EXHIBIT 4
- 6 -
FIRST UNION RESIDENTIAL SECURITIZATION TRANSACTIONS, INC.,
as Depositor
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Seller and Master Servicer
POOLING AND SERVICING AGREEMENT
Dated as of August 1, 1996
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, TRUST DEPARTMENT
as Document Custodian
HOME EQUITY LOAN ASSET-BACKED CERTIFICATES
Series 1996 - 1
TABLE OF CONTENTS
Page
ARTICLE 1.
DEFINITIONS
Section 1.1. Definitions.........................................................................1
Section 1.2. Other Definitional Provisions..................................................... 22
Section 1.3. Interest Calculations............................................................. 22
ARTICLE 2.
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.1. Conveyance of Mortgage Loans...................................................... 23
Section 2.2. Acceptance by Trustee; Retransfer of Mortgage Loans............................... 27
Section 2.3. Representations and Warranties of the Depositor................................... 27
Section 2.4. Representations and Warranties Regarding the Master
Servicer.......................................................................... 28
Section 2.5. Representations and Warranties Regarding the Seller............................... 30
Section 2.6. Representations and Warranties of the Seller Regarding this
Agreement and the Mortgage Loans; Transfer of Certain
Mortgage Loans.................................................................... 31
Section 2.7. Substitution of Mortgage Loans.................................................... 39
Section 2.8. Execution and Authentication of Certificates...................................... 40
ARTICLE 3.
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
Section 3.1. The Master Servicer............................................................... 40
Section 3.2. Collection of Certain Mortgage Loan Payments...................................... 44
Section 3.3. Withdrawals from the Collection Account........................................... 46
Section 3.4. Monthly Advances.................................................................. 47
Section 3.5. Maintenance of Hazard Insurance; Property Protection
Expenses.......................................................................... 47
Section 3.6. Assumption and Modification Agreements............................................ 48
Section 3.7. Realization Upon Defaulted Mortgage Loans......................................... 49
Section 3.8. Trustee to Cooperate.............................................................. 50
Section 3.9. Servicing Compensation; Payment of Certain Expenses by
Master Servicer................................................................... 51
Section 3.10. Annual Statement as to Compliance................................................. 52
Section 3.11. Annual Servicing Report........................................................... 52
i
Section 3.12. Access to Certain Documentation and Information Regarding
the Mortgage Loans................................................................ 52
Section 3.13. Maintenance of Certain Insurance Policies......................................... 53
Section 3.14. Reports of Foreclosures and Abandonments of Mortgaged
Property, Returns Relating to Mortgage Interest Received
from Individuals and Returns Relating to Cancellation of
Indebtedness...................................................................... 53
Section 3.15. Reports to the Securities and Exchange Commission. ............... 54
Section 3.16. Custody of Mortgage Files......................................................... 54
Section 3.17. Duties of Document Custodian; Authority; Indemnification.......................... 55
Section 3.18. Superior Liens.................................................................... 56
Section 3.19. Payment of Taxes, Insurance and Other Charges. ............... 57
ARTICLE 4.
SERVICING CERTIFICATE;
CERTIFICATE INSURANCE POLICY
Section 4.1. Servicing Certificate............................................................. 58
Section 4.2. Certificate Insurance Policy...................................................... 58
Section 4.3. Replacement Certificate Insurance Policies........................................ 59
ARTICLE 5.
DISTRIBUTION AMOUNTS;
PAYMENTS AND STATEMENTS TO
CERTIFICATEHOLDERS; RIGHTS OF CERTIFICATEHOLDERS;
Section 5.1. Distributions..................................................................... 60
Section 5.2. Statements........................................................................ 62
Section 5.3. Distribution Account.............................................................. 65
Section 5.4. Investment of Accounts............................................................ 65
ARTICLE 6.
THE CERTIFICATES
Section 6.1. The Certificates.................................................................. 66
Section 6.2. Registration of Transfer and Exchange of the Certificates......................... 67
Section 6.3. Mutilated, Destroyed, Lost or Stolen Certificates................................. 71
Section 6.4. Persons Deemed Owners............................................................. 72
Section 6.5. Appointment of Paying Agent....................................................... 72
ARTICLE 7.
THE DEPOSITOR, THE SELLER AND THE MASTER SERVICER
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Section 7.1. Liability of the Depositor, the Seller and the Master Servicer.................... 73
Section 7.2. Merger or Consolidation of, or Assumption of the
Obligations of, the Depositor, the Seller or the Master
Servicer.......................................................................... 73
Section 7.3. Limitation on Liability of the Master Servicer and Others......................... 73
Section 7.4. Master Servicer Not to Resign..................................................... 74
Section 7.5. Delegation of Duties.............................................................. 75
Section 7.6. Indemnification of the Trust by the Seller and Master
Servicer.......................................................................... 75
ARTICLE 8.
DEFAULT
Section 8.1. Events of Default................................................................. 76
Section 8.2. Trustee to Act; Appointment of Successor.......................................... 79
Section 8.3. Waiver of Defaults................................................................ 80
Section 8.4. Notification to Certificateholders................................................ 80
ARTICLE 9.
THE TRUSTEE
Section 9.1. Duties of Trustee................................................................. 80
Section 9.2. Certain Matters Affecting the Trustee............................................. 81
Section 9.3. Trustee Not Liable for Certificates or Mortgage Loans............................. 83
Section 9.4. Trustee May Own Certificates...................................................... 84
Section 9.5. Master Servicer to Pay Trustee's Expenses......................................... 84
Section 9.6. Eligibility Requirements for Trustee.............................................. 84
Section 9.7. Resignation or Removal of Trustee................................................. 85
Section 9.8. Successor Trustee................................................................. 86
Section 9.9. Merger or Consolidation of Trustee................................................ 86
Section 9.10. Appointment of Co-Trustee or Separate Trustee..................................... 86
Section 9.11. Limitation of Liability........................................................... 88
Section 9.12. Trustee May Enforce Claims Without Possession of
Certificates...................................................................... 88
Section 9.13. Suits for Enforcement............................................................. 88
Section 9.14. Waiver of Bond Requirement........................................................ 88
Section 9.15. Waiver of Inventory, Accounting and Appraisal Requirement......................... 89
ARTICLE 10.
TERMINATION
Section 10.1. Termination....................................................................... 89
Section 10.2. Additional Termination Requirements............................................... 91
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ARTICLE 11.
REMIC ADMINISTRATION
Section 11.1. REMIC Administration.............................................................. 91
Section 11.2. Prohibited Transactions and Activities............................................ 94
Section 11.3. Indemnification with Respect to Certain Taxes and Loss of
REMIC Status...................................................................... 94
ARTICLE 12.
MISCELLANEOUS PROVISIONS
Section 12.1. Amendment......................................................................... 95
Section 12.2. Recordation of Agreement.......................................................... 96
Section 12.3. Limitation on Rights of Certificateholders........................................ 97
Section 12.4. GOVERNING LAW..................................................................... 98
Section 12.5. Notices........................................................................... 98
Section 12.6. Severability of Provisions........................................................ 99
Section 12.7. Assignment........................................................................ 99
Section 12.8. Certificates Nonassessable and Fully Paid......................................... 99
Section 12.9. Third-Party Beneficiaries......................................................... 99
Section 12.10. Counterparts...................................................................... 99
Section 12.11. Effect of Headings and Table of Contents.......................................... 99
Section 12.12. Provision of Information to Prospective Purchasers; Rule
144A..............................................................................100
Section 12.13. The Certificate Insurer...........................................................100
iv
EXHIBIT A - FORM OF CLASS A CERTIFICATE.........................................................A-1
EXHIBIT B - FORM OF CLASS B-IO CERTIFICATE......................................................B-1
EXHIBIT C - FORM OF CLASS R CERTIFICATE.........................................................C-1
EXHIBIT D - MORTGAGE LOAN SCHEDULE..............................................................D-1
EXHIBIT E - FORM OF ASSIGNMENT..................................................................E-1
EXHIBIT F - FORM OF NOTE AND MORTGAGE...........................................................F-1
EXHIBIT G - FORM OF OFFICER'S CERTIFICATE OF MASTER SERVICER....................................G-1
EXHIBIT H - FORM OF TRUST RECEIPT...............................................................H-1
EXHIBIT I - FORM OF PURCHASER'S LETTER..........................................................I-1
EXHIBIT J - LOST NOTE SCHEDULE................................................................. J-1
EXHIBIT K - FORM OF OPINION OF COUNSEL......................................................... K-1
EXHIBIT L - FORM OF CLASS R CERTIFICATE TRANSFEREE'S
INVESTMENT LETTER.................................................................. L-1
EXHIBIT M - FORM OF CLASS B-I/O CERTIFICATEHOLDER AFFIDAVIT.................................... M-1
EXHIBIT N - SCHEDULE OF MORTGAGE LOANS AS TO WHICH
RELATED MORTGAGE NOTES WILL BE
DELIVERED AFTER THE CLOSING DATE................................................... N-1
EXHIBIT O - FORM OF LIQUIDATION REPORT......................................................... O-1
EXHIBIT P - COPY OF THE CERTIFICATE INSURANCE POLICY........................................... P-1
SCHEDULE 1 OFFICES OF DOCUMENT CUSTODIAN
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POOLING AND SERVICING AGREEMENT
POOLING AND SERVICING AGREEMENT, dated as of August 1, 1996, among
FIRST UNION RESIDENTIAL SECURITIZATION TRANSACTIONS, INC., as Depositor (the
"Depositor"), FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as Seller (the
"Seller") and as Master Servicer (the "Master Servicer"), FIRST UNION NATIONAL
BANK OF NORTH CAROLINA, TRUST DEPARTMENT, as Document Custodian (the "Document
Custodian") and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee (the
"Trustee").
In consideration of the mutual agreements herein contained, the parties
hereto agree as follows:
ARTICLE 1.
DEFINITIONS
Section 1.1. Definitions.
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the meanings specified in this
Article.
Accounts: The Collection Account and the Distribution Account.
Affiliate: With respect to any Person, any other Person controlling, controlled
by or under common control with such Person. For purposes of this definition,
"control" means the power to direct the management and policies of a Person,
directly or indirectly, whether through ownership of voting securities, by
contract or otherwise and "controlling" and "controlled" shall have meanings
correlative to the foregoing.
Agreement: This Pooling and Servicing Agreement and all amendments hereof and
supplements hereto.
Aggregate Class A Interest Distribution: With respect to any Distribution Date,
the aggregate of the Class Interest Distributions with respect to the Class A
Certificates.
Aggregate Class A Principal Balance: As of any date of determination, the
aggregate of the Class A Principal Balance of all Class A Certificates as of
such date.
Aggregate Loan Balance: As of any date of determination, the sum of the Loan Balances of
all the Mortgage Loans.
Appraised Value: As to any Mortgaged Property, the value set forth in an
appraisal of such Mortgaged Property made to establish compliance with the
underwriting criteria then in effect in connection with the application for the
Mortgage Loan secured by such Mortgaged Property.
Assignment Event: The 30th day following either (i) the occurrence and
continuance of an Event of Default, (ii) the Seller's long-term unsecured debt
rating is reduced below A2 by Moody's or A by Standard & Poor's or (iii) the
suspension, termination or withdrawal of the Seller's long-term unsecured debt
rating by Moody's and Standard & Poor's.
Assignment of Mortgage: With respect to any Mortgage, an assignment, notice of
transfer or equivalent instrument, in recordable form, sufficient under the laws
of the jurisdiction in which the related Mortgaged Property is located to
reflect the sale of the Mortgage to the Trustee, which assignment, notice of
transfer or equivalent instrument may be in the form of one or more blanket
assignments covering the Mortgage Loans secured by Mortgaged Properties located
in the same jurisdiction.
Available Funds: As to any Distribution Date, the sum of (A) (x) the sum of all
amounts described in clauses (i) through (v) inclusive, of Section 3.2(b)
received by the Master Servicer (including any amounts paid by the Master
Servicer and the Seller and excluding (a) any amounts not required to be
deposited in the Collection Account pursuant to Section 3.2(b), (b) any amounts
paid to, or withdrawn by, the Master Servicer pursuant to Section 3.3(ii),
(iii), (iv), (vi) and (vii) in respect of the Mortgage Loans as of the related
Determination Date and (c) any Payaheads received during the related Collection
Period intended by the Mortgagor to be applied in subsequent Collection Periods)
during the related Collection Period and deposited into the Collection Account
as of the related Determination Date and (y) Payaheads deposited to the
Collection Account and intended by the Mortgagor to be applied in the related
Collection Period, (B) Insured Payments, if any, and (C) any amount paid in
connection with a termination of the Trust pursuant to Section 10.1(a). No
amount included in this definition by virtue of being described by any component
of the definition thereof shall be included twice by virtue of also being
described by any other component or otherwise.
Avoided Payment: As defined in Section 4.2(b) hereof.
Base O/C Amount: On any day, an amount equal to the product of the Base O/C
Percentage and the Cut-Off Date Aggregate Loan Balance.
Base O/C Percentage: 2.45%.
BIF: The Bank Insurance Fund, as from time to time constituted, created under
the Financial Institutions Reform, Recovery and Enhancement Act of 1989, or if
at any time after the execution of this instrument the Bank Insurance Fund is
not existing and performing duties now assigned to it, the body performing such
duties on such date.
Book-Entry Certificate: Any Class A Certificate registered in the name of the
Depository or its nominee, ownership of which is reflected on the books of the
Depository or on the books of a Person maintaining an account with such
Depository (directly or as an indirect participant in accordance with the rules
of such Depository).
2
Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a day on
which banking institutions in the State of North Carolina or the State of
Minnesota are required or authorized by law to be closed.
Certificate: A Class A Certificate, a Class B-IO Certificate or a Class R
Certificate.
Certificate Insurance Policy: The Financial Guaranty Insurance Company Surety
Bond (No. 96010466) with respect to the Class A Certificates, and all
endorsements thereto, dated the Closing Date, issued by the Certificate Insurer
for the benefit of the Holders of each Class of Class A Certificates, a copy of
which is attached hereto as Exhibit P.
Certificate Insurer: Financial Guaranty Insurance Company, a stock insurance
company organized and created under the laws of the State of New York, and any
successors thereto.
Certificate Insurer Default: (i) Any failure of the Certificate Insurer to make
a payment required under the Certificate Insurance Policy in accordance with its
terms; (ii) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Certificate Insurer in an
involuntary case or proceeding under any applicable United States federal or
state bankruptcy, insolvency, rehabilitation, reorganization or other similar
law or (B) a decree or order adjudging the Certificate Insurer as bankrupt or
insolvent, or approving as properly filed a petition seeking reorganizing,
rehabilitation, arrangement, adjustment or composition of or in respect of the
Certificate Insurer under any applicable United States federal or state law, or
appointing a custodian, receiver, liquidator, rehabilitator, assignee, trustee,
sequestrator or other similar official of the Certificate Insurer or of any
substantial part of its property, or ordering the winding-up or liquidation of
its affairs, and the continuance of any such decree or order for relief or any
such other decree to order unstayed and in each case in effect for a period of
60 consecutive days; or (iii) the commencement by the Certificate Insurer of a
voluntary case or proceeding under any applicable United States federal or state
bankruptcy, insolvency, reorganization or other similar law or of any other case
or proceeding to be adjudicated as bankrupt or insolvent, or the consent of the
Certificate Insurer to the entry of a decree or order for relief in respect of
the Certificate Insurer in an involuntary case or proceeding under any
applicable United States federal or state bankruptcy, insolvency case or
proceeding against the Certificate Insurer, or the filing by the Certificate
Insurer to the filing of such petition or to the appointment of or the consent
possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator
or similar official of the Certificate Insurer or of any substantial part of its
property, or the failure by the Certificate Insurer to pay debts generally as
they become due, or the admission by the Certificate Insurer in writing of its
inability to pay its debts generally as they become due, or the taking of
corporate action by the Certificate Insurer in furtherance of any such action.
Certificate Owner: The Person who is the beneficial owner of a Book-Entry
Certificate.
Certificate Rate: With respect to the Class A-1 Certificates, 6.69% per annum.
With respect to Class A-2 Certificates, 6.97% per annum. With respect to Class
A-3 Certificates, 7.29% per annum. With respect to Class A-4 Certificates, 7.60%
per annum. With respect to Class A-5 Certificates, the lesser of (a) 7.77% per
annum and (b) the Weighted Average Net Loan Rate for such Distribution Date.
3
Certificate Register and Certificate Registrar: The register maintained and the
registrar appointed pursuant to Section 6.2.
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, direction, waiver or request pursuant to this Agreement, (x)
any Class A Certificate registered in the name of the Depositor or any Person
actually known to a Responsible Officer to be an Affiliate of the Depositor and
(y) any Class A Certificate for which the Depositor or any Person actually known
to a Responsible Officer to be an Affiliate of the Depositor is the Certificate
Owner shall be deemed not to be outstanding (unless to the actual knowledge of a
Responsible Officer (i) the Depositor or such Affiliate is acting as trustee or
nominee for a Person who is not an Affiliate of such Depositor and who makes the
voting decision with respect to such Class A Certificates or (ii) the Depositor
or such Affiliate is the Certificate Owner of all the Class A Certificates) and
the Percentage Interest evidenced thereby shall not be taken into account in
determining whether the requisite amount of Percentage Interests necessary to
effect any such consent, direction, waiver or request has been obtained.
Class: With respect to each of Class A-1, Class A-2, Class A-3, Class A-4, Class
A-5, Class B-IO and Class R Certificates, all of the Certificates of such Class.
Class A Certificate: Any certificate executed and authenticated by the Trustee
substantially in the form set forth in Exhibit A and designated as a Class A-1,
Class A-2, Class A-3, Class A-4 or Class A-5 Certificate pursuant to Section
6.1.
Class A Certificateholder: A Holder of a Class A Certificate.
Class A Guaranteed Principal Distribution Amount: With respect to any
Distribution Date, the positive excess, if any, of (i) the Aggregate Class A
Principal Balance as of such Distribution Date (taking into account
distributions allocable to principal on such Distribution Date pursuant to
Section 5.1) over (ii) the Aggregate Loan Balance as of the end of the related
Collection Period.
Class A Monthly Principal Distributable Amount: With respect to any Distribution
Date, the amount (without duplication) equal to the sum of (i) (a) that portion
of all Monthly Payments allocable to principal on the Mortgage Loans, including
all Principal Payments and Curtailments received during the related Collection
Period and (b) the principal portion of Payaheads received by the Master
Servicer in prior Collection Periods intended by the Mortgagor to be applied in
the related Collection Period, (ii) the Loan Balance as of the end of the
immediately preceding Collection Period of all Mortgage Loans that became
Liquidated Mortgage Loans during the related Collection Period, (iii) the
portion of the Purchase Price allocable to principal of all Defective Mortgage
Loans that were repurchased during the related Collection Period, (iv) any
Substitution Adjustment Amounts deposited to the Collection Account pursuant to
Section 2.7(a) on or prior to the previous Determination Date and not yet
distributed and (v) the Distributable Excess Spread for such Distribution Date.
4
Class A Principal Balance: As of any date of determination and Class of Class A
Certificates, the applicable Original Class A Certificate Principal Balance for
such Class reduced by the sum of all amounts previously distributed to the
Certificateholders of such Class in respect of principal on all previous
Distribution Dates.
Class A Principal Distribution: With respect to any Distribution Date, the
excess of (A) the sum of the Class A Monthly Principal Distributable Amount for
such Distribution Date and any Outstanding Class A Principal Carryover Shortfall
as of the close of the preceding Distribution Date over (B) the O/C Reduction
Amount for such Distribution Date.
Class A-1 Certificate: Any certificate executed and authenticated by the Trustee
substantially in the form attached hereto as Exhibit A and designated as a Class
A-1 Certificate pursuant to Section 6.1.
Class A-2 Certificate: Any certificate executed and authenticated by the Trustee
substantially in the form attached hereto as Exhibit A and designated as a Class
A-2 Certificate pursuant to Section 6.1.
Class A-3 Certificate: Any certificate executed and authenticated by the Trustee
substantially in the form attached hereto as Exhibit A and designated as a Class
A-3 Certificate pursuant to Section 6.1.
Class A-4 Certificate: Any certificate executed and authenticated by the Trustee
substantially in the form attached hereto as Exhibit A and designated as a Class
A-4 Certificate pursuant to Section 6.1.
Class A-5 Certificate: Any certificate executed and authenticated by the Trustee
substantially in the form attached hereto as Exhibit A and designated as a Class
A-5 Certificate pursuant to Section 6.1.
Class B-IO Carry Forward Amount: With respect to any Distribution Date, the sum
of the amount, if any, by which (x) the Class B-IO Distribution Amount as of the
immediately preceding Distribution Date exceeded (y) the amount actually
distributed to Holders of the Class B-IO Certificates pursuant to Section
5.1(a)(ii)(C) on such immediately preceding Distribution Date.
Class B-IO Certificate: Any certificate executed and authenticated by the
Trustee substantially set forth in Exhibit B and designated as a Class B-IO
Certificate pursuant to Section 6.1.
Class B-IO Certificateholder: A Holder of a Class B-IO Certificate.
Class B-IO Denomination: The minimum denominations of each Class B-IO
Certificate which shall be a 10% Percentage Interest.
Class B-IO Distribution Amount: With respect to any Distribution Date, the sum
of (i) one-twelfth of the product of (x) the Aggregate Loan Balance as of the
close of business on the last day of the second calendar month prior to such
Distribution Date (or, with respect to the
5
first Distribution Date, the Cut-Off Date Aggregate Loan Balance) and (y) the
excess of (I) the weighted average of the Loan Rates, weighted on the basis of
the Loan Balances of the Mortgage Loans as of the close of business on the last
day of the second calendar month prior to such Distribution Date (or, with
respect to the first Distribution Date, the Cut-Off Date Aggregate Loan Balance)
over (II) the sum (A) the Servicing Fee Rate, (B) the Premium Amount (expressed
as a percentage of such Aggregate Loan Balance), (C) the Trustee Fee Rate, (D)
any Reimbursement Amount (expressed as a percentage of such Aggregate Loan
Balance) and (E) the weighted average of the Certificate Rates for the Class A
Certificates from such Distribution Date, weighted on the basis of the Class A
Principal Balances immediately prior to such Distribution Date, and (ii) the
Class B-IO Carry Forward Amount.
Class Interest Carryover Shortfall: With respect to any Class of Class A
Certificates and any Distribution Date, the amount by which the Class Interest
Distribution for such Class for each prior Distribution Date exceeded the amount
of interest actually distributed on such prior Distribution Dates.
Class Interest Distribution: With respect to any Distribution Date and each
Class of Class A Certificates, the sum of (i) the applicable Class Monthly
Interest Distributable Amount for such Class on such Distribution Date and (ii)
the applicable Outstanding Class Interest Carryover Shortfall for such Class on
such Distribution Date.
Class Monthly Interest Distributable Amount: As to any Distribution Date and
Class of Class A Certificates, interest accrued during the related Interest
Period at the applicable Certificate Rate on the related Class A Principal
Balance immediately prior to such Distribution Date.
Class R Certificate: Any Certificate executed and authenticated by the Trustee
substantially in the form set forth in Exhibit C hereto and designated as a
Class R Certificate pursuant to Section 6.1.
Class R Certificateholder: The Holder of a Class R Certificate.
Closing Date: August 28, 1996.
Code: The Internal Revenue Code of 1986, as the same may be amended from time to
time (or any successor statute thereto).
Collection Account: The Eligible Account created and maintained for the benefit
of the Holders of Certificates pursuant to Section 3.2(b).
Collection Period: With respect to any Distribution Date, the calendar month
immediately preceding the month in which such Distribution Date occurs.
Combined Loan-to-Value Ratio: With respect to any Mortgage Loan as of any date,
the percentage equivalent of the fraction, the numerator of which is the sum of
(i) the Original Loan Balance and (ii) the outstanding principal balance as of
the date of execution of the
6
related original Mortgage of any mortgage loan or mortgage loans the liens of
which are senior or equal in priority to the Mortgage Loan and which is secured
by the same Mortgaged Property and the denominator of which is the Valuation of
the related Mortgaged Property as of the date of the execution of the related
original Mortgage.
Corporate Trust Office: The principal office of the Trustee at which at any
particular time its corporate business shall be administered, which office on
the Closing Date is located at Sixth Street and Marquette Avenue, Minneapolis,
Minnesota 55479.
Curtailment: With respect to a Mortgage Loan, any payment of principal received
during a Collection Period as part of a payment that is in excess of the amount
of the Monthly Payment due for such Collection Period and which is not intended
to satisfy the Mortgage Loan in full, is not a Payahead, is not intended to cure
a delinquency or is not accompanied by an amount of interest representing the
full amount of scheduled interest due on any date or dates in any month or
months subsequent to the month such payment is received.
Custodial Agreement: The Custodial Agreement, dated as of August 1, 1996, by and
among the Trustee, the Seller, the Master Servicer and the Document Custodian.
Cut-Off Date: August 1, 1996.
Cut-Off Date Aggregate Loan Balance: $157,259,098.27.
Cut-Off Date Loan Balance: With respect to any Mortgage Loan, the scheduled
principal balance thereof as of the Cut-Off Date.
Defective Mortgage Loan: Any Mortgage Loan subject to retransfer pursuant to
Section 2.2, 2.6 or 3.1(e).
Depositor: First Union Residential Securitization Transactions, Inc., a North
Carolina corporation, and any successor thereto.
Depository: The initial Depository shall be The Depository Trust Company
("DTC"), the nominee of which is Cede & Co., as the registered Holder of Class
A-1, Class A-2, Class A- 3, Class A-4 and Class A-5 Certificates evidencing
$68,008,000, $34,126,000, $26,157,000, $11,433,000 and $17,535,000,
respectively, in initial aggregate principal amount of such Certificates. The
Depository shall at all times be a "clearing corporation" as defined in Section
8-102(3) of the UCC 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 any Distribution Date, the eighteenth day of
the month in which such Distribution Date occurs (or if such day is not a
Business Day, the Business Day immediately preceding such 18th day).
7
Disqualified Organization: Either (i) the United States, (ii) any state or
political subdivision thereof, (iii) any foreign government, (iv) any
international organization, (v) any agency or instrumentality of any of the
foregoing, (vi) any tax-exempt organization (other than a cooperative described
in Section 521 of the Code) which is exempt from the tax imposed by Chapter 1 of
the Code unless such organization is subject to the tax imposed by Section 511
of the Code, (vii) any organization described in Section 1381(a) (2)(C) of the
Code, or (viii) any other entity designated as a Disqualified Organization by
relevant legislation or regulations amending the REMIC Provisions and in effect
at or proposed to be effective as of the time of the determination. In addition,
a corporation will not be treated as an instrumentality of the United States or
of any state or political subdivision thereof if all of its activities are
subject to tax and a majority of its board of directors is not selected by such
governmental unit. For purposes of this definition, the terms "United States"
and "international organization" shall have the meanings set forth in Section
7701 of the Code.
Distributable Excess Spread: As to any Distribution Date, the lesser of the
amount of related Excess Spread for such Distribution Date and the portion of
such Excess Spread required to be distributed pursuant to Section 5.1(a)(i)(E),
such that the amount of the O/C Amount for such Distribution Date is equal to
the applicable Specified O/C Amount for such Distribution Date.
Distribution Account: The Eligible Account established and maintained by the
Trustee pursuant to Section 5.3.
Distribution Date: The twenty-fifth day of each month, or if such day is not a
Business Day, then the next Business Day, beginning in the month immediately
following the month of the initial issuance of the Certificates.
Document Custodian: The Person designated pursuant to Section 3.16, initially,
First Union National Bank of North Carolina, Trust Department.
Due Date: As to any Mortgage Loan, the day of the month on which the Monthly
Payment is due from the Mortgagor.
Electronic Ledger: The electronic master record of home equity mortgage loans
maintained by the Master Servicer.
Eligible Account: An account that is either (i) maintained with a depository
institution whose short-term debt obligations at the time of any deposit therein
are rated in the highest short-term debt rating category by Standard & Poor's
and are rated P-1 by Moody's, (ii) an account or accounts maintained with a
depository institution with a minimum long-term unsecured debt rating of Baa3 by
Moody's and BBB by S&P, provided that the deposits in such account or accounts
are fully insured by either the BIF or the SAIF, (iii) a segregated trust
account maintained with the corporate trust departments of (A) the Trustee or an
Affiliate of the Trustee in its fiduciary capacity or (B) an institution with
capital and surplus of not less than $50,000,000 and with a minimum long-term
unsecured debt rating of Baa3 by Moody's and BBB by S&P, or (iv) an account
otherwise acceptable to each Rating Agency, the Certificate Insurer, as
evidenced by a letter from each Rating Agency and the
8
Certificate Insurer to the Trustee, without reduction or withdrawal of the then
current ratings of the Certificates provided, however, that no Eligible Account
may at any time be established or maintained with the Depositor or any Affiliate
of the Depositor.
Eligible Investments: One or more of the following (excluding any callable
investments purchased at a premium):
(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) repurchase agreements on obligations specified in
clause (i) maturing not more than three months from the date of
acquisition thereof, provided that the short-term unsecured debt
obligations of the party agreeing to repurchase such obligations are at
the time rated by each Rating Agency in its highest short-term rating
category (which is A-1+ for Standard & Poor's and P-1 for Moody's);
(iii) certificates of deposit, time deposits and
bankers' acceptances (which, if Moody's is a Rating Agency, 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) of any U.S. depository institution or trust company
incorporated under the laws of the United States or any state thereof
and subject to supervision and examination by federal and/or state
banking authorities, provided that the unsecured short-term debt
obligations of such depository institution or trust company at the date
of acquisition thereof have been rated by each of Moody's and Standard
& Poor's in its highest unsecured short-term debt rating category;
(iv) commercial paper (having original maturities of
not more than 90 days) of any corporation incorporated under the laws
of the United States or any state thereof which on the date of
acquisition has been rated by Standard & Poor's and Moody's in their
highest short-term rating categories;
(v) interests in any money market fund which at the
date of acquisition of the interests in such fund and throughout the
time as the interest is held in such fund has a rating of Aaa by
Moody's and either AAAm or AAAm-G by Standard & Poor's; and
(vi) other obligations or securities that are
acceptable to each Rating Agency and the Certificate Insurer as an
Eligible Investment hereunder and will not result in a reduction in the
then current rating of the Certificates, as evidenced by a letter to
such effect from each Rating Agency and the Certificate Insurer and
with respect to which the Master Servicer has received confirmation
that, for tax purposes, the investment complies with the last clause of
this definition;
9
provided 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 provided a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations; and provided, further,
that no instrument described hereunder may be purchased at a price greater than
par if such instrument may be prepaid or called at a price less than its
purchase price prior to its stated maturity.
Eligible Substitute Mortgage Loan: A Mortgage Loan substituted by the Seller for
a Defective Mortgage Loan which must, on the date of such substitution, (i) have
an outstanding Loan Balance (or in the case of a substitution of more than one
Mortgage Loan for a Defective Mortgage Loan, an aggregate outstanding Loan
Balance), equal to or not more than 10% less than the Loan Balance of such
Defective Mortgage Loan; (ii) have a Loan Rate not less than the Loan Rate of
the Defective Mortgage Loan and not more than 1% in excess of the Loan Rate of
such Defective Mortgage Loan; (iii) have a Mortgage of the same or higher level
of priority as the Mortgage relating to the Defective Mortgage Loan at the time
such Mortgage was transferred to the Trust; (iv) have a remaining term to
maturity not more than six months earlier and not later than the remaining term
to maturity of the Defective Mortgage Loan; provided, however, that a Mortgage
Loan that meets all the other requirements of this definition, but has a
remaining term to maturity that is (A) not more than one year longer than that
of the Defective Mortgage Loan and (B) not later than the maturity date of the
latest maturing Mortgage Loan then owned by the Trust, will not fail to qualify
as an Eligible Substitute Mortgage Loan if the Loan Balance of such Mortgage
Loan on the date of such substitution, when added to the Loan Balances
(determined as of the date of the substitution of such loan) that qualified as
Eligible Substitute Mortgage Loans in reliance upon the provisions of this
proviso clause, does not exceed an amount equal to $1,000,000; (v) comply with
each representation and warranty set forth in Section 2.6 (deemed to be made as
of the date of substitution); (vi) have an original Combined Loan-to- Value
Ratio not greater than that of the Defective Mortgage Loan and in no event
greater than 100%; and (vii) have an Original Loan Balance of not greater than
$770,000. More than one Eligible Substitute Mortgage Loan may be substituted for
a Defective Mortgage Loan if such Eligible Substitute Mortgage Loans meet the
foregoing attributes in the aggregate and such substitution is approved in
writing in advance by the Rating Agencies.
Event of Default: As defined in Section 8.1.
Excess O/C Amount: As to any Distribution Date, the amount, if any, by which (i)
the O/C Amount for such Distribution Date exceeds (ii) the Specified O/C Amount
for such Distribution Date.
Excess Spread: With respect to any Distribution Date, the positive excess, if
any, of (x) Available Funds for such Distribution Date over (y) the amount
required to be distributed pursuant to Section 5.1(a)(i)(A)-(D) on such
Distribution Date.
FDIC: The Federal Deposit Insurance Corporation or any successor thereto.
10
FHLMC: The Federal Home Loan Mortgage Corporation.
Final Scheduled Distribution Date: The Distribution Date occurring in September,
2027.
First Lien: With respect to any Mortgage Loan which is a second priority lien,
the mortgage loan relating to the corresponding Mortgaged Property having a
first priority lien.
Foreclosure Proceedings: Proceedings or action for foreclosure, deed in lieu of
foreclosure or trustee's sale with respect to any Mortgage Loan and the related
Mortgaged Property.
Foreclosure Profit: With respect to a Liquidated Mortgage Loan, the amount, if
any, by which (i) the aggregate of its Net Liquidation Proceeds exceeds (ii) the
related Loan Balance (plus accrued and unpaid interest thereon at the applicable
Loan Rate from the date interest was last paid through the date of receipt of
the final Liquidation Proceeds) of such Liquidated Mortgage Loan immediately
prior to the final recovery of its Liquidation Proceeds.
Insurance Agreement: The Insurance Agreement dated as of August 1, 1996 among
the Depositor, the Trustee, the Seller and the Certificate Insurer, including
any amendments and supplements thereto.
Insurance Proceeds: Proceeds paid by any insurer (other than the Certificate
Insurer) pursuant to any insurance policy covering a Mortgage Loan, or amounts
required to be paid by the Master Servicer pursuant to the last sentence of
Section 3.5 hereof, net of any component thereof (i) covering any expenses
incurred by or on behalf of the Master Servicer in connection with obtaining
such proceeds, (ii) that is applied to the restoration or repair of the related
Mortgaged Property, (iii) released to the Mortgagor in accordance with the
Master Servicer's normal servicing procedures or (iv) required to be paid to any
holder of a mortgage senior to such Mortgage Loan.
