[AMBAC company logo] 4 EAST MIFFLIN STREET, MADISON,
CERTIFICATE GUARANTY INSURANCE POLICY WISCONSIN 53703
ADMINISTRATIVE OFFICE:
One State Street Plaza,
New York, New York 10004
Telephone: (212) 668-0340
Insured Obligations: Policy Number:
Fremont Home Loan Trust 1999-3 AB0294BE
Home Loan Asset Backed Certificates,
Series 1999-3
Premium:
As specified in the
endorsement attached hereto
AMBAC ASSURANCE CORPORATION (AMBAC) A Wisconsin Stock Insurance Company in
consideration of the payment of the premium and subject to the terms of this
Policy, hereby agrees unconditionally and irrevocably to pay to the Trustee for
the benefit of the Holders of the Insured Obligations that portion of the
Insured Amounts which shall become Due for Payment but shall be unpaid by reason
of Nonpayment.
Ambac will make such payments to the Trustee from its own funds on the later of
(a) one (1) Business Day following notification to Ambac of Nonpayment or (b)
the Business Day on which the Insured Amounts are Due for Payment. Such payments
of principal or interest shall be made only upon presentation of an instrument
of assignment in form and substance satisfactory to Ambac, transferring to Ambac
all rights under such Insured Obligations to receive the principal of and
interest on the Insured Obligation. Ambac shall be subrogated to all the
Holders' rights to payment on the Insured Obligations to the extent of the
insurance disbursements so made. Once payments of the Insured Amounts have been
made to the Trustee, Ambac shall have no further obligation hereunder in respect
of such insured Amounts.
In the event the Trustee for the Insured Obligations has notice that any payment
of principal or interest on an Insured Obligation which has become Due for
Payment and which is made to a Holder by or on behalf of the Trustee has been
deemed a preferential transfer and theretofore recovered from its Holder
pursuant to the United States Bankruptcy Code in accordance with a final,
nonappealable order of a court of competent jurisdiction, such Holder will be
entitled to payment from Ambac to the extent of such recovery if sufficient
funds are not otherwise available.
This Policy is noncancelable by Ambac for any reason including failure to
receive payment of any premium due hereunder. The premium on this Policy is not
refundable for any reason. This Policy does not insure against loss of any
prepayment or other acceleration payment which at any time may become due in
respect of any Insured Obligation, other than at the sole option of Ambac, nor
against any risk other than Nonpayment, including failure of the Trustee to make
any payment due Holders of Insured Amounts.
To the fullest extent permitted by applicable law, Ambac hereby waives and
agrees not to assert any and all rights and defenses, to the extent such rights
and defenses may be available to Ambac to avoid payment of its obligations under
this Policy in accordance with the express provisions hereof.
Any capitalized terms not defined herein shall have the meaning given such terms
in the endorsement attached hereto or in the Agreement.
In witness whereof, Ambac has caused this Policy to be affixed with its
corporate seal and to be signed by its duly authorized officers in facsimile to
become effective as their original signatures and binding upon Ambac by virtue
of the countersignature of its duly authorized representative.
President Secretary
Effective Date: September 23, 1999 Authorized Representative
CERTIFICATE GUARANTY INSURANCE POLICY ENDORSEMENT
Attached to and forming Effective Date of Endorsement:
part of Policy #AB0294BE September 23, 1999
issued to:
The Bank of New York,
as Trustee for the Holders of Fremont Home Loan Trust 1999-3,
Home Loan Asset Backed Certificates, Series 1999-3
For all purposes of this Policy, the following terms shall
have the following meanings:
"Agreement" shall mean the Pooling and Master Servicing
Agreement dated as of September 1, 1999 among PaineWebber Mortgage Acceptance
Corporation IV, as Depositor, Fremont Investment & Loan, as Transferor and
Master Servicer, and The Bank of New York, as Trustee, as such Agreement may be
amended, modified or supplemented from time to time as set forth in the
Agreement.
