EXHIBIT 4.1
EXECUTION COPY
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RESIDENTIAL ASSET FUNDING CORPORATION,
Depositor
CREDIT-BASED ASSET SERVICING AND SECURITIZATION LLC,
Seller
LITTON LOAN SERVICING LP,
Servicer
and
THE CHASE MANHATTAN BANK,
Trustee
POOLING AND SERVICING AGREEMENT
Dated as of August 1, 2001
2001-CB3 Trust
C-BASS Mortgage Loan Asset-Backed Certificates, Series 2001-CB3
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
Section 1.01. Defined Terms......................................................................5
Section 1.02. Accounting........................................................................45
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Conveyance of Mortgage Loans......................................................45
Section 2.02. Acceptance by Trustee.............................................................48
Section 2.03. Repurchase or Substitution of Mortgage Loans by the Seller........................49
Section 2.04. Representations and Warranties of the Seller with Respect to the Mortgage Loans...52
Section 2.05. Representations, Warranties and Covenants of the Servicer.........................53
Section 2.06. Representations and Warranties of the Depositor...................................55
Section 2.07. Issuance of Certificates and the Uncertificated Regular Interests.................57
Section 2.08. Representations and Warranties of the Seller......................................57
Section 2.09. Covenants of the Seller...........................................................59
ARTICLE III
ADMINISTRATION AND SERVICING
OF THE TRUST FUND
Section 3.01. Servicer to Act as Servicer.......................................................60
Section 3.02. Collection of Mortgage Loan Payments..............................................62
Section 3.03. Realization Upon Defaulted Mortgage Loans.........................................63
Section 3.04. Collection Account and Distribution Account.......................................64
Section 3.05. Permitted Withdrawals From the Collection Account.................................66
Section 3.06. Establishment of Escrow Accounts; Deposits in Escrow Accounts.....................67
Section 3.07. Permitted Withdrawals From Escrow Account.........................................67
Section 3.08. Payment of Taxes, Insurance and Other Charges; Collections Thereunder.............68
Section 3.09. Transfer of Accounts..............................................................69
Section 3.10. Maintenance of Hazard Insurance...................................................69
Section 3.11. Maintenance of Mortgage Impairment Insurance Policy...............................70
Section 3.12. Fidelity Bond, Errors and Omissions Insurance.....................................70
Section 3.13. Title, Management and Disposition of REO Property.................................71
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Section 3.14. Due-on-Sale Clauses; Assumption and Substitution Agreements.......................74
Section 3.15. Notification of Adjustments.......................................................75
Section 3.16. Optional and Mandatory Purchases of Mortgage Loans by Seller......................75
Section 3.17. Trustee to Cooperate; Release of Files............................................76
Section 3.18. Servicing Compensation............................................................77
Section 3.19. Annual Statement as to Compliance.................................................77
Section 3.20. Annual Independent Certified Public Accountants' Reports..........................78
Section 3.21. Access to Certain Documentation and Information Regarding the Mortgage Loans......79
Section 3.22. Reserved..........................................................................79
Section 3.23. Obligations of the Servicer in Respect of Compensating Interest...................79
Section 3.24. Obligations of the Servicer in Respect of Mortgage Interest Rates and
Monthly Payments.................................................................79
Section 3.25. Investment of Funds in the Collection Account and the Distribution Account........79
Section 3.26. Liability of Servicer; Indemnification............................................81
Section 3.27. Reports of Foreclosure and Abandonment of Mortgaged Properties....................82
Section 3.28. Protection of Assets..............................................................82
ARTICLE IV
FLOW OF FUNDS
Section 4.01. Interest Distributions............................................................82
Section 4.02. Distributions of Principal and Monthly Excess Cashflow Amounts....................83
Section 4.03. Allocation of Losses..............................................................87
Section 4.04. Method of Distribution............................................................88
Section 4.05. Distributions on Book-Entry Certificates..........................................88
Section 4.06. Statements........................................................................88
Section 4.07. Remittance Reports; Advances......................................................91
Section 4.08. [Reserved]........................................................................93
Section 4.09. [Reserved]........................................................................93
Section 4.10. Excess Reserve Fund Account.......................................................93
ARTICLE V
THE CERTIFICATES
Section 5.01. The Certificates..................................................................94
Section 5.02. Registration of Transfer and Exchange of Certificates.............................95
Section 5.03. Mutilated, Destroyed, Lost or Stolen Certificates................................100
Section 5.04. Persons Deemed Owners............................................................100
Section 5.05. Appointment of Paying Agent......................................................100
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ARTICLE VI
THE SELLER, THE SERVICER AND THE DEPOSITOR
Section 6.01. Liability of the Seller, the Servicer and the Depositor..........................101
Section 6.02. Merger or Consolidation of, or Assumption of the Obligations of, the Seller,
the Servicer or the Depositor...................................................101
Section 6.03. Limitation on Liability of the Servicer and Others...............................101
Section 6.04. Servicer Not to Resign...........................................................102
Section 6.05. Delegation of Duties.............................................................103
ARTICLE VII
DEFAULT
Section 7.01. Servicer Events of Termination...................................................103
Section 7.02. Trustee to Act; Appointment of Successor.........................................105
Section 7.03. Waiver of Defaults...............................................................106
Section 7.04. Notification to Certificateholders...............................................107
Section 7.05. Survivability of Servicer Liabilities............................................107
ARTICLE VIII
THE TRUSTEE
Section 8.01. Duties of Trustee................................................................107
Section 8.02. Certain Matters Affecting the Trustee............................................109
Section 8.03. Trustee Not Liable for Certificates or Mortgage Loans............................110
Section 8.04. Trustee May Own Certificates.....................................................111
Section 8.05. Seller to Pay Trustee Fees and Expenses..........................................111
Section 8.06. Eligibility Requirements for Trustee.............................................112
Section 8.07. Resignation or Removal of Trustee................................................112
Section 8.08. Successor Trustee................................................................113
Section 8.09. Merger or Consolidation of Trustee...............................................114
Section 8.10. Appointment of Co-Trustee or Separate Trustee....................................114
Section 8.11. Limitation of Liability..........................................................115
Section 8.12. Trustee May Enforce Claims Without Possession of Certificates....................115
Section 8.13. Suits for Enforcement............................................................116
Section 8.14. Waiver of Bond Requirement.......................................................116
Section 8.15. Waiver of Inventory, Accounting and Appraisal Requirement........................116
Section 8.16. Compliance with National Housing Act of 1934.....................................117
ARTICLE IX
REMIC AND GRANTOR TRUST ADMINISTRATION
Section 9.01. REMIC Administration.............................................................117
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Section 9.02. Prohibited Transactions and Activities...........................................120
Section 9.03. Indemnification with Respect to Certain Taxes and Loss of REMIC Status...........120
Section 9.04. REO Property.....................................................................120
Section 9.05. Grantor Trust Administration.....................................................121
ARTICLE X
TERMINATION
Section 10.01. Termination......................................................................122
Section 10.02. Additional Termination Requirements..............................................123
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. Amendment........................................................................124
Section 11.02. Recordation of Agreement; Counterparts...........................................126
Section 11.03. Limitation on Rights of Certificateholders.......................................126
Section 11.04. Governing Law; Jurisdiction......................................................127
Section 11.05. Notices..........................................................................127
Section 11.06. Severability of Provisions.......................................................128
Section 11.07. Article and Section References...................................................128
Section 11.08. Notice to the Rating Agencies....................................................128
Section 11.09. Further Assurances...............................................................129
Section 11.10. Benefits of Agreement............................................................129
Section 11.11. Acts of Certificateholders.......................................................129
EXHIBITS:
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Exhibit A-1 Form of Class A-IO Certificates
Exhibit A-2 Form of Class A-1A Certificates
Exhibit B-1 Form of Class B-1 Certificates
Exhibit B-2 Form of Class B-2 Certificates
Exhibit C-1 Form of Class R Certificates
Exhibit C-2 Form of Class R-4 Certificates
Exhibit C-3 Form of Class M-1 Certificates
Exhibit C-4 Form of Class M-2 Certificates
Exhibit C-5 Form of Class X Certificates
Exhibit C-6 Form of Class N Certificates
Exhibit D Mortgage Loan Schedule
Exhibit E Form of Request for Release of Documents
Exhibit F-1 Form of Trustee's Initial Certification
Exhibit F-2 Form of Trustee's Final Certification
Exhibit F-3 Form of Receipt of Mortgage Note
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Exhibit G Form of Mortgage Loan Purchase Agreement
Exhibit H Form of Lost Note Affidavit
Exhibit I Form of ERISA Representation
Exhibit J Form of Investment Letter
Exhibit K Form of Class R and Class R-4 Certificate Transfer Affidavit
Exhibit L Form of Transferor Certificate
Exhibit M Form of Liquidation Report
Exhibit N [Reserved]
Exhibit O [Reserved]
Exhibit P Monthly Information delivered by Servicer
Exhibit Q [Reserved]
Exhibit R Form of Notice of Prepayment Premium Inconsistency
Exhibit S Form of Officer's Certificate with Respect to Prepayments
Exhibit T Ineligible Foreclosure Property Loan Schedule
v
This Pooling and Servicing Agreement is dated as of August 1,
2001 (the "Agreement"), among RESIDENTIAL ASSET FUNDING CORPORATION, as
depositor (the "Depositor"), CREDIT-BASED ASSET SERVICING AND SECURITIZATION
LLC, as seller (the "Seller"), LITTON LOAN SERVICING LP, as servicer (the
"Servicer"), and THE CHASE MANHATTAN BANK, as trustee (the "Trustee").
PRELIMINARY STATEMENT:
The Depositor intends to sell pass-through certificates
(collectively, the "Certificates"), to be issued hereunder in multiple classes,
which in the aggregate will evidence the entire beneficial ownership interest in
the Trust Fund created hereunder. The Certificates will consist of ten classes
of certificates, designated as (i) the Class A-IO Certificates, (ii) the Class
A-1A Certificates, (iii) the Class M-1 Certificates, (iv) the Class M-2
Certificates, (v) the Class B-1 Certificates, (vi) the Class B-2 Certificates,
(vii) the Class N Certificates, (viii) the Class X Certificates, (ix) the Class
R Certificates and (x) the Class R-4 Certificates.
The Class A-1A Certificates represent (i) a Regular Interest
in REMIC 3 and (ii) the right to receive the Class A-1A LIBOR Carryover Amounts.
The Class N and Class X Certificates, together represent the entire beneficial
ownership of the Class X/N Interest, subject to the obligation to pay Rate
Payments and Class A-1A LIBOR Carryover Amounts.
For federal income tax purposes, the Trust Fund (exclusive of
the Excess Reserve Fund Account) will consist of four REMICs, REMIC 1, REMIC 2,
REMIC 3 and REMIC 4. REMIC 1 will consist of all of the assets constituting the
Trust Fund (exclusive of the Excess Reserve Fund Account) and will be evidenced
by the REMIC 1 Regular Interests (which will be uncertificated and will
represent the "regular interests" in REMIC 1) and the R-1 Interest as the single
"residual interest" in REMIC 1. The Trustee will hold the REMIC 1 regular
interests.
REMIC 2 will consist of the REMIC 1 Regular Interests and will
be evidenced by the "regular interests" in REMIC 2 and the R-2 Interest as the
single "residual interest" in REMIC 2. REMIC 3 will consist of the REMIC 2
Regular Interests and will be evidenced by the "regular interests" in REMIC 3
and the Class R-3 Interest as the single "residual interest" in REMIC 3. REMIC 4
will consist of the T3-X/N Interest, which is a "regular interest" in REMIC 3,
and will be evidenced by the X/N Interest, which is a "regular interest" in
REMIC 4. The R-4 Interest is the single "residual interest" in REMIC 4.
The Class R Certificate will represent beneficial ownership of
the R-1 Interest, the R-2 Interest and the R-3 Interest. The Class R-4
Certificate will represent beneficial ownership of the R-4 Interest. All REMIC
regular and residual interests created hereby will be retired on or before the
Latest Possible Maturity Date.
REMIC 1 will be evidenced by Class T-1A and Class T-1B, which
will be uncertificated and non-transferable and are hereby designated as the
"regular interests" in REMIC 1. The REMIC 1 interests will have the following
designations, initial principal balances, pass-through rates and Lastest
Possible Maturity Dates:
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Uncertificated
Class Initial Uncertificated REMIC 1 Pass- Latest Possible
Designation Principal Balance Through Rate Maturity Date
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T-1A $86,000,000 (1) January 25, 2039
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T-1B $227,764,625 (1) January 25, 2039
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(1) Calculated pursuant to the definition of the Weighted Average Net
Mortgage Rate.
On each Distribution Date, distributions of principal will be
made first to T-1B until it is reduced to zero, and then to T-1A until it is
reduced to zero. Any remaining distributions will be made to the Class R-1
Interest.
REMIC 2 will be evidenced by the T2-Accrual Interest (the
"Subsidiary REMIC Accrual Class"), Class T2-A-1A, Class T2-M-1, Class T2-M-2,
Class T2-B-1 and Class T2-B-2 Interests (the "Subsidiary REMIC Accretion
Directed Classes"), which will be uncertificated and non-transferable and are
hereby designated as the "regular interests" in REMIC 2. The REMIC 2 Interests
will have the following designations, initial principal balances, pass-through
rates, Corresponding Classes of REMIC 3 Certificates ("Corresponding Classes")
and Latest Possible Maturity Dates:
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Uncertificated
Class Initial Uncertificated REMIC 2 Pass- Corresponding Latest Possible
Designation Principal Balance Through Rate Class Maturity Date
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T2-Accrual 1/2 Mortgage Loan balance (1) N/A January 25, 2039
plus 1/2 of the
Overcollateralization
Amount
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T2-A-IO (2) (3) A-IO April 25, 2003
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T2-A-1A 1/2 of the Principal (1) A-1A October 25, 2030
Balance of the
Corresponding Class
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T2-M-1 1/2 of the Principal (1) M-1 January 25, 2039
Balance of the
Corresponding Class
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2
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T2-M-2 1/2 of the Principal (1) M-2 January 25, 2039
Balance of the
Corresponding Class
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T2-B-1 1/2 of the Principal (1) B-1 January 25, 2039
Balance of the
Corresponding Class
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T2-B-2 1/2 of the Principal (1) B-2 January 25, 2039
Balance of the
Corresponding Class
=================================================================================================================
(1) For the period up to and including the Distribution Date in April 2003,
the weighted average of the interest rates on T-1A and T-1B, where the
interest rate on T-1A is first reduced by 2.00%; for all periods
thereafter, the weighted average of the interest rates on T-1A and T-1B.
(2) For the period up to and including the Distribution Date in
April 2003, a notional amount equal to the principal balance of T-1A;
for all periods thereafter, zero.
(3) For the period up to and including the Distribution Date in April 2003,
2.00%; for all periods thereafter, 0%.
On each Distribution Date, 50% of the increase in the
Overcollateralization Amount will be payable as a reduction of the principal
balances of the Subsidiary REMIC Accretion Directed Classes (each such Class
will be reduced by an amount equal to 50% of any increase in the
Overcollateralization Amount that is attributable to a reduction in the
principal balance of its Corresponding Class) and will be accrued and added to
the principal balance of the Subsidiary REMIC Accrual Class. All payments of
scheduled principal and prepayments of principal generated by the Mortgage Loans
shall be allocated 50% to the Subsidiary REMIC Accrual Class, and 50% to the
Subsidiary REMIC Accretion Directed Classes (principal payments shall be
allocated among such Subsidiary REMIC Accretion Directed Classes in an amount
equal to 50% of the principal amounts allocated to their respective
Corresponding Classes), until paid in full. Notwithstanding the above, principal
payments allocated to the Class X/N Interest that result in a reduction in the
Overcollateralization Amount shall be allocated to the Subsidiary REMIC Accrual
Class (until paid in full). Realized Losses shall be applied so that after all
distributions have been made on each Distribution Date (i) the principal
balances of each of the Subsidiary REMIC Accretion Directed Classes is equal to
50% of the principal balance of their Corresponding Class, and (ii) the
Subsidiary REMIC Accrual Class is equal to 50% of the aggregate principal
balance of the Mortgage Loans plus 50% of the Overcollateralization Amount.
3
The REMIC 3 Interests will have the following designations,
REMIC Pass-Through Rates, Original Class Certificate Principal Balance or
Original Class X/N Notional Amount and Latest Possible Maturity Date for each
Class of Certificates comprising the interests in REMIC 3:
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Class Designation Initial Class
Certificate Principal REMIC Pass- Latest Possible
Balance Through Rate Maturity Dates
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A-IO (2) 2.000%(1) April 25, 2003
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A-1A $275,328,000 (3) October 25, 2030
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M-1 $9,727,000 6.574%(4) January 25, 2039
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M-2 $11,609,000 6.863%(5) January 25, 2039
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B-1 $9,570,000 7.204%(6) January 25, 2039
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B-2 $5,177,000 9.000%(7) January 25, 2039
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T3-X/N (8) (8) January 25, 2039
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Total $311,411,000(9) N/A N/A
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(1) Interest will accrue on the Class A-IO Certificates during each Interest
Accrual Period at a rate equal to (i) during the first twenty Interest
Accrual Periods, the Class A-IO Pass-Through Rate and (ii) thereafter,
0%. As a result, no distributions will be made on the Class A-IO
Certificate after the April 2003 Distribution Date.
(2) Class A-IO has no principal balance but rather a notional balance,
initially equal to the lesser of $86,000,000 and the Pool Balance.
(3) Interest will accrue on the Class A-1A Certificates at a rate equal to
the least of: (i) the Class A-1A Pass-Through Rate, and (ii) the Pool Cap
for such Distribution Date. The rate under clause (i) shall be multiplied
by a fraction, the numerator of which is the actual number of days in the
Interest Accrual Period and the denominator of which is 30 to convert
such rates to the equivalent of one based on twelve 30 day months.
(4) Interest will accrue on the Class M-1 Certificates at a rate equal to the
lesser of: (i) the Class M-1 Pass-Through Rate and (ii) the Pool Cap for
such Distribution Date.
(5) Interest will accrue on the Class M-2 Certificates at a rate equal to the
lesser of: (i) the Class M-2 Pass-Through Rate and (ii) the Pool Cap for
such Distribution Date.
(6) Interest will accrue on the Class B-1 Certificates at a rate equal to the
lesser of: (i) the Class B-1 Pass-Through Rate and (ii) the Pool Cap for
such Distribution Date.
(7) Interest will accrue on the Class B-2 Certificates at a rate equal to the
lesser of: (i) the Class B-2 Pass-Through Rate and (ii) the Pool Cap for
such Distribution Date.
(8) The Class T3-X/N Interest is uncertificated, will have no principal
balance and will bear interest at its respective Class T3-X/N
Pass-Through Rate on its Class X/N Notional Amount. The Class T3-X/N
Interest is hereby designated as a REMIC "regular interest" for federal
income tax purposes. The Class T3-X/N Interest will also be entitled to
principal in the amount of the Overcollateralization Release Amount as
part of the distribution of Monthly Excess Cashflow Amounts in conformity
with Section 4.02(b).
(9) Exclusive of the Class A-IO Notional Amount and the Class X/N Notional
Amount.
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The Class R-3 Interest is hereby designated as the sole class
of residual interest in REMIC 3. The Class R Certificates will represent
beneficial ownership of the Class R-1 Interest, the Class R-2 Interest and the
Class R-3 Interest.
REMIC 4 will be evidenced by the Class X/N Interest, which
will be uncertificated and is hereby designated as the "regular interest" in
REMIC 4. The REMIC 4 interest will have the following designation, initial
principal amount, pass-trhough rate and Latest Possible Maturity Date:
================================================================================
Class Initial Principal Pass-Through Latest Possible
Designation Balance Rate Maturity Date
--------------------------------------------------------------------------------
X/N Interest (1) (2) January 25, 2039
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(1) The Class X/N Notional Amount. The Class X/N Interest will be entitled to
principal in the amount of the Overcollateralization Release Amount as
part of the distribution of Monthly Excess Cashflow Amounts in conformity
with Section 4.02(b).
(2) The Class X/N Interest Pass-Through Rate.
The Class R-4 Interest is hereby designated as the sole class
of residual interest in REMIC 4. The Class R-4 Certificate will represent
beneficial ownership of the Class R-4 Interest.
ARTICLE I
DEFINITIONS
Section 1.01. Defined Terms.
--------------
Whenever used in this Agreement or in the Preliminary
Statement, the following words and phrases, unless the context otherwise
requires, shall have the meanings specified in this Article. Unless otherwise
specified, interest on the Class A-IO, Class M-1, Class M-2, Class B-1, Class
B-2 and Class N Certificates and on the REMIC Regular Interests (other than the
Class T2-A-1A Interests) will be calculated on the basis of a 360-day year
consisting of twelve 30-day months. Interest on the Class A-1A Certificates and
on the Class T2-A-1A Interests will be calculated on the basis of the actual
number of days in the related Interest Accrual Period and a 360-day year.
Many of the defined terms listed below may apply to both Loan
Groups and are sometimes used in this Agreement to refer to a particular Loan
Group by the adjectival use of the words "Group 1" and "Group 2."
"1933 Act": The Securities Act of 1933, as amended.
"60+ Day Delinquent Loan": Each Mortgage Loan with respect to
which any portion of a Monthly Payment is, as of the last day of the prior
Collection Period, two
5
months or more past due, each Mortgage Loan in foreclosure, all REO Property and
each Mortgage Loan for which the Mortgagor has filed for bankruptcy after the
Closing Date. Any Re-Performing 60+ Day Delinquent Loan will not be deemed to be
a 60+ Day Delinquent Loan, except for any such Re-Performing 60+ Day Delinquent
Loan which exceed 10% of the Pool Balance.
"Account": Any of the Collection Account, Excess Reserve
Fund Account and Distribution Account.
"Accrued Certificate Interest": With respect to each
Distribution Date and Class of Certificates, an amount equal to the interest
accrued at the applicable rate set forth or described opposite such Class in the
table in the Preliminary Statement during the related Interest Accrual Period on
the Certificate Principal Balance (or Notional Amount) of such Class of
Certificates, reduced by such Class's Interest Percentage of Relief Act Interest
Shortfalls for such Distribution Date.
"Actuarial Mortgage Loan": Any Mortgage Loan other than a
Simple Interest Mortgage Loan.
"Adjustment Date": With respect to each Group 2 Mortgage Loan,
each adjustment date, on which the Mortgage Interest Rate of a Group 2 Mortgage
Loan changes pursuant to the related Mortgage Note. The first Adjustment Date
following the Cut-Off Date as to each Group 2 Mortgage Loan is set forth in the
Mortgage Loan Schedule.
"Advance": As to any Actuarial Mortgage Loan, any advance
made by the Servicer in respect of any Distribution Date pursuant to
Section 4.07.
"Adverse REMIC Event": As defined in Section 9.01(f) hereof.
"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.
"Agency Insurance Agreements": Collectively, the FHA
Insurance Contracts and VA Guaranty Agreements.
"Agreement": This Pooling and Servicing Agreement and all
amendments and supplements hereto.
"Applicable Regulations": As to any Mortgage Loan, all
federal, state and local laws, statutes, rules and regulations applicable
thereto, including with respect to each FHA Loan the FHA Regulations and the
related FHA Insurance Contract and with respect to each VA Loan the VA
Regulations and the related VA Guaranty Agreement.
6
"Applied Realized Loss Amount": With respect to each
Distribution Date, the excess, if any, of (a) the aggregate of the Certificate
Principal Balances of the Certificates (after giving effect to all distributions
on such Distribution Date) over (b) the Pool Balance as of the end of the
related Collection Period.
"Arrearage": With respect to a Delinquent Mortgage Loan, the
total amount of scheduled monthly payments due thereon on or before the Cut-Off
Date that were not received prior to the Cut-Off Date but for which advances of
principal and interest were made, plus any unreimbursed Servicing Advances as of
the Cut-Off Date.
"Assignment": An assignment of Mortgage, notice of transfer or
equivalent instrument, in recordable form, which is sufficient under the laws of
the jurisdiction wherein the related Mortgaged Property is located to reflect of
record the sale of the Mortgage.
"Assumed Final Maturity Date": As to each Class of
Certificates, the date set forth as such in the Preliminary Statement.
"Available Funds": As to any Distribution Date, an amount
equal to the excess of (i) the sum of (a) the aggregate of the Monthly Payments
due on the related Due Date and received by the Trustee one Business Day prior
to the related Distribution Date, (b) Liquidation Proceeds, Insurance Proceeds,
Principal Prepayments, Substitution Adjustment Amounts, the Purchase Price for
any repurchased Mortgage Loan, the Termination Price with respect to the
termination of the Trust pursuant to Section 10.01 hereof and other unscheduled
recoveries of principal and interest (excluding prepayment penalties and amounts
received in respect of Arrearages) in respect of the Mortgage Loans during the
related Prepayment Period, (c) the aggregate of any amounts received in respect
of an REO Property withdrawn from any REO Account and deposited in the
Collection Account for such Distribution Date, (d) any Compensating Interest for
such Distribution Date, and (e) the aggregate of any Advances made by the
Servicer for such Distribution Date over (ii) the sum of (a) amounts
reimbursable or payable to the Servicer pursuant to Section 3.05, (b) Stayed
Funds, (c) the Servicing Fee, (d) the mortgage insurance premiums and (e)
amounts deposited in the Collection Account or the Distribution Account, as the
case may be, in error.
"Balloon Mortgage Loan": A Mortgage Loan that provides for the
payment of the unamortized principal balance of such Mortgage Loan in a single
payment at the maturity of such Mortgage Loan that is substantially greater than
the preceding monthly payment.
"Balloon Payment": A payment of the unamortized principal
balance of a Mortgage Loan in a single payment at the maturity of such Mortgage
Loan that is substantially greater than the preceding Monthly Payment.
"Bankruptcy Code": Title 11 of the United States Code, as
amended.
"Book-Entry Certificates": Any of the Certificates that shall
be registered in the name of the Depository or its nominee, the ownership of
which is reflected on the
7
books of the Depository or on the books of a Person maintaining an account with
the Depository (directly, as a "Depository Participant", or indirectly, as an
indirect participant in accordance with the rules of the Depository and as
described in Section 5.02 hereof). On the Closing Date, the Class A-IO, Class
A-1A, Class M-1, Class M-2, Class B-1 and Class B-2 Certificates shall be
Book-Entry Certificates.
"Business Day": Any day other than a Saturday, a Sunday or a
day on which banking institutions in the State of Delaware, the State of New
York, the State of Texas or in the city in which the Corporate Trust Office of
the Trustee is located are authorized or obligated by law or executive order to
be closed.
"Certificate": Any Regular Certificate, Class R Certificate
or Class R-4 Certificate.
"Certificate Custodian": Initially, The Chase Manhattan
Bank; thereafter any other Certificate Custodian acceptable to the
Depository and selected by the Trustee.
"Certificate Owner": With respect to each Book-Entry
Certificate, any beneficial owner thereof.
"Certificate Principal Balance": With respect to any Class of
Certificates (other than the Class A-IO, Class N, Class X, Class R and Class R-4
Certificates) and any Distribution Date, will be equal to the Original Class
Certificate Principal Balance reduced by the sum of (i) all amounts actually
distributed in respect of principal of such Class on all prior Distribution
Dates and (ii) Applied Realized Loss Amounts allocated thereto. The Class A-IO,
Class N, Class X, Class R and Class R-4 Certificates do not have a Certificate
Principal Balance.
"Certificate Register" and "Certificate Registrar": The
register maintained and registrar appointed pursuant to Section 5.02 hereof.
"Certificateholder" or "Holder": The Person in whose name a
Certificate is registered in the Certificate Register, except that a
Disqualified Organization or Non-U.S. Person shall not be a Holder of a Class R
or Class R-4 Certificate for any purpose hereof.
"Class": Collectively, Certificates or REMIC Regular Interests
which have the same priority of payment and bear the same class designation and
the form of which is identical except for variation in the Percentage Interest
evidenced thereby.
"Class A-1A Applied Realized Loss Amount": As to the Class
A-1A Certificates and as of any Distribution Date, the lesser of (x) the
Certificate Principal Balance thereof (after taking into account the
distribution of the Principal Distribution Amount on such Distribution Date, but
prior to the application of the Applied Realized Loss Amount, if any, on such
Distribution Date) and (y) the excess of (i) the Applied Realized Loss Amount as
of such Distribution Date over (ii) the sum of the Class M-1 Applied Realized
Loss Amount, the Class M-2 Applied Realized Loss Amount, the Class
8
B-1 Applied Realized Loss Amount, the Class B-2 Applied Realized Loss Amount and
the Class N Applied Realized Loss Amount, in each case, as of such Distribution
Date.
"Class A-1A Certificate": Any one of the Certificates with an
"A-1A" designated on the face thereof substantially in the form annexed hereto
as Exhibit A-2, executed by the Trustee on behalf of the Trust and authenticated
and delivered by the Trustee, representing the right to distributions as set
forth herein and thereinof
"Class A-1A Certificate Margin": For each Distribution Date
(i) on or prior to the Optional Termination Date, 0.34% per annum, and (ii)
following the Optional Termination Date, 0.68% per annum.
"Class A-1A LIBOR Carryover Amount": If on any Distribution
Date, the Accrued Certificate Interest for the Class A-1A Certificates is based
upon the Pool Cap, the excess of (i) the amount of interest the Class A-1A
Certificates would have been entitled to receive on such Distribution Date based
on the Class A-1A Pass-Through Rate, over (ii) the amount of interest the Class
A-1A Certificates received on such Distribution Date based on such Pool Cap,
together with the unpaid portion of any such excess from prior Distribution
Dates (and interest accrued thereon at the then applicable Class A-1A
Pass-Through Rate).
"Class A-1A Pass-Through Rate": For each Distribution Date,
LIBOR as of the related LIBOR Determination Date, plus the Class A-1A
Certificate Margin.
"Class A-1A Principal Distribution Amount": As of any
Distribution Date on or after the Stepdown Date and as long as a Trigger Event
is not in effect, the excess of (x) the Certificate Principal Balance of the
Class A-1A Certificates immediately prior to such Distribution Date over (y) the
lesser of (A) the product of (i) 75.50% and (ii) the Pool Balance as of the last
day of the related Collection Period and (B) the Pool Balance as of the last day
of the related Collection Period minus the product of (i) 0.50% and (ii) the
Pool Balance on the Cut-Off Date.
"Class A-1A Realized Loss Amortization Amount": As to the
Class A-1A Certificates and as of any Distribution Date, the lesser of (x) the
Unpaid Realized Loss Amount for the Class A-1A Certificates as of such
Distribution Date and (y) the excess of (i) the Monthly Excess Cashflow Amount
over (ii) the sum of the amounts described in Section 4.02(b)(i) and (ii)
hereof, in each case for such Distribution Date.
"Class A-1A REMIC Pass-Through Rate": The lesser of (a) the
Class A-1A Pass-Through Rate and (b) the Pool Cap. The rate in clauses (a) and
(b) shall be multiplied by a fraction, the numerator of which is the actual
number of days in the Interest Accrual Period and the denominator of which is 30
to convert such rates to the equivalent of one based on twelve 30-day months.
"Class A Certificate": Any one of the Certificates with an "A"
designated on the face thereof substantially in the form annexed hereto as
Exhibits A-1 and A-2, executed by the Trustee on behalf of the Trust and
authenticated and delivered by the Trustee, representing the right to
distributions as set forth herein and therein.
9
"Class A Certificateholders": Collectively, the Holders of
the Class A Certificates.
"Class A Interest Carry Forward Amount": For any Distribution
Date, the sum of the Interest Carry Forward Amounts for the Class A-IO and Class
A-1A Certificates for such Distribution Date.
"Class A-IO Certificates": Any one of the Certificates with an
"A-IO" designated on the face thereof substantially in the form annexed hereto
as Exhibit A-1, executed by the Trustee on behalf of the Trust and authenticated
and delivered by the Trustee, representing the right to distributions as set
forth herein and thereinof
"Class A-IO Notional Amount"; The notional amount for the
Class A-IO Certificates set forth in the Preliminary Statement.
"Class A-IO Pass-Through Rate": For each Distribution Date (i)
on or prior to the Distribution Date in April 2003, 2.000% per annum and (ii)
thereafter, 0.00% per annum.
"Class A-IO REMIC Pass-Through Rate": The least of (a) the
Class A-IO Pass-Through Rate and (b) the Pool Cap.
"Class B-1 Applied Realized Loss Amount": As to the Class B-1
Certificates and as of any Distribution Date, the lesser of (x) the Certificate
Principal Balance thereof (after taking into account the distribution of the
Principal Distribution Amount on such Distribution Date, but prior to the
application of the Applied Realized Loss Amount, if any, on such Distribution
Date) and (y) the excess of (i) the Applied Realized Loss Amount as of such
Distribution Date over (ii) the sum of the Class B-2 Applied Realized Loss
Amount and the Class N Applied Realized Loss Amount, in each case, as of such
Distribution Date.
