates:
Risks Associated with the Mortgage Collateral
The primary assets underlying a series of
Certificates will be the Mortgage Loans or Contracts (or
interests therein) in the related Trust Fund or the
Mortgage Loans or Contracts that underlie the Agency
Securities in a Trust Fund. Defaults on mortgage loans
and contracts may occur because of changes in the
economic status of the related borrower or because of
increases in the monthly payment for such mortgage loan
or contract. Losses upon the foreclosure of a mortgage
loan or contract may occur because the value of the
related Mortgaged Property is insufficient to recover the
outstanding principal balance of the mortgage loan or
contract. A variety of factors affect both the ability
of a borrower to repay a mortgage loan or contract and
the value of the related Mortgaged Property. Losses may
also result from fraud in the origination of a mortgage
loan or contract.
Mortgage Loans or Contracts may have been originated
using underwriting standards that are less stringent than
the underwriting standards applied by other first
mortgage loan purchase programs such as those run by
Fannie Mae or Freddie Mac or by the Company's affiliate,
Residential Funding, for the purpose of collateralizing
securities issued by Residential Funding Mortgage
Securities I, Inc. For example, the Mortgage Loans or
Contracts may have been made to borrowers (the
"Mortgagors") having imperfect credit histories, ranging
from minor delinquencies to bankruptcies, or Mortgagors
with generally higher ratios of monthly mortgage payments
to income or higher ratios of total monthly credit
payments to income. Mortgage Loans or Contracts in a
Trust Fund may also present a greater risk of loss due to
higher Loan-to-Value Ratios or lesser amounts of primary
mortgage insurance than such other lending programs.
Mortgage Loans or Contracts may have been originated
one or more years prior to the Closing Date for the
related Certificates. Such seasoned Mortgage Collateral
may have higher current loan-to-value ratios than at
origination if the value of the related Mortgaged
Property has declined. No assurance can be given that
values of the Mortgaged Properties have remained or will
remain at the levels existing on the dates of origination
of the related Mortgage Loans or Contracts. If a
residential real estate market should experience an
overall decline in property values, or if the Mortgagors
on such seasoned Mortgage Collateral have lower incomes
or poorer credit histories than at the time of
origination of the related Mortgage Loan or Contract, the
actual rates of delinquencies, foreclosures and losses
could be higher than the rates otherwise expected by an
investor in the Certificates.
In addition, in the case of Mortgage Loans or
Contracts that are subject to negative amortization due
to the addition to the related principal balance of
Deferred Interest, the principal balances of such
Mortgage Loans or Contracts could be increased to an
amount equal to or in excess of the value of the
underlying Mortgaged Properties, thereby increasing the
likelihood of default by the Mortgagors which may result
in losses on such Mortgage Loans or Contracts. Certain
other Mortgage Loans or Contracts may provide for
escalating or variable payments by the Mortgagor, as to
which the Mortgagor is generally qualified on the basis
of the initial payment amount. Some of the Mortgage
Loans or Contracts may be Balloon Loans and the ability
of a Mortgagor to pay the related Balloon Amount may
depend on the Mortgagor's ability to refinance the
Mortgage Loan or Contract or on other factors. In some
instances, Mortgagors may not be able to make their loan
payments as such payments increase and thus the
likelihood of default will increase.
Some Mortgage Loans or Contracts may be one or more
months delinquent with regard to payment of principal or
interest at the time of their deposit into a Trust Fund.
Certain Mortgage Loans or Contracts may have incomplete
legal files that, as of the time of deposit into a Trust
Fund, may be missing such documents as a note, a copy of
the Mortgage or a title insurance policy, or may contain
documents that are defective because they are incomplete,
contain incorrect information, are unsigned by the
appropriate parties or have other defects.
In addition to the foregoing, from time to time
certain geographic regions will experience weaker
regional economic conditions and housing markets and,
consequently, may experience higher rates of loss and
delinquency than will be experienced on mortgage loans or
contracts generally. For example, a region's economic
condition and housing market may be directly, or
indirectly, adversely affected by natural disasters or
civil disturbances such as earthquakes, hurricanes,
floods, eruptions or riots. The economic impact of any
of these types of events may also be felt in areas beyond
the region immediately affected by the disaster or
disturbance. The Mortgage Loans or Contracts in the
Trust Fund for a series of Certificates may be
concentrated in these regions, and such concentration may
present risks in addition to those generally present for
similar mortgage-backed securities without such
concentration.
To the extent that losses on any item of Mortgage
Collateral are not covered by any credit enhancement, the
related Certificateholders (or specific classes thereof)
will bear all risk of loss resulting from default by the
Mortgagors, and will have to look primarily to the value
of the Mortgaged Properties for recovery of the
outstanding principal and unpaid interest on the
defaulted Mortgage Loans or Contracts. Specific risks,
if any, associated with the Mortgage Collateral
underlying a particular series of Certificates will be
discussed in the related Prospectus Supplement. See
"Special Considerations," if any, in the related
Prospectus Supplement.
Yield and Prepayment Considerations
The yield to maturity of the Certificates of each
series will depend on the rate and timing of principal
payments (including prepayments, liquidations due to
defaults, and repurchases due to conversion of ARM Loans
to fixed interest rate loans or breaches of
representations and warranties) on the Mortgage Loans or
Contracts and the price paid by Certificateholders. Such
yield may be adversely affected by a higher or lower than
anticipated rate of prepayments on the related Mortgage
Collateral. The yield to maturity on Strip Certificates
will be extremely sensitive to the rate of prepayments on
the related Mortgage Collateral. In addition, the yield
to maturity on certain other types of classes of
Certificates, including Accrual Certificates,
Certificates with a Pass-Through Rate that fluctuates
inversely with an index or certain other classes, may be
relatively more sensitive to the rate of prepayment on
the related Mortgage Collateral than other classes of
Certificates. Prepayments are influenced by a number of
factors, including prevailing mortgage market interest
rates, local and regional economic conditions and
homeowner mobility. See "Yield Considerations" and
"Maturity and Prepayment Considerations."
Limited Representations and Warranties
Certain Mortgage Collateral Sellers may make more
limited representations and warranties with respect to
the Mortgage Loans or Contracts that have been acquired
by the Company than would be required by Fannie Mae or
Freddie Mac in connection with their first mortgage loan
purchase programs. In addition, any item of Mortgage
Collateral for which a breach of a representation or
warranty exists will remain in the related Trust Fund in
the event that a Mortgage Collateral Seller is unable, or
disputes its obligation, to repurchase such Mortgage
Collateral and such a breach does not also constitute a
breach of a representation made by Residential Funding,
the Company or the Master Servicer. In either event, any
resulting losses will be borne by the related form of
credit enhancement, to the extent available, and
otherwise by the holders of one or more classes of
Certificates. See "The Trust Funds--Representations with
Respect to Mortgage Collateral."
Limited Liquidity
There can be no assurance that a secondary market
for the Certificates of any series will develop or, if it
does develop, that it will provide Certificateholders
with liquidity of investment or that it will continue for
the life of the Certificates of any series. The
Prospectus Supplement for any series of Certificates may
indicate that an underwriter specified therein intends to
establish a secondary market in such Certificates,
however no underwriter will be obligated to do so. The
Certificates will not be listed on any securities
exchange.
Limited Obligations
The Certificates will not represent an interest in
or obligation of the Company, the Master Servicer, any
Servicer, the Mortgage Collateral Seller, the Certificate
Administrator, GMAC Mortgage or any of their affiliates.
The only obligations of the foregoing entities with
respect to the Certificates or any Mortgage Collateral
will be the obligations (if any) of the Company, the
related Servicer, if applicable, the Mortgage Collateral
Seller, and the Master Servicer pursuant to certain
limited representations and warranties made with respect
to the Mortgage Collateral, the Master Servicer's or the
applicable Servicer's servicing obligations under the
related Pooling and Servicing Agreement (including such
entity's limited obligation to make certain Advances) and
pursuant to the terms of any Agency Securities, the
Certificate Administrator's (if any) administrative
obligations under the Pooling and Servicing Agreement or
the Trust Agreement, and, if and to the extent expressly
described in the related Prospectus Supplement, certain
limited obligations of the Master Servicer or the related
Servicer in connection with an agreement to purchase a
Convertible Mortgage Loan upon conversion to a fixed
rate. Neither the Certificates nor the underlying
Mortgage Collateral will be guaranteed or insured by any
governmental agency or instrumentality (except in the
case of FHA Loans, FHA Contracts, VA Loans, VA Contracts
or Ginnie Mae Securities), or by the Company, the Master
Servicer, any Servicer, the Mortgage Collateral Seller,
the Certificate Administrator, GMAC Mortgage or any of
their affiliates. Proceeds of the assets included in the
related Trust Fund (including the Mortgage Collateral and
any form of credit enhancement) will be the sole source
of payments on the Certificates, and there will be no
recourse to the Company, the Master Servicer, any
Servicer, the Mortgage Collateral Seller, the Certificate
Administrator, GMAC Mortgage or any other entity in the
event that such proceeds are insufficient or otherwise
unavailable to make all payments provided for under the
Certificates.
Limitations, Reduction and Substitution of Credit
Enhancement
With respect to each series of Certificates, credit
enhancement may be provided in limited amounts to cover
certain types of losses on the underlying Mortgage
Collateral. Credit enhancement will be provided in one
or more of the forms referred to herein, including, but
not limited to: subordination of other classes of
Certificates of the same series; a Letter of Credit; a
Mortgage Pool Insurance Policy; a Special Hazard
Insurance Policy; a Bankruptcy Bond; a Reserve Fund; a
Certificate Insurance Policy; a Surety Bond; or any
combination thereof. See "Subordination" and
"Description of Credit Enhancement" herein. Regardless
of the form of credit enhancement provided, the amount of
coverage will be limited in amount and in most cases will
be subject to periodic reduction in accordance with a
schedule or formula. Furthermore, such credit
enhancement may provide only very limited coverage as to
certain types of losses or risks, and may provide no
coverage as to certain other types of losses or risks.
In the event losses exceed the amount of coverage
provided by any credit enhancement or losses of a type
not covered by any credit enhancement occur, such losses
will be borne by the holders of the related Certificates
(or certain classes thereof). The Master Servicer or the
Certificate Administrator, as applicable, will generally
be permitted to reduce, terminate or substitute all or a
portion of the credit enhancement for any series of
Certificates, if each Rating Agency indicates that the
then-current rating thereof will not be adversely
affected. The rating of any series of Certificates by
any Rating Agency may be lowered following the initial
issuance thereof as a result of the downgrading of the
obligations of any applicable credit support provider, or
as a result of losses on the related Mortgage Collateral
in excess of the levels contemplated by such Rating
Agency at the time of its initial rating analysis. None
of the Company, the Master Servicer, any Servicer, the
Mortgage Collateral Seller, the Certificate
Administrator, GMAC Mortgage nor any of their affiliates
will have any obligation to replace or supplement any
credit enhancement, or to take any other action to
maintain any rating of any series of Certificates. See
"Description of Credit Enhancement--Reduction or
Substitution of Credit Enhancement."
THE TRUST FUNDS
General
A Trust Fund for a series of Certificates may
include Mortgage Collateral that consists of one or more
of the following: (1) Mortgage Loans, or whole or
partial participations in Mortgage Loans, which are one-
to four-family residential mortgage loans, including
loans secured by leases on cooperative apartment units
and loans to cooperative associations; (2) Contracts, or
whole or partial participations in Contracts; (3) Agency
Securities which are mortgage pass-through certificates
(including those representing whole or partial interests
in pools of Mortgage Loans, Contracts or Agency
Securities (a) guaranteed and/or issued by the Government
National Mortgage Association ("Ginnie Mae" and such
securities, "Ginnie Mae Securities"), (b) issued by the
Federal Home Loan Mortgage Corporation ("Freddie Mac" and
such securities, "Freddie Mac Securities") or (c) issued
by the Federal National Mortgage Association ("Fannie
Mae" and such securities, "Fannie Mae Securities"); and
(4) certain other related property conveyed by the
Company. Each Trust Fund may also include (i) the
amounts required to be held from time to time in a trust
account (the "Certificate Account"), into which payments
in respect of the Mortgage Collateral may be deposited,
maintained by the Master Servicer, a Servicer, the
Trustee or the Certificate Administrator, as the case may
be, pursuant to the Pooling and Servicing Agreement or
Trust Agreement, (ii) if so specified in the related
Prospectus Supplement, a trust account (the "Custodial
Account") into which amounts to be deposited in the
Certificate Account may be deposited on a periodic basis
prior to deposit in the Certificate Account, (iii) any
Mortgaged Property which initially secured a Mortgage
Loan or Contract and that is acquired by foreclosure or
deed in lieu of foreclosure and (iv) if so specified in
the related Prospectus Supplement, one or more other cash
accounts, insurance policies or other forms of credit
enhancement with respect to the Certificates, the
Mortgage Collateral or all or any part of the Trust Fund,
required to be maintained pursuant to the related Pooling
and Servicing Agreement or Trust Agreement. See
"Description of Credit Enhancement."
Each Certificate will evidence the interest
specified in the related Prospectus Supplement in a Trust
Fund, containing a Mortgage Pool, a Contract Pool or a
pool of Agency Securities (an "Agency Securities Pool")
having the aggregate principal balance as of the date
(the "Cut-off Date") specified in the related Prospectus
Supplement. Holders of Certificates
("Certificateholders") of a series will have interests
only in such Mortgage Pool, Contract Pool or Agency
Securities Pool and will have no interest in the Mortgage
Pool, Contract Pool or Agency Securities Pool created
with respect to any other series of Certificates.
The related Prospectus Supplement may identify one
or more entities as Servicers for a series of
Certificates evidencing interests in Mortgage Loans or
Contracts or, if so provided in the related Prospectus
Supplement, an entity may act as Master Servicer with
respect to a series of Certificates. The Master Servicer
or any Servicer, as applicable, may service the Mortgage
Loans or Contracts through one or more Sub-Servicers.
See "Description of the Certificates--Servicing and
Administration of Mortgage Collateral." In addition to
or in lieu of the Master Servicer or Servicer for a
series of Certificates, the related Prospectus Supplement
may identify a Certificate Administrator for the Trust
Fund. The related Prospectus Supplement will identify an
entity that will serve as trustee (the "Trustee") for a
series of Certificates. The Trustee will be authorized
to appoint a custodian (a "Custodian") pursuant to a
custodial agreement to maintain possession of and review
documents relating to the Mortgage Collateral as the
agent of the Trustee. The identity of such Custodian, if
any, will be set forth in the related Prospectus
Supplement.
The following is a brief description of the Mortgage
Collateral expected to be included in the Trust Funds.
If specific information respecting the Mortgage
Collateral is not known to the Company at the time
Certificates are initially offered, more general
information of the nature described below will be
provided in the Prospectus Supplement, and specific
information will be set forth in a Current Report on Form
8-K (a "Form 8-K") to be filed with the Securities and
Exchange Commission (the "Commission") within fifteen
days after the initial issuance of such Certificates. A
copy of the Pooling and Servicing Agreement or Trust
Agreement, as applicable, with respect to each series
will be an exhibit to the Form 8-K. A schedule of
Mortgage Collateral will be an exhibit to the related
Pooling and Servicing Agreement or Trust Agreement.
The Mortgage Loans
Unless otherwise stated in the related Prospectus
Supplement, the Mortgage Loans included in a Trust Fund
for a series will have been originated by or on behalf of
either (i) savings and loan associations, savings banks,
commercial banks, credit unions, insurance companies or
similar institutions which are supervised and/or examined
by a federal or state authority, or (ii) HUD-approved
mortgagees. Each Mortgage Loan will be selected by the
Company for inclusion in a Mortgage Pool from those
purchased by the Company from Affiliated Sellers or,
either directly or through its affiliates, including GMAC
Mortgage and Residential Funding, from Unaffiliated
Sellers, all as described in the related Prospectus
Supplement. If a Mortgage Pool is composed of Mortgage
Loans acquired by the Company directly from Unaffiliated
Sellers, the related Prospectus Supplement will specify
the extent of Mortgage Loans so acquired. The
characteristics of the Mortgage Loans will be as
described in the related Prospectus Supplement. The
Mortgage Loans purchased by the Company from a Mortgage
Collateral Seller will be selected by the Company. Other
mortgage loans available for purchase by the Company may
have had characteristics which would have made them
eligible for inclusion in a Mortgage Pool, but were not
selected by the Company for inclusion in such Mortgage
Pool.
If so stated in the related Prospectus Supplement,
all or a portion of the Mortgage Loans that underlie a
series of Certificates may have been purchased by the
Company, either directly, or indirectly through
Residential Funding or other affiliates, from Mortgage
Collateral Sellers under the AlterNet mortgage loan
origination program (the "AlterNet Mortgage Program") as
described below (such Mortgage Loans, the "AlterNet
Loans") .
The Mortgage Loans may include mortgage loans
insured by the Federal Housing Administration (the "FHA"
and such loans, "FHA Loans"), a division of the United
States Department of Housing and Urban Development
("HUD"), mortgage loans partially guaranteed by the
Veterans Administration (the "VA" and such loans, "VA
Loans") and mortgage loans not insured or guaranteed by
the FHA or VA ("Conventional Loans"). The Mortgage Loans
may have fixed interest rates or adjustable interest
rates ("Mortgage Rates") and may provide for fixed level
payments or may be Mortgage Loans pursuant to which the
monthly payments by the Mortgagor during the early years
of the related Mortgage are less than the amount of
interest that would otherwise be payable thereon, with
the interest not so paid added to the outstanding
principal balance of such Mortgage Loan ("GPM Loans"),
Mortgage Loans subject to temporary buy-down plans ("Buy-
Down Loans"), pursuant to which the monthly payments made
by the Mortgagor during the early years of the Mortgage
Loan will be less than the scheduled monthly payments on
the Mortgage Loan, Mortgage Loans that provide for
payment every other week during the term thereof ("Bi-
Weekly Loans"), Mortgage Loans that experience negative
amortization, Mortgage Loans that require a larger
payment of principal upon maturity (a "Balloon Amount")
that may be all or a portion of the principal thereof
("Balloon Loans"), or Mortgage Loans with other payment
characteristics as described below or in the related
Prospectus Supplement. The Mortgage Loans may be secured
by mortgages or deeds of trust or other similar security
instruments (collectively, "Mortgages") creating a first
lien on the related Mortgaged Properties. The Mortgage
Loans may also include Cooperative Loans evidenced by
promissory notes secured by a lien on the shares issued
by private, non-profit, cooperative housing corporations
("Cooperatives") and on the related proprietary leases or
occupancy agreements granting exclusive rights to occupy
specific units within a Cooperative ("Cooperative
Dwellings").
If so specified in the related Prospectus
Supplement, a Mortgage Pool may include Mortgage Loans
that have been modified (each, a "Modified Mortgage
Loan"). Such modifications may include conversions from
an adjustable to a fixed Mortgage Rate (discussed below)
or other changes in the related mortgage note. If a
Mortgage Loan is a Modified Mortgage Loan, references to
origination generally shall be deemed to be references to
the date of modification.
The Mortgaged Properties may consist of detached
individual dwellings, individual condominiums,
townhouses, duplexes, row houses, individual units in
planned unit developments, two- to four-family dwellings
and other attached dwelling units. Each Mortgaged
Property will be located on land owned in fee simple by
the Mortgagor or, if specified in the related Prospectus
Supplement, land leased by the Mortgagor. Attached
dwellings may include structures where each Mortgagor
owns the land upon which the unit is built, with the
remaining adjacent land owned in common or dwelling units
subject to a proprietary lease or occupancy agreement in
a Cooperative. The proprietary lease or occupancy
agreement securing a Cooperative Loan is generally
subordinate to any blanket mortgage on the related
cooperative apartment building or on the underlying land.
Additionally, in the case of a Cooperative Loan, the
proprietary lease or occupancy agreement is subject to
termination and the cooperative shares are subject to
cancellation by the Cooperative if the tenant-stockholder
fails to pay maintenance or other obligations or charges
owed by such tenant-stockholder. See "Certain Legal
Aspects of Mortgage Loans and Contracts."
The percentage of Mortgage Loans that are owner-
occupied will be disclosed in the related Prospectus
Supplement. The basis for any statement that a given
percentage of the Mortgage Loans are secured by Mortgaged
Properties that are owner-occupied will be one or more of
the following: (i) the making of a representation by the
Mortgagor at origination of a Mortgage Loan that the
Mortgagor intends to use the Mortgaged Property as a
primary residence for at least the first six months of
occupancy, (ii) a representation by the originator of the
Mortgage Loan (which representation may be based solely
on (i) above) or (iii) the fact that the mailing address
for the Mortgagor is the same as the address of the
Mortgaged Property, and any representation and warranty
in the related Pooling and Servicing Agreement to such
effect may be qualified similarly. To the extent
specified in the related Prospectus Supplement, the
Mortgaged Properties may include vacation homes, second
homes and non-owner-occupied investment properties.
Mortgage Loans secured by investment properties
(including two- to four-unit dwellings) may also be
secured by an assignment of leases and rents and
operating or other cash flow guarantees relating to the
Mortgage Loans.
Certain information, including information regarding
loan-to-value ratios (each, a "Loan-to-Value Ratio") at
origination (unless otherwise specified in the related
Prospectus Supplement) of the Mortgage Loans underlying
each series of Certificates, will be supplied in the
related Prospectus Supplement. In the case of most
Mortgage Loans, the Loan-to-Value Ratio is defined
generally as the ratio, expressed as a percentage, of the
principal amount of the Mortgage Loan at origination to
the lesser of (1) the appraised value determined in an
appraisal obtained at origination of such Mortgage Loan
and (2) the sales price for the related Mortgaged
Property. In the case of certain refinanced, modified or
converted Mortgage Loans, the Loan-to-Value Ratio at
origination is defined as the ratio, expressed as a
percentage, of the principal amount of such Mortgage Loan
to either the appraised value determined in an appraisal
obtained at the time of refinancing, modification or
conversion or, if no such appraisal has been obtained, to
the lesser of (1) the appraised value of the related
Mortgaged Property determined at origination of the loan
to be refinanced, modified or converted and (2) the sales
price of the related Mortgaged Property. The denominator
of the ratio described in the preceding sentence or the
second preceding sentence, as the case may be, is
hereinafter referred to as the "Appraised Value." Certain
Mortgage Loans which are subject to negative amortization
will have Loan-to-Value Ratios which will increase after
origination as a result of such negative amortization.
In the case of seasoned Mortgage Loans, the appraisals
upon which Loan-to-Value Ratios have been calculated may
no longer be accurate valuations of the Mortgaged
Properties. Certain Mortgaged Properties may be located
in regions where property values have declined
significantly since the time of origination.
The Mortgage Loans may be "equity refinance"
Mortgage Loans, as to which a portion of the proceeds are
used to refinance an existing mortgage loan, and the
remaining proceeds may be retained by the Mortgagor or
used for purposes unrelated to the Mortgaged Property.
Alternatively, the Mortgage Loans may be "rate and term
refinance" Mortgage Loans, as to which substantially all
of the proceeds (net of related costs incurred by the
Mortgagor) are used to refinance an existing mortgage
loan or loans (which may include a junior lien) primarily
in order to change the interest rate or other terms
thereof. The Mortgage Loans may be mortgage loans that
have been consolidated and/or have had various terms
changed, mortgage loans that have been converted from
adjustable rate mortgage loans to fixed rate mortgage
loans, or construction loans which have been converted to
permanent mortgage loans. In addition, a Mortgaged
Property may be subject to secondary financing at the
time of origination of the Mortgage Loan or thereafter.
Mortgage Loans that have adjustable Mortgage Rates
("ARM Loans") generally will provide for a fixed initial
Mortgage Rate until the first date on which such Mortgage
Rate is to be adjusted. Thereafter, the Mortgage Rate is
subject to periodic adjustment as described in the
related Prospectus Supplement, subject to the applicable
limitations, based on changes in the relevant index (the
"Index") described in the applicable Prospectus
Supplement, to a rate equal to the Index plus a fixed
percentage spread over the Index established
contractually for each ARM Loan at the time of its
origination (the "Gross Margin"). The initial Mortgage
Rate on an ARM Loan may be lower than the sum of the
then-applicable Index and the Gross Margin for such ARM
Loan.
ARM Loans have features that provide different
investment considerations than fixed-rate mortgage loans.
In particular, adjustable mortgage rates can cause
payment increases that may exceed some Mortgagors'
capacity to cover such payments. However, to the extent
specified in the related Prospectus Supplement, an ARM
Loan may provide that its Mortgage Rate may not be
adjusted to a rate above the applicable maximum Mortgage
Rate (the "Maximum Mortgage Rate") or below the
applicable minimum Mortgage Rate (the "Minimum Mortgage
Rate"), if any, for such ARM Loan. In addition, to the
extent specified in the related Prospectus Supplement,
certain of the ARM Loans may provide for limitations on
the maximum amount by which their mortgage rates may
adjust for any single adjustment period (the "Periodic
Cap"). Some ARM Loans provide for limitations on the
amount of scheduled payments of principal and interest.
Certain ARM Loans may be subject to negative
amortization from time to time prior to their maturity
(such ARM Loans, "Neg-Am ARM Loans"). Such negative
amortization may result from either the adjustment of the
Mortgage Rate on a more frequent basis than the
adjustment of the scheduled payment or the application of
a cap on the size of the scheduled payment. In the first
case, negative amortization results if an increase in the
Mortgage Rate occurs prior to an adjustment of the
scheduled payment on the related Mortgage Loan and such
increase causes accrued monthly interest on the Mortgage
Loan to exceed the scheduled payment. In the second
case, negative amortization results if an increase in the
Mortgage Rate causes accrued monthly interest on a
Mortgage Loan to exceed the limit on the size of the
scheduled payment on such Mortgage Loan. In the event
that the scheduled payment is not sufficient to pay the
accrued monthly interest on a Neg-Am ARM Loan, the amount
of accrued monthly interest that exceeds the scheduled
payment on such Mortgage Loans (the "Deferred Interest")
is added to the principal balance of such ARM Loan and is
to be repaid from future scheduled payments. Neg-Am ARM
Loans do not provide for the extension of their original
stated maturity to accommodate changes in their Mortgage
Rate. The related Prospectus Supplement will specify
whether the ARM Loans underlying a series are Neg-Am ARM
Loans.
A Mortgage Pool may contain ARM Loans which allow
the Mortgagors to convert the adjustable rates on such
Mortgage Loans to a fixed rate at one or more specified
periods during the life of such Mortgage Loans (each, a
"Convertible Mortgage Loan"), generally not later than
ten years subsequent to the date of origination. If
specified in the related Prospectus Supplement, upon any
conversion, the Company will repurchase or Residential
Funding, the applicable Servicer or Sub-Servicer or a
third party will purchase the converted Mortgage Loan as
and to the extent set forth in the related Prospectus
Supplement. Alternatively, if specified in the related
Prospectus Supplement, the Company or Residential Funding
(or another party specified therein) may agree to act as
remarketing agent with respect to such converted Mortgage
Loans and, in such capacity, to use its best efforts to
arrange for the sale of converted Mortgage Loans under
specified conditions. Upon the failure of any party so
obligated to purchase any such converted Mortgage Loan,
the inability of any remarketing agent to arrange for the
sale of the converted Mortgage Loan and the unwillingness
of such remarketing agent to exercise any election to
purchase the converted Mortgage Loan for its own account,
the related Mortgage Pool will thereafter include both
fixed rate and adjustable rate Mortgage Loans.
If specified in the related Prospectus Supplement,
certain of the Mortgage Loans may be Buy-Down Loans
pursuant to which the monthly payments made by the
Mortgagor during the early years of the Mortgage Loan
(the "Buy-Down Period") will be less than the scheduled
monthly payments on the Mortgage Loan, the resulting
difference to be made up from (i) an amount (such amount,
exclusive of investment earnings thereon, being
hereinafter referred to as "Buy-Down Funds") contributed
by the seller of the Mortgaged Property or another source
and placed in an escrow account, (ii) if the Buy-Down
Funds are contributed on a present value basis,
investment earnings on such Buy-Down Funds or (iii)
additional buydown funds to be contributed over time by
the Mortgagor's employer or another source.
The related Prospectus Supplement will provide
material information concerning the types and
characteristics of the Mortgage Loans included in a Trust
Fund as of the related Cut-off Date. In the event that
Mortgage Loans are added to or deleted from the Trust
Fund after the date of the related Prospectus Supplement
and prior to the Closing Date for the related series of
Certificates, the final characteristics of the Mortgage
Pool will be noted in the Form 8-K.
Certain Mortgage Pools may include Mortgage Loans
that are one or more months delinquent with regard to
payment of principal or interest at the time of their
deposit into a Trust Fund. The related Prospectus
Supplement will set forth the percentage of Mortgage
Loans that are so delinquent. In addition, the related
Prospectus Supplement will set forth the percentage of
Mortgage Loans that have been delinquent more than once
during the preceding twelve months. Delinquent Mortgage
Loans are more likely to result in losses than Mortgage
Loans that have a current payment status.
Under the Pooling and Servicing Agreement for each
series of Certificates, the Company will cause the
Mortgage Loans constituting each Mortgage Pool to be
assigned to the Trustee for such series of Certificates,
for the benefit of the holders of all such Certificates.
Such assignment of the Mortgage Loans to the Trustee will
be without recourse. See "Description of the
Certificates--Assignment of Mortgage Loans."
Underwriting Policies
The Company generally expects that the originator of
each of the Mortgage Loans included in a Trust Fund for
a series will have applied, consistent with applicable
federal and state laws and regulations, underwriting
procedures intended to evaluate the borrower's credit
standing and repayment ability and/or the value and
adequacy of the related property as collateral. If so
specified in the related Prospectus Supplement, all or a
portion of the Mortgage Loans constituting the Mortgage
Pool for a series of Certificates may have been acquired
either directly or indirectly by the Company through the
AlterNet Mortgage Program. Any FHA Loans or VA Loans
will have been originated in compliance with the
underwriting policies of the FHA or VA, respectively.
The underwriting criteria applied by the originators of
the Mortgage Loans included in a Mortgage Pool may vary
significantly among Mortgage Collateral Sellers. The
related Prospectus Supplement will describe generally
certain underwriting criteria, to the extent known by the
Company, that were applied by the originators of such
Mortgage Loans. The Company generally will have less
detailed information concerning the origination of
seasoned Mortgage Loans than it will have concerning
newly-originated Mortgage Loans.
General Standards. Generally, each Mortgagor will
have been required to complete an application designed to
provide to the original lender pertinent credit
information concerning the Mortgagor. As part of the
description of the Mortgagor's financial condition, such
Mortgagor will have furnished information (which may be
supplied solely in such application) with respect to its
assets, liabilities, income, credit history, employment
history and personal information, and furnished an
authorization to apply for a credit report which
summarizes the borrower's credit history with local
merchants and lenders and any record of bankruptcy. The
Mortgagor may also have been required to authorize
verifications of deposits at financial institutions where
the Mortgagor had demand or savings accounts. In the
case of investment properties, only income derived from
the Mortgaged Property may have been considered for
underwriting purposes, rather than the income of the
Mortgagor from other sources. With respect to Mortgaged
Property consisting of vacation or second homes, no
income derived from the property generally will have been
considered for underwriting purposes.
As described in the related Prospectus Supplement,
certain Mortgage Loans may have been originated under
"limited documentation" or "no documentation" programs
which require less documentation and verification than do
traditional "full documentation" programs. Generally,
under such a program, minimal investigation into the
Mortgagor's credit history and income profile is
undertaken by the originator and such underwriting may be
based primarily or entirely on an appraisal of the
Mortgaged Property and the Loan-to-Value Ratio at
origination.
The adequacy of the Mortgaged Property as security
for repayment of the related Mortgage Loan will generally
have been determined by appraisal in accordance with pre-
established appraisal procedure guidelines for appraisals
established by or acceptable to the originator.
Appraisers may be staff appraisers employed by the
originator or independent appraisers selected in
accordance with pre-established guidelines established by
the originator. The appraisal procedure guidelines
generally will have required the appraiser or an agent on
its behalf to personally inspect the property and to
verify whether the property was in good condition and
that construction, if new, had been substantially
completed. The appraisal generally will have been based
upon a market data analysis of recent sales of comparable
properties and, when deemed applicable, an analysis based
on income generated from the property or a replacement
cost analysis based on the current cost of constructing
or purchasing a similar property.
The underwriting standards applied by an originator
generally require that the underwriting officers be
satisfied that the value of the property being financed,
as indicated by an appraisal or other acceptable
valuation method, currently supports and is anticipated
to support in the future the outstanding loan balance.
In fact, certain states where the Mortgaged Properties
may be located have "anti-deficiency" laws requiring, in
general, that lenders providing credit on single family
property look solely to the property for repayment in the
event of foreclosure. See "Certain Legal Aspects of
Mortgage Loans and Contracts." Any of these factors
could change nationwide or merely could affect a locality
or region in which all or some of the Mortgaged
Properties are located. However, declining values of
real estate, as experienced recently in certain regions,
or increases in the principal balances of certain
Mortgage Loans, such as GPM Loans and Neg-Am ARM Loans,
could cause the principal balance of some or all of the
Mortgage Loans to exceed the value of the Mortgaged
Properties.
Based on the data provided in the application,
certain verifications (if required by the originator of
the Mortgage Loan) and the appraisal or other valuation
of the Mortgaged Property, a determination will have been
made by the original lender that the Mortgagor's monthly
income would be sufficient to enable the Mortgagor to
meet its monthly obligations on the Mortgage Loan and
other expenses related to the property (such as property
taxes, utility costs, standard hazard and primary
mortgage insurance and, if applicable, maintenance fees
and other levies assessed by a Cooperative) and other
fixed obligations other than housing expenses. The
originator's guidelines for Mortgage Loans generally will
specify that scheduled payments on a Mortgage Loan during
the first year of its term plus taxes and insurance
(including primary mortgage insurance) and all scheduled
payments on obligations that extend beyond one year
(including those mentioned above and other fixed
obligations) would equal no more than specified
percentages of the prospective Mortgagor's gross income.
The originator may also consider the amount of liquid
assets available to the Mortgagor after origination.
Residential Funding, on behalf of the Company,
generally will review a portion of the Mortgage Loans
constituting the Mortgage Pool for a Series of
Certificates to assess the likelihood of repayment of the
Mortgage Loan from the various sources for such
repayment, including the Mortgagor, the Mortgaged
Property, and primary mortgage insurance, if any. In
reviewing seasoned Mortgage Loans (those which have been
outstanding for more than 12 months) Residential Funding
may also take into consideration the Mortgagor's actual
payment history in assessing a Mortgagor's current
ability to make payments on the Mortgage Loan. In
addition, Residential Funding may conduct additional
procedures to assess the current value of the Mortgaged
Properties. Such procedures may consist of drive by
appraisals or real estate broker's price opinions. The
Company may also consider a specific area's housing value
trends. These alternative valuation methods are not
generally as reliable as the type of mortgagor financial
information or appraisals that are generally obtained at
origination.
The Company anticipates that Mortgage Loans included
in Mortgage Pools for certain series of Certificates will
have been originated based on underwriting standards that
are less stringent than for other first mortgage loan
lending programs. In such cases, borrowers may have
credit histories that contain delinquencies on mortgage
and/or consumer debts. In addition, some borrowers may
have filed bankruptcy within a few years of the time of
origination of the related Mortgage Loan. Likewise,
Mortgage Loans included in a Trust Fund may have been
originated in connection with a governmental program
under which underwriting standards were significantly
less stringent and designed to promote home ownership or
the availability of affordable residential rental
property notwithstanding higher risks of default and
losses. As discussed above, in evaluating seasoned
mortgage loans, the Company may place greater weight on
payment history or market and other economic trends and
less weight on underwriting factors generally applied to
newly originated mortgage loans.
The AlterNet Program. The underwriting standards
with respect to AlterNet Loans will generally conform to
those published in the AlterNet Seller Guide (the
"AlterNet Seller Guide"), as modified from time to time.
The AlterNet Seller Guide will set forth general
underwriting standards relating to mortgage loans made to
borrowers having a range of imperfect credit histories,
ranging from minor delinquencies to borrower
bankruptcies. The underwriting standards set forth in
the AlterNet Seller Guide are revised based on changing
conditions in the residential mortgage market and the
market for the Company's mortgage pass-through
certificates and may also be waived by Residential
Funding from time to time. The Prospectus Supplement for
each series of Certificates secured by AlterNet Loans
will set forth the general underwriting criteria
applicable to such Mortgage Loans.
A portion of AlterNet Loans generally will be
reviewed by Residential Funding or by a designated third
party for compliance with applicable underwriting
criteria. Certain of the AlterNet Loans may be purchased
in negotiated transactions (which may be governed by
agreements relating to ongoing purchases of AlterNet
Loans by Residential Funding) ("Master Commitments"),
from AlterNet Program Sellers who will represent that
AlterNet Loans have been originated in accordance with
underwriting standards agreed to by Residential Funding.
Certain other AlterNet Loans will be purchased from
AlterNet Program Sellers who will represent that AlterNet
Loans were originated pursuant to underwriting standards
determined by a mortgage insurance company acceptable to
Residential Funding. Residential Funding may accept a
certification from such insurance company as to an
AlterNet Loan's insurability in a mortgage pool as of the
date of certification as evidence of an AlterNet Loan
conforming to applicable underwriting standards. Such
certifications will likely have been issued before the
purchase of the AlterNet Loan by Residential Funding or
the Company.
FHA and VA Programs. With respect to FHA Loans and
VA Loans, traditional underwriting guidelines used by the
FHA and the VA, as the case may be, which were in effect
at the time of origination of each such Mortgage Loan
will have generally been applied.
The Contracts
General
The Trust Fund for a series may include a Contract
Pool evidencing interests in Contracts originated by one
or more manufactured housing dealers, or such other
entity or entities described in the related Prospectus
Supplement. The Contracts may be conventional Contracts
or Contracts insured by the FHA ("FHA Contracts") or
partially guaranteed by the VA ("VA Contracts"). Each
Contract will be secured by a Manufactured Home. Unless
otherwise specified in the related Prospectus Supplement,
the Contracts will be fully amortizing.
The Manufactured Homes securing the Contracts will
consist of "manufactured homes" within the meaning of 42
U.S.C. 5402(6) which are treated as "single family
residences" for the purposes of the REMIC provisions of
the Code. Accordingly, a Manufactured Home will be a
structure built on a permanent chassis, which is
transportable in one or more sections and customarily
used at a fixed location, has a minimum of 400 square
feet of living space and minimum width in excess of 8-1/2
feet and is designed to be used as a dwelling with or
without a permanent foundation when connected to the
required utilities, and includes the plumbing, heating,
air conditioning, and electrical systems contained
therein.
The related Prospectus Supplement will provide
information concerning the types or characteristics of
the Contracts included in a Trust Fund as of the related
Cut-off Date. In the event that Contracts are added to
or deleted from the Trust Fund after the date of the
related Prospectus Supplement, the final characteristics
of the Contract Pool will be noted in the Form 8-K.
Certain Contract Pools may include Contracts that
are one or more months delinquent with regard to payment
of principal or interest at the time of their deposit
into a Trust Fund. The related Prospectus Supplement
will set forth the percentage of Contracts that are
delinquent and whether such Contracts have been so
delinquent more than once during the preceding twelve
months. Contract Pools that contain delinquent Contracts
are more likely to sustain losses than are Contract Pools
that contain Contracts that have a current payment
status.
Underwriting Policies
Conventional Contracts will comply with the
underwriting policies of the applicable originator or
Mortgage Collateral Seller, which will be described in
the related Prospectus Supplement. With respect to FHA
Contracts and VA Contracts, traditional underwriting
guidelines used by the FHA and the VA, as the case may
be, which were in effect at the time of origination of
each such Contract will generally have been applied.
With respect to a Contract made in connection with
the Mortgagor's purchase of a Manufactured Home, the
"Appraised Value" is generally the sales price of the
Manufactured Home or the amount determined by a
professional appraiser. The appraiser must personally
inspect the Manufactured Home and prepare a report which
includes market data based on recent sales of comparable
Manufactured Homes and, when deemed applicable, a
replacement cost analysis based on the current cost of a
similar Manufactured Home. The Loan-to-Value Ratio for
a Contract generally will be equal to the original
principal amount of the Contract divided by the lesser of
the Appraised Value or the sales price for the
Manufactured Home; however, unless otherwise specified in
the related Prospectus Supplement, an appraisal of the
Manufactured Home will not be required.
The Agency Securities
Government National Mortgage Association
Ginnie Mae is a wholly-owned corporate
instrumentality of the United States within HUD. Section
306(g) of Title III of the National Housing Act of 1934,
as amended (the "Housing Act"), authorizes Ginnie Mae to
guarantee the timely payment of the principal of and
interest on certificates representing interests in a pool
of mortgages (i) insured by the FHA, under the Housing
Act or under Title V of the Housing Act of 1949, or (ii)
partially guaranteed by the VA under the Servicemen's
Readjustment Act of 1944, as amended, or under Chapter 37
of Title 38, United States Code.
Section 306(g) of the Housing Act provides that "the
full faith and credit of the United States is pledged to
the payment of all amounts which may be required to be
paid under any guarantee under this subsection." In
order to meet its obligations under any such guarantee,
Ginnie Mae may, under Section 306(d) of the Housing Act,
borrow from the United States Treasury an amount that is
at any time sufficient to enable Ginnie Mae to perform
its obligations under its guarantee.
Ginnie Mae Securities
Unless otherwise specified in the related Prospectus
Supplement, each Ginnie Mae Security relating to a series
(which may be a "Ginnie Mae I Certificate" or a "Ginnie
Mae II Certificate" as referred to by Ginnie Mae) will be
a "fully modified pass-through" mortgage-backed
certificate issued and serviced by a mortgage banking
company or other financial concern approved by Ginnie
Mae, except with respect to any stripped mortgage backed
securities guaranteed by Ginnie Mae or any REMIC
securities issued by Ginnie Mae. The characteristics of
any Ginnie Mae Securities included in the Trust Fund for
a series of Certificates will be set forth in the related
Prospectus Supplement.
Federal Home Loan Mortgage Corporation
Freddie Mac is a corporate instrumentality of the
United States created pursuant to Title III of the
Emergency Home Finance Act of 1970, as amended (the
"Freddie Mac Act"). Freddie Mac was established
primarily for the purpose of increasing the availability
of mortgage credit for the financing of needed housing.
The principal activity of Freddie Mac currently consists
of purchasing first-lien, conventional, residential
mortgage loans or participation interests in such
mortgage loans and reselling the mortgage loans so
purchased in the form of guaranteed mortgage securities,
primarily Freddie Mac Securities. In 1981, Freddie Mac
initiated its Home Mortgage Guaranty Program under which
it purchases mortgage loans from sellers with Freddie Mac
Securities representing interests in the mortgage loans
so purchased. All mortgage loans purchased by Freddie
Mac must meet certain standards set forth in the Freddie
Mac Act. Freddie Mac is confined to purchasing, so far
as practicable, mortgage loans that it deems to be of
such quality and type as to meet generally the purchase
standards imposed by private institutional mortgage
investors. See "Additional Information" for the
availability of further information regarding Freddie Mac
and Freddie Mac Securities.
Freddie Mac Securities
Unless otherwise specified in the related Prospectus
Supplement, each Freddie Mac Security relating to a
series will represent an undivided interest in a pool of
mortgage loans that typically consists of conventional
loans (but may include FHA Loans and VA Loans) purchased
by Freddie Mac, except with respect to any stripped
mortgage backed securities issued by Freddie Mac. Each
such pool will consist of mortgage loans (i)
substantially all of which are secured by one- to four-
family residential properties or (ii) if specified in the
related Prospectus Supplement, are secured by five or
more family residential properties. The characteristics
of any Freddie Mac Securities included in the Trust Fund
for a series of Certificates will be set forth in the
related Prospectus Supplement.
Federal National Mortgage Association
Fannie Mae is a federally chartered and privately
owned corporation organized and existing under the
Federal National Mortgage Association Charter Act (12
U.S.C. 1716 et seq.). It is the nation's largest
supplier of residential mortgage funds. Fannie Mae was
originally established in 1938 as a United States
government agency to provide supplemental liquidity to
the mortgage market and was transformed into a
stockholder-owned and privately managed corporation by
legislation enacted in 1968. Fannie Mae provides funds
to the mortgage market primarily by purchasing home
mortgage loans from local lenders, thereby replenishing
their funds for additional lending. See "Additional
Information" for the availability of further information
respecting Fannie Mae and Fannie Mae Securities. Neither
the United States nor any agency thereof is obligated to
finance Fannie Mae's operations or to assist Fannie Mae
in any other manner.
Fannie Mae Securities
Unless otherwise specified in the related Prospectus
Supplement, each Fannie Mae Security relating to a series
will represent a fractional undivided interest in a pool
of mortgage loans formed by Fannie Mae, except with
respect to any stripped mortgage backed securities issued
by Fannie Mae. Mortgage loans underlying Fannie Mae
Securities will consist of (i) fixed, variable or
adjustable rate conventional mortgage loans or (ii)
fixed-rate FHA Loans or VA Loans. Such mortgage loans
may be secured by either one- to four-family or multi-
family residential properties. The characteristics of
any Fannie Mae Securities included in the Trust Fund for
a series of Certificates will be set forth in the related
Prospectus Supplement.
Mortgage Collateral Sellers
The Mortgage Collateral to be included in a Trust
Fund will be purchased by the Company from Mortgage
Collateral Sellers that may be (a) banks, savings and
loan associations, mortgage bankers, investment banking
firms, insurance companies, the Resolution Trust
Corporation (the "RTC"), the Federal Deposit Insurance
Corporation (the "FDIC") and other mortgage loan
originators or sellers not affiliated with the Company
(each, an "Unaffiliated Seller") or (b) GMAC Mortgage,
the indirect parent of the Company, Residential Funding
and their affiliates (each, an "Affiliated Seller").
Such purchases may occur by one or more of the following
methods: (i) one or more purchases from Unaffiliated
Sellers, which may occur simultaneously with the issuance
of the Certificates or which may occur over an extended
period of time; (ii) multiple direct or indirect
purchases through the AlterNet Mortgage Program; or (iii)
one or more purchases from Affiliated Sellers. The
Prospectus Supplement for a series of Certificates will
disclose the method or methods used to acquire the
Mortgage Collateral for such series. The Company may
issue one or more classes of Certificates to a Mortgage
Collateral Seller as consideration for the purchase of
the Mortgage Collateral securing such series of
Certificates, if so described in the related Prospectus
Supplement.
The Mortgage Collateral Sellers that participate in
the AlterNet Mortgage Program (each, an "AlterNet Program
Seller") will have been selected by Residential Funding
on the basis of criteria set forth in the AlterNet Seller
Guide. An AlterNet Program Seller may be an affiliate of
the Company and the Company presently anticipates that
GMAC Mortgage Corporation of PA, an affiliate of the
Company, will be an AlterNet Program Seller. Except in
the case of the RTC, the FDIC and investment banking
firms, unless otherwise specified in the related
Prospectus Supplement, each AlterNet Program Seller will
have been a HUD-approved mortgagee or a financial
institution supervised by a federal or state authority
and will have had generally a minimum of two years'
experience (which may be through a predecessor entity) in
originating mortgage loans. If an AlterNet Program
Seller becomes subject to the direct or indirect control
of RTC or FDIC or if an AlterNet Program Seller's net
worth, financial performance or delinquency and
foreclosure rates are adversely impacted, such
institution may continue to be treated as an AlterNet
Program Seller. Any such event may adversely affect the
ability of any such AlterNet Program Seller to repurchase
Mortgage Collateral in the event of a breach of a
representation or warranty which has not been cured. See
"-Repurchases of Mortgage Collateral" below.
Representations with Respect to Mortgage Collateral
Mortgage Collateral Sellers generally will make
certain limited representations and warranties with
respect to the Mortgage Collateral that they sell.
However, Mortgage Collateral purchased from certain
Unaffiliated Sellers may be purchased with very limited
representations and warranties. The Company will assign
to the Trustee for the benefit of the related
Certificateholders all of its right, title and interest
in each agreement pursuant to which it purchased any item
of Mortgage Collateral from a Mortgage Collateral Seller,
to the extent such agreement relates to (i) the
representations and warranties made by a Mortgage
Collateral Seller or Residential Funding, as the case may
be, in respect of such item of Mortgage Collateral and
(ii) any remedies provided for any breach of such
representations and warranties.
With respect to any Mortgage Loan (including
AlterNet Loans) or Contract constituting a part of the
Trust Fund, unless otherwise disclosed in the related
Prospectus Supplement, Residential Funding generally will
represent and warrant that: (i) as of the Cut-off Date,
the information set forth in a listing of the related
Mortgage Loan or Contract was true and correct in all
material respects; (ii) except in the case of Cooperative
Loans, a policy of title insurance was effective or
attorney's certificate was received at origination, and
each policy remained in full force and effect on the date
of sale of the related Mortgage Loan or Contract to the
Company; (iii) to the best of Residential Funding's
knowledge, if required by applicable underwriting
standards, the Mortgage Loan or Contract is the subject
of a Primary Insurance Policy; (iv) Residential Funding
had good title to the Mortgage Loan or Contract and the
Mortgage Loan or Contract is not subject to offsets,
defenses or counterclaims except as may be provided under
the Relief Act and except with respect to any buydown
agreement for a Buy-Down Loan; (v) each Mortgaged
Property is free of material damage and in good repair;
(vi) the Mortgage Loan or Contract was not one month or
more delinquent in payment of principal and interest as
of the related Cut-off Date and was not so delinquent
more than once during the twelve-month period prior to
the Cut-off Date; and (vii) there is no delinquent tax or
assessment lien against the related Mortgaged Property.
In the event of a breach of a representation or
warranty made by Residential Funding that materially
adversely affects the interests of the Certificateholders
in the Mortgage Loan or Contract, Residential Funding
will be obligated to repurchase any such Mortgage Loan or
Contract or substitute for such Mortgage Loan or Contract
as described below. In addition, unless otherwise
specified in the related Prospectus Supplement,
Residential Funding will be obligated to repurchase or
substitute for any Mortgage Loan as to which it is
discovered that the related Mortgage does not create a
valid first lien on, or in the case of a Contract a
perfected security interest in, the related Mortgaged
Property, subject only to (a) liens of real property
taxes and assessments not yet due and payable, (b)
covenants, conditions and restrictions, rights of way,
easements and other matters of public record as of the
date of recording of such Mortgage and certain other
permissible title exceptions and (c) other encumbrances
to which like properties are commonly subject which do
not materially adversely affect the value, use, enjoyment
or marketability of the Mortgaged Property. In addition,
unless otherwise specified in the related Prospectus
Supplement, with respect to any Mortgage Loan or Contract
as to which the Company delivers to the Trustee an
affidavit certifying that the original Mortgage Note or
Contract has been lost or destroyed, if such Mortgage
Loan or Contract subsequently is in default and the
enforcement thereof or of the related Mortgage or
Contract is materially adversely affected by the absence
of the original Mortgage Note or Contract, Residential
Funding will be obligated to repurchase or substitute for
such Mortgage Loan or Contract in the manner described
below. However, unless otherwise set forth in the
related Prospectus Supplement, Residential Funding will
not be required to repurchase or substitute for any
Mortgage Loan or Contract if the circumstances giving
rise to such requirement also constitute fraud in the
origination of the related Mortgage Loan or Contract.
Furthermore, because the listing of the related Mortgage
Collateral generally contains information with respect to
the Mortgage Collateral as of the Cut-off Date,
prepayments and, in certain limited circumstances,
modifications to the interest rate and principal and
interest payments may have been made with respect to one
or more of the related items of Mortgage Collateral
between the Cut-off Date and the Closing Date. Neither
Residential Funding nor any Seller will be required to
repurchase or substitute for any item of Mortgage
Collateral as a result of any such prepayment or
modification.
All of the representations and warranties of a
Mortgage Collateral Seller in respect of an item of
Mortgage Collateral will have been made as of the date on
which such Mortgage Collateral Seller sold the Mortgage
Collateral to the Company or Residential Funding or one
of their affiliates. The date as of which such
representations and warranties were made generally will
be a date prior to the date of issuance of the related
series of Certificates. A substantial period of time may
elapse between the date as of which the representations
and warranties were made and the date of issuance of the
related series of Certificates. The Mortgage Collateral
Seller's repurchase obligation (or, if specified in the
related Prospectus Supplement, limited substitution
option) will not arise if, after the sale of the related
Mortgage Collateral, an event occurs that would have
given rise to such an obligation had the event occurred
prior to such period.
Repurchases of Mortgage Collateral
If a Mortgage Collateral Seller or Residential
Funding, as the case may be, cannot cure a breach of any
representation or warranty made by it in respect of an
item of Mortgage Collateral within 90 days after notice
from the Master Servicer, the Servicer, the Certificate
Administrator or the Trustee, and such breach materially
and adversely affects the interests of the
Certificateholders in such item of Mortgage Collateral,
such Mortgage Collateral Seller or Residential Funding,
as the case may be, will be obligated to purchase such
item of Mortgage Collateral at a price set forth in the
related Pooling and Servicing Agreement or Trust
Agreement. Likewise, as described under "Description of
the Certificates--Review of Mortgage Loan or Contract
Documents," if the Company or the Mortgage Collateral
Seller, as applicable, cannot cure certain documentary
defects with respect to a Mortgage Loan or Contract, the
Company or the Mortgage Collateral Seller, as applicable,
will be required to repurchase such item of Mortgage
Collateral. Unless otherwise specified in the related
Prospectus Supplement, the "Purchase Price" for any such
item of Mortgage Collateral will be equal to the
principal balance thereof as of the date of purchase plus
accrued and unpaid interest to the first day of the month
following the month of repurchase (less the amount,
expressed as a percentage per annum, payable in respect
of servicing or administrative compensation and the
Spread, if any). In certain limited cases, a
substitution may be made in lieu of such repurchase
obligation. See "--Limited Right of Substitution" below.
The Master Servicer, the Servicer or the Certificate
Administrator, as applicable, will be required under the
applicable Pooling and Servicing Agreement or Trust
Agreement to enforce this repurchase obligation, or the
substitution right described below, for the benefit of
the Trustee and the Certificateholders, using practices
it would employ in its good faith business judgment and
which are normal and usual in its general mortgage
servicing activities. If, as a result of a breach of
representation or warranty, a Mortgage Collateral Seller
is required, but fails, to repurchase the related
Mortgage Collateral, the Company or Residential Funding
will only be required to repurchase such Mortgage
Collateral if the Company or Residential Funding has
assumed such representations and warranties.
Consequently, such Mortgage Collateral will remain in the
related Trust Fund and any related losses not borne by
any applicable credit enhancement will be borne by
Certificateholders. If the Mortgage Collateral Seller
fails to honor its repurchase or substitution obligation,
such obligation will not become an obligation of
Residential Funding, the Master Servicer or Servicer
(although Residential Funding, the Master Servicer or
Servicer may have an independent obligation to repurchase
or substitute for such Mortgage Collateral). In
instances where a Mortgage Collateral Seller is unable or
disputes its obligation to repurchase affected Mortgage
Collateral, the Master Servicer or Servicer, using
practices it would employ in its good faith business
judgment and which are normal and usual in its general
mortgage servicing activities, may negotiate and enter
into settlement agreements with such Mortgage Collateral
Seller that could provide for, among other things, the
repurchase of only a portion of the affected Mortgage
Collateral. Any such settlement could lead to losses on
the Mortgage Collateral which would be borne by the
related Certificateholders. In accordance with the above
described practices, the Master Servicer or Servicer will
not be required to enforce any purchase obligation of a
Mortgage Collateral Seller arising from any
misrepresentation by the Mortgage Collateral Seller, if
the Master Servicer or Servicer determines in the
reasonable exercise of its business judgment that the
matters related to such misrepresentation did not
directly cause or are not likely to directly cause a loss
on the related Mortgage Collateral. Unless otherwise
specified in the related Prospectus Supplement, the
foregoing repurchase obligations and the limited right of
substitution (described below) will constitute the sole
remedies available to Certificateholders or the Trustee
for a breach of any representation by a Mortgage
Collateral Seller in its capacity as a seller of Mortgage
Collateral, or for any other event giving rise to such
obligations as described above.
The Company and Residential Funding generally
monitor which Mortgage Collateral Sellers are under the
control of the RTC or the FDIC, or are insolvent,
otherwise in receivership or conservatorship or
financially distressed. Such Mortgage Collateral Sellers
may not be able or permitted to repurchase Mortgage
Collateral for which there has been a breach of
representation or warranty. Moreover, any such Mortgage
Collateral Seller may make no representations or
warranties with respect to Mortgage Collateral sold by
it. The RTC or FDIC (either in their corporate capacity
or as receiver for a depository institution), may also be
a Mortgage Collateral Seller, in which event neither the
RTC nor the FDIC, as applicable, nor the related
depository institution, may make representations or
warranties with respect to the Mortgage Collateral sold,
or only limited representations or warranties may be made
(for example, that the related legal documents are
enforceable). The RTC or FDIC, as applicable, may have
no obligation to repurchase any Mortgage Collateral for
a breach of a representation or warranty. In addition,
Mortgage Collateral that is purchased either directly or
indirectly from the RTC may be subject to a contract
right of the RTC to repurchase such Mortgage Collateral
under certain limited circumstances.
Limited Right of Substitution
In the case of a Mortgage Loan or Contract required
to be repurchased from the Trust Fund (a "Repurchased
Mortgage Loan" or a "Repurchased Contract," respectively)
the related Mortgage Collateral Seller or Residential
Funding, as applicable, may substitute a new Mortgage
Loan or Contract (a "Qualified Substitute Mortgage Loan"
or a "Qualified Substitute Contract," respectively) for
the Repurchased Mortgage Loan or Contract that was
removed from the Trust Fund, during the limited time
period described below. Any such substitution must be
effected within 120 days of the date of the issuance of
the Certificates with respect to a Trust Fund for which
no REMIC election is to be made. With respect to a Trust
Fund for which a REMIC election is to be made, except as
otherwise provided in the related Prospectus Supplement,
such substitution must be effected within two years of
the date of the issuance of the Certificates, and may not
be made if such substitution would cause the Trust Fund
to fail to qualify as a REMIC or result in a prohibited
transaction tax under the Code.
Except as otherwise provided in the related
Prospectus Supplement, any Qualified Substitute Mortgage
Loan or Qualified Substitute Contract generally will, on
the date of substitution: (i) have an outstanding
principal balance, after deduction of the principal
portion of the monthly payment due in the month of
substitution, not in excess of the outstanding principal
balance of the Repurchased Mortgage Loan or Repurchased
Contract; (ii) have a Mortgage Rate and a Net Mortgage
Rate not less than (and not more than one percentage
point greater than) the Mortgage Rate and Net Mortgage
Rate, respectively, of the Repurchased Mortgage Loan or
Repurchased Contract as of the date of substitution;
(iii) have a Loan-to-Value Ratio at the time of
substitution no higher than that of the Repurchased
Mortgage Loan or Repurchased Contract; (iv) have a
remaining term to maturity not greater than (and not more
than one year less than) that of the Repurchased Mortgage
Loan or Repurchased Contract; and (v) comply with all of
the representations and warranties set forth in the
related Pooling and Servicing Agreement as of the date of
substitution. In the event the outstanding principal
balance of a Qualified Substitute Mortgage Loan or
Qualified Substitute Contract is less than the
outstanding principal balance of the related Repurchased
Mortgage Loan or Repurchased Contract, the amount of such
shortfall shall be deposited into the Custodial Account
in the month of substitution for distribution to the
related Certificateholders. The related Pooling and
Servicing Agreement may include additional requirements
relating to ARM Loans or other specific types of Mortgage
Loans or Contracts, or additional provisions relating to
meeting the foregoing requirements on an aggregate basis
where a number of substitutions occur contemporaneously.
Unless otherwise specified in the related Prospectus
Supplement, a Mortgage Collateral Seller will have no
option to substitute for a Mortgage Loan or Contract that
it is obligated to repurchase in connection with a breach
of a representation and warranty.
DESCRIPTION OF THE CERTIFICATES
General
The Certificates will be issued in series. Each
series of Certificates (or, in certain instances, two or
more series of Certificates) will be issued pursuant to
a Pooling and Servicing Agreement or, in the case of
Certificates backed by Agency Securities, a Trust
Agreement, similar to one of the forms filed as an
exhibit to the Registration Statement of which this
Prospectus is a part. Each Pooling and Servicing
Agreement or Trust Agreement will be filed with the
Commission as an exhibit to a Form 8-K. The following
summaries (together with additional summaries under "The
Pooling and Servicing Agreement" below) describe certain
provisions relating to the Certificates common to each
Pooling and Servicing Agreement or Trust Agreement. All
references herein to a "Pooling and Servicing Agreement"
and any discussion of the provisions thereof will also
apply to Trust Agreements. The summaries do not purport
to be complete and are subject to, and are qualified in
their entirety by reference to, all of the provisions of
the Pooling and Servicing Agreement for each Trust Fund
and the related Prospectus Supplement.
Each series of Certificates may consist of any one
or a combination of the following: (i) a single class of
Certificates; (ii) two or more classes of Certificates,
one or more classes of which may be Senior Certificates
that are senior in right of payment to one or more of the
other classes of Subordinate Certificates, and as to
which certain classes of Senior (or Subordinate)
Certificates may be senior to other classes of Senior (or
Subordinate) Certificates, as described in the respective
Prospectus Supplement (any such series, a
"Senior/Subordinate Series"); (iii) one or more classes
of Strip Certificates which will be entitled to (a)
principal distributions, with disproportionate, nominal
or no interest distributions or (b) interest
distributions, with disproportionate, nominal or no
principal distributions; (iv) two or more classes of
Certificates which differ as to the timing, sequential
order, rate, pass-through rate or amount of distributions
of principal or interest or both, or as to which
distributions of principal or interest or both on any
class may be made upon the occurrence of specified
events, in accordance with a schedule or formula
(including "planned amortization classes" and "targeted
amortization classes"), or on the basis of collections
from designated portions of the Mortgage Pool or Contract
Pool, which series may include one or more classes of
Accrual Certificates with respect to which certain
accrued interest will not be distributed but rather will
be added to the principal balance thereof on each
Distribution Date for the period described in the related
Prospectus Supplement; or (v) other types of classes of
Certificates, as described in the related Prospectus
Supplement. Credit support for each series of
Certificates will be provided by a Mortgage Pool
Insurance Policy, Special Hazard Insurance Policy,
Bankruptcy Bond, Letter of Credit, Reserve Fund,
Certificate Insurance Policy or other credit enhancement
as described under "Description of Credit Enhancement,"
or by the subordination of one or more classes of
Certificates as described under "Subordination" or by any
combination of the foregoing.
Form of Certificates
As specified in the related Prospectus Supplement,
the Certificates of each series will be issued either as
physical certificates or in book-entry form. If issued
as physical certificates, the Certificates will be in
fully- registered form only in the denominations
specified in the related Prospectus Supplement, and will
be transferrable and exchangeable at the corporate trust
office of the person appointed under the related Pooling
and Servicing Agreement to register the Certificates (the
"Certificate Registrar"). No service charge will be made
for any registration of exchange or transfer of
Certificates, but the Trustee may require payment of a
sum sufficient to cover any tax or other governmental
charge. The term "Certificateholder" as used herein
refers to the entity whose name appears on the records of
the Certificate Registrar (or, if applicable, a transfer
agent) as the registered holder thereof, except as
otherwise indicated in the related Prospectus Supplement.
If issued in book-entry form, specified classes of
a series of Certificates will be initially issued through
the book-entry facilities of The Depository Trust Company
("DTC"). As to any such class of Certificates so issued
("DTC Registered Certificates"), the record holder of
such Certificates will be DTC's nominee. DTC is a
limited-purpose trust company organized under the laws of
the State of New York, which holds securities for its
participating organizations ("Participants") and
facilitates the clearance and settlement of securities
transactions between Participants through electronic
book-entry changes in the accounts of Participants.
Participants include securities brokers and dealers,
banks, trust companies and clearing corporations and may
include certain other organizations. Other institutions
that are not Participants but clear through or maintain
a custodial relationship with Participants (such
institutions, "Indirect Participants") have indirect
access to DTC's clearance system.
Unless otherwise specified in the related Prospectus
Supplement, no person acquiring an interest in any DTC
Registered Certificates (each such person, a "Beneficial
Owner") will be entitled to receive a Certificate
representing such interest in registered, certificated
form, unless either (i) DTC ceases to act as depository
in respect thereof and a successor depository is not
obtained or (ii) the Company elects in its sole
discretion to discontinue the registration of such
Certificates through DTC. Prior to any such event,
Beneficial Owners will not be recognized by the Trustee,
the Master Servicer, any Servicer or the Certificate
Administrator as holders of the related Certificates for
purposes of the Pooling and Servicing Agreement and
Beneficial Owners will be able to exercise their rights
as owners of such Certificates only indirectly through
DTC, Participants and Indirect Participants. Any
Beneficial Owner that desires to purchase, sell or
otherwise transfer any interest in DTC Registered
Certificates may do so only through DTC, either directly
if such Beneficial Owner is a Participant or indirectly
through Participants and, if applicable, Indirect
Participants. Pursuant to the procedures of DTC,
transfers of the beneficial ownership of any DTC
Registered Certificates will be required to be made in
minimum denominations specified in the related Prospectus
Supplement. The ability of a Beneficial Owner to pledge
DTC Registered Certificates to persons or entities that
are not Participants in the DTC system, or to otherwise
act with respect to such Certificates, may be limited
because of the lack of physical certificates evidencing
such Certificates and because DTC may act only on behalf
of Participants.
Distributions in respect of the DTC Registered
Certificates will be forwarded by the Trustee to DTC, and
DTC will be responsible for forwarding such payments to
Participants, each of which will be responsible for
disbursing such payments to the Beneficial Owners it
represents or, if applicable, to Indirect Participants.
Accordingly, Beneficial Owners may experience delays in
the receipt of payments in respect of their Certificates.
Under DTC's procedures, DTC will take actions permitted
to be taken by holders of any class of DTC Registered
Certificates under the Pooling and Servicing Agreement
only at the direction of one or more Participants to
whose account the DTC Registered Certificates are
credited and whose aggregate holdings represent no less
than any minimum amount of Percentage Interests or voting
rights required therefor. DTC may take conflicting
actions with respect to any action of Certificateholders
of any Class to the extent that Participants authorize
such actions. None of the Master Servicer, the
Certificate Administrator, the Company, any Servicer, the
Trustee or any of their respective affiliates will have
any liability for any aspect of the records relating to
or payments made on account of beneficial ownership
interests in the DTC Registered Certificates, or for
maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
Assignment of Mortgage Loans
At the time of issuance of a series of Certificates,
the Company will cause the Mortgage Loans being included
in the related Trust Fund to be assigned to the Trustee
or its nominee (which may be the Custodian) together with
all principal and interest received on or with respect to
such Mortgage Loans after the Cut-off Date (other than
principal and interest due on or before the Cut-off Date
and any Spread). The Trustee will, concurrently with
such assignment, deliver a series of Certificates to the
Company in exchange for the Mortgage Loans. Each
Mortgage Loan will be identified in a schedule appearing
as an exhibit to the related Pooling and Servicing
Agreement. Such schedule will include, among other
things, information as to the principal balance of each
Mortgage Loan as of the Cut-off Date, as well as
information respecting the Mortgage Rate, the currently
scheduled monthly payment of principal and interest, the
maturity of the Mortgage Note and the Loan-to-Value Ratio
at origination or modification (without regard to any
secondary financing).
In addition, the Company will, as to each Mortgage
Loan other than a Mortgage Loan underlying any Agency
Securities, deliver to the Trustee (or to the Custodian)
the legal documents relating to such Mortgage Loan that
are in possession of the Company, which may include: (i)
the note evidencing such Mortgage Loan (the "Mortgage
Note") (and any modification or amendment thereto)
endorsed without recourse either in blank or to the order
of the Trustee (or its nominee); (ii) the Mortgage
(except for any Mortgage not returned from the public
recording office) with evidence of recording indicated
thereon or, in the case of a Cooperative Loan, the
respective security agreements and any applicable UCC
financing statements; (iii) an assignment in recordable
form of the Mortgage (or, with respect to a Cooperative
Loan, an assignment of the respective security
agreements, any applicable UCC financing statements,
recognition agreements, relevant stock certificates,
related blank stock powers and the related proprietary
leases or occupancy agreements); and (iv) if applicable,
any riders or modifications to such Mortgage Note and
Mortgage, together with certain other documents at such
times as set forth in the related Pooling and Servicing
Agreement. Such assignments may be blanket assignments
covering Mortgages secured by Mortgaged Properties
located in the same county, if permitted by law. If so
provided in the related Prospectus Supplement, the
Company may not be required to deliver one or more of
such documents if such documents are missing from the
files of the party from whom such Mortgage Loans were
purchased.
In the event that, with respect to any Mortgage
Loan, the Company cannot deliver the Mortgage or any
assignment with evidence of recording thereon
concurrently with the execution and delivery of the
related Pooling and Servicing Agreement because of a
delay caused by the public recording office, the Company
will deliver or cause to be delivered to the Trustee or
the Custodian a true and correct photocopy of such
Mortgage or assignment. The Company will deliver or
cause to be delivered to the Trustee or the Custodian
such Mortgage or assignment with evidence of recording
indicated thereon after receipt thereof from the public
recording office or from the related Servicer or Sub-
Servicer.
Assignments of the Mortgage Loans to the Trustee
will be recorded in the appropriate public recording
office, except in states where, in the opinion of counsel
acceptable to the Trustee, such recording is not required
to protect the Trustee's interests in the Mortgage Loan
against the claim of any subsequent transferee or any
successor to or creditor of the Company or the originator
of such Mortgage Loan, or except as otherwise specified
in the related Prospectus Supplement.
Assignment of Contracts
The Company will cause the Contracts constituting
the Contract Pool to be assigned to the Trustee or its
nominee (which may be the Custodian), together with
principal and interest due on or with respect to the
Contracts after the Cut-off Date, but not including
principal and interest due on or before the Cut-off Date
or any Spread. Each Contract will be identified in a
schedule appearing as an exhibit to the Pooling and
Servicing Agreement. Unless otherwise specified in the
related Prospectus Supplement, such schedule will
specify, with respect to each Contract, among other
things: the original principal amount and the adjusted
principal balance as of the close of business on the Cut-
off Date; the Mortgage Rate; the current scheduled
monthly level payment of principal and interest; and the
maturity date of the Contract.
In addition, the Company, the Servicer or the Master
Servicer, as to each Contract, will deliver or cause to
be delivered to the Trustee, or, as specified in the
related Prospectus Supplement, the Custodian, the
original Contract and copies of documents and instruments
related to each Contract and the security interest in the
Manufactured Home securing each Contract. The Company,
the Master Servicer or the Servicer will cause a UCC-1
financing statement to be executed by the Company
identifying the Trustee as the secured party and
identifying all Contracts as collateral. However, unless
otherwise specified in the related Prospectus Supplement,
the Contracts will not be stamped or otherwise marked to
reflect their assignment from the Company to the Trust
Fund and no recordings or filings will be made in the
jurisdictions in which the Manufactured Homes are
located. See "Certain Legal Aspects of Mortgage Loans
and Contracts--The Contracts."
Review of Mortgage Loan or Contract Documents
The Trustee or the Custodian will hold such
documents in trust for the benefit of the
Certificateholders and, generally within 45 days after
receipt thereof, will review such documents. Unless
otherwise provided in the related Prospectus Supplement,
if any such document is found to be defective in any
material respect, the Trustee or such Custodian shall
immediately notify the Master Servicer or the Servicer,
if any, and the Company, and if so specified in the
related Prospectus Supplement, the Master Servicer, the
Servicer or the Trustee shall immediately notify the
Mortgage Collateral Seller. If the Mortgage Collateral
Seller (or, if so specified in the related Prospectus
Supplement, the Company) cannot cure such defect within
60 days (or within such other period specified in the
related Prospectus Supplement) after notice of the defect
is given to the Mortgage Collateral Seller (or, if
applicable, the Company), the Mortgage Collateral Seller
(or, if applicable, the Company) will, not later than 90
days after such notice (or within such other period
specified in the related Prospectus Supplement), either
repurchase the related Mortgage Loan or Contract or any
property acquired in respect thereof from the Trustee or
substitute for such Mortgage Loan or Contract, a new
Mortgage Loan or Contract in accordance with the
standards set forth herein. See "The Trust
Funds--Repurchases of Mortgage Collateral." Unless
otherwise specified in the related Prospectus Supplement,
the obligation to repurchase or substitute for a Mortgage
Loan or Contract constitutes the sole remedy available to
the Certificateholders or the Trustee for a material
defect in a constituent document.
Assignment of Agency Securities
The Company will transfer, convey and assign to the
Trustee or its nominee (which may be the Custodian) all
right, title and interest of the Company in the Agency
Securities and other property to be included in the Trust
Fund for a series. Such assignment will include all
principal and interest due on or with respect to the
Agency Securities after the Cut-off Date specified in the
related Prospectus Supplement (except for any Spread).
The Company will cause the Agency Securities to be
registered in the name of the Trustee or its nominee, and
the Trustee will concurrently authenticate and deliver
the Certificates. Unless otherwise specified in the
related Prospectus Supplement, the Trustee will not be in
possession of or be assignee of record of any underlying
assets for a Agency Security. Each Agency Security will
be identified in a schedule appearing as an exhibit to
the related Pooling and Servicing Agreement, which will
specify as to each Agency Security the original principal
amount and outstanding principal balance as of the Cut-
off Date; the annual pass-through rate or interest rate
for each Agency Security conveyed to the Trustee.
Spread
The Company, the Servicer, the Mortgage Collateral
Seller, the Master Servicer or any of their affiliates,
or such other entity as may be specified in the related
Prospectus Supplement may retain or be paid a portion of
interest (the "Spread") due with respect to the related
Mortgage Collateral. The payment of any Spread will be
disclosed in the related Prospectus Supplement. The
Spread may be in addition to any other payment (such as
the Servicing Fee) that any such entity is otherwise
entitled to receive with respect to the Mortgage
Collateral. Any Spread in respect of an item of Mortgage
Collateral will represent a specified portion of the
interest payable thereon and will not be part of the
related Trust Fund. Any partial recovery of interest in
respect of an item of Mortgage Collateral will be
allocated between the owners of any Spread and the
Certificateholders entitled to payments of interest as
provided in the applicable Pooling and Servicing
Agreement.
Payments on Mortgage Collateral
The Trustee or the Master Servicer, if any, will, as
to each series of Certificates, establish and maintain in
trust the Certificate Account which will be a separate
account that may be interest bearing or non-interest
bearing in the name of the Trustee, maintained with a
depository institution and in a manner acceptable to each
Rating Agency. If permitted by each such Rating Agency,
a Certificate Account may contain funds relating to one
or more series of Certificates.
The Trustee, the Servicer or the Master Servicer, if
any, will establish a Custodial Account which will be a
separate trust account, into which payments on the
Mortgage Collateral for such series may be transferred on
a periodic basis and from which funds may be transferred
to the Certificate Account in order to make payments to
Certificateholders. The Custodial Account may contain
funds relating to more than one series of Certificates as
well as payments received on other mortgage loans
serviced or master serviced by the Master Servicer or the
Servicer, as applicable. Amounts held in the Certificate
Account or a Custodial Account may be invested in
Permitted Investments. See "--Collection of Payments on
Mortgage Loans and Contracts" below. In addition, if so
stated in such Prospectus Supplement, one or more other
trust accounts, including any Reserve Funds, will be
established into which cash, certificates of deposit or
letters of credit, or a combination thereof, will be
deposited by the Company, if such assets are required to
make timely distributions with respect to the
Certificates of a series, are required as a condition to
the rating of such Certificates or are required in order
to provide for certain contingencies as described in the
related Prospectus Supplement.
Collection of Payments on Mortgage Loans and
Contracts
Each Servicer or the Master Servicer, if any, will
be required to deposit into the Custodial Account (unless
otherwise specified in the related Prospectus Supplement)
all amounts enumerated in the following paragraph in
respect of the Mortgage Loans or Contracts serviced by
it, less the Servicing Fee and Spread, if any.
The Servicer or Master Servicer, as applicable, will
deposit or will cause to be deposited into the Custodial
Account certain payments and collections received by it
subsequent to the Cut-off Date (other than payments due
on or before the Cut-off Date), as specifically set forth
in the related Pooling and Servicing Agreement, which
(except as otherwise provided therein) generally will
include the following:
(i) all payments on account of principal of
the Mortgage Loans or Contracts comprising a Trust
Fund;
(ii) all payments on account of interest on
the Mortgage Loans comprising such Trust Fund, net
of the portion of each payment thereof retained by
the Servicer or Sub-Servicer, if any, as Spread,
its servicing or other compensation;
(iii) all amounts (net of unreimbursed
liquidation expenses and insured expenses incurred,
and unreimbursed Servicing Advances made, by the
related Servicer or Sub-Servicer) received and
retained in connection with the liquidation of any
defaulted Mortgage Loan or Contract, by foreclosure
or otherwise ("Liquidation Proceeds"), including
all proceeds of any Special Hazard Insurance
Policy, Bankruptcy Bond, Mortgage Pool Insurance
Policy, Contract Pool Insurance Policy, Primary
Insurance Policy and any title, hazard or other
insurance policy covering any Mortgage Loan or
Contract in such Trust Fund (together with any
payments under any Letter of Credit, "Insurance
Proceeds") or proceeds from any alternative
arrangements established in lieu of any such
insurance and described in the applicable
Prospectus Supplement, other than proceeds to be
applied to the restoration of the related property
or released to the Mortgagor in accordance with the
Master Servicer's or Servicer's normal servicing
procedures;
(iv) any Buy-Down Funds (and, if applicable,
investment earnings thereon) required to be paid to
Certificateholders, as described below;
(v) all proceeds of any Mortgage Loan or
Contract in such Trust Fund purchased (or, in the
case of a substitution, certain amounts
representing a principal adjustment) by the Master
Servicer, the Company, Residential Funding, any
Sub-Servicer or Mortgage Collateral Seller or any
other person pursuant to the terms of the Pooling
and Servicing Agreement. See "The Trust
Funds--Representations with Respect to Mortgage
Collateral" and "--Repurchases of Defective Mortgage
Collateral" herein;
(vi) any amount required to be deposited by
the Master Servicer in connection with losses
realized on investments of funds held in the
Custodial Account, as described below; and
(vii) any amounts required to be
transferred from the Certificate Account to the
Custodial Account.
Both the Custodial Account and the Certificate
Account must be either (i) maintained with a depository
institution whose debt obligations at the time of any
deposit therein are rated by any Rating Agency that rated
any Certificates of the related series not less than a
specified level comparable to the rating category of such
Certificates, (ii) an account or accounts the deposits in
which are fully insured to the limits established by the
FDIC, provided that any deposits not so insured shall be
otherwise maintained such that, as evidenced by an
opinion of counsel, the Certificateholders have a claim
with respect to the funds in such accounts or a perfected
first priority security interest in any collateral
securing such funds that is superior to the claims of any
other depositors or creditors of the depository
institution with which such accounts are maintained,
(iii) in the case of the Custodial Account, a trust
account or accounts maintained in either the corporate
trust department or the corporate asset services
department of a financial institution which has debt
obligations that meet certain rating criteria, (iv) in
the case of the Certificate Account, a trust account or
accounts maintained with the Trustee or (v) such other
account or accounts acceptable to any applicable Rating
Agency (an "Eligible Account"). The collateral that is
eligible to secure amounts in an Eligible Account is
limited to certain permitted investments, which are
generally limited to United States government securities
and other investments that are rated, at the time of
acquisition, in one of the categories permitted by the
related Pooling and Servicing Agreement ("Permitted
Investments").
Unless otherwise set forth in the related Prospectus
Supplement, not later than the business day preceding
each Distribution Date, the Master Servicer or Servicer,
as applicable, will withdraw from the Custodial Account
and deposit into the applicable Certificate Account, in
immediately available funds, the amount to be distributed
therefrom to Certificateholders on such Distribution
Date. The Master Servicer, the Servicer or the Trustee,
as applicable, will also deposit or cause to be deposited
into the Certificate Account: (i) the amount of any
advances made by the Master Servicer or the Servicer as
described herein under "--Advances," (ii) any payments
under any Letter of Credit, and any amounts required to
be transferred to the Certificate Account from a Reserve
Fund, as described under "Description of Credit
Enhancement" below, (iii) any amounts required to be paid
by the Master Servicer or Servicer out of its own funds
due to the operation of a deductible clause in any
blanket policy maintained by the Master Servicer or
Servicer to cover hazard losses on the Mortgage Loans as
described under "Insurance Policies on Mortgage Loans or
Contracts" below, (iv) any distributions received on any
Agency Securities included in the Trust Fund and (v) any
other amounts as set forth in the related Pooling and
Servicing Agreement.
Unless otherwise specified in the related Prospectus
Supplement, the portion of any payment received by the
Master Servicer or the Servicer in respect of a Mortgage
Loan that is allocable to Spread will generally be
deposited into the Custodial Account, but will not be
deposited in the Certificate Account for the related
series of Certificates and will be distributed as
provided in the related Pooling and Servicing Agreement.
Funds on deposit in the Custodial Account may be
invested in Permitted Investments maturing in general not
later than the business day preceding the next
Distribution Date and funds on deposit in the related
Certificate Account may be invested in Permitted
Investments maturing, in general, no later than the
Distribution Date. Unless otherwise specified in the
related Prospectus Supplement, all income and gain
realized from any such investment will be for the account
of the Servicer or the Master Servicer as additional
servicing compensation. The amount of any loss incurred
in connection with any such investment must be deposited
in the Custodial Account or in the Certificate Account,
as the case may be, by the Servicer or the Master
Servicer out of its own funds upon realization of such
loss.
Collection of Payments on Agency Securities
The Trustee or the Certificate Administrator, as
specified in the related Prospectus Supplement, will
deposit in the Certificate Account all payments on the
Agency Securities as they are received after the Cut-off
Date. If the Trustee has not received a distribution
with respect to any Agency Security by the second
business day after the date on which such distribution
was due and payable, the Trustee will request the issuer
or guarantor, if any, of such Agency Security to make
such payment as promptly as possible and legally
permitted. The Trustee may take such legal action
against such issuer or guarantor as the Trustee deems
appropriate under the circumstances, including the
prosecution of any claims in connection therewith. The
reasonable legal fees and expenses incurred by the
Trustee in connection with the prosecution of such legal
action will be reimbursable to the Trustee out of the
proceeds of any such action and will be retained by the
Trustee prior to the deposit of any remaining proceeds in
the Certificate Account pending distribution thereof to
the Certificateholders of the affected series. In the
event that the Trustee has reason to believe that the
proceeds of any such legal action may be insufficient to
cover its projected legal fees and expenses, the Trustee
will notify such Certificateholders that it is not
obligated to pursue any such available remedies unless
adequate indemnity for its legal fees and expenses is
provided by such Certificateholders.
Withdrawals from the Custodial Account
The Servicer or the Master Servicer, as applicable,
may, from time to time, make withdrawals from the
Custodial Account for certain purposes, as specifically
set forth in the related Pooling and Servicing Agreement,
which (except as otherwise provided therein) generally
will include the following:
(i) to make deposits to the Certificate
Account in the amounts and in the manner provided
in the Pooling and Servicing Agreement and
described above under "--Payments on Mortgage
Collateral";
(ii) to reimburse itself or any Sub-Servicer
for Advances, or for amounts advanced in respect of
taxes, insurance premiums or similar expenses
("Servicing Advances") as to any Mortgaged
Property, out of late payments, Insurance Proceeds,
Liquidation Proceeds or collections on the Mortgage
Loan or Contract with respect to which such
Advances or Servicing Advances were made;
(iii) to pay to itself or any Sub-Servicer
unpaid Servicing Fees and subservicing fees, out of
payments or collections of interest on each
Mortgage Loan or Contract;
(iv) to pay to itself as additional servicing
compensation any investment income on funds
deposited in the Custodial Account, any amounts
remitted by Sub-Servicers as interest in respect of
partial prepayments on the Mortgage Loans or
Contracts, and, if so provided in the Pooling and
Servicing Agreement, any profits realized upon
disposition of a Mortgaged Property acquired by
deed in lieu of foreclosure or repossession or
otherwise allowed under the Pooling and Servicing
Agreement;
(v) to pay to itself, a Sub-Servicer,
Residential Funding, the Company or the Mortgage
Collateral Seller all amounts received with respect
to each Mortgage Loan or Contract purchased,
repurchased or removed pursuant to the terms of the
Pooling and Servicing Agreement and not required to
be distributed as of the date on which the related
Purchase Price is determined;
(vi) to pay the Company or its assignee, or
any other party named in the related Prospectus
Supplement, all amounts allocable to the Spread, if
any, out of collections or payments which represent
interest on each Mortgage Loan or Contract
(including any Mortgage Loan or Contract as to
which title to the underlying Mortgaged Property
was acquired);
(vii) to reimburse itself or any Sub-
Servicer for any Advance previously made which the
Master Servicer has determined to not be ultimately
recoverable from Liquidation Proceeds, Insurance
Proceeds or otherwise (a "Nonrecoverable Advance"),
subject to any limitations set forth in the Pooling
and Servicing Agreement as described in the related
Prospectus Supplement;
(viii) to reimburse itself or the Company
for certain other expenses incurred for which it or
the Company is entitled to reimbursement or against
which it or the Company is indemnified pursuant to
the Pooling and Servicing Agreement; and
(ix) to clear the Custodial Account of amounts
relating to the corresponding Mortgage Loans or
Contracts in connection with the termination of the
Trust Fund pursuant to the Pooling and Servicing
Agreement, as described in "The Pooling and
Servicing Agreement--Termination; Retirement of
Certificates."
Distributions
Distributions of principal and interest (or, where
applicable, of principal only or interest only) on each
class of Certificates entitled thereto will be made on
each Distribution Date either by the Trustee, the Master
Servicer or the Certificate Administrator acting on
behalf of the Trustee or a paying agent appointed by the
Trustee (the "Paying Agent"). Such distributions will be
made to the persons who are registered as the holders of
such Certificates at the close of business on the last
business day of the preceding month (the "Record Date").
Distributions will be made in immediately available funds
(by wire transfer or otherwise) to the account of a
Certificateholder at a bank or other entity having
appropriate facilities therefor, if such
Certificateholder has so notified the Trustee, the Master
Servicer, the Certificate Administrator or the Paying
Agent, as the case may be, and the applicable Pooling and
Servicing Agreement provides for such form of payment, or
by check mailed to the address of the person entitled
thereto as it appears on the Certificate Register. The
final distribution in retirement of the Certificates will
be made only upon presentation and surrender of the
Certificates at the office or agency of the Trustee
specified in the notice to Certificateholders.
Distributions will be made to each Certificateholder in
accordance with such holder's Percentage Interest in a
particular class. The "Percentage Interest" represented
by a Certificate of a particular class will be equal to
the percentage obtained by dividing the initial principal
balance or notional amount of such Certificate by the
aggregate initial amount or notional balance of all the
Certificates of such class.
Principal and Interest on the Certificates
The method of determining, and the amount of,
distributions of principal and interest (or, where
applicable, of principal only or interest only) on a
particular series of Certificates will be described in
the related Prospectus Supplement. Distributions of
interest on each class of Certificates will be made prior
to distributions of principal thereon. Each class of
Certificates (other than certain classes of Strip
Certificates) may have a different Pass-Through Rate,
which may be a fixed, variable or adjustable Pass-Through
Rate, or any combination of two or more such Pass-Through
Rates. The related Prospectus Supplement will specify
the Pass-Through Rate or Rates for each class, or the
initial Pass-Through Rate or Rates and the method for
determining the Pass-Through Rate or Rates. Unless
otherwise specified in the related Prospectus Supplement,
interest on the Certificates will be calculated on the
basis of a 360-day year consisting of twelve 30-day
months.
On each Distribution Date for a series of
Certificates, the Trustee or the Master Servicer or the
Certificate Administrator on behalf of the Trustee will
distribute or cause the Paying Agent to distribute, as
the case may be, to each holder of record on the Record
Date of a class of Certificates, an amount equal to the
Percentage Interest represented by the Certificate held
by such holder multiplied by such class's Distribution
Amount. The "Distribution Amount" for a class of
Certificates for any Distribution Date will be the
portion, if any, of the Principal Distribution Amount (as
defined in the related Prospectus Supplement) allocable
to such class for such Distribution Date, plus, if such
class is entitled to payments of interest on such
Distribution Date, one month's interest at the applicable
Pass-Through Rate on the principal balance or notional
amount of such class specified in the applicable
Prospectus Supplement, less certain interest shortfalls,
which generally will include (i) any Deferred Interest
added to the principal balance of the Mortgage Loans
and/or the outstanding balance of one or more classes of
Certificates on the related Due Date, (ii) any other
interest shortfalls (including, without limitation,
shortfalls resulting from application of the Relief Act
or similar legislation or regulations as in effect from
time to time) allocable to Certificateholders which are
not covered by advances or the applicable credit
enhancement and (iii) unless otherwise specified in the
related Prospectus Supplement, Prepayment Interest
Shortfalls, in each case in such amount that is allocated
to such class on the basis set forth in the Prospectus
Supplement.
In the case of a series of Certificates which
includes two or more classes of Certificates, the timing,
sequential order, priority of payment or amount of
distributions in respect of principal, and any schedule
or formula or other provisions applicable to the
determination thereof (including distributions among
multiple classes of Senior Certificates or Subordinate
Certificates) shall be set forth in the related
Prospectus Supplement. Distributions in respect of
principal of any class of Certificates will be made on a
pro rata basis among all of the Certificates of such
class unless otherwise set forth in the related
Prospectus Supplement.
Except as otherwise provided in the related Pooling
and Servicing Agreement, on or prior to the 20th day (or,
if such day is not a business day, the next business day)
of the month of distribution (the "Determination Date"),
the Master Servicer or the Certificate Administrator, as
applicable, will determine the amounts of principal and
interest which will be passed through to
Certificateholders on the succeeding Distribution Date.
Prior to the close of business on the business day
succeeding each Determination Date, the Master Servicer
or the Certificate Administrator, as applicable, will
furnish a statement to the Trustee (the information in
such statement to be made available to Certificateholders
by the Master Servicer or the Certificate Administrator,
as applicable, on request) setting forth, among other
things, the amount to be distributed on the next
succeeding Distribution Date.
Example of Distributions
The following chart sets forth an example of the
flow of funds as it would relate to a hypothetical series
of Certificates issued, and with a Cut-off Date
occurring, in June 1995:
Date Note Description
June 1 . . . . . . . (A) Cut-off Date.
June 2-30. . . . . . (B) The Servicers or the Sub-Servicers, as
applicable, receive any Principal
Prepayments and applicable interest on
such Principal Prepayments.
June 30. . . . . . . (C) Record Date.
July 1 . . . . . . . (D) The due date for a Mortgage Loan or
Contract (the "Due Date").
July 18 . . . . . . (E) The Servicers or the Sub-Servicers, as
applicable, remit to the Master Servicer
or the Servicer, as applicable, scheduled
payments of principal and interest due on
July 1 and received or advanced by them.
July 20. . . . . . . (F) Determination Date.
July 25. . . . . . . (G) Distribution Date.
Succeeding months follow the pattern of (B) through (G),
except that for succeeding months (B) will also include
the first day of such month. Certain series of
Certificates may have different prepayment periods, Cut-
off Dates, Record Dates, Due Dates, remittance dates,
Determination Dates and/or Distribution Dates than those
set forth above.
(A) The initial principal balance of the Mortgage Pool
or Contract Pool will be the aggregate principal
balance of the Mortgage Loans or Contracts at the
close of business on June 1, 1995, after deducting
principal payments due on or before such date.
Those principal payments due on or before June 1,
and the accompanying interest payments, and any
Principal Prepayments received as of the close of
business on June 1, 1995 are not part of the
Mortgage Pool or Contract Pool and will not be
passed through to Certificateholders.
(B) Any principal payments received in advance of the
scheduled Due Date and not accompanied by a payment
of interest for any period following the date of
payment ("Principal Prepayments") may be received
at any time during this period and will be remitted
to the Master Servicer or Servicer as described in
(E) below for distribution to Certificateholders as
described in (F) below. When a Mortgage Loan or
Contract is prepaid in full, interest on the amount
prepaid is collected from the Mortgagor only to the
date of payment. Partial Principal Prepayments are
applied so as to reduce the principal balances of
the related Mortgage Loans or Contracts as of the
first day of the month in which the payments are
made; no interest will be paid to
Certificateholders in respect of such prepaid
amounts for the month in which such partial
Principal Prepayments were received.
(C) Distributions on July 25 will be made to
Certificateholders of record at the close of
business on June 30.
(D) Scheduled principal and interest payments are due
from Mortgagors.
(E) Payments due on July 1 from Mortgagors will be
deposited by the Sub-Servicers in subservicing
accounts or Servicers in collection accounts (or
will be otherwise managed in a manner acceptable to
the Rating Agencies) as received and will include
the scheduled principal payments plus interest on
the June balances (with the exception of interest
from the date of prepayment of any Mortgage Loan or
Contract prepaid in full during June and interest
on the amount of partial Principal Prepayments in
June). Funds required to be remitted from the
collection accounts or the subservicing accounts to
the Master Servicer or the Servicer, as applicable,
will be so remitted on July 18 together with any
required Advances by the Servicer or the Sub-
Servicers (except that Principal Prepayments in
full and certain Principal Prepayments in part
received by Sub-Servicers during the month of June
will have been remitted to the Master Servicer or
the Servicer, as applicable, within five business
days of receipt).
(F) On July 20, the Master Servicer or the Certificate
Administrator, if any, will determine the amounts
of principal and interest which will be passed
through on July 25 to the holders of each class of
Certificates. The Master Servicer or the
Certificate Administrator, if any, will be
obligated to distribute those payments due July 1
which have been received from Servicers or Sub-
Servicers prior to and including July 18, as well
as all Principal Prepayments received on Mortgage
Loans in June (with interest adjusted to the
Pass-Through Rates applicable to the respective
classes of Certificates and reduced on account of
Principal Prepayments as described above).
Distributions to the holders of Senior
Certificates, if any, on July 25 may include
certain amounts otherwise distributable to the
holders of the related Subordinate Certificates,
amounts withdrawn from any Reserve Fund and amounts
advanced by the Master Servicer or the Servicer
under the circumstances described in
"Subordination" and "--Advances."
(G) On July 25, the amounts determined on July 20 will
be distributed to Certificateholders.
If provided in the related Prospectus Supplement,
the Distribution Date with respect to any series of
Certificates as to which the Trust Fund includes Agency
Securities may be a specified date or dates other than
the 25th day of each month in order to allow for the
receipt of distributions on such Agency Securities.
Advances
Unless otherwise specified in the related Prospectus
Supplement, the Master Servicer or the applicable
Servicer will agree to advance (either out of its own
funds, funds advanced to it by Servicers or Sub-
Servicers, as applicable, or funds being held in the
Custodial Account for future distribution), for the
benefit of the related Certificateholders, on or before
each Distribution Date, an amount equal to the aggregate
of all scheduled payments of principal (other than any
Balloon Amount in the case of a Balloon Loan) and
interest at the applicable Pass-Through Rate or Net
Mortgage Rate, as the case may be (an "Advance"), which
were delinquent as of the close of business on the
business day preceding the related Determination Date on
the related Mortgage Loans or Contracts, but only to the
extent that such Advances would, in the judgment of the
Master Servicer or the Servicer, be recoverable out of
late payments by the Mortgagors, Liquidation Proceeds,
Insurance Proceeds or otherwise. If a Trust Fund
includes Agency Securities, any advancing obligations
with respect to underlying Mortgage Loans or Contracts
will be pursuant to the terms of such Agency Securities
and may differ from the provisions relating to Advances
described herein.
Advances are intended to maintain a regular flow of
scheduled interest and principal payments to related
Certificateholders. Such Advances do not represent an
obligation of the Master Servicer or the Servicer to
guarantee or insure against losses. If Advances have
been made by the Master Servicer or Servicer from cash
being held for future distribution to Certificateholders,
such funds will be required to be replaced on or before
any future Distribution Date to the extent that funds in
the Certificate Account on such Distribution Date would
be less than payments required to be made to
Certificateholders. Any Advances will be reimbursable to
the Master Servicer or Servicer out of recoveries on the
related Mortgage Loans or Contracts for which such
amounts were advanced (e.g., late payments made by the
related Mortgagor, any related Liquidation Proceeds and
Insurance Proceeds, proceeds of any applicable form of
credit enhancement or proceeds of any Mortgage Collateral
purchased by the Company, Residential Funding, a Sub-
Servicer or a Mortgage Collateral Seller under the
circumstances described above). Such Advances will also
be reimbursable from cash otherwise distributable to
Certificateholders to the extent that the Master Servicer
or Servicer shall determine that any such Advances
previously made are not ultimately recoverable as
described above. With respect to any Senior/Subordinate
Series, so long as the related Subordinate Certificates
remain outstanding and subject to certain limitations
with respect to Special Hazard Losses, Fraud Losses,
Bankruptcy Losses and Extraordinary Losses, such Advances
may also be reimbursable out of amounts otherwise
distributable to holders of the Subordinate Certificates,
if any. The Master Servicer or the Servicer will also be
obligated to make Servicing Advances, to the extent
recoverable out of Liquidation Proceeds or otherwise, in
respect of certain taxes and insurance premiums not paid
by Mortgagors on a timely basis. Funds so advanced will
be reimbursable to the Master Servicer or Servicer to the
extent permitted by the Pooling and Servicing Agreement.
The Master Servicer's or Servicer's obligation to make
Advances may be supported by another entity, a letter of
credit or other method as may be described in the related
Pooling and Servicing Agreement. In the event that the
short-term or long-term obligations of the provider of
such support are downgraded by a Rating Agency rating the
related Certificates or if any collateral supporting such
obligation is not performing or is removed pursuant to
the terms of any agreement described in the related
Prospectus Supplement, the Certificates may also be
downgraded.
Prepayment Interest Shortfalls
When a Mortgagor prepays a Mortgage Loan or Contract
in full between scheduled Due Dates for such Mortgage
Loan or Contract, the Mortgagor pays interest on the
amount prepaid only to but not including the date on
which such Principal Prepayment is made. Similarly,
Liquidation Proceeds from a Mortgaged Property will not
include interest for any period after the date on which
the liquidation took place. The shortfall between a full
month's interest due with respect to a Mortgage Loan or
Contract and the amount of interest paid or recovered
with respect thereto in the event of a prepayment or
liquidation is referred to as a "Prepayment Interest
Shortfall." If so specified in the related Prospectus
Supplement, to the extent funds are available from the
Servicing Fee, the Servicer or Master Servicer may make
an additional payment to Certificateholders with respect
to any Mortgage Loan or Contract that prepaid in full
during the related prepayment period equal to the amount,
if any, necessary to assure that, on the related
Distribution Date, the Available Distribution Amount
would include with respect to each such Mortgage Loan or
Contract an amount equal to interest at the Mortgage Rate
(less the Servicing Fee and Spread, if any) for such
Mortgage Loan or Contract from the date of such
prepayment or liquidation through the related Due Date
(such amount, "Compensating Interest"). Compensating
Interest may be limited to the aggregate amount (or any
portion thereof) of the Servicing Fee received by the
Servicer or Master Servicer in that month in relation to
the Mortgage Loans or Contracts, or in any other manner,
and, if so limited, may not be sufficient to cover the
Prepayment Interest Shortfall. If so disclosed in the
related Prospectus Supplement, Prepayment Interest
Shortfalls may be applied to reduce interest otherwise
payable with respect to one or more classes of
Certificates of a series. See "Yield Considerations."
Reports to Certificateholders
On each Distribution Date, the Master Servicer or
the Certificate Administrator, as applicable, will
forward or cause to be forwarded to each
Certificateholder of record a statement or statements
with respect to the related Trust Fund setting forth the
information described in the related Pooling and
Servicing Agreement. Except as otherwise provided in the
related Pooling and Servicing Agreement, such information
generally will include the following (as applicable):
(i) the amount, if any, of such distribution
allocable to principal;
(ii) the amount, if any, of such distribution
allocable to interest and the amount, if any, of
any shortfall in the amount of interest and
principal;
(iii) the aggregate unpaid principal
balance of the Mortgage Collateral after giving
effect to the distribution of principal on such
Distribution Date;
(iv) the outstanding principal balance or
notional amount of each class of Certificates after
giving effect to the distribution of principal on
such Distribution Date;
(v) based on the most recent reports
furnished by Servicers or Sub-Servicers, the number
and aggregate principal balances of any items of
Mortgage Collateral in the related Trust Fund that
are delinquent (a) one month, (b) two months and
(c) three months, and that are in foreclosure;
(vi) the book value of any property acquired
by such Trust Fund through foreclosure or grant of
a deed in lieu of foreclosure;
(vii) the balance of the Reserve Fund, if
any, at the close of business on such Distribution
Date;
(viii) the Senior Percentage, if
applicable, after giving effect to the
distributions on such Distribution Date;
(ix) the amount of coverage under any Letter
of Credit, Mortgage Pool Insurance Policy or other
form of credit enhancement covering default risk as
of the close of business on the applicable
Determination Date and a description of any credit
enhancement substituted therefor;
(x) if applicable, the Special Hazard Amount,
Fraud Loss Amount and Bankruptcy Amount as of the
close of business on the applicable Distribution
Date and a description of any change in the
calculation of such amounts;
(xi) in the case of Certificates benefiting
from alternative credit enhancement arrangements
described in a Prospectus Supplement, the amount of
coverage under such alternative arrangements as of
the close of business on the applicable
Determination Date; and
(xii) with respect to any series of
Certificates as to which the Trust Fund includes
Agency Securities, certain additional information
as required under the related Pooling and Servicing
Agreement.
Each amount set forth pursuant to clause (i) and
(ii) above will be expressed as a dollar amount per
Single Certificate. As to a particular class of
Certificates, a "Single Certificate" generally will
evidence a Percentage Interest obtained by dividing
$1,000 by the initial principal balance or notional
balance of all the Certificates of such class, except as
otherwise provided in the related Pooling and Servicing
Agreement. In addition to the information described
above, reports to Certificateholders will contain such
other information as is set forth in the applicable
Pooling and Servicing Agreement, which may include,
without limitation, information as to Advances,
reimbursements to Sub-Servicers, Servicers and the Master
Servicer and losses borne by the related Trust Fund.
In addition, within a reasonable period of time
after the end of each calendar year, the Master Servicer
or the Certificate Administrator, as applicable, will
furnish a report to each person that was a holder of
record any class of Certificates at any time during such
calendar year. Such report will include information as
to the aggregate of amounts reported pursuant to clauses
(i) and (ii) above for such calendar year or, in the
event such person was a holder of record of a class of
Certificates during a portion of such calendar year, for
the applicable portion of such year.
Servicing and Administration of Mortgage Collateral
General
The Master Servicer, the Certificate Administrator
or any Servicer, as applicable, that is a party to a
Pooling and Servicing Agreement, will be required to
perform the services and duties specified in the related
Pooling and Servicing Agreement. The duties to be
performed by the Master Servicer or each Servicer,
subject to the general supervision by the Master Servicer
or the Certificate Administrator, if any, will include
the customary functions of a servicer, including
collection of payments from Mortgagors; maintenance of
any primary mortgage insurance, hazard insurance and
other types of insurance; processing of assumptions or
substitutions; attempting to cure delinquencies;
supervising foreclosures; inspection and management of
Mortgaged Properties under certain circumstances; and
maintaining accounting records relating to the Mortgage
Collateral. Each Servicer or the Master Servicer, if
any, may be obligated, under certain circumstances, to
make Advances in respect of delinquent installments of
principal of and interest on Mortgage Loans or Contracts
and in respect of certain taxes and insurance premiums
not paid on a timely basis by Mortgagors, as described
under "--Advances" above. With respect to any series of
Certificates for which the Trust Fund includes Agency
Securities, the Master Servicer's or Certificate
Administrator's servicing and administration obligations
will be set forth in the related Prospectus Supplement.
Pursuant to each Pooling and Servicing Agreement,
each Servicer or the Master Servicer, if there are no
Servicers for the related series, may enter into sub-
servicing agreements (each, a "Sub-Servicing Agreement")
with one or more Sub-Servicers who will agree to perform
certain functions for the Servicer or Master Servicer
relating to the servicing and administration of the
Mortgage Loans or Contracts included in the Trust Fund
relating to such Sub-Servicing Agreement. Under any Sub-
Servicing Agreement, each Sub-Servicer, will agree, among
other things, to perform some or all of the Servicer's or
the Master Servicer's servicing obligations, including
but not limited to, making Advances to the related
Certificateholders. The Servicer or the Master Servicer,
as applicable, will remain liable for its servicing
obligations that are delegated to a Sub-Servicer as if
such Servicer or the Master Servicer alone were servicing
such Mortgage Loans or Contracts.
Collection and Other Servicing Procedures
Each Servicer or the Master Servicer, as applicable,
will make reasonable efforts to collect all payments
called for under the Mortgage Loans or Contracts and
will, consistent with the related Pooling and Servicing
Agreement and any applicable insurance policy or other
credit enhancement, follow such collection procedures as
it follows with respect to mortgage loans or contracts
serviced by it that are comparable to the Mortgage Loans
or Contracts. The Servicer or the Master Servicer may,
in its discretion, waive any prepayment charge in
connection with the prepayment of a Mortgage Loan or
extend the due dates for payments due on a Mortgage Note
or Contract, provided that the insurance coverage for
such Mortgage Loan or Contract or any coverage provided
by any alternative credit enhancement will not be
adversely affected.
The Master Servicer, any Servicer or one or more
Sub-Servicers with respect to a given Trust Fund may
establish and maintain an escrow account (the "Escrow
Account") in which Mortgagors will be required to deposit
amounts sufficient to pay taxes, assessments, certain
mortgage and hazard insurance premiums and other
comparable items. Withdrawals from any such Escrow
Account may be made to effect timely payment of taxes,
assessments, mortgage and hazard insurance, to refund to
Mortgagors amounts determined to be owed, to pay interest
on balances in any such Escrow Account, if required, to
repair or otherwise protect the Mortgaged Properties and
to clear and terminate such account. The Master Servicer
or any Servicer or Sub-Servicer, as the case may be, will
be responsible for the administration of each such Escrow
Account and will be obligated to make advances to such
accounts when a deficiency exists therein. The Master
Servicer, Servicer or Sub-Servicer will be entitled to
reimbursement for any such advances from the Collection
Account.
Other duties and responsibilities of each Servicer,
the Master Servicer and the Certificate Administrator are
described above under "--Payments on Mortgage Collateral."
Servicing Compensation and Payment of Expenses
Each Servicer, the Master Servicer or the
Certificate Administrator, as applicable, will be paid
compensation for the performance of its servicing
obligations, which compensation will be part of the
servicing fee (the "Servicing Fee") specified in the
related Prospects Supplement. Any Sub-Servicer will be
entitled to receive a portion of the Servicing Fee.
Except as otherwise provided in the related Prospectus
Supplement, the Servicer or the Master Servicer, if any,
will deduct the Servicing Fee with respect to the
Mortgage Loans or Contracts underlying the Certificates
of a Series in an amount to be specified in the related
Prospectus Supplement. The Servicing Fee may be fixed or
variable. In addition to the Servicing Fee, unless
otherwise specified in the related Prospectus Supplement,
the Master Servicer, any Servicer or the relevant Sub-
Servicers, if any, will be entitled to servicing
compensation in the form of assumption fees, late
payments charges or excess proceeds following disposition
of property in connection with defaulted Mortgage Loans
or Contracts and any earnings on investments held in the
Certificate Account or any Custodial Account. Any Spread
retained by a Mortgage Collateral Seller, the Master
Servicer, or any Servicer or Sub-Servicer will not
constitute part of the Servicing Fee. Notwithstanding
the foregoing, with respect to a series of Certificates
as to which the Trust Fund includes Agency Securities,
the compensation payable to the Master Servicer or
Certificate Administrator for servicing and administering
such Agency Securities on behalf of the holders of such
Certificates may be based on a percentage per annum
described in the related Prospectus Supplement of the
outstanding balance of such Agency Securities and may be
retained from distributions of interest thereon, if so
specified in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus
Supplement, the Servicer, the Master Servicer or the
Certificate Administrator will pay from the Servicing Fee
the fees of any Sub-Servicers, certain expenses incurred
in connection with the servicing of the Mortgage Loans or
Contracts, including, without limitation, payment of
certain of the insurance policy premiums, fees or other
amounts payable for any alternative credit enhancement,
payment of the fees and disbursements of the Trustee (and
any Custodian selected by the Trustee), the Certificate
Registrar, any Paying Agent, independent accountants and
payment of expenses incurred in enforcing the obligations
of Sub-Servicers, Servicers and Mortgage Collateral
Sellers and in preparation of reports to
Certificateholders. Certain of these expenses may be
reimbursable from Liquidation Proceeds or insurance
policies and, in the case of enforcement of the
obligations of Sub-Servicers, from any recoveries in
excess of amounts due with respect to the related
Mortgage Loans or Contracts or from specific recoveries
of costs. The related Pooling and Servicing Agreement
may provide that the Certificate Administrator, the
Master Servicer, and any Servicer and Sub-Servicer may
obtain their respective fees by deducting them from
amounts otherwise required to be deposited into the
Collection Account.
The related Trust Fund will suffer no loss by reason
of the expenses of the Servicer or Master Servicer
described above to the extent claims are fully paid from
amounts in any Reserve Fund, any related insurance
policies, the Liquidation Proceeds or any applicable
alternative credit enhancement described in the related
Prospectus Supplement. In the event, however, that
claims are either not made or are not fully paid from
such sources, the related Trust Fund will suffer a loss
to the extent that Liquidation Proceeds, after
reimbursement of the expenses of the Master Servicer or
any Servicer or Sub-Servicer, are less than the principal
balance of and accrued interest on the related Mortgage
Loan or Contract. In addition, the Master Servicer or
any Servicer or Sub-Servicer, as applicable, will be
entitled to reimbursement of expenditures incurred by it
in connection with the restoration of Mortgaged Property,
such right of reimbursement being prior to the rights of
the Certificateholders to receive any payments from any
Reserve Fund or from any related Insurance Proceeds,
Liquidation Proceeds or any proceeds of alternative
credit enhancement.
Evidence as to Compliance
Each Servicer, the Master Servicer or the
Certificate Administrator, as appropriate, will, with
respect to each series of Certificates, deliver to the
Trustee, on or before the date in each year specified in
the related Pooling and Servicing Agreement, an officer's
certificate stating that (i) a review of the activities
of the Certificate Administrator, each Servicer or the
Master Servicer and each Sub-Servicer, as applicable,
during the preceding calendar year and of performance
under such Pooling and Servicing Agreement and the
applicable Sub-Servicing Agreement, if any, has been made
under the supervision of such officer, and (ii) to the
best of such officer's knowledge, based on such review,
the Certificate Administrator, each Servicer or the
Master Servicer and each Sub-Servicer, as applicable, has
fulfilled all its obligations under such Pooling and
Servicing Agreement throughout such year, or, if there
has been a default in the fulfillment of any such
obligation, specifying each such default known to such
officer and the nature and status thereof. If set forth
in the Prospectus Supplement, such officer's certificate
shall be accompanied by a statement of a firm of
independent public accountants to the effect that, on the
basis of an examination of certain documents and records
relating to servicing of the Mortgage Loans or Contracts,
including similar reports delivered by each Servicer or
Sub-Servicer (upon which such firm is entitled to rely),
conducted in accordance with the Uniform Single Audit
Program for Mortgage Bankers or similar standards
acceptable to the Servicer, the Master Servicer or the
Certificate Administrator, as applicable, the servicing
of the Mortgage Loans or Contracts was conducted in
compliance with the provisions of the related Pooling and
Servicing Agreement and the applicable Sub-Servicing
Agreement, if any, except for (a) such exceptions as such
firm believes to be immaterial and (b) such other
exceptions as are set forth in such statement.
Certain Other Matters Regarding Servicing
Each Servicer, the Master Servicer or the
Certificate Administrator, as applicable, may not resign
from its obligations and duties under the related Pooling
and Servicing Agreement except with the consent of all
Certificateholders or upon a determination that its
duties thereunder are no longer permissible under
applicable law. No such resignation will become
effective until the Trustee or a successor servicer or
administrator has assumed the Servicer's, the Master
Servicer's or the Certificate Administrator's obligations
and duties under such Pooling and Servicing Agreement.
A Servicer, the Master Servicer or the Certificate
Administrator, as applicable, may be removed upon the
occurrence of certain Events of Default described below
under "The Pooling and Servicing Agreement--Events of
Default" and "--Rights Upon Event of Default."
Each Pooling and Servicing Agreement will also
provide that neither the Servicer, the Master Servicer or
the Certificate Administrator, nor any director, officer,
employee or agent thereof, will be under any liability to
the Trust Fund or the Certificateholders for any action
taken or for restraining from taking any action in good
faith pursuant to the Pooling and Servicing Agreement, or
for errors in judgment. However, neither the Servicer,
the Master Servicer or the Certificate Administrator nor
any such person will be protected against any liability
which would otherwise be imposed by reason of the failure
to perform its obligations in compliance with any
standard of care set forth in the Pooling and Servicing
Agreement. The Servicer, the Master Servicer or the
Certificate Administrator, as applicable, may, in its
discretion, undertake any such action that it may deem
necessary or desirable with respect to the Pooling and
Servicing Agreement and the rights and duties of the
parties thereto and the interest of the
Certificateholders thereunder. In such event, the legal
expenses and costs of such action and any liability
resulting therefrom will be expenses, costs and
liabilities of the Trust Fund and the Servicer, the
Master Servicer or the Certificate Administrator will be
entitled to be reimbursed therefor out of funds otherwise
distributable to Certificateholders.
The Master Servicer or Servicer may in its
discretion (i) waive any late payment charge or any
prepayment charge or penalty interest in connection with
the prepayment of a Mortgage Loan or Contract and (ii)
extend the Due Date for payments due on a Mortgage Loan
or Contract, if the Master Servicer or Servicer has
determined that any such waiver or extension will not
impair the coverage of any related insurance policy,
materially adversely affect the lien of the related
Mortgage or, if a REMIC election has been made with
respect to the Trust Fund, adversely affect such REMIC
status.
The Master Servicer will be required to maintain a
fidelity bond and errors and omissions policy with
respect to its officers and employees and other persons
acting on behalf of the Master Servicer in connection
with its activities under the Pooling and Servicing
Agreement.
A Servicer, the Master Servicer or the Certificate
Administrator may have other business relationships with
the Company, any Mortgage Collateral Seller or their
affiliates.
Special Servicing
If provided for in the related Prospectus
Supplement, the Pooling and Servicing Agreement for a
series of Certificates may name a special servicer (a
"Special Servicer"). The Special Servicer will be
responsible for the servicing of certain delinquent
Mortgage Loans or Contracts as described in the
Prospectus Supplement. The Special Servicer may have
certain discretion to extend relief to Mortgagors whose
payments become delinquent. The Special Servicer may be
permitted to grant a period of temporary indulgence to a
Mortgagor or may enter into a liquidating plan providing
for repayment by the Mortgagor, in each case without the
prior approval of the Master Servicer or the Servicer, as
applicable. Other types of forbearance generally will
require the approval of the Master Servicer or Servicer,
as applicable.
Enforcement of "Due-on-Sale" Clauses
Unless otherwise specified in the related Prospectus
Supplement, when any Mortgaged Property relating to a
Mortgage Loan or Contract (other than an ARM Loan
described below) is about to be conveyed by the
Mortgagor, the Master Servicer or the Servicer, as
applicable, directly or through a Sub-Servicer, to the
extent it has knowledge of such proposed conveyance,
generally will be obligated to exercise the Trustee's
rights to accelerate the maturity of such Mortgage Loan
or Contract under any due-on-sale clause applicable
thereto. A due-on-sale clause will be enforced only if
the exercise of such rights is permitted by applicable
law and only to the extent it would not adversely affect
or jeopardize coverage under any Primary Insurance Policy
or applicable credit enhancement arrangements. See
"Certain Legal Aspects of Mortgage Loans and
Contracts--The Mortgage Loans--Enforceability of Certain
Provisions" and "--The Contracts--Due-on-Sale-- Clauses."
If the Master Servicer, Servicer or Sub-Servicer is
prevented from enforcing a due-on-sale clause under
applicable law or if the Master Servicer, Servicer or
Sub-Servicer determines that it is reasonably likely that
a legal action would be instituted by the related
Mortgagor to avoid enforcement of such due-on-sale
clause, the Master Servicer, Servicer or Sub-Servicer
will enter into an assumption and modification agreement
with the person to whom such property has been or is
about to be conveyed, pursuant to which such person
becomes liable under the Mortgage Note or Contract
subject to certain specified conditions. The original
Mortgagor may be released from liability on a Mortgage
Loan or Contract if the Master Servicer, Servicer or Sub-
Servicer shall have determined in good faith that such
release will not adversely affect the collectability of
the Mortgage Loan or Contract. In the event of the sale
of a Mortgaged Property subject to an ARM Loan, such ARM
Loan may be assumed if it is by its terms assumable and
if, in the reasonable judgment of the Master Servicer,
Servicer or Sub-Servicer, the proposed transferee of the
related Mortgaged Property establishes its ability to
repay the loan and the security for such ARM Loan would
not be impaired by the assumption. If a Mortgagor
transfers the Mortgaged Property subject to an ARM Loan
without consent, such ARM Loan may be declared due and
payable. In connection with any such assumption, the
Mortgage Rate borne by the related Mortgage Note or
Contract may not be altered. Mortgagors may, from time
to time, request partial releases of the Mortgaged
Properties, easements, consents to alteration or
demolition and other similar matters. The Master
Servicer, Servicer or Sub-Servicer may approve such a
request if it has determined, exercising its good faith
business judgment, that such approval will not adversely
affect the security for, and the timely and full
collectability of, the related Mortgage Loan or Contract.
Any fee collected by the Master Servicer, Servicer or
Sub-Servicer for entering into an assumption or
substitution of liability agreement or for processing a
request for partial release of the Mortgaged Property
generally will be retained by the Master Servicer,
Servicer or Sub-Servicer as additional servicing
compensation.
Realization Upon Defaulted Property
In the event that title to any Mortgaged Property is
acquired in foreclosure or by deed in lieu of foreclosure
(or, in the case of Contracts in certain sates, by
repossession of the related Manufactured Home), the deed
or certificate of sale will be issued to the Trustee or
to its nominee on behalf of Certificateholders.
Notwithstanding any such acquisition of title and
cancellation of the related Mortgage Loan or Contract,
such Mortgage Loan (an "REO Mortgage Loan") or Contract
(an "REO Contract") will be considered for most purposes
to be an outstanding Mortgage Loan or Contract held in
the Trust Fund until such time as the Mortgaged Property
is sold and all recoverable Liquidation Proceeds and
Insurance Proceeds have been received with respect to
such defaulted Mortgage Loan (a "Liquidated Mortgage
Loan") or Contract (a "Liquidated Contract"). For
purposes of calculations of amounts distributable to
Certificateholders in respect of an REO Mortgage Loan or
an REO Contract, the amortization schedule in effect at
the time of any such acquisition of title (before any
adjustment thereto by reason of any bankruptcy or any
similar proceeding or any moratorium or similar waiver or
grace period) will be deemed to have continued in effect
(and, in the case of an ARM Loan, such amortization
schedule will be deemed to have adjusted in accordance
with any interest rate changes occurring on any
adjustment date therefor) so long as such REO Mortgage
Loan or REO Contract is considered to remain in the Trust
Fund. If a REMIC election has been made, any Mortgaged
Property so acquired by the Trust Fund must be disposed
of in accordance with applicable federal income tax
regulations and consistent with the status of the Trust
Fund as a REMIC. To the extent provided in the related
Pooling and Servicing Agreement, any income (net of
expenses and other than gains described below) received
by the Sub-Servicer, Servicer or Master Servicer on such
Mortgaged Property prior to its disposition will be
deposited in the Custodial Account upon receipt and will
be available at such time for making payments to
Certificateholders.
With respect to a Mortgage Loan or Contract in
default, the Master Servicer or Servicer may pursue
foreclosure (or similar remedies) concurrently with
pursuing any remedy for a breach of a representation and
warranty. However, the Master Servicer or Servicer is
not required to continue to pursue both such remedies if
it determines that one such remedy is more likely to
result in a greater recovery. Upon the first to occur of
final liquidation and a repurchase or substitution
pursuant to a breach of a representation and warranty,
such Mortgage Loan or Contract will be removed from the
related Trust Fund. The Master Servicer or Servicer may
elect to treat a defaulted Mortgage Loan or Contract as
having been finally liquidated if substantially all
amounts expected to be received in connection therewith
have been received. Any additional liquidation expenses
relating to such Mortgage Loan or Contract thereafter
incurred will be reimbursable to the Master Servicer or
Servicer (or any Sub-Servicer) from any amounts otherwise
distributable to the related Certificateholders, or may
be offset by any subsequent recovery related to such
Mortgage Loan or Contract. Alternatively, for purposes
of determining the amount of related Liquidation Proceeds
to be distributed to Certificateholders, the amount of
any Realized Loss or the amount required to be drawn
under any applicable form of credit enhancement, the
Master Servicer or Servicer may take into account minimal
amounts of additional receipts expected to be received,
as well as estimated additional liquidation expenses
expected to be incurred in connection with such defaulted
Mortgage Loan or Contract.
With respect to certain series of Certificates, if
so provided in the related Prospectus Supplement, the
applicable form of credit enhancement may provide, to the
extent of coverage thereunder, that a defaulted Mortgage
Loan or Contract or REO Mortgage Loan or REO Contract
will be removed from the Trust Fund prior to the final
liquidation thereof. In addition, the Master Servicer or
Servicer may have the option to purchase from the Trust
Fund any defaulted Mortgage Loan or Contract after a
specified period of delinquency. In the case of a
Senior/Subordinate Series, unless otherwise specified in
the related Prospectus Supplement, if a final liquidation
of a Mortgage Loan or Contract resulted in a Realized
Loss and within two years thereafter the Master Servicer
or Servicer receives a subsequent recovery specifically
related to such Mortgage Loan or Contract (in connection
with a related breach of a representation or warranty or
otherwise), such subsequent recovery shall be distributed
to the then-current Certificateholders of any outstanding
class to which such Realized Loss was allocated (with the
amounts to be distributed allocated among such classes in
the same proportions as such Realized Loss was
allocated), provided that no such distribution shall
result in distributions on the Certificates of any such
class in excess of the total amounts of principal and
interest that would have been distributable thereon if
such Mortgage Loan or Contract had been liquidated with
no Realized Loss. In the case of a series of
Certificates other than a Senior/Subordinate Series, if
so provided in the related Prospectus Supplement, the
applicable form of credit enhancement may provide for
reinstatement subject to certain conditions in the event
that, following the final liquidation of a Mortgage Loan
or Contract and a draw under such credit enhancement,
subsequent recoveries are received. If a defaulted
Mortgage Loan or Contract or REO Mortgage Loan or REO
Contract is not so removed from the Trust Fund, then,
upon the final liquidation thereof, if a loss is realized
which is not covered by any applicable form of credit
enhancement or other insurance, the Certificateholders
will bear such loss. However, if a gain results from the
final liquidation of an REO Mortgage Loan or REO Contract
which is not required by law to be remitted to the
related Mortgagor, the Master Servicer or the Servicer
will be entitled to retain such gain as additional
servicing compensation unless the related Prospectus
Supplement provides otherwise. For a description of the
Certificate Administrator's, the Master Servicer's or the
Servicer's obligations to maintain and make claims under
applicable forms of credit enhancement and insurance
relating to the Mortgage Loans or Contracts, see
"Description of Credit Enhancement" and "Insurance
Policies on Mortgage Loans or Contracts."
For a discussion of legal rights and limitations
associated with the foreclosure of a Mortgage Loan or
Contract, see "Certain Legal Aspects of Mortgage Loans
and Contracts."
The Master Servicer or the Certificate
Administrator, as applicable, will deal with any
defaulted Agency Securities in the manner set forth in
the related Prospectus Supplement.
SUBORDINATION
A Senior/Subordinate Series of Certificates will
consist of one or more classes of Senior Certificates and
one or more classes of Subordinate Certificates, as set
forth in the related Prospectus Supplement.
Subordination of the Subordinate Certificates of any
Senior/Subordinate Series will be effected by the
following method, unless an alternative method is
specified in the related Prospectus Supplement. In
addition, certain classes of Senior (or Subordinate)
Certificates may be senior to other classes of Senior (or
Subordinate) Certificates, as specified in the related
Prospectus Supplement.
With respect to any Senior/Subordinate Series, the
total amount available for distribution on each
Distribution Date, as well as the method for allocating
such amount among the various classes of Certificates
included in such series, will be described in the related
Prospectus Supplement. Generally, with respect to any
such series, the amount available for distribution will
be allocated first to interest on the Senior Certificates
and then to principal of the Senior Certificates up to
the amounts described in the related Prospectus
Supplement, prior to allocation of any amounts to the
Subordinate Certificates.
With respect to any defaulted Mortgage Loan or
Contract that is finally liquidated, the amount of loss
realized, if any (as more fully described in the related
Pooling and Servicing Agreement, a "Realized Loss"), will
equal the portion of the Stated Principal Balance
remaining after application of all amounts recovered (net
of amounts reimbursable to the Master Servicer or
Servicer for related Advances and expenses) towards
interest and principal owing on the Mortgage Loan. With
respect to a Mortgage Loan or Contract, the principal
balance of which has been reduced in connection with
bankruptcy proceedings, the amount of such reduction will
be treated as a Realized Loss. If so provided in the
Pooling and Servicing Agreement, the Master Servicer may
be permitted, under certain circumstances, to purchase
any Mortgage Loan that is three or more months delinquent
in payments of principal and interest, at the Purchase
Price. Any Realized Loss incurred in connection with any
such Mortgage Loan will be passed through to the then
outstanding Certificateholders of the related series in
the same manner as Realized Losses on Mortgage Loans that
have not been so purchased.
In the event of any Realized Losses not in excess of
the limitations described below (other than Extraordinary
Losses), the rights of the Subordinate Certificateholders
to receive distributions will be subordinate to the
rights of the Senior Certificateholders.
Except as noted below, Realized Losses will be
allocated to the Subordinate Certificates of the related
series until the outstanding principal balance thereof
has been reduced to zero. Additional Realized Losses, if
any, will be allocated to the Senior Certificates. If
such series includes more than one class of Senior
Certificates, such additional Realized Losses will be
allocated either on a pro rata basis among all of the
Senior Certificates in proportion to their respective
outstanding principal balances or as otherwise provided
in the related Prospectus Supplement.
With respect to certain Realized Losses resulting
from physical damage to Mortgaged Properties which are
generally of the same type as are covered under a Special
Hazard Insurance Policy, the amount thereof that may be
allocated to the Subordinate Certificates of the related
series may be limited to an amount (the "Special Hazard
Amount") specified in the related Prospectus Supplement.
See "Description of Credit Enhancement--Special Hazard
Insurance Policies." If so, any Special Hazard Losses in
excess of the Special Hazard Amount will be allocated
among all outstanding classes of Certificates of the
related series, either on a pro rata basis in proportion
to their outstanding principal balances, or as otherwise
provided in the related Prospectus Supplement. The
respective amounts of other specified types of losses
(including Fraud Losses and Bankruptcy Losses) that may
be borne solely by the Subordinate Certificates may be
similarly limited to an amount (with respect to Fraud
Losses, the "Fraud Loss Amount" and with respect to
Bankruptcy Losses, the "Bankruptcy Amount"), and the
Subordinate Certificates may provide no coverage with
respect to certain other specified types of losses, as
described in the related Prospectus Supplement, in which
case such losses would be allocated on a pro rata basis
among all outstanding classes of Certificates. Each of
the Special Hazard Amount, Fraud Loss Amount and
Bankruptcy Amount may be subject to periodic reductions
and may be subject to further reduction or termination,
without the consent of the Certificateholders, upon the
written confirmation from each applicable Rating Agency
that the then-current rating of the related series of
Certificates will not be adversely affected thereby.
Generally, any allocation of a Realized Loss
(including a Special Hazard Loss) to a Certificate will
be made by reducing the outstanding principal balance
thereof as of the Distribution Date following the
calendar month in which such Realized Loss was incurred.
At any given time, the percentage of the outstanding
principal balances of all of the Certificates evidenced
by the Senior Certificates is the "Senior Percentage,"
determined in the manner set forth in the related
Prospectus Supplement. The "Stated Principal Balance" of
any item of Mortgage Collateral as of any date of
determination is equal to the principal balance thereof
as of the Cut-off Date, after application of all
scheduled principal payments due on or before the Cut-off
Date, whether received or not, reduced by all amounts
allocable to principal that are distributed to
Certificateholders on or before the date of
determination, and as further reduced to the extent that
any Realized Loss thereon has been allocated to any
Certificates on or before such date.
As set forth above, the rights of holders of the
various classes of Certificates of any series to receive
distributions of principal and interest is determined by
the aggregate outstanding principal balance of each such
class (or, if applicable, the related notional amount).
The outstanding principal balance of any Certificate will
be reduced by all amounts previously distributed on such
Certificate in respect of principal and by any Realized
Losses allocated thereto. If there are no Realized
Losses or Principal Prepayments on any item of Mortgage
Collateral, the respective rights of the holders of
Certificates of any series to future distributions
generally would not change. However, to the extent set
forth in the related Prospectus Supplement, holders of
Senior Certificates may be entitled to receive a
disproportionately larger amount of prepayments received
during certain specified periods, which will have the
effect (absent offsetting losses) of accelerating the
amortization of the Senior Certificates and increasing
the respective percentage ownership interest evidenced by
the Subordinate Certificates in the related Trust Fund
(with a corresponding decrease in the Senior Percentage),
thereby preserving the availability of the subordination
provided by the Subordinate Certificates. In addition,
as set forth above, certain Realized Losses generally
will be allocated first to Subordinate Certificates by
reduction of the outstanding principal balance thereof,
which will have the effect of increasing the respective
ownership interest evidenced by the Senior Certificates
in the related Trust Fund.
If so provided in the related Prospectus Supplement,
certain amounts otherwise payable on any Distribution
Date to holders of Subordinate Certificates may be
deposited into a Reserve Fund. Amounts held in any
Reserve Fund may be applied as described under
"Description of Credit Enhancement--Reserve Funds" and in
the related Prospectus Supplement.
With respect to any Senior/Subordinate Series, the
terms and provisions of the subordination may vary from
those described above. Any such variation and any
additional credit enhancement will be described in the
related Prospectus Supplement.
DESCRIPTION OF CREDIT ENHANCEMENT
General
Credit support with respect to each series of
Certificates may be comprised of one or more of the
following components. Each component will have a dollar
limit and will provide coverage with respect to Realized
Losses that are (i) attributable to the Mortgagor's
failure to make any payment of principal or interest as
required under the Mortgage Note or Contract, but not
including Special Hazard Losses, Extraordinary Losses or
other losses resulting from damage to a Mortgaged
Property, Bankruptcy Losses or Fraud Losses (any such
loss, a "Defaulted Mortgage Loss"); (ii) of a type
generally covered by a Special Hazard Insurance Policy
(any such loss, a "Special Hazard Loss"); (iii)
attributable to certain actions which may be taken by a
bankruptcy court in connection with a Mortgage Loan,
including a reduction by a bankruptcy court of the
principal balance of or the Mortgage Rate on a Mortgage
Loan or Contract or an extension of its maturity (any
such loss, a "Bankruptcy Loss"); and (iv) incurred on
defaulted Mortgage Loans or Contracts as to which there
was fraud in the origination of such Mortgage Loans or
Contracts (any such loss, a "Fraud Loss").