Insured Payment: With respect to any Distribution Date, an amount equal to the
sum of (a) the amount, if any, by which the Aggregate Class A Interest
Distribution for such Distribution Date exceeds the amount on deposit in the
Distribution Account available to be distributed therefor on such Distribution
Date pursuant to Section 5.1 and (b) (i) if such Distribution Date is not the
Final Scheduled Distribution Date, the Class A Guaranteed Principal Distribution
Amount on such Distribution Date or (ii) if such Distribution Date is the Final
Scheduled Distribution Date, the related Aggregate Class A Principal Balance
(taking into account distributions allocable to principal on such Distribution
Date pursuant to Section 5.1(a)).
Interest Collections: As to any Distribution Date, all payments by or on behalf
of Mortgagors and any other amounts constituting interest (including without
limitation such portion of any payments of the Purchase Price for a Mortgage
Loan, Insurance Proceeds, Net Liquidation Proceeds and any Monthly Advance made
with respect to such Distribution Date as is allocable to interest on the
applicable Mortgage Loan and any portion of Payaheads constituting interest
intended by the Mortgagor for application in the related Collection Period)
collected by the Master Servicer under the Mortgage Loans (excluding any portion
of Payaheads constituting interest intended by the Mortgagor for application in
a subsequent
11
Collection Period, any fees, late charges or similar administrative fees paid by
Mortgagors) during the related Collection Period (net of the Servicing Fee for
such Collection Period and any portion of any Unreimbursed Advance as is
allocable to interest on the applicable Mortgage Loan).
Interest Period: As to any Distribution Date, the calendar month immediately
preceding the month in which such Distribution Date occurs.
Lien: Any mortgage, deed of trust, pledge, conveyance, hypothecation,
assignment, participation, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority right or interest or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement under the UCC (other than
any such financing statement filed for informational purposes only) or
comparable law of any jurisdiction to evidence any of the foregoing.
Liquidated Mortgage Loan: As to any Distribution Date, any Mortgage Loan in
respect of which the Master Servicer has determined, in accordance with the
servicing procedures specified herein, as of the end of the related Collection
Period that all Liquidation Proceeds which it expects to recover with respect to
the disposition of the related Mortgage Loan have been recovered.
Liquidation Expenses: Out-of-pocket expenses (exclusive of overhead) which are
incurred by the Master Servicer in connection with the liquidation of any
Mortgage Loan and not recovered under any insurance policy, such expenses
including, without limitation, legal fees and expenses, any unreimbursed amount
expended pursuant to Section 3.18 (including, without limitation, amounts
advanced to correct defaults on any mortgage loan which is senior to such
Mortgage Loan and amounts advanced to keep current or pay off a mortgage loan
that is senior to such Mortgage Loan) respecting the related Mortgage Loan and
any related and unreimbursed expenditures for real estate property taxes or for
property restoration, preservation or insurance against casualty loss or damage.
Liquidation Loss Amount: With respect to any Distribution Date and any Mortgage
Loan that becomes a Liquidated Mortgage Loan during the related Collection
Period, the excess, if any, of the Loan Balance thereof at the end of such
Collection Period over the Net Liquidation Proceeds applied in reduction of such
Loan Balance.
Liquidation Proceeds: Proceeds (including Insurance Proceeds but not including
amounts drawn under the Certificate Insurance Policy) received in connection
with the liquidation of any Mortgage Loan or related REO or any condemnation or
taking by eminent domain, whether through trustee's sale, foreclosure sale or
otherwise (including rental income).
Liquidation Report: As defined in Section 3.7.
Loan Balance: With respect to each Mortgage Loan, other than a Liquidated
Mortgage Loan, and as of any date of determination, the Cut-Off Date Loan
Balance less all Principal
12
Collections credited against the Loan Balance of such Mortgage Loan. The Loan
Balance of any Liquidated Mortgage Loan shall be deemed to be equal to the Loan
Balance of the related Mortgage Loan as of the final recovery of related
Liquidation Proceeds and a Loan Balance of zero thereafter.
Loan Rate: With respect to any Mortgage Loan as of any day, the per annum rate
of interest applicable under the related Mortgage Note to the calculation of
interest for such day on the Loan Balance.
Majority Holders: The Holder or Holders of each Class of Class A Certificates
evidencing Percentage Interests in excess of 51% in the aggregate and of the
Class B-IO Certificate evidencing Percentage Interests in excess of 51% in the
aggregate.
Monthly Advance: As defined in Section 3.4.
Monthly Payment: For any Collection Period with respect to any Mortgage Loan,
the scheduled monthly payment of principal of and interest due on such Mortgage
Loan that is payable by the Mortgagor under the related Mortgage Note during
such Collection Period (without regard to any rescheduling pursuant to Section
3.2(a)(ii)).
Moody's: Moody's Investors Service, Inc. or its successor in interest.
Mortgage: The mortgage, deed of trust or other instrument creating a first, or
second, lien on an estate in fee simple interest in real property securing a
Mortgage Loan.
Mortgage File: The mortgage documents listed in Section 2.1(a) pertaining to a
particular Mortgage Loan and any additional documents required to be added to
the Mortgage File pursuant to this Agreement.
Mortgage Loan Schedule: With respect to any date, the schedule of Mortgage Loans
included in the Trust on such date. The initial schedule of Mortgage Loans as of
the Cut-Off Date is the schedule set forth herein as Exhibit D, which schedule
sets forth as to each Mortgage Loan (i) the Cut-Off Date Loan Balance, (ii) the
name of the Mortgagor, (iii) the account number, (iv) the lien position of the
related Mortgage, (v) the State and Zip Code in which the Mortgaged Property is
located, (vi) the Loan Rate, (vii) the stated maturity date of the Mortgage
Note, (viii) the Combined Loan-to-Value Ratio, (ix) the Original Loan Balance,
(x) the Due Date, (xi) the remaining number of months to maturity as of the
Cut-Off Date, (xii) the first date on which a Monthly Payment is due, (xiii)
whether the Mortgaged Property is owner occupied or non-owner occupied, (xiv)
whether the Mortgaged Property is a single family residence, two-to-four family
residence, a condominium or other property and (xv) if the Mortgage Loan is a
"balloon loan", the amortization terms (e.g., 30 due in 15). The Mortgage Loan
Schedule will be amended from time to time to reflect the substitution of an
Eligible Substitute Mortgage Loan for a Defective Mortgage Loan from time to
time hereunder.
Mortgage Loans: The mortgage loans that are transferred and assigned to the
Trustee pursuant to Section 2.1 (including, without limitation, all Eligible
Substitute Mortgage Loans
13
that are at any time substituted for any Defective Mortgage Loans), together
with the Related Documents, exclusive of Mortgage Loans that are transferred to
the Seller or the Master Servicer, as the case may be, from time to time
pursuant to Section 2.2, 2.6 or 3.1, as from time to time are held as a part of
the Trust, such mortgage loans originally so held being identified in the
Mortgage Loan Schedule delivered at the Closing Date.
Mortgage Note: With respect to a Mortgage Loan, the note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan.
Mortgaged Property: The underlying property, including real property and
improvements thereon, securing a Mortgage Loan.
Mortgagor: The obligor or obligors under a Mortgage Note.
Net Liquidation Proceeds: With respect to any Liquidated Mortgage Loan,
Liquidation Proceeds net of Liquidation Expenses.
Net Loan Rate: As to any Mortgage Loan, the related Loan Rate less the Servicing
Fee Rate, the Trustee Fee Rate and the Premium Percentage.
Nondisqualification Opinion: An Opinion of Counsel that a contemplated action
will neither cause the REMIC Pool to fail to qualify as a REMIC at any time that
the Certificates are outstanding nor cause a "prohibited transaction" or
"prohibited contribution" tax (as defined in the REMIC Provisions) to be imposed
on the REMIC Pool.
Nonrecoverable Advances: With respect to any Mortgage Loan, (i) any Monthly
Advance previously made and not reimbursed pursuant to Section 3.3(ii), or (ii)
a Monthly Advance proposed to be made in respect of a Mortgage Loan which, in
the good faith business judgment of the Master Servicer, as evidenced by an
Officer's Certificate delivered to the Certificate Insurer, the Seller and the
Trustee no later than the Business Day following such determination, would not
be ultimately recoverable pursuant to Sections 3.3(ii) or 3.3(vii).
O/C Amount: As of any Distribution Date, the excess, if any, of (i) the
Aggregate Loan Balance as of the close of business on the last day of the
related Collection Period over (ii) the Aggregate Class A Principal Balance as
of such Distribution Date (after giving effect to amounts otherwise available in
respect of the Class A Monthly Principal Distribution Amount and Outstanding
Class A Principal Carryover Shortfall, if any, for such Distribution Date).
O/C Reduction Amount: As to any Distribution Date, an amount equal to the lesser
of (i) the Excess O/C Amount for such Distribution Date and (ii) Available Funds
remaining after making the distributions required to be made pursuant to Section
5.1(a)(i)(A) and (B) on such Distribution Date.
Officer's Certificate: A certificate signed by the President, a Senior Vice
President, a Vice President, Assistant Vice President, the Treasurer, Assistant
Treasurer, Controller or Assistant Controller of the Depositor, the Seller, the
Master Servicer or the Document Custodian, as the case may be.
14
Opinion of Counsel: A written opinion of counsel acceptable to the Trustee, who
may be in-house counsel for the Seller, the Master Servicer or the Depositor
(except that any opinion relating to taxation must be an opinion of independent
outside counsel).
Original Class A Certificate Principal Balance: With respect to the Class A-1
Certificates, $68,008,000, with respect to the Class A-2 Certificates,
$34,126,000, with respect to the Class A-3 Certificates, $26,157,000, with
respect to the Class A-4 Certificates, $11,433,000, and with respect to the
Class A-5 Certificates, $17,535,000.
Original Loan Balance: As to any Mortgage Loan, the original principal amount of
such Mortgage Loan outstanding on the date such loan was made.
Outstanding Class A Principal Carryover Shortfall: As to any Distribution Date,
the amount by which the Class A Principal Distribution for each prior
Distribution Date exceeded the amount in respect of principal that is actually
distributed in respect thereof on such prior Distribution Date.
Outstanding Class Interest Carryover Shortfall: As to any Class of Class A
Certificates and any Distribution Date, the amount of Class Interest Carryover
Shortfall for such Distribution Date plus one month's interest thereon, at the
related Certificate Rate, to the extent permitted by law.
Owner: As defined in Section 6.4.
Ownership Interest: With respect to any Certificate, any ownership or security
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, as owner or as pledgee.
Payahead: With respect to any Due Date and Mortgage Loan, a Monthly Payment
received by the Master Servicer with the scheduled Monthly Payment for such Due
Date, intended by the related Mortgagor to be applied on a subsequent Due Date.
Paying Agent: Any paying agent appointed pursuant to Section 6.5.
Percentage Interest: As to any Class A Certificate, the percentage obtained by
dividing the principal denomination of such Certificate by the aggregate of the
principal denominations of all Class A Certificates of the same Class. As to any
Class R Certificate, the percentage stated on the face of such Certificate,
which shall be either 99.999999% or, but only with respect to the Tax Matters
Person Residual Interest held by the Tax Matters Person, 0.000001%.
Permitted Transferee: Any Person other than (i) the United States, a State or
any political subdivision or possession 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 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) or any excess inclusions (as defined in Code Section
860E(c)(1)), with
15
respect to any Class R Certificate (except certain farmers' cooperatives
described in Code Section 521), (iv) rural electric and telephone cooperative
described in Code Section 1381(a)(2)(C), (v) a Person that is not a citizen or
resident of the United States, a corporation, partnership, or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, or an estate or trust whose income from sources without the
United States is includible in gross income for United States federal income tax
purposes regardless or its connection with the conduct of a trade or business
within the United States, and (vi) any other Person so designated in an
Officer's Certificate delivered to the Trustee by the Master Servicer based on
an Opinion of Counsel delivered to the Master Servicer and the Trustee to the
effect that any Transfer to such Person may cause the REMIC Pool or any other
Holder of a Class R Certificate to incur tax liability that would not be imposed
other than on account of such Transfer. The terms "United States," "State" and
"international organization" shall have the meanings set forth in Code Section
7701 or successor provisions. The terms "United States", "State" and
"international organization" shall have the meanings set forth in Code section
7701 or successor provisions. A corporation will not be treated as an
instrumentality of the United States or of any State or political subdivision
thereof if all of its activities are subject to tax, and, with the exception of
the Federal Home Loan Mortgage Corporation, a majority of its board of directors
is not selected by such governmental unit.
Person: Any individual, corporation, partnership, joint venture, limited
liability company, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
Pool Delinquency Rate: As to any Collection Period, the fraction, expressed as a
percentage, the numerator of which is equal to the aggregate Loan Balance of all
Mortgage Loans that are 90 or more days delinquent (including Mortgage Loans in
foreclosure and REO) as of the close of business on the last day of such
Collection Period and the denominator of which is equal to the Aggregate Loan
Balance as of the close of business on the last day of such Collection Period.
Pool Factor: With respect to any Distribution Date and the Mortgage Loans, the
percentage, carried to six places, obtained by dividing the Class A Principal
Balance of a Class of Class A Certificates for such Distribution Date by the
Original Class A Certificate Principal Balance of such Class.
Premium Amount: As to any Distribution Date, the product of the Premium
Percentage and the Aggregate Class A Principal Balance before giving effect to
distributions to be made on such Distribution Date.
Premium Percentage: As defined in the Certificate Insurance Policy.
Prepayment Assumption: A conditional rate of prepayment equal to 4.00% per annum
in the first month of the life of the mortgage loans and an additional 1.45%
(precisely 16/11) (expressed as a percentage per annum) in each month thereafter
until the twelfth month; beginning in the twelfth month and in each month
thereafter during the life of the mortgage loans, a conditional prepayment rate
of 20% per annum each month is assumed.
16
Principal Collections: As to any Distribution Date, all payments by or on behalf
of Mortgagors and any other amounts constituting principal (including without
limitation such portion of any payments of the Purchase Price for any Mortgage
Loan, Insurance Proceeds, Net Liquidation Proceeds and any Monthly Advance as is
allocable to principal of the applicable Mortgage Loan, any portion of Payaheads
constituting principal intended by the Mortgagor for application in the related
Collection Period and any Substitution Adjustment Amounts, but excluding
Foreclosure Profits and any portion of any Unreimbursed Advance as is allocable
to principal of the applicable Mortgage Loan and any portion of Payaheads
constituting principal intended by the Mortgagor for application in any
subsequent Collection Period) collected by the Master Servicer under the
Mortgage Loans during the related Collection Period, including, without
limitation, all Principal Prepayments and Curtailments received during such
Collection Period.
Principal Prepayment: Any payment or other recovery of principal on a Mortgage
Loan equal to the outstanding principal balance thereof, received in advance of
the final scheduled Due Date which is intended to satisfy a Mortgage Loan in
full.
Prospectus: The base prospectus dated August 19, 1996.
Prospectus Supplement: The prospectus supplement dated August 22, 1996 relating
to the offering of the Class A Certificates.
Purchase Agreement: The Mortgage Loan Purchase Agreement, dated as of the
Cut-Off Date, between the Seller, as seller, and the Depositor, as purchaser,
with respect to the Mortgage Loans.
Purchase Price: With respect to any Mortgage Loan to be repurchased or purchased
pursuant to Sections 2.2, 2.6 or 3.1 on any date pursuant to any provision of
this Agreement, an amount equal to the sum of (i) the Loan Balance of such
Mortgage Loan as of the last day of the Collection Period ended immediately
preceding the date of repurchase or purchase, (ii) accrued and unpaid interest
through such Collection Period computed at the applicable Loan Rate on the Loan
Balance calculated as set forth in clause (i) of this definition, (iii) any
delinquent interest on such Mortgage Loan as to which no Monthly Advance has
been made, (iv) all Unreimbursed Advances relating to such Mortgage Loan and (v)
all amounts owed to the Certificate Insurer in respect of any portion of any
Insured Payment that relates to such Mortgage Loan.
Qualified Mortgage: Has the meaning from time to time given to that term in
Section 860G(a)(3) of the Code.
Rating Agency: Any statistical credit rating agency, or its successor, that
rated the Class A Certificates at the request of the Depositor at the time of
the initial issuance of the Certificates. If such agency or a successor is no
longer in existence, "Rating Agency" shall be such statistical credit rating
agency, or other comparable Person, designated by the Depositor, notice of which
designation shall be given to the Trustee. References herein to the highest
short term unsecured rating category of a Rating Agency shall mean A-l+ or
better in the case of Standard & Poor's and P-1 or better in the case of Moody's
and in the
17
case of any other Rating Agency shall mean such equivalent ratings. References
herein to the highest long-term rating category of a Rating Agency shall mean
"AAA" in the case of Standard & Poor's and "Aaa" in the case of Moody's and in
the case of any other Rating Agency, such equivalent rating.
Record Date: The last day of the month preceding the month in which the related
Distribution Date occurs.
Reimbursement Amount: With respect to any Distribution Date, the amount required
to be distributed to the Certificate Insurer pursuant to Section 5.1(ii)(A) and
(B) on such Distribution Date.
Related Documents: As defined in Section 2.1(a).
REMIC: A "real estate mortgage investment conduit" within the meaning of Section
860D of the Code.
REMIC Pool: The Trust Assets and the Certificate Insurance Policy.
REMIC Provisions: The provisions of the federal income tax law relating to real
estate mortgage investment conduits, which appear in Sections 860A through 860G
of Subchapter M of Chapter 1 of the Code, and related provisions, and Treasury
regulations promulgated thereunder, as the foregoing may be in effect from time
to time.
REO: A Mortgaged Property that is acquired by the Trustee in foreclosure or by
deed in lieu of foreclosure.
Replacement Event: As defined in Section 4.3.
Responsible Officer: When used with respect to any Person, any officer of such
Person with direct responsibility for the administration of this Agreement and
also, with respect to a particular matter, any other officer to whom such matter
is referred because of such officer's knowledge of and familiarity with the
particular subject.
Rolling Three Month Delinquency Rate: As to any Distribution Date, the average
of the Pool Delinquency Rates for each of the three (or one and two in the case
of the first and second Distribution Dates) immediately preceding Collection
Periods.
SAIF: The Savings Association Insurance Fund, as from time to time constituted,
created under the Financial Institutions Reform, Recovery and Enhancement Act of
1989, or if at any time after the execution of this instrument the Savings
Association Insurance Fund is not existing and performing duties now assigned to
it, the body performing such duties on such date.
Servicer Removal Right Event: The occurrence of:
18
(i) on any Distribution Date, the Rolling Three Month Delinquency Rate
exceeds 6.0%; or
(ii) (A) on any Distribution Date on or prior to the Distribution Date
that is the fifth anniversary of the initial Distribution Date, the Total Losses
exceed 3.5% of the CutOff Date Aggregate Loan Balance; or (B) on any
Distribution Date on or prior to the Distribution Date that is the tenth
anniversary of the initial Distribution Date, Total Losses exceed 4.5% of the
Cut-Off Date Aggregate Loan Balance.
Servicing Advances: All reasonable and customary unanticipated "out of pocket"
costs and expenses incurred in the performance by the Master Servicer or a
Subservicer of its servicing obligations, including, but not limited to, the
cost of (i) the preservation, restoration and protection of the Mortgaged
Property, (ii) any enforcement or judicial proceedings, including foreclosures,
(iii) compliance with the obligations under Sections 3.5, 3.7 and 3.19 and (iv)
in connection with the liquidation of a Mortgage Loan, expenditures relating to
the purchase or maintenance of the first lien pursuant to Section 3.18, all of
which reasonable and customary unanticipated out-of-pocket costs and expenses
are reimbursable to the extent provided in Sections 3.3(ii) and 3.3(vii) and
3.7.
Servicing Certificate: A certificate completed and executed by a Servicing
Officer on behalf of the Master Servicer in accordance with Section 4.1.
Servicing Compensation: The Servicing Fee and other amounts to which the Master
Servicer is entitled pursuant to Section 3.9.
Servicing Fee: With respect to any Collection Period, the product of (i) the
Servicing Fee Rate divided by 12 and (ii) the Aggregate Loan Balance of the
Mortgage Loans as of the first day of such Collection Period.
Servicing Fee Rate: 0.50% per annum.
Servicing Officer: Any officer of the Master Servicer or a Subservicer involved
in, or responsible for, the administration and servicing of the Mortgage Loans
whose name and specimen signature appear on a list of servicing officers
furnished to the Trustee and the Certificate Insurer by the Master Servicer, as
such list may be amended from time to time.
Single-Family Residence: Has the meaning from time to time given to that term in
Section 25(e)(10) of the Code.
Specified O/C Amount: As to any Distribution Date, the greatest of:
(i) (a) for any Distribution Date prior to the Step Down Date the Base
O/C Amount and (b) for any Distribution Date occurring on or after the Step Down
Date, the lesser of (A) the Base O/C Amount and (B) two (2) times the product of
the Base O/C Percentage and the Aggregate Loan Balance as of the close of
business on the last day of the related Collection Period;
19
(ii) the product of (x) the excess, if any, of the Rolling Three Month
Delinquency Rate for such Distribution Date over 2.00% and (y) the Aggregate
Loan Balance as of the close of business on the last day of the related
Collection Period;
(iii) with respect to the Distribution Dates after the Spread Holiday
Expiration Date, the sum of the Loan Balances of the five (5) largest Mortgage
Loans as of the close of business on the last day of the related Collection
Period; and
(iv) an amount equal to the product of (x) the Cut-Off Date Aggregate
Loan Balance and (y) .25%, which is $393,147.75.
Spread Holiday Expiration Date: The fifth (5th) Distribution Date after the
Distribution Date on which the Base O/C Amount equals or exceeds $750,000.
Standard & Poor's: Standard & Poor's Ratings Group, a division of McGraw-Hill,
Inc. or its successor in interest.
Step Down Date: The later to occur of (i) the first date on which the Aggregate
Loan Balance is less than or equal to $78,629,500 and (ii) the thirtieth
Distribution Date provided, however, that, if on the Step Down Date either
(a)(I) the Aggregate Loan Balances of all Mortgage Loans that were 60 or more
days past due on average during the six month period preceding the Step Down
Date exceeded 4.00% and are less than 8.00% of the Aggregate Loan Balance, and
(II) the Total Losses since the Cut-Off Date exceeded 4.50% of the CutOff Date
Aggregate Loan Balance or (b)(I) the aggregate Loan Balances of all Mortgage
Loans that were 60 or more days past due on average during the six month period
preceding the Step Down Date exceeded 8.00% of the Cut-Off Date Aggregate Loan
Balance and (II) the Total Losses since the Cut-Off Date exceeded 2.00% of the
Cut-Off Date Aggregate Loan Balance, then the Step Down Date shall not occur
until such time as the foregoing tests have been met for any six consecutive
month period (calculated as of a Distribution Date).
Subordinate Certificates: The Class B-IO and Class R Certificates.
Subservicer: First Union Mortgage Corporation and any other Person with whom the
Master Servicer has entered into an arrangement to service the Mortgage Loans.
Substitution Adjustment Amount: As to any Collection Period related to the
Distribution Date with respect to which the Seller or the Master Servicer
substitutes one or more Eligible Substitute Mortgage Loans pursuant to any
provision hereof, the amount, if any, by which (i) the aggregate Loan Balances
at the end of such Collection Period of all such Eligible Substitute Mortgage
Loans being added to the Trust is less than (ii) the aggregate Loan Balances at
the end of such Collection Period of the related Mortgage Loans being removed
from the Trust, such amount to be deposited into the Collection Account as
provided in Section 2.7(a).
Tax Matters Person: The Person designated by Section 11.1(a) as the "tax matters
person" of the REMIC Pool as required by and in conformity with Treasury
regulations Section 1.860F-4(d).
20
Tax Matters Person Residual Interest: A 0.000001% interest in the Class R
Certificates, which shall be issued to and held by the Tax Matters Person.
Total Losses: On any Distribution Date, the sum of the aggregate of all
Liquidation Loss Amounts through and including such Distribution Date.
Transfer: Any direct or indirect transfer, sale, pledge, hypothecation or other
form of assignment of any Ownership Interest in a Certificate.
Transfer Date: With respect to any Mortgage Loan transferred to or retransferred
from the Trust hereunder, the date on which such transfer or retransfer is made
under the terms hereof, which date shall be the Closing Date in the case of all
of the Mortgage Loans originally listed on the Mortgage Loan Schedule.
Trust: The trust created by this Agreement.
Trust Assets: As specified in Section 2.1.
Trustee: Norwest Bank Minnesota, National Association and its successors in
interest or any successor Trustee appointed in accordance with this Agreement
that has accepted such appointment in accordance with this Agreement.
Trustee Fee: As to an Distribution Date, an amount equal to the product of the
Trustee Fee Rate and the Class A Certificate Balance as of the first day of the
preceding Collection Period.
Trustee Fee Rate: 0.01625% per annum.
Unreimbursed Advances: With respect to any Distribution Date, an amount equal to
the aggregate of all Monthly Advances made on prior Distribution Dates that have
not been reimbursed to the Master Servicer.
Updated Combined Loan-to-Value Ratio: As to any Mortgage Loan with respect to
which the Master Servicer consents to the placement of a senior lien on the
related Mortgaged Property pursuant to Section 3.1, the fraction, expressed as a
percentage, the numerator of which is the sum of (i) the Loan Balance of such
Mortgage Loan immediately following such placement and (ii) the unpaid principal
balance of the related first mortgage loan immediately following such placement,
and the denominator of which is the Valuation of the related Mortgaged Property
based upon the drive-by appraisal or other estimate of the value made by or on
behalf of the Trust at the time of and in connection with such consent.
Valuation: With respect to any Mortgaged Property at any time referred to
herein, the appraised value of the Mortgaged Property based upon the most recent
appraisal made by or on behalf of the Master Servicer or the originator of the
related Mortgage Loan.
Voting Rights: The portion of the aggregate voting rights of all the
Certificates evidenced by a Certificate. At all times during the term of this
Agreement, 100% of the Voting Rights
21
shall be allocated among Holders of the Class A Certificates in proportion to
the Original Class Certificate Principal Balances of their respective Classes.
The Holders of the Subordinate Certificates shall have no Voting Rights.
Weighted Average Net Loan Rate: As to any Distribution Date, the average of the
Net Loan Rates applicable to interest due on the Mortgage Loans during the
related Collection Period, weighted on the basis of the related Loan Balances as
of the first day of the related Collection Period.
Section 1.2. Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in Section
1.1, and accounting terms partly defined in Section 1.1 to the extent not
defined, shall have the respective meanings given to them under generally
accepted accounting principles or regulatory accounting principles, as
applicable. To the extent that the definitions of accounting terms herein are
inconsistent with the meanings of such terms under generally accepted accounting
principles or regulatory accounting principles, the definitions contained herein
shall control.
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; the word "including" when
used in this Agreement is intended to be illustrative and not exclusive;
Section, subsection, paragraph, clause and Exhibit references contained in this
Agreement are references to Sections, subsections, paragraphs, clauses and
Exhibits in or to this Agreement unless otherwise specified; and the definitions
of terms set forth herein are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as the feminine and neuter
genders of such terms.
Section 1.3. Interest Calculations.
All calculations of interest hereunder that are made in respect of the
Loan Balance of a Mortgage Loan shall be made on the basis of a 360-day year
consisting of twelve 30-day months. All calculations of interest on the
Certificates shall be made on the basis of a 360- day year consisting of twelve
30-day months. The calculation of the Servicing Fee shall be made on the basis
of a 360-day year consisting of twelve 30-day months. All dollar amounts
calculated hereunder shall be rounded to the nearest penny with one-half of one
penny being rounded down.
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ARTICLE 2.
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.1. Conveyance of Mortgage Loans.
(a) The Depositor, concurrently with the execution and delivery of this
Agreement, does hereby sell, transfer, assign, set over and otherwise convey to
the Trust without recourse (subject to Sections 2.3 and 2.6), (i) all of its
right, title and interest in and to each Mortgage Loan (including all
substitutions therefor), including its Cut-Off Date Loan Balance and all
collections in respect thereof received on or after the Cut-Off Date (exclusive
of payments in respect of principal and interest on the Mortgage Loans due prior
to the CutOff Date and received thereafter but including any Payaheads received
prior to the Cut-Off Date relating to a Due Date occurring after the Cut-Off
Date), (ii) any Mortgaged Property converted to ownership through Foreclosure
Proceedings or otherwise, (iii) any insurance policies related to the Mortgage
Loans, (iv) all rights under any guaranty executed in connection with a Mortgage
Loan; (v) the related Mortgage Notes, Mortgages and other documents related to
the Mortgage Loans, (vi) all other assets included or to be included in the
Trust for the benefit of the Certificateholders, (vii) the Collection Account
and the Distribution Account and all funds and other assets deposited therein
and all instruments, securities (including, without limitation, Eligible
Investments) or other property in which the Collection Account and the
Distribution Account may be invested in whole or in part from time to time,
including all amounts from time to time on deposit therein (other than
investment income earned on such Eligible Investments); (viii) the Depositor's
rights under the Purchase Agreement, including, without limitation, the
representations and warranties of the Seller thereunder together with all rights
of the Depositor to require the Seller to cure any breach thereof or to
repurchase or substitute for any affected Mortgage Loan in accordance with the
Purchase Agreement and (ix) the proceeds of all of the foregoing (all of the
foregoing being referred to as the "Trust Assets"). In addition, on or prior to
the Closing Date, the Depositor shall cause the Certificate Insurer to deliver
the Certificate Insurance Policy to the Trustee. The foregoing sale, transfer,
assignment, set over and conveyance does not and is not intended to result in a
creation or an assumption by the Trustee of any obligation of the Depositor, the
Seller or any other Person in connection with the Mortgage Loans or any
agreement or instrument relating thereto except as specifically set forth
herein.
In connection with such transfer, assignment and conveyance by the
Depositor, the Seller shall deliver to, and deposit with the Document Custodian,
on or before the Closing Date and, subject to the provisions of Sections 3.16
and 3.17, the Document Custodian shall retain, the following documents or
instruments with respect to each Mortgage Loan (the "Related Documents"):
(i) the original Mortgage Note, endorsed "Pay to the
order of _________________, without recourse," signed in the name of
the Seller by an authorized officer, with all intervening endorsements
showing a complete chain of title from the originator of such Mortgage
Loan to the Seller;
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(ii) the original Mortgage, with evidence of recording
thereon, provided, that if the original Mortgage has been delivered for
recording to the appropriate public recording office of the
jurisdiction in which the Mortgaged Property is located but has not yet
been returned to the Seller by such recording office, the Seller shall
cause to be delivered to the Document Custodian a certified true copy
of such original Mortgage so certified by the Seller, together with a
certificate of the Depositor certifying that such original Mortgage has
been so delivered to such recording office;
(iii) the original assignment of Mortgage, from the
Seller to "Norwest Bank Minnesota, National Association, as trustee for
the registered holders from time to time of First Union Residential
Securitization Transactions, Inc. Home Equity Loan Asset-Backed
Certificates, Series 1996-1," which assignment shall be in form and
substance acceptable for recording;
(iv) the original attorney's opinion of title or the
original policy of title insurance, provided, that if any such original
policy of title insurance has not yet been received by the Seller, the
Seller shall cause to be delivered to the Document Custodian a copy of
such policy or a title insurance binder or commitment for the issuance
of such policy;
(v) originals of all intervening assignments of
Mortgage, with evidence of recording thereon, showing a complete chain
of title from the originator to the Seller, provided, that if any such
original intervening assignment of Mortgage has been delivered for
recording to the appropriate public recording office of the
jurisdiction in which the Mortgaged Property is located but has not yet
been returned to the Seller by such recording office, the Seller may
have delivered to the Document Custodian a certified true copy of such
original assignment of Mortgage so certified by the Seller, together
with a certificate of the Seller certifying that such original
assignment of Mortgage has been so delivered to such recording office;
and
(vi) originals of all assumption and modification
agreements, if any;
provided, however, the Seller may deliver to the Document Custodian all Related
Documents other than those referred to in clause (i) above (except for those
Mortgage Loans listed on Exhibit N which may be delivered within 30 days after
the Closing Date) within 60 days after the Closing Date.
In all such instances, the Seller will deliver or cause to be delivered
the original recorded Mortgage to the Document Custodian promptly upon receipt
of the original recorded Mortgage.
The Seller hereby confirms to the Trustee that it has caused the
portions of the Electronic Ledger relating to the Mortgage Loans to be clearly
and unambiguously marked, and made the appropriate entries in its general
accounting records to indicate that such Mortgage Loans have been transferred to
the Trustee and constitute part of the Trust in accordance with the terms of the
trust created hereunder. The Electronic Ledger shall
24
indicate that the Mortgage Loans are held by the Document Custodian as custodian
for the Trustee with respect to the FURST Home Equity Loan Trust 1996-1.
The Depositor and the Trustee intend that the assignment and transfer
herein contemplated constitute a sale of the Mortgages, the Mortgage Notes and
the Related Documents, conveying good title thereto free and clear of any liens
and encumbrances, from the Depositor to the Trustee and that such property not
be part of the Depositor's estate or property of the Depositor in the event of
any insolvency by the Depositor. In the event that such conveyance is deemed to
be, or to be made as security for, a loan, the parties intend that the Depositor
shall be deemed to have granted to the Trustee a first priority perfected
security interest in all of the Depositor's right, title and interest in and to
the Mortgages, the Mortgage Notes and the Related Documents, and that this
Agreement shall constitute a security agreement under applicable law.
In connection with such assignment, transfer, sale and conveyance, the
Seller shall file, on or prior to the Closing Date, in the appropriate office of
any applicable state, county or other relevant jurisdiction, a UCC-1 financing
statement executed by the Seller as debtor, naming the Depositor as secured
party (and indicating that the security interest in such loans has been assigned
to the Trustee) and listing as collateral the Mortgages, the Mortgage Notes, the
Related Documents and other property constituting the Trust. The
characterization of the Seller as "debtor" and the Depositor as "secured party"
in any such financing statement is solely for protective purposes and shall in
no way be construed as being contrary to the intent of the parties that either
the transfer of the Mortgage Loans by the Seller to the Depositor and the
transfer of the Mortgage Loans by the Depositor to the Trust be treated as a
sale to the Depositor and Trust, respectively, of the respective transferor's
entire right, title and interest in and to the property specified in the
preceding sentence. In connection with such filing, the Seller shall cause to be
filed all necessary continuation statements thereof and amendments thereto and
take or cause to be taken such actions and execute such documents as are
necessary to continue the perfection and protect the Certificateholders'
interest in such property.