"Class B-1 Certificate": Any one of the Certificates with a
"B-1" designated on the face thereof substantially in the form annexed hereto as
Exhibit B-1, executed by the Trustee on behalf of the Trust and authenticated
and delivered by the Trustee, representing the right to distributions as set
forth herein and therein.
"Class B-1 Certificateholder": Any Holder of a Class B-1
Certificate.
"Class B-1 Pass-Through Rate": For each Distribution Date,
7.204%, per annum.
"Class B-1 Principal Distribution Amount": As of any
Distribution Date on or after the Stepdown Date and as long as a Trigger Event
is not in effect, the excess of (x) the sum of (i) the Certificate Principal
Balance of the Class A-1A Certificates (after taking into account the payment of
the Class A-1A Principal Distribution Amount on such Distribution Date), (ii)
the Certificate Principal Balance of the Class M-1 Certificates (after taking
into account the payment of the Class M-1 Principal Distribution Amount on such
Distribution Date), (iii) the Certificate Principal Balance of the Class M-2
10
Certificates (after taking into account the payment of the Class M-2 Principal
Distribution Amount on such Distribution Date) and (iv) the Certificate
Principal Balance of the Class B-1 Certificates immediately prior to such
Distribution Date over (y) the lesser of (A) the product of (i) 95.20% and (ii)
the Pool Balance as of the last day of the related Collection Period and (B) the
Pool Balance as of the last day of the related Collection Period minus the
product of 0.50% and the Pool Balance on the Cut-Off Date.
"Class B-1 Realized Loss Amortization Amount": As to the Class
B-1 Certificates and as of any Distribution Date, the lesser of (x) the Unpaid
Realized Loss Amount for the Class B-1 Certificates as of such Distribution Date
and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum
of the amounts described in Section 4.02(b)(i) through (xii) hereof, in each
case for such Distribution Date.
"Class B-1 REMIC Pass-Through Rate": The lesser of the Class
B-1 Pass-Through Rate and the Pool Cap.
"Class B-2 Applied Realized Loss Amount": As to the Class B-2
Certificates and as of any Distribution Date, the lesser of (x) the Certificate
Principal Balance thereof (after taking into account the distribution of the
Principal Distribution Amount on such Distribution Date, but prior to the
application of the Applied Realized Loss Amount, if any, on such Distribution
Date) and (y) the excess of (i) the related Applied Realized Loss Amount as of
such Distribution Date over (ii) the Class N Applied Realized Loss Amount as of
such Distribution Date.
"Class B-2 Certificate": Any one of the Certificates with a
"B-2" designated on the face thereof substantially in the form annexed hereto as
Exhibit B-2, executed by the Trustee on behalf of the Trust and authenticated
and delivered by the Trustee, representing the right to distributions as set
forth herein and therein.
"Class B-2 Certificateholder": Any Holder of a Class B-2
Certificate.
"Class B-2 Pass-Through Rate": For each Distribution Date,
9.000%, per annum.
"Class B-2 Principal Distribution Amount": As of any
Distribution Date on or after the Stepdown Date and as long as a Trigger Event
is not in effect, the excess of (x) the sum of (i) the Certificate Principal
Balance of the Class A-1A Certificates (after taking into account the payment of
the Class A-1A Principal Distribution Amount on such Distribution Date), (ii)
the Certificate Principal Balance of the Class M-1 Certificates (after taking
into account the payment of the Class M-1 Principal Distribution Amount on such
Distribution Date), (iii) the Certificate Principal Balance of the Class M-2
Certificates (after taking into account the payment of the Class M-2 Principal
Distribution Amount on such Distribution Date), (iv) the Certificate Principal
Balance of the Class B-1 Certificates (after taking into account the payment of
the Class B-1 Principal Distribution Amount on such Distribution Date) and (v)
the Certificate Principal Balance of the Class B-2 Certificates immediately
prior to such Distribution Date over (y) the lesser of (A) the product of (i)
98.50% and (ii) the Pool Balance as of
11
the last day of the related Collection Period and (B) the Pool Balance as of the
last day of the related Collection Period minus the product of 0.50% and the
Pool Balance on the Cut-Off Date.
"Class B-2 Realized Loss Amortization Amount": As to the Class
B-2 Certificates and as of any Distribution Date, the lesser of (x) the Unpaid
Realized Loss Amount for the Class B-2 Certificates as of such Distribution Date
and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum
of the amounts described in Section 4.02(b)(i) through (xv) hereof, in each case
for such Distribution Date.
"Class B-2 REMIC Pass-Through Rate": The lesser of the Class
B-2 Pass-Through Rate and the Pool Cap.
"Class M-1 Applied Realized Loss Amount": As to the Class M-1
Certificates and as of any Distribution Date, the lesser of (x) the Certificate
Principal Balance thereof (after taking into account the distribution of the
Principal Distribution Amount on such Distribution Date, but prior to the
application of the Class M-1 Applied Realized Loss Amount, if any, on such
Distribution Date) and (y) the excess of (i) the Applied Realized Loss Amount as
of such Distribution Date over (ii) the sum of the Class M-2 Applied Realized
Loss Amount, the Class B-1 Applied Realized Loss Amount, the Class B-2 Applied
Realized Loss Amount and the Class N Applied Realized Loss Amount, in each case,
as of such Distribution Date.
"Class M-1 Certificate": Any one of the Certificates with a
"M-1" designated on the face thereof substantially in the form annexed hereto as
Exhibit C-3, executed by the Trustee on behalf of the Trust and authenticated
and delivered by the Trustee, representing the right to distributions as set
forth herein and therein.
"Class M-1 Pass-Through Rate": For each Distribution Date,
6.574% per annum.
"Class M-1 Principal Distribution Amount": As of any
Distribution Date on or after the Stepdown Date and as long as a Trigger Event
is not in effect, the excess of (x) the sum of (i) the Certificate Principal
Balances of the Class A-1A Certificates (after taking into account the payment
of the Class A-1A Principal Distribution Amount on such Distribution Date) and
(ii) the Certificate Principal Balance of the Class M-1 Certificates immediately
prior to such Distribution Date over (y) the lesser of (A) the product of (i)
81.70% and (ii) the Pool Balance as of the last day of the related Collection
Period and (B) the Pool Balance as of the last day of the related Collection
Period minus the product of 0.50% and the Pool Balance on the Cut-Off Date.
"Class M-1 Realized Loss Amortization Amount": As to the Class
M-1 Certificates and as of any Distribution Date, the lesser of (x) the Unpaid
Realized Loss Amount for the Class M-1 Certificates as of such Distribution Date
and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum
of the amounts described in Section 4.02(b)(i) through (vi) hereof, in each case
for such Distribution Date.
12
"Class M-1 REMIC Pass-Through Rate": The lesser of the Class
M-1 Pass-Through Rate and the Pool Cap.
"Class M-2 Applied Realized Loss Amount": As to the Class M-2
Certificates and as of any Distribution Date, the lesser of (x) the Certificate
Principal Balance thereof (after taking into account the distribution of the
Principal Distribution Amount on such Distribution Date, but prior to the
application of the Class M-2 Applied Realized Loss Amount, if any, on such
Distribution Date) and (y) the excess of (i) the related Applied Realized Loss
Amount as of such Distribution Date over (ii) the sum of the Class B-1 Applied
Realized Loss Amount, the Class B-2 Applied Realized Loss Amount and the Class N
Applied Realized Loss Amount, in each case, as of such Distribution Date.
"Class M-2 Certificate": Any one of the Certificates with a
"M-2" designated on the face thereof substantially in the form annexed hereto as
Exhibit C-4, executed by the Trustee on behalf of the Trust and authenticated
and delivered by the Trustee, representing the right to distributions as set
forth herein and therein.
"Class M-2 Pass-Through Rate": For each Distribution Date,
6.863% per annum.
"Class M-2 Principal Distribution Amount": As of any
Distribution Date on or after the Stepdown Date and as long as a Trigger Event
is not in effect, the excess of (x) the sum of (i) the Certificate Principal
Balances of the Class A-1A Certificates (after taking into account the payment
of the Class A-1A Principal Distribution Amount on such Distribution Date), (ii)
the Certificate Principal Balance of the Class M-1 Certificates (after taking
into account the payment of the Class M-1 Principal Distribution Amount on such
Distribution Date) and (iii) the Certificate Principal Balance of the Class M-2
Certificates immediately prior to such Distribution Date over (y) the lesser of
(A) the product of (i) 89.10% and (ii) the Pool Balance as of the last day of
the related Collection Period and (B) the Pool Balance as of the last day of the
related Collection Period minus the product of 0.50% and the Pool Balance on the
Cut-Off Date.
"Class M-2 Realized Loss Amortization Amount": As to the Class
M-2 Certificates and as of any Distribution Date, the lesser of (x) the Unpaid
Realized Loss Amount for the Class M-2 Certificates as of such Distribution Date
and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum
of the amounts described in Section 4.02(b)(i) through (ix) hereof, in each case
for such Distribution Date.
"Class M-2 REMIC Pass-Through Rate": The lesser of the Class
M-2 Pass-Through Rate and the Pool Cap.
"Class N Applied Realized Loss Amount": As to the Class N
Certificates and as of any Distribution Date, the lesser of (x) the Certificate
Principal Balance thereof (after taking into account the distribution of the
Principal Distribution Amount on such Distribution Date, but prior to the
application of the Class N Applied Realized Loss
13
Amount, if any, on such Distribution Date) and (y) the Applied Realized Loss
Amount as of such Distribution Date.
"Class N Certificate": Any one of the Certificates with a "N"
designated on the face thereof substantially in the form annexed hereto as
Exhibit C-6, executed by the Trustee on behalf of the Trust and authenticated
and delivered by the Trustee, representing the right to distributions as set
forth herein and therein. The Class N Certificate shall not be designated as a
REMIC Regular Interest.
"Class N Notional Amount": On any Distribution Date, with
respect to the Class N Certificates, an amount equal to the Original Class N
Notional Amount reduced by the aggregate distributions made to the Class N
Certificates pursuant to Sections 4.02(b)(xx) through (xxii).
"Class N Pass-Through Rate": For each Distribution Date,
9.000% per annum.
"Class N Realized Loss Amortization Amount": As to the Class N
Certificates and as of any Distribution Date, the lesser of (x) the Unpaid
Realized Loss Amount for the Class N Certificates as of such Distribution Date
and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum
of the amounts described in Section 4.02(b)(i) through (xx) hereof, in each case
for such Distribution Date.
"Class R Certificate": The Class R Certificate executed by the
Trustee on behalf of the Trust, and authenticated and delivered by the
Certificate Registrar, substantially in the form annexed hereto as Exhibit C-1,
evidencing the ownership of the Class R-1 Interest, the Class R-2 Interest and
the Class R-3 Interest.
"Class R-1 Interest": The uncertificated residual interest in
REMIC 1.
"Class R-2 Interest": The uncertificated residual interest in
REMIC 2.
"Class R-3 Interest": The uncertificated residual interest in
REMIC 3.
"Class R-4 Certificate": The Class R-4 Certificate executed by
the Trustee on behalf of the Trust, and authenticated and delivered by the
Certificate Registrar, substantially in the form annexed hereto as Exhibit C-2,
evidencing the ownership of the Class R-4 Interest.
"Class R-4 Interest": The uncertificated residual interest in
REMIC 4.
"Class T3-X/N Interest Pass-Through Rate": The Pass-Through
Rate in respect of the Class T3-X/N Interest for any Distribution Date equal to
the excess of (i) the the Pool Cap over (ii) the product of (A) two and (B) the
weighted average Pass-Through Rate of the Subsidiary REMIC Regular Interests,
where the Subsidiary REMIC Accrual Class is subject to a cap of zero and each
Subsidiary REMIC Accretion Directed Class is subject to a cap equal to the REMIC
Pass-Through Rate on its Corresponding Class. For purposes of the foregoing
calculation the Class A-1A REMIC Pass-Through
14
Rate shall be multiplied by a fraction, the numerator of which is the actual
number of days in the Interest Accrual Period and the denominator of which is 30
so as to adjust it to a rate that consists of twelve 30 day accrual periods and
a 360-day year. The initial Pool Cap for this purpose shall be the rate
necessary to allow the Class T3-X/N Interest to absorb the interest for the
first Interest Accrual Period in excess of the interest due on other REMIC 3
interests.
"Class X/N Interest Pass-Through Rate": One hundred percent
of the interest payable on the Class T3-X/N Interest.
"Class X Certificate": Any one of the Class X Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit C-5, executed by the Trustee on behalf of the Trust and authenticated
and delivered by the Trustee, representing the right to distributions as set
forth herein and therein. The Class X Certificate shall not be designated as a
REMIC Regular Interest.
"Class X/N Interest": An uncertificated interest in the Trust
held by the Trustee on behalf of the holders of the Class X and Class N
Certificates and which is entitled to all distributions in respect of the Class
X/N Interest Pass-Through Rate and which distributions shall first be used to
pay the amount of any Class A-1A LIBOR Carryover Amounts pursuant to Sections
4.02(b)(xvii) and 4.02(e) or Rate Payments pursuant to Section 4.02(d). The
Class X/N Interest shall be designated as a REMIC Regular Interest.
"Class X/N Notional Amount": On any Distribution Date, with
respect to the Class X/N Interest, an amount equal to the Original Class X/N
Notional Amount reduced by the aggregate of distributions made on the Class X/N
Interest.
"Class X Distributable Amount": With respect to any
Distribution Date, the excess of (i) the aggregate of amounts distributable on
the Class X/N Interest for such Distribution Date, over (ii) the aggregate of
amounts distributable to the Class N Certificates pursuant to Section 4.02(b).
"Closing Date": September 17, 2001.
"Code": The Internal Revenue Code of 1986, as it may be
amended from time to time.
"Collection Account": The account or accounts created and
maintained by the Servicer pursuant to Section 3.04, which shall be entitled
"Litton Loan Servicing LP, as Servicer for The Chase Manhattan Bank, as Trustee,
in trust for registered Holders of 2001-CB3 Trust, C-BASS Mortgage Loan
Asset-Backed Certificates, Series 2001-CB3", and which must be an Eligible
Account.
"Collection Period": With respect to any Distribution Date,
the period from the second day of the calendar month preceding the month in
which such Distribution Date occurs through the first day of the month in which
such Distribution Date occurs.
15
"Combined Loan-to-Value Ratio": As of any date and Mortgage
Loan, the fraction, expressed as a percentage, the numerator of which is the
Principal Balance of the Mortgage Loan plus the principal balance of any related
senior mortgage loan, and the denominator of which is the Value of the related
Mortgaged Property.
"Compensating Interest": As defined in Section 3.23 hereof.
"Condemnation Proceeds": All awards or settlements in
respect of a taking of a Mortgaged Property by exercise of the power of eminent
domain or condemnation.
"Conventional Mortgage Loan": Any Mortgage Loan that is
neither an FHA Loan nor a VA Loan.
"Corporate Trust Office": The principal corporate trust office
of the Trustee at which at any particular time its corporate trust business in
connection with this Agreement shall be administered, which office at the date
of the execution of this instrument is located at 450 West 33rd Street, 14th
Floor, New York, New York 10001, Attention: Structured Finance, C-BASS Series
2001-CB3, or at such other address as the Trustee may designate from time to
time by notice to the Certificateholders, the Depositor, the Servicer and the
Seller.
"Custodial Agreement": The Custodial Agreement, dated as of
August 1, 2001, among the Trustee, the Servicer and the Custodian, as the same
may be amended or supplemented pursuant to the terms thereof.
"Custodian": The Bank of New York, or any successor
custodian appointed pursuant to the terms of the Custodial Agreement.
"Cut-Off Date": August 1, 2001.
"Cut-Off Date Aggregate Principal Balance": The aggregate of
the Cut-Off Date Principal Balances of the Mortgage Loans.
"Cut-Off Date Principal Balance": With respect to any Mortgage
Loan, the unpaid principal balance thereof as of the Cut-Off Date after
application of funds received or advanced on or before such date (or as of the
applicable date of substitution with respect to an Eligible Substitute Mortgage
Loan).
"Debt Service Reduction": With respect to any Mortgage Loan, a
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, except such a
reduction resulting from a Deficient Valuation.
"Defective Mortgage Loan": A Mortgage Loan replaced or
to be replaced by one or more Eligible Substitute Mortgage Loans.
16
"Deferred Interest": With respect to any Mortgage Loan
identified on the Mortgage Loan Schedule as having the possibility of negative
amortization, the current portion of interest not currently paid by the
Mortgagor that is added to the principal balance of such Mortgage Loan.
"Deficient Valuation": With respect to any Mortgage Loan, a
valuation of the related Mortgaged Property by a court of competent jurisdiction
in an amount less than the then outstanding principal balance of the Mortgage
Loan, which valuation results from a proceeding initiated under the Bankruptcy
Code.
"Definitive Certificates": As defined in Section 5.02(c)
hereof.
"Delinquent": Any Mortgage Loan, the Monthly Payment due on a
Due Date with respect to which such monthly payment is not made by the close of
business on the next scheduled Due Date for such Mortgage Loan.
"Depositor": Residential Asset Funding Corporation, a North
Carolina corporation, or any successor in interest.
"Depository": The initial depository shall be The Depository
Trust Company, whose nominee is Cede & Co., or any other organization registered
as a "clearing agency" pursuant to Section 17A of the Securities Exchange Act of
1934, as amended. The Depository shall initially be the registered Holder of the
Book-Entry Certificates. The Depository shall at all times be a "clearing
corporation" as defined in Section 8-102(3) of the Uniform Commercial Code of
the State of New York.
"Depository Agreement": With respect to any Book-Entry
Certificates, the agreement among the Depositor, the Trustee and the initial
Depository, to be dated on or about the Closing Date.
"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 10th day of the calendar month in which such Distribution Date occurs or, if
such 10th day is not a Business Day, the Business Day immediately preceding such
10th day.
"Directly Operate": With respect to any REO Property, the
furnishing or rendering of services to the tenants thereof, the management or
operation of such REO Property, the holding of such REO Property primarily for
sale to customers, the performance of any construction work thereon or any use
of such REO Property in a trade or business conducted by the Trust other than
through an Independent Contractor; provided, however, that the Trustee (or the
Servicer on behalf of the Trustee) shall not be considered to Directly Operate
an REO Property solely because the Trustee (or the Servicer on behalf of the
Trustee) establishes rental terms, chooses tenants, enters into or renews
leases, deals with taxes and insurance, or makes decisions as to repairs or
capital expenditures with respect to such REO Property.
17
"Disqualified Organization": A "disqualified organization"
under Section 860E of the Code, which as of the Closing Date is any of: (i) the
United States, any state or political subdivision thereof, any possession of the
United States, any foreign government, any international organization, or any
agency or instrumentality of any of the foregoing, (ii) any 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, (iii) any organization described in
Section 1381(a)(2)(C) of the Code, or (iv) any other Person so designated by the
Trustee based upon an Opinion of Counsel provided by nationally recognized
counsel to the Trustee that the holding of an ownership interest in a Class R or
Class R-4 Certificate by such Person may cause the Trust Fund or any Person
having an ownership interest in any Class of Certificates (other than such
Person) to incur liability for any federal tax imposed under the Code that would
not otherwise be imposed but for the transfer of an ownership interest in the
Class R or Class R-4 Certificate to such Person. 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 a governmental unit. The term
"United States", "state" and "international organization" shall have the
meanings set forth in Section 7701 of the Code.
"Distribution Account": The trust account or accounts created
and maintained by the Trustee pursuant to Section 3.04(b) which shall be
entitled "Distribution Account, The Chase Manhattan Bank, as Trustee, in trust
for the registered Holders of 2001-CB3 Trust, C-BASS Mortgage Loan Asset-Backed
Certificates, Series 2001-CB3" and which must be an Eligible Account.
"Distribution Date": The 25th day of any calendar month, or if
such 25th day is not a Business Day, the Business Day immediately following such
25th day, commencing in September 2001.
"Due Date": With respect to each Mortgage Loan and any
Distribution Date, the day of the calendar month in which such Distribution Date
occurs on which the Monthly Payment for such Mortgage Loan was due, exclusive of
any grace period.
"Eligible Account": Any of (i) an account or accounts
maintained with a federal or state chartered depository institution or trust
company the short-term unsecured debt obligations of which (or, in the case of a
depository institution or trust company that is the principal subsidiary of a
holding company, the short-term unsecured debt obligations of such holding
company) are rated "A-1" (or the equivalent) by each of the Rating Agencies at
the time any amounts are held on deposit therein, (ii) an account or accounts
the deposits in which are fully insured by the FDIC (to the limits established
by such corporation), the uninsured deposits in which account are otherwise
secured such that, as evidenced by an Opinion of Counsel delivered to the
Trustee and to each Rating Agency, the Certificateholders will have a claim with
respect to the funds in such account or a perfected first priority security
interest against such collateral (which shall be limited to Permitted
Investments) securing such funds that is superior to claims of any other
depositors or creditors of the depository institution with which such account is
18
maintained, (iii) a trust account or accounts maintained with the trust
department of a federal or state chartered depository institution, national
banking association or trust company acting in its fiduciary capacity or (iv) an
account otherwise acceptable to each Rating Agency without reduction or
withdrawal of their then current ratings of the Certificates as evidenced by a
letter from each Rating Agency to the Trustee. Eligible Accounts may bear
interest.
"Eligible Substitute Mortgage Loan": A mortgage loan
substituted for a Defective Mortgage Loan pursuant to the terms of this
Agreement which must, on the date of such substitution, (i) have an outstanding
principal balance, after application of all scheduled payments of principal and
interest due during or prior to the month of substitution, not in excess of, and
not more than 5% less than, the outstanding principal balance of the Defective
Mortgage Loan as of the Due Date in the calendar month during which the
substitution occurs, (ii) have a Mortgage Interest Rate, with respect to a Group
1 Mortgage Loan, not less than the Mortgage Interest Rate of the Defective
Mortgage Loan and not more than 1% in excess of the Mortgage Interest Rate of
such Defective Mortgage Loan, (iii) if a Group 2 Mortgage Loan, have a Maximum
Loan Rate not less than the Maximum Loan Rate for the Defective Mortgage Loan,
(iv) if a Group 2 Mortgage Loan, have a Minimum Loan Rate not less than the
Minimum Loan Rate of the Defective Mortgage Loan, (v) if a Group 2 Mortgage
Loan, have a Gross Margin equal to or greater than the Gross Margin of the
Defective Mortgage Loan, (vi) if a Group 2 Mortgage Loan, have a next Adjustment
Date not more than two months later than the next Adjustment Date on the
Defective Mortgage Loan, except in the case of any Mortgage Loan which has an
Arrearage due to the application of any related forbearance plan with respect to
such Mortgage Loan, an Eligible Substitute Mortgage Loan must have all
Adjustment Dates occurring during the same Interest Accrual Period during which
Adjustment Dates occur with respect to the substituted Mortgage Loan, (vii) have
a remaining term to maturity not greater than (and not more than one year less
than) that of the Defective Mortgage Loan, (viii) be current as of the date of
substitution, (ix) have a Combined Loan-to-Value Ratio as of the date of
substitution equal to or lower than the Combined Loan-to-Value Ratio of the
Defective Mortgage Loan as of such date, (x) have a risk grading determined by
the Seller at least equal to the risk grading assigned on the Defective Mortgage
Loan, (xi) have been reunderwritten by the Seller in accordance with the same
underwriting criteria and guidelines as the Defective Mortgage Loan and (xii)
conform to each representation and warranty set forth in Section 2.04 hereof
applicable to the Defective Mortgage Loan. In the event that one or more
mortgage loans are substituted for one or more Defective Mortgage Loans, the
amounts described in clause (i) hereof shall be determined on the basis of
aggregate principal balances, the Mortgage Interest Rates described in clause
(ii) hereof shall be determined on the basis of weighted average Mortgage
Interest Rates, the risk gradings described in clause (x) hereof shall be
satisfied as to each such mortgage loan, the terms described in clause (vii)
hereof shall be determined on the basis of weighted average remaining term to
maturity, the Combined Loan-to-Value Ratios described in clause (ix) hereof
shall be satisfied as to each such mortgage loan and, except to the extent
otherwise provided in this sentence, the representations and warranties
described in clause (xii) hereof must be satisfied as to each Eligible
Substitute Mortgage Loan or in the aggregate, as the case may be.
19
"ERISA": The Employee Retirement Income Security Act of 1974,
as amended.
"ERISA-Restricted Certificates": Any of the Class M-1, Class
M-2, Class B-1, Class B-2, Class N, Class X, Class R Certificates and Class R-4
Certificates.
"Escrow Account": The account or accounts created and
maintained pursuant to Section 3.06.
"Escrow Payments": The amounts constituting ground rents,
taxes, assessments, water rates, mortgage insurance premiums, fire and hazard
insurance premiums and other payments required to be escrowed by the Mortgagor
with the mortgagee pursuant to any Mortgage Loan.
"Estate in Real Property": A fee simple estate in a parcel of
real property.
"Excess Reserve Fund Account": The separate account, held in
trust, created and maintained by the Trustee pursuant to Section 4.10 in the
name of the Trustee for the benefit of the Class A-1A Certificateholders and
designated "The Chase Manhattan Bank in trust for registered Holders of C-BASS
Mortgage Loan Asset-Backed Certificates, Series 2001-CB3, Class A-1A." The
Excess Reserve Fund Account is not an asset of any REMIC.
"Expense Fee Rate": The sum of (i) the Trustee Fee Rate and
(ii) the Servicing Fee Rate.
"Extended Period": As defined in Section 9.04(b).
"Extra Principal Distribution Amount": As of any Distribution
Date, the lesser of (x) the Monthly Excess Interest Amount for such Distribution
Date and (y) the Overcollateralization Deficiency for such Distribution Date.
"FDIC": Federal Deposit Insurance Corporation or any
successor thereto.
"FHA": The Federal Housing Administration, an agency within
HUD.
"FHA Approved Mortgagee": Those institutions which are
approved by FHA to act as servicer and mortgagee of record pursuant to FHA
Regulations.
"FHA Insurance Contract" or "FHA Insurance": The contractual
obligation of FHA respecting the insurance of an FHA Loan pursuant to the
National Housing Act, as amended.
"FHA Loan": A Mortgage Loan which is the subject of an FHA
Insurance Contract as evidenced by a Mortgage Insurance Certificate.
"FHA Regulations": Regulations promulgated by HUD under the
National Housing Act, codified in 24 Code of Federal Regulations, and other HUD
20
issuances relating to FHA Loans, including the related handbooks, circulars,
notices and mortgagee letters.
"FHLMC": Federal Home Loan Mortgage Corporation or any
successor thereto.
"Fidelity Bond": Shall have the meaning assigned thereto in
Section 3.12.
"Final Recovery Determination": With respect to any defaulted
Mortgage Loan or any REO Property (other than a Mortgage Loan or REO Property
purchased by the Seller or the Servicer pursuant to or as contemplated by
Section 2.03 or 10.01), a determination made by the Servicer that all Insurance
Proceeds, Liquidation Proceeds and other payments or recoveries which the
Servicer, in its reasonable good faith judgment, expects to be finally
recoverable in respect thereof have been so recovered. The Servicer shall
maintain records, prepared by a Servicing Officer, of each Final Recovery
Determination made thereby.
"Fitch": "Fitch, Inc. and its successors, and if such
company shall for any reason no longer perform the functions of a securities
rating agency, "Fitch" shall be deemed to refer to any other "nationally
recognized statistical rating organization" as set forth on the most current
list of such organizations released by the Securities and Exchange Commission.
"FNMA": Fannie Mae or any successor thereto.
"Foreclosure Price": The amount reasonably expected to
be received from the sale of the related Mortgaged Property net of any
expenses associated with foreclosure proceedings.
"Grantor Trust": That portion of the Trust exclusive of REMIC
1, REMIC 2, REMIC 3 and REMIC 4 which holds the Excess Reserve Fund Account.
"Gross Margin": With respect to each Group 2 Mortgage Loan,
the fixed percentage set forth in the related Mortgage Note that is added to the
Index on each Adjustment Date in accordance with the terms of the related
Mortgage Note used to determine the Mortgage Interest Rate for such Mortgage
Loan.
"Group 1 Loan Balance": As of any date, the aggregate of the
Principal Balances of all Mortgage Loans in Loan Group 1 as of such date.
"Group 1 Mortgage Loan": A Mortgage Loan in Loan Group 1.
"Group 2 Loan Balance": As of any date, the aggregate of the
Principal Balances of all Mortgage Loans in Loan Group 2 as of such date.
"Group 2 Mortgage Loan": A Mortgage Loan in Loan Group 2.
21
"HUD": The United States Department of Housing and Urban
Development, or any successor thereto and including the Federal Housing
Commissioner and the Secretary of Housing and Urban Development where
appropriate under the FHA Regulations.
"Independent": When used with respect to any specified Person,
any such Person who (i) is in fact independent of the Depositor, the Servicer
and their respective Affiliates, (ii) does not have any direct financial
interest in or any material indirect financial interest in the Depositor or the
Servicer or any Affiliate thereof, and (iii) is not connected with the Depositor
or the Servicer or any Affiliate thereof as an officer, employee, promoter,
underwriter, trustee, partner, director or Person performing similar functions;
provided, however, that a Person shall not fail to be Independent of the
Depositor or the Servicer or any Affiliate thereof merely because such Person is
the beneficial owner of 1% or less of any Class of securities issued by the
Depositor or the Servicer or any Affiliate thereof, as the case may be.
"Independent Contractor": Either (i) any Person (other than
the Servicer) that would be an "independent contractor" with respect to the
Trust Fund within the meaning of Section 856(d)(3) of the Code if the Trust Fund
were a real estate investment trust (except that the ownership tests set forth
in that Section shall be considered to be met by any Person that owns, directly
or indirectly, 35 percent or more of any Class of Certificates), so long as the
Trust Fund does not receive or derive any income from such Person and provided
that the relationship between such Person and the Trust Fund is at arm's length,
all within the meaning of Treasury Regulation Section 1.856-4(b)(5), or (ii) any
other Person (including the Servicer) if the Trustee has received an Opinion of
Counsel, which Opinion of Counsel shall be an expense of the Trust Fund, to the
effect that the taking of any action in respect of any REO Property by such
Person, subject to any conditions therein specified, that is otherwise herein
contemplated to be taken by an Independent Contractor will not cause such REO
Property to cease to qualify as "foreclosure property" within the meaning of
Section 860G(a)(8) of the Code (determined without regard to the exception
applicable for purposes of Section 860D(a) of the Code), or cause any income
realized in respect of such REO Property to fail to qualify as Rents from Real
Property.
"Index": With respect to each Group 2 Mortgage Loan and with
respect to each related Adjustment Date, the index as specified in the related
Mortgage Note.
"Ineligible Foreclosure Property Loan": Any Mortgage Loan
listed on the Ineligible Foreclosure Property Loan Schedule as of the Closing
Date and for which there is no written agreement modifying such Mortgagor's
obligation to make payments under the Mortgage Loan.
"Ineligible Foreclosure Property Loan Schedule": The
schedule, attached hereto as Exhibit S, of Ineligible Foreclosure Property
Loans to be prepared by the Seller.
22
"Initial Certificate Principal Balance": With respect to any
Certificate of a Class other than a Class A-IO, Class N, Class X, Class R or
Class R-4 Certificate, the amount designated "Initial Certificate Principal
Balance" on the face thereof.
"Initial Class A-IO Notional Amount": With respect to any
Class A-IO Certificate, the amount designated "Initial Class A-IO Notional
Amount" on the face thereof.
"Initial Class N Notional Amount": With respect to any Class N
Certificate, the amount designated "Initial Class N Notional Amount" on the face
thereof.
"Initial Notional Amount": Any of the Intial Class A-IO
Notional Amount or the Initial Class N Notional Amount, as the context may
require.
"Initial Overcollateralization Amount": $2,353,625.
"Insurance Proceeds": Proceeds of any title policy, hazard
policy or other insurance policy covering a Mortgage Loan, to the extent such
proceeds are not to be applied to the restoration of the related Mortgaged
Property or released to the Mortgagor in accordance with the procedures that the
Servicer would follow in servicing mortgage loans held for its own account,
subject to the terms and conditions of the related Mortgage Note and Mortgage.
"Interest Accrual Period": With respect to any Distribution
Date and (i) with respect to the Class A-IO, Class M-1, Class M-2, Class B-1,
Class B-2 and Class N Certificates and any Class of REMIC Regular Interests
(other than the Class T2-A-1A Certificates), the calendar month immediately
preceding the month in which such Distribution Date occurs, and (ii) with
respect to the Class A-1A Certificates and the Class T2-A-1A Certificates, the
period from the preceding Distribution Date to the day prior to the current
Distribution Date (or, in the case of the first Distribution Date, the period
from the Closing Date through September 25, 2001).
