Filed On 10/10/96 ˇ SEC File 33-05042 ˇ Accession Number 903423-96-99
As Of Filer Filing On/For/As Docs:Pgs Issuer Agent
10/10/96 Ge Capital Mortgage Services Inc 8-K{2,7} 9/27/96 4:593 903423
Document/Exhibit Description Pages Size
1: 8-K Current Report 16 59K
2: EX-1.1 Underwriting Agreement 33 135K
3: EX-1.1 Underwriting Agreement 4 16K
4: EX-4.1 Instrument Defining the Rights of Security Holders 540 2,665K
EX-4.1 ˇ Instrument Defining the Rights of Security Holders
Exhibit Table of Contents
EXECUTION
GE CAPITAL MORTGAGE SERVICES, INC.,
Seller and Servicer
and
STATE STREET BANK AND TRUST COMPANY,
Trustee
POOLING AND SERVICING AGREEMENT
Dated as of September 1, 1996
REMIC Multi-Class Pass-Through Certificates,
Series 1996-14
Section Page
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.01. Definitions.............................................. 1
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
2.01. Conveyance of Mortgage Loans............................. 46
2.02. Acceptance by Trustee.................................... 49
2.03. Representations and Warranties of the Company;
Mortgage Loan Repurchase................................. 50
2.04. Execution of Certificates................................ 57
2.05. Designations under the REMIC Provisions.................. 57
ARTICLE III
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
3.01. Company to Act as Servicer............................... 57
3.02. Collection of Certain Mortgage Loan Payments;
Mortgage Loan Payment Records; Certificate Account....... 63
3.03. Collection of Taxes, Assessments and Other Items......... 66
3.04. Permitted Debits to the Mortgage Loan Payment
Records.................................................. 67
3.05. Maintenance of the Primary Insurance Policies............ 68
3.06. Maintenance of Hazard Insurance.......................... 69
3.07. Assumption and Modification Agreements................... 70
3.08. Realization Upon Defaulted Mortgage Loans................ 71
3.09. Trustee to Cooperate; Release of Mortgage Files.......... 74
3.10. Servicing Compensation; Payment of Certain
Expenses by the Company.................................. 75
3.11. Reports to the Trustee; Certificate Account
Statements............................................... 76
3.12. Annual Statement as to Compliance........................ 76
3.13. Annual Independent Public Accountants'
Servicing Report......................................... 76
3.14. Access to Certain Documentation and Information
Regarding the Mortgage Loans............................. 77
3.15. Maintenance of Certain Servicing Policies................ 77
3.16. Optional Purchase of Defaulted Mortgage Loans............ 77
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Section Page
ARTICLE IV
PAYMENTS AND STATEMENTS
4.01. Distributions............................................ 78
4.02. Method of Distribution................................... 86
4.03. Allocation of Losses..................................... 87
4.04. Monthly Advances; Purchases of Defaulted
Mortgage Loans........................................... 91
4.05. Statements to Certificateholders......................... 92
4.06. Servicer's Certificate................................... 95
4.07. Reports of Foreclosures and Abandonments of
Mortgaged Property....................................... 95
4.08. Reduction of Servicing Fees by Compensating
Interest Payments........................................ 95
ARTICLE V
THE CERTIFICATES
5.01. The Certificates......................................... 95
5.02. Registration of Transfer and Exchange of
Certificates............................................. 98
5.03. Mutilated, Destroyed, Lost or Stolen Certificates........105
5.04. Persons Deemed Owners....................................106
5.05. Access to List of Certificateholders' Names
and Addresses............................................106
5.06. Representation of Certain Certificateholders.............107
5.07. Determination of COFI....................................107
5.08. Determination of LIBOR...................................108
ARTICLE VI
THE COMPANY
6.01. Liability of the Company.................................109
6.02. Merger or Consolidation of, or Assumption of
the Obligations of, the Company..........................109
6.03. Assignment...............................................110
6.04. Limitation on Liability of the Company and Others........110
6.05. The Company Not to Resign................................111
ARTICLE VII
DEFAULT
7.01. Events of Default........................................111
7.02. Trustee to Act; Appointment of Successor.................113
7.03. Notification to Certificateholders.......................114
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ARTICLE VIII
THE TRUSTEE
8.01. Duties of Trustee........................................114
8.02. Certain Matters Affecting the Trustee....................116
8.03. Trustee Not Liable for Certificates or
Mortgage Loans...........................................117
8.04. Trustee May Own Certificates.............................117
8.05. The Company to Pay Trustee's Fees and Expenses...........117
8.06. Eligibility Requirements for Trustee.....................118
8.07. Resignation or Removal of Trustee........................118
8.08. Successor Trustee........................................119
8.09. Merger or Consolidation of Trustee.......................120
8.10. Appointment of Co-Trustee or Separate Trustee............120
8.11. Compliance with REMIC Provisions; Tax Returns............122
ARTICLE IX
TERMINATION
9.01. Termination upon Repurchase by the Company
or Liquidation of All Mortgage Loans.....................122
9.02. Additional Termination Requirements......................124
ARTICLE X
MISCELLANEOUS PROVISIONS
10.01. Amendment...............................................124
10.02. Recordation of Agreement................................126
10.03. Limitation on Rights of Certificateholders..............126
10.04. Governing Law...........................................127
10.05. Notices.................................................127
10.06. Notices to the Rating Agencies..........................128
10.07. Severability of Provisions..............................128
10.08. Certificates Nonassessable and Fully Paid...............128
iii
Exhibits
EXHIBIT A Forms of Certificates
EXHIBIT B Principal Balance Schedules
EXHIBIT C Mortgage Loans
EXHIBIT D Form of Servicer's Certificate
EXHIBIT E Form of Transfer Certificate as to
ERISA Matters for Definitive
ERISA-Restricted Certificates
EXHIBIT F Form of Residual Certificate
Transferee Affidavit
EXHIBIT G Form of Residual Certificate
Transferor Letter
EXHIBIT H Additional Servicer Compensation
EXHIBIT I Form of Investment Letter for
Definitive Restricted Certificates
EXHIBIT J Form of Distribution Date
Statement
EXHIBIT K Form of Special Servicing and
Collateral Fund Agreement
EXHIBIT L Form of Lost Note Affidavit and
Agreement
iv
THIS POOLING AND SERVICING AGREEMENT, dated as of
September 1, 1996, between GE CAPITAL MORTGAGE SERVICES, INC., a
corporation organized and existing under the laws of the State of
New Jersey, and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts banking corporation, as Trustee.
W I T N E S S E T H T H A T :
In consideration of the mutual agreements herein
contained, GE Capital Mortgage Services, Inc. and State Street
Bank and Trust Company agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. Whenever used in this
Agreement, the following words and phrases, unless the context
otherwise requires, shall have the following meanings:
Accretion Directed Certificate: None.
Accretion Termination Date: None.
Accrual Amount: As to any Class of Accrual
Certificates and any Accrual Component and each
Distribution Date through the related Accretion Termination
Date, the sum of (x) any amount of Accrued Certificate
Interest allocable to such Class or Component pursuant to
Section 4.01(a)(i) or (b)(i) on such Distribution Date and
(y) any amount of Unpaid Class Interest Shortfall allocable
to such Class or Component pursuant to Section 4.01(a)(ii)
or (b)(ii) on such Distribution Date, to the extent that
such amounts are distributed to any Accretion Directed
Certificates pursuant to Section 4.01(f). As to any Class
of Accrual Certificates and any Accrual Component and each
Distribution Date after the related Accretion Termination
Date, zero.
Accrual Certificate: None.
Accrual Component: None.
Accrued Certificate Interest: As to any Distribution
Date and any Class of Certificates (other than any Class of
Principal Only Certificates), interest accrued during the
related Interest Accrual Period at the applicable
Certificate Interest Rate on the Class Certificate
Principal Balance (or, in the case of any Class of Notional
Certificates other than the Class S Certificates, on the
aggregate Notional Principal Balance) thereof immediately
prior (or, in the case of the Class S Certificates, on the
aggregate Notional Principal Balance thereof with respect)
to such Distribution Date, calculated on the basis of a
360-day year consisting of twelve 30-day months. As to any
Distribution Date and any Component (other than any
Principal Only Component), interest accrued during the
related Interest Accrual Period at the applicable Component
Interest Rate on the Component Principal Balance (or
Notional Component Principal Balance) thereof immediately
prior to such Distribution Date, calculated on the basis of
a 360-day year consisting of twelve 30-day months.
Accrued Certificate Interest on each Class of
Certificates (other than any Class of Principal Only
Certificates) and any Component (other than any Principal
Only Component) shall be reduced by such Class's or
Component's share of the amount of any Net Interest
Shortfall and Interest Losses for such Distribution Date.
Any Net Interest Shortfall and Interest Losses shall be
allocated among the Classes of Certificates (other than any
Class of Principal Only Certificates) and among the
Components (other than any Principal Only Component) of any
Component Certificate in proportion to the respective
amounts of Accrued Certificate Interest that would have
resulted absent such shortfall or losses.
Agreement: This Pooling and Servicing Agreement and
all amendments hereof and supplements hereto.
Allocable Share: (a) As to any Distribution Date and
amounts distributable pursuant to clauses (i) and (iii) of
the definition of Junior Optimal Principal Amount for a
Certificate Group, and as to each related Class of Junior
Certificates, the fraction, expressed as a percentage, the
numerator of which is the Class Certificate Principal
Balance of such Class and the denominator of which is the
aggregate Class Certificate Principal Balance of the Junior
Certificates in such Certificate Group.
(b) As to any Distribution Date and amounts
distributable pursuant to clauses (ii), (iv) and (v) of the
definition of Junior Optimal Principal Amount for a
Certificate Group, and as to the Class M Certificates in
such Certificate Group and each Class of Class B
Certificates in such Certificate Group for which the
related Prepayment Distribution Trigger has been satisfied
on such Distribution Date, the fraction, expressed as a
percentage, the numerator of which is the Class Certificate
Principal Balance of such Class and the denominator of
which is the aggregate Class Certificate Principal Balance
of all such Classes in such Certificate Group. As to any
2
Distribution Date and each Class of Class B Certificates for which
the related Prepayment Distribution Trigger has not been
satisfied on such Distribution Date, 0%.
Amortization Payment: As to any REO Mortgage Loan and
any month, the payment of principal and accrued interest
due in such month in accordance with the terms of the
related Mortgage Note as contemplated by Section 3.08(b).
Amount Held for Future Distribution: As to each
Distribution Date and Mortgage Pool, the total of all
amounts credited to the Mortgage Loan Payment Record for
such Mortgage Pool as of the preceding Determination Date
on account of (i) Principal Prepayments, Insurance Proceeds
and Liquidation Proceeds received in respect of such
Mortgage Pool subsequent to the preceding Prepayment Period
applicable to such receipts, and (ii) monthly payments of
principal and interest due subsequent to the preceding Due
Date.
Anniversary Determination Date: The Determination Date
occurring in October of each year that the Certificates are
outstanding, commencing in October 1996.
Assumed Monthly Payment Reduction: As of any
Anniversary Determination Date and as to any Non-Primary
Residence Loan remaining in the applicable Mortgage Pool
whose original principal balance was 80% or greater of the
Original Value thereof, the excess of (i) the Monthly
Payment thereof calculated on the assumption that the
Mortgage Rate thereon was equal to the weighted average (by
principal balance) of the Net Mortgage Rates of all
Outstanding Mortgage Loans in such Mortgage Pool (the
"Weighted Average Rate") as of such Anniversary
Determination Date over (ii) the Monthly Payment thereof
calculated on the assumption that the Net Mortgage Rate
thereon was equal to the Weighted Average Rate less 1.25%
per annum.
Available Funds: As to each Distribution Date and
Mortgage Pool, an amount equal to the sum of (i) all
amounts credited to the Mortgage Loan Payment Record for
such Mortgage Pool pursuant to Section 3.02 as of the
preceding Determination Date, (ii) any Monthly Advance and
any Compensating Interest Payment in respect of such
Mortgage Pool for such Distribution Date, (iii) the
Purchase Price of any Defective Mortgage Loans, Defaulted
Mortgage Loans, and Modified Mortgage Loans in respect of
such Mortgage Pool deposited in the Certificate Account on
the Business Day preceding such Distribution Date
(including any amounts deposited in the Certificate Account
in connection with any substitution of a Mortgage Loan in
3
such Mortgage Pool as specified in Section 2.03(b)), and
(iv) the purchase price of any defaulted Mortgage Loan in such
Mortgage Pool purchased under an agreement entered into pursuant to
Section 3.08(e) as of the end of the preceding Prepayment
Period, less the sum of (x) the Amount Held for Future
Distribution in respect of such Mortgage Pool and (y)
amounts permitted to be debited from the related Mortgage
Loan Payment Record pursuant to clauses (i) through (vii)
of Section 3.04.
Bankruptcy Coverage Termination Date: As to each
Mortgage Pool, the Distribution Date upon which the
Bankruptcy Loss Amount for such Mortgage Pool has been
reduced to zero or a negative number (or the related
CrossOver Date, if earlier).
Bankruptcy Loss Amount: As of any Determination Date
prior to the first Anniversary Determination Date, the
Bankruptcy Loss Amount for Pool 1 shall equal $146,236, and
the Bankruptcy Loss Amount for Pool 2 shall equal $100,000
as reduced in each case by the aggregate amount of
Deficient Valuations and Debt Service Reductions in respect
of such Mortgage Pool since the Cut-off Date. As of any
Determination Date after the first Anniversary
Determination Date, other than an Anniversary Determination
Date, the Bankruptcy Loss Amount for a Mortgage Pool shall
equal such Bankruptcy Loss Amount on the immediately
preceding Anniversary Determination Date as reduced by the
aggregate amount of Deficient Valuations and Debt Service
Reductions for such Mortgage Pool since such preceding
Anniversary Determination Date. As of any Anniversary
Determination Date, the Bankruptcy Loss Amount for a
Mortgage Pool shall equal the lesser of (x) the related
Bankruptcy Loss Amount as of the preceding Determination
Date as reduced by any Deficient Valuations and Debt
Service Reductions for such Mortgage Pool for the preceding
Distribution Date, and (y) the greater of (i) the Fitch
Formula Amount for such Mortgage Pool for such Anniversary
Determination Date and (ii) the S&P Formula Amount for such
Mortgage Pool for such Anniversary Determination Date.
The Bankruptcy Loss Amount for a Mortgage Pool may be
further reduced by the Company (including accelerating the
manner in which such coverage is reduced) provided that
prior to any such reduction, the Company shall obtain
written confirmation from each Rating Agency that such
reduction shall not adversely affect the then-current
rating assigned to the related Classes of Certificates by
such Rating Agency and shall provide a copy of such written
confirmation to the Trustee.
4
BIF: The Bank Insurance Fund of the FDIC, or its
successor in interest.
Book-Entry Certificate: Any Certificate registered in
the name of the Depository or its nominee, ownership of
which is reflected on the books of the Depository or on the
books of a person maintaining an account with such
Depository (directly or as an indirect participant in
accordance with the rules of such Depository). As of the
Closing Date, each Class of Certificates, other than the
Class 1-PO, Class 1-S, Class 1-B3, Class 1-B4, Class 1-B5,
Class R, Class 2-PO, Class 2-S, Class 2-B3, Class 2-B4 and
Class 2-B5 Certificates, constitutes a Class of Book-Entry
Certificates.
Book-Entry Nominee: As defined in Section 5.02(b).
Business Day: Any day other than a Saturday or a
Sunday, or a day on which banking institutions in New York
City or Boston, Massachusetts are authorized or obligated
by law or executive order to be closed.
Buydown Funds: Funds contributed by the Mortgagor or another source
in order to reduce the interest payments required from the Mortgagor
for a specified period in specified amounts.
Buydown Mortgage Loan: Any Mortgage Loan as to which
the Mortgagor pays less than the full monthly payment
specified in the Mortgage Note during the Buydown Period
and the difference between the amount paid by the Mortgagor
and the amount specified in the Mortgage Note is paid from
the related Buydown Funds.
Buydown Period: The period during which Buydown Funds
are required to be applied to the related Buydown Mortgage
Loan.
Certificate: Any one of the certificates signed and
countersigned by the Trustee in substantially the forms
attached hereto as Exhibit A.
Certificate Account: The trust account or accounts
created and maintained with the Trustee pursuant to Section
3.02 and which must be an Eligible Account.
Certificate Group: The Pool 1 Certificates or the Pool
2 Certificates, as applicable.
Certificate Interest Rate: With respect to any Class
of Certificates other than any Class of Class S
Certificates, the fixed per annum rate specified in Section
5
5.01(b). With respect to any Class of Class S Certificates
and any Distribution Date, the applicable Strip Rate for
such Distribution Date.
Certificate Owner: With respect to any Book-Entry
Certificate, the person who is the beneficial owner thereof.
Certificate Principal Balance: As to any Certificate
other than a Notional Certificate, and as of any
Distribution Date, the Initial Certificate Principal
Balance of such Certificate (plus, in the case of any
Accrual Certificate, its Percentage Interest of any related
Accrual Amount for each previous Distribution Date) 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 4.01, (ii) any Realized Losses allocated to such
Certificate on previous Distribution Dates pursuant to
Section 4.03(b) and (c), and (iii) in the case of a
Subordinate Certificate, such Certificate's Percentage
Interest of the Subordinate Certificate Writedown Amount
for the related Certificate Group allocated to such
Certificate on previous Distribution Dates. The Notional
Certificates are issued without Certificate Principal
Balances.
Certificate Register and Certificate Registrar: The
register maintained and the registrar appointed pursuant to
Section 5.02.
Certificateholder or Holder: The person in whose name
a Certificate is registered in the Certificate Register,
except that, solely for the purposes of giving any consent
pursuant to this Agreement, a Certificate of any Class to
the extent that the Company or any affiliate is the
Certificate Owner or Holder thereof (except to the extent
the Company or any affiliate thereof shall be the
Certificate Owner or Holder of all Certificates of such
Class), shall be deemed not to be outstanding and the
Percentage Interest (or Voting Rights) evidenced thereby
shall not be taken into account in determining whether the
requisite amount of Percentage Interests (or Voting Rights)
necessary to effect any such consent has been obtained;
provided, however, that in determining whether the Trustee
shall be protected in relying on such consent only the
Certificates that the Trustee knows to be so held shall be
so disregarded.
Class: All Certificates bearing the same class
designation.
6
Class B Certificate: Any Class 1-B1, Class 1-B2, Class
1-B3, Class 1-B4, Class 1-B5, Class 2-B1, Class 2-B2, Class
2-B3, Class 2-B4 or Class 2-B5 Certificate.
Class B1 Certificate: Any Class 1-B1 or Class 2-B1
Certificate.
Class B2 Certificate: Any Class 1-B2 or Class 2-B2
Certificate.
Class B3 Certificate: Any Class 1-B3 or Class 2-B3
Certificate.
Class B4 Certificate: Any Class 1-B4 or Class 2-B4
Certificate.
Class B5 Certificate: Any Class 1-B5 or Class 2-B5
Certificate.
Class Certificate Principal Balance: As to any Class
of Certificates, other than any Class of Notional
Certificates, and any date of determination, the aggregate
of the Certificate Principal Balances of all Certificates
of such Class. The Class Certificate Principal Balance of
each such Class of Certificates as of the Closing Date is
specified in Section 5.01(b).
Class Interest Shortfall: As to any Distribution Date
and any Class of Certificates (other than any Class of
Principal Only Certificates) or any Component, any amount
by which the amount distributed to Holders of such Class of
Certificates or in respect of such Component (or added to
the Class Certificate Principal Balance of any Class of
Accrual Certificates or to the Component Principal Balance
of any Accrual Component) on such Distribution Date is less
than the Accrued Certificate Interest thereon for such
Distribution Date.
Class M Certificate: Any Class 1-M or Class 2-M
Certificate.
Class PO Certificate: Any Class 1-PO or Class 2-PO
Certificate.
Class PO Deferred Amount: As to each Mortgage Pool and
any Distribution Date on or prior to the related Cross-Over
Date, the aggregate of the applicable PO Percentage of the
principal portion of each Realized Loss in respect of such
Mortgage Pool, other than any related Excess Loss, to be
allocated to the Class 1-PO Certificates, in the case of
Pool 1, or to the Class 2-PO Certificates, in the case of
Pool 2, on such Distribution Date or previously allocated
7
to such Class of Certificates and not yet paid to the Holders
of such Class of Certificates pursuant to Section
4.01(a)(iv) or (b)(iv), as applicable.
Class S Certificate: Any Class 1-S or Class 2-S
Certificate.
Closing Date: September 27, 1996.
Code: The Internal Revenue Code of 1986, as it may be
amended from time to time, any successor statutes thereto,
and applicable U.S. Department of the Treasury temporary or
final regulations promulgated thereunder.
COFI: The monthly weighted average cost of funds for
savings institutions the home offices of which are located
in Arizona, California, or Nevada that are member
institutions of the Eleventh Federal Home Loan Bank
District, as computed from statistics tabulated and
published by the Federal Home Loan Bank of San Francisco in
its monthly Information Bulletin.
COFI Certificates: None.
COFI Determination Date: As to each Interest Accrual
Period for any COFI Certificates, the last Business Day of
the calendar month preceding the commencement of such
Interest Accrual Period.
Company: GE Capital Mortgage Services, Inc., a
corporation organized and existing under the laws of the
State of New Jersey, or its successor in interest or, if
any successor servicer is appointed as herein provided,
then such successor servicer.
Compensating Interest Payment: With respect to any
Distribution Date and Mortgage Pool, an amount equal to the
aggregate of the Interest Shortfalls described in clauses
(a) and (b) of the definition thereof with respect to such
Distribution Date and Mortgage Pool; provided, however,
that such amount shall not exceed the lesser of (i) an
amount equal to the product of (x) the Pool Scheduled
Principal Balance with respect to such Distribution Date
and Mortgage Pool and (y) one-twelfth of 0.125%, and (ii)
the aggregate of the Servicing Fees that the Company would
be entitled to retain on such Distribution Date in respect
of the Mortgage Loans in such Mortgage Pool (less any
portion thereof paid as servicing compensation to any
Primary Servicer) without giving effect to any related
Compensating Interest Payment.
Component: None.
8
Component Certificate: None.
Component Principal Balance: As of any Distribution
Date, and with respect to any Component, other than any
Notional Component, the initial Component Principal Balance
thereof (as set forth, as applicable, in the definition of
Component) (plus, in the case of any Accrual Component, any
related Accrual Amount for each previous Distribution Date)
less the sum of (x) all amounts distributed in reduction
thereof on previous Distribution Dates pursuant to Section
4.01 and (y) the amount of all Realized Losses allocated
thereto pursuant to Section 4.03(d).
Confirmatory Mortgage Note: With respect to any
Mortgage Loan, a note or other evidence of indebtedness
executed by the Mortgagor confirming its obligation under
the note or other evidence of indebtedness previously
executed by the Mortgagor upon the origination of the
related Mortgage Loan.
Corporate Trust Office: The principal office of the
Trustee at which at any particular time its corporate trust
business shall be administered, which office at the date of
the execution of this instrument is located at 225 Franklin
Street, Boston, Massachusetts 02110, Attention: Corporate
Trust Department.
Cross-Over Date: As to each Certificate Group, the
first Distribution Date on which the aggregate Class
Certificate Principal Balance of the Junior Certificates in
such Certificate Group has been reduced to zero (giving
effect to all distributions on such Distribution Date).
Cut-off Date: September 1, 1996.
Debt Service Reduction: As to any Mortgage Loan and
any Determination Date, the excess of (a) the then current
Monthly Payment for such Mortgage Loan over (b) the amount
of the monthly payment of principal and interest required
to be paid by the Mortgagor as established by a court of
competent jurisdiction as a result of a proceeding
initiated by or against the related Mortgagor under the
Bankruptcy Code, as amended from time to time (11 U.S.C.).
Defaulted Mortgage Loan: With respect to any
Determination Date, a Mortgage Loan as to which the related
Mortgagor has failed to make unexcused payment in full of a
total of three or more consecutive installments of
principal and interest, and as to which such delinquent
installments have not been paid, as of the close of
business on the last Business Day of the month next
preceding the month of such Determination Date.
9
Defective Mortgage Loan: Any Mortgage Loan which is
required to be purchased by the Company (or which the
Company may replace with a substitute Mortgage Loan)
pursuant to Section 2.02 or 2.03(a).
Deficient Valuation: As to any Mortgage Loan and any
Determination Date, the excess of (a) the then outstanding
indebtedness under such Mortgage Loan over (b) the
valuation by a court of competent jurisdiction of the
related Mortgaged Property as a result of a proceeding
initiated by or against the related Mortgagor under the
Bankruptcy Code, as amended from time to time (11 U.S.C.),
pursuant to which such Mortgagor retained such Mortgaged
Property.
Definitive Certificate: Any Certificate, other than a
Book-Entry Certificate, issued in definitive, fully
registered form.
Definitive Restricted Junior Certificate: Any
Restricted Junior Certificate that is in the form of a
Definitive Certificate.
Depository: The initial Depository shall be The
Depository Trust Company, the nominee of which is CEDE &
Co. The Depository shall at all times be a "clearing
corporation" as defined in Section 8-102(3) of the Uniform
Commercial Code of the State of New York, as amended, or
any successor provisions thereto.
Depository Participant: A broker, dealer, bank or
other financial institution or other Person for which, from
time to time, the Depository effects book-entry transfers
and pledges of securities deposited with such Depository.
Designated Loan Closing Documents: With respect to any
Designated Loan, a Lost Note Affidavit substantially in the
form of Exhibit L, and an assignment of the related
Mortgage to the Trustee in recordable form (except for the
omission therein of recording information concerning such
Mortgage).
Designated Loans: None.
Determination Date: With respect to any Distribution
Date, the fifth Business Day prior thereto.
Discount Mortgage Loan: As to Pool 1, any Mortgage
Loan with a Net Mortgage Rate less than 7.75% per annum. As
to Pool 2, any Mortgage Loan with a Net Mortgage Rate less
than 7.25% per annum.
10
Disqualified Organization: Any of the following: (i)
the United States, any State or political subdivision
thereof, or any agency or instrumentality of any of the
foregoing (including but not limited to state pension
organizations); (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) which
is exempt from tax imposed by Chapter 1 of the Code
(including the tax imposed by section 511 of the Code on
unrelated business taxable income); and (iv) a rural
electric and telephone cooperative described in Code
section 1381(a)(2)(C). 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 for these purposes if all of its activities are
subject to tax and a majority of its board of directors is
not selected by such governmental unit.
Distribution Date: The 25th day of each calendar month after the
month of initial issuance of the Certificates, or, if such 25th day
is not a Business Day, the next succeeding Business Day.
Distribution Date Statement: The statement referred to
in Section 4.05(a).
Document File: As defined in Section 2.01.
Due Date: The first day of the month of the related
Distribution Date.
Eligible Account: An account that is either (i)
maintained with a depository institution the debt
obligations of which have been rated by each Rating Agency
in one of its two highest long-term rating categories and
has been assigned by S&P its highest short-term rating,
(ii) an account or accounts the deposits in which are fully
insured by either the BIF or the SAIF, (iii) an account or
accounts, in a depository institution in which such
accounts are insured by the BIF or the SAIF (to the limits
established by the FDIC), the uninsured deposits in which
accounts are either invested in Permitted Investments or
are otherwise secured to the extent required by the Rating
Agencies such that, as evidenced by an Opinion of Counsel
delivered to the Trustee, the Certificateholders have a
claim with respect to the funds in such account or a
perfected first security interest against any collateral
(which shall be limited to Permitted Investments) securing
such funds that is superior to claims of any other
11
depositors or creditors of the depository institution with
which such account is maintained, (iv) a trust account
maintained with the corporate trust department of a federal
or state chartered depository institution or of a trust
company with trust powers and acting in its fiduciary
capacity for the benefit of the Trustee hereunder or (v)
such account as will not cause either Rating Agency to
downgrade or withdraw its then-current rating assigned to
the Certificates, as evidenced in writing by the Rating
Agencies.
ERISA: The Employee Retirement Income Security Act of
1974, as amended.
ERISA-Restricted Certificate: Any Class 1-A9, Class M,
Class B or Class S Certificate.
Event of Default: An event described in Section 7.01.
Excess Bankruptcy Loss: As to each Mortgage Pool, any
Deficient Valuation or Debt Service Reduction, or portion
thereof, in respect of a Mortgage Loan in such Mortgage
Pool, (i) occurring after the related Bankruptcy Coverage
Termination Date or (ii) if on such date, in excess of the
then-applicable Bankruptcy Loss Amount for such Mortgage
Pool.
Excess Fraud Loss: As to each Mortgage Pool, any Fraud
Loss, or portion thereof, in respect of a Mortgage Loan in
such Mortgage Pool, (i) occurring after the related Fraud
Coverage Termination Date or (ii) if on such date, in
excess of the then-applicable Fraud Loss Amount for such
Mortgage Pool.
Excess Loss: As to each Mortgage Pool, any related
Excess Bankruptcy Loss, Excess Fraud Loss or Excess Special
Hazard Loss.
Excess Special Hazard Loss: As to each Mortgage Pool,
any Special Hazard Loss, or portion thereof, in respect of
a Mortgage Loan in such Mortgage Pool, (i) occurring after
the related Special Hazard Termination Date or (ii) if on
such date, in excess of the then-applicable Special Hazard
Loss Amount for such Mortgage Pool.
FDIC: The Federal Deposit Insurance Corporation, or
its successor in interest.
FHLMC: The Federal Home Loan Mortgage Corporation or
its successor in interest.
12
Financial Intermediary: A broker, dealer, bank or
other financial institution or other Person that clears
through or maintains a custodial relationship with a
Depository Participant.
Fitch: Fitch Investors Service, L.P. and its
successors.
Fitch Formula Amount: As to each Anniversary
Determination Date and each Mortgage Pool, the greater of
(i) $50,000 and (ii) the product of (x) the greatest
Assumed Monthly Payment Reduction for any Non-Primary
Residence Loan in such Mortgage Pool whose original
principal balance was 80% or greater of the Original Value
thereof, (y) the weighted average remaining term to
maturity (expressed in months) of all the Non-Primary
Residence Loans remaining in such Mortgage Pool as of such
Anniversary Determination Date, and (z) the sum of (A) one
plus (B) the number of all remaining Non-Primary Residence
Loans in such Mortgage Pool divided by the total number of
Outstanding Mortgage Loans in such Mortgage Pool as of such
Anniversary Determination Date.
FNMA: The Federal National Mortgage Association or its
successor in interest.
Fraud Coverage Termination Date: As to each Mortgage
Pool, the Distribution Date upon which the related Fraud
Loss Amount has been reduced to zero or a negative number
(or the related Cross-Over Date, if earlier).
Fraud Loss: Any Realized Loss attributable to fraud in
the origination of the related Mortgage Loan.