"Certificate Insurance Policy" or "Policy" shall mean this
Certificate Guaranty Insurance Policy together with each and every endorsement
hereto.
"Certificates" means, collectively, the Fremont Home Loan
Trust 1999-3, Home Loan Asset-Backed Certificates, Series 1999-3, Class A-1 and
Class A-2, substantially in the form set forth in Exhibits G- 1 and G-2 to the
Agreement.
"Collection Account" shall have the meaning set forth in
Section 5.0l(a)(i) of the Agreement.
"Distribution Date" shall mean the 25th day of any month (or
if such 25th day is not a Business Day, the first Business Day immediately
following) beginning with the First Distribution Date.
"Due for Payment" shall mean, with respect to any Insured
Amount or Preference Amount, such amount is due and payable pursuant to the
terms of the Pooling and Servicing Agreement.
"First Distribution Date" shall mean October 25, 1999.
"Holder" shall mean the registered owner or beneficial owner
of any Certificate.
"Insurance Agreement" shall mean the Insurance and Indemnity
Agreement, dated as of September 23, 1999, among Ambac Assurance Corporation, as
Securities Insurer, Fremont Investment & Loan, as Transferor and Master
Servicer, PaineWebber Mortgage Acceptance Corporation IV, as Depositor and The
Bank of New York, as Trustee, as such Insurance Agreement may be amended,
modified or supplemented from time to time.
"Insured Amount" shall mean, with respect to any Class of
Class A Certificates and for any Distribution Date, the sum of (1) any
insufficiency resulting from (a) the sum of (i) the Available Distribution
Amount for the related Pool and (ii) the excess, if any, of the Available
Distribution Amount for the other Pool over the Certificateholders' Interest
Distribution Amount for the other Class of Class A Certificates for that
Distribution Date, being less than (b) the Certificateholders' Interest
Distribution Amount for such Class of Class A Certificates, less any Relief Act
Shortfalls, and (2) any Certificateholders' Principal Deficiency Amount.
"Insured Payments" shall mean, with respect to any
Distribution Date, the aggregate amount actually paid by the Securities Insurer
to The Trustee in respect of (i) Insured Amounts for such Distribution Date and
(ii) Preference Amounts for any given Business Day.
"Late Payment Rate" shall mean for any Distribution Date, the
greater of (i) the rate of interest, as it is publicly announced by Citibank,
N.A. at its principal office in New York, New York as its prime rate (any change
in such prime rate of interest to be effective on the date such change is
announced by Citibank, N.A.) plus 1% and (ii) the then applicable highest rate
of interest on the Certificates. The Late Payment Rate shall be computed on the
basis of a year of 360 days and the actual number of days elapsed. In no event
shall the Late Payment Rate exceed the maximum rate permissible under any
applicable law limiting interest rates.
"Nonpayment" shall mean, with respect to any Distribution
Date, an Insured Amount is Due for Payment but has not been paid pursuant to the
Pooling and Servicing Agreement.
"Notice" shall mean the telephonic or telegraphic notice,
promptly confirmed in writing by telecopy substantially in the form of Exhibit A
to the Policy, the original of which is subsequently delivered by registered or
certified mail, from the Trustee specifying the Insured Amount which shall be
due and owing on the applicable Distribution Date.
"Preference Amount" shall mean any payment of Insured Amounts
on a Certificate which has become Due for Payment and which is made to a Holder
by or on behalf of the Trustee which has been deemed a preferential transfer and
theretofore recovered from its Holder pursuant to the United States Bankruptcy
Code in accordance with a final, nonappealable order of a court of competent
jurisdiction.
"Premium" shall mean the amount payable to the Securities
Insurer on each Distribution Date calculated at the Premium Percentage.
"Premium Percentage" shall have the meaning set forth in the
Insurance Agreement.
