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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 24, 1997
SOUTHERN PACIFIC SECURED ASSETS CORP. (as seller under a Pooling and Servicing
Agreement dated as of September 1, 1997 providing for, inter alia, the issuance
of Mortgage Loan Asset-Backed Pass-Through Certificates, Series 1997-3)
SOUTHERN PACIFIC SECURED ASSETS CORP.
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(Exact name of registrant as specified in its charter)
California 333-26215 33-0659688
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
One Centerpointe Drive, Suite 500
Lake Oswego, Oregon 97035
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(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code, is (503) 684-4700
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Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Not applicable
(b) Not applicable
(c) Exhibits:
1. Pooling and Servicing Agreement, dated as of September 1,
1997 among Southern Pacific Secured Assets Corp. as company, Advanta Mortgage
Corp. USA, as master servicer, and Norwest Bank Minnesota, N.A., as trustee.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
SOUTHERN PACIFIC SECURED ASSETS
CORP.
By: /s/ James L. Smith
------------------------------
Name: James L. Smith
Title: Director
Dated: October 8, 1997
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
SOUTHERN PACIFIC SECURED ASSETS
CORP.
By:
------------------------------
Name: James L. Smith
Title: Director
Dated: October 8, 1997
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EXHIBIT INDEX
Item 601 (a) of Sequentially
Exhibit Regulation S-K Numbered
Number Exhibit No. Description
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1 4 Pooling and Servicing
Agreement
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EXHIBIT 4
THE MORTGAGE LOAN SCHEDULES HAVE BEEN FILED IN PAPER PURSUANT TO
A CONTINUING HARDSHIP EXEMPTION, AS PROVIDED IN RULE 202 OF
REGULATION S-T
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SOUTHERN PACIFIC SECURED ASSETS CORP.
Company,
and
ADVANTA MORTGAGE CORP. USA
Master Servicer
and
NORWEST BANK MINNESOTA, N.A.
Trustee
POOLING AND SERVICING AGREEMENT
Dated as of September 1, 1997
Mortgage Loan Asset-Backed Pass-Through Certificates
Series 1997-3
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ARTICLE I
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DEFINITIONS..............................................................................................3
Section 1.01 CERTAIN DEFINED TERMS..................................................................3
Accepted Servicing Practices.............................................................................3
Account ................................................................................................3
Accrual Period...........................................................................................3
Advanta ................................................................................................3
Affiliate................................................................................................3
Agreement................................................................................................3
Appraised Value..........................................................................................3
Assignment Of Mortgage...................................................................................3
Authorized Denominations.................................................................................4
Available Funds Shortfall................................................................................4
Balloon Mortgage Loan....................................................................................4
Balloon Payment..........................................................................................4
Business Day.............................................................................................4
Certificate..............................................................................................4
Certificate Account......................................................................................4
Certificateholder or Holder..............................................................................4
Certificate Insurance Payments Account...................................................................5
Certificate Insurance Policy.............................................................................5
Certificate Insurer......................................................................................5
Certificate Insurer Default..............................................................................5
Certificate Principal Balance............................................................................5
Certificate Register.....................................................................................5
Civil Relief Act.........................................................................................5
Civil Relief Act Interest Shortfall......................................................................5
Class A Certificate......................................................................................6
Class A Certificateholder................................................................................6
Class A-1 Certificate....................................................................................6
Class A-2 Certificate....................................................................................6
Class A-3 Certificate....................................................................................6
Class A-4 Certificate....................................................................................6
Class A-5 Certificate....................................................................................6
Class A-6 Certificate....................................................................................7
Class A-7 Certificate....................................................................................7
Class A-7 Component A....................................................................................7
Class A-7 Component B....................................................................................7
Class A-7 Component C....................................................................................7
Class A-7 Component D....................................................................................7
Class A-7 Component E....................................................................................7
Class A-7 Component F....................................................................................8
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Class A-7 Component G....................................................................................8
Class R Certificate......................................................................................8
Class R-I Certificate....................................................................................8
Class R-II Certificate...................................................................................8
Class R Certificateholder................................................................................8
Closing Date.............................................................................................8
Code ................................................................................................8
Collection Account.......................................................................................8
Commission...............................................................................................8
Company ................................................................................................9
Compensating Interest....................................................................................9
Curtailment..............................................................................................9
Custodian................................................................................................9
Cut-off Date.............................................................................................9
DCR ................................................................................................9
Debt Service Reduction...................................................................................9
Deficient Valuation......................................................................................9
Deleted Mortgage Loan....................................................................................9
Delinquent...............................................................................................9
Depository...............................................................................................9
Direct Participant.......................................................................................9
Disqualified Organization...............................................................................10
Distribution Date.......................................................................................10
Due Date ...............................................................................................10
Due Period..............................................................................................10
Eligible Account........................................................................................10
ERISA ...............................................................................................10
Event of Default........................................................................................10
FDIC ...............................................................................................11
FHLMC ...............................................................................................11
Fixed Strip Certificates................................................................................11
FNMA ...............................................................................................11
Foreclosure Profits.....................................................................................11
GAAP ...............................................................................................11
Gross Margin............................................................................................11
Group I Available Funds.................................................................................11
Group II Available Funds................................................................................11
Group III Available Funds...............................................................................11
Group I Certificate Account.............................................................................11
Group II Certificate Account............................................................................11
Group III Certificate Account...........................................................................11
Group I Certificate Insurance Policy....................................................................12
Group II Certificate Insurance Policy...................................................................12
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Group III Certificate Insurance Policy..................................................................12
Group I Certificates....................................................................................12
Group II Certificates...................................................................................12
Group III Certificates..................................................................................12
Group I Class A Available Funds Cap Carry-Forward Amount................................................12
Group II Class A Available Funds Cap Carry-Forward Amount...............................................12
Group I Class A Available Funds Pass-Through Rate.......................................................13
Group II Class A Available Funds Pass-Through Rate......................................................13
Group III Weighted Average Pass-Through Cap.............................................................13
Group I Class A Carry-Forward Amount....................................................................13
Group II Class A Carry-Forward Amount...................................................................13
Group III Class A Carry-Forward Amount..................................................................14
Group I Class A Certificates............................................................................14
Group II Class A Certificates...........................................................................14
Group III Class A Certificates..........................................................................14
Group I Class A Formula Pass-Through Rate...............................................................14
Group II Class A Formula Pass-Through Rate..............................................................14
Group I Class A Interest Distribution Amount............................................................14
Group II Class A Interest Distribution Amount...........................................................15
Group III Class A Interest Distribution Amount..........................................................15
Group I Class A Pass-Through Rate.......................................................................15
Group II Class A Pass-Through Rate......................................................................16
Group III Class A Pass-Through Rate.....................................................................16
Group I Class A Principal Distribution Amount...........................................................17
Group II Class A Principal Distribution Amount..........................................................18
Group III Class A Principal Distribution Amount.........................................................18
Group I Delinquency Amount..............................................................................19
Group II Delinquency Amount.............................................................................19
Group III Delinquency Amount............................................................................20
Group I Delinquency Percentage..........................................................................20
Group II Delinquency Percentage.........................................................................20
Group III Delinquency Percentage........................................................................20
Group I Excess Subordinated Amount......................................................................20
Group II Excess Subordinated Amount.....................................................................20
Group III Excess Subordinated Amount....................................................................20
Group I Fixed Strip Components..........................................................................21
Group II Fixed Strip Components.........................................................................21
Group III Fixed Strip Component.........................................................................21
Group I Fixed Strip Effective Rate......................................................................21
Group II Fixed Strip Effective Rate.....................................................................21
Group I Insured Distribution Amount.....................................................................21
Group II Insured Distribution Amount....................................................................21
Group III Insured Distribution Amount...................................................................21
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Group I Loans" or "Loan Group I.........................................................................21
Group II Loans" or "Loan Group II.......................................................................21
Group III Loans.........................................................................................21
Group I Net Monthly Excess Cashflow.....................................................................21
Group II Net Monthly Excess Cashflow....................................................................22
Group III Net Monthly Excess Cashflow...................................................................22
Group I Pool Principal Balance..........................................................................22
Group II Pool Principal Balance.........................................................................22
Group III Pool Principal Balance........................................................................22
Group I Principal Remittance Amount.....................................................................22
Group II Principal Remittance Amount....................................................................22
Group III Principal Remittance Amount...................................................................22
Group I Reimbursement Amount............................................................................22
Group II Reimbursement Amount...........................................................................23
Group III Reimbursement Amount..........................................................................23
Group I Required Subordinated Amount....................................................................23
Group II Required Subordinated Amount...................................................................24
Group III Required Subordinated Amount..................................................................24
Group I Subordinated Amount.............................................................................25
Group II Subordinated Amount............................................................................25
Group III Subordinated Amount...........................................................................25
Group I Subordination Deficiency Amount.................................................................25
Group II Subordination Deficiency Amount................................................................25
Group III Subordination Deficiency Amount...............................................................25
Group I Subordination Deficit...........................................................................26
Group II Subordination Deficit..........................................................................26
Group III Subordination Deficit.........................................................................26
Group I Subordination Increase Amount...................................................................26
Group II Subordination Increase Amount..................................................................26
Group III Subordination Increase Amount.................................................................26
Group I Subordination Reduction Amount..................................................................26
Group II Subordination Reduction Amount.................................................................27
Group III Subordination Reduction Amount................................................................27
Index ...............................................................................................27
Indirect Participant....................................................................................27
Initial Group I Specified Subordinated Amount...........................................................27
Initial Group II Specified Subordinated Amount..........................................................27
Initial Group III Specified Subordinated Amount.........................................................27
Initial Group I Specified Subordinated Percentage.......................................................27
Initial Group II Specified Subordinated Percentage......................................................27
Initial Group III Specified Subordinated Percentage.....................................................27
Insurance Agreement.....................................................................................27
Insurance Proceeds......................................................................................27
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Insured Payment.........................................................................................28
Interest Determination Date.............................................................................28
Lifetime Cap............................................................................................28
Lifetime Floor..........................................................................................28
Liquidated Loan Loss....................................................................................28
Liquidated Mortgage Loan................................................................................28
Liquidation Expenses....................................................................................28
Liquidation Proceeds....................................................................................28
Liquidation Report......................................................................................29
Loan Repurchase Price...................................................................................29
Loan-to-Value Ratio or LTV..............................................................................29
Lockout Certificates....................................................................................29
Lockout Certificate Percentage..........................................................................29
Lockout Distribution Percentage.........................................................................29
London Business Day.....................................................................................29
Majority Certificateholders.............................................................................29
Master Servicer.........................................................................................29
Master Servicer Remittance Amount.......................................................................30
Master Servicer Remittance Date.........................................................................30
Monthly Payment.........................................................................................30
Moody's ...............................................................................................30
Mortgage ...............................................................................................30
Mortgage File...........................................................................................31
Mortgage Impairment Insurance Policy....................................................................31
Mortgage Interest Rate..................................................................................31
Mortgage Loan...........................................................................................31
Mortgage Loan Documents.................................................................................31
Mortgage Loan Group.....................................................................................31
Mortgage Loan Interest Shortfall........................................................................31
Mortgage Loan Schedule..................................................................................32
Mortgage Note...........................................................................................33
Mortgaged Property......................................................................................33
Mortgagor...............................................................................................33
Net Foreclosure Profits.................................................................................33
Net Lifetime Cap........................................................................................33
Net Liquidation Proceeds................................................................................33
Net Mortgage Interest Rate..............................................................................33
Net REO Proceeds........................................................................................33
Nonrecoverable Advances.................................................................................34
Non-United States Person................................................................................34
Notional Amount.........................................................................................34
Officer's Certificate...................................................................................34
One-Month LIBOR.........................................................................................34
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Opinion of Counsel......................................................................................34
Original Group I Pool Principal Balance.................................................................34
Original Group II Pool Principal Balance................................................................35
Original Group III Pool Principal Balance...............................................................35
Original Certificate Principal Balance..................................................................35
Original Pool Principal Balance.........................................................................35
Outstanding Mortgage Loan...............................................................................35
Ownership Interest......................................................................................35
Owner-Occupied Mortgaged Property.......................................................................35
Percentage Interest.....................................................................................35
Periodic Advance........................................................................................35
Periodic Cap............................................................................................36
Permitted Investments...................................................................................36
Permitted Transferee....................................................................................37
Person ...............................................................................................37
Plan ...............................................................................................37
Policy Business Day.....................................................................................37
Pool Principal Balance..................................................................................37
Preference Amount.......................................................................................37
Preference Claim........................................................................................37
Premium Amount..........................................................................................37
Premium Exhibit.........................................................................................38
Premium Percentage......................................................................................38
Prepayment Assumption...................................................................................38
Prepayment Interest Shortfall...........................................................................38
Principal Balance.......................................................................................38
Principal Prepayment in Full............................................................................38
Purchase Agreement......................................................................................38
Qualified Mortgage......................................................................................39
Qualified Substitute Mortgage Loan......................................................................39
Rate Adjustment Date....................................................................................39
Rating Agency...........................................................................................39
Record Date.............................................................................................39
Reference Bank Rate.....................................................................................39
Reference Banks.........................................................................................40
Released Mortgaged Property Proceeds....................................................................40
REMIC ...............................................................................................40
REMIC I ...............................................................................................40
REMIC I Regular Interest................................................................................40
REMIC I Regular Interest LT-AYI.........................................................................40
REMIC I Regular Interest LT-AZI.........................................................................40
REMIC I Regular Interest LT-AYII........................................................................41
REMIC I Regular Interest LT-AZII........................................................................41
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REMIC I Regular Interest LT-FY..........................................................................41
REMIC I Regular Interest LT-FZ..........................................................................41
REMIC I Remittance Rate.................................................................................41
REMIC II ...............................................................................................41
REMIC Provisions........................................................................................41
REO Acquisition.........................................................................................42
REO Disposition.........................................................................................42
REO Mortgage Loan.......................................................................................42
REO Proceeds............................................................................................42
REO Property............................................................................................42
Representation Letter...................................................................................42
Request for Release.....................................................................................42
Reserve Interest Rate...................................................................................42
Residential Dwelling....................................................................................42
Responsible Officer.....................................................................................42
S&P ...............................................................................................42
Seller ...............................................................................................43
Servicing Account.......................................................................................43
Servicing Advances......................................................................................43
Servicing Compensation..................................................................................43
Servicing Fee...........................................................................................43
Servicing Officer.......................................................................................43
Special Deposit.........................................................................................43
Startup Day.............................................................................................43
Subservicer.............................................................................................43
Subservicing Agreement..................................................................................43
Substitution Adjustment.................................................................................43
Tax Matters Person......................................................................................44
Tax Return..............................................................................................44
Transfer ...............................................................................................44
Transfer Affidavit And Agreement........................................................................44
Transferee..............................................................................................44
Transferor..............................................................................................44
Trustee ...............................................................................................44
Trustee Fee.............................................................................................44
Trustee Remittance Report...............................................................................44
Trust Fund..............................................................................................44
12 Month Loss Amount....................................................................................44
UCC ...............................................................................................44
UCC Financing Statement.................................................................................44
Uncertificated Balance..................................................................................45
Uncertificated Interest.................................................................................45
Underwriters............................................................................................45
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Underwriting Guidelines.................................................................................45
United States Person....................................................................................45
Unpaid REO Amortization.................................................................................45
Voting Rights...........................................................................................45
Section 1.02 PROVISIONS OF GENERAL APPLICATION.....................................................45
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES.......................................................................47
Section 2.01 CONVEYANCE OF MORTGAGE LOANS; SPECIAL DEPOSIT; PRIORITY AND
SUBORDINATION OF OWNERSHIP INTERESTS...........................................................47
Section 2.02 POSSESSION OF MORTGAGE FILES; ACCESS TO MORTGAGE FILES................................48
Section 2.03 DELIVERY OF MORTGAGE LOAN DOCUMENTS AND CERTIFICATE INSURANCE POLICY
..............................................................................................49
Section 2.04 ACCEPTANCE BY TRUSTEE OF THE TRUST FUND; CERTAIN SUBSTITUTIONS;
CERTIFICATION BY TRUSTEE.......................................................................50
Section 2.05 EXECUTION OF CERTIFICATES.............................................................52
Section 2.06 FURTHER ACTION EVIDENCING ASSIGNMENTS.................................................52
Section 2.07 [RESERVED]............................................................................53
Section 2.08 CONVEYANCE OF REMIC I REGULAR INTERESTS; ACCEPTANCE OF REMIC II BY
THE TRUSTEE....................................................................................53
Section 2.09 ISSUANCE OF CLASS R-II CERTIFICATES...................................................53
ARTICLE III
REPRESENTATIONS AND WARRANTIES..........................................................................54
Section 3.01 REPRESENTATIONS OF THE MASTER SERVICER................................................54
Section 3.02 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY..............................55
Section 3.03 PURCHASE AND SUBSTITUTION.............................................................56
ARTICLE IV
THE CERTIFICATES........................................................................................59
Section 4.01 THE CERTIFICATES......................................................................59
Section 4.02 REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES.................................59
Section 4.03 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES.....................................64
Section 4.04 PERSONS DEEMED OWNERS.................................................................64
ARTICLE V
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS......................................................65
Section 5.01 APPOINTMENT OF THE MASTER SERVICER....................................................65
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Section 5.02 SUBSERVICING AGREEMENTS BETWEEN THE MASTER SERVICER AND SUBSERVICERS
..............................................................................................66
Section 5.03 COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS; COLLECTION ACCOUNT
..............................................................................................67
Section 5.04 PERMITTED WITHDRAWALS FROM THE COLLECTION ACCOUNT.....................................69
Section 5.05 PAYMENT OF TAXES, INSURANCE AND OTHER CHARGES.........................................70
Section 5.06 MAINTENANCE OF CASUALTY INSURANCE.....................................................71
Section 5.07 MAINTENANCE OF MORTGAGE IMPAIRMENT INSURANCE POLICY...................................72
Section 5.08 FIDELITY BOND; ERRORS AND OMISSIONS POLICY............................................72
Section 5.09 COLLECTION OF TAXES, ASSESSMENTS AND OTHER ITEMS; SERVICING ACCOUNT
..............................................................................................73
Section 5.10 PERIODIC FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION;
ADDITIONAL INFORMATION.........................................................................73
Section 5.11 ENFORCEMENT OF DUE-ON-SALE CLAUSES; ASSUMPTION AGREEMENTS.............................73
Section 5.12 REALIZATION UPON DEFAULTED MORTGAGE LOANS.............................................74
Section 5.13 TRUSTEE TO COOPERATE; RELEASE OF MORTGAGE FILES.......................................76
Section 5.14 SERVICING FEE; SERVICING COMPENSATION.................................................77
Section 5.15 REPORTS TO THE TRUSTEE AND THE COMPANY; COLLECTION ACCOUNT STATEMENTS
..............................................................................................78
Section 5.16 ANNUAL STATEMENT AS TO COMPLIANCE.....................................................78
Section 5.17 ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT...............................79
Section 5.18 OPTIONAL PURCHASE OF DEFAULTED MORTGAGE LOANS.........................................79
Section 5.19 REPORTS TO BE PROVIDED BY THE MASTER SERVICER.........................................79
Section 5.20 ADJUSTMENT OF SERVICING COMPENSATION IN RESPECT OF PREPAID MORTGAGE
LOANS..........................................................................................79
Section 5.21 PERIODIC ADVANCES.....................................................................80
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Section 5.22 THIRD PARTY CLAIMS....................................................................80
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Section 5.23 MAINTENANCE OF CORPORATE EXISTENCE AND LICENSES; MERGER OR
CONSOLIDATION OF THE MASTER SERVICER...........................................................81
Section 5.24 ASSIGNMENT OF AGREEMENT BY MASTER SERVICER; MASTER SERVICER NOT TO
RESIGN.........................................................................................81
Section 5.25 INFORMATION REPORTS TO BE FILED BY THE MASTER SERVICER................................81
ARTICLE VI
DISTRIBUTIONS AND PAYMENTS..............................................................................82
Section 6.01 ESTABLISHMENT OF CERTIFICATE ACCOUNTS; DEPOSITS TO THE CERTIFICATE
ACCOUNTS.......................................................................................82
Section 6.02 PERMITTED WITHDRAWALS FROM THE CERTIFICATE ACCOUNTS...................................82
Section 6.03 COLLECTION OF MONEY...................................................................83
Section 6.04 THE CERTIFICATE INSURANCE POLICY......................................................83
Section 6.05 DISTRIBUTIONS.........................................................................85
Section 6.06 INVESTMENT OF ACCOUNTS................................................................98
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Section 6.07 REPORTS BY TRUSTEE....................................................................99
Section 6.08 ADDITIONAL REPORTS BY TRUSTEE........................................................102
Section 6.09 COMPENSATING INTEREST................................................................102
Section 6.10 EFFECT OF PAYMENTS BY THE CERTIFICATE INSURER; SUBROGATION...........................102
Section 6.11...........................................................................................103
DISTRIBUTIONS ON THE UNCERTIFICATED REMIC I REGULAR INTERESTS.................................103
ARTICLE VII
DEFAULT................................................................................................104
Section 7.01 EVENTS OF DEFAULT....................................................................104
Section 7.02 TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.............................................106
Section 7.03 WAIVER OF DEFAULTS...................................................................108
Section 7.04 MORTGAGE LOANS, TRUST FUND AND ACCOUNTS HELD FOR BENEFIT OF THE
CERTIFICATE INSURER...........................................................................108
ARTICLE VIII
TERMINATION............................................................................................109
Section 8.01 TERMINATION..........................................................................109
Section 8.02 ADDITIONAL TERMINATION REQUIREMENTS..................................................110
Section 8.03 ACCOUNTING UPON TERMINATION OF MASTER SERVICER.......................................111
ARTICLE IX
CONCERNING THE TRUSTEE.................................................................................112
Section 9.01 DUTIES OF TRUSTEE....................................................................112
Section 9.02 CERTAIN MATTERS AFFECTING THE TRUSTEE................................................113
Section 9.03 TRUSTEE NOT LIABLE FOR CERTIFICATES OR MORTGAGE LOANS................................115
Section 9.04 TRUSTEE MAY OWN .....................................................................115
Section 9.05 PAYMENT OF TRUSTEE'S FEES............................................................116
Section 9.06 ELIGIBILITY REQUIREMENTS FOR TRUSTEE.................................................117
Section 9.07 RESIGNATION AND REMOVAL OF THE TRUSTEE...............................................117
Section 9.08 SUCCESSOR TRUSTEE....................................................................118
Section 9.09 MERGER OR CONSOLIDATION OF TRUSTEE...................................................119
Section 9.10 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE........................................119
Section 9.11. LIMITATION OF LIABILITY..............................................................120
Section 9.12. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF CERTIFICATES........................120
Section 9.13. SUITS FOR ENFORCEMENTS...............................................................120
Section 9.14. WAIVER OF INVENTORY, ACCOUNTING AND APPRAISAL REQUIREMENTS...........................121
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ARTICLE X
REMIC PROVISIONS.......................................................................................122
Section 10.01 REMIC ADMINISTRATION.................................................................122
Section 10.02 PROHIBITED TRANSACTIONS AND ACTIVITIES...............................................125
Section 10.03 MASTER SERVICER AND TRUSTEE INDEMNIFICATION..........................................126
ARTICLE XI
MISCELLANEOUS PROVISIONS...............................................................................127
Section 11.01 LIMITATION ON LIABILITY OF THE COMPANY AND THE MASTER SERVICER.......................127
Section 11.02 ACTS OF CERTIFICATEHOLDERS...........................................................127
Section 11.03 AMENDMENT............................................................................128
Section 11.04 RECORDATION OF AGREEMENT.............................................................129
Section 11.05 NOTICES..............................................................................129
Section 11.06 SEVERABILITY OF PROVISIONS...........................................................130
Section 11.07 COUNTERPARTS.........................................................................130
Section 11.08 SUCCESSORS AND ASSIGNS...............................................................130
Section 11.09 HEADINGS.............................................................................130
Section 11.10 CERTIFICATE INSURER DEFAULT..........................................................130
Section 11.11 THIRD PARTY BENEFICIARY..............................................................131
Section 11.12 INTENT OF THE PARTIES................................................................131
Section 11.13 NOTICE TO RATING AGENCIES AND CERTIFICATEHOLDER......................................131
Section 11.14 GOVERNING LAW........................................................................132
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LIST OF EXHIBITS
Exhibit A-1 Group I Certificate Insurance Policy
Exhibit A-2 Group II Certificate Insurance Policy
Exhibit A-3 Group III Certificate Insurance Policy
Exhibit B-1 Form of Class A Certificate
Exhibit B-2 Form of Class R Certificate
Exhibit C Mortgage File
Exhibit D-1 Mortgage Loan Schedule for Loan Group I
Exhibit D-2 Mortgage Loan Schedule for Loan Group II
Exhibit D-3 Mortgage Loan Schedule for Loan Group III
Exhibit E Trustee's Acknowledgment of Receipt
Exhibit F Initial Certification of Trustee
Exhibit G Final Certification of the Trustee
Exhibit H Request for Release of Documents
Exhibit I Form of Transfer Affidavit and Agreement
Exhibit J Form of Transferor Certificate
Exhibit K Reserved
Exhibit L Reserved
Exhibit M Certificate Regarding Prepaid Loans
Exhibit N Reserved
Exhibit O Form of Investor Representation Letter
Exhibit P Form of Transferor Representation Letter
Exhibit Q Form of Rule 144A Investor Affidavit
Exhibit R Premium Exhibit
Exhibit S Liquidation Report
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POOLING AND SERVICING AGREEMENT, dated as of September 1, 1997
(the "Cut-off Date"), by and among SOUTHERN PACIFIC SECURED ASSETS CORP., a
California corporation, in its capacity as company (the "Company"), ADVANTA
MORTGAGE CORP. USA, a Delaware corporation, in its capacity as master servicer
(the "Master Servicer"), and NORWEST BANK MINNESOTA, N.A., a national banking
association, in its capacity as trustee (the "Trustee").
PRELIMINARY STATEMENT:
The Company intends to sell mortgage pass-through certificates
(collectively, the "Certificates"), to be issued hereunder in eight classes
(each, a "Class"), which in the aggregate will evidence the entire beneficial
ownership interest in the Trust Fund (as defined herein), consisting primarily
of the Mortgage Loans (as defined herein). As provided herein, the Trustee will
make an election to treat the entire segregated pool of assets described in the
definition of REMIC I (as defined herein) and subject to this Agreement as a
real estate mortgage investment conduit (a "REMIC") for federal income tax
purposes and such segregated pool of assets will be designated as "REMIC I." The
Uncertificated REMIC I Regular Interests (as defined herein) will be "regular
interests" in REMIC I and the Class R-I Certificates will be the sole class of
"residual interests" in REMIC I for purposes of the REMIC Provisions (as defined
herein) under the federal income tax law.
The following table irrevocably sets forth the designation, the REMIC I
Remittance Rate, the initial Uncertificated Balance and, solely for purposes of
satisfying Treasury regulation Section 1.860G-1(a)(4)(iii), the "latest possible
maturity date" for each of the REMIC I Regular Interests.
None of the REMIC I Regular Interests will be certificated.
REMIC I Initial Latest Possible
Designation Remittance Rate Uncertificated Balance Maturity Date(1)
- ----------- --------------- ---------------------- ----------------
LT-AYI Variable(2) $ 227,075,400.00 September 25, 2027
LT-AZI Variable(2) $ 25,230,600.00 September 25, 2027
LT-AYII Variable(2) $ 79,408,800.00 September 25, 2027
LT-AZII Variable(2) $ 8,823,200.00 September 25, 2027
LT-FY Variable(2) $ 98,515,800.00 September 25, 2027
LT-FZ Variable(2) $ 10,946,200.00 September 25, 2027
- ------------------
(1) Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
regulations, the Distribution Date immediately following the maturity date
for the Mortgage Loan with the latest maturity date has been designated as
the "latest possible maturity date" for each REMIC I Regular Interest.
(2) Calculated in accordance with the definition of "REMIC I Remittance Rate"
herein.
As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the REMIC I Regular Interests as a REMIC
for federal income tax purposes, and such segregated pool of assets will be
designated as "REMIC II." The Class R-II Certificates will evidence the sole
class of "residual interests" in REMIC II for purposes of the REMIC Provisions
under federal income tax law.
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<PAGE>
The Class A-1, Class A-2, Class A-3, Class A-4, Class A-5 and Class A-6
Certificates and the Class A-7 Component A, B, C, D, E, F and G will be "regular
interests" in REMIC II, and the Class R-II 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 following table sets forth the designation, type,
aggregate Original Certificate Principal Balance (as defined herein), maturity
date, initial ratings and certain features for each Class of Certificates
comprising the interests in the Trust Fund created hereunder.
<TABLE>
<CAPTION>
Aggregate Original Initial
Certificate Principal Maturity Ratings
Designation Type Balance Features Date S&P DCR Moody's
- ----------- ---- ---------------------- -------- -------- --- --- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A-1 Senior $ 252,306,000.00 Senior September 25, 2027 AAA AAA Aaa
Class A-2 Senior $ 88,232,000.00 Senior September 25, 2027 AAA AAA Aaa
Class A-3 Senior $ 39,982,000.00 Senior September 25, 2027 AAA AAA Aaa
Class A-4 Senior $ 34,467,000.00 Senior September 25, 2027 AAA AAA Aaa
Class A-5 Senior $ 24,067,000.00 Senior September 25, 2027 AAA AAA Aaa
Class A-6 Senior $ 10,946,000.00 Senior September 25, 2027 AAA AAA Aaa
Class A-7 Senior Notional Amount Senior/Interest September 25, 2027 AAAr AAA Aaa
Only
Class R-I Subordinate N/A Residual N/A N/R N/R N/R
Class R-II Subordinate N/A Residual N/A N/R N/R N/R
</TABLE>
The Group I Loans (as defined herein) have an aggregate Principal
Balance (as defined herein) as of the Cut-off Date equal to $252,305,845.70. The
Group II Loans (as defined herein) have an aggregate Principal Balance (as
defined herein) as of the Cut-off Date equal to $88,232,430.20. The Group III
Loans (as defined herein) have an aggregate Principal Balance as of the Cut-off
Date equal to $109,468,481.20.
In consideration of the mutual agreements herein contained,
the Company, the Master Servicer and the Trustee agree as follows:
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<PAGE>
ARTICLE I
DEFINITIONS
Section 1.01 CERTAIN DEFINED TERMS. Whenever used herein, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings.
"Accepted Servicing Practices": The Master Servicer's normal
servicing practices, which in general will conform to the mortgage servicing
practices of prudent mortgage lending institutions which service for their own
account mortgage loans of the same type as the Mortgage Loans in the
jurisdictions in which the related Mortgaged Properties are located.
"Account": Any Eligible Account established pursuant to
Sections 5.03, 5.09, 6.01 or 6.04 hereof.
"Accrual Period": With respect to (i) the Class A-1
Certificates and the Class A-2 Certificates, the "Accrual Period" is the period
commencing on the Distribution Date immediately preceding the month on which
such Distribution Date occurs and ending on the calendar day immediately
preceding such Distribution Date, except with respect to the first Distribution
Date, which has an accrual period from September 26, 1997, to October 24, 1997,
and (ii) with respect to the Class A-3, Class A-4, Class A-5 and Class A-6
Certificates and the Group I, Group II and Group III Components of the Class A-7
Certificates, the "Accrual Period" is the previous calendar month.
"Advanta": Advanta Mortgage Corp. USA, a Delaware
corporation.
"Affiliate": With respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agreement": This Pooling and Servicing Agreement, including
the Exhibits hereto, and all amendments hereof and supplements hereto.
"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, 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 as to
which it is the lesser of 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 Of Mortgage": With respect to each Mortgage Loan,
an assignment of the Mortgage, notice of transfer or equivalent instrument, in
recordable form, sufficient under
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<PAGE>
the laws of the jurisdiction wherein the related Mortgaged Property is located
to reflect of record the sale of the Mortgage to the Trustee for the benefit of
the Certificateholders.
"Authorized Denominations": With respect to each class of
Class A Certificates, (other than the Class A-7 Certificates) the minimum
Percentage Interest corresponding to a minimum denomination of $25,000 and
integral multiples of $1 in excess thereof. With respect to the Class A-7
Certificates a minimum Percentage Interest of 20.00% and integral multiples of
0.01% in excess thereof. With respect to each class of Class R Certificates, a
minimum Percentage Interest of 10.00% and integral multiples of 0.01% in excess
thereof.
"Available Funds Shortfall": With respect to the Group I Loans
and any Distribution Date, an amount equal to the sum of (a) the Group I Class A
Interest Distribution Amount minus the Group I Available Funds for such
Distribution Date (to the extent such difference is not covered by payments
under Section 6.05(c)(vi) or (d)(vi)) and (b) the Group I Subordination Deficit
(to the extent not covered by payments pursuant to Section 6.05(c)(vii) or
(d)(vii)). With respect to the Group II Loans and any Distribution Date, an
amount equal to the sum of (a) the Group II Class A Interest Distribution Amount
minus the Group II Available Funds for such Distribution Date (to the extent
such difference is not covered by payments under Section 6.05(b)(vi) or (d)(vi))
and (b) the Group II Subordination Deficit (to the extent not covered by
payments pursuant to Section 6.05(b)(vii) or (d)(vii)). With respect to the
Group III Loans and any Distribution Date, an amount equal to the sum of (a) the
Group III Class A Interest Distribution Amount minus the Group III Available
Funds for such Distribution Date (to the extent such difference is not covered
by payments made under Section 6.05(b)(vi) or (c)(vi)) and (b) the Group III
Subordination Deficit (to the extent not covered by payments pursuant to Section
6.05(b)(vii) or (c)(vii)).
"Balloon Mortgage Loan": Any Mortgage Loan that provided on
the date of origination for an amortization schedule extending beyond its stated
maturity date.
"Balloon Payment": With respect to any Balloon Mortgage Loan,
as of any date of determination, the Monthly Payment payable on the stated
maturity date of such Mortgage Loan.
"Business Day": Any day other than (a) a Saturday or Sunday,
or (b) a day on which banking institutions in the State of California, the State
of New York or the state where the Trustee's corporate trust office is located
are authorized or obligated by law or executive order to be closed.
"Certificate": Any Class A Certificate or Class R Certificate
executed by the Trustee on behalf of the Trust Fund and authenticated by the
Trustee.
"Certificate Account": The Group I, Group II or Group III
Certificate Account, as applicable.
"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 purposes hereof and, solely for the
4
<PAGE>
purposes of giving any consent (except any consent required to be obtained
pursuant to Section 11.03), waiver, request or demand pursuant to this
Agreement, any Certificate registered in the name of the Company or the Master
Servicer or any Affiliate thereof shall be deemed not to be outstanding and the
rights to which it is entitled shall not be taken into account in determining
whether the requisite percentage of rights necessary to effect any such consent
has been obtained, except as otherwise provided in Section 11.03. The Trustee
shall be entitled to rely upon a certification of the Company or the Master
Servicer in determining if any Certificates are registered in the name of a
respective Affiliate. Any Certificates on which payments are made under the
Certificate Insurance Policy shall be deemed to be outstanding and held by the
Certificate Insurer to the extent of such payment.
"Certificate Insurance Payments Account": The Certificate
Insurance Payments Account established in accordance with Section 6.04(c) hereof
and maintained by the Trustee.
"Certificate Insurance Policy": As the context requires, one
of (i) the Group I Certificate Insurance Policy, the Group II Certificate
Insurance Policy and the Group III Certificate Insurance Policy collectively or
(ii) the Group I, Group II or Group III Certificate Insurance Policy, as
applicable.
"Certificate Insurer": MBIA Insurance Corporation, a stock
insurance company organized and created under the laws of the State of New York,
and any successors thereto.
"Certificate Insurer Default": The failure by the Certificate
Insurer to make a payment required under any one of the Group I, Group II or
Group III Certificate Insurance Policies in accordance with its terms.
"Certificate Principal Balance": With respect to each class of
Class A Certificates (other than the Class A-7 Certificates), as determined
separately, as of any time of determination, the related Original Certificate
Principal Balance less any amounts distributed in reduction of the Certificate
Principal Balance thereof pursuant to Section 6.05 on all prior Distribution
Dates. The Class R Certificates do not have a "Certificate Principal Balance".
"Certificate Register": As described in Section 4.02(a).
"Civil Relief Act": The Soldiers' and Sailors' Civil Relief
Act of 1940, as amended.
"Civil Relief Act Interest Shortfall": With respect to any
Distribution Date, for any Mortgage Loan as to which there has been a reduction
in the amount of interest collectible thereon for the most recently ended Due
Period as a result of the application of the Civil Relief Act, the amount, if
any, by which (i) interest collectible on such Mortgage Loan during the most
recently ended calendar month is less than (ii) interest accrued for the related
Accrual Period on the Principal Balance of such Mortgage Loan, calculated at a
rate equal to the sum of (A)(1) with respect to a Group I Loan, the sum of (a)
the Group I Class A Pass-Through Rate on the Class A-1 Certificates and (b) the
Group I Fixed Strip Effective Rate times (x) the related Notional Amount of the
Group I Fixed Strip Components divided by (y) the Certificate Principal Balance
of the Class A-1 Certificates, (2) with respect to a Group II Loan, the sum of
(a) the Group II Class A
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<PAGE>
Pass-Through Rate on the Class A-2 Certificates and (b) the Group II Fixed Strip
Effective Rate times (x) the related Notional Amount of the Group II Fixed Strip
Components divided by (y) the Certificate Principal Balance of the Class A-2
Certificates or (3) with respect to a Group III Loan, the sum of (a) weighted
average of the Group III Class A Pass-Through Rates on the Class A-3, Class A-4,
Class A-5 and Class A-6 Certificates and (b) the Group III Class A Pass-Through
Rate on the Group III Fixed Strip Component times (x) the related Notional
Amount of the Group III Fixed Strip Component divided by (y) the aggregate
Certificate Principal Balance of the Class A-3, Class A-4, Class A-5 and Class
A-6 Certificates, in each case for such Distribution Date and (B) the per annum
rates at which the related Servicing Fee and Trustee Fee accrue and the related
Premium Percentage.
"Class A Certificate": Any one of the Class A-1, Class A-2,
Class A-3, Class A-4, Class A-5, Class A-6 or Class A-7 Certificates.
"Class A Certificateholder": A Holder of a Class A
Certificate.
"Class A-1 Certificate": Any Certificate designated as a
"Class A-1 Certificate" on the face thereof, in the form of Exhibit B-1 hereto,
and authenticated by the Trustee in accordance with the procedures set forth
herein and evidencing an interest designated as a "regular interest" in REMIC II
for the purposes of the REMIC Provisions and primarily evidencing an interest in
Loan Group I.
"Class A-2 Certificate": Any Certificate designated as a
"Class A-2 Certificate" on the face thereof, in the form of Exhibit B-1 hereto,
and authenticated by the Trustee in accordance with the procedures set forth
herein and evidencing an interest designated as a "regular interest" in REMIC II
for the purposes of the REMIC Provisions and primarily evidencing an
interest in Loan Group II.
"Class A-3 Certificate": Any Certificate designated as a
"Class A-3 Certificate" on the face thereof, in the form of Exhibit B-1 hereto,
and authenticated by the Trustee in accordance with the procedures set forth
herein and evidencing an interest designated as a "regular interest" in REMIC II
for the purposes of the REMIC Provisions and primarily evidencing an
interest in Loan Group III.
"Class A-4 Certificate": Any Certificate designated as a
"Class A-4 Certificate" on the face thereof, in the form of Exhibit B-1 hereto,
and authenticated by the Trustee in accordance with the procedures set forth
herein and evidencing an interest designated as a "regular interest" in REMIC II
for the purposes of the REMIC Provisions and primarily evidencing an
interest in Loan Group III.
"Class A-5 Certificate": Any Certificate designated as a
"Class A-5 Certificate" on the face thereof, in the form of Exhibit B-1 hereto,
and authenticated by the Trustee in accordance with the procedures set forth
herein and evidencing an interest designated as a "regular interest" in REMIC II
for the purposes of the REMIC Provisions and primarily evidencing an
interest in Loan Group III.
6
<PAGE>
"Class A-6 Certificate": Any Certificate designated as a
"Class A-6 Certificate" on the face thereof, in the form of Exhibit B-1 hereto,
and authenticated by the Trustee in accordance with the procedures set forth
herein and evidencing an interest designated as a "regular interest" in REMIC II
for the purposes of the REMIC Provisions and primarily evidencing an
interest in Loan Group III.
"Class A-7 Certificate": Any Certificate designated as a
"Class A-7 Certificate" on the face thereof, in the form of Exhibit B-1 hereto,
and authenticated by the Trustee in accordance with the procedures set forth
herein and evidencing seven separate interests designated as a "regular
interest" in REMIC II for purposes of the REMIC Provisions and evidencing an
interest in all of Loan Group I, Loan Group II and Loan Group III.
"Class A-7 Component A": With respect to the Class A-7
Certificates, the component thereof having a Notional Amount as set forth in
this Agreement and entitled to distributions of interest (but not principal) to
the extent set forth in this Agreement, being an uncertificated interest
representing an interest designated as a "regular interest" in REMIC II for
purposes of the REMIC Provisions. The Class A-7 Component A shall accrue
interest at the related Group I Class A Pass-Through Rate on its related
Notional Amount but shall not be entitled to any distributions of principal.
"Class A-7 Component B": With respect to the Class A-7
Certificates, the component thereof having a Notional Amount as set forth in
this Agreement and entitled to distributions of interest (but not principal) to
the extent set forth in this Agreement, being an uncertificated interest
representing an interest designated as a "regular interest" in REMIC II for
purposes of the REMIC Provisions. The Class A-7 Component B shall accrue
interest at the related Group I Class A Pass-Through Rate on its related
Notional Amount but shall not be entitled to any distributions of principal.
"Class A-7 Component C": With respect to the Class A-7
Certificates, the component thereof having a Notional Amount as set forth in
this Agreement and entitled to distributions of interest (but not principal) to
the extent set forth in this Agreement, being an uncertificated interest
representing an interest designated as a "regular interest" in REMIC II for
purposes of the REMIC Provisions. The Class A-7 Component C shall accrue
interest at the related Group I Class A Pass-Through Rate on its related
Notional Amount but shall not be entitled to any distributions of principal.
"Class A-7 Component D": With respect to the Class A-7
Certificates, the component thereof having a Notional Amount as set forth in
this Agreement and entitled to distributions of interest (but not principal) to
the extent set forth in this Agreement, being an uncertificated interest
representing an interest designated as a "regular interest" in REMIC II for
purposes of the REMIC Provisions. The Class A-7 Component D shall accrue
interest at the related Group II Class A Pass-Through Rate on its related
Notional Amount but shall not be entitled to any distributions of principal.
"Class A-7 Component E": With respect to the Class A-7
Certificates, the component thereof having a Notional Amount as set forth in
this Agreement and entitled to distributions of interest (but not principal) to
the extent set forth in this Agreement, being an
7
<PAGE>
uncertificated interest representing an interest designated as a "regular
interest" in REMIC II for purposes of the REMIC Provisions. The Class A-7
Component E shall accrue interest at the related Group II Class A Pass-Through
Rate related on its related Notional Amount but shall not
be entitled to any distributions of principal.
"Class A-7 Component F": With respect to the Class A-7
Certificates, the component thereof having a Notional Amount as set forth in
this Agreement and entitled to distributions of interest (but not principal) to
the extent set forth in this Agreement, being an uncertificated interest
representing an interest designated as a "regular interest" in REMIC II for
purposes of the REMIC Provisions. The Class A-7 Component F shall accrue
interest at the related Group II Class A Pass-Through Rate related on its
related Notional Amount but shall not be entitled to any distributions of
principal.
"Class A-7 Component G": With respect to the Class A-7
Certificates, the component thereof having a Notional Amount as set forth in
this Agreement and entitled to distributions of interest (but not principal) to
the extent set forth in this Agreement, being an uncertificated interest
representing an interest designated as a "regular interest" in REMIC II for
purposes of the REMIC Provisions. The Class A-7 Component G shall accrue
interest at the related Group III Class A Pass-Through Rate related on its
related Notional Amount but shall not be entitled to any distributions of
principal.
"Class R Certificate": Any one of the Class R-I or Class R-II
Certificates.
"Class R-I Certificate": Any one of the Class R-I Certificates
executed by the Trustee and authenticated by the Trustee substantially in the
form annexed hereto as Exhibit B-2, subordinate to the Class A Certificates in
right of payment to the extent set forth herein and evidencing an interest
designated as a "residual interest" in REMIC I for purposes of the REMIC
Provisions.
"Class R-II Certificate": Any one of the Class R-II
Certificates executed by the Trustee and authenticated by the Trustee
substantially in the form annexed hereto as Exhibit B-2, subordinate to the
Class A Certificates in right of payment to the extent set forth herein and
evidencing an interest designated as a "residual interest" in REMIC II for
purposes of the REMIC Provisions.
"Class R Certificateholder": A Holder of a Class R-I or Class
R-II Certificate.
"Closing Date": September 26, 1997.
"Code": The Internal Revenue Code of 1986.
"Collection Account": The Eligible Account established and
maintained by the Master Servicer pursuant to Section 5.03.
"Commission": The Securities and Exchange Commission.
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<PAGE>
"Company": Southern Pacific Secured Assets Corp., a California
corporation, and any successor thereto.
"Compensating Interest": As defined in Section 6.09 hereof.
"Curtailment": With respect to a Mortgage Loan, any payment of
principal received during a Due Period as part of a payment that is in excess of
the amount of the Monthly Payment due for such Due Period and which is not
intended to satisfy the Mortgage Loan in full, nor is intended to cure a
delinquency.
"Custodian": As defined in Section 2.02(c).
"Cut-off Date": September 1, 1997.
"DCR": Duff & Phelps Credit Rating Co., or its successor in
interest.
"Debt Service Reduction": With respect to any Mortgage Loan, a
reduction by a court of competent jurisdiction of the Monthly Payment due on
such Mortgage Loan in a proceeding under the United States Bankruptcy Code,
except such a reduction that constitutes a Deficient Valuation or a permanent
forgiveness of principal.
"Deficient Valuation": With respect to any Mortgage Loan, a
valuation of the related Mortgaged Property by a court of competent jurisdiction
in an amount less than the then outstanding principal balance of the Mortgage
Loan, which valuation results from a proceeding initiated under the United
States Bankruptcy Code.
"Deleted Mortgage Loan": A Mortgage Loan replaced by or to be
replaced by a Qualified Substitute Mortgage Loan.
"Delinquent": A Mortgage Loan is "delinquent" if any payment
due thereon is not made by the close of business on the day such payment by the
related Mortgagor is scheduled to be due. A Mortgage Loan is "30 days
delinquent" if such payment has not been received by the close of business on
the corresponding day of the month immediately succeeding the month in which
such payment was due, or, if there is no such corresponding day (e.g., as when a
30-day month follows a 31-day month in which a payment was due on the 31st day
of such month) then on the last day of such immediately succeeding month.
Similarly for "60 days delinquent," "90 days delinquent" and so on.
"Depository": The Depository Trust Company, 55 Water Street,
New York, New York 10041 and any successor Depository hereafter named. The
nominee of the initial Depository for purposes of registering those Certificates
that are to be book-entry Certificates is Cede & Co. The Depository shall at all
times be a "clearing corporation" as defined in Section 8-102(3) of the Uniform
Commercial Code of the State of New York and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934, as amended.
"Direct Participant": Any broker-dealer, bank or other
financial institution for which the Depository holds Class A Certificates from
time to time as a securities depositary.
9
<PAGE>
"Disqualified Organization": Any of (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) any 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), or rural electric
and telephone cooperatives described in Section 1381(a)(2)(C) of the Code and
(iv) any other Person so designated by the Trustee based upon an Opinion of
Counsel provided to the Trustee that the holding of an ownership interest in a
Class R Certificate by such Person may cause REMIC I or REMIC II or any Person
having an ownership interest in any Class of Certificates (other than such
Person) to incur liability for any federal tax imposed under the Code that would
not otherwise be imposed but for the transfer of an ownership interest in the
Class R Certificate to such Person. The terms "United States", "State" and
"international organization" shall have the meanings set forth in Section 7701
of the Code.
"Distribution Date": The 25th day of any month or if such 25th
day is not a Business Day, the first Business Day immediately following,
commencing on October 25, 1997.
"Due Date": The first day of each calendar month.
"Due Period": With respect to each Distribution Date, the
period beginning on the opening of business on the second day of the calendar
month preceding the calendar month in which such Distribution Date occurs, and
ending at the close of business on the first day of the calendar month in which
such Distribution Date occurs.
"Eligible Account": Either (A) an account or accounts
maintained with an institution (which may include the Trustee, provided such
institution otherwise meets these requirements) whose deposits are insured by
the FDIC, the unsecured and uncollateralized debt obligations of which
institution shall be rated AA or better by S&P and DCR and Aa2 or better by
Moody's and in the highest short term rating by the Rating Agencies, and which
is (i) a federal savings and loan association duly organized, validly existing
and in good standing under the federal banking laws, (ii) an institution duly
organized, validly existing and in good standing under the applicable banking
laws of any state, (iii) a national banking association (including the Trustee)
duly organized, validly existing and in good standing under the federal banking
laws, (iv) a principal subsidiary of a bank holding company, or (v) approved in
writing by the Certificate Insurer and the Rating Agencies or (B) a trust
account or accounts maintained with the corporate trust department of a federal
or state chartered depository institution acceptable to each Rating Agency and
the Certificate Insurer (the Trustee shall be deemed acceptable, provided that
the Trustee otherwise meets these requirements), having capital and surplus of
not less than $50,000,000, acting in its fiduciary capacity.
"ERISA": As defined in Section 4.02(m) hereof.
"Event of Default": One or more of the events described in
Section 7.01 hereof.
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<PAGE>
"FDIC": The Federal Deposit Insurance Corporation and any
successor thereto.
"FHLMC": The Federal Home Loan Mortgage Corporation and any
successor thereto.
"Fixed Strip Certificates": The Class A-7 Certificates.
"FNMA": Fannie Mae and any successor thereto.
"Foreclosure Profits": As to any Distribution Date, the
excess, if any, of (i) Net Liquidation Proceeds in respect of each Mortgage Loan
that became a Liquidated Mortgage Loan during the month immediately preceding
the month of such Distribution Date over (ii) the sum of the unpaid principal
balance of each such Liquidated Mortgage Loan plus accrued and unpaid interest
at the applicable Mortgage Interest Rate on the unpaid principal balance thereof
from the Due Date to which interest was last paid by the Mortgagor (or, in the
case of a Liquidated Mortgage Loan that had been an REO Mortgage Loan, from the
Due Date to which interest was last deemed to have been paid pursuant to Section
5.12) to the first day of the month following the month in which such Mortgage
Loan became a Liquidated Mortgage Loan.
"GAAP": Generally accepted accounting principles.
"Gross Margin": As to each Group I Loan and Group II Loan, the
fixed percentage set forth in the related Mortgage Note and indicated in the
related Mortgage Loan Schedules as the "Gross Margin," which percentage is added
to the related Index on each Rate Adjustment Date to determine (subject to
rounding, the Periodic Cap, Lifetime Floor and the Lifetime Cap) the Mortgage
Interest Rate on such Mortgage Loan until the next Rate Adjustment Date.
"Group I Available Funds": As defined in Section 6.04(a).
"Group II Available Funds": As defined in Section 6.04(a).
"Group III Available Funds": As defined in Section 6.04(a).
"Group I Certificate Account": The Certificate Account
established with respect to the Group I Certificates in accordance with Section
6.01(a) hereof and maintained by the Trustee.
"Group II Certificate Account": The Certificate Account
established with respect to the Group II Certificates in accordance with Section
6.01(a) hereof and maintained by the Trustee.
"Group III Certificate Account": The Certificate Account
established with respect to the Group III Certificates in accordance with
Section 6.01(a) hereof and maintained by the Trustee.
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<PAGE>
"Group I Certificate Insurance Policy": The certificate
guaranty insurance policy No. 24865, and all endorsements thereto dated the
Closing Date, issued by the Certificate Insurer for the benefit of the Group I
Certificateholders, a copy of which is attached hereto as Exhibit A-1.