Fraud Loss Amount: As of any Distribution Date after
the Cut-off Date, (x) prior to the first anniversary of the
Cut-off Date, an amount equal to $6,507,745, in the case of
Pool 1, and $1,105,640, in the case of Pool 2, minus in
each case the aggregate amount of Fraud Losses in respect
of such Mortgage Pool that would have been allocated to the
related Junior Certificates in accordance with Section 4.03
in the absence of the applicable Loss Allocation Limitation
since the Cut-off Date, and (y) from the first through the
fifth anniversary of the Cut-off Date, an amount equal to
(1) the lesser of (a) such Fraud Loss Amount as of the most
recent anniversary of the Cut-off Date and (b) in the case
of Pool 1, 1.00%, and in the case of Pool 2, 1.00% (from
the first anniversary to but excluding the third
anniversary of the Cut-off Date) or 0.50% (from the third
through the fifth anniversaries of the Cut-off Date), of
the aggregate outstanding principal balance of all of the
Mortgage Loans in such Mortgage Pool as of the most recent
anniversary of
13
the Cut-off Date minus (2) the Fraud Losses in respect of
such Mortgage Pool that would have been allocated to the
related Junior Certificates in accordance with Section 4.03
in the absence of the applicable Loss Allocation Limitation
since the most recent anniversary of the Cut-off Date.
After the fifth anniversary of the Cut-off Date the Fraud
Loss Amount for each Mortgage Pool shall be zero.
Group I Excess Prepayment Amount: As set forth in the
definition of Group I Senior Prepayment Percentage.
Group I Senior Certificate: As to the Pool 1
Certificates, any Class 1-A1, Class 1-A2, Class 1-A3, Class
1-A4, Class 1-A5, Class 1-A6, Class 1-A7 or Class R
Certificate. As to the Pool 2 Certificates, any Class 2-A1,
Class 2-A2, Class 2-A3 or Class 2-A4 Certificate.
Group I Senior Certificate Principal Balance: As to
any Distribution Date and each Certificate Group, an amount
equal to the sum of the Class Certificate Principal
Balances of the related Group I Senior Certificates.
Group I Senior Optimal Principal Amount: As to any
Distribution Date and each Certificate Group, an amount
equal to the sum of:
(i) the related Group I Senior Percentage of the
applicable Non-PO Percentage of the principal
portion of each Monthly Payment due on the related
Due Date on each Outstanding Mortgage Loan in the
related Mortgage Pool as of such Due Date as
specified in the amortization schedule at the time
applicable thereto (after adjustments for previous
Principal Prepayments and Debt Service Reductions
in respect of such Mortgage Pool subsequent to the
related Bankruptcy Coverage Termination Date but
before any adjustment to such amortization
schedule by reason of any bankruptcy (except as
aforesaid) or similar proceeding or any moratorium
or similar waiver or grace period);
(ii) the related Group I Senior Prepayment Percentage
of the applicable Non-PO Percentage of all
principal prepayments in part in respect of the
related Mortgage Pool received during the related
Prepayment Period, together with the related Group
I Senior Prepayment Percentage of the applicable
Non-PO Percentage of the Scheduled Principal
Balance of each Mortgage Loan in the related
Mortgage Pool that was the subject of a Voluntary
14
Principal Prepayment in full during the related
Prepayment Period;
(iii) the lesser of (x) the related Group I Senior
Percentage of the applicable Non-PO Percentage of
the sum of (A) the Scheduled Principal Balance of
each Mortgage Loan in the related Mortgage Pool
that became a Liquidated Mortgage Loan (other than
Mortgage Loans described in clause (B)) during the
related Prepayment Period and (B) the Scheduled
Principal Balance of each Mortgage Loan in the
related Mortgage Pool that was purchased by an
insurer from the Trustee during the related
Prepayment Period pursuant to the related Primary
Insurance Policy, as reduced in each case by the
related Group I Senior Percentage of the
applicable Non-PO Percentage of the principal
portion of any Excess Losses in respect of the
related Mortgage Pool (other than Excess
Bankruptcy Losses attributable to Debt Service
Reductions), and (y) the related Group I Senior
Prepayment Percentage of the applicable Non-PO
Percentage of the sum of (A) all Net Liquidation
Proceeds allocable to principal received in
respect of each such Liquidated Mortgage Loan in
the related Mortgage Pool (other than Mortgage
Loans described in clause (B)) and (B) the
principal balance of each such Mortgage Loan in
the related Mortgage Pool purchased by an insurer
from the Trustee pursuant to the related Primary
Insurance Policy, in each case during the related
Prepayment Period;
(iv) the related Group I Senior Prepayment Percentage
of the applicable Non-PO Percentage of the
Scheduled Principal Balance of each Mortgage Loan
in the related Mortgage Pool that was purchased
on such Distribution Date pursuant to Section
2.02, 2.03(a) or 3.16; and
(v) the related Group I Senior Prepayment Percentage
of the applicable Non-PO Percentage of the
Substitution Amount for any Mortgage Loan in the
related Mortgage Pool substituted during the
month of such Distribution Date.
For purposes of clause (ii) above, a Voluntary Principal
Prepayment in full with respect to a Mortgage Loan serviced
by a Primary Servicer shall be deemed to have been received
when the Company, as servicer, receives notice thereof.
15
Group I Senior Percentage: As to any Distribution Date
and each Certificate Group, the lesser of (i) 100% and (ii)
the percentage (carried to six places rounded up) obtained
by dividing the related Group I Senior Certificate
Principal Balance immediately prior to such Distribution
Date by an amount equal to the sum of the Class Certificate
Principal Balances of all the Certificates in such
Certificate Group other than the related Class PO
Certificates immediately prior to such Distribution Date.
Group I Senior Prepayment Percentage: With respect to
each Mortgage Pool, for any Distribution Date occurring
prior to the fifth anniversary of the first Distribution
Date, 100%.
With respect to each Mortgage Pool, for any
Distribution Date occurring on or after the fifth
anniversary of the first Distribution Date, an amount as
follows:
(i) for any Distribution Date subsequent to September
2001 to and including the Distribution Date in
September 2002, the related Group I Senior
Percentage for such Distribution Date plus 70% of
the sum of the related Group II Senior Percentage
and the related Junior Percentage for such
Distribution Date;
(ii) for any Distribution Date subsequent to September
2002 to and including the Distribution Date in
September 2003, the related Group I Senior
Percentage for such Distribution Date plus 60% of
the sum of the related Group II Senior Percentage
and the related Junior Percentage for such
Distribution Date;
(iii) for any Distribution Date subsequent to September
2003 to and including the Distribution Date in
September 2004, the related Group I Senior
Percentage for such Distribution Date plus 40% of
the sum of the related Group II Senior Percentage
and the related Junior Percentage for such
Distribution Date;
(iv) for any Distribution Date subsequent to September
2004 to and including the Distribution Date in
September 2005, the related Group I Senior
Percentage for such Distribution Date plus 20% of
the sum of the related Group II Senior Percentage
and the related Junior Percentage for such
Distribution Date; and
16
(v) for any Distribution Date thereafter, the related
Group I Senior Percentage for such Distribution
Date.
On any Distribution Date on which the amount available for
distribution in respect of the Group I Senior Optimal
Principal Amount for a Certificate Group would otherwise
exceed the remaining aggregate Class Certificate Principal
Balance of the related Group I Senior Certificates, (1) the
Group I Senior Prepayment Percentage for such Certificate
Group shall be limited to the percentage necessary (after
giving effect to the allocation on such date of amounts
pursuant to clause (i) and, if applicable, clause (iii) (x)
of the definition of "Group I Senior Optimal Principal
Amount" for such Certificate Group) to reduce the Class
Certificate Principal Balances of the related Group I
Senior Certificates to zero, and (2) if the Pro Rata
Allocation Conditions are satisfied with respect to such
Certificate Group, any amount that would have been
allocable to the related Group I Senior Certificates
without giving effect to the limitation in clause (1) above
(such amount, the "Group I Excess Prepayment Amount" for
such Certificate Group) shall be allocated as provided in
the definitions of Group II Senior Prepayment Percentage
and Junior Prepayment Percentage.
After the Group I Senior Certificate Principal Balance for a
Certificate Group has been reduced to zero, the Group I
Senior Prepayment Percentage for such Certificate Group
shall be zero.
Group II Senior Certificate: With respect to the Pool
1 Certificates, any Class 1-A8 or Class 1-A9 Certificate.
With respect to the Pool 2 Certificates, any Class 2-A5
Certificate.
Group II Senior Certificate Principal Balance: As of
any Distribution Date and each Certificate Group, an amount
equal to the Class Certificate Principal Balance of the
related Group II Senior Certificates.
Group II Senior Optimal Principal Amount: As to
any Distribution Date and each Certificate Group, an
amount equal to the sum of:
(i) the related Group II Senior Percentage of the
applicable Non-PO Percentage of the principal
portion of each Monthly Payment due on the
related Due Date on each Outstanding Mortgage
Loan in the related Mortgage Pool as of such Due
Date as specified in the amortization schedule at
the time applicable thereto (after adjustments
17
for previous Principal Prepayments and Debt Service
Reductions in respect of such Mortgage Pool subsequent to
the related Bankruptcy Coverage Termination Date
but before any adjustment to such amortization
schedule by reason of any bankruptcy (except as
aforesaid) or similar proceeding or any
moratorium or similar waiver or grace period);
(ii) the Group II Senior Prepayment Percentage of the
applicable Non-PO Percentage of all principal
prepayments in part in respect of the related
Mortgage Pool received during the related
Prepayment Period, together with the related Group
II Senior Prepayment Percentage of the Non-PO
Percentage of the Scheduled Principal Balance of
each Mortgage Loan in the related Mortgage Pool
that was the subject of a Voluntary Principal
Prepayment in full during the related Prepayment
Period;
(iii) the amount by which (a) the lesser of (x) the
related Senior Percentage of the applicable Non-PO
Percentage of the sum of (A) the Scheduled
Principal Balance of each Mortgage Loan in the
related Mortgage Pool that became a Liquidated
Mortgage Loan (other than Mortgage Loans described
in clause (B)) during the related Prepayment
Period and (B) the Scheduled Principal Balance of
each Mortgage Loan in the related Mortgage Pool
that was purchased by an insurer from the Trustee
during the related Prepayment Period pursuant to
the related Primary Insurance Policy, as reduced
in each case by the related Senior Percentage of
the applicable Non-PO Percentage of the principal
portion of any Excess Losses in respect of the
related Mortgage Pool (other than Excess
Bankruptcy Losses attributable to Debt Service
Reductions), and (y) the related Senior Prepayment
Percentage of the applicable Non-PO Percentage of
the sum of (A) all Net Liquidation Proceeds
allocable to principal received in respect of each
such Liquidated Mortgage Loan in the related
Mortgage Pool (other than Mortgage Loans described
in clause (B)) and (B) the principal balance of
each such Mortgage Loan purchased by an insurer
from the Trustee pursuant to the related Primary
Insurance Policy, in each case during the related
Prepayment Period, exceeds (b) the amount
distributable pursuant to clause (iii) of the
definition of Group I Senior Optimal Principal
Amount for the related Certificate Group;
18
(iv) the related Group II Senior Prepayment Percentage
of the applicable Non-PO Percentage of the
Scheduled Principal Balance of each Mortgage Loan
in the related Mortgage Pool that was purchased
on such Distribution Date pursuant to Section
2.02, 2.03(a) or 3.16; and
(v) the related Group II Senior Prepayment Percentage
of the applicable Non-PO Percentage of the
Substitution Amount for any Mortgage Loan in the
related Mortgage Pool substituted during the
month of such Distribution Date.
For purposes of clause (ii) above, a Voluntary Principal
Prepayment in full with respect to a Mortgage Loan serviced
by a Primary Servicer shall be deemed to have been received
when the Company, as servicer, receives notice thereof.
Group II Senior Percentage: As to any Distribution
Date and each Certificate Group, the related Senior
Percentage minus the related Group I Senior Percentage.
Group II Senior Prepayment Percentage: As to any
Distribution Date and each Certificate Group, the
related Senior Prepayment Percentage minus the related Group I Senior
Prepayment Percentage. On the Distribution Date on which the Group I
Senior Certificate Principal Balance for a Certificate Group has been
reduced to zero, provided that the Pro Rata Allocation Conditions are
satisfied, the related Group II Senior Prepayment Percentage shall be
increased to the extent necessary to include an additional amount equal
to the product of (x) the fraction, the numerator of which is the
aggregate Certificate Principal Balance of the related Group II Senior
Certificates for such date (plus, if such Distribution Date occurs prior
to October 25, 1999, 50% of the aggregate Certificate Principal Balance
of the related Junior Certificates), and the denominator of which is the
aggregate Certificate Principal Balance of such Group II Senior
Certificates and the related Junior Certificates for such date and
(y) the Group I Excess Prepayment Amount for such date and such
Certificate Group. After the Distribution Date on which the Group I
Senior Certificate Principal Balance for a Certificate Group has been
reduced to zero, the Group II Senior Prepayment Percentage for such
Certificate Group for any Distribution Date shall be the related Senior
Prepayment Percentage for such Distribution Date.
19
Initial Certificate Principal Balance: With respect to
any Certificate, other than a Notional Certificate, the
Certificate Principal Balance of such Certificate or any
predecessor Certificate on the Closing Date.
Initial LIBOR Rate: None.
Insurance Proceeds: Proceeds paid pursuant to the Primary Insurance
Policies, if any, and amounts paid by any insurer pursuant to any other
insurance policy covering a Mortgage Loan.
Insured Expenses: Expenses covered by the Primary
Insurance Policies, if any, or any other insurance policy or
policies applicable to the Mortgage Loans.
Interest Accrual Period: With respect to any
Distribution Date and any Class of Certificates (other than
any Class of Principal Only Certificates) or any Component,
the one-month period ending on the last day of the month
preceding the month in which such Distribution Date occurs.
Interest Losses: With respect to each Mortgage Pool,
the interest portion of (i) on or prior to the Cross-Over
Date for such Mortgage Pool, any related Excess Losses and
(ii) after the Cross-Over Date for such Mortgage Pool, any
related Realized Losses and Debt Service Reductions.
Interest Shortfall: With respect to any Distribution
Date and each Mortgage Loan that during the related
Prepayment Period was the subject of a Voluntary Principal
Prepayment, or constitutes a Relief Act Mortgage Loan, an
amount determined as follows:
(a) partial principal prepayments: one month's
interest at the applicable Net Mortgage Rate on the
amount of such prepayment;
(b) principal prepayments in full (including the
Purchase Price of any Modified Mortgage Loan purchased
pursuant to Section 3.01(c)) received on or after the
sixteenth day of the month preceding the month of such
Distribution Date (or, in the case of the first
Distribution Date, on or after the Cut-off Date) but
on or before the last day of the month preceding the
month of such Distribution Date: the difference
between (i) one month's interest at the applicable Net
Mortgage Rate on the Scheduled Principal Balance of
such Mortgage Loan immediately prior to such
prepayment and (ii) the amount of interest for the
calendar month of such prepayment (adjusted to the
applicable Net Mortgage Rate) received at the time of
such prepayment;
20
(c) principal prepayments in full (including the
Purchase Price of any Modified Mortgage Loan purchased
pursuant to Section 3.01(c)) received by the Company
(or of which the Company receives notice, in the case
of a Mortgage Loan serviced by a Primary Servicer) on
or after the first day but on or before the fifteenth
day of the month of such Distribution Date: none; and
(d) Relief Act Mortgage Loans: As to any Relief
Act Mortgage Loan, the excess of (i) 30 days' interest
(or, in the case of a Principal Prepayment in full,
interest to the date of prepayment) on the Scheduled
Principal Balance thereof (or, in the case of a
Principal Prepayment in part, on the amount so
prepaid) at the related Net Mortgage Rate over (ii) 30
days' interest (or, in the case of a Principal
Prepayment in full, interest to the date of
prepayment) on such Scheduled Principal Balance (or,
in the case of a Principal Prepayment in part, on the
amount so prepaid) at the Net Mortgage Rate required
to be paid by the Mortgagor as limited by application
of the Relief Act.
Junior Certificate: As to each Certificate Group, any
related Class M or Class B Certificate.
Junior Optimal Principal Amount: As to any
Distribution Date and each Certificate Group, an amount
equal to the sum of the following (but in no event greater
than the aggregate Certificate Principal Balance of the
related Junior Certificates immediately prior to such
Distribution Date):
(i) the related Junior Percentage of the applicable
Non-PO Percentage of the principal portion of each
Monthly Payment due on the related Due Date on
each Outstanding Mortgage Loan in the related
Mortgage Pool as of such Due Date as specified in
the amortization schedule at the time applicable
thereto (after adjustment for previous Principal
Prepayments and Debt Service Reductions in respect
of such Mortgage Pool subsequent to the related
Bankruptcy Coverage Termination Date but before
any adjustment to such amortization schedule by
reason of any bankruptcy (other than as aforesaid)
or similar proceeding or any moratorium or similar
waiver or grace period);
(ii) the related Junior Prepayment Percentage of the
applicable Non-PO Percentage of all principal
prepayments in part in respect of the related
Mortgage Pool received during the related
Prepayment Period, and 100% of any related Senior
21
Optimal Principal Amount not distributed to the
related Senior Certificates on such Distribution
Date, together with the related Junior Prepayment
Percentage of the applicable Non-PO Percentage of
the Scheduled Principal Balance of each Mortgage
Loan in the related Mortgage Pool that was the
subject of a Voluntary Principal Prepayment in
full during the related Prepayment Period;
(iii) the excess, if any, of (x) the applicable Non-PO
Percentage of the sum of (A) all Net Liquidation
Proceeds in respect of the related Mortgage Pool
allocable to principal received during the related
Prepayment Period (other than in respect of
Mortgage Loans described in clause (B)) and (B)
the principal balance of each Mortgage Loan in the
related Mortgage Pool that was purchased by an
insurer from the Trustee during the related
Prepayment Period pursuant to the related Primary
Insurance Policy, over (y) the amount
distributable pursuant to clause (iii) of each of
the definitions of Group I Senior Optimal
Principal Amount and Group II Senior Optimal
Principal Amount for the related Certificate Group
on such Distribution Date;
(iv) the related Junior Prepayment Percentage of the
applicable Non-PO Percentage of the Scheduled
Principal Balance of each Mortgage Loan in the
related Mortgage Pool that was purchased on such
Distribution Date pursuant to Section 2.02,
2.03(a) or 3.16; and
(v) the related Junior Prepayment Percentage of the
applicable Non-PO Percentage of the Substitution
Amount for any Mortgage Loan in the related
Mortgage Pool substituted during the month of
such Distribution Date.
For purposes of clause (ii) above, a Voluntary Principal
Prepayment in full with respect to a Mortgage Loan serviced
by a Primary Servicer shall be deemed to have been received
when the Company, as servicer, receives notice thereof.
After the Class Certificate Principal Balances of the
Junior Certificates in a Certificate Group have been
reduced to zero, the related Junior Optimal Principal
Amount shall be zero.
Junior Percentage: As to any Distribution Date and
each Certificate Group, the excess of 100% over the related
Senior Percentage for such Distribution Date.
22
Junior Prepayment Percentage: As to any Distribution
Date and each Certificate Group, the excess of 100% over
the related Senior Prepayment Percentage for such
Distribution Date, except that (i) after the aggregate
Certificate Principal Balance of the related Senior
Certificates, other than the related Class PO Certificates,
has been reduced to zero, the Junior Prepayment Percentage
for such Certificate Group shall be 100%, and (ii) after
the related Cross-Over Date, the Junior Prepayment
Percentage for such Certificate Group shall be zero. On the
Distribution Date on which the Group I Senior Certificate
Principal Balance for a Certificate Group has been reduced
to zero, provided that the Pro Rata Allocation Conditions
are satisfied, the related Junior Prepayment Percentage
shall be increased to the extent necessary to include an
additional amount equal to the product of (x) the fraction,
the numerator of which is the aggregate Certificate
Principal Balance of the related Junior Certificates for
such date (multiplied, if such Distribution Date occurs
prior to October 25, 1999, by 50%), and the denominator of
which is the aggregate Certificate Principal Balance of the
related Group II Senior Certificates and such Junior
Certificates for such date and (y) the Group I Excess
Prepayment Amount for such date and such Certificate Group.
Latest Possible Maturity Date: September 25, 2028.
LIBOR: The per annum rate determined, pursuant to
Section 5.08, on the basis of London interbank offered rate
quotations for one-month Eurodollar deposits, as such
quotations may appear on the display designated as page
"LIBO" on the Reuters Monitor Money Rates Service (or such
other page as may replace the LIBO page on the Reuters
Monitor Money Rates Service for the purpose of displaying
London interbank offered quotations of major banks).
LIBOR Certificate: None.
LIBOR Determination Date: The second London Business
Day immediately preceding the commencement of each Interest
Accrual Period for any LIBOR Certificates.
Liquidated Mortgage Loan: Any defaulted Mortgage Loan
as to which the Company has determined that all amounts
which it expects to recover on behalf of the Trust Fund
from or on account of such Mortgage Loan have been
recovered, including any Mortgage Loan with respect to
which the Company determines not to foreclose upon the
related Mortgaged Property based on its belief that such
Mortgaged Property may be contaminated with or affected by
hazardous or toxic wastes, materials or substances.
23
Liquidation Expenses: Expenses which are incurred by
the Company in connection with the liquidation of any
defaulted Mortgage Loan and not recovered by the Company
under any Primary Insurance Policy for reasons other than
the Company's failure to comply with Section 3.05, such
expenses including, without limitation, legal fees and
expenses, and, regardless of when incurred, any
unreimbursed amount expended by the Company pursuant to
Section 3.03 or Section 3.06 respecting the related
Mortgage Loan and any related and unreimbursed Property
Protection Expenses.
Liquidation Proceeds: Cash (other than Insurance
Proceeds) received in connection with the liquidation of
any defaulted Mortgage Loan whether through judicial
foreclosure or otherwise.
London Business Day: Any day on which banks are open
for dealing in foreign currency and exchange in London,
England and New York City.
Loss Allocation Limitation: As defined in Section
4.03(g).
Modified Mortgage Loan: Any Mortgage Loan which the
Company has modified pursuant to Section 3.01(c).
Monthly Advance: With respect to any Distribution Date
and each Mortgage Pool, the aggregate of the advances
required to be made by the Company pursuant to Section
4.04(a) (or by the Trustee pursuant to Section 4.04(b)) on
such Distribution Date in respect of such Mortgage Pool,
the amount of any such Monthly Advance being equal to (a)
the aggregate of payments of principal and interest
(adjusted to the related Net Mortgage Rate) on the Mortgage
Loans in such Mortgage Pool that were due on the related
Due Date, without regard to any arrangements entered into
by the Company with the related Mortgagors pursuant to
Section 3.02(a)(ii), and delinquent as of the close of
business on the Business Day next preceding the related
Determination Date, less (b) the amount of any such
payments which the Company or the Trustee, as applicable,
in its reasonable judgment believes will not be ultimately
recoverable by it either out of late payments by the
Mortgagor, Net Liquidation Proceeds, Insurance Proceeds,
REO Proceeds or otherwise. With respect to any Mortgage
Loan, the portion of any such advance or advances made with
respect thereto.
Monthly Payment: The scheduled monthly payment on a
Mortgage Loan for any month allocable to principal or
interest on such Mortgage Loan.
24
Mortgage: The mortgage or deed of trust creating a
first lien on a fee simple interest in real property
securing a Mortgage Note.
Mortgage File: The mortgage documents listed in
Section 2.01 pertaining to a particular Mortgage Loan and
any additional documents required to be added to such
documents pursuant to this Agreement.
Mortgage Loan Payment Record: With respect to each
Mortgage Pool, the record maintained by the Company pursuant
to Section 3.02(b).
Mortgage Loan Schedule: As of any date of
determination, the schedule of Mortgage Loans, identified
by Mortgage Pool, included in the Trust Fund. The initial
schedule of Mortgage Loans as of the Cut-off Date is
attached hereto as Exhibit C.
Mortgage Loans: As of any date of determination, each
of the mortgage loans identified on the Mortgage Loan
Schedule (as amended pursuant to Section 2.03(b)) delivered
and assigned to the Trustee pursuant to Section 2.01 or
2.03(b), and not theretofore released from the Trust Fund
by the Trustee.
Mortgage Note: With respect to any Mortgage Loan, the
note or other evidence of indebtedness (which may consist
of a Confirmatory Mortgage Note) evidencing the
indebtedness of a Mortgagor under such Mortgage Loan.
Mortgage Pool: Either of Pool 1 or Pool 2, as
applicable.
Mortgage Rate: The per annum rate of interest borne by
a Mortgage Loan as set forth in the related Mortgage Note.
Mortgaged Property: The property securing the Mortgage
Note.
Mortgagor: With respect to any Mortgage Loan, each
obligor on the related Mortgage Note.
Net Interest Shortfall: With respect to any
Distribution Date and each Mortgage Pool, the excess, if
any, of the aggregate Interest Shortfalls in respect of
Mortgage Loans in such Mortgage Pool for such Distribution
Date over any related Compensating Interest Payment for
such date.
Net Liquidation Proceeds: As to any Liquidated
Mortgage Loan, the sum of (i) any Liquidation Proceeds
25
therefor less the related Liquidation Expenses, and (ii)
any Insurance Proceeds therefor, other than any such
Insurance Proceeds applied to the restoration of the
related Mortgaged Property.
Net Mortgage Rate: With respect to any Mortgage Loan,
the related Mortgage Rate less the applicable Servicing Fee
Rate.
Non-Book-Entry Certificate: Any Certificate other than
a Book-Entry Certificate.
Non-Credit Loss: Any Fraud Loss, Special Hazard Loss
or Deficient Valuation.
Non-Discount Mortgage Loan: With respect to Pool 1,
any Mortgage Loan with a Net Mortgage Rate greater than or
equal to 7.75% per annum. With respect to Pool 2, any
Mortgage Loan with a Net Mortgage Rate greater than or
equal to 7.25% per annum.
Non-permitted Foreign Holder: As defined in Section
5.02(b).
Non-PO Percentage: As to any Discount Mortgage Loan in
Pool 1, a fraction (expressed as a percentage), the
numerator of which is the Net Mortgage Rate of such
Discount Mortgage Loan and the denominator of which is
7.75%. As to any Discount Mortgage Loan in Pool 2, a
fraction (expressed as a percentage), the numerator of
which is the Net Mortgage Rate of such Discount Mortgage
Loan and the denominator of which is 7.25%.
As to any Non-Discount Mortgage Loan, 100%.
Non-Primary Residence Loan: Any Mortgage Loan secured
by a Mortgaged Property that is (on the basis of
representations made by the Mortgagors at origination) a
second home or investor-owned property.
Nonrecoverable Advance: All or any portion of any
Monthly Advance or Monthly Advances previously made by the
Company (or the Trustee) which, in the reasonable judgment
of the Company (or, as applicable, the Trustee) will not be
ultimately recoverable from related Liquidation Proceeds,
Insurance Proceeds or otherwise. The determination by the
Company that it has made a Nonrecoverable Advance or that
any advance, if made, would constitute a Nonrecoverable
Advance, shall be evidenced by an Officer's Certificate of
the Company delivered to the Trustee and detailing the
reasons for such determination.
Non-U.S. Person: As defined in Section 4.02(c).
26
Notional Certificate: Any Class S Certificate.
Notional Component: None.
Notional Component Balance: None.
Notional Principal Balance: As to any Distribution
Date and any Class of Class S Certificates, the aggregate
Scheduled Principal Balance of the Outstanding Non-Discount
Mortgage Loans in the related Mortgage Pool as of the Due
Date in the month preceding such Distribution Date. As to
any Distribution Date and any Class S Certificate, such
Certificate's Percentage Interest of the aggregate Notional
Principal Balance of the Certificates of such Class for
such Distribution Date.
Officer's Certificate: A certificate signed by the
President, a Senior Vice President or a Vice President of
the Company and delivered to the Trustee.
Opinion of Counsel: A written opinion of counsel, who
may be counsel for the Company; provided, however, that any
Opinion of Counsel with respect to the interpretation or
application of the REMIC Provisions or the status of an
account as an Eligible Account shall be the opinion of
independent counsel satisfactory to the Trustee.
Original Subordinate Principal Balance: As set forth
in the definition of Senior Prepayment Percentage.
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 Company or the sales price of such
property or, in the case of a refinancing, on an appraisal
satisfactory to the Company.
Outstanding Mortgage Loan: With respect to any Due
Date, a Mortgage Loan which, prior to such Due Date, was
not the subject of a Principal Prepayment in full, did not
become a Liquidated Mortgage Loan and was not purchased
pursuant to Section 2.02, 2.03(a), 3.01(c) or 3.16 or
replaced pursuant to Section 2.03(b).
Outstanding Non-Discount Mortgage Loan: Any
Outstanding Mortgage Loan that is a Non-Discount Mortgage
Loan.
PAC Balance: As to any Distribution Date and any Class
of PAC Certificates and any PAC Component, the balance
designated as such for such Distribution Date and such
27
Class or Component as set forth in the Principal Balance
Schedules.
PAC Certificate: None.
PAC Component: None.
Pay-out Rate: With respect to any Class of
Certificates (other than any Class of Principal Only
Certificates) and any Distribution Date, the rate at which
interest is distributed on such Class on such Distribution
Date and which is equal to a fraction (expressed as an
annualized percentage) the numerator of which is the
Accrued Certificate Interest for such Class and
Distribution Date, and the denominator of which is the
Class Certificate Principal Balance (or, in the case of the
Notional Certificates, the Notional Principal Balance) of
such Class immediately prior to such Distribution Date.
Percentage Interest: With respect to any Certificate,
the percentage interest in the undivided beneficial
ownership interest in the Trust Fund evidenced by
Certificates of the same Class as such Certificate. With
respect to any Certificate, the Percentage Interest
evidenced thereby shall equal the Initial Certificate
Principal Balance (or, in the case of a Notional
Certificate, the initial Notional Principal Balance)
thereof divided by the aggregate Initial Certificate
Principal Balance (or, in the case of a Notional
Certificate, the aggregate initial Notional Principal
Balance) of all Certificates of the same Class.
Permitted Investments: One or more of the following;
provided, however, that no such Permitted Investment may
mature later than the Business Day preceding the
Distribution Date after such investment except as otherwise
provided in Section 3.02(e) hereof, provided, further, that
such investments qualify as "cash flow investments" as
defined in section 860G(a)(6) of the Code:
(i) obligations of, or guaranteed as to timely
receipt of principal and interest by, the United
States or any agency or instrumentality thereof when
such obligations are backed by the full faith and
credit of the United States;
(ii) repurchase agreements on obligations
specified in clause (i) provided that the unsecured
obligations of the party agreeing to repurchase such
obligations are at the time rated by each Rating
Agency in the highest long-term rating category;
28
(iii) federal funds, certificates of deposit, time
deposits and banker's acceptances, of any U.S.
depository institution or trust company incorporated
under the laws of the United States or any state
provided that the debt obligations of such depository
institution or trust company at the date of
acquisition thereof have been rated by each Rating
Agency in the highest long-term rating category;
(iv) commercial paper of any corporation
incorporated under the laws of the United States or
any state thereof which on the date of acquisition has
the highest short term rating of each Rating Agency;
and
(v) other obligations or securities that are
acceptable to each Rating Agency as a Permitted
Investment hereunder and will not, as evidenced in
writing, result in a reduction or withdrawal in the
then current rating of the Certificates.
Notwithstanding the foregoing, Permitted Investments shall
not include "stripped securities" and investments which
contractually may return less than the purchase price
therefor.
Person: Any legal person, including any individual,
corporation, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
Plan: Any Person which is an employee benefit plan
subject to ERISA or a plan subject to section 4975 of the
Code.