"Interest Carry Forward Amount": For any Class of Certificates
(other than the Class X, Class R or Class R-4 Certificates) and any Distribution
Date, the sum of (a) the excess, if any, of the Accrued Certificate Interest and
any Interest Carry Forward Amount for the prior Distribution Date, over the
amount in respect of interest actually distributed on such Class on such prior
Distribution Date and (b) interest on such excess (except with respect to the
Class N Certificates) at the applicable Pass-Through Rate (x) with respect to
the Class A-IO, Class M-1, Class M-2, Class B-1 and Class B-2 Certificates, on
the basis of a 360-day year consisting of twelve 30-day months, and (y) with
respect to the Class A-1A Certificates, for the actual number of days elapsed
since the prior Distribution Date and a 360-day year.
"Interest Percentage": With respect to any Class of
Certificates and any Distribution Date, the ratio (expressed as a decimal
carried to six places) of the Accrued Certificate Interest for such Class to the
sum of the Accrued Certificate Interest for all Classes, in each case with
respect to such Distribution Date.
23
"Interest Remittance Amount": As of any Determination Date,
the sum, without duplication, of (i) all interest due and collected or advanced
with respect to the related Collection Period on the Mortgage Loans (less the
Servicing Fee, mortgage insurance premiums, amounts available for reimbursement
of Advances and Servicing Advances pursuant to Section 3.05 and expenses
reimbursable pursuant to Section 6.03), (ii) all Compensating Interest paid by
the Servicer on such Determination Date with respect to the Mortgage Loans and
(iii) the portion of any payment in connection with any substitution, Purchase
Price, Termination Price or Net Liquidation Proceeds relating to interest with
respect to the Mortgage Loans received during the related Prepayment Period.
"Late Collections": With respect to any Mortgage Loan, all
amounts received subsequent to the Determination Date immediately following any
related Collection Period, whether as late payments of Monthly Payments or as
Insurance Proceeds, Liquidation Proceeds or otherwise, which represent late
payments or collections of principal and/or interest due (without regard to any
acceleration of payments under the related Mortgage and Mortgage Note) but
delinquent on a contractual basis for such Collection Period and not previously
recovered.
"Latest Possible Maturity Date": The Distribution Date in
November 25, 2031.
"LIBOR": With respect to each Interest Accrual Period, the
rate determined by the Trustee on the related LIBOR Determination Date on the
basis of the offered rate for one-month United States dollar deposits, as such
rate appears on the Telerate Page 3750, as of 11:00 a.m. (London time) on such
LIBOR Determination Date. If no such quotations are available on a LIBOR
Determination Date, LIBOR for the related Interest Accrual Period will be
established by the Trustee as follows:
(i) If on such LIBOR Determination Date two or more
Reference Banks provide such offered quotations, LIBOR for the related Interest
Accrual Period shall be the arithmetic mean of such offered quotations (rounded
upwards if necessary to the nearest whole multiple of 0.001%);
(ii) If on such LIBOR Determination Date fewer than two
Reference Banks provide such offered quotations, LIBOR for the related Interest
Accrual Period shall be the arithmetic mean of the rates quoted by one or more
major banks in New York City, selected by the Trustee after consultation with
the Servicer, as of 11:00 A.M., New York City time, on such date for loans in
U.S. Dollars to leading European banks for a period of one month in amounts
approximately equal to the aggregate Certificate Principal Balance of the Class
A-1A Certificates; and
(iii) If no such quotations can be obtained, LIBOR for the
related Interest Accrual Period shall be LIBOR for the prior Distribution Date.
24
"LIBOR Business Day": Any day on which banks in London,
England and The City of New York are open and conducting transactions in foreign
currency and exchange.
"LIBOR Determination Date": With respect to the Class A-1A
Certificates, (i) for the first Distribution Date, the second LIBOR Business Day
preceding the Closing Date and (ii) for each subsequent Distribution Date, the
second LIBOR Business Day prior to the immediately preceding Distribution Date.
"Liquidated Mortgage Loan": As to any Distribution Date, any
Mortgage Loan in respect of which the Servicer has determined, in accordance
with the servicing procedures specified herein, as of the end of the related
Prepayment Period, that all Liquidation Proceeds and Insurance Proceeds which it
expects to recover with respect to the liquidation of the Mortgage Loan or
disposition of the related REO Property have been recovered.
"Liquidation Event": With respect to any Mortgage Loan, any of
the following events: (i) such Mortgage Loan is paid in full; (ii) a Final
Recovery Determination is made as to such Mortgage Loan; or (iii) such Mortgage
Loan is removed from the Trust Fund by reason of its being purchased, sold or
replaced pursuant to or as contemplated by Section 2.03 or Section 10.01. With
respect to any REO Property, either of the following events: (i) a Final
Recovery Determination is made as to such REO Property; or (ii) such REO
Property is removed from the Trust Fund by reason of its being sold or purchased
pursuant to Section 3.13 or Section 10.01.
"Liquidation Proceeds": The amount (other than amounts
received in respect of the rental of any REO Property prior to REO Disposition)
received by the Servicer in connection with (i) the taking of all or a part of a
Mortgaged Property by exercise of the power of eminent domain or condemnation or
(ii) the liquidation of a defaulted Mortgage Loan by means of a trustee's sale,
foreclosure sale or otherwise.
"Liquidation Report": The report with respect to a Liquidated
Mortgage Loan in such form and containing such information as is agreed to by
the Servicer and the Trustee and substantially in the form of Exhibit M attached
hereto.
"Loan Group": Either Loan Group 1 or Loan Group 2, as the
context requires.
"Loan Group Balance": Either the Group 1 Loan Balance or the
Group 2 Loan Balance, as applicable.
"Loan Group 1": The pool of Mortgage Loans identified in the
Mortgage Loan Schedule as having been assigned to Sub-group 1A and Sub-group 1B.
"Loan Group 2": The pool of Mortgage Loans identified in the
Mortgage Loan Schedule as having been assigned to Loan Group 2.
25
"Loan Guaranty Certificate": The certificate evidencing a VA
Guaranty Agreement.
"Losses": As defined in Section 9.03.
"Lost Note Affidavit": With respect to any Mortgage Loan as to
which the original Mortgage Note has been permanently lost or destroyed and has
not been replaced, an affidavit from the Seller certifying that the original
Mortgage Note has been lost, misplaced or destroyed (together with a copy of the
related Mortgage Note and indemnifying the Trust against any loss, cost or
liability resulting from the failure to deliver the original Mortgage Note) in
the form of Exhibit H hereto.
"Majority Certificateholders": The Holders of Certificates
evidencing at least 51% of the Voting Rights.
"Majority Class R Certificateholders": The Holders of
Class R Certificates evidencing at least a 51% Percentage Interest in the
Class R Certificates.
"Majority Class R-4 Certificateholders": The Holders of Class
R-4 Certificates evidencing at least a 51% Percentage Interest in the Class R-4
Certificates.
"Maximum Loan Rate": With respect to each Group 2 Mortgage
Loan, the percentage set forth in the related Mortgage Note as the maximum
Mortgage Interest Rate thereunder.
"Minimum Loan Rate": With respect to each Group 2 Mortgage
Loan, the percentage set forth in the related Mortgage Note as the minimum
Mortgage Interest Rate thereunder.
"Monthly Excess Cashflow Amount": The sum of the Monthly
Excess Interest Amount, the Overcollateralization Release Amount and (without
duplication) any portion of the Principal Distribution Amount remaining after
principal distributions on the Offered Certificates and the Class B-2
Certificates.
"Monthly Excess Interest Amount": With respect to each
Distribution Date, the amount, if any, by which the Interest Remittance Amount
for such Distribution Date exceeds the aggregate amount distributed on such
Distribution Date pursuant to paragraphs (i) through (vi) under Section 4.01.
"Monthly Payment": With respect to any Mortgage Loan, the
scheduled monthly payment of principal and interest on such Mortgage Loan which
is payable by the related Mortgagor from time to time under the related Mortgage
Note, determined: (a) after giving effect to (i) any Deficient Valuation and/or
Debt Service Reduction with respect to such Mortgage Loan and (ii) any reduction
in the amount of interest collectible from the related Mortgagor pursuant to the
Relief Act; (b) without giving effect to any extension granted or agreed to by
the Servicer pursuant to Section 3.01; and (c) on the assumption that all other
amounts, if any, due under such Mortgage Loan are paid when due.
26
"Moody's": Moody's Investors Services, Inc. and its
successors, and if such company shall for any reason no longer perform the
functions of a securities rating agency, "Moody's" shall be deemed to refer
to any other "nationally recognized statistical rating organization" as set
forth on the most current list of such organizations released by the
Securities and Exchange Commission.
"Mortgage": The mortgage, deed of trust or other instrument
creating a first or second lien on, or first or second priority security
interest in, a Mortgaged Property securing a Mortgage Note.
"Mortgage File": The mortgage documents listed in Section 2.01
pertaining to a particular Mortgage Loan and any additional documents required
to be added to the Mortgage File pursuant to this Agreement.
"Mortgage Insurance Certificate": The certificate evidencing
an FHA Insurance Contract.
"Mortgage Interest Rate": With respect to each Mortgage Loan,
the annual rate at which interest accrues on such Mortgage Loan from time to
time in accordance with the provisions of the related Mortgage Note, which rate
(i) in the case of each Group 1 Mortgage Loan shall remain constant at the rate
set forth in the Mortgage Loan Schedule as the Mortgage Interest Rate in effect
immediately following the Cut-Off Date and (ii) in the case of each Group 2
Mortgage Loan (A) as of any date of determination until the first Adjustment
Date following the Cut-Off Date shall be the rate set forth in the Mortgage Loan
Schedule as the Mortgage Interest Rate in effect immediately following the
Cut-Off Date and (B) as of any date of determination thereafter shall be the
rate as adjusted on the most recent Adjustment Date, to equal the sum, rounded
to the nearest 0.125% as provided in the Mortgage Note, of the Index, determined
as set forth in the related Mortgage Note, plus the related Gross Margin subject
to the limitations set forth in the related Mortgage Note. With respect to each
Mortgage Loan that becomes an REO Property, as of any date of determination, the
annual rate determined in accordance with the immediately preceding sentence as
of the date such Mortgage Loan became an REO Property.
"Mortgage Loan": Each mortgage loan transferred and assigned
to the Trustee pursuant to Section 2.01 or Section 2.03(d) as from time to time
held as a part of the Trust Fund, the Mortgage Loans so held being identified in
the Mortgage Loan Schedule.
"Mortgage Loan Purchase Agreement": The agreement between the
Seller and the Depositor, dated as of August 1, 2001, regarding the transfer of
the Mortgage Loans by the Seller to or at the direction of the Depositor.
"Mortgage Loan Schedule": As of any date (i) with respect to
the Mortgage Loans, the list of such Mortgage Loans included in the Trust Fund
on such date, separately identifying the Group 1 Mortgage Loans and the Group 2
Mortgage Loans, attached hereto as Exhibit D. The Mortgage Loan Schedule shall
be prepared by
27
the Seller and shall set forth the following information with respect to each
Mortgage Loan:
(1) the Seller's Mortgage Loan identifying number;
(2) the city, state, and zip code of the Mortgaged Property;
(3) the type of Residential Dwelling constituting the
Mortgaged Property or a designation that the Mortgaged Property is a multi-
family property;
(4) the occupancy status of the Mortgaged Property at
origination;
(5) the original months to maturity;
(6) the date of origination;
(7) the first payment date;
(8) the stated maturity date;
(9) the stated remaining months to maturity;
(10) the original principal amount of the Mortgage Loan;
(11) the Principal Balance of each Mortgage Loan as of the
Cut-Off Date;
(12) the Arrearage of the Mortgage Loan as of the Cut-Off
Date;
(13) the Mortgage Interest Rate of the Mortgage Loan as of
the Cut-Off Date;
(14) the current principal and interest payment of the
Mortgage Loan as of the Cut-Off Date;
(15) the contractual interest paid to date of the Mortgage
Loan;
(16) if the Mortgage Loan is not owner-financed, the Combined
Loan-to-Value Ratio at origination;
(17) a code indicating the loan performance status of the
Mortgage Loan as of the Cut-Off Date;
(18) a code indicating whether the Mortgage Loan is a Simple
Interest Mortgage Loan or an Actuarial Mortgage Loan;
(19) a code indicating whether the Mortgaged Property is in
bankruptcy or in its forbearance period as of the Cut-Off Date;
28
(20) a code indicating whether the Mortgage Loan is
conventional, insured by the FHA or guaranteed by the VA;
(21) a code indicating the Index that is associated with
such Mortgage Loan;
(22) the Gross Margin;
(23) the Periodic Rate Cap;
(24) the Minimum Loan Rate;
(25) the Maximum Loan Rate;
(26) a code indicating whether the Mortgage Loan has a
prepayment penalty and the type of prepayment penalty;
(27) the first Adjustment Date immediately following the
Cut-Off Date;
(28) the rate adjustment frequency;
(29) the payment adjustment frequency;
(30) a code indicating whether the Mortgage Loan is owner-
financed; and
(31) a code indicating whether the Mortgage Loan is a
first, second or third lien.
The Mortgage Loan Schedule shall set forth the following
information, as of the Cut-Off Date, with respect to the Mortgage Loans in the
aggregate and for each Loan Group: (1) the number of Mortgage Loans; (2) the
current Principal Balance of the Mortgage Loans; (3) the weighted average
Mortgage Interest Rate of the Mortgage Loans; and (4) the weighted average
maturity of the Mortgage Loans. The Mortgage Loan Schedule shall be amended from
time to time by the Seller in accordance with the provisions of this Agreement.
With respect to any Eligible Substitute Mortgage Loan, Cut-Off Date shall refer
to the related Cut-Off Date for such Mortgage Loan, determined in accordance
with the definition of Cut-Off Date herein.
"Mortgage Note": The original executed note or other
evidence of indebtedness evidencing the indebtedness of a Mortgagor under
a Mortgage Loan.
"Mortgage Pool": The pool of Mortgage Loans, identified
on Exhibit D from time to time, and any REO Properties acquired in respect
thereof.
"Mortgaged Property": The underlying property securing a
Mortgage Loan, including any REO Property, consisting of an Estate in Real
Property improved by a Residential Dwelling or multi-family dwelling.
29
"Mortgagor": The obligor on a Mortgage Note.
"Net Excess Spread": With respect to any Distribution Date,
the fraction, expressed as a percentage, the numerator of which is equal to the
amount, if any, by which (a) the product of (i) the Pool Balance as of the end
of the related Collection Period and (ii) the weighted average of the Net
Mortgage Rates exceeds (b) the Interest Remittance Amount for such Distribution
Date, and the denominator of which is the product of (x) the Pool Balance and
(y) the actual number of days in the related Interest Accrual Period divided by
360.
"Net Liquidation Proceeds": With respect to any Liquidated
Mortgage Loan or any other disposition of related Mortgaged Property (including
REO Property) the related Liquidation Proceeds net of Advances, Servicing
Advances, Servicing Fees and any other accrued and unpaid servicing fees
received and retained in connection with the liquidation of such Mortgage Loan
or Mortgaged Property.
"Net Mortgage Interest Rate": With respect to any Mortgage
Loan, the Mortgage Interest Rate borne by such Mortgage Loan minus the sum of
the (i) Expense Fee Rate, (ii) the rate at which the primary mortgage insurance
premium, if any, is calculated and (iii) interest paid on the Class A-IO
Certificates, if any, expressed as a per annum rate.
"New Lease": Any lease of REO Property entered into on behalf
of the Trust, including any lease renewed or extended on behalf of the Trust if
the Trust has the right to renegotiate the terms of such lease.
"Nonrecoverable Advance": Any Advance or Servicing Advance
previously made or proposed to be made in respect of a Mortgage Loan that, in
the good faith business judgment of the Servicer, will not or, in the case of a
proposed Advance or Servicing Advance, would not be ultimately recoverable from
Late Collections on such Mortgage Loan as provided herein.
"Non-U.S. Person": Any Person other than a U.S. Person.
"Notional Amount": The Class A-IO Notional Amount, the
Class N Notional Amount or the Class X/N Notional Amount, as applicable.
"Offered Certificates": The Class A-IO, Class A-1A, Class M-1,
Class M-2 and Class B-1 Certificates.
"Officers' Certificate": A certificate signed by the Chairman
of the Board, the Vice Chairman of the Board, the President or a vice president
(however denominated), and by the Treasurer, the Secretary, or one of the
assistant treasurers or assistant secretaries of the Servicer, the Seller or the
Depositor, as applicable.
"Opinion of Counsel": A written opinion of counsel, who may,
without limitation, be a salaried counsel for the Depositor or the Servicer
except that any opinion
30
of counsel relating to (a) the qualification of any REMIC as a REMIC or (b)
compliance with the REMIC Provisions must be an opinion of Independent counsel.
"Optional Termination Date": The first Distribution Date
on which the Seller may opt to terminate the Mortgage Pool pursuant to
Section 10.01.
"Original Class A-IO Notional Amount": The Notional Amount of
the Class A-IO Certificates on the Closing Date which shall equal the lesser of
$86,000,000 and the Pool Balance.
"Original Class N Notional Amount": The Notional Amount of the
Class N Certificates on the Closing Date which shall be $16,700,000.
"Original Class X/N Notional Amount": $313,764,624.50
"Original Class Certificate Principal Balance": With respect
to each Class of Certificates, the Certificate Principal Balance thereof on the
Closing Date, as set forth opposite such Class in the Preliminary Statement,
except with respect to the Class A-IO, Class N, Class X, Class R and Class R-4
Certificates, which have an Original Class Certificate Principal Balance of
zero.
"Original Notional Amount": Either the Original Class N
Notional Amount or the Original Class A-IO Notional Amount as the context
requires.
"Overcollateralization Amount": As of any Distribution Date,
the excess, if any, of (x) the Pool Balance as of the last day of the
immediately preceding Collection Period over (y) the aggregate Certificate
Principal Balances of all Classes of Offered Certificates (excluding the Class
A-IO Certificates) and the Class B-2 Certificates (after taking into account all
distributions of principal on such Distribution Date).
"Overcollateralization Deficiency": As of any Distribution
Date, the excess, if any, of (x) the Targeted Overcollateralization Amount for
such Distribution Date over (y) the Overcollateralization Amount for such
Distribution Date, calculated for this purpose after taking into account the
reduction on such Distribution Date of the Certificate Principal Balances of all
Classes of Offered Certificates (excluding the Class A-IO Certificates) and the
Class B-2 Certificates resulting from the distribution of the Principal
Distribution Amount (but not the Extra Principal Distribution Amount) on such
Distribution Date, but prior to taking into account any Applied Realized Loss
Amounts on such Distribution Date.
"Overcollateralization Release Amount": With respect to any
Distribution Date on or after the Stepdown Date on which a Trigger Event is not
in effect, the lesser of (x) the Principal Remittance Amount for such
Distribution Date and (y) the excess, if any, of (i) the Overcollateralization
Amount for such Distribution Date, assuming that 100% of the Principal
Remittance Amount is applied as a principal payment on the Offered Certificates
(excluding the Class A-IO Certificates) and the Class B-2 Certificates on such
Distribution Date, over (ii) the Targeted Overcollateralization
31
Amount for such Distribution Date. With respect to any Distribution Date on
which a Trigger Event is in effect, the Overcollateralization Release Amount
will be zero.
"Ownership Interest": As 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.
"Pass-Through Rate": Any of the Class A-IO Pass-Through Rate,
the Class A-1A Pass-Through Rate, the Class M-1 Pass-Through Rate, the Class M-2
Pass-Through Rate, the Class B-1 Pass-Through Rate, the Class B-2 Pass-Through
Rate, the Class X/N Interest Pass-Through Rate and the Class N Pass-Through
Rate.
"Paying Agent": Any paying agent appointed pursuant to
Section 5.05.
"Percentage Interest": With respect to any Certificate (other
than a Class A-IO, Class N, Class X, Class R or Class R-4 Certificate), a
fraction, expressed as a percentage, the numerator of which is the Initial
Certificate Principal Balance, as the case may be, represented by such
Certificate and the denominator of which is the Original Class Certificate
Principal Balance of the related Class. With respect to a Class A-IO or Class N
Certificate, the undivided percentage interest obtained by dividing the Initial
Notional Amount evidenced by such Certificate by the Original Class A-IO
Certificate or the Original Class N Notional Amount, as the case may be, of such
Class. With respect to a Class X, Class R or Class R-4 Certificate, the portion
of the Class evidenced thereby, expressed as a percentage, as stated on the face
of such Certificate; provided, however, that the sum of all such percentages for
each such Class, totals 100%.
"Periodic Rate Cap": With respect to each Group 2 Mortgage
Loan and any Adjustment Date therefor, the fixed percentage set forth in the
related Mortgage Note, which is the maximum amount by which the Mortgage
Interest Rate for such Mortgage Loan may increase or decrease (without regard to
the Maximum Loan Rate or the Minimum Loan Rate) on such Adjustment Date from the
Mortgage Interest Rate in effect immediately prior to such Adjustment Date.
"Permitted Investments": Any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
regardless of whether issued or managed by the Depositor, the Servicer, the
Trustee or any of their respective Affiliates or for which an Affiliate of the
Trustee serves as an advisor:
(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) (A) demand and time deposits in, certificates of
deposit of, bankers' acceptances issued by or federal funds sold by any
depository institution or trust company (including the Trustee or its agent
acting in their respective commercial capacities) incorporated under the laws of
the United States of America or any state
32
thereof and subject to supervision and examination by federal and/or state
authorities, so long as, at the time of such investment or contractual
commitment providing for such investment, such depository institution or trust
company or its ultimate parent has a short-term uninsured debt rating in one of
the two highest available rating categories of S&P and Moody's and the highest
available rating category of Fitch and provided that each such investment has an
original maturity of no more than 365 days and (B) any other demand or time
deposit or deposit which is fully insured by the FDIC;
(iii) repurchase obligations with a term not to exceed 30
days with respect to any security described in clause (i) above and entered into
with a depository institution or trust company (acting as principal) rated A or
higher by S&P and Fitch and A1 or higher by Moody's; provided, however, that
collateral transferred pursuant to such repurchase obligation must be of the
type described in clause (i) above and must (A) be valued daily at current
market prices plus accrued interest or (B) pursuant to such valuation, be equal,
at all times, to 105% of the cash transferred by the Trustee in exchange for
such collateral and (C) be delivered to the Trustee or, if the Trustee is
supplying the collateral, an agent for the Trustee, in such a manner as to
accomplish perfection of a security interest in the collateral by possession of
certificated securities;
(iv) securities bearing interest or sold at a discount
that are issued by any corporation incorporated under the laws of the United
States of America or any State thereof and that are rated by each Rating Agency
in its highest long-term unsecured rating categories at the time of such
investment or contractual commitment providing for such investment;
(v) commercial paper (including both non-interest-bearing
discount obligations and interest-bearing obligations payable on demand or on a
specified date not more than 30 days after the date of acquisition thereof) that
is rated by each Rating Agency in its highest short-term unsecured debt rating
available at the time of such investment;
(vi) units of money market funds registered under the
Investment Company Act of 1940 including funds managed or advised by the Trustee
or an affiliate thereof having the highest rating category by the applicable
Rating Agency; and
(vii) if previously confirmed in writing to the Trustee,
any other demand, money market or time deposit, or any other obligation,
security or investment, as may be acceptable to the Rating Agencies in writing
as a permitted investment of funds backing securities having ratings equivalent
to its highest initial rating of the Class A Certificates;
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 provide a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations.
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"Permitted Transferee": Any transferee of a Residual
Certificate other than a Disqualified Organization or a Non-U.S. Person.
"Person": Any individual, corporation, partnership, joint
venture, association, joint stock company, trust, limited liability company,
unincorporated organization or government or any agency or political subdivision
thereof.
"Pool Balance": As of any date of determination, the
aggregate Principal Balance of the Mortgage Loans.
"Pool Cap": With respect to any Distribution Date, the average
of the Net Mortgage Interest Rates of the Mortgage Loans, weighted on the basis
of their Principal Balances as of the first day of the related Collection Period
(or, in the case of the first Distribution Date, the Cut-Off Date).
"Prepayment Assumption": Prepayment Scenario IV as set forth
in the Prospectus Supplement.
"Prepayment Interest Shortfall": With respect to any
Distribution Date, for each Mortgage Loan that was during the related Prepayment
Period the subject of a Principal Prepayment in full that was applied by the
Servicer to reduce the outstanding principal balance of such loan on a date
preceding the related Due Date, an amount equal to interest at the applicable
Mortgage Interest Rate (net of the Servicing Fee Rate) on the amount of such
Principal Prepayment for the number of days commencing on the date on which the
prepayment is applied and ending on the last day of the related Prepayment
Period.
"Prepayment Period": With respect to any Distribution Date,
the calendar month preceding the month in which such Distribution Date occurs.
"Primary Insurance Policy": Each policy of primary guaranty
mortgage insurance issued by a Qualified Insurer in effect with respect to any
Mortgage Loan, or any replacement policy therefor obtained by the Servicer
pursuant to Section 3.08.
"Principal Balance": As to any Mortgage Loan and any day,
other than a Liquidated Mortgage Loan, the related Cut-Off Date Principal
Balance, minus all collections credited against the principal balance of any
such Mortgage Loan and the principal portion of Advances plus, Deferred
Interest, if any. For purposes of this definition, a Liquidated Mortgage Loan
shall be deemed to have a Principal Balance equal to the Principal Balance of
the related Mortgage Loan as of the final recovery of related Liquidation
Proceeds and a Principal Balance of zero thereafter. As to any REO Property and
any day, the Principal Balance of the related Mortgage Loan immediately prior to
such Mortgage Loan becoming REO Property minus any REO Principal Amortization
received with respect thereto on or prior to such day.
"Principal Distribution Amount": As to any Distribution Date,
the sum of (i) the Principal Remittance Amount minus, for Distribution Dates
occurring on and after the Stepdown Date and for which a Trigger Event is not in
effect, the
34
Overcollateralization Release Amount, if any, and (ii) the Extra
Principal Distribution Amount, if any.
"Principal Prepayment": Any payment of principal made by the
Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due
Date and which is not accompanied by an amount of interest representing the full
amount of scheduled interest due on any Due Date in any month or months
subsequent to the month of prepayment.
"Principal Remittance Amount": With respect to any
Distribution Date, to the extent of funds available therefor, the sum (less
amounts available for reimbursement of Advances and Servicing Advances pursuant
to Section 3.05 and expenses reimbursable pursuant to Section 6.03) of: (i) each
payment of principal on a Mortgage Loan due during the related Collection Period
and received by the Servicer on or prior to the related Determination Date, and
any Advances with respect thereto, (ii) all full and partial Principal
Prepayments received by the Servicer during the related Prepayment Period, (iii)
the Net Liquidation Proceeds allocable to principal actually collected by the
Servicer during the related Prepayment Period, (iv) with respect to Defective
Mortgage Loans repurchased with respect to such Prepayment Period, the portion
of the Purchase Price allocable to principal, (v) any Substitution Adjustment
Amounts received on or prior to the previous Determination Date and not yet
distributed and (vi) on the Distribution Date on which the Trust is to be
terminated in accordance with Section 10.01 hereof, that portion of the
Termination Price in respect of principal.
"Private Certificates": Any of the Class B-2, Class N,
Class X, Class R and Class R-4 Certificates.
"Property Insurance Proceeds": Proceeds of any title policy,
hazard policy or other insurance policy covering a Mortgage Loan, to the extent
such proceeds are received by the Servicer and are not to be applied to the
restoration of the related Mortgaged Property or released to the Mortgagor in
accordance with the Servicer's servicing procedures, subject to the terms and
conditions of the related Mortgage Note and Mortgage.
"Prospectus Supplement": That certain Prospectus Supplement
dated September 6, 2001 relating to the public offering of the Offered
Certificates.
"Purchase Price": With respect to any Mortgage Loan or REO
Property to be purchased pursuant to or as contemplated by Section 2.03 or
10.01, and as confirmed by an Officers' Certificate from the Servicer to the
Trustee, an amount equal to the sum of (i) 100% of the Principal Balance thereof
as of the date of purchase (or such other price as provided in Section 10.01),
(ii) in the case of (x) a Mortgage Loan, accrued interest on such Principal
Balance at the applicable Mortgage Interest Rate in effect from time to time
from the Due Date as to which interest was last covered by a payment by the
Mortgagor or an Advance by the Servicer, which payment or Advance had as of the
date of purchase been distributed pursuant to Section 4.01, through the end of
the calendar month in which the purchase is to be effected, and (y) an REO
Property, its fair market
35
value, determined in good faith by the Servicer, (iii) any unreimbursed
Servicing Advances and Advances and any unpaid Servicing Fees and Special
Servicing Fees allocable to such Mortgage Loan or REO Property, (iv) any amounts
previously withdrawn from the Collection Account in respect of such Mortgage
Loan or REO Property pursuant to Section 3.13, and (v) in the case of a Mortgage
Loan required to be purchased pursuant to Section 2.03, expenses reasonably
incurred or to be incurred by the Servicer or the Trustee in respect of the
breach or defect giving rise to the purchase obligation.
"Qualified Insurer": Any insurance company acceptable to FNMA
or FHLMC.
"Rate Payment": With respect to any Distribution Date, the
excess, if any, of Accrued Certificate Interest on a Class of Offered
Certificates or the Class B-2 Certificates over the amount of interest accrued
for the same period with respect to the REMIC 3 Regular Interest with the same
alphabetical or numeric Class designation, together with the unpaid portion of
any such excess from prior Distribution Dates (and interest accrued thereon at
the then applicable Pass-Through Rate for such Class of Certificates).
"Rating Agency or Rating Agencies": Moody's, Fitch and S&P, or
their respective successors. If such agencies or their successors are no longer
in existence, "Rating Agencies" shall be such nationally recognized statistical
rating organizations as set forth on the most current list of such organizations
released by the Securities and Exchange Commission and designated by the
Depositor, notice of which designation shall be given to the Trustee and the
Servicer.
"Realized Loss": With respect to a Liquidated Mortgage Loan,
the amount by which the remaining unpaid principal balance of the Mortgage Loan
exceeds the amount of Net Liquidation Proceeds applied to the principal balance
of the related Mortgage Loan.
"Realized Loss Amortization Amount": Any of the Class A-1A
Realized Loss Amortization Amount, the Class M-1 Realized Loss Amortization
Amount, the Class M-2 Realized Loss Amortization Amount, the Class B-1 Realized
Loss Amortization Amount, the Class B-2 Realized Loss Amortization Amount and
the Class N Realized Loss Amortization Amount.
"Record Date": With respect to all of the Certificates (except
for the Class A-1A Certificates), the last Business Day of the month immediately
preceding the month in which the related Distribution Date occurs (or the
Closing Date, in the case of the first Distribution Date). With respect to the
Class A-1A Certificates, the Business Day immediately preceding such
Distribution Date; provided, however, that if any Class A-1A Certificate becomes
a Definitive Certificate, the Record Date for such Certificate shall be the last
Business Day of the month immediately preceding the month in which the related
Distribution Date occurs.
36
"Reference Banks": Those banks (i) with an established place
of business in London, England, (ii) not controlling, under the control of or
under common control with the Depositor or the Trustee, (iii) whose quotations
appear on the Telerate Page 3750 on the relevant LIBOR Determination Date and
(iv) which have been designated as such by the Trustee; provided, however, that
if fewer than two of such banks provide a LIBOR rate, then any leading banks
selected by the Trustee which are engaged in transactions in United States
dollar deposits in the international Eurocurrency market.
"Regular Certificate": Any of the Offered Certificates,
the Class B-2 Certificates, the Class N Certificates and the Class X
Certificates.
"Related Documents": With respect to any Mortgage Loan, the
related Mortgage Notes, Mortgages and other related documents.
"Relief Act": The Soldiers' and Sailors Civil Relief Act of
1940, as amended.
"Relief Act Interest Shortfall": With respect to any
Distribution Date, for any Mortgage Loan with respect to which there has been a
reduction in the amount of interest collectible thereon for the most recently
ended Collection Period as a result of the application of the Relief Act, the
amount by which (i) interest collectible on such Mortgage Loan during such
Collection Period is less than (ii) one month's interest on the Principal
Balance of such Mortgage Loan at the Mortgage Interest Rate for such Mortgage
Loan before giving effect to the application of the Relief Act.
"Remaining Initial Overcollateralization Amount": As of any
Distribution Date, an amount equal to (a) the Initial Overcollateralization
Amount minus (b) the sum of (i) any Overcollateralization Release Amounts
distributed and (ii) Realized Losses allocated to the REMIC 3 Regular Interests.