(b) The Seller shall use its best efforts, within 30 days of the
occurrence of an Assignment Event, and in any event within 60 days of the
occurrence of an Assignment Event, at its own expense, shall either (i) record
the assignment of each Mortgage in favor of the Trustee in the appropriate real
property office or other records office or (ii) deliver to the Trustee the
assignment of each Mortgage in favor of the Trustee in form for recordation,
together with an Opinion of Counsel to the effect that recording is not required
to protect the Trustee's right, title and interest in and to the related
Mortgage Loan or, in the event a court should recharacterize the conveyance of
the Mortgage Loans as a loan or a security for a loan, to perfect a first
priority security interest in favor of the Trustee in the related Mortgage Loan.
With respect to any Assignment of Mortgage as to which the related recording
information is unavailable within the applicable time period set forth above,
such Assignment of Mortgage shall be submitted for recording within 30 days
after receipt of such information but in no event later than one year after the
date such Assignment of Mortgage is otherwise required to be recorded pursuant
to this Section. The Trustee shall be required to retain a copy of each
Assignment of Mortgage submitted for recording. In the event that any such
Assignment of Mortgage is lost or returned unrecorded because of a defect
therein, the
25
Seller shall promptly prepare a substitute Assignment of Mortgage or cure such
defect, as the case may be, and thereafter the Depositor shall be required to
submit each such Assignment of Mortgage for recording. Any failure of the Seller
to comply with this Section 2.1(b) shall result in the obligation of the Seller
to purchase or substitute for the related Mortgage Loans pursuant to the
provisions of Section 2.2.
(c) The Document Custodian agrees, for the benefit of
Certificateholders and the Trustee, within 60 days after delivery to it of the
Mortgage Files and the Related Documents hereof to review the Mortgage Files to
ascertain that all required documents set forth in paragraphs (i) - (v) of
Section 2.1(a) have been executed and received, and that the Mortgage Notes have
been endorsed without recourse and in blank, and that such documents relate to
the Mortgage Loans identified on the Mortgage Loan Schedule and in so doing the
Document Custodian may rely on the purported due execution and genuineness of
any signature thereon. If within such 60-day period the Document Custodian finds
any document constituting a part of a Mortgage File not to have been executed or
received or to be unrelated to the Mortgage Loans identified in said Mortgage
Loan Schedule or, if in the course of its review, the Document Custodian
determines that such Mortgage File is otherwise defective in any material
respect, the Document Custodian shall promptly upon the conclusion of its review
of all of the Mortgage Files notify the Trustee, the Certificate Insurer, the
Depositor and the Seller, and the Seller shall have a period of 60 days after
such notice within which to correct or cure any such defect; provided, however,
that if such defect shall not have been corrected or cured within such 60-day
period due primarily to the failure of the related office of real property or
other records to return any document constituting a part of a Mortgage File, the
Seller shall so notify the Document Custodian and the Trustee in writing and the
period during which such defect may be corrected or cured shall be extended
until such time as any such documents are returned from such related office (in
no event, however, will such period extend beyond one (1) year from the date of
discovery of such defect); provided that prior to any such extension the Seller
shall deliver to the Document Custodian a true copy of such document with a
certification by the Seller on the face of such copy substantially as follows:
"certified true and correct copy of original which has been transmitted for
recordation."
(d) The Document Custodian shall have no responsibility for reviewing
any Mortgage File except as expressly provided in subsection (c) of Section 2.1.
Without limiting the effect of the preceding sentence, in reviewing any Mortgage
File pursuant to such subsection, the Document Custodian and the Trustee shall
have no responsibility for determining whether any document is valid and
binding, whether the text of any assignment or endorsement is in proper or
recordable form (except, if applicable, to determine if the Trustee is the
assignee), whether any document has been recorded in accordance with the
requirements of any applicable jurisdiction, but shall only be required to
determine whether a document has been executed, that it appears to be what it
purports to be, and, where applicable, that it purports to be recorded, but
shall not be required to determine whether any Person executing any document is
authorized to do so or whether any signature thereon is genuine. In addition,
with respect to documents referred to in clause (vi) of Section 2.1(a), the
Document Custodian shall only be obligated to identify whether any such
documents are included in the Mortgage File for each Mortgage Loan.
26
Section 2.2. Acceptance by Trustee; Retransfer of Mortgage Loans.
(a) The Trustee hereby acknowledges its receipt of the Certificate
Insurance Policy and the sale and assignment of the Mortgage Loans and the
Related Documents pursuant to the terms of this Agreement and declares that the
Trustee holds and will hold such documents (to the extent required to be held by
the Trustee hereunder) and all amounts received by it thereunder and hereunder
in trust, upon the terms herein set forth, for the use and benefit of all
present and future Certificateholders.
(b) If the time to correct or cure any defect of which the Trustee or
the Document Custodian, as the case may be, has notified the Seller following
review of the Mortgage Files by the Trustee or the Document Custodian, as the
case may be, has expired without any correction or cure, the Seller shall, two
Business Days immediately preceding the Distribution Date in the month following
the Collection Period in which the time to correct or cure such defect expired,
repurchase the related Mortgage Loan (including any property acquired in respect
thereof and any insurance policy or Insurance Proceeds with respect thereto)
from the Trust at a price equal to the Purchase Price, which amount shall be
deposited into the Collection Account pursuant to Section 3.2 on such Business
Day or substitute an Eligible Substitute Mortgage Loan for such Mortgage Loan in
accordance with Section 2.7. Promptly upon receipt by the Trustee of written
notification signed by a Servicing Officer to the effect that the Purchase Price
for any such Mortgage Loan has been so deposited into the Collection Account,
the Document Custodian shall release to the Seller the Mortgage File for the
repurchased Mortgage Loan and the Trustee shall execute and deliver to the
Seller an assignment substantially in the form of Exhibit E, without recourse,
in order to vest in the Seller legal and beneficial ownership of such
repurchased or removed Mortgage Loan (including any property acquired in respect
thereof and any insurance policy or Insurance Proceeds with respect thereto).
The form of assignment attached as Exhibit E may be modified from time to time
to the extent required by applicable law, as evidenced by an Opinion of Counsel
delivered to the Trustee, it being understood that the Trustee shall have no
responsibility for determining the sufficiency of such assignment for its
intended purpose. The obligation of the Seller to repurchase or substitute for
any Mortgage Loan shall constitute the sole remedy with respect to such defect
available to Certificateholders or the Trustee against the Seller on behalf of
Certificateholders. An Opinion of Counsel to the effect set forth in Section
2.7(d) shall be delivered to the Trustee in connection with any such repurchase.
Section 2.3. Representations and Warranties of the Depositor.
(a) The Depositor represents and warrants to the Trustee on behalf of the
Certificateholders as follows:
(i) This Agreement constitutes a legal, valid and
binding obligation of the Depositor, enforceable against the Depositor
in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect affecting the enforcement
of creditors' rights in general and except as such enforceability may
be limited by general principles of equity (whether considered in a
proceeding at law or in equity);
27
(ii) Immediately prior to the sale and assignment by
the Depositor to the Trustee of each Mortgage Loan, the Depositor has
good and marketable title to each Mortgage Loan (insofar as such title
was conveyed to it by the Depositor) subject to no prior lien, claim,
participation interest, mortgage, security interest, pledge, charge or
other encumbrance or other interest of any nature;
(iii) As of the Closing Date, the Depositor has
transferred all right, title and interest in the Mortgage Loans to the
Trustee; and
(iv) The Depositor has not transferred the Mortgage
Loans to the Trustee with any intent to hinder, delay or defraud any of
its creditors.
Section 2.4. Representations and Warranties Regarding the Master
Servicer.
The Master Servicer represents and warrants to the Trustee on behalf of
the Certificateholders that as of the Closing Date:
(i) It is a national banking association, validly
existing and in good standing under the laws of the United States of
America and has the requisite power and authority to own its assets and
to transact the business in which it is currently engaged. It is duly
qualified to do business and is in good standing in each jurisdiction
in which the character of the business transacted by it or properties
owned or leased by it requires such qualification and in which the
failure so to qualify would have a material adverse effect on (a) its
business, properties, assets, or condition (financial or other), (b)
its performance of its obligations under this Agreement, (c) the value
or marketability of the Mortgage Loans and (d) the ability to foreclose
on the related Mortgaged Properties;
(ii) It has the power and authority to make, execute,
deliver and perform this Agreement and all of the transactions
contemplated under the Agreement, and has taken all necessary action to
authorize the execution, delivery and performance of this Agreement.
When executed and delivered, this Agreement will constitute its legal,
valid and binding obligation enforceable in accordance with its terms,
except as enforcement of such terms may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors'
rights generally and by the availability of equitable remedies;
(iii) It holds all necessary licenses, certificates and
permits from all government authorities necessary for conducting its
business as it is presently conducted. It is not required to obtain the
consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any
governmental authority, bureau or agency in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement, except for such consents, licenses, approvals or
authorizations, or registrations or declarations, as shall have been
obtained or filed, as the case may be, prior to the Closing Date;
28
(iv) The execution, delivery and performance of this
Agreement by it will not conflict with or result in a breach of, or
constitute a default under, any provision of any existing law or
regulation or any order or decree of any court applicable to it or any
of its properties or any provision of its Articles of Association or
Bylaws, or constitute a material breach of, or result in the creation
or imposition of any lien, charge or encumbrance upon any of its
properties pursuant to, any mortgage, indenture, contract or other
agreement to which it is a party or by which it may be bound;
(v) Neither this Agreement nor the Prospectus nor any
statement, report or other document prepared by the Master Servicer and
furnished or to be furnished pursuant to this Agreement or in
connection with the transactions contemplated hereby contains any
untrue statement of material fact or omits to state a material fact
necessary to make the statements contained herein or therein not
misleading;
(vi) The Master Servicer 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, which
default might have consequences that would materially and adversely
affect the condition (financial or other) or operations of the Master
Servicer or its properties or might have consequences that would
adversely affect its performance hereunder or under any subservicing
agreement;
(vii) The collection practices used by the Master
Servicer with respect to each Mortgage Note and Mortgage have been in
all material respects legal, proper, prudent and customary in the
mortgage origination and servicing business and in compliance with the
Master Servicer's underwriting criteria as described in the Prospectus;
(viii) No litigation or administrative proceeding of or
before any court, tribunal or governmental body is currently pending,
or to its knowledge threatened, against it or any of its properties or
with respect to this Agreement or the Certificates which in its opinion
has a reasonable likelihood of resulting in a material adverse effect
on the transactions contemplated by this Agreement; and
(ix) The transactions contemplated by this Agreement
are in the ordinary course of business of the Master Servicer.
It is understood and agreed that the representations and warranties set
forth in this Section 2.4 shall survive delivery of the Mortgage Files to the
Document Custodian or the Trustee.
Upon discovery by the Seller, the Certificate Insurer, the Master
Servicer, the Depositor or the Trustee, as the case may be, of a breach of any
representations and warranties which materially and adversely affects the
interests of the Certificateholders, the Person discovering such breach shall
give prompt written notice to the other parties. Within 60 days of its discovery
or its receipt of notice of breach, or, with the prior written consent
29
of a Responsible Officer of the Trustee, such longer period specified in such
consent, the Master Servicer shall cure such breach in all material respects.
Section 2.5. Representations and Warranties Regarding the Seller.
The Seller represents and warrants to the Trustee on behalf of the
Certificateholders that as of the Closing Date:
(i) It is a national banking association, validly
existing and in good standing under the laws of the United States of
America and has the requisite power and authority to own its assets and
to transact the business in which it is currently engaged. It is duly
qualified to do business and is in good standing in each jurisdiction
in which the character of the business transacted by it or properties
owned or leased by it requires such qualification and in which the
failure so to qualify would have a material adverse effect on (a) its
business, properties, assets, or condition (financial or other), (b)
its performance of its obligations under this Agreement, (c) the value
or marketability of the Mortgage Loans and (d) the ability to foreclose
on the related Mortgaged Properties;
(ii) It has the power and authority to make, execute,
deliver and perform this Agreement and all of the transactions
contemplated under the Agreement, and has taken all necessary action to
authorize the execution, delivery and performance of this Agreement.
When executed and delivered, this Agreement will constitute its legal,
valid and binding obligation enforceable in accordance with its terms,
except as enforcement of such terms may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors'
rights generally and by the availability of equitable remedies;
(iii) It holds all necessary licenses, certificates and
permits from all government authorities necessary for conducting its
business as it is presently conducted. It is not required to obtain the
consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any
governmental authority, bureau or agency in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement, except for such consents, licenses, approvals or
authorizations, or registrations or declarations, as shall have been
obtained or filed, as the case may be, prior to the Closing Date;
(iv) The execution, delivery and performance of this
Agreement by it will not conflict with or result in a breach of, or
constitute a default under, any provision of any existing law or
regulation or any order or decree of any court applicable to it or any
of its properties or any provision of its Articles of Association or
Bylaws, or constitute a material breach of, or result in the creation
or imposition of any lien, charge or encumbrance upon any of its
properties pursuant to, any mortgage, indenture, contract or other
agreement to which it is a party or by which it may be bound;
30
(v) No litigation or administrative proceeding of or
before any court, tribunal or governmental body is currently pending,
or to its knowledge threatened, against it or any of its properties or
with respect to this Agreement or the Certificates which in its opinion
has a reasonable likelihood of resulting in a material adverse effect
on the transactions contemplated by this Agreement;
(vi) Neither this Agreement nor the Prospectus nor any
statement, report or other document prepared by the Seller and
furnished or to be furnished pursuant to this Agreement or in
connection with the transactions contemplated hereby contains any
untrue statement of material fact or omits to state a material fact
necessary to make the statements contained herein or therein not
misleading;
(vii) The Seller 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, which default might
have consequences that would materially and adversely affect the
condition (financial or other) or operations of the Seller or its
properties or might have consequences that would adversely affect its
performance hereunder;
(viii) The transfer, assignment and conveyance of the
Mortgage Notes and the Mortgages by the Seller pursuant to this
Agreement are not subject to the bulk transfer laws or any similar
statutory provisions in effect in the State of North Carolina;
(ix) The transactions contemplated by this Agreement
are in the ordinary course of business of the Seller; and
(x) The Seller is not insolvent, nor will it be made
insolvent by the transfer of the Mortgage Loans, nor is the Seller
aware of any pending insolvency.
It is understood and agreed that the representations and warranties set
forth in this Section 2.5 shall survive delivery of the Mortgage Files to
Document Custodian or the Trustee.
Upon discovery by the Depositor, the Certificate Insurer, the Master
Servicer, the Seller, or the Trustee, as the case may be, of a breach of any
representations and warranties which materially and adversely affects the
interests of the Certificateholders, the Person discovering such breach shall
give prompt written notice to the other parties. Within 60 days of its discovery
or its receipt of notice of breach, or, with the prior written consent of a
Responsible Officer of the Trustee, such longer period specified in such
consent, the Seller shall cure such breach in all material respects.
Section 2.6. Representations and Warranties of the Seller Regarding
this Agreement and the Mortgage Loans; Transfer of Certain Mortgage Loans.
(a) The Seller represents and warrants to the Trustee on behalf of the
Certificate- holders as follows:
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(i) The information with respect to each Mortgage
Loan set forth in the Mortgage Loan Schedule is true and correct in all
material respects as of the CutOff Date;
(ii) All of the Related Documents set forth in Section
2.1 (including all material documents related thereto) will have been
delivered to the Document Custodian within the time periods set forth
in Section 2.1. The Mortgage File contains each of the documents and
instruments specified to be included therein duly executed and in due
and proper form, and each such document or instrument is in a form
generally acceptable to prudent mortgage lenders that regularly
originate or purchase mortgage loans comparable to the Mortgage Loans
for sale to prudent investors in the secondary market that invest in
mortgage loans such as the Mortgage Loans;
(iii) (A) Each Mortgaged Property is improved by a
single (one-to-four) family residential dwelling, including, without
limitation, condominiums, townhouses, manufactured homes and mobile
homes. Each mobile home and manufactured home constituting any portion
of any Mortgaged Property constitutes real property under applicable
state law; and (B) each mobile home constituting any portion of any
Mortgaged Property is a Single-Family Residence;
(iv) Each Mortgage Loan is being serviced by the
Master Servicer;
(v) Each Mortgage Note with respect to the Mortgage
Loans will provide for a schedule of substantially level and equal
Monthly Payments which are sufficient to amortize fully the principal
balance of such Mortgage Loan over a period of time equal to the
amortization period of such Mortgage Note; provided, however that
certain Mortgage Loans constituting approximately 42.7% of the Cut-Off
Date Aggregate Loan Balance are balloon loans that provide for a final
monthly payment substantially greater than the preceding monthly
payments. All such balloon loans provide for monthly payment based upon
a 30 year amortization schedule with a final balloon payment at the end
of the 15th year;
(vi) Each Mortgage is a valid and subsisting first or
second lien of record on the Mortgaged Property subject, in the case of
second Mortgage Loan, only to a First Lien on such Mortgaged Property
and subject in all cases to the exceptions to title set forth in the
title insurance policy or attorney's opinion, as the case may be, with
respect to the related Mortgage Loan, which exceptions are generally
acceptable to home equity mortgage lending companies, and such other
exceptions to which similar properties are commonly subject and which
do not individually, or in the aggregate, materially and adversely
affect the benefits of the security intended to be provided by such
Mortgage. Any security agreement, chattel mortgage or equivalent
document related to the Mortgage and delivered to the Document
Custodian on behalf of the Trustee establishes in the Seller a valid
and subsisting lien on the property described therein, and the Seller
has full right to assign the same to the Trustee;
32
(vii) Except with respect to liens released immediately
prior to the transfer herein contemplated, each Mortgage Note and
related Mortgage have not been assigned or pledged and immediately
prior to the transfer and assignment herein contemplated, the Seller
held good, marketable and indefeasible title to, and was the sole owner
and holder of, each Mortgage Loan subject to no liens, charges,
mortgages, claims, participation interests, equities, pledges or
security interests of any nature, encumbrances or rights of others
(collectively, a "Lien"); the Seller has full right and authority under
all governmental and regulatory bodies having jurisdiction over the
Seller, subject to no interest or participation of, or agreement with,
any party, to sell and assign the same pursuant to this Agreement; and
immediately upon the transfer and assignment herein contemplated, the
Seller shall have transferred all of its right, title and interest in
and to each Mortgage Loan to the Depositor (or its assignee) and the
Depositor (or its assignee) will hold good, marketable and indefeasible
title, to, and be the sole owner of, each Mortgage Loan subject to no
Liens;
(viii) None of the Mortgage Loans were 30 or more days
delinquent as of the Cut-Off Date;
(ix) To the best knowledge of the Seller, there is no
delinquent tax, fee or assessment lien on any Mortgaged Property;
(x) No Mortgage Loan is subject to any right of
rescission, set-off, counterclaim or defense, including the defense of
usury, nor will the operation of any of the terms of any Mortgage Note
or Mortgage, or the exercise of any right thereunder, render either the
Mortgage Note or the Mortgage unenforceable in whole or in part, or
subject to any right of rescission, set-off, counterclaim or defense,
including the defense of usury, and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect
thereto;
(xi) (i) There is no mechanics' lien or claim for
work, labor or material affecting the Mortgaged Property which is or
may be a lien prior to, or equal or coordinate with, the lien of the
related Mortgage except those liens which are fully insured against by
the title insurance policy referred to in clause (xiii) below; and (ii)
to the best of its knowledge, each Mortgaged Property is free of
material damage and is in good repair;
(xii) Each Mortgage Loan at the time it was made
complied in all material respects with applicable state and federal
laws and regulations, including, without limitation, usury, equal
credit opportunity, consumer credit, truth-in-lending and disclosure
laws;
(xiii) Either an attorney's opinion of title has been
obtained or a lender's title insurance policy or binder issued in
standard American Land Title Association form by a title insurance
company authorized to transact business in the state in which the
related Mortgaged Property is situated in an amount at least equal to
the original principal balance thereof plus the original principal
balance of any
33
senior lien mortgage that was issued on the date of the origination of
each such Mortgage Loan, subject only to the exceptions of the
character referred to in (vii) above, and each such policy or binder is
valid and remains in full force and effect, and a title search or other
assurance of title customary in the relevant jurisdiction was obtained
with respect to each Mortgage Loan as to which no title insurance
policy or binder was issued;
(xiv) The improvements upon each Mortgaged Property are
covered by a valid and existing hazard insurance policy with a
generally acceptable carrier that provides for fire and extended
coverage representing coverage described in Section 3.5;
(xv) A flood insurance policy is in effect with
respect to each Mortgaged Property with a generally acceptable carrier
in an amount representing coverage described in Section 3.5, if and to
the extent required by Section 3.5;
(xvi) Each Mortgage and Mortgage Note is the legal,
valid and binding obligation of the related Mortgagor and is
enforceable by the Trustee or any co-trustee appointed hereunder
against the Mortgagor in accordance with its terms, except only as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law), and
all parties to each Mortgage Loan and the Mortgagee had full legal
capacity to execute all Mortgage Loan documents and to convey the
estate therein purported to be conveyed;
(xvii) All individual insurance policies contain a
standard mortgagee clause naming the Seller, its successors and
assigns, as mortgagee. All premiums thereon have been paid. Each
Mortgage obligates the Mortgagor thereunder to maintain all such
insurance at the Mortgagor's cost and expense, and upon the Mortgagor's
failure to do so, authorizes the holder of the Mortgage to obtain and
maintain such insurance at the Mortgagor's cost and expense and to seek
reimbursement therefor from the Mortgagor;
(xviii) The terms of the Mortgage Note and the Mortgage
have not been impaired, altered or modified in any material respect,
except by a written instrument which has been recorded or is in the
process of being recorded, if necessary, to protect the interests of
the Certificateholders and the Certificate Insurer and which has been
or will be delivered to the Document Custodian on behalf of the
Trustee. Each original Mortgage was recorded, and all subsequent
assignments of the original Mortgage (other than the assignment to the
Trustee) have been recorded in the appropriate jurisdictions wherein
such recordation is necessary to perfect the lien thereof as against
creditors of the Seller, or is in the process of being recorded;
(xix) No instrument of release or waiver has been
executed in connection with the Mortgage Loan, and no Mortgagor has
been released, in whole or in part;
34
(xx) Any advances made after the date of origination
of a Mortgage Loan but prior to the Cut-Off Date have been consolidated
with the outstanding principal amount secured by the related Mortgage,
and the secured principal amount, as consolidated, bears a single
interest rate and single repayment term reflected on the Mortgage Loan
Schedule. The consolidated principal amount does not exceed the
original principal amount of the related Mortgage Loan. No Mortgage
Note permits or obligates the Master Servicer to make future advances
to the related Mortgagor at the option of the Mortgagor. There are no
defaults in complying with the terms of the Mortgage, and either (1)
any taxes, governmental assessments, insurance premiums, water, sewer
and municipal charges or ground rents which previously became due and
owing have been paid, or (2) an escrow of funds has been established in
an amount sufficient to pay for every such item which remains unpaid
and which has been assessed but is not yet due and payable. Except for
payments in the nature of escrow payments, including without
limitation, taxes and insurance payments, the Seller has not advanced
funds, or induced, solicited or knowingly received any advance of funds
by a party other than the Mortgagor, directly or indirectly, for the
payment of any amount required by the Mortgage Note, except for
interest accruing from the date of the Mortgage Note or date of
disbursement of the Mortgage proceeds, whichever is greater, to the day
which precedes by one month the Due Date of the first installment of
principal and interest;
(xxi) To the best knowledge of the Seller, there is no
proceeding pending or threatened for the total or partial condemnation
of any Mortgaged Property, nor is such a proceeding currently
occurring, and such property is undamaged by waste, fire, earthquake or
earth movement, windstorm, flood, tornado or other casualty, so as to
affect adversely the value of the Mortgaged Property as security for
the Mortgage Loan or the use for which the premises were intended;
(xxii) To the best of its knowledge, no improvement
located on or being part of any Mortgaged Property is in violation of
any applicable zoning law or regulation. All inspections, licenses and
certificates required to be made or issued with respect to all occupied
portions of each Mortgaged Property and, with respect to the use and
occupancy of the same, including but not limited to certificates of
occupancy and fire underwriting certificates, have been made or
obtained from the appropriate authorities and such Mortgaged Property
is lawfully occupied under the applicable law;
(xxiii) The proceeds of each Mortgage Loan have been
fully disbursed, and there is no obligation on the part of the
mortgagee to make future advances thereunder. Any and all requirements
as to completion of any on-site or off-site improvements and as to
disbursements of any escrow funds therefor have been complied with. All
costs, fees and expenses incurred in making or closing or recording the
Mortgage Loans were paid;
(xxiv) No Mortgage Loan was originated under a buydown
plan or under a limited documentation program or is subject to the
requirements of the Home Ownership and Equity Protection Act of 1994;
35
(xxv) There is no obligation on the part of the Seller
or any other party to make payments in addition to those made by the
Mortgagor;
(xxvi) No Mortgage Loan has a shared appreciation
feature, or other contingent interest feature;
(xxvii) Either (i) no consent for the Mortgage Loan is
required by the holder of the related First Lien or (ii) such consent
has been obtained and is contained in the Mortgage File;
(xxviii) Each Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof
adequate for the realization against the related Mortgaged Property of
the benefits of the security, including, (i) in the case of a Mortgage
designated as a deed of trust, by trustee's sale, and (ii) otherwise by
judicial or non-judicial foreclosure. To the Seller's best knowledge,
there is no homestead or other exemption available to the related
Mortgagor which would materially interfere with the right to sell the
Mortgaged Property at a trustee's sale or the right to foreclose the
Mortgage except as set forth in the Prospectus;
(xxix) Except for Mortgage Loans that are delinquent for
a time period less than that set forth in (viii) above, there is no
default, breach, violation or event of acceleration existing under any
Mortgage or the related Mortgage Note and no event which, with the
passage of time or with notice and the expiration of any grace or cure
period, would constitute a default, breach, violation or event of
acceleration; and the Seller has not waived any default, breach,
violation or event of acceleration;
(xxx) All amounts received after the Cut-Off Date with
respect to the Mortgage Loans to which the Seller is not entitled have
been deposited into the Collection Account and are, as of the Closing
Date in the Collection Account;
(xxxi) Substantially all of the Mortgage Loans were
originated in general accordance with the credit underwriting
guidelines of the Seller, which are at least as stringent as the
underwriting criteria set forth in the Prospectus Supplement;
(xxxii) Each Mortgage Loan conforms, and all Mortgage
Loans in the aggregate conform, in all material respects, to the
description thereof set forth in the Prospectus Supplement; each
Mortgage Note and Mortgage is in substantially the form of Exhibit F
hereto;
(xxxiii) The Mortgage Loans were not selected by the
Seller for inclusion in the Trust on any basis intended to adversely
affect the Trust;
(xxxiv) Each Mortgage Loan was originated based upon an
appraisal. Each such appraisal meets guidelines that would be generally
acceptable to prudent mortgage lenders that regularly originate or
purchase mortgage loans comparable to the Mortgage Loans;
36
(xxxv) Each Mortgage Loan was originated by the Seller
or an affiliate of the Seller or purchased by the Seller;
(xxxvi) (i) Each Mortgaged Property is located in the
state identified on the Mortgage Loan Schedule and consists of a
single-family residence (which may be detached, part of a two-to-four
family dwelling, a condominium unit, a mobile, manufactured or modular
home, a townhouse or a unit in a planned unit development). With
respect to the Cut-Off Date Aggregate Loan Balance, (a) no more than
94.2% of the Mortgage Loans (by Cut-Off Date Aggregate Loan Balance)
are secured by real property improved by a one-family residence erected
thereon, (b) no more than 3.9% of the Mortgage Loans (by Cut-Off Date
Aggregate Loan Balance) are secured by real property improved by two-
to four-family dwellings, (c) no more than 0.77% of the Mortgage Loans
(by Cut-Off Date Aggregate Loan Balance) are secured by real property
improved by individual condominium units and units in a planned unit
development, (d) no more than 0.5% of the Mortgage loans (by Cut-Off
Date Aggregate Loan Balance) are secured by real property improved by
mobile homes, and (e) no more than 0.63% of the Mortgage Loans (by
Cut-Off Date Loan Balances) are secured by real property improved by a
single-family residence of a type other than those enumerated in clause
(a), (b) or (c) above; and (ii) as of the Cut-Off Date, no more than
0.53% of the Mortgage Loans (by Cut-Off Date Aggregate Loan Balance)
are secured by Mortgaged Properties located in one United States postal
zip code;
(xxxvii) No Mortgage Loan had a Combined Loan-to-Value
Ratio at the time of origination of more than 100%;
(xxxviii) With respect to the Cut-Off Date Aggregate Loan
Balance, 4.56% of the Mortgage Loans (by Cut-Off Date Loan Balances)
are secured by Mortgaged Properties that are non-owner occupied
properties (i.e., investor-owned and vacation);
(xxxix) The Mortgage Note is not and has not been secured
by any collateral, pledged account or other security except the lien of
the corresponding Mortgage and the security interest of any applicable
security agreement or chattel mortgage referred to in (vi) above;
(xl) Each Mortgage Loan was originated on or after
July 1, 1986;
(xli) As of the Closing Date, the Seller has not
received a notice of default of a First Lien which has not been cured;
(xlii) The Seller has not transferred the Mortgage
Loans to the Depositor with any intent to hinder, delay or defraud any
of its creditors;
(xliii) To the best knowledge of the Seller, all parties
which have had any interest in the Mortgage Loan, whether as
originator, mortgagee, assignee, pledgee or otherwise, are (or, during
the period in which they held and disposed of
37
such interest, were): (1) in compliance with any and all applicable
licensing requirements of the laws of the state wherein the Mortgaged
Property is located, and (2)(A) organized under the laws of such state,
or (B) qualified to do business in such state, or (C) federal savings
and loan associations or national banks having principal offices in
such state, or (D) not doing business in such state so as to require
qualification or licensing, or (E) not otherwise required to be
qualified or licensed in such state;
(xliv) To the best knowledge of the Seller, all parties
to the Mortgage Note and the Mortgage had legal capacity to execute the
Mortgage Note and the Mortgage and each Mortgage Note and Mortgage have
been duly and properly executed by such parties;
(xlv) Each Mortgage Loan being transferred to the
Trust is a Qualified Mortgage;
(xlvi) The Cut-Off Date Loan Balance for each Mortgage
Loan is the scheduled Loan Balance indicated on the Mortgage Loan
Schedule for such Mortgage Loan as of the Cut-Off Date; and
(xlvii) Each Mortgage contains a provision for the
acceleration of the payment of the unpaid principal balance of the
related Mortgage Loan in the event the related Mortgaged Property is
sold without the prior consent of the mortgagee thereunder.
With respect to the representations and warranties set forth
in this Section 2.6(a) that are made to the best of the Seller's knowledge or as
to which the Seller has no knowledge, if it is discovered by the Depositor, the
Certificate Insurer, the Seller, the Master Servicer, the Trustee or the
Document Custodian that the substance of such representation and warranty is
inaccurate and such inaccuracy materially and adversely affects the value of the
related Mortgage Loan then, notwithstanding the Seller's lack of knowledge with
respect to the substance of such representation and warranty being inaccurate at
the time the representation or warranty was made, such inaccuracy shall be
deemed a breach of the applicable representation or warranty.
(b) The representations and warranties set forth in Section 2.6(a)
shall survive the delivery of the Mortgage Files to the Document Custodian or
the Trustee. Upon discovery by the Seller, the Depositor, the Master Servicer,
the Certificate Insurer or the Trustee of a breach of any of the foregoing
representations and warranties with respect to any Mortgage Loan, the party
discovering such breach shall give written notice thereof to the other parties
within five (5) days after such discovery. Promptly after its discovery or its
receipt of notice of any such breach, the Seller shall use all reasonable
efforts to cure such breach in all material respects. Unless at the expiration
of the 60-day period following receipt of such notice, such breach has been
cured in all material respects or otherwise does not exist or continue to exist,
the Seller shall, not later than two Business Days immediately preceding the
Distribution Date in the month following the related Collection Period in which
any such cure period expired, but only to the extent that such uncured breach
materially and adversely
38
affects the interests of the Certificateholders, repurchase at the Purchase
Price such Defective Mortgage Loan (including any property acquired in respect
thereof and any insurance policy or Insurance Proceeds with respect thereto) in
the same manner and subject to the same conditions as set forth in Section 2.2
or shall substitute an Eligible Substitute Mortgage Loan in accordance with
Section 2.7. Upon making any such repurchase, the Seller shall be entitled to
receive an assignment of the repurchased or removed Mortgage Loan and a release
of the related Mortgage File from the Document Custodian to the extent set forth
in Section 2.2. The obligation of the Seller to repurchase or replace any
Mortgage Loan as to which a breach has occurred and is continuing shall
constitute the sole remedy against the Seller with respect to such breach
available to Certificateholders or the Trustee on behalf of Certificateholders.
Section 2.7. Substitution of Mortgage Loans. (a) On a Determination
Date within two years following the Closing Date and which is on or before the
date on which the Seller would otherwise be required to repurchase a Mortgage
Loan under this Article II, the Seller may deliver to the Trustee one or more
Eligible Substitute Mortgage Loans in substitution for any one or more of the
Defective Mortgage Loans which the Seller would otherwise be required to
repurchase pursuant to this Article II. In connection with any such
substitution, the Seller shall calculate the Substitution Adjustment Amount, if
any, and shall deposit such amount to the Collection Account on or before the
second Business Day prior to the Distribution Date in the month succeeding the
calendar month during which the related Mortgage Loan became required to be
purchased or replaced hereunder.
(b) The Seller shall notify the Master Servicer and the Trustee in
writing not less than five Business Days before the related Determination Date
which is on or before the date on which the Seller would otherwise be required
to repurchase such Mortgage Loan pursuant to this Article II of its intention to
effect a substitution under this Section. On such Determination Date (the
"Substitution Date"), the Seller shall deliver to the Trustee (1) the Eligible
Substitute Mortgage Loans to be substituted for the original Mortgage Loans, (2)
a list of the original Mortgage Loans to be substituted for by such Eligible
Substitute Mortgage Loans, (3) an Officers' Certificate (A) stating that no
default by the Master Servicer described in Section 8.1 shall have occurred and
be continuing, (B) stating that the aggregate principal balance of all Eligible
Substitute Mortgage Loans (determined with respect to each Eligible Substitute
Mortgage Loan as of the Determination Date on which it was substituted)
including the principal balance of Eligible Substitute Mortgage Loans being
substituted on such Determination Date does not exceed an amount equal to 10% of
the Cut-Off Date Aggregate Loan Balance as of the Closing Date, (C) stating that
all conditions precedent to such substitution specified in subsection (a) have
been satisfied and that each such substituted Mortgage Loan constitutes an
Eligible Substitute Mortgage Loan and attaching as an exhibit a supplemental
Mortgage Loan Schedule (the "Supplemental Mortgage Loan Schedule") setting forth
the same type of information as appears on the Mortgage Loan Schedule and
representing as to the accuracy thereof and (D) confirming that the
representations and warranties contained in Section 2.6 are true and correct in
all material respects with respect to the Eligible Substitute Mortgage Loans on
and as of such Determination Date, provided that remedies for the inaccuracy of
such representations are limited as set forth in Section 2.6 and this Section
2.7, (4) an Opinion of Counsel to the effect set forth below and (5) a
certificate stating that cash in the amount of the related Substitution
Adjustment Amount, if
39
any, has been deposited to the Collection Account. Upon receipt of the
foregoing, the Trustee shall release such original Mortgage Loans to the Seller.
