December 18, 1998
To the parties listed on Annex A attached hereto
Re: Mortgage Lenders Network Home Equity Loan Trust 1998-3,
Asset Backed Notes, Series 1998-3
Ladies and Gentlemen:
We have acted as special counsel to Residential Asset Funding
Corporation (the "Depositor") and Mortgage Lenders Network Home Equity Loan
Trust 1998-3, a Delaware business trust (the "Issuer") in connection with the
execution and delivery of the following documents:
(i) the Mortgage Loan Sale Agreement dated as of December 1, 1998
(the "Sale Agreement") between the Depositor and Mortgage Lenders Network
USA, Inc., as Seller (the "Seller");
(ii) the Deposit Trust Agreement dated as of December 1, 1998
(the "Trust Agreement") among the Depositor, the Seller, Norwest Bank
Minnesota, National Association, as Trust Paying Agent and Wilmington
Trust Company, as Owner Trustee;
(iii) the Management Agreement dated as of December 1, 1998 (the
"Management Agreement") between the Issuer and Norwest Bank Minnesota,
National Association, as Manager;
(iv) the Mortgage Loan Contribution Agreement dated as of
December 1, 1998 (the "Contribution Agreement") between the Depositor and
the Issuer;
(v) the Indenture dated as of December 1, 1998 (the "Indenture")
between Norwest Bank Minnesota, National Association, as Indenture Trustee
(in such capacity, the "Indenture Trustee") and the Issuer;
(vi) the Underwriting Agreement dated as of December 11, 1998
(the "Underwriting Agreement") between the Depositor and First Union
Capital Markets, a division of Wheat First Securities, Inc. (the
"Underwriter");
(vii) the Standard Provisions to Underwriting Agreement dated as
of December 11, 1998 between the Depositor and the Underwriter;
(viii) the Custodial Agreement dated as of December 1, 1998 among
Mortgage Lenders Network USA, Inc., as Servicer (in such capacity, the
"Servicer"), Bank Boston, as Custodian and the Indenture Trustee;
(ix) the Servicing Agreement dated as of December 1, 1998 among
the Servicer, the Issuer and Norwest Bank Minnesota, as Trust Paying
Agent; and
(x) the Insurance Agreement dated as of December 1, 1998 (the
"Insurance Agreement") among MBIA Insurance Corporation (the "Insurer"),
the Issuer, the Seller, the Servicer, the Depositor and the Indenture
Trustee.
Capitalized terms used herein, but not defined, shall have the
meanings assigned to them in the Indenture.
We have examined executed copies of the Sale Agreement, the
Underwriting Agreement, the Standard Provisions to Underwriting Agreement, the
Contribution Agreement, the Trust Agreement, the Servicing Agreement; the
Custodial Agreement, the Indenture. the Management Agreement and the Insurance
Agreement (collectively, the "Documents"). We have also examined a copy of each
of the executed Notes. We have also examined the Registration Statement No.
333-64775, as heretofore amended (the "Registration Statement") and the
Prospectus dated November 10, 1998 the Preliminary Prospectus Supplement
relating to the Notes and the Prospectus Supplement dated December 11, 1998
relating to the Notes (such Prospectus, Preliminary Prospectus Supplement and
Prospectus Supplement being referred to together as the "Prospectus").
We have also examined originals or photostatic or certified copies
of all such corporate records of the Depositor and such certificates of public
officials, certificates of corporate officers, and other documents, and such
questions of law, as we have deemed relevant and necessary as a basis for the
opinions hereinafter expressed. As to certain issues of fact material to the
opinions expressed herein, we have, with your consent, relied to the extent we
deemed appropriate upon certificates and representations of officers of the
Depositor. In making our examinations and rendering the opinions herein
expressed, we have made the following assumptions:
(1) each party to each of the Documents (other than the Depositor) has
the corporate power to enter into and perform all of its obligations
thereunder;
(2) the due authorization, execution and delivery of the Documents by
all parties thereto (other than the Depositor) and the validity and
binding effect on all parties (other than the Depositor) of each of
the Documents, as applicable;
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(3) the genuineness of all signatures;
(4) the authenticity of all documents submitted to us as originals and
the conformity to originals of all documents submitted to us as
copies;
(5) in the case of each purchaser of a Note investing assets of an
employee benefit plan covered by ERISA, such plan is a plan to which
Prohibited Transaction Exemption 90-32 is fully available.
The opinions expressed in paragraphs 3 and 4 with respect to the
enforceability of certain agreements are subject to the following additional
qualifications:
The effect of bankruptcy, insolvency, reorganization, moratorium,
receivership, or other similar laws of general applicability relating to
or affecting creditors' rights generally or the rights of creditors of
national banking associations in the event of bankruptcy, insolvency,
reorganization, moratorium or receivership.
The application of general principles of equity, including, but not
limited to, the right of specific performance (regardless of whether
enforceability is considered in a proceeding in equity or at law).
In addition, we wish to advise you that the enforceability of
certain provisions set forth in the Underwriting Agreement which purport to
provide for indemnification for losses due to securities laws violations may be
limited by public policy considerations.