PO Percentage: As to any Discount Mortgage Loan in
Pool 1, a fraction (expressed as a percentage), the
numerator of which is the excess of 7.75% over the Net
Mortgage Rate of such Discount Mortgage Loan and the
denominator of which is 7.75%. As to any Discount Mortgage
Loan in Pool 2, a fraction (expressed as a percentage), the
numerator of which is the excess of 7.25% over the Net
Mortgage Rate of such Discount Mortgage Loan and the
denominator of which is 7.25%. As to any Non-Discount
Mortgage Loan, 0%.
PO Principal Distribution Amount: As to any
Distribution Date and each Certificate Group, an amount
equal to the sum of the applicable PO Percentage of:
(i) the related principal portion of each Monthly
Payment due on the related Due Date on each
Outstanding Mortgage Loan in the related Mortgage
29
Pool as of such Due Date as specified in the
amortization schedule at the time applicable
thereto (after adjustments for previous Principal
Prepayments and Debt Service Reductions in
respect of such Mortgage Pool subsequent to the
Bankruptcy Coverage Termination Date but before
any adjustment to such amortization schedule by
reason of any bankruptcy (except as aforesaid) or
similar proceeding or any moratorium or similar
waiver or grace period);
(ii) all principal prepayments in part in respect of
the related Mortgage Pool received during the
related Prepayment Period, together with the
Scheduled Principal Balance (as reduced by any
Deficient Valuation in respect of such Mortgage
Pool occurring on or prior to the related
Bankruptcy Coverage Termination Date) of each
Mortgage Loan in the related Mortgage Pool that
was the subject of a Voluntary Principal
Prepayment in full during the related Prepayment
Period;
(iii) the sum of (A) all Net Liquidation Proceeds in
respect of the related Mortgage Pool allocable to
principal received in respect of each Mortgage
Loan in the related Mortgage Pool that became a
Liquidated Mortgage Loan during the related
Prepayment Period (other than Mortgage Loans
described in clause (B)) and (B) the principal
balance of each Mortgage Loan in the related
Mortgage Pool purchased by an insurer from the
Trustee pursuant to the related Primary Insurance
Policy, in each case during the related Prepayment
Period;
(iv) the Scheduled Principal Balance (as reduced by
any Deficient Valuation in respect of such
Mortgage Pool occurring on or prior to the
related Bankruptcy Coverage Termination Date) of
each Mortgage Loan in the related Mortgage Pool
that was purchased on such Distribution Date
pursuant to Section 2.02, 2.03(a) or 3.16; and
(v) the Substitution Amount for any Mortgage Loan in
the related Mortgage Pool substituted during the
month of such Distribution Date; for purposes of
this clause (v), the definition of "Substitution
Amount" shall be modified to reduce the Scheduled
Principal Balance of the Mortgage Loan that is
substituted for by any Deficient Valuation in
respect of such Mortgage Pool occurring on or
30
prior to the related Bankruptcy Coverage
Termination Date.
For purposes of clause (ii) above, a Voluntary Principal
Prepayment in full with respect to a Mortgage Loan serviced
by a Primary Servicer shall be deemed to have been received
when the Company, as servicer, receives notice thereof.
Pool 1: The aggregate of the Mortgage Loans identified
in the Mortgage Loan Schedule as Pool 1 Mortgage Loans.
Pool 1 Certificate: Any Pool 1 Senior Certificate,
Pool 1 Junior Certificate or Class 1-S Certificate.
Pool 1 Junior Certificate: Any Class 1-M, Class 1-B1,
Class 1-B2, Class 1-B3, Class 1-B4 or Class 1-B5
Certificate.
Pool 1 Mortgage Loan: A Mortgage Loan identified as a
Pool 1 Mortgage Loan in the Mortgage Loan Schedule.
Pool 1 Senior Certificate: Any Class 1-A1, Class 1-A2,
Class 1-A3, Class 1-A4, Class 1-A5, Class 1-A6, Class 1-A7,
Class 1-A8, Class 1-A9, Class R or Class 1-PO Certificate.
Pool 2: The aggregate of the Mortgage Loans identified
in the Mortgage Loan Schedule as Pool 2 Mortgage Loans.
Pool 2 Certificate: Any Pool 2 Senior Certificate,
Pool 2 Junior Certificate or Class 2-S Certificate.
Pool 2 Junior Certificate: Any Class 2-M, Class 2-B1,
Class 2-B2, Class 2-B3, Class 2-B4 or Class 2-B5
Certificate.
Pool 2 Mortgage Loan: A Mortgage Loan identified as a
Pool 2 Mortgage Loan in the Mortgage Loan Schedule.
Pool 2 Senior Certificate: Any Class 2-A1, Class 2-A2,
Class 2-A3, Class 2-A4, Class 2-A5 or Class 2-PO
Certificate.
Pool Scheduled Principal Balance: With respect to any
Distribution Date and each Mortgage Pool, the aggregate
Scheduled Principal Balance of all the Mortgage Loans in
such Mortgage Pool that were Outstanding Mortgage Loans on
the Due Date in the month next preceding the month of such
Distribution Date (or, in the case of the first
Distribution Date, the Cut-off Date; or, if so specified,
such other date).
31
Prepayment Assumption: The assumed fixed schedule of
prepayments on a pool of new mortgage loans with such
schedule given as a monthly sequence of prepayment rates,
expressed as annualized percent values. These values start
at 0.2% per year in the first month, increase by 0.2% per
year in each succeeding month until month 30, ending at
6.0% per year. At such time, the rate remains constant at
6.0% per year for the balance of the remaining term.
Multiples of the Prepayment Assumption are calculated from
this prepayment rate series.
Prepayment Assumption Multiple: As to the Pool 1
Certificates, 225% of the Prepayment Assumption; as to the
Pool 2 Certificates, 215% of the Prepayment Assumption.
Prepayment Distribution Trigger: As of any
Distribution Date and as to each Class of Class B
Certificates, the related Prepayment Distribution Trigger
is satisfied if (x) the fraction, expressed as a
percentage, the numerator of which is the aggregate Class
Certificate Principal Balance of such Class and each Class
of the related Certificate Group subordinate thereto, if
any, on such Distribution Date, and the denominator of
which is the Pool Scheduled Principal Balance for the
related Mortgage Pool for such Distribution Date, equals or
exceeds (y) such percentage calculated as of the Closing
Date.
Prepayment Interest Excess: As to any Voluntary
Principal Prepayment in full received from the first day
through the fifteenth day of any calendar month (other than
the calendar month in which the Cut-off Date occurs), all
amounts paid in respect of interest on such Principal
Prepayment. For purposes of determining the amount of
Prepayment Interest Excess for any month, a Voluntary
Principal Prepayment in full with respect to a Mortgage
Loan serviced by a Primary Servicer shall be deemed to have
been received when the Company, as servicer, receives
notice thereof. All Prepayment Interest Excess shall be
retained by the Company, as servicer, as additional
servicing compensation.
Prepayment Period: With respect to any Distribution
Date and any Voluntary Principal Prepayment in part or
other Principal Prepayment other than a Voluntary Principal
Prepayment in full, the calendar month preceding the month
of such Distribution Date; with respect to any Distribution
Date and any Voluntary Principal Prepayment in full, the
period beginning on the sixteenth day of the calendar month
preceding the month of such Distribution Date (or, in the
case of the first Distribution Date, beginning on the
Cutoff Date) and ending on the fifteenth day of the month
in which such Distribution Date occurs.
32
Primary Insurance Policy: The certificate of private
mortgage insurance relating to a particular Mortgage Loan,
or an electronic screen print setting forth the information
contained in such certificate of private mortgage
insurance, including, without limitation, information
relating to the name of the mortgage insurance carrier, the
certificate number, the loan amount, the property address,
the effective date of coverage, the amount of coverage and
the expiration date of the policy. Each such policy covers
defaults by the Mortgagor, which coverage shall equal the
portion of the unpaid principal balance of the related
Mortgage Loan that exceeds 75% (or such lesser coverage
required or permitted by FNMA or FHLMC) of the Original
Value of the underlying Mortgaged Property.
Primary Servicer: Any servicer with which the Company
has entered into a servicing agreement, as described in
Section 3.01(f).
Principal Balance Schedules: Any principal balance
schedules attached hereto, if applicable, as Exhibit B,
setting forth the PAC Balances of any PAC Certificates and
PAC Components, the TAC Balances of any TAC Certificates
and TAC Components, and the Scheduled Balances of any
Scheduled Certificates and Scheduled Components.
Principal Only Certificate: Any Class PO Certificate.
Principal Only Component: None.
Principal Prepayment: Any payment or other recovery of
principal on a Mortgage Loan (including, for this purpose,
any refinancing permitted by Section 3.01, any Purchase
Price of a Modified Mortgage Loan purchased pursuant to
Section 3.01(c) and any REO Proceeds treated as such
pursuant to Section 3.08(b)) which is received in advance
of its scheduled Due Date and is not accompanied by an
amount of interest representing scheduled interest for any
month subsequent to the month of prepayment.
Private Placement Memorandum: The private placement
memorandum relating to the Restricted Junior Certificates,
dated September 19, 1996.
Pro Rata Allocation Conditions: As set forth in the
definition of Senior Prepayment Percentage.
Prohibited Transaction Exemption: U.S. Department of
Labor Prohibited Transaction Exemption 90-36, 55 Fed. Reg.
25903, June 25, 1990.
33
Property Protection Expenses: With respect to any
Mortgage Loan, expenses paid or incurred by or for the
account of the Company in accordance with the related
Mortgage for (a) real estate property taxes and property
repair, replacement, protection and preservation expenses
and (b) similar expenses reasonably paid or incurred to
preserve or protect the value of such Mortgage to the
extent the Company is not reimbursed therefor pursuant to
the Primary Insurance Policy, if any, or any other
insurance policy with respect thereto.
Purchase Price: With respect to any Mortgage Loan
required or permitted to be purchased hereunder from the
Trust Fund, an amount equal to 100% of the unpaid principal
balance thereof plus interest thereon at the applicable
Mortgage Rate from the date to which interest was last paid
to the first day of the month in which such purchase price
is to be distributed; provided, however, that if the
Company is the servicer hereunder, such purchase price
shall be net of unreimbursed Monthly Advances with respect
to such Mortgage Loan, and the interest component of the
Purchase Price may be computed on the basis of the Net
Mortgage Rate for such Mortgage Loan; and provided,
further, that if such Mortgage Loan is a Modified Mortgage
Loan, the interest component of the Purchase Price shall be
computed (i) on the basis of the applicable Mortgage Rate
before giving effect to the related modification and (ii)
from the date to which interest was last paid to the date
on which such Modified Mortgage Loan is assigned to the
Company pursuant to Section 3.01(c).
QIB: A "qualified institutional buyer" as defined in
Rule 144A under the Securities Act of 1933, as amended.
Rating Agency: Any statistical credit rating agency,
or its successor, that rated any of the Certificates at the
request of the Company at the time of the initial issuance
of the Certificates. If such agency or a successor is no
longer in existence, "Rating Agency" shall be such
statistical credit rating agency, or other comparable
Person, designated by the Company, notice of which
designation shall be given to the Trustee. References
herein to the two highest long-term rating categories of a
Rating Agency shall mean such ratings without any
modifiers. As of the date of the initial issuance of the
Certificates, the Rating Agencies are Fitch and S&P; except
that for purposes of the Class 1-M, Class 1-B1, Class 1-B2,
Class 1- B3, Class 1-B4, Class 2-M, Class 2-B1, Class 2-B2,
Class 2- B3 and Class 2-B4 Certificates, Fitch shall be the
sole Rating Agency.
34
Realized Loss: Any (i) Deficient Valuation or (ii) as
to any Liquidated Mortgage Loan, (x) the unpaid principal
balance of such Liquidated Mortgage Loan plus accrued and
unpaid interest thereon at the Net Mortgage Rate through
the last day of the month of such liquidation less (y) the
related Net Liquidation Proceeds.
Record Date: The last Business Day of the month
immediately preceding the month of the related Distribution
Date.
Reference Banks: As defined in Section 5.08.
Relief Act: The Soldiers' and Sailors' Civil Relief
Act of 1940, as amended.
Relief Act Mortgage Loan: Any Mortgage Loan as to
which the Monthly Payment thereof has been reduced due to
the application of the Relief Act.
REMIC: A "real estate mortgage investment conduit"
within the meaning of section 860D of the Code.
REMIC Provisions: Provisions of the federal income tax
law relating to real estate mortgage investment conduits,
which appear at sections 860A through 860G of Part IV of
Subchapter M of Chapter 1 of the Code, and related
provisions, and U.S. Department of the Treasury temporary
or final regulations promulgated thereunder, as the
foregoing may be in effect from time to time, as well as
provisions of applicable state laws.
REO Mortgage Loan: Any Mortgage Loan which is not a
Liquidated Mortgage Loan and as to which the related
Mortgaged Property is held as part of the Trust Fund.
REO Proceeds: Proceeds, net of any related expenses of
the Company, received in respect of any REO Mortgage Loan
(including, without limitation, proceeds from the rental of
the related Mortgaged Property).
Reserve Fund: None.
Reserve Interest Rate: As defined in Section 5.08.
Residual Certificate: Any Class R Certificate.
Responsible Officer: When used with respect to the
Trustee, any officer or assistant officer assigned to and
working in the Corporate Trust Department of the Trustee
and, also, with respect to a particular matter, any other
officer to whom such matter is referred because of such
35
officer's knowledge of and familiarity with the particular
subject.
Restricted Certificate: Any Restricted Junior
Certificate, Class PO Certificate or Class S Certificate.
Restricted Junior Certificate: Any Class 1-B3, Class
1-B4, Class 1-B5, Class 2-B3, Class 2-B4 or Class 2-B5
Certificate.
S&P: Standard & Poor's Rating Services, a division of
The McGraw-Hill Companies, Inc., and its successors.
S&P Formula Amount: As to each Anniversary
Determination Date and each Mortgage Pool, the greater of
(i) $100,000 and (ii) the product of (x) 0.06% and (y) the
Scheduled Principal Balance of each Mortgage Loan remaining
in such Mortgage Pool whose original principal balance was
75% or greater of the Original Value thereof.
SAIF: The Savings Association Insurance Fund of the
FDIC, or its successor in interest.
Scheduled Balance: As to any Distribution Date and any
Class of Scheduled Certificates and any Scheduled
Component, the balance designated as such for such
Distribution Date and such Class or Component as set forth
in the Principal Balance Schedules.
Scheduled Certificates: None.
Scheduled Component: None.
Scheduled Principal Balance: As to any Mortgage Loan
and Distribution Date, the principal balance of such
Mortgage Loan as of the Due Date in the month next
preceding the month of such Distribution Date (or, if so
specified, such other date) as specified in the
amortization schedule at the time relating to such Mortgage
Loan (before any adjustment to such amortization schedule
by reason of any bankruptcy or similar proceeding or any
moratorium or similar waiver or grace period) after giving
effect to any previous Principal Prepayments, Deficient
Valuations incurred subsequent to the related Bankruptcy
Coverage Termination Date, adjustments due to the
application of the Relief Act and the payment of principal
due on such Due Date, irrespective of any delinquency in
payment by the related Mortgagor. As to any Mortgage Loan
and the Cut-off Date, the "unpaid balance" thereof
specified in the initial Mortgage Loan Schedule.
36
Senior Certificate: Any Pool 1 Senior Certificate or
Pool 2 Senior Certificate.
Senior Certificate Principal Balance: As of any
Distribution Date and as to each Certificate Group, an
amount equal to the sum of the Certificate Principal
Balances of the related Senior Certificates (other than the
related Class PO Certificates).
Senior Optimal Principal Amount: As to any
Distribution Date and each Certificate Group, an amount
equal to the sum of the related Group I Senior Optimal
Principal Amount for such date and the related Group II
Senior Optimal Principal Amount for such date.
Senior Percentage: As to any Distribution Date and
each Certificate Group, the lesser of (i) 100% and (ii) the
percentage (carried to six places rounded up) obtained by
dividing the Senior Certificate Principal Balance for such
Certificate Group immediately prior to such Distribution
Date by an amount equal to the sum of the Certificate
Principal Balances of all the Certificates in such
Certificate Group other than the related Class PO
Certificates immediately prior to such Distribution Date.
Senior Prepayment Percentage: As to each Certificate
Group, for any Distribution Date occurring prior to the
fifth anniversary of the first Distribution Date, 100%. As
to each Certificate Group, for any Distribution Date
occurring on or after the fifth anniversary of the first
Distribution Date, an amount as follows:
(i) for any Distribution Date subsequent to September
2001 to and including the Distribution Date in
September 2002, the related Senior Percentage for
such Distribution Date plus 70% of the related
Junior Percentage for such Distribution Date;
(ii) for any Distribution Date subsequent to September
2002 to and including the Distribution Date in
September 2003, the related Senior Percentage for
such Distribution Date plus 60% of the related
Junior Percentage for such Distribution Date;
(iii) for any Distribution Date subsequent to September
2003 to and including the Distribution Date in
September 2004, the related Senior Percentage for
such Distribution Date plus 40% of the related
Junior Percentage for such Distribution Date;
(iv) for any Distribution Date subsequent to September
2004 to and including the Distribution Date in
37
September 2005, the related Senior Percentage for
such Distribution Date plus 20% of the related
Junior Percentage for such Distribution Date; and
(v) for any Distribution Date thereafter, the related
Senior Percentage for such Distribution Date.
Notwithstanding the foregoing, (i) if on any Distribution
Date the related Senior Percentage exceeds the related
Senior Percentage as of the Closing Date, the Senior
Prepayment Percentage for such Certificate Group for such
Distribution Date will equal 100% and (ii) after the Group
I Senior Certificate Principal Balance for such Certificate
Group has been reduced to zero, the related Senior
Prepayment Percentage will equal (a) if such Distribution
Date occurs prior to October 25, 1999, the related Senior
Percentage for such Distribution Date plus 50% of the
related Junior Percentage for such Distribution Date, and
(b) if such Distribution Date occurs on or after October
25, 1999, the related Senior Percentage for such
Distribution Date, provided in each case that all of the
following conditions (such conditions, the "Pro Rata
Allocation Conditions") are satisfied: (x) the related
Junior Percentage as of such Distribution Date is at least
double the related Junior Percentage as of the Closing
Date; (y) the aggregate Scheduled Principal Balance of
Mortgage Loans in the related Mortgage Pool delinquent 60
days or more (including for this purpose any Mortgage Loans
in foreclosure and any REO Mortgage Loans) averaged over
the last six months, as a percentage of the aggregate
Scheduled Principal Balance of all Mortgage Loans in the
related Mortgage Pool averaged over the last six months,
does not exceed 2%; and (z) cumulative Realized Losses in
respect of the related Mortgage Pool do not exceed 30% of
the Original Subordinate Principal Balance. The Pro Rata
Allocation Conditions shall not be applicable on any
Distribution Date on or after October 25, 2005.
In addition, notwithstanding the foregoing, no reduction of
the Senior Prepayment Percentage for a Certificate Group
below the level in effect for the most recent prior period
as set forth in clauses (i) through (iv) above shall be
effective on any Distribution Date unless at least one of
the following two tests is satisfied:
Test I: If, as of the last day of the month
preceding such Distribution Date, (i) the aggregate
Scheduled Principal Balance of Mortgage Loans in the
related Mortgage Pool delinquent 60 days or more
(including for this purpose any Mortgage Loans in
foreclosure and REO Mortgage Loans) as a percentage of
the aggregate Class Certificate Principal Balance of
38
the related Junior Certificates as of such date, does
not exceed 50%, and (ii) cumulative Realized Losses
with respect to the Mortgage Loans in the related
Mortgage Pool do not exceed (a) 30% of the aggregate
Class Certificate Principal Balance of the related
Junior Certificates as of the Closing Date (the
"Original Subordinate Principal Balance" for such
Certificate Group) if such Distribution Date occurs
between and including October 2001 and September 2002,
(b) 35% of the Original Subordinate Principal Balance
for such Certificate Group if such Distribution Date
occurs between and including October 2002 and
September 2003, (c) 40% of the Original Subordinate
Principal Balance for such Certificate Group if such
Distribution Date occurs between and including October
2003 and September 2004, (d) 45% of the Original
Subordinate Principal Balance for such Certificate
Group if such Distribution Date occurs between and
including October 2004 and September 2005 and (e) 50%
of the Original Subordinate Principal Balance for such
Certificate Group if such Distribution Date occurs
during or after October 2005; or
Test II: If, as of the last day of the month
preceding such Distribution Date, (i) the aggregate
Scheduled Principal Balance of Mortgage Loans in the
related Mortgage Pool delinquent 60 days or more
(including for this purpose any Mortgage Loans in
foreclosure and REO Mortgage Loans) averaged over the
last three months, as a percentage of the aggregate
Scheduled Principal Balance of Mortgage Loans in the
related Mortgage Pool averaged over the last three
months, does not exceed 4%, and (ii) cumulative
Realized Losses with respect to the Mortgage Loans in
the related Mortgage Pool do not exceed (a) 10% of the
Original Subordinate Principal Balance for such
Certificate Group if such Distribution Date occurs
between and including October 2001 and September 2002,
(b) 15% of the Original Subordinate Principal Balance
for such Certificate Group if such Distribution Date
occurs between and including October 2002 and
September 2003, (c) 20% of the Original Subordinate
Principal Balance for such Certificate Group if such
Distribution Date occurs between and including October
2003 and September 2004, (d) 25% of the Original
Subordinate Principal Balance for such Certificate
Group if such Distribution Date occurs between and
including October 2004 and September 2005, and (e) 30%
of the Original Subordinate Principal Balance for such
Certificate Group if such Distribution Date occurs
during or after October 2005.
39
Servicer's Certificate: A certificate, completed by
and executed on behalf of the Company in accordance with
Section 4.06, substantially in the form of Exhibit D hereto
or in such other form as the Company and the Trustee shall
agree.
Servicing Fee: As to any Mortgage Loan and
Distribution Date, an amount equal to the product of (i)
the Scheduled Principal Balance of such Mortgage Loan as of
the Due Date in the preceding calendar month and (ii) the
Servicing Fee Rate for such Mortgage Loan.
Servicing Fee Rate: As to any Mortgage Loan, the per
annum rate identified as such for such Mortgage Loan and set
forth in the Mortgage Loan Schedule.
Servicing Officer: Any officer of the Company involved
in, or responsible for, the administration and servicing of
the Mortgage Loans whose name appears on a list of
servicing officers attached to an Officer's Certificate
furnished to the Trustee by the Company, as such list may
from time to time be amended.
Single Certificate: A Certificate with an Initial
Certificate Principal Balance, or initial Notional
Principal Balance, of $1,000 or, in the case of a Class of
Certificates issued with an initial Class Certificate
Principal Balance or initial Notional Principal Balance of
less than $1,000, such lesser amount.
Special Hazard Loss: (i) A Realized Loss suffered by a
Mortgaged Property on account of direct physical loss,
exclusive of (a) any loss covered by a hazard policy or a
flood insurance policy required to be maintained in respect
of such Mortgaged Property under Section 3.06 and (b) any
loss caused by or resulting from:
(1) normal wear and tear;
(2) conversion or other dishonest act on the part of
the Trustee, the Company or any of their agents or
employees; or
(3) errors in design, faulty workmanship or faulty
materials, unless the collapse of the property or
a part thereof ensues;
or (ii) any Realized Loss suffered by the Trust Fund
arising from or related to the presence or suspected
presence of hazardous wastes or hazardous substances on a
Mortgaged Property unless such loss to a Mortgaged Property
is covered by a hazard policy or a flood insurance policy
40
required to be maintained in respect of such Mortgaged Property under
Section 3.06.
Special Hazard Loss Amount: As of any Distribution
Date, an amount equal to $3,256,471, in the case of Pool 1,
and $1,988,530, in the case of Pool 2, minus, in each case,
the sum of (i) the aggregate amount of Special Hazard
Losses in respect of such Mortgage Pool that would have
been allocated to the related Junior Certificates in
accordance with Section 4.03 in the absence of the Loss
Allocation Limitation and (ii) the related Adjustment
Amount (as defined below) as most recently calculated. On
each anniversary of the Cut-off Date, the "Adjustment
Amount" for each Mortgage Pool shall be equal to the
amount, if any, by which the amount calculated in
accordance with the preceding sentence for such Mortgage
Pool (without giving effect to the deduction of the related
Adjustment Amount for such anniversary) exceeds the lesser
of (x) the greater of (A) the product of the Special Hazard
Percentage for such Mortgage Pool for such anniversary
multiplied by the outstanding principal balance of all the
Mortgage Loans in such Mortgage Pool on the Distribution
Date immediately preceding such anniversary and (B) twice
the outstanding principal balance of the Mortgage Loan in
such Mortgage Pool that has the largest outstanding
principal balance on the Distribution Date immediately
preceding such anniversary, and (y) an amount calculated by
the Company and approved by each Rating Agency, which
amount shall not be less than $500,000.
Special Hazard Percentage: With respect to each
Mortgage Pool and as of each anniversary of the Cut-off
Date, the greater of (i) 1.00% and (ii) the largest
percentage obtained by dividing (x) the aggregate
outstanding principal balance (as of the immediately
preceding Distribution Date) of the Mortgage Loans in such
Mortgage Pool secured by Mortgaged Properties located in a
single, five-digit zip code area in the State of California
by (y) the outstanding principal balance of all the
Mortgage Loans in such Mortgage Pool as of the immediately
preceding Distribution Date.
Special Hazard Termination Date: With respect to each
Mortgage Pool, the Distribution Date upon which the Special
Hazard Loss Amount for such Mortgage Pool has been reduced
to zero or a negative number (or the related Cross-Over
Date, if earlier).
Startup Day: As defined in Section 2.05(b).
Strip Rate: With respect to the Class 1-S Certificates
and any Distribution Date, a variable rate per annum equal
41
to the excess of (x) the weighted average (by Scheduled
Principal Balance) carried to six decimal places, rounded
down, of the Net Mortgage Rates of the Outstanding Non-
Discount Mortgage Loans in Pool 1 as of the Due Date in the
preceding calendar month (or the Cut-off Date, in the case
of the first Distribution Date) over (y) 7.75%, and with
respect to the Class 2-S Certificates and any Distribution
Date, a variable rate per annum equal to the excess of (x)
the weighted average (by Scheduled Principal Balance)
carried to six decimal places, rounded down, of the Net
Mortgage Rates of the Outstanding Non-Discount Mortgage
Loans in Pool 2 as of the Due Date in the preceding
calendar month (or the Cut-off Date, in the case of the
first Distribution Date) over (y) 7.25%; provided, however,
that in each case such calculation shall not include any
Mortgage Loan that was the subject of a Voluntary Principal
Prepayment in full received by the Company (or of which the
Company received notice, in the case of a Mortgage Loan
serviced by a Primary Servicer) on or after the first day
but on or before the 15th day of such preceding calendar
month.
Subordinate Certificates: As to any date of
determination and each Certificate Group, first, the
related Class B5 Certificates until the Class Certificate
Principal Balance thereof has been reduced to zero; second,
the related Class B4 Certificates until the Class
Certificate Principal Balance thereof has been reduced to
zero; third, the related Class B3 Certificates until the
Class Certificate Principal Balance thereof has been
reduced to zero; fourth, the related Class B2 Certificates
until the Class Certificate Principal Balance thereof has
been reduced to zero; fifth, the related Class B1
Certificates until the Class Certificate Principal Balance
thereof has been reduced to zero; and sixth, the related
Class M Certificates until the Class Certificate Principal
Balance thereof has been reduced to zero.
Subordinate Certificate Writedown Amount: As to any
Distribution Date, first, in the case of the Pool 1
Certificates, any amount distributed to the Class 1-PO
Certificates on such Distribution Date pursuant to Section
4.01(a)(iv), and in the case of the Pool 2 Certificates,
any amount distributed to the Class 2-PO Certificates on
such Distribution Date pursuant to Section 4.01(b)(iv), and
second, after giving effect to the application of the
applicable portion of clause first above, the amount by
which (i) the sum of the Class Certificate Principal
Balances of all the Certificates in the related Certificate
Group (after giving effect to the distribution of principal
and the application of Realized Losses in reduction of the
Certificate Principal Balances of the related Certificates
42
on such Distribution Date) exceeds (ii) the Pool Scheduled
Principal Balance of the related Mortgage Pool on the first
day of the month of such Distribution Date less any
Deficient Valuations occurring in respect of the Mortgage
Loans in such Mortgage Pool on or prior to the related
Bankruptcy Coverage Termination Date.
Substitution Amount: With respect to any Mortgage Loan
substituted pursuant to Section 2.03(b), the excess of (x)
the Scheduled Principal Balance of the Mortgage Loan that
is substituted for, over (y) the Scheduled Principal
Balance of the related substitute Mortgage Loan, each
balance being determined as of the date of substitution.
TAC Balance: As to any Distribution Date and any Class
of TAC Certificates and any TAC Component, the balance
designated as such for such Distribution Date and such
Class or Component as set forth in the Principal Balance
Schedules.
TAC Certificates: None.
TAC Component: None.
Trigger Event: Any one or more of the following: (i)
if the Company is not a wholly-owned direct or indirect
subsidiary of General Electric Company or if General
Electric Capital Corporation shall not own (directly or
indirectly) at least two-thirds of the voting shares of the
capital stock of the Company, (ii) if the long-term senior
unsecured rating of General Electric Capital Corporation is
downgraded or withdrawn by Fitch or S&P below their two
highest rating categories, (iii) if General Electric
Capital Corporation is no longer obligated pursuant to the
terms of the support agreement, dated as of October 1,
1990, between General Electric Capital Corporation and the
Company, to maintain the Company's net worth or liquidity
(as such terms are defined therein) at the levels specified
therein, or if such support agreement, including any
amendment thereto, has been breached, terminated or
otherwise held to be unenforceable and (iv) if such support
agreement, including any amendment thereto, is amended or
modified.
Trust Fund: The corpus of the trust created by this
Agreement evidenced by the Certificates and consisting of:
(i) the Mortgage Loans;
(ii) all payments on or collections in respect of
such Mortgage Loans, except as otherwise described in
the first paragraph of Section 2.01;
43
(iii) the obligation of the Company to deposit in
the Certificate Account the amounts required by
Sections 3.02(d), 3.02(e) and 4.04(a), and the
obligation of the Trustee to deposit in the
Certificate Account any amount required pursuant to
Section 4.04(b);
(iv) the obligation of the Company to purchase or
replace any Defective Mortgage Loan pursuant to Section
2.02 or 2.03;
(v) the obligation of the Company to purchase any
Modified Mortgage Loan pursuant to Section 3.01(c);
(vi) all property acquired by foreclosure or deed
in lieu of foreclosure with respect to any REO Mortgage
Loan;
(vii) the proceeds of the Primary Insurance
Policies, if any, and the hazard insurance policies
required by Section 3.06, in each case, in respect of
the Mortgage Loans;
(viii) the Certificate Account established pursuant
to Section 3.02(d);
(ix) the Eligible Account or Accounts, if any,
established pursuant to Section 3.02(e); and
(x) any collateral funds established to secure
the obligations of the Holder of the Class 1-B4 and
Class 1-B5 Certificates, respectively, or of the Class
2-B4 and Class 2-B5 Certificates, respectively, under
any agreements entered into between either such Holder
and the Company pursuant to Section 3.08(e).