Unless otherwise specified in the related Prospectus
Supplement, credit support will not provide protection
against all risks of loss and will not guarantee
repayment of the entire outstanding principal balance of
the Certificates and interest thereon. If losses occur
which exceed the amount covered by credit support or
which are not covered by the credit support,
Certificateholders will bear their allocable share of
deficiencies. In particular, Defaulted Mortgage Losses,
Special Hazard Losses, Bankruptcy Losses and Fraud Losses
in excess of the amount of coverage provided therefor and
losses occasioned by war, civil insurrection, certain
governmental actions, nuclear reaction and certain other
risks ("Extraordinary Losses") will not be covered. To
the extent that the credit enhancement for any series of
Certificates is exhausted, the Certificateholders will
bear all further risks of loss not otherwise insured
against.
As set forth below and in the related Prospectus
Supplement, (i) coverage with respect to Defaulted
Mortgage Losses may be provided by a Mortgage Pool
Insurance Policy or Contract Pool Insurance Policy, (ii)
coverage with respect to Special Hazard Losses may be
provided by a Special Hazard Insurance Policy, (iii)
coverage with respect to Bankruptcy Losses may be
provided by a Bankruptcy Bond and (iv) coverage with
respect to Fraud Losses may be provided by a Mortgage
Pool Insurance Policy or mortgage repurchase bond. In
addition, if so specified in the applicable Prospectus
Supplement, in lieu of or in addition to any or all of
the foregoing arrangements, credit enhancement may be in
the form of a Reserve Fund to cover such losses, in the
form of subordination of one or more classes of
Certificates as described under "Subordination," or in
the form of a Certificate Insurance Policy, a Letter of
Credit, surety bonds or other types of insurance
policies, certain other secured or unsecured corporate
guarantees or in such other form as may be described in
the related Prospectus Supplement, or in the form of a
combination of two or more of the foregoing. The credit
support may be provided by an assignment of the right to
receive certain cash amounts, a deposit of cash into a
Reserve Fund or other pledged assets, or by banks,
insurance companies, guarantees or any combination
thereof identified in the related Prospectus Supplement.
Each Prospectus Supplement will include a
description of (a) the amount payable under the credit
enhancement arrangement, if any, provided with respect to
a series, (b) any conditions to payment thereunder not
otherwise described herein, (c) the conditions under
which the amount payable under such credit support may be
reduced and under which such credit support may be
terminated or replaced and (d) the material provisions of
any agreement relating to such credit support.
Additionally, each such Prospectus Supplement will set
forth certain information with respect to the issuer of
any third-party credit enhancement.
The descriptions of any insurance policies, bonds or
other instruments described in this Prospectus or any
Prospectus Supplement and the coverage thereunder do not
purport to be complete and are qualified in their
entirety by reference to the actual forms of such
policies, copies of which are available upon request.
Letters of Credit
If any component of credit enhancement as to any
series of Certificates is to be provided by a letter of
credit (the "Letter of Credit"), a bank (the "Letter of
Credit Bank") will deliver to the Trustee an irrevocable
Letter of Credit. The Letter of Credit may provide
direct coverage with respect to the Mortgage Collateral.
The Letter of Credit Bank, the amount available under the
Letter of Credit with respect to each component of credit
enhancement, the expiration date of the Letter of Credit,
and a more detailed description of the Letter of Credit
will be specified in the related Prospectus Supplement.
On or before each Distribution Date, the Letter of Credit
Bank will be required to make certain payments after
notification from the Trustee, to be deposited in the
related Certificate Account with respect to the coverage
provided thereby. The Letter of Credit may also provide
for the payment of Advances.
Mortgage Pool Insurance Policies
Any pool-wide insurance policy covering losses on
Mortgage Loans (each, a "Mortgage Pool Insurance Policy")
obtained by the Company for a Trust Fund will be issued
by the insurer named in the related Prospectus Supplement
(the "Pool Insurer"). Each Mortgage Pool Insurance
Policy, subject to the limitations described below and in
the Prospectus Supplement, if any, will cover Defaulted
Mortgage Losses in an amount specified in the applicable
Prospectus Supplement. As set forth under "--Maintenance
of Credit Enhancement" below, the Master Servicer,
Servicer or Certificate Administrator, as applicable,
will use its best reasonable efforts to maintain the
Mortgage Pool Insurance Policy and to present claims
thereunder to the Pool Insurer on behalf of itself, the
Trustee and the Certificateholders. The Mortgage Pool
Insurance Policies, however, are not blanket policies
against loss, since claims thereunder may only be made
respecting particular defaulted Mortgage Loans and only
upon satisfaction of certain conditions precedent
described below. Unless specified in the related
Prospectus Supplement, the Mortgage Pool Insurance
Policies may not cover losses due to a failure to pay or
denial of a claim under a Primary Insurance Policy,
irrespective of the reason therefor.
Each Mortgage Pool Insurance Policy will provide
that no claims may be validly presented thereunder
unless, among other things, (i) any required Primary
Insurance Policy is in effect for the defaulted Mortgage
Loan and a claim thereunder has been submitted and
settled, (ii) hazard insurance on the property securing
such Mortgage Loan has been kept in force and real estate
taxes and other protection and preservation expenses have
been paid by the Master Servicer, Servicer or Sub-
Servicer, (iii) if there has been physical loss or damage
to the Mortgaged Property, it has been restored to its
condition (reasonable wear and tear excepted) at the
Cut-off Date and (iv) the insured has acquired good and
merchantable title to the Mortgaged Property free and
clear of liens except certain permitted encumbrances.
Upon satisfaction of these conditions, the Pool Insurer
will have the option either (a) to purchase the property
securing the defaulted Mortgage Loan at a price equal to
the outstanding principal balance thereof plus accrued
and unpaid interest at the applicable Mortgage Rate to
the date of purchase and certain expenses incurred by the
Master Servicer, Servicer or Sub-Servicer on behalf of
the Trustee and Certificateholders, or (b) to pay the
amount by which the sum of the outstanding principal
balance of the defaulted Mortgage Loan plus accrued and
unpaid interest at the Mortgage Rate to the date of
payment of the claim and the aforementioned expenses
exceeds the proceeds received from an approved sale of
the Mortgaged Property, in either case net of certain
amounts paid or assumed to have been paid under any
related Primary Insurance Policy. Certificateholders
will experience a shortfall in the amount of interest
payable on the related Certificates in connection with
the payment of claims under a Mortgage Pool Insurance
Policy because the Pool Insurer is only required to remit
unpaid interest through the date a claim is paid rather
than through the end of the month in which such claim is
paid. In addition, the Certificateholders will also
experience losses with respect to the related
Certificates in connection with payments made under a
Mortgage Pool Insurance Policy to the extent that the
Master Servicer, Servicer or Sub-Servicer expends funds
to cover unpaid real estate taxes or to repair the
related Mortgaged Property in order to make a claim under
a Mortgage Pool Insurance Policy, as those amounts will
not be covered by payments under such policy and will be
reimbursable to the Master Servicer, Servicer or Sub-
Servicer from funds otherwise payable to the
Certificateholders. If any Mortgaged Property securing
a defaulted Mortgage Loan is damaged and proceeds, if any
(see "--Special Hazard Insurance Policies" below for risks
which are not covered by such policies), from the related
hazard insurance policy or applicable Special Hazard
Instrument are insufficient to restore the damaged
property to a condition sufficient to permit recovery
under the Mortgage Pool Insurance Policy, the Master
Servicer, Servicer or Sub-Servicer is not required to
expend its own funds to restore the damaged property
unless it determines that (a) such restoration will
increase the proceeds to Certificateholders on
liquidation of the Mortgage Loan after reimbursement of
the Master Servicer, Servicer or Sub-Servicer for its
expenses and (b) such expenses will be recoverable by it
through Liquidation Proceeds or Insurance Proceeds.
Unless otherwise specified in the related Prospectus
Supplement, a Mortgage Pool Insurance Policy (and certain
Primary Insurance Policies) will likely not insure
against loss sustained by reason of a default arising
from, among other things, (i) fraud or negligence in the
origination or servicing of a Mortgage Loan, including
misrepresentation by the Mortgagor, the Mortgage
Collateral Seller or other persons involved in the
origination thereof, or (ii) failure to construct a
Mortgaged Property in accordance with plans and
specifications. Depending upon the nature of the event,
a breach of representation made by a Mortgage Collateral
Seller may also have occurred. Such a breach, unless
otherwise specified in the related Prospectus Supplement,
would not give rise to a repurchase obligation on the
part of the Company or Residential Funding.
The original amount of coverage under each Mortgage
Pool Insurance Policy will be reduced over the life of
the related series of Certificates by the aggregate
amount of claims paid less the aggregate of the net
amounts realized by the Pool Insurer upon disposition of
all foreclosed properties. The amount of claims paid
includes certain expenses incurred by the Master
Servicer, Servicer or Sub-Servicer as well as accrued
interest on delinquent Mortgage Loans to the date of
payment of the claim. See "Certain Legal Aspects of
Mortgage Loans and Contracts--Foreclosure." Accordingly,
if aggregate net claims paid under any Mortgage Pool
Insurance Policy reach the original policy limit,
coverage under that Mortgage Pool Insurance Policy will
be exhausted and any further losses will be borne by the
related Certificateholders. In addition, unless the
Master Servicer or Servicer could determine that an
Advance in respect of a delinquent Mortgage Loan would be
recoverable to it from the proceeds of the liquidation of
such Mortgage Loan or otherwise, the Master Servicer or
Servicer would not be obligated to make an Advance
respecting any such delinquency since the Advance would
not be ultimately recoverable to it from either the
Mortgage Pool Insurance Policy or from any other related
source. See "Description of the Certificates--Advances."
Since each Mortgage Pool Insurance Policy will
require that the property subject to a defaulted Mortgage
Loan be restored to its original condition prior to
claiming against the Pool Insurer, such policy will not
provide coverage against hazard losses. As set forth
under "Insurance Policies on Mortgage Loans or
Contracts--Standard Hazard Insurance on Mortgaged
Properties," the hazard policies covering the Mortgage
Loans typically exclude from coverage physical damage
resulting from a number of causes and, even when the
damage is covered, may afford recoveries which are
significantly less than full replacement cost of such
losses. Additionally, no coverage in respect of Special
Hazard Losses, Fraud Losses or Bankruptcy Losses will
cover all risks, and the amount of any such coverage will
be limited. See "--Special Hazard Insurance Policies"
below. As a result, certain hazard risks will not be
insured against and may be borne by Certificateholders.
Contract Pools may be covered by pool insurance
policies (each, a "Contract Pool Insurance Policy") that
are similar to the Mortgage Pool Insurance Policies
described above.
Special Hazard Insurance Policies
Any insurance policy covering Special Hazard Losses
(a "Special Hazard Insurance Policy") obtained for a
Trust Fund will be issued by the insurer named in the
related Prospectus Supplement (the "Special Hazard
Insurer"). Each Special Hazard Insurance Policy, subject
to limitations described below and in the related
Prospectus Supplement, if any, will protect the related
Certificateholders from Special Hazard Losses which are
(i) losses due to direct physical damage to a Mortgaged
Property other than any loss of a type covered by a
hazard insurance policy or a flood insurance policy, if
applicable, and (ii) losses from partial damage caused by
reason of the application of the co-insurance clauses
contained in hazard insurance policies. See "Insurance
Policies on Mortgage Loans or Contracts." A Special
Hazard Insurance Policy will not cover losses occasioned
by war, civil insurrection, certain governmental actions,
errors in design, faulty workmanship or materials (except
under certain circumstances), nuclear reaction, chemical
contamination, waste by the Mortgagor and certain other
risks. Aggregate claims under a Special Hazard Insurance
Policy will be limited to the amount set forth in the
related Pooling and Servicing Agreement and will be
subject to reduction as set forth in such related Pooling
and Servicing Agreement. A Special Hazard Insurance
Policy will provide that no claim may be paid unless
hazard and, if applicable, flood insurance on the
property securing the Mortgage Loan or Contract has been
kept in force and other protection and preservation
expenses have been paid by the Master Servicer or
Servicer.
Subject to the foregoing limitations, a Special
Hazard Insurance Policy will provide that, where there
has been damage to property securing a foreclosed
Mortgage Loan (title to which has been acquired by the
insured) and to the extent such damage is not covered by
the hazard insurance policy or flood insurance policy, if
any, maintained by the Mortgagor or the Master Servicer,
Servicer or Sub-Servicer, the insurer will pay the lesser
of (i) the cost of repair or replacement of such property
or (ii) upon transfer of the property to the insurer, the
unpaid principal balance of such Mortgage Loan or
Contract at the time of acquisition of such property by
foreclosure or deed in lieu of foreclosure, plus accrued
interest at the Mortgage Rate to the date of claim
settlement and certain expenses incurred by the Master
Servicer, Servicer or Sub-Servicer with respect to such
property. If the property is transferred to a third
party in a sale approved by the Special Hazard Insurer,
the amount that the Special Hazard Insurer will pay will
be the amount under (ii) above reduced by the net
proceeds of the sale of the property. If the unpaid
principal balance plus accrued interest and certain
expenses is paid by the Special Hazard Insurer, the
amount of further coverage under the related Special
Hazard Insurance Policy will be reduced by such amount
less any net proceeds from the sale of the property. Any
amount paid as the cost of repair of the property will
further reduce coverage by such amount. Restoration of
the property with the proceeds described under (i) above
will satisfy the condition under each Mortgage Pool
Insurance Policy or Contract Pool Insurance Policy that
the property be restored before a claim under such policy
may be validly presented with respect to the defaulted
Mortgage Loan or Contract secured by such property. The
payment described under (ii) above will render
presentation of a claim in respect of such Mortgage Loan
or Contract under the related Mortgage Pool Insurance
Policy or Contract Pool Insurance Policy unnecessary.
Therefore, so long as a Mortgage Pool Insurance Policy or
Contract Pool Insurance Policy remains in effect, the
payment by the insurer under a Special Hazard Insurance
Policy of the cost of repair or of the unpaid principal
balance of the related Mortgage Loan or contract plus
accrued interest and certain expenses will not affect the
total Insurance Proceeds paid to Certificateholders, but
will affect the relative amounts of coverage remaining
under the related Special Hazard Insurance Policy and
Mortgage Pool Insurance Policy or Contract Pool Insurance
Policy.
To the extent set forth in the related Prospectus
Supplement, coverage in respect of Special Hazard Losses
for a series of Certificates may be provided, in whole or
in part, by a type of special hazard coverage other than
a Special Hazard Insurance Policy or by means of a
representation of the Company or Residential Funding.
Bankruptcy Bonds
In the event of a personal bankruptcy of a
Mortgagor, a bankruptcy court may establish the value of
the Mortgaged Property of such Mortgagor at an amount
less than the then outstanding principal balance of the
Mortgage Loan or Contract secured by such Mortgaged
Property (such difference, a "Deficient Valuation"). The
amount of the secured debt could then be reduced to such
value and, thus, the holder of such Mortgage Loan or
Contract would become an unsecured creditor to the extent
the outstanding principal balance of such Mortgage Loan
or Contract exceeds the value assigned to the Mortgaged
Property by the bankruptcy court. In addition, certain
other modifications of the terms of a Mortgage Loan or
Contract can result from a bankruptcy proceeding,
including a reduction in the amount of the Monthly
Payment on the related Mortgage Loan (a "Debt Service
Reduction"). See "Certain Legal Aspects of Mortgage
Loans and Contracts--Mortgage Loans--Anti-Deficiency
Legislation and Other Limitations on Lenders." Any
Bankruptcy Bond to provide coverage for Bankruptcy Losses
resulting from proceedings under the federal Bankruptcy
Code obtained for a Trust Fund will be issued by an
insurer named in the related Prospectus Supplement. The
level of coverage under each Bankruptcy Bond will be set
forth in the related Prospectus Supplement.
Reserve Funds
If so specified in the related Prospectus
Supplement, the Company will deposit or cause to be
deposited in an account (a "Reserve Fund") any
combination of cash or Permitted Investments in specified
amounts, or any other instrument satisfactory to the
Rating Agency or Agencies, which will be applied and
maintained in the manner and under the conditions
specified in such Prospectus Supplement. In the
alternative or in addition to such deposit, to the extent
described in the related Prospectus Supplement, a Reserve
Fund may be funded through application of all or a
portion of amounts otherwise payable on any related
Subordinate Certificates, from the Spread or otherwise.
To the extent that the funding of the Reserve Fund is
dependent on amounts otherwise payable on related
Subordinate Certificates, Spread or other cash flows
attributable to the related Mortgage Loans or on
reinvestment income, the Reserve Fund may provide less
coverage than initially expected if the cash flows or
reinvestment income on which such funding is dependent
are lower than anticipated. With respect to any series
of Certificates as to which credit enhancement includes
a Letter of Credit, if so specified in the related
Prospectus Supplement, under certain circumstances the
remaining amount of the Letter of Credit may be drawn by
the Trustee and deposited in a Reserve Fund. Amounts in
a Reserve Fund may be distributed to Certificateholders,
or applied to reimburse the Master Servicer or Servicer
for outstanding Advances, or may be used for other
purposes, in the manner and to the extent specified in
the related Prospectus Supplement. Unless otherwise
specified in the related Prospectus Supplement, any such
Reserve Fund will not be deemed to be part of the related
Trust Fund. A Reserve Fund may provide coverage to more
than one series of Certificates, if set forth in the
related Prospectus Supplement.
Unless otherwise specified in the related Prospectus
Supplement, the Trustee will have a perfected security
interest for the benefit of the Certificateholders in the
assets in the Reserve Fund. However, to the extent that
the Company, any affiliate thereof or any other entity
has an interest in any Reserve Fund, in the event of the
bankruptcy, receivership or insolvency of such entity,
there could be delays in withdrawals from the Reserve
Fund and the corresponding payments to the
Certificateholders. Such delays could adversely affect
the yield to investors on the related Certificates.
Amounts deposited in any Reserve Fund for a series
will be invested in Permitted Investments by, or at the
direction of, and for the benefit of a Servicer, the
Master Servicer, the Certificate Administrator or any
other person named in the related Prospectus Supplement.
Certificate Insurance Policies
If so specified in the related Prospectus
Supplement, the Company may obtain one or more
certificate insurance policies (each, a "Certificate
Insurance Policy"), issued by insurers acceptable to the
Rating Agency or Agencies rating the Certificates offered
pursuant to such Prospectus Supplement, insuring the
holders of one or more classes of Certificates the
payment of amounts due in accordance with the terms of
such class or classes of Certificates. Any Certificate
Insurance Policy will have the characteristics described
in and will be subject to such limitations and exceptions
as set forth in the related Prospectus Supplement.
Surety Bonds
If so specified in the related Prospectus
Supplement, the Company may obtain one or more surety
bonds (each, a "Surety Bond"), issued by insurers
acceptable to the Rating Agency or Agencies rating the
Certificates offered pursuant to such Prospectus
Supplement, insuring the holders of one or more classes
of Certificates the payment of amounts due in accordance
with the terms of such class or classes of Certificates.
Any surety bond will have the characteristics described
in and will be subject to such limitations and exceptions
as set forth in the related Prospectus Supplement.
Maintenance of Credit Enhancement
If credit enhancement has been obtained for a series
of Certificates, the Master Servicer, the Servicer or the
Certificate Administrator will be obligated to exercise
its best reasonable efforts to keep or cause to be kept
such credit enhancement in full force and effect
throughout the term of the applicable Pooling and
Servicing Agreement or Trust Agreement, unless coverage
thereunder has been exhausted through payment of claims
or otherwise, or substitution therefor is made as
described below under "--Reduction or Substitution of
Credit Enhancement." The Master Servicer, the Servicer
or the Certificate Administrator, as applicable, on
behalf of itself, the Trustee and Certificateholders,
will be required to provide information required for the
Trustee to draw under any applicable credit enhancement.
Unless otherwise specified in the related Prospectus
Supplement, the Master Servicer, the Servicer or the
Certificate Administrator will agree to pay the premiums
for each Mortgage Pool Insurance Policy, Contract Pool
Insurance Policy, Special Hazard Insurance Policy,
Bankruptcy Bond, Certificate Insurance Policy or Surety
Bond, as applicable, on a timely basis. In the event the
related insurer ceases to be a "Qualified Insurer"
because it ceases to be qualified under applicable law to
transact such insurance business or coverage is
terminated for any reason other than exhaustion of such
coverage, the Master Servicer, the Servicer or the
Certificate Administrator will use its best reasonable
efforts to obtain from another Qualified Insurer a
comparable replacement insurance policy or bond with a
total coverage equal to the then outstanding coverage of
such policy or bond. If the cost of the replacement
policy is greater than the cost of such policy or bond,
the coverage of the replacement policy or bond will,
unless otherwise agreed to by the Company, be reduced to
a level such that its premium rate does not exceed the
premium rate on the original insurance policy. In the
event that the Pool Insurer ceases to be a Qualified
Insurer because it ceases to be approved as an insurer by
Freddie Mac, Fannie Mae or any successor entity, the
Master Servicer, the Servicer or the Certificate
Administrator, as applicable, will review, not less often
than monthly, the financial condition of the Pool Insurer
with a view toward determining whether recoveries under
the Mortgage Pool Insurance Policy or Contract Pool
Insurance Policy are jeopardized for reasons related to
the financial condition of the Pool Insurer. If the
Master Servicer, the Servicer or the Certificate
Administrator determines that recoveries are so
jeopardized, it will exercise its best reasonable efforts
to obtain from another Qualified Insurer a replacement
insurance policy as described above, subject to the same
cost limit. Any losses in market value of the
Certificates associated with any reduction or withdrawal
in rating by an applicable Rating Agency shall be borne
by the Certificateholders.
If any property securing a defaulted Mortgage Loan
or Contract is damaged and proceeds, if any, from the
related hazard insurance policy or any applicable Special
Hazard Insurance Policy are insufficient to restore the
damaged property to a condition sufficient to permit
recovery under any Letter of Credit, Mortgage Pool
Insurance Policy, Contract Pool Insurance Policy or any
related Primary Insurance Policy, the Master Servicer or
the Servicer, as applicable, is not required to expend
its own funds to restore the damaged property unless it
determines (i) that such restoration will increase the
proceeds to one or more classes of Certificateholders on
liquidation of the Mortgage Loan after reimbursement of
the Master Servicer or the Servicer, as applicable, for
its expenses and (ii) that such expenses will be
recoverable by it through Liquidation Proceeds or
Insurance Proceeds. If recovery under any Letter of
Credit, Mortgage Pool Insurance Policy, Contract Pool
Insurance Policy, other credit enhancement or any related
Primary Insurance Policy is not available because the
Master Servicer or the Servicer, as applicable, has been
unable to make the above determinations, has made such
determinations incorrectly or recovery is not available
for any other reason, the Master Servicer or the
Servicer, as applicable, is nevertheless obligated to
follow such normal practices and procedures (subject to
the preceding sentence) as it deems necessary or
advisable to realize upon the defaulted Mortgage Loan and
in the event such determination has been incorrectly
made, is entitled to reimbursement of its expenses in
connection with such restoration.
Reduction or Substitution of Credit Enhancement
Unless otherwise specified in the Prospectus
Supplement, the amount of credit support provided with
respect to any series of Certificates may be reduced
under certain specified circumstances. In most cases,
the amount available as credit support will be subject to
periodic reduction on a non-discretionary basis in
accordance with a schedule or formula set forth in the
related Pooling and Servicing Agreement or Trust
Agreement. Additionally, in most cases, such credit
support may be replaced, reduced or terminated, and the
formula used in calculating the amount of coverage with
respect to Bankruptcy Losses, Special Hazard Losses or
Fraud Losses may be changed, without the consent of the
Certificateholders, upon the written assurance from each
applicable Rating Agency that the then-current rating of
the related series of Certificates will not be adversely
affected thereby. Furthermore, in the event that the
credit rating of any obligor under any applicable credit
enhancement is downgraded, the credit rating of each
class of the related Certificates may be downgraded to a
corresponding level, and, unless otherwise specified in
the related Prospectus Supplement, the Master Servicer,
the Servicer or the Certificate Administrator, as
applicable, will not be obligated to obtain replacement
credit support in order to restore the rating of the
Certificates. The Master Servicer, the Servicer or the
Certificate Administrator, as applicable, will also be
permitted to replace such credit support with other
credit enhancement instruments issued by obligors whose
credit ratings are equivalent to such downgraded level
and in lower amounts which would satisfy such downgraded
level, provided that the then-current rating of each
class of the related series of Certificates is
maintained. Where the credit support is in the form of
a Reserve Fund, a permitted reduction in the amount of
credit enhancement will result in a release of all or a
portion of the assets in the Reserve Fund to the Company,
the Master Servicer or such other person that is entitled
thereto. Any assets so released will not be available
for distributions in future periods.
INSURANCE POLICIES ON MORTGAGE LOANS OR CONTRACTS
Each Mortgage Loan or Contract will be required to
be covered by a hazard insurance policy (as described
below) and, in certain cases, a Primary Insurance Policy.
In addition, FHA Loans and VA Loans will be covered by
the government mortgage insurance programs described
below. The descriptions of any insurance policies set
forth in this Prospectus or any Prospectus Supplement and
the coverage thereunder do not purport to be complete and
are qualified in their entirety by reference to such
forms of policies, sample copies of which are available
upon request.
Primary Mortgage Insurance Policies
Unless otherwise specified in the related Prospectus
Supplement, (i) each Mortgage Loan having a Loan-to-Value
Ratio at origination of over 80% will be covered by a
primary mortgage guaranty insurance policy (a "Primary
Insurance Policy") insuring against default on such
Mortgage Loan as to at least the principal amount thereof
exceeding 75% of the Appraised Value of the Mortgaged
Property at origination of the Mortgage Loan, unless and
until the principal balance of the Mortgage Loan is
reduced to a level that would produce a Loan-to-Value
Ratio equal to or less than 80%, and (ii) the Company or
the related Mortgage Collateral Seller will represent and
warrant that, to the best of such entity's knowledge,
such Mortgage Loans are so covered. Mortgage Loans which
are subject to negative amortization will only be covered
by a Primary Insurance Policy if such coverage was so
required upon their origination, notwithstanding that
subsequent negative amortization may cause such Mortgage
Loan's Loan-to-Value Ratio (based on the then-current
balance) to subsequently exceed the limits which would
have required such coverage upon their origination.
While the terms and conditions of the Primary
Insurance Policies issued by one primary mortgage
guaranty insurer (a "Primary Insurer") will differ from
those in Primary Insurance Policies issued by other
Primary Insurers, each Primary Insurance Policy generally
will pay either: (i) the insured percentage of the loss
on the related Mortgaged Property; (ii) the entire amount
of such loss, after receipt by the Primary Insurer of
good and merchantable title to, and possession of, the
Mortgaged Property; or (iii) at the option of the Primary
Insurer under certain Primary Insurance Policies, the sum
of the delinquent monthly payments plus any advances made
by the insured, both to the date of the claim payment
and, thereafter, monthly payments in the amount that
would have become due under the Mortgage Loan if it had
not been discharged plus any advances made by the insured
until the earlier of (a) the date the Mortgage Loan would
have been discharged in full if the default had not
occurred or (b) an approved sale. The amount of the loss
as calculated under a Primary Insurance Policy covering
a Mortgage Loan will generally consist of the unpaid
principal amount of such Mortgage Loan and accrued and
unpaid interest thereon and reimbursement of certain
expenses, less (i) rents or other payments collected or
received by the insured (other than the proceeds of
hazard insurance) that are derived from the related
Mortgaged Property, (ii) hazard insurance proceeds in
excess of the amount required to restore such Mortgaged
Property and which have not been applied to the payment
of the Mortgage Loan, (iii) amounts expended but not
approved by the Primary Insurer, (iv) claim payments
previously made on such Mortgage Loan and (v) unpaid
premiums and certain other amounts.
As conditions precedent to the filing or payment of
a claim under a Primary Insurance Policy, in the event of
default by the Mortgagor, the insured will typically be
required, among other things, to: (i) advance or
discharge (a) hazard insurance premiums and (b) as
necessary and approved in advance by the Primary Insurer,
real estate taxes, protection and preservation expenses
and foreclosure and related costs; (ii) in the event of
any physical loss or damage to the Mortgaged Property,
have the Mortgaged Property restored to at least its
condition at the effective date of the Primary Insurance
Policy (ordinary wear and tear excepted); and (iii)
tender to the Primary Insurer good and merchantable title
to, and possession of, the Mortgaged Property.
The Pooling and Servicing Agreement for a series
generally will require that the Master Servicer or
Servicer maintain, or cause to be maintained, coverage
under a Primary Insurance Policy to the extent such
coverage was in place on the Cut-off Date. In the event
that the Company gains knowledge that, as of the Closing
Date, a Mortgage Loan had a Loan-to-Value Ratio at
origination in excess of 80% and was not the subject of
a Primary Insurance Policy (and was not included in any
exception to such standard disclosed in the related
Prospectus Supplement) and that such Mortgage Loan has a
then current Loan-to-Value Ratio in excess of 80%, then
the Master Servicer or the Servicer is required to use
its reasonable efforts to obtain and maintain a Primary
Insurance Policy to the extent that such a policy is
obtainable at a reasonable price.
Any primary mortgage insurance or primary credit
insurance policies relating to Contracts will be
described in the related Prospectus Supplement.
Standard Hazard Insurance on Mortgaged Properties
The terms of the Mortgage Loans require each
Mortgagor to maintain a hazard insurance policy covering
the related Mortgaged Property and providing for coverage
at least equal to that of the standard form of fire
insurance policy with extended coverage customary in the
state in which the property is located. Such coverage
generally will be in an amount equal to the lesser of the
principal balance of such Mortgage Loan or 100% of the
insurable value of the improvements securing the Mortgage
Loan. The Pooling and Servicing Agreement will provide
that the Master Servicer or Servicer shall cause such
hazard policies to be maintained or shall obtain a
blanket policy insuring against losses on the Mortgage
Loans. The ability of the Master Servicer or Servicer to
ensure that hazard insurance proceeds are appropriately
applied may be dependent on its being named as an
additional insured under any hazard insurance policy and
under any flood insurance policy referred to below, or
upon the extent to which information in this regard is
furnished to the Master Servicer or the Servicer by
Mortgagors or Sub-Servicers.
In general, the standard form of fire and extended
coverage policy covers physical damage to or destruction
of the improvements on the property by fire, lightning,
explosion, smoke, windstorm, hail, riot, strike and civil
commotion, subject to the conditions and exclusions
specified in each policy. The policies relating to the
Mortgage Loans will be underwritten by different insurers
under different state laws in accordance with different
applicable state forms and therefore will not contain
identical terms and conditions, the basic terms thereof
are dictated by respective state laws. Such policies
typically do not cover any physical damage resulting from
the following: war, revolution, governmental actions,
floods and other water-related causes, earth movement
(including earthquakes, landslides and mudflows), nuclear
reactions, wet or dry rot, vermin, rodents, insects or
domestic animals, theft and, in certain cases, vandalism.
The foregoing list is merely indicative of certain kinds
of uninsured risks and is not intended to be
all-inclusive. Where the improvements securing a
Mortgage Loan are located in a federally designated flood
area at the time of origination of such Mortgage Loan,
the Pooling and Servicing Agreement generally requires
the Master Servicer or Servicer to cause to be maintained
for each such Mortgage Loan serviced, flood insurance (to
the extent available) in an amount equal in general to
the lesser of the amount required to compensate for any
loss or damage on a replacement cost basis or the maximum
insurance available under the federal flood insurance
program.
Since the amount of hazard insurance that Mortgagors
are required to maintain on the improvements securing the
Mortgage Loans may decline as the principal balances
owing thereon decrease, and since residential properties
have historically appreciated in value over time, hazard
insurance proceeds could be insufficient to restore fully
the damaged property in the event of a partial loss. See
"Subordination" above for a description of when
subordination is provided, the protection (limited to the
Special Hazard Amount as described in the related
Prospectus Supplement) afforded by such subordination,
and "Description of Credit Enhancement--Special Hazard
Insurance Policies" for a description of the limited
protection afforded by any Special Hazard Insurance
Policy against losses occasioned by hazards which are
otherwise uninsured against.
Standard Hazard Insurance on Manufactured Homes
The terms of the Pooling and Servicing Agreement
will require the Servicer or the Master Servicer, as
applicable, to cause to be maintained with respect to
each Contract one or more Standard Hazard Insurance
Policies which provide, at a minimum, the same coverage
as a standard form fire and extended coverage insurance
policy that is customary for manufactured housing, issued
by a company authorized to issue such policies in the
state in which the Manufactured Home is located, and in
an amount which is not less than the maximum insurable
value of such Manufactured Home or the principal balance
due from the Mortgagor on the related Contract, whichever
is less. Such coverage may be provided by one or more
blanket insurance policies covering losses on the
Contracts resulting from the absence or insufficiency of
individual Standard Hazard Insurance Policies. If a
Manufactured Home's location was, at the time of
origination of the related Contract, within a federally
designated flood area, the Servicer or the Master
Servicer also will be required to maintain flood
insurance.
If the Servicer or the Master Servicer repossesses
a Manufactured Home on behalf of the Trustee, the
Servicer or the Master Servicer will either (i) maintain
at its expense hazard insurance with respect to such
Manufactured Home or (ii) indemnify the Trustee against
any damage to such Manufactured Home prior to resale or
other disposition.
FHA Mortgage Insurance
The Housing Act authorizes various FHA mortgage
insurance programs. Some of the Mortgage Loans may be
insured under either Section 203(b), Section 234 or
Section 235 of the Housing Act. Under Section 203(b),
FHA insures mortgage loans of up to 30 years' duration
for the purchase of one- to four-family dwelling units.
Mortgage loans for the purchase of condominium units are
insured by FHA under Section 234. Loans insured under
these programs must bear interest at a rate not exceeding
the maximum rate in effect at the time the loan is made,
as established by HUD, and may not exceed specified
percentages of the lesser of the appraised value of the
property and the sales price, less seller paid closing
costs for the property, up to certain specified maximums.
In addition, FHA imposes initial investment minimums and
other requirements on mortgage loans insured under the
Section 203(b) and Section 234 programs.
Under Section 235, assistance payments are paid by
HUD to the mortgagee on behalf of eligible mortgagors for
as long as the mortgagors continue to be eligible for the
payments. To be eligible, a mortgagor must be part of a
family, have income within the limits prescribed by HUD
at the time of initial occupancy, occupy the property and
meet requirements for recertification at least annually.
The regulations governing these programs provide
that insurance benefits are payable either (i) upon
foreclosure (or other acquisition of possession) and
conveyance of the mortgaged premises to HUD or (ii) upon
assignment of the defaulted mortgage loan to HUD. The
FHA insurance that may be provided under these programs
upon the conveyance of the home to HUD is equal to 100%
of the outstanding principal balance of the mortgage
loan, plus accrued interest, as described below, and
certain additional costs and expenses. When entitlement
to insurance benefits results from assignment of the
mortgage loan to HUD, the insurance payment is computed
as of the date of the assignment and includes the unpaid
principal amount of the mortgage loan plus mortgage
interest accrued and unpaid to the assignment date.
When entitlement to insurance benefits results from
foreclosure (or other acquisition of possession) and
conveyance, the insurance payment is equal to the unpaid
principal amount of the mortgage loan, adjusted to
reimburse the mortgagee for certain tax, insurance and
similar payments made by it and to deduct certain amounts
received or retained by the mortgagee after default, plus
reimbursement not to exceed two-thirds of the mortgagee's
foreclosure costs. Any FHA insurance relating to
Contracts underlying a series of Certificates will be
described in the related Prospectus Supplement.
VA Mortgage Guaranty
The Servicemen's Readjustment Act of 1944, as
amended, permits a veteran (or, in certain instances, his
or her spouse) to obtain a mortgage loan guaranty by the
VA covering mortgage financing of the purchase of a one-
to four-family dwelling unit to be occupied as the
veteran's home at an interest rate not exceeding the
maximum rate in effect at the time the loan is made, as
established by HUD. The program has no limit on the
amount of a mortgage loan, requires no down payment from
the purchaser and permits the guaranty of mortgage loans
with terms, limited by the estimated economic life of the
property, up to 30 years. The maximum guaranty that may
be issued by the VA under this program is 50% of the
original principal amount of the mortgage loan up to a
certain dollar limit established by the VA. The
liability on the guaranty is reduced or increased pro
rata with any reduction or increase in the amount of
indebtedness, but in no event will the amount payable on
the guaranty exceed the amount of the original guaranty.
Notwithstanding the dollar and percentage limitations of
the guaranty, a mortgagee will ordinarily suffer a
monetary loss only when the difference between the
unsatisfied indebtedness and the proceeds of a
foreclosure sale of mortgaged premises is greater than
the original guaranty as adjusted. The VA may, at its
option, and without regard to the guaranty, make full
payment to a mortgagee of the unsatisfied indebtedness on
a mortgage upon its assignment to the VA.
Since there is no limit imposed by the VA on the
principal amount of a VA-guaranteed mortgage loan but
there is a limit on the amount of the VA guaranty,
additional coverage under a Primary Mortgage Insurance
Policy may be required by the Company for VA loans in
excess of certain amounts. The amount of any such
additional coverage will be set forth in the related
Prospectus Supplement. Any VA guaranty relating to
Contracts underlying a series of Certificates will be
described in the related Prospectus Supplement.
THE COMPANY
The Company is an indirect wholly-owned subsidiary
of GMAC Mortgage which is a wholly-owned subsidiary of
GMAC. The Company was incorporated in the State of
Delaware in November 1994. The Company was organized for
the purpose of serving as a private secondary mortgage
market conduit. The Company anticipates that it will in
many cases have acquired Mortgage Loans indirectly
through Residential Funding, which is also an indirect
wholly-owned subsidiary of GMAC Mortgage. The Company
does not have, nor is it expected in the future to have,
any significant assets.
The Company maintains its principal office at 8400
Normandale Lake Boulevard, Suite 700, Minneapolis,
Minnesota 55437. Its telephone number is (612) 832-7000.
RESIDENTIAL FUNDING CORPORATION
Unless otherwise specified in the related Prospectus
Supplement, Residential Funding, an affiliate of the
Company, will act as the Master Servicer or Certificate
Administrator for each series of Certificates.
Residential Funding buys conventional mortgage loans
under several loan purchase programs from mortgage loan
originators or sellers nationwide that meet its
seller/servicer eligibility requirements and services
mortgage loans for its own account and for others.
Residential Funding's principal executive offices are
located at 8400 Normandale Lake Boulevard, Suite 700,
Minneapolis, Minnesota 55437. Its telephone number is
(612) 832-7000. Residential Funding conducts operations
from its headquarters in Minneapolis and from offices
located in California, Connecticut, Florida, Georgia,
Rhode Island and Washington, D.C. At September 30, 1994,
Residential Funding was master servicing a mortgage loan
portfolio of approximately $23,552 million.
THE POOLING AND SERVICING AGREEMENT
As described above under "Description of the
Certificates--General," each series of Certificates will
be issued pursuant to a Pooling and Servicing Agreement
or, if the Trust Fund for a series of Certificates
contains Agency Securities, a Trust Agreement. The
discussion below covers Pooling and Servicing Agreements,
but its terms are also generally applicable to Trust
Agreements. The following summaries describe certain
additional provisions common to each Pooling and
Servicing Agreement and are qualified entirely by
reference to the actual terms of the Pooling and
Servicing Agreement for a series of Certificates.
Servicing and Administration
The Pooling and Servicing Agreement for a series of
Certificates will set forth the party responsible for
performing servicing functions for such series which may
be the Master Servicer or one or more Servicers. If
there is more than one Servicer and there is no Master
Servicer, a Certificate Administrator may be party to the
Pooling and Servicing Agreement. The Certificate
Administrator will not be responsible for servicing
Mortgage Loans or Contracts and instead will perform
certain specified administrative and reporting functions
with regard to the Trust Fund. In addition, if the Trust
Fund for a series of Certificates contains Agency
Securities, generally the Certificate Administrator will
perform collection, administrative and reporting
functions pursuant to a Trust Agreement and no Master
Servicer or Servicer will be appointed for such series.
The Master Servicer or any Servicer for a series of
Certificates generally will perform the functions set
forth under "Description of the Certificates--Servicing
and Administration of Mortgage Collateral" above.
Events of Default
Events of Default under the Pooling and Servicing
Agreement in respect of a series of Certificates, unless
otherwise specified in the Prospectus Supplement, will
include: (i) in the case of a Trust Fund including
Mortgage Loans or Contracts, any failure by the
Certificate Administrator, the Master Servicer or a
Servicer (if such Servicer is a party to the Pooling and
Servicing Agreement) to make a required deposit to the
Certificate Account or, if the Certificate Administrator
or the Master Servicer is the Paying Agent, to distribute
to the holders of any class of Certificates of such
series any required payment which continues unremedied
for five days after the giving of written notice of such
failure to the Master Servicer or the Certificate
Administrator, as applicable, by the Trustee or the
Company, or to the Master Servicer, the Certificate
Administrator, the Company and the Trustee by the holders
of Certificates of such class evidencing not less than
25% of the aggregate Percentage Interests constituting
such class; (ii) any failure by the Master Servicer or
the Certificate Administrator, as applicable, duly to
observe or perform in any material respect any other of
its covenants or agreements in the Pooling and Servicing
Agreement with respect to such series of Certificates
which continues unremedied for 30 days (15 days in the
case of a failure to pay the premium for any insurance
policy which is required to be maintained under the
Pooling and Servicing Agreement) after the giving of
written notice of such failure to the Master Servicer or
the Certificate Administrator, as applicable, by the
Trustee or the Company, or to the Master Servicer, the
Certificate Administrator, the Company and the Trustee by
the holders of any class of Certificates of such series
evidencing not less than 25% (33% in the case of a Trust
Fund including Agency Securities) of the aggregate
Percentage Interests constituting such class; and (iii)
certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar
proceedings regarding the Master Servicer or the
Certificate Administrator, as applicable, and certain
actions by the Master Servicer or the Certificate
Administrator indicating its insolvency or inability to
pay its obligations. A default pursuant to the terms of
any Agency Securities included in any Trust Fund will not
constitute an Event of Default under the related Pooling
and Servicing Agreement.
Rights Upon Event of Default
So long as an Event of Default remains unremedied,
either the Company or the Trustee may, and, at the
direction of the holders of Certificates evidencing not
less than 51% of the aggregate Percentage Interests (or,
if so specified in the related Prospectus Supplement,
voting rights) in the related Trust Fund, the Trustee
shall, by written notification to the Master Servicer or
the Certificate Administrator, as applicable, and to the
Company or the Trustee, terminate all of the rights and
obligations of the Master Servicer or the Certificate
Administrator under the Pooling and Servicing Agreement
(other than any rights of the Master Servicer or the
Certificate Administrator as Certificateholder) covering
such Trust Fund and in and to the Mortgage Collateral and
the proceeds thereof, whereupon the Trustee or, upon
notice to the Company and with the Company's consent, its
designee will succeed to all responsibilities, duties and
liabilities of the Master Servicer or the Certificate
Administrator under such Pooling and Servicing Agreement
(other than the obligation to purchase Mortgage
Collateral under certain circumstances) and will be
entitled to similar compensation arrangements. In the
event that the Trustee would be obligated to succeed the
Master Servicer but is unwilling so to act, it may
appoint (or if it is unable so to act, it shall appoint)
or petition a court of competent jurisdiction for the
appointment of, a Fannie Mae or Freddie Mac approved
mortgage servicing institution with a net worth of at
least $10,000,000 to act as successor to the Master
Servicer under the Pooling and Servicing Agreement
(unless otherwise set forth in the Pooling and Servicing
Agreement). Pending such appointment, the Trustee is
obligated to act in such capacity. The Trustee and such
successor may agree upon the servicing compensation to be
paid, which in no event may be greater than the
compensation to the initial Master Servicer or the
Certificate Administrator under the Pooling and Servicing
Agreement.
No Certificateholder will have any right under a
Pooling and Servicing Agreement to institute any
proceeding with respect to such Pooling and Servicing
Agreement unless such holder previously has given to the
Trustee written notice of default and the continuance
thereof and unless the holders of Certificates of any
class evidencing not less than 25% of the aggregate
Percentage Interests constituting such class have made
written request upon the Trustee to institute such
proceeding in its own name as Trustee thereunder and have
offered to the Trustee reasonable indemnity and the
Trustee for 60 days after receipt of such request and
indemnity has neglected or refused to institute any such
proceeding. However, the Trustee will be under no
obligation to exercise any of the trusts or powers vested
in it by the Pooling and Servicing Agreement or to
institute, conduct or defend any litigation thereunder or
in relation thereto at the request, order or direction of
any of the holders of Certificates covered by such
Pooling and Servicing Agreement, unless such
Certificateholders have offered to the Trustee reasonable
security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby.
Amendment
Each Pooling and Servicing Agreement may be amended
by the Company, the Master Servicer, the Certificate
Administrator or any Servicer, as applicable, and the
Trustee, without the consent of the related
Certificateholders: (i) to cure any ambiguity; (ii) to
correct or supplement any provision therein which may be
inconsistent with any other provision therein or to
correct any error; (iii) to change the timing and/or
nature of deposits in the Custodial Account or the
Certificate Account or to change the name in which the
Custodial Account is maintained (except that (a) deposits
to the Certificate Account may not occur later than the
related Distribution Date, (b) such change may not
adversely affect in any material respect the interests of
any Certificateholder, as evidenced by an opinion of
counsel, and (c) such change may not adversely affect the
then-current rating of any rated classes of Certificates,
as evidenced by a letter from each applicable Rating
Agency); (iv) if a REMIC election has been made with
respect to the related Trust Fund, to modify, eliminate
or add to any of its provisions (a) to the extent
necessary to maintain the qualification of the Trust Fund
as a REMIC or to avoid or minimize the risk of imposition
of any tax on the related Trust Fund, provided that the
Trustee has received an opinion of counsel to the effect
that (1) such action is necessary or desirable to
maintain such qualification or to avoid or minimize such
risk and (2) such action will not adversely affect in any
material respect the interests of any related
Certificateholder or (b) to restrict the transfer of the
REMIC Residual Certificates, provided that the Company
has determined that such change would not adversely
affect the applicable ratings of any classes of the
Certificates, as evidenced by a letter from each
applicable Rating Agency, and that any such amendment
will not give rise to any tax with respect to the
transfer of the REMIC Residual Certificates to a
non-permitted transferee; or (v) to make any other
provisions with respect to matters or questions arising
under such Pooling and Servicing Agreement which are not
materially inconsistent with the provisions thereof, so
long as such action will not adversely affect in any
material respect the interests of any Certificateholder.
The Pooling and Servicing Agreement may also be
amended by the Company, the Master Servicer, the
Certificate Administrator or any Servicer, as applicable,
and the Trustee with the consent of the holders of
Certificates of each class affected thereby evidencing,
in each case, not less than 66% of the aggregate
Percentage Interests constituting such class for the
purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of such
Pooling and Servicing Agreement or of modifying in any
manner the rights of the related Certificateholders,
except that no such amendment may (i) reduce in any
manner the amount of, or delay the timing of, payments
received on Mortgage Collateral which are required to be
distributed on a Certificate of any class without the
consent of the holder of such Certificate or (ii) reduce
the percentage of Certificates of any class the holders
of which are required to consent to any such amendment
unless the holders of all Certificates of such class have
consented to the change in such percentage.
Notwithstanding the foregoing, if a REMIC election
has been made with respect to the related Trust Fund, the
Trustee will not be entitled to consent to any amendment
to a Pooling and Servicing Agreement without having first
received an opinion of counsel to the effect that such
amendment or the exercise of any power granted to the
Master Servicer, the Certificate Administrator, any
Servicer, the Company or the Trustee in accordance with
such amendment will not result in the imposition of a tax
on the related Trust Fund or cause such Trust Fund to
fail to qualify as a REMIC.
Termination; Retirement of Certificates
The obligations created by the Pooling and Servicing
Agreement for each series of Certificates (other than
certain limited payment and notice obligations of the
Trustee and the Company, respectively) will terminate
upon the payment to the related Certificateholders of all
amounts held in the Certificate Account or by the Master
Servicer or any Servicer and required to be paid to
Certificateholders following the earlier of (i) the final
payment or other liquidation or disposition (or any
advance with respect thereto) of the last item of
Mortgage Collateral subject thereto and all property
acquired upon foreclosure or deed in lieu of foreclosure
of any Mortgage Loan or Contract and (ii) the purchase by
the Master Servicer, the Certificate Administrator, a
Servicer or the Company or, if specified in the related
Prospectus Supplement, by the holder of the REMIC
Residual Certificates (see "Certain Federal Income Tax
Consequences" below) from the Trust Fund for such series
of all remaining Mortgage Collateral and all property
acquired in respect of such Mortgage Collateral. In
addition to the foregoing, the Master Servicer, the
Certificate Administrator or the Company may have the
option to purchase, in whole but not in part, the
Certificates specified in the related Prospectus
Supplement in the manner set forth in the related
Prospectus Supplement. Upon the purchase of such
Certificates or at any time thereafter, at the option of
the Master Servicer, the Certificate Administrator or the
Company, the Mortgage Collateral may be sold, thereby
effecting a retirement of the Certificates and the
termination of the Trust Fund, or the Certificates so
purchased may be held or resold by the Master Servicer,
the Certificate Administrator or the Company. Written
notice of termination of the Pooling and Servicing
Agreement will be given to each Certificateholder, and
the final distribution will be made only upon surrender
and cancellation of the Certificates at an office or
agency appointed by the Trustee which will be specified
in the notice of termination. If the Certificateholders
are permitted to terminate the trust under the applicable
Pooling and Servicing Agreement, a penalty may be imposed
upon the Certificateholders based upon the fee that would
be foregone by the Master Servicer, the Certificate
Administrator or a Servicer, as applicable, because of
such termination.
Any such purchase of Mortgage Collateral and
property acquired in respect of Mortgage Collateral
evidenced by a series of Certificates shall be made at
the option of the Master Servicer, the Certificate
Administrator, a Servicer, the Company or, if applicable,
the holder of the REMIC Residual Certificates at the
price specified in the related Prospectus Supplement.
The exercise of such right will effect early retirement
of the Certificates of that series, but the right of any
such entity to purchase the Mortgage Collateral and
related property will be subject to the criteria, and
will be at the price, set forth in the related Prospectus
Supplement. Such early termination may adversely affect
the yield to holders of certain classes of such
Certificates. If a REMIC election has been made, the
termination of the related Trust Fund will be effected in
a manner consistent with applicable federal income tax
regulations and its status as a REMIC.
The Trustee
The Trustee under each Pooling and Servicing
Agreement will be named in the related Prospectus
Supplement. The commercial bank or trust company serving
as Trustee may have normal banking relationships with the
Company and/or its affiliates, including Residential
Funding.
The Trustee may resign at any time, in which event
the Company will be obligated to appoint a successor
trustee. The Company may also remove the Trustee if the
Trustee ceases to be eligible to continue as such under
the Pooling and Servicing Agreement or if the Trustee
becomes insolvent. Upon becoming aware of such
circumstances, the Company will be obligated to appoint
a successor Trustee. The Trustee may also be removed at
any time by the holders of Certificates evidencing not
less than 51% of the aggregate Percentage Interests (or,
if so specified in the related Prospectus Supplement,
voting rights) in the related Trust Fund. Any
resignation or removal of the Trustee and appointment of
a successor Trustee will not become effective until
acceptance of the appointment by the successor Trustee.
YIELD CONSIDERATIONS
The yield to maturity of a Certificate will depend
on the price paid by the holder for such Certificate, the
Pass-Through Rate on any such Certificate entitled to
payments of interest (which Pass-Through Rate may vary if
so specified in the related Prospectus Supplement) and
the rate and timing of principal payments (including
prepayments, defaults, liquidations and repurchases) on
the Mortgage Collateral and the allocation thereof to
reduce the principal balance of such Certificate (or
notional amount thereof, if applicable) and other
factors.
The rate of defaults on the Mortgage Loans or
Contracts will affect the rate and timing of principal
prepayments on such Mortgage Collateral and, thus, the
yield on the Certificates. Defaults on the Mortgage
Loans or Contracts may lead to Realized Losses upon
foreclosure and liquidation. To the extent Realized
Losses are not covered by any credit enhancement, they
will be allocated to Certificates as described in the
related Prospectus Supplement and, accordingly, will
affect the yield on such Certificates. In general,
defaults on mortgage loans or manufactured housing
contracts are expected to occur with greater frequency in
their early years. The rate of default on refinance,
limited documentation or no documentation mortgage loans,
and on mortgage loans or manufactured housing contracts
with high Loan-to-Value Ratios, may be higher than for
other types of mortgage loans or manufactured housing
contracts. Likewise, the rate of default on mortgage
loans or manufactured housing contracts that have been
originated pursuant to lower than traditional
underwriting standards may be higher than those
originated pursuant to traditional standards. A Trust
Fund may include Mortgage Loans or Contracts that are one
month or more delinquent at the time of offering of the
related series of Certificates. In addition, the rate
and timing of prepayments, defaults and liquidations on
the Mortgage Loans or Contracts will be affected by the
general economic condition of the region of the country
or the locality in which the related Mortgaged Properties
are located. The risk of delinquencies and loss is
greater and prepayments are less likely in regions where
a weak or deteriorating economy exists, as may be
evidenced by, among other factors, increasing
unemployment or falling property values. In addition,
Manufactured Homes may decline in value even in areas
where real estate values generally have not declined.
Each Prospectus Supplement will highlight any material
characteristics of the Mortgage Collateral in the related
Trust Fund that may make such Mortgage Collateral more
susceptible to default.
To the extent that any document relating to a
Mortgage Loan or Contract is not in the possession of the
Trustee, such deficiency may make it difficult or
impossible to realize on the Mortgaged Property in the
event of foreclosure which will affect the amount of
Liquidation Proceeds received by the Trustee. See
"Description of the Certificates--Assignment of Mortgage
Loans" and "--Assignment of Contracts."
The amount of interest payments with respect to each
item of Mortgage Collateral distributed (or accrued in
the case of Deferred Interest or Accrual Certificates)
monthly to holders of a class of Certificates entitled to
payments of interest will be calculated on the basis of
such class's specified percentage of each such payment of
interest (or accrual in the case of Accrual Certificates)
and will be expressed as a fixed, adjustable or variable
Pass-Through Rate payable on the outstanding principal
balance or notional amount of such Certificate, or any
combination of such Pass-Through Rates, calculated as
described herein and in the related Prospectus
Supplement. Holders of Strip Certificates or a class of
Certificates having a Pass-Through Rate that varies based
on the weighted average interest rate of the underlying
Mortgage Collateral will be affected by disproportionate
prepayments and repurchases of Mortgage Collateral having
higher net interest rates or higher rates applicable to
the Strip Certificates, as applicable.
The effective yield to maturity to each holder of
Certificates entitled to payments of interest will be
below that otherwise produced by the applicable
Pass-Through Rate and purchase price of such Certificate
because, while interest will accrue on each Mortgage Loan
or Contract from the first day of each month, the
distribution of such interest will be made on the 25th
day (or, if such day is not a business day, the next
succeeding business day) of the month following the month
of accrual or, in the case of a Trust Fund including
Agency Certificates, such other day that is specified in
the related Prospectus Supplement.
A class of Certificates may be entitled to payments
of interest at a fixed, variable or adjustable
Pass-Through Rate, or any combination of such Pass-
Through Rates, as specified in the related Prospectus
Supplement. A variable Pass-Through Rate may be
calculated based on the weighted average of the Mortgage
Rates (net of Servicing Fees and any Certificate
Administrator fee or Spread (each, a "Net Mortgage
Rate")) of the related Mortgage Collateral for the month
preceding the Distribution Date if so specified in the
related Prospectus Supplement. The aggregate payments of
interest on a class of Certificates, and the yield to
maturity thereon, will be affected by the rate of payment
of principal on the Certificates (or the rate of
reduction in the notional amount of Certificates entitled
to payments of interest only) and, in the case of
Certificates evidencing interests in ARM Loans, by
changes in the Net Mortgage Rates on the ARM Loans. See
"Maturity and Prepayment Considerations" below. The
yield on the Certificates will also be affected by
liquidations of Mortgage Loans or Contracts following
Mortgagor defaults and by purchases of Mortgage
Collateral in the event of breaches of representations
made in respect of such Mortgage Collateral by the
Company, the Master Servicer and others, or conversions
of ARM Loans to a fixed interest rate. See "The Trust
Funds--Representations with Respect to Mortgage
Collateral."
In general, if a Certificate is purchased at a
premium over its face amount and payments of principal on
the related Mortgage Collateral occur at a rate faster
than anticipated at the time of purchase, the purchaser's
actual yield to maturity will be lower than that assumed
at the time of purchase. Conversely, if a class of
Certificates is purchased at a discount from its face
amount and payments of principal on the related Mortgage
Collateral occur at a rate slower than that assumed at
the time of purchase, the purchaser's actual yield to
maturity will be lower than that originally anticipated.
If Strip Certificates are issued evidencing a right to
payments of interest only or disproportionate payments of
interest, a faster than expected rate of principal
prepayments on the Mortgage Collateral will negatively
affect the total return to investors in any such
Certificates. If Strip Certificates are issued
evidencing a right to payments of principal only or
disproportionate payments of principal, a slower than
expected rate of principal payments on the Mortgage
Collateral could negatively affect the anticipated yield
on such Strip Certificates. If Certificates with either
of the foregoing characteristics are issued, the total
return to investors of such Certificates will be
extremely sensitive to such prepayments. In addition,
the total return to investors of Certificates evidencing
a right to distributions of interest at a rate that is
based on the weighted average Net Mortgage Rate of the
Mortgage Collateral from time to time will be adversely
affected by principal prepayments on Mortgage Collateral
with Mortgage Rates higher than the weighted average
Mortgage Rate on the Mortgage Collateral. In general,
mortgage loans or manufactured housing contracts with
higher Mortgage Rates prepay at a faster rate than
mortgage loans or manufactured housing contracts with
lower Mortgage Rates. The yield on a class of Strip
Certificates that is entitled to receive a portion of
principal or interest from each item of Mortgage
Collateral in a Trust Fund will be affected by any losses
on the Mortgage Collateral because of the affect on
timing and amount of payments. In certain circumstances,
rapid prepayments may result in the failure of such
holders to recoup their original investment. In
addition, the yield to maturity on certain other types of
classes of Certificates, including Accrual Certificates,
Certificates with a Pass-Through Rate that fluctuates
inversely with or at a multiple of an index or certain
other classes in a series including more than one class
of Certificates, may be relatively more sensitive to the
rate of prepayment on the related Mortgage Collateral
than other classes of Certificates.
The timing of changes in the rate of principal
payments on or repurchases of the Mortgage Collateral may
significantly affect an investor's actual yield to
maturity, even if the average rate of principal payments
experienced over time is consistent with an investor's
expectation. In general, the earlier a prepayment of
principal on the Mortgage Collateral or a repurchase
thereof, the greater will be the effect on an investor's
yield to maturity. As a result, the effect on an
investor's yield of principal payments and repurchases
occurring at a rate higher (or lower) than the rate
anticipated by the investor during the period immediately
following the issuance of a series of Certificates would
not be fully offset by a subsequent like reduction (or
increase) in the rate of principal payments.
Unless otherwise specified in the related Prospectus
Supplement, prepayments in full or final liquidations
will reduce the amount of interest distributed in the
following month to holders of Certificates entitled to
distributions of interest because the resulting
Prepayment Interest Shortfall will not be covered by
Compensating Interest. See "Description of the
Certificates--Prepayment Interest Shortfalls". Unless
otherwise specified in the related Prospectus Supplement,
a partial prepayment of principal is applied so as to
reduce the outstanding principal balance of the related
Mortgage Loan or Contract as of the first day of the
month in which such partial prepayment is received. As
a result, unless otherwise specified in the related
Prospectus Supplement, the effect of a partial prepayment
on a Mortgage Loan or Contract will be to reduce the
amount of interest distributed to holders of Certificates
in the month following the receipt of such partial
prepayment by an amount equal to one month's interest at
the applicable Pass-Through Rate or Net Mortgage Rate, as
the case may be, on the prepaid amount. See "Description
of the Certificates--Prepayment Interest Shortfalls."
Neither full or partial principal prepayments nor
Liquidation Proceeds will be distributed until the
Distribution Date in the month following receipt. See
"Maturity and Prepayment Considerations."
With respect to certain ARM Loans, the Mortgage Rate
at origination may be below the rate that would result
from the sum of the then-applicable Index and Gross
Margin. Under the applicable underwriting standards, the
Mortgagor under each Mortgage Loan or Contract generally
will be qualified on the basis of the Mortgage Rate in
effect at origination and not the higher rate that would
be produced by the sum of the Index and Gross Margin.
The repayment of any such Mortgage Loan or Contract may
thus be dependent on the ability of the Mortgagor to make
larger level monthly payments following the adjustment of
the Mortgage Rate. In addition, the periodic increase in
the amount paid by the Mortgagor of a Buy-Down Loan
during or at the end of the applicable Buy-Down Period
may create a greater financial burden for the Mortgagor,
who might not have otherwise qualified for a mortgage
under the applicable underwriting guidelines, and may
accordingly increase the risk of default with respect to
the related Mortgage Loan.
If so specified in the related Prospectus
Supplement, a Trust Fund may contain Neg-Am ARM Loans
with fluctuating Mortgage Rates that adjust more
frequently than the monthly payment with respect to such
Mortgage Loans or Contracts. During a period of rising
interest rates as well as immediately after origination,
the amount of interest accruing on the principal balance
of such Mortgage Loans may exceed the amount of the
minimum scheduled monthly payment thereon. As a result,
a portion of the accrued interest on Neg-Am ARM Loans may
become Deferred Interest which will be added to the
principal balance thereof and will bear interest at the
applicable Mortgage Rate. The addition of any such
Deferred Interest to the principal balance of any related
class of Certificates will lengthen the weighted average
life thereof and may adversely affect yield to holders
thereof. In addition, with respect to certain Neg-Am ARM
Loans, during a period of declining interest rates, it
might be expected that each minimum scheduled monthly
payment on such a Mortgage Loan would exceed the amount
of scheduled principal and accrued interest on the
principal balance thereof, and since such excess will be
applied to reduce the principal balance of the related
class or classes of Certificates, the weighted average
life of such Certificates will be reduced and may
adversely affect yield to holders thereof.
If so specified in the related Prospectus
Supplement, a Trust Fund may contain GPM Loans or Buy-
Down Loans which have monthly payments that increase
during the first few years following origination.
Mortgagors generally will be qualified for such loans on
the basis of the initial monthly payment. To the extent
that the related Mortgagor's income does not increase at
the same rate as the monthly payment, such a loan may be
more likely to default than a mortgage loan with level
monthly payments.
If so specified in the related Prospectus
Supplement, a Trust Fund may contain Balloon Loans which
require a single payment of a Balloon Amount. The
payment of Balloon Amounts may result in a lower yield on
Certificates than would be the case if all such Mortgage
Collateral was fully-amortizing because the maturity of
a Balloon Loan occurs earlier than that for a fully-
amortizing Mortgage Loan due to the payment of a Balloon
Amount. Balloon Loans also pose a greater risk of
default than fully-amortizing Mortgage Loans because
Mortgagors are required to pay the Balloon Amount upon
maturity. A Mortgagor's ability to pay a Balloon Amount
may depend on its ability to refinance the related
Mortgaged Property or other factors.
If credit enhancement for a series of Certificates
is provided by a Letter of Credit, insurance policy or
bond that is issued or guaranteed by an entity that
suffers financial difficulty, such credit enhancement may
not provide the level of support that was anticipated at
the time an investor purchased its Certificate. In the
event of a default under the terms of such a Letter of
Credit, insurance policy or bond, any Realized Losses on
the Mortgage Collateral not covered by such credit
enhancement will be applied to a series of Certificates
in the manner described in the related Prospectus
Supplement and may reduce an investor's anticipated yield
to maturity.
The related Prospectus Supplement may set forth
other factors concerning the Mortgage Collateral securing
a series of Certificates or the structure of such series
that will affect the yield on such Certificates.
MATURITY AND PREPAYMENT CONSIDERATIONS
As indicated above under "The Trust Funds," the
original terms to maturity of the Mortgage Collateral in
a given Trust Fund will vary depending upon the type of
Mortgage Collateral included in such Trust Fund. The
Prospectus Supplement for a series of Certificates will
contain information with respect to the types and
maturities of the Mortgage Collateral in the related
Trust Fund. The prepayment experience, the timing and
rate of repurchases and the timing and amount of
liquidations with respect to the related Mortgage Loans
or Contracts will affect the life and yield of the
related series of Certificates.
Prepayments on mortgage loans and manufactured
housing contracts are commonly measured relative to a
prepayment standard or model. The Prospectus Supplement
for each series of Certificates may describe one or more
such prepayment standards or models and may contain
tables setting forth the projected yields to maturity on
each class of Certificates or the weighted average life
of each class of Certificates and the percentage of the
original principal amount of each class of Certificates
of such series that would be outstanding on specified
payment dates for such series based on the assumptions
stated in such Prospectus Supplement, including
assumptions that prepayments on the Mortgage Collateral
are made at rates corresponding to various percentages of
the prepayment standard or model specified in the related
Prospectus Supplement.
There is no assurance that prepayment of the
Mortgage Collateral underlying a series of Certificates
will conform to any level of the prepayment standard or
model specified in the related Prospectus Supplement. A
number of factors, including homeowner mobility, economic
conditions, changes in mortgagors' housing needs, job
transfers, unemployment, mortgagors' net equity in the
properties securing the mortgages, servicing decisions,
enforceability of due-on-sale clauses, mortgage market
interest rates, mortgage recording taxes, solicitations
and the availability of mortgage funds, may affect
prepayment experience. The rate of prepayment with
respect to conventional fixed-rate mortgage loans and
contracts has fluctuated significantly in recent years.
In general, however, if prevailing interest rates fall
significantly below the Mortgage Rates on the Mortgage
Loans or Contracts underlying a series of Certificates,
the prepayment rate of such Mortgage Loans or Contracts
is likely to be higher than if prevailing rates remain at
or above the rates borne by such Mortgage Loans or
Contracts. It should be noted that Certificates of a
certain series may evidence an interest in Mortgage Loans
or Contracts with different Mortgage Rates. Accordingly,
the prepayment experience of these Certificates will to
some extent be a function of the range of interest rates
of such Mortgage Loans or Contracts.
Unless otherwise specified in the related Prospectus
Supplement, all of the Mortgage Loans or Contracts may be
prepaid without penalty in full or in part at any time.
The terms of the related Pooling and Servicing Agreement
generally will require the Servicer or Master Servicer,
as the case may be, to enforce any due-on-sale clause to
the extent it has knowledge of the conveyance or the
proposed conveyance of the underlying Mortgaged Property
and to the extent permitted by applicable law, except
that any enforcement action that would impair or threaten
to impair any recovery under any related insurance policy
will not be required or permitted. See "Description of
the Certificates--Servicing and Administration of Mortgage
Collateral--Enforcement of `Due-on-Sale' Clauses" and
"Certain Legal Aspects of Mortgage Loans and
Contracts-The Mortgage Loans--Enforceability of Certain
Provisions" and "--The Contracts" for a description of
certain provisions of each Pooling and Servicing
Agreement and certain legal aspects that may affect the
prepayment rate of Mortgage Loans or Contracts.
Certain types of Mortgage Collateral included in a
Trust Fund may have characteristics that make it more
likely to default than collateral provided for mortgage
pass-through certificates from other mortgage purchase
programs. The Company anticipates including "limited
documentation" and "no documentation" Mortgage Loans and
Contracts, as well as Mortgage Loans and Contracts that
were originated in accordance with lower underwriting
standards and which may have been made to Mortgagors with
imperfect credit histories and prior bankruptcies.
Likewise, a Trust Fund may include Mortgage Loans or
Contracts that are one month or more delinquent at the
time of offering of the related series of Certificates.
Such Mortgage Collateral may be susceptible to a greater
risk of default and liquidation than might otherwise be
expected by investors in the related Certificates.
The Master Servicer, a Servicer, a Sub-Servicer or
a Mortgage Collateral Seller may refinance a Mortgage
Loan or Contract in a Trust Fund by accepting full
prepayment thereof and making a new loan secured by a
mortgage on the same property. A Mortgagor may be
legally entitled to require the Master Servicer,
Servicer, Sub-Servicer or Mortgage Collateral Seller, as
applicable, to allow such refinancing. Any such
refinancing will have the same effect on the
Certificateholders as a prepayment in full of the
refinanced Mortgage Loan or Contract, thereby affecting
the yield to Certificateholders.
There are no uniform statistics compiled for
prepayments of contracts relating to Manufactured Homes.
Prepayments on manufactured housing contracts may be
influenced by a variety of economic, geographic, social
and other facts, including repossessions, aging,
seasonality and interest rate fluctuations. Other
factors affecting prepayment of manufactured housing
contracts include changes in housing needs, job
transfers, unemployment and servicing decisions. An
investment in Certificates evidencing interests in
Contracts may be affected by, among other things, a
downturn in regional or local economic conditions. These
regional or local economic conditions are often volatile,
and historically have affected the delinquency, loan loss
and repossession experience of the Contracts. To the
extent that losses on the Contracts are not covered by
any credit enhancement, holders of the Certificates of a
series evidencing interests in such Contracts will bear
all risk of loss resulting from default by Mortgagors and
will have to look primarily to the value of the
Manufactured Homes, which generally depreciate in value,
for recovery of the outstanding principal and unpaid
interest of the defaulted Contracts. See "The Trust
Funds-The Contracts."
While most manufactured housing contracts will
contain "due-on-sale" provisions permitting the holder of
the contract to accelerate the maturity of the contract
upon conveyance by the Mortgagor, the Master Servicer,
Servicer or Sub-Servicer, as applicable, may permit
proposed assumptions of contracts where the proposed
buyer of the Manufactured Home meets the underwriting
standards described above. Such assumption would have
the effect of extending the average life of the contract.
FHA Loans, FHA Contracts, VA Loans and VA Contracts are
not permitted to contain "due on sale" clauses, and are
freely assumable.
Although the Mortgage Rates on ARM Loans will be
subject to periodic adjustments, such adjustments, unless
otherwise specified in the related Prospectus Supplement,
generally will (i) not increase or decrease such Mortgage
Rates by more than a fixed percentage amount on each
adjustment date, (ii) not increase such Mortgage Rates
over a fixed percentage amount during the life of any ARM
Loan and (iii) be based on an index (which may not rise
and fall consistently with mortgage interest rates) plus
the related Gross Margin (which may be different from
margins being used at the time for newly originated
adjustable rate mortgage loans). As a result, the
Mortgage Rates on the ARM Loans in a Trust Fund at any
time may not equal the prevailing rates for similar,
newly originated adjustable rate mortgage loans. In
certain rate environments, the prevailing rates on
fixed-rate mortgage loans may be sufficiently low in
relation to the then-current Mortgage Rates on ARM Loans
that the rate of prepayment may increase as a result of
refinancings. There can be no certainty as to the rate
of prepayments on the Mortgage Collateral during any
period or over the life of any series of Certificates.
With respect to Balloon Loans, payment of the
Balloon Amount (which, based on the amortization schedule
of such Mortgage Loans, is expected to be a substantial
amount) will generally depend on the Mortgagor's ability
to obtain refinancing of such a Mortgage Loan or to sell
the Mortgaged Property prior to the maturity of the
Balloon Loan. The ability to obtain refinancing will
depend on a number of factors prevailing at the time
refinancing or sale is required, including, without
limitation, real estate values, the Mortgagor's financial
situation, prevailing mortgage loan interest rates, the
Mortgagor's equity in the related Mortgaged Property, tax
laws and prevailing general economic conditions. Unless
otherwise specified in the related Prospectus Supplement,
none of the Company, the Master Servicer, a Servicer, a
Sub-Servicer, a Mortgage Collateral Seller nor any of
their affiliates will be obligated to refinance or
repurchase any Mortgage Loan or to sell the Mortgaged
Property.
An ARM Loan is assumable under certain conditions
if the proposed transferee of the related Mortgaged
Property establishes its ability to repay the Mortgage
Loan and, in the reasonable judgment of the Master
Servicer or the related Sub-Servicer, the security for
the ARM Loan would not be impaired by the assumption.
The extent to which ARM Loans are assumed by purchasers
of the Mortgaged Properties rather than prepaid by the
related Mortgagors in connection with the sales of the
Mortgaged Properties will affect the weighted average
life of the related series of Certificates. See
"Description of the Certificates" and "Certain Legal
Aspects of Mortgage Loans and Contracts."
No assurance can be given that the value of the
Mortgaged Property securing a Mortgage Loan or Contract
has remained or will remain at the level existing on the
date of origination. If the residential real estate
market should experience an overall decline in property
values such that the outstanding balances of the Mortgage
Loans or Contracts and any secondary financing on the
Mortgaged Properties in a particular Mortgage Pool or
Contract Pool become equal to or greater than the value
of the Mortgaged Properties, the actual rates of
delinquencies, foreclosures and losses could be higher
than those now generally experienced in the mortgage
lending industry. In addition, the value of property
securing Cooperative Loans and the delinquency rates with
respect to Cooperative Loans could be adversely affected
if the current favorable tax treatment of cooperative
tenant stockholders were to become less favorable. See
"Certain Legal Aspects of Mortgage Loans and Contracts."
To the extent that losses resulting from
delinquencies, losses and foreclosures or repossession of
Mortgaged Property with respect to Mortgage Loans or
Contracts included in a Trust Fund for a series of
Certificates are not covered by the methods of credit
enhancement described herein or in the related Prospectus
Supplement, such losses will be borne by holders of the
Certificates of such series. Even where credit
enhancement covers all Realized Losses resulting from
delinquency and foreclosure or repossession, the effect
of foreclosures and repossessions may be to increase
prepayment experience on the Mortgage Collateral, thus
reducing average weighted life and affecting yield to
maturity. See "Yield Considerations."
Under certain circumstances, the Master Servicer, a
Servicer, the Company or, if specified in the related
Prospectus Supplement, the holders of the REMIC Residual
Certificates may have the option to purchase the Mortgage
Loans in a Trust Fund. See "The Pooling and Servicing
Agreement--Termination; Retirement of Certificates." Any
such repurchase will shorten the weighted average lives
of the related Certificates.
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS AND CONTRACTS
The following discussion contains summaries of
certain legal aspects of mortgage loans and manufactured
housing contracts that are general in nature. Because
such legal aspects are governed in part by state law
(which laws may differ substantially from state to
state), the summaries do not purport to be complete, to
reflect the laws of any particular state or to encompass
the laws of all states in which the Mortgaged Properties
may be situated. The summaries are qualified in their
entirety by reference to the applicable federal and state
laws governing the Mortgage Loans or Contracts.
The Mortgage Loans
General
The Mortgage Loans (other than Cooperative Loans)
will be secured by either deeds of trust or mortgages,
depending upon the prevailing practice in the state in
which the related Mortgaged Property is located. In some
states, a mortgage or deed of trust creates a lien upon
the real property encumbered by the mortgage. In other
states, the mortgage or deed of trust conveys legal title
to the property to the mortgagee subject to a condition
subsequent (i.e., the payment of the indebtedness secured
thereby). It is not prior to the lien for real estate
taxes and assessments and other charges imposed under
governmental police powers. Priority with respect to
such instruments depends on their terms and in some cases
on the terms of separate subordination or inter-creditor
agreements, and generally on the order of recordation of
the mortgage in the appropriate recording office. There
are two parties to a mortgage, the mortgagor, who is the
borrower and homeowner, and the mortgagee, who is the
lender. Under the mortgage instrument, the mortgagor
delivers to the mortgagee a note or bond and the
mortgage. In the case of a land trust, there are three
parties because title to the property is held by a land
trustee under a land trust agreement of which the
borrower is the beneficiary; at origination of a mortgage
loan, the borrower executes a separate undertaking to
make payments on the mortgage note. Although a deed of
trust is similar to a mortgage, a deed of trust has three
parties: the trustor, who is the borrower/homeowner; the
beneficiary, who is the lender; and a third-party grantee
called the trustee. Under a deed of trust, the borrower
grants the property, irrevocably until the debt is paid,
in trust, generally with a power of sale, to the trustee
to secure payment of the obligation. The trustee's
authority under a deed of trust and the mortgagee's
authority under a mortgage are governed by the law of the
state in which the real property is located, the express
provisions of the deed of trust or mortgage and, in
certain deed of trust transactions, the directions of the
beneficiary.
Cooperative Loans
If specified in the Prospectus Supplement relating
to a series of Certificates, the Mortgage Loans may
include Cooperative Loans. Each debt instrument (a
"Cooperative Note") evidencing a Cooperative Loan will be
secured by a security interest in shares issued by a
related cooperative housing corporation, which is a
private corporation entitled to be treated as a housing
cooperative under federal tax law, and in the related
proprietary lease or occupancy agreement granting
exclusive rights to occupy a specific dwelling unit in
the cooperative's building. The security agreement will
create a lien upon, or grant a title interest in, the
shares in the cooperative's building, the priority of
which will depend on the terms of the particular security
agreement as well as the order of recordation of the
agreement (or financing statements related thereto) in
the appropriate recording office.
Unless otherwise specified in the related Prospectus
Supplement, all cooperative apartments relating to the
Cooperative Loans are located in the State of New York.
Each cooperative owns in fee or has a leasehold interest
in all the real property and owns in fee or leases the
building and all separate dwelling units therein. The
cooperative is directly responsible for property
management and, in most cases, payment of real estate
taxes, other governmental impositions and hazard and
liability insurance. If there is a blanket mortgage (or
mortgages) on the cooperative apartment building or
underlying land, as is generally the case, or an
underlying lease of the land, as is the case in some
instances, the cooperative housing corporation, as
property mortgagor or lessee, as the case may be, is also
responsible for fulfilling such mortgage or rental
obligations. A blanket mortgage is ordinarily incurred
by the cooperative in connection with either the
construction or purchase of the cooperative's apartment
building or the obtaining of capital by the cooperative.
The interest of the occupant under proprietary leases or
occupancy agreements as to which that cooperative is the
landlord is generally subordinate to the interest of the
holder of a blanket mortgage and to the interest of the
holder of a land lease. If the cooperative is unable to
meet the payment obligations (i) arising under a blanket
mortgage, the mortgagee holding a blanket mortgage could
foreclose on that mortgage and terminate all subordinate
proprietary leases and occupancy agreements or (ii)
arising under its land lease, the holder of the
landlord's interest under the land lease could terminate
it and all subordinate proprietary leases and occupancy
agreements. In addition, a blanket mortgage on a
cooperative may provide financing in the form of a
mortgage that does not fully amortize, with a significant
portion of principal being due in one final payment at
maturity. The inability of the cooperative to refinance
a mortgage and its consequent inability to make such
final payment could lead to foreclosure by the mortgagee.
Similarly, a land lease has an expiration date and the
inability of the cooperative to extend its term or, in
the alternative, to purchase the land, could lead to
termination of the cooperative's interest in the property
and termination of all proprietary leases and occupancy
agreements. In either event, a foreclosure by the holder
of a blanket mortgage or the termination of the
underlying lease could eliminate or significantly
diminish the value of any collateral held by the lender
who financed the purchase by an individual
tenant-stockholder of cooperative shares or, in the case
of the Mortgage Loans, the collateral securing the
Cooperative Loans.
Each cooperative is owned by tenant-stockholders
who, through ownership of stock or shares in the
corporation, receive proprietary leases or occupancy
agreements which confer exclusive rights to occupy
specific units. Generally, a tenant-stockholder of a
cooperative must make a monthly payment to the
cooperative representing such tenant-stockholder's pro
rata share of the cooperative's payments for its blanket
mortgage, real property taxes, maintenance expenses and
other capital or ordinary expenses. An ownership
interest in a cooperative (which is accompanied by
occupancy rights to the related dwelling unit) may be
financed through a Cooperative Loan evidenced by a
Cooperative Note and secured by an assignment of and a
security interest in the occupancy agreement or
proprietary lease and a security interest in the related
cooperative shares. The lender generally takes
possession of the share certificate and a counterpart of
the proprietary lease or occupancy agreement and a
financing statement covering the proprietary lease or
occupancy agreement and the cooperative shares is filed
in the appropriate state and local offices to perfect the
lender's interest in its collateral. Subject to the
limitations discussed below, upon default of the
tenant-stockholder, the lender may sue for judgment on
the Cooperative Note, dispose of the collateral at a
public or private sale or otherwise proceed against the
collateral or tenant-stockholder as an individual as
provided in the security agreement covering the
assignment of the proprietary lease or occupancy
agreement and the pledge of cooperative shares. See
"--Foreclosure on Shares of Cooperatives" below.
Foreclosure on Mortgage Loans
Although a deed of trust may also be foreclosed by
judicial action, foreclosure of a deed of trust is
generally accomplished by a non-judicial trustee's sale
under a specific provision in the deed of trust which
authorizes the trustee to sell the property upon any
default by the borrower under the terms of the note or
deed of trust. In addition to any notice requirements
contained in a deed of trust, in some states, the trustee
must record a notice of default and send a copy to the
borrower/trustor and to any person who has recorded a
request for a copy of notice of default and notice of
sale. In addition, in some states, the trustee must
provide notice to any other individual having an interest
of record in the real property, including any junior
lienholders. If the deed of trust is not reinstated
within a specified period, a notice of sale must be
posted in a public place and, in most states, published
for a specific period of time in one or more newspapers.
In addition, some states' laws require that a copy of the
notice of sale be posted on the property and sent to all
parties having an interest of record in the real
property.
Foreclosure of a mortgage generally is accomplished
by judicial action. Generally, the action is initiated
by the service of legal pleadings upon all parties having
an interest of record in the real property. Delays in
completion of the foreclosure may occasionally result
from difficulties in locating necessary parties. If the
mortgagee's right to foreclose is contested, the legal
proceedings necessary to resolve the issue can be
time-consuming.
In some states, the borrower-trustor has the right
to reinstate the loan at any time following default until
shortly before the trustee's sale. In general, in such
states, the borrower, or any other person having a junior
encumbrance on the real estate, may, during a
reinstatement period, cure the default by paying the
entire amount in arrears plus the costs and expenses
incurred in enforcing the obligation.
In the case of foreclosure under either a mortgage
or a deed of trust, the sale by the referee or other
designated officer or by the trustee is a public sale.
However, because of the difficulty a potential buyer at
the sale would have in determining the exact status of
title and because the physical condition of the property
may have deteriorated during the foreclosure proceedings,
it is uncommon for a third party to purchase the property
at a foreclosure sale. Rather, it is common for the
lender to purchase the property from the trustee or
referee for a credit bid less than or equal to the unpaid
principal amount of the mortgage or deed of trust,
accrued and unpaid interest and the expense of
foreclosure. Generally, state law controls the amount of
foreclosure costs and expenses, including attorneys'
fees, which may be recovered by a lender. Thereafter,
subject to the right of the borrower in some states to
remain in possession during the redemption period, the
lender will assume the burdens of ownership, including
obtaining hazard insurance and making such repairs at its
own expense as are necessary to render the property
suitable for sale. Generally, the lender will obtain the
services of a real estate broker and pay the broker's
commission in connection with the sale of the property.
Depending upon market conditions, the ultimate proceeds
of the sale of the property may not equal the lender's
investment in the property and, in some states, the
lender may be entitled to a deficiency judgment. Any
loss may be reduced by the receipt of any mortgage
insurance proceeds or other forms of credit enhancement
for a series of Certificates. See "Description of Credit
Enhancement."
Foreclosure on Shares of Cooperatives
The cooperative shares owned by the tenant-
stockholder, together with the rights of the tenant-
stockholder under the proprietary lease or occupancy
agreement, are pledged to the lender and are, in almost
all cases, subject to restrictions on transfer as set
forth in the cooperative's certificate of incorporation
and by-laws, as well as in the proprietary lease or
occupancy agreement. The proprietary lease or occupancy
agreement, even while pledged, may be cancelled by the
cooperative for failure by the tenant stockholder to pay
rent or other obligations or charges owed by such tenant-
stockholder, including mechanics' liens against the
cooperative apartment building incurred by such
tenant-stockholder. Generally, rent and other
obligations and charges arising under a proprietary lease
or occupancy agreement which are owed to the cooperative
are made liens upon the shares to which the proprietary
lease or occupancy agreement relates. In addition, the
proprietary lease or occupancy agreement generally
permits the cooperative to terminate such lease or
agreement in the event the borrower defaults in the
performance of covenants thereunder. Typically, the
lender and the cooperative enter into a recognition
agreement which, together with any lender protection
provisions contained in the proprietary lease,
establishes the rights and obligations of both parties in
the event of a default by the tenant-stockholder on its
obligations under the proprietary lease or occupancy
agreement. A default by the tenant-stockholder under the
proprietary lease or occupancy agreement will usually
constitute a default under the security agreement between
the lender and the tenant-stockholder.
The recognition agreement generally provides that,
in the event that the tenant-stockholder has defaulted
under the proprietary lease or occupancy agreement, the
cooperative will take no action to terminate such lease
or agreement until the lender has been provided with
notice of and an opportunity to cure the default. The
recognition agreement typically provides that if the
proprietary lease or occupancy agreement is terminated,
the cooperative will recognize the lender's lien against
proceeds from a sale of the cooperative apartment,
subject, however, to the cooperative's right to sums due
under such proprietary lease or occupancy agreement or
which have become liens on the shares relating to the
proprietary lease or occupancy agreement. The total
amount owed to the cooperative by the tenant-stockholder,
which the lender generally cannot restrict and does not
monitor, could reduce the amount realized upon a sale of
the collateral below the outstanding principal balance of
the Cooperative Loan and accrued and unpaid interest
thereon.
Recognition agreements also generally provide that
in the event the lender succeeds to the tenant-
shareholder's shares and proprietary lease or occupancy
agreement as the result of realizing upon its collateral
for a Cooperative Loan, the lender must obtain the
approval or consent of the cooperative as required by the
proprietary lease before transferring the cooperative
shares or assigning the proprietary lease. Such approval
or consent is usually based on the prospective
purchaser's income and net worth, among other factors,
and may significantly reduce the number of potential
purchasers, which could limit the ability of the lender
to sell and realize upon the value of the collateral.
Generally, the lender is not limited in any rights it may
have to dispossess the tenant-stockholder.
The terms of the Cooperative Loans do not require
either the tenant-stockholder or the cooperative to
obtain title insurance of any type. Consequently, the
existence of any prior liens or other imperfections of
title to the building also may adversely affect the
marketability of the cooperative dwelling unit in the
event of foreclosure.
In New York, foreclosure on the cooperative shares
is accomplished by public sale in accordance with the
provisions of Article 9 of the New York Uniform
Commercial Code (the "UCC") and the security agreement
relating to those shares. Article 9 of the UCC requires
that a sale be conducted in a "commercially reasonable"
manner. Whether a sale has been conducted in a
"commercially reasonable" manner will depend on the facts
in each case. In determining commercial reasonableness,
a court will look to the notice given the debtor and the
method, manner, time, place and terms of the sale and the
sale price. Generally, a sale conducted according to the
usual practice of banks selling similar collateral in the
same area will be considered reasonably conducted.
Article 9 of the UCC provides that the proceeds of
the sale will be applied first to pay the costs and
expenses of the sale and then to satisfy the indebtedness
secured by the lender's security interest. The
recognition agreement, however, generally provides that
the lender's right to reimbursement is subject to the
right of the cooperative corporation to receive sums due
under the proprietary lease or occupancy agreement. If
there are proceeds remaining, the lender must account to
the tenant-stockholder for the surplus. Conversely, if
a portion of the indebtedness remains unpaid, the
tenant-stockholder is generally responsible for the
deficiency. See "--Anti-Deficiency Legislation and Other
Limitations on Lenders" below.
Rights of Redemption
In some states, after sale pursuant to a deed of
trust or foreclosure of a mortgage, the borrower and
foreclosed junior lienors or other parties are given a
statutory period (generally ranging from six months to
two years) in which to redeem the property from the
foreclosure sale. In some states, redemption may occur
only upon payment of the entire principal balance of the
loan, accrued interest and expenses of foreclosure. In
other states, redemption may be authorized if the former
borrower pays only a portion of the sums due. The effect
of a statutory right of redemption is to diminish the
ability of the lender to sell the foreclosed property.
The rights of redemption would defeat the title of any
purchaser subsequent to foreclosure or sale under a deed
of trust. Consequently, the practical effect of the
redemption right is to force the lender to maintain the
property and pay the expenses of ownership until the
redemption period has expired.
Anti-Deficiency Legislation and Other Limitations on
Lenders
Certain states have imposed statutory prohibitions
which limit the remedies of a beneficiary under a deed of
trust or a mortgagee under a mortgage. In some states
(including California), statutes limit the right of the
beneficiary or mortgagee to obtain a deficiency judgment
against the borrower following foreclosure. A deficiency
judgment is a personal judgment against the former
borrower equal in most cases to the difference between
the net amount realized upon the public sale of the real
property and the amount due to the lender. In the case
of a Mortgage Loan secured by a property owned by a trust
where the Mortgage Note is executed on behalf of the
trust, a deficiency judgment against the trust following
foreclosure or sale under a deed of trust, even if
obtainable under applicable law, may be of little value
to the mortgagee or beneficiary if there are no trust
assets against which such deficiency judgment may be
executed. Other statutes require the beneficiary or
mortgagee to exhaust the security afforded under a deed
of trust or mortgage by foreclosure in an attempt to
satisfy the full debt before bringing a personal action
against the borrower. In certain other states, the
lender has the option of bringing a personal action
against the borrower on the debt without first exhausting
such security; however, in some of these states, the
lender, following judgment on such personal action, may
be deemed to have elected a remedy and may be precluded
from exercising remedies with respect to the security.
Consequently, the practical effect of the election
requirement, in those states permitting such election, is
that lenders will usually proceed against the security
first rather than bringing a personal action against the
borrower. Finally, in certain other states, statutory
provisions limit any deficiency judgment against the
former borrower following a foreclosure to the excess of
the outstanding debt over the fair value of the property
at the time of the public sale. The purpose of these
statutes is generally to prevent a beneficiary or
mortgagee from obtaining a large deficiency judgment
against the former borrower as a result of low or no bids
at the judicial sale.
In the case of cooperative loans, lenders generally
realize on cooperative shares and the accompanying
proprietary lease or occupancy agreement given to secure
a cooperative loan under Article 9 of the UCC. Some
courts have interpreted Article 9 to prohibit or limit a
deficiency award in certain circumstances, including
circumstances where the disposition of the collateral was
not conducted in a commercially reasonable manner.
In addition to laws limiting or prohibiting
deficiency judgments, numerous other federal and state
statutory provisions, including the federal bankruptcy
laws and state laws affording relief to debtors, may
interfere with or affect the ability of the secured
mortgage lender to realize upon collateral or enforce a
deficiency judgment. For example, with respect to
federal bankruptcy law, a court having federal bankruptcy
jurisdiction may permit a debtor through its Chapter 11
or Chapter 13 rehabilitative plan to cure a monetary
default in respect of a mortgage loan on such debtor's
residence by paying arrearages within a reasonable time
period and reinstating the original mortgage loan payment
schedule, even though the lender accelerated the mortgage
loan and final judgment of foreclosure had been entered
in state court (provided no sale of the residence had yet
occurred) prior to the filing of the debtor's petition.
Some courts with federal bankruptcy jurisdiction have
approved plans, based on the particular facts of the
reorganization case, that effected the curing of a
mortgage loan default by paying arrearages over a number
of years.
Courts with federal bankruptcy jurisdiction have
also indicated that the terms of a mortgage loan secured
by property of the debtor may be modified. These courts
have allowed modifications that include reducing the
amount of each monthly payment, changing the rate of
interest, altering the repayment schedule, forgiving all
or a portion of the debt and reducing the lender's
security interest to the value of the residence, thus
leaving the lender a general unsecured creditor for the
difference between the value of the residence and the
outstanding balance of the loan. Generally, however, the
terms of a mortgage loan secured only by a mortgage on
real property that is the debtor's principal residence
may not be modified pursuant to a plan confirmed pursuant
to Chapter 13 except with respect to mortgage payment
arrearages, which may be cured within a reasonable time
period.
Certain tax liens arising under the Code may, in
certain circumstances, have priority over the lien of a
mortgage or deed of trust. In addition, substantive
requirements are imposed upon mortgage lenders in
connection with the origination and the servicing of
mortgage loans by numerous federal and some state
consumer protection laws. These laws include the federal
Truth-in-Lending Act, Real Estate Settlement Procedures
Act, Equal Credit Opportunity Act, Fair Credit Billing
Act, Fair Credit Reporting Act and related statutes.
These federal laws impose specific statutory liabilities
upon lenders who originate mortgage loans and who fail to
comply with the provisions of the law. In some cases,
this liability may affect assignees of the mortgage
loans.
Enforceability of Certain Provisions
Unless the Prospectus Supplement indicates
otherwise, the Mortgage Loans generally contain
due-on-sale clauses. These clauses permit the lender to
accelerate the maturity of the loan if the borrower
sells, transfers or conveys the property. The
enforceability of these clauses has been the subject of
legislation or litigation in many states, and in some
cases the enforceability of these clauses has been
limited or denied. However, the Garn-St Germain
Depository Institutions Act of 1982 (the "Garn-St Germain
Act"), preempts state constitutional, statutory and case
law that prohibit the enforcement of due-on-sale clauses
and permits lenders to enforce these clauses in
accordance with their terms, subject to certain limited
exceptions. The Garn-St Germain Act does "encourage"
lenders to permit assumption of loans at the original
rate of interest or at some other rate less than the
average of the original rate and the market rate.
The Garn-St Germain Act also sets forth nine
specific instances in which a mortgage lender covered by
the Garn-St Germain Act may not exercise a due-on-sale
clause, notwithstanding the fact that a transfer of the
property may have occurred. These include intra-family
transfers, certain transfers by operation of law, leases
of fewer than three years and the creation of a junior
encumbrance. Regulations promulgated under the Garn-St
Germain Act also prohibit the imposition of a prepayment
penalty upon the acceleration of a loan pursuant to a
due-on-sale clause.
The inability to enforce a due-on-sale clause may
result in a mortgage loan bearing an interest rate below
the current market rate being assumed by a new home buyer
rather than being paid off, which may have an impact upon
the average life of the Mortgage Loans and the number of
Mortgage Loans which may be outstanding until maturity.
Upon foreclosure, courts have imposed general
equitable principles. These equitable principles are
generally designed to relieve the borrower from the legal
effect of its defaults under the loan documents.
Examples of judicial remedies that have been fashioned
include judicial requirements that the lender undertake
affirmative and expensive actions to determine the causes
for the borrower's default and the likelihood that the
borrower will be able to reinstate the loan. In some
cases, courts have required that lenders reinstate loans
or recast payment schedules in order to accommodate
borrowers who are suffering from temporary financial
disability. In other cases, courts have limited the
right of the lender to foreclose if the default under the
mortgage instrument is not monetary, such as the borrower
failing to adequately maintain the property or the
borrower executing a second mortgage or deed of trust
affecting the property. Finally, some courts have been
faced with the issue of whether or not federal or state
constitutional provisions reflecting due process concerns
for adequate notice require that borrowers under deeds of
trust or mortgages receive notices in addition to the
statutorily prescribed minimum. For the most part, these
cases have upheld the notice provisions as being
reasonable or have found that the sale by a trustee under
a deed of trust, or under a mortgage having a power of
sale, does not involve sufficient state action to afford
constitutional protections to the borrower.
Applicability of Usury Laws
Title V of the Depository Institutions Deregulation
and Monetary Control Act of 1980 ("Title V"), provides
that state usury limitations shall not apply to certain
types of residential first mortgage loans originated by
certain lenders after March 31, 1980. A similar federal
statute was in effect with respect to mortgage loans made
during the first three months of 1980. The Office of
Thrift Supervision is authorized to issue rules and
regulations and to publish interpretations governing
implementation of Title V. The statute authorized any
state to impose interest rate limits by adopting, before
April 1, 1983, a law or constitutional provision which
expressly rejects application of the federal law. In
addition, even where Title V is not so rejected, any
state is authorized by the law to adopt a provision
limiting discount points or other charges on mortgage
loans covered by Title V. Certain states have taken
action to reimpose interest rate limits or to limit
discount points or other charges.
Unless otherwise set forth in the related Prospectus
Supplement, each Mortgage Collateral Seller, or another
specified party, will have represented that each Mortgage
Loan was originated in compliance with then applicable
state laws, including usury laws, in all material
respects. However, the Mortgage Rates on the Mortgage
Loans will be subject to applicable usury laws as in
effect from time to time.
Alternative Mortgage Instruments
Alternative mortgage instruments, including
adjustable rate mortgage loans and early ownership
mortgage loans, originated by non-federally chartered
lenders, have historically been subjected to a variety of
restrictions. Such restrictions differed from state to
state, resulting in difficulties in determining whether
a particular alternative mortgage instrument originated
by a state-chartered lender was in compliance with
applicable law. These difficulties were alleviated
substantially as a result of the enactment of Title VIII
of the Garn-St Germain Act ("Title VIII"). Title VIII
provides that, notwithstanding any state law to the
contrary, (i) state-chartered banks may originate
alternative mortgage instruments in accordance with
regulations promulgated by the Comptroller of the
Currency with respect to the origination of alternative
mortgage instruments by national banks, (ii)
state-chartered credit unions may originate alternative
mortgage instruments in accordance with regulations
promulgated by the National Credit Union Administration
with respect to origination of alternative mortgage
instruments by federal credit unions and (iii) all other
non-federally chartered housing creditors, including
state-chartered savings and loan associations,
state-chartered savings banks and mutual savings banks
and mortgage banking companies, may originate alternative
mortgage instruments in accordance with the regulations
promulgated by the Federal Home Loan Bank Board,
predecessor to the Office of Thrift Supervision, with
respect to origination of alternative mortgage
instruments by federal savings and loan associations.
Title VIII also provides that any state may reject
applicability of the provisions of Title VIII by
adopting, prior to October 15, 1985, a law or
constitutional provision expressly rejecting the
applicability of such provisions. Certain states have
taken such action.
The Contracts
General
A Contract evidences both (a) the obligation of the
Mortgagor to repay the loan evidenced thereby and (b) the
grant of a security interest in the Manufactured Home to
secure repayment of such loan. Certain aspects of both
features of the Contracts are described below.
Security Interests in Manufactured Homes
The law governing perfection of a security interest
in a Manufactured Homes varies from state to state.
Security interests in manufactured homes may be perfected
either by notation of the secured party's lien on the
certificate of title or by delivery of the required
documents and payments of a fee to the state motor
vehicle authority, depending on state law. In some non-
title states, perfection pursuant to the provisions of
the UCC is required. The lender, the Servicer or the
Master Servicer may effect such notation or delivery of
the required documents and fees, and obtain possession of
the certificate of title, as appropriate under the laws
of the state in which any Manufactured Home securing a
Contract is registered. In the event the Master
Servicer, the Servicer or the lender fails to effect such
notation or delivery, or files the security interest
under the wrong law (for example, under a motor vehicle
title statute rather than under the UCC, in a few
states), the Certificateholders may not have a first
priority security interest in the Manufactured Home
securing a Contract. As manufactured homes have become
larger and often have been attached to their sites
without any apparent intention to move them, courts in
many states have held that manufactured homes, under
certain circumstances, may become subject to real estate
title and recording laws. As a result, a security
interest in a manufactured home could be rendered
subordinate to the interests of other parties claiming an
interest in the home under applicable state real estate
law. In order to perfect a security interest in a
manufactured home under real estate laws, the holder of
the security interest must make a filing under the real
estate laws of the state where the manufactured home is
located. These filings must be made in the real estate
records office of the county where the manufactured home
is located. Unless otherwise provided in the related
Prospectus Supplement, substantially all of the Contracts
will contain provisions prohibiting the Mortgagor from
permanently attaching the Manufactured Home to its site.
So long as the Mortgagor does not violate this agreement
and a court does not hold that the Manufactured Home is
real property, a security interest in the Manufactured
Home will be governed by the certificate of title laws or
the UCC, and the notation of the security interest on the
certificate of title or the filing of a UCC financing
statement will be effective to maintain the priority of
the seller's security interest in the Manufactured Home.
If, however, a Manufactured Home is permanently attached
to its site or if a court determines that a Manufactured
Home is real property, other parties could obtain an
interest in the Manufactured Home which is prior to the
security interest originally retained by the Mortgage
Collateral Seller and transferred to the Company. In
certain cases, the Master Servicer or the Servicer, as
applicable, may be required to perfect a security
interest in the Manufactured Home under applicable real
estate laws. If such real estate filings are not
required and if any of the foregoing events were to
occur, the only recourse of the Certificateholders would
be against the Mortgage Collateral Seller pursuant to its
repurchase obligation for breach of representations or
warranties.
The Company will assign its security interests in
the Manufactured Homes to the Trustee on behalf of the
Certificateholders. See "Description of the
Certificates--Assignment of Contracts." Unless otherwise
specified in the related Prospectus Supplement, if a
Manufactured Home is governed by the applicable motor
vehicle laws of the relevant state neither the Company
nor the Trustee will amend the certificates of title to
identify the Trustee as the new secured party.
Accordingly, the Company or such other entity as may be
specified in the Prospectus Supplement will continue to
be named as the secured party on the certificates of
title relating to the Manufactured Homes. However, there
exists a risk that, in the absence of an amendment to the
certificate of title, such assignment of the security
interest may not be held effective against subsequent
purchasers of a Manufactured Home or subsequent lenders
who take a security interest in the Manufactured Home or
creditors of the assignor.
If the owner of a Manufactured Home moves it to a
state other than the state in which such Manufactured
Home initially is registered and if steps are not taken
to re-perfect the Trustee's security interest in such
state, the security interest in the Manufactured Home
will cease to be perfected. While in many circumstances
the Trustee would have the opportunity to re-perfect its
security interest in the Manufactured Home in the state
of relocation, there can be no assurance that the Trustee
will be able to do so.
When a Mortgagor under a Contract sells a
Manufactured Home, the Trustee, or the Servicer or the
Master Servicer on behalf of the Trustee, must surrender
possession of the certificate of title or will receive
notice as a result of its lien noted thereon and
accordingly will have an opportunity to require
satisfaction of the related before release of the lien.
Under the laws of most states, liens for repairs
performed on a Manufactured Home take priority over a
perfected security interest. The applicable Mortgage
Collateral Seller generally will represent that it has no
knowledge of any such liens with respect to any
Manufactured Home securing payment on any Contract.
However, such liens could arise at any time during the
term of a Contract. No notice will be given to the
Trustee or Certificateholders in the event such a lien
arises and such lien would not give rise to a repurchase
obligation on the part of the party specified in the
Pooling and Servicing Agreement.
To the extent that Manufactured Homes are not
treated as real property under applicable state law,
contracts generally are "chattel paper" as defined in the
UCC in effect in the states in which the Manufactured
Homes initially were registered. Pursuant to the UCC,
the sale of chattel paper is treated in a manner similar
to perfection of a security interest in chattel paper.
Under the Pooling and Servicing Agreement, the Master
Servicer or the Company, as the case may be, will
transfer physical possession of the Contracts to the
Trustee or its Custodian. In addition, the Master
Servicer will make an appropriate filing of a UCC-1
financing statement in the appropriate states to give
notice of the Trustee's ownership of the Contracts.
Unless otherwise specified in the related Prospectus
Supplement, the Contracts will not be stamped or marked
otherwise to reflect their assignment from the Company to
the Trustee. Therefore, if a subsequent purchaser were
able to take physical possession of the Contracts without
notice of such assignment, the Trustee's interest in the
Contracts could be defeated. To the extent that
Manufactured Homes are treated as real property under
applicable state law, Contracts will be treated in a
manner similar to that described above with regard to
Mortgage Loans. See "--The Mortgage Loans" above.
Enforcement of Security Interests in Manufactured
Homes
The Servicer or the Master Servicer on behalf of the
Trustee, to the extent required by the related Pooling
and Servicing Agreement, may take action to enforce the
Trustee's security interest with respect to Contracts in
default by repossession and sale of the Manufactured
Homes securing such defaulted Contracts. So long as the
Manufactured Home has not become subject to real estate
law, a creditor generally can repossess a Manufactured
Home securing a Contract by voluntary surrender, by
"self-help" repossession that is "peaceful" or, in the
absence of voluntary surrender and the ability to
repossess without breach of the peace, by judicial
process. The UCC and consumer protection laws in most
states place restrictions on repossession sales,
including requiring prior notice to the debtor and
commercial reasonableness in effecting such a sale. The
debtor may also have a right to redeem the Manufactured
Home at or before resale.
Certain statutory provisions, including federal and
state bankruptcy and insolvency laws and general
equitable principles, may limit or delay the ability of
a lender to repossess and resell collateral or enforce a
deficiency judgment. For a discussion of deficiency
judgments, see "--The Mortgage Loans--Anti-Deficiency
Legislation and Other Limitations on Lenders" above.
Consumer Protection Laws
If the transferor of a consumer credit contract is
also the seller of goods that give rise to the
transaction (and, in certain cases, related lenders and
assignees), the "Holder-in-Due-Course" rule of the
Federal Trade Commission is intended to defeat the
ability of such transferor to transfer such contract free
of notice of claims by the debtor thereunder. The effect
of this rule is to subject the assignee of such a
contract to all claims and defenses that the debtor could
assert against the seller of goods. Liability under this
rule is limited to amounts paid under a Contract;
however, the Mortgagor also may be able to assert the
rule to set off remaining amounts due as a defense
against a claim brought against such Mortgagor. Numerous
other federal and state consumer protection laws impose
requirements applicable to the origination and lending
pursuant to the Contracts, including the Truth in Lending
Act, the Federal Trade Commission Act, the Fair Credit
Billing Act, the Fair Credit Reporting Act, the Equal
Credit Opportunity Act, the Fair Debt Collection
Practices Act and the Uniform Consumer Credit Code. In
the case of some of these laws, the failure to comply
with their provisions may affect the enforceability of
the related Contract.
"Due-on-Sale" Clauses
The Contracts, in general, prohibit the sale or
transfer of the related Manufactured Homes without the
consent of the Company, the Master Servicer or the
Servicer and permit the acceleration of the maturity of
the Contracts by the Company, the Master Servicer or the
Servicer upon any such sale or transfer that is not
consented to. Unless otherwise specified in the related
Prospectus Supplement, the Company, the Master Servicer
or the Servicer generally will permit most transfers of
Manufactured Homes and not accelerate the maturity of the
related Contracts. In certain cases, the transfer may be
made by a delinquent Mortgagor in order to avoid a
repossession proceeding with respect to a Manufactured
Home.
In the case of a transfer of a Manufactured Home
after which the Company desires to accelerate the
maturity of the related Contract, the Company's ability
to do so will depend on the enforceability under state
law of the "due-on-sale" clause. The Garn-St Germain Act
preempts, subject to certain exceptions and conditions,
state laws prohibiting enforcement of "due-on-sale"
clauses applicable to the Manufactured Homes. In some
states the Company or the Master Servicer may be
prohibited from enforcing a "due-on-sale" clause in
respect of certain Manufactured Homes.
Applicability of Usury Laws
Title V provides that, subject to certain
conditions, state usury limitations shall not apply to
any loan that is secured by a first lien on certain kinds
of manufactured housing. For a discussion of Title V,
see "--The Mortgage Loans--Applicability of Usury Laws"
above. Unless otherwise specified in the related Pooling
and Servicing Agreement, each Mortgage Collateral Seller,
or another specified party, will represent that all of
the Contracts comply with applicable usury laws.
Environmental Legislation
Real property pledged as security to a lender may be
subject to unforeseen environmental risks. Most
environmental statutes create obligations for any party
that can be classified as the "owner" or "operator" of a
"facility" (referring to both operating facilities and to
real property). Under the laws of some states and under
the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, a lender may be
liable, as an "owner" or "operator," for costs arising
out of releases or threatened releases of hazardous
substances that require remedy at a mortgaged property,
if agents or employees of the lender have become
sufficiently involved in the operations of the borrower
or, subsequent to a foreclosure, in the management of the
property. Such liability may arise regardless of whether
the environmental damage or threat was caused by a prior
owner.
Under federal and certain state laws, contamination
of a property may give rise to a lien on the property to
assure the payment of costs of clean-up. Under federal
law and in several states, such a lien has priority over
the lien of an existing mortgage against such property.
If a lender is or becomes directly liable following a
foreclosure, it may be precluded from bringing an action
for contribution against the owner or operator who
created the environmental hazard. Such clean-up costs
may be substantial. It is possible that such costs could
become a liability of the related Trust Fund and occasion
a loss to Certificateholders in certain circumstances
described above if such remedial costs were incurred.
Except as otherwise specified in the applicable
Prospectus Supplement, at the time the Mortgage Loans or
Contracts were originated, no environmental assessment or
a very limited environment assessment of the Mortgaged
Properties will have been conducted.
Soldiers' and Sailors' Civil Relief Act of 1940
Under the terms of the Relief Act, a borrower who
enters military service after the origination of such
borrower's mortgage loan or contract (including a
borrower who was in reserve status and is called to
active duty after origination of the mortgage loan or
contract), may not be charged interest (including fees
and charges) above an annual rate of 6% during the period
of such borrower's active duty status, unless a court
orders otherwise upon application of the lender. The
Relief Act applies to borrowers who are members of the
Air Force, Army, Marines, Navy, National Guard, Reserves
or Coast Guard, and officers of the U.S. Public Health
Service assigned to duty with the military. Because the
Relief Act applies to borrowers who enter military
service (including reservists who are called to active
duty) after origination of the related mortgage loan or
contract, no information can be provided as to the number
of Mortgage Loans or Contracts that may be affected by
the Relief Act. With respect to Mortgage Loans or
Contracts included in a Trust Fund, application of the
Relief Act would adversely affect, for an indeterminate
period of time, the ability of the Servicer or the Master
Servicer, as applicable, to collect full amounts of
interest on such Mortgage Collateral. Any shortfall in
interest collections resulting from the application of
the Relief Act or similar legislation or regulations,
which would not be recoverable from the related Mortgage
Loans or Contracts, would result in a reduction of the
amounts distributable to the holders of the related
Certificates, and would not be covered by Advances or any
form of credit enhancement provided in connection with
the related series of Certificates. In addition, the
Relief Act imposes limitations that would impair the
ability of the Servicer or the Master Servicer, as
applicable, to foreclose on an affected Mortgage Loan or
Contract during the Mortgagor's period of active duty
status, and, under certain circumstances, during an
additional three month period thereafter. Thus, in the
event that the Relief Act or similar legislation or
regulations applies to any Mortgage Loan or Contract
which goes into default, there may be delays in payment
and losses on the related Certificates in connection
therewith. Any other interest shortfalls, deferrals or
forgiveness of payments on the Mortgage Loans or
Contracts resulting from similar legislation or
regulations may result in delays in payments or losses to
Certificateholders of the related series.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General
The following is a general discussion of certain
anticipated material federal income tax consequences of
the purchase, ownership and disposition of the
Certificates offered hereunder. This discussion is
directed solely to Certificateholders that hold the
Certificates as capital assets within the meaning of
Section 1221 of the Code and does not purport to discuss
all federal income tax consequences that may be
applicable to particular categories of investors, some of
which (such as banks, insurance companies and foreign
investors) may be subject to special rules. In addition,
the authorities on which this discussion, and the opinion
referred to below, are based are subject to change or
differing interpretations, which could apply
retroactively. Taxpayers and preparers of tax returns
(including those filed by any REMIC or other issuer)
should be aware that under applicable Treasury
regulations a provider of advice on specific issues of
law is not considered an income tax return preparer
unless the advice (i) is given with respect to events
that have occurred at the time the advice is rendered and
is not given with respect to the consequences of
contemplated actions, and (ii) is directly relevant to
the determination of an entry on a tax return.
Accordingly, taxpayers should consult their tax advisors
and tax return preparers regarding the preparation of any
item on a tax return, even where the anticipated tax
treatment has been discussed herein or in a Prospectus
Supplement. In addition to the federal income tax
consequences described herein, potential investors should
consider the state and local tax consequences, if any, of
the purchase, ownership and disposition of the
Certificates. See "State and Other Tax Consequences."
Certificateholders are advised to consult their tax
advisors concerning the federal, state, local or other
tax consequences to them of the purchase, ownership and
disposition of the Certificates offered hereunder.
The following discussion addresses certificates (the
"REMIC Certificates") representing interests in a Trust
Fund, or a portion thereof, which the Master Servicer or
Certificate Administrator, as applicable, will covenant
to elect to have treated as a "real estate mortgage
investment conduit" (a "REMIC") under Sections 860A
through 860G (the "REMIC Provisions") of the Code. The
Prospectus Supplement for each series of Certificates
will indicate whether a REMIC election (or elections)
will be made for the related Trust Fund and, if such an
election is to be made, will identify all "regular
interests" and "residual interests" in the REMIC. If a
REMIC election will not be made for a Trust Fund, the
federal income consequences of the purchase, ownership
and disposition of the related Certificates will be set
forth in the related Prospectus Supplement. For purposes
of this tax discussion, references to a
"Certificateholder" or a "holder" are to the beneficial
owner of a Certificate.
The following discussion is based in part upon the
rules governing original issue discount that are set
forth in Sections 1271 through 1273 and Section 1275 of
the Code and in the Treasury regulations issued
thereunder (the "OID Regulations"), and in part upon the
REMIC Provisions and the Treasury regulations issued
thereunder (the "REMIC Regulations"). The OID Regulations
do not adequately address certain issues relevant to, and
in some instances provide that they are not applicable
to, securities such as the Certificates.
REMICs
Classification of REMICs
Upon the issuance of each series of REMIC
Certificates, Orrick, Herrington & Sutcliffe or Thacher
Proffitt & Wood, counsel to the Company, will deliver
their opinion generally to the effect that, assuming
compliance with all provisions of the related Pooling and
Servicing Agreement or Trust Agreement, the related Trust
Fund (or each applicable portion thereof) will qualify as
a REMIC and the REMIC Certificates offered with respect
thereto will be considered to evidence ownership of
"regular interests" ("REMIC Regular Certificates") or
"residual interests" ("REMIC Residual Certificates") in
that REMIC within the meaning of the REMIC Provisions.
If an entity electing to be treated as a REMIC fails
to comply with one or more of the ongoing requirements of
the Code for such status during any taxable year, the
Code provides that the entity will not be treated as a
REMIC for such year and thereafter. In that event, such
entity may be taxable as a separate corporation under
Treasury regulations, and the related REMIC Certificates
may not be accorded the status or given the tax treatment
described below. Although the Code authorizes the
Treasury Department to issue regulations providing relief
in the event of an inadvertent termination of REMIC
status, no such regulations have been issued. Any such
relief, moreover, may be accompanied by sanctions, such
as the imposition of a corporate tax on all or a portion
of the Trust Fund's income for the period in which the
requirements for such status are not satisfied. The
Pooling and Servicing Agreement or Trust Agreement, with
respect to each REMIC will include provisions designed to
maintain the Trust Fund's status as a REMIC under the
REMIC Provisions. It is not anticipated that the status
of any Trust Fund as a REMIC will be terminated.
Characterization of Investments in REMIC
Certificates
In general, the REMIC Certificates will be
"qualifying real property loans" within the meaning of
Section 593(d) of the Code, "real estate assets" within
the meaning of Section 856(c)(5)(A) of the Code and
assets described in Section 7701(a)(19)(C) of the Code in
the same proportion that the assets of the REMIC
underlying such Certificates would be so treated.
Moreover, if 95% or more of the assets of the REMIC
qualify for any of the foregoing treatments at all times
during a calendar year, the REMIC Certificates will
qualify for the corresponding status in their entirety
for that calendar year. Interest (including original
issue discount) on the REMIC Regular Certificates and
income allocated to the class of REMIC Residual
Certificates will be interest described in Section
856(c)(3)(B) of the Code to the extent that such
Certificates are treated as "real estate assets" within
the meaning of Section 856(c)(5)(A) of the Code. In
addition, the REMIC Regular Certificates will be
"qualified mortgages" within the meaning of Section
860G(a)(3)(C) of the Code if transferred to another REMIC
on its startup day in exchange for regular or residual
interests therein. The determination as to the
percentage of the REMIC's assets that constitute assets
described in the foregoing sections of the Code will be
made with respect to each calendar quarter based on the
average adjusted basis of each category of the assets
held by the REMIC during such calendar quarter. The
Master Servicer or the Certificate Administrator, as
applicable, will report those determinations to
Certificateholders in the manner and at the times
required by applicable Treasury regulations.
The assets of the REMIC will include, in addition to
Mortgage Collateral, payments on Mortgage Collateral held
pending distribution on the REMIC Certificates and
property acquired by foreclosure held pending sale, and
may include amounts in reserve accounts. It is unclear
whether property acquired by foreclosure held pending
sale and amounts in reserve accounts would be considered
to be part of the Mortgage Collateral, or whether such
assets (to the extent not invested in assets described in
the foregoing sections) otherwise would receive the same
treatment as the Mortgage Collateral for purposes of all
of the foregoing sections. In addition, in some
instances Mortgage Collateral may not be treated entirely
as assets described in the foregoing sections. If so,
the related Prospectus Supplement will describe the
Mortgage Collateral that may not be so treated. The
REMIC Regulations do provide, however, that payments on
Mortgage Collateral held pending distribution are
considered part of the Mortgage Collateral for purposes
of Sections 593(d) and 856(c)(5)(A) of the Code.
Tiered REMIC Structures
For certain series of REMIC Certificates, two or
more separate elections may be made to treat designated
portions of the related Trust Fund as REMICs ("Tiered
REMICs") for federal income tax purposes. Upon the
issuance of any such series of REMIC Certificates,
Orrick, Herrington & Sutcliffe or Thacher Proffitt &
Wood, counsel to the Company, will deliver their opinion
generally to the effect that, assuming compliance with
all provisions of the related Pooling and Servicing
Agreement or Trust Agreement, the Tiered REMICs will each
qualify as a REMIC and the REMIC Certificates issued by
the Tiered REMICs, respectively, will be considered to
evidence ownership of REMIC Regular Certificates or REMIC
Residual Certificates in the related REMIC within the
meaning of the REMIC Provisions.
Solely for purposes of determining whether the REMIC
Certificates will be "qualifying real property loans"
under Section 593(d) of the Code, "real estate assets"
within the meaning of Section 856(c)(5)(A) of the Code,
and "loans secured by an interest in real property" under
Section 7701(a)(19)(C) of the Code, and whether the
income on such Certificates is interest described in
Section 856(c)(3)(B) of the Code, the Tiered REMICs will
be treated as one REMIC.
Taxation of Owners of REMIC Regular Certificates
General. Except as otherwise stated in this
discussion, REMIC Regular Certificates will be treated
for federal income tax purposes as debt instruments
issued by the REMIC and not as ownership interests in the
REMIC or its assets. Moreover, holders of REMIC Regular
Certificates that otherwise report income under a cash
method of accounting will be required to report income
with respect to REMIC Regular Certificates under an
accrual method.
Original Issue Discount. Certain REMIC Regular
Certificates may be issued with "original issue discount"
within the meaning of Section 1273(a) of the Code. Any
holders of REMIC Regular Certificates issued with
original issue discount generally will be required to
include original issue discount in income as it accrues,
in accordance with the method described below, in advance
of the receipt of the cash attributable to such income.
In addition, Section 1272(a)(6) of the Code provides
special rules applicable to REMIC Regular Certificates
and certain other debt instruments issued with original
issue discount. Regulations have not been issued under
that section.
The Code requires that a prepayment assumption be
used with respect to Mortgage Collateral held by a REMIC
in computing the accrual of original issue discount on
REMIC Regular Certificates issued by that REMIC, and that
adjustments be made in the amount and rate of accrual of
such discount to reflect differences between the actual
prepayment rate and the prepayment assumption. The
prepayment assumption is to be determined in a manner
prescribed in Treasury regulations; as noted above, those
regulations have not been issued. The Committee Report
indicates that the regulations will provide that the
prepayment assumption used with respect to a REMIC
Regular Certificate must be the same as that used in
pricing the initial offering of such REMIC Regular
Certificate. The Prepayment Assumption used by the Master
Servicer or the Certificate Administrator, as applicable,
in reporting original issue discount for each series of
REMIC Regular Certificates will be consistent with this
standard and will be disclosed in the related Prospectus
Supplement. However, neither the Company, the Master
Servicer nor the Certificate Administrator will make any
representation that the Mortgage Collateral will in fact
prepay at a rate conforming to the Prepayment Assumption
or at any other rate.
The original issue discount, if any, on a REMIC
Regular Certificate will be the excess of its stated
redemption price at maturity over its issue price. The
issue price of a particular class of REMIC Regular
Certificates will be the first cash price at which a
substantial amount of REMIC Regular Certificates of that
class is sold (excluding sales to bond houses, brokers
and underwriters). If less than a substantial amount of
a particular class of REMIC Regular Certificates is sold
for cash on or prior to the date of their initial
issuance (the "Closing Date"), the issue price for such
class will be treated as the fair market value of such
class on the Closing Date. Under the OID Regulations, the
stated redemption price of a REMIC Regular Certificate is
equal to the total of all payments to be made on such
Certificate other than "qualified stated interest."
"Qualified stated interest" includes interest that is
unconditionally payable at least annually at a single
fixed rate, or in the case of a variable rate debt
instrument, at a "qualified floating rate," an "objective
rate," a combination of a single fixed rate and one or
more "qualified floating rates" or one "qualified inverse
floating rate," or a combination of "qualified floating
rates" that generally does not operate in a manner that
accelerates or defers interest payments on such REMIC
Regular Certificate.
In the case of REMIC Regular Certificates bearing
adjustable interest rates, the determination of the total
amount of original issue discount and the timing of the
inclusion thereof will vary according to the
characteristics of such REMIC Regular Certificates. If
the original issue discount rules apply to such
Certificates, the related Prospectus Supplement will
describe the manner in which such rules will be applied
by the Master Servicer or the Certificate Administrator,
as applicable, with respect to those Certificates in
preparing information returns to the Certificateholders
and the IRS.
Certain classes of the REMIC Regular Certificates
may provide for the first interest payment with respect
to such Certificates to be made more than one month after
the date of issuance, a period which is longer than the
subsequent monthly intervals between interest payments.
Assuming the "accrual period" (as defined herein) for
original issue discount is each monthly period that
begins or ends on a Distribution Date, in some cases, as
a consequence of this "long first accrual period," some
or all interest payments may be required to be included
in the stated redemption price of the REMIC Regular
Certificate and accounted for as original issue discount.
Because interest on REMIC Regular Certificates must in
any event be accounted for under an accrual method,
applying this analysis would result in only a slight
difference in the timing of the inclusion in income of
the yield on the REMIC Regular Certificates.
In addition, if the accrued interest to be paid on
the first Distribution Date is computed with respect to
a period that begins prior to the Closing Date, a portion
of the purchase price paid for a REMIC Regular
Certificate will reflect such accrued interest. In such
cases, information returns to the Certificateholders and
the IRS will be based on the position that the portion of
the purchase price paid for the interest accrued with
respect to periods prior to the Closing Date is treated
as part of the overall cost of such REMIC Regular
Certificate (and not as a separate asset the cost of
which is recovered entirely out of interest received on
the next Distribution Date) and that portion of the
interest paid on the first Distribution Date in excess of
interest accrued for a number of days corresponding to
the number of days from the Closing Date to the first
Distribution Date should be included in the stated
redemption price of such REMIC Regular Certificate.
However, the OID Regulations state that all or some
portion of such accrued interest may be treated as a
separate asset the cost of which is recovered entirely
out of interest paid on the first Distribution Date. It
is unclear how an election to do so would be made under
the OID Regulations and whether such an election could be
made unilaterally by a Certificateholder.
Notwithstanding the general definition of original
issue discount, original issue discount on a REMIC
Regular Certificate will be considered to be de minimis
if it is less than 0.25% of the stated redemption price
of the REMIC Regular Certificate multiplied by its
weighted average life. For this purpose, the weighted
average life of the REMIC Regular Certificate is computed
as the sum of the amounts determined, as to each payment
included in the stated redemption price of such REMIC
Regular Certificate, by multiplying (i) the number of
complete years (rounding down for partial years) from the
issue date until such payment is expected to be made
(presumably taking into account the Prepayment
Assumption) by (ii) a fraction, the numerator of which is
the amount of the payment, and the denominator of which
is the stated redemption price at maturity of such REMIC
Regular Certificate. Under the OID Regulations, original
issue discount of only a de minimis amount (other than de
minimis original issue discount attributable to a so-
called "teaser" interest rate or an initial interest
holiday) will be included in income as each payment of
stated principal is made, based on the product of the
total amount of such de minimis original issue discount
and a fraction, the numerator of which is the amount of
such principal payment and the denominator of which is
the outstanding stated principal amount of the REMIC
Regular Certificate. The OID Regulations also would
permit a Certificateholder to elect to accrue de minimis
original issue discount into income currently based on a
constant yield method. See "--Market Discount" for a
description of such election under the OID Regulations.
If original issue discount on a REMIC Regular
Certificate is in excess of a de minimis amount, the
holder of such Certificate must include in ordinary gross
income the sum of the "daily portions" of original issue
discount for each day during its taxable year on which it
held such REMIC Regular Certificate, including the
purchase date but excluding the disposition date. In the
case of an original holder of a REMIC Regular
Certificate, the daily portions of original issue
discount will be determined as follows.
As to each "accrual period," that is, unless
otherwise stated in the related Prospectus Supplement,
each period that begins or ends on a date that
corresponds to a Distribution Date and begins on the
first day following the immediately preceding accrual
period (or in the case of the first such period, begins
on the Closing Date), a calculation will be made of the
portion of the original issue discount that accrued
during such accrual period. The portion of original
issue discount that accrues in any accrual period will
equal the excess, if any, of (i) the sum of (A) the
present value, as of the end of the accrual period, of
all of the distributions remaining to be made on the
REMIC Regular Certificate, if any, in future periods and
(B) the distributions made on such REMIC Regular
Certificate during the accrual period of amounts included
in the stated redemption price, over (ii) the adjusted
issue price of such REMIC Regular Certificate at the
beginning of the accrual period. The present value of
the remaining distributions referred to in the preceding
sentence will be calculated (1) assuming that
distributions on the REMIC Regular Certificate will be
received in future periods based on the Mortgage
Collateral being prepaid at a rate equal to the
Prepayment Assumption and (2) using a discount rate equal
to the original yield to maturity of the Certificate. For
these purposes, the original yield to maturity of the
Certificate will be calculated based on its issue price
and assuming that distributions on the Certificate will
be made in all accrual periods based on the Mortgage
Collateral being prepaid at a rate equal to the
Prepayment Assumption. The adjusted issue price of a
REMIC Regular Certificate at the beginning of any accrual
period will equal the issue price of such Certificate,
increased by the aggregate amount of original issue
discount that accrued with respect to such Certificate in
prior accrual periods, and reduced by the amount of any
distributions made on such REMIC Regular Certificate in
prior accrual periods of amounts included in its stated
redemption price. The original issue discount accruing
during any accrual period, computed as described above,
will be allocated ratably to each day during the accrual
period to determine the daily portion of original issue
discount for such day.
A subsequent purchaser of a REMIC Regular
Certificate that purchases such Certificate at a cost
(excluding any portion of such cost attributable to
accrued qualified stated interest) less than its
remaining stated redemption price will also be required
to include in gross income the daily portions of any
original issue discount with respect to such Certificate.
However, each such daily portion will be reduced, if such
cost is in excess of its "adjusted issue price," in
proportion to the ratio such excess bears to the
aggregate original issue discount remaining to be accrued
on such REMIC Regular Certificate. The adjusted issue
price of a REMIC Regular Certificate on any given day
equals the sum of (i) the adjusted issue price (or, in
the case of the first accrual period, the issue price) of
such Certificate at the beginning of the accrual period
which includes such day and (ii) the daily portions of
original issue discount for all days during such accrual
period prior to such day.
Market Discount. A Certificateholder that purchases
a REMIC Regular Certificate at a market discount, that
is, in the case of a REMIC Regular Certificate issued
without original issue discount, at a purchase price less
than its remaining stated principal amount, or in the
case of a REMIC Regular Certificate issued with original
issue discount, at a purchase price less than its
adjusted issue price will recognize income upon receipt
of each distribution representing stated redemption
price. In particular, under Section 1276 of the Code
such a Certificateholder generally will be required to
allocate the portion of each such distribution
representing stated redemption price first to accrued
market discount not previously included in income, and to
recognize ordinary income to that extent. A
Certificateholder may elect to include market discount in
income currently as it accrues rather than including it
on a deferred basis in accordance with the foregoing. If
made, such election will apply to all market discount
bonds acquired by such Certificateholder on or after the
first day of the first taxable year to which such
election applies. In addition, the OID Regulations permit
a Certificateholder to elect to accrue all interest,
discount (including de minimis market or original issue
discount) and premium in income as interest, based on a
constant yield method. If such an election were made
with respect to a REMIC Regular Certificate with market
discount, the Certificateholder would be deemed to have
made an election to include currently market discount in
income with respect to all other debt instruments having
market discount that such Certificateholder acquires
during the taxable year of the election or thereafter,
and possibly previously acquired instruments. Similarly,
a Certificateholder that made this election for a
Certificate that is acquired at a premium would be deemed
to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond
premium that such Certificateholder owns or acquires.
See "--Premium." Each of these elections to accrue
interest, discount and premium with respect to a
Certificate on a constant yield method or as interest
would be irrevocable.
However, market discount with respect to a REMIC
Regular Certificate will be considered to be de minimis
for purposes of Section 1276 of the Code if such market
discount is less than 0.25% of the remaining stated
redemption price of such REMIC Regular Certificate
multiplied by the number of complete years to maturity
remaining after the date of its purchase. In
interpreting a similar rule with respect to original
issue discount on obligations payable in installments,
the OID Regulations refer to the weighted average
maturity of obligations, and it is likely that the same
rule will be applied with respect to market discount,
presumably taking into account the Prepayment Assumption.
If market discount is treated as de minimis under this
rule, it appears that the actual discount would be
treated in a manner similar to original issue discount of
a de minimis amount. See "--Original Issue Discount."
Such treatment would result in discount being included in
income at a slower rate than discount would be required
to be included in income using the method described
above.
Section 1276(b)(3) of the Code specifically
authorizes the Treasury Department to issue regulations
providing for the method for accruing market discount on
debt instruments, the principal of which is payable in
more than one installment. Until regulations are issued
by the Treasury Department, certain rules described in
the Committee Report apply. The Committee Report
indicates that in each accrual period market discount on
REMIC Regular Certificates should accrue, at the
Certificateholder's option: (i) on the basis of a
constant yield method, (ii) in the case of a REMIC
Regular Certificate issued without original issue
discount, in an amount that bears the same ratio to the
total remaining market discount as the stated interest
paid in the accrual period bears to the total amount of
stated interest remaining to be paid on the REMIC Regular
Certificate as of the beginning of the accrual period, or
(iii) in the case of a REMIC Regular Certificate issued
with original issue discount, in an amount that bears the
same ratio to the total remaining market discount as the
original issue discount accrued in the accrual period
bears to the total original issue discount remaining on
the REMIC Regular Certificate at the beginning of the
accrual period. Moreover, the Prepayment Assumption used
in calculating the accrual of original issue discount is
to be used in calculating the accrual of market discount.
