Filed On 9/9/03 5:07pm ET ˇ SEC File 333-104046-09 ˇ Accession Number 1019056-3-894
As Of Filer Filing As/For/On Docs:Pgs Issuer Agent
9/09/03 Morgan Stanley Abs Capi..2003-He3 8-K{2,7} 8/25/03 5:241 Borer Financial Com..LLC
Document/Exhibit Description Pages Size
1: 8-K Current Report 5 19K
2: EX-1.1 Underwriting Agreement 18 75K
3: EX-1.2 Exhibit 1.1 8 39K
4: EX-4.1 Instrument Defining the Rights of Security Holders 206 736K
5: EX-8.1 Opinion re: Tax Matters 4 20K
EX-4.1 ˇ Instrument Defining the Rights of Security Holders
Exhibit Table of Contents
Exhibit 4.1
================================================================================
MORGAN STANLEY ABS CAPITAL I INC.,
as Depositor,
OCWEN FEDERAL BANK FSB,
as Servicer,
CDC MORTGAGE CAPITAL INC.,
as Unaffiliated Seller,
and
DEUTSCHE BANK NATIONAL TRUST COMPANY,
as Trustee,
POOLING AND SERVICING AGREEMENT
Dated as of August 1, 2003
CDC MORTGAGE CAPITAL TRUST 2003-HE3
MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 2003-HE3
================================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS..........................................................8
ARTICLE II CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND
WARRANTIES..................................................49
Section 2.01 Conveyance of Mortgage Loans.............................49
Section 2.02 Acceptance by the Trustee of the Mortgage Loans..........55
Section 2.03 Representations, Warranties and Covenants of the
Unaffiliated Seller and the Servicer.....................56
Section 2.04 The Depositor and the Mortgage Loans.....................59
Section 2.05 Delivery of Opinion of Counsel in Connection with
Substitutions and Non-Qualified Mortgages................59
Section 2.06 Execution and Delivery of Certificates...................59
Section 2.07 REMIC Matters............................................59
Section 2.08 Representations and Warranties of the Depositor..........59
ARTICLE III ADMINISTRATION AND SERVICING OF MORTGAGE LOANS....................61
Section 3.01 Servicer to Service Mortgage Loans.......................61
Section 3.02 Subservicing Agreements Between the Servicer and
Subservicers.............................................63
Section 3.03 Successor Subservicers...................................64
Section 3.04 Liability of the Servicer................................64
Section 3.05 No Contractual Relationship Between Subservicers
and the Trustee..........................................64
Section 3.06 Assumption or Termination of Subservicing Agreements
by Trustee...............................................64
Section 3.07 Collection of Certain Mortgage Loan Payments;
Establishment of Certain Accounts........................65
Section 3.08 Subservicing Accounts....................................68
Section 3.09 Collection of Taxes, Assessments and Similar Items;
Escrow Accounts..........................................68
Section 3.10 Collection Account.......................................69
Section 3.11 Withdrawals from the Collection Account..................70
Section 3.12 Investment of Funds in the Account.......................71
Section 3.13 Maintenance of Hazard Insurance and Errors and
Omissions and Fidelity Coverage..........................73
Section 3.14 Enforcement of Due-On-Sale Clauses Assumption
Agreements...............................................74
Section 3.15 Realization Upon Defaulted Mortgage Loans................75
Section 3.16 Release of Mortgage Files................................77
Section 3.17 Title, Conservation and Disposition of REO Property......78
Section 3.18 Notification of Adjustments..............................80
Section 3.19 Access to Certain Documentation and Information
Regarding the Mortgage Loans.............................80
Section 3.20 Documents, Records and Funds in Possession of the
Servicer to be Held for the Trustee......................80
Section 3.21 Servicing Compensation...................................81
Section 3.22 Annual Statement as to Compliance........................81
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Section 3.23 Annual Independent Public Accountants' Servicing
Statement; Financial Statements..........................81
Section 3.24 Trustee to Act as Servicer...............................82
Section 3.25 Compensating Interest....................................83
Section 3.26 Credit Reporting; Gramm-Leach-Bliley Act.................83
Section 3.27 Advance Facilities.......................................83
ARTICLE IV DISTRIBUTIONS AND ADVANCES BY THE SERVICER.........................85
Section 4.01 Advances.................................................85
Section 4.02 Priorities of Distribution...............................86
Section 4.03 Monthly Statements to Certificateholders.................92
Section 4.04 Certain Matters Relating to the Determination of LIBOR...96
Section 4.05 The Certificate Insurance Policy.........................96
Section 4.06 Effect of Payments by the Certificate Insurer;
Subrogation..............................................98
ARTICLE V THE CERTIFICATES....................................................99
Section 5.01 The Certificates.........................................99
Section 5.02 Certificate Register; Registration of Transfer and
Exchange of Certificates.................................99
Section 5.03 Mutilated, Destroyed, Lost or Stolen Certificates.......104
Section 5.04 Persons Deemed Owners...................................104
Section 5.05 Access to List of Certificateholders' Names and
Addresses...............................................104
Section 5.06 Maintenance of Office or Agency.........................105
Section 5.07 Rights of the Certificate Insurer to Exercise Rights
of Class A-1 and Class A-3 Certificateholders...........105
Section 5.08 Trustee To Act Solely with Consent of the Certificate
Insurer.................................................106
Section 5.09 Mortgage Loans, Trust Fund and Accounts Held for
Benefit of the Certificate Insurer......................106
Section 5.10 Certificate Insurer Default.............................106
ARTICLE VI THE DEPOSITOR AND THE SERVICER....................................107
Section 6.01 Respective Liabilities of the Depositor and the
Servicer................................................107
Section 6.02 Merger or Consolidation of the Depositor or the
Servicer................................................107
Section 6.03 Limitation on Liability of the Depositor, the Servicer
and Others..............................................107
Section 6.04 Limitation on Resignation of the Servicer...............109
Section 6.05 Additional Indemnification by the Servicer; Third
Party Claims............................................109
ARTICLE VII DEFAULT..........................................................109
Section 7.01 Events of Default.......................................109
Section 7.02 Trustee to Act; Appointment of Successor................112
Section 7.03 Notification to Certificateholders......................113
ARTICLE VIII CONCERNING THE TRUSTEE..........................................113
Section 8.01 Duties of the Trustee...................................113
Section 8.02 Certain Matters Affecting the Trustee...................114
Section 8.03 Trustee Not Liable for Certificates or Mortgage Loans...115
Section 8.04 Trustee May Own Certificates............................116
Section 8.05 Trustee's Fees and Expenses.............................116
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Section 8.06 Eligibility Requirements for the Trustee................116
Section 8.07 Resignation and Removal of the Trustee..................116
Section 8.08 Successor Trustee.......................................117
Section 8.09 Merger or Consolidation of the Trustee..................118
Section 8.10 Appointment of Co-Trustee or Separate Trustee...........118
Section 8.11 Tax Matters.............................................119
Section 8.12 Periodic Filings........................................121
Section 8.13 Tax Classification of the Excess Reserve Fund Account...123
Section 8.14 Cap Agreement...........................................124
ARTICLE IX TERMINATION.......................................................124
Section 9.01 Termination upon Liquidation or Purchase of the
Mortgage Loans..........................................124
Section 9.02 Final Distribution on the Certificates..................125
Section 9.03 Additional Termination Requirements.....................126
ARTICLE X MISCELLANEOUS PROVISIONS...........................................126
Section 10.01 Amendment...............................................126
Section 10.02 Recordation of Agreement; Counterparts..................128
Section 10.03 Governing Law...........................................129
Section 10.04 Intention of Parties....................................129
Section 10.05 Notices.................................................129
Section 10.06 Severability of Provisions..............................130
Section 10.07 Assignment..............................................130
Section 10.08 Limitation on Rights of Certificateholders..............131
Section 10.09 Inspection and Audit Rights.............................131
Section 10.10 Certificates Nonassessable and Fully Paid...............132
Section 10.11 The Certificate Insurer Default.........................132
Section 10.12 Third Party Beneficiary.................................132
Section 10.13 Waiver of Jury Trial....................................132
Section 10.14 Limitation of Damages...................................132
SCHEDULES
---------
Schedule I Mortgage Loan Schedule
Schedule IA Mortgage Loan Schedule - Group I
Schedule IB Mortgage Loan Schedule - Group II
Schedule II Representations and Warranties of the Servicer
Schedule IIA Further Representations and Warranties of the Servicer
Schedule III Representations and Warranties as to the Unaffiliated Seller
EXHIBITS
--------
Exhibit A Form of Class A-1, Class A-2, Class A-3, Class A-4, Class
A-5, Class M-1, Class M-2, Class M-3, Class B-1, Class B-2 and
Class B-3 Certificate
Exhibit B [Reserved]
Exhibit C Form of Class P Certificate
iii
Exhibit D Form of Class R Certificate
Exhibit E Form of Class X Certificate
Exhibit F Form of Initial Certification of Trustee
Exhibit G Form of Final Certification of Trustee
Exhibit H Form of Transfer Affidavit
Exhibit I Form of Transferor Certificate
Exhibit J Form of Rule 144A Letter
Exhibit K Form of Request for Release
Exhibit L Form of Subsequent Transfer Agreement
Exhibit M Depositor Certification
Exhibit N Trustee/Servicer Certification
iv
THIS POOLING AND SERVICING AGREEMENT, dated as of August 1,
2003, among MORGAN STANLEY ABS CAPITAL I INC., a Delaware corporation, as
depositor (the "Depositor"), OCWEN FEDERAL BANK FSB, a federally chartered
savings bank, as servicer (the "Servicer"), CDC MORTGAGE CAPITAL INC., a New
York corporation, as unaffiliated seller (the "Unaffiliated Seller") and
DEUTSCHE BANK NATIONAL TRUST COMPANY, a national banking association, as trustee
(the "Trustee"),
W I T N E S S E T H:
- - - - - - - - - -
In consideration of the mutual agreements herein contained,
the parties hereto agree as follows:
PRELIMINARY STATEMENT
The Trustee shall elect that three segregated asset pools
within the Trust Fund be treated for federal income tax purposes as comprising
three REMICs (each a "REMIC" or, in the alternative, the Lower Tier REMIC, the
Middle Tier REMIC and the Upper Tier REMIC, respectively). Each Certificate,
other than the Class P and Class R Certificates, represents ownership of one or
more regular interests in the Upper Tier REMIC for purposes of the REMIC
Provisions. The Class R Certificate represents ownership of the sole class of
residual interest in each of the Lower Tier REMIC, Middle Tier REMIC and the
Upper Tier REMIC for purposes of the REMIC Provisions. Class UT-R, Class MT-R
and Class LT-R comprise the Class R Certificate. The Startup Day for each REMIC
described herein is the Closing Date. The latest possible maturity date for each
regular interest is the date referenced for such regular interest in this
preliminary statement.
The Upper Tier REMIC shall hold as assets the several classes
of uncertificated Middle Tier Regular Interests. Each such Middle Tier Regular
Interest is hereby designated as a regular interest in the Middle Tier REMIC.
Class MT-A-1, Class MT-A-2, Class MT-A-3, Class MT-A-4, Class MT-A-5, Class
MT-M-1, Class MT-M-2, Class MT-M-3, Class MT-B-1, Class MT-B-2 and Class MT-B-3
are hereby designated the MT Accretion Directed Classes. The Class P Certificate
represents beneficial ownership of the Prepayment Charges, which portion of the
Trust Fund shall be treated as a grantor trust.
The Middle Tier REMIC shall hold as assets the several classes
of uncertificated Lower Tier Regular Interests. Each such Lower Tier Regular
Interest is hereby designated as a regular interest in the Lower Tier REMIC.
The Lower Tier REMIC shall hold as assets all of the assets
included in the Trust Fund other than Prepayment Charges, the Excess Reserve
Fund Account, the Pre-Funding Accounts, the Capitalized Interest Account and the
Cap Agreement. The Lower Tier REMIC shall issue the following classes of
interests, and each Lower Tier Interest, other than the Class LT-R Interest, is
hereby designated as a regular interest in the Lower Tier REMIC.
[Enlarge/Download Table]
Lower Tier Class Tier Interest Initial Tier Principal
Designation Rate Amount Latest Possible Maturity Date
---------------- ------------- ---------------------- -----------------------------
Class LT-C (1) $558,949,180 November 25, 2033
Class LT-N (2) (3) November 25, 2033
Class LT-PO (4) $154,608,415 November 25, 2033
Class LT-R (5) (5) November 25, 2033
(1) The interest rate with respect to any Distribution Date for this
interest is (i) during the Pre-Funding Period, an interest rate equal
to a per annum variable rate equal to the weighted average of the
Adjusted Net Mortgage Rates then in effect on the beginning of the
related Due Period on the Initial Mortgage Loans, and (ii) thereafter,
a per annum variable rate equal to the weighted average of the Adjusted
Net Mortgage Rates then in effect on the beginning of the related Due
Period on the Mortgage Loans.
(2) The interest rate with respect to any Distribution Date for the Class
LT-N is (i) during the Pre-Funding Period, all interest on the
Subsequent Mortgage Loans for such Distribution Date divided by
$154,608,415, and (ii) thereafter, 0.00%.
(3) The Class LT-N will have a notional principal balance equal to
$154,608,415.
(4) The interest rate with respect to any Distribution Date for the Class
LT-PO is (i) during the Pre-Funding Period, 0.00% and (ii) thereafter,
a per annum variable rate equal to the weighted average of the Adjusted
Net Mortgage Rates then in effect on the beginning of the related Due
Period on the Mortgage Loans.
(5) The Class LT-R is the sole class of residual interest in the Lower Tier
REMIC. The Class LT-R does not have a principal amount or an interest
rate.
During the Pre-Funding Period, all principal payments
(scheduled and prepaid) and Realized Losses with respect to the Initial Mortgage
Loans shall be allocated to the Class LT-C, until such Class is paid in full or
eliminated by such losses. All principal payments (scheduled and prepaid) and
Realized Losses generated with respect to the Subsequent Mortgage Loans and any
amounts transferred from the Pre-Funding Accounts to the Lower Tier REMIC shall
be allocated to the Class LT-PO.
On each Distribution Date thereafter, all principal payments
(scheduled and prepaid) and Realized Losses generated with respect to the
Mortgage Loans shall be allocated, pro rata, to the Class LT-C and Class LT-PO,
until such Classes are paid in full or eliminated by such losses.
The Middle Tier REMIC shall issue the following classes of
interests, and each Middle Tier Interest, other than the Class MT-R Interest, is
hereby designated as a regular interest in the Middle Tier REMIC.
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[Enlarge/Download Table]
Tier
Middle Tier Class Interest Initial Tier Principal Corresponding Latest Possible
Designation Rate Amount Class Maturity Date
----------------- -------- ------------------------- ------------- -----------------
Class MT-A-1 (1) 1/2 of the Class A-1 November 25, 2033
Corresponding Class
initial principal balance
Class MT-A-2 (1) 1/2 of the Class A-2 November 25, 2033
Corresponding Class
initial principal balance
Class MT-A-3 (1) 1/2 of the Class A-3 November 25, 2033
Corresponding Class
initial principal balance
Class MT-A-4 (1) 1/2 of the Class A-4 November 25, 2033
Corresponding Class
initial principal balance
Class MT-A-5 (1) 1/2 of the Class A-5 November 25, 2033
Corresponding Class
initial principal balance
Class MT-M-1 (1) 1/2 of the Class M-1 November 25, 2033
Corresponding Class
initial principal balance
Class MT-M-2 (1) 1/2 of the Class M-2 November 25, 2033
Corresponding Class
initial principal balance
Class MT-M-3 (1) 1/2 of the Class M-3 November 25, 2033
Corresponding Class
initial principal balance
Class MT-B-1 (1) 1/2 of the Class B-1 November 25, 2033
Corresponding Class
initial principal balance
Class MT-B-2 (1) 1/2 of the Class B-2 November 25, 2033
Corresponding Class
initial principal balance
Class MT-B-3 (1) 1/2 of the Class B-3 November 25, 2033
Corresponding Class
initial principal balance
Class MT- (1) 1/2 of the sum of the November 25, 2033
Accrual Pool Stated Principal
Balance, the
Subordinated Amount
and the Pre-Funding
Amount, minus $100.
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[Enlarge/Download Table]
Tier
Middle Tier Class Interest Initial Tier Principal Corresponding Latest Possible
Designation Rate Amount Class Maturity Date
----------------- -------- ------------------------- ------------- -----------------
Class MT-N (2) (3) November 25, 2033
Class MT-R (4) (4) November 25, 2033
(1) The interest rate with respect to any Distribution Date for these
interests is (i) during the Pre-Funding Period, the weighted average
Pass-Through Rate of the Class LT-C and Class LT-PO, and (ii)
thereafter, a per annum variable rate equal to the weighted average of
the Adjusted Net Mortgage Rates then in effect on the beginning of the
related Due Period on the Mortgage Loans.
(2) The Class MT-N is entitled to all distributions of interest on the
Class LT-N.
(3) The Class MT-N will have a notional principal balance equal to the
notional principal balance of the Class LT-N.
(4) The Class MT-R is the sole class of residual interest in the Middle
Tier REMIC. The Class MT-R does not have a principal amount or an
interest rate.
On each Distribution Date, 50% of the increase in the
Subordinated Amount will be payable as a reduction of the principal balances of
the MT Accretion Directed Classes and will be accrued and added to the principal
balance of the MT-Accrual Class. To this end, each MT Accretion Directed Class
will be reduced by an amount equal to 50% of any increase in the Subordinated
Amount that is attributable to a reduction in the principal balance of its
Corresponding Class. On each Distribution Date, the increase in the principal
balance of the MT-Accrual Class may not exceed interest accruals for such
Distribution Date for the MT-Accrual Class. If, with respect to any Distribution
Date, 50% of the increase in the Subordinated Amount exceeds accrued interest on
the MT-Accrual Class, the excess (accumulated with all such excess for all prior
Distribution Dates) will be added to any increase in the Subordinated Amount for
purposes of calculating accrued interest on the MT-Accrual Class payable as
principal on the MT Accretion Directed Classes on the next Distribution Date.
All principal payments (scheduled and prepaid) on the Mortgage
Loans shall be allocated 50% to the MT-Accrual Class and 50% to the MT Accretion
Directed Classes, until paid in full. To this end, principal payments shall be
allocated among such MT Accretion Directed Classes in an amount equal to 50% of
the principal amounts allocated to their respective Corresponding Classes.
Notwithstanding the foregoing, principal payments allocated to the Class X
Certificates that result in the reduction of the Subordinated Amount shall be
allocated to the MT-Accrual Class until paid in full. Realized losses shall be
applied so that after all distributions have been made on each Distribution Date
(i) the principal balance of each MT Accretion Directed Class is equal to 50% of
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the principal balance of its Corresponding Class, and (ii) the MT-Accrual Class
is equal to 50% of the sum of (1) the Pool Stated Principal Balance, (2) the
Subordinated Amount, and (3) the Pre-Funding Amount, minus $100.
The Upper Tier REMIC shall issue the following classes of
interests, and each Upper Tier Interest, other than the Class UT-R Interest, is
hereby designated as a regular interest in the Upper Tier REMIC.
[Enlarge/Download Table]
Upper Tier Class Upper Tier Initial Upper Tier Corresponding Latest Possible
Designation Interest Rate Principal Amount Class Maturity Date
---------------- ------------- ------------------ ------------- -----------------
Class A-1 (1) $200,000,000 Class A-1(17) November 25, 2033
Class A-2 (2) $110,000,000 Class A-2(17) November 25, 2033
Class A-3 (3) $145,000,000 Class A-3(17) November 25, 2033
Class A-4 (4) $ 80,000,000 Class A-4(17) November 25, 2033
Class A-5 (5) $ 44,765,000 Class A-5(17) November 25, 2033
Class M-1 (6) $ 45,311,000 Class M-1(17) November 25, 2033
Class M-2 (7) $ 35,321,000 Class M-2(17) November 25, 2033
Class M-3 (8) $ 7,849,000 Class M-3(17) November 25, 2033
Class B-1 (9) $ 9,276,000 Class B-1(17) November 25, 2033
Class B-2 (10) $ 9,276,000 Class B-2(17) November 25, 2033
Class B-3 (11) $ 13,202,000 Class B-3(17) November 25, 2033
Class X-1(16) (12) (12) November 25, 2033
Class X-2(16) (13) (14) Class X November 25, 2033
Class UT-R (15) $ Class R November 25, 2033
(1) The Class A-1 Certificates will bear interest during each Interest
Accrual Period at a per annum rate equal to the least of (a) one-month
LIBOR plus (x) on or prior to the Optional Termination Date, 0.300% or
(y) after the Optional Termination Date, 0.600%, (b) the Adjusted WAC
Cap and (c) the Loan Group I Cap.
(2) The Class A-2 Certificates will bear interest during each Interest
Accrual Period at a per annum rate equal to the least of (a) one-month
LIBOR plus (x) on or prior to the Optional Termination Date, 0.360% or
(y) after the Optional Termination Date, 0.720%, (b) the Adjusted WAC
Cap and (c) the Loan Group II Cap.
(3) The Class A-3 Certificates will bear interest during each Interest
Accrual Period at a per annum rate equal to the least of (a) one-month
LIBOR plus (x) on or prior to the Optional Termination Date, 0.300% or
(y) after the Optional Termination Date, 0.600%, (b) the Adjusted WAC
Cap and (c) the Loan Group II Cap.
5
(4) The Class A-4 Certificates will bear interest during each Interest
Accrual Period at a per annum rate equal to the least of (a) one-month
LIBOR plus (x) on or prior to the Optional Termination Date, 0.190% or
(y) after the Optional Termination Date, 0.380%, (b) the Adjusted WAC
Cap and (c) the Loan Group II Cap.
(5) The Class A-5 Certificates will bear interest during each Interest
Accrual Period at a per annum rate equal to the least of (a) one-month
LIBOR plus (x) on or prior to the Optional Termination Date, 0.500% or
(y) after the Optional Termination Date, 1.000%, (b) the Adjusted WAC
Cap and (c) the Loan Group II Cap.
(6) The Class M-1 Certificates will bear interest during each Interest
Accrual Period at a per annum rate equal to the lesser of (a) one-month
LIBOR plus (x) on or prior to the Optional Termination Date, 0.700% or
(y) after the Optional Termination Date, 1.050% and (b) the Adjusted
WAC Cap.
(7) The Class M-2 Certificates will bear interest during each Interest
Accrual Period at a per annum rate equal to the lesser of (a) one-month
LIBOR plus (x) on or prior to the Optional Termination Date, 1.750% or
(y) after the Optional Termination Date, 2.625% and (b) the Adjusted
WAC Cap.
(8) The Class M-3 Certificates will bear interest during each Interest
Accrual Period at a per annum rate equal to the lesser of (a) one-month
LIBOR plus (x) on or prior to the Optional Termination Date, 2.100% or
(y) after the Optional Termination Date, 3.150% and (b) the Adjusted
WAC Cap.
(9) The Class B-1 Certificates will bear interest during each Interest
Accrual Period at a per annum rate equal to the lesser of (a) one-month
LIBOR plus (x) on or prior to the Optional Termination Date, 3.400% or
(y) after the Optional Termination Date, 5.100% and (b) the Adjusted
WAC Cap.
(10) The Class B-2 Certificates will bear interest during each Interest
Accrual Period at a per annum rate equal to the lesser of (a) one-month
LIBOR plus (x) on or prior to the Optional Termination Date, 3.750% or
(y) after the Optional Termination Date, 5.625% and (b) the Adjusted
WAC Cap.
(11) The Class B-3 Certificates will bear interest during each Interest
Accrual Period at a variable rate equal to the lesser of (a) one-month
LIBOR plus (x) on or prior to the Optional Termination Date, 3.750% or
(y) after the Optional Termination Date, 5.625% and (b) the Adjusted
WAC Cap.
(12) The Class X has an initial principal balance of $13,557,494, but it
will not accrue interest on such balance but will accrue interest on a
notional principal balance. As of any Distribution Date, the Class X-1
shall have a notional principal balance equal to the Pool Stated
Principal Balance as of the first day of the related Interest Accrual
Period. With respect to any Interest Accrual Period, the Class X-1
shall bear interest at a rate equal to the excess, if any, of the WAC
Cap over the product of (i) 2 and (ii) the weighted average
Pass-Through Rate of the Middle Tier Regular Interests, where each MT
Accretion Directed Class is subject to a cap and a floor equal to the
Pass-Through Rate on its Corresponding Class, and the MT-Accrual Class
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is subject to a cap of zero. With respect to any Distribution Date,
interest that so accrues on the notional principal balance of the Class
X-1 shall be deferred in an amount equal to any increase in the
Subordinated Amount on such Distribution Date. Such deferred interest
shall not itself bear interest.
(13) The Class X-2 is entitled to all distributions of interest on the Class
MT-N.
(14) The Class X-2 will have a notional principal balance equal to the
notional principal balance of the Class MT-N.
(15) The Class UT-R is the sole class of residual interest in the Upper Tier
REMIC. The Class UT-R does not have an interest rate.
(16) The Class X Certificates will represent two regular interests in the
Upper Tier REMIC, the Class X-1 and Class X-2.
(17) Each of these Certificates will represent not only the ownership of the
Corresponding Class of Upper Tier Regular Interest but also the right
to receive payments from the Excess Reserve Fund Account in respect of
any Basis Risk CarryForward Amounts. For federal income tax purposes,
the Trustee will treat a Certificateholder's right to receive payments
from the Excess Reserve Fund Account as payments made pursuant to a
notional principal contract written by the Class X Certificateholder.
The minimum denomination for each Class of Certificates, other
than the Class P, Class R and the Class X Certificates, will be $25,000 and
integral multiples of $1 thereof. The Class P, Class R and the Class X
Certificates will each represent a 100% Percentage Interest in such class.
Set forth below are designations of Classes of Certificates to
the categories used herein:
Book-Entry Certificates.................... All Classes of Certificates other
than the Physical Certificates.
Subordinated Certificates.................. Class M-1, Class M-2, Class M-3,
Class B-1, Class B-2 and Class B-3
Certificates.
Delay Certificates......................... None.
ERISA-Restricted Certificates.............. Class R Certificates, Class P
Certificate and Class X
Certificate; any certificate with a
rating below the lowest applicable
permitted rating under the
Underwriters' Exemption.
Floating Rate Certificates................. Class A-1, Class A-2, Class A-3,
Class A-4, Class A-5 and
Subordinated Certificates.
7
LIBOR Certificates......................... Class A-1, Class A-2, Class A-3,
Class A-4, Class A-5 and
Subordinated Certificates.
Non-Delay Certificates..................... Class A-1, Class A-2, Class A-3,
Class A-4, Class A-5, Class X and
Subordinated Certificates.
Offered Certificates....................... All Classes of Certificates other
than the Private Certificates.
Physical Certificates...................... Class P, Class X and Class R
Certificates.
Private Certificates....................... Class P, Class X and Class R
Certificates.
Rating Agencies............................ Moody's, Fitch and Standard &
Poor's.
Regular Certificates....................... All Classes of Certificates other
than the Class P and Class R
Certificates.
Residual Certificates...................... Class R Certificates.
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the following
meanings:
60+ Day Delinquent Loan: Each Mortgage Loan with respect to
which any portion of a Scheduled Payment is, as of the last day of the prior Due
Period, two months or more past due (without giving effect to any grace period),
each Mortgage Loan in foreclosure, all REO Property and each Mortgage Loan for
which the Mortgagor has filed for bankruptcy.
Aames: Aames Capital Corporation, a California corporation.
Aames Assignment Agreement: The Assignment and Recognition
Agreement, dated as of August 25, 2003, by and among the Unaffiliated Seller,
the Depositor and Aames, and each other Assignment and Recognition Agreement by
and among the Unaffiliated Seller, the Depositor and Aames in connection with
any Subsequent Transfer of Aames Mortgage Loans.
Aames Mortgage Loan: A Mortgage Loan which was acquired from
Aames by the Unaffiliated Seller pursuant to the Aames Purchase Agreement, and
which has been acquired by the Trust Fund.
8
Aames Purchase Agreement: The Mortgage Loan Purchase and
Warranties Agreement, dated as of June 23, 2003, as amended to date, by and
between the Unaffiliated Seller and Aames.
Accepted Servicing Practices: With respect to any Mortgage
Loan, those mortgage servicing practices set forth in Section 3.01.
Account: Any of the Capitalized Interest Account, the
Collection Account, the Distribution Account, any Escrow Account, the Excess
Reserve Fund Account, the Insurance Payment Account or the Pre-Funding Accounts.
Each Account shall be an Eligible Account.
Accrued Certificate Interest: With respect to any Distribution
Date for each Class of Certificates (other than the Class P, Class R and Class X
Certificates), the amount of interest accrued during the related Interest
Accrual Period at the applicable Pass-Through Rate on the related Class
Certificate Balance immediately prior to such Distribution Date, as reduced by
such Class's share of Net Prepayment Interest Shortfalls and Relief Act
Shortfalls for the related Due Period allocated to such Class pursuant to
Section 4.02.
Addition Notice: A written notice from the Unaffiliated Seller
to the Trustee, the Rating Agencies and the Certificate Insurer that the
Unaffiliated Seller desires to make a Subsequent Transfer.
Adjustable Rate Mortgage Loan: A Mortgage Loan bearing
interest at an adjustable rate.
Adjusted Mortgage Rate: As to each Mortgage Loan and at any
time, the per annum rate equal to the Mortgage Rate less the Servicing Fee Rate.
Adjusted Net Mortgage Rate: As to each Mortgage Loan and at
any time, the per annum rate equal to the Mortgage Rate less the Expense Fee
Rate.
Adjusted WAC Cap: The weighted average Pass-Through Rate of
the Middle Tier Regular Interests (other than the Class MT-N) minus, in the case
of each of the Class A-1 and Class A-3 Certificates, the Premium Rate, in
respect of the Class A-1 or Class A-3 Certificates, respectively.
Adjustment Date: As to any Adjustable Rate Mortgage Loan, the
first Due Date on which the related Mortgage Rate adjusts as set forth in the
related Mortgage Note and each Due Date thereafter on which the Mortgage Rate
adjusts as set forth in the related Mortgage Note.
Advances: Collectively, the P&I Advances and Servicing
Advances.
Advance Facility: As defined in Section 3.27.
Advance Facility Trustee: As defined in Section 3.27.
Advance Reimbursement Amount: As defined in Section 3.27.
9
Advancing Person: As defined in Section 3.27.
Aegis: Aegis Mortgage Corporation, a Delaware corporation.
Aegis Assignment Agreement: The Assignment and Recognition
Agreement, dated as of August 25, 2003, by and among the Unaffiliated Seller,
the Depositor and Aegis, and each other Assignment and Recognition Agreement by
and among the Unaffiliated Seller, the Depositor and Aegis in connection with
any Subsequent Transfer of Aegis Mortgage Loans.
Aegis Mortgage Loan: A Mortgage Loan which was acquired from
Aegis by the Unaffiliated Seller pursuant to the Aegis Purchase Agreement, and
which has been acquired by the Trust Fund.
Aegis Purchase Agreement: The Mortgage Loan Purchase and
Warranties Agreement, dated as of December 1, 2002, as amended to date, by and
between the Unaffiliated Seller and Aegis.
Affiliate: With respect to any Person, any other Person
controlling, controlled by or under common control with such first Person. For
the purposes of this definition, "control" means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
Agreement: This Pooling and Servicing Agreement and all
amendments or supplements hereto.
Ameriquest: Ameriquest Mortgage Company, a Delaware
corporation.
Ameriquest Assignment Agreement: The Assignment and
Recognition Agreement, dated as of August 25, 2003, by and among the
Unaffiliated Seller, the Depositor and Ameriquest, and each other Assignment and
Recognition Agreement by and among the Unaffiliated Seller, the Depositor and
Ameriquest in connection with any Subsequent Transfer of Ameriquest Mortgage
Loans.
Ameriquest Mortgage Loan: A Mortgage Loan which was acquired
from Ameriquest by the Unaffiliated Seller pursuant to the Ameriquest Purchase
Agreement, and which has been acquired by the Trust Fund.
Ameriquest Purchase Agreement: The Mortgage Loan Purchase and
Warranties Agreement, dated as of June 30, 2003, as amended to date, by and
between the Unaffiliated Seller and Ameriquest.
Amount Held for Future Distribution: As to the Certificates on
any Distribution Date, the aggregate amount held in the Collection Account at
the close of business on the related Determination Date on account of (i)
Principal Prepayments and Liquidation Proceeds on the Mortgage Loans received
after the end of the related Prepayment Period and (ii) all Scheduled Payments
on the Mortgage Loans due after the end of the related Due Period.
10
Applied Realized Loss Amount: With respect to any Distribution
Date, the amount, if any, by which the aggregate Class Certificate Balance of
the Regular Certificates after distributions of principal on such Distribution
Date exceeds the aggregate Stated Principal Balance of the Mortgage Loans for
such Distribution Date.
Appraised Value: The value set forth in an appraisal made in
connection with the origination of the related Mortgage Loan as the value of the
Mortgaged Property.
Assignment and Recognition Agreement: The Aames Assignment
Agreement, the Aegis Assignment Agreement, the Ameriquest Assignment Agreement,
the BNC Assignment Agreement, the Chapel Mortgage Assignment Agreement, the
Encore Assignment Agreement, the First Banc Assignment Agreement, the First NLC
Assignment Agreement, the Impac Assignment Agreement, the Master Financial
Assignment Agreement, the Novelle Assignment Agreement, the People's Choice
Assignment Agreement or the SIB Mortgage Assignment Agreement, as applicable.
Assignment of Mortgage: An assignment of the Mortgage, notice
of transfer or equivalent instrument in recordable form (other than the
assignee's name and recording information not yet returned from the recording
office), reflecting the sale of the Mortgage to the Trustee.
Average Net Proceeds: As defined in Exhibit M hereto.
Balloon Loan: Any Mortgage Loan that provided on the date of
origination for an amortization schedule extending beyond its stated maturity
date.
Basic Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the Principal Remittance Amount for such
Distribution Date over (ii) the Excess Subordinated Amount, if any, for such
Distribution Date.
Basis Risk CarryForward Amount: With respect to each Class of
Regular Certificates, as of any Distribution Date, the sum of (A) if on such
Distribution Date the Pass-Through Rate for any Class of Regular Certificates is
based upon the Adjusted WAC Cap, or the Loan Group I Cap or the Loan Group II
Cap, as applicable, the excess of (i) the amount of interest such Class of
Certificates would otherwise be entitled to receive on such Distribution Date
had such rate been calculated as the sum of LIBOR and the applicable
Pass-Through Margin on such Class of Certificates for such Distribution Date,
over (ii) the amount of interest payable on such Class of Certificates
calculated at the Adjusted WAC Cap, the Loan Group I Cap or the Loan Group II
Cap, as applicable, for such Distribution Date and (B) the Basis Risk
CarryForward Amount for such Class of Certificates for all previous Distribution
Dates not previously paid, together with interest thereon at a rate equal to the
sum of LIBOR and the applicable Pass-Through Margin for such Class of
Certificates for such Distribution Date.
Basis Risk Payment: For any Distribution Date, an amount equal
to any Basis Risk CarryForward Amount; provided, however, that with respect to
any Distribution Date, the payment cannot exceed the amounts otherwise
distributable on the Class X Certificates plus any Interest Rate Cap Payment
with respect to such Distribution Date.
11
Best's: Best's Key Rating Guide, as the same shall be amended
from time to time.
BNC: BNC Mortgage, Inc., a Delaware corporation.
