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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): June 30, 1998
BEAR STEARNS ASSET BACKED SECURITIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 333-49015 13-3836437
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
245 Park Avenue
New York, New York 10167
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(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code (212) 272-4095
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Item 5. Other Events.
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On June 30, 1998, Bear Stearns Asset Backed Securities, Inc. (the
"Company") entered into a Pooling and Servicing Agreement dated as of June 1,
1998 (the "Pooling and Servicing Agreement"), by and among the Company, as
depositor, American Residential Holdings, Inc., as seller ("ARH"), Countrywide
Home Loans, Inc. ("CHL"), as master servicer, and Bankers Trust Company of
California, N.A., as trustee (the "Trustee"), providing for the issuance of
the Company's Asset-Backed Certificates, Series 1998-1. The Pooling and
Servicing Agreement is annexed hereto as Exhibit 99.1.
Item 7. Financial Statements, Pro Forma Financial
- ---- -----------------------------------------
Information and Exhibits.
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(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
99.1. The Pooling and Servicing Agreement, dated as of June 1,
1998, by and among the Company, ARH, CHL and the Trustee.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
BEAR STEARNS ASSET BACKED
SECURITIES, INC.
By: /s/ Jonathan Lieberman
-----------------------------
Name: Jonathan Lieberman
Title: Vice President
Dated: September 16, 1998
Exhibit Page
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Exhibit Index
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Exhibit Page
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99.1. Pooling and Servicing Agreement,
dated as of June 1, 1998, by
and among, the Company, ARH, CHL
and the Trustee. 6
EXHIBIT 99.1
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EXECUTION COPY
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BEAR STEARNS ASSET BACKED SECURITIES, INC.,
Depositor
AMERICAN RESIDENTIAL HOLDINGS, INC.,
Seller
COUNTRYWIDE HOME LOANS, INC.,
Master Servicer
and
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
Trustee
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POOLING AND SERVICING AGREEMENT
Dated as of June 1, 1998
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ASSET-BACKED CERTIFICATES, SERIES 1998-1
==============================================================================
POOLING AND SERVICING AGREEMENT, dated as of June 1, 1998, among
BEAR STEARNS ASSET BACKED SECURITIES, INC., as depositor (the "Depositor"),
AMERICAN RESIDENTIAL HOLDINGS, INC., as seller (the "Seller"), COUNTRYWIDE
HOME LOANS, INC., as master servicer (the "Master Servicer"), and BANKERS
TRUST COMPANY OF CALIFORNIA, N.A., as trustee (the "Trustee").
PRELIMINARY STATEMENT
The Depositor is the owner of the Trust Fund that is hereby conveyed
to the Trustee in return for the Certificates. As provided herein, the Trustee
shall elect that the Trust Fund be treated for Federal income tax purposes as
four separate real estate mortgage investment conduits (each a "REMIC" or, in
the alternative, "REMIC 1", "REMIC 2", "REMIC 3", and "REMIC 4", respectively,
REMIC 4 also being referred to as the "Upper Tier REMIC." The Class A, Class
M-1, Class M-2, Class B, and Class X Certificates represent ownership of all
of the regular interests in REMIC 4. The Class R4 Interest represents the sole
class of "residual interest" in REMIC 4 for purposes of the REMIC provisions
and shall have a $1,000.01 principal balance. Each of the Class R-1, Class
R-2, and Class R-3 Interests represent the sole class of residual interest in
REMIC 1, REMIC 2, and REMIC 3, respectively, for purposes of the REMIC
provisions and shall not have principal balances. Under this Agreement, there
are also three classes of uncertificated REMIC 1 regular interests issued (the
Class T1-1, Class T1-2 and Class T1-3 Interests), four classes of
uncertificated REMIC 2 regular interests issued (the Class T2-1, Class T2-2,
Class T2-3 and Class T2-4 Interests), seven classes of uncertificated REMIC 3
regular interests issued (the Class T3-1, Class T3-2, Class T3-3, Class T3-4,
Class T3-5, Class T3-6 and Class T3-7 Interests), and eight classes of
uncertificated REMIC 4 regular interests issued (the Class Class T4-1, Class
T4-2, Class T4-3, Class T4-4, Class T4-5, Class T4-6, Class T4-7 and Class
T4-8 Interests). The REMIC 1 Regular Interests will be held as assets of REMIC
2, the REMIC 2 Regular Interests will be held as assets of REMIC 3, and the
REMIC 3 Regular Interests will be held as assets of REMIC 4. The "latest
possible maturity date" for federal income tax purposes of all interests
created hereby will be the Latest Possible Maturity Date.
In consideration of the mutual agreements herein contained, the
Depositor, the Master Servicer, the Seller and the Trustee agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms.
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In addition to those defined terms defined in Section 1.02, whenever
used in this Agreement, the following words and phrases, unless the context
otherwise requires, shall have the following meanings:
ACCRUAL PERIOD: With respect to any Distribution Date, the period
--------------
commencing on the immediately preceding Distribution Date (or, in the case of
the first Distribution Date, the Closing Date) and ending on the day
immediately preceding such Distribution Date. All calculations of interest on
the Certificates will be made on the basis of the actual number of days
elapsed in the related Accrual Period and a 360 day year.
ADJUSTED OVERCOLLATERALIZATION AMOUNT: For any Distribution Date,
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the excess of (a) the Stated Principal Balance of the Mortgage Loans as of the
preceding Due Date over (b) the aggregate principal balance of the Class T3-1,
Class T3-2, Class T3-3, and the Class T3-4 Interests.
ADJUSTED OVERCOLLATERALIZATION RELEASE AMOUNT: For any Distribution
---------------------------------------------
Date, the lesser of the (a) the Principal Distribution Amount, and (b) the
amount, if any, by which the Adjusted Overcollateralization Amount exceeds the
sum of the Stated Principal Balance of the Mortgage Loans and the Specified
Overcollateralization Amount.
ADJUSTMENT DATE: As to each Mortgage Loan, each date on which the
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related Mortgage Rate is subject to adjustment, as provided in the related
Mortgage Note.
ADVANCE: The aggregate of the advances required to be made by the
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Master Servicer with respect to any Distribution Date pursuant to Section
4.01, the amount of any such advances being equal to the sum of (A) the
aggregate of payments of principal and interest (net of the Servicing Fees) on
the Mortgage Loans that were due on the related Due Date and not received as
of the close of business on the related Determination Date and (B) with
respect to each REO Property that has not been liquidated, an amount equal to
the excess, if any, of (x) one month's interest (adjusted to the Net Mortgage
Rate) on the Stated Principal Balance of the related Mortgage Loan over (y)
the net monthly rental income (if any) from such REO Property deposited in the
Certificate Account for such Distribution Date pursuant to Section 3.12, less
the aggregate amount of any such delinquent payments that the Master Servicer
has determined would constitute a Nonrecoverable Advance were an advance to be
made with respect thereto.
AGREEMENT: This Pooling and Servicing Agreement and any and all
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amendments or supplements hereto made in accordance with the terms herein.
AMOUNT HELD FOR FUTURE DISTRIBUTION: As to any Distribution Date,
-----------------------------------
the aggregate amount held in the Certificate Account at the close of business
on the immediately preceding Determination Date on account of (i) all
Scheduled Payments or portions thereof received in respect of the Mortgage
Loans due after the related Due Date and (ii) Principal Prepayments and
Liquidation Proceeds received in respect of such Mortgage Loans after the last
day of the related Prepayment Period.
APPLIED REALIZED LOSS AMOUNT: With respect to any Distribution Date,
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the sum of the Realized Losses with respect to the Mortgage Loans which are to
be applied in reduction of the Certificate Principal Balance of the
Certificates pursuant to this Agreement, which shall on any such Distribution
Date equal the amount, if any, by which the Certificate Principal Balance of
the Certificates (after all distributions of principal on such Distribution
Date) exceeds the Stated Principal Balance of the Mortgage Loans as of the
preceding Due Date.
APPRAISED VALUE: The appraised value of the Mortgaged Property based
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upon the appraisal made for the Originator by a fee appraiser at the time of
the origination of the related Mortgage Loan, or the sales price of the
Mortgaged Property at the time of such origination, whichever is less, or with
respect to any Mortgage Loan originated in connection with a refinancing, the
appraised value of the Mortgaged Property based upon the appraisal made at the
time of such refinancing.
AVAILABLE FUNDS CAP: As of any Distribution Date, a per annum rate
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equal to twelve times the quotient of (x) the total scheduled interest
collected or Advanced on the Mortgage Loans based on the Mortgage Rates in
effect on the related Due Date less the related Servicing and Trustee Fees for
such Distribution Date divided by (y) the aggregate Certificate Principal
Balance of the Certificates.
BANKRUPTCY CODE: Title 11 of the United States Code.
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BOOK-ENTRY CERTIFICATES: Any of the Certificates that shall be
-----------------------
registered in the name of the Depository or its nominee, the ownership of
which is reflected on the books of the Depository or on the books of a person
maintaining an account with the Depository (directly, as a "Depository
Participant", or indirectly, as an indirect participant in accordance with the
rules of the Depository and as described in Section 5.06). As of the Closing
Date, each Class of Regular Certificates (other than the Class X Certificates)
constitutes a Class of Book-Entry Certificates.
BUSINESS DAY: Any day other than (i) a Saturday or a Sunday, or (ii)
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a day on which banking institutions in the City of New York, New York or the
city in which the Corporate Trust Office of the Trustee is located are
authorized or obligated by law or executive order to be closed.
CARRYOVER RESERVE FUND: The separate Eligible Account created and
----------------------
initially maintained by the Trustee pursuant to Section 4.08 in the name of
the Trustee for the benefit of the Certificateholders and designated "Bankers
Trust Company of California, N.A., in trust for registered holders of Bear
Stearns Asset Backed Securities, Inc., Asset-Backed Certificates, Series
1998-1". Funds in the Carryover Reserve Fund shall be held in trust for the
Certificateholders for the uses and purposes set forth in this Agreement.
CERTIFICATE: Any one of the certificates of any Class executed and
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authenticated by the Trustee in substantially the forms attached hereto as
exhibits.
CERTIFICATE ACCOUNT: The separate Eligible Account created and
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initially maintained by the Trustee pursuant to Section 3.05(b) in the name of
the Trustee for the benefit of the Certificateholders and designated "Bankers
Trust Company of California, N.A., in trust for registered holders of Bear
Stearns Asset Backed Securities, Inc., Asset-Backed Certificates, Series
1998-1". Funds in the Certificate Account shall be held in trust for the
Certificateholders for the uses and purposes set forth in this Agreement.
CERTIFICATE INTEREST CARRYOVER AMOUNT: With respect to any
-------------------------------------
Distribution Date, an amount equal to the sum of (i) the Class A Interest
Carryover Amount for such Distribution Date (if any), (ii) the Class M-1
Interest Carryover Amount for such Distribution Date (if any), (iii) the Class
M-2 Interest Carryover Amount for such Distribution Date (if any) and (iv) the
Class B Interest Carryover Amount for such Distribution Date (if any);
provided that when the term Certificate Interest Carryover Amount is used with
respect to one Class of Certificates, it shall mean such carryover amount
listed in clauses (i), (ii), (iii) or (iv), as applicable, with the same Class
designation.
CERTIFICATE OWNER: With respect to a Book-Entry Certificate, the
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person that is the beneficial owner of such Book-Entry Certificate.
CERTIFICATE PRINCIPAL BALANCE: As to any Certificate (other than any
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Class X Certificates) and as of any Distribution Date, the Initial Certificate
Principal Balance of such Certificate less the sum of (i) all amounts
distributed with respect to such Certificate in reduction of the Certificate
Principal Balance thereof on previous Distribution Dates pursuant to Section
4.04, and (ii) any Applied Realized Loss Amounts allocated to such Certificate
on previous Distribution Dates pursuant to Section 4.04(f). References herein
to the Certificate Principal Balance of a Class of Certificates shall mean the
Certificate Principal Balances of all Certificates in such Class.
CERTIFICATE REGISTER: The register maintained pursuant to Section
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5.02 hereof.
CERTIFICATEHOLDER or HOLDER: The person in whose name a Certificate
----------------- ------
is registered in the Certificate Register (initially, Cede & Co., as nominee
for the Depository, in the case of any Class of Regular Certificates (other
than the Class X Certificates), except that solely for the purpose of giving
any consent pursuant to this Agreement, any Certificate registered in the name
of the Depositor or any affiliate of the Depositor shall be deemed not to be
Outstanding and the Voting Right evidenced thereby shall not be taken into
account in determining whether the requisite amount of Voting Rights necessary
to effect such consent has been obtained; provided that if any such Person
(including the Depositor) owns 100% of the Voting Rights evidenced by a Class
of Certificates, such Certificates shall be deemed to be Outstanding for
purposes of any provision hereof that requires the consent of the Holders of
Certificates of a particular Class as a condition to the taking of any action
hereunder. The Trustee is entitled to rely conclusively on a certification of
the Depositor or any affiliate of the Depositor in determining which
Certificates are registered in the name of an affiliate of the Depositor.
CLASS: All Certificates bearing the same Class designation as set
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forth in Section 5.01 hereof.
CLASS A CERTIFICATE: Any Certificate designated as a "Class A
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Certificate" on the face thereof, in the form of Exhibit A-1 hereto,
representing the right to distributions as set forth herein.
CLASS A CURRENT INTEREST: As of any Distribution Date, the interest
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accrued on the Class A Certificate Principal Balance during the related
Accrual Period at the Class A Pass-Through Rate plus any amount previously
distributed with respect to interest for such Class that is recovered as a
voidable preference by a trustee in bankruptcy.
CLASS A INTEREST CARRYOVER AMOUNT: As of any Distribution Date, the
---------------------------------
sum of (A) if on such Distribution Date the Pass-Through Rate for the Class A
Certificates is based upon the Available Funds Cap, the excess of (i) the
amount of interest the Class A Certificates would otherwise be entitled to
receive on such Distribution Date had such rate been calculated as the sum of
One-Month LIBOR and the Class A Margin for such Distribution Date, up to the
Weighted Maximum Rate Cap, over (ii) the amount of interest payable on the
Class A Certificates at the Available Funds Cap for such Distribution Date and
(B) the Class A Interest Carryover Amount for all previous Distribution Dates
not previously paid pursuant to Section 4.04(e), together with interest
thereon (to the extent permitted by applicable law) at a rate equal to the sum
of One-Month LIBOR and the Class A Margin for such Distribution Date.
CLASS A INTEREST SHORTFALL AMOUNT: As of any Distribution Date, the
---------------------------------
sum of (i) the excess of (a) the Class A Current Interest with respect to
prior Distribution Dates (excluding any Class A Interest Carryover Amount)
over (b) the amount actually distributed to the Class A Certificates with
respect to interest and (ii) interest thereon (to the extent permitted by
applicable law) at the Class A Pass-Through Rate for the related Accrual
Period.
CLASS A MARGIN: As of any Distribution Date on or prior to the
--------------
Optional Termination Date, 0.18% per annum and, as of any Distribution Date
after such Optional Termination Date, 0.36% per annum.
CLASS A PASS-THROUGH RATE: For the first Distribution Date, 5.86750%
-------------------------
per annum. As of any Distribution Date thereafter, the least of (i) One-Month
LIBOR plus the Class A Margin, (ii) the Weighted Maximum Rate Cap and (iii)
the Available Funds Cap for such Distribution Date.
CLASS A PRINCIPAL DISTRIBUTION AMOUNT: With respect to (i) any
-------------------------------------
Distribution Date prior to the Stepdown Date or the Distribution Date on which
a Trigger Event has occurred, 100% of the Principal Distribution Amount for
such Distribution Date and (ii) any Distribution Date on or after the Stepdown
Date and as long as a Trigger Event has not occurred and is not continuing,
the excess of (A) the Class A Certificate Principal Balance immediately prior
to such Distribution Date over (B) the lesser of (I) 66.41% of the Stated
Principal Balance of the Mortgage Loans on the immediately preceding Due Date
and (II) the Stated Principal Balance of the Mortgage Loans on the immediately
preceding Due Date less an amount equal to 0.50% of the aggregate Cut-off Date
Principal Balance of the Mortgage Loans.
CLASS B APPLIED REALIZED LOSS AMOUNT: As of any Distribution Date,
------------------------------------
the sum of all Applied Realized Loss Amounts with respect to the Mortgage
Loans which have been applied to the reduction of the Certificate Principal
Balance of the Class B Certificates.
CLASS B CERTIFICATE: Any Certificate designated as a "Class B
-------------------
Certificate" on the face thereof, in the form of Exhibit A-4 hereto,
representing the right to distributions as set forth herein.
CLASS B CURRENT INTEREST: As of any Distribution Date, the interest
------------------------
accrued on the Class B Certificate Principal Balance during the related
Accrual Period at the Class B Pass-Through Rate plus any amount previously
distributed with respect to interest for such Class that is recovered as a
voidable preference by a trustee in bankruptcy.
CLASS B INTEREST CARRYOVER AMOUNT: As of any Distribution Date, the
---------------------------------
sum of (A) if on such Distribution Date the Pass-Through Rate for the Class B
Certificates is based upon the Available Funds Cap, the excess of (i) the
amount of interest the Class B Certificates would otherwise be entitled to
receive on such Distribution Date had such rate been calculated as the sum of
One-Month LIBOR and the Class B Margin for such Distribution Date, up to the
Weighted Maximum Rate Cap, over (ii) the amount of interest payable on the
Class B Certificates at the Available Funds Cap for such Distribution Date and
(B) the Class B Interest Carryover Amount for all previous Distribution Dates
not previously paid pursuant to Section 4.04(e), together with interest (to
the extent permitted by applicable law)thereon at a rate equal to the sum of
One-Month LIBOR and the Class B Margin for such Distribution Date.
CLASS B INTEREST SHORTFALL AMOUNT: As of any Distribution Date, the
---------------------------------
sum of (i) the excess of (a) the Class B Current Interest with respect to
prior Distribution Dates (excluding any Class B Interest Carryover Amount)
over (b) the amount actually distributed to the Class B Certificates with
respect to interest and (ii) interest thereon (to the extent permitted by
applicable law) at the Class B Pass-Through Rate for the related Accrual
Period.
CLASS B MARGIN: For any Distribution Date on or prior to the
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Optional Termination Date, 1.45% per annum and, as of any Distribution Date
after the Optional Termination Date, 2.175% per annum.
CLASS B PASS-THROUGH RATE: For the first Distribution Date, 6.1375%
-------------------------
per annum. As of any Distribution Date thereafter, the least of (i) One-Month
LIBOR plus the Class B Margin, (ii) the Weighted Maximum Rate Cap and (iii)
the Available Funds Cap for such Distribution Date.
CLASS B PRINCIPAL DISTRIBUTION AMOUNT: With respect to any
-------------------------------------
Distribution Date on or after the Stepdown Date and as long as a Trigger Event
has not occurred and is not continuing, the excess of (i) the sum of (A) the
Class A Certificate Principal Balance (after taking into account distribution
of the Class A Principal Distribution Amount on such Distribution Date), (B)
the Class M-1 Certificate Principal Balance (after taking into account
distribution of the Class M-1 Principal Distribution Amount on such
Distribution Date), (C) the Class M-2 Certificate Principal Balance (after
taking into account distribution of the Class M-2 Principal Distribution
Amount on such Distribution Date), and (D) the Class B Certificate Principal
Balance immediately prior to such Distribution Date, over (ii) the lesser of
(A) 95.60% of the Stated Principal Balance of the Mortgage Loans on the
immediately preceding Due Date and (B) the Stated Principal Balance of the
Mortgage Loans on the immediately preceding Due Date less an amount equal to
0.50% of the aggregate Cut-off Date Principal Balance of the Mortgage Loans;
provided that after the Class A Certificate Principal Balance, the Class M-1
Certificate Principal Balance and the Class M-2 Certificate Principal Balance
has been reduced to zero, the Class B Principal Distribution Amount for such
Distribution Date will equal 100% of the Principal Distribution Amount for
such Distribution Date.
CLASS B UNPAID REALIZED LOSS AMOUNT: As of any Distribution Date,
-----------------------------------
the excess of (i) the Class B Applied Realized Loss Amount over (ii) the sum
of all distributions in reduction of the Class B Applied Realized Loss Amounts
on all previous Distribution Dates.
CLASS M-1 APPLIED REALIZED LOSS AMOUNT: As of any Distribution Date,
--------------------------------------
the sum of all Realized Losses with respect to the Mortgage Loans which have
been applied to the reduction of the Certificate Principal Balance of the
Class M-1 Certificates.
CLASS M-1 CERTIFICATE: Any Certificate designated as a "Class M-1
---------------------
Certificate" on the face thereof, in the form of Exhibit A-2 hereto,
representing the right to distributions as set forth herein.
CLASS M-1 CURRENT INTEREST: As of any Distribution Date, the
--------------------------
interest accrued on the Class M-1 Certificate Principal Balance during the
related Accrual Period at the Class M-1 Pass-Through Rate plus any amount
previously distributed with respect to interest for such Class that is
recovered as a voidable preference by a trustee in bankruptcy.
CLASS M-1 INTEREST CARRYOVER AMOUNT: As of any Distribution Date,
-----------------------------------
the sum of (A) if on such Distribution Date the Pass-Through Rate for the
Class M-1 Certificates is based upon the Available Funds Cap, the excess of
(i) the amount of interest the Class M-1 Certificates would otherwise be
entitled to receive on such Distribution Date had such rate been calculated as
the sum of One-Month LIBOR and the Class M-1 Margin for such Distribution
Date, up to the Weighted Maximum Rate Cap, over (ii) the amount of interest
payable on the Class M-1 Certificates at the Available Funds Cap for such
Distribution Date and (B) the Class M-1 Interest Carryover Amount for all
previous Distribution Dates not previously paid pursuant to Section 4.04(e),
together with interest thereon (to the extent permitted by applicable law) at
a rate equal to the sum of One-Month LIBOR and the Class M-1 Margin for such
Distribution Date.
CLASS M-1 INTEREST SHORTFALL AMOUNT: As of any Distribution Date,
-----------------------------------
the sum of (i) the excess of (a) the Class M-1 Current Interest with respect
to prior Distribution Dates (excluding any Class M-1 Interest Carryover
Amount) over (b) the amount actually distributed to the Class M-1 Certificates
with respect to interest and (ii) interest thereon (to the extent permitted by
applicable law) at the Class M-1 Pass-Through Rate for the related Accrual
Period.
CLASS M-1 MARGIN: As of any Distribution Date on or prior to the
----------------
Optional Termination Date, 0.45% per annum and, as of any Distribution Date
after the Optional Termination Date, 0.675% per annum.
CLASS M-1 PASS-THROUGH RATE: For the first Distribution Date,
---------------------------
6.1375% per annum. As of any Distribution Date thereafter, the least of (i)
One-Month LIBOR plus the Class M-1 Margin, (ii) the Weighted Maximum Rate Cap
and (iii) the Available Funds Cap for such Distribution Date.
CLASS M-1 PRINCIPAL DISTRIBUTION AMOUNT: With respect to any
---------------------------------------
Distribution Date on or after the Stepdown Date, 100% of the Principal
Distribution Amount for such Distribution Date if the Class A Certificate
Principal Balance has been reduced to zero and a Trigger Event has occurred
and is continuing, or, if any of the Class A Certificates are still
outstanding and as long as a Trigger Event has not occurred and is not
continuing, the excess of (i) the sum of (A) the Class A Certificate Principal
Balance (after taking into account distributions of the Class A Principal
Distribution Amount on such Distribution Date) and (B) the Class M-1
Certificate Principal Balance immediately prior to such Distribution Date,
over (ii) the lesser of (A) 80.09% of the Stated Principal Balance of the
Mortgage Loans on the immediately preceding Due Date and (B) the Stated
Principal Balance of the Mortgage Loans on the immediately preceding Due Date
less an amount equal to 0.50% of the aggregate Cut-off Date Principal Balance
of the Mortgage Loans.
CLASS M-1 UNPAID REALIZED LOSS AMOUNT: As of any Distribution Date,
-------------------------------------
the excess of (i) the Class M-1 Applied Realized Loss Amount over (ii) the sum
of all distributions in reduction of the Class M-1 Applied Realized Loss
Amounts on all previous Distribution Dates.
CLASS M-2 APPLIED REALIZED LOSS AMOUNT: As of any Distribution Date,
--------------------------------------
the sum of all Realized Losses with respect to the Mortgage Loans which have
been applied to the reduction of the Certificate Principal Balance of the
Class M-2 Certificates.
CLASS M-2 CERTIFICATE: Any Certificate designated as a "Class M-2
---------------------
Certificate" on the face thereof, in the form of Exhibit A-3 hereto,
representing the right to distributions as set forth herein.
CLASS M-2 CURRENT INTEREST: As of any Distribution Date, the
--------------------------
interest accrued on the Class M-2 Certificate Principal Balance during the
related Accrual Period at the Class M-2 Pass-Through Rate plus any amount
previously distributed with respect to interest for such Class that is
recovered as a voidable preference by a trustee in bankruptcy.
CLASS M-2 INTEREST CARRYOVER AMOUNT: As of any Distribution Date,
-----------------------------------
the sum of (A) if on such Distribution Date the Pass-Through Rate for the
Class M-2 Certificates is based upon the Available Funds Cap, the excess of
(i) the amount of interest the Class M-2 Certificates would otherwise be
entitled to receive on such Distribution Date had such rate been calculated as
the sum of One-Month LIBOR and the Class M-2 Margin for such Distribution
Date, up to the Weighted Maximum Rate Cap, over (ii) the amount of interest
payable on the Class M-2 Certificates at the Available Funds Cap for such
Distribution Date and (B) the Class M-2 Interest Carryover Amount for all
previous Distribution Dates not previously paid pursuant to Section 4.04(e),
together with interest thereon (to the extent permitted by applicable law) at
a rate equal to the sum of One-Month LIBOR and the Class M-2 Margin for such
Distribution Date.
CLASS M-2 INTEREST SHORTFALL AMOUNT: As of any Distribution Date,
-----------------------------------
the sum of (i) the excess of (a) the Class M-2 Current Interest with respect
to prior Distribution Dates (excluding any Class M-2 Interest Carryover
Amount) over (b) the amount actually distributed to the Class M-2 Certificates
with respect to interest and (ii) interest thereon (to the extent permitted by
applicable law) at the Class M-2 Pass-Through Rate for the related Accrual
Period.
CLASS M-2 MARGIN: As of any Distribution Date on or prior to the
----------------
Optional Termination Date, 0.65% per annum and, as of any Distribution Date
after the Optional Termination Date, 0.975% per annum.
CLASS M-2 PASS-THROUGH RATE: For the first Distribution Date,
---------------------------
7.13750% per annum. As of any Distribution Date thereafter, the least of (i)
One-Month LIBOR plus the Class M-2 Margin, (ii) the Weighted Maximum Rate Cap
and (iii) the Available Funds Cap for such Distribution Date.
CLASS M-2 PRINCIPAL DISTRIBUTION AMOUNT: With respect to any
---------------------------------------
Distribution Date on or after the Stepdown Date, 100% of the Principal
Distribution Amount for such Distribution Date if the Class A Certificate
Principal Balance and the Class M-1 Certificate Principal Balance have been
reduced to zero and a Trigger Event has occurred and is continuing, or, if any
of the Class A or Class M-1 Certificates are still outstanding and as long as
a Trigger Event has not occurred and is not continuing, the excess of (i) the
sum of (A) the Class A Certificate Principal Balance (after taking into
account distributions of the Class A Principal Distribution Amount on such
Distribution Date), (B) the Class M-1 Certificate Principal Balance (after
taking into account distributions of the Class M-1 Principal Distribution
Amount on such Distribution Date) and (C) the Class M-2 Certificate Principal
Balance immediately prior to such Distribution Date, over (ii) the lesser of
(A) 88.71% of the Stated Principal Balance of the Mortgage Loans on the
immediately preceding Due Date and (B) the Stated Principal Balance of the
Mortgage Loans on the immediately preceding Due Date less an amount equal to
0.50% of the aggregate Cut-off Date Principal Balance of the Mortgage Loans.
CLASS M-2 UNPAID REALIZED LOSS AMOUNT: As of any Distribution Date,
-------------------------------------
the excess of (i) the Class M-2 Applied Realized Loss Amount over (ii) the sum
of all distributions in reduction of the Class M-2 Applied Realized Loss
Amounts on all previous Distribution Dates.
CLASS R CERTIFICATE: Any one of the Class R Certificates executed
-------------------
and authenticated by the Trustee in substantially the form set forth in
Exhibits D and E hereto, and evidencing ownership of the Class R-1, Class R-2,
Class R-3, and Class R-4 Interests.
CLASS X CERTIFICATES: Any Certificate designated as a "Class X
--------------------
Certificate" on the face thereof, in the form of Exhibit A-5 hereto,
representing ownership of the Class T4-V5, Class T4-V6, Class T4-V7, and Class
T4-V8 Interests.
CLASS X DISTRIBUTABLE AMOUNT: With respect to any Distribution Date,
----------------------------
the aggregate of the amounts distributable on the Class T4-V5, Class T4-V6,
Class T4-V7, and Class T4-V8 Interests.
CLOSING DATE: June 30, 1998.
------------
CODE: The Internal Revenue Code of 1986, including any successor or
----
amendatory provisions.
COMBINED LOAN-TO-VALUE RATIO: The fraction, expressed as a
----------------------------
percentage, the numerator of which is the sum of (x) the original principal
balance of the related Mortgage Loan and (y) the outstanding principal balance
at the date of origination of the Mortgage Loan of any senior mortgage loan,
or in the case of an open-ended senior mortgage loan (if any), the maximum
available line of credit with respect to such mortgage loan, regardless of any
lesser amount actually outstanding at the date of origination of the Mortgage
Loan, and the denominator of which is the Appraised Value of the related
Mortgaged Property.
COMPENSATING INTEREST: With respect to any Mortgage Loan, an amount
---------------------
equal to one-half of the Servicing Fee, to be applied to the interest portion
of a Prepayment Interest Shortfall on such Mortgage Loan pursuant to Section
4.02 hereof.
CORRESPONDING CERTIFICATE: With respect to each REMIC 4 Regular
-------------------------
Interest, the Certificate that evidences ownership of that REMIC 4 Regular
Interest.
CORPORATE TRUST OFFICE: The designated office of the Trustee in the
----------------------
State of New York where at any particular time its corporate trust business
with respect to this Agreement shall be administered, which office at the date
of the execution of this Agreement is located at 3 Park Plaza, 16th Floor,
Irvine, California 92614, (Attention: Bear Stearns/American Residential 98-1),
telephone: (949) 253-7575, facsimile: (949) 253-7577.
CUT-OFF DATE: June 1, 1998.
------------
CUT-OFF DATE PRINCIPAL BALANCE: As to any Mortgage Loan, the unpaid
------------------------------
principal balance thereof as of the close of business on the calendar day
immediately preceding the Cut-off Date after application of all payments of
principal due prior to the Cut-off Date, whether or not received, and all
Principal Prepayments received prior to the Cut-Off Date, but without giving
effect to any installments of principal received in respect of Due Dates on
and after the Cut-off Date.
DEBT SERVICE REDUCTION: With respect to any Mortgage Loan, a
----------------------
reduction by a court of competent jurisdiction in a proceeding under the
Bankruptcy Code in the Scheduled Payment for such Mortgage Loan that became
final and non-appealable, except such a reduction resulting from a Deficient
Valuation or any other reduction that results in a permanent forgiveness of
principal.
DEFICIENT VALUATION: With respect to any Mortgage Loan, a valuation
-------------------
by a court of competent jurisdiction of the Mortgaged Property in an amount
less than the then outstanding indebtedness under such Mortgage Loan, or any
reduction in the amount of principal to be paid in connection with any
Scheduled Payment that results in a permanent forgiveness of principal, which
valuation or reduction results from an order of such court that is final and
non-appealable in a proceeding under the Bankruptcy Code.
DEFINITIVE CERTIFICATES: As defined in Section 5.06.
-----------------------
DELETED MORTGAGE LOAN: A Mortgage Loan replaced or to be replaced
---------------------
by a Replacement Mortgage Loan.
DELINQUENT: A Mortgage Loan is "delinquent" if any payment due
----------
thereon is not made pursuant to the terms of such Mortgage Loan by the close
of business on the day such payment 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.
DENOMINATION: With respect to each Certificate, the amount set forth
------------
on the face thereof as the "Initial Principal Balance of this Certificate".
DEPOSITOR: Bear Stearns Asset Backed Securities, Inc., a Delaware
---------
corporation, or its successor in interest.
DEPOSITORY: The initial Depository shall be The Depository Trust
----------
Company ("DTC"), the nominee of which is Cede & Co., or any other organization
registered as a "clearing agency" pursuant to Section 17A of the Securities
Exchange Act of 1934, as amended. The Depository shall initially be the
registered Holder of the Book-Entry Certificates. The Depository shall at all
times be a "clearing corporation" as defined in Section 8-102(a)(5) of the
Uniform Commercial Code of the State of New York.
DEPOSITORY AGREEMENT: With respect to the Class of Book-Entry
--------------------
Certificates, the agreement among the Depositor, the Trustee and the initial
Depository, dated as of the Closing Date, substantially in the form of Exhibit
0.
DEPOSITORY PARTICIPANT: A broker, dealer, bank or other financial
----------------------
institution or other person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
DETERMINATION DATE: With respect to any Distribution Date, the 15th
------------------
day of the month of such Distribution Date or, if such 15th day is not a
Business Day, the immediately preceding Business Day.
DISTRIBUTION ACCOUNT: The separate Eligible Account created and
--------------------
maintained by the Trustee pursuant to Section 3.05 in the name of the Trustee
for the benefit of the Certificateholders and designated "Bankers Trust
Company of California, N.A., in trust for registered holders of Bear Stearns
Asset Backed Securities, Inc., Asset-Backed Certificates, Series 1998-1".
Funds in the Distribution Account shall be held in trust for the
Certificateholders for the uses and purposes set forth in this Agreement.
DISTRIBUTION DATE: The 25th day of each calendar month after the
-----------------
initial issuance of the Certificates, or if such 25th day is not a Business
Day, the next succeeding Business Day, commencing in July, 1998.
DUE DATE: With respect to any Distribution Date, the first day of
--------
the month in which the related Distribution Date occurs.
DUE PERIOD: With respect to any Distribution Date, the period
----------
beginning on the second day of the calendar month preceding the calendar month
in which such Distribution Date occurs (or, in the case of the first
Distribution Date, beginning on the Cut-off Date) and ending on the Due Date
in the month in which such Distribution Date occurs.
ELIGIBLE ACCOUNT: Any of (i) an account or accounts maintained with
----------------
a federal or state chartered depository institution or trust company, the
long-term unsecured debt obligations and short-term unsecured debt obligations
of which (or, in the case of a depository institution or trust company that is
the principal subsidiary of a holding company, the debt obligations of such
holding company, so long as Moody's is not a Rating Agency) are rated A+ or
better by S&P and Fitch, and P-1 or better by S&P and F-1 or better by Fitch,
respectively, at the time any amounts are held on deposit therein, or (ii) an
account or accounts in a depository institution or trust company in which such
accounts are insured by the FDIC (to the limits established by the FDIC) and
the uninsured deposits in which accounts are otherwise secured such that, as
evidenced by an Opinion of Counsel delivered to the Trustee and to each Rating
Agency, the Certificateholders have a claim with respect to the funds in such
account or a perfected first priority security interest against any collateral
(which shall be limited to Permitted Investments) securing such funds that is
superior to claims of any other depositors or creditors of the depository
institution or trust company in which such account is maintained, or (iii) a
segregated account or accounts maintained with the corporate trust department
of a federal or state chartered depository institution or trust company having
capital and surplus of not less than $50,000,000, acting in its fiduciary
capacity or (iv) any other account acceptable to the Rating Agencies. Eligible
Accounts may bear interest, and may include, if otherwise qualified under this
definition, accounts maintained with the Trustee.
ERISA: The Employee Retirement Income Security Act of 1974, as
-----
amended.
ERISA RESTRICTED CERTIFICATE: Each of the Class M-1, Class M-2,
----------------------------
Class B, Class X and Class R Certificates.
EVENT OF DEFAULT: As defined in Section 7.01 hereof.
----------------
EXCESS CASHFLOW: With respect to any Distribution Date, the
---------------
aggregate remaining amounts constituting Excess Cashflow for such Distribution
Date pursuant to Sections 4.04(b)(v) and 4.04(c)(v).
EXCESS PROCEEDS: With respect to any Liquidated Loan, any
---------------
Liquidation Proceeds that are in excess of the sum of (i) the unpaid principal
balance of such Liquidated Loan as of the date of such liquidation plus (ii)
interest at the Mortgage Rate from the Due Date as to which interest was last
paid or advanced to Certificateholders (and not reimbursed to the Master
Servicer) up to the Due Date in the month in which such Liquidation Proceeds
are required to be distributed on the Stated Principal Balance of such
Liquidated Loan outstanding during each Due Period as to which such interest
was not paid or advanced.
EXTRA MASTER SERVICING FEE: The Extra Master Servicing Fee payable
--------------------------
pursuant to Section 4.07 hereof.
EXTRA PRINCIPAL DISTRIBUTION AMOUNT: With respect to any Distribution
-----------------------------------
Date, the lesser of (i) the excess, if any, of the Specified
Overcollateralization Amount for such Distribution Date over the
Overcollateralization Amount for such Distribution Date (after giving effect to
distributions of principal on the Certificates other than any Extra Principal
Distribution Amount) and (ii) the Excess Cashflow for such Distribution Date
available therefor in the priorities set forth in Section 4.04.
FDIC: The Federal Deposit Insurance Corporation, or any successor
----
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, a corporate
-----
instrumentality of the United States created and existing under Title III of the
Emergency Home Finance Act of 1970, as amended, or any successor thereto.
FIRREA: The Financial Institutions Reform, Recovery, and Enforcement
------
Act of 1989.
FIRST ADJUSTMENT DATE: As to each Mortgage Loan, the first Adjustment
---------------------
Date, as provided in the related Mortgage Note.
FNMA: The Federal National Mortgage Association, a federally chartered
----
and privately owned corporation organized and existing under the Federal
National Mortgage Association Charter Act, or any successor thereto.
GROSS MARGIN: The percentage set forth in the related Mortgage Note
------------
for the Mortgage Loans to be added to the Index for use in determining the
Mortgage Rate on each Adjustment Date, and which is set forth in the Mortgage
Loan Schedule for the Mortgage Loans.
INDEX: As to any Mortgage Loan on any Adjustment Date related thereto,
-----
the index for the adjustment of the Mortgage Rate set forth as such in the
related Mortgage Note, such index in general being either (i) the average of the
London interbank offered rates for six-month U.S. dollar deposits in the London
market, as set forth in THE WALL STREET JOURNAL, or, if the Index ceases to be
published in THE WALL STREET JOURNAL or becomes unavailable for any reason, then
the Index shall be a new index selected by the Master Servicer on behalf of the
Trustee, as holder of the Mortgage Note, based on comparable information or (ii)
is the weekly average yield on United States Treasury securities adjusted to a
constant maturity of one year, as made available by the Board of Governors of
the Federal Reserve System, in the case of both (i) and (ii) above as most
recently announced as of a date 45 days prior to such Adjustment Date. The
Master Servicer hereby agrees that should the Index become unavailable, the
Master Servicer, on behalf of the Trustee, will select a new index that is based
upon comparable information.
INITIAL ADJUSTMENT DATE: As to any Mortgage Loan, the first Adjustment
-----------------------
Date following the origination of such Mortgage Loan.
INITIAL CERTIFICATE ACCOUNT DEPOSIT: An amount equal to the aggregate
-----------------------------------
of all amounts in respect of (i) principal of the Mortgage Loans due on or after
the Cut-off Date and received by the Master Servicer before the Closing Date and
not applied in computing the Cut-off Date Principal Balance thereof and (ii)
interest on the Mortgage Loans due on and after the Cut-off Date and received by
the Master Servicer before the Closing Date.
INITIAL CERTIFICATE PRINCIPAL BALANCE: With respect to any
-------------------------------------
Certificate, the Certificate Principal Balance of such Certificate or any
predecessor Certificate on the Closing Date.
INITIAL MORTGAGE RATE: As to each Mortgage Loan, the Mortgage Rate in
---------------------
effect prior to the Initial Adjustment Date.
INSURANCE POLICY: With respect to any Mortgage Loan included in the
----------------
Trust Fund, any insurance policy, including all riders and endorsements thereto
in effect with respect to such Mortgage Loan, including any replacement policy
or policies for any Insurance Policies.