Trustee: The institution executing this Agreement as
Trustee, or its successor in interest, or if any successor
trustee is appointed as herein provided, then such
successor trustee so appointed.
Uninsured Cause: Any cause of damage to property
subject to a Mortgage such that the complete restoration of
the property is not fully reimbursable by the hazard
insurance policies required to be maintained pursuant to
Section 3.06.
Unpaid Class Interest Shortfall: As to any
Distribution Date and any Class of Certificates (other than
any Class of Principal Only Certificates) or any Component
(other than any Principal Only Component), the amount, if
any, by which the aggregate of the Class Interest
44
Shortfalls for such Class or Component for prior Distribution Dates is
in excess of the aggregate amounts distributed on prior
Distribution Dates to Holders of such Class of Certificates
or in respect of such Component (or added to the Class
Certificate Principal Balance of any Class of Accrual
Certificates, or to the Component Principal Balance of any
Accrual Component) pursuant to (A) with respect to the Pool
1 Certificates, Section 4.01(a)(ii), in the case of the
Pool 1 Senior Certificates (other than any Class of
Principal Only Certificates), and any Component thereof
(other than any Principal Only Component), and the Class
1-S Certificates, Section 4.01(a)(vi), in the case of the
Class 1-M Certificates, Section 4.01(a)(ix), in the case of
the Class 1-B1 Certificates, Section 4.01(a)(xii), in the
case of the Class 1-B2 Certificates, Section 4.01(a)(xv),
in the case of the Class 1-B3 Certificates, Section
4.01(a)(xviii), in the case of the Class 1-B4 Certificates,
Section 4.01(a)(xxi), in the case of the Class 1-B5
Certificates, (B) with respect to the Pool 2 Certificates,
Section 4.01(b)(ii), in the case of the Pool 2 Senior
Certificates (other than any Class of Principal Only
Certificates) and any Component thereof (other than any
Principal Only Component), Section 4.01(b)(vi), in the case
of the Class 2- M Certificates, Section 4.01(b)(ix), in the
case of the Class 2-B1 Certificates, Section 4.01(b)(xii),
in the case of the Class 2-B2 Certificates, Section
4.01(b)(xv), in the case of the Class 2-B3 Certificates,
Section 4.01(b)(xviii), in the case of the Class 2-B4
Certificates, and Section 4.01(b)(xxi), in the case of the
Class 2-B5 Certificates.
Voluntary Principal Prepayment: With respect to any
Distribution Date, any prepayment of principal received from
the related Mortgagor on a Mortgage Loan (including the
Purchase Price of any Modified Mortgage Loan purchased
pursuant to Section 3.01(c)).
Voting Rights: The portion of the voting rights of all
the Certificates that is allocated to any Certificate for
purposes of the voting provisions of Section 10.01. At all
times during the term of this Agreement, 98% of all Voting
Rights shall be allocated to the Certificates other than
the S Certificates and 2% of all Voting Rights shall be
allocated to the Class S Certificates. Voting Rights
allocated to the Class S Certificates shall be allocated
between such Classes (and among the Certificates within
each such Class) in proportion to their Notional Principal
Balances. Voting Rights allocated to the other Classes of
Certificates shall be allocated among such Classes (and
among the Certificates within each such Class) in
proportion to their Class Certificate Principal Balances
(or Certificate Principal Balances), as the case may be.
45
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Conveyance of Mortgage Loans. The
Company, concurrently with the execution and delivery of this
Agreement, does hereby transfer, assign, set-over and otherwise
convey to the Trustee, without recourse (except as provided
herein) all the right, title and interest of the Company in and
to the Mortgage Loans, including all interest and principal
received by the Company on or with respect to the Mortgage Loans
(other than payments of principal and interest due and payable on
the Mortgage Loans on or before, and all Principal Prepayments
received before, the Cut-off Date).
In connection with such transfer and assignment, the
Company does hereby deliver to the Trustee the following
documents or instruments with respect to each Mortgage Loan
(other than any Designated Loan) so transferred and assigned:
(i) The Mortgage Note, endorsed without recourse in
blank by the Company, including all intervening
endorsements showing a complete chain of endorsement from
the originator to the Company; provided, however, that if
such Mortgage Note is a Confirmatory Mortgage Note, such
Confirmatory Mortgage Note may be payable directly to the
Company or may show a complete chain of endorsement from
the named payee to the Company;
(ii) Any assumption and modification agreement; and
(iii) An assignment in recordable form (which may be
included in a blanket assignment or assignments) of the
Mortgage to the Trustee.
With respect to each Designated Loan, the Company does hereby
deliver to the Trustee the Designated Loan Closing Documents.
In instances where a completed assignment of the
Mortgage in recordable form cannot be delivered by the Company to
the Trustee prior to or concurrently with the execution and
delivery of this Agreement, due to a delay in connection with
recording of the Mortgage, the Company may, in lieu of delivering
the completed assignment in recordable form, deliver to the
Trustee the assignment in such form, otherwise complete except
for recording information.
With respect to each Designated Loan, within 45 days
of the Closing Date the Company shall deliver to the Trustee
either (a) the documents referred to in clauses (i) and (ii) of
the second preceding paragraph, provided that if the Company
46
cannot locate such documents in the form initially executed by the
Mortgagor and the obligor under any assumption and modification
agreement, then it shall use reasonable efforts to obtain, and
may deliver, new documents executed by such parties evidencing
their obligations under the initial documents or (b) an Opinion
of Counsel satisfactory to the Trustee from counsel admitted to
practice in the jurisdiction in which the related Mortgaged
Property is located to the effect that the absence of the
original Mortgage Note or assumption and modification agreement,
as the case may be, will not preclude the Company as servicer
from initiating or prosecuting to completion any foreclosure
proceeding with respect to such Mortgaged Property. If such
documents are not so delivered within 45 days of the Closing
Date, the Company will use its best reasonable efforts (and the
Trustee will have no obligation to inquire as to such efforts) to
substitute another Mortgage Loan for such Designated Loan on the
next succeeding Distribution Date pursuant to Section 2.03(b). If
the Company is unable to effect such substitution, it shall
repurchase such Designated Loan on such Distribution Date
pursuant to Section 2.03(a).
In connection with each Mortgage Loan transferred and
assigned to the Trustee, the Company shall deliver to the Trustee
the following documents or instruments as promptly as
practicable, but in any event within 30 days, after receipt by
the Company of all such documents and instruments for all of the
outstanding Mortgage Loans:
(i) the Mortgage with evidence of recording indicated
thereon;
(ii) a copy of the title insurance policy; and
(iii) with respect to any Mortgage that has been
assigned to the Company, the related recorded intervening
assignment or assignments of Mortgage, showing a complete
chain of assignment from the originator to the Company.
Pending such delivery, the Company shall retain in its files (a)
copies of the documents described in clauses (i) and (iii) of the
preceding sentence, without evidence of recording thereon, and
(b) title insurance binders with respect to the Mortgage Loans.
The Company shall also retain in its files evidence of any
primary mortgage insurance relating to the Mortgage Loans during
the period when the related insurance is in force. Pending
delivery of the documents referred to in the second preceding
sentence, such evidence of primary mortgage insurance shall
include a copy of the relevant Primary Insurance Policy. (The
copies of the Mortgage, intervening assignments of Mortgage, if
any, title insurance binder and the Primary Insurance Policy, if
any, described in the second and third preceding sentences are
collectively referred to herein as the "Document File" with
47
respect to each Mortgage Loan.) The Company shall advise the
Trustee in writing if such delivery to the Trustee shall not have
occurred on or before the first anniversary of the Closing Date.
The Company shall promptly furnish to the Trustee the documents
included in the Document Files (other than any such documents
previously delivered to the Trustee as originals or copies)
either (a) upon the written request of the Trustee or (b) when
the Company or the Trustee obtains actual notice or knowledge of
a Trigger Event. The Trustee shall have no obligation to request
delivery of the Document Files unless a Responsible Officer of
the Trustee has actual notice or knowledge of the occurrence of a
Trigger Event.
In the case of Mortgage Loans which have been prepaid
in full after the Cut-off Date and prior to the date of execution
and delivery of this Agreement, the Company, in lieu of
delivering the above documents to the Trustee, herewith delivers
to the Trustee a certification of a Servicing Officer of the
nature set forth in Section 3.09.
The Company shall not be required to record the
assignments of the Mortgages to the Trustee unless the Company or
the Trustee obtains actual notice or knowledge of the occurrence
of any Trigger Event; provided, however, that such recording
shall not be required if the Company delivers to the Trustees a
letter from each Rating Agency to the effect that the failure to
take such action will not cause such Rating Agency to reduce or
withdraw its then current ratings of the Certificates. The party
obtaining actual notice or knowledge of any of such events shall
give the other party prompt written notice thereof. For purposes
of the foregoing (as well as for purposes of determining whether
the Company shall be required to deliver the Document Files to
the Trustee following the occurrence of a Trigger Event), the
Company shall be deemed to have knowledge of any such downgrading
referred to in the definition of Trigger Event if, in the
exercise of reasonable diligence, the Company has or should have
had knowledge thereof. As promptly as practicable subsequent to
the Company's delivery or receipt of such written notice, as the
case may be, the Company shall insert the recording information
in the assignments of the Mortgages to the Trustee and shall
cause the same to be recorded, at the Company's expense, in the
appropriate public office for real property records, except that
the Company need not cause to be so completed and recorded any
assignment which relates to a Mortgage Loan secured by property
in a jurisdiction under the laws of which, on the basis of an
Opinion of Counsel reasonably satisfactory to the Trustee and
satisfactory to each Rating Agency (as evidenced in writing),
recordation of such assignment is not necessary to protect the
Trustee against discharge of such Mortgage Loan by the Company or
any valid assertion that any Person other than the Trustee has
title to or any rights in such Mortgage Loan. In the event that
the Company fails or refuses to record the assignment of
48
Mortgages in the circumstances provided above, the Trustee shall
record or cause to be recorded such assignment at the expense of
the Company. In connection with the recording of any such
assignment, the Company shall furnish such documents as may be
reasonably necessary to accomplish such recording.
Notwithstanding the foregoing, at any time the Company may
record, or cause to be recorded, the assignments of Mortgages at
the expense of the Company.
Section 2.02. Acceptance by Trustee. Subject to the
examination hereinafter provided, the Trustee acknowledges
receipt by it of the Mortgage Notes, the assignments of the
Mortgages to the Trustee, the assumption and modification
agreements, if any, and the Designated Loan Closing Documents, if
any, delivered pursuant to Section 2.01, and declares that the
Trustee holds and will hold such documents and each other
document delivered to it pursuant to Section 2.01 in trust, upon
the trusts herein set forth, for the use and benefit of all
present and future Certificateholders. The Trustee agrees, for
the benefit of Certificateholders, to review each Mortgage File
within 45 days after (i) the execution and delivery of this
Agreement, in the case of the Mortgage Notes, the assignments of
the Mortgages to the Trustee, the assumption and modification
agreements, if any, and the Designated Loan Closing Documents, if
any, (ii) delivery after the Closing Date of (x) the Mortgage
Notes and the assumption and modification agreements, if any, or
(y) an Opinion of Counsel described in the fourth paragraph of
Section 2.01, as applicable, with respect to each Designated
Loan, and (iii) delivery of the recorded Mortgages, title
insurance policies and recorded intervening assignments of
Mortgage, if any, to ascertain that all required documents set
forth in Section 2.01 have been executed, received and recorded,
if applicable, and that such documents relate to the Mortgage
Loans identified in Exhibit C hereto. In performing such
examination, the Trustee may conclusively assume the due
execution and genuineness of any such document and the
genuineness of any signature thereon. It is understood that the
scope of the Trustee's examination of the Mortgage Files is
limited solely to confirming, after receipt of the documents
listed in Section 2.01, that such documents have been executed,
received and recorded, if applicable, and relate to the Mortgage
Loans identified in Exhibit C to this Agreement. If in the course
of such review the Trustee finds (1) that any document required
to be delivered as aforesaid has not been delivered, or (2) any
such document has been mutilated, defaced or physically altered
without the borrower's authorization or approval, or (3) based
upon its examination of such documents, the information with
respect to any Mortgage Loan set forth on Exhibit C is not
accurate, the Trustee shall promptly so notify the Company in
writing, which shall have a period of 60 days after receipt of
such notice to correct or cure any such defect. The Company
hereby covenants and agrees that, if any such material defect
49
cannot be corrected or cured, the Company will on a Distribution
Date which is not later than the first Distribution Date which is
more than ten days after the end of such 60-day period repurchase
the related Mortgage Loan from the Trustee at the Purchase Price
therefor or replace such Mortgage Loan pursuant to Section
2.03(b); provided, however, that if the defect (or breach
pursuant to Section 2.03(a)) is one that, had it been discovered
before the Startup Day, would have prevented the Mortgage Loan
from being a "qualified mortgage" within the meaning of the REMIC
Provisions, such defect or breach shall be cured, or the related
Mortgage Loan shall be repurchased or replaced, on a Distribution
Date which falls within 90 days of the date of discovery of such
defect or breach. The Purchase Price for the repurchased Mortgage
Loan, or any amount required in respect of a substitution
pursuant to Section 2.03(b), shall be deposited by the Company in
the Certificate Account pursuant to Section 3.02(d) on the
Business Day prior to the applicable Distribution Date and, upon
receipt by the Trustee of written notification of such deposit
signed by a Servicing Officer, the Trustee shall release or cause
to be released to the Company the related Mortgage File and shall
execute and deliver or cause to be executed and delivered such
instruments of transfer or assignment, in each case without
recourse, as shall be necessary to vest in the Company any
Mortgage Loan released pursuant hereto. It is understood and
agreed that the obligation of the Company to repurchase or
replace any Mortgage Loan as to which a material defect in a
constituent document exists shall constitute the sole remedy
respecting such defect available to Certificateholders or the
Trustee on behalf of Certificateholders.
Upon receipt by the Trustee of the Mortgage Note with
respect to a Designated Loan that is not defective in accordance
with the fifth sentence of the preceding paragraph, the related
Lost Note Affidavit delivered pursuant to Section 2.01 shall be
void and the Trustee shall return it to the Company.
Section 2.03. Representations and Warranties of the
Company; Mortgage Loan Repurchase. (a) The Company hereby
represents and warrants to the Trustee that:
(i) The information set forth in Exhibit C hereto was
true and correct in all material respects at the date or
dates respecting which such information is furnished;
(ii) As of the date of the initial issuance of the
Certificates, each Mortgage is a valid and enforceable
first lien on the property securing the related Mortgage
Note subject only to (a) the lien of current real property
taxes and assessments, (b) covenants, conditions and
restrictions, rights of way, easements and other matters of
public record as of the date of recording of such Mortgage,
50
such exceptions appearing of record being acceptable to mortgage
lending institutions generally in the area wherein the
property subject to the Mortgage is located or specifically
reflected in the appraisal obtained in connection with the
origination of the related Mortgage Loan obtained by the
Company and (c) other matters to which like properties are
commonly subject which do not materially interfere with the
benefits of the security intended to be provided by such
Mortgage;
(iii) Immediately prior to the transfer and assignment
herein contemplated, the Company had good title to, and was
the sole owner of, each Mortgage Loan and all action had
been taken to obtain good record title to each related
Mortgage. Each Mortgage Loan has been transferred free and
clear of any liens, claims and encumbrances;
(iv) As of the date of the initial issuance of the
Certificates, no payment of principal of or interest on or
in respect of any Mortgage Loan is 30 or more days past due
and none of the Mortgage Loans have been past due 30 or
more days more than once during the preceding 12 months;
(v) As of the date of the initial issuance of the
Certificates, there is no mechanics' lien or claim for
work, labor or material affecting the premises subject to
any Mortgage which is or may be a lien prior to, or equal
or coordinate with, the lien of such Mortgage except those
which are insured against by the title insurance policy
referred to in (x) below;
(vi) As of the date of the initial issuance of the
Certificates, there is no delinquent tax or assessment lien
against the property subject to any Mortgage;
(vii) As of the date of the initial issuance of the
Certificates, there is no valid offset, defense or
counterclaim to any Mortgage Note or Mortgage, including
the obligation of the Mortgagor to pay the unpaid principal
and interest on such Mortgage Note;
(viii) As of the date of the initial issuance of the
Certificates, the physical property subject to any Mortgage
is free of material damage and is in good repair;
(ix) Each Mortgage Loan at the time it was made
complied in all material respects with applicable state and
federal laws, including, without limitation, usury, equal
credit opportunity and disclosure laws;
(x) A lender's title insurance policy or binder, or
other assurance of title insurance customary in the relevant
51
jurisdiction therefor, in either case, in a form acceptable
to FNMA or FHLMC, was issued on the date of the origination
of each Mortgage Loan and each such policy or binder is
valid and remains in full force and effect;
(xi) The original principal amount of each Mortgage
Note was not more than 95% of the Original Value thereof;
as of the Cut-off Date, no more than 33.0% of the Mortgage
Loans in Pool 1 and no more than 11.5% of the Mortgage
Loans in Pool 2, in each case by Scheduled Principal
Balance, had original principal amounts of more than 80% of
the Original Value and each Mortgage Note having an
original principal amount in excess of 80% of the Original
Value is covered by a Primary Insurance Policy so long as
its then outstanding principal amount exceeds 80% of the
greater of (a) the Original Value and (b) the then current
value of the related Mortgaged Property as evidenced by an
appraisal thereof satisfactory to the Company. Each Primary
Insurance Policy is issued by a private mortgage insurer
acceptable to FNMA or FHLMC;
(xii) Each Mortgage Note is payable on the first day of
each month in self-amortizing monthly installments of
principal and interest, with interest payable in arrears,
over an original term of not more than thirty years. The
Mortgage Rate of each Mortgage Note of the related Mortgage
Loan was not less than 6.625% per annum and not greater
than 9.500% per annum, in the case of Pool 1, and was not
less than 6.125% per annum and not greater than 9.000% per
annum, in the case of Pool 2. The Mortgage Rate of each
Mortgage Note is fixed for the life of the related Mortgage
Loan;
(xiii) The improvements on the Mortgaged Properties are
insured against loss under a hazard insurance policy with
extended coverage and conforming to the requirements of
Section 3.06 hereof. As of the date of initial issuance of
the Certificates, all such insurance policies are in full
force and effect;
(xiv) As of the Cut-off Date, no more than 15.00% of the
Mortgage Loans in Pool 1 and no more than 21.75% of the
Mortgage Loans in Pool 2, in each case by Scheduled
Principal Balance, had a Scheduled Principal Balance of
more than $400,000;
(xv) As of the Cut-off Date, no more than 1.0% of the
Mortgage Loans in Pool 1 and no more than 1.5% of the
Mortgage Loans in Pool 2, in each case by Scheduled
Principal Balance, are secured by Mortgaged Properties
located in any one postal zip code area;
52
(xvi) As of the Cut-off Date, at least 97.5% of the
Mortgage Loans in Pool 1 and at least 92.5% of the Mortgage
Loans in Pool 2, in each case by Scheduled Principal
Balance, are secured by Mortgaged Properties determined by
the Company to be the primary residence of the Mortgagor.
The basis for such determination is the making of a
representation by the Mortgagor at origination that he or
she intends to occupy the underlying property;
(xvii) As of the Cut-off Date, at least 94.5% of the
Mortgage Loans in Pool 1 and at least 92.5% of the Mortgage
Loans in Pool 2, in each case by Scheduled Principal
Balance, are secured by one-family detached residences;
(xviii) As of the Cut-off Date, no more than 2.50% of the
Mortgage Loans in Pool 1 and no more than 4.25% of the
Mortgage Loans in Pool 2, in each case by Scheduled
Principal Balance, are secured by condominiums and, as of
the Cut-off Date, no more than 1.00% of the Mortgage Loans
in Pool 1 and no more than 0.75% of the Mortgage Loans in
Pool 2, in each case by Scheduled Principal Balance, are
secured by two- to four-family residential properties. As
to each condominium or related Mortgage Loan, (a) the
related condominium is in a project that is on the FNMA or
FHLMC approved list, (b) the related condominium is in a
project that, upon submission of appropriate application,
could be so approved by either FNMA or FHLMC, (c) the
related Mortgage Loan meets the requirements for purchase
by FNMA or FHLMC, (d) the related Mortgage Loan is of the
type that could be approved for purchase by FNMA or FHLMC
but for the principal balance of the related Mortgage Loan
or the pre-sale requirements or (e) the related Mortgage
Loan has been approved by a nationally recognized mortgage
pool insurance company for coverage under a mortgage pool
insurance policy issued by such insurer. As of the Cut-off
Date, no more than 0.25% of the Mortgage Loans in Pool 1
and no more than 0.75% of the Mortgage Loans in Pool 2, in
each case by Scheduled Principal Balance, are secured by
condominiums located in any one postal zip code area;
(xix) No Mortgage Loan is secured by a leasehold
interest in the related Mortgaged Property, and each
Mortgagor holds fee title to the related Mortgaged
Property;
(xx) As of the Cut-off Date, no more than 1.75% of the
Mortgage Loans in Pool 1 and none of the Mortgage Loans in
Pool 2, in each case by Scheduled Principal Balance,
constituted Buydown Mortgage Loans. The maximum Buydown
Period for any Buydown Mortgage Loan is three years, and
the maximum difference between the stated Mortgage Rate of
any Buydown Mortgage Loan and the rate paid by the related
53
Mortgagor is three percentage points. Each Buydown Mortgage
Loan has been fully funded;
(xxi) The original principal balances of the Mortgage
Loans in Pool 1 range from $115,000 to $650,000, and the
original principal balances of the Mortgage Loans in Pool 2
range from $64,000 to $1,000,000;
(xxii) As of the Cut-off Date, no more than 2.25% of the
Mortgage Loans in Pool 1 and no more than 7.0% of the
Mortgage Loans in Pool 2, in each case by Scheduled
Principal Balance, are secured by second homes, and no more
than 0.25% of the Mortgage Loans in Pool 1 and no more than
0.50% of the Mortgage Loans in Pool 2, in each case by
Scheduled Principal Balance, are secured by investor-owned
properties;
(xxiii) All appraisals are on forms acceptable to either
FNMA or FHLMC, including information regarding three
comparable properties;
(xxiv) No selection procedures, other than those
necessary to comply with the representations and warranties
set forth herein or the description of the Mortgage Loans
made in any disclosure document delivered to prospective
investors in the Certificates, have been utilized in
selecting the Mortgage Loans from the Company's portfolio
which would be adverse to the interests of the
Certificateholders;
(xxv) To the best of the Company's knowledge, at
origination no improvement located on or being part of a
Mortgaged Property was in violation of any applicable
zoning and subdivision laws and ordinances;
(xxvi) None of the Mortgage Loans is a temporary
construction loan. With respect to any Mortgaged Property
which constitutes new construction, the related
construction has been completed substantially in accordance
with the specifications therefor and any incomplete aspect
of such construction shall not be material or interfere
with the habitability or legal occupancy of the Mortgaged
Property. Mortgage Loan amounts sufficient to effect any
such completion are in escrow for release upon or in
connection with such completion or a performance bond or
completion bond is in place to provide funds for this
purpose and such completion shall be accomplished within
120 days after weather conditions permit the commencement
thereof;
(xxvii) As of the Closing Date, each Mortgage Loan is a
"qualified mortgage" as defined in Section 860G(a)(3) of the
Code; and
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(xxviii) As of the Closing Date, the Company possesses the
Document File with respect to each Mortgage Loan, and the
related Mortgages and intervening assignment or assignments
of Mortgages, if any, have been delivered to a title
insurance company for recording.
It is understood and agreed that the representations
and warranties set forth in this Section 2.03(a) shall survive
delivery of the respective Mortgage Files to the Trustee. Upon
discovery by either the Company or the Trustee of a breach of any
of the foregoing representations and warranties which materially
and adversely affects the interests of the Certificateholders in
the related Mortgage Loan, the party discovering such breach
shall give prompt written notice to the other. Subject to the
following sentence, within 60 days of its discovery or its
receipt of notice of breach, or, with the prior written consent
of a Responsible Officer of the Trustee, such longer period
specified in such consent, the Company shall cure such breach in
all material respects or shall repurchase such Mortgage Loan from
the Trustee or replace such Mortgage Loan pursuant to Section
2.03(b). Any such repurchase by the Company shall be accomplished
in the manner set forth in Section 2.02, subject to the proviso
of the third-to-last sentence thereof, and at the Purchase Price.
It is understood and agreed that the obligation of the Company to
repurchase or replace any Mortgage Loan as to which a breach
occurred and is continuing shall constitute the sole remedy
respecting such breach available to Certificateholders or the
Trustee on behalf of Certificateholders and such obligation of
the Company to repurchase or replace any such Mortgage Loan shall
not be assumed by any Person which may succeed the Company as
servicer hereunder, but shall continue as an obligation of the
Company. Notwithstanding the preceding sentence, if a breach of
the representation and warranty of the Company contained in
Section 2.03(a)(ix) occurs as a result of a violation of the
federal Truth in Lending Act, 15 U.S.C. ss. 1601 et seq., as
amended ("TILA"), and the Trustee or the Trust Fund is named as a
defendant in a TILA suit in respect of such violation and
liability in respect thereof is imposed upon the Trustee or the
Trust Fund as assignees of the related Mortgage Loan pursuant to
Section 1641 of TILA, the Company shall indemnify the Trustee and
the Trust Fund from, and hold them harmless against, any and all
losses, liabilities, damages, claims or expenses (including
reasonable attorneys' fees) to which the Trustee and the Trust
Fund, or either of them, become subject pursuant to TILA, insofar
as such losses, damages, claims or expenses (including reasonable
attorneys' fees) result from such violation. The Company's
obligations under the preceding sentence shall not impair or
derogate from the Company's obligations to the Trustee under
Section 8.05.
(b) If the Company is required to repurchase any
Mortgage Loan pursuant to Section 2.02 or 2.03(a), the Company
55
may, at its option, within the applicable time period specified
in such respective Sections, remove such Defective Mortgage Loan
from the terms of this Agreement and substitute one or more other
mortgage loans for such Defective Mortgage Loan, in lieu of
repurchasing such Defective Mortgage Loan, provided that no such
substitution shall occur more than two years after the Closing
Date. Any substitute Mortgage Loan shall (a) have a Scheduled
Principal Balance (together with that of any other Mortgage Loan
substituted for the same Defective Mortgage Loan) as of the first
Distribution Date following the month of substitution not in
excess of the Scheduled Principal Balance of the Defective
Mortgage Loan as of such date (the amount of any difference, plus
one month's interest thereon at the respective Net Mortgage Rate,
to be deposited by the Company in the Certificate Account
pursuant to Section 2.02), (b) have a Mortgage Rate not less
than, and not more than one percentage point greater than, the
Mortgage Rate of the Defective Mortgage Loan, (c) have the same
Net Mortgage Rate as the Defective Mortgage Loan, (d) have a
remaining term to stated maturity not later than, and not more
than one year less than, the remaining term to stated maturity of
the Defective Mortgage Loan, (e) be, in the reasonable
determination of the Company, of the same type, quality and
character as the Defective Mortgage Loan as if the defect or
breach had not occurred, (f) have a ratio of its current
principal amount to its Original Value not greater than that of
the removed Mortgage Loan and (g) be, in the reasonable
determination of the Company, in compliance with the
representations and warranties contained in Section 2.03(a) as of
the date of substitution.
The Company shall amend the Mortgage Loan Schedule to
reflect the withdrawal of any Defective Mortgage Loan and the
substitution of a substitute Mortgage Loan therefor. Upon such
amendment the Company shall be deemed to have made as to such
substitute Mortgage Loan the representations and warranties set
forth in Section 2.03(a) as of the date of such substitution,
which shall be continuing as long as any Certificate shall be
outstanding or this Agreement has not been terminated, and the
remedies for breach of any such representation or warranty shall
be as set forth in Section 2.03(a). Upon such amendment, the
Trustee shall review the Mortgage File delivered to it relating
to the substitute Mortgage Loan, within the time and in the
manner and with the remedies specified in Section 2.02, except
that for purposes of this Section 2.03(b) (other than the
two-year period specified in the first sentence of the preceding
paragraph of this Section 2.03(b)), such time shall be measured
from the date of the applicable substitution.
Section 2.04. Execution of Certificates. The Trustee
has caused to be executed, countersigned and delivered to or upon
the order of the Company, in exchange for the Mortgage Loans, the
56
Certificates in authorized denominations evidencing the entire
ownership of the Trust Fund.
Section 2.05. Designations under the REMIC Provisions.
(a) The Company hereby designates the Classes of Certificates
identified in Section 5.01(b), other than the Residual
Certificates, as "regular interests," and the Class R Certificate
as the single class of "residual interests," in the REMIC
established hereunder for purposes of the REMIC Provisions.
(b) The Closing Date will be the "Startup Day" for the
REMIC established hereunder for purposes of the REMIC Provisions.
(c) The "tax matters person" with respect to the REMIC
established hereunder for purposes of the REMIC Provisions shall
be (i) the Company, if the Company is the owner of a Class R
Certificate, or (ii) in any other case, the beneficial owner of
the Class R Certificate having the largest Percentage Interest of
such Class; provided, however, that such largest beneficial owner
and, to the extent relevant, each other holder of a Class R
Certificate, by its acceptance thereof irrevocably appoints the
Company as its agent and attorney-in-fact to act as "tax matters
person" with respect to the REMIC established hereunder for
purposes of the REMIC Provisions.
(d) The "latest possible maturity date" of the regular
interests in the REMIC established hereunder is the Latest
Possible Maturity Date for purposes of section 860G(a)(1) of the
Code.
(e) In no event shall the assets described in clause
(x) of the definition of the term Trust Fund constitute a part of
the REMIC established hereunder.