"Group II Certificate Insurance Policy": The certificate
guaranty insurance policy No. 24866, and all endorsements thereto dated the
Closing Date, issued by the Certificate Insurer for the benefit of the Group II
Certificateholders, a copy of which is attached hereto as Exhibit A- 2.
"Group III Certificate Insurance Policy": The certificate
guaranty insurance policy No. 24867, and all endorsements thereto dated the
Closing Date, issued by the Certificate Insurer for the benefit of the Group III
Certificateholders, a copy of which is attached hereto as Exhibit A- 3.
"Group I Certificates": Collectively, the Class A-1
Certificates, the Group I Fixed Strip Components and the Class R-II
Certificates.
"Group II Certificates": Collectively, the Class A-2
Certificates, the Group II Fixed Strip Components and the Class R-II
Certificates.
"Group III Certificates": Collectively, the Class A-3, Class
A-4, Class A-5 and Class A-6 Certificates, the Group III Fixed Strip Component
and the Class R-II Certificates.
"Group I Class A Available Funds Cap Carry-Forward Amount": As
of any Distribution Date, an amount equal to (x) the sum of (i) the excess, if
any, of (a) the aggregate amount of interest due on the Class A-1 Certificates
on each Distribution Date, calculated at the Group I Class A Formula
Pass-Through Rate applicable to each such Distribution Date over (b) the
aggregate amount of interest due on the Class A-1 Certificates on such
Distribution Dates, calculated at the Group I Class A Pass-Through Rate
applicable to each such Distribution Date for the Class A-1 Certificates, and
(ii) the interest accrued during the prior Accrual Period on the amount of any
Group I Class A Available Funds Cap Carry-Forward Amount immediately prior to
such Distribution Date, calculated on the basis of a 360-day year and the actual
number of days elapsed and using the Group I Class A Formula Pass-Through Rate
applicable to such Distribution Date minus (y) the aggregate of all amounts
distributed to the Class A-1 Certificateholders on all prior Distribution Dates
pursuant to Section 6.05(b)(xi) hereof.
"Group II Class A Available Funds Cap Carry-Forward Amount":
As of any Distribution Date, an amount equal to (x) the sum of (i) the excess,
if any, of (a) the aggregate amount of interest due on the Class A-2
Certificates on each Distribution Date, calculated at the Group II Class A
Formula Pass-Through Rate applicable to each such Distribution Date over (b) the
aggregate amount of interest due on the Class A-2 Certificates on such
Distribution Dates, calculated at the Group II Class A Pass-Through Rate
applicable to each such Distribution Date for the Class A-2 Certificates, and
(ii) the interest accrued during the prior Accrual Period on the amount of any
Group II Class A Available Funds Cap Carry-Forward Amount immediately prior to
such Distribution Date, calculated on the basis of a 360-day year and the actual
number of days elapsed and using the Group II Class A Formula Pass-Through Rate
applicable to such
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Distribution Date minus (y) the aggregate of all amounts distributed to the
Class A-2 Certificateholders on all prior Distribution Dates pursuant to Section
6.05(c)(xi) hereof.
"Group I Class A Available Funds Pass-Through Rate": As of any
Distribution Date, the per annum rate equal to (i) the weighted average of the
Mortgage Interest Rates of the Group I Loans, minus (ii) the sum of the rates
per annum used to determine the Servicing Fee, the Trustee Fee and the Premium
Percentage and minus (iii) the Group I Fixed Strip Effective Rate times a
fraction equal to (x) the Notional Amount of the Group I Fixed Strip Components
divided by (y) the Certificate Principal Balance of the Class A-1 Certificates
immediately prior to such Distribution and minus (iv) commencing on the seventh
Distribution Date, 0.50% per annum.
"Group II Class A Available Funds Pass-Through Rate": As of
any Distribution Date, the per annum rate equal to (i) the weighted average of
the Mortgage Interest Rates of the Group II Loans, minus (ii) the sum of the
rates per annum used to determine the Servicing Fee, the Trustee Fee and the
Premium Percentage and minus (iii) the Group II Fixed Strip Effective Rate times
a fraction equal to (x) the Notional Amount of the Group II Fixed Strip
Components divided by (y) the Certificate Principal Balance of the Class A-2
Certificates immediately prior to such Distribution and minus (iv) commencing on
the seventh Distribution Date, 0.50% per annum.
"Group III Weighted Average Pass-Through Cap": As of any
Distribution Date, is equal to a per annum rate, equal to (i) the weighted
average of the Mortgage Interest Rates of the Group III Loans, minus (ii) the
sum of the rates per annum used to determine the Servicing Fee, the Trustee Fee
and the Premium Percentage.
"Group I Class A Carry-Forward Amount": As of any Distribution
Date, the sum of (a) the amount, if any, by which (i) the Group I Insured
Distribution Amount as of the immediately preceding Distribution Date exceeded
(ii) the amount actually distributed to the Holders of the Group I Class A
Certificates on such Distribution Date in respect thereof (including, without
limitation, any Insured Payments paid to the Holders of the Group I Class A
Certificates by the Certificate Insurer as described in Sections 6.04 and 6.05
hereof) and (b) interest accrued for the related Accrual Period on the amount
described in clause (a), calculated at an interest rate equal to the sum of (1)
Group I Class A Pass-Through Rate on the Class A-1 Certificates applicable to
such Distribution Date, and (2) the Group I Fixed Strip Effective Rate times a
fraction equal to (x) the Notional Amount of the Group I Fixed Strip Components
divided by (y) the Certificate Principal Balance of the Class A-1 Certificates
immediately prior to such Distribution Date. Any Group I Class A Carry-Forward
Amount shall be deemed to be allocated first to any related Group I
Subordination Deficit and second to any related Group I Class A Interest
Distribution Amount.
"Group II Class A Carry-Forward Amount": As of any
Distribution Date, the sum of (a) the amount, if any, by which (i) the Group II
Insured Distribution Amount as of the immediately preceding Distribution Date
exceeded (ii) the amount actually distributed to the Holders of the Group II
Class A Certificates on such Distribution Date in respect thereof (including,
without limitation, any Insured Payments paid to the Holders of the Group II
Class A Certificates by the Certificate Insurer as described in Sections 6.04
and 6.05 hereof) and (b) interest accrued for the related Accrual Period on the
amount described in clause (a), calculated at an interest rate equal to the sum
of (1) Group II Class A Pass-Through Rate on the Class A-2
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<PAGE>
Certificates applicable to such Distribution Date, and (2) the Group II Fixed
Strip Effective Rate times a fraction equal to (x) the Notional Amount of the
Group II Fixed Strip Components divided by (y) the Certificate Principal Balance
of the Class A-2 Certificates immediately prior to such Distribution Date. Any
Group II Class A Carry-Forward Amount shall be deemed to be allocated first to
any related Group II Subordination Deficit and second to any related Group II
Class A Interest Distribution Amount.
"Group III Class A Carry-Forward Amount": As of any
Distribution Date, the sum of (a) the amount, if any, by which (i) the Group III
Insured Distribution Amount as of the immediately preceding Distribution Date
exceeded (ii) the amount actually distributed to the Holders of the Group III
Class A Certificates on such Distribution Date in respect thereof (including,
without limitation, any Insured Payments paid to the Holders of the Group III
Class A Certificates by the Certificate Insurer as described in Sections 6.04
and 6.05 hereof) and (b) interest accrued for the related Accrual Period on the
amount described in clause (a), calculated at an interest rate equal to the sum
of (1) weighted average of the Group III Class A Pass-Through Rates applicable
to such Distribution Date, weighted on the basis of the Certificate Principal
Balances of the Group III Class A Certificates, and (2) the Group III Class A
Pass-Through Rate on the Group III Fixed Strip Component for such Distribution
Date times a fraction equal to (x) the Notional Amount of the Group III Fixed
Strip Certificates divided by (y) the aggregate Certificate Principal Balance of
the Group III Class A Certificates immediately prior to such Distribution Date.
Any Group III Class A Carry-Forward Amount shall be deemed to be allocated first
to any related Group III Subordination Deficit and second to any related Group
III Class A Interest Distribution Amount.
"Group I Class A Certificates": The Class A-1 Certificates and
the Group I Fixed Strip Components.
"Group II Class A Certificates": The Class A-2 Certificates
and the Group II Fixed Strip Components.
"Group III Class A Certificates": The Class A-3, Class A-4,
Class A-5 and Class A-6 Certificates and the Group III Fixed Strip Component.
"Group I Class A Formula Pass-Through Rate": As of any
Distribution Date, is the lesser of (x) the rate described in clause (i) of the
definition of "Group I Class A Pass-Through Rate" for such Distribution Date and
(y) the weighted average of the Net Lifetime Caps of the
Group I Loans.
"Group II Class A Formula Pass-Through Rate": As of any
Distribution Date, is the lesser of (x) the rate described in clause (i) of the
definition of "Group II Class A PassThrough Rate" for such Distribution Date and
(y) the weighted average of the Net Lifetime Caps
of the Group II Loans.
"Group I Class A Interest Distribution Amount": With respect
to the Class A-1 Certificates and each of the Group I Fixed Strip Components for
any Distribution Date the sum of (i) (a) the aggregate amount of interest
accrued for the related Accrual Period on the related Certificate Principal
Balance (or related Notional Amount thereof, in the case of the Group I Fixed
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<PAGE>
Strip Components) immediately prior to such Distribution Date at the related
Group I Class A Pass-Through Rate (based on (x) with respect to the Class A-1
Certificates, a 360-day year and the actual number of days in the prior calendar
month if clause (i) of the definition of Group I Class A Pass-Through Rate is
used with respect to such Distribution Date, or a 360-day year and a 30-day
month if clause (ii) of the definition of Group I Class A Pass-Through Rate is
used with respect to such Distribution Date or (y) with respect to the Group I
Fixed Strip Components, a 360-day year and a 30-day month) minus (b) a pro rata
portion of the aggregate related Mortgage Loan Interest Shortfall for such
Distribution Date and (ii) the portion of any related Group I Class A
Carry-Forward Amount which relates to a shortfall (other than a related Mortgage
Loan Interest Shortfall) in a distribution of a Group I Class A Interest
Distribution Amount in respect of such Class A-1 Certificates or Group I Fixed
Strip Components, in each case as of such Distribution Date.
"Group II Class A Interest Distribution Amount": With respect
to the Class A-2 Certificates and each of the Group II Fixed Strip Components
for any Distribution Date the sum of (i) (a) the aggregate amount of interest
accrued for the related Accrual Period on the related Certificate Principal
Balance (or related Notional Amount thereof, in the case of the Group II Fixed
Strip Components) immediately prior to such Distribution Date at the related
Group II Class A Pass-Through Rate (based on (x) with respect to the Class A-2
Certificates, a 360-day year and the actual number of days in the prior calendar
month if clause (i) of the definition of Group II Class A Pass-Through Rate is
used with respect to such Distribution Date, or a 360-day year and a 30-day
month if clause (ii) of the definition of Group II Class A Pass-Through Rate is
used with respect to such Distribution Date or (y) with respect to the Group II
Fixed Strip Components, a 360-day year and a 30-day month) minus (b) a pro rata
portion of the aggregate related Mortgage Loan Interest Shortfall for such
Distribution Date and (ii) the portion of any related Group II Class A
Carry-Forward Amount which relates to a shortfall (other than a related Mortgage
Loan Interest Shortfall) in a distribution of a Group II Class A Interest
Distribution Amount in respect of such Class A-2 Certificates or Group II Fixed
Strip Components, in each case as of such Distribution Date.
"Group III Class A Interest Distribution Amount": With respect
to each class of the Group III Class A Certificates and the Group III Fixed
Strip Component for any Distribution Date, the sum of (i) (a) the aggregate
amount of interest accrued for the related Accrual Period on the related
Certificate Principal Balance (or related Notional Amount thereof, in the case
of the Group III Fixed Strip Component) immediately prior to such Distribution
Date at the related Group III Class A Pass-Through Rate, based on 360-day year
and a 30-day month minus (b) a pro rata portion of the aggregate related
Mortgage Loan Interest Shortfall for such Distribution Date and (ii) the portion
of any related Group III Class A Carry-Forward Amount which relates to a
shortfall (other than a related Mortgage Loan Interest Shortfall) in a
distribution of a Group III Class A Interest Distribution Amount in respect of
such Group III Class A Certificates, as of such Distribution Date.
"Group I Class A Pass-Through Rate": With respect to the Class
A-1 Certificates, for each Distribution Date, the per annum rate equal to the
lesser of:
(i) with respect to (a) any Distribution Date which
occurs on or prior to the date on which the Pool
Principal Balance is less than 10% of the Original
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<PAGE>
Pool Principal Balance, One-Month LIBOR plus 0.21% or
(b) any Distribution Date thereafter One-Month LIBOR
plus 0.42%; and
(ii) the Group I Class A Available Funds Pass-Through Rate
for such Distribution Date.
With respect to the Class A-7 Component A, for each Distribution Date, the per
annum rate equal to 2.50% for the first 30 Distribution Dates, 0.00% thereafter.
With respect to the Class A-7 Component B, for each Distribution Date, the per
annum rate equal to 1.50% for the first 24 Distribution Dates, 0.00% thereafter.
With respect to the Class A-7 Component C, for each Distribution Date, the per
annum rate equal to 1.50% for the first 12 Distribution Dates, 0.00% thereafter.
"Group II Class A Pass-Through Rate": With respect to the
Class A-2 Certificates, for each Distribution Date, the per annum rate equal to
the lesser of:
(iii) with respect to (a) any Distribution Date which
occurs on or prior to the date on which the Pool
Principal Balance is less than 10% of the Original
Pool Principal Balance, One-Month LIBOR plus 0.20% or
(b) any Distribution Date thereafter One-Month LIBOR
plus 0.40%; and
(iv) the Group II Class A Available Funds Pass-Through
Rate for such Distribution Date.
With respect to the Class A-7 Component D, for each Distribution Date, the per
annum rate equal to 2.50% for the first 30 Distribution Dates, 0.00% thereafter.
With respect to the Class A-7 Component E, for each Distribution Date, the per
annum rate equal to 1.50% for the first 24 Distribution Dates, 0.00% thereafter.
With respect to the Class A-7 Component F, for each Distribution Date, the per
annum rate equal to 1.50% for the first 12 Distribution Dates, 0.00% thereafter.
"Group III Class A Pass-Through Rate": With respect to the
Class A-3 Certificates, 6.61%. With respect to the Class A-4 Certificates,
6.66%. With respect to the Class A-5 Certificates and the first 36 Distribution
Dates, (i) with respect to any Distribution Date which occurs on or prior to the
date on which the aggregate Principal Balance of the Mortgage Loans is less than
10% of the sum of the aggregate Principal Balance of the Mortgage Loans as of
the Cutoff Date, 7.19% per annum and (ii) with respect to any Distribution Date
thereafter, 7.94% per annum. With respect to the Class A-5 Certificates and each
Distribution Date following the first 36 Distribution Dates, the lesser of:
(i)(a) with respect to any Distribution Date which occurs on or prior to the
date on which the aggregate Principal Balance of the Mortgage Loans is less than
10% of the sum of the aggregate Principal Balance of the Mortgage Loans as of
the Cut-off Date, 7.19% per annum and (b) with respect to any Distribution Date
thereafter, 7.94% per annum and (ii) the Group III Weighted Average Pass-Through
Cap. The Pass-Through Rate on the Class A-6 Certificates is equal to: (i) on the
first 36 Distribution Dates, 6.87% per annum, and (ii) on any Distribution Date
thereafter, the lesser of (a) 6.87% per annum and (b) the Group III Weighted
Average Pass-Through Cap. With respect to the Class A-7 Component G, 6.50% for
the first 36 Distribution Dates and 0.00% thereafter.
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<PAGE>
"Group I Class A Principal Distribution Amount": With respect
to the Group I Certificates (other than the Group I Fixed Strip Components) for
any Distribution Date, the lesser of:
(a) the excess of (i) the sum, as of such Distribution Date, of
(A) the Group I Available Funds and (B) any related Insured
Payment over (ii) the Group I Class A Interest Distribution
Amount; and
(b) the sum, without duplication, of:
(i) the portion of any Group I Class A Carry-Forward
Amount which relates to a shortfall in a distribution
of a Group I Subordination Deficit,
(ii) all scheduled installments of principal in respect of
the Group I Loans received or advanced during the
related Due Period, together with all unscheduled
recoveries of principal in respect of the Group I
Loans received by the Master Servicer during the
prior calendar month (and, on the first Distribution
Date, the Special Deposit),
(iii) the Principal Balance of each Group I Loan that was
repurchased by the Seller, by an Affiliate of the
Seller or by the Company,
(iv) any Substitution Adjustments delivered by the Company
on the related Master Servicer Remittance Date in
connection with a substitution of a Group I Loan,
(v) the Net Liquidation Proceeds collected by the Master
Servicer of all Group I Loans during the related Due
Period (to the extent such Net Liquidation
Proceeds related to principal),
(vi) the amount of any Group I Subordination Deficit for
such Distribution Date,
(vii) the proceeds received by the Trustee with respect to
the Group I Loans from any termination of the Trust
Fund (to the extent such proceeds are related to
principal), and
(viii) the amount of any Group I Subordination Increase
Amount for such Distribution Date;
Minus
-----
(ix) the amount of any Group I Subordination Reduction
Amount for such Distribution Date.
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<PAGE>
"Group II Class A Principal Distribution Amount": With respect
to the Group II Certificates (other than the Group II Fixed Strip Components)
for any Distribution Date, the lesser of:
(a) the excess of (i) the sum, as of such Distribution Date, of
(A) the Group II Available Funds and (B) any related Insured
Payment over (ii) the Group II Class A Interest Distribution
Amount; and
(b) the sum, without duplication, of:
(i) the portion of any Group II Class A Carry-Forward
Amount which relates to a shortfall in a distribution
of a Group II Subordination Deficit,
(ii) all scheduled installments of principal in respect of
the Group II Loans received or advanced during the
related Due Period, together with all unscheduled
recoveries of principal in respect of the Group II
Loans received by the Master Servicer during the
prior calendar month,
(iii) the Principal Balance of each Group II Loan that was
repurchased by the Seller, by an Affiliate of the
Seller or by the Company,
(iv) any Substitution Adjustments delivered by the Company
on the related Master Servicer Remittance Date in
connection with a substitution of a Group II Loan,
(v) the Net Liquidation Proceeds collected by the Master
Servicer of all Group II Loans during the related Due
Period (to the extent such Net Liquidation
Proceeds related to principal),
(vi) the amount of any Group II Subordination Deficit for
such Distribution Date,
(vii) the proceeds received by the Trustee with respect to
the Group II Loans from any termination of the Trust
Fund (to the extent such proceeds are related to
principal), and
(viii) the amount of any Group II Subordination Increase
Amount for such Distribution Date;
Minus
-----
(ix) the amount of any Group II Subordination Reduction
Amount for such Distribution Date.
"Group III Class A Principal Distribution Amount": With
respect to the Group III Class A Certificates (other than the Group III Fixed
Strip Component) for any Distribution Date, the lesser of:
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<PAGE>
(a) the excess of (i) the sum, as of such Distribution Date, of
(A) the Group III Available Funds and (B) any related Insured
Payment over (ii) the Group III Class A Interest Distribution
Amount; and
(b) the sum, without duplication, of:
(i) the portion of any Group III Class A Carry-Forward
Amount which relates to a shortfall in a distribution
of a Group III Subordination Deficit,
(ii) all scheduled installments of principal in respect of
the Group III Loans received or advanced during the
related Due Period, together with all unscheduled
recoveries of principal in respect of the Group III
Loans received by the Master Servicer during the
prior calendar month,
(iii) the Principal Balance of each Group III Loan that
either was repurchased by the Seller, by an Affiliate
of the Seller or by the Company,
(iv) any Substitution Adjustments delivered by the Company
on the related Master Servicer Remittance Date in
connection with a substitution of a Group III Loan,
(v) the Net Liquidation Proceeds collected by the Master
Servicer of all Group III Loans during the related
Due Period (to the extent such Net Liquidation
Proceeds related to principal),
(vi) the amount of any Group III Subordination Deficit for
such Distribution Date,
(vii) the proceeds received by the Trustee with respect to
the Group III Loans of any termination of the Trust
Fund (to the extent such proceeds are related to
principal),
(viii) the amount of any Group III Subordination Increase
Amount for such Distribution Date, and
Minus
-----
(ix) the amount of any Group III Subordination Reduction
Amount for such Distribution Date.
"Group I Delinquency Amount": With respect to any
Distribution Date, the product of the (x) Group I Delinquency Percentage and (y)
the Group I Pool Principal Balance as of such Distribution Date.
"Group II Delinquency Amount": With respect to any
Distribution Date, the product of the (x) Group II Delinquency Percentage and
(y) the Group II Pool Principal Balance as of such Distribution Date.
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<PAGE>
"Group III Delinquency Amount": With respect to any
Distribution Date, the product of the (x) Group III Delinquency Percentage and
(y) the Group III Pool Principal Balance as of such Distribution Date.
"Group I Delinquency Percentage": With respect to any
Distribution Date, the rolling three month average of the percentage equivalent
of a fraction, the numerator of which is (x) the aggregate Principal Balances of
all Group I Loans which are, without duplication, (i) 90 or more days Delinquent
(ii) in bankruptcy and 90 days or more Delinquent under the related Mortgage
Note, (iii) REO Mortgage Loans and (iv) Group I Loans for which foreclosure
proceedings have commenced and the denominator of which is (y) the Group I Pool
Principal Balance as of such Distribution Date.
"Group II Delinquency Percentage": With respect to any
Distribution Date, the rolling three month average of the percentage equivalent
of a fraction, the numerator of which is (x) the aggregate Principal Balances of
all Group II Loans which are, without duplication, (i) 90 or more days
Delinquent (ii) in bankruptcy and 90 days or more Delinquent under the related
Mortgage Note, (iii) REO Mortgage Loans and (iv) Group II Loans for which
foreclosure proceedings have commenced and the denominator of which is (y) the
Group II Pool Principal Balance as of such Distribution Date.
"Group III Delinquency Percentage": With respect to any
Distribution Date, the rolling three month average of the percentage equivalent
of a fraction, the numerator of which is (x) the aggregate Principal Balances of
all Group III Loans which are, without duplication, (i) 90 or more days
Delinquent (ii) in bankruptcy and 90 days or more Delinquent under the related
Mortgage Note, (iii) REO Mortgage Loans and (iv) Group III Loans for which
foreclosure proceedings have commenced and the denominator of which is (y) the
Group III Pool Principal Balance as of such Distribution Date.
"Group I Excess Subordinated Amount": With respect to any
Distribution Date, the difference, if any, between (a) the Group I Subordinated
Amount that would exist on such Distribution Date after taking into account all
distributions to be made on such Distribution Date (exclusive of any reductions
thereto attributable to Group I Subordination Reduction Amounts on such
Distribution Date) and (b) the Group I Required Subordinated Amount for such
Distribution Date.
"Group II Excess Subordinated Amount": With respect to any
Distribution Date, the difference, if any, between (a) the Group II Subordinated
Amount that would exist on such Distribution Date after taking into account all
distributions to be made on such Distribution Date (exclusive of any reductions
thereto attributable to Group II Subordination Reduction Amounts on such
Distribution Date) and (b) the Group II Required Subordinated Amount for such
Distribution Date.
"Group III Excess Subordinated Amount": With respect to any
Distribution Date, the difference, if any, between (a) the Group III
Subordinated Amount that would exist on such Distribution Date after taking into
account all distributions to be made on such Distribution Date (exclusive of any
reductions thereto attributable to Group III Subordination Reduction Amounts
20
<PAGE>
on such Distribution Date) and (b) the Group III Required Subordinated Amount
for such Distribution Date.
"Group I Fixed Strip Components": Any of the Class A-7
Component A, Class A-7 Component B or Class A-7 Component C.
"Group II Fixed Strip Components": Any of the Class A-7
Component D, Class A-7 Component E or Class A-7 Component F.
"Group III Fixed Strip Component": The Class A-7 Component G.
"Group I Fixed Strip Effective Rate": With respect to the
first 12 Distribution Dates, 5.50%. With respect to the 13th through the 24th
Distribution Date, 4.00%. With respect to the 24th through the 30th Distribution
Date, 2.50%. With respect to any Distribution Date after the 30th Distribution
Date, 0.00%.
"Group II Fixed Strip Effective Rate": With respect to the
first 12 Distribution Dates, 5.50%. With respect to the 13th through the 24th
Distribution Date, 4.00%. With respect to the 24th through the 30th Distribution
Date, 2.50%. With respect to any Distribution Date after the 30th Distribution
Date, 0.00%.
"Group I Insured Distribution Amount": With respect to any
Distribution Date, the sum of (a) the Group I Class A Interest Distribution
Amount with respect to such Distribution Date and (b) the Group I Subordination
Deficit, if any, as of such Distribution Date.
"Group II Insured Distribution Amount": With respect to any
Distribution Date, the sum of (a) the Group II Class A Interest Distribution
Amount with respect to such Distribution Date and (b) the Group II Subordination
Deficit, if any, as of such Distribution Date.
"Group III Insured Distribution Amount": With respect to any
Distribution Date, the sum of (a) the Group III Class A Interest Distribution
Amount with respect to such Distribution Date and (b) the Group III
Subordination Deficit, if any, as of such Distribution Date.
"Group I Loans" or "Loan Group I": The group of Mortgage Loans
identified on Exhibit D-1 from time to time.
"Group II Loans" or "Loan Group II": The group of Mortgage
Loans identified on Exhibit D-2 from time to time.
"Group III Loans or "Loan Group III": The group of Mortgage
Loans identified on Exhibit D-3 from time to time.
"Group I Net Monthly Excess Cashflow": As of any Distribution
Date, an amount equal to (x) the Group I Available Funds minus (y) the sum of
(i) the sum of the Group I Class A Interest Distribution Amount and the amount
described in clause (b) of the definition of Group I Class A Principal
Distribution Amount (calculated for this purpose without regard to any Group I
Subordination Increase Amount, Group I Subordination Reduction Amount, Group I
21
<PAGE>
Subordination Deficit or portion thereof included therein) and (ii) the Group I
Reimbursement Amount, if any, for such Distribution Date.
"Group II Net Monthly Excess Cashflow": As of any Distribution
Date, an amount equal to (x) the Group II Available Funds minus (y) the sum of
(i) the sum of the Group II Class A Interest Distribution Amount and the amount
described in clause (b) of the definition of Group II Class A Principal
Distribution Amount (calculated for this purpose without regard to any Group II
Subordination Increase Amount, Group II Subordination Reduction Amount, Group II
Subordination Deficit or portion thereof included therein) and (ii) the Group II
Reimbursement Amount, if any, for such Distribution Date.
"Group III Net Monthly Excess Cashflow": As of any
Distribution Date, an amount equal to (x) the Group III Available Funds minus
(y) the sum of (i) the sum of the Group III Class A Interest Distribution Amount
and the amount described in clause (b) of the definition of Group III Class A
Principal Distribution Amount (calculated for this purpose without regard to any
Group III Subordination Increase Amount, Group III Subordination Reduction
Amount, Group III Subordination Deficit or portion thereof included therein) and
(ii) the Group III Reimbursement Amount, if any, for such Distribution Date.
"Group I Pool Principal Balance": The sum of the aggregate
Principal Balances of the Group I Loans in the Trust Fund as of any date of
determination.
"Group II Pool Principal Balance": The sum of the aggregate
Principal Balances of the Group II Loans in the Trust Fund as of any date of
determination.
"Group III Pool Principal Balance": The sum of the aggregate
Principal Balances of the Group III Loans in the Trust Fund as of any date of
determination.
"Group I Principal Remittance Amount": As of any Distribution
Date, the sum, without duplication of the amounts specified in clauses (b)(ii)
through (v) and (vii) of the definition of Group I Class A Principal
Distribution Amount.
"Group II Principal Remittance Amount": As of any Distribution
Date, the sum, without duplication of the amounts specified in clauses (b)(ii)
through (v) and (vii) of the definition of Group II Class A Principal
Distribution Amount.
"Group III Principal Remittance Amount": As of any
Distribution Date, the sum, without duplication of the amounts specified in
clauses (b)(ii) through (v) and (vii) of the definition of Group III Class A
Principal Distribution Amount.
"Group I Reimbursement Amount": As of any Distribution Date,
the sum of (a)(i) all Group I Insured Payments (as defined in the Group I
Certificate Insurance Policy) previously paid by the Certificate Insurer and in
each case not previously repaid to the Certificate Insurer pursuant to Sections
6.05(b), 6.05(c) or 6.05(d) hereof plus (ii) interest accrued on each such Group
I Insured Payment not previously repaid calculated at a rate equal to the sum of
(A) the Group I Class A Pass-Through Rate on the Class A-1 Certificates and (B)
the Group I Fixed Strip Effective Rate times (x) the Notional Amount of the
Group I Fixed Strip Components divided by
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<PAGE>
(y) the Certificate Principal Balance of the Class A-1 Certificates from the
date such Group I Insured Payment was made and (b)(i) any amounts then due and
owing to the Certificate Insurer under the Insurance Agreement, as certified to
the Trustee by the Certificate Insurer plus (ii) interest on such amounts at the
Late Payment Rate (as defined in the Insurance Agreement). The Certificate
Insurer shall notify the Trustee and the Company of the amount of any Group I
Reimbursement Amount.
"Group II Reimbursement Amount": As of any Distribution Date,
the sum of (a)(i) all Group II Insured Payments (as defined in the Group II
Certificate Insurance Policy) previously paid by the Certificate Insurer and in
each case not previously repaid to the Certificate Insurer pursuant to Sections
6.05(b), 6.05(c) or 6.05(d) hereof plus (ii) interest accrued on each such Group
II Insured Payment not previously repaid calculated at a rate equal to the sum
of (A) the Group II Class A Pass-Through Rate on the Class A-2 Certificates and
(B) the Group II Fixed Strip Effective Rate times (x) the Notional Amount of the
Group II Fixed Strip Components divided by (y) the Certificate Principal Balance
of the Class A-2 Certificates from the date such Group II Insured Payment was
made and (b)(i) any amounts then due and owing to the Certificate Insurer under
the Insurance Agreement, as certified to the Trustee by the Certificate Insurer
plus (ii) interest on such amounts at the Late Payment Rate (as defined in the
Insurance Agreement). The Certificate Insurer shall notify the Trustee and the
Company of the amount of any Group II Reimbursement Amount.
"Group III Reimbursement Amount": As of any Distribution Date,
the sum of (a)(i) all Group III Insured Payments (as defined in the Group III
Certificate Insurance Policy) previously paid by the Certificate Insurer and in
each case not previously repaid to the Certificate Insurer pursuant to Sections
6.05(b), 6.05(c) or 6.05(d) hereof plus (ii) interest accrued on each such Group
III Insured Payment not previously repaid calculated at a rate equal to the sum
of (A) the weighted average of the Group III Class A Pass-Through Rates on the
Group III Class A Certificates (other than the Group III Fixed Strip Component)
and (B) the Group III Class A PassThrough Rate on the Group III Fixed Strip
Component times (x) the Notional Amount of the Group III Fixed Strip Component
divided by (y) the aggregate Certificate Principal Balance of the Group III
Class A Certificates from the date such Group III Insured Payment was made and
(b)(i) any amounts then due and owing to the Certificate Insurer under the
Insurance Agreement, as certified to the Trustee by the Certificate Insurer plus
(ii) interest on such amounts at the Late Payment Rate (as defined in the
Insurance Agreement). The Certificate Insurer shall notify the Trustee and the
Company of the amount of any Group III Reimbursement Amount.
"Group I Required Subordinated Amount": For each Distribution
Date, the amount determined as follows:
(a) for any Distribution Date occurring during the period
commencing on the Closing Date and ending on the later of (x) the date
upon which principal payments on the Group I Loans in the amount of
one-half of the Original Group I Pool Principal Balance have been
received by the Group I Certificateholders and (y) the thirtieth
Distribution Date following the Closing Date, the greater of: (i) the
product of (A) the Initial Group I Specified Subordinated Percentage
and (B) the Original Group I Pool Principal Balance; and (ii) 40% of
the Group I Delinquency Amount as of such Distribution Date:
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<PAGE>
(b) for any Distribution Date occurring after the end of the
period in clause (a) above, the greatest of (i) the product of (x) 2
and (y) the Initial Group I Specified Subordinated Percentage times the
Group I Pool Principal Balance as of such Distribution Date, (ii) 40%
of the Group I Delinquency Amount; and (iii) 0.75% of the Original
Group I Pool Principal Balance;
provided, however, for any Distribution Date occurring after the end of the
period in clause (a) above, if the Group I Delinquency Percentage exceeds 10%,
the Group I Required Subordinated Amount as calculated in clause (b)(i) above,
shall be no less than the Group I Required
Subordinated Amount as of the previous Distribution Date.
"Group II Required Subordinated Amount": For each Distribution
Date, the amount determined as follows:
(a) for any Distribution Date occurring during the period
commencing on the Closing Date and ending on the later of (x) the date
upon which principal payments on the Group II Loans in the amount of
one-half of the Original Group II Pool Principal Balance have been
received by the Group II Certificateholders and (y) the thirtieth
Distribution Date following the Closing Date, the greater of: (i) the
product of (A) the Initial Group II Specified Subordinated Percentage
and (B) the Original Group II Pool Principal Balance; and (ii) 40% of
the Group II Delinquency Amount as of such Distribution Date:
(b) for any Distribution Date occurring after the end of the
period in clause (a) above, the greatest of (i) the product of (x) 2
and (y) the Initial Group II Specified Subordinated Percentage times
the Group II Pool Principal Balance as of such Distribution Date, (ii)
40% of the Group II Delinquency Amount; and (iii) 0.75% of the Original
Group II Pool Principal Balance;
provided, however, for any Distribution Date occurring after the end of the
period in clause (a) above, if the Group II Delinquency Percentage exceeds 10%,
the Group II Required Subordinated Amount as calculated in clause (b)(i) above,
shall be no less than the Group II Required
Subordinated Amount as of the previous Distribution Date.
"Group III Required Subordinated Amount": For each
Distribution Date, the amount determined as follows:
(a) for any Distribution Date occurring during the period
commencing on the Closing Date and ending on the later of (x) the date
upon which principal payments on the Group III Loans in the amount of
one-half of the Original Group III Pool Principal Balance have been
received by the Group III Certificateholders and (y) the thirtieth
Distribution Date following the Closing Date, the greater of: (i) the
product of (A) the Initial Group III Specified Subordinated Percentage
and (B) the Original Group III Pool Principal Balance; and (ii) 40% of
the Group III Delinquency Amount as of such Distribution Date:
(b) for any Distribution Date occurring after the end of the
period in clause (a) above, the greatest of (i) the product of (x) 2
and (y) the Initial Group III Specified Subordinated Percentage times
the Group III Pool Principal Balance as of such Distribution
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<PAGE>
Date, (ii) 40% of the Group III Delinquency Amount; and (iii) 0.75% of
the Original Group III Pool Principal Balance;
provided, however, for any Distribution Date occurring after the end of the
period in clause (a) above, if the Group III Delinquency Percentage exceeds 10%,
the Group III Required Subordinated Amount as calculated in clause (b)(i) above,
shall be no less than the Group III Required Subordinated Amount as of the
previous Distribution Date.
"Group I Subordinated Amount": As of any Distribution Date,
the difference, if any, between (a) the Group I Pool Principal Balance as of the
close of business on the last day of the related Due Period and (b) the
aggregate Certificate Principal Balance of the Class A-1 Certificates as of such
Distribution Date (after taking into account the payment of the Group I
Principal Remittance Amount related to such Distribution Date); PROVIDED,
HOWEVER, that such amount shall not be less than zero.
"Group II Subordinated Amount": As of any Distribution Date,
the difference, if any, between (a) the Group II Pool Principal Balance as of
the close of business on the last day of the related Due Period and (b) the
aggregate Certificate Principal Balance of the Group II Class A Certificates as
of such Distribution Date (after taking into account the payment of the Group II
Principal Remittance Amount related to such Distribution Date); PROVIDED,
HOWEVER, that such amount shall not be less than zero.
"Group III Subordinated Amount": As of any Distribution Date,
the difference, if any, between (a) the Group III Pool Principal Balance as of
the close of business on the last day of the related Due Period and (b) the
aggregate Certificate Principal Balance of the Group III Class A Certificates as
of such Distribution Date (after taking into account the payment of the Group
III Principal Remittance Amount related to such Distribution Date); PROVIDED,
HOWEVER, that such amount shall not be less than zero.
"Group I Subordination Deficiency Amount": With respect to any
Distribution Date, the amount, if any, by which (a) the Group I Required
Subordinated Amount applicable to such Distribution Date exceeds (b) the Group I
Subordinated Amount applicable to such Distribution Date prior to taking into
account the payment of any related Group I Subordination Increase Amounts on
such Distribution Date.
"Group II Subordination Deficiency Amount": With respect to
any Distribution Date, the amount, if any, by which (a) the Group II Required
Subordinated Amount applicable to such Distribution Date exceeds (b) the Group
II Subordinated Amount applicable to such Distribution Date prior to taking into
account the payment of any related Group II Subordination Increase Amounts on
such Distribution Date.
"Group III Subordination Deficiency Amount": With respect to
any Distribution Date, the amount, if any, by which (a) the Group III Required
Subordinated Amount applicable to such Distribution Date exceeds (b) the Group
III Subordinated Amount applicable to such Distribution Date prior to taking
into account the payment of any related Group III Subordination Increase Amounts
on such Distribution Date.
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<PAGE>
"Group I Subordination Deficit": As of any Distribution Date,
the amount, if any, by which (a) the Certificate Principal Balance of the Class
A-1 Certificates (after taking into account the payment of the Group I Class A
Principal Distribution Amount (other than payments made with respect thereto
pursuant to clause (vi) of the definition of Group I Class A Principal
Distribution Amount from amounts drawn under the Group I Certificate Insurance
Policy)) on such date exceeds (b) the Group I Pool Principal Balance determined
as of the end of the immediately preceding Due Period.
"Group II Subordination Deficit": As of any Distribution Date,
the amount, if any, by which (a) the Certificate Principal Balance of the Class
A-2 Certificates (after taking into account the payment of the Group II Class A
Principal Distribution Amount (other than payments made with respect thereto
pursuant to clause (vi) of the definition of Group II Class A Principal
Distribution Amount from amounts drawn under the Group II Certificate Insurance
Policy)) on such date exceeds (b) the Group II Pool Principal Balance determined
as of the end of the immediately preceding Due Period.
"Group III Subordination Deficit": As of any Distribution
Date, the amount, if any, by which (a) the aggregate Certificate Principal
Balance of the Group III Class A Certificates (after taking into account the
payment of the Group III Class A Principal Distribution Amount (other than
payments made with respect thereto pursuant to clause (vi) of the definition of
Group III Class A Principal Distribution Amount from amounts drawn under the
Group III Certificate Insurance Policy)) on such date exceeds (b) the Group III
Pool Principal Balance determined as of the end of the immediately preceding Due
Period.
"Group I Subordination Increase Amount": With respect to any
Distribution Date, the lesser of (a) the Group I Subordination Deficiency Amount
as of such Distribution Date (after taking into account the payment of the Group
I Class A Principal Distribution Amount on such Distribution Date (other than
clause (viii) thereof)) and (b) the amount of Group I Net Monthly Excess
Cashflow on such Distribution Date.
"Group II Subordination Increase Amount": With respect to any
Distribution Date, the lesser of (a) the Group II Subordination Deficiency
Amount as of such Distribution Date (after taking into account the payment of
the Group II Class A Principal Distribution Amount on such Distribution Date
(other than clause (viii) thereof)) and (b) the amount of Group II Net Monthly
Excess Cashflow on such Distribution Date.
"Group III Subordination Increase Amount": With respect to any
Distribution Date, the lesser of (a) the Group III Subordination Deficiency
Amount as of such Distribution Date (after taking into account the payment of
the Group III Class A Principal Distribution Amount on such Distribution Date
(other than clause (viii) thereof)) and (b) the amount of Group III Net Monthly
Excess Cashflow on such Distribution Date.
"Group I Subordination Reduction Amount": With respect to any
Distribution Date, an amount equal to the lesser of (a) the Group I Excess
Subordinated Amount for such Distribution Date and (b) the Group I Principal
Remittance Amount for the prior Due Period.
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<PAGE>
"Group II Subordination Reduction Amount": With respect to any
Distribution Date, an amount equal to the lesser of (a) the Group II Excess
Subordinated Amount for such Distribution Date and (b) the Group II Principal
Remittance Amount for the prior Due Period.
"Group III Subordination Reduction Amount": With respect to
any Distribution Date, an amount equal to the lesser of (a) the Group III Excess
Subordinated Amount for such Distribution Date and (b) the Group III Principal
Remittance Amount for the prior Due Period.
"Index": As to any Group I Loan or Group II Loan, a rate per
annum equal to the average of the interbank offered rates for six month United
States dollar deposits in the London market as published in the Western Edition
of THE WALL STREET JOURNAL, as most recently available as of the first business
day forty-five, thirty or five days prior to any Rate Adjustment Date, as
specified in the related Mortgage Note.
"Indirect Participant": Any financial institution for whom any
Direct Participant holds an interest in a Class A Certificate.
"Initial Group I Specified Subordinated Amount": An amount
equal to the product of (x) the Initial Group I Specified Subordinated
Percentage and (y) the Original Group I Pool Principal Balance.
"Initial Group II Specified Subordinated Amount": An amount
equal to the product of (x) the Initial Group II Specified Subordinated
Percentage and (y) the Original Group II Pool Principal Balance.
"Initial Group III Specified Subordinated Amount": An amount
equal to the product of (x) the Initial Group III Specified Subordinated
Percentage and (y) the Original Group III Pool Principal Balance.
"Initial Group I Specified Subordinated Percentage": A
percentage equal to 4.05%.
"Initial Group II Specified Subordinated Percentage": A
percentage equal to 4.05%.
"Initial Group III Specified Subordinated Percentage": A
percentage equal to 3.05%.
"Insurance Agreement": The Insurance Agreement dated as of
September 1, 1997 among the Certificate Insurer, the Company, the Master
Servicer, the Trustee and Southern Pacific Funding Corporation, as such
agreement may be amended or supplemented in accordance with the provisions
thereof.
"Insurance Proceeds: Proceeds paid by any insurer pursuant to
any insurance policy covering a Mortgage Loan to the extent such proceeds are
not applied to the restoration of the related Mortgaged Property or released to
the related Mortgagor in accordance with Accepted Servicing Practices.
"Insurance Proceeds" do not include "Insured Payments."
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<PAGE>
"Insured Payment": As determined separately for Group I, Group
II and Group III Class A Certificates, the sum of (i) with respect to each
Distribution Date, the related Available Funds Shortfall and (ii) any related
unpaid Preference Amount.
"Interest Determination Date": With respect to any Accrual
Period, the second London Business Day preceding the commencement of such
Accrual Period.
"Lifetime Cap": As to any Mortgage Loan in Loan Group I or
Loan Group II, the maximum Mortgage Interest Rate set forth in the related
Mortgage Note and indicated in the Mortgage Loan Schedule, which rate may be
applicable to such Mortgage Loan at any time during the life of such Mortgage
Loan.
"Lifetime Floor": As to any Mortgage Loan in Loan Group I and
Loan Group II, the minimum Mortgage Interest Rate set forth in the related
Mortgage Note and indicated in the Mortgage Loan Schedule, which rate may be
applicable to such Mortgage Loan at any time during the life of such Mortgage
Loan.
"Liquidated Loan Loss": With respect to any Distribution Date,
the aggregate of the amount of losses with respect to each Mortgage Loan which
became a Liquidated Mortgage Loan during the Due Period preceding such
Distribution Date, equal to the excess, if any, of (i) the unpaid principal
balance of each such Liquidated Mortgage Loan, plus accrued interest thereon in
accordance with the amortization schedule at the time applicable thereto at the
applicable Mortgage Interest Rate from the Due Date as to which interest was
last paid with respect thereto through the last day of the month in which such
Mortgage Loan became a Liquidated Mortgage Loan, over (ii) Net Liquidation
Proceeds with respect to such Liquidated Mortgage Loan.
"Liquidated Mortgage Loan": A Mortgage Loan with respect to
which the related Mortgaged Property has been acquired, liquidated and/or
foreclosed and with respect to which the Master Servicer determines that all
Liquidation Proceeds which it expects to recover have been recovered.
"Liquidation Expenses": Expenses incurred by the Master
Servicer or any Subservicer in connection with the liquidation of any defaulted
Mortgage Loan or property acquired in respect thereof (including, without
limitation, legal fees and expenses, committee or referee fees, and, if
applicable, brokerage commissions and conveyance taxes), any unreimbursed amount
expended by the Master Servicer pursuant to Sections 5.05, 5.06 and 5.12
respecting the related Mortgage Loan and any unreimbursed expenditures for real
property taxes or for property restoration or preservation of the related
Mortgaged Property. Liquidation Expenses shall not include any previously
incurred expenses in respect of an REO Mortgage Loan which have been netted
against related REO Proceeds.
"Liquidation Proceeds": Amounts received by the Master
Servicer (including Insurance Proceeds) in connection with the liquidation of
defaulted Mortgage Loans or property acquired in respect thereof, whether
through foreclosure, sale or otherwise, including payments in connection with
such Mortgage Loans received from the Mortgagor, other than amounts required to
be paid to the Mortgagor pursuant to the terms of the applicable Mortgage or to
be applied otherwise pursuant to law.
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<PAGE>
"Liquidation Report": A report in the form set forth hereto as
Exhibit S.
"Loan Repurchase Price": As defined in Section 2.04(b).
"Loan-to-Value Ratio or LTV": With respect to any Mortgage
Loan, the fraction, expressed as a percentage, the numerator of which is the
principal balance of such Mortgage Loan, as of the date of origination of the
Mortgage Loan, divided by the Appraised Value of the related Mortgaged Property.
"Lockout Certificates": The Class A-6 Certificates.
"Lockout Certificate Percentage": As of each Distribution
Date, the percentage equal to the aggregate Certificate Principal Balance of the
Lockout Certificates divided by the sum of the aggregate Certificate Principal
Balances of the Group II Class A Certificates.
"Lockout Distribution Percentage": With respect to any
Distribution Date, the percentage indicated below:
<TABLE>
<CAPTION>
Distribution Date Lockout Distribution Percentage
----------------- -------------------------------
<S> <C>
September 1997 through
August 2000............................................. 0%
September 2000 through
August 2002............................................. 45% of the Lockout Certificate Percentage
September 2002 through
August 2003............................................. 80% of the Lockout Certificate Percentage
September 2003 through
August 2004............................................. 100% of the Lockout Certificate Percentage
September 2004 and the lesser of (x) 100% and (y) 300% of the
thereafter.............................................. Lockout Certificate Percentage
</TABLE>
Notwithstanding the foregoing, if the Certificate Principal Balances of the
Group II Class A Certificates (other than the Lockout Certificates) have been
reduced to zero, the Lockout Distribution Percentage will be equal to 100%.
"London Business Day": Any day on which banks in the City of
London, England are open and conducting transactions in United States dollars.
"Majority Certificateholders": As of any date, the Holder or
Holders of Class A Certificates evidencing an excess of 50% of the Voting Rights
of the Class A Certificates.
"Master Servicer": Advanta Mortgage Corp. USA, a Delaware
corporation, or any successor appointed as herein provided.
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<PAGE>
"Master Servicer Remittance Amount": With respect to any
Master Servicer Remittance Date, an amount equal to the sum of (i) all
unscheduled collections of principal and interest on the Mortgage Loans
(including Principal Prepayments in Full and Curtailments, Net REO Proceeds and
Net Liquidation Proceeds, if any) collected by the Master Servicer during the
prior calendar month and all scheduled Monthly Payments due on the related Due
Date and received on or prior to the Business Day preceding such Master Servicer
Remittance Date, (ii) all Periodic Advances made by the Master Servicer with
respect to payments due to be received on the Mortgage Loans on the related Due
Date and (iii) any other amounts required to be placed in the Collection Account
by the Master Servicer pursuant to this Agreement but excluding the following:
(a) amounts received on particular Mortgage Loans as late
payments of principal or interest and respecting which the Master Servicer has
previously made an unreimbursed
Periodic Advance;
(b) those portions of each payment of interest on a particular
Mortgage Loan which represent the Servicing Fee;
(c) that portion of Liquidation Proceeds and REO Proceeds
which represents any unpaid Servicing Fee;
(d) all income from Permitted Investments that is held in the
Collection Account for the account of the Master Servicer;
(e) all amounts in respect of late fees, assumption fees,
prepayment fees and similar fees;
(f) certain other amounts which are reimbursable to the Master
Servicer, as provided in this Agreement; and
(g) Net Foreclosure Profits.
"Master Servicer Remittance Date": With respect to any
Distribution Date, the 18th of the month in which such Distribution Date occurs,
or if such 18th day is not a Business Day, the Business Day preceding such 18th
day.
"Monthly Payment": As to any Mortgage Loan (including any REO
Mortgage Loan) and any Due Date, the scheduled payment of principal and interest
due thereon for such Due Date (after adjustment for any Curtailments and
Deficient Valuations occurring prior to such Due Date but before any adjustment
to such amortization schedule by reason of any bankruptcy, other than Deficient
Valuations or similar proceeding or any moratorium or similar waiver or grace
period).
"Moody's": Moody's Investors Service, Inc., or any successor
thereto.
"Mortgage": The mortgage, deed of trust or other instrument
creating a first lien on the Mortgaged Property.
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<PAGE>
"Mortgage File": The mortgage documents listed in Exhibit C
attached hereto pertaining to a particular Mortgage Loan and any additional
documents required to be added to the Mortgage File pursuant to this Agreement;
provided that whenever the term "Mortgage File" is used to refer to documents
actually received by the Trustee, such term shall not be deemed to include such
additional documents required to be added unless they are actually so added.
"Mortgage Impairment Insurance Policy": As defined in Section
5.07.
"Mortgage Interest Rate": As to any Group I Loan, the per
annum rate at which interest accrues on the unpaid principal balance thereof, as
adjusted from time to time in accordance with the provisions of the related
Mortgage Note, which rate is (a) prior to the first related Rate Adjustment Date
occurring after the Cut-off Date, the initial Mortgage Interest Rate for such
Mortgage Loan indicated on the Mortgage Loan Schedule and (b) from and after
such first Rate Adjustment Date, the sum of the related Index applicable to the
most recent Rate Adjustment Date, and the Gross Margin, rounded as set forth in
such Mortgage Note, subject to the Periodic Cap, the Lifetime Cap and Lifetime
Floor set forth in the related Mortgage Note that may be applicable to such
Mortgage Loan at any time during the life of such Mortgage Loan. As to any Group
II Loan, the fixed per annum rate at which interest accrued on the unpaid
principal balance thereof, which rate is the Mortgage Interest Rate for such
Group II Loan indicated on the related Mortgage Loan Schedule.
"Mortgage Loan": An individual mortgage loan which is assigned
and transferred to the Trustee pursuant to this Agreement, together with the
rights and obligations of a holder thereof and payments thereon and proceeds
therefrom (other than payments of interest that accrued on each Mortgage Loan up
to and including the Due Date therefor occurring, with respect to the Mortgage
Loans prior to the Cut-off Date), the Mortgage Loans originally subject to this
Agreement being identified on the Mortgage Loan Schedule. As applicable,
Mortgage Loan shall be deemed to refer to the related REO Property.
"Mortgage Loan Documents": As defined in Section 2.03(a).
"Mortgage Loan Group": The Group I Loans, Group II Loans or
Group III Loans. References herein to "Mortgage Loan Group" when used with
respect to any Certificate shall mean (i) Group I Loans, in the case of the
Group I Certificates, (ii) Group II Loans, in the case of the Group II
Certificates, or (iii) Group III Loans, in the case of the Group III
Certificates.