INSURANCE PROCEEDS: Proceeds paid in respect of the Mortgage Loans
------------------
pursuant to any Insurance Policy or any other insurance policy covering a
Mortgage Loan, to the extent such proceeds are payable to the mortgagee under
the Mortgage, the Master Servicer or the trustee under the deed of trust and are
not applied to the restoration of the related Mortgaged Property or released to
the Mortgagor in accordance with the procedures that the Master Servicer would
follow in servicing mortgage loans held for its own account, in each case other
than any amount included in such Insurance Proceeds in respect of Insured
Expenses.
INSURED EXPENSES: Expenses covered by an Insurance Policy or any other
----------------
insurance policy with respect to the Mortgage Loans.
INTEREST DETERMINATION DATE: With respect to the Certificates for the
---------------------------
first Accrual Period, June 26, 1998. With respect to the Certificates and any
Accrual Period thereafter, the second LIBOR Business Day preceding the
commencement of such Accrual Period.
INTEREST FUNDS: With respect to any Master Servicer Advance Date, the
--------------
sum, without duplication, of (i) all scheduled interest collected during the
related Due Period with respect to the Mortgage Loans less the Servicing Fee,
(ii) all Advances relating to interest with respect to the Mortgage Loans, (iii)
all Compensating Interest with respect to the Mortgage Loans and (iv)
Liquidation Proceeds with respect to the Mortgage Loans (to the extent such
Liquidation Proceeds relate to interest) less all Nonrecoverable Advances
relating to interest reimbursed during the related Due Period.
LATEST POSSIBLE MATURITY DATE: May 25, 2029.
-----------------------------
LIBOR BUSINESS DAY: Any day on which banks in the City of London,
------------------
England and New York City, U.S.A. are open and conducting transactions in
foreign currency and exchange.
LIQUIDATED LOAN: With respect to any Distribution Date, a defaulted
---------------
Mortgage Loan that has been liquidated through deed-in-lieu of foreclosure,
foreclosure sale, trustee's sale or other realization as provided by applicable
law governing the real property subject to the related Mortgage and any security
agreements and as to which the Master Servicer has certified (in accordance with
Section 3.12) in the related Prepayment Period that it has received all amounts
it expects to receive in connection with such liquidation.
LIQUIDATION PROCEEDS: Amounts, including Insurance Proceeds, received
--------------------
in connection with the partial or complete liquidation of Mortgage Loans,
whether through trustee's sale, foreclosure sale or otherwise or amounts
received in connection with any condemnation or partial release of a Mortgaged
Property and any other proceeds received in connection with an REO Property,
less the sum of related unreimbursed Advances, Servicing Fees and Servicing
Advances.
LOAN PURCHASE AGREEMENT: The Mortgage Loan Purchase Agreement, dated
-----------------------
as of June 1, 1998, between the Seller and the Depositor.
LOAN-TO-VALUE RATIO: The fraction, expressed as a percentage, the
-------------------
numerator of which is the original principal balance of the related Mortgage
Loan and the denominator of which is the Appraised Value of the related
Mortgaged Property.
MASTER SERVICER ADVANCE DATE: As to any Distribution Date, the
----------------------------
Business Day immediately preceding such Distribution Date.
MASTER SERVICER: Countrywide Home Loans, Inc., a New York corporation,
---------------
and its successors and assigns, in its capacity as master servicer hereunder.
MAXIMUM MORTGAGE RATE: With respect to each Mortgage Loan, the maximum
---------------------
rate of interest set forth as such in the related Mortgage Note.
MINIMUM MORTGAGE RATE: With respect to each Mortgage Loan, the minimum
---------------------
rate of interest set forth as such in the related Mortgage Note.
MONTHLY STATEMENT: The statement delivered to the Certificateholders
-----------------
pursuant to Section 4.05.
MORTGAGE: The mortgage, deed of trust or other instrument creating a
--------
first lien on or first priority ownership interest, or creating a second lien on
or second priority ownership interest, as applicable, in an estate in fee simple
in real property securing a Mortgage Note.
MORTGAGE FILE: The mortgage documents listed in Section 2.01 hereof
-------------
pertaining to a particular Mortgage Loan and any additional documents delivered
to the Trustee to be added to the Mortgage File pursuant to this Agreement.
MORTGAGE LOANS: The mortgage loans transferred and assigned to the
--------------
Trustee pursuant to the provisions hereof as from time to time are held as a
part of the Trust Fund (including any REO Property), the mortgage loans so held
being identified in the Mortgage Loan Schedule, including any mortgage loans
delivered in replacement thereof, notwithstanding foreclosure or other
acquisition of title of the related Mortgaged Property. Any mortgage loan that
was intended by the parties hereto to be transferred to the Trust Fund as
indicated by such Mortgage Loan Schedule which is in fact not so transferred for
any reason including, without limitation, a breach of the representation
contained in Section 2.03(b)(iv) hereof, shall continue to be a Mortgage Loan
hereunder until the Purchase Price with respect thereto has been paid to the
Trust Fund.
MORTGAGE LOAN REPURCHASE PRICE: The price, calculated as set forth in
------------------------------
Section 9.01, to be paid in connection with the repurchase of the Mortgage Loans
pursuant to Section 9.01.
MORTGAGE LOAN SCHEDULE: The list of Mortgage Loans (as from time to
----------------------
time amended by the Master Servicer to reflect the deletion of Deleted Mortgage
Loans, the release of Mortgage Loans paid in full and the addition of
Replacement Mortgage Loans pursuant to the provisions of this Agreement)
transferred to the Trustee as part of the Trust Fund and from time to time
subject to this Agreement, attached hereto as Exhibit F-1, setting forth the
following information with respect to each Mortgage Loan:
(i) the loan number assigned by the Master Servicer;
(ii) the purpose of the Mortgage Loan;
(iii) the Appraised Value;
(iv) the Initial Mortgage Rate;
(v) the stated maturity date;
(vi) the original principal balance;
(vii) the Cut-off Date Principal Balance;
(viii) the first payment date of the Mortgage Loan;
(ix) the Scheduled Payment in effect as of the Cut-off Date;
(x) the Loan-to-Value Ratio or Combined Loan-to-Value Ratio, as
applicable, at origination;
(xi) a code indicating whether the residential dwelling at the
time of origination was represented to be owner-occupied;
(xii) a code indicating whether the residential dwelling is
either (a) a detached single family dwelling (b) a condominium unit or
(c) a two- to four-unit residential property;
(xiii) the next Adjustment Date;
(xiv) the Maximum Mortgage Rate;
(xv) the Minimum Mortgage Rate;
(xvi) the Mortgage Rate as of the Cut-off Date;
(xvii) the related Periodic Rate Cap;
(xviii) the Gross Margin;
(xix) the Mortgagor's name;
(xx) the address of the Mortgaged Property;
(xxi) a code indicating whether the Mortgage Loan has a
prepayment penalty or charge and, if so, the prepayment penalty
expiration date/term; and
(xxii) a code indicating whether the Mortgage Loan is a fixed
rate loan or an adjustable rate loan.
Such schedule shall also set forth the total of the amounts described under
(vii) above for all of the Mortgage Loans.
MORTGAGE NOTE: The original executed note or other evidence of
-------------
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan.
MORTGAGE RATE: The annual rate of interest borne by a Mortgage Note
-------------
from time to time.
MORTGAGED PROPERTY: The underlying property securing a Mortgage Loan.
------------------
MORTGAGOR: The obligors on a Mortgage Note.
---------
NET EXCESS SPREAD: With respect to any Distribution Date, the
-----------------
fraction, expressed as a percentage, the numerator of which is equal to the
amount, if any, by which (a) the product of (i) the aggregate Stated Principal
Balance of the Mortgage Loans as of the end of the related Accrual Period and
(ii) the Net Rate exceeds (b) the sum of Class A Current Interest, Class M-1
Current Interest, Class M-2 Current Interest and Class B Current Interest for
such Distribution Date, and the denominator of which is the product of (x) the
aggregate Stated Principal Balance of the Mortgage Loans as of the end of the
related Accrual Period and (y) the actual number of days in the related Accrual
Period divided by 360.
NET MORTGAGE RATE: As to each Mortgage Loan, and at any time, the per
-----------------
annum rate equal to the Mortgage Rate less the sum of the Servicing Fee Rate and
the Trustee Fee Rate. All calculations of interest at the Net Mortgage Rate made
in respect of a Mortgage Loan will be made on the basis of the actual number of
days in the related Due Period and a 360 day year.
NET RATE: The weighted average Net Mortgage Rate for the Mortgage
--------
Loans.
NON-BOOK-ENTRY CERTIFICATE: Any Certificate other than a Book-Entry
--------------------------
Certificate.
NONRECOVERABLE ADVANCE: Any portion of an Advance previously made or
----------------------
proposed to be made by the Master Servicer that, in the good faith judgment of
the Master Servicer, will not or, in the case of a current delinquency, would
not, be ultimately recoverable by the Master Servicer from the related
Mortgagor, related Liquidation Proceeds or otherwise.
OFFICER'S CERTIFICATE: A certificate (i) signed by the Chairman of the
---------------------
Board, the Vice Chairman of the Board, the President, a Vice President (however
denominated), an Assistant Vice President, the Treasurer, the Secretary, or one
of the assistant treasurers or assistant secretaries of the Depositor, the
Seller or the Master Servicer (or any other officer customarily performing
functions similar to those performed by any of the above designated officers and
also to whom, with respect to a particular matter, such matter is referred
because of such officer's knowledge of and familiarity with a particular
subject) or (ii), if provided for in this Agreement, signed by a Servicing
Officer, as the case may be, and delivered to the Depositor, the Seller and the
Trustee, as the case may be, 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 rate for U.S. dollar deposits for one month that appears on
Telerate Screen Page 3750 as of 11:00 a.m. (London time) on such Interest
Determination Date; provided that the parties hereto acknowledge that One-Month
LIBOR calculated for the first Accrual Period shall equal 5.68750% per annum. 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 after consultation with the Seller), One-Month LIBOR for
the applicable Accrual Period will be the Reference Bank Rate. If no such
quotations can be obtained by the Trustee and no Reference Bank Rate is
available, One-Month LIBOR will be One-Month LIBOR applicable to the preceding
Accrual Period.
OPINION OF COUNSEL: A written opinion of counsel, who may be counsel
------------------
for the Depositor or the Master Servicer, reasonably acceptable to each
addressee of such opinion; provided that with respect to Section 6.04 or 10.01,
or the interpretation or application of the REMIC Provisions, such counsel must
(i) in fact be independent of the Depositor, the Seller and the Master Servicer,
(ii) not have any direct financial interest in the Depositor, the Seller or the
Master Servicer or in any affiliate of either, and (iii) not be connected with
the Depositor, the Seller or the Master Servicer as an officer, employee,
promoter, underwriter, trustee, partner, director or person performing similar
functions.
OPTIONAL TERMINATION: The termination of the Trust Fund created
--------------------
hereunder following the purchase of the Mortgage Loans pursuant to the last
sentence of Section 9.01 hereof.
OPTIONAL TERMINATION DATE: The Distribution Date on which the
-------------------------
aggregate of the Stated Principal Balances of the Mortgage Loans is equal to or
less than 10% of the aggregate of the Cut-off Date Principal Balances of the
Mortgage Loans.
ORIGINAL MORTGAGE LOAN: The mortgage loan refinanced in connection
----------------------
with the origination of a Refinancing Mortgage Loan.
ORIGINAL VALUE: The value of the property underlying a Mortgage Loan
--------------
based, in the case of the purchase of the underlying Mortgaged Property, on the
lower of an appraisal satisfactory to the Master Servicer or the sales price of
such property or, in the case of a refinancing, on an appraisal satisfactory to
the Master Servicer.
ORIGINATOR: Countrywide Home Loans, Inc., a New York corporation, in
----------
its capacity as the originator of the Mortgage Loans.
OTS: The Office of Thrift Supervision.
---
OUTSTANDING: With respect to the Certificates as of any date of
-----------
determination, all Certificates theretofore executed and authenticated under
this Agreement except:
(i) Certificates theretofore canceled by the Trustee or
delivered to the Trustee for cancellation; and
(ii) Certificates in exchange for which or in lieu of
which other Certificates have been executed and delivered by the
Trustee pursuant to this Agreement.
OUTSTANDING MORTGAGE LOAN: As of any Distribution Date, a Mortgage
-------------------------
Loan with a Stated Principal Balance greater than zero that was not the subject
of a Principal Prepayment in full, and that did not become a Liquidated Loan,
prior to the end of the related Prepayment Period.
OVERCOLLATERALIZATION AMOUNT: With respect to any Distribution Date,
----------------------------
the excess, if any, the aggregate Stated Principal Balance of the Mortgage Loans
as of the preceding Due Date over the aggregate Certificate Principal Balances
of all Certificates on such Distribution Date (after taking into account the
payment of principal on such Certificates on such Distribution Date, other than
any Extra Principal Distribution Amount).
OWNERSHIP INTEREST: As to any Certificate, any ownership interest in
------------------
such Certificate including any interest in such Certificate as the Holder
thereof and any other interest therein, whether direct or indirect, legal or
beneficial.
PERCENTAGE INTEREST: With respect to any Class A or Subordinate
-------------------
Certificate, the percentage interest evidenced thereby of the related Class
shall equal the percentage obtained by dividing the Denomination of such
Certificate by the aggregate of the Denominations of all Certificates of such
Class, and with respect to the Class X Certificates, the Percentage Interest
specified on the faces thereof.
PERIODIC RATE CAP: As to each Mortgage Loan and the related Mortgage
-----------------
Note, the provision therein that limits permissible increases and decreases in
the Mortgage Rate on any Adjustment Date to not more than one and one-half
percentage points.
PERMITTED INVESTMENTS: At any time, any one or more of the following
---------------------
obligations and securities:
(i) obligations of the United States or any agency thereof,
provided such obligations are backed by the full faith and credit of the
United States;
(ii) general obligations of or obligations guaranteed by any
state of the United States or the District of Columbia receiving the
highest long-term debt rating of each Rating Agency rating the
Certificates, or such lower rating as will not result in the downgrading or
withdrawal of the ratings then assigned to the Certificates by each such
Rating Agency;
(iii) [Reserved];
(iv) commercial or finance company paper which is then receiving
the highest commercial or finance company paper rating of each such Rating
Agency, or such lower rating as will not result in the downgrading or
withdrawal of the ratings then assigned to the Certificates by each such
Rating Agency;
(v) certificates of deposit, demand or time deposits, or bankers'
acceptances issued by any depository institution or trust company
incorporated under the laws of the United States or of any state thereof
and subject to supervision and examination by federal and/or state banking
authorities, provided that the commercial paper and/or long term unsecured
debt obligations of such depository institution or trust company (or in the
case of the principal depository institution in a holding company system,
the commercial paper or long-term unsecured debt obligations of such
holding company, but only if Moody's is not a Rating Agency) are then rated
one of the two highest long-term and the highest short-term ratings of each
such Rating Agency for such securities, or such lower ratings as will not
result in the downgrading or withdrawal of the rating then assigned to the
Certificates by any such Rating Agency;
(vi) demand or time deposits or certificates of deposit issued by
any bank or trust company or savings institution to the extent that such
deposits are fully insured by the FDIC;
(vii) guaranteed reinvestment agreements issued by any bank,
insurance company or other corporation containing, at the time of the
issuance of such agreements, such terms and conditions as will not result
in the downgrading or withdrawal of the rating then assigned to the
Certificates by any such Rating Agency;
(viii) repurchase obligations with respect to any security
described in clauses (i) and (ii) above, in either case entered into with a
depository institution or trust company (acting as principal) described in
clause (v) above;
(ix) securities (other than stripped bonds, stripped coupons or
instruments sold at a purchase price in excess of 115% of the face amount
thereof) bearing interest or sold at a discount issued by any corporation
incorporated under the laws of the United States or any state thereof
which, at the time of such investment, have one of the two highest long
term ratings of each Rating Agency (except if the Rating Agency is S&P,
such rating shall be the highest commercial paper rating of S&P for any
such securities), or such lower rating as will not result in the
downgrading or withdrawal of the rating then assigned to the Certificates
by any such Rating Agency, as evidenced by a signed writing delivered by
each such Rating Agency;
(x) interests in any money market fund which at the date of
acquisition of the interests in such fund and throughout the time such
interests are held in such fund has the highest applicable rating by each
Rating Agency if rated by both Rating Agencies, or by one Rating Agency if
not rated by both Rating Agencies, or such lower rating as will not result
in the downgrading or withdrawal of the ratings then assigned to the
Certificates by each such Rating Agency;
(xi) short term investment funds sponsored by any trust company
or national banking association incorporated under the laws of the United
States or any state thereof which on the date of acquisition has been rated
by each such Rating Agency in their respective highest applicable rating
category or such lower rating as will not result in the downgrading or
withdrawal of the ratings then assigned to the Certificates by each such
Rating Agency; and
(xii) such other investments having a specified stated maturity
and bearing interest or sold at a discount acceptable to each Rating Agency
as will not result in the downgrading or withdrawal of the rating then
assigned to the Certificates by any such Rating Agency, as evidenced by a
signed writing delivered by each such Rating Agency;
provided, that no such instrument shall be a Permitted Investment if such
instrument (i) evidences the right to receive interest only payments with
respect to the obligations underlying such instrument, (ii) is purchased at a
premium or (iii) is purchased at a deep discount; provided further that no
such instrument shall be a Permitted Investment (A) if such instrument
evidences principal and interest payments derived from obligations underlying
such instrument and the interest payments with respect to such instrument
provide a yield to maturity of greater than 120% of the yield to maturity at
par of such underlying obligations, or (B) if it may be redeemed at a price
below the purchase price (the foregoing clause (B) not to apply to investments
in units of money market funds pursuant to clause (vii) above); provided
further that no amount beneficially owned by any REMIC (including, without
limitation, any amounts collected by the Master Servicer but not yet deposited
in the Certificate Account) may be invested in investments (other than money
market funds) treated as equity interests for Federal income tax purposes,
unless the Seller shall receive an Opinion of Counsel, at the expense of the
Seller, to the effect that such investment will not adversely affect the
status of any such REMIC as a REMIC under the Code or result in imposition of
a tax on any such REMIC. Permitted Investments that are subject to prepayment
or call may not be purchased at a price in excess of par.
PERMITTED TRANSFEREE: Any person other than (i) the United States, any
--------------------
State or political subdivision thereof, or any agency or instrumentality of any
of the foregoing, (ii) a foreign government, International Organization or any
agency or instrumentality of either of the foregoing, (iii) an organization
(except certain farmers' cooperatives described in section 521 of the Code) that
is exempt from tax imposed by Chapter 1 of the Code (including the tax imposed
by section 511 of the Code on unrelated business taxable income) on any excess
inclusions (as defined in section 860E(c)(1) of the Code) with respect to any
Class R Certificate, (iv) rural electric and telephone cooperatives described in
section 1381(a)(2)(C) of the Code, and (v) a Person that is not a citizen or
resident of the United States, a corporation, partnership, or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, or an estate whose income from sources without the United
States is includable in gross income for United States federal income tax
purposes regardless of its connection with the conduct of a trade or business
within the United States, 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 trustees have authority to control all substantial decisions
of the trust, unless such Person has furnished the transferor and the Trustee
with a duly completed Internal Revenue Service Form 4224. The terms "United
States," "State" and "International Organization" shall have the meanings set
forth in section 7701 of the Code or successor provisions. A corporation will
not be treated as an instrumentality of the United States or of any State or
political subdivision thereof for these purposes if all of its activities are
subject to tax and, with the exception of the Federal Home Loan Mortgage
Corporation, a majority of its board of directors is not selected by such
government unit.
PERSON: Any individual, corporation, partnership, joint venture,
------
association, joint-stock company, trust, unincorporated organization or
government, or any agency or political subdivision thereof.
PREPAYMENT ASSUMPTION: The applicable rate of prepayment, as described
---------------------
in the Prospectus Supplement relating to the Certificates.
PREPAYMENT INTEREST EXCESS: With respect to any Distribution Date, for
--------------------------
each Mortgage Loan that was the subject of a Principal Prepayment during the
period from the second day through the fifteenth day of the month of such
Distribution Date, any payment of interest received in connection therewith (net
of any applicable Servicing and Trustee Fees) representing interest accrued for
any portion of such month of receipt.
PREPAYMENT INTEREST SHORTFALL: With respect to any Distribution Date,
-----------------------------
for each Mortgage Loan that was the subject of a partial Principal Prepayment, a
Principal Prepayment in full, or that became a Liquidated Loan during the period
from the sixteenth day of the month preceding such Distribution Date through the
first day of the month in which such Distribution Date occurs, or in the case of
the first Distribution Date, from the Cut-off Date through and including the
fifteenth day of the month of such Distribution Date, (other than a Principal
Prepayment in full resulting from the purchase of a Mortgage Loan pursuant to
Section 2.02, 2.03, 2.04, 3.12 or 9.01 hereof), the amount, if any, by which (i)
one month's interest at the applicable Net Mortgage Rate on the Stated Principal
Balance of such Mortgage Loan immediately prior to such prepayment (or
liquidation) or in the case of a partial Principal Prepayment on the amount of
such prepayment (or liquidation proceeds) exceeds (ii) the amount of interest
paid or collected in connection with such Principal Prepayment or such
liquidation proceeds.
PREPAYMENT PERIOD: As to any Distribution Date, the time period
-----------------
beginning with the opening of business on the sixteenth day of the calendar
month preceding the month in which such Distribution Date occurs (or, with
respect to the first Distribution Date, the period from the Cut-off Date) and
ending on the close of business on the fifteenth day of the month in which such
Distribution Date occurs.
PRINCIPAL DISTRIBUTION AMOUNT: With respect to each Distribution Date,
-----------------------------
the sum of (i) the Principal Funds for such Distribution Date and (ii) any Extra
Principal Distribution Amount for such Distribution Date.
PRINCIPAL FUNDS: The sum, without duplication, of (i) the scheduled
---------------
principal collected during the related Due Period or Advanced on or before the
related Master Servicer Advance Date, (ii) prepayments collected in the related
Prepayment Period, (iii) the Stated Principal Balance of each Mortgage Loan that
was repurchased by the Seller, (iv) the amount, if any, by which the aggregate
unpaid principal balance of any Replacement Mortgage Loan is less than the
aggregate unpaid principal balance of the related Deleted Mortgage Loans
delivered by the Seller in connection with a substitution of a Mortgage Loan
pursuant to Section 2.03(c) and (v) all Liquidation Proceeds collected during
the related Due Period (to the extent such Liquidation Proceeds related to
principal) less all Nonrecoverable Advances relating to principal reimbursed
during the related Due Period.
PRINCIPAL PREPAYMENT: Any Mortgagor payment or other recovery of (or
--------------------
proceeds with respect to) principal on a Mortgage Loan (including loans
purchased or repurchased under Sections 2.02, 2.03, 2.04, 3.12 and 9.01 hereof)
that is received in advance of its scheduled Due Date and is not accompanied by
an amount as to interest representing scheduled interest due on any date or
dates in any month or months subsequent to the month of prepayment. Partial
Principal Prepayments shall be applied by the Master Servicer in accordance with
the terms of the related Mortgage Note.
PROSPECTUS SUPPLEMENT: The Prospectus Supplement dated June 25, 1998
---------------------
relating to the public offering of the Class A and Subordinate Certificates.
PUD: A Planned Unit Development.
---
PURCHASE AND SALE AGREEMENT: The agreement by which the Mortgage Loans
---------------------------
were acquired by an affiliate of the Seller from the Originator.
PURCHASE PRICE: With respect to any Mortgage Loan (x) required to be
--------------
repurchased by the Seller pursuant to Section 2.02, 2.03, 2.04 or 3.12 hereof or
(y) that the Seller has a right to repurchase pursuant to Section 3.12 hereof,
an amount equal to the sum of (i) 100% of the unpaid principal balance of the
Mortgage Loan as of the date of such purchase and (ii) accrued interest thereon
at the applicable Mortgage Rate from (a) the date through which interest was
last paid by the Mortgagor to (b) the Due Date in the month in which the
Purchase Price is to be distributed to Certificateholders.
RATING AGENCY: Standard & Poor's Rating Services, a division of the
-------------
McGraw-Hill Companies, Inc. ("S&P"), and Fitch IBCA, Inc. ("Fitch"). If any such
organization or its successor is no longer in existence, "Rating Agency" shall
be a nationally recognized statistical rating organization, or other comparable
Person, designated by the Depositor, notice of which designation shall be given
to the Trustee. References herein to a given rating category of a Rating Agency
shall mean such rating category without giving effect to any modifiers.
REALIZED LOSS: With respect to each Liquidated Loan, an amount (not
-------------
less than zero or more than the Stated Principal Balance of the Mortgage Loan)
as of the date of such liquidation, equal to (i) the Stated Principal Balance of
such Liquidated Loan as of the date of such liquidation, minus (ii) the
Liquidation Proceeds, if any, received in connection with such liquidation
during the month in which such liquidation occurs, to the extent applied as
recoveries of principal of the Liquidated Loan. With respect to each Mortgage
Loan that has become the subject of a Deficient Valuation, (i) if the value of
the related Mortgaged Property was reduced below the principal balance of the
related Mortgage Note, the amount by which the value of the Mortgaged Property
was reduced below the principal balance of the related Mortgage Note, (b) if the
principal amount due under the related Mortgage Note has been reduced, the
difference between the principal balance of the Mortgage Loan outstanding
immediately prior to such Deficient Valuation and the principal balance of the
Mortgage Loan as reduced by the Deficient Valuation plus any reduction in the
interest component of the Scheduled Payments. With respect to each Mortgage Loan
that has become the subject of a Debt Service Reduction and any Distribution
Date, the amount, if any, by which the related Scheduled Payment was reduced.
RECORD DATE: With respect to any Distribution Date, the close of
-----------
business on the Business Day immediately preceding such Distribution Date.
REFERENCE BANK RATE: With respect to any Accrual Period, the
-------------------
arithmetic mean (rounded upwards, if necessary, to the nearest whole multiple of
0.03125%) of the offered rates for United States dollar deposits for one month
that are quoted by the Reference Banks as of 11:00 a.m., New York City time, on
the related Interest Determination Date to prime banks in the London interbank
market for a period of one month in amounts approximately equal to the
outstanding balance of the Certificates on such Interest Determination Date,
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
(rounded upwards, if necessary, to the nearest whole multiple of 0.03125%) of
the rates quoted by one or more major banks in New York City, selected by the
Trustee after consultation with the Seller, as of 11:00 a.m., New York City
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 outstanding balance of
the Certificates on such Interest Determination Date.
REFERENCE BANKS: Barclays Bank PLC, Bankers Trust and NatWest, N.A.,
---------------
provided that if any of the foregoing banks are not suitable to serve as a
Reference Bank, then any leading banks selected by the Trustee, after
consultation with the Seller, which are engaged in transactions in Eurodollar
deposits in the international Eurocurrency market (i) with an established place
of business in London, England, (ii) not controlling, under the control of or
under common control with the Depositor or any affiliate thereof and (iii) which
have been designated as such by the Trustee, after consultation with the Seller.
REFINANCING MORTGAGE LOAN: Any Mortgage Loan originated in connection
-------------------------
with the refinancing of an existing mortgage loan.
REGULAR CERTIFICATE: Any one of the Class A, Class M-1, Class M-2,
-------------------
Class B or Class X Certificates.
REO PROPERTY: A Mortgaged Property acquired by the Master Servicer on
------------
behalf of the Trust Fund through foreclosure or deed-in-lieu of foreclosure in
connection with a defaulted Mortgage Loan.
REPLACEMENT MORTGAGE LOAN: A Mortgage Loan substituted by the Seller
-------------------------
for a Deleted Mortgage Loan, which must, on the date of such substitution, as
confirmed in a Request for Release, substantially in the form of Exhibit N, (i)
have a Stated Principal Balance, after deduction of the principal portion of the
Scheduled Payment due in the month of substitution, not in excess of, and not
less than 90% of the Stated Principal Balance of the Deleted Mortgage Loan; (ii)
have a Maximum Mortgage Rate no more than 1% per annum higher or lower than the
Maximum Mortgage Rate of the Deleted Mortgage Loan; (iii) have a Minimum
Mortgage Rate no more than 1% per annum higher or lower than the Minimum
Mortgage Rate of the Deleted Mortgage Loan; (iv) have the same Index and
Periodic Rate Cap as that of the Deleted Mortgage Loan and a Gross Margin not
more than 1% per annum higher or lower than that of the Deleted Mortgage Loan;
(v) not permit conversion of the related Mortgage Rate to a fixed Mortgage Rate;
(vi) have the same or higher credit quality characteristics than that of the
Deleted Mortgage Loan; (vii) be accruing interest at a rate not more than 1% per
annum higher or lower than that of the Deleted Mortgage Loan; (viii) have a
Loan-to-Value Ratio or Combined Loan-to-Value Ratio, as applicable, no higher
than that of the Deleted Mortgage Loan; (ix) have a remaining term to maturity
no greater than (and not more than one year less than) that of the Deleted
Mortgage Loan; (x) provide for a prepayment charge on terms substantially
similar to those of the prepayment charge, if any, of the Deleted Mortgage Loan;
(xi) have the same lien priority as the Deleted Mortgage Loan; (xii) constitute
the same occupancy type as the Deleted Mortgage Loan; and (xiii) comply with
each representation and warranty set forth in Section 2.03 hereof.
REQUEST FOR RELEASE: The Request for Release submitted by the Master
-------------------
Servicer to the Trustee, substantially in the form of Exhibits M and N, as
appropriate.
REQUIRED CARRYOVER RESERVE FUND DEPOSIT: With respect to any
---------------------------------------
Distribution Date on which the Net Excess Spread is greater than 0.25%, an
amount equal to the lesser of (i) the Certificate Interest Carryover Amount for
such Distribution Date and (ii) (A) for the first Distribution Date, $5,000 and
(B) for each Distribution Date thereafter, an amount that when added to other
amounts already on deposit in the Carryover Reserve Fund, the aggregate amount
on deposit therein is equal to $5,000. With respect to any Distribution Date on
which the Net Excess Spread is less than 0.25%, the amount, if any by which (a)
the product of 0.50% and the aggregate Stated Principal Balance of the Mortgage
Loans as of such date exceeds (b) the amount on deposit in the Carryover Reserve
Fund immediately prior to such date.
REQUIRED PERCENTAGE: With respect to any Distribution Date after the
-------------------
Stepdown Date, is equal to the quotient of (x) the excess of (i) the aggregate
Stated Principal Balance of the Mortgage Loans as of as of the preceding Due
Date over (ii) the Certificate Principal Balance of the most senior Class of the
Certificates outstanding as of the preceding Master Servicer Advance Date
divided by (y) the aggregate Stated Principal Balance of the Mortgage Loans as
of the preceding Due Date.
REQUIRED INSURANCE POLICY: With respect to any Mortgage Loan, any
-------------------------
insurance policy that is required to be maintained from time to time under this
Agreement.
RESPONSIBLE OFFICER: When used with respect to the Trustee, any Vice
-------------------
President, any Assistant Vice President, the Secretary, any Assistant Secretary,
any Trust Officer or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also to whom, with respect to a particular matter, such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.
SCHEDULED PAYMENT: The scheduled monthly payment on a Mortgage Loan
-----------------
due on any Due Date allocable to principal and/or interest on such Mortgage
Loan.
SECURITIES ACT: The Securities Act of 1933, as amended.
--------------
SELLER: American Residential Holdings, Inc., a Delaware corporation,
------
and its successors and assigns, in its capacity as seller of the Mortgage Loans
to the Depositor.
SERVICING ADVANCES: All customary, reasonable and necessary "out of
------------------
pocket" costs and expenses incurred in the performance by the Master Servicer of
its servicing obligations hereunder, including, but not limited to, the cost of
(i) the preservation, restoration and protection of a Mortgaged Property, (ii)
any enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of any REO Property and (iv) compliance with the
obligations under Section 3.10.
SERVICING FEE: As to each Mortgage Loan and any Distribution Date, an
-------------
amount equal to one month's interest at the Servicing Fee Rate on the Stated
Principal Balance of such Mortgage Loan or, in the event of any payment of
interest that accompanies a Principal Prepayment in full made by the Mortgagor,
interest at the Servicing Fee Rate on the Stated Principal Balance of such
Mortgage Loan for the period covered by such payment of interest.
SERVICING FEE RATE: With respect to each Mortgage Loan, 0.50% per
------------------
annum.
SERVICING OFFICER: Any officer of the Master Servicer involved in, or
-----------------
responsible for, the administration and servicing of the Mortgage Loans whose
name and facsimile signature appear on a list of servicing officers furnished to
the Trustee by the Master Servicer on the Closing Date pursuant to this
Agreement, as such list may from time to time be amended.
SPECIFIED OVERCOLLATERALIZATION AMOUNT: Prior to the Stepdown Date,
--------------------------------------
2.20% of the aggregate Cut-off Date Principal Balance of the Mortgage Loans, and
on and after the Stepdown Date, 4.40% of the aggregate Stated Principal Balance
of the Mortgage Loans as of the preceding Due Date, subject to a minimum of
0.50% of the aggregate Cut-off Date Principal Balance of the Mortgage Loans;
provided that, if on any Distribution Date a Trigger Event has occurred, the
Specified Overcollateralization Amount shall not be reduced to the applicable
percentage of the then current aggregate Stated Principal Balance of the
Mortgage Loans until the Distribution Date on which a Trigger Event no longer
exists.
STATED PRINCIPAL BALANCE: With respect to any Mortgage Loan or related
------------------------
REO Property (i) as of the Cut-off Date and each day thereafter to and including
the first Distribution Date, the Cut-off Date Principal Balance thereof, and
(ii) as of any Distribution Date after the first Distribution Date, such Cut-off
Date Principal Balance minus the sum of (i) the principal portion of the
Scheduled Payments (x) due with respect to such Mortgage Loan during each Due
Period ending prior to the immediately preceding Distribution Date and (y) that
were received by the Master Servicer as of the close of business on the
Determination Date related to such preceding Distribution Date or with respect
to which Advances were made on each Master Servicer Advance Date prior to such
preceding Distribution Date and (b) all Principal Prepayments with respect to
such Mortgage Loan received prior to the preceding Prepayment Period, and all
Liquidation Proceeds to the extent applied by the Master Servicer as recoveries
of principal in accordance with Section 3.12 with respect to such Mortgage Loan,
that were received by the Master Servicer as of the close of business on the
Determination Date related to such preceding Distribution Date. The Stated
Principal Balance of any Mortgage Loan immediately following a given
Distribution Date shall be deemed to equal the Stated Principal Balance of such
Mortgage Loan as of the immediately following Distribution Date, and, in
particular, the Stated Principal Balance of any Mortgage Loan that becomes a
Liquidated Loan will be zero immediately following the Distribution Date
following the Prepayment Period in which such Mortgage Loan becomes a Liquidated
Loan.
STEPDOWN DATE: With respect to Mortgage Loans, the later to occur of
-------------
(i) the Distribution Date in July 2001 or (ii) the first Distribution Date on
which the Class A Certificate Principal Balance is less than or equal to 66.41%
of the aggregate Stated Principal Balance of the Mortgage Loans as of the
preceding Due Date.
SUBORDINATE CERTIFICATES: The Class M-1, M-2 and Class B Certificates.
------------------------
SUBSERVICER: As defined in Section 3.02(a).
-----------
SUBSERVICING AGREEMENT: As defined in Section 3.02(a).
----------------------
SUBSTITUTION ADJUSTMENT AMOUNT: The meaning ascribed to such term
------------------------------
pursuant to Section 2.03(c).
SUBSTITUTION AMOUNT: With respect to any Mortgage Loan substituted
-------------------
pursuant to Section 2.03(c), the excess of (x) the principal balance of the
Mortgage Loan that is substituted for, over (y) the principal balance of the
Replacement Mortgage Loan, each balance being determined as of the date of
substitution.
TAX MATTERS PERSON: The person designated as "tax matters person" in
------------------
the manner provided under Treasury regulation ss. 1.860F-4(d) and temporary
Treasury regulation ss. 301.6231(a)(7)-1T. Initially, this person shall be the
Trustee.
TAX MATTERS PERSON CLASS R CERTIFICATE: A Class R Certificate
--------------------------------------
designated as the Tax Matters Person Class R Certificate and evidencing a
Denomination of $0.01.
TRANSFER: Any direct or indirect transfer or sale of any Ownership
--------
Interest in a Certificate.
TRIGGER EVENT: With respect to any Distribution Date after the
-------------
Stepdown Date, when the product of (i) two (2) times (ii) the quotient of (A)
the Stated Principal Balance of all Mortgage Loans 60 or more days delinquent
(including Mortgage Loans in foreclosure and REO Properties) divided by (B) the
Stated Principal Balance of the Mortgage Loans as of the preceding Master
Servicer Advance Date, equals or exceeds the Required Percentage.
TRUST FUND: The corpus of the trust created hereunder consisting of
----------
(i) the Mortgage Loans and all interest and principal received on or with
respect thereto on and after the Cut-off Date to the extent not applied in
computing the Cut-off Date Principal Balance thereof, exclusive of interest not
required to be deposited in the Certificate Account pursuant to Section
3.05(b)(ii); (ii) the Certificate Account, the Distribution Account and the
Carryover Reserve Fund and all amounts deposited therein pursuant to the
applicable provisions of this Agreement; (iii) property that secured a Mortgage
Loan and has been acquired by foreclosure, deed in lieu of foreclosure or
otherwise; (iv) the mortgagee's rights under the Insurance Policies with respect
to the Mortgage Loan; (v) the rights of the owner of the Mortgage Loans under
the Purchase and Sale Agreement; (vi) the rights of the Depositor under the Loan
Purchase Agreement; and (vii) all proceeds of the conversion, voluntary or
involuntary, of any of the foregoing into cash or other liquid property.
TRUSTEE: Bankers Trust Company of California, N.A., a national banking
-------
association, not in its individual capacity, but solely in its capacity as
trustee for the benefit of the Certificateholders under this Agreement, and any
successor thereto, and any corporation or national banking association resulting
from or surviving any consolidation or merger to which it or its successors may
be a party and any successor trustee as may from time to time be serving as
successor trustee hereunder.
TRUSTEE FEE: As to each Mortgage Loan and any Distribution Date, an
-----------
amount equal to one month's interest at the Trustee Fee Rate on the Stated
Principal Balance of such Mortgage Loan or, in the event of any payment of
interest that accompanies a Principal Prepayment in full made by the Mortgagor,
interest at the Trustee Fee Rate on the Stated Principal Balance of such
Mortgage Loan for the period covered by such payment of interest.
TRUSTEE FEE RATE: With respect to each Mortgage Loan, 0.015% per
----------------
annum.
VOTING RIGHTS: The portion of the voting rights of all the
-------------
Certificates that is allocated to any Certificate for purposes of the voting
provisions hereunder. Voting Rights allocated to each Class of Certificates
shall be allocated 95% to the Class A and Subordinate Certificates, and 5% to
the Class X and Class R Certificates, with the allocation among the Class A and
Subordinate Certificates to be in proportion to the Certificate Principal
Balance of each such Class relative to the Certificate Principal Balance of all
other such Classes, and with the allocation among the Class X and Class R
Certificates being four-fifths and one-fifth, respectively. Voting Rights will
be allocated among the Certificates of each such Class in accordance with their
respective Percentage Interests.
WEIGHTED MAXIMUM RATE CAP: As of any Distribution Date, a rate equal
-------------------------
to (i) the weighted average of the Maximum Mortgage Rates on the Mortgage Loans
on such Distribution Date minus (ii) the Servicing Fee Rate.
SECTION 1.02. Certain REMIC-Related Defined Terms.
-----------------------------------
In addition to those defined terms defined in Section 1.01, whenever
used in this Agreement, the following words and phrases, unless the context
otherwise requires, shall have the following meanings:
Class R-1 Interest: The uncertificated residual interest in REMIC 1.
------------------
Class R-2 Interest: The uncertificated residual interest in REMIC 2.
------------------
Class R-3 Interest: The uncertificated residual interest in REMIC 3.
------------------
Class R-4 Interest: The uncertificated residual interest in REMIC 4.
------------------
Class T1-1 Interest: A regular interest in REMIC 1 that is held as an
-------------------
asset of REMIC 2, that has an initial principal balance equal to 98% of the
Stated Principal Balance of the Mortgage Loans as of the Cut-off Date, that
bears interest at a per annum rate equal to the Net Rate, and that has such
other terms as are described in Section 4.06.
