FINANCIAL GUARANTY
INSURANCE POLICY
FINANCIAL
[LOGO] SECURITY
ASSURANCE(R)
Obligor: As described in Endorsement No. 1 Policy No.: 50881-N
Obligations: $144,953,790 Mortgage Lenders Date of Issuance: 11/18/99
Network Home Equity Loan Trust 1999-2,
Asset-Backed Notes, Series 1999-2,
Class A
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for
consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY GUARANTEES to
each Holder, subject only to the terms of this Policy (which includes each
endorsement hereto), the full and complete payment by the Obligor of Scheduled
Payments of principal of, and interest on, the Obligations.
For the further protection of each Holder, Financial Security irrevocably
and unconditionally guarantees:
(a) payment of the amount of any distribution of principal of, or
interest on, the Obligations made during the Term of this Policy to such
Holder that is subsequently avoided in whole or in part as a preference
payment under applicable law (such payment to be made by Financial
Security in accordance with Endorsement No. 1 hereto).
(b) payment of any amount required to be paid under this Policy by
Financial Security following Financial Security's receipt of notice as
described in Endorsement No. 1 hereto.
Financial Security shall be subrogated to the rights of each Holder to
receive payments under the Obligations to the extent of any payment by Financial
Security hereunder.
Except to the extent expressly modified by an endorsement hereto,
following terms shall have the meanings specified for all purposes of this
Policy. "Holder" means the registered owner of any Obligation as indicated on
the registration books maintained by or on behalf of the Obligor for such
purpose or, if the Obligation is in bearer form, the holder of the Obligation.
"Scheduled Payments" means payments which are scheduled to be made during the
Term of this Policy in accordance with the original terms of the Obligations
when issued and without regard to any amendment or modification of such
Obligations thereafter; payments which become due on an accelerated basis as a
result of (a) a default by the Obligor, (b) an election by the Obligor to pay
principal or an accelerated basis or (c) any other cause, shall not constitute
"Scheduled Payments" unless Financial Security shall elect, in its sole
discretion, to pay such principal due upon such acceleration together with any
accrued interest to the date of acceleration. "Term of this Policy" shall have
the meaning set forth in Endorsement No. 1 hereto.
This Policy sets forth in full the undertaking of Financial Security, and
shall not be modified, altered or affected by any other agreement or instrument,
including any modification or amendment thereto, or by the merger, consolidation
or dissolution of the Obligor. Except to the extent expressly modified by an
endorsement hereto, the premiums paid in respect of this Policy are
nonrefundable for any reason whatsoever, including payment, or provision being
made for payment, of the Obligations prior to maturity. This Policy may not be
canceled or revoked during the Term of this Policy. THIS POLICY IS NOT COVERED
BY PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW
YORK INSURANCE LAW.
In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has caused this
Policy to be executed on its behalf by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By:
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AUTHORIZED OFFICER
A subsidiary of Financial Security Assurance Holdings Ltd.
350 Park Avenue, New York, N.Y. 10022-6022 (212) 826-0100
Form 100NY (5/89)
Policy No.: 50081-N Date of Issuance: November 18, 1999
ENDORSEMENT NO. 1
TO FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL SECURITY ASSURANCE INC.
OBLIGOR: Mortgage Lenders Network Home Equity Loan Trust 1999-2,
pursuant to the Indenture dated as of November 1, 1999 between
Mortgage Lenders Network Home Equity Loan Trust 1999-2 and
Norwest Bank, Minnesota, National Association
OBLIGATIONS: $144,953,790 Mortgage Lenders Network Home Equity Loan Trust
1999-2, Asset-Backed Notes, Series 1999-2, Class A
POLICY NO.: 50881-N
DATE OF ISSUANCE: November 18, 1999
1. Definitions. For all purposes of this Policy, the terms specified below
shall have the meanings or constructions provided below. Capitalized terms used
herein and not otherwise defined herein shall have the meanings provided in the
Indenture unless the context shall otherwise require.
"Business Day" means any day other than (i) a Saturday or Sunday or (ii) a
day on which banking institutions in the City of New York, New York, the States
of New York or Minnesota or in the city in which the corporate trust office of
the Indenture Trustee is located, are authorized or obligated by law or
executive order to be closed.
"Holder" shall not include the Obligor or any affiliates or successors
thereof in the event the Obligor, or any such affiliate or successor, is a
registered or beneficial owner of the Obligation.