BNC Assignment Agreement: The Assignment and Recognition
Agreement, dated as of August 25, 2003, by and among the Unaffiliated Seller,
the Depositor and BNC, and each other Assignment and Recognition Agreement by
and among the Unaffiliated Seller, the Depositor and BNC in connection with any
Subsequent Transfer of BNC Mortgage Loans.
BNC Mortgage Loan: A Mortgage Loan which was acquired from BNC
by the Unaffiliated Seller pursuant to the BNC Purchase Agreement, and which has
been acquired by the Trust Fund.
BNC Purchase Agreement: The Amended and Restated Mortgage Loan
Purchase and Warranties Agreement, dated as of February 26, 2002, as amended to
date, by and between the Unaffiliated Seller and BNC.
Book-Entry Certificates: As specified in the Preliminary
Statement.
Business Day: Any day other than (i) Saturday or Sunday, or
(ii) a day on which banking and savings and loan institutions, in (a) the State
of New York, Utah, New Jersey and Florida, (b) the state in which the Servicer's
servicing operations are located, or (c) the State in which the Trustee's
operations are located, are authorized or obligated by law or executive order to
be closed.
Cap Agreement: The interest rate cap agreement dated August
25, 2003 with the Cap Provider, as "Party A" thereunder, and the Unaffiliated
Seller, as "Party B" thereunder, or any replacement thereof.
Cap Provider: CDC Financial Products, Inc., a Delaware
corporation, and any successor thereto.
Capitalized Interest Account: The separate Eligible Account
created and maintained by the Trustee pursuant to Section 3.07(e) in the name of
the Trustee for the benefit of the Offered Certificateholders and designated
"Deutsche Bank National Trust Company, in trust for registered holders of CDC
Mortgage Capital Trust 2003-HE3, Mortgage Pass-Through Certificates, Series
2003-HE3".
Capitalized Interest Requirement: With respect to the
Distribution Dates occurring in September 2003, October 2003 and November 2003,
the excess, if any, of (x) the Accrued Certificate Interests for all classes of
the Offered Certificates for such Distribution Date over (y) all scheduled
installments of interest (net of the related Expense Fees) due on the Mortgage
Loans in the related Due Period. In no event will the Capitalized Interest
Requirement be less than zero.
Certificate: Any one of the Certificates executed by the
Trustee in substantially the forms attached hereto as exhibits.
12
Certificate Balance: With respect to any Class of
Certificates, other than the Class R Certificate, at any date, the maximum
dollar amount of principal to which the Holder thereof is then entitled
hereunder, such amount being equal to the Denomination thereof minus all
distributions of principal previously made with respect thereto and in the case
of any Subordinated Certificates, reduced by any Applied Realized Loss Amounts
applicable to such Class of Subordinated Certificates. The Class R Certificate
has no Certificate Balance.
Certificate Insurance Policy: The Financial Guaranty Insurance
Policy No. 51439-N, and all endorsements thereto dated the Closing Date, issued
by the Certificate Insurer for the benefit of the Class A-1 and Class A-3
Certificateholders.
Certificate Insurer: Financial Security Assurance Inc., a
monoline stock insurance company organized and created under the laws of the
State of New York, and any successors thereto.
Certificate Insurer Default: The existence and continuance of
any of the following:
(a) the Certificate Insurer shall have failed to
make a required payment when due under the Certificate Insurance
Policy;
(b) the Certificate Insurer shall have (i) filed a
petition or commenced any case or proceeding under any provision or
chapter of the United States Bankruptcy Code, the New York State
Insurance Law or any other similar federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation, or reorganization,
(ii) made a general assignment for the benefit of its creditors or
(iii) had an order for relief entered against it under the United
States Bankruptcy Code, the New York State Insurance Law or any other
similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation, or reorganization that is final and
nonappealable; or
(c) a court of competent jurisdiction, the New York
Department of Insurance or any other competent regulatory authority
shall have entered a final and nonappealable order, judgment or decree
(i) appointing a custodian, trustee, agent, or receiver for the
Certificate Insurer or for all or any material portion of its property
or (ii) authorizing the taking of possession by a custodian, trustee,
agent, or receiver of the Certificate Insurer or of all or any material
portion of its property.
Certificate Owner: With respect to a Book-Entry Certificate,
the Person who is the beneficial owner of such Book-Entry Certificate.
Certificate Register: The register maintained 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 purpose of giving any consent pursuant to this Agreement, any Certificate
registered in the name of the Depositor or any Affiliate of the Depositor shall
be deemed not to be Outstanding and the Percentage Interest evidenced thereby
shall not be taken into account in determining whether the requisite amount of
Percentage Interests necessary to effect such consent has been obtained;
provided, however, that if any such Person (including the Depositor) owns 100%
13
of the Percentage Interests evidenced by a Class of Certificates, such
Certificates shall be deemed to be Outstanding for the purposes of any provision
hereof that requires the consent of the Holders of Certificates of a particular
Class as a condition to the taking of any action hereunder. The Trustee is
entitled to rely conclusively on a certification of the Depositor or any
Affiliate of the Depositor in determining which Certificates are registered in
the name of an Affiliate of the Depositor.
Certification: As defined in Section 8.12(b).
Chapel Mortgage: Chapel Mortgage Corporation, a New Jersey
corporation.
Chapel Mortgage Assignment Agreement: The Assignment and
Recognition Agreement, dated as of August 25, 2003, by and among the
Unaffiliated Seller, the Depositor and Chapel Mortgage, and each other
Assignment and Recognition Agreement by and among the Unaffiliated Seller, the
Depositor and Chapel Mortgage in connection with any Subsequent Transfer of
Chapel Mortgage Loans.
Chapel Mortgage Loan: A Mortgage Loan which was acquired from
Chapel Mortgage by the Unaffiliated Seller pursuant to the Chapel Mortgage
Purchase Agreement, and which has been acquired by the Trust Fund.
Chapel Mortgage Purchase Agreement: The Mortgage Loan Purchase
and Warranties Agreement, dated as of June 4, 2002, as amended to date, by and
between the Unaffiliated Seller and Chapel Mortgage.
Class: All Certificates bearing the same class designation as
set forth in the Preliminary Statement.
Class A Certificates: The Class A-1 Certificates, the Class
A-2 Certificates, the Class A-3 Certificates, the Class A-4 Certificates and the
Class A-5 Certificates.
Class A Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the aggregate Class Certificate Balances of
the Class A Certificates immediately prior to such Distribution Date over (ii)
the lesser of (A) the product of 62.50% of the Current Maximum Amount and (B)
the excess, if any, of the Current Maximum Amount over $3,567,788.
Class A-1 Allocation Percentage: With respect to any
Distribution Date, the percentage equivalent of a fraction, (i) the numerator of
which is the Group I Principal Remittance Amount for such Distribution Date and
(ii) the denominator of which is the Principal Remittance Amount for such
Distribution Date.
Class A-1 Certificates: All Certificates bearing the class
designation of "Class A-1 Certificates."
14
Class A-1 Deficiency: With respect to any Distribution Date
and the Class A-1 Certificates, an amount equal to the sum of:
(i) the Class A-1 Interest Deficit Amount; plus
(ii) the Class A-1 Principal Parity Amount, if any, for
such Distribution Date.
Class A-1 Interest Deficit Amount: With respect to any
Distribution Date and the Class A-1 Certificates, the product of (i) the
Interest Deficit Amount and (ii) a fraction, the numerator of which is the
outstanding Class Certificate Balance of the Class A-1 Certificates on such
Distribution Date, and the denominator of which is the aggregate outstanding
Class Certificate Balances of all Class A Certificates on such Distribution
Date, in each case, without taking into account any reduction of principal on
such Certificates on such Distribution Date.
Class A-1 Principal Parity Amount: With respect to any
Distribution Date, the product of (i) the Principal Parity Deficit and (ii) a
fraction, the numerator of which is the initial Class Certificate Balance of the
Class A-1 Certificates, and the denominator of which is the initial aggregate
Class Certificate Balances of all Class A Certificates.
Class A-2 Certificates: All Certificates bearing the class
designation of "Class A-2 Certificates."
Class A-3 Certificates: All Certificates bearing the class
designation of "Class A-3 Certificates."
Class A-3 Deficiency: With respect to any Distribution Date
and the Class A-3 Certificates, an amount equal to the sum of:
(i) the Class A-3 Interest Deficit Amount; plus
(ii) the Class A-3 Principal Parity Amount, if any, for
such Distribution Date.
Class A-3 Interest Deficit Amount: With respect to any
Distribution Date and the Class A-3 Certificates, the product of (i) the
Interest Deficit Amount and (ii) a fraction, the numerator of which is the
outstanding Class Certificate Balance of the Class A-3 Certificates on such
Distribution Date, and the denominator of which is the aggregate outstanding
Class Certificate Balances of all Class A Certificates on such Distribution
Date, in each case, without taking into account any reduction of principal on
such Certificates on such Distribution Date.
Class A-3 Principal Parity Amount: With respect to any
Distribution Date, the product of (i) the Principal Parity Deficit and (ii) a
fraction, the numerator of which is the initial Class Certificate Balance of the
Class A-3 Certificates, and the denominator of which is the initial aggregate
Class Certificate Balances of all Class A Certificates.
Class A-4 Certificates: All Certificates bearing the class
designation of "Class A-4 Certificates."
15
Class A-5 Certificates: All Certificates bearing the class
designation of "Class A-5 Certificates."
Class B-1 Certificates: All Certificates bearing the class
designation of "Class B-1 Certificates."
Class B-1 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the sum of (A) the aggregate Class
Certificate Balances of the Class A Certificates (after taking into account
distribution of the Class A Principal Distribution Amount on such Distribution
Date), (B) the Class Certificate Balance of the Class M-1 Certificates (after
taking into account distribution of the Class M-1 Principal Distribution Amount
on such Distribution Date), (C) the Class Certificate Balance of the Class M-2
Certificates (after taking into account distribution of the Class M-2 Principal
Distribution Amount on such Distribution Date), (D) the Class Certificate
Balance of the Class M-3 Certificates (after taking into account distribution of
the Class M-3 Principal Distribution Amount on such Distribution Date), and (E)
the Class Certificate Balance of the Class B-1 Certificates immediately prior to
such Distribution Date over (ii) the lesser of (A) 89.90% of the Current Maximum
Amount and (B) the excess, if any, of the Current Maximum Amount over
$3,567,788.
Class B-2 Certificates: All Certificates bearing the class
designation of "Class B-2 Certificates".
Class B-2 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the sum of (A) the aggregate Class
Certificate Balances of the Class A Certificates (after taking into account
distribution of the Class A Principal Distribution Amount on such Distribution
Date), (B) the Class Certificate Balance of the Class M-1 Certificates (after
taking into account distribution of the Class M-1 Principal Distribution Amount
on such Distribution Date), (C) the Class Certificate Balance of the Class M-2
Certificates (after taking into account distribution of the Class M-2 Principal
Distribution Amount on such Distribution Date), (D) the Class Certificate
Balance of the Class M-3 Certificates (after taking into account distribution of
the Class M-3 Principal Distribution Amount on such Distribution Date), (E) the
Class Certificate Balance of the Class B-1 Certificates (after taking into
account distribution of the Class B-1 Principal Distribution Amount on such
Distribution Date), and (F) the Class Certificate Balance of the Class B-2
Certificates immediately prior to such Distribution Date over (ii) the lesser of
(A) 92.50% of the Current Maximum Amount and (B) the excess, if any, of the
Current Maximum Amount over $3,567,788.
Class B-3 Certificates: All Certificates bearing the class
designation of "Class B-3 Certificates".
Class B-3 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the sum of (A) the aggregate Class
Certificate Balances of the Class A Certificates (after taking into account
distribution of the Class A Principal Distribution Amount on such Distribution
Date), (B) the Class Certificate Balance of the Class M-1 Certificates (after
taking into account distribution of the Class M-1 Principal Distribution Amount
on such Distribution Date), (C) the Class Certificate Balance of the Class M-2
Certificates (after taking into account distribution of the Class M-2 Principal
Distribution Amount on such Distribution Date), (D) the Class Certificate
Balance of the Class M-3 Certificates (after taking into account distribution of
the Class M-3 Principal Distribution Amount on such Distribution Date), (E) the
16
Class Certificate Balance of the Class B-1 Certificates (after taking into
account distribution of the Class B-1 Principal Distribution Amount on such
Distribution Date), (F) the Class Certificate Balance of the Class B-2
Certificates (after taking into account distribution of the Class B-2 Principal
Distribution Amount on such Distribution Date) and (G) the Class Certificate
Balance of the Class B-3 Certificates immediately prior to such Distribution
Date over (ii) the lesser of (A) 96.20% of the Current Maximum Amount and (B)
the excess, if any, of the Current Maximum Amount over $3,567,788.
Class Certificate Balance: With respect to any Class and as to
any date of determination, the aggregate of the Certificate Balances of all
Certificates of such Class as of such date.
Class M-1 Certificates: All Certificates bearing the class
designation of "Class M-1 Certificates".
Class M-1 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the sum of (A) the aggregate Class
Certificate Balances of the Class A Certificates (after taking into account
distribution of the Class A Principal Distribution Amount on such Distribution
Date), and (B) the Class Certificate Balance of the Class M-1 Certificates
immediately prior to such Distribution Date over (ii) the lesser of (A) 75.20%
of the Current Maximum Amount and (B) the excess, if any, of the Current Maximum
Amount over $3,567,788.
Class M-2 Certificates: All Certificates bearing the class
designation of "Class M-2 Certificates."
Class M-2 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the sum of (A) the aggregate Class
Certificate Balances of the Class A Certificates (after taking into account
distribution of the Class A Principal Distribution Amount on such Distribution
Date), (B) the Class Certificate Balance of the Class M-1 Certificates (after
taking into account distribution of the Class M-1 Principal Distribution Amount
on such Distribution Date), and (C) the Class Certificate Balance of the Class
M-2 Certificates immediately prior to such Distribution Date over (ii) the
lesser of (A) 85.10% of the Current Maximum Amount and (B) the excess, if any,
of the Current Maximum Amount over $3,567,788.
Class M-3 Certificates: All Certificates bearing the class
designation of "Class M-3 Certificates".
Class M-3 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the sum of (A) the aggregate Class
Certificate Balances of the Class A Certificates (after taking into account
distribution of the Class A Principal Distribution Amount on such Distribution
Date), (B) the Class Certificate Balance of the Class M-1 Certificates (after
17
taking into account distribution of the Class M-1 Principal Distribution Amount
on such Distribution Date), (C) the Class Certificate Balance of the Class M-2
Certificates (after taking into account distribution of the Class M-2 Principal
Distribution Amount on such Distribution Date), and (D) the Class Certificate
Balance of the Class M-3 Certificates immediately prior to such Distribution
Date over (ii) the lesser of (A) 87.30% of the Current Maximum Amount and (B)
the excess, if any, of the Current Maximum Amount over $3,567,788.
Class P Certificates: All Certificates bearing the class
designation of "Class P Certificates".
Class R Certificates: All Certificates bearing the class
designation of "Class R Certificates".
Class X Certificates: All Certificates bearing the designation
of "Class X Certificates".
Class X Distributable Amount: On any Distribution Date, the
sum of (i) the amount of interest that has accrued on the Class X Regular
Interests and not applied as an Extra Principal Distribution Amount on such
Distribution Date, plus any such accrued interest remaining undistributed from
prior Distribution Dates, and (ii) any portion of the principal balance of the
Class X Regular Interest which is distributable as a Subordination Reduction
Amount, less any amounts paid as a Basis Risk Payment.
Closing Date: August 25, 2003.
Code: The Internal Revenue Code of 1986, including any
successor or amendatory provisions.
Collection Account: As defined in Section 3.10(a).
Compensating Interest: For any Distribution Date, the lesser
of (a) the Prepayment Interest Shortfall, if any, for such Distribution Date,
and (b) the Servicing Fee payable to the Servicer for such Distribution Date.
Condemnation Proceeds: All awards of settlements in respect of
a Mortgaged Property, whether permanent or temporary, partial or entire, by
exercise of the power of eminent domain or condemnation.
Corporate Trust Office: The designated office of the Trustee
in the State of California at which at any particular time its corporate trust
business with respect to this Agreement is administered, which office at the
date of the execution of this Agreement is located at 1761 East St. Andrew
Place, Santa Ana, California 92705, Attn: Trust Administration DC03M3, facsimile
no. (714) 247-6478 and which is the address to which notices to and
correspondence with the Trustee should be directed.
Corresponding Class: The class of interests in any REMIC
created under this Agreement that correspond to the Class of interests in
another such REMIC or to a Class of Certificates in the manner set out below:
18
Middle Tier Upper Tier Corresponding
Class Designation Interest Certificate
----------------- ---------- -------------
Class MT-A-1 Class A-1 Class A-1
Class MT -A-2 Class A-2 Class A-2
Class MT -A-3 Class A-3 Class A-3
Class MT -A-4 Class A-4 Class A-4
Class MT -A-5 Class A-5 Class A-5
Class MT -M-1 Class M-1 Class M-1
Class MT -M-2 Class M-2 Class M-2
Class MT -M-3 Class M-3 Class M-3
Class MT -B-1 Class B-1 Class B-1
Class MT -B-2 Class B-2 Class B-2
Class MT -B-3 Class B-3 Class B-3
Cumulative Loss Percentage: With respect to any Distribution
Date, the percentage equivalent of a fraction, the numerator of which is the
aggregate amount of Applied Realized Loss Amounts incurred from the Cut-off Date
to the last day of the preceding calendar month less any amounts received with
respect to Applied Realized Loss Amounts on the related Mortgage Loans
subsequent to the Final Recovery Determination being made with respect to such
Mortgage Loans and the denominator of which is the Scheduled Principal Balance
of the Mortgage Loans as of the Cut-off Date.
Current Maximum Amount: With respect to any Distribution Date,
the sum of (i) the aggregate of the Stated Principal Balances of the Mortgage
Loans in the Trust at such time, and (ii) with respect to each Distribution Date
on or prior to November 25, 2003, the Pre-Funding Amount immediately prior to
such Distribution Date, net of investment earnings on deposit therein.
Custodial File: With respect to each Mortgage Loan, the file
retained by the Trustee consisting of items (i) - (viii) of Section 2.01(c).
Cut-off Date: With respect to the Initial Mortgage Loans,
August 1, 2003, and with respect to each Subsequent Mortgage Loan, the related
Subsequent Cut-off Date.
Cut-off Date Pool Principal Balance: The aggregate Stated
Principal Balances of all Mortgage Loans as of the Cut-off Date.
Cut-off Date Principal Balance: As to any Mortgage Loan, the
Stated Principal Balance thereof as of the close of business on the Cut-off
Date.
Data Tape Information: The information provided by the
Unaffiliated Seller as of August 1, 2003 to the Depositor setting forth the
following information with respect to each Mortgage Loan: (1) the Mortgagor's
name; (2) as to each Mortgage Loan, the Scheduled Principal Balance as of the
Cut-off Date; (3) the Mortgage Rate Cap; (4) the Index; (5) a code indicating
whether the Mortgaged Property is owner-occupied; (6) the type of Mortgaged
19
Property; (7) the first date on which the Monthly Payment was due on the
Mortgage Loan and, if such date is not consistent with the Due Date currently in
effect, such Due Date; (8) the "paid through date" based on payments received
from the related Mortgagor; (9) the original principal amount of the Mortgage
Loan; (10) with respect to Adjustable Rate Mortgage Loans, the Maximum Mortgage
Rate; (11) the type of Mortgage Loan (i.e., fixed or adjustable); (12) a code
indicating the purpose of the loan (i.e., purchase, rate and term refinance,
equity take-out refinance); (13) a code indicating the documentation style
(i.e., full, asset verification, income verification and no documentation); (14)
the credit risk score (FICO score); (15) the loan credit grade classification
(as described in the Underwriting Guidelines); (16) with respect to each
Adjustable Rate Mortgage Loan, the Minimum Mortgage Rate; (17) the Mortgage Rate
at origination; (18) with respect to each Adjustable Rate Mortgage Loan, the
first Adjustment Date immediately following the Cut-off Date; (19) the Value of
the Mortgaged Property; (20) a code indicating the type and term of Prepayment
Charges applicable to such Mortgage Loan, if any; and (21) with respect to each
Adjustable Rate Mortgage Loan, the Periodic Mortgage Rate Cap. With respect to
the Mortgage Loans in the aggregate, the Data Tape Information shall set forth
the following information, as of the Cut-off Date: (1) the number of Mortgage
Loans; (2) the current aggregate outstanding principal balance of the Mortgage
Loans; (3) the weighted average Mortgage Rate of the Mortgage Loans; and (4) the
weighted average maturity of the Mortgage Loans.
Debt Service Reduction: With respect to any Mortgage Loan, a
reduction by a court of competent jurisdiction in a proceeding under the
Bankruptcy Code in the Scheduled Payment for such Mortgage Loan which became
final and non-appealable, except such a reduction resulting from a Deficient
Valuation or any reduction that results in a permanent forgiveness of principal.
Deficient Valuation: With respect to any Mortgage Loan, a
valuation of the related Mortgaged Property by a court of competent jurisdiction
in an amount less than the then- outstanding principal balance of the Mortgage
Loan, which valuation results from a proceeding initiated under the Bankruptcy
Code.
Definitive Certificates: Any Certificate evidenced by a
Physical Certificate and any Certificate issued in lieu of a Book-Entry
Certificate pursuant to Section 5.02(e).
Delay Certificates: As specified in the Preliminary Statement.
Deleted Mortgage Loan: A Mortgage Loan that is repurchased by
the Unaffiliated Seller or the related Originator, as applicable, or replaced
with a Substitute Mortgage Loan in accordance with the terms hereof and the
related Mortgage Loan Purchase Agreement.
Delinquency Trigger Event: With respect to a Distribution Date
after the Stepdown Date, the event that is in effect if the quotient (expressed
as a percentage) of (x) the three-month rolling daily average of the Stated
Principal Balance of 60+ Day Delinquent Loans as of the last day of the related
Due Period, over (y) the Pool Stated Principal Balance of the Mortgage Loans as
of the last day of the related Due Period exceeds 37.50% of the prior period's
Senior Enhancement Percentage.
20
Delinquent: A mortgage loan is "Delinquent" if any monthly
payment due on a due date is not made by the close of business on the next
scheduled due date for that mortgage loan (including all Mortgage Loans in
foreclosure, Mortgage Loans in respect of REO Properties and Mortgage Loans for
which the related Mortgagor has declared bankruptcy). A mortgage loan is "30
days Delinquent" if the monthly payment has not been received by the close of
business on the corresponding day of the month immediately succeeding the month
in which that monthly payment was due or, if there was no corresponding date
(e.g., as when a 30-day month follows a 31-day month in which the payment was
due on the 31st day of that month), then on the last day of that immediately
preceding month; and similarly for "60 days Delinquent" and "90 days
Delinquent," etc.
Delivery Date: With respect to the Initial Mortgage Loans, the
Closing Date; with respect to any Subsequent Mortgage Loans, the related
Subsequent Transfer Date therefor.
Denomination: With respect to each Certificate, the amount set
forth on the face thereof as the "Initial Certificate Balance of this
Certificate" or the Percentage Interest appearing on the face thereof.
Depositor: Morgan Stanley ABS Capital I Inc., a Delaware
corporation, or its successor in interest.
Depository: The initial Depository shall be The Depository
Trust Company, the nominee of which is CEDE & Co., as the registered Holder of
the Book-Entry Certificates. The Depository shall at all times be a "clearing
corporation" as defined in Section 8-102(a)(5) of the Uniform Commercial Code of
the State of New York.
Depository Participant: A broker, dealer, bank or other
financial institution or other Person for whom from time to time a Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.
Determination Date: With respect to each Remittance Date, the
Business Day immediately preceding such Remittance Date.
Distribution Account: The separate Eligible Account created
and maintained by the Trustee pursuant to Section 3.07(d) in the name of the
Trustee for the benefit of the Certificateholders and designated "Deutsche Bank
National Trust Company, in trust for registered holders of CDC Mortgage Capital
Trust 2003-HE3, Mortgage Pass-Through Certificates, Series 2003-HE3".
Distribution Date: The 25th day of each calendar month after
the initial issuance of the Certificates, or if such day is not a Business Day,
the next succeeding Business Day, commencing in September 2003.
Document Exception Report: The report attached to Exhibit G
hereto.
Due Date: The day of the month on which the Scheduled Payment
is due on a Mortgage Loan, exclusive of any days of grace.
21
Due Period: With respect to each Distribution Date, the period
commencing on the second day of the calendar month preceding the month in which
such Distribution Date occurs and ending on the first day of the calendar month
in which such Distribution Date occurs.
Eligible Account: Either (i) a demand account maintained with
an Eligible Institution or (ii) a trust account or accounts maintained with a
federal or state chartered depository institution or trust company acting in its
fiduciary capacity or (iii) any other account acceptable to each Rating Agency.
Eligible Accounts may bear interest, and may include, if otherwise qualified
under this definition, accounts maintained with the Trustee.
Eligible Institution: A federal or state chartered depository
institution or trust company, which (x) with respect to any Eligible Account,
the amounts on deposit in which will be held for less than 30 days, the
commercial paper, short-term debt obligations, or other short-term deposits of
which are rated at least "F1" by Fitch, "P-1" by Moody's, and either "A-1+" or
"A-1", if the amounts on deposit represent less than 20% of the initial par
value of the securities, are not intended to be used as credit enhancement and
are to be held for less than 30 days, by Standard & Poor's (or a comparable
rating if another Rating Agency is specified by the Depositor by written notice
to the Servicer and the Trustee) or (y) with respect to any Eligible Account,
the amounts on deposit in which will be held for no more than 365 days, the
long-term unsecured debt obligations of which are rated at least "A" by Fitch,
"A" by Standard & Poor's and "A2" by Moody's (or a comparable rating if another
Rating Agency is specified by the Depositor by written notice to the Servicer
and the Trustee).
Encore: Encore Credit Corporation, a California corporation.
Encore Assignment Agreement: The Assignment and Recognition
Agreement, dated as of August 25, 2003, by and among the Unaffiliated Seller,
the Depositor and Encore, and each other Assignment and Recognition Agreement by
and among the Unaffiliated Seller, the Depositor and Encore in connection with
any Subsequent Transfer of Encore Mortgage Loans.
Encore Mortgage Loan: A Mortgage Loan which was acquired from
Encore by the Unaffiliated Seller pursuant to the Encore Purchase Agreement, and
which has been acquired by the Trust Fund.
Encore Purchase Agreement: The Mortgage Loan Purchase and
Warranties Agreement, dated as of December 1, 2002, as amended to date, by and
between the Unaffiliated Seller and Encore.
ERISA: The Employee Retirement Income Security Act of 1974, as
amended.
ERISA-Restricted Certificate: As specified in the Preliminary
Statement.
Escrow Account: The Eligible Account or Accounts established
and maintained pursuant to Section 3.09(b).
Escrow Payments: As defined in Section 3.09(b).
22
Event of Default: As defined in Section 7.01.
Excess Reserve Fund Account: The separate Eligible Account
created and maintained by the Trustee pursuant to Sections 3.07(b) and 3.07(c)
in the name of the Trustee for the benefit of the Offered Certificateholders and
designated "Deutsche Bank National Trust Company, in trust for registered
holders of CDC Mortgage Capital Trust 2003-HE3, Mortgage Pass-Through
Certificates, Series 2003-HE3".
Excess Subordinated Amount: With respect to any Distribution
Date, the excess, if any, of (a) the Subordinated Amount on such Distribution
Date over (b) the Specified Subordinated Amount for such Distribution Date.
Expense Fees: As to each Mortgage Loan, the sum of the
Servicing Fee and the Trustee Fee.
Expense Fee Rate: As to each Mortgage Loan, a per annum rate
equal to the sum of the Servicing Fee Rate and the Trustee Fee Rate.
Extra Principal Distribution Amount: As of any Distribution
Date, the lesser of (x) the related Total Monthly Excess Spread for such
Distribution Date and (y) the Subordination Deficiency for such Distribution
Date.
Fannie Mae: The Federal National Mortgage Association, or any
successor thereto.
Fannie Mae Guides: The Fannie Mae Sellers' Guide and the
Fannie Mae Servicers' Guide and all amendments or additions thereto.
FDIC: The Federal Deposit Insurance Corporation, or any
successor thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created and existing under Title III of the
Emergency Home Finance Act of 1970, as amended, or any successor thereto.
Final Certification: A certification submitted by the Trustee
in substantially the form of Exhibit G hereto.
Final Recovery Determination: With respect to any defaulted
Mortgage Loan or any REO Property (other than a Mortgage Loan or REO Property
purchased by an Originator as contemplated by the Assignment and Recognition
Agreements), a determination made by the Servicer that all Insurance Proceeds,
Liquidation Proceeds and other payments or recoveries which the Servicer, in its
reasonable good faith judgment, expects to be finally recoverable in respect
thereof have been so recovered. The Servicer shall maintain records, prepared by
a Servicing Officer, of each Final Recovery Determination made thereby.
Final Scheduled Distribution Date: The Final Scheduled
Distribution Date for each Class of Certificates is the Distribution Date in
each of the following months:
23
Final Scheduled
Distribution Date
-----------------
Class A-1 Certificates..................................... November 25, 2033
Class A-2 Certificates..................................... November 25, 2033
Class A-3 Certificates..................................... November 25, 2033
Class A-4 Certificates..................................... November 25, 2033
Class A-5 Certificates..................................... November 25, 2033
Class M-1 Certificates..................................... November 25, 2033
Class M-2 Certificates..................................... November 25, 2033
Class M-3 Certificates..................................... November 25, 2033
Class B-1 Certificates..................................... November 25, 2033
Class B-2 Certificates..................................... November 25, 2033
Class B-3 Certificates..................................... November 25, 2033
Class X Certificates....................................... November 25, 2033
Class P Certificates....................................... November 25, 2033
Class R Certificates....................................... November 25, 2033
First Banc: First Banc Mortgage, Inc., a Missouri corporation.
First Banc Assignment Agreement: The Assignment and
Recognition Agreement, dated as of August 25, 2003, by and among the
Unaffiliated Seller, the Depositor and First Banc, and each other Assignment and
Recognition Agreement by and among the Unaffiliated Seller, the Depositor and
First Banc in connection with any Subsequent Transfer of First Banc Mortgage
Loans.
First Banc Mortgage Loan: A Mortgage Loan which was acquired
from First Banc by the Unaffiliated Seller pursuant to the First Banc Purchase
Agreement, and which has been acquired by the Trust Fund.
First Banc Purchase Agreement: The Mortgage Loan Purchase and
Warranties Agreement, dated as of April 1, 2003, as amended to date, by and
between the Unaffiliated Seller and First Banc.
First NLC: First NLC Financial Services, LLC, a Florida
limited liability company.
First NLC Assignment Agreement: The Assignment and Recognition
Agreement, dated as of August 25, 2003, by and among the Unaffiliated Seller,
the Depositor and First NLC, and each other Assignment and Recognition Agreement
by and among the Unaffiliated Seller, the Depositor and First NLC in connection
with any Subsequent Transfer of First NLC Mortgage Loans.
First NLC Mortgage Loan: A Mortgage Loan which was acquired
from First NLC by the Unaffiliated Seller pursuant to the First NLC Purchase
Agreement, and which has been acquired by the Trust Fund.
24
First NLC Purchase Agreement: The Mortgage Loan Purchase and
Warranties Agreement, dated as of October 14, 2002, as amended to date, by and
between the Unaffiliated Seller and First NLC.
Fitch: Fitch, Inc. If Fitch is designated as a Rating Agency
in the Preliminary Statement, for purposes of Section 10.05(b) the address for
notices to Fitch shall be Fitch, Inc., One State St. Plaza, New York, New York
10004, Attention: Residential Mortgage Surveillance Group - Morgan Stanley ABS
Capital I Inc. 2003-HE3, or such other address as Fitch may hereafter furnish to
the Depositor and the Servicer.
Fixed Rate Mortgage Loan: A Mortgage Loan bearing interest at
a fixed rate.
Floating Rate Certificates: As specified in the Preliminary
Statement.
Floor Amount: An amount equal to the product of (x) 0.50% and
(y) the Maximum Pool Principal Balance.
Gross Margin: With respect to each Adjustable Rate Mortgage
Loan, the fixed percentage amount set forth in the related Mortgage Note to be
added to the applicable Index to determine the Mortgage Rate.
Group I Basic Principal Distribution Amount: With respect to
any Distribution Date, the excess of (i) the Group I Principal Remittance Amount
for such Distribution Date over (ii) the product of (a) the Excess Subordinated
Amount, if any, for such Distribution Date and (b) the Class A-1 Allocation
Percentage.
Group I Interest Remittance Amount: With respect to any
Distribution Date, the portion of the Interest Remittance Amount that was
collected or advanced on the Group I Mortgage Loans.
Group I Mortgage Loans: The Mortgage Loans allocated to Group
I which primarily support the Class A-1 Certificates, as initially set forth on
Schedule IA hereto.
Group I Pre-Funding Account: The separate Eligible Account
created and maintained by the Trustee pursuant to Section 3.07(f) in the name of
the Trustee for the benefit of the Certificateholders, and designated "Deutsche
Bank National Trust Company, in trust for registered holders of CDC Mortgage
Capital Trust 2003-HE3, Mortgage Pass-Through Certificates, Series 2003-HE3,"
the funds of which, during the Pre-Funding Period, shall be applied solely to
the purchase of Group I Subsequent Mortgage Loans.
Group I Principal Distribution Amount: With respect to any
Distribution Date, the sum of (i) the Group I Basic Principal Distribution
Amount for such Distribution Date and (ii) the product of (a) the Extra
Principal Distribution Amount for such Distribution Date and (b) the Class A-1
Allocation Percentage.
Group I Principal Remittance Amount: With respect to any
Distribution Date, that portion of the Principal Remittance Amount for such
Distribution Date that was collected or advanced on the Group I Mortgage Loans.
25
Group II Basic Principal Distribution Amount: With respect to
any Distribution Date, the excess of (i) the Group II Principal Remittance
Amount for such Distribution Date over (ii) the product of (a) the Excess
Subordinated Amount, if any, for such Distribution Date and (b) the Group II
Class A Allocation Percentage.
Group II Class A Allocation Percentage: With respect to any
Distribution Date, the percentage equivalent of a fraction, (i) the numerator of
which is the Group II Principal Remittance Amount for such Distribution Date and
(ii) the denominator of which is the Principal Remittance Amount for such
Distribution Date.
Group II Class A Certificates: The Class A-2, Class A-3, Class
A-4 and Class A-5 Certificates.
Group II Interest Remittance Amount: With respect to any
Distribution Date, the portion of the Interest Remittance Amount that was
collected or advanced on the Group II Mortgage Loans.
Group II Mortgage Loans: The Mortgage Loans allocated to Group
II which primarily support the Group II Class A Certificates, as initially set
forth on Schedule IB hereto.
Group II Pre-Funding Account: The separate Eligible Account
created and maintained by the Trustee pursuant to Section 3.07(f) in the name of
the Trustee for the benefit of the Certificateholders, and designated "Deutsche
Bank National Trust Company, in trust for registered holders of CDC Mortgage
Capital Trust 2003-HE3, Mortgage Pass-Through Certificates, Series 2003-HE3,"
the funds of which, during the Pre-Funding Period, shall be applied solely to
the purchase of Group II Subsequent Mortgage Loans.