Class T1-2 Interest: A regular interest in REMIC 1 that is held as an
-------------------
asset of REMIC 2, that has an initial principal balance equal to 1% of the
Stated Principal Balance of the Mortgage Loans as of the Cut-off Date, that
bears interest at a per annum rate equal to Net Rate, and that has such other
terms as are described in Section 4.06.
Class T1-3 Interest: A regular interest in REMIC 1 that is held as an
-------------------
asset of REMIC 2, that has an initial principal balance equal to 1% of the
Stated Principal Balance of the Mortgage Loans as of the Cut-off Date, that
bears interest at a per annum rate equal to the Net Rate, and that has such
other terms as are described in Section 4.06.
Class T2-1 Interest: A regular interest in REMIC 2 that is held as an
-------------------
asset of REMIC 3, that has an initial principal balance equal to 98% of the
Stated Principal Balance of the Mortgage Loans as of the Cut-off Date, that
bears interest at a per annum rate equal to the Net Rate, and that has such
other terms as are described in Section 4.06.
Class T2-2 Interest: A regular interest in REMIC 2 that is held as an
-------------------
asset of REMIC 3, that has an initial principal balance equal to 1% of the
Stated Principal Balance of the Mortgage Loans as of the Cut-off Date, that
bears interest at a per annum rate equal to the Standard Rate, and that has such
other terms as are described in Section 4.06.
Class T2-3 Interest: A regular interest in REMIC 2 that is held as an
-------------------
asset of REMIC 3, that has an initial principal balance equal to 1% of the
Stated Principal Balance of the Mortgage Loans as of the Cut-off Date, that
bears interest at a per annum rate equal to the Net Rate, and that has such
other terms as are described in Section 4.06.
Class T2-4 Interest: A regular interest in REMIC 2 that is held as an
-------------------
asset of REMIC 3, that is entitled to 100% of the interest accruals on the Class
T1-V2 Interest in excess of interest accruals at the Standard Rate, and that has
such other terms as are described in Section 4.06. The Class T2-F4 interest
shall not have a principal balance.
Class T3-1 Interest: A regular interest in REMIC 3 held as an asset of
-------------------
REMIC 4 that has an initial principal balance of $83,822,000 and bears interest
at a rate equal to the Standard Rate.
Class T3-2 Interest: A regular interest in REMIC 3 held as an asset of
-------------------
REMIC 4 that has an initial principal balance of $6,715,000 bears interest at a
rate equal to the Standard Rate.
Class T3-3 Interest: A regular interest in REMIC 3 held as an asset of
-------------------
REMIC 4 that has an initial principal balance of $4,228,000 and bears interest
at a rate equal to the Standard Rate.
Class T3-4 Interest: A regular interest in REMIC 3 held as an asset of
-------------------
REMIC 4 that has an initial principal balance of $3,376,000 and bears interest
at a rate equal to the Standard Rate.
Class T3-5 Interest: A regular interest in REMIC 3 held as an asset of
-------------------
REMIC 4 that has such terms as are described in Section 4.06.
Class T3-5 Distributable Amount: With respect to any Distribution
-------------------------------
Date, an amount equal to the product of (i) a fraction, the numerator of which
is the number of days in the related Accrual Period and the denominator of which
is 360, (ii) the Class T3-5 Notional Balance, and (iii) the Class T3-5
Pass-Through Rate.
Class T3-5 Notional Balance: A notional principal balance equal as of
---------------------------
any date to the sum of the principal balances of the Class T2-1 and T2-3
Interests for such date.
Class T3-5 Pass-Through Rate: With respect to any Distribution Date, a
----------------------------
per annum rate equal to the excess of (i) the Net Rate for such date over (ii)
the product of two and a fraction, the numerator of which is the product of (x)
the Standard Rate and (y) the principal balance of the Class T2-2 Interest
immediately prior to such Distribution Date, and the denominator of which is the
sum of the principal balances of the Class T2-1 and Class T2-3 Interests
immediately prior to such Distribution Date.
Class T3-6 Interest: A regular interest in REMIC 3 held as an asset of
-------------------
REMIC 4 that has such terms as are described in Section 4.06.
Class T3-6 Distributable Amount: With respect to any Distribution
-------------------------------
Date, an amount equal to the product of (i) a fraction, the numerator of which
is the number of days in the related Accrual Period and the denominator of which
is 360, (ii) the Class T3-6 Notional Balance, and (iii) the Class T3-6
Pass-Through Rate.
Class T3-6 Notional Balance: A notional principal balance equal as of
---------------------------
any date to the principal balance of the Class T2-2 Interests for such date.
Class T3-6 Pass-Through Rate: With respect to any Distribution Date, a
----------------------------
per annum rate equal to the excess of (i) the Standard Rate for such date over
(ii) the product of (x) two and (y) a fraction, the numerator of which is the
product of the Standard Rate, and the denominator of which is the sum of the
principal balances of the Class T2-2 and Class T2-3 Interests immediately prior
to such Distribution Date.
Class T3-7 Interest: A regular interest in REMIC 3 held as an asset of
-------------------
REMIC 4 that is entitled to receive 100% of the amounts distributable with
respect to the Class T2-4 Interest, and has such terms as are described in
Section 4.06.
Class T3-8 Interest: A regular interest in REMIC 3 held as an asset of
-------------------
REMIC 4 that has an initial principal balance of $1,000.01 and that bears
interest at a rate equal to the Standard Rate.
Class T4-1 Interest: A regular interest in REMIC 4 that has an initial
-------------------
principal balance of $83,822,000 and that bears interest at the lesser of (i)
One-Month LIBOR plus the Class A Margin and (ii) the Net Rate. Ownership of the
Class T4-1 Interest is evidenced by the Class A Certificates.
Class T4-2 Interest: A regular interest in REMIC 4 that has an initial
-------------------
principal balance of $6,715,000 and that bears interest at the lesser of (i)
One-Month LIBOR plus the Class M-1 Margin and (ii) the Net Rate. Ownership of
the Class T4-2 Interest is evidenced by the Class M-1 Certificates.
Class T4-3 Interest: A regular interest in REMIC 4 that has an initial
-------------------
principal balance of $4,228,000 and that bears interest at the lesser of (i)
One-Month LIBOR plus the Class M-2 Margin and (ii) the Net Rate. Ownership of
the Class T4-3 Interest is evidenced by the Class M-2 Certificates.
Class T4-4 Interest: A regular interest in REMIC 4 that has an initial
-------------------
principal balance of $3,376,000 and that bears interest at the lesser of (i)
One-Month LIBOR plus the Class B Margin and (ii) the Net Rate. Ownership of the
Class T4-4 Interest is evidenced by the Class B Certificates.
Class T4-5 Interest: A regular interest in REMIC 4 that is entitled to
-------------------
100% of the interest accruals on the Class T3-1 Interest in excess of the lesser
of (i) One-Month LIBOR plus the Class A Margin and (ii) the Net Rate. Ownership
of the Class T4-5 Interest is evidenced by the Class X Certificates.
Class T4-6 Interest: A regular interest in REMIC 4 that is entitled to
-------------------
100% of the interest accruals on the Class T3-2 Interest in excess of the lesser
of (i) One-Month LIBOR plus the Class M-1 Margin and (ii) the Net Rate.
Ownership of the Class T4-6 Interest is evidenced by the Class X Certificates.
Class T4-7 Interest: A regular interest in REMIC 4 that is entitled to
-------------------
100% of the interest accruals on the Class T3-3 Interest in excess of the lesser
of (i) One-Month LIBOR plus the Class M-2 Margin and (ii) the Net Rate.
Ownership of the Class T4-6 Interest is evidenced by the Class X Certificates.
Class T4-8 Interest: A regular interest in REMIC 4 that is entitled to
-------------------
100% of the amounts distributable with respect to the Class T3-5, Class T3-6,
and Class T3-7 Interests. Ownership of the Class T4-8 Interests is evidenced by
the Class X Certificates.
REMIC: As described in the Preliminary Statements, which term shall
-----
mean "real estate mortgage investment conduit" within the meaning of section
860D of the Code.
REMIC 1: As described in the Preliminary Statement.
-------
REMIC 2: As described in the Preliminary Statement.
-------
REMIC 3: As described in the Preliminary Statement.
-------
REMIC 4: As described in the Preliminary Statement.
-------
REMIC 1 Regular Interests: As described in the Preliminary Statement.
-------------------------
REMIC 2 Regular Interests: As described in the Preliminary Statement.
-------------------------
REMIC 3 Regular Interests: As described in the Preliminary Statement.
-------------------------
REMIC 4 Regular Interests: As described in the Preliminary Statement.
-------------------------
REMIC Provisions: Provisions of the federal income tax law relating to
----------------
real estate mortgage investment conduits, which appear at sections 860A through
860G of Subchapter M of Chapter 1 of the Code, and related provisions, and
proposed, temporary and final regulations and published rulings, notices and
announcements promulgated thereunder, as the foregoing may be in effect from
time to time as well as provisions of applicable state laws.
Standard Rate: The lesser of (i) One-Month LIBOR plus the Class B
-------------
Margin and (ii) the Net Rate.
Upper Tier REMIC: As described in the Preliminary Statement.
----------------
For purposes of the REMIC-related definitions in this Section 1.02,
all calculations of interest made in respect of a Mortgage Loan shall be made on
the basis of the actual number of days in the related Due Period and a 360 day
year.
[THE REMAINDER OF THIS PAGE WAS LEFT BLANK INTENTIONALLY]
<PAGE>
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
REPRESENTATIONS AND WARRANTIES
SECTION 2.01. Conveyance of Mortgage Loans.
----------------------------
The Seller hereby sells, transfers, assigns, sets over and otherwise
conveys to the Depositor, without recourse, all the right, title and interest of
the Seller in and to the Mortgage Loans, including all interest and principal
received and receivable by the Seller on or with respect to the Mortgage Loans
on and after the Cut-off Date (to the extent not applied in computing the
Cut-off Date Principal Balance thereof) or deposited into the Certificate
Account by the Seller as an Initial Certificate Account Deposit as provided in
this Agreement, other than principal due on the Mortgage Loans prior to the
Cut-off Date and interest accruing prior to June 1, 1998. The Seller confirms
that, concurrently with such transfer and assignment, it has deposited into the
Certificate Account the Initial Certificate Account Deposit, if any. The
aggregate Cut-off Date Principal Balance of the Mortgage Loans is
$98,206,198.20.
The Seller has entered into this Agreement in consideration for the
purchase of the Mortgage Loans by the Depositor and has agreed to take the
actions specified herein.
The Depositor, concurrently with the execution and delivery hereof,
hereby sells, transfers, assigns, sets over and otherwise conveys to the Trustee
for the use and benefit of the Certificateholders, without recourse, all the
right, title and interest of the Depositor in and to the Trust Fund.
In connection with any such transfer and assignment, the Depositor has
delivered to, and deposited with, the Trustee (except as provided in clause (vi)
below) for the benefit of the Certificateholders, the following documents or
instruments with respect to each Mortgage Loan so assigned and described in the
Mortgage Loan Schedule provided by the Seller in computer readable form to the
Trustee no later than the Closing Date:
(i) the original Mortgage Note, endorsed by the last endorsee or the
originator of such Mortgage Loan, without recourse, in the following form:
"Pay to the order of ____________________ without recourse", with all
intervening endorsements that show a complete chain of endorsement from the
originator to the last endorsee;
(ii) original recorded Mortgage;
(iii) a duly executed assignment of the Mortgage to "Bankers Trust
Company of California, N.A., a national banking association, as trustee
under the Pooling and Servicing Agreement dated as of June 1, 1998, Bear
Stearns Asset Backed Securities, Inc., Asset-Backed Certificates, Series
1998-1, without recourse" (each such assignment, when duly and validly
completed, to be in recordable form and sufficient to effect the assignment
of and transfer to the assignee thereof, under the Mortgage to which such
assignment relates);
(iv) the original recorded assignment or assignments of the Mortgage
from the original holder, together with any interim recorded assignments of
such Mortgage through any subsequent transferees, to the Seller or an
affiliate thereof;
(v) the original or copies of each assumption, modification, written
assurance or substitution agreement, if any; and
(vi) the original or duplicate original lender's title policy and all
riders thereto or, in the event such original title policy has not been
received from the insurer, such original or duplicate original lender's
title policy and all riders thereto shall be delivered within one year of
the Closing Date.
In the event that in connection with any Mortgage Loan the Seller
cannot deliver the original recorded Mortgage or all interim recorded
assignments of the Mortgage satisfying the requirements of clause (ii), (iii) or
(iv) concurrently with the execution and delivery hereof, the Seller shall
deliver or cause to be delivered to the Trustee a true copy of such Mortgage and
of each such undelivered interim assignment of the Mortgage each certified by
the Seller, the applicable title company, escrow agent or attorney, or the
originator of such Mortgage, as the case may be, to be a true and complete copy
of the original Mortgage or assignment of Mortgage submitted for recording. The
Seller shall promptly deliver or cause to be delivered to the Trustee such
original Mortgage and such assignment or assignments with evidence of recording
indicated thereon upon receipt thereof from the public recording official, or a
copy thereof, certified, if appropriate, by the relevant recording office, but
in no event shall any such delivery be made later than 270 days following the
Closing Date; provided that in the event that by such date the Seller is unable
to deliver or cause to be delivered each Mortgage and each interim assignment by
reason of the fact that any such documents have not been returned by the
appropriate recording office, or, in the case of each interim assignment,
because the related Mortgage has not been returned by the appropriate recording
office, the Seller shall deliver or cause to be delivered such documents to the
Trustee as promptly as possible upon receipt thereof. If the public recording
office in which a Mortgage or interim assignment thereof is recorded retains the
original of such Mortgage or assignment, a copy of the original Mortgage or
assignment so retained, with evidence of recording thereon, certified to be true
and complete by such recording office, shall satisfy the Seller's obligations in
this Section 2.01. If any document submitted for recording pursuant to this
Agreement is (a) lost prior to recording or rejected by the applicable recording
office, the Seller shall immediately prepare or cause to be prepared a
substitute and submit it for recording, and shall deliver copies and originals
thereof in accordance with the foregoing or (b) lost after recording, the Seller
shall deliver to the Trustee a copy of such document certified by the applicable
public recording office to be a true and complete copy of the original recorded
document. The Seller shall promptly forward or cause to be forwarded to the
Trustee (a) from time to time additional original documents evidencing an
assumption or modification of a Mortgage Loan and (b) any other documents
required to be delivered by the Depositor or the Master Servicer to the Trustee
within the time periods specified in this Section 2.01.
With respect to each Mortgage Loan as to which the related Mortgaged
Property and Mortgage File are located in (a) the State of California or (b) any
other jurisdiction under the laws of which the recordation of the assignment
specified in clause (iii) above is not necessary to protect the Trustee's and
the Certificateholders, interest in the related Mortgage Loan, as evidenced by
an Opinion of Counsel, delivered by the Seller to the Trustee and a copy to the
Rating Agencies, in lieu of recording the assignment specified in clause (iii)
above, the Seller may deliver an unrecorded assignment in blank, in form
otherwise suitable for recording to the Trustee; provided that if the related
Mortgage has not been returned from the applicable public recording office, such
assignment, or any copy thereof, of the Mortgage may exclude the information to
be provided by the recording office. As to any Mortgage Loan, the procedures of
the preceding sentence shall be applicable only so long as the related Mortgage
File is maintained in the possession of the Trustee in the State or jurisdiction
described in such sentence. In the event that (i) the Seller, the Depositor or
the Master Servicer gives written notice to the Trustee that recording is
required to protect the right, title and interest of the Trustee on behalf of
the Certificateholders in and to any Mortgage Loan, (ii) a court recharacterizes
the sale of the Mortgage Loans as a financing, or (iii) as a result of any
change in or amendment to the laws of the State or jurisdiction described in the
first sentence of this paragraph or any applicable political subdivision
thereof, or any change in official position regarding application or
interpretation of such laws, including a holding by a court of competent
jurisdiction, such recording is so required, the Trustee shall complete the
assignment in the manner specified in clause (iii) of the second paragraph of
this Section 2.01 and the Seller shall submit or cause to be submitted for
recording as specified above or, should the Seller fail to perform such
obligations, the Trustee shall cause the Master Servicer, at the Master
Servicer's expense, to cause each such previously unrecorded assignment to be
submitted for recording as specified above. In the event a Mortgage File is
released to the Master Servicer as a result of the Master Servicer's having
completed a Request for Release in the form of Exhibit M, the Trustee shall
complete the assignment of the related Mortgage in the manner specified in
clause (iii) of the second paragraph of this Section 2.01.
In the event that the Seller fails to record an assignment of a
Mortgage Loan as herein provided within 90 days of notice of an event set forth
in clause (i), (ii) or (iii) of the above paragraph, the Master Servicer shall
prepare and, if required hereunder, file such assignments for recordation in the
appropriate real property or other records office. The Seller hereby appoints
the Master Servicer (and any successor servicer hereunder) as its
attorney-in-fact with full power and authority acting in its stead for the
purpose of such preparation, execution and filing.
In the case of Mortgage Loans that become the subject of a Principal
Prepayment between the Cut-off Date and the Closing Date, the Seller shall
deposit or cause to be deposited in the Certificate Account the amount required
to be deposited therein with respect to such payment pursuant to Section 3.05
hereof.
SECTION 2.02. Acceptance by Trustee of the Mortgage Loans.
-------------------------------------------
The Trustee acknowledges receipt, subject to the limitations contained
in and any exceptions noted in the Initial Certification in the form annexed
hereto as Exhibit G-1 and in the list of exceptions attached thereto, of the
documents referred to in clauses (i) and (iii) of Section 2.01 above and all
other assets included in the Trust Fund and declares that it holds and will hold
such documents and the other documents delivered to it constituting the Mortgage
Files, and that it holds or will hold such other assets included in the Trust
Fund, in trust for the exclusive use and benefit of all present and future
Certificateholders.
The Trustee agrees to execute and deliver on the Closing Date to the
Depositor, the Master Servicer and the Seller an Initial Certification in the
form annexed hereto as Exhibit G-1 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), the documents described in Section 2.01(i) and
(iii) with respect to such Mortgage Loan are in its possession, and based on its
review and examination and only as to the foregoing documents, such documents
appear regular on their face and relate to such Mortgage Loan. The Trustee
agrees to execute and deliver within 30 days after the Closing Date to the
Depositor, the Master Servicer and the Seller an Interim Certification in the
form annexed hereto as Exhibit G-2 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), all documents required to be delivered to it
pursuant to this Agreement with respect to such Mortgage Loan are in its
possession (except those described in Section 2.01(v)) and based on its review
and examination and only as to the foregoing documents, (i) such documents
appear regular on their face and relate to such Mortgage Loan, and (ii) the
information set forth in items (i), (iv), (v), (vi), (viii), (xiv), (xv), (xvii)
and (xviii) of the definition of the "Mortgage Loan Schedule" accurately
reflects information set forth in the Mortgage File.
The Trustee shall be under no duty or obligation to inspect, review or
examine such documents, instruments, certificates or other papers to determine
that the same are genuine, enforceable or appropriate for the represented
purpose or that they have actually been recorded in the real estate records or
that they are other than what they purport to be on their face. In performing
any review pursuant to this Section 2.02, the Trustee shall not be obligated to
warrant and expressly makes no representations as to (i) the validity, legality,
sufficiency, enforceability or genuineness of any of the documents in any
Mortgage File or (ii) the collectibility, insurability, effectiveness, or
suitability of any Mortgage Loan.
Not later than 180 days after the Closing Date, the Trustee shall
deliver to the Depositor, the Master Servicer and the Seller (and to any
Certificateholder that so requests) a Final Certification in the form annexed
hereto as Exhibit H, with any applicable exceptions noted thereon.
In connection with the Trustee's completion and delivery of such Final
Certification, the Trustee shall review each Mortgage File to determine that it
contains the following documents:
(i) the original Mortgage Note, endorsed by the last endorsee or the
originator of such Mortgage Loan, without recourse, in the following form:
"Pay to the order of _______________ without recourse", with all
intervening endorsements that show a complete chain of endorsement from the
originator to the last endorsee;
(ii) the original recorded Mortgage;
(iii) a duly executed assignment of the Mortgage in the form permitted
by Section 2.01(iii);
(iv) the original recorded assignment or assignments of the Mortgage
from the original holder, together with any interim recorded assignments of
such Mortgage through any subsequent transferees, to the Seller or an
affiliate thereof;
(v) the original or copies of each assumption, modification, written
assurance or substitution agreement, if any; and
(vi) the original or duplicate original lender's title policy and all
riders thereto if delivered pursuant to Section 2.01 (vi) (otherwise such
original or duplicate original lender's title policy and all riders thereto
shall be held in the Mortgage File upon delivery as provided in such
Section).
If, in the course of such review, the Trustee finds any document or
documents constituting a part of such Mortgage File that do not meet the
requirements of clauses (i)-(iv) and (vi) above, the Trustee shall include such
exceptions in such Final Certification (and Trustee shall state in such Final
Certification whether any Mortgage File does not then include the original or
duplicate original lender's title policy and all riders thereto). If the public
recording office in which a Mortgage or assignment thereof is recorded retains
the original of such Mortgage or assignment, a copy of the original Mortgage or
assignment so retained, with evidence of recording thereon, certified to be true
and complete by such recording office, shall be deemed to satisfy the
requirements of clause (ii), (iii) or (iv) above, as applicable. The Seller
shall promptly correct or cure such defect referred to above within 90 days from
the date it was so notified of such defect and, if the Seller does not correct
or cure such defect within such period, the Seller shall either (a) if the time
to cure such defect expires prior to the end of the second anniversary of the
Closing Date, substitute for the related Mortgage Loan a Replacement Mortgage
Loan, which substitution shall be accomplished in the manner and subject to the
conditions set forth in Section 2.03, or (b) purchase such Mortgage Loan from
the Trustee within 90 days from the date the Seller was notified of such defect
in writing at the Purchase Price of such Mortgage Loan; provided that any such
substitution pursuant to (a) above or repurchase pursuant to (b) above shall not
be effected prior to the delivery to the Trustee of the Opinion of Counsel
required by Section 2.05 hereof and any substitution pursuant to (a) above shall
not be effected prior to the additional delivery to the Trustee of a Request for
Release substantially in the form of Exhibit N. No substitution will be made in
any calendar month after the Determination Date for such month. The Purchase
Price for any such Mortgage Loan shall be deposited by the Seller in the
Certificate Account and, upon receipt of such deposit and certification with
respect thereto in the form of Exhibit N hereto, the Trustee shall release the
related Mortgage File to the Seller and shall execute and deliver at the
Seller's request such instruments of transfer or assignment as the Seller has
prepared, in each case without recourse, as shall be necessary to vest in the
Seller, or a designee, the Trustee's interest in any Mortgage Loan released
pursuant hereto.
The Trustee shall retain possession and custody of each Mortgage File
in accordance with and subject to the terms and conditions set forth herein. The
Seller shall promptly deliver to the Trustee, upon the execution or receipt
thereof, the originals of such other documents or instruments constituting the
Mortgage File that come into the possession of the Seller from time to time.
It is understood and agreed that the obligation of the Seller to
substitute for or to purchase any Mortgage Loan that does not meet the
requirements of Section 2.01(i)-(vi) above shall constitute the sole remedy
respecting such defect available to the Trustee, the Depositor, and any
Certificateholder against the Seller.
SECTION 2.03. Representations, Warranties and Covenants of the Master
Servicer and the Seller.
-------------------------------------------------------
(a) The Master Servicer hereby represents and warrants to the
Depositor and the Trustee as follows, as of the date hereof:
(i) The Master Servicer is duly organized as a New York corporation
and is validly existing and in good standing under the laws of the State of
New York and is duly authorized and qualified to transact any and all
business contemplated by this Agreement to be conducted by the Master
Servicer in any state in which a Mortgaged Property is located or is
otherwise not required under applicable law to effect such qualification
and, in any event, is in compliance with the doing business laws of any
such state, to the extent necessary to ensure its ability to enforce each
Mortgage Loan, to service the Mortgage Loans in accordance with the terms
of this Agreement and to perform any of its other obligations under this
Agreement in accordance with the terms hereof.
(ii) The Master Servicer has the full corporate power and authority to
service each Mortgage Loan, and to execute, deliver and perform, and to
enter into and consummate the transactions contemplated by this Agreement
and has duly authorized by all necessary corporate action on the part of
the Master Servicer the execution, delivery and performance of this
Agreement; and this Agreement, assuming the due authorization, execution
and delivery hereof by the other parties hereto, constitutes a legal, valid
and binding obligation of the Master Servicer, enforceable against the
Master Servicer in accordance with its terms, except that (a) the
enforceability hereof may be limited by bankruptcy, insolvency, moratorium,
receivership and other similar laws relating to creditors' rights generally
and (b) the remedy of specific performance and injunctive and other forms
of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought.
(iii) The execution and delivery of this Agreement by the Master
Servicer, the servicing of the Mortgage Loans by the Master Servicer under
this Agreement, the consummation of any other of the transactions
contemplated by this Agreement, and the fulfillment of or compliance with
the terms hereof are in the ordinary course of business of the Master
Servicer and will not (A) result in a material breach of any term or
provision of the charter or by-laws of the Master Servicer or (B)
materially conflict with, result in a material breach, violation or
acceleration of, or result in a material default under, the terms of any
other material agreement or instrument to which the Master Servicer is a
party or by which it may be bound, or (C) constitute a material violation
of any statute, order or regulation applicable to the Master Servicer of
any court, regulatory body, administrative agency or governmental body
having jurisdiction over the Master Servicer; and the Master Servicer is
not in breach or violation of any material indenture or other material
agreement or instrument, or in violation of any statute, order or
regulation of any court, regulatory body, administrative agency or
governmental body having jurisdiction over it which breach or violation may
materially impair the Master Servicer's ability to perform or meet any of
its obligations under this Agreement.
(iv) The Master Servicer is an approved servicer of conventional
mortgage loans for FNMA or FHLMC and is a mortgagee approved by the
Secretary of Housing and Urban Development pursuant to sections 203 and 211
of the National Housing Act.
(v) No litigation is pending or, to the best of the Master Servicer's
knowledge, threatened, against the Master Servicer that would materially
and adversely affect the execution, delivery or enforceability of this
Agreement or the ability of the Master Servicer to service the Mortgage
Loans or to perform any of its other obligations under this Agreement in
accordance with the terms hereof.
(vi) 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 consummation of the transactions contemplated
hereby, or if any such consent, approval, authorization or order is
required, the Master Servicer has obtained the same.
(b) The Seller hereby represents and warrants to the Depositor and
the Trustee as follows, as of the date hereof (unless otherwise indicated or
the context otherwise requires, percentages with respect to the Mortgage Loans
are measured by the Cut-off Date Principal Balance of the Mortgage Loans):
(i) Due Organization. The Seller is duly organized as a Delaware
----------------
corporation and is validly existing and in good standing under the laws of
the State of Delaware and is duly authorized and qualified to transact any
and all business contemplated by this Agreement to be conducted by the
Seller in any state in which a Mortgaged Property is located or is
otherwise not required under applicable law to effect such qualification
and, in any event, is in compliance with the doing business laws of any
such state, to the extent necessary to ensure its ability to enforce each
Mortgage Loan, to sell the Mortgage Loans in accordance with the terms of
this Agreement and to perform any of its other obligations under this
Agreement in accordance with the terms hereof.
(ii) Power and Authority. The Seller has the full corporate power and
-------------------
authority to sell each Mortgage Loan, and to execute, deliver and perform,
and to enter into and consummate the transactions contemplated by this
Agreement and has duly authorized by all necessary corporate action on the
part of the Seller the execution, delivery and performance of this
Agreement; and this Agreement, assuming the due authorization, execution
and delivery hereof by the other parties hereto, constitutes a legal, valid
and binding obligation of the Seller, enforceable against the Seller in
accordance with its terms, except that (a) the enforceability hereof may be
limited by bankruptcy, insolvency, moratorium, receivership and other
similar laws relating to creditors' rights generally and (b) the remedy of
specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(iii) No Material Breach. The execution and delivery of this Agreement
------------------
by the Seller, the sale of the Mortgage Loans by the Seller under this
Agreement, the consummation of any other of the transactions contemplated
by this Agreement, and the fulfillment of or compliance with the terms
hereof are in the ordinary course of business of the Seller and will not
(A) result in a material breach of any term or provision of the charter or
by-laws of the Seller or (B) materially conflict with, result in a material
breach, violation or acceleration of, or result in a material default
under, the terms of any other material agreement or instrument to which the
Seller is a party or by which it may be bound, or (C) constitute a material
violation of any statute, order or regulation applicable to the Seller of
any court, regulatory body, administrative agency or governmental body
having jurisdiction over the Seller; and the Seller is not in breach or
violation of any material indenture or other material agreement or
instrument, or in violation of any statute, order or regulation of any
court, regulatory body, administrative agency or governmental body having
jurisdiction over it which breach or violation may materially impair the
Seller's ability to perform or meet any of its obligations under this
Agreement.
(iv) No Litigation. No litigation is pending or, to the best of the
-------------
Seller's knowledge, threatened, against the Seller that would materially
and adversely affect the execution, delivery or enforceability of this
Agreement or the ability of the Seller to sell the Mortgage Loans or to
perform any of its other obligations under this Agreement in accordance
with the terms hereof.
(v) No Consent. No consent, approval, authorization or order of any
----------
court or governmental agency or body is required for the execution,
delivery and performance by the Seller of, or compliance by the Seller
with, this Agreement or the consummation of the transactions contemplated
hereby, or if any such consent, approval, authorization or order is
required, the Seller has obtained the same.
(vi) Mortgage Loan Schedule. The information contained in the Mortgage
----------------------
Loan Schedule is complete, true and correct in all material respects;
(vii) No Delinquencies or Advances. All payments required to be made
----------------------------
prior to the related Cut-Off Date for such Mortgage Loan under the terms of
the Mortgage Note have been made; funds have not been advanced or induced,
solicited or knowingly received from a party other than the owner of the
Mortgaged Property subject to the Mortgage, directly or indirectly, for the
payment of any amount required by the Mortgage Loan; and there has been no
delinquency of more than thirty (30) days in any payment by the Mortgagor
thereunder during the last twelve (12) months;
(viii) Taxes, Assessments, Insurance Premiums and Other Charges. The
--------------------------------------------------------
Seller has no knowledge of any delinquent taxes, ground rents, water
charges, sewer rents, assessments, insurance premiums, leasehold payments,
including assessments payable in future installments or other outstanding
charges affecting the related Mortgaged Property;
(ix) No Modifications. The terms of the Mortgage Note and the Mortgage
----------------
have not been impaired, waived, altered or modified in any respect, except
by written instruments that have been or will be recorded, if necessary to
protect the interests of Purchaser, and that have been or will be delivered
to Purchaser, all in accordance with this Agreement. The substance of any
such waiver, alteration or modification has been approved by the primary
mortgage guaranty insurer, if any, and by the title insurer, to the extent
required by the related policy and its terms are reflected on the Mortgage
Loan Schedule. No Mortgagor has been released, in whole or in part, except
in connection with an assumption agreement approved by the primary mortgage
insurer, if any, and the title insurer, to the extent required by the
policy, and which assumption agreement is part of the Mortgage Loan file
and the terms of which are reflected in the Mortgage Loan Schedule if
executed prior to the Closing Date;
(x) No Defenses. The Mortgage Note and the Mortgage are not subject to
-----------
any right of rescission, set-off, counterclaim or defense, including the
defense of usury, nor will the operation of any of the terms of the
Mortgage Note and the Mortgage, or the exercise of any right thereunder,
render the Mortgage unenforceable, in whole or in part, or subject to any
right of rescission, set-off, counterclaim or defense, including the
defense of usury, and no such right of rescission, set-off, counterclaim or
defense has been asserted with respect thereto;
(xi) Hazard and Flood Insurance. All buildings upon the Mortgaged
--------------------------
Property are insured by an insurer acceptable to an Agency against loss by
fire, hazards of extended coverage and by such other hazards as are
customary in the area where the Mortgaged Property is located, and such
insurer is licensed to do business in the state where the Mortgaged
Property is located. All such insurance policies contain a standard
mortgagee clause naming the originator of the Mortgage Loan, its successors
and assigns as mortgagee, and all premiums thereon have been paid. If, upon
the origination of the Mortgage Loan, the Mortgaged Property was or was
subsequently deemed to be 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), a flood insurance
policy that meets the requirements of the current guidelines of the Federal
Insurance Administration (or any successor thereto) and conforms to the
requirements of an Agency is in effect. The Mortgage obligates the
Mortgagor thereunder to maintain all such insurance at the Mortgagor's
expense, and upon the failure of the Mortgagor to do so, the holder of the
Mortgage is authorized to maintain such insurance at the Mortgagor's
expense and to seek reimbursement therefor from the Mortgagor;
(xii) Compliance with Applicable Law. Each Mortgage Loan at the time
------------------------------
of origination complied in all material respects with applicable state and
federal laws including truth in lending, real estate settlement procedures,
consumer credit protection, equal credit opportunity and disclosure laws
applicable to the Mortgage Loan;
(xiii) No Release of Mortgage. The Mortgage has not been satisfied,
----------------------
cancelled, subordinated, or rescinded, in whole or in part, and the
Mortgaged Property has not been released from the lien of the Mortgage, in
whole or in part, nor has any instrument been executed that would effect
any such release, cancellation, subordination or rescission;
(xiv) Enforceability of Mortgage Documents. The Mortgage Note and the
------------------------------------
related Mortgage are genuine and each is the legal, valid and binding
obligation of the maker thereof, enforceable in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or similar laws;
(xv) Validity of Mortgage. The Mortgage is a valid, existing and
--------------------
enforceable first or second lien (as specified in the related Mortgage Loan
Schedule) on the Mortgaged Property, including all improvements on the
Mortgaged Property, subject only to (i) the lien of current real property
taxes and assessments not yet due and payable, (ii) covenants, conditions
and restrictions, rights of way, easements and other matters of public
record as of the date of recording that are acceptable to mortgage lending
institutions generally and specifically referred to in lender's title
insurance policy delivered to the originator of the Mortgage Loan and that
do not adversely affect the appraised value of the Mortgaged Property;
(iii) if a second lien, any first mortgage loan secured by the Mortgaged
Property; and (iv) other matters to which like properties are commonly
subject that do not materially interfere with the benefits of the security
intended to be provided by the Mortgage or the use, enjoyment, value or
marketability of the related Mortgaged Property;
(xvi) Disbursements of Proceeds. The proceeds of the Mortgage Loan
-------------------------
have been fully disbursed and there is no requirement for future advances
thereunder and any and all requirements as to completion of any on-site or
off-site improvement and as to disbursements of any escrow funds therefor
have been complied with. All costs, fees and expenses incurred in making or
closing the Mortgage Loan and recording the Mortgage were paid, and the
Mortgagor is not entitled to any refund of any amounts paid or due under
the Mortgage Note or Mortgage;
(xvii) Sole Owner. Immediately prior to the transfer and assignment
----------
herein contemplated, the Seller is the sole owner and holder of the
Mortgage Loan. The Mortgage Loan is not assigned or pledged, and the Seller
has good and marketable title thereto, and has full right to transfer and
sell the Mortgage Loan to the Purchaser free and clear of any encumbrance,
equity, lien, pledge, charge, claim or security interest not specifically
set forth in the related Mortgage Loan Schedule and has full right and
authority subject to no interest or participation of, or agreement with,
any other party, to sell and assign each Mortgage Loan pursuant to the
terms of this Agreement;
(xviii) Title Insurance. Each Mortgage Loan secured by a first
---------------
priority Mortgage and each Mortgage Loan secured by a second priority
Mortgage with an original principal balance of $100,000 or more is covered
by an ALTA lender's title insurance policy acceptable to an Agency, issued
by a title insurer acceptable to an Agency and qualified to do business in
the jurisdiction where the Mortgaged Property is located, insuring (subject
to the exceptions contained in clauses (i), (ii) and (iii) of paragraph (j)
above) the originator of the Mortgage Loan, its successors and assigns as
to the first or second priority lien of the Mortgage, as applicable.
Additionally, such lender's title insurance policy affirmatively insures
ingress and egress, and against encroachments by or upon the Mortgaged
Property or any interest therein. Such lender's title insurance policy is
in full force and effect and will be in full force and effect upon the
consummation of the transactions contemplated by this Agreement. No claims
have been made under such lender's title insurance policy, and no prior
holder of the related Mortgage, including the Seller, has done, by act or
omission, anything which would impair the coverage of such lender's title
insurance policy;
(xix) No Default. There is no default, breach, violation or event of
----------
acceleration existing under the Mortgage or the Mortgage Note and no event
which, with the passage of time or with notice and the expiration of any
grace or cure period, would constitute a default, breach, violation or
event of acceleration, and no default, breach, violation or event of
acceleration has been waived;
(xx) No Mechanics' Liens. There are no mechanics' or similar liens or
-------------------
claims which have been filed for work, labor or material (and no rights are
outstanding that under law could give rise to such lien) affecting the
related Mortgaged Property which are or may be liens prior to, or equal or
co-ordinate with, the lien of the related Mortgage;
(xxi) Origination and Collection Practices. The origination and
------------------------------------
collection practices used by the originator of the Mortgage Loan with
respect to each Mortgage Note and Mortgage have been in all respects legal,
proper, prudent and customary in the mortgage origination and servicing
business. There exist no deficiencies in connection with escrow deposits
and escrow payments for which customary arrangements for repayment thereof
have not been made. No escrow deposits or escrow payments or other charges
or payments due the originator of the Mortgage Loan have been capitalized
under any Mortgage or the related Mortgage Note. With respect to Adjustable
Rate Mortgage Loans, all Mortgage Interest Rate adjustments have been made
in strict compliance with state and federal law and the terms of the
related Mortgage Note. Any interest required to be paid pursuant to state
and local law has been properly paid and credited;
(xxii) No Condemnation or Damage. To the best of the Seller's
-------------------------
knowledge, the Mortgaged Property is free of material damage and waste and
there is no proceeding pending for the total or partial condemnation
thereof;
(xxiii) Customary and Enforceable Provisions. The Mortgage contains
------------------------------------
customary and enforceable provisions such as to render the rights and
remedies of the holder thereof adequate for the realization against the
Mortgaged Property of the benefits of the security provided thereby
including (i) in the case of a Mortgage designated as a deed of trust, by
trustee's sale, and (ii) otherwise by judicial foreclosure;
(xxiv) Collateral. The Mortgage Note is not and has not been secured
----------
by any collateral except the lien of the corresponding Mortgage and the
security interest of any applicable security agreement or chattel mortgage
referred to in paragraph (j) above;
(xxv) Appraisal. Unless the Mortgage Loan was underwritten pursuant to
---------
one of the originator's limited documentation programs, the credit file
contains an appraisal of the related Mortgaged Property signed prior to the
approval of the Mortgage Loan application by an appraiser who meets the
minimum requisite qualifications of an Agency for appraisers, duly
appointed by the originator, that had no interest, direct or indirect in
the Mortgaged Property, and whose compensation is not affected by the
approval or disapproval of the Mortgage Loan; the appraisal is in a form
acceptable to an Agency, with such riders as are acceptable to such Agency;
(xxvi) Trustee for Deed of Trust. In the event the Mortgage
-------------------------
constitutes a deed of trust, a trustee, duly qualified under applicable law
to serve as such, has been properly designated and currently so serves and
is named in the Mortgage, and no fees or expenses are or will become
payable by the Purchaser to the trustee under the deed of trust, except in
connection with a trustee's sale after default by the Mortgagor;
(xxvii) Private Mortgage Insurance, FHA Insurance and VA Guarantees.