We are admitted to the Bar of the State of New York, and we express
no opinion as to the laws of any other jurisdiction except as to matters that
are governed by federal law and with respect to paragraph 1 below, the General
Corporation Law of the State of Delaware. All opinions expressed herein are
based on laws, regulations and policy guidelines currently in force and may be
affected by future regulations. Furthermore, no opinion is expressed herein
regarding the applicable state Blue Sky, legal investment or real estate
syndication laws.
Based upon the foregoing and subject to the last paragraph hereof,
we are of the opinion that:
1. The Depositor is a corporation duly organized, validly
existing and in good standing under the laws of the State of North
Carolina and is duly qualified to do business in each State necessary to
enable it to perform its obligations under the Documents to which it is a
party.
2. The Depositor has the corporate power and authority to convey
the Mortgage Loans and to execute, deliver and perform, and to enter into
and consummate transactions contemplated by the Documents to which it is a
party and such Documents have been duly authorized, executed and delivered
by the Depositor.
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3. Each of the Documents to which the Depositor is a party
constitutes the valid, legal and binding agreement of the Depositor, and
is enforceable against the Depositor in accordance with its terms.
4. Each of the Documents to which the Issuer is a party is
enforceable against the Issuer in accordance with its terms.
5. The Notes, assuming the due execution by the Owner Trustee on
behalf of the Trust and due authentication by the Indenture Trustee and
payment therefor pursuant to the Underwriting Agreement, are validly
issued and outstanding and are entitled to the benefits of the Indenture.
6. No consent, approval, authorization or order of, registration
or filing with, or notice to, any governmental authority or court is
required under federal laws or the laws of the State of New York for the
execution, delivery and performance of the Documents to which the
Depositor is a party, or the offer, issuance, sale or delivery of the
Notes or the consummation of any other transaction contemplated thereby by
the Depositor, except such which have been obtained.
7. The Registration Statement and the Prospectus (other than the
financial and statistical data included therein, as to which we are not
called upon to express any opinion), at the time the Registration
Statement became effective, as of the date of execution of the
Underwriting Agreement and as of the date hereof comply as to form in all
material respects with the requirements of the Securities Act of 1933, as
amended, and the rules and regulations thereunder, and the Exchange Act
and the rules and regulations thereunder, and we do not know of any
amendment to the Registration Statement required to be filed, or of any
contracts, indentures or other documents of a character required to be
filed as an exhibit to the Registration Statement or required to be
described in the Registration Statement or the Prospectus, which has not
been filed or described as required.
8. The Registration Statement is effective, and to the best of
our knowledge, the Commission has not issued any stop order suspending the
effectiveness of the Registration Statement (which for purposes of this
opinion shall not be deemed to include any exhibits filed therewith) or
any order directed to any prospectus relating to the Notes (including the
Prospectus), and has not initiated or threatened any proceeding for that
purpose.
9. The Indenture has been duly qualified under the Trust
Indenture Act of 1939 (the "TIA"), as amended, the Trust Agreement is not
required to be qualified under the TIA and neither the Depositor nor the
Issuer is required to be qualified under the Investment Company Act of
1940.
10. The statements in the Prospectus Supplement set forth under
the caption "DESCRIPTION OF THE NOTES," to the extent such statements
purport
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to summarize certain provisions of the Notes or of the Indenture, are fair
and accurate in all material respects.
11. None of the sale of the Mortgage Loans to the Issuer, the
issuance or sale of the Notes, or the execution, delivery or performance
by the Depositor of its obligations under the Documents, conflicts with or
will conflict with, or results or will result in a breach of, or
constitutes or will constitute a default under the charter or bylaws of
the Depositor or any law, rule or regulation of the United States federal
government or of the State of New York.
12. The Indenture establishes in favor of the Indenture Trustee
for the benefit of the Noteholders and the Insurer, a valid and
enforceable security interest in all right, title and interest of the
Issuer in the Mortgage Loans.
Our opinions contained herein are rendered only as of the date
hereof, and we undertake no obligation to update this letter or the opinions
contained herein after the date hereof.
This opinion is furnished by us as counsel in connection with the
conveyance of the Mortgage Loans to the Issuer as of the date hereof and is
solely for the benefit of the addressees hereto, and is not to be used,
circulated, quoted or otherwise referred to for any other purpose without our
express written permission.
Very truly yours,
/s/ Dewey Ballantine LLP
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ANNEX A
MBIA Insurance Corporation First Union Capital Markets,
113 King Street a division of Wheat First Securities, Inc.
Armonk, New York 10504 301 South College Street
Charlotte, North Carolina 28288
Norwest Bank Minnesota, National Residential Asset Funding Corporation
Association c/o First Union Capital Markets
Sixth Street and Marquette Avenue 301 South College Street
Minneapolis, Minnesota 55479-0070 Charlotte, North Carolina 28288-0610
Standard & Poor's Ratings Services Moody's Investors Service, Inc.
25 Broadway 99 Church Street
New York, New York 10004 New York, New York 10007
Mortgage Lenders Network USA, Inc. Wilmington Trust Company
Middlex Corporate Center, 11th Floor Rodney Square North
213 Court Street 1100 North Market Street
Middletown, Connecticut 06457 Wilmington, Delaware 19890-0001
Mortgage Lenders Home Equity Loan Trust
1998-3
c/o Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001