Because the regulations referred to in this paragraph
have not been issued, it is not possible to predict what
effect such regulations might have on the tax treatment
of a REMIC Regular Certificate purchased at a discount in
the secondary market.
To the extent that REMIC Regular Certificates
provide for monthly or other periodic distributions
throughout their term, the effect of these rules may be
to require market discount to be includible in income at
a rate that is not significantly slower than the rate at
which such discount would accrue if it were original
issue discount. Moreover, in any event a holder of a
REMIC Regular Certificate generally will be required to
treat a portion of any gain on the sale or exchange of
such Certificate as ordinary income to the extent of the
market discount accrued to the date of disposition under
one of the foregoing methods, less any accrued market
discount previously reported as ordinary income.
In addition, under Section 1277 of the Code, a
holder of a REMIC Regular Certificate may be required to
defer a portion of its interest deductions for the
taxable year attributable to any indebtedness incurred or
continued to purchase or carry a REMIC Regular
Certificate purchased with market discount. For these
purposes, the de minimis rule referred to above applies.
Any such deferred interest expense would not exceed the
market discount that accrues during such taxable year and
is, in general, allowed as a deduction not later than the
year in which such market discount is includible in
income. If such holder elects to include market discount
in income currently as it accrues on all market discount
instruments acquired by such holder in that taxable year
or thereafter, the interest deferral rule described above
will not apply.
Premium. A REMIC Regular Certificate purchased at
a cost (excluding any portion of such cost attributable
to accrued qualified stated interest) greater than its
remaining stated redemption price will be considered to
be purchased at a premium. The holder of such a REMIC
Regular Certificate may elect under Section 171 of the
Code to amortize such premium under the constant yield
method over the life of the Certificate. If made, such
an election will apply to all debt instruments having
amortizable bond premium that the holder owns or
subsequently acquires. Amortizable premium will be
treated as an offset to interest income on the related
REMIC Regular Certificate, rather than as a separate
interest deduction. The OID Regulations also permit
Certificateholders to elect to include all interest,
discount and premium in income based on a constant yield
method, further treating the Certificateholder as having
made the election to amortize premium generally. See
"--Market Discount." The Committee Report states that the
same rules that apply to accrual of market discount
(which rules will require use of a Prepayment Assumption
in accruing market discount with respect to REMIC Regular
Certificates without regard to whether such Certificates
have original issue discount) will also apply in
amortizing bond premium under Section 171 of the Code.
Realized Losses. Under Section 166 of the Code,
both corporate holders of the REMIC Regular Certificates
and noncorporate holders of the REMIC Regular
Certificates that acquire such Certificates in connection
with a trade or business should be allowed to deduct, as
ordinary losses, any losses sustained during a taxable
year in which their Certificates become wholly or
partially worthless as the result of one or more Realized
Losses on the Mortgage Collateral. However, it appears
that a noncorporate holder that does not acquire a REMIC
Regular Certificate in connection with a trade or
business will not be entitled to deduct a loss under
Section 166 of the Code until such holder's Certificate
becomes wholly worthless (i.e., until its outstanding
principal balance has been reduced to zero) and that the
loss will be characterized as a short-term capital loss.
Each holder of a REMIC Regular Certificate will be
required to accrue interest and original issue discount
with respect to such Certificate, without giving effect
to any reductions in distributions attributable to
defaults or delinquencies on the Mortgage Collateral
until it can be established that any such reduction
ultimately will not be recoverable. As a result, the
amount of taxable income reported in any period by the
holder of a REMIC Regular Certificate could exceed the
amount of economic income actually realized by the holder
in such period. Although the holder of a REMIC Regular
Certificate eventually will recognize a loss or reduction
in income attributable to previously accrued and included
income that, as the result of a realized loss, ultimately
will not be realized, the law is unclear with respect to
the timing and character of such loss or reduction in
income.
Taxation of Owners of REMIC Residual Certificates
General. As residual interests, the REMIC Residual
Certificates will be subject to tax rules that differ
significantly from those that would apply if the REMIC
Residual Certificates were treated for federal income tax
purposes as direct ownership interests in the Mortgage
Collateral or as debt instruments issued by the REMIC.
A holder of a REMIC Residual Certificate generally
will be required to report its daily portion of the
taxable income or, subject to the limitations noted in
this discussion, the net loss of the REMIC for each day
during a calendar quarter that such holder owned such
REMIC Residual Certificate. For this purpose, the
taxable income or net loss of the REMIC will be allocated
to each day in the calendar quarter ratably using a "30
days per month/90 days per quarter/360 days per year"
convention unless otherwise disclosed in the related
Prospectus Supplement. The daily amounts will then be
allocated among the REMIC Residual Certificateholders in
proportion to their respective ownership interests on
such day. Any amount included in the gross income or
allowed as a loss of any REMIC Residual Certificateholder
by virtue of this allocation will be treated as ordinary
income or loss. The taxable income of the REMIC will be
determined under the rules described below in "--Taxable
Income of the REMIC" and will be taxable to the REMIC
Residual Certificateholders without regard to the timing
or amount of cash distributions by the REMIC. Ordinary
income derived from REMIC Residual Certificates will be
"portfolio income" for purposes of the taxation of
taxpayers subject to limitations under Section 469 of the
Code on the deductibility of "passive losses."
A holder of a REMIC Residual Certificate that
purchased such Certificate from a prior holder of such
Certificate also will be required to report on its
federal income tax return amounts representing its daily
portion of the taxable income (or net loss) of the REMIC
for each day that it holds such REMIC Residual
Certificate. These daily portions generally will equal
the amounts of taxable income or net loss determined as
described above. The Committee Report indicates that
certain modifications of the general rules may be made,
by regulations, legislation or otherwise, to reduce (or
increase) the income or loss of a holder of a REMIC
Residual Certificateholder that purchased such REMIC
Residual Certificate from a prior holder of such
Certificate at a price greater than (or less than) the
adjusted basis (as defined herein) such REMIC Residual
Certificate would have had in the hands of an original
holder of such Certificate. The REMIC Regulations,
however, do not provide for any such modifications.
Any payments received by a holder of a REMIC
Residual Certificate in connection with the acquisition
of such REMIC Residual Certificate will be taken into
account in determining the income of such holder for
federal income tax purposes. Although it appears likely
that any such payment would be includible in income
immediately upon its receipt, the IRS might assert that
such payment should be included in income over time
according to an amortization schedule or according to
some other method. Because of the uncertainty concerning
the treatment of such payments, holders of REMIC Residual
Certificates should consult their tax advisors concerning
the treatment of such payments for income tax purposes.
The amount of income REMIC Residual
Certificateholders will be required to report (or the tax
liability associated with such income) may exceed the
amount of cash distributions received from the REMIC for
the corresponding period. Consequently, REMIC Residual
Certificateholders should have other sources of funds
sufficient to pay any federal income taxes due as a
result of their ownership of REMIC Residual Certificates
or unrelated deductions against which income may be
offset, subject to the rules relating to "excess
inclusions," residual interests without "significant
value" and "noneconomic" residual interests discussed
below. The fact that the tax liability associated with
the income allocated to REMIC Residual Certificateholders
may exceed the cash distributions received by such REMIC
Residual Certificateholders for the corresponding period
may significantly adversely affect such REMIC Residual
Certificateholders' after-tax rate of return.
Taxable Income of the REMIC. The taxable income of
the REMIC will equal the income from the Mortgage
Collateral and other assets of the REMIC plus any
cancellation of indebtedness income due to the allocation
of realized losses to REMIC Regular Certificates, less
the deductions allowed to the REMIC for interest
(including original issue discount and reduced by the
amortization of any premium received on issuance) on the
REMIC Regular Certificates (and any other class of REMIC
Certificates constituting "regular interests" in the
REMIC not offered hereby), amortization of any premium on
the Mortgage Collateral, bad debt deductions with respect
to the Mortgage Collateral and, except as described
below, for servicing, administrative and other expenses.
For purposes of determining its taxable income, the
REMIC will have an initial aggregate basis in its assets
equal to their fair market value immediately after their
transfer to the REMIC. For this purpose, the Master
Servicer or the Certificate Administrator, as applicable,
intends to treat the fair market value of the Mortgage
Collateral as being equal to the aggregate issue prices
of the REMIC Regular Certificates and REMIC Residual
Certificates. Such aggregate basis will be allocated
among the Mortgage Collateral collectively and the other
assets of the REMIC in proportion to their respective
fair market values. The issue price of any REMIC
Certificates offered hereby will be determined in the
manner described above under "--Taxation of Owners of
REMIC Regular Certificates--Original Issue Discount."
Accordingly, if one or more classes of REMIC Certificates
are retained initially rather than sold, the Master
Servicer or the Certificate Administrator, as applicable,
may be required to estimate the fair market value of such
interests in order to determine the basis of the REMIC in
the Mortgage Collateral and other property held by the
REMIC.
Subject to the possible application of the de
minimis rules, the method of accrual by the REMIC of
original issue discount income and market discount income
with respect to Mortgage Collateral that it holds will be
equivalent to the method of accruing original issue
discount income for REMIC Regular Certificateholders
(that is, under the constant yield method taking into
account the Prepayment Assumption). However, a REMIC
that acquires Mortgage Collateral at a market discount
must include such discount in income currently, as it
accrues, on a constant interest basis. See "--Taxation of
Owners of REMIC Regular Certificates" above, which
describes a method of accruing discount income that is
analogous to that required to be used by a REMIC as to
Mortgage Collateral with market discount that it holds.
An item of Mortgage Collateral will be deemed to
have been acquired with discount (or premium) to the
extent that the REMIC's basis therein, determined as
described in the preceding paragraph, is less than (or
greater than) its stated redemption price. Any such
discount will be includible in the income of the REMIC as
it accrues, in advance of receipt of the cash
attributable to such income, under a method similar to
the method described above for accruing original issue
discount on the REMIC Regular Certificates. It is
anticipated that each REMIC will elect under Section 171
of the Code to amortize any premium on the Mortgage
Collateral. Premium on any item of Mortgage Collateral
to which such election applies may be amortized under a
constant yield method, presumably taking into account a
Prepayment Assumption.
The REMIC will be allowed deductions for interest
(including original issue discount) on the REMIC Regular
Certificates (including any other class of REMIC
Certificates constituting "regular interests" in the
REMIC not offered hereby) equal to the deductions that
would be allowed if the REMIC Regular Certificates
(including any other class of REMIC Certificates
constituting "regular interests" in the REMIC not offered
hereby) were indebtedness of the REMIC. Original issue
discount will be considered to accrue for this purpose as
described above under "--Taxation of Owners of REMIC
Regular Certificates--Original Issue Discount," except
that the de minimis rule and the adjustments for
subsequent holders of REMIC Regular Certificates
(including any other class of Certificates constituting
"regular interests" in the REMIC not offered hereby)
described therein will not apply.
If a class of REMIC Regular Certificates is issued
at a price in excess of the stated redemption price of
such class (such excess, "Issue Premium"), the net amount
of interest deductions that are allowed the REMIC in each
taxable year with respect to the REMIC Regular
Certificates of such class will be reduced by an amount
equal to the portion of the Issue Premium that is
considered to be amortized or repaid in that year.
Although the matter is not entirely certain, it is likely
that Issue Premium would be amortized under a constant
yield method in a manner analogous to the method of
accruing original issue discount described above under
"--Taxation of Owners of REMIC Regular
Certificates--Original Issue Discount."
As a general rule, the taxable income of the REMIC
will be determined in the same manner as if the REMIC
were an individual having the calendar year as its
taxable year and using the accrual method of accounting.
However, no item of income, gain, loss or deduction
allocable to a prohibited transaction will be taken into
account. See "--Prohibited Transactions and Other
Possible REMIC Taxes" below. Further, the limitation on
miscellaneous itemized deductions imposed on individuals
by Section 67 of the Code (which allows such deductions
only to the extent they exceed in the aggregate two
percent of the taxpayer's adjusted gross income) will not
be applied at the REMIC level so that the REMIC will be
allowed deductions for servicing, administrative and
other non-interest expenses in determining its taxable
income. All such expenses will be allocated as a
separate item to the holders of REMIC Certificates,
subject to the limitation of Section 67 of the Code. See
"--Possible Pass-Through of Miscellaneous Itemized
Deductions" below. If the deductions allowed to the
REMIC exceed its gross income for a calendar quarter,
such excess will be the net loss for the REMIC for that
calendar quarter.
Basis Rules, Net Losses and Distributions. The
adjusted basis of a REMIC Residual Certificate will be
equal to the amount paid for such REMIC Residual
Certificate, increased by amounts included in the income
of the related Certificateholder and decreased (but not
below zero) by distributions made, and by net losses
allocated, to such Certificateholder.
A REMIC Residual Certificateholder is not allowed to
take into account any net loss for any calendar quarter
to the extent such net loss exceeds such REMIC Residual
Certificateholder's adjusted basis in its REMIC Residual
Certificate as of the close of such calendar quarter
(determined without regard to such net loss). Any loss
that is not currently deductible by reason of this
limitation may be carried forward indefinitely to future
calendar quarters and, subject to the same limitation,
may be used only to offset income from the REMIC Residual
Certificate. The ability of holders of REMIC Residual
Certificates to deduct net losses may be subject to
additional limitations under the Code, as to which such
Certificateholders should consult their tax advisors.
Any distribution on a REMIC Residual Certificate
will be treated as a non-taxable return of capital to the
extent it does not exceed the holder's adjusted basis in
such REMIC Residual Certificate. To the extent a
distribution on a REMIC Residual Certificate exceeds such
adjusted basis, it will be treated as gain from the sale
of such REMIC Residual Certificate. Holders of certain
REMIC Residual Certificates may be entitled to
distributions early in the term of the related REMIC
under circumstances in which their bases in such REMIC
Residual Certificates will not be sufficiently large that
such distributions will be treated as nontaxable returns
of capital. Their bases in such REMIC Residual
Certificates will initially equal the amount paid for
such REMIC Residual Certificates and will be increased by
their allocable shares of taxable income of the Trust
Fund. However, such basis increases may not occur until
the end of the calendar quarter, or perhaps the end of
the calendar year, with respect to which such REMIC
taxable income is allocated to the holders of REMIC
Residual Certificates. To the extent such
Certificateholders' initial bases are less than the
distributions to such REMIC Residual Certificateholders,
and increases in such initial bases either occur after
such distributions or (together with their initial bases)
are less than the amount of such distributions, gain will
be recognized to such Certificateholders on such
distributions and will be treated as gain from the sale
of their REMIC Residual Certificates.
The effect of these rules is that a
Certificateholder may not amortize its basis in a REMIC
Residual Certificate, but may only recover its basis
through distributions, through the deduction of its share
of any net losses of the REMIC or upon the sale of its
REMIC Residual Certificate. See "--Sales of REMIC
Certificates" below. For a discussion of possible
modifications of these rules that may require adjustments
to income of a holder of a REMIC Residual Certificate
other than an original holder in order to reflect any
difference between the cost of such REMIC Residual
Certificate to such holder and the adjusted basis such
REMIC Residual Certificate would have had in the hands of
the original holder, see "--General" above.
Excess Inclusions. Any "excess inclusions" with
respect to a REMIC Residual Certificate will, with an
exception discussed below for certain REMIC Residual
Certificates held by thrift institutions, be subject to
federal income tax in all events.
In general, the "excess inclusions" with respect to
a REMIC Residual Certificate for any calendar quarter
will be the excess, if any, of (i) the sum of the daily
portions of REMIC taxable income allocable to such REMIC
Residual Certificate over (ii) the sum of the "daily
accruals" (as defined herein) for each day during such
quarter that such REMIC Residual Certificate was held by
such REMIC Residual Certificateholder. The daily
accruals of a REMIC Residual Certificateholder will be
determined by allocating to each day during a calendar
quarter its ratable portion of the product of the
"adjusted issue price" of the REMIC Residual Certificate
at the beginning of the calendar quarter and 120% of the
"long-term federal rate" in effect on the Closing Date.
For this purpose, the adjusted issue price of a REMIC
Residual Certificate as of the beginning of any calendar
quarter will be equal to the issue price of the REMIC
Residual Certificate, increased by the sum of the daily
accruals for all prior quarters and decreased (but not
below zero) by any distributions made with respect to
such REMIC Residual Certificate before the beginning of
such quarter. The issue price of a REMIC Residual
Certificate is the initial offering price to the public
(excluding bond houses and brokers) at which a
substantial amount of the REMIC Residual Certificates
were sold. The "long-term federal rate" is an average of
current yields on Treasury securities with a remaining
term of greater than nine years, computed and published
monthly by the IRS.
For REMIC Residual Certificateholders, an excess
inclusion (i) will not be permitted to be offset by
deductions, losses or loss carryovers from other
activities, (ii) will be treated as "unrelated business
taxable income" to an otherwise tax-exempt organization
and (iii) will not be eligible for any rate reduction or
exemption under any applicable tax treaty with respect to
the 30% United States withholding tax imposed on
distributions to REMIC Residual Certificateholders that
are foreign investors. See, however, "--Foreign Investors
in REMIC Certificates" below.
As an exception to the general rules described
above, thrift institutions are allowed to offset their
excess inclusions with unrelated deductions, losses or
loss carryovers, but only if the REMIC Residual
Certificates are considered to have "significant value."
The REMIC Regulations provide that in order to be treated
as having significant value, the REMIC Residual
Certificates must have an aggregate issue price at least
equal to two percent of the aggregate issue prices of all
of the related REMIC's Regular and Residual Certificates.
In addition, based on the Prepayment Assumption, the
anticipated weighted average life of the REMIC Residual
Certificates must equal or exceed 20% of the anticipated
weighted average life of the REMIC and on any required or
permitted clean up calls or required qualified
liquidation provided for in the REMIC's organizational
documents. Although it has not done so, the Treasury
also has authority to issue regulations that would treat
the entire amount of income accruing on a REMIC Residual
Certificate as an excess inclusion if the REMIC Residual
Certificates are considered not to have "significant
value." The related Prospectus Supplement will disclose
whether offered REMIC Residual Certificates may be
considered to have "significant value" under the REMIC
Regulations; except that any disclosure that a REMIC
Residual Certificate will have "significant value" will
be based upon certain assumptions, and the Company will
make no representation that a REMIC Residual Certificate
will have "significant value" for purposes of the above-
described rules. The above-described exception for thrift
institutions applies only to those residual interests
held directly by, and deductions, losses and loss
carryovers incurred by, such institutions (and not by
other members of an affiliated group of corporations
filing a consolidated income tax return) or by certain
wholly-owned direct subsidiaries of such institutions
formed or operated exclusively in connection with the
organization and operation of one or more REMICs.
In the case of any REMIC Residual Certificates held
by a real estate investment trust, the aggregate excess
inclusions with respect to such REMIC Residual
Certificates, reduced (but not below zero) by the real
estate investment trust taxable income (within the
meaning of Section 857(b)(2) of the Code, excluding any
net capital gain), will be allocated among the
shareholders of such trust in proportion to the dividends
received by such shareholders from such trust, and any
amount so allocated will be treated as an excess
inclusion with respect to a REMIC Residual Certificate as
if held directly by such shareholder. Treasury
regulations yet to be issued could apply a similar rule
to regulated investment companies, common trust funds and
certain cooperatives; the REMIC Regulations currently do
not address this subject.
Noneconomic REMIC Residual Certificates. Under the
REMIC Regulations, transfers of "noneconomic" REMIC
Residual Certificates will be disregarded for all federal
income tax purposes if "a significant purpose of the
transfer was to enable the transferor to impede the
assessment or collection of tax." If such transfer is
disregarded, the purported transferor will continue to
remain liable for any taxes due with respect to the
income on such "noneconomic" REMIC Residual Certificate.
The REMIC Regulations provide that a REMIC Residual
Certificate is noneconomic unless, based on the
Prepayment Assumption and on any required or permitted
clean up calls, or required qualified liquidation
provided for in the REMIC's organizational documents, (1)
the present value of the expected future distributions
(discounted using the "applicable federal rate" for
obligations whose term ends on the close of the last
quarter in which excess inclusions are expected to accrue
with respect to the REMIC Residual Certificate, which
rate is computed and published monthly by the IRS) on the
REMIC Residual Certificate equals at least the present
value of the expected tax on the anticipated excess
inclusions, and (2) the transferor reasonably expects
that the transferee will receive distributions with
respect to the REMIC Residual Certificate at or after the
time the taxes accrue on the anticipated excess
inclusions in an amount sufficient to satisfy the accrued
taxes. Accordingly, all transfers of REMIC Residual
Certificates that may constitute noneconomic residual
interests will be subject to certain restrictions under
the terms of the related Pooling and Servicing Agreement
or Trust Agreement that are intended to reduce the
possibility of any such transfer being disregarded.
Such restrictions will require each party to a transfer
to provide an affidavit that no purpose of such transfer
is to impede the assessment or collection of tax,
including certain representations as to the financial
condition of the prospective transferee, as to which the
transferor also is required to make a reasonable
investigation to determine such transferee's historic
payment of its debts and ability to continue to pay its
debts as they come due in the future. Prior to
purchasing a REMIC Residual Certificate, prospective
purchasers should consider the possibility that a
purported transfer of such REMIC Residual Certificate by
such a purchaser to another purchaser at some future date
may be disregarded in accordance with the above-described
rules which would result in the retention of tax
liability by such purchaser.
The related Prospectus Supplement will disclose
whether offered REMIC Residual Certificates may be
considered "noneconomic" residual interests under the
REMIC Regulations. Any such disclosure that a REMIC
Residual Certificate will not be considered "noneconomic"
will be based upon certain assumptions, and the Company
will make no representation that a REMIC Residual
Certificate will not be considered "noneconomic" for
purposes of the above-described rules. See "--Foreign
Investors in REMIC Certificates" below for additional
restrictions applicable to transfers of certain REMIC
Residual Certificates to foreign persons.
Mark-to-Market Rules. On December 28, 1993, the IRS
released temporary regulations (the "Mark-to-Market
Regulations") relating to the requirement that a
securities dealer mark to market securities held for sale
to customers. This mark-to-market requirement applies to
all securities owned by a dealer, except to the extent
that the dealer has specifically identified a security as
held for investment. The Mark-to-Market Regulations
provide that for purposes of this mark-to-market
requirement, a "negative value" REMIC Residual
Certificate is not treated as a security and thus
generally may not be marked to market. In general, a
REMIC Residual Certificate has negative value if, as of
the date a taxpayer acquires the REMIC Residual
Certificate, the present value of the tax liabilities
associated with holding the REMIC Residual Certificate
exceeds the sum of (i) the present value of the expected
future distributions on the REMIC Residual Certificate
and (ii) the present value of the anticipated tax savings
associated with holding the REMIC Residual Certificate as
the REMIC generates losses. The amounts and present
values of the anticipated tax liabilities, expected
future distributions and anticipated tax savings are all
to be determined using (i) the prepayment and
reinvestment assumptions adopted under Section 1272(a)(6)
of the Code, or that would have been adopted had the
REMIC's regular interests been issued with original issue
discount, (ii) any required or permitted clean up calls,
or required qualified liquidation, provided for in the
REMIC's organizational documents and (iii) a discount
rate equal to the "applicable federal rate" (as specified
in Section 1274(d)(1) of the Code) that would apply to a
debt instrument issued on the date of acquisition of the
REMIC Residual Certificate. Furthermore, the Mark-to-
Market Regulations provide the IRS with the authority to
treat any REMIC Residual Certificate having substantially
the same economic effect as a "negative value" residual
interest. The IRS could issue subsequent regulations
which could apply retroactively, providing additional or
different requirements with respect to such deemed
negative value residual interests. Any such regulations
could also limit the applicability of the mark-to-market
requirements to residual interests having economic value
at the time of their acquisition. Prospective purchasers
of a REMIC Residual Certificate should consult their tax
advisors regarding the possible application of the Mark-
to-Market Regulations to REMIC Residual Certificates.
Possible Pass-Through of Miscellaneous Itemized
Deductions. Fees and expenses of a REMIC generally will
be allocated to the holders of the related REMIC Residual
Certificates. The applicable Treasury regulations
indicate, however, that in the case of a REMIC that is
similar to a single class grantor trust, all or a portion
of such fees and expenses should be allocated to the
holders of the related REMIC Regular Certificates.
Unless otherwise stated in the related Prospectus
Supplement, such fees and expenses will be allocated to
holders of the related REMIC Residual Certificates in
their entirety and not to the holders of the related
REMIC Regular Certificates.
With respect to REMIC Residual Certificates or REMIC
Regular Certificates the holders of which receive an
allocation of fees and expenses in accordance with the
preceding discussion, if any holder thereof is an
individual, estate or trust, or a "pass-through entity"
beneficially owned by one or more individuals, estates or
trusts, (i) an amount equal to such individual's,
estate's or trust's share of such fees and expenses will
be added to the gross income of such holder and (ii) such
individual's, estate's or trust's share of such fees and
expenses will be treated as a miscellaneous itemized
deduction allowable subject to the limitation of Section
67 of the Code, which permits such deductions only to the
extent they exceed in the aggregate two percent of a
taxpayer's adjusted gross income. In addition, Section
68 of the Code provides that the amount of itemized
deductions otherwise allowable for an individual whose
adjusted gross income exceeds a specified amount will be
reduced by the lesser of (i) 3% of the excess of the
individual's adjusted gross income over such amount or
(ii) 80% of the amount of itemized deductions otherwise
allowable for the taxable year. The amount of additional
taxable income reportable by REMIC Certificateholders
that are subject to the limitations of either Section 67
or Section 68 of the Code may be substantial.
Furthermore, in determining the alternative minimum
taxable income of such a holder of a REMIC Certificate
that is an individual, estate or trust, or a "pass-
through entity" beneficially owned by one or more
individuals, estates or trusts, no deduction will be
allowed for such holder's allocable portion of servicing
fees and other miscellaneous itemized deductions of the
REMIC, even though an amount equal to the amount of such
fees and other deductions will be included in such
holder's gross income. Accordingly, such REMIC
Certificates may not be appropriate investments for
individuals, estates, or trusts, or pass-through entities
beneficially owned by one or more individuals, estates or
trusts. Such prospective investors should consult with
their tax advisors prior to making an investment in such
Certificates.
Sales of REMIC Certificates
If a REMIC Certificate is sold, the selling
Certificateholder will recognize gain or loss equal to
the difference between the amount realized on the sale
and its adjusted basis in the REMIC Certificate. The
adjusted basis of a REMIC Regular Certificate generally
will equal the cost of such REMIC Regular Certificate to
such Certificateholder, increased by income reported by
such Certificateholder with respect to such REMIC Regular
Certificate (including original issue discount and market
discount income) and reduced (but not below zero) by
distributions on such REMIC Regular Certificate received
by such Certificateholder and by any amortized premium.
The adjusted basis of a REMIC Residual Certificate will
be determined as described under "--Taxation of Owners of
REMIC Residual Certificates--Basis Rules, Net Losses and
Distributions" above. Except as described below, any
such gain or loss generally will be capital gain or loss.
The Code as of the date of this Prospectus provides for
a top marginal tax rate of 39.6% for individuals and a
maximum marginal rate for long-term capital gains of
individuals of 28%. No such rate differential exists for
corporations. In addition, the distinction between a
capital gain or loss and ordinary income or loss remains
relevant for other purposes.
Gain from the sale of a REMIC Regular Certificate
that might otherwise be capital gain will be treated as
ordinary income to the extent such gain does not exceed
the excess, if any, of (i) the amount that would have
been includible in the seller's income with respect to
such REMIC Regular Certificate had income accrued thereon
at a rate equal to 110% of the "applicable federal rate"
(generally, a rate based on an average of current yields
on Treasury securities having a maturity comparable to
that of the Certificate, which rate is computed and
published monthly by the IRS), determined as of the date
of purchase of such REMIC Regular Certificate, over (ii)
the amount of ordinary income actually includible in the
seller's income prior to such sale. In addition, gain
recognized on the sale of a REMIC Regular Certificate by
a seller who purchased such REMIC Regular Certificate at
a market discount will be taxable as ordinary income to
the extent of any accrued and previously unrecognized
market discount that accrued during the period the
Certificate was held. See "--Taxation of Owners of REMIC
Regular Certificates--Market Discount" above.
REMIC Certificates will be "evidences of
indebtedness" within the meaning of Section 582(c)(1) of
the Code, so that gain or loss recognized from the sale
of a REMIC Certificate by a bank or thrift institution to
which such section applies will be ordinary income or
loss.
A portion of any gain from the sale of a REMIC
Regular Certificate that might otherwise be capital gain
may be treated as ordinary income to the extent that such
Certificate is held as part of a "conversion transaction"
within the meaning of Section 1258 of the Code. A
conversion transaction generally is one in which the
taxpayer has taken two or more positions in Certificates
or similar property that reduce or eliminate market risk,
if substantially all of the taxpayer's return is
attributable to the time value of the taxpayer's net
investment in such transaction. The amount of gain so
realized in a conversion transaction that is
recharacterized as ordinary income generally will not
exceed the amount of interest that would have accrued on
the taxpayer's net investment at 120% of the appropriate
"applicable federal rate" (which rate is computed and
published monthly by the IRS) at the time the taxpayer
enters into the conversion transaction, subject to
appropriate reduction for prior inclusion of interest and
other ordinary income items from the transaction.
Finally, a taxpayer may elect to have net capital
gain taxed at ordinary income rates rather than capital
gains rates in order to include such net capital gain in
total net investment income for the taxable year, for
purposes of the limitation on the deduction of interest
on indebtedness incurred to purchase or carry property
held for investment to a taxpayer's net investment
income.
Except as may be provided in Treasury regulations
yet to be issued, if the seller of a REMIC Residual
Certificate reacquires the Certificate, any other
residual interest in a REMIC or any similar interest in
a "taxable mortgage pool" (as defined in Section 7701(i)
of the Code) within six months of the date of such sale,
the sale will be subject to the "wash sale" rules of
Section 1091 of the Code. In that event, any loss
realized by the REMIC Residual Certificateholder on the
sale will not be deductible, but instead will be added to
such REMIC Residual Certificateholder's adjusted basis in
the newly-acquired asset.
Prohibited Transactions and Other Possible REMIC
Taxes
The Code imposes a tax on REMICs equal to 100% of
the net income derived from "prohibited transactions"
(the "Prohibited Transactions Tax"). In general, subject
to certain specified exceptions a prohibited transaction
means the disposition of an item of Mortgage Collateral,
the receipt of income from a source other than an item of
Mortgage Collateral or certain other permitted
investments, the receipt of compensation for services, or
gain from the disposition of an asset purchased with the
payments on the Mortgage Collateral for temporary
investment pending distribution on the REMIC
Certificates. It is not anticipated that any REMIC will
engage in any prohibited transactions in which it would
recognize a material amount of net income.
In addition, certain contributions to a REMIC made
after the day on which the REMIC issues all of its
interests could result in the imposition of a tax on the
REMIC equal to 100% of the value of the contributed
property (the "Contributions Tax"). Each Pooling and
Servicing Agreement or Trust Agreement will include
provisions designed to prevent the acceptance of any
contributions that would be subject to such tax.
REMICs also are subject to federal income tax at the
highest corporate rate on "net income from foreclosure
property," determined by reference to the rules
applicable to real estate investment trusts. "Net income
from foreclosure property" generally means gain from the
sale of a foreclosure property that is inventory property
and gross income from foreclosure property other than
qualifying rents and other qualifying income for a real
estate investment trust. Unless otherwise disclosed in
the related Prospectus Supplement, it is not anticipated
that any REMIC will recognize "net income from
foreclosure property" subject to federal income tax.
Unless otherwise disclosed in the related Prospectus
Supplement, it is not anticipated that any material state
or local income or franchise tax will be imposed on any
REMIC.
Unless otherwise stated in the related Prospectus
Supplement, and to the extent permitted by then
applicable laws, any Prohibited Transactions Tax,
Contributions Tax, tax on "net income from foreclosure
property" or state or local income or franchise tax that
may be imposed on the REMIC will be borne by the related
Master Servicer, the Certificate Administrator or the
Trustee in either case out of its own funds, provided
that the Master Servicer, the Certificate Administrator
or the Trustee, as the case may be, has sufficient assets
to do so, and provided further that such tax arises out
of a breach of the Master Servicer's, the Certificate
Administrator's or the Trustee's obligations, as the case
may be, under the related Pooling and Servicing Agreement
or Trust Agreement and in respect of compliance with
applicable laws and regulations. Any such tax not borne
by the Master Servicer, the Certificate Administrator or
the Trustee will be payable out of the related Trust Fund
resulting in a reduction in amounts payable to holders of
the related REMIC Certificates.
Tax and Restrictions on Transfers of REMIC Residual
Certificates to Certain Organizations
If a REMIC Residual Certificate is transferred to a
"disqualified organization" (as defined below), a tax
would be imposed in an amount (determined under the REMIC
Regulations) equal to the product of (i) the present
value (discounted using the "applicable federal rate" for
obligations whose term ends on the close of the last
quarter in which excess inclusions are expected to accrue
with respect to the Certificate, which rate is computed
and published monthly by the IRS) of the total
anticipated excess inclusions with respect to such REMIC
Residual Certificate for periods after the transfer and
(ii) the highest marginal federal income tax rate
applicable to corporations. The anticipated excess
inclusions must be determined as of the date that the
REMIC Residual Certificate is transferred and must be
based on events that have occurred up to the time of such
transfer, the Prepayment Assumption and any required or
permitted clean up calls or required liquidation provided
for in the REMIC's organizational documents. Such a tax
generally would be imposed on the transferor of the REMIC
Residual Certificate, except that where such transfer is
through an agent for a disqualified organization, the tax
would instead be imposed on such agent. However, a
transferor of a REMIC Residual Certificate would in no
event be liable for such tax with respect to a transfer
if the transferee furnishes to the transferor an
affidavit that the transferee is not a disqualified
organization and, as of the time of the transfer, the
transferor does not have actual knowledge that such
affidavit is false. Moreover, an entity will not qualify
as a REMIC unless there are reasonable arrangements
designed to ensure that (i) residual interests in such
entity are not held by disqualified organizations and
(ii) information necessary for the application of the tax
described herein will be made available. Restrictions on
the transfer of REMIC Residual Certificates and certain
other provisions that are intended to meet this
requirement will be included in the Pooling and Servicing
Agreement or Trust Agreement, and will be discussed more
fully in any Prospectus Supplement relating to the
offering of any REMIC Residual Certificate.
In addition, if a "pass-through entity" (as defined
below) includes in income excess inclusions with respect
to a REMIC Residual Certificate, and a disqualified
organization is the record holder of an interest in such
entity, then a tax will be imposed on such entity equal
to the product of (i) the amount of excess inclusions on
the REMIC Residual Certificate that are allocable to the
interest in the pass-through entity held by such
disqualified organization and (ii) the highest marginal
federal income tax rate imposed on corporations. A
pass-through entity will not be subject to this tax for
any period, however, if each record holder of an interest
in such pass-through entity furnishes to such pass-
through entity (i) such holder's social security number
and a statement under penalties of perjury that such
social security number is that of the record holder or
(ii) a statement under penalties of perjury that such
record holder is not a disqualified organization.
For these purposes, a "disqualified organization"
means (i) the United States, any State or political
subdivision thereof, any foreign government, any
international organization, or any agency or
instrumentality of the foregoing (but would not include
instrumentalities described in Section 168(h)(2)(D) of
the Code or Freddie Mac), (ii) any organization (other
than a cooperative described in Section 521 of the Code)
that is exempt from federal income tax, unless it is
subject to the tax imposed by Section 511 of the Code or
(iii) any organization described in Section 1381(a)(2)(C)
of the Code. For these purposes, a "pass-through entity"
means any regulated investment company, real estate
investment trust, trust, partnership or certain other
entities described in Section 860E(e)(6) of the Code. In
addition, a person holding an interest in a pass-through
entity as a nominee for another person will, with respect
to such interest, be treated as a pass-through entity.
Termination
A REMIC will terminate immediately after the
Distribution Date following receipt by the REMIC of the
final payment in respect of the Mortgage Collateral or
upon a sale of the REMIC's assets following the adoption
by the REMIC of a plan of complete liquidation. The last
distribution on a REMIC Regular Certificate will be
treated as a payment in retirement of a debt instrument.
In the case of a REMIC Residual Certificate, if the last
distribution on such REMIC Residual Certificate is less
than the Certificateholder's adjusted basis in such
Certificate, such Certificateholder should be treated as
realizing a loss equal to the amount of such difference,
and such loss may be treated as a capital loss.
Reporting and Other Administrative Matters
Solely for purposes of the administrative provisions
of the Code, the REMIC will be treated as a partnership
and holders of REMIC Residual Certificates will be
treated as partners. Unless otherwise stated in the
related Prospectus Supplement, the Master Servicer or the
Certificate Administrator, as applicable, will file REMIC
federal income tax returns on behalf of the related REMIC
and will be designated as and will act as the "tax
matters person" for the REMIC in all respects, and may
hold a nominal amount of REMIC Residual Certificates.
As the tax matters person, the Master Servicer or
the Certificate Administrator, as applicable, subject to
certain notice requirements and various restrictions and
limitations, generally will have the authority to act on
behalf of the REMIC and the holders of REMIC Residual
Certificates in connection with the administrative and
judicial review of items of income, deduction, gain or
loss of the REMIC, as well as the REMIC's classification.
Holders of REMIC Residual Certificates generally will be
required to report such REMIC items consistently with
their treatment on the related REMIC's tax return and may
in some circumstances be bound by a settlement agreement
between the Master Servicer or the Certificate
Administrator, as applicable, as tax matters person, and
the IRS concerning any such REMIC item. Adjustments made
to the REMIC tax return may require a holder of a REMIC
Residual Certificate to make corresponding adjustments on
its return, and an audit of the REMIC's tax return, or
the adjustments resulting from such an audit, could
result in an audit of such Certificateholder's return.
No REMIC will be registered as a tax shelter pursuant to
Section 6111 of the Code because it is not anticipated
that any REMIC will have a net loss for any of the first
five taxable years of its existence. Any person that
holds a REMIC Residual Certificate as a nominee for
another person may be required to furnish to the related
REMIC, in a manner to be provided in Treasury
regulations, the name and address of such person and
other information.
Reporting of interest income, including any original
issue discount, with respect to REMIC Regular
Certificates is required annually, and may be required
more frequently under Treasury regulations. These
information reports generally are required to be sent to
individual holders of REMIC Regular Interests and the
IRS; holders of REMIC Regular Certificates that are
corporations, trusts, securities dealers and certain
other non-individuals will be provided interest and
original issue discount income information and the
information set forth in the following paragraph upon
request in accordance with the requirements of the
applicable regulations. The information must be provided
by the later of 30 days after the end of the quarter for
which the information was requested, or two weeks after
the receipt of the request. The REMIC must also comply
with rules requiring a REMIC Regular Certificate issued
with original issue discount to disclose on its face
certain information including the amount of original
issue discount and the issue date, and requiring such
information to be reported to the IRS. Reporting with
respect to the REMIC Residual Certificates, including
income, excess inclusions, investment expenses and
relevant information regarding qualification of the
REMIC's assets will be made as required under the
Treasury regulations, generally on a quarterly basis.
As applicable, the REMIC Regular Certificate
information reports will include a statement of the
adjusted issue price of the REMIC Regular Certificate at
the beginning of each accrual period. In addition, the
reports will include information required by regulations
with respect to computing the accrual of any market
discount. Because exact computation of the accrual of
market discount on a constant yield method requires
information relating to the holder's purchase price that
the Master Servicer or the Certificate Administrator will
not have, such regulations only require that information
pertaining to the appropriate proportionate method of
accruing market discount be provided. See "--Taxation of
Owners of REMIC Regular Certificates--Market Discount."
The responsibility for complying with the foregoing
reporting rules will be borne by the Master Servicer or
the Certificate Administrator. Certificateholders may
request any information with respect to the returns
described in Section 1.6049-7(e)(2) of the Treasury
regulations. Such request should be directed to the
Master Servicer or the Certificate Administrator, as
applicable, at Residential Funding Corporation, 8400
Normandale Lake Boulevard, Suite 600, Minneapolis,
Minnesota 55437.
Backup Withholding with Respect to REMIC
Certificates
Payments of interest and principal, as well as
payments of proceeds from the sale of REMIC Certificates,
may be subject to the "backup withholding tax" under
Section 3406 of the Code at a rate of 31% if recipients
of such payments fail to furnish to the payor certain
information, including their taxpayer identification
numbers, or otherwise fail to establish an exemption from
such tax. Any amounts deducted and withheld from a
distribution to a recipient would be allowed as a credit
against such recipient's federal income tax.
Furthermore, certain penalties may be imposed by the IRS
on a recipient of payments that is required to supply
information but that does not do so in the proper manner.
Foreign Investors in REMIC Certificates
A REMIC Regular Certificateholder that is not a
"United States person" and is not subject to federal
income tax as a result of any direct or indirect
connection to the United States in addition to its
ownership of a REMIC Regular Certificate will not be
subject to United States federal income or withholding
tax in respect of a distribution on a REMIC Regular
Certificate, provided that the holder complies to the
extent necessary with certain identification requirements
(including delivery of a statement, signed by the
Certificateholder under penalties of perjury, certifying
that such Certificateholder is not a United States person
and providing the name and address of such
Certificateholder). For these purposes, "United States
person" means a citizen or resident of the United States,
a corporation, partnership or other entity created or
organized in, or under the laws of, the United States or
any political subdivision thereof, or an estate or trust
whose income from sources without the United States is
includible in gross income for United States federal
income tax purposes regardless of its connection with the
conduct of a trade or business within the United States.
It is possible that the IRS may assert that the foregoing
tax exemption should not apply with respect to a REMIC
Regular Certificate held by a Certificateholder that owns
directly or indirectly a 10% or greater interest in the
REMIC Residual Certificates. If the holder does not
qualify for exemption, distributions of interest,
including distributions in respect of accrued original
issue discount, to such holder may be subject to a tax
rate of 30%, subject to reduction under any applicable
tax treaty.
In addition, the foregoing rules will not apply to
exempt a United States shareholder of a controlled
foreign corporation from taxation on such United States
shareholder's allocable portion of the interest income
received by such controlled foreign corporation.
Further, it appears that a REMIC Regular Certificate
would not be included in the estate of a non-resident
alien individual and would not be subject to United
States estate taxes. However, Certificateholders who are
non-resident alien individuals should consult their tax
advisors concerning this question.
Unless otherwise stated in the related Prospectus
Supplement, transfers of REMIC Residual Certificates to
investors that are not United States persons will be
prohibited under the related Pooling and Servicing
Agreement or Trust Agreement.
STATE AND OTHER TAX CONSEQUENCES
In addition to the federal income tax consequences
described in "Certain Federal Income Tax Consequences,"
potential investors should consider the state and local
tax consequences of the acquisition, ownership, and
disposition of the Certificates offered. State tax law
may differ substantially from the corresponding federal
tax law, and the discussion above does not purport to
describe any aspect of the tax laws of any state or other
jurisdiction. Therefore, prospective investors should
consult their tax advisors with respect to the various
tax consequences of investments in the Certificates
offered hereby.
ERISA CONSIDERATIONS
ERISA imposes certain fiduciary and prohibited
transaction restrictions on employee pension and welfare
benefit plans subject to ERISA ("ERISA Plans"). Section
4975 of the Code imposes similar prohibited transaction
restrictions on tax-qualified retirement plans described
in Section 401(a) of the Code ("Qualified Retirement
Plans") and on individual retirement accounts and
annuities ("IRAs") described in Section 408 of the Code
(collectively, "Tax-Favored Plans").
Certain employee benefit plans, such as governmental
plans (as defined in Section 3(32) of ERISA), are not
subject to the ERISA requirements discussed herein.
Accordingly, assets of such plans may be invested in
Certificates without regard to the ERISA considerations
described below, subject to the provisions of applicable
federal and state law. Any such plan that is a Qualified
Retirement Plan and exempt from taxation under Sections
401(a) and 501(a) of the Code, however, is subject to the
prohibited transaction rules set forth in Section 503 of
the Code.
In addition to imposing general fiduciary
requirements, including those of investment prudence and
diversification and the requirement that a Plan's
investment be made in accordance with the documents
governing the Plan, Section 406 of ERISA and Section 4975
of the Code prohibit a broad range of transactions
involving "plan assets" of ERISA Plans and Tax-Favored
Plans (collectively, "Plans") and persons ("Parties in
Interest" under ERISA or "Disqualified Persons" under the
Code) who have certain specified relationships to the
Plans, unless a statutory or administrative exemption is
available. Certain Parties in Interest (or Disqualified
Persons) that participate in a prohibited transaction may
be subject to a penalty (or an excise tax) imposed
pursuant to Section 502(i) of ERISA or Section 4975 of
the Code, unless a statutory or administrative exemption
is available.
Plan Asset Regulations
An investment of Plan Assets in Certificates may
cause the underlying Mortgage Loans, Contracts or Agency
Securities included in a Trust Fund to be deemed "plan
assets" of such Plan. The U.S. Department of Labor (the
"DOL") has promulgated regulations at 29 C.F.R. 2510.3-
101 (the "DOL Regulations") concerning whether or not a
Plan's assets would be deemed to include an interest in
the underlying assets of an entity (such as a Trust Fund)
for purposes of applying the general fiduciary
responsibility provisions of ERISA and the prohibited
transaction provisions of ERISA and the Code, when a Plan
acquires an "equity interest" (such as a Certificate) in
such entity. Because of the factual nature of certain of
the rules set forth in the DOL Regulations, Plan Assets
either may be deemed to include an interest in the assets
of an entity (such as a Trust Fund) or may be deemed
merely to include its interest in the instrument
evidencing such equity interest (such as a Certificate).
Therefore, neither Plans nor such entities should acquire
or hold Certificates in reliance upon the availability of
any exception under the DOL Regulations. For purposes of
this section, the term "plan assets" ("Plan Assets") or
"assets of a Plan" has the meaning specified in the DOL
Regulations and includes an undivided interest in the
underlying assets of certain entities in which a Plan
invests.
The prohibited transaction provisions of Section 406
of ERISA and Section 4975 of the Code may apply to a
Trust Fund and cause the Company, the Master Servicer,
the Certificate Administrator, any Servicer, any Sub-
Servicer, the Trustee, the obligor under any credit
enhancement mechanism or certain affiliates thereof to be
considered or become Parties in Interest or Disqualified
Persons with respect to an investing Plan (or of a Plan
holding an interest in such an entity). If so, the
acquisition or holding of Certificates by or on behalf of
the investing Plan could also give rise to a prohibited
transaction under ERISA and the Code, unless some
statutory or administrative exemption is available.
Certificates acquired by a Plan would be assets of that
Plan. Under the DOL Regulations, the Trust Fund,
including the Mortgage Loans, Contracts or Agency
Securities and the other assets held in the Trust Fund,
may also be deemed to be assets of each Plan that
acquires Certificates. Special caution should be
exercised before Plan Assets are used to acquire a
Certificate in such circumstances, especially if, with
respect to such assets, the Company, the Master Servicer,
the Certificate Administrator, any Servicer, any Sub-
Servicer, the Trustee, the obligor under any credit
enhancement mechanism or an affiliate thereof either (i)
has investment discretion with respect to the investment
of Plan Assets; or (ii) has authority or responsibility
to give (or regularly gives) investment advice with
respect to Plan Assets for a fee pursuant to an agreement
or understanding that such advice will serve as a primary
basis for investment decisions with respect to such Plan
Assets.
Any person who has discretionary authority or
control respecting the management or disposition of Plan
Assets, and any person who provides investment advice
with respect to such Plan Assets for a fee (in the manner
described above), is a fiduciary of the investing Plan.
If the Mortgage Loans, Contracts or Agency Securities
were to constitute Plan Assets, then any party exercising
management or discretionary control regarding those Plan
Assets may be deemed to be a Plan "fiduciary," and thus
subject to the fiduciary requirements of ERISA and the
prohibited transaction provisions of ERISA and Section
4975 of the Code with respect to any investing Plan. In
addition, if the Mortgage Loans, Contracts or Agency
Securities were to constitute Plan Assets, then the
acquisition or holding of Certificates by, on behalf of
or with Plan Assets, as well as the operation of the
Trust Fund, may constitute or involve a prohibited
transaction under ERISA and the Code.
Prohibited Transaction Exemption
On March 29, 1994, the DOL issued (with an effective
date of June 9, 1992) an individual exemption (the
"Exemption"), to Residential Funding and certain of its
affiliates, which generally exempts from the application
of the prohibited transaction provisions of Section 406
of ERISA, and the excise taxes imposed on such prohibited
transactions pursuant to Section 4975(a) and (b) of the
Code, certain transactions, among others, relating to the
servicing and operation of pools of certain secured
obligations such as Mortgage Loans, Cooperative Loans,
Contracts or Agency Securities which are held in a trust
and the purchase, sale and holding of pass-through
certificates issued by such a trust as to which (i) the
Company or any of its affiliates is the sponsor if any
entity which has received from the DOL an individual
prohibited transaction exemption which is similar to the
Exemption is the sole underwriter, or manager or co-
manager of the underwriting syndicate or a seller or
placement agent, or (ii) the Company or an affiliate is
the underwriter, provided that certain conditions set
forth in the Exemption are satisfied. For purposes of
this section, the term "Underwriter" shall include (a)
the Company and certain of its affiliates, (b) any person
directly or indirectly, through one or more
intermediaries, controlling, controlled by or under
common control with the Company and certain of its
affiliates, (c) any member of the underwriting syndicate
or selling group of which a person described in (a) or
(b) is a manager or co-manager with respect to a class of
Certificates, or (d) any entity which has received an
exemption from the DOL relating to Certificates which is
similar to the Exemption.
The Exemption sets forth six general conditions
which must be satisfied for a transaction involving the
purchase, sale and holding of Certificates to be eligible
for exemptive relief thereunder. First, the acquisition
of Certificates by a Plan or with Plan Assets must be on
terms that are at least as favorable to the Plan as they
would be in an arm's-length transaction with an unrelated
party. Second, the Exemption only applies to
Certificates evidencing rights and interests that are not
subordinated to the rights and interests evidenced by the
other Certificates of the same trust. Third, the
Certificates at the time of acquisition by a Plan or with
Plan Assets must be rated in one of the three highest
generic rating categories by Standard & Poor's Ratings
Group, Moody's Investors Service, Inc., Duff & Phelps,
Inc. or Fitch Investors Service, Inc. Fourth, the
Trustee cannot be an affiliate of any member of the
"Restricted Group" which consists of any underwriter, the
Company, the Master Servicer, the Certificate
Administrator, any Servicer, any Sub-Servicer and any
mortgagor with respect to assets of a Trust Fund
constituting more than 5% of the aggregate unamortized
principal balance of the assets in the related Trust Fund
as of the date of initial issuance of the Certificates.
Fifth, the sum of all payments made to and retained by
the underwriters must represent not more than reasonable
compensation for underwriting the Certificates; the sum
of all payments made to and retained by the Company
pursuant to the assignment of the assets to the related
Trust Fund must represent not more than the fair market
value of such obligations; and the sum of all payments
made to and retained by the Master Servicer, the
Certificate Administrator, any Servicer or any Sub-
Servicer must represent not more than reasonable
compensation for such person's services under the related
Pooling and Servicing Agreement or Trust Agreement and
reimbursement of such person's reasonable expenses in
connection therewith. Sixth, the Exemption states that
the investing Plan or Plan Asset investor must be an
accredited investor as defined in Rule 501(a)(1) of
Regulation D of the Commission under the Securities Act
of 1933, as amended.
A fiduciary of or other investor of Plan Assets
contemplating purchasing a Certificate must make its own
determination that the general conditions set forth above
will be satisfied with respect to such Certificate.
If the general conditions of the Exemption are
satisfied, the Exemption may provide an exemption from
the restrictions imposed by Sections 406(a) and 407 of
ERISA (as well as the excise taxes imposed by Sections
4975(a) and (b) of the Code by reason of Sections
4975(c)(1)(A) through (D) of the Code) in connection with
the direct or indirect sale, exchange, transfer, holding
or the direct or indirect acquisition or disposition in
the secondary market of Certificates by a Plan or with
Plan Assets. However, no exemption is provided from the
restrictions of Sections 406(a)(1)(E) and 406(a)(2) of
ERISA for the acquisition or holding of a Certificate by
a Plan or with Plan Assets of an Excluded Plan by any
person who has discretionary authority or renders
investment advice with respect to Plan Assets of such
Excluded Plan. For purposes of the Certificates, an
"Excluded Plan" is a Plan sponsored by any member of the
Restricted Group.
If certain specific conditions of the Exemption are
also satisfied, the Exemption may provide an exemption
from the restrictions imposed by Sections 406(b)(1) and
(b)(2) of ERISA and the taxes imposed by Section
4975(c)(1)(E) of the Code in connection with (1) the
direct or indirect sale, exchange or transfer of
Certificates in the initial issuance of Certificates
between the Company or an Underwriter and a Plan when the
person who has discretionary authority or renders
investment advice with respect to the investment of the
relevant Plan Assets in the Certificates is (a) a
mortgagor with respect to 5% or less of the fair market
value of the assets of a Trust Fund or (b) an affiliate
of such a person, (2) the direct or indirect acquisition
or disposition in the secondary market of Certificates by
a Plan or with Plan Assets and (3) the holding of
Certificates by a Plan or with Plan Assets.
Additionally, if certain specific conditions of the
Exemption are satisfied, the Exemption may provide an
exemption from the restrictions imposed by Sections
406(a), 406(b) and 407 of ERISA, and the taxes imposed by
Sections 4975(a) and (b) of the Code by reason of Section
4975(c) of the Code, for transactions in connection with
the servicing, management and operation of the Mortgage
Pools and Contract Pools. The Company expects that the
specific conditions of the Exemption required for this
purpose will be satisfied with respect to the
Certificates so that the Exemption would provide an
exemption from the restrictions imposed by Sections
406(a) and (b) of ERISA (as well as the excise taxes
imposed by Sections 4975(a) and (b) of the Code by reason
of Section 4975(c) of the Code) for transactions in
connection with the servicing, management and operation
of the Mortgage Pools and Contract Pools, provided that
the general conditions of the Exemption are satisfied.
The Exemption also may provide an exemption from the
restrictions imposed by Sections 406(a) and 407(a) of
ERISA, and the taxes imposed by Section 4975(a) and (b)
of the Code by reason of Sections 4975(c)(1)(A) through
(D) of the Code if such restrictions are deemed to
otherwise apply merely because a person is deemed to be
a "party in interest" (within the meaning of Section
3(14) of ERISA) or a "disqualified person" (within the
meaning of Section 4975(e)(2) of the Code) with respect
to an investing Plan (or the investing entity holding
Plan Assets) by virtue of providing services to the Plan
or such Plan Assets (or by virtue of having certain
specified relationships to such a person) solely as a
result of the ownership of Certificates by a Plan or such
Plan Asset investor.
Before purchasing a Certificate, a fiduciary or
other investor of Plan Assets should itself confirm (a)
that the Certificates constitute "certificates" for
purposes of the Exemption and (b) that the specific and
general conditions set forth in the Exemption and the
other requirements set forth in the Exemption would be
satisfied. In addition to making its own determination
as to the availability of the exemptive relief provided
in the Exemption, the fiduciary or other investor of Plan
Assets should consider its general fiduciary obligations
under ERISA in determining whether to purchase any
Certificates with Plan Assets.
Any fiduciary or other investor of Plan Assets that
proposes to purchase Certificates on behalf of or with
Plan Assets should consult with its counsel with respect
to the potential applicability of ERISA and the Code to
such investment and the availability of the Exemption or
any other prohibited transaction exemption in connection
therewith. In particular, in connection with a
contemplated purchase of Certificates representing a
beneficial ownership interest in a pool of single-family
residential first Mortgage Loans or Agency Certificates,
such fiduciary or other Plan investor should consider the
availability of the Exemption or Prohibited Transaction
Class Exemption 83-1 ("PTCE 83-1") for certain
transactions involving mortgage pool investment trusts.
The Prospectus Supplement with respect to a series of
Certificates may contain additional information regarding
the application of the Exemption, PTCE 83-1, or any other
exemption, with respect to the Certificates offered
thereby. However, PTCE 83-1 does not provide exemptive
relief with respect to Certificates evidencing interests
in Trust Funds which include Contracts or Cooperative
Loans.
Tax-Exempt Investors
A Plan that is exempt from federal income taxation
pursuant to Section 501 of the Code (a "Tax-Exempt
Investor") nonetheless will be subject to federal income
taxation to the extent that its income is "unrelated
business taxable income" ("UBTI") within the meaning of
Section 512 of the Code. All "excess inclusions" of a
REMIC allocated to a REMIC Residual Certificate held by
a Tax-Exempt Investor will be considered UBTI and thus
will be subject to federal income tax. See "Certain
Federal Income Tax Consequences--Taxation of Owners of
REMIC Residual Certificates--Excess Inclusions."
Consultation with Counsel
Any fiduciary or other investor of Plan Assets that
proposes to acquire or hold Certificates on behalf of or
with Plan Assets of any Plan should consult with its
counsel with respect to the potential applicability of
the fiduciary responsibility provisions of ERISA and the
prohibited transaction provisions of ERISA and the Code
to the proposed investment and the Exemption, the
availability of PTCE 83-1 or any other prohibited
transaction exemption.
LEGAL INVESTMENT MATTERS
Each class of Certificates offered hereby and by the
related Prospectus Supplement will be rated at the date
of issuance in one of the four highest rating categories
by at least one Rating Agency. Unless otherwise
specified in the related Prospectus Supplement, each such
class that is, and continues to be, rated in one of the
two highest rating categories by at least one nationally
recognized statistical rating organization will
constitute "mortgage related securities" for purposes of
the Secondary Mortgage Market Enhancement Act of 1984, as
amended ("SMMEA"), and, as such, will be legal
investments for persons, trusts, corporations,
partnerships, associations, business trusts and business
entities (including depository institutions, life
insurance companies and pension funds) created pursuant
to or existing under the laws of the United States or of
any State whose authorized investments are subject to
state regulation to the same extent that, under
applicable law, obligations issued by or guaranteed as to
principal and interest by the United States or any agency
or instrumentality thereof constitute legal investments
for such entities. Under SMMEA, if a State enacted
legislation on or prior to October 3, 1991 specifically
limiting the legal investment authority of any such
entities with respect to "mortgage related securities,"
such securities will constitute legal investments for
entities subject to such legislation only to the extent
provided therein. Certain States enacted legislation
which overrides the preemption provisions of SMMEA.
SMMEA provides, however, that in no event will the
enactment of any such legislation affect the validity of
any contractual commitment to purchase, hold or invest in
"mortgage related securities," or require the sale or
other disposition of such securities, so long as such
contractual commitment was made or such securities
acquired prior to the enactment of such legislation.
SMMEA also amended the legal investment authority of
federally-chartered depository institutions as follows:
federal savings and loan associations and federal savings
banks may invest in, sell or otherwise deal with
"mortgage related securities" without limitation as to
the percentage of their assets represented thereby,
federal credit unions may invest in such securities, and
national banks may purchase such securities for their own
account without regard to the limitations generally
applicable to investment securities set forth in 12
U.S.C. 24 (Seventh), subject in each case to such
regulations as the applicable federal regulatory
authority may prescribe.
The Federal Financial Institutions Examination
Council has issued a supervisory policy statement (the
"Policy Statement") applicable to all depository
institutions, setting forth guidelines for and
significant restrictions on investments in "high-risk
mortgage securities." The Policy Statement has been
adopted by the Federal Reserve Board, the Office of the
Comptroller of the Currency, the FDIC and the Office of
Thrift Supervision (the "OTS") with an effective date of
February 10, 1992. The Policy Statement generally
indicates that a mortgage derivative product will be
deemed to be high risk if it exhibits greater price
volatility than a standard fixed-rate thirty-year
mortgage security. According to the Policy Statement,
prior to purchase, a depository institution will be
required to determine whether a mortgage derivative
product that it is considering acquiring is high-risk
and, if so, that the proposed acquisition would reduce
the institution's overall interest rate risk. Reliance
on analysis and documentation obtained from a securities
dealer or other outside party without internal analysis
by the institution would be unacceptable. There can be
no assurance as to which classes of Certificates will be
treated as high-risk under the Policy Statement.
The predecessor to the OTS issued a bulletin,
entitled "Mortgage Derivative Products and Mortgage
Swaps," which is applicable to thrift institutions
regulated by the OTS. The bulletin established
guidelines for the investment by savings institutions in
certain "high-risk" mortgage derivative securities and
limitations on the use of such securities by insolvent,
undercapitalized or otherwise "troubled" institutions.
According to the bulletin, such "high-risk" mortgage
derivative securities include securities having certain
specified characteristics, which may include certain
classes of Certificates. In addition, the National
Credit Union Administration has issued regulations
governing federal credit union investments which prohibit
investment in certain specified types of securities,
which may include certain classes of Certificates.
Similar policy statements have been issued by regulators
having jurisdiction over other types of depository
institutions.
Certain classes of Certificates offered hereby,
including any class that is not rated in one of the two
highest rating categories by at least one nationally
recognized statistical rating organization, will not
constitute "mortgage related securities" for purposes of
SMMEA. Any such class of Certificates will be identified
in the related Prospectus Supplement. Prospective
investors in such classes of Certificates, in particular,
should consider the matters discussed in the following
paragraph.
There may be other restrictions on the ability of
certain investors either to purchase certain classes of
Certificates or to purchase any class of Certificates
representing more than a specified percentage of the
investors' assets. The Company will make no
representations as to the proper characterization of any
class of Certificates for legal investment or other
purposes, or as to the ability of particular investors to
purchase any class of Certificates under applicable legal
investment restrictions. These uncertainties may
adversely affect the liquidity of any class of
Certificates. Accordingly, all investors whose
investment activities are subject to legal investment
laws and regulations, regulatory capital requirements or
review by regulatory authorities should consult with
their own legal advisors in determining whether and to
what extent the Certificates of any class constitute
legal investments or are subject to investment, capital
or other restrictions, and, if applicable, whether SMMEA
has been overridden in any jurisdiction relevant to such
investor.
USE OF PROCEEDS
Unless otherwise specified in the related Prospectus
Supplement, substantially all of the net proceeds to be
received from the sale of Certificates will be applied by
the Company to finance the purchase of, or to repay
short-term loans incurred to finance the purchase of, the
Mortgage Collateral underlying the Certificates or will
be used by the Company for general corporate purposes.
The Company expects that it will make additional sales of
securities similar to the Certificates from time to time,
but the timing and amount of any such additional
offerings will be dependent upon a number of factors,
including the volume of mortgage loans, contracts or
mortgage securities purchased by the Company, prevailing
interest rates, availability of funds and general market
conditions.
METHODS OF DISTRIBUTION
The Certificates offered hereby and by the related
Prospectus Supplements will be offered in series through
one or more of the methods described below. The
Prospectus Supplement prepared for each series will
describe the method of offering being utilized for that
series and will state the net proceeds to the Company
from such sale.
The Company intends that Certificates will be
offered through the following methods from time to time
and that offerings may be made concurrently through more
than one of these methods or that an offering of a
particular series of Certificates may be made through a
combination of two or more of these methods. Such
methods are as follows:
1. by negotiated firm commitment or best
efforts underwriting and public
re-offering by underwriters;
2. by placements by the Company with
institutional investors through dealers; and
3. by direct placements by the Company with
institutional investors.
In addition, if specified in the related Prospectus
Supplement, a series of Certificates may be offered in
whole or in part in exchange for the Mortgage Collateral
(and other assets, if applicable) that would comprise the
Trust Fund for such Certificates.
If underwriters are used in a sale of any
Certificates (other than in connection with an
underwriting on a best efforts basis), such Certificates
will be acquired by the underwriters for their own
account and may be resold from time to time in one or
more transactions, including negotiated transactions, at
fixed public offering prices or at varying prices to be
determined at the time of sale or at the time of
commitment therefor. Such underwriters may be
broker-dealers affiliated with the Company whose
identities and relationships to the Company will be as
set forth in the related Prospectus Supplement. The
managing underwriter or underwriters with respect to the
offer and sale of a particular series of Certificates
will be set forth on the cover of the Prospectus
Supplement relating to such series and the members of the
underwriting syndicate, if any, will be named in such
Prospectus Supplement.
In connection with the sale of the Certificates,
underwriters may receive compensation from the Company or
from purchasers of the Certificates in the form of
discounts, concessions or commissions. Underwriters and
dealers participating in the distribution of the
Certificates may be deemed to be underwriters in
connection with such Certificates, and any discounts or
commissions received by them from the Company and any
profit on the resale of Certificates by them may be
deemed to be underwriting discounts and commissions under
the Securities Act of 1933, as amended.
It is anticipated that the underwriting agreement
pertaining to the sale of any series of Certificates will
provide that the obligations of the underwriters will be
subject to certain conditions precedent, that the
underwriters will be obligated to purchase all such
Certificates if any are purchased (other than in
connection with an underwriting on a best efforts basis)
and that, in limited circumstances, the Company will
indemnify the several underwriters and the underwriters
will indemnify the Company against certain civil
liabilities, including liabilities under the Securities
Act of 1933, as amended, or will contribute to payments
required to be made in respect thereof.
The Prospectus Supplement with respect to any series
offered by placements through dealers will contain
information regarding the nature of such offering and any
agreements to be entered into between the Company and
purchasers of Certificates of such series.
The Company anticipates that the Certificates
offered hereby will be sold primarily to institutional
investors or sophisticated non-institutional investors.
Purchasers of Certificates, including dealers, may,
depending on the facts and circumstances of such
purchases, be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, as amended, in
connection with reoffers and sales by them of
Certificates. Holders of Certificates should consult
with their legal advisors in this regard prior to any
such reoffer or sale.
LEGAL MATTERS
Certain legal matters will be passed upon for the
Company by Orrick, Herrington & Sutcliffe, New York, New
York, or by Thacher Proffitt & Wood, New York, New York,
as specified in the Prospectus Supplement.
FINANCIAL INFORMATION
The Company has determined that its financial
statements are not material to the offering made hereby.
ADDITIONAL INFORMATION
The Company has filed with the Commission a
Registration Statement under the Securities Act of 1933,
as amended, with respect to the Certificates (the
"Registration Statement"). This Prospectus, which forms
a part of the Registration Statement, omits certain
information contained in such Registration Statement
pursuant to the Rules and Regulations of the Commission.
The Company is also subject to certain of the information
requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and, accordingly, will file
reports thereunder with the Commission. The Registration
Statement and the exhibits thereto, and reports and other
information filed by the Company pursuant to the Exchange
Act can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at certain of
its Regional Offices located as follows: Chicago
Regional Office, Northwestern Atrium Center, 500 West
Madison Street, Suite 1401, Chicago, Illinois 60661-2511;
and New York Regional Office, 7 World Trade Center, New
York, New York 10048. Copies of such material can also
be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates.
Copies of Freddie Mac's most recent offering
circular for Freddie Mac Certificates, Freddie Mac's
information statement and most recent supplement to such
information statement and any quarterly report made
available by Freddie Mac can be obtained by writing or
calling the Investor Relations Department of Freddie Mac
at Post Office Box 4112, Reston, Virginia 22090 (outside
the Washington, D.C. metropolitan area, telephone 800-
424-5401, ext. 8160; within the Washington, D.C.
metropolitan area, telephone 703-759-8160). Copies of
Fannie Mae's most recent prospectus for Fannie Mae
Certificates and Fannie Mae's annual report and quarterly
financial statements, as well as other financial
information, are available from the Director of Investor
Relations of Fannie Mae, 3900 Wisconsin Avenue, N.W.,
Washington, D.C. 20016 (202-537-7115). The Company does
not, and will not, participate in the preparation of
Freddie Mac's offering circulars, information statements
or any supplements thereto or any of its quarterly
reports or Fannie Mae's prospectuses or any of its
reports, financial statements or other information and,
accordingly, makes no representations as to the accuracy
or completeness of the information set forth therein.
INDEX OF PRINCIPAL DEFINITIONS
Accrual Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Advance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Affiliated Seller. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Agency Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Agency Securities Pool . . . . . . . . . . . . . . . . . . . . . . . . . . .13
AlterNet Mortgage Program. . . . . . . . . . . . . . . . . . . . . . . . . .14
AlterNet Program Seller. . . . . . . . . . . . . . . . . . . . . . . . . . .21
AlterNet Seller Guide. . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Appraised Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
ARM Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Balloon Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Balloon Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Bankruptcy Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
Bankruptcy Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
Beneficial Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Bi-Weekly Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Buy-Down Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Buy-Down Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Buy-Down Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Certificate Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Certificate Administrator. . . . . . . . . . . . . . . . . . . . . . . . . . 1
Certificate Insurance Policy . . . . . . . . . . . . . . . . . . . . . . . .47
Certificate Registrar. . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 5
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Compensating Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Contract Pool. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Contract Pool Insurance
Policy . . . . . . . . . . . . . . . . . . . . . . . .45
Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 3
Contributions Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .83
Conventional Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Convertible Mortgage Loan. . . . . . . . . . . . . . . . . . . . . . . . . .16
Cooperative Dwellings. . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Cooperative Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Cooperative Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
Cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Custodial Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Cut-off Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Debt Service Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . .46
Defaulted Mortgage Loss. . . . . . . . . . . . . . . . . . . . . . . . . . .43
Deferred Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Deficient Valuation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Disqualified Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . .86
Distribution Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Distribution Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
DOL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .86
DOL Regulations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .86
DTC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
DTC Registered Certificates. . . . . . . . . . . . . . . . . . . . . . . . .25
Due Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Eligible Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ERISA Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .86
Escrow Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .92
Excluded Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .88
Exemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .87
Extraordinary Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Fannie Mae Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . .12
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
FHA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
FHA Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
FHA Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Fraud Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
Fraud Loss Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
Freddie Mac. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Freddie Mac Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Freddie Mac Securities . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Garn-St Germain Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . .65
Ginnie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
GMAC Mortgage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
GNMA Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
GPM Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Gross Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Housing Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
HUD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Indirect Participants. . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
IRAs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .86
Issue Premium. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78
Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
Letter of Credit Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . .43
Liquidated Contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Liquidated Mortgage Loan . . . . . . . . . . . . . . . . . . . . . . . . . .40
Liquidation Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
Loan-to-Value Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Manufactured Home. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Mark-to-Market Regulations . . . . . . . . . . . . . . . . . . . . . . . . .81
Master Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Master Servicer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Maximum Mortgage Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Minimum Mortgage Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Modified Mortgage Loan . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Mortgage Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 3
Mortgage Collateral Seller . . . . . . . . . . . . . . . . . . . . . . . . . 6
Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 3
Mortgage Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Mortgage Pool. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Mortgage Pool Insurance
Policy . . . . . . . . . . . . . . . . . . . . . . . .44
Mortgage Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Mortgaged Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Mortgages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Mortgagor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Mortgagors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Neg-Am ARM Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Net Mortgage Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
Nonrecoverable Advance . . . . . . . . . . . . . . . . . . . . . . . . . . .31
OID Regulations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71
OTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .90
Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Parties in Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . .86
Pass-Through Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Percentage Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Periodic Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Permitted Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . .29
Plan Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .87
Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .86
Policy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .90
Pool Insurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
Pooling and Servicing
Agreement. . . . . . . . . . . . . . . . . . . . . .1, 3
Prepayment Interest Shortfall. . . . . . . . . . . . . . . . . . . . . . . .34
Primary Insurance Policy . . . . . . . . . . . . . . . . . . . . . . . . . .49
Primary Insurer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
Principal Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Program Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Prohibited Transactions Tax. . . . . . . . . . . . . . . . . . . . . . . . .83
PTCE 83-1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .89
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Qualified Insurer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
Qualified Retirement Plans . . . . . . . . . . . . . . . . . . . . . . . . .86
Qualified Substitute Contract. . . . . . . . . . . . . . . . . . . . . . . .24
Qualified Substitute Mortgage
Loan . . . . . . . . . . . . . . . . . . . . . . . . .24
Rating Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Realized Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . .92
REMIC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
REMIC Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71
REMIC Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71
REMIC Regular Certificates . . . . . . . . . . . . . . . . . . . . . . . . .71
REMIC Regulations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71
REMIC Residual Certificates. . . . . . . . . . . . . . . . . . . . . . . . .71
REO Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
REO Mortgage Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Repurchased Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Repurchased Mortgage Loan. . . . . . . . . . . . . . . . . . . . . . . . . .24
Reserve Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
Residential Funding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Restricted Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .88
RTC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Senior Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Senior Percentage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
Senior/Subordinate Series. . . . . . . . . . . . . . . . . . . . . . . . . .25
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Servicing Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Servicing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Single Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
SMMEA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .89
Special Hazard Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . .42
Special Hazard Insurance
Policy . . . . . . . . . . . . . . . . . . . . . . . .45
Special Hazard Insurer . . . . . . . . . . . . . . . . . . . . . . . . . . .45
Special Hazard Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
Special Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Spread . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Stated Principal Balance . . . . . . . . . . . . . . . . . . . . . . . . . .42
Strip Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Sub-Servicing Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . .36
Subordinate Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Surety Bond. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
Tax-Exempt Investor. . . . . . . . . . . . . . . . . . . . . . . . . . . . .89
Tax-Favored Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .86
Tiered REMICs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .72
Title V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66
Title VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66
Trust Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 3
Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1, 3
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
UBTI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .89
UCC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
Unaffiliated Seller. . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
VA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
VA Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
VA Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Other Expenses of Issuance and Distribution (Item 14 of
Form S-3).
The expenses expected to be incurred in connection
with the issuance and distribution of the Certificates
being registered, other than underwriting compensation,
are as set forth below. All such expenses, except for
the filing fee, are estimated.
Filing Fee for Registration Statement $ 689,660
Legal Fees and Expenses 1,780,000
Accounting Fees and Expenses 625,000
Trustee's Fees and Expenses
(including counsel fees) 300,000
Blue Sky Fees and Expenses 45,000
Printing and Engraving Fees 625,000
Rating Agency Fees 750,000
Miscellaneous 50,000
Total $4,864,660
Indemnification of Directors and Officers (Item 15 of
Form S-3).
The Pooling and Servicing Agreements or the Trust
Agreements, as applicable will provide that no director,
officer, employee or agent of the Registrant is liable to
the Trust Fund or the Certificateholders, except for such
person's own willful misfeasance, bad faith, gross
negligence in the performance of duties or reckless
disregard of obligations and duties. The Pooling and
Servicing Agreements or the Trust Agreements, as
applicable, will further provide that, with the
exceptions stated above, a director, officer, employee or
agent of the Registrant is entitled to be indemnified
against any loss, liability or expense incurred in
connection with legal action relating to such Pooling and
Servicing Agreements or the Trust Agreements. as
applicable, and related Certificates other than such
expenses related to particular Mortgage Loans or
Contracts.
Any underwriters who execute an Underwriting
Agreement in the form filed as Exhibit 1.1 to this
Registration Statement will agree to indemnify the
Registrant's directors and its officers who signed this
Registration Statement against certain liabilities which
might arise under the Securities Act of 1933 from certain
information furnished to the Registrant by or on behalf
of such indemnifying party.
Subsection (a) of Section 145 of the General
Corporation Law of Delaware empowers a corporation to
indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an
action by or in the right of the corporation) by reason
of the fact that he is or was a director, employee or
agent of the corporation or is or was serving at the
request of the corporation as a director, officer,
employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any
criminal action or proceeding, had no cause to believe
his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation
to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason
of the fact that such person acted in any of the
capacities set forth above, against expenses (including
attorneys' fees) actually and reasonably incurred by him
in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no
indemnification may be made in respect to any claim,
issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only
to the extent that the Court of Chancery or the court in
which such action or suit was brought shall determine
that despite the adjudication of liability such person is
fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper.
Section 145 further provides that to the extent a
director, officer, employee or agent of a corporation has
been successful in the defense of any action, suit or
proceeding referred to in subsections (a) and (b) or in
the defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him
in connection therewith; that indemnification or
advancement of expenses provided for by Section 145 shall
not be deemed exclusive of any other rights to which the
indemnified party may be entitled; and empowers the
corporation to purchase and maintain insurance on behalf
of a director, officer, employee or agent of the
corporation against any liability asserted against him or
incurred by him in any such capacity or arising out of
his status as such whether or not the corporation would
have the power to indemnify him against such liabilities
under Section 145.
The By-Laws of the Registrant provide, in effect,
that to the extent and under the circumstances permitted
by subsections (a) and (b) of Section 145 of the General
Corporation Law of the State of Delaware, the Registrant
(i) shall indemnify and hold harmless each person who was
or is a party or is threatened to be made a party to any
action, suit or proceeding described in subsections (a)
and (b) by reason of the fact that he is or was a
director or officer, or his testator or intestate is or
was a director or officer of the Registrant, against
expenses, judgments, fines and amounts paid in
settlement, and (ii) shall indemnify and hold harmless
each person who was or is a party or is threatened to be
made a party to any such action, suit or proceeding if
such person is or was serving at the request of the
Registrant as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or
other enterprise.
Pursuant to separate agreements, Residential Funding
has also agreed to indemnify certain officers and
directors of the Registrant, to the extent and under the
circumstances permitted by subsections (a) and (b) of
Section 145 of the General Corporation Law of Delaware,
against all threatened, pending or completed actions,
suits and proceedings by reason of their service as
officers or directors of the Registrant.
Exhibits (Item 16 of Form S-3).
Exhibits--
1.1 -- Form of Underwriting Agreement.
3.1 -- Certificate of Incorporation.
3.2 -- By-Laws.
4.1 -- Form of Pooling and Servicing Agreement.
4.2 -- Form of Trust Agreement.
5.1 -- Opinion of Orrick, Herrington &
Sutcliffe with respect to legality.
5.2 -- Opinion of Thacher Proffitt & Wood with
respect to legality.
8.1 -- Opinion of Orrick, Herrington &
Sutcliffe with respect to certain tax
matters.
8.2 -- Opinion of Thacher Proffitt & Wood with
respect to certain tax matters (included
with Exhibit 5.2).
23.1 -- Consent of Orrick, Herrington &
Sutcliffe (included as part of Exhibit
5.1 and Exhibit 8.1).
23.2 -- Consent of Thacher Proffitt & Wood
(included as part of Exhibit 5.2 and
Exhibit 8.2).
24.1 -- Power of Attorney.
Undertakings (Item 17 of Form S-3).
The Registrant hereby undertakes:
(a)(1) To file, during any period in which
offers or sales are being made, a post-effective
amendment to this Registration Statement (i) to include
any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, (ii) to reflect in the prospectus
any facts or events arising after the effective date of
the registration statement (or the most recent
post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement, and
(iii) to include any material information with respect to
the plan of distribution not previously disclosed in this
Registration Statement or any material change to such
information in this Registration Statement.
(2) That, for the purpose of determining any
liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of
a post-effective amendment any of the securities being
registered which remain unsold at the termination of the
offering.
(b) The undersigned Registrant hereby undertakes
that, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's
annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new
Registration Statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted
to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the
securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, Residential Asset Securities Corporation
certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3
and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Minneapolis, State of
Minnesota, on the 12th day of December, 1994.
RESIDENTIAL ASSET SECURITIES CORPORATION
By: /s/ Keenen W. Dammen
Keenen W. Dammen
President
Pursuant to the requirements of the Securities
Act of 1933, this Registration Statement has been signed
below by the following persons in the capacities and on
the dates indicated:
SIGNATURE TITLE DATE
/s/ Mark L. Korell Director December 12, 1994
Mark L. Korell
/s/ John D. Finnegan Director December 12, 1994
John D. Finnegan
/s/ Bruce J. Paradis Director December 12, 1994
Bruce J. Paradis
/s/ Keenen W. Dammen President and Chief December 12, 1994
Keenen W. Dammen Executive Officer
(Principal Executive
Officer)
/s/ Davee L. Olson Treasurer and Chief December 12, 1994
Davee L. Olson Financial Officer
(Principal Financial
Officer)
/s/ Scott T. Young Controller (Principal December 12, 1994
Scott T. Young Accounting Officer)
EXHIBIT 1.1
RESIDENTIAL ASSET SECURITIES CORPORATION
[Mortgage] [Manufactured Housing Contract]
Pass-Through Certificates, Series 199_-___
FORM OF
UNDERWRITING AGREEMENT
_________, 199__
[Name of Underwriter]
Ladies and Gentlemen:
Residential Asset Securities Corporation a
Delaware corporation (the "Company"), proposes to sell
to _______________________________ (the "Underwriter")
[Mortgage] [Manufactured Housing] Pass-Through
Certificates, Series 199[_]-[___], Class A-1, Class A-
2, [Class A-3,] [Class A-4,] Class A-5, Class R [(other
than a de minimis portion thereof) and Class M
Certificates] (collectively, the "Certificates"),
having the aggregate principal amounts and Pass-Through
Rates set forth above. The Certificates, together with
the [Class A-3] and [Class B Certificates] of the same
series, will evidence the entire beneficial interest in
the Trust Fund (as defined in the [Pooling and
Servicing] [Trust] Agreement referred to below)
consisting primarily of a pool (the "Pool") of [one- to
four-family first lien mortgage loans (the "Mortgage
Loans")] [Manufactured Housing Contracts (the
"Contracts")] [or interests therein] [GNMA Certificates
(collectively, the "Agency Securities")] as described
in the Prospectus Supplement (as hereinafter defined)
to be sold by the Company. [A de minimis portion of
the Class R Certificates will not be sold hereunder and
will be held by Residential Funding Corporation
("Residential Funding").]
The Certificates will be issued pursuant to [a
pooling and servicing agreement] [a trust agreement]
[(the "Pooling and Servicing Agreement")] [(the "Trust
Agreement")] to be dated as of ________ 1, 199_ (the
"Cut-off Date") among the Company, as company,
[Residential Funding Corporation [____], as [master]
servicer[s], and ________________________________ (the
"Trustee"). The Certificates are described more fully
in the Basic Prospectus and the Prospectus Supplement
(each as hereinafter defined) which the Company has
furnished to the Underwriter.
1. Representations, Warranties and Covenants.
1.1 The Company represents and warrants to,
and agrees with, the Underwriter that:
(a) The Company has filed with the
Securities and Exchange Commission (the
"Commission") a registration statement (No.
33-_____) on Form S-3 for the registration under
the Securities Act of 1933, as amended (the
"Act"), of [Mortgage] [Manufactured Housing
Contract] Pass-Through Certificates (issuable in
series), including the Certificates, which
registration statement has become effective, and a
copy of which, as amended to the date hereof, has
heretofore been delivered to the Underwriter. The
Company proposes to file with the Commission
pursuant to Rule 424(b) under the rules and
regulations of the Commission under the Act (the
"1933 Act Regulations") a supplement dated
__________, 199_ (the "Prospectus Supplement"), to
the prospectus dated ________, 199_ (the "Basic
Prospectus"), relating to the Certificates and the
method of distribution thereof. Such registration
statement (No. 33-_____ including exhibits thereto
and any information incorporated by reference
therein, as amended at the date hereof, is
hereinafter called the "Registration Statement";
and the Basic Prospectus and the Prospectus
Supplement and any information incorporated by
reference therein, together with any amendment
thereof or supplement thereto authorized by the
Company prior to the Closing Date for use in
connection with the offering of the Certificates,
are hereinafter called the "Prospectus". Any
preliminary form of the Prospectus Supplement
which has heretofore been filed pursuant to Rule
424, or prior to the effective date of the
Registration Statement, pursuant to Rule 402(a) or
424(a) is hereinafter called a "Preliminary
Prospectus Supplement".
(b) The Registration Statement has
become effective, and the Registration Statement
as of its effective date (the "Effective Date"),
and the Prospectus, as of the date of the
Prospectus Supplement, complied in all material
respects with the applicable requirements of the
Act and the 1933 Act Regulations; and the
Registration Statement, as of the Effective Date,
did not contain any untrue statement of a material
fact and did 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 of the date of the Prospectus
Supplement, did not, and as of the Closing Date
will not, contain an untrue statement of a mater-
ial 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 neither the
Company nor Residential Funding makes any
representations or warranties as to the
information contained in or omitted from the
Registration Statement or the Prospectus or any
amendment thereof or supplement thereto relating
to the information identified by underlining or
other highlighting as shown in Exhibit E (the
"Excluded Information"); and provided, further,
that neither the Company nor Residential Funding
makes any representations or warranties as to
either (i) any information in any Computational
Materials (as hereinafter defined) required to be
provided by the Underwriter to the Company
pursuant to Section 4.2, except to the extent of
any information set forth therein that constitutes
Pool Information (as defined below), or (ii) as to
any information contained in or omitted from the
portions of the Prospectus identified by
underlining or other highlighting as shown in
Exhibit F (the "Underwriter Information"). As
used herein, "Pool Information" means information
with respect to the characteristics of the
[Mortgage Loans] [Contracts] and administrative
and servicing fees, as provided by or on behalf of
the Company or Residential Funding to the
Underwriter in final form and set forth in the
Prospectus Supplement. The Company acknowledges
that, except for any Computational Materials, the
Underwriter Information constitutes the only
information furnished in writing by the
Underwriter or on behalf of the Underwriter for
use in connection with the preparation of the
Registration Statement, any preliminary prospectus
or the Prospectus, and the Underwriter confirms
that such Underwriter Information is correct.
(c) The Company has been duly
incorporated and is validly existing as a
corporation in good standing under the laws of the
State of Delaware and has the requisite corporate
power to own its properties and to conduct its
business as presently conducted by it.
(d) This Agreement has been duly
authorized, executed and delivered by the Company.
(e) As of the Closing Date (as defined
below) the Certificates will conform in all
material respects to the description thereof
contained in the Prospectus and the
representations and warranties of the Company in
the [Pooling and Servicing] [Trust] Agreement will
be true and correct.
1.2 Residential Funding represents and
warrants to and agrees with the Underwriter that as of
the Closing Date the representations and warranties of
Residential Funding in the [Pooling and Servicing]
[Trust] Agreement will be true and correct.
1.3 The Underwriter represents and
warrants to and agrees with the Company that:
(a) [omitted]
(b) [omitted]
(c) [omitted]
(d) [omitted]
(e) The Underwriter hereby certifies
that (i) with respect to any class of Certificates
issued in authorized denominations of less than
$25,000, the fair market value of each such
Certificate on the date of initial sale thereof by
the Underwriter will not be less than $100,000,
and (ii) with respect to each class of
Certificates to be maintained on the book-entry
records of The Depository Trust Company ("DTC"),
the interest in each such class of Certificates
sold to any person on the date of initial sale
thereof by the Underwriter will not be less than
an initial Certificate Principal Balance of
$25,000.
(f) The Underwriter will use its best
reasonable efforts to cause Trepp & Co. to issue a
commitment letter, prior to the Closing Date, to
DTC stating that Trepp & Co. will value the DTC
Registered Certificates (hereinafter defined) on
an ongoing basis subsequent to the Closing Date.
(g) [omitted]
(h) [omitted]
(i) The Underwriter will have funds
available at ________________ in the Underwriter's
account at such bank at the time all documents are
executed and the closing of the sale of the
Certificates is completed except for the transfer
of funds and the delivery of the Certificates.
Such funds will be available for immediate
transfer into the account of Residential Funding
maintained at such bank.
(j) As of the date hereof and as of the
Closing Date, the Underwriter has complied with
all of its obligations hereunder including
Section 4.2, and, with respect to all
Computational Materials provided by the
Underwriter to the Company pursuant to Section
4.2, if any, such Computational Materials are
accurate (except to the extent of any errors
therein that are caused by errors in the Pool
Information). The Computational Materials
provided by the Underwriter to the Company
constitute a complete set of all Computational
Materials that are required to be filed with the
Commission.
2. Purchase and Sale. Subject to the terms and
conditions and in reliance upon the representations and
warranties herein set forth, the Company agrees to sell
to the Underwriter, and the Underwriter agrees to
purchase from the Company, the Certificates at a price
equal to ____________% of the aggregate principal
balance of the Certificates as of the Closing Date.
There will be added to the purchase price of the
Certificates an amount equal to interest accrued
thereon from the Cut-off Date to but not including the
Closing Date.
3. Delivery and Payment. Delivery of and
payment for the Certificates shall be made at the
office of [Thacher Proffitt & Wood] [Orrick, Herrington
& Sutcliffe] at 10:00 a.m., New York City time, on
__________, 199_, or such later date as the Underwriter
shall designate, which date and time may be postponed
by agreement between the Underwriter and the Company
(such date and time of delivery and payment for the
Certificates being herein called the "Closing Date").
Delivery of the Certificates shall be made to you
through the Depository Trust Company ("DTC") (such
Certificates, the "DTC Registered Certificates").
4. Offering by Underwriter.
4.1 It is understood that the Underwriter
proposes to offer the Certificates for sale to the
public as set forth in the Prospectus and the
Underwriter agrees that all such offers and sales by
the Underwriter shall be made in compliance with all
applicable laws and regulations.
4.2 It is understood that you may prepare
and provide to prospective investors certain
Computational Materials in connection with your
offering of the Certificates, subject to the following
conditions:
(a) The Underwriter shall comply with
all applicable laws and regulations in connection
with the use of Computational Materials, including
the No-Action Letter of May 20, 1994 issued by the
Commission to Kidder, Peabody Acceptance
Corporation I, Kidder, Peabody & Co. Incorporated
and Kidder Structured Asset Corporation, as made
applicable to other issuers and underwriters by
the Commission in response to the request of the
Public Securities Association dated May 24, 1994
(collectively, the "Kidder/PSA Letter").
(b) For purposes hereof, "Computational
Materials" as used herein shall have the meaning
given such term in the Kidder/PSA Letter, but
shall include only those Computational Materials
that have been prepared or delivered to
prospective investors by or at the direction of
the Underwriter.
(c) All Computational Materials (except
those identified to the Company on the date
hereof) provided to prospective investors that are
required to be filed pursuant to the Kidder/PSA
Letter shall bear a legend on each page including
the following statement:
"THE INFORMATION HEREIN HAS BEEN
PROVIDED SOLELY BY
_________________________________
[name of Underwriter]. NEITHER THE
ISSUER OF THE CERTIFICATES NOR ANY
OF ITS AFFILIATES MAKES ANY
REPRESENTATION AS TO THE ACCURACY
OR COMPLETENESS OF THE INFORMATION
HEREIN. THE INFORMATION HEREIN IS
PRELIMINARY, AND WILL BE SUPERSEDED
BY THE APPLICABLE PROSPECTUS
SUPPLEMENT AND BY ANY OTHER
INFORMATION SUBSEQUENTLY FILED WITH
THE SECURITIES AND EXCHANGE
COMMISSION.
The Company shall have the right to require
additional specific legends or notations to appear
on any Computational Materials, the right to
require changes regarding the use of terminology
and the right to determine the types of
information appearing therein. Notwithstanding
the foregoing, this subsection (c) will be
satisfied if all such Computational Materials bear
a legend in the form set forth in Exhibit H
hereto.
(d) The Underwriter shall provide the
Company with representative forms of all
Computational Materials prior to their first use,
to the extent such forms have not previously been
approved by the Company for use by the
Underwriter. The Underwriter shall provide to the
Company, for filing on Form 8-K as provided in
Section 5.9, copies (in such format as required by
the Company) of all Computational Materials that
are required to be filed with the Commission
pursuant to the Kidder/PSA Letter. The
Underwriter may provide copies of the foregoing in
a consolidated or aggregated form including all
information required to be filed. All
Computational Materials described in this
subsection (d) must be provided to the Company not
later than 10:00 a.m. New York time one business
day before filing thereof is required pursuant to
the terms of this Agreement.
(e) All information included in the
Computational Materials shall be generated based
on substantially the same methodology and
assumptions that are used to generate the
information in the Prospectus Supplement as set
forth therein; provided, however, that the
Computational Materials may include information
based on alternative assumptions if specified
therein. If any Computational Materials that are
required to be filed were based on assumptions
with respect to the Pool that differ from the
final Pool Information in any material respect or
on Certificate structuring terms that were revised
prior to the printing of the Prospectus, the
Underwriter shall prepare revised Computational
Materials based on the final Pool Information and
structuring assumptions, circulate such revised
Computational Materials to all recipients of the
preliminary versions thereof and include such
revised Computational Materials (marked, "as
revised") in the materials delivered to the
Company pursuant to subsection (d) above.
(f) The Company shall not be obligated
to file any Computational Materials that have been
determined to contain any material error or
omission, except any such Computational Materials
filed together with the corrected Computational
Materials. In the event that any Computational
Materials are determined, within the period which
the Prospectus relating to the Certificates is
required to be delivered under the Act, to contain
a material error or omission, the Underwriter
shall prepare a corrected version of such
Computational Materials, shall circulate such
corrected Computational Materials to all
recipients of the prior versions thereof and shall
deliver copies of such corrected Computational
Materials (marked, "as corrected") to the Company
for filing with the Commission in a subsequent
Form 8-K submission (subject to the Company's
obtaining an accountant's comfort letter in
respect of such corrected Computational Materials,
which shall be at the expense of the Underwriter).
(g) If the Underwriter does not provide
any Computational Materials to the Company
pursuant to subsection (d) above, the Underwriter
shall be deemed to have represented, as of the
Closing Date, that it did not provide any
prospective investors with any information in
written or electronic form in connection with the
offering of the Certificates that is required to
be filed with the Commission in accordance with
the Kidder/PSA Letter, and the Underwriter shall
provide the Company with a certification to that
effect on the Closing Date.
(h) In the event of any delay in the
delivery by the Underwriter to the Company of all
Computational Materials required to be delivered
in accordance with subsection (d) above, or in the
delivery of the accountant's comfort letter in
respect thereof pursuant to Section 5.9, the
Company shall have the right to delay the release
of the Prospectus to investors or to the
Underwriter, to delay the Closing Date and to take
other appropriate actions in each case as
necessary in order to allow the Company to comply
with its agreement set forth in Section 5.9 to
file the Computational Materials by the time
specified therein.
(i) The Underwriter represents that it
has in place, and covenants that it shall maintain
internal controls and procedures which it
reasonably believes to be sufficient to ensure
full compliance with all applicable legal
requirements of the Kidder/PSA Letter with respect
to the generation and use of Computational
Materials in connection with the offering of the
Certificates.
4.3 The Underwriter further agrees that on
or prior to the fifth day after the Closing Date, it
shall provide the Company with a certificate,
substantially in the form of Exhibit G attached hereto,
setting forth (i) in the case of each class of
Certificates, (a) if less than 10% of the aggregate
principal balance of such class of Certificates has
been sold to the public as of such date, the value
calculated pursuant to clause (b)(iii) of Exhibit G
hereto, or, (b) if 10% or more of such class of
Certificates has been sold to the public as of such
date but no single price is paid for at least 10% of
the aggregate principal balance of such class of
Certificates, then the weighted average price at which
the Certificates of such class were sold expressed as a
percentage of the principal balance of such class of
Certificates sold, or (c) the first single price at
which at least 10% of the aggregate principal balance
of such class of Certificates was sold to the public,
(ii) the prepayment assumption used in pricing each
class of Certificates, and (iii) such other information
as to matters of fact as the Company may reasonably
request in writing to enable it to comply with its
reporting requirements with respect to each class of
Certificates to the extent such information can in the
good faith judgment of the Underwriter be determined by
it.
5. Agreements. The Company agrees with the
Underwriter that:
5.1 Before amending or supplementing the
Registration Statement or the Prospectus with respect
to the Certificates, the Company will furnish the
Underwriter a copy of each such proposed amendment or
supplement.
5.2 The Company will cause the Prospectus to
be transmitted to the Commission for filing pursuant to
Rule 424(b) under the Act by means reasonably
calculated to result in filing with the Commission
pursuant to said rule.
5.3 If, during the period after the first
date of the public offering of the Certificates in
which a prospectus relating to the Certificates is
required to be delivered under the Act, any event
occurs as a result of which it is necessary to amend or
supplement the Prospectus, as then amended or supple-
mented, in order to make the statements therein, in the
light of the circumstances when the Prospectus is
delivered to a purchaser, not misleading, or if it
shall be necessary to amend or supplement the
Prospectus to comply with the Act or the 1933 Act
Regulations, the Company promptly will prepare and
furnish, at its own expense, to the Underwriter, either
amendments or supplements to the Prospectus so that the
statements in the Prospectus as so amended or
supplemented will not, in the light of the circum-
stances when the Prospectus is delivered to a
purchaser, be misleading or so that the Prospectus will
comply with law.
5.4 The Company will furnish to the
Underwriter, without charge, a copy of the Registration
Statement (including exhibits thereto) and, so long as
delivery of a prospectus by an underwriter or dealer
may be required by the Act, as many copies of the
Prospectus, any documents incorporated by reference
therein and any amendments and supplements thereto as
the Underwriter may reasonably request.
5.5 The Company agrees, so long as the
Certificates shall be outstanding, or until such time
as the Underwriter shall cease to maintain a secondary
market in the Certificates, whichever first occurs, to
deliver to the Underwriter the annual statement as to
compliance delivered to the Trustee pursuant to
[Section 3.18 of the Pooling and Servicing Agreement]
[Section 3.05 of the Trust Agreement] [and the annual
statement of a firm of independent public accountants
furnished to the Trustee pursuant to Section 3.19 of
the Pooling and Servicing Agreement], as soon as such
statements are furnished to the Company.
5.6 The Company will endeavor to arrange for
the qualification of the Certificates for sale under
the laws of such jurisdictions as the Underwriter may
reasonably designate and will maintain such
qualification in effect so long as required for the
initial distribution of the Certificates; provided,
however, that the Company shall not be required to
qualify to do business in any jurisdiction where it is
not now so qualified or to take any action that would
subject it to general or unlimited service of process
in any jurisdiction where it is not now so subject.
5.7 If the transactions contemplated by this
Agreement are consummated, the Company or Residential
Funding will pay or cause to be paid all expenses
incident to the performance of the obligations of the
Company and Residential Funding under this Agreement,
and will reimburse the Underwriter for any reasonable
expenses (including reasonable fees and disbursements
of counsel) reasonably incurred by the Underwriter in
connection with qualification of the Certificates for
sale and determination of their eligibility for
investment under the laws of such jurisdictions as the
Underwriter has reasonably requested pursuant to
Section 5.6 above and the printing of memoranda
relating thereto, for any fees charged by investment
rating agencies for the rating of the Certificates, and
for expenses incurred in distributing the Prospectus
(including any amendments and supplements thereto) to
the Underwriter. Except as herein provided, the
Underwriter shall be responsible for paying all costs
and expenses incurred by it, including the fees and
disbursements of its counsel, in connection with the
purchase and sale of the Certificates.
5.8 If, during the period after the Closing
Date in which a prospectus relating to the Certificates
is required to be delivered under the Act, the Company
receives notice that a stop order suspending the
effectiveness of the Registration Statement or
preventing the offer and sale of the Certificates is in
effect, the Company will advise the Underwriter of the
issuance of such stop order.
5.9 The Company shall file the Computational
Materials (if any) provided to it by the Underwriter
under Section 4.2(d) with the Commission pursuant to a
Current Report on Form 8-K by 10:00 a.m. on the morning
the Prospectus is delivered to the Underwriter;
provided, however, that prior to such filing of the
Computational Materials by the Company, the Underwriter
must comply with its obligations pursuant to Section
4.2 and the Company must receive a letter from
_________________, certified public accountants,
satisfactory in form and substance to the Company,
Residential Funding and their respective counsels, to
the effect that such accountants have performed certain
specified procedures, all of which have been agreed to
by the Company, as a result of which they determined
that all information that is included in the
Computational Materials (if any) provided by the
Underwriter to the Company for filing on Form 8-K, as
provided in Section 4.2 and this Section 5.9, is
accurate. The foregoing letter shall be at the expense
of the Underwriter. The Company also will file with
the Commission within fifteen days of the issuance of
the Certificates a Current Report on Form 8-K (for
purposes of filing the Pooling and Servicing
Agreement).
6. Conditions to the Obligations of the Under-
writer. The Underwriter's obligation to purchase the
Certificates shall be subject to the following
conditions:
6.1 No stop order suspending the
effectiveness of the Registration Statement shall be in
effect, and no proceedings for that purpose shall be
pending or, to the knowledge of the Company, threatened
by the Commission; and the Prospectus Supplement shall
have been filed or transmitted for filing, by means
reasonably calculated to result in a filing with the
Commission pursuant to Rule 424(b) under the Act.
6.2 Since _________, 199_ there shall have
been no material adverse change (not in the ordinary
course of business) in the condition of the Company or
Residential Funding.
6.3 The Company shall have delivered to the
Underwriter a certificate, dated the Closing Date, of
the President, a Senior Vice President or a Vice
President of the Company to the effect that the signer
of such certificate has examined this Agreement, the
Prospectus, the Pooling and Servicing Agreement and
various other closing documents, and that, to the best
of his or her knowledge after reasonable investigation:
(a) the representations and warranties
of the Company in this Agreement and in the
[Pooling and Servicing] [Trust] Agreement are true
and correct in all material respects; and
(b) the Company has complied, in all
material respects, with all the agreements and
satisfied all the conditions on its part to be
performed or satisfied hereunder at or prior to
the Closing Date.
6.4 Residential Funding shall have delivered
to the Underwriter a certificate, dated the Closing
Date, of the President, a Senior Vice President or a
Vice President of Residential Funding to the effect
that the signer of such certificate has examined the
[Pooling and Servicing] [Trust] Agreement and this
Agreement and that, to the best of his or her knowledge
after reasonable investigation, the representations and
warranties of Residential Funding contained in the
[Pooling and Servicing] [Trust] Agreement and in this
Agreement are true and correct in all material
respects.
6.5 The Underwriter shall have received the
opinion of [Orrick, Herrington & Sutcliffe] [Thacher
Proffitt & Wood] special counsel for the Company dated
the Closing Date substantially to the effect set forth
in Exhibit A-1 and the opinion of ________________,
general counsel for the Company and Residential
Funding, dated the Closing Date substantially to the
effect set forth in Exhibit A-2.
6.6 The Underwriter shall have received from
____________, counsel for the Underwriter, an opinion
dated the Closing Date substantially to the effect set
forth in Exhibit B in form and substance satisfactory
to the Underwriter.
6.7 The Underwriter shall have received from
_________________, certified public accountants, a
letter dated the date hereof and satisfactory in form
and substance to the Underwriter and the Underwriter's
counsel, to the effect that they have performed certain
specified procedures, all of which have been agreed to
by the Underwriter, as a result of which they
determined that certain information of an accounting,
financial or statistical nature set forth in the
Prospectus Supplement under the captions "Description
of the Mortgage Pool", ["Pooling and Servicing
Agreement"] ["The Trust Agreement"], "Description of
the Certificates" and "Certain Yield and Prepayment
Considerations" agrees with the records of the Company
excluding any questions of legal interpretation.
6.8 The Class [A] Certificates shall have
been rated "___" by ________________________________
and _______ [and the Class M Certificates shall have
been rated "__" by ___________________________].
6.9 The Underwriter shall have received the
opinion of ______________, counsel to the Trustee,
dated the Closing Date, substantially to the effect set
forth in Exhibit C.
6.10 The Underwriter shall have received the
opinion of _______________, special Minnesota tax
counsel for Residential Funding, dated the Closing
Date, substantially to the effect set forth in Exhibit
D.
The Company will furnish the Underwriter with conformed
copies of the above opinions, certificates, letters and
documents as the Underwriter reasonably requests.
7. Indemnification and Contribution.
7.1 The Company and Residential Funding,
jointly and severally, agree to indemnify and hold
harmless the Underwriter and each person, if any, who
controls the Underwriter within the meaning of either
Section 15 of the Act or Section 20 of the Securities
Exchange Act of 1934, from and against any and all
losses, claims, damages and liabilities caused by any
untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement
for the registration of the Certificates as originally
filed or in any amendment thereof or other filing
incorporated by reference therein, or in the Prospectus
or other filing incorporated by reference therein (if
used within the period set forth in Section 5.3 hereof
and as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto),
or caused by any omission or alleged omission to state
therein a material fact required to be stated therein
or necessary to make the statements therein, in light
of the circumstances under which they are made, not
misleading, except insofar as such losses, claims,
damages, or liabilities are caused by any such untrue
statement or omission or alleged untrue statement or
omission based upon information furnished in writing to
the Company by the Underwriter expressly for use
therein, provided that none of the Company, Residential
Funding and the Underwriter will be liable in any case
to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such
untrue statement or alleged untrue statement or
omission or alleged omission made therein relating to
the Excluded Information.
7.2 The Underwriter agrees to indemnify and
hold harmless the Company, Residential Funding, their
respective directors or officers and any person
controlling the Company or Residential Funding to the
same extent as the indemnity set forth in clause 7.1
above from the Company and Residential Funding to the
Underwriter, but only with respect to (i) the
Underwriter Information and (ii) the Computational
Materials, except to the extent of any errors in the
Computational Materials that are caused by errors in
the Pool Information. In addition, the Underwriter
agrees to indemnify and hold harmless the Company,
Residential Funding, their respective directors or
officers and any person controlling the Company or
Residential Funding against any and all losses, claims,
damages, liabilities and expenses (including, without
limitation, reasonable attorneys' fees) caused by,
resulting from, relating to, or based upon any legend
regarding original issue discount on any Certificate
resulting from incorrect information provided by the
Underwriter in the certificates described in Section 4
hereof.
7.3 In case any proceeding (including any
governmental investigation) shall be instituted
involving any person in respect of which indemnity may
be sought pursuant to either Section 7.1 or 7.2, such
person (the "indemnified party") shall promptly notify
the person against whom such indemnity may be sought
(the "indemnifying party") in writing and the indem-
nifying 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 reasonable 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 reasonable 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. 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 reasonable fees and
expenses of more than one separate firm for all such
indemnified parties. Such firm shall be designated in
writing by the Underwriter, in the case of parties
indemnified pursuant to Section 7.1 and by the Company
or Residential Funding, in the case of parties
indemnified pursuant to Section 7.2. The indemnifying
party may, at its option, at any time upon written
notice to the indemnified party, assume the defense of
any proceeding and may designate counsel satisfactory
to the indemnified party in connection therewith
provided that the counsel so designated would have no
actual or potential conflict of interest in connection
with such representation. Unless it shall assume the
defense of any proceeding 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 be 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. If the indemnifying party assumes the
defense of any proceeding, it shall be entitled to
settle such proceeding with the consent of the
indemnified party or, if such settlement provides for
release of the indemnified party in connection with all
matters relating to the proceeding which have been
asserted against the indemnified party in such
proceeding by the other parties to such settlement,
without the consent of the indemnified party.
7.4 If the indemnification provided for in
this Section 7 is unavailable to an indemnified party
under Section 7.1 or 7.2 hereof or insufficient in
respect of any losses, claims, damages or liabilities
referred to therein, then the indemnifying party, in
lieu of indemnifying such indemnified party, shall
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 not only the relative benefits
received by the indemnified party on the one hand and
the indemnifying party on the other from the offering
of the Certificates but also the relative fault of the
indemnified party on the one hand and of the
indemnifying party, on the other in connection with the
statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault
of the indemnified party on the one hand and of the
indemnifying party on the other shall be determined by
reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact
relates to information supplied by the indemnified
party or by the indemnifying party, and the parties'
relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or
omission.
7.5 The Company, Residential Funding and the
Underwriter agree that it would not be just and
equitable if contribution pursuant to this Section 7
were determined by pro rata allocation or by any other
method of allocation which does not take account of the
considerations referred to in Section 7.4 above. The
amount paid or payable by an indemnified party as a
result of the losses, claims, damages and liabilities
referred to in this Section 7 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 except where the
indemnified party is required to bear such expenses
pursuant to Section 7.4; which expenses the
indemnifying party shall pay as and when incurred, at
the request of the indemnified party, to the extent
that the indemnifying party believes that it will be
ultimately obligated to pay such expenses. In the
event that any expenses so paid by the indemnifying
party are subsequently determined to not be required to
be borne by the indemnifying party hereunder, the party
which received such payment shall promptly refund the
amount so paid to the party which made such payment.
No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall
be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
7.6 The indemnity and contribution
agreements contained in this Section 7 and the
representations and warranties of the Company and
Residential Funding in this Agreement shall remain
operative and in full force and effect regardless of
(i) any termination of this Agreement, (ii) any
investigation made by the Underwriter or on behalf of
the Underwriter or any person controlling the
Underwriter or by or on behalf of the Company or
Residential Funding and their respective directors or
officers or any person controlling the Company or
Residential Funding and (iii) acceptance of and payment
for any of the Certificates.
8. Termination. This Agreement shall be subject
to termination by notice given to the Company and
Residential Funding, if the sale of the Certificates
provided for herein is not consummated because of any
failure or refusal on the part of the Company or
Residential Funding to comply with the terms or to
fulfill any of the conditions of this Agreement, or if
for any reason the Company or Residential Funding shall
be unable to perform their respective obligations under
this Agreement. If the Underwriter terminates this
Agreement in accordance with this Section 8, the
Company or Residential Funding will reimburse the
Underwriter for all reasonable out-of-pocket expenses
(including reasonable fees and disbursements of
counsel) that shall have been reasonably incurred by it
in connection with the proposed purchase and sale of
the Certificates.
9. Certain Representations and Indemnities to
Survive. The respective agreements, representations,
warranties, indemnities and other statements of the
Company, Residential Funding or the officers of any of
the Company, Residential Funding and the Underwriter
set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any
investigation, or statement as to the results thereof,
made by the Underwriter or on the Underwriter's behalf
or made by or on behalf of the Company or Residential
Funding or any of their respective officers, directors
or controlling persons, and will survive delivery of
and payment for the Certificates.
10. Notices. All communications hereunder will
be in writing and effective only on receipt, and will
be mailed, delivered or telegraphed and confirmed to
the Underwriter at Attention: or, if sent to the
Company, will be mailed, delivered or telegraphed and
confirmed to it at Residential Asset Securities
Corporation, __________________, Attention:
_____________ or, if sent to Residential Funding will
be mailed, delivered or telegraphed and confirmed to it
at Residential Funding Corporation, 8400 Normandale
Lake Boulevard, Suite 600, Minneapolis, Minnesota
55437, Attention: ___________________.
11. Successors. This Agreement will inure to the
benefit of and be binding upon the parties hereto and
their respective successors and the officers and
directors and controlling persons referred to in
Section 7 hereof, and their successors and assigns, and
no other person will have any right or obligation
hereunder.
12. Applicable Law. THIS AGREEMENT WILL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK.
13. Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be
deemed an original, which taken together shall
constitute one and the same instrument.
<PAGE>
If the foregoing is in accordance with your under-
standing of our agreement, please sign and return to us
a counterpart of this Underwriting Agreement, whereupon
this letter and your acceptance shall represent a
binding agreement among the Company, Residential
Funding and the Underwriter.
Very truly yours,
RESIDENTIAL ASSET SECURITIES CORPORATION
By:
Name:
Title:
RESIDENTIAL FUNDING CORPORATION
By:
Name:
Title:
The foregoing Underwriting Agreement
is hereby confirmed and accepted as of
the date first above written.
[NAME OF UNDERWRITER]
By:
Name:
Title:
<PAGE>
EXHIBIT A-1
[ORRICK, HERRINGTON & SUTCLIFFE/
THACHER PROFFITT & WOOD LETTERHEAD]
[DATE]
Residential Asset
Securities Corporation
[8400 Normandale Lake Boulevard
Minneapolis, Minnesota 55437]
[The Underwriter]
Re: Residential Asset Securities Corporation
[Mortgage] [Manufactured Housing
Contract]
Pass-Through Certificates, Series 199_-___
Ladies and Gentlemen:
We have acted as special counsel to
Residential Asset Securities Corporation (the
"Company") and Residential Funding Corporation (the
"Master Servicer") in connection with the issuance and
sale by the Company of [Mortgage] [Manufactured Housing
Contract] Pass-Through Certificates, Series 199_-___
(the "Certificates") pursuant to a [pooling and
servicing] [trust] agreement, dated as of _______ 1,
19__ [(the "Pooling and Servicing Agreement"), among
the Company, [________, as Certificate Administrator
(the "Certificate Administrator")] [the [Master]
Servicer[s]] and __________________________, as trustee
(the "Trustee"). The Certificates consist of [
classes designated as Class A-1, Class A-2, Class A-4,
Class A-5, (collectively, the "Class A Certificates");
Class R (the "Class R Certificates"; together with the
Class A Certificates, the "Senior Certificates"); Class
M (the "Class M Certificates"); and Class B (the "Class
B Certificates"). The Class A Certificates [, the
Class R Certificates] and the Class M Certificates are
referred to herein as the "Offered Certificates").]
The Certificates will evidence the entire
undivided interest in a trust fund (the "Trust Fund")
consisting primarily of a pool of [one- to four-family
first mortgage loans (the "Mortgage Loans")]
[manufactured housing contracts (the "Contracts")] [or
interests therein] [[______] GNMA Certificates (the
"Agency Securities")]. The Offered Certificates are
included in a Registration Statement on Form S-3
(File No. 33-_____) filed by the Company with the
Securities and Exchange Commission (the "Commission")
on _______, 199_, and declared effective on _______,
199_ (as amended as of the date hereof, the
"Registration Statement"), and were offered by the
prospectus dated _______, 199_, as supplemented by the
prospectus supplement dated __________, 199_ (together,
the "Prospectus"), filed with the Commission pursuant
to Rule 424(b) of the rules and regulations of the
Commission under the Securities Act of 1933, as amended
(the "Act").
The Company will sell to
_________________________, (the "Underwriter") the
Class A [, the Class R Certificates (other than a de
minimis portion thereof] and Class M Certificates
("Offered Certificates") pursuant to an Underwriting
Agreement, dated __________, 199_, among the Company,
and the Underwriter (the "Underwriting Agreement"; the
Pooling and Servicing Agreement, the Assignment and
Assumption Agreement between the [Master] Servicer and
the Company, dated _______ (the "Assignment and
Assumption Agreement") and the Underwriting Agreement,
collectively, the "Agreements"). Capitalized terms
used but not defined herein shall have the meanings set
forth in the Agreements. This opinion letter is
rendered pursuant to Section 6.5 of the Underwriting
Agreement.
In arriving at the opinion expressed below,
we have examined and relied on the following documents:
(a) executed copies of the Agreements;
(b) the articles of incorporation and bylaws
of the Company and [the [Master]
Servicer[s]];
(c) good standing certificates from the
Secretary of State of the State of
Delaware concerning the Company and [the
Certificate Administrator] [the [Master]
Servicer[s]];
(d) resolutions adopted by the Board of
Directors of the Company at a meeting
held on __________, 199_, authorizing,
among other things, the issuance of
series of certificates registered under
the Registration Statement;
(e) resolutions adopted by the Board of
Directors of the ____________
[Certificate Administrator] as of
________, 199_, authorizing, among other
things, the sale of the [Mortgage Loans]
[Contracts] [Agency Securities];
(f) a Certificate of Approval executed by
the _______________________ and the
_______________________ of the Company,
authorizing, among other things, the
issuance of the Certificates;
(g) the Registration Statement;
(h) the Prospectus;
(i) the forms of the Certificates; and
(j) the documents delivered by the Company
and the [Certificate Administrator]
[[Master] Servicer[s]] on the Closing
Date pursuant to the Agreements.
In addition, we have examined and relied, as
to factual matters, on the representations of the
Company in the Agreements and on originals or copies
certified or otherwise identified to our satisfaction
of all such corporate records of the Company and such
other instruments and other certificates of public
officials, officers and representatives of the Company
and the Trustee, and we have made such investigations
of law, as we have deemed appropriate as a basis for
the opinion expressed below.
Based upon such examination and having regard
for legal considerations which we deem relevant, we are
of the following opinion:
1. The Registration Statement has become
effective under the Act, and, to our
knowledge, no stop order suspending the
effectiveness of the Registration Statement
has been issued and not withdrawn, and no
proceedings for that purpose have been
instituted or threatened under Section 8(d)
of the Act.
2. The Registration Statement, as of the date it
became effective, and the Prospectus, as of
the date of the Prospectus Supplement, other
than any financial or statistical information
or Computational Materials contained therein
as to which we express no opinion, complied
as to form in all material respects with the
requirements of the Act and the applicable
rules and regulations thereunder.
3. To our knowledge, there are no material
contracts, indentures, or other documents
(not including Computational Materials) of a
character required to be described or
referred to in either the Registration
Statement or the Prospectus or to be filed as
exhibits to the Registration Statement other
than those described or referred to therein
or filed as exhibits thereto.
4. The Offered Certificates, when duly and
validly executed and authenticated in
accordance with the Pooling and Servicing
Agreement and paid for and delivered in
accordance with the Underwriting Agreement,
will be entitled to the benefits of the
Pooling and Servicing Agreement.
5. The statements set forth in the Prospectus
under the heading "Description of the
Certificates," insofar as such statements
purport to summarize certain provisions of
the Certificates and the Pooling and
Servicing Agreement, are correct in all
material respects. The statements set forth
in the Basic Prospectus under the headings
"Certain Federal Income Tax Consequences,"
"Certain Legal Aspects of Mortgage Loans and
Contracts and Related Matters--Applicability
of Usury Laws," "--Alternative Mortgage
Instruments," and "ERISA Considerations" and
in the Prospectus Supplement under the
headings "Certain Federal Income Tax
Consequences" and "ERISA Considerations," to
the extent that they constitute matters of
federal law or legal conclusions with respect
thereto, are correct in all material
respects.
[6. The [Class A] Certificates will be "mortgage
related securities," as defined in Section
3(a)(41) of the Securities Exchange Act of
1934, as amended, so long as such
Certificates are rated in one of the two
highest rating categories by at least one
nationally recognized statistical rating
organization.]
7. The Pooling and Servicing Agreement is not
required to be qualified under the Trust
Indenture Act of 1939, as amended, and the
Trust Fund created by the Pooling and
Servicing Agreement is not required to be
registered under the Investment Company Act
of 1940, as amended.
8. No consent, approval, authorization or order
of any federal or State of New York court or
governmental agency or body is required for
the consummation by the Company [or the
Master Servicer] of the transactions
contemplated by the terms of the Agreements,
except (a) such as have been obtained under
the Act and (b) such as may be required under
the blue sky laws of any jurisdiction in
connection with the offer and sale of the
Certificates, as to which we express no
opinion.
9. Neither the sale of the Offered Certificates
to the Underwriter by the Company pursuant to
the Underwriting Agreement nor the
consummation by the Company [or the Master
Servicer] of any other of the transactions
contemplated by, or the fulfillment by the
Company [or the Master Servicer] of the terms
of the Agreements will result in a breach of
any term or provision of any federal or State
of New York statute or regulation or, to our
knowledge, conflict with, result in a breach,
violation or acceleration of or constitute a
default under any order of any federal or
State of New York court, regulatory body,
administrative agency or governmental body
having jurisdiction over the Company.
10. Each of the Agreements has been duly
authorized, executed and delivered by the
Company [and the Master Servicer] and, upon
due authorization, execution and delivery by
the other parties thereto, each will
constitute a valid, legal and binding
agreement of the Company [and the Master
Servicer], enforceable against the Company
[and the Master Servicer] in accordance with
its terms.
[11. Assuming compliance with all provisions of
the Pooling and Servicing Agreement, under
existing law, (a) the Trust Fund will be
treated as a "real estate mortgage investment
conduit" (a "REMIC") as defined by Section
860D of the Internal Revenue Code of 1986
(the "Code"), (b) each of the Class A, Class
M and Class B Certificates will be treated as
(or will be comprised of) "regular interests"
in the REMIC as the term "regular interest"
is defined in the Code, and (c) the Class R
Certificates will be treated as the sole
class of "residual interests" in the REMIC as
the term "residual interest" is defined in
the Code. However, continuation of the
status of the Trust Fund as a REMIC may
entail compliance with statutory changes in
the future and with regulations not yet
issued.]
In addition, we have participated in
conferences with your representatives concerning the
Registration Statement and the Prospectus and have
considered the matters required to be stated therein
and the statements contained therein, although we have
not independently verified the accuracy, completeness
or fairness of such statements (except as described in
paragraph 5 above). Based upon and subject to the
foregoing, nothing has come to our attention to cause
us to believe that the Registration Statement
(excluding any exhibits filed therewith), as of the
date it became effective, contained an untrue statement
of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading or that the
Prospectus, as of the date of the Prospectus Supplement
and as of the Closing Date, contained or contains an
untrue statement of a material fact or omitted or omits
to state a material fact required to be stated therein
or necessary to make the statements therein, in light
of the circumstances under which they were made, not
misleading (it being understood that we have not been
requested to and we do not make any comment in this
paragraph with respect to the financial statements,
schedules and other financial and statistical
information contained in the Registration Statement or
the Prospectus).
With your permission we have assumed the
following: (a) the authenticity of original documents
and the genuineness of all signatures; (b) the
conformity to the originals of all documents submitted
to us as copies; (c) the truth, accuracy and
completeness of the information, factual matters,
representations and warranties contained in the
records, documents, instruments and certificates we
have reviewed; and (d) except as specifically covered
in the opinions set forth above, the due authorization,
execution and delivery on behalf of the respective
parties thereto of documents referred to herein and the
legal, valid and binding effect thereof on such
parties.
Whenever a statement herein is qualified by
the phrase "to our knowledge," it is intended to
indicate that, during the course of our representation
of the Company, no information that would give us
current actual knowledge of the inaccuracy of such
statement has come to the attention of those attorneys
currently in this firm who have rendered legal services
in connection with this opinion letter. However, we
have not undertaken any independent investigation to
determine the accuracy of any such statement, and any
limited inquiry undertaken by us during the preparation
of this opinion letter should not be regarded as such
an investigation; no inference as to our knowledge of
any matters bearing on the accuracy of any such
statement should be drawn from the fact of our
representation of the Company.
Our opinion that any document is valid, legal
and binding or enforceable in accordance with its terms
is subject to: (1) limitations imposed by bankruptcy,
insolvency, reorganization, arrangement, moratorium or
other laws relating to or affecting the enforcement of
creditors' rights generally; (2) general principles of
equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law; and
(3) rights to indemnification which may be limited by
applicable law or equitable principles or otherwise
unenforceable as against public policy.
With respect to our opinion set forth in
paragraph 2, in passing on the form of Registration
Statement and the Prospectus, we have necessarily
assumed the correctness and completeness of the
statements made therein.
We express no opinion as to matters of law
other than the law of the State of New York and the
United States of America. In rendering the opinion set
forth herein, as to matters governed by the law of the
State of Minnesota, we have relied without independent
investigation on the opinion of ________________, Esq.,
general counsel to the Company, dated the date hereof,
a copy of which has been provided to you. To the
extent that we have relied on the foregoing opinion,
the opinion set forth herein is subject to the same
assumptions, qualifications, exceptions and other
limitations set forth therein.
This opinion letter is solely for your
benefit and may not be relied upon or used by,
circulated, quoted or referred to, nor may copies
hereof be delivered to, any other person without our
prior written approval. We disclaim any obligation to
update this opinion letter for events occurring or
coming to our attention after the date hereof.
Very truly yours,
[ORRICK, HERRINGTON & SUTCLIFFE/
THACHER PROFFITT & WOOD]
<PAGE>
EXHIBIT A-2
[GMAC/RFC LETTERHEAD]
__________, 199_
[The Underwriter]
Re: Residential Asset Securities Corporation
[Mortgage] [Manufactured Housing Contract]
Pass-Through Certificates, Series 199_-___
Ladies & Gentlemen:
I am General Counsel to Residential Asset
Securities Corporation (the "Company") and Residential
Funding Corporation (the "Master Servicer") in
connection with the issuance and sale by the Company of
[Mortgage] [Manufactured Housing Contract] Pass-Through
Certificates, Series 199_-___ (the "Certificates")
pursuant to a [pooling and servicing] [trust]
agreement, dated as of _______ 1, 19__ (the "Pooling
and Servicing Agreement"), among the Company, [______,
a certificate administrator (the "Certificate
Administrator] [the [Master] Servicer[s]] and
__________________________ , as trustee (the
"Trustee"). The Certificates consist of [ classes
designated as Class A-1, Class A-2, Class A-4, Class A-
5 (collectively, the "Class A Certificates"); Class R
(the "Class R Certificates"; together with the Class A
Certificates, the "Senior Certificates"); Class M (the
"Class M Certificates"); and Class B (the "Class B
Certificates"). The Class A Certificates [, the Class
R Certificates] and the Class M Certificates are
referred to herein as the "Offered Certificates")].
The Certificates in the aggregate will
evidence the entire undivided interest in a trust fund
(the "Trust Fund") consisting primarily of a pool of
[one- to four-family first mortgage loans (the
"Mortgage Loans")] [manufactured housing contracts (the
"Contracts")] [or interests therein] [[_____] [GNMA
Certificates (the "Agency Securities"). The Company
will sell to _____________________ (the
"Underwriters") the Offered Certificates pursuant to an
Underwriting Agreement, dated __________, 199_, among
the Company and the Underwriters (the "Underwriting
Agreement") the Pooling and Servicing Agreement, the
Assignment and Assumption Agreement between the
[Master] Servicer and the Company, dated (the
"Assignment and Assumption Agreement") and the
Underwriting Agreement, (collectively, the
"Agreements"). Capitalized terms used but not defined
herein shall have the meanings set forth in the
Agreements. This opinion letter is rendered pursuant
to Section 6.5 of the Underwriting Agreement.
In connection with rendering this opinion
letter, I have examined the Agreements and such other
records and other documents as I have deemed necessary
and relevant. As to matters of fact, I have examined
and relied upon representations of the parties
contained in the Agreements and, where I have deemed
appropriate, representations and certifications of
officers of the Company, the Trustee or public
officials. I have assumed the authenticity of all
documents submitted to me as originals, the genuineness
of all signatures, the legal capacity of natural
persons and the conformity to the original of all
documents submitted to me as copies. I have assumed
that all parties, except for the Company, had the
corporate power and authority to enter into and perform
all obligations under such documents, and, as to such
parties, I also have assumed the due authorization by
all requisite corporate action, the due execution and
delivery and the validity, binding effect and
enforceability of such documents. I have not examined
the [Mortgage Notes, the Mortgages or other documents
in the Mortgage Files] [the Contracts] (such documents,
collectively, the "Mortgage Documents"), and I express
no opinion concerning the conformity of any of the
Mortgage Documents to the requirements of the
Agreements.
In rendering this opinion letter, I do not
express any opinion concerning law other than the law
of the State of [__________], the corporate law of the
State of Delaware and the federal law of the United
States, and I do not express any opinion concerning the
application of the "doing business" laws or the
securities laws of the jurisdiction other than the
federal securities laws of the United States. I do not
express any opinion, either implicitly or otherwise, on
any issue not expressly addressed below.
Based upon the foregoing, I am of the opinion
that:
1. The Company [and the Master Servicer]
[is] [are] duly incorporated and [is] [are] validly
existing as [a] corporation[s] in good standing under
the laws of the State of Delaware and [each] has the
requisite power and authority, corporate or other, to
own its properties and conduct its business, as
presently conducted by it, and to enter into and
perform its obligations under the Agreements and the
Offered Certificates.
2. Each of the Agreements has been duly and
validly authorized, executed and delivered by the
Company [and the Master Servicer] and upon due
authorization, execution and delivery by other parties
thereto will constitute the valid, legal and binding
agreements of the Company [and the Master Servicer],
enforceable against the Company [and the Master
Servicer] 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
rights of creditors, (ii) general principles of equity,
whether enforcement is sought in a proceeding in equity
or at law, and (iii) public policy considerations
underlying the securities laws, to the extent that such
public policy considerations limit the enforceability
of the provisions of the Agreements which purport to
provide indemnification from securities law violations.
3. The Offered Certificates, when duly and
validly executed, authenticated and delivered in
accordance with the Agreement and when paid for in
accordance with the Underwriting Agreement and
Assignment and Assumption Agreement, will be entitled
to the benefits of the Agreement.
4. No consent, approval, authorization or
order of the State of Minnesota or federal court or
governmental agency or body is required for the
consummation by the Company [and the Master Servicer]
of the transactions contemplated by the terms of the
Agreements, except for those consents, approvals,
authorizations or orders which previously have been
obtained.
5. Neither the sale, issuance and delivery
of the Offered Certificates by the Company as provided
in the Agreements, nor the consummation of any other of
the transactions contemplated by, or the fulfillment by
the Company of any other of the terms of, the
Agreements, will result in a breach of any term or
provision of the charter or bylaws of the Company [or
the Master Servicer] or any State of Minnesota or
federal statute or regulation or conflict with, result
in a breach, violation or acceleration of, or
constitute a default under, the terms of any indenture
or other material agreement or instrument to which the
Company [or the Master Servicer] is a party or by which
they are bound or any order or regulation of the State
of Minnesota or federal court, regulatory body,
administrative agency or governmental body having
jurisdiction over the Company.
This opinion letter is rendered for the sole
benefit of the persons or entities to which it is
addressed, and no other person or entity, except
[Orrick, Herrington & Sutcliffe] [Thacher Proffitt &
Wood], is entitled to rely hereon without my prior
written consent. Copies of this opinion letter may not
be furnished to any other person or entity, nor may any
portion of this opinion letter be quoted, circulated or
referred to in any other document without my prior
written consent.
Very truly yours,
[_____________]
General Counsel
<PAGE>
EXHIBIT B
[COUNSEL TO THE UNDERWRITER LETTERHEAD]
__________, 199_
[The Underwriter]
Re: Residential Asset Securities Corporation
[Mortgage] [Manufactured Housing
Contract]
Pass-Through Certificates, Series 199_-___
Ladies and Gentlemen:
We have acted as counsel to ____________ (the
"Underwriter") in connection with the sale by
Residential Asset Securities Corporation, a Delaware
corporation (the "Company"), and the purchase by the
Underwriter pursuant to an underwriting agreement dated
__________, 199_ (the "Underwriting Agreement") of
certificates entitled [Mortgage] [Manufactured Housing
Contract] Pass-Through Certificates, Series 199_-___,
[Class A-1, Class A-2, Class A-4, Class A-5, Class R
and Class M] [Class A-1, Class A-2, Class A-3, Class R
and Class M] (the "Offered Certificates"). The Offered
Certificates [, together with the [Mortgage]
[Manufactured Housing Contract] Pass-Through
Certificates, Series 199_-___, [Class R] [and] [Class
B] comprise the entire issue of Certificates entitled
[Mortgage] [Manufactured Housing Contract] Pass-Through
Certificates, Series 199_-___ (collectively, the
"Certificates"). The Certificates are issued pursuant
to a [Pooling and Servicing] [Trust] Agreement (the
"Pooling and Servicing Agreement"), dated as of
_________, 199_, among the Company, as trustee (the
"Trustee"), and _______________________________, [as
certificate administrator (the "Certificate
Administrator")] [as [master] servicer[s] (the
"[Master] Servicer[s]")]. The Certificates evidence in
the aggregate the entire beneficial interest in a trust
fund (the "Trust Fund") consisting primarily of a pool
of certain [one- to four-family first mortgage loans]
[manufactured housing contracts (the "Contracts")] [or
interests therein] [[_____] GNMA Certificates (the
"Agency Securities"). Capitalized terms used, but not
defined herein, shall have the meanings assigned to
such terms in the Pooling and Servicing Agreement.
We have examined such documents and records
as we deemed appropriate, including the following:
1. Copy of the Certificate of Incorporation
of the Company and all amendments thereto, certified by
the Secretary of State of the State of Delaware to be a
true and correct copy.