"REMIC": A "real estate mortgage investment conduit" within
the meaning of Section 860D of the Code.
"REMIC 1 Regular Interests": The Class T-1A Interest and the
Class T-1B Interest.
"REMIC 2 Regular Interests": The Class T2-Accrual Interest,
Class T2-A-IO Interest, Class T2-A-1A Interest, Class T2-M-1 Interest, Class
T2-M-2 Interest, Class T2-B-1 Interest and Class T2-B-2 Interest.
"REMIC 3 Regular Interests": The Class A-IO Certificates,
Class A-1A Certificates, Class M-1 Certificates, Class M-2 Certificates, Class
B-1 Certificates, Class B-2 Certificates and Class T3-X/N Interest.
"REMIC 4 Regular Interest": The Class X/N Interest.
"REMIC Provisions": Provisions of the federal income tax law
relating to real estate mortgage investment conduits which appear at Section
860A through 860G of
37
Subchapter M of Chapter 1 of the Code, and related provisions, and regulations
and rulings promulgated thereunder, as the foregoing may be in effect from time
to time.
"REMIC Regular Interest": As defined in the Preliminary
Statement.
"Remittance Report": A report prepared by the Servicer and
delivered to the Trustee pursuant to Section 4.07.
"Rents from Real Property": With respect to any REO Property,
gross income of the character described in Section 856(d) of the Code.
"REO Account": The account or accounts maintained by the
Servicer in respect of an REO Property pursuant to Section 3.13.
"REO Disposition": The sale or other disposition of an REO
Property on behalf of the Trust Fund.
"REO Principal Amortization": With respect to any REO
Property, for any calendar month, the aggregate of all amounts received in
respect of such REO Property during such calendar month, whether in the form of
rental income, sale proceeds (including, without limitation, that portion of the
Termination Price paid in connection with a purchase of all of the Mortgage
Loans and REO Properties pursuant to Section 10.01 that is allocable to such REO
Property) or otherwise, net of any portion of such amounts (i) payable pursuant
to Section 3.13 in respect of the proper operation, management and maintenance
of such REO Property or (ii) payable or reimbursable to the Servicer pursuant to
Section 3.13 for unpaid Servicing Fees in respect of the related Mortgage Loan
and unreimbursed Servicing Advances and Advances in respect of such REO Property
or the related Mortgage Loan.
"REO Property": A Mortgaged Property acquired by the Servicer
on behalf of the Trust Fund through foreclosure or deed-in-lieu of foreclosure,
as described in Section 3.13.
"Re-Performing 60+ Day Delinquent Loan": Each Mortgage Loan
with respect to which, as of any date of determination, (x) any portion of a
Monthly Payment is, as of the last day of the prior Collection Period, two
months or more past due and (y) with respect to which the Mortgagor has made
three Monthly Payments within the three calendar months preceding such date of
determination. To the extent that, as of any date of determination, more than
10% of the Mortgage Loans (measured by scheduled principal balance) are
Re-Performing 60+ Day Delinquent Loans, the Re-Performing 60+ Day Delinquent
Loans constituting such excess shall be deemed to be 60+ Day Delinquent Loans.
"Re-performance Test": The following criteria one of which
must be met for a Mortgage Loan to qualify as a Re-performing Mortgage Loan: (1)
the Mortgagor has made at least three aggregate Monthly Payments in the three
calendar months preceding the Cut-Off Date (regardless of either the timing of
receipt of such payments or the payment history of such loans prior to May 1,
2001), or (2) the Mortgagor has made
38
at least four aggregate Monthly Payments in the four calendar months preceding
the Cut-Off Date (regardless of either the timing of receipt of such payments or
the payment history of such loans prior to April 1, 2001), or (3) the Mortgagor
has made at least five aggregate Monthly Payments in the five calendar months
preceding the Cut-Off Date (regardless of either the timing of receipt of such
payments or the payment history of such loans prior to March 1, 2001).
"Re-performing Mortgage Loan": A Mortgage Loan which has
defaulted in the past and which is at least 90 days Delinquent with respect to
certain Monthly Payments but which satisfies one of the Re-Performance Test
criteria.
"Request for Release": A release signed by a Servicing
Officer, substantially in the form of Exhibit E attached hereto.
"Required Excess Reserve Fund Balance": An amount
initially equal to $5,000 and thereafter as calculated pursuant to Section 4.10.
"Required Excess Reserve Fund Deposit": With respect to any
Distribution Date occurring between the Closing Date and the Distribution Date
on which the amount on deposit in the Excess Reserve Fund first equals the
Required Excess Reserve Fund Balance, the amount, if any, by which (i) the
Required Excess Reserve Fund Balance exceeds (ii) the amount on deposit in the
Excess Reserve Fund immediately prior to such date.
"Residential Dwelling": Any one of the following: (i) a
one-family dwelling, (ii) a two- to four-family dwelling, (iii) a one-family
dwelling unit in a FNMA eligible condominium project, (iv) a one-family dwelling
in a planned unit development, which is not a co-operative, or (v) a mobile or
manufactured home (as defined in 42 United States Code, Section 5402(6)).
"Residual Certificates": The Class R and the Class R-4
Certificates.
"Residual Interest": The sole Class of "residual interests"
in each REMIC within the meaning of Section 860G(a)(2) of the Code.
"Responsible Officer": When used with respect to the Trustee,
any officer assigned to the Corporate Trust Division (or any successor thereto),
including any Vice President, Assistant Vice President, Trust Officer, any
Assistant Secretary, any trust officer or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and in each case having direct responsibility for the
administration of this Agreement.
"S&P": Standard & Poor's Ratings Services and its successors,
and if such company shall for any reason no longer perform the functions of a
securities rating agency, "S&P" shall be deemed to refer to any other
"nationally recognized statistical rating organization" as set forth on the most
current list of such organizations released by the Securities and Exchange
Commission.
39
"Seller": Credit-Based Asset Servicing and Securitization
LLC, or its successor in interest, in its capacity as seller under the Mortgage
Loan Purchase Agreement.
"Senior Certificates": The Class A-IO and Class A-1A
Certificates.
"Senior Enhancement Percentage": For any Distribution Date,
the percentage obtained by dividing (x) the sum of (i) the aggregate Certificate
Principal Balances of the Subordinated Certificates and (ii) the
Overcollateralization Amount, in each case after taking into account the
distribution of the Principal Distribution Amount on such Distribution Date by
(y) the Pool Balance as of the last day of the related Collection Period.
"Senior Specified Enhancement Percentage": On any date of
determination thereof, 24.50%.
"Servicer": Litton Loan Servicing LP, a Delaware limited
partnership, or any successor servicer appointed as herein provided, in its
capacity as Servicer hereunder.
"Servicer Affiliate": A Person (i) controlling, controlled by
or under common control with the Servicer or which is 50% or more owned by the
Servicer and (ii) which is qualified to service residential mortgage loans.
"Servicer Event of Termination": One or more of the events
described in Section 7.01.
"Servicer Remittance Date": With respect to any
Distribution Date, one Business Day prior to such Distribution Date.
"Servicing Advances": All customary, reasonable and necessary
"out of pocket" costs and expenses incurred by the Servicer in the performance
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) the
management and liquidation of the REO Property and (iv) compliance with the
obligations under Section 3.08.
"Servicing Fee": With respect to each Mortgage Loan (including
each REO Property) and for any calendar month, an amount equal to one month's
interest (or in the event of any payment of interest which accompanies a
Principal Prepayment in full made by the Mortgagor during such calendar month,
interest for the number of days covered by such payment of interest) at the
Servicing Fee Rate on the same principal amount on which interest on such
Mortgage Loan accrues for such calendar month.
"Servicing Fee Rate": With respect to each Mortgage Loan,
0.50% per annum.
"Servicing Officer": Any officer of the Servicer involved in,
or responsible for, the administration and servicing of Mortgage Loans, whose
name and
40
specimen signature appear on a list of servicing officers furnished by the
Servicer to the Trustee and the Depositor on the Closing Date, as such list may
from time to time be amended.
"Servicing Rights Pledgee": One or more lenders, selected by
the Servicer, to which the Servicer will pledge and assign all of its right,
title and interest in, to and under this Agreement, including First Union
National Bank, as the representative of certain lenders.
"Servicing Standard": Shall mean the standards set forth in
Section 3.01.
"Simple Interest Method": The method of allocating a payment
to principal and interest, pursuant to which the portion of such payment that is
allocated to interest is equal to the product of the fixed rate of interest
multiplied by the unpaid principal balance multiplied by the period of time
elapsed since the preceding payment of interest was made and divided by either
360 or 365, as specified in the related Mortgage Note, and the remainder of such
payment is allocated to principal.
"Simple Interest Mortgage Loan": Any Mortgage Loan under which
the portion of a payment allocable to interest and the portion of such payment
allocable to principal is determined in accordance with the Simple Interest
Method.
"Special Hazard Losses": Realized Losses that result from
direct physical damage to Mortgaged Properties caused by natural disasters and
other hazards (i) which are not covered by hazard insurance policies (such as
earthquakes) and (ii) for which claims have been submitted and rejected by the
related hazard insurer and any shortfall in insurance proceeds for partial
damage due to the application of the co-insurance clauses contained in hazard
insurance policies.
"Special Servicing Fee": With respect to each Mortgage Loan
(except a Re-performing Mortgage Loan and any second or third lien Mortgage
Loan) that is delinquent 90 or more days, $150 per month payable until the
earlier of (i) 18 consecutive months and (ii) the Delinquency status of such
Mortgage Loan has been reduced to less than 90 days.
"Startup Day": As defined in Section 9.01(b) hereof.
"Stayed Funds": Any payment required to be made under the
terms of the Certificates and this Agreement but which is not remitted by the
Servicer because the Servicer is the subject of a proceeding under the
Bankruptcy Code and the making of such remittance is prohibited by Section 362
of the Bankruptcy Code.
"Stepdown Date": The later to occur of (x) the earlier to
occur of (A) the Distribution Date in September 2004 and (B) the Distribution
Date on which the aggregate Certificate Principal Balance of the Class A-1A
Certificates is reduced to zero, and (y) the first Distribution Date on which
the Senior Enhancement Percentage (after taking into account distributions of
principal on such Distribution Date) is greater than or equal to the Senior
Specified Enhancement Percentage.
41
"Sub-group": Either Sub-group 1A or Sub-group 1B.
"Sub-group 1A": The pool of Mortgage Loans identified in the
Mortgage Loan Schedule as having been assigned to Sub-group 1A.
"Sub-group 1B": The pool of Mortgage Loans identified in the
Mortgage Loan Schedule as having been assigned to Sub-group 1B.
"Subordinated Certificates": The Class M-1, Class M-2,
Class B-1, Class B-2, Class N, Class X, Class R and Class R-4 Certificates.
"Subsequent Overcollateralization Amount": As of any
Distribution Date, after the application of principal payments and Applied
Realized Loss Amounts, an amount equal to the excess, if any of (a) the Pool
Balance over (b) the sum of (i) the Certificate Principal Balance of each Class
of Offered Certificates (excluding the Class A-IO Certificates) and the Class
B-2 Certificates and (ii) the Remaining Initial Overcollateralization Amount.
"Substitution Adjustment Amount":As defined in Section 2.03(d)
hereof.
"Targeted Overcollateralization Amount": As of any
Distribution Date, (x) prior to the Stepdown Date, 0.75% of the initial Pool
Balance and (y) on and after the Stepdown Date, the lesser of (i) 0.75% of the
initial Pool Balance and (ii) the greater of (A) 1.50% of the Pool Balance as of
the last day of the related Collection Period and (B) 0.50% of the initial Pool
Balance.
"Tax Matters Person": The tax matters person appointed
pursuant to Section 9.01(e) hereof.
"Tax Returns": The federal income tax returns on Internal
Revenue Service Form 1066, U.S. Real Estate Mortgage Investment Conduit Income
Tax Return, including Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of the REMIC Taxable Income or Net Loss Allocation, or any successor
forms, to be filed on behalf of the Trust in its capacity as a REMIC under the
REMIC Provisions, together with any and all other information reports or returns
that may be required to be furnished to the Certificateholders of the related
Group or filed with the Internal Revenue Service or any other governmental
taxing authority under any applicable provisions of federal, state or local tax
laws.
"Telerate Page 3750": The display page currently so designated
on the Bridge Telerate Service (or such other page as may replace the Telerate
Page 3750 page on that service for the purpose of displaying London interbank
offered rates of major banks).
"Termination Price": As defined in Section 10.01(a) hereof.
"Trigger Event": With respect to any Distribution Date, if (i)
the six-month rolling average of 60+ Day Delinquent Loans equals or exceeds 45%
of the Senior
42
Enhancement Percentage; provided, that if the Certificate Principal Balance of
the Senior Certificates has been reduced to zero, a Trigger Event will have
occurred if the six-month rolling average of 60+ Day Delinquent Loans equals or
exceeds 20% or (ii) the aggregate amount of Realized Losses incurred since the
Cut-Off Date through the last day of the related Collection Period divided by
the initial Pool Balance exceeds the applicable percentages set forth below with
respect to such Distribution Date:
DISTRIBUTION DATE OCCURRING IN PERCENTAGE
September 2004 through August 2005 3.00%
September 2005 through August 2006 3.75%
September 2006 through August 2007 4.25%
September 2007 and thereafter 4.75%
"Trust": 2001-CB3 Trust, the trust created hereunder.
"Trust Fund": The segregated pool of assets subject hereto,
constituting the primary trust created hereby and to be administered hereunder,
with respect to a portion of which two REMIC elections are to be made, such
entire Trust Fund consisting of: (i) such Mortgage Loans as from time to time
are subject to this Agreement, together with the Mortgage Files relating
thereto, and together with all collections thereon and proceeds thereof, (ii)
any REO Property, together with all collections thereon and proceeds thereof,
(iii) the Trustee's rights with respect to the Mortgage Loans under all
insurance policies required to be maintained pursuant to this Agreement and any
proceeds thereof, (iv) the Depositor's rights under the Mortgage Loan Purchase
Agreement (including any security interest created thereby) and (v) the
Collection Account, the Distribution Account, the Excess Reserve Fund Account
and any REO Account and such assets that are deposited therein from time to time
and any investments thereof, together with any and all income, proceeds and
payments with respect thereto. Notwithstanding the foregoing, however, the Trust
Fund specifically excludes all payments and other collections of principal and
interest representing Arrearage.
"Trustee": The Chase Manhattan Bank, a New York banking
corporation, or any successor Trustee appointed as herein provided.
"Trustee Fee": With respect to any Distribution Date, the
product of (x) one-twelfth of the Trustee Fee Rate and (y) the aggregate of the
Principal Balances of all Mortgage Loans as of the opening of business on the
first day of the related Collection Period, subject to a minimum amount of
$7,500 per annum.
"Trustee Fee Rate": With respect to any Distribution Date,
0.0055% per annum.
"Underwriters": First Union Securities, Inc. and Salomon
Smith Barney, as underwriters with respect to the Offered Certificates.
"United States Person" or "U.S. Person": (i) A citizen or
resident of the United States, (ii) a corporation, partnership or other entity
treated as a corporation or
43
partnership for United States federal income tax purposes organized in or under
the laws of the United States or any state thereof or the District of Columbia
(unless, in the case of a partnership, Treasury regulations provide otherwise)
and in the case of a partnership to which any REMIC residual interest is being
transferred, all persons that own an interest in such partnership either
directly or through any entity that is not a corporation for United States
federal income tax purposes and required to be United States Persons or (iii) an
estate the income of which is includible in gross income for United States tax
purposes, regardless of its source, or (iv) a trust if a court within the United
States is able to exercise primary supervision over the administration of the
trust and one or more United States persons have authority to control all
substantial decisions of the trust. Notwithstanding the preceding sentence, to
the extent provided in Treasury regulations, certain Trusts in existence on
August 20, 1996, and treated as United States persons prior to such date, that
elect to continue to be treated as United States persons will also be a U.S.
Person.
"Unpaid Realized Loss Amount": For any Class B-1, Class B-2,
Class M-1, Class M-2 and Class A-1A Certificates and as to any Distribution
Date, the excess of (x) the aggregate Applied Realized Loss Amounts applied
respect to such Class for all prior Distribution Dates over (y) the aggregate
Realized Loss Amortization Amounts with respect to such Class for all prior
Distribution Dates.
"VA": The United States Department of Veterans Affairs.
"VA Approved Lender": Those institutions which are approved
by the VA to act as servicer and mortgagee of record pursuant to VA Regulations.
"VA Guaranty Agreements": With respect to a VA Loan, the
agreements evidencing the guaranty of such Mortgage Loan by the VA.
"VA Loan": A Mortgage Loan guaranteed by the VA.
"VA Regulations": Any and all regulations promulgated by the
VA under the Servicemen's Readjustment Act of 1944, as amended.
"Value": With respect to any Mortgaged Property, the value
thereof as determined by an independent appraisal made at the time of the
origination of the related Mortgage Loan or the sale price, if the appraisal is
not available; except that, with respect to any Mortgage Loan that is a purchase
money mortgage loan, the lesser of (i) the value thereof as determined by an
independent appraisal made at the time of the origination of such Mortgage Loan,
if any, and (ii) the sales price of the related Mortgaged Property.
"Voting Rights": The portion of the voting rights of all of
the Certificates which is allocated to any Certificate. The Voting Rights
allocated among Holders of the Offered Certificates and the Class B-2
Certificates shall be 98%, and shall be allocated among each such Class
according to the fraction, expressed as a percentage, the numerator of which is
the aggregate Certificate Principal Balance of all the Certificates of such
Class then outstanding and the denominator of which is the aggregate Certificate
Principal Balance of all the Offered Certificates and the Class B-2 Certificates
then
44
outstanding. The Voting Rights allocated to each such Class of Certificates
shall be allocated among all holders of each such Class in proportion to the
outstanding Certificate Principal Balance of such Certificates; provided,
however, that any Certificate registered in the name of the Servicer, the
Depositor or the Trustee or any of their respective affiliates shall not be
included in the calculation of Voting Rights. The percentage of all the Voting
Rights allocated among the Holders of the Class X and Class N Certificates shall
be 2%. The Class A-IO, Class R and Class R-4 Certificates shall have no Voting
Rights.
"Weighted Average Net Mortgage Rate": The weighted average
(based on Principal Balance as of the first day of the related Collection Period
or, in the case of the first Distribution Date, the Cut-off Date) of the
Mortgage Interest Rate of the Mortgage Loans minus the sum of (i) the Expense
Fee Rate and (ii) the rate at which the primary mortgage insurance premium, if
any, is calculated, expressed as an annual rate and calculated on the basis of
twelve months consisting of 30 days each and a 360 day year.
Section 1.02. Accounting.
-----------
Unless otherwise specified herein, for the purpose of any
definition or calculation, whenever amounts are required to be netted,
subtracted or added or any distributions are taken into account such definition
or calculation and any related definitions or calculations shall be determined
without duplication of such functions.
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Conveyance of Mortgage Loans.
-----------------------------
The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee without recourse for the benefit of the Certificateholders all the
right, title and interest of the Depositor, including any security interest
therein for the benefit of the Depositor, in and to (i) each Mortgage Loan
identified on the Mortgage Loan Schedule, including the related Cut-Off Date
Principal Balance, all interest accruing thereon after the Cut-Off Date and all
collections in respect of interest and principal due after the Cut-Off Date;
(ii) property which secured each such Mortgage Loan and which has been acquired
by foreclosure or deed in lieu of foreclosure; (iii) its interest in any
insurance policies in respect of the Mortgage Loans; (iv) all proceeds of any of
the foregoing; (v) the rights of the Depositor under the Mortgage Loan Purchase
Agreement, and (vi) all other assets included or to be included in the Trust
Fund; provided, however, so long as the Servicer is an FHA Approved Mortgagee,
the Commissioner of HUD shall have no obligation to recognize or deal with any
person other than the Servicer with respect to FHA Insurance. Such assignment
includes all interest and principal due to the Depositor or the Servicer after
the Cut-Off Date with respect to the Mortgage Loans.
45
In connection with such transfer and assignment, the Seller,
on behalf of the Depositor, does hereby deliver to, and deposit with the
Trustee, or its designated agent (the "Custodian"), the following documents or
instruments with respect to each Mortgage Loan (a "Mortgage File") so
transferred and assigned:
(i) the original Mortgage Note, endorsed either (A) in
blank or (B) in the following form: "Pay to the order
of The Chase Manhattan Bank, as Trustee under the
Pooling and Servicing Agreement, dated as of August
1, 2001, among Credit-Based Asset Servicing and
Securitization LLC, Residential Asset Funding
Corporation, Litton Loan Servicing LP and The Chase
Manhattan Bank, C-BASS Mortgage Loan Asset-Backed
Certificates, Series 2001-CB3, without recourse", or
with respect to any lost Mortgage Note, an original
Lost Note Affidavit, together with a copy of the
related Mortgage Note;
(ii) the original Mortgage with evidence of recording
thereon, and the original recorded power of attorney,
if the Mortgage was executed pursuant to a power of
attorney, with evidence of recording thereon or, if
such Mortgage or power of attorney has been submitted
for recording but has not been returned from the
applicable public recording office, has been lost or
is not otherwise available, a copy of such Mortgage
or power of attorney, as the case may be, certified
to be a true and complete copy of the original
submitted for recording;
(iii) an original Assignment of Mortgage, in form and
substance acceptable for recording. The Mortgage
shall be assigned either (A) in blank or (B) to "The
Chase Manhattan Bank, as Trustee under the Pooling
and Servicing Agreement, dated as of August 1, 2001,
among Credit-Based Asset Servicing and Securitization
LLC, Residential Asset Funding Corporation, Litton
Loan Servicing LP and The Chase Manhattan Bank,
C-BASS Mortgage Loan Asset-Backed Certificates,
Series 2001-CB3, without recourse";
(iv) an original copy of any intervening assignment of
Mortgage showing a complete chain of assignments;
(v) the original or a certified copy of lender's title
insurance policy;
(vi) the original or copies of each assumption,
modification, written assurance or substitution
agreement, if any;
(vii) for each FHA Loan, the original Mortgage Insurance
Certificate;
(viii) for each VA Loan, the original Loan Guaranty
Certificate;
46
(ix) [Reserved]; and
(x) the original, or a certified copy of the, Primary
Insurance Policy.
The Trustee agrees to execute and deliver (or cause the
Custodian to execute and deliver) to the Depositor on or prior to the Closing
Date an acknowledgment of receipt of the original Mortgage Note (with any
exceptions noted), substantially in the form attached as Exhibit F-3 hereto.
The Seller or Servicer shall within 90 days following the
Closing Date, with respect to each Mortgage Loan that is subject to the
provisions of the Homeownership and Equity Protection Act of 1994 place a legend
on the original Mortgage Note indicating the satisfaction of the provisions of
such Act and the regulations issued thereunder, to the effect that the Mortgage
Loan is subject to special truth in lending rules.
The Servicer shall promptly (and in no event later than thirty
days following the Closing Date) submit or cause to be submitted for recording,
at the Servicer's expense and at no expense to the Trust Fund or the Trustee, in
the appropriate public office for real property records, each Assignment
referred to in Sections 2.01(iii) and (iv) above. In the event that any such
Assignment is lost or returned unrecorded because of a defect therein, the
Seller shall promptly prepare or cause to be prepared a substitute Assignment or
cure or cause to be cured such defect, as the case may be, and thereafter cause
each such Assignment to be duly recorded.
If any of the documents referred to in Section 2.01(ii), (iii)
or (iv) above has as of the Closing Date been submitted for recording but either
(x) has not been returned from the applicable public recording office or (y) has
been lost or such public recording office has retained the original of such
document, the obligations of the Seller to deliver such documents shall be
deemed to be satisfied upon (1) delivery to the Trustee or the Custodian no
later than the Closing Date, of a copy of each such document certified by the
Seller in the case of (x) above or the applicable public recording office in the
case of (y) above to be a true and complete copy of the original that was
submitted for recording and (2) if such copy is certified by the Seller,
delivery to the Trustee or the Custodian, promptly upon receipt thereof of
either the original or a copy of such document certified by the applicable
public recording office to be a true and complete copy of the original. The
Seller shall deliver or cause to be delivered to the Trustee or the Custodian
promptly upon receipt thereof any other documents constituting a part of a
Mortgage File received with respect to any Mortgage Loan, including, but not
limited to, any original documents evidencing an assumption or modification of
any Mortgage Loan.
Upon discovery or receipt of notice of any materially
defective document in, or that a document is missing from, a Mortgage File, the
Seller shall have 120 days to cure such defect or 150 days following the Closing
Date, in the case of missing Mortgages or Assignments or deliver such missing
document to the Trustee or the Custodian. If the Seller does not cure such
defect or deliver such missing document
47
within such time period, the Seller shall either repurchase or substitute for
such Mortgage Loan in accordance with Section 2.03.
The Seller shall cause the Assignments of Mortgage which were
delivered in blank to be completed and shall cause all Assignments referred to
in Section 2.01(iii) hereof and, to the extent necessary, in Section 2.01(iv)
hereof to be recorded; provided, however, the Seller need not cause to be
recorded any Assignment which relates to a Mortgage Loan in any jurisdiction
under the laws of which, as evidenced by an Opinion of Counsel delivered by the
Seller to the Trustee and the Rating Agencies, the recordation of such
assignment is not necessary to protect the Trustee's interest in the related
Mortgage Loan. The Seller shall be required to deliver such assignments for
recording within 30 days of the Closing Date. The Seller shall furnish the
Trustee, or its designated agent, with a copy of each assignment of Mortgage
submitted for recording. In the event that any such Assignment is lost or
returned unrecorded because of a defect therein, the Seller shall promptly have
a substitute Assignment prepared or have such defect cured, as the case may be,
and thereafter cause each such Assignment to be duly recorded. In the event that
any Mortgage Note is endorsed in blank as of the Closing Date, promptly
following the Closing Date the Seller shall cause to be completed such
endorsements "Pay to the order of The Chase Manhattan Bank, as Trustee under the
Pooling and Servicing Agreement, dated as of August 1, 2001, among Credit-Based
Asset Servicing and Securitization LLC, Residential Asset Funding Corporation,
Litton Loan Servicing LP and The Chase Manhattan Bank, C-BASS Mortgage Loan
Asset-Backed Certificates, Series 2001-CB3, without recourse."
The Depositor herewith delivers to the Trustee an executed
copy of the Mortgage Loan Purchase Agreement.
Section 2.02. Acceptance by Trustee.
----------------------
The Trustee acknowledges the receipt of, subject to the
provisions of Section 2.01 and subject to the review described below and any
exceptions noted on the exception report described in the next paragraph below,
the documents referred to in Section 2.01 above and all other assets included in
the definition of "Trust Fund" and declares that it holds and will hold such
documents and the other documents delivered to it constituting a Mortgage File,
and that it holds or will hold all such assets and such other assets included in
the definition of "Trust Fund" in trust for the exclusive use and benefit of all
present and future Certificateholders.
The Trustee agrees, for the benefit of the Certificateholders,
to review (or cause the Custodian to review) each Mortgage File within 60 days
after the Closing Date (or, with respect to any document delivered after the
Startup Day, within 60 days of receipt and with respect to any Qualified
Substitute Mortgage, within 60 days after the assignment thereof) and to certify
in substantially the form attached hereto as Exhibit F-1 that, as to each
Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan
paid in full or any Mortgage Loan specifically identified in the exception
report annexed thereto as not being covered by such certification), (i) all
documents required to be delivered to it pursuant Section 2.01 of this Agreement
are in its
48
possession, (ii) such documents have been reviewed by it and have not been
mutilated, damaged or torn and relate to such Mortgage Loan and (iii) based on
its examination and only as to the foregoing, the information set forth in the
Mortgage Loan Schedule that corresponds to items (1), (2), (3), (5), (13) and
(26) (in the case of (26), only as to whether there is a prepayment penalty) of
the Mortgage Loan Schedule accurately reflects information set forth in the
Mortgage File. It is herein acknowledged that, in conducting such review, the
Trustee (or the Custodian, as applicable) is under no duty or obligation to
inspect, review or examine any such documents, instruments, certificates or
other papers to determine that they are genuine, enforceable, or appropriate for
the represented purpose or that they have actually been recorded or that they
are other than what they purport to be on their face.
Prior to the first anniversary date of this Agreement the
Trustee shall deliver (or cause the Custodian to deliver) to the Depositor and
the Servicer a final certification in the form annexed hereto as Exhibit F-2
evidencing the completeness of the Mortgage Files, with any applicable
exceptions noted thereon.
If in the process of reviewing the Mortgage Files and making
or preparing, as the case may be, the certifications referred to above, the
Trustee (or the Custodian, as applicable) finds any document or documents
constituting a part of a Mortgage File to be missing or defective in any
material respect, at the conclusion of its review the Trustee shall so notify
the Seller, the Depositor and the Servicer. In addition, upon the discovery by
the Seller, Depositor or the Servicer (or upon receipt by the Trustee of written
notification of such breach) of a breach of any of the representations and
warranties made by the Seller in the related Mortgage Loan Purchase Agreement in
respect of any Mortgage Loan which materially adversely affects such Mortgage
Loan or the interests of the related Certificateholders in such Mortgage Loan,
the party discovering such breach shall give prompt written notice to the other
parties.
The Depositor and the Trustee intend that the assignment and
transfer herein contemplated constitute a sale of the Mortgage Loans 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 and does hereby grant to the Trustee a first
priority perfected security interest in all of the Depositor's right, title and
interest in and to the Mortgage Loans and the Related Documents, and that this
Agreement shall constitute a security agreement under applicable law.
Section 2.03. Repurchase or Substitution of Mortgage Loans
--------------------------------------------
by the Seller.
--------------
(a) Upon discovery or receipt of written notice of any materially
defective document in, or that a document is missing from, a Mortgage File or of
the breach by the Seller of any representation, warranty or covenant under the
Mortgage Loan Purchase Agreement or in Section 2.04 in respect of any Mortgage
Loan which
49
materially adversely affects the value of such Mortgage Loan or the interest
therein of the Certificateholders, the Trustee (or the Custodian, as applicable)
shall promptly notify the Seller and the Servicer of such defect, missing
document or breach and request that the Seller deliver such missing document or
cure such defect or breach within 120 days or 150 days following the Closing
Date, in the case of missing Mortgages or Assignments from the date the Seller
was notified of such missing document, defect or breach, and if the Seller does
not deliver such missing document or cure such defect or breach in all material
respects during such period, the Trustee shall enforce the Seller's obligation
under the Mortgage Loan Purchase Agreement and cause the Seller to repurchase
such Mortgage Loan from the Trust Fund at the Purchase Price on or prior to the
Determination Date following the expiration of such 120 day period (subject to
Section 2.03(e)); provided that, in connection with any such breach that could
not reasonably have been cured within such 120 day or 150 day period, if the
Seller shall have commenced to cure such breach within such 120 day or 150 day
period, the Seller shall be permitted to proceed thereafter diligently and
expeditiously to cure the same within the additional period provided under the
Mortgage Loan Purchase Agreement. The Purchase Price for the repurchased
Mortgage Loan shall be deposited in the Collection Account, and the Trustee,
upon receipt of written certification from the Servicer of such deposit, shall
release to the Seller the related Mortgage File and shall execute and deliver
such instruments of transfer or assignment, in each case without recourse, as
the Seller shall furnish to it and as shall be necessary to vest in the Seller
any Mortgage Loan released pursuant hereto and the Trustee shall have no further
responsibility with regard to such Mortgage File. In lieu of repurchasing any
such Mortgage Loan as provided above, the Seller may cause such Mortgage Loan to
be removed from the Trust Fund (in which case it shall become a Defective
Mortgage Loan) and substitute one or more Eligible Substitute Mortgage Loans in
the manner and subject to the limitations set forth in Section 2.03(d). It is
understood and agreed that the obligation of the Seller to cure or to repurchase
(or to substitute for) any Mortgage Loan as to which a document is missing, a
material defect in a constituent document exists or as to which such a breach
has occurred and is continuing shall constitute the sole remedy against the
Seller respecting such omission, defect or breach available to the Trustee on
behalf of the Certificateholders.
(b) A Mortgage Loan that has an Arrearage cannot be substituted
for a Mortgage Loan that does not have an Arrearage.
(c) Within 90 days of the earlier of discovery by the Servicer or
receipt of notice by the Servicer of the breach of any representation, warranty
or covenant of the Servicer set forth in Section 2.05 which materially and
adversely affects the interests of the Certificateholders in any Mortgage Loan,
the Servicer shall cure such breach in all material respects.