-----------------------------------------------------------
Each conventional mortgage loan, except a Mortgage Loan secured by a second
priority Mortgage or underwritten in accordance with sub-prime underwriting
guidelines, with a loan-to-value ratio at origination in excess of 80% is
and will be subject to a private mortgage insurance policy which insures
that portion of the Mortgage Loan over 75% of the appraised value of the
related Mortgaged Property. All provisions of such private mortgage
insurance policy have been and are being complied with, such policy is in
full force and effect, and all premiums due thereunder have been paid. Any
Mortgage subject to any such private mortgage insurance policy obligates
the Mortgagor thereunder to maintain such insurance and to pay all premiums
and charges in connection therewith or, in the case of a lender paid
mortgage insurance policy, the premiums and charges are included in the
Mortgage Interest Rate for the Mortgage Loan. Each government Mortgage Loan
either has or will have in due course a valid and enforceable mortgage
insurance certificate issued by the Department of Housing and Urban
Development or a loan guarantee certificate issued by the Department of
Veterans Affairs, as applicable and, in each case, all premiums due
thereunder have been paid;
(xxviii) Lawfully Occupied. To the best of the Seller's knowledge, the
-----------------
Mortgaged Property is lawfully occupied under applicable law. To the best
of the Seller's knowledge, all inspections, licenses and certificates
required to be made or issued with respect to all occupied portions of the
Mortgaged Property and, with respect to the use and occupancy of the same
including certificates of occupancy, have been made or obtained from the
appropriate authorities;
(xxix) Assignment of Mortgage. Except for the absence of recording
----------------------
information, the related assignment of mortgage is in recordable form and
is acceptable for recording under the laws of the jurisdiction in which the
Mortgaged Property is located;
(xxx) Consolidation of Future Advances. Any future advances made to
--------------------------------
the Mortgagor prior to the Cut-Off Date have been consolidated with the
outstanding principal amount secured by the Mortgage and the secured
principal amount, as consolidated, bears a single interest rate and single
repayment term. The consolidated principal amount does not exceed the
original principal amount of the Mortgage Loan.
(xxxi) Form of Mortgage Note and Mortgage. The Mortgage Note and
----------------------------------
Mortgage are on forms acceptable to an Agency.
(xxxii) Sale. The Seller will treat the transfer of the Mortgage Loans
----
to the Depositor as a sale of the Mortgage Loans for all tax, accounting
and regulatory purposes.
(xxxiii) Servicing. Each Mortgage Loan is being serviced by the Master
---------
Servicer.
(xxxiv) Conformity to Prospectus Supplement. The Mortgage Loans,
-----------------------------------
individually and in the aggregate, conform in all material respects to the
descriptions thereof in the Prospectus Supplement.
(xxxv) Qualified Mortgage. Each Mortgage Loan represents a "qualified
------------------
mortgage" within the meaning of Section 860(a)(3) of the Code (but without
regard to the rule in Treasury Regulation ss. 1.860G-2(f)(2) that treats a
defective obligation as a qualified mortgage, or any substantially similar
successor provision) and applicable Treasury regulations promulgated
thereunder.
(xxxvi) Qualified Originator. Each Mortgage Loan was originated
--------------------
(within the meaning of Section 3(a) (41) of the Securities Exchange Act of
1934, as amended) by an entity that satisfied at the time of origination
the requirements of Section 3(a)(41) of the Securities Exchange Act of
1934, as amended.
(c) Upon discovery by any of the parties hereto of a breach of a
representation or warranty set forth in Section 2.03(a) or (b) that materially
and adversely affects the interests of the Certificateholders in any Mortgage
Loan, the party discovering such breach shall give prompt notice thereof to the
other parties. Each of the Master Servicer and the Seller (each, a "Representing
Party") hereby covenants with respect to the representations and warranties set
forth in Sections 2.03(a) and (b), respectively, that within 90 days of the
earlier of the discovery by such Representing Party or receipt of written notice
by such Representing Party from any party of a breach of any representation or
warranty set forth herein made that materially and adversely affects the
interests of the Certificateholders in any Mortgage Loan, it shall cure such
breach in all material respects and, if such breach is not so cured, shall, (i)
if such 90-day period expires prior to the second anniversary of the Closing
Date, remove such Mortgage Loan (a "Deleted Mortgage Loan") from the Trust Fund
and substitute in its place a Replacement Mortgage Loan, in the manner and
subject to the conditions set forth in this Section; or (ii) repurchase the
affected Mortgage Loan or Mortgage Loans from the Trustee at the Purchase Price
in the manner set forth below; provided that any such substitution pursuant to
(i) above or repurchase pursuant to (ii) above shall not be effected prior to
the delivery to the Trustee of the Opinion of Counsel required by Section 2.05
hereof and any such substitution pursuant to (i) above shall not be effected
prior to the additional delivery to the Trustee of a Request for Release
substantially in the form of Exhibit N. Any Representing Party liable for a
breach under this Section 2.03 shall promptly reimburse the Master Servicer and
the Trustee for any expenses reasonably incurred by the Master Servicer or the
Trustee in respect of enforcing the remedies for such breach. To enable the
Master Servicer to amend the Mortgage Loan Schedule, any Representing Party
liable for a breach under this Section 2.03 shall, unless it cures such breach
in a timely fashion pursuant to this Section 2.03, promptly notify the Master
Servicer whether such Representing Party intends either to repurchase, or to
substitute for, the Mortgage Loan affected by such breach. With respect to the
representations and warranties described in this Section that are made to the
best of the Representing Party's knowledge, if it is discovered by any of the
Depositor, the Master Servicer, the Seller or the Trustee that the substance of
such representation and warranty is inaccurate and such inaccuracy materially
and adversely affects the value of the related Mortgage Loan, notwithstanding
the Representing Party's lack of knowledge with respect to the substance of such
representation or warranty, such inaccuracy shall be deemed a breach of the
applicable representation or warranty.
With respect to any Replacement Mortgage Loan or Loans, the Seller
delivering such Replacement Mortgage Loan shall deliver to the Trustee for the
benefit of the Certificateholders the related Mortgage Note, Mortgage and
assignment of the Mortgage, and such other documents and agreements as are
required by Section 2.01, with the Mortgage Note endorsed and the Mortgage
assigned as required by Section 2.01. No substitution will be made in any
calendar month after the Determination Date for such month. Scheduled Payments
due with respect to Replacement Mortgage Loans in the Due Period related to the
Distribution Date on which such proceeds are to be distributed shall not be part
of the Trust Fund and will be retained by the Seller delivering such Replacement
Loan on such Distribution Date. For the month of substitution, distributions to
Certificateholders will include the Scheduled Payment due on any Deleted
Mortgage Loan for the related Due Period and thereafter the Seller shall be
entitled to retain all amounts received in respect of such Deleted Mortgage
Loan. The Master Servicer shall amend the Mortgage Loan Schedule for the benefit
of the Certificateholders to reflect the removal of such Deleted Mortgage Loan
and the substitution of the Replacement Mortgage Loan or Loans and the Master
Servicer shall deliver the amended Mortgage Loan Schedule to the Trustee. Upon
such substitution, the Replacement Mortgage Loan or Loans shall be subject to
the terms of this Agreement in all respects, and the Seller delivering such
Replacement Mortgage Loan shall be deemed to have made with respect to such
Replacement Mortgage Loan or Loans, as of the date of substitution, the
representations and warranties set forth in Section 2.03(b) with respect to such
Mortgage Loan. Upon any such substitution and the deposit to the Certificate
Account of the amount required to be deposited therein in connection with such
substitution as described in the following paragraph, the Trustee shall release
to the Representing Party the Mortgage File relating to such Deleted Mortgage
Loan and held for the benefit of the Certificateholders and shall execute and
deliver at the Seller's direction such instruments of transfer or assignment as
have been prepared by, or at the direction of, the Seller, in each case without
recourse, as shall be necessary to vest in the Seller, or its respective
designee, title to the Trustee's interest in any Deleted Mortgage Loan
substituted for pursuant to this Section 2.03.
For any month in which the Seller substitutes one or more Replacement
Mortgage Loans for one or more Deleted Mortgage Loans, the Master Servicer will
determine the amount (if any) by which the aggregate principal balance of all
such Replacement Mortgage Loans as of the date of substitution is less than the
Stated Principal Balance (after application of the principal portion of the
Scheduled Payment due in the month of substitution) of all such Deleted Mortgage
Loans. An amount equal to the aggregate of the deficiencies described in the
preceding sentence (such amount, the "Substitution Adjustment Amount") shall be
deposited into the Certificate Account by the Seller delivering such Replacement
Mortgage Loan on the Determination Date for the Distribution Date relating to
the Prepayment Period during which the related Mortgage Loan became required to
be purchased or replaced hereunder.
In the event that the Seller shall have repurchased a Mortgage Loan,
the Purchase Price therefor shall be deposited in the Certificate Account
pursuant to Section 3.08 on the Determination Date for the Distribution Date in
the month following the month during which the Seller became obligated to
repurchase or replace such Mortgage Loan and upon such deposit of the Purchase
Price, the delivery of the Opinion of Counsel required by Section 2.05, if any,
and the receipt of a Request for Release in the form of Exhibit N hereto, the
Trustee shall release the related Mortgage File held for the benefit of the
Certificateholders to the Seller, and the Trustee shall execute and deliver at
such Person's direction the related instruments of transfer or assignment
prepared by the Seller, in each case without recourse, as shall be necessary to
transfer title from the Trustee for the benefit of the Certificateholders and
transfer the Trustee's interest to the Seller to any Mortgage Loan purchased
pursuant to this Section 2.03. It is understood and agreed that the obligation
under this Agreement of the Seller to cure, repurchase or replace any Mortgage
Loan as to which a breach has occurred and is continuing shall constitute the
sole remedy against the Seller respecting such breach available to
Certificateholders, the Depositor or the Trustee.
(d) The representations and warranties set forth in Section 2.03
hereof shall survive delivery of the respective Mortgage Files to the Trustee
for the benefit of the Certificateholders.
SECTION 2.04. Representations and Warranties of the Depositor.
-----------------------------------------------
The Depositor hereby represents and warrants to the Master Servicer
and the Trustee as follows, as of the date hereof:
(i) The Depositor is duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware and
has full power and authority (corporate and other) necessary to own or hold
its properties and to conduct its business as now conducted by it and to
enter into and perform its obligations under this Agreement.
(ii) The Depositor has the full corporate power and authority to
execute, deliver and perform, and to enter into and consummate the
transactions contemplated by, this Agreement and has duly authorized, by
all necessary corporate action on its part, the execution, delivery and
performance of this Agreement; and this Agreement, assuming the due
authorization, execution and delivery hereof by the other parties hereto,
constitutes a legal, valid and binding obligation of the Depositor,
enforceable against the Depositor in accordance with its terms, subject, as
to enforceability, to (i) bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting creditors' rights generally and
(ii) general principles of equity, regardless of whether enforcement is
sought in a proceeding in equity or at law.
(iii) The execution and delivery of this Agreement by the Depositor,
the consummation of the transactions contemplated by this Agreement, and
the fulfillment of or compliance with the terms hereof are in the ordinary
course of business of the Depositor and will not (A) result in a material
breach of any term or provision of the charter or by-laws of the Depositor
or (B) materially conflict with, result in a material breach, violation or
acceleration of, or result in a material default under, the terms of any
other material agreement or instrument to which the Depositor is a party or
by which it may be bound or (C) constitute a material violation of any
statute, order or regulation applicable to the Depositor of any court,
regulatory body, administrative agency or governmental body having
jurisdiction over the Depositor; and the Depositor is not in breach or
violation of any material indenture or other material agreement or
instrument, or in violation of any statute, order or regulation of any
court, regulatory body, administrative agency or governmental body having
jurisdiction over it which breach or violation may materially impair the
Depositor's ability to perform or meet any of its obligations under this
Agreement.
(iv) No litigation is pending, or, to the best of the Depositor's
knowledge, threatened, against the Depositor that would materially and
adversely affect the execution, delivery or enforceability of this
Agreement or the ability of the Depositor to perform its obligations under
this Agreement in accordance with the terms hereof.
(v) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Depositor of, or compliance by the Depositor with, this
Agreement or the consummation of the transactions contemplated hereby, or
if any such consent, approval, authorization or order is required, the
Depositor has obtained the same.
The Depositor hereby represents and warrants to the Trustee with
respect to each Mortgage Loan as of the Closing Date, and following the transfer
of the Mortgage Loans to it by the Seller, the Depositor had good title to the
Mortgage Loans and the Mortgage Notes were subject to no offsets, claims,
defenses or counterclaims.
It is understood and agreed that the representations and warranties
set forth in the two immediately preceding paragraphs shall survive delivery of
the Mortgage Files to the Trustee. Upon discovery by the Depositor, the Seller,
the Master Servicer or the Trustee of a breach of any of the foregoing
representations and warranties set forth in the immediately preceding paragraph
(referred to herein as a "breach"), which breach materially and adversely
affects the interest of the Certificateholders, the party discovering such
breach shall give prompt written notice to the others and to each Rating Agency.
The Depositor hereby covenants with respect to the representations and
warranties made by it in this Section 2.04 that within 90 days of the earlier of
the discovery it or receipt of written notice by it from any party of a breach
of any representation or warranty set forth herein made that materially and
adversely affects the interests of the Certificateholders in any Mortgage Loan,
it shall cure such breach in all material respects and, if such breach is not so
cured, shall repurchase or replace the affected Mortgage Loan or Loans in
accordance with the procedure set forth in Section 2.03(c).
SECTION 2.05. Delivery of Opinion of Counsel in Connection with
Substitutions and Repurchases.
-------------------------------------------------
(a) Notwithstanding any contrary provision of this Agreement, with
respect to any Mortgage Loan that is not in default or as to which default is
not imminent, no repurchase or substitution pursuant to Sections 2.02, 2.03 or
2.04 shall be made unless the Representing Party making such repurchase or
substitution delivers to the Trustee an Opinion of Counsel, addressed to the
Trustee, to the effect that such repurchase or substitution would not (i) result
in the imposition of the tax on "prohibited transactions" of the Trust Fund or
contributions after the Closing Date, as defined in sections 860F(a)(2) and
860G(d) of the Code, respectively or (ii) cause the Trust Fund to fail to
qualify as a REMIC at any time that any Certificates are outstanding. Any
Mortgage Loan as to which repurchase or substitution was delayed pursuant to
this paragraph shall be repurchased or the substitution therefor shall occur
(subject to compliance with Sections 2.02, 2.03 or 2.04) upon the earlier of (a)
the occurrence of a default or imminent default with respect to such loan and
(b) receipt by the Trustee of an Opinion of Counsel to the effect that such
repurchase or substitution, as applicable, will not result in the events
described in clause (i) or clause (ii) of the preceding sentence.
(b) Upon discovery by the Depositor, the Seller, the Master Servicer
or the Trustee that any Mortgage Loan does not constitute a "qualified mortgage"
within the meaning of section 86OG(a)(3) of the Code, the party discovering such
fact shall promptly (and in any event within 5 Business Days of discovery) give
written notice thereof to the other parties. In connection therewith, the
Trustee shall require the Seller, at the Seller's option, to either (i)
substitute, if the conditions in Section 2.03(b) with respect to substitutions
are satisfied, a Replacement Mortgage Loan for the affected Mortgage Loan, or
(ii) repurchase the affected Mortgage Loan within 90 days of such discovery in
the same manner as it would a Mortgage Loan for a breach of representation or
warranty contained in Section 2.03. The Trustee shall reconvey to the Seller the
Mortgage Loan to be released pursuant hereto in the same manner, and on the same
terms and conditions, as it would a Mortgage Loan repurchased for breach of a
representation or warranty contained in Section 2.03.
SECTION 2.06. Authentication and Delivery of Certificates.
-------------------------------------------
The Trustee acknowledges the transfer and assignment to it of the
Trust Fund and, concurrently with such transfer and assignment, has executed,
authenticated and delivered, to or upon the order of the Depositor, the
Certificates in authorized denominations evidencing the entire ownership of the
Trust Fund. The Trustee agrees to hold the Trust Fund and exercise the rights
referred to above for the benefit of all present and future Holders of the
Certificates and to perform the duties set forth in this Agreement to the best
of its ability, to the end that the interests of the Holders of the Certificates
may be adequately and effectively protected.
SECTION 2.07. Covenants of the Master Servicer.
--------------------------------
The Master Servicer hereby covenants to the Depositor, the Trustee as
follows:
(a) the Master Servicer shall comply in the performance of its
obligations under this Agreement with all reasonable rules and requirements of
the insurer under each Required Insurance Policy; and
(b) no written information, certificate of an officer, statement
furnished in writing or written report delivered to the Depositor, any affiliate
of the Depositor or the Trustee and prepared by the Master Servicer pursuant to
this Agreement will contain any untrue statement of a material fact or omit to
state a material fact necessary to make the information, certificate, statement
or report not misleading.
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<PAGE>
ARTICLE III
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
SECTION 3.01. Master Servicer to Service Mortgage Loans.
-----------------------------------------
For and on behalf of the Certificateholders, the Master Servicer shall
service and administer the Mortgage Loans in accordance with customary and usual
standards of practice of prudent mortgage loan lenders in the respective states
in which the Mortgaged Properties are located. In connection with such servicing
and administration, the Master Servicer shall have full power and authority,
acting alone and/or through subservicers as provided in Section 3.02 hereof, to
do or cause to be done any and all things that it may deem necessary or
desirable in connection with such servicing and administration, including but
not limited to, the power and authority, subject to the terms hereof (i) to
execute and deliver, on behalf of the Certificateholders and the Trustee,
customary consents or waivers and other instruments and documents, (ii) to
consent to transfers of any Mortgaged Property and assumptions of the Mortgage
Notes and related Mortgages (but only in the manner provided in this Agreement),
(iii) to collect any Insurance Proceeds and other Liquidation Proceeds, and (iv)
subject to Section 3.12(a), to effectuate foreclosure or other conversion of the
ownership of the Mortgaged Property securing any Mortgage Loan; provided that
the Master Servicer shall take no action that is inconsistent with or prejudices
the interests of the Trust Fund or the Certificateholders in any Mortgage Loan
or the rights and interests of the Depositor, the Seller and the Trustee under
this Agreement. The Master Servicer shall represent and protect the interest of
the Trust Fund in the same manner as it currently protects its own interest in
mortgage loans in its own portfolio in any claim, proceeding or litigation
regarding a Mortgage Loan and shall not make or permit any modification, waiver
or amendment of any term of any Mortgage Loan which would cause the Trust Fund
to fail to qualify as a REMIC or result in the imposition of any tax under
Section 860F(a) or 860G(d) of the Code, but in any case not in any manner that
is a lesser standard than that provided in the first sentence of this Section
3.01. Without limiting the generality of the foregoing, the Master Servicer, in
its own name or in the name of the Depositor and the Trustee, is hereby
authorized and empowered by the Depositor and the Trustee, when the Master
Servicer believes it appropriate in its reasonable judgment, to execute and
deliver, on behalf of the Trustee, the Depositor, the Certificateholders or any
of them, any and all instruments of satisfaction or cancellation, or of partial
or full release or discharge and all other comparable instruments, with respect
to the Mortgage Loans, and with respect to the Mortgaged Properties held for the
benefit of the Certificateholders. The Master Servicer shall prepare and deliver
to the Depositor and/or the Trustee such documents requiring execution and
delivery by any or all of them as are necessary or appropriate to enable the
Master Servicer to service and administer the Mortgage Loans. Upon receipt of
such documents, the Depositor and/or the Trustee shall execute such documents
and deliver them to the Master Servicer.
In accordance with the standards of the preceding paragraph, the
Master Servicer shall advance or cause to be advanced funds as necessary for the
purpose of effecting the payment of taxes and assessments on the Mortgaged
Properties, which advances shall be reimbursable in the first instance from
related collections from the Mortgagors pursuant to Section 3.06, and further as
provided in Section 3.08. All costs incurred by the Master Servicer, if any, in
effecting the timely payments of taxes and assessments on the Mortgaged
Properties and related insurance premiums shall not, for the purpose of
calculating monthly distributions to the Certificateholders, be added to the
Stated Principal Balance under the related Mortgage Loans, notwithstanding that
the terms of such Mortgage Loans so permit.
The Master Servicer shall deliver a list of Servicing Officers,
attached hereto as Exhibit Q, to the Trustee by the Closing Date and shall from
time to time provide to the Trustee an amended and updated list of Servicing
Officers. In the absence of any such amended list, the Trustee may rely
conclusively on the most recently received list of Servicing Officers.
In connection with any program of the Master Servicer or its
affiliates designed to solicit or encourage mortgagors to refinance their
mortgage loans through the Master Servicer or its affiliates, the Master
Servicer agrees that it will not, without the prior written consent of the
Seller, target such solicitations at any of the Mortgagors whose Mortgage Loans
are included in the Trust Fund at the time of such solicitations.
Notwithstanding the foregoing, the following solicitations, if undertaken by the
Master Servicer or any affiliate of the Master Servicer, shall not be prohibited
under the preceding sentence: (i) solicitations that are directed to the general
public at large, including, without limitation, mass mailings based on
commercially acquired mailing lists and newspaper, radio, television and other
mass media advertisements; (ii) statement inserts, provided, however, that
similar inserts are sent to the borrowers of other mortgage loans serviced by
the Master Servicer; (iii) solicitations made in response to an inquiry from a
Mortgagor relating to a payoff or information pertaining to a mortgage loan
product; and (iv) solicitations made as a part of a campaign directed to all
mortgagors with mortgage loans meeting certain defined parameters.
SECTION 3.02. Subservicing; Enforcement of the Obligations of Master
Servicer.
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(a) The Master Servicer may arrange for the subservicing of any
Mortgage Loan by a subservicer (each, a "Subservicer") pursuant to a
subservicing agreement (each, a "Subservicing Agreement"); provided that such
subservicing arrangement and the terms of the related subservicing agreement
must provide for the servicing of such Mortgage Loans in a manner consistent
with the servicing arrangements contemplated hereunder. Notwithstanding the
provisions of any subservicing agreement, any of the provisions of this
Agreement relating to agreements or arrangements between the Master Servicer or
a subservicer or reference to actions taken through a Master Servicer or
otherwise, the Master Servicer shall remain obligated and liable to the
Depositor, the Trustee and the Certificateholders for the servicing and
administration of the Mortgage Loans in accordance with the provisions of this
Agreement without diminution of such obligation or liability by virtue of such
subservicing agreements or arrangements or by virtue of indemnification from the
subservicer and to the same extent and under the same terms and conditions as if
the Master Servicer alone were servicing and administering the Mortgage Loans.
Every subservicing agreement entered into by the Master Servicer shall contain a
provision giving the successor Master Servicer the option to terminate such
agreement in the event a successor Master Servicer is appointed. All actions of
each subservicer performed pursuant to the related subservicing agreement shall
be performed as an agent of the Master Servicer with the same force and effect
as if performed directly by the Master Servicer.
(b) For purposes of this Agreement, the Master Servicer shall be
deemed to have received any collections, recoveries or payments with respect to
the Mortgage Loans that are received by a subservicer regardless of whether such
payments are remitted by the subservicer to the Master Servicer.
SECTION 3.03. Rights of the Depositor, the Seller, the Trustee in
Respect of the Master Servicer.
---------------------------------------------------
Neither the Trustee nor the Depositor nor the Seller shall have any
responsibility or liability for any action or failure to act by the Master
Servicer, and none of them is obligated to supervise the performance of the
Master Servicer hereunder or otherwise.
SECTION 3.04. Trustee to Act as Master Servicer.
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In the event that the Master Servicer shall for any reason no longer
be the Master Servicer hereunder (including by reason of an Event of Default),
the Trustee or its designee shall thereupon assume all of the rights and
obligations of the Master Servicer hereunder arising thereafter (except that the
Trustee shall not be (i) liable for losses of the Master Servicer pursuant to
Section 3.10 hereof or any acts or omissions of the predecessor Master Servicer
hereunder, (ii) obligated to make Advances if it is prohibited from doing so by
applicable law, (iii) obligated to effectuate repurchases or substitutions of
Mortgage Loans hereunder, including pursuant to Section 2.02 or 2.03 hereof,
(iv) responsible for expenses of the Master Servicer pursuant to Section 2.03 or
(v) deemed to have made any representations and warranties hereunder, including
pursuant to Section 2.03 or the first paragraph of Section 6.02 hereof). If the
Master Servicer shall for any reason no longer be the Master Servicer (including
by reason of any Event of Default), the Trustee (or any other successor
servicer) may, at its option, succeed to any rights and obligations of the
Master Servicer under any subservicing agreement in accordance with the terms
thereof; provided that the Trustee (or any other successor servicer) shall not
incur any liability or have any obligations in its capacity as servicer under a
subservicing agreement arising prior to the date of such succession unless it
expressly elects to succeed to the rights and obligations of the Master Servicer
thereunder; and the Master Servicer shall not thereby be relieved of any
liability or obligations under the subservicing agreement arising prior to the
date of such succession.
The Master Servicer shall, upon request of the Trustee, but at the
expense of the Master Servicer, deliver to the assuming party all documents and
records relating to each subservicing agreement and the Mortgage Loans then
being serviced thereunder and an accounting of amounts collected held by it and
otherwise use its best efforts to effect the orderly and efficient transfer of
the subservicing agreement to the assuming party.
SECTION 3.05. Collection of Mortgage Loan Payments; Certificate
Account; Distribution Account.
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(a) The Master Servicer shall make reasonable efforts in accordance
with customary and usual standards of practice of prudent mortgage lenders in
the respective states in which the Mortgaged Properties are located to collect
all payments called for under the terms and provisions of the Mortgage Loans to
the extent such procedures shall be consistent with this Agreement and the terms
and provisions of any related Required Insurance Policy. Consistent with the
foregoing, the Master Servicer (i) may, with the written consent of the Seller,
waive any late payment charge or any prepayment charge or penalty interest in
connection with the prepayment of a Mortgage Loan and (ii) may in its discretion
extend the due dates for payments due on a Mortgage Note for a period not
greater than 270 days. In the event of any such arrangement, the Master Servicer
shall make Advances on the related Mortgage Loan during the scheduled period in
accordance with the amortization schedule of such Mortgage Loan without
modification thereof by reason of such arrangements. The Master Servicer shall
not be required to institute or join in litigation with respect to collection of
any payment (whether under a Mortgage, Mortgage Note or otherwise or against any
public or governmental authority with respect to a taking or condemnation) if it
reasonably believes that enforcing the provision of the Mortgage or other
instrument pursuant to which such payment is required is prohibited by
applicable law.
(b) The Trustee or the Master Servicer shall establish and initially
maintain, on behalf of the Certificateholders, the Certificate Account. The
Master Servicer shall deposit into the Certificate Account daily, within two
Business Days of receipt thereof, in immediately available funds, the following
payments and collections received or made by it on and after the Cut-off Date
(to the extent not applied in computing the Cut-off Date Principal Balance
thereof):
(i) all payments on account of principal, including Principal
Prepayments, on the Mortgage Loans;
(ii) all payments on account of interest on the Mortgage Loans net of
the related Servicing Fee permitted under Section 3.15, other than interest
accrued on the Mortgage Loans prior to June 1, 1998, and (b) the Initial
Certificate Account Deposit;
(iii) all Liquidation Proceeds, other than proceeds to be applied to
the restoration or repair of the Mortgaged Property or released to the
Mortgagor in accordance with the Master Servicer's normal servicing
procedures;
(iv) all Compensating Interest;
(v) any amount required to be deposited by the Seller pursuant to
Section 3.05(e) in connection with any losses on Permitted Investments;
(vi) any amounts required to be deposited by the Master Servicer
pursuant to Section 3.10 hereof;
(vii) the Purchase Price and any Substitution Adjustment Amount;
(viii) all Advances made by the Master Servicer pursuant to Section
4.01; and
(ix) any other amounts required to be deposited hereunder.
The foregoing requirements for remittance by the Master Servicer into
the Certificate Account shall be exclusive, it being understood and agreed that,
without limiting the generality of the foregoing, payments in the nature of
prepayment penalties, late payment charges or assumption fees, if collected,
need not be remitted by the Master Servicer, provided, however, that the Master
Servicer shall deposit all prepayment penalties collected by it into the
Certificate Account. The Master Servicer shall provide to the Seller and the
Trustee an accounting of prepayment penalties collected by it and deposited into
the Certificate Account. In the event that the Master Servicer shall remit any
amount into the Certificate Account not required to be remitted and not
otherwise subject to withdrawal pursuant to Section 3.08 hereof, it may at any
time withdraw or direct the Trustee, or such other institution maintaining the
Certificate Account, to withdraw such amount from the Certificate Account, any
provision herein to the contrary notwithstanding. Such withdrawal or direction
may be accomplished by delivering written notice thereof to the Trustee, or such
other institution maintaining the Certificate Account, that describes the
amounts deposited in error in the Certificate Account. The Master Servicer shall
maintain adequate records with respect to all withdrawals made pursuant to this
Section. All funds deposited in the Certificate Account shall be held in trust
for the Certificateholders until withdrawn in accordance with Section 3.08. In
no event shall the Trustee incur liability for withdrawals from the Certificate
Account at the direction of the Master Servicer.
(c) The Trustee shall establish and maintain, on behalf of the
Certificateholders, the Distribution Account. The Trustee shall, promptly upon
receipt, deposit in the Distribution Account and retain therein the following:
(i) the aggregate amount withdrawn by the Trustee pursuant to the
second paragraph of Section 3.08(a); and
(ii) any amount required to be deposited by the Seller pursuant to
Section 3.05(e) in connection with any losses on Permitted Investments.
The foregoing requirements for remittance by the Master Servicer and
deposit by the Trustee into the Distribution Account shall be exclusive. In the
event that the Master Servicer shall remit any amount not required to be
remitted and not otherwise subject to withdrawal pursuant to Section 3.08
hereof, it may at any time direct the Trustee to withdraw such amount from the
Distribution Account, any provision herein to the contrary notwithstanding. Such
direction may be accomplished by delivering a written notice to the Trustee that
describes the amounts deposited in error in the Distribution Account. All funds
deposited in the Distribution Account shall be held by the Trustee in trust for
the Certificateholders until disbursed in accordance with this Agreement or
withdrawn in accordance with Section 3.08. In no event shall the Trustee incur
liability for withdrawals from the Distribution Account at the direction of the
Master Servicer.
(d) [Reserved.]
(e) Each institution that maintains the Certificate Account, the
Distribution Account or the Carryover Reserve Fund shall invest the funds in
each such account, as directed by the Seller, in Permitted Investments, which
shall mature not later than (i) in the case of the Certificate Account, the
Business Day preceding the related Distribution Date (except that if such
Permitted Investment is an obligation of the institution that maintains such
Certificate Account, then such Permitted Investment shall mature not later than
such Distribution Date) and (ii) in the case of the Distribution Account and the
Carryover Reserve Fund, the Business Day immediately preceding the first
Distribution Date that follows the date of such investment (except that if such
Permitted Investment is an obligation of the institution that maintains such
Distribution Account or Carryover Reserve Fund, then such Permitted Investment
shall mature not later than such Distribution Date) and, in each case, shall not
be sold or disposed of prior to its maturity. All such Permitted Investments
shall be made in the name of the Trustee, for the benefit of the
Certificateholders, except in connection with Permitted Investments made with
respect to funds in the Carryover Reserve Fund which shall be made in the name
of the Trustee, for the benefit of the Class X Certificateholders. In the case
of (x) the Certificate Account and the Distribution Account, all income and gain
net of any losses realized from any such investment shall be for the benefit of
the Seller and shall be remitted to the Seller monthly as provided herein and
(y) the Carryover Reserve Fund all income and gain net of any losses realized
from any such investment shall be for the benefit of the Class X
Certificateholders and shall be remitted to the Class X Certificateholders
monthly as provided herein. The amount of any losses incurred in the Certificate
Account or the Distribution Account in respect of any such investments shall be
deposited by the Seller, or the Trustee upon receipt from the Seller, in the
Certificate Account or the Distribution Account, as applicable, out of the
Seller's own funds immediately as realized. Any losses incurred in the Carryover
Reserve Fund in respect of any such investments shall be charged against amounts
on deposit in the Carryover Fund (or such investments) immediately as realized.
The Trustee shall not be liable for the amount of any loss incurred in respect
of any investment or lack of investment of funds held in the Certificate
Account, the Distribution Account or the Carryover Reserve Fund and made in
accordance with this Section 3.05.
(f) The Trustee shall give at least 30 days advance notice to the
Master Servicer, the Seller, each Rating Agency and the Depositor of any
proposed change of the location of the Certificate Account, the Distribution
Account or the Carryover Reserve Fund prior to any change thereof.
SECTION 3.06. Collection of Taxes, Assessments and Similar Items;
Escrow Accounts.
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To the extent required by the related Mortgage Note, the Master
Servicer shall establish and maintain one or more accounts (each, an "Escrow
Account") and deposit and retain therein all collections from the Mortgagors (or
advances by the Master Servicer) for the payment of taxes, assessments, hazard
insurance premiums or comparable items for the account of the Mortgagors.
Nothing herein shall require the Master Servicer to compel a Mortgagor to
establish an Escrow Account in violation of applicable law.
Withdrawals of amounts so collected from the Escrow Accounts may be
made only to effect timely payment of taxes, assessments, hazard insurance
premiums, condominium or PUD association dues, or comparable items, to reimburse
the Master Servicer out of related collections for any payments made pursuant to
Sections 3.01 hereof (with respect to taxes and assessments and insurance
premiums) and 3.10 hereof (with respect to hazard insurance), to refund to any
Mortgagors any sums as may be determined to be overages, to pay interest, if
required by law or the terms of the related Mortgage or Mortgage Note, to
Mortgagors on balances in the Escrow Account or to clear and terminate the
Escrow Account at the termination of this Agreement in accordance with Section
9.01 hereof. The Escrow Accounts shall not be a part of the Trust Fund.
SECTION 3.07. Access to Certain Documentation and Information
Regarding the Mortgage Loans.
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The Master Servicer shall afford the Seller, the Depositor and the
Trustee reasonable access to all records and documentation regarding the
Mortgage Loans and all accounts, insurance policies and other matters relating
to this Agreement, such access being afforded without charge, but only upon
reasonable request and during normal business hours at the offices of the Master
Servicer designated by it.
Upon reasonable advance notice in writing if required by federal
regulation, the Master Servicer will provide to each Certificateholder that is a
savings and loan association, bank or insurance company certain reports and
reasonable access to information and documentation regarding the Mortgage Loans
sufficient to permit such Certificateholder to comply with applicable
regulations of the OTS or other regulatory authorities with respect to
investment in the Certificates; provided that the Master Servicer shall be
entitled to be reimbursed by each such Certificateholder for actual expenses
incurred by the Master Servicer in providing such reports and access.
SECTION 3.08. Permitted Withdrawals from the Certificate Account,
Distribution Account and the Carryover Reserve Fund.
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(a) The Master Servicer (or the Depositor or the Seller, as
applicable, in the case of clauses (viii) and (ix) below) may from time to time,
direct the Trustee to make withdrawals from the Certificate Account, and such
institution shall make such withdrawals therefrom, for the following purposes:
(i) to pay to the Master Servicer (to the extent not previously paid
to or withheld by the Master Servicer), as servicing compensation in
accordance with Section 3.15, that portion of any payment of interest that
equals the Servicing Fee for the period with respect to which such interest
payment was made, and, as additional servicing compensation, those other
amounts set forth in Section 3.15;
(ii) to pay to the Trustee that portion of each payment of interest
that equals the Trustee Fee for the period with respect to which such
interest payment was made;
(iii) to pay to the Seller (to the extent not previously paid to the
Seller), any payments in the nature of prepayment penalties;
(iv) to reimburse the Master Servicer for Advances made by it with
respect to the Mortgage Loans, such right of reimbursement pursuant to this
subclause (iv) being limited to amounts received on particular Mortgage
Loan(s) (including, for this purpose, Liquidation Proceeds) that represent
late recoveries of payments of principal and/or interest on such particular
Mortgage Loan(s) in respect of which any such Advance was made;
(v) to reimburse the Master Servicer for any Nonrecoverable Advance
previously made;
(vi) to reimburse the Master Servicer from Insurance Proceeds for
Insured Expenses covered by the related Insurance Policy;
(vii) to pay the Master Servicer any unpaid Servicing Fees and to
reimburse it for any unreimbursed Servicing Advances, the Master Servicer's
right to reimbursement of Servicing Advances pursuant to this subclause
(vii) with respect to any Mortgage Loan being limited to amounts received
on particular Mortgage Loan(s) (including, for this purpose, Liquidation
Proceeds and purchase and repurchase proceeds) that represent late
recoveries of the payments for which such advances were made pursuant to
Section 3.01 or Section 3.06;
(viii) to pay to the Seller, the Depositor or the Master Servicer, as
applicable, with respect to each Mortgage Loan or property acquired in
respect thereof that has been purchased pursuant to Section 2.02, 2.03 or
3.12, all amounts received thereon and not taken into account in
determining the related Stated Principal Balance of such repurchased
Mortgage Loan;
(ix) to reimburse the Seller, the Master Servicer or the Depositor for
expenses incurred by any of them in connection with the Mortgage Loans or
Certificates and reimbursable pursuant to Section 6.03 hereof provided that
such amount shall only be withdrawn following the withdrawal from the
Certificate Account for deposit into the Distribution Account pursuant to
the following paragraph;
(x) to withdraw pursuant to Section 3.05 any amount deposited in the
Certificate Account and not required to be deposited therein; and
(xi) to clear and terminate the Certificate Account upon termination
of this Agreement pursuant to Section 9.01 hereof.
In addition, no later than 1:00 p.m. Pacific time on the Master
Servicer Advance Date, the Trustee shall withdraw from the Certificate Account
the amount of Interest Funds and Principal Funds, to the extent on deposit, and
the Trustee shall deposit such amount in the Distribution Account.
The Master Servicer shall keep and maintain separate accounting, on a
Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any
withdrawal from the Certificate Account pursuant to subclauses (i), (iv), (vi),
(vii) and (viii) above.
(b) The Trustee shall withdraw funds from the Distribution Account for
distribution to the Certificateholders in the manner specified in this Agreement
(and to withhold from the amounts so withdrawn, the amount of any taxes that it
is authorized to retain pursuant to the last paragraph of Section 8.11). In
addition, the Trustee may from time to time make withdrawals from the
Distribution Account for the following purposes:
(i) to pay to the Seller earnings on or investment income with respect
to funds in or credited to the Distribution Account;
(ii) to pay to itself the Trustee Fee to the extent not previously
paid or withheld pursuant to Section 3.08(a)(ii);
(iii) to withdraw pursuant to Section 3.05 any amount deposited in the
Distribution Account and not required to be deposited therein; and
(iv) to clear terminate the Distribution Account upon termination of
the Agreement pursuant to Section 9.01 hereof.
(c) The Trustee shall withdraw funds from the Carryover Reserve Fund
for distribution to the Certificateholders in the manner specified in this
Agreement (and to withhold from the amounts so withdrawn, the amount of any
taxes that it is authorized to retain pursuant to the last paragraph of Section
8.11). In addition, the Trustee may from time to time make withdrawals from the
Carryover Reserve Fund for the following purposes:
(i) to withdraw pursuant to Section 3.05 any amount deposited in the
Carryover Reserve Fund and not required to be deposited therein; and
(ii) to clear and terminate the Carryover Reserve Fund upon
termination of the Agreement pursuant to Section 9.01 hereof.
SECTION 3.09. [Reserved.]
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SECTION 3.10. Maintenance of Hazard Insurance.
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The Master Servicer shall cause to be maintained, for each Mortgage
Loan, hazard insurance with extended coverage in an amount that is at least
equal to the lesser of (i) the maximum insurable value of the improvements
securing such Mortgage Loan and (ii) the greater of (a) the outstanding
principal balance of the Mortgage Loan and (b) an amount such that the proceeds
of such policy shall be sufficient to prevent the related Mortgagor and/or
mortgagee from becoming a co-insurer. Each such policy of standard hazard
insurance shall contain, or have an accompanying endorsement that contains, a
standard mortgagee clause. The Master Servicer shall also cause flood insurance
to be maintained on property acquired upon foreclosure or deed in lieu of
foreclosure of any Mortgage Loan, to the extent described below. Pursuant to
Section 3.05 hereof, any amounts collected by the Master Servicer under any such
policies (other than the amounts to be applied to the restoration or repair of
the related Mortgaged Property or property thus acquired or amounts released to
the Mortgagor in accordance with the Master Servicer's normal servicing
procedures) shall be deposited in the Certificate Account. Any cost incurred by
the Master Servicer in maintaining any such insurance shall not, for the purpose
of calculating monthly distributions to the Certificateholders or remittances to
the Trustee for their benefit, be added to the principal balance of the Mortgage
Loan, notwithstanding that the terms of the Mortgage Loan so permit. Such costs
shall be recoverable by the Master Servicer out of late payments by the related
Mortgagor or out of Liquidation Proceeds to the extent permitted by Section 3.08
hereof. It is understood and agreed that no earthquake or other additional
insurance is to be required of any Mortgagor or maintained on property acquired
in respect of a Mortgage other than pursuant to such applicable laws and
regulations as shall at any time be in force and as shall require such
additional insurance. If the Mortgaged Property is located at the time of
origination of the Mortgage Loan in a federally designated special flood hazard
area and such area is participating in the national flood insurance program, the
Master Servicer shall cause flood insurance to be maintained with respect to
such Mortgage Loan. Such flood insurance shall be in an amount equal to the
lesser of (i) the original principal balance of the related Mortgage Loan, (ii)
the replacement value of the improvements that are part of such Mortgaged
Property, or (iii) the maximum amount of such insurance available for the
related Mortgaged Property under the Flood Disaster Protection Act of 1973, as
amended.