2. Copy of the By-Laws of the Company
certified by the Secretary of the Company to be a true
and correct copy.
3. Certificate of the Secretary of State of
the State of Delaware, dated as of recent date, to the
effect that the Company is in good standing under the
laws of the State of Delaware.
4. Copy of resolutions adopted by the Board
of Directors of the Company in connection with the
authorization, issuance and sale of the Certificates,
certified by the Secretary of Company to be a true and
correct copy.
5. Officer's Certificate of the Company
pursuant to Section 6.3 of the Underwriting Agreement.
6. Signed copy of the Underwriting
Agreement.
7. Signed copy of the Pooling and Servicing
Agreement.
8. Specimens of the Offered Certificates.
9. Signed copies of the Company's
registration statement (File No. 33-_____) on Form S-3
filed by the Company with the Securities and Exchange
Commission relating to [Mortgage] [Manufactured Housing
Contract] Pass-Through Certificates (the registration
statement in the form in which it became effective
being hereinafter called the "Registration Statement").
10. The final form of a prospectus dated
_______, 199_ (the "Basic Prospectus").
11. The final form of a supplement dated
__________, 199_ to the Basic Prospectus relating
specifically to the Certificates (the "Prospectus
Supplement"; the Basic Prospectus and Prospectus
Supplement are herein collectively referred to as the
"Prospectus.")
Based upon the foregoing, we are of the
opinion that:
(a) The Registration Statement has become
effective under the Securities Act of 1933, as
amended (the "Act"), and, to the best of our
knowledge and information, no proceedings for a
stop order have been instituted or are threatened
under Section 8(d) of the Act.
(b) The Registration Statement as of its
effective date and the Prospectus as of the date
of the Prospectus Supplement, other than the
numerical, financial and statistical data
contained therein, as to which we express no
opinion, comply as to form in all material
respects with the requirements of the Act and the
rules thereunder.
(c) The Underwriting Agreement has been duly
and validly authorized, executed and delivered by
the Company.
[(d) The Pooling and Servicing Agreement has
been duly and validly authorized, executed and
delivered by the Company and, assuming that it has
been duly and validly authorized, executed and
delivered by the other parties thereto,
constitutes a valid, legal and binding agreement
of the Company, enforceable against the Company in
accordance with its terms subject to bankruptcy,
insolvency, reorganization or other similar laws
affecting creditors' rights generally and, as to
enforceability, to general principles of equity,
regardless of whether such enforcement is
considered in a proceeding in equity or at law.]
(e) The Offered Certificates, assuming that
they have been duly and validly authorized,
executed and issued by the Trustee, will, when
authenticated as specified in the Pooling and
Servicing Agreement and delivered to the
Underwriter pursuant to the Underwriting
Agreement, be entitled to the benefits of the
Pooling and Servicing Agreement.
(f) The statements in the Prospectus under
the headings "Certain Federal Income Tax
Consequences," "Certain Legal Aspects of Mortgage
Loans and Contracts and Related Matters --
Applicability of Usury Laws" and "-- Alternative
Mortgage Instruments and "ERISA Considerations,"
to the extent that they constitute matters of New
York or Federal law or legal conclusions with
respect thereto, have been reviewed by us and
provide a fair summary of such law or legal
conclusions.
[(g) The Offered Certificates will be
mortgage related securities, as defined in Section
3(a)(41) of the Securities Exchange Act of 1934,
as amended, so long as the Underwritten
Certificates are rated in one of the two highest
rating categories by at least one nationally
recognized statistical rating organization.]
(h) The Pooling and Servicing Agreement is
not required to be qualified under the Trust
Indenture Act of 1939, as amended, and the Trust
Fund is not required to be registered under the
Investment Company Act of 1940, as amended.
We have endeavored to see that the
Registration Statement and the Prospectus comply with
the Act and the rules and regulations of the Securities
and Exchange Commission thereunder relating to
registration statements on Form S-3 and related
prospectuses, but we cannot, of course, make any
representation to you as to the accuracy or
completeness of statements of fact contained in the
Registration Statement or Prospectus. Nothing,
however, has come to our attention that would lead us
to believe that the Registration Statement at the time
it became effective contained an untrue statement of a
material fact or omitted to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading or that the
Prospectus as of the date of the Prospectus Supplement
and at the date hereof contained or contains an 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 were made, not misleading (other than the
numerical, financial and statistical data contained in
the Registration Statement or the Prospectus, as to
which we express no opinion).
This opinion is for your benefit only and is
not to be relied upon by any other person. The
opinions expressed herein are limited to matters of
Federal law and the laws of the State of [__________].
Very truly yours,
[Counsel to the Underwriter]
<PAGE>
EXHIBIT C
[COUNSEL TO TRUSTEE LETTERHEAD]
__________, 199_
Residential Asset Securities Corporation
8400 Normandale Lake Boulevard
Suite 600
Minneapolis, Minnesota 554327
[The Trustee]
[The Underwriter]
Ladies and Gentlemen:
We have acted as special counsel to
__________________________________ in its capacity as
trustee (the "Trustee") in connection with the issuance
and sale by the Company of [Mortgage] [Manufactured
Housing Contract] Pass-Through Certificates, Series
199_-___ (the "Certificates") pursuant to a [pooling
and servicing] [trust] agreement, dated as of _______
1, 19__ (the "Pooling and Servicing Agreement"), among
the Company, ________________ [as certificate
administrator (the "Certificate Administrator")] [the
[Master] Servicer[s]] and __________________________ ,
as trustee (the "Trustee"). The Certificates consist
of [ classes designated as Class A-1, Class A-2,
Class A-4, Class A-5 (collectively the "Class A
Certificates"); Class R (the "Class R Certificates";
together with the Class A Certificates, the "Senior
Certificates"); Class M (the "Class M Certificates");
and Class B (the "Class B Certificates"). The Class A
Certificates [, the Class R Certificates] and the Class
M Certificates are referred to herein as the "Offered
Certificates")].
Based on the foregoing and subject to the
qualifications and matters of reliance set forth
herein, it is our opinion that:
1. The Trustee is duly organized, validly
existing and in good standing as a
____________________________ under the laws of
_____________________, with full corporate and trust
power and authority to conduct its business and affairs
as a Trustee.
2. The Trustee has full corporate power and
authority to execute and deliver the Pooling and
Servicing Agreement and the Certificates and to perform
its obligations thereunder.
3. The Trustee has duly accepted the office
of trustee under the Pooling and Servicing Agreement.
4. The Trustee has duly authorized,
executed, issued and delivered the Pooling and
Servicing Agreement and has duly and validly
authorized, executed, issued and delivered the
Certificates as the Trustee.
5. The Pooling and Servicing Agreement
constitutes the legal, valid and binding agreements of
the Trustee, enforceable against the Trustee in
accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting the rights of
creditors generally and by general principles of equity
and the discretion of the court, regardless of whether
such enforcement is considered in a proceeding in
equity or at law, and except as enforceability may be
determined according to or limited by the laws of
jurisdictions other than those specified below.
[6. Assuming compliance with the provisions
of the Pooling and Servicing Agreement, and assuming
that for Federal income tax purposes the Trust Fund (as
defined in the Pooling and Servicing Agreement) will
qualify as a REMIC election within the meaning of
Sections 860A through 860G of the Internal Revenue Code
of 1986, as amended (the "Code"), for State of Illinois
income and franchise tax purposes, the Trust Fund will
be classified as a REMIC and not as a corporation,
partnership or trust, in conformity with the federal
income tax treatment of the Trust Fund. Accordingly,
except to the extent the Trust Fund has net income
derived from prohibited transactions as defined by
Internal Revenue Code Section 860F, the Trust Fund will
not be subject to the Illinois income tax or the
Illinois franchise tax and holders of Certificates who
are not residents of or otherwise than in connection
with the Certificates subject to tax in Illinois will
not be subject to the Illinois income tax or the
Illinois franchise tax.]
In rendering the foregoing opinion, we have
assumed that the Pooling and Servicing Agreement have
been duly authorized, executed and delivered by the
other parties thereto and are valid, legal, binding and
enforceable obligations of such parties.
We express no opinion as to any matter other
than as expressly set forth above, and, in conjunction
therewith, we specifically express no opinion as to the
status of the Certificates or the Trust Fund under any
federal or state securities laws, including, but not
limited to, the Securities Act of 1933, as amended,
the Trust Indenture Act of 1939, as amended, and the
Investment Company Act of 1940, as amended.
This opinion is as of the date hereof and we
undertake no, and disclaim any, obligation to advise
you of any change in any matter set forth herein. This
opinion has been furnished to you at your request in
connection with the transactions described herein, and
it may not be relied upon by you for any other purpose
or by any other person without our prior written
consent.
We are admitted to practice law under the
laws of the State of _________ and the opinion set
forth above is limited to the laws of the State of
____________ and the laws of the United States of
America.
Very truly yours,
[COUNSEL TO THE TRUSTEE]
<PAGE>
EXHIBIT D
[Faegre & Benson Letterhead]
__________, 199_
Residential Asset Securities Corporation
8400 Normandale Lake Boulevard - Suite 600
Minneapolis, Minnesota 55437
[The Underwriter]
Dear Sir or Madam:
We have acted as special counsel for Residential
Funding Corporation in connection with the sale by
Residential Asset Securities Corporation (the
"Company") of certificates entitled [Mortgage]
[Manufactured Housing Contract] Pass-Through
Certificates, Series 199_-__, consisting of ______
classes of Mortgage Pass-Through Certificates (the
"Senior Certificates") and ______ classes of
subordinate certificates (together with the Senior
Certificates, the "Certificates"). The Certificates in
the aggregate will evidence the entire beneficial
ownership interest in a trust fund (the "Trust Fund")
that will own a pool of mortgage loans (the "Mortgage
Loans"). A "real estate mortgage investment conduit"
("REMIC") election will be made in connection with the
Trust Fund for federal income tax purposes. The Certi-
ficates are being issued pursuant to a [pooling and
servicing agreement] [trust agreement] (the "Pooling
and Servicing Agreement") dated as of _________, 199_,
among the Company, _______________________________, as
[master] servicer[s] and ___________________________,
as trustee. We have examined an execution copy of the
Pooling and Servicing Agreement, the Prospectus, dated
_______, 199_, and the Prospectus Supplement, dated
__________, 199_ and our opinion is based thereon.
Based upon our examination and assuming that the
Trust Fund will be treated as a REMIC for federal
income tax purposes, we are of the opinion that the
Trust Fund will not be subject to Minnesota income or
franchise taxes and that holders of Certificates who
are not residents of or otherwise subject to tax in
Minnesota will not be subject to Minnesota income or
franchise taxes with respect to income derived from the
Certificates.
Very truly yours,
FAEGRE & BENSON
<PAGE>
EXHIBIT E
Excluded Information
<PAGE>
EXHIBIT F
Underwriter Information
<PAGE>
EXHIBIT G
__________, 199_
Residential Asset Securities Corporation
8400 Normandale Lake Boulevard
Suite 600
Minneapolis, Minnesota 55437
Re: Residential Asset Securities Corporation
[Mortgage] [Manufactured Housing
Contract] Pass-Through Certificates,
Series 199_-___, [Class A], [Class R]
and [Class M]
Pursuant to Section 4 of the Underwriting
Agreement, dated __________, 199_, among Residential
Asset Securities Corporation, Residential Funding
Corporation and _________________________, (the
"Underwriter") relating to the Certificates referenced
above (the "Underwriting Agreement"), the undersigned
does hereby certify that:
(a) The prepayment assumption used in pricing
the Certificates was % [CPR] [SPA].
(b) Set forth below is (i), the first price, as
a percentage of the principal balance of each class of
Certificates, at which 10% of the aggregate principal
balance of each such class of Certificates was sold to
the public at a single price, if applicable, or (ii) if
more than 10% of a class of Certificates have been sold
to the public but no single price is paid for at least
10% of the aggregate principal balance of such class of
Certificates, then the weighted average price at which
the Certificates of such class were sold expressed as a
percentage of the principal balance of such class of
Certificates, or (iii) if less than 10% of the
aggregate principal balance of a class of Certificates
has been sold to the public, the purchase price for
each such class of Certificates paid by the Underwriter
expressed as a percentage of the principal balance of
such class of Certificates calculated by: (1)
estimating the fair market value of each such class of
Certificates as of __________, 199_; (2) adding such
estimated fair market value to the aggregate purchase
price of each class of Certificates described in clause
(i) or (ii) above; (3) dividing each of the fair market
values determined in clause (1) by the sum obtained in
clause (2); (4) multiplying the quotient obtained for
each class of Certificates in clause (3) by the
purchase price paid by the Underwriter for all the
Certificates; and (5) for each class of Certificates,
dividing the product obtained from such class of
Certificates in clause (4) by the original principal
balance of such class of Certificates:
[Class A: ]
[Class R: ]
[Class M: ]
[* less than 10% has been sold to the public]
The prices set forth above do not include accrued
interest with respect to periods before closing.
[THE UNDERWRITER]
By:
Name:
Title:
<PAGE>
EXHIBIT H
Form of Legend
<PAGE>
CERTIFICATE OF INCORPORATION
OF
RESIDENTIAL ASSET SECURITIES CORPORATION
The undersigned, a natural person of full age, for
the purpose of forming a corporation under the General
Corporation Law of Delaware, does hereby adopt the
following Articles of Incorporation:
ARTICLE I
The name of the corporation shall be Residential
Asset Securities Corporation.
ARTICLE II
The registered office of this corporation is located
at Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801.
ARTICLE III
The purpose for which the corporation is organized
is to engage in any lawful act or activity for which
corporations may be organized under the General
Corporation Law of Delaware.
ARTICLE IV
The total number of shares of stock which this
corporation shall have the authority to issue is one
thousand (1,000) shares of Common Stock with a par value
of One Cent ($.01) per share.
ARTICLE V
The board of directors is authorized to make, alter
or repeal the bylaws of the Corporation. Election of
directors need not be by written ballot.
ARTICLE VI
The name and address of the incorporator are:
Name Address
Lorna P. Gleason 4444 Fondell Drive, Edina, MN 55435
ARTICLE VII
The corporation is to have perpetual existence.
ARTICLE VIII
A director of the corporation shall not be
personally liable to the corporation or its stockholders
for monetary damages for breach of fiduciary duty as a
director, except for (i) liability based on a breach of
the duty of loyalty to the corporation or the
stockholders; (ii) liability for acts or omissions not in
good faith or that involve intentional misconduct or a
knowing violation of law; (iii) liability under Section
174 of the Delaware General Corporation Law, or liability
based on the payment of an improper dividend, or (iv)
liability for any transaction form which the director
derived an improper personal benefit.
I, THE UNDERSIGNED, being the incorporator named
above, for the purpose of forming a corporation pursuant
to the General Corporation Law of the State of Delaware,
do make this Certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated
are true, and accordingly have hereunto set my hand this
7th day of November, 1994.
INCORPORATOR:
/s/ Lorna P. Gleason
BYLAWS
OF
RESIDENTIAL ASSET SECURITIES CORPORATION
ARTICLE I
Offices
SECTION 1. REGISTERED OFFICE. The registered
office shall be established and maintained at the office
of The Corporation Trust Company at 1209 Orange Street in
the City of Wilmington, County of New Castle, State of
Delaware, and said corporation shall be the registered
agent of the Corporation in charge thereof.
SECTION 2. OTHER OFFICES. The Corporation may have
other offices, either within or without the State of
Delaware, at such place or places as the Board of
Directors may from time to time select or the business of
the Corporation may require.
ARTICLE II
Meetings of Stockholders
SECTION 1. ANNUAL MEETINGS. Annual meetings of
stockholders for the election of directors, and for such
other business as may be stated in the notice of the
meeting, shall be held at such place, either within or
without the State of Delaware, and at such time and date
as the Board of Directors, by resolution, shall determine
and as set forth in the notice of the meeting. If the
Board of Directors fails to so determine the time, date
and place of meeting, the annual meeting of stockholders
shall be held at the registered office of the Corporation
on the first Tuesday in April. If the date of the annual
meeting shall fall upon a legal holiday, the meeting
shall be held on the next succeeding business day. At
each annual meeting, the stockholders entitled to vote
shall elect a Board of Directors and they may transact
such other corporate business as shall be stated in the
notice of the meeting or in a duly executed waiver of
notice thereof.
SECTION 2. SPECIAL MEETINGS. Special meetings of
the stockholders for any purpose or purposes may be
called by the Chairman of the Board, if any, President or
Secretary, or by resolution of the Board of Directors.
SECTION 3. VOTING. Each stockholder entitled to
vote in accordance with the terms of the Certificate of
Incorporation of the Corporation and these Bylaws shall
be entitled to one vote, in person or by proxy, for each
share of stock entitled to vote held by such stockholder,
but no proxy shall be voted after three years from its
date unless such proxy provides for a longer period. All
elections for the Board of Directors shall be decided by
plurality vote; all other questions shall be decided by
majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of the State of
Delaware.
A complete list of the stockholders entitled to vote
at the meeting, arranged in alphabetical order, with the
address of each, and the number of shares held by each,
shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior
to the meeting, either at a place within the city where
the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at
the place where the meeting is to be held. The list
shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be
inspected by any stockholder who is entitled to be
present.
SECTION 4. QUORUM. Except as otherwise required by
Law, by the Certificate of Incorporation of the
Corporation or by these Bylaws, the presence, in person
or by proxy, of stockholders holding a majority of the
stock of the Corporation entitled to vote shall
constitute a quorum at all meetings of the stockholders.
In case a quorum shall not be present at any meeting, a
majority in interest of the stockholders entitled to vote
thereat, present in person or by proxy, shall have power
to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until the
requisite amount of stock entitled to vote shall be
present. At any such adjourned meeting at which the
requisite amount of stock entitled to vote shall be
represented, any business may be transacted which might
have been transacted at the meeting as originally
noticed; but only those stockholders entitled to vote at
the meeting as originally noticed shall be entitled to
vote at any adjournment or adjournments thereof.
SECTION 5. NOTICE OF MEETINGS. Written notice,
stating the place, date and time of the meeting, and the
general nature of the business to be considered, shall be
given to each stockholder entitled to vote thereat at his
address as it appears on the records of the Corporation,
not less than ten or more than sixty days before the date
of the meeting. No business other than that stated in
the notice shall be transacted at any meeting without the
unanimous consent of all the stockholders entitled to
vote thereat.
SECTION 6. ACTION WITHOUT MEETING. Unless
otherwise provided by the Certificate of Incorporation of
the Corporation, any action required or permitted to be
taken at any annual or special meeting of stockholders
may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number
of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of
the taking of the corporation action without a meeting by
less than unanimous written consent shall be given to
those stockholders who have not consented in writing.
ARTICLE III
Directors
SECTION 1. NUMBER AND TERM. Directors shall be
elected at the annual meeting of stockholders and each
director shall be elected to serve until his successor
shall be elected and shall qualify. The number of
directors shall be as fixed at a number no less than
three (3) and no more than six (6) by an affirmative vote
of a majority in interest of the stockholders, at the
annual meeting or at a special meeting called for that
purpose, and by like vote the additional directors may be
chosen at such meeting to hold office until the next
annual election and until their successors are elected
and qualify. A director need not be a stockholder.
SECTION 2. RESIGNATIONS. Any director may resign
at any time. Such resignation shall be made in writing,
and shall take effect at the time specified therein, and
if no time be specified, at the time of its receipt by
the Chairman of the Board, if any, President or
Secretary. The acceptance of a resignation shall not be
necessary to make it effective.
SECTION 3. VACANCIES. If the office of any
director becomes vacant, the remaining directors in
office, though less than a quorum, by a majority vote,
may appoint any qualified person to fill such vacancy,
who shall hold office for the unexpired term and until
his successor shall be duly chosen. If the office of any
director becomes vacant and there are no remaining
directors, the stockholders, by the affirmative vote of
the holders of a majority of all the shares of stock
outstanding and entitled to vote, at a special meeting
called for such purpose, may appoint any qualified person
to fill such vacancy.
SECTION 4. REMOVAL. Except as hereinafter
provided, any director or directors may be removed either
for or without cause at any time by the affirmative vote
of the holders of a majority of all the shares of stock
outstanding and entitled to vote for the election of
directors, at an annual meeting or a special meeting
called for the purpose, and the vacancy thus created may
be filled, at such meeting, by the affirmative vote of
holders of a majority of all the shares of stock
outstanding and entitled to vote.
SECTION 5. POWERS. The Board of Directors shall
exercise all of the powers of the Corporation except such
as are by law, or by the Certificate of Incorporation of
the Corporation or by these Bylaws, conferred upon or
reserved to the stockholders.
SECTION 6. MEETINGS. The newly elected directors
may hold their first meeting for the purpose of
organization and the transaction of business, if a quorum
be present, immediately after the annual meeting of the
stockholders; or the time and place of such meeting may
be fixed by consent of all the directors.
Except as otherwise provided herein, regular
meetings of the directors may be held without notice at
such places and times as shall be determined from time to
time by resolution of the directors.
Not less than two days' written notice shall be
given for any regular or special meeting of the board
relating to the issuance of stock of the Corporation, the
removal of any member of the Executive Committee or the
alteration or repeal of this provision.
Special meetings of the board may be called by the
Chairman of the Board, if any, President or by the
Secretary on the written request of any director on at
least two days' notice to each director (except that
notice to any director may be waived in writing by such
director) and shall be held at such place or places as
may be determined by the directors, or as shall be stated
in the call of the meeting.
Notice of the time and place of any regular meeting
which requires the giving of notice or each special
meeting shall be sent to each member of the Board of
Directors by telex, cable or facsimile transmission,
addressed to him at his address as it appears on the
records of the Corporation, or delivered to him
personally, at least two days before the day on which the
meeting is to be held.
Unless otherwise restricted by the Certificate of
Incor-poration or these Bylaws, members of the Board of
Directors, or any committee designated by the Board of
Directors, may participate in any meeting of the Board of
Directors or any committee thereof by means of a
conference telephone or similar communications equipment
by means of which all persons participating in the
meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the
meeting.
SECTION 7. QUORUM. A majority of the directors
shall consti-tute a quorum for the transaction of
business. If at any meeting of the board there shall be
less than a quorum present, a majority of those present
may adjourn the meeting form time to time until a quorum
is obtained, and no further notice thereof need be given
other than by announcement at the meeting which shall be
so adjourned. The vote of the majority of the directors
present at a meeting at which a quorum is present shall
be the act of the Board of Directors unless the
Certificate of Incorporation or these Bylaws shall
require the vote of a greater number.
SECTION 8. COMPENSATION. Directors shall not
receive any stated salary for their services as directors
or as members of committees, but by resolution of the
board a fixed fee and expenses of attendance may be
allowed for attendance at each meeting. Nothing herein
contained shall be construed to preclude any director
from serving the Corporation in any other capacity as an
officer, agent or otherwise, and receiving compensation
therefor.
SECTION 9. ACTION WITHOUT MEETING. Any action
required or permitted to be taken at any meeting of the
Board of Directors or of any committee thereof may be
taken without a meeting if a written consent thereto is
signed by all members of the board or of such committee,
as the case may be, and such written consent is filed
with the minutes of proceedings of the board of such
committee.
ARTICLE IV
Executive, Finance and Other Committees
SECTION 1. DESIGNATION, TERM OF OFFICE AND
QUALIFICATIONS. The Board of Directors may in its
discretion, by a resolution duly adopted by a majority of
the whole board, designate an Executive Committee
consisting of one or more directors and may in its
discretion, by a resolution duly adopted by a majority of
the whole board, designate a Finance Committee consisting
of one or more directors. Each member of the Executive
Committee or Finance Committee shall continue in office
until his successor shall be designated, or until he
shall cease to be a director, or until his death,
resignation or removal, or until the dissolution of the
Executive Committee or Finance Committee, as the case may
be, in the manner provided in Section 3 of this Article
IV.
SECTION 2. POWERS. Except as may be provided by
law or by the resolution of designation, the Executive
Committee, if designated, shall have and may exercise all
of the powers of the Board of Directors in the management
of the business and affairs of the Corporation, expressly
including the power to declare a dividend or to authorize
the issuance of stock, and including without limitation
all powers expressly conferred on the Board of Directors
by these Bylaws, and shall have power to authorize the
seal of the Corporation to be affixed to all papers which
may require it. Except as may be provided by law or by
the resolution of designation, the Finance Committee, if
designated, shall have and may exercise all of the power
of the Board of Directors in the management of the
financial affairs of the Corporation, expressly including
the power to fix and determine the terms and conditions
of any series of bonds issued by the Corporation and to
take any other action deemed necessary in connection with
the authorization, execution, authentication and delivery
of any series of Bonds, and shall have the power to
authorize the sale of the Corporation to be affixed to
all papers which may require it. Notwithstanding the
foregoing, neither the Executive Committee nor the
Finance Commit-tee shall have power to amend the
Certificate of Incorporation, to adopt an agreement of
merger or consolidation, to recommend to the stockholders
the sale, lease or exchange of all, or substantially all
of the Corporation's property and assets, or to recommend
to the stockholders a dissolution of the Corporation or
a revocation of a dissolution.
SECTION 3. RESIGNATION, REMOVAL OR DISSOLUTION.
Any member of the Executive Committee or Finance
Committee may resign at any time by giving written notice
to the Chairman of the Board, if any, President or the
Secretary. Unless otherwise specified therein, such
resignation shall take effect on receipt thereof. Any
member of the Executive Committee or Finance Committee
may be removed at any time, either with or without cause,
by a majority vote of the directors then in office, given
at any meeting of the Board of Directors called for that
purpose. The Board of Directors may, by a resolution
duly adopted at any meeting, dissolve the Executive
Committee or the Finance Committee.
SECTION 4. VACANCIES. If any vacancy shall occur
in the Executive Committee or the Finance Committee by
reason of death, resignation, removal or otherwise, such
vacancy may be filled at any meeting of the Board of
Directors or may be filled until the next meeting of the
Board of Directors by the remaining member,s if any, of
the Executive Committee or the Finance Committee, as the
case may be, whether or not he or they constitute a
quorum.
SECTION 5. MEETINGS OF THE EXECUTIVE COMMITTEE.
The Execu-tive Committee may provide for the holding of
regular meetings at such times and places (within or
without the State of Delaware) as it may from time to
time determine by resolution duly adopted at any meeting
of the Executive Committee. A special meeting of the
Executive Committee may be called at any time by the
Chairman of the Board, if any, President or by any two
members of the Executive Committee. Except as otherwise
provided herein, no notice of any special or regular
meeting need be given. Not less than two days' written
notice shall be given for any regular or special meeting
of the Executive Committee relating to the issuance of
stock of the Corporation or the alteration or repeal of
this provision. Notice of the time and place of each
regular or special meeting which requires the giving of
notice shall be sent to each member of the Executive
Committee by telex, cable or facsimile transmission,
addressed to him at his address as it appears on the
records of the Corporation, or delivered to him
personally, at least two days before the day on which the
meeting is to be held. Any member of the Executive
Committee may participate in a meeting of the Executive
Committee by means of a conference telephone or similar
communications equipment by means of which all persons
partici-pating in the meeting can hear each other.
Participation in a meeting by such means shall constitute
presence in person at such meeting within the meaning of
Section 6 of this Article IV, or for any other purpose.
The Executive Committee shall keep minutes of its
proceedings and shall report the same to the meeting of
the Board of Directors held next after such proceedings
are taken. The Executive Committee may adopt such rules
and regulations for the conduct of its meetings as it may
deem proper, not inconsistent with law, the Certificate
of Incorporation or the Bylaws.
SECTION 6. QUORUM. At all meetings of the
Executive Commit-tee or the Finance Committee the
presence in person of one-third of the members of the
Executive Committee or the Finance Committee, as the case
may be, shall be necessary and sufficient to constitute
a quorum for the transaction of business, and, except as
otherwise provided by law, by the Certificate of
Incorporation or by these Bylaws, if a quorum shall be
present, the act of a majority of the members present
shall be the act of the Executive Committee or the
Finance Committee, as the case may be. In the absence of
a quorum, a majority of the members present, without
notice other than by announcement at the meeting, may
adjourn the meeting from time to time, for a period of
not more than thirty days at any one time, until a quorum
shall be present.
SECTION 7. OTHER COMMITTEES. The Board of
Directors may in its discretion, by a resolution duly
adopted by a majority of the whole board, designate such
other committees as it may deem advisable. Each such
committee shall consist of such number of directors as
may be so designated, and shall have and may exercise
such powers, and shall perform such duties, as may be
delegated to it by resolution of the Board of Directors.
The Board of Directors shall have power at any time to
remove any member of any such committee, with or without
cause, and to fill vacancies in and to dissolve any such
committee.
SECTION 8. TEMPORARY COMMITTEE MEMBERS. In the
absence of disqualification of any member of any
committee created pursuant to this Article IV, the member
or members thereof present at the meeting and not
disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in
the place of any absent or disqualified member.
ARTICLE V
Officers
SECTION 1. OFFICERS. The officers of the
Corporation shall be a Chairman of the Board, if any, a
President, one or more Vice Presidents, if any, a
Treasurer and a Secretary, all of whom shall be elected
by the Board of Directors and shall hold office until
their successors are elected and qualified. In addition,
the Board of Directors may elect such Assistant Vice
Presidents, Assistant Secretaries and Assistant
Treasurers as they may deem proper. The Board of
Directors may appoint such other officers and agents as
it may deem advisable, who shall hold their offices for
such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by
the Board of Directors.
SECTION 2. CHAIRMAN OF THE BOARD. The Chairman of
the Board shall preside at all meetings of the
stockholders or the Board of Directors and shall have the
general powers and duties of super-vision and management
usually vested in the office of chief executive officer
of a corporation. Except as the Board of Directors shall
authorize execution thereof in some other manner, he
shall execute bonds, mortgages and other contracts on
behalf of the Corporation, and shall cause the seal to be
affixed to any instrument requiring it and when so
affixed the seal shall be attested by the signature of
the Secretary or the Treasurer or an Assistant Secretary
or an Assistant Treasurer.
SECTION 3. PRESIDENT. The President shall be the
chief executive officer of the Corporation and, subject
to the control of the Board of Directors, shall exercise
general and active super-vision over and management of
the property, affairs and business of the Corporation and
shall authorize other officers of the Corpor-ation to
exercise such powers as he, in his discretion, may deem
to be in the best interests of the Corporation. The
President shall preside at meetings of stockholders and
the Board of Directors in the absence or non-election of
the Chairman of the Board. The President shall, in
general, perform all duties incident to the office of
President and shall have such other duties as the Board
of Directors may from time to time prescribe.
SECTION 4. VICE PRESIDENTS. The Vice President, or
Vice Presidents and any Executive, Senior or Assistant
Vice Presidents as elected or appointed by the Board of
Directors, shall have such duties as the Board of
Directors, the President, or the Bylaws may from time to
time prescribe.
SECTION 5. TREASURER. The Treasurer shall have the
custody of the corporate funds and securities and shall
keep full and accurate account of receipts and
disbursements in books belonging to the Corporation. He
shall deposit all moneys and other valuables in the name
and to the credit of the Corporation in such depositaries
as may be designated by the Board of Directors. He shall
disburse the funds of the Corporation as may be ordered
by the Board of Directors, or the President, taking
proper vouchers for such disbursements. He shall render
to the President and Board of Directors at the regular
meetings of the Board of Directors, or whenever they may
request it, an account of all his transactions as
Treasurer and of the financial condition of the
Corporation.
SECTION 6. SECRETARY. The Secretary shall give, or
cause to be given, notice of all meetings of stockholders
and directors and all other notices required by law or by
these Bylaws, and in case of his absence or refusal or
neglect so to do, any such notice may be given by any
person thereunto directed by the President, or by the
directors, or stockholders, upon whose request the
meeting is called as provided in these Bylaws. he shall
record all the proceedings of the meetings of the Board
of Directors, any committees thereof and the stockholders
of the Corporation in a book to be kept for that purpose,
and shall perform such other duties as may be assigned to
him by the Board of Directors or the President. He shall
have the custody of the seal of the Corpor-ation and
shall affix the same to all instruments requiring it,
when authorized by the Board of Directors or the
President, and attest the same.
SECTION 7. ASSISTANT VICE PRESIDENTS, ASSISTANT
TREASURERS AND ASSISTANT SECRETARIES. Assistant Vice
Presidents, Assistant Treasurers and Assistant
Secretaries, if any, shall be elected and shall have such
powers and shall perform such duties as shall be assigned
to them, respectively, by the Board of Directors or the
President.
ARTICLE VI
Miscellaneous
SECTION 1. CERTIFICATES OF STOCK. A certificate of
stock shall be issued to each stockholder certifying the
number of shares owned by such stockholder in the
Corporation.
SECTION 2. LOST CERTIFICATES. A new certificate of
stock may be issued in the place of any certificate
theretofore issued by the Corporation, alleged to have
been lost or destroyed, and the Board of Directors may,
in its discretion, require the owner of the lost or
destroyed certificate, or such owner's legal
representatives, to give the Corporation a bond, in such
sum as they may direct, not exceeding double the value of
the stock, to indemnify the Corpor-ation against any
claim that may be made against it on account of the
alleged loss of any such certificate, or the issuance of
any such new certificate.
SECTION 3. TRANSFER OF SHARES. The shares of stock
of the Corporation shall be transferable only upon its
books by the holders thereof in person or by their duly
authorized attorneys or legal representatives, and upon
such transfer the old certificates shall be surrendered
to the Corporation by the delivery thereof to the person
in charge of the stock and transfer books and ledgers, or
to such other person as the Board of Directors may
designate, by whom they shall be canceled, and new
certificates shall thereupon be issued. A record shall
be made of each transfer and whenever a transfer shall be
made for collateral security, and not absolutely, it
shall be so expressed in the entry of the transfer.
SECTION 4. STOCKHOLDERS RECORD DATE. In order that
the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to
corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other
lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than
sixty nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other
action. A determination of stockholders of record
entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors
may fix a new record date for the adjourned meeting.
SECTION 5. DIVIDENDS. Subject to the provisions of
the Certificate of Incorporation, the Board of Directors
may, out of funds legally available therefor at any
regular or special meeting, declare dividends upon the
capital stock of the Corporation as and when they deem
expedient. Before declaring any dividend there may be
set apart out of any funds of the Corporation available
for dividends, such sum or sums as the directors form
time to time in their discretion deem proper for working
capital or as a reserve fund to meet contingencies or for
equalizing dividends or for such other purposes as the
directors shall deem conducive to the interests of the
Corporation.
SECTION 6. SEAL. The corporate seal of the
Corporation shall be in such form as shall be determined
by resolution of the Board of Directors. Said seal may
be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
SECTION 7. FISCAL YEAR. The fiscal year of the
Corporation shall be determined by resolution of the
Board of Directors.
SECTION 8. CHECKS. All checks, drafts or other
orders for the payment of money, notes or other evidence
of indebtedness issued in the name of the Corporation
shall be signed by such officer or officers, agent or
agents of the Corporation, and in such manner as shall be
determined from time to time by resolution of the Board
of Directors.
SECTION 9. BORROWING. No loans or advances shall
be obtained or contracted for, by or on behalf of the
Corporation and no negotiable paper shall be issued in
its name, unless and except as authorized by the Board of
Directors. Such authorization may be general or confined
to specific instances. Any officer or agent of the
Corporation thereunto so authorized may obtain loans and
advances for the Corporation, and for such loans and
advances may make, execute and deliver promissory notes,
bonds or other evidences of indebtedness of the
Corporation. Any officer or agent of the Corporation
thereunto so authorized may pledge, hypothecate or
transfer as security for the payment of any and all
loans, advances, indebtedness and liabilities of the
Corporation, any and all stocks, bonds, other securities
and other personal property at any time held by the
Corporation, and to that end may endorse, assign and
deliver the same and do every act and thing necessary or
proper in connection therewith.
SECTION 10. NOTICE AND WAIVER OF NOTICE. Whenever
any notice is required by these Bylaws to be given,
personal notice is not required unless expressly so
stated, and any notice so required shall be deemed to be
sufficient if given by depositing the same in the United
States mail, postage prepaid, addressed to the person
entitled thereto at his address as it appears on the
records of the Corporation, and such notice shall be
deemed to have been given on the day of such mailing.
Stockholders not entitled to vote shall not be entitled
to receive notice of any meetings except as other-wise
provided by law. Whenever any notice is required to be
given under the provisions of any law, or under the
provisions of the Certificate of Incorporation or these
Bylaws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed equivalent
thereto.
ARTICLE VII
Indemnification
To the full extent permitted by law, the Corporation
shall indemnify and hold harmless each person who was or
is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative and whether or not by or in the right of
the Corporation, by reason of the fact that he is or was
a director or officer, or his testator or intestate is or
was a director or officer, of the Corporation, or by
reason of the fact that he is or was servicing at the
request of the Corporation as a director, officer,
employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, of any type or
kind, domestic or foreign, against expenses, including
attorneys' fee, judgments, fines, and amounts paid in
settlement, actually and reasonably incurred as result of
such action, suit or proceeding.
ARTICLE VIII
Amendments
These Bylaws may be altered or repealed and Bylaws
may be made at any annual meeting of the stockholders, or
at any special meeting thereof if notice of the proposed
alteration or repeal of Bylaw or Bylaws to be made be
contained in the notice of such special meeting, by the
affirmative vote of a majority of the stock issued and
outstanding and entitled to vote thereat, or by the
affirmative vote of a majority of the Board of Directors,
at any regular or special meeting of the Board of
Directors, if notice of the proposed alteration or repeal
of Bylaw or Bylaws to be made is contained in the notice
of such regular or special meeting.
EXHIBIT 4.1
RESIDENTIAL ASSET SECURITIES CORPORATION,
Company,
[NAME OF [MASTER] SERVICER],
[Master] Servicer,
and
[NAME OF TRUSTEE],
Trustee
POOLING AND SERVICING AGREEMENT
Dated as of [_____ __, 199_]
[Mortgage] [Manufactured Housing Contract] Pass-Through
Certificates
Series [199_-___]
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS . . . . . . . . . 2
Section 1.01. Definitions. . . . . . . . . . . . . 2
Accretion Termination
Date . . . . . . . . . . . . . . . 2
Accrued Certificate
Interest . . . . . . . . . . . . . 2
Adjusted Mortgage Rate. . . . . . . . . . . 3
Advance . . . . . . . . . . . . . . . . . . 3
Affiliate . . . . . . . . . . . . . . . . . 3
Agreement . . . . . . . . . . . . . . . . . 3
Amount Held for Future
Distribution . . . . . . . . . . . 3
Appraised Value . . . . . . . . . . . . . . 4
Assignment. . . . . . . . . . . . . . . . . 4
Assignment Agreement. . . . . . . . . . . . 4
Available Distribution
Amount . . . . . . . . . . . . . . 4
Bankruptcy Amount . . . . . . . . . . . . . 4
Bankruptcy Code . . . . . . . . . . . . . . 5
Bankruptcy Loss . . . . . . . . . . . . . . 5
Business Day. . . . . . . . . . . . . . . . 5
Buydown Funds . . . . . . . . . . . . . . . 6
Buydown Mortgage Loan . . . . . . . . . . . 6
Cash Liquidation. . . . . . . . . . . . . . 6
Certificate . . . . . . . . . . . . . . . . 6
Certificate Account . . . . . . . . . . . . 6
Certificate Account
Deposit Date . . . . . . . . . . . 6
Certificateholder or
Holder . . . . . . . . . . . . . . 6
Certificate Principal
Balance. . . . . . . . . . . . . . 6
Certificate Register and
Certificate
Registrar. . . . . . . . . . . . . 7
Class . . . . . . . . . . . . . . . . . . . 7
Class A Certificate . . . . . . . . . . . . 7
Class A-4 Principal
Distribution
Amount . . . . . . . . . . . . . . 7
Class B Certificate . . . . . . . . . . . . 8
Class B Percentage. . . . . . . . . . . . . 8
Class B Prepayment
Distribution
Trigger. . . . . . . . . . . . . . 8
Class M Certificate . . . . . . . . . . . . 8
Class M Percentage. . . . . . . . . . . . . 8
Class M Prepayment
Distribution
Trigger. . . . . . . . . . . . . . 8
Class R Certificate . . . . . . . . . . . . 8
Closing Date. . . . . . . . . . . . . . . . 8
Code. . . . . . . . . . . . . . . . . . . . 8
Compensating Interest . . . . . . . . . . . 9
Corporate Trust Office. . . . . . . . . . . 9
Credit Support Depletion
Date . . . . . . . . . . . . . . . 9
Curtailment . . . . . . . . . . . . . . . . 9
Custodial Account . . . . . . . . . . . . . 9
Custodial Agreement . . . . . . . . . . . . 9
Custodian . . . . . . . . . . . . . . . . . 9
Cut-off Date. . . . . . . . . . . . . . . . 9
Cut-off Date Principal
Balance. . . . . . . . . . . . . . 9
Debt Service Reduction. . . . . . . . . . . 9
Deficient Valuation . . . . . . . . . . . . 9
Deleted [Mortgage Loan]
[Contract] . . . . . . . . . . . . 10
Destroyed [Mortgage Note]
[Contract] . . . . . . . . . . . . 10
Determination Date. . . . . . . . . . . . . 10
Discount Fraction . . . . . . . . . . . . . 10
Discount [Mortgage Loan]
[Contract] . . . . . . . . . . . . 10
Disqualified
Organization . . . . . . . . . . . 10
Distribution Date . . . . . . . . . . . . . 10
Due Date. . . . . . . . . . . . . . . . . . 11
Due Period. . . . . . . . . . . . . . . . . 11
Eligible Account. . . . . . . . . . . . . . 11
Event of Default. . . . . . . . . . . . . . 11
Excess Bankruptcy Loss. . . . . . . . . . . 11
Excess Fraud Loss . . . . . . . . . . . . . 11
Excess Special Hazard
Loss . . . . . . . . . . . . . . . 11
Excess Subordinate
Principal Amount . . . . . . . . . 11
Extraordinary Events. . . . . . . . . . . . 12
Extraordinary Losses. . . . . . . . . . . . 12
FDIC. . . . . . . . . . . . . . . . . . . . 12
FHLMC . . . . . . . . . . . . . . . . . . . 12
Final Distribution Date . . . . . . . . . . 13
Fitch . . . . . . . . . . . . . . . . . . . 13
FNMA. . . . . . . . . . . . . . . . . . . . 13
Foreclosure Profits . . . . . . . . . . . . 13
Fraud Loss Amount . . . . . . . . . . . . . 13
Fraud Losses. . . . . . . . . . . . . . . . 13
Independent . . . . . . . . . . . . . . . . 14
Initial Certificate
Principal Balance. . . . . . . . . 14
Initial Monthly Payment
Fund . . . . . . . . . . . . . . . 14
Insurance Proceeds. . . . . . . . . . . . . 14
Insurer . . . . . . . . . . . . . . . . . . 14
Late Collections. . . . . . . . . . . . . . 14
Liquidation Proceeds. . . . . . . . . . . . 14
Loan-to-Value Ratio . . . . . . . . . . . . 14
Maturity Date . . . . . . . . . . . . . . . 14
Monthly Payment . . . . . . . . . . . . . . 15
Moody's . . . . . . . . . . . . . . . . . . 15
Mortgage. . . . . . . . . . . . . . . . . . 15
[Mortgage] [Contract]
File . . . . . . . . . . . . . . . 15
[Mortgage Loan]
[Contract]
Schedule . . . . . . . . . . . . . 15
[Mortgage Loans]
[Contracts]. . . . . . . . . . . . 16
Mortgage Note . . . . . . . . . . . . . . . 16
Mortgage Rate . . . . . . . . . . . . . . . 16
Mortgaged Property. . . . . . . . . . . . . 16
Mortgagor . . . . . . . . . . . . . . . . . 16
Net Mortgage Rate . . . . . . . . . . . . . 16
Non-Discount [Mortgage
Loans] [Contracts] . . . . . . . . 16
Non-Primary Residence
Loans. . . . . . . . . . . . . . . 16
Non-United States Person. . . . . . . . . . 16
Nonrecoverable Advance. . . . . . . . . . . 16
Nonsubserviced [Mortgage
Loan] [Contract] . . . . . . . . . 17
Notional Amount . . . . . . . . . . . . . . 17
Officers' Certificate . . . . . . . . . . . 17
Opinion of Counsel. . . . . . . . . . . . . 17
Original Senior
Percentage . . . . . . . . . . . . 17
Outstanding [Mortgage
Loan] [Contract] . . . . . . . . . 17
Ownership Interest. . . . . . . . . . . . . 17
Pass-Through Rate . . . . . . . . . . . . . 17
Paying Agent. . . . . . . . . . . . . . . . 18
Percentage Interest . . . . . . . . . . . . 18
Permitted Investments . . . . . . . . . . . 18
Permitted Transferee. . . . . . . . . . . . 19
Person. . . . . . . . . . . . . . . . . . . 19
Pool Stated Principal
Balance. . . . . . . . . . . . . . 19
Pool Strip Rate . . . . . . . . . . . . . . 19
Prepayment Assumption . . . . . . . . . . . 19
Prepayment Distribution
Percentage . . . . . . . . . . . . 20
Prepayment Distribution
Trigger. . . . . . . . . . . . . . 21
Prepayment Interest
Shortfall. . . . . . . . . . . . . 21
Prepayment Period . . . . . . . . . . . . . 21
Primary Insurance Policy. . . . . . . . . . 21
Principal Prepayment. . . . . . . . . . . . 21
Principal Prepayment in
Full . . . . . . . . . . . . . . . 21
Program Guide . . . . . . . . . . . . . . . 21
Purchase Price. . . . . . . . . . . . . . . 21
Qualified Substitute
[Mortgage Loan]
[Contract] . . . . . . . . . . . . 21
Rating Agency . . . . . . . . . . . . . . . 22
Realized Loss . . . . . . . . . . . . . . . 22
Record Date . . . . . . . . . . . . . . . . 23
Regular Certificate . . . . . . . . . . . . 23
REMIC . . . . . . . . . . . . . . . . . . . 23
REMIC Provisions. . . . . . . . . . . . . . 23
REO Acquisition . . . . . . . . . . . . . . 23
REO Disposition . . . . . . . . . . . . . . 23
REO Imputed Interest. . . . . . . . . . . . 23
REO Proceeds. . . . . . . . . . . . . . . . 23
REO Property. . . . . . . . . . . . . . . . 23
Request for Release . . . . . . . . . . . . 24
Required Insurance
Policy . . . . . . . . . . . . . . 24
Residential Funding . . . . . . . . . . . . 24
Responsible Officer . . . . . . . . . . . . 24
Schedule of Discount
Fractions. . . . . . . . . . . . . 24
Seller. . . . . . . . . . . . . . . . . . . 24
Seller's Agreement. . . . . . . . . . . . . 24
Senior Accelerated
Distribution
Percentage . . . . . . . . . . . . 24
Senior Percentage . . . . . . . . . . . . . 25
Senior Principal
Distribution
Amount . . . . . . . . . . . . . . 25
Servicing Accounts. . . . . . . . . . . . . 26
Servicing Advances. . . . . . . . . . . . . 26
Servicing Fee . . . . . . . . . . . . . . . 26
Servicing Officer . . . . . . . . . . . . . 26
Special Hazard Amount . . . . . . . . . . . 26
Special Hazard Loss . . . . . . . . . . . . 27
Special Hazard
Percentage . . . . . . . . . . . . 27
Standard & Poor's . . . . . . . . . . . . . 27
Stated Principal Balance. . . . . . . . . . 27
Subordinate Principal
Distribution
Amount . . . . . . . . . . . . . . 27
Subserviced [Mortgage
Loan] [Contract] . . . . . . . . . 28
Subservicer . . . . . . . . . . . . . . . . 28
Subservicer Advance . . . . . . . . . . . . 28
Subservicing Account. . . . . . . . . . . . 28
Subservicing Agreement. . . . . . . . . . . 28
Subservicing Fee. . . . . . . . . . . . . . 28
Tax Returns . . . . . . . . . . . . . . . . 29
Title Documents . . . . . . . . . . . . . . 29
Transfer. . . . . . . . . . . . . . . . . . 29
Transferee. . . . . . . . . . . . . . . . . 29
Transferor. . . . . . . . . . . . . . . . . 29
Trust Fund. . . . . . . . . . . . . . . . . 29
Uncertificated Accrued
Interest . . . . . . . . . . . . . 29
Uncertificated Notional
Amount . . . . . . . . . . . . . . 30
Uncertificated Pass-
Through Rate . . . . . . . . . . . 30
Uncertificated REMIC
Regular Interest
Pool Strip Rate. . . . . . . . . . 30
Uncertificated REMIC
Regular Interests. . . . . . . . . 30
Uncertificated REMIC
Regular Interests
Distribution
Amounts. . . . . . . . . . . . . . 30
Uninsured Cause . . . . . . . . . . . . . . 30
United States Person. . . . . . . . . . . . 30
Voting Rights . . . . . . . . . . . . . . . 30
ARTICLE II. . . . . . . . . . 31
CONVEYANCE OF [MORTGAGE LOANS]
[CONTRACTS];
ORIGINAL ISSUANCE OF CERTIFICATES. . . . 31
Section 2.01. Conveyance of
[Mortgage
Loans]
[Contracts]. . . . . . . . . 31
Section 2.02. Acceptance by
Trustee. . . . . . . . . . . 34
Section 2.03. Representations
, Warranties
and Covenants
of the [Master]
Servicer and
the Company. . . . . . . . . 36
Section 2.04. Representations
and Warranties
of Sellers . . . . . . . . . 39
Section 2.05. Execution and
Authentication
of
Certificates . . . . . . . . 41
ARTICLE III . . . . . . . . . 42
ADMINISTRATION AND SERVICING
OF [MORTGAGE LOANS] [CONTRACTS] . . . . 42
Section 3.01. [Master]
Servicer to Act
as Servicer. . . . . . . . . 42
Section 3.02. Subservicing
Agreements
Between
[Master]
Servicer and
Subservicers;
Enforcement of
Subservicers'
and Sellers'
Obligations. . . . . . . . . 43
Section 3.03. Successor
Subservicers . . . . . . . . 44
Section 3.04. Liability of
the [Master]
Servicer . . . . . . . . . . 44
Section 3.05. No Contractual
Relationship
Between
Subservicer and
Trustee or
Certificateholders. . . . . . . . . . . . . . . . . 45
Section 3.06. Assumption or
Termination of
Subservicing
Agreements
by Trustee . . . . . 45
Section 3.07. Collection of
Certain
[Mortgage Loan]
[Contract]
Payments;
Deposits to
Custodial Account . . . . . . . . . . . . . . . . . 45
Section 3.08. Subservicing
Accounts;
Servicing
Accounts . . . . . . . . . . 47
Section 3.09. Access to
Certain
Documentation
and Information
Regarding the
[Mortgage
Loans]
[Contracts]. . . . . . . . . 49
Section 3.10. Permitted
Withdrawals
from the
Custodial
Account. . . . . . . . . . . 49
Section 3.11. Maintenance of
the Primary
Insurance
Policies;
Collections
Thereunder. . . . . . . . . . . . . . . . . . . . . 51
Section 3.12. Maintenance of
Fire Insurance
and Omissions
and
Fidelity
Coverage. . . . . . . . . . . . . . . . . . . . . . 52
Section 3.13. Enforcement of
Due-on-Sale
Clauses;
Assumption and
Modification
Agreements;
Certain
Assignments. . . . . . . . . 53
Section 3.14. Realization
Upon Defaulted
[Mortgage
Loans]
[Contracts]. . . . . . . . . 55
Section 3.15. Trustee to
Cooperate;
Release of
[Mortgage]
[Contract]
Files. . . . . . . . . . . . 58
Section 3.16. Servicing and
Other
Compensation[;
Compensating
Interest . . . . . . . . . . 59
Section 3.17. Reports to the
Trustee and the
Company. . . . . . . . . . . 60
Section 3.18. Annual
Statement as to
Compliance . . . . . . . . . 60
Section 3.19. Annual
Independent
Public
Accountants'
Servicing
Report . . . . . . . . . . . 60
Section 3.20. Rights of the
Company in
Respect of the
[Master]
Servicer . . . . . . . . . . 61
[Section 3.21. Administration
of Buydown
Funds. . . . . . . . . . . . 62
ARTICLE IV. . . . . . . . . . 63
PAYMENTS TO CERTIFICATEHOLDERS. . . . . 63
Section 4.01. Certificate
Account. . . . . . . . . . . 63
Section 4.02. Distributions. . . . . . . . 63
Section 4.03. Statements to
Certificatehold
ers. . . . . . . . . . . . . 69
Section 4.04. Distribution of
Reports to the
Trustee and the
Company;
Advances by the
[Master]
Servicer . . . . . . . . . . 72
Section 4.05. Allocation of
Realized
Losses . . . . . . . . . . . 73
Section 4.06. Reports of
Foreclosures
and Abandonment
of Mortgaged
Property . . . . . . . . . . 74
Section 4.07. Optional
Purchase of
Defaulted
[Mortgage
Loans]
[Contracts]. . . . . . . . . 74
Section 4.08. Distributions
on the
Uncertificated
Regular
Interests. . . . . . . . . . 75
ARTICLE V. . . . . . . . . . 76
THE CERTIFICATES . . . . . . . . 76
Section 5.01. The
Certificates . . . . . . . . 76
Section 5.02. Registration of
Transfer and
Exchange of
Certificates . . . . . . . . 76
Section 5.03. Mutilated,
Destroyed, Lost
or Stolen
Certificates . . . . . . . . 81
Section 5.04. Persons Deemed
Owners . . . . . . . . . . . 82
Section 5.05. Appointment of
Paying Agent . . . . . . . . 82
Section 5.06. Optional
Purchase of
Certificates . . . . . . . . 82
ARTICLE VI. . . . . . . . . . 85
THE COMPANY AND THE [MASTER]
SERVICER. . . . . . . . . . . . . . . . . . 85
Section 6.01. Respective
Liabilities of
the Company and
the [Master]
Servicer . . . . . . . . . . 85
Section 6.02. Merger or
Consolidation
of the Company
or the [Master]
Servicer;
Assignment of
Rights and
Delegation of
Duties by
[Master] Servicer.. . . . . . . . . . . . . . . . . 85
Section 6.03. Limitation on
Liability of
the Company,
the Master
Servicer and
Others. . . . . . . . . . . . . . . . . . . . . . . 86
Section 6.04. Company and
[Master]
Servicer Not to
Resign . . . . . . . . . . . 87
ARTICLE VII . . . . . . . . . 88
DEFAULT . . . . . . . . . . 88
Section 7.01. Events of
Default. . . . . . . . . . . 88
Section 7.02. Trustee or
Company to Act;
Appointment of
Successor. . . . . . . . . . 90
Section 7.03. Notification to
Certificatehold
ers. . . . . . . . . . . . . 90
Section 7.04. Waiver of
Events of Default . . . . . . . . . . . . . 91
ARTICLE VIII . . . . . . . . . 92
CONCERNING THE TRUSTEE. . . . . . . 92
Section 8.01. Duties of
Trustee . . . . . . . . . . . . . . . . . . 92
Section 8.02. Certain Matters
Affecting the
Trustee. . . . . . . . . . . 93
Section 8.03. Trustee Not
Liable for
Certificates or
[Mortgage
Loans]
[Contracts]. . . . . . . . . 95
Section 8.04. Trustee May Own
Certificates . . . . . . . . 95
Section 8.05. [Master]
Servicer to Pay
Trustee's Fees
and Expenses;
Indemnification
. . . . . . . . . . . . . . 95
Section 8.06. Eligibility
Requirements
for Trustee. . . . . . . . . 96
Section 8.07. Resignation and
Removal of the
Trustee. . . . . . . . . . . 97
Section 8.08. Successor
Trustee. . . . . . . . . . . 98
Section 8.09. Merger or
Consolidation
of Trustee . . . . . . . . . 98
Section 8.10. Appointment of
Co-Trustee or
Separate
Trustee. . . . . . . . . . . 99
Section 8.11. Appointment of
Custodians . . . . . . . . .100
Section 8.12. Appointment of
Office or
Agency . . . . . . . . . . .100
ARTICLE IX. . . . . . . . . .101
TERMINATION . . . . . . . . .101
Section 9.01. Termination
Upon Purchase
by the [Master]
Servicer or the
Company or
Liquidation of
All [Mortgage
Loans]
[Contracts]. . . . . . . . .101
Section 9.02. Additional
Termination Requirements. . . . . . . . . .103
ARTICLE X. . . . . . . . . .105
REMIC PROVISIONS . . . . . . . .105
Section 10.01. REMIC
Administration . . . . . . .105
ARTICLE X. . . . . . . . . .109
MISCELLANEOUS PROVISIONS . . . . . .109
Section 11.01. Amendment. . . . . . . . . .109
Section 11.02. Recordation of
Agreement;
Counterparts . . . . . . . .111
Section 11.03. Limitation on
Rights of
Certificatehold
ers. . . . . . . . . . . . .112
Section 11.04. Governing Law. . . . . . . .113
Section 11.05. Notices. . . . . . . . . . .113
Section 11.06. Notices to
Rating Agency. . . . . . . .113
Section 11.07. Severability of
Provisions . . . . . . . . .114
Section 11.08. Supplemental
Provisions for
Resecuritizatio
n. . . . . . . . . . . . . .114
EXHIBITS
Exhibit A: Form of Class A Certificate
Exhibit B: Form of Class M Certificate
Exhibit C: Form of Class B Certificate
Exhibit D: Form of Class R Certificate
Exhibit E: Form of Custodial Agreement
Exhibit One: Form of Custodian Initial Certification
Exhibit Two: Form of Custodian Interim Certification
Exhibit Three: Form of Custodian Final Certification
Exhibit F: [Mortgage Loan] [Contract] Schedule
Exhibit G: Form of Seller/Servicer Contract
Exhibit H: Forms of Request for Release
Exhibit I-1: Form of Transfer Affidavit and Agreement
Exhibit I-2: Form of Transferor Certificate
Exhibit L: Form of Rule 144A Investment
Representation Letter
Exhibit J: Form of Investor Representation Letter
Exhibit K: Form of Transferor Representation Letter
Exhibit M: Text of Amendment to Pooling and
Servicing Agreement Pursuant to Section
11.01(e) for a Limited Guaranty
Exhibit N: Form of Limited Guaranty
Exhibit O: Form of Lender Certification for
Assignment of [Mortgage Loan] [Contract]
Exhibit P: Schedule of Discount Fractions
This Pooling and Servicing Agreement, effective
as of [________, 199_], among RESIDENTIAL ASSET
SECURITIES CORPORATION, as the company (together with its
permitted successors and assigns, the "Company"), [NAME
OF [MASTER] SERVICER], as [master] servicer (together
with its permitted successors and assigns, the "[Master]
Servicer"), and [NAME OF TRUSTEE], as trustee (together
with its permitted successors and assigns, the
"Trustee"),
PRELIMINARY STATEMENT:
The Company intends to sell [mortgage]
[manufactured housing contract] pass-through certificates
(collectively, the "Certificates"), to be issued
hereunder in multiple classes, which in the aggregate
will evidence the entire beneficial ownership interest in
the [Mortgage Loans] [Contracts] (as defined herein). As
provided herein, the [Master] Servicer will make an
election to treat the entire segregated pool of assets
subject to this Agreement (including the [Mortgage Loans]
[Contracts] but excluding the Initial Monthly Payment
Fund), as a real estate mortgage investment conduit (a
"REMIC") for federal income tax purposes and such
segregated pool of assets will be designated as the
"Trust Fund". The Class A-1 Certificates, Class A-2
Certificates, Class A-3 Certificates, Class A-4
Certificates, each of the Uncertificated REMIC Regular
Interests (as defined herein), Class M Certificates and
Class B Certificates will represent ownership of "regular
interests" in the REMIC, and the Class R Certificates
will be the sole class of "residual interests" therein
for purposes of the REMIC Provisions (as defined herein)
under federal income tax law. The Class A-5 Certificates
will represent the entire beneficial ownership interest
in the Uncertificated REMIC Regular Interests.
The following table sets forth the designation,
type, Pass-Through Rate, aggregate Initial Certificate
Principal Balance, Maturity Date, initial ratings and
certain features for each Class of Certificates
comprising the interests in the Trust Fund created
hereunder.
Aggregate Initial
Certificate
Pass-Through Principal
Designation Type Rate Balance
Class A-1 Senior [____]% $[ ___________.__]
Class A-2 Senior [____]% $[ ___________.__]
Class A-3 Senior [____]% $[ ___________.__]
Class A-4 Senior/ 0.00% $[ ___________.__]
Principal Only
Class A-5 Senior/ Variable Rate $ 0.00
Stripped Interest
Class R Residual [____]% $[___________.__]
Class M Mezzanine [____]% $[___________.__]
Class B Subordinate [____]% $[___________.__]
Initial Ratings
Designation Features Maturity Date [S&P] [Fitch] [Moody's]
Class A-1 Senior [_______ __, ____] [___] [___] [___]
Class A-2 Senior [_______ __, ____] [___] [___] [___]
Class A-3 Accrual [_______ __, ____] [___] [___] [___]
Class A-4 Principal [_______ __, ____] [___] [___] [___]
Only
Class A-5 Stripped [_______ __, ____] [___] [___] [___]
Interest
Class R Residual [_______ __, ____] [___] [___] [___]
Class M Mezzanine [_______ __, ____] [___] [___] [___]
Class B Subordinate [_______ __, ____] [___] [___] [___]
The [Mortgage Loans] [Contracts] have an
aggregate Cut-off Date Principal Balance equal to
$[_____________]. The [Mortgage Loans] [Contracts] are
[fixed] [adjustable] rate mortgage loans.
In consideration of the mutual agreements
herein contained, the Company, the [Master] Servicer and
the Trustee agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions.
Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires,
shall have the meanings specified in this Article.
Accretion Termination Date: With respect to
the Class A-3 Certificates, the earlier to occur of (i)
the Distribution Date on which the Certificate Principal
Balances of the Class A-1 and Class A-2 Certificates have
been reduced to zero and (ii) the Credit Support
Depletion Date.
Accrued Certificate Interest: With respect to
each Distribution Date, as to any Class A Certificate
(other than a Class A-4 Certificate or Class A-5
Certificate), any Class M Certificate, any Class B
Certificate or any Class R Certificate, one month's
interest accrued at the related Pass-Through Rate on the
Certificate Principal Balance thereof immediately prior
to such Distribution Date. With respect to each
Distribution Date, as to the Class A-5 Certificates, one
month's interest accrued at the then applicable Pass-
Through Rate on the Notional Amount thereof. Accrued
Certificate Interest will be calculated on the basis of
a 360-day year consisting of twelve 30-day months. In
each case Accrued Certificate Interest on any Class of
Certificates will be reduced by the amount of (i)
Prepayment Interest Shortfalls [(to the extent not offset
by the [Master] Servicer with a payment of Compensating
Interest as provided in Section 3.16(e))], (ii) the
interest portion (adjusted to the Net Mortgage Rate) of
Realized Losses (including Excess Special Hazard Losses,
Excess Fraud Losses, Excess Bankruptcy Losses and
Extraordinary Losses) not allocated solely to one or more
specific Classes of Certificates pursuant to Section
4.05, (iii) the interest portion of Advances previously
made with respect to a [Mortgage Loan] [Contract] or REO
Property which remained unreimbursed following the Cash
Liquidation or REO Disposition of such [Mortgage Loan]
[Contract] or REO Property that were made with respect to
delinquencies that were ultimately determined to be
Excess Special Hazard Losses, Excess Fraud Losses, Excess
Bankruptcy Losses or Extraordinary Losses and (iv) any
other interest shortfalls not covered by the
subordination provided by the Class M Certificates and
Class B Certificates, including interest that is not
collectible from the Mortgagor pursuant to the Soldiers'
and Sailors' Civil Relief Act of 1940, as amended, or
similar legislation or regulations as in effect from time
to time, with all such reductions allocated among all of
the Certificates in proportion to their respective
amounts of Accrued Certificate Interest which would have
resulted absent such reduction. With respect to the
Class A-3 Certificates on each Distribution Date that
occurs prior to the Accretion Termination Date, interest
shortfalls allocable to the Class A-3 Certificates on
such Distribution Date will be so allocated by reducing
the amount that is added to the Certificate Principal
Balance thereof in respect of Accrued Certificate
Interest pursuant to Section 4.02(d). In addition to
that portion of the reductions described in the second
preceding sentence that are allocated to the Class B
Certificates or any Class of Class M Certificates,
Accrued Certificate Interest on the Class B Certificates
or such Class of Class M Certificates will be reduced by
the interest portion (adjusted to the Net Mortgage Rate)
of Realized Losses that are allocated solely to the Class
B Certificates or such Class of Class M Certificates
pursuant to Section 4.05. The Class A-4 Certificates
receive no distributions of Accrued Certificate Interest.
Adjusted Mortgage Rate: With respect to any
[Mortgage Loan] [Contract] and any date of determination,
the Mortgage Rate borne by [the related Mortgage Note]
[the related Contract], less the rate at which the
related Subservicing Fee accrues.
Advance: As to any [Mortgage Loan] [Contract],
any advance made by the [Master] Servicer, pursuant to
Section 4.04.
Affiliate: With respect to any Person, any
other Person controlling, controlled by or under common
control with such first Person. For the purposes of this
definition, "control" means the power to direct the
management and policies of such Person, directly or
indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative
to the foregoing.
Agreement: This Pooling and Servicing
Agreement and all amendments hereof and supplements
hereto.
Amount Held for Future Distribution: As to any
Distribution Date, the total of the amounts held in the
Custodial Account at the close of business on the
preceding Determination Date on account of (i)
Liquidation Proceeds, Insurance Proceeds, Principal
Prepayments, [Mortgage Loan] [Contract] purchases made
pursuant to Section 2.02, 2.03 or 2.04 and [Mortgage
Loan] [Contract] substitutions made pursuant to Section
2.03 or 2.04 received or made in the month of such
Distribution Date (other than such Liquidation Proceeds,
Insurance Proceeds and purchases of [Mortgage Loans]
[Contracts] that the [Master] Servicer has deemed to have
been received in the preceding month in accordance with
Section 3.07(b)) and (ii) payments which represent early
receipt of scheduled payments of principal and interest
due on a date or dates subsequent to the related Due
Date.
Appraised Value: As to any Mortgaged Property,
the lesser of (i) the appraised value of such Mortgaged
Property based upon the appraisal made at the time of the
origination of the related [Mortgage Loan] [Contract],
and (ii) the sales price of the Mortgaged Property at
such time of origination, except in the case of a
Mortgaged Property securing a refinanced or modified
[Mortgage Loan] [Contract] as to which it is either the
appraised value determined above or the appraised value
determined in an appraisal at the time of refinancing or
modification, as the case may be.
Assignment: An assignment of the Mortgage,
notice of transfer or equivalent instrument, in
recordable form, sufficient under the laws of the
jurisdiction wherein the related Mortgaged Property is
located to reflect of record the sale of the [Mortgage
Loan] [Contract] to the Trustee for the benefit of
Certificateholders, which assignment, notice of transfer
or equivalent instrument may be in the form of one or
more blanket assignments covering Mortgages secured by
Mortgaged Properties located in the same county, if
permitted by law and accompanied by an Opinion of Counsel
to that effect.
Assignment Agreement: The Assignment and
Assumption Agreement, dated as of [__________, 199_],
between Residential Funding and the Company relating to
the transfer and assignment of the [Mortgage Loans]
[Contracts].
Available Distribution Amount: As to any
Distribution Date, an amount equal to (a) the sum of (i)
the amount relating to the [Mortgage Loans] [Contracts]
on deposit in the Custodial Account as of the close of
business on the immediately preceding Determination Date
and amounts deposited in the Custodial Account in
connection with the substitution of Qualified Substitute
[Mortgage Loans] [Contracts], (ii) the amount of any
Advance made on the immediately preceding Certificate
Account Deposit Date, (iii) any amount deposited in the
Custodial Account pursuant to Section 3.12(a), (iv) any
amount deposited in the Custodial Account pursuant to
Section 2.01(f); (v) any amount deposited in the
Certificate Account pursuant to Section 4.07 and (vi) any
amount deposited in the Certificate Account pursuant to
Section 3.16(e), reduced by (b) the sum as of the close
of business on the immediately preceding Determination
Date of (w) aggregate Foreclosure Profits, (x) the Amount
Held for Future Distribution, and (y) amounts permitted
to be withdrawn by the [Master] Servicer from the
Custodial Account in respect of the [Mortgage Loans]
[Contracts] pursuant to clauses (ii)-(x), inclusive, of
Section 3.10(a).
Bankruptcy Amount: As of any date of
determination prior to the first anniversary of the Cut-
off Date, an amount equal to the excess, if any, of (A)
$[_______] over (B) the aggregate amount of Bankruptcy
Losses allocated solely to one or more specific Classes
of Certificates in accordance with Section 4.05. As of
any date of determination prior to the first anniversary
of the Cut-off Date, an amount equal to the excess, if
any, of (1) the lesser of (a) the Bankruptcy Amount
calculated as of the close of business on the Business
Day immediately preceding the most recent anniversary of
the Cut-off Date coinciding with or preceding such date
of determination (or, if such date of determination is an
anniversary of the Cut-off Date, the Business Day
immediately preceding such date of determination) (for
purposes of this definition, the "Relevant Anniversary")
and (b) the greater of (A) the greater of (i) [ ] times
the aggregate principal balance of all the [Mortgage
Loans] [Contracts] in the [Mortgage] [Contract] Pool as
of the Relevant Anniversary having a Loan-to-Value at
origination which exceeds 75% and (ii) $[ ]; and
(B) the greater of (i) the product of (x) an amount equal
to the largest difference in the related Monthly Payment
for any Non-Primary Residence Loan remaining in the
[Mortgage] [Contract] Pool which had an original Loan-to-
Value Ratio of 80% or greater that would result if the
Net Mortgage Rate thereof was equal to the weighted
average (based on the principal balance of the [Mortgage
Loans] [Contracts] as of the Relevant Anniversary) of the
Net Mortgage Rates of all Outstanding [Mortgage Loans]
[Contracts] as of the Relevant Anniversary less [ ]%
per annum, (y) a number equal to the weighted average
remaining term to maturity, in months, of all Non-Primary
Residence Loans remaining in the [Mortgage] [Contract]
Pool as of the Relevant Anniversary, and (z) one plus the
quotient of the number of all Non-Primary Residence Loans
remaining in the [Mortgage] [Contract] Pool divided by
the total number of Outstanding [Mortgage Loans]
[Contracts] in the [Mortgage] [Contract] Pool as of the
Relevant Anniversary, and (ii) $[ ], over (2)
the aggregate amount of Bankruptcy Losses allocated
solely to one or more specific Classes of Certificates in
accordance with Section 4.05 since the Relevant
Anniversary.
The Bankruptcy Amount may be further reduced by
the [Master] Servicer (including accelerating the manner
in which such coverage is reduced) provided that prior to
any such reduction, the [Master] Servicer shall (i)
obtain written confirmation from each Rating Agency that
such reduction shall not reduce the rating assigned to
any Class of Certificates by such Rating Agency below the
lower of the then-current rating or the rating assigned
to such Certificates as of the Closing Date by such
Rating Agency and (ii) provide a copy of such written
confirmation to the Trustee.
Bankruptcy Code: The Bankruptcy Code of 1978,
as amended.
Bankruptcy Loss: With respect to any [Mortgage
Loan] [Contract], a Deficient Valuation or Debt Service
Reduction; provided, however, that neither a Deficient
Valuation nor a Debt Service Reduction shall be deemed a
Bankruptcy Loss hereunder so long as the [Master]
Servicer has notified the Trustee in writing that the
[Master] Servicer is diligently pursuing any remedies
that may exist in connection with the representations and
warranties made regarding the related [Mortgage Loan]
[Contract] and either (A) the related [Mortgage Loan]
[Contract] is not in default with regard to payments due
thereunder or (B) delinquent payments of principal and
interest under the related [Mortgage Loan] [Contract] and
any premiums on any applicable primary hazard insurance
policy and any related escrow payments in respect of such
[Mortgage Loan] [Contract] are being advanced on a
current basis by the [Master] Servicer or a Subservicer,
in either case without giving effect to any Debt Service
Reduction.
Business Day: Any day other than (i) a
Saturday or a Sunday or (ii) a day on which banking
institutions in the State of New York, the State of
Michigan, the State of California or the State of
Illinois (and such other state or states in which the
Custodial Account or the Certificate Account are at the
time located) are required or authorized by law or
executive order to be closed.
[Buydown Funds: Any amount contributed by the
seller of a Mortgaged Property, the Company or other
source in order to enable the Mortgagor to reduce the
payments required to be made from the Mortgagor's funds
in the early years of a Mortgage Loan. Buydown Funds are
not part of the Trust Fund prior to deposit into the
Custodial or Certificate Account.]
[Buydown Mortgage Loan: Any Mortgage Loan as
to which a specified amount of interest is paid out of
related Buydown Funds in accordance with a related
buydown agreement.]
Cash Liquidation: As to any defaulted
[Mortgage Loan] [Contract] other than a [Mortgage Loan]
[Contract] as to which an REO Acquisition occurred, a
determination by the [Master] Servicer that it has
received all Insurance Proceeds, Liquidation Proceeds and
other payments or cash recoveries which the [Master]
Servicer reasonably and in good faith expects to be
finally recoverable with respect to such [Mortgage Loan]
[Contract].
Certificate: Any Class A Certificate, Class M
Certificate, Class B Certificate or Class R Certificate.
Certificate Account: The account or accounts
created and maintained pursuant to Section 4.01, which
shall be entitled "[name of Trustee], as trustee, in
trust for the registered holders of Residential Asset
Securities Corporation, [Mortgage] [Manufactured Housing
Contract] Pass-Through Certificates, Series [199_-__]"
and which must be an Eligible Account.
Certificate Account Deposit Date: As to any
Distribution Date, the Business Day prior thereto.
Certificateholder or Holder: The Person in
whose name a Certificate is registered in the Certificate
Register, except that neither a Disqualified Organization
nor a Non-United States Person shall be a Holder of a
Class R Certificate for purposes hereof. Solely for the
purpose of giving any consent or direction pursuant to
this Agreement, any Certificate, other than a Class R
Certificate, registered in the name of the Company, the
[Master] Servicer or any Subservicer or any Affiliate
thereof shall be deemed not to be outstanding and the
Percentage Interest or Voting Rights evidenced thereby
shall not be taken into account in determining whether
the requisite amount of Percentage Interests or Voting
Rights necessary to effect any such consent or direction
has been obtained. The Trustee shall be required to
recognize as a "Holder" or "Certificateholder" only the
Person in whose name a Certificate is registered in the
Certificate Register.
Certificate Principal Balance: With respect to
each Class A Certificate (other than a Class A-5
Certificate) and Class R Certificate, on any date of
determination, an amount equal to (i) the Initial
Certificate Principal Balance of such Certificate as
specified on the face thereof, plus (ii) in the case of
each Class A-3 Certificate, all Accrued Certificate
Interest added to the Certificate Principal Balance
thereof on each Distribution Date on or prior to the
Accretion Termination Date pursuant to Section 4.02(d),
minus (iii) the sum of (x) the aggregate of all amounts
previously distributed with respect to such Certificate
(or any predecessor Certificate) and applied to reduce
the Certificate Principal Balance thereof pursuant to
Section 4.02(a) and (y) the aggregate of all reductions
in Certificate Principal Balance deemed to have occurred
in connection with Realized Losses which were previously
allocated to such Certificate (or any predecessor
Certificate) pursuant to Section 4.05. With respect to
each Class M Certificate, on any date of determination,
an amount equal to (i) the Initial Certificate Principal
Balance of such Class M Certificate as specified on the
face thereof, minus (ii) the sum of (x) the aggregate of
all amounts previously distributed with respect to such
Certificate (or any predecessor Certificate) and applied
to reduce the Certificate Principal Balance thereof
pursuant to Section 4.02(a) and (y) the aggregate of all
reductions in Certificate Principal Balance deemed to
have occurred in connection with Realized Losses which
were previously allocated to such Certificate (or any
predecessor Certificate) pursuant to Section 4.05;
provided, that if the Certificate Principal Balances of
the Class B Certificates have been reduced to zero, the
Certificate Principal Balance of each Class M Certificate
shall thereafter be calculated to equal the Percentage
Interest evidenced by such Certificate times the excess,
if any, of (A) the then aggregate Stated Principal
Balance of the [Mortgage Loans] [Contracts] over (B) the
then aggregate Certificate Principal Balance of all other
Classes of Certificates then outstanding. With respect
to each Class B Certificate, on any date of
determination, an amount equal to (i) the Initial
Certificate Principal Balance of such Class B Certificate
as specified on the face thereof, minus (ii) the sum of
(x) the aggregate of all amounts previously distributed
with respect to such Certificate (or any predecessor
Certificate) and applied to reduce the Certificate
Principal Balance thereof pursuant to Section 4.02(a) and
(y) the aggregate of all reductions in Certificate
Principal Balance deemed to have occurred in connection
with Realized Losses which were previously allocated to
such Certificate (or any predecessor Certificate)
pursuant to Section 4.05; provided, that the Certificate
Principal Balance of each Class B Certificate shall be
calculated to equal the Percentage Interest evidenced by
such Certificate times the excess, if any, of (A) the
then aggregate Stated Principal Balance of the [Mortgage
Loans] [Contracts] over (B) the then aggregate
Certificate Principal Balance of all other Classes of
Certificates then outstanding. The Class A-5
Certificates have no Certificate Principal Balance.
Certificate Register and Certificate Registrar:
The register maintained and the registrar appointed
pursuant to Section 5.02.
Class: Collectively, all of the Certificates
bearing the same designation.
Class A Certificate: Any one of the Class A-1,
Class A-2, Class A-3, Class A-4 or Class A-5
Certificates, executed by the Trustee and authenticated
by the Certificate Registrar substantially in the form
annexed hereto as Exhibit A, each such Certificate (other
than the Class A-5 Certificates) evidencing an interest
designated as a "regular interest" in the REMIC for
purposes of the REMIC Provisions. The Class A-5
Certificates will represent the entire beneficial
ownership interest in the Uncertificated REMIC Regular
Interests.
Class A-4 Principal Distribution Amount: As
defined in Section 4.02(b)(i).
Class B Certificate: Any one of the Class B
Certificates executed by the Trustee and authenticated by
the Certificate Registrar substantially in the form
annexed hereto as Exhibit C and evidencing an interest
designated as a "regular interest" in the REMIC purposes
of the REMIC Provisions.
Class B Percentage: With respect to any
Distribution Date, a fraction, expressed as a percentage,
the numerator of which is the aggregate Certificate
Principal Balance of the Class B Certificates immediately
prior to such date and the denominator of which is the
aggregate Stated Principal Balance of all of the
[Mortgage Loans] [Contracts] (or related REO Properties)
(other than the related Discount Fraction of each
Discount [Mortgage Loan] [Contract]) immediately prior to
such Distribution Date.
Class B Prepayment Distribution Trigger: With
respect to any Distribution Date, a test that shall be
satisfied if the fraction (expressed as a percentage)
equal to the sum of the Certificate Principal Balances of
the Class B Certificates immediately prior to such
Distribution Date divided by the aggregate Stated
Principal Balance of all of the [Mortgage Loans]
[Contracts] (or related REO Properties) immediately prior
to such Distribution Date is greater than or equal to
[____]%.
Class M Certificate: Any one of the Class M
Certificates executed by the Trustee and authenticated by
the Certificate Registrar substantially in the form
annexed hereto as Exhibit B and evidencing an interest
designated as a "regular interest" in the REMIC for
purposes of the REMIC Provisions.
Class M Percentage: With respect to any
Distribution Date, a fraction, expressed as a percentage,
the numerator of which is the aggregate Certificate
Principal Balance of the Class M Certificates immediately
prior to such date and the denominator of which is the
aggregate Stated Principal Balance of all of the
[Mortgage Loans] [Contracts] (or related REO Properties)
(other than the related Discount Fraction of each
Discount [Mortgage Loan] [Contract]) immediately prior to
such Distribution Date.
Class M Prepayment Distribution Trigger: With
respect to any Distribution Date, a test that shall be
satisfied if the fraction (expressed as a percentage)
equal to the sum of the Certificate Principal Balances of
the Class M Certificates and Class B Certificates
immediately prior to such Distribution Date divided by
the aggregate Stated Principal Balance of all of the
[Mortgage Loans] [Contracts] (or related REO Properties)
immediately prior to such Distribution Date is greater
than or equal to [_____]%.
Class R Certificate: Any one of the Class R
Certificates executed by the Trustee and authenticated by
the Certificate Registrar substantially in the form
annexed hereto as Exhibit D and evidencing an interest
designated as a "residual interest" in the REMIC for
purposes of the REMIC Provisions.
Closing Date: [__________, 199_].
Code: The Internal Revenue Code of 1986.
[Compensating Interest: With respect to any
Distribution Date, an amount equal to Prepayment Interest
Shortfalls resulting from Principal Prepayments in Full
during the related Prepayment Period, but not more than
one-twelfth of [_____]% of the Stated Principal Balance
of the [Mortgage Loans] [Contracts] immediately preceding
such Distribution Date.]
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 administered, which office at the date of the
execution of this instrument is located at [address of
Trustee], Attention: Corporate Trust Administration
Series [199_-___].
Credit Support Depletion Date: The first
Distribution Date on which the Senior Percentage equals
100%.
Curtailment: Any Principal Prepayment made by
a Mortgagor which is not a Principal Prepayment in Full.
Custodial Account: The custodial account or
accounts created and maintained pursuant to Section 3.07
in the name of a depository institution, as custodian for
the holders of the Certificates, for the holders of
certain other interests in mortgage loans serviced or
sold by the [Master] Servicer and for the [Master]
Servicer, into which the amounts set forth in Section
3.07 shall be deposited directly. Any such account or
accounts shall be an Eligible Account.
Custodial Agreement: An agreement that may be
entered into among the Company, the [Master] Servicer,
the Trustee and a Custodian in substantially the form of
Exhibit E hereto.
Custodian: A custodian appointed pursuant to
a Custodial Agreement.
Cut-off Date: [________ 1, 199_].
Cut-off Date Principal Balance: As to any
[Mortgage Loan] [Contract], the unpaid principal balance
thereof at the Cut-off Date after giving effect to all
installments of principal due on or prior thereto,
whether or not received.
Debt Service Reduction: With respect to any
[Mortgage Loan] [Contract], a reduction in the scheduled
Monthly Payment for such [Mortgage Loan] [Contract] by a
court of competent jurisdiction in a proceeding under the
Bankruptcy Code, except such a reduction constituting a
Deficient Valuation or any reduction that results in a
permanent forgiveness of principal.
Deficient Valuation: With respect to any
[Mortgage Loan] [Contract], a valuation by a court of
competent jurisdiction of the Mortgaged Property in an
amount less than the then outstanding indebtedness under
the [Mortgage Loan] [Contract], or any reduction in the
amount of principal to be paid in connection with any
scheduled Monthly Payment that constitutes a permanent
forgiveness of principal, which valuation or reduction
results from a proceeding under the Bankruptcy Code.
Deleted [Mortgage Loan] [Contract]: A
[Mortgage Loan] [Contract] replaced or to be replaced
with a Qualified Substitute [Mortgage Loan] [Contract].
Destroyed [Mortgage Note] [Contract]: A
[Mortgage Note] [Contract] the original of which was
permanently lost or destroyed and has not been replaced.
Determination Date: With respect to any
Distribution Date, the 20th day (or if such 20th day is
not a Business Day, the Business Day immediately
following such 20th day) of the month of the related
Distribution Date.
Discount Fraction: With respect to each
Discount [Mortgage Loan] [Contract], the fraction
expressed as a percentage, the numerator of which is
[____]% minus the Net Mortgage Rate (or the initial Net
Mortgage Rate with respect to any Discount [Mortgage
Loans] [Contracts] as to which the Mortgage Rate is
modified pursuant to Section 3.07(a)) for such [Mortgage
Loan] [Contract] and the denominator of which is [____]%.
The Discount Fraction with respect to each Discount
[Mortgage Loan] [Contract] is set forth on Exhibit P
attached hereto.
Discount [Mortgage Loan] [Contract]: Any
[Mortgage Loan] [Contract] having a Net Mortgage Rate of
less than [____]% and any [Mortgage Loan] [Contract]
deemed to be a Discount [Mortgage Loan] [Contract]
pursuant to the definition of Qualified Substitute
[Mortgage Loan] [Contract].
Disqualified Organization: Any organization
defined as a "disqualified organization" under Section
860E(e)(5) of the Code, which includes any of the
following: (i) the United States, any State or political
subdivision thereof, any possession of the United States,
or any agency or instrumentality of any of the foregoing
(other than an instrumentality which is a corporation if
all of its activities are subject to tax and, except for
the FHLMC, a majority of its board of directors is not
selected by such governmental unit), (ii) a foreign
government, any international organization, or any agency
or instrumentality of any of the foregoing, (iii) any
organization (other than certain farmers' cooperatives
described in Section 521 of the Code) which is exempt
from the tax imposed by Chapter 1 of the Code (including
the tax imposed by Section 511 of the Code on unrelated
business taxable income), (iv) rural electric and
telephone cooperatives described in Section 1381(a)(2) of
the Code 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 the REMIC or any Person having an
Ownership Interest in any Class of Certificates (other
than such Person) to incur a liability for any federal
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 Section 7701 of the Code
or successor provisions.
Distribution Date: The 25th day of any month
beginning in the month immediately following the month of
the initial issuance of the Certificates or, if such 25th
day is not a Business Day, the Business Day immediately
following such 25th day.
Due Date: With respect to any Distribution
Date, the first day of the month in which such
Distribution Date occurs.
Due Period: With respect to any Distribution
Date, the period commencing on the second day of the
month preceding the month of such Distribution Date and
ending on the related Due Date.
Eligible Account: An account that is any of
the following: (i) maintained with a depository
institution the debt obligations of which have been rated
by each Rating Agency in its highest rating available, or
(ii) an account or accounts in a depository institution
in which such accounts are fully insured to the limits
established by the FDIC, provided that any deposits not
so insured shall, to the extent acceptable to each Rating
Agency, as evidenced in writing, be maintained such that
(as evidenced by an Opinion of Counsel delivered to the
Trustee and each Rating Agency) the registered Holders of
Certificates have a claim with respect to the funds in
such account or a perfected first security interest
against any collateral (which shall be limited to
Permitted Investments) securing such funds that is
superior to claims of any other depositors or creditors
of the depository institution with which such account is
maintained, or (iii) in the case of the Custodial
Account, either (A) a trust account or accounts
maintained in the corporate trust department of
[__________________________________] or (B) an account or
accounts maintained in the corporate asset services
department of [______________________________], as long
as its short term debt obligations are rated P-1 (or the
equivalent) or better by each Rating Agency, and its long
term debt obligations are rated A2 (or the equivalent) or
better, by each Rating Agency, or (iv) in the case of the
Certificate Account, a trust account or accounts
maintained in the corporate trust division of
[__________________________________], or (v) an account
or accounts of a depository institution acceptable to
each Rating Agency (as evidenced in writing by each
Rating Agency that use of any such account as the
Custodial Account or the Certificate Account will not
reduce the rating assigned to any Class of Certificates
by such Rating Agency below the lower of the then-current
rating or the rating assigned to such Certificates as of
the Closing Date by such Rating Agency).
Event of Default: As defined in Section 7.01.
Excess Bankruptcy Loss: Any Bankruptcy Loss,
or portion thereof, which exceeds the then applicable
Bankruptcy Amount.
Excess Fraud Loss: Any Fraud Loss, or portion
thereof, which exceeds the then applicable Fraud Loss
Amount.
Excess Special Hazard Loss: Any Special Hazard
Loss, or portion thereof, that exceeds the then
applicable Special Hazard Amount.
Excess Subordinate Principal Amount: With
respect to any Distribution Date on which the Certificate
Principal Balance of the most subordinate class or
classes of Certificates (as established in Section 4.05
hereof) then outstanding is to be reduced to zero and on
which Realized Losses are to be allocated to such class
or classes, the amount, if any, by which (i) the amount
that would otherwise be distributable in respect of
principal on such classes of Certificates on such
Distribution Date is greater than (ii) the excess, if
any, of the Certificate Principal Balance of such classes
of Certificates immediately prior to such Distribution
Date over the aggregate amount of Realized Losses to be
allocated to such classes of Certificates on such
Distribution Date.
Extraordinary Events: Any of the following
conditions with respect to a Mortgaged Property or
[Mortgage Loan] [Contract] causing or resulting in a loss
which causes the liquidation of such [Mortgage Loan]
[Contract]:
(a) losses that are of a type that would be
covered by the fidelity bond and the errors and
omissions insurance policy required to be
maintained pursuant to Section 3.12(b) but are in
excess of the coverage maintained thereunder;
(b) nuclear reaction or nuclear radiation or
radioactive contamination, all whether controlled
or uncontrolled, and whether such loss be direct or
indirect, proximate or remote or be in whole or in
part caused by, contributed to or aggravated by a
peril covered by the definition of the term
"Special Hazard Loss";
(c) hostile or warlike action in time of
peace or war, including action in hindering,
combatting or defending against an actual,
impending or expected attack:
1. by any government or sovereign
power, de jure or de facto, or by any
authority maintaining or using military, naval
or air forces; or
2. by military, naval or air forces; or
3. by an agent of any such government,
power, authority or forces;
(d) any weapon of war employing atomic
fission or radioactive force whether in time of
peace or war; or
(e) insurrection, rebellion, revolution,
civil war, usurped power or action taken by
governmental authority in hindering, combatting or
defending against such an occurrence, seizure or
destruction under quarantine or customs
regulations, confiscation by order of any
government or public authority; or risks of
contraband or illegal transportation or trade.
Extraordinary Losses: Any loss incurred on a
[Mortgage Loan] [Contract] caused by or resulting from an
Extraordinary Event.
FDIC: Federal Deposit Insurance Corporation or
any successor thereto.
FHLMC: Federal Home Loan Mortgage Corporation,
a corporate instrumentality of the United States created
and existing under Title III of the Emergency Home
Finance Act of 1970, as amended, or any successor
thereto.
Final Distribution Date: The Distribution Date
on which the final distribution in respect of the
Certificates will be made pursuant to Section 9.01 which
Final Distribution Date shall in no event be later than
the end of the 90-day liquidation period described in
Section 9.03.
Fitch: Fitch Investors Service, Inc. or its
successor in interest.
FNMA: Federal National Mortgage Association,
a federally chartered and privately owned corporation
organized and existing under the Federal National
Mortgage Association Charter Act, or any successor
thereto.
Foreclosure Profits: As to any Distribution
Date or related Determination Date and any [Mortgage
Loan] [Contract], the excess, if any, of Liquidation
Proceeds, Insurance Proceeds and REO Proceeds (net of all
amounts reimbursable therefrom pursuant to Section
3.10(a)(ii)) in respect of each [Mortgage Loan]
[Contract] or REO Property for which a Cash Liquidation
or REO Disposition occurred in the related Prepayment
Period over the sum of the unpaid principal balance of
such [Mortgage Loan] [Contract] or REO Property
(determined, in the case of an REO Disposition, in
accordance with Section 3.14) plus accrued and unpaid
interest at the Mortgage Rate on such unpaid principal
balance from the Due Date to which interest was last paid
by the Mortgagor to the first day of the month following
the month in which such Cash Liquidation or REO
Disposition occurred.
Fraud Loss Amount: As of any date of
determination after the Cut-off Date, an amount equal to:
(X) prior to the first anniversary of the Cut-off Date an
amount equal to [2.00]% of the aggregate outstanding
principal balance of all of the [Mortgage Loans]
[Contracts] as of the Cut-off Date minus the aggregate
amount of Fraud Losses allocated solely to one or more
specific Classes of Certificates in accordance with
Section 4.05 since the Cut-off Date up to such date of
determination and (Y) from the first to the [fifth]
anniversary of the Cut-off Date, an amount equal to (1)
the lesser of (a) the Fraud Loss Amount as of the most
recent anniversary of the Cut-off Date and (b) [1.00]% of
the aggregate outstanding principal balance of all of the
[Mortgage Loans] [Contracts] as of the most recent
anniversary of the Cut-off Date minus (2) the Fraud
Losses allocated solely to one or more specific Classes
of Certificates in accordance with Section 4.05 since the
most recent anniversary of the Cut-off Date up to such
date of determination. On and after the fifth
anniversary of the Cut-off Date the Fraud Loss Amount
shall be zero.
The Fraud Loss Amount may be further reduced by
the [Master] Servicer (including accelerating the manner
in which such coverage is reduced) provided that prior to
any such reduction, the [Master] Servicer shall (i)
obtain written confirmation from each Rating Agency that
such reduction shall not reduce the rating assigned to
any Class of Certificates by such Rating Agency below the
lower of the then-current rating or the rating assigned
to such Certificates as of the Closing Date by such
Rating Agency and (ii) provide a copy of such written
confirmation to the Trustee.
Fraud Losses: Losses on [Mortgage Loans]
[Contracts] as to which there was fraud in the
origination of such [Mortgage Loan] [Contract].
Independent: When used with respect to any
specified Person, means such a Person who (i) is in fact
independent of the Company, the [Master] Servicer and the
Trustee, or any Affiliate thereof, (ii) does not have any
direct financial interest or any material indirect
financial interest in the Company, the [Master] Servicer
or the Trustee or in an Affiliate thereof, and (iii) is
not connected with the Company, the [Master] Servicer or
the Trustee as an officer, employee, promoter,
underwriter, trustee, partner, director or person
performing similar functions.
Initial Certificate Principal Balance: With
respect to each Class of Certificates, the Certificate
Principal Balance of such Class of Certificates as of the
Cut-off Date as set forth in the Preliminary Statement
hereto.
Initial Monthly Payment Fund: As defined in
Section 2.01(f).
Insurance Proceeds: Proceeds paid in respect
of the [Mortgage Loans] [Contracts] pursuant to any
Primary Insurance Policy or any other related insurance
policy covering a [Mortgage Loan] [Contract], to the
extent such proceeds are payable to the mortgagee under
the [Mortgage] [Contract], any Subservicer, the [Master]
Servicer or the Trustee and are not applied to the
restoration of the related Mortgaged Property or released
to the Mortgagor in accordance with the procedures that
the [Master] Servicer would follow in servicing [mortgage
loans] [contracts] held for its own account.
Insurer: Any named insurer under any Primary
Insurance Policy or any successor thereto or the named
insurer in any replacement policy.
Late Collections: With respect to any
[Mortgage Loan] [Contract], all amounts received during
any Due Period, whether as late payments of Monthly
Payments or as Insurance Proceeds, Liquidation Proceeds
or otherwise, which represent late payments or
collections of Monthly Payments due but delinquent for a
previous Due Period and not previously recovered.
Liquidation Proceeds: Amounts (other than
Insurance Proceeds) received by the [Master] Servicer in
connection with the taking of an entire Mortgaged
Property by exercise of the power of eminent domain or
condemnation or in connection with the liquidation of a
defaulted [Mortgage Loan] [Contract] through trustee's
sale, foreclosure sale or otherwise, other than REO
Proceeds.
Loan-to-Value Ratio: As of any date, the
fraction, expressed as a percentage, the numerator of
which is the current principal balance of the related
[Mortgage Loan] [Contract] at the date of determination
and the denominator of which is the Appraised Value of
the related Mortgaged Property.
Maturity Date: With respect to (i) a Class of
Certificates representing a regular interest in the REMIC
or (ii) an Uncertificated REMIC Regular Interest, the
latest possible maturity date, solely for purposes of
Section 1.860G-1(a)(4)(iii) of the Treasury regulations,
by which the Certificate Principal Balance or
Uncertificated Notional Amount, respectively, thereof
would be reduced to zero.
Monthly Payment: With respect to any [Mortgage
Loan] [Contract] (including any REO Property) and any Due
Date, the payment of principal and interest due thereon
in accordance with the amortization schedule at the time
applicable thereto (after adjustment, if any, for
curtailments and for Deficient Valuations occurring prior
to such Due Date but before any adjustment to such
amortization schedule by reason of any bankruptcy, other
than a Deficient Valuation, or similar proceeding or any
moratorium or similar waiver or grace period).
Moody's: Moody's Investors Service, Inc. or
its successor in interest.
[Mortgage: The mortgage, deed of trust or
other comparable instrument creating a first lien on an
estate in fee simple or leasehold interest in real
property securing a Mortgage Note.]
[Mortgage] [Contract] File: The mortgage
documents listed in Section 2.01 pertaining to a
particular [Mortgage Loan] [Contract] and any additional
documents required to be added to the [Mortgage]
[Contract] File pursuant to this Agreement.
[Mortgage Loan] [Contract] Schedule: The list
of the [Mortgage Loans] [Contracts] attached hereto as
Exhibit F (as amended from time to time to reflect the
addition of Qualified Substitute [Mortgage Loans]
[Contracts]), which list shall set forth at a minimum the
following information as to each [Mortgage Loan]
[Contract]:
(i) the [Mortgage Loan] [Contract]
identifying number ("RFC LOAN #");
(ii) the street address of the Mortgaged
Property including state and zip code ("ADDRESS");
(iii) the maturity of the [Mortgage Note]
[Contract] ("MATURITY DATE");
(iv) the Mortgage Rate ("ORIG RATE");
(v) the Subservicer pass-through rate ("CURR
NET");
(vi) the Net Mortgage Rate ("NET MTG RT");
(vii) the Pool Strip Rate ("STRIP");
(viii) the initial scheduled monthly payment of
principal, if any, and interest ("ORIGINAL P & I");
(ix) the Cut-off Date Principal Balance
("PRINCIPAL BAL");
(x) the Loan-to-Value Ratio at origination
("LTV");
(xi) the rate at which the Subservicing Fee
accrues ("SUBSERV FEE");
(xii) a code "T," "BT" or "CT" under the column
"LN FEATURE," indicating that the [Mortgage Loan]
[Contract] is secured by a second or vacation
residence; and
(xiii) a code "N" under the column "OCCP CODE,"
indicating that the [Mortgage Loan] [Contract] is
secured by a non-owner occupied residence.
Such schedule may consist of multiple reports that
collectively set forth all of the information requested.
[Mortgage Loans] [Contracts]: Such of the
[mortgage loans] [manufactured housing contracts]
transferred and assigned to the Trustee pursuant to
Section 2.01 as from time to time are held or deemed to
be held as a part of the Trust Fund, the [Mortgage Loans]
[Contracts] originally so held being identified in the
initial [Mortgage Loan] [Contract] Schedule, and
Qualified Substitute [Mortgage Loans] [Contracts] held or
deemed held as part of the Trust Fund including, without
limitation, each related [Mortgage Note, Mortgage][
Contract] and [Mortgage] [Contract] File and all rights
appertaining thereto.
[Mortgage Note: The originally executed note
or other evidence of indebtedness evidencing the
indebtedness of a Mortgagor under a Mortgage Loan,
together with any modification thereto.]
Mortgage Rate: As to any [Mortgage Loan]
[Contract], the interest rate borne by the related
Mortgage Note, or any modification thereto.
Mortgaged Property: The underlying real
property securing a [Mortgage Loan] [Contract].
Mortgagor: The obligor on a Mortgage Note.
Net Mortgage Rate: As to each [Mortgage Loan]
[Contract], a per annum rate of interest equal to the
Adjusted Mortgage Rate less the per annum rate at which
the Servicing Fee is calculated.
Non-Discount [Mortgage Loans] [Contracts]: The
[Mortgage Loans] [Contracts] other than the Discount
[Mortgage Loans] [Contracts].
Non-Primary Residence Loans: The [Mortgage
Loans] [Contracts] designated as secured by second or
vacation residences, or by non-owner occupied residences,
on the [Mortgage Loan] [Contract] Schedule.
Non-United States Person: Any Person other
than a United States Person.
Nonrecoverable Advance: Any Advance previously
made or proposed to be made by the [Master] Servicer in
respect of a [Mortgage Loan] [Contract] (other than a
Deleted [Mortgage Loan] [Contract]) which, in the good
faith judgment of the [Master] Servicer, will not, or, in
the case of a proposed Advance, would not, be ultimately
recoverable by the [Master] Servicer from related Late
Collections, Insurance Proceeds, Liquidation Proceeds,
REO Proceeds or amounts reimbursable to the [Master]
Servicer pursuant to Section 4.02(a) hereof.
Nonsubserviced [Mortgage Loan] [Contract]: Any
[Mortgage Loan] [Contract] that, at the time of reference
thereto, is not subject to a Subservicing Agreement.
Notional Amount: As of any Distribution Date,
and with respect to the Class A-5 Certificates, the
aggregate Certificate Principal Balance of all Classes of
Certificates immediately prior to such date.
Officers' Certificate: A certificate signed by
the President, the Chief Financial Officer, the
Treasurer, any Vice President, the Secretary or any other
officer specifically authorized by the board of directors
of the Company or of the [Master] Servicer, as the case
may be, and delivered to the Trustee, as required by this
Agreement.
Opinion of Counsel: A written opinion of
counsel acceptable to the Trustee and the [Master]
Servicer, who may be counsel for the Company or the
[Master] Servicer, provided that any opinion of counsel
(i) referred to in the definition of "Permitted
Transferee" or (ii) relating to the qualification of the
Trust Fund as a REMIC or compliance with the REMIC
Provisions must, unless otherwise specified, be an
opinion of Independent counsel.
Original Senior Percentage: [______]%, which
is the fraction, expressed as a percentage, the numerator
of which is the aggregate Initial Certificate Principal
Balance of the Class A Certificates (other than the Class
A-4 Certificates) and Class R Certificates and the
denominator of which is the aggregate Stated Principal
Balance of the [Mortgage Loans] [Contracts] (other than
the Discount Fraction of the Discount [Mortgage Loans]
[Contracts]).
Outstanding [Mortgage Loan] [Contract]: As to
any Due Date, a [Mortgage Loan] [Contract] (including an
REO Property) which was not the subject of a Principal
Prepayment in Full, Cash Liquidation or REO Disposition
and which was not purchased, deleted or substituted for
prior to such Due Date pursuant to Section 2.02, 2.03 or
2.04.
Ownership Interest: As to any Certificate, any
ownership or security interest in such Certificate,
including any interest in such Certificate as the Holder
thereof and any other interest therein, whether direct or
indirect, legal or beneficial, as owner or as pledgee.
Pass-Through Rate: With respect to the Class
A Certificates (other than the Class A-5 Certificates),
Class M Certificates, Class B Certificates and Class R
Certificates and any Distribution Date, the per annum
rate set forth in the Preliminary Statement hereto. With
respect to the Class A-5 Certificates and any
Distribution Date, a rate equal to the weighted average,
expressed as a percentage, of the Pool Strip Rates of all
[Mortgage Loans] [Contracts] in the Trust Fund as of the
Due Date in the month immediately preceding the month in
which such Distribution Date occurs, weighted on the
basis of the respective Stated Principal Balances of such
[Mortgage Loans] [Contracts], which Stated Principal
Balances shall be the Stated Principal Balances of such
[Mortgage Loans] [Contracts] at the close of business on
the immediately preceding Distribution Date after giving
effect to distributions thereon allocable to principal
(or, in the case of the Pass-Through Rate for the initial
Distribution Date, at the close of business on the Cut-
off Date). With respect to the Class A-5 Certificates
and the initial Distribution Date, the Pass-Through Rate
is equal to [____]% per annum.
Paying Agent: [Name of Trustee] or any
successor Paying Agent appointed by the Trustee.
Percentage Interest: With respect to any
Certificate (other than a Class A-5 or Class R
Certificate), the undivided percentage ownership interest
in the related Class evidenced by such Certificate, which
percentage ownership interest shall be equal to the
Initial Certificate Principal Balance thereof divided by
the aggregate Initial Certificate Principal Balance of
all of the Certificates of the same Class. With respect
to a Class A-5 or Class R Certificate, the interest in
distributions to be made with respect to such Class
evidenced thereby, expressed as a percentage, as stated
on the face of each such Certificate.
Permitted Investments: One or more of the
following:
(i) obligations of or guaranteed as to
principal and interest by the United States or any
agency or instrumentality thereof when such
obligations are backed by the full faith and credit
of the United States;
(ii) repurchase agreements on obligations
specified in clause (i) maturing not more than one
month from the date of acquisition thereof,
provided that the unsecured obligations of the
party agreeing to repurchase such obligations are
at the time rated by each Rating Agency in its
highest short-term rating available;
(iii) federal funds, certificates of deposit,
demand deposits, time deposits and bankers'
acceptances (which shall each have an original
maturity of not more than 90 days and, in the case
of bankers' acceptances, shall in no event have an
original maturity of more than 365 days or a
remaining maturity of more than 30 days)
denominated in United States dollars of any U.S.
depository institution or trust company
incorporated under the laws of the United States or
any state thereof or of any domestic branch of a
foreign depository institution or trust company;
provided that the debt obligations of such
depository institution or trust company (or, if the
only Rating Agency is Standard & Poor's, in the
case of the principal depository institution in a
depository institution holding company, debt
obligations of the depository institution holding
company) at the date of acquisition thereof have
been rated by each Rating Agency in its highest
short-term rating available; and provided further
that, if the only Rating Agency is Standard &
Poor's and if the depository or trust company is a
principal subsidiary of a bank holding company and
the debt obligations of such subsidiary are not
separately rated, the applicable rating shall be
that of the bank holding company; and, provided
further that, if the original maturity of such
short-term obligations of a domestic branch of a
foreign depository institution or trust company
shall exceed 30 days, the short-term rating of such
institution shall be A-1+ in the case of Standard &
Poor's if Standard & Poor's is the Rating Agency;
(iv) commercial paper (having original
maturities of not more than 365 days) of any
corporation incorporated under the laws of the
United States or any state thereof which on the
date of acquisition has been rated by each Rating
Agency in its highest short-term rating available;
provided that such commercial paper shall have a
remaining maturity of not more than 30 days;
(v) a money market fund or a qualified
investment fund rated by each Rating Agency in its
highest long-term rating available; and
(vi) other obligations or securities that are
acceptable to each Rating Agency as a Permitted
Investment hereunder and will not reduce the rating
assigned to any Class of Certificates by such
Rating Agency below the lower of the then-current
rating or the rating assigned to such Certificates
as of the Closing Date by such Rating Agency, as
evidenced in writing;
provided, however, that no instrument shall be a
Permitted Investment if it represents, either (1) the
right to receive only interest payments with respect to
the underlying debt instrument or (2) the right to
receive both principal and interest payments derived from
obligations underlying such instrument and the principal
and interest payments with respect to such instrument
provide a yield to maturity greater than 120% of the
yield to maturity at par of such underlying obligations.
References herein to the highest rating available on
unsecured long-term debt shall mean AAA in the case of
Standard & Poor's and Fitch and Aaa in the case of
Moody's, and references herein to the highest rating
available on unsecured commercial paper and short-term
debt obligations shall mean A-1 in the case of Standard
& Poor's, P-1 in the case of Moody's and either A-1 by
Standard & Poor's, P-1 by Moody's or F-1 by Fitch in the
case of Fitch.
Permitted Transferee: Any Transferee of a
Class R Certificate, other than a Disqualified
Organization or Non-United States Person.
Person: Any individual, corporation,
partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government
or any agency or political subdivision thereof.
Pool Stated Principal Balance: As to any date
of determination, the aggregate of the Stated Principal
Balances of each [Mortgage Loan] [Contract] that was an
Outstanding [Mortgage Loan] [Contract] on the Due Date in
the month preceding the month of such date of
determination.
Pool Strip Rate: With respect to each
[Mortgage Loan] [Contract], the rate per annum designated
on the [Mortgage Loan] [Contract] Schedule as the "STRIP"
for such [Mortgage Loan] [Contract]. For purposes of the
definition of Qualified Substitute [Mortgage Loan]
[Contract], Pool Strip Rate is the excess of the Net
Mortgage Rate over [____]% per annum (but not less than
0.00% per annum).
Prepayment Assumption: A prepayment assumption
of [____]% of the standard prepayment assumption, used
for determining the accrual of original issue discount
and market discount and premium on the Certificates for
federal income tax purposes. The standard prepayment
assumption assumes a constant rate of prepayment of
mortgage loans of 0.2% per annum of the then outstanding
principal balance of such mortgage loans in the first
month of the life of the mortgage loans, increasing by an
additional 0.2% per annum in each succeeding month until
the thirtieth month, and a constant 6% per annum rate of
prepayment thereafter for the life of the mortgage loans.
Prepayment Distribution Percentage: With
respect to any Distribution Date and each Class of Class
M Certificates and Class B Certificates, under the
applicable circumstances set forth below, the respective
percentages set forth below:
(i) For any Distribution Date on which the Class M
Certificates are outstanding and prior to the
later to occur of (x) the Distribution Date in
[_______, 20__] and (y) the Distribution Date
on which the Class B Percentage (before taking
into account such month's distribution) equals
or exceeds [____]%:
(a) in the case of the Class M Certificates,
100%; and
(b) in the case of the Class B Certificates,
0%.
(ii) Notwithstanding the foregoing, if the
application of the foregoing percentages on
any Distribution Date as provided in Section
4.02 (determined without regard to the proviso
to the definition of "Subordinate Principal
Distribution Amount") would result in a
distribution in respect of principal of the
Class M Certificates and Class B Certificates
in an amount greater than the remaining
Certificate Principal Balance thereof (any
such class, a "Maturing Class"), then: (a) the
Prepayment Distribution Percentage of each
Maturing Class shall be reduced to a level
that, when applied as described above, would
exactly reduce the Certificate Principal
Balance of such Class to zero; (b) the
Prepayment Distribution Percentage of the
Class M Certificates (any such Class, a "Non-
Maturing Class") shall be recalculated in
accordance with the provisions in paragraph
(ii) above, as if the Certificate Principal
Balance of each Maturing Class had been
reduced to zero (such percentage as
recalculated, the "Recalculated Percentage");
(c) the total amount of the reductions in the
Prepayment Distribution Percentages of the
Maturing Class pursuant to clause (a) of this
sentence, expressed as an aggregate
percentage, shall be allocated among the Non-
Maturing Class in proportion to their
respective Recalculated Percentages (the
portion of such aggregate reduction so
allocated to any Non-Maturing Class, the
"Adjustment Percentage"); and (d) for purposes
of such Distribution Date, the Prepayment
Distribution Percentage of each Non-Maturing
Class shall be equal to the sum of (1) the
Prepayment Distribution Percentage thereof,
calculated in accordance with the provisions
in paragraph (ii) above as if the Certificate
Principal Balance of each Maturing Class had
not been reduced to zero, plus (2) the related
Adjustment Percentage.
Prepayment Distribution Trigger: The Class M
Prepayment Distribution Trigger or Class B Prepayment
Distribution Trigger.
Prepayment Interest Shortfall: As to any
Distribution Date and any [Mortgage Loan] [Contract]
(other than a [Mortgage Loan] [Contract] relating to an
REO Property) that was the subject of (a) a Principal
Prepayment in Full during the related Prepayment Period,
an amount equal to the excess of one month's interest at
the Net Mortgage Rate on the Stated Principal Balance of
such [Mortgage Loan] [Contract] over the amount of
interest (adjusted to the Net Mortgage Rate) paid by the
Mortgagor for such Prepayment Period to the date of such
Principal Prepayment in Full or (b) a Curtailment during
the prior calendar month, an amount equal to one month's
interest at the Net Mortgage Rate on the amount of such
Curtailment.
Prepayment Period: As to any Distribution
Date, the calendar month preceding the month of
distribution.
Primary Insurance Policy: Each primary policy
of mortgage guaranty insurance or any replacement policy
therefor referred to in Section 2.03(b)(iv) and (v).
Principal Prepayment: Any payment of principal
or other recovery on a [Mortgage Loan] [Contract],
including a recovery that takes the form of Liquidation
Proceeds or Insurance Proceeds, which is received in
advance of its scheduled Due Date and is not accompanied
by an amount as to interest representing scheduled
interest on such payment due on any date or dates in any
month or months subsequent to the month of prepayment.
Principal Prepayment in Full: Any Principal
Prepayment made by a Mortgagor of the entire principal
balance of a [Mortgage Loan] [Contract].
[Program Guide: Collectively, the Seller Guide
and the Servicer Guide for Residential Funding's AlterNet
[mortgage loan] [manufactured home contract] origination
program and all supplements and amendments thereto
published by Residential Funding from time to time.]
Purchase Price: With respect to any [Mortgage
Loan] [Contract] (or REO Property) required to be
purchased on any date pursuant to Section 2.02, 2.03,
2.04 or 4.07, an amount equal to the sum of (i) 100% of
the Stated Principal Balance thereof plus the principal
portion of any related unreimbursed Advances and (ii)
unpaid accrued interest at the Adjusted Mortgage Rate (or
at the Net Mortgage Rate in the case of a purchase made
by the [Master] Servicer) on the Stated Principal Balance
thereof to the first day of the month following the month
of purchase from the Due Date to which interest was last
paid by the Mortgagor.
Qualified Substitute [Mortgage Loan]
[Contract]: A [Mortgage Loan] [Contract] substituted by
Residential Funding or the Company for a Deleted
[Mortgage Loan] [Contract] which must, on the date of
such substitution, as confirmed in an Officers'
Certificate delivered to the Trustee, (i) have an
outstanding principal balance, after deduction of the
principal portion of the monthly payment due in the month
of substitution (or in the case of a substitution of more
than one [Mortgage Loan] [Contract] for a Deleted
[Mortgage Loan] [Contract], an aggregate outstanding
principal balance, after such deduction), not in excess
of the Stated Principal Balance of the Deleted [Mortgage
Loan] [Contract] (the amount of any shortfall to be
deposited by Residential Funding, in the Custodial
Account in the month of substitution); (ii) have a
Mortgage Rate and a Net Mortgage Rate no lower than and
not more than 1% per annum higher than the Mortgage Rate
and Net Mortgage Rate, respectively, of the Deleted
[Mortgage Loan] [Contract] as of the date of
substitution; (iii) have a Loan-to-Value Ratio at the
time of substitution no higher than that of the Deleted
[Mortgage Loan] [Contract] at the time of substitution;
(iv) have a remaining term to stated maturity not greater
than (and not more than one year less than) that of the
Deleted [Mortgage Loan] [Contract]; (v) comply with each
representation and warranty set forth in Sections 2.03
and 2.04 hereof and Section 4 of the Assignment
Agreement; and (vi) have a Pool Strip Rate equal to or
greater than that of the Deleted [Mortgage Loan]
[Contract]. Notwithstanding any other provisions herein,
[(x) with respect to any Qualified Substitute [Mortgage
Loan] [Contract] substituted for a Deleted [Mortgage
Loan] [Contract] which was a Discount [Mortgage Loan]
[Contract], such Qualified Substitute [Mortgage Loan]
[Contract] shall be deemed to be a Discount [Mortgage
Loan] [Contract] and to have a Discount Fraction equal to
the Discount Fraction of the Deleted [Mortgage Loan]
[Contract] and (y)] in the event that the Pool Strip Rate
of any Qualified Substitute [Mortgage Loan] [Contract] as
calculated pursuant to the definition of "Pool Strip
Rate" is greater than the Pool Strip Rate of the related
Deleted [Mortgage Loan] [Contract] (i) the Pool Strip
Rate of such Qualified Substitute [Mortgage Loan]
[Contract] shall be equal to the Pool Strip Rate of the
related Deleted [Mortgage Loan] [Contract] for purposes
of calculating the Pass-Through Rate on the Class A-5
Certificates and (ii) the excess of the Pool Strip Rate
on such Qualified Substitute [Mortgage Loan] [Contract]
as calculated pursuant to the definition of "Pool Strip
Rate" over the Pool Strip Rate on the related Deleted
[Mortgage Loan] [Contract] shall be payable to the Class
R Certificates pursuant to Section 4.02 hereof.
Rating Agency: [Fitch] [Standard & Poor's]
[Moody's], with respect to the Class [A] Certificates and
Class [R] Certificates, [Fitch] [Standard & Poor's]
[Moody's] with respect to the Class [M] Certificates and
Class [B] Certificates. If any agency or a successor is
no longer in existence, "Rating Agency" shall be such
statistical credit rating agency, or other comparable
Person, designated by the Company, notice of which
designation shall be given to the Trustee and the
[Master] Servicer.
Realized Loss: With respect to each [Mortgage
Loan] [Contract] (or REO Property) as to which a Cash
Liquidation or REO Disposition has occurred, an amount
(not less than zero) equal to (i) the Stated Principal
Balance of the [Mortgage Loan] [Contract] (or REO
Property) as of the date of Cash Liquidation or REO
Disposition, plus (ii) interest (and REO Imputed
Interest, if any) at the Net Mortgage Rate from the Due
Date as to which interest was last paid or advanced to
Certificateholders up to the last day of the month in
which the Cash Liquidation (or REO Disposition) occurred
on the Stated Principal Balance of such [Mortgage Loan]
[Contract] (or REO Property) outstanding during each Due
Period that such interest was not paid or advanced, minus
(iii) the proceeds, if any, received during the month in
which such Cash Liquidation (or REO Disposition)
occurred, to the extent applied as recoveries of interest
at the Net Mortgage Rate and to principal of the
[Mortgage Loan] [Contract], net of the portion thereof
reimbursable to the [Master] Servicer or any Subservicer
with respect to related Advances or expenses as to which
the [Master] Servicer or Subservicer is entitled to
reimbursement thereunder but which have not been
previously reimbursed. With respect to each [Mortgage
Loan] [Contract] which has become the subject of a
Deficient Valuation, the difference between the principal
balance of the [Mortgage Loan] [Contract] outstanding
immediately prior to such Deficient Valuation and the
principal balance of the [Mortgage Loan] [Contract] as
reduced by the Deficient Valuation. With respect to each
[Mortgage Loan] [Contract] which has become the object of
a Debt Service Reduction, the amount of such Debt Service
Reduction.
Record Date: With respect to each Distribution
Date, the close of business on the last Business Day of
the month next preceding the month in which the related
Distribution Date occurs.
Regular Certificate: Any of the Certificates
other than a Class R Certificate.
REMIC: A "real estate mortgage investment
conduit" within the meaning of Section 860D of the Code.
As used herein, the term "the REMIC" shall mean the REMIC
created under this Agreement.
REMIC Provisions: Provisions of the federal
income tax law relating to real estate mortgage
investment conduits, which appear at Sections 860A
through 860G of Subchapter M of Chapter 1 of the Code,
and related provisions, and temporary and final
regulations (or, to the extent not inconsistent with such
temporary or final regulations, proposed regulations) and
published rulings, notices and announcements promulgated
thereunder, as the foregoing may be in effect from time
to time.
REO Acquisition: The acquisition by the
[Master] Servicer on behalf of the Trustee for the
benefit of the Certificateholders of any REO Property
pursuant to Section 3.14.
REO Disposition: As to any REO Property, a
determination by the [Master] Servicer that it has
received all Insurance Proceeds, Liquidation Proceeds,
REO Proceeds and other payments and recoveries (including
proceeds of a final sale) which the [Master] Servicer
expects to be finally recoverable from the sale or other
disposition of the REO Property.
REO Imputed Interest: As to any REO Property,
for any period, an amount equivalent to interest (at the
Net Mortgage Rate that would have been applicable to the
related [Mortgage Loan] [Contract] had it been
outstanding) on the unpaid principal balance of the
[Mortgage Loan] [Contract] as of the date of acquisition
thereof for such period.
REO Proceeds: Proceeds, net of expenses,
received in respect of any REO Property (including,
without limitation, proceeds from the rental of the
related Mortgaged Property) which proceeds are required
to be deposited into the Custodial Account only upon the
related REO Disposition.
REO Property: A Mortgaged Property acquired by
the [Master] Servicer through foreclosure or deed in lieu
of foreclosure in connection with a defaulted [Mortgage
Loan] [Contract].
Request for Release: A request for release,
the forms of which are attached as Exhibit H hereto.
Required Insurance Policy: With respect to any
[Mortgage Loan] [Contract], any insurance policy which is
required to be maintained from time to time under this
Agreement, the Program Guide or the related Subservicing
Agreement in respect of such [Mortgage Loan] [Contract].
Residential Funding: Residential Funding
Corporation, a Delaware corporation, in its capacity as
seller of the [Mortgage Loans] [Contracts] to the Company
and any successor thereto.
Responsible Officer: When used with respect to
the Trustee, any officer of the Corporate Trust
Department of the Trustee, including any Senior Vice
President, any Vice President, any Assistant Vice
President, any Assistant Secretary, any Trust Officer or
Assistant Trust Officer, or any other officer of the
Trustee customarily performing functions similar to those
performed by any of the above designated officers to
whom, with respect to a particular matter, such matter is
referred.
Schedule of Discount Fractions: The schedule
setting forth the Discount Fractions with respect to the
Discount [Mortgage Loans] [Contracts], attached hereto as
Exhibit P.
Seller: As to any [Mortgage Loan] [Contract],
a Person, including any Subservicer, that executed a
Seller's Agreement applicable to such [Mortgage Loan]
[Contract].
Seller's Agreement: An agreement for the
origination and sale of [Mortgage Loans] [Contracts]
generally in the form of the Seller Contract referred to
or contained in the Program Guide, or in such other form
as has been approved by the [Master] Servicer and the
Company, each containing representations and warranties
in respect of one or more [Mortgage Loans] [Contracts].
Senior Accelerated Distribution Percentage:
With respect to any Distribution Date, the percentage
indicated below:
Senior Accelerated
Distribution Date Distribution Percentage
[____ 19__] through [___]%
[_____, ____]
[______, ____] through Senior Percentage, plus [__]% of
[_____, ___]_ the difference between 100% and
the Senior Percentage
[______, ____] through Senior Percentage, plus [__]% of
[_____, ____] the difference between 100% and
the Senior Percentage
[______, ____] through Senior Percentage, plus [__]% of
[_____, ____] the difference between 100% and
the Senior Percentage
[______, ____] through Senior Percentage, plus [__]% of
[_____, ____] the difference between 100% and
the Senior Percentage
[______, ____] and Senior Percentage;
thereafter
provided, however, (i) that any scheduled reduction to
the Senior Accelerated Distribution Percentage described
above shall not occur as of any Distribution Date unless
either (a)(1) the outstanding principal balance of
[Mortgage Loans] [Contracts] delinquent [__] days or more
averaged over the last [___] months, as a percentage of
the aggregate outstanding principal balance of all
[Mortgage Loans] [Contracts] averaged over the last [___]
months, does not exceed [_]% and (2) Realized Losses on
the [Mortgage Loans] [Contracts] to date for such
Distribution Date if occurring during the [_____],
[_____], [_____], [_____] or [_____] year (or any year
thereafter) after the Delivery Date are less than [__]%,
[__]%, [__]%, [__]% and [__]%, respectively, of the sum
of the Initial Certificate Principal Balances of the
Class M Certificates and Class B Certificates or (b)(1)
the outstanding principal balance of the [Mortgage Loans]
[Contracts] delinquent [__] days or more averaged over
the last [___] months, as a percentage of the aggregate
outstanding principal balance of all [Mortgage Loans]
[Contracts] averaged over the last [___] months, does not
exceed [__]% and (2) Realized Losses on the [Mortgage
Loans] [Contracts] to date for such Distribution Date are
less than [__]% of the sum of the Initial Certificate
Principal Balances of the Class M Certificates and Class
B Certificates and (ii) that for any Distribution Date on
which the Senior Percentage is greater than the Original
Senior Percentage, the Senior Accelerated Distribution
Percentage for such Distribution Date shall be 100%.
Notwithstanding the foregoing, upon the reduction of the
aggregate Certificate Principal Balance of the Class A
Certificates (other than the Class A-4 Certificates) and
Class R Certificates to zero, the Senior Accelerated
Distribution Percentage shall thereafter be 0%.
Senior Percentage: As of any Distribution
Date, the lesser of 100% and a fraction, expressed as a
percentage, the numerator of which is the aggregate
Certificate Principal Balance of the Class A (other than
the Class A-4 Certificates) and Class R Certificates
immediately prior to such Distribution Date and the
denominator of which is the aggregate Stated Principal
Balance of all of the [Mortgage Loans] [Contracts] (or
related REO Properties) [other than the related Discount
Fraction of each Discount [Mortgage Loan]
[Contract])]immediately prior to such Distribution Date.
Senior Principal Distribution Amount: As to
any Distribution Date, the lesser of (a) the balance of
the Available Distribution Amount remaining after the
distribution of all amounts required to be distributed
pursuant to Section 4.02(a)(i) and (ii)(X) and (b) the
sum of the amounts required to be distributed to the
Class A (other than the Class A-4 Certificateholders) and
Class R Certificateholders on such Distribution Date
pursuant to Section 4.02(a)(ii), (xvi) and (xvii).
Servicing Accounts: The account or accounts
created and maintained pursuant to Section 3.08.
Servicing Advances: All customary, reasonable
and necessary "out of pocket" costs and expenses incurred
in the performance by the [Master] Servicer of its
servicing obligations, including, but not limited to, the
cost of (i) the preservation, restoration and protection
of a Mortgaged Property, (ii) any enforcement or judicial
proceedings, including foreclosures, (iii) the management
and liquidation of any REO Property and (iv) compliance
with the obligations under Sections 3.01, 3.08, 3.12(a)
and 3.14.
Servicing Fee: With respect to any [Mortgage
Loan] [Contract] and Distribution Date, the fee payable
monthly to the [Master] Servicer in respect of master
servicing compensation that accrues at an annual rate
equal to [____]% on the Stated Principal Balance of such
[Mortgage Loan] [Contract] as of the related Due Date, as
may be adjusted with respect to successor [Master]
Servicers as provided in Section 7.02.
Servicing Officer: Any officer of the [Master]
Servicer involved in, or responsible for, the
administration and servicing of the [Mortgage Loans]
[Contracts] whose name and specimen signature appear on
a list of servicing officers furnished to the Trustee by
the [Master] Servicer, as such list may from time to time
be amended.
Special Hazard Amount: As of any Distribution
Date, an amount equal to $[_________] minus the sum of
(i) the aggregate amount of Special Hazard Losses
allocated solely to one or more specific Classes of
Certificates in accordance with Section 4.05 and (ii) the
Adjustment Amount (as defined below) as most recently
calculated. For each anniversary of the Cut-off Date,
the Adjustment Amount shall be calculated and shall be
equal to the amount, if any, by which the amount
calculated in accordance with the preceding sentence
(without giving effect to the deduction of the Adjustment
Amount for such anniversary) exceeds the greater of (A)
[the greater of (i) the product of [____]% multiplied by
the outstanding principal balance of all the [Mortgage
Loans] [Contracts] on the Distribution Date immediately
preceding such anniversary times a fraction, the
numerator of which is equal to the aggregate outstanding
principal balance (as of the immediately preceding
Distribution Date) of all of the [Mortgage Loans]
[Contracts] secured by Mortgaged Properties located in
the State of California divided by the aggregate
outstanding principal balance (as of the immediately
preceding Distribution Date) of all the [Mortgage Loans]
[Contracts], expressed as a percentage, and the
denominator of which is equal to [_____]% (which
percentage is equal to the percentage of [Mortgage Loans]
[Contracts] initially secured by Mortgaged Properties
located in the State of California) and (ii) the
aggregate outstanding principal balance (as of the
immediately preceding Distribution Date) of the largest
[Mortgage Loan] [Contract] secured by a Mortgaged
Property located in the State of California, and (B) the
lesser of (i) the product of the Special Hazard
Percentage for such anniversary and the outstanding
principal balance of all the [Mortgage Loans] [Contracts]
on the Distribution Date immediately preceding such
anniversary, (ii) twice the outstanding principal balance
of the [Mortgage Loan] [Contract] in the Trust Fund which
has the largest outstanding principal balance on the
Distribution Date immediately preceding such anniversary
and (iii) an amount calculated by the [Master] Servicer
and approved by each Rating Agency, which amount shall
not be less than $[_________].]
The Special Hazard Amount may be further
reduced by the [Master] Servicer (including accelerating
the manner in which coverage is reduced) provided that
prior to any such reduction, the [Master] Servicer shall
(i) obtain written confirmation from each Rating Agency
that such reduction shall not reduce the rating assigned
to any Class of Certificates by such Rating Agency below
the lower of the then-current rating or the rating
assigned to such Certificates as of the Closing Date by
such Rating Agency and (ii) provide a copy of such
written confirmation to the Trustee.
Special Hazard Loss: Any Realized Loss not in
excess of the cost of the lesser of repair or replacement
of a Mortgaged Property suffered by such Mortgaged
Property on account of direct physical loss, exclusive of
(i) any loss of a type covered by a hazard policy or a
flood insurance policy required to be maintained in
respect of such Mortgaged Property pursuant to Section
3.12(a), except to the extent of the portion of such loss
not covered as a result of any coinsurance provision and
(ii) any Extraordinary Loss.
Special Hazard Percentage: As of each
anniversary of the Cut-off Date, the greater of (i)
[____]% and (ii) the largest percentage obtained by
dividing the aggregate outstanding principal balance (as
of the immediately preceding Distribution Date) of the
[Mortgage Loans] [Contracts] secured by Mortgaged
Properties located in a single, five-digit zip code area
in the State of California by the outstanding principal
balance of all of the [Mortgage Loans] [Contracts] as of
the immediately preceding Distribution Date.
Standard & Poor's: Standard & Poor's Ratings
Group, a division of McGraw-Hill, Inc., or its successor
in interest.
Stated Principal Balance: With respect to any
[Mortgage Loan] [Contract] or related REO Property, at
any given time, (i) the Cut-off Date Principal Balance of
the [Mortgage Loan] [Contract], minus (ii) the sum of (a)
the principal portion of the Monthly Payments due with
respect to such [Mortgage Loan] [Contract] or REO
Property during each Due Period ending prior to the most
recent Distribution Date which were received or with
respect to which an Advance was made, and (b) all
Principal Prepayments with respect to such [Mortgage
Loan] [Contract] or REO Property, and all Insurance
Proceeds, Liquidation Proceeds and REO Proceeds, to the
extent applied by the [Master] Servicer as recoveries of
principal in accordance with Section 3.14 with respect to
such [Mortgage Loan] [Contract] or REO Property, in each
case which were distributed pursuant to Section 4.02 on
any previous Distribution Date, and (c) any Realized Loss
allocated to Certificateholders with respect thereto for
any previous Distribution Date.
Subordinate Principal Distribution Amount:
With respect to any Distribution Date and each Class of
Class M Certificates and Class B Certificates, (a) the
sum of (i) the product of (x) the related Class M
Percentage or Class B Percentage, as applicable, and (y)
the aggregate of the amounts calculated for such
Distribution Date under clauses (1), (2) and (3) of
Section 4.02(a)(ii)(Y)(A) without giving effect to the
Senior Percentage, (ii) such Class's pro rata share,
based on the Certificate Principal Balance of each Class
of Class M Certificates and Class B Certificates then
outstanding, of the principal collections described in
Section 4.02(a)(ii)(Y)(B) to the extent such collections
are not otherwise distributed to the Senior Certificates,
(iii) the product of (x) the related Prepayment
Distribution Percentage, (y) 100% minus the Senior
Accelerated Distribution Percentage and (z) the aggregate
of all Principal Prepayments in Full and Curtailments
received in the related Prepayment Period (other than the
Discount Fraction of the Discount [Mortgage Loans]
[Contracts]), (iv) if such Class is the most senior Class
of Certificates then outstanding (as established in
Section 4.05 hereof), any Excess Subordinate Principal
Amount for such Distribution Date and (v) any amounts
described in clauses (i), (ii) and (iii) as determined
for any previous Distribution Date, that remain
undistributed to the extent that such amounts are not
attributable to Realized Losses which have been allocated
to a subordinate Class of Class M or Class B Certificates
minus (b) any Excess Subordinate Principal Amount not
payable to such Class on such Distribution Date pursuant
to the definition thereof; provided, however, that such
amount shall in no event exceed the outstanding
Certificate Principal Balance of such Class of
Certificates immediately prior to such date.