"Mortgage Loan Interest Shortfall": With respect to any
Distribution Date, as to the Mortgage Loans in either Loan Group, the sum of (a)
any Civil Relief Act Interest Shortfalls in respect of such Mortgage Loans for
such Distribution Date and (b) any related Master Servicer Default Prepayment
Interest Shortfall. A "Master Servicer Default Prepayment Interest Shortfall"
will only exist on a Distribution Date with respect to which the Master Servicer
has defaulted on its obligations under Sections 5.20 and 6.09 with respect to
Prepayment Interest Shortfalls and on such a Distribution Date will equal, for
Loan Group I, Loan Group II and Loan Group III in the aggregate, the excess of
(i) the aggregate maximum amount of Compensating Interest required pursuant to
Sections 5.20 and 6.09 to have been paid by the Master Servicer or a Subservicer
or netted against the Master Servicer's aggregate Servicing Fee for such
Distribution Date over (ii)
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<PAGE>
the amount of Compensating Interest actually paid by the Master Servicer or a
Subservicer or actually netted against the Master Servicer's aggregate Servicing
Fee for such Distribution Date.
"Mortgage Loan Schedule": The lists of the Mortgage Loans
transferred to the Trustee on or before the Closing Date as part of the Trust
Fund and attached hereto as Exhibits D-1, D-2 and D-3 and delivered in computer
readable format, which list shall set forth at a minimum the following
information as to each Mortgage Loan:
(i) the Mortgage Loan identifying number;
(ii) the city, state and zip code of the Mortgaged Property;
(iii) the type of property;
(iv) the current Monthly Payment as of the Cut-off Date;
(v) the original number of months to maturity;
(vi) the scheduled maturity date;
(vii) the Principal Balance as of the Cut-off Date;
(viii) the Loan-to-Value Ratio at origination;
(ix) the Mortgage Interest Rate as of the Cut-off Date;
(x) the Mortgage Interest Rate at origination;
(xi) the Gross Margin (with respect to Group I Loans and Group II
Loans) and the frequency of the adjustment thereof;
(xii) the first Rate Adjustment Date (with respect to Group I
II Loans) after the Cut-off Date;
(xiii) the first Rate Adjustment Date after origination and
the frequency of adjustment (with respect to Group I
Loans and Group Loans and Group II Loans);
(xiv) the Lifetime Cap (with respect to Group I Loans and Group II
Loans);
(xv) the Lifetime Floor (with respect to Group I Loans and Group
II Loans);
(xvi) the Appraised Value;
(xvii) the stated purpose of the loan at origination;
(xviii) the type of occupancy at origination;
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<PAGE>
(xix) the documentation type (as described in the Underwriting
Guidelines);
(xx) the Periodic Cap (with respect to Group I Loans and Group II
Loans);
(xxi) the loan classification (as described in the Underwriting
Guidelines);
(xxii) the related Index (with respect to Group I Loans and Group
II Loans) and the look-back period for such Mortgage Loan;
and
(xxiii) the Servicing Fee with respect to such Mortgage Loan,
expressed as a rate per annum.
Such schedule may consist of multiple reports that collectively set forth all of
the information required.
"Mortgage Note": The original, executed note or other evidence
of indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage
Loan.
"Mortgaged Property": The underlying property securing a
Mortgage Loan, consisting of a fee simple estate in a single parcel of land
improved by a Residential Dwelling.
"Mortgagor": The obligor on a Mortgage Note.
"Net Foreclosure Profits": As to any Distribution Date, an
amount equal to (i) the aggregate Foreclosure Profits with respect to such
Distribution Date minus (ii) Liquidated Loan
Losses with respect to such Distribution Date.
"Net Lifetime Cap": With respect to each Mortgage Loan in Loan
Group I and Loan Group II at any time of determination, a sum equal to (i) the
Lifetime Cap on such Mortgage Loan minus (ii) the sum of the per annum rates
used to determine the related Servicing Fee and
Trustee Fee and the Premium Percentage.
"Net Liquidation Proceeds": As to any Liquidated Mortgage
Loan, Liquidation Proceeds net of Liquidation Expenses and net of any
unreimbursed Periodic Advances and unreimbursed Servicing Advances made by the
Master Servicer. For all purposes of this Agreement, Net Liquidation Proceeds
shall be allocated first to accrued and unpaid interest on the related Mortgage
Loan and then to the unpaid principal balance thereof.
"Net Mortgage Interest Rate": With respect to each Mortgage
Loan at any time of determination, a rate equal to (i) the Mortgage Interest
Rate on such Mortgage Loan minus (ii) the sum of the per annum rates used to
determine the related Servicing Fee and Trustee Fee and the Premium Percentage.
Any regular monthly computation of interest at such rate shall be based upon
annual interest at such rate on the applicable amount divided by twelve.
"Net REO Proceeds": As to any REO Mortgage Loan, REO Proceeds
net of any related expenses of the Master Servicer.
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<PAGE>
"Nonrecoverable Advances": With respect to any Mortgage Loan,
(a) any Periodic Advance or Servicing Advance previously made and not reimbursed
from late collections pursuant to Section 5.04(b), or (b) a Periodic Advance or
Servicing Advance proposed to be made in respect of a Mortgage Loan or REO
Property either of which, in the good faith business judgment of the Master
Servicer, as evidenced by an Officer's Certificate delivered to the Certificate
Insurer and the Trustee would not be ultimately recoverable pursuant to Sections
5.04 and Section 6.02.
"Non-United States Person": Any Person other than a United
States Person.
"Notional Amount": As of any Distribution Date, with respect
to the Group I Fixed Strip Components, an amount equal to the Uncertificated
Balance of REMIC I Regular Interest LT-AZ1. As of any Distribution Date, with
respect to the Group II Fixed Strip Components, an amount equal to the
Uncertificated Balance of REMIC I Regular Interest LT-AZII. As of any
Distribution Date, with respect to the Group III Fixed Strip Component, an
amount equal to the Uncertificated Balance of REMIC I Regular Interest LT-FZ
immediately prior to such date.
"Officer's Certificate": A certificate signed by the Chairman
of the Board, the President or a Vice President and the Treasurer, the Secretary
or one of the Assistant Treasurers or Assistant Secretaries of the Seller and/or
the Master Servicer, or the Company, as required by this Agreement.
"One-Month LIBOR": With respect to any Accrual Period, the
rate determined by the Trustee on the related Interest Determination Date on the
basis of the offered rates of the Reference Banks for one-month United States
dollar deposits, as such rates appear on the Telerate Screen Page 3750 as of
11:00 A.M., London, England time, on the Interest Determination Date. If such
rate does not appear on such page (or such other page as may replace that page
on that service, or if such service is no longer offered, such other service for
displaying One-Month LIBOR or comparable rates as may be reasonably selected by
the Trustee), the rate will be the Reference Bank Rate. If no such quotations
can be obtained and no Reference Bank Rate is available, One-Month LIBOR will be
One-Month LIBOR applicable to the preceding Distribution Date.
"Opinion of Counsel": A written opinion of counsel, who may,
without limitation, be counsel for the Seller, the Master Servicer, the Trustee,
a Certificateholder or a Certificateholder's prospective transferee or the
Certificate Insurer (including except as otherwise provided herein, in-house
counsel) reasonably acceptable to each addressee of such opinion and experienced
in matters relating to the subject of such opinion; except that any opinion of
counsel relating to (a) the qualification of REMIC I and REMIC II under the
REMIC Provisions must be an opinion of counsel who (i) is in fact independent of
the Seller, the Master Servicer and the Trustee, (ii) does not have any direct
financial interest or any material indirect financial interest in the Seller or
the Master Servicer or the Trustee or in an Affiliate thereof, (iii) is not
connected with the Seller or the Master Servicer or the Trustee as an officer,
employee, director or person performing similar functions and (iv) is reasonably
acceptable to the Certificate Insurer.
"Original Group I Pool Principal Balance": The Group I Pool
Principal Balance as of the Cut-off Date and the amount of the Special Deposit,
which is $252,306,000.00.
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"Original Group II Pool Principal Balance": The Group II Pool
Principal Balance as of the Cut-off Date, which is $88,232,430.20.
"Original Group III Pool Principal Balance": The Group III
Pool Principal Balance as of the Cut-off Date, which is $109,468,481.20.
"Original Certificate Principal Balance": As of the Startup
Day and as to the Class A-1 Certificates, $252,306,000.00, as to the Class A-2
Certificates, $88,232,000.00, as to the Class A-3 Certificates, $39,982,000.00,
as to the Class A-4 Certificates, $34,467,000.00, as to the Class A-5
Certificates, $24,067,000.00, and as to the Class A-6 Certificates,
$10,946,000.00. The Class A-7 and Class R Certificates do not have an Original
Certificate Principal Balance.
"Original Pool Principal Balance": The Pool Principal Balance
as of the Cut-off Date, which is $450,006,911.40.
"Outstanding Mortgage Loan": As to any Due Date, a Mortgage
Loan (including an REO Mortgage Loan) which was not the subject of a Principal
Prepayment in Full prior to such Due Date, which did not become a Liquidated
Mortgage Loan prior to such Due Date, which was not repurchased by the Seller
prior to such Due Date pursuant to Section 2.04 and which was not repurchased by
an Affiliate of the Seller pursuant to Section 5.18.
"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.
"Owner-Occupied Mortgaged Property": A Residential Dwelling as
to which (a) the related Mortgagor represented an intent to occupy as such
Mortgagor's primary, secondary or vacation residence at the origination of the
Mortgage Loan, and (b) the Seller has no actual knowledge that such Residential
Dwelling is not so occupied.
"Percentage Interest": With respect to a Class A Certificate
and any date of determination, the portion evidenced by such Certificate,
expressed as a percentage rounded to four decimal places, equal to a fraction
the numerator of which is the initial Authorized Denomination represented by
such Certificate and the denominator of which is the Original Certificate
Principal Balance of such Certificate. With respect to a Class R Certificate and
any date of determination, the portion evidenced thereby as stated on the face
of such Certificate.
"Periodic Advance": The aggregate of the advances with respect
to Mortgage Loans and REO Properties required to be made by the Master Servicer
on any Master Servicer Remittance Date pursuant to Section 5.21 hereof, the
amount of any such advances being equal to the sum of: (i) with respect to the
Mortgage Loans (other than Balloon Mortgage Loans with delinquent Balloon
Payments as described in clause (iii) below and other than REO Properties as
described in clauses (ii) and (iv) below), all Monthly Payments (net of the
related Servicing Fee) on such Mortgage Loans that were delinquent as of the
close of business on the Business Day preceding the related Master Servicer
Remittance Date, plus (ii) with respect to each REO Property (other than any REO
Property relating to a Balloon Mortgage Loan with a delinquent Balloon Payment
as described in clause (iv) below), which REO Property was acquired during or
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prior to the related Due Period and as to which an REO Disposition did not occur
during the related Due Period, an amount equal to the Monthly Payment (net of
the related Servicing Fee) for the most recently ended Due Period for the
related Mortgage Loan minus the net income from such REO Property transferred to
the related Certificate Account for such Distribution Date, plus (iii) with
respect to each Balloon Mortgage Loan with a delinquent Balloon Payment (other
than any related REO Property as described in clause (iv) below), an amount
equal to the assumed monthly principal and interest payment (net of the related
Servicing Fee) that would have been due on the related Due Date based on the
original principal amortization schedule for such Balloon Mortgage Loan, plus
(iv) with respect to each REO Property relating to a Balloon Mortgage Loan with
a delinquent Balloon Payment, which REO Property was acquired during or prior to
the related Due Period and as to which an REO Disposition did not occur during
the related Due Period, an amount equal to the assumed monthly principal and
interest payment (net of the related Servicing Fee) that would have been due on
the related Due Date based on the original principal amortization schedule for
the related Balloon Mortgage Loan minus the net income from such REO Property
transferred to the related Certificate Account for such Distribution Date, minus
(v) the amount of any advance otherwise required for such Distribution Date
pursuant to clauses (i) through (iv) above which the Master Servicer has
determined to be a Nonrecoverable Advance.
"Periodic Cap": With respect to each Group I Loan and Group II
Loan, the provision in the related Mortgage Note that provides for an absolute
maximum amount by which the Mortgage Interest Rate therein may increase or
decrease on a Rate Adjustment Date above or below the Mortgage Interest Rate
previously in effect.
"Permitted Investments": As used herein, Permitted Investments
shall include the following:
(a) direct general obligations of, or obligations fully and
unconditionally guaranteed as to the timely payment of principal and
interest by, the United States or any agency or instrumentality
thereof, provided such obligations are backed by the full faith and
credit of the United States and any obligation of, or guaranties by,
FHLMC or
FNMA
(other than senior debt obligations and mortgage pass-through
certificates guaranteed by FHLMC or FNMA) shall be a Permitted
Investment; PROVIDED THAT at the time of such investment, such
investment is acceptable to the Certificate Insurer, but excluding any
of such securities whose terms do not provide for payment of a fixed
dollar amount upon maturity or call for redemption;
(b) federal funds and certificates of deposit, time and demand
deposits and banker's acceptances issued by any bank or trust company
incorporated under the laws of the United States or any state thereof
and subject to supervision and examination by federal or state banking
authorities, provided that at the time of such investment or
contractual commitment providing for such investment the short-term
debt obligations of such bank or trust company at the date of
acquisition thereof have been rated in its highest rating by each
Rating Agency;
(c) commercial paper (having original maturities of not more
than 180 days) rated in its highest rating by each Rating Agency;
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(d) investments in money market funds rated in its highest
rating by each Rating Agency, including funds for which the Trustee
acts as an advisor; and
(e) investments approved by the Rating Agencies and the
Certificate Insurer in writing delivered to the Trustee;
provided that each such Permitted Investment shall be a "permitted investment"
within the meaning of Section 860G(a)(5) of the Code and that no instrument
described hereunder shall evidence either the right to receive (x) only interest
with respect to the obligations underlying such instrument or (y) both principal
and interest payments derived from obligations underlying such instrument and
the interest and principal payments with respect to such instrument provided a
yield to maturity at par greater than 120% of the yield to maturity at par of
the underlying obligations; and provided, further, that no instrument described
hereunder may be purchased at a price greater than par.
"Permitted Transferee": Any transferee of a Class R
Certificate other than a Non- United States Person or Disqualified Organization.
"Person": Any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, national banking association,
unincorporated organization or government or any agency or political subdivision
thereof.
"Plan": Any employee benefit plan and certain other retirement
plans and arrangements, including individual retirement accounts and annuities,
and Keogh plans, and bank collective investment funds and insurance company
general or separate accounts in which such plans, accounts or arrangements are
invested, that are subject to the prohibited transaction and fiduciary
responsibility provisions of ERISA and Section 4975 of the Code.
"Policy Business Day": A Business Day as defined in the
Certificate Insurance Policy.
"Pool Principal Balance": The sum of the Group I, Group II and
Group III Pool Principal Balance as of any date of determination.
"Preference Amount": Any amount previously distributed to a
Class A Certificateholder that is recoverable and sought to be recovered as a
voidable preference by a trustee in bankruptcy pursuant to the United States
Bankruptcy Code as amended from time to time, in accordance with a final
nonappealable order of a court having competent jurisdiction.
"Preference Claim": As defined in Section 6.04(f).
"Premium Amount": As determined separately with respect to the
Group I Loans, Group II Loans and Group III Loans, with respect to (i) the first
two Distribution Dates, $0.00, and (ii) the third Distribution Date and each
Distribution Date thereafter, the product of 1/12 of the Premium Percentage and
the aggregate Certificate Principal Balance of the Group I, Group II and Group
III Class A Certificates, as applicable, immediately prior to the related
Distribution Date.
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"Premium Exhibit": The document attached hereto as Exhibit R.
"Premium Percentage": With respect to any Group I Loan, Group
II Loan or Group III Loan, the rate per annum set forth in the Premium Exhibit.
"Prepayment Assumption": With respect to (i) the Group I
Certificates and Group II Certificates, a constant prepayment rate of 25% and
(ii) the Group III Certificates, a 115% Prepayment Assumption (i.e. a 100%
Prepayment Assumption multiplied by 1.15), used solely for determining the
accrual of original issue discount, market discount and premium, if any, on the
Certificates for federal income tax purposes. A 100% Prepayment Assumption
assumes a constant prepayment rate of 3.0% per annum for the first month,
increasing each month by an additional approximate 1.5454% (precisely 17/11)
(expressed as a percentage per annum) until such rate reaches 20.00% (on the
twelfth month) and remaining level at 20.00% thereafter.
"Prepayment Interest Shortfall": With respect to any
Distribution Date, for each Mortgage Loan that was the subject during the
related Due Period of a Principal Prepayment in Full or Curtailment, an amount
equal to (a) 30 days' interest on the Principal Balance of such Mortgage Loan or
the amount of such Curtailment at a per annum rate equal to the Mortgage
Interest Rate (or at such lower rate as may be in effect for such Mortgage Loan
pursuant to application of the Civil Relief Act, any Deficient Valuation and/or
any Debt Service Reduction) minus the rate at which the Servicing Fee is
calculated minus (b) the amount of interest actually remitted by the Mortgagor
in connection with such Principal Prepayment in Full or Curtailment less the
Servicing Fee for such Mortgage Loan in such month.
"Principal Balance": As to any Mortgage Loan and Distribution
Date, the principal balance of such Mortgage Loan as of the Due Date preceding
such date of determination as specified for such Due Date in the amortization
schedule (before any adjustment to such amortization schedule by reason of any
bankruptcy (other than Deficient Valuations) or similar proceeding or any
moratorium or similar waiver or grace period) after giving effect to Principal
Prepayments in Full or Curtailments received prior to such Due Date, Deficient
Valuations incurred prior to such Due Date, to any Curtailments applied by the
Master Servicer in reduction of the unpaid principal balance of such Mortgage
Loan as of such Due Date and to the payment of principal due on such Due Date
and irrespective of any delinquency in payment by the related Mortgagor. The
Principal Balance of a Mortgage Loan which becomes a Liquidated Mortgage Loan
prior to such Due Date shall be zero.
"Principal Prepayment in Full": Any payment or other recovery
of principal on a Mortgage Loan equal to the outstanding principal balance
thereof, received in advance of the final scheduled Due Date which is not
intended as an advance payment of a scheduled Monthly Payment.
"Purchase Agreement": The Mortgage Loan Purchase Agreement,
dated as of the date hereof, between the Seller and the Company relating to the
sale of the Mortgage Loans to the Company.
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"Qualified Mortgage": "Qualified Mortgage" shall have the
meaning set forth from time to time in the definition thereof at Section
860G(a)(3) of the Code (or any successor statute thereto).
"Qualified Substitute Mortgage Loan": A mortgage loan or
mortgage loans substituted for a Deleted Mortgage Loan pursuant to Section 2.04
or 3.03 hereof, which (a)(i) with respect to a Group I Loan or Group II Loan,
has or have the same interest rate index, a margin over such index and a maximum
interest rate at least equal to those applicable to the Deleted Mortgage Loan
and (ii) with respect to a Group III Loan, has the same or greater interest
rate, (b) relates or relate to a detached one-family residence or to the same
type of Residential Dwelling as the Deleted Mortgage Loan and in each case has
or have the same or a better lien priority as the Deleted Mortgage Loan and has
the same occupancy status or is an Owner Occupied Mortgaged Property, (c)
matures or mature no later than (and not more than one year earlier than) the
Deleted Mortgage Loan (except during the first 90 days after the Cut-off Date),
(d) has or have a Loan-to-Value Ratio or Loan-to-Value Ratios at the time of
such substitution no higher than the Loan-to-Value Ratio of the Deleted Mortgage
Loan, (e) has or have a principal balance or principal balances (after
application of all payments received on or prior to the date of substitution)
not substantially less and not more than the Principal Balance of the Deleted
Mortgage Loan as of such date, (f) satisfies or satisfy the criteria set forth
from time to time in the definition of "qualified replacement mortgage" at
Section 860G(a)(4) of the Code (or any successor statute thereto) and (g)
complies or comply as of the date of substitution with each representation and
warranty set forth in Sections 3.01 and 3.02 of the Purchase Agreement.
"Rate Adjustment Date": The date on which the Mortgage
Interest Rate is adjusted with respect to each Group I Loan and Group II Loan.
The first Rate Adjustment Date for each Group I Loan and Group II Loan is set
forth on the Mortgage Loan Schedule.
"Rating Agency": S&P, DCR or Moody's.
"Record Date": With respect to the first Distribution Date,
the Closing Date. With respect to any Distribution Date thereafter, the close of
business on the last Business Day of the month immediately preceding the month
of such Distribution Date.
"Reference Bank Rate": With respect to any Accrual Period, as
follows: the arithmetic mean (rounded upwards, if necessary, to the nearest one
sixteenth of a percent) of the offered rates for United States dollar deposits
for one month which are offered by the Reference Banks as of 11:00 A.M., London,
England time, on the Interest Determination Date to prime banks in the London
interbank market for a period of one month in amounts approximately equal to the
aggregate outstanding Certificate Principal Balance of the Class A-1
Certificates and Class A-2 Certificates; PROVIDED that at least two such
Reference Banks provide such rate. If fewer than two offered rates appear, the
Reference Bank Rate will be the arithmetic mean of the rates quoted by one or
more major banks in New York City, selected by the Trustee, as of 11:00 a.m.,
New York time, on such date for loans in U.S. Dollars to leading European Banks
for a period of one month in amounts approximately equal to the aggregate
outstanding Certificate Principal Balance of the Class A-1 Certificates and
Class A-2 Certificates. If no such quotations can be obtained, the Reference
Bank Rate shall be the Reference Bank Rate applicable to the preceding
Distribution Date.
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"Reference Banks": Bankers Trust Company, Barclay's Bank PLC
and National Westminster Bank PLC.
"Released Mortgaged Property Proceeds": As to any Mortgage
Loan, proceeds received by the Master Servicer in connection with (a) a taking
of an entire Mortgaged Property by exercise of the power of eminent domain or
condemnation or (b) any release of part of the Mortgaged Property from the lien
of the related Mortgage, whether by partial condemnation, sale or otherwise;
which are not released to the Mortgagor in accordance with applicable law,
Accepted Servicing Practices and this Agreement.
"REMIC": A "real estate mortgage investment conduit" within
the meaning of Section 860D of the Code.
"REMIC I": The segregated pool of assets subject hereto,
constituting the trust created hereby and to be administered hereunder,
consisting of: (a) such Mortgage Loans as from time to time are subject to this
Agreement, together with the Mortgage Files relating thereto and all collections
thereon and proceeds thereof after the Cut-off Date, (b) such assets as from
time to time are identified as deposited in the Certificate Accounts (including
the Special Deposit), (c) such assets as from time to time are identified as REO
Property and collections thereon and proceeds thereof, assets that are deposited
in the Accounts, including amounts on deposit in the Accounts and invested in
Permitted Investments, (d) the Trustee's rights with respect to the Mortgage
Loans under all insurance policies required to be maintained pursuant to this
Agreement (including the Certificate Insurance Policy) and any Insurance
Proceeds (and any proceeds of the Certificate Insurance Policy), (e) Liquidation
Proceeds, (f) Released Mortgaged Property Proceeds and (g) the representations
and warranties of the Seller pursuant to the Purchase Agreement.
"REMIC I Regular Interest": Any of the six separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a "regular interest" in REMIC I. Each REMIC I Regular Interest
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto. The
designations for the respective REMIC I Regular Interests are set forth in the
Preliminary Statement hereto.
"REMIC I Regular Interest LT-AYI": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest LT-AYI
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
"REMIC I Regular Interest LT-AZI": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest LT-AZI
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto
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"REMIC I Regular Interest LT-AYII": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest LT-AYII
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
"REMIC I Regular Interest LT-AZII": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest LT-AZII
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
"REMIC I Regular Interest LT-FY": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest LT-FY
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
"REMIC I Regular Interest LT-FZ": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest LT-FZ
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.
"REMIC I Remittance Rate": With respect to REMIC I Regular
Interest LT-AYI and LT-AZI, the weighted average of the Net Mortgage Interest
Rates on the then outstanding Mortgage Loans and REO Properties in Group I. With
respect to REMIC I Regular Interest LT- AYII and LT-AZII, the weighted average
of the Net Mortgage Interest Rates on the then outstanding Mortgage Loans and
REO Properties in Group II. With respect to REMIC I Regular Interest LT-FY and
LT-FZ, the weighted average of the Net Mortgage Interest Rates on the then
outstanding Mortgage Loans and REO Properties in Group III.
"REMIC II": The segregated pool of assets consisting of the
Uncertificated REMIC II Regular Interests conveyed in trust to the Trustee for
the benefit of the holders of the Class A-1, Class A-2, Class A-3, Class A-4,
Class A-5, Class A-6 and Class A-7 Certificates pursuant to Section 2.06, with
respect to which a separate REMIC election is to be made.
"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 I of the Code, and related
provisions, and temporary and final regulations promulgated thereunder and
published rulings, notices and announcements, as the foregoing may be in effect
from time to time.
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"REO Acquisition": The acquisition of any REO Property
pursuant to Section 5.12.
"REO Disposition": The final sale by the Master Servicer of a
Mortgaged Property acquired by the Master Servicer in foreclosure or by deed in
lieu of foreclosure.
"REO Mortgage Loan": Any Mortgage Loan which is not a
Liquidated Mortgage Loan and as to which the indebtedness evidenced by the
related Mortgage Note is discharged and the related Mortgaged Property is held
as part of the Trust Fund.
"REO Proceeds": Proceeds received in respect of any REO
Mortgage Loan (including, without limitations, proceeds from the rental of the
related Mortgaged Property).
"REO Property": As described in Section 5.12.
"Representation Letter": Letters to, or agreements with, the
Depository to effectuate a book entry system with respect to the Class A
Certificates registered in the Certificate Register under the nominee name of
the Depository.
"Request for Release": A request for release in substantially
the form attached as Exhibit H hereto.
"Reserve Interest Rate": With respect to any Interest
Determination Date, the rate per annum that the Trustee determines to be either
(i) the arithmetic mean (rounded upwards if necessary to the nearest whole
multiple of 1/16%) of the three-month United States dollar lending rates which
New York City banks selected by the Trustee are quoting on the relevant Interest
Determination Date to the principal London offices of leading banks in the
London interbank market or (ii) in the event that the Trustee can determine no
such arithmetic mean, the lowest three-month United States dollar lending rate
which New York City banks selected by the Trustee are quoting on such Interest
Determination Date to leading European banks.
"Residential Dwelling": A one- to four-family dwelling, a unit
in a planned unit development, a unit in a condominium development, a townhouse
or a manufactured housing unit which is non-mobile.
"Responsible Officer": When used with respect to the Trustee,
any officer assigned to the Corporate Trust Division (or any successor thereto),
including any Vice President, Senior Trust Officer, Trust Officer, Assistant
Trust Officer, any Assistant Secretary, any trust officer or any other officer
of the Trustee customarily performing functions similar to those performed by
any of the above designated officers and to whom, with respect to a particular
matter, such matter is referred because of such officer's knowledge of and
familiarity with the particular subject. When used with respect to the Seller or
the Master Servicer, the President or any Vice President, Assistant Vice
President, or any Secretary or Assistant Secretary.
"S&P": Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. or any successor thereto.
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"Seller": Southern Pacific Funding Corporation, or its
successor.
"Servicing Account": The account created and maintained
pursuant to Section 5.09.
"Servicing Advances": All reasonable and customary
"out-of-pocket" costs and expenses relating to a borrower default or delinquency
or other unanticipated event incurred by the Master Servicer in the performance
of its servicing obligations, including, but not limited to, the cost of (a) the
preservation, restoration and protection of the Mortgaged Property including,
without limitation, taxes and insurance costs, (b) any enforcement or judicial
proceedings, including foreclosures, (c) the management and liquidation of the
REO Property, including reasonable fees paid to any independent contractor in
connection therewith, (d) compliance with the obligations under Sections 5.02
(limited solely to the reasonable and customary out-of-pocket expenses of the
subservicer), 5.05, 5.07, 5.09 or 5.10, all of which reasonable and customary
out-of-pocket costs and expenses are reimbursable to the Master Servicer to the
extent provided in Section 5.04(a) and (b).
"Servicing Compensation": The Servicing Fee and other amounts
to which the Master Servicer is entitled pursuant to Section 5.14.
"Servicing Fee": As to each Mortgage Loan, the annual fee
payable to the Master Servicer and the related Subservicer, if any, as indicated
on the related Mortgage Loan Schedule. Such fee shall be 0.50% per annum. Such
fee shall be calculated and payable monthly only from the amounts received in
respect of interest on such Mortgage Loan and shall be computed on the basis of
the same principal amount and for the period respecting which any related
interest payment on a Mortgage Loan is computed. The Servicing Fee includes any
servicing fees owed or payable to any Subservicer.
"Servicing Officer": Any officer of the Master Servicer
involved in, or responsible for, the administration and servicing of the
Mortgage Loans whose name and specimen signature appear on a list of servicing
officers furnished to the Trustee and the Certificate Insurer by the Master
Servicer, as such list may from time to time be amended.
"Special Deposit": As defined in Section 2.01(a) hereof.
"Startup Day": The day designated as such pursuant to Section
10.01(b) hereof.
"Subservicer": Any Person with whom the Master Servicer has
entered into a Subservicing Agreement and who satisfies the requirements set
forth in Section 5.02(a) hereof in respect of the qualification of a
Subservicer.
"Subservicing Agreement": Any agreement between the Master
Servicer and any Subservicer relating to subservicing and/or administration of
certain Mortgage Loans as provided in Section 5.02, a copy of which shall be
delivered, along with any modifications thereto, to the Trustee and the
Certificate Insurer.
"Substitution Adjustment": As to any date on which a
substitution occurs pursuant to Sections 2.04 or 3.03, the amount (if any) by
which the aggregate principal balances (after
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application of principal payments received on or before the date of substitution
of any Qualified Substitute Mortgage Loans as of the date of substitution), are
less than the aggregate of the Principal Balances of the related Deleted
Mortgage Loans.
"Tax Matters Person": The Person or Persons appointed pursuant
to Section 10.01(c) from time to time to act as the "tax matters person" (within
the meaning of the REMIC Provisions) of the Trust Fund.
"Tax Return": The federal income tax return on Internal
Revenue Service Form 1066, U.S. Real Estate Mortgage Investment Conduit Income
Tax Return, including Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of REMIC Taxable Income or Net Loss Allocation, or any successor forms,
to be filed on behalf of REMIC I and REMIC II due to their classification as
REMICs 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.
"Transfer": Any direct or indirect transfer, sale, pledge,
hypothecation or other form of assignment of any Ownership Interest in a
Certificate.
"Transfer Affidavit And Agreement": As defined in Section
4.02(j).
"Transferee": Any Person who is acquiring by Transfer any
Ownership Interest in a Certificate.
"Transferor": Any Person who is disposing by Transfer any
Ownership Interest in a Certificate.
"Trustee": Norwest Bank Minnesota, N.A., or its successor in
interest, or any successor trustee appointed as herein provided.
"Trustee Fee": As to any Distribution Date, the fee payable to
the Trustee in respect of its services as Trustee that accrues at a monthly rate
equal to 1/12 of 0.0075% of the sum of the Principal Balance of each Mortgage
Loan as of the immediately preceding Due Date.
"Trustee Remittance Report": As defined in Section 6.07.
"Trust Fund": REMIC I and REMIC II.
"12 Month Loss Amount": With respect to any Distribution Date,
an amount equal to the aggregate of all Liquidation Loan Losses on the Mortgage
Loans which became Liquidated Mortgage Loans during the 12 preceding Due
Periods.
"UCC": The Uniform Commercial Code in effect in the applicable
jurisdiction.
"UCC Financing Statement": A financing statement executed and
filed pursuant to the UCC.
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"Uncertificated Balance": The amount of any REMIC I Regular
Interest outstanding as of any date of determination. As of the Closing Date,
the Uncertificated Balance of each REMIC I Regular Interest shall equal the
amount set forth in the Preliminary Statement hereto as its initial
uncertificated balance. On each Distribution Date, the Uncertificated Balance of
each REMIC I Regular Interest shall be reduced by all distributions of principal
made on such REMIC I Regular Interest, as applicable, on such Distribution Date
pursuant to Section 6.12.
"Uncertificated Interest": With respect to any REMIC I Regular
Interest for any Distribution Date, one month's interest at the REMIC I
Remittance Rate applicable to such REMIC I Regular Interest for such
Distribution Date, accrued on the Uncertificated Balance thereof immediately
prior to such Distribution Date. Uncertificated Interest in respect of any REMIC
I Regular Interest shall accrue on the basis of a 360-day year consisting of
twelve 30-day months. Uncertificated Interest with respect to each Distribution
Date, as to any REMIC I Regular Interest shall be reduced by an amount equal to
a PRO RATA portion of the sum of (a) the aggregate Prepayment Interest
Shortfall, if any, for such Distribution Date to the extent not covered by
Compensating Interest and (b) the aggregate amount of any Relief Act Interest
Shortfall, if any, for such Distribution Date.
"Underwriters": Morgan Stanley & Co. Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Lehman Brothers Inc.
"Underwriting Guidelines": The underwriting guidelines of the
Seller.
"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 whose income is subject to United States federal income tax regardless of
its source, or a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more United
States fiduciaries have the authority to control all substantial decisions of
the trust.
"Unpaid REO Amortization": As to any REO Mortgage Loan and any
month, the aggregate of the installments of principal and accrued interest
(adjusted to the related Net Mortgage Interest Rate) deemed to be due in such
month and in any prior months that remain unpaid, calculated in accordance with
Section 5.12.
"Voting Rights": The portion of the voting rights of all of
the Certificates which is allocated to any Class A Certificate. 99.0% of all of
the Voting Rights shall be allocated among Holders of Class A Certificates,
other than the Class A-7 Certificates, in proportion to the outstanding
Certificate Principal Balances of their respective Certificates; and 1% of all
Voting Rights shall be allocated to the Holders of the Class A-7 Certificates,
allocated among the Certificates of each such Class in accordance with their
respective Percentage Interests.
Section 1.02 PROVISIONS OF GENERAL APPLICATION. (a) All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP.
(b) The terms defined in this Article include the plural as
well as the singular.
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(c) The words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole. All references to
Articles and Sections shall be deemed to refer to Articles and Sections of this
Agreement.
(d) Reference to statutes are to be construed as including all
statutory provisions consolidating, amending or replacing the statute to which
reference is made and all regulations
promulgated pursuant to such statutes.
(e) All calculations of interest (other than with respect to
the Mortgage Loans, or as otherwise specifically set forth herein) provided for
herein shall be made on the basis of a 360- day year and the actual number of
days elapsed in the related period. All calculations of interest with respect to
any Mortgage Loan provided for herein shall be made in accordance with the terms
of the related Mortgage Note and Mortgage or, if such documents do not specify
the basis upon which interest accrues thereon, on the basis of a 360-day year
and the actual number of days elapsed in the related period, to the extent
permitted by applicable law.
(f) Any Mortgage Loan payment is deemed to be received on the
date such payment is actually received by the Master Servicer, provided,
however, that for purposes of calculating distributions on the Certificates,
prepayments with respect to any Mortgage Loan are deemed to be received on the
date they are applied in accordance with customary servicing practices
consistent with the terms of the related Mortgage Note and Mortgage to reduce
the outstanding principal balance of such Mortgage Loan on which interest
accrues.
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ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01 CONVEYANCE OF MORTGAGE LOANS; SPECIAL DEPOSIT;
PRIORITY AND SUBORDINATION OF OWNERSHIP INTERESTS. (a) The Company does hereby
sell, transfer, assign, set over and convey to the Trustee without recourse but
subject to the provisions in this Section 2.01 and the other terms and
provisions of this Agreement, all of the right, title and interest of the
Company in and to the Mortgage Loans (other than payment of interest and
principal due thereon on or before the Cut-off Date), and all other assets
included or to be included in the Trust Fund for the benefit of the
Certificateholders and the Certificate Insurer. In connection with such transfer
and assignment, and pursuant to Section 2.06 of the Purchase Agreement, the
Company does hereby also irrevocably transfer, assign, set over and otherwise
convey to the Trustee all of its rights under the Purchase Agreement including,
without limitation, its right to exercise the remedies created by Sections 2.05
and 3.04 of the Purchase Agreement for breaches of representations and
warranties, agreements and covenants of the Seller contained in Sections 3.01
and 3.02 of the Purchase Agreement.
In addition, the Company shall make a special deposit (the
"Special Deposit") on the Closing Date of $154.30 into the Group I Certificate
Account. The Special Deposit shall be made without regard to recoverability, and
shall not be reimbursable. In no event shall the Trustee or Master Servicer be
liable for the payment of the Special Deposit.
(b) The rights of the Certificateholders to receive payments
with respect to the Mortgage Loans in respect of the Certificates, and all
ownership interests of the Certificateholders in such payments, shall be as set
forth in this Agreement. In this regard, all rights of the Class R
Certificateholders to receive payments in respect of the Class R Certificates
are subject and subordinate to the preferential rights of the Class A
Certificateholders to receive payments in respect of the Class A Certificates
and to the Certificate Insurer's rights to be reimbursed for Group I, Group II
and Group III Insured Payments together with interest thereon at the rate
specified herein or in the Insurance Agreement. In accordance with the
foregoing, the ownership interest of the Class R Certificateholders in amounts
deposited in the Group I, Group II and Group III Certificate Account from time
to time shall not vest unless and until such amounts are distributed in respect
of the Class R Certificates in accordance with the terms of this Agreement.
(c) It is intended that the conveyance of the Mortgage Loans
by the Company to the Trustee as provided in this Section be, and be construed
as, a sale of the Mortgage Loans by the Company to the Trustee for the benefit
of the Certificateholders. It is, further, not intended that such conveyance be
deemed a pledge of the Mortgage Loans by the Company to the Trustee to secure a
debt or other obligation of the Company. However, in the event that the Mortgage
Loans are held to be property of the Company, or if for any reason this
Agreement is held or deemed to create a security interest in the Mortgage Loans,
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 this Section 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
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(including the power to convey title thereto), title and interest, whether now
owned or hereafter acquired, in and to (A) the Mortgage Loans, including the
Mortgage Notes, the Mortgages, any related insurance policies and all other
documents in the related Mortgage Files, (B) all amounts payable to the holders
of the Mortgage Loans in accordance with the terms thereof and (C) 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 Accounts or the
Collection 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 the Seller'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)
through (C) granted by the Seller to the Company pursuant to the Purchase
Agreement; (c) the possession by the Trustee or its agent of Mortgage Notes and
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 New York
Uniform Commercial Code and the Uniform Commercial Code of any other applicable
jurisdiction (including, without limitation, Sections 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 written direction of the Company, the Seller 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, such security interest would
be deemed to be a perfected security interest of first priority under applicable
law and will be maintained as such throughout the term of the Agreement.
Section 2.02 POSSESSION OF MORTGAGE FILES; ACCESS TO MORTGAGE
FILES. (a) Upon the issuance of the Certificates, the ownership of each Mortgage
Note, the Mortgage and the contents of the Mortgage File related to each
Mortgage Loan is vested in the Trustee for the benefit of the Certificateholders
and the Certificate Insurer.
(b) Pursuant to Section 2.04 of the Purchase Agreement, the
Company has delivered or caused to be delivered the Mortgage File related to
each Mortgage Loan to the Trustee.
(c) The Trustee may enter into a custodial agreement pursuant
to which the Trustee will appoint a custodian (a "Custodian") to hold the
Mortgage Files in trust for the benefit of all present and future
Certificateholders and the Certificate Insurer; provided, however, that the
custodian so appointed shall in no event be the Company or the Master Servicer
or any Person known to a Responsible Officer of the Trustee to be an Affiliate
of the Company or the Master Servicer. The Trustee hereby appoints Norwest Bank
Minnesota, N.A. as the initial Custodian.
(d) The Custodian shall afford the Company, the Certificate
Insurer and the Master Servicer reasonable access to all records and
documentation regarding the Mortgage Loans relating to this Agreement, such
access being afforded at customary charges, upon reasonable request and during
normal business hours at the offices of the Custodian.
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Section 2.03 DELIVERY OF MORTGAGE LOAN DOCUMENTS AND
CERTIFICATE INSURANCE POLICY. (a) In connection with each conveyance pursuant to
Section 2.01 hereof, the Company has delivered or does hereby agree to deliver
or cause to be delivered to the Trustee on or before the Closing Date, the
Certificate Insurance Policy, the Mortgage Loan Schedule and each of the
following documents (the "Mortgage Loan Documents") for each Mortgage Loan sold
by the Seller to the Company and sold by the Company to the Trust Fund:
(i) The original Mortgage Note bearing all intervening
endorsements showing a complete chain of endorsements from the
originator of such Mortgage Loan to the Seller, endorsed by the Seller
without recourse in the following form: "Pay to the order of--------
--------, without recourse" and signed in the name of the Seller by an
authorized officer;
(ii) The original Mortgage with evidence of recording
indicated thereon;
(iii) An original assignment of the original Mortgage, in
suitable form for recordation in the jurisdiction in which the related
Mortgaged Property is located, such assignment to be in blank and
signed in the name of the Seller by an authorized officer;
(iv) The originals of all intervening assignments of the
Mortgage (with evidence of recording thereon) showing a complete chain
of assignments from the originator of such
Mortgage Loan to the Seller;
(v) Any assumption, modification (with evidence of
recording thereon), consolidation or extension agreements;
(vi) The original policy of title insurance (or a
commitment for title insurance, if the policy is being held by the
title insurance company pending recordation of the Mortgage); and
(vii) The certificate of primary mortgage guaranty
insurance, if any, issued with respect to such Mortgage Loan;
PROVIDED, HOWEVER, that as to certain Mortgages or assignments thereof which
have been delivered or are being delivered to recording offices for recording
and have not been returned to the Seller in time to permit their delivery
hereunder at the time of such transfer, in lieu of delivering such original
documents, the Company shall deliver to the Trustee a true copy thereof with a
certification by the Seller on the face of such copy substantially as follows:
"certified true and correct copy of original which has been transmitted for
recordation". The Company will cause the Seller to deliver such original
documents, together with any related policy of title insurance not previously
delivered, on behalf of the Company to the Trustee promptly after they are
received, but in any event no later than 120 days after the Closing Date. The
Company agrees, at its own expense, to complete each assignment to the Trustee
and to record (or to provide the Trustee with evidence of recordation thereof)
each assignment referred to in clause (iii) above promptly after the Closing
Date in the appropriate public office for real property records, provided that
such assignments are redelivered by the Trustee to the Seller upon the Seller's
written request and at the Seller's expense, unless the Seller (at its expense)
furnishes to the Trustee, the Certificate Insurer and the Rating Agencies an
unqualified Opinion of Counsel reasonably
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acceptable to the Trustee to the effect that recordation of such assignment is
not necessary under applicable state law to preserve the Trustee's interest in
the related Mortgage Loan against the claim of any subsequent transferee of such
Mortgage Loan or any successor to, or creditor of, the
Seller.
Within a period of 14 days from the Closing Date, the Trustee
shall complete the endorsement of each Mortgage Note such that the final
endorsement appears in the following form:
"Pay to the order of Norwest Bank Minnesota, N.A., as Trustee
under that certain Pooling and Servicing Agreement dated as of
September 1, 1997, for Southern Pacific Secured Assets Corp.,
Mortgage Loan Asset-Backed Pass-Through Certificates, Series
1997-3, without recourse."
Within a period of 14 days from the Closing Date, the Trustee
shall also complete each Assignment of Mortgage such that the final Assignment
of Mortgage appears in the following form:
"Norwest Bank Minnesota, N.A., as Trustee under that certain
Pooling and Servicing Agreement dated as of September 1, 1997,
for Southern Pacific Secured Assets Corp., Mortgage Loan
AssetBacked Pass-Through Certificates, Series 1997-3."
(b) In the event that any such original document is required
pursuant to the terms of this Section 2.03 to be a part of a Mortgage File, such
document shall be delivered promptly by the Company to the Trustee. In acting as
custodian of any such original document, the Master Servicer agrees further that
it does not and will not have or assert any beneficial ownership interest in the
Mortgage Loans or the Mortgage Files.
Section 2.04 ACCEPTANCE BY TRUSTEE OF THE TRUST FUND; CERTAIN
SUBSTITUTIONS; CERTIFICATION BY TRUSTEE. (a) The Trustee agrees to execute and
deliver to the Company, the Certificate Insurer, the Master Servicer and the
Seller on or prior to the Closing Date an acknowledgment of receipt of the
Certificate Insurance Policy and, with respect to each Mortgage Loan, on or
prior to the Closing Date, an acknowledgement of receipt of the original
Mortgage Note (with any exceptions noted), in the form attached as Exhibit E
hereto and declares that it will hold such documents and any amendments,
replacements or supplements thereto, as well as any other assets included in the
definition of Trust Fund and delivered to the Trustee, as Trustee in trust upon
and subject to the conditions set forth herein for the benefit of the
Certificateholders and the Certificate Insurer. The Trustee agrees, for the
benefit of the Certificateholders and the Certificate Insurer, to review (or
cause to be reviewed) each Mortgage File within 45 Business Days after the
Closing Date, and to deliver to the Seller, the Master Servicer, the Company and
the Certificate Insurer a certification in the form attached hereto as Exhibit F
to the effect that, as to each Mortgage Loan listed in the related Mortgage Loan
Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan
specifically identified in such certification as not covered by such
certification), (i) all documents required to be delivered to it pursuant to
Section 2.03 are in its possession, (ii) each such document has been reviewed by
it and has not been mutilated,
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damaged, torn or otherwise physically altered (handwritten additions, changes or
corrections shall not constitute physical alteration if initialed by the
Mortgagor), appears regular on its face and relates to such Mortgage Loan, and
(iii) based on its examination and only as to the foregoing documents, the
information set forth on the Mortgage Loan Schedule as to the information set
forth in (i), (ii), (v), (vi), (x), (xi), (xiii), (xiv), (xv), (xx) and (xxii)
of the definition of "Mortgage Loan Schedule" set forth herein accurately
reflects the information set forth in the Mortgage File delivered on such date.
The Trustee makes no representations as to and shall not be responsible to
verify (i) the validity, legality, enforceability, sufficiency, due
authorization, recordability or genuineness of any of the documents contained in
each Mortgage File or of any of the Mortgage Loans or (ii) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan.
By December 27, 1997, the Trustee shall deliver (or cause to be
delivered) to the Master Servicer, the Seller, the Company and the Certificate
Insurer a final certification in the form attached hereto as Exhibit G to the
effect that, as to each Mortgage Loan listed in the Mortgage Loan Schedule
(other than any Mortgage Loan paid in full or any Mortgage Loan specifically
identified in such certification as not covered by such certification), (i) all
documents required to be delivered to it pursuant to Section 2.03 are in its
possession, (ii) each such document has been reviewed by it and has not been
mutilated, damaged, torn or otherwise physically altered (handwritten additions,
changes or corrections shall not constitute physical alteration if initialed by
the Mortgagor), appears regular on its face and relates to such Mortgage Loan,
and (iii) based on its examination and only as to the foregoing documents, the
information set forth in (i), (ii), (v), (vi), (x), (xi), (xiii), (xiv), (xv),
(xx) and (xxii) of the definition of "Mortgage Loan Schedule" set forth herein
accurately reflects the information set forth in the Mortgage File delivered on
such date.
(b) If the Certificate Insurer or the Trustee during the
process of reviewing the Mortgage Files finds any document constituting a part
of a Mortgage File which is not executed, has not been received, is unrelated to
the Mortgage Loan identified in the related Mortgage Loan Schedule, or does not
conform to the requirements of Section 2.03 or the description thereof as set
forth in the related Mortgage Loan Schedule, the Trustee or the Certificate
Insurer, as applicable, shall promptly so notify the Master Servicer, the
Seller, the Certificate Insurer and the Trustee. In performing any such review,
the Trustee may conclusively rely on the Seller as to the purported genuineness
of any such document and any signature thereon. It is understood that the scope
of the Trustee's review of the Mortgage Files is limited solely to confirming
that the documents listed in Section 2.03 have been executed and received and
relate to the Mortgage Files identified in the related Mortgage Loan Schedule
and such documents conform to the standard set forth in clause (ii) of the
paragraph directly above. The Trustee shall request that the Seller cure any
such defect within 60 days from the date on which the Seller was notified of
such defect, and if the Seller does not cure such defect in all material
respects during such period, request that the Seller (i) substitute in lieu of
such Mortgage Loan a Qualified Substitute Mortgage Loan in the manner and
subject to the conditions set forth in Section 3.03 or (ii) purchase such
Mortgage Loan on the next succeeding Master Servicer Remittance Date at a
purchase price equal to the actual stated principal balance of such Mortgage
Loan as of the date of purchase, plus all accrued and unpaid interest on such
principal balance computed at the Mortgage Interest Rate, plus the amount of any
unpaid Servicing Fees, unreimbursed Periodic Advances and unreimbursed Servicing
Advances made by the Master Servicer with respect to such Mortgage Loan, which
purchase price
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shall be deposited in the Collection Account on the same Business Day, after
deducting therefrom any amounts received in respect of such repurchased Mortgage
Loan or Loans and being held in the Collection Account for future distribution
to the extent such amounts have not yet been applied to principal or interest on
such Mortgage Loan (the "Loan Repurchase Price"). It is understood and agreed
that the obligation of the Seller to so cure or purchase any Mortgage Loan 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. In addition,
it is understood and agreed that the Company has assigned to the Trustee all of
its rights under the Purchase Agreement and the right to enforce any remedy
against the Seller as provided in Section 2.05 of the Purchase Agreement. For
purposes of calculating the amount the Master Servicer is required to remit on
the Master Servicer Remittance Date following such repurchase or substitution,
any Loan Repurchase Price or Substitution Adjustment that is paid and deposited
in the related Collection Account as provided above shall be deemed to have been
deposited in the related Collection Account in the Due Period preceding such
Master Servicer Remittance Date.
(c) Upon receipt by the Trustee of a certification of a
Servicing Officer of such substitution or purchase and, in the case of a
substitution, upon receipt of the related Mortgage File, and the deposit of the
amounts described above in the Collection Account (which certification shall be
in the form of Exhibit H hereto), the Trustee shall release to the Master
Servicer for release to the Seller the related Mortgage File and shall execute,
without recourse, and deliver such instruments of transfer furnished by the
Seller as may be necessary to transfer such Mortgage Loan to the Seller. The
Trustee shall notify the Certificate Insurer if the Seller fails to repurchase
or substitute for a Mortgage Loan in accordance with the foregoing.
Section 2.05 EXECUTION OF CERTIFICATES. The Trustee
acknowledges the assignment to it of the Mortgage Loans and the delivery of the
Mortgage Files relating thereto to it and, concurrently with such delivery, has
executed, authenticated and delivered to or upon the order of the Company, in
exchange for the Mortgage Loans, the Mortgage Files and the other assets
included in the definition of Trust Fund, Certificates duly authenticated by the
Trustee in Authorized Denominations evidencing the entire ownership of the Trust
Fund.
Section 2.06 FURTHER ACTION EVIDENCING ASSIGNMENTS. (a) The
Company agrees that, from time to time, at the Seller's expense, the Company
shall cause the Seller promptly to execute and deliver all further instruments
and documents, and take all further action, that may be necessary or
appropriate, or that the Master Servicer or the Trustee may reasonably request,
in order to perfect, protect or more fully evidence the transfer of ownership of
the Trust Fund or to enable the Trustee to exercise or enforce any of its rights
hereunder. Without limiting the generality of the foregoing, the Company will,
upon the request of the Master Servicer or of the Trustee execute and file (or
cause to be executed and filed) such real estate filings, financing or
continuation statements, or amendments thereto or assignments thereof, and such
other instruments or notices, as may be necessary or appropriate.
(b) The Company hereby grants to the Master Servicer and the
Trustee powers of attorney to execute all documents on its behalf under this
Agreement and the Purchase Agreement as may be necessary or desirable to
effectuate the foregoing.
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Section 2.07 [RESERVED].
Section 2.08 CONVEYANCE OF REMIC I REGULAR INTERESTS;
ACCEPTANCE OF REMIC II BY THE TRUSTEE. The Company, concurrently with the
execution and delivery hereof, does hereby transfer, assign, set over and
otherwise convey to the Trustee without recourse all the right, title and
interest of the Company in and to the REMIC I Regular Interests for the benefit
of the Certificateholders and the Certificate Insurer. The Trustee acknowledges
receipt of the REMIC I Regular Interests (which are uncertificated) and declares
that it holds and will hold the same in trust for the exclusive use and benefit
of all present and future Certificateholders and the Certificate Insurer.