(c) Concurrently with the satisfaction of the conditions set forth in
Section 2.7(a) and (b) above and the transfer of such Eligible Substitute
Mortgage Loans to the Trustee pursuant to Section 2.7(a) above, Exhibit D to
this Agreement shall be deemed to be amended to exclude all Mortgage Loans being
replaced by such Eligible Substitute Mortgage Loans and to include the
information set forth on the Supplemental Mortgage Loan Schedule with respect to
such Eligible Substitute Mortgage Loans, and all references in this Agreement to
Mortgage Loans shall include such Eligible Substitute Mortgage Loans and be
deemed to be made on or after the related Substitution Date, as the case may be,
as to such Eligible Substitute Mortgage Loans.
(d) In connection with any Mortgage Loan that the Seller is required to
purchase or replace, the Seller shall deliver to the Trustee an Opinion of
Counsel to the effect that such purchase or substitution will not cause (x) any
federal tax to be imposed on the Trust, including without limitation, any
Federal tax imposed on "prohibited transactions" under Section 860F(a)(1) of the
Code or on "contributions after the start-up day under Section 860G(d)(1) of the
Code or (y) any portion of the Trust to fail to qualify as a REMIC at any time
that any Certificate is outstanding. In the event that such opinion indicates
that a repurchase or substitution will result in the imposition of a prohibited
transaction tax, give rise to net taxable income or be deemed a contribution to
the REMIC after the "start-up day", the Seller shall not be required to
repurchase or replace any such Mortgage Loan unless and until the Master
Servicer has determined there is an actual or imminent default with respect
thereto or that such defect or breach adversely affects the enforceability of
such Mortgage Loan.
Section 2.8. Execution and Authentication of Certificates. The Trustee
on behalf of the Trust shall cause to be executed, authenticated and delivered
on the Closing Date to or upon the order of the Depositor, in exchange for the
Mortgage Loans, concurrently with the sale, assignment and conveyance to the
Trustee of the Mortgage Loans, each Class of Regular Certificates in authorized
denominations and the Class R Certificates, together evidencing the ownership of
the entire Trust.
ARTICLE 3.
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
Section 3.1. The Master Servicer.
(a) It is intended that the Trust formed hereunder shall constitute,
and that the affairs of the Trust shall be conducted so as to qualify it as, a
"real estate mortgage investment conduit" ("REMIC") as defined in and in
accordance with the REMIC Provisions. In furtherance of such intentions, the
Master Servicer covenants and agrees that it shall not
40
knowingly or intentionally take any action or omit to take any action that would
cause the termination of the REMIC status of the Trust.
(b) The Master Servicer shall service and administer the Mortgage Loans
in a manner consistent with the terms of this Agreement and with general
industry practice and shall have full power and authority, acting alone or
through a Subservicer, to do any and all things in connection with such
servicing and administration which it may deem necessary or desirable, it being
understood, however, that the Master Servicer shall at all times remain
responsible to the Trustee and the Certificateholders for the performance of its
duties and obligations hereunder in accordance with the terms hereof and any
amounts in respect of the Mortgage Loans received by any such Subservicer shall
be deemed to have been received by the Master Servicer whether or not actually
received by it. Without limiting the generality of the foregoing, the Master
Servicer shall continue, and is hereby authorized and empowered by the Trustee,
to execute and deliver, in connection with the Trust taking possession of any
Mortgaged Property or upon receipt from the Mortgagor of the amounts owed under
the related Mortgage Loan and upon delivery of written notice to the Trustee, on
behalf of itself, the Certificateholders and the Trustee or any of them, any and
all instruments of satisfaction or cancellation, or of partial or full release
or discharge and all other comparable instruments, with respect to the Mortgage
Loans and with respect to the Mortgaged Properties. The Trustee shall upon
written request of a Servicing Officer furnish the Master Servicer with any
powers of attorney and other documents necessary or appropriate to enable the
Master Servicer to carry out its servicing and administrative duties hereunder,
which powers of attorney or other documents shall be prepared by the Master
Servicer.
The relationship of the Master Servicer (and of any successor to the
Master Servicer as servicer and any subservicer under this Agreement) to the
Trustee under this Agreement is intended by the parties to be that of an
independent contractor and not that of a joint venturer, partner or agent.
(c) In the event that the rights, duties and obligations of the Master
Servicer are terminated hereunder, any successor to the Master Servicer in its
sole discretion may, to the extent permitted by applicable law, terminate the
existing subservicer arrangements with any subservicer or assume the terminated
Master Servicer's rights under such subservicing arrangements which termination
or assumption will not violate the terms of such arrangements.
(d) The Master Servicer shall not consent to the placement of a lien on
the Mortgaged Property senior to that of the related Mortgage unless (i) such
action is consistent with reasonable commercial practice and (ii) such consent
is given in any one of the following situations:
(A) such Mortgage succeeded to a first lien position
after the related Mortgage Loan was conveyed to the
Trust and, immediately following the placement of
such senior lien, such Mortgage is in a second lien
position and both (i) the outstanding principal
amount of the mortgage loan secured by such senior
lien is no greater than the outstanding principal
amount of the first mortgage loan secured by the
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Mortgaged Property as of the date the related
Mortgage Loan was conveyed to the Trust and (ii)
the Updated Combined Loan-to-Value Ratio of such
Mortgage Loan is not greater than the Combined
Loan- to-Value Ratio of such Mortgage Loan as of
the date such Mortgage Loan was conveyed to the
Trust; or
(B) such senior lien secures a mortgage loan that
refinances an existing first mortgage loan and
either (i) the outstanding principal amount of the
replacement first mortgage loan immediately
following such refinancing is not greater than the
outstanding principal amount of such existing first
mortgage loan at the date of such refinancing or
(ii) the Updated Combined Loan-to-Value Ratio of
the applicable Mortgage Loan is not greater than
the Combined Loan-to-Value Ratio of such Mortgage
Loan as of the date such Mortgage Loan was conveyed
to the Trust.
The Master Servicer shall notify the Certificate Insurer of the placement of a
senior lien on any Mortgage Property and after such time as the Master Servicer
may have consented to the placement of senior liens on Mortgaged Properties with
an aggregate Cut-Off Date Loan Balance in excess of 10% of the Cut-Off Date
Aggregate Loan Balance, the Master Servicer shall obtain the prior written
consent of the Certificate Insurer for the placement of any further senior lien
on any Mortgaged Property.
(e) The Master Servicer may agree to changes in the terms of a Mortgage
Loan that would not cause the REMIC Pool to fail to qualify as a REMIC, as
evidenced by an Opinion of Counsel delivered by the Master Servicer to the
Trustee and the Certificate Insurer prior to the effective date of any such
change, provided, however, that such changes (i) do not adversely affect the
interests of Certificateholders or the Certificate Insurer (ii) are consistent
with prudent business practice, as evidenced by an Officer's Certificate,
substantially in the form of Exhibit G, delivered by the Master Servicer to the
Trustee and the Certificate Insurer prior to such effective date, (iii) do not
extend the maturity date of such Mortgage Loan in excess of one year; and (iv)
do not result in any change of the Loan Rate of such Mortgage Loan. Any changes
to the terms of a Mortgage Loan that may cause the REMIC Pool to fail to qualify
as a REMIC may be agreed to by the Master Servicer, provided, however, that (i)
the Master Servicer has determined that such changes are necessary to avoid
prepayment of the Mortgage Loan as a result of a refinancing thereof provided by
another lender and that such changes are consistent with prudent business
practice, as evidenced by an Officer's Certificate to such effect, substantially
in the form of Exhibit G, delivered by the Master Servicer to the Trustee and
the Certificate Insurer prior to the effective date of any such change, (ii) the
Master Servicer purchases such Mortgage Loan two Business Days immediately
preceding the Distribution Date following the related Collection Period during
which such determination was made and (iii) after giving effect to such
purchase, the REMIC Pool continues, as evidenced by an Opinion of Counsel, to
qualify as a REMIC. In the event that such purchase does not occur, the proposed
changes to the terms of the related Mortgage Loan shall not be made. The Master
Servicer shall notify the Certificate Insurer of any changes in the terms of a
Mortgage Loan pursuant to this Section and after such time as the Master
Servicer may have consented to changes in the
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terms (other than the placement of senior liens pursuant to subsection (c) of
this Section 3.1) of Mortgage Loans with an aggregate Cut-Off Date Loan Balance
in excess of 10% of the Cut-Off Date Aggregate Loan Balance, the Master Servicer
shall obtain the prior written consent of the Certificate Insurer to any further
changes in terms of any Mortgage Loan.
(f) Any purchase of a Mortgage Loan or Loans by the Master Servicer
pursuant to Section 3.1(e) shall be effected in the same manner and subject to
the same conditions as set forth in Section 2.2; provided, however, that any
change to the terms of a Mortgage Loan pursuant to the third sentence of Section
3.1(e) and the related purchase of such Mortgage Loan may occur only if, as
evidenced by an Opinion of Counsel delivered by the Master Servicer to the
Trustee and the Certificate Insurer prior to the effective date of any such
change, such change and purchase will occur in a manner that will not cause the
REMIC Pool to fail to qualify as a REMIC at any time any Certificate is
outstanding. Upon completing any such purchase, the Master Servicer shall
receive an assignment of such Defective Mortgage Loan and a release of the
related Mortgage File from the Document Custodian to the extent set forth in
Section 2.2.
(g) The Master Servicer may enter into subservicing agreements for any
servicing and administration of Mortgage Loans with any institution which is in
compliance with the laws of each state necessary to enable it to perform its
obligations under such subservicing agreement and (1) (x) has been designated an
approved Seller-Servicer by FHLMC or FannieMae for first and second mortgage
loans, or (y) is an affiliate of the Master Servicer, or (2) is otherwise
approved by the Certificate Insurer. The Master Servicer shall give notice to
the Certificate Insurer and the Trustee of the appointment of any Subservicer.
The Master Servicer has initially appointed First Union Mortgage Corporation as
a subservicer. Any subservicing arrangement shall be consistent with and not
violate the provisions of this Agreement. The Master Servicer shall not be
relieved of its obligations under this Agreement notwithstanding any such
arrangement or any of the provisions of this Agreement relating to arrangements
between the Master Servicer and a Subservicer or otherwise, and the Master
Servicer shall be obligated to the same extent and under the same terms and
conditions as if the Master Servicer alone were servicing and administering the
Mortgage Loans. Any such arrangement shall be deemed to be between the
Subservicer and the Master Servicer alone and the Trustee and the Trust shall
not be deemed a party thereto and shall have no claims, rights, obligations,
duties or liabilities with respect to any Subservicer.
(h) The Master Servicer and all Subservicers shall be deemed a single
entity for the purpose of determining compliance with the terms of this
Agreement and the Master Servicer shall be deemed to have received Principal
Collections and Interest Collections on the Mortgage Loans when any Subservicer
has received such Principal Collections and Interest Collections.
(i) With regard to any Mortgage Loan that is a second lien on the
Mortgaged Property, the Master Servicer shall notify any superior lienholder in
writing of the existence of the Mortgage Loan and request notification of any
action (as described in (j) below) to be taken against the Mortgagor or the
Mortgaged Property by the superior lienholder.
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(j) If the Master Servicer is notified that any superior lienholder has
accelerated or intends to accelerate the obligations under its Mortgage Loan, or
has declared or intends to declare a default under the mortgage or the
promissory note secured thereby, or has filed or intends to file an election to
have the Mortgaged Property sold or foreclosed, the Master Servicer shall take,
on behalf of the Trust, whatever actions are necessary to protect the interests
of the Owners and the Certificate Insurer, and/or to preserve the security of
the related Mortgage Loan, subject to the application of the REMIC Provisions.
The Master Servicer shall advance the necessary funds to cure the default or
reinstate the superior lien if such advance is in the best interests of the
Certificateholders or the Certificate Insurer; provided, however, that no such
advance need be made if the Master Servicer, in its sole discretion, determines
that such advance would be nonrecoverable. All such advances, whether for
principal or interest, shall be reimbursed to the Master Servicer only from
Liquidation Proceeds received with respect to such Mortgage Loan.
Section 3.2. Collection of Certain Mortgage Loan Payments.
(a) The Master 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,
follow such collection procedures as it follows with respect to mortgage loans
in its servicing portfolio comparable to the Mortgage Loans. Consistent with the
foregoing, and without limiting the generality of the foregoing, the Master
Servicer may in its discretion (i) waive any late payment charge or any
assumption fees or other fees which may be collected in the ordinary course of
servicing such Mortgage Loan and (ii) arrange with a Mortgagor a schedule for
the payment of interest due and unpaid; provided such arrangement is consistent
with the Master Servicer's policies with respect to the mortgage loans it owns
or services; provided, further, that notwithstanding such arrangement such
Mortgage Loans will be included in the information regarding delinquent Mortgage
Loans set forth in the Servicing Certificate and monthly statement to
Certificateholders pursuant to Section 5.2.
(b) The Master Servicer shall, upon the occurrence and continuance of
the failure of any of the events described in clauses (i) or (ii) of Section
3.2(d), establish and maintain with an entity meeting the requirements of the
definition of "Eligible Account", a separate trust account (the "Collection
Account") titled "Norwest Bank Minnesota, National Association, as Trustee, in
trust for the registered holders of FURST Home Equity Loan Asset-Backed
Certificates, Series 1996-1." The Collection Account shall be established and
maintained as an Eligible Account. Subject to the provisions of Section 3.2(d),
the Master Servicer shall on the Closing Date deposit any amounts representing
payments on and any collections in respect of the Mortgage Loans received as of
the Cut-Off Date and prior to the Closing Date and thereafter deposit within one
Business Day following receipt thereof the following payments and collections
received or made by it (without duplication):
(i) all Interest Collections and Principal
Collections (including any Payaheads received);
(ii) Net Liquidation Proceeds net of any related
Foreclosure Profit; and
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(iii) Insurance Proceeds;
(iv) any amounts payable in connection with the
repurchase of any Mortgage Loan and the Substitution Adjustment Amount
pursuant to Article II hereof; and
(v) any amount required to be deposited in the
Collection Account pursuant to Sections 3.1(e), 3.4, 3.5, 3.7, 3.13 or
5.4(e);
provided, however, with respect to each Collection Period, the Master Servicer
shall be permitted to retain from payments in respect of interest on the
Mortgage Loans, the Servicing Fee for such Collection Period and the amount of
any Unreimbursed Advances. Subject to the provisions of Section 3.2(d), the
foregoing requirements respecting deposits to the Collection Account are
exclusive, it being understood that, without limiting the generality of the
foregoing, the Master Servicer need not deposit in the Collection Account
amounts representing Foreclosure Profits, fees (including annual fees) or late
charge penalties payable by Mortgagors, or amounts received by the Master
Servicer for the accounts of Mortgagors for application towards the payment of
taxes, insurance premiums, assessments and similar items. The Master Servicer
may retain, as additional servicing compensation, all Foreclosure Profits.
Subject to the provisions of Section 3.2(d), the Seller shall deposit
the amounts required to be deposited in respect of Mortgage Loans purchased by
the Seller pursuant to Sections 2.2 and 2.6 to the Collection Account no later
than the date specified therein.
(c) All funds in the Collection Account shall be held (i) uninvested or
(ii) invested at the direction of the Master Servicer in Eligible Investments.
Any investments of funds in the Collection Account shall mature or be
withdrawable at par on or prior to the second Business Day preceding the
immediately succeeding Distribution Date. Any investment earnings on funds held
in the Collection Account shall be for the account of the Master Servicer and
may be withdrawn from the Collection Account by the Master Servicer at any time.
Any investment losses on funds held in the Collection Account shall be for the
account of the Master Servicer and promptly upon the realization of such loss
shall be contributed by the Master Servicer to the Collection Account. Any
references herein to amounts on deposit in the Collection Account shall refer to
amounts net of such investment earnings.
(d) Notwithstanding anything in this Agreement to the contrary, (i) for
so long as (A) the Master Servicer remains an Affiliate of the Seller, (B) no
Event of Default shall have occurred and be continuing and (C) the Seller
maintains a long-term unsecured rating of at least A2 by Moody's and A by S&P
and a short-term rating of at least A-1 by Standard & Poor's and P-1 by Moody's,
and for three Business Days following any reduction, suspension, termination or
withdrawal in either such rating, or (ii) following the occurrence and
continuation of any event described in subclause (i) of this Section 3.2(d), an
arrangement is established that is satisfactory to the Rating Agencies and which
does not in itself result in (I) any reduction of any rating issued in respect
of the Class A Certificates or (II) any reduction below investment grade of the
Class A Certificates without the benefit of the Certificate Insurance Policy,
the Master Servicer, notwithstanding anything to the
45
contrary herein provided, may establish and maintain the Collection Account as a
deposit account with the Seller.
(e) For all purposes of this Agreement, any amount received at any time
during the term hereof by any Subservicer shall be deemed to constitute receipt
of such amount by the Master Servicer (receipt by the Master Servicer shall also
be deemed to occur on the same day as the amount is actually received by the
relevant Subservicer), regardless of whether the Master Servicer actually
receives such amount.
Section 3.3. Withdrawals from the Collection Account.
The Trustee or the Master Servicer, if the Master Servicer is then
maintaining the Collection Account pursuant to Section 3.2(d), shall withdraw or
cause to be withdrawn funds from the Collection Account for the following
purposes:
(i) two Business Days prior to each Distribution
Date, to deposit the portion of the Available Funds then in the
Collection Account to the Distribution Account;
(ii) to reimburse the Master Servicer for any accrued
unpaid Servicing Fees and for unreimbursed Monthly Advances and
Servicing Advances. The Master Servicer's right to reimbursement for
unpaid Servicing Fees and unreimbursed Servicing Advances shall be
limited to late collections on the related Mortgage Loan, including
Liquidation Proceeds, Insurance Proceeds and such other amounts as may
be collected by the Master Servicer from the related Mortgagor or
otherwise relating to the Mortgage Loan in respect of which such
reimbursed amounts are owed. The Master Servicer's right to
reimbursement for unreimbursed Monthly Advances shall be limited to
late collections of interest on any Mortgage Loan and to Liquidation
Proceed and Insurance Proceeds on related Mortgage Loans;
(iii) to withdraw any amount received from a Mortgagor
that is recoverable and sought to be recovered as a voidable preference
by a trustee in bankruptcy pursuant to the United States Bankruptcy
Code in accordance with a final, nonappealable order of a court having
competent jurisdiction;
(iv) to pay to the Master Servicer, as the case may
be, interest earned in respect of Eligible Investments or on funds
deposited in the Collection Account;
(v) to withdraw any funds deposited in the Collection
Account that were not required to be deposited therein (such as
Servicing Compensation) or were deposited therein in error and to pay
such funds to the appropriate Person;
(vi) to pay the Servicing Compensation pursuant to
Section 3.9 hereof to the extent not retained or paid pursuant to
Section 3.2(b);
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(vii) to reimburse the Master Servicer for
Nonrecoverable Advances that are not, with respect to aggregate Monthly
Advances on any single Mortgage Loan or REO, in excess of the Loan
Balance thereof; and
(viii) to clear and terminate the Collection Account
upon the termination of this Agreement and to pay any amounts remaining
therein to the Class R Certificateholders.
Section 3.4. Monthly Advances.
No later than 12:00 noon New York City time on the second Business Day
immediately preceding each Distribution Date, the Master Servicer shall, from
its own funds, deposit in the Distribution Account in immediately available
funds by wire transfer an amount (a "Monthly Advance") equal to the aggregate of
the portions of the Monthly Payment of each Mortgage Loan representing interest
due on such Mortgage Loan during the related Collection Period which Mortgage
Loan was delinquent during such Collection Period, such Monthly Advance to be in
an amount net of the Servicing Fee payable on the related Distribution Date.
Notwithstanding the foregoing, the Master Servicer shall not be required to make
a Monthly Advance if in the good faith judgment and sole discretion of the
Master Servicer, the Master Servicer determines that such advance will not be
ultimately recoverable from collections received from the Mortgagor in respect
of such Mortgage Loan. The determination by the Master Servicer that it has
made, or would be making, a Nonrecoverable Advance shall be evidenced by a
certificate of a Responsible Officer of the Master Servicer delivered to the
Trustee, the Certificate Insurer, each Certificateholder, and each Rating Agency
and stating the basis for such determination. The Master Servicer's obligation
to make a Monthly Advance with respect to any Mortgage Loan will continue until
such Mortgage Loan becomes a Liquidated Mortgage Loan.
Section 3.5. Maintenance of Hazard Insurance; Property
Protection Expenses.
The Master Servicer shall cause to be maintained for each Mortgage Loan
hazard insurance naming the Master Servicer as loss payee thereunder providing
extended coverage in an amount which is at least equal to the lesser of (i) the
maximum insurable value of the improvements securing such Mortgage Loan from
time to time, (ii) the combined principal balance owing on such Mortgage Loan
and any mortgage loan senior to such Mortgage Loan from time to time or (iii)
the minimum amount required to compensate for damage or loss on a replacement
cost basis in each case in an amount not less than such amount as is necessary
to avoid the application of any co-insurance clause contained in the related
hazard insurance policy. The Master Servicer shall also maintain on property
acquired upon foreclosure, or by deed in lieu of foreclosure, hazard insurance
with extended coverage in an amount which is at least equal to the lesser of (i)
the maximum insurable value from time to time of the improvements which are a
part of such property, (ii) the combined principal balance owing on such
Mortgage Loan and any mortgage loan senior to such Mortgage Loan or (iii) the
minimum amount required to compensate for damage or loss on a replacement cost
basis at the time of such foreclosure or deed in lieu of foreclosure plus
accrued interest and the good-faith estimate of the Master Servicer of related
Liquidation Expenses to be incurred in connection therewith. Amounts collected
by the Master Servicer under any such policies
47
shall be deposited in the Collection Account to the extent required by Section
3.2. In cases in which any Mortgaged Property is located in a federally
designated flood area, the hazard insurance to be maintained for the related
Mortgage Loan shall include flood insurance to the extent such flood insurance
is available and the Master Servicer has determined such insurance to be
necessary in accordance with accepted second mortgage loan servicing standards.
All such flood insurance shall be in amounts equal to the least of the amount in
clause (i) above, clause (ii) above and the maximum amount of insurance
available under the National Flood Insurance Act of 1968, as amended. The Master
Servicer shall be under no obligation to require that any Mortgagor maintain
earthquake or other additional insurance and shall be under no obligation itself
to maintain any such additional insurance on property acquired in respect of a
Mortgage Loan, other than pursuant to such applicable laws and regulations as
shall at any time be in force and as shall require such additional insurance.
Section 3.6. Assumption and Modification Agreements.
In any case in which a Mortgaged Property has been or is about to be
conveyed by the Mortgagor, the Master Servicer shall exercise or refrain from
exercising its right to accelerate the maturity of such Mortgage Loan consistent
with the then current practice of the Master Servicer and without regard to the
inclusion of such Mortgage Loan in the Trust unless prohibited by law from doing
so. If it elects not to enforce its right to accelerate or if it is prevented
from doing so by applicable law, the Master Servicer (so long as such action
conforms with the Master Servicer's underwriting standards at the time for new
origination) is authorized to take or enter into an assumption and modification
agreement from or with the Person to whom such Mortgaged Property has been or is
about to be conveyed, pursuant to which such Person becomes liable under the
Mortgage and, to the extent permitted by applicable law, the Mortgagor remains
liable thereon; provided, however that the Master Servicer shall not enter into
any such assumption or modification agreement unless the Master Servicer has
determined that the Person to become liable under the Mortgage Loan has achieved
a credit grade under the Master Servicer's then current credit scoring policy of
at least the same level achieved by the original Mortgagor at the time the
Mortgage Loan was originated. In the event that the Trust acquires any Mortgaged
Property as aforesaid or otherwise in connection with a default or imminent
default on a Mortgage Loan, such Mortgaged Property shall be disposed of by or
on behalf of the Trust within two (2) years after its acquisition by the Trust
unless the Trustee shall have received an Opinion of Counsel to the effect that
the holding by the Trust of such Mortgaged Property subsequent to two (2) years
after its acquisition will not result in the imposition of taxes on "prohibited
transactions" of the Trust as defined in section 860F of the Code or cause the
REMIC Pool to fail to qualify as a REMIC at any time that any Certificates are
outstanding. The Master Servicer shall notify the Trustee that any assumption
and modification agreement has been completed by delivering to the Trustee an
Officer's Certificate certifying that such agreement is in compliance with this
Section 3.6 and by forwarding to the Document Custodian the original copy of
such assumption and modification agreement. Any such assumption and modification
agreement shall, for all purposes, be considered a part of the related Mortgage
File to the same extent as all other documents and instruments constituting a
part thereof. No change in the terms of the related Mortgage Loan may be made by
the Master Servicer in connection with any such assumption to the extent that
such change would not be permitted to be made in respect of the original
Mortgage Loan pursuant to Section 3.1(e) or (f). Any
48
fee collected by the Master Servicer for entering into any such agreement will
be retained by the Master Servicer as additional servicing compensation.
Section 3.7. Realization Upon Defaulted Mortgage Loans.
The Master Servicer shall foreclose upon or otherwise comparably
convert to ownership Mortgaged Properties securing such of the Mortgage Loans as
come into and continue in default either when, in the opinion of the Master
Servicer based upon the practices and procedures referred to in the following
sentence, no satisfactory arrangements can be made for collection of delinquent
payments pursuant to Section 3.2; provided that if the Master Servicer has
actual knowledge or reasonably believes that any Mortgaged Property is affected
by hazardous or toxic wastes or substances and that the acquisition of such
Mortgaged Property would not be commercially reasonable, then the Master
Servicer will not cause the Trust to acquire title to such Mortgaged Property in
a foreclosure or similar proceeding. In connection with such foreclosure or
other conversion, the Master Servicer shall follow such practices (including, in
the case of any default on a related senior mortgage loan, the advancing of
funds to correct such default) and procedures as it shall deem necessary or
advisable and as shall be normal and usual in its general mortgage servicing
activities. The foregoing is subject to the proviso that the Master Servicer
shall not be required to expend its own funds in connection with any foreclosure
or towards the correction of any default on a related senior mortgage loan or
restoration of any property unless it shall determine that such expenditure will
increase Net Liquidation Proceeds.
The Master Servicer shall cause to be deposited, no later than five
Business Days after the receipt thereof, in the Collection Account, all revenues
received with respect to the related REO and shall retain, or cause the Trustee
to withdraw therefrom funds necessary for the proper operation, management and
maintenance of the REO and the fees of any managing agent acting on behalf of
the Master Servicer.
The disposition of REO shall be carried out by the Master Servicer for
cash at such price, and upon such terms and conditions, as the Master Servicer
deems to be in the best interest of the Certificateholders and, as soon as
practicable thereafter, the expenses of such sale shall be paid. The cash
proceeds of sale of the REO shall be promptly deposited in the Collection
Account, net of Foreclosure Profits accrued and unpaid Servicing Fees and
unreimbursed Monthly Advances payable to the Master Servicer in accordance with
Section 3.3, for distribution to the Certificateholders in accordance with
Section 5.1 hereof.
The Master Servicer shall foreclose upon or otherwise comparably covert
to ownership Mortgaged Properties securing such of the Mortgage Loans as come
into and continue in default either when no satisfactory arrangements can be
made for collection of delinquent payments pursuant to Section 3.2 subject to
the provisions contained in the last paragraph of this Section 3.7.
In the event that title to any Mortgage Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be issued to the Trustee, or to its nominee on behalf of
Certificateholders and the Certificate Insurer.
49
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be issued to the Trustee, or to its nominee, on behalf of
Certificateholders. In the event that the Trust acquires any Mortgaged Property
as aforesaid or otherwise in connection with a default or imminent default on a
Mortgage Loan, such Mortgaged Property shall be disposed of by or on behalf of
the Trust within two (2) years after its acquisition by the Trust unless the
Trustee shall have received an Opinion of Counsel to the effect that the holding
by the Trust of such Mortgaged Property subsequent to two (2) years after its
acquisition will not result in the imposition of taxes on "prohibited
transactions" of the Trust as defined in section 860F of the Code or cause the
Trust to fail to qualify as a REMIC at any time that any Certificates are
outstanding. Notwithstanding any other provision of this Agreement, (i) no
Mortgaged Property acquired by the Master Servicer pursuant to this Section
shall be rented (or allowed to continue to be rented) or otherwise used for the
production of income by or on behalf of the Trust, and (ii) no construction
shall take place on such Mortgaged Property in such a manner or pursuant to any
terms, in either case, that would cause such Mortgaged Property to fail to
qualify as "foreclosure property" within the meaning of Section 860G(a)(8) of
the Code or result in the receipt by the Trust of any "net income from
foreclosure property" which is subject to taxation within the meaning of
Sections 860G(c) and 857(b)(4)(B) of the Code. If a period greater than two
years is permitted under this Agreement and is necessary to sell any REO, the
Master Servicer shall give appropriate notice to the Trustee, the Certificate
Insurer and the Certificateholders and shall report monthly to the Trustee as to
the progress being made in selling such REO.
The Master Servicer will provide hereto to the Certificate Insurer on
each Distribution Date a report in the form attached as Exhibit O (a
"Liquidation Report") with respect to each Liquidated Mortgage Loan during the
related Collection Period.
Section 3.8. Trustee to Cooperate.
On or before each Distribution Date, the Master Servicer will notify
the Trustee of the payment in full of the Loan Balance of any Mortgage Loan
during the preceding Collection Period, which notification shall be by a
certification (which certification shall include a statement to the effect that
all amounts received in connection with such payment which are required to be
deposited in the Collection Account pursuant to Section 3.2 have been so
deposited or credited) of a Servicing Officer. Upon any such payment in full,
the Master Servicer is authorized to execute, pursuant to the authorization
contained in Section 3.1, if the assignments of Mortgage have been recorded as
required hereunder, an instrument of satisfaction regarding the related
Mortgage, which instrument of satisfaction shall be recorded by the Master
Servicer if required by applicable law and be delivered to the Person entitled
thereto. It is understood and agreed that no expenses incurred in connection
with such instrument of satisfaction or transfer shall be reimbursed from
amounts deposited in the Collection Account.
If the Trustee is holding the Mortgage Files, from time to time and as
appropriate for the servicing or foreclosure of any Mortgage Loan, the Trustee
shall, upon request of the Master Servicer and delivery to the Trustee of a
trust receipt, in the form annexed hereto as Exhibit H, signed by a Servicing
Officer, release the related Mortgage File to the Master
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Servicer and the Trustee shall execute such documents, in the forms provided by
the Master Servicer, as shall be necessary to the prosecution of any such
proceedings or the taking of other servicing actions. Such trust receipt shall
obligate the Master Servicer to return the Mortgage File to the Trustee or the
Document Custodian appointed by it when the need therefor by the Master Servicer
no longer exists unless the Mortgage Loan shall be liquidated, in which case,
upon receipt of a certificate of a Servicing Officer similar to that hereinabove
specified, the trust receipt shall be released by the Trustee to the Master
Servicer.
In order to facilitate the foreclosure of the Mortgage securing any
Mortgage Loan that is in default following recordation of the assignments of
Mortgage in accordance with the provisions hereof, the Trustee shall, if so
requested in writing by the Master Servicer, execute an appropriate assignment
in the form provided to the Trustee by the Master Servicer to assign such
Mortgage Loan for the purpose of collection to the Master Servicer (any such
assignment shall unambiguously indicate that the assignment is for the purpose
of collection only), and, upon such assignment, such assignee for collection
will thereupon bring all required actions in its own name and otherwise enforce
the terms of the Mortgage Loan and deposit or credit the Net Liquidation
Proceeds, exclusive of Foreclosure Profits, received with respect thereto in the
Collection Account, it being understood that the Trustee shall have no
responsibility for determining the sufficiency of such assignment for its
intended purpose. In the event that all delinquent payments due under any such
Mortgage Loan are paid by the Mortgagor and any other defaults are cured then
the assignee for collection shall promptly reassign such Mortgage Loan to the
Trustee and return it to the place where the related Mortgage File was being
maintained.
Section 3.9. Servicing Compensation; Payment of Certain Expenses by
Master Servicer.
(a) The Master Servicer shall be entitled to receive the Servicing Fee
in accordance with the terms of this Agreement as compensation for its services
in connection with servicing the Mortgage Loans. Moreover, additional servicing
compensation in the form of late payment charges, Foreclosure Profits or other
receipts not required to be deposited in the Collection Account shall be
retained by the Master Servicer as additional compensation. The Master Servicer
shall be required to pay all expenses incurred by it in connection with its
activities hereunder (including payment of all other fees and expenses not
expressly stated hereunder to be for the account of the Certificateholders) and
shall not be entitled to reimbursement therefor except as specifically provided
herein.
(b) The Master Servicer shall be required to pay all expenses incurred
by it in connection with its activities under this Agreement, including fees and
disbursements of the independent accountants referred to in Section 3.11, taxes
imposed on the Master Servicer, expenses incurred in connection with
distributions and reports to Certificateholders, all Trustee expenses payable to
the Trustee pursuant to Section 9.5, and all other fees and expenses not
expressly stated hereunder to be for the account of the Certificateholders
(including, without limitation, the cost of obtaining Opinions of Counsel
required under this Agreement, except as otherwise provided herein), and shall
not be entitled to reimbursement
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therefor except to the extent that such expenses constitute Liquidation Expenses
or as otherwise specifically provided herein.
Section 3.10. Annual Statement as to Compliance.
The Master Servicer, at its expense, will deliver to the Trustee, the
Certificate Insurer and the Rating Agencies, on or before the last day of the
fifth calendar month of each year, beginning in 1997, an Officer's Certificate
stating that (i) a review of the activities of the Master Servicer during the
preceding calendar year (or such shorter period as is applicable in the case of
the first report) and of its performance under this Agreement has been made
under such officer's supervision and (ii) to the best of such officer's
knowledge, based on such review, the Master Servicer has fulfilled all its
material obligations under this Agreement throughout such year, or, if there has
been a default in the fulfillment of any such obligation, specifying each such
default known to such officer, the nature and status thereof and the steps being
taken to remedy such default.