(d) Any substitution of Eligible Substitute Mortgage Loans for
Defective Mortgage Loans made pursuant to Section 2.03(a) must be effected prior
to the last Business Day that is within two years after the Closing Date. As to
any Defective Mortgage Loan for which the Seller substitutes an Eligible
Substitute Mortgage Loan or Loans, such substitution shall be effected by the
Seller delivering to the Trustee, for such
50
Eligible Substitute Mortgage Loan or Loans, the Mortgage Note, the Mortgage, the
Assignment to the Trustee, and such other documents and agreements, with all
necessary endorsements thereon, as are required by Section 2.01, together with
an Officers' Certificate providing that each such Eligible Substitute Mortgage
Loan satisfies the definition thereof and specifying the Substitution Adjustment
Amount (as described below), if any, in connection with such substitution. The
Trustee shall acknowledge receipt for such Eligible Substitute Mortgage Loan or
Loans and, within ten Business Days thereafter, shall review such documents as
specified in Section 2.02 and deliver to the Servicer, with respect to such
Eligible Substitute Mortgage Loan or Loans, a certification substantially in the
form attached hereto as Exhibit F-1, with any applicable exceptions noted
thereon. Within one year of the date of substitution, the Trustee shall deliver
to the Servicer a certification substantially in the form of Exhibit F-2 hereto
with respect to such Eligible Substitute Mortgage Loan or Loans, with any
applicable exceptions noted thereon. Monthly Payments due with respect to
Eligible Substitute Mortgage Loans in the month of substitution are not part of
the Trust Fund and will be retained by the Seller. For the month of
substitution, distributions to Certificateholders will reflect the collections
and recoveries in respect of such Defective Mortgage Loan in the Collection
Period preceding the month of substitution and the Depositor or the Seller, as
the case may be, shall thereafter be entitled to retain all amounts subsequently
received in respect of such Defective Mortgage Loan. The Seller shall give or
cause to be given written notice to the Certificateholders that such
substitution has taken place, shall amend the Mortgage Loan Schedule to reflect
the removal of such Defective Mortgage Loan from the terms of this Agreement and
the substitution of the Eligible Substitute Mortgage Loan or Loans and shall
deliver a copy of such amended Mortgage Loan Schedule to the Trustee. Upon such
substitution, such Eligible Substitute Mortgage Loan or Loans shall constitute
part of the Mortgage Pool and shall be subject in all respects to the terms of
this Agreement and, in the case of a substitution effected by the Seller, the
Mortgage Loan Purchase Agreement, including, in the case of a substitution
effected by the Seller all applicable representations and warranties thereof
included in the Mortgage Loan Purchase Agreement and all applicable
representations and warranties thereof set forth in Section 2.04, in each case
as of the date of substitution.
For any month in which the Seller substitutes one or more
Eligible Substitute Mortgage Loans for one or more Defective Mortgage Loans, the
Servicer will determine the amount (the "Substitution Adjustment Amount"), if
any, by which the aggregate Purchase Price of all such Defective Mortgage Loans
exceeds the aggregate, as to each such Eligible Substitute Mortgage Loan, of the
principal balance thereof as of the date of substitution, together with one
month's interest on such principal balance at the applicable Net Mortgage
Interest Rate. On the date of such substitution, the Seller will deliver or
cause to be delivered to the Servicer for deposit in the Collection Account an
amount equal to the Substitution Adjustment Amount, if any, and the Trustee,
upon receipt of the related Eligible Substitute Mortgage Loan or Loans and
certification by the Servicer of such deposit, shall release to the Seller the
related Mortgage File or Files and shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as the Seller shall
deliver to it and as shall be necessary to vest therein any Defective Mortgage
Loan released pursuant hereto.
51
In addition, the Seller shall obtain at its own expense and
deliver to the Trustee an Opinion of Counsel to the effect that such
substitution will not cause (a) any federal tax to be imposed on the Trust Fund,
including, without limitation, any federal tax imposed on "prohibited
transactions" under Section 860F(a)(l) of the Code or on "contributions after
the startup date" under Section 860G(d)(l) of the Code, or (b) any REMIC to fail
to qualify as a REMIC at any time that any Certificate is outstanding. If such
Opinion of Counsel can not be delivered, then such substitution may only be
effected at such time as the required Opinion of Counsel can be given.
(e) Upon discovery by the Seller, the Servicer or the Trustee
that any Mortgage Loan does not constitute a "qualified mortgage" within the
meaning of Section 860G(a)(3) of the Code, the party discovering such fact shall
within two Business Days give written notice thereof to the other parties. In
connection therewith, the Seller shall repurchase or, subject to the limitations
set forth in Section 2.03(d), substitute one or more Eligible Substitute
Mortgage Loans for the affected Mortgage Loan within 90 days of the earlier of
discovery or receipt of such notice with respect to such affected Mortgage Loan.
In addition, upon discovery that a Mortgage Loan is defective in a manner that
would cause it to be a "defective obligation" within the meaning of Treasury
regulations relating to REMICs, the Seller shall cure the defect or make the
required purchase or substitution no later than 90 days after the discovery of
the defect. Any such repurchase or substitution shall be made in the same manner
as set forth in Section 2.03(a), if made by the Seller. The Trustee shall
reconvey to the Seller the Mortgage Loan to be released pursuant hereto in the
same manner, and on the same terms and conditions, as it would a Mortgage Loan
repurchased for breach of a representation or warranty.
Notwithstanding anything to the contrary contained herein, the
parties hereto acknowledge that the functions of the Trustee with respect to the
custody, acceptance, inspection and release of the Mortgage Files pursuant to
Sections 2.01, 2.02 and 2.03 and preparation and delivery of the certifications
in the form of Exhibit F-1, Exhibit F-2 and Exhibit F-3 shall be performed by
the Custodian pursuant to the terms and conditions of the Custodial Agreement.
The fees and expenses of the Custodian shall be paid by the Servicer.
Section 2.04. Representations and Warranties of the Seller
--------------------------------------------
with Respect to the Mortgage Loans.
-----------------------------------
The Seller hereby represents and warrants to the Trustee for
the benefit of the Certificateholders that as of the Closing Date or as of such
other date specifically provided herein:
(a) The representations and warranties made by the Seller
pursuant to Section 3.01 of the Mortgage Loan Purchase Agreement are hereby
being made to the Trustee and are true and correct as of the Closing Date.
(b) Any written agreement between the Mortgagor in respect of
a Mortgage Loan and the Servicer modifying such Mortgagor's obligation to make
52
payments under the Mortgage Loan (such modified Mortgage Loan, a "Modified
Mortgage Loan") involved the application of the Seller's underwriting standards
or some assessment of the Mortgagor's ability to repay the Modified Mortgage
Loan.
With respect to the representations and warranties set forth
in this Section 2.04 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
Seller, the Servicer or the Trustee that the substance of such representation
and warranty is inaccurate and such inaccuracy materially and adversely affects
the value of the related Mortgage Loan or the interest therein of the
Certificateholders 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.
Upon discovery by the Depositor, the Seller, the Servicer or
the Trustee of a breach of any of the representations and warranties contained
in this Section that materially and adversely affects the value of any Mortgage
Loan or the interest therein of the Certificateholders, the party discovering
the breach shall give prompt written notice to the others and in no event later
than two Business Days from the date of such discovery. Within ninety days of
its discovery or its receipt of notice of any such missing or materially
defective documentation or any such breach of a representation or warranty, the
Seller shall promptly deliver such missing document or cure such defect or
breach in all material respects, or in the event such defect or breach cannot be
cured, the Seller shall repurchase the affected Mortgage Loan or cause the
removal of such Mortgage Loan from the Trust Fund and substitute for it one or
more Eligible Substitute Mortgage Loans, in either case, in accordance with
Section 2.03.
It is understood and agreed that the representations and
warranties set forth in this Section 2.04 shall survive delivery of the Mortgage
Files to the Trustee and shall inure to the benefit of the Certificateholders
notwithstanding any restrictive or qualified endorsement or assignment. It is
understood and agreed that the obligations of the Seller set forth in Section
2.03(a) to cure, substitute for or repurchase a Mortgage Loan pursuant to the
Mortgage Loan Purchase Agreement constitute the sole remedies available to the
Certificateholders or to the Trustee on their behalf respecting a breach of the
representations and warranties contained in this Section 2.04.
Section 2.05. Representations, Warranties and Covenants of
--------------------------------------------
the Servicer.
--------------
The Servicer hereby represents, warrants and covenants to the
Trustee, for the benefit of each of the Trustee and the Certificateholders and
to the Depositor that as of the Closing Date or as of such date specifically
provided herein:
(i) The Servicer is duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its formation
and has all licenses necessary to ensure the enforceability or
validity of each Mortgage Loan and to carry on its business as now
being conducted, except for such licenses, certificates and permits
the absence of which, individually or in the aggregate, would not
53
have a material adverse effect on the ability of the Servicer to
conduct its business as it is presently conducted; the Servicer has
the power and authority to execute and deliver this Agreement and
to perform in accordance herewith; the execution, delivery and
performance of this Agreement (including all instruments of
transfer to be delivered pursuant to this Agreement) by the
Servicer and the consummation of the transactions contemplated
hereby have been duly and validly authorized; this Agreement
evidences the valid, binding and enforceable obligation of the
Servicer, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally; and all requisite
corporate action has been taken by the Servicer to make this
Agreement valid and binding upon the Servicer in accordance with
its terms;
(ii) The consummation of the transactions contemplated by this
Agreement are in the ordinary course of business of the Servicer
and will not result in the breach of any term or provision of the
certificate of formation or the partnership agreement of the
Servicer or result in the breach of any term or provision of, or
conflict with or constitute a default under or result in the
acceleration of any obligation under, any agreement, indenture or
loan or credit agreement or other instrument to which the Servicer
or its property is subject, or result in the violation of any law,
rule, regulation, order, judgment or decree to which the Servicer
or its property is subject;
(iii) The Servicer is an approved seller/servicer of
conventional mortgage loans for FNMA, and is an FHA Approved
Mortgagee in good standing to service mortgages, is a VA Approved
Lender and has not been suspended as a mortgagee or servicer by the
FHA or VA and has the facilities, procedures and experienced
personnel necessary for the sound servicing of mortgage loans of
the same type as the Mortgage Loans. The Servicer is, and shall
remain for as long as it is servicing the Mortgage Loans hereunder,
in good standing as a FHA Approved Mortgagee and a VA Approved
Lender and to service mortgage loans for HUD, FNMA or FHLMC, and no
event has occurred, including but not limited to a change in
insurance coverage, which would make the Servicer unable to comply
with HUD, FNMA, FHLMC, FHA or VA eligibility requirements or which
would require notification to any of HUD, FNMA, FHLMC, FHA or VA;
(iv) This Agreement, and all documents and instruments
contemplated hereby which are executed and delivered by the
Servicer, constitute and will constitute valid, legal and binding
obligations of the Servicer, enforceable in accordance with their
respective terms, except as the enforcement thereof may be limited
by applicable bankruptcy laws and general principles of equity;
(v) The Servicer does not believe, nor does it have any reason
or cause to believe, that it cannot perform each and every covenant
contained in this Agreement;
54
(vi) There is no action, suit, proceeding or investigation
pending or, to its knowledge, threatened against the Servicer that,
either individually or in the aggregate, may result in any material
adverse change in the business, operations, financial condition,
properties or assets of the Servicer, or in any material impairment
of the right or ability of the Servicer to carry on its business
substantially as now conducted, or in any material liability on the
part of the Servicer, or that would draw into question the validity
or enforceability of this Agreement or of any action taken or to be
taken in connection with the obligations of the Servicer
contemplated herein, or that would be likely to impair materially
the ability of the Servicer to perform under the terms of this
Agreement;
(vii) No consent, approval or order of any court or
governmental agency or body is required for the execution, delivery
and performance by the Servicer of or compliance by the Servicer
with this Agreement or the consummation of the transactions
contemplated by this Agreement, except for such consents,
approvals, authorizations and orders, if any, that have been
obtained; and
(viii) Neither this Agreement nor any information, certificate
of an officer, statement furnished in writing or report delivered
to the Trustee by the Servicer in connection with the transactions
contemplated hereby contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact
necessary in order to make the statements contained therein, in
light of the circumstances under which they were made, not
misleading.
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 2.05 shall survive delivery
of the Mortgage Files to the Trustee and shall inure to the benefit of the
Trustee, the Depositor and the Certificateholders. Upon discovery by any of the
Depositor, the Servicer, the Seller or the Trustee of a breach of any of the
foregoing representations, warranties and covenants which materially and
adversely affects the value of any Mortgage Loan or the interests therein of the
Certificateholders, the party discovering such breach shall give prompt written
notice (but in no event later than two Business Days following such discovery)
to the other parties hereto.
Section 2.06. Representations and Warranties of the Depositor.
------------------------------------------------
The Depositor represents and warrants to the Trust and 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);
55
(ii) Immediately prior to the sale and assignment by the
Depositor to the Trustee on behalf of the Trust of each Mortgage
Loan, the Depositor had good and marketable title to each Mortgage
Loan (insofar as such title was conveyed to it by the Seller)
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 interest in the Mortgage Loans to the Trustee on
behalf of the Trust;
(iv) The Depositor has not transferred the Mortgage Loans to
the Trustee on behalf of the Trust with any intent to hinder, delay
or defraud any of its creditors;
(v) The Depositor has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware, with full corporate power and authority to own
its assets and conduct its business as presently being conducted;
(vi) The Depositor is not in violation of its articles of
incorporation or by-laws or in default in the performance or
observance of any material obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which the Depositor
is a party or by which it or its properties may be bound, which
default might result in any material adverse changes in the
financial condition, earnings, affairs or business of the Depositor
or which might materially and adversely affect the properties or
assets, taken as a whole, of the Depositor;
(vii) The execution, delivery and performance of this
Agreement by the Depositor, and the consummation of the
transactions contemplated thereby, do not and will not result in a
material breach or violation of any of the terms or provisions of,
or, to the knowledge of the Depositor, constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Depositor is a party or by
which the Depositor is bound or to which any of the property or
assets of the Depositor is subject, nor will such actions result in
any violation of the provisions of the articles of incorporation or
by-laws of the Depositor or, to the best of the Depositor's
knowledge without independent investigation, any statute or any
order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Depositor or any of its
properties or assets (except for such conflicts, breaches,
violations and defaults as would not have a material adverse effect
on the ability of the Depositor to perform its obligations under
this Agreement);
(viii) To the best of the Depositor's knowledge without any
independent investigation, no consent, approval, authorization,
order, registration or qualification of or with any court or
governmental agency or body of the United States or any other
jurisdiction is required for the issuance of the Certificates, or
56
the consummation by the Depositor of the other transactions
contemplated by this Agreement, except such consents, approvals,
authorizations, registrations or qualifications as (a) may be
required under State securities or Blue Sky laws, (b) have been
previously obtained or (c) the failure of which to obtain would not
have a material adverse effect on the performance by the Depositor
of its obligations under, or the validity or enforceability of,
this Agreement; and
(ix) There are no actions, proceedings or investigations
pending before or, to the Depositor's knowledge, threatened by any
court, administrative agency or other tribunal to which the
Depositor is a party or of which any of its properties is the
subject: (a) which if determined adversely to the Depositor would
have a material adverse effect on the business, results of
operations or financial condition of the Depositor; (b) asserting
the invalidity of this Agreement or the Certificates; (c) seeking
to prevent the issuance of the Certificates or the consummation by
the Depositor of any of the transactions contemplated by this
Agreement, as the case may be; (d) which might materially and
adversely affect the performance by the Depositor of its
obligations under, or the validity or enforceability of, this
Agreement.
Section 2.07. Issuance of Certificates and the
--------------------------------
Uncertificated Regular Interests.
---------------------------------
The Trustee acknowledges the assignment to it of the Mortgage
Loans and the delivery to it (or the Custodian, as bailee and Custodian of the
Trustee) of the Mortgage Files, subject to the provisions of Sections 2.01 and
2.02, together with the assignment to it of all other assets included in the
Trust Fund, receipt of which is hereby acknowledged. Concurrently with such
assignment and delivery and in exchange therefor, the Trustee, pursuant to the
Written Order to Authenticate executed by an officer of the Depositor, has
executed, authenticated and delivered to or upon the order of the Depositor, the
Certificates (other than the Class R and Class R-4 Certificates) in minimum
dollar denominations of $25,000 and integral dollar multiples of $1 in excess.
The Class R and Class R-4 Certificates are issuable only in minimum Percentage
Interests of 10%. The Trustee acknowledges the issuance of the uncertificated
REMIC 1 Regular Interests and the uncertificated REMIC 2 Regular Interests and
declares that it holds such regular interests as assets of REMIC 3. The Trustee
acknowledges the issuance of the uncertificated Class T3-X/N Interest, and
declares that it holds the same as assets of REMIC 4 on behalf of the Holders of
the Class X/N Interest, initially the Holders of the Class N and Class X
Certificates. The interests evidenced by the Certificates constitute the entire
beneficial ownership interest in the Trust Fund.
Section 2.08. Representations and Warranties of the Seller.
---------------------------------------------
The Seller hereby represents and warrants to the Trust and the
Trustee on behalf of the Certificateholders that as of the Closing Date or as of
such date specifically provided herein:
57
(i) The Seller is duly organized, validly existing and in good
standing as a limited liability company under the laws of the State
of Delaware and has the power and authority to own its assets and
to transact the business in which it is currently engaged. The
Seller 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 to so qualify would have a
material adverse effect on (a) its business, properties, assets or
condition (financial or other), (b) the performance of its
obligations under this Agreement, (c) the value or marketability of
the Mortgage Loans, or (d) its ability to foreclose on the related
Mortgaged Properties.
(ii) The Seller has the power and authority to make, execute,
deliver and perform this Agreement and to consummate all of the
transactions contemplated hereunder and has taken all necessary
action to authorize the execution, delivery and performance of this
Agreement. When executed and delivered, this Agreement will
constitute the Seller's legal, valid and binding obligations
enforceable in accordance with its terms, except as enforcement of
such terms may be limited by (1) bankruptcy, insolvency,
reorganization, receivership, moratorium or similar laws affecting
the enforcement of creditors' rights generally and by the
availability of equitable remedies, (2) general equity principles
(regardless of whether such enforcement is considered in a
proceeding in equity or at law) or (3) public policy considerations
underlying the securities laws, to the extent that such policy
considerations limit the enforceability of the provisions of this
Agreement which purport to provide indemnification from securities
laws liabilities.
(iii) The Seller holds all necessary licenses, certificates
and permits from all governmental authorities necessary for
conducting its business as it is presently conducted, except for
such licenses, certificates and permits the absence of which,
individually or in the aggregate, would not have a material adverse
effect on the ability of the Seller to conduct 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 the Seller 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 the
Seller or any of its properties or any provision of its Limited
Liability Company Agreement, 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.
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(v) No certificate of an officer, written statement or report
delivered pursuant to the terms hereof by the Seller contains any
untrue statement of a material fact or omits to state any material
fact necessary to make the certificate, statement or report not
misleading.
(vi) The transactions contemplated by this Agreement are in
the ordinary course of the Seller's business.
(vii) The Seller is not insolvent, nor will the Seller be made
insolvent by the transfer of the Mortgage Loans to the Depositor,
nor is the Seller aware of any pending insolvency.
(viii) The Seller is not in violation of, and the execution
and delivery of this Agreement by it and its performance and
compliance with the terms of this Agreement will not constitute a
violation with respect to any order or decree of any court, or any
order or regulation of any federal, state, municipal or
governmental agency having jurisdiction, which violation would
materially and adversely affect the Seller's condition (financial
or otherwise) or operations or any of the Seller's properties, or
materially and adversely affect the performance of any of its
duties hereunder.
(ix) There are no actions or proceedings against, or
investigations of, the Seller pending or, to its knowledge,
threatened, before any court, administrative agency or other
tribunal (i) that, if determined adversely, would prohibit the
Seller from entering into this Agreement, (ii) seeking to prevent
the consummation of any of the transactions contemplated by this
Agreement or (iii) that, if determined adversely, would prohibit or
materially and adversely affect the Seller's performance of any of
its respective obligations under, or the validity or enforceability
of, this Agreement.
(x) The Seller did not transfer the Mortgage Loans to the
Depositor with any intent to hinder, delay or defraud any of its
creditors.
(xi) The Seller acquired title to the Mortgage Loans in good
faith, without notice of any adverse claims.
(xii) The transfer, assignment and conveyance of the Mortgage
Notes and the Mortgages by the Seller to the Depositor are not
subject to the bulk transfer laws or any similar statutory
provisions in effect in any applicable jurisdiction.
Section 2.09. Covenants of the Seller.
------------------------
(a) The Seller hereby covenants that except for the transfer
hereunder, the Seller will not sell, pledge, assign or transfer to
any other Person, or grant, create, incur, assume or suffer to
exist any lien on any Mortgage Loan, or any interest therein; the
Seller will notify the Trustee, as assignee of the Depositor, of
the existence of any lien on any Mortgage Loan immediately upon
discovery thereof, and the Seller will defend
59
the right, title and interest of the Trust, as assignee of the
Depositor, in, to and under the Mortgage Loans, against all claims
of third parties claiming through or under the Seller; provided,
however, that nothing in this Section 2.09 shall prevent or be
deemed to prohibit the Seller from suffering to exist upon any of
the Mortgage Loans any liens for municipal or other local taxes and
other governmental charges if such taxes or governmental charges
shall not at the time be due and payable or if the Seller shall
currently be contesting the validity thereof in good faith by
appropriate proceedings and shall have set aside on its books
adequate reserves with respect thereto.
(b) The Seller hereby covenants that neither it nor any
Affiliate of the Seller will directly solicit any Mortgagor
hereunder to refinance the related Mortgage Loan. For the purposes
of the foregoing, neither the Seller nor any Affiliate of the
Seller shall be deemed to directly solicit any Mortgagor if the
Seller responds to a request from a Mortgagor regarding a
refinancing or if the Mortgagor receives marketing materials which
are generally disseminated.
ARTICLE III
ADMINISTRATION AND SERVICING
OF THE TRUST FUND
Section 3.01. Servicer to Act as Servicer.
----------------------------
The Servicer, as independent contract servicer, shall service
and administer the Mortgage Loans in accordance with this Agreement and the
normal and usual standards of practice of prudent mortgage servicers, and shall
have full power and authority, acting alone, to do or cause to be done any and
all things in connection with such servicing and administration which the
Servicer may deem necessary or desirable and consistent with the terms of this
Agreement including, in the case of FHA Loans and VA Loans, taking all actions
that a mortgagee is permitted or required to take by the FHA or the VA, as the
case may be (the "Servicing Standards").
Consistent with the terms of this Agreement, the Servicer may
waive, modify or vary any term of any Mortgage Loan or consent to the
postponement of strict compliance with any such term or in any manner grant
indulgence to any Mortgagor if in the Servicer's reasonable and prudent
determination such waiver, modification, postponement or indulgence is not
materially adverse to the Certificateholders; provided, however, that the
Servicer shall not make future advances and, unless the Mortgagor is in default
with respect to the Mortgage Loan or such default is, in the judgment of the
Servicer, reasonably foreseeable, the Servicer shall not permit any modification
with respect to any Mortgage Loan that would (i) change the Mortgage Interest
Rate, defer or forgive the payment thereof of any principal or interest
payments, reduce the outstanding principal amount (except for actual payments of
principal) or extend the final maturity date with respect to such Mortgage Loan,
(ii) in the case of FHA Loans and VA Loans, affect the FHA Insurance Contract or
VA Guaranty Agreement, as the case may be, with respect to such Mortgage Loan,
(iii) affect adversely the status of any REMIC as a REMIC or (iv) cause any
REMIC to be subject to a tax on "prohibited transactions" or
60
"contributions" pursuant to the REMIC Provisions. Notwithstanding the
foregoing, the Servicer shall not permit any modification with respect to any
Mortgage Loan that would both (x) effect an exchange or reissuance of such
Mortgage Loan under Section 1.860G-2(b) of the Treasury Regulations and (y)
cause any REMIC constituting part of the Trust Fund to fail to qualify as a
REMIC under the Code or the imposition of any tax on "prohibited transactions"
or "contributions" after the Startup Day under the REMIC Provisions. Without
limiting the generality of the foregoing, the Servicer shall continue, and is
hereby authorized and empowered to execute and deliver on behalf of itself, and
the Trustee, all instruments of satisfaction or cancellation, or of partial or
full release, discharge and all other comparable instruments, with respect to
the Mortgage Loans and with respect to the Mortgaged Property. The Servicer
shall make all required Servicing Advances and shall service and administer the
Mortgage Loans in accordance with Applicable Regulations, and shall provide to
the Mortgagor any reports required to be provided to them thereby. If reasonably
required by the Servicer, the Trustee shall furnish the Servicer with any powers
of attorney and other documents necessary or appropriate to enable the Servicer
to carry out its servicing and administrative duties under this Agreement.
In servicing and administering FHA Loans and VA Loans, the
Servicer shall comply strictly with the National Housing Act, the FHA
Regulations, the Servicemen's Readjustment Act and the VA Regulations and
administrative guidelines issued thereunder or pursuant thereto (insofar as the
same apply to any Mortgage Loan) and, to the extent permitted hereunder,
promptly discharge all of the obligations of the mortgagee thereunder and under
each Mortgage including the timely giving of notices, the essence hereof being
that the full benefits of each FHA Insurance Contract and VA Guaranty Agreement
inure to the Trustee, on behalf of the Certificateholders.
In servicing and administering the Mortgage Loans, the
Servicer shall employ procedures including collection procedures and exercise
the same care that it customarily employs and exercises in servicing and
administering mortgage loans for its own account giving due consideration to
accepted mortgage servicing practices of prudent lending institutions, the FHA
Insurance Contracts and the VA Guaranty Agreements, where applicable, and the
Certificateholders' reliance on the Servicer.
The Servicer shall give prompt notice to the Trustee of any
action, of which the Servicer has actual knowledge, to (i) assert a claim
against the Trust Fund or (ii) assert jurisdiction over the Trust Fund.
Notwithstanding anything in this Agreement to the contrary, in
the event of a Principal Prepayment in full of a Mortgage Loan, the Servicer may
not waive any prepayment penalty or portion thereof required by the terms of the
related Mortgage Note unless (i) the Servicer determines that such waiver would
maximize recovery of Liquidation Proceeds for such Mortgage Loan, taking into
account the value of such prepayment penalty, or (ii) (A) the enforceability
thereof is limited (1) by bankruptcy, insolvency, moratorium, receivership, or
other similar law relating to creditors' rights generally or (2) due to
acceleration in connection with a foreclosure or other involuntary payment, or
(B) the enforceability is otherwise limited or prohibited by applicable law.
61
In the event of a Principal Prepayment in full with respect to any Mortgage
Loan, the Servicer shall deliver to the Trustee an Officer's Certificate
substantially in the form of Exhibit Q no later than the third Business Day
following the immediately succeeding Determination Date with a copy to the Class
X Certificateholder. If the Servicer has waived or does not collect all or a
portion of a prepayment penalty relating to a Principal Prepayment in full due
to any action or omission of the Servicer, other than as provided above, the
Servicer shall, within 90 days of the date on which the Principal Prepayment in
full is remitted to the Trustee, deliver to the Trustee the amount of such
prepayment penalty (or such portion thereof as had been waived for deposit) into
the Distribution Account for distribution in accordance with the terms of this
Agreement.
With respect to each Mortgage Loan which is the subject of a
Principal Prepayment in full, the Trustee shall verify whether such Mortgage
Loan was identified on the Mortgage Loan Schedule as being subject to a
prepayment penalty and, if such Mortgage Loan is so identified, whether the
amount of the prepayment penalty remitted by the Servicer (including any amounts
to be remitted by the Servicer pursuant to the last sentence of the preceding
paragraph), if any, is consistent with the amount of the prepayment penalty set
forth in the Mortgage Loan Schedule. In the event that the Trustee determines
that a prepayment penalty received with respect to a Principal Prepayment in
full is inconsistent with the prepayment penalty set forth in the Mortgage Loan
Schedule for the related Mortgage Loan and such inconsistency results in the
receipt of a reduced prepayment penalty, the Trustee shall provide notice to the
Seller of such inconsistency. Within 90 days of receipt of such notice, the
Seller shall remit to the Trustee for deposit in the Distribution Account an
amount equal to the difference between the amount of the prepayment penalties
received by the Trustee and the amount of the prepayment penalties determined in
accordance with the description thereof set forth in the Mortgage Loan Schedule
for the related Mortgage Loans.
The Trustee shall prepare and deliver to the Depositor and the
owner of the Class N and Class X Certificates, on a monthly basis, a statement
setting forth the amounts due and received with respect to prepayment penalties.
Section 3.02. Collection of Mortgage Loan Payments.
-------------------------------------
Continuously from the date hereof until the principal and
interest on all Mortgage Loans are paid in full, the Servicer will diligently
collect all payments due under each Mortgage Loan when the same shall become due
and payable and shall, to the extent such procedures shall be consistent with
this Agreement and the terms and provisions of any related Primary Insurance
Policy and Applicable Regulations, follow such collection procedures as it
follows with respect to mortgage loans comparable to the Mortgage Loans and held
for its own account. Further, the Servicer will take special care in
ascertaining and estimating annual ground rents, taxes, assessments, water
rates, fire and hazard insurance premiums, mortgage insurance premiums, and all
other charges that, as provided in the Mortgage, will become due and payable to
that end that the installments payable by the Mortgagors will be sufficient to
pay such charges as and when they become due and payable.
62
Section 3.03. Realization Upon Defaulted Mortgage Loans.
------------------------------------------
In the event that any payment due under any Conventional
Mortgage Loan is not paid when the same becomes due and payable, or in the event
the Mortgagor fails to perform any other covenant or obligation under the
Mortgage Loan and such failure continues beyond any applicable grace period, the
Servicer shall take such action as it shall deem to be in the best interest of
the Certificateholders. In the event that any payment due under any FHA Loan
becomes delinquent, the Servicer shall take all such actions as are in the best
interests of the Certificateholders and permitted under any applicable FHA loss
mitigation proceedings, including, but not limited to, requesting the FHA to
accept an assignment of such FHA Loan, and, upon the Servicer's determination
that foreclosure is in the best interest of the Certificateholders, commencing
foreclosure proceedings. With respect to each VA Loan, the Servicer shall
diligently seek to mitigate losses by utilizing all remedies available in the VA
Regulations. With respect to any defaulted Mortgage Loan, the Servicer shall
have the right to review the status of the related forbearance plan and, subject
to the second paragraph of Section 3.01, may modify such forbearance plan.
In connection with a foreclosure or other conversion, the
Servicer shall exercise such rights and powers vested in it hereunder and use
the same degree of care and skill in its exercise as prudent mortgage servicers
would exercise or use under the circumstances in the conduct of their own
affairs and consistent with Applicable Regulations and the servicing standards
set forth in the FNMA Guide, including, without limitation, advancing funds for
the payment of taxes and insurance premiums with respect to first lien Mortgage
Loans.
Notwithstanding the foregoing provisions of this Section 3.03,
with respect to any Mortgage Loan as to which the Servicer has received actual
notice of, or has actual knowledge of, the presence of any toxic or hazardous
substance on the related Mortgaged Property, the Servicer shall not either (i)
obtain title to such Mortgaged Property as a result of or in lieu of foreclosure
or otherwise, or (ii) otherwise acquire possession of, or take any other action
with respect to, such Mortgaged Property if, as a result of any such action, the
Trust Fund would be considered to hold title to, to be a mortgagee-in-possession
of, or to be an owner or operator of such Mortgaged Property within the meaning
of the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended from time to time, or any comparable law, unless the Servicer
has also previously determined, based on its reasonable judgment and a prudent
report prepared by a Person who regularly conducts environmental audits using
customary industry standards, that:
A. such Mortgaged Property is in compliance with applicable
environmental laws or, if not, that it would be in the best economic interest of
the Certificateholders to take such actions as are necessary to bring the
Mortgaged Property into compliance therewith; and
B. there are no circumstances present at such Mortgaged
Property relating to the use, management or disposal of any hazardous
substances, hazardous
63
materials, hazardous wastes, or petroleum-based materials for which
investigation, testing, monitoring, containment, clean-up or remediation could
be required under any federal, state or local law or regulation, or that if any
such materials are present for which such action could be required, that it
would be in the best economic interest of the Certificateholders to take such
actions with respect to the affected Mortgaged Property.
The cost of the environmental audit report contemplated by
this Section 3.03 shall be advanced by the Servicer, subject to the Servicer's
right to be reimbursed therefor from the Collection Account as provided in
Section 3.05(b).
If the Servicer determines, as described above, that it is in
the best economic interest of the Certificateholders to take such actions as are
necessary to bring any such Mortgaged Property into compliance with applicable
environmental laws, or to take such action with respect to the containment,
clean-up or remediation of hazardous substances, hazardous materials, hazardous
wastes, or petroleum-based materials affecting any such Mortgaged Property, then
the Servicer shall take such action as it deems to be in the best economic
interest of the Certificateholders. The cost of any such compliance,
containment, cleanup or remediation shall be advanced by the Servicer, subject
to the Servicer's right to be reimbursed therefor from the Collection Account as
provided in Section 3.05(b).