"Reimbursement Amount" shall mean, as to any Distribution
Date, the sum of (x) (i) all Insured Payments paid by the Securities Insurer,
but for which the Securities Insurer has not been reimbursed prior to such
Distribution Date pursuant to Section 5.01(d) of the Agreement, plus
(ii) interest accrued thereon, alculated at the Late Payment Rate from the date
the Trustee received the related Insured Payments, and (y) without duplication
(i) any amounts then due and owing to the Securities Insurer under the
Insurance Agreement plus (ii) interest on such amounts at the Late Payment Rate.
"Relief Act Shortfalls" shall mean interest shortfalls
resulting from the application of the Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
"Securities Insurer" shall mean Ambac Assurance Corporation,
or any successor thereto, as issuer of the Certificate Insurance Policy.
"Total Available Funds" shall mean, as to each Pool and for
any Distribution Date, the sum of (i) the Available Distribution Amount for such
Pool and (ii) any Excess Spread available from the other Pool.
"Trustee" shall mean The Bank of New York or its
successor-in-interest, in its capacity as Trustee under the Agreement, or if any
successor Trustee or any co-trustee shall be appointed as provided therein, then
"Trustee" shall also mean such successor trustee or such co-trustee, as the case
may be, subject to the provisions thereof.
Capitalized used herein and not otherwise defined shall have
the meaning assigned to them in the Agreement.
As provided by the Policy, the Securities Insurer will pay any
amount payable hereunder no later than 12:00 noon, New York City time, on the
later of the Distribution Date on which the related Insured Amount is due or the
Business Day following receipt in New York, New York on a Business Day by the
Securities Insurer of a Notice; provided that, if such Notice is received after
12:00 noon, New York City time, on such Business Day, it will be deemed to be
received on the following Business Day. If any such Notice is not in proper form
or is otherwise insufficient for the purpose of making a claim under the Policy,
it shall be deemed not to have been received for purposes of this paragraph, and
the Securities Insurer shall promptly so advise the Trustee and the Trustee may
submit an amended Notice.
The Securities Insurer shall make Insured Payments which are
Preference Amounts out of its own funds by 12:00 noon (New York City time) in
immediately available funds to the Trustee or Certificateholders, as applicable,
on the later of (a) the Business Day next following the day on which the
Securities Insurer shall have received the items referred to in clauses (i),
(ii), (iii) and (iv) below and (b) the date pursuant to the Order, upon receipt
of (i) a certified copy of a final, nonappealable order of a court or other body
exercising jurisdiction in such insolvency proceeding to the effect that the
Trustee or the Certificateholder, as applicable, is required to return such
Preference Amount paid during the term of this Policy because such payments were
avoided as a preferential transfer or otherwise rescinded or required to be
restored by the Trustee or the Certificateholder (the "Order"), (ii) a
certificate by or on behalf of the Certificateholder or Trustee that the Order
has been entered and is not subject to any stay, (iii) an assignment, in form
and substance satisfactory to the Securities Insurer, duly executed and
delivered by the Certificateholder or Trustee, irrevocably assigning to the
Securities Insurer all rights and claims of the Trustee or the Certificateholder
relating to or arising under the Agreement against the estate of the bankruptcy
trustee or otherwise with respect to such Preference Amount and (iv) a Notice
appropriately completed and executed by the Trustee. Such payment shall be
disbursed to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the Order, and not to the Certificateholder directly, unless
the Certificateholder has made a payment of the Preference Amount to the court
or such receiver, conservator, debtor-in-possession or trustee in bankruptcy
named in the Order, in which case the Securities Insurer will pay the
Certificateholder, subject to the delivery of (a) the items referred to in
clauses (i), (ii), (iii) and (iv) above to the Securities Insurer and
(b) evidence satisfactory to the Securities Insurer that payment has been made
to such court or receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the Order.
The Securities Insurer hereby agrees that if it shall be
subrogated to the rights of Holders by virtue of any previous payment under this
Policy, no recovery of such payment will occur unless the full amount of the
Holders' allocable distributions for such Distribution Date can be made. In so
doing, the Securities Insurer does not waive its rights to seek full payment of
all Reimbursement Amounts owed to it under the Agreement.