Group II Principal Distribution Amount: With respect to any
Distribution Date, the sum of (i) the Group II Basic Principal Distribution
Amount for such Distribution Date and (ii) the product of (a) the Extra
Principal Distribution Amount for such Distribution Date and (b) the Group II
Class A Allocation Percentage.
Group II Principal Remittance Amount: With respect to any
Distribution Date, that portion of the Principal Remittance Amount for such
Distribution Date that was collected or advanced on the Group II Mortgage Loans.
Group I Subsequent Mortgage Loans: The Mortgage Loans
hereafter transferred and assigned to the Trust Fund and allocated to Group I
pursuant to Section 2.01(c), each of which shall have been purchased by the
Unaffiliated Seller under a Mortgage Loan Purchase Agreement.
Group II Subsequent Mortgage Loans: The Mortgage Loans
hereafter transferred and assigned to the Trust Fund and allocated to Group II
pursuant to Section 2.01(c), each of which shall have been purchased by the
Unaffiliated Seller under a Mortgage Loan Purchase Agreement.
26
High Cost Loan: A Mortgage Loan classified as (a) a "high
cost" loan under the Home Ownership and Equity Protection Act of 1994 or (b) a
"high cost," "threshold," "covered", "predatory" or similar loan under any other
applicable state, federal or local law.
I&I Payments: Payments due and owing under the Insurance and
Indemnity Agreement.
Impac: Impac Funding Corporation, a California corporation.
Impac Assignment Agreement: The Assignment and Recognition
Agreement, dated as of August 25, 2003, by and among the Unaffiliated Seller,
the Depositor and Impac, and each other Assignment and Recognition Agreement by
and among the Unaffiliated Seller, the Depositor and Impac in connection with
any Subsequent Transfer of Impac Mortgage Loans.
Impac Mortgage Loan: A Mortgage Loan which was acquired from
Impac by the Unaffiliated Seller pursuant to the Impac Purchase Agreement, and
which has been acquired by the Trust Fund.
Impac Purchase Agreement: The Amended and Restated Mortgage
Loan Purchase and Warranties Agreement, dated as of January 29, 2003, as amended
to date, by and between the Unaffiliated Seller and Impac.
Index: As to each Adjustable Rate Mortgage Loan, the index
from time to time in effect for the adjustment of the Mortgage Rate set forth as
such on the related Mortgage Note.
Initial Cut-off Date: August 1, 2003.
Initial Group I Pre-Funded Amount: The amount of $52,273,158.
Initial Group II Pre-Funded Amount: The amount of $99,054,546.
Initial Mortgage Loans: The Mortgage Loans delivered by the
Depositor on the Startup Date.
Initial Pre-Funded Amount: The sum of the Initial Group I
Pre-Funded Amount and the Initial Group II Pre-Funded Amount.
Insurance and Indemnity Agreement: The Insurance and Indemnity
Agreement dated as of August 1, 2003 among the Certificate Insurer, the Servicer
and the Unaffiliated Seller, as such agreement may be amended or supplemented in
accordance with the provisions thereof.
Insurance Payment Account: The separate Eligible Account
created and maintained by the Trustee pursuant to Section 4.05(c) in the name of
the Trustee for the benefit of the Class A-1 and Class A-3 Certificateholders
and the Certificate Insurer, and designated "Deutsche Bank National Trust
Company, in trust for Financial Security Assurance Inc. and the registered
holders of CDC Mortgage Capital Trust 2003-HE3, Mortgage Pass-Through
Certificates, Series 2003-HE3."
27
Insurance Policy: With respect to any Mortgage Loan included
in the Trust Fund, any insurance policy, including all riders and endorsements
thereto in effect, including any replacement policy or policies for any
Insurance Policies.
Insurance Proceeds: With respect to each Mortgage Loan,
proceeds of insurance policies insuring the Mortgage Loan or the related
Mortgaged Property.
Insured Payment: With respect to any Distribution Date, the
sum of the Class A-1 Deficiency and the Class A-3 Deficiency for that
Distribution Date.
Interest Accrual Period: With respect to any Distribution
Date, the period beginning with the immediately preceding Distribution Date (or
in the case of the first Distribution Date, the period from and including the
Closing Date to but excluding such first Distribution Date) and ending on the
day prior to the current Distribution Date (on an actual/360 day count basis).
Interest Deficit Amount: With respect to any Distribution
Date, the excess of (i) the aggregate Accrued Certificate Interest for all
Classes of the Class A Certificates on such Distribution Date, over (ii) an
amount equal to the Interest Remittance Amount less the Premium Amount and the
Trustee Fee, in each case, for such Distribution Date.
Interest Rate Adjustment Date: With respect to each Adjustable
Rate Mortgage Loan, the date, specified in the related Mortgage Note and the
Mortgage Loan Schedule, on which the Mortgage Rate is adjusted.
Interest Rate Cap Payment: Beginning on the first Distribution
Date, and continuing through the 20 Distribution Dates thereafter, the amount,
if any, equal to the product of (a) the number of basis points by which LIBOR
exceeds 6.75% (up to a maximum excess of 200 basis points) and (b) the amount
set forth on the notional balance and multiplier schedule attached to the Cap
Agreement as applicable to that Distribution Date, based on an "actual/360"
accrual. Commencing June 24, 2005 until and including February 24, 2006 (subject
to adjustment in accordance with ISDA's "Preceding Business Day Convention"),
the Interest Rate Cap Payment will be the amount, if any, equal to the product
of (a) the number of basis points by which LIBOR exceeds 7.75% (up to a maximum
excess of 100 basis points) and (b) the amount set forth on the notional balance
and multiplier schedule attached to the Cap Agreement as applicable to that
Distribution Date, based on an "actual/360" accrual.
Interest Remittance Amount: With respect to any Distribution
Date, the sum of (a) the sum, without duplication, of the following amounts
received by the Trustee from the Servicer on the related Remittance Date:
(i) all installments of interest due on the Mortgage
Loans during the related Due Period and received or advanced by the
Servicer on or prior to the related Remittance Date;
(ii) Compensating Interest paid by the Servicer on such
Remittance Date;
28
(iii) the interest component of all Substitution Adjustment
Amounts and Repurchase Prices received by the Servicer during the
related Due Period;
(iv) the interest component of all Condemnation Proceeds,
Insurance Proceeds and Liquidation Proceeds received by the Servicer
during the related Due Period (in each case, net (but not to be reduced
below zero) of unreimbursed expenses incurred in connection with a
liquidation or foreclosure and unreimbursed Advances, if any); and
(v) the interest component of the proceeds of any
termination of the Trust Fund;
reduced by the Servicing Fee for the related Due Period, together with amounts
in reimbursement for Advances previously made with respect to the Mortgage Loans
and other amounts as to which the Servicer is entitled to be reimbursed pursuant
to the Agreement; and
(b) the Capitalized Interest Requirement, if any, deposited into the
Distribution Account on such Distribution Date
Investment Account: As defined in Section 3.12(a).
Late Collections: With respect to any Mortgage Loan and any
Due Period, all amounts received subsequent to the Determination Date
immediately following such Due Period, whether as late payments of Monthly
Payments or as Insurance Proceeds, Liquidation Proceeds or otherwise, which
represent late payments or collections of principal and/or interest due (without
regard to any acceleration of payments under the related Mortgage and Mortgage
Note) but delinquent for such Due Period and not previously recovered.
Late Payment Rate: Has the meaning ascribed thereto in the
Insurance and Indemnity Agreement.
LIBOR: With respect to any Interest Accrual Period for the
LIBOR Certificates, the rate determined by the Trustee on the related LIBOR
Determination Date on the basis of the offered rate for one-month U.S. dollar
deposits as such rate appears on Telerate Page 3750 as of 11:00 a.m. (London
time) on such date; provided that if such rate does not appear on Telerate Page
3750, the rate for such date will be determined on the basis of the rates at
which one-month U.S. dollar deposits are offered by the Reference Banks at
approximately 11:00 a.m. (London time) on such date to prime banks in the London
interbank market. In such event, the Trustee will request the principal London
office of each of the Reference Banks to provide a quotation of its rate. If at
least two such quotations are provided, the rate for that date will be the
arithmetic mean of the quotations (rounded upwards if necessary to the nearest
whole multiple of 1/16%). If fewer than two quotations are provided as
requested, the rate for that date will be the arithmetic mean of the rates
quoted by major banks in New York City, selected by the Servicer, at
approximately 11:00 a.m. (New York City time) on such date for one-month U.S.
dollar loan to leading European banks.
LIBOR Certificates: As specified in the Preliminary Statement.
29
LIBOR Determination Date: With respect to any Interest Accrual
Period (other than the initial Interest Accrual Period) for the LIBOR
Certificates, the second London Business Day preceding the commencement of such
Interest Accrual Period.
Liquidated Mortgage Loan: With respect to any Distribution
Date, a defaulted Mortgage Loan (including any REO Property) which was
liquidated in the calendar month preceding the month of such Distribution Date
and as to which the Servicer has certified (in accordance with this Agreement)
that it has received all amounts it expects to receive in connection with the
liquidation of such Mortgage Loan including the final disposition of an REO
Property.
Liquidation Event: With respect to any Mortgage Loan, any of
the following events: (i) such Mortgage Loan is paid in full; (ii) a Final
Recovery Determination is made as to such Mortgage Loan; or (iii) such Mortgage
Loan is removed from coverage under this Agreement by reason of its being
purchased, sold or replaced pursuant to or as contemplated by this Agreement.
With respect to any REO Property, either of the following events: (i) a Final
Recovery Determination is made as to such REO Property; or (ii) such REO
Property is removed from coverage under this Agreement by reason of its being
purchased pursuant to this Agreement.
Liquidation Proceeds: Cash received in connection with the
liquidation of a defaulted Mortgage Loan, whether through trustee's sale,
foreclosure sale or otherwise.
Loan Group I Cap: The per annum rate equal to the weighted
average gross rate of the Group I Mortgage Loans then in effect on the beginning
of the related Due Period, less the applicable Expense Fee Rate and further
reduced by the Premium Rate in respect of the Class A-1 Certificates.
Loan Group II Cap: The per annum rate equal to the weighted
average gross rate of the Group II Mortgage Loans then in effect on the
beginning of the related Due Period, less the applicable Expense Fee Rate and,
in the case of the Class A-3 Certificates only, further reduced by the Premium
Rate in respect of the Class A-3 Certificates.
Loan-to-Value Ratio or LTV: With respect to any Mortgage Loan,
the ratio (expressed as a percentage) of the original outstanding principal
amount of the Mortgage Loan as of the Cut-off Date (unless otherwise indicated),
to the lesser of (a) the Appraised Value of the Mortgaged Property at
origination, and (b) if the Mortgage Loan was made to finance the acquisition of
the related Mortgaged Property, the purchase price of the Mortgaged Property.
London Business Day: Any day on which dealings in deposits of
United States dollars are transacted in the London interbank market.
Loss Trigger Event: With respect to any Distribution Date, the
event that is in effect if the aggregate amount of Realized Losses incurred
since the related Cut-off Date through the last day of the related Prepayment
Period divided by the Maximum Pool Principal Balance exceeds the applicable
percentage as follows with respect to such Distribution Date: (a) 3.00% for the
Distribution Dates occurring from September 2005 to August 2006; (b) 4.25% for
the Distribution Dates occurring from September 2006 to August 2007; (c) 5.25%
30
for Distribution Dates occurring from September 2007 to August 2008; and (d)
6.00% for Distribution Dates occurring in September 2008 and thereafter.
Lower Tier Regular Interest: As described in the Preliminary
Statement.
Lower Tier REMIC: As described in the Preliminary Statement
Master Financial: Master Financial, Inc., a California
corporation.
Master Financial Assignment Agreement: The Assignment and
Recognition Agreement, dated as of August 25, 2003, by and among the
Unaffiliated Seller, the Depositor and Master Financial, and each other
Assignment and Recognition Agreement by and among the Unaffiliated Seller, the
Depositor and Master Financial in connection with any Subsequent Transfer of
Master Financial Mortgage Loans.
Master Financial Mortgage Loan: A Mortgage Loan which was
acquired from Master Financial by the Unaffiliated Seller pursuant to the Master
Financial Purchase Agreement, and which has been acquired by the Trust Fund.
Master Financial Purchase Agreement: The Mortgage Loan
Purchase and Warranties Agreement, dated as of June 1, 2003, as amended to date,
by and between the Unaffiliated Seller and Master Financial.
Maximum Mortgage Rate: With respect to each Adjustable Rate
Mortgage Loan, a rate that (i) is set forth on the Data Tape Information and in
the related Mortgage Note and (ii) is the maximum interest rate to which the
Mortgage Rate on such Adjustable Rate Mortgage Loan may be increased during the
lifetime of such Mortgage Loan.
Maximum Pool Principal Balance: The aggregate Stated Principal
Balances of all Initial Mortgage Loans as of the Initial Cut-off Date plus the
Initial Pre-Funded Amount.
Middle Tier Regular Interest: As described in the Preliminary
Statement.
Middle Tier REMIC: As described in the Preliminary Statement.
Minimum Mortgage Rate: With respect to each Adjustable Rate
Mortgage Loan, a rate that (i) is set forth on the Data Tape Information and in
the related Mortgage Note and (ii) is the minimum interest rate to which the
Mortgage Rate on such Adjustable Rate Mortgage Loan may be decreased during the
lifetime of such Mortgage Loan.
Monthly Statement: The statement delivered to the
Certificateholders pursuant to Section 4.03.
Moody's: Moody's Investors Service, Inc. If Moody's is
designated as a Rating Agency in the Preliminary Statement, for purposes of
Section 10.05(b) the address for notices to Moody's shall be Moody's Investors
Service, Inc., 99 Church Street, New York, New York 10007, Attention:
Residential Mortgage Pass-Through Group, or such other address as Moody's may
hereafter furnish to the Depositor and the Servicer.
31
Mortgage: The mortgage, deed of trust or other instrument
identified on the Mortgage Loan Schedule as securing a Mortgage Note.
Mortgage File: The items pertaining to a particular Mortgage
Loan contained in either the Servicing File or Custodial File.
Mortgage Loan Purchase Agreement: The Aames Purchase
Agreement, the Aegis Purchase Agreement, the Ameriquest Purchase Agreement, the
BNC Purchase Agreement, the Chapel Mortgage Purchase Agreement, the Encore
Purchase Agreement, the First Banc Purchase Agreement, the First NLC Purchase
Agreement, the Impac Purchase agreement, the Master Financial Purchase
Agreement, the Novelle Purchase Agreement, the People's Choice Purchase
Agreement and the SIB Purchase Agreement, as applicable.
Mortgage Loans: An individual Mortgage Loan which is the
subject of this Agreement, each Mortgage Loan originally sold and subject to
this Agreement being identified on the Mortgage Loan Schedule, which Mortgage
Loan includes, without limitation, the Mortgage File, the Scheduled Payments,
Principal Prepayments, Liquidation Proceeds, Condemnation Proceeds, Insurance
Proceeds, REO Disposition proceeds, and all other rights, benefits, proceeds and
obligations arising from or in connection with such Mortgage Loan, excluding
replaced or repurchased Mortgage Loans. As applicable, "Mortgage Loan" shall be
deemed to refer to REO Property.
Mortgage Loan Schedule: A schedule of Mortgage Loans annexed
hereto as Schedule I, such schedule setting forth the following information with
respect to each Mortgage Loan: (1) the Originator's Mortgage Loan number; (2)
the city, state and zip code of the Mortgaged Property; (3) a code indicating
whether the Mortgaged Property is a single family residence, two-family
residence, three-family residence, four-family residence, PUD or condominium;
(4) the current Mortgage Interest Rate; (5) the current net Mortgage Rate; (6)
the current Monthly Payment; (7) the Gross Margin; (8) the original term to
maturity; (9) the scheduled maturity date; (10) the principal balance of the
Mortgage Loan as of the Cut-off Date after deduction of payments of principal
due on or before the Cut-off Date whether or not collected; (11) the
Loan-to-Value Ratio; (12) the next Interest Rate Adjustment Date; (13) the
lifetime Mortgage Interest Rate Cap; (14) whether the Mortgage Loan is
convertible or not; (15) a code indicating the mortgage guaranty insurance
company; (16) the Servicing Fee; (17) the identity of the related Originator of
such Mortgage Loan; (18) the Mortgagor's name; (19) the "paid-through" date
(based on payments received from the related Mortgagor) as of the Cut-off Date;
and (20) the Servicing Transfer Date.
Mortgage Note: The note or other evidence of the indebtedness
of a Mortgagor under a Mortgage Loan.
Mortgage Rate: The annual rate of interest borne on a Mortgage
Note, which shall be adjusted from time to time with respect to Adjustable Rate
Mortgage Loans.
Mortgage Rate Caps: With respect to an Adjustable Rate
Mortgage Loan, the Periodic Mortgage Rate Cap, the Maximum Mortgage Rate, and
the Minimum Mortgage Rate for such Mortgage Loan.
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Mortgaged Property: The real property (or leasehold estate, if
applicable) identified on the Mortgage Loan Schedule as securing repayment of
the debt evidenced by a Mortgage Note.
Mortgagor: The obligor(s) on a Mortgage Note.
Net Interest Margin Securities: As defined in Section 9.01.
Net Monthly Excess Cash Flow: For any Distribution Date the
amount remaining for distribution pursuant to subsection 4.02(a)(iii) (before
giving effect to distributions pursuant to such subsection).
Net Prepayment Interest Shortfall: For any Distribution Date,
the amount by which the sum of the Prepayment Interest Shortfalls exceeds the
sum of the Compensating Interest payments made on such Distribution Date.
NIM Closing Date: On or about August 25, 2003.
NIMs Trust: CDC Mortgage Capital Inc. NIM Trust 2003-HE3N, a
Delaware business trust.
Non-Delay Certificates: As specified in the Preliminary
Statement.
Nonrecoverable Advance: Any Servicing Advances previously made
or proposed to be made in respect of a Mortgage Loan or REO Property, which, in
the good faith business judgment of the Servicer, will not or, in the case of a
proposed Servicing Advance, would not, be ultimately recoverable from related
late payments, Insurance Proceeds, Liquidation Proceeds or otherwise on such
Mortgage Loan or REO Property. The determination by the Servicer that it has
made a Nonrecoverable Advance or that any proposed Servicing Advances, if made,
would constitute a Nonrecoverable Advance, shall be evidenced by an Officers'
Certificate delivered to the Trustee.
Nonrecoverable P&I Advance: Any P&I Advance previously made or
proposed to be made in respect of a Mortgage Loan or REO Property that, in the
good faith business judgment of the Servicer, will not or, in the case of a
proposed P&I Advance, would not be ultimately recoverable from related late
payments, Insurance Proceeds or Liquidation Proceeds on such Mortgage Loan or
REO Property as provided herein.
Notice of Final Distribution: The notice to be provided
pursuant to Section 9.02 to the effect that final distribution on any of the
Certificates shall be made only upon presentation and surrender thereof.
Novelle: Novelle Financial Services, Inc., a California
corporation.
Novelle Assignment Agreement: The Assignment and Recognition
Agreement, dated as of August 25, 2003, by and among the Unaffiliated Seller,
the Depositor and Novelle, and each other Assignment and Recognition Agreement
by and among the Unaffiliated Seller, the Depositor and Novelle in connection
with any Subsequent Transfer of Novelle Mortgage Loans.
33
Novelle Mortgage Loan: A Mortgage Loan which was acquired from
Novelle by the Unaffiliated Seller pursuant to the Novelle Purchase Agreement,
and which has been acquired by the Trust Fund.
Novelle Purchase Agreement: The Mortgage Loan Purchase and
Warranties Agreement, dated as of September 27, 2002, by and between the
Unaffiliated Seller and Novelle.
Ocwen: Ocwen Federal Bank FSB, a federally chartered savings
bank.
Offered Certificates: As specified in the Preliminary
Statement.
Officer's Certificate: A certificate signed by an officer of
the Servicer with responsibility for the servicing of the Mortgage Loans and
listed on a list delivered to the Trustee pursuant to this Agreement.
Opinion of Counsel: A written opinion of counsel, who may be
in-house counsel for the Servicer or the Subservicer, reasonably acceptable to
the Trustee and to the Certificate Insurer; provided that any Opinion of Counsel
relating to (a) qualification of the Mortgage Loans in a REMIC or (b) compliance
with the REMIC Provisions, must be (unless otherwise stated in such Opinion of
Counsel) an opinion of counsel who (i) is in fact independent of the Servicer of
the Mortgage Loans, (ii) does not have any material direct or indirect financial
interest in the Servicer of the Mortgage Loans or in an affiliate of either and
(iii) is not connected with the Servicer of the Mortgage Loans as an officer,
employee, director or person performing similar functions.
Optional Termination Date: means:
(i) For so long as the Class X Certificates are 100%
owned, either directly or indirectly, by the Unaffiliated Seller or any
Affiliate thereof, then the Servicer may cause the Optional Termination
Date to occur on any Distribution Date when the aggregate Stated
Principal Balance of the Mortgage Loans is 10.00% or less of the
Maximum Pool Principal Balance; and
(ii) If the Class X Certificates are not 100% owned,
either directly or indirectly, by the Unaffiliated Seller or any
Affiliate thereof, then the Holders of a majority in Class Certificate
Balance of the Class X Certificates may cause the Optional Termination
Date to occur on any Distribution Date when the aggregate Stated
Principal Balance of the Mortgage Loans is 10.00% or less of the
Maximum Pool Principal Balance, and, if such Class X Certificateholders
do not do so, then the Servicer shall also have such right.
Originator: The party that originated or acquired a Mortgage
Loan and, more specifically, (i) with respect to any Aames Mortgage Loan, Aames,
(ii) with respect to any Aegis Mortgage Loan, Aegis, (iii) with respect to any
Ameriquest Mortgage Loan, Ameriquest, (iv) with respect to any BNC Mortgage
Loan, BNC, (v) with respect to any Chapel Mortgage Loan, Chapel Mortgage, (vi)
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with respect to any Encore Mortgage Loan, Encore, (vii) with respect to any
First Banc Mortgage Loan, First Banc, (viii) with respect to any First NLC
Mortgage Loan, First NLC, (ix) with respect to any Impac Mortgage Loan or
Novelle Mortgage Loan, Impac or Novelle, as applicable, (x) with respect to any
Master Financial Mortgage Loan, Master Financial, (xi) with respect to any
People's Choice Mortgage Loan, People's Choice and (xii) with respect to any SIB
Mortgage Loan, SIB Mortgage.
OTS: Office of Thrift Supervision, and any successor thereto.
Outstanding: With respect to the Certificates as of any date
of determination, all Certificates theretofore executed and authenticated under
this Agreement except:
(i) Certificates theretofore canceled by the Trustee or
delivered to the Trustee for cancellation; and
(ii) Certificates in exchange for which or in lieu of
which other Certificates have been executed and delivered by the
Trustee pursuant to this Agreement.
Outstanding Mortgage Loan: As of any Due Date, a Mortgage Loan
with a Stated Principal Balance greater than zero which was not the subject of a
Principal Prepayment in Full prior to such Due Date and which did not become a
Liquidated Mortgage Loan prior to such Due Date.
Ownership Interest: As to any Residual Certificate, any
ownership interest in such Certificate including any interest in such
Certificate as the Holder thereof and any other interest therein, whether direct
or indirect, legal or beneficial.
P&I Advance: As to any Mortgage Loan or REO Property, any
advance made by the Servicer in respect of any Remittance Date with respect to
any Mortgage Loan representing the aggregate of all payments of principal and
interest on such Mortgage Loan, net of the related Servicing Fee, that were due,
and that were delinquent or unpaid on the related Determination Date, plus
certain amounts representing assumed payments not covered by any current net
income on the Mortgaged Properties acquired by foreclosure or deed in lieu of
foreclosure as determined pursuant to Section 4.01.
Pass-Through Margin: With respect to each Class of Regular
Certificates, on or prior to the Optional Termination Date the following
percentages: Class A-1 Certificates, 0.300%, Class A-2 Certificates, 0.360%,
Class A-3 Certificates, 0.300%, Class A-4 Certificates, 0.190%, Class A-5
Certificates, 0.500%, Class M-1 Certificates, 0.700%, Class M-2 Certificates,
1.750%, Class M-3 Certificates, 2.100%, Class B-1 Certificates, 3.400%, Class
B-2 Certificates, 3.750% and Class B-3 Certificates, 3.750%. Commencing on the
first Distribution Date after the Optional Termination Date, the Pass-Through
Margins shall increase to: Class A-1 Certificates, 0.600%, Class A-2
Certificates, 0.720%, Class A-3 Certificates, 0.600%, Class A-4 Certificates,
0.380%, Class A-5 Certificates, 1.000%, Class M-1 Certificates, 1.050%, Class
M-2 Certificates, 2.625%, Class M-3 Certificates, 3.150%, Class B-1
Certificates, 5.100%, Class B-2 Certificates, 5.625% and Class B-3 Certificates,
5.625%.
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Pass-Through Rate: For each Class of Certificates and each
Lower Tier and Middle Tier Regular Interest, the per annum rate set forth or
calculated in the manner described in the Preliminary Statement.
People's Choice: People's Choice Home Loan, Inc., a Wyoming
corporation.
People's Choice Assignment Agreement: The Assignment and
Recognition Agreement, dated as of August 25, 2003 as amended to date, by and
among the Unaffiliated Seller, the Depositor and People's Choice, and each other
Assignment and Recognition Agreement by and among the Unaffiliated Seller, the
Depositor and People's Choice in connection with any Subsequent Transfer of
People's Choice Mortgage Loans.
People's Choice Mortgage Loan: A Mortgage Loan which was
acquired from People's Choice by the Unaffiliated Seller pursuant to the
People's Choice Purchase Agreement, and which has been acquired by the Trust
Fund.
People's Choice Purchase Agreement: The Amended and Restated
Mortgage Loan Purchase and Warranties Agreement, dated as of October 24, 2002,
as amended to date, by and between the Unaffiliated Seller and People's Choice.
Percentage Interest: As to any Certificate, the percentage
interest evidenced thereby in distributions required to be made on the related
Class, such percentage interest being set forth on the face thereof or equal to
the percentage obtained by dividing the Denomination of such Certificate by the
aggregate of the Denominations of all Certificates of the same Class.
Periodic Mortgage Rate Cap: With respect to an Adjustable Rate
Mortgage Loan, the periodic limit on each Mortgage Rate adjustment as set forth
in the related Mortgage Note.
Permitted Investments: Any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
regardless of whether issued by the Servicer, the Trustee or any of their
respective Affiliates:
(i) direct obligations of, or obligations fully
guaranteed as to timely payment of principal and interest by, the
United States or any agency or instrumentality thereof; provided such
obligations are backed by the full faith and credit of the United
States;
(ii) demand and time deposits in, certificates of deposit
of, or bankers' acceptances (which shall each have an original maturity
of not more than 90 days and, in the case of bankers' acceptances,
shall in no event have an original maturity of more than 365 days or a
remaining maturity of more than 30 days) denominated in United States
dollars and issued by, any Eligible Institution;
(iii) repurchase obligations with respect to any security
described in clause (i) above entered into with an Eligible Institution
(acting as principal);
(iv) securities bearing interest or sold at a discount
that are issued by any corporation incorporated under the laws of the
United States of America or any state thereof and that are rated by
each Rating Agency that rates such securities in its highest long-term
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unsecured rating categories at the time of such investment or
contractual commitment providing for such investment;
(v) commercial paper (including both non-interest-bearing
discount obligations and interest-bearing obligations payable on demand
or on a specified date not more than 30 days after the date of
acquisition thereof) that is rated by each Rating Agency that rates
such securities in its highest short-term unsecured debt rating
available at the time of such investment;
(vi) units of money market funds, including money market
funds advised by the Depositor or an Affiliate thereof, that have been
rated "Aaa" by Moody's, "AAA" by Fitch and "AAA" by Standard & Poor's;
and
(vii) if previously confirmed in writing to the Trustee and
to the Certificate Insurer, any other demand, money market or time
deposit, or any other obligation, security or investment, as may be
acceptable to the Rating Agencies as a permitted investment of funds
backing "Aaa" or "AAA" rated securities;
provided, however, that no instrument described hereunder shall evidence either
the right to receive (a) only interest with respect to the obligations
underlying such instrument or (b) both principal and interest payments derived
from obligations underlying such instrument and the interest and principal
payments with respect to such instrument provide a yield to maturity at par
greater than 120% of the yield to maturity at par of the underlying obligations.
Permitted Transferee: Any person other than (i) the United
States, any State or political subdivision thereof, or any agency or
instrumentality of any of the foregoing, (ii) a foreign government,
International Organization or any agency or instrumentality of either of the
foregoing, (iii) an organization (except certain farmers' cooperatives described
in section 521 of the Code) 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) on any excess inclusions (as defined in section 860E(c)(1) of
the Code) with respect to any Residual Certificate, (iv) rural electric and
telephone cooperatives described in section 1381(a)(2)(C) of the Code, (v) a
Person that is not a U.S. Person, (vi) an "electing large partnership" within
the meaning of section 775 of the Code and (vii) any other Person so designated
by the Depositor based upon an Opinion of Counsel that the Transfer of an
Ownership Interest in a Residual Certificate to such Person may cause any REMIC
created hereunder to fail to qualify as a REMIC at any time that the
Certificates are outstanding. The terms "United States," "State" and
"International Organization" shall have the meanings set forth in section 7701
of the Code or successor provisions. A corporation will not be treated as an
instrumentality of the United States or of any State or political subdivision
thereof for these purposes if all of its activities are subject to tax and, with
the exception of the Federal Home Loan Mortgage Corporation, a majority of its
board of directors is not selected by such government unit.
Person: Any individual, corporation, partnership, joint
venture, association, limited liability company, joint-stock company, trust,
unincorporated organization or government, or any agency or political
subdivision thereof.
37
Physical Certificates: As specified in the Preliminary
Statement.
Pool Stated Principal Balance: As to any Distribution Date,
the aggregate of the Stated Principal Balances of the Mortgage Loans for such
Distribution Date which were Outstanding Mortgage Loans as of the last day of
the related Due Period.
Preference Amount: Any amounts distributed in respect of the
Class A-1 Certificates or Class A-3 Certificates that are recovered from any
Holder of such Certificates as a voidable preference by a trustee in bankruptcy
pursuant to the United States Bankruptcy Code or other similar law in accordance
with a final, nonappealable order of a court having competent jurisdiction and
which have not theretofore been repaid to such Holder.
Preference Claim: As defined in Section 4.05(f).
Pre-Funding Accounts: The Group I Pre-Funding Account and the
Group II Pre-Funding Account.
Pre-Funding Amount: With respect to any date, the amount on
deposit in the Pre-Funding Accounts.
Pre-Funding Earnings: With respect to a Pre-Funding Account,
the actual investment earnings realized on amounts deposited in such Pre-Funding
Account.
Pre-Funding Period: The period commencing on the Startup Date
and ending on the earliest to occur of (i) the date on which the amount on
deposit in the Pre-Funding Account (exclusive of any investment earnings) is
less than $100,000, (ii) the date on which any Event of Default occurs and (iii)
November 24, 2003.
Premium Amount: The product of (i) the Premium Rate and (ii)
the sum of the Certificate Balances of the Class A-1 Certificates and the Class
A-3 Certificates immediately prior to such Distribution Date.
Premium Rate: The rate at which the "Premium" is determined as
described in the letter dated August 25, 2003 between the Unaffiliated Seller
and the Certificate Insurer (a copy of which shall be provided by the
Unaffiliated Seller to the Trustee).
Prepayment Charge: Any prepayment premium, penalty or charge
collected by the Servicer with respect to a Mortgage Loan from a Mortgagor in
connection with any voluntary Principal Prepayment in Full pursuant to the terms
of the related Mortgage Note.
Prepayment Interest Shortfall: With respect to any Remittance
Date, the sum of, for each Mortgage Loan that was during the related Prepayment
Period the subject of a Principal Prepayment in Full, that was applied by the
Servicer to reduce the outstanding principal balance of such Mortgage Loan on a
date preceding the Due Date in the succeeding Prepayment Period, an amount equal
to the product of (a) the Mortgage Rate net of the Servicing Fee Rate for such
Mortgage Loan, (b) the amount of the Principal Prepayment for such Mortgage
Loan, (c) 1/360 and (d) the number of days commencing on the date on which such
Principal Prepayment was applied and ending on the last day of the related
Prepayment Period.
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Prepayment Period: With respect to any Distribution Date, the
calendar month preceding the calendar month in which such Distribution Date
occurs.
Principal Distribution Amount: For any Distribution Date, the
sum of (i) the Basic Principal Distribution Amount for such Distribution Date
and (ii) the Extra Principal Distribution Amount for such Distribution Date.
Principal Parity Deficit: With respect to any Distribution
Date, the excess of (i) the aggregate Class Certificate Balances of the Class A
Certificates on that Distribution Date, after taking into account any reduction
(other than, with respect to the Class A-1 and Class A-3 Certificates,
reductions due to payments from the Certificate Insurance Policy on that
Distribution Date), of those Class Certificate Balances on that Distribution
Date, less the excess of (a) any Principal Parity Deficits for all prior
Distribution Dates over (b) any Class A-1 or Class A-3 Principal Parity Amounts
for all prior Distribution Dates over (ii) the Current Maximum Amount for that
Distribution Date. For the first Distribution Date, the Principal Parity Deficit
will equal zero.
Principal Prepayment: Any full or partial payment or other
recovery of principal on a Mortgage Loan (including upon liquidation of a
Mortgage Loan) which is received in advance of its scheduled Due Date, excluding
any prepayment penalty or premium thereon and which is not accompanied by an
amount of interest representing scheduled interest due on any date or dates in
any month or months subsequent to the month of prepayment.
Principal Prepayment in Full: Any Principal Prepayment made by
a Mortgagor of the entire principal balance of a Mortgage Loan.
Principal Remittance Amount: With respect to any Remittance
Date, the sum, without duplication, of: (i) all scheduled installments of
principal due on the Mortgage Loans during the related Due Period and received
or advanced by the Servicer on or prior to the related Remittance Date; (ii) the
principal component of all Condemnation Proceeds, Insurance Proceeds and
Liquidation Proceeds during the related Due Period (in each case, net of
remaining (i.e., not deducted from the Interest Remittance Amount) unreimbursed
expenses incurred in connection with a liquidation or foreclosure and
unreimbursed Advances, if any); (iii) all partial or full prepayments on the
Mortgage Loans received during the related Prepayment Period; (iv) the principal
component of all Substitution Adjustment Amounts and Repurchase Prices received
by the Servicer during the related Due Period; and (v) the principal component
of the proceeds of any termination of the Trust Fund; reduced by remaining
amounts (i.e., not deducted from the Interest Remittance Amount) in
reimbursement for Advances previously made with respect to the Mortgage Loans
and other amounts as to which the Servicer is entitled to be reimbursed pursuant
to this Agreement.
Private Certificates: As specified in the Preliminary
Statement.
Prospectus Supplement: The Prospectus Supplement, dated August
22, 2003, relating to the Offered Certificates.
PUD: Planned Unit Development.
39
Qualified Insurer: A mortgage guaranty insurance company duly
qualified as such under the laws of the state of its principal place of business
and each state having jurisdiction over such insurer in connection with the
insurance policy issued by such insurer, duly authorized and licensed in such
states to transact a mortgage guaranty insurance business in such states and to
write the insurance provided by the insurance policy issued by it, approved as a
FNMA- or FHLMC-approved mortgage insurer or having a claims paying ability
rating of at least "AA" or equivalent rating by a nationally recognized
statistical rating organization. Any replacement insurer with respect to a
Mortgage Loan must have at least as high a claims paying ability rating as the
insurer it replaces had on the Closing Date.