Section 3.04. Collection Account and Distribution Account.
--------------------------------------------
(a) The Servicer shall segregate and hold all funds collected
and received pursuant to each Mortgage Loan separate and apart from any of its
own funds and general assets and shall establish and maintain one or more
Collection Accounts. Each Collection Account shall be an Eligible Account.
The Servicer shall deposit in the Collection Account on a
daily basis within two Business Days of receipt, and retain therein, the
following payments and collections received or made by it after the Cut-Off Date
with respect to the Mortgage Loans:
(i) all payments on account of principal, including Principal
Prepayments, on the Mortgage Loans;
(ii) all payments on account of interest on the Mortgage Loans
adjusted to the Mortgage Interest Rate less the Servicing Fee Rate
and the amount required to maintain the Primary Insurance Policy;
(iii) all proceeds from a cash liquidation;
(iv) all Insurance Proceeds including amounts required to be
deposited pursuant to Section 3.10, other than proceeds to be held
in the Escrow Account and applied to the restoration or repair of
the Mortgaged Property or released to the Mortgagor in accordance
with the Servicer's normal servicing procedures, the loan documents
or applicable law;
64
(v) all Condemnation Proceeds affecting any Mortgaged Property which
are not released to the Mortgagor in accordance with the Servicer's normal
servicing procedures, the loan documents or applicable law; and
(vi) any amounts required to be deposited by the Servicer in connection
with any REO Property pursuant to Section 3.13.
Any interest paid on funds deposited in the Collection Account, subject
to Section 3.25, shall accrue to the benefit of the Servicer and the Servicer
shall be entitled to retain and withdraw such interest from the Collection
Account pursuant to Section 3.05(e). The foregoing requirements for deposit from
the Collection Account shall be exclusive, it being understood and agreed that,
without limiting the generality of the foregoing, payments in the nature of late
payment charges, prepayment charges that are not prepayment penalties, and
assumption fees need not be deposited by the Servicer in the Collection Account.
(b) On behalf of the Trust Fund, the Trustee shall establish and
maintain one or more accounts (such account or accounts, the "Distribution
Account"), held in trust for the benefit of the Certificateholders. On behalf of
the Trust Fund, the Servicer shall deliver to the Trustee in immediately
available funds for deposit in the Distribution Account by the close of business
New York time on the Servicer Remittance Date, that portion of the Available
Funds (calculated without regard to the references in the definition thereof to
amounts that may be deposited to the Distribution Account from a different
source as provided herein) then on deposit in the Collection Account. Amounts in
the Distribution Account shall be deemed to be held on behalf of the related
REMICs and the Grantor Trust in accordance with the REMIC distributions set
forth in Section 4.10.
(c) Funds in the Collection Account and the Distribution Account may be
invested in Permitted Investments in accordance with the provisions set forth in
Section 3.25. The Servicer shall give notice to the Trustee of the location of
the Collection Account maintained by it when established and prior to any change
thereof. The Trustee shall give notice to the Servicer and the Depositor of the
location of the Distribution Account when established and prior to any change
thereof.
(d) In the event the Servicer shall deliver to the Trustee for deposit
in the Distribution Account any amount not required to be deposited therein, it
may at any time request that the Trustee withdraw such amount from the
Distribution Account and remit to the Servicer any such amount, any provision
herein to the contrary notwithstanding. In addition, the Servicer shall deliver
to the Trustee from time to time for deposit, and the Trustee shall so deposit,
in the Distribution Account in respect of REMIC 1:
(i) any Advances, as required pursuant to Section 4.07;
(ii) any Stayed Funds, as soon as permitted by the federal bankruptcy
court having jurisdiction in such matters;
65
(iii) any prepayment penalties and premiums or amounts in connection
with the waiver of such prepayment penalties or premiums, in each case
required to be deposited pursuant to Section 3.01;
(iv) any amounts required to be deposited in the Distribution Account
pursuant to Sections 2.03, 3.04, 3.15, 3.16, 3.23, 3.28 or 4.07; and
(v) any amounts required to be deposited by the Servicer pursuant to
Section 3.11 in connection with the deductible clause in any blanket hazard
insurance policy, such deposit being made from the Servicer's own funds,
without reimbursement therefor.
(e) Promptly upon receipt of any Stayed Funds, whether from the
Servicer, a trustee in bankruptcy, or federal bankruptcy court or other source,
the Trustee shall notify the Servicer of such receipt and deposit such funds in
the Distribution Account, subject to withdrawal thereof as permitted hereunder.
In addition, the Trustee shall deposit in the Distribution Account any amounts
required to be deposited pursuant to Section 3.25 in connection with losses
realized on Permitted Investments with respect to funds held in the Distribution
Account.
Section 3.05. Permitted Withdrawals From the Collection Account.
--------------------------------------------------
The Servicer may, from time to time, withdraw from the Collection
Account for the following purposes:
(a) to remit to the Trustee for deposit in the Distribution
Account the amounts required to be so remitted pursuant to Section
3.04(b) or permitted to be so remitted pursuant to the first sentence
of Section 3.04(d);
(b) to reimburse itself for Advances and Servicing Advances;
provided that the Servicer's right to reimburse itself pursuant to this
subclause (b) is limited to amounts received on the related Mortgage
Loan which represent payments of (i) principal and/or interest
respecting which any such Advance was made or (ii) Condemnation
Proceeds, Insurance Proceeds or Liquidation Proceeds respecting which
any such Servicing Advance was made;
(c) to reimburse itself for unreimbursed Servicing Advances, any
unpaid Servicing Fees and for unreimbursed Advances to the extent that
such amounts are deemed to be Nonrecoverable Advances, and to reimburse
itself for such amounts to the extent that such amounts are
nonrecoverable from the disposition of REO Property pursuant to Section
3.03 or Section 3.13 hereof;
(d) to reimburse itself for any amounts paid pursuant to Section
3.03 (and not otherwise previously reimbursed);
(e) to pay to itself as servicing compensation (a) any interest
earned on funds in the Collection Account (all such interest to be
withdrawn monthly not later than each Servicer Remittance Date) and (b)
the Servicing Fee from that portion of any
66
payment or recovery as to interest to a particular Mortgage Loan to the
extent not retained pursuant to Section 3.04(a)(ii);
(f) to reimburse itself for any amounts paid pursuant to Section
6.03 (and not otherwise previously reimbursed); and
(g) to clear and terminate the Collection Account upon the
termination of this Agreement.
The foregoing requirements for withdrawal from the Collection
Account shall be exclusive. In the event the Servicer shall deposit in the
Collection Account any amount not required to be deposited therein, it may at
any time withdraw such amount from the Collection Account, any provision herein
to the contrary notwithstanding.
Section 3.06. Establishment of Escrow Accounts; Deposits in Escrow
----------------------------------------------------
Accounts.
---------
The Servicer shall segregate and hold all funds collected and received
pursuant to each Mortgage Loan which constitute Escrow Payments separate and
apart from any of its own funds and general assets and shall establish and
maintain one or more Escrow Accounts, in the form of time deposit or demand
accounts. A copy of any letter agreement related to such accounts shall be
furnished to the Trustee upon request. The Escrow Account shall be an Eligible
Account.
The Servicer shall deposit in the Escrow Account or Accounts on a daily
basis within two Business Days of receipt, and retain therein, (i) all Escrow
Payments collected on account of the Mortgage Loans, for the purpose of
effecting timely payment of any such items as required under the terms of this
Agreement, and (ii) all Insurance Proceeds which are to be applied to the
restoration or repair of any Mortgaged Property. The Servicer shall make
withdrawals therefrom only to effect such payments as are required under this
Agreement, and for such other purposes as shall be set forth in, or in
accordance with, Section 3.07. The Servicer shall be entitled to retain any
interest paid on funds deposited in the Escrow Account by the depository
institution other than interest on escrowed funds required by law to be paid to
the Mortgagor and, to the extent required by the related Mortgage Loan or
Applicable Regulations, the Servicer shall pay interest on escrowed funds to the
Mortgagor notwithstanding that the Escrow Account is non-interest bearing or
that interest paid thereon is insufficient for such purposes.
Section 3.07. Permitted Withdrawals From Escrow Account.
------------------------------------------
Withdrawals from the Escrow Account may be made by the Servicer (i) to
effect timely payments of ground rents, taxes, assessments, water rates, fire,
flood and hazard insurance premiums, Primary Insurance Policy premiums, if
applicable, and comparable items, (ii) to reimburse the Servicer for any
Servicing Advance made by the Servicer with respect to a related Mortgage Loan
but only from amounts received on the related Mortgage Loan which represent late
payments or Late Collections of Escrow Payments thereunder, (iii) to refund to
the Mortgagor any funds as may be determined to be overages, (iv) for transfer
to the Collection Account in accordance with the terms of
67
this Agreement, (v) for application to restoration or repair of the Mortgaged
Property, (vi) to pay to the Servicer, or to the Mortgagor to the extent
required by the related Mortgage Loan or Applicable Regulations, any interest
paid on the funds deposited in the Escrow Account, (vii) to clear and terminate
the Escrow Account on the termination of this Agreement, (viii) to transfer to
the Collection Account any insurance proceeds, or (ix) in the case of FHA Loans
and VA Loans, for transfer to the Collection Account, fire and hazard insurance
proceeds and Escrow Payments with respect to any Mortgage Loan where the FHA or
VA, as the case may be, has directed application of such funds as a credit
against the proceeds of the FHA Insurance Contract or the VA Guaranty Agreement.
As part of its servicing duties, the Servicer shall pay to the Mortgagor
interest on funds in the Escrow Account, to the extent required by the related
Mortgage Loan or Applicable Regulations, and to the extent that interest earned
on funds in the Escrow Account is insufficient, shall pay such interest from its
own funds, without any reimbursement therefor.
In the event the Servicer shall deposit in the Escrow Account any
amount not required to be deposited therein, it may at any time withdraw such
amount from the Escrow Account, any provision herein to the contrary
notwithstanding.
Section 3.08. Payment of Taxes, Insurance and Other Charges;
----------------------------------------------
Collections Thereunder.
-----------------------
With respect to each first lien Mortgage Loan, the 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 Insurance Policy premiums and
fire, flood 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 the Escrow Account which shall have
been estimated and accumulated by the Servicer in amounts sufficient for such
purposes, as allowed under the terms of the Mortgage or Applicable Regulations.
To the extent that the Mortgage does not provide for Escrow Payments, the
Servicer shall determine that any such payments are made by the Mortgagor at the
time they first become due. The Servicer assumes full responsibility for the
timely payment of all such bills and shall effect timely payments of all such
bills irrespective of the Mortgagor's faithful performance in the payment of
same or the making of the Escrow Payments and shall make Servicing Advances from
its own funds to effect such payments.
The Servicer, on behalf of the Trustee, as mortgagee, will maintain in
full force and effect (to the extent a Mortgage Loan has a Primary Insurance
Policy) a Primary Insurance Policy issued by a Qualified Insurer with respect to
each Mortgage Loan for which such coverage is required. Such coverage will be
maintained until the Combined Loan-to-Value Ratio of the related Mortgage Loan
is reduced to 80% or less. The Servicer will not cancel or refuse to renew any
Primary Insurance Policy in effect on the Closing Date that is required to be
kept in force under this Agreement unless a replacement Primary Insurance Policy
for such cancelled or non-renewed policy is
68
obtained from and maintained with a Qualified Insurer. The Servicer shall not
take any action which would result in non-coverage under any applicable Primary
Insurance Policy of any loss which, but for the actions of the Servicer, would
have been covered thereunder. In connection with any assumption or substitution
agreement entered into or to be entered into pursuant to Section 3.14, the
Servicer shall promptly notify the insurer under the related Primary Insurance
Policy, if any, of such assumption or substitution of liability in accordance
with the terms of such policy and shall take all actions which may be required
by such insurer as a condition to the continuation of coverage under the Primary
Insurance Policy. If such Primary Insurance Policy is terminated as a result of
such assumption or substitution of liability, the Servicer shall obtain a
replacement Primary Insurance Policy as provided above.
In connection with its activities as servicer, the Servicer agrees to
prepare and present, on behalf of itself and the Trustee, claims to the insurer
under any Primary Insurance Policy in a timely fashion in accordance with the
terms of such policies and, in this regard, to take such action as shall be
necessary to permit recovery under any Primary Insurance Policy respecting a
defaulted Mortgage Loan. Pursuant to Section 3.04, any amounts collected by the
Servicer under any Primary Insurance Policy shall be deposited in the Collection
Account, subject to withdrawal pursuant to Section 3.05.
Section 3.09. Transfer of Accounts.
---------------------
The Servicer may transfer the Collection Account or the Escrow Account
to a different depository institution from time to time. Upon such transfer, the
Servicer shall deliver to the Trustee and the Depositor, a certification or
letter agreement, as the case may be, as required pursuant to Sections 3.04 and
3.06.
Section 3.10. Maintenance of Hazard Insurance.
--------------------------------
The Servicer shall cause to be maintained for each Mortgage Loan fire
and hazard insurance with extended coverage as is customary in the area where
the Mortgaged Property is located in an amount which is at least equal to the
lesser of (i) the amount necessary to fully compensate for any damage or loss to
the improvements which are a part of such property on a replacement cost basis,
(ii) the Principal Balance of the Mortgage Loan, in each case in an amount not
less than such amount as is necessary to prevent the Mortgagor and/or the
Mortgagee from becoming a co-insurer or (iii) the amount required under
applicable HUD/FHA regulations. If the Mortgaged Property is in an area
identified in the Federal Register by the Flood Emergency Management Agency as
having special flood hazards and flood insurance has been made available, the
Servicer will cause to be maintained a flood insurance policy meeting the
requirements of the current guidelines of the Federal Insurance Administration
with a generally acceptable insurance carrier, in an amount representing
coverage not less than the least of (i) the Principal Balance of the Mortgage
Loan, (ii) the maximum insurable value of the improvements securing such
Mortgage Loan or (iii) the maximum amount of insurance which is available under
the Flood Disaster Protection Act of 1973, as amended. The Servicer shall also
maintain on the REO Property for the benefit of the Certificateholders, (x) fire
and hazard insurance with extended coverage in an amount which is at least equal
69
to the replacement cost of the improvements which are a part of such property,
(y) public liability insurance and, (z) to the extent required and available
under the Flood Disaster Protection Act of 1973, as amended, flood insurance in
an amount as provided above. Any amounts collected by the Servicer under any
such policies other than amounts to be deposited in the Escrow Account and
applied to the restoration or repair of the Mortgaged Property or REO Property,
or released to the Mortgagor in accordance with the Servicer's normal servicing
procedures, shall be deposited in the Collection Account, subject to withdrawal
pursuant to Section 3.05. It is understood and agreed that no earthquake or
other additional insurance is required to be maintained by the Servicer or the
Mortgagor or maintained on property acquired in respect of the Mortgage Loan,
other than pursuant to such Applicable Regulations as shall at any time be in
force and as shall require such additional insurance. All such policies shall be
endorsed with standard mortgagee clauses with loss payable to the Servicer and
shall provide for at least thirty days prior written notice of any cancellation,
reduction in the amount of or material change in coverage to the Servicer. The
Servicer shall not interfere with the Mortgagor's freedom of choice in selecting
either his insurance carrier or agent; provided, however, that the Servicer
shall not accept any such insurance policies from insurance companies unless
such companies currently reflect a general policy rating of B:VI or better in
Best's Key Rating Guide and are licensed to do business in the state wherein the
property subject to the policy is located.
Section 3.11. Maintenance of Mortgage Impairment Insurance Policy.
----------------------------------------------------
In the event that the Servicer shall obtain and maintain a blanket
policy issued by an insurer that has a general policy rating of B:VI or better
in Best's Key Rating Guide insuring against hazard losses on all of the Mortgage
Loans, then, to the extent such policy provides coverage in an amount equal to
the amount required pursuant to Section 3.10 and otherwise complies with all
other requirements of Section 3.10, it shall conclusively be deemed to have
satisfied its obligations as set forth in Section 3.10, it being understood and
agreed that such policy may contain a deductible clause, in which case the
Servicer shall, in the event that there shall not have been maintained on the
related Mortgaged Property or REO Property a policy complying with Section 3.10,
and there shall have been a loss which would have been covered by such policy,
deliver to the Trustee for deposit in the Distribution Account the amount not
otherwise payable under the blanket policy because of such deductible clause,
which amount shall not be reimbursable to the Servicer from the Trust Fund. In
connection with its activities as servicer of the Mortgage Loans, the Servicer
agrees to prepare and present, on behalf of the Trustee, claims under any such
blanket policy in a timely fashion in accordance with the terms of such policy.
Upon request of the Trustee, the Servicer shall cause to be delivered to the
Trustee a certified true copy of such policy and a statement from the insurer
thereunder that such policy shall in no event be terminated or materially
modified without thirty days prior written notice to the Trustee.
Section 3.12. Fidelity Bond, Errors and Omissions Insurance.
----------------------------------------------
The Servicer shall maintain, at its own expense, a blanket fidelity
bond (the "Fidelity Bond") and an errors and omissions insurance policy, with
broad coverage
70
with financially responsible companies on all officers, employees or other
persons acting in any capacity with regard to the Mortgage Loans to handle
funds, money, documents and papers relating to the Mortgage Loans. The Fidelity
Bond and errors and omissions insurance shall be in the form of the Mortgage
Banker's Blanket Bond and shall protect and insure the Servicer against losses,
including forgery, theft, embezzlement, fraud, errors and omissions and
negligent acts of such persons. Such Fidelity Bond shall also protect and insure
the Servicer against losses in connection with the failure to maintain any
insurance policies required pursuant to this Agreement and the release or
satisfaction of a Mortgage Loan without having obtained payment in full of the
indebtedness secured thereby. No provision of this Section 3.12 requiring the
Fidelity Bond and errors and omissions insurance shall diminish or relieve the
Servicer from its duties and obligations as set forth in this Agreement. The
minimum coverage under any such bond and insurance policy shall be at least
equal to the corresponding amounts required by FNMA in the FNMA MBS Selling and
Servicing Guide or by FHLMC in the FHLMC Servicer's Guide. Upon request of the
Trustee, the Servicer shall cause to be delivered to the Trustee a certified
true copy of the Fidelity Bond and errors and omissions insurance policy and a
statement from the surety and the insurer that such Fidelity Bond and errors and
omissions insurance policy shall in no event be terminated or materially
modified without thirty days' prior written notice to the Trustee.
Section 3.13. Title, Management and Disposition of REO Property.
--------------------------------------------------
(a) In the event that title to a Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be taken (pursuant to a limited power of attorney to be provided by the
Trustee to the Servicer) in the name of the Trustee, on behalf of the
Certificateholders, or in the event the Trustee is not authorized or permitted
to hold title to real property in the state where the REO Property is located,
or would be adversely affected under the "doing business" or tax laws of such
state by so holding title, the deed or certificate of sale shall be taken in the
name of such Person or Persons as shall be consistent with an Opinion of Counsel
obtained by the Servicer from an attorney duly licensed to practice law in the
state where the REO Property is located. Any Person or Persons holding such
title other than the Trustee shall acknowledge in writing that such title is
being held as nominee for the benefit of the Trustee.
(b) In the event that the Trust Fund acquires any REO Property as
aforesaid or otherwise in connection with a default or imminent default on a
Mortgage Loan, the Servicer shall dispose of such REO Property before the end of
the third calendar year beginning after the year of its acquisition by the Trust
Fund for purposes of Section 860G(a)(8) of the Code or, at the expense of the
Trust Fund, request from the Internal Revenue Service, more than 60 days before
the day on which the above-mentioned grace period would otherwise expire, an
extension of the above-mentioned grace period, unless the Servicer obtains an
Opinion of Counsel, addressed to the Servicer and the Trustee, to the effect
that the holding by the Trust Fund of such REO Property subsequent to such
period will not: (i) result in the imposition of any tax on "prohibited
transactions" as defined in Section 860F of the Code; or (ii) cause any REMIC
constituting any part of the Trust Fund to fail to qualify as a REMIC at any
time
71
that any Certificates are outstanding, in which case the Trust Fund may continue
to hold such REO Property (subject to any conditions contained in such Opinion
of Counsel). The Servicer shall be entitled to be reimbursed from the Collection
Account for any costs incurred in obtaining such Opinion of Counsel, as provided
in Section 3.05.
Subject to compliance with applicable laws and regulations as shall at
any time be in force, and notwithstanding any other provisions of this
Agreement, no REO Property acquired by the Trust Fund shall be rented (or
allowed to continue to be rented) or otherwise used by or on behalf of the Trust
Fund in such a manner or pursuant to any terms that would: (i) cause such REO
Property to fail to qualify as "foreclosure property" within the meaning of
Section 860G(a)(8) of the Code; or (ii) subject any REMIC constituting part of
the Trust Fund to the imposition of any federal income taxes on the income
earned from such REO Property, including any taxes imposed by reason of Sections
860F or 860G(c) of the Code, unless the Servicer has agreed to indemnify and
hold harmless the Trust Fund with respect to the imposition of any such taxes.
The Servicer shall manage, conserve, protect and operate each REO
Property for the Certificateholders and the Trust Fund solely for the purpose of
its prompt disposition and sale in a manner which does not cause such REO
Property to fail to qualify as "foreclosure property" within the meaning of
Section 860G(a)(8) of the Code or result in the receipt by the related REMIC of
any "income from non-permitted assets" within the meaning of Section
860F(a)(2)(B) of the Code, or any "net income from foreclosure property" which
is subject to taxation under the REMIC Provisions. The Servicer shall cause each
REO Property to be inspected promptly upon the acquisition of title thereto and
shall cause each REO Property to be inspected at least annually thereafter. The
Servicer shall make or cause to be made a written report of each such
inspection. Such reports shall be retained in the Mortgage Servicing File and
copies thereof shall be forwarded by the Servicer to the Trustee upon request.
The Servicer shall attempt to sell the same (and may temporarily rent the same)
on such terms and conditions as the Servicer deems to be in the best interest of
the Certificateholders and the Trust Fund.
With respect to each REO Property, the Servicer shall segregate and
hold all funds collected and received in connection with the operation of the
REO Property separate and apart from its own funds or general assets and shall
establish and maintain with respect to all REO Property an REO Account or
Accounts in the form of a time deposit or demand account, unless an Opinion of
Counsel is obtained by the Servicer to the effect that the classification as a
REMIC for federal income tax purposes of the arrangement under which the
Mortgage Loans and the REO Property is held will not be adversely affected by
holding such funds in another manner. Such REO Account shall be established with
the Servicer or with a commercial bank, a mutual savings bank or a savings and
loan association. The creation of any REO Account shall be evidenced by a letter
agreement, in the case of an account held by a depository. In either case, an
original of such certification or letter agreement shall be furnished to the
Trustee upon request.
72
The Servicer shall deposit or cause to be deposited, on a daily basis,
within two Business Days of receipt, in each REO Account, all revenues received
with respect to the related REO Property and shall withdraw therefrom funds
necessary for the proper operation, management and maintenance of the REO
Property, including the cost of maintaining any hazard insurance pursuant to
Section 3.10 hereof and the fees of any managing agent acting on behalf of the
Servicer. The Servicer shall have the right to earn interest, if any, on funds
deposited in such REO Account. On or before each Determination Date, the
Servicer shall withdraw from each REO Account and deposit into the Collection
Account the net receipts from the REO Property on deposit in the REO Account and
retain any interest.
The Servicer shall furnish to the Trustee, on each Servicer Remittance
Date, an operating statement for each REO Property covering the operation of
each REO Property for the previous month. Such operating statement shall be
accompanied by such other information as the Trustee shall reasonably request.
The Servicer shall use its best efforts to dispose of the REO Property
as promptly as is practically consistent with protecting the Certificateholders'
interests.
Each REO Disposition shall be carried out by the Servicer at such price
and upon such terms and conditions as the Servicer deems to be in the best
interest of the Certificateholders. If as of the date title to any REO Property
was acquired by the Servicer there were outstanding unreimbursed Servicing
Advances with respect to the REO Property, the Servicer, upon an REO Disposition
of such REO Property, shall be entitled to reimbursement for any related
unreimbursed Servicing Advances from proceeds received in connection with such
REO Disposition. The proceeds from the REO Disposition, net of any payment to
the Servicer as provided above, shall be deposited in the REO Account and shall
be transferred to the Collection Account on the Determination Date in the month
following receipt thereof for distribution on the succeeding Servicer Remittance
Date in accordance with Section 4.01.
Any REO Disposition shall be for cash only (unless changes in the REMIC
Provisions made subsequent to the Startup Day allow a sale for other
consideration and an Opinion of Counsel is obtained by the Servicer to the
effect that such sale shall not cause any REMIC constituting part of the Trust
Fund to fail to qualify as a REMIC).
The Servicer shall not complete, or allow to be completed, a
foreclosure or accept a deed in lieu of a foreclosure with respect to any
Ineligible Foreclosure Property Loan if it would cause the Trustee to hold REO
Property from Ineligible Foreclosure Property Loans with an aggregate value in
excess of 0.75% of the aggregate outstanding Principal Balance of the Mortgage
Loans as of the end of the prior Collection Period. If the Value of REO Property
from Ineligible Foreclosure Property Loans equals or exceeds 1% of the
outstanding Principal Balance of the Mortgage Loans as of the end of any
Collection Period, the Seller shall purchase at the Purchase Price on or prior
to the related Distribution Date sufficient REO Property from Ineligible
Foreclosure Property Loans to cause the Trustee to hold REO Property from
Ineligible Foreclosure Property Loans with
73
a Value of less than 1% of the outstanding Principal Balance of the Mortgage
Loans and such proceeds shall be treated as received during the related
Prepayment Period. If the Seller shall fail to purchase any REO Property as
described in the preceding sentences, the Servicer shall sell such REO Property
as soon as reasonably practicable and in a commercially reasonable manner. For
purposes of this paragraph the "Value" of REO Property from a Ineligible
Foreclosure Property Loan shall be treated as equal to the Principal Balance of
the related Ineligible Foreclosure Property Loan plus interest that had accrued
on such Mortgage Loan as of the date of acquisition of the REO Property by the
Trustee. The Trustee shall reconvey a Mortgage Loan so purchased in the same
manner and under the same terms as specified in Section 2.03.
Section 3.14. Due-on-Sale Clauses; Assumption and Substitution
------------------------------------------------
Agreements.
-----------
When a Mortgaged Property has been or is about to be conveyed by the
Mortgagor, the Servicer shall, to the extent it has knowledge of such conveyance
or prospective conveyance, exercise its rights to accelerate the maturity of the
related Mortgage Loan under any "due-on-sale" clause contained in the related
Mortgage or Mortgage Note; provided, however, that the Servicer shall not
exercise any such right if the "due-on-sale" clause, in the reasonable belief of
the Servicer, is not enforceable under applicable law. An Opinion of Counsel at
the expense of the Servicer (which expense shall constitute a Servicing Advance)
delivered to the Trustee and the Depositor to the foregoing effect shall
conclusively establish the reasonableness of such belief. In such event, the
Servicer shall make reasonable efforts to enter into an assumption and
modification agreement with the Person to whom such property has been or is
about to be conveyed, pursuant to which such Person becomes liable under the
Mortgage Note and, unless prohibited by applicable law or the Mortgage, the
Mortgagor remains liable thereon. If the foregoing is not permitted under
applicable law, the Servicer is authorized to enter into a substitution of
liability agreement with such Person, pursuant to which the original Mortgagor
is released from liability and such Person is substituted as Mortgagor and
becomes liable under the Note. The Mortgage Loan, as assumed, shall conform in
all respects to the requirements, representations and warranties of this
Agreement. The Servicer shall notify the Trustee that any such assumption or
substitution agreement has been completed by forwarding to the Trustee (or the
Custodian, as the case may be) the original copy of such assumption or
substitution agreement (indicating the Mortgage File to which it relates) which
copy shall be added by the Trustee (or the Custodian, as the case may be) to the
related Mortgage File and which shall, for all purposes, be considered a part of
such Mortgage File to the same extent as all other documents and instruments
constituting a part thereof. The Servicer shall be responsible for recording any
such assumption or substitution agreements. In connection with any such
assumption or substitution agreement, the Monthly Payment on the related
Mortgage Loan shall not be changed but shall remain as in effect immediately
prior to the assumption or substitution, the stated maturity or outstanding
principal amount of such Mortgage Loan shall not be changed nor shall any
required monthly payments of principal or interest be deferred or forgiven. Any
fee collected by the Servicer for consenting to any such conveyance or entering
into an assumption or substitution agreement shall be retained by or paid to the
Servicer as additional servicing compensation.
74
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Mortgage Loan by operation of law or any assumption which the Servicer may be
restricted by law from preventing, for any reason whatsoever.
Section 3.15. Notification of Adjustments.
----------------------------
On each Adjustment Date, the Servicer shall make Mortgage Interest Rate
adjustments for each Group 2 Mortgage Rate Loan in compliance with the
requirements of the related Mortgage and Mortgage Note and Applicable
Regulations. The Servicer shall execute and deliver the notices required by each
Mortgage and Mortgage Note and Applicable Regulations regarding Mortgage
Interest Rate adjustments. The Servicer also shall provide timely notification
to the Trustee of all applicable data and information regarding such Mortgage
Interest Rate adjustments and the Servicer's methods of implementing such
Mortgage Interest Rate adjustments. Upon the discovery by the Servicer or the
Trustee that the Servicer has failed to adjust or has incorrectly adjusted a
Mortgage Interest Rate or a Monthly Payment pursuant to the terms of the related
Mortgage Note and Mortgage, the Servicer shall deliver to the Trustee for
deposit in the Distribution Account from its own funds the amount of any
interest loss caused thereby without reimbursement therefor; provided, however,
the Servicer shall be held harmless with respect to any Mortgage Interest Rate
adjustments made by any servicer prior to the Servicer.
Section 3.16. Optional and Mandatory Purchases of Mortgage Loans by
-----------------------------------------------------
Seller.
-------
The Servicer (or an affiliate of the Servicer) may, at its option,
repurchase a Mortgage Loan or REO Property which becomes 120 or more days
delinquent or for which the Servicer has accepted a deed in lieu of foreclosure.
Prior to repurchase pursuant to this Section 3.16, the Servicer shall be
required to continue to make monthly advances pursuant to Section 4.07. The
Servicer (or an affiliate of the Servicer) shall not use any procedure in
selecting Mortgage Loans to be repurchased which is materially adverse to the
interests of the Certificateholders. The Servicer (or an affiliate of the
Servicer) shall purchase such (i) delinquent Mortgage Loan at a price equal to
the Principal Balance of the Mortgage Loan plus accrued interest thereon at the
Mortgage Interest Rate from the date to which interest has last been paid to the
Trust Fund to the date of purchase plus any unreimbursed Servicing Advances and
Advances or (ii) REO Property at its fair market value as determined in good
faith by the Servicer. Any such repurchase of a Mortgage Loan or REO Property
pursuant to this Section 3.16 shall be accomplished by delivery to the Trustee
for deposit in the Distribution Account of the amount of the purchase price. The
Trustee shall immediately effectuate the conveyance of such delinquent Mortgage
Loan or REO Property to the Servicer (or an affiliate of the Servicer) to the
extent necessary, including the prompt delivery of all documentation to the
Servicer (or an affiliate of the Servicer).
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Section 3.17. Trustee to Cooperate; Release of Files.
---------------------------------------
(a) Upon the payment in full of any Mortgage Loan (including any
liquidation of such Mortgage Loan through foreclosure or otherwise, or the
receipt by the Servicer of a notification that payment in full will be escrowed
in a manner customary for such purposes), the Servicer shall deliver to the
Trustee (or the Custodian as the case may be) two executed copies of a completed
"Request for Release" substantially in the form of Exhibit E. Upon receipt of
such Request for Release of Documents, the Trustee (or the Custodian as the case
may be) shall promptly release the related Mortgage File, in trust to (i) the
Servicer, or (ii) such other party identified in the related Request for
Release. Upon any such payment in full, or the receipt of such notification that
such funds have been placed in escrow, the Servicer shall direct the Trustee in
writing to execute an instrument of satisfaction (or assignment of Mortgage
without recourse) regarding the Mortgaged Property relating to such Mortgage,
which instrument of satisfaction or assignment, as the case may be, shall be
delivered to the Person or Persons entitled thereto against receipt therefor of
payment in full, it being understood and agreed that no expense incurred in
connection with such instrument of satisfaction or assignment, as the case may
be, shall be chargeable to the Collection Account. In lieu of executing any such
satisfaction or assignment, as the case may be, the Servicer may prepare and
submit to the Trustee a satisfaction (or assignment without recourse, if
requested by the Person or Persons entitled thereto) in form for execution by
the Trustee with all requisite information completed by the Servicer; in such
event, the Trustee shall execute and acknowledge such satisfaction or
assignment, as the case may be, and deliver the same with the related Mortgage
File, as aforesaid.