Section 2.09 ISSUANCE OF CLASS R-II CERTIFICATES. The Trustee
acknowledges the assignment to it of the REMIC I Regular Interests and,
concurrently therewith and in exchange therefor, pursuant to the written request
of the Company executed by an officer of the Company, the Trustee has executed,
authenticated and delivered to or upon the order of the Company, the Class R-II
Certificates in authorized denominations. The interests evidenced by the Class
R-II Certificates, together with the Regular Certificates, constitute the entire
beneficial ownership interest in REMIC II.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 REPRESENTATIONS OF THE MASTER SERVICER. The
Master Servicer hereby represents and warrants to the Trustee, the Company, the
Certificate Insurer and the Certificateholders as of the Closing Date:
(a) The Master Servicer is a Delaware corporation duly
organized, validly existing and in good standing under the laws of the
state of its incorporation and is in compliance with the laws of each
state in which any Mortgaged Property is located to the extent
necessary to enable it to perform its obligations under the terms of
this Agreement; the Master Servicer has the full corporate power and
authority to execute and deliver this Agreement and to perform in
accordance herewith; the execution, delivery and performance of this
Agreement by the Master Servicer and the consummation of the
transactions contemplated hereby have been duly and validly authorized;
this Agreement evidences the valid, binding and enforceable obligation
of the Master Servicer; and all requisite corporate action has been
taken by the Master Servicer to make this Agreement valid and binding
upon the Master Servicer in accordance with its terms;
(b) Neither the execution and delivery of this Agreement, nor
the fulfillment of or compliance with the terms and conditions of this
Agreement, will conflict with or result in a breach of any of the
terms, conditions or provisions of the Master Servicer's charter or
by-laws or any legal restriction or any agreement or instrument to
which the Master Servicer is now a party or by which it is bound, or
constitute a default or result in an acceleration under any of the
foregoing, or result in the violation of any law, rule, regulation,
order, judgment or decree to which the Master Servicer or its property
is subject, or impair the ability of the Trustee (or the Master
Servicer as the agent of the Trustee) to realize on the Mortgage Loans,
or impair the value of the Mortgage Loans;
(c) The Master Servicer is an approved seller/servicer of
conventional residential mortgage loans for FNMA and FHLMC;
(d) There is no action, suit, proceeding or investigation
pending or, to the knowledge of the Master Servicer, threatened against
the Master Servicer which, either in any one instance or in the
aggregate, may result in any material adverse change in the business,
operations, financial condition, properties or assets of the Master
Servicer, or in any material impairment of the right or ability of the
Master Servicer to carry on its business substantially as now
conducted, or of any action taken or to be taken in connection with the
obligations of the Master Servicer contemplated herein, or which would
materially impair the ability of the Master Servicer to perform under
the terms of this Agreement;
(e) No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery
and performance by the Master Servicer of or compliance by the Master
Servicer with this Agreement or the Mortgage
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Loans or the consummation of the transactions contemplated by this
Agreement, or if required, such approval has been obtained prior to the
Closing Date; and
(f) Neither this Agreement nor any statement, report or other
document furnished by the Master Servicer pursuant to this Agreement or
in connection with the transactions contemplated hereby contains any
untrue statement of material fact regarding the Master Servicer or
omits to state a material fact necessary to make the statements
regarding the Master Servicer contained herein or therein not
misleading.
It is understood and agreed that the representations and warranties set forth in
this Section 3.01 shall survive the delivery of the respective Mortgage Files to
the Trustee or to a custodian, as the case may be, and inure to the benefit of
the Trustee, the Certificateholders and the Certificate
Insurer.
Section 3.02 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
COMPANY. The Company hereby represents, warrants and covenants to the Trustee,
the Certificateholders and the Certificate Insurer that as of the date of this
Agreement or as of such date specifically provided herein:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
California;
(b) The Company has the corporate power and authority to
convey the Mortgage Loans and to execute, deliver and perform, and to
enter into and consummate transactions contemplated by, this Agreement;
(c) This Agreement has been duly and validly authorized,
executed and delivered by the Company, all requisite corporate action
having been taken, and, assuming the due authorization, execution and
delivery hereof by the Master Servicer and the Trustee, constitutes or
will constitute the legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as
such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting the rights of creditors generally, and by general equity
principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(d) No consent, approval, authorization or order of or
registration or filing with, or notice to, any governmental authority
or court is required for the execution, delivery and performance of or
compliance by the Company with this Agreement or the consummation by
the Company of any of the transactions contemplated hereby, except as
have been made on or prior to the Closing Date;
(e) None of the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or thereby, or the
fulfillment of or compliance with the terms and conditions of this
Agreement, (i) conflicts or will conflict with or results or will
result in a breach of, or constitutes or will constitute a default or
results or will result in an acceleration under (A) the charter or
bylaws of the Company, or (B) of any term,
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condition or provision of any material indenture, deed of trust,
contract or other agreement or instrument to which the Company or any
of its subsidiaries is a party or by which it or any of its
subsidiaries is bound; (ii) results or will result in a violation of
any law, rule, regulation, order, judgment or decree applicable to the
Company of any court or governmental authority having jurisdiction over
the Company or its subsidiaries; or (iii) results in the creation or
imposition of any lien, charge or encumbrance which would have a
material adverse effect upon the Mortgage Loans or any documents or
instruments evidencing or securing the Mortgage Loans;
(f) There are no actions, suits or proceedings before or
against or investigations of, the Company pending, or to the knowledge
of the Company, threatened, before any court, administrative agency or
other tribunal, and no notice of any such action, which, in the
Company's reasonable judgment, might materially and adversely affect
the performance by the Company of its obligations under this Agreement,
or the validity or enforceability of this Agreement; and
(g) The Company is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal,
state, municipal or governmental agency that would materially and
adversely affect its performance hereunder.
It is understood and agreed that the representations, warranties and covenants
set forth in this Section 3.02 shall survive delivery of the respective Mortgage
Files to the Trustee or to a custodian, as the case may be, and shall inure to
the benefit of the Trustee, the Certificateholders
and the Certificate Insurer.
Section 3.03 PURCHASE AND SUBSTITUTION. (a) It is
understood and agreed that the representations and warranties set forth in
Sections 3.01 and 3.02 of the Purchase Agreement shall survive delivery of the
Certificates to the Certificateholders. Pursuant to the Purchase Agreement, with
respect to any representation or warranty contained in Sections 3.01 and 3.02 of
the Purchase Agreement that is made to the best of the Seller's knowledge, if it
is discovered by the Master Servicer, any Subservicer, the Trustee, the
Certificate Insurer or any Certificateholder that the substance of such
representation and warranty was inaccurate as of the Closing Date and such
inaccuracy materially and adversely affects the value of the related Mortgage
Loan, then notwithstanding the Seller's lack of knowledge with respect to the
inaccuracy at the time the representation or warranty was made, such inaccuracy
shall be deemed a breach of the applicable representation or warranty. Upon
discovery by the Seller, the Master Servicer, any Subservicer, the Trustee or
the Certificate Insurer of a breach of any of such representations and
warranties which materially and adversely affects the value of the Mortgage
Loans or the interest of the Certificateholders or the Certificate Insurer, or
which materially and adversely affects the interests of the Certificate Insurer
or the Certificateholders in the related Mortgage Loan in the case of a
representation and warranty relating to a particular Mortgage Loan
(notwithstanding that such representation and warranty was made to the Seller's
best knowledge), the party discovering such breach shall give prompt written
notice to the others. Subject to the last paragraph of this Section 3.03, within
60 days of the earlier of its discovery or its receipt of notice of any breach
of a representation or warranty, pursuant to the Purchase Agreement, the Seller
shall be required to (a) promptly cure such breach in all material respects, or
(b) purchase such Mortgage Loan on the next succeeding Master Servicer
Remittance Date, in the manner and at the price specified in
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Section 2.04(b), or (c) remove such Mortgage Loan from the Trust Fund (in which
case it shall become a Deleted Mortgage Loan) and substitute one or more
Qualified Substitute Mortgage Loans; provided, that, such substitution is
effected not later than the date which is two years after the Startup Day or at
such later date, if the Trustee and the Certificate Insurer receive an Opinion
of Counsel to the effect set forth below in this Section. Pursuant to the
Purchase Agreement, any such substitution shall be accompanied by payment by the
Seller of the Substitution Adjustment, if any, to be deposited in the Collection
Account.
(b) As to any Deleted Mortgage Loan for which the Seller
substitutes a Qualified Substitute Mortgage Loan or Loans, the Seller shall be
required pursuant to the Purchase Agreement to effect such substitution by
delivering to the Trustee a certification in the form attached hereto as Exhibit
H, executed by a Servicing Officer and the documents described in Sections
2.03(a)(i)-(vi) for such Qualified Substitute Mortgage Loan or Loans.
(c) The Master Servicer shall deposit in the Collection
Account all payments received in connection with such Qualified Substitute
Mortgage Loan or Loans after the date of such substitution. Monthly Payments
received with respect to Qualified Substitute Mortgage Loans on or before the
date of substitution will be retained by the Seller. The Trust Fund will own all
payments received on the Deleted Mortgage Loan on or before the date of
substitution, and the Seller shall thereafter be entitled to retain all amounts
subsequently received in respect of such Deleted Mortgage Loan. The Master
Servicer shall give written notice to the Trustee and the Certificate Insurer
that such substitution has taken place and shall amend the Mortgage Loan
Schedule to reflect the removal of such Deleted Mortgage Loan from the terms of
this Agreement and the substitution of the Qualified Substitute Mortgage Loan.
Upon such substitution, such Qualified Substitute Mortgage Loan or Loans shall
be subject to the terms of this Agreement in all respects.
(d) It is understood and agreed that the obligations of the
Seller set forth in Sections 2.05 and 3.04 of the Purchase Agreement to cure,
purchase or substitute for a defective Mortgage Loan as provided in Sections
2.05 and 3.04 constitute the sole remedies of the Trustee and the
Certificateholders respecting a breach of the representations and warranties of
the Seller set forth in Sections 3.01 and 3.02 of the Purchase Agreement. In
addition, it is understood and agreed that the Company has assigned to the
Trustee all of its rights under the Purchase Agreement and the right to enforce
any remedy against the Seller as provided in Section 3.04 of the Purchase
Agreement. The Trustee shall give prompt written notice to the Certificate
Insurer and the Rating Agencies of any repurchase or substitution made pursuant
to this Section 3.03 or Section 2.04(b).
(e) Upon discovery by the Master Servicer, the Trustee, the
Certificate Insurer or any Certificateholder that any Mortgage Loan does not
constitute a Qualified Mortgage, the party discovering such fact shall promptly
(and in any event within five days of the discovery) give written notice thereof
to the other parties. In connection therewith, pursuant to the Purchase
Agreement, the Seller shall be required to repurchase or substitute a Qualified
Substitute Mortgage Loan for the affected Mortgage Loan within 90 days of the
earlier of such discovery by any of the foregoing parties, or the Trustee's or
the Seller's receipt of notice, in the same manner as it would a Mortgage Loan
for a breach of representation or warranty contained in Section 3.01 or 3.02 of
the Purchase Agreement. The Trustee shall reconvey to the Seller the Mortgage
Loan to be released pursuant hereto in the same manner, and on the same terms
and conditions, as it would
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a Mortgage Loan repurchased for breach of a representation or warranty contained
in Section 3.01 or 3.02 of the Purchase Agreement.
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ARTICLE IV
THE CERTIFICATES
Section 4.01 THE CERTIFICATES. The Certificates shall be
substantially in the forms annexed hereto as Exhibits B-1 and B-2. The
Certificates shall be issued in Authorized Denominations only. All Certificates
shall be executed by manual or facsimile signature on behalf of the Trustee by
an authorized officer and authenticated by the manual or facsimile signature of
an authorized officer. Certificates bearing the signatures of individuals who
were at the time of the execution of the Certificates 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 delivery of such
Certificates or did not hold such offices at the date of such Certificates. All
Certificates issued hereunder shall be dated the date of their authentication.
Section 4.02 REGISTRATION OF TRANSFER AND EXCHANGE OF
CERTIFICATES. (a) The Trustee, as registrar, shall cause to be kept a register
(the "Certificate Register") in which, subject to such reasonable regulations as
it may prescribe, the Trustee shall provide for the registration of Certificates
and the registration of transfer of Certificates. The Trustee is hereby
appointed registrar for the purpose of registering Certificates and transfers of
Certificates as herein provided. The Certificate Insurer shall be entitled to
inspect and verify the Certificate Register and the records of the Trustee
relating to the Certificates during normal business hours upon reasonable
notice.
(b) All Certificates issued upon any registration of transfer
or exchange of Certificates shall be valid evidence of the same ownership
interests in the Trust Fund and entitled to the same benefits under this
Agreement as the Certificates surrendered upon such registration
of transfer or exchange.
(c) Every Certificate presented or surrendered for
registration of transfer or exchange shall be duly endorsed, or be accompanied
by a written instrument of transfer in form satisfactory to the Trustee duly
executed by the Holder thereof or his attorney duly authorized in
writing.
(d) No service charge shall be made to a Holder for any
registration of transfer or exchange of Certificates, but the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Certificates; any other expenses in connection with such transfer or
exchange shall be an expense of the Trust Fund.
(e) It is intended that the Class A Certificates be registered
so as to participate in a global book-entry system with the Depository, as set
forth herein. The Class A Certificates shall, except as otherwise provided in
the next paragraph, be initially issued in the form of a single fully registered
Class A Certificate with a denomination equal to the Original Certificate
Principal Balance. Upon initial issuance, the ownership of each such Class A
Certificate shall be registered in the Certificate Register in the name of Cede
& Co., or any successor thereto, as nominee for the Depository. The Company and
the Trustee are hereby authorized to execute and deliver the Representation
Letter with the Depository. With respect to Class A Certificates registered in
the
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Certificate Register in the name of Cede & Co., as nominee of the Depository,
the Company, each Seller, the Master Servicer, the Trustee and the Certificate
Insurer shall have no responsibility or obligation to Direct or Indirect
Participants or beneficial owners for which the Depository holds Class A
Certificates from time to time as a Depository. Without limiting the immediately
preceding sentence, the Company, each Seller, the Master Servicer, the Trustee
and the Certificate Insurer shall have no responsibility or obligation with
respect to (i) the accuracy of the records of the Depository, Cede & Co., or any
Direct or Indirect Participant with respect to any Ownership Interest, (ii) the
delivery to any Direct or Indirect Participant or any other Person, other than a
Certificateholder, of any notice with respect to the Class A Certificates or
(iii) the payment to any Direct or Indirect Participant or any other Person,
other than a Certificateholder, of any amount with respect to any distribution
of principal or interest on the Class A Certificates. No Person other than a
Certificateholder shall receive a certificate evidencing such Class A
Certificate. Upon delivery by the Depository to the Trustee of written notice to
the effect that the Depository has determined to substitute a new nominee in
place of Cede & Co., and subject to the provisions hereof with respect to the
payment of interest by the mailing of checks or drafts to the Certificate
holders appearing as Certificateholders at the close of business on a Record
Date, the name "Cede & Co." in this Agreement shall refer to such new nominee of
the Depository.
(f) In the event that (i) the Depository or the Company
advises the Trustee in writing that the Depository is no longer willing or able
to discharge properly its responsibilities as nominee and depository with
respect to the Class A Certificates and the Company or the Depository is unable
to locate a qualified successor or (ii) the Company at its sole option elects to
terminate the book-entry system through the Depository, the Class A Certificates
shall no longer be restricted to being registered in the Certificate Register in
the name of Cede & Co. (or a successor nominee) as nominee of the Depository. At
that time, the Company may determine that the Class A Certificates shall be
registered in the name of and deposited with a successor depository operating a
global book-entry system, as may be acceptable to the Company, or such
depository's agent or designee but, if the Company does not select such
alternative global book-entry system, then the Class A Certificates may be
registered in whatever name or names Certificateholders transferring Class A
Certificates shall designate, in accordance with the provisions hereof;
provided, however, that any such reregistration shall be at the expense of the
Company.
(g) Notwithstanding any other provision of this Agreement to
the contrary, so long as any Class A Certificate is registered in the name of
Cede & Co., as nominee of the Depository, all distributions of principal or
interest on such Class A Certificates as the case may be and all notices with
respect to such Class A Certificates as the case may be shall be made and given,
respectively, in the manner provided in the Representation Letter.
(h) Except as provided in Section 4.02(i), no transfer, sale,
pledge or other disposition of a Class R 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 (the "Act"), 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 R Certificate is to be made under
this Section 4.02(h), (i) the Company may direct the Trustee to require an
Opinion of Counsel acceptable to and in form and substance satisfactory to the
Trustee and the Company that such transfer shall be made pursuant to an
exemption, describing the applicable exemption and the basis therefor, from said
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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, provided that such Opinion of Counsel will not be required in
connection with the initial transfer of any such Certificate by the Company or
any Affiliate thereof, to a non-affiliate of the Company and (ii) the Trustee
shall require the transferee to execute a representation letter, substantially
in the form of Exhibit O hereto, and the Trustee shall require the transferor to
execute a representation letter, substantially in the form of Exhibit P 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, provided that such representation letter
will not be required in connection with any transfer of any such Certificate by
the Company to an Affiliate of the Company. Any such Certificateholder desiring
to effect such transfer shall, and does hereby agree to, indemnify the Trustee,
the Certificate Insurer, the Company and the Master Servicer against any
liability that may result if the transfer is not so exempt or is not made in
accordance with such applicable federal and state laws.
(i) Transfers of Class R Certificates may be made in
accordance with this Section 4.02(i) if the prospective transferee of a
Certificate provides the Trustee and the Company with an investment letter
substantially in the form of Exhibit Q attached hereto, 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 is a
"qualified institutional buyer" as defined under Rule 144A. Such transfers shall
be deemed to have complied with the requirements of Section 4.02(h) hereof;
provided, however, that no Transfer of any of the Certificates may be made
pursuant to this Section 4.02(i) by the Company. Any such Certificateholder
desiring to effect such transfer shall, and does hereby agree to, indemnify the
Trustee, the Certificate Insurer, the Company and the Master Servicer against
any liability that may result if the transfer is not so exempt or is not made in
accordance with such applicable federal and state laws.
(j) 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 appointed the Company or its designee as its
attorney-in-fact to negotiate the terms of any mandatory sale under clause (8)
below and to execute all instruments of transfer and to do all other things
necessary in connection with any such sale, and the rights of each Person
acquiring any Ownership Interest in a Class R Certificate are expressly subject
to the following provisions:
(1) 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.
(2) 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, an affidavit and agreement (a "Transfer Affidavit
and Agreement") attached hereto as Exhibit I from the proposed
Transferee, in form and substance satisfactory to the Trustee,
representing and warranting, among other things, that such Transferee
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
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as a nominee, trustee or agent for any Person that 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
4.02(j) and agrees to be bound by them.
(3) Notwithstanding the delivery of a Transfer Affidavit and
Agreement by a proposed Transferee under clause (2) 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.
(4) 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 Transferor
Certificate to the Trustee stating that, among other things, it has no
actual knowledge that such other Person is not a Permitted Transferee.
(5) 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
regulation 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".
(6) The Trustee will register the Transfer of any Class R
Certificate only if it shall have received the Transfer Affidavit and
Agreement and all of such other documents as shall have been reasonably
required by the Trustee as a condition to such registration. In
addition, no Transfer of a Class R Certificate shall be made unless the
Trustee shall have received a representation letter from the Transferee
of such Certificate to the effect that such Transferee is a United
States Person and is not a Disqualified Organization. Transfers of the
Class R Certificates to Non-United States Persons and Disqualified
Organizations are prohibited.
(7) Any attempted or purported transfer of any Ownership
Interest in a Class R Certificate in violation of the provisions of
this Section 4.02 shall be absolutely null and void and shall vest no
rights in the purported transferee. If any purported transferee shall
become a Holder of a Class R Certificate in violation of the provisions
of this Section 4.02, then the last preceding Permitted Transferee
shall be restored to all rights as Holder thereof retroactive to the
date of registration of transfer of such Class R Certificate. The
Trustee shall notify the Company upon receipt of written notice or
discovery by a Responsible Officer that the registration of transfer of
a Class R Certificate was not in fact permitted by this Section 4.02.
Knowledge shall not be imputed to the Trustee with respect to an
impermissible transfer in the absence of such a written notice or
discovery by a Responsible Officer of the Trustee. 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 4.02
or for making any payments due on such Certificate to the Holder
thereof or taking any other action with respect to such Holder under
the provisions of this Agreement
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so long as the transfer was registered after receipt of the related
Transfer Affidavit and Agreement and Transfer Certificate. The Trustee
shall be entitled, but not obligated to recover from any Holder of a
Class R Certificate that was in fact not a Permitted Transferee at the
time it became a Holder or, at such subsequent time as it became other
than a Permitted Transferee, all payments made on such Class R
Certificate at and after either such time. Any such payments so
recovered by the Trustee shall be paid and delivered by the Trustee to
the last preceding Holder of such Certificate that was a Permitted
Transferee.
(8) If any purported transferee shall become a Holder of a
Class R Certificate in violation of the restrictions in this Section
4.02, then the Company or its designee 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 Company
or its designee on such reasonable terms as the Company or its designee
may choose. Such purchaser may be the Company itself or any Affiliate
of the Company. The proceeds of such sale, net of commissions, expenses
and taxes due, if any, will be remitted by the Company to the last
preceding purported transferee of such Class R Certificate, except that
in the event that the Company determines that the Holder or any prior
Holder of such Class R Certificate may be liable for any amount due
under this Section 4.02 or any other provision of this Agreement, the
Company may withhold a corresponding amount from such remittance as
security for such claim. The terms and conditions of any sale under
this clause (8) shall be determined in the sole discretion of the
Company or its designee, and it 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.
(k) The Trustee shall make available to the Internal Revenue
Service and those Persons specified by the REMIC Provisions, 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. The Trustee may charge and shall
be entitled to reasonable compensation for providing such information as may be
required from those Persons which may have had a tax imposed upon them as
specified in clauses (A) and (B) of this paragraph for providing such
information.
(l) The provisions of Sections 4.02(j) and 4.02(k) may be
modified, added to or eliminated, provided that there shall have been delivered
to the Trustee and the Certificate Insurer an Opinion of Counsel to the effect
that such modification of, addition to or elimination 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 Ownership Interest in a Class R Certificate to a Person that is not a
Permitted Transferee or (y) a Person other than the prospective transferee to be
subject to a REMIC-related tax caused by the Transfer of an Ownership Interest
in a Class R Certificate to a Person that is not a Permitted Transferee.
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(m) No transfer of any Class R Certificate shall be made to
any Plan subject to ERISA or the Code (or comparable provisions of any
subsequent enactments) or to any Person acting, directly or indirectly, on
behalf of any such Plan or acquiring such Certificate with "plan assets" of a
Plan within the meaning of the Department of Labor ("DOL") regulation
promulgated at 29 C.F.R. ss.2510.3-101 ("Plan Assets") or otherwise under ERISA.
(n) Subject to the restrictions set forth in this Agreement,
upon surrender for registration of transfer of any Certificate at the office or
agency of the office or agency of the Trustee located in Minneapolis, Minnesota,
the Trustee shall execute, authenticate and deliver in the name of the
designated transferee or transferees, a new Certificate of the same Class and
Percentage Interest and dated the date of authentication by the Trustee. At the
option of the Certificateholders, Certificates may be exchanged for other
Certificates of Authorized Denominations of a like aggregate Percentage
Interest, upon surrender of the Certificates to be exchanged at such office.
Whenever any Certificates are so surrendered for exchange, the Trustee shall
execute, authenticate and deliver the Certificates which the Certificateholder
making the exchange is entitled to receive. 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. All Certificates
surrendered for transfer and exchange shall be cancelled by the Trustee.
Section 4.03 MUTILATED, DESTROYED, LOST OR STOLEN
CERTIFICATES. If (a) any mutilated Certificate is surrendered to the Trustee, or
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Certificate, and (b) there is delivered to the Trustee such
security or indemnity as may reasonably be required by each of them to save each
of them harmless, then, in the absence of notice to the Trustee that such
Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute, authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
tenor and Percentage Interest, but bearing a number not contemporaneously
outstanding. Upon the issuance of any new Certificate under this Section 4.03,
the Trustee may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and their fees
and expenses connected therewith. Any duplicate Certificate issued pursuant to
this Section 4.03 shall constitute complete and indefeasible evidence of
ownership in the Trust Fund, as if originally issued, whether or not the
mutilated, destroyed, lost or stolen Certificate shall be found at any time.
Section 4.04 PERSONS DEEMED OWNERS. Prior to due presentation of a
Certificate for registration of transfer and subject to the provisions of
Section 4.02 and Article X, the Master Servicer, the Company, the Seller, the
Certificate Insurer and the Trustee may treat the Person in whose name any
Certificate is registered as the owner of such Certificate for the purpose of
receiving remittances pursuant to Section 6.05 and for all other purposes
whatsoever, and the Master Servicer, the Company, the Seller, the Certificate
Insurer and the Trustee shall not be affected by notice to the contrary.
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ARTICLE V
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 5.01 APPOINTMENT OF THE MASTER SERVICER. (a)
Advanta Mortgage Corp. USA agrees to act as the Master Servicer and to perform
all servicing duties under this Agreement subject to the terms hereof.
(b) The Master Servicer shall service and administer the
Mortgage Loans on behalf of the Trustee and shall have full power and authority,
acting alone or through one or more Subservicers, to do any and all things in
connection with such servicing and administration which it may deem necessary or
desirable. Without limiting the generality of the foregoing, the Master
Servicer, in its own name or the name of a Subservicer, may, and is hereby
authorized and empowered by the Trustee to, execute and deliver, on behalf of
itself, the Certificateholders and the Trustee or any of them, any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge and all other comparable instruments, with respect to the Mortgage
Loans, the insurance policies and accounts related thereto and the properties
subject to the Mortgages. Upon the execution and delivery of this Agreement, and
from time to time as may be required thereafter, the Trustee shall, upon written
request, execute for the Master Servicer or its Subservicers any powers of
attorney and such other documents as may be necessary or appropriate to enable
the Master Servicer to carry out its servicing and administrative duties
hereunder.
In servicing and administering the Mortgage Loans, the Master Servicer
shall employ procedures consistent with Accepted Servicing Practices and in a
manner consistent with recovery under any insurance policy required to be
maintained by the Master Servicer pursuant to this
Agreement.
The Master Servicer shall make Mortgage Interest Rate and Monthly
Payment adjustments on each Rate Adjustment Date in compliance with applicable
regulatory adjustable mortgage loan requirements and the Mortgage Notes with
respect to each Group I Loan and Group II Loan. The Master Servicer shall
establish procedures to monitor the Rate Adjustment Dates and the Index in order
to assure that it uses the correct Index in determining an interest rate change,
and it will comply with those procedures. In the event the Index is no longer
available, the Master Servicer shall choose a new comparable Index in accordance
with the provisions hereof, of the applicable Mortgage Note and of Accepted
Servicing Practices, and shall provide the Mortgagor and the Trustee with notice
of the new Index sufficient under law and the Mortgage Loan Documents. The
Master Servicer shall execute and deliver all appropriate notices required by
the applicable adjustable mortgage loan laws and regulations and the Mortgage
Loan Documents regarding such Mortgage Interest Rate adjustments and payment
adjustments.
Each adjustment in the Mortgage Interest Rate shall result in an
adjustment to the related Monthly Payment. If the Master Servicer fails to make
a timely Mortgage Interest Rate or Monthly Payment adjustment, the Master
Servicer shall use its own funds to satisfy any shortage in the Mortgagor's
remittance so long as such shortage shall continue; any such amount paid by the
Master Servicer shall be reimbursable to it from any subsequent amounts
collected on account of the related Mortgage Loan with respect to such
adjustments.
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Costs incurred by the Master Servicer in effectuating the timely
payment of taxes and assessments on the property securing a Mortgage Note and
foreclosure costs may be added by the Master Servicer to the amount owing under
such Mortgage Note where the terms of such Mortgage Note so permit; PROVIDED,
HOWEVER, that the addition of any such cost shall not be taken into account for
purposes of calculating the principal amount of the Mortgage Note and Mortgage
Loan, the Monthly Payments on the Mortgage Note and Mortgage Loan or
distributions to be made to Certificateholders. Such costs shall be recoverable
by the Master Servicer pursuant to Section 5.04.
(c) Subject to Section 5.12, the Master Servicer is hereby authorized
and empowered to execute and deliver on behalf of the Trustee and each
Certificateholder, all instruments of satisfaction or cancellation, or of
partial or full release, discharge and all other comparable instruments, with
respect to the Mortgage Loans and with respect to the Mortgaged
Properties.
If reasonably required by the Master Servicer, each Certificateholder and the
Trustee shall execute any powers of attorney furnished to the Trustee by the
Master Servicer and other documents necessary or appropriate to enable the
Master Servicer to carry out its servicing and administrative
duties under this Agreement.
(d) On and after such time as the Trustee receives the resignation of,
or notice of the removal of, the Master Servicer from its rights and obligations
under this Agreement, and with respect to resignation pursuant to Section 5.24,
after receipt by the Trustee and the Certificate Insurer of the Opinion of
Counsel required pursuant to Section 5.24, the Trustee or its designee approved
by the Certificate Insurer (which approval shall not be unreasonably withheld)
shall assume all of the rights and obligations of the Master Servicer, subject
to Section 7.02 hereof. The Master Servicer shall, upon request of the Trustee
but at the expense of the Master Servicer, deliver to the Trustee all documents
and records relating to the Mortgage Loans, any other instruments or documents
as the Trustee may reasonably request to effect the efficient transfer of the
duties of the Master Servicer and an accounting of amounts collected and held by
the Master Servicer and otherwise use its best efforts to effect the orderly and
efficient transfer of servicing rights and obligations to the assuming party.
(e) If the Mortgage relating to a Mortgage Loan did not have a lien
senior on the related Mortgaged Property as of the Cut-Off Date, then the Master
Servicer, in such capacity, may not consent to the placing of a lien senior to
that of the Mortgage on the related Mortgaged
Property.
(f) The Master Servicer shall deliver a list of Servicing Officers to
the Trustee and the Certificate Insurer by the Closing Date.
Section 5.02 SUBSERVICING AGREEMENTS BETWEEN THE MASTER
SERVICER AND SUBSERVICERS. (a) The Master Servicer may, subject to the prior
written approval of the Certificate Insurer, enter into Subservicing Agreements
with Subservicers for the servicing and administration of the Mortgage Loans and
for the performance of any and all other activities of the Master Servicer
hereunder. Each Subservicer shall be either (i) a depository institution the
accounts of which are insured by the FDIC or (ii) another entity that engages in
the business of originating, acquiring or servicing loans, and in either case
shall be authorized to transact business in the state or states where the
related Mortgaged Properties it is to service are situated and in either case
shall be a FNMA-approved mortgage servicer. In addition, each Subservicer will
obtain and preserve
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its qualifications to do business as a foreign corporation in each jurisdiction
in which such qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the Certificates or any of the Mortgage Loans
and to perform or cause to be performed its duties under the related
Subservicing Agreement. Each Subservicing Agreement shall provide that the
Subservicer's rights shall terminate at the option of the successor Master
Servicer and without any termination fee, expense, penalty or other cost upon
the termination, resignation or other removal of the Master Servicer under this
Agreement.
(b) Notwithstanding any Subservicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Master Servicer and a Subservicer or reference to actions taken through a
Subservicer or otherwise, the Master Servicer shall remain obligated and
primarily liable to the Trustee, Certificateholders and the Certificate Insurer
for the servicing and administering of the Mortgage Loans in accordance with the
provisions of this Agreement without diminution of such obligation or liability
by virtue of such Subservicing Agreements or arrangements or by virtue of
indemnification from the Subservicer and to the same extent and under the same
terms and conditions as if the Master Servicer alone were servicing and
administering the Mortgage Loans. For purposes of this Agreement, the Master
Servicer shall be deemed to have received payments on Mortgage Loans when the
Subservicer has received such payments.
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 or its designee may, at its option, either (i) assume all of the rights
and obligations of the Master Servicer under each Subservicing Agreement that
the Master Servicer may have entered into or (ii) notwithstanding anything to
the contrary contained in each such Subservicing Agreement, terminate the
related Subservicer without being required to pay any fee, expense, penalty or
other costs in connection therewith.
Section 5.03 COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS;
COLLECTION ACCOUNT. (a) The Master Servicer shall make reasonable efforts to
collect all payments called for under the terms and provisions of the Mortgage
Loans, and shall, to the extent such procedures shall be consistent with this
Agreement and any applicable primary mortgage insurance policy, follow such
collection procedures as shall constitute Accepted Servicing Practices.
Consistent with the foregoing, the Master Servicer may in its discretion (i)
waive any prepayment charge, assumption fee, late payment charge or other charge
in connection with a Mortgage Loan, and (ii) arrange a schedule, running for no
more than 180 days after the Due Date for payment of any installment on any
Mortgage Note, for the liquidation of delinquent items. Any provision of this
agreement to the contrary notwithstanding, the Master Servicer shall not agree
to the modification or waiver of any provision of a Mortgage Loan at a time when
such Mortgage Loan is not in default or such default is not reasonably
foreseeable, if such modification or waiver would be treated as a taxable
exchange under Section 1001 of the Code, unless such exchange would not be
considered a "prohibited transaction" under the REMIC Provisions.
The Master Servicer shall establish and maintain in the name
of the Trustee the Collection Account, in trust for the benefit of the
Certificateholders and the Certificate Insurer. The Collection Account shall be
established and maintained as an Eligible Account.
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The Master Servicer shall deposit in the Collection Account
(i) any amounts representing Monthly Payments on the Mortgage Loans due or to be
applied as of a date after the Cut-off Date, (ii) any amounts representing
Monthly Payments on the Mortgage Loans due or to be applied as of a date on or
before the Cut-off Date (except for any interest accrued prior to September 1,
1997 and except for any principal received by the Company prior to the Cut-off
Date the receipt of which is reflected on the Mortgage Loan Schedule) and (iii)
thereafter, on a daily basis within two Business Days of receipt (except as
otherwise permitted herein), the following payments and collections received or
made by it (other than any amounts in respect of principal of or interest on the
Mortgage Loans which, under clauses (i) and (ii) above, are not required to be
deposited in the Collection Account):
(i) all payments received after the Cut-off Date on account
of principal on the Mortgage Loans and all Principal Prepayments in
Full, Curtailments and all Net REO
Proceeds collected after the Cut-off Date;
(ii) all payments received after the Cut-off Date on account
of interest on the Mortgage Loans (other than payments of interest that
accrued on each Mortgage Loan up
to and including the Cut-off Date);
(iii) all Net Liquidation Proceeds;
(iv) all Insurance Proceeds;
(v) all Released Mortgaged Property Proceeds;
(vi) any amounts payable in connection with the repurchase
of any Mortgage Loan and the amount of any Substitution Adjustment
pursuant to Sections 2.04 and 3.03; and
(vii) any amount expressly required to be deposited in the
Collection Account in accordance with certain provisions of this
Agreement, including, without limitation Sections 2.04(b), 2.04(c),
3.03(a), 3.03(c), 5.06, 5.07 and 5.18 of this Agreement;
PROVIDED, HOWEVER, that the Master Servicer shall be entitled, at its election,
either (a) to withhold and to pay to itself the applicable Servicing Fee from
any payment on account of interest or other recovery (including Net REO
Proceeds) as received and prior to deposit of such payments in the Collection
Account or (b) to withdraw the applicable Servicing Fee from the Collection
Account after the entire payment or recovery has been deposited therein;
provided, further, that with respect to any payment of interest received by the
Master Servicer in respect of a Mortgage Loan (whether paid by the Mortgagor or
received as Liquidation Proceeds, Insurance Proceeds or otherwise) which is less
than the full amount of interest then due with respect to such Mortgage Loan,
only that portion of such payment that bears the same relationship to the total
amount of such payment of interest as the rate used to determine the Servicing
Fee bears to the Mortgage Interest Rate borne by such Mortgage Loan shall be
allocated to the Servicing Fee with respect to such Mortgage Loan. All other
amounts shall be deposited in the Collection Account not later than the second
Business Day following the day of receipt and posting by the Master Servicer.
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The Master Servicer may invest the funds in the Collection
Account only in Permitted Investments. No Permitted Investment shall be sold or
disposed of at a gain prior to maturity unless the Master Servicer has obtained
an Opinion of Counsel (at the Master Servicer's expense) that such sale or
disposition will not cause the Trust Fund to be subject to the tax on income
from prohibited transactions imposed by Section 860F(a)(1) of the Code,
otherwise subject the Trust Fund to tax or cause the Trust Fund to fail to
qualify as a REMIC. All income (other than any gain from a sale or disposition
of the type referred to in the preceding sentence) realized from any such
Permitted Investment shall be for the benefit of the Master Servicer as
additional servicing compensation. The amount of any losses incurred in respect
of any such investments shall be deposited in the Collection Account by the
Master Servicer out of its own funds immediately as realized.
The foregoing requirements for deposit in the Collection
Account shall be exclusive, it being understood and agreed that, without
limiting the generality of the foregoing, payments in the nature of those
described in the last paragraph of Section 5.14 and payments in the nature of
prepayment charges, late payment charges or assumption fees need not be
deposited by the Master Servicer in the Collection Account. If the Master
Servicer deposits in the Collection Account any amount not required to be
deposited therein, it may at any time withdraw such amount from the Collection
Account, any provision herein to the contrary notwithstanding. All funds
deposited by the Master Servicer in the Collection Account shall be held in the
Collection Account for the account of the Trustee in trust for the
Certificateholders until disbursed in accordance with Section 6.01 or withdrawn
in accordance with Section 5.04.
(b) Prior to the time of their required deposit in the
Collection Account, all amounts required to be deposited therein may be
deposited in an account in the name of Master Servicer, provided that such
account is an Eligible Account. All such funds shall be held by the Master
Servicer in trust for the benefit of the Certificateholders and the Certificate
Insurer pursuant to the terms hereof.
(c) The Collection Account may, upon written notice by the
Trustee to the Certificate Insurer, be transferred to a different depository so
long as such transfer is to an Eligible
Account.
Section 5.04 PERMITTED WITHDRAWALS FROM THE COLLECTION
ACCOUNT. The Master Servicer may, from time to time, make withdrawals from the
Collection Account for the following purposes, without duplication:
(a) to reimburse itself for any accrued unpaid Servicing Fees
and for unreimbursed Periodic Advances and Servicing Advances. The
Master Servicer's right to reimbursement for unpaid Servicing Fees and
unreimbursed Servicing Advances shall be limited to late collections on
the related Mortgage Loan, including Liquidation Proceeds, Released
Mortgaged Property Proceeds, Insurance Proceeds and such other amounts
as may be collected by the Master Servicer from the related Mortgagor
or otherwise relating to the Mortgage Loan in respect of which such
unreimbursed amounts are owed. The Master Servicer's right to
reimbursement for unreimbursed Periodic Advances shall be limited to
late collections on any Mortgage Loan and to Liquidation Proceeds,
Released Mortgage Property Proceeds and Insurance Proceeds on related
Mortgage Loans;
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(b) to reimburse itself for any Periodic Advances or Servicing
Advances determined in good faith to have become Nonrecoverable
Advances, such reimbursement to be made from any funds in the
Collection Account;
(c) to withdraw any amount received from a Mortgagor that is
recoverable and sought to be recovered as a voidable preference by a
trustee in bankruptcy pursuant to the United States Bankruptcy Code in
accordance with a final, nonappealable order of a court having
competent jurisdiction;
(d) to withdraw any funds deposited in the Collection Account
that were not required to be deposited therein;
(e) to pay itself Servicing Compensation pursuant to Section
5.14 hereof to the extent not retained or paid pursuant to Section
5.03, 5.04 or 5.14;
(f) to pay to the Seller with respect to each Mortgage Loan or
property acquired in respect thereof that has been repurchased or
replaced pursuant to Section 2.04 or 3.03 or to pay to itself with
respect to each Mortgage Loan or property acquired in respect thereof
that has been purchased pursuant to Section 8.01 all amounts received
thereon and not required to be distributed as of the date on which the
related repurchase or purchase price or Principal Balance, as the case
may be, was determined;
(g) to pay to the Seller with respect to each Mortgage Loan
the amount of interest accrued and unpaid on such Mortgage Loan on the
Cut-off Date;
(h) to make deposits to the Certificate Accounts (which shall
include the Trustee Fee) in the amounts and in the manner provided for
herein;
(i) to pay itself any interest earned on or investment income
earned with respect to funds in the Collection Account;
(j) to reimburse itself or the Company pursuant to
Section 11.01; and
(k) to clear and terminate the Collection Account upon the
termination of this Agreement.
The Master Servicer shall keep and maintain a separate
accounting for each Mortgage Loan for the purpose of accounting for withdrawals
from the Collection Account pursuant to subclause (a).
Section 5.05 PAYMENT OF TAXES, INSURANCE AND OTHER CHARGES.
With respect to each Mortgage Loan, the Master Servicer shall maintain accurate
records reflecting casualty insurance coverage.
With respect to each Mortgage Loan as to which the Master
Servicer maintains escrow accounts, the Master Servicer shall maintain accurate
records reflecting the status of ground rents, taxes, assessments, water rates
and other charges which are or may become a lien
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upon the Mortgaged Property and the status of primary mortgage guaranty
insurance premiums, if any, and casualty insurance coverage and shall obtain,
from time to time, all bills for the payment of such charges (including renewal
premiums) and shall effect payment thereof prior to the applicable penalty or
termination date and at a time appropriate for securing maximum discounts
allowable, employing for such purpose deposits of the Mortgagor in any escrow
account which shall have been estimated and accumulated by the Master Servicer
in amounts sufficient for such purposes, as allowed under the terms of the
Mortgage. To the extent that a Mortgage does not provide for escrow payments,
the Master Servicer shall, if it has received notice of a default or deficiency,
monitor such payments to determine if they are made by the Mortgagor.
Section 5.06 MAINTENANCE OF CASUALTY INSURANCE. The Master
Servicer shall cause to be maintained for each Mortgage Loan a casualty
insurance policy with extended coverage issued by a generally acceptable insurer
in an amount which is not less than the full insurable value of the Mortgaged
Property securing such Mortgage Loan or the unpaid principal balance of such
Mortgage Loan, whichever is less; provided, however, that such insurance may not
be less than the minimum amount required to fully compensate for any loss or
damage on a replacement cost basis. If, upon origination of the Mortgage Loan,
the improvements on the Mortgaged Property were in an area identified in the
Federal Register by the Federal Emergency Management Agency as having special
flood hazards (and such flood insurance has been made available) the Master
Servicer will cause to be maintained any existing flood insurance policy meeting
the requirements of the current guidelines of the Federal Insurance
Administration with a generally acceptable insurance carrier, in an amount
representing coverage not less than the lesser of (i) the unpaid principal
balance of the Mortgage Loan and (ii) the maximum amount of insurance which was
available under the Flood Disaster Protection Act of 1973. The Master Servicer
shall also maintain similar fire insurance coverage and, if applicable, flood
insurance on property acquired upon foreclosure, or by deed in lieu of
foreclosure, of any Mortgage Loan in an amount which is at least equal to the
lesser of (i) the full insurable value of the improvements which are a part of
such property and (ii) the principal balance owing on such Mortgage Loan at the
time of such foreclosure or grant of deed in lieu of foreclosure; provided,
however, that such insurance may not be less than the minimum amount required to
fully compensate for any loss or damage on a replacement cost basis. It is
understood and agreed that such insurance shall be with insurers approved by the
Master Servicer and that no earthquake or other additional insurance is to be
required of any Mortgagor, other than pursuant to such applicable laws and
regulations as shall at any time be in force and as shall require such
additional insurance. Pursuant to Section 5.03, any amounts collected by the
Master Servicer under any insurance policies maintained pursuant to this Section
5.06 (other than amounts to be applied to the restoration or repair of the
related Mortgaged Property or released to the Mortgagor in accordance with
Accepted Servicing Practices) shall be deposited into the Collection Account,
subject to withdrawal pursuant to Section 5.04. Any cost incurred by the Master
Servicer in maintaining any such insurance shall be added to the amount owing
under the Mortgage Loan where the terms of the Mortgage Loan so permit;
provided, however, that the addition of any such cost shall not be taken into
account for purposes of calculating the principal amount of the Mortgage Note or
Mortgage Loan, the Monthly Payments on the Mortgage Note or the distributions to
be made to the Certificateholders. Such costs shall be recoverable by the Master
Servicer pursuant to Section 5.04. In the event that the Master Servicer shall
obtain and maintain a blanket policy issued by an insurer that is acceptable to
FNMA or FHLMC, insuring against hazard losses on all of the Mortgage Loans, it
shall conclusively be deemed to have satisfied its obligation as set forth in
the first sentence of this
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Section 5.06, 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 or acquired
property an insurance policy complying with the first sentence of this Section
5.06 and there shall have been a loss which would have been covered by such a
policy had it been maintained, be required to deposit from its own funds into
the Collection Account the amount not otherwise payable under the blanket policy
because of such deductible clause.
Section 5.07 MAINTENANCE OF MORTGAGE IMPAIRMENT INSURANCE
POLICY. In the event that the Master Servicer shall obtain and maintain a
blanket policy (the "Mortgage Impairment Insurance Policy") with an insurer
either (i) having a General Policy rating of A:VIII or better in Best's Key
Rating Guide or (ii) approved in writing by the Certificate Insurer, such
approval not to be unreasonably withheld, insuring against fire and hazards of
extended coverage on all of the Mortgage Loans, then, to the extent such policy
names the Master Servicer as loss payee and provides coverage in an amount equal
to the aggregate unpaid principal balance on the Mortgage Loans without
co-insurance, and otherwise complies with the requirements of Section 5.06, the
Master Servicer shall be deemed conclusively to have satisfied its obligations
with respect to fire and hazard insurance coverage under Section 5.06, it being
understood and agreed that such blanket 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
Section 5.06, and there shall have been a loss which would have been covered by
such policy, deposit in the Collection Account the difference, if any, between
the amount that would have been payable under a policy complying with Section
5.06 and the amount paid under such blanket policy. Upon the written request of
the Certificate Insurer, the Trustee or any Certificateholder, the Master
Servicer shall cause to be delivered to the Certificate Insurer, the Trustee or
such Certificateholder, as the case may be, a certified true copy of such
policy. The Master Servicer agrees to prepare and present, on behalf of itself,
the Trustee, the Certificate Insurer and Certificateholders, claims under any
such policy in a timely fashion in accordance with the terms of such policy.
Section 5.08 FIDELITY BOND; ERRORS AND OMISSIONS POLICY. (a)
The Master Servicer shall maintain with a responsible company, and at its own
expense, a blanket fidelity bond (a "Fidelity Bond") and an errors and omissions
insurance policy (an "Errors and Omissions Policy"), in a minimum amount
acceptable to FNMA or FHLMC or, if Advanta is the Master Servicer or if the
Trustee is the successor Master Servicer, in an amount generally maintained by
prudent mortgage loan servicers having servicing portfolios of a similar size.
(b) The Master Servicer shall be deemed to have complied with
this provision if one of its respective Affiliates has such a Fidelity Bond and
Errors and Omissions Policy and, by the terms of such fidelity bond and errors
and omission policy, the coverage afforded thereunder extends to the Master
Servicer. The Master Servicer shall cause each and every Subservicer for it to
maintain a policy of insurance covering errors and omissions and a fidelity bond
which would meet the requirements of Section 5.08(a). If Advanta is not the
Master Servicer and the Trustee is not the successor Master Servicer, any such
Fidelity Bond and Errors and Omissions Policy shall not be cancelled or modified
in a materially adverse manner without 10 days prior written notice to the
Certificate Insurer.
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Section 5.09 COLLECTION OF TAXES, ASSESSMENTS AND OTHER ITEMS;
SERVICING ACCOUNT. In addition to the Collection Account, the Master Servicer
shall establish and maintain a Servicing Account, which shall be an Eligible
Account, and shall deposit therein all payments by Mortgagors for taxes,
assessments, primary mortgage or hazard insurance premiums or comparable items.
Withdrawals from the Servicing Account may be made to effect payment of taxes,
assessments, primary mortgage or hazard insurance premiums or comparable items,
to reimburse the Master Servicer out of related collections for any advances
made in the nature of any of the foregoing, to refund to any Mortgagors any sums
determined to be overages, or to pay any interest owed to Mortgagors on such
account to the extent required by law or to clear and terminate the Servicing
Account at the termination of this Agreement upon the termination of the Trust
Fund. The Master Servicer shall advance the payments referred to in the first
sentence of this Section 5.09 that are not timely paid by the Mortgagors on the
date when the tax, premium or other cost for which such payment is intended is
due, but the Master Servicer shall be required to so advance only to the extent
that such advances, in the good faith judgment of the Master Servicer, will be
recoverable by the Master Servicer pursuant to Section 5.04 out of Liquidation
Proceeds, Insurance Proceeds or otherwise.
Section 5.10 PERIODIC FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION; ADDITIONAL INFORMATION. The Trustee shall prepare or cause to be
prepared for filing with the Commission (other than the Current Report on Form
8-K to be filed by the Company in connection with computational materials and
the initial Current Report on Form 8-K to be filed by the Company in connection
with the issuance of the Certificates) any and all reports, statements and
information respecting the Trust Fund and/or the Certificates required to be
filed with the Commission pursuant to the Securities Exchange Act of 1934, as
amended, and shall solicit any and all proxies of the Certificateholders
whenever such proxies are required to be solicited, pursuant to the Securities
Exchange Act of 1934, as amended. The Company shall promptly file, and exercise
its reasonable best efforts to obtain a favorable response to, no-action
requests with, or other appropriate exemptive relief from, the Commission
seeking the usual and customary exemption from such reporting requirements
granted to issuers of securities similar to the Certificates. Fees and expenses
incurred by the Trustee in connection with this Section shall not be
reimbursable from the Trust Fund.
The Master Servicer and the Company each agree to promptly
furnish to the Trustee, from time to time upon request, such further
information, reports and financial statements within their respective control
related to this Agreement and the Mortgage Loans as the Trustee reasonably deems
appropriate to prepare and file all necessary reports with the Commission.
Section 5.11 ENFORCEMENT OF DUE-ON-SALE CLAUSES; ASSUMPTION
AGREEMENTS. In any case in which a Mortgaged Property is about to be conveyed by
the Mortgagor (whether by absolute conveyance or by contract of sale, and
whether or not the Mortgagor remains liable thereon) and the Master Servicer has
knowledge of such prospective conveyance, the Master Servicer shall effect
assumptions in accordance with the terms of any due-on-sale provision contained
in the related Mortgage Note or Mortgage. The Master Servicer shall enforce any
due-on-sale provision contained in such Mortgage Note or Mortgage to the extent
the requirements thereunder for an assumption of the Mortgage Loan have not been
satisfied to the extent permitted under the terms of the related Mortgage Note,
unless such provision is not exercisable under applicable law and governmental
regulations or in the Master Servicer's judgment, such exercise
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is reasonably likely to result in legal action by the Mortgagor, or such
conveyance is in connection with a permitted assumption of the related Mortgage
Loan. Subject to the foregoing, the Master Servicer is authorized to take or
enter into an assumption agreement from or with the Person to whom such property
is about to be conveyed, pursuant to which such person becomes liable under the
related Mortgage Note and, unless prohibited by applicable state law, the
Mortgagor remains liable thereon, provided that the Mortgage Interest Rate with
respect to such Mortgage Loan shall remain unchanged. The Master Servicer is
also authorized, to release the original Mortgagor from liability upon the
Mortgage Loan and substitute the new Mortgagor as obligor thereon. In connection
with such assumption or substitution, the Master Servicer shall apply such
underwriting standards and follow such practices and procedures as shall be
normal and usual for mortgage loans similar to the Mortgage Loans and as it
applies to mortgage loans owned solely by it. The Master Servicer shall notify
the Trustee that any such assumption or substitution agreement has been
completed by forwarding to the Trustee the original copy of such assumption or
substitution agreement, which copy shall be added by the Trustee to the related
Mortgage File and shall, for all purposes, be considered a part of such Mortgage
File to the same extent as all other documents and instruments constituting a
part thereof. In connection with any such assumption or substitution agreement,
the Mortgage Interest Rate of the related Mortgage Note and the payment terms
shall not be changed. Any fee collected by the Master Servicer for entering into
an assumption or substitution of liability agreement will be retained by the
Master Servicer as servicing compensation.