Rating Agency: Each of Standard & Poor's, Fitch and Moody's.
If such organization or a successor is no longer in existence, "Rating Agency"
shall be such nationally recognized statistical rating organization, or other
comparable Person, as is designated by the Depositor, notice of which
designation shall be given to the Trustee. References herein to a given rating
or rating category of a Rating Agency shall mean such rating category without
giving effect to any modifiers. For purposes of Section 10.05(b), the addresses
for notices to each Rating Agency shall be the address specified therefor in the
definition corresponding to the name of such Rating Agency, or such other
address as such Rating Agency may hereafter furnish to the Depositor and the
Servicer.
Record Date: With respect to any Distribution Date, the close
of business on the Business Day immediately preceding such Distribution Date;
provided, however, that for any Certificate issued in Definitive Form, the
Record Date shall be the close of business on the last Business Day of the month
immediately preceding such applicable Distribution Date.
Realized Loss: The excess of the outstanding principal balance
of a defaulted Mortgage Loan over the net Liquidation Proceeds with respect
thereto that are allocable to principal.
Reference Bank: As defined in Section 4.04.
Regular Certificates: As specified in the Preliminary
Statement.
Reimbursement Amount: As of any Distribution Date, the sum of
(a)(i) all Insured Payments previously received by the Trustee and all
Preference Amounts previously paid by the Certificate Insurer and in each case
not previously repaid to the Certificate Insurer pursuant to Section 4.02(a)
plus (ii) interest accrued on each such Insured Payment and Preference Amounts
not previously repaid calculated at the Late Payment Rate from the date the
Trustee received the related Insured Payment or Preference Amounts were paid by
the Certificate Insurer and (b)(i) any amounts then due and owing to the
Certificate Insurer under the Insurance and Indemnity Agreement (excluding the
Premium Amount due on such Distribution Date), as certified to the Trustee by
the Certificate Insurer plus (ii) interest on such amounts at the rate specified
in the Insurance and Indemnity Agreement. The Certificate Insurer shall notify
the Trustee and the Unaffiliated Seller of the amount of any Reimbursement
Amount.
Relief Act Shortfall: With respect to any Distribution Date
and any Mortgage Loan, any reduction in the amount of interest or principal
collectible on such Mortgage Loan for the most recently ended Due Period as a
40
result of the application of the Soldiers' and Sailors' Civil Relief Act of
1940, as amended, and similar state laws.
Remainder Amount: As defined in Section 9.01.
REMIC: A "real estate mortgage investment conduit" within the
meaning of section 860D of the Code.
REMIC Provisions: Provisions of the federal income tax law
relating to REMICs, which appear at sections 860A through 860G of Subchapter M
of Chapter 1 of the Code, and related provisions, and regulations promulgated
thereunder, as the foregoing may be in effect from time to time as well as
provisions of applicable state laws.
REMIC Trust: The segregated pool of assets consisting of the
Trust Fund, exclusive of Prepayment Charges and the Excess Reserve Fund Account.
Remittance Date: The 18th day (or if such 18th day is not a
Business Day, the first Business Day immediately preceding) of any month.
REO Disposition: The final sale by the Servicer of any REO
Property.
REO Imputed Interest: As to any REO Property, for any period,
an amount equivalent to interest (at the Mortgage Rate net of the Servicing Fee
Rate that would have been applicable to the related Mortgage Loan had it been
outstanding) on the unpaid principal balance of the Mortgage Loan as of the date
of acquisition thereof (as such balance is reduced pursuant to Section 3.17 by
any income from the REO Property treated as a recovery of principal).
REO Property: A Mortgaged Property acquired by the Trust Fund
through foreclosure or deed-in-lieu of foreclosure in connection with a
defaulted Mortgage Loan.
Representative: Morgan Stanley & Co. Incorporated, as
representative on behalf of itself, Banc of America Securities LLC and
Countrywide Securities, Inc.
Repurchase Price: With respect to any Mortgage Loan, an amount
equal to the sum (without duplication) of (i) the unpaid principal balance of
such Mortgage Loan as of the date of repurchase and (ii) (x) if such Mortgage
Loan is being repurchased by the Unaffiliated Seller, the sum of (A) interest on
such unpaid principal balance of such Mortgage Loan at the Mortgage Rate from
the last date through which interest has been paid and distributed to the
Trustee to the last day of the month in which such repurchase occurs, (B) all
unreimbursed P&I Advances and Servicing Advances, (C) all unpaid Servicing Fees,
(D) all expenses reasonably incurred by the Servicer, the Trustee, the
Certificate Insurer or the Unaffiliated Seller, as the case may be, in respect
of a breach or defect, including, without limitation, expenses arising out of
any such party's enforcement of the Originator's repurchase obligation, to the
extent not included in (B), and (E) all costs and expenses incurred by, or on
behalf of, the Trust Fund in connection with any violation by such Mortgage Loan
of a predatory or abusive-lending law or (y) if such Mortgage Loan is being
repurchased by the related Originator, all other amounts payable by such
Originator in accordance with the terms of the related Mortgage Loan Purchase
Agreement.
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Request for Release: The Request for Release submitted by the
Servicer to the Trustee, substantially in the form of Exhibit K.
Residual Certificates: As specified in the Preliminary
Statement.
Responsible Officer: When used with respect to the Trustee,
any Vice President, any Assistant Vice President, any Assistant Secretary, any
Assistant Treasurer or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers who
at such time shall be officers to whom, with respect to a particular matter,
such matter is referred because of such officer's knowledge of and familiarity
with the particular subject and who shall have direct responsibility for the
administration of this Agreement.
Rule 144A Letter: As defined in Section 5.02(b).
Scheduled Payment: The scheduled monthly payment on a Mortgage
Loan due on any Due Date allocable to principal and/or interest on such Mortgage
Loan which, unless otherwise specified herein, shall give effect to any related
Debt Service Reduction and any Deficient Valuation that affects the amount of
the monthly payment due on such Mortgage Loan.
Scheduled Principal Balance: With respect to any Mortgage
Loan: (a) as of the Cut-off Date, the outstanding principal balance of such
Mortgage Loan as of such date, net of the principal portion of all unpaid
Monthly Payments, if any, due on or before such date; (b) as of any Due Date
subsequent to the Cut-off Date up to and including the Due Date in the calendar
month in which a Liquidation Event occurs with respect to such Mortgage Loan,
the Scheduled Principal Balance of such Mortgage Loan as of the Cut-off Date,
minus the sum of (i) the principal portion of each Monthly Payment due on or
before such Due Date but subsequent to the Cut-off Date, whether or not
received, (ii) all Principal Prepayments received before such Due Date but after
the Cut-off Date, (iii) the principal portion of all Liquidation Proceeds and
Insurance Proceeds received before such Due Date but after the Cut-off Date, net
of any portion thereof that represents principal due (without regard to any
acceleration of payments under the related Mortgage and Mortgage Note) on a Due
Date occurring on or before the date on which such proceeds were received and
(iv) any reduction in the principal balance of such Mortgage Loan incurred with
respect thereto as a result of a Deficient Valuation occurring before such Due
Date, but only to the extent such reduction in principal balance represents a
reduction in the portion of principal of such Mortgage Loan not yet due (without
regard to any acceleration of payments under the related Mortgage and Mortgage
Note) as of the date of such Deficient Valuation; and (c) as of any Due Date
subsequent to the occurrence of a Liquidation Event with respect to such
Mortgage Loan, zero.
SEC: As defined in Section 8.12(a).
Securities Act: The Securities Act of 1933, as amended.
Senior Enhancement Percentage: With respect to any
Distribution Date, the percentage obtained by dividing (x) the sum of (i) the
aggregate Class Certificate Balances of the Subordinated Certificates and (ii)
the Subordinated Amount (in each case after taking into account the
42
distributions of the Principal Distribution Amount for such Distribution Date)
by (y) the Current Maximum Amount for that Distribution Date.
Senior Specified Enhancement Percentage: As of any date of
determination, 37.50%.
Servicer: Ocwen Federal Bank FSB, a federally chartered
savings bank, and its successors and assigns, in its capacity as servicer
hereunder.
Servicer Termination Test: With respect to any Distribution
Date, the Servicer Termination Test will be failed with respect to the Servicer
if either:
(a) the Cumulative Loss Percentage exceeds (i) in months
1 through 24, 2.50%, (ii) in months 25 through 36, 4.00%, (iii) in
months 37 through 48, 5.25% and (iv) in month 49 and thereafter, 6.70%;
or
(b) the quotient (expressed as a percentage) of (x) the
Stated Principal Balance of Mortgage Loans 60 days Delinquent or more
as of the end of the related Due Period (including Mortgage Loans in
bankruptcy, foreclosure or represented by an REO Property) over (y) the
aggregate Stated Principal Balance of the Mortgage Loans as of the end
of the related Due Period, exceeds 20%.
Servicing Advances: The reasonable "out-of-pocket" costs and
expenses (including legal fees) incurred by the Servicer in the performance of
its servicing obligations in connection with a default, delinquency or other
unanticipated event, including, but not limited to, the cost of (i) the
preservation, restoration and protection of a Mortgaged Property, (ii) any
enforcement or judicial proceedings, including foreclosures and litigation, in
respect of a particular Mortgage Loan, (iii) the management (including
reasonable fees in connection therewith) and liquidation of any REO Property and
(iv) the performance of its obligations under Section 3.01, Section 3.09,
Section 3.13 and Section 3.15 hereof. Servicing advances also include any
reasonable "out-of-pocket" costs and expenses (including legal fees) incurred by
the Servicer in connection with executing and recording instruments of
satisfaction, deeds of reconveyance or Assignments of Mortgage in connection
with any satisfaction or foreclosure in respect of any Mortgage Loan to the
extent not recovered from the Mortgagor or otherwise payable under this
Agreement. The Servicer shall not be required to make any Nonrecoverable
Advances.
Servicing Fee: With respect to each Mortgage Loan and for any
calendar month, an amount equal to one month's interest (or in the event of any
payment of interest which accompanies a Principal Prepayment in Full made by the
Mortgagor during such calendar month, interest for the number of days covered by
such payment of interest) at the Servicing Fee Rate on the same principal amount
on which interest on such Mortgage Loan accrues for such calendar month. Such
fee shall be payable monthly, and shall be pro rated for any portion of a month
during which the Mortgage Loan is serviced by the Servicer under this Agreement.
The Servicing Fee is payable solely from, the interest portion (including
recoveries with respect to interest from Liquidation Proceeds and proceeds
received with respect to REO Properties, to the extent permitted by Section
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3.11) of such Monthly Payment collected by the Servicer, or as otherwise
provided under Section 3.11.
Servicing Fee Rate: With respect to each Mortgage Loan, 0.50%
per annum.
Servicing File: With respect to each Mortgage Loan, the file
retained by the Servicer consisting of originals or copies of all documents in
the Mortgage File which are not delivered to the Trustee in the Custodial File
and copies of each of the other Mortgage Loan documents required to be delivered
by the related Originator pursuant to the terms of the related Mortgage Loan
Purchase Agreement.
Servicing Officer: Any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name and facsimile signature appear on a list of servicing officers furnished to
the Trustee by the Servicer on the Closing Date pursuant to this Agreement, as
such list may from time to time be amended.
Servicing Transfer Date: With respect to each Mortgage Loan,
the date on which Ocwen commenced servicing such Mortgage Loan, as set forth on
the Mortgage Loan Schedule.
SIB Mortgage: SIB Mortgage Corp., a New Jersey corporation.
SIB Mortgage Assignment Agreement: The Assignment and
Recognition Agreement, dated as of August 25, 2003, by and among the
Unaffiliated Seller, the Depositor and SIB Mortgage, and each other Assignment
and Recognition Agreement by and among the Unaffiliated Seller, the Depositor
and SIB Mortgage in connection with any Subsequent Transfer of SIB Mortgage
Loans.
SIB Mortgage Loan: A Mortgage Loan which was acquired from SIB
Mortgage by the Unaffiliated Seller pursuant to the SIB Mortgage Purchase
Agreement, and which has been acquired by the Trust Fund.
SIB Mortgage Purchase Agreement: The Mortgage Loan Purchase
and Warranties Agreement, dated as of July 11, 2002, as amended to date, by and
between the Unaffiliated Seller and SIB Mortgage.
Similar Law: As defined in Section 5.02(b).
Specified Subordinated Amount: With respect to any
Distribution Date prior to the Stepdown Date, an amount equal to 1.90% of the
Maximum Pool Principal Balance; and with respect to any Distribution Date on and
after the Stepdown Date, an amount equal to 3.80% of the Current Maximum Amount
for that Distribution Date subject to a minimum amount equal to 0.50% of the
Maximum Pool Principal Balance; provided, however, that if, on any Distribution
Date, a Delinquency Trigger Event has occurred, the Specified Subordinated
Amount shall not be reduced to the applicable percentage of the Current Maximum
Amount, but instead remain the same as the prior period's Specified Subordinated
Amount until the distribution date on which a Delinquency Trigger Event is no
longer occurring; provided, further, that if, on any Distribution Date, a Loss
Trigger Event exists, the Specified Subordinated Amount shall equal 2.40% of the
Maximum Pool Principal Balance until the Distribution Date on which a Loss
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Trigger Event no longer exists. When the Class Certificate Balance of each Class
of Offered Certificates has been reduced to zero, the Specified Subordinated
Amount shall thereafter equal zero.
Standard & Poor's: Standard & Poor's Ratings Services, a
division of the McGraw-Hill Companies, Inc. If Standard & Poor's is designated
as a Rating Agency in the Preliminary Statement, for purposes of Section
10.05(b) the address for notices to Standard & Poor's shall be Standard &
Poor's, 55 Water, New York, New York 10041, Attention: Residential Mortgage
Surveillance Group - Morgan Stanley ABS Capital I Inc. 2003-HE3, or such other
address as Standard & Poor's may hereafter furnish to the Depositor and the
Servicer.
Startup Day: For each REMIC created hereunder, the Closing
Date.
Stated Principal Balance: As to each Mortgage Loan, (i) the
principal balance of the Mortgage Loan at the Cut-off Date after giving effect
to payments of principal due on or before such date, to the extent actually
received, minus (ii) all amounts previously distributed to the Trustee with
respect to the related Mortgage Loan representing payments or recoveries of
principal, including Advances in respect of scheduled payments of principal. For
purposes of any Distribution Date, the Stated Principal Balance of any Mortgage
Loan will give effect to any scheduled payments of principal received or
advanced prior to the related Remittance Date and any unscheduled principal
payments and other unscheduled principal collections received during the related
Prepayment Period.
Stepdown Date: The later to occur of (i) the earlier to occur
of (a) the Distribution Date in September 2006 and (b) the Distribution Date on
which the aggregate Class Certificate Balances of the Class A Certificates are
reduced to zero and (ii) the first Distribution Date on which the Senior
Enhancement Percentage (calculated for this purpose only after taking into
account scheduled and unscheduled payments of principal on the Mortgage Loans on
the last day of the related Due Period but prior to any applications of
Principal Distribution Amount to the Offered Certificates on the applicable
Distribution Date) is greater than or equal to the Senior Specified Enhancement
Percentage.
Subordinated Amount: As of any Distribution Date, the excess,
if any, of (a) the Current Maximum Amount for that Distribution Date on such
Distribution Date over (b) the aggregate of the Class Certificate Balances of
the Offered Certificates as of such Distribution Date plus the Class Certificate
Balance of the Class P Certificates (after giving effect to the payment of the
Principal Remittance Amount on such Certificates on such Distribution Date).
Subordinated Certificates: As specified in the Preliminary
Statement.
Subordination Deficiency: With respect to any Distribution
Date, the excess, if any, of (a) the Specified Subordinated Amount applicable to
such Distribution Date over (b) the Subordinated Amount applicable to such
Distribution Date.
Subordination Reduction Amount: With respect to any
Distribution Date, an amount equal to the lesser of (a) the Excess Subordinated
Amount and (b) the Total Monthly Excess Spread.
Subservicer: As defined in Section 3.02(a).
45
Subservicing Account: As defined in Section 3.08.
Subservicing Agreement: As defined in Section 3.02.
Subsequent Cut-off Date: As to any Subsequent Mortgage Loans,
the date specified in the Addition Notice delivered in connection therewith,
which date shall be the close of business on the first day of the month in which
such Subsequent Mortgage Loans will be conveyed to the Trust Fund.
Subsequent Mortgage Loans: The Mortgage Loans hereafter
transferred and assigned to the Trust Fund pursuant to Section 2.01(c), each of
which shall have been purchased by the Unaffiliated Seller under a Mortgage Loan
Purchase Agreement.
Subsequent Transfer: The transfer and assignment by the
Depositor to the Trust of the Subsequent Mortgage Loans pursuant to the terms
hereof.
Subsequent Transfer Agreement: A subsequent transfer agreement
in substantially the form of Exhibit L.
Subsequent Transfer Date: The Business Day on which a
Subsequent Transfer occurs.
Substitute Mortgage Loan: A Mortgage Loan substituted by the
Unaffiliated Seller or an Originator for a Deleted Mortgage Loan in accordance
with the terms of this Agreement or the related Mortgage Loan Purchase
Agreement, which must, on the date of such substitution, as confirmed in a
Request for Release, substantially in the form of Exhibit K, (i) have a Stated
Principal Balance, after deduction of the principal portion of the Scheduled
Payment due in the month of substitution, not in excess of, and not more than
10% less than, the Stated Principal Balance of the Deleted Mortgage Loan; (ii)
be accruing interest at a rate no lower than and not more than 1% per annum
higher than, that of the Deleted Mortgage Loan; (iii) have a Loan-to-Value Ratio
no higher than that of the Deleted Mortgage Loan; (iv) have a remaining term to
maturity no greater than (and not more than one year less than that of) the
Deleted Mortgage Loan; and (v) comply with each representation and warranty set
forth in Sections 3.01(f), 3.01(h) and 3.03 of the Unaffiliated Seller's
Agreement and each representation and warranty set forth in the applicable
Mortgage Loan Purchase Agreement.
Substitution Adjustment Amount: The meaning ascribed to such
term pursuant to Section 2.03.
Tax Service Contract: As defined in Section 3.09(a).
Telerate Page 3750: The display page currently so designated
on the Bridge Telerate Service (or such other page as may replace that page on
that service for displaying comparable rates or prices).
Termination Price: As defined in Section 9.01.
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Total Monthly Excess Spread: As to any Distribution Date, an
amount equal to the excess if any, of (i) the interest collected (prior to the
Remittance Date) or advanced on the Mortgage Loans for Due Dates during the
related Due Period (net of Expense Fees, Premium Amount and Reimbursement
Amounts, if any) over (ii) the sum of the interest payable to the Classes of
Floating Rate Certificates on such Distribution Date.
Transfer: Any direct or indirect transfer or sale of any
Ownership Interest in a Residual Certificate.
Transfer Affidavit: As defined in section 5.02(b).
Transferor Certificate: As defined in Section 5.02(b).
Trigger Event: The occurrence of either a Delinquency Trigger
Event or a Loss Trigger Event.
Trust Fund: The corpus of the trust created hereunder
consisting of (i) the Mortgage Loans and all interest and principal received on
or with respect thereto after the related Cut-off Date, other than such amounts
which were due on the Mortgage Loans on or before the related Cut-off Date; (ii)
each Account, and all amounts deposited therein pursuant to the applicable
provisions of this Agreement; (iii) property that secured a Mortgage Loan and
has been acquired by foreclosure, deed-in-lieu of foreclosure or otherwise; (iv)
all rights of the Depositor against the Unaffiliated Seller under the
Unaffiliated Seller's Agreement; (v) all rights of the Depositor against each
Originator under the related Assignment and Recognition Agreement and the
related Mortgage Loan Purchase Agreement; (vi) the Certificate Insurance Policy;
(vii) the Cap Agreement, for the benefit of the Holders of the Offered
Certificates (other than the Class A-1 Certificateholders); and (viii) all
proceeds of the conversion, voluntary or involuntary, of any of the foregoing.
Trustee: Deutsche Bank National Trust Company and its
successors and, if a successor trustee is appointed hereunder, such successor.
Trustee Fee: As to any Distribution Date, an amount equal to
the sum of (a) the product of one-twelfth of the Trustee Fee Rate times the sum
of (i) the aggregate Stated Principal Balances of the Mortgage Loans at the end
of the prior Due Period, and (ii) the amount on deposit in the Pre-Funding
Account at the end of such prior Due Period and (b) any reasonable compensation
and expenses of a separate trustee or co-trustee to be paid pursuant to Section
8.10(d).
Trustee Fee Rate: With respect to each Mortgage Loan, 0.0042%
per annum.
Unaffiliated Seller's Agreement: The Unaffiliated Seller's
Agreement, dated as of the date hereof, among the Unaffiliated Seller and the
Depositor relating to the sale of the Mortgage Loans from the Unaffiliated
Seller to the Depositor.
Unpaid Interest Amounts: As of any Distribution Date and any
Class of Certificates, the sum of (a) the excess of (i) the sum of the Accrued
Certificate Interest for such Distribution Date and any portion of such Accrued
Certificate Interest from prior Distribution Dates remaining unpaid over (ii)
47
the amount in respect of interest on such Class of Certificates actually
distributed on that Distribution Date and (b) 30 days' interest on such excess
at the applicable Pass-Through Rate (to the extent permitted by applicable law).
Unpaid Realized Loss Amount: With respect to any Class of
Subordinated Certificates and as to any Distribution Date, is the excess of (i)
Applied Realized Loss Amounts with respect to such Class over (ii) the sum of
all distributions in reduction of such Applied Realized Loss Amounts on all
previous Distribution Dates. Any amounts distributed to a Class of Subordinated
Certificates in respect of any Unpaid Realized Loss Amount will not be applied
to reduce the Class Certificate Balance of such Class.
Upper Tier Regular Interest: As described in the Preliminary
Statement.
Upper Tier REMIC: As described in the Preliminary Statement.
U.S. Person: Shall mean (i) a citizen or resident of the
United States; (ii) a corporation (or entity treated as a corporation for tax
purposes) created or organized in the United States or under the laws of the
United States or of any state thereof, including, for this purpose, the District
of Columbia; (iii) a partnership (or entity treated as a partnership for tax
purposes) organized in the United States or under the laws of the United States
or of any state thereof, including, for this purpose, the District of Columbia
(unless provided otherwise by future Treasury regulations); (iv) an estate whose
income is includible in gross income for United States income tax purposes
regardless of its source; or (v) a trust, if a court within the United States is
able to exercise primary supervision over the administration of the trust and
one or more U.S. Persons have authority to control all substantial decisions of
the trust. Notwithstanding the last clause of the preceding sentence, to the
extent provided in Treasury regulations, certain trusts in existence on August
20, 1996, and treated as U.S. Persons prior to such date, may elect to continue
to be U.S. Persons.
Voting Rights: The portion of the voting rights of all of the
Certificates which is allocated to any Certificate. As of any date of
determination, (a) 1% of all Voting Rights shall be allocated to the Class X
Certificates, if any (such Voting Rights to be allocated among the holders of
Certificates of each such Class in accordance with their respective Percentage
Interests), (b) 1% of all Voting Rights shall be allocated to the Class P
Certificates, if any, and (c) the remaining Voting Rights shall be allocated
among Holders of the remaining Classes of Certificates in proportion to the
Certificate Balances of their respective Certificates on such date.
WAC Cap: With respect to the Mortgage Loans as of any
Distribution Date, the product of (i) the weighted average of the Adjusted Net
Mortgage Rates then in effect on the beginning of the related Due Period on the
Mortgage Loans, in the case of each of the Class A-1 and Class A-3 Certificates,
minus the Premium Rate in respect of the Class A-1 or Class A-3 Certificates,
respectively, and (ii) a fraction, the numerator of which is 30 and the
denominator of which is the actual number of days in the Interest Accrual Period
related to such Distribution Date.
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ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
REPRESENTATIONS AND WARRANTIES
Section 2.01 Conveyance of Mortgage Loans.
----------------------------
(a) The Depositor, concurrently with the execution and
delivery hereof, hereby sells, transfers, assigns, sets over and otherwise
conveys to the Trustee for the benefit of the Certificateholders, without
recourse, all the right, title and interest of the Depositor in and to the Trust
Fund, other than any Subsequent Mortgage Loans, which will be so sold,
transferred, assigned, set-over and conveyed on the related Subsequent Transfer
Date.
(b) In connection with the transfer and assignment of
each Mortgage Loan, the Unaffiliated Seller has delivered or caused to be
delivered to the Trustee for the benefit of the Certificateholders the following
documents or instruments with respect to each Mortgage Loan so assigned (to the
extent such documents or instruments are required to be delivered by the related
Originator under each Mortgage Loan Purchase Agreement):
(i) the original Mortgage Note bearing all intervening
endorsements evidencing a complete chain of assignment from the
originator to the related Originator, endorsed "Pay to the order of
_________, without recourse" and signed in the name of the related
Originator by an authorized officer. To the extent that there is no
room on the face of the Mortgage Notes for endorsements, the
endorsement may be contained on an allonge, if state law so allows and
the Trustee is so advised by the related Originator that state law so
allows. If the Mortgage Loan was acquired by an Originator in a merger,
the endorsement must be by "[related Originator], successor by merger
to [name of predecessor]". If the Mortgage Loan was acquired or
originated by the related Originator while doing business under another
name, the endorsement must be by "[related Originator], formerly known
as [previous name]";
(ii) the original of any guarantee executed in connection
with the Mortgage Note;
(iii) the original Mortgage with evidence of recording
thereon. If in connection with any Mortgage Loan, the original Mortgage
with evidence of recording thereon can not be delivered on or prior to
the related Delivery Date because of a delay caused by the public
recording office where such Mortgage has been delivered for recordation
or because such Mortgage has been lost or because such public recording
office retains the original recorded Mortgage, then the related
Originator, as required by the terms of the related Mortgage Loan
Purchase Agreement, will be required to deliver to the Trustee a
photocopy of such Mortgage and (i) the original recorded Mortgage or a
copy of such Mortgage certified by such public recording office to be a
true and complete copy of the original recorded Mortgage promptly upon
receipt thereof by the related Originator (but in any event within 360
days from the related Delivery Date); or (ii) in the case of a Mortgage
where a public recording office retains the original recorded Mortgage
or in the case where a Mortgage is lost after recordation in a public
recording office, a copy of such Mortgage certified by such public
recording office to be a true and complete copy of the original
recorded Mortgage;
49
(iv) the originals of all assumption, modification,
consolidation or extension agreements, if any, with evidence of
recording thereon;
(v) the original Assignment of Mortgage for each Mortgage
Loan endorsed in blank, in form and substance acceptable for recording;
(vi) the originals of all intervening assignments of
mortgage, evidencing a complete chain of assignment from the originator
to the related Originator, with evidence of recording thereon or if any
such intervening assignment has not been returned from the applicable
recording office or has been lost or if such public recording office
retains the original recorded assignments of mortgage;
(vii) the original or duplicate lender's title policy and
all riders thereto or, if such original is unavailable, either an
original title binder or an original or copy of the title commitment,
and if copies then certified to be true and complete by the title
company; and
(viii) the security agreement, chattel mortgage or
equivalent document executed in connection with the Mortgage, if any.
From time to time, the Servicer shall forward to the Trustee
additional original documents, additional documents evidencing an assumption,
modification, consolidation or extension of a Mortgage Loan approved by the
Servicer, in accordance with the terms of this Agreement. All such mortgage
documents held by the Trustee as to each Mortgage Loan shall constitute the
"Custodial File".
On or prior to the related Delivery Date, the Unaffiliated
Seller shall deliver, or cause the related Originator to deliver, to the Trustee
Assignments of Mortgage, in blank, for each Mortgage Loan. If an Assignment of
Mortgage is required to be recorded pursuant to the terms hereof, the Trustee
shall promptly forward such Assignment of Mortgage to the Servicer for
recording. No later than thirty (30) Business Days following the date of receipt
by the Servicer of all necessary recording information for a Mortgage, the
Servicer shall promptly submit or cause to be submitted for recording, at the
expense of the Unaffiliated Seller (the Unaffiliated Seller to seek
reimbursement from the related Originator under the applicable Mortgage Loan
Purchase Agreement) in the appropriate public office for real property records,
each Assignment of Mortgage referred to in Section 2.01(b)(v). Notwithstanding
the foregoing, however, for administrative convenience and facilitation of
servicing and to reduce closing costs, the Assignment of Mortgage shall not be
required to be completed and submitted for recording with respect to any
Mortgage Loan (other than any Mortgage Loan where the Mortgaged Property is
located in any state where recordation is required by any Rating Agency to
obtain the initial ratings on the Certificates, which states as of the date
hereof, are Florida and Maryland) until the earliest to occur of (i) direction
by the Certificate Insurer or (ii) upon a determination by the Servicer that
recordation is necessary for the enforcement of rights under, or satisfaction or
assignment of, the related Mortgage, at which time, the Servicer shall record
any such Assignment of Mortgage in accordance with the terms hereof. If any
50
Assignment of Mortgage is required to be recorded pursuant to the terms hereof,
the Mortgage shall be assigned from the related Originator, to "Deutsche Bank
National Trust Company, as trustee under the Pooling and Servicing Agreement
dated as of August 1, 2003, Morgan Stanley ABS Capital I Inc. Trust 2003-HE3."
In the event that any such assignment is lost or returned unrecorded because of
a defect therein, the Unaffiliated Seller shall cause the related Originator to
promptly prepare a substitute assignment to cure such defect and thereafter
cause each such assignment to be duly recorded. In the event the Unaffiliated
Seller does not pay or otherwise reimburse the Servicer for any of the foregoing
costs of recording any such Assignment of Mortgage, the Servicer shall be
entitled to be reimbursed from the Trust Fund from amounts on deposit in the
Collection Account. In the event the related Originator fails to reimburse the
Unaffiliated Seller for the recording costs described above, upon receipt of
written direction from the Unaffiliated Seller, the Trustee shall assign its
rights under the applicable Mortgage Loan Purchase Agreement solely with respect
to payment of such expenses to the Unaffiliated Seller.
The Unaffiliated Seller shall use commercially reasonable
efforts to assist the Servicer in causing the related Originator to deliver (at
the expense of such Originator pursuant to the related Mortgage Loan Purchase
Agreement) to the Servicer copies of all trailing documents required to be
included in the Custodial File at the same time the originals or certified
copies thereof are delivered to the Trustee, such documents, including, but not
limited to, the mortgagee policy of title insurance and any mortgage loan
documents upon return from the recording office. The Unaffiliated Seller shall
use commercially reasonable efforts to assist the Servicer in seeking
reimbursement from the related Originator pursuant to the related Mortgage Loan
Purchase Agreement for any fees or costs incurred by the Servicer in obtaining
such documents.
On or prior to the Closing Date, the Unaffiliated Seller shall
deliver to the Trustee and the Servicer a copy of the Data Tape Information in
electronic, machine readable medium in a form mutually acceptable to the Trustee
and the Servicer. Within ten days of the Closing Date, the Unaffiliated Seller
shall deliver a copy of the complete Mortgage Loan Schedule to the Trustee and
the Servicer.
In the event that such original or copy of any document
submitted for recordation to the appropriate public recording office is not so
delivered to the Trustee within 90 days following the related Delivery Date, and
in the event that the Originator does not cure such failure within 30 days of
discovery or receipt of written notification of such failure from the Depositor,
the Trustee or the Certificate Insurer, the Trustee shall notify the related
Originator to repurchase the Mortgage Loan pursuant to the related Mortgage Loan
Purchase Agreement, upon the request of the Depositor, the Trustee or the
Certificate Insurer, at the Repurchase Price and in the manner specified in
Section 2.03. The foregoing repurchase provision shall not apply in the event
that the related Originator cannot deliver such original or copy of any document
submitted for recordation to the appropriate public recording office within the
specified period due to a delay caused by the recording office in the applicable
jurisdiction; provided that the related Originator shall instead be required to
deliver a recording receipt of such recording office or, if such recording
receipt is not available, an officer's certificate of a servicing officer of the
Originator confirming that such document has been accepted for recording.
51
(c) Purchase and Sale of Subsequent Mortgage Loans.
(i) Subject to the satisfaction of the conditions set
forth in paragraph (ii) below, and upon the Trustee's receipt of a
Subsequent Transfer Agreement executed by all other parties thereto, in
consideration of the Trustee's delivery on the related Subsequent
Transfer Dates to or upon the order of the Depositor of all or a
portion of the balance of funds in the related Pre-Funding Account or
both Pre-Funding Accounts, as applicable, the Depositor shall on any
Subsequent Transfer Date sell, transfer, assign, set over and convey to
the Trustee without recourse but subject to terms and provisions of
this Agreement, all of the right, title and interest of the Depositor
in and to the Subsequent Mortgage Loans, including the outstanding
principal of and interest due on such Subsequent Mortgage Loans, and
all other related assets included or to be included in the Trust Fund
with respect thereto.
The amount released from the related Pre-Funding Account or
both Pre-Funding Accounts, as applicable, with respect to a transfer of
Subsequent Mortgage Loans shall be one-hundred percent (100%) of the
aggregate Stated Principal Balances as of the related Subsequent
Cut-off Date of the Subsequent Mortgage Loans so transferred.
(ii) The Subsequent Mortgage Loans and the other property
and rights related thereto described in paragraph (a) above shall be
transferred by the Depositor to the Trust Fund only upon the
satisfaction of each of the following conditions on or prior to the
related Subsequent Transfer Date:
(a) the Unaffiliated Seller shall have provided
the Depositor, the Trustee, the Rating Agencies and the
Certificate Insurer with a timely Addition Notice, which shall
include a Mortgage Loan Schedule, listing the Subsequent
Mortgage Loans and shall have provided any other information
reasonably requested by any of the foregoing with respect to
the Subsequent Mortgage Loans;
(b) the Servicer shall have deposited in the
Collection Account all collections of (x) principal in respect
of the Subsequent Mortgage Loans received and due after the
related Subsequent Cut-off Date and (y) interest due on the
Subsequent Mortgage Loans after the related Subsequent Cut-off
Date;
(c) as of each Subsequent Transfer Date, the
Unaffiliated Seller was not insolvent nor will be made
insolvent by such transfer nor is the Unaffiliated Seller
aware of any pending insolvency;
(d) such addition will not result in a
"prohibited transaction" (as defined in the REMIC Provisions)
for any REMIC held by the Trust Fund, and will not cause any
REMIC held by the Trust Fund to cease to qualify as a REMIC,
as evidenced by an Opinion of Counsel with respect to such
matters (which may be a blanket opinion dated the Closing
Date);
(e) the Pre-Funding Period shall not have
terminated;
52
(f) the Unaffiliated Seller shall have delivered
to the Trustee an executed Assignment and Recognition
Agreement with respect to each related Originator of
Subsequent Mortgage Loans to be added to the Trust Fund on
such Subsequent Transfer Date (which Assignment and
Recognition Agreement shall include a representation and
warranty from the related Originator that none of the
Subsequent Mortgage Loans is a High Cost Loan, none of the
Subsequent Mortgage Loans is covered by the Home Ownership and
Equity Protection Act of 1994 and none of the Subsequent
Mortgage Loans is in violation of any comparable state law);
(g) the Unaffiliated Seller shall have delivered
to the Trustee an Officer's Certificate confirming the
satisfaction of each condition precedent specified in this
paragraph (ii), and the Opinion of Counsel referenced in
clause (d);
(h) the Unaffiliated Seller and the Depositor
shall have delivered to the Trustee an executed copy of a
Subsequent Transfer Agreement, substantially in the form of
Exhibit L hereto; and
(i) the Unaffiliated Seller shall have obtained
the consent of the Certificate Insurer.