Subserviced [Mortgage Loan] [Contract]: Any
[Mortgage Loan] [Contract] that, at the time of reference
thereto, is subject to a Subservicing Agreement.
Subservicer: Any Person with whom the [Master]
Servicer has entered into a Subservicing Agreement and
who generally satisfied the requirements set forth in the
Program Guide in respect of the qualification of a
Subservicer as of the date of its approval as a
Subservicer by the [Master] Servicer.
Subservicer Advance: Any delinquent
installment of principal and interest on a [Mortgage
Loan] [Contract] which is advanced by the related
Subservicer (net of its Subservicing Fee) pursuant to the
Subservicing Agreement.
Subservicing Account: An account established
by a Subservicer in accordance with Section 3.08.
Subservicing Agreement: The written contract
between the [Master] Servicer and any Subservicer
relating to servicing and administration of certain
[Mortgage Loans] [Contracts] as provided in Section 3.02,
generally in the form of the servicer contract referred
to or contained in the Program Guide or in such other
form as has been approved by the [Master] Servicer and
the Company.
Subservicing Fee: As to any [Mortgage Loan]
[Contract], the fee payable monthly to the related
Subservicer (or, in the case of a Nonsubserviced
[Mortgage Loan] [Contract], to the [Master] Servicer) in
respect of subservicing and other compensation that
accrues at an annual rate equal to the excess of the
Mortgage Rate borne by the [related Mortgage Note]
[Contract] over the rate per annum designated on the
[Mortgage Loan] [Contract] Schedule as the "CURR NET" for
such [Mortgage Loan] [Contract].
Tax Returns: The federal income tax return on
Internal Revenue Service Form 1066, U.S. Real Estate
Mortgage Investment Conduit Income Tax Return, including
Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of REMIC Taxable Income or Net Loss Allocation,
or any successor forms, to be filed on behalf of the
Trust Fund due to its classification as a REMIC under the
REMIC Provisions, together with any and all other
information, reports or returns that may be required to
be furnished to the Certificateholders or filed with the
Internal Revenue Service or any other governmental taxing
authority under any applicable provisions of federal,
state or local tax laws.
[Title Documents: With respect to any
Mortgaged Property, the certificate of title for, or
other evidence of ownership of, such Mortgaged Property
issued by the Registrar of Titles in the jurisdiction in
which such Mortgaged Property is located.]
Transfer: Any direct or indirect transfer,
sale, pledge, hypothecation or other form of assignment
of any Ownership Interest in a Certificate.
Transferee: Any Person who is acquiring by
Transfer any Ownership Interest in a Certificate.
Transferor: Any Person who is disposing by
Transfer of any Ownership Interest in a Certificate.
Trust Fund: The segregated pool of assets,
with respect to which a REMIC election is to be made,
consisting of:
(i) the [Mortgage Loans] [Contracts] and the
related [Mortgage] [Contract] Files.
(ii) all payments on and collections in
respect of the [Mortgage Loans]
[Contracts] due after the Cut-off Date as
shall be on deposit in the Custodial
Account or in the Certificate Account and
identified as belonging to the Trust
Fund.
(iii) property which secured a [Mortgage Loan]
[Contract] and which has been acquired
for the benefit of the Certificateholders
by foreclosure or deed in lieu of
foreclosure, and
(iv) the hazard insurance policies and Primary
Insurance Policies, if any, and certain
proceeds thereof.
Uncertificated Accrued Interest: With respect
to each Distribution Date, as to each Uncertificated
REMIC Regular Interest, an amount equal to the aggregate
amount of Accrued Certificate Interest that would result
under the terms of the definition thereof on each such
uncertificated interest, if the Pass-Through Rate on such
uncertificated interest were equal to the related
Uncertificated Pass-Through Rate and the notional amount
of such uncertificated interest were equal to the related
Uncertificated Notional Amount. Any reduction in the
amount of Accrued Certificate Interest resulting from the
allocation of Prepayment Interest Shortfalls, Realized
Losses or other amounts to the Class A-5
Certificateholders pursuant to Section 4.05 shall be
allocated to the Uncertificated REMIC Regular Interests
pro rata in accordance with the amount of interest
accrued with respect to each related Uncertificated
Notional Amount and such Distribution Date.
Uncertificated Notional Amount: With respect
to each Uncertificated REMIC Regular Interest, the
aggregate Stated Principal Balance of the related
[Mortgage Loan] [Contract].
Uncertificated Pass-Through Rate: With respect
to each Uncertificated REMIC Regular Interest, the
related Uncertificated REMIC Regular Interest Pool Strip
Rate.
Uncertificated REMIC Regular Interest Pool
Strip Rate: With respect to each Uncertificated REMIC
Regular Interest, the Pool Strip Rate for the related
[Mortgage Loan] [Contract].
Uncertificated REMIC Regular Interests: The
uncertificated partial undivided beneficial ownership
interests in the Trust Fund, each relating to a
particular [Mortgage Loan] [Contract], each having no
principal balance and each bearing interest at the
respective Uncertificated Pass-Through Rate on the
respective Uncertificated Notional Amount.
Uncertificated REMIC Regular Interests
Distribution Amounts: With respect to any Distribution
Date, the sum of the amounts deemed to be distributed on
the Uncertificated REMIC Regular Interests for such
Distribution Date pursuant to Section 4.08(a).
Uninsured Cause: Any cause of damage to
property subject to a [Mortgage] [Contract] such that the
complete restoration of such property is not fully
reimbursable by the hazard insurance policies.
United States Person: A citizen or resident of
the United States, a corporation, partnership or other
entity created or organized in, or under the laws of, the
United States or any political subdivision thereof, or an
estate or trust whose income from sources without the
United States is includable in gross income for United
States federal income tax purposes regardless of its
connection with the conduct of a trade or business within
the United States.
Voting Rights: The portion of the voting
rights of all of the Certificates which is allocated to
any Certificate. [__]% of all of the Voting Rights shall
be allocated among Holders of Certificates, respectively,
other than the Class A-5 and Class R Certificates, in
proportion to the outstanding Certificate Principal
Balances of their respective Certificates; and the
Holders of the Class A-5 and Class R Certificates shall
be entitled to [_]% and [_]% of all of the Voting Rights,
respectively, allocated among the Certificates of each
such Class in accordance with their respective Percentage
Interests.
ARTICLE II
CONVEYANCE OF [MORTGAGE LOANS] [CONTRACTS];
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Conveyance of [Mortgage Loans]
[Contracts].
(a) The Company, concurrently with the
execution and delivery hereof, does hereby assign to the
Trustee without recourse all the right, title and
interest of the Company in and to the [Mortgage Loans]
[Contracts], including all interest and principal
received on or with respect to the [Mortgage Loans]
[Contracts] after the Cut-off Date (other than payments
of principal and interest due on the [Mortgage Loans]
[Contracts] on or before the Cut-off Date) except for
scheduled payments due on [______ , 199_], with respect
to which the [Master] Servicer made a deposit pursuant to
Section 2.01(f).
(b) In connection with such assignment, except
as set forth in Section 2.01(c) below, the Company does
hereby deliver to, and deposit with, the Trustee, or to
and with one or more Custodians, as the duly appointed
agent or agents of the Trustee for such purpose, the
following documents or instruments (or copies thereof as
permitted by this Section) with respect to each [Mortgage
Loan] [Contract] so assigned:
(i) The original [Mortgage Note] [Contract],
endorsed without recourse to the order of the
Trustee and showing an unbroken chain of
endorsements from the originator thereof to the
Person endorsing it to the Trustee, or with respect
to any Destroyed [Mortgage Note] [Contract], an
original lost note affidavit from the related
Seller or Residential Funding stating that the
original [Mortgage Note] [Contract] was lost,
misplaced or destroyed, together with a copy of the
related [Mortgage Note] [Contract];
(ii) The original [Mortgage] [Title Documents]
with evidence of recording indicated thereon or [a
copy] [copies] of the [Mortgage] [Title Documents]
certified by the public recording office in which
such [Mortgage] [Title Documents] has [have] been
recorded;
(iii) An original Assignment of the
[Mortgage] [Contract] to the Trustee with evidence
of recording indicated thereon or a copy of such
assignment certified by the public recording office
in which such assignment has been recorded;
(iv) The original recorded assignment or
assignments of the [Mortgage] [Contract] showing an
unbroken chain of title from the originator thereof
to the Person assigning it to the Trustee or a copy
of such assignment or assignments of the [Mortgage]
[Contract] certified by the public recording office
in which such assignment or assignments have been
recorded; and
(v) The original of each modification,
assumption agreement or preferred loan agreement,
if any, relating to such [Mortgage Loan] [Contract]
or a copy of each modification, assumption
agreement or preferred loan agreement certified by
the public recording office in which such document
has been recorded.
(c) The Company may, in lieu of delivering the
documents set forth in Section 2.01(b)(iv) and (v) to the
Trustee or the Custodian or Custodians, deliver such
documents to the [Master] Servicer, and the [Master]
Servicer shall hold such documents in trust for the use
and benefit of all present and future Certificateholders
until such time as is set forth below. Within ten
Business Days following the earlier of (i) the receipt of
the original of each of the documents or instruments set
forth in Section 2.01(b)(iv) and (v) (or copies thereof
as permitted by such Section) for any [Mortgage Loan]
[Contract] and (ii) a written request by the Trustee to
deliver those documents with respect to any or all of the
[Mortgage Loans] [Contracts] then being held by the
[Master] Servicer, the [Master] Servicer shall deliver a
complete set of such documents to the Trustee or the
Custodian or Custodians that are the duly appointed agent
or agents of the Trustee.
On the Closing Date, the [Master] Servicer
shall certify that it has in its possession an original
or copy of each of the documents referred to in Section
2.01(b)(iv) and (v) which has been delivered to it by the
Company. Every six months after the Closing Date, for so
long as the [Master] Servicer is holding documents
pursuant to this Section 2.01(c), the [Master] Servicer
shall deliver to (i) Moody's, if it is one of the Rating
Agencies, (ii) Standard & Poor's if it is one of the
Rating Agencies, (iii) the Trustee and (iv) each
Custodian a report setting forth the status of the
documents which it is holding.
(d) In the event that in connection with any
[Mortgage Loan] [Contract] the Company cannot deliver the
[Mortgage] [Contract, Title Documents], any assignment,
modification, assumption agreement or preferred loan
agreement (or copy thereof certified by the public
recording office) with evidence of recording thereon
concurrently with the execution and delivery of this
Agreement solely because of a delay caused by the public
recording office where such [Mortgage] [Contract, Title
Documents], assignment, modification, assumption
agreement or preferred loan agreement as the case may be,
has been delivered for recordation, the Company shall
deliver or cause to be delivered to the Trustee or the
respective Custodian a true and correct photocopy of such
[Mortgage] [Contract, Title Documents], assignment,
modification, assumption agreement or preferred loan
agreement.
The Company shall promptly cause to be recorded
in the appropriate public office for real property
records the Assignment referred to in clause (iii) of
Section 2.01(b), except in states where, in the opinion
of counsel acceptable to the Trustee and the [Master]
Servicer, such recording is not required to protect the
Trustee's interests in the [Mortgage Loan] [Contract]
against the claim of any subsequent transferee or any
successor to or creditor of the Company or the originator
of such [Mortgage Loan] [Contract]. If any Assignment is
lost or returned unrecorded to the Company because of any
defect therein, the Company shall prepare a substitute
Assignment or cure such defect, as the case may be, and
cause such Assignment to be recorded in accordance with
this paragraph. The Company shall promptly deliver or
cause to be delivered to the Trustee or the respective
Custodian such [Mortgage] [Contract] or assignment (or
copy thereof certified by the public recording office)
with evidence of recording indicated thereon upon receipt
thereof from the public recording office or from the
related Subservicer.
Any of the items set forth in Section 2.01(b)
that may be delivered as a copy rather than the original
may be delivered in microfiche form.
(e) It is intended that the conveyances by the
Company to the Trustee of the [Mortgage Loans]
[Contracts] as provided for in this Section 2.01 be
construed as a sale by the Company to the Trustee of the
[Mortgage Loans] [Contracts] for the benefit of the
Certificateholders. Further, it is not intended that any
such conveyance be deemed to be a pledge of the [Mortgage
Loans] [Contracts] by the Company to the Trustee to
secure a debt or other obligation of the Company.
However, in the event that the [Mortgage Loans]
[Contracts] are held to be property of the Company or of
Residential Funding, or if for any reason this Agreement
is held or deemed to create a security interest in the
[Mortgage Loans] [Contracts], then it is intended that
(a) this Agreement shall also be deemed to be a security
agreement within the meaning of Articles 8 and 9 of the
New York Uniform Commercial Code and the Uniform
Commercial Code of any other applicable jurisdiction; (b)
the conveyance provided for in Section 2.01 shall be
deemed to be (1) a grant by the Company to the Trustee of
a security interest in all of the Company's right
(including the power to convey title thereto), title and
interest, whether now owned or hereafter acquired, in and
to (A) the [Mortgage Loans] [Contracts], including the
[Mortgage Notes, the Mortgages] [Title Documents], any
related insurance policies and all other documents in the
related [Mortgage] [Contract] Files, (B) all amounts
payable pursuant to the [Mortgage Loans] [Contracts] in
accordance with the terms thereof and (C) any and all
general intangibles consisting of, arising from or
relating to any of the foregoing, and all proceeds of the
conversion, voluntary or involuntary, of the foregoing
into cash, instruments, securities or other property,
including without limitation all amounts from time to
time held or invested in the Certificate Account or the
Custodial Account, whether in the form of cash,
instruments, securities or other property and (2) an
assignment by the Company to the Trustee of any security
interest in any and all of Residential Funding's right
(including the power to convey title thereto), title and
interest, whether now owned or hereafter acquired, in and
to the property described in the foregoing clauses
(1)(A), (B) and (C) granted by Residential Funding to the
Company pursuant to the Assignment Agreement; (c) the
possession by the Trustee, the Custodian or any other
agent of the Trustee of [Mortgage Notes] [Contracts] or
such other items of property as constitute instruments,
money, negotiable documents or chattel paper shall be
deemed to be "possession by the secured party," or
possession by a purchaser or a person designated by such
secured party, for purposes of perfecting the security
interest pursuant to the Minnesota Uniform Commercial
Code and the Uniform Commercial Code of any other
applicable jurisdiction (including, without limitation,
Section 9-305, 8-313 or 8-321 thereof); and (d)
notifications to persons holding such property, and
acknowledgments, receipts or confirmations from persons
holding such property, shall be deemed notifications to,
or acknowledgments, receipts or confirmations from,
financial intermediaries, bailees or agents (as
applicable) of the Trustee for the purpose of perfecting
such security interest under applicable law.
The Company and, at the Company's direction,
Residential Funding and the Trustee shall, to the extent
consistent with this Agreement, take such reasonable
actions as may be necessary to ensure that, if this
Agreement were deemed to create a security interest in
the [Mortgage Loans] [Contracts], Uncertificated REMIC
Regular Interests and the other property described above,
such security interest would be deemed to be a perfected
security interest of first priority under applicable law
and will be maintained as such throughout the term of
this Agreement. Without limiting the generality of the
foregoing, the Company shall prepare and deliver to the
Trustee not less than 15 days prior to any filing date
and, the Trustee shall forward for filing, or shall cause
to be forwarded for filing, at the expense of the
Company, all filings necessary to maintain the
effectiveness of any original filings necessary under the
Uniform Commercial Code as in effect in any jurisdiction
to perfect the Trustee's security interest in or lien on
the [Mortgage Loans] [Contracts] as evidenced by an
Officer's Certificate of the Company, including without
limitation (x) continuation statements, and (y) such
other statements as may be occasioned by (1) any change
of name of Residential Funding, the Company or the
Trustee (such preparation and filing shall be at the
expense of the Trustee, if occasioned by a change in the
Trustee's name), (2) any change of location of the place
of business or the chief executive office of Residential
Funding or the Company, (3) any transfer of any interest
of Residential Funding or the Company in any [Mortgage
Loan] [Contract] or (4) any transfer of any interest of
Residential Funding or the Company in any Uncertificated
REMIC Regular Interest.
(f) The [Master] Servicer hereby acknowledges
the receipt by it of cash in an amount equal to
$[___________] (the "Initial Monthly Payment Fund"),
representing scheduled principal amortization and
interest at the Net Mortgage Rate for the Due Date in
[______ 199_], for those [Mortgage Loans] [Contracts] for
which the Trustee will not be entitled to receive such
payment. The [Master] Servicer shall hold such Initial
Monthly Payment Fund in the Custodial Account and shall
include such Initial Monthly Payment Fund in the
Available Distribution Amount for the Distribution Date
in [_______ 199_]. Notwithstanding anything herein to
the contrary, the Initial Monthly Payment Fund shall not
be an asset of the REMIC. To the extent that the Initial
Monthly Payment Fund constitutes a reserve fund for
federal income tax purposes, (1) it shall be an outside
reserve fund and not an asset of the REMIC, (2) it shall
be owned by the Seller and (3) amounts transferred by the
REMIC to the Initial Monthly Payment Fund shall be
treated as transferred to the Seller or any successor,
all within the meaning of Section 1.860G-2(h) of the
Treasury Regulations.
Section 2.02. Acceptance by Trustee.
The Trustee acknowledges receipt (or, with
respect to [Mortgage Loans] [Contracts] subject to a
Custodial Agreement, and based solely upon a receipt or
certification executed by the Custodian, receipt by the
respective Custodian as the duly appointed agent of the
Trustee) of the documents referred to in Section
2.01(b)(i) through (iii) above (except that for purposes
of such acknowledgement only, a [Mortgage Note]
[Contract] may be endorsed in blank and an Assignment of
[Mortgage] [Contract] may be in blank) and declares that
it, or a Custodian as its agent, holds and will hold such
documents and the other documents constituting a part of
the [Mortgage] [Contract] Files delivered to it, or a
Custodian as its agent, in trust for the use and benefit
of all present and future Certificateholders. The
Trustee or Custodian (such Custodian being so obligated
under a Custodial Agreement) agrees, for the benefit of
Certificateholders, to review each [Mortgage] [Contract]
File delivered to it pursuant to Section 2.01(b) within
45 days after the Closing Date to ascertain that all
required documents (specifically as set forth in Section
2.01(b)), have been executed and received, and that such
documents relate to the [Mortgage Loans] [Contracts]
identified on the [Mortgage Loan] [Contract] Schedule, as
supplemented, that have been conveyed to it. Upon
delivery of the [Mortgage] [Contract] Files by the
Company or the [Master] Servicer, the Trustee shall
acknowledge receipt (or, with respect to [Mortgage Loans]
[Contracts] subject to a Custodial Agreement, and based
solely upon a receipt or certification executed by the
Custodian, receipt by the respective Custodian as the
duly appointed agent of the Trustee) of the documents
referred to in Section 2.01(c) above. The Trustee or
Custodian (such Custodian being so obligated under a
Custodial Agreement) agrees to review each [Mortgage]
[Contract] File delivered to it pursuant to Section
2.01(c) within 45 days after receipt thereof to ascertain
that all documents required to be delivered pursuant to
such Section have been received, and that such documents
relate to the [Mortgage Loans] [Contracts] identified on
the [Mortgage Loan] [Contract] Schedule, as supplemented,
that have been conveyed to it.
If the Custodian, as the Trustee's agent, finds
any document or documents constituting a part of a
[Mortgage] [Contract] File to be missing or defective in
any material respect, the Trustee shall promptly so
notify the [Master] Servicer and the Company. Pursuant
to Section 2.3 of the Custodial Agreement, the Custodian
will notify the [Master] Servicer, the Company and the
Trustee of any such omission or defect found by it in
respect of any [Mortgage] [Contract] File held by it.
The [Master] Servicer shall promptly notify the related
Subservicer or Seller of such omission or defect and
request that such Subservicer or Seller correct or cure
such omission or defect within 60 days from the date the
[Master] Servicer was notified of such omission or defect
and, if such Subservicer or Seller does not correct or
cure such omission or defect within such period, that
such Subservicer or Seller purchase such [Mortgage Loan]
[Contract] from the Trust Fund at its Purchase Price, in
either case within 90 days from the date the [Master]
Servicer was notified of such omission or defect. The
Purchase Price for any such [Mortgage Loan] [Contract],
whether purchased by the Seller or the Subservicer, shall
be deposited or caused to be deposited by the [Master]
Servicer in the Custodial Account maintained by it
pursuant to Section 3.07 and, upon receipt by the Trustee
of written notification of such deposit signed by a
Servicing Officer, the Trustee or any Custodian, as the
case may be, shall release to the [Master] Servicer the
related [Mortgage] [Contract] File and the Trustee shall
execute and deliver such instruments of transfer or
assignment prepared by the [Master] Servicer, in each
case without recourse, as shall be necessary to vest in
the Seller or its designee or the Subservicer or its
designee, as the case may be, any [Mortgage Loan]
[Contract] released pursuant hereto and thereafter such
[Mortgage Loan] [Contract] shall not be part of the Trust
Fund. It is understood and agreed that the obligation of
the Seller or the Subservicer, as the case may be, to so
cure or purchase any [Mortgage Loan] [Contract] as to
which a material defect in or omission of a constituent
document exists shall constitute the sole remedy
respecting such defect or omission available to
Certificateholders or the Trustee on behalf of
Certificateholders.
Section 2.03. Representations, Warranties and Covenants
of the [Master] Servicer and the Company.
(a) The [Master] Servicer hereby represents
and warrants to the Trustee for the benefit of
Certificateholders that:
(i) The [Master] Servicer is a corporation
duly organized, validly existing and in good
standing under the laws governing its creation and
existence and is or will be in compliance with the
laws of each state in which any Mortgaged Property
is located to the extent necessary to ensure the
enforceability of each [Mortgage Loan] [Contract]
in accordance with the terms of this Agreement;
(ii) The execution and delivery of this
Agreement by the [Master] Servicer and its
performance and compliance with the terms of this
Agreement will not violate the [Master] Servicer's
Certificate of Incorporation or Bylaws or
constitute a default (or an event which, with
notice or lapse of time, or both, would constitute
a material default) under, or result in the
material breach of, any material contract,
agreement or other instrument to which the [Master]
Servicer is a party or which may be applicable to
the [Master] Servicer or any of its assets;
(iii) This Agreement, assuming due
authorization, execution and delivery by the
Trustee and the Company, constitutes a valid, legal
and binding obligation of the [Master] Servicer,
enforceable against it in accordance with the terms
hereof subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other
laws affecting the enforcement of creditors' rights
generally and to general principles of equity,
regardless of whether such enforcement is
considered in a proceeding in equity or at law;
(iv) The [Master] Servicer is not in default
with respect to any order or decree of any court or
any order, regulation or demand of any Federal,
state, municipal or governmental agency, which
default might have consequences that would
materially and adversely affect the condition
(financial or other) or operations of the [Master]
Servicer or its properties or might have
consequences that would materially adversely affect
its performance hereunder;
(v) No litigation is pending or, to the best
of the [Master] Servicer's knowledge, threatened
against the [Master] Servicer which would prohibit
its entering into this Agreement or performing its
obligations under this Agreement;
(vi) The [Master] Servicer will comply in all
material respects in the performance of this
Agreement with all reasonable rules and
requirements of each insurer under each Required
Insurance Policy;
(vii) No information, certificate of an
officer, statement furnished in writing or report
delivered to the Company, any Affiliate of the
Company or the Trustee by the [Master] Servicer
will, to the knowledge of the [Master] Servicer,
contain any untrue statement of a material fact or
omit a material fact necessary to make the
information, certificate, statement or report not
misleading; and
(viii) The [Master] Servicer has examined
each existing, and will examine each new,
Subservicing Agreement and is or will be familiar
with the terms thereof. The terms of each existing
Subservicing Agreement and each designated
Subservicer are acceptable to the [Master] Servicer
and any new Subservicing Agreements will comply
with the provisions of Section 3.02.
It is understood and agreed that the representations and
warranties set forth in this Section 2.03(a) shall
survive delivery of the respective [Mortgage] [Contract]
Files to the Trustee or any Custodian.
Upon discovery by either the Company, the
[Master] Servicer, the Trustee or any Custodian of a
breach of any representation or warranty set forth in
this Section 2.03(a) which materially and adversely
affects the interests of the Certificateholders in any
[Mortgage Loan] [Contract], the party discovering such
breach shall give prompt written notice to the other
parties (any Custodian being so obligated under a
Custodial Agreement). Within 90 days of its discovery or
its receipt of notice of such breach, the [Master]
Servicer shall either (i) cure such breach in all
material respects or (ii) to the extent that such breach
is with respect to a [Mortgage Loan] [Contract] or a
related document, purchase such [Mortgage Loan]
[Contract] from the Trust Fund at the Purchase Price and
in the manner set forth in Section 2.02. The obligation
of the [Master] Servicer to cure such breach or to so
purchase such [Mortgage Loan] [Contract] shall constitute
the sole remedy in respect of a breach of a
representation and warranty set forth in this Section
2.03(a) available to the Certificateholders or the
Trustee on behalf of the Certificateholders.
(b) The Company hereby represents and warrants
to the Trustee for the benefit of Certificateholders that
as of the Closing Date (or, if otherwise specified below,
as of the date so specified):
(i) No [Mortgage Loan] [Contract] is one
month or more delinquent in payment of principal
and interest as of the Cut-off Date;
(ii) The information set forth in Exhibit F
hereto with respect to each [Mortgage Loan]
[Contract] or the [Mortgage Loans] [Contracts], as
the case may be, is true and correct in all
material respects at the date or dates respecting
which such information is furnished;
(iii) The [Mortgage Loans] [Contracts] are
[fully-amortizing] [balloon], [fixed] [adjustable]-
rate mortgage loans with level Monthly Payments due
on the first day of each month and terms to
maturity at origination or modification of not more
than [__]years;
(iv) To the best of the Company's knowledge,
except with respect to [___] [Mortgage Loans]
[Contracts] representing approximately [____]% of
the [Mortgage Loans] [Contracts], if a [Mortgage
Loan] [Contract] is secured by a Mortgaged
Property with a Loan-to-Value Ratio at origination
in excess of 80%, such [Mortgage Loan] [Contract]
is the subject of a Primary Insurance Policy that
insures that portion of the principal balance
thereof that exceeds the amount equal to 75% of the
Appraised Value of the related Mortgaged Property.
To the best of the Company's knowledge, each such
Primary Insurance Policy is in full force and
effect and the Trustee is entitled to the benefits
thereunder;
(v) The issuers of the Primary Insurance
Policies are insurance companies whose
claims-paying abilities are currently acceptable to
each Rating Agency;
(vi) No more than [___]% of the [Mortgage
Loans] [Contracts] by aggregate Stated Principal
Balance as of the Cut-off Date are secured by
Mortgaged Properties located in any one zip code
area in California and no more than [___]% of the
[Mortgage Loans] [Contracts] by aggregate Stated
Principal Balance as of the Cut-off Date are
secured by Mortgaged Properties located in any one
zip code area outside of California;
(vii) If the improvements securing a
[Mortgage Loan] [Contract] are in a federally
designated special flood hazard area, flood
insurance in the amount required under the Program
Guide covers the related Mortgaged Property (either
by coverage under the federal flood insurance
program or by coverage by private insurers);
(viii) Immediately prior to the assignment
of the [Mortgage Loans] [Contracts] to the Trustee,
the Company had good title to, and was the sole
owner of, each [Mortgage Loan] [Contract] free and
clear of any pledge, lien, encumbrance or security
interest (other than rights to servicing and
related compensation) and such assignment validly
transfers ownership of the [Mortgage Loans]
[Contracts] to the Trustee free and clear of any
pledge, lien, encumbrance or security interest;
(ix) Approximately [_____]% of the [Mortgage
Loans] [Contracts] by aggregate Stated Principal
Balance as of the Cut-off Date were underwritten
under a reduced loan documentation program;
(x) Each Mortgagor represented in its loan
application with respect to the related [Mortgage
Loan] [Contract] that the Mortgaged Property would
be owner-occupied and therefore would not be an
investor property as of the date of origination of
such [Mortgage Loan] [Contract]. No Mortgagor is a
corporation or a partnership;
[(xi) No more than [____]% of the Mortgage
Loans by aggregate Stated Principal Balance as of
the Cut-off Date will be Buydown Mortgage Loans;]
(xii) Each [Mortgage Loan] [Contract]
constitutes a qualified mortgage under Section
860G(a)(3)(A) of the Code and Treasury Regulations
Section 1.860G-2(a)(1); and
(xiii) A policy of title insurance was
effective as of the closing of each [Mortgage Loan]
[Contract] and is valid and binding and remains in
full force and effect.
It is understood and agreed that the representations and
warranties set forth in this Section 2.03(b) shall
survive delivery of the respective [Mortgage] [Contract]
Files to the Trustee or any Custodian.
Upon discovery by any of the Company, the
[Master] Servicer, the Trustee or any Custodian of a
breach of any of the representations and warranties set
forth in this Section 2.03(b) which materially and
adversely affects the interests of the Certificateholders
in any [Mortgage Loan] [Contract], the party discovering
such breach shall give prompt written notice to the other
parties (any Custodian being so obligated under a
Custodial Agreement); provided, however, that in the
event of a breach of the representation and warranty set
forth in Section 2.03(b)(xi), the party discovering such
breach shall give such notice within five days of
discovery. Within 90 days of its discovery or its
receipt of notice of breach, the Company shall either (i)
cure such breach in all material respects or (ii)
purchase such [Mortgage Loan] [Contract] from the Trust
Fund at the Purchase Price and in the manner set forth in
Section 2.02; provided that the Company shall have the
option to substitute a Qualified Substitute [Mortgage
Loan] [Contract] or [Loans] [Contracts] for such
[Mortgage Loan] [Contract] if such substitution occurs
within two years following the Closing Date. Any such
substitution shall be effected by the Company under the
same terms and conditions as provided in Section 2.04 for
substitutions by Residential Funding. It is understood
and agreed that the obligation of the Company to cure
such breach or to so purchase or substitute for any
[Mortgage Loan] [Contract] as to which such a breach has
occurred and is continuing shall constitute the sole
remedy respecting such breach available to
Certificateholders or the Trustee on behalf of
Certificateholders. Notwithstanding the foregoing, the
Company shall not be required to cure breaches or
purchase or substitute for [Mortgage Loans] [Contracts]
as provided in this Section 2.03(b) if the substance of
the breach of a representation set forth above also
constitutes fraud in the origination of the [Mortgage
Loan] [Contract].
Section 2.04. Representations and Warranties of
Sellers.
The Company, as assignee of Residential Funding
under the Assignment Agreement, hereby assigns to the
Trustee for the benefit of Certificateholders all of its
right, title and interest in respect of the Assignment
Agreement and each Seller's Agreement applicable to a
[Mortgage Loan] [Contract]. Insofar as the Assignment
Agreement or such Seller's Agreement relates to the
representations and warranties made by Residential
Funding or the related Seller in respect of such
[Mortgage Loan] [Contract] and any remedies provided
thereunder for any breach of such representations and
warranties, such right, title and interest may be
enforced by the [Master] Servicer on behalf of the
Trustee and the Certificateholders. Upon the discovery
by the Company, the [Master] Servicer, the Trustee or any
Custodian of a breach of any of the representations and
warranties made in a Seller's Agreement or the Assignment
Agreement (which, for purposes hereof, will be deemed to
include any other cause giving rise to a repurchase
obligation under the Assignment Agreement) in respect of
any [Mortgage Loan] [Contract] which materially and
adversely affects the interests of the Certificateholders
in such [Mortgage Loan] [Contract], the party discovering
such breach shall give prompt written notice to the other
parties (any Custodian being so obligated under a
Custodial Agreement). The [Master] Servicer shall
promptly notify the related Seller or Residential
Funding, as the case may be, of such breach and request
that such Seller or Residential Funding, as the case may
be, either (i) cure such breach in all material respects
within 90 days from the date the [Master] Servicer was
notified of such breach or (ii) purchase such [Mortgage
Loan] [Contract] from the Trust Fund at the Purchase
Price and in the manner set forth in Section 2.02;
provided that in the case of a breach under the
Assignment Agreement Residential Funding shall have the
option to substitute a Qualified Substitute [Mortgage
Loan] [Contract] or [Loans] [Contracts] for such
[Mortgage Loan] [Contract] if such substitution occurs
within two years following the Closing Date, except that
if the breach would cause the [Mortgage Loan] [Contract]
to be other than a "qualified mortgage" as defined in
Section 860G(a)(3) of the Code, any such substitution
must occur within 90 days from the date the [Master]
Servicer was notified of the breach if such 90 day period
expires before two years following the Closing Date. In
the event that Residential Funding elects to substitute
a Qualified Substitute [Mortgage Loan] [Contract] or
[Loans] [Contracts] for a Deleted [Mortgage Loan]
[Contract] pursuant to this Section 2.04, Residential
Funding shall deliver to the Trustee for the benefit of
the Certificateholders with respect to such Qualified
Substitute [Mortgage Loan] [Contract] or Loans, the
original [Mortgage Note, the Mortgage] [Contract, the
Title Documents], an Assignment of the [Mortgage]
[Contract] in recordable form, and such other documents
and agreements as are required by Section 2.01, with the
[Mortgage Note] [Contract] endorsed as required by
Section 2.01. No substitution will be made in any
calendar month after the Determination Date for such
month. Monthly Payments due with respect to Qualified
Substitute [Mortgage Loans] [Contracts] in the month of
substitution shall not be part of the Trust Fund and will
be retained by the [Master] Servicer and remitted by the
[Master] Servicer to Residential Funding on the next
succeeding Distribution Date. For the month of
substitution, distributions to Certificateholders will
include the Monthly Payment due on a Deleted [Mortgage
Loan] [Contract] for such month and thereafter
Residential Funding shall be entitled to retain all
amounts received in respect of such Deleted [Mortgage
Loan] [Contract]. The [Master] Servicer shall amend or
cause to be amended the [Mortgage Loan] [Contract]
Schedule, [and, if the Deleted [Mortgage Loan] [Contract]
was a Discount [Mortgage Loan] [Contract], the Schedule
of Discount Fractions], for the benefit of the
Certificateholders to reflect the removal of such Deleted
[Mortgage Loan] [Contract] and the substitution of the
Qualified Substitute [Mortgage Loan] [Contract] or
[Loans] [Contracts] and the [Master] Servicer shall
deliver the amended [Mortgage Loan] [Contract] Schedule,
and, if the Deleted [Mortgage Loan] [Contract] was a
Discount Loan, [the amended Schedule of Discount
Fractions], to the Trustee. Upon such substitution, the
Qualified Substitute [Mortgage Loan] [Contract] or
[Loans] [Contracts] shall be subject to the terms of this
Agreement and the related Subservicing Agreement in all
respects, the related Seller shall be deemed to have made
the representations and warranties with respect to the
Qualified Substitute [Mortgage Loan] [Contract] contained
in the related Seller's Agreement as of the date of
substitution, and the Company and the [Master] Servicer
shall be deemed to have made with respect to any
Qualified Substitute [Mortgage Loan] [Contract] or
[Loans] [Contracts], as of the date of substitution, the
covenants, representations and warranties set forth in
this Section 2.04, in Section 2.03 hereof and in Section
4 of the Assignment Agreement, and the [Master] Servicer
shall be obligated to repurchase or substitute for any
Qualified Substitute [Mortgage Loan] [Contract] as to
which a Repurchase Event (as defined in the Assignment
Agreement) has occurred pursuant to Section 4 of the
Assignment Agreement.
In connection with the substitution of one or
more Qualified Substitute [Mortgage Loans] [Contracts]
for one or more Deleted [Mortgage Loans] [Contracts], the
[Master] Servicer will determine the amount (if any) by
which the aggregate principal balance of all such
Qualified Substitute [Mortgage Loans] [Contracts] as of
the date of substitution is less than the aggregate
Stated Principal Balance of all such Deleted [Mortgage
Loans] [Contracts] (in each case after application of the
principal portion of the Monthly Payments due in the
month of substitution that are to be distributed to
Certificateholders in the month of substitution).
Residential Funding shall deposit the amount of such
shortfall into the Custodial Account on the day of
substitution, without any reimbursement therefor.
Residential Funding shall give notice in writing to the
Trustee of such event, which notice shall be accompanied
by an Officers' Certificate as to the calculation of such
shortfall and by an Opinion of Counsel to the effect that
such substitution will not cause (a) any federal tax to
be imposed on the Trust Fund, including without
limitation, any federal tax imposed on "prohibited
transactions" under Section 860F(a)(1) of the Code or on
"contributions after the startup date" under Section
860G(d)(1) of the Code or (b) any portion of the Trust
Fund to fail to qualify as a REMIC at any time that any
Certificate is outstanding.
It is understood and agreed that the obligation
of the Seller or Residential Funding, as the case may be,
to cure such breach or purchase (or in the case of
Residential Funding to substitute for) such [Mortgage
Loan] [Contract] as to which such a breach has occurred
and is continuing shall constitute the sole remedy
respecting such breach available to Certificateholders or
the Trustee on behalf of Certificateholders. If the
[Master] Servicer is Residential Funding, then the
Trustee shall also have the right to give the
notification and require the purchase or substitution
provided for in the second preceding paragraph in the
event of such a breach of a representation or warranty
made by Residential Funding in the Assignment Agreement.
In connection with the purchase of or substitution for
any such [Mortgage Loan] [Contract] by Residential
Funding, the Trustee shall assign to Residential Funding
all of the right, title and interest in respect of the
Seller's Agreement and the Assignment Agreement
applicable to such [Mortgage Loan] [Contract].
Section 2.05. Execution and Authentication of
Certificates.
The Trustee acknowledges the assignment to it
of the [Mortgage Loans] [Contracts] and the delivery of
the [Mortgage] [Contract] Files to it, or any Custodian
on its behalf, subject to any exceptions noted, together
with the assignment to it of all other assets included in
the Trust Fund, receipt of which is hereby acknowledged.
Concurrently with such delivery and in exchange therefor,
the Trustee, pursuant to the written request of the
Company executed by an officer of the Company has
executed and caused to be authenticated and delivered to
or upon the order of the Company the Certificates in
authorized denominations which evidence ownership of the
entire Trust Fund.
ARTICLE III
ADMINISTRATION AND SERVICING
OF [MORTGAGE LOANS] [CONTRACTS]
Section 3.01. [Master] Servicer to Act as Servicer.
(a) The [Master] Servicer shall service and
administer the [Mortgage Loans] [Contracts] in accordance
with the terms of this Agreement and the respective
[Mortgage Loans] [Contracts] and shall have full power
and authority, acting alone or through Subservicers as
provided in Section 3.02, to do any and all things which
it may deem necessary or desirable in connection with
such servicing and administration. Without limiting the
generality of the foregoing, the [Master] Servicer in its
own name or in the name of a Subservicer is hereby
authorized and empowered by the Trustee when the [Master]
Servicer or the Subservicer, as the case may be, believes
it appropriate in its best judgment, to execute and
deliver, on behalf of the Certificateholders and the
Trustee or any of them, any and all instruments of
satisfaction or cancellation, or of partial or full
release or discharge, or of consent to assumption or
modification in connection with a proposed conveyance, or
of assignment of any [Mortgage and Mortgage Note]
[Contract] in connection with the repurchase of a
[Mortgage Loan] [Contract] and all other comparable
instruments, or with respect to the modification or re-
recording of a [Mortgage] [Contract] for the purpose of
correcting the [Mortgage] [Contract], the subordination
of the lien of the [Mortgage] [Contract] in favor of a
public utility company or government agency or unit with
powers of eminent domain, the taking of a deed in lieu of
foreclosure, the completion of judicial or non-judicial
foreclosure, the conveyance of a Mortgaged Property to an
Insurer, the acquisition of any property acquired by
foreclosure or deed in lieu of foreclosure, or the
management, marketing and conveyance of any property
acquired by foreclosure or deed in lieu of foreclosure
with respect to the [Mortgage Loans] [Contracts] and with
respect to the Mortgaged Properties. Notwithstanding the
foregoing, subject to Section 3.07(a), the [Master]
Servicer shall not permit any modification with respect
to any [Mortgage Loan] [Contract] that would constitute
a sale or exchange of such [Mortgage Loan] [Contract]
within the meaning of Section 1001 of the Code and any
proposed, temporary or final regulations promulgated
thereunder (other than in connection with a proposed
conveyance or assumption of such [Mortgage Loan]
[Contract] that is treated as a Principal Prepayment in
Full pursuant to Section 3.13(d) hereof) and cause the
REMIC to fail to qualify as such under the Code. The
Trustee shall furnish the [Master] Servicer with any
powers of attorney and other documents necessary or
appropriate to enable the [Master] Servicer to service
and administer the [Mortgage Loans] [Contracts]. In
servicing and administering any Nonsubserviced [Mortgage
Loan] [Contract], the [Master] Servicer shall, to the
extent not inconsistent with this Agreement, comply with
the Program Guide as if it were the originator of such
[Mortgage Loan] [Contract] and had retained the servicing
rights and obligations in respect thereof.
(b) All costs incurred by the [Master]
Servicer or by Subservicers in effecting the timely
payment of taxes and assessments on the properties
subject to the [Mortgage Loans] [Contracts] shall not,
for the purpose of calculating monthly distributions to
Certificateholders, be added to the amount owing under
the related [Mortgage Loans] [Contracts], notwithstanding
that the terms of such [Mortgage Loan] [Contract] so
permit, and such costs shall be recoverable to the extent
permitted by Section 3.10(a)(ii).
(c) The [Master] Servicer may enter into one
or more agreements in connection with the offering of
pass-through certificates evidencing interests in one or
more of the Certificates providing for the payment by the
[Master] Servicer of amounts received by the [Master]
Servicer as servicing compensation hereunder and required
to cover certain Prepayment Interest Shortfalls on the
[Mortgage Loans] [Contracts], which payment obligation
will thereafter be an obligation of the [Master] Servicer
hereunder.
Section 3.02. Subservicing Agreements Between [Master]
Servicer and Subservicers; Enforcement of
Subservicers' and Sellers' Obligations.
(a) The [Master] Servicer may continue in
effect Subservicing Agreements entered into by
Residential Funding and Subservicers prior to the
execution and delivery of this Agreement, and may enter
into new Subservicing Agreements with Subservicers, for
the servicing and administration of all or some of the
[Mortgage Loans] [Contracts]. Each Subservicer of a
[Mortgage Loan] [Contract] shall be entitled to receive
and retain, as provided in the related Subservicing
Agreement and in Section 3.07, the related Subservicing
Fee from payments of interest received on such [Mortgage
Loan] [Contract] after payment of all amounts required to
be remitted to the [Master] Servicer in respect of such
[Mortgage Loan] [Contract]. For any [Mortgage Loan]
[Contract] that is a Nonsubserviced [Mortgage Loan]
[Contract], the [Master] Servicer shall be entitled to
receive and retain an amount equal to the Subservicing
Fee from payments of interest. Unless the context
otherwise requires, references in this Agreement to
actions taken or to be taken by the [Master] Servicer in
servicing the [Mortgage Loans] [Contracts] include
actions taken or to be taken by a Subservicer on behalf
of the [Master] Servicer. Each Subservicing Agreement
will be upon such terms and conditions as are generally
required or permitted by the Program Guide and are not
inconsistent with this Agreement and as the [Master]
Servicer and the Subservicer have agreed. A
representative form of Subservicing Agreement is attached
to this Agreement as Exhibit G. With the approval of the
[Master] Servicer, a Subservicer may delegate its
servicing obligations to third-party servicers, but such
Subservicer will remain obligated under the related
Subservicing Agreement. The [Master] Servicer and a
Subservicer may enter into amendments thereto or a
different form of Subservicing Agreement, and the form
referred to or included in the Program Guide is merely
provided for information and shall not be deemed to limit
in any respect the discretion of the [Master] Servicer to
modify or enter into different Subservicing Agreements;
provided, however, that any such amendments or different
forms shall be consistent with and not violate the
provisions of either this Agreement or the Program Guide
in a manner which would materially and adversely affect
the interests of the Certificateholders.
(b) As part of its servicing activities
hereunder, the [Master] Servicer, for the benefit of the
Trustee and the Certificateholders, shall use its best
reasonable efforts to enforce the obligations of each
Subservicer under the related Subservicing Agreement and
of each Seller under the related Seller's Agreement, to
the extent that the non-performance of any such
obligation would have a material and adverse effect on a
[Mortgage Loan] [Contract], including, without
limitation, the obligation to purchase a [Mortgage Loan]
[Contract] on account of defective documentation, as
described in Section 2.02, or on account of a breach of
a representation or warranty, as described in Section
2.04. Such enforcement, including, without limitation,
the legal prosecution of claims, termination of
Subservicing Agreements or Seller's Agreements, as
appropriate, and the pursuit of other appropriate
remedies, shall be in such form and carried out to such
an extent and at such time as the [Master] Servicer would
employ in its good faith business judgment and which are
normal and usual in its general mortgage servicing
activities. The [Master] Servicer shall pay the costs of
such enforcement at its own expense, and shall be
reimbursed therefor only (i) from a general recovery
resulting from such enforcement to the extent, if any,
that such recovery exceeds all amounts due in respect of
the related [Mortgage Loan] [Contract] or (ii) from a
specific recovery of costs, expenses or attorneys fees
against the party against whom such enforcement is
directed.
Section 3.03. Successor Subservicers.
The [Master] Servicer shall be entitled to
terminate any Subservicing Agreement that may exist in
accordance with the terms and conditions of such
Subservicing Agreement and without any limitation by
virtue of this Agreement; provided, however, that in the
event of termination of any Subservicing Agreement by the
[Master] Servicer or the Subservicer, the [Master]
Servicer shall either act as servicer of the related
[Mortgage Loan] [Contract] or enter into a Subservicing
Agreement with a successor Subservicer which will be
bound by the terms of the related Subservicing Agreement.
If the [Master] Servicer or any Affiliate of Residential
Funding acts as servicer, it will not assume liability
for the representations and warranties of the Subservicer
which it replaces. If the [Master] Servicer enters into
a Subservicing Agreement with a successor Subservicer,
the [Master] Servicer shall use reasonable efforts to
have the successor Subservicer assume liability for the
representations and warranties made by the terminated
Subservicer in respect of the related [Mortgage Loans]
[Contracts] and, in the event of any such assumption by
the successor Subservicer, the [Master] Servicer may, in
the exercise of its business judgment, release the
terminated Subservicer from liability for such
representations and warranties.
Section 3.04. Liability of the [Master] Servicer.
Notwithstanding any Subservicing Agreement, any
of the provisions of this Agreement relating to
agreements or arrangements between the [Master] Servicer
or a Subservicer or reference to actions taken through a
Subservicer or otherwise, the [Master] Servicer shall
remain obligated and liable to the Trustee and
Certificateholders for the servicing and administering of
the [Mortgage Loans] [Contracts] in accordance with the
provisions of Section 3.01 without diminution of such
obligation or liability by virtue of such Subservicing
Agreements or arrangements or by virtue of
indemnification from the Subservicer or the Company and
to the same extent and under the same terms and
conditions as if the [Master] Servicer alone were
servicing and administering the [Mortgage Loans]
[Contracts]. The [Master] Servicer shall be entitled to
enter into any agreement with a Subservicer or Seller for
indemnification of the [Master] Servicer and nothing
contained in this Agreement shall be deemed to limit or
modify such indemnification.
Section 3.05. No Contractual Relationship Between
Subservicer and Trustee or
Certificateholders.
Any Subservicing Agreement that may be entered
into and any other transactions or services relating to
the [Mortgage Loans] [Contracts] involving a Subservicer
in its capacity as such and not as an originator shall be
deemed to be between the Subservicer and the [Master]
Servicer alone and the Trustee and Certificateholders
shall not be deemed parties thereto and shall have no
claims, rights, obligations, duties or liabilities with
respect to the Subservicer in its capacity as such except
as set forth in Section 3.06. The foregoing provision
shall not in any way limit a Subservicer's obligation to
cure an omission or defect or to repurchase a [Mortgage
Loan] [Contract] as referred to in Section 2.02 hereof.
Section 3.06. Assumption or Termination of Subservicing
Agreements by Trustee.
(a) In the event the [Master] Servicer shall
for any reason no longer be the master servicer
(including by reason of an Event of Default), the
Trustee, its designee or its successor shall thereupon
assume all of the rights and obligations of the [Master]
Servicer under each Subservicing Agreement that may have
been entered into. The Trustee, its designee or the
successor servicer for the Trustee shall be deemed to
have assumed all of the [Master] Servicer's interest
therein and to have replaced the [Master] Servicer as a
party to the Subservicing Agreement to the same extent as
if the Subservicing Agreement had been assigned to the
assuming party except that the [Master] Servicer shall
not thereby be relieved of any liability or obligations
under the Subservicing Agreement.
(b) The [Master] Servicer shall, upon request
of the Trustee but at the expense of the [Master]
Servicer, deliver to the assuming party all documents and
records relating to each Subservicing Agreement and the
[Mortgage Loans] [Contracts] then being serviced and an
accounting of amounts collected and held by it and
otherwise use its best efforts to effect the orderly and
efficient transfer of each Subservicing Agreement to the
assuming party.
Section 3.07. Collection of Certain [Mortgage Loan]
[Contract] Payments; Deposits to
Custodial Account.
(a) The [Master] Servicer shall make
reasonable efforts to collect all payments called for
under the terms and provisions of the [Mortgage Loans]
[Contracts], and shall, to the extent such procedures
shall be consistent with this Agreement and the terms and
provisions of any related Primary Insurance Policy,
follow such collection procedures as it would employ in
its good faith business judgment and which are normal and
usual in its general mortgage servicing activities.
Consistent with the foregoing, the [Master] Servicer may
in its discretion (i) waive any late payment charge or
any prepayment charge or penalty interest in connection
with the prepayment of a [Mortgage Loan] [Contract] and
(ii) extend the Due Date for payments due on a [Mortgage
Loan] [Contract] in accordance with the Program Guide,
provided, however, that the [Master] Servicer shall first
determine that any such waiver or extension will not
impair the coverage of any related Primary Insurance
Policy or materially adversely affect the lien of the
related Mortgage. Consistent with the terms of this
Agreement, the [Master] Servicer may also waive, modify
or vary any term of any [Mortgage Loan] [Contract] or
consent to the postponement of strict compliance with any
such term or in any manner grant indulgence to any
Mortgagor if in the [Master] Servicer's determination
such waiver, modification, postponement or indulgence is
not materially adverse to the interests of the
Certificateholders, provided, however, that the [Master]
Servicer may not modify materially or permit any
Subservicer to modify any [Mortgage Loan] [Contract],
including without limitation any modification that would
change the Mortgage Rate, forgive the payment of any
principal or interest (unless in connection with the
liquidation of the related [Mortgage Loan] [Contract] or
except in connection with prepayments to the extent that
such reamortization is not inconsistent with the terms of
the [Mortgage Loan] [Contract]), or extend the final
maturity date of such [Mortgage Loan] [Contract], unless
such [Mortgage Loan] [Contract] is in default or, in the
judgment of the [Master] Servicer, such default is
reasonably foreseeable.
(b) The [Master] Servicer shall establish and
maintain a Custodial Account in which the [Master]
Servicer shall deposit or cause to be deposited on a
daily basis, except as otherwise specifically provided
herein, the following payments and collections remitted
by Subservicers or received by it in respect of the
[Mortgage Loans] [Contracts] subsequent to the Cut-off
Date (other than in respect of principal and interest on
the [Mortgage Loans] [Contracts] due on or before the
Cut-off Date):
(i) All payments on account of principal,
including Principal Prepayments made by Mortgagors
on the [Mortgage Loans] [Contracts] and the
principal component of any Subservicer Advance or
of any REO Proceeds received in connection with an
REO Property for which an REO Disposition has
occurred;
(ii) All payments on account of interest at
the Adjusted Mortgage Rate on the [Mortgage Loans]
[Contracts], including Buydown Funds, if any, and
the interest component of any Subservicer Advance
or of any REO Proceeds received in connection with
an REO Property for which an REO Disposition has
occurred;
(iii) Insurance Proceeds and Liquidation
Proceeds (net of any related expenses of the
Subservicer);
(iv) All proceeds of any [Mortgage Loans]
[Contracts] purchased pursuant to Section 2.02,
2.03, 2.04 or 4.07 and all amounts required to be
deposited in connection with the substitution of a
Qualified Substitute [Mortgage Loan] [Contract]
pursuant to Section 2.03 or 2.04;
(v) Any amounts required to be deposited
pursuant to Section 2.01(f), 3.07(c) or 3.21; and
(vi) All amounts transferred from the
Certificate Account to the Custodial Account in
accordance with Section 4.02(a).
The foregoing requirements for deposit in the Custodial
Account shall be exclusive, it being understood and
agreed that, without limiting the generality of the
foregoing, payments on the [Mortgage Loans] [Contracts]
which are not part of the Trust Fund (consisting of
payments in respect of principal and interest on the
[Mortgage Loans] [Contracts] due on or before the Cut-off
Date) and payments or collections in the nature of
prepayment charges or late payment charges or assumption
fees may but need not be deposited by the [Master]
Servicer in the Custodial Account. In the event any
amount not required to be deposited in the Custodial
Account is so deposited, the [Master] Servicer may at any
time withdraw such amount from the Custodial Account, any
provision herein to the contrary notwithstanding. The
Custodial Account may contain funds that belong to one or
more trust funds created for mortgage pass-through
certificates of other series and may contain other funds
respecting payments on mortgage loans belonging to the
[Master] Servicer or serviced or master serviced by it on
behalf of others. Notwithstanding such commingling of
funds, the [Master] Servicer shall keep records that
accurately reflect the funds on deposit in the Custodial
Account that have been identified by it as being
attributable to the [Mortgage Loans] [Contracts].
With respect to Insurance Proceeds, Liquidation
Proceeds, REO Proceeds and the proceeds of the purchase
of any [Mortgage Loan] [Contract] pursuant to Sections
2.02, 2.03, 2.04 and 4.07 received in any calendar month,
the [Master] Servicer may elect to treat such amounts as
included in the Available Distribution Amount for the
Distribution Date in the month of receipt, but is not
obligated to do so. If the [Master] Servicer so elects,
such amounts will be deemed to have been received (and
any related Realized Loss shall be deemed to have
occurred) on the last day of the month prior to the
receipt thereof.
(c) The [Master] Servicer shall use its best
efforts to cause the institution maintaining the
Custodial Account to invest the funds in the Custodial
Account attributable to the [Mortgage Loans] [Contracts]
in Permitted Investments which shall mature not later
than the Certificate Account Deposit Date next following
the date of such investment (with the exception of the
Amount Held for Future Distribution) and which shall not
be sold or disposed of prior to their maturities. All
income and gain realized from any such investment shall
be for the benefit of the [Master] Servicer as additional
servicing compensation and shall be subject to its
withdrawal or order from time to time. The amount of any
losses incurred in respect of any such investments
attributable to the investment of amounts in respect of
the [Mortgage Loans] [Contracts] shall be deposited in
the Custodial Account by the [Master] Servicer out of its
own funds immediately as realized.
(d) The [Master] Servicer shall give notice to
the Trustee and the Company of any change in the location
of the Custodial Account and the location of the
Certificate Account prior to the use thereof.
Section 3.08. Subservicing Accounts; Servicing
Accounts.
(a) In those cases where a Subservicer is
servicing a [Mortgage Loan] [Contract] pursuant to a
Subservicing Agreement, the [Master] Servicer shall cause
the Subservicer, pursuant to the Subservicing Agreement,
to establish and maintain one or more Subservicing
Accounts which shall be an Eligible Account or, if such
account is not an Eligible Account, shall generally
satisfy the requirements of the Program Guide and be
otherwise acceptable to the [Master] Servicer and each
Rating Agency. The Subservicer will be required thereby
to deposit into the Subservicing Account on a daily basis
all proceeds of [Mortgage Loans] [Contracts] received by
the Subservicer, less its Subservicing Fees and
unreimbursed advances and expenses, to the extent
permitted by the Subservicing Agreement. If the
Subservicing Account is not an Eligible Account, the
[Master] Servicer shall be deemed to have received such
monies upon receipt thereof by the Subservicer. The
Subservicer shall not be required to deposit in the
Subservicing Account payments or collections in the
nature of prepayment charges or late charges or
assumption fees. On or before the date specified in the
Program Guide, but in no event later than the
Determination Date, the [Master] Servicer shall cause the
Subservicer, pursuant to the Subservicing Agreement, to
remit to the [Master] Servicer for deposit in the
Custodial Account all funds held in the Subservicing
Account with respect to each [Mortgage Loan] [Contract]
serviced by such Subservicer that are required to be
remitted to the [Master] Servicer. The Subservicer will
also be required, pursuant to the Subservicing Agreement,
to advance on such scheduled date of remittance amounts
equal to any scheduled monthly installments of principal
and interest less its Subservicing Fees on any [Mortgage
Loans] [Contracts] for which payment was not received by
the Subservicer. This obligation to advance with respect
to each [Mortgage Loan] [Contract] will continue up to
and including the first of the month following the date
on which the related Mortgaged Property is sold at a
foreclosure sale or is acquired by the Trust Fund by deed
in lieu of foreclosure or otherwise. All such advances
received by the [Master] Servicer shall be deposited
promptly by it in the Custodial Account.
(b) The Subservicer may also be required,
pursuant to the Subservicing Agreement, to remit to the
[Master] Servicer for deposit in the Custodial Account
interest at the Adjusted Mortgage Rate on any Curtailment
received by such Subservicer in respect of a [Mortgage
Loan] [Contract] from the related Mortgagor during any
month that is to be applied by the Subservicer to reduce
the unpaid principal balance of the related [Mortgage
Loan] [Contract] as of the first day of such month, from
the date of application of such Curtailment to the first
day of the following month. Any amounts paid by a
Subservicer pursuant to the preceding sentence shall be
for the benefit of the [Master] Servicer as additional
servicing compensation and shall be subject to its
withdrawal or order from time to time pursuant to
Sections 3.10(a)(iv) and (v).
(c) In addition to the Custodial Account and
the Certificate Account, the [Master] Servicer shall for
any Nonsubserviced [Mortgage Loan] [Contract], and shall
cause the Subservicers for Subserviced [Mortgage Loans]
[Contracts] to, establish and maintain one or more
Servicing Accounts and deposit and retain therein all
collections from the Mortgagors (or advances from
Subservicers) for the payment of taxes, assessments,
hazard insurance premiums, Primary Insurance Policy
premiums, if applicable, or comparable items for the
account of the Mortgagors. Each Servicing Account shall
satisfy the requirements for a Subservicing Account and,
to the extent permitted by the Program Guide or as is
otherwise acceptable to the [Master] Servicer, may also
function as a Subservicing Account. Withdrawals of
amounts related to the [Mortgage Loans] [Contracts] from
the Servicing Accounts may be made only to effect timely
payment of taxes, assessments, hazard insurance premiums,
Primary Insurance Policy premiums, if applicable, or
comparable items, to reimburse the [Master] Servicer or
Subservicer out of related collections for any payments
made pursuant to Sections 3.11 (with respect to the
Primary Insurance Policy) and 3.12(a) (with respect to
hazard insurance), to refund to any Mortgagors any sums
as may be determined to be overages, to pay interest, if
required, to Mortgagors on balances in the Servicing
Account or to clear and terminate the Servicing Account
at the termination of this Agreement in accordance with
Section 9.01 or in accordance with the Program Guide. As
part of its servicing duties, the [Master] Servicer
shall, and the Subservicers will, pursuant to the
Subservicing Agreements, be required to pay to the
Mortgagors interest on funds in this account to the
extent required by law.
(d) The [Master] Servicer shall advance the
payments referred to in the preceding subsection that are
not timely paid by the Mortgagors or advanced by the
Subservicers on the date when the tax, premium or other
cost for which such payment is intended is due, but the
[Master] Servicer shall be required so to advance only to
the extent that such advances, in the good faith judgment
of the [Master] Servicer, will be recoverable by the
[Master] Servicer out of Insurance Proceeds, Liquidation
Proceeds or otherwise.
Section 3.09. Access to Certain Documentation and
Information Regarding the [Mortgage
Loans] [Contracts].
In the event that compliance with this Section
3.09 shall make any Class of Certificates legal for
investment by federally insured savings and loan
associations, the [Master] Servicer shall provide, or
cause the Subservicers to provide, to the Trustee, the
Office of Thrift Supervision or the FDIC and the
supervisory agents and examiners thereof access to the
documentation regarding the [Mortgage Loans] [Contracts]
required by applicable regulations of the Office of
Thrift Supervision, such access being afforded without
charge but only upon reasonable request and during normal
business hours at the offices designated by the [Master]
Servicer. The [Master] Servicer shall permit such
representatives to photocopy any such documentation and
shall provide equipment for that purpose at a charge
reasonably approximating the cost of such photocopying to
the [Master] Servicer.
Section 3.10. Permitted Withdrawals from the Custodial
Account.
(a) The [Master] Servicer may, from time to
time as provided herein, make withdrawals from the
Custodial Account of amounts on deposit therein pursuant
to Section 3.07 that are attributable to the [Mortgage
Loans] [Contracts] for the following purposes:
(i) to make deposits into the Certificate
Account in the amounts and in the manner provided
for in Section 4.01;
(ii) to reimburse itself or the related
Subservicer for previously unreimbursed advances or
expenses made pursuant to Sections 3.01, 3.08,
3.11, 3.12(a), 3.14 and 4.04 or otherwise
reimbursable pursuant to the terms of this
Agreement, such withdrawal right being limited to
amounts received on particular [Mortgage Loans]
[Contracts] (including, for this purpose, REO
Proceeds, Insurance Proceeds, Liquidation Proceeds
and proceeds from the purchase of a [Mortgage Loan]
[Contract] pursuant to Section 2.02, 2.03, 2.04 or
4.07) which represent (A) Late Collections of
Monthly Payments for which any such advance was
made in the case of Subservicer Advances or
Advances pursuant to Section 4.04 and (B) late
recoveries of the payments for which such advances
were made in the case of Servicing Advances;
(iii) to pay to itself or the related
Subservicer (if not previously retained by such
Subservicer) out of each payment received by the
[Master] Servicer on account of interest on a
[Mortgage Loan] [Contract] as contemplated by
Sections 3.14 and 3.16, an amount equal to that
remaining portion of any such payment as to
interest (but not in excess of the Servicing Fee
and the Subservicing Fee, if not previously
retained) which, when deducted, will result in the
remaining amount of such interest being interest at
the Net Mortgage Rate on the amount specified in
the amortization schedule of the related [Mortgage
Loan] [Contract] as the principal balance thereof
at the beginning of the period respecting which
such interest was paid after giving effect to any
previous Curtailments;
(iv) to pay to itself as additional servicing
compensation any interest or investment income
earned on funds deposited in the Custodial Account
that it is entitled to withdraw pursuant to Section
3.07(c);
(v) to pay to itself as additional servicing
compensation any Foreclosure Profits, and any
amounts remitted by Subservicers as interest in
respect of Curtailments pursuant to Section
3.08(b);
(vi) to pay to itself, a Subservicer, a
Seller, Residential Funding, the Company or any
other appropriate Person, as the case may be, with
respect to each [Mortgage Loan] [Contract] or
property acquired in respect thereof that has been
purchased or otherwise transferred pursuant to
Section 2.02, 2.03, 2.04, 4.07 or 9.01, all amounts
received thereon and not required to be distributed
to Certificateholders as of the date on which the
related Stated Principal Balance or Purchase Price
is determined;
(vii) to reimburse itself or the related
Subservicer for any Nonrecoverable Advance or
Advances in the manner and to the extent provided
in subsection (c) below or any Advance reimbursable
to the [Master] Servicer pursuant to Section
4.02(a)(iii);
(viii) to reimburse itself or the Company
for expenses incurred by and reimbursable to it or
the Company pursuant to Section 3.13, 3.14(c),
6.03, 10.01 or otherwise;
(ix) to reimburse itself for amounts expended
by it (a) pursuant to Section 3.14 in good faith in
connection with the restoration of property damaged
by an Uninsured Cause, and (b) in connection with
the liquidation of a [Mortgage Loan] [Contract] or
disposition of an REO Property to the extent not
otherwise reimbursed pursuant to clause (ii) or
(viii) above; and
(x) to withdraw any amount deposited in the
Custodial Account that was not required to be
deposited therein pursuant to Section 3.07.
(b) Since, in connection with withdrawals
pursuant to clauses (ii), (iii), (v) and (vi), the
[Master] Servicer's entitlement thereto is limited to
collections or other recoveries on the related [Mortgage
Loan] [Contract], the [Master] Servicer shall keep and
maintain separate accounting, on a [Mortgage Loan]
[Contract] by [Mortgage Loan] [Contract] basis, for the
purpose of justifying any withdrawal from the Custodial
Account pursuant to such clauses.
(c) Notwithstanding any other provision of
this Agreement, the [Master] Servicer shall be entitled
to reimburse itself or the related Subservicer for (i)
any advance made in respect of a [Mortgage Loan]
[Contract] that the [Master] Servicer determines to be a
Nonrecoverable Advance and (ii) any previously
unreimbursed advances or expenses made pursuant to
Sections 3.01, 3.08, 3.11, 3.12 or 3.14 or otherwise
reimbursable pursuant to the terms of this Agreement that
the [Master] Servicer determines to be otherwise
nonrecoverable, by withdrawal from the Custodial Account
of amounts on deposit therein attributable to the
[Mortgage Loans] [Contracts] on any Certificate Account
Deposit Date succeeding the date of such determination.
Such right of reimbursement in respect of a
Nonrecoverable Advance on any such Certificate Account
Deposit Date shall be limited to an amount not exceeding
the portion of such advance previously paid to
Certificateholders (and not theretofore reimbursed to the
[Master] Servicer or the related Subservicer).
Section 3.11. Maintenance of the Primary Insurance
Policies; Collections Thereunder.
(a) The [Master] Servicer shall not take, or
permit any Subservicer to take, any action which would
result in non-coverage under any applicable Primary
Insurance Policy of any loss which, but for the actions
of the [Master] Servicer or Subservicer, would have been
covered thereunder. To the extent coverage is available,
the [Master] Servicer shall keep or cause to be kept in
full force and effect each such Primary Insurance Policy
until the principal balance of the related [Mortgage
Loan] [Contract] secured by a Mortgaged Property is
reduced to 80% or less of the Appraised Value in the case
of such a [Mortgage Loan] [Contract] having a
Loan-to-Value Ratio at origination in excess of 80%,
provided that such Primary Insurance Policy was in place
as of the Cut-off Date and the Company had knowledge of
such Primary Insurance Policy. In the event that the
Company gains knowledge that as of the Closing Date, a
[Mortgage Loan] [Contract] had a Loan-to-Value Ratio at
origination in excess of 80% and is not the subject of a
Primary Insurance Policy (and was not included in any
exception to the representation in Section 2.03(b)(iv))
and that such [Mortgage Loan] [Contract] has a current
Loan-to-Value Ratio in excess of 80% then the [Master]
Servicer shall use its reasonable efforts to obtain and
maintain a Primary Insurance Policy to the extent that
such a policy is obtainable at a reasonable price. The
[Master] Servicer shall not cancel or refuse to renew any
such Primary Insurance Policy applicable to a
Nonsubserviced [Mortgage Loan] [Contract], or consent to
any Subservicer canceling or refusing to renew any such
Primary Insurance Policy applicable to a [Mortgage Loan]
[Contract] subserviced by it, that is in effect at the
date of the initial issuance of the Certificates and is
required to be kept in force hereunder unless the
replacement Primary Insurance Policy for such canceled or
non-renewed policy is maintained with an insurer whose
claims-paying ability is acceptable to each Rating Agency
for mortgage pass-through certificates having a rating
equal to or better than the lower of the then-current
rating or the rating assigned to the Certificates as of
the Closing Date by such Rating Agency.
(b) In connection with its activities as
administrator and servicer of the [Mortgage Loans]
[Contracts], the [Master] Servicer agrees to present or
to cause the related Subservicer to present, on behalf of
the [Master] Servicer, the Subservicer, if any, the
Trustee and Certificateholders, claims to the Insurer
under any Primary Insurance Policies, in a timely manner
in accordance with such policies, and, in this regard, to
take or cause to be taken such reasonable action as shall
be necessary to permit recovery under any Primary
Insurance Policies respecting defaulted [Mortgage Loans]
[Contracts]. Pursuant to Section 3.07, any Insurance
Proceeds collected by or remitted to the [Master]
Servicer under any Primary Insurance Policies shall be
deposited in the Custodial Account, subject to withdrawal
pursuant to Section 3.10.
Section 3.12. Maintenance of Fire Insurance and
Omissions and Fidelity Coverage.
(a) The [Master] Servicer shall cause to be
maintained for each [Mortgage Loan] [Contract] fire
insurance with extended coverage in an amount which is
equal to the lesser of the principal balance owing on
such [Mortgage Loan] [Contract] or 100 percent of the
insurable value of the improvements; provided, however,
that such coverage may not be less than the minimum
amount required to fully compensate for any loss or
damage on a replacement cost basis. To the extent it may
do so without breaching the related Subservicing
Agreement, the [Master] Servicer shall replace any
Subservicer that does not cause such insurance, to the
extent it is available, to be maintained. The [Master]
Servicer shall also cause to be maintained on property
acquired upon foreclosure, or deed in lieu of
foreclosure, of any [Mortgage Loan] [Contract], fire
insurance with extended coverage in an amount which is at
least equal to the amount necessary to avoid the
application of any co-insurance clause contained in the
related hazard insurance policy. Pursuant to Section
3.07, any amounts collected by the [Master] Servicer
under any such policies (other than amounts to be applied
to the restoration or repair of the related Mortgaged
Property or property thus acquired or amounts released to
the Mortgagor in accordance with the [Master] Servicer's
normal servicing procedures) shall be deposited in the
Custodial Account, subject to withdrawal pursuant to
Section 3.10. Any cost incurred by the [Master] Servicer
in maintaining any such insurance shall not, for the
purpose of calculating monthly distributions to
Certificateholders, be added to the amount owing under
the [Mortgage Loan] [Contract], notwithstanding that the
terms of the [Mortgage Loan] [Contract] so permit. Such
costs shall be recoverable by the [Master] Servicer as
provided in Section 3.10. It is understood and agreed
that no earthquake or other additional insurance is to be
required of any Mortgagor or maintained on property
acquired in respect of a [Mortgage Loan] [Contract] other
than pursuant to such applicable laws and regulations as
shall at any time be in force and as shall require such
additional insurance. When the improvements securing a
[Mortgage Loan] [Contract] are located at the time of
origination of such [Mortgage Loan] [Contract] in a
federally designated special flood hazard area, the
[Master] Servicer shall cause flood insurance (to the
extent available) to be maintained in respect thereof.
Such flood insurance shall be in an amount equal to the
lesser of (i) the amount required to compensate for any
loss or damage to the Mortgaged Property on a replacement
cost basis and (ii) the maximum amount of such insurance
available for the related Mortgaged Property under the
national flood insurance program (assuming that the area
in which such Mortgaged Property is located is
participating in such program).
In the event that the [Master] Servicer shall
obtain and maintain a blanket fire insurance policy with
extended coverage insuring against hazard losses on all
of the [Mortgage Loans] [Contracts], it shall
conclusively be deemed to have satisfied its obligations
as set forth in the first sentence of this Section
3.12(a), it being understood and agreed that such policy
may contain a deductible clause, in which case the
[Master] Servicer shall, in the event that there shall
not have been maintained on the related Mortgaged
Property a policy complying with the first sentence of
this Section 3.12(a) and there shall have been a loss
which would have been covered by such policy, deposit in
the Certificate Account the amount not otherwise payable
under the blanket policy because of such deductible
clause. Any such deposit by the [Master] Servicer shall
be made on the Certificate Account Deposit Date next
preceding the Distribution Date which occurs in the month
following the month in which payments under any such
policy would have been deposited in the Custodial
Account. In connection with its activities as
administrator and servicer of the [Mortgage Loans]
[Contracts], the [Master] Servicer agrees to present, on
behalf of itself, the Trustee and Certificateholders,
claims under any such blanket policy.
(b) The [Master] Servicer shall obtain and
maintain at its own expense and keep in full force and
effect throughout the term of this Agreement a blanket
fidelity bond and an errors and omissions insurance
policy covering the [Master] Servicer's officers and
employees and other persons acting on behalf of the
[Master] Servicer in connection with its activities under
this Agreement. The amount of coverage shall be at least
equal to the coverage that would be required by FNMA or
FHLMC, whichever is greater, with respect to the [Master]
Servicer if the [Master] Servicer were servicing and
administering the [Mortgage Loans] [Contracts] for FNMA
or FHLMC. In the event that any such bond or policy
ceases to be in effect, the [Master] Servicer shall
obtain a comparable replacement bond or policy from an
issuer or insurer, as the case may be, meeting the
requirements, if any, of the Program Guide and acceptable
to the Company. Coverage of the [Master] Servicer under
a policy or bond obtained by an Affiliate of the [Master]
Servicer and providing the coverage required by this
Section 3.12(b) shall satisfy the requirements of this
Section 3.12(b).
Section 3.13. Enforcement of Due-on-Sale Clauses;
Assumption and Modification Agreements;
Certain Assignments.
(a) When any Mortgaged Property is conveyed by
the Mortgagor, the [Master] Servicer or Subservicer, to
the extent it has knowledge of such conveyance, shall
enforce any due-on-sale clause contained in any [Mortgage
Note or Mortgage] [Contract] to the extent permitted
under applicable law and governmental regulations, but
only to the extent that such enforcement will not
adversely affect or jeopardize coverage under any
Required Insurance Policy. Notwithstanding the
foregoing:
(i) the [Master] Servicer shall not be deemed
to be in default under this Section 3.13(a) by
reason of any transfer or assumption which the
[Master] Servicer is restricted by law from
preventing; and
(ii) if the [Master] Servicer determines that
it is reasonably likely that any Mortgagor will
bring, or if any Mortgagor does bring, legal action
to declare invalid or otherwise avoid enforcement
of a due-on-sale clause contained in any [Mortgage
Note or Mortgage] [Contract], the [Master] Servicer
shall not be required to enforce the due-on-sale
clause or to contest such action.
(b) Subject to the [Master] Servicer's duty to
enforce any due-on-sale clause to the extent set forth in
Section 3.13(a), in any case in which a Mortgaged
Property is to be conveyed to a Person by a Mortgagor,
and such Person is to enter into an assumption or
modification agreement or supplement to the [Mortgage
Note or Mortgage] [Contract] which requires the signature
of the Trustee, or if an instrument of release signed by
the Trustee is required releasing the Mortgagor from
liability on the [Mortgage Loan] [Contract], the [Master]
Servicer is authorized, subject to the requirements of
the sentence next following, to execute and deliver, on
behalf of the Trustee, the assumption agreement with the
Person to whom the Mortgaged Property is to be conveyed
and such modification agreement or supplement to the
[Mortgage Note or Mortgage] [Contract] or other
instruments as are reasonable or necessary to carry out
the terms of the [Mortgage Note or Mortgage] [Contract]
or otherwise to comply with any applicable laws regarding
assumptions or the transfer of the Mortgaged Property to
such Person; provided, however, none of such terms and
requirements shall constitute a "significant
modification" effecting an exchange or reissuance of such
[Mortgage Loan] [Contract] under the Code (or final,
temporary or proposed Treasury Regulations promulgated
thereunder) and causing the REMIC to fail to qualify as
such under the Code. The [Master] Servicer shall execute
and deliver such documents only if it reasonably
determines that (i) its execution and delivery thereof
will not conflict with or violate any terms of this
Agreement or cause the unpaid balance and interest on the
[Mortgage Loan] [Contract] to be uncollectible in whole
or in part, (ii) any required consents of insurers under
any Required Insurance Policies have been obtained and
(iii) subsequent to the closing of the transaction
involving the assumption or transfer (A) the [Mortgage
Loan] [Contract] will continue to be secured by a first
mortgage lien pursuant to the terms of the [Mortgage]
[Contract], (B) such transaction will not adversely
affect the coverage under any Required Insurance
Policies, (C) the [Mortgage Loan] [Contract] will fully
amortize over the remaining term thereof, (D) no material
term of the [Mortgage Loan] [Contract] (including the
interest rate on the [Mortgage Loan] [Contract]) will be
altered nor will the term of the [Mortgage Loan]
[Contract] be changed and (E) if the seller/transferor of
the Mortgaged Property is to be released from liability
on the [Mortgage Loan] [Contract], such release will not
(based on the [Master] Servicer's or Subservicer's good
faith determination) adversely affect the collectability
of the [Mortgage Loan] [Contract]. Upon receipt of
appropriate instructions from the [Master] Servicer in
accordance with the foregoing, the Trustee shall execute
any necessary instruments for such assumption or
substitution of liability as directed by the [Master]
Servicer. Upon the closing of the transactions
contemplated by such documents, the [Master] Servicer
shall cause the originals or true and correct copies of
the assumption agreement, the release (if any), or the
modification or supplement to the [Mortgage Note or
Mortgage] [Contract] to be delivered to the Trustee or
the Custodian and deposited with the [Mortgage]
[Contract] File for such [Mortgage Loan] [Contract]. Any
fee collected by the [Master] Servicer or such related
Subservicer for entering into an assumption or
substitution of liability agreement will be retained by
the [Master] Servicer or such Subservicer as additional
servicing compensation.
(c) The [Master] Servicer or the related
Subservicer, as the case may be, shall be entitled to
approve a request from a Mortgagor for a partial release
of the related Mortgaged Property, the granting of an
easement thereon in favor of another Person, any
alteration or demolition of the related Mortgaged
Property or other similar matters if it has determined,
exercising its good faith business judgment in the same
manner as it would if it were the owner of the related
[Mortgage Loan] [Contract], that the security for, and
the timely and full collectability of, such [Mortgage
Loan] [Contract] would not be adversely affected thereby
and that the REMIC would not fail to continue to qualify
as a REMIC under the Code as a result thereof. Any fee
collected by the [Master] Servicer or the related
Subservicer for processing such a request will be
retained by the [Master] Servicer or such Subservicer as
additional servicing compensation.
(d) Subject to any other applicable terms and
conditions of this Agreement, the Trustee and [Master]
Servicer shall be entitled to approve an assignment in
lieu of satisfaction with respect to any [Mortgage Loan]
[Contract], provided the obligee with respect to such
[Mortgage Loan] [Contract] following such proposed
assignment provides the Trustee and [Master] Servicer
with a "Lender Certification for Assignment of [Mortgage
Loan] [Contract]" in the form attached hereto as Exhibit
O, in form and substance satisfactory to the Trustee and
[Master] Servicer, providing the following: (i) that the
[Mortgage Loan] [Contract] is secured by Mortgaged
Property located in a jurisdiction in which an assignment
in lieu of satisfaction is required to preserve lien
priority, minimize or avoid mortgage recording taxes or
otherwise comply with, or facilitate a refinancing under,
the laws of such jurisdiction; (ii) that the substance of
the assignment is, and is intended to be, a refinancing
of such [Mortgage Loan] [Contract] and that the form of
the transaction is solely to comply with, or facilitate
the transaction under, such local laws; (iii) that the
[Mortgage Loan] [Contract] following the proposed
assignment will have a rate of interest at least 0.25
percent below or above the rate of interest on such
[Mortgage Loan] [Contract] prior to such proposed
assignment; and (iv) that such assignment is at the
request of the borrower under the related [Mortgage Loan]
[Contract]. Upon approval of an assignment in lieu of
satisfaction with respect to any [Mortgage Loan]
[Contract], the [Master] Servicer shall receive cash in
an amount equal to the unpaid principal balance of and
accrued interest on such [Mortgage Loan] [Contract] and
the [Master] Servicer shall treat such amount as a
Principal Prepayment in Full with respect to such
[Mortgage Loan] [Contract] for all purposes hereof.
Section 3.14. Realization Upon Defaulted [Mortgage
Loans] [Contracts].
(a) The [Master] Servicer shall foreclose upon
or otherwise comparably convert (which may include an REO
Acquisition) the ownership of properties securing such of
the [Mortgage Loans] [Contracts] as come into and
continue in default and as to which no satisfactory
arrangements can be made for collection of delinquent
payments pursuant to Section 3.07. In connection with
such foreclosure or other conversion, the [Master]
Servicer shall, consistent with Section 3.11, follow such
practices and procedures as it shall deem necessary or
advisable, as shall be normal and usual in its general
mortgage servicing activities and as shall be required or
permitted by the Program Guide; provided that the
[Master] Servicer shall not be liable in any respect
hereunder if the [Master] Servicer is acting in
connection with any such foreclosure or other conversion
in a manner that is consistent with the provisions of
this Agreement. The [Master] Servicer, however, shall
not be required to expend its own funds in connection
with any foreclosure, or attempted foreclosure which is
not completed, or towards the restoration of any property
unless it shall determine (i) that such restoration
and/or foreclosure will increase the proceeds of
liquidation of the [Mortgage Loan] [Contract] to Holders
of Certificates of one or more Classes after
reimbursement to itself for such expenses and (ii) that
such expenses will be recoverable to it through
Liquidation Proceeds, Insurance Proceeds, or REO Proceeds
(respecting which it shall have priority for purposes of
withdrawals from the Custodial Account pursuant to
Section 3.10, whether or not such expenses are actually
recoverable from related Liquidation Proceeds, Insurance
Proceeds or REO Proceeds). In the event of a
determination by the [Master] Servicer pursuant to this
Section 3.14(a), the [Master] Servicer shall be entitled
to reimbursement of its funds so expended pursuant to
Section 3.10. Concurrently with the foregoing, the
[Master] Servicer may pursue any remedies that may be
available in connection with a breach of a representation
and warranty with respect to any such [Mortgage Loan]
[Contract] in accordance with Sections 2.03 and 2.04.
However, the [Master] Servicer is not required to
continue to pursue both foreclosure (or similar remedies)
with respect to the [Mortgage Loans] [Contracts] and
remedies in connection with a breach of a representation
and warranty if the [Master] Servicer determines in its
reasonable discretion that one such remedy is more likely
to result in a greater recovery as to the [Mortgage Loan]
[Contract]. Upon the occurrence of a Cash Liquidation or
REO Disposition, following the deposit in the Custodial
Account of all Insurance Proceeds, Liquidation Proceeds
and other payments and recoveries referred to in the
definition of "Cash Liquidation" or "REO Disposition," as
applicable, upon receipt by the Trustee of written
notification of such deposit signed by a Servicing
Officer, the Trustee or any Custodian, as the case may
be, shall release to the [Master] Servicer the related
[Mortgage] [Contract] File and the Trustee shall execute
and deliver such instruments of transfer or assignment
prepared by the [Master] Servicer, in each case without
recourse, as shall be necessary to vest in the [Master]
Servicer or its designee, as the case may be, the related
[Mortgage Loan] [Contract], and thereafter such [Mortgage
Loan] [Contract] shall not be part of the Trust Fund.
Notwithstanding the foregoing or any other provision of
this Agreement, in the [Master] Servicer's sole
discretion with respect to any defaulted [Mortgage Loan]
[Contract] or REO Property as to either of the following
provisions, (i) a Cash Liquidation or REO Disposition may
be deemed to have occurred if substantially all amounts
expected by the [Master] Servicer to be received in
connection with the related defaulted [Mortgage Loan]
[Contract] or REO Property have been received, and (ii)
for purposes of determining the amount of any Liquidation
Proceeds, Insurance Proceeds, REO Proceeds or any other
unscheduled collections or the amount of any Realized
Loss, the [Master] Servicer may take into account minimal
amounts of additional receipts expected to be received or
any estimated additional liquidation expenses expected to
be incurred in connection with the related defaulted
[Mortgage Loan] [Contract] or REO Property.
(b) In the event that title to any Mortgaged
Property is acquired by the Trust Fund as an REO Property
by 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 behalf of
Certificateholders. Notwithstanding any such acquisition
of title and cancellation of the related [Mortgage Loan]
[Contract], such REO Property shall (except as otherwise
expressly provided herein) be considered to be an
Outstanding [Mortgage Loan] [Contract] held in the Trust
Fund until such time as the REO Property shall be sold.
Consistent with the foregoing for purposes of all
calculations hereunder so long as such REO Property shall
be considered to be an Outstanding [Mortgage Loan]
[Contract] it shall be assumed that, notwithstanding that
the indebtedness evidenced by the related Mortgage Note
shall have been discharged, such Mortgage Note and the
related amortization schedule in effect at the time of
any such acquisition of title (after giving effect to any
previous Curtailments and before any adjustment thereto
by reason of any bankruptcy or similar proceeding or any
moratorium or similar waiver or grace period) remain in
effect.
(c) In the event that the Trust Fund acquires
any REO Property as aforesaid or otherwise in connection
with a default or imminent default on a [Mortgage Loan]
[Contract], the [Master] Servicer shall dispose of such
REO Property either (i) within two years after its
acquisition by the Trust Fund, as determined for the
purposes of Section 860G(a)(8) of the Code or (ii) prior
to the expiration of any extension of such two-year grace
period which is requested on behalf of the Trust Fund by
the [Master] Servicer (at the expense of the Trust Fund)
more than 60 days prior to the end of such two-year grace
period and granted by the Internal Revenue Service unless
the [Master] Servicer has delivered to the Trustee an
Opinion of Counsel, addressed to the Trustee and the
[Master] Servicer, to the effect that the holding by the
Trust Fund of such REO Property subsequent to such
two-year period will not result in the imposition of
taxes on "prohibited transactions" as defined in Section
860F of the Code or cause the Trust Fund to fail to
qualify as a REMIC at any time that any Certificates or
Uncertificated REMIC Regular Interests are outstanding,
in which case the Trust Fund may continue to hold such
REO Property (subject to any conditions contained in such
Opinion of Counsel). The [Master] Servicer shall be
entitled to be reimbursed from the Custodial Account for
any costs incurred in obtaining such Opinion of Counsel,
as provided in Section 3.10. Notwithstanding any other
provision of this Agreement, no REO Property acquired by
the Trust Fund shall be rented (or allowed to continue to
be rented) or otherwise used by or on behalf of the Trust
Fund in such a manner or pursuant to any terms that would
(i) cause such REO Property to fail to qualify as
"foreclosure property" within the meaning of Section
860G(a)(8) of the Code or (ii) subject the Trust Fund to
the imposition of any federal income taxes on the income
earned from such REO Property, including any taxes
imposed by reason of Section 860G(c) of the Code, unless
the [Master] Servicer has agreed to indemnify and hold
harmless the Trust Fund with respect to the imposition of
any such taxes.
(d) The proceeds of any Cash Liquidation, REO
Disposition or purchase or repurchase of any [Mortgage
Loan] [Contract] pursuant to the terms of this Agreement,
as well as any recovery resulting from a collection of
Liquidation Proceeds, Insurance Proceeds or REO Proceeds,
will be applied in the following order of priority:
first, to reimburse the [Master] Servicer or the related
Subservicer in accordance with Section 3.10(a)(ii);
second, to the Certificateholders to the extent of
accrued and unpaid interest on the [Mortgage Loan]
[Contract], and any related REO Imputed Interest, at the
Net Mortgage Rate to the Due Date prior to the
Distribution Date on which such amounts are to be
distributed; third, to the Certificateholders as a
recovery of principal on the [Mortgage Loan] [Contract]
(or REO Property); fourth, to all Servicing Fees and
Subservicing Fees payable therefrom (and the [Master]
Servicer and the Subservicer shall have no claims for any
deficiencies with respect to such fees which result from
the foregoing allocation); and fifth, to Foreclosure
Profits.
Section 3.15. Trustee to Cooperate; Release of
[Mortgage] [Contract] Files.
(a) Upon becoming aware of the payment in full
of any [Mortgage Loan] [Contract], or upon the receipt by
the [Master] Servicer of a notification that payment in
full will be escrowed in a manner customary for such
purposes, the [Master] Servicer will immediately notify
the Trustee (if it holds the related [Mortgage]
[Contract] File) or the Custodian by a certification of
a Servicing Officer (which certification shall include a
statement to the effect that all amounts received or to
be received in connection with such payment which are
required to be deposited in the Custodial Account
pursuant to Section 3.07 have been or will be so
deposited), substantially in one of the forms attached
hereto as Exhibit H requesting delivery to it of the
[Mortgage] [Contract] File. Upon receipt of such
certification and request, the Trustee shall promptly
release, or cause the Custodian to release, the related
[Mortgage] [Contract] File to the [Master] Servicer. The
[Master] Servicer is authorized to execute and deliver to
the Mortgagor the request for reconveyance, deed of
reconveyance or release or satisfaction of mortgage or
such instrument releasing the lien of the [Mortgage]
[Contract], together with the [Mortgage Note] [Contract]
with, as appropriate, written evidence of cancellation
thereon. No expenses incurred in connection with any
instrument of satisfaction or deed of reconveyance shall
be chargeable to the Custodial Account or the Certificate
Account.
(b) From time to time as is appropriate for
the servicing or foreclosure of any [Mortgage Loan]
[Contract], the [Master] Servicer shall deliver to the
Custodian, with a copy to the Trustee, a certificate of
a Servicing Officer substantially in one of the forms
attached as Exhibit H hereto, requesting that possession
of all, or any document constituting part of, the
[Mortgage] [Contract] File be released to the [Master]
Servicer and certifying as to the reason for such release
and that such release will not invalidate any insurance
coverage provided in respect of the [Mortgage Loan]
[Contract] under any Required Insurance Policy. Upon
receipt of the foregoing, the Trustee shall deliver, or
cause the Custodian to deliver, the [Mortgage] [Contract]
File or any document therein to the [Master] Servicer.
The [Master] Servicer shall cause each [Mortgage]
[Contract] File or any document therein so released to be
returned to the Trustee, or the Custodian as agent for
the Trustee when the need therefor by the [Master]
Servicer no longer exists, unless (i) the [Mortgage Loan]
[Contract] has been liquidated and the Liquidation
Proceeds relating to the [Mortgage Loan] [Contract] have
been deposited in the Custodial Account or (ii) the
[Mortgage] [Contract] File or such document has been
delivered directly or through a Subservicer to an
attorney, or to a public trustee or other public official
as required by law, for purposes of initiating or
pursuing legal action or other proceedings for the
foreclosure of the Mortgaged Property either judicially
or non-judicially, and the [Master] Servicer has
delivered directly or through a Subservicer to the
Trustee a certificate of a Servicing Officer certifying
as to the name and address of the Person to which such
[Mortgage] [Contract] File or such document was delivered
and the purpose or purposes of such delivery. In the
event of the liquidation of a [Mortgage Loan] [Contract],
the Trustee shall deliver the Request for Release with
respect thereto to the [Master] Servicer upon deposit of
the related Liquidation Proceeds in the Custodial
Account.
(c) The Trustee or the [Master] Servicer on
the Trustee's behalf shall execute and deliver to the
[Master] Servicer, if necessary, any court pleadings,
requests for trustee's sale or other documents necessary
to the foreclosure or trustee's sale in respect of a
Mortgaged Property or to any legal action brought to
obtain judgment against any Mortgagor on the [Mortgage
Note or Mortgage] [Contract] or to obtain a deficiency
judgment, or to enforce any other remedies or rights
provided by the [Mortgage Note or Mortgage] [Contract] or
otherwise available at law or in equity. Together with
such documents or pleadings (if signed by the Trustee),
the [Master] Servicer shall deliver to the Trustee a
certificate of a Servicing Officer requesting that such
pleadings or documents be executed by the Trustee and
certifying as to the reason such documents or pleadings
are required and that the execution and delivery thereof
by the Trustee will not invalidate any insurance coverage
under any Required Insurance Policy or invalidate or
otherwise affect the lien of the [Mortgage] [Contract],
except for the termination of such a lien upon completion
of the foreclosure or trustee's sale.
Section 3.16. Servicing and Other Compensation[;
Compensating Interest].
(a) The [Master] Servicer, as compensation for
its activities hereunder, shall be entitled to receive on
each Distribution Date the amounts provided for by
clauses (iii), (iv) and (v) of Section 3.10(a), subject
to clause (e) below. The amount of servicing
compensation provided for in such clauses shall be
accounted for on a [Mortgage Loan]
[Contract]-by-[Mortgage Loan] [Contract] basis. In the
event that Liquidation Proceeds, Insurance Proceeds and
REO Proceeds (net of amounts reimbursable therefrom
pursuant to Section 3.10(a)(ii)) in respect of a Cash
Liquidation or REO Disposition exceed the unpaid
principal balance of such [Mortgage Loan] [Contract] plus
unpaid interest accrued thereon (including REO Imputed
Interest) at the related Net Mortgage Rate, the [Master]
Servicer shall be entitled to retain therefrom and to pay
to itself and/or the related Subservicer any Servicing
Fee or Subservicing Fee considered to be accrued but
unpaid.
(b) Additional servicing compensation in the
form of prepayment charges, assumption fees, late payment
charges, investment income on amounts in the Custodial
Account or the Certificate Account or otherwise shall be
retained by the [Master] Servicer or the Subservicer to
the extent provided herein, [subject to clause (e)
below].
(c) The [Master] Servicer shall be required to
pay, or cause to be paid, all expenses incurred by it in
connection with its servicing activities hereunder
(including payment of premiums for the Primary Insurance
Policies, if any, to the extent such premiums are not
required to be paid by the related Mortgagors, and the
fees and expenses of the Trustee and any Custodian) and
shall not be entitled to reimbursement therefor except as
specifically provided in Sections 3.10 and 3.14.
(d) The [Master] Servicer's right to receive
servicing compensation may not be transferred in whole or
in part except in connection with the transfer of all of
its responsibilities and obligations of the [Master]
Servicer under this Agreement.
(e) [Notwithstanding clauses (a) and (b)
above, the amount of servicing compensation that the
[Master] Servicer shall be entitled to receive for its
activities hereunder for the one-month period ending on
each Distribution Date shall be reduced (not below zero)
by an amount equal to Compensating Interest (if any) for
such Distribution Date and the [Master] Servicer shall
not be entitled to servicing compensation to the extent
of such reduction. Such reduction shall be applied
during such period as follows: first, to any Servicing
Fee to which the [Master] Servicer is entitled pursuant
to Section 3.10(a)(iii); second, to any income or gain
realized from any investment of funds held in the
Custodial Account or the Certificate Account to which the
[Master] Servicer is entitled pursuant to Sections
3.07(c) or 4.01(b), respectively; and third, to any other
compensation to which the [Master] Servicer is entitled
for its activities hereunder (excluding any additional
amounts payable in respect of any Nonsubserviced
[Mortgage Loans] [Contracts]). To the extent that any
such reduction is required on any Distribution Date, the
[Master] Servicer will (i) first reduce the amount
withdrawn from the Custodial Account pursuant to Section
3.10(a)(iii); (ii) next reduce the amount withdrawn from
the Custodial Account or Certificate Account pursuant to
Section 3.07(c) or 4.01(b); and (iii) third deposit to
the Certificate Account any other amounts representing
compensation to which the [Master] Servicer would
otherwise be entitled for its activities hereunder, but
not in the aggregate more than the amount of Compensating
Interest due with respect to such Distribution Date.]
Section 3.17. Reports to the Trustee and the Company.
Not later than fifteen days after each
Distribution Date, the [Master] Servicer shall forward to
the Trustee and the Company a statement, certified by a
Servicing Officer, setting forth the status of the
Custodial Account as of the close of business on such
Distribution Date as it relates to the [Mortgage Loans]
[Contracts] and showing, for the period covered by such
statement, the aggregate of deposits in or withdrawals
from the Custodial Account in respect of the [Mortgage
Loans] [Contracts] for each category of deposit specified
in Section 3.07 and each category of withdrawal specified
in Section 3.10.
Section 3.18. Annual Statement as to Compliance.
The [Master] Servicer will deliver to the
Company and the Trustee on or before March 31 of each
year, beginning with the first March 31 that occurs at
least six months after the Cut-off Date, an Officers'
Certificate stating, as to each signer thereof, that (i)
a review of the activities of the [Master] Servicer
during the preceding calendar year and of its performance
under the pooling and servicing agreements, including
this Agreement, has been made under such officers'
supervision, (ii) to the best of such officers'
knowledge, based on such review, the [Master] Servicer
has fulfilled all of its material obligations in all
material respects throughout such year, or, if there has
been a default in the fulfillment in all material
respects of any such obligation relating to this
Agreement, specifying each such default known to such
officer and the nature and status thereof and (iii) to
the best of such officers' knowledge, each Subservicer
has fulfilled its material obligations under its
Subservicing Agreement in all material respects, or if
there has been a material default in the fulfillment of
such obligations relating to this Agreement, specifying
such default known to such officer and the nature and
status thereof.
Section 3.19. Annual Independent Public Accountants'
Servicing Report.
On or before March 31 of each year, beginning
with the first March 31 that occurs at least six months
after the Cut-off Date, the [Master] Servicer at its
expense shall cause a firm of Independent public
accountants which is a member of the American Institute
of Certified Public Accountants to furnish a statement to
the Company and the Trustee to the effect that such firm
has examined certain documents and records relating to
the servicing of the [mortgage loans] [manufactured
housing contracts] under pooling and servicing agreements
(including this Agreement) substantially similar one to
another (such statement to have attached thereto a
schedule setting forth the pooling and servicing
agreements covered thereby, including this Agreement) and
that, on the basis of such examination conducted
substantially in compliance with the Uniform Single Audit
Program for Mortgage Bankers or the Audit Program for
Mortgages serviced for FHLMC, such servicing has been
conducted in compliance with such pooling and servicing
agreements except for such significant exceptions or
errors in records that, in the opinion of such firm, the
Uniform Single Audit Program for Mortgage Bankers or the
Audit Program for Mortgages serviced for FHLMC requires
it to report. In rendering such statement, such firm may
rely, as to matters relating to direct servicing of
[mortgage loans] [manufactured housing contracts] by
Subservicers, upon comparable statements for examinations
conducted substantially in compliance with the Uniform
Single Audit Program for Mortgage Bankers or the Audit
Program for Mortgages serviced for FHLMC (rendered within
one year of such statement) of Independent public
accountants with respect to the related Subservicer. For
purposes of such statement, such firm may conclusively
assume that all pooling and servicing agreements among
the Company, the [Master] Servicer and the Trustee
relating to Mortgage Pass-Through Certificates evidencing
an interest in [first mortgage loans] [manufactured
housing contracts] are substantially similar one to
another except for any such pooling and servicing
agreement which, by its terms, specifically states
otherwise.
Section 3.20. Rights of the Company in Respect of the
[Master] Servicer.
The [Master] Servicer shall afford the Company,
upon reasonable notice, during normal business hours
access to all records maintained by the [Master] Servicer
in respect of its rights and obligations hereunder and
access to officers of the [Master] Servicer responsible
for such obligations. Upon request, the [Master]
Servicer shall furnish the Company with its most recent
financial statements and such other information as the
[Master] Servicer possesses regarding its business,
affairs, property and condition, financial or otherwise.
The [Master] Servicer shall also cooperate with all
reasonable requests for information including, but not
limited to, notices, tapes and copies of files, regarding
itself, the [Mortgage Loans] [Contracts] or the
Certificates from any Person or Persons identified by the
Company or Residential Funding. The Company may, but is
not obligated to, enforce the obligations of the [Master]
Servicer hereunder and may, but is not obligated to,
perform, or cause a designee to perform, any defaulted
obligation of the [Master] Servicer hereunder or exercise
the rights of the [Master] Servicer hereunder; provided
that the [Master] Servicer shall not be relieved of any
of its obligations hereunder by virtue of such
performance by the Company or its designee. The Company
shall not have any responsibility or liability for any
action or failure to act by the [Master] Servicer and is
not obligated to supervise the performance of the
[Master] Servicer under this Agreement or otherwise.
[Section 3.21. Administration of Buydown Funds.
(a) With respect to any Buydown Mortgage Loan,
the Subservicer has deposited Buydown Funds in an account
that satisfies the requirements for a Subservicing
Account (the "Buydown Account"). The [Master] Servicer
shall cause the Subservicing Agreement to require that
upon receipt from the Mortgagor of the amount due on a
Due Date for each Buydown Mortgage Loan, the Subservicer
will withdraw from the Buydown Account the predetermined
amount that, when added to the amount due on such date
from the Mortgagor, equals the full Monthly Payment and
transmit that amount in accordance with the terms of the
Subservicing Agreement to the [Master] Servicer together
with the related payment made by the Mortgagor or
advanced by the Subservicer.
(b) If the Mortgagor on a Buydown Mortgage
Loan prepays such loan in its entirety during the period
(the "Buydown Period") when Buydown Funds are required to
be applied to such Buydown Mortgage Loan, the Subservicer
shall be required to withdraw from the Buydown Account
and remit any Buydown Funds remaining in the Buydown
Account in accordance with the related buydown agreement.
The amount of Buydown Funds which may be remitted in
accordance with the related buydown agreement may reduce
the amount required to be paid by the Mortgagor to fully
prepay the related Mortgage Loan. If the Mortgagor on a
Buydown Mortgage Loan defaults on such Mortgage Loan
during the Buydown Period and the property securing such
Buydown Mortgage Loan is sold in the liquidation thereof
(either by the [Master] Servicer or the insurer under any
related Primary Insurance Policy), the Subservicer shall
be required to withdraw from the Buydown Account the
Buydown Funds for such Buydown Mortgage Loan still held
in the Buydown Account and remit the same to the [Master]
Servicer in accordance with the terms of the Subservicing
Agreement for deposit in the Custodial Account or, if
instructed by the [Master] Servicer, pay to the insurer
under any related Primary Insurance Policy if the
Mortgaged Property is transferred to such insurer and
such insurer pays all of the loss incurred in respect of
such default. Any amount so remitted pursuant to the
preceding sentence will be deemed to reduce the amount
owed on the Mortgage Loan.]
ARTICLE IV
PAYMENTS TO CERTIFICATEHOLDERS
Section 4.01. Certificate Account.
(a) The [Master] Servicer acting as agent of
the Trustee shall establish and maintain a Certificate
Account in which the [Master] Servicer shall cause to be
deposited on behalf of the Trustee on or before 2:00 P.M.
New York time on each Certificate Account Deposit Date by
wire transfer of immediately available funds an amount
equal to the sum of (i) any Advance for the immediately
succeeding Distribution Date, (ii) any amount required to
be deposited in the Custodial Account pursuant to Section
3.12(a), (iii) any amount required to be deposited in the
Certificate Account pursuant to Section 4.07, (iv) the
amount by which the servicing compensation is reduced
with respect to the period ending on the immediately
succeeding Distribution Date pursuant to Section 3.16(e);
and (v) all other amounts constituting the Available
Distribution Amount for the immediately succeeding
Distribution Date.
(b) The Trustee shall, upon written request
from the [Master] Servicer, invest or cause the
institution maintaining the Certificate Account to invest
the funds in the Certificate Account in Permitted
Investments designated in the name of the Trustee for the
benefit of the Certificateholders, which shall mature not
later than the Business Day next preceding the
Distribution Date next following the date of such
investment (except that (i) any investment in the
institution with which the Certificate Account is
maintained may mature on such Distribution Date and (ii)
any other investment may mature on such Distribution Date
if the Trustee shall advance funds on such Distribution
Date to the Certificate Account in the amount payable on
such investment on such Distribution Date, pending
receipt thereof to the extent necessary to make
distributions on the Certificates) and shall not be sold
or disposed of prior to maturity. All income and gain
realized from any such investment shall be for the
benefit of the [Master] Servicer and shall be subject to
its withdrawal or order from time to time. The amount of
any losses incurred in respect of any such investments
shall be deposited in the Certificate Account by the
[Master] Servicer out of its own funds immediately as
realized.
Section 4.02. Distributions.
(a) On each Distribution Date the [Master]
Servicer on behalf of the Trustee or the Paying Agent
appointed by the Trustee, shall distribute to the
[Master] Servicer, in the case of a distribution pursuant
to Section 4.02(a)(iii), the amount required to be
distributed to the [Master] Servicer or a Subservicer
pursuant to Section 4.02(a)(iii), and to each
Certificateholder of record on the next preceding Record
Date (other than as provided in Section 9.01 respecting
the final distribution) either in immediately available
funds (by wire transfer or otherwise) to the account of
such Certificateholder at a bank or other entity having
appropriate facilities therefor, if such
Certificateholder has so notified the [Master] Servicer
or the Paying Agent, as the case may be, or, if such
Certificateholder has not so notified the [Master]
Servicer or the Paying Agent by the Record Date, by check
mailed to such Certificateholder at the address of such
Holder appearing in the Certificate Register such
Certificateholder's share (based on the aggregate of the
Percentage Interests represented by Certificates of the
applicable Class held by such Holder) of the following
amounts, in the following order of priority (subject to
the provisions of Section 4.02(b)), in each case to the
extent of the Available Distribution Amount:
(i) to the Class A Certificateholders (other
than the Class A-4 Certificateholders) and Class R
Certificateholders on a pro rata basis based on
Accrued Certificate Interest payable thereon,
Accrued Certificate Interest on such Classes of
Certificates as applicable for such Distribution
Date, plus any Accrued Certificate Interest thereon
remaining unpaid from any previous Distribution
Date except as provided below; provided that if
such Distribution Date is on or prior to the
Accretion Termination Date, no distribution shall
be made pursuant to this clause (i) to the Class
A-3 Certificateholders to the extent that Accrued
Certificate Interest is not then payable in
accordance with Section 4.02(d);
(ii) (X) to the Class A-4 Certificateholders,
except as otherwise provided in Section
4.02(c), the Class A-4 Principal Distribution
Amount; and
(Y) to the Class A (other than the Class
A-4 and Class A-5 Certificateholders) and
Class R Certificateholders, in the priorities
and amounts set forth in Section 4.02(b), (c)
and (d) the sum of the following (applied to
reduce the Certificate Principal Balances of
such Class A or Class R Certificates, as
applicable):
(A) the Senior Percentage for such
Distribution Date times the sum of the
following:
(1) the principal portion of each
Monthly Payment due during the related
Due Period on each Outstanding [Mortgage
Loan] [Contract] (other than the related
Discount Fraction of the principal
portion of such payment with respect to a
Discount [Mortgage Loan] [Contract]),
whether or not received, minus the
principal portion of any Debt Service
Reduction (other than the related
Discount Fraction of the principal
portion of such Debt Service Reduction
with respect to a Discount [Mortgage
Loan] [Contract]) which together with
other Bankruptcy Losses exceeds the
Bankruptcy Amount;
(2) the Stated Principal Balance of
any [Mortgage Loan] [Contract]
repurchased during the related Prepayment
Period (or deemed to have been so
repurchased in accordance with Section
3.07(b)) pursuant to Section 2.02, 2.03,
2.04 or 4.07 and the amount of any
shortfall deposited in the Custodial
Account in connection with the
substitution of a Deleted [Mortgage Loan]
[Contract] pursuant to Section 2.03 or
2.04 during the related Prepayment Period
(other than the related Discount Fraction
of such Stated Principal Balance or
shortfall with respect to a Discount
[Mortgage Loan] [Contract]); and
(3) the principal portion of all
other unscheduled collections (other than
Principal Prepayments in Full and
Curtailments and amounts received in
connection with a Cash Liquidation or REO
Disposition of a [Mortgage Loan]
[Contract] described in Section
4.02(a)(ii)(Y)(B) including without
limitation Insurance Proceeds,
Liquidation Proceeds and REO Proceeds)
received during the related Prepayment
Period (or deemed to have been so
received in accordance with Section
3.07(b)) to the extent applied by the
[Master] Servicer as recoveries of
principal of the related [Mortgage Loan]
[Contract] pursuant to Section 3.14
(other than the related Discount Fraction
of the principal portion of such
unscheduled collections with respect to a
Discount [Mortgage Loan] [Contract]);
(B) with respect to each [Mortgage Loan]
[Contract] for which a Cash Liquidation or an REO
Disposition occurred during the related Prepayment
Period (or was deemed to have occurred during such
period in accordance with Section 3.07(b)) and did
not result in any Excess Special Hazard Losses,
Excess Fraud Losses, Excess Bankruptcy Losses or
Extraordinary Losses an amount equal to the lesser
of (a) the Senior Percentage for such Distribution
Date times the Stated Principal Balance of such
[Mortgage Loan] [Contract] (other than the related
Discount Fraction of such Stated Principal Balance,
with respect to a Discount [Mortgage Loan]
[Contract]) and (b) the Senior Accelerated
Distribution Percentage for such Distribution Date
times the related collections (including without
limitation Insurance Proceeds, Liquidation Proceeds
and REO Proceeds) to the extent applied by the
[Master] Servicer as recoveries of principal of the
related [Mortgage Loan] [Contract] pursuant to
Section 3.14 (other than the related Discount
Fraction of the principal portion of such
collections with respect to a Discount [Mortgage
Loan] [Contract]);
(C) if such Distribution Date is on or
prior to the Accretion Termination Date, the
Accrued Certificate Interest on the Class A-3
Certificates that would otherwise be distributed to
such Certificates on such Distribution Date, to the
extent added to the Certificate Principal Balance
of such Class on such Distribution Date in
accordance with Section 4.02(d);
(D) the Senior Accelerated Distribution
Percentage for such Distribution Date times the
aggregate of all Principal Prepayments in Full and
Curtailments received in the related Prepayment
Period (other than the related Discount Fraction of
such Principal Prepayments in Full and Curtailments
with respect to a Discount [Mortgage Loan]
[Contract]);
(E) any Excess Subordinate Principal
Amount for such Distribution Date; and
(F) any amounts described in subsection
(a)(ii)(Y), clauses (A), (B), (C) and (D) of this
Section 4.02(a), as determined for any previous
Distribution Date, which remain unpaid after
application of amounts previously distributed
pursuant to this clause (F) to the extent that such
amounts are not attributable to Realized Losses
which have been allocated to the Class M
Certificates or Class B Certificates;
(iii) if the Certificate Principal
Balances of the Class M Certificates and Class B
Certificates have not been reduced to zero; to the
[Master] Servicer or a Subservicer, by remitting
for deposit to the Custodial Account, to the extent
of and in reimbursement for any Advances or
Subservicer Advances previously made with respect
to any [Mortgage Loan] [Contract] or REO Property
which remain unreimbursed in whole or in part
following the Cash Liquidation or REO Disposition
of such [Mortgage Loan] [Contract] or REO Property,
minus any such Advances that were made with respect
to delinquencies that ultimately constituted Excess
Special Hazard Losses, Excess Fraud Losses, Excess
Bankruptcy Losses or Extraordinary Losses;
(iv) to the Holders of the Class M
Certificates, the Accrued Certificate Interest
thereon for such Distribution Date, plus any
Accrued Certificate Interest thereon remaining
unpaid from any previous Distribution Date, except
as provided below;
(v) to the Holders of the Class M
Certificates, an amount equal to the Subordinate
Principal Distribution Amount for such Class of
Certificates for such Distribution Date, applied in
reduction of the Certificate Principal Balance of
the Class M Certificates;
(vi) to the Holders of the Class B
Certificates, the Accrued Certificate Interest
thereon for such Distribution Date, plus any
Accrued Certificate Interest thereon remaining
unpaid from any previous Distribution Date, except
as provided below;
(vii) to the Holders of the Class B
Certificates, an amount equal to the Subordinate
Principal Distribution Amount for such Class of
Certificates for such Distribution Date, applied in
reduction of the Certificate Principal Balance of
the Class B Certificates;
(viii) to the Class A (other than the Class
A-4 and Class A-5 Certificateholders) and Class R
Certificateholders in the priority set forth in
Section 4.02(b), the portion, if any, of the
Available Distribution Amount remaining after the
foregoing distributions, applied to reduce the
Certificate Principal Balances of such Class A and
Class R Certificates, but in no event more than the
sum of the outstanding Certificate Principal
Balances of each Class of Class A (other than the
Class A-4 Certificates) and Class R Certificates
and thereafter to the Class M Certificates, any
portion of the Available Distribution Amount
remaining after the Class A (other than the Class
A-4 and Class A-5 Certificates) and Class R
Certificates have been retired, applied to reduce
the Certificate Principal Balance of the Class M
Certificates, but in no event more than the
outstanding Certificate Principal Balance of the
Class M Certificates; and thereafter to the Class B
Certificates, any portion of the Available
Distribution Amount remaining after the Class M
Certificates have been retired, applied to reduce
the Certificate Principal Balance of the Class B
Certificates, but in no event more than the
outstanding Certificate Principal Balance of the
Class B Certificates; and
(ix) to the Class R Certificateholders, the
balance, if any, of the Available Distribution
Amount.
Notwithstanding the foregoing, on any
Distribution Date, with respect to the Class of Class B
Certificates outstanding on such Distribution Date, or in
the event the Class B Certificates are no longer
outstanding, the Class M Certificates then outstanding,
or in the event the Class B Certificates and Class M
Certificates are no longer outstanding, the Class A and
Class R Certificates, Accrued Certificate Interest
thereon remaining unpaid from any previous Distribution
Date will be distributable only to the extent that such
unpaid Accrued Certificate Interest was attributable to
interest shortfalls relating to Nonrecoverable Advances
as determined by the [Master] Servicer with respect to
the related [Mortgage Loan] [Contract] where such
[Mortgage Loan] [Contract] has not yet been the subject
of a Cash Liquidation or REO Disposition.
(b) Distributions of principal on the Class A
(other than the Class A-5 Certificates) and Class R
Certificates on each Distribution Date occurring prior to
the occurrence of the Credit Support Depletion Date will
be made as follows:
(i) to the Class A-4 Certificates, until the
Certificate Principal Balance thereof is reduced to
zero, an amount (the "Class A-4 Principal
Distribution Amount") equal to the aggregate of:
(1) the related Discount Fraction of the
principal portion of each Monthly Payment on
each Discount [Mortgage Loan] [Contract] due
during the related Due Period, whether or not
received on or prior to the related
Determination Date, minus the Discount
Fraction of the principal portion of any
related Debt Service Reduction which together
with other Bankruptcy Losses exceeds the
Bankruptcy Amount;
(2) the related Discount Fraction of the
principal portion of all unscheduled
collections on each Discount [Mortgage Loan]
[Contract] received during the preceding
calendar month (other than amounts received in
connection with a Cash Liquidation or REO
Disposition of a Discount [Mortgage Loan]
[Contract] described in clause (3) below),
including Principal Prepayments and
repurchases (including deemed repurchases
under Section 3.07(b)) of Discount [Mortgage
Loans] [Contracts] (or, in the case of a
substitution, certain amounts representing a
principal adjustment) as required hereunder;
(3) in connection with the Cash
Liquidation or REO Disposition of a Discount
[Mortgage Loan] [Contract] that occurred
during the related Prepayment Period (or was
deemed to have occurred during such period in
accordance with Section 3.07(b)) and did not
result in any Excess Special Hazard Losses,
Excess Fraud Losses, Excess Bankruptcy Losses
or Extraordinary Losses, an amount equal to
the applicable Discount Fraction of the Stated
Principal Balance of such Discount [Mortgage
Loan] [Contract] immediately prior to such
Distribution Date net of the principal portion
of any related Realized Loss allocated to the
Class A-4 Certificates on such Distribution
Date; and
(4) any amounts allocable to principal
for any previous Distribution Date (calculated
pursuant to clauses (1) - (3) above) that
remain undistributed;
(ii) the Senior Principal Distribution Amount
shall be distributed to the Class R Certificates,
in reduction of the Certificate Principal Balance
thereof, until such Certificate Principal Balance
is reduced to zero; and
(iii) the balance of the Senior Principal
Distribution Amount remaining after the
distribution described in clause (i) above shall be
distributed in reduction of the Certificate
Principal Balances of the classes set forth below
as follows:
(A) first, [___________]% and
[__________]% of such amount, concurrently, to
the Class A-1 Certificates and Class A-2
Certificates, respectively, until the
Certificate Principal Balances thereof have
been reduced to zero; and
(B) second, to the Class A-3
Certificates, until the Certificate Principal
Balance thereof has been reduced to zero.
(c) On or after the occurrence of the Credit
Support Depletion Date, all priorities relating to
distributions as described in Section 4.02(b) above in
respect of principal among the various Classes of Class
A (other than the Class A-4 Certificates) and Class R
Certificates will be disregarded, an amount equal to the
Discount Fraction of the principal portion of scheduled
payments and unscheduled collections received or advanced
in respect of the Discount [Mortgage Loans] [Contracts]
will be distributed to the Class A-4 Certificates, and
the Senior Principal Distribution Amount will be
distributed among all Classes of Class A (other than the
Class A-4 Certificates) Certificates and Class R
Certificates pro rata in accordance with their respective
outstanding Certificate Principal Balances.
(d) On each Distribution Date prior to the
Accretion Termination Date, an amount equal to the amount
of Accrued Certificate Interest on the Class A-3
Certificates for such Distribution Date (or from any
previous Distribution Date) that would otherwise be
distributed on such Certificates on such Distribution
Date pursuant to Section 4.02(a)(i) shall be added to the
Certificate Principal Balance thereof. After the
Accretion Termination Date and on the Accretion
Termination Date if such date is the Credit Support
Depletion Date, the entire amount of Accrued Certificate
Interest on the Class A-3 Certificates for such
Distribution Date shall be payable to such Certificates.
On the Accretion Termination Date if such date is not the
Credit Support Deletion Date, Accrued Certificate
Interest will be added to the Certificate Principal
Balance of the Class A-3 Certificates in the manner
described in the first sentence of this Section 4.02(d),
but only to the extent that such amount is necessary to
increase the Senior Principal Distribution Amount to an
amount that will reduce the Certificate Principal
Balances of the Class A-1, Class A-2, Class A-3 and Class
R Certificates to zero.
(e) In addition to the foregoing
distributions, with respect to any [Mortgage Loan]
[Contract] that was previously the subject of a Cash
Liquidation or an REO Disposition that resulted in a
Realized Loss, in the event that within two years of the
date on which such Realized Loss was determined to have
occurred the [Master] Servicer receives amounts, which
the [Master] Servicer reasonably believes to represent
subsequent recoveries (net of any related liquidation
expenses), or determines that it holds surplus amounts
previously reserved to cover estimated expenses,
specifically related to such [Mortgage Loan] [Contract]
(including, but not limited to, recoveries in respect of
the representations and warranties made by the related
Seller pursuant to the applicable Seller's Agreement),
the [Master] Servicer shall distribute such amounts to
the applicable Certificateholders of the Class or Classes
to which such Realized Loss was allocated (with the
amounts to be distributed allocated among such Classes in
the same proportions as such Realized Loss was
allocated), subject to the following. No such
distribution shall be in an amount that would result in
total distributions on the Certificates of any such Class
in excess of the total amounts of principal and interest
that would have been distributable thereon if such Cash
Liquidation or REO Disposition had occurred but had
resulted in a Realized Loss equal to zero.
Notwithstanding the foregoing, no such distribution shall
be made with respect to the Certificates of any Class to
the extent that either (i) such Class was protected
against the related Realized Loss pursuant to any
instrument or fund established under Section 11.01(e) or
(ii) such Class of Certificates has been deposited into
a separate trust fund or other structuring vehicle and
separate certificates or other instruments representing
interests therein have been issued in one or more
classes, and any of such separate certificates or other
instruments was protected against the related Realized
Loss pursuant to any limited guaranty, payment
obligation, irrevocable letter of credit, surety bond,
insurance policy or similar instrument or a reserve fund,
or a combination thereof. Any amount to be so
distributed with respect to the Certificates of any Class
shall be distributed by the [Master] Servicer to the
Certificateholders of record as of the Record Date
immediately preceding the date of such distribution, on
a pro rata basis based on the Percentage Interest
represented by each Certificate of such Class as of such
Record Date. Any amounts to be so distributed shall not
be remitted to or distributed from the Trust Fund, and
shall constitute subsequent recoveries with respect to
[Mortgage Loans] [Contracts] that are no longer assets of
the Trust Fund.
Section 4.03. Statements to Certificateholders.
(a) Concurrently with each distribution
charged to the Certificate Account and with respect to
each Distribution Date the [Master] Servicer shall
forward to the Trustee and the Trustee shall forward by
mail to each Holder and the Company a statement setting
forth the following information as to each Class of
Certificates to the extent applicable:
(i) (a) the amount of such distribution to
the Certificateholders of such Class applied to
reduce the Certificate Principal Balance thereof,
and (b) the aggregate amount included therein
representing Principal Prepayments;
(ii) the amount of such distribution to
Holders of such Class of Certificates allocable to
interest and the amount of interest allocable to
the Class A-3 Certificates and added to the
Certificate Principal Balance thereof;
(iii) if the distribution to the Holders
of such Class of Certificates is less than the full
amount that would be distributable to such Holders
if there were sufficient funds available therefor,
the amount of the shortfall;
(iv) the amount of any Advance by the [Master]
Servicer pursuant to Section 4.04;
(v) the number and Pool Stated Principal
Balance of the [Mortgage Loans] [Contracts] after
giving effect to the distribution of principal on
such Distribution Date;
(vi) the Certificate Principal Balance of each
Class of Certificates and each of the Senior, Class
M and Class B Percentages, after giving effect to
the amounts distributed on such Distribution Date,
separately identifying any reduction thereof due to
Realized Losses other than pursuant to an actual
distribution of principal;
(vii) the related Subordinate Principal
Distribution Amount and Prepayment Distribution
Percentage, if applicable;
(viii) on the basis of the most recent
reports furnished to it by Subservicers, the number
and aggregate principal balances of [Mortgage
Loans] [Contracts] that are delinquent (A) one
month, (B) two months and (C) three months and the
number and aggregate principal balance of [Mortgage
Loans] [Contracts] that are in foreclosure;
(ix) the number, aggregate principal balance
and book value of any REO Properties;
(x) the aggregate Accrued Certificate
Interest remaining unpaid, if any, for each Class
of Certificates, after giving effect to the
distribution made on such Distribution Date;
(xi) the Special Hazard Amount, Fraud Loss
Amount and Bankruptcy Amount as of the close of
business on such Distribution Date and a
description of any change in the calculation of
such amounts;
(xii) the Pass-Through Rate on the Class
A-5 Certificates for such Distribution Date;
(xiii) the occurrence of the Credit Support
Depletion Date;
(xiv) the Senior Accelerated Distribution
Percentage applicable to such distribution;
(xv) the Senior Percentage for such
Distribution Date;
(xvi) the aggregate amount of Realized
Losses for such Distribution Date;
(xvii) the aggregate amount of any
recoveries on previously foreclosed loans from
Sellers due to a breach of representation or
warranty;
(xviii) the weighted average remaining term
to maturity of the [Mortgage Loans] [Contracts]
after giving effect to the amounts distributed on
such Distribution Date; and
(xix) the weighted average Mortgage Rates
of the [Mortgage Loans] [Contracts] after giving
effect to the amounts distributed on such
Distribution Date.
In the case of information furnished pursuant to clauses
(i) and (ii) above, the amounts shall be expressed as a
dollar amount per Certificate with a $1,000 denomination.
In addition to the statement provided to the Trustee as
set forth in this Section 4.03(a), the [Master] Servicer
shall provide to any manager of a trust fund consisting
of some or all of the Certificates, upon reasonable
request, such additional information as is reasonably
obtainable by the [Master] Servicer at no additional
expense to the [Master] Servicer.
(b) Within a reasonable period of time after
the end of each calendar year, the [Master] Servicer
shall prepare, or cause to be prepared, and the Trustee
shall forward, or cause to be forwarded, to each Person
who at any time during the calendar year was the Holder
of a Certificate, other than a Class R Certificate, a
statement containing the information set forth in clauses
(i) and (ii) of subsection (a) above aggregated for such
calendar year or applicable portion thereof during which
such Person was a Certificateholder. Such obligation of
the [Master] Servicer and Trustee shall be deemed to have
been satisfied to the extent that substantially
comparable information shall be provided by the [Master]
Servicer and Trustee pursuant to any requirements of the
Code.
(c) Within a reasonable period of time after
the end of each calendar year, the [Master] Servicer
shall prepare, or cause to be prepared, and the Trustee
shall forward, or cause to be forwarded, to each Person
who at any time during the calendar year was the Holder
of a Class R Certificate, a statement containing the
applicable distribution information provided pursuant to
this Section 4.03 aggregated for such calendar year or
applicable portion thereof during which such Person was
the Holder of a Class R Certificate. Such obligation of
the [Master] Servicer and Trustee shall be deemed to have
been satisfied to the extent that substantially
comparable information shall be provided by the [Master]
Servicer and Trustee pursuant to any requirements of the
Code.
(d) Upon the written request of any
Certificateholder, the [Master] Servicer, as soon as
reasonably practicable, shall provide the requesting
Certificateholder with such information as is necessary
and appropriate, in the [Master] Servicer's sole
discretion, for purposes of satisfying applicable
reporting requirements under Rule 144A.
Section 4.04. Distribution of Reports to the Trustee
and the Company; Advances by the [Master]
Servicer.
(a) Prior to the close of business on the
Business Day next succeeding each Determination Date, the
[Master] Servicer shall furnish a written statement to
the Trustee, any Paying Agent and the Company (the
information in such statement to be made available to
Certificateholders by the [Master] Servicer on request)
setting forth (i) the Available Distribution Amount and
(ii) the amounts required to be withdrawn from the
Custodial Account and deposited into the Certificate
Account on the immediately succeeding Certificate Account
Deposit Date pursuant to clause (iii) of Section 4.01(a).
The determination by the [Master] Servicer of such
amounts shall, in the absence of obvious error, be
presumptively deemed to be correct for all purposes
hereunder and the Trustee shall be protected in relying
upon the same without any independent check or
verification.
(b) On or before 2:00 P.M. New York time on
each Certificate Account Deposit Date, the [Master]
Servicer shall either (i) deposit in the Certificate
Account from its own funds, or funds received therefor
from the Subservicers, an amount equal to the Advances to
be made by the [Master] Servicer in respect of the
related Distribution Date, which shall be in an aggregate
amount equal to the aggregate amount of Monthly Payments
(with each interest portion thereof adjusted to the Net
Mortgage Rate), less the amount of any related Debt
Service Reductions or reductions in the amount of
interest collectable from the Mortgagor pursuant to the
Soldiers' and Sailors' Civil Relief Act of 1940, as
amended, or similar legislation or regulations then in
effect, on the Outstanding [Mortgage Loans] [Contracts]
as of the related Due Date, which Monthly Payments were
delinquent as of the close of business as of the related
Determination Date; provided that no Advance shall be
made if it would be a Nonrecoverable Advance, (ii)
withdraw from amounts on deposit in the Custodial Account
and deposit in the Certificate Account all or a portion
of the Amount Held for Future Distribution in discharge
of any such Advance, or (iii) make advances in the form
of any combination of (i) and (ii) aggregating the amount
of such Advance. Any portion of the Amount Held for
Future Distribution so used shall be replaced by the
[Master] Servicer by deposit in the Certificate Account
on or before 11:00 A.M. New York time on any future
Certificate Account Deposit Date to the extent that funds
attributable to the [Mortgage Loans] [Contracts] that are
available in the Custodial Account for deposit in the
Certificate Account on such Certificate Account Deposit
Date shall be less than payments to Certificateholders
required to be made on the following Distribution Date.
The [Master] Servicer shall be entitled to use any
Advance made by a Subservicer as described in Section
3.07(b) that has been deposited in the Custodial Account
on or before such Distribution Date as part of the
Advance made by the [Master] Servicer pursuant to this
Section 4.04. The amount of any reimbursement pursuant
to Section 4.02(a)(iii) in respect of outstanding
Advances on any Distribution Date shall be allocated to
specific Monthly Payments due but delinquent for previous
Due Periods, which allocation shall be made, to the
extent practicable, to Monthly Payments which have been
delinquent for the longest period of time. Such
allocations shall be conclusive for purposes of
reimbursement to the [Master] Servicer from recoveries on
related [Mortgage Loans] [Contracts] pursuant to Section
3.10.
The determination by the [Master] Servicer that
it has made a Nonrecoverable Advance or that any proposed
Advance, if made, would constitute a Nonrecoverable
Advance, shall be evidenced by a certificate of a
Servicing Officer delivered to the Seller and the
Trustee.
In the event that the [Master] Servicer
determines as of the Business Day preceding any
Certificate Account Deposit Date that it will be unable
to deposit in the Certificate Account an amount equal to
the Advance required to be made for the immediately
succeeding Distribution Date, it shall give notice to the
Trustee of its inability to advance (such notice may be
given by telecopy), not later than 3:00 P.M., New York
time, on such Business Day, specifying the portion of
such amount that it will be unable to deposit. Not later
than 3:00 P.M., New York time, on the Certificate Account
Deposit Date the Trustee shall, unless by 12:00 Noon, New
York time, on such day the Trustee shall have been
notified in writing (by telecopy) that the [Master]
Servicer shall have directly or indirectly deposited in
the Certificate Account such portion of the amount of the
Advance as to which the [Master] Servicer shall have
given notice pursuant to the preceding sentence, pursuant
to Section 7.01, (a) terminate all of the rights and
obligations of the [Master] Servicer under this Agreement
in accordance with Section 7.01 and (b) assume the rights
and obligations of the [Master] Servicer hereunder,
including the obligation to deposit in the Certificate
Account an amount equal to the Advance for the
immediately succeeding Distribution Date.
The Trustee shall deposit all funds it receives
pursuant to this Section 4.04 into the Certificate
Account.
Section 4.05. Allocation of Realized Losses.
Prior to each Distribution Date, the [Master]
Servicer shall determine the total amount of Realized
Losses, if any, that resulted from any Cash Liquidation,
Debt Service Reduction, Deficient Valuation or REO
Disposition that occurred during the related Prepayment
Period. The amount of each Realized Loss shall be
evidenced by an Officers' Certificate. All Realized
Losses, other than Excess Special Hazard Losses,
Extraordinary Losses, Excess Bankruptcy Losses or Excess
Fraud Losses, shall be allocated as follows: first, to
the Class B Certificates until the Certificate Principal
Balance thereof has been reduced to zero; second, to the
Class M Certificates until the Certificate Principal
Balance thereof has been reduced to zero; third, if such
Realized Losses are on a Discount [Mortgage Loan]
[Contract], to the Class A-4 Certificates in a amount
equal to the Discount Fraction of the principal portion
thereof; and fourth, to the Class A (other than the Class
A-4 Certificates) and Class R Certificates on a pro rata
basis, as described below. Any Excess Special Hazard
Losses, Excess Bankruptcy Losses, Excess Fraud Losses and
Extraordinary Losses on Non-Discount [Mortgage Loans]
[Contracts] will be allocated among the Class A (except
the Class A-4 Certificates), Class M, Class B and Class
R Certificates on a pro rata basis, as described below.
The principal portion of such losses on Discount
[Mortgage Loans] [Contracts] will be allocated to the
Class A-4 Certificates in an amount equal to the related
Discount Fraction thereof, and the remainder of such
losses on Discount [Mortgage Loans] [Contracts] will be
allocated among the Class A (other than the Class A-4
Certificates), Class M, Class B and Class R Certificates
on a pro rata basis, as described below.