ARTICLE III
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
Section 3.01. Company to Act as Servicer. (a) It is
intended that the REMIC established hereunder shall constitute,
and that the affairs of the REMIC shall be conducted so as to
qualify the Trust Fund (other than any collateral fund
established under the agreement referred to in Section 3.08(e))
as, a "real estate mortgage investment conduit" as defined in and
in accordance with the REMIC Provisions. In furtherance of such
intention, the Company covenants and agrees that it shall act as
agent (and the Company is hereby appointed to act as agent) on
behalf of the Trust Fund and the Holders of the Residual
Certificates and that in such capacity it shall:
57
(i) prepare and file, or cause to be prepared and
filed, in a timely manner, a U.S. Real Estate Mortgage
Investment Conduit Income Tax Return (Form 1066) 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 the REMIC established
hereunder, using the calendar year as the taxable year and
the accrual method of accounting, 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 shall 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;
(ii) within thirty days of the Closing Date, shall
furnish or cause to be furnished to the Internal Revenue
Service, on Form 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 (and the Company shall
act as the representative the REMIC established hereunder
for this purpose), together with such additional
information as may be required by such Form, and shall
update such information at the time or times and in the
manner required by the Code;
(iii) make or cause to be made an election, on behalf of
the REMIC established hereunder, to be treated as a REMIC,
and make the appropriate designations, if applicable, in
accordance with Section 2.05 hereof on the federal tax
return of the Trust Fund for its first taxable year (and,
if necessary, under applicable state law);
(iv) 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 or reports, or furnish or cause to
be furnished by telephone, mail, publication or other
appropriate method such information, as and when required
to be provided to them in accordance with the REMIC
Provisions, including without limitation, the calculation
of any original issue discount using the Prepayment
Assumption Multiple;
(v) provide information necessary for the computation
of tax imposed on the transfer of a Residual Certificate to
a Disqualified Organization, or an agent (including a
broker, nominee or other middleman) of a Disqualified
Organization, or a pass-through entity in which a
Disqualified Organization is the record holder of an
58
interest (the reasonable cost of computing and furnishing
such information may be charged to the Person liable for
such tax);
(vi) use its best reasonable efforts to conduct the
affairs of the REMIC established hereunder at all times
that any Certificates are outstanding so as to maintain the
status thereof as a REMIC under the REMIC Provisions;
(vii) not knowingly or intentionally take any action or
omit to take any action that would cause the termination of
the REMIC status of the REMIC or that would subject the
Trust Fund to tax, except for taxes for which the Company
is required to indemnify the REMIC pursuant to Section
3.01(c);
(viii) exercise reasonable care not to allow the creation
of any "interests" in the REMIC within the meaning of
section 860D(a)(2) of the Code other than the interests
represented by the Classes of Certificates identified in
Section 5.01(b);
(ix) exercise reasonable care not to allow the
occurrence of any "prohibited transactions" within the
meaning of section 860F of the Code, unless (1) the Company
shall have provided an Opinion of Counsel to the Trustee
that such occurrence would not (a) result in a taxable
gain, (b) otherwise subject the Trust Fund to tax, or (c)
cause the REMIC established hereunder to fail to qualify as
a REMIC or (2) such "prohibited transactions" arise from
the modification, holding or purchase of a Modified
Mortgage Loan pursuant to Section 3.01(c);
(x) exercise reasonable care not to allow the Trust
Fund to receive income from the performance of services or
from assets not permitted under the REMIC Provisions to be
held by a REMIC, except such as may arise from the
modification, holding or purchase of a Modified Mortgage
Loan pursuant to Section 3.01(c);
(xi) pay the amount of any federal or state tax,
including prohibited transaction taxes, taxes on certain
contributions to the REMIC after the Startup Day, and taxes
on net income from foreclosure property, imposed on the
Trust Fund when and as the same shall be due and payable
(but such obligation shall not prevent the Company or any
other appropriate Person from contesting any such tax in
appropriate proceedings and shall not prevent the Company
from withholding payment of such tax, if permitted by law,
pending the outcome of such proceedings);
(xii) ensure that federal, state or local income tax or
information returns shall be signed by the Trustee or such
59
other person as may be required to sign such returns by the
Code or state or local laws, regulations or rules; and
(xiii) maintain such records relating to the REMIC
established hereunder, including but not limited to the
income, expenses, individual Mortgage Loans (including
Mortgaged Property), other assets and liabilities thereof,
and the fair market value and adjusted basis of the
property of each determined at such intervals as may be
required by the Code, as may be necessary to prepare the
foregoing returns, schedules, statements or information.
The Company shall be entitled to be reimbursed
pursuant to Section 3.04 for any federal income taxes paid by it
pursuant to clause (xi) of the preceding sentence, except to the
extent that such taxes are imposed as a result of the bad faith,
misfeasance or negligence of the Company in the performance of
its obligations hereunder. The Company shall not be entitled to
be reimbursed for any taxes paid pursuant to the indemnification
provisions of Section 3.01(c) (except as provided therein). With
respect to any reimbursement of prohibited transaction taxes, the
Company shall inform the Trustee of the circumstances under which
such taxes were incurred.
(b) The Company shall service and administer the
Mortgage Loans and shall have full power and authority, acting
alone or through one or more Primary Servicers, to do any and all
things in connection with such servicing and administration which
it may deem necessary or desirable. Without limiting the
generality of the foregoing, the Company shall continue, and is
hereby authorized and empowered by the Trustee, to execute and
deliver, or file, as appropriate, on behalf of itself, the
Certificateholders and the Trustee or any of them, any and all
continuation statements, termination statements, 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 properties subject to
the Mortgages. Without limitation of the foregoing, if the
Company in its individual capacity agrees to refinance any
Mortgage Loan upon the request of the related Mortgagor, the
Company, as servicer hereunder, may execute an instrument of
assignment in customary form to the Company in its individual
capacity. In connection with any such refinancing, the Trustee
shall, upon certification of a Servicing Officer to the effect
that an amount equal to the principal balance of the related
Mortgage Loan together with accrued and unpaid interest thereon
at the applicable Net Mortgage Rate to the date of such
certification has been credited to the applicable Mortgage Loan
Payment Record, release the related Mortgage File to the Company
whereupon the Company may cancel the related Mortgage Note. Upon
request by the Company after the execution and delivery of this
Agreement, the Trustee shall furnish the Company with any powers
60
of attorney and other documents necessary or appropriate to
enable the Company to carry out its servicing and administrative
duties hereunder. The Company shall maintain servicing standards
equivalent to those required for approval by FNMA or FHLMC. The
Company shall not agree to any modification of the material terms
of any Mortgage Loan except as provided in Section 3.01(c), the
second sentence of Section 3.02(a) and in Section 3.07. The
Company shall not release any portion of any Mortgaged Property
from the lien of the related Mortgage unless the related Mortgage
Loan would be a "qualified mortgage" within the meaning of the
REMIC Provisions following such release.
(c) The Company may agree to a modification of any
Mortgage Loan (the "Relevant Mortgage Loan") upon the request of
the related Mortgagor, provided that (i) the modification is in
lieu of a refinancing and the Mortgage Rate on the Relevant
Mortgage Loan, as modified, is approximately a prevailing market
rate for newly-originated mortgage loans having similar terms,
(ii) the aggregate of the adjusted bases of all Modified Mortgage
Loans (including the Relevant Mortgage Loan) plus the aggregate
adjusted bases of any assets that are not qualified mortgages or
Permitted Investments under Code Section 860GA that are assets of
the REMIC established hereunder at all times on any day is less
than one percent of the aggregate of the adjusted bases of all
assets of the REMIC (including such Modified Mortgage Loans) on
such day, and (iii) the Company purchases the Relevant Mortgage
Loan from the Trust Fund as described below. Effective
immediately after such modification, and, in any event, on the
same Business Day on which the modification occurs, all right,
title and interest of the Trustee in and to the Modified Mortgage
Loan shall automatically be deemed transferred and assigned to
the Company and all benefits and burdens of ownership thereof,
including without limitation the right to accrued interest
thereon from and including the date of modification and the risk
of default thereon, shall pass to the Company. To confirm such
transfer and assignment, the Company, as servicer hereunder, as
soon as practicable shall execute an instrument of assignment of
the Modified Mortgage Loan without recourse in customary form to
the Company in its individual capacity. The Company shall
promptly deliver to the Trustee a certification of a Servicing
Officer to the effect that (i) an amount equal to the Purchase
Price of such Modified Mortgage Loan has been credited to the
applicable Mortgage Loan Payment Record on the date of the
transfer and assignment of such Modified Mortgage Loan to the
Company and (ii) all requirements of the first paragraph of this
subsection (c) have been satisfied with respect to such Modified
Mortgage Loan.
The Company shall deposit the Purchase Price for any
Modified Mortgage Loan in the Certificate Account pursuant to
Section 3.02(d) on the Business Day prior to the Distribution
Date on which such funds are considered Available Funds,
61
provided, however, that if the Company is required to deposit
funds in one or more Eligible Accounts on a daily basis pursuant
to Section 3.02(e), the Purchase Price for any Modified Mortgage
Loan shall be deposited therein within one Business Day after the
purchase of such Modified Mortgage Loan. Upon receipt by the
Trustee of written notification of any such deposit signed by a
Servicing Officer, the Trustee shall release to the Company the
related Mortgage File and shall execute and deliver such
instruments of transfer or assignment, in each case without
recourse, as shall be necessary more fully to vest in the Company
any Modified Mortgage Loan previously transferred and assigned
pursuant hereto.
The Company covenants and agrees to indemnify the
Trust Fund against any and all liability for any "prohibited
transaction" taxes and any related interest, additions and
penalties imposed on the REMIC established hereunder as a result
of any modification of a Mortgage Loan effected pursuant to this
subsection (c), any holding of a Modified Mortgage Loan by the
REMIC or any purchase of a Modified Mortgage Loan by the Company
(but such obligation shall not prevent the Company or any other
appropriate Person from contesting any such tax in appropriate
proceedings and shall not prevent the Company from withholding
payment of such tax, if permitted by law, pending the outcome of
such proceedings). The Company shall have no right of
reimbursement for any amount paid pursuant to the foregoing
indemnification, except to the extent that the amount of any tax,
interest and penalties, together with interest thereon, is
refunded to the Trust Fund or the Company.
(d) The relationship of the Company (and of any
successor to the Company as servicer under this Agreement) to the
Trustee under this Agreement is intended by the parties to be
that of an independent contractor and not that of a joint
venturer, partner or agent.
(e) All costs incurred by the Company in effecting the
timely payment of taxes and assessments on the properties subject
to the Mortgage Loans shall not, for the purpose of calculating
monthly distributions to Certificateholders, be added to the
amount owing under the related Mortgage Loans, notwithstanding
that the terms of such Mortgage Loans so permit, and such costs
shall be recoverable by the Company to the extent permitted by
Section 3.04. The Company shall collect such amounts from the
Mortgagor and shall credit the applicable Mortgage Loan Payment
Record accordingly.
(f) If the Company enters into a servicing agreement
with any servicer (a "Primary Servicer") pursuant to which such
Primary Servicer shall directly service certain Mortgage Loans
and the Company shall perform master servicing with respect
thereto, the Company shall not be released from its obligations
62
to the Trustee and Certificateholders with respect to the
servicing and administration of the Mortgage Loans in accordance
with the provisions of Article III hereof and such obligations
shall not be diminished by virtue of any such servicing agreement
or arrangement and the Company shall be obligated to the same
extent and under the same terms and conditions as if the Company
alone were servicing and administering the Mortgage Loans. Any
amounts received by a Primary Servicer in respect of a Mortgage
Loan shall be deemed to have been received by the Company whether
or not actually received by it. Any servicing agreement that may
be entered into and any transactions or services relating to the
Mortgage Loans involving a Primary Servicer in its capacity as
such shall be deemed to be between the Company and the Primary
Servicer alone, and the Trustee and the Certificateholders shall
have no claims, obligations, duties or liabilities with respect
thereto. Notwithstanding the foregoing, in the event the Company
has been removed as the servicer hereunder pursuant to Section
6.04 or Section 7.01, the Trustee or any successor servicer
appointed pursuant to Section 7.02 shall succeed to all of the
Company's rights and interests (but not to any obligations or
liabilities of the Company arising prior to the date of
succession) under any servicing agreement with any Primary
Servicer in respect of the Mortgage Loans, subject to the
limitation on the Trustee's responsibilities under Section 7.02.
(g) In no event shall any collateral fund established
under the agreement referred to in Section 3.08(e) constitute an
asset of any REMIC established hereunder.
Section 3.02. Collection of Certain Mortgage Loan
Payments; Mortgage Loan Payment Records; Certificate Account. (a)
The Company shall make reasonable efforts to collect all payments
called for under the terms and provisions of the Mortgage Loans,
and shall, to the extent such procedures shall be consistent with
this Agreement, follow such collection procedures as it follows
with respect to mortgage loans comparable to the Mortgage Loans
in its servicing portfolio. Consistent with the foregoing, the
Company may in its discretion (i) waive any late payment charge
or any assumption fees or other fees which may be collected in
the ordinary course of servicing such Mortgage Loan and (ii) if a
default on the Mortgage Loan has occurred or is reasonably
foreseeable, arrange at any time prior to foreclosure with a
Mortgagor a schedule for the payment of due and unpaid principal
and interest for a period extending not longer than 125 days
after the date that such schedule is arranged. Any arrangement of
the sort described in clause (ii) above shall not affect the
amount or timing of the Company's obligation to make Monthly
Advances with respect to any Mortgage Loan which Monthly Advances
shall be made pursuant to the original amortization schedule
applicable to such Mortgage Loan.
63
(b) The Company shall establish and maintain a
Mortgage Loan Payment Record for each Mortgage Pool in which the
following payments on and collections in respect of each Mortgage
Loan in such Mortgage Pool shall as promptly as practicable be
credited by the Company for the account of the Holders of the
Certificates:
(i) All payments on account of principal, including
Principal Prepayments (other than (A) payments of principal
due and payable on the Mortgage Loans on or before, and all
Principal Prepayments received before, the Cut-off Date,
(B) in the case of a substitute Mortgage Loan, payments of
principal due and payable on such Mortgage Loan on or
before the Determination Date in the month of substitution,
and all Principal Prepayments received before the first day
of the month of substitution, and (C) in the case of a
replaced Mortgage Loan, payments of principal due and
payable on such Mortgage Loan after the Determination Date
in the month of substitution, and all Principal Prepayments
received in the month of substitution);
(ii) All payments (other than (A) those due and payable
on or before the Cut-off Date, (B) in the case of a
substitute Mortgage Loan, those due and payable on such
Mortgage Loan on or before the Determination Date in the
month of substitution, and (C) in the case of a replaced
Mortgage Loan, those due and payable on such Mortgage Loan
after the Determination Date in the month of substitution)
on account of interest at the applicable Net Mortgage Rate
on the Mortgage Loan received from the related Mortgagor,
including any Buydown Funds applied with respect to
interest at the applicable Net Mortgage Rate on any Buydown
Mortgage Loan;
(iii) All Liquidation Proceeds received by the Company
with respect to such Mortgage Loan and the Purchase Price
for any Mortgage Loan purchased by the Company pursuant to
Sections 2.02, 2.03, 3.01(c) and 3.16 (including any
amounts received in respect of a substitution of a Mortgage
Loan);
(iv) All Insurance Proceeds (including, for this
purpose, any amounts required to be credited by the Company
pursuant to the last sentence of Section 3.06) received by
the Company in respect of the related Mortgage Pool for the
benefit of the Trust Fund, other than proceeds to be
applied to the restoration or repair of the property
subject to the related Mortgage or released, or to be
released, to the related Mortgagor in accordance with the
normal servicing procedures of the Company; and
(v) All REO Proceeds.
64
The foregoing requirements respecting credits to each Mortgage
Loan Payment Record are exclusive, it being understood that,
without limiting the generality of the foregoing, the Company
need not enter in either Mortgage Loan Payment Record
collections, Liquidation Proceeds or Insurance Proceeds in
respect of Mortgage Loans which have been previously released
from the terms of this Agreement, amounts representing fees or
late charge penalties payable by Mortgagors, or amounts received
by the Company for the account of Mortgagors for application
towards the payment of taxes, insurance premiums, assessments and
similar items.
(c) Subject to subsection (e) below, until the
Business Day prior to each Distribution Date on which amounts are
required to be deposited in the Certificate Account pursuant to
subsection (d) of this Section 3.02, the Company may retain and
commingle such amounts with its own funds and shall be entitled
to retain for its own account any gain or investment income
thereon, and any such investment income shall not be subject to
any claim of the Trustee or Certificateholders. To the extent
that the Company realizes any net loss on any such investments,
the Company shall deposit in the Certificate Account an amount
equal to such net loss at the time the Company is required to
deposit amounts in the Certificate Account pursuant to subsection
(d) of this section 3.02. Any such deposit shall not increase the
Company's obligation under said subsection (d).
(d) The Trustee shall establish and maintain with the
Trustee in its corporate trust department a single separate trust
account designated in the name of the Trustee for the benefit of
the Holders of the Certificates issued hereunder (the
"Certificate Account") into which the Company shall deposit, not
later than 11:00 a.m. New York time on the Business Day prior to
each Distribution Date, an amount in next day funds equal to the
Available Funds in respect of each Mortgage Pool for such
Distribution Date. If the Trustee does not receive such deposit
by 2:00 p.m. on such Business Day, it shall give the Company
written notice thereof.
(e) If the Company or a Responsible Officer of the
Trustee obtains actual notice of or knowledge of the occurrence
of either (x) any Trigger Event or (y) the downgrade by S&P of
General Electric Capital Corporation's short-term senior
unsecured debt rating below A-1+, then, notwithstanding
subsection (c) above, the Company shall promptly establish, and
thereafter maintain, one or more Eligible Accounts, in respect of
each Mortgage Pool, in the name of the Trustee and bearing a
designation indicating that amounts therein are held for the
benefit of the Trustee and the related Certificateholders, into
which the Company and any Primary Servicer shall deposit within
two Business Days after receipt, all amounts otherwise required
to be credited to the applicable Mortgage Loan Payment Record
65
pursuant to Section 3.02(b); provided, however, that such action
shall not be required if the Company delivers to the Trustee a
letter from each Rating Agency to the effect that the failure to
take such action will not cause such Rating Agency to withdraw or
reduce its then current ratings of the Certificates. All amounts
so deposited shall be held in trust for the benefit of
Certificateholders. Amounts so deposited may be invested at the
written instruction of the Company in Permitted Investments in
the name of the Trustee maturing no later than the Business Day
preceding the Distribution Date following the date of such
investment; provided, however, that any such Permitted Investment
which is an obligation of State Street Bank and Trust Company, in
its individual capacity and not in its capacity as Trustee, may
mature on such Distribution Date; and, provided further, that no
such Permitted Investment shall be sold before the maturity
thereof if the sale thereof would result in the realization of
gain prior to maturity unless the Company has obtained an Opinion
of Counsel that such sale or disposition will not cause the Trust
Fund to be subject to the tax on prohibited transactions under
section 860F of the Code, or otherwise subject the Trust Fund to
tax or cause the REMIC established hereunder to fail to qualify
as a REMIC. The Trustee shall maintain physical possession of all
Permitted Investments, other than Permitted Investments
maintained in book-entry form. The Company, as servicer, shall be
entitled to retain for its own account any gain or other income
from Permitted Investments, and neither the Trustee nor Cer-
tificateholders shall have any right or claim with respect to
such income. The Company shall deposit an amount equal to any
loss realized on any Permitted Investment as soon as any such
loss is realized. If the provisions in this subsection (e) become
operable, references in this Agreement to each Mortgage Loan
Payment Record and credits and debits to such Record shall be
deemed to refer to the related Eligible Accounts and deposits to
and withdrawals from such Eligible Accounts. Any action which may
be necessary to establish the terms of an account pursuant to
this Section 3.02(e) may be taken by an amendment or supplement
to this Agreement or pursuant to a written order of the Company,
which amendment, supplement or order shall not require the
consent of Certificateholders, provided that the Company has
delivered to the Trustee a letter from each Rating Agency to the
effect that such amendment, supplement or order will not cause
such Rating Agency to withdraw or reduce its then current ratings
of the Certificates.
Section 3.03. Collection of Taxes, Assessments and
Other Items. The Company shall establish and maintain with one or
more depository institutions one or more accounts into which it
shall deposit all collections of taxes, assessments, private
mortgage or hazard insurance premiums or comparable items for the
account of the Mortgagors. As servicer, the Company shall effect
the timely payment of all such items for the account of
Mortgagors. Withdrawals from such account or accounts may be
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made only to effect payment of taxes, assessments, private
mortgage or standard hazard insurance premiums or comparable
items, to reimburse the Company out of related collections for
any payments made regarding taxes and assessments or for any
payments made pursuant to Section 3.05 regarding premiums on
Primary Insurance Policies and Section 3.06 regarding premiums on
standard hazard insurance policies, to refund to any Mortgagors
any sums determined to be overages, or to pay interest owed to
Mortgagors to the extent required by law.
Section 3.04. Permitted Debits to the Mortgage Loan
Payment Records. The Company (or any successor servicer pursuant
to Section 7.02) may, from time to time, make debits to each
Mortgage Loan Payment Record for the following purposes (in each
case as to the Mortgage Loans in the related Mortgage Pool):
(i) To reimburse the Company or the applicable Primary
Servicer for Liquidation Expenses theretofore incurred in
respect of any Mortgage Loan in an amount not to exceed the
amount of the related Liquidation Proceeds credited to such
Mortgage Loan Payment Record pursuant to Section
3.02(b)(iii); provided that the Company or the applicable
Primary Servicer shall not be entitled to reimbursement for
Liquidation Expenses incurred after the initiation of
foreclosure proceedings in respect of any Defaulted
Mortgage Loan that is repurchased pursuant to Section 3.16;
(ii) To reimburse the Company or the applicable Primary
Servicer for Insured Expenses and amounts expended by it
pursuant to Section 3.08 in good faith in connection with
the restoration of property damaged by an Uninsured Cause,
in an amount not to exceed the amount of the related
Insurance Proceeds and Liquidation Proceeds (net of any
debits pursuant to clause (i) above) and amounts
representing proceeds of other insurance policies covering
the property subject to the related Mortgage credited to
such Mortgage Loan Payment Record pursuant to Section
3.02(b) (iii) and (iv);
(iii) To reimburse the Company to the extent permitted
by Sections 3.01(a) and 6.04;
(iv) To pay to the Company amounts received in respect
of any Defective Mortgage Loan, Defaulted Mortgage Loan, or
Modified Mortgage Loan purchased by the Company to the
extent that the distribution of any such amounts on the
Distribution Date upon which the proceeds of such purchase
are distributed would make the total amount distributed in
respect of any such Mortgage Loan on such Distribution Date
greater than the Purchase Price therefor, net of any
unreimbursed Monthly Advances made by the Company;
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(v) To reimburse the Company (or the Trustee, as
applicable) for Monthly Advances theretofore made in
respect of any Mortgage Loan to the extent of late
payments, REO Proceeds, Insurance Proceeds and Liquidation
Proceeds in
respect of such Mortgage Loan;
(vi) To reimburse the Company from any Mortgagor
payment of interest or other recovery with respect to a
particular Mortgage Loan, to the extent not previously
retained by the Company, for unpaid Servicing Fees with
respect to such Mortgage Loan, subject to Section 3.08(d);
(vii) To reimburse the Company (or the Trustee, as
applicable) for any Nonrecoverable Advance in respect of
such Mortgage Pool (which right of reimbursement of the
Trustee pursuant to this clause shall be prior to such
right of the Company); and
(viii) To make deposits into the Certificate Account
pursuant to Section 3.02(d).
The Company shall keep and maintain separate
accounting records, on a Mortgage Loan by Mortgage Loan basis,
for the purpose of accounting for debits to the related Mortgage
Loan Payment Record pursuant to clauses (i), (ii), (iv), (v) and
(vi) of this Section 3.04; provided, however, that it is
understood and agreed that the records of such accounting need
not be retained by the Company for a period longer than the five
most recent fiscal years.
Section 3.05. Maintenance of the Primary Insurance
Policies. (a) The Company shall not take any action which would
result in non-coverage under any applicable Primary Insurance
Policy of any loss which, but for the actions of the Company,
would have been covered thereunder. To the extent coverage is
available, the Company shall keep or cause to be kept in full
force and effect each such Primary Insurance Policy until the
principal balance of the related Mortgage Note is 80% or less of
the greater of (i) the related Original Value and (ii) the then
current value of the property underlying the related Mortgage
Note as evidenced by an appraisal thereof satisfactory to the
Company. The Company shall not cancel or refuse to renew any such
Primary Insurance Policy applicable to a Mortgage Loan that is in
effect at the Closing Date and is required to be kept in force
hereunder unless the replacement Primary Insurance Policy for
such canceled or non-renewed policy is maintained with an insurer
whose claims-paying ability is acceptable to each Rating Agency
for mortgage pass-through certificates having ratings equal to or
better than the ratings then assigned to the Certificates by such
Rating Agency. The Company agrees to effect the timely payment of
the premium on each Primary Insurance Policy, and such costs not
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otherwise recoverable shall be recoverable by the Company
from related Insurance Proceeds and Liquidation Proceeds pursuant
to Section 3.04.
(b) In connection with its activities as administrator
and servicer of the Mortgage Loans, the Company agrees to
present, on behalf of itself, the Trustee and the
Certificateholders, claims to the insurer under each Primary
Insurance Policy and, in this regard, to take such reasonable
action as shall be necessary to permit recovery under any Primary
Insurance Policy respecting a related defaulted Mortgage Loan. To
the extent provided in Section 3.02(b), any amounts collected by
the Company under any Primary Insurance Policy in respect of the
Mortgage Loans (including, without limitation, a Mortgage Loan
purchased by a related insurer) shall be credited to the
applicable Mortgage Loan Payment Record.
Section 3.06. Maintenance of Hazard Insurance. The
Company shall cause to be maintained for each Mortgage Loan
hazard insurance with a standard mortgagee clause and with
extended coverage in an amount which is at least equal to the
maximum insurable value of the improvements securing such
Mortgage Loan from time to time or the principal balance owing on
such Mortgage Loan from time to time, whichever is less. The
Company shall also maintain on property acquired upon
foreclosure, or by deed in lieu of foreclosure, hazard insurance
with extended coverage in an amount which is at least equal to
the lesser of (i) the maximum insurable value from time to time
of the improvements which are a part of such property or (ii) the
unpaid principal balance of such Mortgage Loan at the time of
such foreclosure or deed in lieu of foreclosure plus accrued
interest and the good-faith estimate of the Company of related
Liquidation Expenses to be incurred in connection therewith. To
the extent provided in Section 3.02(b)(iv), amounts collected by
the Company under any such policies in respect of the Mortgage
Loans shall be credited to the applicable Mortgage Loan Payment
Record. Such costs shall be recoverable by the Company pursuant
to Sections 3.03 and 3.04. In cases in which property securing
any Mortgage Loan is located in a federally designated flood
area, the hazard insurance to be maintained for such Mortgage
Loan shall include flood insurance. All such flood insurance
shall be in such amounts as are required under applicable
guidelines of FNMA. The Company shall be under no obligation to
require that any Mortgagor maintain earthquake or other
additional insurance and shall be under no obligation itself to
maintain any such additional insurance on property acquired in
respect of a Mortgage Loan, other than pursuant to such
applicable laws and regulations as shall at any time be in force
and as shall require such additional insurance. If the Company
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 3.06, it being understood and
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agreed that such policy may contain a deductible clause, in which
case the Company 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 3.06, and there
shall have been a loss which would have been covered by such
policy, credit to the applicable Mortgage Loan Payment Record the
amount not otherwise payable under the blanket policy because of
such deductible clause.
Section 3.07. Assumption and Modification Agreements.
(a) In any case in which property subject to a Mortgage has been
or is about to be conveyed by the Mortgagor, the Company shall
exercise its right to accelerate the maturity of such Mortgage
Loan under any "due-on-sale" clause applicable thereto, unless in
the reasonable discretion of the Company, such exercise would
adversely affect or jeopardize coverage under the related Primary
Insurance Policy, if any; provided, however, that if the Company
is prevented, as provided in Section 3.07(b), from enforcing any
such clause, the Company is authorized to make 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
the Mortgagor remains liable thereon. In connection with any such
assumption and modification agreement, the Company shall apply
its then current underwriting standards to such Person. The
Company shall not make or enter into any such assumption and
modification agreement, however, unless (to the extent
practicable in the circumstances) it shall have received
confirmation of the continued effectiveness of any applicable
Primary Insurance Policy and hazard insurance policy. The Company
shall notify the Trustee that any assumption and modification
agreement has been completed by forwarding to the Trustee the
original copy thereof, which copy shall be added by the Trustee
to the related Mortgage File and shall, for all purposes, be
considered a part of such Mortgage File to the same extent as all
other documents and instruments constituting a part thereof. In
connection with any such agreement, the Mortgage Rate, mortgage
term and any other material term of such Mortgage Loan shall not
be changed. Any fee collected by the Company for entering into
any such agreement will be retained by the Company as additional
servicing compensation.
(b) Notwithstanding Section 3.07(a) or any other
provision of this Agreement, the Company shall not be deemed to
be in default, breach or any other violation of its obligations
hereunder by reason of any assumption of a Mortgage Loan, or
transfer of the property subject to a Mortgage without the
assumption thereof, by operation of law or any assumption or
transfer which the Company reasonably believes it may be
restricted by law from preventing, for any reason whatsoever.
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Section 3.08. Realization Upon Defaulted Mortgage
Loans. (a) The Company shall foreclose upon or otherwise
comparably convert the ownership of properties securing such of
the Mortgage Loans as come into and continue in default and as to
which no satisfactory arrangements can be made for collection of
delinquent payments pursuant to Section 3.02. In connection with
such foreclosure or other conversion the Company shall,
consistent with Section 3.05, 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.
The foregoing is subject to the proviso that the Company 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 or foreclosure will
increase the proceeds of liquidation of the Mortgage Loan to
Certificateholders of the related Certificate Group after
reimbursement to itself for such expenses and (ii) that such
expenses will be recoverable to it either through Liquidation
Proceeds or Insurance Proceeds. Notwithstanding the foregoing,
the Company shall not be entitled to recover legal expenses
incurred in connection with foreclosure proceedings where the
Mortgage Loan is reinstated and such foreclosure proceedings are
terminated prior to completion, other than sums received from the
Mortgagor for such expenses.
Notwithstanding anything to the contrary contained
herein, the Company shall be under no obligation to foreclose
upon or otherwise convert the ownership of any Mortgaged Property
which it believes may be contaminated with or affected by
hazardous or toxic wastes, materials or substances. The Company
may, but shall not be obligated to, make such determination on
the basis of a Phase I environmental assessment with respect to
the related Mortgaged Property. Neither the Trustee nor the
Company shall be liable to the Trust Fund or the
Certificateholders if, based on the Company's belief that such
contamination or effect exists, the Company does not foreclose
upon or otherwise convert the ownership of a Mortgaged Property.
In addition, neither the Trustee nor the Company shall be liable
to the Trust Fund or the Certificateholders if, based on the
Company's belief that no such contamination or effect exists, the
Company forecloses upon a Mortgaged Property and the Trustee or
its nominee on behalf of the Trust Fund takes title to such
Mortgaged Property, and thereafter such Mortgaged Property is
determined to be so contaminated or affected.
(b) In the event that title to any Mortgaged Property
is acquired in foreclosure or by deed in lieu of foreclosure, the
deed or certificate of sale shall be issued to the Trustee, or to
its nominee on behalf of the Trust Fund. Notwithstanding any such
acquisition of title and cancellation of the related Mortgage
Loan, such Mortgage Loan shall (except for purposes of Section
9.01) be considered to be an Outstanding Mortgage Loan
71
until such time as the Mortgaged Property shall be sold and such
Mortgage Loan becomes a Liquidated Mortgage Loan. Consistent with
the foregoing, for purposes of all calculations hereunder so long
as such Mortgage Loan shall be considered to be an Outstanding
Mortgage Loan, it shall be assumed that the related Mortgage Note
and its amortization schedule in effect on and after such
acquisition of title (after giving effect to any previous
Principal Prepayments and Deficient Valuations incurred
subsequent to the related Bankruptcy Coverage Termination Date
and before any adjustment thereto by reason of any bankruptcy
(other than as aforesaid) or any similar proceeding or any
moratorium or similar waiver or grace period) remain in effect
(notwithstanding that the indebtedness evidenced by such Mortgage
Note shall have been discharged), subject to adjustment to
reflect the application of REO Proceeds received in any month.
REO Proceeds received in any month shall be applied to the
payment of the installments of principal due and interest accrued
on the related REO Mortgage Loan in accordance with the terms of
such Mortgage Note. REO Proceeds received in any month in excess
of the Amortization Payment for such month due on an REO Mortgage
Loan shall be treated as a Principal Prepayment received in
respect of such Mortgage Loan.