(iii) The obligation of the Trust Fund to purchase the
Subsequent Mortgage Loans on a Subsequent Transfer Date is subject to
the requirements that, following the purchase of such Subsequent
Mortgage Loans, with respect to Group I:
(a) none may be second lien mortgage loans;
(b) no more than 21.25% and no less than 19.00%
may be Fixed Rate Mortgage Loans;
(c) the weighted average original term to
maturity may not exceed 360 months;
(d) the weighted average gross Mortgage Rate
must not be less than 7.88%, or more than 8.23%;
(e) the weighted average LTV must not exceed
81.00%, and no more than 52.00% of the Mortgage Loans may have
LTVs in excess of 80.00%;
(f) no Mortgage Loan may have a Stated Principal
Balance in excess of $1,000,000 as of the related Cut-off
Date;
(g) at least 84.00% of the Mortgage Loans must
have prepayment penalties;
(h) the weighted average Gross Margin for the
Adjustable Rate Mortgage Loans must be at least 6.40%;
53
(i) the weighted average credit score (FICO
Score) must be at least 604, and none of the Mortgage Loans
may have credit scores below 500; and
(j) no Mortgage Loan originated on or after
October 1, 2002 but before or on March 7, 2003 will be secured
by property located in the State of Georgia and no mortgage
loan originated on or after March 7, 2003 is a "high cost home
loan" as defined under the Georgia Fair Lending Act.
(iv) The obligation of the Trust Fund to purchase the
Subsequent Mortgage Loans on a Subsequent Transfer Date is subject to
the requirements that, following the purchase of such Subsequent
Mortgage Loans, with respect to Group II:
(a) no more than 4.00% may be second lien
mortgage loans;
(b) no more than 33.00% and no less than 29.00%
may be Fixed Rate Mortgage Loans;
(c) the weighted average original term to
maturity may not exceed 360 months;
(d) the weighted average gross Mortgage Rate
must not be less than 7.90%, or more than 8.25%;
(e) the weighted average LTV must not exceed
80.59%, and no more than 52.00% of the Mortgage Loans may have
LTVs in excess of 80.00%;
(f) no Mortgage Loan may have a Stated Principal
Balance in excess of $1,000,000 as of the related Cut-off
Date;
(g) at least 85.00% of the Mortgage Loans must
have prepayment penalties;
(h) the weighted average Gross Margin for the
Adjustable Rate Mortgage Loans must be at least 6.30%;
(i) the weighted average credit score (FICO
score) must be at least 609, and none of the mortgage loans
may have credit scores below 500; and
(j) no mortgage loan originated on or after
October 1, 2002 but before or on March 7, 2003 will be secured
by property located in the State of Georgia and no mortgage
loan originated on or after March 7, 2003 is a "high cost home
loan" as defined under the Georgia Fair Lending Act.
Any of the requirements set forth in clauses (ii), (iii) and
(iv) above may be waived or modified in any respect with the consent of
the Certificate Insurer and the Rating Agencies.
54
(v) In connection with the transfer and assignment of the
Subsequent Mortgage Loans, the Unaffiliated Seller shall satisfy the
document delivery requirements set forth in Section 2.01(b).
Section 2.02 Acceptance by the Trustee of the Mortgage
-----------------------------------------
Loans.
-----
The Trustee shall acknowledge, on each Delivery Date, receipt
of the documents identified in the Initial Certification in the form annexed
hereto as Exhibit F, and declares that it holds and will hold such documents and
the other documents delivered to it pursuant to Section 2.01, and that it holds
or will hold such other assets as are included in the Trust Fund, in trust for
the exclusive use and benefit of all present and future Certificateholders and
the Certificate Insurer. The Trustee acknowledges that it will maintain
possession of the related Mortgage Notes in the State of California, unless
otherwise permitted by the Rating Agencies and the Certificate Insurer.
In connection with each Delivery, the Trustee shall deliver
via facsimile (with original to follow the next Business Day) to the Depositor,
the Unaffiliated Seller, the Servicer and the Certificate Insurer an Initial
Certification on or prior to the related Delivery Date, certifying receipt of
the related Mortgage Notes and Assignments of Mortgage for each related Mortgage
Loan. The Trustee shall not be responsible to verify the validity, sufficiency
or genuineness of any document in any Custodial File.
Within 120 days after the related Delivery Date, the Trustee
shall ascertain that all documents required to be reviewed by it are in its
possession, and shall deliver to the Depositor, the Unaffiliated Seller, the
Servicer and the Certificate Insurer a Final Certification to the effect that,
as to each Mortgage Loan listed in the Mortgage Loan Schedule (other than any
Mortgage Loan paid in full or any Mortgage Loan specifically identified in such
certification as an exception and not covered by such certification): (i) all
documents required to be delivered to it are in its possession; (ii) such
documents have been reviewed by it and appear regular on their face and relate
to such Mortgage Loan; (iii) based on its examination and only as to the
foregoing documents, the information set forth in items (1), (2) and (18) of the
Mortgage Loan Schedule and items (1), (9) and (17) of the Data Tape Information
respecting such Mortgage Loan is correct; and (iv) each Mortgage Note has been
endorsed as provided in Section 2.01 of this Agreement. The Trustee shall not be
responsible to verify the validity, sufficiency or genuineness of any document
in any Custodial File. Upon receipt of such Final Certification, if the
Depositor, the Unaffiliated Seller or the Certificate Insurer determines that
any noncompliance identified by the Trustee is a breach of a representation or
warranty relating to such Mortgage Loan, such party shall give written notice to
the Trustee thereof.
The Trustee shall retain possession and custody of each
Custodial File in accordance with and subject to the terms and conditions set
forth herein. The Servicer shall promptly deliver to the Trustee, upon the
execution or receipt thereof, the originals of such other documents or
instruments constituting the Custodial File as come into the possession of the
Servicer from time to time.
55
Section 2.03 Representations, Warranties and Covenants of
--------------------------------------------
the Unaffiliated Seller and the Servicer.
----------------------------------------
(a) The Servicer hereby makes the representations and
warranties set forth in (i) Schedule II hereto to the Depositor, the
Unaffiliated Seller, the Certificate Insurer and the Trustee and (ii) Schedule
IIA hereto to the Unaffiliated Seller and the Certificate Insurer, in each case,
as of the Closing Date, and with respect to Subsequent Mortgage Loans, as of the
related Subsequent Transfer Date; provided, however, that in the case of clause
(ii), the Servicer only makes representations and warranties with respect to
those Mortgage Loans for which the Servicing Transfer Date has occurred prior to
the Closing Date or the related Subsequent Transfer Date, as applicable.
(b) CDC Mortgage Capital Inc., in its capacity as the
Unaffiliated Seller, hereby makes the representations and warranties set forth
in Schedule III hereto to the Depositor, the Trustee and the Certificate
Insurer, as of the Closing Date.
(c) It is understood and agreed by the Servicer and the
Unaffiliated Seller that the representations and warranties set forth in Section
2.03 shall survive the transfer of the Mortgage Loans to the Trust Fund, and
shall inure to the benefit of the Trust Fund notwithstanding any restrictive or
qualified endorsement on any Mortgage Note or Assignment of Mortgage or the
examination or failure to examine any Mortgage File. Upon discovery by any of
the Depositor, the Unaffiliated Seller, the Certificate Insurer, the Trustee or
the Servicer of a breach by the Unaffiliated Seller of any of the foregoing
representations or any of the representations and warranties made pursuant to
Sections 3.01(f), 3.01(h) or 3.03 of the Unaffiliated Seller's Agreement or by
any Originator of the representations and warranties made pursuant to the
related Assignment and Recognition Agreement, the party discovering such breach
shall give prompt written notice to the others.
(d) Within 90 days of the earlier of either discovery by
or notice to the Unaffiliated Seller of any breach of a representation or
warranty set forth in Section 3.01(f), 3.01(h) or 3.03 of the Unaffiliated
Seller's Agreement that materially and adversely affects the value of the
Mortgage Loans or the interest of the Trustee, the Certificate Insurer or the
Certificateholders therein, the Unaffiliated Seller shall use its best efforts
to cure such breach in all material respects and, if such breach cannot be
remedied, the Unaffiliated Seller shall, (i) if such 90-day period expires prior
to the second anniversary of the related Delivery Date, remove such Mortgage
Loan from the Trust Fund and substitute in its place a Substitute Mortgage Loan,
in the manner and subject to the conditions set forth in this Section 2.03; or
(ii) repurchase such Mortgage Loan at the Repurchase Price; provided, however,
that any such substitution pursuant to (i) above shall not be effected prior to
the delivery to the Trustee of the Opinion of Counsel required by Section 2.05,
if any, and a Request for Release substantially in the form of Exhibit K, and
the Mortgage File for any such Substitute Mortgage Loan.
With respect to any Substitute Mortgage Loan or Loans, the
Unaffiliated Seller shall deliver to the Trustee for the benefit of the
Certificateholders the Mortgage Note, the Mortgage, the related Assignment of
the Mortgage, and such other documents and agreements as are required by Section
2.01, with the Mortgage Note endorsed and the Mortgage assigned as required by
Section 2.01. No substitution is permitted to be made in any calendar month
56
after the Determination Date for such month. Scheduled Payments due with respect
to Substitute Mortgage Loans in the Due Period of substitution shall not be part
of the Trust Fund and will be retained by the related Originator on the next
succeeding Distribution Date. For the Due Period of substitution, distributions
to Certificateholders will include the monthly payment due on any Deleted
Mortgage Loan for such Due Period and thereafter the related Originator shall be
entitled to retain all amounts received in respect of such Deleted Mortgage
Loan.
For any month in which the Unaffiliated Seller substitutes one
or more Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the
Servicer will determine the amount (if any) by which the aggregate principal
balance of all such Substitute Mortgage Loans as of the date of substitution is
less than the aggregate Stated Principal Balance of all such Deleted Mortgage
Loans (after application of the scheduled principal portion of the monthly
payments due in the Due Period of substitution). The Unaffiliated Seller shall
deposit the amount of such shortage (the "Substitution Adjustment Amount") plus,
an amount equal to the aggregate of any unreimbursed Advances and accrued and
unpaid Servicing Fees with respect to such Deleted Mortgage Loans into the
Collection Account on or before the Remittance Date for the Distribution Date in
the month succeeding the calendar month during which the related Mortgage Loan
became required to be purchased or replaced hereunder.
Upon discovery that any document does not comply with the
requirements set forth in clauses (i) through (iv) of the Trustee's review of
the Custodial Files pursuant to Section 2.02 or receipt of written notice of a
breach of a representation and warranty, the Trustee shall in turn promptly
notify the applicable Originator (with a copy to the Servicer, the Certificate
Insurer and the Unaffiliated Seller) in writing of such non compliance or breach
and request that the related Originator cure such non compliance or breach
within the time period set forth in the applicable Mortgage Loan Purchase
Agreement (but in any event, within 60 days from the date the related Originator
is notified of such non compliance or breach) and if the related Originator does
not cure such non compliance or breach in all material respects during such
period, the Trustee shall notify such Originator to repurchase such Mortgage
Loan from the Trust Fund at the Repurchase Price. In the event the Trustee
receives written notice of a breach by any Originator of a representation and
warranty that is subject to an automatic sixty-day repurchase obligation
pursuant to Section 9.03 of the related Mortgage Loan Purchase Agreement, which
representations and warranties relate to Prepayment Fees, Predatory Lending
Regulations, Single Premium Credit Insurance, the Georgia Fair Lending Act, the
Fair Credit Reporting Act, New York State Banking Law or failure of a Mortgage
Loan to constitute a "qualified mortgage" within the meaning of Section
860G(a)(3) of the Code, the Trustee shall notify such Originator to repurchase
the Mortgage Loan at the Repurchase Price within sixty (60) days of such
Originator's receipt of such notice.
(e) Upon delivery of the Final Certification with respect
to each Mortgage Loan, the Trustee will notify the related Originator within 5
Business Days of such delivery of any missing documents from the Custodial File
and if the related Originator does not deliver such missing documents within 60
days from the date the related Originator is notified of such noncompliance or
breach, the Trustee shall notify such Originator to repurchase such Mortgage
Loan from the Trust Fund at the Repurchase Price.
57
(f) Based solely on information received with respect to
any Substitute Mortgage Loan from the Unaffiliated Seller or the related
Originator, as applicable, the Servicer shall amend the Mortgage Loan Schedule
to reflect the removal of such Deleted Mortgage Loan and the substitution of the
Substitute Mortgage Loan or Loans and the Servicer shall deliver the amended
Mortgage Loan Schedule to the Trustee. Upon such substitution, the Substitute
Mortgage Loan or Loans shall be subject to the terms of this Agreement in all
respects, and the Unaffiliated Seller shall be deemed to have made with respect
to such Substitute Mortgage Loan or Loans, as of the date of substitution, the
representations and warranties made pursuant to Sections 3.01(f), 3.01(h) and
3.03 of the Unaffiliated Seller's Agreement with respect to such Mortgage Loan.
Upon any such substitution and the deposit to the Collection Account of the
amount required to be deposited therein in connection with such substitution as
described in the following paragraph, the Trustee shall release the Mortgage
File relating to such Deleted Mortgage Loan to the Unaffiliated Seller or the
related Originator, as applicable, and shall execute and deliver at the
Unaffiliated Seller's or related Originator's direction, as applicable, such
instruments of transfer or assignment prepared by such party, in each case
without recourse, as shall be necessary to vest title in the Unaffiliated Seller
or the related Originator, or its designee, as applicable, the Trustee's
interest in any Deleted Mortgage Loan substituted for pursuant to this Section
2.03.
(g) In the event that the Unaffiliated Seller or the
related Originator, as applicable, shall have repurchased a Mortgage Loan, the
Repurchase Price therefor shall be deposited in the Collection Account pursuant
to Section 3.10 on or before the Remittance Date for the Distribution Date in
the month following the month during which the Unaffiliated Seller or the
related Originator, as applicable, became obligated hereunder to repurchase or
replace such Mortgage Loan and upon such deposit of the Repurchase Price, the
delivery of the Opinion of Counsel required by Section 2.05 and receipt of a
Request for Release in the form of Exhibit K hereto, the Trustee shall release
the related Custodial File to such Person as directed by the Servicer, and the
Trustee shall execute and deliver at such Person's direction such instruments of
transfer or assignment prepared by such Person, in each case without recourse,
as shall be necessary to transfer title from the Trustee. It is understood and
agreed that the obligation under this Agreement of any Person to cure,
repurchase or replace any Mortgage Loan as to which a breach has occurred and is
continuing shall constitute the sole remedy against such Persons respecting such
breach available to Certificateholders, the Depositor, the Unaffiliated Seller,
the Certificate Insurer or the Trustee on their behalf. In the event such
required repurchase or replacement does not occur, the Trustee shall take such
actions as directed upon written direction from the Depositor or the Certificate
Insurer and the provision of reasonable indemnity satisfactory to the Trustee in
accordance with Sections 6.03 and 8.02.
(h) If the Unaffiliated Seller is required to repurchase
or replace a Mortgage Loan pursuant to the terms hereof, upon receipt by the
Trustee of written direction from the Unaffiliated Seller and either the related
Repurchase Price or Substitute Mortgage Loan, as applicable, the Trustee shall
assign to the Unaffiliated Seller its rights under the related Mortgage Loan
Purchase Agreement solely with respect to such Mortgage Loan by an assignment in
form and substance mutually satisfactory to the Unaffiliated Seller and the
Trustee.
(i) The representations and warranties made pursuant to
this Section 2.03 shall survive delivery of the respective Custodial Files to
the Trustee.
58
Section 2.04 The Depositor and the Mortgage Loans.
------------------------------------
The Depositor hereby represents and warrants to the Trustee
and to the Certificate Insurer with respect to each Mortgage Loan as of the date
hereof or such other date set forth herein that as of the related Delivery Date,
and following the transfer of the Mortgage Loans to it by the Unaffiliated
Seller, the Depositor had good title to the Mortgage Loans and the Mortgage
Notes were subject to no offsets, defenses or counterclaims.
The Depositor hereby assigns, transfers and conveys to the
Trustee all of its rights with respect to the Initial Mortgage Loans and shall,
on each subsequent Transfer Date, convey all of its right, title and interest
with respect to the related subsequent Mortgage Loans.
Section 2.05 Delivery of Opinion of Counsel in Connection
--------------------------------------------
with Substitutions and Non-Qualified Mortgages.
----------------------------------------------
Notwithstanding any contrary provision of this Agreement, no
substitution pursuant to Section 2.03 shall be made more than 30 days after the
related Delivery Date unless the Unaffiliated Seller delivers, or causes the
related Originator to deliver, as applicable, to the Trustee an Opinion of
Counsel, at the expense of the Unaffiliated Seller or the related Originator, as
applicable, addressed to the Trustee, to the effect that such substitution will
not (i) result in the imposition of the tax on "prohibited transactions" on the
Trust Fund or contributions after the Startup Date, as defined in Sections
860F(a)(2) and 860G(d) of the Code, respectively or (ii) cause the Trust Fund to
fail to qualify as one or more REMICs at any time that any Certificates are
outstanding.
Section 2.06 Execution and Delivery of Certificates.
--------------------------------------
The Trustee acknowledges the transfer and assignment to it of
the Trust Fund and, concurrently with such transfer and assignment, has executed
and delivered to or upon the order of the Depositor, the Certificates in
authorized denominations evidencing directly or indirectly the entire ownership
of the Trust Fund. The Trustee agrees to hold the Trust Fund and exercise the
rights referred to above for the benefit of all present and future Holders of
the Certificates, and for the benefit of the Certificate Insurer.
Section 2.07 REMIC Matters.
-------------
The Preliminary Statement sets forth the designations for
federal income tax purposes of all interests created hereby. The "Startup Day"
for purposes of the REMIC Provisions shall be the Closing Date. The "latest
possible maturity date" is November 25, 2033, which is the sixth Distribution
Date following the latest Mortgage Loan maturity date.
Section 2.08 Representations and Warranties of the
-------------------------------------
Depositor.
---------
The Depositor hereby represents, warrants and covenants to the
Trustee, the Servicer and to the Certificate Insurer and the that as of the date
of this Agreement or as of such date specifically provided herein:
59
(a) The Depositor is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware;
(b) The Depositor has the corporate power and authority
to convey the Mortgage Loans and to execute, deliver and perform, and to enter
into and consummate the transactions contemplated by, this Agreement;
(c) This Agreement has been duly and validly authorized,
executed and delivered by the Depositor, all requisite corporate action having
been taken, and, assuming the due authorization, execution and delivery hereof
by the other parties hereto, constitutes or will constitute the legal, valid and
binding agreement of the Depositor, enforceable against the Depositor in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(d) No consent, approval, authorization or order of or
registration or filing with, or notice to, any governmental authority or court
is required for the execution, delivery and performance of or compliance by the
Depositor with this Agreement or the consummation by the Depositor of any of the
transactions contemplated hereby, except as have been made on or prior to the
Closing Date;
(e) None of the execution and delivery of this Agreement,
the consummation of the transactions contemplated hereby or thereby, or the
fulfillment of or compliance with the terms and conditions of this Agreement,
(i) conflicts or will conflict with or results or will result in a breach of, or
constitutes or will constitute a default or results or will result in an
acceleration under (A) the charter or bylaws of the Depositor, or (B) of any
term, condition or provision of any material indenture, deed of trust, contract
or other agreement or instrument to which the Depositor or any of its
subsidiaries is a party or by which it or any of its subsidiaries is bound; (ii)
results or will result in a violation of any law, rule, regulation, order,
judgment or decree applicable to the Depositor of any court or governmental
authority having jurisdiction over the Depositor or its subsidiaries; or (iii)
results in the creation or imposition of any lien, charge or encumbrance which
would have a material adverse effect upon the Mortgage Loans or any documents or
instruments evidencing or securing the Mortgage Loans;
(f) There are no actions, suits or proceedings before or
against or investigations of, the Depositor pending, or to the knowledge of the
Depositor, threatened, before any court, administrative agency or other
tribunal, and no notice of any such action, which, in the Depositor's reasonable
judgment, might materially and adversely affect the performance by the Depositor
of its obligations under this Agreement, or the validity or enforceability of
this Agreement;
(g) The Depositor is not in default with respect to any
order or decree of any court or any order, regulation or demand of any federal,
state, municipal or governmental agency that may materially and adversely affect
its performance hereunder; and
60
(h) Immediately prior to the transfer and assignment by
the Depositor to the Trustee, the Depositor had, or, with respect to the
subsequent Mortgage Loans, will have, good title to, and was, or will be, the
sole owner of each Mortgage Loan, free of any interest of any other Person, and
the Depositor has transferred, or shall transfer, all right, title and interest
in each Mortgage Loan to the Trustee. The transfer of the Mortgage Note and the
Mortgage as and in the manner contemplated by this Agreement is sufficient
either (i) fully to transfer to the Trustee, for the benefit of the
Certificateholders and for the benefit of the Certificate Insurer, all right,
title, and interest of the Depositor thereto as note holder and mortgagee or
(ii) to grant to the Trustee, for the benefit of the Certificateholders and for
the benefit of the Certificate Insurer, the security interest referred to in
Section 10.04.
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 2.08 shall survive delivery
of the respective Custodial Files to the Trustee or to a custodian, as the case
may be, and shall inure to the benefit of the Trustee.
ARTICLE III
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
Section 3.01 Servicer to Service Mortgage Loans.
----------------------------------
(a) For and on behalf of the Certificateholders and for
the benefit of the Certificate Insurer, the Servicer shall service and
administer the Mortgage Loans in accordance with the terms of this Agreement and
the respective Mortgage Loans and, to the extent consistent with such terms, in
the same manner in which it services and administers similar mortgage loans for
its own portfolio, giving due consideration to customary and usual standards of
practice of mortgage lenders and loan servicers administering similar mortgage
loans but without regard to:
(i) any relationship that the Servicer, any Subservicer
or any Affiliate of the Servicer or any Subservicer may have with the
related Mortgagor;
(ii) the ownership or non-ownership of any Certificate by
the Servicer or any Affiliate of the Servicer;
(iii) the Servicer's obligation to make P&I Advances or
Servicing Advances; or
(iv) the Servicer's or any Subservicer's right to receive
compensation for its services hereunder or with respect to any
particular transaction.
To the extent consistent with the foregoing, the Servicer
shall seek to maximize the timely and complete recovery of principal and
interest on the Mortgage Notes. Subject only to the above-described servicing
standards and the terms of this Agreement and of the respective Mortgage Loans,
the Servicer shall have full power and authority, acting alone or through
Subservicers as provided in Section 3.02, to do or cause to be done 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
Servicer in its own name or in the name of a Subservicer is hereby authorized
61
and empowered by the Trustee when the Servicer believes it appropriate in its
best judgment in accordance with the servicing standards set forth above, to
execute and deliver any and all instruments of satisfaction or cancellation, or
of partial or full release or discharge, and all other comparable instruments,
with respect to the Mortgage Loans and the Mortgaged Properties and to institute
foreclosure proceedings or obtain a deed-in-lieu of foreclosure so as to convert
the ownership of such properties, and to hold or cause to be held title to such
properties, on behalf of the Trustee. The Servicer shall service and administer
the Mortgage Loans in accordance with applicable state and federal law and shall
provide to the Mortgagors any reports required to be provided to them thereby.
The Servicer shall also comply in the performance of this Agreement with all
reasonable rules and requirements of each insurer under any standard hazard
insurance policy. Subject to Section 3.15, the Trustee shall execute, at the
written request of the Servicer, and furnish to the Servicer and any Subservicer
such documents as are necessary or appropriate to enable the Servicer or any
Subservicer to carry out their servicing and administrative duties hereunder,
and the Trustee hereby grants to the Servicer, and this Agreement shall
constitute, a power of attorney to carry out such duties including a power of
attorney to take title to Mortgaged Properties after foreclosure on behalf of
the Trustee. The Trustee shall execute a separate power of attorney in favor of
the Servicer for the purposes described herein to the extent necessary or
desirable to enable the Servicer to perform its duties hereunder. The Trustee
shall not be liable for the actions of the Servicer or any Subservicers under
such powers of attorney.
(b) Subject to Section 3.09(b), in accordance with the
standards of the preceding paragraph, the Servicer shall advance or cause to be
advanced funds as necessary for the purpose of effecting the timely payment of
taxes and assessments on the Mortgaged Properties, which advances shall be
Servicing Advances reimbursable in the first instance from related collections
from the Mortgagors pursuant to Section 3.09(b), and further as provided in
Section 3.11. Any cost incurred by the Servicer or by Subservicers in effecting
the timely payment of taxes and assessments on a Mortgaged Property shall not be
added to the unpaid principal balance of the related Mortgage Loan,
notwithstanding that the terms of such Mortgage Loan so permit.
(c) Notwithstanding anything in this Agreement to the
contrary, the Servicer may not make any future advances with respect to a
Mortgage Loan (except as provided in Section 4.01) and the Servicer shall not
(i) permit any modification with respect to any Mortgage Loan that would change
the Mortgage Rate, reduce or increase the principal balance (except for
reductions resulting from actual payments of principal) or change the final
maturity date on such Mortgage Loan or (ii) permit any modification, waiver or
amendment of any term of any Mortgage Loan that would both (A) effect an
exchange or reissuance of such Mortgage Loan under Section 1001 of the Code (or
final, temporary or proposed Treasury regulations promulgated thereunder) and
(B) cause any REMIC to fail to qualify as a REMIC under the Code or the
imposition of any tax on "prohibited transactions" or "contributions after the
startup date" under the REMIC Provisions, or (iii) except as provided in Section
3.07(a), waive any Prepayment Charges.
(d) The Servicer may delegate its responsibilities under
this Agreement; provided, however, that no such delegation shall release the
Servicer from the responsibilities or liabilities arising under this Agreement.
62
Section 3.02 Subservicing Agreements Between the Servicer
--------------------------------------------
and Subservicers.
----------------
(a) Subject to the consent of the Certificate Insurer (so
long as no Certificate Insurer Default has occurred and is continuing), which
consent shall not be unreasonably withheld, the Servicer may enter into
Subservicing Agreements with Subservicers (each, a "Subservicer"), for the
servicing and administration of the Mortgage Loans.
Unless otherwise approved by the Certificate Insurer (so long
as no Certificate Insurer Default has occurred and is continuing), each
Subservicer shall be (i) authorized to transact business in the state or states
in which the related Mortgaged Properties it is to service are situated, if and
to the extent required by applicable law to enable the Subservicer to perform
its obligations hereunder and under the Subservicing Agreement, (ii) an
institution approved as a mortgage loan originator by the Federal Housing
Administration or an institution that has deposit accounts insured by the FDIC
and (iii) a Freddie Mac or Fannie Mae approved mortgage servicer. Each
Subservicing Agreement must impose on the Subservicer requirements conforming to
the provisions set forth in Section 3.08 and provide for servicing of the
Mortgage Loans consistent with the terms of this Agreement. The Servicer will
examine each Subservicing Agreement and will be familiar with the terms thereof.
The terms of any Subservicing Agreement will not be inconsistent with any of the
provisions of this Agreement. The Servicer and the Subservicers may enter into
and make amendments to the Subservicing Agreements or enter into different forms
of Subservicing Agreements; provided, however, that any such amendments or
different forms shall be consistent with and not violate the provisions of this
Agreement, and that no such amendment or different form shall be made or entered
into which could be reasonably expected to be materially adverse to the
interests of the Trustee, without the consent of the Trustee. Any variation
without the consent of the Trustee from the provisions set forth in Section 3.08
relating to insurance or priority requirements of Subservicing Accounts, or
credits and charges to the Subservicing Accounts or the timing and amount of
remittances by the Subservicers to the Servicer, are conclusively deemed to be
inconsistent with this Agreement and therefore prohibited. The Servicer shall
deliver to the Trustee, the Unaffiliated Seller, the Certificate Insurer and the
Depositor copies of all Subservicing Agreements, and any amendments or
modifications thereof, promptly upon the Servicer's execution and delivery of
such instruments.
(b) As part of its servicing activities hereunder, the
Servicer (except as otherwise provided in the last sentence of this paragraph),
for the benefit of the Trustee, shall enforce the obligations of each
Subservicer under the related Subservicing Agreement, including, without
limitation, any obligation to make advances in respect of delinquent payments as
required by a Subservicing Agreement. Such enforcement, including, without
limitation, the legal prosecution of claims, termination of Subservicing
Agreements, and the pursuit of other appropriate remedies, shall be in such form
and carried out to such an extent and at such time as the Servicer, in its good
faith business judgment, would require were it the owner of the related Mortgage
Loans. The Servicer shall pay the costs of such enforcement at its own expense,
and shall be reimbursed therefor only (i) from a general recovery resulting from
such enforcement, to the extent, if any, that such recovery exceeds all amounts
due in respect of the related Mortgage Loans or (ii) from a specific recovery of
costs, expenses or attorneys' fees against the party against whom such
enforcement is directed.
63
Section 3.03 Successor Subservicers.
----------------------
The Servicer shall be entitled to terminate any Subservicing
Agreement and the rights and obligations of any Subservicer pursuant to any
Subservicing Agreement in accordance with the terms and conditions of such
Subservicing Agreement. In the event of termination of any Subservicer, all
servicing obligations of such Subservicer shall be assumed simultaneously by the
Servicer without any act or deed on the part of such Subservicer or the
Servicer, and the Servicer either shall service directly the related Mortgage
Loans or shall enter into a Subservicing Agreement with a successor Subservicer
which qualifies under Section 3.02.
Any Subservicing Agreement shall include the provision that
such agreement may be immediately terminated by the Depositor or the Trustee
without fee, in accordance with the terms of this Agreement, in the event that
the Servicer shall, for any reason, no longer be the Servicer (including
termination due to an Event of Default).
Section 3.04 Liability of the Servicer.
-------------------------
Notwithstanding any Subservicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer and a Subservicer or reference to actions taken through a Subservicer
or otherwise, the Servicer shall remain obligated and primarily liable to the
Trustee for the servicing and administering of the Mortgage Loans in accordance
with the provisions of Section 3.01 without diminution of such obligation or
liability by virtue of such Subservicing Agreements or arrangements or by virtue
of indemnification from the Subservicer and to the same extent and under the
same terms and conditions as if the Servicer alone were servicing and
administering the Mortgage Loans. The Servicer shall be entitled to enter into
any agreement with a Subservicer for indemnification of the Servicer by such
Subservicer and nothing contained in this Agreement shall be deemed to limit or
modify such indemnification.
Section 3.05 No Contractual Relationship Between
-----------------------------------
Subservicers and the Trustee.
----------------------------
Any Subservicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Subservicer
in its capacity as such shall be deemed to be between the Subservicer and the
Servicer alone, and the Trustee (or any successor Servicer) shall not be deemed
a party thereto and shall have no claims, rights, obligations, duties or
liabilities with respect to the Subservicer except as set forth in Section 3.06.
The Servicer shall be solely liable for all fees owed by it to any Subservicer,
irrespective of whether the Servicer's compensation pursuant to this Agreement
is sufficient to pay such fees.
Section 3.06 Assumption or Termination of Subservicing
-----------------------------------------
Agreements by Trustee.
---------------------
In the event the Servicer at any time shall for any reason no
longer be the Servicer (including by reason of the occurrence of a Event of
Default), the Trustee or its designee shall thereupon assume all of the rights
and obligations of the Servicer under each Subservicing Agreement that the
Servicer may have entered into, with copies thereof provided to the Trustee
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prior to the Trustee assuming such rights and obligations, unless the Trustee
elects to terminate any Subservicing Agreement in accordance with its terms as
provided in Section 3.03.
Upon such assumption, the Trustee, its designee or the
successor servicer shall be deemed, subject to Section 3.03, to have assumed all
of the Servicer's interest therein and to have replaced the Servicer as a party
to each Subservicing Agreement to the same extent as if each Subservicing
Agreement had been assigned to the assuming party, except that (i) the Servicer
shall not thereby be relieved of any liability or obligations under any
Subservicing Agreement that arose before it ceased to be the Servicer and (ii)
none of the Depositor, the Trustee, their designees or any successor Servicer
shall be deemed to have assumed any liability or obligation of the Servicer that
arose before it ceased to be the Servicer.
The Servicer at its expense shall, upon request of the
Trustee, deliver to the assuming party all documents and records relating to
each Subservicing Agreement and the Mortgage Loans then being serviced and an
accounting of amounts collected and held by or on behalf of it, and otherwise
use its best efforts to effect the orderly and efficient transfer of the
Subservicing Agreements to the assuming party.
Section 3.07 Collection of Certain Mortgage Loan
-----------------------------------
Payments; Establishment of Certain Accounts.
-------------------------------------------
(a) The Servicer shall make reasonable efforts to collect
all payments called for under the terms and provisions of the Mortgage Loans,
and shall, to the extent such procedures shall be consistent with this Agreement
and the terms and provisions of any applicable insurance policies, follow such
collection procedures as it would follow with respect to mortgage loans
comparable to the Mortgage Loans and held for its own account. Consistent with
the foregoing, the Servicer may (i) waive any late payment charge or, if
applicable, any penalty interest, or (ii) extend the due dates for the Scheduled
Payments due on a Mortgage Note for a period of not greater than 180 days;
provided that any extension pursuant to clause (ii) above shall not affect the
amortization schedule of any Mortgage Loan for purposes of any computation
hereunder, except as provided below. In the event of any such arrangement
pursuant to clause (ii) above, the Servicer shall make timely advances on such
Mortgage Loan during such extension pursuant to Section 4.01 and in accordance
with the amortization schedule of such Mortgage Loan without modification
thereof by reason of such arrangements, subject to Section 4.01(d) pursuant to
which the Servicer shall not be required to make any such advances that are
Nonrecoverable P&I Advances. Notwithstanding the foregoing, the Servicer may not
waive, in whole or in part, a Prepayment Charge, except under the following
circumstances: (i) such waiver relates to a default or a reasonably foreseeable
default and would, in the reasonable judgment of the Servicer, maximize recovery
of total proceeds taking into account the value of such Prepayment Charge and
the related Mortgage Loan, and doing so is standard and customary in servicing
mortgage loans similar to the Mortgage Loans (including any waiver of a
Prepayment Charge in connection with a refinancing of a Mortgage Loan that is
related to a default or a reasonably foreseeable default), and in no event will
the Servicer waive a Prepayment Charge in connection with a refinancing of a
Mortgage Loan that is not related to a default or a reasonably foreseeable
default or (ii) such Prepayment Charge is not permitted to be collected by
applicable law. If a Prepayment Charge is waived other than as permitted by the
prior sentence, then the Servicer is required to pay the amount of such waived
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Prepayment Charge, for the benefit of the Holders of the Class P Certificates,
by depositing such amount into the Collection Account together with and at the
time that the amount prepaid on the related Mortgage Loan is required to be
deposited into the Collection Account. Notwithstanding any provision in this
Agreement to the contrary, in the event the Prepayment Charge payable under the
terms of the Mortgage Note is less than the amount of the Prepayment Charge set
forth in the Mortgage Loan Schedule or other information provided to the
Servicer, the Servicer shall not have any liability or obligation with respect
to such difference, and in addition shall not have any liability or obligation
to pay the amount of any uncollected Prepayment Charge if the failure to collect
such amount is the direct result of inaccurate or incomplete information on the
Mortgage Loan Schedule.