Notwithstanding the foregoing paragraph or any other provision
of this Agreement, the Master Servicer shall not be deemed to be in default,
breach or any other violation of its obligations hereunder by reason of any
conveyance by the Mortgagor of the property subject to the Mortgage or any
assumption of a Mortgage Loan by operation of law which the Master Servicer in
good faith determines it may be restricted by law from preventing, for any
reason whatsoever, or if the exercise of such right would impair or threaten to
impair any recovery under any applicable insurance policy or, in the Master
Servicer's judgment, be reasonably likely to result in legal action by the
Mortgagor.
Section 5.12 REALIZATION UPON DEFAULTED MORTGAGE LOANS.
(a) Except as provided in the last two paragraphs of this Section
5.12(a), the Master Servicer shall foreclose upon or otherwise comparably
convert the ownership of properties securing such of the Mortgage Loans as come
into and continue in default and as to which no satisfactory arrangements can be
made for collection of delinquent payments pursuant to Section 5.03. In
connection with such foreclosure or other conversion, the Master Servicer shall
follow Accepted Servicing Practices. The foregoing is subject to the proviso
that the Master Servicer shall not be required to expend its own funds in
connection with any foreclosure or to restore any damaged property unless it
shall determine that (i) such foreclosure and/or restoration will increase the
proceeds of liquidation of the Mortgage Loan to Certificateholders after
reimbursement to itself for such expenses and (ii) such expenses will be
recoverable to it through Liquidation Proceeds (respecting which it shall have
priority for purposes of withdrawal from the Collection Account pursuant to
Section 5.04) or otherwise. The Master Servicer shall be entitled to
reimbursement of the Servicing Fee and other amounts due it, if any, to the
extent, but only to the extent, that withdrawals from the Collection Account
with respect thereto are permitted under Section 5.04.
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The Master Servicer may foreclose against the Mortgaged
Property securing a defaulted Mortgage Loan either by foreclosure, by sale or by
strict foreclosure, and in the event a deficiency judgment is available against
the Mortgagor or any other person, may proceed for the
deficiency.
In the event that title to any Mortgaged Property is acquired
in foreclosure or by deed in lieu of foreclosure (an "REO Property"), the deed
or certificate of sale shall be issued to the Master Servicer on behalf of the
Trustee in the name of the Trustee, as trustee on behalf of the
Certificateholders. Notwithstanding any such acquisition of title and
cancellation of the related Mortgage Loan, such Mortgage Loan shall be
considered to be a Mortgage Loan held in the Trust Fund until such time as the
related Mortgaged Property shall be sold and such Mortgage Loan becomes a
Liquidated Mortgage Loan. Consistent with the foregoing, for purposes of all
calculations hereunder, so long as such Mortgage Loan shall be considered to be
an Outstanding Mortgage Loan:
(i) 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, except that such
schedule shall be adjusted to reflect the application of Net REO
Proceeds received in any month pursuant to the succeeding clause.
(ii) Net REO Proceeds received in any month shall be deemed to
have been received first in payment of the accrued interest that
remained unpaid on the date that such Mortgage Loan became an REO
Mortgage Loan, with the excess thereof, if any, being deemed to have
been received in respect of the delinquent principal installments that
remained unpaid on such date. Thereafter, Net REO Proceeds received in
any month shall be applied to the payment of installments of principal
and accrued interest on such Mortgage Loan deemed to be due and payable
in accordance with the terms of such Mortgage Note and such
amortization schedule. If such Net REO Proceeds exceed the then Unpaid
REO Amortization, the excess shall be treated as a Curtailment received
in respect of such Mortgage Loan.
(iii) Only that portion of Net REO Proceeds allocable to interest
that bears the same relationship to the total amount of Net REO
Proceeds allocable to interest as the rate of the Servicing Fee bears
to the Mortgage Interest Rate borne by such Mortgage Loan shall be
allocated to the Servicing Fee with respect thereto.
In the event that the Trust Fund acquires any Mortgaged
Property as aforesaid or otherwise in connection with a default or reasonably
foreseeable default on a Mortgage Loan, such Mortgaged Property shall be
disposed of by or on behalf of the Trust Fund within two years after its
acquisition by the Trust Fund unless (a) the Master Servicer shall have provided
to the Trustee an Opinion of Counsel (at the expense of the Trust Fund) to the
effect that the holding by the Trust Fund of such Mortgaged Property subsequent
to two years after its acquisition (and specifying the period beyond such
two-year period for which the Mortgaged Property may be held) will not cause the
Trust Fund to be subject to the tax on prohibited transactions imposed by
Section 860F(a)(1)
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of the Code, otherwise subject the Trust Fund to tax or cause the Trust Fund to
fail to qualify as a REMIC at any time that any Certificates are outstanding, or
(b) the Master Servicer (at the Trust Fund's expense) shall have applied for, at
least 60 days prior to the expiration of such two-year period, an extension of
such two-year period in the manner contemplated by Section 856(e)(3) of the
Code, in which case the two-year period shall be extended by the applicable
period. The Master Servicer shall further ensure that the Mortgaged Property is
administered so that it constitutes "foreclosure property" within the meaning of
Section 860G(a)(8) of the Code at all times, that the sale of such property does
not result in the receipt by the Trust Fund of any income from non-permitted
assets as described in Section 860F(a)(2)(B) of the Code, and that the Trust
Fund does not derive any "net income from foreclosure property" within the
meaning of Section 860G(c)(2) of the Code with respect to such property.
Any REO Disposition shall be for cash only (unless changes in
the REMIC Provisions made subsequent to the Startup Day allow a sale for other
consideration).
In lieu of foreclosing upon any defaulted Mortgage Loan, the
Master Servicer may, in its discretion, permit the assumption of such Mortgage
Loan if, in the Master Servicer's judgment, such default is unlikely to be cured
and if the assuming borrower satisfies the Master Servicer's underwriting
guidelines with respect to mortgage loans owned by the Master Servicer. In
connection with any such assumption, the Mortgage Interest Rate of the related
Mortgage Note and the payment terms shall not be changed. Any fee collected by
the Master Servicer for entering into an assumption agreement will be retained
by the Master Servicer as servicing compensation. Alternatively, the Master
Servicer may encourage the refinancing of any defaulted Mortgage Loan by the
Mortgagor.
Notwithstanding the foregoing, prior to instituting
foreclosure proceedings or accepting a deed-in-lieu of foreclosure with respect
to any Mortgaged Property, the Master Servicer shall make, or cause to be made,
inspection of the Mortgaged Property in accordance with the Accepted Servicing
Practices and, with respect to environmental hazards, such procedures are as
required by the provisions of the Federal National Mortgage Association's
selling and servicing guide applicable to single-family homes and in effect on
the date hereof. The Master Servicer shall be entitled to rely upon the results
of any such inspection made by others. In cases where the inspection reveals
that such Mortgaged Property is potentially contaminated with or affected by
hazardous wastes or hazardous substances, the Master Servicer shall promptly
give written notice of such fact to the Certificate Insurer, the Trustee and
each Class A Certificateholder. The Master Servicer shall not commence
foreclosure proceedings or accept a deed-in-lieu of foreclosure for Mortgaged
Property with respect to this paragraph without obtaining the written consent of
the Certificate Insurer.
Section 5.13 TRUSTEE TO COOPERATE; RELEASE OF MORTGAGE FILES.
Upon the payment in full of any Mortgage Loan, or the receipt by the Master
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Master Servicer shall immediately notify the
Trustee in the form of a Request for Release in the form attached hereto as
Exhibit H (which request shall include a statement to the effect that all
amounts received in connection with such payment which are required to be
deposited in the Collection Account pursuant to Section 5.03 have been or shall
be so deposited) of a Servicing Officer and shall request delivery to it of the
Mortgage File. Upon receipt of such Request for Release, the Trustee,
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or the Custodian on its behalf, shall promptly release the related Mortgage File
to the Master Servicer. Upon any such payment in full, the Master Servicer is
authorized to give, as agent for the Trustee and the mortgagee under the
Mortgage which secured the Mortgage Loan, an instrument of satisfaction (or
assignment of mortgage without recourse) regarding the property subject to such
Mortgage, which instrument of satisfaction or assignment, as the case may be,
shall be delivered to the Person or Persons entitled thereto against receipt
therefor of such payment, it being understood and agreed that no expenses
incurred in connection with such instrument of satisfaction or assignment, as
the case may be, shall be chargeable to the Collection Account. In connection
therewith, the Trustee shall execute and return to the Master Servicer any
required power of attorney provided to the Trustee by the Master Servicer and
other required documentation in accordance with Section 5.01(c). From time to
time and as appropriate for the servicing or foreclosure of any Mortgage Loan
and in accordance with Accepted Servicing Practices, the Trustee shall, upon
request of the Master Servicer and delivery to the Trustee of a Request for
Release signed by a Servicing Officer, release, or cause the Custodian to
release, the related Mortgage File to the Master Servicer and shall execute such
documents as shall be necessary to the prosecution of any such proceedings. Such
Request for Release shall obligate the Master Servicer to return the Mortgage
File to the Trustee when the need therefor by the Master Servicer no longer
exists unless the Mortgage Loan shall be liquidated, in which case, upon receipt
of a certificate of a Servicing Officer similar to the Request for Release
hereinabove specified, the Mortgage File shall be delivered by the Trustee to
the Master Servicer.
Each Request for Release may be delivered to the Trustee (i) via mail
or courier, (ii) via facsimile or (iii) by such other means, including, without
limitation, electronic or computer readable medium, as the Master Servicer and
the Trustee shall mutually agree. The Trustee shall promptly release the related
Mortgage File(s) within five (5) to seven (7) Business Days of receipt of a
properly completed Request for Release pursuant to clauses (i), (ii) or (iii)
above shall be authorization to the Trustee to release such Mortgage Files,
provided the Trustee has determined that such Request for Release has been
executed, with respect to clauses (i) or (ii) above, or approved, with respect
to clause (iii) above, by an authorized Servicing Officer of the Master
Servicer, and so long as the Trustee complies with its duties and obligations
under this Agreement. If the Trustee is unable to release the Mortgage Files
within the time frames previously specified, the Trustee shall immediately
notify the Master Servicer indicating the reason for such delay, but in no event
shall such notification be later than five Business Days after receipt of a
Request for Release. If the Master Servicer is required to pay penalties or
damages due to the Trustee's negligent failure to release the related Mortgage
File or the Trustee's negligent failure to execute and release documents in a
timely manner, the Trustee shall be liable for such penalties or damages.
On each day that the Master Servicer remits to the Trustee Requests for
Releases pursuant to clauses (ii) or (iii) above, the Master Servicer shall also
submit to the Trustee a summary of the total amount of such Requests for
Releases requested on such day by the same method as described in such clauses
(ii) and (iii) above.
Section 5.14 SERVICING FEE; SERVICING COMPENSATION. The Master
Servicer shall be entitled, at its election, either (a) to pay itself the
Servicing Fee out of any Mortgagor payment on account of interest or Net REO
Proceeds prior to the deposit of such payment in the Collection Account or (b)
to withdraw from the Collection Account such Servicing Fee pursuant to Section
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5.04. The Master Servicer shall also be entitled, at its election, either (a) to
pay itself the Servicing Fee in respect of each delinquent Mortgage Loan out of
Liquidation Proceeds in respect of such Mortgage Loan or other recoveries with
respect thereto to the extent permitted in Section 5.03(a) to withdraw from the
Collection Account the Servicing Fee in respect of each such Mortgage Loan to
the extent of such Liquidation Proceeds or other recoveries, to the extent
permitted by Section 5.04.
Servicing compensation in the form of Net Foreclosure Profits,
prepayment penalties, assumption fees, late payment charges, tax service fees,
fees for statement of account or payoff of the Mortgage Loan (to the extent
permitted by applicable law) or otherwise shall be retained by the Master
Servicer and are not required to be deposited in the Collection Account. The
aggregate Servicing Fee is reserved for the administration of the Trust Fund
and, in the event of replacement of the Master Servicer as servicer of the
Mortgage Loans, for the payment of other expenses related to such replacement.
The aggregate Servicing Fee shall be offset as provided in Section 5.20. The
Master Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder (including maintenance of the
hazard insurance required by Section 5.05) and shall not be entitled to
reimbursement therefor except as specifically provided herein.
Section 5.15 REPORTS TO THE TRUSTEE AND THE COMPANY;
COLLECTION ACCOUNT STATEMENTS. Not later than 15 days after each Distribution
Date, the Master Servicer shall provide to the Trustee and the Company a
statement, certified by a Servicing Officer, setting forth the status of the
Collection Account as of the close of business on the last day of the
immediately preceding calendar month, stating that all distributions required by
this Agreement to be made by the Master Servicer on behalf of the Trustee have
been made (or if any required distribution has not been made by the Master
Servicer, specifying the nature and status thereof) and showing, for the period
covered by such statement, the aggregate of deposits into and withdrawals from
the Collection Account for each category of deposit specified in Section 5.03
and each category of withdrawal specified in Section 5.04 and the aggregate of
deposits into the Certificate Accounts as specified in Section 6.01(c). Such
statement shall also state the aggregate unpaid principal balance of all the
Mortgage Loans as of the close of business on the last day of the month
preceding the month in which such Distribution Date occurs. Copies of such
statement shall be provided by the Trustee to any Certificateholder upon
request.
Section 5.16 ANNUAL STATEMENT AS TO COMPLIANCE. The Master
Servicer will deliver to the Trustee, the Certificate Insurer and the Rating
Agencies on or before June 30th of each year, beginning with June 30, 1998, 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 this Agreement has been made under such officer's
supervision, and (ii) to the best of such officer's knowledge, based on such
review, the Master Servicer has fulfilled all its obligations under this
Agreement throughout such year, or if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof. Such Officers' Certificate shall be
accompanied by the statement described in Section 5.17 of this Agreement. Copies
of such statement shall, upon request, be provided to any Certificateholder by
the Master Servicer, or by the Trustee at the Master Servicer's expense if the
Master Servicer shall fail to provide such copies.
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Section 5.17 ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING
REPORT. On or before March 30th of every year, beginning with March 30, 1998,
the Master Servicer, at its expense, shall cause a firm of nationally recognized
independent public accountants to furnish a statement to the Trustee, the
Certificate Insurer and the Rating Agencies to the effect that, on the basis of
an examination of certain documents and records relating to the servicing of the
mortgage loans being serviced by the Master Servicer under pooling and servicing
agreements similar to this Agreement, conducted substantially in compliance with
the Uniform Single Attestation Program for Mortgage Bankers, such firm is of the
opinion that such servicing has been conducted in compliance with this
Agreement. Copies of such statement shall, upon written request, be provided to
Certificateholders by the Master Servicer, or by the Trustee at the Master
Servicer's expense if the Master Servicer shall fail to provide such copies. For
purposes of such statement, such firm may conclusively presume that any pooling
and servicing agreement which governs mortgage pass-through certificates offered
by the Company (or any predecessor or successor thereto) in a registration
statement under the Securities Act of 1933, as amended, is similar to this
Agreement, unless such other pooling and servicing agreement expressly states
otherwise.
Section 5.18 OPTIONAL PURCHASE OF DEFAULTED MORTGAGE LOANS.
Any Affiliate of the Seller, in its sole discretion, shall have the right to
elect (by written notice sent to the Master Servicer, the Trustee and the
Certificate Insurer), but shall not be obligated, to purchase for its own
account from the Trust Fund any Mortgage Loan which is 90 days or more
Delinquent in the manner and at the price specified in Section 2.04(b). The
purchase price for any Mortgage Loan purchased hereunder shall be deposited in
the Collection Account and the Trustee, upon receipt of such deposit, shall
release or cause to be released to the purchaser of such Mortgage Loan the
related Mortgage File and shall execute and deliver such instruments of transfer
or assignment prepared by the purchaser of such Mortgage Loan, in each case
without recourse, as shall be necessary to vest in the purchaser of such
Mortgage Loan any Mortgage Loan released pursuant hereto and the purchaser of
such Mortgage Loan shall succeed to all the Trustee's right, title and interest
in and to such Mortgage Loan and all security and documents related thereto.
Such assignment shall be an assignment outright and not for security. The
purchaser of such Mortgage Loan shall thereupon own such Mortgage Loan, and all
security and documents, free of any further obligation to the Trustee or the
Certificateholders with respect thereto.
Section 5.19 REPORTS TO BE PROVIDED BY THE MASTER SERVICER.
The Master Servicer agrees to make available on a reasonable basis to the
Certificate Insurer a knowledgeable financial or accounting officer for the
purpose of answering reasonable questions respecting recent developments
affecting the Master Servicer or the financial statements of the Master Servicer
and to permit the Certificate Insurer to inspect the Master Servicer's servicing
facilities during normal business hours for the purpose of satisfying the
Certificate Insurer that the Master Servicer has the ability to service the
Mortgage Loans in accordance with this Agreement. With respect to the
liquidation of a Mortgage Loan or disposition of an REO Property, upon the
determination by the Master Servicer that all Liquidation Proceeds which it
expects to recover with respect to such Mortgage Loan or REO Property have been
recovered, the Master Servicer shall promptly deliver to the Certificate Insurer
a related Liquidation Report with respect to such Mortgage Loan.
Section 5.20 ADJUSTMENT OF SERVICING COMPENSATION IN RESPECT
OF PREPAID MORTGAGE LOANS. The aggregate amount of the Servicing Fees that the
Master Servicer and any Subservicer shall be entitled to receive with respect to
all of the Mortgage Loans and each
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Distribution Date shall be offset on such Distribution Date by an amount equal
to the aggregate Prepayment Interest Shortfall with respect to all Mortgage
Loans which were subjects of Principal Prepayments in Full or Curtailments
during the month preceding the month of such Distribution Date. The amount of
any offset against the aggregate Servicing Fee with respect to any Distribution
Date under this Section 5.20 shall be limited to the aggregate amount of the
Servicing Fees otherwise payable to the Master Servicer and any Subservicer
(without adjustment on account of Prepayment Interest Shortfalls) with respect
to (i) scheduled payments having the Due Date occurring in the month of such
Distribution Date received by the Master Servicer or any Subservicer prior to
the Master Servicer Remittance Date, and (ii) Principal Prepayments in Full,
Curtailments and Liquidation Proceeds received in the month preceding the month
in which such Distribution Date occurs, and the rights of the Certificateholders
to the offset of the aggregate Prepayment Interest Shortfalls shall not be
cumulative.
Section 5.21 PERIODIC ADVANCES. If, on any Master Servicer
Remittance Date, the Master Servicer determines that any Monthly Payments due on
the Due Date immediately preceding such Master Servicer Remittance Date have not
been received as of the close of business on the Business Day preceding such
Master Servicer Remittance Date, the Master Servicer shall determine the amount
of any Periodic Advance required to be made with respect to the related
Distribution Date. The Master Servicer shall, on the Master Servicer Remittance
Date, deliver in a computer-readable form (including electronic transmission) to
the Trustee indicating the payment status of each Mortgage Loan as of the
Business Day prior to such Master Servicer Remittance Date. The Master Servicer
shall include in the amount to be deposited in the related Certificate Account
on such Master Servicer Remittance Date an amount equal to the Periodic Advance,
if any, which deposit may be made in whole or in part from funds in the
Collection Account being held for future distribution or withdrawal on or in
connection with Distribution Dates in subsequent months. Any funds being held
for future distribution to Certificateholders and so used shall be replaced by
the Master Servicer from its own funds by deposit in the related Certificate
Account on or before the Business Day preceding any such future Master Servicer
Remittance Date to the extent that funds in the related Certificate Account on
such Master Servicer Remittance Date shall be less than payments to
Certificateholders required to be made on such date.
The Master Servicer shall designate on its records the
specific Mortgage Loans and related installments (or portions thereof) as to
which such Periodic Advance shall be deemed to have been made, such
determination being conclusive for purposes of withdrawals from the
Collection Account pursuant to Section 5.04.
Section 5.22 THIRD PARTY CLAIMS. The Trustee shall reimburse
the Seller from amounts otherwise distributable on the Class R Certificates for
all amounts advanced by the Seller pursuant to the second sentence of Section
4.03(a)(ii) of the Purchase Agreement except when the relevant claim relates
directly to the failure of the Seller to perform its duties in compliance with
the terms of the Purchase Agreement.
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Section 5.23 MAINTENANCE OF CORPORATE EXISTENCE AND LICENSES;
MERGER OR CONSOLIDATION OF THE MASTER SERVICER. (a) The Master Servicer will
keep in full effect its existence, rights and franchises as a corporation, will
obtain and preserve its qualification to do business as a foreign corporation in
each jurisdiction necessary to protect the validity and enforceability of this
Agreement or any of the Mortgage Loans and to perform its duties under this
Agreement and will otherwise operate its business so as to cause the
representations and warranties under Section 3.01 to be true and correct at all
times under this Agreement.
(b) Any Person into which the Master Servicer may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Master Servicer shall be a party, or any Person
succeeding to the business of the Master Servicer, shall be an established
mortgage loan servicing institution acceptable to the Certificate Insurer that
has a net worth of at least $15,000,000, and in all events shall be the
successor of the Master Servicer 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 Master Servicer shall send notice of any such
merger or consolidation to the Trustee and the Certificate Insurer.
Section 5.24 ASSIGNMENT OF AGREEMENT BY MASTER SERVICER;
MASTER SERVICER NOT TO RESIGN. The Master Servicer shall not assign this
Agreement or resign from the obligations and duties hereby imposed on it except
by mutual consent of the Certificate Insurer and the Trustee or upon the
determination that the Master Servicer's duties hereunder are no longer
permissible under applicable law and that such incapacity cannot be cured by the
Master Servicer without incurring, in the reasonable judgment of the Certificate
Insurer, unreasonable expense. Any such determination that the Master Servicer's
duties hereunder are no longer permissible under applicable law permitting the
resignation of the Master Servicer shall be evidenced by a written Opinion of
Counsel (who may be counsel for the Master Servicer) to such effect delivered to
the Trustee, the Seller, the Company and the Certificate Insurer. No such
resignation shall become effective until the Trustee or a successor appointed in
accordance with the terms of this Agreement has assumed the Master Servicer's
responsibilities and obligations hereunder in accordance with Section 7.02. The
Master Servicer shall provide the Trustee, the Rating Agencies and the
Certificate Insurer with 30 days prior written notice of its intention to resign
pursuant to this Section 5.24. In the event the Master Servicer wishes to resign
from its obligations hereunder, the Holder of the Class R-II Certificates shall
have the right to select a new Master Servicer, with the consent of the
Certificate Insurer and the Rating Agencies.
Section 5.25 INFORMATION REPORTS TO BE FILED BY THE MASTER
SERVICER. The Master Servicer shall file (or cause any Subservicers to file)
information returns with respect to the receipt of mortgage interest received in
a trade or business, reports of foreclosures and abandonments of any Mortgaged
Property and cancellation of indebtedness income with respect to any Mortgaged
Property as required by Sections 6050H, 6050J and 6050P of the Code,
respectively. Copies of such information returns shall also be sent to the
Trustee.
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ARTICLE VI
DISTRIBUTIONS AND PAYMENTS
Section 6.01 ESTABLISHMENT OF CERTIFICATE ACCOUNTS; DEPOSITS
TO THE CERTIFICATE ACCOUNTS. (a) The Trustee shall establish and maintain three
separate Certificate Accounts which shall be Eligible Accounts and shall be
titled "Group I Certificate Account, Norwest Bank Minnesota, N.A., as trustee
for the registered holders of Southern Pacific Secured Assets Corp., Mortgage
Loan Asset-Backed Pass-Through Certificates, Series 1997-3," "Group II
Certificate Account, Norwest Bank Minnesota, N.A., as trustee for the registered
holders of Southern Pacific Secured Assets Corp., Mortgage Loan Asset-Backed
Pass-Through Certificates, Series 1997-3" and "Group III Certificate Account,
Norwest Bank Minnesota, N.A., as trustee for the registered holders of Southern
Pacific Secured Assets Corp., Mortgage Loan Asset-Backed Pass-Through
Certificates, Series 1997-3."
(b) From the period from each Master Servicer Remittance Date
to the Business Day prior to each Distribution Date, the Master Servicer may
direct the Trustee in writing to invest the funds in the Certificate Accounts
only in Permitted Investments. From the Business Day prior to each Distribution
Date to such Distribution Date, the Trustee shall invest the funds in the
Certificate Accounts only in Permitted Investments. No Permitted Investment
shall be sold or disposed of at a gain prior to maturity unless the Master
Servicer or Trustee, as applicable, has received an Opinion of Counsel (at the
Master Servicer's or Trustee's expense, as applicable) that such sale or
disposition will not cause the Trust Fund to be subject to the tax on income
from prohibited transactions imposed by Section 860F(a)(1) of the Code,
otherwise subject REMIC I or REMIC II to tax or cause either REMIC I or REMIC II
to fail to qualify as a REMIC. All net income (other than any gain from a sale
or disposition of the type referred to in the preceding sentence) realized from
any such Permitted Investment shall be for the benefit of the Master Servicer or
Trustee, as applicable, as additional compensation. The amount of any losses
incurred in respect of any such Permitted Investments held therein which is in
excess of the income and gain thereon shall be deposited in the related
Certificate Account by the Master Servicer or Trustee, as applicable, out of its
own funds immediately as realized.
(c) On each Master Servicer Remittance Date, the Master
Servicer shall cause to be deposited in the Group I, Group II and Group III
Certificate Account, from funds on deposit in the Collection Account, an amount
equal to the related Master Servicer Remittance Amount with respect to Loan
Group I, Loan Group II and Loan Group III, respectively. On the Closing Date the
Company will also deposit the Special Deposit in the Group I Certificate
Account.
Section 6.02 PERMITTED WITHDRAWALS FROM THE CERTIFICATE
ACCOUNTS. The Trustee shall withdraw or cause to be withdrawn funds from the
Certificate Accounts for the following purposes:
(a) to effect the distributions described in Section 6.05;
(b) to pay to the Seller with respect to each Mortgage Loan or
property acquired in respect thereof that has been repurchased or
replaced pursuant to Section 2.04 or
3.03
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or to pay to the Master Servicer with respect to each Mortgage Loan or
property acquired in respect thereof that has been purchased all
amounts received thereon and not required to be distributed as of the
date on which the related repurchase or purchase price or
Principal Balance was determined;
(c) on the Business Day prior to each Distribution Date, to
pay the Master Servicer any interest earned on or investment income
earned with respect to funds in the Certificate Accounts up to the
Business Day immediately prior to such Distribution Date;
(d) on each Distribution Date, to pay itself any interest
earned on or investment income earned with respect to funds in the
Certificate Accounts from the Business Day immediately prior to such
Distribution Date to such Distribution Date;
(e) to return to the Collection Account any amount deposited
in a Certificate Account that was not required to be deposited
therein;
(f) to make reimbursements to itself in accordance with
Section 9.05; and
(g) to clear and terminate the Certificate Accounts upon
termination of any of the Trust Fund pursuant to Article VIII.
The Trustee shall keep and maintain a separate accounting for
withdrawals from the Certificate Accounts pursuant to each of subclauses (a)
through (f) listed above.
Section 6.03 COLLECTION OF MONEY. Except as otherwise
expressly provided herein, the Trustee may demand payment or delivery of all
money and other property payable to or receivable by the Trustee pursuant to
this Agreement, including (a) all payments due on the Mortgage Loans in
accordance with the respective terms and conditions of such Mortgage Loans and
required to be paid over to the Trustee by the Master Servicer or by any
Subservicer and (b) Insured Payments. The Trustee shall hold all such money and
property received by it, as part of the Trust Fund and shall apply it as
provided in this Agreement.
Section 6.04 THE CERTIFICATE INSURANCE POLICY. (a) Within two
Business Days after each Master Servicer Remittance Date the Trustee shall
determine with respect to the immediately following Distribution Date the amount
to be on deposit in the Certificate Accounts on such Distribution Date as a
result of the Master Servicer's remittance of the Master Servicer Remittance
Amount on the related Master Servicer Remittance Date plus the amount of the
Special Deposit in the Group I Certificate Account, less the amounts described
in clause (f) of Section 6.02 to be withdrawn on such Distribution Date and
clauses (i) through (ii) of Section 6.05(b), (c) or (d) for the related
Distribution Date, and not including the amount of any Insured Payment which is
required to be deposited in the related Certificate Account for such
Distribution Date. The amounts described in the preceding sentence, as
determined separately with respect to the Group I Loans, Group II Loans and
Group III Loans, with respect to each Distribution Date are the "Group I
Available Funds," "Group II Available Funds" and "Group III Available Funds" for
such Distribution Date.
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(b) If on any Distribution Date there is an Available Funds
Shortfall, the Trustee shall complete a Notice in the form of Exhibit A to the
related Certificate Insurance Policy and submit such notice to the Certificate
Insurer no later than 12:00 noon New York City time on the second Policy
Business Day preceding such Distribution Date as a claim for an Insured Payment
in an amount equal to such Available Funds Shortfall.
(c) The Trustee shall establish a separate Eligible Account
for the benefit of Holders of the Certificates and the Certificate Insurer
referred to herein as the "Certificate Insurance Payments Account" over which
the Trustee shall have exclusive control and sole right of withdrawal. The
Trustee shall deposit upon receipt any amount paid under the Certificate
Insurance Policy in the Certificate Insurance Payments Account and distribute
such amount only for purposes of payment to Certificateholders of the Group I,
Group II or Group III Insured Distribution Amount for which a claim was made and
such amount may not be applied to satisfy any costs, expenses or liabilities of
the Master Servicer, the Trustee or the Trust Fund. Amounts paid under the
Certificate Insurance Policy, to the extent needed to pay the Group I, Group II
or Group III Insured Distribution Amount shall be transferred by the Trustee
from the Certificate Insurance Payments Account to the related Certificate
Account on the related Distribution Date and disbursed by the Trustee to
Certificateholders in accordance with Section 6.05. It shall not be necessary
for payments made under the Certificate Insurance Policy to be made by checks or
wire transfers separate from other amounts distributed pursuant to Section 6.05.
However, the amount of any payment of principal or of interest on the
Certificates to be paid from funds transferred from the Certificate Insurance
Payments Account shall be noted as provided in paragraph (d) below. Funds held
in the Certificate Insurance Payments Account shall not be invested. Any funds
remaining in the Certificate Insurance Payments Account on the first Policy
Business Day following a Distribution Date shall be returned to the Certificate
Insurer pursuant to the written instructions of the Certificate Insurer by the
end of such Policy Business Day.
(d) The Trustee Remittance Report shall indicate the amount of
interest and principal paid in respect of the Group I, Group II and Group III
Class A Certificates from moneys
received under the Certificate Insurance Policy.
(e) In the event that the Trustee has received a certified
copy of an order of the appropriate court that any Insured Payment has been
voided in whole or in part as a preference payment under applicable bankruptcy
law, the Trustee shall so notify the Certificate Insurer, shall comply with the
provisions of the Certificate Insurance Policy to obtain payment by the
Certificate Insurer of such voided Insured Payment, and shall, at the time it
provides notice to the Certificate Insurer, notify, by mail to
Certificateholders of the affected Certificates that, in the event any
Certificateholder's Insured Payment is so recovered, such Certificateholder will
be entitled to payment pursuant to the Certificate Insurance Policy, a copy of
which shall be made available through the Trustee, the Certificate Insurer or
the Certificate Insurer's fiscal agent, if any, and the Trustee shall furnish to
the Certificate Insurer or its fiscal agent, if any, its records evidencing the
payments which have been made by the Trustee and subsequently recovered from
Certificateholders, and dates on which such payments were made.
(f) The Trustee shall promptly notify the Certificate Insurer
of any proceeding or the institution of any action, of which a Responsible
Officer of the Trustee has actual knowledge, seeking the avoidance as a
preferential transfer under applicable bankruptcy, insolvency,
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receivership or similar law (a "Preference Claim") of any distribution made with
respect to the Certificates. Each Certificateholder, by its purchase of
Certificates, the Master Servicer and the Trustee agree that, the Certificate
Insurer (so long as no Certificate Insurer Default exists) may at any time
during the continuation of any proceeding relating to a Preference Claim direct
all matters relating to such Preference Claim, including, without limitation,
(i) the direction of any appeal of any order relating to such Preference Claim
and (ii) the posting of any surety, supersedeas or performance bond pending any
such appeal. In addition and without limitation of the foregoing, the
Certificate Insurer shall be subrogated to, and each Certificateholder, the
Master Servicer and the Trustee hereby delegate and assign to the Certificate
Insurer, to the fullest extent permitted by law, the rights of the Master
Servicer, the Trustee and each Certificateholder in the conduct of any such
Preference Claim, including, without limitation, all rights of any party to any
adversary proceeding or action with respect to any court order issued in
connection with any such Preference Claim.
Section 6.05 DISTRIBUTIONS. (a) No later than 12:00 noon
Minneapolis time on each Master Servicer Remittance Date, the Master Servicer
shall deliver to the Trustee a report in computer-readable form (including
electronic transmission, provided that a portion of such report relating to
certain delinquency information may be delivered in hard copy form rather than
computer-readable form) containing such information as to each Mortgage Loan as
of such date and such other information as the Trustee shall reasonably require.
(b) With respect to funds deposited in the Group I Certificate
Account, on each Distribution Date, the Trustee shall make the following
allocations, disbursements and transfers in the following order of priority, and
each such allocation, transfer and disbursement shall be treated as having
occurred only after all preceding allocations, transfers and disbursements have
occurred:
(i) commencing with the Distribution Date occurring in
December 1997, to the Certificate Insurer, the Premium Amount with
respect to the Group I Loans;
(ii) to the Trustee, an amount equal to the Trustee's Fees
then due to it with respect to the Group I Loans;
(iii) to the Certificate Insurer the lesser of (x) an amount
equal to (i) the amount then on deposit in the Group I Certificate
Account remaining after the foregoing distributions minus (ii) the
Group I Insured Distribution Amount for such Distribution Date and (y)
the outstanding Group I Reimbursement Amount, if any, as of such
Distribution Date;
(iv) from amounts then on deposit in the Group I Certificate
Account (including any Group I Insured Payments), to the Group I Class
A Certificateholders an amount equal to the Group I Class A Interest
Distribution Amount, with such amount distributed first, to the Group I
Fixed Strip Components, and second, to the Class A-1 Certificates, in
each case in an amount equal to the related Group I Class A Interest
Distribution Amount payable thereon;
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(v) from amounts then on deposit in the Group I Certificate
Account (including any Group I Insured Payments), to the Group I Class
A Certificateholders an amount equal to the lesser of (a) the Group I
Class A Principal Distribution Amount and (b) the amount remaining in
the Group I Certificate Account after distributions pursuant to clauses
(i) through (iv) above, in the manner described below;
(vi) from amounts then on deposit in the Group I
Certificate Account:
(A) on any Distribution Date when, following
distributions to be made on such date, the Group II
Available Funds would be less than the Group II Class A
Interest Distribution Amount and the Group III Available
Funds is greater than or equal to the Group III Class A
Interest Distribution Amount, to the Group II Class A
Certificateholders, an amount equal to such difference;
provided that if on such Distribution Date amounts are
available in the Group III Certificate Account following
distributions pursuant to clause (d)(v), the Group II Class
A Certificateholders shall receive from amounts on deposit
in the Group I Certificate Account the pro rata portion of
such difference, based on the relative amounts in the Group
I Certificate Account and Group III Certificate Account
remaining following distributions pursuant to clauses (b)(v)
and (d)(v) hereof;
(B) on any Distribution Date when following distributions
to be made on such date, the Group III Available Funds would
be less than the Group III Class A Interest Distribution
Amount and the Group II Available Funds is greater than or
equal to the Group II Class A Interest Distribution Amount, to
the Group III Class A Certificateholders, an amount equal to
such difference; provided that if on such Distribution Date
amounts are available in the Group II Certificate Account
following distributions pursuant to clause (c)(v), the Group
III Class A Certificateholders shall receive from amounts on
deposit in the Group I Certificate Account the pro rata
portion of such difference, based on the relative amounts in
the Group I Certificate Account and Group II Certificate
Account remaining following distributions pursuant to clauses
(b)(v) and (c)(v) hereof;
(C) on any Distribution Date when following distributions
to be made on such date, the Group II Available Funds would be
less than the Group II Class A Interest Distribution Amount
and the Group III Available Funds would be less than the Group
III Class A Interest Distribution Amount, to the Group II
Class A Certificateholders and Group III Class A
Certificateholders, an amount equal to the sum of such
differences, allocated to the Group II Class A
Certificateholders and Group III Class A Certificateholders on
a pro rata basis;
(vii) from amounts then on deposit in the Group I
Certificate Account:
(A) on any Distribution Date when following distributions
to be made on such date, a Group II Subordination Deficit
exists (following payments pursuant to Section 6.05(c)(v)
hereof) and a Group III Subordination Deficit does not exist
(following payment pursuant to Section 6.05(d)(v) hereof), to
the Group II Class A Certificateholders, an amount equal to
such Group II Subordination Deficit;
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provided that if on such Distribution Date amounts are
available in the Group III Certificate Account following
distributions pursuant to clause (d)(vi), the Group II Class A
Certificateholders shall receive from amounts on deposit in
the Group I Certificate Account the pro rata portion of such
Group II Subordination Deficit, based on the relative amounts
in the Group I Certificate Account and Group III Certificate
Account remaining following distributions pursuant to clauses
(b)(vi) and (d)(vi) hereof;
(B) on any Distribution Date when following distributions
to be made on such date, a Group III Subordination Deficit
exists (following payments pursuant to Section 6.05(d)(v)
hereof) and a Group II Subordination Deficit does not exist
(following payment pursuant to Section 6.05(c)(v) hereof),
to the Group III Class A Certificateholders, an amount equal
to such Group III Subordination Deficit; provided that if on
such Distribution Date amounts are available in the Group II
Certificate Account following distributions pursuant to
clause (c)(vi), the Group III Class A Certificateholders
shall receive from amounts on deposit in the Group I
Certificate Account the pro rata portion of such Group II
Subordination Deficit, based on the relative amounts in the
Group I Certificate Account and Group II Certificate Account
remaining following distributions pursuant to clauses
(b)(vi) and (c)(vi) hereof;
(C) on any Distribution Date when following distributions
to be made on such date, a Group II Subordination Deficit
exists (following payments pursuant to Section 6.05(c)(v)
hereof) and a Group III Subordination Deficit exists
(following payment pursuant to Section 6.05(d)(v) hereof), to
the Group II Class A Certificateholders and Group III Class A
Certificateholders, an amount equal to such Group II
Subordination Deficit and Group III Subordination Deficit,
allocated to the Group II Class A Certificateholders and Group
III Class A Certificateholders on a pro rata basis;
(viii) from amounts then on deposit in the Group I
Certificate Account:
(A) on any Distribution Date when following distributions
to be made on such date, a Group II Reimbursement Amount
exists (following payments pursuant to Section 6.05 (c)(vii)
hereof) and a Group III Reimbursement Amount does not exist
(following payment pursuant to Section 6.05(d)(vii) hereof),
to the Certificate Insurer, an amount equal to such Group II
Reimbursement Amount; provided that if on such Distribution
Date amounts are available in the Group III Certificate
Account following distributions pursuant to clause (d)(vii),
the Certificate Insurer shall receive from amounts on deposit
in the Group I Certificate Account the pro rata portion of
such Group II Reimbursement Amount, based on the relative
amounts in the Group I Certificate Account and Group III
Certificate Account remaining following distributions pursuant
to clauses (b)(vii) and (d)(vii) hereof;
(B) on any Distribution Date when following distributions
to be made on such date, a Group III Reimbursement Amount
exists (following payments
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pursuant to Section 6.05(d)(vii) hereof) and a Group II
Reimbursement Amount does not exist (following payments
pursuant to Section 6.05(c)(vii) hereof), to the Certificate
Insurer, an amount equal to such Group III Reimbursement
Amount; provided that if on such Distribution Date amounts are
available in the Group II Certificate Account following
distributions pursuant to clause (c)(vii), the Certificate
Insurer shall receive from amounts on deposit in the Group I
Certificate Account the pro rata portion of such Group II
Reimbursement Amount, based on the relative amounts in the
Group I Certificate Account and Group II Certificate Account
remaining following distributions pursuant to clauses (b)(vii)
and (c)(vii) hereof
(C) on any Distribution Date when following distributions
to be made on such date, both a Group II Reimbursement Amount
exists (following payments pursuant to Section 6.05 (c)(vii)
hereof) and a Group III Reimbursement Amount exists (following
payment pursuant to Section 6.05(d)(vii) hereof), to the
Certificate Insurer, an amount equal to the sum of such Group
II Reimbursement Amount and Group III Reimbursement Amount;
(ix) from amounts then on deposit in the Group I
Certificate Account:
(A) on any Distribution Date when following distributions
to be made on such date, the Group II Subordinated Amount
would be less than the Group II Required Subordinated Amount
and the Group III Subordinated Amount is greater than or equal
to the Group III Required Subordinated Amount, to the Group II
Class A Certificateholders, an amount equal to such amount;
provided that if on such Distribution Date amounts are
available in the Group III Certificate Account following
distributions pursuant to clause (d)(viii), the Group II Class
A Certificateholders shall receive from amounts on deposit in
the Group I Certificate Account the pro rata portion of such
amount, based on the relative amounts in the Group I
Certificate Account and Group III Certificate Account
remaining following distributions pursuant to clauses
(b)(viii) and (d)(viii) hereof
(B) on any Distribution Date when following distributions
to be made on such date, the Group III Subordinated Amount
would be less than the Group III Required Subordinated Amount
and the Group II Subordinated Amount is greater than or equal
to the Group II Required Subordinated Amount, to the Group III
Class A Certificateholders, an amount equal to such amount;
provided that if on such Distribution Date amounts are
available in the Group II Certificate Account following
distributions pursuant to clause (c)(viii), the Group III
Class A Certificateholders shall receive from amounts on
deposit in the Group I Certificate Account the pro rata
portion of such amount, based on the relative amounts in the
Group I Certificate Account and Group II Certificate Account
remaining following distributions pursuant to clauses
(b)(viii) and (c)(viii) hereof;
(C) on any Distribution Date when following distributions
to be made on such date, the Group II Subordinated Amount
would be less than the Group II Required Subordinated Amount
and the Group III Subordinated Amount would be
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less than the Group III Required Subordinated Amount, to the
Group II Class A Certificateholders and Group III Class A
Certificateholders, an amount equal to the sum of such
amounts, allocated to the Group II Class A Certificateholders
and Group III Class A Certificateholders on a pro rata basis;
(x) from amounts then on deposit in the Group I Certificate
Account, to the Trustee, without duplication, an amount equal to any
costs and expenses owed to the Trustee as described in Section 9.05(b)
of this Agreement in excess of $75,000 in aggregate in any calendar
year and only that portion of such amounts in excess of $75,000;
(xi) from amounts then on deposit in the Group I Certificate
Account, to the Group I Class A Certificateholders the amount equal to
the lesser of (i) any amount then remaining in the Group I Certificate
Account after distributions to clauses (i) through (x) above and (ii)
the aggregate Group I Class A Available Funds Cap Carry-Forward Amount
shall be paid to the Group I Class A Certificateholders on account of
the Group I Class A Available Funds Cap Carry-Forward Amount, if any;
and
(xii) from amounts then on deposit in the Group I Certificate
Account, to the Holders of the Class R-II Certificates, the amount
remaining on such Distribution Date, if any.
Notwithstanding clause (v) above, the aggregate amounts distributed on all
Distribution Dates to the Holders of the Class A-1 Certificates on account of
the Group I Class A Principal Distribution Amount shall not exceed the Original
Group I Certificate Principal Balance of the Class A-1
Certificates.
Distributions of the Group I Class A Principal Distribution Amount and
amounts allocated pursuant to Section 6.05(c)(vii) and (ix) and (d)(vii) and
(ix) will be distributed to the Class A-1 Certificates in reduction of the
Certificate Principal Balance thereof, until the Certificate Principal Balance
thereof has been reduced to zero.
(c) With respect to funds deposited in the Group II
Certificate Account, on each Distribution Date, the Trustee shall make the
following allocations, disbursements and transfers in the following order of
priority, and each such allocation, transfer and disbursement shall be treated
as having occurred only after all preceding allocations, transfers and
disbursements have occurred:
(i) commencing with the Distribution Date occurring in
December 1997, to the Certificate Insurer, the Premium Amount with
respect to the Group II Loans;
(ii) to the Trustee, an amount equal to the Trustee's Fees
then due to it with respect to the Group II Loans;
(iii) to the Certificate Insurer the lesser of (x) an amount
equal to (i) the amount then on deposit in the Group II Certificate
Account remaining after the foregoing distributions minus (ii) the
Group II Insured Distribution Amount for such Distribution
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Date and (y) the outstanding Group II Reimbursement Amount, if any, as
of such Distribution Date;
(iv) from amounts then on deposit in the Group II
Certificate Account (including any Group II Insured Payments), to the
Group II Class A Certificateholders an amount equal to the Group II
Class A Interest Distribution Amount, with such amount distributed
first, to the Group II Fixed Strip Components, and second, to the Class
A-2 Certificates, in each case in an amount equal to the related Group
II Class A Interest Distribution Amount payable thereon;
(v) from amounts then on deposit in the Group II
Certificate Account (including any Group II Insured Payments), to the
Group II Class A Certificateholders an amount equal to the lesser of
(a) the Group II Class A Principal Distribution Amount and (b) the
amount remaining in the Group II Certificate Account after
distributions pursuant to clauses (i) through (iv) above, in the manner
described below;
(vi) from amounts then on deposit in the Group II
Certificate Account:
(A) on any Distribution Date when, following
distributions to be made on such date, the Group I Available
Funds would be less than the Group I Class A Interest
Distribution Amount and the Group III Available Funds is
greater than or equal to the Group III Class A Interest
Distribution Amount, to the Group I Class A
Certificateholders, an amount equal to such difference;
provided that if on such Distribution Date amounts are
available in the Group III Certificate following
distributions pursuant to clause (d)(v), the Group I Class A
Certificateholders shall receive from amounts on deposit in
the Group II Certificate Account the pro rata portion of
such difference, based on the relative amounts in the Group
II Certificate Account and Group III Certificate Account
remaining following distributions pursuant to clauses (c)(v)
and (d)(v) hereof;
(B) on any Distribution Date when following distributions
to be made on such date, the Group III Available Funds would
be less than the Group III Class A Interest Distribution
Amount and the Group I Available Funds is greater than or
equal to the Group I Class A Interest Distribution Amount, to
the Group III Class A Certificateholders, an amount equal to
such difference; provided that if on such Distribution Date
amounts are available in the Group I Certificate Account
following distributions pursuant to clause (b)(v), the Group
III Class A Certificateholders shall receive from amounts on
deposit in the Group II Certificate Account the pro rata
portion of such difference, based on the relative amounts in
the Group I Certificate Account and Group II Certificate
Account remaining following distributions pursuant to clauses
(b)(v) and (c)(v) hereof;
(C) on any Distribution Date when following distributions
to be made on such date, the Group I Available Funds would be
less than the Group I Class A Interest Distribution Amount and
the Group III Available Funds would be less than the Group III
Class A Interest Distribution Amount, to the Group I Class A
Certificateholders and Group III Class A Certificateholders,
an amount equal to the
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sum of such differences, allocated to the Group I Class A
Certificateholders and Group III Class A Certificateholders on
a pro rata basis;
(vii) from amounts then on deposit in the Group II
Certificate Account:
(A) on any Distribution Date when following distributions
to be made on such date, a Group I Subordination Deficit
exists payments pursuant to Section 6.05(b)(v) hereof) and a
Group III Subordination Deficit does not exist (following
payment pursuant to Section 6.05(d)(v) hereof), to the Group I
Class A Certificateholders, an amount equal to such Group I
Subordination Deficit; provided that if on such Distribution
Date amounts are available in the Group III Certificate
Account following distributions pursuant to clause (d)(vi),
the Group I Class A Certificateholders shall receive from
amounts on deposit in the Group II Certificate Account the pro
rata portion of such Group I Subordination Deficit, based on
the relative amounts in the Group II Certificate Account and
Group III Certificate Account remaining following
distributions pursuant to clauses (c)(vi) and (d)(vi) hereof;
(B) on any Distribution Date when following distributions
to be made on such date, a Group III Subordination Deficit
exists (following payments pursuant to Section 6.05(d)(v)
hereof) and a Group I Subordination Deficit does not exist
(following payment pursuant to Section 6.05(b)(v) hereof),
to the Group III Class A Certificateholders, an amount equal
to such Group III Subordination Deficit; provided that if on
such Distribution Date amounts are available in the Group I
Certificate Account following distributions pursuant to
clause (b)(vi), the Group III Class A Certificateholders
shall receive from amounts on deposit in the Group II
Certificate Account the pro rata portion of such Group I
Subordination Deficit, based on the relative amounts in the
Group I Certificate Account and Group II Certificate Account
remaining following distributions pursuant to clauses
(b)(vi) and (c)(vi) hereof;
(C) on any Distribution Date when following distributions
to be made on such date, a Group I Subordination Deficit
exists (following payments pursuant to Section 6.05(c)(v)
hereof) and a Group III Subordination Deficit exists
(following payment pursuant to Section 6.05(d)(v) hereof), to
the Group I Class A Certificateholders and Group III Class A
Certificateholders, an amount equal to such Group I
Subordination Deficit and Group III Subordination Deficit,
allocated to the Group I Class A Certificateholders and Group
III Class A Certificateholders on a pro rata basis;
(viii) from amounts then on deposit in the Group II
Certificate Account:
(A) on any Distribution Date when following distributions
to be made on such date, a Group I Reimbursement Amount exists
(following payments pursuant to Section 6.05(b)(vii) hereof)
and a Group III Reimbursement Amount does not exist (following
payment pursuant to Section 6.05(d)(vii) hereof), to the
Certificate Insurer, an amount equal to such Group I
Reimbursement Amount;
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provided that if on such Distribution Date amounts are
available in the Group III Certificate Account following
distributions pursuant to clause (d)(vii), the Certificate
Insurer shall receive from amounts on deposit in the Group II
Certificate Account the pro rata portion of such Group I
Reimbursement Amount, based on the relative amounts in the
Group II Certificate Account and Group III Certificate Account
remaining following distributions pursuant to clauses (c)(vii)
and (d)(vii) hereof;
(B) on any Distribution Date when following distributions
to be made on such date, a Group III Reimbursement Amount
exists (following payments pursuant to Section 6.05(d)(vii)
hereof) and a Group I Reimbursement Amount does not exist
(following payments pursuant to Section 6.05(b)(vii) hereof),
to the Certificate Insurer, an amount equal to such Group III
Reimbursement Amount; provided that if on such Distribution
Date amounts are available in the Group I Certificate Account
following distributions pursuant to clause (b)(vii), the
Certificate Insurer shall receive from amounts on deposit in
the Group II Certificate Account the pro rata portion of such
Group I Reimbursement Amount, based on the relative amounts in
the Group I Certificate Account and Group II Certificate
Account remaining following distributions pursuant to clauses
(b)(vii) and (c)(vii) hereof;
(C) on any Distribution Date when following distributions
to be made on such date, both a Group I Reimbursement Amount
exists (following payments pursuant to Section 6.05(b)(vii)
hereof) and a Group III Reimbursement Amount exists (following
payment pursuant to Section 6.05(d)(vii) hereof), to the
Certificate Insurer, an amount equal to the sum of such Group
I Reimbursement Amount and Group III Reimbursement Amount;
(ix) from amounts then on deposit in the Group II
Certificate Account:
(A) on any Distribution Date when following distributions
to be made on such date, the Group I Subordinated Amount would
be less than the Group I Required Subordinated Amount and the
Group III Subordinated Amount is greater than or equal to the
Group III Required Subordinated Amount, to the Group I Class A
Certificateholders, an amount equal to such amount; provided
that if on such Distribution Date amounts are available in the
Group III Certificate Account following distributions pursuant
to clause (d)(viii), the Group I Class A Certificateholders
shall receive from amounts on deposit in the Group II
Certificate Account the pro rata portion of such amount, based
on the relative amounts in the Group II Certificate Account
and Group III Certificate Account remaining following
distributions pursuant to clauses (c)(viii) and (d)(viii)
hereof
(B) on any Distribution Date when following distributions
to be made on such date, the Group III Subordinated Amount
would be less than the Group III Required Subordinated Amount
and the Group I Subordinated Amount is greater than or equal
to the Group I Required Subordinated Amount, to the Group III
Class A Certificateholders, an amount equal to such amount;
provided that if on
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such Distribution Date amounts are available in the Group I
Certificate Account following distributions pursuant to clause
(b)(viii), the Group III Class A Certificateholders shall
receive from amounts on deposit in the Group II Certificate
Account the pro rata portion of such amount, based on the
relative amounts in the Group I Certificate Account and Group
II Certificate Account remaining following distributions
pursuant to clauses (b)(viii) and (c)(viii) hereof;
(C) on any Distribution Date when following distributions
to be made on such date, the Group I Subordinated Amount would
be less than the Group I Required Subordinated Amount and the
Group III Subordinated Amount would be less than the Group III
Required Subordinated Amount, to the Group I Class A
Certificateholders and Group III Class A Certificateholders,
an amount equal to the sum of such amounts, allocated to the
Group I Class A Certificateholders and Group III Class A
Certificateholders on a pro rata basis;
(x) from amounts then on deposit in the Group II
Certificate Account, to the Trustee, without duplication, an amount
equal to any costs and expenses owed to the Trustee as described in
Section 9.05(b) of this Agreement in excess of $75,000 in aggregate in
any calendar year and only that portion of such amounts in excess of
$75,000;
(xi) from amounts then on deposit in the Group II Certificate
Account, to the Group II Class A Certificateholders the amount equal to
the lesser of (i) any amount then remaining in the Group II Certificate
Account after distributions to clauses (i) through (x) above and (ii)
the aggregate Group II Class A Available Funds Cap Carry-Forward Amount
shall be paid to the Group II Class A Certificateholders on account of
the Group II Class A Available Funds Cap Carry-Forward Amount, if any;
and
(xii) from amounts then on deposit in the Group II
Certificate Account, to the Holders of the Class R-II Certificates, the
amount remaining on such Distribution Date, if any.