(c) 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 Company shall
dispose of such Mortgaged Property prior to two years after its
acquisition by the Trust Fund unless (a) the Trustee shall have
been supplied with an Opinion of Counsel to the effect that the
holding by the Trust Fund of such Mortgaged Property subsequent
to such two-year period (and specifying the period beyond such
two-year period for which the Mortgaged Property may be held)
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 REMIC established hereunder to fail to qualify
as a REMIC at any time that any Certificates are outstanding, in
which case the Trust Fund may continue to hold such Mortgaged
Property (subject to any conditions contained in such Opinion of
Counsel), or (b) the Trustee (at the Company's expense) or the
Company shall have applied for, not later than 61 days prior to
the expiration of such two-year period, an extension of such
two-year period in the manner contemplated by section 856(e)(3)
of the Code, in which case the two-year period shall be extended
by the applicable period. 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 or sold in such a manner or pursuant to any terms
that would (i) cause such Mortgaged Property to fail to qualify
at any time as "foreclosure property" within the meaning of
section 860G(a)(8) of the Code, (ii) subject the Trust Fund to
the imposition of any federal or state income taxes on "net
72
income from foreclosure property" with respect to such Mortgaged
Property within the meaning of section 860G(c) of the Code, or
(iii) cause the sale of such Mortgaged Property to result in the
receipt by the Trust Fund of any income from non-permitted assets
as described in section 860F(a)(2)(B) of the Code, unless the
Company has agreed to indemnify and hold harmless the Trust Fund
with respect to the imposition of any such taxes.
(d) Any collection of Insurance Proceeds or
Liquidation Proceeds will be applied in the following order of
priority: first, to reimburse the Company for any related
unreimbursed Liquidation Expenses and to reimburse the Company or
the Trustee, as applicable, for any related unreimbursed Monthly
Advances; second, to accrued and unpaid interest on the Mortgage
Loan at the Mortgage Rate from the date to which interest was
last paid or advanced to the Due Date prior to the Distribution
Date on which such amounts are to be distributed; and third, as a
recovery of principal of the Mortgage Loan. If the amount so
allocated to interest is less than the full amount of accrued and
unpaid interest due on such Mortgage Loan, the amount of such
recovery will be allocated between the Servicing Fee and interest
at the Net Mortgage Rate in proportion to the amount of such
accrued interest which would have been allocated to each such
category in the absence of any shortfall.
(e) Notwithstanding anything to the contrary contained
herein, the Company shall have the right to enter into an
agreement substantially in the form of Exhibit K hereto with any
Person that is the Holder of 100% of the Class 1-B5 Certificates
or the Class 2-B5 Certificates (provided that such form may be
revised to delete the option on the part of such Person to
purchase a defaulted Mortgage Loan as set forth in Section
2.02(f) thereof). Prior to entering into any such agreement with
any Person, the Company shall obtain a certification from such
Person to the effect that (i) such Person is not an "affiliate"
(within the meaning of the Prohibited Transaction Exemption) of
the Trustee and (ii) such Person will not purchase any
Certificates if such purchase would cause such Person to hold
more than a ten percent interest in the related Mortgage Pool, or
in the Trust Fund. It is understood that the right of the Company
to be reimbursed for Monthly Advances and Nonrecoverable Advances
under this Agreement shall not be affected in any way by the
provisions of any such agreement. The Trustee hereby agrees to
perform such obligations as may be expressly required of it
pursuant to the provisions of such agreement and to promptly
notify each party to such agreement if a Responsible Officer of
the Trustee (with direct responsibility for administration of
this Agreement) becomes aware of any discussions, plans or events
that might lead to the Trustee's becoming an "affiliate" (within
the meaning of the Prohibited Transaction Exemption) of any
Person with which the Company has entered into such agreement,
provided that the contents of any such notification shall be kept
73
confidential by the parties to such agreement. The Company agrees
to promptly notify the Trustee upon entering into any such
agreement. In addition, the Company shall provide the Trustee
with such information as may be necessary for the Trustee to
perform its obligations thereunder, including written
instructions, clearly identifying the source, amount and
application of funds to be deposited or withdrawn from the
Collateral Fund (as defined in such agreement). The Trustee shall
provide the Company with such information concerning credits and
debits to the Collateral Fund on account of income, gains and
losses realized from Collateral Fund Permitted Investments (as
defined in such agreement), and costs associated with the
purchase and sale thereof, as the Company may request in order to
prepare the instructions described in the preceding sentence.
In addition, subject to the provisions of the
preceding paragraph, the Company shall have the right to enter
into an agreement substantially in the form of Exhibit K hereto
with any Person that is the Holder of 100% of the Class 1-B4
Certificates or the Class 2-B4 Certificates, provided that (i)
such Person is also the Holder of 100% of the Class B5
Certificates of the related Certificate Group, (ii) such Person
shall have no rights under such agreement until the date on which
the Class Certificate Principal Balance of the Class B5 of the
related Certificate Group has been reduced to zero, and (iii) any
rights of such Person under such Agreement shall terminate in the
event that such Person transfers, directly or indirectly, the
Class B4 Certificates of such Certificate Group to any other
Person.
Section 3.09. Trustee to Cooperate; Release of
Mortgage Files. Upon the payment in full of any Mortgage Loan,
the Company will immediately notify the Trustee by a
certification (which certification shall include a statement to
the effect that all amounts received in connection with such
payment which are required to be credited to the applicable
Mortgage Loan Payment Record pursuant to Section 3.02 have been
so credited) of a Servicing Officer and shall request delivery to
it of the Mortgage File. If a Buydown Mortgage Loan is the
subject of a Principal Prepayment in full during the related
Buydown Period, the related Buydown Funds will be applied or
returned to the Person entitled thereto in accordance with the
terms of such Buydown Mortgage Loan. Upon receipt of such
certification and request in form satisfactory to the Trustee,
the Trustee shall promptly, but in any event within five Business
Days, release the related Mortgage File to the Company; provided,
that the Trustee shall not be responsible for any delay in the
release of a Mortgage File resulting from acts beyond its
control, including without limitation, acts of God, strikes,
lockouts, riots, acts of war or terrorism, epidemics,
nationalization, governmental regulations imposed after the fact,
fire, communication line failures, computer viruses, power
74
failures, earthquakes or other disasters. Upon any such payment
in full, the Company is authorized to execute, pursuant to the
authorization contained in Section 3.01, an instrument of
satisfaction regarding such Mortgage, which instrument of
satisfaction shall be recorded by the Company if required by
applicable law and be delivered to the Person entitled thereto,
it being understood and agreed that no expenses incurred in
connection with such instrument of satisfaction shall be
reimbursed from amounts at the time credited to the applicable
Mortgage Loan Payment Record. From time to time and as
appropriate for the servicing or foreclosure of any Mortgage Loan
(including, without limitation, collection under any Primary
Insurance Policy), the Trustee shall, upon request of the Company
and delivery to the Trustee of a receipt signed by a Servicing
Officer, release the related Mortgage File to the Company and
shall execute such documents as shall be necessary to the
prosecution of any such proceedings. Such receipt shall obligate
the Company to return the Mortgage File to the Trustee when the
need therefor by the Company no longer exists unless the Mortgage
Loan shall be liquidated, in which case, upon receipt of a
certificate of a Servicing Officer similar to that hereinabove
specified, the receipt shall be released by the Trustee to the
Company.
Section 3.10. Servicing Compensation; Payment of
Certain Expenses by the Company. (a) As compensation for its
activities and obligations hereunder, the Company shall be
entitled to withhold and pay to itself out of each payment
received by it on account of interest on each Mortgage Loan
(including the portion of any Buydown Funds applied to the
related Buydown Mortgage Loan for the applicable period) an
amount equal to the Servicing Fee. The aggregate of the Servicing
Fees payable to the Company on any Distribution Date in respect
of the Mortgage Loans in a Mortgage Pool shall be reduced by the
amount of any Compensating Interest Payment in respect of such
Mortgage Pool for such Distribution Date. Additional servicing
compensation in the form of Prepayment Interest Excess,
assumption fees, modification fees, late payment charges,
interest income or gain with respect to amounts deposited in the
Certificate Account and invested by the Company or otherwise
shall be retained by the Company, subject to Section 3.10(b), if
applicable. The Company shall be required to pay all expenses
incurred by it in connection with its activities hereunder
(including payment of Trustee fees and all other fees and
expenses not expressly stated hereunder to be for the account of
the Certificateholders) and shall not be entitled to
reimbursement therefor except as provided in Sections 3.01, 3.03,
3.04 and 3.08.
(b) The Company may, as a condition to granting any
request by a Mortgagor for any consent, modification, waiver or
amendment or any other matter or thing, the granting of which is
75
in the Company's discretion pursuant to the terms of the
instruments evidencing or securing the related Mortgage Loan and
is permitted by other sections of this Agreement, require (to the
extent permitted by applicable law) that such Mortgagor pay to it
a reasonable or customary fee in accordance with the schedule set
forth as Exhibit H (which may be amended from time to time by
provision of a revised schedule of such fees to the Trustee,
whereupon such revised schedule shall be deemed to be Exhibit H
hereunder) for the additional services performed in connection
with such request, together with any related costs and expenses
incurred by it. Such fees shall be additional servicing
compensation to the Company.
Section 3.11. Reports to the Trustee; Certificate
Account Statements. Not later than 15 days after each
Distribution Date, the Company shall forward to the Trustee a
statement, certified by a Servicing Officer, setting forth the
status of each Mortgage Loan Payment Record as of the close of
business on such Distribution Date and showing, for the period
covered by such statement, the aggregate of credits to each
Mortgage Loan Payment Record for each category of credit
specified in Section 3.02 and each category of debit specified in
Section 3.04.
Section 3.12. Annual Statement as to Compliance. The
Company will deliver to the Trustee, on or before March 31 of
each year, beginning with March 31, 1997, an Officer's
Certificate stating that (a) a review of the activities of the
Company during the preceding calendar year and of its performance
under this Agreement has been made under such Officer's
supervision and (b) to the best of such Officer's knowledge,
based on such review, the Company has fulfilled all its material
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.
Section 3.13. Annual Independent Public Accountants'
Servicing Report. On or before March 31 of each year, beginning
with March 31, 1997, the Company at its expense shall cause a
firm of independent public accountants (who may also render other
services to the Company) to furnish a report to the Trustee to
the effect that such firm has examined certain documents and
records relating to the servicing of mortgage loans under pooling
and servicing agreements (including this Agreement) substantially
similar to this Agreement (which agreements shall be described in
a schedule to such statement), and that such examination, which
has been conducted substantially in compliance with the Uniform
Single Attestation Program for Mortgage Bankers has disclosed no
items of noncompliance with the provisions of this Agreement
which, in the opinion of such firm, are material, except for such
items of noncompliance as shall be set forth in such report. For
76
purposes of such report, such firm may conclusively presume that
any pooling and servicing agreement which governs certificates
offered under a common registration statement under the
Securities Act of 1933 with the Certificates is similar to this
Agreement, unless such other pooling and servicing agreement
expressly states otherwise. In rendering such report, such firm
may rely, as to matters relating to direct servicing of Mortgage
Loans by any Primary Servicer, upon comparable reports of
independent public accountants with respect to such Primary
Servicer.
Section 3.14. Access to Certain Documentation and
Information Regarding the Mortgage Loans. To the extent permitted
by applicable law, the Company shall provide to the Trustee,
Certificateholders which are regulated insurance entities and the
applicable insurance regulatory agencies thereof,
Certificateholders which are federally insured savings and loan
associations, the Office of Thrift Supervision, the FDIC and the
supervisory agents and examiners thereof access to the
documentation regarding the Mortgage Loans required by applicable
regulations of the Office of Thrift Supervision or of such
insurance regulatory agencies, as the case may be, such access
being afforded without charge but only upon reasonable request
and during normal business hours at the offices of the Company.
Nothing in this Section 3.14 shall derogate from the obligation
of the Company to observe any applicable law prohibiting
disclosure of information regarding the Mortgagors and the
failure of the Company to provide access as provided in this
Section 3.14 as a result of such obligation shall not constitute
a breach of this Section 3.14.
Section 3.15. Maintenance of Certain Servicing
Policies. The Company shall during the term of its service as
servicer maintain in force (i) a policy or policies of insurance
covering errors and omissions in the performance of its
obligations as servicer hereunder and (ii) a fidelity bond in
respect of its officers, employees or agents. Each such policy or
policies and bond shall, together, comply with the requirements
from time to time of FNMA for persons performing servicing for
mortgage loans purchased by such association.
Section 3.16. Optional Purchase of Defaulted Mortgage
Loans. The Company shall have the right, but not the obligation,
to purchase any Defaulted Mortgage Loan for a price equal to the
Purchase Price therefor. Any such purchase shall be accomplished
as provided in Section 4.04(a) hereof.
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ARTICLE IV
PAYMENTS AND STATEMENTS
Section 4.01. Distributions. (a) On each Distribution
Date, the Trustee shall withdraw the Available Funds in respect
of Pool 1 from the Certificate Account and shall make
distributions to Holders of the Pool 1 Certificates as of the
preceding Record Date in the following order of priority, to the
extent of the remaining Available Funds in respect of Pool 1:
(i) to each Class of Pool 1 Senior Certificates (other
than any Class of Principal Only Certificates) and the
Class 1-S Certificates, the Accrued Certificate Interest
thereon for such Distribution Date; provided, however, that
any shortfall in available amounts shall be allocated among
such Classes in proportion to the amount of Accrued
Certificate Interest that would otherwise be distributable
thereon;
(ii) to each Class of Pool 1 Senior Certificates (other
than any Class of Principal Only Certificates) and the
Class 1-S Certificates, any related Unpaid Class Interest
Shortfall for such Distribution Date; provided, however,
that any shortfall in available amounts shall be allocated
among such Classes in proportion to the Unpaid Class
Interest Shortfall for each such Class on such Distribution
Date;
(iii) to the Classes of Pool 1 Senior Certificates, in
reduction of the Class Certificate Principal Balances
thereof, concurrently as follows:
(A) to the Class 1-PO Certificates, the PO
Principal Distribution Amount for the Pool 1
Certificates on such Distribution Date, until the
Class Certificate Principal Balance thereof has been
reduced to zero;
(B) to the Class 1-A8 and Class 1-A9
Certificates, the Group II Senior Optimal Principal
Amount for the Pool 1 Certificates on such
Distribution Date, pro rata in proportion to their
respective Class Certificate Principal Balances, until
the Class Certificate Principal Balance of each such
Class has been reduced to zero; and
(C) to the Class 1-A1, Class 1-A2, Class 1-A3,
Class 1-A4, Class 1-A5, Class 1-A6, Class 1-A7 and
Class R Certificates, the Group I Senior Optimal
Principal Amount for the Pool 1 Certificates on such
Distribution Date, in the following order of priority:
78
first, to the Class R Certificate, until the
Class Certificate Principal Balance thereof has
been reduced to zero;
second, concurrently, to the Class 1-A1,
Class 1-A2, Class 1-A3 and Class 1-A4
Certificates, 37.8900104207%, 42.2799901923%,
4.3199975481% and 15.5100018389%, respectively,
of the remaining Group I Senior Optimal Principal
Amount, until the Class Certificate Principal
Balance of the Class 1-A1 Certificates has been
reduced to zero;
third, concurrently, to the Class 1-A2,
Class 1-A3, Class 1-A4 and Class 1-A5
Certificates, pro rata in proportion to their
respective Class Certificate Principal Balances,
until the Class Certificate Principal Balance of
each such Class has been reduced to zero;
fourth, to the Class 1-A6 Certificates, until
the Class Certificate Principal Balance thereof
has been reduced to zero; and
fifth, to the Class 1-A7 Certificates, until
the Class Certificate Principal Balance thereof
has been reduced to zero;
(iv) to the Class 1-PO Certificates, any related Class
PO Deferred Amount for such Distribution Date, up to an
amount not to exceed the Junior Optimal Principal Amount
for the Pool 1 Certificates for such Distribution Date,
until the Class Certificate Principal Balance of such Class
has been reduced to zero; provided, that any such amounts
distributed to the Class 1-PO Certificates pursuant to this
clause (iv) shall not reduce the Class Certificate
Principal Balance thereof;
(v) to the Class 1-M Certificates, the Accrued
Certificate Interest thereon for such Distribution Date;
(vi) to the Class 1-M Certificates, any Unpaid Class
Interest Shortfall therefor on such Distribution Date;
(vii) to the Class 1-M Certificates, in reduction of the
Class Certificate Principal Balance thereof, such Class's
Allocable Share of the Junior Optimal Principal Amount for
the Pool 1 Certificates on such Distribution Date;
(viii) to the Class 1-B1 Certificates, the Accrued
Certificate Interest thereon for such Distribution Date;
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(ix) to the Class 1-B1 Certificates, any Unpaid Class
Interest Shortfall therefor on such Distribution Date;
(x) to the Class 1-B1 Certificates, in reduction of
the Class Certificate Principal Balance thereof, such
Class's Allocable Share of the Junior Optimal Principal
Amount for the Pool 1 Certificates on such Distribution
Date;
(xi) to the Class 1-B2 Certificates, the Accrued
Certificate Interest thereon for such Distribution Date;
(xii) to the Class 1-B2 Certificates, any Unpaid Class
Interest Shortfall therefor on such Distribution Date;
(xiii) to the Class 1-B2 Certificates, in reduction of
the Class Certificate Principal Balance thereof, such
Class's Allocable Share of the Junior Optimal Principal
Amount for the Pool 1 Certificates on such Distribution
Date;
(xiv) to the Class 1-B3 Certificates, the Accrued
Certificate Interest thereon for such Distribution Date;
(xv) to the Class 1-B3 Certificates, any Unpaid Class
Interest Shortfall therefor on such Distribution Date;
(xvi) to the Class 1-B3 Certificates, in reduction of
the Class Certificate Principal Balance thereof, such
Class's Allocable Share of the Junior Optimal Principal
Amount for the Pool 1 Certificates on such Distribution
Date;
(xvii) to the Class 1-B4 Certificates, the Accrued
Certificate Interest thereon for such Distribution Date;
(xviii) to the Class 1-B4 Certificates, any Unpaid Class
Interest Shortfall therefor on such Distribution Date;
(xix) to the Class 1-B4 Certificates, in reduction of
the Class Certificate Principal Balance thereof, such
Class's Allocable Share of the Junior Optimal Principal
Amount for the Pool 1 Certificates on such Distribution
Date;
(xx) to the Class 1-B5 Certificates, the Accrued
Certificate Interest thereon for such Distribution Date;
(xxi) to the Class 1-B5 Certificates, any Unpaid Class
Interest Shortfall therefor on such Distribution Date; and
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(xxii) to the Class 1-B5 Certificates, in reduction of
the Class Certificate Principal Balance thereof, such
Class's Allocable Share of the Junior Optimal Principal
Amount for the Pool 1 Certificates on such Distribution
Date.
Notwithstanding the foregoing, amounts otherwise distributable
pursuant to clauses (vii), (x), (xiii), (xvi), (xix) and (xxii)
on any Distribution Date shall be reduced, in inverse order of
priority, by any amount distributed pursuant to clause (iv) on
such date, such that such amount distributed pursuant to clause
(iv) on such date shall be applied first to reduce the amount
distributable pursuant to clause (xxii), and then, to the extent
of any excess, applied second, to reduce the amount distributable
pursuant to clause (xix), third, to reduce the amount
distributable pursuant to clause (xvi), fourth, to reduce the
amount distributable pursuant to clause (xiii), fifth, to reduce
the amount distributable pursuant to clause (x) and sixth, to
reduce the amount distributable pursuant to clause (vii).
If, on any Distribution Date, after distributions have been made
pursuant to clauses (i) and (ii) above, the remaining Available
Funds in respect of Pool 1 are insufficient to make the full
amount of distributions required to be made pursuant to clause
(iii) above, (1) the amount distributable to the Class 1-PO
Certificates pursuant to clause (iii)(A) shall be equal to the
product of (x) the remaining Available Funds in respect of Pool 1
and (y) the fraction, expressed as a percentage, the numerator of
which is the related PO Principal Distribution Amount for such
Distribution Date and the denominator of which is the sum of such
PO Principal Distribution Amount and the related Senior Optimal
Principal Amount for such Distribution Date; (2) the amount
distributable to the Pool 1 Senior Certificates other than the
Class 1-PO Certificates pursuant to clauses (iii)(B) and (C)
shall be equal to the product of (x) the remaining Available
Funds in respect of Pool 1 and (y) the fraction, expressed as a
percentage, the numerator of which is the related Senior Optimal
Principal Amount for such Distribution Date and the denominator
of which is the sum of such Senior Optimal Principal Amount and
the related PO Principal Distribution Amount for such
Distribution Date; and (3) the amounts distributable to the
related Group I Senior Certificates pursuant to clause (iii)(C)
and to the related Group II Senior Certificates pursuant to
clause (iii)(B), respectively, shall be equal to the product of
(x) the amount determined pursuant to clause (2) above and (y) a
fraction, expressed as a percentage, the numerator of which is
the related Group I Senior Optimal Principal Amount, in the case
of the related Group I Senior Certificates, or the related Group
II Senior Optimal Principal Amount, in the case of the related
Group II Senior Certificates, and the denominator of which is the
related Senior Optimal Principal Amount for such Distribution
Date.
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(b) On each Distribution Date, the Trustee shall
withdraw the Available Funds in respect of Pool 2 from the
Certificate Account and shall make distributions to Holders of
the Pool 2 Certificates as of the preceding Record Date in the
following order of priority, to the extent of the remaining
Available Funds in respect of Pool 2:
(i) to each Class of Pool 2 Senior Certificates (other
than any Class of Principal Only Certificates) and the
Class 2-S Certificates, the Accrued Certificate Interest
thereon for such Distribution Date; provided, however, that
any shortfall in available amounts shall be allocated among
such Classes in proportion to the amount of Accrued
Certificate Interest that would otherwise be distributable
thereon;
(ii) to each Class of Pool 2 Senior Certificates (other
than any Class of Principal Only Certificates) and the
Class 2-S Certificates, any related Unpaid Class Interest
Shortfall for such Distribution Date; provided, however,
that any shortfall in available amounts shall be allocated
among such Classes in proportion to the Unpaid Class
Interest Shortfall for each such Class on such Distribution
Date;
(iii) to the Classes of Pool 2 Senior Certificates, in
reduction of the Class Certificate Principal Balances
thereof, concurrently as follows:
(A) to the Class 2-PO Certificates, the PO
Principal Distribution Amount for the Pool 2
Certificates on such Distribution Date, until the
Class Certificate Principal Balance thereof has been
reduced to zero;
(B) to the Class 2-A5 Certificates, the Group II
Senior Optimal Principal Amount for the Pool 2
Certificates on such Distribution Date, until the
Class Certificate Principal Balance thereof has been
reduced to zero; and
(C) to the Class 2-A1, Class 2-A2, Class 2-A3 and
Class 2-A4 Certificates, the Group I Senior Optimal
Principal Amount for the Pool 2 Certificates on such
Distribution Date, in the following order of priority:
first, to the Class 2-A1 Certificates, until
the Class Certificate Principal Balance thereof
has been reduced to zero;
second, to the Class 2-A2 Certificates, until
the Class Certificate Principal Balance thereof
has been reduced to zero;
82
third, to the Class 2-A3 Certificates, until
the Class Certificate Principal Balance thereof
has been reduced to zero; and
fourth, to the Class 2-A4 Certificates, until
the Class Certificate Principal Balance thereof
has been reduced to zero;
(iv) to the Class 2-PO Certificates, any related Class
PO Deferred Amount for such Distribution Date, up to an
amount not to exceed the Junior Optimal Principal Amount
for the Pool 2 Certificates for such Distribution Date,
until the Class Certificate Principal Balance of such Class
has been reduced to zero; provided, that any such amounts
distributed to the Class 2-PO Certificates pursuant to this
clause (iv) shall not reduce the Class Certificate
Principal Balance thereof;
(v) to the Class 2-M Certificates, the Accrued
Certificate Interest thereon for such Distribution Date;
(vi) to the Class 2-M Certificates, any Unpaid Class
Interest Shortfall therefor on such Distribution Date;
(vii) to the Class 2-M Certificates, in reduction of the
Class Certificate Principal Balance thereof, such Class's
Allocable Share of the Junior Optimal Principal Amount for
the Pool 2 Certificates on such Distribution Date;
(viii) to the Class 2-B1 Certificates, the Accrued
Certificate Interest thereon for such Distribution Date;
(ix) to the Class 2-B1 Certificates, any Unpaid Class
Interest Shortfall therefor on such Distribution Date;
(x) to the Class 2-B1 Certificates, in reduction of
the Class Certificate Principal Balance thereof, such
Class's Allocable Share of the Junior Optimal Principal
Amount for the Pool 2 Certificates on such Distribution
Date;
(xi) to the Class 2-B2 Certificates, the Accrued
Certificate Interest thereon for such Distribution Date;
(xii) to the Class 2-B2 Certificates, any Unpaid Class
Interest Shortfall therefor on such Distribution Date;
(xiii) to the Class 2-B2 Certificates, in reduction of
the Class Certificate Principal Balance thereof, such
Class's Allocable Share of the Junior Optimal Principal
Amount for the Pool 2 Certificates on such Distribution
Date;
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(xiv) to the Class 2-B3 Certificates, the Accrued
Certificate Interest thereon for such Distribution Date;
(xv) to the Class 2-B3 Certificates, any Unpaid Class
Interest Shortfall therefor on such Distribution Date;
(xvi) to the Class 2-B3 Certificates, in reduction of
the Class Certificate Principal Balance thereof, such
Class's Allocable Share of the Junior Optimal Principal
Amount for the Pool 2 Certificates on such Distribution
Date;
(xvii) to the Class 2-B4 Certificates, the Accrued
Certificate Interest thereon for such Distribution Date;
(xviii) to the Class 2-B4 Certificates, any Unpaid Class
Interest Shortfall therefor on such Distribution Date;
(xix) to the Class 2-B4 Certificates, in reduction of
the Class Certificate Principal Balance thereof, such
Class's Allocable Share of the Junior Optimal Principal
Amount for the Pool 2 Certificates on such Distribution
Date;
(xx) to the Class 2-B5 Certificates, the Accrued
Certificate Interest thereon for such Distribution Date;
(xxi) to the Class 2-B5 Certificates, any Unpaid Class
Interest Shortfall therefor on such Distribution Date; and
(xxii) to the Class 2-B5 Certificates, in reduction of
the Class Certificate Principal Balance thereof, such
Class's Allocable Share of the Junior Optimal Principal
Amount for the Pool 2 Certificates on such Distribution
Date.
Notwithstanding the foregoing, amounts otherwise distributable
pursuant to clauses (vii), (x), (xiii), (xvi), (xix) and (xxii)
on any Distribution Date shall be reduced, in inverse order of
priority, by any amount distributed pursuant to clause (iv) on
such date, such that such amount distributed pursuant to clause
(iv) on such date shall be applied first to reduce the amount
distributable pursuant to clause (xxii), and then, to the extent
of any excess, applied second, to reduce the amount distributable
pursuant to clause (xix), third, to reduce the amount
distributable pursuant to clause (xvi), fourth, to reduce the
amount distributable pursuant to clause (xiii), fifth, to reduce
the amount distributable pursuant to clause (x) and sixth, to
reduce the amount distributable pursuant to clause (vii).
If, on any Distribution Date, after distributions have been made
pursuant to clauses (i) and (ii) above, the remaining Available
84
Funds in respect of Pool 2 are insufficient to make the full
amount of distributions required to be made pursuant to clause
(iii) above, (1) the amount distributable to the Class 2-PO
Certificates pursuant to clause (iii)(A) shall be equal to the
product of (x) the remaining Available Funds in respect of Pool 2
and (y) the fraction, expressed as a percentage, the numerator of
which is the related PO Principal Distribution Amount for such
Distribution Date and the denominator of which is the sum of such
PO Principal Distribution Amount and the related Senior Optimal
Principal Amount for such Distribution Date; (2) the amount
distributable to the Pool 2 Senior Certificates other than the
Class 2-PO Certificates pursuant to clauses (iii)(B) and (C)
shall be equal to the product of (x) the remaining Available
Funds in respect of Pool 2 and (y) the fraction, expressed as a
percentage, the numerator of which is the related Senior Optimal
Principal Amount for such Distribution Date and the denominator
of which is the sum of such Senior Optimal Principal Amount and
the related PO Principal Distribution Amount for such
Distribution Date; and (3) the amounts distributable to the
related Group I Senior Certificates pursuant to clause (iii)(C)
and to the related Group II Senior Certificates pursuant to
clause (iii)(B), respectively, shall be equal to the product of
(x) the amount determined pursuant to clause (2) above and (y) a
fraction, expressed as a percentage, the numerator of which is
the related Group I Senior Optimal Principal Amount, in the case
of the related Group I Senior Certificates, or the related Group
II Senior Optimal Principal Amount, in the case of the related
Group II Senior Certificates, and the denominator of which is the
related Senior Optimal Principal Amount for such Distribution
Date.
(c) On each Distribution Date, the Trustee shall
distribute to the holder of the Class R Certificate any remaining
Available Funds for such Distribution Date after application of
all amounts described in clauses (a) and (b) of this Section
4.01. Any distributions pursuant to this clause (c) shall not
reduce the Class Certificate Principal Balance of the Class R
Certificate.
(d) If on any Distribution Date the Class Certificate
Principal Balances of the Pool 1 Junior Certificates have each
been reduced to zero, the amount distributable to the Pool 1
Senior Certificates other than the Class 1-PO Certificates
pursuant to Section 4.01(a)(iii)(B) and (C) for such Distribution
Date and each succeeding Distribution Date shall be allocated
among such Classes of Pool 1 Senior Certificates, pro rata, on
the basis of their respective Class Certificate Principal
Balances immediately prior to such Distribution Date, regardless
of the priorities and amounts set forth in Section
4.01(a)(iii)(B) and (C).
85
If on any Distribution Date the Class Certificate
Principal Balances of the Pool 2 Junior Certificates have each
been reduced to zero, the amount distributable to the Pool 2
Senior Certificates other than the Class 2-PO Certificates
pursuant to Section 4.01(b)(iii)(B) and (C) for such Distribution
Date and each succeeding Distribution Date shall be allocated
among such Classes of Pool 2 Senior Certificates, pro rata, on
the basis of their respective Class Certificate Principal
Balances immediately prior to such Distribution Date, regardless
of the priorities and amounts set forth in Section
4.01(b)(iii)(B) and (C).
(e) If on any Distribution Date (i) the Class
Certificate Principal Balance of a Class of Class M Certificates
or any Class of Class B Certificates for which the related
Prepayment Distribution Trigger was satisfied on such
Distribution Date is reduced to zero and (ii) amounts
distributable pursuant to clauses (ii), (iv) and (v) of the
Junior Optimal Principal Amount for the related Certificate Group
remain undistributed on such Distribution Date after all amounts
otherwise distributable on such date pursuant to clauses (iv)
through (xxii) of Section 4.01(a), in the case of the Pool 1
Certificates, or Section 4.01(b), in the case of the Pool 2
Certificates, have been distributed, such amounts shall be
distributed on such Distribution Date to the remaining Classes of
Junior Certificates of such Certificate Group in order of
priority, such that no such distribution shall be made to any
Class of Junior Certificates while a prior such Class of the
related Certificate Group is outstanding.