(b) From time to time and as appropriate in the servicing of any
Mortgage Loan, including, without limitation, foreclosure or other comparable
conversion of a Mortgage Loan or collection under any insurance policy relating
to a Mortgage Loan, the Trustee shall (except in the case of the payment or
liquidation pursuant to which the related Mortgage File is released to an escrow
agent or an employee, agent or attorney of the Trustee), upon written request of
the Servicer and delivery to the Trustee (or the Custodian, as the case may be)
of two executed copies of a "Request for Release" substantially in the form of
Exhibit E signed by a Servicing Officer, release the related Mortgage File to
the Servicer and shall execute such documents as shall be necessary to the
prosecution of any such proceedings, including, without limitation, an
assignment without recourse of the related Mortgage to the Servicer. Such
receipt shall obligate the Servicer to return the Mortgage File to the Trustee
(or the Custodian, as the case may be) when the need therefor by the Servicer no
longer exists unless the Mortgage Loan shall be liquidated, in which case, upon
receipt of a Request for Release evidencing such liquidation, the receipt shall
be released by the Trustee (or the Custodian, as the case may be) to the
Servicer.
(c) Subject to Section 3.01, the Servicer shall have the right to
accept applications of Mortgagors for consent to (i) partial releases of
Mortgages, (ii) alterations, (iii) removal, demolition or division of properties
subject to Mortgages and (iv) second mortgage subordination agreements. No
application for approval shall be considered by the Servicer unless: (w) it has
received an Opinion of Counsel, addressed to the Trustee
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(which opinion shall not be an expense of the Trustee or the Trust Fund) that
such sale, disposition, substitution, acquisition or contribution will not
affect adversely the status of any REMIC constituting part of the Trust Fund as
a REMIC or cause any REMIC constituting part of the Trust Fund to be subject to
a tax on "prohibited transactions" or "contributions" pursuant to the REMIC
Provisions; (x) the provisions of the related Note and Mortgage have been
complied with; (y) the Combined Loan-to-Value Ratio and debt-to-income ratio
after any release does not exceed the maximum Combined Loan-to-Value Ratio and
debt-to-income ratio established in accordance with the underwriting standards
of the Mortgage Loans; and (z) the lien priority of the related Mortgage is not
affected. Upon receipt by the Trustee of a Servicing Officer's certificate
setting forth the action proposed to be taken in respect of a particular
Mortgage Loan and certifying that the criteria set forth in the immediately
preceding sentence have been satisfied, the Trustee shall execute and deliver to
the Servicer the consent or partial release so requested by the Servicer. A
proposed form of consent or partial release, as the case may be, shall accompany
any Servicing Officer's certificate delivered by the Servicer pursuant to this
paragraph.
Section 3.18. Servicing Compensation.
-----------------------
As compensation for its activities hereunder, the Servicer shall be
entitled to retain the amount of the Servicing Fee with respect to each Mortgage
Loan (including REO Properties). The Servicer shall be entitled to retain
additional servicing compensation in the form of release fees, bad check
charges, assumption fees, modification or extension fees, late payment charges,
or any other service-related fees, Insurance Proceeds and Liquidation Proceeds
not required to be deposited in the Collection Account and similar items, to the
extent collected from Mortgagors. Additionally, the Servicer shall be entitled
to the Special Servicing Fee, payable in accordance with Section 4.02.
Section 3.19. Annual Statement as to Compliance.
----------------------------------
(a) The Servicer, at its own expense, will deliver to the Trustee and
the Depositor, not later than 90 days following the end of the fiscal year of
the Servicer which as of the Startup Day ends on the last day of December,
commencing in 2001, a Servicing Officer's certificate stating, as to each signer
thereof, that (i) a review of the activities of the Servicer during such
preceding fiscal year (or such shorter period in the case of the first such
report) and of performance under this Agreement has been made under such
officers' supervision, and (ii) to the best of such officers' knowledge, based
on such review, the Servicer has fulfilled all its obligations under this
Agreement for such year, or, if there has been a default in the fulfillment of
all such obligations, specifying each such default known to such officers and
the nature and status thereof including the steps being taken by the Servicer to
remedy such default.
(b) Delivery of such reports, information and documents to the Trustee
is for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable, from information contained therein, including the Servicer's
compliance with any of its
77
covenants hereunder (as to which the Trustee is entitled to rely exclusively on
Officers' Certificates).
Section 3.20. Annual Independent Certified Public Accountants' Reports.
---------------------------------------------------------
(a) Not later than 90 days following the end of each fiscal year of the
Servicer commencing in 2001, the Servicer, at its expense, shall cause a
nationally recognized firm of independent certified public accountants to
furnish to the Trustee and the Depositor a report stating that (i) it has
obtained a letter of representation regarding certain matters from the
management of the Servicer which includes an assertion that the Servicer has
complied with certain minimum residential mortgage loan servicing standards,
identified in either the Uniform Single Attestation Program for Mortgage Bankers
established by the Mortgage Bankers Association of America or the Audit Program
for Mortgages serviced by FHLMC, with respect to the servicing of residential
mortgage loans during the most recently completed fiscal year and (ii) on the
basis of an examination conducted by such firm in accordance with standards
established by the American Institute of Certified Public Accountants, such
representation is fairly stated in all material respects, subject to such
exceptions and other qualifications that may be appropriate. Immediately upon
receipt of such report, the Servicer shall furnish a copy of such report to the
Trustee, the Depositor and each Rating Agency. Copies of such statement shall be
provided by the Trustee to any Certificateholder upon request at the Servicer's
expense, provided that such statement is delivered by the Servicer to the
Trustee.
(b) Delivery of such reports, information and documents to the Trustee
is for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable, from information contained therein, including the Servicer's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
(c) The Trustee shall, on behalf of the Trust Fund, prepare, sign and
file with the Securities and Exchange Commission any and all reports, statements
and information respecting the Trust which the Depositor determines are required
to be filed with the Securities and Exchange Commission pursuant to Sections
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, each such
report, statement and information to be filed on or prior to the required filing
date for such report, statement or information. Upon the request of the Trustee,
each of the Seller, the 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.
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Section 3.21. Access to Certain Documentation and Information Regarding
---------------------------------------------------------
the Mortgage Loans.
-------------------
The Servicer shall provide to the Trustee, Certificateholders that are
federally insured savings and loan associations, the Office of Thrift
Supervision, the FDIC and the supervisory agents and examiners of each of the
foregoing (which, in the case of supervisory agents and examiners, may be
required by applicable state and federal regulations) access to the
documentation regarding the Mortgage Loans, such access being afforded without
charge but only upon reasonable request and during normal business hours at the
offices of the Servicer designated by it.
Section 3.22. Reserved.
---------
Section 3.23. Obligations of the Servicer in Respect of Compensating
------------------------------------------------------
Interest.
---------
Not later than the close of business on each Servicer Remittance Date,
the Servicer shall deliver to the Trustee for deposit in the Distribution
Account an amount ("Compensating Interest") equal to the lesser of (A) the
aggregate of the Prepayment Interest Shortfalls on the Actuarial Mortgage Loans
for the related Distribution Date resulting from Principal Prepayments on the
Actuarial Mortgage Loans during the related Prepayment Period and (B) 50% of its
aggregate Servicing Fee received in the related Collection Period. The Servicer
shall apply Compensating Interest to offset any Prepayment Interest Shortfalls
on the Actuarial Mortgage Loans. The Servicer shall not have the right to
reimbursement for any amounts remitted to the Trustee in respect of Compensating
Interest. Such amounts so remitted shall be included in the Available Funds and
distributed therewith on the next Distribution Date. The Servicer shall not be
obligated to pay Compensating Interest with respect to Prepayment Interest
Shortfalls on Simple Interest Mortgage Loans or Relief Act Interest Shortfalls.
Section 3.24. Obligations of the Servicer in Respect of Mortgage
--------------------------------------------------
Interest Rates and Monthly Payments.
------------------------------------
In the event that a shortfall in any collection on or liability with
respect to any Mortgage Loan results from or is attributable to adjustments to
Mortgage Interest Rates, Monthly Payments or Principal Balances that were made
by the Servicer in a manner not consistent with the terms of the related
Mortgage Note and this Agreement, the Servicer, upon discovery or receipt of
notice thereof, immediately shall deliver to the Trustee for deposit in the
Distribution Account from its own funds the amount of any such shortfall and
shall indemnify and hold harmless the Trust Fund, the Trustee, the Depositor and
any successor servicer in respect of any such liability. Such indemnities shall
survive the termination or discharge of this Agreement.
Section 3.25. Investment of Funds in the Collection Account and the
-----------------------------------------------------
Distribution Account.
---------------------
(a) The Servicer may direct any depository institution maintaining the
Collection Account and the Trustee may direct any depository institution
maintaining the
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Distribution Account (for purposes of this Section 3.25, each an "Investment
Account"), to invest the funds in such Investment Account in one or more
Permitted Investments bearing interest or sold at a discount, and maturing,
unless payable on demand, (i) no later than the Business Day immediately
preceding the date on which such funds are required to be withdrawn from such
account pursuant to this Agreement, if a Person other than the Trustee is the
obligor thereon, and (ii) no later than the date on which such funds are
required to be withdrawn from such account pursuant to this Agreement, if the
Trustee is the obligor thereon. All such Permitted Investments shall be held to
maturity, unless payable on demand. Any investment of funds in an Investment
Account shall be made in the name of the Trustee or the Servicer, as applicable
(in its capacity as such) or in the name of a nominee of the Trustee. The
Trustee shall be entitled to sole possession (except with respect to investment
direction of funds held in the Collection Account) over each such investment and
the income thereon, and any certificate or other instrument evidencing any such
investment shall be delivered directly to the Trustee or its agent, together
with any document of transfer necessary to transfer title to such investment to
the Trustee or its nominee. In the event amounts on deposit in an Investment
Account are at any time invested in a Permitted Investment payable on demand,
the Trustee shall at the direction of the Servicer:
(x) consistent with any notice required to be
given thereunder, demand that payment thereon be made on
the last day such Permitted Investment may otherwise
mature hereunder in an amount equal to the lesser of (1)
all amounts then payable thereunder and (2) the amount
required to be withdrawn on such date; and
(y) demand payment of all amounts due thereunder
promptly upon determination by a Responsible Officer of
the Trustee that such Permitted Investment would not
constitute a Permitted Investment in respect of funds
thereafter on deposit in the Investment Account.
(b) All income and gain realized from the investment of funds in the
Collection Account shall be for the benefit of the Servicer. The Servicer shall
deposit in the Collection Account the amount of any loss incurred in respect of
any such Permitted Investment made with funds in such account immediately upon
realization of such loss. All income and gain realized from the investment of
funds in the Distribution Account shall be for the benefit of the Trustee. The
Trustee shall deposit in the Distribution Account the amount of any loss
incurred on Permitted Investments in the Distribution Account.
(c) Except as otherwise expressly provided in this Agreement, if any
default occurs in the making of a payment due under any Permitted Investment, or
if a default occurs in any other performance required under any Permitted
Investment, the Trustee may and, subject to Section 8.01 and Section 8.02(a)(v),
upon the request of the Holders of Certificates representing more than 50% of
the Voting Rights allocated to any Class of Certificates, shall take such action
as may be appropriate to enforce such
80
payment or performance, including the institution and prosecution of appropriate
proceedings.
The Trustee shall not in any way be held liable by reason of any
insufficiency in any Account held by the Trustee resulting from any investment
loss on any Permitted Investment included therein (except to the extent that the
Trustee is the obligor and has defaulted thereon).
Section 3.26. Liability of Servicer; Indemnification.
---------------------------------------
(a) Subject to clause (b) below and Section 6.03, the Servicer (except
the Trustee if it is required to succeed the Servicer hereunder) indemnifies and
holds the Trustee, the Seller, the Depositor and each Certificateholder harmless
against any and all claims, losses, penalties, fines, forfeitures, reasonable
legal fees and related costs, judgments, and any other costs, fees and expenses
that the Trustee, the Depositor and any Certificateholder may sustain in any way
related to the failure of the Servicer to perform its duties and service the
Mortgage Loans in compliance with the Servicing Standards. The Servicer shall
immediately notify the Trustee, the Depositor and each Certificateholder if a
claim is made that may result in such claims, losses, penalties, fines,
forfeitures, legal fees or related costs, judgments, or any other costs, fees
and expenses, and the Servicer shall assume (with the consent of the Trustee)
the defense of any such claim and pay all expenses in connection therewith,
including reasonable counsel fees, and promptly pay, discharge and satisfy any
judgment or decree which may be entered against the Servicer, the Trustee, the
Depositor and/or Certificateholder in respect of such claim. The provisions of
this Section 3.26 shall survive the termination of this Agreement and the
payment of the outstanding Certificates.
(b) None of the Depositor, the Seller, the Servicer, or any of the
directors, officers, employees or agents of the Depositor, the Seller or the
Servicer shall be under any liability to the Trust Fund or the
Certificateholders for any action taken, or for refraining from the taking of
any action, in good faith pursuant to this Agreement, or for errors in judgment;
provided, however, that this provision shall not protect the Depositor, the
Seller or the Servicer or any such Person against any breach of warranties or
representations made herein, or against any specific liability imposed on the
Servicer for a breach of the Servicing Standard, or against any liability which
would otherwise be imposed by reason of its respective willful misfeasance, bad
faith, fraud or negligence in the performance of its duties or by reasons of
negligent disregard of its respective obligations or duties hereunder.
The Depositor, the Servicer, the Seller and any director, officer,
employee or agent of the Depositor, the Seller or the Servicer, may rely in good
faith on any document of any kind which, prima facie, is properly executed and
submitted by any appropriate Person with respect to any matters arising
hereunder. The Depositor, the Servicer, the Seller, and any director, officer,
employee or agent of the Depositor, the Seller or the Servicer shall be
indemnified and held harmless by the Trust Fund 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 incurred in
81
connection with any legal action incurred by reason of its respective
misfeasance, bad faith, fraud or negligence, a breach of a representation or
warranty hereunder or (in the case of the Servicer) a breach of the Servicing
Standard in the performance of its respective duties or by reason of negligent
disregard of its respective obligations or duties hereunder. Neither the
Depositor, the Seller nor the Servicer shall be under any obligation to appear
in, prosecute or defend any legal action unless such action is related to its
respective duties under this Agreement and in its opinion does not expose it to
any expense or liability; provided, however, that the Depositor, the Seller or
the Servicer may in its discretion undertake any action related to its
obligations hereunder which it may deem necessary or desirable with respect to
this Agreement and the rights and duties of the parties hereto and the interests
of the Certificateholders hereunder.
Section 3.27. Reports of Foreclosure and Abandonment of Mortgaged
--------------------------------------------------
Properties.
-----------
On or before the last day of February of each year beginning in 2002,
the Servicer shall file the reports of foreclosure and abandonment of any
Mortgaged Property required by Section 6050J of the Code with the Internal
Revenue Service and provide an Officer's Certificate certifying its compliance
with this Section 3.27 to the Trustee. The reports from the Servicer shall be in
form and substance sufficient to meet the reporting requirements imposed by such
Section 6050J.
Section 3.28. Protection of Assets (a) Except for transactions and
activities entered into in connection with the securitization that is the
subject of this agreement, the trust created by this agreement is not authorized
and has no power to:
(1) borrow money or issue debt;
(2) merge with another entity, reorganize, liquidate or sell assets;
(3) engage in any business or activities.
(b) Each party to this agreement agrees that it will not file an
involuntary bankruptcy petition against the Trustee or the Trust Fund or
initiate any other form of insolvency proceeding until after the Certificates
have been paid.
ARTICLE IV
FLOW OF FUNDS
Section 4.01. Interest Distributions.
-----------------------
On each Distribution Date, the Trustee shall withdraw from the Distribution
Account the Interest Remittance Amount and apply it in the following order of
priority (based upon the Mortgage Loan information provided to it in the
Remittance Report, upon which the Trustee may conclusively rely), and the
calculations required to be made by the Trustee, to the extent available:
82
(i) to the Trustee, the Trustee Fee for such Distribution Date;
(ii) concurrently, to the Class A-IO and Class A-1A Certificates, pro
rata, the applicable Accrued Certificate Interest thereon for such
Distribution Date;
(iii) concurrently, to the Class A-IO and Class A-1A Certificates, pro
rata, the applicable Interest Carry Forward Amount for the Class A-IO and
Class A-1A Certificates, respectively;
(iv) to the Class M-1 Certificates, the Accrued Certificate Interest
thereon for such Distribution Date;
(v) to the Class M-2 Certificates, the Accrued Certificate Interest
thereon for such Distribution Date;
(vi) to the Class B-1 Certificates, the Accrued Certificate Interest
thereon for such Distribution Date;
(vii) to the Class B-2 Certificates, the Accrued Certificate Interest
thereon for such Distribution Date; and
(viii) the amount, if any, of the Interest Remittance Amount remaining
after application with respect to the priorities set forth above will be
applied as described under Section 4.02(b) hereof.
Section 4.02. Distributions of Principal and Monthly Excess Cashflow
------------------------------------------------------
Amounts.
--------
(a) On each Distribution Date, the Trustee shall make the following
distributions in the following order of priority (based upon the Mortgage Loan
information provided to it in the Remittance Report), and the calculations
required to be made by the Trustee, to the extent of the Principal Distribution
Amount:
(i) before the Stepdown Date or with respect to which a Trigger Event
is in effect,
(A) to the Holders of the Class A-1A Certificates, the Principal
Distribution Amount for such Distribution Date, until the Certificate
Principal Balance of the Class A-1A Certificates has been reduced to
zero;
(B) to the Holders of the Class M-1 Certificates, 100% of the
remaining Principal Distribution Amount for such Distribution Date,
until the Certificate Principal Balance of the Class M-1 Certificates
has been reduced to zero;
83
(C) to the Holders of the Class M-2 Certificates, 100% of the
remaining Principal Distribution Amount, until the Certificate
Principal Balance of the Class M-2 Certificates has been reduced to
zero;
(D) to the Holders of the Class B-1 Certificates, 100% of the
remaining Principal Distribution Amount, until the Certificate
Principal Balance of the Class B-1 Certificates has been reduced to
zero;
(E) to the Holders of the Class B-2 Certificates, 100% of the
remaining Principal Distribution Amount, until the Certificate
Principal Balance of the Class B-2 Certificates has been reduced to
zero; and
(F) any amount of the Principal Distribution Amount remaining
after making all of the distributions in clauses (A), (B), (C), (D) and
(E) shall be applied as set forth in Section 4.02(b).
(ii) on or after the Stepdown Date and as long as a Trigger Event is
not in effect:
(A) the lesser of (x) the Principal Distribution Amount and (y)
the Class A-1A Principal Distribution Amount, will be distributed to
the Class A-1A Certificates until the Certificate Principal Balance
thereof has been reduced to zero;
(B) the lesser of (x) the excess of (i) the Principal Distribution
Amount over (ii) the amount distributed to the Class A-1A Certificates
in clause (A) above and (y) the Class M-1 Principal Distribution Amount
will be distributed to the Class M-1 Certificates, until the
Certificate Principal Balance thereof has been reduced to zero;
(C) the lesser of (x) the excess of (i) the Principal Distribution
Amount over (ii) the sum of the amount distributed to the Class A-1A
Certificates in clause (A) above and the amount distributed to the
Class M-1 Certificates in clause (B) above and (y) the Class M-2
Principal Distribution Amount will be distributed to the Class M-2
Certificates, until the Certificate Principal Balance thereof has been
reduced to zero;
(D) the lesser of (x) the excess of (i) the Principal Distribution
Amount over (ii) the sum of the amount distributed to the Class A-1A
Certificates pursuant to clause (A) above, the amount distributed to
the Class M-1 Certificates pursuant to clause (B) above and the amount
distributed to the Class M-2 Certificates pursuant to clause (C) above
and (y) the Class B-1 Principal Distribution Amount will be distributed
to the Class B-1 Certificates, until the Certificate Principal Balance
thereof has been reduced to zero;
(E) the lesser of (x) the excess of (i) the Principal Distribution
Amount over (ii) the sum of the amount distributed to the Class A-1A
84
Certificates pursuant to clause (A) above, the amount distributed to
the Class M-1 Certificates pursuant to clause (B) above, the amount
distributed to the Class M-2 Certificates pursuant to clause (C) above
and the amount distributed to the Class B-1 Certificates pursuant to
clause (D) above and (y) the Class B-2 Principal Distribution Amount
will be distributed to the Class B-2 Certificates, until the
Certificate Principal Balance thereof has been reduced to zero; and
(F) any amount of the Principal Distribution Amount remaining
after making all of the distributions in clauses (A), (B), (C), (D) and
(E) above shall be applied as set forth in Section 4.02(b).
(b) On each Distribution Date, any Monthly Excess Cashflow Amount shall
be distributed, to the extent available, in the following order of priority on
such Distribution Date:
(i) to pay any remaining unpaid Accrued Certificate Interest for such
Distribution Date, pro rata, among the Class A-IO and --- ---- Class A-1A
Certificates;
(ii) to pay the remaining Interest Carry Forward Amounts for the
Classes of Class A Certificates, if any, pro rata, among the Class A-IO and
the Class A-1A Certificates;
(iii) to pay the Class A-1A Realized Loss Amortization Amount for such
Distribution Date;
(iv) to pay the Extra Principal Distribution Amount for such
Distribution Date in accordance with Section 4.02(a);
(v) to pay any remaining unpaid Accrued Certificate Interest for such
Distribution Date for the Class M-1 Certificates;
(vi) to pay the remaining Class M-1 Interest Carry Forward Amount, if
any;
(vii) to pay the Class M-1 Realized Loss Amortization Amount for such
Distribution Date;
(viii) to pay any remaining unpaid Accrued Certificate Interest for
such Distribution Date for the Class M-2 Certificates;
(ix) to pay the remaining Class M-2 Interest Carry Forward Amount, if
any;
(x) to pay the Class M-2 Realized Loss Amortization Amount for such
Distribution Date;
85
(xi) to pay any remaining unpaid Accrued Certificate Interest for such
Distribution Date for the Class B-1 Certificates;
(xii) to pay the remaining Class B-1 Interest Carry Forward Amount, if
any;
(xiii) to pay the Class B-1 Realized Loss Amortization Amount for such
Distribution Date;
(xiv) to pay any remaining unpaid Accrued Certificate Interest for such
Distribution Date for the Class B-2 Certificates;
(xv) to pay the remaining Class B-2 Interest Carry Forward Amount, if
any;
(xvi) to pay the Class B-2 Realized Loss Amortization Amount for such
Distribution Date;
(xvii) to the Excess Reserve Fund Account from amounts payable to the
Class X/N Interest, and then from the Excess Reserve Fund Account to the
Class A-1A Certificates, an amount equal to the Class A-1A LIBOR Carryover
Amount;
(xviii) to the Excess Reserve Fund Account from amounts payable to the
Class X/N Interest, an amount equal to the Required Excess Reserve Fund
Deposit;
(xix) to pay the Special Servicing Fees for such Distribution Date and
any accrued and unpaid Special Servicing Fees which remain unpaid from any
previous Distribution Date;
(xx) to the Class N Certificates, the Accrued Certificate Interest for
the Class N Certificates and any Interest Carry Forward Amount thereon
unpaid on prior Distribution Dates;
(xxi) to pay the Class N Realized Loss Amortization Amount for such
Distribution Date;
(xxii) from amounts payable to the Class X/N Interest, any remaining
Monthly Excess Cashflow Amount together with the Class N Excess Release
Amount to reduce the Class N Notional Amount, until the Class N Notional
Amount has been reduced to zero; and
(xxiii) to the Class X Certificates from amounts payable to the Class
X/N Interest, the Class X Distributable Amount for such Distribution Date.
On each Distribution Date, there shall be distributed to the Holders of
the Class R Certificates, in respect of the Class R-1 Interest, the Class R-2
Interest and the
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Class R-3 Interest, any remaining amount in the Distribution Account on such
date after the application pursuant to Sections 4.01, 4.02(a),
4.02(b)(i)-(xxiii) and 4.02(c); except that any remaining amounts otherwise
payable to the Class X/N Interest shall be distributed to the Class R-4
Certificates.
(c) On each Distribution Date, all prepayment premiums and penalties
(including amounts deposited by the Seller in lieu thereof pursuant to Section
3.01) shall be allocated to the Class N Certificates for so long as the Class N
Notional Amount is greater than zero pursuant to Section 4.02(b)(xxii) above,
and to the Class X Certificates after the Class N Notional Amount has been
reduced to zero.
(d) Any amounts distributed to the Offered Certificates and the Class
B-2 Certificates in respect of interest pursuant to Sections 4.01(ii)-(vii)
which constitute Rate Payments shall first be deemed distributed by REMIC 4 to
the Class X/N Interest as a distribution in respect of the Class X/N Interest
Pass-Through Rate and then distributed to the Class A-1A Certificates from the
Grantor Trust as payments on notional principal contracts in the nature of cap
contracts.
(e) Any amounts distributed to the Class A-1A Certificates in respect
of Class A-1A LIBOR Carryover Amounts pursuant to Section 4.02(b)(xvii) shall
first be deemed distributed by REMIC 4 to the Class X/N Interest as a
distribution in respect of the Class X/N Interest Pass-Through Rate, and then
distributed to the Class A-1A Certificates from the Grantor Trust as payments on
notional principal contracts in the nature of cap contracts.
(f) Any amounts distributed to the Class N Certificates pursuant to
Section 4.02(b)(xx) through (xxii) and to the Class X Certificates pursuant to
Section 4.02(b)(xxiii) shall be considered distributed to the Class X/N Interest
in respect of the Class X/N Interest Pass-Through Rate and then to the Class N
and Class X Certificates.
Section 4.03. Allocation of Losses.
---------------------
Realized Losses shall be allocated first against the Remaining Initial
Overcollateralization Amount and second to the Subsequent Overcollateralization
Amount, until the Overcollateralization Amount has been reduced to zero. If,
after giving effect to the distribution of the Principal Distribution Amount on
any Distribution Date the aggregate Certificate Principal Balance of the Offered
Certificates (excluding the Class A-IO Certificates) and the Class B-2
Certificates exceeds the Pool Balance as of the end of the related Collection
Period, such excess will be allocated against the Class B-2, Class B-1, Class
M-2, Class M-1 and the Class A-1A Certificates, in that order and until the
respective Certificate Principal Balances thereof are reduced to zero. Special
Hazard Losses will be allocated as described above, except that if the aggregate
amount of such losses, as of any date of determination, exceeds the greatest of
(i) 1.0% of the Pool Balance as of the Cut-off Date, (ii) two times the amount
of the Principal Balance of the largest Mortgage Loan in the Mortgage Pool as of
the date of determination and (iii) an amount equal to the current Principal
Balances of the Mortgage Loans in the largest zip-code concentration in the
State of California as of the date of determination, such excess
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losses will be allocated among all the outstanding classes, including the Class
N and Class X Certificates, pro-rata, based on their respective Certificate
Principal Balances or Notional Amounts. Any such reduction of a Certificate
Principal Balance or Notional Amount will not be reversed or reinstated.
However, on future Distribution Dates, Certificateholders of the related class
may receive amounts in respect of prior reductions in the related Certificate
Principal Balances or Notional Amounts as described above in Section 4.02(b).
Such subsequent payments will be applied in the reverse of the order set forth
above.
Section 4.04. 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 10.01 respecting the final distribution), in the case of
Certificateholders of the Certificates, by wire transfer in immediately
available funds to the account of the Person entitled thereto if such Person
shall have so notified the Trustee in writing at least five Business Days prior
to the Record Date immediately prior to such Distribution Date and is the
registered owner of such Certificates the aggregate initial Certificate
Principal Balance of which is in excess of $5,000,000, or by check mailed by
first class mail to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate Register, provided that the Trustee may
deduct a reasonable wire transfer fee from any payment made by wire transfer.
Distributions among Certificateholders shall be made in proportion to the
Percentage Interests evidenced by the Certificates held by such
Certificateholders.
Section 4.05. 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 Depositor, the Servicer or the Seller
shall have any responsibility therefor except as otherwise provided by
applicable law.
Section 4.06. Statements.
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(a) On each Distribution Date, based, as applicable, on the Mortgage
Loan information contained in the Remittance Report, the Trustee shall prepare
and post on its website at www.chase.com/absmbs, a statement as to the
distributions made on such Distribution Date:
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(i) the amount of the distribution made on such Distribution Date to
the Holders of each Class of Certificates allocable to principal or
reduction of the Class N Notional Amount, separately identified;
(ii) the amount of the distribution made on such Distribution Date to
the Holders of each Class of Certificates allocable to interest or Class X
Distributable Amount, separately identified;
(iii) the Overcollateralization Amount, the Overcollateralization
Release Amount, the Overcollateralization Deficiency and the
Overcollateralization Target Amount as of such Distribution Date and the
Monthly Excess Interest Amount and Monthly Excess Cashflow Amount for such
Distribution Date;
(iv) the aggregate amount of servicing compensation received by the
Servicer during the related Collection Period and accrued and unpaid
Special Servicing Fees;
(v) the aggregate amount of Advances for the related Collection Period;
(vi) the Pool Balance at the close of business at the end of the
related Collection Period;
(vii) the number, weighted average remaining term to maturity and
weighted average Mortgage Interest Rate of the Mortgage Loans as of the
related Due Date;
(viii) the number and aggregate unpaid principal balance of Mortgage
Loans (a) 30 to 59 days past due on a contractual basis, (b) 60 to 89 days
past due on a contractual basis, (c) 90 or more days past due on a
contractual basis, (d) as to which foreclosure proceedings have been
commenced and (e) in bankruptcy as of the close of business on the last day
of the calendar month preceding such Distribution Date;
(ix) with respect to any Mortgage Loan that became an REO Property
during the preceding calendar month, the loan number of such Mortgage Loan,
the unpaid principal balance and the Principal Balance of such Mortgage
Loan as of the date it became an REO Property;
(x) the book value of any REO Property as of the close of business on
the last Business Day of the calendar month preceding the Distribution
Date, and, cumulatively, the total number and cumulative principal balance
of all REO Properties as of the close of business of the last day of the
preceding Collection Period;
(xi) the aggregate amount of Principal Prepayments made during the
related Prepayment Period;
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(xii) the aggregate amount of prepayment penalties collected or
deposits by the Seller in lieu thereof pursuant to Section 3.01 during the
related Collection Period and the amounts thereof allocable to the Class N
Certificates and the Class X Certificates;
(xiii) the aggregate amount of Realized Losses incurred during the
related Collection Period and the cumulative amount of Realized Losses;
(xiv) the Certificate Principal Balance, or Notional Amount, as
applicable, of each Class of Certificates, after giving effect to the
distributions, and allocations of Realized Losses or Applied Realized Loss
Amounts, as applicable, made on such Distribution Date, separately
identifying any reduction thereof due to allocations of Realized Losses or
Applied Realized Loss Amounts;
(xv) the beginning balance of amounts on deposit in the Excess Reserve
Fund as of the preceding Distribution Date, any withdrawals from and
deposits into the Excess Reserve Fund as of the Distribution Date, and the
ending balance of amounts on deposit in the Excess Reserve Fund on such
Distribution Date;
(xvi) [Reserved];
(xvii) the Accrued Certificate Interest in respect of each Class of
Offered Certificates and the Class B-2 Certificates for such Distribution
Date, separately identifying the portions thereof attributable to Rate
Payments, and the respective portions thereof, if any, remaining unpaid
following the distributions made in respect of such Certificates on such
Distribution Date;
(xviii) the aggregate amount of any Prepayment Interest Shortfalls for
such Distribution Date, to the extent not covered by payments by the
Servicer pursuant to Section 3.23;
(xix) [Reserved];
(xx) the Principal Balance of the Re-performing 60+ Day Delinquent
Loans;
(xxi) the amount of the Trustee Fee paid;
(xxii) Class A-1A LIBOR Carryover Amounts for the Class A-1A
Certificates distributed on such Distribution Date and the amounts
remaining after giving effect to distributions thereof on such Distribution
Date;
(xxiii) any Overcollateralization Deficiency after giving effect to the
distribution of principal on such Distribution Date;
(xxiv) whether a Trigger Event has occurred and is continuing, and the
cumulative Realized Losses, as a percentage of the original Pool Balance;
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(xxv) the Available Funds;
(xxvi) the rate at which interest accrues for each Class of
Certificates for such Distribution Date;
(xxvii) the Liquidation Report for such Distribution Date;
(xxviii) [Reserved]
(xxix) the aggregate Principal Balance of Mortgage Loans purchased by
the Servicer or Seller during the related Collection Period and indicating
the Section of this Agreement requiring or allowing the purchase of each
such Mortgage Loan; and
(xxx) the aggregate Principal Balance of the Mortgage Loans repurchased
by the Seller during the related Collection Period in connection with
Section 3.16.