(b) (i) The Trustee shall establish and maintain the
Excess Reserve Fund Account, on behalf of the Class X Certificateholders, to
secure their limited recourse obligation to pay to the Floating Rate
Certificateholders Basis Risk CarryForward Amounts.
(ii) On each Distribution Date, the Trustee shall deposit
the amount of any Basis Risk Payment made for the benefit of the
Certificateholders and any Interest Rate Cap Payment made for the
benefit of the Offered Certificates other than the Class A-1
Certificates for such date into the Excess Reserve Fund Account.
(c) (i) On each Distribution Date on which there
exists a Basis Risk CarryForward Amount on any Class of Certificates, the
Trustee shall (1) withdraw from the Distribution Account and deposit in the
Excess Reserve Fund Account, as set forth in Section 4.02(a)(iii)(N), the lesser
of (a) the sum of (x) the Class X Distributable Amount (without regard to the
reduction in the definition thereof with respect to the Basis Risk CarryForward
Amount) (to the extent remaining after the distributions specified in Sections
4.02(a)(iii)(A)-(M), and (y) the Interest Rate Cap Payment, if any, with respect
to such Distribution Date, and (b) the Basis Risk CarryForward Amount and (2)
withdraw from the Excess Reserve Fund Account amounts necessary to pay to such
Class or Classes of Certificates the Basis Risk CarryForward Amount. Such
payments shall be allocated to those Classes on a pro rata basis based upon the
amount of Basis Risk CarryForward Amount owed to each such Class and shall be
paid in the priority set forth in Section 4.02(a)(iii)(O).
(ii) The Trustee shall account for the Excess Reserve Fund
Account as an outside reserve fund within the meaning of Treasury
regulation 1.860G-2(h) and not as an asset of any REMIC created
pursuant to this Agreement. The beneficial owner of the Excess Reserve
Fund Account is the Class X Certificateholder. For all federal tax
purposes, amounts transferred by the Upper Tier REMIC to the Excess
Reserve Fund Account shall be treated as distributions by the Trustee
to the Class X Certificateholder.
(iii) Any Basis Risk CarryForward Amounts paid by the
Trustee to the Floating Rate Certificateholders shall be accounted for
by the Trustee as amounts paid first to the Holders of the Class X
Certificate and then to the respective Class or Classes of Floating
Rate Certificates. In addition, the Trustee shall account for the
Floating Rate Certificateholders' rights to receive payments of Basis
Risk CarryForward Amounts as rights in a limited recourse interest rate
cap contract written by the Class X Certificateholders in favor of the
Floating Rate Certificateholders.
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(iv) Notwithstanding any provision contained in this
Agreement, the Trustee shall not be required to make any payments from
the Excess Reserve Fund Account except as expressly set forth in this
Section 3.07(c).
(d) The Trustee shall establish and maintain the
Distribution Account on behalf of the Certificateholders. The Trustee shall,
promptly upon receipt, deposit in the Distribution Account and retain therein
the following:
(i) the aggregate amount remitted by the Servicer to the
Trustee pursuant to Section 3.11;
(ii) any amount deposited by the Servicer pursuant to
Section 3.10 in connection with any losses on Permitted Investments;
and
(iii) any other amounts deposited hereunder which are
required to be deposited in the Distribution Account.
In the event that the Servicer shall remit any amount not
required to be remitted, it may at any time direct the Trustee in writing to
withdraw such amount from the Distribution Account, any provision herein to the
contrary notwithstanding. Such direction may be accomplished by delivering
notice to the Trustee which describes the amounts deposited in error in the
Distribution Account. All funds deposited in the Distribution Account shall be
held by the Trustee in trust for the Certificateholders until disbursed in
accordance with this Agreement or withdrawn in accordance with Section 4.02. In
no event shall the Trustee incur liability for withdrawals from the Distribution
Account at the direction of the Servicer.
(e) The Trustee shall establish and maintain the
Capitalized Interest Account, on behalf of the Certificateholders. On the
Closing Date, the Trustee shall deposit $669,588 into the Capitalized Interest
Account from the proceeds of the sale of the Offered Certificates. Withdrawals
from the Capitalized Interest Account shall be made in accordance with Sections
4.02(c) and (d). The Trustee shall account for the Capitalized Interest Account
as an outside reserve fund within the meaning of Treasury Regulation 1.860G-2(h)
and not as an asset of any REMIC created pursuant to this Agreement. The
beneficial owner of the Capitalized Interest Account shall be the Unaffiliated
Seller.
(f) The Trustee shall establish and maintain each of the
Group I Pre-Funding Account and the Group II Pre-Funding Account, on behalf of
the Certificateholders. On the Closing Date, the Trustee shall deposit the
Initial Group I Pre-Funded Amount into the Group I Pre-Funding Account and the
Initial Group II Pre-Funded Amount into the Group II Pre-Funding Account, in
each case, from the proceeds of the sale of the Offered Certificates.
Withdrawals from the Pre-Funding Accounts shall be made in accordance with
Sections 4.02(e) and (f).
(g) The Trustee may invest the funds in the Accounts if
directed in writing by the Servicer, with respect to the Collection Account and
the Distribution Account or by the Unaffiliated Seller, with respect to the
Pre-Funding Accounts and the Capitalized Interest Account in each case, in
Permitted Investments, which directions shall be in accordance with Section
3.12. Amounts on deposit in the Excess Reserve Fund Account shall not be
invested.
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(h) The Servicer shall give prior written notice to the
Trustee, each Rating Agency and the Depositor of any proposed change of the
location of the Collection Account.
Section 3.08 Subservicing Accounts.
---------------------
In those cases where a Subservicer is servicing a Mortgage
Loan pursuant to a Subservicing Agreement, the Subservicer will be required to
establish and maintain one or more accounts (collectively, the "Subservicing
Account"). The Subservicing Account shall be an Eligible Account and shall
otherwise be acceptable to the Servicer. The Subservicer shall deposit in the
clearing account (which account must be an Eligible Account) in which it
customarily deposits payments and collections on mortgage loans in connection
with its mortgage loan servicing activities on a daily basis, and in no event
more than one Business Day after the Subservicer's receipt thereof, all proceeds
of Mortgage Loans received by the Subservicer less its servicing compensation to
the extent permitted by the Subservicing Agreement, and shall thereafter deposit
such amounts in the Subservicing Account, in no event more than two Business
Days after the deposit of such funds into the clearing account. The Subservicer
shall thereafter deposit such proceeds in the Collection Account or remit such
proceeds to the Servicer for deposit in the Collection Account not later than
two Business Days after the deposit of such amounts in the Subservicing Account.
For purposes of this Agreement, the Servicer shall be deemed to have received
payments on the Mortgage Loans when the Subservicer receives such payments.
Section 3.09 Collection of Taxes, Assessments and Similar
--------------------------------------------
Items; Escrow Accounts.
----------------------
(a) The Servicer shall ensure that each of the Mortgage
Loans shall be covered by a paid-in-full, life-of-the-loan tax service contract
with a nationally recognized provider acceptable to the Servicer (each, a "Tax
Service Contract"). Each Tax Service Contract shall be assigned to the Trustee,
or its designee, at the Servicer's expense in the event that the Servicer is
terminated as Servicer of the related Mortgage Loan.
(b) To the extent that the services described in this
paragraph (b) are not otherwise provided pursuant to the Tax Service Contracts
described in paragraph (a) hereof, the Servicer undertakes to perform such
functions. The Servicer shall establish and maintain, or cause to be established
and maintained, one or more accounts (the "Escrow Accounts"), which shall be
Eligible Accounts. The Servicer shall deposit in the clearing account (which
account must be an Eligible Account) in which it customarily deposits payments
and collections on mortgage loans in connection with its mortgage loan servicing
activities on a daily basis, and in no event more than one Business Day after
the Servicer's receipt thereof, all collections from the Mortgagors (or related
advances from Subservicers) for the payment of taxes, assessments, hazard
insurance premiums and comparable items for the account of the Mortgagors
("Escrow Payments") collected on account of the Mortgage Loans and shall
thereafter deposit such Escrow Payments in the Escrow Accounts, in no event more
than two Business Days after the deposit of such funds in the clearing account,
for the purpose of effecting the payment of any such items as required under the
terms of this Agreement. Withdrawals of amounts from an Escrow Account may be
made only to (i) effect payment of taxes, assessments, hazard insurance
premiums, and comparable items; (ii) reimburse the Servicer (or a Subservicer to
the extent provided in the related Subservicing Agreement) out of related
68
collections for any advances made pursuant to Section 3.01 (with respect to
taxes and assessments) and Section 3.13 (with respect to hazard insurance);
(iii) refund to Mortgagors any sums as may be determined to be overages; (iv)
pay interest, if required and as described below, to Mortgagors on balances in
the Escrow Account, and the Servicer shall be entitled to withdraw from the
Escrow Account any interest earned and not required to be paid to Mortgagors;
(v) clear and terminate the Escrow Account at the termination of the Servicer's
obligations and responsibilities in respect of the Mortgage Loans under this
Agreement or (vi) recover amounts deposited in error. As part of its servicing
duties, the Servicer or Subservicers shall pay to the Mortgagors interest on
funds in Escrow Accounts, to the extent required by law and, to the extent that
interest earned on funds in the Escrow Accounts is insufficient, to pay such
interest from its or their own funds, without any reimbursement therefor. To the
extent that a Mortgage does not provide for Escrow Payments, the Servicer shall
determine whether any such payments are made by the Mortgagor in a manner and at
a time that avoids the loss of the Mortgaged Property due to a tax sale or the
foreclosure of a tax lien. The Servicer assumes full responsibility for the
payment of all such bills within such time and shall effect payments of all such
bills irrespective of the Mortgagor's faithful performance in the payment of
same or the making of the Escrow Payments and shall make advances from its own
funds to effect such payments; provided, however, that such advances are deemed
to be Servicing Advances.
Section 3.10 Collection Account.
------------------
(a) On behalf of the Trustee, the Servicer shall
establish and maintain, or cause to be established and maintained, one or more
Eligible Accounts (such account or accounts, the "Collection Account"), held in
trust for the benefit of the Trustee. On behalf of the Trustee, the Servicer
shall deposit or cause to be deposited in the clearing account (which account
must be an Eligible Account) in which it customarily deposits payments and
collections on mortgage loans in connection with its mortgage loan servicing
activities on a daily basis, and in no event more than one Business Day after
the Servicer's receipt thereof, and shall thereafter deposit in the Collection
Account, in no event more than two Business Days after the deposit of such funds
into the clearing account, as and when received or as otherwise required
hereunder, the following payments and collections received or made by it
subsequent to the related Cut-off Date (other than in respect of principal or
interest on the related Mortgage Loans due on or before the related Cut-off
Date, and except for $9,370.42 in interest, which is being retained by the
Unaffiliated Seller), or payments (other than Principal Prepayments) received by
it on or prior to the related Cut-off Date but allocable to a Due Period
subsequent thereto:
(i) all payments on account of principal, including
Principal Prepayments, on the Mortgage Loans;
(ii) all payments on account of interest (net of the
related Servicing Fee) on each Mortgage Loan;
(iii) all Insurance Proceeds to the extent such Insurance
Proceeds are not to be applied to the restoration of the related
Mortgaged Property or released to the related Mortgagor in accordance
with the express requirements of law or in accordance with prudent and
customary servicing practices and Liquidation Proceeds;
69
(iv) any amounts required to be deposited pursuant to
Section 3.12 in connection with any losses realized on Permitted
Investments with respect to funds held in the Collection Account;
(v) any amounts required to be deposited by the Servicer
pursuant to the second paragraph of Section 3.13(a) in respect of any
blanket policy deductibles;
(vi) all proceeds of any Mortgage Loan repurchased or
purchased in accordance with this Agreement; and
(vii) all Prepayment Charges collected by the Servicer.
The foregoing requirements for deposit in the Collection
Accounts shall be exclusive, it being understood and agreed that, without
limiting the generality of the foregoing, payments in the nature of late payment
charges, NSF fees, reconveyance fees, assumption fees and other similar fees and
charges need not be deposited by the Servicer in the Collection Account and
shall, upon collection, belong to the Servicer as additional compensation for
its servicing activities. In the event the Servicer shall deposit in the
Collection Account any amount not required to be deposited therein, it may at
any time withdraw such amount from the Collection Account, any provision herein
to the contrary notwithstanding.
(b) Funds in the Collection Account may be invested in
Permitted Investments in accordance with the provisions set forth in Section
3.12. The Servicer shall give notice to the Trustee and the Depositor of the
location of the Collection Account maintained by it when established and prior
to any change thereof.
Section 3.11 Withdrawals from the Collection Account.
---------------------------------------
(a) The Servicer shall, from time to time, make
withdrawals from the Collection Account for any of the following purposes or as
described in Section 4.01:
(i) On or prior to the Remittance Date, to remit to the
Trustee the Interest Remittance Amount and the Principal Remittance
Amount in respect of the related Distribution Date together with all
amounts representing Prepayment Charges from the Mortgage Loans
received during the related Prepayment Period;
(ii) to reimburse the Servicer for unreimbursed P&I
Advances, but only to the extent of amounts received which represent
Late Collections (net of the related Servicing Fees) of Monthly
Payments on Mortgage Loans with respect to which such P&I Advances were
made in accordance with the provisions of Section 4.01;
(iii) to pay the Servicer or any Subservicer (a) any unpaid
Servicing Fees or (b) any unreimbursed Servicing Advances with respect
to each Mortgage Loan, but only to the extent of any Late Collections
or other amounts as may be collected by the Servicer from the related
Mortgagor, or otherwise received with respect to such Mortgage Loan (or
the related REO Property);
70
(iv) to pay to the Servicer as servicing compensation (in
addition to the Servicing Fee) on the Remittance Date any interest or
investment income earned on funds deposited in the Collection Account;
(v) to pay to the Unaffiliated Seller or the related
Originator, as applicable, with respect to each Mortgage Loan that has
previously been purchased or replaced by the Unaffiliated Seller or
such Originator, as applicable, pursuant to this Agreement, all amounts
received thereon subsequent to the date of purchase or substitution, as
the case may be;
(vi) to reimburse the Servicer for (a) any P&I Advance or
Servicing Advance previously made which the Servicer has determined to
be a Nonrecoverable P&I Advance or Nonrecoverable Servicing Advance in
accordance with the provisions of Section 4.01 and (b) any unpaid
Servicing Fees to the extent not recoverable from Late Collections or
other amounts received with respect to the related Mortgage Loan under
Section 3.11(a)(iii); provided, that this clause (b) shall only apply
with respect to Servicing Fees to second lien Mortgage Loans;
(vii) to pay, or to reimburse the Servicer for advances in
respect of, expenses incurred in connection with any Mortgage Loan
pursuant to Section 3.15;
(viii) to reimburse the Servicer, the Depositor or the
Trustee for expenses incurred by or reimbursable to the Servicer, the
Depositor or the Trustee, as the case may be, pursuant to Section 6.03;
(ix) to reimburse the Servicer, the Unaffiliated Seller,
the Depositor, the Certificate Insurer or the Trustee, as the case may
be, for expenses reasonably incurred in respect of the breach or defect
giving rise to the purchase obligation under Section 2.03 of this
Agreement that were included in the Repurchase Price of the Mortgage
Loan, including any expenses arising out of the enforcement of the
purchase obligation to the extent not otherwise paid pursuant to the
terms hereof;
(x) to withdraw any amounts deposited in the Collection
Account in error; and
(xi) to clear and terminate the Collection Account upon
termination of this Agreement.
(b) The Servicer shall keep and maintain separate
accounting, on a Mortgage Loan by Mortgage Loan basis, for the purpose of
justifying any withdrawal from the Collection Account, to the extent held by or
on behalf of it, pursuant to subclauses (a)(ii), (iii), (v), (vi), (vii), (viii)
and (ix) above. The Servicer shall provide written notification to the Trustee,
on or prior to the next succeeding Remittance Date, upon making any withdrawals
from the Collection Account pursuant to subclause (a)(vii) above.
Section 3.12 Investment of Funds in the Account.
----------------------------------
(a) The Servicer may direct the investment of funds in
the Collection Account and may direct the Trustee to invest funds in the
Distribution Account, and the Unaffiliated Seller may direct the Trustee to
71
invest the funds in the Pre-Funding Accounts and the Capitalized Interest
Account (each of such Accounts, for purposes of this Section 3.12, an
"Investment Account"), in one or more Permitted Investments bearing interest or
sold at a discount, and maturing, unless payable on demand no later than the
Business Day immediately preceding the date on which such funds are required to
be withdrawn from such account pursuant to this Agreement. All such investment
directions shall be in writing and if the Trustee does not receive such written
instructions no investment shall be made. All such Permitted Investments shall
be held to maturity, unless payable on demand. Any investment of funds in an
Investment Account shall be made in the name of the Trustee. The Trustee shall
be entitled to sole possession (except with respect to investment direction of
funds held in the related Account and any income and gain realized thereon) over
each such investment, and any certificate or other instrument evidencing any
such investment shall be delivered directly to the Trustee or its agent,
together with any document of transfer necessary to transfer title to such
investment to the Trustee. In the event amounts on deposit in an Investment
Account are at any time invested in a Permitted Investment payable on demand,
the Trustee may:
(x) consistent with any notice required to be given
thereunder, demand that payment thereon be made on
the last day such Permitted Investment may otherwise
mature hereunder in an amount equal to the lesser of
(1) all amounts then payable thereunder and (2) the
amount required to be withdrawn on such date; and
(y) demand payment of all amounts due thereunder that
such Permitted Investment would not constitute a
Permitted Investment in respect of funds thereafter
on deposit in the Investment Account.
(b) (i) All income and gain realized from the
investment of funds deposited in the Collection Account and the
Distribution Account held by or on behalf of the Servicer, shall be for
the benefit of the Servicer and shall be subject to its withdrawal in
the manner set forth in Section 3.11 in the case of income in the
Collection Account, and on each Distribution Date, the Trustee shall
withdraw from the Distribution Account, and remit to the Servicer all
amounts in respect of such income and gain in the Distribution Account.
Whether in regard to the Collection Account or the Distribution
Account, the Servicer shall deposit in the Collection Account or the
Distribution Account, as applicable, the amount of any loss of
principal incurred in respect of any such Permitted Investment directed
by the Servicer made with funds in such accounts immediately upon
realization of such loss.
(ii) All income and gain realized from the investment of
funds deposited in the Pre-Funding Accounts and the Capitalized
Interest Account held by or on behalf of the Unaffiliated Seller shall
be retained in such Investment Account, subject to withdrawal as
provided in Section 4.02. Whether in regard to a Pre-Funding Account or
the Capitalized Interest Account, the Unaffiliated Seller shall deposit
in such Pre-Funding Account or the Capitalized Interest Account, as
applicable, the amount of any loss of principal incurred in respect of
any such Permitted Investment made with funds in such accounts
immediately upon realization of such loss.
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(c) Except as otherwise expressly provided in this
Agreement, if any default occurs in the making of a payment due under any
Permitted Investment, or if a default occurs in any other performance required
under any Permitted Investment, the Trustee shall take such action as may be
appropriate to enforce such payment or performance, including the institution
and prosecution of appropriate proceedings. The Trustee shall not be liable for
the amount of any loss incurred in respect of any investment or lack of
investment of funds held in any Investment Account or the Distribution Account
if made in accordance with this Section 3.12.
(d) The Trustee or its Affiliates are permitted to
receive additional compensation that could be deemed to be in the Trustee's
economic self-interest for (i) serving as investment adviser, administrator,
shareholder, servicing agent, custodian or sub-custodian with respect to certain
of the Permitted Investments, (ii) using Affiliates to effect transactions in
certain Permitted Investments and (iii) effecting transactions in certain
Permitted Investments. Such compensation shall not be considered an amount that
is reimbursable or payable pursuant to this Agreement.
Section 3.13 Maintenance of Hazard Insurance and Errors
------------------------------------------
and Omissions and Fidelity Coverage.
-----------------------------------
(a) The Servicer shall cause to be maintained for each
Mortgage Loan fire insurance with extended coverage on the related Mortgaged
Property in an amount which is at least equal to the least of (i) the current
principal balance of such Mortgage Loan, (ii) the amount necessary to fully
compensate for any damage or loss to the improvements that are a part of such
property on a replacement cost basis and (iii) the maximum insurable value of
the improvements which are a part of such Mortgaged Property, in each case in an
amount not less than such amount as is necessary to avoid the application of any
coinsurance clause contained in the related hazard insurance policy. The
Servicer shall also cause to be maintained fire insurance with extended coverage
on each REO Property in an amount which is at least equal to the lesser of (i)
the maximum insurable value of the improvements which are a part of such
property and (ii) the outstanding principal balance of the related Mortgage Loan
at the time it became an REO Property, plus accrued interest at the Mortgage
Rate and related Servicing Advances. The Servicer will comply in the performance
of this Agreement with all reasonable rules and requirements of each insurer
under any such hazard policies. Any amounts to be collected by the Servicer
under any such policies (other than amounts to be applied to the restoration or
repair of the property subject to the related Mortgage or amounts to be released
to the Mortgagor in accordance with the procedures that the Servicer would
follow in servicing loans held for its own account, subject to the terms and
conditions of the related Mortgage and Mortgage Note) shall be deposited in the
Collection Account, subject to withdrawal pursuant to Section 3.11. Any cost
incurred by the Servicer in maintaining any such insurance shall not, for the
purpose of calculating distributions to the Trustee, be added to the unpaid
principal balance of the related Mortgage Loan, notwithstanding that the terms
of such Mortgage Loan so permit. It is understood and agreed that no earthquake
or other additional insurance is to be required of any Mortgagor other than
pursuant to such applicable laws and regulations as shall at any time be in
force and as shall require such additional insurance. If the Mortgaged Property
or REO Property is at any time in an area identified in the Federal Register by
the Federal Emergency Management Agency as having special flood hazards and
flood insurance has been made available, the Servicer will cause to be
maintained a flood insurance policy in respect thereof. Such flood insurance
73
shall be in an amount equal to the lesser of (i) the unpaid principal balance of
the related Mortgage Loan and (ii) the maximum amount of such insurance
available for the related Mortgaged Property under the national flood insurance
program (assuming that the area in which such Mortgaged Property is located is
participating in such program).
In the event that the Servicer shall obtain and maintain a
blanket policy with an insurer having a General Policy Rating of A:X or better
in Best's (or such other rating that is comparable to such rating) 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 two sentences
of this Section 3.13, it being understood and agreed that such policy may
contain a deductible clause, in which case the Servicer shall, in the event that
there shall not have been maintained on the related Mortgaged Property or REO
Property a policy complying with the first two sentences of this Section 3.13,
and there shall have been one or more losses which would have been covered by
such policy, deposit to the Collection Account from its own funds the amount not
otherwise payable under the blanket policy because of such deductible clause. In
connection with its activities as administrator and servicer of the Mortgage
Loans, the Servicer agrees to prepare and present, on behalf of itself, the
Trustee claims under any such blanket policy in a timely fashion in accordance
with the terms of such policy.
(b) The Servicer shall keep in force during the term of
this Agreement a policy or policies of insurance covering errors and omissions
for failure in the performance of the Servicer's obligations under this
Agreement, which policy or policies shall be in such form and amount that would
meet the requirements of Fannie Mae or Freddie Mac if it were the purchaser of
the Mortgage Loans, unless the Servicer has obtained a waiver of such
requirements from Fannie Mae or Freddie Mac. The Servicer shall also maintain a
fidelity bond in the form and amount that would meet the requirements of Fannie
Mae or Freddie Mac, unless the Servicer has obtained a waiver of such
requirements from Fannie Mae or Freddie Mac. The Servicer shall provide the
Trustee with copies of any such insurance policies and fidelity bond. The
Servicer shall be deemed to have complied with this provision if an Affiliate of
the Servicer has such errors and omissions and fidelity bond coverage and, by
the terms of such insurance policy or fidelity bond, the coverage afforded
thereunder extends to the Servicer. Any such errors and omissions policy and
fidelity bond shall by its terms not be cancelable without thirty days' prior
written notice to the Trustee. The Servicer shall also cause each Subservicer to
maintain a policy of insurance covering errors and omissions and a fidelity bond
which would meet such requirements.
Section 3.14 Enforcement of Due-On-Sale Clauses
----------------------------------
Assumption Agreements.
---------------------
The Servicer will, to the extent it has knowledge of any
conveyance or prospective conveyance of any Mortgaged Property by any Mortgagor
(whether by absolute conveyance or by contract of sale, and whether or not the
Mortgagor remains or is to remain liable under the Mortgage Note and/or the
Mortgage), exercise its rights to accelerate the maturity of such Mortgage Loan
under the "due-on-sale" clause, if any, applicable thereto; provided, however,
that the Servicer shall not be required to take such action if, in its sole
business judgment, the Servicer believes it is not in the best interests of the
Trust Fund and shall not exercise any such rights if prohibited by law from
doing so. If the Servicer reasonably believes it is unable under applicable law
to enforce such "due-on-sale" clause or if any of the other conditions set forth
74
in the proviso to the preceding sentence apply, the Servicer will enter into an
assumption and modification agreement from or with the person to whom such
property has been conveyed or is proposed to be conveyed, pursuant to which such
person becomes liable under the Mortgage Note and, to the extent permitted by
applicable state law, the Mortgagor remains liable thereon. The Servicer is also
authorized to enter into a substitution of liability agreement with such person,
pursuant to which the original Mortgagor is released from liability and such
person is substituted as the Mortgagor and becomes liable under the Mortgage
Note; provided that no such substitution shall be effective unless such person
satisfies the underwriting criteria of the Servicer, has a credit risk rating at
least equal to that of the original Mortgagor and such substitution is in the
best interest of Certificateholders as determined by the Servicer. In connection
with any assumption, modification or substitution, the Servicer shall apply such
underwriting standards and follow such practices and procedures as shall be
normal and usual in its general mortgage servicing activities and as it applies
to other mortgage loans owned solely by it. The Servicer shall not take or enter
into any assumption and modification agreement, however, unless (to the extent
practicable in the circumstances) it shall have received confirmation, in
writing, of the continued effectiveness of any applicable hazard insurance
policy, or a new policy meeting the requirements of this Section is obtained.
Any fee collected by the Servicer in respect of an assumption or substitution of
liability agreement will be retained by the Servicer as additional servicing
compensation. In connection with any such assumption, no material term of the
Mortgage Note (including, but not limited to, the related Mortgage Rate and the
amount of the Scheduled Payment) may be amended or modified, except as otherwise
required pursuant to the terms thereof. The Servicer shall notify the Trustee
that any such substitution, modification or assumption agreement has been
completed by forwarding to the Trustee the executed original of such
substitution or assumption agreement, which document shall be added to the
related Mortgage File and shall, for all purposes, be considered a part of such
Mortgage File to the same extent as all other documents and instruments
constituting a part thereof.
Notwithstanding the foregoing paragraph or any other provision
of this Agreement, the Servicer 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 by operation of law or by the terms of the Mortgage Note or any
assumption which the Servicer may be restricted by law from preventing, for any
reason whatever. For purposes of this Section 3.14, the term "assumption" is
deemed to also include a sale (of the Mortgaged Property) subject to the
Mortgage that is not accompanied by an assumption or substitution of liability
agreement.
Section 3.15 Realization Upon Defaulted Mortgage Loans.
-----------------------------------------
The Servicer shall use its best efforts, consistent with
customary servicing practices as described in Section 3.01, to foreclose upon or
otherwise comparably convert (which may include an acquisition of REO Property)
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 3.07, and which are not
released from this Agreement pursuant to any other provision hereof. The
Servicer shall use reasonable efforts to realize upon such defaulted Mortgage
Loans in such manner as will maximize the receipt of principal and interest by
the Trustee, taking into account, among other things, the timing of foreclosure
proceedings. The foregoing is subject to the provisions that, in any case in
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which Mortgaged Property shall have suffered damage from an uninsured cause, the
Servicer shall not be required to expend its own funds toward the restoration of
such property unless it shall determine in its sole discretion (i) that such
restoration will increase the net proceeds of liquidation of the related
Mortgage Loan to the Trustee, after reimbursement to itself for such expenses,
and (ii) that such expenses will be recoverable by the Servicer through
Insurance Proceeds or Liquidation Proceeds from the related Mortgaged Property,
as contemplated in Section 3.11. The Servicer shall be responsible for all other
costs and expenses incurred by it in any such proceedings; provided, however,
that it shall be entitled to reimbursement thereof from the related property, as
contemplated in Section 3.11.
The proceeds of any liquidation or REO Disposition, as well as
any recovery resulting from a partial collection of Insurance Proceeds or
Liquidation Proceeds or any income from an REO Property, will be applied in the
following order of priority: first, to reimburse the Servicer or any Subservicer
for any related unreimbursed Servicing Advances, pursuant to Section 3.11 or
3.17; second, to accrued and unpaid interest on the Mortgage Loan or REO Imputed
Interest, at the Mortgage Rate, to the date of the liquidation or REO
Disposition, or to the Due Date prior to the Remittance Date on which such
amounts are to be distributed if not in connection with a liquidation or REO
Disposition; third, to reimburse the Servicer for any related unreimbursed P&I
Advances, pursuant to Section 3.11; and fourth, as a recovery of principal of
the Mortgage Loan. If the amount of the recovery so allocated to interest is
less than a full recovery thereof, that amount will be allocated as follows:
first, to unpaid Servicing Fees; and second, as interest at the Mortgage Rate
(net of the Servicing Fee Rate). The portion of the recovery so allocated to
unpaid Servicing Fees shall be reimbursed to the Servicer or any Subservicer
pursuant to Section 3.11 or 3.17. The portions of the recovery so allocated to
interest at the Mortgage Rate (net of the Servicing Fee Rate) and to principal
of the Mortgage Loan shall be applied as follows: first, to reimburse the
Servicer or any Subservicer for any related unreimbursed Servicing Advances in
accordance with Section 3.11 or 3.17, and second, to the Trustee in accordance
with the provisions of Section 4.02, subject to the last paragraph of Section
3.17 with respect to certain excess recoveries from an REO Disposition.
Notwithstanding anything to the contrary contained herein, in
connection with a foreclosure or acceptance of a deed in lieu of foreclosure, in
the event the Servicer has received actual notice of, or has actual knowledge of
the presence of, hazardous or toxic substances or wastes on the related
Mortgaged Property, or if the Trustee otherwise requests, the Servicer shall
cause an environmental inspection or review of such Mortgaged Property to be
conducted by a qualified inspector. Upon completion of the inspection, the
Servicer shall promptly provide the Trustee with a written report of the
environmental inspection.
After reviewing the environmental inspection report, the
Servicer shall determine how to proceed with respect to the Mortgaged Property.
In the event (a) the environmental inspection report indicates that the
Mortgaged Property is contaminated by hazardous or toxic substances or wastes
and (b) the Servicer determines to proceed with foreclosure or acceptance of a
deed in lieu of foreclosure, the Servicer shall be reimbursed for all reasonable
costs associated with such foreclosure or acceptance of a deed in lieu of
foreclosure and any related environmental clean-up costs, as applicable, from
the related Liquidation Proceeds, or if the Liquidation Proceeds are
insufficient to fully reimburse the Servicer, the Servicer shall be entitled to
be reimbursed from amounts in the Collection Account pursuant to Section 3.11
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hereof. In the event the Servicer determines not to proceed with foreclosure or
acceptance of a deed in lieu of foreclosure, the Servicer shall be reimbursed
from general collections for all Servicing Advances made with respect to the
related Mortgaged Property from the Collection Account pursuant to Section 3.11
hereof.
Section 3.16 Release of Mortgage Files.
-------------------------
(a) Upon the payment in full of any Mortgage Loan, or the
receipt by the Servicer of a notification that payment in full shall be escrowed
in a manner customary for such purposes, the Servicer will, within five (5)
Business Days of the payment in full, notify the Trustee by a certification
(which certification shall include a statement to the effect that all amounts
received or to be received in connection with such payment which are required to
be deposited in the Collection Account pursuant to Section 3.10 have been or
will be so deposited) of a Servicing Officer and shall request delivery to it of
the Custodial File. Upon receipt of such certification and request, the Trustee
shall promptly release the related Custodial File to the Servicer within five
(5) Business Days. No expenses incurred in connection with any instrument of
satisfaction or deed of reconveyance shall be chargeable to the Collection
Account.
(b) From time to time and as appropriate for the
servicing or foreclosure of any Mortgage Loan, including, for this purpose,
collection under any insurance policy relating to the Mortgage Loans, the
Trustee shall, upon request of the Servicer and delivery to the Trustee, of a
Request for Release, release the related Custodial File to the Servicer, and the
Trustee shall, at the direction of the Servicer, execute such documents as shall
be necessary to the prosecution of any such proceedings and the Servicer shall
retain the Mortgage File in trust for the benefit of the Trustee. Such Request
for Release shall obligate the Servicer to return each and every document
previously requested from the Custodial File to the Trustee when the need
therefor by the Servicer no longer exists, unless the Mortgage Loan has been
liquidated and the Liquidation Proceeds relating to the Mortgage Loan have been
deposited in the Collection Account or the Mortgage File or such document has
been delivered to an attorney, or to a public trustee or other public official
as required by law, for purposes of initiating or pursuing legal action or other
proceedings for the foreclosure of the Mortgaged Property either judicially or
non-judicially, and the Servicer has delivered to the Trustee a certificate of a
Servicing Officer certifying as to the name and address of the Person to which
such Mortgage File or such document was delivered and the purpose or purposes of
such delivery. Upon receipt of a certificate of a Servicing Officer stating that
such Mortgage Loan was liquidated and that all amounts received or to be
received in connection with such liquidation that are required to be deposited
into the Collection Account have been so deposited, or that such Mortgage Loan
has become an REO Property, a copy of the Request for Release of Documents shall
be released by the Trustee to the Servicer or its designee.
Upon written certification of a Servicing Officer, the Trustee
shall execute and deliver to the Servicer any court pleadings, requests for
trustee's sale or other documents reasonably necessary to the foreclosure or
trustee's sale in respect of a Mortgaged Property or to any legal action brought
to obtain judgment against any Mortgagor on the Mortgage Note or Mortgage or to
obtain a deficiency judgment, or to enforce any other remedies or rights
provided by the Mortgage Note or Mortgage or otherwise available at law or in
equity, or shall exercise and deliver to the Servicer a power of attorney
sufficient to authorize the Servicer to execute such documents on its behalf.
77
Each such certification shall include a request that such pleadings or documents
be executed by the Trustee and a statement as to the reason such documents or
pleadings are required and that the execution and delivery thereof by the
Trustee will not invalidate or otherwise affect the lien of the Mortgage, except
for the termination of such a lien upon completion of the foreclosure or
trustee's sale.
Upon receipt of a Request for Release under this Section 3.16,
the Trustee shall deliver the related Custodial File to the Servicer by regular
mail, unless the Servicer requests that the Trustee deliver such Custodial File
to the Servicer by overnight courier (in which case such delivery shall be at
the Servicer's expense). To the extent that the Servicer requires an overnight
courier for such delivery and incurs the related expense due to the Servicer not
having previously received copies of the documents required to be delivered to
the Servicer hereunder, the Unaffiliated Seller shall use commercially
reasonable efforts to assist the Servicer in causing the related Originator
pursuant to the related Mortgage Loan Purchase Agreement to reimburse the
Servicer for such expense.
Section 3.17 Title, Conservation and Disposition of REO
------------------------------------------
Property.