In the event that the Master Servicer shall obtain and maintain a
blanket policy insuring against hazard losses on all of the Mortgage Loans, it
shall conclusively be deemed to have satisfied its obligations as set forth in
the first sentence of this Section 3.10, it being understood and agreed that
such policy may contain a deductible clause on terms substantially equivalent to
those commercially available and maintained by comparable servicers. If such
policy contains a deductible clause, the Master Servicer shall, in the event
that there shall not have been maintained on the related Mortgaged Property a
policy complying with the first sentence of this Section 3.10, and there shall
have been a loss that would have been covered by such policy, deposit in the
Certificate Account the amount not otherwise payable under the blanket policy
because of such deductible clause. In connection with its activities as
administrator and servicer of the Mortgage Loans, the Master Servicer agrees to
present, on behalf of itself, the Depositor and the Trustee for the benefit of
the Certificateholders, claims under any such blanket policy.
SECTION 3.11. Enforcement of Due-On-Sale Clauses; Assumption
Agreements.
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(a) Except as otherwise provided in this Section 3.11(a), when any
property subject to a Mortgage has been or is about to be conveyed by the
Mortgagor, the Master Servicer shall to the extent that it has knowledge of such
conveyance, enforce any due-on-sale clause contained in any Mortgage Note or
Mortgage, to the extent permitted under applicable law and governmental
regulations, but only to the extent that such enforcement will not adversely
affect or jeopardize coverage under any Required Insurance Policy.
Notwithstanding the foregoing, the Master Servicer is not required to exercise
such rights with respect to a Mortgage Loan if the Person to whom the related
Mortgaged Property has been conveyed or is proposed to be conveyed satisfies the
terms and conditions contained in the Mortgage Note and Mortgage related thereto
and the consent of the mortgagee under such Mortgage Note or Mortgage is not
otherwise so required under such Mortgage Note or Mortgage as a condition to
such transfer. In the event that the Master Servicer is prohibited by law from
enforcing any such due-on-sale clause, or if coverage under any Required
Insurance Policy would be adversely affected, or if nonenforcement is otherwise
permitted hereunder, the Master Servicer is authorized, subject to Section
3.11(b), to take or enter into an assumption and modification agreement from or
with the person to whom such property has been or is about to be conveyed,
pursuant to which such person becomes liable under the Mortgage Note and, unless
prohibited by applicable state law, the Mortgagor remains liable thereon,
provided that the Mortgage Loan shall continue to be covered (if so covered
before the Master Servicer enters such agreement) by the applicable Required
Insurance Policies. The Master Servicer, subject to Section 3.11(b), is also
authorized with the prior approval of the insurers under any Required Insurance
Policies to enter into a substitution of liability agreement with such Person,
pursuant to which the original Mortgagor is released from liability and such
Person is substituted as Mortgagor and becomes liable under the Mortgage Note.
Notwithstanding the foregoing, the Master Servicer shall not be deemed to be in
default under this Section 3.11(a) by reason of any transfer or assumption that
the Master Servicer reasonably believes it is restricted by law from preventing.
(b) Subject to the Master Servicer's duty to enforce any due-on-sale
clause to the extent set forth in Section 3.11(a) hereof, in any case in which a
Mortgaged Property has been conveyed to a Person by a Mortgagor, and such Person
is to enter into an assumption agreement or modification agreement or supplement
to the Mortgage Note or Mortgage that requires the signature of the Trustee, or
if an instrument of release signed by the Trustee is required releasing the
Mortgagor from liability on the Mortgage Loan, the Master Servicer shall prepare
and deliver or cause to be prepared and delivered to the Trustee for signature
and shall direct, in writing, the Trustee to execute the assumption agreement
with the Person to whom the Mortgaged Property is to be conveyed and such
modification agreement or supplement to the Mortgage Note or Mortgage or other
instruments as are reasonable or necessary to carry out the terms of the
Mortgage Note or Mortgage or otherwise to comply with any applicable laws
regarding assumptions or the transfer of the Mortgaged Property to such Person.
In connection with any such assumption, no material term of the Mortgage Note
(including, but not limited to, the Mortgage Rate, the amount of the Scheduled
Payment, the Maximum Rate, the Minimum Rate, the Gross Margin, the Periodic Rate
Cap, the Adjustment Date and any other term affecting the amount or timing of
payment on the Mortgage Loan) may be changed. In addition, the substitute
Mortgagor and the Mortgaged Property must be acceptable to the Master Servicer
in accordance with its underwriting standards as then in effect. The Master
Servicer shall notify the Trustee that any such substitution or assumption
agreement has been completed by forwarding to the Trustee the original of such
substitution or assumption agreement, which in the case of the original shall be
added to the related Mortgage File and shall, for all purposes, be considered a
part of such Mortgage File to the same extent as all other documents and
instruments constituting a part thereof. Any fee collected by the Master
Servicer for entering into an assumption or substitution of liability agreement
will be retained by the Master Servicer as additional servicing compensation.
SECTION 3.12. Realization Upon Defaulted Mortgage Loans;
Determination of Excess Proceeds and Realized Losses;
Repurchase of Certain Mortgage Loans.
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(a) The Master Servicer shall use reasonable efforts to foreclose upon
or otherwise comparably convert the ownership of properties securing such of the
Mortgage Loans as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments. In
connection with such foreclosure or other conversion, the Master Servicer shall
follow such practices and procedures as it shall deem necessary or advisable and
as shall be normal and usual in its general mortgage servicing activities and
the requirements of the insurer under any Required Insurance Policy; provided
that the Master Servicer shall not be required to expend its own funds in
connection with any foreclosure or towards the restoration of any property
unless it shall determine (i) that such restoration and/or foreclosure will
increase the proceeds of liquidation of the Mortgage Loan after reimbursement to
itself of such expenses and (ii) that such expenses will be recoverable to it
through Liquidation Proceeds (respecting which it shall have priority for
purposes of withdrawals from the Certificate Account pursuant to Section 3.08
hereof). The Master Servicer shall be responsible for all other costs and
expenses incurred by it in any such proceedings; provided that it shall be
entitled to reimbursement thereof from the proceeds of liquidation of the
related Mortgaged Property, as contemplated in Section 3.08 hereof. If the
Master Servicer has knowledge that a Mortgaged Property that the Master Servicer
is contemplating acquiring in foreclosure or by deed-in-lieu of foreclosure is
located within a one-mile radius of any site with environmental or hazardous
waste risks known to the Master Servicer, the Master Servicer will, prior to
acquiring the Mortgaged Property, consider such risks and only take action in
accordance with its established environmental review procedures.
With respect to any REO Property, the deed or certificate of sale
shall be taken in the name of the Trustee for the benefit of the
Certificateholders (or the Trustee's nominee on behalf of the
Certificateholders). The Trustee's name shall be placed on the title to such REO
Property solely as the Trustee hereunder and not in its individual capacity. The
Master Servicer shall ensure that the title to such REO Property references this
Agreement and the Trustee's capacity thereunder. Pursuant to its efforts to sell
such REO Property, the Master Servicer shall either itself or through an agent
selected by the Master Servicer protect and conserve such REO Property in the
same manner and to such extent as is customary in the locality where such REO
Property is located and may, incident to its conservation and protection of the
interests of the Certificateholders, rent the same, or any part thereof, as the
Master Servicer deems to be in the best interest of the Master Servicer and the
Certificateholders for the period prior to the sale of such REO Property. The
Master Servicer shall prepare for and deliver to the Trustee a statement with
respect to each REO Property that has been rented showing the aggregate rental
income received and all expenses incurred in connection with the management and
maintenance of such REO Property at such times as is necessary to enable the
Trustee to comply with the reporting requirements of the REMIC Provisions. The
net monthly rental income, if any, from such REO Property shall be deposited in
the Certificate Account no later than the close of business on each
Determination Date. The Master Servicer shall perform the tax reporting and
withholding related to foreclosures, abandonments and cancellation of
indebtedness income as specified by Sections 1445, 6050J and 6050P of the Code
by preparing and filing such tax and information returns, as may be required.
In the event that the Trust Fund acquires any Mortgaged Property as
aforesaid or otherwise in connection with a default or imminent default on a
Mortgage Loan, the Master Servicer shall dispose of such Mortgaged Property
prior to two years after its acquisition by the Trust Fund or, at the expense of
the Trust Fund, request more than 60 days prior to the day on which such
two-year period would otherwise expire, an extension of the two-year grace
period unless the Trustee shall have been supplied with an Opinion of Counsel
(such opinion not to be an expense of the Trustee) to the effect that the
holding by the Trust Fund of such Mortgaged Property subsequent to such two-year
period will not result in the imposition of taxes on "prohibited transactions"
of the Trust Fund as defined in section 860F of the Code or cause the Trust Fund
to fail to qualify as a REMIC at any time that any Certificates are outstanding,
in which case the Trust Fund may continue to hold such Mortgaged Property
(subject to any conditions contained in such Opinion of Counsel).
Notwithstanding any other provision of this Agreement, no Mortgaged Property
acquired by the Trust Fund shall be rented (or allowed to continue to be rented)
or otherwise used for the production of income by or on behalf of the Trust Fund
in such a manner or pursuant to any terms that would (i) cause such Mortgaged
Property to fail to qualify as "foreclosure property" within the meaning of
section 860G(a)(8) of the Code or (ii) subject the Trust Fund to the imposition
of any federal, state or local income taxes on the income earned from such
Mortgaged Property under section 860G(c) of the Code or otherwise, unless the
Master Servicer has agreed to indemnify and hold harmless the Trust Fund with
respect to the imposition of any such taxes.
The decision of the Master Servicer to foreclose on a defaulted
Mortgage Loan shall be subject to a determination by the Master Servicer that
the proceeds of such foreclosure would exceed the costs and expenses of bringing
such a proceeding. The income earned from the management of any Mortgaged
Properties acquired through foreclosure or other judicial proceeding, net of
reimbursement to the Master Servicer for expenses incurred (including any
property or other taxes) in connection with such management and net of
unreimbursed Servicing Fees, Trustee Fees, Advances, Servicing Advances and any
management fee paid or to be paid with respect to the management of such
Mortgaged Property, shall be applied to the payment of principal of, and
interest on, the related defaulted Mortgage Loans (with interest accruing as
though such Mortgage Loans were still current) and all such income shall be
deemed, for all purposes in this Agreement, to be payments on account of
principal and interest on the related Mortgage Notes and shall be deposited into
the Certificate Account. To the extent the income received during a Prepayment
Period is in excess of the amount attributable to amortizing principal and
accrued interest at the related Mortgage Rate on the related Mortgage Loan, such
excess shall be considered to be a partial Principal Prepayment for all purposes
hereof.
The Liquidation Proceeds from any liquidation of a Mortgage Loan, net
of any payment to the Master Servicer as provided above, shall be deposited in
the Certificate Account on the next succeeding Determination Date following
receipt thereof for distribution on the related Distribution Date, except that
any Excess Proceeds shall be deposited by the Master Servicer into the
Certificate Account.
The proceeds of any Liquidated Loan, as well as any recovery resulting
from a partial collection of Liquidation Proceeds or any income from an REO
Property, will be applied in the following order of priority: first, to
reimburse the Master Servicer for any related unreimbursed Servicing Advances
and Servicing Fees, pursuant to Section 3.08(a)(vii) or this Section 3.12;
second, to reimburse the Master Servicer for any unreimbursed Advances, pursuant
to Section 3.08(a)(iv) or this Section 3.12; third, to accrued and unpaid
interest (to the extent no Advance has been made for such amount) on the
Mortgage Loan or related REO Property, at the Net Mortgage Rate to the Due Date
occurring in the month in which such amounts are required to be distributed; and
fourth, as a recovery of principal of the Mortgage Loan.
(b) On each Determination Date, the Master Servicer shall determine
the respective aggregate amounts of Excess Proceeds and Realized Losses, if any,
for the related Prepayment Period.
(c) The Seller, in its sole discretion, shall have the right to elect
(by written notice sent to the Trustee) to purchase for its own account from the
Trust Fund any Mortgage Loan that is 91 days or more delinquent at a price equal
to the Purchase Price. The Purchase Price for any Mortgage Loan purchased
hereunder shall be delivered to the Trustee for deposit in the Certificate
Account and the Trustee, upon receipt of such deposit and a Request for Release
from the Master Servicer, on behalf of the Seller, in the form of Exhibit N
hereto, shall release or cause to be released to the purchaser of such Mortgage
Loan the related Mortgage File and shall execute and deliver such instruments of
transfer or assignment prepared by the purchaser of such Mortgage Loan, in each
case without recourse, as shall be necessary to vest in the purchaser of such
Mortgage Loan any Mortgage Loan released pursuant hereto and the purchaser of
such Mortgage Loan shall succeed to all the Trustee's right, title and interest
in and to such Mortgage Loan and all security and documents related thereto.
Such assignment shall be an assignment outright and not for security. The
purchaser of such Mortgage Loan shall thereupon own such Mortgage Loan, and all
security and documents, free of any further obligation to the Trustee or the
Certificateholders with respect thereto.
SECTION 3.13. 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 will promptly notify the
Trustee by delivering a Request for Release substantially in the form of Exhibit
N. Upon receipt of such request, the Trustee shall promptly release the related
Mortgage File to the Master Servicer, and the Trustee shall at the Master
Servicer's direction execute and deliver to the Master Servicer the request for
reconveyance, deed of reconveyance or release or satisfaction of mortgage or
such instrument releasing the lien of the Mortgage in each case provided by the
Master Servicer, together with the Mortgage Note with written evidence of
cancellation thereon. No expenses incurred in connection with any instrument of
satisfaction or deed of reconveyance shall be chargeable to the Certificate
Account, the Distribution Account, the Carryover Reserve Fund or the related
subservicing account. From time to time and as shall be appropriate for the
servicing or foreclosure of any Mortgage Loan, including for such purpose,
collection under any policy of flood insurance any fidelity bond or errors or
omissions policy, or for the purposes of effecting a partial release of any
Mortgaged Property from the lien of the Mortgage or the making of any
corrections to the Mortgage Note or the Mortgage or any of the other documents
included in the Mortgage File, the Trustee shall, upon delivery to the Trustee
of a Request for Release in the form of Exhibit M signed by a Servicing Officer,
release the Mortgage File to the Master Servicer. Subject to the further
limitations set forth below, the Master Servicer shall cause the Mortgage File
or documents so released to be returned to the Trustee when the need therefor by
the Master Servicer no longer exists, unless the Mortgage Loan is liquidated and
the proceeds thereof are deposited in the Certificate Account, in which case the
Trustee shall deliver the Request for Release to the Master Servicer.
If the Master Servicer at any time seeks to initiate a foreclosure
proceeding in respect of any Mortgaged Property as authorized by this Agreement,
the Master Servicer shall deliver or cause to be delivered to the Trustee, for
signature, as appropriate, any court pleadings, requests for trustee's sale or
other documents necessary to effectuate such foreclosure or any legal action
brought to obtain judgment against the Mortgagor on the Mortgage Note or the
Mortgage or to obtain a deficiency judgment or to enforce any other remedies or
rights provided by the Mortgage Note or the Mortgage or otherwise available at
law or in equity. Notwithstanding the foregoing, the Master Servicer shall cause
possession of any Mortgage File or of the documents therein that shall have been
released by the Trustee to be returned to the Trustee within 21 calendar days
after possession thereof shall have been released by the Trustee unless (i) the
Mortgage Loan has been liquidated and the Liquidation Proceeds relating to the
Mortgage Loan have been deposited in the Certificate Account, and the Master
Servicer shall have delivered to the Trustee a Request for Release in the form
of Exhibit N or (ii) the Mortgage File or document shall have been delivered to
an attorney or to a public trustee or other public official as required by law
for purposes of initiating or pursuing legal action or other proceedings for the
foreclosure of the Mortgaged Property and the Master Servicer shall have
delivered to the Trustee an Officer's Certificate of a Servicing Officer
certifying as to the name and address of the Person to which the Mortgage File
or the documents therein were delivered and the purpose or purposes of such
delivery.
SECTION 3.14. Documents, Records and Funds in Possession of Master
Servicer to be Held for the Trustee.
----------------------------------------------------
Notwithstanding any other provisions of this Agreement, the Master
Servicer shall transmit to the Trustee as required by this Agreement all
documents and instruments in respect of a Mortgage Loan coming into the
possession of the Master Servicer from time to time and shall account fully to
the Trustee for any funds received by the Master Servicer or that otherwise are
collected by the Master Servicer as Liquidation Proceeds or Insurance Proceeds
in respect of any Mortgage Loan. All Mortgage Files and funds collected or held
by, or under the control of, the Master Servicer in respect of any Mortgage
Loans, whether from the collection of principal and interest payments or from
Liquidation Proceeds, including but not limited to, any funds on deposit in the
Certificate Account, shall be held by the Master Servicer for and on behalf of
the Trustee and shall be and remain the sole and exclusive property of the
Trustee, subject to the applicable provisions of this Agreement. The Master
Servicer also agrees that it shall not create, incur or subject any Mortgage
File or any funds that are deposited in the Certificate Account, Distribution
Account or Carryover Reserve Fund or in any Escrow Account (as defined in
Section 3.06), or any funds that otherwise are or may become due or payable to
the Trustee for the benefit of the Certificateholders, to any claim, lien,
security interest, judgment, levy, writ of attachment or other encumbrance, or
assert by legal action or otherwise any claim or right of set off against any
Mortgage File or any funds collected on, or in connection with, a Mortgage Loan,
except, however, that the Master Servicer shall be entitled to set off against
and deduct from any such funds any amounts that are properly due and payable to
the Master Servicer under this Agreement.
SECTION 3.15. Servicing Compensation.
----------------------
As compensation for its activities hereunder, the Master Servicer
shall be entitled to retain or direct the Trustee to withdraw from the
Certificate Account out of each payment of interest on a Mortgage Loan included
in the Trust Fund an amount equal to interest at the applicable Servicing Fee
Rate on the Stated Principal Balance of the related Mortgage Loan for the period
covered by such interest payment.
Additional servicing compensation in the form of any assumption fees,
late payment charges and Prepayment Interest Excess shall be retained by the
Master Servicer to the extent not required to be deposited in the Certificate
Account pursuant to Section 3.05 or 3.12(a) hereof. The Master Servicer shall be
required to pay all expenses incurred by it in connection with its servicing
activities hereunder (including payment of any premiums for hazard insurance, as
required by Section 3.10 hereof and maintenance of the other forms of insurance
coverage required by Section 3.10 hereof) and shall not be entitled to
reimbursement therefor except as specifically provided in Sections 3.08 and 3.12
hereof.
SECTION 3.16. Access to Certain Documentation.
-------------------------------
The Master Servicer shall provide to the OTS and the FDIC and to
comparable regulatory authorities supervising Holders of the Certificates and
the examiners and supervisory agents of the OTS, the FDIC and such other
authorities, access to the documentation regarding the Mortgage Loans required
by applicable regulations of the OTS and the FDIC. Such access shall be afforded
without charge, but only upon reasonable and prior written request and during
normal business hours at the offices of the Master Servicer designated by it.
Nothing in this Section shall limit the obligation of the Master Servicer to
observe any applicable law prohibiting disclosure of information regarding the
Mortgagors and the failure of the Master Servicer to provide access as provided
in this Section as a result of such obligation shall not constitute a breach of
this Section.
SECTION 3.17. Annual Statement as to Compliance.
---------------------------------
The Master Servicer shall deliver to the Depositor and the Trustee on
or before June 30 of each year commencing June 30, 1999, an Officer's
Certificate stating, as to the signer thereof, that (i) a review of the
activities of the Master Servicer during the preceding calendar year and of the
performance of the Master Servicer under this Agreement has been made under such
officer's supervision and (ii) to the best of such officer's knowledge, based on
such review, the Master Servicer has fulfilled all its obligations under this
Agreement throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof and (iii) to the best of such
officer's knowledge, each Subservicer has fulfilled all its obligations under
its Subservicing Agreement throughout such year, or, if there has been a default
in the fulfillment of any such obligation specifying each such default known to
such officer and the nature and status thereof. The Trustee shall forward a copy
of each such statement to each Rating Agency. Copies of such statement shall be
provided by the Trustee to any Certificateholder upon request at the Master
Servicer's expense, provided such statement is delivered by the Master Servicer
to the Trustee.
SECTION 3.18. Annual Independent Public Accountants' Servicing
Statement; Financial Statements.
------------------------------------------------
On or before the later of (i) June 30 of each year, beginning with
June 30, 1999 or (ii) within 30 days of the issuance of the annual audited
financial statements beginning with the audit for the period ending in 1998, the
Master Servicer at its expense shall cause a nationally recognized firm of
independent public accountants (who may also render other services to the Master
Servicer, the Seller or any affiliate thereof) that is a member of the American
Institute of Certified Public Accountants to furnish a report to the Trustee,
Depositor and the Seller in compliance with the Uniform Single Attestation
Program for Mortgage Bankers. Copies of such report shall be provided by the
Trustee to any Certificateholder upon request at the Master Servicer's expense,
provided such report is delivered by the Master Servicer to the Trustee. Upon
written request, the Master Servicer shall provide to the Certificateholders its
publicly available annual financial statements (or, for so long as Countrywide
Home Loans, Inc. is the Master Servicer hereunder, the Master Servicer's parent
company's publicly available annual financial statements), if any, promptly
after they become available.
SECTION 3.19. Indemnification of Master Servicer.
----------------------------------
The Master Servicer and any director, officer, employee or agent of
the Master Servicer shall be indemnified by the Seller and held harmless against
any loss, liability or expense incurred in connection with any claim, or
proceeding relating to this Agreement or the Certificates, or in connection with
the performance of any of the Master Servicer's duties hereunder, including the
costs and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder, other than any loss, liability or expense incurred by reason of
willful misfeasance, bad faith or negligence in the performance of any of Master
Servicer's duties hereunder or by reason of reckless disregard of Master
Servicer's obligations and duties hereunder. Such indemnity shall survive the
termination of this Agreement or the resignation or removal of the Master
Servicer hereunder.
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<PAGE>
ARTICLE IV
DISTRIBUTIONS AND
ADVANCES BY THE MASTER SERVICER
SECTION 4.01. Advances.
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Subject to the conditions of this Article IV, the Master Servicer, as
required below, shall make an Advance and deposit such Advance in the
Certificate Account. Each such Advance shall be remitted to the Certificate
Account no later than 1:00 p.m. Pacific time on the Master Servicer Advance Date
in immediately available funds. The Master Servicer shall be obligated to make
any such Advance only to the extent that such advance would not be a
Nonrecoverable Advance. If the Master Servicer shall have determined that it has
made a Nonrecoverable Advance or that a proposed Advance or a lesser portion of
such Advance would constitute a Nonrecoverable Advance, the Master Servicer
shall (i) deliver to the Trustee for the benefit of the Certificateholders funds
constituting the remaining portion of such Advance, if applicable, and (ii)
deliver no later than the related Determination Date to the Depositor, each
Rating Agency and the Trustee an Officer's Certificate setting forth the basis
for such determination.
In lieu of making all or a portion of such Advance from its own funds,
the Master Servicer may (i) cause to be made an appropriate entry in its records
relating to the Certificate Account that any Amount Held for Future
Distributions has been used by the Master Servicer in discharge of its
obligation to make any such Advance and (ii) transfer such funds from the
Certificate Account to the Distribution Account. Any funds so applied and
transferred shall be replaced by the Master Servicer by deposit in the
Certificate Account no later than the close of business on the Business Day
immediately preceding the Distribution Date on which such funds are required to
be distributed pursuant to this Agreement. The Master Servicer shall be entitled
to be reimbursed from the Certificate Account for all Advances of its own funds
made pursuant to this Section as provided in Section 3.08. The obligation to
make Advances with respect to any Mortgage Loan shall continue until such
Mortgage Loan is paid in full or the related Mortgaged Property or related REO
Property has been liquidated or until the purchase or repurchase thereof (or
substitution therefor) from the Trust Fund pursuant to any applicable provision
of this Agreement, except as otherwise provided in this Section 4.01.
SECTION 4.02. Reduction of Servicing Compensation in Connection with
Prepayment Interest Shortfalls.
------------------------------------------------------
In the event that any Mortgage Loan is the subject of a Prepayment
Interest Shortfall, the Master Servicer shall, to the extent of one-half]of the
Servicing Fee for such Distribution Date, deposit into the Certificate Account,
as a reduction of the Servicing Fee (but not in excess of one-half thereof) for
such Distribution Date, no later than the close of business on the Business Day
immediately preceding such Distribution Date, an amount equal to the Prepayment
Interest Shortfall; and in case of such deposit, the Master Servicer shall not
be entitled to any recovery or reimbursement from the Depositor, the Trustee,
the Trust Fund or the Certificateholders.
SECTION 4.03. REMIC Distributions
-------------------
On each Distribution Date the Trustee shall allocate distributions to
the REMIC 1 Regular Interests, the REMIC 2 Regular Interests, the REMIC 3
Regular Interests, and the REMIC 4 Regular Interests in accordance with Section
4.06 hereof.
SECTION 4.04. Distributions.
-------------
(a) On each Distribution Date the Trustee (or the Paying Agent on
behalf of the Trustee) shall make the following allocations from the
Distribution Account to the interest issued in respect of REMIC 1, REMIC 2, and
REMIC 3, and shall distribute such amount as specified in this Section.
(b) On each Distribution Date, the Trustee shall make the following
allocations from, and to the extent of funds on deposit in, the Distribution
Account of an amount equal to the Interest Funds in the following order of
priority:
(i) to the Class A Certificates, the Class A Current Interest and any
Class A Interest Shortfall Amount;
(ii) to the Class M-1 Certificates, the Class M-1 Current Interest;
(iii) to the Class M-2 Certificates, the Class M-2 Current Interest;
(iv) to the Class B Certificates, the Class B Current Interest; and
(v) any remainder shall constitute part of the Excess Cashflow for
such Distribution Date.
(c) On each Distribution Date, the Trustee shall make the following
allocations from , and to the extent of funds on deposit in, the Distribution
Account of an amount equal to the Principal Distribution Amount in the following
order of priority:
(i) to the Class R Certificates, an amount equal to the Certificate
Principal Balances thereof;
(ii) to the Class A Certificates, the Class A Principal Distribution
Amount;
(iii) to the Class M-1 Certificates, the Class M-1 Principal
Distribution Amount;
(iv) to the Class M-2 Certificates, the Class M-2 Principal
Distribution Amount;
(v) to the Class B Certificates, the Class B Principal Distribution
Amount; and
(vi) any remainder shall constitute part of the Excess Cashflow for
such Distribution Date.
(d) On each Distribution Date, the Trustee shall make the following
allocations from, and to the extent of funds on deposit in, the Distribution
Account of the Excess Cashflow in the following order of priority:
(i) for distribution as part of the Principal Distribution Amount, the
Extra Principal Distribution Amount;
(ii) to the Class M-1 Certificates, the Class M-1 Interest Shortfall
Amount;
(iii) to the Class M-1 Certificates, the Class M-1 Unpaid Realized
Loss Amount;
(iv) to the Class M-2 Certificates, the Class M-2 Interest Shortfall
Amount;
(v) to the Class M-2 Certificates, the Class M-2 Unpaid Realized Loss
Amount;
(vi) to the Class B Certificates, the Class B Interest Shortfall
Amount;
(vii) to the Class B Certificates, the Class B Unpaid Realized Loss
Amount;
(viii) to the Carryover Reserve Fund, in an amount equal to the
Required Carryover Reserve Fund Deposit for further allocation pursuant to
Section 4.04(e);
(ix) to the Class X Certificates, the Class X Distributable Amount;
(x) to the Master Servicer, in payment of the Extra Master Servicing
Fee for such Distribution Date pursuant to Section 4.07 hereof; and
(xi) to the Class R Certificates (notwithstanding that the Certificate
Principal Balances thereof may be zero), any remainder.
(e) On each Distribution the Trustee shall make the following
allocations from the, and to the extent of funds on deposit in, Carryover
Reserve Fund of the Required Carryover Reserve Fund Deposit: to each Class of
Certificates pro rata, any Certificate Interest Carryover Amount for such Class.
(f) On each Distribution Date, the Trustee shall allocate the Applied
Realized Loss Amount to reduce the Certificate Principal Balances of the
Subordinate Certificates in the following order of priority:
(i) to the Class B Certificates until the Class B Certificate
Principal Balance is reduced to zero;
(ii) to the Class M-2 Certificates until the Class M-2 Certificate
Principal Balance is reduced to zero; and
(iii) to the Class M-1 Certificates until the Class M-1 Certificate
Principal Balance is reduced to zero.
(g) Subject to Section 9.02 hereof respecting the final distribution,
on each Distribution Date the Trustee shall make distributions to each
Certificateholder of record on the preceding Record Date either by wire transfer
in immediately available funds to the account of such holder at a bank or other
entity having appropriate facilities therefor, if (i) such Holder has so
notified the Trustee at least five (5) Business Days prior to the related Record
Date and (ii) such Holder shall hold Regular Certificates with aggregate
principal denominations of not less than $1,000,000 or evidencing a Percentage
Interest aggregating ten percent (10%) or more with respect to such Class or, if
not, by check mailed by first class mail to such Certificateholder at the
address of such holder appearing in the Certificate Register. Notwithstanding
the foregoing, but subject to Section 9.02 hereof respecting the final
distribution, distributions with respect to Certificates registered in the name
of a Depository shall be made to such Depository in immediately available funds.
(h) On or before 5:00 p.m. (Pacific time) on the third (3rd) Business
Day following each Determination Date (but in no event later than 5:00 p.m.
(Pacific time) on the fifth (5th) Business Day before the related Distribution
Date), the Master Servicer shall deliver a report to the Trustee and the Seller
in the form of a computer readable magnetic tape (or by such other means as the
Master Servicer, the Trustee and the Seller may agree from time to time)
containing such data and information as agreed to by the Master Servicer and the
Trustee so as to permit the Trustee to prepare the Monthly Statement to
Certificateholders and make the required distributions for the related
Distribution Date (the "Remittance Report"). The Trustee shall, not later than
9:00 a.m. (Pacific time) on the Master Servicer Advance Date, other than any
Master Servicer Advance Date relating to any Distribution Date on which the
proceeds of any Optional Termination are being distributed, (i) furnish by
telecopy a statement to the Master Servicer (the information in such statement
to be made available to Certificateholders by the Trustee on request) setting
forth the Interest Funds and Principal Funds for such Distribution Date and the
amount to be withdrawn from the Certificate Account and (ii) determine (and
notify the Master Servicer by telecopy of the results of such determination) the
amount of Advances to be made by the Master Servicer in respect of the related
Distribution Date; provided that no Advance shall be made if it would be a
Nonrecoverable Advance; provided further that any failure by the Trustee to
notify the Master Servicer will not relieve the Master Servicer from any
obligation to make any such Advances. The Trustee shall not be responsible to
recompute, recalculate or verify information provided to it by the Master
Servicer and shall be permitted to conclusively rely on any information provided
to it by the Master Servicer.
(i) In addition to the reporting requirements set forth in Section
4.04(h), the Master Servicer agrees to cooperate with all reasonable requests of
the Seller to be furnished with additional information, including monthly and
special reports, with respect to the Mortgage Loans. At the written request of
the Seller, the Master Servicer shall, if within its normal course of business,
provide such information and reports to the Seller in electronic or
machine-readable format.
SECTION 4.05. Monthly Statements to Certificateholders.
----------------------------------------
(a) Not later than each Distribution Date, the Trustee shall prepare
and cause to be forwarded by first class mail to each Holder of a Class of
Certificates of the Trust Fund, the Master Servicer, the Seller and the
Depositor a statement setting forth for the Certificates:
(i) the amount of the related distribution to Holders of each Class
allocable to principal, separately identifying (A) the aggregate amount of
any Principal Prepayments included therein, (B) the aggregate of all
scheduled payments of principal included therein and (C) the Extra
Principal Distribution Amount (if any);
(ii) the amount of such distribution to Holders of each Class
allocable to interest;
(iii) the aggregate Certificate Principal Balance of each Class after
giving effect (A) to all distributions allocable to principal on such
Distribution Date and (B) the allocation of any Applied Realized Loss
Amounts for such Distribution Date;
(iv) the aggregate Stated Principal Balance of the Mortgage Loans for
the following Distribution Date;
(v) the related amount of the Servicing Fees paid to or retained by
the Master Servicer;
(vi) the Pass-Through Rate for each Class of Certificates with respect
to the current Accrual Period;
(vii) any Interest Shortfall Amount for each Class of Certificates;
(viii) the Net Rate;
(ix) the amount of Advances included in the distribution on such
Distribution Date;
(x) the cumulative amount of Applied Realized Loss Amounts to date;
(xi) the number and aggregate principal amounts of Mortgage Loans (A)
delinquent (exclusive of Mortgage Loans in foreclosure) (1) 30 days, (2) 31
to 60 days, (3) 61 to 90 days and (4) 91 or more days, and (B) in
foreclosure and delinquent (1) 30 days, (2) 31 to 60 days, (3) 61 to 90
days and (4) 91 or more days, in each case as of the close of business on
the last day of the calendar month preceding such Distribution Date;
(xii) with respect to any Mortgage Loan that became an REO Property
during the preceding calendar month, the loan number and Stated Principal
Balance of such Mortgage Loan as of the close of business on the
Determination Date preceding such Distribution Date and the date of
acquisition thereof;
(xiii) the total number and principal balance of any REO Properties as
of the close of business on the Determination Date preceding such
Distribution Date;
(xiv) the Stated Principal Balance of all Liquidated Loans;
(xv) with respect to any Liquidated Loan, the loan number and Stated
Principal Balance relating thereto;
(xvi) whether a Trigger Event has occurred; and
(xvii) the Certificate Interest Carryover Amount (if any) with respect
to each Class of Certificates.
(b) The Trustee's responsibility for disbursing the above information
to the Certificateholders is limited to the availability, timeliness and
accuracy of the information derived from the Master Servicer. The Trustee shall
send a copy of each statement provided pursuant to this Section 4.05 to each
Rating Agency.
(c) Within a reasonable period of time after the end of each calendar
year, the Trustee shall cause to be furnished to each Person who at any time
during the calendar year was a Certificateholder, a statement containing the
information set forth in clauses (a)(i), (a)(ii) and (a)(iii) of this Section
4.05 aggregated for such calendar year or applicable portion thereof during
which such Person was a Certificateholder. Such obligation of the Trustee shall
be deemed to have been satisfied to the extent that substantially comparable
information shall be provided by the Trustee pursuant to any requirements of the
Code as from time to time in effect.
(d) Upon filing with the Internal Revenue Service, the Trustee shall
furnish to the Holders of the Class R Certificates , in accordance with
Section 8.11, 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:
(i) The original projected principal and interest cash flows on the
Closing Date on each Class of regular and residual interests created
hereunder and on the Mortgage Loans, based on the Prepayment Assumption;
(ii) The projected remaining principal and interest cash flows as of
the end of any calendar quarter with respect to each Class of regular and
residual interests created hereunder and the Mortgage Loans, based on the
Prepayment Assumption;
(iii) The applicable Prepayment Assumption and any interest rate
assumptions used in determining the projected principal and interest cash
flows described above;
(iv) 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 each Class of regular or residual
interests created hereunder and to the Mortgage Loans, together with each
constant yield to maturity used in computing the same;
(v) 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 the REMIC with respect
to such regular interests or bad debt deductions claimed with respect to
the Mortgage Loans; and
(vi) 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.
The information pursuant to clauses (i), (ii), (iii) and (iv) above
shall be provided by the Depositor and/or the Seller to the Trustee pursuant to
Section 8.11.
SECTION 4.06. REMIC 1, REMIC 2, REMIC 3, and REMIC 4 Allocations.
--------------------------------------------------
(a) The initial principal balances of the Class T1-1, Class T1-2, and
Class T1-3 Interests shall equal 98%, 1%, and 1%, respectively, of the Stated
Principal Balance of the Mortgage Loans as of the Cut-of Date. On each
Distribution Date, 98% of all Principal Funds for the related Due Period shall
be allocated to the Class T1-1 Interest. Remaining amounts of Principal Funds
for the related Due Period shall be allocated first to the Class T1-3 Interest
up to an amount equal to 2% of any amount that represents a Adjusted
Overcollateralization Release Amount with respect to such Distribution Date and
then equally between the Class T1-2 and Class T1-3 Interests. Interest accruing
on the Class T1-3 Interest in respect of each Distribution Date in an amount
equal to 1% of the increase in the Adjusted Overcollateralization Amount from
the immediately preceding Distribution Date shall be deferred and added to the
principal balance of the Class T1-3 Interest. The amount of interest accrued and
deferred on the Class T1-3 Interest in accordance with the preceding sentence in
respect of each Distribution Date shall be distributed as principal on such date
to the Class T1-2 Interest.
(b) On each Distribution Date, the Applied Realized Loss Amount for
such date shall be allocated 98% to the Class T1-1 Interest. The remaining 2% of
such Applied Realized Loss Amount shall be allocated to the Class T1-3 Interest
to the extent that the principal balance of the Class T1-3 Interest exceeds 1%
of the aggregate of the Stated Principal Balance of the Mortgage Loans as of
such date and then equally between the Class T1-2 and Class T1-3 Interests.
(c) The initial principal balances of the Class T2-1, Class T2-2, and
Class T2-3 Interests shall equal 98%, 1%, and 1%, respectively, of the Stated
Principal Balance of the Mortgage Loans as of the Cut-of Date. The Class T2-4
Interest shall not have a principal balance. On each Distribution Date, 98% of
all Principal Funds for the related Due Period shall be allocated to the Class
T2-1 Interest. Remaining amounts of Principal Funds for the related Due Period
shall be allocated first to the Class T2-3 Interest up to an amount equal to 2%
of any amount that represents a Adjusted Overcollateralization Release Amount
with respect to such Distribution Date and then equally between the Class T2-2
and Class T2-3 Interests. Interest accruing on the Class T2-3 Interest in
respect of each Distribution Date in an amount equal to 1% of the increase in
the Adjusted Overcollateralization Amount from the immediately preceding
Distribution Date shall be deferred and added to the principal balance of the
Class T2-3 Interest. The amount of interest accrued and deferred on the Class
T2-3 Interest in accordance with the preceding sentence in respect of each
Distribution Date shall be distributed as principal on such date to the Class
T2-2 Interest.
(d) On each Distribution Date, the Applied Realized Loss Amount with
respect to the Group II Certificates for such date shall be allocated 98% to the
Class T2-1 Interest. The remaining 2% of such Applied Realized Loss Amount shall
be allocated to the Class T2-3 Interest to the extent that the principal balance
of the Class T2-3 Interest exceeds 1% of the aggregate of the Stated Principal
Balance of the Mortgage Loans as of such date and then equally between the Class
T2-2 and Class T2-3 Interests.
(e) On each Distribution Date, the Class T3-1, Class T3-2, Class T3-3
and Class T3-4 Interests shall be entitled to receive principal distributions
that correspond to the principal distributions on the corresponding class of
Interests in REMIC 4 (the Class T4-1, Class T4-2, Class T4-3, and Class T4-4
Interests, respectively).
(f) On each Distribution Date, interest that accrues with respect to
the Class T3-5, Class T3-6, and Class T3-7 Interests shall be distributed as
principal on the Class T3-1, Class T3-2, Class T3-3, and Class T3-4 Interests to
achieve the Specified Overcollateralization Amount for such Distribution Date,
and to the extent not needed for this purpose, shall be distributed with respect
to the Class T3-5, Class T3-6, and Class T3-7 Interests in proportion to their
entitlements to current and accrued undistributed interest. Interest that
accrues on the Class T3-F8, Class T3-F9, Class T3-F10, Class T3-5, Class T3-6,
and Class T3-7 Interests shall not itself bear interest.