"Indenture" means the Indenture, dated as of November 1, 1999, by and
between Mortgage Lenders Network Home Equity Loan Trust 1999-2 as issuer (the
"Issuer") and Norwest Bank, Minnesota, National Association as indenture trustee
(the "Indenture Trustee"), as amended from time to time with the consent of
Financial Security.
"Indenture Trustee" means Norwest Bank, Minnesota, National Association,
in its capacity as Indenture Trustee under the Indenture and any successor in
such capacity.
"Policy" means this Financial Guaranty Insurance Policy and includes each
endorsement thereto.
"Receipt" and "Received" mean actual delivery to Financial Security and to
the Fiscal Agent (as defined below), if any, prior to 12:00 noon, New York City
time, on a Business Day; delivery either on a day that is not a Business Day, or
after 12:00 noon, New York City time, shall be deemed to be receipt on the next
succeeding Business Day. If any notice or certificate given hereunder by the
Indenture Trustee is not in proper form or is not properly completed, executed
or delivered, it shall be deemed not to have been Received, and Financial
Security or its Fiscal Agent shall promptly so advise the Indenture Trustee and
the Indenture Trustee may submit an amended notice.
"Scheduled Payments" shall mean with respect to any Payment Date the
Required Payment with respect to such Payment Date. Scheduled Payments shall not
include any amounts due in respect of the Obligations attributable to any
increase in interest rate, penalty or other sum payable by the Obligor by reason
of any default or event of default in respect of the Obligations, or by reason
of any deterioration of the creditworthiness of the Obligor, nor shall Scheduled
Payments include, nor shall coverage be provided under this Policy in respect
of, any taxes, withholding or other charge imposed by any governmental authority
due in connection with the payment of any Scheduled Payment to a Holder.
"Term of This Policy" means the period from and including the Date of
Issuance to and including the date on which (i) all Scheduled Payments have been
paid that are required to be paid by the Obligor within the meaning of Section
4.01 of the Indenture; (ii) any period during which any Scheduled Payment could
have been avoided in whole or in part as a preference payment under applicable
bankruptcy, insolvency, receivership or similar law shall have expired and (iii)
if any proceedings requisite to avoidance as a preference payment have been
commenced prior to the occurrence of (i) and (ii), a final and nonappealable
order in resolution of each such proceeding has been entered.
2. Notices and Conditions to Payment in Respect of Scheduled Payments.
Following Receipt by Financial Security of a notice and certificate from the
Indenture Trustee in the form attached as Exhibit A to this Endorsement,
Financial Security will pay any amount payable hereunder in respect of Scheduled
Payments on the Obligations out of the funds of Financial Security on the later
to occur of (a) 12:00 noon, New York City time, on the third Business Day
following such Receipt; and (b) 12:00 noon, New York City time, on the date on
which such payment is due on the Obligations. Payments due hereunder in respect
of Scheduled Payments will be disbursed to the Indenture Trustee by wire
transfer of immediately available funds.
Financial Security shall be entitled to pay any amount hereunder in
respect of Scheduled Payments on the Obligations, including any amount due on
the Obligations on an accelerated basis, whether or not any notice and
certificate shall have been Received by Financial Security as provided above;
provided, however, that by acceptance of this Policy the Indenture Trustee
agrees to provide upon request to Financial Security a notice and certificate in
respect of any such payments made by Financial Security. Financial Security
shall be entitled to pay hereunder any amount due on the Obligations on an
accelerated basis at any time or from time to time, in whole or in part, prior
to the scheduled date of payment thereof; Scheduled Payments insured hereunder
shall not include interest, in respect of principal paid hereunder on an
accelerated basis, accruing from after the date of such payment of principal.
Financial Security's obligations hereunder in respect of Scheduled Payments
shall be discharged to the extent such amounts are paid by the Issuer in
accordance with the Indenture or disbursed by Financial Security as provided
herein whether or not such funds are properly applied by the Indenture Trustee
except as otherwise provided in paragraph 3 of this Endorsement.