--------
(a) This Section shall apply only to REO Properties
acquired for the account of the Trustee and shall not apply to any REO Property
relating to a Mortgage Loan which was purchased or repurchased from the Trustee
pursuant to any provision hereof. In the event that title to any such REO
Property is acquired, the Servicer shall cause the deed or certificate of sale
to be issued in the name of the Trustee, on behalf of the Certificateholders.
(b) The Servicer shall manage, conserve, protect and
operate each REO Property for the Trustee solely for the purpose of its prompt
disposition and sale. The Servicer, either itself or through an agent selected
by the Servicer, shall manage, conserve, protect and operate the REO Property in
the same manner that it manages, conserves, protects and operates other
foreclosed property for its own account, and in the same manner that similar
property in the same locality as the REO Property is managed. The Servicer shall
attempt to sell the same (and may temporarily rent the same for a period not
greater than one year, except as otherwise provided below) on such terms and
conditions as the Servicer deems to be in the best interest of the Trustee. The
Servicer shall notify the Trustee from time to time as to the status of each REO
Property.
(c) The Servicer shall use its best efforts to dispose of
the REO Property as soon as possible and shall sell such REO Property in any
event within one year after title has been taken to such REO Property, unless
the Servicer determines, and gives an appropriate notice to the Trustee to such
effect, that a longer period is necessary for the orderly liquidation of such
REO Property. If a period longer than one year is permitted under the foregoing
sentence and is necessary to sell any REO Property, the Servicer shall report
monthly to the Trustee as to the progress being made in selling such REO
Property. The Trustee has no obligation with respect to REO dispositions.
(d) [Reserved].
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(e) The Servicer shall segregate and hold all funds
collected and received in connection with the operation of any REO Property
separate and apart from its own funds and general assets and shall deposit such
funds in the Collection Account.
(f) The Servicer shall deposit net of reimbursement to
the Servicer for any related outstanding P&I Advances, Servicing Advances and
unpaid Servicing Fees provided in Section 3.11 hereof, or cause to be deposited,
on a daily basis in the Collection Account all revenues received with respect to
the related REO Property and shall withdraw therefrom funds necessary for the
proper operation, management and maintenance of the REO Property.
(g) The Servicer, upon an REO Disposition, shall be
entitled to reimbursement for any related unreimbursed P&I Advances and
Servicing Advances as well as any unpaid Servicing Fees from proceeds received
in connection with the REO Disposition, as further provided in Section 3.11.
(h) Any net proceeds which are in excess of the
applicable Stated Principal Balance plus all unpaid REO Imputed Interest thereon
through the date of the REO Disposition shall be retained by the Servicer as
additional servicing compensation.
(i) The Servicer shall use its reasonable best efforts to
sell, or cause the Subservicer to sell, any REO Property as soon as possible,
but in no event later than the conclusion of the third calendar year beginning
after the year of its acquisition by the REMIC unless (i) the Servicer applies
for an extension of such period from the Internal Revenue Service pursuant to
the REMIC Provisions and Code Section 856(e)(3), in which event such REO
Property shall be sold within the applicable extension period, or (ii) the
Servicer obtains for the Trustee an Opinion of Counsel, addressed to the
Depositor, the Trustee and the Servicer, to the effect that the holding by the
REMIC of such REO Property subsequent to such period will not result in the
imposition of taxes on "prohibited transactions" as defined in Section 860F of
the Code or cause the REMIC to fail to qualify as a REMIC under the REMIC
Provisions or comparable provisions of relevant state laws at any time. The
Servicer shall manage, conserve, protect and operate each REO Property for the
Trustee solely for the purpose of its prompt disposition and sale in a manner
which does not cause such REO Property to fail to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) or result in the receipt by
the REMIC of any "income from non-permitted assets" within the meaning of
Section 860F(a)(2)(B) of the Code or any "net income from foreclosure property"
which is subject to taxation under Section 860G(a)(1) of the Code. Pursuant to
its efforts to sell such REO Property, the Servicer shall either itself or
through an agent selected by the Servicer protect and conserve such REO Property
in the same manner and to such extent as is customary in the locality where such
REO Property is located and may, incident to its conservation and protection of
the interests of the Trustee on behalf of the Certificateholders, rent the same,
or any part thereof, as the Servicer deems to be in the best interest of the
Trustee on behalf of the Certificateholders for the period prior to the sale of
such REO Property; provided, however, that any rent received or accrued with
respect to such REO Property qualifies as "rents from real property" as defined
in Section 856(d) of the Code.
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Section 3.18 Notification of Adjustments.
---------------------------
With respect to each Adjustable Rate Mortgage Loan, the
Servicer shall adjust the Mortgage Rate on the related Interest Rate Adjustment
Date and shall adjust the Scheduled Payment on the related mortgage payment
adjustment date, if applicable, in compliance with the requirements of
applicable law and the related Mortgage and Mortgage Note. The Servicer shall
execute and deliver any and all necessary notices required under applicable law
and the terms of the related Mortgage Note and Mortgage regarding the Mortgage
Rate and Scheduled Payment adjustments. The Servicer shall promptly, upon
written request therefor, deliver to the Trustee such notifications and any
additional applicable data regarding such adjustments and the methods used to
calculate and implement such adjustments. Upon the discovery by the Servicer or
the receipt of notice from the Trustee that the Servicer has failed to adjust a
Mortgage Rate or Scheduled Payment in accordance with the terms of the related
Mortgage Note, the Servicer shall deposit in the Collection Account from its own
funds the amount of any interest loss caused as such interest loss occurs.
Section 3.19 Access to Certain Documentation and
-----------------------------------
Information Regarding the Mortgage Loans.
----------------------------------------
The Servicer shall provide, or cause the Subservicer to
provide, to the Depositor, the Unaffiliated Seller, the Certificate Insurer, the
Trustee, the OTS or the FDIC and the examiners and supervisory agents thereof
access to the documentation regarding the Mortgage Loans in its possession. Such
access shall be afforded without charge, but only upon reasonable and prior
written request and during normal business hours at the offices of the Servicer
or any Subservicer. Nothing in this Section shall derogate from the obligation
of any such party to observe any applicable law prohibiting disclosure of
information regarding the Mortgagors and the failure of any such party to
provide access as provided in this Section as a result of such obligation shall
not constitute a breach of this Section.
Section 3.20 Documents, Records and Funds in Possession
------------------------------------------
of the Servicer to be Held for the Trustee.
------------------------------------------
The Servicer shall account fully to the Trustee for any funds
received by the Servicer or which otherwise are collected by the Servicer as
Liquidation Proceeds or Insurance Proceeds in respect of any Mortgage Loan. All
Mortgage Files and funds collected or held by, or under the control of, the
Servicer in respect of any Mortgage Loans, whether from the collection of
principal and interest payments or from Liquidation Proceeds, including, but not
limited to, any funds on deposit in the Collection Account, shall be held by the
Servicer for and on behalf of the Trustee and shall be and remain the sole and
exclusive property of the Trustee, subject to the applicable provisions of this
Agreement. The Servicer also agrees that it shall not create, incur or subject
any Mortgage File or any funds that are deposited in any Account, or any funds
that otherwise are or may become due or payable to the Trustee for the benefit
of the Certificateholders, to any claim, lien, security interest, judgment,
levy, writ of attachment or other encumbrance, or assert by legal action or
otherwise any claim or right of setoff against any Mortgage File or any funds
collected on, or in connection with, a Mortgage Loan, except, however, that the
Servicer shall be entitled to set off against and deduct from any such funds any
amounts that are properly due and payable to the Servicer under this Agreement.
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Section 3.21 Servicing Compensation.
----------------------
(a) As compensation for its activities hereunder, the
Servicer shall, with respect to each Mortgage Loan, be entitled to retain from
deposits to the Collection Account and from Liquidation Proceeds, Insurance
Proceeds and REO Proceeds related to such Mortgage Loan, the Servicing Fee with
respect to each Mortgage Loan (less any portion of such amounts retained by any
Subservicer). In addition, the Servicer shall be entitled to recover unpaid
Servicing Fees out of related late collections and as otherwise permitted under
Section 3.11. The right to receive the Servicing Fee may not be transferred in
whole or in part except in connection with the transfer of all of the Servicer's
responsibilities and obligations under this Agreement; provided, however, that
the Servicer may pay from the Servicing Fee any amounts due to a Subservicer
pursuant to a Subservicing Agreement entered into under Section 3.02.
(b) Additional servicing compensation in the form of
assumption or modification fees, late payment charges, NSF fees, reconveyance
fees and other similar fees and charges (other than Prepayment Charges) shall be
retained by the Servicer only to the extent such fees or charges are received by
the Servicer. The Servicer shall also be entitled pursuant to Section
3.11(a)(iv) to withdraw from the Collection Account and the Distribution
Account, as additional servicing compensation, interest or other income earned
on deposits therein.
(c) The Servicer shall be required to pay all expenses
incurred by it in connection with its servicing activities hereunder (including
payment of premiums for any blanket policy insuring against hazard losses
pursuant to Section 3.13, servicing compensation of the Subservicer to the
extent not retained by it and the fees and expenses of independent accountants
and any agents appointed by the Servicer), and shall not be entitled to
reimbursement therefor except as specifically provided in Section 3.11.
Section 3.22 Annual Statement as to Compliance.
---------------------------------
The Servicer will deliver or cause to be delivered to the
Depositor, the Rating Agencies, the Unaffiliated Seller, the Certificate
Insurer, and the Trustee on or before March 15th of each calendar year,
commencing in 2004, an Officers' Certificate stating, as to each signatory
thereof, that (i) a review of the activities of the Servicer during the
preceding calendar year and of performance under this Agreement has been made
under such officers' supervision, and (ii) to the best of such officers'
knowledge, based on such review, the Servicer has fulfilled all of its
obligations under this Agreement throughout such year, or, if there has been a
default in the fulfillment of any such obligation, specifying each such default
known to such officers and the nature and status thereof.
Section 3.23 Annual Independent Public Accountants'
--------------------------------------
Servicing Statement; Financial Statements.
-----------------------------------------
Not later than March 15th of each calendar year commencing in
2004, the Servicer, at its expense, shall cause a nationally recognized firm of
independent certified public accountants to furnish to the Depositor, the
Unaffiliated Seller, the Certificate Insurer, the Rating Agencies and the
Trustee a report stating that (i) it has obtained a letter of representation
regarding certain matters from the management of the Servicer which includes an
assertion that the Servicer has complied with certain minimum residential
81
mortgage loan servicing standards, identified in the Uniform Single Attestation
Program for Mortgage Bankers established by the Mortgage Bankers Association of
America, with respect to the servicing of residential mortgage loans during the
most recently completed fiscal year and (ii) on the basis of an examination
conducted by such firm in accordance with standards established by the American
Institute of Certified Public Accountants, such representation is fairly stated
in all material respects, subject to such exceptions and other qualifications
that may be appropriate. In rendering its report such firm may rely, as to
matters relating to the direct servicing of residential mortgage loans by
Subservicers, upon comparable reports of firms of independent certified public
accountants rendered on the basis of examinations conducted in accordance with
the same standards (rendered within one year of such report) with respect to
those Subservicers.
Section 3.24 Trustee to Act as Servicer.
--------------------------
In the event that the Servicer shall for any reason no longer
be the Servicer hereunder (including by reason of an Event of Default), except
as provided under Section 7.02, the Trustee or its successor shall thereupon
assume all of the rights and obligations of the Servicer hereunder arising
thereafter (except that the Trustee shall not be (i) liable for losses of the
Servicer pursuant to Section 3.10 or any acts or omissions of the predecessor
Servicer hereunder, (ii) obligated to make Advances if it is prohibited from
doing so by applicable law, (iii) obligated to effectuate repurchases or
substitutions of Mortgage Loans hereunder, including, but not limited to,
repurchases or substitutions pursuant to Section 2.03, (iv) responsible for
expenses of the Servicer pursuant to Section 2.03 or (v) deemed to have made any
representations and warranties of the Servicer hereunder). Any such assumption
shall be subject to Section 7.02.
Every subservicing agreement entered into by the Servicer
shall contain a provision giving the successor Servicer the option to terminate
such agreement in the event a successor Servicer is appointed.
If the Servicer shall for any reason no longer be the Servicer
(including by reason of any Event of Default), the Trustee (or any other
successor Servicer) may, at its option, succeed to any rights and obligations of
the Servicer under any subservicing agreement in accordance with the terms
thereof; provided that the Trustee (or any other successor Servicer) shall not
incur any liability or have any obligations in its capacity as successor
Servicer under a subservicing agreement arising prior to the date of such
succession unless it expressly elects to succeed to the rights and obligations
of the Servicer thereunder; and the Servicer shall not thereby be relieved of
any liability or obligations under the subservicing agreement arising prior to
the date of such succession.
The Servicer shall, upon request of the Trustee, but at the
expense of the Servicer, deliver to the assuming party all documents and records
relating to each subservicing agreement (if any) and the Mortgage Loans then
being serviced thereunder and an accounting of amounts collected held by it and
otherwise use its best efforts to effect the orderly and efficient transfer of
the subservicing agreement to the assuming party.
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Section 3.25 Compensating Interest.
---------------------
The Servicer shall remit to the Trustee on each Remittance
Date an amount from its own funds equal to the Compensating Interest for the
related Distribution Date.
Section 3.26 Credit Reporting; Gramm-Leach-Bliley Act.
----------------------------------------
(a) The Servicer agrees to fully furnish, in accordance
with the Fair Credit Reporting Act and its implementing regulations, accurate
and complete information (i.e., favorable and unfavorable) on its borrower
credit files to Equifax, Experian, and Trans Union Credit Information Company
(three of the credit repositories), on a monthly basis.
(b) The Servicer shall comply with Title V of the
Gramm-Leach-Bliley Act of 1999 and all applicable regulations promulgated
thereunder, relating to the Mortgage Loans and the related borrowers and shall
provide all required notices thereunder.
Section 3.27 Advance Facilities.
------------------
With the prior written consent of the Certificate Insurer, the
Servicer is hereby authorized to enter into a financing or other facility (an
"Advance Facility") under which (l) the Servicer sells, assigns or pledges to
another Person (an "Advancing Person") the Servicer's rights under this
Agreement to be reimbursed for any Advances and/or (2) an Advancing Person
agrees to fund some or all P&I Advances or Servicing Advances required to be
made by the Servicer pursuant to this Agreement. Except as provided in the
preceding sentence, no consent of any party is required before the Servicer may
enter into an Advance Facility. Notwithstanding the existence of any Advance
Facility under which an Advancing Person agrees to fund P&I Advances and/or
Servicing Advances on the Servicer's behalf, the Servicer shall remain obligated
pursuant to this Agreement to make P&I Advances and Servicing Advances pursuant
to and as required by this Agreement, and shall not be relieved of such
obligations by virtue of such Advance Facility.
Reimbursement amounts ("Advance Reimbursement Amounts") shall
consist solely of amounts in respect of P&I Advances and/or Servicing Advances
made with respect to the Mortgage Loans for which the Servicer would be
permitted to reimburse itself in accordance with this Agreement, assuming the
Servicer had made the related P&I Advance(s) and/or Servicing Advance(s).
The Servicer shall maintain and provide to any successor
Servicer a detailed accounting on a loan-by-loan basis as to amounts advanced
by, pledged or assigned to, and reimbursed to any Advancing Person. The
successor Servicer shall be entitled to rely on any such information provided by
the predecessor Servicer, and the successor Servicer shall not be liable for any
errors in such information.
An Advancing Person who purchases or receives an assignment or
pledge of the rights to be reimbursed for P&I Advances and/or Servicing
Advances, and/or whose obligations hereunder are limited to the funding of P&I
Advances and/or Servicing Advances shall not be required to meet the criteria
for qualification of a subservicer set forth in this Agreement.
83
The documentation establishing any Advance Facility shall
require that Advance Reimbursement Amounts distributed with respect to each
Mortgage Loan be allocated to outstanding unreimbursed P&I Advances or Servicing
Advances (as the case may be) made with respect to that Mortgage Loan on a
"first-in, first out" (FIFO) basis. Such documentation shall also require the
Servicer to provide to the related Advancing Person or its designee loan-by-loan
information with respect to each Advance Reimbursement Amount distributed to
such Advancing Person or to a trustee or custodian (an "Advance Facility
Trustee") on each Distribution Date, to enable the Advancing Person or Advance
Facility Trustee to make the FIFO allocation of each Advance Reimbursement
Amount with respect to each Mortgage Loan. The Servicer shall remain entitled to
be reimbursed pursuant to the Advance Facility by the Advancing Person or
Advance Facility Trustee for all P&I Advances and Servicing Advances funded by
the Servicer to the extent the related rights to be reimbursed therefor have not
been sold, assigned or pledged to an Advancing Person.
Any amendment to this Section 3.27 or to any other provision
of this Agreement that may be necessary or appropriate to effect the terms of an
Advance Facility as described generally in this Section 3.27, including
amendments to add provisions relating to a successor Servicer, may be entered
into by the Trustee, the Depositor, the Unaffiliated Seller and the Servicer
without the consent of any Certificateholder, but with the consent of the
Certificate Insurer, notwithstanding anything to the contrary in this Agreement.
Prior to entering into an Advance Facility, the Servicer shall notify the lender
under such facility in writing that: (a) the Advances financed by and/or pledged
to the lender are obligations owed to the Servicer on a non-recourse basis
payable only from the cash flows and proceeds received under this Agreement for
reimbursement of such Advances only to the extent provided herein, and the
Trustee is not otherwise obligated or liable to repay any Advances financed by
the lender; (b) the Servicer will be responsible for remitting to the lender the
applicable amounts collected by it as reimbursement for Advances funded by the
lender, subject to the restrictions and priorities created in this Agreement;
(c) the Trustee shall not have any responsibility to track or monitor the
administration of the financing arrangement between the Servicer and the lender;
(d) if the Servicer is replaced by a successor servicer, the lender shall
continue to be entitled to receive reimbursements as provided in clause (a)
above but shall have no further right to make advances with respect to the
transaction subject to this Agreement; and (e) (i) the pledge, if any, of
Servicer's rights to the lender under the facility conveys no rights (such as a
right to fees after the removal of the Servicer or the right to become a
substitute servicer) under this Agreement, or against the Trust Fund, any
investor in or guarantor of securities issued hereunder, or any person other
than the Servicer, (ii) the Servicer is only pledging assets and rights that it
owns and any purported pledge of any assets or rights that are not property of
the Servicer shall be of force and effect and will not be deemed to create any
additional rights or assets of either the lender or the Servicer and (iii) the
lender shall take such steps as are reasonably necessary to confirm to a
successor servicer that it has no rights in any collateral due or payable on or
after the date of servicing transfer other than the Servicer's rights to
reimbursement of Advances (to be repaid pursuant to the terms of this Agreement)
for Advances made prior to such servicing transfer.
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ARTICLE IV
DISTRIBUTIONS AND
ADVANCES BY THE SERVICER
Section 4.01 Advances.
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(a) The amount of P&I Advances to be made by the Servicer
for any Remittance Date shall equal, subject to Section 4.01(c), the sum of (i)
with respect to the Mortgage Loans, the aggregate amount of Scheduled Payments
(with each interest portion thereof net of the related Servicing Fee), due on
the Due Date immediately preceding such Remittance Date in respect of such
Mortgage Loans, which Scheduled Payments were not received as of the close of
business on the last Business Day of the immediately preceding calendar month,
plus (ii) with respect to each REO Property, which REO Property was acquired
during or prior to the related Prepayment Period and as to which such REO
Property an REO Disposition did not occur during the related Prepayment Period,
an amount equal to the excess, if any, of the Scheduled Payments (with each
interest portion thereof net of the related Servicing Fee) that would have been
due on the related Due Date in respect of the related Mortgage Loans, over the
net income from such REO Property transferred to the Collection Account for
distribution on such Remittance Date.
(b) On the Remittance Date, the Servicer shall remit in
immediately available funds to the Trustee an amount equal to the aggregate
amount of P&I Advances, if any, to be made in respect of the Mortgage Loans and
REO Properties for the related Remittance Date either (i) from its own funds,
(ii) from the Collection Account, to the extent of funds held therein for future
distribution (in which case, it will cause to be made an appropriate entry in
the records of Collection Account that Amounts Held For Future Distribution have
been, as permitted by this Section 4.01, used by the Servicer in discharge of
any such P&I Advance) or (iii) in the form of any combination of (i) and (ii)
aggregating the total amount of P&I Advances to be made by the Servicer with
respect to the Mortgage Loans and REO Properties. Any Amounts Held For Future
Distribution and so used shall be appropriately reflected in the Servicer's
records and replaced by the Servicer by deposit in the Collection Account on or
before any future Remittance Date to the extent required.
(c) The obligation of the Servicer to make such P&I
Advances is mandatory, notwithstanding any other provision of this Agreement but
subject to (d) below, and, with respect to any Mortgage Loan or REO Property,
shall continue until a Final Recovery Determination in connection therewith or
the removal thereof from coverage under this Agreement, except as otherwise
provided in this Section.
(d) Notwithstanding anything herein to the contrary, no
P&I Advance or Servicing Advance shall be required to be made hereunder by the
Servicer if such P&I Advance or Servicing Advance would, if made, constitute a
Nonrecoverable P&I Advance or Nonrecoverable Advance. The determination by the
Servicer that it has made a Nonrecoverable P&I Advance or a Nonrecoverable
Advance or that any proposed P&I Advance or Servicing Advance, if made, would
constitute a Nonrecoverable P&I Advance or a Nonrecoverable Advance,
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respectively, shall be evidenced by an Officers' Certificate of the Servicer
delivered to the Trustee.
(e) Except as otherwise provided herein, the Servicer
shall be entitled to reimbursement pursuant to Section 3.11 hereof for P&I
Advances and Servicing Advances from recoveries from the related Mortgagor or
from all Liquidation Proceeds and other payments or recoveries (including
Insurance Proceeds and Condemnation Proceeds) with respect to the related
Mortgage Loan.
Section 4.02 Priorities of Distribution.
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(a) On each Distribution Date, the Trustee will make the
disbursements and transfers from available funds then on deposit in the
Distribution Account in the following order of priority:
(i) from the Interest Remittance Amount, in the following
order of priority:
(A) to the Certificate Insurer, the Premium Amount for
such Distribution Date;
(B) concurrently, with equal priority of payment:
(1) payable solely from the Group I Interest
Remittance Amount for that Distribution
Date, to the holders of the Class A-1
Certificates, the Accrued Certificate
Interest and any Unpaid Interest Amounts for
the Class A-1 Certificates, and to the
extent that the Group I Interest Remittance
Amount is less than the Accrued Certificate
Interest and any Unpaid Interest Amounts for
the Class A-1 Certificates, payable from any
Group II Interest Remittance Amount for that
Distribution Date remaining after payment of
the Accrued Certificate Interest, any Unpaid
Interest Amounts and related administrative
fees with respect to the Group II Class A
Certificates, to the holders of the Class
A-1 Certificates, the unpaid portion of the
Accrued Certificate Interest and any Unpaid
Interest Amounts for the Class A-1
Certificates; and
(2) payable solely from the Group II Interest
Remittance Amount for that Distribution
Date, to the holders of the Group II Class A
Certificates, pro rata, the Accrued
Certificate Interest and any Unpaid Interest
Amounts for the Group II Class A
Certificates, and to the extent that the
Group II Interest Remittance Amount is less
than the Accrued Certificate Interest and
any Unpaid Interest Amounts for the Group II
Class A Certificates, payable from any Group
I Interest Remittance Amount for that
Distribution Date remaining after payment of
the Accrued Certificate Interest, any Unpaid
Interest Amounts and related administrative
fees with respect to the Class A-1
Certificates, to the holders of each Class
of the Group II Class A Certificates, pro
rata, the unpaid portion of the Accrued
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Certificate Interest and any Unpaid Interest
Amounts for the Group II Class A
Certificates;
(C) from both the Group I Interest Remittance Amount and
the Group II Interest Remittance Amount to the
Certificate Insurer, the amount of any Reimbursement
Amount then owing to it on account of a prior draw
relating to interest on the Class A-1 or Class A-3
Certificates;
(D) from both the Group I Interest Remittance Amount and
the Group II Interest Remittance Amount to the Class
M-1 Certificates, the Accrued Certificate Interest
for such Class on such Distribution Date;
(E) from both the Group I Interest Remittance Amount and
the Group II Interest Remittance Amount to the Class
M-2 Certificates, the Accrued Certificate Interest
for such class on such Distribution Date;
(F) from both the Group I Interest Remittance Amount and
the Group II Interest Remittance Amount to the Class
M-3 Certificates, the Accrued Certificate Interest
for such Class on such Distribution Date;
(G) from both the Group I Interest Remittance Amount and
the Group II Interest Remittance Amount to the Class
B-1 Certificates, the Accrued Certificate Interest
for such Class on such Distribution Date;
(H) from both the Group I Interest Remittance Amount and
the Group II Interest Remittance Amount to the Class
B-2 Certificates, the Accrued Certificate Interest
for such Class on such Distribution Date; and
(I) from both the Group I Interest Remittance Amount and
the Group II Interest Remittance Amount to the Class
B-3 Certificates, the Accrued Certificate Interest
for such Class on such Distribution Date;
(ii) (x) on each Distribution Date (A) before the Stepdown
Date or (B) with respect to which a Trigger Event is in effect, to the
holders of the Class or Classes of Offered Certificates then entitled
to distributions of principal as set forth below, and to the
Certificate Insurer, from the amounts remaining on deposit in the
Distribution Account after making distributions pursuant to clause (i)
above, an amount equal to the Principal Distribution Amount in the
following order of priority:
(A) concurrently, with equal priority of payment:
(1) to the holders of the Class A-1 Certificates,
the Class A-1 Allocation Percentage of the Principal
Distribution Amount, until the Class Certificate Balance
of the Class A-1 Certificates has been reduced to zero;
and
(2) to the holders of the Group II Class A
Certificates pro rata, the Group II Class A Allocation
Percentage of the Principal Distribution Amount, until the
Class Certificate Balance of each Class of the Group II
Class A Certificates has been reduced to zero, such amount
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to be allocated pro rata to the Class A-2, Class A-3 and
Group II Class A Sequential Certificates, with amounts
allocated to the Group II Class A Sequential Certificates
further allocated first to the Class A-4 Certificates
until those Certificates are reduced to zero and then to
the Class A-5 Certificates until those Certificates are
reduced to zero;
(B) to the Certificate Insurer, the amount of any
Reimbursement Amount then owing to the Certificate
Insurer on account of a prior draw relating to
principal on the Class A-1 or Class A-3 Certificates;
(C) concurrently, with equal priority of payment:
(1) if the Class Certificate Balance of the Class
A-1 Certificates has been reduced to zero, then to the
Holders of the Group II Class A Certificates pro rata, the
amount of any remaining Principal Distribution Amount,
until the Class Certificate Balance of each Class of the
Group II Class A Certificates has been reduced to zero,
such amount to be allocated pro rata to the Class A-2,
Class A-3 and Group II Class A Sequential Certificates,
with amounts allocated to the Group II Class A Sequential
Certificates further allocated first to the Class A-4
Certificates until those Certificates are reduced to zero
and then to the Class A-5 Certificates until those
Certificates are reduced to zero; or
(2) if the Class Certificate Balance of each
Class of the Group II Class A Certificates has been
reduced to zero, then to the Holders of the Class A-1
Certificates, the amount of any remaining Principal
Distribution Amount, until the Class Certificate Balance
of the Class A-1 Certificates has been reduced to zero;
(D) to the Class M-1, Class M-2, Class M-3, Class B-1,
Class B-2 and Class B-3 Certificates, in that order,
until the respective Class Certificate Balances are
reduced to zero;
(y) on each Distribution Date (1) on and after the
Stepdown Date and (2) as long as a Trigger Event is not in effect, to
the holders of the related Class or Classes of Offered Certificates
then entitled to distribution of principal, from amounts remaining on
deposit in the Distribution Account after making distributions pursuant
to clause (i) above, an amount equal to, in the aggregate, the
Principal Distribution Amount in the following amounts and order of
priority:
(A) concurrently, with equal priority of payment:
(1) to the holders of the Class A-1 Certificates,
the Class A-1 Allocation Percentage of the lesser of the
Principal Distribution Amount and the Class A Principal
Distribution Amount, until the Class Certificate Balance
of the Class A-1 Certificates has been reduced to zero;
and
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(2) to the holders of the Group II Class A
Certificates, the Group II Class A Allocation Percentage
of the lesser of the Principal Distribution Amount and the
Class A Principal Distribution Amount, until the Class
Certificate Balance of each Class of the Group II Class A
Certificates has been reduced to zero, such amount to be
allocated pro rata to the Class A-2, Class A-3 and Group
II Class A Sequential Certificates, with amounts allocated
to the Group II Class A Sequential Certificates further
allocated first to the Class A-4 Certificates until those
Certificates are reduced to zero and then to the Class A-5
Certificates until those Certificates are reduced to zero;
(B) to the Certificate Insurer, the amount of any
Reimbursement Amount then owing to the Certificate
Insurer on account of a prior draw relating to
principal on the Class A-1 or Class A-3 Certificates;
(C) concurrently, with equal priority of payment:
(1) if the Class Certificate Balance of the Class
A-1 Certificates has been reduced to zero, then to the
holders of the Group II Class A Certificates pro rata, any
remaining amounts allocable but not required to be
distributed pursuant to clauses (A)(1) or (B) of this
subsection (y), until the Class Certificate Balance of
each Class of the Group II Class A Certificates has been
reduced to zero, such amount to be allocated pro rata to
the Class A-2, Class A-3 and Group II Class A Sequential
Certificates, with amounts allocated to the Group II Class
A Sequential Certificates further allocated first to the
Class A-4 Certificates until those Certificates are
reduced to zero and then to the Class A-5 Certificates
until those Certificates are reduced to zero; or
(2) if the Class Certificate Balance of each
Class of the Group II Class A Certificates has been
reduced to zero, then to the holders of the Class A-1
Certificates, any remaining amounts allocable but not
required to be distributed pursuant to clauses (A)(2) or
(B) of this subsection (y), until the Class Certificate
Balance of the Class A-1 Certificates has been reduced to
zero;
(D) to the Class M-1 Certificates, the lesser of the
remaining Principal Distribution Amount and the Class
M-1 Principal Distribution Amount, until the Class
Certificate Balance thereof has been reduced to zero;
(E) to the Class M-2 Certificates, the lesser of the
remaining Principal Distribution Amount and the Class
M-2 Principal Distribution Amount, until the Class
Certificate Balance thereof has been reduced to zero;
(F) to the Class M-3 Certificates, the lesser of the
remaining Principal Distribution Amount and the Class
M-3 Principal Distribution Amount, until the Class
Certificate Balance thereof has been reduced to zero;
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(G) to the Class B-1 Certificates, the lesser of the
remaining Principal Distribution Amount and the Class
B-1 Principal Distribution Amount, until the Class
Certificate Balance thereof has been reduced to zero;
(H) to the Class B-2 Certificates, the lesser of the
remaining Principal Distribution Amount and the Class
B-2 Principal Distribution Amount, until the Class
Certificate Balance thereof has been reduced to zero;
and
(I) to the Class B-3 Certificates, the lesser of the
remaining Principal Distribution Amount and the Class
B-3 Principal Distribution Amount, until the Class
Certificate Balance thereof has been reduced to zero;
(iii) any amount remaining in the Distribution Account
after the distributions in clauses (i) and (ii) above, plus as
specifically indicated below, from amounts on deposit in the Excess
Reserve Fund Account, shall be distributed in the following order of
priority:
(A) to the Certificate Insurer, to the extent of any
remaining Reimbursement Amount then owing to it;
(B) to the holders of the Class M-1 Certificates, any
Unpaid Interest Amounts for such Class;
(C) to the holders of the Class M-1 Certificates, any
Unpaid Realized Loss Amount for such Class;
(D) to the holders of the Class M-2 Certificates, any
Unpaid Interest Amounts for such Class;
(E) to the holders of the Class M-2 Certificates, any
Unpaid Realized Loss Amount for such Class;
(F) to the holders of the Class M-3 Certificates, any
Unpaid Interest Amounts for such Class;
(G) to the holders of the Class M-3 Certificates, any
Unpaid Realized Loss Amount for such Class;
(H) to the holders of the Class B-1 Certificates, any
Unpaid Interest Amounts for such Class;
(I) to the holders of the Class B-1 Certificates, any
Unpaid Realized Loss Amount for such Class;
(J) to the holders of the Class B-2 Certificates, any
Unpaid Interest Amounts for such Class;
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(K) to the holders of the Class B-2 Certificates, any
Unpaid Realized Loss Amount for such Class;
(L) to the holders of the Class B-3 Certificates, any
Unpaid Interest Amounts for such Class;
(M) to the holders of the Class B-3 Certificates, any
Unpaid Realized Loss Amount for such Class;
(N) to the Excess Reserve Fund Account, the amount of any
Basis Risk Payment for such Distribution Date;
(O) from amounts on deposit in the Excess Reserve Fund
Account (not including any Interest Rate Cap Payment
included in that account) with respect to such
Distribution Date, an amount equal to any Basis Risk
CarryForward Amount for such Distribution Date in the
same order and priority in which Accrued Certificate
Interest is allocated among those Classes of
Certificates;
(P) from any Interest Rate Cap Payment on deposit in the
Excess Reserve Fund Account with respect to that
Distribution Date, an amount equal to any unpaid
remaining Basis Risk CarryForward Amount with respect
to the Certificates other than the Class A-1
Certificates, for that Distribution Date (after
giving effect to distributions pursuant to clause (O)
above) in the same order and priority in which
Accrued Certificate Interest is allocated among those
Classes of Certificates;
(Q) to the holders of the Class P Certificates, the
outstanding principal balance thereof, if any, and to
the holders of the Class X Certificates, the
remainder of the Class X Distributable Amount not
distributed pursuant to Sections 4.02(a)(iii)(A)-(O)
(to the extent stated in clause (i) of the definition
of Class X Distributable Amount, as interest, and to
the extent stated in clause (ii) of the definition of
Class X Distributable Amount, as principal); and
(R) to the holders of the Class R Certificates, any
remaining amount.
(b) On each Distribution Date, all amounts representing
Prepayment Charges from the Mortgage Loans received during the related
Prepayment Period will be distributed to the holders of the Class P
Certificates.
(c) On the September 2003, October 2003 and November 2003
Distribution Dates, the Trustee shall transfer from the Capitalized Interest
Account to the Distribution Account the Capitalized Interest Requirement, if
any, for such Distribution Date.
(d) On the Distribution Date following either the final
Subsequent Transfer Date or November 24, 2003, whichever date is earlier, any
amounts remaining in the Capitalized Interest Account and all Pre-Funding
Earnings in the Pre-Funding Accounts, after taking into account the transfers in
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respect of the Distribution Date described in clause (c) above, shall be paid by
the Trustee to the Unaffiliated Seller.
(e) On each Subsequent Transfer Date, the Unaffiliated
Seller shall instruct in writing the Trustee to withdraw from each of the
Pre-Funding Accounts an amount equal to 100% of the aggregate Stated Principal
Balances as of the related Subsequent Cut-off Date of the Subsequent Mortgage
Loans sold to the Trust Fund on such Subsequent Transfer Date and pay such
amount to or upon the order of the Unaffiliated Seller upon satisfaction of the
conditions set forth in Section 2.01(c) with respect to such transfer. The
Trustee may conclusively rely on such written instructions from the Unaffiliated
Seller.