Notwithstanding clause (v) above, the aggregate amounts distributed on all
Distribution Dates to the Holders of the Class A-2 Certificates on account of
the Group II Class A Principal Distribution Amount shall not exceed the Original
Group II Certificate Principal Balance of the Class A-2
Certificates.
Distributions of the Group II Class A Principal Distribution Amount and
amounts allocated pursuant to Section 6.05(b)(vii) and (ix) and (d)(vii) and
(ix) will be distributed to the Class A-2 Certificates in reduction of the
Certificate Principal Balance thereof, until the Certificate Principal Balance
thereof has been reduced to zero.
(d) With respect to funds deposited in the Group III
Certificate Account, on each Distribution Date, the Trustee shall make the
following allocations, disbursements and transfers in the following order of
priority, and each such allocation, transfer and disbursement shall be treated
as having occurred only after all preceding allocations, transfers and
disbursements have occurred:
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(i) commencing with the Distribution Date occurring in
December 1997, to the Certificate Insurer, the Premium Amount with
respect to the Group III Loans;
(ii) to the Trustee, an amount equal to the Trustee's Fees
then due to it with respect to the Group III Loans;
(iii) to the Certificate Insurer the lesser of (x) an amount
equal to (i) the amount then on deposit in the Group III Certificate
Account remaining after the foregoing distributions minus (ii) the
Group III Insured Distribution Amount for such Distribution Date and
(y) the outstanding Group III Reimbursement Amount, if any, as of such
Distribution Date;
(iv) from amounts then on deposit in the Group III
Certificate Account (including any Group III Insured Payments), an
amount equal to the Group III Class A Interest Distribution Amount
allocated among the Group III Class A Certificates in the manner
described below;
(v) from amounts then on deposit in the Group III
Certificate Account (including any Group III Insured Payments), to the
Group III Class A Certificateholders (other than the Group III Fixed
Strip Component) an amount equal to the lesser of (a) the Group III
Class A Principal Distribution Amount and (b) the amount remaining in
the Group III Certificate Account after distributions pursuant to
clauses (i) through (iv) above, allocated in the manner described
below;
(vi) from amounts then on deposit in the Group III
Certificate Account:
(A) on any Distribution Date when, following
distributions to be made on such date, the Group I Available
Funds would be less than the Group I
Class A
Interest Distribution Amount and the Group II Available Funds
is greater than or equal to the Group II Class A Interest
Distribution Amount, to the Group I Class A
Certificateholders, an amount equal to such difference;
provided that if on such Distribution Date amounts are
available in the Group II Certificate Account following
distributions pursuant to clause (c)(v), the Group I Class A
Certificateholders shall receive from amounts on deposit in
the Group III Certificate Account the pro rata portion of such
difference, based on the relative amounts in the Group II
Certificate Account and Group III Certificate Account
remaining following distributions pursuant to clauses (c)(v)
and (d)(v) hereof;
(B) on any Distribution Date when following distributions
to be made on such date, the Group II Available Funds would be
less than the Group II Class A Interest Distribution Amount
and the Group I Available Funds is greater than or equal to
the Group I Class A Interest Distribution Amount, to the Group
II Class A Certificateholders, an amount equal to such
difference; provided that if on such Distribution Date amounts
are available in the Group I Certificate Account following
distributions pursuant to clause (b)(v), the Group II Class A
Certificateholders shall receive from amounts on deposit in
the Group III Certificate Account the pro rata portion of such
difference, based on the relative amounts in
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the Group I Certificate Account and Group III Certificate
Account remaining following distributions pursuant to clauses
(b)(v) and (d)(v) hereof;
(C) on any Distribution Date when following distributions
to be made on such date, the Group I Available Funds would be
less than the Group I Class A Interest Distribution Amount and
the Group II Available Funds would be less than the Group II
Class A Interest Distribution Amount, to the Group I Class A
Certificateholders and Group II Class A Certificateholders, an
amount equal to the sum of such differences, allocated to the
Group I Class A Certificateholders and Group II Class A
Certificateholders on a pro rata basis;
(vii) from amounts then on deposit in the Group III
Certificate Account:
(A) on any Distribution Date when following distributions
to be made on such date, a Group I Subordination Deficit
exists (following payments pursuant to Section 6.05 (b)(v)
hereof) and a Group II Subordination Deficit does not exist
(following payment pursuant to Section 6.05(c)(v) hereof), to
the Group I Class A Certificateholders, an amount equal to
such Group I Subordination Deficit; provided that if on such
Distribution Date amounts are available in the Group II
Certificate Account following distributions pursuant to clause
(c)(vi), the Group I Class A Certificateholders shall receive
from amounts on deposit in the Group III Certificate Account
the pro rata portion of such Group I Subordination Deficit,
based on the relative amounts in the Group II Certificate
Account and Group III Certificate Account remaining following
distributions pursuant to clauses (c)(vi) and (d)(vi) hereof;
(B) on any Distribution Date when following distributions
to be made on such date, a Group II Subordination Deficit
exists (following payments pursuant to Section 6.05(c)(v)
hereof) and a Group I Subordination Deficit does not exist
(following payment pursuant to Section 6.05(b)(v) hereof), to
the Group II
Class A
Certificateholders, an amount equal to such Group II
Subordination Deficit; provided that if on such Distribution
Date amounts are available in the Group I Certificate Account
following distributions pursuant to clause (b)(vi), the Group
II Class A Certificateholders shall receive from amounts on
deposit in the Group III Certificate Account the pro rata
portion of such Group I Subordination Deficit, based on the
relative amounts in the Group I Certificate Account and Group
III Certificate Account remaining following distributions
pursuant to clauses (b)(vi) and (d)(vi) hereof;
(C) on any Distribution Date when following distributions
to be made on such date, a Group I Subordination Deficit
exists (following payments pursuant to Section 6.05(c)(v)
hereof) and a Group II Subordination Deficit exists (following
payment pursuant to Section 6.05(c)(v) hereof), to the Group I
Class A Certificateholders and Group II Class A
Certificateholders, an amount equal to such Group I
Subordination Deficit and Group II Subordination Deficit,
allocated to the Group I Class A Certificateholders and Group
II Class A Certificateholders on a pro rata basis;
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(viii) from amounts then on deposit in the Group III
Certificate Account:
(A) on any Distribution Date when following distributions
to be made on such date, a Group I Reimbursement Amount exists
(following payments pursuant to Section 6.05(b)(vii) hereof)
and a Group II Reimbursement Amount does not exist (following
payment pursuant to Section 6.05(c)(vii) hereof), to the
Certificate Insurer, an amount equal to such Group I
Reimbursement Amount; provided that if on such Distribution
Date amounts are available in the Group II Certificate Account
following distributions pursuant to clause (c)(vii), the
Certificate Insurer shall receive from amounts on deposit in
the Group III Certificate Account the pro rata portion of such
Group I Reimbursement Amount, based on the relative amounts in
the Group II Certificate Account and Group III Certificate
Account remaining following distributions pursuant to clauses
(c)(vii) and (d)(vii) hereof;
(B) on any Distribution Date when following distributions
to be made on such date, a Group II Reimbursement Amount
exists (following payments pursuant to Section 6.05(c)(vii)
hereof) and a Group I Reimbursement Amount does not exist
(following payments pursuant to Section 6.05(b)(vii) hereof),
to the Certificate Insurer, an amount equal to such Group II
Reimbursement Amount; provided that if on such Distribution
Date amounts are available in the Group I Certificate Account
following distributions pursuant to clause (b)(vii), the
Certificate Insurer shall receive from amounts on deposit in
the Group III Certificate Account the pro rata portion of such
Group I Reimbursement Amount, based on the relative amounts in
the Group I Certificate Account and Group III Certificate
Account remaining following distributions pursuant to clauses
(b)(vii) and (c)(vii) hereof;
(C) on any Distribution Date when following distributions
to be made on such date, both a Group I Reimbursement Amount
exists (following payments pursuant to Section 6.05(b)(vii)
hereof) and a Group II Reimbursement Amount exists (following
payment pursuant to Section 6.05(c)(vii) hereof), to the
Certificate Insurer, an amount equal to the sum of such Group
I Reimbursement Amount and Group II Reimbursement Amount;
(ix) from amounts then on deposit in the Group III
Certificate Account:
(A) on any Distribution Date when following distributions
to be made on such date, the Group I Subordinated Amount would
be less than the Group I Required Subordinated Amount and the
Group II Subordinated Amount is greater than or equal to the
Group II Required Subordinated Amount, to the Group I Class A
Certificateholders, an amount equal to such amount; provided
that if on such Distribution Date amounts are available in the
Group II Certificate Account following distributions pursuant
to clause (c)(viii), the Group I Class A Certificateholders
shall receive from amounts on deposit in the Group III
Certificate Account the pro rata portion of such amount, based
on the relative amounts in the
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Group II Certificate Account and Group III Certificate Account
remaining following distributions pursuant to clauses
(c)(viii) and (d)(viii) hereof;
(B) on any Distribution Date when following distributions
to be made on such date, the Group II Subordinated Amount
would be less than the Group II Required Subordinated Amount
and the Group I Subordinated Amount is greater than or equal
to the Group I Required Subordinated Amount, to the Group II
Class A Certificateholders, an amount equal to such amount;
provided that if on such Distribution Date amounts are
available in the Group I Certificate Account following
distributions pursuant to clause (b)(viii), the Group II Class
A Certificateholders shall receive from amounts on deposit in
the Group III Certificate Account the pro rata portion of such
amount, based on the relative amounts in the Group I
Certificate Account and Group III Certificate Account
remaining following distributions pursuant to clauses
(b)(viii) and (d)(viii) hereof;
(C) on any Distribution Date when following distributions
to be made on such date, the Group I Subordinated Amount would
be less than the Group I Required Subordinated Amount and the
Group II Subordinated Amount would be less than the Group II
Required Subordinated Amount, to the Group I Class A
Certificateholders and Group II Class A Certificateholders, an
amount equal to the sum of such amounts, allocated to the
Group I Class A Certificateholders and Group II Class A
Certificateholders on a pro rata basis;
(x) from amounts then on deposit in the Group III Certificate
Account, to the Trustee, without duplication, an amount equal to any
costs and expenses owed to the Trustee as described in Section 9.05(b)
of this Agreement in excess of $75,000 in aggregate in any calendar
year and only that portion of such amounts in excess of $75,000; and
(xi) from amounts then on deposit in the Group III Certificate
Account, to the Holders of the Class R-II Certificates, the amount
remaining on such Distribution Date, if any.
Notwithstanding clause (v) above, the aggregate amounts distributed on all
Distribution Dates to the Holders of the Group III Class A Certificates on
account of the Group III Class A Principal Distribution Amount shall not exceed
the Original Group III Certificate Principal Balance for the
Group III Class A Certificates.
The Group III Class A Interest Distribution Amount shall be distributed
first, to the Group III Fixed Strip Component, in an amount equal to the related
Group II Class A Interest Distribution Amount payable thereon, and second, to
the remaining Group II Class A Certificates on a pro rata basis in proportion to
the related Group II Class A Interest Distribution Amount
payable thereon.
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Distributions of the Group III Class A Principal Distribution Amount
and amounts allocated pursuant to Section 6.05(b)(vii) and (ix) and 6.05(c)(vii)
and (ix) will be distributed as
follows:
(i) first, to the Lockout Certificates, the Lockout
Distribution Percentage of the Group II Class A Principal Distribution
Amount, in reduction of the Certificate Principal Balance thereof,
until such Certificate Principal Balance has been reduced to zero;
(ii) second, to the Class A-3 Certificates, in reduction of
the Certificate Principal Balance thereof, until such Certificate
Principal Balance has been reduced to zero;
(iii) third, to the Class A-4 Certificates, in reduction of
the Certificate Principal Balance thereof, until such Certificate
Principal Balance has been reduced to zero;
(iv) fourth, to the Class A-5 Certificates, in reduction of
the Certificate Principal Balance thereof, until such Certificate
Principal Balance has been reduced to zero; and
(v) fifth, to the Lockout Certificates, in reduction of the
Certificate Principal Balance thereof, until such Certificate Principal
Balance has been reduced to zero;
provided, however, that if on any Distribution Date a Certificate Insurer
Default and a Group III Subordination Deficit exists, the Group III Class A
Principal Distribution Amount will be distrib uted to the Group III Class A
Certificates on a pro rata basis based on the Certificate Principal Balances
thereof, in reduction of the Certificate Principal Balances thereof, until the
Certificate Principal Balances thereof have been reduced to zero.
Section 6.06 INVESTMENT OF ACCOUNTS. (a) So long as no Event
of Default shall have occurred and be continuing, and consistent with any
requirements of the Code, all or a portion of any Account (other than the
Certificate Insurance Payments Account) held by the Trustee shall be invested
and reinvested by the Trustee, as directed in writing by the Master Servicer
(with respect to the Certificate Accounts up to the Business Day prior to each
Distribution Date) or the Trustee (with respect to the Certificate Accounts from
the Business Day prior to each Distribution Date to such Distribution Date) in
one or more Permitted Investments bearing interest or sold at a discount. If an
Event of Default shall have occurred and be continuing or if the Master Servicer
or the Company does not provide investment directions, the Trustee shall invest
all Accounts in Permitted Investments described in paragraph (d) of the
definition of Permitted Investments. No such investment in any Account shall
mature later than the Business Day immediately preceding the next Distribution
Date (except that if such Permitted Investment is an obligation of the Trustee,
then such Permitted Investment shall mature not later than such Distribution
Date).
(b) If any amounts are needed for disbursement from any
Account held by the Trustee and sufficient uninvested funds are not available to
make such disbursement, the Trustee shall cause to be sold or otherwise
converted to cash a sufficient amount of the investments in such Account. The
Trustee shall not be liable for any investment loss or other charge resulting
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therefrom unless the Trustee's failure to perform in accordance with this
Section 6.06 is the cause of such loss or charge.
(c) Subject to Section 9.01 hereof, the Trustee shall not in
any way be held liable by reason of any insufficiency in any Account held by the
Trustee resulting from any investment loss on any Permitted Investments included
therein other than with respect to the investment of funds in the Certificate
Accounts from the Business Day prior to each Distribution Date to such
Distribution Date, and except to the extent that the Trustee is the obligor and
has defaulted thereon or as provided in subsection (b) of this Section 6.06.
(d) So long as no Event of Default shall have occurred and be
continuing, all net income and gain realized from investment of, and all
earnings on, funds deposited in any Account shall be for the benefit of the
Master Servicer as compensation (in addition to the Servicing Fee) and the
benefit of the Trustee as compensation (in addition to the Trustee Fee). The
Master Servicer and the Trustee shall deposit in each Account, from its own
funds, the amount of any loss incurred in respect of any Permitted Investment
held therein which is in excess of the income and gain thereon immediately upon
realization of such loss, without any right to reimbursement therefor; provided,
however, that the Master Servicer shall only be responsible for the
reimbursement of losses in the Certificate Accounts up until the Business Day
prior to each Distribution Date, and the Trustee shall only be responsible for
the reimbursement of losses from the Business Day prior to each Distribution
Date to such Distribution Date.
Section 6.07 REPORTS BY TRUSTEE. (a) On each Distribution Date
the Trustee shall provide to each Holder, to the Master Servicer, to the
Certificate Insurer, to the Underwriters, to the Company and to the Rating
Agencies a written report (the "Trustee Remittance Report"), based solely on
information provided by the Master Servicer and containing the following
information:
(i) the amount of the distribution with respect to each
class of Certificates;
(ii) the amount of such distributions allocable to
principal, separately identifying the aggregate amount of any
Prepayments in Full and Curtailments or other unscheduled recoveries of
principal included therein and separately identifying any Subordination
Increase Amounts;
(iii) the amount of such distributions allocable to
interest and the calculation thereof separately identifying the amount
of any Periodic Advances;
(iv) the Certificate Principal Balance of each class of the
Class A Certificates (other than the Fixed Strip Certificates) and
Class II S Certificates as of such Distribution Date, together with the
principal amount of each class of the Class A Certificates (based on a
Certificate in an original principal amount of $1,000) then outstanding
and the Notional Amount of each Group I Fixed Strip Component and Group
II Fixed Strip Component of the Fixed Strip Certificates, in each case
after giving effect to any payment of principal on such Distribution
Date;
(v) the amount of any Insured Payment included in the
amounts distributed to the Class A Certificateholders on such
Distribution Date;
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(vi) the Group I, Group II and Group III Required
Subordinated Amount and the Group I , Group II and Group III
Subordinated Amount as of such Distribution Date;
(vii) the total of any Substitution Adjustments and any
Loan Repurchase Price amounts included in such distribution;
(viii) the amounts, if any, of any Liquidation Loan Losses for
the related Due Period and the cumulative amount of Liquidated Loan
Losses from the Closing Date;
(ix) the number of Mortgage Loans and the aggregate
Principal Balance of Mortgage Loans purchased pursuant to Section 5.18
for the related Distribution Date and since the closing date the
cumulative number and Principal Balance of Mortgage Loans
purchased pursuant to Section 5.18.
(x) the number of Mortgage Loans and the aggregate
Principal Balance of Mortgage Loans purchased or substituted for
pursuant to Sections 3.03 and 2.04 for the related Distribution Date
and, since the closing date, the cumulative number and Principal
Balance of Mortgage Loans purchased or substituted for pursuant to
Sections 3.03 and
2.04;
(xi) the applicable Group I, Group II or Group III Class A
Pass-Through Rate, as applicable, for each class of Class A
Certificates (and each Group I, Group II and Group III Fixed Strip
Component of the Fixed Strip Certificates) Certificates for such
distribution; and
(xii) the amount, if any, of any Group I or Group II Class
A Available Funds Cap Carry-Forward Amount.
Items (i), (ii) and (iii) above shall, with respect to the Class A Certificates,
be presented on the basis of a Certificate having a $1,000 denomination. In
addition, by January 31 of each calendar year following any year during which
the Certificates are outstanding, the Trustee shall furnish a report to each
Holder of record if so requested in writing at any time during each calendar
year as to the aggregate of amounts reported pursuant to (i), (ii) and (iii)
with respect to the Certificates for such calendar year.
(b) All distributions made to the Class A Certificateholders,
Class II S Certificateholders and the Class R Certificateholders as a Class on
each Distribution Date will be made on a PRO RATA basis among the
Certificateholders of such Class on the next preceding Record Date based on the
Percentage Interest represented by their respective Certificates, and 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, in the case of a Class A Certificateholder, such Certificateholder
shall own of record Certificates of the same Class which have denominations
aggregating at least $5,000,000 (or, with respect to the Fixed Strip
Certificates, a Percentage Interest in excess of 20.00%) appearing in the
Certificate Register and shall have provided complete wiring instructions by the
Record Date, and otherwise by check mailed to the address of such
Certificateholder appearing in the Certificate Register.
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(c) In addition, on each Distribution Date the Trustee will
distribute to each Holder, to the Certificate Insurer, to the Underwriters, to
the Master Servicer, to the Company and to the Rating Agencies, together with
the information described in subsection (a) preceding, the following information
with respect to the Group I Loans, Group II Loans and Group III Loans as of the
close of business on the last Business Day of the prior calendar month, which is
hereby required to be prepared by the Master Servicer and furnished to the
Trustee for such purpose on or prior to the related Master Servicer Remittance
Date (such information to be provided for the Group I Loans, Group II Loans and
Group III Loans separately):
(i) the total number of Mortgage Loans and the aggregate
Principal Balances thereof, together with the number and aggregate
principal balances of such Mortgage Loans and the percentage (based on
the aggregate Principal Balances of the Mortgage Loans) of the
aggregate Principal Balances of such Mortgage Loans to the aggregate
Principal Balance of all Mortgage Loans (A) 30-59 days Delinquent, (B)
60-89 days Delinquent and (C) 90 or more days Delinquent;
(ii) the number and aggregate Principal Balances of all
Mortgage Loans and percentage (based on the aggregate Principal
Balances of the Mortgage Loans) of the aggregate Principal Balances of
such Mortgage Loans to the aggregate Principal Balance of all Mortgage
Loans in foreclosure proceedings and the number and aggregate Principal
Balances of all Mortgage Loans and percentage (based on the aggregate
Principal Balances of the Mortgage Loans) of any such Mortgage Loans
which are also included in any of the statistics described in the
foregoing clauses (i)(A), (i)(B) and (i)(C);
(iii) the number and aggregate Principal Balances of all
Mortgage Loans and percentage (based on the aggregate Principal
Balances of the Mortgage Loans) of the aggregate Principal Balances of
such Mortgage Loans to the aggregate Principal Balance of all Mortgage
Loans relating to Mortgagors in bankruptcy proceedings and the number
and aggregate Principal Balances of all Mortgage Loans and percentage
(based on the aggregate Principal Balances of the Mortgage Loans) of
any such Mortgage Loans which are also included in any of the
statistics described in the foregoing clauses (i)(A), (i)(B) and
(i)(C);
(iv) the number and aggregate Principal Balances of all
Mortgage Loans and percentage (based on the aggregate Principal
Balances of the Mortgage Loans) of the aggregate Principal Balances of
such Mortgage Loans to the aggregate Principal Balance of all Mortgage
Loans relating to REO Properties and the number and aggregate Principal
Balances of all Mortgage Loans and percentage (based on the aggregate
Principal Balances of the Mortgage Loans) of any such Mortgage Loans
which are also included in any of the statistics described in the
foregoing clause (i)(A), (i)(B) and (i)(C);
(v) the weighted average Mortgage Interest Rate as of the
Due Date occurring in the Due Period related to such Distribution
Date;
(vi) the weighted average remaining term to stated
maturity of all Mortgage Loans; and
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(vii) the book value of any REO Property.
Section 6.08 ADDITIONAL REPORTS BY TRUSTEE. (a) The Trustee
shall report to the Company, the Master Servicer and the Certificate Insurer
with respect to the amount then held in each Account (including investment
earnings accrued or scheduled to accrue) held by the Trustee and the identity of
the investments included therein, as the Company, the Master Servicer or the
Certificate Insurer may from time to time request in writing.
(b) From time to time, at the request of the Certificate
Insurer, the Trustee shall report to the Certificate Insurer with respect to its
actual knowledge, without independent investigation, of any breach of any of the
representations or warranties relating to individual Mortgage Loans set forth in
the Purchase Agreement or in Section 3.01 or 3.02 hereof.
(c) On each Distribution Date, the Trustee shall provide
Bloomberg Financial Markets, L.P. ("Bloomberg") Certificate Factors for each
class of Certificates as of such Distribution Date, using a format and media
mutually acceptable to the Trustee and Bloomberg.
Section 6.09 COMPENSATING INTEREST. Not later than the close
of business on the third Business Day prior to the Distribution Date, the Master
Servicer or any Subservicer shall remit to the Trustee (without right or
reimbursement therefor) for deposit into the related Certificate Account an
amount equal to the lesser of (a) the aggregate of the Prepayment Interest
Shortfalls for the related Distribution Date resulting from Principal
Prepayments in Full and Curtailments during the related Due Period and (b) its
aggregate Servicing Fees payable in the related Due Period and shall not have
the right to reimbursement therefor (the "Compensating Interest").
Section 6.10 EFFECT OF PAYMENTS BY THE CERTIFICATE INSURER;
SUBROGATION. Anything herein to the contrary notwithstanding, any payment with
respect to principal of or interest on the Class A Certificates which is made
with moneys received pursuant to the terms of the Certificate Insurance Policy
shall not be considered payment of the Certificates from the Trust Fund. The
Company, the Master Servicer and the Trustee acknowledge, and each Holder by its
acceptance of a Certificate agrees, that without the need for any further action
on the part of the Certificate Insurer, the Company, the Master Servicer or the
Trustee (a) to the extent the Certificate Insurer makes payments, directly or
indirectly, on account of principal of or interest on the Class A Certificates
to the Holders of such Certificates, the Certificate Insurer will be fully
subrogated to, and each Certificateholder, the Master Servicer and the Trustee
hereby delegate and assign to the Certificate Insurer, to the fullest extent
permitted by law, the rights of such Holders to receive such principal and
interest from the Trust Fund, including, without limitation, any amounts due to
the Certificateholders in respect of securities law violations arising from the
offer and sale of the Class A Certificates, and (b) the Certificate Insurer
shall be paid such amounts but only from the sources and in the manner provided
herein for the payment of such amounts. The Trustee and the Master Servicer
shall cooperate in all respects with any reasonable request by the Certificate
Insurer for action to preserve or enforce the Certificate Insurer's rights or
interests under this Agreement without limiting the rights or affecting the
interests of the Holders as otherwise set forth herein.
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Section 6.11 DISTRIBUTIONS ON THE UNCERTIFICATED REMIC I
REGULAR INTERESTS.
(a) On each Distribution Date, the following amounts, in the following
order of priority, shall be distributed by REMIC I to REMIC II on account of the
REMIC I Regular Interests or withdrawn from the Certificate Account:
(i) to the Holders of REMIC I Regular Interests, PRO RATA, in
an amount equal to (A) the Uncertificated Interest for such
Distribution Date, plus (B) any amounts in respect thereof
remaining unpaid from previous Distribution Dates; and
(ii) (x) on each Distribution Date, with respect to the Group
I Loans, all principal received on the Group I Loans under the
definition of Principal Remittance Amount shall be paid to
REMIC I Regular Interest LT-AYI until its Uncertificated
Balance has been reduced to zero and then shall be paid the
REMIC I Regular Interest LT-AZI until its Uncertificated
Balance has been reduced to zero;
(y) on each Distribution Date, with respect to the Group
II Loans, all principal received on the Group II Loans under
the definition of Principal Remittance Amount shall be paid to
REMIC I Regular Interest LT-AYII until its Uncertificated
Balance has been reduced to zero and then shall be paid the
REMIC I Regular Interest LT-AZII until its Uncertificated
Balance has been reduced to zero
(z) on each Distribution Date, with respect to the Group
III Loans, all principal received on the Group III Loans
under the definition of Principal Remittance Amount shall be
paid to REMIC I Regular Interest LT-FY until its
Uncertificated Balance has been reduced to zero and then
shall be paid the REMIC I Regular Interest LT-FZ until its
Uncertificated Balance has been reduced to zero;
(b) Notwithstanding the deemed distributions on the Uncertificated
REMIC I Regular Interests described in this Section 6.11, distributions of funds
from the Certificate Account shall
be made only in accordance with Section 6.05.
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ARTICLE VII
DEFAULT
Section 7.01 EVENTS OF DEFAULT. (a) "Event of Default",
wherever used herein, means any one of the following events:
(i) any failure by the Master Servicer to remit to the
Trustee any payment, other than a Servicing Advance, required to be
made by the Master Servicer under the terms of this Agreement which
continues unremedied for five Business Days after the date
upon which such payment was required to be made;
(ii) the failure by the Master Servicer to make any required
Servicing Advance which failure continues unremedied for a period of 30
days after the date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the Master Servicer
by the Trustee or to the Master Servicer and the Trustee by any
Certificateholder or the Certificate Insurer;
(iii) any failure on the part of the Master Servicer duly to
observe or perform in any material respect any other of the covenants
or agreements on the part of the Master Servicer contained in this
Agreement, or the failure of any representation and warranty made
pursuant to Section 3.01 to be true and correct which continues
unremedied for a period of 30 days (or 15 days in the case of a failure
to pay the premium for any insurance policy which is required to be
maintained under this Agreement) 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 Company or the Trustee or to the
Master Servicer and the Trustee by any Certificateholder or the
Certificate Insurer;
(iv) a decree or order of a court or agency or supervisory
authority having jurisdiction in an involuntary case under any present
or future federal or state bankruptcy, insolvency or similar law or for
the appointment of 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;
(v) 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 Master Servicer's property;
(vi) the Master Servicer shall admit in writing its
inability to pay its debts as they become due, file a petition to take
advantage of any applicable insolvency or reorganization statute, make
an assignment for the benefit of its creditors, or voluntarily suspend
payment of its obligations;
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(vii) on any Distribution Date the average Sixty-Day
Delinquency Ratio, for each of the three (or one or two, in the case
of the first and second Distribution Dates) immediately preceding Due
Periods, exceeds 13%. The "Sixty-Day Delinquency Ratio" with respect
to any Distribution Date means a fraction, expressed as a percentage,
(a) the numerator of which is the aggregate Principal Balances of all
Mortgage Loans that are 60 or more days Delinquent, in foreclosure or
converted to REO Property as of the last day of the related Due Period
and (b) the denominator of which is the Pool Principal Balance as of
the last day of the related Due Period;
(viii) if on any Distribution Date occurring in September of
any year, commencing in September 1998, the 12 Month Loss Amount
exceeds 1.05% of the average Pool Principal Balance as of the close of
business on the last day of each of the twelve preceding Due Periods;
or
(ix) if (a) on any Distribution Date occurring before
October 1, 1998, the aggregate Liquidated Loan Losses since the Cut-off
Date exceed 0.75% of the Original Pool Principal Balance, (b) on any
Distribution Date on or after October 1, 1998 and before October 1,
1999, the aggregate Liquidated Loan Losses since the Cut-off Date
exceed 1.50% of the Original Pool Principal Balance, (c) on any
Distribution Date on or after October 1, 1999 and before October 1,
2000, the aggregate Liquidated Loan Losses since the Cut-off Date
exceed 2.25% of the Original Pool Principal Balance, (d) on any
Distribution Date on or after October 1, 2000 and before October 1,
2001, the aggregate Liquidated Loan Losses since the Cut-off Date
exceed 3.00% of the Original Pool Principal Balance, or (e) on any
Distribution Date on or after October 1, 2001, the aggregate Liquidated
Loan Losses since the Cut-off Date exceed 3.50% of the Original Pool
Principal Balance.
(b) 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: with respect to clauses (i), (ii), (iii), (iv),
(v) and (vi) above, the Trustee shall, but only at the direction of the
Certificate Insurer or the Majority Certificateholders and with the prior
written consent of the Certificate Insurer, by notice in writing to the Master
Servicer and a Responsible Officer of the Trustee, and in addition to whatever
rights such Certificateholders may have at law or equity to damages, including
injunctive relief and specific performance, terminate all the rights and
obligations of the Master Servicer under this Agreement and in and to the
Mortgage Loans and the proceeds thereof, as servicer; and with respect to
clauses (vii)-(ix) above, the Trustee shall, but only at the direction of the
Certificate Insurer, after notice in writing to the Master Servicer and a
Responsible Officer of the Trustee, terminate all the rights and obligations of
the Master Servicer under this Agreement and in and to the Mortgage Loans and
the proceeds thereof, as servicer. Upon 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 Mortgage Loans or otherwise, shall,
subject to Section 7.02, pass to and be vested in the Trustee, or its designee
approved by the Certificate Insurer, and the Trustee is hereby authorized and
empowered to execute and deliver, on behalf of the Master Servicer, as
attorney-in-fact or otherwise, at the expense of the Master Servicer, any and
all documents and other instruments and do or cause to be done all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, including, but not limited to, the transfer and endorsement or
assignment of the
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Mortgage Loans and related documents. 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 amounts
which shall at the time be credited by the Master Servicer to the Collection
Account or thereafter received with respect to the Mortgage Loans. The Trustee
shall promptly notify the Certificate Insurer and the Rating Agencies of the
occurrence of an Event of Default.
In the event the Master Servicer is terminated pursuant to this Section
7.01, the Trustee shall notify the Holder of the Class R-II Certificates. Such
Holder of the Class R-II Certificates shall have the right to select a new
Master Servicer, with the consent of the Certificate Insurer and the Rating
Agencies; provided, however, that pending the appointment of a new Master
Servicer, the Trustee shall act as Master Servicer as described in Section 7.02
below.
Section 7.02 TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR. (a) On
and after the time the Master Servicer receives a notice of termination pursuant
to Section 7.01, or the Trustee receives the resignation of the Master Servicer
evidenced by an Opinion of Counsel pursuant to Section 5.24, or the Master
Servicer is removed as Master Servicer pursuant to Article VII, in which event
the Trustee shall promptly notify the Rating Agencies, except as otherwise
provided in Section 7.01, the Trustee shall be the successor in all respects to
the Master Servicer in its capacity as master servicer under this Agreement and
the transactions set forth or provided for herein and shall be subject to all
the responsibilities, duties and liabilities relating thereto placed on the
Master Servicer by the terms and provisions hereof arising on or after the date
of succession; provided, however, that the Trustee shall not be liable for any
actions or the representations and warranties of any master servicer prior to it
and including, without limitation, the obligations of the Master Servicer set
forth in Sections 2.04 and 3.03. The Trustee, as successor master servicer,
shall be obligated to pay Compensating Interest pursuant to Section 6.09 in any
event and to make advances pursuant to Section 5.21 unless, and only to the
extent the Trustee as successor master servicer determines reasonably and in
good faith that such advances would not be recoverable pursuant to Sections
5.04(a), or 5.04(j), such determination to be evidenced by a certification of a
Responsible Officer of the Trustee, as successor master servicer delivered to
the Certificate Insurer.
(b) Notwithstanding the above, the Trustee may, if it shall be
unwilling to so act, or shall, if it is unable to so act or if the Majority
Certificateholders with the consent of the Certificate Insurer or the
Certificate Insurer so requests in writing to the Trustee, appoint, pursuant to
the provisions set forth in paragraph (c) below, or petition a court of
competent jurisdiction to appoint, any established mortgage loan servicing
institution acceptable to the Certificate Insurer that has a net worth of not
less than $15,000,000 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.
(c) In the event the Trustee is the successor master servicer,
it shall be entitled to Servicing Compensation (including the Servicing Fee as
adjusted pursuant to the definition thereof) and other funds pursuant to Section
5.14 hereof as the Master Servicer. In the event the Trustee is unable or
unwilling to act as successor master servicer, the Trustee shall solicit, by
public announcement, bids from housing and home finance institutions, banks and
mortgage servicing institutions meeting the qualifications set forth above. Such
public announcement shall specify that
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the successor master servicer shall be entitled to the full amount of the
aggregate Servicing Fees hereunder as servicing compensation, together with the
other Servicing Compensation. Within thirty days after any such public
announcement, the Trustee shall negotiate and effect the sale, transfer and
assignment of the servicing rights and responsibilities hereunder to the
qualified party submitting the highest qualifying bid. The Trustee shall deduct
from any sum received by the Trustee from the successor to the Master Servicer
in respect of such sale, transfer and assignment all costs and expenses of any
public announcement and of any sale, transfer and assignment of the servicing
rights and responsibilities hereunder and the amount of any unreimbursed
Servicing Advances and Periodic Advances owed to the Trustee. After such
deductions, the remainder of such sum shall be paid by the Trustee to the Master
Servicer at the time of such sale, transfer and assignment to the Master
Servicer's successor.
(d) The Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. The Master Servicer agrees to cooperate with the Trustee and any
successor master servicer in effecting the termination of the Master Servicer's
servicing responsibilities and rights hereunder and shall promptly provide the
Trustee or such successor master servicer, as applicable, at the Master
Servicer's cost and expense, all documents and records reasonably requested by
it to enable it to assume the Master Servicer's functions hereunder and shall
promptly also transfer to the Trustee or such successor master servicer, as
applicable, all amounts that then have been or should have been deposited in the
Collection Account by the Master Servicer or that are thereafter received with
respect to the Mortgage Loans. Any collections received by the Master Servicer
after such removal or resignation shall be endorsed by it to the Trustee and
remitted directly to the Trustee or, at the direction of the Trustee, to the
successor master servicer. Neither the Trustee nor any other successor master
servicer shall be held liable by reason of any failure to make, or any delay in
making, any distribution hereunder or any portion thereof caused by (i) the
failure of the Master Servicer to deliver, or any delay in delivering, cash,
documents or records to it, or (ii) restrictions imposed by any regulatory
authority having jurisdiction over the Master Servicer hereunder. No appointment
of a successor to the Master Servicer hereunder shall be effective until the
Trustee and the Certificate Insurer shall have consented in writing thereto, and
written notice of such proposed appointment shall have been provided by the
Trustee to the Certificate Insurer and to each Certificateholder. The Trustee
shall not resign as servicer until a successor master servicer reasonably
acceptable to the Certificate Insurer has been appointed.
(e) Pending appointment of a successor to the Master Servicer
hereunder, the Trustee shall act in such capacity as hereinabove provided. In
connection with such appointment and assumption, the Trustee may make such
arrangements for the compensation of such successor out of payments on Mortgage
Loans as it and such successor shall agree; PROVIDED, HOWEVER, that no such
compensation shall be in excess of that permitted the Master Servicer pursuant
to Section 5.14, together with other Servicing Compensation. The Master
Servicer, the Trustee and such successor shall take such action, consistent with
this Agreement, as shall be necessary to effectuate any such succession.
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Section 7.03 WAIVER OF DEFAULTS. The Majority
Certificateholders may, on behalf of all Certificateholders, and subject to the
consent of the Certificate Insurer (so long as no Certificate Insurer Default
has occurred and is continuing), waive any events permitting removal of the
Master Servicer as servicer pursuant to this Article VII; provided, however,
that the Majority Certificateholders may not waive a default in making a
required distribution on a Certificate without the consent of the holder of such
Certificate. Upon any waiver of a past default, such default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereto except to the
extent expressly so waived. Notice of any such waiver shall be given by the
Trustee to the Rating Agencies.
Section 7.04 MORTGAGE LOANS, TRUST FUND AND ACCOUNTS HELD FOR
BENEFIT OF THE CERTIFICATE INSURER. (a) The Trustee shall hold the Trust Fund
and the Mortgage Files for the benefit of the Certificateholders and the
Certificate Insurer and all references in this Agreement and in the Certificates
to the benefit of Holders of the Certificates shall be deemed to include the
Certificate Insurer. Unless a Certificate Insurer Default has occurred and is
continuing, the Trustee shall cooperate in all reasonable respects with any
reasonable request by the Certificate Insurer for action to preserve or enforce
the Certificate Insurer's rights or interests under this Agreement and the
Certificates unless, as stated in an Opinion of Counsel addressed to the Trustee
and the Certificate Insurer (which Opinion of Counsel shall not be an expense of
the Trustee or the Trust Fund), such action is adverse to the interests of the
Certificateholders or diminishes the rights of the Certificateholders or imposes
additional burdens or restrictions on the Certificateholders.
(b) The Master Servicer hereby acknowledges and agrees that it
shall service the Mortgage Loans for the benefit of the Certificateholders and
for the benefit of the Certificate Insurer, and all references in this Agreement
to the benefit of or actions on behalf of the Certificateholders shall be deemed
to include the Certificate Insurer.
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ARTICLE VIII
TERMINATION
Section 8.01 TERMINATION. (a) Subject to Section 8.02, this
Agreement shall terminate upon notice to the Trustee of either: (i) the
disposition of all funds with respect to the last Mortgage Loan and the
remittance of all funds due hereunder and the payment of all amounts due and
payable to the Certificate Insurer and the Trustee or (ii) mutual consent of the
Master Servicer, the Certificate Insurer and all Certificateholders in writing;
PROVIDED, HOWEVER, that in no event shall the Trust established by this
Agreement terminate later than twenty-one years after the death of the last
surviving lineal descendant of Joseph P. Kennedy, late Ambassador of the United
States to the Court of St. James's, alive as of the date hereof.
(b) In addition, subject to Section 8.02, the Holder of a
50.01% Percentage Interest or greater of the Class R-II Certificates or the
Master Servicer (or the Certificate Insurer, if Advanta Mortgage Corp. USA is
removed as Master Servicer) may, at its option and at its sole cost and expense,
terminate this Agreement on any date on which the related Pool Principal Balance
is less than 10%, if the holder of the Class R-II Certificates exercises this
option, or is less than 5%, if the Master Servicer or the Certificate Insurer
exercises this option, of the sum of the aggregate of the Principal Balances of
the Mortgage Loans on the Cut-off Date, by purchasing, on the next succeeding
Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a
price (the "Termination Price") equal to the sum of (i) 100% of the Principal
Balance of each such outstanding Mortgage Loan and each REO Property; (ii) the
aggregate amount of accrued and unpaid interest on such Mortgage Loans through
the related due period and 30 days' interest on such Mortgage Loans at a rate
equal to the related Mortgage Interest Rate (net of the Servicing Fee if the
Master Servicer exercises this option) with respect to such Mortgage Loan; (iii)
any unreimbursed amounts due to the Certificate Insurer under this Agreement or
the Insurance Agreement; (iv) the amount of any unpaid Servicing Fees and
unreimbursed Servicing Advances made by the Master Servicer with respect to the
related Mortgage Loans; (v) any excess of the actual stated principal balance of
each such Mortgage Loan and REO Property over the Principal Balance thereof, the
aggregate amount of accrued and unpaid interest on such excess through the
related due period and 30 days' interest on such excess at a rate equal to the
related Mortgage Interest Rate with respect to each related Mortgage Loan; and
(vi) the amount of any unpaid Servicing Fees, unreimbursed Servicing Advances
and unreimbursed Periodic Advances not included in clauses (i) to (v) above. Any
such purchase shall be accomplished by deposit into the related Certificate
Account of the Termination Price. From the Termination Price so deposited, the
Trustee shall reimburse the Master Servicer for the amount of any unpaid
Servicing Fees, unreimbursed Periodic Advances and unreimbursed Servicing
Advances made by the Master Servicer with respect to the related Mortgage Loans.
No such termination is permitted without the prior written consent of the
Certificate Insurer (i) if it would result in a draw on the Certificate
Insurance Policy or (ii) unless the Master Servicer shall have delivered to the
Certificate Insurer an opinion of counsel reasonably satisfactory to the
Certificate Insurer stating that no amounts paid hereunder are subject to
recapture as preferential transfers under the United States Bankruptcy Code, 11
U.S.C. ss.ss. 101 ET SEQ., as amended.
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(c) If on any Distribution Date, the Master Servicer
determines that there are no outstanding Mortgage Loans and no other funds or
assets in the Trust Fund other than funds in the related Certificate Account,
the Master Servicer shall notify the Trustee and the Trustee shall send a final
distribution notice promptly to the related Certificateholders in accordance
with paragraph (d) below.
(d) Notice of any termination, specifying the Distribution
Date upon which the Trust Fund will terminate and that the Certificateholders
shall surrender their Certificates to the Trustee for payment of the final
distribution and cancellation, shall be given promptly by the Trustee by letter
to the Certificateholders mailed during the month of such final distribution
before the Master Servicer Remittance Date in such month, specifying (i) the
Distribution Date upon which final payment of the Certificates will be made upon
presentation and surrender of the Certificates at the office of the Trustee
therein designated, (ii) the amount of any such final payment and (iii) that the
Record Date otherwise applicable to such Distribution Date is not applicable,
payments being made only upon presentation and surrender of the Certificates at
the office of the Trustee therein specified. The obligations of the Certificate
Insurer hereunder shall terminate upon the deposit by the Master Servicer with
the Trustee of a sum sufficient to purchase all of the Mortgage Loans and REO
Properties in the Trust Fund as set forth above and when the aggregate
Certificate Principal Balance of the Certificates has been reduced to zero.
(e) In the event that all Certificateholders do not surrender
their Certificates for cancellation within six months after the time specified
in the above-mentioned written notice, the Trustee shall give a second written
notice to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
six months after the second notice, all of the Certificates shall not have been
surrendered for cancellation, the Trustee may take appropriate steps, or may
appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates and the cost
thereof shall be paid out of the funds and other assets which remain subject
hereto. If within nine months after the second notice all the Certificates shall
not have been surrendered for cancellation, the Holders of the Class R-II
Certificates shall be entitled to all unclaimed funds and other assets which
remain subject hereto and the Trustee upon transfer of such funds shall be
discharged of any responsibility for such funds and the Certificateholders shall
look only to such Holders of the Class R-II Certificates for payment. Such funds
shall remain uninvested.
Section 8.02 ADDITIONAL TERMINATION REQUIREMENTS. (a) In the
event that the Holder of a 50.01% Percentage Interest or greater of the Class
R-II Certificates, Master Servicer or Certificate Insurer (any of which, an
"Exercising Party") exercises its purchase option with respect to the Trust Fund
as provided in Section 8.01, REMIC I and REMIC II as the case may be, shall be
terminated in accordance with the following additional requirements, unless the
Trustee has been furnished with an Opinion of Counsel (which Opinion of Counsel
shall not be an expense of the Trustee or the Trust Fund) to the effect that the
failure of REMIC I and REMIC II to comply with the requirements of this Section
8.02 will not (i) result in the imposition of taxes on "prohibited transactions"
of either REMIC I or REMIC II as defined in Section 860F of the Code or (ii)
cause either REMIC I or REMIC II to fail to qualify as a REMIC at any time that
any Class A Certificates are outstanding:
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(i) The Trustee shall establish a 90-day liquidation period for
REMIC I and REMIC II and specify the first day of such period in a
statement attached to the Trust Fund's final Tax Return pursuant to
Treasury Regulation Section 1.860F-1. The Trustee shall satisfy all the
requirements of a qualified liquidation for REMIC I and REMIC II, as
the case may be, under Section 860F of the Code and any regulations
thereunder, as evidenced by an Opinion of Counsel obtained at the
expense of the Exercising Party;
(ii) During 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 all of the assets of the Trust Fund for cash; and
(iii) At the time of the making of the final payment on the
Certificates, the Trustee shall distribute or credit, or cause to be
distributed or credited, to the Holders of the Class R-II Certificates
all cash on hand in the Trust Fund (other than cash retained to meet
claims), and REMIC I and REMIC II shall terminate at that time.
(b) By their acceptance of the Class R Certificates, the
Holders thereof hereby agree to authorize the Trustee to specify the 90-day
liquidation period for the Trust Fund, which authorization shall be binding upon
all successor Class R Certificateholders.
Section 8.03 ACCOUNTING UPON TERMINATION OF MASTER
SERVICER. Upon termination of the Master Servicer, the Master Servicer shall, at
its expense:
(a) deliver to its successor or, if none shall yet have been
appointed, to the Trustee, the funds in any Account;
(b) deliver to its successor or, if none shall yet have been
appointed, to the Trustee all of the Mortgage Files and related documents and
statements held by it hereunder and a
Mortgage Loan portfolio computer tape;
(c) deliver to its successor or, if none shall yet have been
appointed, to the Trustee and, upon request, to the Certificateholders a full
accounting of all funds, including a statement showing the Monthly Payments
collected by it and a statement of monies held in trust by it for the payments
or charges with respect to the Mortgage Loans; and
(d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer of
servicing of the Mortgage Loans to its successor and to more fully and
definitively vest in such successor all rights, powers, duties,
responsibilities, obligations and liabilities of the "Master Servicer" under
this Agreement.
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ARTICLE IX
CONCERNING THE TRUSTEE
Section 9.01 DUTIES OF TRUSTEE. 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. If an Event of Default occurs
and is continuing, 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 its
exercise as a prudent person would exercise or use under the circumstances in
the conduct of such person's own affairs. Any permissive right of the Trustee
enumerated in this Agreement shall not be construed as a duty.
The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to deter mine whether they
conform on their face to the requirements of this Agreement; provided, however,
that the Trustee shall not be responsible for the accuracy or content of any
resolution, certificate, statement, opinion, report, document, order or other
instrument furnished by the Master Servicer or the Seller hereunder. If any such
instrument is found not to conform to the requirements of this Agreement in a
material manner, the Trustee shall take action as it deems appropriate to have
the instrument corrected and will provide notice thereof to the Certificate
Insurer.
Notwithstanding any other provision of this Agreement, the
Trustee shall comply with all federal withholding requirements respecting
payments to Certificateholders of interest or original issue discount that the
Trustee reasonably believes are applicable under the Code. The consent of
Certificateholders shall not be required for such withholding. In the event the
Trustee does withhold any amount from interest or original issue discount
payments or advances thereof to any Certificateholder pursuant to federal
withholding requirements, the Trustee shall indicate the amount withheld to such
Certificateholders.
The Trustee shall sign on behalf of the Trust Fund any tax
return that the Trustee is required to sign pursuant to applicable federal,
state or local tax laws.
The Trustee covenants and agrees that it shall perform its
obligations hereunder in a manner so as to maintain the status of REMIC I and
REMIC II 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.
No provision of this Agreement shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct; provided, however, that:
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(i) Prior to the occurrence of an Event of Default, and
after the curing of all such Events of Default which may have
occurred, the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Agreement,
the Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in
this Agreement, no implied covenants or obligations shall be
read into this Agreement against the Trustee and, in the
absence of bad faith on the part of the Trustee, the Trustee
may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Agreement;
(ii) The Trustee shall not be 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 Certificate
Insurer relating to the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee,
under this Agreement; and
(iv) The Trustee shall not be charged with knowledge of any
failure by the Master Servicer to comply with any of its
obligations hereunder, or any breaches of representations or
warranties under the Purchase Agreement unless a Responsible
Officer of the Trustee obtains actual knowledge of such
failure or breach or the Trustee receives written notice of
such failure or breach from the Master Servicer, the Company,
the Seller or the Certificate Insurer.
The Trustee shall not be required to expend or risk its own
funds or otherwise incur financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Agreement shall in any event require
the Trustee to perform, or be responsible for the manner of performance of, any
of the obligations of the Company or the Master Servicer under this Agreement,
except during such time, if any, as the Trustee shall be the successor to, and
be vested with the rights, duties, powers and privileges of, the Master Servicer
pursuant to Section 7.02 of this Agreement.
Section 9.02 CERTAIN MATTERS AFFECTING THE TRUSTEE.
Except as otherwise provided in Section 9.01:
(a) The Trustee may request and rely upon and shall be
protected in acting or refraining from acting upon any
resolution, Officers' Certificate, Opinion of Counsel,
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;
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(b) 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
therewith;
(c) The Trustee shall be under no obligation to exercise
any of the trusts or powers vested in it by this Agreement or
to make any investigation of matters arising hereunder or to
institute, conduct or defend any litigation hereunder or in
relation hereto at the request, order or direction of any of
the Certificateholders or the Certificate Insurer, pursuant to
the provisions of this Agreement, unless such
Certificateholders or the Certificate Insurer, as the case may
be, 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 its exercise as a prudent person would exercise or
use under the circumstances in the conduct of such person's
own affairs;
(d) 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;
(e) 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 to do so
by the Certificate Insurer or by at least a 25% Percentage
Interest of any Class of Class A Certificates; 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 Certificate Insurer or such Certificateholders, as the
case may be, the Trustee may require reasonable indemnity
against such expense, or liability from such
Certificateholders or the Certificate Insurer, as the case may
be, as a condition to taking any such action;
(f) The Trustee shall not be accountable, shall have no
liability and makes no representation as to any acts or
omissions hereunder of the Master Servicer until such time as
the Trustee may be required to act as Master Servicer pursuant
to Section 7.02 and thereupon only for the acts or omissions
of the Trustee as successor Master Servicer;
(g) 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;
(h) The right of the Trustee to perform any discretionary
act enumerated in this Agreement shall not be construed as a
duty, and the Trustee shall not be answerable
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for other than its negligence or willful misconduct in the
performance of such act; and
(i) The Trustee shall not be required to give any bond or
surety in respect of the execution of the trust created hereby
or the powers granted hereunder.