(g) On each Distribution Date, the Applied Realized Loss Amount for
the Group II Certificates shall be allocated as follows:
FIRST, to the Class T3-1 Interest to the extent
that its principal balance exceeds the principal
balance of the Class T4-1 Interest on such
Distribution Date (after giving effect to any
distributions made on such date);
SECOND, to the Class T3-2 Interest to the extent
that its principal balance exceeds the principal
balance of the Class T4-2 Interest on such
Distribution Date (after giving effect to any
distributions made on such date);
THIRD, to the Class T3-3 Interest to the extent
that its principal balance exceeds the principal
balance of the Class T4-3 Interest on such
Distribution Date (after giving effect to any
distributions made on such date);
FOURTH, to the Class T3-4 Interest to the extent
that its principal balance exceeds the principal
balance of the Class T4-4 Interest on such
Distribution Date (after giving effect to any
distributions made on such date);
FIFTH, to the Class T3-5 Interest to the extent
that its notional principal balance exceeds the
notional principal balance of the Class T4-5
Interest on such Distribution Date (after giving
effect to any distributions made on such date);
SIXTH, to the Class T3-6 Interest to the extent
that its notional principal balance exceeds the
notional principal balance of the Class T4-6
Interest on such Distribution Date (after giving
effect to any distributions made on such date);
SEVENTH, to the Class T3-7 Interest to the extent
that its notional principal balance exceeds the
notional principal balance of the Class T4-7
Interest on such Distribution Date (after giving
effect to any distributions made on such date);
EIGHTH, proportionately to the accrued interest
balances of the T3-5, Class T3-6, Class T3-7
Interests; and
NINTH, in a manner that will cause any amount due
on each REMIC 3 Regular Interests to equal the
amount due on the corresponding Class of REMIC 4
Regular Interests.
(h) On each Distribution Date, the Class T4-1, Class T4-2, Class T4-3,
and Class T4-4 Interests shall be entitled to receive distributions of principal
and interest equal to the principal and interest distributions required to be
paid with respect to the corresponding Class of Certificates (determined as if
the distributions on the Certificates were computed without regard to the
amounts distributed under Section 4.04(h)(viii)-(xi) hereof from the Carryover
Reserve Fund). On each Distribution Date, interest that accrues with respect to
the Class T4-5, Class T4-6, Class T4-7, and Class T4-8 Interests during the
related Accrual Period shall be distributed as Excess Cashflow in accordance
with Section 4.04(d) hereof. Interest that accrues on the Class T4-5, Class
T4-6, Class T4-7, and Class T4-8 Interests shall not itself bear interest.
(i) On each Distribution Date, the Applied Realized Loss Amount shall
be allocated among the REMIC 4 Regular Interests in accordance with the
allocations provided in Section 4.04 (f) hereof for the corresponding classes of
Certificates.
SECTION 4.07. Extra Master Servicing Fee.
--------------------------
(a) REMIC 4 shall pay to the Master Servicer the Extra Master
Servicing Fee as an additional fee for services rendered as Master Servicer.
Such amount shall be due and payable on any Distribution Date only to the extent
there are amounts remaining after all amounts required to be distributed with
respect to the REMIC 4 Regular Interests have been made for that Distribution
Date. Furthermore, if for any Distribution Date an amount would be required to
be paid from the Carryover Reserve Fund pursuant to Section 4.04(e), the Master
Servicer shall make an advance to REMIC 4 in the amount of any Extra Master
Servicing Fee due for that Distribution Date.
(b) With respect to each Distribution Date, the Extra Master Servicing
Fee shall equal the sum of the following:
(i) an amount equal to the product of (A) the lesser of the Class A
Pass-Through Rate and the Net Rate for such Distribution Date and (B) the
excess of the Class T3-1 Interest principal balance over the Class T4-1
Interest principal balance (before giving effect to any reductions of such
balances on such Distribution Date);
(ii) an amount equal to the product of (A) the lesser of the Class M-1
Pass-Through Rate and the Net Rate for such Distribution Date and (B) the
excess of the Class T3-2 Interest principal balance over the Class T4-2
Interest principal balance (before giving effect to any reductions of such
balances on such Distribution Date); and
(iii) an amount equal to the product of (A) the lesser of the Class
M-2 Pass-Through Rate and the Net Rate for such Distribution Date and (B)
the excess of the Class T3-3 Interest principal balance over the Class T4-3
Interest principal balance (before giving effect to any reductions of such
balances on such Distribution Date).
SECTION 4.08. Carryover Reserve Fund.
----------------------
(a) On the Closing Date, the Trustee shall establish and maintain in
its name, in trust for the benefit of the Holders of the Class A, Class M-1,
Class M-2, and Class B Certificates, the Carryover Reserve Fund. The Carryover
Reserve Fund shall be an Eligible Account, and funds on deposit therein shall be
held separate and apart from, and shall not be commingled with , any other
moneys, including without limitation, other moneys held by the Trustee pursuant
to this Agreement.
(b) On each Distribution Date for which the amount on deposit in the
Carryover Reserve Fund is less than the amount of Required Carryover Reserve
Fund Deposit, the Trustee shall deposit amounts from the Distribution Account to
the Carryover Reserve Fund pursuant to Section 4.04(d)(viii). The Trustee shall
make withdrawals from the Carryover Reserve Fund to make distributions pursuant
to Section 4.04(d)(viii) hereof.
(c) Funds in the Carryover Reserve Fund may be invested in Permitted
Investments. Any earnings on such amounts shall be payable to the Class X
Certificates. The Class X Certificates shall evidence ownership of the Carryover
Reserve Fund for federal tax purposes and shall direct the Trustee in writing as
to the investment of amounts therein.
(d) Upon termination of the Trust Fund, any amounts remaining in the
Carryover Reserve Fund shall be distributed to the Holders of the Class X
Certificates in the same manner as if distributed pursuant to Section
4.04(d)(viii) hereof.
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<PAGE>
ARTICLE V
THE CERTIFICATES
SECTION 5.01. The Certificates.
----------------
The Certificates shall be substantially in the forms attached hereto
as exhibits. The Certificates shall be issuable in registered form, in the
minimum dollar denominations, integral dollar multiples in excess thereof
(except that one Certificate in of each Class may be issued in a different
amount which must be in excess of the applicable minimum dollar denomination)
and aggregate dollar denominations as set forth in the following table:
Integral Original
Multiples Certificate
Minimum in Excess of Principal
Class Denomination Minimum Balance
- -------- -------------- -------------------- ----------------------
A $25,000.00 $1,000.00 $83,822,000.00
M-1 $25,000.00 $1,000.00 $6,715,000.00
M-2 $25,000.00 $1,000.00 $4,228,000.00
B $25,000.00 $1,000.00 $3,376,000.00
X N/A N/A N/A
R-1 $0.01 N/A $0.01
R-2 $1,000.00 N/A $1,000.00
The Certificates shall be executed by manual or facsimile signature on
behalf of the Trustee by an authorized officer. Certificates bearing the manual
or facsimile signatures of individuals who were, at the time when such
signatures were affixed, authorized to sign on behalf of the Trustee shall bind
the Trustee, notwithstanding that such individuals or any of them have ceased to
be so authorized prior to the authentication and delivery of such Certificates
or did not hold such offices at the date of such authentication and delivery. No
Certificate shall be entitled to any benefit under this Agreement, or be valid
for any purpose, unless there appears on such Certificate a certificate of
authentication substantially in the form set forth as attached hereto executed
by the Trustee by manual signature, and such certificate of authentication upon
any Certificate shall be conclusive evidence, and the only evidence, that such
Certificate has been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication. On the Closing
Date, the Trustee shall authenticate the Certificates to be issued at the
written direction of the Depositor, or any affiliate thereof.
The Depositor shall provide, or cause to be provided, to the Trustee
on a continuous basis, an adequate inventory of Certificates to facilitate
transfers.
SECTION 5.02. Certificate Register; Registration of Transfer and
Exchange of Certificates.
--------------------------------------------------
(a) The Trustee shall maintain, or cause to be maintained in
accordance with the provisions of Section 5.09 hereof, a Certificate Register
for the Trust Fund in which, subject to the provisions of subsections (b) and
(c) below and to such reasonable regulations as it may prescribe, the Trustee
shall provide for the registration of Certificates and of Transfers and
exchanges of Certificates as herein provided. Upon surrender for registration of
Transfer of any Certificate, the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Certificates
of the same Class and of like aggregate Percentage Interest.
At the option of a Certificateholder, Certificates may be exchanged
for other Certificates of the same Class in authorized denominations and
evidencing the same aggregate Percentage Interest upon surrender of the
Certificates to be exchanged at the office or agency of the Trustee. Whenever
any Certificates are so surrendered for exchange, the Trustee shall execute,
authenticate, and deliver the Certificates that the Certificateholder making the
exchange is entitled to receive. Every Certificate presented or surrendered for
registration of Transfer or exchange shall be accompanied by a written
instrument of Transfer in form satisfactory to the Trustee duly executed by the
holder thereof or his attorney duly authorized in writing.
No service charge to the Certificateholders shall be made for any
registration of Transfer or exchange of Certificates, but payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any Transfer or exchange of Certificates may be required.
All Certificates surrendered for registration of Transfer or exchange
shall be canceled and subsequently destroyed by the Trustee in accordance with
the Trustee's customary procedures.
(b) No Transfer of a Class X or Class R Certificate shall be made
unless such Transfer is made pursuant to an effective registration statement
under the Securities Act and any applicable state securities laws or is exempt
from the registration requirements under the Securities Act and such state
securities laws. In the event that a Transfer is to be made in reliance upon an
exemption from the Securities Act and such laws, in order to assure compliance
with the Securities Act and such laws, the Certificateholder desiring to effect
such Transfer and such Certificateholder's prospective transferee shall each
certify to the Trustee in writing the facts surrounding the Transfer in
substantially the forms set forth in Exhibit J (the "Transferor Certificate")
and (x) deliver a letter in substantially the form of either Exhibit K (the
"Investment Letter") or Exhibit L (the "Rule 144A Letter") or (y) there shall be
delivered to the Trustee an opinion of counsel that such Transfer may be made
pursuant to an exemption from the Securities Act, which opinion of counsel shall
not be an expense of the Depositor, the Seller, the Master Servicer or the
Trustee. The Depositor shall provide to any Holder of a Class X or Class R
Certificate and any prospective transferee designated by any such Holder,
information regarding the related Certificates and the Mortgage Loans and such
other information as shall be necessary to satisfy the condition to eligibility
set forth in Rule 144A(d)(4) for Transfer of any such Certificate without
registration thereof under the Securities Act pursuant to the registration
exemption provided by Rule 144A. The Trustee and the Master Servicer shall
cooperate with the Depositor in providing the Rule 144A information referenced
in the preceding sentence, including providing to the Depositor such information
regarding the Certificates, the Mortgage Loans and other matters regarding the
Trust Fund as the Depositor shall reasonably request to meet its obligation
under the preceding sentence. Each Holder of a Class X or Class R Certificate
desiring to effect such Transfer shall, and does hereby agree to, indemnify the
Trustee, the Depositor, the Seller and the Master Servicer against any liability
that may result if the Transfer is not so exempt or is not made in accordance
with such federal and state laws.
No Transfer of an ERISA Restricted Certificate shall be made unless
the Trustee shall have received either (i) a representation from the transferee
of such Certificate acceptable to and in form and substance satisfactory to the
Trustee, to the effect that such transferee is not an employee benefit plan
subject to Section 406 of ERISA or a plan subject to Section 4975 of the Code,
or a Person acting on behalf of any such plan or using the assets of any such
plan, (ii) if such purchaser is an insurance company, a representation that the
purchaser is an insurance company that is purchasing such Certificates with
funds contained in an "insurance company general account" (as such term is
defined in Section V(e) of Prohibited Transaction Class Exemption 95-60 ("PTCE
95-60")) and that the purchase and holding of such Certificates are covered
under PTCE 95-60, or (iii) in the case of any such ERISA Restricted Certificate
presented for registration in the name of an employee benefit plan subject to
ERISA, or a plan subject to Section 4975 of the Code (or comparable provisions
of any subsequent enactments), or a trustee of any such plan or any other person
acting on behalf of any such plan, an opinion of counsel satisfactory to the
Trustee and the Master Servicer to the effect that the purchase or holding of
such ERISA Restricted Certificate will not result in the assets of the Trust
Fund being deemed to be "plan assets" and subject to the prohibited transaction
provisions of ERISA and the Code and will not subject the Trustee or the Master
Servicer to any obligation in addition to those expressly undertaken in this
Agreement, which opinion of counsel shall not be an expense of the Trustee or
the Master Servicer. For purposes of clause (i) of the preceding sentence, such
representation shall be deemed to have been made to the Trustee by the
transferee's acceptance of an ERISA Restricted Certificate (or the acceptance by
a Certificate Owner of the beneficial interest in any such Class of ERISA
Restricted Certificates) unless the Trustee shall have received from the
transferee an alternative representation acceptable in form and substance to the
Master Servicer and the Depositor. Notwithstanding anything else to the contrary
herein, any purported transfer of an ERISA Restricted Certificate to or on
behalf of an employee benefit plan subject to Section 406 of ERISA or a plan
subject to Section 4975 of the Code without the delivery to the Trustee and the
Master Servicer of an opinion of counsel satisfactory to the Trustee and the
Master Servicer as described above shall be void and of no effect; provided that
the restriction set forth in this sentence shall not be applicable if there has
been delivered to the Trustee and the Master Servicer an opinion of counsel
satisfactory to the Trustee and the Master Servicer to the effect that the
purchase or holding of an ERISA Restricted Certificate will not result in the
assets of the Trust Fund being deemed to be "plan assets" and subject to the
prohibited transaction provisions of ERISA and the Code and will not subject the
Trustee or the Master Servicer to any obligation in addition to those expressly
undertaken in this Agreement. The Trustee shall be under no liability to any
Person for any registration of transfer of any ERISA Restricted Certificate that
is in fact not permitted by this Section 5.02(b) or for making any payments due
on such Certificate to the Holder thereof or taking any other action with
respect to such Holder under the provisions of this Agreement so long as the
transfer was registered by the Trustee in accordance with the foregoing
requirements. The Trustee shall be entitled, but not obligated, to recover from
any Holder of any ERISA Restricted Certificate that was in fact an employee
benefit plan subject to Section 406 of ERISA or a plan subject to Section 4975
of the Code or a Person acting on behalf of any such plan at the time it became
a Holder or, at such subsequent time as it became such a plan or Person acting
on behalf of such a plan, all payments made on such ERISA Restricted 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 is not such a plan or Person acting on behalf of a plan.
(c) 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
the rights of each Person acquiring any Ownership Interest in a Class R
Certificate are expressly subject to the following provisions:
(i) 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.
(ii) No Ownership Interest in a Class R Certificate may be registered
on the Closing Date or thereafter transferred, and the Trustee shall not
register the Transfer of any Class R Certificate unless, in addition to the
certificates required to be delivered to the Trustee under subparagraph (b)
above, the Trustee shall have been furnished with an affidavit (a "Transfer
Affidavit") of the initial owner or the proposed transferee in the form
attached hereto as Exhibit I.
(iii) Each Person holding or acquiring any Ownership Interest in a
Class R Certificate shall agree (A) to obtain a Transfer Affidavit from any
other Person to whom such Person attempts to Transfer its Ownership
Interest in a Class R Certificate, (B) to obtain a Transfer Affidavit from
any Person for whom such Person is acting as nominee, trustee or agent in
connection with any Transfer of a Class R Certificate and (C) not to
Transfer its Ownership Interest in a Class R Certificate or to cause the
Transfer of an Ownership Interest in a Class R Certificate to any other
Person if it has actual knowledge that such Person is not a Permitted
Transferee.
(iv) Any attempted or purported Transfer of any Ownership Interest in
a Class R Certificate in violation of the provisions of this Section
5.02(c) shall be absolutely null and void and shall vest no rights in the
purported Transferee. If any purported transferee shall become a Holder of
a Class R Certificate in violation of the provisions of this Section
5.02(c), then the last preceding Permitted Transferee shall be restored to
all rights as Holder thereof retroactive to the date of registration of
Transfer of such Class R Certificate. The Trustee shall be under no
liability to any Person for any registration of Transfer of a Class R
Certificate that is in fact not permitted by Section 5.02(b) and this
Section 5.02(c) or for making any payments due on such Certificate to the
Holder thereof or taking any other action with respect to such Holder under
the provisions of this Agreement so long as the Transfer was registered
after receipt of the related Transfer Affidavit, Transferor Certificate and
either the Rule 144A Letter or the Investment Letter. The Trustee shall be
entitled but not obligated to recover from any Holder of a 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 Permitted
Transferee of such Certificate.
(v) The Master Servicer shall use its best efforts to make available,
upon receipt of written request from the Trustee, all information necessary
to compute any tax imposed under Section 860E(e) of the Code as a result of
a Transfer of an Ownership Interest in a Class R Certificate to any Holder
who is not a Permitted Transferee.
The restrictions on Transfers of a Class R Certificate set forth in
this Section 5.02(c) shall cease to apply (and the applicable portions of the
legend on a Class R Certificate may be deleted) with respect to Transfers
occurring after delivery to the Trustee of an Opinion of Counsel, which Opinion
of Counsel shall not be an expense of the Trustee, the Seller or the Master
Servicer to the effect that the elimination of such restrictions will not cause
the Trust Fund to fail to qualify as a REMIC at any time that the Certificates
are outstanding or result in the imposition of any tax on the Trust Fund, a
Certificateholder or another Person. Each Person holding or acquiring any
ownership Interest in a Class R Certificate hereby consents to any amendment of
this Agreement that, based on an Opinion of Counsel furnished to the Trustee, is
reasonably necessary (a) to ensure that the record ownership of, or any
beneficial interest in, a Class R Certificate is not transferred, directly or
indirectly, to a Person that is not a Permitted Transferee and (b) to provide
for a means to compel the Transfer of a Class R Certificate that is held by a
Person that is not a Permitted Transferee to a Holder that is a Permitted
Transferee.
(d) The preparation and delivery of all certificates and opinions
referred to above in this Section 5.02 shall not be an expense of the Trust
Fund, the Trustee, the Depositor, the Seller or the Master Servicer.
SECTION 5.03. Mutilated, Destroyed, Lost or Stolen Certificates.
-------------------------------------------------
If (a) any mutilated Certificate is surrendered to the Trustee, or the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Certificate and of the ownership thereof and (b) there is delivered to
the Master Servicer and the Trustee such security or indemnity as may be
required by them to save each of them harmless, then, in the absence of notice
to the Trustee that such Certificate has been acquired by a bona fide purchaser,
the Trustee shall execute, authenticate and deliver, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate
of like Class, tenor and Percentage Interest. In connection with the issuance of
any new Certificate under this Section 5.03, the Trustee may require the payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses (including the fees and
expenses of the Trustee) connected therewith. Any replacement Certificate issued
pursuant to this Section 5.03 shall constitute complete and indefeasible
evidence of ownership in the Trust Fund, as if originally issued, whether or not
the lost, stolen or destroyed Certificate shall be found at any time. All
Certificates surrendered to the Trustee under the terms of this Section 5.03
shall be canceled and destroyed by the Trustee in accordance with its standard
procedures without liability on its part.
SECTION 5.04. Persons Deemed Owners.
---------------------
The Master Servicer, the Trustee and any agent of the Master Servicer
or the Trustee may treat the person in whose name any Certificate is registered
as the owner of such Certificate for the purpose of receiving distributions as
provided in this Agreement and for all other purposes whatsoever, and neither
the Master Servicer, the Trustee nor any agent of the Master Servicer or the
Trustee shall be affected by any notice to the contrary.
SECTION 5.05. Access to List of Certificateholders' Names and
Addresses.
-----------------------------------------------
If three or more Certificateholders (a) request such information in
writing from the Trustee, (b) state that such Certificateholders desire to
communicate with other Certificateholders with respect to their rights under
this Agreement or under the Certificates, and (c) provide a copy of the
communication that such Certificateholders propose to transmit or if the
Depositor or Master Servicer shall request such information in writing from the
Trustee, then the Trustee shall, within ten Business Days after the receipt of
such request, provide the Depositor, the Master Servicer or such
Certificateholders at such recipients' expense the most recent list of the
Certificateholders of the Trust Fund held by the Trustee, if any. The Depositor
and every Certificateholder, by receiving and holding a Certificate, agree that
the Trustee shall not be held accountable by reason of the disclosure of any
such information as to the list of the Certificateholders hereunder, regardless
of the source from which such information was derived.
SECTION 5.06. Book-Entry Certificates.
-----------------------
The Regular Certificates (other than the Class X Certificates), upon
original issuance, shall be issued in the form of one or more typewritten
Certificates representing the Book-Entry Certificates, to be delivered to the
Depository by or on behalf of the Depositor. Such Certificates shall initially
be registered on the Certificate Register in the name of the Depository or its
nominee, and no Certificate Owner of such Certificates will receive a definitive
certificate representing such Certificate Owner's interest in such Certificates,
except as provided in Section 5.08. Unless and until definitive, fully
registered Certificates ("Definitive Certificates") have been issued to the
Certificate Owners of such Certificates pursuant to Section 5.08:
(a) the provisions of this Section shall be in full force and effect;
(b) the Depositor, the Master Servicer and the Trustee may deal with
the Depository and the Depository Participants for all purposes (including the
making of distributions) as the authorized representative of the respective
Certificate Owners of such Certificates;
(c) registration of the Book-Entry Certificates may not be transferred
by the Trustee except to another Depository;
(d) the rights of the respective Certificate Owners of such
Certificates shall be exercised only through the Depository and the Depository
Participants and shall be limited to those established by law and agreements
between the Owners of such Certificates and the Depository and/or the Depository
Participants. Pursuant to the Depository Agreement, unless and until Definitive
Certificates are issued pursuant to Section 5.08, the Depository will make
book-entry transfers among the Depository Participants and receive and transmit
distributions of principal and interest on the related Certificates to such
Depository Participants;
(e) the Depository may collect its usual and customary fees, charges
and expenses from its Depository Participants;
(f) the Trustee may rely and shall be fully protected in relying upon
information furnished by the Depository with respect to its Depository
Participants; and
(g) to the extent that the provisions of this Section conflict with
any other provisions of this Agreement, the provisions of this Section shall
control.
For purposes of any provision of this Agreement requiring or
permitting actions with the consent of, or at the direction of,
Certificateholders evidencing a specified percentage of the aggregate unpaid
principal amount of any Class of Certificates, such direction or consent may be
given by Certificate Owners (acting through the Depository and the Depository
Participants) owning Book-Entry Certificates evidencing the requisite percentage
of principal amount of such Class of Certificates.
SECTION 5.07. Notices to Depository.
---------------------
Whenever any notice or other communication is required to be
given to Certificateholders of the Class with respect to which Book-Entry
Certificates have been issued, unless and until Definitive Certificates shall
have been issued to the related Certificate Owners, the Trustee shall give all
such notices and communications to the Depository.
SECTION 5.08. Definitive Certificates.
-----------------------
If, after Book-Entry Certificates have been issued with respect to any
Certificates, (a) the Depositor advises the Trustee that the Depository is no
longer willing or able to discharge properly its responsibilities under the
Depository Agreement with respect to such Certificates and the Trustee or the
Depositor is unable to locate a qualified successor, (b) the Depositor, at its
sole option, advises the Trustee that it elects to terminate the book-entry
system with respect to such Certificates through the Depository or (c) after the
occurrence and continuation of an Event of Default, Certificate Owners of such
Book-Entry Certificates having not less than 51% of the Voting Rights evidenced
by any Class of Book-Entry Certificates advise the Trustee and the Depository in
writing through the Depository Participants that the continuation of a
book-entry system with respect to Certificates of such Class through the
Depository (or its successor) is no longer in the best interests of the
Certificate Owners of such Class, then the Trustee shall notify all Certificate
Owners of such Certificates, through the Depository, of the occurrence of any
such event and of the availability of Definitive Certificates to Certificate
Owners of such Class requesting the same. The Depositor shall provide the
Trustee with an adequate inventory of certificates to facilitate the issuance
and transfer of Definitive Certificates. Upon surrender to the Trustee of any
such Certificates by the Depository, accompanied by registration instructions
from the Depository for registration, the Trustee shall authenticate and deliver
such Definitive Certificates. Neither the Depositor nor the Trustee shall be
liable for any delay in delivery of such instructions and each may conclusively
rely on, and shall be protected in relying on, such instructions. Upon the
issuance of such Definitive Certificates, all references herein to obligations
imposed upon or to be performed by the Depository shall be deemed to be imposed
upon and performed by the Trustee, to the extent applicable with respect to such
Definitive Certificates and the Trustee shall recognize the Holders of such
Definitive Certificates as Certificateholders hereunder.
SECTION 5.09. Maintenance of Office or Agency.
-------------------------------
The Trustee will maintain or cause to be maintained at its expense an
office or offices or agency or agencies in New York City where Certificates may
be surrendered for registration of transfer or exchange. The Trustee initially
designates its offices at 123 Washington Street, New York, New York 10006,
Attention: Securities Transfer Department, as offices for such purposes. The
Trustee will give prompt written notice to the Certificateholders of any change
in such location of any such office or agency.
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<PAGE>
ARTICLE VI
THE DEPOSITOR, THE MASTER SERVICER AND THE SELLER
SECTION 6.01. Respective Liabilities of the Depositor, the Master
Servicer and the Seller.
---------------------------------------------------
The Depositor, the Master Servicer and the Seller shall each be liable
in accordance herewith only to the extent of the obligations specifically and
respectively imposed upon and undertaken by them herein.
SECTION 6.02. Merger or Consolidation of the Depositor, the Master
Servicer or the Seller.
----------------------------------------------------
The Depositor, the Master Servicer and the Seller will each keep in
full effect its existence, rights and franchises as a corporation under the laws
of the United States or under the laws of one of the States thereof and will
each obtain and preserve its qualification to do business as a foreign
corporation in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Agreement, or any
of the Mortgage Loans and to perform its respective duties under this Agreement.
Any Person into which the Depositor, the Master Servicer or the Seller
may be merged or consolidated, or any Person resulting from any merger or
consolidation to which the Depositor, the Master Servicer or the Seller shall be
a party, or any person succeeding to the business of the Depositor, the Master
Servicer or the Seller, shall be the successor of the Depositor, the Master
Servicer or the Seller, as the case may be, hereunder, without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding; provided that the successor or
surviving Person to the Master Servicer shall be qualified to sell mortgage
loans to, and to service mortgage loans on behalf of, FNMA or FHLMC.
SECTION 6.03. Limitation on Liability of the Depositor, the Seller,
the Master Servicer and others.
-----------------------------------------------------
None of the Depositor, the Seller, the Master Servicer or any of the
directors, officers, employees or agents of the Depositor, the Seller or the
Master Servicer shall be under any liability to the 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 that this provision shall not protect the Depositor, the Seller, the
Master Servicer or any such Person against any breach of representations or
warranties made by it herein or protect the Depositor, the Seller, the Master
Servicer or any such Person from any liability that would otherwise be imposed
by reasons of willful misfeasance, bad faith or gross negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties hereunder. The Depositor, the Seller, the Master Servicer and any
director, officer, employee or agent of the Depositor, the Seller or the Master
Servicer may rely in good faith on any document of any kind prima facie properly
executed and submitted by any Person respecting any matters arising hereunder.
The Depositor, the Seller, the Master Servicer and any director, officer,
employee or agent of the Depositor, the Seller or the Master Servicer shall be
indemnified by the Trust Fund and held harmless against any loss, liability or
expense incurred in connection with any audit, controversy or judicial
proceeding relating to a governmental taxing authority or any legal action
relating to this Agreement or the Certificates, other than any loss, liability
or expense related to any specific Mortgage Loan or Mortgage Loans (except as
any such loss, liability or expense shall be otherwise reimbursable pursuant to
this Agreement) and any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or gross negligence in the performance of duties
hereunder or by reason of reckless disregard of obligations and duties
hereunder. None of the Depositor, the Seller or the Master Servicer shall be
under any obligation to appear in, prosecute or defend any legal action that is
not incidental to its respective duties hereunder and that in its opinion may
involve it in any expense or liability; provided that any of the Depositor, the
Seller or the Master Servicer may, in its discretion undertake any such action
that it may deem necessary or desirable in respect of this Agreement and the
rights and duties of the parties hereto and interests of the Trustee and the
Certificateholders hereunder. In such event, the legal expenses and costs of
such action and any liability resulting therefrom shall be, expenses, costs and
liabilities of the Trust Fund, and the Depositor, the Seller and the Master
Servicer shall be entitled to be reimbursed therefor out of the Certificate
Account as provided by Section 3.08 hereof.
SECTION 6.04. Limitation on Resignation of Master Servicer.
--------------------------------------------
The Master Servicer shall not resign from the obligations and duties
hereby imposed on it except upon determination that its duties hereunder are no
longer permissible under applicable law. Any such determination permitting the
resignation of the Master Servicer shall be evidenced by an Opinion of Counsel
to such effect delivered to the Trustee. No such resignation shall become
effective until the Trustee or a successor servicer to such appointment shall
have assumed the Master Servicer's responsibilities, duties, liabilities and
obligations hereunder.
SECTION 6.05. Errors and Omissions Insurance; Fidelity Bonds.
----------------------------------------------
The Master Servicer shall, for so long as it acts as servicer under
this Agreement, obtain and maintain in force (a) a policy or policies of
insurance covering errors and omissions in the performance of its obligations as
servicer hereunder, and (b) a fidelity bond in respect of its officers,
employees and agents. Each such policy or policies and bond shall, together,
comply with the requirements from time to time of FNMA or FHLMC for persons
performing servicing for mortgage loans purchased by FNMA or FHLMC. In the event
that any such policy or bond ceases to be in effect, the Master Servicer shall
use its reasonable best efforts to obtain a comparable replacement policy or
bond from an insurer or issuer, meeting the requirements set forth above as of
the date of such replacement.
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<PAGE>
ARTICLE VII
DEFAULT; TERMINATION OF MASTER SERVICER
SECTION 7.01. Events of Default.
-----------------
"Event of Default," wherever used herein, means any one of the
following events:
(i) any failure by the Master Servicer to deposit in the Certificate
Account or the Distribution Account or remit to the Trustee any payment
(excluding a payment required to be made under Section 4.01 hereof)
required to be made under the terms of this Agreement, which failure shall
continue unremedied for five (5) Business Days and, with respect to a
payment required to be made under Section 4.01 hereof, for one (1) Business
Day, after the date on which written notice of such failure shall have been
given to the Master Servicer by the Trustee or the Depositor, or to the
Trustee and the Master Servicer by the Holders of Certificates evidencing
not less than 25% of the Voting Rights evidenced by the Certificates; or
(ii) any failure by the Master Servicer or the Seller to observe or
perform in any material respect any other of their respective covenants or
agreements contained in this Agreement or any representation or warranty
shall prove to be untrue, which failure or breach shall continue unremedied
for a period of 60 days after the date on which written notice of such
failure shall have been given to the Master Servicer or the Seller, as
applicable, by the Trustee or the Depositor, or to the Trustee by the
Holders of Certificates evidencing not less than 25% of the voting Rights
evidenced by the Certificates; or
(iii) a decree or order of a court or agency or supervisory authority
having jurisdiction in the premises for the appointment of a receiver or
liquidator in any insolvency, readjustment of debt, marshalling of assets
and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Master
Servicer and such decree or order shall have remained in force undischarged
or unstayed for a period of 60 consecutive days; or
(iv) the Master Servicer shall consent to the appointment of a
receiver or liquidator in any insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings of or relating to the
Master Servicer or all or substantially all of the property of the Master
Servicer; or
(v) the Master Servicer shall admit in writing its inability to pay
its debts generally as they become due, file a petition to take advantage
of, or commence a voluntary case under, any applicable insolvency or
reorganization statute, make an assignment for the benefit of its
creditors, or voluntarily suspend payment of its obligations.
If an Event of Default shall occur, then, and in each and every such
case, so long as such Event of Default shall not have been remedied, the Trustee
shall, but only at the direction of the Holders of Certificates evidencing not
less than 25% of the Voting Rights evidenced by the Certificates, by notice in
writing to the Master Servicer (with a copy to each Rating Agency), terminate
all of the rights and obligations of the Master Servicer under this Agreement
and in and to the Mortgage Loans and the proceeds thereof, other than its rights
as a Certificateholder hereunder. On or after the receipt by the Master Servicer
of such written notice, all authority and power of the Master Servicer
hereunder, whether with respect to the Mortgage Loans or otherwise, shall pass
to and be vested in the Trustee. The Trustee shall thereupon make any Advance
described in Section 4.01 hereof subject to Section 3.04 hereof. The Trustee is
hereby authorized and empowered to execute and deliver, on behalf of the Master
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement or assignment of the Mortgage Loans and
related documents, or otherwise. Unless expressly provided in such written
notice, no such termination shall affect any obligation of the Master Servicer
to pay amounts owed pursuant to Article VIII. The Master Servicer agrees to
cooperate with the Trustee in effecting the termination of the Master Servicer's
responsibilities and rights hereunder, including, without limitation, the
transfer to the Trustee of all cash amounts which shall at the time be credited
to the Certificate Account, or thereafter be received with respect to the
Mortgage Loans. The Trustee shall promptly notify the Rating Agencies of the
occurrence of an Event of Default.
Notwithstanding any termination of the activities of a Master Servicer
hereunder, such Master Servicer shall be entitled to receive, out of any late
collection of a Scheduled Payment on a Mortgage Loan that was due prior to the
notice terminating such Master Servicer's rights and obligations as Master
Servicer hereunder and received after such notice, that portion thereof to which
such Master Servicer would have been entitled pursuant to Sections 3.08(a)(i)
through (x), and any other amounts payable to such Master Servicer hereunder the
entitlement to which arose prior to the termination of its activities hereunder.
SECTION 7.02. Trustee to Act; Appointment of Successor.
----------------------------------------
On and after the time the Master Servicer receives a notice of
termination pursuant to Section 7.01 hereof, the Trustee shall, to the extent
provided in Section 3.04, be the successor to the Master Servicer in its
capacity as servicer under this Agreement and the transactions set forth or
provided for herein and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Master Servicer by the terms and
provisions hereof and applicable law including the obligation to make advances
pursuant to Section 4.01. As compensation therefor, the Trustee shall be
entitled to all fees, costs and expenses relating to the Mortgage Loans that the
Master Servicer would have been entitled to if the Master Servicer had continued
to act hereunder. Notwithstanding the foregoing, if the Trustee has become the
successor to the Master Servicer in accordance with Section 7.01 hereof, the
Trustee may, if it shall be unwilling to so act, or shall, if it is prohibited
by applicable law from making Advances pursuant to Section 4.01 hereof or if it
is otherwise unable to so act, appoint, or petition a court of competent
jurisdiction to appoint, any established mortgage loan servicing institution the
appointment of which does not adversely affect the then current rating of the
Certificates by each Rating Agency as the successor to the Master Servicer
hereunder in the assumption of all or any part of the responsibilities, duties
or liabilities of the Master Servicer hereunder. Any successor Master Servicer
shall be an institution that is a FNMA and FHLMC approved seller/servicer in
good standing, that has a net worth of at least $15,000,000, and that is willing
to service the Mortgage Loans and executes and delivers to the Depositor and the
Trustee an agreement accepting such delegation and assignment, that contains an
assumption by such Person of the rights, powers, duties, responsibilities,
obligations and liabilities of the Master Servicer (other than liabilities of
the Master Servicer under Section 6.03 hereof incurred prior to termination of
the Master Servicer under Section 7.01), with like effect as if originally named
as a party to this Agreement; and provided further that each Rating Agency
acknowledges that its rating of the Certificates in effect immediately prior to
such assignment and delegation will not be qualified or reduced as a result of
such assignment and delegation. No appointment of a successor to the Master
Servicer hereunder shall be effective until the Trustee shall have consented
thereto, and written notice of such proposed appointment shall have been
provided by the Trustee to each Certificateholder. The Trustee shall not resign
as servicer until a successor servicer has been appointed and has accepted such
appointment. Pending appointment of a successor to the Master Servicer
hereunder, the Trustee, unless the Trustee is prohibited by law from so acting,
shall, subject to Section 3.04 hereof, act in such capacity as hereinabove
provided. In connection with such appointment and assumption, the Trustee may
make such arrangements for the compensation of such successor out of payments on
Mortgage Loans as it and such successor shall agree; provided that no such
compensation shall be in excess of that permitted the Master Servicer hereunder.
The Trustee and such successor shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession. Neither the
Trustee nor any other successor servicer shall be deemed to be in default
hereunder by reason of any failure to make, or any delay in making, any
distribution hereunder or any portion thereof or any failure to perform, or any
delay in performing, any duties or responsibilities hereunder, in either case
caused by the failure of the Master Servicer to deliver or provide, or any delay
in delivering or providing, any cash, information, documents or records to it.
Any successor to the Master Servicer as servicer shall give notice to
the Mortgagors of such change of servicer and shall, during the term of its
service as servicer maintain in force the policy or policies that the Master
Servicer is required to maintain pursuant to Section 6.05.
SECTION 7.03. Notification to Certificateholders.
----------------------------------
(a) Upon any termination of or appointment of a successor to the
Master Servicer, the Trustee shall give prompt written notice thereof to
Certificateholders and to each Rating Agency.
(b) Within 60 days after the occurrence of any Event of Default, the
Trustee shall transmit by mail to all Certificateholders notice of each such
Event of Default hereunder known to the Trustee, unless such Event of Default
shall have been cured or waived.
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<PAGE>
ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.01. Duties of Trustee.
-----------------
The Trustee, prior to the occurrence of an Event of Default and after
the curing of all Events of Default that may have occurred, shall undertake to
perform such duties and only such duties as are specifically set forth in this
Agreement. In case an Event of Default has occurred and remains uncured, the
Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee that are specifically required to be furnished pursuant to any
provision of this Agreement shall examine them to determine whether they conform
to the requirements of this Agreement. 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.
No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own grossly negligent action, its own gross
negligent failure to act or its own misconduct, its grossly negligent failure to
perform its obligations in compliance with this Agreement, or any liability that
would be imposed by reason of its willful misfeasance or bad faith; provided
that:
(i) prior to the occurrence of an Event of Default, and after the
curing of all such Events of Default that may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express
provisions of this Agreement, the Trustee shall not be liable, individually
or as Trustee, except for the performance of such duties and obligations as
are specifically set forth in this Agreement, no implied covenants or
obligations shall be read into this Agreement against the Trustee and the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Agreement that it reasonably believed in good faith to be genuine and
to have been duly executed by the proper authorities respecting any matters
arising hereunder;
(ii) the Trustee shall not be liable, individually or as Trustee, for
an error of judgment made in good faith by a Responsible Officer or
Responsible Officers of the Trustee, unless the Trustee was grossly
negligent or acted in bad faith or with willful misfeasance; and
(iii) the Trustee shall not be liable, individually or as Trustee,
with respect to any action taken, suffered or omitted to be taken by it in
good faith in accordance with the direction of Holders of each Class of
Certificates evidencing not less than 25% of the Voting Rights of such
Class relating to the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee under this Agreement.
SECTION 8.02. Certain Matters Affecting the Trustee.
-------------------------------------
(a) Except as otherwise provided in Section 8.01:
(i) the Trustee may request and rely upon and shall be protected in
acting or refraining from acting upon any resolution, Officer's
Certificate, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, consent, order, appraisal,
bond or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(ii) the Trustee may consult with counsel and any Opinion of Counsel
shall be full and complete authorization and protection in respect of any
action taken or suffered or omitted by it hereunder in good faith and in
accordance with such Opinion of Counsel;
(iii) the Trustee shall not be liable, individually or as Trustee, for
any action taken, suffered or omitted by it in good faith and believed by
it to be authorized or within the discretion or rights or powers conferred
upon it by this Agreement;
(iv) prior to the occurrence of an Event of Default hereunder and
after the curing of all Events of Default that may have occurred, the
Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond or other
paper or document, unless requested in writing so to do by Holders of each
Class of Certificates evidencing not less than 25% of the Voting Rights of
such Class;
(v) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents,
accountants or attorneys;
(vi) the Trustee shall not be required to expend its own funds or
otherwise incur any financial liability in the performance of any of its
duties hereunder if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such liability is not
assured to it;
(vii) the Trustee shall not be liable, individually or as Trustee, for
any loss on any investment of funds pursuant to this Agreement (other than
as issuer of the investment security);
(viii) the Trustee shall not be deemed to have knowledge of an Event
of Default until a Responsible Officer of the Trustee shall have received
written notice thereof; and
(ix) the Trustee shall be under no obligation to exercise any of the
trusts 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, pursuant to the provisions
of this Agreement, unless such Certificateholders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities that may be incurred therein or thereby.