Section 3.11. Annual Servicing Report.
Not later than the last day of the fifth month following the end of the
Master Servicer's fiscal year (December 31), beginning in 1997, the Master
Servicer, at its expense, shall cause a firm of independent public accountants
reasonably acceptable to the Depositor and the Certificate Issuer to furnish a
letter or letters to the Certificate Issuer, the Depositor, the Trustee, S&P and
Moody's to the effect that such firm has with respect to the Servicer's overall
servicing operations examined such operations in accordance with the
requirements of the Uniform Single Attestation Program for Mortgage Bankers, and
stating such firm's conclusions relating thereto.
Section 3.12. Access to Certain Documentation and Information
Regarding the Mortgage Loans.
(a) The Master Servicer and the Document Custodian shall provide to the
Trustee, the Certificate Insurer, and, to the extent that any Certificateholder
is a federally insured savings association, the Office of Thrift Supervision,
successor to the Federal Home Loan Bank Board, to the FDIC and the supervisory
agents and examiners of the Office of Thrift Supervision, access to the
documentation regarding the Mortgage Loans, and the right to inspect the Master
Servicer's servicing operations and discuss such operations, such access being
afforded without charge but only upon reasonable request and during normal
business hours at their respective offices. Nothing in this Section 3.12 shall
derogate from the obligation of the Master Servicer to observe any applicable
law prohibiting disclosure of information regarding the Mortgagors and the
failure of the Master Servicer to provide access as provided in this Section
3.12 as a result of such obligation shall not constitute a breach of this
Section 3.12.
(b) The Master Servicer shall supply information to the Trustee and the
Paying Agent in such form as the Trustee shall reasonably request, on or before
the start of the fifth Business Day preceding the related Distribution Date, as
is required in the Trustee's reasonable judgment to enable the Paying Agent or
the Trustee, as the case may be, to make
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required distributions and to furnish the required reports to Certificateholders
and to make any claim under the Certificate Insurance Policy.
Section 3.13. Maintenance of Certain Insurance Policies.
(a) The Master Servicer shall during the term of its service as
servicer maintain in force (i) a policy or policies of insurance covering errors
and omissions in the performance of its obligations as master servicer hereunder
and (ii) a fidelity bond in respect of its officers, employees or agents. Each
such policy or policies and bond shall, together, comply with the requirements
from time to time of the Fannie Mae for persons performing servicing for
mortgage loans purchased by Fannie Mae. Any such fidelity bond and errors and
omissions insurance shall protect and insure the Master Servicer against losses,
including losses resulting from forgery, theft, embezzlement, fraud, errors and
omissions and negligent acts of Master Servicer employees. Such fidelity bond
shall also protect and insure the Master Servicer against losses in connection
with the release or satisfaction of a Mortgage Loan without having obtained
payment in full of the indebtedness secured thereby. No provision of the Section
3.13 requiring such fidelity bond and errors and omissions insurance shall
diminish or relieve the Master Servicer from its duties and obligations as set
forth in this Agreement. Upon the request of the Trustee, the Certificate
Insurer or any Certificateholder, the Master Servicer shall cause to be
delivered to the Trustee, such Certificateholder or the Certificate Insurer a
certified true copy of such fidelity bond and insurance policy.
(b) In the event that the Master Servicer shall obtain and maintain a
blanket policy consistent with prudent industry standards insuring against fire
and hazards of extended coverage on all of the Mortgage Loans, then, to the
extent such policy names the Master Servicer as loss payee and provides coverage
in an amount equal to the aggregate unpaid principal balance on the Mortgage
Loans without co-insurance, and otherwise complies with the requirements of
section 3.5, the Master Servicer shall be deem conclusively to have satisfied
its obligations with respect to fire and hazard insurance coverage under Section
3.5, it being understood and agreed that such blanket policy may contain a
deductible clause, in which case the Master Servicer shall, in the event that
there shall not have been maintained on the related Mortgaged Property a policy
complying with Section 3.5, and there shall have been a loss which would have
been covered by such policy, deposit in the Collection Account the difference,
if any, between the amount that would have been payable under a policy complying
with Section 3.5 and the amount paid under such blanket policy. Upon the request
of the Certificate Issuer, the Trustee or any Certificateholder, the Master
Servicer shall cause to be delivered to the Trustee or such Certificateholder,
as the case may be, a certified true copy of such policy. 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, the Certificate
Issuer and Certificateholders, claims under any such policy in a timely fashion
in accordance with the terms of such policy.
Section 3.14. Reports of Foreclosures and Abandonments of Mortgaged
Property, Returns Relating to Mortgage Interest Received from Individuals and
Returns Relating to Cancellation of Indebtedness. The Master Servicer shall make
reports of foreclosures and abandonments of any Mortgaged Property for each year
beginning in 1996. The Master
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Servicer shall file reports relating to each instance occurring during the
previous calendar year in which the Master Servicer (i) on behalf of the Trustee
acquires an interest in any Mortgaged Property through foreclosure or other
comparable conversion in full or partial satisfaction of a Mortgage Loan, or
(ii) knows or has reason to know that any Mortgaged Property has been abandoned.
The reports from the Master Servicer shall be in form and substance sufficient
to meet the reporting requirements imposed by Sections 6050J, 6050H and 6050P of
the Code.
Section 3.15. Reports to the Securities and Exchange Commission. The
Trustee shall, on behalf of the Trust, cause to be filed with the Securities and
Exchange Commission any periodic reports required to be filed under the
provisions of the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Securities and Exchange Commission thereunder. Upon the
request of the Trustee, each of the Seller, the Master Servicer and the
Depositor shall cooperate with the Trustee in the preparation of any such report
and shall provide to the Trustee in a timely manner all such information or
documentation as the Trustee may reasonably request in connection with the
performance of its duties and obligations under this Section.
Section 3.16. Custody of Mortgage Files.
To assure uniform quality in servicing the Mortgage Loans and to reduce
administrative costs, First Union National Bank of North Carolina, Trust
Department, hereby agrees to act as Document Custodian of the Related Documents
for each Mortgage Loan, which are hereby constructively delivered to the
Trustee. First Union National Bank of North Carolina, Trust Department agrees to
perform its duties as Document Custodian without charge. Immediately upon the
occurrence of any such Assignment Event, the Master Servicer shall notify the
Trustee of such occurrence and thereafter shall begin the transfer of all
Mortgage Files and the Related Documents to the Trustee. The Document Custodian
shall undertake such transfer in a manner that will result in the completion of
the transfer of all Mortgage Files and Related Documents within the 60-day
period following the occurrence of a Assignment Event. From and after the
occurrence of a Assignment Event, or other earlier termination of the Custodial
Agreement, and the delivery of the Mortgage Files and the Related Documents to
the Trustee, the Trustee shall act as Document Custodian or it may engage the
services of another Person (other than the Depositor or an Affiliate of the
Depositor) the Rating Agencies and the Certificate Insurer to act as Document
Custodian. From and following the occurrence of any Assignment Event, the Seller
shall be required to pay the Trustee (or any other Person designated by the
Trustee to act as document custodian) reasonable fees based on the reciprocal
fees charged by the Trustee and the Seller for similar services. The Document
Custodian hereby acknowledges that it is bailee for the Trustee and is holding
all of Related Documents delivered to it in trust for the Trustee. The Trustee
shall not be liable to any Person for actions or failures to take action of the
Document Custodian, unless, and only to the extent, such actions or failures to
act constitute willful misconduct or negligence.
From time to time following delivery of the Mortgage Files and the
Related Documents to the Trustee pursuant to this Section 3.16 hereof, the
Trustee may appoint a
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Document Custodian who is acceptable to the Certificate Insurer, the Depositor
and the Master Servicer (provided no Event of Default is then occurring or
continuing). Upon execution of a custodial agreement, such Document Custodian
shall maintain possession of the Mortgage Files, or such part of them as the
Trustee shall direct, as agent of the Trustee pursuant to the terms of such
custodial agreement; provided, however, that the Document Custodian may not be
an Affiliate of the Depositor.
While the Mortgage Files and the Related Documents are required to be
in the possession of the Trustee or a Document Custodian appointed by it, the
Trustee shall keep the Master Servicer apprised at all times of the location of
the Mortgage Files.
Section 3.17. Duties of Document Custodian; Authority;
Indemnification.
(a) Safekeeping. The Document Custodian shall hold the Mortgage Files
for the benefit of the Trustee and maintain such accurate and complete accounts,
records and computer systems pertaining to each Mortgage File as shall enable
the Depositor, the Seller, the Master Servicer and the Trustee to comply with
this Agreement. The Document Custodian shall act with reasonable care, using
that degree of skill and attention in the performance of its duties as it
exercises with respect to the mortgage files relating to all comparable home
equity loans that it owns or services for itself or others. The Document
Custodian shall conduct, or cause to be conducted, periodic audits of the
Mortgage Files held by it under this Agreement and of the related accounts,
records and computer systems, in such a manner as shall enable the Trustee to
verify the accuracy of the Master Servicer's record keeping. The Document
Custodian shall promptly report to Trustee any failure on its part to hold the
Mortgage Files and maintain its accounts, records and computer systems as herein
provided and promptly take appropriate action to remedy any such failure.
Nothing herein shall be deemed to require an initial review or any periodic
review by the Trustee of the Mortgage Files.
(b) Maintenance of and Access to Records. The Document Custodian shall
maintain each Mortgage File at one of its offices specified in Schedule 1 or at
such other office as shall be specified to the Trustee by written notice
immediately upon any change in location. The Document Custodian shall make
available to the Trustee or its duly authorized representatives, attorneys or
auditors a list of locations of the Mortgage Files and the related accounts,
records and computer systems maintained by the Document Custodian at such times
during normal business hours as the Trustee shall instruct.
(c) Release of Documents. Upon written instruction in the form of
Exhibit H from the Trustee, the Master Servicer or a Subservicer, the Document
Custodian shall release any Mortgage File to the Trustee, the Trustee's agent,
the Trustee's designee, the Master Servicer or a Subservicer requested in such
written instruction, as the case may be, at such place or places as requested in
such written instruction, as soon as practicable.
(d) Review of Documents. The Document Custodian shall perform the
review (described in Section 2.1(c)) of each Related Document in each Mortgage
File within 60 days from (i) the Closing Date (or the date of actual receipt of
such document if not received on the Closing Date), with respect to each
Mortgage Loan transferred to the Trust on the
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Closing Date and (ii) the Transfer Date, with respect to each Eligible
Substitute Mortgage Loan transferred to the Trust. Upon completion of such
60-day period, the Document Custodian will notify the Trustee and the
Certificate Insurer of any material defect discovered in such review and the
Trustee shall notify the Depositor of such material defect, as provided in
Section 2.1(c).
(e) Instructions; Authority To Act. The Document Custodian shall be
deemed to have received proper instructions with respect to the Mortgage Files
upon its receipt of written instructions signed by a Responsible Officer of the
Trustee.
(f) Document Custodian's Indemnification. The Document Custodian shall
indemnify the Seller, the Master Servicer, the Depositor, the Trust, the
Certificate Insurer and the Trustee and each of their officers, directors and
agents for any and all liabilities, obligations, losses, compensatory damages,
payments, costs or expenses of any kind whatsoever that may be imposed on,
incurred by or asserted against the Trust or the Trustee or any of their
officers, directors and agents as the result of any improper act or omission in
any way relating to the maintenance and custody by the Document Custodian as
custodian of the Mortgage Files; provided, however, that the Document Custodian
shall not be liable to the Trustee and any portion of any such amount resulting
from the willful misfeasance, bad faith or negligence of the Trustee. The Seller
shall indemnify the Trust and the Trustee and each of their officers, directors
and agents for any and all liabilities, obligations, losses, compensatory
damages, payments, costs or expenses of any kind whatsoever that may be imposed
on, incurred by or asserted against the Trust or the Trustee as a result of the
retention of the Mortgage Loans and Mortgage Files by any Affiliate of the
Seller as Document Custodian. The provisions of this Section 3.17(f) shall
survive the termination of this Agreement.
(g) Location of Mortgage Loans. The Mortgage Loans and Related
Documents shall not be located outside the State of North Carolina unless the
Document Custodian shall deliver an Opinion of Counsel to the Trustee and the
Certificate Insurer to the effect that all actions have been taken, including
the filing of UCC financing statements, to perfect the rights of the Trustee in
the Mortgage Loans and Related Documents.
Section 3.18. Superior Liens.
The Master Servicer shall file (or cause to be filed) of record a
request for notice of any action by a superior lienholder with respect to any
Mortgage Loan for the protection of the Trustee's interest, where permitted by
local law and whenever applicable state law does not require that a junior
lienholder be named as a party defendant in foreclosure proceedings in order to
foreclose such junior lienholder's equity of redemption.
If the Master Servicer is notified that any superior lienholder has
accelerated or intends to accelerate the obligations secured by its lien, or has
declared or intends to declare a default under the mortgage or the promissory
note secured thereby, or has filed or intends to file an election to have the
Mortgaged Property sold or foreclosed, the Master Servicer shall take, on behalf
of the Trust, whatever actions are necessary to protect the interests of the
Certificateholders and the Certificate Insurer, and/or to preserve the security
of the
56
related Mortgage Loan, subject to the application of the REMIC Provisions in
accordance with the terms of this Agreement. The Master Servicer shall
immediately notify the Trustee and the Certificate Insurer of any such action or
circumstances. The Master Servicer shall advance the necessary funds to cure the
default or reinstate the superior lien, if such advance is in the best interests
of the Certificate Insurer and the Certificateholders which the Master Servicer
may establish by seeking approval from the Certificate Insurer as evidenced by
written instruction from the Certificate Insurer. Any action or inaction on the
part of the Master Servicer in accordance with such written instructions shall
be deemed to be in the best interests of the Certificate Insurer and the
Certificateholders. If no written response is received within five (5) Business
Days of receipt by the Certificate Insurer of such request for approval, the
Master Servicer may advance or not advance in accordance with the second
preceding sentence without liability to the Certificateholders or the
Certificate Insurer. The Master Servicer shall not make such an advance except
to the extent that it determines in its reasonable good faith judgment that the
advance would be recoverable from Liquidation Proceeds on the related Mortgage
Loan and in no event in an amount that is greater than the Principal Balance of
the related Mortgage Loan, except with the consent of the Certificate Insurer,
which consent shall not be unreasonably withheld. The Master Servicer shall
thereafter take such action as is necessary to recover the amount so advanced.
Notwithstanding the foregoing, the Master Servicer may change, modify
or amend any or all of the foregoing procedures if such change, modification or
amendment is applicable to the Mortgage Loans and all other mortgage loans
serviced by the Master Servicer and is otherwise in accordance with Section 3.1.
Section 3.19. Payment of Taxes, Insurance and Other Charges. With
respect to each Mortgage Loan, the Master Servicer shall maintain accurate
records reflecting fire and hazard insurance coverage.
With respect to each Mortgage Loan as to which the Master Servicer
maintains escrow accounts, the Master Servicer shall maintain accurate records
reflecting the status of ground rents, taxes, assessments, water rates and other
charges which are or may become a lien upon the Mortgaged Property and the
status of primary mortgage guaranty insurance premiums, if any, and fire and
hazard insurance coverage and shall obtain, from time to time, all bills for the
payment of such charges (including renewal premiums) and shall effect payment
thereof prior to the applicable penalty or termination date and at a time
appropriate for securing maximum discounts allowable, employing for such purpose
deposits of the Mortgagor in any escrow account which shall have been estimated
and accumulated by the Master Servicer in amounts sufficient for such purposes,
as allowed under the terms of the Mortgage. To the extent that a Mortgage does
not provide for escrow payments, the Master Servicer shall, if it has received
notice of a default or deficiency, monitor such payments to determine if they
are made by the Mortgagor.
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ARTICLE 4.
SERVICING CERTIFICATE;
CERTIFICATE INSURANCE POLICY
Section 4.1. Servicing Certificate.
Not later than the 15th day of each month, the Master Servicer shall
deliver (a) to the Trustee and the Certificate Insurer a Servicing Certificate
(in written form or the form of computer readable media or such other form as
may be agreed to by the Trustee and the Master Servicer), together with an
Officer's Certificate to the effect that such Servicing Certificate is true and
correct in all material respects, stating the related Collection Period,
Distribution Date, the series number of the Certificates, the date of this
Agreement, and:
(i) the aggregate amount of collections received on
the Mortgage Loans on or prior to the Determination Date in respect of
such Collection Period, separately stating the amounts received in
respect of principal and interest;
(ii) the aggregate amount of (a) Interest Collections
and (b) Principal Collections for such Collection Period; and
(iii) any other information necessary for the Trustee
to make distributions and payments in accordance with Section 5.1 and
to prepare the reports required to be delivered to Certificateholders
pursuant to Section 5.2.
The Trustee shall conclusively rely upon the information contained in a
Servicing Certificate for purposes of making distributions pursuant to Section
5.1 and for all other purposes, shall have no duty to inquire into such
information and shall have no liability in so relying. The format and content of
the Servicing Certificate may be modified by the mutual agreement of the Master
Servicer, the Trustee and the Certificate Insurer. The Master Servicer shall
give notice of any such change to the Rating Agencies.
Section 4.2. Certificate Insurance Policy.
(a) Following any Determination Date with respect to which it is
determined that a Insured Payment exists for the related Distribution Date, the
Trustee shall provide a notice to the Certificate Insurer to draw on the
Certificate Insurance Policy in the amount of the Insured Payment, such notice
to be provided no later than 1:00 p.m., New York City time, on the second
Business Day prior to each Distribution Date. Upon receipt of such Insured
Payment in accordance with the terms of the Certificate Insurance Policy, the
Trustee shall deposit such Insured Payment in the Distribution Account for
distribution to the Holders of the Certificates pursuant to Section 5.1. The
Master Servicer shall, in connection with any draw to be made on the Certificate
Insurance Policy in respect of an Avoided Payment, prepare at its expense, any
assignments necessary under the Certificate Insurance Policy.
(b) If the payment of any portion or all of any Class Interest
Distribution or Class A Principal Distribution is voided (a "Preference Event")
pursuant to a final, non-appealable
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order under the U.S. Bankruptcy Code in an insolvency proceeding, and, as a
result of such a Preference Event, the Trustee or any Class A Certificateholder
is required to return such voided payment, or any portion of such voided payment
made in respect of the Class A Certificates (an "Avoided Payment"), the Trustee
shall provide a notice to the Certificate Insurer which notice shall be
accompanied by (x) a certified copy of a final order of a court exercising
jurisdiction in such insolvency proceeding to the effect that the Trustee or
Class A Certificateholder is required to return any such payment or portion
thereof prior to the termination of the Trust because such payment was voided
under applicable law, with respect to which order the appeal period has expired
without an appeal having been filed (the "Final Order"), (y) an assignment, in
form reasonably satisfactory to Certificate Insurer, irrevocably assigning to
Certificate Insurer all rights and claims of such beneficiary relating to or
arising under such Avoided Payment and (z) a notice in the form attached to the
Certificate Insurance Policy appropriately completed and executed by the Trustee
or Class A Certificateholder. Any payment of an Avoided Payment under the
Certificate Insurance Policy shall be disbursed to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Final Order and not
to the beneficiary directly.
The Trustee agrees and the Class A Certificateholders by accepting
their Certificates agree that, so long as no Certificate Insurer Default has
occurred and is continuing the Certificate Insurer may at any time during the
continuation of any proceeding relating to a Preference Event direct all matters
relating to such Preference Event, including, without limitation, the direction
of any appeal of any order relating to such Preference Event and 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 the rights of the Seller, the Master Servicer, the Trustee and
each Certificateholder in the conduct of any such preference claim, including
without limitation, all rights to any party to an adversary proceeding action
with respect to any court order issued in connection with any such preference
claim.
Section 4.3. Replacement Certificate Insurance Policies.
In the event of a Certificate Insurer Default or if the claims paying
ability rating of the Certificate Insurer is downgraded below "Aa2" by Moody's
or "AA" by S&P and such downgrade results in a downgrading of the then current
rating of the Class A Certificates (in each case, a "Replacement Event"), the
Depositor, in accordance with and upon satisfaction of the conditions set forth
in the Certificate Insurance Policy, including, without limitation payment in
full of all amounts owed to the Certificate Insurer, may, but shall not be
required to, substitute a new surety bond or surety bonds for the existing
Certificate Insurance Policy or may arrange for any other form of credit
enhancement; provided, however, that in each case the Class A Certificates shall
be rated no lower than the rating assigned by each Rating Agency to the Class A
Certificates immediately prior to such Replacement Event and the timing and
mechanism for drawing on such new credit enhancement shall be reasonably
acceptable to the Trustee. It shall be a condition to substitution of any new
credit enhancement that there be delivered to the Trustee (i) a legal opinion,
acceptable in form to the Trustee, from counsel to the provider of such new
credit enhancement with respect to the enforceability thereof and such other
matters as the Trustee may require and (ii) an Opinion of Counsel to the effect
that such substitution would not (a) adversely affect in any material
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respect the tax status of the Certificates, (b) cause the Trust to be subject to
a tax at the entity level or to be classified as a taxable mortgage pool within
the meaning of Section 7701(i) of the Code, or (c) result in a material
modification to this Agreement or of the Certificates as described in Section
1001 of the Code and the regulations thereunder. Upon receipt of the items
referred to above and the taking of physical possession of the new credit
enhancement, the Trustee shall, within five Business Days following receipt of
such items and such taking of physical possession, deliver the replaced
Certificate Insurance Policy to the Certificate Insurer.
ARTICLE 5.
DISTRIBUTION AMOUNTS;
PAYMENTS AND STATEMENTS TO
CERTIFICATEHOLDERS; RIGHTS OF CERTIFICATEHOLDERS;
Section 5.1. Distributions.
(a) On each Distribution Date, the Trustee shall distribute out of the
Distribution Account the Available Funds and make distributions thereof as
described below and to the extent of the Available Funds:
(i) The Available Funds in the following order of
priority:
(A) to the Trustee, the Trustee Fee for
such Distribution Date;
(B) to Holders of each Class of Class A
Certificates, an amount equal to the related Class Interest
Distribution for such Distribution Date, any shortfall being
distributed pro rata to each such Class based on the amount
each such Class is entitled to receive in the absence of such
shortfall;
(C) sequentially, to the Class A-1, Class
A-2, Class A-3, Class A-4 and Class A-5 Certificateholders, in
that order, until the respective Class A Principal Balance of
each such Class is reduced to zero, the related Class A
Principal Distribution (other than the portion thereof
attributable to the Distributable Excess Spread); provided,
however, after the occurrence and continuance of Certificate
Insurer Default, such portion of the Class A Principal
Distribution will be distributed pro rata to the Holders
thereof based on the respective Class A Principal Balances;
provided, further, however, if such Distribution Date is the
Final Scheduled Distribution Date, to the Holders of the Class
A Certificates, an amount of principal equal to the related
Aggregate Class A Principal Balance.
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(D) to the Certificate Insurer, the Premium
Amount; and
(E) sequentially, to the Class A-1, Class
A-2, Class A-3, Class A-4 and Class A-5 Certificateholders, in
that order, until the respective Class A Principal Balance of
each such Class is reduced to zero, the related Distributable
Excess Spread for such Distribution Date, provided, however,
after the occurrence and continuance of a Certificate Insurer
Default, such Distributable Excess Spread for the Class A
Certificates shall be distributed pro rata to the Holders
thereof based on the respective Class A Principal Balances.
(ii) After making the distributions referred to in
clause (i) above, the Trustee shall make distributions in the following
order of priority, to the extent of the balance of the Available Funds:
(A) to the Certificate Insurer, amounts owing to
the Certificate Insurer under the Insurance Agreement for
reimbursement for prior draws made on the Certificate
Insurance Policy;
(B) to the Certificate Insurer for any other
amounts owing to the Certificate Insurer under the Insurance
Agreement;
(C) to the Class B-IO Certificateholders, the Class
B-IO Distribution Amount; and
(D) to the Class R Certificateholders, the balance,
if any.
(b) Distribution of Insured Payment. With respect to any Distribution
Date, in the event of an Insured Payment, the Trustee shall make such payments
from the amount drawn under the Certificate Insurance Policy pursuant to Article
IV for such Distribution Date in accordance with Section 5.1(a). The Certificate
Insurer shall be deemed to be the assignee of the Holders of the Class A
Certificates to the extent of any amount of Insured Payments disbursed by the
Trustee from proceeds of the Certificate Insurance Policy and to such extent,
shall be the subrogee of each such Holder of the Class A Certificates; provided,
however, that any such right of subrogation inuring to the Certificate Insurer
hereunder or otherwise shall be and is subordinated to the rights under this
Pooling and Servicing Agreement of the Holders of the Class A Certificates.
(c) Method of Distribution. The Trustee shall make distributions in
respect of a Distribution Date to each Certificateholder of record on the
related Record Date (other than as provided in Section 10.1 respecting the final
distribution) by check or money order mailed to such Certificateholder at the
address appearing in the Certificate Register, or upon written request by a
Certificateholder delivered to the Trustee at least five Business Days prior to
such Record Date, by wire transfer (but only if such Certificateholder is the
Depository or such Certificateholder owns of record either (a) one or more Class
A Certificates of a Class aggregating at least $1,000,000 Original Class A
Certificate Principal Balance or (b) one or
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more Class Certificates of a Class with Percentage Interests aggregating 30%).
Distributions among Certificateholders shall be made in proportion to the
Percentage Interests evidenced by the Certificates held by such
Certificateholders.
(d) Distributions on Book-Entry Certificates. Each distribution with
respect to a Book-Entry Certificate shall be paid to the Depository, which shall
credit the amount of such distribution to the accounts of its Depository
Participants in accordance with its normal procedures. Each Depository
Participant shall be responsible for disbursing such distribution to the
Certificate Owners that it represents and to each indirect participating
brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent. Each brokerage firm shall be responsible for disbursing funds
to the Certificate Owners that it represents. All such credits and disbursements
with respect to a Book-Entry Certificate are to be made by the Depository and
the Depository Participants in accordance with the provisions of the
Certificates. None of the Trustee, the Paying Agent, the Trustee, the Depositor,
the Master Servicer or the Seller shall have any responsibility therefor except
as otherwise provided by applicable law.
Section 5.2. Statements. (a) Not later than 12:00 Noon New York time on
the Distribution Date, the Trustee shall deliver to the Master Servicer, the
Depositor and to the Certificate Insurer, by telecopy, with a hard copy thereof
to be delivered on such Distribution Date, a statement (the "Trustee's
Remittance Report") (based solely on the information provided pursuant to
Section 4.1) containing the information set forth below with respect to such
Distribution Date:
(i) The Available Funds for the related Distribution
Date;
(ii) The Class A Principal Balance of each Class, the
Aggregate Loan Balance and the Aggregate Loan Balance as reported in
the prior Trustee's Remittance Report, or, in the case of the first
Determination Date, the Original Class A Principal Balance of each
Class, and the Cut-Off Date Aggregate Loan Balance;
(iii) The aggregate amount of collections received on
the Mortgage Loans on or prior to the Determination Date in respect of
the preceding Collection Period, separately stating the amounts
received in respect principal and interest;
(iv) The amount repaid by the Seller or Master
Servicer (reported separately) pursuant to Sections 2.2, 2.6 or 3.1;
(v) The amount of the Monthly Advances to be made with
respect to such Distribution Date;
(vi) The Class A Principal Distribution for the
Distribution Date with the components thereof stated separately and the
Class Interest Distribution for the Distribution Date and for each
Class, stating separately the components thereof; and the Class B-IO
Distribution Amount for such Distribution Date, separately stating the
components thereof;
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(vii) The amount, if any, of the Outstanding Class
Interest Carryover Shortfall and Outstanding Class A Principal
Carryover Shortfall for each Class after giving effect to the
distributions on such Distribution Date;
(viii) The amount of the Insured Payment, if any, to
be made on the Distribution Date;
(ix) The Class A Principal Balance of each Class and
the Aggregate Class A Principal Balance after giving effect to the
distribution to be made on the Distribution Date;
(x) The weighted average remaining term to maturity of
the Mortgage Loans and the weighted average Loan Rate;
(xi) The Servicing Fee and the amount to be paid to
the Certificate Insurer, separately stated, pursuant to Sections
5.1(a)(i)(D), 5.1(a)(ii)(A) and 5.1(a)(ii)(B);
(xii) The amount of all payments or reimbursements to
the Master Servicer pursuant to Section 3.3;
(xiii) The Pool Factor determined using the balances
in subclause (x) above, computed to six (6) decimal places;
(xiv) The O/C Amount, the O/C Reduction Amount, the
Excess O/C Amount and the Specified O/C Amount for the Distribution
Date and the Excess Spread for such Distribution Date;
(xv) The amount of Distributable Excess Spread to be
distributed to the Class A Certificateholders on such Distribution Date
pursuant to Sections 5.1(a)(i)(E) on such Distribution Date;
(xvi) The number of Mortgage Loans outstanding at the
beginning and at the end of the related Collection Period;
(xvii) The aggregate Liquidation Loss Amount, if any,
for the preceding Collection Period, the cumulative Total Losses and
the Rolling Three Month Delinquency Rate;
(xviii) The Aggregate Loan Balance, as of the end of
the Collection Period related to such Distribution Date;
(xix) The number and aggregate Principal Balances of
Mortgage Loans (w) as to which the Monthly Payment is delinquent for
30-59 days, 60-89 days and 90 or more days, respectively, (x) that have
become REO, in each case as of the end of the preceding Collection
Period, (y) that are in foreclosure, and (z) the Mortgagor of which is
the subject of any bankruptcy or insolvency proceeding;
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(xx) The unpaid principal amount of all Mortgage Loans
that became Liquidated Mortgage Loans during such Collection Period;
(xxi) The Net Liquidation Proceeds received during
such Collection Period;
(xxii) The book value (within the meaning of 12 C.F.R.
ss. 571.13 or comparable provision) of any real estate acquired through
foreclosure or grant of a deed in lieu of foreclosure; and
(xxiii) Such other information as is required by the Code
and regulations thereunder to be made available to Holders of the Class
A Certificates.
The Trustee shall forward such report to the Master Servicer, the
Depositor, the Certificate Insurer, the Certificateholders and the Rating
Agencies on such Distribution Date. The Trustee may fully rely upon and shall
have no liability with respect to information provided by the Master Servicer.
To the extent that there are inconsistencies between the telecopy of
the Trustee's Remittance Report and the hard copy thereof, the Master Servicer
may rely upon the latter.
In the case of information furnished pursuant to subclause (ii) above,
the amounts shall be expressed in a separate section of the report as a dollar
amount for each Class for each $1,000 original dollar amount as of the Cut-Off
Date.
(b) Within a reasonable period of time after the end of each calendar
year, the Trustee shall furnish to each Person who at any time during the
calendar year was a Class A or Class B-IO Certificateholder, if requested in
writing by such Person, such information as is reasonably necessary to provide
to such Person a statement containing the information set forth in subclauses
(vi) and (vii) above, aggregated for such calendar year or applicable portion
thereof during which such Person was a Certificateholder. Such obligation of the
Trustee shall be deemed to have been satisfied to the extent that substantially
comparable information shall be prepared and furnished by the Trustee to
Certificateholders pursuant to any requirements of the Code as are in force from
time to time.
(c) On each Distribution Date, the Trustee shall forward to the Class R
Certificateholders a copy of the reports forwarded to the Class A and Class B-IO
Certificateholders in respect of such Distribution Date and a statement setting
forth the amounts actually distributed to the Class R Certificateholders on such
Distribution Date together with such other information as the Trustee deems
necessary or appropriate.
(d) Within a reasonable period of time after the end of each calendar
year, the Trustee shall deliver to each Person who at any time during the
calendar year was a Class R Certificateholder, if requested in writing by such
Person, such information as is reasonably necessary to provide to such Person a
statement containing the information provided pursuant to the previous paragraph
aggregated for such calendar year or applicable portion thereof during which
such Person was a Class R Certificateholder. Such obligation of the Trustee
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shall be deemed to have been satisfied to the extent that substantially
comparable information shall be prepared and furnished to Certificateholders by
the Trustee pursuant to any requirements of the Code as from time to time in
force.
(e) The Master Servicer and the Trustee shall furnish to each
Certificateholder and to the Certificate Insurer (if requested in writing),
during the term of this Agreement, such periodic, special, or other reports or
information, whether or not provided for herein, as shall be necessary,
reasonable, or appropriate with respect to the Certificateholder or the
Certificate Insurer, as the case may be, or otherwise with respect to the
purposes of this Agreement, all such reports or information to be provided by
and in accordance with such applicable instructions and directions (if requested
in writing) as the Certificateholder or the Certificate Insurer, as the case may
be, may reasonably require; provided, that the Master Servicer and the Trustee
shall be entitled to be reimbursed by such Certificateholder or the Certificate
Insurer, as the case may be, for their respective fees and actual expenses
associated with providing such reports, if such reports are not generally
produced in the ordinary course of their respective businesses or readily
obtainable.
(f) Reports and computer tapes furnished by the Master Servicer
pursuant to this Agreement shall be deemed confidential and of a proprietary
nature, and shall not be copied or distributed except to the extent provided in
this Agreement and to the extent required by law or to the Rating Agencies, the
Depositor, the Certificate Insurer's reinsurer, parent, regulators, liquidity
providers and auditors and to the extent the Seller instructs the Trustee in
acting to furnish information regarding the Trust or the Mortgage Loans to
third-party information providers. No Person entitled to receive copies of such
reports or tapes or lists of Certificateholders shall use the information
therein for the purpose of soliciting the customers of the Seller or for any
other purpose except as set forth in this Agreement.
Section 5.3. Distribution Account.
The Trustee shall establish at the Corporate Trust Office a separate
trust account (the "Distribution Account") titled "Norwest Bank Minnesota,
National Association as Trustee, in trust for the registered holders of FURST
Home Equity Loan Asset-Backed Certificates, Series 1996-1." The Distribution
Account shall be maintained as an Eligible Account. The Trustee shall deposit
any amounts representing payments on and any collections in respect of the
Mortgage Loans received by it immediately following receipt thereof, including,
without limitation, all amounts withdrawn by the Master Servicer from the
Collection Account pursuant to Section 3.3 for deposit to the Distribution
Account.
Section 5.4. Investment of Accounts.