Section 9.03 TRUSTEE NOT LIABLE FOR CERTIFICATES OR MORTGAGE
LOANS. The recitals contained herein and in the Certificates, other than the
signature of the Trustee on the Certificates and the certificate of
authentication, 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 or warranties as to the
validity or sufficiency of this Agreement or of the Certificates or of any
Mortgage Loan or related document, other than the signature of the Trustee on
the Certificates and the Certificate of Authentication. 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 Seller in respect of the Mortgage Loans
or deposited in or withdrawn from the Custodial Account or the Certificate
Accounts or any other account by or on behalf of the Company or the Master
Servicer, other than any funds held by or on behalf of the Trustee in accordance
with Section 6.01.
Except in connection with its duties pursuant to Section 7.02 of this
Agreement, and as otherwise specifically provided in this Agreement, the Trustee
shall at no time have any responsibility or liability for or with respect to the
legality, validity and enforceability of any Mortgage or any Mortgage Loan, or
the perfection and priority of any mortgage or the maintenance of any such
perfection and priority or with respect to the sufficiency of the Trust Fund,
including, without limitation: the existence, condition and ownership of any
Mortgaged Property; the existence and enforceability of any hazard insurance
thereon; the validity of the assignment of any Mortgage Loan to the Trustee or
of any intervening assignment; the performance or enforcement of any Mortgage
Loan; the compliance by the Seller, the Company or the Master Servicer with any
warranty or representation made under this Agreement or in any related document
or the accuracy of any such warranty or representation; any investment of monies
by or at the direction of the Company or the Master Servicer or any loss
resulting therefrom (unless the Trustee is the obligor thereon); the acts or
omissions of any of the Seller, the Company, the Master Servicer, any
subservicer or any Mortgagor; any action of the Master Servicer or any
subservicer taken in the name of the Trustee; the failure of the Master Servicer
or any subservicer to act or perform any duties acquired of it as agent of the
Trustee hereunder; or any action by the Trustee taken at the instruction of the
Master Servicer or the Certificate Insurer. The Trustee shall have no
responsibility for filing any financing or continuation statement in any public
office at any time or to other perfect or maintain the perfection of any
security interest or lien granted to it hereunder unless directed by the
Company.
Section 9.04 TRUSTEE MAY OWN CERTIFICATES. The Trustee in its
individual or any other capacity may become the owner or pledgee of Certificates
with the same rights it would have if it were not Trustee and may transact any
banking or trust business with the Company, the Master Servicer or any of their
respective Affiliates.
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Section 9.05 PAYMENT OF TRUSTEE'S FEES. (a) The Trustee shall
withdraw from each of the Group I, Group II and Group III Certificate Accounts
on each Distribution Date and pay to itself the Trustee's Fee. Except to the
extent otherwise provided in this Section, the Trustee and any director,
officer, employee or agent of the Trustee shall be indemnified by the Trust Fund
and held harmless against any loss, liability or "unanticipated out-of-pocket"
expense incurred or paid to third parties (which expenses shall not include
costs and expenses relating to claims or legal actions nor salaries paid to
employees, or allocable overhead, of the Trustee, or expenses, disbursements and
advances incurred by or made by the Trustee (including the compensation and the
expenses and disbursements of its agents and counsel except as provided in
Section 9.05(b)) in the ordinary course of the Trustee's performance in
accordance with the provisions of this Agreement) in connection with the
acceptance or administration of its trusts hereunder or the Certificates, or its
performance under the Insurance Agreement, other than any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or negligence in
the performance of its duties hereunder or under the Insurance Agreement or by
reason of the Trustee's reckless disregard of its obligations and duties
hereunder or under the Insurance Agreement. All such amounts shall be payable
from funds in the Certificate Accounts as provided in Section 6.02(f).
(b) In addition, the Trustee shall be further indemnified and
held harmless against any reasonable costs and expenses not included in Section
9.05(a), including reasonable attorney's fees and related expenses incurred in
connection with any Event of Default, any breach of this Agreement or any claim
or legal action (including any pending or threatened claim or legal action)
relating to the acceptance or administration of its trusts hereunder or under
the Insurance Agreement, other than any cost or expense incurred by reason of
the Trustee's willful misfeasance, bad faith or negligence in the performance of
its duties hereunder or under the Insurance Agreement or by reason of the
Trustee's reckless disregard of its obligations and duties hereunder or under
the Insurance Agreement or to the extent recoverable from the Master Servicer
under Section 9.05(d); provided however, any amounts payable to the Trustee, or
any director, officer, employee or agent of the Trustee, in respect of the
indemnification provided by this Section may be withdrawn at any time by the
Trustee from the Certificate Account designated by the Certificate Insurer,
provided that sufficient funds are available in such Certificate Account, and
subject to a maximum amount of $75,000 in aggregate in any calendar year. Any
such amount due to the Trustee, or any director, officer, employee or agent of
the Trustee under this subsection (b), in excess of $75,000 in aggregate in such
calendar year shall be reimbursable pursuant to Section 6.05.
(c) 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 by litigation hereunder or in relation hereto at the request, or
direction of the Certificate Insurer or any of the Certificateholders, pursuant
to the provisions of this Agreement, unless such Certificateholders or the
Certificate Insurer, as applicable, 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 its exercise as
a prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
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(d) The Master Servicer covenants and agrees to indemnify the
Trustee and any director, officer, employee or agent of the Trustee against any
losses, liabilities, damages, claims or expenses (including reasonable legal
fees and such related expenses) that may be sustained by the Trustee in
connection with this Agreement related to the willful misfeasance, bad faith or
negligence in the performance of the Master Servicer's duties hereunder.
(e) The provisions of this Section 9.05 shall survive the
termination of this Agreement and the removal or resignation of the Trustee.
Section 9.06 ELIGIBILITY REQUIREMENTS FOR TRUSTEE. The Trustee
hereunder shall at all times be a corporation or a national banking association
organized and doing business under the laws of any state or the United States of
America or the District of Columbia, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
$50,000,000 and a long-term secured debt rating of at least "Baa3" if Moody's is
one of the Rating Agencies and subject to supervision or examination by federal
or state authority. In addition, the Trustee shall at all times be acceptable to
the Rating Agencies rating the Certificates. If such corporation or bank
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 or
bank shall be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published. In case at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section,
the Trustee shall resign immediately in the manner and with the effect specified
in Section 9.07. The corporation or national banking association serving as
Trustee may have normal banking and trust relationships with the Seller and
their affiliates or the Master Servicer and its affiliates; provided, however,
that such corporation or bank cannot be an affiliate of the Master Servicer
other than the Trustee in its role as successor to the Master Servicer.
Section 9.07 RESIGNATION AND REMOVAL OF THE TRUSTEE. The
Trustee may at any time resign and be discharged from the trusts hereby created
by giving notice thereof to the Company, the Certificate Insurer, the Master
Servicer and to all Certificateholders; provided, that such resignation shall
not be effective until a successor trustee is appointed and accepts appointment
in accordance with the following provisions. Upon receiving such notice of
resignation, the Master Servicer shall, with the written consent of the
Certificate Insurer, promptly appoint a successor trustee who meets the
eligibility requirements of Section 9.06 by written instrument, in duplicate,
which instrument shall be delivered to the resigning Trustee and to the
successor trustee. A copy of such instrument shall be delivered to the
Certificateholders, the Certificate Insurer and the Master Servicer by the
Company. If no successor trustee shall have been so appointed and have accepted
appointment within 60 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; provided, however, that the resigning
Trustee shall not resign and be discharged from the trusts hereby created until
such time as the Rating Agency rating the Certificates approves the successor
trustee.
If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 9.06 and shall fail to resign after
written request therefor by the Master Servicer or the Certificate Insurer, 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,
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or any public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, or if the rating of the long-term debt obligations of the Trustee
is not acceptable to the Rating Agencies in respect of mortgage pass-through
certificates having a rating equal to the then current rating on the
Certificates, then the Master Servicer, with the written consent of the
Certificate Insurer, may remove the Trustee and appoint a successor trustee who
meets the eligibility requirements of Section 9.06 by written instrument, in
duplicate, which instrument shall be delivered to the Trustee so removed and to
the successor trustee. A copy of such instrument shall be delivered to the
Certificateholders, the Certificate Insurer and the Company by the Master
Servicer.
The Majority Certificateholders, with the written consent of
the Certificate Insurer, may at any time remove the Trustee and appoint a
successor trustee by written instrument or instruments, in triplicate, signed by
the Certificate Insurer or such Holders or their attorneys-in-fact duly
authorized, one complete set of which instruments shall be delivered to the
Master Servicer, one complete set to the Trustee so removed and one complete set
to the successor so appointed. A copy of such instrument shall be delivered to
the Certificateholders, the Certificate Insurer and the Company by the Master
Servicer.
Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor trustee as
provided in Section 9.08.
Section 9.08 SUCCESSOR TRUSTEE. Any successor trustee
appointed as provided in Section 9.07 shall execute, acknowledge and deliver to
the Master Servicer, the Certificate Insurer 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 of the Mortgage
Files and related documents and statements held by it hereunder, and the Master
Servicer and the predecessor trustee shall execute and deliver such instruments
and do such other things as may reasonably be required for more fully and
certainly vesting and confirming in the successor trustee all such rights,
powers, duties and obligations.
No successor trustee shall accept appointment as provided in
this Section unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section
9.06.
Upon acceptance of appointment by a successor trustee as
provided in this Section, the Master Servicer shall mail notice of the
succession of such trustee hereunder to the Certificate Insurer and all Holders
of Certificates at their addresses as shown in the Certificate Register provided
that the Master Servicer has received such Certificate Register. If the Master
Servicer fails to mail such notice within ten days after acceptance of
appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Master Servicer.
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Notwithstanding anything to the contrary contained herein, so
long as no Certificate Insurer Default exists, the appointment of any successor
trustee pursuant to any provision of this Agreement will be subject to the prior
written consent of the Certificate Insurer.
Section 9.09 MERGER OR CONSOLIDATION OF TRUSTEE. Any
corporation into which the Trustee may be merged or converted or with which it
may be consolidated or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to the business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be eligible under the provisions of
Section 9.06, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
Section 9.10 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
Notwithstanding any other provisions 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 Company
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 9.10,
such powers, duties, obligations, rights and trusts as the Company and the
Trustee may consider necessary or desirable. If the Company 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 9.06 hereunder and no notice to Holders of
Certificates of the appointment of co-trustee(s) or separate trustee(s) shall be
required under Section 9.08 hereof.
In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 9.10 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. No trustee
hereunder shall be held personally liable by reason of any act or omission of
any other trustee hereunder. The Company and the Trustee may each at any time
accept the resignation of or remove any separate trustee or co-trustee except
that following the occurrence of an Event of Default, the Trustee acting along
may accept the resignation or remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article IX. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its
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instrument of appointment, either jointly with the Trustee or separately, as may
be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the
Trustee. Every such instrument shall be filed with the Trustee.
Any separate trustee or co-trustee may, at any time,
constitute the Trustee, its agent or attorney-in-fact, with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. If any separate trustee
or co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Section 9.11. LIMITATION OF LIABILITY.
The Certificates are executed and authenticated by the Trustee, not in
its individual capacity but solely as Trustee of the Trust Fund created by this
Agreement, in the exercise of the powers and authority conferred and vested in
it by this Agreement. Each of the undertakings and agreements made on the part
of the Trustee in the Certificates is made and intended not as a personal
undertaking or agreement by the Trustee but is made and intended for the purpose
of binding only the Trust Fund.
Section 9.12. TRUSTEE MAY ENFORCE CLAIMS WITHOUT
POSSESSION OF CERTIFICATES.
All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and such proceeding instituted by the Trustee shall
be brought in its own name or in its capacity as Trustee. Any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursement and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Certificateholders and the Certificate Insurer in
respect of which such judgment has been recovered.
Section 9.13. SUITS FOR ENFORCEMENTS.
Except as otherwise provided in Section 9.05, in case an Event of
Default or other default by the Master Servicer or the Company hereunder, any
Certificate Insurer Default or other default by the Certificate Insurer
hereunder or under the Certificate Insurance Policy shall occur and be
continuing, the Trustee, in its discretion, may proceed to protect and enforce
its rights and the rights of the Holders of Certificates under this Agreement by
a suit, action or proceeding in equity or at law or otherwise, whether for the
specific performance of any covenant or agreement contained in this Agreement or
the Certificate Insurance Policy or in aid of the execution of any power granted
in this Agreement or for the enforcement of any other legal, equitable or other
remedy, as the Trustee, being advised by counsel (the advice of such counsel
being an expense of the Trustee), shall deem most effectual to protect and
enforce any of the rights of the Trustee and the Certificateholders.
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Section 9.14. WAIVER OF INVENTORY, ACCOUNTING AND
APPRAISAL REQUIREMENTS.
The Trustee shall be relieved of, and each Certificateholder hereby
waives, any requirement of any jurisdiction in which the Trust Fund, or any part
thereof, may be located that the Trustee file any inventory, accounting of
appraisal of the Trust Fund with any court, agency
or body at any time or in any manner whatsoever.
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ARTICLE X
REMIC PROVISIONS
Section 10.01 REMIC ADMINISTRATION.
(a) The Trustee shall make an election to treat each of REMIC
I and REMIC II 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 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 purposes of the REMIC election in respect of REMIC I, (i) the
Uncertificated REMIC I Regular Interests shall be designated as the "regular
interests" in REMIC I and (ii) the Class R-I Certificates shall be designated as
the sole Class of "residual interest" in REMIC I. For purposes of the REMIC
election in respect of REMIC II, (i) the Class A-1, Class A-2, Class A-3, Class
A- 4, Class A-5 and Class A-6 Certificates, each of the Class A-7 Components A,
B, C, D, E, F and G shall be designated as the "regular interests" in REMIC II
and (ii) the Class R-II Certificates shall be designated as the sole Class of
"residual interest" in REMIC II. The Trustee shall not permit the creation of
any "interests" in the Trust Fund (within the meaning of Section 860G of the
Code) other than the REMIC regular interests and the interests represented by
the Certificates.
(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 Trustee shall pay out of its own funds, without any
right of reimbursement, any and all expenses relating to any tax audit of the
Trust Fund (including, but not limited to, any professional fees or any
administrative or judicial proceedings with respect thereto that involved the
Internal Revenue Service or state tax authorities), other than the expense of
obtaining any tax related Opinion of Counsel not obtained in connection with
such an audit and other than taxes, in either case except as specified herein;
provided, however, that if such audit resulted from the negligence of the Master
Servicer or the Company, then the Master Servicer or the Company, as the case
may be, shall pay such expenses. The Trustee, as agent for the 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 Holder of the largest
Percentage Interest in the Class R-II Certificates from time to time is hereby
designated as Tax Matters Person with respect to the Trust Fund and hereby
irrevocably appoints and authorizes the Trustee to act its agent to perform the
duties of the Tax Matters Person with respect to REMIC I and REMIC II. 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.
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(d) The Trustee shall prepare or cause to be prepared, sign
and file all of the Tax Returns that it determines are required with respect to
either REMIC I, REMIC II or REMIC III created hereunder, other than Tax Returns
required to be filed by the Master Servicer pursuant to Section 5.23. The
expenses of preparing and filing such returns shall be borne by the Trustee
without any right of reimbursement therefor.
(e) The Trustee shall perform on behalf of the Trust Fund all
reporting and other tax compliance duties that are the responsibility of the
Trust Fund under the Code, REMIC Provisions or other compliance guidance issued
by the Internal Revenue Service or any state or local taxing authority. Among
its other duties, as required by the Code, the REMIC Provisions or other such
compliance guidance, the Trustee 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
Disqualified Organization, (ii) to 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 each of REMIC I and REMIC II. In addition, the Company shall
provide or cause to be provided to the Trustee, within ten (10) days after the
Closing Date, all information or data that the Trustee reasonably determines to
be relevant for tax purposes as to the valuations and issue prices of the
Certificates, including, without limitation, the price, yield, prepayment
assumption and projected cash flow of the Certificates.
(f) The Trustee shall take such action and shall cause each of
REMIC I and REMIC II created hereunder to take such action as shall be necessary
to create or maintain the status thereof as a REMIC under the REMIC Provisions
(and the Master Servicer shall assist it, to the extent reasonably requested by
it). The Trustee shall not take any action, cause the Trust Fund to take any
action or fail to take (or fail to cause to be taken) any action that, under the
REMIC Provisions, if taken or not taken, as the case may be, could (i) endanger
the status of either REMIC I or REMIC II 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 Trustee received an Opinion of
Counsel (at the expense of the party seeking to take such action but in no event
shall such Opinion of Counsel be an expense of the Trustee) to the effect that
the contemplated action will not, with respect to the Trust Fund created
hereunder, endanger such status or result in the imposition of such a tax. The
Master Servicer shall not take or fail to take any action (whether or not
authorized hereunder) as to which the Trustee has advised it in writing that it
has received an Opinion of Counsel (which such Opinion of Counsel shall not be
an expense of the Trustee) 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
Master Servicer will consult with the Trustee 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 Master Servicer shall not take any such
action or cause the Trust Fund to take any such action as to which the Trustee
has advised it in writing that an Adverse REMIC Event could occur. The Trustee
may
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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 permitted by this Agreement
(but in no event shall such cost be an expense of the Trustee). At all times as
may be required by the Code, the Trustee will, to the extent reasonably within
the control of the Trustee and reasonably within the scope of the Trustee's
duties hereunder, ensure that substantially all of the assets of the Trust Fund
will consist of "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 REMIC I or REMIC II created hereunder as defined in Section
860F(a)(2) of the Code on "net income from foreclosure property" of REMIC I or
REMIC II as defined in Section 860G(c) of the Code, on any contributions to
REMIC I or REMIC II 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
Trustee pursuant to Section 10.03 hereof, if such tax arises out of or results
from a breach by the Trustee of any of its obligations under this Article X,
(ii) to the Master Servicer pursuant to Section 10.03 hereof, if such tax arises
out of or results from a breach by the Master Servicer of any of its obligations
under Article V or this Article X, or otherwise (iii) against amounts on deposit
in the related Certificate Account and shall be paid by withdrawal therefrom.
(h) On or before April 15 of each calendar year, commencing
April 15, 1998, the Trustee shall deliver to the Master Servicer and each Rating
Agency a Certificate from a Responsible Officer of the Trustee stating the
Trustee's compliance with this Article X.
(i) The Master Servicer and the Trustee shall, for federal
income tax purposes, maintain books and records with respect to REMIC I and
REMIC II on a calendar year and on an
accrual basis.
(j) The Trustee shall not accept any contributions of assets
to REMIC I and REMIC II, unless it shall have received an Opinion of Counsel
(which such Opinion of Counsel shall not be an expense of the Trustee) to the
effect that the inclusion of such assets in REMIC I and REMIC II will not cause
either REMIC I or REMIC II to fail to qualify as a REMIC at any time that any
Certificates are outstanding or subject REMIC I or REMIC II to any tax under the
REMIC Provisions or other applicable provisions of federal, state and local law
or ordinances.
(k) Neither the Trustee nor the Master Servicer shall enter
into any arrangement by which REMIC I and REMIC II 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.
(l) Solely for purposes of satisfying Section
1.860G-1(a)(4)(iii) of the Treasury Regulations, the "latest possible maturity
date" by which the Certificate Principal Balances of each Class of Certificates
representing a regular interest in REMIC II would be reduced to zero is
September 25, 2027, which is the Distribution Date thirteen months following the
latest scheduled maturity of any Group I Loan, Group II Loan or Group III Loan.
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(m) Upon filing with the Internal Revenue Service, the Trustee
shall furnish to the Holders of the Class R Certificates the Form 1066 and each
Form 1066Q and shall respond promptly to written requests made not more
frequently than quarterly by any Holder of Class R Certificates with respect to
the following matters:
(A) the original projected principal and interest cash
flows on the Closing Date on the regular and residual
interests created hereunder and on the Mortgage
Loans, based on the Prepayment Assumptions;
(B) the projected remaining principal and interest cash
flows as of the end of any calendar quarter with respect to
the regular and residual interests created hereunder and the
Mortgage Loans, based on the Prepayment Assumptions;
(C) the Prepayment Assumptions and any interest rate
assumptions used in determining the projected principal and
interest cash flows described above;
(D) the original issue discount (or, in the case of the
Mortgage Loans, market discount) or premium accrued or
amortized through the end of such calendar quarter with
respect to the regular or residual interests created hereunder
and with respect to the Mortgage Loans, together with each
constant yield to
maturity used in computing the same;
(E) the treatment of losses realized with respect to the
Mortgage Loans or the regular interests created hereunder,
including the timing and amount of any cancellation of
indebtedness income of REMIC I and REMIC II with respect to
such regular interests or bad debt deductions claimed with
respect to the Mortgage Loans;
(F) the amount and timing of any non-interest
expenses of REMIC I or REMIC II; and
(G) any taxes (including penalties and interest) imposed
on the REMIC, including, without limitation, taxes on
"prohibited transactions," "contributions" or "net income from
foreclosure property" or state or local income or franchise
taxes.
Section 10.02 PROHIBITED TRANSACTIONS AND ACTIVITIES.
Neither the Company, the Master Servicer nor the Trustee shall
sell, dispose of or substitute for any of the Mortgage Loans, except in
connection with (i) the 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 REMIC I, REMIC II and REMIC III,
(iii) the termination of REMIC I and REMIC II pursuant to Article VIII of this
Agreement, or (iv) a purchase of Mortgage Loans pursuant to Article II or III of
this Agreement nor acquire any assets for REMIC I and REMIC II, nor sell or
dispose of any investments in the Certificate Accounts for gain, nor accept any
contributions to REMIC I and REMIC II after the Closing Date unless it has
received an Opinion of Counsel (at the expense of the party seeking to
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cause such sale, disposition, substitution or acquisition but in no event shall
such Opinion of Counsel be an expense of the Trustee) that such sale,
disposition, substitution or acquisition will not (a) affect adversely the
status of either REMIC I or REMIC II as a REMIC or (b) cause REMIC I and REMIC
II to be subject to a tax on "prohibited transactions" or "contributions"
pursuant to the REMIC Provisions.
Section 10.03 MASTER SERVICER AND TRUSTEE INDEMNIFICATION.
(a) The Trustee agrees to indemnify the Trust Fund, the
Company and the Master Servicer for any taxes and costs including, without
limitation, any reasonable attorneys' fees imposed on or incurred by the Trust
Fund, the Company or the Master Servicer, as a result of a
breach of the Trustee's covenants set forth in this Article X.
(b) The Master Servicer 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 Master
Servicer's covenants set forth in this Article X or in Article V 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
Master Servicer pursuant to Section 5.25 that contain errors or omissions.
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ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01 LIMITATION ON LIABILITY OF THE COMPANY AND THE
MASTER SERVICER. 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 Certificate Insurer, 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 or the
Master Servicer (but this provision shall protect the above described persons)
against any breach of warranties or representations made herein, or against any
specific liability imposed on the Master Servicer or the Company pursuant to any
other Section hereof; and provided further that this provision shall not protect
the Company, the Master Servicer or any such person, against any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or
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 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 related to Master Servicer's servicing obligations with
respect to any specific Mortgage Loan or Mortgage Loans (except as any such
loss, liability or expense shall be otherwise reimbursable pursuant to this
Agreement) or related to the Master Servicer's obligations under this Agreement,
or any loss, liability or expense incurred by reason of willful misfeasance, bad
faith or negligence in the performance of duties hereunder or by reason of
reckless disregard of obliga tions and duties hereunder. Neither the Company nor
the Master Servicer shall be under any obligation to appear in, prosecute or
defend any legal action which 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
sole 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 the
event the Company or the Master Servicer take any action as described in the
preceding sentence, the legal expenses and costs of such action, if previously
approved in writing by the Certificate Insurer, which approval shall not be
unreasonably withheld, and any liability resulting therefrom will be expenses,
costs and liabilities of the Trust Fund, and the Master Servicer or the Company,
as the case may be, will be entitled to be reimbursed therefor out of funds in
the Collection Account.
Section 11.02 ACTS OF CERTIFICATEHOLDERS. (a) Except with
respect to amendments hereto pursuant to the second paragraph of Section 11.03
and as otherwise specifically provided herein, whenever Certificateholder
action, consent or approval is required under this Agreement, such action,
consent or approval shall be deemed to have been taken or given on behalf of,
and shall be binding upon, all Certificateholders if the Majority
Certificateholders or the Certificate Insurer agrees to take such action or give
such consent or approval.
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(b) 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 heir 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.
(c) 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 person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.
Section 11.03 AMENDMENT. This Agreement may be amended from
time to time by the Company, the Master Servicer and the Trustee without the
consent of any of the Certificate holders, (i) to cure any ambiguity, (ii) to
correct or supplement any provisions herein which may be erroneous, defective or
inconsistent with any other provisions herein, (iii) to amend this Agreement in
any respect subject to the provisions below, or (iv) if such amendment, as
evidenced by an Opinion of Counsel (provided by the Person requesting such
amendment) delivered to the Trustee, is reasonably necessary to comply with any
requirements imposed by the Code or any successor or amendatory statute or any
temporary or final regulation, revenue ruling, revenue procedure or other
written official announcement or interpretation relating to federal income tax
laws or any proposed such action which, if made effective, would apply
retroactively to the Trust Fund at least from the effective date of such
amendment; provided that such action (except any amendment described in (iv)
above) shall not, as evidenced by an Opinion of Counsel (provided by the Person
requesting such amendment) delivered to the Trustee and the Certificate Insurer,
adversely affect in any material respect the interests of any Certificateholder
(other than Certificateholders who shall consent to such amendment) or the
Certificate Insurer.
This Agreement may also be amended from time to time by the
Company, the Master Servicer and the Trustee with the consent of the Certificate
Insurer and the Majority Certificateholders for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Holders of
Certificates; provided, however, that no such amendment shall (i) reduce in any
manner the amount of, or delay the timing of, payments received on Mortgage
Loans 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 interests of the Holders of any Class of Certificates in a manner
other than as described in (i), without the consent of the Majority
Certificateholders or (iii) reduce the aforesaid percentage of Certificates the
Holders of which are required to consent to any such amendment, without the
consent of the Certificate Insurer and the Holders of all Certificates then
outstanding. Notwithstanding any other provision of this Agreement, for purposes
of the giving or withholding of consents pursuant to this Section 11.03,
Certificates registered in the name of the Company or the Master Servicer or any
affiliate thereof shall be entitled to voting rights with respect to matters
described in (i), (ii) and (iii) of this paragraph.
128
<PAGE>
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 (provided by the Person requesting
such amendment) to the effect that such amendment will not result in the
imposition of any tax on REMIC I and REMIC II pursuant to the REMIC Provisions
or cause REMIC I and REMIC II to fail to qualify as a REMIC at any time that any
of the Certificates are outstanding.
Promptly after the execution of any such amendment the Trustee
shall furnish a statement describing the amendment to each Certificateholder,
the Certificate Insurer, S&P and Moody's.
It shall not be necessary for the consent of
Certificateholders under this Section 11.03 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.
Prior to executing any amendment pursuant to this Section, the
Trustee shall be entitled to receive an Opinion of Counsel (provided by the
Person requesting such amendment) to the effect that such amendment is
authorized or permitted by this Agreement. The cost of an Opinion of Counsel
delivered pursuant to this Section 11.03 shall be an expense of the party
requesting such amendment, but in any case shall not be an expense of the
Trustee.
The Trustee may, but shall not be obligated to enter into any
amendment pursuant to this Section that affects its rights, duties and
immunities under this Agreement or otherwise.
Section 11.04 RECORDATION OF AGREEMENT. To the extent
permitted by applicable law, this Agreement, or a memorandum thereof if
permitted under applicable law, is subject to recordation in all appropriate
public offices for real property records in all of the counties or other
comparable jurisdictions in which any or all of the properties subject to the
Mortgages are situated, and in any other appropriate public recording office or
elsewhere, such recordation to be effected by the Master Servicer at the
Certificateholders' expense on direction and at the expense of Majority
Certificateholders requesting such recordation, but only when accompanied by an
Opinion of Counsel to the effect that such recordation materially and
beneficially affects the interests of the Certificateholders or is necessary for
the administration or servicing of the Mortgage Loans.
Section 11.05 NOTICES. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered to (i) in the case of the Master Servicer, Advanta Mortgage Corp. USA,
16875 West Bernardo Drive, San Diego, California 92127, Attention: Senior Vice
President Loan Servicing, (ii) in the case of Southern Pacific Funding
Corporation, Southern Pacific Funding Corporation, One Centerpointe Drive, Suite
500, Lake Oswego, Oregon 97035, Attention: Mr. Barney Guy, (iii) in the case of
the Trustee, Norwest Bank Minnesota, N.A., Norwest Center, Sixth & Marquette,
Minneapolis, Minnesota 55479, Attention: Southern Pacific Secured Assets Corp.,
Mortgage Loan AssetBacked Pass-Through Certificates, Series 1997-3, and with a
copy to Norwest Bank Minnesota, N.A., 11000 Broken Land Parkway, Columbia,
Maryland 21044, Attention: Southern Pacific
129
<PAGE>
Series 1997-3, (iv) in the case of the Certificateholders, as set forth in the
Certificate Register, (v) in the case of Moody's, Moody's Investors Service,
Inc., 99 Church Street, New York, New York 10007 Attention: Home Equity
Monitoring Group, (vi) in the case of S&P, Standard & Poor's Ratings Services,
26 Broadway, New York, New York 10004 Attention: Residential Mortgage
Surveillance Group, (vii) in the case of DCR, Duff & Phelps Credit Rating Co.,
55 East Monroe Street, 35th Floor, Chicago, Illinois 60603, Attention: MBS
Monitoring, (viii) in the case of the Certificate Insurer, MBIA Insurance
Corporation, 113 King Street, Armonk, New York 10504, Attention: Insured
Portfolio Management--SF, (ix) in the case of the Underwriters, Morgan Stanley &
Co. Incorporated, 1585 Broadway, 3rd Floor, New York, New York 10038, Attention:
James Fadel, Lehman Brothers Inc., Three World Financial Center, 12th Floor, New
York, New York 10285, Attention: Samir A. Tabet and Donaldson, Lufkin & Jenrette
Securities Corporation, 277 Park Avenue, New York, NY 10172, Attention: Mike
McMahon and (x) in the case of the Company, Southern Pacific Secured Assets
Corp., One Centerpointe Drive, Suite 500, Lake Oswego, Oregon 97035, Attention:
Mr. Barney Guy. Any such notices shall be deemed to be effective with respect to
any party hereto upon the receipt of such notice by such party, except that
notices to the Certificateholders shall be effective upon mailing or personal
delivery.
Section 11.06 SEVERABILITY OF PROVISIONS. If any one or more
of the covenants, agreements, provisions or terms of this Agreement shall be
held invalid for any reason whatsoever, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Agreement and shall in no way affect the
validity or enforceability of the other covenants, agreements, provisions or
terms of this Agreement or of the Certificates or the rights of the Holders
thereof.
Section 11.07 COUNTERPARTS. This Agreement may be executed in
one or more counterparts and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed to be an
original; such counterparts, together, shall constitute one and
the same agreement.
Section 11.08 SUCCESSORS AND ASSIGNS. This Agreement
shall inure to the benefit of and be binding upon the Master Servicer, the
Company, the Trustee and the Certificateholders and their respective successors
and permitted assigns.
Section 11.09 HEADINGS. The headings of the various
articles and sections of this Agreement have been inserted for convenience of
reference only and shall not be deemed to be part of this Agreement.
Section 11.10 CERTIFICATE INSURER DEFAULT. Any right conferred
to the Certificate Insurer, including, without limitation, the right to receive
the Premium Amount pursuant to Section 6.05(b)(i), 6.05(c)(i) and 6.05(d)(i),
shall be suspended during any period in which a Certificate Insurer Default
exists. At such time as the Certificates are no longer outstanding hereunder,
and no amounts owed to the Certificate Insurer hereunder remain unpaid, the
Certificate Insurer's rights hereunder shall terminate.
130
<PAGE>
Section 11.11 THIRD PARTY BENEFICIARY. The parties agree
that each of the Seller and the Certificate Insurer are intended and shall have
all rights of a third-party beneficiary of this Agreement.
Section 11.12 INTENT OF THE PARTIES. It is the intent of the
Company and Certificateholders that, for federal income taxes, state and local
income or franchise taxes and other taxes imposed on or measured by income, the
Certificates will be treated as evidencing beneficial ownership interests in a
REMIC. The parties to this Agreement and the holder of each Certificate, by
acceptance of its Certificate, and each beneficial owner thereof, agree to
treat, and to take no action inconsistent with the treatment of, the
Certificates in accordance with the preceding sentence for purposes of federal
income taxes, state and local income and franchise taxes and other taxes imposed
on or measured by income.
Section 11.13 NOTICE TO RATING AGENCIES AND
CERTIFICATEHOLDER.
The Trustee shall use its best efforts to promptly provide
notice to the Rating Agencies and the Certificate Insurer with respect to each
of the following of which it has actual
knowledge:
1. Any material change or amendment to this Agreement;
2. The occurrence of any Event of Default that has not been
cured;
3. The resignation or termination of the Master Servicer or
the Trustee;
4. The repurchase of Mortgage Loans pursuant to Section 3.03;
5. The final payment to Certificateholders; and
6. Any change in the location of the Collection Account or
the Certificate Accounts.
In addition, the Trustee shall promptly furnish to the Rating
Agencies copies of the following:
1. Each report to Certificateholders described in Section
6.07; and
2. Each annual independent public accountants' servicing
report described in Section 5.17.
Any such notice pursuant to this Section 11.13 shall be in
writing and shall be deemed to have been duly given if personally delivered or
mailed by first class mail, postage prepaid, or by express delivery service
(except in the case of notice to the Certificate Insurer which notice shall be
given in accordance with Section 11.05 hereof).
131
<PAGE>
Section 11.14 GOVERNING LAW. (a) THIS AGREEMENT AND THE
CERTIFICATES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE OF NEW
YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
132
<PAGE>
IN WITNESS WHEREOF, the Master Servicer, the Trustee and the
Company have caused their names to be signed hereto by their respective officers
thereunto duly authorized as
of the day and year first above written.
SOUTHERN PACIFIC SECURED ASSETS
CORP., as Company
By:
-------------------------------
Name:
Title:
ADVANTA MORTGAGE CORP. USA,
as Master Servicer
By:
-------------------------------
Name:
Title:
NORWEST BANK MINNESOTA, N.A.,
as Trustee
By:
-------------------------------
Name:
Title:
133
<PAGE>
State of __________ )
) ss.:
County of __________ )
On the ____ day of September, 1997, before me, a Notary Public in and
for the State of __________________, personally appeared ____________________,
known to me to be a ___________________ of Advanta Mortgage Corp. USA, the
corporation that executed the within instrument and also known to me to be the
person who executed it on behalf of said corporation, and acknowledged to me
that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
-------------------------
Notary Public
My Commission expires _______________
134
<PAGE>
State of __________ )
) ss.:
County of __________ )
On the ____ day of September, 1997, before me, a Notary Public in and
for the State of New York, personally appeared _____________________, known to
me to be Trust Officer of Norwest Bank Minnesota, N.A., the corporation that
executed the within instrument and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
- -------------------------
Notary Public
My
Commission expires _______________
135
<PAGE>
State of )
) ss.:
County of )
On the __the day of September, 1997, before me, a Notary Public in and
for the State of ________, personally appeared _______________, known to me to
be
- ---------------
of Southern Pacific Secured Assets Corp., the corporation that executed the
within instrument and also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that such corporation
executed the within instrument.
IN WITNESS WHEREOF, I have hereunder to set my hand and affixed my
official seal the day and year in this certificate first above written.
-------------------------
Notary Public
My Commission expires _______________
136
<PAGE>
EXHIBIT A-1
Group I Certificate Insurance Policy
CERTIFICATE GUARANTY INSURANCE POLICY
OBLIGATIONS: $____________ POLICY NUMBER ______
Southern Pacific Secured Assets Corp.
Mortgage Loan Asset-Backed Pass-Through Certificates, Series 1997-3
Class A-1 Certificates
MBIA Insurance Corporation (the "Insurer"), in consideration of the
payment of the premium and subject to the terms of this Certificate Guaranty
Insurance Policy (this "Policy"), hereby unconditionally and irrevocably
guarantees to any Owner that an amount equal to each full and complete Group I
Insured Payment will be received by Norwest Bank Minnesota, N.A., or its
successor, as trustee for the Owners (the "Trustee"), on behalf of the Owners
from the Insurer, for distribution by the Trustee to each Owner of each Owner's
proportionate share of such Group I Insured Payment. The Insurer's obligations
hereunder with respect to a particular Group I Insured Payment shall be
discharged to the extent funds equal to the applicable Group I Insured Payment
are received by the Trustee, whether or not such funds are properly applied by
the Trustee. Group I Insured Payments shall be made only at the time set forth
in this Policy, and no accelerated Group I Insured Payments shall be made
regardless of any acceleration of the Obligations, unless such acceleration is
at the sole option of the Insurer.
Notwithstanding the foregoing paragraph, this Policy does not cover
shortfalls, if any, attributable to the liability of the Trust Fund, the REMIC
or the Trustee for withholding taxes, if any (including interest and penalties
in respect of any such liability).
The Insurer will pay any Group I Insured Payment that is a Group I
Preference Amount on the Business Day following receipt on a Business Day by the
Fiscal Agent (as described below) of (i) a certified copy of the order requiring
the return of the related preference payment, (ii) an opinion of counsel
satisfactory to the Insurer that such order is final and not subject to appeal
(iii) an in such form as is reasonably required by the Insurer, irrevocably
assigning to the Insurer all rights and claims of the Owner relating to or
arising under the Obligations against the debtor which made such preference
payment or otherwise with respect to such preference payment and (iv)
appropriate instruments to effect the appointment of the Insurer as agent for
such Owner in any legal proceeding related to such preference payment, such
instruments being in a form satisfactory to the Insurer, provided that if such
documents are received after 12:00 noon New York City time on such Business Day,
they will be deemed to be received on the following Business Day. Such payments
shall be disbursed to the receiver or trustee in bankruptcy named in the final
order of the court exercising jurisdiction on behalf of the Owner and not to any
Owner directly unless such Owner has returned principal or interest paid on the
Obligations to such receiver or trustee in bankruptcy, in which case such
payment shall be disbursed to such Owner.
<PAGE>
The Insurer will pay any other amount payable hereunder no later than
12:00 noon, New York City time, on the later of (i) the Distribution Date on
which the Group I Insured Payment is due or (ii) the Business Day following
receipt in New York, New York on a Business Day by State Street Bank and Trust
Company, N.A., as Fiscal Agent for the Insurer or any successor fiscal agent
appointed by the Insurer (the "Fiscal Agent") of a Notice (as described below),
provided that, if such Notice is received after 12:00 noon, New York City time,
on such Business Day, it will be deemed to be received on the following Business
Day. If any such Notice received by the Fiscal Agent is not in proper form or is
otherwise insufficient for the purpose of making claim hereunder it shall be
deemed not to have been received by the Fiscal Agent for purposes of this
paragraph, and the Insurer or the Fiscal Agent, as the case may be, shall
promptly so advise the Trustee and the Trustee may submit an amended Notice.
Group I Insured Payments due hereunder unless otherwise stated herein
will be disbursed by the Fiscal Agent to the Trustee on behalf of the Owners by
wire transfer of immediately available funds in the amount of the Group I
Insured Payment less, in respect of Group I Insured Payments related to Group I
Preference Amounts, any amount held by the Trustee for the payment of such Group
I insured Payment and legally available therefor.
The Fiscal Agent is the agent of the Insurer only and the Fiscal Agent
shall in no event be able to Owners for any acts of the Fiscal Agent or any
failure of the Insurer to deposit or cause to be deposited, sufficient funds to
make payments due under this Policy.
As used herein, the following terms shall have the following meanings:
"AGREEMENT" means the Pooling and Servicing Agreement dated as of
September 1, 1997 by and among Southern Pacific Secured Assets Corp., as
Company, Advanta Mortgage Corp. USA, as Master Servicer, and Trustee, as
trustee, without regard to any amendment or supplement
thereto.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day
on which banking institutions in New York City or in the city in which the
corporate trust office of the Trustee under the Agreement is located are
authorized or obligated by law or executive order to close.
"GROUP I INSURED PAYMENT" means, (i) on each Distribution Date, an
amount equal to (a) the Group I Class A Interest Distribution Amount minus Group
I Available Funds and (b) the Group I Subordination Deficit (to the extent not
covered by Cross-Collateralization Payments (as defined in the Prospectus
Supplement)) and (ii) the unpaid Group I Preference Amount.
"GROUP I PREFERENCE AMOUNT" means any amount previously distributed to
an Owner on the Obligations that is recoverable and sought to be recovered as a
voidable preference by a trustee in bankruptcy pursuant to the United States
Bankruptcy Code (11 U.S.C.), as amended from time to time, in accordance with a
full nonappealable order of a court having competent jurisdiction.
"NOTICE" means the telephonic or telegraphic notice, promptly confirmed
in writing by telecopy substantially in the form of Exhibit A attached hereto,
the original of which is
<PAGE>
subsequently delivered by registered or certified mail, from the Trustee
specifying the Group I Insured Payment which shall be due and owing on the
applicable Distribution Date.
"ORIGINATORS" means Southern Pacific Funding Corporation and Oceanmark
Bank, FSB.
"OWNER" means each Holder of a Class A-1 Certificate (as defined in the
Agreement) who, on the applicable Distribution Date, is entitled under the terms
of the Class A-1 Certificates to payment thereunder.
"PROSPECTUS SUPPLEMENT" means the form of final Prospectus Supplement
dated September ___, 1997.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Agreement as of the date of
execution of this Policy, without giving effect to any subsequent amendment or
modification to the Agreement unless such amendment or
modification has been approved in writing by the Insurer.
Any notice hereunder or service of process on the Fiscal Agent of the
Insurer may be made at the address listed below for the Fiscal Agent of the
Insurer or such other address as the Insurer
shall specify in writing to the Trustee.
The notice address of the Fiscal Agent is 15th Floor, 61 Broadway, New
York, New York 10006, Attention: Municipal Registrar and Paying Agency, or such
other address as the Fiscal Agent shall specify to the Trustee in writing.
This Policy is being issued under and pursuant to, and shall be
construed under, the laws of the State of New York, without giving effect to the
conflict of laws principles thereof
The insurance provided by this Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
This Policy is not cancelable for any reason. The premium on this
Policy is not refundable for any reason including payment, or provision being
made for payment, prior to maturity of the Obligations.
<PAGE>
IN WITNESS WHEREOF, the Insurer has caused this Policy to be executed
and attested this 26th day of September, 1997.
MBIA INSURANCE CORPORATION
---------------------------------------
President
Attest:
---------------------------------------
Assistant Secretary
<PAGE>
EXHIBIT A
TO CERTIFICATE GUARANTY INSURANCE POLICY
NUMBER: _______
NOTICE UNDER CERTIFICATE GUARANTY
INSURANCE POLICY NUMBER: _______
State Street Bank and Trust Company, N.A.,
as Fiscal Agent for MBIA Insurance Corporation
15th Floor
61 Broadway
New York, NY 10006
Attention: Municipal Registrar and
Paying Agency
MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
The undersigned, a duly authorized officer of , as trustee (the
"Trustee"), hereby certifies to State Street Bank and Trust Company, N.A. (the
"Fiscal Agent") and MBIA Insurance Corporation (the "Insurer"), with reference
to Certificate Guaranty Insurance Policy Number 21858 (the "Policy") issued by
the Insurer in respect of the Southern Pacific Secured Assets Corp. Mortgage
Loan Asset-Backed Pass-Through Certificates, Series 1997-3 Class A Certificates
(the "Obligations"), that:
(i) the Trustee is the trustee under the Pooling and
Servicing Agreement dated as of September 1, 1997 by and among Southern
Pacific Secured Assets Corp., as Company, Advanta Mortgage Corp. USA,
as Master Servicer, and the Trustee, as trustee for the Owners (the
"Agreement");
(ii) the Group I Insured Distribution Amount for the
Distribution Date occurring on ______ (the "Applicable Distribution
Date") is $___;
(iii) the Group I Available Funds available under the
Agreement to pay the Group I Insured Distribution Amount for the
Applicable Distribution Date (the "Group I Available Distribution
Amount") is $_______ ;
(iv) the amount by which the Group I Insured
Distribution Amount exceeds the Group I Available Distribution Amount
is $___ (the "Group I Deficiency Amount");
(v) the amount of the Group I Preference Amount due and
owing under the policy is $___ (the "Group I Preference Amount");
<PAGE>
(vi) the sum of the Group 1 Deficiency Amount and the
Group I Preference Amount is $________ (the " Group I Insured
Payment");
(vii) the Trustee is making a claim under and pursuant to
the terms of the Policy for the payment of the Group I Insured
Payment; and
(viii) the Trustee directs that payment of the Group I
Insured Payment be made to the following account by bank wire transfer
of federal or other immediately available funds in accordance with the
terms of the Policy:___________ [Certificate
Account].
Any capitalized term used in this Notice and not otherwise defined
herein shall have the meaning assigned thereto in the Policy.
ANY PERSON WHO KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE
COMPANY OR OTHER PERSON FILES AN APPLICATION FOR INSURANCE OR STATEMENT OF CLAIM
CONTAINING ANY MATERIALLY FALSE INFORMATION, OR CONCEALS FOR THE PURPOSE OF
MISLEADING, INFORMATION CONCERNING ANY FACT MATERIAL THERETO, COMMITS A
FRAUDULENT INSURANCE ACT, WHICH IS A CRIME, AND SHALL ALSO BE SUBJECT TO A CIVIL
PENALTY NOT TO EXCEED FIVE THOUSAND DOLLARS AND THE STATED VALUE OF THE CLAIM
FOR EACH SUCH VIOLATION.
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice
under the Policy as of the day of ,
[TRUSTEE]
By
---------------------------------------
Title
-------------------------------------
<PAGE>
EXHIBIT A-2
Group II Certificate Insurance Policy
CERTIFICATE GUARANTY INSURANCE POLICY
OBLIGATIONS: $____________ POLICY NUMBER _______
Southern Pacific Secured Assets Corp.
Mortgage Loan Asset-Backed Pass-Through Certificates, Series 1997-3
Class A-2 and Group II Fixed Strip Component (the "Obligations")
MBIA Insurance Corporation (the "Insurer"), in consideration of the
payment of the premium and subject to the terms of this Certificate Guaranty
Insurance Policy (this "Policy"), hereby unconditionally and irrevocably
guarantees to any Owner that an amount equal to each full and complete Group II
Insured Payment will be received by Norwest Bank Minnesota, N.A., or its
successor, as trustee for the Owners (the "Trustee"), on behalf of the Owners
from the Insurer, for distribution by the Trustee to each Owner of each Owner's
proportionate share of such Group II Insured Payment. The Insurer's obligations
hereunder with respect to a particular Group II Insured Payment shall be
discharged to the extent funds equal to the applicable Group II Insured Payment
are received by the Trustee, whether or not such funds are properly applied by
the Trustee. Group II Insured Payments shall be made only at the time set forth
in this Policy, and no accelerated Group II Insured Payments shall be made
regardless of any acceleration of the Obligations, unless such acceleration is
at the sole option of the Insurer.
Notwithstanding the foregoing paragraph, this Policy does not cover
shortfalls, if any, attributable to the liability of the Trust Fund, the REMIC
or the Trustee for withholding taxes, if any (including interest and penalties
in respect of any such liability).
The Insurer will pay any Group II Insured Payment that is a Group II
Preference Amount on the Business Day following receipt on a Business Day by the
Fiscal Agent (as described below) of (i) a certified copy of the order requiring
the return of the related preference payment, (ii) an opinion of counsel
satisfactory to the Insurer that such order is final and not subject to appeal,
(iii) an assignment in such form as is reasonably required by the Insurer,
irrevocably assigning to the Insurer all rights and claims of the Owner relating
to or arising under the Obligations against the debtor which made such
preference payment or otherwise with respect to such preference payment and (iv)
appropriate instruments to effect the appointment of the Insurer as agent for
such Owner in any legal proceeding related to such preference payment, such
instruments being in a form satisfactory to the Insurer, provided that if such
documents are received after 12:00 noon New York City time on such Business Day,
they will be deemed to be received on the following Business Day. Such payments
shall be disbursed to the receiver or trustee in bankruptcy named in the final
order of the court exercising jurisdiction on behalf of the Owner and not to any
Owner directly unless such Owner has returned principal or interest paid on the
Obligations to such receiver or trustee in bankruptcy, in which case such
payment shall be disbursed to such Owner.
<PAGE>
The Insurer will pay any other amount payable hereunder no later than
12:00 noon, New York City time, on the later of (i) the Distribution Date on
which the Group II Insured Payment is due or (ii) the Business Day following
receipt in New York, New York on a Business Day by State Street Bank and Trust
Company, N.A., as Fiscal Agent for the Insurer or any successor fiscal agent
appointed by the Insurer (the "Fiscal Agent") of a Notice (as described below),
provided that, if such Notice is received after 12:00 noon, New York City time,
on such Business Day, it will be deemed to be received on the following Business
Day. If any such Notice received by the Fiscal Agent is not in proper form or is
otherwise insufficient for the purpose of making claim hereunder it shall be
deemed not to have been received by the Fiscal Agent for purposes of this
paragraph, and the Insurer or the Fiscal Agent, as the case may be, shall
promptly so advise the Trustee and the Trustee may submit an amended Notice.
Group II Insured Payments due hereunder unless otherwise stated herein
will be disbursed by the Fiscal Agent to the Trustee on behalf of the Owners by
wire transfer of immediately available funds in the amount of the Group II
Insured Payment less, in respect of Group II Insured Payments related to Group
II Preference Amounts, any amount held by the Trustee for the payment of such
Group II Insured Payment and legally available therefor.
The Fiscal Agent is the agent of the Insurer only and the Fiscal Agent
shall in no event be liable to Owners for any acts of the Fiscal Agent or any
failure of the Insurer to deposit or cause to be deposited, sufficient funds to
make payments due under this Policy.
As used herein, the following terms shall have the following meanings:
"AGREEMENT" means the Pooling and Servicing Agreement dated as of
September 1, 1997 by and among Southern Pacific Secured Assets Corp., as
Company, Advanta Mortgage Corp. USA as Master Servicer, and Trustee, as trustee,
without regard to any amendment or supplement
thereto.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day
on which banking institutions in New York City or in the city in which the
corporate trust office of the Trustee under the Agreement is located are
authorized or obligated by law or executive order to close.
"GROUP II INSURED PAYMENT" means, (i) on each Distribution Date, an
amount equal to (a) the Group II Class A Interest Distribution Amount minus
Group II Available Funds and (b) the Group II Subordination Deficit (to the
extent not covered by Cross-Collateralization Payments (as defined in the
Prospectus Supplement)) and (ii) the unpaid Group II Preference Amount.
"GROUP II PREFERENCE AMOUNT" means any amount previously distributed to
an Owner on the obligations that is recoverable and sought to be recovered as a
voidable preference by a trustee in bankruptcy pursuant to the United States
Bankruptcy Code (11 U.S.C.), as amended from time to time, in accordance with a
final nonappealable order of a court having competent jurisdiction.
"NOTICE" means the telephonic or telegraphic notice, promptly confirmed
in writing by telecopy substantially in the form of Exhibit A attached hereto,
the original of which is
<PAGE>
subsequently delivered by registered or certified mail, from the Trustee
specifying the Group II Insured Payment which shall be due and owing on the
applicable Distribution Date.