(b) All rights of action under this Agreement or under any of the
Certificates, enforceable by the Trustee, may be enforced by the Trustee
without the possession of any of the Certificates, or the production
thereof at the trial or other proceeding relating thereto, and any such
suit, action or proceeding instituted by the Trustee shall be brought in
its name for the benefit of all the Holders of the Certificates, subject to
the provisions of this Agreement.
SECTION 8.03. Trustee Not Liable for Mortgage Loans.
-------------------------------------
The recitals contained herein shall be taken as the statements of the
Depositor or the Master Servicer, as the case may be, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Agreement or of any Mortgage Loan or related
document other than with respect to the Trustee's execution and authentication
of the Certificates. The Trustee shall not be accountable for the use or
application by the Depositor or the Master Servicer of any funds paid to the
Depositor or the Master Servicer in respect of the Mortgage Loans or deposited
in or withdrawn from the Certificate Account by the Depositor or the Master
Servicer.
SECTION 8.04. Trustee May Own Certificates.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Certificates with the same rights as it would have if it
were not the Trustee.
SECTION 8.05. Payment of Trustee's Fees and Expenses.
--------------------------------------
The Trustee shall be entitled to pay to itself the Trustee Fees by
withdrawing funds from the Certificate Account or the Distribution Account, as
applicable, pursuant to Section 3.08 as reasonable compensation (which shall not
be limited by any provision of law in regard to the compensation of a trustee of
an express trust) for all services rendered by it in the execution of the trusts
hereby created and in the exercise and performance of any of its powers and
duties. The Seller covenants and agrees to pay or reimburse the Trustee, upon
its request, for all reasonable expenses, disbursements and advances incurred or
made by the Trustee on behalf of the Trust Fund as provided in a separate letter
agreement between the Trustee and the Seller. The Trustee and any director,
officer, employee or agent of the Trustee shall be indemnified by the Seller and
held harmless against any loss, liability or expense incurred in connection with
any claim or proceeding relating to this Agreement or the Certificates, or in
connection with the performance of any of the Trustee's duties hereunder,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder, other than any loss, liability or expense incurred by reason
of willful misfeasance, bad faith or negligence in the performance of any of the
Trustee's duties hereunder or by reason of reckless disregard of the Trustee's
obligations and duties hereunder. Such indemnity shall survive the termination
of this Agreement or the resignation or removal of the Trustee hereunder.
SECTION 8.06. Eligibility Requirements for Trustee.
------------------------------------
The Trustee hereunder shall, at all times, be a corporation or
association organized and doing business under the laws of a state or the United
States of America, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $50,000,000, subject
to supervision or examination by federal or state authority and with a credit
rating that would not cause any of the Rating Agencies to reduce their
respective ratings of any Class of Certificates below the ratings issued on the
Closing Date (or having provided such security from time to time as is
sufficient to avoid such reduction). If such corporation or association
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section 8.06 the combined capital and surplus of such
corporation or association shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 8.06, the Trustee shall resign immediately in the
manner and with the effect specified in Section 8.07 hereof. The corporation or
national banking association serving as Trustee may have normal banking and
trust relationships with the Depositor, the Seller and the Master Servicer and
their respective affiliates; provided that such corporation cannot be an
affiliate of the Master Servicer other than the Trustee in its role as successor
to the Master Servicer.
SECTION 8.07. Resignation and Removal of Trustee.
----------------------------------
The Trustee may at any time resign and be discharged from the trusts
hereby created by (1) giving written notice of resignation to the Depositor and
the Master Servicer and by mailing notice of resignation by first class mail,
postage prepaid, to the Certificateholders at their addresses appearing on the
Certificate Register and each Rating Agency, not less than 60 days before the
date specified in such notice when, subject to Section 8.08, such resignation is
to take effect, and (2) acceptance of appointment by a successor trustee in
accordance with Section 8.08 and meeting the qualifications set forth in Section
8.06. If no successor trustee shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice or resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor trustee.
If at any time (i) the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.06 hereof and shall fail to resign
after written request thereto by the Depositor, (ii) the Trustee shall become
incapable of acting, or shall be adjudged as bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, or
(iii)(A) a tax is imposed with respect to the Trust Fund by any state in which
the Trustee or the Trust Fund is located, (B) the imposition of such tax would
be avoided by the appointment of a different trustee and (C) the Trustee fails
to indemnify the Trust Fund against such tax, then the Depositor or the Master
Servicer may remove the Trustee and appoint a successor trustee by written
instrument, in triplicate, one copy of which instrument shall be delivered to
the Trustee, one copy of which shall be delivered to the Master Servicer and one
copy of which shall be delivered to the successor trustee.
The Holders evidencing at least 51% of the Voting Rights of each Class
of Certificates may at any time remove the Trustee and appoint a successor
trustee by written instrument or instruments, in triplicate, signed by such
Holders or their attorneys-in-fact duly authorized, one complete set of which
instruments shall be delivered by the successor Trustee to the Master Servicer
one complete set to the Trustee so removed and one complete set to the successor
so appointed. Notice of any removal of the Trustee shall be given to each Rating
Agency by the Successor Trustee.
Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 8.07 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 8.08 hereof.
SECTION 8.08. Successor Trustee.
-----------------
Any successor trustee appointed as provided in Section 8.07 hereof
shall execute, acknowledge and deliver to the Depositor and to its predecessor
trustee and the Master Servicer an instrument accepting such appointment
hereunder and thereupon the resignation or removal of the predecessor trustee
shall become effective and such successor trustee, without any further act, deed
or conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as trustee herein.
No successor trustee shall accept appointment as provided in this
Section 8.08 unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 8.06 hereof and its appointment
shall not adversely affect the then current rating of the Certificates.
Upon acceptance of appointment by a successor trustee as provided in
this Section 8.08, the Depositor shall mail notice of the succession of such
trustee hereunder to all Holders of Certificates. If the Depositor fails to mail
such notice within 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 Depositor.
SECTION 8.09. Merger or Consolidation of Trustee.
----------------------------------
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to substantially all of the corporate trust business of
the Trustee, shall be the successor of the Trustee hereunder, provided that such
corporation shall be eligible under the provisions of Section 8.06 hereof
without the execution or filing of any paper or further act on the part of any
of the parties hereto, anything herein to the contrary notwithstanding.
SECTION 8.10. Appointment of Co-Trustee or Separate Trustee.
---------------------------------------------
Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust Fund or property securing any Mortgage Note may at the
time be located, the Master Servicer and the Trustee acting jointly shall have
the power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Trustee to act as co-trustee or co-trustees jointly with
the Trustee, or separate trustee or separate trustees, of all or any part of the
Trust Fund, and to vest in such Person or Persons, in such capacity and for the
benefit of the Certificateholders, such title to the Trust Fund or any part
thereof, whichever is applicable, and, subject to the other provisions of this
Section 8.10, such powers, duties, obligations, rights and trusts as the Master
Servicer and the Trustee may consider necessary or desirable. The Trustee shall
be ultimately liable for the actions of any co-trustee. If the Master Servicer
shall not have joined in such appointment within 15 days after the receipt by it
of a request to do so, or in the case an Event of Default shall have occurred
and be continuing, the Trustee alone shall have the power to make such
appointment. No co-trustee or separate trustee hereunder shall be required to
meet the terms of eligibility as a successor trustee under Section 8.06 and no
notice to Certificateholders of the appointment of any co-trustee or separate
trustee shall be required under Section 8.08.
Every separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and conditions:
(i) All rights, powers, duties and obligations conferred or imposed
upon the Trustee, except for the obligation of the Trustee under this
Agreement to advance funds on behalf of the Master Servicer, shall be
conferred or imposed upon and exercised or performed by the Trustee and
such separate trustee or co-trustee jointly (it being understood that such
separate trustee or co-trustee is not authorized to act separately without
the Trustee joining in such act), except to the extent that under any law
of any jurisdiction in which any particular act or acts are to be performed
(whether as Trustee hereunder or as successor to the Master Servicer
hereunder), the Trustee shall be incompetent or unqualified to perform such
act or acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Trust Fund or any portion thereof in
any such jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of the Trustee;
(ii) No trustee hereunder shall be held personally liable by reason of
any act or omission of any other trustee hereunder; and
(iii) The Trustee may at any time accept the resignation of 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 VIII. Each separate trustee and co-trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Master Servicer and the Depositor.
Any separate trustee or co-trustee may, at any time, constitute the
Trustee its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
SECTION 8.11. Tax Matters.
-----------
It is intended that the Trust Fund shall constitute, and that the
affairs of the Trust Fund shall be conducted so that REMIC 1, REMIC 2, REMIC 3,
and REMIC 4 qualify as, a "real estate mortgage investment conduit" as defined
in and in accordance with the REMIC Provisions. In furtherance of such
intention, the Trustee covenants and agrees that it shall act as agent (and the
Trustee is hereby appointed to act as agent) on behalf of the Trust Fund and
that in such capacity it shall: (a) prepare and file, or cause to be prepared
and filed, in a timely manner, a U.S. Real Estate Mortgage Investment Conduit
Income Tax Returns (Form 1066 or any successor form adopted by the Internal
Revenue Service) and prepare and file or cause to be prepared and filed with the
Internal Revenue Service and applicable state or local tax authorities income
tax or information returns for each taxable year with respect to each of REMIC
1, REMIC 2, REMIC 3, and REMIC 4, containing such information and at the times
and in the manner as may be required by the Code or state or local tax laws,
regulations, or rules, and furnish or cause to be furnished to
Certificateholders the schedules, statements or information at such times and in
such manner as may be required thereby; (b) within thirty days of the Closing
Date, furnish or cause to be furnished to the Internal Revenue Service, on Forms
8811 or as otherwise may be required by the Code, the name, title, address, and
telephone number of the person that the holders of the Certificates may contact
for tax information relating thereto, together with such additional information
as may be required by such Form, and update such information at the time or
times in the manner required by the Code for the Trust Fund; (c) make or cause
to be made elections, on behalf of REMIC 1, REMIC 2, REMIC 3, and REMIC 4 to be
treated as a REMIC on the federal tax return of the REMIC 1, REMIC 2, REMIC 3,
and REMIC 4 for its first taxable year (and, if necessary, under applicable
state law); (d) prepare and forward, or cause to be prepared and forwarded, to
the Certificateholders and to the Internal Revenue Service and, if necessary,
state tax authorities, all information returns and reports as and when required
to be provided to them in accordance with the REMIC Provisions, including
without limitation, the calculation of any original issue discount using the
Prepayment Assumption; (e) provide information necessary for the computation of
tax imposed on the transfer of a Class R Certificate to a Person that is not a
Permitted Transferee, or an agent (including a broker, nominee or other
middleman) of a Non-Permitted Transferee, or a pass-through entity in which a
Non-Permitted Transferee is the record holder of an interest (the reasonable
cost of computing and furnishing such information may be charged to the Person
liable for such tax); (f) to the extent that they are under its control conduct
the affairs of the Trust Fund at all times that any Certificates are outstanding
so as to maintain the status of REMIC 1, REMIC 2, REMIC 3, or REMIC 4 as a REMIC
under the REMIC Provisions; (g) not knowingly or intentionally take any action
or omit to take any action that would cause the termination of the REMIC status
of REMIC 1, REMIC 2, REMIC 3, or REMIC 4; (h) pay, from the sources specified in
the next to last paragraph of this Section 8.11, the amount of any federal,
state and local taxes, including prohibited transaction taxes as described
below, imposed on REMIC 1, REMIC 2, REMIC 3, or REMIC 4 prior to the termination
of the Trust Fund when and as the same shall be due and payable (but such
obligation shall not prevent the Trustee or any other appropriate Person from
contesting any such tax in appropriate proceedings and shall not prevent the
Trustee from withholding payment of such tax, if permitted by law, pending the
outcome of such proceedings); (i) sign or cause to be signed federal, state or
local income tax or information returns; (j) maintain records relating to the
REMIC 1, REMIC 2, REMIC 3, or REMIC 4, including but not limited to the income,
expenses, assets and liabilities of REMIC 1, REMIC 2, REMIC 3, or REMIC 4, and
the fair market value and adjusted basis of the Trust Fund property determined
at such intervals as may be required by the Code, as may be necessary to prepare
the foregoing returns, schedules, statements or information; and (k) as and when
necessary and appropriate, represent the Trust Fund in any administrative or
judicial proceedings relating to an examination or audit by any governmental
taxing authority, request an administrative adjustment as to any taxable year of
a REMIC 1, REMIC 2, REMIC 3, or REMIC 4 , enter into settlement agreements with
any governmental taxing agency, extend any statute of limitations relating to
any tax item of the Trust Fund, and otherwise act on behalf of the REMIC 1,
REMIC 2, REMIC 3, or REMIC 4 in relation to any tax matter involving the REMIC
1, REMIC 2, REMIC 3, or REMIC 4.
In order to enable the Trustee to perform its duties as set forth
herein, the Depositor and/or Seller shall provide, or cause to be provided, to
the Trustee within 10 days after the Closing Date all information or data that
the Trustee requests in writing and determines to be relevant for tax purposes
to the valuations and offering prices of the Certificates, including, without
limitation, the price, yield, prepayment assumption and projected cash flows of
the Certificates and the Mortgage Loans. Thereafter, the Depositor and the
Seller, as applicable, shall provide to the Trustee promptly upon written
request therefor, any such additional information or data that the Trustee may,
from time to time, request in order to enable the Trustee to perform its duties
as set forth herein. The Depositor and the Seller hereby indemnify the Trustee
for any losses, liabilities, damages, claims or expenses of the Trustee arising
from any errors or miscalculations of the Trustee that result from any failure
of the Depositor or the Seller, as applicable, to provide, or to cause to be
provided, accurate information or data to the Trustee on a timely basis.
In the event that any tax is imposed on "prohibited transactions" of
the Trust Fund as defined in Section 860F(a)(2) of the Code, on the "net income
from foreclosure property" of the Trust Fund as defined in Section 860G(c) of
the Code, on any contribution to the Trust Fund after the startup day pursuant
to Section 860G(d) of the Code, or any other tax is imposed, including, without
limitation, any federal, state or local tax or minimum tax imposed upon the
Trust Fund pursuant to Sections 23153 and 24872 of the California Revenue and
Taxation Code if not paid as otherwise provided for herein, such tax shall be
paid by (i) the Trustee, if any such other tax arises out of or results from a
breach by the Trustee of any of its obligations under this Agreement, (ii) (x)
the Master Servicer, in the case of any such minimum tax, and (y) any party
hereto (other than the Trustee) to the extent any such other tax arises out of
or results from a breach by such other party of any of its obligations under
this Agreement or (iii) in all other cases, or in the event that any liable
party here fails to honor its obligations under the preceding clauses (i) or
(ii), any such tax will be paid first with any amounts otherwise to be
distributed to the Class R Certificateholders, second with any amounts otherwise
to be distributed to the Class X Certificateholders, and third with any amounts
otherwise to be distributed to all other Certificateholders in the following
order of priority: first, to the Class B Certificates, second, to the Class M-2
Certificates, third, to the Class M-1 Certificates, and fourth, to the Class A
Certificates. Notwithstanding anything to the contrary contained herein, to the
extent that such tax is payable by the Class R Certificates, the Trustee is
hereby authorized to retain on any Distribution Date, from the Holders of the
Class R Certificates (and, if necessary, second, from the Holders of the all
other Certificates in the priority specified in the preceding sentence), funds
otherwise distributable to such Holders in an amount sufficient to pay such tax.
The Trustee agrees to promptly notify in writing the party liable for any such
tax of the amount thereof and the due date for the payment thereof.
The Trustee shall treat the Carryover Reserve Fund as an outside
reserve fund within the meaning of Treasury Regulation 1.860G-2(h) that is owned
by the Class X Certificateholders and that is not an asset of the REMIC. The
Trustee shall treat the rights of the Class A, Class M-1, Class M-2, and Class B
Certificateholders to receive payments from the Carryover Reserve Fund as rights
in an interest rate cap contract written by the Class X Certificateholder in
favor of the Class A, Class M-1, Class M-2, and Class B Certificateholders. Thus
each Class A, Class M-1, Class M-2, and Class B Certificate shall be treated as
representing ownership of not only REMIC 4 Regular Interests, but also ownership
of an interest in an interest rate cap contract. For purposes of determining the
issue price of the REMIC 4 Regular interests, the Trustee shall assume that the
interest rate cap contract has a value of $5,000.
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<PAGE>
ARTICLE IX
TERMINATION
SECTION 9.01. Termination upon Liquidation or Repurchase of all
Mortgage Loans.
-------------------------------------------------
Subject to Section 9.03, the obligations and responsibilities of the
Depositor, the Master Servicer, the Seller and the Trustee created hereby with
respect to the Trust Fund shall terminate upon the earlier of (a) the repurchase
by the Seller of all of the Mortgage Loans (and REO Properties) at the price
equal to the sum of (i) 100% of the Stated Principal Balance of each Mortgage
Loan (other than in respect of REO Property), (ii) accrued interest thereon at
the applicable Mortgage Rate, (iii) the appraised value of any REO Property (up
to the Stated Principal Balance of the related Mortgage Loan), such appraisal to
be conducted by an appraiser mutually agreed upon by the Seller, the Master
Servicer and the Trustee and (iv) any unreimbursed Servicing Advances, and the
principal portion of any unreimbursed Advances, made on the Mortgage Loans prior
to the exercise of such repurchase and (b) the later of (i) the maturity or
other liquidation (or any Advance with respect thereto) of the last Mortgage
Loan remaining in the Trust Fund and the disposition of all REO Property and
(ii) the distribution to Certificateholders of all amounts required to be
distributed to them pursuant to this Agreement, as applicable. In no event shall
the trusts created hereby continue beyond the earlier of (i) the expiration of
21 years from the death of the last survivor of the descendants of Joseph P.
Kennedy, the late Ambassador of the United States to the Court of St. James,
living on the date hereof and (ii) the Latest Possible Maturity Date.
The right to repurchase all Mortgage Loans and REO Properties pursuant
to clause (a) above shall be conditioned upon the Stated Principal Balance of
the Mortgage Loans, at the time of any such repurchase, aggregating ten percent
(10%)or less of the aggregate Cut-off Date Principal Balance of the Mortgage
Loans.
SECTION 9.02. Final Distribution on the Certificates.
--------------------------------------
If on any Determination Date, (i) the Master Servicer determines that
there are no Outstanding Mortgage Loans and no other funds or assets in the
Trust Fund other than the funds in the Certificate Account, the Master Servicer
shall direct the Trustee to send a final distribution notice promptly to each
Certificateholder or (ii) the Trustee determines that a Class of Certificates
shall be retired after a final distribution on such Class, the Trustee shall
notify the Certificateholders within five (5) Business Days after such
Determination Date that the final distribution in retirement of such Class of
Certificates is scheduled to be made on the immediately following Distribution
Date. Any final distribution made pursuant to the immediately preceding sentence
will be made only upon presentation and surrender of the related Certificates at
the Corporate Trust Office of the Trustee. If the Seller elects to terminate the
Trust Fund pursuant to clause (a) of Section 9.01, at least 20 days prior to the
date notice is to be mailed to the affected Certificateholders, such electing
party shall notify the Depositor, the Master Servicer and the Trustee of the
date such electing party intends to terminate the Trust Fund and of the
applicable repurchase price of the Mortgage Loans and REO Properties.
Notice of any termination of the Trust Fund, specifying the
Distribution Date on which Certificateholders may surrender their Certificates
for payment of the final distribution and cancellation, shall be given promptly
by the Trustee by letter to Certificateholders mailed not earlier than the 10th
day and no later than the 25th day of the month immediately preceding the month
of such final distribution. Any such notice shall specify (a) the Distribution
Date upon which final distribution on the Certificates will be made upon
presentation and surrender of Certificates at the office therein designated, (b)
the amount of such final distribution, (c) the location of the office or agency
at which such presentation and surrender must be made, and (d) that the Record
Date otherwise applicable to such Distribution Date is not applicable,
distributions being made only upon presentation and surrender of the
Certificates at the office therein specified. The Trustee shall give such notice
to each Rating Agency at the time such notice is given to Certificateholders.
In the event such notice is given, the Master Servicer shall cause all
funds in the Certificate Account to be remitted to the Trustee for deposit in
the Distribution Account on the Business Day prior to the applicable
Distribution Date in an amount equal to the final distribution in respect of the
Certificates. Upon such final deposit with respect to the Trust Fund and the
receipt by the Trustee of a Request for Release therefor, the Trustee shall
promptly release to the Seller the Mortgage Files for the Mortgage Loans.
Upon presentation and surrender of the Certificates, the Trustee shall
cause to be distributed to Certificateholders of each Class the amounts
allocable to such Certificates held in the Distribution Account (and, if
applicable, the Carryover Reserve Fund) in the order and priority set forth in
Section 4.04 hereof on the final Distribution Date and in proportion to their
respective Percentage Interests.
In the event that any affected Certificateholders shall not surrender
Certificates for cancellation within six months after the date specified in the
above mentioned written notice, the Trustee shall give a second written notice
to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
six months after the second notice all the applicable Certificates shall not
have been surrendered for cancellation, the Trustee may take appropriate steps,
or may appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the funds and other assets that remain a part of
the Trust Fund. If within one year after the second notice all Certificates
shall not have been surrendered for cancellation, the Class R Certificateholders
shall be entitled to all unclaimed funds and other assets of the Trust Fund that
remain subject hereto.
SECTION 9.03. Additional Termination Requirements.
-----------------------------------
(a) In the event the Seller exercises its option to purchase the
Mortgage Loans as provided in Section 9.01, the Trust Fund shall be terminated
in accordance with the following additional requirements, unless the Trustee has
been supplied with an Opinion of Counsel, at the expense of the Seller, to the
effect that the failure of the Trust Fund to comply with the requirements of
this Section 9.03 will not (i) result in the imposition of taxes on "prohibited
transactions" of a REMIC, or (ii) cause a REMIC to fail to qualify as a REMIC at
any time that any Certificates are outstanding:
(1) The Master Servicer shall establish a 90-day liquidation
period and notify the Trustee thereof, which shall in turn 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
Master Servicer shall satisfy all the requirements of a qualified
liquidation under Section 860F of the Code and any regulations
thereunder, as evidenced by an Opinion of Counsel obtained at the
expense of the Master Servicer;
(2) During such 90-day liquidation period, and at or prior
to the time of making the final payment on the Certificates, the
Master Servicer as agent of the Trustee shall sell all of the assets
of the Trust Fund for cash; and
(3) 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 Class R Certificateholders all cash on
hand (other than cash retained to meet claims), and the Trust Fund
shall terminate at that time.
(b) By their acceptance of the Certificates, the Holders thereof
hereby authorize the Master Servicer to specify the 90-day liquidation period
for the Trust Fund, which authorization shall be binding upon all successor
Certificateholders.
(c) The Trustee as agent for each REMIC hereby agrees to adopt and
sign such a plan of complete liquidation upon the written request of the Master
Servicer, and the receipt of the Opinion of Counsel referred to in Section
9.03(a)(1) and to take such other action in connection therewith as may be
reasonably requested by the Seller and/or the Master Servicer.
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<PAGE>
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.01. Amendment.
---------
This Agreement may be amended from time to time by the Depositor, the
Master Servicer, the Seller and the Trustee, without the consent of any of the
Certificateholders to cure any ambiguity, to correct or supplement any
provisions herein, or to make such other provisions with respect to matters or
questions arising under this Agreement, as shall not be inconsistent with any
other provisions herein if such action shall not, as evidenced by an Opinion of
Counsel, adversely affect in any material respect the interests of any
Certificateholder; provided that any such amendment shall be deemed not to
adversely affect in any material respect the interests of the Certificateholders
and no such Opinion of Counsel shall be required if the Person requesting such
amendment obtains a letter from each Rating Agency stating that such amendment
would not result in the downgrading or withdrawal of the respective ratings then
assigned to the Certificates, it being understood and agreed that any such
letter in and of itself will not represent a determination as to the materiality
of any such amendment and will represent a determination only as to the credit
issues affecting any such rating.
Notwithstanding the foregoing, without the consent of the
Certificateholders, the Trustee, the Depositor, the Master Servicer and the
Seller may at any time and from time to time amend this Agreement to modify,
eliminate or add to any of its provisions to such extent as shall be necessary
or appropriate to maintain the qualification of the Trust Fund as a REMIC under
the Code or to avoid or minimize the risk of the imposition of any tax on the
Trust Fund pursuant to the Code that would be a claim against the Trust Fund at
any time prior to the final redemption of the Certificates, provided that the
Trustee have been provided an Opinion of Counsel, which opinion shall be an
expense of the party requesting such opinion but in any case shall not be an
expense of the Trustee, to the effect that such action is necessary or
appropriate to maintain such qualification or to avoid or minimize the risk of
the imposition of such a tax.
This Agreement may also be amended from time to time by the Depositor,
the Master Servicer, the Seller and the Trustee and the Holders of each Class of
Certificates affected thereby evidencing not less than 51% of the Voting Rights
of such Class 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 that no such
amendment shall (i) reduce in any manner the amount of, or delay the timing of,
payments required to be distributed on any Certificate without the consent of
the Holder of such Certificate, (ii) adversely affect in any material respect
the interests of the Holders of any Class of Certificates in a manner other than
as described in (i), without the consent of the Holders of Certificates of such
Class evidencing 66% or more of the Voting Rights of such Class or (iii) reduce
the aforesaid percentages of Certificates the Holders of which are required to
consent to any such amendment without the consent of the Holders of all such
Certificates then outstanding.
Notwithstanding any contrary provision of this Agreement, the Trustee
shall not consent to any amendment to this Agreement unless it shall have first
received an Opinion of Counsel, which opinion shall be an expense of the party
requesting such amendment but in any case shall not be an expense of the
Trustee, to the effect that such amendment will not cause the imposition of any
tax on the Trust Fund or the Certificateholders or cause the Trust Fund to fail
to qualify as a REMIC at any time that any Certificates are outstanding.
Promptly after the execution of any amendment to this Agreement
requiring the consent of Certificateholders, the Trustee shall furnish written
notification of the substance of such amendment to each Certificateholder and
each Rating Agency.
It shall not be necessary for the consent of Certificateholders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
regulations as the Trustee may prescribe.
Nothing in this Agreement shall require the Trustee to enter into an
amendment without receiving an Opinion of Counsel, satisfactory to the Trustee
that (i) such amendment is permitted and is not prohibited by this Agreement and
that all requirements for amending this Agreement have been complied with; and
(ii) either (A) the amendment does not adversely affect in any material respect
the interests of any Certificateholder or (B) the conclusion set forth in the
immediately preceding clause (A) is not required to be reached pursuant to this
Section 10.01.
SECTION 10.02. Recordation of Agreement; Counterparts.
--------------------------------------
This Agreement is subject to recordation in all appropriate public
offices for real property records in all the counties or other comparable
jurisdictions in which any or all of the properties subject to the Mortgages are
situated, and in any other appropriate public recording office or elsewhere,
such recordation to be effected by the Master Servicer at its expense.
For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
SECTION 10.03. Governing Law.
-------------
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND
TO BE PERFORMED IN THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HERETO AND THE CERTIFICATEHOLDERS SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES
THEREOF.
SECTION 10.04. Intention of Parties.
--------------------
It is the express intent of the parties hereto that the conveyance of
the Mortgage Notes, Mortgages, assignments of Mortgages, title insurance
policies and any modifications, extensions and/or assumption agreements and
private mortgage insurance policies relating to the Mortgage Loans by the
Depositor to the Trustee be, and be construed as, an absolute sale thereof to
the Trustee. It is, further, not the intention of the parties that such
conveyance be deemed a pledge thereof by the Depositor to the Trustee. However,
in the event that, notwithstanding the intent of the parties, such assets are
held to be the property of the Depositor, or if for any other reason this
Agreement is held or deemed to create a security interest in such assets, then
(i) this Agreement shall be deemed to be a security agreement within the meaning
of the Uniform Commercial Code of the State of New York and (ii) the conveyance
provided for in this Agreement shall be deemed to be an assignment and a grant
by the Depositor to the Trustee, for the benefit of the Certificateholders, of a
security interest in all of the assets that constitute the Trust Fund, whether
now owned or hereafter acquired.
The Depositor for the benefit of the Certificateholders shall, to the
extent consistent with this Agreement, take such actions as may be necessary to
ensure that, if this Agreement were deemed to create a security interest in the
assets of the Trust Fund, such security interest would be deemed to be a
perfected security interest of first priority under applicable law and will be
maintained as such throughout the term of the Agreement. The Depositor shall
arrange for filing any Uniform Commercial Code continuation statements in
connection with any security interest granted or assigned to the Trustee for the
benefit of the Certificateholders.
SECTION 10.05. Notices.
-------
(a) The Trustee shall use its best efforts to promptly provide notice
to each Rating Agency with respect to each of the following of which it has
actual knowledge:
(i) Any material change or amendment to this Agreement;
(ii) The occurrence of any Event of Default that has not been cured;
(iii) The resignation or termination of the Master Servicer or the
Trustee and the appointment of any successor;
(iv) The repurchase or substitution of Mortgage Loans pursuant to
Sections 2.02, 2.03, 2.04 and 3.12; and
(v) The final payment to Certificateholders.
In addition, the Trustee shall promptly furnish to each Rating Agency
copies of the following:
(i) Each report to Certificateholders described in Section 4.04;
(ii) Each annual statement as to compliance described in Section 3.17;
and
(iii) Each annual independent public accountants' servicing report
described in Section 3.18.
(b) All directions, demands and notices hereunder shall be in writing
and shall be deemed to have been duly given when delivered to (a) in the case of
the Depositor, Bear Stearns Asset Backed Securities, Inc., 245 Park Avenue, New
York, New York 10167 Attention: President with a copy to the same address,
Attention: Legal Department, or such other address as may be hereafter furnished
to the Seller and the Trustee by the Depositor in writing; (b) in the case of
the Seller, American Residential Holdings, Inc., 455 Marine View Avenue, Del
Mar, California 92014, Attention: President, with a copy to the same address,
Attention: Legal Department, or such other address as may be hereafter furnished
to the Depositor and the Trustee by the Seller in writing; (c) in the case of
Master Servicer, Countrywide Home Loans, Inc., 4500 Park Granada, Calabasas,
California 91302, Attention: Dave Walker, with a copy to the same address,
Attention: Legal Department, or such other address as may be hereafter furnished
to the Depositor, the Seller and the Trustee by the Master Servicer in writing;
(d) in the case of the Trustee, Bankers Trust Company of California, N.A., to
the Corporate Trust Office or such other address as the Trustee may hereafter
furnish to the Depositor, the Seller and the Master Servicer in writing; and (e)
in the case of the Rating Agencies, (i) Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc., Attention: Mortgage Surveillance,
25 Broadway, 20th Floor, New York, NY 10007 and (ii) Fitch IBCA, One State
Street Plaza, New York, New York 10004, Attention: Mortgage Surveillance.
Notices to Certificateholders shall be deemed given when mailed, first class
postage prepaid, to their respective addresses appearing in the Certificate
Register.
SECTION 10.06. Severability of Provisions.
--------------------------
If any one or more of the covenants, agreements, provisions or terms
of this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the Holders thereof.
SECTION 10.07. Assignment.
----------
Notwithstanding anything to the contrary contained herein, except as
provided pursuant to Section 6.02, this Agreement may not be assigned by the
Master Servicer without the prior written consent of the Trustee, the Seller and
Depositor.
SECTION 10.08. Limitation on Rights of Certificateholders.
------------------------------------------
The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the Trust Fund, nor entitle such Certificateholder's
legal representative or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a petition or winding up of the Trust
Fund, or otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them.
No Certificateholder shall have any right to vote (except as provided
herein) or in any manner otherwise control the operation and management of the
Trust Fund, or the obligations of the parties hereto, nor shall anything herein
set forth or contained in the terms of the Certificates be construed so as to
constitute the Certificateholders from time to time as partners or members of an
association; nor shall any Certificateholder be under any liability to any third
party by reason of any action taken by the parties to this Agreement pursuant to
any provision hereof.
No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless such Holder previously shall have given to the Trustee a written notice
of an Event of Default and of the continuance thereof, as hereinbefore provided,
the Holders of Certificates evidencing not less than 25% of the Voting Rights
evidenced by the Certificates shall also have made written request to the
Trustee to institute such action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to the Trustee such reasonable indemnity as it
may require against the costs, expenses, and liabilities to be incurred therein
or thereby, and the Trustee, for 60 days after its receipt of such notice,
request and offer of indemnity shall have neglected or refused to institute any
such action, suit or proceeding; it being understood and intended, and being
expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Holders of Certificates
shall have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb or prejudice
the rights of the Holders of any other of the Certificates, or to obtain or seek
to obtain priority over or preference to any other such Holder or to enforce any
right under this Agreement, except in the manner herein provided and for the
common benefit of all Certificateholders. For the protection and enforcement of
the provisions of this Section 10.08, each and every Certificateholder and the
Trustee shall be entitled to such relief as can be given either at law or in
equity.
SECTION 10.09. Inspection and Audit Rights.
---------------------------
The Master Servicer agrees that, on reasonable prior notice, it will
permit any representative of the Depositor, the Seller or the Trustee during the
Master Servicer's normal business hours, to examine all the books of account,
records, reports and other papers of the Master Servicer relating to the
Mortgage Loans, to make copies and extracts therefrom, to cause such books to be
audited by independent certified public accountants selected by the Depositor or
the Trustee and to discuss its affairs, finances and accounts relating to the
Mortgage Loans with its officers, employees and independent public accountants
(and by this provision the Master Servicer hereby authorizes such accountants to
discuss with such representative such affairs, finances and accounts), all at
such reasonable times and as often as may be reasonably requested. Any
out-of-pocket expense incident to the exercise by the Depositor, the Seller or
the Trustee of any right under this Section 10.09 shall be borne by the party
requesting such inspection; all other such expenses shall be borne by the Master
Servicer.
SECTION 10.10. Certificates Nonassessable and Fully Paid.
-----------------------------------------
It is the intention of the Depositor that Certificateholders shall not
be personally liable for obligations of the Trust Fund, that the interests in
the Trust Fund represented by the Certificates shall be nonassessable for any
reason whatsoever, and that the Certificates, upon due authentication thereof by
the Trustee pursuant to this Agreement, are and shall be deemed fully paid.
[THE REMAINDER OF THIS PAGE WAS LEFT BLANK INTENTIONALLY]
<PAGE>
IN WITNESS WHEREOF, the Depositor, the Master Servicer, the Seller and
the Trustee have caused their names to be signed hereto by their respective
officers thereunto duly authorized as of the day and year first above written.
BEAR STEARNS ASSET BACKED
SECURITIES, INC.,
as Depositor
By: /s/ Jonathan Lieberman
___________________________________
Name: Jonathan Lieberman
Title: Vice President
AMERICAN RESIDENTIAL HOLDINGS, INC.,
as Seller
By: /s/ Jay M. Fuller
___________________________________
Name: Jay M. Fuller
Title: President
COUNTRYWIDE HOME LOANS, INC.,
as Master Servicer
By: /s/ Michael W. Schloessmann
___________________________________
Name: Michael W. Schloessmann
Title: Vice President
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A.,
not in its individual capacity,
but solely as Trustee
By: /s/ David M. Arnold
___________________________________
Name: David M. Arnold
Title: Assistant Secretary
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 30th day of June, 1998, before me, a notary public in and for
said State, appeared Jonathan Lieberman, personally known to me on the basis of
satisfactory evidence to be a vice president of Bear Stearns Asset Backed
Securities, Inc., one of the corporations that executed the within instrument,
and also known to me to be the person who executed it on behalf of such
corporation and acknowledged to me that such corporation executed the within
instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Taettun Kim
___________________________________
Notary Public
[Notarial Seal]
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 30th day of June, 1998, before me, a notary public in and for
said State, appeared David M. Arnold, personally known to me on the basis of
satisfactory evidence to be an assistant secretary of Bankers Trust Company of
California, N.A., one of the corporations that executed the within instrument,
and also known to me to be the person who executed it on behalf of such
corporation and acknowledged to me that such corporation executed the within
instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Taettun Kim
___________________________________
Notary Public
[Notarial Seal]
<PAGE>
STATE OF CALIFORNIA )
) ss.:
COUNTY OF SAN DIEGO )
On this 30th day of June, 1998, before me, a notary public in and for
said State, appeared Jay M. Fuller, personally known to me on the basis of
satisfactory evidence to be the president of American Residential Holdings,
Inc., one of the corporations that executed the within instrument, and also
known to me to be the person who executed it on behalf of such corporation and
acknowledged to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Christine Winans
___________________________________
Notary Public
[Notarial Seal]
<PAGE>
STATE OF CALIFORNIA )
) ss.:
COUNTY OF LOS ANGELES )
On this 30th day of June, 1998, before me, a notary public in and for
said State, appeared Michael W. Schloessmann, personally known to me on the
basis of satisfactory evidence to be the Vice President of Countrywide Home
Loans, Inc., that executed the within instrument, and also known to me to be the
person who executed it on behalf of such corporation, and acknowledged to me
that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Patricia Lappin
___________________________________
Notary Public
[Notarial Seal]
<PAGE>
Exhibit A-1
through A-6
[Exhibits A-1 through A-6 are
photocopies of such Certificates as
delivered.]
[see appropriate documents delivered at closing]
<PAGE>
Exhibit B
[Reserved]
<PAGE>
Exhibit C
[Reserved]
<PAGE>
Exhibit D
[Exhibit D is a photocopy
of the Class R Certificate
as delivered.]
[see appropriate documents delivered at closing]
<PAGE>
Exhibit E
[Exhibit E is a photocopy
of the Tax Matters Person Class R Certificate
as delivered.]
[see appropriate documents delivered at closing]
<PAGE>
Exhibit F-1
[Reserved.]
<PAGE>
EXHIBIT G-1
FORM OF INITIAL CERTIFICATION OF TRUSTEE
[date]
[Depositor]
[Master Servicer]
Re: Pooling and Servicing Agreement dated as of June 1, 1998
among Bear Stearns Asset Backed Securities, Inc., as
Depositor, American Residential Holdings, Inc., as Seller,
Countrywide Home Loans, Inc., as Master Servicer, and
Bankers Trust Company of California, N.A., as Trustee,
Asset-Backed Certificates, Series 1998-1
Gentlemen:
In accordance with Section 2.02 of the above-captioned
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 listed in the attached list of
exceptions) it has received:
(i) the original Mortgage Note, endorsed by the last endorsee or the
originator of such Mortgage Loan, without recourse, in the following form:
"Pay to the order of , without recourse"; with all intervening endorsements
that show a complete chain of endorsement from the originator to the last
endorsee; and
(ii) a duly executed assignment of the Mortgage in the form permitted
by Section 2.01 of the Pooling and Servicing Agreement referred to above.
Based on its review and examination and only as to the
foregoing documents, such documents appear regular on their face and related
to such Mortgage Loan.
The Trustee has made no independent examination of any
documents contained in each Mortgage File beyond the review specifically
required in the above-referenced Pooling and Servicing Agreement. The Trustee
makes no representations as to: (i) the validity, legality, sufficiency,
enforceability or genuineness of any of the documents contained in each
Mortgage File of any of the Mortgage Loans identified on the Mortgage Loan
Schedule or (ii) the collectibility, 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.
Bankers Trust Company of California, N.A.,
as Trustee
By: ______________________________________
Name:
Title:
<PAGE>
EXHIBIT G-2
FORM OF INTERIM CERTIFICATION OF TRUSTEE
[date]
[Depositor]
[Master Servicer]
Re: Pooling and Servicing Agreement dated as of June 1, 1998
among Bear Stearns Asset Backed Securities, Inc., as
Depositor, American Residential Holdings, Inc., as Seller,
Countrywide Home Loans, Inc., as Master Servicer, and
Bankers Trust Company of California, N.A., as Trustee,
Asset-Backed Certificates, Series 1998-1
Gentlemen:
In accordance with Section 2.02 of the above-captioned
Pooling and Servicing Agreement, the undersigned, as Trustee, hereby certifies
that, except as listed in the following paragraph, as to each Mortgage Loan
listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid in
full or listed on the attached list of exceptions) it has received:
(i) the original Mortgage Note, endorsed by the last endorsee or the
originator of such Mortgage Loan, without recourse in the following form: "Pay
to the order of __________________________ without recourse", with all
intervening endorsements that show a complete chain of endorsement from the
originator to the last endorsee;
(ii) the original recorded Mortgage;
(iii) a duly executed assignment of the Mortgage in the form
permitted by Section 2.01 of the Pooling and Servicing Agreement referred to
above;
(iv) the original recorded assignment or assignments of the Mortgage
together with all interim recorded assignments of such Mortgage;
(v) the original or copies of each assumption, modification, written
assurance or substitution agreement, if any, with evidence of recording
thereon if recordation thereof is permissible under applicable law; and
(vi) the original or duplicate original lender's title policy and all
riders thereto or, in the event such original title policy has not been
received from the insurer, any one of an original title binder, an original
preliminary title report or an original title commitment, or a copy thereof
certified by the title company, with the original policy of title insurance to
be delivered within one year of the Closing Date.