(a) Consistent with any requirements of the Code, all or a portion of
the Distribution Account held by the Trustee shall be invested and reinvested by
the Trustee, in one or more Eligible Investments bearing interest or sold at a
discount. Any investment earnings on funds held in the Distribution Account
shall be for the account of the Master Servicer. No such investment in the
Distribution Account shall mature later than the Business Day immediately
preceding the next Distribution Date (except that (i) if such Eligible
Investment is an obligation of the Trustee or an affiliate of the Trustee, then
such
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Eligible Investment shall mature not later than such Distribution Date and (ii)
any other date as may be approved by the Rating Agencies and the Certificate
Insurer).
(b) If any amounts are needed for disbursement from any Account held by
the Trustee and sufficient uninvested funds are not available to make such
disbursements, the Trustee shall cause to be sold or otherwise converted to cash
a sufficient amount of the investments in such Account.
(c) The Master Servicer shall deposit in the Distribution Account the
amount of any loss incurred in respect of any Eligible Investment held therein
which is in excess of the income and gain thereon immediately upon realization
of such loss from its own funds, without any right to reimbursement therefore.
ARTICLE 6.
THE CERTIFICATES
Section 6.1. The Certificates.
The Class A Certificates, Class R Certificates and Class B-IO
Certificates shall be substantially in the forms set forth in Exhibits A, B and
C, respectively, and shall, on original issue, be executed, authenticated and
delivered by the Trustee to or upon the order of the Depositor concurrently with
the sale and assignment to the Trustee of the Trust. The Class A Certificates
shall be initially evidenced by one or more certificates representing the entire
Original Class A Certificate Principal Balance and shall be held in minimum
dollar denominations of $1,000 and integral dollar multiples in excess thereof.
The Class B-IO Certificates shall be issued fully registered, definitive form in
Percentage Interests of ownership of such Class of not less than 10%. The Class
R Certificates shall be issuable as one or more certificates representing the
entire interest in the assets of the Trust other than that represented by the
Class A Certificates and the Class B-IO Certificates and shall be issued to the
Depositor and the Tax Matters Person.
The Certificates shall be executed by manual or facsimile signature on
behalf of the Trustee by an authorized officer under its seal imprinted thereon.
Certificates bearing the manual or facsimile signatures of individuals who were,
at the time when such signatures were affixed, authorized to sign on behalf of
the Trustee shall bind the Trust, notwithstanding that such individuals or any
of them have ceased to be so authorized prior to the authentication and delivery
of such Certificates or did not hold such offices at the date of such
Certificate. No Certificate shall be entitled to any benefit under this
Agreement, or be valid for any purpose, unless such Certificate shall have been
manually authenticated by the Trustee substantially in the form provided for
herein, and such authentication upon any Certificate shall be conclusive
evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication. Subject to Section 6.2(c), the Class A Certificates
shall be Book-Entry
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Certificates. The Class B-IO Certificates and Class R Certificates shall not be
Book-Entry Certificates.
Section 6.2. Registration of Transfer and Exchange of the
Certificates.
(a) The Certificate Registrar shall maintain or cause to be maintained
a Certificate Register in its Corporate Trust office in which, subject to such
reasonable regulations as it may prescribe, the Certificate Registrar shall
provide for the registration of the Certificates and of Transfers of the
Certificates as herein provided. The Trustee shall initially serve as
Certificate Registrar for the purpose of registering the Certificates and
Transfers of the Certificates as herein provided.
Upon surrender for registration of Transfer of any Certificate at any
office or agency of the Certificate Registrar maintained for such purpose
pursuant to the foregoing paragraph and, in the case of the Class B-IO and Class
R Certificates upon the satisfaction of those conditions applicable to such
Certificates, as set forth in Section 6.2(d) and (e) hereof, the Trustee shall
execute, authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates of a like class and of the same
aggregate Percentage Interest.
At the option of the Certificateholders, Certificates may be exchanged
for other Certificates in authorized denominations and the same aggregate
Percentage Interests, upon surrender of the Certificates to be exchanged at any
such office or agency. Whenever any Certificates are so surrendered for
exchange, the Trustee shall execute, authenticate and deliver the Certificates
of such class which the Certificateholder making the exchange is entitled to
receive. Every Certificate presented or surrendered for registration of Transfer
or exchange shall (if so required by the Trustee or the Certificate Registrar)
be duly endorsed by, or be accompanied by a written instrument of transfer in
form satisfactory to the Trustee and the Certificate Registrar duly executed by,
the Holder thereof or its attorney duly authorized in writing.
No service charge shall be made for any registration of Transfer or
exchange of any Certificates, but the Certificate Registrar may require payment
of a sum sufficient to cover any tax or governmental charge that may be imposed
in connection with any transfer or exchange of Certificates.
All Certificates surrendered for registration of Transfer shall be
canceled by the Certificate Registrar and disposed of pursuant to its standard
procedures.
(b) Except as provided in paragraph (c) 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 such 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 Certificates; (iii) ownership
and transfers of registration of such 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;
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(v) the Trustee shall deal with the Depository as representative of the
Certificate Owners of the Certificates for purposes of exercising the rights of
Holders under this Agreement, and requests and directions for and votes of such
representative 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 Owners. Each Depository
Participant shall only transfer Book- Entry Certificates of Certificate Owners
that it represents or of brokerage firms for which its acts as agent in
accordance with the Depository's normal procedures. The parties hereto are
hereby authorized to execute a Letter of Representations with the Depository or
take such other action as may be necessary or desirable to register a Book-Entry
Certificate to Depository. In the event of any conflict between the terms of any
such Letter of Representation and this Agreement the terms of this Agreement
shall control.
(c) If (i)(x) the Depository or the Depositor advises the Trustee in
writing that the Depository is no longer willing or able to discharge properly
its responsibilities as Depository, and (y) the Trustee or the Depositor is
unable to locate a qualified successor, (ii) the Depositor, at its sole option,
with consent of the Trustee, elects to terminate the book-entry system through
the Depository or (iii) after the occurrence of an Event of Default, the
Certificate Owners of each Class of Class A Certificates representing Percentage
Interests aggregating not less than 51% advises the Trustee and Depository
through the DTC participants in writing that the continuation of a book-entry
system through the Depository to the exclusion of definitive, fully registered
certificates (the "Definitive Certificates") to Certificate Owners is no longer
in the best interests of the Certificate Owners. Upon surrender to the Trustee
of each Class of Class A Certificates by the Depository, accompanied by
registration instructions from the Depository for registration, the Trustee
shall, at the Depositor's expense, in the case of (i) and (ii) above, or the
Seller's expense, in the case of (iii) above, execute and authenticate the
Definitive Certificates. Neither the Depositor nor the Trustee shall be liable
for any delay in delivery of such instructions and may conclusively rely on, and
shall be protected in relying on, such instructions. Upon the issuance of
Definitive Certificates, the Trustee, the Master Servicer, any Paying Agent and
the Depositor shall recognize the Holders of the Definitive Certificates as
Certificateholders hereunder.
(d) No Transfer of a Class B-IO or Class R Certificate shall be made or
registered unless such Transfer is exempt from the registration requirements of
the Securities Act of 1933, as amended, and any applicable state securities laws
or is made in accordance with such Act and laws. In the event that such a
Transfer of a Class B-IO or Class R Certificate is to be made, the Trustee may
require a written Opinion of Counsel substantially in the form of Exhibit K or
otherwise acceptable to the Trustee to the effect that such Transfer may be made
pursuant to an exemption, describing the applicable exemption and the basis
therefor, from such Act and laws or is being made pursuant to such Act and laws.
The Holder of a
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Class B-IO or Class R Certificate desiring to effect such Transfer shall, and
does hereby agree to, indemnify the Trustee and the Master Servicer against any
liability that may result if the Transfer is not so exempt or is not made in
accordance with such federal and state laws.
No Opinion of Counsel delivered pursuant to this subsection 6.2(d)
shall be an expense of the Trustee or the Master Servicer, but shall, in each
case, be paid either by the Holder of the Class B-IO or a Class R Certificate
subject to the proposed Transfer or by the proposed Transferee.
(e) No Transfer of a Class B-IO or Class R Certificate shall be made or
registered unless the Trustee shall have received either (i) a representation
letter in the form of Exhibit I from the Transferee of such Class B-IO or Class
R Certificate, or (ii) in the case of any such Class B-IO or Class R Certificate
presented for registration in the name of an employee benefit plan subject to
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
to Section 4975 of the Code (or comparable provisions of any subsequent
enactments), or a trustee of any such plan, an Opinion of Counsel in form and
substance satisfactory to the Trustee to the effect that the purchase or holding
of such Class B-IO or Class R Certificate will not result in the assets of the
Trust being deemed to be "plan assets" and subject to the prohibited transaction
provisions of ERISA and the Code and will not subject the Trustee, the Master
Servicer or the Depositor to any obligation in addition to those undertaken in
this Agreement. No representation letter or Opinion of Counsel delivered
pursuant to this subsection 6.2(e) shall be an expense of the Trustee, the
Master Servicer or the Depositor, but shall, in each case, be paid either by the
Holder of the Class B-IO or Class R Certificate subject to the proposed Transfer
or by the proposed Transferee.
Each Person who has or who acquires any Ownership Interest in a Class R
Certificate shall be deemed by the acceptance or acquisition of such Ownership
Interest to have agreed to be bound by the following provisions and to have
irrevocably appointed the Depositor or its designee as its attorney-in-fact to
negotiate the terms of any mandatory sale under clause (vi) below and to execute
all instruments of Transfer and to do all other things necessary in connection
with any such sale, and the rights of each Person acquiring any Ownership
Interest in a Class R Certificate are expressly subject to the following
provisions:
(i) Each Person holding or acquiring any Ownership Interest in a
Class R Certificate shall be a Permitted Transferee, shall not be
holding or acquiring such Ownership Interest on behalf of any Person
that is not a Permitted Transferee and shall promptly notify the
Trustee of any change or impending change in its status or the status
of any beneficial owner as a Permitted Transferee.
(ii) No Person shall acquire an Ownership Interest in a Class R
Certificate unless such Ownership Interest is a pro rata undivided
interest.
(iii) No Ownership Interest in a Class R Certificate may be
transferred without the express written consent of the Trustee. In
connection with any proposed registered Transfer of any Ownership
Interest in a Class R Certificate, the Trustee shall, as a condition to
such consent, require delivery to it of each of the following:
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(A) an affidavit from the proposed Transferee in
the form attached as Exhibit M (a "Transfer Affidavit") to the
effect that (a) such Transferee is a Permitted Transferee and
that it is not acquiring its Ownership Interest in the Class R
Certificate that is the subject of the proposed Transfer as a
nominee, trustee or agent for any Person who is not a
Permitted Transferee; (b) the proposed Transferee does not
have the intention to impede the assessment or collection of
tax legally required to be paid with respect to any Ownership
Interest in a Class R Certificate; (c) it has no present
knowledge or expectation that it will become insolvent or
subject to a bankruptcy proceeding for so long as it holds any
Ownership Interest in a Class R Certificate; and (d) it will
abide by the provisions of clause (vii) below; and
(B) a covenant of the proposed Transferee stating
that the proposed Transferee agrees to be bound by and to
abide by the Transfer restrictions applicable to the Class R
Certificates.
(iv) Notwithstanding the delivery of a Transfer
Affidavit by a proposed Transferee under clause (iii) above, if an
officer of the Trustee assigned to its Corporate Trustee Administration
Department has actual knowledge that the proposed Transferee is not a
Permitted Transferee, no Transfer of any Ownership Interest in a Class
R Certificate to such proposed Transferee shall be effected.
(v) Any attempted or purported registered Transfer of
any Ownership Interest in a Class B-IO or Class R Certificate in
violation of the provisions of subsections 6.2(d) or (e) shall be
absolutely null and void and shall vest no rights in the purported
Transferee, to the extent permitted by applicable law. If any purported
Transferee shall, in violation of the provisions of subsections 6.2(d)
or (e), become a Holder of a Class B-IO or Class R Certificate, the
prior Holder of such Certificate that is a Permitted Transferee shall,
upon discovery that the registration of Transfer of such Class B-IO or
Class R Certificate was not permitted by subsections 6.2(d) or (e), be
restored to all rights as Holder thereof retroactive to the date of
registration of Transfer of such Class B-IO or Class R Certificate. The
Trustee shall be under no liability to any Person for any registration
of Transfer of a Class B-IO or Class R Certificate that is in fact not
permitted by subsections 6.2(d) or (e) or for making any distributions
due on such Certificate to the Holder thereof or taking any other
action with respect to such Holder under the provisions of the
Agreement. The Trustee shall be entitled, but shall not be obligated,
to recover from any Holder of a Class B-IO or Class R Certificate that
was not a Permitted Transferee at the time such distributions were made
all distributions made on such Class B-IO or Class R Certificate. Any
such distributions so recovered by the Trustee shall be distributed and
delivered by the Trustee to the prior Holder of such Certificate that
is a Permitted Transferee.
(vi) If any Person other than a Permitted Transferee
acquires any Ownership Interest in a Class R Certificate in violation
of the restrictions in subsections 6.2(d) or (e), the Trustee shall
have the right, but shall not be obligated, without notice to the
Holder of such Class R Certificate or any other Person having
70
an Ownership Interest therein, to sell such Class R Certificate to a
purchaser selected by the Trustee on such terms as the Trustee may
choose. Such purchaser may be the Trustee itself or any affiliate of
the Trustee. The proceeds of such sale, net of commissions (which may
include commissions payable to the Trustee or its affiliates), expenses
and taxes due, if any, shall be remitted by the Trustee to the previous
Holder of such Class R Certificate that is a Permitted Transferee,
except that in the event that the Trustee determines that the Holder of
such Class R Certificate may be liable for any amount due under
subsection 6.2(d) or (e) or any other provisions of this Agreement, the
Trustee may withhold a corresponding amount from such remittance as
security for such claim. The terms and conditions of any sale under
this clause (vi) shall be determined in the sole discretion of the
Trustee, and the Trustee shall not be liable to any Person having an
Ownership Interest in a Class R Certificate as a result of its exercise
of such discretion.
(vii) Each Person holding or acquiring any Ownership
Interest in a Class R Certificate shall provide the Trustee with its
written agreement (in form and substance satisfactory to the Trustee)
(a) to require a Transfer Affidavit in the form of Exhibit M hereto
from any other Person to whom such Person attempts to transfer any
Ownership Interest in a Class R Certificate and (b) not to transfer any
Ownership Interest in, or to cause the transfer of any Ownership
Interest in, a Class R Certificate if it has actual knowledge that such
other Person is not a Permitted Transferee or will be holding any
Ownership Interest in a Class R Certificate on behalf of a Person that
is not a Permitted Transferee.
Upon notice to the Trustee by any Person, or if an officer of the
Trustee assigned to its Corporate Trustee Administration Department otherwise
has actual knowledge, that any Ownership Interest in a Class R Certificate has
been transferred, either directly or indirectly, to any Person that is not a
Permitted Transferee or an agent thereof (including a broker, nominee or
middleman) in contravention of the foregoing restrictions, the Trustee agrees to
furnish to the Internal Revenue Service and to the Person described in
860E(e)(3) of the Code the information described in Treasury Regulation Section
1.860D-1(b)(5)(11), or any successor regulation thereto. Such information will
be provided in the manner described in Treasury Regulation Section
1.860E-2(a)(5), or any successor regulation thereto. The Trustee shall be
permitted to be reimbursed by such Person for the cost of providing such
information, but the Trustee shall in all events be required to furnish such
information.
The foregoing provisions of subsection 6.2(c) shall cease to apply to Transfers
occurring on or after the date on which there shall have been delivered to the
Trustee, in form satisfactory to the Trustee, an Opinion of Counsel to the
effect that such removal will not cause the Trust to fail to qualify as a REMIC
at any time any Certificate is outstanding.
Section 6.3. Mutilated, Destroyed, Lost or Stolen Certificates.
If (i) any mutilated Certificate is surrendered to the Certificate
Registrar or the Certificate Registrar receives evidence to its satisfaction of
the destruction, loss or theft of any Certificate, and (ii) there is delivered
to the Trustee, the Depositor and the Certificate Registrar such reasonable
security or indemnity as may be required by them to save each of
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them harmless, then, in the absence of notice to the Trustee or the Certificate
Registrar that such Certificate has been acquired by a bona fide purchaser, the
Trustee shall execute, authenticate and deliver, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of
like tenor and Percentage Interest. Upon the issuance of any new Certificate
under this Section 6.3, the Trustee or the Certificate Registrar may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses (including the fees
and expenses of the Trustee and the Certificate Registrar) connected therewith.
Any duplicate Certificate issued pursuant to this Section 6.3, shall constitute
complete and indefeasible evidence of ownership in the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Certificate shall be found
at any time.
Section 6.4. Persons Deemed Owners.
Prior to due presentation of a Certificate for registration of
transfer, the Master Servicer, the Trustee, the Certificate Registrar, any
Paying Agent, the Certificate Insurer and any agent of the Master Servicer, the
Trustee, any Paying Agent or the Certificate Registrar may treat the Person,
including a Depository, in whose name any Certificate is registered as the owner
(the "Owner") of such Certificate for the purpose of receiving distributions
pursuant to Section 5.1 and for all other purposes whatsoever, and none of the
Master Servicer, the Depositor, the Trustee, the Certificate Registrar, the
Certificate Insurer nor any agent of any of them shall be affected by notice to
the contrary.
Section 6.5. Appointment of Paying Agent.
(a) The Paying Agent shall make distributions to the Holders of
Certificates from the Distribution Account pursuant to Section 5.1 and shall
report the amounts of such distributions to the Trustee. The duties of the
Paying Agent may include the obligation (i) to withdraw funds from the
Distribution Account for the purpose of making the distributions referred to
above and (ii) to distribute statements and provide information to Certificate-
holders as required hereunder. The Paying Agent hereunder shall at all times be
a national banking association or a corporation duly incorporated and validly
existing under the laws of the United States of America or any state thereof,
authorized under such laws to exercise corporate trust powers and subject to
supervision or examination by federal or state authorities. The Paying Agent
shall initially be the Trustee. The Trustee may appoint a successor Paying
Agent, which appointment shall be reasonably satisfactory to the Depositor and
the Seller.
(b) The Trustee shall cause the Paying Agent (if other than the
Trustee) to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee that such Paying Agent shall hold all
sums, if any, held by it for payment to the Holders of Certificates in trust for
the benefit of the Holders of Certificates entitled thereto until such sums
shall be paid to such Certificateholders and shall agree that it shall comply
with all requirements of the Code regarding the withholding of payments in
respect of Federal income taxes due from Certificate Owners and otherwise comply
with the provisions of this Agreement applicable to it.
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6.6. 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 Minneapolis, Minnesota where
Certificates may be surrendered for registration of transfer or exchange. The
Trustee initially designates its Corporate Trust Office for such purposes. The
Trustee will give prompt written notice to the Certificateholders of any change
in such location of any such office or agency.
ARTICLE 7.
THE DEPOSITOR, THE SELLER AND THE MASTER SERVICER
Section 7.1. Liability of the Depositor, the Seller and the
Master Servicer.
The Seller and the Master Servicer shall be liable in accordance
herewith only to the extent of the obligations specifically imposed upon and
undertaken by the Seller and the Master Servicer, as the case may be, herein.
The Depositor shall be liable in accordance herewith only to the extent of the
obligations specifically imposed upon and undertaken by the Depositor.
Section 7.2. Merger or Consolidation of, or Assumption of the
Obligations of, the Depositor, the Seller or the Master Servicer.
Any corporation into which the Depositor, the Seller or the Master
Servicer may be merged or consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Depositor, the Seller or the
Master Servicer shall be a party, or any corporation succeeding to the business
of the Depositor, the Seller or the Master Servicer shall be the successor of
the Depositor, the Master Servicer or the Depositor, as the case may be,
hereunder, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
Section 7.3. Limitation on Liability of the Master Servicer and
Others.
Neither the Master Servicer nor any of the directors or officers or
employees or agents of the Master Servicer shall be under any liability to the
Trust or the Certificateholders for any action taken or for refraining from the
taking of any action by the Master Servicer in good faith pursuant to this
Agreement, or for errors in judgment; provided, however, that this provision
shall not protect the Master Servicer or any such Person against any liability
which would otherwise be imposed by reason of its willful misfeasance, bad faith
or gross negligence in the performance of duties of the Master Servicer or by
reason of its reckless disregard of its obligations and duties of the Master
Servicer hereunder and, provided, further, that this provision shall not be
construed to entitle the Master Servicer to indemnity in the event that amounts
advanced by the Master Servicer to retire any senior lien exceed Net Liquidation
Proceeds realized with respect to the related Mortgage Loan. The Master Servicer
and any director or officer or employee or agent of the Master Servicer may rely
in good faith on any document of any kind prima facie properly
73
executed and submitted by any Person respecting any matters arising hereunder.
The Master Servicer and any director or officer or employee or agent of the
Master Servicer shall be indemnified by the Trust and held harmless against any
loss, liability or expense incurred in connection with any legal action relating
to this Agreement or the Certificates, other than any loss, liability or expense
related to any specific Mortgage Loan or Mortgage Loans (except as any such
loss, liability or expense shall be otherwise reimbursable pursuant to this
Agreement) and any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or gross negligence in the performance of duties
hereunder or by reason of reckless disregard of obligations and duties
hereunder; provided, however that such indemnification shall be limited solely
to amounts available therefor from time to time pursuant to Section
5.1(a)(ii)(D). The Master Servicer shall not be under any obligation to appear
in, prosecute or defend any legal action which is not incidental to duties to
service the Mortgage Loans in accordance with this Agreement, and which in its
opinion may involve it in any expense or liability; provided, however, that the
Master Servicer may in its sole discretion undertake any such action which it
may deem necessary or desirable in respect of this Agreement, and the rights and
duties of the parties hereto and the interests of the Certificateholders
hereunder. In such event, the reasonable legal expenses and costs of such action
and any liability resulting therefrom shall be expenses, costs and liabilities
of the Trust and the Master Servicer shall be entitled to be reimbursed therefor
solely pursuant to Section 5.1(a)(ii)(D). The Master Servicer's right to
indemnity or reimbursement pursuant to this Section 7.3 shall survive any
resignation or termination of the Master Servicer pursuant to Section 7.4 or 8.1
with respect to any losses, expenses, costs or liabilities arising prior to such
resignation or termination (or arising from events that occurred prior to such
resignation or termination).
Section 7.4. Master Servicer Not to Resign.
Subject to the provisions of Section 7.2, the Master Servicer shall not
resign from the obligations and duties hereby imposed on it except (i) upon
determination that the performance of its obligations or duties hereunder are no
longer permissible under applicable law or are in material conflict by reason of
applicable law with any other activities carried on by it or its subsidiaries or
Affiliates, the other activities of the Master Servicer so causing such a
conflict being of a type and nature carried on by the Master Servicer or its
subsidiaries or Affiliates at the date of this Agreement or (ii) upon
satisfaction of the following conditions: (a) the Master Servicer has proposed a
successor Master Servicer to the Trustee in writing and such proposed successor
Master Servicer is reasonably acceptable to the Trustee and the Certificate
Insurer; and (b) each Rating Agency shall have delivered a letter to the Trustee
prior to the appointment of the successor Master Servicer stating that the
proposed appointment of such successor Master Servicer as Master Servicer
hereunder will not result in the reduction or withdrawal of the then current
rating of the Class A Certificates; provided, however, that no such resignation
by the Master Servicer shall become effective until such successor Master
Servicer or, in the case of (i) above, the Trustee shall have assumed the Master
Servicer's responsibilities and obligations hereunder (including, without
limitation the obligations of the Master Servicer under Section 3.4) or the
Trustee shall have designated a successor Master Servicer in accordance with
Section 8.2. Any such resignation shall not relieve the Master Servicer of
responsibility for any of the obligations specified in Sections 8.1 and 8.2 as
obligations that survive the resignation or
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termination of the Master Servicer. Any such determination permitting the
resignation of the Master Servicer pursuant to clause (i) above shall be
evidenced by an Opinion of Counsel to such effect delivered to the Trustee, the
Certificate Insurer and the Certificateholders. The Master Servicer shall have
no claim (whether by subrogation or otherwise) or other action against any
Certificateholder or the Certificate Insurer for any amounts paid by the Master
Servicer pursuant to any provision of this Agreement. Any such determination
permitting the resignation of the Master Servicer shall be evidenced by an
Opinion of Counsel to such effect delivered to the Trustee and the Certificate
Insurer. The Trustee shall provide written notice to each Holder of a
Certificate promptly after any resignation by the Master Servicer hereunder.
Section 7.5. Delegation of Duties.
In the ordinary course of business, the Master Servicer at any time may
delegate any of its duties hereunder to any Person, including any of its
Affiliates, who agrees to conduct such duties in accordance with standards
comparable to those with which the Master Servicer complies pursuant to Section
3.1. Such delegation shall not relieve the Master Servicer of its liabilities
and responsibilities with respect to such duties and shall not constitute a
resignation within the meaning of Section 7.4. The Master Servicer shall provide
the Certificate Insurer, each Rating Agency, the Trustee and each
Certificateholder with written notice prior to the delegation of any of its
duties to any Person other than any of the Master Servicer's Affiliates or their
respective successors and assigns.
Section 7.6. Indemnification of the Trust by the Seller and Master
Servicer. (a) The Master Servicer shall indemnify and hold harmless the Trust
and the Trustee from and against any loss, liability, expense, damage or injury
suffered or sustained by reason of the Master Servicer's activities or omissions
in servicing or administering the Mortgage Loans that are not in accordance with
this Agreement, including, but not limited to, any judgment, award, settlement,
reasonable attorneys' fees and other costs or expenses incurred in connection
with the defense of any actual or threatened action, proceeding or claim related
to the Master Servicer's failure to perform hereunder. Any such indemnification
shall not be payable from the assets of the Trust. The provisions of this
indemnity shall run directly to and be enforceable by an injured party subject
to the limitations hereof.
(b) Notwithstanding anything to the contrary contained herein, the
Seller (i) agrees to be liable directly to the injured party for the entire
amount and (ii) shall indemnify and hold harmless the Trust and the Trustee, and
with respect to subclause (A) below, the Certificate Insurer, from and against
any loss, liability, expense, damage, claim or injury (including, without
limitation, any prohibited transactions tax imposed on the Trust, but excluding
any loss, liability, expense, damage, claim or injury attributable to a holder
of a Regular Certificate in the capacity as an investor in such Certificates as
a result of defaults on the Mortgage Loans) arising out of or based on (A) the
retention of the Mortgage Loans and Mortgage Files pursuant to the Custodial
Agreement and (B) this Agreement by reason of any acts, omissions, or alleged
acts or omissions arising out of activities of the Trust or the Trustee, or the
actions of the Master Servicer including, in either case, but not limited to,
amounts payable to the Master Servicer pursuant to Section 7.3, any judgment,
award, settlement, reasonable attorneys' fees and other costs or expenses
incurred in connection with
75
the defense of any actual or threatened action, proceeding or claim; provided
that the Seller shall not indemnify the Trustee (but shall indemnify any other
injured party) if such loss, liability, expense, damage or injury is due to the
Trustee's willful malfeasance, bad faith or negligence or by reason of the
Trustee's reckless disregard of its obligations hereunder. The provisions of
this indemnity shall run directly to and be enforceable by an injured party
subject to the limitations hereof. The provisions of this Section shall survive
the termination of the Agreement.
ARTICLE 8.
DEFAULT
Section 8.1. Events of Default.
If any one of the following events (an "Event of Default") shall occur
and be continuing:
(i) (A) The failure by the Master Servicer to make
any Monthly Advance; or (B) any other failure by the Master Servicer to
deposit in any Account any deposit required to be made under the terms
of this Agreement which continues unremedied for a period of two
Business Days after the earlier of the (a) knowledge of the Master
Servicer of such failure and (b) the date upon which written notice of
such failure, requiring the same to be remedied, and stating that such
notice is a "Notice of Default" hereunder, shall have been given to the
Master Servicer by the Trustee or to the Master Servicer and the
Trustee by the Certificate Insurer or to the Master Servicer and the
Trustee by any Certificateholder; or
(ii) The failure by the Master Servicer to make any
required Servicing Advance which failure continues unremedied for a
period of 30 days, or the failure on the part of the Master Servicer
duly to observe or perform in any material respect any other covenants
or agreements of the Master Servicer set forth in the Certificates or
in this Agreement, which failure, in each case, materially and
adversely affects the interests of Certificateholders or the
Certificate Insurer and which continues unremedied for a period of 60
days after the earlier of (a) knowledge of the Master Servicer of such
failure and (b) date on which written notice of such failure, requiring
the same to be remedied, and stating that such notice is a "Notice of
Default" hereunder, shall have been given to the Master Servicer by the
Trustee or to the Master Servicer and the Trustee by the Certificate
Insurer or to the Master Servicer and the Trustee by any
Certificateholder or the Certificate Insurer; or
(iii) The entry against the Master Servicer of a decree
or order by a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a trustee,
conservator, receiver or liquidator in any insolvency, conservatorship,
receivership, readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or for the winding up or
liquidation of its affairs,
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and the continuance of any such decree or order unstayed and in effect
for a period of 60 consecutive days; or
(iv) The consent by the Master Servicer to the
appointment of a trustee, conservator, receiver or liquidator in any
insolvency, conservatorship, receivership, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or
relating to the Master Servicer or of or relating to substantially all
of its property; or the Master Servicer shall admit in writing its
inability to pay its debts generally as they become due, file a
petition to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of its
creditors, or voluntarily suspend payment of its obligations;
(v) Any breach by the Master Servicer of a
representation or warranty made in Section 2.4, which breach continues
unremedied for a period of 60 days after the earlier of (a) knowledge
of the Master Servicer of such failure and (b) the date on which
written notice of such breach, requiring the same to be remedied, and
stating that such notice is a "Notice of Default" hereunder, shall have
been given to the Master Servicer by the Trustee or to the Master
Servicer and the Trustee by the Certificate Insurer or to the Master
Servicer and the Trustee by any Certificateholder;
(vi) the occurrence of a Servicer Removal Right Event;
or
(vii) The Certificate Insurer reasonably determines
that the performance by the Master Servicer of its servicing duties
hereunder with respect to the Mortgage Loans is not in material
compliance with reasonably acceptable servicing standards after
considering the following factors: (A) the terms and conditions of this
Pooling and Servicing Agreement, (B) the Master Servicer's practices as
of the Closing Date, as the same may be amended or modified by the
Master Servicer from time to time provided that such amendments or
modifications are either (i) consistent with reasonable industry
standards for the servicing of closed-end fixed-rate sub-prime home
equity loans similar to the Mortgage Loans or (ii) the Master
Servicer's historical practices and procedures regarding the amendment,
modification and development of its servicing procedures and (C) the
then current practices of the Master Servicer applied to all other
loans similar to the Mortgage Loans then serviced by the Master
Servicer whether such mortgage loans are owned by the Master Servicer
or otherwise, and in the reasonable judgment of the Certificate Insurer
such material noncompliance would materially and adversely affect the
interests of the Certificateholders or the Certificate Insurer and
continues unremedied for a period of 45 days after the date on which
written notice thereof, describing with reasonable detail such
noncompliance, requiring the same to be remedied, and stating that such
notice is a "Notice of Default" hereunder, shall be given to the Master
Servicer, each Certificateholder and the Trustee.
then, and in each and every such case, so long as an Event of Default shall not
have been remedied by the Master Servicer within the time periods provided for
above, (x) subject to the succeeding paragraph, with respect solely to clause
(i)(A) above, if such Monthly Advance is not made by 4:00 P.M. New York time on
the second Business Day following
77
written notice to the Master Servicer of such event, the Trustee shall terminate
all of the rights and obligations of the Master Servicer under this Agreement
and the Trustee, or a successor Master Servicer appointed in accordance with
Section 8.2, shall immediately make such Monthly Advance and assume, pursuant to
Section 8.2 hereof, the duties of a successor Master Servicer and (y) in the
case of (i)(B), (ii), (iii), (iv), (v), (vi) and (vii), the Trustee shall, at
the direction of the Certificate Insurer or the Holders of each Class of Class A
Certificates evidencing Percentage Interests aggregating not less than 51% by
notice then given in writing to the Master Servicer, shall terminate all of the
rights and obligations of the Master Servicer as Master Servicer under this
Agreement. Upon the Trustee's obtaining actual knowledge that a required amount
described in clause (i) above has not been made by the Master Servicer, the
Trustee shall notify an Authorized Officer of the Master Servicer, and the
Certificate Insurer, as soon as is reasonably practical. Any such notice to the
Master Servicer shall also be given to each Rating Agency and each
Certificateholder. On or after the receipt by the Master Servicer of such
written notice, all authority and power of the Master Servicer under this
Agreement, whether with respect to the Certificates or the Mortgage Loans or
otherwise, shall pass to and be vested in the Trustee pursuant to and under this
Section 8.1; and, without limitation, the Trustee is hereby authorized and
empowered to execute and deliver, on behalf of the Master Servicer as
attorney-in-fact or otherwise, any and all documents and other instruments, and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such notice of termination, whether to complete the transfer and
endorsement of each Mortgage Loan and related documents, or otherwise. The
Master Servicer agrees to cooperate with the Trustee in effecting the
termination of the responsibilities and rights of the Master Servicer hereunder,
including, without limitation, the transfer to the Trustee for the
administration by it of all cash amounts that shall at the time be held by the
Master Servicer and to be deposited by it in the Collection Account, or that
have been deposited by the Master Servicer in the Collection Account or
thereafter received by the Master Servicer with respect to the Mortgage Loans.
All costs and expenses (including attorneys' fees) incurred in connection with
transferring the Mortgage Files to the successor Master Servicer and amending
this Agreement to reflect such succession as Master Servicer pursuant to this
Section 8.1 shall be paid by the predecessor Master Servicer (or if the
predecessor Master Servicer is the Trustee, the initial Master Servicer) upon
presentation of reasonable documentation of such costs and expenses.
Notwithstanding the foregoing, a delay in or failure of performance
under Section 8.1(i)(A) for a period of ten Business Days or under Section
8.1(ii) for a period of 30 Business Days, shall not constitute an Event of
Default if such delay or failure could not be prevented by the existence of
reasonable diligence by the Master Servicer and such delay or failure was caused
by an act of God or the public enemy, acts of declared or undeclared war, public
disorder, rebellion or sabotage, epidemics, landslides, lightning, fire,
hurricanes, earthquakes, floods or similar causes. The preceding sentence shall
not relieve the Master Servicer from using its best efforts to perform its
respective obligations in a timely manner in accordance with the terms of this
Agreement and the Master Servicer shall provide the Trustee, the Certificate
Insurer and the Certificateholders with an Officers' Certificate giving prompt
notice of such failure or delay by it, together with a description of its
efforts to so perform its obligations. The Master Servicer shall immediately
notify the Trustee and the Certificate Insurer in writing of any Event of
Default.