3. Notices and Conditions to Payment in Respect of Scheduled Payments
Avoided as Preference Payments. If any Scheduled Payment is avoided as a
preference payment under applicable bankruptcy, insolvency, receivership or
similar law, Financial Security will pay such amount out of the funds of
Financial Security on the later of (a) the date when due to be paid pursuant to
the Order referred to below or (b) the first to occur of (i) the fourth Business
Day following Receipt by Financial Security from the Indenture Trustee of (A) a
certified copy of the order of the court or other governmental body which
exercised jurisdiction to the effect that the Holder is required to return
principal of or interest paid on the Obligations during the Term of this Policy
because such payments were avoidable as preference payments under applicable
bankruptcy law (the "Order"), (B) a certificate of the Holder that the Order has
been entered and is not subject to any stay and (C) an assignment duly executed
and delivered by the Holder, in such form as is reasonably required by Financial
Security, and provided to the Holder by Financial Security, irrevocably
assigning to Financial Security all rights and claims of the Holder relating to
or arising under the Obligations against the estate of the Obligor or otherwise
with respect to such preference payment or (ii) the date of Receipt by Financial
Security from the Indenture Trustee of the items referred to in clauses (A), (B)
and (C) above if, at least four Business Days prior to such date of Receipt,
Financial Security shall have Received written notice from the Indenture Trustee
that such items were to be delivered on such date and such date was specified in
such notice. Such payment shall be disbursed to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order and not to the
Indenture Trustee or any Holder directly (unless a Holder has previously paid
such amount to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the Order, in which case such payment shall be disbursed to
the Indenture Trustee for distribution to such Holder upon proof of such payment
reasonably satisfactory to Financial Security). In connection with the
foregoing, Financial Security shall have the rights provided pursuant to Section
8.03 of the Indenture.
4. Governing Law. This Policy shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to the
conflict of laws principles thereof.
5. Fiscal Agent. At any time during the Term of this Policy, Financial
Security may appoint a fiscal agent (the "Fiscal Agent") for purposes of this
Policy by written notice to the Indenture Trustee at the notice address
specified in the Indenture specifying the name and notice address of the Fiscal
Agent. From and after the date of receipt of such notice by the Indenture
Trustee, (i) copies of all notices and documents required to be delivered to
Financial Security pursuant to this Policy shall be simultaneously delivered to
the Fiscal Agent and to Financial Security and shall not be deemed Received
until Received by both, and (ii) all payments required to be made by Financial
Security under this Policy may be made directly by Financial Security or by the
Fiscal Agent on behalf of Financial Security. The Fiscal Agent is the agent of
Financial Security only and the Fiscal Agent shall in no event be liable to any
Holder for any acts of the Fiscal Agent or any failure of Financial Security to
deposit, or cause to be deposited, sufficient funds to make payments due under
the Policy.
6. Waiver of Defense. To the fullest extent permitted by applicable law,
Financial Security agrees not to assert, and hereby waives, for the benefit of
each Holder, all rights (whether by counterclaim, setoff or otherwise) and
defenses (including, without limitation, the defense of fraud), whether acquired
by subrogation, assignment or otherwise, to the extent that such rights and
defenses may be available to Financial Security to avoid payment of its
obligations under this Policy in accordance with the express provisions of this
Policy.
7. Notice. All notices to be given hereunder shall be in writing (except
as otherwise specifically provided herein) and shall be mailed by registered
mail or personally delivered or telecopied to Financial Security as follows:
Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022
Attention: Managing Director - Surveillance
Telecopy No.: (212) 339-3518
Confirmation: (212) 826-0100
Financial Security may specify a different address or addresses by writing
mailed or delivered to the Indenture Trustee.
8. Priorities. In the event that any term or provision of the face of this
Policy is inconsistent with the provisions of this Endorsement, the provisions
of this Endorsement shall take precedence and shall be binding.
9. Exclusions From Insurance Guaranty Funds. This Policy is not covered by
the Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law. This Policy is not covered by the Florida Insurance Guaranty
Association created under Part II of Chapter 631 of the Florida Insurance Code.
In the event Financial Security were to become insolvent, any claims rising
under this Policy are excluded from coverage by the California Insurance
Guaranty Association, established pursuant to Article 14.2 of Chapter 1 of Part
2 of Division 1 of the California Insurance Code.
10. Surrender of Policy. The Indenture Trustee shall surrender this Policy
to Financial Security for cancellation upon expiration of the Term of this
Policy.
Policy No.: 50081-N Date of Issuance: November 18, 1999
IN WITNESS WHEREOF, FINANCIAL SECURITY ASSURANCE INC. has caused this
Endorsement No. 1 to be executed by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By:
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Authorized Officer
Policy No.: 50081-N Date of Issuance: November 18, 1999
Exhibit A
To Endorsement No. 1
NOTICE OF CLAIM AND CERTIFICATE
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
The undersigned, a duly authorized officer of Norwest Bank, Minnesota,
National Association (the "Indenture Trustee"), hereby certifies to Financial
Security Assurance Inc. ("Financial Security"), with reference to Financial
Guaranty Insurance Policy No. 50881-N dated November 18, 1999 (the "Policy")
issued by Financial Security in respect of the Mortgage Lenders Network Home
Equity Loan Trust 1999-2, Asset-Backed Notes, Series 1999-2, Class A (the
"Obligations"), that:
(i) The Indenture Trustee is the Indenture Trustee under the
Indenture for the Holders.