If the Trustee has not received the original recorded
Mortgage or an original recorded assignment of the Mortgage satisfying the
requirements of clause (ii), (iii) or (iv) above, as applicable, the Trustee
has received, in lieu thereof, a true and complete copy of such Mortgage
and/or such assignment or assignments of the Mortgage, as applicable, each
certified by the Seller, the applicable title company, escrow agent or
attorney, or the originator of such Mortgage Loan, as the case may be, to be a
true and complete copy of the original Mortgage or assignment of Mortgage
submitted for recording.
Based on its review and examination and only as to the
foregoing documents, (i) such documents appear regular on their face and
related to such Mortgage Loan, and (ii) the information set forth in items
(i), (iv), (v), (vi), (viii), (xiv), (xv), (xvii) and (xviii) of the
definition of the "Mortgage Loan Schedule" in Section 1.01 of the Pooling and
Servicing Agreement accurately reflects information set forth in the Mortgage
File.
The Trustee has made no independent examination of any
documents contained in each Mortgage File beyond the review specifically
required in the above-referenced Pooling and Servicing Agreement. The Trustee
makes no representations as to: (i) the validity, legality, sufficiency,
enforceability or genuineness of any of the documents contained in each
Mortgage File of any of the Mortgage Loans identified on the Mortgage Loan
Schedule or (ii) the collectibility, 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.
Bankers Trust Company of California, N.A.,
as Trustee
By: _____________________________________
Name:
Title:
<PAGE>
EXHIBIT H
FORM OF FINAL CERTIFICATION OF TRUSTEE
[date]
[Depositor]
[Master Servicer]
[Seller]
Re: Pooling and Servicing Agreement dated as of June 1, 1998
among Bear Stearns Asset Backed Securities, Inc., as
Depositor, American Residential Holdings, Inc., as Seller,
Countrywide Home Loans, Inc., as Master Servicer, and
Bankers Trust Company of California, N.A., as Trustee,
Asset-Backed Certificates, Series 1998-1
Gentlemen:
In accordance with Section 2.02 of the above-captioned
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 listed on the attached Document Exception
Report) it has received:
(i) the original Mortgage Note, endorsed by the last endorsee or the
originator of such Mortgage Loan, without recourse in the following form: "Pay
to the order of _________________ without recourse", with all intervening
endorsements that show a complete chain of endorsement from the originator to
the last endorsee;
(ii) the original recorded Mortgage;
(iii) a duly executed assignment of the Mortgage in the form permitted by
Section 2.01 of the Pooling and Servicing Agreement referred to above;
(iv) the original recorded assignment or assignments of the Mortgage from
the original holder, together with any interim recorded assignments of such
Mortgage, through any subsequent transferees, to the Seller or an affiliate
thereof;
(v) the original or copies of each assumption, modification, written
assurance or substitution agreement, if any, with evidence of recording
thereon if recordation thereof is permissible under applicable law; and
(vi) the original or duplicate original lender's title policy and all
riders thereto or any one of an original title binder, an original preliminary
title report or an original title commitment, or a copy thereof certified by the
title company.
If the public recording office in which a Mortgage or
assignment thereof is recorded has retained the original of such Mortgage or
assignment, the Trustee has received, in lieu thereof, a copy of the original
Mortgage or assignment so retained, with evidence of recording thereon,
certified to be true and complete by such recording office.
Based on its review and examination and only as to the
foregoing documents, (i) such documents appear regular on their face and
related to such Mortgage Loan, and (ii) the information set forth in items
(i), (iv), (v), (vi), (viii), (xiv), (xiv), (xv), (xvii) and (xviii) of the
definition of the "Mortgage Loan Schedule" in Section 1.01 of the Pooling and
Servicing Agreement accurately reflects information set forth in the Mortgage
File.
The Trustee has made no independent examination of any
documents contained in each Mortgage File beyond the review specifically
required in the above-referenced Pooling and Servicing Agreement. The Trustee
makes no representations as to: (i) the validity, legality, sufficiency,
enforceability or genuineness of any of the documents contained in each
Mortgage File of any of the Mortgage Loans identified on the Mortgage Loan
Schedule or (ii) the collectibility, 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.
Bankers Trust Company of California, N.A.,
as Trustee
By: _____________________________________
Name:
Title:
<PAGE>
EXHIBIT I
TRANSFER AFFIDAVIT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
The undersigned, being first duly sworn, deposes and says as
follows:
1. The undersigned is an officer of _______________, the proposed
Transferee of an Ownership Interest in a Class R Certificate (the
"Certificate") issued pursuant to the Pooling and Servicing Agreement, dated
as of June 1, 1998 (the "Agreement"), by and among Bear Stearns Asset Backed
Securities, Inc., as depositor (the "Depositor"), American Residential
Holdings, Inc., as Seller, Countrywide Home Loans, Inc., as Master Servicer
and Bankers Trust Company of California, N.A., as Trustee. Capitalized terms
used, but not defined herein or in Exhibit 1 hereto, shall have the meanings
ascribed to such terms in the Agreement. The Transferee has authorized the
undersigned to make this affidavit on behalf of the Transferee.
2. The Transferee is, as of the date hereof, and will be, as of the
date of the Transfer, a Permitted Transferee. The Transferee is acquiring its
Ownership Interest in the Certificate either (i) for its own account or (ii)
as nominee, trustee or agent for another Person and has attached hereto an
affidavit from such Person in substantially the same form as this affidavit.
The Transferee has no knowledge that any such affidavit is false.
3. The Transferee has been advised of, and understands that (i) a tax
will be imposed on Transfers of the Certificate to Persons that are not
Permitted Transferees; (ii) such tax will be imposed on the transferor, or, if
such Transfer is through an agent (which includes a broker, nominee or
middleman) for a Person that is not a Permitted Transferee, on the agent; and
(iii) the Person otherwise liable for the tax shall be relieved of liability
for the tax if the subsequent Transferee furnished to such Person an affidavit
that such subsequent Transferee is a Permitted Transferee and, at the time of
Transfer, such Person does not have actual knowledge that the affidavit is
false.
4. The Transferee has been advised of, and understands that a tax
will be imposed on a "pass-through entity" holding the Certificate if at any
time during the taxable year of the pass-through entity a Person that is not a
Permitted Transferee is the record holder of an interest in such entity. The
Transferee understands that such tax will not be imposed for any period with
respect to which the record holder furnishes to the pass-through entity an
affidavit that such record holder is a Permitted Transferee and the
pass-through entity does not have actual knowledge that such affidavit is
false. (For this purpose, a "pass-through entity" includes a regulated
investment company, a real estate investment trust or common trust fund, a
partnership, trust or estate, and certain cooperatives and, except as may be
provided in Treasury Regulations, persons holding interests in pass-through
entities as a nominee for another Person.)
5. The Transferee has reviewed the provisions of Section 5.02(c) of
the Agreement (attached hereto as Exhibit 2 and incorporated herein by
reference) and understands the legal consequences of the acquisition of an
Ownership Interest in the Certificate including, without limitation, the
restrictions on subsequent Transfers and the provisions regarding voiding the
Transfer and mandatory sales. The Transferee expressly agrees to be bound by
and to abide by the provisions of Section 5.02(c) of the Agreement and the
restrictions noted on the face of the Certificate. The Transferee understands
and agrees that any breach of any of the representations included herein shall
render the Transfer to the Transferee contemplated hereby null and void.
6. The Transferee agrees to require a Transfer Affidavit from any
Person to whom the Transferee attempts to Transfer its Ownership Interest in
the Certificate, and in connection with any Transfer by a Person for whom the
Transferee is acting as nominee, trustee or agent, and the Transferee will not
Transfer its Ownership Interest or cause any Ownership Interest to be
Transferred to any Person that the Transferee knows is not a Permitted
Transferee. In connection with any such Transfer by the Transferee, the
Transferee agrees to deliver to the Trustee a certificate substantially in the
form set forth as Exhibit M to the Agreement (a "Transferor Certificate") to
the effect that such Transferee has no actual knowledge that the Person to
which the Transfer is to be made is not a Permitted Transferee.
7. The Transferee does not have the intention to impede the
assessment or collection of any tax legally required to be paid with respect
to the Class R Certificates.
8. The Transferee's taxpayer identification number is _____.
9. The Transferee is a U.S. Person as defined in Code Section
7701(a)(30).
10. The Transferee is aware that the Class R Certificates may be
"noneconomic residual interests" within the meaning of proposed Treasury
regulations promulgated pursuant to the Code and that the transferor of a
noneconomic residual interest will remain liable for any taxes due with
respect to the income on such residual interest, unless no significant purpose
of the transfer was to impede the assessment or collection of tax. In
addition, as the holder of a noneconomic residual interest, the Transferee may
incur tax liabilities in excess of any cash flows generated by the interest
and the Transferee hereby represents that it intends to pay taxes associated
with holding the residual interest as they become due.
* * *
IN WITNESS WHEREOF, the Transferee has caused this instrument to be
executed on its behalf, pursuant to authority of its Board of Directors, by its
duly authorized officer and its corporate seal to be hereunto affixed, duly
attested, this ____ day of _____________, 19__.
[NAME OF TRANSFEREE]
By: ___________________________________
Name:
Title:
[Corporate Seal]
ATTEST:
________________________________
[Assistant] Secretary
Personally appeared before me the above-named _____________,
known or proved to me to be the same person who executed the foregoing
instrument and to be the ____________ of the Transferee, and acknowledged that
he executed the same as his free act and deed and the free act and deed of the
Transferee.
Subscribed and sworn before me this ____ day of _______,
19__.
____________________________________
NOTARY PUBLIC
My Commission expires the ___ day of
_______________, 19__.
<PAGE>
EXHIBIT 1
Certain Definitions
-------------------
"Ownership Interest": As to any Certificate, any ownership interest in
such Certificate, including any interest in such Certificate as the Holder
thereof and any other interest therein, whether direct or indirect, legal or
beneficial.
"Permitted Transferee": Any Person other than (i) the United States,
any State or political subdivision thereof, or any agency or instrumentality of
any of the foregoing, (ii) a foreign government, International Organization or
any agency or instrumentality of either of the foregoing, (iii) an organization
(except certain farmers' cooperatives described in Code Section 521) that is
exempt from tax imposed by Chapter 1 of the Code (including the tax imposed by
Code Section 511 on unrelated business taxable income) on any excess inclusions
(as defined in Code Section 860E(c)(1)) with respect to any Class R Certificate,
(iv) rural electric and telephone cooperatives described in Code Section
1381(a)(2)(c), (v) a Person that is not a citizen or resident of the United
States, a corporation, partnership, or other entity created or organized in or
under the laws of the United States or any political subdivision thereof, or an
estate or trust whose income from sources without the United States is
includable in gross income for United States federal income tax purposes
regardless of its connection with the conduct of a trade or business within the
United States and (vi) any other Person so designated by the Trustee based upon
an Opinion of Counsel that the Transfer of an Ownership Interest in a Class R
Certificate to such Person may cause the Trust Fund to fail to qualify as a
REMIC at any time that certain Certificates are Outstanding. The terms "United
States," "State" and "International Organization" shall have the meanings set
forth in Code Section 7701 or successor provisions. A corporation will not be
treated as an instrumentality of the United States or of any State or political
subdivision thereof if all of its activities are subject to tax, and, with the
exception of the FHLMC, a majority of its board of directors is not selected by
such governmental unit.
"Person": Any individual, corporation, partnership, joint venture,
bank, joint stock company, trust (including any beneficiary thereof),
unincorporated organization or government or any agency or political subdivision
thereof.
"Transfer": Any direct or indirect transfer or sale of any Ownership
Interest in a Certificate, including the acquisition of a Certificate by the
Depositor.
"Transferee": Any Person who is acquiring by Transfer any Ownership
Interest in a Certificate.
<PAGE>
EXHIBIT 2
(b) Section 5.02(c) of the Agreement
(c) 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
the rights of each Person acquiring any Ownership Interest in a Class R
Certificate are expressly subject to the following provisions:
(i) 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.
(ii) No Ownership Interest in a Class R Certificate may be registered
on the Closing Date or thereafter transferred, and the Trustee shall not
register the Transfer of any Class R Certificate unless, in addition to the
certificates required to be delivered to the Trustee under subparagraph (b)
above, the Trustee shall have been furnished with an affidavit (a "Transfer
Affidavit") of the initial owner or the proposed transferee in the form
attached hereto as Exhibit I.
(iii) Each Person holding or acquiring any Ownership Interest in a
Class R Certificate shall agree (A) to obtain a Transfer Affidavit from any
other Person to whom such Person attempts to Transfer its Ownership
Interest in a Class R Certificate, (B) to obtain a Transfer Affidavit from
any Person for whom such Person is acting as nominee, trustee or agent in
connection with any Transfer of a Class R Certificate and (C) not to
Transfer its Ownership Interest in a Class R Certificate or to cause the
Transfer of an Ownership Interest in a Class R Certificate to any other
Person if it has actual knowledge that such Person is not a Permitted
Transferee.
(iv) Any attempted or purported Transfer of any Ownership Interest in
a Class R Certificate in violation of the provisions of this Section
5.02(c) shall be absolutely null and void and shall vest no rights in the
purported Transferee. If any purported transferee shall become a Holder of
a Class R Certificate in violation of the provisions of this Section
5.02(c), then the last preceding Permitted Transferee shall be restored to
all rights as Holder thereof retroactive to the date of registration of
Transfer of such Class R Certificate. The Trustee shall be under no
liability to any Person for any registration of Transfer of a Class R
Certificate that is in fact not permitted by Section 5.02(b) and this
Section 5.02(c) or for making any payments due on such Certificate to the
Holder thereof or taking any other action with respect to such Holder under
the provisions of this Agreement so long as the Transfer was registered
after receipt of the related Transfer Affidavit, Transferor Certificate and
either the Rule 144A Letter or the Investment Letter. The Trustee shall be
entitled but not obligated to recover from any Holder of a 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 Permitted
Transferee of such Certificate.
(v) The Master Servicer shall use its best efforts to make available,
upon receipt of written request from the Trustee, all information necessary
to compute any tax imposed under Section 860E(e) of the Code as a result of
a Transfer of an Ownership Interest in a Class R Certificate to any Holder
who is not a Permitted Transferee.
The restrictions on Transfers of a Class R Certificate set forth in
this Section 5.02(c) shall cease to apply (and the applicable portions of the
legend on a Class R Certificate may be deleted) with respect to Transfers
occurring after delivery to the Trustee of an Opinion of Counsel, which Opinion
of Counsel shall not be an expense of the Trustee, the Seller or the Master
Servicer to the effect that the elimination of such restrictions will not cause
the Trust Fund to fail to qualify as a REMIC at any time that the Certificates
are outstanding or result in the imposition of any tax on the Trust Fund, a
Certificateholder or another Person. Each Person holding or acquiring any
Ownership Interest in a Class R Certificate hereby consents to any amendment of
this Agreement that, based on an Opinion of Counsel furnished to the Trustee, is
reasonably necessary (a) to ensure that the record ownership of, or any
beneficial interest in, a Class R Certificate is not transferred, directly or
indirectly, to a Person that is not a Permitted Transferee and (b) to provide
for a means to compel the Transfer of a Class R Certificate that is held by a
Person that is not a Permitted Transferee to a Holder that is a Permitted
Transferee.
<PAGE>
EXHIBIT J
FORM OF TRANSFEROR CERTIFICATE FOR
Class X AND CLASS R CERTIFICATES
Date:
[Depositor]
[address]
Bankers Trust Company of California, N.A., as Trustee
[address]
Re: Bear Stearns Asset Backed Securities, Inc.; Asset-Backed
Certificates, Series 1998-1
Ladies and Gentlemen:
In connection with our disposition of the Class __
Certificates, we certify that (a) we understand that the Certificates have not
been registered under the Securities Act of 1933, as amended (the "Act"), and
are being disposed by us in a transaction that is exempt from the registration
requirements of the Act, (b) we have not offered or sold any Certificates to,
or solicited offers to buy any Certificates from, any person, or otherwise
approached or negotiated with any person with respect thereto, in a manner
that would be deemed, or taken any other action that would result in, a
violation of Section 5 of the Act and (c) if we are disposing of a Class R
Certificate, we have no knowledge the Transferee is not a Permitted
Transferee. All capitalized terms used herein but not defined herein shall
have the meanings assigned to them in the Pooling and Servicing Agreement
dated as of June 1, 1998, among Bear Stearns Asset Backed Securities, Inc., as
Depositor, American Residential Holdings, Inc., as Seller, Countrywide Home
Loans, Inc., as Master Servicer, and Bankers Trust Company of California,
N.A., as Trustee.
Very truly yours,
_______________________________________
Name of Transferor
By: __________________________________
Name:
Title:
<PAGE>
EXHIBIT K
FORM OF INVESTMENT LETTER [NON-RULE 144A] FOR
Class X AND CLASS R CERTIFICATES
Date:
[Depositor]
[address]
Bankers Trust Company of California, N.A.,
as Trustee
[address]
Re: Bear Stearns Asset Backed Securities, Inc.; Asset-Backed
Certificates, Series 1998-1
Ladies and Gentlemen:
In connection with our acquisition of the Class __ Certificates in the
Denomination of (the "Certificates"), we certify that (a) we understand that the
Certificates are not being registered under the Securities Act of 1933, as
amended (the "Act"), or any state securities laws and are being transferred to
us in a transaction that is exempt from the registration requirements of the Act
and any such laws, (b) we are an "accredited investor," as defined in Regulation
D under the Act, and have such knowledge and experience in financial and
business matters that we are capable of evaluating the merits and risks of
investments in the Certificates, (c) we have had the opportunity to ask
questions of and receive answers from the Depositor concerning the purchase of
the Certificates and all matters relating thereto or any additional information
deemed necessary to our decision to purchase the Certificates, (d) either (i) we
are not an employee benefit plan that is subject to the Employee Retirement
Income Security Act of 1974, as amended, nor a plan subject to Section 4975 of
the Internal Revenue Code of 1986 (each of the foregoing, a "Plan"), nor are we
acting on behalf of any Plan or (ii) if we are an insurance company, a
representation that we are an insurance company which is purchasing the
Certificates with funds contained in an "insurance company general account" (as
such term is defined in Section V(e) of Prohibited Transaction Class Exemption
95-60 ("PTCE 95-60")) and that the purchase and holding of the Certificates are
covered under PTCE 95-60, (e) we are acquiring the Certificates for investment
for our own account and not with a view to any distribution of the Certificates
(but without prejudice to our right at all times to sell or otherwise dispose of
the Certificates in accordance with clause (g) below), (f) we have not offered
or sold any Certificates to, or solicited offers to buy any Certificates from,
any person, or otherwise approached or negotiated with any person with respect
thereto, or taken any other action that would result in a violation of Section 5
of the Act, and (g) we will not sell, transfer or otherwise dispose of any
Certificates unless (1) such sale, transfer or other disposition is made
pursuant to an effective registration statement under the Act or is exempt from
such registration requirements, and if requested, we will at our expense provide
an opinion of counsel satisfactory to the addressees of this certificate that
such sale, transfer or other disposition may be made pursuant to an exemption
from the Act, (2) the purchaser or transferee of the Certificate has executed
and delivered to you a certificate to substantially the same effect as this
certificate, and (3) the purchaser or transferee has otherwise complied with any
conditions for transfer set forth in the Pooling and Servicing Agreement dated
as of June 1, 1998 (the "Agreement"), among Bear Stearns Asset Backed
Securities, Inc., as Depositor, American Residential Holdings, Inc., as Seller,
Countrywide Home Loans, Inc., as Master Servicer, and Bankers Trust Company of
California, N.A., as Trustee. All capitalized terms used herein but not defined
herein shall have the meanings assigned to them in the Agreement.
Very truly yours,
_______________________________________
Name of Transferee
By: __________________________________
Name:
Title:
<PAGE>
EXHIBIT L
FORM OF RULE 144A LETTER FOR
Class X AND CLASS R CERTIFICATES
Date:
[Depositor]
[address]
Bankers Trust Company of California, N.A.,
as Trustee
[address]
Re: Bear Stearns Asset Backed Securities, Inc.; Asset-Backed
Certificates, Series 1998-1
Ladies and Gentlemen:
In connection with our proposed purchase of the Class R
Certificates (the "Certificates") we certify that (a) we understand that the
Certificates are not being registered under the Securities Act of 1933, as
amended (the "Act"), or any state securities laws and are being transferred to
us in a transaction that is exempt from the registration requirements of the
Act and any such laws, (b) we have such knowledge and experience in financial
and business matters that we are capable of evaluating the merits and risks of
investments in the Certificates, (c) we have had the opportunity to ask
questions of and receive answers from the Depositor concerning the purchase of
the Certificates and all matters relating thereto or any additional
information deemed necessary to our decision to purchase the Certificates, (d)
or either (i) we are not an employee benefit plan that is subject to the
Employee Retirement Income Security Act of 1974, as amended, nor a plan
subject to Section 4975 of the Internal Revenue Code of 1986 (each of the
foregoing, a "Plan"), nor are we acting on behalf of any Plan or (ii) if we
are an insurance company, a representation that we are an insurance company
which is purchasing the Certificates with funds contained in an "insurance
company general account" (as such term is defined in Section V(e) of
Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60")) and that the
purchase and holding of the Certificates are covered under PTCE 95-60, (e) we
have not, nor has anyone acting on our behalf offered, transferred, pledged,
sold or otherwise disposed of the Certificates, any interest in the
Certificates or any other similar security to, or solicited any offer to buy
or accept a transfer, pledge or other disposition of the Certificates, any
interest in the Certificates or any other similar security from, or otherwise
approached or negotiated with respect to the Certificates, any interest in the
Certificates 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
Certificates under the Securities Act or that would render the disposition of
the Certificates a violation of Section 5 of the Securities Act or require
registration pursuant thereto, nor will act, nor has authorized or will
authorize any person to act, in such manner with respect to the Certificates,
and (f) we are a "qualified institutional buyer" as that term is defined in
Rule 144A under the Securities Act and have completed either of the forms of
certification to that effect attached hereto as Annex 1 or Annex 2. We are
aware that the sale to us is being made in reliance on Rule 144A. We are
acquiring the Certificates for our own account or for resale pursuant to Rule
144A and further, understand that the Certificates 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 Securities Act. All capitalized
terms used herein but not defined herein shall have the meanings assigned to
them in the Pooling and Servicing Agreement dated as of June 1, 1998, among
Bear Stearns Asset Backed Securities, Inc., as Depositor, American Residential
Holdings, Inc., as Seller, Countrywide Home Loans, Inc., as Master Servicer,
and Bankers Trust Company of California, N.A., as Trustee.
_______________________________________
Name of Buyer
By: __________________________________
Name:
Title:
<PAGE>
ANNEX 1 TO EXHIBIT L
--------------------
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
--------------------------------------------------------
[For Transferees Other Than Registered Investment Companies]
The undersigned (the "Buyer") hereby certifies as follows to the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificates described therein:
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, as amended ("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.
- ----------
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.
_____ 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 of 1986, as amended.
_____ Bank. The Buyer (a) is a national bank or banking
institution organized under the laws of any State,
territory or the District of Columbia, the business
of which is substantially confined to banking and is
supervised by the State or territorial banking
commission or similar official or is a foreign bank
or equivalent institution, and (b) has an audited net
worth of at least $25,000,000 as demonstrated in its
latest annual financial statements, a copy of which
is attached hereto.
_____ Savings and Loan. The Buyer (a) is a savings and loan
association, building and loan association,
cooperative bank, homestead association or similar
institution, which is supervised and examined by a
State or Federal authority having supervision over
any such institutions or is a foreign savings and
loan association or equivalent institution and (b)
has an audited net worth of at least $25,000,000 as
demonstrated in its latest annual financial
statements, a copy of which is attached hereto.
_____ 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 Advisor. The Buyer is an investment
advisor registered under the Investment Advisors Act
of 1940.
_____ Small Business Investment Company. 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 Advisors Act of 1940.
_____ Trust Fund. The Buyer is a trust fund whose trustee
is a bank or trust company and whose participants are
exclusively State or Local Plans or ERISA Plans as
defined above, and no participant of the Buyer is an
individual retirement account or an H.R. 10 (Keogh)
plan.
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, except (i) where the Buyer reports its
securities holdings in its financial statements on the basis of their market
value, and (ii) no current information with respect to the cost of those
securities has been published. If clause (ii) in the preceding sentence applies,
the securities may be valued at market. Further, in determining such aggregate
amount, the Buyer may have included securities owned by subsidiaries of the
Buyer, but only if such subsidiaries are consolidated with the Buyer in its
financial statements prepared in accordance with generally accepted accounting
principles and if the investments of such subsidiaries are managed under the
Buyer's direction. However, such securities were not included if the Buyer is a
majority-owned, consolidated subsidiary of another enterprise and the Buyer is
not itself a reporting company under the Securities Exchange Act of 1934, as
amended.
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.
6. Until the date of purchase of the Rule 144A Securities, 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 the Certificates will constitute a reaffirmation of this
certification as of the date of such purchase. In addition, if the Buyer is a
bank or savings and loan is provided above, the Buyer agrees that it will
furnish to such parties updated annual financial statements promptly after they
become available.
______________________________________
Name of Buyer
By: _________________________________
Name:
Title:
Date:
<PAGE>
ANNEX 2 TO EXHIBIT L
--------------------
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
--------------------------------------------------------
[For Transferees That are Registered Investment Companies]
The undersigned (the "Buyer") hereby certifies as follows to the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificates described therein:
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, as amended ("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, as
amended 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, except (i) where the Buyer or the Buyer's Family of Investment
Companies reports its securities holdings in its financial statements on the
basis of their market value, and (ii) no current information with respect to the
cost of those securities has been published. If clause (ii) in the preceding
sentence applies, the securities may be valued at market.
___ The Buyer owned $____________ in securities (other
than the excluded securities referred to below) as
of the end of the Buyer's most recent fiscal year
(such amount being calculated in accordance with
Rule 144A).
___ The Buyer is part of a Family of Investment
Companies which owned in the aggregate $__________
in securities (other than the excluded securities
referred to below) as of the end of the Buyer's most
recent fiscal year (such amount being calculated in
accordance with Rule 144A).
3. The term "Family of Investment Companies" as used herein means two
or more registered investment companies (or series thereof) that have the same
investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).
4. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Buyer or are part of the
Buyer's Family of Investment Companies, (ii) bank deposit notes and certificates
of deposit, (iii) loan participations, (iv) repurchase agreements, (v)
securities owned but subject to a repurchase agreement and (vi) currency,
interest rate and commodity swaps.
5. The Buyer is familiar with Rule 144A and understands that the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates 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. Until the date of purchase of the Certificates, the undersigned
will notify the parties listed in the Rule 144A Transferee Certificate to which
this certification relates of any changes in the information and conclusions
herein. Until such notice is given, the Buyer's purchase of the Certificates
will constitute a reaffirmation of this certification by the undersigned as of
the date of such purchase.
____________________________________
Name of Buyer
By: _______________________________
Name:
Title:
IF AN ADVISER:
____________________________________
Name of Buyer
Date: ______________________________
<PAGE>
EXHIBIT M
REQUEST FOR RELEASE
(for Trustee)
Loan Information
- ----------------
Name of Mortgagor: ____________________________________
Master Servicer
Loan No.: ____________________________________
Trustee
- -------
Name: ____________________________________
Address: ____________________________________
____________________________________
____________________________________
Trustee
Mortgage File No.: ____________________________________
The undersigned Master Servicer hereby acknowledges that it has
received from _______________________________________, as Trustee for the
Holders of Asset-Backed Certificates, Series 1998-1, the documents referred to
below (the "Documents"). All capitalized terms not otherwise defined in this
Request for Release shall have the meanings given them in the Pooling and
Servicing Agreement dated as of June 1, 1998 (the "Pooling and Servicing
Agreement") among Bear Stearns Asset Backed Securities, Inc., as Depositor,
American Residential Holdings, Inc., as Seller, Countrywide Home Loans, Inc., as
Master Servicer, and the Trustee.
( ) Mortgage Note dated ___________, 19__, in the original principal sum of
$________, made by __________________, payable to, or endorsed to the order
of, the Trustee.
( ) Mortgage recorded on _________________ as instrument no. ________________
in the County Recorder's Office of the County of ________________, State of
_______________ in book/reel/docket _______________ of official records
at page/image _____________.
( ) Deed of Trust recorded on _________________ as instrument no. ____________
in the County Recorder's Office of the County of ________________, State
of _______________ in book/reel/docket _______________ of official records
at page/image _____________.
( ) Assignment of Mortgage or Deed of Trust to the Trustee, recorded on
_________________ as instrument no. __________ in the County Recorder's
Office of the County of __________, State of _______________ in
book/reel/docket _______________ of official records at page/image
_____________.
( ) Other documents, including any amendments, assignments or other assumptions
of the Mortgage Note or Mortgage.
( ) ____________________________________
( ) ____________________________________
( ) ____________________________________
( ) ____________________________________
The undersigned Master Servicer hereby acknowledges and agrees as
follows:
(1) The Master Servicer shall hold and retain possession of
the Documents in trust for the benefit of the Trustee,
solely for the purposes provided in the Agreement.
(2) The Master Servicer shall not cause or knowingly permit
the Documents to become subject to, or encumbered by, any
claim, liens, security interest, charges, writs of
attachment or other impositions nor shall the Master
Servicer assert or seek to assert any claims or rights of
setoff to or against the Documents or any proceeds thereof.
(3) The Master Servicer shall return each and every Document
previously requested from the Mortgage File to the Trustee
when the need therefor no longer exists, unless the Mortgage
Loan relating to the Documents has been liquidated and the
proceeds thereof have been remitted to the Certificate
Account and except as expressly provided in the Agreement.
(4) The Documents and any proceeds thereof, including any
proceeds of proceeds, coming into the possession or control
of the Master Servicer shall at all times be earmarked for
the account of the Trustee, and the Master Servicer shall
keep the Documents and any proceeds separate and distinct
from all other property in the Master Servicer's possession,
custody or control.
[Master Servicer]
By _______________________
Its _______________________
Date: _________________, 19__
<PAGE>
EXHIBIT N
REQUEST FOR RELEASE
[Mortgage Loans Paid in Full, Repurchased or Replaced]
OFFICER'S CERTIFICATE AND TRUST RECEIPT
ASSET-BACKED CERTIFICATES,
Series 1998-1
__________________________________________ HEREBY CERTIFIES THAT HE/SHE IS AN
OFFICER OF THE Master Servicer, HOLDING THE OFFICE SET FORTH BENEATH HIS/HER
SIGNATURE, AND HEREBY FURTHER CERTIFIES AS FOLLOWS:
WITH RESPECT TO THE MORTGAGE LOANS, AS THE TERM IS DEFINED IN THE POOLING AND
SERVICING AGREEMENT DESCRIBED IN THE ATTACHED SCHEDULE:
[ALL PAYMENTS OF PRINCIPAL AND INTEREST HAVE BEEN MADE.] [THE [PURCHASE PRICE]
[MORTGAGE LOAN REPURCHASE PRICE] FOR SUCH MORTGAGE LOANS HAS BEEN PAID.] [THE
MORTGAGE LOANS HAVE BEEN LIQUIDATED AND THE RELATED [INSURANCE PROCEEDS]
[LIQUIDATION PROCEEDS] HAVE BEEN DEPOSITED PURSUANT TO SECTION 3.13 OF THE
POOLING AND SERVICING AGREEMENT.] [A REPLACEMENT MORTGAGE LOAN HAS BEEN
DELIVERED TO THE TRUSTEE IN THE MANNER AND OTHERWISE IN ACCORDANCE WITH THE
CONDITIONS SET FORTH IN SECTIONS 2.02 AND 2.03 OF THE POOLING AND SERVICING
AGREEMENT.]
LOAN NUMBER:_______________ BORROWER'S NAME:_____________
COUNTY:____________________
[For Substitution or Repurchase Only: The Master Servicer certifies that
[an] [no] opinion is required by Section 2.05 [and is attached hereto].]
I HEREBY CERTIFY THAT ALL AMOUNTS RECEIVED IN CONNECTION WITH SUCH PAYMENTS,
THAT ARE REQUIRED TO BE DEPOSITED IN THE CERTIFICATE ACCOUNT PURSUANT TO
SECTION 3.05 OF THE POOLING AND SERVICING AGREEMENT, HAVE BEEN OR WILL BE
CREDITED.
____________ _____________________ DATED:____________
/ / VICE PRESIDENT
/ / ASSISTANT VICE PRESIDENT
<PAGE>
Exhibit O
[Exhibit O is a photocopy
of the Depository Agreement
as delivered.]
[see appropriate documents delivered at closing]
<PAGE>
EXHIBIT P
FORM OF MORTGAGE NOTE
AND MORTGAGE
<PAGE>
EXHIBIT Q
LIST OF SERVICING OFFICERS
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms..................................................3
SECTION 1.02. Certain REMIC-Related Defined Terms...........................33
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND WARRANTIES
SECTION 2.01. Conveyance of Mortgage Loans..................................38
SECTION 2.02. Acceptance by Trustee of the Mortgage Loans...................41
SECTION 2.03. Representations, Warranties and Covenants of the Master
Servicer and the Seller....................................43
SECTION 2.04. Representations and Warranties of the Depositor...............53
SECTION 2.05. Delivery of Opinion of Counsel in Connection with
Substitutions and Repurchases..............................55
SECTION 2.06. Authentication and Delivery of Certificates...................56
SECTION 2.07. Covenants of the Master Servicer..............................56
ARTICLE III
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
SECTION 3.01. Master Servicer to Service Mortgage Loans.....................57
SECTION 3.02. Subservicing; Enforcement of the Obligations of
Master Servicer....................... ....................58
SECTION 3.03. Rights of the Depositor, the Seller, the Trustee in
Respect of the Master Servicer.............................59
SECTION 3.04. Trustee to Act as Master Servicer.............................59
SECTION 3.05. Collection of Mortgage Loan Payments; Certificate Account;
Distribution Account.......................................60
SECTION 3.06. Collection of Taxes, Assessments and Similar Items;
Escrow Accounts................... ........................63
SECTION 3.07. Access to Certain Documentation and Information Regarding
the Mortgage Loans.......... ..............................63
SECTION 3.08. Permitted Withdrawals from the Certificate Account,
Distribution Account and the Carryover Reserve Fund........64
SECTION 3.09. [Reserved]....................................................66
SECTION 3.10. Maintenance of Hazard Insurance...............................66
SECTION 3.11. Enforcement of Due-On-Sale Clauses; Assumption
Agreements............................. ...................67
SECTION 3.12. Realization Upon Defaulted Mortgage Loans; Determination
of Excess Proceeds and Realized Losses; Repurchase
of Certain Mortgage Loans.......................... .......68
SECTION 3.13. Trustee to Cooperate; Release of Mortgage Files...............71
SECTION 3.14. Documents, Records and Funds in Possession of Master
Servicer to be Held for the Trustee........................72
SECTION 3.15. Servicing Compensation........................................73
SECTION 3.16. Access to Certain Documentation...............................73
SECTION 3.17. Annual Statement as to Compliance.............................73
SECTION 3.18. Annual Independent Public Accountants' Servicing Statement;
Financial Statements.......................................74
SECTION 3.19. Indemnification of Master Servicer............................74
ARTICLE IV
DISTRIBUTIONS AND ADVANCES BY THE MASTER SERVICER
SECTION 4.01. Advances......................................................75
SECTION 4.02. Reduction of Servicing Compensation in Connection with
Prepayment Interest Shortfalls.............................75
SECTION 4.03. REMIC Distributions...........................................76
SECTION 4.04. Distributions.................................................76
SECTION 4.05. Monthly Statements to Certificateholders......................79
SECTION 4.06. REMIC 1, REMIC 2, REMIC 3, and REMIC 4 Allocations............81
SECTION 4.07. Extra Master Servicing Fee....................................84
SECTION 4.08. Carryover Reserve Fund........................................85
ARTICLE V
THE CERTIFICATES
SECTION 5.01. The Certificates..............................................86
SECTION 5.02. Certificate Register; Registration of Transfer and Exchange
of Certificates........... ................................87
SECTION 5.03. Mutilated, Destroyed, Lost or Stolen Certificates.............91
SECTION 5.04. Persons Deemed Owners.........................................91
SECTION 5.05. Access to List of Certificateholders' Names and Addresses.....91
SECTION 5.06. Book-Entry Certificates.......................................92
SECTION 5.07. Notices to Depository.........................................93
SECTION 5.08. Definitive Certificates.......................................93
SECTION 5.09. Maintenance of Office or Agency...............................93
ARTICLE VI
THE DEPOSITOR, THE MASTER SERVICER AND THE SELLER
SECTION 6.01. Respective Liabilities of the Depositor, the Master
Servicer and the Seller........... ........................95
SECTION 6.02. Merger or Consolidation of the Depositor, the Master
Servicer or the Seller........... .........................95
SECTION 6.03. Limitation on Liability of the Depositor, the Seller,
the Master Servicer and others.............................95
SECTION 6.04. Limitation on Resignation of Master Servicer..................96
SECTION 6.05. Errors and Omissions Insurance; Fidelity Bonds................96
ARTICLE VII
DEFAULT; TERMINATION OF MASTER SERVICER
SECTION 7.01. Events of Default............................................98
SECTION 7.02. Trustee to Act; Appointment of Successor.....................99
SECTION 7.03. Notification to Certificateholders..........................101
ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.01. Duties of Trustee...........................................102
SECTION 8.02. Certain Matters Affecting the Trustee.......................103
SECTION 8.03. Trustee Not Liable for Mortgage Loans.......................104
SECTION 8.04. Trustee May Own Certificates................................104
SECTION 8.05. Payment of Trustee's Fees and Expenses.....................104
SECTION 8.06. Eligibility Requirements for Trustee........................105
SECTION 8.07. Resignation and Removal of Trustee..........................105
SECTION 8.08. Successor Trustee...........................................106
SECTION 8.09. Merger or Consolidation of Trustee..........................107
SECTION 8.10. Appointment of Co-Trustee or Separate Trustee...............107
SECTION 8.11. Tax Matters.................................................108
ARTICLE IX
TERMINATION
SECTION 9.01. Termination upon Liquidation or Repurchase of all
Mortgage Loans..................... .....................112
SECTION 9.02. Final Distribution on the Certificates......................112
SECTION 9.03. Additional Termination Requirements.........................114
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.01. Amendment...................................................115
SECTION 10.02. Recordation of Agreement; Counterparts......................116
SECTION 10.03. Governing Law...............................................116
SECTION 10.04. Intention of Parties........................................117
SECTION 10.05. Notices.....................................................117
SECTION 10.06. Severability of Provisions..................................118
SECTION 10.07. Assignment..................................................119
SECTION 10.08. Limitation on Rights of Certificateholders..................119
SECTION 10.09. Inspection and Audit Rights.................................120
SECTION 10.10. Certificates Nonassessable and Fully Paid...................120
<PAGE>
BROWN & WOOD LLP
One World Trade Center
New York, New York 10048
Telephone: (212) 839-5300
Facsimile: (212) 839-5599
September 16, 1998
VIA EDGAR
- ---------
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Bear Stearns Asset Backed Securities, Inc.
American Residential Home Equity Loan Trust, Series 1998-1
Asset-Backed Certificates
----------------------------------------------------------
Ladies and Gentlemen:
On behalf of Bear Stearns Asset Backed Securities, Inc. (the "Company"),
we enclose herewith for filing, pursuant to the Securities and Exchange Act of
1934, as amended, the Company's Current Report on Form 8-K, for the Pooling
and Servicing Agreement and the Corrective Amendment in connection with the
above-referenced transaction.
Very truly yours,
/s/ TaeHun Kim
TaeHun Kim
Enclosure