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Section 8.2. Trustee to Act; Appointment of Successor.
(a) On and after the time the Master Servicer receives a notice of
termination pursuant to Section 8.1 or 7.4, the Trustee shall be the successor
in all respects to the Master Servicer in its capacity as servicer under this
Agreement and the transactions set forth or provided for herein and shall be
subject to all the responsibilities, duties and liabilities relating thereto
placed on the Master Servicer by the terms and provisions hereof. As
compensation therefor, the Trustee shall be entitled to all such compensation
and expenses as the Master Servicer would have been entitled to hereunder if no
such notice of termination had been given. Notwithstanding the above, (i) if the
Trustee is unwilling to act as successor Master Servicer, or (ii) if the Trustee
is legally unable so to act, the Trustee may, with the written consent of the
Certificate Insurer (in the situation described in clause (i) above) or shall at
the direction of the Certificate Insurer (in the situation described in clause
(ii) above) appoint or petition a court of competent jurisdiction to appoint,
any established housing and home finance institution, bank or other mortgage
loan or home equity loan servicer having a net worth of not less than
$50,000,000 as the successor to the Master Servicer hereunder in the assumption
of all or any part of the responsibilities, duties or liabilities of the Master
Servicer hereunder; provided that any such successor Master Servicer shall be
acceptable to the Certificate Insurer, as evidenced by the prior written consent
of the Certificate Insurer, which consent shall not be unreasonably withheld,
and provided further that the appointment of any such successor Master Servicer
will not result in the qualification, reduction or withdrawal of the ratings
assigned to the Certificates by the Rating Agencies. Pending appointment of a
successor to the Master Servicer hereunder, unless the Trustee is prohibited by
law from so acting, the Trustee shall act in such capacity as hereinabove
provided. In connection with such appointment and assumption, the successor
shall be entitled to receive compensation out of payments on Mortgage Loans in
an amount equal to the compensation and expenses which the Master Servicer would
otherwise have received pursuant to Section 3.9 (or such lesser compensation as
the Trustee and such successor shall agree). The appointment of a successor
Master Servicer shall not affect any liability of the predecessor Master
Servicer which may have arisen under this Agreement prior to its termination as
Master Servicer (including, without limitation, the obligation to purchase
Mortgage Loans pursuant to Section 3.1, to pay any deductible under an insurance
policy pursuant to Section 3.4 or to indemnify the Trustee pursuant to Section
7.6), nor shall any successor Master Servicer be liable for any acts or
omissions of the predecessor Master Servicer or for any breach by such Master
Servicer of any of its representations or warranties contained herein or in any
related document or agreement. The Trustee and such successor shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession.
(b) Any successor, including the Trustee, to the Master Servicer as
Master Servicer shall during the term of its service as Master Servicer (i)
continue to service and administer the Mortgage Loans for the benefit of
Certificateholders and (ii) maintain in force a policy or policies of insurance
covering errors and omissions in the performance of its obligations as Master
Servicer hereunder and a fidelity bond in respect of its officers, employees and
agents to the same extent as the Master Servicer is so required pursuant to
Section 3.12.
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Section 8.3. Waiver of Defaults.
The Trustee may, on behalf of all Certificateholders, and subject to
the consent of the Certificate Insurer, waive any events permitting removal of
the Master Servicer as servicer pursuant to this Article VIII, provided,
however, that the Trustee may not waive a default in making a required
distribution on a Certificate without the consent of the Holder of such
Certificate. Upon any waiver of a past default, such default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereto except to the
extent expressly so waived. Notice of any such waiver shall be given by the
Trustee to the Rating Agencies.
Section 8.4. Notification to Certificateholders.
Upon any termination or appointment of a successor to the Master
Servicer pursuant to this Article VIII or Section 7.4, the Trustee shall give
prompt written notice thereof to the Certificateholders at their respective
addresses appearing in the Certificate Register, the Certificate Insurer and
each Rating Agency.
ARTICLE 9.
THE TRUSTEE
Section 9.1. Duties of Trustee.
The Trustee, prior to the occurrence of an Event of Default and after
the curing of all Events of Default which may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Agreement. If an Event of Default has occurred (which has not been cured) of
which a Responsible Officer of the Trustee has actual knowledge, the Trustee
shall exercise such of the rights and powers vested in it by this Agreement, and
use the same degree of care and skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of his or her own
affairs.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they are in
the form required by this Agreement; provided, however, that the Trustee will
not be responsible for the accuracy or content of any such resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments.
No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct; provided, however, that:
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(i) prior to the occurrence of an Event of Default,
and after the curing of all such Events of Default which may have
occurred, the duties and obligations of the Trustee shall be determined
solely by the express provisions of this Agreement, the Trustee shall
not be liable except for the performance of such duties and obligations
as are specifically set forth in this Agreement, no implied covenants
or obligations shall be read into this Agreement against the Trustee
and, in the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Agreement;
(ii) the Trustee shall not be personally liable for an
error of judgment made in good faith by a Responsible Officer of the
Trustee, unless it shall be proved that the Trustee was negligent in
ascertaining or investigating the facts related thereto;
(iii) the Trustee shall not be personally liable with
respect to any action taken, suffered or omitted to be taken by it in
good faith in accordance with the consent or direction of the
Certificate Insurer or Certificateholders under this Agreement; and
(iv) the Trustee shall not be charged with knowledge
of any failure by the Master Servicer to comply with the obligations of
the Master Servicer referred to in clauses (i) and (ii) of Section 8.1
unless a Responsible Officer of the Trustee at the Corporate Trust
Office obtains actual knowledge of such failure or the Trustee receives
written notice of such failure from the Master Servicer.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Agreement shall in any event require
the Trustee to perform, or be responsible for the manner of performance of, any
of the obligations of the Depositor, the Seller or the Master Servicer under
this Agreement, except during such time, if any, as the Trustee shall be the
successor to, and be vested with the rights, duties, powers and privileges of,
the Master Servicer in accordance with the terms of this Agreement.
Section 9.2. Certain Matters Affecting the Trustee.
Except as otherwise provided in Section 9.1:
(i) the Trustee may request and rely upon, and shall
be protected in acting or refraining from acting upon, any resolution,
Officer's Certificate, certificate of auditors or any other
certificate, statement, instrument, opinion, report, notice, request,
consent, order, appraisal, bond or other paper or document reasonably
believed by it to be genuine and to have been signed or presented by
the proper party or parties, and the manner of obtaining consents and
of evidencing the authorization
81
of the execution thereof by Certificateholders shall be subject to such
reasonable regulations as the Trustee may prescribe;
(ii) the Trustee may consult with counsel and any
written advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection in respect of any action
taken or suffered or omitted by it hereunder in good faith and in
accordance with such advice or Opinion of Counsel;
(iii) the Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Agreement, or
to institute, conduct or defend any litigation hereunder or in relation
hereto, at the request, order or direction of any of the
Certificateholders or the Certificate Insurer, pursuant to the
provisions of this Agreement, unless such Certificateholders or the
Certificate Insurer shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which
may be incurred therein or thereby; the right of the Trustee to perform
any discretionary act enumerated in this Agreement shall not be
construed as a duty, and the Trustee shall not be answerable for other
than its negligence or wilful misconduct in the performance of any such
act; nothing contained herein shall, however, relieve the Trustee of
the obligations, upon the occurrence of an Event of Default (which has
not been cured) of which a Responsible Officer of the Trustee has
actual knowledge, to exercise such of the rights and powers vested in
it by this Agreement, and to use the same degree of care and skill in
their exercise as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs;
(iv) the Trustee shall not be personally liable for
any action taken, suffered or omitted by it in good faith and believed
by it to be authorized or within the discretion or rights or powers
conferred upon it by this Agreement;
(v) prior to the occurrence of an Event of Default
and after the curing of all Events of Default which may have occurred,
the Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond or other paper or documents, unless requested in writing to do so
by the Certificate Insurer; provided, however, that if the payment
within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured
to the Trustee by the security afforded to it by the terms of this
Agreement, the Trustee may require reasonable indemnity against such
cost, expense or liability as a condition to such proceeding. The
reasonable expense of every such examination shall be paid by the
Master Servicer or, if paid by the Trustee, shall be reimbursed by the
Master Servicer upon demand. Nothing in this clause (v) shall derogate
from the obligation of the Master Servicer to observe any applicable
law prohibiting disclosure of information regarding the Mortgagors;
(vi) the Trustee shall not be accountable, shall have
no liability and makes no representation as to any acts or omissions
hereunder of the Master Servicer
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until such time as the Trustee may be required to act as Master
Servicer pursuant to Section 8.2 and thereupon only for the acts or
omissions of the Trustee as successor Master Servicer; and
(vii) the Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents or attorneys or a custodian.
Section 9.3. Trustee Not Liable for Certificates or Mortgage Loans.
The recitals contained herein and in the Certificates (other than the
authentication of the Trustee on the Certificates) shall be taken as the
statements of the Depositor, and the Trustee assumes no responsibility for the
correctness of the same. The Trustee makes no representations as to the validity
or sufficiency of this Agreement or of the Certificates (other than the
signature and authentication of the Trustee on the Certificates) or of any
Mortgage Loan or related document. The Trustee shall not be accountable for the
use or application by the Master Servicer of any of the Certificates or of the
proceeds of such Certificates, or for the use or application of any funds paid
to the Master Servicer in respect of the Mortgage Loans or deposited in or
withdrawn from the Collection Account by the Master Servicer. The Trustee shall
at no time have any responsibility or liability for or with respect to the
legality, validity and enforceability of any Mortgage or any Mortgage Loan, or
the perfection and priority of any mortgage or the maintenance of any such
perfection and priority or for or with respect to the sufficiency of the Trust
or its ability to generate the payments to be distributed to Certificateholders
under this Agreement, including, without limitation: the existence, condition
and ownership of any Mortgaged Property; the existence and enforceability of any
hazard insurance thereon (other than if the Trustee shall assume the duties of
the Master Servicer pursuant to Section 8.2 and thereupon only for the acts or
omissions of the successor Master Servicer); the validity of the assignment of
any Mortgage Loan to the Trustee or of any intervening assignment; the
completeness of any Mortgage Loan; the performance or enforcement of any
Mortgage Loan (other than if the Trustee shall assume the duties of the Master
Servicer pursuant to Section 8.2 and thereupon only for the acts or omissions of
the Trustee as successor Master Servicer); the compliance by the Depositor or
the Master Servicer with any warranty or representation made under this
Agreement or in any related document or the accuracy of any such warranty or
representation; any investment of monies by or at the direction of the Master
Servicer or any loss resulting therefrom, it being understood that the Trustee
shall remain responsible for any Trust property that it may hold in its
individual capacity; the acts or omissions of any of the Depositor, the Master
Servicer (other than if the Trustee shall assume the duties of the Master
Servicer pursuant to Section 8.2 and thereupon only for the acts or omissions of
the Trustee as successor Master Servicer), any subservicer or any Mortgagor; any
action of the Master Servicer (other than if the Trustee shall assume the duties
of the Master Servicer pursuant to Section 8.2 and thereupon only for the acts
or omissions of the Trustee as successor Master Servicer), or any subservicer
taken in the name of the Trustee; the failure of the Master Servicer or any
subservicer to act or perform any duties acquired of it as agent of the Trustee
hereunder; or any action by the Trustee taken at the instruction of the Master
Servicer (other than if the Trustee shall assume the duties of the Master
Servicer pursuant to Section 8.2 and thereupon only for the acts or omissions of
the Trustee as successor Master
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Servicer); provided, however, that the foregoing shall not relieve the Trustee
of its obligation to perform its duties under this Agreement, including, without
limitation, the Trustee's review of the Mortgage Files pursuant to Section
2.1(d). The Trustee shall have no responsibility for filing any financing or
continuation statement in any public office at any time or to otherwise perfect
or maintain the perfection of any security interest or lien granted to it
hereunder (unless the Trustee shall have become the successor Master Servicer).
Section 9.4. Trustee May Own Certificates.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Certificates with the same rights as it would have if it
were not Trustee and may transact any banking and/or trust business with the
Depositor, the Seller, the Master Servicer or their Affiliates.
Section 9.5. Master Servicer to Pay Trustee's Expenses.
The Trustee shall be entitled to receive the Trustee Fee pursuant to
Section 5.1(a)(i)(A) and the Master Servicer will pay or reimburse the Trustee
upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any of the provisions of this
Agreement or any other agreement related hereto (including the reasonable
compensation and the expenses and disbursements of its counsel and of all
persons not regularly in its employ) except any such expense, disbursement or
advance as may arise from its negligence or bad faith or which is the
responsibility of Certificateholders hereunder. In addition, the Master Servicer
covenants and agrees to indemnify the Trustee and any directors, officers,
employees and agents of the Trustee from, and hold it harmless against, any and
all losses, liabilities, damages, claims or expenses other than those resulting
from the Trustee's negligence or bad faith of the Trustee. In the event the
Master Servicer fails to perform its obligations hereunder, then the Trustee
shall be indemnified by the Trust for the payment of the Trustee's monthly fee
which right of the Trustee shall have priority over all other distributions and
payments from the Distribution Account. This section shall survive termination
of this Agreement or the resignation or removal of any Trustee hereunder.
Section 9.6. Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be a national banking
association or a corporation duly incorporated and validly existing under the
laws of the United States of America or any state thereof, authorized under such
laws to exercise corporate trust powers, having a combined capital and surplus
of at least $50,000,000, subject to supervision or examination by federal or
state authority and having (or in the case of a bank or corporation included in
a bank holding company system, the related bank holding company shall have) a
rating with respect to its long-term unsecured debt obligations of at least Baa3
by Moody's and BBB- by S&P (or such lower rating as such rating agency may from
time to time agree). If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purposes of this Section 9.6, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
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published. The principal office of the Trustee (other than the initial Trustee)
shall be in a state with respect to which an Opinion of Counsel has been
delivered to such Trustee at the time such Trustee is appointed Trustee to the
effect that the Trust will not be a taxable entity under the laws of such state.
In case at any time the Trustee shall cease to be eligible in accordance with
the provisions of this Section 9.6, the Trustee shall resign immediately in the
manner and with the effect specified in Section 9.7.
Section 9.7. Resignation or Removal of Trustee.
The Trustee may at any time resign and be discharged from the trusts
hereby created by giving written notice thereof to the Depositor, the Master
Servicer, the Certificate Insurer and each Rating Agency. Upon receiving such
notice of resignation, the Depositor shall promptly appoint a successor Trustee
(approved in writing by the Certificate Insurer, so long as such approval is not
unreasonably withheld) by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Trustee and one copy to the
successor Trustee; provided, however, that any such successor Trustee shall be
subject to the prior written approval of the Master Servicer. If no successor
Trustee shall have been so appointed and having accepted appointment within 30
days after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 9.6 and shall fail to resign after written
request therefor by the Depositor or the Certificate Insurer, or if at any time
the Trustee shall be legally unable to act, or shall be adjudged a bankrupt or
insolvent, or a receiver of the Trustee or of its property shall be appointed,
or any public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, or if a tax is imposed or threatened with respect to the Trust Fund
by any state in which the Trustee is located, then the Depositor or the
Certificate Insurer may remove the Trustee. If the Depositor or the Certificate
Insurer removes the Trustee under the authority of the immediately preceding
sentence, the Depositor shall promptly appoint a successor Trustee (approved in
writing by the Certificate Insurer, so long as such approval is not unreasonably
withheld) by written instrument, in duplicate, one copy of which instrument
shall be delivered to the Trustee so removed and one copy to the successor
trustee. Immediately upon its appointment and qualification hereunder, the
successor Trustee shall provide written notice to each Holder of a Class A
Certificate of its appointment and qualification.
The Holders of Certificates evidencing Voting Interests aggregating at
least 51% may at any time remove the Trustee by written instrument or
instruments delivered to the Master Servicer, the Depositor and the Trustee and
shall thereupon use their best efforts to appoint a successor trustee in
accordance with this Section.
Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 9.7 shall
not become effective until acceptance of appointment by the successor Trustee as
provided in Section 9.8.
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Section 9.8. Successor Trustee.
Any successor Trustee appointed as provided in Section 9.7 shall
execute, acknowledge and deliver to the Depositor and to its predecessor Trustee
and the Certificate Insurer an instrument accepting such appointment hereunder,
and thereupon the resignation or removal of the predecessor Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Trustee. The Depositor, the Master Servicer and the predecessor Trustee
shall execute and deliver such instruments and do such other things as may
reasonably be required for fully and certainly vesting and confirming in the
successor Trustee all such rights, powers, duties and obligations.
No successor Trustee shall accept appointment as provided in this
Section 9.8 unless at the time of such acceptance such successor Trustee shall
be eligible under the provisions of Section 9.6.
Upon acceptance of appointment by a successor Trustee as provided in
this Section 9.8, the Master Servicer shall mail notice of the succession of
such Trustee hereunder to all Holders of Certificates at their addresses as
shown in the Certificate Register and to each Rating Agency. If the Master
Servicer fails to mail such notice within 30 days after acceptance of
appointment by the successor Trustee, the successor Trustee shall cause such
notice to be mailed at the expense of the Master Servicer.
Section 9.9. Merger or Consolidation of Trustee.
Any Person into which the Trustee may be merged or converted or with
which it may be consolidated, or any Person resulting from any, merger,
conversion or consolidation to which the Trustee shall be a party, or any Person
succeeding to all or substantially all of the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided such Person
shall be eligible under the provisions of Section 9.6, without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.
Section 9.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust or any Mortgaged Property may at the time be located, the
Depositor and the Trustee shall each have the power and shall execute and
deliver all instruments to appoint one or more Persons approved by the Trustee
and the Certificate Insurer to act as co-trustee or co-trustees, jointly with
the Trustee, or separate trustee or separate trustees, of all or any part of the
Trust, and to vest in such Person or Persons, in such capacity and for the
benefit of the Certificateholders, such title to the Trust, or any part thereof,
and, subject to the other provisions of this Section 9.10, such powers, duties,
obligations, rights and trusts as the Master Servicer and the Trustee may
consider necessary or desirable. The parties hereto acknowledge that any such
co-trustee or separate trustee will act as co-trustee or separate
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trustee hereunder pursuant to any co-trustee agreement between the Trustee and
such co-trustee or separate Trustee, and shall be entitled to the same rights
and subject to the same standards as the Trustee with respect to all rights and
immunities of the Trustee, including with respect to indemnification and the
obligations and duties of the Depositor or the Master Servicer to the Trustee
pursuant to the terms hereof. Any such co-trustee or separate trustee shall be
subject to the written approval of the Master Servicer and of the Certificate
Insurer. If the Master Servicer shall not have joined in such appointment within
15 days after the receipt by it of a request so to do, or in the case an Event
of Default shall have occurred and be continuing, the Trustee alone shall have
the power to make such appointment. No co-trustee or separate trustee hereunder
shall be required to meet the terms of eligibility as a successor trustee under
Section 9.6 and no notice to Certificateholders of the appointment of any
co-trustee or separate trustee shall be required under Section 9.8. The Master
Servicer shall be responsible for the fees of any co-trustee or separate trustee
appointed hereunder.
Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed
upon and exercised or performed by the Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee is not authorized to act separately without the
Trustee joining in such act), except to the extent that under any law
of any jurisdiction in which any particular act or acts are to be
performed (whether as Trustee hereunder or as successor to the Master
Servicer hereunder), the Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers, duties
and obligations (including the holding of title to the Trust or any
portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at
the direction of the Trustee;
(ii) no trustee hereunder shall be held personally
liable by reason of any act or omission of any other trustee hereunder;
and
(iii) the Master Servicer and the Trustee may each at
any time accept the resignation of or remove any separate trustee or
co-trustee except that following the occurrence of an Event of Default,
the Trustee acting alone may accept the resignation or remove any
separate trustee or co-trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article 9. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Depositor and the Master Servicer.
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Any separate trustee or co-trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor Trustee.
Section 9.11. Limitation of Liability.
The Certificates are executed by the Trustee, not in its individual
capacity but solely as Trustee of the Trust, in the exercise of the powers and
authority conferred and vested in it by this Agreement. Each of the undertakings
and agreements made on the part of the Trustee in the Certificates is made and
intended not as a personal undertaking or agreement by the Trustee but is made
and intended for the purpose of binding only the Trust.
Section 9.12. Trustee May Enforce Claims Without Possession of
Certificates.
All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and such preceding instituted by the Trustee shall
be brought in its own name or in its capacity as Trustee. Any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursement and advances of the Trustee, its agents and counsel, be
for the ratable benefit or the Certificateholders in respect of which such
judgment has been recovered.
Section 9.13. Suits for Enforcement.
In case an Event of Default or other default by the Master Servicer or
the Depositor hereunder or any Certificate Insurer Default or other default by
the Certificate Insurer hereunder or under the Certificate Insurance Policy
shall occur and be continuing, the Trustee, in its discretion, may proceed to
protect and enforce its rights and the rights of the Holders of Certificates
under this Agreement by a suit, action or proceeding in equity or at law or
otherwise, whether for the specific performance of any covenant or agreement
contained in this Agreement or in aid of the execution of any power granted in
this Agreement or for the enforcement of any other legal, equitable or other
remedy, as the Trustee, being advised by counsel, shall deem most effectual to
protect and enforce any of the rights of the Trustee and the Certificateholders.
Section 9.14. Waiver of Bond Requirement.
The Trustee shall be relieved of, and each Certificateholder hereby
waives, any requirement of any jurisdiction in which the Trust, or any part
thereof, may be located that the Trustee post a bond or other surety with any
court, agency or body whatsoever.
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Section 9.15. Waiver of Inventory, Accounting and Appraisal
Requirement.
The Trustee shall be relieved of, and each Certificateholder hereby
waives, any requirement of any jurisdiction in which the Trust, or any part
thereof, may be located that the Trustee file any inventory, accounting or
appraisal of the Trust with any court, agency or body at any time or in any
manner whatsoever.
ARTICLE 10.
TERMINATION
Section 10.1. Termination.
(a) The respective obligations and responsibilities of the Seller, the
Master Servicer, the Depositor, the Document Custodian and the Trustee created
hereby (other than the obligation of the Trustee to make certain payments to
Certificateholders after the final Distribution Date and the obligation of the
Master Servicer to send certain notices as hereinafter set forth) shall
terminate upon notice to the Trustee of the later of (A) payment in full of all
amounts owing to the Certificate Insurer unless the Certificate Insurer shall
otherwise consent and (B) the earliest of (i) the Distribution Date on which the
Aggregate Class A Principal Balance has been reduced to zero, (ii) the final
payment or other liquidation of the last Mortgage Loan in the Trust, (iii) the
optional purchase by the Master Servicer of the Mortgage Loans pursuant to
Section 10.1(b) and (iv) the Distribution Date in September, 2027.
Notwithstanding the foregoing, in no event shall the trust created hereby
continue beyond the expiration of 21 years from the death of the last surviving
descendants of Joseph P. Kennedy, the late ambassador of the United States to
the Court of St. James's, living on the date hereof.
(b) The Master Servicer shall have the right to exercise the option to
effect the transfer to it of each Mortgage Loan pursuant to Section 10.1(a)
above on any Distribution Date on or after the Distribution Date immediately
prior to which the Aggregate Loan Balance is less than five percent (5%) of the
Cut-Off Date Aggregate Loan Balance. The exercise of such purchase right shall
be conditioned upon receipt by the Trustee of an Opinion of Counsel to the
effect that such purchase will not give rise either to any tax on "prohibited
transactions" under Section 860F(a)(1) of the Code or any tax on contributions
made to the REMIC after the "startup day" under Section 860G(d) of the Code. If
such right is exercised, the Master Servicer shall provide to the Trustee the
certification required by Section 3.8 and, promptly following payment of the
repurchase price, the Trustee shall execute proper instruments acknowledging
termination and discharge of this Agreement in the form provided by the Master
Servicer. Such certificate shall be delivered by the Master Servicer to the
Trustee in a timely manner so as to enable the Trustee to timely notify the
Holders of Certificates pursuant to Section 10.1(c).
(c) Notice of any termination, specifying the Distribution Date (which
shall be a date that would otherwise be a Distribution Date) upon which the
Holders of Certificates may
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surrender their Certificates to the Trustee for payment of the final
distribution and cancellation, shall be given promptly by the Trustee (upon
receipt of written directions from the Depositor, if the Depositor is exercising
its right to retransfer the Mortgage Loans, given not later than the first day
of the month preceding the month of such final distribution) by letter to the
Holders of Certificates mailed not earlier than the 15th day and not later than
the 25th day of the month next preceding the month of such final distribution
specifying (i) the Distribution Date upon which final distribution of the
Certificates will be made, (ii) the amount of each such final distribution and
(iii) that the Record Date otherwise applicable to such Distribution Date is not
applicable. In the event written directions are delivered by the Depositor to
the Trustee as described in the preceding sentence, the Depositor shall deposit
in the Distribution Account on or before the Distribution Date for such final
distribution in immediately available funds an amount which, when added to the
funds on deposit in the Distribution Account that are payable to the Holders of
Certificates, will be equal to the retransfer amount for the Mortgage Loans
computed as above provided.
(d) Upon presentation and surrender of the Class A and Class B-IO
Certificates, the Trustee shall cause to be distributed to the holders of Class
A and Class B-IO Certificates on the Distribution Date for such final
distribution, in proportion to the Percentage Interests of their respective
Class A and Class B-IO Certificates and to the extent that funds are available
for such purpose, an amount equal to the amount required to be distributed to
holders of Class A and Class B-IO Certificates pursuant to Section 5.1 for such
Distribution Date. On the final Distribution Date, the Trustee will withdraw
from the Distribution Account and remit to the Certificate Insurer the lesser of
(x) the amount available for distribution on such final Distribution Date, net
of any portion thereof necessary to pay holders of Class A and Class B-IO
Certificates pursuant to Section 5.1 (a) and any amounts owing to the Trustee in
respect of the Trustee Fee and (y) the unpaid amounts due and owing to the
Certificate Insurer pursuant to Section 5.1(a)
(e) In the event that all of the Class A and Class B-IO
Certificateholders shall not surrender their Class A and Class B-IO Certificates
for final payment and cancellation on or before such final Distribution Date,
the Trustee shall promptly following such date cause all funds in the
Distribution Account not distributed in final distribution to Class A and Class
B- IO Certificateholders to be withdrawn therefrom and credited to the remaining
Class A and Class B-IO Certificateholders by depositing such finds in a separate
escrow account for the benefit of such Class A and Class B-IO Certificateholders
and the Master Servicer (if the Master Servicer has exercised its right to
purchase the Mortgage Loans) or the Trustee (in any other case) shall give a
second written notice to the remaining Class A and Class B-IO Certificateholders
to surrender their Class A and Class B-IO Certificates for cancellation and
receive the final distribution with respect thereto. If within nine months after
the second notice all the Certificates shall not have been surrendered for
cancellation, the Class R Certificateholder shall be entitled to all unclaimed
funds and other assets which remain subject hereto and the Trustee upon transfer
of such funds shall be discharged of any responsibility for such funds and the
Certificateholders shall look to the Class R Certificateholder for payment.
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Section 10.2. Additional Termination Requirements.
(a) In the event that the Master Servicer exercises its purchase option
as provided in Section 10.1, the Trust shall be terminated in accordance with
the following additional requirements, unless the Trustee has received an
Opinion of Counsel to the effect that the failure of the Trust to comply with
the requirements of this subsection 10.2(a) will not (A) result in the
imposition of taxes on "prohibited transactions" of the Trust, as defined in
Section 860F of the Code, or contributions to the REMIC after the "startup day,"
as defined in Section 860G(d) of the Code, or (B) cause the Trust to fail to
qualify as a REMIC at any time any Certificate is outstanding:
(i) within ninety (90) days prior to the final
Distribution Date set forth in the notice given by the Trustee under
Section 10.1, the Trustee, at the direction of the Depositor, shall
adopt a plan of complete liquidation of the Trust in the form prepared
by the Depositor;
(ii) at or after the time of adoption of such a plan
of complete liquidation and at or prior to the Distribution Date for
the final distribution, the Trustee shall sell all of the assets of the
Trust either to the Depositor or other purchaser of the assets of the
Trust, as the case may be, for cash; provided, however, that in the
event that a calendar quarter ends after the time of adoption of such a
plan of complete liquidation but prior to the such final Distribution
Date, the Trustee shall not sell any of the assets of the Trust prior
to the close of that calendar quarter; and
(iii) the Trustee shall make the distributions
specified in subsection 10.1(e) on or before the final Distribution
Date referred to in clause (i) above.
(b) The Trustee hereby agrees to adopt a plan of complete liquidation
as specified in subsection 10.2(a) upon the written direction of the Depositor
and to take such other action in connection therewith as may be reasonably
requested by the Depositor.
ARTICLE 11.
REMIC ADMINISTRATION
Section 11.1. REMIC Administration.
(a) It is intended that the REMIC Pool designated hereunder shall
constitute, and that the affairs of the Trust shall be conducted so as to
qualify it as, a REMIC as defined in and in accordance with the REMIC
Provisions. In furtherance of such intention, the Trustee covenants and agrees
that it shall act as agent (and the Trustee is hereby appointed to act as agent)
and as Tax Matters Person on behalf of the Trust, and that in such capacities,
it shall:
(i) prepare, sign and file, or cause to be prepared
and filed, in a timely manner, a U.S. Real Estate Mortgage Investment
Conduit Income Tax Return
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(Form 1066) and any other Tax Return required to be filed by the Trust,
using a calendar year as the taxable year for the Trust;
(ii) make, or cause to be made, an election, on behalf
of the Trust, to be treated as a REMIC on the federal tax return of the
Trust for its first taxable year;
(iii) prepare and forward, or cause to be prepared and
forwarded, to the Trustee, the Certificateholders and to the Internal
Revenue Service and any other relevant governmental taxing authority
all information returns or reports as and when required to be provided
to them in accordance with the REMIC Provisions;
(iv) to the extent that the affairs of the Trust are
within its control, conduct such affairs of the Trust at all times that
any Certificates are outstanding so as to maintain the status of the
Trust as a REMIC under the REMIC Provisions and any other applicable
federal, state and local laws, including, without limitation,
information reports relating to "original issue discount," as defined
in the Code, based upon the Prepayment Assumption and calculated by
using the issue price of the Certificates;
(v) not knowingly or intentionally take any action or
omit to take any action that would cause the termination of the REMIC
status of the Trust;
(vi) pay from the Trust the amount of any and all
federal, state, and local taxes, imposed upon the Trustee or the
Certificateholders in connection with the Trust Fund or the Mortgage
Loans, prohibited transaction taxes as defined in Section 860F of the
Code imposed on the Trust Fund when and as the same shall be due and
payable (but such obligation shall not prevent the Trustee or any other
appropriate Person from contesting any such tax in appropriate
proceedings and shall not prevent the Trustee from withholding payment
of such tax, if permitted by law, pending the outcome of such
proceedings). The Trustee shall be entitled to prompt reimbursement
from the Master Servicer;
(vii) ensure that any such returns or reports filed on
behalf of the Trust Fund by the Trustee are properly executed by the
appropriate person;
(viii) represent the Trust Fund in any administrative or
judicial proceedings relating to an examination or audit by any
governmental taxing authority, request an administrative adjustment as
to any taxable year of the Trust Fund, enter into settlement agreements
with any government taxing agency, extend any statute of limitations
relating to any item of the Trust Fund and otherwise act on behalf of
the Trust Fund in relation to any tax matter involving the Trust Fund
at the expense of the Master Servicer;
(ix) as provided in Section 5.12 hereof, make
available information necessary for the computation of any tax imposed
(1) on transferors of residual interests to transferees that are not
Permitted Transferees or (2) on pass-through
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entities, any interest in which is held by an entity which is not a
Permitted Transferee. The Trustee covenants and agrees that it will
cooperate with the Master Servicer in the foregoing matters and that it
will sign, as Trustee, any and all Tax Returns required to be filed by
the Trust Fund. Notwithstanding the foregoing, at such time as the
Trustee becomes the successor Master Servicer, the holder of the
largest percentage of the Class R Certificates shall serve as Tax
Matters Person until such time as an entity is appointed to succeed the
Trustee as Servicer;
(x) make available to the Internal Revenue Service
and those Persons specified by the REMIC Provisions all information
necessary to compute any tax imposed (A) as a result of the Transfer of
an Ownership Interest in a Class B-IO or Class R Certificate to any
Person who is not a Permitted Transferee, including the information
described in Treasury regulations sections 1.860D-1(b)(5) and
1.860E-2(a)(5) with respect to the "excess inclusions" of such Class
B-IO or Class R Certificate and (B) as a result of any regulated
investment company, real estate investment trust, common trust fund,
partnership, trust, estate or organization described in Section 1381 of
the Code that holds an Ownership Interest in a Class B- IO or Class R
Certificate having as among its record holders at any time any Person
that is not a Permitted Transferee. Reasonable compensation for
providing such information may be accepted by the Trustee; and
(xi) Upon filing with the Internal Revenue Service,
the Trustee shall furnish to the Holders of the Class B-IO or Class R
Certificates the Form 1066 and each Form 1066Q and shall respond
promptly to written requests made not more frequently than quarterly by
any Holder of Class B-IO or Class R Certificates with respect to the
following matters but only to the extent the Trustee has the
information available with respect to such matters:
(1) The original projected principal and interest
cash flows on the Closing Date on each class of regular and
residual interests created hereunder and on the Mortgage
Loans, based on the Prepayment Assumption;
(2) The projected remaining principal and interest
cash flows as of the end of any calendar quarter with respect
to each class of regular and residual interests created
hereunder and the Mortgage Loans, based on the Prepayment
Assumption;
(3) The Prepayment Assumption and any interest rate
assumptions used in determining the projected principal and
interest cash flows described above;
(4) The original issue discount (or, in the case of
the Mortgage Loans, market discount) or premium accrued or
amortized through the end of such calendar quarter with
respect to each class of regular or residual interests created
hereunder and with respect to the Mortgage Loans, together
with each constant yield to maturity used in computing the
same;
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(5) The treatment of losses realized with respect
to the Mortgage Loans or the regular interests created
hereunder, including the timing and amount of any cancellation
of indebtedness income of the REMIC with respect to such
regular interests or bad debt deductions claims with respect
to the Mortgage Loans;
(6) The amount and timing of any non-interest
expenses of the REMIC; and
(7) Any taxes (including penalties and interest)
imposed on the REMIC, including, without limitation, taxes on
"prohibited transactions," "contribution" or "net income from
foreclosure property" or state or local income or franchise
taxes;
Section 11.2. Prohibited Transactions and Activities.