As used herein, with respect to a [Mortgage
Loan] [Contract] that is not a Discount [Mortgage Loan]
[Contract], an allocation of a Realized Loss on a "pro
rata basis" among two or more specified Classes of
Certificates means an allocation on a pro rata basis,
among the various Classes so specified, to each such
Class of Certificates on the basis of their then
outstanding Certificate Principal Balances prior to
giving effect to distributions to be made on such
Distribution Date in the case of the principal portion of
a Realized Loss or based on the Accrued Certificate
Interest (without regard to any Compensating Interest for
such Distribution Date) thereon in the case of an
interest portion of a Realized Loss. With respect to a
Discount [Mortgage Loan] [Contract], an allocation of a
Realized Loss on a "pro rata basis" means an allocation
to the Class A-4 Certificates in an amount equal to the
Discount Fraction of the principal portion thereof, with
the remainder of such Realized Loss on such Discount
[Mortgage Loan] [Contract] allocated to the other
applicable Classes of Certificates on a pro rata basis as
described in the immediately preceding sentence. Except
as provided in the following sentence, any allocation of
the principal portion of Realized Losses (other than Debt
Service Reductions) to a Class of Certificates, shall be
made by reducing the Certificate Principal Balance
thereof by the amount so allocated, which allocation
shall be deemed to have occurred on such Distribution
Date. Any allocation of the principal portion of
Realized Losses (other than Debt Service Reductions) to
the Class of Class B Certificates then outstanding with
the highest numerical designation or, after the
Certificate Principal Balances of the Class B
Certificates have been reduced to zero, to the Class of
Class M Certificates then outstanding with the highest
numerical designation shall be made by operation of the
definition of "Certificate Principal Balance" and by
operation of the provisions of Section 4.02(a).
Allocations of the interest portions of Realized Losses
shall be made by operation of the definition of "Accrued
Certificate Interest" and by operation of the provisions
of Section 4.02(a). Allocations of the principal portion
of Debt Service Reductions shall be made by operation of
the provisions of Section 4.02(a). All Realized Losses
and all other losses allocated to a Class of Certificates
hereunder will be allocated among the Certificates of
such Class in proportion to the Percentage Interests
evidenced thereby.
Section 4.06. Reports of Foreclosures and Abandonment
of Mortgaged Property.
The [Master] Servicer or the Subservicers shall
file information returns with respect to the receipt of
mortgage interests received in a trade or business, the
reports of foreclosures and abandonments of any Mortgaged
Property and the information returns relating to
cancellation of indebtedness income with respect to any
Mortgaged Property required by Sections 6050H, 6050J and
6050P of the Code and deliver to the Trustee an Officers'
Certificate stating that such reports have been filed.
Such reports shall be in form and substance sufficient to
meet the reporting requirements imposed by Sections
6050H, 6050J and 6050P of the Code.
Section 4.07. Optional Purchase of Defaulted [Mortgage
Loans] [Contracts].
As to any [Mortgage Loan] [Contract] which is
delinquent in payment by 90 days or more, the [Master]
Servicer may, at its option, purchase such [Mortgage
Loan] [Contract] from the Trustee at the Purchase Price
therefor. If at any time the [Master] Servicer makes a
payment to the Certificate Account covering the amount of
the Purchase Price for such a [Mortgage Loan] [Contract],
and the [Master] Servicer provides to the Trustee a
certification signed by a Servicing Officer stating that
the amount of such payment has been deposited in the
Certificate Account, then the Trustee shall execute the
assignment of such [Mortgage Loan] [Contract] at the
request of the [Master] Servicer without recourse to the
[Master] Servicer which shall succeed to all the
Trustee's right, title and interest in and to such
[Mortgage Loan] [Contract], and all security and
documents relative thereto. Such assignment shall be an
assignment outright and not for security. The [Master]
Servicer will thereupon own such [Mortgage Loan]
[Contract], and all such security and documents, free of
any further obligation to the Trustee or the
Certificateholders with respect thereto. Notwithstanding
anything to the contrary in this Section 4.07, the
[Master] Servicer shall continue to service any such
[Mortgage Loan] [Contract] after the date of such
purchase in accordance with the terms of this Agreement
and, if any Realized Loss with respect to such [Mortgage
Loan] [Contract] occurs, allocate such Realized Loss in
accordance with the terms hereof as if such [Mortgage
Loan] [Contract] had not been so purchased.
Section 4.08. Distributions on the Uncertificated
Regular Interests.
(a) On each Distribution Date the Trustee
shall be deemed to distribute to itself, as the holder of
the Uncertificated REMIC Regular Interests, an amount
equal to the amount distributable on such Distribution
Date to the Class A-5 Certificateholders pursuant to
Section 4.02(a)(i) in payment of Uncertificated Accrued
Interest on the Uncertificated REMIC Regular Interests
for such Distribution Date plus any Uncertificated
Accrued Interest thereon remaining unpaid from any
previous Distribution Date.
(b) In determining from time to time the
Uncertificated REMIC Regular Interests Distribution
Amounts, Realized Losses allocated to the Class A-5
Certificates under Section 4.05 shall be deemed allocated
to Uncertificated REMIC Regular Interests on a pro rata
basis based on the Uncertificated Accrued Interest for
the related Distribution Date.
(c) On each Distribution Date the Trustee
shall be deemed to distribute from the Trust Fund, in the
priority set forth in Sections 4.02(a) and (b), to the
Class A-5 Certificates the amounts distributable thereon,
from the Uncertificated REMIC Regular Interest
Distribution Amounts deemed to have been received by the
Trust Fund under this Section 4.08. The amount deemed
distributable hereunder with respect to the Class A-5
Certificates shall equal 100% of the amounts payable with
respect to Uncertificated REMIC Regular Interests.
(d) Notwithstanding the deemed distributions
on the Uncertificated REMIC Regular Interests described
in this Section 4.08, distributions of funds from the
Certificate Account shall be made only in accordance with
Section 4.02.
ARTICLE V
THE CERTIFICATES
Section 5.01. The Certificates.
(a) The Class A, Class M, Class B and Class R
Certificates, respectively, shall be substantially in the
forms set forth in Exhibits A, B, C and D and shall, on
original issue, be executed and delivered by the Trustee
to the Certificate Registrar for authentication and
delivery to or upon the order of the Company upon receipt
by the Trustee or one or more Custodians of the documents
specified in Section 2.01. The Certificates, other than
the Class A-5 and Class R Certificates, shall be issuable
in minimum dollar denominations of $[_______] (or
$[_______] in the case of the Class [__], Class [___] and
Class [___] Certificates and integral multiples of
$[_____] in excess thereof, [except that one Certificate
of each of the Class [___], Class [___], Class [___],
Class [___] Certificates may be issued in a denomination
equal to the denomination set forth as follows for such
Class or the sum of such denomination and an integral
multiple of $[_____]].
Class [___]: $[________]
Class [___]: $[________]
Class [___]: $[________]
Class [___]: $[________]
The Class A-5 and Class R Certificates shall be
issuable in minimum denominations of not less than a
[___]% Percentage Interest [; provided, however, that one
Class R Certificate will be issuable to Residential
Funding as "tax matters person" pursuant to Section
10.01(c) in a minimum denomination representing a
Percentage Interest of not less than 0.01%].
The Certificates shall be executed by manual or
facsimile signature on behalf of an authorized officer of
the Trustee. Certificates bearing the manual or
facsimile signatures of individuals who were at any time
the proper officers of the Trustee shall bind the
Trustee, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the
authentication and delivery of such Certificate or did
not hold such offices at the date of such Certificates.
No Certificate shall be entitled to any benefit under
this Agreement, or be valid for any purpose, unless there
appears on such Certificate a certificate of
authentication substantially in the form provided for
herein executed by the Certificate Registrar by manual
signature, and such certificate 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 5.02. Registration of Transfer and Exchange of
Certificates.
(a) The Trustee shall cause to be kept at one
of the offices or agencies to be appointed by the Trustee
in accordance with the provisions of Section 8.12 a
Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Trustee shall
provide for the registration of Certificates and of
transfers and exchanges of Certificates as herein
provided. The Trustee is initially appointed Certificate
Registrar for the purpose of registering Certificates and
transfers and exchanges of Certificates as herein
provided. The Certificate Registrar, or the Trustee,
shall provide the [Master] Servicer with a certified list
of Certificateholders as of each Record Date prior to the
related Determination Date.
(b) Upon surrender for registration of
transfer of any Certificate at any office or agency of
the Trustee maintained for such purpose pursuant to
Section 8.12 and, in the case of any Class A-3, Class M,
Class B or Class R Certificate, upon satisfaction of the
conditions set forth below, the Trustee shall execute and
the Certificate Registrar shall authenticate and deliver,
in the name of the designated transferee or transferees,
one or more new Certificates of a like Class and
aggregate Percentage Interest.
(c) At the option of the Certificateholders,
Certificates may be exchanged for other Certificates of
authorized denominations of a like Class and aggregate
Percentage Interest, upon surrender of the Certificates
to be exchanged at any such office or agency. Whenever
any Certificates are so surrendered for exchange the
Trustee shall execute and the Certificate Registrar shall
authenticate and deliver the Certificates of such Class
which the Certificateholder making the exchange is
entitled to receive. Every Certificate presented or
surrendered for transfer or exchange shall (if so
required by the Trustee or the Certificate Registrar) be
duly endorsed by, or be accompanied by a written
instrument of transfer in form satisfactory to the
Trustee and the Certificate Registrar duly executed by,
the Holder thereof or his attorney duly authorized in
writing.
(d) Except as provided in Section 5.02(e), no
transfer, sale, pledge or other disposition of a Class B
Certificate shall be made unless such transfer, sale,
pledge or other disposition is exempt from the
registration requirements of the Securities Act of 1933,
as amended, and any applicable state securities laws or
is made in accordance with said Act and laws. In the
event that a transfer of a Class B Certificate is to be
made (i) unless the Company directs the Trustee
otherwise, the Trustee shall require a written Opinion of
Counsel acceptable to and in form and substance
satisfactory to the Trustee and the Company that such
transfer may be made pursuant to an exemption, describing
the applicable exemption and the basis therefor, from
said Act and laws or is being made pursuant to said Act
and laws, which Opinion of Counsel shall not be an
expense of the Trustee, the Company or the [Master]
Servicer, and (ii) the Trustee shall require the
transferee to execute a representation letter,
substantially in the form of Exhibit J hereto, and the
Trustee shall require the transferor to execute a
representation letter, substantially in the form of
Exhibit K hereto, each acceptable to and in form and
substance satisfactory to the Company and the Trustee
certifying to the Company and the Trustee the facts
surrounding such transfer, which representation letters
shall not be an expense of the Trustee, the Company or
the [Master] Servicer. The Holder of a Class B
Certificate desiring to effect any transfer, sale, pledge
or other disposition shall, and does hereby agree to,
indemnify the Trustee, the Company, the [Master] Servicer
and the Certificate Registrar against any liability that
may result if the transfer, sale, pledge or other
disposition is not so exempt or is not made in accordance
with such federal and state laws.
(e) Transfers of Class B Certificates after
the first transfer to a Person that is not an affiliate
of the Company may be made if the prospective transferee
of such a Certificate provides the Trustee and the
[Master] Servicer with an investment letter substantially
in the form of Exhibit L attached hereto (except that
paragraph 3 of Exhibit L shall not be required in the
case of a transfer of the Class A-3 Certificates), which
investment letter shall not be an expense of the Trustee,
the Company or the [Master] Servicer, and which
investment letter states that, among other things, such
transferee (i) is a "qualified institutional buyer" as
defined under Rule 144A, acting for its own account or
the accounts of other "qualified institutional buyers" as
defined under Rule 144A, and (ii) is aware that the
proposed transferor intends to rely on the exemption from
registration requirements under the 1933 Act provided by
Rule 144A. Such transfers shall be deemed to have
complied with the requirements of Section 5.02(d) hereof.
The Holder of such a Certificate desiring to effect such
transfer (except for any Holder of such Certificate on
the Closing Date) does hereby agree to indemnify the
Trustee, the Company, the [Master] Servicer and the
Certificate Registrar against any liability that may
result if transfer is not made in accordance with this
Agreement. Each Holder of such a Certificate on the
Closing Date does hereby agree that it will comply with
the requirements of this Section 5.02(e) in connection
with the transfer of any such Certificate.
(f) In the case of any Class M, Class B or
Class R Certificate presented for registration in the
name of an employee benefit plan or other plan subject to
the prohibited transaction provisions of the Employee
Retirement Income Security Act of 1974, as amended
("ERISA") or Section 4975 of the Code (or comparable
provisions of any subsequent enactments), an investment
manager, a named fiduciary or a trustee of any such plan,
or any other Person who is using "plan assets" of any
such plan to effect such acquisition, unless otherwise
directed by the Company, the Trustee shall require an
Opinion of Counsel acceptable to and in form and
substance satisfactory to the Trustee, the Company and
the [Master] Servicer to the effect that the purchase or
holding of a Class M, Class B or Class R Certificate is
permissible under applicable law, will not constitute or
result in any non-exempt prohibited transaction under
Section 406 of ERISA or Section 4975 of the Code, and
will not subject the Trustee, the Company or the [Master]
Servicer to any obligation or liability (including
obligations or liabilities under ERISA or Section 4975 of
the Code) in addition to those undertaken in this
Agreement or any other liability, which Opinion of
Counsel shall not be an expense of the Trustee, the
Company or the [Master] Servicer. The Trustee may
require that any prospective transferee of a Class M,
Class B or Class R Certificate provide such
certifications as the Trustee may deem desirable or
necessary in order to establish that such transferee or
the Person in whose name such registration is requested
is not an employee benefit plan or other plan subject to
the prohibited transaction provisions of ERISA or Section
4975 of the Code, an investment manager, a named
fiduciary or a trustee of any such plan, or any other
Person who is using "plan assets" of any such plan to
effect such acquisition.
(g) (i) Each Person who has or who acquires
any Ownership Interest in a Class R Certificate shall be
deemed by the acceptance or acquisition of such Ownership
Interest to have agreed to be bound by the following
provisions and to have irrevocably authorized the Trustee
or its designee under clause (iii)(A) below to deliver
payments to a Person other than such Person and to
negotiate the terms of any mandatory sale under clause
(iii)(B) below and to execute all instruments of transfer
and to do all other things necessary in connection with
any such sale. The rights of each Person acquiring any
Ownership Interest in a Class R Certificate are expressly
subject to the following provisions:
(A) Each Person holding or acquiring any
Ownership Interest in a Class R Certificate shall
be a Permitted Transferee and shall promptly notify
the Trustee of any change or impending change in
its status as a Permitted Transferee.
(B) In connection with any proposed Transfer
of any Ownership Interest in a Class R Certificate,
the Trustee shall require delivery to it, and shall
not register the Transfer of any Class R
Certificate until its receipt of, (I) an affidavit
and agreement (a "Transfer Affidavit and
Agreement," in the form attached hereto as Exhibit
I-1) from the proposed Transferee, in form and
substance satisfactory to the [Master] Servicer,
representing and warranting, among other things,
that it is a Permitted Transferee, that it is not
acquiring its Ownership Interest in the Class R
Certificate that is the subject of the proposed
Transfer as a nominee, trustee or agent for any
Person who is not a Permitted Transferee, that for
so long as it retains its Ownership Interest in a
Class R Certificate, it will endeavor to remain a
Permitted Transferee, and that it has reviewed the
provisions of this Section 5.02(f) and agrees to be
bound by them, and (II) a certificate, in the form
attached hereto as Exhibit I-2, from the Holder
wishing to transfer the Class R Certificate, in
form and substance satisfactory to the [Master]
Servicer, representing and warranting, among other
things, that no purpose of the proposed Transfer is
to impede the assessment or collection of tax.
(C) Notwithstanding the delivery of a
Transfer Affidavit and Agreement by a proposed
Transferee under clause (B) above, if a Responsible
Officer of the Trustee who is assigned to this
Agreement has actual knowledge that the proposed
Transferee is not a Permitted Transferee, no
Transfer of an Ownership Interest in a Class R
Certificate to such proposed Transferee shall be
effected.
(D) Each Person holding or acquiring any
Ownership Interest in a Class R Certificate shall
agree (x) to require a Transfer Affidavit and
Agreement from any other Person to whom such Person
attempts to transfer its Ownership Interest in a
Class R Certificate and (y) not to transfer its
Ownership Interest unless it provides a certificate
to the Trustee in the form attached hereto as
Exhibit I-2.
(E) Each Person holding or acquiring an
Ownership Interest in a Class R Certificate, by
purchasing an Ownership Interest in such
Certificate, agrees to give the Trustee written
notice that it is a "pass-through interest holder"
within the meaning of Temporary Treasury
Regulations Section 1.67-3T(a)(2)(i)(A) immediately
upon acquiring an Ownership Interest in a Class R
Certificate, if it is, or is holding an Ownership
Interest in a Class R Certificate on behalf of, a
"pass-through interest holder."
(ii) The Trustee will register the Transfer of
any Class R Certificate only if it shall have received
the Transfer Affidavit and Agreement, a certificate of
the Holder requesting such transfer in the form attached
hereto as Exhibit I-2 and all of such other documents as
shall have been reasonably required by the Trustee as a
condition to such registration. Transfers of the Class
R Certificates to Non-United States Persons and
"Disqualified Organizations" (as defined in Section
860E(e)(5) of the Code) are prohibited.
(iii) (A) If any "Disqualified
Organization" (as defined in Section 860E(e) of the Code)
shall become a holder of a Class R Certificate, then the
last preceding Permitted Transferee shall be restored, to
the extent permitted by law, to all rights and
obligations as Holder thereof retroactive to the date of
registration of such Transfer of such Class R
Certificate. If a Non-United States Person shall become
a holder of a Class R Certificate, then the last
preceding United States Person shall be restored, to the
extent permitted by law, to all rights and obligations as
Holder thereof retroactive to the date of registration of
such Transfer of such Class R Certificate. If a transfer
of a Class R Certificate is disregarded pursuant to the
provisions of Treasury Regulations Section 1.860E-1 or
Section 1.860G-3, then the last preceding Permitted
Transferee shall be restored, to the extent permitted by
law, to all rights and obligations as Holder thereof
retroactive to the date of registration of such Transfer
of such Class R Certificate. The Trustee shall be under
no liability to any Person for any registration of
Transfer of a Class R Certificate that is in fact not
permitted by this Section 5.02(f) or for making any
payments due on such Certificate to the holder thereof or
for taking any other action with respect to such holder
under the provisions of this Agreement.
(B) If any purported Transferee shall become
a Holder of a Class R Certificate in violation of the
restrictions in this Section 5.02(f) and to the extent
that the retroactive restoration of the rights of the
Holder of such Class R Certificate as described in clause
(iii)(A) above shall be invalid, illegal or
unenforceable, then the [Master] Servicer shall have the
right, without notice to the holder or any prior holder
of such Class R Certificate, to sell such Class R
Certificate to a purchaser selected by the [Master]
Servicer on such terms as the [Master] Servicer may
choose. Such purported Transferee shall promptly endorse
and deliver each Class R Certificate in accordance with
the instructions of the [Master] Servicer. Such
purchaser may be the [Master] Servicer itself or any
Affiliate of the [Master] Servicer. The proceeds of such
sale, net of the commissions (which may include
commissions payable to the [Master] Servicer or its
Affiliates), expenses and taxes due, if any, will be
remitted by the [Master] Servicer to such purported
Transferee. The terms and conditions of any sale under
this clause (iii)(B) shall be determined in the sole
discretion of the [Master] Servicer, and the [Master]
Servicer shall not be liable to any Person having an
Ownership Interest in a Class R Certificate as a result
of its exercise of such discretion.
(iv) The [Master] Servicer, on behalf of the
Trustee, shall make available, upon written request from
the Trustee, all information necessary to compute any tax
imposed (A) as a result of the Transfer of an Ownership
Interest in a Class R Certificate to any Person who is a
Disqualified Organization, including the information
regarding "excess inclusions" of such Class R
Certificates required to be provided to the Internal
Revenue Service and certain Persons as described in
Treasury Regulations Sections 1.860D-1(b)(5) and 1.860E-
2(a)(5), and (B) as a result of any regulated investment
company, real estate investment trust, common trust fund,
partnership, trust, estate or organization described in
Section 1381 of the Code that holds an Ownership Interest
in a Class R Certificate having as among its record
holders at any time any Person who is a Disqualified
Organization. Reasonable compensation for providing such
information may be required by the [Master] Servicer from
such Person.
(v) The provisions of this Section 5.02(f) set
forth prior to this clause (v) may be modified, added to
or eliminated, provided that there shall have been
delivered to the Trustee the following:
(A) written notification from each Rating
Agency to the effect that the modification,
addition to or elimination of such provisions will
not cause such Rating Agency to downgrade its
then-current ratings, if any, of any Class of the
Class A, Class M, Class B or Class R Certificates
below the lower of the then-current rating or the
rating assigned to such Certificates as of the
Closing Date by such Rating Agency; and
(B) a certificate of the [Master] Servicer
stating that the [Master] Servicer has received an
Opinion of Counsel, in form and substance
satisfactory to the [Master] Servicer, to the
effect that such modification, addition to or
absence of such provisions will not cause the Trust
Fund to cease to qualify as a REMIC and will not
cause (x) the Trust Fund to be subject to an
entity-level tax caused by the Transfer of any
Class R Certificate to a Person that is a
Disqualified Organization or (y) a
Certificateholder or another Person to be subject
to a REMIC-related tax caused by the Transfer of a
Class R Certificate to a Person that is not a
Permitted Transferee.
(h) No service charge shall be made for any
transfer or exchange of Certificates of any Class, 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.
(i) All Certificates surrendered for transfer
and exchange shall be destroyed by the Certificate
Registrar.
Section 5.03. Mutilated, Destroyed, Lost or Stolen
Certificates.
If (i) any mutilated Certificate is surrendered
to the Certificate Registrar, or the Trustee and the
Certificate Registrar receive evidence to their
satisfaction of the destruction, loss or theft of any
Certificate, and (ii) there is delivered to the Trustee
and the Certificate Registrar 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 or the
Certificate Registrar that such Certificate has been
acquired by a bona fide purchaser, the Trustee shall
execute and the Certificate Registrar shall authenticate
and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new
Certificate of like tenor, Class and Percentage Interest
but bearing a number not contemporaneously outstanding.
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
and the Certificate Registrar) connected therewith. Any
duplicate Certificate issued pursuant to this Section
shall constitute complete and indefeasible evidence of
ownership in the Trust Fund, as if originally issued,
whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
Section 5.04. Persons Deemed Owners.
Prior to due presentation of a Certificate for
registration of transfer, the Company, the [Master]
Servicer, the Trustee, the Certificate Registrar and any
agent of the Company, the [Master] Servicer, the Trustee
or the Certificate Registrar 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 4.02 and for all other
purposes whatsoever, and neither the Company, the
[Master] Servicer, the Trustee, the Certificate Registrar
nor any agent of the Company, the [Master] Servicer, the
Trustee or the Certificate Registrar shall be affected by
notice to the contrary except as provided in Section
5.02(f).
Section 5.05. Appointment of Paying Agent.
The Trustee may appoint a Paying Agent for the
purpose of making distributions to Certificateholders
pursuant to Section 4.02. In the event of any such
appointment, on or prior to each Distribution Date the
[Master] Servicer on behalf of the Trustee shall deposit
or cause to be deposited with the Paying Agent a sum
sufficient to make the payments to Certificateholders in
the amounts and in the manner provided for in Section
4.02, such sum to be held in trust for the benefit of
Certificateholders.
The Trustee shall cause each Paying Agent to
execute and deliver to the Trustee an instrument in which
such Paying Agent shall agree with the Trustee that such
Paying Agent will hold all sums held by it for the
payment to Certificateholders in trust for the benefit of
the Certificateholders entitled thereto until such sums
shall be paid to such Certificateholders. Any sums so
held by such Paying Agent shall be held only in Eligible
Accounts to the extent such sums are not distributed to
the Certificateholders on the date of receipt by such
Paying Agent.
Section 5.06. Optional Purchase of Certificates.
(a) On any Distribution Date on which the Pool
Stated Principal Balance is less than ten percent of the
Cut-off Date Principal Balance of the [Mortgage Loans]
[Contracts], either the [Master] Servicer or the Company
shall have the right, at its option, to purchase the
Certificates in whole, but not in part, at a price equal
to the outstanding Certificate Principal Balance of such
Certificates plus the sum of one month's Accrued
Certificate Interest thereon and any previously unpaid
Accrued Certificate Interest.
(b) The [Master] Servicer or the Company, as
applicable, shall give the Trustee not less than 60 days'
prior notice of the Distribution Date on which the
[Master] Servicer or the Company, as applicable,
anticipates that it will purchase the Certificates
pursuant to Section 5.06(a). Notice of any such
purchase, specifying the Distribution Date upon which the
Holders may surrender their Certificates to the Trustee
for payment in accordance with this Section 5.06, shall
be given promptly by the [Master] Servicer or the
Company, as applicable, by letter to Certificateholders
(with a copy to the Certificate Registrar and each Rating
Agency) mailed not earlier than the 15th day and not
later than the 25th day of the month next preceding the
month of such final distribution, specifying:
(i) the Distribution Date upon which purchase
of the Certificates is anticipated to be made upon
presentation and surrender of such Certificates at
the office or agency of the Trustee therein
designated;
(ii) the purchase price therefor, if known;
and
(iii) that the Record Date otherwise
applicable to such Distribution Date is not
applicable, payments being made only upon
presentation and surrender of the Certificates at
the office or agency of the Trustee therein
specified.
If either the [Master] Servicer or the Company gives the
notice specified above, the [Master] Servicer or the
Company, as applicable, shall deposit in the Certificate
Account before the Distribution Date on which the
purchase pursuant to Section 5.06(a) is to be made, in
immediately available funds, an amount equal to the
purchase price for the Certificates computed as provided
above.
(c) Upon presentation and surrender of the
Certificates to be purchased pursuant to Section 5.06(a)
by the Holders thereof, the Trustee shall distribute to
such Holders an amount equal to the outstanding
Certificate Principal Balance thereof plus the sum of one
month's Accrued Certificate Interest thereon and any
previously unpaid Accrued Certificate Interest with
respect thereto.
(d) In the event that any Certificateholders
do not surrender their Certificates on or before the
Distribution Date on which a purchase pursuant to this
Section 5.06 is to be made, the Trustee shall on such
date cause all funds in the Certificate Account deposited
therein by the [Master] Servicer or the Company, as
applicable, pursuant to Section 5.06(b) to be withdrawn
therefrom and deposited in a separate escrow account for
the benefit of such Certificateholders, and the [Master]
Servicer or the Company, as applicable, shall give a
second written notice to such Certificateholders to
surrender their Certificates for payment of the purchase
price therefor. If within six months after the second
notice any Certificate shall not have been surrendered
for cancellation, the Trustee shall take appropriate
steps as directed by the [Master] Servicer or the
Company, as applicable, to contact the Holders of such
Certificates concerning surrender of their Certificates.
The costs and expenses of maintaining the escrow account
and of contacting Certificateholders shall be paid out of
the assets which remain in the escrow account. If within
nine months after the second notice any Certificates
shall not have been surrendered for cancellation in
accordance with this Section 5.06, the Trustee shall pay
to the [Master] Servicer or the Company, as applicable,
all amounts distributable to the Holders thereof and the
[Master] Servicer or the Company, as applicable, shall
thereafter hold such amounts until distributed to such
Holders. No interest shall accrue or be payable to any
Certificateholder on any amount held in the escrow
account or by the [Master] Servicer or the Company, as
applicable, as a result of such Certificateholder's
failure to surrender its Certificate(s) for payment in
accordance with this Section 5.06. Any Certificate that
is not surrendered on the Distribution Date on which a
purchase pursuant to this Section 5.06 occurs as provided
above will be deemed to have been purchased and the
Holder as of such date will have no rights with respect
thereto except to receive the purchase price therefor
minus any costs and expenses associated with such escrow
account and notices allocated thereto. Any Certificates
so purchased or deemed to have been purchased on such
Distribution Date shall remain outstanding hereunder.
The [Master] Servicer or the Company, as applicable,
shall be for all purposes the Holder thereof as of such
date.
ARTICLE VI
THE COMPANY AND THE [MASTER] SERVICER
Section 6.01. Respective Liabilities of the Company and
the [Master] Servicer.
The Company and the [Master] Servicer shall
each be liable in accordance herewith only to the extent
of the obligations specifically and respectively imposed
upon and undertaken by the Company and the [Master]
Servicer herein. By way of illustration and not
limitation, the Company is not liable for the servicing
and administration of the [Mortgage Loans] [Contracts],
nor is it obligated by Section 7.01 or Section 10.01 to
assume any obligations of the [Master] Servicer or to
appoint a designee to assume such obligations, nor is it
liable for any other obligation hereunder that it may,
but is not obligated to, assume unless it elects to
assume such obligation in accordance herewith.
Section 6.02. Merger or Consolidation of the Company or
the [Master] Servicer; Assignment of
Rights and Delegation of Duties by
[Master] Servicer.
(a) The Company and the [Master] Servicer will
each keep in full effect its existence, rights and
franchises as a corporation under the laws of the state
of its incorporation, and will each obtain and preserve
its qualification to do business as a foreign corporation
in each jurisdiction in which such qualification is or
shall be necessary to protect the validity and
enforceability of this Agreement, the Certificates or any
of the [Mortgage Loans] [Contracts] and to perform its
respective duties under this Agreement.
(b) Any Person into which the Company or the
[Master] Servicer may be merged or consolidated, or any
corporation resulting from any merger or consolidation to
which the Company or the [Master] Servicer shall be a
party, or any Person succeeding to the business of the
Company or the [Master] Servicer, shall be the successor
of the Company or the [Master] Servicer, as the case may
be, hereunder, without the execution or filing of any
paper or any further act on the part of any of the
parties hereto, anything herein to the contrary
notwithstanding; provided, however, that the successor or
surviving Person to the [Master] Servicer shall be
qualified to service mortgage loans on behalf of FNMA or
FHLMC; and provided further that each Rating Agency's
ratings, if any, of the Class A, Class M, Class B or
Class R Certificates in effect immediately prior to such
merger or consolidation will not be qualified, reduced or
withdrawn as a result thereof (as evidenced by a letter
to such effect from each Rating Agency).
(c) Notwithstanding anything else in this
Section 6.02 and Section 6.04 to the contrary, the
[Master] Servicer may assign its rights and delegate its
duties and obligations under this Agreement; provided
that the Person accepting such assignment or delegation
shall be a Person which is qualified to service mortgage
loans on behalf of FNMA or FHLMC, is reasonably
satisfactory to the Trustee and the Company, is willing
to service the [Mortgage Loans] [Contracts] and executes
and delivers to the Company and the Trustee an agreement,
in form and substance reasonably satisfactory to the
Company and the Trustee, which contains an assumption by
such Person of the due and punctual performance and
observance of each covenant and condition to be performed
or observed by the [Master] Servicer under this
Agreement; provided further that each Rating Agency's
rating of the Classes of Certificates that have been
rated in effect immediately prior to such assignment and
delegation will not be qualified, reduced or withdrawn as
a result of such assignment and delegation (as evidenced
by a letter to such effect from each Rating Agency). In
the case of any such assignment and delegation, the
[Master] Servicer shall be released from its obligations
under this Agreement, except that the [Master] Servicer
shall remain liable for all liabilities and obligations
incurred by it as [Master] Servicer hereunder prior to
the satisfaction of the conditions to such assignment and
delegation set forth in the next preceding sentence.
Section 6.03. Limitation on Liability of the Company,
the Master Servicer and Others.
Neither the Company, the [Master] Servicer nor
any of the directors, officers, employees or agents of
the Company or the [Master] Servicer shall be under any
liability to the Trust Fund or the Certificateholders for
any action taken or for refraining from the taking of any
action in good faith pursuant to this Agreement, or for
errors in judgment; provided, however, that this
provision shall not protect the Company, the [Master]
Servicer or any such Person against any breach of
warranties or representations made herein or any
liability which would otherwise be imposed by reason of
willful misfeasance, bad faith or gross negligence in the
performance of duties or by reason of reckless disregard
of obligations and duties hereunder. The Company, the
[Master] Servicer and any director, officer, employee or
agent of the Company or the [Master] Servicer may rely in
good faith on any document of any kind prima facie
properly executed and submitted by any Person respecting
any matters arising hereunder. The Company, the [Master]
Servicer and any director, officer, employee or agent of
the Company or the [Master] Servicer shall be indemnified
by the Trust Fund and held harmless against any loss,
liability or expense incurred in connection with any
legal action relating to this Agreement or the
Certificates, other than any loss, liability or expense
related to any specific [Mortgage Loan] [Contract] or
[Mortgage Loans] [Contracts] (except as any such loss,
liability or expense shall be otherwise reimbursable
pursuant to this Agreement) and any loss, liability or
expense incurred by reason of willful misfeasance, bad
faith or gross negligence in the performance of duties
hereunder or by reason of reckless disregard of
obligations and duties hereunder.
Neither the Company nor the [Master] Servicer
shall be under any obligation to appear in, prosecute or
defend any legal or administrative action, proceeding,
hearing or examination that is not incidental to its
respective duties under this Agreement and which in its
opinion may involve it in any expense or liability;
provided, however, that the Company or the [Master]
Servicer may in its discretion undertake any such action,
proceeding, hearing or examination that it may deem
necessary or desirable in respect to this Agreement and
the rights and duties of the parties hereto and the
interests of the Certificateholders hereunder. In such
event, the legal expenses and costs of such action,
proceeding, hearing or examination and any liability
resulting therefrom shall be expenses, costs and
liabilities of the Trust Fund, and the Company and the
[Master] Servicer shall be entitled to be reimbursed
therefor out of amounts attributable to the [Mortgage
Loans] [Contracts] on deposit in the Custodial Account as
provided by Section 3.10 and, on the Distribution Date(s)
following such reimbursement, the aggregate of such
expenses and costs shall be allocated in reduction of the
Accrued Certificate Interest on each Class entitled
thereto in the same manner as if such expenses and costs
constituted a Prepayment Interest Shortfall.
Section 6.04. Company and [Master] Servicer Not to
Resign.
Subject to the provisions of Section 6.02,
neither the Company nor the [Master] Servicer shall
resign from its respective obligations and duties hereby
imposed on it except upon determination that its duties
hereunder are no longer permissible under applicable law.
Any such determination permitting the resignation of the
Company or the [Master] Servicer shall be evidenced by an
Opinion of Counsel to such effect delivered to the
Trustee. No such resignation by the [Master] Servicer
shall become effective until the Trustee or a successor
servicer shall have assumed the [Master] Servicer's
responsibilities and obligations in accordance with
Section 7.02.
ARTICLE VII
DEFAULT
Section 7.01. Events of Default.
Event of Default, wherever used herein, means
any one of the following events (whatever reason for such
Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or
governmental body):
(i) the [Master] Servicer shall fail to
distribute or cause to be distributed to Holders of
Certificates of any Class any distribution required
to be made under the terms of the Certificates of
such Class and this Agreement and, in either case,
such failure shall continue unremedied for a period
of 5 days after the date upon which written notice
of such failure, requiring such failure to be
remedied, shall have been given to the [Master]
Servicer by the Trustee or the Company or to the
[Master] Servicer, the Company and the Trustee by
the Holders of Certificates of such Class
evidencing Percentage Interests aggregating not
less than 25%; or
(ii) the [Master] Servicer shall fail to
observe or perform in any material respect any
other of the covenants or agreements on the part of
the [Master] Servicer contained in the Certificates
of any Class or in this Agreement and such failure
shall continue unremedied for a period of 30 days
(except that such number of days shall be 15 in the
case of a failure to pay the premium for any
Required Insurance Policy) after the date on which
written notice of such failure, requiring the same
to be remedied, shall have been given to the
[Master] Servicer by the Trustee or the Company, or
to the [Master] Servicer, the Company and the
Trustee by the Holders of Certificates of any Class
evidencing, as to such Class, Percentage Interests
aggregating not less than 25%; or
(iii) a decree or order of a court or
agency or supervisory authority having jurisdiction
in the premises in an involuntary case under any
present or future federal or state bankruptcy,
insolvency or similar law or appointing a
conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings, or
for the winding-up or liquidation of its affairs,
shall have been entered against the [Master]
Servicer and such decree or order shall have
remained in force undischarged or unstayed for a
period of 60 days; or
(iv) the [Master] Servicer shall consent to
the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities, or similar
proceedings of, or relating to, the [Master]
Servicer or of, or relating to, all or
substantially all of the property of the [Master]
Servicer; or
(v) the [Master] Servicer shall admit in
writing its inability to pay its debts generally as
they become due, file a petition to take advantage
of, or commence a voluntary case under, any
applicable insolvency or reorganization statute,
make an assignment for the benefit of its
creditors, or voluntarily suspend payment of its
obligations; or
(vi) the [Master] Servicer shall notify the
Trustee pursuant to Section 4.04(b) that it is
unable to deposit in the Certificate Account an
amount equal to the Advance.
If an Event of Default described in clauses
(i)-(v) of this Section shall occur, then, and in each
and every such case, so long as such Event of Default
shall not have been remedied, either the Company or the
Trustee may, and at the direction of Holders of
Certificates entitled to at least 51% of the Voting
Rights, the Trustee shall, by notice in writing to the
[Master] Servicer (and to the Company if given by the
Trustee or to the Trustee if given by the Company),
terminate all of the rights and obligations of the
[Master] Servicer under this Agreement and in and to the
[Mortgage Loans] [Contracts] and the proceeds thereof,
other than its rights as a Certificateholder hereunder.
If an Event of Default described in clause (vi) hereof
shall occur, the Trustee shall, by notice to the [Master]
Servicer and the Company, immediately terminate all of
the rights and obligations of the [Master] Servicer under
this Agreement and in and to the [Mortgage Loans]
[Contracts] and the proceeds thereof, other than its
rights as a Certificateholder hereunder as provided in
Section 4.04(b). On or after the receipt by the [Master]
Servicer of such written notice, all authority and power
of the [Master] Servicer under this Agreement, whether
with respect to the Certificates (other than as a Holder
thereof) or the [Mortgage Loans] [Contracts] or
otherwise, shall subject to Section 7.02 pass to and be
vested in the Trustee or the Trustee's designee appointed
pursuant to Section 7.02; and, without limitation, the
Trustee is hereby authorized and empowered to execute and
deliver, on behalf of the [Master] Servicer, as
attorney-in-fact or otherwise, any and all documents and
other instruments, and to do or accomplish all other acts
or things necessary or appropriate to effect the purposes
of such notice of termination, whether to complete the
transfer and endorsement or assignment of the [Mortgage
Loans] [Contracts] and related documents, or otherwise.
The [Master] Servicer agrees to cooperate with the
Trustee in effecting the termination of the [Master]
Servicer's responsibilities and rights hereunder,
including, without limitation, the transfer to the
Trustee or its designee for administration by it of all
cash amounts which shall at the time be credited to the
Custodial Account or the Certificate Account or
thereafter be received with respect to the [Mortgage
Loans] [Contracts]. No such termination shall release
the [Master] Servicer for any liability that it would
otherwise have hereunder for any act or omission prior to
the effective time of such termination.
Notwithstanding any termination of the
activities of [__________] in its capacity as [Master]
Servicer hereunder, [__________] shall be entitled to
receive, out of any late collection of a Monthly Payment
on a [Mortgage Loan] [Contract] which was due prior to
the notice terminating [__________] rights and
obligations as [Master] Servicer hereunder and received
after such notice, that portion to which [__________]
would have been entitled pursuant to Sections
3.10(a)(ii), (vi) and (vii) as well as its Servicing Fee
in respect thereof, and any other amounts payable to
[__________] hereunder the entitlement to which arose
prior to the termination of its activities hereunder.
Upon the termination of [__________] as [Master] Servicer
hereunder the Company shall deliver to the Trustee a copy
of the Program Guide.
Section 7.02. Trustee or Company to Act; Appointment of
Successor.
On and after the time the [Master] Servicer
receives a notice of termination pursuant to Section 7.01
or resigns in accordance with Section 6.04, the Trustee
or, upon notice to the Company and with the Company's
consent (which shall not be unreasonably withheld) a
designee (which meets the standards set forth below) of
the Trustee, shall be the successor in all respects to
the [Master] Servicer in its capacity as servicer under
this Agreement and the transactions set forth or provided
for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto
placed on the [Master] Servicer (except for the
responsibilities, duties and liabilities contained in
Sections 2.02 and 2.03(a), excluding the duty to notify
related Subservicers or Sellers as set forth in such
Sections, and its obligations to deposit amounts in
respect of losses incurred prior to such notice or
termination on the investment of funds in the Custodial
Account or the Certificate Account pursuant to Sections
3.07(c) and 4.01(b) by the terms and provisions hereof);
provided, however, that any failure to perform such
duties or responsibilities caused by the preceding
[Master] Servicer's failure to provide information
required by Section 4.04 shall not be considered a
default by the Trustee hereunder. As compensation
therefor, the Trustee shall be entitled to all funds
relating to the [Mortgage Loans] [Contracts] which the
[Master] Servicer would have been entitled to charge to
the Custodial Account or the Certificate Account if the
[Master] Servicer had continued to act hereunder and, in
addition, shall be entitled to the income from any
Permitted Investments made with amounts attributable to
the [Mortgage Loans] [Contracts] held in the Custodial
Account or the Certificate Account. If the Trustee has
become the successor to the [Master] Servicer in
accordance with Section 6.04 or Section 7.01, then
notwithstanding the above, the Trustee may, if it shall
be unwilling to so act, or shall, if it is unable to so
act, appoint, or petition a court of competent
jurisdiction to appoint, any established housing and home
finance institution, which is also a FNMA- or
FHLMC-approved mortgage servicing institution, having a
net worth of not less than $10,000,000 as the successor
to the [Master] Servicer hereunder in the assumption of
all or any part of the responsibilities, duties or
liabilities of the [Master] Servicer hereunder. Pending
appointment of a successor to the [Master] Servicer
hereunder, the Trustee shall become successor to the
[Master] Servicer and 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] [Contracts] as it and
such successor shall agree; provided, however, that no
such compensation shall be in excess of that permitted
the initial [Master] Servicer hereunder. The Company,
the Trustee, the Custodian and such successor shall take
such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession. The
Servicing Fee for any successor [Master] Servicer
appointed pursuant to this Section 7.02 will be lowered
with respect to those [Mortgage Loans] [Contracts], if
any, where the Subservicing Fee accrues at a rate of less
than [___]% per annum in the event that the successor
[Master] Servicer is not servicing such [Mortgage Loans]
[Contracts] directly and it is necessary to raise the
related Subservicing Fee to a rate of [___]% per annum in
order to hire a Subservicer with respect to such
[Mortgage Loans] [Contracts].
Section 7.03. Notification to Certificateholders.
(a) Upon any such termination or appointment
of a successor to the [Master] Servicer, the Trustee
shall give prompt written notice thereof to
Certificateholders at their respective addresses
appearing in the Certificate Register.
(b) Within 60 days after the occurrence of any
Event of Default, the Trustee shall transmit by mail to
all Holders of Certificates notice of each such Event of
Default hereunder known to the Trustee, unless such Event
of Default shall have been cured or waived.
Section 7.04. Waiver of Events of Default.
The Holders representing at least 66% of the
Voting Rights of Certificates affected by a default or
Event of Default hereunder, may waive such default or
Event of Default; provided, however, that (a) a default
or Event of Default under clause (i) of Section 7.01 may
be waived only by all of the Holders of Certificates
affected by such default or Event of Default and (b) no
waiver pursuant to this Section 7.04 shall affect the
Holders of Certificates in the manner set forth in
Section 11.01(b)(i), (ii) or (iii). Upon any such waiver
of a default or Event of Default by the Holders
representing the requisite percentage of Voting Rights of
Certificates affected by such default or Event of
Default, such default or Event of Default shall cease to
exist and shall be deemed to have been remedied for every
purpose hereunder. No such waiver shall extend to any
subsequent or other default or Event of Default or impair
any right consequent thereon except to the extent
expressly so waived.
ARTICLE VIII
CONCERNING THE TRUSTEE
Section 8.01. Duties of Trustee.
(a) The Trustee, prior to the occurrence of an
Event of Default and after the curing of all Events of
Default which may have occurred, undertakes to perform
such duties and only such duties as are specifically set
forth in this Agreement. In case an Event of Default has
occurred (which has not been cured or waived), 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 investor
would exercise or use under the circumstances in the
conduct of such investor's own affairs.
(b) The Trustee, upon receipt of all
resolutions, certificates, statements, opinions, reports,
documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished
pursuant to any provision of this Agreement, shall
examine them to determine whether they conform to the
requirements of this Agreement. The Trustee shall notify
the Certificateholders of any such documents which do not
materially conform to the requirements of this Agreement
in the event that the Trustee, after so requesting, does
not receive satisfactorily corrected documents.
The Trustee shall forward or cause to be
forwarded in a timely fashion the notices, reports and
statements required to be forwarded by the Trustee
pursuant to Sections 4.03, 4.06, 7.03 and 10.01. The
Trustee shall furnish in a timely fashion to the [Master]
Servicer such information as the [Master] Servicer may
reasonably request from time to time for the [Master]
Servicer to fulfill its duties as set forth in this
Agreement. The Trustee covenants and agrees that it
shall perform its obligations hereunder in a manner so as
to maintain the status of the Trust Fund as a REMIC under
the REMIC Provisions and to prevent the imposition of any
federal, state or local income, prohibited transaction,
contribution or other tax on the Trust Fund to the extent
that maintaining such status and avoiding such taxes are
reasonably within the control of the Trustee and are
reasonably within the scope of its duties under this
Agreement.
(c) No provision of this Agreement shall be
construed to relieve the Trustee from liability for its
own negligent action, its own negligent failure to act or
its own willful misconduct; provided, however, that:
(i) Prior to the occurrence of an Event of
Default, and after the curing or waiver of all such
Events of Default which may have occurred, the
duties and obligations of the Trustee shall be
determined solely by the express provisions of this
Agreement, the Trustee shall not be liable except
for the performance of such duties and obligations
as are specifically set forth in this Agreement, no
implied covenants or obligations shall be read into
this Agreement against the Trustee and, in the
absence of bad faith on the part of the Trustee,
the Trustee may conclusively rely, as to the truth
of the statements and the correctness of the
opinions expressed therein, upon any certificates
or opinions furnished to the Trustee by the Company
or the [Master] Servicer and which on their face,
do not contradict the requirements of this
Agreement;
(ii) The Trustee shall not be personally
liable for an error of judgment made in good faith
by a Responsible Officer or Responsible Officers of
the Trustee, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent
facts;
(iii) 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 Certificateholders
of any Class holding Certificates which evidence,
as to such Class, Percentage Interests aggregating
not less than 25% as to the time, method and place
of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust
or power conferred upon the Trustee, under this
Agreement;
(iv) The Trustee shall not be charged with
knowledge of any default (other than a default in
payment to the Trustee) specified in clauses (i)
and (ii) of Section 7.01 or an Event of Default
under clauses (iii), (iv) and (v) of Section 7.01
unless a Responsible Officer of the Trustee
assigned to and working in the Corporate Trust
Office obtains actual knowledge of such failure or
event or the Trustee receives written notice of
such failure or event at its Corporate Trust Office
from the [Master] Servicer, the Company or any
Certificateholder; and
(v) Except to the extent provided in Section
7.02, no provision in this Agreement shall require
the Trustee to expend or risk its own funds
(including, without limitation, the making of any
Advance) or otherwise incur any personal financial
liability in the performance of any of its duties
as Trustee hereunder, or in the exercise of any of
its rights or powers, if the Trustee shall have
reasonable grounds for believing that repayment of
funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(d) The Trustee shall timely pay, from its own
funds, the amount of any and all federal, state and local
taxes imposed on the Trust Fund or its assets or
transactions including, without limitation, (A)
"prohibited transaction" penalty taxes as defined in
Section 860F of the Code, if, when and as the same shall
be due and payable, (B) any tax on contributions to a
REMIC after the Closing Date imposed by Section 860G(d)
of the Code and (C) any tax on "net income from
foreclosure property" as defined in Section 860G(c) of
the Code, but only if such taxes arise out of a breach by
the Trustee of its obligations hereunder, which breach
constitutes negligence or willful misconduct of the
Trustee.
Section 8.02. Certain Matters Affecting the Trustee.
(a) Except as otherwise provided in Section
8.01:
(i) The Trustee may rely and shall be
protected in acting or refraining from acting upon
any resolution, Officers' Certificate, certificate
of auditors or any other certificate, statement,
instrument, opinion, report, notice, request,
consent, order, appraisal, bond or other paper or
document believed by it to be genuine and to have
been signed or presented by the proper party or
parties;
(ii) The Trustee may consult with counsel and
any Opinion of Counsel shall be full and complete
authorization and protection in respect of any
action taken or suffered or omitted by it hereunder
in good faith and in accordance with such Opinion
of Counsel;
(iii) The Trustee shall be under no
obligation to exercise any of the trusts or powers
vested in it by this Agreement or to institute,
conduct or defend any litigation hereunder or in
relation hereto at the request, order or direction
of any of the Certificateholders, pursuant to the
provisions of this Agreement, unless such
Certificateholders shall have offered to the
Trustee reasonable security or indemnity against
the costs, expenses and liabilities which may be
incurred therein or thereby; nothing contained
herein shall, however, relieve the Trustee of the
obligation, upon the occurrence of an Event of
Default (which has not been cured), to exercise
such of the rights and powers vested in it by this
Agreement, and to use the same degree of care and
skill in their exercise as a prudent investor would
exercise or use under the circumstances in the
conduct of such investor's own affairs;
(iv) The Trustee shall not be personally
liable for any action taken, suffered or omitted by
it in good faith and believed by it to be
authorized or within the discretion or rights or
powers conferred upon it by this Agreement;
(v) Prior to the occurrence of an Event of
Default hereunder and after the curing of all
Events of Default which may have occurred, the
Trustee shall not be bound to make any
investigation into the facts or matters stated in
any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order,
approval, bond or other paper or document, unless
requested in writing so to do by Holders of
Certificates of any Class evidencing, as to such
Class, Percentage Interests, aggregating not less
than 50%; provided, however, that if the payment
within a reasonable time to the Trustee of the
costs, expenses or liabilities likely to be
incurred by it in the making of such investigation
is, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to
it by the terms of this Agreement, the Trustee may
require reasonable indemnity against such expense
or liability as a condition to so proceeding. The
reasonable expense of every such examination shall
be paid by the [Master] Servicer, if an Event of
Default shall have occurred and is continuing, and
otherwise by the Certificateholder requesting the
investigation;
(vi) The Trustee may execute any of the trusts
or powers hereunder or perform any duties hereunder
either directly or by or through agents or
attorneys; and
(vii) To the extent authorized under the
Code and the regulations promulgated thereunder,
each Holder of a Class R Certificate hereby
irrevocably appoints and authorizes the Trustee to
be its attorney-in-fact for purposes of signing any
Tax Returns required to be filed on behalf of the
Trust Fund. The Trustee shall sign on behalf of
the Trust Fund and deliver to the [Master] Servicer
in a timely manner any Tax Returns prepared by or
on behalf of the [Master] Servicer that the Trustee
is required to sign as determined by the [Master]
Servicer pursuant to applicable federal, state or
local tax laws, provided that the [Master] Servicer
shall indemnify the Trustee for signing any such
Tax Returns that contain errors or omissions.
(b) Following the issuance of the
Certificates, the Trustee shall not accept any
contribution of assets to the Trust Fund unless it shall
have obtained or been furnished with an Opinion of
Counsel to the effect that such contribution will not (i)
cause the Trust Fund to fail to qualify as a REMIC at any
time that any Certificates are outstanding or (ii) cause
the Trust Fund to be subject to any federal tax as a
result of such contribution (including the imposition of
any federal tax on "prohibited transactions" imposed
under Section 860F(a) of the Code).
Section 8.03. Trustee Not Liable for Certificates or
[Mortgage Loans] [Contracts].
The recitals contained herein and in the
Certificates (other than the execution of the
Certificates and relating to the acceptance and receipt
of the [Mortgage Loans] [Contracts]) shall be taken as
the statements of the Company or the [Master] Servicer as
the case may be, and the Trustee assumes no
responsibility for their correctness. The Trustee makes
no representations as to the validity or sufficiency of
this Agreement or of the Certificates (except that the
Certificates shall be duly and validly executed and
authenticated by it as Certificate Registrar) or of any
[Mortgage Loan] [Contract] or related document. Except
as otherwise provided herein, the Trustee shall not be
accountable for the use or application by the Company or
the [Master] 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 Company or the
[Master] Servicer in respect of the [Mortgage Loans]
[Contracts] or deposited in or withdrawn from the
Custodial Account or the Certificate Account by the
Company or the [Master] Servicer.
Section 8.04. Trustee May Own Certificates.
The Trustee in its individual or any other
capacity may become the owner or pledgee of Certificates
with the same rights it would have if it were not
Trustee.
Section 8.05. [Master] Servicer to Pay Trustee's Fees
and Expenses; Indemnification.
(a) The [Master] Servicer covenants and agrees
to pay to the Trustee and any co-trustee from time to
time, and the Trustee and any co-trustee shall be
entitled to, reasonable compensation (which shall not be
limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all
services rendered by each of them 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 co-trustee, and the [Master] Servicer will pay or
reimburse the Trustee and any co-trustee upon request for
all reasonable expenses, disbursements and advances
incurred or made by the Trustee or any co-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, and the expenses incurred by the
Trustee or any co-trustee in connection with the
appointment of an office or agency pursuant to Section
8.12) except any such expense, disbursement or advance as
may arise from its negligence or bad faith.
(b) The [Master] Servicer agrees to indemnify
the Trustee for, and to hold the Trustee harmless
against, any loss, liability or expense incurred without
negligence or willful misconduct on its part, arising out
of, or in connection with, the acceptance and
administration of the Trust Fund, including the costs and
expenses (including reasonable legal fees and expenses)
of defending itself against any claim in connection with
the exercise or performance of any of its powers or
duties under this Agreement, provided that:
(i) with respect to any such claim, the
Trustee shall have given the [Master] Servicer
written notice thereof promptly after the Trustee
shall have actual knowledge thereof;
(ii) while maintaining control over its own
defense, the Trustee shall cooperate and consult
fully with the [Master] Servicer in preparing such
defense; and
(iii) notwithstanding anything in this
Agreement to the contrary, the [Master] Servicer
shall not be liable for settlement of any claim by
the Trustee entered into without the prior consent
of the [Master] Servicer which consent shall not
be unreasonably withheld.
No termination of this Agreement shall affect the
obligations created by this Section 8.05(b) of the
[Master] Servicer to indemnify the Trustee under the
conditions and to the extent set forth herein.
Notwithstanding the foregoing, the
indemnification provided by the [Master] Servicer in this
Section 8.05(b) shall not pertain to any loss, liability
or expense of the Trustee, including the costs and
expenses of defending itself against any claim, incurred
in connection with any actions taken by the Trustee at
the direction of Certificateholders pursuant to the terms
of this Agreement.
Section 8.06. Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be a
corporation or a national banking association having its
principal office in a state and city acceptable to the
Company and organized and doing business under the laws
of such state or the United States of America, authorized
under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by
federal or state authority. If such corporation or
national banking association publishes reports of
condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section 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 8.07.
Section 8.07. Resignation and Removal of the Trustee.
(a) The Trustee may at any time resign and be
discharged from the trusts hereby created by giving
written notice thereof to the Company. Upon receiving
such notice of resignation, the Company shall promptly
appoint a successor trustee by written instrument, in
duplicate, one copy of which instrument shall be
delivered to the resigning Trustee and one copy to the
successor trustee. If no successor trustee shall have
been so appointed and have accepted appointment within 30
days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.
(b) If at any time the Trustee shall cease to
be eligible in accordance with the provisions of Section
8.06 and shall fail to resign after written request
therefor by the Company, or if at any time the Trustee
shall become incapable of acting, or shall be adjudged
bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed, or any public officer
shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Company may remove
the Trustee and appoint a successor trustee by written
instrument, in duplicate, one copy of which instrument
shall be delivered to the Trustee so removed and one copy
to the successor trustee. In addition, in the event that
the Company determines that the Trustee has failed (i) to
distribute or cause to be distributed to
Certificateholders any amount required to be distributed
hereunder, if such amount is held by the Trustee or its
Paying Agent (other than the [Master] Servicer or the
Company) for distribution or (ii) to otherwise observe or
perform in any material respect any of its covenants,
agreements or obligations hereunder, and such failure
shall continue unremedied for a period of 5 days (in
respect of clause (i) above) or 30 days (in respect of
clause (ii) above) after the date on which written notice
of such failure, requiring that the same be remedied,
shall have been given to the Trustee by the Company, then
the Company may remove the Trustee and appoint a
successor trustee by written instrument delivered as
provided in the preceding sentence. In connection with
the appointment of a successor trustee pursuant to the
preceding sentence, the Company shall, on or before the
date on which any such appointment becomes effective,
obtain from each Rating Agency written confirmation that
the appointment of any such successor trustee will not
result in the reduction of the ratings on any class of
the Certificates below the lesser of the then current or
original ratings on such Certificates.
(c) The Holders of Certificates entitled to at
least 51% of the Voting Rights may at any time remove the
Trustee and appoint a successor trustee by written
instrument or instruments, in triplicate, signed by such
Holders or their attorneys-in-fact duly authorized, one
complete set of which instruments shall be delivered to
the Company, one complete set to the Trustee so removed
and one complete set to the successor so appointed.
(d) Any resignation or removal of the Trustee
and appointment of a successor trustee pursuant to any of
the provisions of this Section shall become effective
upon acceptance of appointment by the successor trustee
as provided in Section 8.08.
Section 8.08. Successor Trustee.
(a) Any successor trustee appointed as
provided in Section 8.07 shall execute, acknowledge and
deliver to the Company and to its predecessor trustee an
instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor
trustee shall become effective and such successor trustee
shall become effective and such successor trustee,
without any further act, deed or conveyance, shall become
fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like
effect as if originally named as trustee herein. The
predecessor trustee shall deliver to the successor
trustee all [Mortgage] [Contract] Files and related
documents and statements held by it hereunder (other than
any [Mortgage] [Contract] Files at the time held by a
Custodian, which shall become the agent of any successor
trustee hereunder), and the Company, the [Master]
Servicer and the predecessor trustee shall execute and
deliver such instruments and do such other things as may
reasonably be required for more fully and certainly
vesting and confirming in the successor trustee all such
rights, powers, duties and obligations.
(b) No successor trustee shall accept
appointment as provided in this Section unless at the
time of such acceptance such successor trustee shall be
eligible under the provisions of Section 8.06.
(c) Upon acceptance of appointment by a
successor trustee as provided in this Section, the
Company shall mail notice of the succession of such
trustee hereunder to all Holders of Certificates at their
addresses as shown in the Certificate Register. If the
Company 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 Company.
Section 8.09. Merger or Consolidation of Trustee.
Any corporation or national banking association
into which the Trustee may be merged or converted or with
which it may be consolidated or any corporation or
national banking association resulting from any merger,
conversion or consolidation to which the Trustee shall be
a party, or any corporation or national banking
association succeeding to the business of the Trustee,
shall be the successor of the Trustee hereunder, provided
such corporation or national banking association shall be
eligible under the provisions of Section 8.06, without
the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein
to the contrary notwithstanding. The Trustee shall mail
notice of any such merger or consolidation to the
Certificateholders at their address as shown in the
Certificate Register.
Section 8.10. Appointment of Co-Trustee or Separate
Trustee.
(a) Notwithstanding any other provisions
hereof, at any time, for the purpose of meeting any legal
requirements of any jurisdiction in which any part of the
Trust Fund or property securing the same may at the time
be located, the [Master] Servicer and the Trustee acting
jointly shall have the power and shall execute and
deliver all instruments to appoint one or more Persons
approved by the Trustee to act as co-trustee or
co-trustees, jointly with the Trustee, or separate
trustee or separate trustees, of all or any part of the
Trust Fund, and to vest in such Person or Persons, in
such capacity, such title to the Trust Fund, or any part
thereof, and, subject to the other provisions of this
Section 8.10, such powers, duties, obligations, rights
and trusts as the [Master] Servicer and the Trustee may
consider necessary or desirable. If the [Master]
Servicer shall not have joined in such appointment within
15 days after the receipt by it of a request so to do, or
in case an Event of Default shall have occurred and be
continuing, the Trustee alone shall have the power to
make such appointment. No co-trustee or separate trustee
hereunder shall be required to meet the terms of
eligibility as a successor trustee under Section 8.06
hereunder and no notice to Holders of Certificates of the
appointment of co-trustee(s) or separate trustee(s) shall
be required under Section 8.08 hereof.
(b) In the case of any appointment of a
co-trustee or separate trustee pursuant to this Section
8.10 all rights, powers, duties and obligations conferred
or imposed upon the Trustee shall be conferred or imposed
upon and exercised or performed by the Trustee, and such
separate trustee or co-trustee jointly, except to the
extent that under any law of any jurisdiction in which
any particular act or acts are to be performed (whether
as Trustee hereunder or as successor to the [Master]
Servicer hereunder), the Trustee shall be incompetent or
unqualified to perform such act or acts, in which event
such rights, powers, duties and obligations (including
the holding of title to the Trust Fund or any portion
thereof in any such jurisdiction) shall be exercised and
performed by such separate trustee or co-trustee at the
direction of the Trustee.
(c) Any notice, request or other writing given
to the Trustee shall be deemed to have been given to each
of the then separate trustees and co-trustees, as
effectively as if given to each of them. Every
instrument appointing any separate trustee or co-trustee
shall refer to this Agreement and the conditions of this
Article VIII. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested
with the estates or property specified in its instrument
of appointment, either jointly with the Trustee or
separately, as may be provided therein, subject to all
the provisions of this Agreement, specifically including
every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed
with the Trustee.
(d) Any separate trustee or co-trustee may, at
any time, constitute the Trustee, its agent or
attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under
or in respect of this Agreement on its behalf and in its
name. If any separate trustee or co-trustee shall die,
become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts
shall vest in and be exercised by the Trustee, to the
extent permitted by law, without the appointment of a new
or successor trustee.
Section 8.11. Appointment of Custodians.
The Trustee may, with the consent of the
[Master] Servicer and the Company, appoint one or more
Custodians who are not Affiliates of the Company, the
[Master] Servicer or any Seller to hold all or a portion
of the [Mortgage] [Contract] Files as agent for the
Trustee, by entering into a Custodial Agreement. Subject
to Article VIII, the Trustee agrees to comply with the
terms of each Custodial Agreement and to enforce the
terms and provisions thereof against the Custodian for
the benefit of the Certificateholders. Each Custodian
shall be a depository institution subject to supervision
by federal or state authority, shall have a combined
capital and surplus of at least $15,000,000 and shall be
qualified to do business in the jurisdiction in which it
holds any [Mortgage] [Contract] File. Each Custodial
Agreement may be amended only as provided in Section
11.01. The Trustee shall notify the Certificateholders
of the appointment of any Custodian (other than the
Custodian appointed as of the Closing Date) pursuant to
this Section 8.11.
Section 8.12. Appointment of Office or Agency.
The Trustee will maintain an office or agency
in the City of New York where Certificates may be
surrendered for registration of transfer or exchange.
The Trustee initially designates its offices located at
[____________________] for the purpose of keeping the
Certificate Register. The Trustee will maintain an
office at the address stated in Section 11.05(c) hereof
where notices and demands to or upon the Trustee in
respect of this Agreement may be served.
ARTICLE IX
TERMINATION
Section 9.01. Termination Upon Purchase by the [Master]
Servicer or the Company or Liquidation of
All [Mortgage Loans] [Contracts].
(a) Subject to Section 9.02, the respective
obligations and responsibilities of the Company, the
[Master] Servicer and the Trustee created hereby in
respect of the Certificates (other than the obligation of
the Trustee to make certain payments after the Final
Distribution Date to Certificateholders and the
obligation of the Company to send certain notices as
hereinafter set forth) shall terminate upon the last
action required to be taken by the Trustee on the Final
Distribution Date pursuant to this Article IX following
the earlier of:
(i) the later of the final payment or other
liquidation (or any Advance with respect thereto)
of the last [Mortgage Loan] [Contract] remaining in
the Trust Fund or the disposition of all property
acquired upon foreclosure or deed in lieu of
foreclosure of any [Mortgage Loan] [Contract], or
(ii) the purchase by the [Master] Servicer or
the Company of all [Mortgage Loans] [Contracts] and
all property acquired in respect of any [Mortgage
Loan] [Contract] remaining in the Trust Fund at a
price equal to 100% of the unpaid principal balance
of each [Mortgage Loan] [Contract] (or, if less
than such unpaid principal balance, the fair market
value of the related underlying property of such
[Mortgage Loan] [Contract] with respect to
[Mortgage Loans] [Contracts] as to which title has
been acquired), including with respect to any
mortgage loan as to which an REO Property was
acquired, the unpaid principal balance thereof
immediately prior to the date of acquisition (net
of any unreimbursed Advances attributable to
principal) on the day of repurchase, plus accrued
interest thereon at the Net Mortgage Rate to, but
not including, the first day of the month in which
such repurchase price is distributed, 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, living on the date hereof and provided
further that the purchase price set forth above
shall be increased as is necessary, as determined
by the [Master] Servicer, to avoid disqualification
of the Trust Fund as a REMIC.
The right of the [Master] Servicer or the
Company to purchase all the assets of the Trust Fund
pursuant to clause (ii) above is conditioned upon the
Pool Stated Principal Balance as of the Final
Distribution Date being less than ten percent of the
Cut-off Date Principal Balance of the [Mortgage Loans]
[Contracts]. If such right is exercised by the [Master]
Servicer, the [Master] Servicer shall be deemed to have
been reimbursed for the full amount of any unreimbursed
Advances theretofore made by it with respect to the
[Mortgage Loans] [Contracts]. In addition, the [Master]
Servicer or the Company, as applicable, shall provide to
the Trustee the certification required by Section 3.15
and the Trustee and any Custodian shall, promptly
following payment of the purchase price, release to the
[Master] Servicer or the Company, as applicable, the
[Mortgage] [Contract] Files pertaining to the [Mortgage
Loans] [Contracts] being purchased.
(b) The [Master] Servicer or, in the case of
a final distribution as a result of the exercise by the
Company of its right to purchase the assets of the Trust
Fund, the Company shall give the Trustee not less than 60
days' prior notice of the Distribution Date on which the
[Master] Servicer or the Company, as applicable,
anticipates that the final distribution will be made to
Certificateholders (whether as a result of the exercise
by the [Master] Servicer or the Company of its right to
purchase the assets of the Trust Fund or otherwise).
Notice of any termination, specifying the anticipated
Final Distribution Date (which shall be a date that would
otherwise be a Distribution Date) upon which the
Certificateholders may surrender their Certificates to
the Trustee for payment of the final distribution and
cancellation, shall be given promptly by the [Master]
Servicer or the Company, as applicable, (if it is
exercising its right to purchase the assets of the Trust
Fund) or by the Trustee (in any other case) by letter to
Certificateholders mailed not earlier than the 15th day
and not later than the 25th day of the month next
preceding the month of such final distribution
specifying:
(i) the anticipated Final Distribution Date
upon which final payment of the Certificates is
anticipated to be made upon presentation and
surrender of Certificates at the office or agency
of the Trustee therein designated;
(ii) the amount of any such final payment, if
known; and
(iii) that the Record Date otherwise
applicable to such Distribution Date is not
applicable, payments being made only upon
presentation and surrender of the Certificates at
the office or agency of the Trustee therein
specified.
If the [Master] Servicer or the Company, as applicable,
is obligated to give notice to Certificateholders as
aforesaid, it shall give such notice to the Certificate
Registrar at the time such notice is given to
Certificateholders. In the event such notice is given by
the [Master] Servicer or the Company, the [Master]
Servicer or the Company, as applicable, shall deposit in
the Certificate Account before the Final Distribution
Date in immediately available funds an amount equal to
the purchase price for the assets of the Trust Fund
computed as above provided.
(c) Upon presentation and surrender of the
Certificates by the Certificateholders, the Trustee shall
distribute to the Certificateholders (i) the amount
otherwise distributable on such Distribution Date, if not
in connection with the [Master] Servicer's or the
Company's election to repurchase, or (ii) if the [Master]
Servicer or the Company elected to so repurchase, an
amount determined as follows: (A) with respect to each
Certificate the outstanding Certificate Principal Balance
thereof, plus one month's Accrued Certificate Interest
and any previously unpaid Accrued Certificate Interest,
subject to the priority set forth in Section 4.02(a) and
(B) with respect to the Class R Certificates, any excess
of the amounts available for distribution (including the
repurchase price specified in clause (ii) of subsection
(a) of this Section) over the total amount distributed
under the immediately preceding clause (A).
(d) In the event that any Certificateholders
shall not surrender their Certificates for final payment
and cancellation on or before the Final Distribution
Date, the Trustee shall on such date cause all funds in
the Certificate Account not distributed in final
distribution to Certificateholders to be withdrawn
therefrom and credited to the remaining
Certificateholders by depositing such funds in a separate
escrow account for the benefit of such
Certificateholders, and the [Master] Servicer or the
Company, as applicable (if it exercised its right to
purchase the assets of the Trust Fund), 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 six months
after the second notice any Certificate shall not have
been surrendered for cancellation, the Trustee shall take
appropriate steps as directed by the [Master] Servicer or
the Company, as applicable, to contact the remaining
Certificateholders concerning surrender of their
Certificates. The costs and expenses of maintaining the
escrow account and of contacting Certificateholders shall
be paid out of the assets which remain in the escrow
account. If within nine months after the second notice
any Certificates shall not have been surrendered for
cancellation, the Trustee shall pay to the [Master]
Servicer or the Company, as applicable, all amounts
distributable to the holders thereof and the [Master]
Servicer or the Company, as applicable, shall thereafter
hold such amounts until distributed to such holders. No
interest shall accrue or be payable to any
Certificateholder on any amount held in the escrow
account or by the [Master] Servicer or the Company, as
applicable, as a result of such Certificateholder's
failure to surrender its Certificate(s) for final payment
thereof in accordance with this Section 9.01.
Section 9.02. Additional Termination Requirements.
(a) The Trust Fund shall be terminated in
accordance with the following additional requirements,
unless the Trustee and the [Master] Servicer have
received an Opinion of Counsel (which Opinion of Counsel
shall not be an expense of the Trustee) to the effect
that the failure of the Trust Fund to comply with the
requirements of this Section 9.02 will not (i) result in
the imposition on the Trust Fund of taxes on "prohibited
transactions," as described in Section 860F of the Code,
or (ii) cause the Trust Fund to fail to qualify as a
REMIC at any time that any Certificate is outstanding:
(i) The [Master] Servicer shall establish a
90-day liquidation period for the Trust Fund and
specify the first day of such period in a statement
attached to the Trust Fund's final Tax Return
pursuant to Treasury regulations Section 1.860F-1.
The [Master] Servicer also shall satisfy all of the
requirements of a qualified liquidation for the
Trust Fund under Section 860F of the Code and the
regulations thereunder;
(ii) The [Master] Servicer shall notify the
Trustee at the commencement of such 90-day
liquidation period and, at or prior to the time of
making of the final payment on the Certificates,
the Trustee shall sell or otherwise dispose of all
of the remaining assets of the Trust Fund in
accordance with the terms hereof; and
(iii) If the [Master] Servicer is
exercising its right to purchase the assets of the
Trust Fund, the [Master] Servicer shall, during the
90-day liquidation period and at or prior to the
Final Distribution Date, purchase all of the assets
of the Trust Fund for cash; provided, however, that
in the event that a calendar quarter ends after the
commencement of the 90-day liquidation period but
prior to the Final Distribution Date, the [Master]
Servicer shall not purchase any of the assets of
the Trust Fund prior to the close of that calendar
quarter.
(b) Each Holder of a Certificate and the
Trustee hereby irrevocably approves and appoints the
[Master] Servicer as its attorney-in-fact to adopt a plan
of complete liquidation for the Trust Fund in accordance
with the terms and conditions of this Agreement.
ARTICLE X
REMIC PROVISIONS
Section 10.01. REMIC Administration.
(a) The [Master] Servicer shall make an
election to treat the Trust Fund as a REMIC under the
Code and, if necessary, under applicable state law. Such
election will be made on Form 1066 or other appropriate
federal tax or information return (including Form 8811)
or any appropriate state return for the taxable year
ending on the last day of the calendar year in which the
Certificates are issued. For the purposes of the REMIC
election in respect of the Trust Fund, the Class A (other
than the Class A-5 Certificates), Class M and Class B
Certificates and the Uncertificated REMIC Regular
Interests shall be designated as the "regular interests"
and the Class R Certificates shall be designated as the
sole class of "residual interests" in the REMIC. The
[Master] Servicer and the Trustee shall not permit the
creation of any "interests" (within the meaning of
Section 860G of the Code) in the REMIC other than the
Certificates (excluding the Class A-5 Certificates) and
the Uncertificated REMIC Regular Interests.
(b) The Closing Date is hereby designated as
the "startup day" of the Trust Fund within the meaning of
Section 860G(a)(9) of the Code.
(c) [Residential Funding Corporation] [shall
hold a Class R Certificate representing a 0.01%
Percentage Interest of all Class R Certificates and]
shall be designated as the tax matters person with
respect to the REMIC in the manner provided under
Treasury regulations section 1.860F-4(d) and temporary
Treasury regulations section 301.6231(a)(7)-1T.
[Residential Funding Corporation], as tax matters person,
shall (i) act on behalf of the REMIC in relation to any
tax matter or controversy involving the Trust Fund and
(ii) represent the Trust Fund in any administrative or
judicial proceeding relating to an examination or audit
by any governmental taxing authority with respect
thereto. The legal expenses, including without
limitation attorneys' or accountants' fees, and costs of
any such proceeding and any liability resulting therefrom
shall be expenses of the Trust Fund and [Residential
Funding Corporation] shall be entitled to reimbursement
therefor out of amounts attributable to the [Mortgage
Loans] [Contracts] on deposit in the Custodial Account as
provided by Section 3.10 unless such legal expenses and
costs are incurred by reason of [Residential Funding
Corporation's] willful misfeasance, bad faith or gross
negligence. If [Residential Funding] is no longer the
[Master] Servicer hereunder [Residential Funding] shall
be paid reasonable compensation by any successor [Master]
Servicer hereto for so acting as "tax matters person".
(d) The [Master] Servicer shall prepare or
cause to be prepared all of the Tax Returns that it
determines are required with respect to the REMIC and
deliver such Tax Returns in a timely manner to the
Trustee and the Trustee shall sign and file such Tax
Returns in a timely manner. The expenses of preparing
such returns shall be borne by the [Master] Servicer
without any right of reimbursement therefor. The
[Master] Servicer agrees to indemnify and hold harmless
the Trustee with respect to any tax or liability arising
from the Trustee's signing of Tax Returns that contain
errors or omissions.
(e) The [Master] Servicer shall provide (i) to
any Transferor of a Class R Certificate such information
as is necessary for the application of any tax relating
to the transfer of a Class R Certificate to any Person
who is not a Permitted Transferee, (ii) to the Trustee
and the Trustee shall forward to the Certificateholders
such information or reports as are required by the Code
or the REMIC Provisions including reports relating to
interest, original issue discount and market discount or
premium (using the Prepayment Assumption) and (iii) to
the Internal Revenue Service the name, title, address and
telephone number of the person who will serve as the
representative of the REMIC.
(f) The [Master] Servicer shall take such
actions and shall cause the REMIC to take such actions as
are reasonably within the [Master] Servicer's control and
the scope of its duties more specifically set forth
herein as shall be necessary to maintain the status
thereof as a REMIC under the REMIC Provisions (and the
Trustee shall assist the [Master] Servicer, to the extent
reasonably requested by the [Master] Servicer to do so).
The [Master] Servicer shall not knowingly or
intentionally take any action, cause the REMIC to take
any action or fail to take (or fail to cause to be taken)
any action reasonably within its control and the scope of
duties more specifically set forth herein, that, under
the REMIC Provisions, if taken or not taken, as the case
may be, could (i) endanger the status of the Trust Fund
as a REMIC or (ii) result in the imposition of a tax upon
the REMIC (including but not limited to the tax on
prohibited transactions as defined in Section 860F(a)(2)
of the Code and the tax on contributions to a REMIC set
forth in Section 860G(d) of the Code) (either such event,
an "Adverse REMIC Event") unless the [Master] Servicer
receives an Opinion of Counsel (at the expense of the
party seeking to take such action or, if such party fails
to pay such expense, and the [Master] Servicer determines
that taking such action is in the best interest of the
Trust Fund and the Certificateholders, at the expense of
the Trust Fund, but in no event at the expense of the
[Master] Servicer or the Trustee) to the effect that the
contemplated action will not, with respect to the REMIC,
endanger such status or, unless the [Master] Servicer
determines in its sole discretion to indemnify the Trust
Fund against such tax, result in the imposition of such
a tax. The Trustee shall not take or fail to take any
action (whether or not authorized hereunder) as to which
the [Master] Servicer has advised it in writing that it
has received an Opinion of Counsel to the effect that an
Adverse REMIC Event could occur with respect to such
action. In addition, prior to taking any action with
respect to the REMIC or its assets, or causing the REMIC
to take any action, which is not expressly permitted
under the terms of this Agreement, the Trustee will
consult with the [Master] Servicer or its designee, in
writing, with respect to whether such action could cause
an Adverse REMIC Event to occur with respect to the REMIC
and the Trustee shall not take any such action or cause
the REMIC to take any such action as to which the
[Master] Servicer has advised it in writing that an
Adverse REMIC Event could occur. The [Master] Servicer
may consult with counsel to make such written advice, and
the cost of same shall be borne by the party seeking to
take the action not expressly permitted by this
Agreement, but in no event at the expense of the [Master]
Servicer. At all times as may be required by the Code,
the [Master] Servicer will to the extent within its
control and the scope of its duties more specifically set
forth herein, maintain substantially all of the assets of
the REMIC as "qualified mortgages" as defined in Section
860G(a)(3) of the Code and "permitted investments" as
defined in Section 860G(a)(5) of the Code.
(g) In the event that any tax is imposed on
"prohibited transactions" of the REMIC as defined in
Section 860F(a)(2) of the Code, on "net income from
foreclosure property" of the REMIC as defined in Section
860G(c) of the Code, on any contributions to the REMIC
after the Startup Day therefor pursuant to Section
860G(d) of the Code, or any other tax imposed by the Code
or any applicable provisions of state or local laws, such
tax shall be charged (i) to the [Master] Servicer, if
such tax arises out of or results from a breach by the
[Master] Servicer of any of its obligations under this
Agreement or the [Master] Servicer has in its sole
discretion determined to indemnify the Trust Fund against
such tax, (ii) to the Trustee, if such tax arises out of
or results from a breach by the Trustee of any of its
obligations under this, or otherwise (iii) against
amounts on deposit in the Custodial Account as provided
by Section 3.10 and on the Distribution Date(s) following
such reimbursement the aggregate of such taxes shall be
allocated in reduction of the Accrued Certificate
Interest on each Class entitled thereto in the same
manner as if such taxes constituted a Prepayment Interest
Shortfall.
(h) The Trustee and the [Master] Servicer
shall, for federal income tax purposes, maintain books
and records with respect to the REMIC on a calendar year
and on an accrual basis or as otherwise may be required
by the REMIC Provisions.
(i) Following the Startup Day, neither the
[Master] Servicer nor the Trustee shall accept any
contributions of assets to the REMIC unless the [Master]
Servicer and the Trustee shall have received an Opinion
of Counsel (at the expense of the party seeking to make
such contribution) to the effect that the inclusion of
such assets in the REMIC will not cause the Trust Fund to
fail to qualify as a REMIC at any time that any
Certificates are outstanding or subject the REMIC to any
tax under the REMIC Provisions or other applicable
provisions of federal, state and local law or ordinances.
(j) Neither the [Master] Servicer nor the
Trustee shall enter into any arrangement by which the
REMIC will receive a fee or other compensation for
services nor permit the REMIC to receive any income from
assets other than "qualified mortgages" as defined in
Section 860G(a)(3) of the Code or "permitted investments"
as defined in Section 860G(a)(5) of the Code.
(k) The Maturity Date of each Class of
Certificates representing a regular interest in the REMIC
(other than the Uncertificated REMIC Regular Interests)
is [__________ __, 20__] which is the Distribution Date
immediately following the latest scheduled maturity of
any [Mortgage Loan] [Contract]. The Maturity Date of
each Uncertificated REMIC Regular Interest is the
Distribution Date immediately following the maturity date
for the related [Mortgage Loan] [Contract].
(l) Within 30 days after the Closing Date,
the [Master] Servicer shall prepare and file with the
Internal Revenue Service Form 8811, "Information Return
for Real Estate Mortgage Investment Conduits (REMIC) and
Issuers of Collateralized Debt Obligations" for the
REMIC.
(m) Neither the Trustee nor the [Master]
Servicer shall sell, dispose of or substitute for any of
the [Mortgage Loans] [Contracts] (except in connection
with (i) the default, imminent default or foreclosure of
a [Mortgage Loan] [Contract], including but not limited
to, the acquisition or sale of a Mortgaged Property
acquired by deed in lieu of foreclosure, (ii) the
bankruptcy of the REMIC, (iii) the termination of the
REMIC pursuant to Article IX of this Agreement or (iv) a
purchase of [Mortgage Loans] [Contracts] pursuant to
Article II or III of this Agreement) or acquire any
assets for the REMIC or sell or dispose of any
investments in the Custodial Account or the Certificate
Account for gain, or accept any contributions to the
REMIC after the Closing Date unless it has received an
Opinion of Counsel that such sale, disposition,
substitution or acquisition will not (a) affect adversely
the status of the Trust Fund as a REMIC or (b) unless the
[Master] Servicer has determined in its sole discretion
to indemnify the Trust Fund against such tax, cause the
REMIC to be subject to a tax on "prohibited transactions"
or "contributions" pursuant to the REMIC Provisions.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. Amendment.
(a) This Agreement or any Custodial Agreement
may be amended from time to time by the Company, the
[Master] Servicer and the Trustee, without the consent of
any of the Certificateholders:
(i) to cure any ambiguity,
(ii) to correct or supplement any provisions
herein or therein, which may be inconsistent with
any other provisions herein or therein or to
correct any error,
(iii) to modify, eliminate or add to any
of its provisions to such extent as shall be
necessary to maintain the qualification of the
Trust Fund as a REMIC at all times that any
Certificate is outstanding or to avoid or minimize
the risk of the imposition of any tax on the Trust
Fund pursuant to the Code that would be a claim
against the Trust Fund, provided that the Trustee
has received an Opinion of Counsel to the effect
that (A) such action is necessary or desirable to
maintain such qualification or to avoid or minimize
the risk of the imposition of any such tax and (B)
such action will not adversely affect in any
material respect the interests of any
Certificateholder,
(iv) to change the timing and/or nature of
deposits into the Custodial Account or the
Certificate Account or to change the name in which
the Custodial Account is maintained, provided that
(A) the Certificate Account Deposit Date shall in
no event be later than the related Distribution
Date, (B) such change shall not, as evidenced by an
Opinion of Counsel, adversely affect in any
material respect the interests of any
Certificateholder and (C) such change shall not
result in a reduction of the rating assigned to any
Class of Certificates below the lower of the then-
current rating or the rating assigned to such
Certificates as of the Closing Date, as evidenced
by a letter from each Rating Agency to such effect,
(v) to modify, eliminate or add to the
provisions of Section 5.02(f) or any other
provision hereof restricting transfer of the Class
R Certificates by virtue of their being the REMIC
"residual interests," provided that (A) such change
shall not result in reduction of the rating
assigned to any such Class of Certificates below
the lower of the then-current rating or the rating
assigned to such Certificates as of the Closing
Date, as evidenced by a letter from each Rating
Agency to such effect, and (B) such change shall
not, as evidenced by an Opinion of Counsel (at the
expense of the party seeking so to modify,
eliminate or add such provisions), cause either the
Trust Fund or any of the Certificateholders (other
than the transferor) to be subject to a federal tax
caused by a transfer to a Person that is not a
Permitted Transferee, or
(vi) to make any other provisions with respect
to matters or questions arising under this
Agreement or such Custodial Agreement which shall
not be materially inconsistent with the provisions
of this Agreement, provided that such action shall
not, as evidenced by an Opinion of Counsel,
adversely affect in any material respect the
interests of any Certificateholder.
(b) This Agreement or any Custodial Agreement
may also be amended from time to time by the Company, the
[Master] Servicer and the Trustee with the consent of the
Holders of Certificates evidencing in the aggregate not
less than 66% of the Percentage Interests of each Class
of Certificates affected thereby for the purpose of
adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or
such Custodial Agreement or of modifying in any manner
the rights of the Holders of Certificates of such Class;
provided, however, that no such amendment shall:
(i) reduce in any manner the amount of, or
delay the timing of, payments which are required to
be distributed on any Certificate without the
consent of the Holder of such Certificate,
(ii) adversely affect in any material respect
the interest of the Holders of Certificates of any
Class in a manner other than as described in clause
(i) hereof without the consent of Holders of
Certificates of such Class evidencing, as to such
Class, Percentage Interests aggregating not less
than 66%, or
(iii) reduce the aforesaid percentage of
Certificates of any Class the Holders of which are
required to consent to any such amendment, in any
such case without the consent of the Holders of all
Certificates of such Class then outstanding.
(c) Notwithstanding any contrary provision of
this Agreement, the Trustee shall not consent to any
amendment to this Agreement unless it shall have first
received an Opinion of Counsel (at the expense of the
party seeking such amendment) to the effect that such
amendment or the exercise of any power granted to the
[Master] Servicer, the Company or the Trustee in
accordance with such amendment will not result in the
imposition of a federal tax on the Trust Fund or cause
the Trust Fund to fail to qualify as a REMIC at any time
that any Certificate is outstanding.
(d) Promptly after the execution of any such
amendment the Trustee shall furnish written notification
of the substance of such amendment to each
Certificateholder. It shall not be necessary for the
consent of Certificateholders under this Section 11.01 to
approve the particular form of any proposed amendment,
but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such
consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject
to such reasonable regulations as the Trustee may
prescribe.
(e) The Company shall have the option, in its
sole discretion, to obtain and deliver to the Trustee any
corporate guaranty, payment obligation, irrevocable
letter of credit, surety bond, insurance policy or
similar instrument or a reserve fund, or any combination
of the foregoing, for the purpose of protecting the
Holders of the Class B Certificates against any or all
Realized Losses or other shortfalls. Any such instrument
or fund shall be held by the Trustee for the benefit of
the Class B Certificateholders, but shall not be and
shall not be deemed to be under any circumstances
included in the Trust Fund. To the extent that any such
instrument or fund constitutes a reserve fund for federal
income tax purposes, (i) any reserve fund so established
shall be an outside reserve fund and not an asset of the
Trust Fund, (ii) any such reserve fund shall be owned by
the Company, and (iii) amounts transferred by the Trust
Fund to any such reserve fund shall be treated as amounts
distributed by the Trust Fund to the Company or any
successor, all within the meaning of proposed Treasury
Regulations Section 1.860G-1(h) as it reads as of the
Cut-off Date. In connection with the provision of any
such instrument or fund, this Agreement and any provision
hereof may be modified, added to, deleted or otherwise
amended in any manner that is related or incidental to
such instrument or fund or the establishment or
administration thereof, such amendment to be made by
written instrument executed or consented to by the
Company but without the consent of any Certificateholder
and without the consent of the [Master] Servicer or the
Trustee being required unless any such amendment would
impose any additional obligation on, or otherwise
adversely affect the interests of the Class A
Certificateholders, the Class R Certificateholders, the
Class M Certificateholders, the [Master] Servicer or the
Trustee, as applicable; provided that the Company obtains
an Opinion of Counsel (which need not be an opinion of
Independent counsel) to the effect that any such
amendment will not cause (a) any federal tax to be
imposed on the Trust Fund, including without limitation,
any federal tax imposed on "prohibited transactions"
under Section 860F(a)(1) of the Code or on "contributions
after the startup date" under Section 860G(d)(1) of the
Code and (b) the Trust Fund to fail to qualify as a REMIC
at any time that any Certificate is outstanding. In the
event that the Company elects to provide such coverage in
the form of a limited guaranty provided by General Motors
Acceptance Corporation, the Company may elect that the
text of such amendment to this Agreement shall be
substantially in the form attached hereto as Exhibit M
(in which case Residential Funding's Subordinate
Certificate Loss Obligation as described in such exhibit
shall be established by Residential Funding's consent to
such amendment) and that the limited guaranty shall be
executed in the form attached hereto as Exhibit N, with
such changes as the Company shall deem to be appropriate;
it being understood that the Trustee has reviewed and
approved the content of such forms and that the Trustee's
consent or approval to the use thereof is not required.
Section 11.02. Recordation of Agreement; Counterparts.
(a) To the extent permitted by applicable law,
this Agreement is subject to recordation in all
appropriate public offices for real property records in
all the counties or other comparable jurisdictions in
which any or all of the properties subject to the
Mortgages are situated, and in any other appropriate
public recording office or elsewhere, such recordation to
be effected by the [Master] Servicer and at its expense
on direction by the Trustee (pursuant to the request of
Holders of Certificates entitled to at least 25% of the
Voting Rights), but only upon direction accompanied by an
Opinion of Counsel to the effect that such recordation
materially and beneficially affects the interests of the
Certificateholders.
(b) 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.
(a) The death or incapacity of any
Certificateholder shall not operate to terminate this
Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or heirs to
claim an accounting or to take any action or proceeding
in any court for a partition or winding up of the Trust
Fund, nor otherwise affect the rights, obligations and
liabilities of any of the parties hereto.
(b) No Certificateholder shall have any right
to vote (except as expressly provided herein) or in any
manner otherwise control the operation and management of
the Trust Fund, or the obligations of the parties hereto,
nor shall anything herein set forth, or contained in the
terms of the Certificates, be construed so as to
constitute the Certificateholders from time to time as
partners or members of an association; nor shall any
Certificateholder be under any liability to any third
person by reason of any action taken by the parties to
this Agreement pursuant to any provision hereof.
(c) No Certificateholder shall have any right
by virtue of any provision of this Agreement to institute
any suit, action or proceeding in equity or at law upon
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 of any Class evidencing in the aggregate not
less than 25% of the related Percentage Interests of such
Class, shall have made written request upon the Trustee
to institute such action, suit or proceeding in its own
name as Trustee hereunder 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
of any Class shall have any right in any manner whatever
by virtue of any provision of this Agreement to affect,
disturb or prejudice the rights of the Holders of any
other of such Certificates of such Class or any other
Class, or to obtain or seek to obtain priority over or
preference to any other such Holder, or to enforce any
right under this Agreement, except in the manner herein
provided and for the common benefit of Certificateholders
of such Class or all Classes, as the case may be. For
the protection and enforcement of the provisions of this
Section 11.03, 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 AND THE CERTIFICATES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
Section 11.05. Notices.
All demands and notices hereunder shall be in
writing and shall be deemed to have been duly given if
personally delivered at or mailed by registered mail,
postage prepaid (except for notices to the Trustee which
shall be deemed to have been duly given only when
received), to (a) in the case of the Company, 8400
Normandale Lake Boulevard, Suite 700, Minneapolis,
Minnesota 55437, Attention: President, or such other
address as may hereafter be furnished to the [Master]
Servicer and the Trustee in writing by the Company, (b)
in the case of the [Master] Servicer,
[_______________________] Attention: [________] or such
other address as may be hereafter furnished to the
Company and the Trustee by the [Master] Servicer in
writing, (c) in the case of the Trustee,
[_______________________], Attention:
[__________________], or such other address as may
hereafter be furnished to the Company and the [Master]
Servicer in writing by the Trustee, (d) in the case of
[name of rating agency], [_____________________], or such
other address as may hereafter be furnished to the
Company, the Trustee and the [Master] Servicer in writing
by [name of rating agency] and (e) in the case of [name
of rating agency], [____________________] or such other
address as may be hereafter furnished to the Company,
Trustee, and [Master] Servicer by [name of rating
agency]. Any notice required or permitted to be mailed
to a Certificateholder shall be given by first class
mail, postage prepaid, at the address of such holder as
shown in the Certificate Register. Any notice so mailed
within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given, whether or
not the Certificateholder receives such notice.
Section 11.06. Notices to Rating Agency.
The Company, the [Master] Servicer or the
Trustee, as applicable, shall notify each Rating Agency
and the Subservicer at such time as it is otherwise
required pursuant to this Agreement to give notice of the
occurrence of, any of the events described in clause (a),
(b), (c), (d), (g), (h), (i) or (j) below or provide a
copy to each Rating Agency at such time as otherwise
required to be delivered pursuant to this Agreement of
any of the statements described in clauses (e) and (f)
below:
(a) a material change or amendment to this
Agreement,
(b) the occurrence of an Event of Default,
(c) the termination or appointment of a
successor [Master] Servicer or Trustee or a change
in the majority ownership of the Trustee,
(d) the filing of any claim under the
[Master] Servicer's blanket fidelity bond and the
errors and omissions insurance policy required by
Section 3.12 or the cancellation or modification of
coverage under any such instrument,
(e) the statement required to be delivered to
the Holders of each Class of Certificates pursuant
to Section 4.03,
(f) the statements required to be delivered
pursuant to Sections 3.18 and 3.19,
(g) a change in the location of the Custodial
Account or the Certificate Account,
(h) the occurrence of any monthly cash flow
shortfall to the Holders of any Class of
Certificates resulting from the failure by the
[Master] Servicer to make an Advance pursuant to
Section 4.04,
(i) the occurrence of the Final Distribution
Date, and
(j) the repurchase of or substitution for any
[Mortgage Loan] [Contract],
provided, however, that with respect to notice of the
occurrence of the events described in clauses (d), (g) or
(h) above, the [Master] Servicer shall provide prompt
written notice to each Rating Agency and the Subservicer
of any such event known to the [Master] Servicer.
Section 11.07. Severability of Provisions.
If any one or more of the covenants,
agreements, provisions or terms of this Agreement shall
be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be
deemed severable from the remaining covenants,
agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of
the other provisions of this Agreement or of the
Certificates or the rights of the Holders thereof.
Section 11.08. Supplemental Provisions for
Resecuritization.
This Agreement may be supplemented by means of
the addition of a separate Article hereto (a
"Supplemental Article") for the purpose of resecuritizing
any of the Certificates issued hereunder, under the
following circumstances. With respect to any Class or
Classes of Certificates issued hereunder, or any portion
of any such Class, as to which the Company or any of its
Affiliates (or any designee thereof) is the registered
Holder (the "Resecuritized Certificates"), the Company
may deposit such Resecuritized Certificates into a new
REMIC, grantor trust or custodial arrangement (a
"Restructuring Vehicle") to be held by the Trustee
pursuant to a Supplemental Article. The instrument
adopting such Supplemental Article shall be executed by
the Company, the [Master] Servicer and the Trustee;
provided, that neither the [Master] Servicer nor the
Trustee shall withhold their consent thereto if their
respective interests would not be materially adversely
affected thereby. To the extent, but only to the extent
that the terms of the Supplemental Article do not in any
way affect any provisions of this Agreement as to any of
the Certificates initially issued hereunder, the adoption
of the Supplemental Article shall not constitute an
"amendment" of this Agreement subject to the requirements
of Section 11.01.
Each Supplemental Article shall set forth all
necessary provisions relating to the holding of the
Resecuritized Certificates by the Trustee, the
establishment of the Restructuring Vehicle, the issuing
of various classes of new certificates by the
Restructuring Vehicle and the distributions to be made
thereon, and any other provisions necessary to the
purposes thereof. In connection with each Supplemental
Article, the Company shall deliver to the Trustee an
Opinion of Counsel to the effect that the Restructuring
Vehicle will qualify as a REMIC, grantor trust or other
entity not subject to taxation for federal income tax
purposes.
IN WITNESS WHEREOF, the Company, the [Master]
Servicer and the Trustee have caused their names to be
signed hereto by their respective officers thereunto
duly authorized and their respective seals, duly
attested, to be hereunto affixed, all as of the day and
year first above written.
RESIDENTIAL ASSET SECURITIES
CORPORATION
[Seal]
By:
Name:
Title:
Attest:
Name:
Title:
[NAME OF [MASTER] SERVICER]
[Seal]
Name:
Title:
Attest:
Name:
Title:
[NAME OF TRUSTEE]
as Trustee
[Seal]
Name:
Title:
Attest:
Name:
Title:
STATE OF )
) ss.:
COUNTY OF )
On the ______ day of _____, 199_ before me, a
notary public in and for said State personally appeared
______________, known to me to be a _____________ of
Residential Asset Securities Corporation, one of the
corporations that executed the within instrument, and
also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that
such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand
and affixed my official seal the day and year in this
certificate first above written.
Notary Public
[Notarial Seal]
STATE OF )
) ss.:
COUNTY OF )
On the ____ day of ____, 199_ before me, a
notary public in and for said State, personally appeared
_______________, known to me to be a ____________ of
[Name of [Master] Servicer], one of the corporations that
executed the within instrument, and also known to me to
be the person who executed it on behalf of said
corporation, and acknowledged to me that such corporation
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand
and affixed my official seal the day and year in this
certificate first above written.
Notary Public
[Notarial Seal]
STATE OF )
) ss.:
COUNTY OF )
On the _____ day of _____, 199_ before me, a
notary public in and for said State, personally appeared
________________, known to me to be a ______________ of
[Name of Trustee], a __________ that executed the within
instrument, and also known to me to be the person who
executed it on behalf of said ___________________ and
acknowledged to me that such national banking association
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand
and affixed my official seal the day and year in this
certificate first above written.
Notary Public
[Notarial Seal]
EXHIBIT A
FORM OF CLASS A CERTIFICATE
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES,
THIS CERTIFICATE IS A "REGULAR INTEREST" IN A "REAL
ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986 (THE "CODE").
[THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE RESOLD
OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH
ACT AND LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS
WHICH ARE EXEMPT FROM REGISTRATION UNDER SUCH ACT AND
UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF THE
AGREEMENT.]
[NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO
AN EMPLOYEE BENEFIT PLAN OR OTHER PLAN SUBJECT TO THE
PROHIBITED TRANSACTION PROVISIONS OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA"), OR SECTION 4975 OF THE CODE UNLESS THE
TRANSFEREE PROVIDES AN OPINION OF COUNSEL SATISFACTORY TO
THE [MASTER] SERVICER, THE COMPANY AND THE TRUSTEE THAT
THE PURCHASE OF THIS CERTIFICATE BY, ON BEHALF OF OR WITH
"PLAN ASSETS" OF ANY SUCH PLAN IS PERMISSIBLE UNDER
APPLICABLE LAW, WILL NOT CONSTITUTE OR RESULT IN A NON-
EXEMPT PROHIBITED TRANSACTION WITHIN THE MEANING OF
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE AND WILL
NOT SUBJECT THE [MASTER] SERVICER, THE COMPANY OR THE
TRUSTEE TO ANY OBLIGATION IN ADDITION TO THOSE UNDERTAKEN
IN THE AGREEMENT (AS DEFINED BELOW), PROVIDED, THAT NO
SUCH OPINION SHALL BE REQUIRED UNDER THE CIRCUMSTANCES
SET FORTH IN SECTION 5.02 OF THE AGREEMENT.]
[THE FOLLOWING INFORMATION IS PROVIDED SOLELY
FOR THE PURPOSES OF APPLYING THE U.S. FEDERAL INCOME TAX
ORIGINAL ISSUE DISCOUNT ("OID") RULES TO THIS
CERTIFICATE. THE ISSUE DATE OF THIS CERTIFICATE IS
[_____ __, 199_]. ASSUMING THAT THE [MORTGAGE LOANS]
[CONTRACTS] PREPAY AT [___]% OF THE STANDARD PREPAYMENT
ASSUMPTION (AS DESCRIBED IN THE PROSPECTUS SUPPLEMENT),
[AND ASSUMING A CONSTANT PASS-THROUGH RATE EQUAL TO THE
INITIAL PASS-THROUGH RATE,] THIS CERTIFICATE HAS BEEN
ISSUED WITH NO MORE THAN $[ ] OF OID PER [$1,000]
[$100,000] OF [INITIAL CERTIFICATE PRINCIPAL BALANCE]
[NOTIONAL AMOUNT], THE YIELD TO MATURITY IS [ ]% AND
THE AMOUNT OF OID ATTRIBUTABLE TO THE INITIAL ACCRUAL
PERIOD IS NO MORE THAN $[ ] PER [$1,000] [$100,000]
OF [INITIAL CERTIFICATE PRINCIPAL BALANCE] [NOTIONAL
AMOUNT], COMPUTED USING THE APPROXIMATE METHOD. NO
REPRESENTATION IS MADE THAT THE [MORTGAGE LOANS]
[CONTRACTS] WILL PREPAY AT A RATE BASED ON THE STANDARD
PREPAYMENT ASSUMPTION OR AT ANY OTHER RATE OR AS TO THE
CONSTANCY OF THE PASS-THROUGH RATE.]
Certificate No. [____%] [Variable] Pass-Through
Rate
Class A- Senior [___% [Initial] Pass-Through
Rate based on a Notional Amount]
[Percentage Interest: ___%]
Date of Pooling and Servicing
Agreement and Cut-off Date:
[_____ __, 199_]
First Distribution Date:
[_______ __, 199_]
[Aggregate [Initial Certificate
Principal Balance] [Notional
Amount] of the Class A-__
Certificates:
$ ]
[Master] Servicer: [Initial [Certificate Principal
Name of [Master] Servicer Balance] [Notional Amount]
of this Certificate:
$ ]
CUSIP: [_______]
Assumed Final Distribution Date:
[__________ __, 20__]
[MORTGAGE] [MANUFACTURED HOUSING CONTRACT]
PASS-THROUGH CERTIFICATE
SERIES [199_-___]
evidencing a percentage interest in the
distributions allocable to the Class A-
Certificates with respect to a Trust Fund consisting
primarily of a pool of conventional one- to
four-family fixed interest rate first mortgage loans
formed and sold by RESIDENTIAL ASSET SECURITIES
CORPORATION.
This Certificate is payable solely from the
assets of the Trust Fund, and does not represent an
obligation of or interest in Residential Asset Securities
Corporation, the [Master] Servicer, the Trustee referred
to below or GMAC Mortgage Corporation or any of their
affiliates. Neither this Certificate nor the underlying
[Mortgage Loans] [Contracts] are guaranteed or insured by
any governmental agency or instrumentality or by
Residential Asset Securities Corporation, the [Master]
Servicer, the Trustee or GMAC Mortgage Corporation or any
of their affiliates. None of the Company, the [Master]
Servicer, GMAC Mortgage Corporation or any of their
affiliates will have any obligation with respect to any
certificate or other obligation secured by or payable
from payments on the Certificates.
This certifies that is the
registered owner of the Percentage Interest evidenced by
this Certificate [(obtained by dividing the Initial
Certificate Principal Balance of this Certificate by the
aggregate Initial Certificate Principal Balance of all
Class A-___ Certificates, both as specified above)] in
certain distributions with respect to the Trust Fund
consisting primarily of an interest in a pool of
[[conventional] [FHA-insured] [VA-guaranteed] one- to
four-family [fixed] [adjustable] interest rate first
mortgage loans (the "Mortgage Loans")[manufactured
housing conditional sales contracts and installment loan
agreements (the "Contracts")], formed and sold by
Residential Asset Securities Corporation (hereinafter
called the "Company," which term includes any successor
entity under the Agreement referred to below). The Trust
Fund was created pursuant to a Pooling and Servicing
Agreement dated as specified above (the "Agreement")
among the Company, the [Master] Servicer and
[________________], as trustee (the "Trustee"), a summary
of certain of the pertinent provisions of which is set
forth hereafter. To the extent not defined herein, the
capitalized terms used herein have the meanings assigned
in the Agreement. This Certificate is issued under and
is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this
Certificate by virtue of the acceptance hereof assents
and by which such Holder is bound.
Pursuant to the terms of the Agreement, a
distribution will be made on the 25th day of each month
or, if such 25th day is not a Business Day, the Business
Day immediately following (the "Distribution Date"),
commencing as described in the Agreement, to the Person
in whose name this Certificate is registered at the close
of business on the last day (or if such last day is not
a Business Day, the Business Day immediately preceding
such last day) of the month immediately preceding the
month of such distribution (the "Record Date"), from the
Available Distribution Amount in an amount equal to the
product of the Percentage Interest evidenced by this
Certificate and the amount [(of interest and principal,
if any)] required to be distributed to Holders of Class
A- Certificates on such Distribution Date. [The
Notional Amount of the Class A-5 Certificates as of any
date of determination is equal to the aggregate
Certificate Principal Balance of all Classes of
Certificates.] [Class A-5] Certificates have no
Certificate Principal Balance.] [On each Distribution
Date preceding the Accretion Termination Date, Accrued
Certificate Interest on each Class A-3 Certificate for
such date will be added to the Certificate Principal
Balance thereof.]
Distributions on this Certificate will be made
either by the [Master] Servicer acting on behalf of the
Trustee or by a Paying Agent appointed by the Trustee in
immediately available funds (by wire transfer or
otherwise) for the account of the Person entitled thereto
if such Person shall have so notified the [Master]
Servicer or such Paying Agent, or by check mailed to the
address of the Person entitled thereto, as such name and
address shall appear on the Certificate Register.
Notwithstanding the above, the final
distribution on this Certificate will be made after due
notice of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that
purpose in the City and State of New York. [The Initial
Certificate Principal Balance of this Certificate is set
forth above. The Certificate Principal Balance hereof
will be reduced to the extent of distributions allocable
to principal and any Realized Losses allocable hereto.]
[This Certificate is one of the ___ Certificates.]
[No transfer of this Class A-__ Certificate
will be made unless such transfer is exempt from the
registration requirements of the Securities Act of 1933,
as amended (the "Act"), and any applicable state
securities laws or is made in accordance with said Act
and laws. In the event that such a transfer is to be
made, (i) unless the Company directs the Trustee
otherwise, the Trustee shall require an opinion of
counsel acceptable to and in form and substance
satisfactory to the Trustee and the Company that such
transfer is exempt (describing the applicable exemption
and the basis therefor) from or is being made pursuant to
the registration requirements of the Securities Act of
1933, as amended, and of any applicable statute of any
state and (ii) the transferee shall execute an investment
letter in the form described by the Agreement; provided
that no such opinion will be required if such transfer is
made pursuant to Rule 144A under the Act. The Holder
hereof desiring to effect such transfer shall, and does
hereby agree to, indemnify the Trustee, the Company, the
[Master] Servicer and the Certificate Registrar acting on
behalf of the Trustee against any liability that may
result if the transfer is not so exempt or is not made in
accordance with such Federal and state laws or, in the
case of a transfer pursuant to Rule 144A, if such
transfer is not made in accordance with the Agreement
(except as otherwise provided in the Agreement). In
connection with any such transfer, the Trustee will also
require (i) a representation letter, in the form as
described by the Agreement, stating that the transferee
is not and is not using "plan assets" of an employee
benefit plan or other plan subject to the prohibited
transaction provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or Section
4975 of the Code, or (ii) if such transferee is or is
using "plan assets" of such a plan, an opinion of counsel
acceptable to and in form and substance satisfactory to
the Trustee, the Company and the [Master] Servicer with
respect to the permissibility of such transfer under
applicable law and stating, among other things, that the
transferee's acquisition of a Class A-__ Certificate will
not constitute or result in a non-exempt prohibited
transaction within the meaning of Section 406 of ERISA or
Section 4975 of the Code.]
This Certificate is one of a duly authorized
issue of Certificates issued in several Classes
designated as [Mortgage] [Manufactured Housing Contract]
Pass-Through Certificates of the Series specified hereon
(herein collectively called the "Certificates").
The Certificates are limited in right of
payment to certain collections and recoveries respecting
the [Mortgage Loans] [Contracts], all as more
specifically set forth herein and in the Agreement. In
the event [Master] Servicer funds are advanced with
respect to any [Mortgage Loan] [Contract], such advance
is reimbursable to the [Master] Servicer, to the extent
provided in the Agreement, from related recoveries on
such [Mortgage Loan] [Contract] or from other cash that
would have been distributable to Certificateholders.
As provided in the Agreement, withdrawals from
the Custodial Account and/or the Certificate Account
created for the benefit of Certificateholders may be made
by the [Master] Servicer from time to time for purposes
other than distributions to Certificateholders, such
purposes including without limitation reimbursement to
the Company and the [Master] Servicer of advances made,
or certain expenses incurred, by either of them.
The Agreement permits, with certain exceptions
therein provided, the amendment of the Agreement and the
modification of the rights and obligations of the
Company, the [Master] Servicer and the Trustee and the
rights of the Certificateholders under the Agreement at
any time by the Company, the [Master] Servicer and the
Trustee with the consent of the Holders of Certificates
evidencing in the aggregate not less than 66% of the
Percentage Interests of each Class of Certificates
affected thereby. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such
Holder and upon all future holders of this Certificate
and of any Certificate issued upon the transfer hereof or
in exchange herefor or in lieu hereof whether or not
notation of such consent is made upon the Certificate.
The Agreement also permits the amendment thereof in
certain circumstances without the consent of the Holders
of any of the Certificates and, in certain additional
circumstances, without the consent of the Holders of
certain Classes of Certificates.
As provided in the Agreement and subject to
certain limitations therein set forth, the transfer of
this Certificate is registrable in the Certificate
Register upon surrender of this Certificate for
registration of transfer at the offices or agencies
appointed by the Trustee in the City and State of New
York, duly endorsed by, or accompanied by an assignment
in the form below or other written instrument of transfer
in form satisfactory to the Trustee and the Certificate
Registrar duly executed by the Holder hereof or such
Holder's attorney duly authorized in writing, and
thereupon one or more new Certificates of authorized
denominations evidencing the same Class and aggregate
Percentage Interest will be issued to the designated
transferee or transferees.
The Certificates are issuable only as
registered Certificates without coupons in Classes and in
denominations specified in the Agreement. As provided in
the Agreement and subject to certain limitations therein
set forth, Certificates are exchangeable for new
Certificates of authorized denominations evidencing the
same Class and aggregate Percentage Interest, as
requested by the Holder surrendering the same.
No service charge will be made for any such
registration of transfer or exchange, but the Trustee may
require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection
therewith.
The Company, the [Master] Servicer, the Trustee
and the Certificate Registrar and any agent of the
Company, the [Master] Servicer, the Trustee or the
Certificate Registrar may treat the Person in whose name
this Certificate is registered as the owner hereof for
all purposes, and neither the Company, the [Master]
Servicer, the Trustee nor any such agent shall be
affected by notice to the contrary.
This Certificate shall be governed by and
construed in accordance with the laws of the State of New
York.
The obligations created by the Agreement in
respect of the Certificates and the Trust Fund created
thereby shall terminate upon the payment to
Certificateholders of all amounts held by or on behalf of
the Trustee and required to be paid to them pursuant to
the Agreement following the earlier of (i) the maturity
or other liquidation of the last [Mortgage Loan]
[Contract] subject thereto or the disposition of all
property acquired upon foreclosure or deed in lieu of
foreclosure of any [Mortgage Loan] [Contract] and (ii)
the purchase by the [Master] Servicer or the Company from
the Trust Fund of all remaining [Mortgage Loans]
[Contracts] and all property acquired in respect of such
[Mortgage Loans] [Contracts], thereby effecting early
retirement of the Certificates. The Agreement permits,
but does not require, the [Master] Servicer or the
Company to (i) purchase at a price determined as provided
in the Agreement all remaining [Mortgage Loans]
[Contracts] and all property acquired in respect of any
[Mortgage Loan] [Contract] or (ii) purchase in whole, but
not in part, all of the Certificates from the Holders
thereof; provided, that any such option may only be
exercised if the Pool Stated Principal Balance of the
[Mortgage Loans] [Contracts] as of the Distribution Date
upon which the proceeds of any such purchase are
distributed is less than ten percent of the Cut-off Date
Principal Balance of the [Mortgage Loans] [Contracts].
Reference is hereby made to the further
provisions of this Certificate set forth on the reverse
hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon
has been executed by the Certificate Registrar, by manual
signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee has caused this
Certificate to be duly executed.
Dated:
[NAME OF TRUSTEE],
as Trustee
By:
Authorized Signatory
Certificate of
Authentication
This is one of the Class A-
Certificates referred to
in the within-mentioned
Agreement.
[NAME OF CERTIFICATE REGISTRAR]
as Certificate Registrar
By:
Authorized Signatory
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby
sell(s), assign(s) and transfer(s) unto
(Please print or typewrite name and address including
postal zip code of assignee)
the beneficial interest evidenced by the within
[Mortgage] [Manufactured Housing Contract] Pass-Through
Certificate and hereby authorizes the transfer of
registration of such interest to assignee on the
Certificate Register of the Trust Fund.
I (We) further direct the Certificate Registrar
to issue a new Certificate of a like denomination and
Class to the above named assignee and deliver such
Certificate to the following address:
Dated:
Signature by or on behalf of assignor
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for
purposes of distribution:
Distributions shall be made, by wire transfer
or otherwise, in immediately available funds to
for the account of
account number , or,
if mailed by check, to
. Applicable statements
should be mailed to
.
This information is provided by
, the assignee named above, or
, as its agent.
EXHIBIT B
FORM OF CLASS M CERTIFICATE
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO
THE CLASS A CERTIFICATES, CLASS R CERTIFICATES AS
DESCRIBED IN THE AGREEMENT (AS DEFINED BELOW).
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS
CERTIFICATE IS A "REGULAR INTEREST" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED,
RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986 (THE "CODE").
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO AN
EMPLOYEE BENEFIT PLAN OR OTHER PLAN SUBJECT TO THE
PROHIBITED TRANSACTION PROVISIONS OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA"), OR SECTION 4975 OF THE CODE UNLESS THE
TRANSFEREE PROVIDES AN OPINION OF COUNSEL SATISFACTORY TO
THE [MASTER] SERVICER, THE COMPANY AND THE TRUSTEE THAT
THE PURCHASE OF THIS CERTIFICATE BY, ON BEHALF OF OR WITH
"PLAN ASSETS" OF ANY SUCH PLAN IS PERMISSIBLE UNDER
APPLICABLE LAW, WILL NOT CONSTITUTE OR RESULT IN A NON-
EXEMPT PROHIBITED TRANSACTION WITHIN THE MEANING OF
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE AND WILL
NOT SUBJECT THE [MASTER] SERVICER, THE COMPANY OR THE
TRUSTEE TO ANY OBLIGATION IN ADDITION TO THOSE UNDERTAKEN
IN THE AGREEMENT.
[THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR THE
PURPOSES OF APPLYING THE U.S. FEDERAL INCOME TAX ORIGINAL
ISSUE DISCOUNT ("OID") RULES TO THIS CERTIFICATE. THE
ISSUE DATE OF THIS CERTIFICATE IS [_____ __, 199_].
ASSUMING THAT THE [MORTGAGE LOANS] [CONTRACTS] PREPAY AT
[___]% OF THE STANDARD PREPAYMENT ASSUMPTION (AS
DESCRIBED IN THE PROSPECTUS SUPPLEMENT), THIS CERTIFICATE
HAS BEEN ISSUED WITH NO MORE THAN $[___________] OF OID
PER $1,000 OF INITIAL CERTIFICATE PRINCIPAL BALANCE, THE
YIELD TO MATURITY IS [___]% AND THE AMOUNT OF OID
ATTRIBUTABLE TO THE INITIAL ACCRUAL PERIOD IS NO MORE
THAN $[_________] PER $1,000 OF INITIAL CERTIFICATE
PRINCIPAL BALANCE, COMPUTED UNDER THE APPROXIMATE METHOD.
NO REPRESENTATION IS MADE THAT THE [MORTGAGE LOANS]
[CONTRACTS] WILL PREPAY AT A RATE BASED ON THE STANDARD
PREPAYMENT ASSUMPTION OR AT ANY OTHER RATE.]
Certificate No.
Class M
Subordinate [____]% Pass-Through Rate
[____]% Initial Pass-Through
Rate
Date of Pooling and Servicing Aggregate Certificate
Agreement and Cut-off Date: Principal Balance of the Class M
[_______ __, 199_] Certificates: $[ ]
First Distribution Date: Initial Certificate Principal
[_______ __, 199_] Balance of this Certificate:
$[ ]
[Master] Servicer:
Name of [Master] Servicer CUSIP: [________]
Assumed Final Distribution Date:
[__________ __, 20__]
[MORTGAGE] [MANUFACTURED HOUSING CONTRACT]
PASS-THROUGH CERTIFICATE,
SERIES [199_-___]
evidencing a percentage interest in any
distributions allocable to the Class M Certificates
with respect to the Trust Fund consisting primarily
of a pool of conventional one- to four-family fixed
interest rate first mortgage loans formed and sold
by RESIDENTIAL ASSET SECURITIES CORPORATION.
This Certificate is payable solely from the
assets of the Trust Fund, and does not represent an
obligation of or interest in Residential Asset Securities
Corporation, the [Master] Servicer, the Trustee referred
to below or GMAC Mortgage Corporation or any of their
affiliates. Neither this Certificate nor the underlying
[Mortgage Loans] [Contracts] are guaranteed or insured by
any governmental agency or instrumentality or by
Residential Asset Securities Corporation, the [Master]
Servicer, the Trustee or GMAC Mortgage Corporation or any
of their affiliates. [None of the Company, the [Master]
Servicer, GMAC Mortgage Corporation or any of their
affiliates will have any obligation with respect to any
certificate or other obligation secured by or payable
from payments on the Certificates.]
This certifies that is the
registered owner of the Percentage Interest evidenced by
this Certificate (obtained by dividing the Certificate
Principal Balance of this Certificate by the aggregate
Certificate Principal Balance of all Class M
Certificates, both as specified above) in certain
distributions with respect to a Trust Fund consisting
primarily of a pool of [[conventional] [FHA-insured] [VA-
guaranteed] one- to four-family [fixed] [adjustable]
interest rate first mortgage loans (the "Mortgage Loans")
[manufactured housing conditional sales contracts and
installment loan agreements (the "Contracts")], formed
and sold by Residential Asset Securities Corporation
(hereinafter called the "Company," which term includes
any successor entity under the Agreement referred to
below). The Trust Fund was created pursuant to a Pooling
and Servicing Agreement dated as specified above (the
"Agreement") among the Company, the [Master] Servicer and
[_______________], as trustee (the "Trustee"), a summary
of certain of the pertinent provisions of which is set
forth hereafter. To the extent not defined herein, the
capitalized terms used herein have the meanings assigned
in the Agreement. This Certificate is issued under and
is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this
Certificate by virtue of the acceptance hereof assents
and by which such Holder is bound.
Pursuant to the terms of the Agreement, a
distribution will be made on the 25th day of each month
or, if such 25th day is not a Business Day, the Business
Day immediately following (the "Distribution Date"),
commencing as described in the Agreement, to the Person
in whose name this Certificate is registered at the close
of business on the last day (or if such last day is not
a Business Day, the Business Day immediately preceding
such last day) of the month immediately preceding the
month of such distribution (the "Record Date"), from the
Available Distribution Amount in an amount equal to the
product of the Percentage Interest evidenced by this
Certificate and the amount (of interest and principal, if
any) required to be distributed to Holders of Class M
Certificates on such Distribution Date.
Distributions on this Certificate will be made
either by the [Master] Servicer acting on behalf of the
Trustee or by a Paying Agent appointed by the Trustee in
immediately available funds (by wire transfer or
otherwise) for the account of the Person entitled thereto
if such Person shall have so notified the [Master]
Servicer or such Paying Agent, or by check mailed to the
address of the Person entitled thereto, as such name and
address shall appear on the Certificate Register.
Notwithstanding the above, the final
distribution on this Certificate will be made after due
notice of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that
purpose in the City and State of New York. The Initial
Certificate Principal Balance of this Certificate is set
forth above. The Certificate Principal Balance hereof
will be reduced to the extent of the distributions
allocable to principal and any Realized Losses allocable
hereto.
This Certificate is one of a duly authorized
issue of Certificates issued in several Classes
designated as [Mortgage] [Manufactured Housing Contract]
Pass-Through Certificates of the Series specified hereon
(herein collectively called the "Certificates").
The Certificates are limited in right of
payment to certain collections and recoveries respecting
the [Mortgage Loans] [Contracts], all as more
specifically set forth herein and in the Agreement. In
the event [Master] Servicer funds are advanced with
respect to any [Mortgage Loan] [Contract], such advance
is reimbursable to the [Master] Servicer, to the extent
provided in the Agreement, from related recoveries on
such [Mortgage Loan] [Contract] or from other cash that
would have been distributable to Certificateholders.
As provided in the Agreement, withdrawals from
the Custodial Account and/or the Certificate Account
created for the benefit of Certificateholders may be made
by the [Master] Servicer from time to time for purposes
other than distributions to Certificateholders, such
purposes including without limitation reimbursement to
the Company and the [Master] Servicer of advances made,
or certain expenses incurred, by either of them.
The Agreement permits, with certain exceptions
therein provided, the amendment of the Agreement and the
modification of the rights and obligations of the
Company, the [Master] Servicer and the Trustee and the
rights of the Certificateholders under the Agreement at
any time by the Company, the [Master] Servicer and the
Trustee with the consent of the Holders of Certificates
evidencing in the aggregate not less than 66% of the
Percentage Interests of each Class of Certificates
affected thereby. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such
Holder and upon all future holders of this Certificate
and of any Certificate issued upon the transfer hereof or
in exchange herefor or in lieu hereof whether or not
notation of such consent is made upon the Certificate.
The Agreement also permits the amendment thereof in
certain circumstances without the consent of the Holders
of any of the Certificates and, in certain additional
circumstances, without the consent of the Holders of
certain Classes of Certificates.
As provided in the Agreement and subject to
certain limitations therein set forth, the transfer of
this Certificate is registrable in the Certificate
Register upon surrender of this Certificate for
registration of transfer at the offices or agencies
appointed by the Trustee in the City and State of New
York, duly endorsed by, or accompanied by an assignment
in the form below or other written instrument of transfer
in form satisfactory to the Trustee and the Certificate
Registrar duly executed by the Holder hereof or such
Holder's attorney duly authorized in writing, and
thereupon one or more new Certificates of authorized
denominations evidencing the same Class and aggregate
Percentage Interest will be issued to the designated
transferee or transferees.
The Certificates are issuable only as
registered Certificates without coupons in Classes and in
denominations specified in the Agreement. As provided in
the Agreement and subject to certain limitations therein
set forth, Certificates are exchangeable for new
Certificates of authorized denominations evidencing the
same Class and aggregate Percentage Interest, as
requested by the Holder surrendering the same.
No service charge will be made for any such
registration of transfer or exchange, but the Trustee may
require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection
therewith.
The Company, the [Master] Servicer, the Trustee
and the Certificate Registrar and any agent of the
Company, the [Master] Servicer, the Trustee or the
Certificate Registrar may treat the Person in whose name
this Certificate is registered as the owner hereof for
all purposes, and neither the Company, the [Master]
Servicer, the Trustee nor any such agent shall be
affected by notice to the contrary.
This Certificate shall be governed by and
construed in accordance with the laws of the State of New
York.
The obligations created by the Agreement in
respect of the Certificates and the Trust Fund created
thereby shall terminate upon the payment to
Certificateholders of all amounts held by or on behalf of
the Trustee and required to be paid to them pursuant to
the Agreement following the earlier of (i) the maturity
or other liquidation of the last [Mortgage Loan]
[Contract] subject thereto or the disposition of all
property acquired upon foreclosure or deed in lieu of
foreclosure of any [Mortgage Loan] [Contract] and (ii)
the purchase by the [Master] Servicer or the Company from
the Trust Fund of all remaining [Mortgage Loans]
[Contracts] and all property acquired in respect of such
[Mortgage Loans] [Contracts], thereby effecting early
retirement of the Certificates. The Agreement permits,
but does not require, the [Master] Servicer or the
Company to (i) purchase at a price determined as provided
in the Agreement all remaining [Mortgage Loans]
[Contracts] and all property acquired in respect of any
[Mortgage Loan] [Contract] or (ii) purchase in whole, but
not in part, all of the Certificates from the Holders
thereof; provided, that any such option may only be
exercised if the Pool Stated Principal Balance of the
[Mortgage Loans] [Contracts] as of the Distribution Date
upon which the proceeds of any such purchase are
distributed is less than ten percent of the Cut-off Date
Principal Balance of the [Mortgage Loans] [Contracts].
Unless the certificate of authentication hereon
has been executed by the Certificate Registrar, by manual
signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee has caused this
Certificate to be duly executed.
Dated:
[NAME OF TRUSTEE],
as Trustee
By:
Authorized Signatory
Certificate of
Authentication
This is one of the Class M
Certificates referred to
in the within-mentioned
Agreement.
[NAME OF CERTIFICATE REGISTRAR],
as Certificate Registrar
By:
Authorized Signatory
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby
sell(s), assign(s) and transfer(s) unto
(Please print or typewrite name and address including
postal zip code of assignee) the beneficial interest
evidenced by the within [Mortgage] [Manufactured Housing
Contract] Pass-Through Certificate and hereby authorizes
the transfer of registration of such interest to assignee
on the Certificate Register of the Trust Fund.
I (We) further direct the Certificate Registrar
to issue a new Certificate of a like denomination and
Class, to the above named assignee and deliver such
Certificate to the following address:
Dated:
Signature by or on behalf of assignor
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for
purposes of distribution:
Distributions shall be made, by wire transfer
or otherwise, in immediately available funds to
for the account of account
number , or, if mailed by check, to
Applicable statements should be mailed to
.
This information is provided by ,
the assignee named above, or ,
as its agent.
EXHIBIT C
FORM OF CLASS B CERTIFICATE
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO
THE CLASS A CERTIFICATES, CLASS R AND CLASS M
CERTIFICATES AS DESCRIBED IN THE AGREEMENT (AS DEFINED
HEREIN).
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE RESOLD OR
TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT
AND LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH
ARE EXEMPT FROM REGISTRATION UNDER SUCH ACT AND UNDER
APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE
WITH THE PROVISIONS OF SECTION 5.02 OF THE AGREEMENT.
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO AN
EMPLOYEE BENEFIT PLAN OR OTHER PLAN SUBJECT TO THE
PROHIBITED TRANSACTION PROVISIONS OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA"), OR SECTION 4975 OF THE CODE UNLESS THE
TRANSFEREE PROVIDES AN OPINION OF COUNSEL SATISFACTORY TO
THE [MASTER] SERVICER, THE COMPANY AND THE TRUSTEE THAT
THE PURCHASE OF THIS CERTIFICATE BY, ON BEHALF OF OR WITH
"PLAN ASSETS" OR ANY SUCH PLAN IS PERMISSIBLE UNDER
APPLICABLE LAW AND WILL NOT SUBJECT THE [MASTER]
SERVICER, THE COMPANY OR THE TRUSTEE TO ANY OBLIGATION IN
ADDITION TO THOSE UNDERTAKEN IN THE AGREEMENT.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS
CERTIFICATE IS A "REGULAR INTEREST" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED,
RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986. THE FOLLOWING INFORMATION IS
PROVIDED SOLELY FOR THE PURPOSES OF APPLYING THE U.S.
FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES
TO THIS CERTIFICATE. THE ISSUE DATE OF THIS CERTIFICATE
IS [______ __, 199_]. ASSUMING THAT THE [MORTGAGE LOANS]
[CONTRACTS] PREPAY AT [___]% OF THE STANDARD PREPAYMENT
ASSUMPTION (AS DESCRIBED IN THE PROSPECTUS SUPPLEMENT),
THIS CERTIFICATE HAS BEEN ISSUED WITH NO MORE THAN $[___]
OF OID PER $1,000 OF INITIAL CERTIFICATE PRINCIPAL
BALANCE, THE YIELD TO MATURITY IS [____]% AND THE AMOUNT
OF OID ATTRIBUTABLE TO THE INITIAL ACCRUAL PERIOD IS NO
MORE THAN $[___] PER $1,000 OF INITIAL CERTIFICATE
PRINCIPAL BALANCE, COMPUTED UNDER THE APPROXIMATE METHOD.
NO REPRESENTATION IS MADE THAT THE [MORTGAGE LOANS]
[CONTRACTS] WILL PREPAY AT A RATE BASED ON THE STANDARD
PREPAYMENT ASSUMPTION OR AT ANY OTHER RATE.
Certificate No.
Class B
Subordinate [____]% Average Pass-Through Rate
[____]% Initial Pass-Through Rate
Date of Pooling and Servicing Aggregate Certificate
Agreement and Cut-off Date: Principal Balance of the Class B
[______ __, 199_] Certificates as of the Cut-off Date:
$[__________]
First Distribution Date: Initial Certificate Principal
[______ __, 199_] Balance of this Certificate:
$[__________]
[Master] Servicer:
[Name of [Master] Servicer]
Assumed Final Distribution Date:
[__________ __, 20__]
[MORTGAGE] [[MANUFACTURED HOUSING CONTRACT]
PASS-THROUGH CERTIFICATE,
SERIES [199_-___]
evidencing a percentage interest in any
distributions allocable to the Class B Certificates
with respect to the Trust Fund consisting primarily
of a pool of conventional one- to four-family fixed
interest rate first mortgage loans formed and sold
by RESIDENTIAL ASSET SECURITIES CORPORATION.
This Certificate is payable solely from the
assets of the Trust Fund, and does not represent an
obligation of or interest in Residential Asset Securities
Corporation, the [Master] Servicer, the Trustee referred
to below or GMAC Mortgage Corporation or any of their
affiliates. Neither this Certificate nor the underlying
[Mortgage Loans] [Contracts] are guaranteed or insured by
any governmental agency or instrumentality or by
Residential Funding Mortgage Securities I, Inc., the
[Master] Servicer, the Trustee or GMAC Mortgage
Corporation or any of their affiliates. [None of the
Company, the [Master] Servicer, GMAC Mortgage Corporation
or any of their affiliates will have any obligation with
respect to any certificate or other obligation secured by
or payable from payments on the Certificates.]
This certifies that is the
registered owner of the Percentage Interest evidenced by
this Certificate (obtained by dividing the Certificate
Principal Balance of this Certificate by the aggregate
Certificate Principal Balance of all Class B
Certificates, both as specified above) in certain
distributions with respect to a Trust Fund consisting
primarily of a pool of [[conventional] [FHA-insured] [VA-
guaranteed] one- to four-family [fixed] [adjustable]
interest rate first mortgage loans (the "Mortgage Loans")
[manufactured housing conditional sales contracts and
installment loan agreements (the "Contracts")], formed
and sold by Residential Asset Securities Corporation
(hereinafter called the "Company", which term includes
any successor entity under the Agreement referred to
below). The Trust Fund was created pursuant to a Pooling
and Servicing Agreement dated as specified above (the
"Agreement") among the Company, the [Master] Servicer and
[_____________], as trustee (the "Trustee"), a summary of
certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the
capitalized terms used herein have the meanings assigned
in the Agreement. This Certificate is issued under and
is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this
Certificate by virtue of the acceptance hereof assents
and by which such Holder is bound.