(f) If the Pre-Funding Amount available in either
Pre-Funding Account (exclusive of Pre-Funding Earnings) has been reduced to
$100,000 or less by the close of business on October 1, 2003 then, on the
October 27, 2003 Distribution Date, after giving effect to any reductions in
such Pre-Funding Amount on such date, the Trustee shall withdraw from the
related Pre-Funding Account on such date and deposit in the Distribution Account
the amount on deposit in such Pre-Funding Account other than any Pre-Funding
Earnings; if the Pre-Funding Amount available in either Pre-Funding Account has
not been reduced to zero by the close of business on November 24, 2003, the
Trustee shall withdraw from each Pre-Funding Account the amount on deposit
therein, other than the Pre-Funding Earnings, and deposit such amount on the
November 25, 2003 Distribution Date into the Distribution Account. Each amount
deposited into the Distribution Account pursuant to the preceding sentence from
the Group I Pre-Funding Account shall be distributed to the Holders of the Class
A-1, Class M and Class B Certificates, pro rata; each amount deposited into the
Distribution Account pursuant to the preceding sentence from the Group II
Pre-Funding Account shall be distributed to the Holders of the Group II Class A,
Class M and Class B Certificates, pro rata, in each case, based on their
relative Class Certificate Balances immediately prior to the related
Distribution Date, as a separate payment of principal, on the related
Distribution Date.
(g) On any Distribution Date, any Relief Act Shortfalls
and Net Prepayment Interest Shortfalls for such Distribution Date will be
allocated as a reduction in the following order:
(1) First, to the amount of interest payable to the Class
X Certificates; and
(2) Second, pro rata, as a reduction of the Accrued
Certificate Interest for the Class A-1, Class A-2, Class A-3, Class
A-4, Class A-5, Class M-1, Class M-2, Class M-3, Class B-1, Class B-2
and Class B-3 Certificates, based on the amount of interest to which
such Classes would otherwise be entitled.
Section 4.03 Monthly Statements to Certificateholders.
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(a) Not later than each Distribution Date, the Trustee
shall make available to each Certificateholder, the Servicer, the Depositor, the
Unaffiliated Seller, the Certificate Insurer and each Rating Agency a statement
setting forth with respect to the related distribution:
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(i) the amount thereof allocable to principal, separately
identifying the aggregate amount of any Principal Prepayments and
Liquidation Proceeds included therein;
(ii) the amount thereof allocable to interest, any Unpaid
Interest Amounts included in such distribution and any remaining Unpaid
Interest Amounts after giving effect to such distribution, any Basis
Risk CarryForward Amount for such Distribution Date and the amount of
all Basis Risk CarryForward Amount covered by withdrawals from the
Excess Reserve Fund Account on such Distribution Date;
(iii) if the distribution to the Holders of such Class of
Certificates is less than the full amount that would be distributable
to such Holders if there were sufficient funds available therefor, the
amount of the shortfall and the allocation thereof as between principal
and interest, including any Basis Risk CarryForward Amount not covered
by amounts in the Excess Reserve Fund Account;
(iv) the Class Certificate Balance of each Class of
Certificates after giving effect to the distribution of principal on
such Distribution Date;
(v) the Pool Stated Principal Balance for the following
Distribution Date;
(vi) the amount of the Servicing Fees paid to or retained
by the Servicer or Subservicer (with respect to the Subservicers, in
the aggregate) with respect to such Distribution Date;
(vii) the Pass-Through Rate for each such Class of
Certificates with respect to such Distribution Date;
(viii) the amount of Advances included in the distribution
on such Distribution Date and the aggregate amount of Advances reported
by the servicer as outstanding as of the close of business on such
Distribution Date;
(ix) the number and aggregate Scheduled Principal Balances
of Mortgage Loans (1) as to which the Scheduled Payment is delinquent
31 to 60 days, 61 to 90 days and 91 or more days, (2) that have become
REO Property, (3) that are in foreclosure and (4) that are in
bankruptcy, in each case as of the close of business on the last
Business Day of the immediately preceding month;
(x) with respect to any Mortgage Loan that became an REO
Property during the preceding calendar month, the loan number and
Stated Principal Balance of such Mortgage Loan as of the close of
business on the Determination Date preceding such Distribution Date and
the date of acquisition thereof;
(xi) the total number and principal balance of any REO
Properties (and market value, if available) as of the close of business
on the Determination Date preceding such Distribution Date;
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(xii) whether a Trigger Event has occurred and is
continuing (including the calculation of thereof and the aggregate
outstanding balance of all 60+ Day Delinquent Loans);
(xiii) the amount on deposit in the Excess Reserve Fund
Account (after giving effect to distributions on such Distribution
Date);
(xiv) the aggregate amount of Applied Realized Loss Amounts
incurred during the preceding calendar month and aggregate Applied
Realized Loss Amounts through such Distribution Date;
(xv) the amount of any Net Monthly Excess Cash Flow on
such Distribution Date and the allocation thereof to the
Certificateholders with respect to Applied Realized Losses and Unpaid
Interest Amounts;
(xvi) the Subordinated Amount and Required Subordinated
Amount;
(xvii) the Interest Remittance Amount, the Principal
Remittance Amount and the Prepayment Charges remitted by Servicer with
respect to that Distribution Date;
(xviii) the Pre-Funded Amount as of the end of the prior Due
Period;
(xix) the amount of any principal prepayment on the
Certificates resulting from the application of unused moneys in the
Pre-Funding Accounts;
(xx) the Class A-1 Deficiency, the Class A-3 Deficiency
and the Insured Payment for such Distribution Date;
(xxi) the Reimbursement Amount immediately prior to such
Distribution Date, and the amount of any payments to the Certificate
Insurer on account thereof on such Distribution Date; and
(xxii) the Interest Rate Cap Payment, if any, for such
Distribution Date.
(b) The Trustee's responsibility for providing the above
statement is limited to the availability, timeliness and accuracy of the
information derived from the Servicer pursuant to Section 4.03(d) below or, in
the case of the Reimbursement Amount, from the Certificate Insurer. The Trustee
will provide the above statement via the Trustee's internet website, except that
the Trustee shall deliver a hard copy of such statement to the Certificate
Insurer on each Distribution Date. The Trustee's website will initially be
located at https://www.corporatetrust.db.com and assistance in using the website
can be obtained by calling the Trustee's investor relations desk at
1-800-735-7777. A paper copy of the statement will also be made available upon
request.
(c) Within a reasonable period of time after the end of
each calendar year, the Trustee shall cause to be furnished to each Person who
at any time during the calendar year was a Certificateholder, a statement
containing the information set forth in clauses (a)(i), (a)(ii) and (a)(vii) of
this Section 4.03 aggregated for such calendar year or applicable portion
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thereof during which such Person was a Certificateholder. Such obligation of the
Trustee shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Trustee pursuant to any
requirements of the Code as from time to time in effect.
(d) Not later than the Determination Date, the Servicer
shall furnish to the Trustee a monthly remittance advice statement containing
such information as shall be reasonably requested by the Trustee to provide the
reports required by Section 4.03(a) as to the accompanying remittance and the
period ending on the close of business on the last Business Day of the
immediately preceding month.
The Servicer shall furnish to the Trustee an individual loan
accounting report, as of the last Business Day of each month, to document
Mortgage Loan payment activity on an individual Mortgage Loan basis. With
respect to each month, the corresponding individual loan accounting report (in
electronic format) shall be received by the Trustee no later than the related
Determination Date, which report shall contain the following:
(i) with respect to each Scheduled Payment, the amount of
such remittance allocable to principal (including a separate breakdown
of any Principal Prepayment, including the date of such prepayment, and
any prepayment penalties or premiums, along with a detailed report of
interest on principal prepayment amounts remitted in accordance with
Section 3.25);
(ii) with respect to each Scheduled Payment, the amount of
such remittance allocable to interest and assumption fees;
(iii) the amount of servicing compensation received by the
Servicer during the prior distribution period;
(iv) the individual and aggregate Stated Principal Balance
of the Mortgage Loans (combined and for each of the Group I and Group
II Mortgage Loans);
(v) the individual and aggregate Scheduled Principal
Balances of the Mortgage Loans (combined and for each of the Group I
and Group II Mortgage Loans);
(vi) the aggregate of any expenses reimbursed to the
Servicer during the prior distribution period pursuant to Section 3.05;
(vii) the number and aggregate Scheduled Principal Balances
of Group I Mortgage Loans (a) as to which the Scheduled Payment is
delinquent (1) 31 to 60 days, (2) 61 to 90 days and (3) 91 days or
more; (b) as to which foreclosure has commenced; (c) as to which REO
Property has been acquired and (d) that are in bankruptcy; and
(viii) the number and aggregate Scheduled Principal Balances
of Group II Mortgage Loans (a) as to which the Scheduled Payment is
delinquent (1) 31 to 60 days, (2) 61 to 90 days and (3) 91 days or
more; (b) as to which foreclosure has commenced; (c) as to which REO
Property has been acquired and (d) that are in bankruptcy.
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Section 4.04 Certain Matters Relating to the
-------------------------------
Determination of LIBOR.
----------------------
Until all of the LIBOR Certificates are paid in full, the
Trustee will at all times retain at least four Reference Banks for the purpose
of determining LIBOR with respect to each Interest Determination Date. The
Servicer initially shall designate the Reference Banks. Each "Reference Bank"
shall be a leading bank engaged in transactions in Eurodollar deposits in the
international Eurocurrency market, shall not control, be controlled by, or be
under common control with, the Trustee and shall have an established place of
business in London. If any such Reference Bank should be unwilling or unable to
act as such or if the Servicer should terminate its appointment as Reference
Bank, the Servicer shall promptly appoint or cause to be appointed another
Reference Bank. The Trustee shall have no liability or responsibility to any
Person for (i) the selection of any Reference Bank for purposes of determining
LIBOR or (ii) any inability to retain at least four Reference Banks which is
caused by circumstances beyond its reasonable control.
The Pass-Through Rate for each Class of LIBOR Certificates for
each Interest Accrual Period shall be determined by the Trustee on each LIBOR
Determination Date so long as the LIBOR Certificates are outstanding on the
basis of LIBOR and the respective formulae appearing in footnotes corresponding
to the LIBOR Certificates in the table relating to the Certificates in the
Preliminary Statement. The Trustee shall not have any liability or
responsibility to any Person for its inability, following a good-faith
reasonable effort, to obtain quotations from the Reference Banks or to determine
the arithmetic mean referred to in the definition of LIBOR, all as provided for
in this Section 4.04 and the definition of LIBOR. The establishment of LIBOR and
each Pass-Through Rate for the LIBOR Certificates by the Trustee shall (in the
absence of manifest error) be final, conclusive and binding upon each Holder of
a Certificate and the Trustee.
Section 4.05 The Certificate Insurance Policy.
--------------------------------
(a) Within two (2) days following each Remittance Date,
the Trustee shall determine with respect to the immediately following
Distribution Date, the amount to be on deposit in the Distribution Account on
such Distribution Date as a result of the (i) Servicer's remittance of the
Interest Remittance Amount and the Principal Remittance Amount on the related
Remittance Date, and (ii) any transfers to the Distribution Account made from
the Capitalized Interest Account and/or the Pre-Funding Account relating to such
Distribution Date pursuant to Section 4.02 hereof, excluding the amount of any
Insured Payment.
(b) If on any Distribution Date there is a Class A-1
Deficiency and/or Class A-3 Deficiency, the Trustee shall complete a Notice in
the form of Exhibit A to the Certificate Insurance Policy and submit such notice
to the Certificate Insurer no later than 12:00 noon New York City time on the
second Business Day preceding such Distribution Date as a claim for an Insured
Payment in an amount equal to such Class A-1 Deficiency and/or Class A-3
Deficiency.
(c) The Trustee shall establish a separate Eligible
Account for the benefit of Holders of the Class A-1 Certificates, the Class A-3
Certificates and the Certificate Insurer, referred to herein as the "Insurance
Payment Account," over which the Trustee shall have exclusive control and sole
right of withdrawal. The Trustee shall deposit upon receipt any amount paid
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under the Certificate Insurance Policy in the Insurance Payment Account and
distribute such amount only for purposes of payment to the Class A-1
Certificateholders and/or Class A-3 Certificateholders, as applicable, of the
Insured Amount and such amount may not be applied to satisfy any costs, expenses
or liabilities of the Servicer, the Trustee or the Trust Fund. Amounts paid
under the Certificate Insurance Policy, to the extent needed to pay the Insured
Amount, shall be transferred to the Distribution Account on the related
Distribution Date and disbursed by the Trustee to the Class A-1
Certificateholders and Class A-3 Certificateholders in accordance with Section
4.02. It shall not be necessary for such payments to be made by checks or wire
transfers separate from the checks or wire transfers used to pay other
distributions to the Class A-1 Certificateholders and Class A-3
Certificateholders with other funds available to make such payment. However, the
amount of any payment of principal or of interest on the Class A-1 Certificates
or Class A-3 Certificates to be paid from funds transferred from the Insurance
Payment Account shall be noted as provided in paragraph (d) below in the
Certificate Register and in the statement to be furnished to Holders of such
Certificates pursuant to Section 4.03(a). Funds held in the Insurance Payment
Account shall not be invested. Any funds remaining in the Insurance Payment
Account on the first Business Day following a Distribution Date shall be
returned to the Certificate Insurer pursuant to the written instructions of the
Certificate Insurer by the end of such Business Day.
(d) The Trustee shall keep a complete and accurate record
of the amount of interest and principal paid in respect of any Class A-1
Certificate or Class A-3 Certificate from moneys received under the Certificate
Insurance Policy. The Certificate Insurer shall have the right to inspect such
records at reasonable times during normal business hours upon one Business Day's
prior notice to the Trustee.
(e) In the event that the Trustee has received a
certified copy of an order of the appropriate court that any Insured Payment has
been voided in whole or in part as a preference payment under applicable
bankruptcy law, the Trustee shall so notify the Certificate Insurer, shall
comply with the provisions of the Certificate Insurance Policy to obtain payment
by the Certificate Insurer of such voided Insured Payment, and shall, at the
time it provides notice to the Certificate Insurer, notify, by mail to the Class
A-1 and Class A-3 Certificateholders of the affected Certificates that, in the
event any Class A-1 or Class A-3 Certificateholder's Insured Payment is so
recovered, such Class A-1 or Class A-3 Certificateholder, as applicable, will be
entitled to payment pursuant to the Certificate Insurance Policy, a copy of
which shall be made available through the Trustee, the Certificate Insurer or
the Certificate Insurer's fiscal agent, if any, and the Trustee shall furnish to
the Certificate Insurer or its fiscal agent, if any, its records evidencing the
payments which have been made by the Trustee and subsequently recovered from the
Class A-1 or Class A-3 Certificateholders, and dates on which such payments were
made.
(f) The Trustee shall promptly notify the Certificate
Insurer of any proceeding or the institution of any action, of which a
Responsible Officer of the Trustee has actual knowledge, seeking the avoidance
as a preferential transfer under applicable bankruptcy, insolvency, receivership
or similar law (a "Preference Claim") of any distribution made with respect to
the Class A-1 or Class A-3 Certificates. Each Class A-1 and Class A-3
Certificateholder, by its purchase of Class A-1 or Class A-3 Certificates, the
Servicer and the Trustee agree that the Certificate Insurer (so long as no
Certificate Insurer Default exists) may at any time during the continuation of
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any proceeding relating to a Preference Claim direct all matters relating to
such Preference Claim, including, without limitation, (i) the direction of any
appeal of any order relating to such Preference Claim and (ii) the posting of
any surety, supersedes or performance bond pending any such appeal. In addition
and without limitation of the foregoing, the Certificate Insurer shall be
subrogated to, and each Class A-1 and Class A-3 Certificateholder, the Servicer
and the Trustee hereby delegate and assign to the Certificate Insurer, to the
fullest extent permitted by law, the rights of the Trustee, the Servicer and
each Class A-1 and Class A-3 Certificateholder in the conduct of any such
Preference Claim, including, without limitation, all rights of any party to any
adversary proceeding or action with respect to any court order issued in
connection with any such Preference Claim.
(g) The Trustee shall, upon retirement of the Class A-1
and Class A-3 Certificates, furnish to the Certificate Insurer a notice of such
retirement, and, upon retirement of the Class A-1 and Class A-3 Certificates and
the expiration of the term of the Certificate Insurance Policy, surrender the
Certificate Insurance Policy to the Certificate Insurer for cancellation.
Section 4.06 Effect of Payments by the Certificate
-------------------------------------
Insurer; Subrogation.
--------------------
Anything herein to the contrary notwithstanding, any payment
with respect to principal of or interest on the Class A-1 or Class A-3
Certificates which is made with moneys received pursuant to the terms of the
Certificate Insurance Policy shall not be considered payment of the Class A-1 or
Class A-3 Certificates from the Trust Fund. The Depositor, the Servicer and the
Trustee acknowledge, and each Holder by its acceptance of a Class A-1 or Class
A-3 Certificate agrees, that without the need for any further action on the part
of the Certificate Insurer, the Depositor, the Servicer, the Trustee or the
Certificate Registrar (a) to the extent the Certificate Insurer makes payments,
directly or indirectly, on account of principal of or interest on the Class A-1
or Class A-3 Certificates to the Holders of such Class A-1 or Class A-3
Certificates, the Certificate Insurer will be fully subrogated to, and each
Class A-1 and Class A-3 Certificateholder, the Servicer and the Trustee hereby
delegate and assign to the Certificate Insurer, to the fullest extent permitted
by law, the rights of such Holders to receive such principal and interest from
the Trust Fund, including, without limitation, any amounts due to the Class A-1
or Class A-3 Certificateholders in respect of securities law violations arising
from the offer and sale of the Class A-1 or Class A-3 Certificates, and (b) the
Certificate Insurer shall be paid such amounts from the sources and in the
manner provided herein for the payment of such amounts and as provided in the
Insurance and Indemnity Agreement. The Trustee and the Servicer shall cooperate
in all respects with any reasonable request by the Certificate Insurer for
action to preserve or enforce the Certificate Insurer's rights or interests
under this Agreement without limiting the rights or affecting the interests of
the Holders as otherwise set forth herein.
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ARTICLE V
THE CERTIFICATES
Section 5.01 The Certificates.
----------------
The Certificates shall be substantially in the forms attached hereto as
exhibits. The Certificates shall be issuable in registered form, in the minimum
denominations, integral multiples in excess thereof (except that one Certificate
in each Class may be issued in a different amount which must be in excess of the
applicable minimum denomination) and aggregate denominations per Class set forth
in the Preliminary Statement.
The Depositor hereby directs the Trustee to register the Class X and
the Class P Certificates initially to "CDC Mortgage Capital Inc." and then on
the Closing Date as follows: "Deutsche Bank National Trust Company, as Indenture
Trustee on behalf of the Noteholders of the CDC Mortgage Capital Inc. NIM Trust
2003-HE3N", and to deliver such Class X and Class P Certificates on the NIM
Closing Date to Deutsche Bank National Trust Company, as trustee of the NIM
Trust.
Subject to Section 9.02 respecting the final distribution on the
Certificates, on each Distribution Date the Trustee shall make distributions to
each Certificateholder of record on the preceding Record Date either (x) by wire
transfer in immediately available funds to the account of such holder at a bank
or other entity having appropriate facilities therefor, if such Holder has so
notified the Trustee at least five Business Days prior to the related Record
Date or (y) by check mailed by first class mail to such Certificateholder at the
address of such holder appearing in the Certificate Register.
The Certificates shall be executed by manual or facsimile signature on
behalf of the Trustee by an authorized officer. Certificates bearing the manual
or facsimile signatures of individuals who were, at the time 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 countersignature and delivery of any 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 countersigned by the Trustee by manual signature, 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 shall be dated the date of their countersignature.
On the Closing Date, the Trustee shall countersign the Certificates to be issued
at the direction of the Depositor, or any affiliate thereof.
The Depositor shall provide, or cause to be provided, to the Trustee on
a continuous basis, an adequate inventory of Certificates to facilitate
transfers.
Section 5.02 Certificate Register; Registration of Transfer and
--------------------------------------------------
Exchange of Certificates.
------------------------
(a) The Trustee shall maintain, or cause to be maintained in
accordance with the provisions of Section 5.06, a Certificate Register for the
Trust Fund in which, subject to the provisions of subsections (b) and (c)
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below and to such reasonable regulations as it may prescribe, the Trustee shall
provide for the registration of Certificates and of transfers and exchanges of
Certificates as herein provided. Upon surrender for registration of transfer of
any Certificate, the Trustee shall execute and deliver, in the name of the
designated transferee or transferees, one or more new Certificates of the same
Class and aggregate Percentage Interest.
At the option of a Certificateholder, Certificates may be exchanged for
other Certificates of the same Class in authorized denominations and evidencing
the same aggregate Percentage Interest upon surrender of the Certificates to be
exchanged at the office or agency of the Trustee. Whenever any Certificates are
so surrendered for exchange, the Trustee shall execute, authenticate, and
deliver the Certificates 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 duly executed by the holder thereof or his
attorney duly authorized in writing.
No service charge to the Certificateholders shall be made for any
registration of transfer or exchange of Certificates, but payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates may be required.
All Certificates surrendered for registration of transfer or exchange
shall be cancelled and subsequently destroyed by the Trustee in accordance with
the Trustee's customary procedures.
(b) No transfer of a Private Certificate shall be made unless such
transfer is made pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws or is exempt from the
registration requirements under said Act and such state securities laws. Except
with respect to the transfer of the Class X and Class P Certificates to the NIMs
Trust on the Closing Date, in the event that a transfer is to be made in
reliance upon an exemption from the Securities Act and such laws, in order to
assure compliance with the Securities Act and such laws, the Certificateholder
desiring to effect such transfer shall certify to the Trustee in writing the
facts surrounding the transfer in substantially the form set forth in Exhibit I
(the "Transferor Certificate") and either (i) there shall be delivered to the
Trustee a letter in substantially the form of Exhibit J (the "Rule 144A Letter")
or (ii) there shall be delivered to the Trustee at the expense of the transferor
an Opinion of Counsel that such transfer may be made without registration under
the Securities Act. The Depositor shall provide to any Holder of a Private
Certificate and any prospective transferee designated by any such Holder,
information regarding the related Certificates and the Mortgage Loans and such
other information as shall be necessary to satisfy the condition to eligibility
set forth in Rule 144A(d)(4) for transfer of any such Certificate without
registration thereof under the Securities Act pursuant to the registration
exemption provided by Rule 144A. The Trustee and the Servicer shall cooperate
with the Depositor in providing the Rule 144A information referenced in the
preceding sentence, including providing to the Depositor such information
regarding the Certificates, the Mortgage Loans and other matters regarding the
Trust Fund as the Depositor shall reasonably request to meet its obligation
under the preceding sentence. Each Holder of a Private Certificate desiring to
effect such transfer shall, and does hereby agree to, indemnify the Trustee and
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the Depositor and the Servicer against any liability that may result if the
transfer is not so exempt or is not made in accordance with such federal and
state laws.
Except with respect to the transfer of the Class X and Class P
Certificates to the NIMs Trust on the Closing Date, no transfer of an
ERISA-Restricted Certificate shall be made unless the Trustee shall have
received a representation letter from the transferee in substantially the form
of Exhibit J, to the effect that such transferee is not an employee benefit plan
or arrangement subject to Title I of ERISA, Section 4975 of the Code or any
Federal, state or local law ("Similar Law") materially similar to the foregoing
provisions of ERISA or the Code, nor a person acting on behalf of any such plan
or arrangement nor using the assets of any such plan or arrangement to effect
such transfer. For purposes of the preceding sentence, with respect to an
ERISA-Restricted Certificate that is not a Private Certificate, in the event the
representation letter referred to in the preceding sentence is not furnished,
such representation shall be deemed to have been made to the Trustee by the
transferee's (including an initial acquiror's) acceptance of the
ERISA-Restricted Certificates. In the event that such representation is
violated, such attempted transfer or acquisition shall be void and of no effect.
To the extent permitted under applicable law (including, but not
limited to, ERISA), the Trustee shall be under no liability to any Person for
any registration of transfer of any ERISA-Restricted Certificate that is in fact
not permitted by this Section 5.02(b) or for making any payments due on such
Certificate to the Holder thereof or taking any other action with respect to
such Holder under the provisions of this Agreement so long as the transfer was
registered by the Trustee in accordance with the foregoing requirements.
(c) Each Person who has or who acquires any Ownership Interest in
a Residual Certificate shall be deemed by the acceptance or acquisition of such
Ownership Interest to have agreed to be bound by the following provisions, and
the rights of each Person acquiring any Ownership Interest in a Residual
Certificate are expressly subject to the following provisions:
(i) Each Person holding or acquiring any Ownership
Interest in a Residual Certificate shall be a Permitted Transferee and
shall promptly notify the Trustee of any change or impending change in
its status as a Permitted Transferee.
(ii) No Ownership Interest in a Residual Certificate may
be registered on the Closing Date or thereafter transferred, and the
Trustee shall not register the Transfer of any Residual Certificate
unless, in addition to the certificates required to be delivered to the
Trustee under subparagraph (b) above, the Trustee shall have been
furnished with an affidavit (a "Transfer Affidavit") of the initial
owner or the proposed transferee in the form attached hereto as Exhibit
H.
(iii) Each Person holding or acquiring any Ownership
Interest in a Residual Certificate shall agree (A) to obtain a Transfer
Affidavit from any other Person to whom such Person attempts to
Transfer its Ownership Interest in a Residual Certificate, (B) to
obtain a Transfer Affidavit from any Person for whom such Person is
acting as nominee, trustee or agent in connection with any Transfer of
a Residual Certificate, (C) not to Transfer its Ownership Interest in a
Residual Certificate or to cause the Transfer of an Ownership Interest
in a Residual Certificate to any other Person if
101
it has actual knowledge that such Person (i) is not a Permitted
Transferee or that such Transfer Affidavit is false, (ii) if such
transfer is for the purpose of impeding the assessment or collection of
tax, (iii) if it has actual knowledge or reason to know that the
proposed transferee would be unwilling or unable to pay taxes
attributed to the Residual Certificate or (iv) if it has actual
knowledge or reason to know that the proposed transferee will not honor
the restrictions on subsequent transfers of the Residual Certificate
set forth in this Section 5.02(c) and in the Transfer Affidavit, (D) to
conduct a reasonable investigation of the financial condition of the
proposed transferee and transfer its Ownership Interest in the Residual
Certificate only if, as a result of such investigation, it concludes
that the proposed transferee has historically paid its debts as they
came due and will continue to pay its debts as they come due in the
future, and (E) not to cause income from its Ownership Interest in a
Residual Certificate to be attributable to a foreign permanent
establishment or fixed base (within the meaning of an applicable income
tax treaty) of the Person or another U.S. taxpayer.
(iv) Any attempted or purported Transfer of any Ownership
Interest in a Residual Certificate in violation of the provisions of
this Section 5.02(c) shall be absolutely null and void and shall vest
no rights in the purported Transferee. If any purported transferee
shall become a Holder of a Residual Certificate in violation of the
provisions of this Section 5.02(c), then the last preceding Permitted
Transferee shall be restored to all rights as Holder thereof
retroactive to the date of registration of Transfer of such Residual
Certificate. The Trustee shall be under no liability to any Person for
any registration of Transfer of a Residual Certificate that is in fact
not permitted by Section 5.02(b) and this Section 5.02(c) or for making
any payments due on such Certificate to the Holder thereof or taking
any other action with respect to such Holder under the provisions of
this Agreement so long as the Transfer was registered after receipt of
the related Transfer Affidavit, Transferor Certificate and the Rule
144A Letter. The Trustee shall be entitled but not obligated to recover
from any Holder of a Residual Certificate that was in fact not a
Permitted Transferee at the time it became a Holder or, at such
subsequent time as it became other than a Permitted Transferee, all
payments made on such Residual Certificate at and after either such
time. Any such payments so recovered by the Trustee shall be paid and
delivered by the Trustee to the last preceding Permitted Transferee of
such Certificate.
(v) The Depositor shall use its best efforts to make
available, upon receipt of written request from the Trustee, all
information necessary to compute any tax imposed under Section 860E(e)
of the Code as a result of a Transfer of an Ownership Interest in a
Residual Certificate to any Holder who is not a Permitted Transferee.
The restrictions on Transfers of a Residual Certificate set forth in
this Section 5.02(c) shall cease to apply (and the applicable portions of the
legend on a Residual Certificate may be deleted) with respect to Transfers
occurring after delivery to the Trustee of an Opinion of Counsel, which Opinion
of Counsel shall not be an expense of the Trust Fund, the Trustee, the
Unaffiliated Seller or the Servicer, to the effect that the elimination of such
restrictions will not cause the transfer to be disregarded under Treasury
Regulation 1.860E-1(c), cause the Trust Fund hereunder to fail to qualify as a
REMIC at any time that the Certificates are outstanding or result in the
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imposition of any tax on the Trust Fund, a Certificateholder or another Person.
Each Person holding or acquiring any Ownership Interest in a Residual
Certificate hereby consents to any amendment of this Agreement which, based on
an Opinion of Counsel furnished to the Trustee, is reasonably necessary (a) to
ensure that the record ownership of, or any beneficial interest in, a Residual
Certificate is not transferred, directly or indirectly, to a Person that is not
a Permitted Transferee and (b) to provide for a means to compel the Transfer of
a Residual Certificate which is held by a Person that is not a Permitted
Transferee to a Holder that is a Permitted Transferee.
(d) The preparation and delivery of all certificates and opinions
referred to above in this Section 5.02 in connection with transfer shall be at
the expense of the parties to such transfers.
(e) Except as provided below, the Book-Entry Certificates shall at
all times remain registered in the name of the Depository or its nominee and at
all times: (i) registration of the Certificates 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 Book-Entry Certificates; (iii) ownership and
transfers of registration of the Book-Entry Certificates on the books of the
Depository shall be governed by applicable rules established by the Depository;
(iv) the Depository may collect its usual and customary fees, charges and
expenses from its Depository Participants; (v) the Trustee shall deal with the
Depository, Depository Participants and indirect participating firms as
representatives of the Certificate Owners of the Book-Entry Certificates for
purposes of 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; and
(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.
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.
If (x) (i) the Depository or the Depositor advises the Trustee in
writing that the Depository is no longer willing or able to properly discharge
its responsibilities as Depository, and (ii) the Trustee or the Depositor is
unable to locate a qualified successor, (y) the Depositor 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 at least 51% of the Certificate Balance of 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,
fully-registered Certificates (the "Definitive Certificates") to Certificate
Owners requesting the same. Upon surrender to the Trustee of the related Class
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of Certificates by the Depository, accompanied by the instructions from the
Depository for registration, the Trustee shall issue the Definitive
Certificates. Neither the Servicer, the Depositor nor the Trustee shall be
liable for any delay in delivery of such instruction and each may conclusively
rely on, and shall be protected in relying on, such instructions. The Depositor
shall provide the Trustee with an adequate inventory of certificates to
facilitate the issuance and transfer of Definitive Certificates. 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; provided, that the
Trustee shall not by virtue of its assumption of such obligations become liable
to any party for any act or failure to act of the Depository.
Section 5.03 Mutilated, Destroyed, Lost or Stolen Certificates.
-------------------------------------------------
If (a) any mutilated Certificate is surrendered to the Trustee, or the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Certificate and (b) there is delivered to the Depositor, the Servicer,
the Certificate Insurer and the Trustee such security or indemnity as may be
required by them to hold each of them harmless, then, in the absence of notice
to the Trustee that such Certificate has been acquired by a bona fide purchaser,
the Trustee shall execute, countersign and deliver, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate
of like Class, tenor and Percentage Interest. In connection with the issuance of
any new Certificate under this Section 5.03, the Trustee may require the payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses (including the fees and
expenses of the Trustee) connected therewith. Any replacement Certificate issued
pursuant to this Section 5.03 shall constitute complete and indefeasible
evidence of ownership, 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.
---------------------
The Servicer, the Trustee, the Depositor, the Certificate Insurer and
any agent of the Servicer, the Depositor, the Certificate Insurer or the Trustee
may treat the Person in whose name any Certificate is registered as the owner of
such Certificate for the purpose of receiving distributions as provided in this
Agreement and for all other purposes whatsoever, and neither the Servicer, the
Trustee, the Depositor, the Certificate Insurer nor any agent of the Servicer,
the Depositor, the Certificate Insurer or the Trustee shall be affected by any
notice to the contrary.
Section 5.05 Access to List of Certificateholders' Names and
-----------------------------------------------
Addresses.
---------
If three or more Certificateholders (a) request such information in
writing from the Trustee, (b) state that such Certificateholders desire to
communicate with other Certificateholders with respect to their rights under
this Agreement or under the Certificates, and (c) provide a copy of the
communication which such Certificateholders propose to transmit, or if the
Depositor or Servicer shall request such information in writing from the
Trustee, then the Trustee shall, within ten Business Days after the receipt of
such request, provide the Depositor, the Servicer or such Certificateholders at
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such recipients' expense the most recent list of the Certificateholders of such
Trust Fund held by the Trustee, if any. The Depositor and every
Certificateholder, by receiving and holding a Certificate, agree that the
Trustee shall not be held accountable by reason of the disclosure of any such
information as to the list of the Certificateholders hereunder, regardless of
the source from which such information was derived.
Section 5.06 Maintenance of Office or Agency.
-------------------------------
The Trustee will maintain or cause to be maintained at its expense an
office or offices or agency or agencies in New York City where Certificates may
be surrendered for registration of transfer or exchange. The Trustee initially
designates the offices of its agent for such purposes located at c/o DTC
Transfer Agent Services, 55 Water Street, Jeanette Park Entrance, New York, New
York 10041. The Trustee will give prompt written notice to the
Certificateholders of any change in such location of any such office or agency.
Section 5.07 Rights of the Certificate Insurer to Exercise Rights
----------------------------------------------------
of Class A-1 and Class A-3 Certificateholders.
----------------------------------------------
By accepting its Class A-1 or Class A-3 Certificate, each Class A-1 and
Class A-3 Certificateholder agrees that unless a Certificate Insurer Default
exists, the Certificate Insurer shall be deemed to be the Class A-1 and Class
A-3 Certificateholders for all purposes (other than with respect to the receipt
of payment on the Class A-1 and Class A-3 Certificates) and shall have the right
to exercise all rights of the Class A-1 and Class A-3 Certificateholders under
this Agreement and under the Class A-1 and Class A-3 Certificates without any
further consent of the Class A-1 or Class A-3 Certificateholders, including,
without limitation:
(a) the right to require the Unaffiliated Seller to repurchase
Mortgage Loans pursuant to Section 2.03 to the extent set forth in such Section;
(b) the right to give notices of breach or to terminate the rights
and obligations of the Servicer as servicer pursuant to Section 7.01;
(c) the right to direct the actions of the Trustee during the
continuance of a Servicer default pursuant to Sections 3.24, 7.01 and 7.02;
(d) the right to institute proceedings against the Servicer
pursuant to Section 7.01;
(e) the right to direct the Trustee to investigate certain matters
pursuant to Sections 8.01 and 8.02;
(f) the right to remove the Trustee pursuant to Section 8.07; and
(g) any rights or remedies expressly given the Class A-1 or Class
A-3 Certificateholders.
105
In addition, each Certificateholder agrees that, subject to Section
10.11, unless a Certificate Insurer Default exists, the rights specifically
enumerated above may only be exercised by the Certificateholders with the prior
written consent of the Certificate Insurer.
Section 5.08 Trustee To Act Solely with Consent of the Certificate
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Insurer.
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Unless a Certificate Insurer Default exists, the Trustee shall not,
without the Certificate Insurer's consent or unless directed by the Certificate
Insurer:
(a) term