(f) [Reserved].
Section 4.02. Method of Distribution. (a) All
distributions with respect to each Class of Certificates on each
Distribution Date shall be made pro rata among the outstanding
Certificates of such Class, based on the Percentage Interest in
such Class represented by each Certificate. Payments to the
Certificateholders on each Distribution Date will be made by the
Trustee to the Certificateholders of record on the related Record
Date (other than as provided in Section 9.01 respecting the final
distribution) by check or money order mailed to a
Certificateholder at the address appearing in the Certificate
Register, or upon written request by such Certificateholder to
the Trustee made not later than the applicable Record Date, by
wire transfer to a U.S. depository institution acceptable to the
Trustee, or by such other means of payment as such
Certificateholder and the Trustee shall agree.
(b) Each distribution with respect to a Book-Entry
Certificate shall be paid to the Depository, which shall credit
the amount of such distribution to the accounts of its Depository
Participants in accordance with its normal procedures. Each
86
Depository Participant shall be responsible for disbursing such
distribution to the Certificate Owners that it represents and to
each Financial Intermediary for which it acts as agent. Each
Financial Intermediary shall be responsible for disbursing funds
to the Certificate Owners that it represents. All such credits
and disbursements with respect to a Book-Entry Certificate are to
be made by the Depository and the Depository Participants in
accordance with the provisions of the applicable Certificates.
Neither the Trustee nor the Company shall have any responsibility
therefor except as otherwise provided by applicable law.
(c) The Trustee shall withhold or cause to be withheld
such amounts as it reasonably determines are required by the Code
(giving full effect to any exemptions from withholding and
related certifications required to be furnished by
Certificateholders or Certificate Owners and any reductions to
withholding by virtue of any bilateral tax treaties and any
applicable certification required to be furnished by
Certificateholders or Certificate Owners with respect thereto)
from distributions to be made to Non-U.S. Persons. If the Trustee
reasonably determines that a more accurate determination of the
amount required to be withheld for a distribution can be made
within a reasonable period after the scheduled date for such
distribution, it may hold such distribution in trust for a holder
of a Residual Certificate until such determination can be made.
For the purposes of this paragraph, a "Non-U.S. Person" is an
individual, corporation, partnership or other person other than 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 that is subject to U.S. federal income tax
regardless of the source of its income.
Section 4.03. Allocation of Losses. (a) On or prior to
each Determination Date, the Company shall determine the amount
of any Realized Loss in respect of each Mortgage Loan in each
Mortgage Pool that occurred during the immediately preceding
calendar month.
(b) With respect to any Distribution Date, the
principal portion of each Realized Loss (other than any Excess
Loss) in respect of Pool 1 shall be allocated as follows:
(i) the applicable PO Percentage of the principal
portion of any such Realized Loss shall be allocated to the
Class 1-PO Certificates until the Class Certificate
Principal Balance thereof has been reduced to zero; and
(ii) the applicable Non-PO Percentage of the principal
portion of any such Realized Loss shall be allocated in the
following order of priority:
87
first, to the Class 1-B5 Certificates until the
Class Certificate Principal Balance thereof has been
reduced to zero;
second, to the Class 1-B4 Certificates until the
Class Certificate Principal Balance thereof has been
reduced to zero;
third, to the Class 1-B3 Certificates until the
Class Certificate Principal Balance thereof has been
reduced to zero;
fourth, to the Class 1-B2 Certificates until the
Class Certificate Principal Balance thereof has been
reduced to zero;
fifth, to the Class 1-B1 Certificates until the
Class Certificate Principal Balance thereof has been
reduced to zero;
sixth, to the Class 1-M Certificates until the
Class Certificate Principal Balance thereof has been
reduced to zero; and
seventh, to the Classes of Pool 1 Senior
Certificates other than the Class 1-PO Certificates,
pro rata, in accordance with their Class Certificate
Principal Balances; provided, that any such loss
allocated to any Class of Accrual Certificates (and
any Accrual Component) shall be allocated (subject to
Section 4.03(d)) on the basis of the lesser of (x) the
Class Certificate Principal Balance (or Component
Principal Balance) thereof immediately prior to the
applicable Distribution Date and (y) the Class
Certificate Principal Balance (or Component Principal
Balance) thereof on the Closing Date (as reduced by
any Realized Losses previously allocated thereto); and
provided, further, that all such losses, other than
Non-Credit Losses, that would otherwise be allocable
to the Class 1-A6 and Class 1-A7 Certificates shall be
allocable, first, to the Class 1-A9 Certificates,
until the Class Certificate Principal Balance thereof
has been reduced to zero, and second, to the Class
1-A6 and Class 1-A7 Certificates, in proportion to the
respective Class Certificate Principal Balances
thereof.
With respect to any Distribution Date, the principal
portion of each Realized Loss (other than any Excess Loss) in
respect of Pool 2 shall be allocated as follows:
88
(i) the applicable PO Percentage of the principal
portion of any such Realized Loss shall be allocated to the
Class 2-PO Certificates until the Class Certificate
Principal Balance thereof has been reduced to zero; and
(ii) the applicable Non-PO Percentage of the principal
portion of any such Realized Loss shall be allocated in the
following order of priority:
first, to the Class 2-B5 Certificates until the
Class Certificate Principal Balance thereof has been
reduced to zero;
second, to the Class 2-B4 Certificates until the
Class Certificate Principal Balance thereof has been
reduced to zero;
third, to the Class 2-B3 Certificates until the
Class Certificate Principal Balance thereof has been
reduced to zero;
fourth, to the Class 2-B2 Certificates until the
Class Certificate Principal Balance thereof has been
reduced to zero;
fifth, to the Class 2-B1 Certificates until the
Class Certificate Principal Balance thereof has been
reduced to zero;
sixth, to the Class 2-M Certificates until the
Class Certificate Principal Balance thereof has been
reduced to zero; and
seventh, to the Classes of Pool 2 Senior
Certificates other than the Class 2-PO Certificates,
pro rata, in accordance with their Class Certificate
Principal Balances; provided, that any such loss
allocated to any Class of Accrual Certificates (and
any Accrual Component) shall be allocated (subject to
Section 4.03(d)) on the basis of the lesser of (x) the
Class Certificate Principal Balance (or Component
Principal Balance) thereof immediately prior to the
applicable Distribution Date and (y) the Class
Certificate Principal Balance (or Component Principal
Balance) thereof on the Closing Date (as reduced by
any Realized Losses previously allocated thereto).
(c) With respect to any Distribution Date, the
principal portion of any Excess Loss in respect of a Mortgage
Pool (other than Excess Bankruptcy Losses attributable to Debt
Service Reductions) shall be allocated as follows: (1) the
applicable PO Percentage of any such loss shall be allocated to
89
the Class 1-PO Certificates, in the case of Pool 1, and to the
Class 2-PO Certificates, in the case of Pool 2, and (2) the
applicable Non-PO Percentage of any such loss shall be allocated
to each Class of Pool 1 Certificates other than the Class 1-PO
Certificates, in the case of Pool 1, and to each Class of Pool 2
Certificates other than the Class 2-PO Certificates, in the case
of Pool 2, pro rata, based on the respective Class Certificate
Principal Balances thereof; provided, that any such loss
allocated to any Class of Accrual Certificates (and any Accrual
Component) shall be allocated (subject to Section 4.03(d)) on the
basis of the lesser of (x) the Class Certificate Principal
Balance (or Component Principal Balance) thereof immediately
prior to the applicable Distribution Date and (y) the Class
Certificate Principal Balance (or Component Principal Balance)
thereof on the Closing Date (as reduced by any Realized Losses
previously allocated thereto).
(d) Any Realized Losses allocated to a Class of
Certificates pursuant to Section 4.03(b) or (c) shall be
allocated among the Certificates of such Class in proportion to
their respective Certificate Principal Balances. In addition, any
Realized Losses allocated to any Class of Component Certificates
on a Distribution Date shall be allocated in reduction of the
Component Principal Balances of the related Components (other
than any Notional Component) in proportion to their respective
Component Principal Balances immediately prior to such
Distribution Date. Any allocation of Realized Losses pursuant to
this paragraph (d) shall be accomplished by reducing the
Certificate Principal Balance (or, in the case of any Component,
the Component Principal Balance) of the related Certificates (or
Components) on the related Distribution Date in accordance with
Section 4.03(e).
(e) Realized Losses allocated in accordance with this
Section 4.03 shall be allocated on the Distribution Date in the
month following the month in which such loss was incurred and, in
the case of the principal portion thereof, after giving effect to
distributions made on such Distribution Date, except that the
aggregate amount of Realized Losses in respect of Pool 1 to be
allocated to the Class 1-PO Certificates on such Distribution
Date will be taken into account in determining distributions in
respect of any related Class PO Deferred Amount for such date,
and the aggregate amount of Realized Losses in respect of Pool 2
to be allocated to the Class 2-PO Certificates on such
Distribution Date will be taken into account in determining
distributions in respect of any related Class PO Deferred Amount
for such date.
(f) On each Distribution Date, the Company shall
determine the Subordinate Certificate Writedown Amount, if any,
for each Mortgage Pool. Any such Subordinate Certificate
Writedown Amount shall effect a corresponding reduction in the
90
Certificate Principal Balance of the Subordinate Certificates of
the related Certificate Group, which reduction shall occur on
such Distribution Date after giving effect to distributions made
on such Distribution Date.
(g) Notwithstanding the foregoing, no such allocation
of the principal portion of any Realized Loss in respect of a
Mortgage Pool shall be made on a Distribution Date to a Class of
Certificates of the related Certificate Group to the extent that
such allocation would result in the reduction of the aggregate
Certificate Principal Balances of all the Certificates as of such
Distribution Date, after giving effect to all distributions and
prior allocations of Realized Losses in respect of such Mortgage
Pool on such date, to an amount less than the aggregate Scheduled
Principal Balance of the Mortgage Loans in the related Mortgage
Pool as of the first day of the month of such Distribution Date,
less any Deficient Valuations occurring on or prior to the
related Bankruptcy Coverage Termination Date (such limitation,
the related "Loss Allocation Limitation").
Section 4.04. Monthly Advances; Purchases of Defaulted
Mortgage Loans. (a) The Company shall be required to make Monthly
Advances in the manner and to the extent provided herein. Prior
to the close of business on each Determination Date, the Company
shall determine (i) the amount of the Monthly Advance which it is
required to make on the related Distribution Date and (ii)
whether it has elected to purchase any Defaulted Mortgage Loan or
Loans on such Distribution Date. If the Company so elects to
purchase any Defaulted Mortgage Loans (or is required to purchase
any Mortgage Loan pursuant to Section 2.02 or 2.03(a) or purchase
any Modified Mortgage Loan pursuant to Section 3.01(c)), no
Monthly Advance shall be required with respect thereto for the
month in which such purchase occurs (or, in the case of a
purchase of a Modified Mortgage Loan, in the month in which the
Purchase Price thereof is required to be deposited in the
Certificate Account). The Company shall include information as to
each of such determinations in the Servicer's Certificate
furnished by it to the Trustee in accordance with Section 4.06
and shall be obligated to deposit in the Certificate Account
pursuant to Section 3.02(d) on or before 11:00 a.m. New York time
on the Business Day next preceding the following Distribution
Date the respective amounts applicable to such determinations
appearing in such Servicer's Certificate. Upon receipt by the
Trustee of written notification signed by a Servicing Officer of
any such deposit relating to the purchase by the Company of such
a Mortgage Loan, the Trustee shall release to the Company the
related Mortgage File and shall execute and deliver such
instruments of transfer or assignment, in each case without
recourse, as shall be necessary to vest in the Company any
Mortgage Loan released pursuant hereto.
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(b) In the event that the Company deposits or expects
to deposit less than the Available Funds in respect of a Mortgage
Pool required to be deposited by it pursuant to Section 3.02(d),
the Company shall so notify the Trustee no later than 9:00 a.m.
on the Business Day preceding the related Distribution Date, and
the amount so deposited, if any, shall be deemed to have been
deposited first pursuant to clause (i) of the definition of
Available Funds for such Mortgage Pool, second pursuant to clause
(iii) of the definition of Available Funds for such Mortgage
Pool, and third pursuant to clause (ii) of the definition of
Available Funds for such Mortgage Pool. Such notice shall specify
each Mortgage Loan delinquent as of the preceding Determination
Date. In such event, the Trustee shall make any Monthly Advance
required to be made hereunder, in the manner and to the extent
required; provided, the Trustee shall not be so obligated if
prohibited by applicable law.
(c) In the event that the Company is succeeded
hereunder as servicer, the obligation to make Monthly Advances in
the manner and to the extent required by Section 4.04(a) shall be
assumed by the successor servicer (subject to Section 7.02).
Section 4.05. Statements to Certificateholders. (a)
Each month, at least two Business Days prior to each Distribution
Date, the Company shall deliver to the Trustee for mailing to
each Certificateholder, and the Trustee shall mail to each
Certificateholder on such Distribution Date, a statement (each, a
"Distribution Date Statement") substantially in the form of
Exhibit J hereto, setting forth:
(i) The amount of such distribution to the
Certificateholders of each Class (and in respect of any
Component), other than any Notional Certificates (and any
Notional Component), allocable to principal, separately
identifying the aggregate amount of any Principal Prepay-
ments included therein (including, for this purpose, the
Scheduled Principal Balances of all Defaulted Mortgage
Loans and Defective Mortgage Loans purchased pursuant to
Section 2.02, 2.03(b) or 3.16, respectively, and any
amounts deposited pursuant to Section 2.03(b) in connection
with the substitution of any Mortgage Loans pursuant to
Section 2.02 or 2.03(a), the proceeds of which purchases or
substitutions are being distributed on such Distribution
Date);
(ii) The amount of such distribution to the
Certificateholders of each Class (other than any Class of
Principal Only Certificates) allocable to interest,
including any Accrual Amount added to the Class Certificate
Principal Balance of any Class of Accrual Certificates;
(iii) The amount of servicing compensation paid to the
Company during the month preceding the month of distribution
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in respect of the Mortgage Loans and such other customary
information as the Company deems necessary or desirable to
enable Certificateholders to prepare their tax returns;
(iv) The Pool Scheduled Principal Balance for each
Mortgage Pool and the aggregate number of the Mortgage
Loans in each Mortgage Pool on the preceding Due Date after
giving effect to all distributions allocable to principal
made on such Distribution Date;
(v) The Class Certificate Principal Balance (or
Notional Principal Balance) of each Class and the
Certificate Principal Balance (or Notional Principal
Balance) of a Single Certificate of each Class after giving
effect to (i) all distributions allocable to principal (or
reductions in the Notional Principal Balance, in the case
of the Notional Certificates, or the addition of any
Accrual Amount, in the case of any Class of Accrual
Certificates) made on such Distribution Date and (ii) the
allocation of any Realized Losses and any Subordinate
Certificate Writedown Amount for such Distribution Date;
(vi) The Pay-out Rate applicable to each Class of
Certificates;
(vii) The book value and unpaid principal balance of any
real estate acquired on behalf of Certificateholders
through foreclosure, or grant of a deed in lieu of
foreclosure or otherwise, of any REO Mortgage Loan, and the
number of the related Mortgage Loans, separately identified
as to each Mortgage Pool;
(viii) The aggregate Scheduled Principal Balances and
number of Mortgage Loans which, as of the close of business
on the last day of the month preceding the related
Distribution Date, were (a) delinquent as to a total of (x)
30-59 days, (y) 60-89 days and (z) 90 days or more, and (b)
in foreclosure, separately identified as to each Mortgage
Pool;
(ix) The Scheduled Principal Balance of any Mortgage
Loan replaced pursuant to Section 2.03(b), and of any
Modified Mortgage Loan purchased pursuant to Section
3.01(c), and the number of such Mortgage Loans, separately
identified as to each Mortgage Pool;
(x) The Certificate Interest Rates of any LIBOR
Certificates, any COFI Certificates and any Class S
Certificates applicable to the Interest Accrual Period
relating to such Distribution Date and such Class;
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(xi) The Senior Percentage, Group I Senior Percentage,
Group II Senior Percentage and Junior Percentage for each
Certificate Group for such Distribution Date; and
(xii) The Senior Prepayment Percentage, Group I Senior
Prepayment Percentage, Group II Senior Prepayment Percentage
and Junior Prepayment Percentage for each Certificate Group
for such Distribution Date.
In the case of information furnished pursuant to
clauses (i) through (iii) above, the amounts shall be expressed
as a dollar amount per Single Certificate.
In connection with any proposed transfer of a
Certificate that is purported to be made in reliance on Rule 144A
under the Securities Act, the Company shall be responsible for
furnishing such information as may be required thereunder to a
proposed transferee. In furtherance of the Company's obligations
hereunder, the Company hereby instructs the Trustee, at the
Company's expense and on its behalf, and the Trustee agrees, to
promptly make available to the proposed transferee, upon request
of the holder, (i) all statements furnished to Certificateholders
pursuant to this Section 4.05(a) on previous Distribution Dates,
(ii) all certificates furnished to the Trustee pursuant to
Section 4.06 in prior months, (iii) Officer's Certificates
furnished to the Trustee pursuant to Section 3.12 for the two
years preceding such request, (iv) reports of independent
accountants furnished to the Trustee pursuant to Section 3.13 for
the two years preceding such request, (v) a copy of the Private
Placement Memorandum relating to such Certificate, together with
any amendments or supplements thereto issued by the Company
(which copy shall be furnished to the Trustee by the Company),
and (vi) the Company's Current Report on Form 8-K, dated the
Closing Date, relating to the Mortgage Loans; provided, however,
that the Trustee shall in no event be required to make available
such statements or certificates pursuant to clauses (i) and (ii)
above relating to Distribution Dates occurring more than
twenty-four months preceding the month in which such request was
received; provided, further, however, that notwithstanding the
Trustee's agreement as aforesaid to provide such materials to a
proposed transferee, the Trustee does not assume, and shall not
thereby be deemed to have assumed, any responsibility for
compliance by the Company with Rule 144A (subject to the
Trustee's agreement set forth in the second sentence of this
paragraph) and shall be entitled to include a notice with such
statements or certificates to the effect that such materials have
not been prepared or assembled by the Trustee and that the
Trustee assumes no responsibility for the adequacy, sufficiency
or contents thereof. In connection with any such proposed
transfer, the Company shall make available to the proposed
holder, at the request of the related transferor, such additional
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information, if any, as may be required to be delivered pursuant
to Rule 144A(d)(4).
(b) On or prior to January 20th of each year,
commencing in 1997, the Company shall furnish to the Trustee for
mailing to each Person who at any time during the calendar year
was a Certificateholder a statement containing information
required to be provided pursuant to the Code.
Section 4.06. Servicer's Certificate. Each month, not
later than the second Business Day next preceding each
Distribution Date, the Company shall deliver to the Trustee a
completed Servicer's Certificate.
Section 4.07. Reports of Foreclosures and Abandonments
of Mortgaged Property. The Trustee (or the Company on behalf of
the Trustee) shall, in each year beginning after 1996, make the
reports of foreclosures and abandonments of any Mortgaged
Property as required by section 6050J of the Code. In order to
facilitate this reporting process, the Company, on or before
January 15th of each year, shall provide to the Trustee reports
relating to each instance occurring during the previous calendar
year in which the Company (i) on behalf of the Trustee acquires
an interest in a Mortgaged Property through foreclosure or other
comparable conversion in full or partial satisfaction of a
Mortgage Loan, or (ii) knows or has reason to know that a
Mortgaged Property has been abandoned. Reports from the Company
shall be in form and substance sufficient to meet the reporting
requirements imposed by section 6050J of the Code.
Section 4.08. Reduction of Servicing Fees by
Compensating Interest Payments. The aggregate amount of the
Servicing Fees subject to retention by the Company as servicer in
respect of any Distribution Date and either Mortgage Pool shall
be reduced by the amount of any Compensating Interest Payment for
such Distribution Date and such Mortgage Pool.
ARTICLE V
THE CERTIFICATES
Section 5.01. The Certificates. (a) The Certificates
shall be substantially in the forms set forth in Exhibit A
hereto, as applicable, and shall, on original issue, be executed
by the Trustee, not in its individual capacity but solely as
Trustee, and countersigned and delivered by the Trustee to or
upon the order of the Company as provided in Article II.
(b) The Certificates shall be issued in an aggregate
Initial Certificate Principal Balance of $435,951,276.02. Such
aggregate original principal balance shall be divided among the
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Classes having the designations, Class Certificate Principal
Balances, Certificate Interest Rates and minimum denominations as
follows:
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Initial
Class
Certificate Certificate
Principal Interest Minimum
Designation Balance Rate Denominations
Class 1-A1 $51,260,000.00 7.500% $ 25,000
Class 1-A2 59,854,000.00 7.750 25,000
Class 1-A3 8,457,000.00 7.250 25,000
Class 1-A4 30,363,000.00 8.500 25,000
Class 1-A5 45,830,000.00 7.625 25,000
Class 1-A6 35,354,000.00 7.750 25,000
Class 1-A7 42,083,000.00 7.750 25,000
Class 1-A8 26,759,000.00 7.750 25,000
Class 1-A9 7,406,000.00 7.750 25,000
Class 1-PO 938,116.78 0.000 250,000
Class 1-S (1) (1) 12,500,000
Class 1-M 5,694,000.00 7.750 100,000
Class 1-B1 3,254,000.00 7.750 100,000
Class 1-B2 4,067,000.00 7.750 100,000
Class 1-B3 1,627,000.00 7.750 250,000
Class 1-B4 976,000.00 7.750 250,000
Class 1-B5 1,465,048.43 7.750 250,000
Class R 100.00 7.750 100
Class 2-A1 41,251,000.00 7.250 25,000
Class 2-A2 19,237,000.00 7.250 25,000
Class 2-A3 26,125,000.00 7.250 25,000
Class 2-A4 11,770,000.00 7.250 25,000
Class 2-A5 7,796,000.00 7.250 25,000
Class 2-PO 238,670.65 0.000 250,000
Class 2-S (1) (1) 12,500,000
Class 2-M 1,658,000.00 7.250 100,000
Class 2-B1 829,000.00 7.250 100,000
Class 2-B2 775,000.00 7.250 100,000
Class 2-B3 276,000.00 7.250 250,000
Class 2-B4 166,000.00 7.250 166,000
Class 2-B5 442,340.16 7.250 250,000
(1) The Class 1-S and Class 2-S Certificates are issued with
initial Notional Principal Balances of $293,862,982.08 and
$103,736,974.96, respectively, and shall bear interest at
the related Strip Rate.
(c) The Certificates shall be issuable in registered
form only. The Book-Entry Certificates will be evidenced by one
or more certificates, beneficial ownership of which will be held
in the minimum dollar denominations in Certificate Principal
Balance or Notional Principal Balance, as applicable, specified
in Section 5.01(b), and integral multiples of $1,000 in excess
thereof. The Non-Book-Entry Certificates other than the Residual
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Certificate shall each be issued in the minimum dollar
denominations in Certificate Principal Balance or Notional
Principal Balance, as applicable, specified in Section 5.01(b),
and integral multiples of $1,000 (or $1,000,000 in the case of
the Class S Certificates) in excess thereof (and, if necessary,
in the amount of the remaining Class Certificate Principal
Balance or Notional Principal Balance, as applicable, of each
Class, in the case of one Certificate of such Class). The
Residual Certificate shall be issued as a single certificate
evidencing the entire Class Certificate Principal Balance of such
Class and having a Percentage Interest of 100%. If necessary, one
Certificate of each Class of Book-Entry Certificates and any
Notional Certificates that are Non-Book-Entry Certificates may
evidence an additional amount equal to the remainder of the Class
Certificate Principal Balance (or Notional Principal Balance) of
such Class.
(d) The Certificates shall be executed by manual or
facsimile signature on behalf of the Trustee by an authorized
officer under its seal, which may be in facsimile form and be
imprinted or otherwise reproduced thereon. 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
Certificate. No Certificate shall be entitled to any benefit
under this Agreement, or be valid for any purpose, unless such
Certificate shall have been manually countersigned by the Trustee
substantially in the forms set forth in Exhibit A hereto, and
such countersignature upon any Certificate shall be conclusive
evidence, and the only evidence, that such Certificate has been
duly executed and delivered hereunder. All Certificates issued on
the Closing Date shall be dated the Closing Date; all
Certificates issued thereafter shall be dated the date of their
countersignature.
(e) The Strip Rates for each Interest Accrual Period
shall be determined by the Company and included in the Servicer's
Certificate for the related Distribution Date.
Section 5.02. Registration of Transfer and Exchange of
Certificates. (a) The Trustee shall cause to be kept at an office
or agency in the city in which the Corporate Trust Office of the
Trustee is located or in the City of New York, New York a
Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Trustee shall provide for
the registration of Certificates and of transfers and exchanges
of Certificates as herein provided. The Trustee shall initially
serve as Certificate Registrar for the purpose of registering
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Certificates and transfers and exchanges of Certificates as
herein provided.
Subject to Sections 5.02(b) and 5.02(c), upon
surrender for registration of transfer of any Certificate at the
Corporate Trust Office, the Trustee shall execute, authenticate
and deliver, in the name of the designated transferee or
transferees, one or more new Certificates of the same Class in
authorized denominations of a like Percentage Interest.
At the option of a Certificateholder, Certificates may
be exchanged for other Certificates of authorized denominations
of a like Class and Percentage Interest, upon surrender of the
Certificates to be exchanged at any such office or agency.
Whenever any Certificates are so surrendered for exchange the
Trustee shall execute, countersign and deliver the Certificates
which the Certificateholder making the exchange is entitled to
receive. Every Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a
written instrument of transfer in form satisfactory to the
Trustee and the Certificate Registrar duly executed by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration
of transfer or exchange of Certificates, but the Trustee may
require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any
transfer or exchange of Certificates.
All Certificates surrendered for registration of
transfer and exchange shall be canceled and subsequently
destroyed by the Trustee and a certificate of destruction shall
be delivered by the Trustee to the Company.
(b) No legal or beneficial interest in all or any
portion of the Residual Certificates may be transferred directly
or indirectly to (i) a Disqualified Organization or an agent of a
Disqualified Organization (including a broker, nominee, or
middleman), (ii) an entity that holds REMIC residual securities
as nominee to facilitate the clearance and settlement of such
securities through electronic book-entry changes in accounts of
participating organizations (a "Book-Entry Nominee"), or (iii) an
individual, corporation, partnership or other person unless such
transferee (A) is not a Non-U.S. Person or (B) is a Non-U.S.
Person that holds a Residual Certificate in connection with the
conduct of a trade or business within the United States and has
furnished the transferor and the Trustee with an effective
Internal Revenue Service Form 4224 or (C) is a Non-U.S. Person
that has delivered to both the transferor and the Trustee an
opinion of a nationally recognized tax counsel to the effect that
the transfer of a Residual Certificate to it is in accordance
with the requirements of the Code and the regulations promulgated
99
thereunder and that such transfer of a Residual Certificate will
not be disregarded for federal income tax purposes (any such
person who is not covered by clause (A), (B) or (C) above being
referred to herein as a "Non-permitted Foreign Holder"), and any
such purported transfer shall be void and have no effect. The
Trustee shall not execute, and shall not authenticate and
deliver, a Residual Certificate in connection with any transfer
thereof unless the transferor shall have provided to the Trustee
an affidavit, substantially in the form attached as Exhibit F
hereto, signed by the transferee, to the effect that the
transferee is not such a Disqualified Organization, an agent
(including a broker, nominee, or middleman) for any entity as to
which the transferee has not received a substantially similar
affidavit, a Book-Entry Nominee or a Non-permitted Foreign
Holder, which affidavit shall contain the consent of the
transferee to any such amendments of this Agreement as may be
required to further effectuate the foregoing restrictions on
transfer of the Residual Certificates to Disqualified
Organizations, Book-Entry Nominees or Non-permitted Foreign
Holders, and an agreement by the Transferee that it will not
transfer a Residual Certificate without providing to the Trustee
an affidavit substantially in the form attached as Exhibit F
hereto and a letter substantially in the form attached as Exhibit
G hereto. Such affidavit shall also contain the statement of the
transferee that (i) it does not have the intention to impede the
assessment or collection of any federal, state or local taxes
legally required to be paid with respect to the Residual
Certificates and (ii) it understands that it may incur tax
liabilities in excess of cash flows generated by a Residual
Certificate and that it intends to pay taxes associated with
holding a Residual Certificate as they become due.
The affidavit described in the preceding paragraph, if
not executed in connection with the initial issuance of the
Residual Certificates, shall be accompanied by a written
statement in the form attached as Exhibit G hereto, signed by the
transferor, to the effect that as of the time of the transfer,
the transferor has (i) no actual knowledge that the transferee is
a Disqualified Organization, Book-Entry Nominee or Non-permitted
Foreign Holder, (ii) no reason to believe that the transferee has
the intention to impede the assessment or collection of any
federal, state or local taxes legally required to be paid with
respect to a Residual Certificate, and (iii) conducted a
reasonable investigation and found that the transferee had
historically paid its debts as they came due and found no
significant evidence to indicate that the transferee will not
continue to pay its debts as they become due. The Residual
Certificates shall bear a legend referring to the foregoing
restrictions contained in this paragraph and the preceding
paragraph.
Upon notice to the Company that any legal or beneficial
interest in any portion of the Residual Certificates has been
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transferred, directly or indirectly, to a Disqualified
Organization or agent thereof (including a broker, nominee, or
middleman) in contravention of the foregoing restrictions, (i)
such transferee shall be deemed to hold the Residual Certificate
in constructive trust for the last transferor who was not a
Disqualified Organization or agent thereof, and such transferor
shall be restored as the owner of such Residual Certificate as
completely as if such transfer had never occurred, provided that
the Company may, but is not required to, recover any
distributions made to such transferee with respect to the
Residual Certificate and return such recovery to the transferor,
and (ii) the Company agrees to furnish to the Internal Revenue
Service and to any transferor of the Residual Certificate or such
agent (within 60 days of the request therefor by the transferor
or agent) such information necessary to the application of
section 860E(e) of the Code as may be required by the Code,
including but not limited to the present value of the total
anticipated excess inclusions with respect to the Residual
Certificate (or portion thereof) for periods after such transfer.
At the election of the Company, the cost to the Company of
computing and furnishing such information may be charged to the
transferor or such agent referred to above; however, the Company
shall in no event be excused from furnishing such information.
The restrictions on transfers of the Residual
Certificates set forth in the preceding three paragraphs shall
cease to apply to transfers (and the applicable portions of the
legend to the Residual Certificates may be deleted) after
delivery to the Trustee of an Opinion of Counsel to the effect
that the elimination of such restrictions will not cause the
REMIC established hereunder to fail to qualify as a REMIC at any
time that the Certificates are outstanding.