Pursuant to the terms of the Agreement, a
distribution will be made on the 25th day of each month
or, if such 25th day is not a Business Day, the Business
Day immediately following (the "Distribution Date"),
commencing on the first Distribution Date specified
above, to the Person in whose name this Certificate is
registered at the close of business on the last day (or
if such last day is not a Business Day, the Business Day
immediately preceding such last day) of the month next
preceding the month of such distribution (the "Record
Date"), from the Available Distribution Amount in an
amount equal to the product of the Percentage Interest
evidenced by this Certificate and the amount (of interest
and principal, if any) required to be distributed to
Holders of Class B Certificates on such Distribution
Date.
Distributions on this Certificate will be made
either by the [Master] Servicer acting on behalf of the
Trustee or by a Paying Agent appointed by the Trustee in
immediately available funds (by wire transfer or
otherwise) for the account of the Person entitled thereto
if such Person shall have so notified the [Master]
Servicer or such Paying Agent, or by check mailed to the
address of the Person entitled thereto, as such name and
address shall appear on the Certificate Register.
Notwithstanding the above, the final
distribution on this Certificate will be made after due
notice of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that
purpose in the City and State of New York. The Initial
Certificate Principal Balance of this Certificate is set
forth above. The Certificate Principal Balance hereof
will be reduced to the extent of the distributions
allocable to principal and any Realized Losses allocable
hereto.
No transfer of this Class B Certificate will be
made unless such transfer is exempt from the registration
requirements of the Securities Act of 1933, as amended,
and any applicable state securities laws or is made in
accordance with said Act and laws. In the event that
such a transfer is to be made, (i) unless the Company
directs the Trustee otherwise, the Trustee shall require
an opinion of counsel acceptable to and in form and
substance satisfactory to the Trustee and the Company
that such transfer is exempt (describing the applicable
exemption and the basis therefor) from or is being made
pursuant to the registration requirements of the
Securities Act of 1933, as amended, and of any applicable
statute of any state and (ii) the transferee shall
execute an investment letter in the form described by the
Agreement. The Holder hereof desiring to effect such
transfer shall, and does hereby agree to, indemnify the
Trustee, the Company, the [Master] Servicer and the
Certificate Registrar acting on behalf of the Trustee
against any liability that may result if the transfer is
not so exempt or is not made in accordance with such
Federal and state laws. In connection with any such
transfer, the Trustee will also require (i) a
representation letter, in the form as described by the
Agreement, stating that the transferee is not and is not
using "plan assets" of an employee benefit plan or other
plan subject to the prohibited transaction provisions of
the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") or Section 4975 of the Code, or (ii) if
such transferee is or is using "plan assets" of such a
plan subject to ERISA, an opinion of counsel acceptable
to and in form and substance satisfactory to the Trustee,
the Company and the [Master] Servicer with respect to the
permissibility of such transfer under applicable law and
stating, among other things, that the transferee's
acquisition of a Class B Certificate will not constitute
or result in a non-exempt prohibited transaction within
the meaning of Section 406 of ERISA or Section 4975 of
the Code.
This Certificate is one of a duly authorized
issue of Certificates issued in several Classes
designated as [Mortgage] [Manufactured Housing Contract]
Pass-Through Certificates of the Series specified hereon
(herein collectively called the "Certificates").
The Certificates are limited in right of
payment to certain collections and recoveries respecting
the [Mortgage Loans] [Contracts], all as more
specifically set forth herein and in the Agreement. In
the event [Master] Servicer funds are advanced with
respect to any [Mortgage Loan] [Contract], such advance
is reimbursable to the [Master] Servicer, to the extent
provided in the Agreement, from related recoveries on
such [Mortgage Loan] [Contract] or from other cash that
would have been distributable to Certificateholders.
As provided in the Agreement, withdrawals from
the Custodial Account and/or the Certificate Account
created for the benefit of Certificateholders may be made
by the [Master] Servicer from time to time for purposes
other than distributions to Certificateholders, such
purposes including without limitation reimbursement to
the Company and the [Master] Servicer of advances made,
or certain expenses incurred, by either of them.
The Agreement permits, with certain exceptions
therein provided, the amendment of the Agreement and the
modification of the rights and obligations of the
Company, the [Master] Servicer and the Trustee and the
rights of the Certificateholders under the Agreement at
any time by the Company, the [Master] Servicer and the
Trustee with the consent of the Holders of Certificates
evidencing in the aggregate not less than 66% of the
Percentage Interests of each Class of Certificates
affected thereby. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such
Holder and upon all future holders of this Certificate
and of any Certificate issued upon the transfer hereof or
in exchange herefor or in lieu hereof whether or not
notation of such consent is made upon the Certificate.
The Agreement also permits the amendment thereof in
certain circumstances without the consent of the Holders
of any of the Certificates and, in certain additional
circumstances, without the consent of the Holders of
certain Classes of Certificates.
As provided in the Agreement and subject to
certain limitations therein set forth, the transfer of
this Certificate is registrable in the Certificate
Register upon surrender of this Certificate for
registration of transfer at the offices or agencies
appointed by the Trustee in the City and State of New
York, duly endorsed by, or accompanied by an assignment
in the form below or other written instrument of transfer
in form satisfactory to the Trustee and the Certificate
Registrar duly executed by the Holder hereof or such
Holder's attorney duly authorized in writing, and
thereupon one or more new Certificates of authorized
denominations evidencing the same Class and aggregate
Percentage Interest will be issued to the designated
transferee or transferees.
The Certificates are issuable only as
registered Certificates without coupons in Classes and in
denominations specified in the Agreement. As provided in
the Agreement and subject to certain limitations therein
set forth, Certificates are exchangeable for new
Certificates of authorized denominations evidencing the
same Class and aggregate Percentage Interest, as
requested by the Holder surrendering the same.
No service charge will be made for any such
registration of transfer or exchange, but the Trustee may
require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection
therewith.
The Company, the [Master] Servicer, the Trustee
and the Certificate Registrar and any agent of the
Company, the [Master] Servicer, the Trustee or the
Certificate Registrar may treat the Person in whose name
this Certificate is registered as the owner hereof for
all purposes, and neither the Company, the [Master]
Servicer, the Trustee nor any such agent shall be
affected by notice to the contrary.
This Certificate shall be governed by and
construed in accordance with the laws of the State of New
York.
The obligations created by the Agreement in
respect of the Certificates and the Trust Fund created
thereby shall terminate upon the payment to
Certificateholders of all amounts held by or on behalf of
the Trustee and required to be paid to them pursuant to
the Agreement following the earlier of (i) the maturity
or other liquidation of the last [Mortgage Loan]
[Contract] subject thereto or the disposition of all
property acquired upon foreclosure or deed in lieu of
foreclosure of any [Mortgage Loan] [Contract] and (ii)
the purchase by the [Master] Servicer or the Company from
the Trust Fund of all remaining [Mortgage Loans]
[Contracts] and all property acquired in respect of such
[Mortgage Loans] [Contracts], thereby effecting early
retirement of the Certificates. The Agreement permits,
but does not require, the [Master] Servicer or the
Company to (i) purchase at a price determined as provided
in the Agreement all remaining [Mortgage Loans]
[Contracts] and all property acquired in respect of any
[Mortgage Loan] [Contract] or (ii) purchase in whole, but
not in part, all of the Certificates other than the Class
R Certificates from the Holders thereof; provided, that
any such option may only be exercised if the Pool Stated
Principal Balance of the [Mortgage Loans] [Contracts] as
of the Distribution Date upon which the proceeds of any
such purchase are distributed is less than ten percent of
the Cut-off Date Principal Balance of the [Mortgage
Loans] [Contracts].
Unless the certificate of authentication hereon
has been executed by the Certificate Registrar, by manual
signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee has caused
this Certificate to be duly executed.
Dated:
[NAME OF TRUSTEE],
as Trustee
By:
Authorized Signatory
Certificate of
Authentication
This is one of the Class B-__
Certificates referred to
in the within-mentioned
Agreement.
[NAME OF CERTIFICATE REGISTRAR]
as Certificate Registrar
By:
Authorized Signatory
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby
sell(s), assign(s) and transfer(s) unto
(Please print or typewrite name and address including
postal zip code of assignee) the beneficial interest
evidenced by the within [Mortgage] [Manufactured Housing
Contract] Pass-Through Certificate and hereby authorizes
the transfer of registration of such interest to assignee
on the Certificate Register of the Trust Fund.
I (We) further direct the Certificate Registrar
to issue a new Certificate of a like denomination and
Class, to the above named assignee and deliver such
Certificate to the following address:
Dated:
Signature by or on behalf of assignor
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for
purposes of distribution:
Distributions shall be made, by wire transfer
or otherwise, in immediately available funds to
for the account of
account number , or, if mailed by check, to
Applicable
statements should be mailed to
.
This information is provided by
, the assignee named above, or
, as its agent.
EXHIBIT D
FORM OF CLASS R CERTIFICATE
THIS CERTIFICATE MAY NOT BE HELD BY OR TRANSFERRED TO A
NON-UNITED STATES PERSON OR A DISQUALIFIED ORGANIZATION
(AS DEFINED BELOW).
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS
CERTIFICATE IS A "RESIDUAL INTEREST" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS ARE DEFINED,
RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986 (THE "CODE").
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO AN
EMPLOYEE BENEFIT PLAN OR OTHER PLAN SUBJECT TO THE
PROHIBITED TRANSACTION PROVISIONS OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA"), OR SECTION 4975 OF THE CODE UNLESS THE
TRANSFEREE PROVIDES AN OPINION OF COUNSEL SATISFACTORY TO
THE [MASTER] SERVICER, THE COMPANY AND THE TRUSTEE THAT
THE PURCHASE OF THIS CERTIFICATE BY, ON BEHALF OF OR WITH
"PLAN ASSETS" OF ANY SUCH PLAN IS PERMISSIBLE UNDER
APPLICABLE LAW, WILL NOT CONSTITUTE OR RESULT IN A NON-
EXEMPT PROHIBITED TRANSACTION WITHIN THE MEANING OF
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE AND WILL
NOT SUBJECT THE [MASTER] SERVICER, THE COMPANY OR THE
TRUSTEE TO ANY OBLIGATION IN ADDITION TO THOSE UNDERTAKEN
IN THE AGREEMENT (AS DEFINED BELOW).
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS
CERTIFICATE MAY BE MADE ONLY IF THE PROPOSED TRANSFEREE
PROVIDES A TRANSFER AFFIDAVIT TO THE [MASTER] SERVICER
AND THE TRUSTEE THAT (1) SUCH TRANSFEREE IS NOT (A) THE
UNITED STATES, ANY STATE OR POLITICAL SUBDIVISION
THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL
ORGANIZATION, OR ANY AGENCY OR INSTRUMENTALITY OF ANY OF
THE FOREGOING, (B) ANY ORGANIZATION (OTHER THAN A
COOPERATIVE DESCRIBED IN SECTION 521 OF THE CODE) WHICH
IS EXEMPT FROM THE TAX IMPOSED BY CHAPTER 1 OF THE CODE
UNLESS SUCH ORGANIZATION IS SUBJECT TO THE TAX IMPOSED BY
SECTION 511 OF THE CODE, (C) ANY ORGANIZATION DESCRIBED
IN SECTION 1381(a)(2)(C) OF THE CODE, (ANY SUCH PERSON
DESCRIBED IN THE FOREGOING CLAUSES (A), (B) OR (C) BEING
HEREIN REFERRED TO AS A "DISQUALIFIED ORGANIZATION") OR
(D) AN AGENT OF A DISQUALIFIED ORGANIZATION, (2) NO
PURPOSE OF SUCH TRANSFER IS TO IMPEDE THE ASSESSMENT OR
COLLECTION OF TAX AND (3) SUCH TRANSFEREE SATISFIES
CERTAIN ADDITIONAL CONDITIONS RELATING TO THE FINANCIAL
CONDITION OF THE PROPOSED TRANSFEREE. NOTWITHSTANDING
THE REGISTRATION IN THE CERTIFICATE REGISTER OR ANY
TRANSFER, SALE OR OTHER DISPOSITION OF THIS CERTIFICATE
TO A DISQUALIFIED ORGANIZATION OR AN AGENT OF A
DISQUALIFIED ORGANIZATION, SUCH REGISTRATION SHALL BE
DEEMED TO BE OF NO LEGAL FORCE OR EFFECT WHATSOEVER AND
SUCH PERSON SHALL NOT BE DEEMED TO BE A CERTIFICATEHOLDER
FOR ANY PURPOSE HEREUNDER, INCLUDING, BUT NOT LIMITED TO,
THE RECEIPT OF DISTRIBUTIONS ON THIS CERTIFICATE. EACH
HOLDER OF THIS CERTIFICATE BY ACCEPTANCE OF THIS
CERTIFICATE SHALL BE DEEMED TO HAVE CONSENTED TO THE
PROVISIONS OF THIS PARAGRAPH.
Class R Senior Certificate No.
Date of Pooling and Servicing [___]% Pass-Through Rate
Agreement and Cut-off Date:
[______ __, 199_] [___]% Initial Pass-Through Rate
Aggregate Initial Certificate
Principal Balance of the Class
[R] Certificates:
$[______]
Initial Certificate Principal
Balance of this Certificate:
$[_____________]
First Distribution Date: Percentage Interest: [_______]%
[______ __, 199_]
[Master] Servicer:
[Name of [Master] Servicer] CUSIP: [_________]
Assumed Final Distribution Date:
[_________ __, 20__]
[MORTGAGE] [MANUFACTURED HOUSING CONTRACT]
PASS-THROUGH CERTIFICATE,
SERIES [199_-___]
evidencing a percentage interest in any
distributions allocable to the Class [R]
Certificates with respect to the Trust Fund
consisting primarily of a pool of conventional one-
to four-family fixed interest rate first mortgage
loans formed and sold by RESIDENTIAL ASSET
SECURITIES CORPORATION.
This Certificate is payable solely from the
assets of the Trust Fund, and does not represent an
obligation of or interest in Residential Asset Securities
Corporation, the [Master] Servicer, the Trustee referred
to below or GMAC Mortgage Corporation or any of their
affiliates. Neither this Certificate nor the underlying
[Mortgage Loans] [Contracts] are guaranteed or insured by
any governmental agency or instrumentality or by
Residential Asset Securities Corporation, the [Master]
Servicer, the Trustee or GMAC Mortgage Corporation or any
of their affiliates. None of the Company, the [Master]
Servicer, GMAC Mortgage Corporation or any of their
affiliates will have any obligation with respect to any
certificate or other obligation secured by or payable
from payments on the Certificates.
This certifies that is
the registered owner of the Percentage Interest evidenced
by this Certificate (obtained by dividing the Initial
Certificate Principal Balance of this Certificate by the
aggregate Initial Certificate Principal Balance of all
Class R Certificates, both as specified above) in certain
distributions with respect to the Trust Fund consisting
primarily of a pool of [[conventional] [FHA-insured] [VA-
guaranteed] one- to four-family [fixed] [adjustable]
interest rate first mortgage loans (the "Mortgage Loans")
[manufactured housing conditional sales contracts and
installment loan agreements (the "Contracts")], formed
and sold by Residential Asset Securities Corporation
(hereinafter called the "Company," which term includes
any successor entity under the Agreement referred to
below). The Trust Fund was created pursuant to a Pooling
and Servicing Agreement dated as specified above (the
"Agreement") among the Company, the [Master] Servicer and
[____________________], as trustee (the "Trustee"), a
summary of certain of the pertinent provisions of which
is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the
meanings assigned in the Agreement. This Certificate is
issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the
Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a
distribution will be made on the 25th day of each month
or, if such 25th day is not a Business Day, the Business
Day immediately following (the "Distribution Date"),
commencing as described in the Agreement, to the Person
in whose name this Certificate is registered at the close
of business on the last day (or if such last day is not
a Business Day, the Business Day immediately preceding
such last day) of the month immediately preceding the
month of such distribution (the "Record Date"), from the
Available Distribution Amount in an amount equal to the
product of the Percentage Interest evidenced by this
Certificate and the amount (of interest and principal, if
any) required to be distributed to Holders of Class R
Certificates on such Distribution Date.
Each Holder of this Certificate will be deemed
to have agreed to be bound by the restrictions set forth
in the Agreement to the effect that (i) each person
holding or acquiring any Ownership Interest in this
Certificate must be a United States Person and a
Permitted Transferee, (ii) the transfer of any Ownership
Interest in this Certificate will be conditioned upon the
delivery to the Trustee of, among other things, an
affidavit to the effect that it is a United States Person
and Permitted Transferee, (iii) any attempted or
purported transfer of any Ownership Interest in this
Certificate in violation of such restrictions will be
absolutely null and void and will vest no rights in the
purported transferee, and (iv) if any person other than
a United States Person and a Permitted Transferee
acquires any Ownership Interest in this Certificate in
violation of such restrictions, then the Company will
have the right, in its sole discretion and without notice
to the Holder of this Certificate, to sell this
Certificate to a purchaser selected by the Company, which
purchaser may be the Company, or any affiliate of the
Company, on such terms and conditions as the Company may
choose.
Notwithstanding the above, the final
distribution on this Certificate will be made after due
notice of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that
purpose in the City and State of New York. The Initial
Certificate Principal Balance of this Certificate is set
forth above. The Certificate Principal Balance hereof
will be reduced to the extent of distributions allocable
to principal and any Realized Losses allocable hereto.
Notwithstanding the reduction of the Certificate
Principal Balance hereof to zero, this Certificate will
remain outstanding under the Agreement and the Holder
hereof may have additional obligations with respect to
this Certificate, including tax liabilities, and may be
entitled to certain additional distributions hereon, in
accordance with the terms and provisions of the
Agreement.
This Certificate is one of a duly authorized
issue of Certificates issued in several Classes
designated as [Mortgage] [Manufactured Housing Contract]
Pass-Through Certificates of the Series specified hereon
(herein collectively called the "Certificates").
The Certificates are limited in right of
payment to certain collections and recoveries respecting
the [Mortgage Loans] [Contracts], all as more
specifically set forth herein and in the Agreement. In
the event [Master] Servicer funds are advanced with
respect to any [Mortgage Loan] [Contract], such advance
is reimbursable to the [Master] Servicer, to the extent
provided in the Agreement, from related recoveries on
such [Mortgage Loan] [Contract] or from other cash that
would have been distributable to Certificateholders.
As provided in the Agreement, withdrawals from
the Custodial Account and/or the Certificate Account
created for the benefit of Certificateholders may be made
by the [Master] Servicer from time to time for purposes
other than distributions to Certificateholders, such
purposes including without limitation reimbursement to
the Company and the [Master] Servicer of advances made,
or certain expenses incurred, by either of them.
The Agreement permits, with certain exceptions
therein provided, the amendment of the Agreement and the
modification of the rights and obligations of the
Company, the [Master] Servicer and the Trustee and the
rights of the Certificateholders under the Agreement at
any time by the Company, the [Master] Servicer and the
Trustee with the consent of the Holders of Certificates
evidencing in the aggregate not less than 66% of the
Percentage Interests of each Class of Certificates
affected thereby. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such
Holder and upon all future holders of this Certificate
and of any Certificate issued upon the transfer hereof or
in exchange herefor or in lieu hereof whether or not
notation of such consent is made upon the Certificate.
The Agreement also permits the amendment thereof in
certain circumstances without the consent of the Holders
of any of the Certificates and, in certain additional
circumstances, without the consent of the Holders of
certain Classes of Certificates.
As provided in the Agreement and subject to
certain limitations therein set forth, the transfer of
this Certificate is registrable in the Certificate
Register upon surrender of this Certificate for
registration of transfer at the offices or agencies
appointed by the Trustee in the City and State of New
York, duly endorsed by, or accompanied by an assignment
in the form below or other written instrument of transfer
in form satisfactory to the Trustee and the Certificate
Registrar duly executed by the Holder hereof or such
Holder's attorney duly authorized in writing, and
thereupon one or more new Certificates of authorized
denominations evidencing the same Class and aggregate
Percentage Interest will be issued to the designated
transferee or transferees.
The Certificates are issuable only as
registered Certificates without coupons in Classes and in
denominations specified in the Agreement. As provided in
the Agreement and subject to certain limitations therein
set forth, Certificates are exchangeable for new
Certificates of authorized denominations evidencing the
same Class and aggregate Percentage Interest, as
requested by the Holder surrendering the same.
No service charge will be made for any such
registration of transfer or exchange, but the Trustee may
require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection
therewith.
The Company, the [Master] Servicer, the Trustee
and the Certificate Registrar and any agent of the
Company, the [Master] Servicer, the Trustee or the
Certificate Registrar may treat the Person in whose name
this Certificate is registered as the owner hereof for
all purposes, and neither the Company, the [Master]
Servicer, the Trustee nor any such agent shall be
affected by notice to the contrary.
This Certificate shall be governed by and
construed in accordance with the laws of the State of New
York.
The obligations created by the Agreement in
respect of the Certificates and the Trust Fund created
thereby shall terminate upon the payment to
Certificateholders of all amounts held by or on behalf of
the Trustee and required to be paid to them pursuant to
the Agreement following the earlier of (i) the maturity
or other liquidation of the last [Mortgage Loan]
[Contract] subject thereto or the disposition of all
property acquired upon foreclosure or deed in lieu of
foreclosure of any [Mortgage Loan] [Contract] and (ii)
the purchase by the [Master] Servicer or the Company from
the Trust Fund of all remaining [Mortgage Loans]
[Contracts] and all property acquired in respect of such
[Mortgage Loans] [Contracts], thereby effecting early
retirement of the Certificates. The Agreement permits,
but does not require, the [Master] Servicer or the
Company to (i) purchase at a price determined as provided
in the Agreement all remaining [Mortgage Loans]
[Contracts] and all property acquired in respect of any
[Mortgage Loan] [Contract] or (ii) purchase in whole, but
not in part, all of the Certificates other than the Class
R Certificates from the Holders thereof; provided, that
any such option may only be exercised if the Pool Stated
Principal Balance of the [Mortgage Loans] [Contracts] as
of the Distribution Date upon which the proceeds of any
such purchase are distributed is less than ten percent of
the Cut-off Date Principal Balance of the [Mortgage
Loans] [Contracts].
Reference is hereby made to the further
provisions of this Certificate set forth on the reverse
hereof, which further provisions shall for all purpose
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon
has been executed by the Certificate Registrar, by manual
signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee has caused this
Certificate to be duly executed.
Dated:
[NAME OF TRUSTEE],
as Trustee
By:
Authorized Signatory
Certificate of
Authentication
This is one of the Class R
Certificates referred to
in the within-mentioned
Agreement.
[NAME OF REGISTRAR],
as Certificate Registrar
By:
Authorized Signatory
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby
sell(s), assign(s) and transfer(s) unto
(Please print or typewrite name and address including
postal zip code of assignee) the beneficial interest
evidenced by the within [Mortgage] [Manufactured Housing
Contract] Pass-Through Certificate and hereby authorizes
the transfer of registration of such interest to assignee
on the Certificate Register of the Trust Fund.
I (We) further direct the Certificate Registrar
to issue a new Certificate of a like denomination and
Class, to the above named assignee and deliver such
Certificate to the following address:
Dated:
Signature by or on behalf of assignor
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for
purposes of distribution:
Distributions shall be made, by wire transfer
or otherwise, in immediately available funds to
for the account of
account number , or,
if mailed by check, to
Applicable statements
should be mailed to
.
This information is provided by
, the assignee named above, or
, as its agent.
EXHIBIT E
CUSTODIAL AGREEMENT
THIS CUSTODIAL AGREEMENT (as amended and
supplemented from time to time, the "Agreement"), dated
as of [______ __, 199_], by and among [NAME OF TRUSTEE],
as Trustee (including its successors under the Pooling
Agreement defined below, the "Trustee"), RESIDENTIAL
ASSET SECURITIES CORPORATION (together with any successor
in interest, the "Company"), [NAME OF [MASTER] SERVICER],
as [master] servicer (together with any successor in
interest or successor under the Pooling Agreement
referred to below, the "[Master] Servicer"), and [NAME OF
CUSTODIAN] (together with any successor in interest or
any successor appointed hereunder, the "Custodian").
W I T N E S S E T H T H A T :
WHEREAS, the Company, the [Master] Servicer,
and the Trustee have entered into a Pooling and Servicing
Agreement dated as of [______ __, 199_], relating to the
issuance of Residential Asset Securities Corporation,
[Mortgage] [Manufactured Housing Contract] Pass-Through
Certificates, Series [19__-___] (as in effect on the date
of this agreement, the "Original Pooling Agreement," and
as amended and supplemented from time to time, the
"Pooling Agreement"); and
WHEREAS, the Custodian has agreed to act as
agent for the Trustee for the purposes of receiving and
holding certain documents and other instruments delivered
by the Company and the [Master] Servicer under the
Pooling Agreement, all upon the terms and conditions and
subject to the limitations hereinafter set forth;
NOW, THEREFORE, in consideration of the
premises and the mutual covenants and agreements
hereinafter set forth, the Trustee, the Company, the
[Master] Servicer and the Custodian hereby agree as
follows:
ARTICLE I
Definitions
Capitalized terms used in this Agreement and
not defined herein shall have the meanings assigned in
the Original Pooling Agreement, unless otherwise required
by the context herein.
ARTICLE II
Custody of Mortgage Documents
Section 2.1. Custodian to Act as Agent;
Acceptance of [Mortgage] [Contract] Files. The
Custodian, as the duly appointed agent of the Trustee for
these purposes, acknowledges receipt of the [Mortgage]
[Contract] Files relating to the [Mortgage Loans]
[Contracts] identified on the schedule attached hereto
(the "[Mortgage] [Contract] Files") and declares that it
holds and will hold the [Mortgage] [Contract] Files as
agent for the Trustee, in trust, for the use and benefit
of all present and future Certificateholders.
Section 2.2. Recordation of Assignments. If
any [Mortgage] [Contract] File includes one or more
assignments to the Trustee of [Mortgage Notes and related
Mortgages] [Contracts and related Title Documents] that
have not been recorded, each such assignment shall be
delivered by the Custodian to the Company for the purpose
of recording it in the appropriate public office for real
property records, and the Company, at no expense to the
Custodian, shall promptly cause to be recorded in the
appropriate public office for real property records each
such assignment and, upon receipt thereof from such
public office, shall return each such assignment to the
Custodian.
Section 2.3. Review of [Mortgage] [Contract] Files.
(a) On or prior to the Closing Date, the
Custodian shall deliver to the Trustee an Initial
Certification in the form annexed hereto as Exhibit One
evidencing receipt of a [Mortgage] [Contract] File for
each [Mortgage Loan] [Contract] listed on the Schedule
attached hereto (the "[Mortgage Loan] [Contract]
Schedule").
(b) Within 45 days of the initial issuance of
the Certificates, the Custodian agrees, for the benefit
of Certificateholders, to review, in accordance with the
provisions of Section 2.02 of the Pooling Agreement, each
[Mortgage] [Contract] File, and shall deliver to the
Trustee an Interim Certification in the form annexed
hereto as Exhibit Two to the effect that all documents
required to be delivered pursuant to Section 2.01(b) of
the Pooling Agreement have been executed and received and
that such documents relate to the [Mortgage Loans]
[Contracts] identified on the [Mortgage Loan] [Contract]
Schedule, except for any exceptions listed on Schedule A
attached to such Interim Certification. Within 45 days
of receipt of the documents required to be delivered
pursuant to Section 2.01(c) of the Pooling Agreement, the
Custodian agrees, for the benefit of Certificateholders,
to review, in accordance with the provisions of Section
2.02 of the Pooling Agreement, each such document, and
shall deliver to the Trustee either (i) an Interim
Certification in the form attached hereto as Exhibit Two
to the effect that all such documents relate to the
[Mortgage Loans] [Contracts] identified on the [Mortgage
Loan] [Contract] Schedule, except for any exceptions
listed on Schedule A attached to such Interim
Certification or (ii) a Final Certification as set forth
in subsection (c) below. The Custodian shall be under no
duty or obligation to inspect, review or examine said
documents, instruments, certificates or other papers to
determine that the same are genuine, enforceable, or
appropriate for the represented purpose or that they have
actually been recorded or that they are other than what
they purport to be on their face. If in performing the
review required by this Section 2.3 the Custodian finds
any document or documents constituting a part of a
[Mortgage] [Contract] File to be defective in any
material respect, the Custodian shall promptly so notify
the Company, the [Master] Servicer and the Trustee. Upon
receipt of written notification from the [Master]
Servicer, signed by a Servicing Officer, that the
[Master] Servicer or a Subservicer, as the case may be,
has made a deposit into the Certificate Account in
payment for the purchase of the related [Mortgage Loan]
[Contract] in an amount equal to the Purchase Price for
such [Mortgage Loan] [Contract], the Custodian shall
release to the [Master] Servicer the related [Mortgage]
[Contract] File.
(c) Upon receipt of all documents required to
be in the [Mortgage] [Contract] Files the Custodian shall
deliver to the Trustee a Final Certification in the form
annexed hereto as Exhibit Three evidencing the
completeness of the [Mortgage] [Contract] Files.
Upon receipt of written request from the
Trustee, the Custodian shall as soon as practicable
supply the Trustee with a list of all of the documents
relating to the [Mortgage Loans] [Contracts] then
contained in the [Mortgage] [Contract] Files.
Section 2.4. Notification of Breaches of
Representations and Warranties. Upon discovery by the
Custodian of a breach of any representation or warranty
made by the [Master] Servicer or the Company as set forth
in the Pooling Agreement or by a Seller in a Seller's
Agreement or by Residential Funding or the Company in the
Assignment Agreement with respect to a [Mortgage Loan]
[Contract] relating to a [Mortgage] [Contract] File, the
Custodian shall give prompt written notice to the
Company, the [Master] Servicer and the Trustee.
Section 2.5. Custodian to Cooperate; Release
of [Mortgage] [Contract] Files. Upon the repurchase or
substitution of any [Mortgage Loan] [Contract] pursuant
to Article II of the Pooling Agreement or payment in full
of any [Mortgage Loan] [Contract], or the receipt by the
[Master] Servicer of a notification that payment in full
will be escrowed in a manner customary for such purposes,
the [Master] Servicer shall immediately notify the
Custodian by a certification (which certification shall
include a statement to the effect that all amounts
received or to be received in connection with such
payment which are required to be deposited in the
Custodial Account pursuant to Section 3.07 of the Pooling
Agreement have been or will be so deposited) of a
Servicing Officer and shall request delivery to it of the
[Mortgage] [Contract] File. The Custodian agrees, upon
receipt of such certification and request, promptly to
release to the [Master] Servicer the related [Mortgage]
[Contract] File. The [Master] Servicer shall deliver to
the Custodian and the Custodian agrees to accept the
Mortgage Note and other documents constituting the
[Mortgage] [Contract] File with respect to any Qualified
Substitute [Mortgage Loan] [Contract].
From time to time as is appropriate for the
servicing or foreclosures of any [Mortgage Loan]
[Contract], including, for this purpose, collection under
any Primary Insurance Policy or any [Mortgage] [Contract]
Pool Insurance Policy, the [Master] Servicer shall
deliver to the Custodian a certificate of a Servicing
Officer requesting that possession of all, or any
document constituting part, of the [Mortgage] [Contract]
File be released to the [Master] Servicer and certifying
as to the reason for such release and that such release
will not invalidate any insurance coverage provided in
respect of the [Mortgage Loan] [Contract] under any of
the Required Insurance Policies. With such certificate,
the [Master] Servicer shall deliver to the Custodian a
trust receipt signed by a Servicing Officer on behalf of
the [Master] Servicer, and upon receipt of the foregoing,
the Custodian shall deliver the [Mortgage] [Contract]
File or such document to the [Master] Servicer. The
[Master] Servicer shall cause each [Mortgage] [Contract]
File or any document therein so released to be returned
to the Custodian when the need therefor by the [Master]
Servicer no longer exists, unless (i) the [Mortgage Loan]
[Contract] has been liquidated and the Liquidation
Proceeds relating to the [Mortgage Loan] [Contract] have
been deposited in the Custodial Account or (ii) the
[Mortgage] [Contract] File or such document has been
delivered to an attorney, or to a public trustee or other
public official as required by law, for purposes of
initiating or pursuing legal action or other proceedings
for the foreclosure of the Mortgaged Property either
judicially or non-judicially, and the [Master] Servicer
has delivered to the Custodian a certificate of a
Servicing Officer certifying as to the name and address
of the Person to which such [Mortgage] [Contract] File or
such document was delivered and the purpose or purposes
of such delivery. In the event of the liquidation of a
[Mortgage Loan] [Contract], the Custodian shall deliver
the Trust Receipt with respect thereto to the [Master]
Servicer upon deposit of the related Liquidation Proceeds
in the Custodial Account as provided in the Pooling
Agreement.
Section 2.6. Assumption Agreements. In the
event that any assumption agreement or substitution of
liability agreement is entered into with respect to any
[Mortgage Loan] [Contract] subject to this Agreement in
accordance with the terms and provisions of the Pooling
Agreement, the [Master] Servicer shall notify the
Custodian that such assumption or substitution agreement
has been completed by forwarding to the Custodian the
original of such assumption or substitution agreement,
which shall be added to the related [Mortgage] [Contract]
File and, for all purposes, shall be considered a part of
such [Mortgage] [Contract] File to the same extent as all
other documents and instruments constituting parts
thereof.
ARTICLE III
Concerning the Custodian
Section 3.1. Custodian a Bailee and Agent of
the Trustee. With respect to each [Mortgage Note,
Mortgage] [Contract] and other documents constituting
each [Mortgage] [Contract] File which are delivered to
the Custodian, the Custodian is exclusively the bailee
and agent of the Trustee and has no instructions to hold
any [Mortgage Note or Mortgage] [Contract] for the
benefit of any person other than the Trustee, holds such
documents for the benefit of Certificateholders and
undertakes to perform such duties and only such duties as
are specifically set forth in this Agreement. Except
upon compliance with the provisions of Section 2.5 of
this Agreement, no [Mortgage Note, Mortgage] [Contract]
or other document constituting a part of a [Mortgage]
[Contract] File shall be delivered by the Custodian to
the Company or the [Master] Servicer or otherwise
released from the possession of the Custodian.
Section 3.2. Indemnification. The Company
hereby agrees to indemnify and hold the Custodian
harmless from and against all claims, liabilities,
losses, actions, suits or proceedings at law or in
equity, or any other expenses, fees or charges of any
character or nature, which the Custodian may incur or
with which the Custodian may be threatened by reason of
its acting as custodian under this Agreement, including
indemnification of the Custodian against any and all
expenses, including attorney's fees if counsel for the
Custodian has been approved by the Company, and the cost
of defending any action, suit or proceedings or resisting
any claim. Notwithstanding the foregoing, it is
specifically understood and agreed that in the event any
such claim, liability, loss, action, suit or proceeding
or other expense, fee or charge shall have been caused by
reason of any negligent act, negligent failure to act or
willful misconduct on the part of the Custodian, or which
shall constitute a willful breach of its duties
hereunder, the indemnification provisions of this
Agreement shall not apply.
Section 3.3. Custodian May Own Certificates.
The Custodian in its individual or any other capacity may
become the owner or pledgee of Certificates with the same
rights it would have if it were not Custodian.
Section 3.4. [Master] Servicer to Pay
Custodian's Fees and Expenses. The [Master] Servicer
covenants and agrees to pay to the Custodian from time to
time, and the Custodian shall be entitled to, reasonable
compensation for all services rendered by it in the
exercise and performance of any of the powers and duties
hereunder of the Custodian, and the [Master] Servicer
will pay or reimburse the Custodian upon its request for
all reasonable expenses, disbursements and advances
incurred or made by the Custodian 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.
Section 3.5. Custodian May Resign; Trustee May
Remove Custodian. The Custodian may resign from the
obligations and duties hereby imposed upon it as such
obligations and duties relate to its acting as Custodian
of the [Mortgage Loans] [Contracts]. Upon receiving such
notice of resignation, the Trustee shall either take
custody of the [Mortgage] [Contract] Files itself and
give prompt notice thereof to the Company, the [Master]
Servicer and the Custodian, or promptly appoint a
successor Custodian by written instrument, in duplicate,
one copy of which instrument shall be delivered to the
resigning Custodian and one copy to the successor
Custodian. If the Trustee shall not have taken custody
of the [Mortgage] [Contract] Files and no successor
Custodian shall have been so appointed and have accepted
appointment within 30 days after the giving of such
notice of resignation, the resigning Custodian may
petition any court of competent jurisdiction for the
appointment of a successor Custodian.
The Trustee may remove the Custodian at any
time. In such event, the Trustee shall appoint, or
petition a court of competent jurisdiction to appoint, a
successor Custodian hereunder. Any successor Custodian
shall be a depository institution subject to supervision
or examination by federal or state authority and shall be
able to satisfy the other requirements contained in
Section 3.7 and shall be unaffiliated with the [Master]
Servicer or the Company.
Any resignation or removal of the Custodian and
appointment of a successor Custodian pursuant to any of
the provisions of this Section 3.5 shall become effective
upon acceptance of appointment by the successor
Custodian. The Trustee shall give prompt notice to the
Company and the [Master] Servicer of the appointment of
any successor Custodian. No successor Custodian shall be
appointed by the Trustee without the prior approval of
the Company and the [Master] Servicer.
Section 3.6. Merger or Consolidation of
Custodian. Any Person into which the Custodian may be
merged or converted or with which it may be consolidated,
or any Person resulting from any merger, conversion or
consolidation to which the Custodian shall be a party, or
any Person succeeding to the business of the Custodian,
shall be the successor of the Custodian hereunder,
without the execution or filing of any paper or any
further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.
Section 3.7. Representations of the Custodian.
The Custodian hereby represents that it is a depository
institution subject to supervision or examination by a
federal or state authority, has a combined capital and
surplus of at least $10,000,000 and is qualified to do
business in the jurisdictions in which it will hold any
[Mortgage] [Contract] File.
ARTICLE IV
Miscellaneous Provisions
Section 4.1. Notices. All notices, requests,
consents and demands and other communications required
under this Agreement or pursuant to any other instrument
or document delivered hereunder shall be in writing and,
unless otherwise specifically provided, may be delivered
personally, by telegram or telex, or by registered or
certified mail, postage prepaid, return receipt
requested, at the addresses specified on the signature
page hereof (unless changed by the particular party whose
address is stated herein by similar notice in writing),
in which case the notice will be deemed delivered when
received.
Section 4.2. Amendments. No modification or
amendment of or supplement to this Agreement shall be
valid or effective unless the same is in writing and
signed by all parties hereto, and neither the Company,
the [Master] Servicer nor the Trustee shall enter into
any amendment hereof except as permitted by the Pooling
Agreement. The Trustee shall give prompt notice to the
Custodian of any amendment or supplement to the Pooling
Agreement and furnish the Custodian with written copies
thereof.
Section 4.3. Governing Law. This Agreement
shall be deemed a contract made under the laws of the
State of New York and shall be construed and enforced in
accordance with and governed by the laws of the State of
New York.
Section 4.4. Recordation of Agreement. To the
extent permitted by applicable law, this Agreement is
subject to recordation in all appropriate public offices
for real property records in all the counties or other
comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated, and in
any other appropriate public recording office or
elsewhere, such recordation to be effected by the
[Master] Servicer and at its expense on direction by the
Trustee (pursuant to the request of holders of
Certificates evidencing undivided interests in the
aggregate of not less than 25% of the Trust Fund), but
only upon direction accompanied by an Opinion of Counsel
reasonably satisfactory to the [Master] Servicer to the
effect that the failure to effect such recordation is
likely to materially and adversely affect the interests
of the Certificateholders.
For the purpose of facilitating the recordation
of this Agreement as herein provided and for other
purposes, this Agreement may be executed simultaneously
in any number of counterparts, each of which counterparts
shall be deemed to be an original, and such counterparts
shall constitute but one and the same instrument.
Section 4.5. Severability of Provisions. If
any one or more of the covenants, agreements, provisions
or terms of this Agreement shall be for any reason
whatsoever held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of
this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement
or of the Certificates or the rights of the holders
thereof.
IN WITNESS WHEREOF, this Agreement is executed
as of the date first above written.
Address: [NAME OF TRUSTEE]
[Address of Trustee]
By:
Name:
Title:
Address: RESIDENTIAL ASSET SECURITIES CORPORATION
[Address of Company]
By:
Name:
Title:
Address: [NAME OF [MASTER] SERVICER],
as [Master] Servicer
[Address of Master Servicer]
By:________________________________
Name:
Title:
Address: [NAME OF CUSTODIAN],
as Custodian
[Address of Custodian
By:___________________________________
Name:
Title:
STATE OF _________ )
) ss.:
COUNTY OF ________ )
On the _____ day of ____, 199_, before me, a
notary public in and for said State, personally appeared
, known to me to be a
of [Name of Trustee] a
______________________________ that executed the within
instrument, and also known to me to be the person who
executed it on behalf of said ___________________________
and acknowledged to me that such
___________________________ executed the within
instrument.
IN WITNESS WHEREOF, I have hereunto set my hand
and affixed my official seal the day and year in this
certificate first above written.
Notary Public
[SEAL]
STATE OF )
) ss.:
COUNTY OF )
On the ____ day of ____, 199_, before me, a
notary public in and for said State, personally appeared
_________________, known to me to be a
____________________ of [Name of Custodian], a
____________________ that executed the within instrument,
and also known to me to be the person who executed it on
behalf of said national banking association, and
acknowledged to me that such _________________________
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand
and affixed my official seal the day and year in this
certificate first above written.
Notary Public
[SEAL]
STATE OF )
) ss.:
COUNTY OF )
On the ____ day of ___________, 199_ before me,
a notary public in and for said State, personally
appeared ______________, known to me to be a
____________________ of Residential Asset Securities
Corporation, a ___________________ one of the
corporations that executed the within instrument, and
also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that
such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand
and affixed my official seal the day and year in this
certificate first above written.
Notary Public
[Notarial Seal]
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the ____ day of _________, 199_ before me,
a notary public in and for said State, personally
appeared _________________, known to me to be a
______________ of [Name of [Master] Servicer, one of the
corporations that executed the within instrument, and
also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that
such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand
and affixed my official seal the day and year in this
certificate first above written.
Notary Public
[Notarial Seal]
EXHIBIT ONE
FORM OF CUSTODIAN
INITIAL CERTIFICATION
[________________ ____, 199__]
[Name of Trustee]
[Address of Trustee]
Attention: Corporate Trust Administration
Re: Custodial Agreement dated as of [______
__, 199_], by and among
[Name of Trustee], Residential Asset
Securities Corporation,
[Name of [Master] Servicer and [Name of
Custodian], [Mortgage]
[Manufactured Housing Contract]
Pass-Through Certificates,
Series [199_-_]
Ladies and Gentlemen:
In accordance with Section 2.3 of the
above-captioned Custodial Agreement, and subject to
Section 2.02 of the Pooling Agreement, the undersigned,
as Custodian, hereby certifies that it has received a
[Mortgage] [Contract] File (which contains an original
[Mortgage Note] [Contact]) to the extent required in
Section 2.01(b) of the Pooling Agreement with respect to
each [Mortgage Loan] [Contract] listed in the [Mortgage
Loan] [Contract] Schedule.
Capitalized words and phrases used herein shall
have the respective meanings assigned to them in the
above-captioned Custodial Agreement.
[NAME OF CUSTODIAN]
by:
Name:
Title:
EXHIBIT TWO
FORM OF CUSTODIAN INTERIM CERTIFICATION
[________________ ____, 199__]
[Name of Trustee]
[Address of Trustee]
Attention: Corporate Trust Administration
Re: Custodial Agreement dated as of [______ __, 199_],
by and among
[Name of Trustee], Residential Asset Securities Corporation,
[Name of [Master] Servicer and [Name of Custodian], [Mortgage]
[Manufactured Housing Contract] Pass-Through Certificates,
Series [199_-_]
Ladies and Gentlemen:
In accordance with Section 2.3 of the
above-captioned Custodial Agreement, the undersigned, as
Custodian, hereby certifies that it has received a
[Mortgage] [Contract] File to the extent required
pursuant to Section 2.01(b) of the Pooling Agreement with
respect to each [Mortgage Loan] [Contract] listed in the
[Mortgage Loan] [Contract] Schedule, and it has reviewed
the [Mortgage] [Contract] File and the [Mortgage Loan]
[Contract] Schedule and has determined that: all
required documents have been executed and received and
that such documents related to the [Mortgage Loans]
[Contracts] identified on the [Mortgage Loan] [Contract]
Schedule, with any exceptions listed on Schedule A
attached hereto.
Capitalized words and phrases used herein shall
have the respective meanings assigned to them in the
above-captioned Custodial Agreement.
[Name of Custodian]
By:
Name:
Title:
EXHIBIT THREE
FORM OF CUSTODIAN FINAL CERTIFICATION
[________________ ____, 199__]
[Name of Trustee]
[Address of Trustee]
Attention: Corporate Trust Administration
Re: Custodial Agreement dated as of [______
__, 199_], by and among [Name of
Trustee], Residential Asset Securities
Corporation, [Name of [Master] Servicer
and [Name of Custodian], [Mortgage]
[Manufactured Housing Contract]
Pass-Through Certificates,
Series [199_-_]
Ladies and Gentlemen:
In accordance with Section 2.3 of the
above-captioned Custodial Agreement, the undersigned, as
Custodian, hereby certifies that it has received a
[Mortgage] [Contract] File with respect to each [Mortgage
Loan] [Contract] listed in the [Mortgage Loan] [Contract]
Schedule it has received:
(i) The original [Mortgage Note] [Contract],
endorsed without recourse to the order of the
Trustee and showing an unbroken chain of
endorsements from the originator thereof to the
Person endorsing it to the Trustee or an original
lost note affidavit from the related Seller or
Residential Funding stating that the original
[Mortgage Note] [Contract] was lost, misplaced or
destroyed, together with a copy of the related
[Mortgage Note] [Contract];
(ii) The original [Mortgage] [Title Documents]
with evidence of recording indicated thereon or a
copy of the [Mortgage] [Title Documents] certified
by the public recording office in which such
mortgage has been recorded;
(iii) An original Assignment of the
[Mortgage] [Contract] to the Trustee with evidence
of recording indicated thereon or a copy of such
assignment certified by the public recording office
in which such assignment has been recorded;
(iv) The original recorded assignment or
assignments of the [Mortgage] [Contract] showing an
unbroken chain of title from the originator thereof
to the Person assigning it to the Trustee or a copy
of such assignment or assignments of the [Mortgage]
[Contract] certified by the public recording office
in which such assignment or assignments have been
recorded;
(v) The original of each modification,
assumption agreement or preferred loan agreement,
if any, relating to such [Mortgage Loan] [Contract]
or a copy of each modification, assumption
agreement or preferred loan agreement certified by
the public recording office in which such document
has been recorded; and
(vi) The certificate of [mortgage] insurance,
if any, or a true and correct copy thereof.
Capitalized words and phrases used herein shall
have the respective meanings assigned to them in the
above-captioned Custodial Agreement.
[NAME OF CUSTODIAN]
By:
Name:
Title:
EXHIBIT F
[MORTGAGE LOAN] [CONTRACT] SCHEDULE
EXHIBIT G
FORM OF SELLER/SERVICER CONTRACT
This Seller/Servicer Contract (as may be amended,
supplemented or otherwise modified from time to time,
this "Contract") is made this _________ day of _______,
19____, by and between Residential Funding Corporation,
its successors and assigns ("Residential Funding") and
_____________________ (the "Seller/Servicer," and,
together with Residential Funding, the "parties" and
each, individually, a "party").
WHEREAS, the Seller/Servicer desires to sell [Loans]
[Contracts] to, and/or service [Loans] [Contracts] for,
Residential Funding, and Residential Funding desires to
purchase [Loans] [Contracts] from the Seller/Servicer
and/or have the Seller/Servicer service various of its
[Loans] [Contracts], pursuant to the terms of this
Contract and the Residential Funding AlterNet Seller and
Servicer Guides incorporated herein by reference, as
amended, supplemented or otherwise modified, from time to
time (together, the "Guides").
NOW, THEREFORE, in consideration of the premises,
and the terms, conditions and agreements set forth below,
the parties agree as follows:
1. Incorporation of Guides by Reference.
The Seller/Servicer acknowledges that it has
received and read the Guides. All provisions of the
Guides are incorporated by reference into and made a part
of this Contract, and shall be binding upon the parties;
provided, however, that the Seller/Servicer shall be
entitled to sell [Loans] [Contracts] to and/or service
[Loans] [Contracts] for Residential Funding only if and
for so long as it shall have been authorized to do so by
Residential Funding in writing; provided, further that if
the Seller/Servicer does not service [Loans] [Contracts]
for Residential Funding, the provisions of the Program
Guide shall be inapplicable, and if the Seller/Servicer
does not sell [Loans] [Contracts] to Residential Funding,
the provisions of the Program Guide shall be
inapplicable, in each case until such time as the
Seller/Servicer does service [Loans] [Contracts] for or,
as appropriate, does sell [Loans] [Contracts] to
Residential Funding. Specific reference in this Contract
to particular provisions of the Guides and not to other
provisions does not mean that those provisions of the
Guides not specifically cited in this Contract are not
applicable. All terms used herein shall have the same
meanings as such terms have in the Guides, unless the
context clearly requires otherwise.
2. Amendments.
This Contract may not be amended or modified orally,
and no provision of this Contract may be waived or
amended except in writing signed by the party against
whom enforcement is sought. Such a written waiver or
amendment must expressly reference this Contract.
However, by their terms, the Guides may be amended or
supplemented by Residential Funding from time to time.
Any such amendment(s) to the Guides shall be binding upon
the parties hereto.
3. Representations and Warranties.
a. Reciprocal Representations and Warranties.
The Seller/Servicer and Residential Funding
each represents and warrants to the other that as of the
date of this Contract:
(1) Each party is duly organized, validly
existing, and in good standing under the
laws of its jurisdiction of organization,
is qualified, if necessary, to do
business in each jurisdiction in which it
is required to be so qualified, and has
the requisite power and authority to
enter into this Contract and all other
agreements which are contemplated by this
Contract and to carry out its obligations
hereunder and under the Guides.
(2) This Contract has been duly authorized,
executed and delivered by each party and
constitutes a valid and legally binding
agreement of each party enforceable in
accordance with its terms.
(3) There is no action, proceeding or
investigation pending or threatened, nor
any basis therefor known to either party,
that questions the validity or
prospective validity of this Contract.
(4) Insofar as its capacity to carry out any
obligation under this Contract is
concerned, neither party is in violation
of any charter, articles of
incorporation, bylaws, mortgage,
indenture, indebtedness, agreement,
instrument, judgment, decree, order,
statute, rule or regulation and no such
obligation adversely affects its capacity
to fulfill any of its promises or duties
under this Contract. Its execution of,
and performance pursuant to, this
Contract will not result in a violation
of any of the foregoing.
b. Seller/Servicer's Representations, Warranties
and Covenants.
In addition to the representations, warranties
and covenants made by the Seller/Servicer
pursuant to subparagraph (a) of this paragraph
3, the Seller/Servicer makes the
representations, warranties and covenants set
forth in the Guides and, upon request, agrees
to deliver to Residential Funding the
certified Resolution of Board of Directors
which authorizes the execution and delivery of
this Contract.
4. Remedies of Residential Funding.
If an Event of Seller Default, or an Event of
Servicer Default shall occur, Residential Funding may, at
its option, exercise one or more of those remedies set
forth in the Guides.
5. Seller/Servicer's Status as Independent Contractor.
At no time shall the Seller/Servicer represent that
it is acting as an agent of Residential Funding. The
Seller/Servicer shall, at all times, act as an
independent contractor.
6. Prior Agreements Superseded.
This Contract restates, amends and supersedes any
and all prior Seller Contracts or Servicer Contracts
between the parties except that any subservicing
agreement executed by the Seller/Servicer in connection
with any loan-security exchange transaction shall not be
affected.
7. Assignment.
This Contract may not be assigned or transferred, in
whole or in part, by the Seller/Servicer without the
prior written consent of Residential Funding.
Residential Funding may sell, assign, convey,
hypothecate, pledge or in any other way transfer, in
whole or in part, without restriction, its rights under
this Contract and the Guides with respect to any
Commitment or Loan. Unless Residential Funding specifies
otherwise, any such sale, assignment, conveyance,
hypothecation, pledge or transfer shall be effective upon
written notice by Residential Funding to the
Seller/Servicer.
8. Notices.
All notices, requests, demands or other
communications that are to be given under this Contract
shall be in writing, addressed to the appropriate parties
and sent by certified mail, return receipt requested,
postage prepaid, to the addresses below. However,
another name or address or both may be substituted by the
Seller/Servicer pursuant to the requirements of this
paragraph 8, or by Residential Funding pursuant to an
amendment to the Guides.
If to Residential Funding, notice must be sent to the
appropriate address specified in the Guides.
If to the Seller/Servicer, notice must be sent to:
Attention:
9. Jurisdiction and Venue.
Each of the parties irrevocably submits to the
jurisdiction of any state or federal court located in
Hennepin County, Minnesota, over any action, suit or
proceeding to enforce or defend any right under this
Contract or otherwise arising from any loan sale or
servicing relationship existing in connection with this
Contract, and each of the parties irrevocably agrees that
all claims in respect of any such action or proceeding
may be heard or determined in such state or federal
court. Each of the parties irrevocably waives the
defense of an inconvenient forum to the maintenance of
any such action or proceeding and any other substantive
or procedural rights or remedies it may have with respect
to the maintenance of any such action or proceeding in
any such forum. Each of the parties agrees that a final
judgment in any such action or proceeding shall be
conclusive and may be enforced in any other jurisdiction
by suit on the judgment or in any other manner provided
by law. Each of the parties further agrees not to
institute any legal actions or proceedings against the
other party or any director, officer, employee, attorney,
agent or property of the other party, arising out of or
relating to this Contract in any court other than as
hereinabove specified in this paragraph 9.
10. Miscellaneous.
This Contract, including all documents incorporated
by reference herein, constitutes the entire understanding
between the parties hereto and supersedes all other
agreements, covenants, representations, warranties,
understandings and communications between the parties,
whether written or oral, with respect to the transactions
contemplated by this Contract. All section headings
contained herein are for convenience only and shall not
be construed as part of this Contract. Any provision of
this Contract that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining
portions hereof or affecting the validity or
enforceability of such provision in any other
jurisdiction, and, to this end, the provisions hereof are
severable. This Contract shall be governed by, and
construed and enforced in accordance with, applicable
federal laws and the laws of the State of Minnesota.
IN WITNESS WHEREOF, the duly authorized officers of
the Seller/Servicer and Residential Funding have executed
this Seller/Servicer Contract as of the date first above
written.
ATTEST: SELLER/SERVICER
[Corporate Seal]
(If none, so state.)
(Name of Seller/Servicer)
By:
(Signature)
By:
(Typed Name) (Typed Name)
Title: Title:
ATTEST: Residential Funding Corporation
By:
(Signature)
By:
(Typed Name) (Typed Name)
Title: Title:
EXHIBIT H
FORMS OF REQUEST FOR RELEASE
DATE:
TO:
RE: REQUEST FOR RELEASE OF DOCUMENTS
In connection with the administration of the pool of
[Mortgage Loans] [Contracts] held by you for the
referenced pool, we request the release of the [Mortgage]
[Contract] File described below.
Pooling and Servicing Agreement Dated:
Series#:
Account#:
Pool#:
Loan#:
Borrower Name(s):
Reason for Document Request: (circle one) [Mortgage
Loan] [Contract] Prepaid in Full
[Mortgage Loan] [Contract] Repurchased
"We hereby certify that all amounts received or to be
received in connection with such payments which are
required to be deposited have been or will be so
deposited as provided in the Pooling and Servicing
Agreement."
Residential Funding Corporation
Authorized Signature
*******************************************************
TO CUSTODIAN/TRUSTEE: Please acknowledge this request,
and check off documents being enclosed with a copy of
this form. You should retain this form for your files in
accordance with the terms of the Pooling and Servicing
Agreement.
Enclosed Documents: [] [Promissory Note]
[] Primary Insurance Policy
[] [Mortgage or Deed of Trust] [Contract]
[] Assignment(s) of [Mortgage or
Deed of Trust] [Contract]
[] Title Insurance Policy
[] Other:
Name Date
Title
EXHIBIT I-1
FORM OF TRANSFER AFFIDAVIT AND AGREEMENT
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
Owner] (record or beneficial owner of the [Mortgage]
[Manufactured Housing Contract] Pass-Through
Certificates, Series [199_-_], Class R (the "Owner")), 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 and agreement.
2. That the Owner (i) is not and will not be
a "disqualified organization" as of [date of transfer]
within the meaning of Section 860E(e)(5) of the Internal
Revenue Code of 1986, as amended (the "Code"), (ii) will
endeavor to remain other than a disqualified organization
for so long as it retains its ownership interest in the
Class R Certificates, and (iii) is acquiring the Class R
Certificates for its own account or for the account of
another Owner from which it has received an affidavit and
agreement in substantially the same form as this
affidavit and agreement. (For this purpose, a
"disqualified organization" means the United States, any
state or political subdivision thereof, any agency or
instrumentality of any of the foregoing (other than an
instrumentality all of the activities of which are
subject to tax and, except for the Federal Home Loan
Mortgage Corporation, a majority of whose board of
directors is not selected by any such governmental
entity) or any foreign government, international
organization or any agency or instrumentality of such
foreign government or organization, any rural electric or
telephone cooperative, or any organization (other than
certain farmers' cooperatives) that is generally exempt
from federal income tax unless such organization is
subject to the tax on unrelated business taxable income).
3. That the Owner is aware (i) of the tax that
would be imposed on transfers of Class R Certificates to
disqualified organizations under the Code, that applies
to all transfers of Class R Certificates after March 31,
1988; (ii) that such tax would be on the transferor, or,
if such transfer is through an agent (which person
includes a broker, nominee or middleman) for a
disqualified organization, on the agent; (iii) that the
person otherwise liable for the tax shall be relieved of
liability for the tax if the transferee furnishes to such
person an affidavit that the transferee is not a
disqualified organization and, at the time of transfer,
such person does not have actual knowledge that the
affidavit is false; and (iv) that the Class R
Certificates may be "noneconomic residual interests"
within the meaning of Treasury regulations promulgated
pursuant to the Code and that the transferor of a
noneconomic residual interest will remain liable for any
taxes due with respect to the income on such residual
interest, unless no significant purpose of the transfer
was to impede the assessment or collection of tax.
4. That the Owner is aware of the tax imposed
on a "pass-through entity" holding Class R Certificates
if at any time during the taxable year of the
pass-through entity 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.)
5. That the Owner is aware that the Trustee
will not register the transfer of any Class R
Certificates unless the transferee, or the transferee's
agent, delivers to it an affidavit and agreement, among
other things, in substantially the same form as this
affidavit and agreement. The Owner expressly agrees that
it will not consummate any such transfer if it knows or
believes that any of the representations contained in
such affidavit and agreement are false.
6. That the Owner has reviewed the
restrictions set forth on the face of the Class R
Certificates and the provisions of Section 5.02(f) of the
Pooling and Servicing Agreement under which the Class R
Certificates were issued (in particular, clause (iii)(A)
and (iii)(B) of Section 5.02(f) which authorize the
Trustee to deliver payments to a person other than the
Owner and negotiate a mandatory sale by the Trustee in
the event the Owner holds such Certificates in violation
of Section 5.02(f)). The Owner expressly agrees to be
bound by and to comply with such restrictions and
provisions.
7. That the Owner consents to any additional
restrictions or arrangements that shall be deemed
necessary upon advice of counsel to constitute a
reasonable arrangement to ensure that the Class R
Certificates will only be owned, directly or indirectly,
by an Owner that is not a disqualified organization.
8. The Owner's Taxpayer Identification Number
is .
9. This affidavit and agreement relates only
to the Class R Certificates held by the Owner and not to
any other holder of the Class R Certificates. The Owner
understands that the liabilities described herein relate
only to the Class R Certificates.
10. That no purpose of the Owner relating to
the transfer of any of the Class R Certificates by the
Owner is or will be to impede the assessment or
collection of any tax.
11. That the Owner has no present knowledge or
expectation that it will be unable to pay any United
States taxes owed by it so long as any of the
Certificates remain outstanding. In this regard, the
Owner hereby represents to and for the benefit of the
person from whom it acquired the Class R Certificate that
the Owner intends to pay taxes associated with holding
such Class R Certificate as they become due, fully
understanding that it may incur tax liabilities in excess
of any cash flows generated by the Class R Certificate.
12. That the Owner has no present knowledge or
expectation that it will become insolvent or subject to
a bankruptcy proceeding for so long as any of the Class
R Certificates remain outstanding.
13. The Owner is a citizen or resident of the
United States, a corporation, partnership or other entity
created or organized in, or under the laws of, the United
States or any political subdivision thereof, or an estate
or trust whose income from sources without the United
States is includable in gross income for United States
federal income tax purposes regardless of its connection
with the conduct of a trade or business within the United
States.
IN WITNESS WHEREOF, the Owner has caused this
instrument to be executed on its behalf, pursuant to the
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
, 19__.
[NAME OF OWNER]
By:
[Name of Officer]
[Title of Officer]
[Corporate Seal]
ATTEST:
[Assistant] Secretary
Personally appeared before me the above-named
[Name of Officer], known or proved to me to be the same
person who executed the foregoing instrument and to be
the [Title of Officer] of the Owner, and acknowledged to
me that he executed the same as his free act and deed and
the free act and deed of the Owner.
Subscribed and sworn before me this day of
, 19__.
NOTARY PUBLIC
COUNTY OF
STATE OF
My Commission expires the day
of , 19 .
EXHIBIT I-2
FORM OF TRANSFEROR CERTIFICATE
[__________________, 19__]
Residential Asset Securities Corporation
8400 Normandale Lake Boulevard
Suite 600
Minneapolis, Minnesota 55437
[Name and Address of
Trustee]
Attention: Corporate Trust Administration
Re: [Mortgage] [Manufactured Housing
Contract] Pass-Through Certificates,
Series [199_-_], Class R
Ladies and Gentlemen:
This letter is delivered to you in connection
with the transfer by (the
"Seller") to ______________________________________ (the
"Purchaser") of $_____________ Initial Certificate
Principal Balance of [Mortgage] [Manufactured Housing
Contract] Pass-Through Certificates, Series [19_-_],
Class R (the "Certificates"), pursuant to Section 5.02 of
the Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"), dated as of [______ __, 199_]
among Residential Asset Securities Corporation, as seller
(the "Company"), [name of [Master] Servicer], as master
servicer, and [Name of Trustee], as trustee (the
"Trustee"). All terms used herein and not otherwise
defined shall have the meanings set forth in the Pooling
and Servicing Agreement. The Seller hereby certifies,
represents and warrants to, and covenants with, the
Company and the Trustee that:
1. No purpose of the Seller relating to the
transfer of the Certificate by the Seller to the
Purchaser is or will be to impede the assessment or
collection of any tax.
2. The Seller understands that the Purchaser
has delivered to the Trustee and the [Master] Servicer a
transfer affidavit and agreement in the form attached to
the Pooling and Servicing Agreement as Exhibit I-1. The
Seller does not know or believe that any representation
contained therein is false.
3. The Seller has at the time of the transfer
conducted a reasonable investigation of the financial
condition of the Purchaser as contemplated by Treasury
Regulations Section 1.860E-1(c)(4)(i) and, as a result of
that investigation, the Seller has determined that the
Purchaser has historically paid its debts as they become
due and has found no significant evidence to indicate
that the Purchaser will not continue to pay its debts as
they become due in the future. The Seller understands
that the transfer of a Class R Certificate may not be
respected for United States income tax purposes (and the
Seller may continue to be liable for United States income
taxes associated therewith) unless the Seller has
conducted such an investigation.
4. The Seller has no actual knowledge that
the proposed Transferee is not both a United States
Person and a Permitted Transferee.
Very truly yours,
(Seller)
By:
Name:
Title:
EXHIBIT J
FORM OF INVESTOR REPRESENTATION LETTER
[__________________, 19__]
Residential Asset Securities Corporation
8400 Normandale Lake Boulevard
Suite 600
Minneapolis, Minnesota 55437
[Name and Address of
Trustee]
Attention: Corporate Trust Administration
Re: [Mortgage] [Manufactured Housing
Contract] Pass-Through Certificates,
Series [199_-_], Class R
Ladies and Gentlemen:
(the "Purchaser")
intends to purchase from (the
"Seller") $ Initial Certificate Principal
Balance of [Mortgage] [Manufactured Housing Contract]
Pass-Through Certificates, Series [199_-_], Class (the
"Certificates"), issued pursuant to the Pooling and
Servicing Agreement (the "Pooling and Servicing
Agreement"), dated as of [______ __, 199_] among
Residential Asset Securities Corporation, as seller (the
"Company"), [name of [Master] Servicer], as [master]
servicer, and [Name of Trustee], as trustee (the
"Trustee"). All terms used herein and not otherwise
defined shall have the meanings set forth in the Pooling
and Servicing Agreement. The Purchaser hereby certifies,
represents and warrants to, and covenants with, the
Company and the Trustee that:
1. The Purchaser understands that (a)
the Certificates have not been and will not be
registered or qualified under the Securities
Act of 1933, as amended (the "Act") or any
state securities law, (b) the Company is not
required to so register or qualify the
Certificates, (c) the Certificates may be
resold only if registered and qualified
pursuant to the provisions of the Act or any
state securities law, or if an exemption from
such registration and qualification is
available, (d) the Pooling and Servicing
Agreement contains restrictions regarding the
transfer of the Certificates and (e) the
Certificates will bear a legend to the
foregoing effect.
2. The Purchaser is acquiring the
Certificates for its own account for
investment only and not with a view to or for
sale in connection with any distribution
thereof in any manner that would violate the
Act or any applicable state securities laws.
3. The Purchaser is (a) a substantial,
sophisticated institutional investor having
such knowledge and experience in financial and
business matters, and, in particular, in such
matters related to securities similar to the
Certificates, such that it is capable of
evaluating the merits and risks of investment
in the Certificates, (b) able to bear the
economic risks of such an investment and (c)
an "accredited investor" within the meaning of
Rule 501(a) promulgated pursuant to the Act.
4. The Purchaser has been furnished
with, and has had an opportunity to review (a)
[a copy of the Private Placement Memorandum,
dated , 19 , relating to the Certificates
(b)] a copy of the Pooling and Servicing
Agreement and [b] [c] such other information
concerning the Certificates, the [Mortgage
[Loans] [Contracts]] [Contracts] and the
Company as has been requested by the Purchaser
from the Company or the Seller and is relevant
to the Purchaser's decision to purchase the
Certificates. The Purchaser has had any
questions arising from such review answered by
the Company or the Seller to the satisfaction
of the Purchaser. [If the Purchaser did not
purchase the Certificates from the Seller in
connection with the initial distribution of
the Certificates and was provided with a copy
of the Private Placement Memorandum (the
"Memorandum") relating to the original sale
(the "Original Sale") of the Certificates by
the Company, the Purchaser acknowledges that
such Memorandum was provided to it by the
Seller, that the Memorandum was prepared by
the Company solely for use in connection with
the Original Sale and the Company did not
participate in or facilitate in any way the
purchase of the Certificates by the Purchaser
from the Seller, and the Purchaser agrees that
it will look solely to the Seller and not to
the Company with respect to any damage,
liability, claim or expense arising out of,
resulting from or in connection with (a) error
or omission, or alleged error or omission,
contained in the Memorandum, or (b) any
information, development or event arising
after the date of the Memorandum.]
5. The Purchaser has not and will not nor
has it authorized or will it authorize any
person to (a) offer, pledge, sell, dispose of
or otherwise transfer any Certificate, any
interest in any Certificate or any other
similar security to any person in any manner,
(b) solicit any offer to buy or to accept a
pledge, disposition of other transfer of any
Certificate, any interest in any Certificate
or any other similar security from any person
in any manner, (c) otherwise approach or
negotiate with respect to any Certificate, any
interest in any Certificate or any other
similar security with any person in any
manner, (d) make any general solicitation by
means of general advertising or in any other
manner or (e) take any other action, that (as
to any of (a) through (e) above) would
constitute a distribution of any Certificate
under the Act, that would render the
disposition of any Certificate a violation of
Section 5 of the Act or any state securities
law, or that would require registration or
qualification pursuant thereto. The Purchaser
will not sell or otherwise transfer any of the
Certificates, except in compliance with the
provisions of the Pooling and Servicing
Agreement.
6. The Purchaser is not an employee
benefit plan or other plan subject to the
Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or Section 4975 of
the Internal Revenue Code of 1986, as amended
(the "Code"), or an investment manager, a
named fiduciary or a trustee of any such plan
or any other Person acting, directly or
indirectly, on behalf of or purchasing any
Certificate with "plan assets" of any such
plan, and understands that registration of
transfer of any Certificate to any such plan,
or to any Person acting on behalf of or
purchasing any Certificate with "plan assets"
of any such plan, will not be made unless such
plan or Person delivers an opinion of its
counsel, addressed and satisfactory to the
Trustee, the Company and the [Master]
Servicer, to the effect that the purchase and
holding of a Certificate by, on behalf of or
with "plan assets" of any such plan is
permissible under applicable law, would not
constitute or result in any non-exempt
prohibited transaction under Section 406 of
ERISA or Section 4975 of the Code, and would
not subject the Company, the [Master] Servicer
or the Trustee to any obligation or liability
(including liabilities under Section 406 of
ERISA or Section 4975 of the Code) in addition
to those undertaken in the Pooling and
Servicing Agreement or any other liability.
7. The Purchaser is not a non-United
States person.
Very truly yours,
By:
Name:
Title:
EXHIBIT K
FORM OF TRANSFEROR REPRESENTATION LETTER
__________________, 19__
Residential Asset Securities Corporation
8400 Normandale Lake Boulevard
Suite 600
Minneapolis, Minnesota 55437
[Name and Address of
Trustee]
Attention: Corporate Trust Administration
Re: [Mortgage] [Manufactured Housing
Contract] Pass-Through Certificates,
Series [199_-_], Class R
Ladies and Gentlemen:
In connection with the sale by
(the "Seller") to (the "Purchaser") of
$ Initial Certificate Principal Balance of
[Mortgage] [Manufactured Housing Contract] Pass-Through
Certificates, Series [199_-_], Class __ (the
"Certificates"), issued pursuant to the Pooling and
Servicing Agreement (the "Pooling and Servicing
Agreement"), dated as of [______ __, 199_] among
Residential Asset Securities Corporation, as seller (the
"Company"), [name of [Master] Servicer], as [master]
servicer, and [name of Trustee], as trustee (the
"Trustee"). The Seller hereby certifies, represents and
warrants to, and covenants with, the Company and the
Trustee that:
Neither the Seller nor anyone acting on its
behalf has (a) offered, pledged, sold, disposed of or
otherwise transferred any Certificate, any interest in
any Certificate or any other similar security to any
person in any manner, (b) has solicited any offer to buy
or to accept a pledge, disposition or other transfer of
any Certificate, any interest in any Certificate or any
other similar security from any person in any manner, (c)
has otherwise approached or negotiated with respect to
any Certificate, any interest in any Certificate or any
other similar security with any person in any manner, (d)
has made any general solicitation by means of general
advertising or in any other manner, or (e) has taken any
other action, that (as to any of (a) through (e) above)
would constitute a distribution of the Certificates under
the Securities Act of 1933 (the "Act"), that would render
the disposition of any Certificate a violation of Section
5 of the Act or any state securities law, or that would
require registration or qualification pursuant thereto.
The Seller will not act, in any manner set forth in the
foregoing sentence with respect to any Certificate. The
Seller has not and will not sell or otherwise transfer
any of the Certificates, except in compliance with the
provisions of the Pooling and Servicing Agreement.
Very truly yours,
(Seller)
By:
Name:
Title:
EXHIBIT L
[FORM OF RULE 144A INVESTMENT REPRESENTATION]
Description of Rule 144A Securities, including numbers:
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
The undersigned seller, as registered holder
(the "Seller"), intends to transfer the Rule 144A
Securities described above to the undersigned buyer (the
"Buyer").
1. In connection with such transfer and in
accordance with the agreements pursuant to which the Rule
144A Securities were issued, the Seller hereby certifies
the following facts: Neither the Seller nor anyone
acting on its behalf has offered, transferred, pledged,
sold or otherwise disposed of the Rule 144A Securities,
any interest in the Rule 144A Securities or any other
similar security to, or solicited any offer to buy or
accept a transfer, pledge or other disposition of the
Rule 144A Securities, any interest in the Rule 144A
Securities or any other similar security from, or
otherwise approached or negotiated with respect to the
Rule 144A Securities, any interest in the Rule 144A
Securities or any other similar security with, any person
in any manner, or made any general solicitation by means
of general advertising or in any other manner, or taken
any other action, that would constitute a distribution of
the Rule 144A Securities under the Securities Act of
1933, as amended (the "1933 Act"), or that would render
the disposition of the Rule 144A Securities a violation
of Section 5 of the 1933 Act or require registration
pursuant thereto, and that the Seller has not offered the
Rule 144A Securities to any person other than the Buyer
or another "qualified institutional buyer" as defined in
Rule 144A under the 1933 Act.
2. The Buyer warrants and represents to, and
covenants with, the Seller, the Trustee and the [Master]
Servicer (as defined in the Pooling and Servicing
Agreement (the "Agreement"), dated as of [______ __,
199_] among [name of [Master] Servicer] as [Master]
Servicer, Residential Asset Securities Corporation as
depositor pursuant to Section 5.02 of the Agreement and
[name of Trustee] as trustee, as follows:
a. The Buyer understands that the Rule
144A Securities have not been registered under the
1933 Act or the securities laws of any state.
b. The Buyer considers itself a
substantial, sophisticated institutional investor
having such knowledge and experience in financial
and business matters that it is capable of
evaluating the merits and risks of investment in
the Rule 144A Securities.
c. The Buyer has been furnished with all
information regarding the Rule 144A Securities that
it has requested from the Seller, the Trustee or
the Servicer.
d. Neither the Buyer nor anyone acting
on its behalf has offered, transferred, pledged,
sold or otherwise disposed of the Rule 144A
Securities, any interest in the Rule 144A
Securities or any other similar security to, or
solicited any offer to buy or accept a transfer,
pledge or other disposition of the Rule 144A
Securities, any interest in the Rule 144A
Securities or any other similar security from, or
otherwise approached or negotiated with respect to
the Rule 144A Securities, any interest in the Rule
144A Securities or any other similar security with,
any person in any manner, or made any general
solicitation by means of general advertising or in
any other manner, or taken any other action, that
would constitute a distribution of the Rule 144A
Securities under the 1933 Act or that would render
the disposition of the Rule 144A Securities a
violation of Section 5 of the 1933 Act or require
registration pursuant thereto, nor will it act, nor
has it authorized or will it authorize any person
to act, in such manner with respect to the Rule
144A Securities.
e. The Buyer is a "qualified
institutional buyer" as that term is defined in
Rule 144A under the 1933 Act and has completed
either of the forms of certification to that effect
attached hereto as Annex 1 or Annex 2. The Buyer
is aware that the sale to it is being made in
reliance on Rule 144A. The Buyer is acquiring the
Rule 144A Securities for its own account or the
accounts of other qualified institutional buyers,
understands that such Rule 144A Securities may be
resold, pledged or transferred only (i) to a person
reasonably believed to be a qualified institutional
buyer that purchases for its own account or for the
account of a qualified institutional buyer to whom
notice is given that the resale, pledge or transfer
is being made in reliance on Rule 144A, or (ii)
pursuant to another exemption from registration
under the 1933 Act.
[3. The Buyer warrants and represents to, and
covenants with, the Seller, the Trustee, [Master]
Servicer and the Company that either (1) the Buyer is (A)
not an employee benefit plan (within the meaning of
Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")), or a plan (within the
meaning of Section 4975(e)(1) of the Internal Revenue
Code of 1986 ("Code")) which (in either case) is subject
to ERISA or Section 4975 of the Code (both, a "Plan"),
and (B) is not directly or indirectly purchasing the Rule
144A Securities on behalf of, as investment manager of,
as named fiduciary of, as trustee of, or with "plan
assets" of a Plan, or (2) the Buyer understands that
registration of transfer of any Rule 144A Securities to
any Plan, or to any Person acting on behalf of any Plan,
will not be made unless such Plan (delivers an opinion of
its counsel, addressed and satisfactory to the Trustee,
the Company and the [Master] Servicer, to the effect that
the purchase and holding of the Rule 144A Securities by,
on behalf of or with "plan assets" of any Plan would not
constitute or result in a prohibited transaction under
Section 406 of ERISA or Section 4975 of the Code, and
would not subject the Company, the [Master] Servicer or
the Trustee to any obligation or liability (including
liabilities under ERISA or Section 4975 of the Code) in
addition to those undertaken in the Pooling and Servicing
Agreement or any other liability.]
4. This document may be executed in one or
more counterparts and by the different parties hereto on
separate counterparts, each of which, when so executed,
shall be deemed to be an original; such counterparts,
together, shall constitute one and the same document.
IN WITNESS WHEREOF, each of the parties has
executed this document as of the date set forth below.
Print Name of Seller Print Name of Buyer
By: By:
Name: Name:
Title: Title:
Taxpayer Identification: Taxpayer Identification:
No. No.
Date: Date:
ANNEX 1 TO EXHIBIT L
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Buyers Other Than Registered Investment Companies]
The undersigned hereby certifies as follows in
connection with the Rule 144A Investment Representation
to which this Certification is attached:
1. As indicated below, the undersigned is the
President, Chief Financial Officer, Senior Vice President
or other executive officer of the Buyer.
2. In connection with purchases by the Buyer,
the Buyer is a "qualified institutional buyer" as that
term is defined in Rule 144A under the Securities Act of
1933 ("Rule 144A") because (i) the Buyer owned and/or
invested on a discretionary basis
$______________________ in securities (except for the
excluded securities referred to below) as of the end of
the Buyer's most recent fiscal year (such amount being
calculated in accordance with Rule 144A) and (ii) the
Buyer satisfies the criteria in the category marked
below.
___ Corporation, etc. The Buyer is a corporation
(other than a bank, savings and loan association
or similar institution), Massachusetts or similar
business trust, partnership, or charitable
organization described in Section 501(c)(3) of
the Internal Revenue Code.
___ Bank. The Buyer (a) is a national bank or
banking institution organized under the laws of
any State, territory or the District of Columbia,
the business of which is substantially confined
to banking and is supervised by the State or
territorial banking commission or similar
official or is a foreign bank or equivalent
institution, and (b) has an audited net worth of
at least $25,000,000 as demonstrated in its
latest annual financial statements, a copy of
which is attached hereto.
___ Savings and Loan. The Buyer (a) is a savings and
loan association, building and loan association,
cooperative bank, homestead association or
similar institution, which is supervised and
examined by a State or Federal authority having
supervision over any such institutions or is a
foreign savings and loan association or
equivalent institution and (b) has an audited net
worth of at least $25,000,000 as demonstrated in
its latest annual financial statements.
___ Broker-Dealer. The Buyer is a dealer registered
pursuant to Section 15 of the Securities Exchange
Act of 1934.
___ Insurance Company. The Buyer is an insurance
company whose primary and predominant business
activity is the writing of insurance or the
reinsuring of risks underwritten by insurance
companies and which is subject to supervision by
the insurance commissioner or a similar official
or agency of a State or territory or the District
of Columbia.
___ State or Local Plan. The Buyer is a plan
established and maintained by a State, its
political subdivisions, or any agency or
instrumentality of the State or its political
subdivisions, for the benefit of its employees.
___ ERISA Plan. The Buyer is an employee benefit
plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974.
___ Investment Adviser. The Buyer is an investment
adviser registered under the Investment Advisers
Act of 1940.
___ SBIC. The Buyer is a Small Business Investment
Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958.
___ Business Development Company. The Buyer is a
business development company as defined in
Section 202(a)(22) of the Investment Advisers Act
of 1940.
___ Trust Fund. The Buyer is a trust fund whose
trustee is a bank or trust company and whose
participants are exclusively (a) plans
established and maintained by a State, its
political subdivisions, or any agency or
instrumentality of the State or its political
subdivisions, for the benefit of its employees,
or (b) employee benefit plans within the meaning
of Title I of the Employee Retirement Income
Security Act of 1974, but is not a trust fund
that includes as participants individual
retirement accounts or H.R. 10 plans.
3. The term "securities" as used herein does
not include (i) securities of issuers that are affiliated
with the Buyer, (ii) securities that are part of an
unsold allotment to or subscription by the Buyer, if the
Buyer is a dealer, (iii) bank deposit notes and
certificates of deposit, (iv) loan participations, (v)
repurchase agreements, (vi) securities owned but subject
to a repurchase agreement and (vii) currency, interest
rate and commodity swaps.
4. For purposes of determining the aggregate
amount of securities owned and/or invested on a
discretionary basis by the Buyer, the Buyer used the cost
of such securities to the Buyer and did not include any
of the securities referred to in the preceding paragraph.
Further, in determining such aggregate amount, the Buyer
may have included securities owned by subsidiaries of the
Buyer, but only if such subsidiaries are consolidated
with the Buyer in its financial statements prepared in
accordance with generally accepted accounting principles
and if the investments of such subsidiaries are managed
under the Buyer's direction. However, such securities
were not included if the Buyer is a majority-owned,
consolidated subsidiary of another enterprise and the
Buyer is not itself a reporting company under the
Securities Exchange Act of 1934.
5. The Buyer acknowledges that it is familiar
with Rule 144A and understands that the seller to it and
other parties related to the Certificates are relying and
will continue to rely on the statements made herein
because one or more sales to the Buyer may be in reliance
on Rule 144A.
___ ___ Will the Buyer be purchasing the Rule 144A
Yes No Securities only for the Buyer's own
account?
6. If the answer to the foregoing question is
"no", the Buyer agrees that, in connection with any
purchase of securities sold to the Buyer for the account
of a third party (including any separate account) in
reliance on Rule 144A, the Buyer will only purchase for
the account of a third party that at the time is a
"qualified institutional buyer" within the meaning of
Rule 144A. In addition, the Buyer agrees that the Buyer
will not purchase securities for a third party unless the
Buyer has obtained a current representation letter from
such third party or taken other appropriate steps
contemplated by Rule 144A to conclude that such third
party independently meets the definition of "qualified
institutional buyer" set forth in Rule 144A.
7. The Buyer will notify each of the parties
to which this certification is made of any changes in the
information and conclusions herein. Until such notice is
given, the Buyer's purchase of Rule 144A Securities will
constitute a reaffirmation of this certification as of
the date of such purchase.
Print Name of Buyer
By:
Name:
Title:
Date:
ANNEX 2 TO EXHIBIT L
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Buyers That Are Registered Investment Companies]
The undersigned hereby certifies as follows in
connection with the Rule 144A Investment Representation
to which this Certification is attached:
1. As indicated below, the undersigned is the
President, Chief Financial Officer or Senior Vice
President of the Buyer or, if the Buyer is a "qualified
institutional buyer" as that term is defined in Rule 144A
under the Securities Act of 1933 ("Rule 144A") because
Buyer is part of a Family of Investment Companies (as
defined below), is such an officer of the Adviser.
2. In connection with purchases by Buyer, the
Buyer is a "qualified institutional buyer" as defined in
SEC Rule 144A because (i) the Buyer is an investment
company registered under the Investment Company Act of
1940, and (ii) as marked below, the Buyer alone, or the
Buyer's Family of Investment Companies, owned at least
$100,000,000 in securities (other than the excluded
securities referred to below) as of the end of the
Buyer's most recent fiscal year. For purposes of
determining the amount of securities owned by the Buyer
or the Buyer's Family of Investment Companies, the cost
of such securities was used.
____ The Buyer owned $___________________ in
securities (other than the excluded securities
referred to below) as of the end of the
Buyer's most recent fiscal year (such amount
being calculated in accordance with
Rule 144A).
____ The Buyer is part of a Family of Investment
Companies which owned in the aggregate
$______________ in securities (other than the
excluded securities referred to below) as of
the end of the Buyer's most recent fiscal year
(such amount being calculated in accordance
with Rule 144A).
3. The term "Family of Investment Companies"
as used herein means two or more registered investment
companies (or series thereof) that have the same
investment adviser or investment advisers that are
affiliated (by virtue of being majority owned
subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).
4. The term "securities" as used herein does
not include (i) securities of issuers that are affiliated
with the Buyer or are part of the Buyer's Family of
Investment Companies, (ii) bank deposit notes and
certificates of deposit, (iii) loan participations, (iv)
repurchase agreements, (v) securities owned but subject
to a repurchase agreement and (vi) currency, interest
rate and commodity swaps.
5. The Buyer is familiar with Rule 144A and
understands that each of the parties to which this
certification is made are relying and will continue to
rely on the statements made herein because one or more
sales to the Buyer will be in reliance on Rule 144A. In
addition, the Buyer will only purchase for the Buyer's
own account.
6. The undersigned will notify each of the
parties to which this certification is made of any
changes in the information and conclusions herein. Until
such notice, the Buyer's purchase of Rule 144A Securities
will constitute a reaffirmation of this certification by
the undersigned as of the date of such purchase.
Print Name of Buyer
Name:
Title:
IF AN ADVISER:
Print Name of Buyer
EXHIBIT M
[Text of Amendment to Pooling and Servicing
Agreement Pursuant to Section 11.01(e) for a
Limited Guaranty]
ARTICLE XII
Subordinate Certificate Loss Coverage; Limited Guaranty
Section 12.01. Subordinate Certificate Loss
Coverage; Limited Guaranty. (a) Subject to subsection
(c) below, prior to the later of the third Business Day
prior to each Distribution Date or the related
Determination Date, the [Master] Servicer shall determine
whether it or any Subservicer will be entitled to any
reimbursement pursuant to Section 4.02(a) on such
Distribution Date for Advances or Subservicer Advances
previously made, (which will not be Advances or
Subservicer Advances that were made with respect to
delinquencies which were subsequently determined to be
Excess Special Hazard Losses, Excess Fraud Losses, Excess
Bankruptcy Losses or Extraordinary Losses) and, if so,
the [Master] Servicer shall demand payment from
Residential Funding of an amount equal to the amount of
any Advances or Subservicer Advances reimbursed pursuant
to Section 4.02(a), to the extent such Advances or
Subservicer Advances have not been included in the amount
of the Realized Loss in the related [Mortgage Loan]
[Contract], and shall distribute the same to the Class
B Certificateholders in the same manner as if such amount
were to be distributed pursuant to Section 4.02(a).
(b) Subject to subsection (c) below, prior to
the later of the third Business Day prior to each
Distribution Date or the related Determination Date, the
[Master] Servicer shall determine whether any Realized
Losses (other than Excess Special Hazard Losses, Excess
Bankruptcy Losses, Excess Fraud Losses and Extraordinary
Losses) will be allocated to the Class B Certificates on
such Distribution Date pursuant to Section 4.05, and, if
so, the [Master] Servicer shall demand payment from
Residential Funding of the amount of such Realized Loss
and shall distribute the same to the Class B
Certificateholders in the same manner as if such amount
were to be distributed pursuant to Sections 4.02(a);
provided, however, that the amount of such demand in
respect of any Distribution Date shall in no event be
greater than the sum of (i) the additional amount of
Accrued Certificate Interest that would have been paid
for the Class B Certificateholders on such Distribution
Date had such Realized Loss or Losses not occurred plus
(ii) the amount of the reduction in the Certificate
Principal Balances of the Class B Certificates on such
Distribution Date due to such Realized Loss or Losses.
Notwithstanding such payment, such Realized Losses shall
be deemed to have been borne by the Certificateholders
for purposes of Section 4.05. Excess Special Hazard
Losses, Excess Fraud Losses, Excess Bankruptcy Losses and
Extraordinary Losses allocated to the Class B
Certificates will not be covered by the Subordinate
Certificate Loss Obligation.
(c) Demands for payments pursuant to this
Section shall be made prior to the later of the third
Business Day prior to each Distribution Date or the
related Determination Date by the [Master] Servicer with
written notice thereof to the Trustee. The maximum
amount that Residential Funding shall be required to pay
pursuant to this Section on any Distribution Date (the
"Amount Available") shall be equal to the lesser of (X)
minus the sum of (i) all previous
payments made under subsections (a) and (b) hereof and
(ii) all draws under the Limited Guaranty made in lieu of
such payments as described below in subsection (d) and
(Y) the then outstanding Certificate Principal Balances
of the Class B Certificates, or such lower amount as may
be established pursuant to Section 12.02. Residential
Funding's obligations as described in this Section are
referred to herein as the "Subordinate Certificate Loss
Obligation."
(d) The Trustee will promptly notify General
Motors Acceptance Corporation of any failure of
Residential Funding to make any payments hereunder and
shall demand payment pursuant to the limited guaranty
(the "Limited Guaranty"), executed by General Motors
Acceptance Corporation, of Residential Funding's
obligation to make payments pursuant to this Section, in
an amount equal to the lesser of (i) the Amount Available
and (ii) such required payments, by delivering to General
Motors Acceptance Corporation a written demand for
payment by wire transfer, not later than the second
Business Day prior to the Distribution Date for such
month, with a copy to the [Master] Servicer.
(e) All payments made by Residential Funding
pursuant to this Section or amounts paid under the
Limited Guaranty shall be deposited directly in the
Certificate Account, for distribution on the Distribution
Date for such month to the Class B Certificateholders.
(f) The Company shall have the option, in its
sole discretion, to substitute for either or both of the
Limited Guaranty or the Subordinate Certificate Loss
Obligation another instrument in the form of a corporate
guaranty, an irrevocable letter of credit, a surety bond,
insurance policy or similar instrument or a reserve fund;
provided that (i) the Company obtains an Opinion of
Counsel (which need not be an opinion of Independent
counsel) to the effect that obtaining such substitute
corporate guaranty, irrevocable letter of credit, surety
bond, insurance policy or similar instrument or reserve
fund will not cause either (a) any federal tax to be
imposed on the Trust Fund, including without limitation,
any federal tax imposed on "prohibited transactions"
under Section 860(F)(a)(1) of the Code or on
"contributions after the startup date" under Section
860(G)(d)(1) of the Code or (b) the Trust Fund to fail to
qualify as a REMIC at any time that any Certificate is
outstanding, and (ii) no such substitution shall be made
unless (A) the substitute Limited Guaranty or Subordinate
Certificate Loss Obligation is for an initial amount not
less than the then current Amount Available and contains
provisions that are in all material respects equivalent
to the original Limited Guaranty or Subordinate
Certificate Loss Obligation (including that no portion of
the fees, reimbursements or other obligations under any
such instrument will be borne by the Trust Fund), (B) the
long term debt obligations of any obligor of any
substitute Limited Guaranty or Subordinate Certificate
Loss Obligation (if not supported by the Limited
Guaranty) shall be rated at least the lesser of (a) the
rating of the long term debt obligations of General
Motors Acceptance Corporation as of the date of issuance
of the Limited Guaranty and (b) the rating of the long
term debt obligations of General Motors Acceptance
Corporation at the date of such substitution and (C) the
Company obtains written confirmation from each nationally
recognized credit rating agency that rated the Class B
Certificates at the request of the Company that such
substitution shall not lower the rating on the Class B
Certificates below the lesser of (a) the then-current
rating assigned to the Class B Certificates by such
rating agency and (b) the original rating assigned to the
Class B Certificates by such rating agency. Any
replacement of the Limited Guaranty or Subordinate
Certificate Loss Obligation pursuant to this Section
shall be accompanied by a written Opinion of Counsel to
the substitute guarantor or obligor, addressed to the
[Master] Servicer and the Trustee, that such substitute
instrument constitutes a legal, valid and binding
obligation of the substitute guarantor or obligor,
enforceable in accordance with its terms, and concerning
such other matters as the [Master] Servicer and the
Trustee shall reasonably request. Neither the Company,
the [Master] Servicer nor the Trustee shall be obligated
to substitute for or replace the Limited Guaranty or
Subordinate Certificate Loss Obligation under any
circumstance.
Section 12.02. Amendments Relating to the
Limited Guaranty. Notwithstanding Sections 11.01 or
12.01: (i) the provisions of this Article XII may be
amended, superseded or deleted, (ii) the Limited Guaranty
or Subordinate Certificate Loss Obligation may be
amended, reduced or canceled, and (iii) any other
provision of this Agreement which is related or
incidental to the matters described in this Article XII
may be amended in any manner; in each case by written
instrument executed or consented to by the Company and
Residential Funding but without the consent of any
Certificateholder and without the consent of the [Master]
Servicer or the Trustee being required unless any such
amendment would impose any additional obligation on, or
otherwise adversely affect the interests of, the [Master]
Servicer or the Trustee, as applicable; provided that the
Company shall also obtain a letter from each nationally
recognized credit rating agency that rated the Class B
Certificates at the request of the Company to the effect
that such amendment, reduction, deletion or cancellation
will not lower the rating on the Class B Certificates
below the lesser of (a) the then-current rating assigned
to the Class B Certificates by such rating agency and (b)
the original rating assigned to the Class B Certificates
by such rating agency, unless (A) the Holder of 100% of
the Class B Certificates is Residential Funding or an
Affiliate of Residential Funding, or (B) such amendment,
reduction, deletion or cancellation is made in accordance
with Section 12.01(e) and, provided further that the
Company obtains, in the case of a material amendment or
supersession (but not a reduction, cancellation or
deletion of the Limited Guaranty or the Subordinate
Certificate Loss Obligation), an Opinion of Counsel
(which need not be an opinion of Independent counsel) to
the effect that any such amendment or supersession will
not cause either (a) any federal tax to be imposed on the
Trust Fund, including without limitation, any federal tax
imposed on "prohibited transactions" under Section
860F(a)(1) of the Code or on "contributions after the
startup date" under Section 860G(d)(1) of the Code or (b)
the Trust Fund to fail to qualify as a REMIC at any time
that any Certificate is outstanding. A copy of any such
instrument shall be provided to the Trustee and the
[Master] Servicer together with an Opinion of Counsel
that such amendment complies with this Section 12.02.
EXHIBIT N
[Form of Limited Guaranty]
LIMITED GUARANTY
RESIDENTIAL ASSET SECURITIES CORPORATION
[Mortgage] [Manufactured Housing Contract] Pass-Through
Certificates
Series [199_-_]
[__________________, 199_]
[Name and address of Trustee]
Attention: Corporate Trust
Ladies and Gentlemen:
WHEREAS, [Residential Funding Corporation], a
Delaware corporation ("Residential Funding"), an indirect
wholly-owned subsidiary of General Motors Acceptance
Corporation, a New York corporation ("GMAC"), plans to
incur certain obligations as described under Section
11.01 of the Pooling and Servicing Agreement dated as of
[______ __, 199_] (the "Servicing Agreement"), among
Residential Asset Securities Corporation (the "Company"),
[Residential Funding] and [name of Trustee] (the
"Trustee") as amended by Amendment No. 1 thereto, dated
as of , with respect to the Mortgage Pass-Through
Certificates, Series [199_-_] (the "Certificates"); and
WHEREAS, pursuant to Section 12.01 of the
Servicing Agreement, Residential Funding agrees to make
payments to the Holders of the Class B Certificates with
respect to certain losses on the [Mortgage [Loans]
[Contracts]] [Contracts] as described in the Servicing
Agreement; and
WHEREAS, GMAC desires to provide certain
assurances with respect to the ability of Residential
Funding to secure sufficient funds and faithfully to
perform its Subordinate Certificate Loss Obligation;
NOW THEREFORE, in consideration of the premises
herein contained and certain other good and valuable
consideration, the receipt of which is hereby
acknowledged, GMAC agrees as follows:
1. Provision of Funds. (a) GMAC agrees to
contribute and deposit in the Certificate Account on
behalf of Residential Funding (or otherwise provide to
Residential Funding, or to cause to be made available to
Residential Funding), either directly or through a
subsidiary, in any case prior to the related Distribution
Date, such moneys as may be required by Residential
Funding to perform its Subordinate Certificate Loss
Obligation when and as the same arises from time to time
upon the demand of the Trustee in accordance with Section
11.01 of the Servicing Agreement.
(b) The agreement set forth in the preceding
clause (a) shall be absolute, irrevocable and
unconditional and shall not be affected by the transfer
by GMAC or any other person of all or any part of its or
their interest in Residential Funding, by any insolvency,
bankruptcy, dissolution or other proceeding affecting
Residential Funding or any other person, by any defense
or right of counterclaim, set-off or recoupment that GMAC
may have against Residential Funding or any other person
or by any other fact or circumstance. Notwithstanding
the foregoing, GMAC's obligations under clause (a) shall
terminate upon the earlier of (x) substitution for this
Limited Guaranty pursuant to Section 12.01(f) of the
Servicing Agreement, or (y) the termination of the Trust
Fund pursuant to the Servicing Agreement.
2. Waiver. GMAC hereby waives any failure or
delay on the part of Residential Funding, the Trustee or
any other person in asserting or enforcing any rights or
in making any claims or demands hereunder. Any defective
or partial exercise of any such rights shall not preclude
any other or further exercise of that or any other such
right. GMAC further waives demand, presentment, notice
of default, protest, notice of acceptance and any other
notices with respect to this Limited Guaranty, including,
without limitation, those of action or nonaction on the
part of Residential Funding or the Trustee.
3. Modification, Amendment and Termination.
This Limited Guaranty may be modified, amended or
terminated only by the written agreement of GMAC and the
Trustee and only if such modification, amendment or
termination is permitted under Section 11.02 of the
Servicing Agreement. The obligations of GMAC under this
Limited Guaranty shall continue and remain in effect so
long as the Servicing Agreement is not modified or
amended in any way that might affect the obligations of
GMAC under this Limited Guaranty without the prior
written consent of GMAC.
4. Successor. Except as otherwise expressly
provided herein, the guarantee herein set forth shall be
binding upon GMAC and its respective successors.
5. Governing Law. THIS LIMITED GUARANTY
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
6. Authorization and Reliance. GMAC
understands that a copy of this Limited Guaranty shall be
delivered to the Trustee in connection with the execution
of Amendment No. 1 to the Servicing Agreement and GMAC
hereby authorizes the Company and the Trustee to rely on
the covenants and agreements set forth herein.
7. Definitions. Capitalized terms used but
not otherwise defined herein shall have the meaning given
them in the Servicing Agreement.
8. Counterparts. This Limited Guaranty may
be executed in any number of counterparts, each of which
shall be deemed to be an original and such counterparts
shall constitute but one and the same instrument.
IN WITNESS WHEREOF, GMAC has caused this
Limited Guaranty to be executed and delivered by its
respective officers thereunto duly authorized as of the
day and year first above written.
GENERAL MOTORS ACCEPTANCE
CORPORATION
By:
Name:
Title:
Acknowledged by:
[NAME OF TRUSTEE],
as Trustee
By:
Name:
Title:
RESIDENTIAL ASSET SECURITIES
CORPORATION
By:
Name:
Title:
EXHIBIT O
FORM OF LENDER CERTIFICATION FOR ASSIGNMENT OF [MORTGAGE
LOAN] [CONTRACT]
[__________________, 19__]
Residential Asset Securities Corporation
8400 Normandale Lake Boulevard
Suite 600
Minneapolis, Minnesota 55437
[Name and Address of Trustee]
Attention: Corporate Trust Administration
Re: [Mortgage] [Manufactured
Housing Contract] Pass-
Through Certificates,
Series [199_- _]
Assignment of [Mortgage
Loan] [Contract].
Ladies and Gentlemen:
This letter is delivered to you in connection
with the assignment by _________________ (the "Trustee")
to _______________________ (the "Lender") of
_______________ (the "[Mortgage Loan] [Contract]")
pursuant to Section 3.13(d) of the Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement"), dated
as of [______ __, 199_] among Residential Asset
Securities Corporation, as seller (the "Company"), [name
of [Master] Servicer], as [master] servicer, and the
Trustee. All terms used herein and not otherwise defined
shall have the meanings set forth in the Pooling and
Servicing Agreement. The Lender hereby certifies,
represents and warrants to, and covenants with, the
[Master] Servicer and the Trustee that:
(i) the [Mortgage Loan] [Contract] is secured
by Mortgaged Property located in a jurisdiction in which
an assignment in lieu of satisfaction is required to
preserve lien priority, minimize or avoid mortgage
recording taxes or otherwise comply with, or facilitate
a refinancing under, the laws of such jurisdiction;
(ii) the substance of the assignment is, and is
intended to be, a refinancing of such [Mortgage Loan]
[Contract] and the form of the transaction is solely to
comply with, or facilitate the transaction under, such
local laws;
(iii) the [Mortgage Loan] [Contract] following
the proposed assignment will be modified to have a rate
of interest at least 0.25 percent below or above the rate
of interest on such [Mortgage Loan] [Contract] prior to
such proposed assignment; and
(iv) such assignment is at the request of the
borrower under the related [Mortgage Loan] [Contract].
Very truly yours,
(Lender)
By:
Name:
Title:
EXHIBIT 4.2
RESIDENTIAL ASSET SECURITIES CORPORATION
Company,
[NAME OF CERTIFICATE ADMINISTRATOR]
Certificate Administrator
and
[NAME OF TRUSTEE]
Trustee
________________________________
TRUST AGREEMENT
Dated as of [______ __, 199_]
________________________________
Mortgage Pass-Through Certificates
Series [199_-__]
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.01. Defined Terms. . . . . . . . . . . . . 6
ARTICLE II
CONVEYANCE OF THE UNDERLYING MORTGAGE
SECURITIES; ORIGINAL ISSUANCE OF THE
CERTIFICATES
Section 2.01. Conveyance of the
Underlying Agency
Securities . . . . . . . . . . . . . . 15
Section 2.02. Acceptance by
Trustee. . . . . . . . . . . . . . . . 16
Section 2.03. Execution and
Authentication of
Certificates . . . . . . . . . . . . . 16
ARTICLE III
ADMINISTRATION OF THE UNDERLYING AGENCY
SECURITIES;
REPORTS TO CERTIFICATEHOLDERS
Section 3.01. Administration of
the Trust Fund and
the Underlying
Agency Securities. . . . . . . . . . . 16
Section 3.02. Collection of
Monies . . . . . . . . . . . . . . . . 17
Section 3.03. Establishment of
Certificate Account;
Deposits in
Certificate Account. . . . . . . . . . 17
Section 3.04. Permitted
Withdrawals From the
Certificate Account. . . . . . . . . . 18
Section 3.05. Annual Statement as
to Compliance. . . . . . . . . . . . . 18
Section 3.06. Rights of the
Company in Respect
of the Certificate
Administrator. . . . . . . . . . . . . 19
ARTICLE IV
PAYMENTS TO CERTIFICATEHOLDERS
Section 4.01. Distributions. . . . . . . . . . . . . 19
Section 4.02. Statements to
Certificateholders . . . . . . . . . . 21
Section 4.03. Access to Certain
Documentation and
Information. . . . . . . . . . . . . . 22
Section 4.04. Permitted
Investments. . . . . . . . . . . . . . 23
<PAGE>
ARTICLE V
THE CERTIFICATES
Section 5.01. The Certificates . . . . . . . . . . . 24
Section 5.02. Registration of
Transfer and
Exchange of
Certificates . . . . . . . . . . . . . 24
Section 5.03. Mutilated,
Destroyed, Lost or
Stolen
Certificates.. . . . . . . . . . . . . 28
Section 5.04. Persons Deemed
Owners . . . . . . . . . . . . . . . . 29
Section 5.05. Appointment of
Paying Agent . . . . . . . . . . . . . 29
ARTICLE VI
THE COMPANY AND THE CERTIFICATE ADMINISTRATOR
Section 6.01. Respective
Liabilities of the
Company and the
Certificate
Administrator. . . . . . . . . . . . . 30
Section 6.02. Merger,
Consolidation or
Conversion of the
Company or the
Certificate
Administrator. . . . . . . . . . . . . 30
Section 6.03. Limitation on
Liability of the
Company, the
Certificate
Administrator and
Others . . . . . . . . . . . . . . . . 30
Section 6.04. Company and
Certificate
Administrator Not to
Resign.. . . . . . . . . . . . . . . . 31
ARTICLE VII
DEFAULT
Section 7.01. Events of Default. . . . . . . . . . . 31
Section 7.02. Trustee or Company
to Act; Appointment
of Successor . . . . . . . . . . . . . 33
Section 7.03. Notification to
Certificateholders . . . . . . . . . . 33
Section 7.04. Waiver of Events of
Default. . . . . . . . . . . . . . . . 34
ARTICLE VIII
THE TRUSTEE
Section 8.01. Duties of Trustee. . . . . . . . . . . 34
Section 8.02. Certain Matters
Affecting the
Trustee. . . . . . . . . . . . . . . . 36
Section 8.03. Trustee Not Liable
for Certificates or
Underlying Agency
Securities.. . . . . . . . . . . . . . 37
Section 8.04. Trustee May Own
Certificates . . . . . . . . . . . . . 38
Section 8.05. Certificate
Administrator to Pay
Trustee's Fees and
Expenses;
Indemnification. . . . . . . . . . . . 38
Section 8.06. Eligibility
Requirements for
Trustee. . . . . . . . . . . . . . . . 39
Section 8.07. Resignation and
Removal of the
Trustee. . . . . . . . . . . . . . . . 39
Section 8.08. Successor Trustee. . . . . . . . . . . 40
Section 8.09. Merger or
Consolidation of
Trustee. . . . . . . . . . . . . . . . 41
Section 8.10. Appointment of
Co-Trustee or
Separate Trustee . . . . . . . . . . . 41
Section 8.11. Appointment of
Office or Agency.. . . . . . . . . . . 42
ARTICLE IX
TERMINATION
Section 9.01. Termination. . . . . . . . . . . . . . 42
Section 9.02. Additional
Termination
Requirements . . . . . . . . . . . . . 44
ARTICLE X
REMIC PROVISIONS
Section 10.01. REMIC
Administration . . . . . . . . . . . . 45
Section 10.02. Certificate
Administrator and
Trustee
Indemnification. . . . . . . . . . . . 48
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. Amendment. . . . . . . . . . . . . . . 48
Section 11.02. Counterparts . . . . . . . . . . . . . 50
Section 11.03. Limitation on Rights
of
Certificateholders . . . . . . . . . . 50
Section 11.04. Governing Law. . . . . . . . . . . . . 51
Section 11.05. Notices. . . . . . . . . . . . . . . . 51
Section 11.06. Notices to Rating
Agency . . . . . . . . . . . . . . . . 51
Section 11.07. Severability of
Provisions . . . . . . . . . . . . . . 52
Section 11.08. Successors and
Assigns. . . . . . . . . . . . . . . . 52
Section 11.09. Article and Section
Headings . . . . . . . . . . . . . . . 52
Exhibit A-1 Form of Class
[A-1][A-2][A-3][S]
Certificate
Exhibit A-2 Form of Class R
Certificate
Exhibit B-1 Form of Transfer
Affidavit and Agreement
Exhibit B-2 Form of Transferor
Certificate
<PAGE>
THIS TRUST AGREEMENT, dated as of [_________ 1,
199_], by and among Residential Asset Securities
Corporation, as the company (together with its permitted
successors and assigns, the "Company"), [
] (together with its permitted successors
and assigns, the "Certificate Administrator") and
[____________], as trustee (together with its permitted
successors and assigns (the "Trustee")).
PRELIMINARY STATEMENT
The Company is the owner of the Underlying
Agency Securities being conveyed by it to the Trustee for
inclusion in the Trust Fund and has duly authorized the
execution and delivery of this Agreement to provide for
the sale and conveyance to the Trustee of the Underlying
Agency Securities and the issuance of the Mortgage
Pass-Through Certificates, Series [199 - ], Class [A-
1], Class [A-2], Class [A-3], Class [S], and Class R
(collectively, the "Certificates"), representing in the
aggregate all of the "regular interests" and "residual
interests" in the Trust Fund, which Certificates are
issuable as provided in this Agreement. All covenants
and agreements made by the Company, the Certificate
Administrator and the Trustee herein are for the benefit
of the Holders of the Certificates. The Company and the
Certificate Administrator are entering into this
Agreement, and the Trustee is accepting the trusts
created hereby, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged.
The Underlying Agency Securities are [GNMA] [I]
[II] Certificates and are identified as
[________________]. The Aggregate Underlying Certificate
Balance as of the Closing Date will be $[ ].
The following table sets forth the designation,
Pass-Through Rate, aggregate Initial Certificate
Principal Balance, features, Maturity Date and initial
rating for each Class of Certificates comprising the
interests in the Trust Fund created hereunder.
Aggregate
Pass- Initial
Through Principal
Designation Rate Balance Features
Class [A-1] [ ]% $[ ] Sequential
Class [A-2] [ ]% $[ ] Sequential
Class [A-3] [ ]% $[ ] Sequential/Accrual
Class [S] [ ]% $[ ] Fixed Strip
Class R [ ]% $[ ] Residual
Maturity Initial Rating
Designation Date [S&P] [Fitch] [Moody's]
Class [A-1]
Class [A-2]
Class [A-3]
Class [S]
Class R
In consideration of the premises and the mutual
agreements herein contained, the Company, the Certificate
Administrator and the Trustee agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Defined Terms.
Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires,
shall have the following meanings:
Accretion Termination Date: With respect to
the Class [A-3] Certificates, the first Distribution Date
on which the Certificate Principal Balances of the Class
R, Class [A-1] and Class [A-2] Certificates have been
reduced to zero.
Accretion Amount: As to any Distribution Date,
the amount set forth in Section 4.01(b).
Accrued Certificate Interest: With respect to
each Distribution Date, (a) as to each Class of
Certificates (other than the Class [S] Certificates), one
month's interest accrued on the Certificate Principal
Balance of the Certificates of such Class at the related
Pass-Through Rate and (b) in the case of the Class [S]
Certificates, one month's interest accrued on the related
Notional Amount at the related Pass-Through Rate.
Accrued Certificate Interest will be calculated on the
basis of a 360-day year consisting of twelve 30-day
months. In each case, Accrued Certificate Interest on
any Class of Certificates will be reduced by the amount
(to the extent such amount is allocated to the Underlying
Agency Securities) of the following shortfalls: (i)
Prepayment Interest Shortfalls, and (ii) any other
interest shortfalls, including interest that is not
collectible from the Mortgagor pursuant to the Soldiers'
and Sailors' Civil Relief Act of 1940, as amended; with
all such reductions allocated among the Certificates in
proportion to their respective amounts of Accrued
Certificate Interest which would have resulted absent
such reductions.
Affiliate: An "affiliate" of, or Person
"affiliated" with, a specified Person, is a Person that
directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under
common control with, the Person specified.
Aggregate Underlying Certificate Balance: As
of any date of determination, the aggregate of the
Underlying Certificate Balances of all of the Underlying
Agency Securities as of such date. As of the Closing
Date, the Aggregate Underlying Certificate Balance was $[
], after giving effect to distributions made
thereon prior to the Closing Date.
Agreement: This Trust Agreement together with
all amendments hereof and supplements hereto.
Anticipated Termination Date: Any Distribution
Date on which the Certificate Administrator anticipates
that the Trust Fund will be terminated pursuant to
Section 9.01.
Available Distribution Amount: As of any
Distribution Date, the aggregate amount on deposit in the
Certificate Account as of such Distribution Date, net of
any portion thereof which represents amounts payable
pursuant to clauses (ii) and (iii) of Section 3.04.
Business Day: Any day other than (i) a
Saturday or a Sunday, or (ii) a day on which banking
institutions in the State of New York[, the State of
] or the State of [ ] and such
other state or states in which the Certificate Account or
any account relating to the Underlying Agency Securities
are required or authorized by law or executive order to
be closed.
Certificate: Any Class [A-1], Class [A-2],
Class [A-3], Class [S] or Class R Certificate.
Certificate Account: The trust account or
accounts, which shall at all times be Eligible Accounts,
created and maintained by the Trustee pursuant to Section
3.03. Funds deposited in the Certificate Account shall
be held in trust for the Certificateholders for the uses
and purposes set forth in Article III hereof.
Certificate Administrator: [
] or its successor in interest, solely in its
capacity as certificate administrator under this
Agreement, or any successor certificate administrator
appointed as provided herein.
Certificateholder or Holder: The Person in
whose name a Certificate is registered in the Certificate
Register, except that neither a Disqualified Organization
nor a Non-United States Person shall be a Holder of a
Class R Certificate for any purpose hereof. Solely for
the purpose of giving any consent or exercising any
Voting Rights pursuant to this Agreement, any Certificate
registered in the name of the Company, the Certificate
Administrator or any Affiliate of either of them shall be
deemed not to be Outstanding and the Percentage Interest
or Voting Rights evidenced thereby shall not be taken
into account in determining whether the requisite amount
of Percentage Interests or Voting Rights necessary to
effect any such consent or direction has been obtained.
Certificate Principal Balance: With respect to
each Certificate (other than the Class [S] Certificates),
on any date of determination, an amount equal to (i) the
Initial Certificate Principal Balance of such Certificate
as specified on the face thereof plus (ii) in the case of
the Class [A-3] Certificates, all Accrued Certificate
Interest added to the Certificate Principal Balances
thereof on each Distribution Date on or prior to the
Accretion Termination Date pursuant to Section 4.01(b),
minus (iii) the aggregate of all amounts previously
distributed with respect to such Certificate and applied
to reduce the Certificate Principal Balance thereof
pursuant to Section 4.01. The Class [S] Certificates
have no Certificate Principal Balance.
Certificate Registrar and Certificate Register:
The registrar appointed and the register maintained
pursuant to Section 5.02.
Class: Collectively, all of the Certificates
bearing the same designation.
Class [A-1] Certificate: Any one of the Class
[A-1] Certificates, executed by the Trustee and
authenticated by the Certificate Registrar, substantially
in the form annexed hereto as Exhibit A-1 and evidencing
an interest designated as a "regular interest" in the
REMIC for purposes of the REMIC Provisions.
Class [A-2] Certificate: Any one of the Class
[A-2] Certificates, executed by the Trustee and
authenticated by the Certificate Registrar, substantially
in the form annexed hereto as Exhibit A-1 and evidencing
an interest designated as a "regular interest" in the
REMIC for purposes of the REMIC Provisions.
Class [A-3] Certificate: Any one of the Class
[A-3] Certificates, executed by the Trustee and
authenticated by the Certificate Registrar, substantially
in the form annexed hereto as Exhibit A-1 and evidencing
an interest designated as a "regular interest" in the
REMIC for purposes of the REMIC Provisions.
Class R Certificate: Any one of the Class R
Certificates, executed by the Trustee and authenticated
by the Certificate Registrar, substantially in the form
annexed hereto as Exhibit A-2 and evidencing an interest
designated as a "residual interest" in the REMIC for
purposes of the REMIC Provisions.
Class [S] Certificate: Any one of the Class
[S] Certificates, executed by the Trustee and
authenticated by the Certificate Registrar, substantially
in the form annexed hereto as Exhibit A-1 and evidencing
an interest designated as a "regular interest" in the
REMIC for purposes of the REMIC Provisions.
Closing Date: [ , 199 ].
Code: The Internal Revenue Code of 1986.
Corporate Trust Office: The principal
corporate trust office of the Trustee in the State of New
York at which at any particular time its corporate trust
business with respect to this Agreement shall be
administered, which office at the date of the execution
of this Agreement is located at [_______________].
Disqualified Organization: Any of the
following: (i) the United States, any State or political
subdivision thereof, any possession of the United States,
or any agency or instrumentality of any of the foregoing
(other than an instrumentality which is a corporation if
all of its activities are subject to tax and, except for
the FHLMC, a majority of its board of directors is not
selected by such governmental unit), (ii) a foreign
government, any international organization, or any agency
or instrumentality of any of the foregoing, (iii) any
organization (other than certain farmers' cooperatives
described in Section 521 of the Code) which is exempt
from the tax imposed by Chapter 1 of the Code (unless
such organization is subject to the tax imposed by
Section 511 of the Code on unrelated business taxable
income), (iv) rural electric and telephone cooperatives
described in Section 1381(a)(2)(C) of the Code 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 Trust Fund or any Person having an Ownership
Interest in any Class of Certificates, other than such
Person, to incur a liability for any federal 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 Section 7701 of the Code or
successor provisions.
Distribution Date: The third Business Day
following each Underlying Security Distribution Date,
commencing with the Distribution Date on [ ,
199 ].
Eligible Account: An account that is any of
the following: (i) maintained with a depository
institution the debt obligations of which have been rated
by the Rating Agency in its highest rating available,
(ii) an account or accounts in a depository institution
in which such accounts are fully insured to the limits
established by the FDIC, provided that any such deposits
not so insured shall, to the extent acceptable to the
Rating Agency, as evidenced in writing, be maintained
such that (as evidenced by an Opinion of Counsel
delivered to the Trustee and the Rating Agency) the
registered Holders of Certificates have a claim with
respect to the funds in such account or a perfected first
security interest against any collateral (which shall be
limited to Permitted Investments) securing such funds
that is superior to claims of any other depositors or
creditors of the depository institution with which such
account is maintained, (iii) a trust account or accounts
maintained in the corporate trust department of
[______________], or (iv) an account or accounts of a
depository institution acceptable to the Rating Agency
(as evidenced in writing by the Rating Agency that use of
any such account as the Certificate Account will not
reduce the rating assigned to the Certificates by such
Rating Agency below the lower of the then-current rating
or the rating assigned to such Certificates as of the
Closing Date by such Rating Agency).
ERISA: The Employment Retirement Income
Security Act of 1974, as amended.
Event of Default: As defined in Section 7.01.
Class [S] Certificate: Any one of the Class
[S] Certificates.
[GNMA Issuer: Any one of the mortgage banking
companies or other financial concerns approved by GNMA
that has issued and is servicing an Underlying Agency
Security.]
Independent: When used with respect to any
specified Person, such a Person who (i) is in fact
independent of the Company, the Certificate Administrator
and the Trustee, or any Affiliate thereof, (ii) does not
have any direct financial interest in the Company, the
Certificate Administrator and the Trustee, or any
Affiliate thereof, and (iii) is not connected with the
Company, the Certificate Administrator and the Trustee as
an officer, employee, promoter, underwriter, trustee,
partner, director or Person performing similar functions.
Initial Certificate Principal Balance: With
respect to each Certificate (other than a Class [S]
Certificate) the initial Certificate Principal Balance of
such Certificate as specified on the face thereof as of
the Closing Date.
Maturity Date: The latest possible maturity
date, solely for purposes of Section 1.860G-1(a)(4)(iii)
of the Treasury regulations, by which the Certificate
Principal Balance of each Class of Certificates
representing a regular interest in the REMIC would be
reduced to zero, which shall be the Distribution Date
immediately following the latest stated maturity date of
any of the Underlying Agency Securities.
Mortgage Loans: With respect to any Underlying
Agency Security, the mortgage loans in which such
Underlying Agency Security evidence a beneficial
ownership interest.
Non-United States Person: Any Person other
than a United States Person.
Notice of Final Distribution: With respect to
any Underlying Agency Security, the notice to be provided
pursuant to the Trustee as holder of such Underlying
Agency Security to the effect that final distribution on
such Underlying Agency Security shall be made only upon
presentation and surrender thereof.
Notice of Termination: Any of the notices
given to the Trustee by the Certificate Administrator
pursuant to Section 9.01(b).
Notional Amount: As of any Distribution Date,
with respect to the Class [S] Certificates, the Aggregate
Underlying Certificate Balance immediately prior to the
most recent Underlying Security Distribution Date.
Officer's Certificate: A certificate signed by
the President, Chief Financial Officer, Treasurer, any
Vice President, Secretary or any other officer authorized
by the board of directors of the Company, the Certificate
Administrator or the Trustee, as required by this
Agreement.
Opinion of Counsel: A written opinion of
counsel, who may be counsel for the Company or the
Certificate Administrator, which opinion is reasonably
acceptable to the Trustee; except that any opinion of
counsel relating to (i) the qualification of any account
required to be maintained pursuant to this Agreement as
an Eligible Account or (ii) the qualification of the
Trust Fund as a REMIC or compliance with the REMIC
Provisions, must be an opinion of Independent counsel.
Outstanding: With respect to the Certificates,
as of the date of determination, all Certificates
previously executed and delivered under this Agreement
except (i) Certificates previously canceled by the
Trustee or delivered to the Trustee for cancellation; and
(ii) Certificates in exchange for which or in lieu of
which other Certificates have been executed and delivered
pursuant to this Agreement.
Ownership Interest: As to any Certificate, any
ownership or security interest in such Certificate,
including any interest in such Certificate as the Holder
thereof and any other interest therein, whether direct or
indirect, legal or beneficial, as owner or as pledgee.
Pass-Through Rate: With respect to each Class
of Certificates, the respective per annum rate set forth
in the Preliminary Statement hereto.
Paying Agent: Any Paying Agent appointed by
the Trustee.
Percentage Interest: With respect to a
Certificate (other than a Class [S] Certificate or a
Class R Certificate), the undivided percentage ownership
interest in the related Class evidenced by such
Certificate, which percentage ownership interest shall be
equal to the Initial Certificate Principal Balance
thereof divided by the aggregate Initial Certificate
Principal Balance of all of the Certificates of the same
Class. With respect to a Class [S] Certificate or Class
R Certificate, the interest in distributions to be made
with respect to such Class evidenced thereby, expressed
as a percentage, as stated on the face of such
Certificate.
Permitted Investments: One or more of the
following:
(i) obligations of, or guaranteed as to
principal and interest by, the United States or any
agency or instrumentality thereof when such
obligations are backed by the full faith and credit
of the United States;
(ii) repurchase agreements on obligations
specified in clause (i) maturing not more than one
month from the date of acquisition thereof,
provided that the unsecured obligations of the
party agreeing to repurchase such obligations are
at the time rated by the Rating Agency in its
highest short-term rating available;
(iii) federal funds, certificates of deposit,
demand deposits, time deposits and bankers'
acceptances (which shall each have an original
maturity of not more than 90 days and, in the case
of bankers' acceptances, shall in no event have an
original maturity of more than 365 days or a
remaining maturity of more than 30 days)
denominated in United States dollars of any U.S.
depository institution or trust company
incorporated under the laws of the United States or
any state thereof or of any domestic branch of a
foreign depository institution or trust company;
provided that the debt obligations of such
depository institution or trust company (or, if the
only Rating Agency is Standard & Poor's in the case
of the principal depository institution in a
depository institution holding company, debt
obligations of the depository institution holding
company) at the date of acquisition thereof have
been rated by the Rating Agency in its highest
short-term rating available; and provided further
that if the only Rating Agency is Standard & Poor's
and if the depository or trust company is a
principal subsidiary of a bank holding company and
the debt obligations of such subsidiary are not
separately rated, the applicable rating shall be
that of the bank holding company; and provided
further that, if the original maturity of such
short-term obligations of a domestic branch of a
foreign depository institution or trust company
shall exceed 30 days, the short-term rating of such
institution shall be A-1+ if Standard & Poor's is
the Rating Agency;
(iv) commercial paper (having original
maturities of not more than 365 days) of any
corporation incorporated under the laws of the
United States or any state thereof which on the
date of acquisition has been rated by the Rating
Agency in its highest short-term rating available;
provided that such commercial paper shall have a
remaining maturity of not more than 30 days;
(v) a money market fund or qualified
investment fund rated by the Rating Agency in its
highest rating available; and
(vi) other obligations or securities that are
acceptable to the Rating Agency as a Permitted
Investment hereunder and will not reduce the rating
assigned to the Certificates by such Rating Agency
below the lower of the then-current rating or the
rating assigned to the Certificates as of the
Closing Date by such Rating Agency, as evidenced in
writing; provided, however, that no instrument
shall be a Permitted Investment if it represents,
either (1) the right to receive only interest
payments with respect to the underlying debt
instrument or (2) the right to receive both
principal and interest payments derived from
obligations underlying such instrument and the
principal payments with respect to such instrument
provide a yield to maturity greater than 120% of
the yield to maturity at par of such underlying
obligations. References herein to the highest
rating available on unsecured long-term debt shall
mean Aaa in the case of Moody's Investors Service,
Inc., AAA in the case of Standard & Poor's and
Fitch Investors Service, Inc. and in the case of
any other Rating Agency shall mean such ratings
without any plus or minus, and references herein to
the highest rating available on unsecured
commercial paper and short-term debt obligations
shall mean P-1 in the case of Moody's Investors
Service, Inc., A-1 in the case of Standard & Poor's
and either A-1 by Standard & Poor's, P-1 by Moody's
Investors Service, Inc. or F-1 by Fitch Investors
Service, Inc. in the case of Fitch Investors
Service, Inc.
Permitted Transferee: Any Transferee of a
Class R Certificate, other than a Disqualified
Organization or a Non-United States Person.
Person: Any individual, corporation,
partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government
or any agency or political subdivision thereof.
Prepayment Assumption: A prepayment assumption
of [ ]% of the standard prepayment assumption used for
determining the accrual of original issue discount and
market discount on the Certificates for federal income
tax purposes. The standard prepayment assumption assumes
a constant rate of prepayment of mortgage loans of [ ]%
per annum of the outstanding principal balance of such
mortgage loans in the first month of life of the mortgage
loans, increasing by an additional [ ]% per annum in
each succeeding month until the thirtieth month, and a
constant [ ]% per annum rate of prepayment thereafter
for the life of the mortgage loans.
Principal Distribution Amount: With respect
to any Distribution Date, the sum of (i) the aggregate of
the Underlying Certificate Principal Distribution Amount
for the immediately preceding Underlying Security
Distribution Date, plus any amounts received as described
in Section 3.03(a)(ii) since the preceding Distribution
Date to the extent allocated to principal of one or more
Underlying Agency Securities and (ii) the Accretion
Amount.
Rating Agencies: [___________________] and
[___________________]. If an agency or a successor is no
longer in existence, "Rating Agency" shall include such
statistical credit rating agency, or other comparable
Person, designated by the Company, notice of which
designation shall be given to the Trustee and the
Certificate Administrator.
Record Date: With respect to any Distribution
Date, other than the first Distribution Date, the last
Business Day of the month preceding the month in which
the Underlying Security Distribution Date on the
Underlying Agency Securities occurs and with respect to
the first Distribution Date, the Closing Date.
Reference Date: [ 1, 199 ].
Regular Certificates: Any of the Certificates
other than the Class R Certificates.
REMIC: A "real estate mortgage investment
conduit" within the meaning of Section 860D of the Code.
REMIC Provisions: Provisions of the federal
income tax law relating to REMICs, which appear at
Sections 860A through 860G of Subchapter M of Chapter 1
of the Code, and related provisions, and temporary and
final regulations (or, to the extent not inconsistent
with such temporary or final regulations, proposed
regulations) and published rulings, notices and
announcements promulgated thereunder, as the foregoing
may be in effect from time to time.
Residual Certificate: Any one of the Class R
Certificates.
Responsible Officer: When used with respect to
the Trustee, any officer of the Trustee employed in its
corporate trust department, including any Senior Vice
President, any Vice President, any Assistant Vice
President, any Assistant Secretary, any Trust Officer or
Assistant Trust Officer or Assistant Trust Officer, or
any other officer of the Trustee customarily performing
functions similar to those performed by any of the above
designated officers to whom, with respect to a particular
matter arising under this Agreement, such matter is
referred.
Servicing Fee: With respect to any
Distribution Date, the fee payable monthly to the
Certificate Administrator in respect of its compensation
hereunder that accrues at an annual rate equal to [
]% on the Aggregate Underlying Certificate Balance as in
effect immediately prior to the preceding Underlying
Security Distribution Date.
Servicing Officer: Any officer of the
Certificate Administrator involved in, or responsible
for, the administration and servicing of the Trust Fund
whose name and specimen signature appear on a list of
servicing officers furnished to the Trustee by the
Certificate Administrator, as such list may from time to
time be amended.
Standard & Poor's: Standard & Poor's Ratings
Group or its successor in interest.
Tax Returns: The federal income tax return on
Internal Revenue Service Form 1066, U.S. Real Estate
Mortgage Investment Conduit Income Tax Return, including
Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of REMIC Taxable Income or Net Loss Allocation,
or any successor forms, to be filed on behalf of the
Trust Fund due to its classification as a REMIC under the
REMIC Provisions, together with any and all other
information, reports or returns that may be required to
be furnished to the Certificateholders or filed with the
Internal Revenue Service or any other governmental taxing
authority under any applicable provisions of federal,
state or local tax laws.
Termination Date: The Distribution Date on
which the Trust Fund is terminated pursuant to Section
9.01.
Trust Fund: The corpus of the trust created by
and to be administered under this Agreement consisting
of: (i) the Underlying Agency Securities, (ii) all
distributions thereon payable after the Closing Date and
(iii) the Certificate Account and such assets that are
deposited therein from time to time, together with any
and all income, proceeds and payments with respect
thereto.
Trustee: [_____________________], a [national
bank] [[state bank] [trust company] [organized under the
laws of [ ]] or its successor in interest, or any
successor trustee appointed as herein provided.
Underlying Agency Security: Any of the [GNMA]
[I] [II] Certificates transferred to the Trustee by the
Company pursuant to Section 2.01 to be held as a part of
the Trust Fund, as more fully described in the
Preliminary Statement hereto.
Underlying Agency Securityholder: The
registered holder of any Underlying Agency Security
which, following the execution and delivery of this
Agreement by the parties hereto, shall be the Trustee for
the benefit of the Certificateholders.
Underlying Certificate Balance: With respect
to any Underlying Agency Security, as of any Underlying
Security Distribution Date (following all distributions
to be made with respect to the Underlying Agency Security
on such Underlying Security Distribution Date), and as of
any date of determination thereafter until the next
succeeding Underlying Security Distribution Date, the
principal balance of such Underlying Agency Security as
set forth in, or calculated in accordance with the terms
of such Underlying Agency Security on the basis of, the
Underlying Security Distribution Date Statement sent to
the Trustee as Underlying Agency Securityholder relating
to such Underlying Security Distribution Date.
Underlying Certificate Principal Distribution
Amount: With respect to any Distribution Date, the
aggregate amount actually distributed on the Underlying
Agency Securities on the immediately preceding Underlying
Security Distribution Date and identified as applied to
reduce the related Underlying Certificate Balance in the
respective Underlying Security Distribution Date
Statement.
Underlying Certificate Rate: With respect to
any Underlying Agency Security and any Underlying
Security Distribution Date, the rate per annum at which
interest payable with respect to such Underlying Agency
Security on such Underlying Security Distribution Date
accrued.
Underlying Security Distribution Date: With
respect to any Underlying Agency Security, the
"Distribution Date", as such term is defined on such
Underlying Agency Security.
Underlying Security Distribution Date
Statement: With respect to any Underlying Agency
Security and any Underlying Security Distribution Date,
the monthly remittance report forwarded to the holder
thereof with respect to such Underlying Security
Distribution Date pursuant to such Underlying Agency
Security.
United States Person: A citizen or resident of
the United States, a corporation, partnership or other
entity created or organized in, or under the laws of, the
United States or any political subdivision thereof, or an
estate or trust whose income from sources without the
United States is includible in gross income for United
States federal income tax purposes regardless of its
connection with the conduct of a trade or business within
the United States. The term "United States" shall have
the meaning set forth in Section 7701 of the Code or
successor provisions.
Voting Rights: The portion of the voting
rights of all Certificates which is allocated to any
Certificate. For so long as the related Classes of
Certificates remain outstanding, [ ]% of all of the
Voting Rights shall be allocated among all Holders of the
Class [A-1] Certificates, Class [A-2] Certificates and
Class [A-3] Certificates in proportion to their then-
outstanding Certificate Principal Balances; and [ ]%
and [ ]% of the Voting Rights shall be allocated among
the Class [S] and Class R Certificates, respectively, in
proportion to the Percentage Interests evidenced by their
respective Certificates.