The terms and provisions of the Agreement constitute the
instrument of assignment referred to in the second paragraph of the face of this
Policy.
A premium will be payable on this Policy on each Distribution
Date as provided in Section 5.01(d) of the Agreement, beginning with the first
Distribution Date, in an amount equal to the Premium.
THE INSURANCE PROVIDED BY THE POLICY IS NOT COVERED BY THE
PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN THE INSURANCE LAWS OF THE
STATE OF NEW YORK.
The Policy to which this Endorsement is attached and of which
it forms a part is hereby amended to provide that there shall be no acceleration
payment due under the Policy unless such acceleration is at the sole option of
the Securities Insurer.
Nothing herein contained shall be held to vary, alter, waive
or extend any of the terms, conditions, provisions, agreements or limitations of
the above mentioned Policy other than as above stated.
This Policy is issued under and pursuant to, and shall be
construed under, the laws of the State of New York.
IN WITNESS WHEREOF, the Securities Insurer has caused this
Endorsement to the Policy to be signed by its duly authorized officers.
- ------------------------------ ----------------------------------
Assistant Secretary Vice President
EXHIBIT A
TO THE CERTIFICATE GUARANTY INSURANCE POLICY
--------------------------------------------
Policy No. AB0294BE
NOTICE OF NONPAYMENT AND DEMAND
FOR PAYMENT OF INSURED AMOUNTS
Date: [ ]
Ambac Assurance Corporation
One State Street Plaza
New York, New York 10004
Attention: General Counsel
Reference is made to Certificate Guaranty Insurance Policy No.
AB0294BE (the "Policy") issued by Ambac Assurance Corporation ("Ambac"). Terms
capitalized herein and not otherwise defined shall have the meanings specified
in the Policy and the Agreement, as the case may be, unless the context
otherwise requires.
The Trustee hereby certifies as follows:
1. The Trustee is the Trustee under the Agreement for the Holders.
2. The relevant Distribution Date is [date].
3. Payment on the Certificates in respect of the Distribution Date
is due to be received on _________________________________ under
the Agreement, in an amount equal to $_______________________.
4. There is an Insured Amount of $_______________________________ in
respect of the Certificates, which amount is Due for Payment
pursuant to the terms of the Agreement.
5. The Trustee has not heretofore made a demand for the Insured
Amount in respect of the Distribution Date.
6. The Trustee hereby requests the payment of the Insured Amount
that is Due For Payment be made by Ambac under the Policy and
directs that payment under the Policy be made to the following
account by bank wire transfer of federal or other immediately
available funds in accordance with the terms of the Policy to:
__________________________________(Trustee's account number).
7. The Trustee hereby agrees that, following receipt of the Insured
Payment from Ambac, it shall (a) hold such amounts in trust and
apply the same directly to the distribution of payment on the
Certificates when due; (b) not apply such funds for any other
purpose; (c) deposit such funds to the Certificate Account and
not commingle such funds with other funds held by the Trustee;
and (d) maintain an accurate record of such payments with respect
to each certificate and the corresponding claim on the Policy and
proceeds thereof.
ANY PERSON WHO KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE
COMPANY OR OTHER PERSON FILES AN APPLICATION FOR INSURANCE OR STATEMENT OF CLAIM
CONTAINING ANY MATERIALLY FALSE INFORMATION, OR CONCEALS FOR THE PURPOSE OF
MISLEADING, INFORMATION CONCERNING ANY FACT MATERIAL THERETO, COMMITS A
FRAUDULENT INSURANCE ACT WHICH IS A CRIME AND SHALL ALSO BE SUBJECT TO A CIVIL
PENALTY NOT TO EXCEED FIVE THOUSAND DOLLARS AND THE STATED VALUE OF THE CLAIM
FOR EACH SUCH VIOLATION.
By:______________________________________
Trustee
Title:____________________________________
(Officer)