No transfer of a Restricted Certificate shall be made
unless such transfer is made pursuant to an effective
registration statement under the Securities Act of 1933, as
amended (the "Act"), and any applicable state securities laws, in
each case as evidenced by an Officer's Certificate, or is exempt
from the registration requirements of the Act and any applicable
state securities laws. In the event of such registration, any
restrictive legends set forth in the form of the relevant
Restricted Certificate in Exhibit A hereto with respect to the
Act and state securities law restrictions shall be removed by the
Trustee upon request of the Holder thereof and automatically upon
exchange or registration of transfer thereof. As a condition to
any transfer that is to be made in reliance upon an exemption
from the Act and such laws of a Restricted Certificate to any
person other than a QIB (as certified by the proposed transferee
in the form of assignment attached to the related Certificate),
either (x) the Trustee shall require the transferee to execute an
investment letter in the form substantially as set forth in
Exhibit I hereto or in such other form as may be acceptable to
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the Trustee, certifying as to the facts surrounding such
transfer, or (y) in lieu of such investment letter, the Trustee
may accept a written Opinion of Counsel (in form and substance
acceptable to the Trustee) that such proposed transfer may be
made pursuant to an exemption from the Act. As an additional
condition to any transfer of a Restricted Certificate, either (i)
the transferor and the transferee shall complete the form of
assignment attached to the Certificate proposed to be
transferred, or (ii) the Trustee shall have received the
above-referenced opinion of counsel. The holder of any Restricted
Certificate desiring to effect the transfer thereof to a person
other than a QIB shall, and hereby agrees to, comply with any
applicable conditions set forth in the preceding two sentences
and indemnify the Trustee and the Company against any liability
that may result if the transfer thereof is not so exempt or is
not made in accordance with such federal and state laws. Such
agreement to so indemnify the Trustee and the Company shall
survive the termination of this Agreement. Notwithstanding the
foregoing, no Opinion of Counsel or investment letter shall be
required upon the original issuance of (i) the Restricted Junior
Certificates to the Initial Purchaser (as defined in the related
Private Placement Memorandum) or its nominee and (ii) the Class
PO and Class S Certificates to the Company or upon any subsequent
transfer of any Class PO or Class S Certificate by the Company,
provided that if any Restricted Junior Certificates are, at the
request of the Initial Purchaser, registered in the name of its
nominee, the Initial Purchaser shall be deemed to acknowledge and
agree with the Company and the Trustee that no transfer of a
beneficial interest in such Certificates will be made without
registering such Certificates in the name of the transferee,
which shall be a Person other than such nominee. Any opinion or
letter required pursuant to this paragraph shall not be at the
expense of the Trust Fund or the Trustee.
(c) (i) No transfer of an ERISA-Restricted Certificate
in the form of a Definitive Certificate shall be made to any
Person unless the Trustee has received (A) a certificate
(substantially in the form of Exhibit E or such other form as is
acceptable to the Company and the Trustee) from such transferee
to the effect that such transferee (i) is not a Plan or a Person
that is using the assets of a Plan to acquire such ERISA-
Restricted Certificate or (ii) is an insurance company investing
assets of its general account and the exemptions provided by
Section III(a) of Department of Labor Prohibited Transaction
Class Exemption 95-60, 60 Fed. Reg. 35925 (July 12, 1995) (the
"Exemptions") apply to the transferee's acquisition and holding
of any ERISA-Restricted Certificate or (B) an opinion of counsel
satisfactory to the Trustee and the Company to the effect that
the purchase and holding of such a Certificate will not
constitute or result in the assets of the Trust Fund being deemed
to be "plan assets" subject to the prohibited transactions
provisions of ERISA or Section 4975 of the Code and will not
102
subject the Trustee or the Company to any obligation in addition
to those undertaken in the Agreement; provided, however, that the
Trustee will not require such certificate or opinion in the event
that, as a result of a change of law or otherwise, counsel
satisfactory to the Trustee has rendered an opinion to the effect
that the purchase and holding of an ERISA-Restricted Certificate
by a Plan or a Person that is purchasing or holding such a
Certificate with the assets of a Plan will not constitute or
result in a prohibited transaction under ERISA or Section 4975 of
the Code. The preparation and delivery of the certificate and
opinions referred to above shall not be an expense of the Trust
Fund, the Trustee or the Company. Notwithstanding the foregoing,
no opinion or certificate shall be required for the initial
issuance of the ERISA-Restricted Certificates.
(ii) No transfer of a Residual Certificate shall be
made to any Person unless the Trustee has received a
certification (substantially in the form of paragraph 4 of
Exhibit F) from such transferee to the effect that, among other
things, such transferee is not a Plan or a Person that is using
the assets of a Plan to acquire any such Certificate. The
preparation and delivery of such certificate shall not be an
expense of the Trust Fund, the Trustee or the Company.
(d) Subject to Section 8.01(i) hereof, the Trustee may
conclusively rely upon any certificate, affidavit or opinion
delivered pursuant to Section 5.02(b) or (c). Any certificate or
affidavit required to be delivered by a transferee under this
Section 5.02 may be executed and delivered in the name of such
transferee by its attorney-in-fact duly authorized in writing in
form and substance satisfactory to the Trustee.
(e) Except as to any additional Certificate of any
Class of Book-Entry Certificates held in physical certificated
form pursuant to Section 5.02(g) or any Restricted Junior
Certificate of any Class of Book-Entry Certificates that is
transferred to an entity other than a QIB, the Book-Entry
Certificates shall, subject to Section 5.02(f), at all times
remain registered in the name of the Depository or its nominee
and at all times: (i) registration thereof may not be transferred
by the Trustee except to another Depository; (ii) the Depository
shall maintain book-entry records with respect to the Certificate
Owners and with respect to ownership and transfers of such
Certificates; (iii) ownership and transfers of registration of
the Certificates issued in book-entry form on the books of the
Depository shall be governed by applicable rules established by
the Depository and the rights of Certificate Owners with respect
to Book-Entry Certificates shall be governed by applicable law
and agreements between such Certificate Owners and the
Depository, Depository Participants, and indirect participating
firms; (iv) the Depository may collect its usual and customary
fees, charges and expenses from its Depository Participants; (v)
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the Trustee shall deal with the Depository, Depository
Participants and indirect participating firms as authorized
representatives of the Certificate Owners of the Certificates
issued in book-entry form for all purposes including the making
of payments due on the Book-Entry Certificates and exercising the
rights of Holders under this Agreement, and requests and
directions for and votes of such representatives shall not be
deemed to be inconsistent if they are made with respect to
different Certificate Owners; (vi) the Trustee may rely and shall
be fully protected in relying upon information furnished by the
Depository with respect to its Depository Participants and
furnished by the Depository Participants with respect to indirect
participating firms and persons shown on the books of such
indirect participating firms as direct or indirect Certificate
Owners; (vii) Certificate Owners shall not be entitled to
certificates for the Book-Entry Certificates and (viii) the
Trustee may establish a reasonable record date in connection with
solicitations of consents from or voting by Certificateholders
and give notice to the Depository of such record date.
All transfers by Certificate Owners of Book-Entry
Certificates shall be made in accordance with the procedures
established by the Depository Participant or brokerage firm
representing such Certificate Owner. Each Depository Participant
shall only transfer Book-Entry Certificates of Certificate Owners
it represents or of brokerage firms for which it acts as agent in
accordance with the Depository's normal procedures. Except as
provided herein, the Trustee shall have no duty to monitor or
restrict the transfer of Certificates or interests therein, and
shall have no liability for any transfer, including any transfer
made through the book-entry facilities of the Depository or
between or among Depository Participants or Certificate Owners,
made in violation of applicable restrictions set forth herein,
except in the event of the failure of the Trustee to perform its
duties and fulfill its obligations under this Agreement.
(f) If (x)(i) the Company or the Depository advises
the Trustee in writing that the Depository is no longer willing,
qualified or able to properly discharge its responsibilities as
Depository, and (ii) the Trustee or the Company is unable to
locate a qualified successor, (y) the Company at its option
advises the Trustee in writing that it elects to terminate the
book-entry system through the Depository or (z) after the
occurrence of an Event of Default, Certificate Owners
representing not less than 51% of the aggregate Voting Rights
allocated to the Book-Entry Certificates together advise the
Trustee and the Depository through the Depository Participants in
writing that the continuation of a book-entry system through the
Depository is no longer in the best interests of the Certificate
Owners, the Trustee shall notify all Certificate Owners, through
the Depository, of the occurrence of any such event and of the
availability of Definitive Certificates to Certificate Owners
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requesting the same. Upon surrender to the Trustee of such
Certificates by the Depository, accompanied by registration
instructions from the Depository for registration, the Trustee
shall issue the Definitive Certificates. Neither the Company nor
the Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected
in relying on, such instructions. Upon the issuance of Definitive
Certificates all references herein to obligations imposed upon or
to be performed by the Depository shall be deemed to be imposed
upon and performed by the Trustee, to the extent applicable with
respect to such Definitive Certificates and the Trustee shall
recognize the Holders of the Definitive Certificates as
Certificateholders hereunder.
(g) On or prior to the Closing Date, there shall be
delivered to the Depository one certificate for each Class of
Book-Entry Certificates registered in the name of the
Depository's nominee, Cede & Co. The face amount of each such
Certificate shall represent 100% of the initial Class Certificate
Principal Balance thereof, except for such amount that does not
constitute an acceptable denomination to the Depository. An
additional Certificate of each Class of Book-Entry Certificates
may be issued evidencing such remainder and, if so issued, will
be held in physical certificated form by the Holders thereof.
Each Certificate issued in book-entry form shall bear the
following legend:
"Unless this Certificate is presented by an authorized
representative of The Depository Trust Company, a New York
corporation ("DTC"), to Issuer or its agent for registration of
transfer, exchange, or payment, and any certificate issued is
registered in the name of Cede & Co. or in such other name as
requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or to such other entity as is requested by
an authorized representative of DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has
an interest herein."
Section 5.03. Mutilated, Destroyed, Lost or Stolen
Certificates. If (a) any mutilated Certificate is surrendered to
the Certificate Registrar, or the Certificate Registrar receives
evidence to its satisfaction of the destruction, loss or theft of
any Certificate and (b) there is delivered to the Company, the
Certificate Registrar 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 Certificate Registrar or the
Trustee that such Certificate has been acquired by a bona fide
purchaser, the Trustee shall execute, countersign and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of like tenor, Class and
Percentage Interest. In connection with the issuance of any new
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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 and the Certificate Registrar) connected therewith. Any
duplicate 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.
Section 5.04. Persons Deemed Owners. Prior to due
presentation of a Certificate for registration of transfer, the
Company, the Trustee, the Certificate Registrar and any agent of
the Company, the Trustee or the Certificate Registrar may treat
the person in whose name any Certificate is registered as the
owner of such Certificate for the purpose of receiving
distributions pursuant to Section 4.01 and for all other purposes
whatsoever, and neither the Company, the Trustee, the Certificate
Registrar nor any agent of the Company, the Trustee or the
Certificate Registrar shall be affected by any notice to the
contrary.
Section 5.05. Access to List of Certificateholders'
Names and Addresses. The Certificate Registrar will furnish or
cause to be furnished to the Company, within 15 days after
receipt by the Certificate Registrar of request therefor from the
Company in writing, a list, in such form as the Company may
reasonably require, of the names and addresses of the
Certificateholders as of the most recent Record Date for payment
of distributions to Certificateholders. If three or more
Certificateholders (hereinafter referred to as "applicants")
apply in writing to the Trustee, and such application states that
the applicants desire to communicate with other
Certificateholders with respect to their rights under this
Agreement or under the Certificates and is accompanied by a copy
of the communication which such applicants propose to transmit,
then the Trustee shall, within five Business Days after the
receipt of such application, afford such applicants access during
normal business hours to the most recent list of
Certificateholders held by the Trustee. If such list is as of a
date more than 90 days prior to the date of receipt of such
applicants' request, the Trustee shall promptly request from the
Certificate Registrar a current list as provided above, and shall
afford such applicants access to such list promptly upon receipt.
Every Certificateholder, by receiving and holding a Certificate,
agrees with the Certificate Registrar and the Trustee that
neither the Certificate Registrar nor the Trustee shall be held
accountable by reason of the disclosure of any such information
as to the names and addresses of the Certificateholders
hereunder, regardless of the source from which such information
was derived.
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Section 5.06. Representation of Certain
Certificateholders. The fiduciary of any Plan which becomes a
Holder of a Certificate, by virtue of its acceptance of such
Certificate, will be deemed to have represented and warranted to
the Trustee and the Company that such Plan is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D
promulgated by the Securities and Exchange Commission under the
Securities Act of 1933.
Section 5.07. Determination of COFI. (a) If the
outstanding Certificates include any COFI Certificates, then on
each COFI Determination Date the Trustee shall determine the
value of COFI on the basis of the most recently available
Information Bulletin referred to in the definition of "COFI". The
establishment of COFI by the Trustee and the Trustee's subsequent
calculation of the rates of interest applicable to the COFI
Certificates for each Interest Accrual Period shall (in the
absence of manifest error) be final and binding. The Trustee
shall provide to Certificateholders who inquire of it by
telephone (at (617) 664-5500) the Certificate Interest Rates of
the COFI Certificates for the current and immediately preceding
Interest Accrual Periods.
(b) The failure by the Federal Home Loan Bank of San
Francisco to publish COFI for a period of 65 calendar days will
constitute an "Alternative Rate Event" for purposes hereof. Upon
the occurrence of an Alternative Rate Event, the Company will
calculate the Certificate Interest Rates for the COFI
Certificates for the subsequent Interest Accrual Periods by
using, in place of COFI, (i) the replacement index, if any,
published or designated by the Federal Home Loan Bank of San
Francisco or (ii) if no replacement index is so published or
designated, an alternative index to be selected by the Company
that has performed, or that the Company expects to perform, in a
manner substantially similar to COFI. At the time an alternative
index is first selected by the Company, the Company shall
determine the average number of basis points, if any, by which
the alternative index differed from COFI for such period as the
Company, in its sole discretion, reasonably determines to reflect
fairly the long-term difference between COFI and the alternative
index, and shall adjust the alternative index by such average.
The Company shall select a particular index as an alternative
only if it receives an Opinion of Counsel to the effect that the
selection of such index will not cause any REMIC established
hereunder to fail to qualify as a REMIC for federal income tax
purposes. In the absence of manifest error, the selection of any
alternative index as provided by this Section 5.07(b) shall be
final and binding for each subsequent Interest Accrual Period.
Upon the occurrence of an Alternative Rate Event, the Trustee
shall have no responsibility for the determination of any
alternative index or the calculation of the Certificate Interest
Rates for the COFI Certificates.
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(c) If at any time after the occurrence of an
Alternative Rate Event the Federal Home Loan Bank of San
Francisco resumes publication of COFI, the Certificate Interest
Rates for the COFI Certificates for each Interest Accrual Period
commencing thereafter will be calculated by reference to COFI.
Section 5.08. Determination of LIBOR. (a) If the
outstanding Certificates include any LIBOR Certificates, then on
each LIBOR Determination Date the Trustee shall determine LIBOR
on the basis of the offered LIBOR quotations of the Reference
Banks as of 11:00 a.m. London time on such LIBOR Determination
Date as follows:
(i) If on any LIBOR Determination Date two or more of
the Reference Banks provide such offered quotations, LIBOR
for the next Interest Accrual Period will be the arithmetic
mean of such offered quotations (rounding such arithmetic
mean upwards if necessary to the nearest whole multiple of
1/16%);
(ii) If on any LIBOR Determination Date only one or
none of the Reference Banks provides such offered
quotations, LIBOR for the next Interest Accrual Period will
be whichever is the higher of (x) LIBOR as determined on
the previous LIBOR Determination Date or (y) the Reserve
Interest Rate. The "Reserve Interest Rate" will be either
(A) the rate per annum which the Trustee determines to be
the arithmetic mean (rounding such arithmetic mean upwards
if necessary to the nearest whole multiple of 1/16%) of the
one-month Eurodollar lending rates that New York City banks
selected by the Trustee are quoting, on the relevant LIBOR
Determination Date, to the principal London offices of
leading banks in the London interbank market or (B) in the
event that the Trustee can determine no such arithmetic
mean, the lowest one-month Eurodollar lending rate that the
New York City banks selected by the Trustee are quoting on
such LIBOR Determination Date to leading European banks;
and
(iii) If on any LIBOR Determination Date the Trustee is
required but is unable to determine the Reserve Interest
Rate in the manner provided in paragraph (ii) above, LIBOR
for the next Interest Accrual Period will be LIBOR as
determined on the previous LIBOR Determination Date, or, in
the case of the first LIBOR Determination Date, the Initial
LIBOR Rate.
(b) The establishment of LIBOR by the Trustee and the
Trustee's subsequent calculation of the Certificate Interest
Rates applicable to the LIBOR Certificates for the relevant
Interest Accrual Period, in the absence of manifest error, will
be final and binding. In all cases, the Trustee may conclusively
rely on quotations of LIBOR for the Reference Banks as such
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quotations appear on the display designated "LIBO" on the Reuters
Monitor Money Rates Service.
(c) Within five Business Days of the Trustee's
calculation of the Certificate Interest Rates of the LIBOR
Certificates, the Trustee shall furnish to the Company by
telecopy (or by such other means as the Trustee and the Company
may agree from time to time) such Certificate Interest Rates.
(d) The Trustee shall provide to Certificateholders
who inquire of it by telephone (at (617) 664-5500) the
Certificate Interest Rates of the LIBOR Certificates for the
current and immediately preceding Interest Accrual Periods.
(e) As used herein, "Reference Banks" shall mean no
more than four leading banks engaged in transactions in
Eurodollar deposits in the international Eurocurrency market (i)
with an established place of business in London, England, (ii)
whose quotations appear on the "Reuters Screen LIBO Page" (as
described in the definition of LIBOR hereof) on the applicable
LIBOR Determination Date and (iii) which have been designated as
such by the Trustee and are able and willing to provide such
quotations to the Trustee on each LIBOR Determination Date. The
Reference Banks initially shall be: Barclay's plc, Bank of Tokyo,
National Westminster Bank and Trust Company and Bankers Trust
Company. If any of the initial Reference Banks should be removed
from the Reuters Screen LIBO Page or in any other way fail to
meet the qualifications of a Reference Bank, the Trustee, after
consultation with the Company, shall use its best efforts to
designate alternate Reference Banks.
ARTICLE VI
THE COMPANY
Section 6.01. Liability of the Company. The Company
shall be liable in accordance herewith only to the extent of the
obligations specifically imposed upon and undertaken by the
Company herein.
Section 6.02. Merger or Consolidation of, or
Assumption of the Obligations of, the Company. Any corporation
into which the Company may be merged or consolidated, or any
corporation resulting from any merger, conversion or
consolidation to which the Company shall be a party, or any
corporation succeeding to the business of the Company, or any
corporation, more than 50% of the voting stock of which is,
directly or indirectly, owned by General Electric Company, or any
limited partnership, the sole general partner of which is either
the Company or a corporation, more than 50% of the voting stock
of which is owned, directly or indirectly, by General Electric
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Company, which executes an agreement of assumption to perform
every obligation of the Company hereunder, shall be the successor
of the Company hereunder, without the execution or filing of any
paper or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding.
Section 6.03. Assignment. The Company may assign its
rights and delegate its duties and obligations as servicer under
this Agreement; provided, that (i) the purchaser or transferee
accepting such assignment or delegation is qualified to service
mortgage loans for FNMA or FHLMC, is reasonably satisfactory to
the Trustee and executes and delivers to the Trustee an
agreement, in form and substance reasonably satisfactory to the
Trustee, which contains an assumption by such purchaser or
transferee of the due and punctual performance and observance of
each covenant and condition to be performed or observed by the
Company as servicer hereunder from and after the date of such
agreement and (ii) each Rating Agency's rating of any Classes of
Certificates in effect immediately prior to such assignment or
delegation would not be qualified, downgraded or withdrawn as a
result thereof. In the case of any such assignment or delegation,
the Company will be released from its obligations as servicer
hereunder except for liabilities and obligations as servicer
incurred prior to such assignment or delegation.
Section 6.04. Limitation on Liability of the Company
and Others. Neither the Company nor any of the directors or
officers or employees or agents of the Company 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 by
the Company pursuant to this Agreement, or for errors in
judgment; provided, however, that this provision shall not
protect the Company or any such person against any liability
which would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence in the performance of
duties of the Company or by reason of reckless disregard of
obligations and duties of the Company hereunder. The Company and
any director or officer or employee or agent of the Company may
rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person respecting any
matters arising hereunder. The Company and any director or
officer or employee or agent of the Company shall be indemnified
by the Trust Fund and held harmless against any loss, liability
or expense incurred in connection with any legal action relating
to this Agreement or the Certificates, other than any loss,
liability or expense related to any specific Mortgage Loan 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. The Company shall be under no
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obligation to appear in, prosecute or defend any legal action
which is not incidental to its duties to service the Mortgage
Loans in accordance with this Agreement and which in its opinion
may involve it in any expense or liability; provided, however,
that the Company may in its sole discretion undertake any such
action which it may deem necessary or desirable in respect of
this Agreement, and the rights and duties of the parties hereto
and the interests of the Certificateholders hereunder. In such
event, the legal expenses and costs of such action and any
liability resulting therefrom shall be expenses, costs and
liabilities of the Trust Fund and the Company shall be entitled
to be reimbursed therefor from amounts credited to the applicable
Mortgage Loan Payment Record as provided by Section 3.04.
Section 6.05. The Company Not to Resign. Subject to
the provisions of Sections 6.02 and 6.03, the Company shall not
resign from the obligations and duties hereby imposed on it
except upon determination that the performance of its duties
hereunder is no longer permissible under applicable law. Any such
determination permitting the resignation of the Company 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 shall have assumed the
responsibilities and obligations of the Company in accordance
with Section 7.02.
ARTICLE VII
DEFAULT
Section 7.01. Events of Default. If any one of the
following events ("Events of Default") shall occur and be
continuing:
(i) Any failure by the Company to make any payment to
the Trustee of funds pursuant to Section 3.02(d) out of
which distributions to Certificateholders of any Class are
required to be made under the terms of the Certificates and
this Agreement which failure continues unremedied for a
period of three Business Days after the date upon which
written notice of such failure shall have been given to the
Company by the Trustee or to the Company and the Trustee by
Holders of Certificates of each Class affected thereby
evidencing, as to each such Class, Percentage Interests
aggregating not less than 25%; or
(ii) Failure on the part of the Company duly to observe
or perform in any material respect any other covenants or
agreements of the Company set forth in the Certificates or
in this Agreement, which covenants and agreements (A)
materially affect the rights of Certificateholders and (B)
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continue unremedied for a period of 60 days after the date
on which written notice of such failure, requiring the same
to be remedied, shall have been given to the Company by the
Trustee, or to the Company and the Trustee by the Holders
of Certificates of each Class affected thereby evidencing,
as to each such Class, Percentage Interests aggregating not
less than 25%; or
(iii) The entry of a decree or order by a court or
agency or supervisory authority having jurisdiction in the
premises for the appointment of a conservator, receiver or
liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar
proceedings of or relating to the Company, or for the
winding up or liquidation of the Company's affairs, and the
continuance of any such decree or order unstayed and in
effect for a period of 60 consecutive days; or
(iv) The consent by the Company to the appointment of a
conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities
or similar proceedings of or relating to the Company or of
or relating to substantially all of its property; or the
Company shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take
advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its
creditors, or voluntarily suspend payment of its
obligations;
then, and in each and every such case, so long as an Event of
Default shall not have been remedied by the Company, either the
Trustee, or the Holders of Certificates of each Class affected
thereby evidencing, as to each such Class, Percentage Interests
aggregating not less than 51%, by notice then given in writing to
the Company (and to the Trustee if given by the
Certificateholders) may terminate all of the rights and
obligations of the Company as servicer under this Agreement. On
or after the receipt by the Company of such written notice, all
authority and power of the Company under this Agreement, whether
with respect to the Certificates or the Mortgage Loans or
otherwise, shall pass to and be vested in the Trustee pursuant to
and under this Section 7.01; and, without limitation, the Trustee
is hereby authorized and empowered to execute and deliver, on
behalf of the Company, as attorney-in-fact or otherwise, any and
all documents and other instruments, and to do or accomplish all
other acts or things necessary or appropriate to effect the
purposes of such notice of termination, whether to complete the
transfer and endorsement of the Mortgage Loans and related
documents, or otherwise, including, without limitation, the
recordation of the assignments of the Mortgage Loans to it. The
Company agrees to cooperate with the Trustee in effecting the
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termination of the responsibilities and rights of the Company
hereunder, including, without limitation, the transfer to the
Trustee for the administration by it of all cash amounts that
shall at the time be held by the Company and that have been or
should have been credited by it to either Mortgage Loan Payment
Record, or that have been deposited by the Company in the
Certificate Account or are thereafter received by the Company
with respect to the Mortgage Loans. In addition to any other
amounts which are then, or, notwithstanding the termination of
its activities as servicer, may become, payable to the Company
under this Agreement, the Company shall be entitled to receive
out of any delinquent payment on account of interest on a
Mortgage Loan, due during the period prior to the notice pursuant
to this Section 7.01 which terminates the obligation and rights
of the Company hereunder and received after such notice, that
portion of such payment which it would have been entitled to
retain pursuant to Section 3.04(vi) if such notice had not been
given.
Section 7.02. Trustee to Act; Appointment of
Successor. (a) On and after the time the Company receives a
notice of termination pursuant to Section 7.01, the Trustee shall
be the successor in all respects to the Company in its capacity
as servicer under this Agreement and the transactions set forth
or provided for herein and shall succeed to all the rights of and
be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Company in its capacity as
servicer by the terms and provisions hereof; provided, however,
that the responsibilities and duties of the Company pursuant to
Sections 2.02 and 2.03(a) and, if the Trustee is prohibited by
law or regulation from making Monthly Advances, the
responsibility to make Monthly Advances pursuant to Section 4.04,
shall not be the responsibilities, duties or obligations of the
Trustee; and provided further, that any failure of the Trustee to
perform such duties and responsibilities that is caused by the
Company's failure to cooperate with the Trustee as required by
Section 7.01 shall not be considered a default by the Trustee
hereunder. As compensation therefor, the Trustee shall, except as
provided in Section 7.01, be entitled to such compensation as the
Company would have been entitled to hereunder if no such notice
of termination had been given. Notwithstanding the above, the
Trustee may, if it shall be unwilling so to act, or shall, if it
is legally unable so to act, appoint, or petition a court of
competent jurisdiction to appoint, any established housing and
home finance institution approved to service mortgage loans for
either FNMA or FHLMC, having a net worth of not less than
$10,000,000, as the successor to the Company hereunder in the
assumption of all or any part of the responsibilities, duties or
liabilities of the Company hereunder. Pending appointment of a
successor to the Company pursuant to this Article VII, unless the
Trustee is prohibited by law from so acting, the Trustee shall
act in such capacity as hereinabove provided. In connection with
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such appointment and assumption, the Trustee may make such
arrangements for the compensation of such successor out of
payments on Mortgage Loans as it and such successor shall agree;
provided, however, that no such compensation shall be in excess
of that permitted the Company hereunder. The Trustee and such
successor shall take such action, consistent with this Agreement,
as shall be necessary to effectuate any such succession.
(b) Any successor, including the Trustee, to the
Company as servicer pursuant to this Article VII shall during the
term of its service as servicer maintain in force (i) a policy or
policies of insurance covering errors and omissions in the
performance of its obligations as servicer hereunder, and (ii) a
fidelity bond in respect of its officers, employees and agents to
the same extent as the Company is so required pursuant to Section
3.15.
Section 7.03. Notification to Certificateholders. Upon
any termination or appointment of a successor to the Company
pursuant to this Article VII, the Trustee shall give prompt
written notice thereof to Certificateholders at their respective
addresses appearing in the Certificate Register.
ARTICLE VIII
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 which may have occurred, undertakes to perform
such duties and only such duties as are specifically set forth in
this Agreement. If an Event of Default has occurred (which has
not been cured), 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
his or her own affairs.
The Trustee, upon receipt of all resolutions,
certificates, statements, opinions, reports, documents, orders or
other instruments furnished to the Trustee which are specifically
required to be furnished pursuant to any provision of this
Agreement, shall examine them to determine whether they conform
to the requirements of this Agreement.
No provision of this Agreement shall be construed to
relieve the Trustee from liability for its own negligent action,
its own negligent failure to act or its own misconduct; provided,
however, that:
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(i) Prior to the occurrence of an Event of Default,
and after the curing of all such Events of Default which
may have occurred, the duties and obligations of the
Trustee shall be determined solely by the express
provisions of this Agreement, the Trustee shall not be
liable except for the performance of such duties and
obligations as are specifically set forth in this
Agreement, no implied covenants or obligations shall be
read into this Agreement against the Trustee and, in the
absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the
Trustee and conforming to the requirements of this
Agreement;
(ii) The Trustee shall not be personally liable for an
error of judgment made in good faith by a Responsible
Officer of the Trustee, unless it shall be proved that the
Trustee was negligent in performing its duties in
accordance with the terms of this Agreement;
(iii) The Trustee shall not be personally liable with
respect to any action taken, suffered or omitted to be
taken by it in good faith in accordance with the direction
of the Holders of Certificates of each Class affected
thereby evidencing, as to each such Class, Percentage
Interests aggregating not less than 25%, relating to the
time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee, under this Agreement; and
(iv) The Trustee shall not be charged with knowledge of
(A) any failure by the Company to comply with the
obligations of the Company referred to in clauses (i) and
(ii) of Section 7.01, (B) the rating downgrade referred to
in the definition of "Trigger Event" or (C) any failure by
the Company to comply with the obligations of the Company
to record the assignments of Mortgages referred to in
Section 2.01 unless a Responsible Officer of the Trustee at
the Corporate Trust Office obtains actual knowledge of such
failures, occurrence or downgrade or the Trustee receives
written notice of such failures, occurrence or downgrade
from the Company or the Holders of Certificates of each
Class affected thereby evidencing, as to each such Class,
Percentage Interests aggregating not less than 25%.
Subject to any obligation of the Trustee to make
Monthly Advances as provided herein, the Trustee shall not be
required to expend or risk its own funds or otherwise incur
financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if
there is reasonable ground for believing that the repayment of
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such funds or adequate indemnity against such risk or liability
is not reasonably assured to it, and none of the provisions
contained in this Agreement shall in any event require the
Trustee to perform, or be responsible for the manner of
performance of, any of the obligations of the Company under this
Agreement, except during such time, if any, as the Trustee shall
be the successor to, and be vested with the rights, duties,
powers and privileges of, the Company in accordance with the
terms of this Agreement.
Section 8.02. Certain Matters Affecting the Trustee.
Except as otherwise provided in Section 8.01:
(i) The Trustee may conclusively rely and shall be
protected in acting or refraining from acting upon any
resolution, Officer's Certificate, certificate of auditors
or any other certificate, statement, instrument, opinion,
report, notice, request, consent, order, appraisal, bond or
other paper or document believed by it to be genuine and to
have been signed or presented by the proper party or
parties;
(ii) The Trustee may consult with counsel and any
Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken or suffered
or omitted by it hereunder in good faith and in accordance
with such Opinion of Counsel;
(iii) The Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this
Agreement, or to institute, conduct or defend any
litigation hereunder or in relation hereto, at the request,
order or direction of any of the Certificateholders,
pursuant to the provisions of this Agreement, unless such
Certificateholders shall have offered to the Trustee
reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred therein or
thereby; nothing contained herein shall, however, relieve
the Trustee of the obligations, upon the occurrence of an
Event of Default (which has not been cured), to exercise
such of the rights and powers vested in it by this
Agreement, and to use the same degree of care and skill in
their exercise as a prudent person would exercise or use
under the circumstances in the conduct of his or her own
affairs;
(iv) The Trustee shall not be personally liable for any
action taken, suffered or omitted by it in good faith and
believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this