"ORIGINATORS" means Southern Pacific Funding Corporation and Oceanmark
Bank, FSB.
"OWNER" means each Holder of a Class A-2 Certificate (as defined in the
Agreement) who, on the applicable Distribution Date, is entitled under the terms
of the Class A-2 Certificates to payment thereunder.
"PROSPECTUS SUPPLEMENT" means the form of final Prospectus Supplement
dated September 24, 1997.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Agreement as of the date of
execution of this Policy, without giving effect to any subsequent amendment or
modification to the Agreement unless such amendment or modification has been
approved in writing by the Insurer.
Any notice hereunder or service of process on the Fiscal Agent of the
Insurer may be made at the address listed below for the Fiscal Agent of the
Insurer or such other address as the Insurer shall specify in writing to the
Trustee.
The notice address of the Fiscal Agent is 15th Floor, 61 Broadway, New
York, New York 10006, Attention: Municipal Registrar and Paying Agency, or such
other address as the Fiscal Agent shall specify to the Trustee in writing.
This Policy is being issued under and pursuant to, and shall be
construed under, the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
The insurance provided by this Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
This Policy is not cancelable for any reason. The premium on this
Policy is not refundable for any reason including payment, or provision being
made for payment, prior to maturity of the Obligations.
<PAGE>
IN WITNESS WHEREOF, the Insurer has caused this Policy to be executed
and attested this 26th day of September, 1997.
MBIA INSURANCE CORPORATION
---------------------------------------
President
Attest:
---------------------------------------
Assistant Secretary
<PAGE>
EXHIBIT A
TO CERTIFICATE GUARANTY INSURANCE POLICY
NUMBER: ______
NOTICE UNDER CERTIFICATE GUARANTY
INSURANCE POLICY NUMBER: _______
State Street Bank and Trust Company, N.A.,
as Fiscal Agent for MBIA Insurance Corporation
15th Floor
61 Broadway
New York, NY 10006
Attention: Municipal Registrar and
Paying Agency
MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
The undersigned, a duly authorized officer of , as trustee (the
"Trustee"), hereby certifies to State Street Bank and Trust Company, N.A. (the
"Fiscal Agent") and MBIA Insurance Corporation (the "Insurer"), with reference
to Certificate Guaranty Insurance Policy Number 21859 (the "Policy") issued by
the Insurer in respect of the Southern Pacific Secured Assets Corp. Mortgage
Loan Asset-Backed Pass-Through Certificates, Series 1997-3, Class A Certificates
(the "Obligations"), that:
(i) the Trustee is the trustee under the Pooling and
Servicing Agreement dated as of September 1, 1997 by and among Southern
Pacific Secured Assets Corp., as Company, Advanta Mortgage Corp. USA as
Master Servicer, and the Trustee, as trustee
for the Owners (the "Agreement");
(ii) the Group II Insured Distribution Amount for the
Distribution Date occurring on _____________ (the "Applicable
Distribution Date") is $_________;
(iii) the Group II Available Funds available under the
Agreement to pay the Group II Insured Distribution Amount for the
Applicable Distribution Date (the "Group II Available Distribution
Amount") is $________ ;
(iv) the amount by which the Group II Insured
Distribution Amount exceeds the Group II Available Distribution Amount
is $____________(the "Group II Deficiency Amount");
(v) the amount of the Group II Preference Amount due
and owing under the policy is $________ (the " Group II Preference
Amount");
<PAGE>
(vi) the sum of the Group II Deficiency Amount and the
Group II Preference Amount is $___ (the " Group II Insured Payment");
(vii) the Trustee is making a claim under and pursuant
to the terms of the Policy for the payment of the Group II Insured
Payment; and
(viii) the Trustee directs that payment of the Group II
Insured Payment be made to the following account by bank wire transfer
of federal or other immediately available funds in accordance with the
terms of the Policy: [Certificate Account].
Any capitalized term used in this Notice and not otherwise defined
herein shall have the meaning assigned thereto in the Policy.
ANY PERSON WHO KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE
COMPANY OR OTHER PERSON FILES AN APPLICATION FOR INSURANCE OR STATEMENT OF CLAIM
CONTAINING ANY MATERIALLY FALSE INFORMATION, OR CONCEALS FOR THE PURPOSE OF
MISLEADING, INFORMATION CONCERNING ANY FACT MATERIAL THERETO, COMMITS A
FRAUDULENT INSURANCE ACT, WHICH IS A CRIME, AND SHALL ALSO BE SUBJECT TO A CIVIL
PENALTY NOT TO EXCEED FIVE THOUSAND DOLLARS AND THE STATED VALUE OF THE CLAIM
FOR EACH SUCH VIOLATION.
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice
under the Policy as of the day of , .
[TRUSTEE]
By
---------------------------------------
Title
------------------------------------
<PAGE>
EXHIBIT A-3
Group III Certificate Insurance Policy
CERTIFICATE GUARANTY INSURANCE POLICY
OBLIGATIONS: $____________ POLICY NUMBER _______
Southern Pacific Secured Assets Corp.
Mortgage Loan Asset-Backed Pass-Through Certificates, Series 1997-3
Class A-3, Class A-4, Class A-5, Class A-6 Certificates
and Group III Fixed Strip Component (the "Obligations")
MBIA Insurance Corporation (the "Insurer"), in consideration of the
payment of the premium and subject to the terms of this Certificate Guaranty
Insurance Policy (this "Policy"), hereby unconditionally and irrevocably
guarantees to any Owner that an amount equal to each full and complete Group III
Insured Payment will be received by Norwest Bank Minnesota, N.A., or its
successor, as trustee for the Owners (the "Trustee"), on behalf of the Owners
from the Insurer, for distribution by the Trustee to each Owner of each Owner's
proportionate share of such Group III Insured Payment. The Insurer's obligations
hereunder with respect to a particular Group III Insured Payment shall be
discharged to the extent funds equal to the applicable Group III Insured Payment
are received by the Trustee, whether or not such funds are properly applied by
the Trustee. Group III Insured Payments shall be made only at the time set forth
in this Policy, and no accelerated Group III Insured Payments shall be made
regardless of any acceleration of the Obligations, unless such acceleration is
at the sole option of the Insurer.
Notwithstanding the foregoing paragraph, this Policy does not cover
shortfalls, if any, attributable to the liability of the Trust Fund, the REMIC
or the Trustee for withholding taxes, if any (including interest and penalties
in respect of any such liability).
The Insurer will pay any Group III Insured Payment that is a Group III
Preference Amount on the Business Day following receipt on a Business Day by the
Fiscal Agent (as described below) of (i) a certified copy of the order requiring
the return of the related preference payment, (ii) an opinion of counsel
satisfactory to the Insurer that such order is final and not subject to appeal,
(iii) an assignment in such form as is reasonably required by the Insurer,
irrevocably assigning to the Insurer all rights and claims of the Owner relating
to or arising under the Obligations against the debtor which made such
preference payment or otherwise with respect to such preference payment and (iv)
appropriate instruments to effect the appointment of the Insurer as agent for
such Owner in any legal proceeding related to such preference payment, such
instruments being in a form satisfactory to the Insurer, provided that if such
documents are received after 12:00 noon New York City time on such Business Day,
they will be deemed to be received on the following Business Day. Such payments
shall be disbursed to the receiver or trustee in bankruptcy named in the final
order of the court exercising jurisdiction on behalf of the Owner and not to any
Owner directly unless such Owner has returned principal or interest paid on the
Obligations to such receiver or trustee in bankruptcy, in which case such
payment shall be disbursed to such Owner.
<PAGE>
The Insurer will pay any other amount payable hereunder no later than
12:00 noon, New York City time, on the later of (i) the Distribution Date on
which the Group III Insured Payment is due or (ii) the Business Day following
receipt in New York, New York on a Business Day by State Street Bank and Trust
Company, N.A., as Fiscal Agent for the Insurer or any successor fiscal agent
appointed by the Insurer (the "Fiscal Agent") of a Notice (as described below),
provided that, if such Notice is received after 12:00 noon, New York City time,
on such Business Day, it will be deemed to be received on the following Business
Day. If any such Notice received by the Fiscal Agent is not in proper form or is
otherwise insufficient for the purpose of making claim hereunder it shall be
deemed not to have been received by the Fiscal Agent for purposes of this
paragraph, and the Insurer or the Fiscal Agent, as the case may be, shall
promptly so advise the Trustee and the Trustee may submit an amended Notice.
Group III Insured Payments due hereunder unless otherwise stated herein
will be disbursed by the Fiscal Agent to the Trustee on behalf of the Owners by
wire transfer of immediately available funds in the amount of the Group III
Insured Payment less, in respect of Group III Insured Payments related to Group
III Preference Amounts, any amount held by the Trustee for the payment of such
Group III Insured Payment and legally available therefor.
The Fiscal Agent is the agent of the Insurer only and the Fiscal Agent
shall in no event be liable to Owners for any acts of the Fiscal Agent or any
failure of the Insurer to deposit or cause to be deposited, sufficient funds to
make payments due under this Policy.
As used herein, the following terms shall have the following meanings:
"AGREEMENT" means the Pooling and Servicing Agreement dated as of
September 1, 1997 by and among Southern Pacific Secured Assets Corp., as
Company, Advanta Mortgage Corp. USA as Master Servicer, and Trustee, as trustee,
without regard to any amendment or supplement
thereto.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day
on which banking institutions in New York City or in the city in which the
corporate trust office of the Trustee under the Agreement is located are
authorized or obligated by law or executive order to close.
"GROUP III INSURED PAYMENT" means, (i) on each Distribution Date, an
amount equal to (a) the Group III Class A Interest Distribution Amount minus
Group II Available Funds and (b) the Group III Subordination Deficit (to the
extent not covered by Cross-Collateralization Payments (as defined in the
Prospectus Supplement)) and (ii) the unpaid Group III Preference Amount.
"GROUP III PREFERENCE AMOUNT" means any amount previously distributed
to an Owner on the obligations that is recoverable and sought to be recovered as
a voidable preference by a trustee in bankruptcy pursuant to the United States
Bankruptcy Code (11 U.S.C.), as amended from time to time, in accordance with a
final nonappealable order of a court having competent jurisdiction.
"NOTICE" means the telephonic or telegraphic notice, promptly confirmed
in writing by telecopy substantially in the form of Exhibit A attached hereto,
the original of which is
<PAGE>
subsequently delivered by registered or certified mail, from the Trustee
specifying the Group III Insured Payment which shall be due and owing on the
applicable Distribution Date.
"ORIGINATORS" means Southern Pacific Funding Corporation and Oceanmark
Bank, FSB.
"OWNER" means each Holder of a Class A-3, Class A-4, Class A-5 or Class
A-6 Certificate (as defined in the Agreement) who, on the applicable
Distribution Date, is entitled under the terms of the Class A-3, Class A-4,
Class A-5, or Class A-6 Certificates to payment thereunder.
"PROSPECTUS SUPPLEMENT" means the form of final Prospectus Supplement
dated September 24, 1997.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Agreement as of the date of
execution of this Policy, without giving effect to any subsequent amendment or
modification to the Agreement unless such amendment or
modification has been approved in writing by the Insurer.
Any notice hereunder or service of process on the Fiscal Agent of the
Insurer may be made at the address listed below for the Fiscal Agent of the
Insurer or such other address as the Insurer shall specify in writing to the
Trustee.
The notice address of the Fiscal Agent is 15th Floor, 61 Broadway, New
York, New York 10006, Attention: Municipal Registrar and Paying Agency, or such
other address as the Fiscal Agent shall specify to the Trustee in writing.
This Policy is being issued under and pursuant to, and shall be
construed under, the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
The insurance provided by this Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
This Policy is not cancelable for any reason. The premium on this
Policy is not refundable for any reason including payment, or provision being
made for payment, prior to maturity of the
Obligations.
<PAGE>
IN WITNESS WHEREOF, the Insurer has caused this Policy to be executed
and attested this 26th day of September, 1997.
MBIA INSURANCE CORPORATION
---------------------------------------
President
Attest:
---------------------------------------
Assistant Secretary
<PAGE>
EXHIBIT A
TO CERTIFICATE GUARANTY INSURANCE POLICY
NUMBER: ______
NOTICE UNDER CERTIFICATE GUARANTY
INSURANCE POLICY NUMBER: _______
State Street Bank and Trust Company, N.A.,
as Fiscal Agent for MBIA Insurance Corporation
15th Floor
61 Broadway
New York, NY 10006
Attention: Municipal Registrar and
Paying Agency
MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
The undersigned, a duly authorized officer of , as trustee (the
"Trustee"), hereby certifies to State Street Bank and Trust Company, N.A. (the
"Fiscal Agent") and MBIA Insurance Corporation (the "Insurer"), with reference
to Certificate Guaranty Insurance Policy Number 21859 (the "Policy") issued by
the Insurer in respect of the Southern Pacific Secured Assets Corp. Mortgage
Loan Asset-Backed Pass-Through Certificates, Series 1997-3, Class A Certificates
(the "Obligations"), that:
(i) the Trustee is the trustee under the Pooling and
Servicing Agreement dated as of September 1, 1997 by and among Southern
Pacific Secured Assets Corp., as Company, Advanta Mortgage Corp. USA as
Master Servicer, and the Trustee, as trustee
for the Owners (the "Agreement");
(ii) the Group III Insured Distribution Amount for the
Distribution Date occurring on _______________ (the "Applicable
Distribution Date") is $_________;
(iii) the Group III Available Funds available under the
Agreement to pay the Group III Insured Distribution Amount for the
Applicable Distribution Date (the "Group III Available Distribution
Amount") is $________ ;
(iv) the amount by which the Group III Insured
Distribution Amount exceeds the Group III Available Distribution Amount
is $____________(the "Group III Deficiency Amount");
<PAGE>
(v) the amount of the Group III Preference Amount due
and owing under the policy is $________ (the " Group III Preference
Amount");
(vi) the sum of the Group III Deficiency Amount and the
Group II Preference Amount is $___ (the " Group III Insured Payment");
(vii) the Trustee is making a claim under and pursuant
to the terms of the Policy for the payment of the Group III Insured
Payment; and
(viii) the Trustee directs that payment of the Group III
Insured Payment be made to the following account by bank wire transfer
of federal or other immediately available funds in accordance with the
terms of the Policy: [Certificate Account].
Any capitalized term used in this Notice and not otherwise defined
herein shall have the meaning assigned thereto in the Policy.
ANY PERSON WHO KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE
COMPANY OR OTHER PERSON FILES AN APPLICATION FOR INSURANCE OR STATEMENT OF CLAIM
CONTAINING ANY MATERIALLY FALSE INFORMATION, OR CONCEALS FOR THE PURPOSE OF
MISLEADING, INFORMATION CONCERNING ANY FACT MATERIAL THERETO, COMMITS A
FRAUDULENT INSURANCE ACT, WHICH IS A CRIME, AND SHALL ALSO BE SUBJECT TO A CIVIL
PENALTY NOT TO EXCEED FIVE THOUSAND DOLLARS AND THE STATED VALUE OF THE CLAIM
FOR EACH SUCH VIOLATION.
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice
under the Policy as of the day of , .
[TRUSTEE]
By
---------------------------------------
Title
------------------------------------
<PAGE>
EXHIBIT B-1
FORM OF CLASS [A-1][A-2][A-3][A-4][A-5][A-6][A-7] 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.
[THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE [GROUP
I][GROUP II][GROUP III] CLASS A CERTIFICATES AS DESCRIBED IN THE POOLING
AND SERVICING AGREEMENT REFERRED TO HEREIN.]
[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. ASSUMING THAT THE MORTGAGE LOANS PREPAY AT AN ASSUMED RATE OF
PREPAYMENT, USED SOLELY FOR THE PURPOSES OF APPLYING THE OID RULES TO THE
CERTIFICATES, EQUAL TO A CONSTANT PREPAYMENT RATE OF ____% PER ANNUM (THE
"PREPAYMENT ASSUMPTION"), THIS CERTIFICATE HAS BEEN ISSUED WITH NO MORE THAN
$______________ OF OID PER $__________ OF [CERTIFICATE PRINCIPAL BALANCE]
[INITIAL NOTIONAL AMOUNT], THE YIELD TO MATURITY IS ______% AND THE AMOUNT OF
OID ATTRIBUTABLE TO THE INITIAL ACCRUAL PERIOD IS NO MORE THAN $__________ PER
$___________ OF [INITIAL NOTIONAL AMOUNT] [CERTIFICATE PRINCIPAL BALANCE],
COMPUTED USING THE EXACT METHOD. NO REPRESENTATION IS MADE THAT THE MORTGAGE
LOANS WILL PREPAY AT A RATE BASED ON THE PREPAYMENT ASSUMPTION OR AT ANY OTHER
RATE.]
Certificate No. _ [Adjustable] [Fixed] Pass-Through Rate
Class [A-1][A-2][A-3][A-4]
[A-5][A-6] [A-7] ____% Initial Pass-Through Rate
[Senior][Subordinate]
Date of Pooling and Servicing Aggregate [Notional] [Original Certificate
Principal
Agreement: September 1, 1997 Balance] of the Class [A-1][A-2][A 3]
[A-4][A-5][A-6][A-7]
Certificates: $__________
First Distribution Date: Initial [Notional Amount][Certificate
__________, 1997 Principal Balance] of this Certificate:
$_________________
Master Servicer: Percentage Interest: 100%
Advanta Mortgage Corp. USA
<PAGE>
Assumed Final Distribution Date: CUSIP:
_________________
MORTGAGE LOAN ASSET-BACKED PASS-THROUGH CERTIFICATE
SERIES 1997-3
evidencing a percentage interest in the distributions allocable to the
Class [A-1][A- 2][A-3][A-4][A-5][A-6][A-7] Certificates with respect to
a Trust Fund consisting primarily of a pool of conventional one- to
four-family [adjustable-rate][fixed rate] [first lien] [and second
lien] residential mortgage loans sold by SOUTHERN PACIFIC SECURED
ASSETS CORP.
This certifies that __________________ is the registered owner
of the Percentage Interest evidenced by this Certificate in certain
distributions with respect to a Trust Fund consisting primarily of a pool of
conventional one- to four-family [adjustable-rate][fixed rate] [first lien] [and
second lien] mortgage loans (the "Mortgage Loans"), sold by Southern Pacific
Secured Assets Corp. (the "Company"). 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 Norwest Bank Minnesota, N.A., 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.
This Certificate is payable solely from the assets of the
Trust Fund [and the [Group I][Group II][Group III] Certificate Insurance Policy
(as defined below)] and does not represent an obligation of or interest in the
Company, the Master Servicer, the Trustee referred to below or any of their
affiliates. Neither this Certificate nor the underlying Mortgage Loans are
guaranteed or insured by any governmental agency or instrumentality or by the
Company, the Master Servicer, the Trustee or any of their affiliates. None of
the Company, the Master Servicer, 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.
[MBIA Insurance Corporation (the "Certificate Insurer") has
issued a certificate insurance policy (the "[Group I][Group II][Group III]
Certificate Insurance Policy") with respect to the Class A-_ Certificates, a
copy of which is attached to the Agreement.]
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 Business Day of the month
immediately preceding the month of such Distribution Date (the "Record Date"),
from the [Group I][Group II][Group III] Available Funds and 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
<PAGE>
to be distributed to holders of Class [A-1][A-2][A-3][A-4][A-5][A-6][A-7]
Certificates on such Distribution Date.
All distributions on this Certificate will be made or caused
to be made by the Trustee in immediately available funds either (i) by check
mailed to the address of the Person entitled thereto, as such name and address
shall appear on the Certificate Register or (ii) by wire transfer to the account
of any Person entitled thereto if such Person shall have so notified the Trustee
and such Certificateholder is the registered holder of Class
[A-1][A-2][A-3][A-4][A-5][A- 6][A-7] Certificates the aggregate [Certificate
Principal Balance] [Notional Amount] of which is not less than $5,000,000.
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. The initial [Certificate
Principal Balance] [Notional Amount] of this Certificate is set forth above. The
[Certificate Principal Balance] [Notional Amount] hereof will be reduced by
distributions of the Class [A-1][A-2][A-3][A-4][A-5][A-6][A-7] Principal
Distribution Amount.
This Certificate is one of a duly authorized issue of
Certificates issued in __________ Classes designated as Mortgage Loan
Asset-Backed 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, all as more
specifically set forth herein and in the Agreement. In the event that Master
Servicer funds are advanced with respect to any Mortgage Loan, such advance is
reimbursable to the Master Servicer, to the extent provided in the Agreement,
from related recoveries on such Mortgage Loan or from other cash that would have
been distributable to Certificateholders.
As provided in the Agreement, withdrawals from the Collection
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 Certificate Insurer and
the Majority Certificateholders. 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.
<PAGE>
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
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.
[No transfer of this Class A-___ Certificate will be made unless the
transferee provides the Trustee with either (i) 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 the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
Section 4975 of the Internal Revenue Code (the "Code") and stating, among other
things, that the transferee's acquisition of a Class A-___ 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 in addition to those undertaken in the Agreement or
(ii) in lieu of such opinion of counsel, a certification in the form set forth
in Exhibit S to the Agreement.]
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 subject thereto
or the disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure of any Mortgage Loan and (ii) the purchase by the holder of a 50.01%
or greater Percentage
<PAGE>
Interest of the Class R-II Certificates or the Master Servicer (and the
Certificate Insurer, if the initial Master Servicer is terminated) from the
Trust Fund of all remaining Mortgage Loans, thereby effecting early retirement
of the Class [A-1][A-2][A-3][A-4][A-5][A-6][A-7] Certificates. The Agreement
permits, but does not require, such Class R-II Certificateholder, the Master
Servicer or the Certificate Insurer, as applicable, to purchase at a price
determined as provided in the Agreement all remaining Mortgage Loans; provided,
that any such option may only be exercised if the Pool Principal Balance as of
the Distribution Date upon which the proceeds of any such purchase are
distributed is less than 10% (or 5% with respect to the Master Servicer or
Certificate Insurer) of the Original Pool Principal Balance.
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.
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.
Dated: September ___, 1997 NORWEST BANK MINNESOTA,
N.A., as Trustee
By:
----------------------------------
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Class [A-1][A-2][A-3][A-4][A-5][A-6][A-7]
Certificates referred to in the within-mentioned Agreement.
NORWEST BANK MINNESOTA,
N.A., 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, address including postal zip code, and Taxpayer
Identification Number of assignee)
a Percentage Interest equal to ____% evidenced by the within Mortgage Loan
Asset-Backed Pass-Through Certificate and hereby authorize(s) the registration
of transfer 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 Percentage Interest 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-2
FORM OF CLASS [R-I][R-II] 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, 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 SUCH PLAN IS PERMISSIBLE UNDER APPLICABLE LAW, WILL
NOT CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION AND WILL NOT
SUBJECT THE SERVICER, THE COMPANY OR THE TRUSTEE TO ANY OBLIGATION IN ADDITION
TO THOSE UNDERTAKEN IN THE AGREEMENT.
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 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), (B) A FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, OR
ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE FOREGOING, (C) 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), (D)
RURAL ELECTRIC AND TELEPHONE COOPERATIVES DESCRIBED IN SECTION 1381(A)(2)(C) OF
THE CODE AND (E) 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-I][R-II] CERTIFICATE BY SUCH PERSON MAY CAUSE THE 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
B-2-1
<PAGE>
IN A CLASS [R-I][R-II] CERTIFICATE TO SUCH PERSON (ANY SUCH PERSON DESCRIBED IN
THE FOREGOING CLAUSES (A), (B), (C), (D) OR (E) BEING HEREIN REFERRED TO AS A
"DISQUALIFIED ORGANIZATION") OR 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. THE TERMS "UNITED STATES,"
"STATE" AND "INTERNATIONAL ORGANIZATION" SHALL HAVE THE MEANINGS SET FORTH IN
SECTION 7701 OF THE CODE OR SUCCESSOR PROVISIONS. 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.
THIS CLASS [R-I][R-II] CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER
THE SECURITIES ACT OF 1933 (THE "1933 ACT") OR THE SECURITIES LAWS OF ANY STATE.
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT SUCH
REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION WHICH DOES NOT
REQUIRE SUCH REGISTRATION OR QUALIFICATION AND WHICH IS IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 4.02 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN.
B-2-2
<PAGE>
Certificate No. _
Class [R-I][R-II] Original Pool Principal Balance:
Subordinate $________________
Date of Pooling and Servicing
Agreement:
September 1, 1997
First Distribution Date:
__________, 1997
Master Servicer: Percentage Interest: ___%
Advanta Mortgage Corp. USA
Assumed Final Distribution Date:
________________
MORTGAGE LOAN ASSET-BACKED PASS-THROUGH CERTIFICATE,
SERIES 1997-3
evidencing a percentage interest in any distributions allocable to the
Class [R-I][R- II] Certificates with respect to a Trust Fund consisting
primarily of a pool of conventional one- to four-family
[adjustable-rate][fixed rate] [first lien][second lien] residential
mortgage loans sold by SOUTHERN PACIFIC SECURED ASSETS CORP.
This certifies that ____________________________ is the
registered owner of the Percentage Interest evidenced by this Certificate in
certain distributions with respect to a Trust Fund consisting primarily of a
pool of conventional one- to four-family [adjustable-rate][fixed rate] [first
lien][second lien] residential mortgage loans (the "Mortgage Loans"), sold by
Southern Pacific Secured Assets Corp. (the "Company"). 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 Norwest Bank
Minnesota, N.A., 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.
This Certificate is payable solely from the assets of the
Trust Fund and does not represent an obligation of or interest in the Company,
the Master Servicer, the Trustee referred to below or any of their affiliates.
Neither this Certificate nor the underlying Mortgage Loans are guaranteed or
insured by any governmental agency or instrumentality or by the Company, the
B-2-3
<PAGE>
Master Servicer, the Trustee or any of their affiliates. None of the Company,
the Master Servicer, 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.
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 Business Day immediately
preceding the month of such Distribution Date (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 (of interest and principal, if any)
required to be distributed to Holders of Class [R-I][R-II] 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.
No transfer of any Class [R-I][R-II] Certificate shall be made
unless that transfer is made pursuant to an effective registration statement
under the 1933 Act and effective registration or qualification under applicable
state securities laws, or is made in a transaction which does not require such
registration or qualification. In the event that a transfer is to be made
without such registration or qualification, (a) the Trustee and the Company
shall require the transferee to execute an investment letter, which investment
letter shall not be an expense of the Company, the Master Servicer or the
Trustee and (b) in the event that such a transfer is not made pursuant to Rule
144A under the Act, the Trustee shall require an Opinion of Counsel satisfactory
to the Trustee and the Company that such transfer may be made without such
registration or qualification, which Opinion of Counsel shall not be an expense
of the Company, the Trustee or the Master Servicer. Neither the Company nor the
Trustee is obligated to register or qualify any of the Class [R-I][R-II]
Certificates under the 1933 Act or any other securities law or to take any
action not otherwise required under the Agreement to permit the transfer of such
Certificates without registration or qualification. Any such Certificateholder
desiring to effect such transfer shall, and does hereby agree to, indemnify the
Trustee, the Company and the Master Servicer against any liability that may
result if the transfer is not so exempt or is not made in accordance with such
federal and state laws.
B-2-4
<PAGE>
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. The Percentage Interest this
Certificate is set forth above. Notwithstanding the fact this Certificate has no
Certificate Principal Balance, 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 two Classes designated as Mortgage Loan Asset-Backed
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, all as more
specifically set forth herein and in the Agreement. In the event that Master
Servicer funds are advanced with respect to any Mortgage Loan, such advance is
reimbursable to the Master Servicer, to the extent provided in the Agreement,
from related recoveries on such Mortgage Loan or from other cash that would have
been distributable to Certificateholders.
As provided in the Agreement, withdrawals from the Collection
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 Certificate Insurer and
the Majority Certificateholders. 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,
B-2-5
<PAGE>
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 subject thereto
or the disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure of any Mortgage Loan and (ii) the purchase by the holder of a 50.01%
or greater Percentage Interest of the Class R-II Certificates or the Master
Servicer (and the Certificate Insurer, if the initial Master Servicer is
terminated) from the Trust Fund of all remaining Mortgage Loans, thereby
effecting early retirement of the Class R Certificates. The Agreement permits,
but does not require, such Class R-II Certificateholder, the Master Servicer or
the Certificate Insurer, as applicable, to purchase at a price determined as
provided in the Agreement all remaining Mortgage Loans; provided, that any such
option may only be exercised if the Pool Principal Balance as of the
Distribution Date upon which the proceeds of any such purchase are distributed
is less than 10% (or 5% with respect to the Master Servicer or Certificate
Insurer) of the Original Pool Principal Balance.
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.
B-2-6
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.
Dated: September ___, 1997 NORWEST BANK MINNESOTA,
N.A. as Trustee
By:
--------------------------------------
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Class [R-I][R-II] Certificates referred to
in the within-mentioned Agreement.
NORWEST BANK MINNESOTA,
N.A. as Certificate Registrar
By:
--------------------------------------
Authorized Signatory
B-2-7
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)
a Percentage Interest equal to ____% evidenced by the within Mortgage Loan
Asset-Backed Pass-Through Certificate and hereby authorize(s) the registration
of transfer 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 Percentage Interest 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.
B-2-1
<PAGE>
EXHIBIT C
Mortgage File
With respect to each Group I Loan, Group II Loan and Group III
Loan the Mortgage File shall include each of the following items (copies to the
extent the originals have been delivered to the Trustee pursuant to Section 2.03
of the Agreement), all of which shall be available for inspection by the
Certificateholders, to the extent required by applicable laws:
a. The original Mortgage Note bearing all intervening
endorsements showing a complete chain of endorsement, from
the originator of such Mortgage Loan to the Seller, endorsed
by the Seller without recourse in blank and signed in the
name of the Seller by an authorized officer;
b. The original Mortgage and any related power of attorney with
evidence of recording thereon;
c. An original assignment of the original Mortgage, in suitable
form for recordation in the jurisdiction in which the
Mortgaged Property is located, such assignment to be in
blank and signed in the name of the Seller by an authorized
officer;
d. The original of all intervening assignments of the Mortgage
showing a complete chain of assignments from the originator
of such Mortgage Loan to the Seller with evidence of
recording indicated thereon;
e. Any assumption, modification (with evidence of recording
thereon), consolidation or extension agreements; and
f. The original policy of title insurance (or a commitment for
title insurance is being held by the title insurance company
pending recordation of the Mortgage) and the certificate of
primary mortgage guaranty insurance, if any, issued with
respect to the Mortgage Loan.
C-1
<PAGE>
EXHIBIT D-1
Mortgage Loan Schedule Loan Group I
SEE TAB [ ]
D-1
<PAGE>
EXHIBIT D-2
Mortgage Loan Schedule Loan Group II
SEE TAB [] EXHIBIT A
D-2
<PAGE>
EXHIBIT D-3
Mortgage Loan Schedule Loan Group III
SEE TAB []
D-3
<PAGE>
EXHIBIT E
TRUSTEE'S ACKNOWLEDGMENT OF RECEIPT
September ___, 1997
Southern Pacific Funding Corporation
One Centerpointe Drive, Suite 500
Lake Oswego, OR 97035
Southern Pacific Secured Assets Corp.
One Centerpointe Drive, Suite 500
Lake Oswego, OR 97035
Advanta Mortgage Corp. USA
16875 West Bernardo Drive
San Diego, CA 92127
MBIA Insurance Corporation
113 King Street
Armonk, New York 10564
Re: Pooling and Servicing Agreement, dated as of September 1, 1997
among Southern Pacific Secured Assets Corp., as Company,
Advanta Mortgage Corp. USA, as Master Servicer, and Norwest
Bank Minnesota, N.A., as Trustee, Mortgage Loan Asset-Backed
Pass-Through Certificates, Series 1997-3
Ladies and Gentlemen:
In accordance with Section 2.04 of the above-captioned Pooling
and Servicing Agreement, the undersigned, as Trustee, hereby certifies: (1)
except as noted on the attachment hereto, if any (the "Loan Exception Report"),
it has received the original Mortgage Note (item (i) in Section 2.03(a)) with
respect to each Mortgage Loan listed in the Mortgage Loan Schedule and the
documents contained therein appear to bear original signatures or copies of
originals if the originals have not yet been delivered, and (2) it has received
the Certificate Insurance Policy.
The Trustee has made no independent examination of any such
documents beyond the review specifically required in the above-referenced
Pooling and Servicing Agreement. The Trustee makes no representations as to: (i)
the validity, legality, sufficiency, enforceability or genuineness of any such
documents or any of the Mortgage Loans identified on the Mortgage Loan Schedule,
or (ii) the collectability, insurability, effectiveness or suitability of any
such Mortgage Loan.
E-1
<PAGE>
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Pooling and
Servicing Agreement.
NORWEST BANK MINNESOTA,
N.A., as Trustee
By
---------------------------------------
Name:
------------------------------------
Title
------------------------------------
E-2
<PAGE>
EXHIBIT F
INITIAL CERTIFICATION OF TRUSTEE
_________, 19_
Southern Pacific Funding Corporation
One Centerpointe Drive, Suite 500
Lake Oswego, OR 97035
Southern Pacific Secured Assets Corporation
One Centerpointe Drive, Suite 500
Lake Oswego, OR 97035
Advanta Mortgage Corp. USA
16875 West Bernardo Drive
San Diego, CA 92127
MBIA Insurance Corporation
113 King Street
Armonk, New York 10564
Re: Pooling and Servicing Agreement, dated as of September 1, 1997 among
Southern Pacific Secured Assets Corp., as Company, Advanta Mortgage
Corp. USA, as Master Servicer, and Norwest Bank Minnesota, N.A., as
Trustee, Mortgage Loan Asset-Backed Pass-Through Certificates,
Series
1997-3
Ladies and Gentlemen:
In accordance with the provisions of Section 2.04 of the
above-referenced Pooling and Servicing Agreement, the undersigned, as Trustee,
hereby certifies that as to each Mortgage Loan listed in the Mortgage Loan
Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan listed
on the attachment hereto), it has reviewed the documents delivered to it
pursuant to Section 2.03 of the Pooling and Servicing Agreement and has
determined that (a) all documents required to be delivered to it pursuant to the
above-referenced Pooling and Servicing Agreement are in its possession, (b) such
documents have been reviewed by it and appear regular on their face and have not
been mutilated, damaged, torn or otherwise physically altered and relate to such
Mortgage Loan, (c) based on its examination and only as to the foregoing
documents, the information set forth in the Mortgage Loan Schedule (described in
the definition of Mortgage Loan Schedule as items (i) the Mortgage Loan
identifying the Trustee, (ii) the city, state and zip code of the property, (v)
the original term of the mortgage, (vi) the scheduled maturity date, (x) the
F-1
<PAGE>
original interest rate, (xi) the gross margin on Group I and Group II Mortgage
Loans and the adjustment frequency and, (xiii) the first rate adjustment date
and frequency of adjustment dates) respecting such Mortgage Loan accurately
reflects the information set forth in the Trustee's Mortgage File and each
Mortgage Note has been endorsed as provided in Section 2.03 of the Pooling and
Servicing Agreement. The Trustee has made no independent examination of such
documents beyond the review specifically required in the above-referenced
Pooling and Servicing Agreement. The Trustee makes no representations as to: (i)
the validity, legality, enforceability or genuineness of any such documents
contained in each or any of the Mortgage Loans identified on the Mortgage Loan
Schedule, or (ii) the collectability, insurability, effectiveness or suitability
of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Pooling and
Servicing Agreement.
NORWEST BANK MINNESOTA,
N.A., as Trustee
By
---------------------------------------
Name:
------------------------------------
Title
------------------------------------
F-2
<PAGE>
EXHIBIT G
FINAL CERTIFICATION OF THE TRUSTEE
_________, 19_
Southern Pacific Funding Corporation
One Centerpointe Drive, Suite 500
Lake Oswego, OR 97035
Southern Pacific Secured Assets Corp.
One Centerpointe Drive, Suite 500
Lake Oswego, OR 97035
Advanta Mortgage Corp. USA
16875 West Bernardo Drive
San Diego, CA 92127
MBIA Insurance Corporation
113 King Street
Armonk, New York 10564
Re: Pooling and Servicing Agreement, dated as of September 1, 1997
among Southern Pacific Funding Corp., as Company, Advanta
Mortgage Corp. USA, as Master Servicer, and Norwest Bank
Minnesota, N.A., as Trustee, Mortgage Loan Asset-Backed
Pass-Through Certificates, Series 1997-3
----------------------------------------
Ladies and Gentlemen:
In accordance with Section 2.04 of the above-captioned Pooling
and Servicing Agreement, the undersigned, as Trustee, hereby certifies that,
except as noted on the attachment hereto, as to each Mortgage Loan listed in the
Mortgage Loan Schedule (other than any Mortgage Loan paid in full or listed on
the attachment hereto) it has reviewed the documents delivered to it pursuant to
Section 2.03 of the Pooling and Servicing Agreement and has determined that (a)
all documents required to be delivered to it pursuant to the above-referenced
Pooling and Servicing Agreement are in its possession, (b) such documents have
been reviewed by it and appear regular on their face and have not been
mutilated, damaged, torn or otherwise physically altered and relate to such
Mortgage Loan, and (c) based on its examination, and only as to the foregoing
documents, the information set forth in the Mortgage Loan Schedule (described in
items (i), (ii), (v), (vi), (x), (xi) and (xiii) of the definition of Mortgage
Loan Schedule) respecting such Mortgage Loan accurately reflects the information
set forth in the Trustee's Mortgage File. The Trustee has made no independent
examination of such documents beyond the review specifically required in the
G-1
<PAGE>
above-referenced Pooling and Servicing Agreement. The Trustee makes no
representations as to: (i) the validity, legality, enforceability or genuineness
of any such documents contained in each or any of the Mortgage Loans identified
on the Mortgage Loan Schedule, or (ii) the collectability, insurability,
effectiveness or suitability of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Pooling and
Servicing Agreement.
NORWEST BANK MINNESOTA,
N.A., as Trustee
By
---------------------------------------
Name:
------------------------------------
Title
------------------------------------
G-2
<PAGE>
EXHIBIT H
REQUEST FOR RELEASE OF DOCUMENTS
_________, 19_
To: Norwest Bank Minnesota, N.A.
Norwest Center
Sixth & Marquette
Minneapolis, Minnesota 55479
Attn:
Re: Southern Pacific Secured Asset Corp., Mortgage Loan Asset-Backed
Pass-Through Certificates, Series 1997-3
----------------------------------------
In connection with the administration of the pool of Mortgage
Loans held by you as Trustee for the Certificateholders, we request the release,
and acknowledge receipt, of the (Trustee's Mortgage File/[specify document]) for
the Mortgage Loan described below, for the
reason indicated.
Mortgagor's Name, Address & Zip Code:
- -------------------------------------
Mortgage Loan Number:
- ---------------------
Reason For Requesting Documents (Check One)
- -------------------------------------------
___________ 1. Mortgage Loan Paid in Full (Master Servicer hereby
certifies that all amounts received in connection
therewith have been credited to the Collection
Account.)
___________ 2. Mortgage Loan Liquidated (Master Servicer hereby
certifies that all proceeds of foreclosure, insurance
or other liquidation have been finally received and
credited to the Collection Account.)
___________ 3. Mortgage Loan in Foreclosure
H-1
<PAGE>
___________ 4. Mortgage Loan Repurchased Pursuant to Section 5.18 of
the Pooling and Servicing Agreement.
___________ 5. Mortgage Loan Repurchased or Substituted pursuant to
Article II or III of the Pooling and Servicing
Agreement (Master Servicer hereby certifies that the
repurchase price or Substitution Adjustment has been
credited to the Certificate Account and that the
substituted mortgage loan is a Qualified Substitute
Mortgage Loan.)
___________ 6. Other
(explain)
If box 1 or 2 above is checked, and if all or part of the
Trustee's Mortgage File was previously released to us, please release to us our
previous receipt on file with you, as well as any additional documents in your
possession relating to the above specified Mortgage Loan.
If box 3, 4, 5 or 6 above is checked, upon our return of all
of the above documents to you as Trustee, please acknowledge your receipt by
signing in the space indicated below, and
returning this form.
___________
------------------------------------------
___________ By
---------------------------------------
___________ Name:
------------------------------------
___________ Title
------------------------------------
Documents returned to Trustee:
NORWEST BANK MINNESOTA, N.A., as
Trustee
By:
---------------------------------------
Date:
---------------------------------------
H-2
<PAGE>
EXHIBIT I
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 Loan Asset-Backed Pass-Through Certificates,
Series 1997-3, Class [R-I][R-II] (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-I][R-II] Certificates, and (iii)
is acquiring the Class [R-I][R-II] 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-I][R-II] Certificates to disqualified
organizations under the Code, that applies to all transfers of Class [R-I][R-II]
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-I][R-II] 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.
I-1
<PAGE>
4. That the Owner is aware of the tax imposed on a
"pass-through entity" holding Class [R-I][R-II] 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-I][R-II] 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-I][R-II] Certificates and the provisions of Section
4.02(i) of the Pooling and Servicing Agreement under which the Class [R-I][R-II]
Certificates were issued (in particular, clause (g) and (h) of Section 4.02(i)
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(i)). 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-I][R-II] 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-I][R-II] Certificates held by the Owner and not to any other holder of the
Class [R-I][R-II] Certificates. The Owner understands that the liabilities
described herein relate only to the Class [R-I][R-II] Certificates.
10. That no purpose of the Owner relating to the transfer of
any of the Class [R- I][R-II] 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-I][R-II] Certificate that the Owner intends to pay taxes associated with
holding such Class [R-I][R-II] Certificate as they become due, fully
understanding that it may incur tax liabilities in excess of any cash flows
generated by the Class [R-I][R-II] Certificate.
I-2
<PAGE>
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-I][R-II] 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 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.
I-3
<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__.
I-4
<PAGE>
EXHIBIT J
FORM OF TRANSFEROR CERTIFICATE
__________________, 19__
Southern Pacific Secured Assets Corp.
One Centerpointe Drive, Suite 500
Lake Oswego, OR 97035
Norwest Bank Minnesota, N.A.
Norwest Center
Sixth & Marquette
Minneapolis, Minnesota 55479
Attn:
Attention: Southern Pacific Secured Assets Corp. Series 1997-3
Re: Mortgage Loan Asset-Backed Pass-Through Certificates, Series 1997-3
-------------------------------------------------------------------
Ladies and Gentlemen:
This letter is delivered to you in connection with the
transfer by _______________________________ (the "Seller") to
_______________________________ (the "Purchaser") of a ____% Percentage
Interests of Mortgage Loan Asset-Backed Pass-Through Certificates, Series
1997-3, [Class R-1] [Class R-II] Certificates (collectively, the "Certificates";
and each individually, a "Certificate"), pursuant to Section 4.02 of the Pooling
and Servicing Agreement (the "Pooling and Servicing Agreement"), dated as of
September 1, 1997, among Southern Pacific Secured Assets Corp., as seller (the
"Company"), Advanta Mortgage Corp. USA, as Master Servicer, and Norwest Bank
Minnesota, N.A., 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
Certificates 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. The Seller
does not know or believe that any representation contained therein is false.
J-1
<PAGE>
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-I][R-II] 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:
------------------------------------
J-2
<PAGE>
EXHIBIT K
[RESERVED]
K-1
<PAGE>
EXHIBIT L
[RESERVED]
L-1
<PAGE>
EXHIBIT M
CERTIFICATE RE: PREPAID LOANS
I ________________, ______________________, of Southern Pacific Funding
Corporation, as Seller, hereby certify that between the "Cut-Off Date"
(as defined in the Pooling and Servicing Agreement dated as of
September 1, 1997 among Southern Pacific Secured Assets Corp.,
Advanta Mortgage Corp. USA and Norwest Bank Minnesota, N.A.,
as trustees) and the "Startup Day" the following schedule of
"Mortgage Loans" (each as defined in the Pooling and Servicing
Agreement) have been prepaid in full.
Dated:
By:
M-1
<PAGE>
EXHIBIT N
[RESERVED]
N-1
<PAGE>
EXHIBIT O
FORM OF INVESTOR REPRESENTATION LETTER
, 1997
Norwest Bank Minnesota, N.A.
Norwest Center
Sixth & Marquette
Minneapolis, Minnesota 55479
Attn:
Re: Southern Pacific Secured Assets Corp.
Mortgage Loan Asset-Backed Pass-Through Certificates,
Series 1997-3
-----------------------------------------------------
Ladies and Gentlemen:
______________________ (the "Purchaser") intends to purchase
from ___________ (the "Seller"), a ____% Percentage Interest of Mortgage Loan
Asset-Backed Pass-Through Certificates, Series 1997-3, Class (the
"Certificates"), issued pursuant to the Pooling and Servicing Agreement (the
"Pooling and Servicing Agreement"), dated as of September 1, 1997 among Southern
Pacific Secured Assets Corp., as Company (the "Company"), Advanta Mortgage Corp.
USA, as master servicer, and Norwest Bank Minnesota, N.A., 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.
O-1
<PAGE>
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 copy of the Pooling and Servicing
Agreement and such other information concerning the
Certificates, the Mortgage Loans 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.
O-2
<PAGE>
*6. The Purchaser represents that either (a) or (b) is
satisfied, as marked below:
a. is not any employee benefit plan subject
to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
the Internal Revenue Code of 1986 (the "Code"), a Person acting, directly or
indirectly, on behalf of any such plan or any Person acquiring such Certificates
with "plan assets" of a Plan within the meaning of the Department of Labor
regulation promulgated at 29 C.F.R. ss.2510.3-101; or
b. will provide the Trustee, the Company and
the Master Servicer with either: (i) an opinion of counsel, satisfactory to the
Trustee, the Company and the Master Servicer, to the effect that the purchase
and holding of a Certificate by or on behalf of the Purchaser is permissible
under applicable law, will not constitute or result in a prohibited transaction
under Section 406 of ERISA or Section 4975 of the Code (or comparable provisions
of any subsequent enactments) and will not subject the Trustee, the Company or
the Master Servicer 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, which opinion of counsel shall not be an
expense of the Trustee, the Company or the Master Servicer; or (ii) in lieu of
such opinion of counsel, a certification in the form of Exhibit S to the Pooling
and Servicing Agreement.
[* To be inserted when Prohibited Transaction Exemption 94-29, the
individual exemption granted to Southern Pacific Secured Assets Corp.
by the Department of Labor, will not exempt a transaction from the
application of the prohibited transaction provisions of ERISA and the
Code.]
Very truly yours,
By:
----------------------------------
Name:
--------------------------------
Title:
--------------------------------
O-3
<PAGE>
EXHIBIT P
Form of Transferor Representation Letter
______________ , 1997
Norwest Bank Minnesota, N.A.
Norwest Center
Sixth & Marquette
Minneapolis, Minnesota 55479
Attn:
Re: Southern Pacific Secured Assets Corp.
Mortgage Loan Asset-Backed Pass-Through Certificates,
Series 1997-3
--------------------------------
Ladies and Gentlemen:
In connection with the sale by ____________ (the "Seller") to
______________ (the "Purchaser") of $ __________ Initial Certificate Principal
Balance of Mortgage Loan Asset-Backed Pass-Through Certificates, Series 1997-3,
Class __ (the "Certificates"), issued pursuant to the Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement"), dated as of September 1, 1997
among Southern Pacific Secured Assets Corp., as company (the "Company"), Advanta
Mortgage Corp. USA, as master servicer, and Norwest Bank Minnesota, N.A., 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
P-1
<PAGE>
transfer any of the Certificates, except in compliance with the provisions of
the Pooling and Servicing Agreement.
Very truly yours,
------------------------------------
(Seller)
By:
----------------------------------
Name:
--------------------------------
Title:
--------------------------------
P-2
<PAGE>
EXHIBIT Q
[FORM OF RULE 144A INVESTMENT REPRESENTATION]
Description of Rule 144A Securities, including numbers:
Southern Pacific Secured Assets Corp.
Mortgage Loan Asset-Backed Pass-Through Certificates
Series 1997-3, Class ___, No. ___
The undersigned seller, as registered holder (the
"Transferor"), 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
Transferor hereby certifies the following facts: Neither the Transferor 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, 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, which would constitute a
distribution of the Rule 144A Securities under the Securities Act of 1933, as
amended (the "1933 Act"), or which 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 Transferor 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 Transferor, the Trustee and the Master Servicer pursuant to Section 5.02 of
the Pooling and Servicing Agreement 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.
Q-1
<PAGE>
c. The Buyer has been furnished with all information
regarding the Rule 144A Securities that it has requested from the
Transferor, the Trustee or the Master 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 account 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 represents that either (a) or (b) is
satisfied, as marked below:
a. is not any employee benefit plan subject
to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
the Internal Revenue Code of 1986 (the "Code"), a Person acting, directly or
indirectly, on behalf of any such plan or any Person acquiring such Certificates
with "plan assets" of a Plan within the meaning of the Department of Labor
regulation promulgated at 29 C.F.R. ss.2510.3-101; or
b. will provide the Trustee, the Company and
the Master Servicer with either: (i) an opinion of counsel, satisfactory to the
Trustee, the Company and the Master Servicer, to the effect that the purchase
and holding of a Certificate by or on behalf of the Buyer is permissible under
applicable law, will not constitute or result in a prohibited transaction under
Section 406 of ERISA or Section 4975 of the Code (or comparable provisions of
any subsequent enactments) and will not subject the Trustee, the Company or the
Master Servicer to any obligation or liability (including liabilities under
ERISA or Section
Q-2
<PAGE>
4975 of the Code) in addition to those undertaken in the Pooling and Servicing
Agreement, which opinion of counsel shall not be an expense of the Trustee, the
Company or the Master Servicer; or (ii) in lieu of such opinion of counsel, a
certification in the form of Exhibit S to the Pooling and Servicing Agreement.
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 Transferor Print Name of Buyer
By:------------------------------ By:----------------------------
Name: Name:
Title: Title:
Taxpayer Identification: Taxpayer Identification:
No.------------------------------ No.------------------------------
Date:---------------------------- Date:----------------------------
Q-3
<PAGE>
ANNEX 1 TO EXHIBIT P
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 $______________________1/ 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.
___ 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.
- --------
1/ Buyer must own and/or invest on a discretionary basis at least $100,000,000
in securities unless Buyer is a dealer, and, in that case, Buyer must own and/or
invest on a discretionary basis at least $10,000,000 in securities.
P-1-1
<PAGE>
___ 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, 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
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<PAGE>
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:-----------------------------
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<PAGE>
ANNEX 2 TO EXHIBIT P
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.
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<PAGE>
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
By:-------------------------------
Name:
Title:
Date:-----------------------------
IF AN ADVISER:
----------------------------------
Print Name of Buyer
Date:-----------------------------
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<PAGE>
EXHIBIT R
PREMIUM EXHIBIT
For the purposes of the Pooling and Servicing Agreement dated as of
September 1, 1997 (the "Agreement") by and among Southern Pacific Secured Assets
Corp., as company, Advanta Mortgage Corp. USA, as master servicer, and Norwest
Bank Minnesota, N.A. as trustee, "Premium Percentage" means, with respect to any
Group I Loan, Group II Loan or Group III Loan, 0.15%
Terms used in this exhibit and not defined in this exhibit have the
meanings ascribed thereto in the Agreement.
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<PAGE>
EXHIBIT S
FORM OF LIQUIDATION REPORT
Customer Name:
Account Number:
Original Principal Balance:
1. Type of Liquidation (REO disposition/charge-off/short pay-off)
Date last paid
Date of foreclosure
Date of REO
Date of REO Disposition
Property Sale Price/Estimated Market Value at disposition
2. Liquidation Proceeds
Principal Prepayment $_____________
Property Sale Proceeds _____________
Insurance Proceeds _____________
Other (itemize)
3. Liquidation Expenses
Servicing Advances $_____________
Periodic Advances _____________
Servicing Advances _____________
Other Servicing Compensation _____________
Supplemental Fee (if any) _____________
Additional Interest (if any) _____________
Total Advances $_____________
4. Net Liquidation Proceeds $_____________
(Item 2 minus Item 3)
5. Principal Balance of Mortgage Loan $_____________
6. Loss, if any (Item 5 minus Item 4) $_____________
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