(ii) The sum of all amounts on deposit (or scheduled to be on
deposit) in the Note Payment Account and available for distribution to the
Holders pursuant to the Indenture will be $___________ (the "Shortfall")
less than the aggregate amount of Scheduled Payments with respect to the
Payment date occurring on ____________.
(iii) The Indenture Trustee is making a claim under the Policy for
the Shortfall to be applied to the payment of Scheduled Payments.
(iv) The Indenture Trustee agrees that, following receipt of funds
from Financial Security, it shall (a) hold such amounts in trust and apply
the same directly to the payment of Scheduled Payments on the Obligations
when due; (b) not apply such funds for any other purpose; (c) not
commingle such funds with other funds held by the Indenture Trustee and
(d) maintain an accurate record of such payments with respect to each
Obligation and the corresponding claim on the Policy and proceeds thereof
and, if the Obligation is required to be surrendered and/or presented for
such payment, shall stamp on each such Obligation the legend "$[insert
applicable amount] paid by Financial Security and the balance hereof has
been cancelled and reissued" and then shall deliver such Obligation to
Financial Security and shall deliver such coupons so paid to Financial
Security.
(v) The Indenture Trustee, on behalf of the Holders, hereby assigns
to Financial Security the rights of the Holders with respect to the
Obligations to the extent of any payments under the Policy, including,
without limitation, any amounts due to the Holders in respect of
securities law violations arising from the offer and sale of the
Obligations. The foregoing assignment is in addition to, and not in
limitation of, rights of subrogation otherwise available to Financial
Security in respect of such payments. Payments to Financial Security in
respect of the foregoing assignment shall in all cases be subject to and
subordinate to the rights of the Holders to receive all Scheduled Payments
in respect of the Obligations. The Indenture Trustee shall take such
action and deliver such instruments as may be reasonably requested or
required by Financial Security to effectuate the purpose or provisions of
this clause (v).
(vi) The Indenture Trustee, on its behalf and on behalf of the
Holders, hereby appoints Financial Security as agent and attorney-in-fact
for the Indenture Trustee and each such Holder in any legal proceeding
with respect to the Obligations. The Indenture Trustee hereby agrees that,
so long as a [Note Insurer Default] (as defined in the Indenture) shall
not exist, Financial Security may at any time during the continuation of
any proceeding by or against the Issuer under the United States Bankruptcy
Code or any other applicable bankruptcy, insolvency, receivership,
rehabilitation or similar law (an "Insolvency Proceeding") direct all
matters relating to such Insolvency Proceeding, including without
limitation, (A) all matters relating to any claim in connection with an
Insolvency Proceeding seeking the avoidance as a preferential transfer of
any payment made with respect to the Obligations (a "Preference Claim"),
(B) the direction of any appeal of any order relating to any Preference
Claim at the expense of Financial Security but subject to reimbursement as
provided in the Insurance Agreement and (C) the posting of any surety,
supersedeas or performance bond pending any such appeal. In addition, the
Indenture Trustee hereby agrees that Financial Security shall be
subrogated to, and the Indenture Trustee on its behalf and on behalf of
each Holder, hereby delegates and assigns, to the fullest extent permitted
by law, the rights of the Indenture Trustee and each Holder in the conduct
of any Insolvency Proceeding, including, without limitation, all rights of
any party to an adversary proceeding or action with respect to any court
order issued in connection with any such Insolvency Proceeding.
(vii) Payment should be made by wire transfer directed to the
[Policy Payments Account].
Unless the context otherwise requires, capitalized terms used in this
Notice of Claim and Certificate and not defined herein shall have the meanings
provided in the Policy.
Policy No.: 50081-N Date of Issuance: November 18, 1999
IN WITNESS WHEREOF, the Indenture Trustee has executed and delivered this
Notice of Claim and Certificate as of the _________ day of ______________,
_____.
NORWEST BANK, MINNESOTA,
NATIONAL ASSOCIATION
By:
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Name:
Title:
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For Financial Security or Fiscal Agent Use Only
Wire transfer sent on_______________________By__________________________________
Confirmation Number_____________________________________________________________