Subject to the provisions of Article 2 and Section 3.1(d), neither the
Trustee nor the Master Servicer shall permit the sale, disposition or
substitution of the Mortgage Note or the substitution of a property for a
Mortgage Property (except in a disposition pursuant to (i) the bankruptcy or
insolvency of the REMIC Pool or (ii) the termination of the REMIC Pool in a
"qualified liquidation" as defined in Section 860F(a)(4) of the Code), nor
acquire any assets for the REMIC Pool (other than REO), nor sell or dispose of
any investments in the Accounts for gain, nor accept any contributions to the
REMIC Pool, unless it has received an Opinion of Counsel (at the expense of the
Person requesting the Trustee to take such action) to the effect that such
disposition, acquisition, substitution, or acceptance will not (a) affect
adversely the status of the REMIC Pool as a REMIC or of the Certificates, other
than the Class R Certificate, as the regular interests therein, (b) affect the
distribution of interest or principal on the Certificates, (c) result in the
encumbrance of the assets transferred or assigned to the REMIC Pool (except
pursuant to the provisions of this Agreement) or (d) cause the REMIC Pool to be
subject to a tax on "prohibited transactions" or "prohibited contributions"
pursuant to the REMIC Provisions.
Section 11.3. Indemnification with Respect to Certain Taxes and
Loss of REMIC Status.
(a) In the event that the REMIC Pool fails to qualify as a REMIC, loses
its status as a REMIC, or incurs state or local taxes, or a tax as a result of a
prohibited transaction or contribution or the receipt of "net income from
foreclosure property" subject to taxation under the REMIC Provisions due to the
willful misfeasance, bad faith or negligent performance by the Trustee of its
duties and obligations specifically set forth herein, or by reason of the
Trustee's reckless disregard of its obligations and duties thereunder, the
Trustee shall indemnify the Trust against any and all losses, claims, damages,
liabilities or expenses ("Losses") resulting therefrom; provided, however, that
the Trustee shall not be liable for any Losses attributable to the action or
inaction of the Master Servicer, the Depositor or the Holder of the Class R
Certificate nor for any Losses resulting from misinformation provided by the
Master Servicer, the Depositor or the Holder of the Class R Certificate on which
the
94
Trustee has relied. The foregoing shall not be deemed to limit or restrict the
rights and remedies of successor Holders of the Class R Certificate at law or in
equity.
(b) In the event that the REMIC Pool fails to qualify as a REMIC, loses
its status as a REMIC, or incurs state or local taxes, or a tax as a result of a
prohibited transaction or contribution or the receipt of "net income from
foreclosure property" subject to taxation under the REMIC Provisions due to the
willful misfeasance, bad faith or negligent performance of the Master Servicer
in the performance of its duties and obligations set forth herein, or by reason
of the Master Servicer's reckless disregard of its obligations and duties
hereunder, the Master Servicer shall indemnify the Trust against any and all tax
related liabilities and expenses, including interest and penalties ("Expenses")
resulting therefrom; provided, however, that the Master Servicer shall not be
liable for any such Expenses attributable to the action or inaction of the
Trustee, the Depositor, or the Holder of the Class R Certificate nor for any
such Expenses resulting from misinformation provided by the Trustee, the
Depositor or the Holder of the Class R Certificate on which the Master Servicer
has reasonably relied.
The foregoing shall not be deemed to limit or restrict the rights and
remedies of any successor Holders of the Class R Certificate at law or in
equity.
ARTICLE 12.
MISCELLANEOUS PROVISIONS
Section 12.1. Amendment.
This Agreement may be amended from time to time by the Depositor, the
Master Servicer, the Seller, the Document Custodian and the Trustee, in each
case without the consent of any of the Certificateholders, but only with the
consent of the Certificate Insurer (which consent shall not be unreasonably
withheld), (i) to cure any ambiguity, (ii) to correct any defective provisions
or to correct or supplement any provisions herein that may be inconsistent with
any other provisions herein, (iii) to add to the duties of the Depositor or the
Master Servicer, (iv) to add any other provisions with respect to matters or
questions arising under this Agreement or the Certificate Insurance Policy, as
the case may be, which shall not be inconsistent with the provisions of this
Agreement, (v) to add or amend any provisions of this Agreement as required by
any Rating Agency or any other nationally recognized statistical rating agency
in order to maintain or improve any rating of the Class A Certificates (it being
understood that, after obtaining the ratings in effect on the Closing Date, none
of the Trustee, the Depositor or the Master Servicer is obligated to obtain,
maintain or improve any such rating), or (vi) to add, delete or modify any
provision to such extent as shall be necessary or desirable to maintain the
qualification of the REMIC Pool as a REMIC; provided, however, that such action
shall not, as evidenced by an Opinion of Counsel, (x) in each case (other than
with respect to any action necessary to maintain REMIC qualification, as
provided in clause (vi) above) adversely affect in any material respect the
interests of any Certificateholder and (y) in each case, is necessary or
desirable to maintain the qualification
95
of the REMIC Pool as a REMIC or shall not cause the REMIC Pool to fail to
qualify as a REMIC materially and adversely affect the interests of any
Certificateholder.
This Agreement also may be amended from time to time with the consent
of the Certificate Insurer (provided no Certificate Insurer Default, as defined
in clause (i) of the definition thereof, has occurred and is continuing), by the
Depositor, the Master Servicer, the Seller, the Document Custodian and the
Trustee; and the Master Servicer and the Certificate Insurer may from time to
time consent to the amendment of this Agreement with the consent of the Majority
Holders for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or the Certificate Insurance
Policy or of modifying in any manner the rights of the Certificateholders;
provided, however, that no such amendment shall (A) reduce in any manner the
amount of, or delay the timing of, payments on the Certificates or distributions
or payments under the Certificate Insurance Policy which are required to be made
on any Certificate without the consent of the Holder of such Certificate, or (B)
reduce the aforesaid percentage required to consent to any such amendment,
without the consent of the Holders of all Certificates then outstanding. Prior
to execution of any such amendment, the Depositor shall furnish the Trustee with
an Opinion of Counsel stating whether such amendment would cause the REMIC Pool
to fail to qualify as a REMIC. An amendment made with the consent of
Certificateholders and the Certificate Insurer and executed in accordance with
this Section 12.1 shall be permitted or authorized by this Agreement
notwithstanding that such Opinion of Counsel may conclude that such amendment
would cause the REMIC Pool to fail to qualify as a REMIC; provided, however,
that the Trustee shall not be liable to any Person for any amendment to this
Agreement permitted under the terms hereof.
Prior to the execution of any such amendment, the Master Servicer shall
furnish written notification of the substance of such amendment to each Rating
Agency. In addition, promptly after the execution of any such amendment made
with the consent of the Holders of the Class A Certificates, the Trustee shall
furnish fully executed original counterparts of the instruments effecting such
amendment to the Certificate Insurer and to each Holder of an Class A
Certificate.
The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable requirements as the Trustee may prescribe.
The Trustee may, but shall not be obligated to, enter into any such
amendment which affects the Trustee's own rights, duties or immunities under
this Agreement or otherwise.
In connection with any amendment pursuant to this Section 12.1, the
Trustee shall be entitled to receive an Opinion of Counsel to the effect that
such amendment is authorized or permitted by this Agreement.
Section 12.2. Recordation of Agreement.
This Agreement is subject to recordation in all appropriate public
offices for real property records in all the counties or other comparable
jurisdictions in which any or all of
96
the properties subject to the Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Master Servicer, provided, however that from and after the date
on which an Assignment Event occurs and the Mortgage Files are delivered to the
Trustee or its designee, such recordation shall be effected by the Trustee, but
only upon direction of Holders of the Class A Certificates accompanied by an
Opinion of Counsel to the effect that such recordation materially and
beneficially affects the interests of Holders of Class A Certificates. The
Holders of Class A Certificates requesting such recordation shall bear all costs
and expenses of such recordation. The Trustee shall have no obligation to
ascertain whether such recordation so affects the interests of the
Certificateholders.
For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
Section 12.3. Limitation on Rights of Certificateholders.
The death or incapacity of any Holder of a Class A Certificate shall
not operate to terminate this Agreement or the Trust, nor entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or commence any proceeding in any court for a partition or
winding up of the Trust, nor otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them.
No Certificateholder shall have any right to vote (except as provided
in Section 12.1) or in any manner otherwise control the operation and management
of the Trust, or the obligations of the parties hereto, nor shall anything
herein set forth, or contained in the terms of the Certificates, be construed so
as to constitute the Certificateholders from time to time as partners or members
of an association; nor shall any Holder of a Class A Certificate be under any
liability to any third person by reason of any action taken by the parties to
this Agreement pursuant to any provision hereof.
No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless such Holder previously shall have given to the Trustee a written notice
of default and of the continuance thereof, as hereinbefore provided, and unless
also the Holders of 25% or more of Percentage Interests in the Class A
Certificates shall have made written request upon the Trustee to institute such
action, suit or proceeding in its own name as Trustee hereunder and shall have
offered to the Trustee such reasonable indemnity as it may require against the
costs, expenses and liabilities to be incurred therein or thereby, and the
Trustee, for 60 days after its receipt of such notice, request and offer of
indemnity, shall have neglected or refused to institute any such action, suit or
proceeding; it being understood and intended, and being expressly covenanted by
each Certificateholder with every other Certificateholder and the Trustee, that
no one or more Holders of Certificates shall have any right in any manner
whatever by virtue or by availing itself or themselves of any provisions of this
Agreement to affect, disturb or prejudice the rights of the Holders of any other
of the Certificates, or to obtain or seek to
97
obtain priority over or preference to any other such Holder, or to enforce any
right under this Agreement, except in the manner herein provided and for the
equal, ratable and common benefit of all Certificateholders. For the protection
and enforcement of the provisions of this Section 12.3, each and every
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
Section 12.4. GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NORTH CAROLINA AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 12.5. Notices.
All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered at or mailed
by certified mail, return receipt requested, to (a) in the case of the Seller,
First Union National Bank of North Carolina, One First Union Center, Charlotte,
North Carolina 28288, Attention: Mortgage Finance, (b) in the case of the Master
Servicer, First Union National Bank of North Carolina, One First Union Center,
Charlotte, North Carolina 28288, Attention: Mortgage Finance, (c) in the case of
the Trustee, at the Corporate Trust Office, (d) in the case of Moody's, Home
Equity Mortgage Loan Monitoring Group, 4th Floor, 99 Church Street, New York,
New York 10007, (e) in the case of Standard & Poor's, 26 Broadway, New York, New
York 10004, (f) in the case of the Depositor, First Union Residential
Securitization Transactions, Inc., One First Union Center, Charlotte, North
Carolina, 28288-0600, Attention: Patrick Tadie, and (g) in the case of the
Certificate Insurer, Financial Guaranty Insurance Company, 115 Broadway, New
York, New York 10006, Attention: Surveillance Department (in each case in which
notice or other communication to the Certificate Insurer refers to an Event of
Default, a claim on the Certificate Insurance Policy or with respect to which
failure on the part of the Certificate Insurer to respond shall be deemed to
constitute consent or acceptance, then a copy of such notice or other
communication should also be sent to the attention of each of the General
Counsel and the Head - Financial Guaranty Group and shall be marked to indicate
"URGENT MATERIAL ENCLOSED"), (h) in the case of Moody's, Home Mortgage Loan
Monitoring Group, 4th Floor, 99 Church Street, New York, New York 10007, and (i)
in the case of Standard & Poor's, 26 Broadway, 15th Floor, New York, New York
10004, Attention: Residential Mortgage Group, or, as to each party, at such
other address as shall be designated by such party in a written notice to each
other party. Any notice required or permitted to be mailed to a
Certificateholder shall be given by first class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder receives
such notice. Any notice or other document required to be delivered or mailed by
the Trustee to any Rating Agency shall be given on a best efforts basis and only
as a matter of courtesy and accommodation and the Trustee shall have no
liability for failure to deliver such notice or document to any Rating Agency.
98
Section 12.6. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the Holders thereof.
Section 12.7. Assignment.
Notwithstanding anything to the contrary contained herein, except as
provided in Sections 6.8, 7.2 and 7.4, this Agreement may not be assigned by the
Depositor or the Master Servicer without the prior written consent of the
Certificate Insurer.
Section 12.8. Certificates Nonassessable and Fully Paid.
The parties agree that the Holders of Class A Certificates shall not be
personally liable for obligations of the Trust, that the beneficial ownership
interests represented by the Certificates shall be nonassessable for any losses
or expenses of the Trust or for any reason whatsoever, and that the Certificates
upon execution, authentication and delivery thereof by the Trustee pursuant to
Section 6.2 are and shall be deemed fully paid.
Section 12.9. Third-Party Beneficiaries.
This Agreement will inure to the benefit of the Certificate Insurer
solely to the extent of any express rights granted to the Certificate Insurer
hereunder and will inure to the benefit of and be binding upon the parties
hereto, the Certificateholders, the Owners and their respective successors and
permitted assigns. Except as otherwise provided in this Agreement, no other
person will have any right or obligation hereunder.
Section 12.10. Counterparts.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
Section 12.11. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
99
Section 12.12. Provision of Information to Prospective Purchasers;
Rule 144A.
For so long as any Class B-IO Certificate is a "restricted security"
within the meaning of Rule 144(a)(3) under the Securities Act of 1933, as
amended (the "Securities Act"), the Trustee shall, upon the request of any Owner
and any prospective purchaser of such Class B- IO Certificate, make available to
such Owner and any prospective purchaser of such Class B- IO Certificate
designated by such Owner (a) a copy of a private resale memorandum, to be
prepared by the Depositor for this purpose, (b) a copy of the most recent report
distributed to the Owners pursuant to Section 5.2 hereof, together with (c) any
additional information required pursuant to Rule 144A, as from time to time
amended, under the Securities Act in order for a sale of Class B-IO Certificates
by such Owner to such prospective purchaser to qualify for the exemption under
the Securities Act provided by Rule 144A; provided, however, that the Trustee
shall have no obligation to deliver any information or item described in clauses
(a) or (c) unless and until the Depositor shall provide the same to the Trustee
and the Trustee's obligation with respect to such delivery shall be limited to
any such information or item supplied to it by the Depositor. The Depositor
shall promptly furnish to the Trustee, upon receipt of a request from the
Trustee or any Holder of a Class A Certificate the items described in clauses
(a) and (c) to the Trustee.
Section 12.13. The Certificate Insurer.
Any right conferred to the Certificate Insurer hereunder shall be
suspended and shall run to the benefit of the Holders during any period in which
there exists a Certificate Insurer Default; provided, that the rights of the
Certificate Insurer to receive any amounts distributable to the Certificate
Insurer pursuant to Sections 5.1(a)(i), (vi) and (viii), and to amounts
representing indemnification payments to be made to the Certificate Insurer and
its rights under Article 10 and its rights to receive any notices, documents,
certificates or opinions shall not be suspended.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
100
IN WITNESS WHEREOF, the Depositor, the Seller, the Master Servicer, the
Trustee and the Document Custodian have caused this Agreement to be duly
executed by their respective officers all as of the day and year first above
written.
FIRST UNION RESIDENTIAL
SECURITIZATION TRANSACTIONS, INC., as
Depositor
By /s/ Patrick J. Tadie
Title: Senior Vice President
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, as Seller
By /s/ Patrick J. Tadie
Title: Vice President
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, as Master Servicer
By /s/ Patrick J. Tadie
Title: Vice President
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By /s/ Michael L. Mayer
Title: Vice President
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, TRUST DEPARTMENT, as
Document Custodian
By /s/ Richard C. Roark
Title: Assistant Vice President
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
I, a Notary Public of the County and State of aforesaid, certify that
Patrick Tadie personally came before me this day and acknowledged that he is a
Senior Vice President of First Union Residential Securitization Transactions,
Inc., a North Carolina corporation, and that by authority duly given and as the
act of the corporation, he signed his name thereto.
WITNESS my hand and official stamp or seal, this 28th day of August,
1996.
/s/ Angela Henson
Notary Public
My Commission Expires:
8/29/2000
(Notary Seal)
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
I, a Notary Public of the County and State of aforesaid, certify that
Michael L. Mayer personally came before me this day and acknowledged that he is
a Vice President of Norwest Bank Minnesota, National Association, and that by
authority duly given and as the act of the corporation, he signed his name
thereto.
WITNESS my hand and official stamp or seal, this 28th day of
August, 1996.
/s/ Angela Henson
Notary Public
My Commission Expires:
8/29/2000
(Notary Seal)
STATE OF NORTH CAROLINA
COUNTY OF WAKE
I, a Notary Public of the County and State of aforesaid, certify that
Richard C. Roark personally came before me this day and acknowledged that he is
an Assistant Vice President of First Union National Bank of North Carolina,
Trust Department, and that by authority duly given and as the act of the
corporation, he signed his name thereto.
WITNESS my hand and official stamp or seal, this 28th day of
August, 1996.
/s/ Aliza L. Carrino
Notary Public
My Commission Expires:
3-20-2001
(Notary Seal)
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
I, a Notary Public of the County and State of aforesaid, certify that
Patrick Tadie personally came before me this day and acknowledged that he is a
Vice President of First Union National Bank of North Carolina, a national
banking association, and that by authority duly given and as the act of the
corporation, he signed his name thereto.
WITNESS my hand and official stamp or seal, this 28th day of
August, 1996.
/s/ Angela Henson
Notary Public
My Commission Expires:
8/29/2000
(Notary Seal)
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
I, a Notary Public of the County and State of aforesaid, certify that
Patrick Tadie personally came before me this day and acknowledged that he is a
Vice President of First Union National Bank of North Carolina, a national
banking association, and that by authority duly given and as the act of the
corporation, he signed his name thereto.
WITNESS my hand and official stamp or seal, this 28th day of
August, 1996.
/s/ Angela Henson
Notary Public
My Commission Expires:
8/29/2000
(Notary Seal)
EXHIBIT E
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby transfers to
________________________________________________________________________________
________________________________________________________________________________
(PRINT NAME AND ADDRESS OF TRANSFEREE)
[U.S. $___________________ principal amount of/ ____% of the Percentage Interest
represented by] this [Class A/Class B-IO] Certificate, and all rights with
respect thereto, and irrevocably constitutes and appoints
_________________________ as attorney to transfer this [Class A/Class B-IO]
Certificate on the books kept for registration thereof, with full power of
substitution.
Dated _______________________________ __________________________________
Certifying Signature
Signed ______________________________
Note:
(i) The signature on this transfer form must
correspond to the name as it appears on the face of this
[Class A/Class B-IO] Certificate.
(ii) A representative of the Certificateholder
should state the capacity in which he or she signs (e.g.,
executor).
(iii) The signature of the person effecting the
transfer shall conform to any list of duly authorized specimen
signatures supplied by the registered holder or in such other
manner as the Registrar may require.
E-1
EXHIBIT I
FORM OF CLASS [B-IO] [R] CERTIFICATE PURCHASER'S LETTER
First Union Residential Securitization Transactions, Inc.
- - -----------------
as Trustee (the "Trustee")
- - --------------------------------------
as Registrar (the "Registrar")
Re: FURST Home Equity Loan Trust 1996-1
Dear Sirs:
In connection with our proposed purchase of the [Class B-IO] [Class R]
Certificates, we confirm that:
1. We are acquiring the [Class B-IO] [Class R] Certificates for our own
account for investment and not with a view to or for sale or transfer in
connection with any distribution thereof in any manner which would violate the
Securities Act of 1933, as amended (the "Act"), provided that the disposition of
our property shall at all times be and remain within our control;
2. We understand that the [Class B-IO] [Class R] Certificates have not
been and will not be registered under the Act and may not be resold or
transferred unless they are (a) registered pursuant to the Act or (b) sold or
transferred in transactions which are exempt from registration.
3. We have received a copy of the Private Placement Memorandum dated
_____________ relating to the [Class B-IO] [Class R] Certificates, the Pooling
and Servicing Agreement dated as of August 1, 1996 (the "Pooling and Servicing
Agreement") pursuant to which the [Class B-IO] [Class R] Certificates are being
sold, and such other documents and information concerning the [Class B-IO]
{Class R] Certificates and the home equity loans in which the [Class B-IO]
[Class R] Certificates represent interests which we have requested.
4. We believe we have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the [Class B- IO] [Class R] Certificates and that we are able to
bear the economic risks of such an investment;
5. If we sell any of the [Class B-IO] [Class R] Certificates at our
option, we will either (i) obtain from any institutional investor that purchases
any Certificate from us a certificate containing the same representations,
warranties and agreements contained in the
I-1
foregoing paragraphs 1, 2 through 4 and this paragraph 5 or (ii) deliver an
Opinion of Counsel to such institutional investor, addressed and satisfactory to
the Depositor and the Trustee, in the form set forth as on Attachment A to this
letter, to the effect that such sale is in compliance with all applicable
federal and state securities laws;
6. We hereby certify to you in connection with our purchase of the
Class B-IO Certificate that either (i) we are not a fiduciary of any employee
benefit plan or other plan or arrangement (a "Plan") subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or section 4975 of
the Internal Revenue Code of 1986, as amended (the "Code"), an insurance company
(whether through it general or separate account) or other person purchasing such
certificate with "plan assets" or otherwise on behalf of any Plan or (ii) you
shall have received, in form and substance satisfactory to you, an Opinion of
Counsel to the effect of Attachment B hereto.
7. This letter and the statements contained herein are made for your
benefit.
You are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.
Very truly yours,
[Purchaser]
By:_________________________
Name:
Title:
I-2
Attachment A to
Purchaser's Letter
FORM OF OPINION OF COUNSEL
Such counsel is of the opinion that the transfer of the Class [B-IO]
[R] Certificates from _______ to _____ [under the circumstances to be
described in such opinion] is not a transaction requiring registration
of the Certificates under the Securities Act of 1933, as amended, or
under any applicable state securities laws.
or
The Class [B-IO] [R] Certificates have been registered under the
Securities Act of 1933, as amended, and no action is required to be
taken under applicable state securities laws, or such action has been
taken.
I-3
[Attachment B to
Purchaser's Letter
FORM OF OPINION OF COUNSEL
Such counsel is of the opinion that the Class [B-IO] [R] Certificate
purchased by [________________________] on behalf of or with "plan
assets" of an employee benefit plan or other plan or arrangement (a
"Plan") subject to the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") or section 4975 of the Internal Revenue Code of
1986, as amended (the "Code"), is permissible under all applicable law,
will not result in any non-exempt prohibited transaction under ERISA or
section 4975 of the Code and will not subject First Union National Bank
of North Carolina, as the seller and servicer, or Chemical Bank, as the
trustee, of the FURST Home Equity Loan Trust, 1996-1 to any obligation
in addition to those undertaken under the Pooling and Servicing
Agreement, dated as of August 1, 1996, by and among First Union
Residential Securitization Transactions, Inc., as depositor, First
Union National Bank of North Carolina, as the seller, document
custodian and master servicer, Norwest Bank Minnesota, National
Association, as the trustee.
I-4
EXHIBIT K
FORM OF OPINION OF COUNSEL PURSUANT TO SECTION 6.2
Such counsel is of the opinion that the transfer of the Class B-IO
Certificates from _______ to _____ [under the circumstances to be
described in such opinion] is not a transaction requiring registration
of the Certificates under the Securities Act of 1933, as amended, or
under any applicable state securities laws.
or
The Class B-IO Certificates have been registered under the Securities
Act of 1933, as amended, and no action is required to be taken under
applicable state securities laws, or such action has been taken.
K-1
EXHIBIT L
FORM OF CLASS R CERTIFICATE TRANSFEREE'S
INVESTMENT AND REPRESENTATION LETTER
__________________, 199___
Norwest Bank Minnesota, National Association, as Trustee
Attention: _____________
- - --------------------
as Registrar
New York, New York ________
Attention:
Ladies and Gentlemen:
We propose to purchase a FURST Home Equity Loan Trust 1996-1 (the
"Trust"), Class R Certificate issued under Pooling and Servicing Agreement,
dated as of __________, among First Union Residential Securitization
Transactions, Inc., as depositor, First Union National Bank of North Carolina,
as seller and master servicer, Norwest Bank Minnesota, National Association, as
trustee and First Union National Bank of North Carolina, Trust Department, as
document Custodian (the "Pooling and Servicing Agreement"). Capitalized terms
used but not defined herein shall have the meanings set forth in the Pooling and
Servicing Agreement. We are delivering this letter pursuant to Section 6.2(b)
and (c) of the Pooling and Servicing Agreement.
1. We certify that on the date hereof we have simultaneously herewith
delivered to you an affidavit certifying, among other things, that (A) we are
not a Disqualified Organization, (B) we will endeavor to remain other than a
Disqualified Organization for so long as we retain ownership of a Class R
Certificate, and (C) we are purchasing such Class R Certificate for our own
account and not on behalf of a Disqualified Organization. We understand that any
breach by us of this certification may cause us to be liable for a tax imposed
upon transfers to Disqualified Organizations.
2. We acknowledge that we will be the beneficial owner of the Class R
Certificate and that the Class R Certificate will be registered in our name and
not in the name of a nominee.
L-1
3. We are acquiring the Class R Certificate for our own account for
investment and not with a view to or for sale or transfer in connection with any
distribution thereof in any manner which would violate the Securities Act of
1933, as amended (the "Act"), provided that the disposition of our property
shall at all times be and remain within our control.
4. We understand that the Class R Certificate have not been and will
not be registered under the Act and may not be resold or transferred unless they
are (a) registered pursuant to the Act or (b) sold or transferred in
transactions which are exempt from registration.
5. If we sell the Class R Certificate we will obtain from any
institutional investor that purchases the Certificate from us a certificate
containing the same representations, warranties and agreements contained in this
letter.
6. This letter and the statements contained herein are made for your
benefit.
7. We certify that no purpose of our purchase of the Class R
Certificate is to avoid or impede the assessment or collection of tax.
8. We represent that:
(a) We understand that the Class R Certificate represents for
federal income tax purposes a "residual interest" in a real estate mortgage
investment conduit ("REMIC");
(b) We understand that as the holder of Class R Certificate we
will be required to take into account, in determining our taxable income, our
pro rata percentage interest of the taxable income of the applicable REMIC in
accordance with all applicable provisions of the Internal Revenue Code of 1986,
as amended (the "Code").
9. We understand that if, notwithstanding the transfer restrictions,
the Class R Certificate is in fact transferred to a Disqualified Organization, a
tax may be imposed on the transferor of such Class R Certificate. We agree that
any breach by us of our agreement in paragraph 16 hereof shall render such
transfer of such Class R Certificate by us absolutely null and void and shall
cause no rights in the Class R Certificate to vest in the transferee.
10. The sale to us and our purchase of the Class R Certificate
constitutes a sale for tax and all other purposes and each party thereto has
received due and adequate consideration. In our view, the transaction represents
fair value, representing the results of arms' length negotiations and taking
into account our analysis of the tax and other consequences of investment in the
Class R Certificate.
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11. We expect that the purchase of the Class R Certificate, together
with the receipt of the price, if any, therefor will be economically neutral or
profitable to us overall, after all related expenses (including taxes) have been
paid and based on conservative assumptions with respect to discount rates,
prepayments and other factors necessary to evaluate profitability.
12. We are a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, or an estate or trust that
is subject to U.S. federal income tax regardless of the source of its income. We
are duly organized and validly existing under the jurisdiction of our
organization. We are neither bankrupt nor insolvent nor do we have reason to
believe that we will become bankrupt or insolvent. We have conducted and are
conducting our business so as to comply in all material respects with all
applicable statutes and regulations. The person executing and delivering this
letter on our behalf is duly authorized to do so, the execution and delivery by
us of this letter and the consummation of the transaction on the terms set forth
herein are within our corporate power and upon such execution and delivery, this
letter will constitute our legal, valid and binding obligation, enforceable
against us in accordance with its terms, subject, as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium and
other laws affecting the right of creditors generally and to general principals
of equity and the discretion of the court (regardless of whether enforcement of
such remedies is considered in a proceeding in equity or at law).
13. Neither the execution and delivery by us of this letter, nor the
compliance by us the provisions hereof, nor the consummation by us of the
transactions as set forth herein, will (A) conflict with or result in a breach
of, or constitute a default or result in the acceleration of any obligation
under, our articles or by-laws or, after giving effect to the consents or the
taking of the actions contemplated by clause (B) of this subparagraph, any of
the provisions of any law, governmental rule, regulation, judgment, decree or
ordering binding on us or our properties, or any of the provisions of any
indenture or mortgage or any other contract or instrument to which we are a
party or by which we or any of our properties is bound, or (B) require the
consent of or notice to or any filing with, any person, entity or governmental
body, which has not been obtained or made by us.
14. We anticipate being a profit-making entity on an ongoing basis.
15. We have filed all required federal and state income tax returns and
have paid all federal and state income taxes due; we intend to file and pay all
such returns and taxes in the future. We acknowledge that as the holder of the
Class R Certificate, to the extent the Class R Certificate would be treated as a
noneconomic residual interest within the meaning of the Treasury regulation
Section 1.860E-1(c)(2), we may incur tax liabilities in excess of cash flows
generated by the Class R Certificate and that we intend to pay taxes associated
with holding the Class R Certificate as they become due.
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16. We agree that in the event that at some future time we wish to
transfer any Class R Certificate, we will transfer such Class R Certificate only
to a transferee that:
(i) is not a Disqualified Organization and is not purchasing
such Class R Certificate on behalf of a Disqualified Organization, and
(ii) has delivered to the Trustee a transferee letter in the
form of Exhibit L to the Pooling and Servicing Agreement, and an
affidavit in the form of Exhibit M to the Pooling and Servicing
Agreement and, if requested by the Trustee, an Opinion of Counsel, in
form acceptable to the Trustee, that the proposed transfer will not
cause the Class R Certificate to be held by a Disqualified
Organization.
17. We are knowledgeable and experienced in financial, business and tax
matters generally and in particular, the investment risks and tax consequences
of REMIC residuals that provide little or no cash flow, and are capable of
evaluating the merits and risks of an investment in the Class R Certificate; we
are able to bear the economic risks of an investment in the Class R Certificate.
18. In addition, we acknowledge that the Trustee will not register the
transfer of a Class R Certificate to a transferee that is a non-U.S. Person.
19. "U.S. Person" shall mean a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision thereof, or an
estate or trust that is subject to U.S. federal income tax regardless of the
source of its income.
20. We hereby designate the Master Servicer as our fiduciary to perform
the duties of the tax matters person for the REMIC.
Very truly yours,
[NAME OF TRANSFEREE]
Name:
Title:
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EXHIBIT M
FORM OF CLASS R CERTIFICATEHOLDER AFFIDAVIT PURSUANT TO
SECTION 860E(e) OF THE INTERNAL REVENUE CODE OF 1986
Re: FURST Home Equity Loan Trust 1996-1 (the "Trust")
STATE OF )
) ss.:
COUNTY OF )
I, ____________________________, under penalties of perjury, declare
that, to the best of my knowledge and belief, the following representations are
true, correct, and complete and being first sworn, depose and say:
1. That I am the _______________ of _____________________ (the
"Investor"), whose taxpayer identification number is ________________, on behalf
of which I have the authority to make this affidavit.
2. That the Investor is acquiring a Class R Certificate which
Certificates represents a residual interest in the Trust for which a real estate
mortgage investment conduit ("REMIC") election has been made under Section 860D
of the Internal Revenue Code of 1986, as amended (the "Code").
3. That no purpose of the acquisition of the Class R Certificate is to
avoid or impede the assessment or collection of federal income tax.
4. That the Investor is not a "Disqualified Organization" (as defined
below), and that the Investor is not acquiring the Class R Certificate for the
account of, or as agent or nominee of, or with a view to the transfer of direct
or indirect record or beneficial ownership to, a Disqualified Organization. For
the purposes hereof, a Disqualified Organization is any of the following: (i)
the United States, any State or political subdivision thereof, any foreign
government, any international organization, or any agency or instrumentality of
any of the foregoing; (ii) any organization (other than a farmer's cooperative
as defined in Section 521 of the Code) that is exempt from federal income
taxation (including taxation under the unrelated business taxable income
provisions of the Code); or (iii) any rural telephone or electrical service
cooperative described in ss. 1381(A)(2)(C) of the Code.
5. That the Investor acknowledges that Section 860E(e) of the Code
imposes a substantial tax on the transferor or, in certain circumstances, on an
agent for the transferee, with respect to any transfer of any interest in any
Class R Certificate to a Disqualified Organization.
M-1
6. That the Investor (i) is not a plan that is subject to the
Department of Labor regulation set forth in 29 C.F.R. ss. 2510.3-101 (the "Plan
Asset Regulations") or (ii) has provided a "Benefit Plan Opinion" to Norwest
Bank minnesota, National Association, as Registrar. A Benefit Plan Opinion is an
Opinion of Counsel satisfactory to the Trustee, the Depositor, the Seller and
the Master Servicer to the effect that the proposed transfer will not (a) cause
the assets of the REMIC to be regarded as plan assets for purposes of the Plan
Asset Regulations or (b) give rise to a fiduciary duty on the part of the
Depositor, the Seller, the Master Servicer or the Trustee.
7. That the Investor is a "U.S. Person" as that term is defined in the
Transferee's Letter of even date herewith, and that the Investor is the
beneficial owner of the Class R Certificate, and is not holding the Class R
Certificate as nominee for any other person.
8. That the Investor acknowledges that as the holder of the Class R
Certificate, to the extent the Class R Certificate would be treated as a
noneconomic residual interest within the meaning of Treasury regulation Section
1.860E-1(c)(2), the Investor may incur tax liabilities in excess of cash flows
generated by the Class R Certificate and that the Investor intends to pay taxes
associated with holding the Class R Certificate as they become due.
9. That the following information of the Investor is true and correct.
Address:______________________________________________________; contact for tax
matters ________________________; phone number______________________________;
form of Organization of Investor __________________________________; and
Acquisition Date ___________________.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
M-2
IN WITNESS WHEREOF, the Investor has caused this instrument to be duly
executed on its behalf, buy its ________________ and its seal to be hereunto
attached, this ________ day of ___________________, 199____.
By: [Name of Investor]
Name:
Title:
Personally appeared before me ________________, known or proved to me
to be the same person who executed the foregoing instrument and to be a
_______________ of the Investor, and acknowledged to me that he executed the
same as his free act and deed as the free act and deed of the Investor.
Subscribed and sworn before me
this _____ day of _____________, ____.
- - ----------------------------------------
Notary Public
My commission expires the _____ day
of ____________________, _____.
M-3
EXHIBIT N
SCHEDULE OF MORTGAGE LOANS AS TO WHICH
RELATED MORTGAGE NOTES WILL BE
DELIVERED AFTER THE CLOSING DATE
Loan No. Borrower Loan Rate Cut-Off Date Loan Balance
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