ARTICLE II
CONVEYANCE OF THE UNDERLYING
MORTGAGE SECURITIES; ORIGINAL ISSUANCE OF THE
CERTIFICATES
Section 2.01. Conveyance of the Underlying Agency
Securities.
The Company, concurrently with the execution
and delivery hereof, does hereby sell, transfer, assign,
set-over and otherwise convey to the Trustee, in trust,
for the use and benefit of the Certificateholders,
without recourse, all the right, title and interest of
the Company in and to the Underlying Agency Securities
and all other assets constituting the Trust Fund. Such
assignment includes, without limitation, all amounts
payable to and all rights of the Underlying Agency
Securityholders after the Closing Date.
In connection with such transfer and
assignment, the Company does hereby deliver to, and
deposit with, the Trustee each of the Underlying Agency
Securities, together with the following documents or
instruments relating to each Underlying Agency Security:
(i) a duly issued and authenticated
certificate for each Underlying Agency Security,
each evidencing the entire interest in such [series
and class] and registered in the name of "[Name of
Trustee], as trustee under the Trust Agreement
relating to Residential Asset Securities
Corporation, Series [199 - ]"; and
(ii) copies of the most recent Underlying
Security Distribution Date Statements, if any,
delivered to the related Underlying Agency
Securityholder with respect to such Underlying
Agency Security.
The transfer of the Underlying Agency
Securities and all other assets constituting the Trust
Fund is absolute and is intended by the parties hereto as
a sale by the Company to the Trustee of the Underlying
Agency Securities for the benefit of the
Certificateholders. Except as provided in Sections
3.02(b) and 9.01 hereof, the Trustee shall not assign,
sell, dispose of or transfer any interest in the
Underlying Agency Securities or any other asset
constituting the Trust Fund or permit the Underlying
Agency Securities or any other asset constituting the
Trust Fund to be subjected to any lien, claim or
encumbrance arising by, through or under the Trustee or
any Person claiming by, through or under the Trustee.
Section 2.02. Acceptance by Trustee.
The Trustee hereby acknowledges receipt of the
documents referred to in Section 2.01(i) and (ii) above
and declares that it holds and will hold the Underlying
Agency Securities and such other documents and
instruments delivered to it with respect to the
Underlying Agency Securities in trust for the use and
benefit of all present and future Certificateholders.
Upon delivery of any document or instrument relating to
a Underlying Agency Security by the Company or the
Certificate Administrator, the Trustee shall acknowledge
receipt of such documents.
Section 2.03. Execution and Authentication of
Certificates.
Concurrently with the transfer and delivery of
the Underlying Agency Securities and all related
documents and instruments, the Trustee has executed,
authenticated and delivered, to or upon the order of the
Company, the Certificates duly executed and authenticated
by the Trustee in authorized Percentage Interests,
registered in such names as the Company has requested.
ARTICLE III
ADMINISTRATION OF THE UNDERLYING AGENCY SECURITIES;
REPORTS TO CERTIFICATEHOLDERS
Section 3.01. Administration of the Trust Fund
and the Underlying Agency
Securities.
(a) If at any time the Trustee, as Underlying
Agency Securityholder, is requested in such capacity to
take any action or to give any consent, approval or
waiver, or if an Event of Default as defined under the
terms of the Underlying Agency Security occurs, the
Trustee, in its capacity as Underlying Agency
Securityholder, may take such action in connection with
the enforcement of any rights and remedies available to
it in such capacity with respect thereto and only in
accordance with the written directions of Holders of
Certificates evidencing at least 51% of the Voting
Rights. The Trustee shall promptly notify all of the
Certificateholders of any such request.
(b) The holders of the Class R Certificates
shall pay in proportion to their ownership interests in
such Class R Certificates any taxes imposed on the Trust
Fund resulting from the Certificate Administrator's
exercise of any option to repurchase any of the
Underlying Agency Securities in accordance with the
Assignment and Assumption Agreement.
Section 3.02. Collection of Monies.
(a) In connection with its receipt of any
distribution on a Underlying Agency Security on any
Underlying Security Distribution Date, the Trustee shall
review the Underlying Security Distribution Date
Statement and shall confirm that the information
contained therein is arithmetically correct. If (i) the
Trustee shall not have received a distribution on any
Underlying Agency Security by the close of business on
the date on which such distribution was to be received by
the Trustee, the Trustee shall notify the Certificate
Administrator if such distribution shall not have been
received by the Trustee one Business Day following such
notice or (ii) the Trustee shall gain actual knowledge of
any event of default under and as defined in any
Underlying Agency Security, the Trustee shall promptly
notify the Certificate Administrator and the
Certificateholders and such parties shall proceed in
accordance with the terms and conditions of Section
3.01(a).
(b) Except as otherwise provided in Section
9.01, upon its receipt of a Notice of Final Distribution,
the Trustee shall present and surrender the applicable
Underlying Agency Security to which such notice applies
for final payment thereon in accordance with the terms
and conditions of such Underlying Agency Security and
such Notice of Final Distribution. The Trustee shall
promptly deposit in the Certificate Account the final
distribution received upon presentation and surrender of
such Underlying Agency Security.
Section 3.03. Establishment of Certificate
Account; Deposits in Certificate
Account.
(a) The Trustee, for the benefit of the
Certificateholders, shall establish and maintain one or
more accounts (collectively, the "Certificate Account"),
each of which shall be an Eligible Account, entitled
"[Name of Trustee], in trust for the registered holders
of Residential Asset Securities Corporation, Mortgage
Pass-Through Certificates, Series [199 - ]", held in
trust by the Trustee for the benefit of the
Certificateholders. The Trustee shall cause the
following payments and collections in respect of the
Underlying Agency Securities to be deposited directly
into the Certificate Account:
(i) all distributions received on
the Underlying Agency Securities subsequent to
the Closing Date;
(ii) any amounts received in
connection with the sale of the Underlying
Agency Securities pursuant to Section 9.01 in
accordance with a plan of complete liquidation
of the Trust Fund meeting the requirements of
Section 860F(a)(4)A of the Code [, or in
connection with any optional repurchase by the
Certificate Administrator or any GNMA Issuer
of any Underlying Agency Security]; and
(iii) any other amounts specifically
required to be deposited in the Certificate
Account hereunder.
The foregoing requirements for deposit in the
Certificate Account shall be exclusive.
(b) Funds in the Certificate Account shall be
invested by the Trustee in Permitted Investments in
accordance with the provisions set forth in Section 4.04.
The Trustee shall give notice to the Certificate
Administrator and the Company of the location of each
Certificate Account upon establishment thereof and prior
to any change thereof.
Section 3.04. Permitted Withdrawals From the
Certificate Account.
The Trustee shall from time to time withdraw
funds from the Certificate Account for the following
purposes:
(i) to make distributions in the
amounts and in the manner provided for in
Section 4.01;
(ii) to pay to the Certificate
Administrator on each Distribution Date, as
compensation for its services hereunder, the
Servicing Fee plus any investment income on
amounts in the Certificate Account;
(iii) to reimburse the Company or
the Certificate Administrator for expenses
incurred by and reimbursable to the Company or
the Certificate Administrator pursuant to
Section 6.03, Sections 10.01(c) and (g) or as
otherwise permitted under this Agreement; and
(iv) to clear and terminate the
Certificate Account upon the termination of
this Agreement.
On each Distribution Date, the Trustee shall
withdraw all funds from the Certificate Account and shall
use such funds withdrawn from the Certificate Account
only for the purposes described in this Section 3.04 and
in Section 4.01.
Section 3.05. Annual Statement as to Compliance.
On or before March 31st of each calendar year,
beginning with calendar year [199 ], the Certificate
Administrator shall deliver to the Trustee an Officer's
Certificate stating that (a) a review of the activities
of the Certificate Administrator during the preceding
calendar year and of its performance under this Agreement
(and similar agreements) has been made under the
supervision of the officer signing such certificate and
(b) to the best of such officer's knowledge, based on
such review, the Certificate Administrator has fulfilled
in all material respects all of its material obligations
under this Agreement (and similar agreements) throughout
such year, or, if there has been a default in the
fulfillment in any material respect of any such
obligation, specifying each such default known to such
officer, the nature and status thereof.
Section 3.06. Rights of the Company in Respect of
the Certificate Administrator.
The Certificate Administrator shall afford the
Company, upon reasonable notice, during normal business
hours access to all records maintained by the Certificate
Administrator in respect of its rights and obligations
hereunder and access to officers of the Certificate
Administrator responsible for such obligations. Upon
request, the Certificate Administrator shall furnish the
Company with its most recent financial statements and
such other information as the Certificate Administrator
possesses regarding its business, affairs, property and
condition, financial or otherwise. The Certificate
Administrator shall also cooperate with all reasonable
requests for information including, but not limited to,
notices and copies of files, regarding itself, the
Underlying Agency Securities or the Certificates from any
Person or Persons identified by the Company or the
Certificate Administrator. The Company may, but is not
obligated to, enforce the obligations of the Certificate
Administrator hereunder and may, but is not obligated to,
perform, or cause a designee to perform, any defaulted
obligation of the Certificate Administrator hereunder or
exercise the rights of the Certificate Administrator
hereunder; provided that the Certificate Administrator
shall not be relieved of any of its obligations hereunder
by virtue of such performance by the Company or its
designee. The Company shall not have any responsibility
or liability for any action or failure to act by the
Certificate Administrator and is not obligated to
supervise the performance of the Certificate
Administrator under this Agreement or otherwise.
ARTICLE IV
PAYMENTS TO CERTIFICATEHOLDERS
Section 4.01. Distributions.
(a) On the Business Day prior to each
Distribution Date, the Certificate Administrator shall
provide written notice to the Trustee indicating the
amount of Accrued Certificate Interest on each Class of
the Certificates, and the Principal Distribution Amount
and the allocation thereof to each Class of Certificates,
for such Distribution Date. On each Distribution Date,
the Trustee shall withdraw from the Certificate Account
all funds then on deposit, and the Trustee or the Paying
Agent appointed by the Trustee shall distribute to the
Holders of each respective Class of Certificates, from
such Available Distribution Amount, the following
amounts, in the following order of priority, in each case
to the extent of the Available Distribution Amount:
(i) first, concurrently to the Class
[A-1] Certificateholders, Class [A-2]
Certificateholders, Class [S]
Certificateholders and Class R
Certificateholders on a pro rata basis based
on the Accrued Certificate Interest payable
thereon, Accrued Certificate Interest on such
Class of Certificates as applicable for such
Distribution Date, plus any Accrued
Certificate Interest thereon remaining unpaid
for any previous Distribution Date;
(ii) second, an amount equal to the
Principal Distribution Amount shall be
distributed in reduction of the Certificate
Principal Balances of the Classes set forth
below as follows:
(A) first, to the Class R
Certificates, until the Certificate
Principal Balance thereof is reduced to
zero;
(B) second, to the Class [A-1]
Certificates, until the Certificate
Principal Balance thereof is reduced to
zero; and
(C) third, to the Class [A-2]
Certificates, until the Certificate
Principal Balance thereof is reduced to
zero;
(iii) third, to the Class [A-3]
Certificateholders, Accrued Certificate
Interest on such Classes of Certificates as
applicable for such Distribution Date, plus
any Accrued Certificate Interest thereon
remaining unpaid from any previous
Distribution Date (to the extent such unpaid
Accrued Certificate Interest does not
constitute an Accretion Amount);
(iv) fourth, an amount equal to the
Principal Distribution Amount remaining after
the distribution described in clause (ii)
above shall be distributed in reduction of the
Certificate Principal Balance of the Class [A-
3] Certificates, until the Certificate
Principal Balance thereof is reduced to zero;
provided, that if such Distribution Date is on or prior
to the Accretion Termination Date, no distribution shall
be made pursuant to clause (iii) above to the Class [A-3]
Certificateholders to the extent that Accrued Certificate
Interest is not then payable in accordance with Section
4.01(b); and provided further, that the amount available
for interest distributions on the Certificates on any
Distribution Date as described above shall not exceed the
aggregate amount distributed on the Underlying Agency
Securities on the preceding Underlying Security
Distribution Date in respect of interest, reduced by the
Servicing Fee; and provided further, that no such unpaid
Accrued Certificate Interest on the Certificates will be
carried forward to the extent that the corresponding
amount of any shortfall in interest distributions on any
of the Underlying Agency Securities on the preceding
Underlying Security Distribution Date is not carried
forward with respect to such Underlying Agency
Securities;
(b) On each Distribution Date prior to the
Accretion Termination Date, an amount equal to the amount
of Accrued Certificate Interest on the Class [A-3]
Certificates for such Distribution Date that would
otherwise be distributed on such Certificates on such
Distribution Date pursuant to Section 4.01(a)(iii) shall
be added to the Certificate Principal Balance thereof
(such amount, the "Accretion Amount"). On and after the
Accretion Termination Date, the entire amount of Accrued
Certificate Interest on the Class [A-3] Certificates for
such Distribution Date shall be payable to such
Certificates to the extent not required to retire fully
the Class [A-1], Class [A-2] and Class R Certificates on
the Accretion Termination Date. Any Accrued Certificate
Interest on the Class [A-3] Certificates which is
required to be paid to the holders of the Class [A-1],
Class [A-2] or Class R Certificates on the Accretion
Termination Date as provided in the preceding sentence
will be added to the Certificate Principal Balance of the
Class [A-3] Certificates in the manner described in the
first sentence of this Section 4.01(b).
(c) Payments on each Distribution Date will be
made to the Certificateholders of record on the related
Record Date. Distributions to any Certificateholder on
any Distribution Date shall be made by wire transfer of
immediately available funds to the account of such
Certificateholder at a bank or other entity having
appropriate facilities therefor, if such
Certificateholder shall have so notified the Trustee or
the Paying Agent in writing at least five Business Days
prior to the Record Date and if the aggregate amount of
distribution to be made to such Holder is at least
$10,000, or in such other manner as shall be agreed to by
the Trustee and such Certificateholder, or otherwise by
check mailed by first class mail to the address of such
Certificateholder appearing in the Certificate Register.
Final distribution on each Certificate will be made in
like manner, but only upon presentment and surrender of
such Certificate at the Corporate Trust Office or such
other location specified in the notice to
Certificateholders of such final distribution.
(d) Except as otherwise provided in Section
9.01, whenever the Trustee, as of five Business Days
prior to any Record Date, expects that the final
distribution with respect to the Certificates will be
made on the related Distribution Date, the Trustee shall,
no later than such related Record Date mail to each
Holder of the Certificates on such date a notice to the
effect that:
(i) the Trustee expects that the final
distribution with respect to the Certificates will
be made on such Distribution Date but only upon
presentation and surrender of such Certificates at
the office of the Trustee therein specified; and
(ii) no interest shall accrue on such
Certificates from and after such Distribution Date.
Section 4.02. Statements to Certificateholders.
On each Distribution Date, the Certificate
Administrator shall prepare and the Trustee shall forward
by mail a statement to each Certificateholder stating:
(i) the Available Distribution Amount for such
Distribution Date and the respective portions
thereof constituting interest and principal
distributions on the Underlying Agency Securities;
(ii) with respect to such Distribution Date,
the aggregate amount of Accrued Certificate
Interest and the amounts of interest and principal
distributed to the Certificateholders of each Class
on such Distribution Date pursuant to Section 4.01;
(iii) the respective amounts of any prepayments
and any purchases of Mortgage Loans (due to
conversion or otherwise) included in such
distributions;
(iv) the Certificate Principal Balance or
Notional Amount of the Certificates of each Class
after giving effect to distributions of principal
on such Distribution Date; and
(v) the Underlying Certificate Balance for
each Underlying Agency Security as of the
Underlying Security Distribution Date immediately
preceding such Distribution Date, after giving
effect to the distribution of principal made
thereon on such Underlying Security Distribution
Date.
In the case of the information furnished
pursuant to clause (ii) above, the amounts shall also be
expressed as a dollar amount per Certificate evidencing
a $1,000 denomination.
In addition, the Trustee promptly will furnish
to Certificateholders and the Certificate Administrator
copies of any notices, statements, reports or other
communications including, without limitation, the
Underlying Security Distribution Date Statements (or, in
lieu thereof, if the Certificate Administrator so elects,
a summary report of information relevant to the
Certificates, reported by the [GNMA Issuer] with regard
to the Underlying Agency Securities) for each Underlying
Security Distribution Date, received by the Trustee as
the Underlying Agency Securityholder.
On or before March 31st of each calendar year,
beginning with calendar year [199 ], the Trustee shall
prepare and deliver by first class mail to each Person
who at any time during the previous calendar year was a
Certificateholder of record a statement containing the
information required to be contained in the regular
monthly report to Certificateholders, as set forth in
clause (ii) above aggregated for such calendar year or
the applicable portion thereof during which such Person
was a Certificateholder. Such obligation of the Trustee
shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by
the Trustee pursuant to any requirements of the Code and
regulations thereunder as from time to time are in force.
The Trustee, upon request, will furnish the Certificate
Administrator with all information the Trustee has as may
reasonably be requested in connection with the
preparation by the Certificate Administrator of all tax
returns described in Section 10.01.
Section 4.03. Access to Certain Documentation and
Information.
The Trustee shall provide to the
Certificateholders access to certificates and all
reports, documents and records maintained by the Trustee
in respect of its duties hereunder, such access being
afforded without charge but only upon reasonable written
request and during normal business hours at offices
designated by the Trustee.
Section 4.04. Permitted Investments.
The Certificate Administrator shall direct any
institution maintaining the Certificate Account to invest
the funds in such Certificate Account in Permitted
Investments, which shall mature not later than the
Business Day immediately preceding the next Distribution
Date (except that, (i) any investment in the institution
with which the Certificate Account is maintained may
mature on such Distribution Date and (ii) any other
investment may mature on such Distribution Date if the
Trustee shall advance funds on such Distribution Date to
the Certificate Account in the amount payable on such
investment on such Distribution Date, pending receipt
thereof to the extent necessary to make distributions on
the Certificates), and shall not be sold or disposed of
prior to their maturity. All such Permitted Investments
shall be made in the name of the Trustee, in trust for
the Holders of the Certificates, or its nominee. All
income and gain received from any such investment shall
be deposited in the appropriate Certificate Account and
may only be withdrawn and applied for the purposes set
forth in Section 3.04. The amount of any losses incurred
in respect of any such investments shall be deposited in
the Certificate Account by the Certificate Administrator
out of its own funds immediately as realized.
<PAGE>
ARTICLE V
THE CERTIFICATES
Section 5.01. The Certificates.
The Certificates shall be substantially in the
form set forth in Exhibits A-1 and A-2 hereto. The
Certificates (other than the Class [S] Certificates and
Class R Certificates) will be issuable in registered
form, with minimum initial Certificate Principal Balances
as of the Closing Date of $[ ] and integral
multiples of $[ ] in excess thereof[; provided,
however, that one Class [ ] Certificate will be issued
in an initial denomination equal to $[ ], or
the sum of $[ ] and any integral multiple of
$[ ]]. The Class [S] Certificates and Class R
Certificates will be issuable in registered form, in
minimum denominations of not less than a [ ]%
Percentage Interest; [provided, however, that at all
times one Class R Certificate will be held by [the
Certificate Administrator] as "tax matters person"
pursuant to Section 10.01(c) in a minimum denomination
representing a Percentage Interest of not less than
0.01%].
The Certificates shall be executed by manual or
facsimile signature on behalf of an authorized officer of
the Trustee. Certificates bearing the manual or
facsimile signatures of individuals who were at any time
the authorized officers of the Trustee shall bind the
Trustee, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the
authentication and delivery of such Certificates or did
not hold such offices at the date of such Certificates.
No Certificate shall be entitled to any benefit under
this Agreement, or be valid for any purpose, unless there
appears on such Certificate a certificate of
authentication substantially in the form provided for
herein executed by the Certificate Registrar by manual
signature, and such certificate 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 5.02. Registration of Transfer and
Exchange of Certificates.
(a) The Trustee shall cause to be kept at one
of the offices or agencies to be appointed by the Trustee
in accordance with the provisions of this Section 5.02 a
Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Trustee shall
provide for the registration of Certificates and of
transfers and exchanges of Certificates as herein
provided. The Trustee is initially appointed Certificate
Registrar for the purpose of registering Certificates and
transfers and exchanges of Certificates as herein
provided. The Certificate Registrar, or the Trustee,
shall provide the Certificate Administrator with a
certified list of Certificateholders as of each Record
Date prior to the Distribution Date. Upon satisfaction
of the conditions set forth below, the Trustee shall
execute and the Certificate Registrar shall authenticate
and deliver, in the name of the designated transferee or
transferees, one or more new Certificates of a like Class
and aggregate Percentage Interest. In addition, the
Trustee shall notify the Company of every proposed
transfer or exchange of the Certificates.
(b) At the option of the Certificateholders,
Certificates may be exchanged for other Certificates of
authorized denominations of a like Class and aggregate
Percentage Interest, upon surrender of the Certificates
to be exchanged at any such office or agency. Whenever
any Certificates are so surrendered for exchange the
Trustee shall execute and the Certificate Registrar shall
authenticate and deliver the Certificates which the
Certificateholder making the exchange is entitled to
receive. Every Certificate presented or surrendered for
transfer or exchange shall (if so required by the Trustee
or the Certificate Registrar) be duly endorsed by, or be
accompanied by a written instrument of transfer in form
satisfactory to the Trustee and the Certificate Registrar
duly executed by, the Holder thereof or his attorney duly
authorized in writing.
(c) In the case of any Certificate presented
for registration in the name of an employee benefit plan
or other plan subject to the fiduciary responsibility
provisions of ERISA, or Section 4975 of the Code (or
comparable provisions of any subsequent enactments), an
investment manager, a named fiduciary or a trustee of
such plan, or any other Person who is using "plan assets"
of any such plan to effect such acquisition (including
any insurance company using funds in its general or
separate accounts that may constitute "plan assets"),
unless otherwise directed by the Company, the Trustee
shall require an Opinion of Counsel acceptable to and in
form and substance satisfactory to the Trustee, the
Company and the Certificate Administrator to the effect
that the purchase or holding of such Certificate is
permissible under applicable law, will not constitute or
result in any non-exempt prohibited transaction under
Section 406 of ERISA or Section 4975 of the Code, and
will not subject the Trustee, the Company or the
Certificate Administrator to any obligation or liability
(including obligations or liabilities under ERISA or
Section 4975 of the Code) in addition to those undertaken
in this Agreement, which Opinion of Counsel shall not be
an expense of the Trustee, the Company or the Certificate
Administrator. Neither the Company, the Certificate
Administrator nor the Trustee will be required to obtain
such Opinion of Counsel on behalf of any prospective
transferee.
(d) (i) Each Person who has or who acquires any
Ownership Interest in a Class R Certificate shall be
deemed by the acceptance or acquisition of such Ownership
Interest to have agreed to be bound by the following
provisions and to have irrevocably authorized the Trustee
or its designee under clause (iii)(A) below to deliver
payments to a Person other than such Person and to
negotiate the terms of any mandatory sale under clause
(iii)(B) below and to execute all instruments of transfer
and to do all other things necessary in connection with
any such sale. The rights of each Person acquiring any
Ownership Interest in a Class R Certificate are expressly
subject to the following provisions:
(A) Each Person holding or
acquiring any Ownership Interest in a Class R
Certificate shall be a Permitted Transferee
and shall promptly notify the Trustee of any
change or impending change in its status as a
Permitted Transferee.
(B) In connection with any proposed
Transfer of any Ownership Interest in a Class
R Certificate, the Trustee shall require
delivery to it, and shall not register the
Transfer of any Class R Certificate until its
receipt of, (I) an affidavit and agreement (a
"Transfer Affidavit and Agreement" attached
hereto as Exhibit B-1) from the proposed
Transferee, in form and substance satisfactory
to the Trustee and the Certificate
Administrator, representing and warranting,
among other things, that it is a United States
Person and Permitted Transferee, that it is
not acquiring its Ownership Interest in the
Class R Certificate that is the subject of the
proposed transfer as a nominee, trustee or
agent for any Person who is not a Permitted
Transferee, that for so long as it retains
its Ownership Interest in a Class R
Certificate, it will endeavor to remain a
Permitted Transferee, and that it has reviewed
the provisions of this Section 5.02(d) and
agrees to be bound by them and (II) a
certificate, attached hereto as Exhibit B-2,
from the Holder wishing to transfer the Class
R Certificate, in form and substance
satisfactory to the Certificate Administrator,
representing and warranting, among other
things, that no purpose of the proposed
Transfer is to impede the assessment or
collection of tax.
(C) Notwithstanding the delivery of
a Transfer Affidavit and Agreement by a
proposed Transferee under clause (B) above, if
the Trustee has actual knowledge that the
proposed Transferee is not a Permitted
Transferee, no transfer of an Ownership
Interest in a Class R Certificate to such
proposed Transferee shall be effected.
(D) Each Person holding or
acquiring any Ownership Interest in a Class R
Certificate shall agree (1) to require a
Transfer Affidavit and Agreement from any
other Person to whom such Person attempts to
transfer its Ownership Interest in a Class R
Certificate and (2) not to transfer its
Ownership Interest unless it provides a
certificate to the Trustee and the Certificate
Administrator in the form attached hereto as
Exhibit B-2.
(E) Each Person holding or
acquiring an Ownership Interest in a Class R
Certificate, by purchasing an Ownership
Interest in such Certificate, agrees to give
the Trustee written notice that it is a
"pass-through interest holder" within the
meaning of Temporary Treasury Regulations
Section 1.67-3T(a)(2)(i)(A) immediately upon
acquiring an Ownership Interest in a Class R
Certificate, if it is, or is holding an
Ownership Interest in a Class R Certificate on
behalf of, "pass-through interest holder."
(F) Each Person holding or
acquiring any Ownership Interest in a Class R
Certificate shall be a "qualified
institutional buyer" as defined in Rule 144A
under the Securities Act of 1933, as amended,
or an Affiliate of the Company or the
Certificate Administrator.
(ii) The Trustee will register the transfer of
any Class R Certificate only if it shall have
received the Transfer Affidavit and Agreement, a
Certificate of the Holder requesting such transfer
in the form attached hereto as Exhibit B-2 and all
of such other documents as shall have been
reasonably required by the Certificate
Administrator as a condition to such registration.
Transfers of the Class R Certificates to Non-United
States Persons and "Disqualified Organizations" (as
defined in Section 860E(e)(5) of the Code) are
prohibited.
(iii) (A) If any Disqualified
Organization shall become a holder of a
Class R Certificate, then the last
preceding Permitted Transferee shall be
restored, to the extent permitted by law,
to all rights as Holder thereof retroactive
to the date of registration of such
transfer of such Class R Certificate. If
a Non-United States Person shall become a
holder of a Class R Certificate, then the
last preceding United States Person shall
be restored, to the extent permitted by
law, to all rights and obligations as
Holder thereof retroactive to the date of
registration of such transfer of such Class
R Certificate. If a transfer of a Class R
Certificate is disregarded pursuant to the
provisions of Treasury Regulation Sections
1.860E-1 or 1.860G-3, then the last
preceding Permitted Transferee shall be
restored, to the extent permitted by law,
to all rights and obligations as Holder
thereof retroactive to the date of
registration of such transfer of such Class
R Certificate. The Trustee shall be under
no liability to any Person for any
registration of transfer of a Class R
Certificate that is in fact not permitted
by this Section 5.02(d) or for making any
payments due on such Certificate to the
holder thereof or for taking any other
action with respect to such holder under
the provisions of this Agreement.
(B) If any purported
Transferee shall become a Holder of a Class
R Certificate in violation of the
restrictions in this Section 5.02(d) and to
the extent that the retroactive restoration
of the rights of the Holder of such Class
R Certificate as described in clause
(iii)(A) above shall be invalid, illegal or
unenforceable, then the Certificate
Administrator shall have the right, without
notice to the Holder or any prior Holder of
such Class R Certificate, to sell such
Class R Certificate to a purchaser selected
by the Certificate Administrator on such
terms as the Certificate Administrator may
choose. Such purported Transferee shall
promptly endorse and deliver each Class R
Certificate in accordance with the
instructions of the Certificate
Administrator. Such purchaser may be the
Company, the Certificate Administrator
itself or any affiliate of the Company or
the Certificate Administrator. The
proceeds of such sale, net of the
commissions (which may include commissions
payable to the Certificate Administrator or
its affiliates), expenses and taxes due, if
any, will be remitted by the Certificate
Administrator to such purported Transferee.
The terms and conditions of any sale under
this clause (iii)(B) shall be determined in
the sole discretion of the Certificate
Administrator, and the Certificate
Administrator shall not be liable to any
Person having an Ownership Interest in a
Class R Certificate as a result of its
exercise of such discretion.
(iv) The Certificate Administrator, on behalf
of the Trustee, shall make available, upon written
request from the Trustee, all information necessary
to compute any tax imposed (A) as a result of the
transfer of an Ownership Interest in a Class R
Certificate to any Person who is not a Permitted
Transferee, including the information regarding
"excess inclusions" of such Class R Certificates
required to be provided to the Internal Revenue
Service and certain Persons as described in
Treasury Regulation Section 1.860D-1(b)(5), and (B)
as a result of any regulated investment company,
real estate investment trust, common trust fund,
partnership, trust, estate or organizations
described in Section 1381 of the Code having as
among its record holders at any time any Person who
is not a Permitted Transferee. Reasonable
compensation for providing such information may be
required by the Certificate Administrator from such
person.
(v) The provisions of this Section 5.02(d) set
forth prior to this subsection (v) may be modified,
added or eliminated, provided that there shall have
been delivered to the Trustee:
(A) written notification from the
Rating Agency to the effect that the
modification, addition or elimination of such
provisions will not cause such Rating Agency
to downgrade its then-current ratings of the
Certificates below the lower of the
then-current rating or the rating assigned to
such Certificates on the Closing Date by such
Rating Agency; and
(B) a certificate of the
Certificate Administrator stating that the
Certificate Administrator has received an
Opinion of Counsel, in form and substance
satisfactory to the Certificate Administrator,
to the effect that such modification, addition
or absence of such provisions will not cause
the Trust Fund to cease to qualify as a REMIC
and will not cause (1) the Trust Fund to be
subject to an entity-level tax caused by the
transfer of any Class R Certificate to a
Person that is not a Permitted Transferee or
(2) a Certificateholder or another Person to
be subject to a REMIC-related tax caused by
the transfer of a Class R Certificate to a
Person that is not a Permitted Transferee.
(e) No service charge shall be made for any
transfer or exchange of Certificates, but the Trustee may
require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection
with any transfer or exchange of Certificates.
(f) All Certificates surrendered for transfer
and exchange shall be destroyed by the Certificate
Registrar.
Section 5.03. Mutilated, Destroyed, Lost or
Stolen Certificates.
If (i) any mutilated Certificate is surrendered
to the Certificate Registrar, or the Trustee and the
Certificate Registrar receive evidence to their
satisfaction of the destruction, loss or theft of any
Certificate, and (ii) there is delivered to the Trustee
and the Certificate Registrar 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 or the
Certificate Registrar that such Certificate has been
acquired by a bona fide purchaser, the Trustee shall
execute and the Certificate Registrar shall 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 but
bearing a number not contemporaneously outstanding. 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 and the
Certificate Registrar) connected therewith. Any
duplicate Certificate issued pursuant to this Section
shall constitute complete and indefeasible evidence of
ownership in the Trust Fund, as if originally issued,
whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
Section 5.04. Persons Deemed Owners.
Prior to due presentation of a Certificate for
registration of transfer, the Company, the Certificate
Administrator, the Trustee, the Certificate Registrar and
any agent of the Company, the Certificate Administrator,
the Trustee or the Certificate Registrar 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 4.01 and for all other
purposes whatsoever, and neither the Company, the
Certificate Administrator, the Trustee, the Certificate
Registrar nor any agent of the Company, the Certificate
Administrator, the Trustee or the Certificate Registrar
shall be affected by notice to the contrary except as
provided in Section 5.02(d).
Section 5.05. Appointment of Paying Agent.
The Trustee may appoint a Paying Agent for the
purpose of making distributions to Certificateholders
pursuant to Section 4.01. In the event of any such
appointment, on or prior to each Distribution Date the
Trustee shall deposit or cause to be deposited with the
Paying Agent a sum sufficient to make the payments to
Certificateholders in the amounts and in the manner
provided for in Section 4.01, such sum to be held in
trust for the benefit of Certificateholders.
The Trustee shall cause each Paying Agent to
execute and deliver to the Trustee an instrument in which
such Paying Agent shall agree with the Trustee that such
Paying Agent will hold all sums held by it for the
payment to Certificateholders in trust for the benefit of
the Certificateholders entitled thereto until such sums
shall be paid to such Certificateholders. Any sums so
held by such Paying Agent shall be held only in Eligible
Accounts to the extent such sums are not distributed to
the Certificateholders on the date of receipt by such
Paying Agent.
ARTICLE VI
THE COMPANY AND THE CERTIFICATE ADMINISTRATOR
Section 6.01. Respective Liabilities of the
Company and the Certificate
Administrator.
The Company and the Certificate Administrator shall
be liable in accordance herewith only to the extent of
the respective obligations specifically imposed upon and
undertaken by the Company and the Certificate
Administrator herein.
Section 6.02. Merger, Consolidation or Conversion
of the Company or the Certificate
Administrator.
Subject to the following paragraph, the Company
and the Certificate Administrator will each keep in full
effect its existence, rights and franchises as a
corporation or association under the laws of the
jurisdiction of its incorporation, and each will obtain
and preserve its qualification to do business as a
foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to protect the
validity and enforceability of this Agreement and the
Certificates and to perform its respective duties under
this Agreement.
The Company or the Certificate Administrator
may be merged or consolidated with or into any Person, or
transfer all or substantially all of its assets to any
Person, in which case any Person resulting from any
merger or consolidation to which the Company or the
Certificate Administrator shall be a party, or any Person
succeeding to the business of the Company or the
Certificate Administrator, shall be the successor of the
Company or the Certificate Administrator, as the case may
be, hereunder, without the execution or filing of any
paper or any further act on the part of any of the
parties hereto, anything herein to the contrary
notwithstanding; provided, that no Event of Default shall
result therefrom and such successor shall meet the
qualifications set forth in Section 7.02.
Section 6.03. Limitation on Liability of the
Company, the Certificate
Administrator and Others.
Neither the Company, the Certificate
Administrator nor any of the directors, officers,
employees or agents of the Company or the Certificate
Administrator shall be under any liability to the Trust
Fund or the Certificateholders for any action taken or
for refraining from the taking of any action in good
faith pursuant to this Agreement, or for errors in
judgment; provided, however, that this provision shall
not protect the Company, the Certificate Administrator or
any such Person against any breach of warranties or
representations made herein, or against any specific
liability imposed on the Certificate Administrator
pursuant to any Section hereof, or against any liability
which would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence in the
performance of duties or by reason of reckless disregard
of obligations or duties hereunder. The Company, the
Certificate Administrator and any director, officer,
employee or agent of the Company or the Certificate
Administrator may rely in good faith on any document of
any kind which, prima facie, is properly executed and
submitted by any Person respecting any matters arising
hereunder. The Company, the Certificate Administrator
and any director, officer, employee or agent of the
Company or the Certificate Administrator shall be
indemnified and held harmless by the Trust Fund against
any loss, liability or expense incurred in connection
with any legal action relating to this Agreement or the
Certificates, other than any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or
gross negligence in the performance of duties or by
reason of reckless disregard of obligations or duties
hereunder. Neither the Company nor the Certificate
Administrator shall be under any obligation to appear in,
prosecute or defend any legal action unless such action
is related to its respective duties under this Agreement
and which in its opinion does not involve it in any
expense or liability; provided, however, that the Company
may in its discretion undertake any such action which it
may deem necessary or desirable with respect to this
Agreement and the rights and duties of the parties hereto
and the interests of the Certificateholders hereunder.
In such event, and provided that such action has been
consented to by the Holders of Certificates evidencing at
least 51% of the Voting Rights, the legal expenses and
costs of such action and any liability resulting
therefrom shall be expenses, costs and liabilities of the
Trust Fund, and the Company shall be entitled to be
reimbursed therefor from the Certificate Account as
provided in Section 3.04. In no event shall the
Certificate Administrator be liable (solely in its
capacity as Certificate Administrator) for any error
arising out of any inaccurate information contained in
any Distribution Date Statement. This provision shall
not limit the Certificate Administrator's liability in
any other capacity.
Section 6.04. Company and Certificate
Administrator Not to Resign.
The Certificate Administrator shall not resign
from the obligations and duties hereby imposed on it,
except upon determination that its duties hereunder are
no longer permissible under applicable law or are in
material conflict by reason of applicable law with any
other activities carried on by it, the other activities
of the Certificate Administrator so causing such a
conflict being of a type and nature carried on by the
Certificate Administrator at the date of this Agreement.
Any such determination permitting the resignation of the
Certificate Administrator shall be evidenced by an
Opinion of Counsel to such effect which shall be
delivered in form and substance satisfactory to the
Trustee. No such resignation shall become effective
until the Trustee or a successor certificate
administrator shall have assumed the Certificate
Administrator's responsibilities and obligations in
accordance with Section 7.02 hereof.
ARTICLE VII
DEFAULT
Section 7.01. Events of Default.
"Event of Default", wherever used herein, means
any one of the following events (whatever reason for such
Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or
governmental body):
(i) the Certificate Administrator shall fail
to observe or perform in any material respect any
of the covenants or agreements on the part of the
Certificate Administrator contained in the
Certificates or in this Agreement and such failure
shall continue unremedied for a period of 30 days
after the date on which written notice of such
failure, requiring the same to be remedied, shall
have been given to the Certificate Administrator by
the Trustee or the Company, or to the Certificate
Administrator, the Company and the Trustee by the
Holders of Certificates evidencing Percentage
Interests aggregating not less than 33%; or
(ii) a decree or order of a court or agency or
supervisory authority having jurisdiction in the
premises in an involuntary case under any present
or future federal or state bankruptcy, insolvency
or similar law or appointing a conservator or
receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall
have been entered against the Certificate
Administrator and such decree or order shall have
remained in force undischarged or unstayed for a
period of 60 days; or
(iii) the Certificate Administrator shall
consent to the appointment of a conservator or
receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and
liabilities, or similar proceedings of, or relating
to, the Certificate Administrator or of, or
relating to, all or substantially all of the
property of the Certificate Administrator; or
(iv) the Certificate Administrator shall admit
in writing its inability to pay its debts generally
as they become due, file a petition to take
advantage of, or commence a voluntary case under,
any applicable insolvency or reorganization
statute, make an assignment for the benefit of its
creditors, or voluntarily suspend payment of its
obligations.
If an Event of Default described in this
Section shall occur, then, and in each and every such
case, so long as such Event of Default shall not have
been remedied, either the Company or the Trustee may, and
at the direction of Holders of Certificates evidencing at
least 51% of the Voting Rights, the Trustee shall, by
notice in writing to the Certificate Administrator (and
to the Company if given by the Trustee or to the Trustee
if given by the Company), terminate all of the rights and
obligations of the Certificate Administrator under this
Agreement and in and to the Underlying Agency Securities
and the proceeds thereof, other than its rights as a
Certificateholder hereunder; provided, however, that the
Certificate Administrator will be entitled to all
compensation and any income on the Certificate Account
that accrued to the Certificate Administrator prior to
such termination. The Trustee is hereby authorized and
empowered to execute and deliver, on behalf of the
Certificate Administrator, as attorney-in-fact or
otherwise, any and all documents and other instruments,
and to do or accomplish all other acts or things
necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer
and endorsement or assignment of the Underlying Agency
Securities and related documents, or otherwise. The
Certificate Administrator agrees to cooperate with the
Trustee in effecting the termination of the Certificate
Administrator's responsibilities and rights hereunder,
including, without limitation, the transfer to the
Trustee or its designee for administration by it of all
cash amounts which shall at the time be credited to the
Certificate Account or thereafter be received with
respect to the Underlying Agency Securities. No such
termination shall release the Certificate Administrator
for any liability that it would otherwise have hereunder
for any act or omission prior to the effective time of
such termination.
Section 7.02. Trustee or Company to Act;
Appointment of Successor.
On and after the time the Certificate
Administrator receives a notice of termination pursuant
to Section 7.01, the Trustee or, upon notice to the
Company, and with the Company's consent (which shall not
be unreasonably withheld) a designee (which meets the
standards set forth below) of the Trustee, shall be the
successor in all respects to the Certificate
Administrator in its capacity as Certificate
Administrator under this Agreement and the transactions
set forth or provided for herein and shall be subject to
all the responsibilities, duties and liabilities relating
thereto placed on the Certificate Administrator (except
for its obligations to deposit amounts in respect of
losses incurred prior to such notice of termination on
the investment of funds in the Certificate Account
pursuant to Section 4.04 by the terms and provisions
hereof); provided, however, that any failure to perform
such duties or responsibilities caused by the preceding
Certificate Administrator's failure to provide
information required by Section 4.01 shall not be
considered a default by the Trustee hereunder. As
compensation therefor, the Trustee shall be entitled to
all funds relating to the Underlying Agency Securities
which the Certificate Administrator would have been
entitled to charge to the Certificate Account if the
Certificate Administrator had continued to act hereunder
and, in addition, shall be entitled to the income from
any Permitted Investments made with amounts attributable
to the Underlying Agency Securities held in the
Certificate Account. If the Trustee has become the
successor to the Certificate Administrator in accordance
with Section 7.01, then notwithstanding the above, the
Trustee may, if it shall be unwilling to so act, or
shall, if it is unable to so act, appoint, or petition a
court of competent jurisdiction to appoint, any
established housing and home finance institution, which
is also a FNMA- or FHLMC-approved mortgage servicing
institution, having a net worth of not less than
$10,000,000 as the successor to the Certificate
Administrator hereunder in the assumption of all or any
part of the responsibilities, duties or liabilities of
the Certificate Administrator hereunder. Pending
appointment of a successor to the Certificate
Administrator hereunder, the Trustee shall become
successor to the Certificate Administrator and 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 Underlying Agency Securities
as it and such successor shall agree; provided, however,
that no such compensation shall be in excess of that
permitted the initial Certificate Administrator
hereunder. The Company, the Trustee, the Certificate
Administrator, the Custodian and such successor shall
take such action, consistent with this Agreement, as
shall be necessary to effectuate any such succession.
Section 7.03. Notification to Certificateholders.
(a) Upon any such termination or appointment
of a successor to the Certificate Administrator, the
Trustee shall give prompt written notice thereof to
Certificateholders at their respective addresses
appearing in the Certificate Register.
(b) Within 60 days after the occurrence of any
Event of Default, the Trustee shall transmit by mail to
all Holders of Certificates notice of each such Event of
Default hereunder known to the Trustee, unless such Event
of Default shall have been cured or waived.
Section 7.04. Waiver of Events of Default.
The Holders representing at least 66% of the
Voting Rights of Certificates may waive such default or
Event of Default; provided, however, that no waiver
pursuant to this Section 7.04 shall affect the Holders of
Certificates in the manner set forth in Section 10.01.
Upon any such waiver of a default or Event of Default,
such default or Event of Default by the Holders
representing the requisite percentage of Voting Rights of
Certificates affected by such default or Event of
Default, shall cease to exist and shall be deemed to have
been remedied for every purpose hereunder. No such
waiver shall extend to any subsequent or other default or
Event of Default or impair any right consequent thereon
except to the extent expressly so waived.
ARTICLE VIII
THE TRUSTEE
Section 8.01. Duties of Trustee.
(a) The Trustee, prior to the occurrence of an
Event of Default and after the curing of all Events of
Default which may have occurred, undertakes to perform
such duties and only such duties as are specifically set
forth in this Agreement. In case an Event of Default has
occurred (which has not been cured or waived), 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 investor
would exercise or use under the circumstances in the
conduct of such investor's own affairs.
(b) The Trustee, upon receipt of all
resolutions, certificates, statements, opinions, reports,
documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished
pursuant to any provision of this Agreement, shall
examine them to determine whether they conform to the
requirements of this Agreement and the terms of the
Underlying Agency Securities. The Trustee shall notify
the Certificateholders of any such documents which do not
materially conform to the requirements of this Agreement
in the event that the Trustee, after so requesting, does
not receive satisfactorily corrected documents or a
satisfactory explanation regarding any such
nonconformities.
The Trustee shall forward or cause to be
forwarded in a timely fashion the notices, reports and
statements required to be forwarded by the Trustee
pursuant to Sections 3.01, 4.02 and 9.01. The Trustee
shall furnish in a timely fashion to the Certificate
Administrator such information as the Certificate
Administrator may reasonably request from time to time
for the Certificate Administrator to fulfill its duties
as set forth in this Agreement. The Trustee covenants
and agrees that it shall perform its obligations
hereunder in a manner so as to maintain the status of the
Trust Fund as a REMIC, under the REMIC Provisions and to
prevent the imposition of any federal, state or local
income, prohibited transaction, contribution or other tax
on the Trust Fund to the extent that maintaining such
status and avoiding such taxes are reasonably within the
control of the Trustee and are reasonably within the
scope of its duties under this Agreement, notwithstanding
the foregoing. Also, the Trustee shall have no
additional obligations with respect to maintenance of the
Trust Fund as a REMIC other than as specifically set
forth herein.
(c) No provision of this Agreement shall be
construed to relieve the Trustee from liability for its
own negligent action, its own negligent failure to act or
its own willful misconduct; provided, however, that:
(i) Prior to the occurrence of an Event of
Default, and after the curing or waiver of all such
Events of Default which may have occurred, the
duties and obligations of the Trustee shall be
determined solely by the express provisions of this
Agreement, the Trustee shall not be liable except
for the performance of such duties and obligations
as are specifically set forth in this Agreement, no
implied covenants or obligations shall be read into
this Agreement against the Trustee and, in the
absence of bad faith on the part of the Trustee,
the Trustee may conclusively rely, as to the truth
of the statements and the correctness of the
opinions expressed therein, upon any certificates
or opinions furnished by the Company or the
Certificate Administrator to the Trustee and which
on their face, do not contradict the requirements
of this Agreement;
(ii) The Trustee shall not be personally liable
for an error of judgment made in good faith by a
Responsible Officer or Responsible Officers of the
Trustee, unless it shall be proved that the Trustee
was negligent in ascertaining the pertinent facts;
(iii) 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
Certificateholders of any Class holding
Certificates which evidence, as to such Class,
Percentage Interests aggregating not less than 25%
as to the time, method and place of conducting any
proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred upon the
Trustee, under this Agreement;
(iv) The Trustee shall not be charged with
knowledge of any default or an Event of Default
under clauses (i), (ii), (iii) or (iv) of Section
7.01 unless a Responsible Officer of the Trustee
assigned to and working in the Corporate Trust
Office obtains actual knowledge of such failure or
event or the Trustee receives written notice of
such failure or event at its Corporate Trust Office
from the Certificate Administrator, the Company, or
any Certificateholder; and
(v) Except to the extent provided in Section
7.02, no provision in this Agreement shall require
the Trustee to expend or risk its own funds or
otherwise incur any personal financial liability in
the performance of any of its duties as Trustee
hereunder, or in the exercise of any of its rights
or powers, if the Trustee shall have reasonable
grounds for believing that repayment of funds or
adequate indemnity against such risk or liability
is not reasonably assured to it. In the event the
Trustee has been authorized by Certificateholders
evidencing the percentage of Percentage Interests
required to authorize such action pursuant to the
terms of this Agreement and the indemnification
provided to the Trustee by such Certificateholders
is not reasonably satisfactory to the Trustee, the
Trustee may require the approval of all
Certificateholders and/or additional
indemnification prior to taking any such action.
In addition, the Trustee may seek indemnification
from the Certificate Administrator or the Company
prior to taking any such action provided that
neither the Certificate Administrator nor the
Company shall be required to provide such
indemnification.
(d) The Trustee shall timely pay, from its own
funds, the amount of any and all federal, state and local
taxes imposed on the Trust Fund or its assets or
transactions including, without limitation, (i)
"prohibited transaction" penalty taxes as defined in
Section 860F of the Code, if, when and as the same shall
be due and payable, and (ii) any tax on contributions to
the Trust Fund after the Closing Date imposed by Section
860G(d) of the Code, but only if such taxes arise out of
a breach by the Trustee of its obligations hereunder
which breach constitutes negligence or willful misconduct
of the Trustee.
Section 8.02. Certain Matters Affecting the
Trustee.
(a) Except as otherwise provided in Section
8.01:
(i) 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;
(ii) the Trustee may consult with counsel and
any Opinion of Counsel shall be full and complete
authorization and protection in respect of any
action taken or suffered or omitted by it hereunder
in good faith and in accordance with such Opinion
of Counsel;
(iii) the Trustee shall be under no obligation
to exercise any of the trusts or powers vested in
it by this Agreement or to institute, conduct or
defend any litigation hereunder or in relation
hereto at the request, order or direction of any of
the Certificateholders, pursuant to the provisions
of this Agreement, unless such Certificateholders
shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses
and liabilities which may be incurred therein or
thereby; nothing contained herein shall, however,
relieve the Trustee of the obligation, upon the
occurrence of an Event of Default (which has not
been cured), to exercise such of the rights and
powers vested in it by this Agreement, and to use
the same degree of care and skill in their exercise
as a prudent investor would exercise or use under
the circumstances in the conduct of such investor's
own affairs;
(iv) the Trustee shall not be personally liable
for any action taken, suffered or omitted by it in
good faith and believed by it to be authorized or
within the discretion or rights or powers conferred
upon it by this Agreement;
(v) prior to the occurrence of an Event of
Default hereunder and after the curing of all
Events of Default which may have occurred, the
Trustee shall not be bound to make any
investigation into the facts or matters stated in
any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order,
approval, bond or other paper or document, unless
requested in writing so to do by Holders of
Certificates evidencing Percentage Interests,
aggregating not less than 50%; provided, however,
that if the payment within a reasonable time to the
Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee,
not reasonably assured to the Trustee by the
security afforded to it by the terms of this
Agreement, the Trustee may require reasonable
indemnity against such expense or liability as a
condition to so proceeding. The reasonable expense
of every such examination shall be paid by the
Certificate Administrator, if an Event of Default
shall have occurred and is continuing, and
otherwise by the Certificateholder requesting the
investigation;
(vi) the Trustee may execute any of the trusts
or powers hereunder or perform any duties hereunder
either directly or by or through agents or
attorneys; and
(vii) to the extent authorized or required from
time to time under the Code and the regulations
promulgated thereunder, each Holder of a Class R
Certificate hereby irrevocably appoints and
authorizes the Trustee to be its attorney-in-fact
for purposes of signing any Tax Returns required to
be filed on behalf of the Trust Fund. The Trustee
shall sign on behalf of the Trust Fund and deliver
to the Certificate Administrator in a timely manner
any Tax Returns prepared by or on behalf of the
Certificate Administrator that the Trustee is
required to sign as determined by the Certificate
Administrator pursuant to applicable federal, state
or local tax laws, provided that the Certificate
Administrator shall indemnify the Trustee for
signing any such Tax Returns that contain errors or
omissions.
(b) Following the issuance of the
Certificates, the Trustee shall not accept any
contribution of assets to the Trust Fund unless it shall
have obtained or been furnished with an Opinion of
Counsel to the effect that such contribution will not (i)
cause the REMIC to fail to qualify as a REMIC at any time
that any Certificates are outstanding or (ii) cause the
Trust Fund to be subject to any tax as a result of such
contribution (including the imposition of any tax on
"prohibited transactions" of the Trust Fund imposed under
Section 860F(a) of the Code).
Section 8.03. Trustee Not Liable for Certificates
or Underlying Agency Securities.
The recitals contained herein and in the
Certificates (other than the execution of the
Certificates and relating to the acceptance and receipt
of the Underlying Agency Securities) shall be taken as
the statements of the Company or the Certificate
Administrator, as the case may be, and the Trustee
assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or
sufficiency of this Agreement or of the Certificates
(except that the Certificates shall be duly and validly
executed and authenticated by it as Certificate
Registrar) or of the Underlying Agency Securities or any
related document. Except as otherwise provided herein,
the Trustee shall not be accountable for the use or
application by the Company or the Certificate
Administrator of any of the Certificates or of the
proceeds of such Certificates, or for the use or
application of any funds paid to the Company or the
Certificate Administrator in respect of the Underlying
Agency Securities deposited in or withdrawn from the
Certificate Account by the Company or the Certificate
Administrator.
Section 8.04. Trustee May Own Certificates.
The Trustee in its individual or any other
capacity may become the owner or pledgee of Certificates
with the same rights it would have if it were not
Trustee.
Section 8.05. Certificate Administrator to Pay
Trustee's Fees and Expenses;
Indemnification.
(a) The Certificate Administrator covenants
and agrees to pay to the Trustee and any co-trustee from
time to time, and the Trustee and any co-trustee shall be
entitled to, reasonable compensation (which shall not be
limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all
services rendered by each of them 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 co-trustee, and the Certificate Administrator
will pay or reimburse the Trustee and any co-trustee upon
request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee or any
co-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, and the expenses
incurred by the Trustee or any co-trustee in connection
with the appointment of an office or agency pursuant to
Section 8.11) except any such expense, disbursement or
advance as may arise from its negligence or bad faith.
(b) The Certificate Administrator agrees to
indemnify the Trustee for, and to hold the Trustee
harmless against, any loss, liability or expense incurred
without negligence or willful misconduct on its part,
arising out of, or in connection with, the acceptance and
administration of the Trust Fund, including the costs and
expenses (including reasonable legal fees and expenses)
of defending itself against any claim in connection with
the exercise or performance of any of its powers or
duties under this Agreement, provided that:
(i) with respect to any such claim, the
Trustee shall have given the Certificate
Administrator written notice thereof promptly after
the Trustee shall have actual knowledge thereof;
(ii) while maintaining control over its own
defense, the Trustee shall cooperate and consult
fully with the Certificate Administrator in
preparing such defense; and
(iii) notwithstanding anything in this Agreement
to the contrary, the Certificate Administrator
shall not be liable for settlement of any claim by
the Trustee entered into without the prior consent
of the Certificate Administrator which consent
shall not be unreasonably withheld.
No termination of this Agreement shall affect the
obligations created by this Section 8.05(b) of the
Certificate Administrator to indemnify the Trustee under
the conditions and to the extent set forth herein.
Notwithstanding the foregoing, the
indemnification provided by the Certificate Administrator
in this Section 8.05(b) shall not pertain to any loss,
liability or expense of the Trustee, including the costs
and expenses of defending itself against any claim,
incurred in connection with any actions taken by the
Trustee at the direction of Certificateholders pursuant
to the terms of this Agreement.
(c) Notwithstanding Section 8.05(b) above, the
Certificate Administrator shall not indemnify the Trustee
for any loss, liability or expense, including the costs
and expenses of defending itself against any claim,
incurred in connection with the Trustee's establishment,
maintenance or management of the Certificate Account;
provided, however, that the foregoing shall not limit the
Certificate Administrator's obligation to made deposits
into the Certificate Account to cover losses incurred in
respect of Permitted Investments pursuant to Section
4.04.
Section 8.06. Eligibility Requirements for
Trustee.
The Trustee hereunder shall at all times be a
corporation or a national banking association having its
principal office in a state and city acceptable to the
Company and organized and doing business under the laws
of such state or the United States of America, authorized
under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by
federal or state authority. If such corporation or
national banking association publishes reports of
condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section 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 8.07.
Section 8.07. Resignation and Removal of the
Trustee.
(a) The Trustee may at any time resign and be
discharged from the trusts hereby created by giving
written notice thereof to the Company. Upon receiving
such notice of resignation, the Company shall promptly
appoint a successor trustee by written instrument, in
duplicate, one copy of which instrument shall be
delivered to the resigning Trustee and one copy each to
the successor trustee. If no successor trustee shall
have been so appointed and have accepted appointment
within 30 days after the giving of such notice of
resignation, then the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a
successor trustee.
(b) If at any time the Trustee shall cease to
be eligible in accordance with the provisions of Section
8.06 and shall fail to resign after written request
therefor by the Company, or if at any time the Trustee
shall become incapable of acting, or shall be adjudged
bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed, or any public officer
shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Company may remove
the Trustee and appoint a successor trustee by written
instrument, in duplicate, one copy of which instrument
shall be delivered to the Trustee so removed and one copy
to the successor trustee.
(c) The Holders of Certificates evidencing at
least 51% of the Voting Rights may at any time remove the
Trustee and appoint a successor trustee by written
instrument or instruments, in triplicate, signed by such
Holders or their attorneys-in-fact duly authorized, one
complete set of which instruments shall be delivered to
the Company, one complete set to the Trustee so removed
and one complete set to the successor so appointed.
(d) Any resignation or removal of the Trustee
and appointment of a successor trustee pursuant to any of
the provisions of this Section shall become effective
upon acceptance of appointment by the successor trustee
as provided in Section 8.08.
Section 8.08. Successor Trustee.
(a) Any successor trustee appointed as
provided in Section 8.07 shall execute, acknowledge and
deliver to the Company and to its predecessor trustee an
instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor
trustee shall become effective and such successor
trustee, without any further act, deed or conveyance,
shall become fully vested with all the rights, powers,
duties and obligations of its predecessor hereunder, with
the like effect as if originally named as trustee herein.
The predecessor trustee shall deliver to the successor
trustee all Underlying Agency Securities and related
documents and statements held by it hereunder, and the
Company, the Certificate Administrator and the
predecessor trustee shall execute and deliver such
instruments and do such other things as may reasonably be
required for more fully and certainly vesting and
confirming in the successor trustee all such rights,
powers, duties and obligations.
(b) No successor trustee shall accept
appointment as provided in this Section unless at the
time of such acceptance such successor trustee shall be
eligible under the provisions of Section 8.06.
(c) Upon acceptance of appointment by a
successor trustee as provided in this Section, the
Company shall mail notice of the succession of such
trustee hereunder to all Holders of Certificates at their
addresses as shown in the Certificate Register. If the
Company 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 Company.
Section 8.09. Merger or Consolidation of Trustee.
Any corporation or national banking association
into which the Trustee may be merged or converted or with
which it may be consolidated or any corporation or
national banking association resulting from any merger,
conversion or consolidation to which the Trustee shall be
a party, or any corporation or national banking
association succeeding to all or substantially all of the
corporation trust business of the Trustee, shall be the
successor of the Trustee hereunder, provided such
corporation or national banking association shall be
eligible under the provisions of Section 8.06, without
the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein
to the contrary notwithstanding. The Trustee shall mail
notice of any such merger or consolidation to the
Certificateholders at their address as shown in the
Certificate Register.
Section 8.10. Appointment of Co-Trustee or
Separate Trustee.
(a) Notwithstanding any other provisions
hereof, at any time, for the purpose of meeting any legal
requirements of any jurisdiction in which any part of the
Trust Fund or property securing the same may at the time
be located, the Certificate Administrator and the Trustee
acting jointly shall have the power and shall execute and
deliver all instruments to appoint one or more Persons
approved by the Trustee to act as co-trustee or
co-trustees, jointly with the Trustee, or separate
trustee or separate trustees, of all or any part of the
Trust Fund, and to vest in such Person or Persons, in
such capacity, such title to the Trust Fund, or any part
thereof, and, subject to the other provisions of this
Section 8.10, such powers, duties, obligations, rights
and trusts as the Certificate Administrator and the
Trustee may consider necessary or desirable. If the
Certificate Administrator shall not have joined in such
appointment within 15 days after the receipt by it of a
request so to do, or in case an Event of Default shall
have occurred and be continuing, the Trustee alone shall
have the power to make such appointment. No co-trustee
or separate trustee hereunder shall be required to meet
the terms of eligibility as a successor trustee under
Section 8.06 hereunder and no notice to Holders of
Certificates of the appointment of co-trustee(s) or
separate trustee(s) shall be required under Section 8.08
hereof.
(b) In the case of any appointment of a
co-trustee or separate trustee pursuant to this Section
8.10 all rights, powers, duties and obligations conferred
or imposed upon the Trustee shall be conferred or imposed
upon and exercised or performed by the Trustee, and such
separate trustee or co-trustee jointly, except to the
extent that under any law of any jurisdiction in which
any particular act or acts are to be performed (whether
as Trustee hereunder or as successor to the Certificate
Administrator hereunder), the Trustee shall be
incompetent or unqualified to perform such act or acts,
in which event such rights, powers, duties and
obligations (including the holding of title to the Trust
Fund or any portion thereof in any such jurisdiction)
shall be exercised and performed by such separate trustee
or co-trustee at the direction of the Trustee.
(c) Any notice, request or other writing given
to the Trustee shall be deemed to have been given to each
of the then separate trustees and co-trustees, as
effectively as if given to each of them. Every
instrument appointing any separate trustee or co-trustee
shall refer to this Agreement and the conditions of this
Article VIII. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested
with the estates or property specified in its instrument
of appointment, either jointly with the Trustee or
separately, as may be provided therein, subject to all
the provisions of this Agreement, specifically including
every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed
with the Trustee.
(d) Any separate trustee or co-trustee may, at
any time, constitute the Trustee, its agent or
attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under
or in respect of this Agreement on its behalf and in its
name. If any separate trustee or co-trustee shall die,
become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts
shall vest in and be exercised by the Trustee, to the
extent permitted by law, without the appointment of a new
or successor trustee.
Section 8.11. Appointment of Office or Agency.
The Trustee will maintain an office or agency
in the City of New York where Certificates may be
surrendered for registration of transfer or exchange.
The Trustee initially designates [_____________________],
which is located at [______________________________] for
the purpose of keeping the Certificate Register. The
Trustee will maintain an office at the address stated in
Section 11.05(c) hereof where notices and demands to or
upon the Trustee in respect of this Agreement may be
served.
ARTICLE IX
TERMINATION
Section 9.01. Termination.
(a) Subject to Section 9.02, the respective
obligations and responsibilities of the Certificate
Administrator, the Company and the Trustee created hereby
with respect to the Certificates (other than the
obligation to make certain payments and to send certain
notices to Certificateholders as hereinafter set forth)
shall terminate immediately upon payment to the
Certificateholders of all amounts held by or on behalf of
the Trustee and required to be paid to them hereunder
following the earlier to occur of (i) the repurchase by
the Certificate Administrator or the Company of all of
the Underlying Agency Securities and other assets
remaining in the Trust Fund at a price equal to 100% of
the then outstanding Certificate Principal Balance of
each of the Class [A-1], Class [A-2], Class [A-3] and
Class R Certificates on the day of repurchase together
with accrued interest thereon on such then outstanding
Certificate Principal Balance and on the Class [S]
Certificates at the then applicable Notional Amount at
the related Pass-Through Rate to the first day of the
month in which the proceeds of such repurchase are to be
distributed, and (ii) the last action required to be
taken by the Trustee on the Termination Date pursuant to
this Article IX following receipt of the final
distribution to be made on the last remaining Underlying
Agency Security in the Trust Fund upon presentation and
surrender of such Underlying Agency Security in
accordance with the terms and conditions thereof;
provided, however, that in no event shall the trust
created hereby continue beyond the expiration of
twenty-one years from the death of the survivor of the
descendants of Joseph P. Kennedy, the late ambassador of
the United States to the United Kingdom, living on the
date hereof.
The right of the Certificate Administrator or
the Company to repurchase all of the Underlying Agency
Securities pursuant to (i) above shall be conditioned
upon the aggregate of the Underlying Certificate Balances
of such Underlying Agency Securities at the time of any
such repurchase aggregating an amount equal to or less
than [__]% of the aggregate of the Underlying Certificate
Balances of the Underlying Agency Securities at the
Closing Date.
(b) The Certificate Administrator shall give
the Trustee and the Rating Agency notice (a "Notice of
Termination") as soon as practicable of the Distribution
Date on which the Certificate Administrator anticipates
that the final distribution will be made to the
Certificateholders. Notice of any termination of the
Trust Fund pursuant to this Section 9.01 shall be mailed
by the Trustee to affected Certificateholders at their
addresses shown in the Certificate Register as soon as
practicable after the Trustee shall have received a
Notice of Termination but in any event, not more than
thirty days, and not less than ten days, prior to the
Anticipated Termination Date. The notice mailed by the
Trustee to affected Certificateholders shall:
(A) specify the Anticipated Termination Date
on which the final distribution is anticipated to
be made to Holders of the Certificates;
(B) specify the amount of any such final
distribution, if known; and
(C) state that the final distribution to
Certificateholders will be made only upon
presentation and surrender of Certificates at the
office of the Trustee therein specified.
If the Trust Fund is not terminated on the Anticipated
Termination Date for any reason, the Trustee shall
promptly mail notice thereof to each affected
Certificateholder.
(c) Upon presentation and surrender of the
Certificates by the Certificateholders on the Termination
Date, the Trustee shall distribute to the
Certificateholders the amounts otherwise distributable on
such Distribution Date pursuant to Section 4.01(a). Any
funds not distributed on the Termination Date because of
the failure of any Certificateholders to tender their
Certificates shall be set aside and held in trust for the
account of the appropriate non-tendering
Certificateholders, whereupon the Trust Fund shall
terminate. If any Certificates as to which notice of the
Termination Date has been given pursuant to this Section
9.01 shall not have been surrendered for cancellation
within six months after the time specified in such
notice, the Trustee shall mail a second notice to the
remaining Certificateholders, at their last addresses
shown in the Certificate Register, to surrender their
Certificates for cancellation in order to receive, from
such funds held, the final distribution with respect
thereto. If within one year after the second notice any
Certificate shall not have been surrendered for
cancellation, the Trustee shall so notify the Certificate
Administrator who shall upon receipt of such notice,
directly or through an agent, take reasonable steps to
contact the remaining Certificateholders concerning
surrender of their Certificates. The costs and expenses
of maintaining such funds and of contacting
Certificateholders shall be paid out of the assets which
remain held. If within two years after the second notice
any Certificates shall not have been surrendered for
cancellation, the Trustee shall pay to the Certificate
Administrator all amounts distributable to the Holders
thereof and the Certificate Administrator shall
thereafter hold such amounts for the benefit of such
Holders. No interest shall accrue or be payable to any
Certificateholder on any amount held as a result of such
Certificateholder's failure to surrender its
Certificate(s) for final payment thereof in accordance
with this Section 9.01.
Section 9.02. Additional Termination
Requirements.
(a) The Trust Fund shall be terminated in
accordance with the following additional requirements,
unless the Trustee and the Certificate Administrator have
received an Opinion of Counsel to the effect that the
failure of the Trust Fund to comply with the requirements
of this Section 9.02 will not (i) result in the
imposition on the Trust Fund of taxes on "prohibited
transactions", as described in Section 860F of the Code,
or (ii) cause the Trust Fund to fail to qualify as a
REMIC at any time that any Certificate is outstanding.
(i) The Certificate Administrator shall
establish a 90-day liquidation period for the Trust
Fund and specify the first day of such period in a
statement attached to the Trust Fund's final Tax
Return pursuant to Treasury regulations Section
1.860F-1. The Certificate Administrator also shall
satisfy all of the requirements of a qualified
liquidation for the Trust Fund under Section 860F
of the Code and the regulations thereunder;
(ii) The Certificate Administrator shall notify
the Trustee at the commencement of such 90-day
liquidation period and, at or prior to the time of
making of the final payment on the Certificates,
the Trustee shall sell or otherwise dispose of all
of the remaining assets of the Trust Fund in
accordance with the terms hereof; and
(iii) After making the final payment on the
Certificates, the Certificate Administrator shall
distribute or credit, or cause to be distributed or
credited, to the Holders of the Class R
Certificates all cash remaining in the Certificate
Account (other than cash retained to meet claims),
and the Trust Fund shall terminate at that time.
(b) Each Holder of a Certificate hereby
irrevocably approves and appoints the Certificate
Administrator as its attorney-in-fact for the purposes of
adoption of the plan of complete liquidation and
obtaining the signature of the Trustee in accordance with
the terms and conditions of this Agreement.
<PAGE>
ARTICLE X
REMIC PROVISIONS
Section 10.01. REMIC Administration.
(a) The Certificate Administrator shall make
an election to treat the Trust Fund as a REMIC under the
Code and, if necessary, under applicable state law. Such
election will be made on Form 1066 or other appropriate
federal tax or information return (including Form 8811)
or any appropriate state return for the taxable year
ending on the last day of the calendar year in which the
Certificates are issued. For the purposes of the REMIC
election in respect of the Trust Fund, the Certificates
(other than the Class R Certificates) shall be designated
as the "regular interests" and the Class R Certificates
shall be designated as the sole class of "residual
interest" in the Trust Fund. The Certificate
Administrator and the Trustee shall not permit the
creation of any "interests" (within the meaning of
Section 860G of the Code) in the Trust Fund other than
the Trust Fund regular interests and the interests
represented by the Certificates, respectively.
(b) The Closing Date is hereby designated as
the "Startup Day" of the Trust Fund within the meaning of
Section 860G(a)(9) of the Code.
(c) [[The Certificate Administrator] shall
hold a Class R Certificate representing a 0.01%
Percentage Interest of all Class R Certificates and shall
be designated as the tax matters person of the Trust Fund
in the manner provided under Treasury regulations section
1.860F-4(d) and temporary Treasury regulations section
301.6231(a)(7)-1T.] [the Certificate Administrator] as
tax matters person, shall (i) act on behalf of the Trust
Fund in relation to any tax matter or controversy
involving the Trust Fund and (ii) represent the Trust
Fund in any administrative or judicial proceeding
relating to an examination or audit by any governmental
taxing authority with respect thereto. The legal
expenses, including without limitation attorneys' or
accountants' fees, and costs of any such proceeding and
any liability resulting therefrom shall be expenses of
the Trust Fund and [the Certificate Administrator] shall
be entitled to reimbursement therefor out of amounts
attributable to the Mortgage Loans on deposit in the
Certificate Account as provided by Section 3.04 unless
such legal expenses and costs are incurred by reason of
[the Certificate Administrator's] willful misfeasance,
bad faith or gross negligence. If [the Certificate
Administrator] is no longer the Certificate Administrator
hereunder [the Certificate Administrator] shall be paid
reasonable compensation by any successor Certificate
Administrator hereto for so acting as "tax matters
person."]
(d) The Certificate Administrator shall
prepare or cause to be prepared all of the Tax Returns
that it determines are required with respect to the Trust
Fund created hereunder and deliver such Tax Returns in a
timely manner to the Trustee and the Trustee shall sign
and file such Tax Returns in a timely manner. The
expenses of preparing such returns shall be borne by the
Certificate Administrator without any right of
reimbursement therefor. The Certificate Administrator
agrees to indemnify and hold harmless the Trustee with
respect to any tax or liability arising from the
Trustee's signing of Tax Returns that contain errors or
omissions.
(e) The Certificate Administrator shall
provide (i) to any transferor of a Class R Certificate
such information as is necessary for the application of
any tax relating to the transfer of a Class R Certificate
to any Person who is not a Permitted Transferee, (ii) to
the Trustee and the Trustee shall forward to the
Certificateholders such information or reports as are
required by the Code or the REMIC Provisions including
reports relating to interest, original issue discount and
market discount or premium (using the Prepayment
Assumption) and (iii) to the Internal Revenue Service the
name, title, address and telephone number of the person
who will serve as the representative of the Trust Fund.
(f) The Certificate Administrator shall take
such actions and shall cause the Trust Fund created
hereunder to take such actions as are reasonably within
the Certificate Administrator's control and the scope of
its duties more specifically set forth herein as shall be
necessary to maintain the status thereof as a REMIC under
the REMIC Provisions (and the Trustee shall assist the
Certificate Administrator, to the extent reasonably
requested by the Certificate Administrator to do so).
The Certificate Administrator shall not knowingly or
intentionally take any action, cause the Trust Fund to
take any action or fail to take (or fail to cause to be
taken) any action reasonably within its control and the
scope of duties more specifically set forth herein, that,
under the REMIC Provisions, if taken or not taken, as the
case may be, could (i) endanger the status of the Trust
Fund as a REMIC or (ii) result in the imposition of a tax
upon the Trust Fund (including but not limited to the tax
on prohibited transactions as defined in Section
860F(a)(2) of the Code and the tax on contributions to a
REMIC set forth in Section 860G(d) of the Code) (either
such event, an "Adverse REMIC Event") unless the
Certificate Administrator has received an Opinion of
Counsel (at the expense of the party seeking to take such
action or, if such party fails to pay such expense, and
the Certificate Administrator determines that taking such
action is in the best interest of the Trust Fund and the
Certificateholders, at the expense of the Trust Fund, but
in no event at the expense of the Certificate
Administrator or the Trustee) to the effect that the
contemplated action will not, with respect to the Trust
Fund created hereunder, endanger such status or, unless
the Certificate Administrator determines in its sole
discretion to indemnify the Trust Fund against such tax,
result in the imposition of such a tax. The Trustee
shall not take or fail to take any action (whether or not
authorized hereunder) as to which the Certificate
Administrator has advised it in writing that it has
received an Opinion of Counsel to the effect that an
Adverse REMIC Event could occur with respect to such
action. In addition, prior to taking any action with
respect to the Trust Fund or its assets, or causing the
Trust Fund to take any action, which is not expressly
permitted under the terms of this Agreement, the Trustee
will consult with the Certificate Administrator or its
designee, in writing, with respect to whether such action
could cause an Adverse REMIC Event to occur with respect
to the Trust Fund, and the Trustee shall not take any
such action or cause the Trust Fund to take any such
action as to which the Certificate Administrator has
advised it in writing that an Adverse REMIC Event could
occur. The Certificate Administrator may consult with
counsel to make such written advice, and the cost of same
shall be borne by the party seeking to take the action
not expressly permitted by this Agreement, but in no
event at the expense of the Certificate Administrator.
At all times as may be required by the Code, the
Certificate Administrator will, to the extent within its
control and the scope of its duties more specifically set
forth herein, maintain substantially all of the assets of
the Trust Fund as "qualified mortgages" as defined in
Section 860G(a)(3) of the Code and "permitted
investments" as defined in Section 860G(a)(5) of the
Code.
(g) In the event that any tax is imposed on
"prohibited transactions" of the Trust Fund created
hereunder as defined in Section 860F(a)(2) of the Code,
on "net income from foreclosure property" of the Trust
Fund as defined in Section 860G(c) of the Code, on any
contributions to the Trust Fund after the Startup Day
therefor pursuant to Section 860G(d) of the Code, or any
other tax is imposed by the Code or any applicable
provisions of state or local tax laws, such tax shall be
charged (i) to the Certificate Administrator, if such tax
arises out of or results from a breach by the Certificate
Administrator of any of its obligations under this
Agreement or the Certificate Administrator has in its
sole discretion determined to indemnify the Trust Fund
against such tax; (ii) to the Trustee, if such tax arises
out of or results from a breach by the Trustee of any of
its obligations under this Agreement; or otherwise (iii)
against amounts on deposit in the Certificate Account as
provided by Section 3.04 and on the Distribution Date(s)
following such reimbursement the aggregate of such taxes
shall be allocated in reduction of the Accrued
Certificate Interest on each Class entitled thereto in
the same manner as if such taxes constituted a Prepayment
Interest Shortfall.
(h) The Trustee and the Certificate
Administrator shall, for federal income tax purposes,
maintain books and records with respect to the Trust Fund
on a calendar year and on an accrual basis or as
otherwise may be required by the REMIC Provisions.
(i) Following the Startup Day, neither the
Certificate Administrator nor the Trustee shall accept
any contributions of assets to the Trust Fund unless the
Certificate Administrator and the Trustee shall have
received an Opinion of Counsel (at the expense of the
party seeking to make such contribution) to the effect
that the inclusion of such assets in the Trust Fund will
not cause the Trust Fund to fail to qualify as a REMIC at
any time that any Certificates are outstanding or subject
the Trust Fund to any tax under the REMIC Provisions or
other applicable provisions of federal, state and local
law or ordinances.
(j) Neither the Certificate Administrator nor
the Trustee shall enter into any arrangement by which the
Trust Fund will receive a fee or other compensation for
services nor permit either such REMIC to receive any
income from assets other than "qualified mortgages" as
defined in Section 860G(a)(3) of the Code or "permitted
investments" as defined in Section 860G(a)(5) of the
Code.
(k) Solely for the purposes of Section 1.860G-
1(a)(4)(iii) of the Treasury regulations, the "latest
possible maturity date" by which the Certificate
Principal Balance of each Class of Certificates
representing a regular interest in the Trust Fund would
be reduced to zero is [__________ __, 20__] which is the
Distribution Date immediately following the latest
scheduled maturity of any Mortgage Loan.
(l) Within 30 days after the Closing Date, the
Certificate Administrator shall prepare and file with the
Internal Revenue Service Form 8811, "Information Return
for Real Estate Mortgage Investment Conduits (REMIC) and
Issuers of Collateralized Debt Obligations" for the Trust
Fund.
(m) Neither the Trustee nor the Certificate
Administrator shall sell, dispose of or substitute for
any of the Mortgage Loans (except in connection with (i)
the default, imminent default or foreclosure of a
Mortgage Loan, including but not limited to, the
acquisition or sale of a Mortgaged Property acquired by
deed in lieu of foreclosure, (ii) the bankruptcy of the
Trust Fund, (iii) the termination of the Trust Fund
pursuant to Article IX of this Agreement or (iv) a
purchase of Mortgage Loans pursuant to Article II or III
of this Agreement) nor acquire any assets for the Trust
Fund, nor sell or dispose of any investments in the
Custodial Account or the Certificate Account for gain,
nor accept any contributions to the Trust Fund after the
Closing Date unless it has received an Opinion of Counsel
that such sale, disposition, substitution or acquisition
will not (a) affect adversely the status of the Trust
Fund as a REMIC or (b) unless the Certificate
Administrator has determined in its sole discretion to
indemnify the Trust Fund against such tax, cause the
Trust Fund to be subject to a tax on "prohibited
transactions" or "contributions" pursuant to the REMIC
Provisions.
Section 10.02. Certificate Administrator and
Trustee Indemnification.
(a) The Trustee agrees to indemnify the Trust
Fund, the Company and the Certificate Administrator for
any taxes and costs including, without limitation, any
reasonable attorneys fees imposed on or incurred by the
Trust Fund, the Company or the Certificate Administrator,
as a result of a breach of the Trustee's covenants set
forth in Article VIII or this Article X.
(b) The Certificate Administrator agrees to
indemnify the Trust Fund, the Company and the Trustee for
any taxes and costs (including, without limitation, any
reasonable attorneys' fees) imposed on or incurred by the
Trust Fund, the Company or the Trustee, as a result of a
breach of the Certificate Administrator's covenants set
forth in this Article X or in Article III with respect to
compliance with the REMIC Provisions, including without
limitation, any penalties arising from the Trustee's
execution of Tax Returns prepared by the Certificate
Administrator that contain errors or omissions.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. Amendment.
(a) This Agreement may be amended from time to
time by the Company, the Certificate Administrator and
the Trustee, without the consent of any of the
Certificateholders:
(i) to cure any ambiguity;
(ii) to correct or supplement any provisions
herein or therein, which may be inconsistent with
any other provisions herein;
(iii) to modify, eliminate or add to any of its
provisions to such extent as shall be necessary to
maintain the qualification of the Trust Fund as a
REMIC at all times that any Certificate is
outstanding or to avoid or minimize the risk of the
imposition of any tax on the Trust Fund pursuant to
the Code that would be a claim against the Trust
Fund, provided that the Trustee has received an
Opinion of Counsel to the effect that (A) such
action is necessary or desirable to maintain such
qualification or to avoid or minimize the risk of
the imposition of any such tax and (B) such action
will not adversely affect in any material respect
the interests of any Certificateholder;
(iv) to change the timing and/or nature of
deposits into the Certificate Account, provided
that (A) such change shall not, as evidenced by an
Opinion of Counsel, adversely affect in any
material respect the interests of any
Certificateholder and (B) such change shall not
adversely affect the then-current rating of the
Certificates, as evidenced by a letter from the
Rating Agency then rating the Certificates to such
effect;
(v) to modify, eliminate or add to the
provisions of Section 5.02(d) or any other
provision hereof restricting transfer of the Class
R Certificates by virtue of their being the REMIC
"residual interest", provided that (A) such change
shall not adversely affect the then-current ratings
of the Certificates, as evidenced by a letter from
the Rating Agency to such effect, and (B) such
change shall not, as evidenced by an Opinion of
Counsel, cause either the Trust Fund or any of the
Certificateholders (other than the transferor) to
be subject to a tax caused by a transfer to a
non-Permitted Transferee; and
(vi) to make any other provisions with respect
to matters or questions arising under this
Agreement which shall not be materially
inconsistent with the provisions of this Agreement,
provided that such action shall not, as evidenced
by an Opinion of Counsel, adversely affect in any
material respect the interests of any
Certificateholder.
(b) This Agreement may also be amended from
time to time by the Company, the Certificate
Administrator and the Trustee with the consent of the
Holders of Certificates evidencing in the aggregate not
less than 66% of the Percentage Interests of each Class
of Certificates affected thereby for the purpose of
adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Holders of
Certificates of such Class; provided, however, that no
such amendment shall:
(i) reduce in any manner the amount of, or
delay the timing of, payments which are required to
be distributed on any Certificate without the
consent of the Holder of such Certificate,
(ii) reduce the aforesaid percentage of
Certificates of any Class the Holders of which are
required to consent to any such amendment, in any
such case without the consent of the Holders of all
Certificates of such Class then outstanding, or
(iii) adversely affect in any material respect
the interests of the Holders of Certificates of any
Class in a manner other than as described in clause
(i) hereof without the consent of Holders of
Certificates of such Class evidencing, as to such
Class, Percentage Interests aggregating not less
than 66%.
(c) Notwithstanding any contrary provision of
this Agreement, the Trustee shall not consent to any
amendment to this Agreement unless it shall have first
received an Opinion of Counsel to the effect that (1)
such amendment or the exercise of any power granted to
the Certificate Administrator, the Company or the Trustee
in accordance with such amendment will not result in the
imposition of a tax on the Trust Fund or cause the Trust
Fund to fail to qualify as a REMIC at any time that any
Certificate is outstanding and (2) such amendment, if
made pursuant to any provision of Section 11.01(a), is
permitted under such provision.
(d) Promptly after the execution of any such
amendment the Trustee shall furnish written notification
of the substance of such amendment to each
Certificateholder. It shall not be necessary for the
consent of Certificateholders under this Section 11.01 to
approve the particular form of any proposed amendment,
but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such
consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject
to such reasonable regulations as the Trustee may
prescribe.
Section 11.02. Counterparts.
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.
(a) The death or incapacity of any
Certificateholder shall not operate to terminate this
Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or heirs to
claim an accounting or to take any action or proceeding
in any court for a partition or winding up of the Trust
Fund, nor otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them.
(b) No Certificateholder shall have any right
to vote (except as expressly provided for herein) or in
any manner otherwise control the operation and management
of the Trust Fund, or the obligations of the parties
hereto, nor shall anything herein set forth, or contained
in the terms of the Certificates, be construed so as to
constitute the Certificateholders from time to time as
partners or members of an association; nor shall any
Certificateholder be under any liability to any third
party by reason of any action taken by the parties to
this Agreement pursuant to any provision hereof.
(c) No Certificateholder shall have any right
by virtue of any provision of this Agreement to institute
any suit, action or proceeding in equity or at law upon
or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a
notice of a default by the Company, the Certificate
Administrator or the Trustee in the performance of any
obligation hereunder, and of the continuance thereof, as
herein- before provided, and unless also the Holders of
Certificates of any Class evidencing at least 33% of the
Voting Rights of such Class, shall have made written
request upon the Trustee to institute such action, suit
or proceeding in its own name as Trustee hereunder 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. 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 AND THE CERTIFICATES SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
Section 11.05. Notices.
All demands and notices hereunder shall be in
writing and shall be deemed to have been duly given if
personally delivered at or mailed by registered mail,
postage prepaid (except for notices to the Trustee which
shall be deemed to have been duly given only when
received), to (a) in the case of the Company, Asset
Securities Corporation, [_____________________________],
Attention: [_________], or such other address as may
hereafter be furnished to the Certificate Administrator
and the Trustee in writing by the Company, (b) in the
case of the Certificate Administrator,
[___________________________], Attention: [__________],
or such other address as may be hereafter furnished to
the Company and the Trustee by the Certificate
Administrator in writing, (c) in the case of the Trustee,
[____________________], Attention: Residential Asset
Securities Corporation, Series [199_-__], with a copy to
[_____________________], Attention: Residential Asset
Securities Corporation, Series [199-__], or such other
address as may hereafter be furnished to the Company and
the Certificate Administrator in writing by the Trustee,
and (d) in the case of [name of rating agency],
[__________________], or such other address as may
hereafter be furnished to the Company, the Trustee and
the Certificate Administrator in writing by [name of
rating agency]. Any notice required or permitted to be
mailed to a Certificateholder shall be given by
first-class mail, postage prepaid, at the address of such
holder as shown in the Certificate Register and shall be
conclusively presumed to have been duly given when
mailed.
Section 11.06. Notices to Rating Agency.
The Company, the Certificate Administrator or
the Trustee, as applicable, shall notify the Rating
Agency at such time as it is otherwise required pursuant
to this Agreement to give notice of the occurrence of any
of the events described in clauses (a), (b), (c), (f) or
(g) below or provide a copy to the Rating Agency at such
time as otherwise required to be delivered pursuant to
this Agreement of any of the statements described in
clauses (d) and (e) below:
(a) a material change or amendment to this
Agreement;
(b) the occurrence of an Event of Default;
(c) the termination or appointment of a
successor Certificate Administrator or Trustee or a
change in the majority ownership of the Trustee;
(d) the statement required to be delivered to
the Holders of the Certificates pursuant to Section 4.02;
(e) the statements required to be delivered
pursuant to Section 3.05;
(f) a change in the location of the
Certificate Account;
(g) the occurrence of the Final Distribution
Date; and
(h) the repurchase of any Underlying Agency
Securities.
Section 11.07. Severability of Provisions.
If any one or more of the covenants,
agreements, provisions or terms of this Agreement shall
be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be
deemed severable from the remaining covenants,
agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of
the other provisions of this Agreement or of the
Certificates or the rights of the Holders thereof.
Section 11.08. Successors and Assigns.
The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective
successors and assigns of the parties hereto, and all
such provisions shall inure to the benefit of the
Certificateholders.
Section 11.09. Article and Section Headings.
The article and section headings herein are for
convenience of reference only, and shall not limit or
otherwise affect the meaning hereof.
IN WITNESS WHEREOF, the Company, the
Certificate Administrator and the Trustee have caused
their names to be signed hereto by their respective
officers thereunto duly authorized and their respective
seals, if required, duly attested, to be hereunto
affixed, all as of the day and year first above written.
RESIDENTIAL ASSET SECURITIES
CORPORATION
[Seal]
By: ___________________________
Name:
Title:
Attest: __________________________
Name:
Title:
[NAME OF CERTIFICATE ADMINISTRATOR]
as Certificate
Administrator
[Seal]
By: _________________________
Name:
Title:
Attest: __________________________
Name:
Title:
[NAME OF TRUSTEE],
as Trustee
By: _________________________
Name:
Title:
Attest: __________________________
Name:
Title:
<PAGE>
STATE OF [______________] )
ss:
COUNTY OF [____________] )
On the [____] day of [_______ __, 199_] before
me, a notary public in and for said State, personally
appeared [__________], known to me to be a [____________]
of Residential Asset Securities Corporation, one of the
corporations that executed the within instrument, and
also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that
such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand
and affixed my official seal the day and year in this
certificate first above written.
______________________________
Notary Public
[Notarial Seal]
<PAGE>
STATE OF [____________] )
ss:
COUNTY OF [___________] )
On the [____] day of [______ __, 199_] before
me, a notary public in and for said State, personally
appeared [_________], known to me to be an [____________]
of [Name of Trustee], a [_______________] that executed
the within instrument, and also known to me to be the
person who executed it on behalf of said
[__________________], and acknowledged to me that such
[______________] executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand
and affixed my official seal the day and year in this
certificate first above written.
_____________________________
Notary Public
[Notarial Seal]
<PAGE>
STATE OF [___________] )
ss:
COUNTY OF [___________] )
On the [__] day of [______ __, 199_] before me,
a notary public in and for said State, personally
appeared [__________] to me to be the [________________]
of [Name of Certificate Administrator], one of the
corporations that executed the within instrument, and
also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that
such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand
and affixed my official seal the day and year in this
certificate first above written.
______________________________
Notary Public
[Notarial Seal]
<PAGE>
EXHIBIT A-1
FORM OF CLASS [A-1][A-2][A-3][S] CERTIFICATE
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES,
THIS CERTIFICATE IS A "REGULAR INTEREST" IN A
"REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN
SECTIONS 860G AND 860D OF THE INTERNAL REVENUE
CODE OF 1986 (THE "CODE").
[NO TRANSFER OF THIS CERTIFICATE MAY BE MADE
TO AN EMPLOYEE BENEFIT PLAN SUBJECT TO THE
FIDUCIARY RESPONSIBILITY PROVISIONS OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED, OR SECTION 4975 OF THE CODE,
UNLESS THE TRANSFEREE PROVIDES AN OPINION OF
COUNSEL SATISFACTORY TO THE CERTIFICATE
ADMINISTRATOR, THE COMPANY AND THE TRUSTEE
THAT THE PURCHASE OF THIS CERTIFICATE BY, ON
BEHALF OF, OR WITH "PLAN ASSETS" OF SUCH PLAN
IS PERMISSIBLE UNDER APPLICABLE LAW, WILL NOT
CONSTITUTE OR RESULT IN A NON-EXEMPT
PROHIBITED TRANSACTION AND WILL NOT SUBJECT
THE CERTIFICATE ADMINISTRATOR, THE COMPANY OR
THE TRUSTEE TO ANY OBLIGATION IN ADDITION TO
THOSE UNDERTAKEN IN THE AGREEMENT (AS DEFINED
BELOW), PROVIDED THAT NO SUCH OPINION SHALL BE
REQUIRED UNDER THE CIRCUMSTANCES SET FORTH IN
THE AGREEMENT.]
[THE FOLLOWING INFORMATION IS PROVIDED SOLELY
FOR THE PURPOSES OF APPLYING THE U.S. FEDERAL
INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID")
RULES TO THIS CERTIFICATE. THE ISSUE DATE OF
THIS CERTIFICATE IS [__________ __, 199_].
ASSUMING THAT THE MORTGAGE LOANS PREPAY AT
[___]% OF THE STANDARD PREPAYMENT ASSUMPTION
(AS DESCRIBED IN THE PROSPECTUS SUPPLEMENT)
AND ASSUMING A CONSTANT PASS-THROUGH RATE
EQUAL TO THE INITIAL PASS-THROUGH RATE, THIS
CERTIFICATE HAS BEEN ISSUED WITH NO MORE THAN
$[__________] OF OID PER [$1,000/$100,000] OF
[PRINCIPAL/NOTIONAL] AMOUNT AND THE YIELD TO
MATURITY IS [____]%, COMPUTED UNDER THE
APPROXIMATE METHOD. THERE IS NO SHORT ACCRUAL
PERIOD WITH RESPECT TO THIS CERTIFICATE. NO
REPRESENTATION IS MADE THAT THE MORTGAGE LOANS
WILL PREPAY AT A RATE BASED ON THE STANDARD
PREPAYMENT ASSUMPTION OR AT ANY OTHER RATE OR
AS TO THE CONSTANCY OF THE PASS-THROUGH RATE.]
<PAGE>
Class [A-1][A-2][A-3][S] Certificate No. [_________]
Date of Trust Agreement: [___]% Pass-Through Rate
[__________ 1, 199_] [based on Notional Amount]
Reference Date:
[_________ 1, 199_]
First Distribution Date: [Aggregate Initial Certificate
[__________ __, 199_] Principal Balance of the
Class [A-1] [A-2][A-3]
Certificates as of the
Reference Date: $[____________]
Certificate Administrator: [Initial Certificate Principal
[ ] Balance of this Certificate:
$__________]
Assumed Termination Date:
[_________ _, 20__] [Percentage Interest: _________%]
CUSIP [ ]
MORTGAGE PASS-THROUGH CERTIFICATE, Series [199 - ]
evidencing a percentage interest in any distributions
allocable to the Class [A-1][A-2][A-3][S] Certificates with
respect to the Trust Fund consisting of the Underlying Agency
Securities formed and sold by Residential Asset Securities
Corporation.
This Certificate is payable solely from the assets of the
Trust Fund, and does not represent an obligation of or interest in
Residential Asset Securities Corporation, the Certificate
Administrator, the Trustee referred to below or GMAC Mortgage
Corporation or any of their affiliates. Although payment of
principal and interest on the Underlying Agency Securities is
guaranteed by [GNMA], this Certificate is not guaranteed or insured
by any governmental agency or instrumentality or by Residential
Asset Securities Corporation, the Certificate Administrator, the
Trustee or GMAC Mortgage Corporation or any of their affiliates.
This certifies that [ ] is the
registered owner of the Percentage Interest evidenced by this
Certificate ([obtained by dividing the Certificate Principal
Balance of this Certificate by the aggregate Certificate Principal
Balance of all Class [A-1][A-2][A-3] Certificates, both] as
specified above) in certain distributions with respect to a Trust
Fund consisting primarily of a pool of the Underlying Agency
Securities, formed and sold by Residential Asset Securities
Corporation (hereinafter called the "Company", which term includes
any successor entity under the Agreement referred to below). The
Trust Fund was created pursuant to a Trust Agreement dated as
specified above (the "Agreement") among the Company, the
Certificate Administrator and [___________________], as trustee
(the "Trustee"), a summary of certain of the pertinent provisions
of which is set forth hereafter. To the extent not defined herein,
the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the
terms, provisions and conditions of the Agreement, to which
Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution
will be made on the third Business Day following the Underlying
Security Distribution Date for the Underlying Agency Securities
(the "Distribution Date"), commencing on the first Distribution
Date specified above, to the Person in whose name this Certificate
is registered at the close of business on the last day (or if such
last day is not a Business Day, the Business Day immediately
preceding such last day) of the month next preceding the month of
the Underlying Security Distribution Date for the Underlying Agency
Securities (the "Record Date"), from the Available Funds in an
amount equal to the product of the Percentage Interest evidenced by
this Certificate and the amount required to be distributed to
Holders of Class [___] Certificates on such Distribution Date.
[The Notional Amount of the Class [S] Certificates as of any date
of determination is equal to the Aggregate Underlying Certificate
Balance. The Class [S] Certificates have no Certificate Principal
Balance.]
Distributions on this Certificate will be made either by
the Trustee or by a Paying Agent appointed by the Trustee in
immediately available funds (by wire transfer or otherwise) for the
account of the Person entitled thereto except as otherwise provided
in the Agreement if such Person shall have so notified the
Certificate Administrator or such Paying Agent, or by check mailed
to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate Register.
Notwithstanding the above, the final distribution on this
Certificate will be made after due notice of the pendency of such
distribution and only upon presentation and surrender of this
Certificate at the office or agency appointed by the Trustee for
that purpose in the City of New York. [The initial aggregate
Certificate Principal Balance of the Certificates is set forth
above. The Certificate Principal Balance hereof will be reduced to
the extent of the distributions allocable to principal.]
This Certificate is one of a duly authorized issue of
Certificates issued in several Classes designated as Mortgage
Pass-Through Certificates of the Series specified hereon (herein
collectively called the "Certificates"). The Certificates are
limited in right of payment to certain collections and recoveries
respecting the Underlying Agency Securities, all as more
specifically set forth herein and in the Agreement.
As provided in the Agreement, withdrawals from the
Certificate Account created for the benefit of Certificateholders
may be made by the Certificate Administrator from time to time for
purposes other than distributions to Certificateholders, such
purposes including without limitation reimbursement to the Company
and the Certificate Administrator of certain expenses incurred, by
either of them.
The Agreement permits, with certain exceptions therein
provided, the amendment of the Agreement and the modification of
the rights and obligations of the Company, the Certificate
Administrator and the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Company,
the Certificate Administrator and the Trustee with the consent of
the Holders of Certificates evidencing in the aggregate not less
than 66% of the Percentage Interests of each Class of Certificates
affected thereby. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such Holder and upon
all future holders of this Certificate and of any Certificate
issued upon the transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent is made upon the
Certificate. The Agreement also permits the amendment thereof in
certain circumstances without the consent of the Holders of any of
the Certificates and, in certain additional circumstances, without
the consent of the Holders of certain Classes of Certificates.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is
registrable in the Certificate Register upon surrender of this
Certificate for registration of transfer at the offices or agencies
appointed by the Trustee in the City and State of New York, duly
endorsed by, or accompanied by an assignment in the form below or
other written instrument of transfer in form satisfactory to the
Trustee and the Certificate Registrar duly executed by, the Holder
hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Certificates of authorized denominations
evidencing the same Class and aggregate Percentage Interest will be
issued to the designated transferee or transferees.
The Certificates are issuable only as registered
Certificates without coupons in Classes and in denominations
specified in the Agreement. As provided in the Agreement and
subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of authorized denominations
evidencing the same Class and aggregate Percentage Interest, as
requested by the Holder surrendering the same.
No service charge will be made for any such registration
of transfer or exchange, but the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
The Company, the Certificate Administrator, the Trustee
and the Certificate Registrar and any agent of the Company, the
Certificate Administrator, the Trustee or the Certificate Registrar
may treat the Person in whose name this Certificate is registered
as the owner hereof for all purposes, and neither the Company, the
Certificate Administrator, the Trustee nor any such agent shall be
affected by notice to the contrary.
THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
The obligations created by the Agreement in respect of
the Certificates and the Trust Fund created thereby shall terminate
upon the payment to Certificateholders of all amounts held by or on
behalf of the Trustee and required to be paid to them pursuant to
the Agreement following receipt of the final distribution to be
made on the last remaining Underlying Agency Security in the Trust
Fund upon presentation and surrender of such Underlying Agency
Security in accordance with the terms and conditions thereof.
IN WITNESS WHEREOF, the Trustee has caused this
Certificate to be duly executed.
Dated:
[NAME OF TRUSTEE],
as Trustee
By:__________________________
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Class [A-1][A-2][A-3][S] Certificates
referred to in the within-mentioned Agreement.
[Name of Certificate Registrar],
as Certificate Registrar
By:__________________________
Authorized Signatory
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s),
assign(s) and transfer(s) unto
(Please print or typewrite name and address including
postal zip code of assignee) the beneficial interest evidenced by
the within the Certificate and hereby authorizes the transfer of
registration of such interest to assignee on the Certificate
Register of the Trust Fund.
I (We) further direct the Certificate Registrar to issue
a new Certificate of a like denomination to the above named
assignee and deliver such Certificate to the following address:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Dated: _____________
________________________________
Signature by or on behalf of assignor
________________________________
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or
otherwise, in immediately available funds to _______________ for
the account of ______________ account number ____________, or, if
mailed by check, to ____________________.
Applicable statements should be mailed to: ________________.
This information is provided by _____________________,
the assignee named above, or _____________________, as its agent.
<PAGE>
EXHIBIT A-2
FORM OF CLASS R CERTIFICATE
THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON-UNITED STATES
PERSON OR A DISQUALIFIED ORGANIZATION (AS DEFINED BELOW).
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO AN EMPLOYEE BENEFIT
PLAN SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, OR SECTION 4975 OF
THE CODE, AS AMENDED, OR SECTION 4975 OF THE CODE, UNLESS THE
TRANSFEREE PROVIDES AN OPINION OF COUNSEL SATISFACTORY TO THE
CERTIFICATE ADMINISTRATOR, THE COMPANY AND THE TRUSTEE THAT THE
PURCHASE OF THIS CERTIFICATE BY, ON BEHALF OF, OR WITH "PLAN
ASSETS" OF SUCH PLAN IS PERMISSIBLE UNDER APPLICABLE LAW, WILL NOT
SUBJECT THE CERTIFICATE ADMINISTRATOR, THE COMPANY OR THE TRUSTEE
TO ANY OBLIGATION IN ADDITION TO THOSE UNDERTAKEN IN THE AGREEMENT
(AS DEFINED BELOW), PROVIDED THAT NO SUCH OPINION SHALL BE REQUIRED
UNDER THE CIRCUMSTANCES SET FORTH IN THE AGREEMENT.
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CLASS R
CERTIFICATE MAY BE MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES A
TRANSFER AFFIDAVIT TO THE CERTIFICATE ADMINISTRATOR AND THE TRUSTEE
THAT (1) SUCH TRANSFEREE IS NOT EITHER (A) THE UNITED STATES, ANY
STATE OR POLITICAL SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY
INTERNATIONAL ORGANIZATION, OR ANY AGENCY OR INSTRUMENTALITY OF ANY
OF THE FOREGOING, (B) ANY ORGANIZATION (OTHER THAN A COOPERATIVE
DESCRIBED IN SECTION 521 OF THE CODE) WHICH IS EXEMPT FROM THE TAX
IMPOSED BY CHAPTER 1 OF THE CODE UNLESS SUCH ORGANIZATION IS
SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE CODE, (C) ANY
ORGANIZATION DESCRIBED IN SECTION 1381(a)(2)(C) OF THE CODE, (ANY
SUCH PERSON DESCRIBED IN THE FOREGOING CLAUSES (A), (B) OR (C)
BEING HEREINAFTER REFERRED TO AS A "DISQUALIFIED ORGANIZATION") OR
(D) AN AGENT OF A DISQUALIFIED ORGANIZATION, (2) NO PURPOSE OF SUCH
TRANSFER IS TO IMPEDE THE ASSESSMENT OR COLLECTION OF TAX, AND (3)
SUCH TRANSFEREE SATISFIES CERTAIN ADDITIONAL CONDITIONS OF THE
PROPOSED TRANSFEREE. NOTWITHSTANDING THE REGISTRATION IN THE
CERTIFICATE REGISTER OR ANY TRANSFER, SALE OR OTHER DISPOSITION OF
THIS RESIDUAL CERTIFICATE TO A DISQUALIFIED ORGANIZATION OR AN
AGENT OF A DISQUALIFIED ORGANIZATION, SUCH REGISTRATION SHALL BE
DEEMED TO BE OF NO LEGAL FORCE OR EFFECT WHATSOEVER AND SUCH PERSON
SHALL NOT BE DEEMED TO BE A CERTIFICATEHOLDER FOR ANY PURPOSE
HEREUNDER, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF
DISTRIBUTIONS ON THIS CERTIFICATE. EACH HOLDER OF THIS CERTIFICATE
BY ACCEPTANCE OF THIS CERTIFICATE SHALL BE DEEMED TO HAVE CONSENTED
TO THE PROVISIONS OF THIS PARAGRAPH.
<PAGE>
Class R Certificate No. [________]
Date of Trust [_____]% Pass-Through Rate
Agreement:
[__________ 1, 199_]
Reference Date:
[__________ 1, 199_]
First Distribution Date: Aggregate Initial Certificate Principal
[__________ __, 199_] the Class R Certificates: $[_________]
Certificate Administrator: Initial Certificate Principal Balance of
[___________________] this Certificate: $[ ]
Assumed Termination Date: [ ]% Percentage Interest
[__________ __, 199_]
CUSIP [__________]
MORTGAGE PASS-THROUGH CERTIFICATE,
Series [199_-___]
evidencing a percentage interest in any distributions
allocable to the Class R Certificates with respect to the
Trust Fund consisting of a pool of Underlying Agency
Securities formed and sold by Residential Asset Securities
Corporation
This Certificate is payable solely from the assets of the
Trust Fund, and does not represent an obligation of or interest in
Residential Asset Securities Corporation, the Certificate
Administrator or the Trustee referred to below or GMAC Mortgage
Corporation or any of their affiliates. Although payment of
principal and interest on the Underlying Agency Securities is
guaranteed by [GNMA], this Certificate is not guaranteed or insured
by any governmental agency or instrumentality or by Residential
Asset Securities Corporation, the Certificate Administrator, the
Trustee or GMAC Mortgage Corporation or any of their affiliates.
This certifies that [__________________] is the
registered owner of a percentage interest evidenced by this
Certificate (obtained by dividing the Initial Certificate Principal
Balance of the Certificate by the aggregate Initial Certificate
Principal Balance of all Class R Certificates, both as specified
above) in certain distributions with respect to the Trust Fund
consisting primarily of a pool of Underlying Agency Securities,
formed and sold by Residential Asset Securities Corporation
(hereinafter called the "Company", which term includes any
successor entity under the Agreement referred to below). The Trust
Fund was created pursuant to a Trust Agreement dated as specified
above (the "Agreement") among the Company, the Certificate
Administrator and [_______________], as trustee (the "Trustee"), a
summary of certain of the pertinent provisions of which is set
forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement.
This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the
Holder of this Certificate by virtue of the acceptance hereof
assents and by which such Holder is bound.
Pursuant to the terms of the Agreement, a distribution
will be made on the third Business Day following the Underlying
Security Distribution Date for the Underlying Agency Securities
(the "Distribution Date"), commencing on the first Distribution
Date specified above, to the Person in whose name this Certificate
is registered at the close of business on the last day (or if such
last day is not a Business Day, the Business Day immediately
preceding such last day) of the month immediately preceding the
month of the related Distribution Date for the Underlying Agency
Securities (the "Record Date"), from the Available Funds in an
amount equal to the product of the Percentage Interest evidenced by
this Certificate and the amount required to be distributed to
Holders of Class R Certificates on such Distribution Date.
Each Holder of this Certificate will be deemed to have
agreed to be bound by the restrictions set forth in the Agreement
to the effect that (i) each person holding or acquiring any
Ownership Interest in this Certificate must be a United States
Person and a Permitted Transferee, (ii) the transfer of any
Ownership Interest in this Certificate will be conditioned upon the
delivery to the Trustee of, among other things, an affidavit to the
effect that it is a United States Person and Permitted Transferee,
(iii) any attempted or purported transfer of any Ownership Interest
in this Certificate in violation of such restrictions will be
absolutely null and void and will vest no rights in the purported
transferee, and (iv) if any person other than a United States
Person and a Permitted Transferee acquires any Ownership Interest
in this Certificate in violation of such restrictions, then the
Company will have the right, in its sole discretion and without
notice to the Holder of this Certificate, to sell this Certificate
to a purchaser selected by the Company, which purchaser may be the
Company, or any affiliate of the Company, on such terms and
conditions as the Company may choose.
Notwithstanding the above, the final distribution on this
Certificate will be made after due notice of the pendency of such
distribution and only upon presentation and surrender of this
Certificate at the office or agency appointed by the Trustee for
that purpose in the City of New York. The Initial Certificate
Principal Balance of this Certificate is set forth above. The
Certificate Principal Balance hereof will be reduced to the extent
of distributions allocable to principal. Notwithstanding the
reduction of the Certificate Principal Balance hereof to zero, this
Certificate will remain outstanding under the Agreement and the
Holder hereof may have additional obligations with respect to this
Certificate, including tax liabilities, and may be entitled to
certain additional distributions hereon, in accordance with the
terms and provisions of the Agreement.
In connection with any transfer of this Certificate, the
Trustee will require (a) a representation letter, in the form as
described by the Agreement, stating that the transferee is not an
employee benefit plan or other plan subject to the fiduciary
responsibility provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or (b) if such
transferee is an employee benefit plan or other plan subject to
ERISA, an opinion of counsel acceptable to and in form and
substance satisfactory to the Trustee, the Company and the Master
Servicer with respect to the permissibility of such transfer under
ERISA and stating, among other things, that the transferee's
acquisition of this Class R Certificate is permissible under
applicable law, will not constitute or result in any non-exempt
"prohibited transaction" under Section 406 of ERISA or Section 4975
of the Internal Revenue Code of 1986 and will not subject the
Trustee, the Company or the Certificate Administrator to any
obligation or liability (including obligations under ERISA or
Section 4975 of the Code) in addition to those undertaken in the
Agreement. Each Holder of this Class R Certificate will be deemed
to have agreed to be bound by the restrictions set forth in the
Agreement to the effect that (i) each person holding or acquiring
any Ownership Interest in this Class R Certificate must be a
Permitted Transferee (and may not be a Non-United States Person),
(ii) no Ownership Interest in this Class R Certificate may be
transferred without the express written consent of the Company,
which consent may be conditioned on the delivery to the Company of,
among other things, an opinion of counsel, (iii) any attempted or
purported transfer of any Ownership Interest in this Class R
Certificate in violation of such restrictions will be absolutely
null and void and will vest no rights in the purported transferee,
and (iv) if any Person other than a Permitted Transferee acquires
any Ownership Interest in this Class R Certificate in violation of
such restrictions, then the Company will have the right, in its
sole discretion and without notice to the Holder of this Class R
Certificate to sell this Class R Certificate to a purchaser
selected by the Company, which purchaser may be the Company, or any
affiliate of the Company, on such terms and conditions as the
Company may choose.
This Certificate is one of a duly authorized issue of
Certificates issued in several Classes designated as Mortgage
Pass-Through Certificates of the Series specified hereon (herein
collectively called the "Certificates"). The Certificates are
limited in right of payment to certain collections and recoveries
respecting the Underlying Agency Securities, all as more
specifically set forth herein and in the Agreement.
As provided in the Agreement, withdrawals from the
Certificate Account created for the benefit of Certificateholders
may be made by the Certificate Administrator from time to time for
purposes other than distributions to Certificateholders, such
purposes including without limitation reimbursement to the Company
and the Certificate Administrator of advances made, or certain
expenses incurred, by either of them.
The Agreement permits, with certain exceptions therein
provided, the amendment of the Agreement and the modification of
the rights and obligations of the Company, the Certificate
Administrator and the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Company,
the Certificate Administrator and the Trustee with the consent of
the Holders of Certificates evidencing in the aggregate not less
than 66% of the Percentage Interests of each Class of Certificates
affected thereby. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such Holder and upon
all future holders of this Certificate and of any Certificate
issued upon the transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent is made upon the
Certificate. The Agreement also permits the amendment thereof in
certain circumstances without the consent of the Holders of any of
the Certificates and, in certain additional circumstances, without
the consent of the Holders of certain Classes of Certificates.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is
registrable in the Certificate Register upon surrender of this
Certificate for registration of transfer at the offices or agencies
appointed by the Trustee in the City and State of New York, duly
endorsed by, or accompanied by an assignment in the form below or
other written instrument of transfer in form satisfactory to the
Trustee and the Certificate Registrar duly executed by, the Holder
hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Certificates of authorized denominations
evidencing the same Class and aggregate Percentage Interest will be
issued to the designated transferee or transferees.
The Certificates are issuable only as registered
Certificates without coupons in Classes and in denominations
specified in the Agreement. As provided in the Agreement and
subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of authorized denominations
evidencing the same Class and aggregate Percentage Interest, as
requested by the Holder surrendering the same.
No service charge will be made for any such registration
of transfer or exchange, but the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
The Company, the Certificate Administrator, the Trustee
and the Certificate Registrar and any agent of the Company, the
Certificate Administrator, the Trustee or the Certificate Registrar
may treat the Person in whose name this Certificate is registered
as the owner hereof for all purposes, and neither the Company, the
Certificate Administrator, the Trustee nor any such agent shall be
affected by notice to the contrary.
THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
The obligations created by the Agreement in respect of
the Certificates and the Trust Fund created thereby shall terminate
upon the payment to Certificateholders of all amounts held by or on
behalf of the Trustee and required to be paid to them pursuant to
the Agreement following receipt of the final distribution to be
made on the last remaining Underlying Agency Security in the Trust
Fund upon presentation and surrender of such Underlying Agency
Security in accordance with the terms and conditions thereof.
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Class R
Certificate to be duly executed.
Dated:
[NAME OF TRUSTEE],
as Trustee
By______________________________________
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Class R Certificates referred to in
the within-mentioned Agreement.
[NAME OF CERTIFICATE REGISTRAR],
as Certificate Registrar
By ______________________________________
Authorized Signatory
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s),
assign(s) and transfer(s) unto
______________________________________________________________
_________________________________________________________________
_________________________________________________________________
_____________.
(Please print or typewrite name and address including
postal zip code of assignee) the beneficial interest evidenced by
the within the Certificate and hereby authorizes the transfer of
registration of such interest to assignee on the Certificate
Register of the Trust Fund.
I (We) further direct the Certificate Registrar to issue
a new Certificate of a like denomination and Class, to the above
named assignee and deliver such Certificate to the following
address: _________________________________.
Dated: ______________
______________________________
Signature by or on behalf of assignor
________________________________
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________ for
the account of _________________________ account number
_____________, or, if mailed by check, to _______________
_______________________________________________________ _________.
Applicable statements should be mailed to
_____________________________________________________.
This information is provided by ______________________,
the assignee named above, or ___________________________________,
as its agent.
<PAGE>
EXHIBIT B-1
FORM OF TRANSFER AFFIDAVIT AND AGREEMENT
STATE OF [____________] )
) ss.:
COUNTY OF [____________] )
[NAME OF OFFICER], being first duly sworn, deposes and
says:
1. That he or she is [Title of Officer] of [Name of
Owner] (record or beneficial owner (the "Owner") of the Residential
Asset Securities Corporation, Class R Certificate, Series
[199_-___] (the "Residual Certificates")), 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 and agreement. The Residual Certificates
were issued pursuant to the Trust Agreement, dated as of
[__________ 1, 199_], among Residential Asset Securities
Corporation, as the company (the "Company"),
[_______________________________], as certificate administrator
(the "Certificate Administrator") and [____________________], as
trustee (the "Trustee").
2. That the Owner (i) is not and will not be a
"disqualified organization" as of [date of transfer] within the
meaning of Section 860E(e)(5) of the Internal Revenue Code of 1986,
as amended (the "Code"), (ii) will endeavor to remain other than a
disqualified organization for so long as it retains its ownership
interest in the Residual Certificate and (iii) is acquiring the
Residual Certificates for its own account or for the account of
another Owner from which it has received an affidavit in
substantially the same form as this affidavit and agreement. (For
this purpose, a "disqualified organization" means the United
States, any state or political subdivision thereof, or any agency
or instrumentality of any of the foregoing (other than an
instrumentality all of the activities of which are subject to tax
and, except for the Federal Home Loan Mortgage Corporation, a
majority of whose board of directors is not selected by any such
governmental entity), or any foreign government, international
organization or any agency or instrumentality of such foreign
government or organization, any rural electric or telephone
cooperative, or any organization (other than certain farmers'
cooperatives) that is generally exempt from federal income tax
unless such organization is subject to the tax on unrelated
business taxable income).
3. That the Owner is aware (i) of the tax that would be
imposed on transfers of the Residual Certificates to disqualified
organizations under the Code that applies to all transfers of
Residual Certificates after March 31, 1988; (ii) that such tax
would be on the transferor, or, if such transfer is through an
agent (which person includes a broker, nominee or middleman) for a
disqualified organization, on the agent; (iii) that the person
otherwise liable for the tax shall be relieved of liability for the
tax if the transferee furnishes to such person an affidavit that
the transferee is not a disqualified organization and, at the time
of transfer, such person does not have actual knowledge that the
affidavit is false; and (iv) that the Residual Certificates may be
"noneconomic residual interests" within the meaning of proposed
Treasury regulations promulgated pursuant to the Code and that the
transferor of a noneconomic residual interest will remain liable
for any taxes due with respect to the income of such residual
interest, unless no significant purpose of the transfer was to
impede the assessment or collection of tax.
4. That the Owner is aware of the tax imposed on a
"pass-through entity" holding the Residual Certificates if at any
time during the taxable year of the pass-through entity 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.)
5. That the Owner is aware that the Trustee will not
register the transfer of any Residual Certificates unless the
transferee, or the transferee's agent, delivers to it an affidavit
and agreement, among other things, in substantially the same form
as this affidavit and agreement. The Owner expressly agrees that
it will not consummate any such transfer if it knows or believes
that any of the representations contained in such affidavit and
agreement are false.
6. That the Owner has reviewed the restrictions set
forth on the face of the Residual Certificates and the provisions
of Section 4.02(f) of the Pooling and Servicing Agreement under
which the Residual Certificates were issued (in particular, clause
(iii)(A) and (iii)(B) of Section 4.02(f) which authorize the
Trustee to deliver payments to a person other than the Owner and
negotiate a mandatory sale by the Trustee in the event the Owner
holds such Certificates in violation of Section 4.02(f)). The
Owner expressly agrees to be bound by and to comply with such
restrictions and provisions.
7. The Owner warrants and represents that it is [a
"qualified institutional buyer" as that term is defined in Rule
144A under the Securities Act of 1933, as amended] [a person
involved in the organization or operation of the Company or
Certificate Administrator, or an affiliate, as defined in Rule 405
under the Securities Act of 1933, as amended, of either of them].
8. That the Owner consents to any additional
restrictions or arrangements that shall be deemed necessary upon
advice of counsel to constitute a reasonable arrangement to ensure
that the Residual Certificates will only be owned, directly or
indirectly, by an Owner that is not a disqualified organization.
9. The Owner's Taxpayer Identification Number is
[_____________].
10. This affidavit and agreement relates only to the
Residual Certificates held by the Owner and not to any other holder
of the Residual Certificates. The Owner understands that the
liabilities described herein relate only to the Residual
Certificates.
11. That no purpose of the Owner relating to the
purchase of any of the Residual Certificates by the Owner is or
will be to impede the assessment or collection of any tax.
12. That the Owner has no present knowledge or
expectation that it will become insolvent or subject to a
bankruptcy proceeding for so long as any of the Residual
Certificates remain outstanding. In this regard, the Owner hereby
represents to and for the benefit of the person from whom it
acquired the Residual Certificate that the Owner intends to pay
taxes associated with holding such Residual Certificate as they
become due, fully understanding that it may incur tax liabilities
in excess of any cash flows generated by the Residual Certificate.
13. The Owner is a citizen or resident of the United
States, a corporation, partnership or other entity created or
organized in, or under the laws of, the United States or any
political subdivision thereof, or an estate or trust whose income
from sources without the United States is includible in gross
income for United States federal income tax purposes regardless of
its connection with the conduct of a trade or business within the
United States.
14. The Owner is not an employee benefit plan or other
plan subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA") or Section 4975 of the Internal Revenue
Code of 1986 (the "Code"), or an investment manager, a named
fiduciary or a trustee of any such plan or any other Person acting,
directly or indirectly, on behalf of or purchasing any Residual
Certificate with "plan assets" of any such plan, and understands
that registration of transfer of any Residual Certificate to any
such plan, or to any Person acting on behalf of or purchasing any
Residual Certificate with "plan assets" of any such plan, will not
be made unless such plan or Person delivers an opinion of its
counsel, addressed and satisfactory to the Trustee, the Company and
the Certificate Administrator, to the effect that the purchase and
holding of a Residual Certificate by, on behalf of or with "plan
assets" of any such plan is permissible under applicable law, would
not constitute or result in any non-exempt prohibited transaction
under Section 406 of ERISA or Section 4975 of the Code, and would
not subject the Company, the Certificate Administrator or the
Trustee to any obligation or liability (including liabilities under
Section 406 of ERISA or Section 4975 of the Code) in addition to
those undertaken in the Trust Agreement or any other liability.
<PAGE>
IN WITNESS WHEREOF, the Owner has caused this instrument
to be executed on its behalf, pursuant to the 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 OWNER]
By:_________________________
[Name of Officer]
[Title of Officer]
[Corporate Seal]
ATTEST:
_____________________________
[Assistant] Secretary
Personally appeared before me the above-named [Name of
Officer], known or proved to me to be the same person who executed
the foregoing instrument and to be the [Title of Officer] of the
Owner, and acknowledged to me that he executed the same as his free
act and deed and the free act and deed of the Owner.
Subscribed and sworn before me this ___ day of
___________, 199__.
____________________________
NOTARY PUBLIC
COUNTY OF
STATE OF
My Commission expires the _________ day of
___________, 19__.
<PAGE>
EXHIBIT B-2
FORM OF TRANSFEROR CERTIFICATE
[__________________, 19__]
Residential Asset Securities
Corporation
8300 Normandale Lake Blvd.
Suite 700
Minneapolis, Minnesota 55437
[Name of Trustee]
[Address of Trustee]
Attention: [__________________]
Re: Mortgage Pass-Through Certificates, Series
[199_-___], Residual
Ladies and Gentlemen:
This letter is delivered to you in connection with the
transfer by [______________________] (the "Seller") to
[_____________________] (the "Purchaser") of $[_____________]
Initial Certificate Principal Balance of the Mortgage Pass-Through
Certificates, Series [199_-___], Class R Certificate (the "Residual
Certificates"), pursuant to Section [____] of the Trust Agreement
(the "Trust Agreement"), dated as of [__________ 1, 199_] among
Residential Asset Securities Corporation, as the company (the
"Company"), [_____________________________], as the certificate
administrator (the "Certificate Administrator"), and
[__________________], as trustee (the "Trustee"). All terms used
herein and not otherwise defined shall have the meanings set forth
in the Trust Agreement. The Seller hereby certifies, represents
and warrants to, and covenants with, the Company and the Trustee
that:
1. No purpose of the Seller relating to transfer of
the Residual Certificate by the Seller to the Purchaser is or will
be to impede the assessment or collection of any tax.
2. The Seller understands that the Purchaser has
delivered to the Trustee and the Certificate Administrator a
Transfer Affidavit and Agreement in the form attached to the Trust
Agreement as Exhibit B-1. The Seller does not know or believe that
any representation contained therein is false.
3. The Seller has at the time of the transfer
conducted a reasonable investigation of the financial condition of
the Purchaser as contemplated by Treasury Regulations Section
1.860E-1(c)(r)(i) and, as a result of that investigation, the
Seller has determined that the Purchaser has historically paid its
debts as they become due and has found no significant evidence to
indicate that the Purchaser will not continue to pay its debts as
they become due in the future. The Seller understands that the
transfer of a Residual Certificate may not be respected for United
States income tax purposes (and the Seller may continue to be
liable for United States income taxes associated therewith) unless
the Seller has conducted such an investigation.
Very truly yours,
[NAME OF SELLER]
(Seller)
By:___________________________
Name:_________________________
Title:_______________________
EXHIBIT 5.1
December 16, 1994
Residential Asset Securities Corporation
8400 Normandale Lake Boulevard
Minneapolis, Minnesota 55437
Ladies and Gentlemen:
At your request, we have examined the Registration
Statement on Form S-3, to be filed by Residential Asset
Securities Corporation, a Delaware corporation (the
"Registrant") with the Securities and Exchange
Commission on December 16, 1994 (the "Registration
Statement), in connection with the registration under
the Securities Act of 1933, as amended (the "Act") of
Mortgage and Manufactured Housing Contract Pass-Through
Certificates (the "Certificates"). The Certificates
are issuable in series (each, a "Series") under either
a separate Pooling and Servicing Agreement (each such
agreement, a "Pooling and Servicing Agreement") by and
among the Registrant, the Master Servicer or Servicer
named therein and the Trustee named therein or a Trust
Agreement (each such agreement, a "Trust Agreement") by
and among the Registrant, the Trustee named therein and
the Certificate Administrator named therein. The
Certificates of each Series are to be sold as set forth
in the Registration Statement, any amendment thereto,
and the prospectus and prospectus supplement relating
to such Series.
We have examined such instruments, documents and
records as we deemed relevant and necessary as a basis
of our opinion hereinafter expressed. In such
examination, we have assumed the following: (a) the
authenticity of original documents and the genuineness
of all signatures; (b) the conformity to the originals
of all documents submitted to us as copies; and (c) the
truth, accuracy and completeness of the information,
representations and warranties contained in the
records, documents, instruments and certificates we
have reviewed.
Based on such examination, we are of the opinion
that when the issuance of each Series of Certificates
has been duly authorized by appropriate corporate
action and the Certificates of such Series have been
duly executed, authenticated and delivered in
accordance with the Pooling and Servicing Agreement or
the Trust Agreement relating to such Series and sold,
the Certificates will be legally issued, fully paid,
binding obligations of the trust created by the Pooling
and Servicing Agreement or the Trust Agreement, and the
holders of the Certificates will be entitled to the
benefits of the Pooling and Servicing Agreement or the
Trust Agreement, except as enforcement thereof may be
limited by applicable bankruptcy, insolvency,
reorganization, arrangement, fraudulent conveyance,
moratorium, or other laws relating to or affecting the
rights of creditors generally 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 injunctive relief, regardless of whether
such enforceability is considered in a proceeding in
equity or at law.
We hereby consent to the filing of this opinion as
an exhibit to the Registration Statement and to the use
of our name wherever appearing in the Registration
Statement and the prospectus contained therein. In
giving such consent, we do not consider that we are
"experts," within the meaning of the term as used in
the Act or the rules and regulations of the Commission
issued thereunder, with respect to any part of the
Registration Statement, including this opinion as an
exhibit or otherwise.
Very truly yours,
/s/ Orrick, Herrington & Sutcliffe
ORRICK, HERRINGTON & SUTCLIFFE
December 16, 1994
Residential Asset Securities Corporation
8400 Normandale Lake Boulevard
Minneapolis, Minnesota 55437
Re: Residential Asset Securities Corporation
Mortgage and Manufactured Housing Contract
Pass-Through Certificates;
Registration Statement on Form S-3
Dear Sirs:
We are counsel to Residential Asset Securities
Corporation, a Delaware corporation (the "Registrant") in
connection with the registration under the Securities Act of 1933,
as amended (the "Act"), of Mortgage and Manufactured Housing
Contract Pass-Through Certificates (the "Certificates"), and the
related preparation and filing of a Registration Statement on Form
S-3 (the "Registration Statement"). The Certificates are issuable
in series under separate pooling and servicing agreements (each
such agreement, a "Pooling and Servicing Agreement") or trust
agreements (each such agreement, a "Trust Agreement"), among the
Registrant, a master servicer, servicer or certificate
administrator to be identified in the prospectus supplement for
such series of Certificates and a trustee to be identified in the
prospectus supplement for such series of Certificates. Each
Pooling and Servicing Agreement or Trust Agreement will be
substantially in the respective form filed as an Exhibit to the
Registration Statement.
In connection with rendering this opinion letter, we have
examined the forms of the Pooling and Servicing Agreement and Trust
Agreement contained as Exhibits in the Registration Statement, the
Registration Statement and such records and other documents as we
have deemed necessary. As to matters of fact, we have examined and
relied upon representations or certifications of officers of the
Registrant or public officials. We have assumed the authenticity
of all documents submitted to us as originals, the genuineness of
all signatures, the legal capacity of natural persons and the
conformity to the originals of all documents. We have assumed that
all parties, other than the Registrant, had the corporate power and
authority to enter into and perform all obligations thereunder,
and, as to such parties, we also have assumed the due authorization
by all requisite corporate action, the due execution and delivery
and the enforceability of such documents.
In rendering this opinion letter, we express no opinion
as to the laws of any jurisdiction other than the laws of the State
of New York and the corporate laws of the State of Delaware, nor do
we express any opinion, either implicitly or otherwise, on 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. This opinion letter is further subject to the
qualification that enforceability may be limited by (i) bankruptcy,
insolvency, liquidation, receivership, moratorium, reorganization
or other laws affecting the enforcement of the rights of creditors
generally and (ii) general principles of equity, whether
enforcement is sought in a proceeding in equity or at law.
Based on the foregoing, we are of the opinion that:
1. When a Pooling and Servicing Agreement or Trust
Agreement for a series of Certificates has been duly authorized by
all necessary action and duly executed and delivered by the parties
thereto, such Pooling and Servicing Agreement or Trust Agreement
will be a legal and valid obligation of the Registrant.
2. When a Pooling and Servicing Agreement or Trust
Agreement for a series of Certificates has been duly authorized by
all necessary action and duly executed and delivered by the parties
thereto, and when the Certificates of such series have been duly
executed and authenticated in accordance with the provisions of
that Pooling and Servicing Agreement or Trust Agreement, and issued
and sold as contemplated in the Registration Statement and the
prospectus and prospectus supplement delivered in connection
therewith, such Certificates will be legally and validly issued and
outstanding, fully paid and non-assessable, and the holders of such
Certificates will be entitled to the benefits of that Pooling and
Servicing Agreement or Trust Agreement.
3. The description of federal income tax consequences
appearing under the heading "Certain Federal Income Tax
Consequences" in the prospectus contained in the Registration
Statement, while not purporting to discuss all possible federal
income tax consequences of an investment in Certificates, is
accurate with respect to those tax consequences which are
discussed.
We hereby consent to the filing of this opinion letter as
an Exhibit to the Registration Statement, and to the use of our
name in the prospectus and prospectus supplement included in the
Registration Statement under the heading "Legal Matters", and in
the prospectus included in the Registration Statement under the
heading "Certain Federal Income Tax Consequences", without
admitting that we are "experts" within the meaning of the Act, and
the rules and regulations thereunder, with respect to any part of
the Registration Statement, including this Exhibit.
Very truly yours,
\s\ Thacher Proffitt & Wood
EXHIBIT 8.1
December 16, 1994
Residential Asset Securities Corporation
8400 Normandale Lake Boulevard
Minneapolis, Minnesota 55437
Ladies and Gentlemen:
We have advised Residential Asset Securities
Corporation (the "Registrant") with respect to certain
federal income tax aspects of the issuance by the
Registrant of its Mortgage and Manufactured Housing
Contract Pass-Through Certificates, issuable in series
(the "Certificates"). Such advice conforms to the
description of selected federal income tax consequences
to holders of the Certificates that appears under the
heading "Certain Federal Income Tax Consequences" in
the prospectus (the "Prospectus") forming a part of the
Registration Statement on Form S-3 as prepared for
filing by the Registrant with the Securities and
Exchange Commission under the Securities Act of 1933,
as amended (the "Act") on December 16, 1994 (the
"Registration Statement"). Such description does not
purport to discuss all possible income tax
ramifications of the proposed issuance, but with
respect to those tax consequences which are discussed,
in our opinion the description is accurate in all
material respects.
We hereby consent to the filing of this opinion as
an exhibit to the Registration Statement and to the use
of our name wherever appearing in the Registration
Statement and the Prospectus contained therein. In
giving such consent, we do not consider that we are
"experts," within the meaning of the term as used in
the Act or the rules and regulations of the Commission
issued thereunder, with respect to any part of the
Registration Statement, including this opinion as an
exhibit or otherwise.
Very truly yours,
/s/ Orrick, Herrington & Sutcliffe
ORRICK, HERRINGTON & SUTCLIFFE
EXHIBIT 24.1
RESIDENTIAL ASSET SECURITIES CORPORATION
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Keenen W. Dammen
as his true and lawful attorney-in-fact and agents, with full
power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities (including his
capacity as director and/or officer of Residential Asset
Securities Corporation), to sign any or all amendments (including
post-effective amendments) to the Registration Statement on Form
S-3, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and
agents full power and authority to do and perform each and every
act and thing requisite and necessary to be done in and about the
premises, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming that said
attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
SIGNATURE TITLE DATE
/s/ Mark L. Korell Director December 12, 1994
Mark L. Korell
/s/ John D. Finnegan Director December 12, 1994
John D. Finnegan
/s/ Bruce J. Paradis Director December 12, 1994
Bruce J. Paradis
/s/ Keenen W. Dammen President and Chief December 12, 1994
Keenen W. Dammen Executive Officer
(Principal Executive
Officer)
/s/ Davee L. Olson Treasurer and Chief December 12, 1994
Davee L. Olson Financial Officer
(Principal Financial
Officer)
/s/ Scott T. Young Comptroller December 12, 1994
Scott T. Young Principal Accounting
Officer)