The Trustee may fully rely upon and shall have no liability with
respect to information with respect to the Mortgage Loans provided by the
Servicer.
In the case of information furnished pursuant to subclauses (i) through
(iii) 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 Certificateholder of a Regular Certificate, 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
(i), (ii), (xv) and (xx) 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 provide to the Class R
and Class R-4 Certificateholders a copy of the reports provided to the Regular
Certificateholders in respect of such Distribution Date with such other
information as the Trustee deems necessary or appropriate. Such obligation of
the Trustee shall be deemed to have been satisfied to the extent that
substantially comparable information shall be prepared and furnished to Class R
and Class R-4 Certificateholders by the Trustee pursuant to any requirements of
the Code as from time to time in force.
Section 4.07. Remittance Reports; Advances.
-----------------------------
(a) On the second Business Day following each Determination Date but in
no event less than four Business Days prior to the related Distribution Date,
the
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Servicer shall deliver to the Trustee by telecopy (or by such other means as the
Servicer and the Trustee may agree from time to time) a Remittance Report with
respect to the related Distribution Date. On the same date, the Servicer shall
forward to the Trustee by overnight mail a computer readable magnetic tape or
diskette or in such other medium as may be agreed between the Servicer and the
Trustee containing the information set forth in such Remittance Report with
respect to the related Distribution Date. Not later than the close of business
New York time on the Servicer Remittance Date, the Servicer shall deliver or
cause to be delivered to the Trustee in addition to the information provided on
the Remittance Report, such other information reasonably available to it with
respect to the Mortgage Loans as the Trustee may reasonably request or order in
order for the Trustee to perform the calculations necessary to make the
distributions contemplated by Section 4.01, 4.02 and 4.03 and to prepare the
statements to Certificateholders contemplated by Section 4.06. The Trustee shall
not be responsible to recompute, recalculate or verify any information provided
to it by the Servicer.
(b) The amount of Advances to be made by the Servicer for any
Distribution Date shall equal, subject to Section 4.07(d), the aggregate amount
of Monthly Payments (net of the related Servicing Fee), due during the related
Collection Period in respect of the Actuarial Mortgage Loans, which Monthly
Payments were delinquent on a contractual basis as of the close of business on
the related Determination Date. For purposes of the preceding sentence, the
Monthly Payment on each Balloon Mortgage Loan with a delinquent Balloon Payment
is equal to the assumed monthly payment that would have been due on the related
Due Date based on the original principal amortization schedule for the such
Balloon Mortgage Loan. The Servicer shall not be obligated to make any Advance
with respect to Simple Interest Mortgage Loans or REO Properties.
On or before the close of business New York time on the Servicer
Remittance Date, the Servicer shall remit in immediately available funds to the
Trustee for deposit in the Distribution Account an amount equal to the aggregate
amount of Advances, if any, to be made in respect of the Mortgage Loans for the
related Distribution Date either (i) from its own funds or (ii) from the
Collection Account, to the extent of funds held therein for future distribution
(in which case it will cause to be made an appropriate entry in the records of
the Collection Account that amounts held for future distribution have been, as
permitted by this Section 4.07, used by the Servicer in discharge of any such
Advance) or (iii) in the form of any combination of (i) and (ii) aggregating the
total amount of Advances to be made by the Servicer with respect to the Mortgage
Loans. Any amounts held for future distribution and so used shall be
appropriately reflected in the Servicer's records and replaced by the Servicer
by deposit in the Collection Account on or before any future Servicer Remittance
Date to the extent that the Available Funds for the related Distribution Date
(determined without regard to Advances to be made on the Servicer Remittance
Date) shall be less than the total amount that would be distributed to the
Classes of Certificateholders pursuant to Section 4.01 and 4.02 on such
Distribution Date if such amounts held for future distributions had not been so
used to make Advances. The Trustee will provide notice to the Servicer by
telecopy by the close of business on any Servicer Remittance Date in the event
that the amount remitted by the Servicer to the Trustee on such date is less
than the Advances required to
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be made by the Servicer for the related Distribution Date, as set forth in the
related Remittance Report.
(c) The obligation of the Servicer to make such Advances is mandatory,
notwithstanding any other provision of this Agreement but subject to (d) below,
and, with respect to any Mortgage Loan, shall continue until the earlier of such
time as the Trust acquires title to the related Mortgaged Property or such
Mortgage Loan is paid in full by the Mortgagor or disposed of by the Trust, or
until the recovery of all Liquidation Proceeds thereon.
(d) Notwithstanding anything herein to the contrary, no Advance or
Servicing Advance shall be required to be made hereunder by the Servicer if such
Advance would, if made, constitute a Nonrecoverable Advance. The determination
by the Servicer that it has made a Nonrecoverable Advance or that any proposed
Advance, if made, would constitute a Nonrecoverable Advance, shall be evidenced
by an Officers' Certificate of the Servicer delivered to the Depositor and the
Trustee.
Section 4.08. [Reserved].
-----------
Section 4.09. [Reserved].
-----------
Section 4.10. Excess Reserve Fund Account.
----------------------------
(a) On the Closing Date, the Trustee shall establish and maintain in
its name, in trust for the benefit of the Holders of the Class A-1A
Certificates, the Excess Reserve Fund Account. The Excess Reserve Fund Account
shall be an Eligible Account, and funds on deposit therein shall be held
separate and apart from, and shall not be commingled with, any other moneys,
including, without limitation, other moneys of the Trustee held pursuant to this
Agreement.
(b) On the Closing Date, $5,000 will be deposited by the Seller into
the Excess Reserve Fund Account. Thereafter, on any Distribution Date if the
Pool Cap does not exceed the Class A-1A Pass-Through Rate by at least 0.25%, the
amount to be held in the Excess Reserve Fund Account on any Distribution Date
thereafter will equal the greater of (i) 0.50% of the outstanding Certificate
Principal Balance of the Class A-1A Certificates as of such Distribution Date
and (ii) $5,000 and will be funded from amounts distributed pursuant to Section
4.02(b)(xviii). Thereafter, if the Pool Cap for any Distribution Date exceeds
the Class A-1A Pass-Through Rate for the Class A-1A Certificates on such
Distribution Date by 0.25% or more, the Required Excess Reserve Fund Balance for
such Distribution Date will be at least $5,000. The amount required to be on
deposit in the Excess Reserve Fund Account at any time is referred to herein as
the "Required Excess Reserve Fund Balance."
(c) On each Distribution Date on which there exists a Class A-1A LIBOR
Carryover Amount on the Class A-1A Certificates, the Trustee shall withdraw from
the Excess Reserve Fund Account amounts necessary to pay the Class A-1A LIBOR
Carryover Amount incurred by the Class A-1A Certificates, until such amount is
reduced to zero.
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(d) Funds in the Excess Reserve Fund Account may be invested in
Permitted Investments by the Trustee at the direction of the Majority
Certificateholders of the Class X Certificates. On each Distribution Date, any
earnings on such amounts shall be distributed to the Holders of the Class X
Certificates and any losses shall be chargeable to amounts held in the Excess
Reserve Fund Account. The Majority Certificateholders of the Class X
Certificates shall evidence ownership of the Excess Reserve Fund Account for
federal income tax purposes and shall direct the Trustee, in writing, as to the
investment of amounts on deposit therein. In the absence of such written
direction, all funds in the Excess Reserve Fund Account shall be invested by the
Trustee in JP Morgan Money Market Fund. Upon termination of the Trust Fund, any
amounts remaining in the Excess Reserve Fund Account shall be distributed to the
Holders of the Class X Certificates. The Excess Reserve Fund Account is not an
asset of any of the REMICs, but rather is an "outside reserve fund" within the
meaning of the REMIC Provisions that is beneficially owned by the beneficial
owner of the Class X Certificates.
ARTICLE V
THE CERTIFICATES
Section 5.01. The Certificates.
-----------------
Each of the Class A-IO, Class A-1A, Class M-1, Class M-2, Class B-1,
Class B-2, Class N, Class X, Class R and Class R-4 Certificates shall be
substantially in the forms annexed hereto as exhibits, and shall, on original
issue, be executed, authenticated and delivered by the Trustee to or upon the
receipt of a Written Order to Authenticate from the Depositor concurrently with
the sale and assignment to the Trustee of the Trust Fund. Each Class of the
Certificates (other than the Class R and Class R-4 Certificates) shall be
initially evidenced by one or more Certificates representing a Percentage
Interest with a minimum dollar denomination of $25,000 and integral dollar
multiples of $1 in excess thereof. The Class R and Class R-4 Certificates are
issuable only in minimum Percentage Interests of 10%.
The Certificates shall be executed on behalf of the Trust by manual or
facsimile signature on behalf of the Trustee by a Responsible Officer.
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 5.02(c), the Offered Certificates
and the Class B-2 Certificates shall be Book-Entry Certificates. The
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Class N, Class X, Class R and Class R-4 Certificates shall not be Book-Entry
Certificates but shall be issued in fully registered certificate form.
Section 5.02. Registration of Transfer and Exchange of Certificates.
------------------------------------------------------
(a) The Certificate Registrar shall cause to be kept at the Corporate
Trust Office a Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Certificate Registrar shall provide for the
registration of Certificates and of transfers and exchanges of Certificates as
herein provided. The Trustee shall initially serve as Certificate Registrar for
the purpose of registering Certificates and transfers and exchanges of
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 a Class R or Class R-4
Certificate, upon satisfaction of the conditions set forth below, the Trustee on
behalf of the Trust shall execute, authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Certificates 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 on behalf of the Trust and authenticate and
deliver the Certificates which the Certificateholder making the exchange is
entitled to receive. Every Certificate presented or surrendered for registration
of transfer or exchange shall (if so required by the Trustee or the Certificate
Registrar) be duly endorsed by, or be accompanied by a written instrument of
transfer satisfactory to the Trustee and the Certificate Registrar duly executed
by, the Holder thereof or his attorney duly authorized in writing.
(b) Upon original issuance, the Book-Entry Certificates shall be issued
in the form of one or more typewritten certificates, to be delivered to the
Depository, the initial Depository, by, or on behalf of, the Depositor; or to,
and deposited with the Certificate Custodian, on behalf of the Depository, if
directed to do so pursuant to instructions from the Depository. 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; (v)
the Trustee shall for all purposes 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; (vi) the Trustee
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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; and (vii) the direct participants of the Depository shall
have no rights under this Agreement under or with respect to any of the
Certificates held on their behalf by the Depository, and the Depository may be
treated by the Trustee and its agents, employees, officers and directors as the
absolute owner of the Certificates for all purposes whatsoever.
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 it 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 the 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 the consent of the Trustee, elects to terminate the book-entry system
through the Depository or (iii) after the occurrence of a Servicer Event of
Termination, the Certificate Owners of each Class of Book-Entry Certificates
representing Percentage Interests of such Classes aggregating not less than 51%
advises the Trustee and Depository through the Financial Intermediaries and the
Depository 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
Certificate Registrar of the Book-Entry 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 (ii) above, or the
Seller's expense, in the case of (i) and (iii) above, execute on behalf of the
Trust 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
Certificate Registrar, the Servicer, any Paying Agent and the Depositor shall
recognize the Holders of the Definitive Certificates as Certificateholders
hereunder.
(d) Except with respect to the initial transfer of the Private
Certificates by the Depositor, no transfer, sale, pledge or other disposition of
any Private Certificate shall be made unless such disposition is exempt from the
registration requirements of the Securities Act of 1933, as amended (the "1933
Act"), and any applicable state securities laws or is made in accordance with
the 1933 Act and laws. In the event of any such
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transfer, (i) unless such transfer is made in reliance upon Rule 144A (as
evidenced by the investment letter delivered to the Trustee, in substantially
the form attached hereto as Exhibit J) under the 1933 Act, the Trustee and the
Depositor shall require a written Opinion of Counsel (which may be in-house
counsel) acceptable to and in form and substance reasonably satisfactory to the
Trustee and the Depositor that such transfer may be made pursuant to an
exemption, describing the applicable exemption and the basis therefor, from the
1933 Act or is being made pursuant to the 1933 Act, which Opinion of Counsel
shall not be an expense of the Trustee or the Depositor or (ii) the Trustee
shall require the transferor to execute a transferor certificate (in
substantially the form attached hereto as Exhibit L) and the transferee to
execute an investment letter (in substantially the form attached hereto as
Exhibit J) acceptable to and in form and substance reasonably satisfactory to
the Depositor and the Trustee certifying to the Depositor and the Trustee the
facts surrounding such transfer, which investment letter shall not be an expense
of the Trustee or the Depositor. The Holder of a Private Certificate that is
also a Class R or Class R-4 Certificate desiring to effect a transfer of a such
Class R or Class R-4 Certificate shall not make such transfer to a Non-U.S.
Person. The Holder of any Private Certificate desiring to effect a transfer
shall, and does hereby agree to, indemnify the Trustee and the Depositor 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 transfer of an ERISA-Restricted Certificate shall be made unless the
Trustee shall have received either (i) a representation from the transferee of
such Certificate, acceptable to and in form and substance satisfactory to the
Trustee and the Depositor, (such requirement is satisfied only by the Trustee's
receipt of a representation letter from the transferee substantially in the form
of Exhibit I hereto, as appropriate), to the effect that such transferee is not
an employee benefit plan or arrangement subject to Section 406 of ERISA or a
plan subject to Section 4975 of the Code, nor a person acting on behalf of any
such plan or arrangement nor using the assets of any such plan or arrangement to
effect such transfer or (ii) (except in the case of a Class B-2, Class X, Class
N, Class R or Class R-4 Certificate) if the purchaser is an insurance company, a
representation that the purchaser is an insurance company which is purchasing
such Certificates with funds contained in an "insurance company general account"
(as such term is defined in Section V(e) of Prohibited Transaction Class
Exemption 95-60 ("PTCE 95-60") and that the purchase and holding of such
Certificates are covered under Sections I and III of PTCE 95-60. For purposes of
clause (i) of the preceding sentence, such representation shall be deemed to
have been made to the Trustee by the acceptance by a Certificate Owner of the
beneficial interest in any such Class of ERISA-Restricted Certificates, unless
the Trustee shall have received from the transferee an alternative
representation acceptable in form and substance to the Depositor.
Notwithstanding anything else to the contrary herein, any purported transfer of
an ERISA-Restricted Certificate to or on behalf of an employee benefit plan
subject to ERISA or to the Code shall be void and of no effect.
Each Person who has or who acquires any Ownership Interest in a Class R
or Class R-4 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
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terms of any mandatory sale under clause (v) 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 or Class R-4 Certificate are expressly subject to the following
provisions:
(i) Each Person holding or acquiring any Ownership Interest in a Class
R or Class R-4 Certificate shall be a Permitted Transferee and shall
promptly notify the Trustee of any change or impending change in its status
as a Permitted Transferee.
(ii) No Person shall acquire an Ownership Interest in a Class R or
Class R-4 Certificate unless such Ownership Interest is a pro rata
undivided interest.
(iii) In connection with any proposed transfer of any Ownership
Interest in a Class R or Class R-4 Certificate, the Trustee shall as a
condition to registration of the transfer, require delivery to it, in form
and substance satisfactory to it, of each of the following:
A. an affidavit in the form of Exhibit K hereto from the proposed
transferee to the effect that, among other things, such transferee is a
Permitted Transferee and that it is not acquiring its Ownership Interest in the
Class R or Class R-4 Certificate that is the subject of the proposed transfer as
a nominee, trustee or agent for any Person who is not a Permitted Transferee;
and
B. a covenant of the proposed transferee to the effect that the
proposed transferee agrees to be bound by and to abide by the transfer
restrictions applicable to the Class R or Class R-4 Certificates.
(iv) Any attempted or purported transfer of any Ownership Interest in a
Class R or Class R-4 Certificate in violation of the provisions of this
Section shall be absolutely null and void and shall vest no rights in the
purported transferee. If any purported transferee shall, in violation of
the provisions of this Section, become a Holder of a Class R or Class R-4
Certificate, then the prior Holder of such Class R or Class R-4 Certificate
that is a Permitted Transferee shall, upon discovery that the registration
of transfer of such Class R or Class R-4 Certificate was not in fact
permitted by this Section, be restored to all rights as Holder thereof
retroactive to the date of registration of transfer of such Class R or
Class R-4 Certificate. The Trustee shall be under no liability to any
Person for any registration of transfer of a Class R or Class R-4
Certificate that is in fact not permitted by this Section or for making any
distributions due on such Class R or Class R-4 Certificate to the Holder
thereof or taking any other action with respect to such Holder under the
provisions of this Agreement so long as the Trustee received the documents
specified in clause (iii). The Trustee shall be entitled to recover from
any Holder of a Class R or Class R-4 Certificate that was in fact not a
Permitted Transferee at the time such distributions were made all
distributions made on such Class R or Class R-4 Certificate. Any such
distributions so
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recovered by the Trustee shall be distributed and delivered by the Trustee to
the prior Holder of such Class R or Class R-4 Certificate that is a Permitted
Transferee.
(v) If any Person other than a Permitted Transferee acquires any
Ownership Interest in a Class R or Class R-4 Certificate in violation of
the restrictions in this Section, then the Trustee shall have the right but
not the obligation, without notice to the Holder of such Class R or Class
R-4 Certificate or any other Person having an Ownership Interest therein,
to notify the Depositor to arrange for the sale of such Class R or Class
R-4 Certificate. The proceeds of such sale, net of commissions (which may
include commissions payable to the Depositor or its affiliates in
connection with such sale), expenses and taxes due, if any, will be
remitted by the Trustee to the previous Holder of such Class R or Class R-4
Certificate that is a Permitted Transferee, except that in the event that
the Trustee determines that the Holder of such Class R or Class R-4
Certificate may be liable for any amount due under this Section 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 (v) shall be determined
in the sole discretion of the Trustee and it shall not be liable to any
Person having an Ownership Interest in a Class R or Class R-4 Certificate
as a result of its exercise of such discretion.
(vi) If any Person other than a Permitted Transferee acquires any
Ownership Interest in a Class R or Class R-4 Certificate in violation of
the restrictions in this Section, then the Trustee will provide to the
Internal Revenue Service, and to the persons specified in Sections
860E(e)(3) and (6) of the Code, information needed to compute the tax
imposed under Section 860E(e)(5) of the Code on transfers of residual
interests to disqualified organizations. The Trustee shall be entitled to
reasonable compensation for providing such information from the person to
whom it is provided.
The foregoing provisions of this Section shall cease to apply to transfers
occurring on or after the date on which there shall have been delivered to the
Trustee, in form and substance satisfactory to the Trustee, (i) written
notification from each Rating Agency that the removal of the restrictions on
Transfer set forth in this Section will not cause such Rating Agency to
downgrade its rating of the Certificates and (ii) an Opinion of Counsel to the
effect that such removal will not cause any REMIC hereunder to fail to qualify
as a REMIC.
(e) No service charge shall be made for any registration of transfer or
exchange of Certificates of any Class, 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 or exchange
shall be cancelled by the Certificate Registrar and disposed of pursuant to its
standard procedures.
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Section 5.03. 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 security or
indemnity as may be required by them to save each of 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 on behalf of the Trust, 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, 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) in
connection therewith. Any duplicate Certificate issued pursuant to this Section,
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 5.04. Persons Deemed Owners.
----------------------
The Servicer, the Depositor, the Trustee, the Certificate Registrar,
any Paying Agent and any agent of the Servicer, the Depositor, the Certificate
Registrar, any Paying Agent or the Trustee may treat the Person, including a
Depository, in whose name any Certificate is registered as the owner of such
Certificate for the purpose of receiving distributions pursuant to Section 4.01
and 4.02 and for all other purposes whatsoever, and none of the Servicer, the
Trust, the Trustee nor any agent of any of them shall be affected by notice to
the contrary.
Section 5.05. Appointment of Paying Agent.
----------------------------
(a) The Paying Agent shall make distributions to Certificateholders
from the Distribution Account pursuant to Section 4.01 and 4.02 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 Collection Account
pursuant to Section 3.05 and for the purpose of making the distributions
referred to above and (ii) to distribute statements and provide information to
Certificateholders as required hereunder. The Paying Agent hereunder shall at
all times be an entity 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 to act as Paying Agent, which appointment
shall be reasonably satisfactory to the Depositor and the Rating Agencies.
(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
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payment to the Certificateholders in trust for the benefit of the
Certificateholders 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.
ARTICLE VI
THE SELLER, THE SERVICER AND THE DEPOSITOR
Section 6.01. Liability of the Seller, the Servicer and the Depositor.
--------------------------------------------------------
The Seller and the Servicer shall be liable in accordance herewith only
to the extent of the obligations specifically imposed upon and undertaken by the
Seller or 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 6.02. Merger or Consolidation of, or Assumption of the
------------------------------------------------
Obligations of, the Seller, the Servicer or the Depositor.
----------------------------------------------------------
Any entity into which the Seller, the Servicer or the Depositor may be
merged or consolidated, or any entity resulting from any merger, conversion or
consolidation to which the Seller, the Servicer or the Depositor shall be a
party, or any corporation succeeding to the business of the Seller, the Servicer
or the Depositor, shall be the successor of the Seller, the 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; provided, however, that the successor
Servicer shall satisfy all the requirements of Section 7.02 with respect to the
qualifications of a successor Servicer.
Section 6.03. Limitation on Liability of the Servicer and Others.
---------------------------------------------------
Neither the Servicer nor any of the directors or officers or employees
or agents of the 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 Servicer in good faith pursuant to this Agreement, or for errors
in judgment; provided, however, that this provision shall not protect the
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 Servicer or by reason of its reckless disregard
of its obligations and duties of the Servicer hereunder; provided, further, that
this provision shall not be construed to entitle the Servicer to indemnity in
the event that amounts advanced by the Servicer to retire any senior lien exceed
Liquidation Proceeds (in excess of related liquidation expenses) realized with
respect to the related Mortgage Loan. The Servicer and any
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director or officer or employee or agent of the Servicer may rely in good faith
on any document of any kind prima facie properly executed and submitted by any
Person respecting any matters arising hereunder. The Servicer and any director
or officer or employee or agent of the 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 its willful misfeasance, bad faith or negligence
in the performance of duties hereunder or by reason of its reckless disregard of
obligations and duties hereunder. The Servicer may 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 Servicer shall be entitled to be
reimbursed therefor only pursuant to Section 3.05. The Servicer's right to
indemnity or reimbursement pursuant to this Section shall survive any
resignation or termination of the Servicer pursuant to Section 6.04 or 7.01 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). This paragraph shall apply to the Servicer solely
in its capacity as Servicer hereunder and in no other capacities.
Section 6.04. Servicer Not to Resign.
-----------------------
Subject to the provisions of Section 7.01 and Section 6.02, the
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 Servicer so
causing such a conflict being of a type and nature carried on by the Servicer or
its subsidiaries or Affiliates at the date of this Agreement or (ii) upon
satisfaction of the following conditions: (a) the Servicer has proposed a
successor servicer to the Trustee in writing and such proposed successor
servicer is reasonably acceptable to the Trustee; and (b) each Rating Agency
shall have delivered a letter to the Trustee prior to the appointment of the
successor servicer stating that the proposed appointment of such successor
servicer as Servicer hereunder will not result in the reduction or withdrawal of
the then current rating of the Regular Certificates or the ratings that are in
effect; provided, however, that no such resignation by the Servicer shall become
effective until such successor servicer or, in the case of (i) above, the
Trustee shall have assumed the Servicer's responsibilities and obligations
hereunder or the Trustee shall have designated a successor servicer in
accordance with Section 7.02. Any such resignation shall not relieve the
Servicer of responsibility for any of the obligations specified in Sections 7.01
and 7.02 as obligations that survive the resignation or termination of the
Servicer. Any such determination permitting the resignation of the Servicer
pursuant to clause (i) above shall be evidenced by an Opinion of Counsel to such
effect delivered to the Trustee. Any such determination permitting the
resignation of the Servicer shall be evidenced by an Opinion of Counsel to such
effect delivered to the Trustee.
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Section 6.05. Delegation of Duties.
---------------------
In the ordinary course of business, the 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 set forth in Section 3.01. Such delegation shall not relieve
the Servicer of its liabilities and responsibilities with respect to such duties
and shall not constitute a resignation within the meaning of Section 6.04. The
Servicer shall provide the Trustee and the Rating Agencies with 60 days prior
written notice prior to the delegation of any of its duties to any Person other
than any of the Servicer's Affiliates or their respective successors and
assigns.
The Trustee and the Depositor hereby specifically (i) consent to the
pledge and assignment by the Servicer of all the Servicer's right, title and
interest in, to and under this Agreement to the Servicing Rights Pledgee, for
the benefit of certain lenders, and (ii) provided that no Servicer Event of
Termination exists, agree that upon delivery to the Trustee by the Servicing
Rights Pledgee of a letter signed by the Servicer whereunder the Servicer shall
resign as Servicer under this Agreement, the Trustee shall appoint the Servicing
Rights Pledgee or its designee as successor Servicer, provided that at the time
of such appointment, the Servicing Rights Pledgee or such designee meets the
requirements of a successor Servicer pursuant to Section 7.02(a) and agrees to
be subject to the terms of this Agreement. If, pursuant to any provision hereof,
the duties of the Servicer are transferred to a successor, the entire amount of
the Servicing Fee and other compensation payable to the Servicer pursuant hereto
shall thereafter be payable to such successor.
ARTICLE VII
DEFAULT
Section 7.01. Servicer Events of Termination.
-------------------------------
(a) If any one of the following events ("Servicer Events of
Termination") shall occur and be continuing:
(i) (A) The failure by the Servicer to make any Advance; or (B) any
other failure by the Servicer to deposit in the Collection Account or
Distribution Account any deposit required to be made under the terms of
this Agreement which continues unremedied for a period of one Business Day
after the date upon which written notice of such failure shall have been
given to the Servicer by the Trustee or by any Holder of a Regular
Certificate evidencing at least 25% of the Voting Rights; or
(ii) The failure by the Servicer to make any required Servicing Advance
which failure continues unremedied for a period of 30 days, or the failure
by the Servicer duly to observe or perform, in any material respect, any
other covenants, obligations or agreements of the Servicer as set forth in
this Agreement, which failure continues unremedied for a period of 30 days,
after the
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date (A) on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the Trustee or by any
Holder of a Regular Certificate evidencing at least 25% of the Voting
Rights or (B) actual knowledge of such failure by a Servicing Officer of
the Servicer; or
(iii) The entry against the 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, and the continuance of any such
decree or order unstayed and in effect for a period of 60 days; or
(iv) The Servicer shall voluntarily go into liquidation, consent to the
appointment of a conservator or receiver or liquidator or similar person in
any insolvency, readjustment of debt, marshalling of assets and liabilities
or similar proceedings of or relating to the Servicer or of or relating to
all or substantially all of its property; or a decree or order of a court
or agency or supervisory authority having jurisdiction in the premises for
the appointment of a conservator, receiver, liquidator or similar person in
any insolvency, readjustment of debt, marshalling of assets and liabilities
or similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the Servicer and such decree or
order shall have remained in force undischarged, unbonded or unstayed for a
period of 60 days; or the 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; or
(v) The aggregate amount of cumulative Realized Losses incurred since
the Cut-Off Date through the last day of the related Collection Period
divided by the initial Pool Balance exceeds the applicable percentages set
forth below with respect to such Distribution Date:
Distribution Date Occurring In Percentage
--------------------------------------- ------------
September 2001 through August 2005 3.00%
September 2005 through August 2006 3.75%
September 2006 through August 2007 4.25%
September 2007 and thereafter 4.75%
(b) Then, and in each and every such case, so long as a Servicer Event
of Termination shall not have been remedied within the applicable grace period,
(x) with respect solely to clause (i)(A) above, if such Advance is not made by
2:00 P.M., New York time, on the Business Day immediately following the Servicer
Remittance Date, the Trustee may terminate all of the rights and obligations of
the Servicer under this Agreement and the Trustee, or a successor servicer
appointed in accordance with Section 7.02, shall immediately make such Advance
and assume, pursuant to Section 7.02, the duties of a successor Servicer and (y)
in the case of (i)(B), (ii), (iii), (iv) and (v) above,
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the Trustee shall, at the direction of the Holders of each Class of Regular
Certificates evidencing Percentage Interests aggregating not less than 51%, by
notice then given in writing to the Servicer (and to the Trustee if given by
Holders of Certificates), terminate all of the rights and obligations of the
Servicer as servicer under this Agreement. Any such notice to the Servicer shall
also be given to each Rating Agency, the Depositor and the Seller. On or after
the receipt by the Servicer (and by the Trustee if such notice is given by the
Holders) of such written notice, all authority and power of the 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; and, without limitation, the Trustee is hereby authorized and
empowered to execute and deliver, on behalf of the 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
Servicer agrees to cooperate with the Trustee (or the applicable successor
Servicer) in effecting the termination of the responsibilities and rights of the
Servicer hereunder, including, without limitation, the delivery to the Trustee
of all documents and records requested by it to enable it to assume the
Servicer's functions under this Agreement within ten Business Days subsequent to
such notice, the transfer within one Business Day subsequent to such notice to
the Trustee (or the applicable successor Servicer) for the administration by it
of all cash amounts that shall at the time be held by the Servicer and to be
deposited by it in the Collection Account, the Distribution Account, the Excess
Reserve Fund Account, any REO Account or any Escrow Account or that have been
deposited by the Servicer in such accounts or thereafter received by the
Servicer with respect to the Mortgage Loans or any REO Property received by the
Servicer. All reasonable costs and expenses (including attorneys' fees) incurred
in connection with transferring the servicing to the successor Servicer and
amending this Agreement to reflect such succession as Servicer pursuant to this
Section shall be paid by the predecessor Servicer (or if the predecessor
Servicer is the Trustee, the initial Servicer) upon presentation of reasonable
documentation of such costs and expenses.
Section 7.02. Trustee to Act; Appointment of Successor.
-----------------------------------------
(a) Within 90 days of the time the Servicer (and the Trustee, if notice
is sent by the Holders) receives a notice of termination pursuant to Section
7.01 or 6.04, the Trustee (or such other successor Servicer as is approved in
accordance with this Agreement) shall be the successor in all respects to the
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 Servicer
by the terms and provisions hereof arising on and after its succession. As
compensation therefor, the Trustee (or such other successor Servicer) shall be
entitled to such compensation as the 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 Servicer or (ii) if
the Trustee is legally unable so to act, the Trustee shall 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
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the Servicer hereunder in the assumption of all or any part of the
responsibilities, duties or liabilities of the Servicer hereunder; provided,
that the appointment of any such successor Servicer will not result in the
qualification, reduction or withdrawal of the ratings assigned to the
Certificates or the ratings that are in effect by the Rating Agencies as
evidenced by a letter to such effect from the Rating Agencies. Pending
appointment of a successor to the 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 which the Servicer would otherwise
have received pursuant to Section 3.18 (or such other compensation as the
Trustee and such successor shall agree, not to exceed the Servicing Fee). The
successor servicer shall be entitled to withdraw from the Collection Account all
costs and expenses associated with the transfer of the servicing to the
successor servicer. The appointment of a successor servicer shall not affect any
liability of the predecessor Servicer which may have arisen under this Agreement
prior to its termination as Servicer to pay any deductible under an insurance
policy pursuant to Section 3.12 or to indemnify the Trustee pursuant to Section
3.26, nor shall any successor Servicer be liable for any acts or omissions of
the predecessor Servicer or for any breach by such 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.
In the event of a Servicer Event of Termination, notwithstanding
anything to the contrary above, the Trustee and the Depositor hereby agree that
upon delivery to the Trustee by the Servicing Rights Pledgee of a letter signed
by the Servicer within ten Business Days of when notification of such event
shall have been provided to the Trustee, whereunder the Servicer shall resign as
Servicer under this Agreement, the Trustee shall appoint the Servicing Rights
Pledgee or its designee as successor Servicer (provided that at the time of such
appointment the Servicing Rights Pledgee or such designee meets the requirements
of a successor Servicer set forth above) and the Servicing Rights Pledgee agrees
to be subject to the terms of this Agreement.
(b) Any successor, including the Trustee, to the Servicer as servicer
shall during the term of its service as servicer continue to service and
administer the Mortgage Loans for the benefit of Certificateholders, and
maintain in force a policy or policies of insurance covering errors and
omissions in the performance of its obligations as Servicer hereunder and a
Fidelity Bond in respect of its officers, employees and agents to the same
extent as the Servicer is so required pursuant to Section 3.12.
Section 7.03. Waiver of Defaults.
-------------------
The Majority Certificateholders may, on behalf of all
Certificateholders, waive any events permitting removal of the Servicer as
servicer pursuant to this Article VII; provided, however, that the Majority
Certificateholders 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 Servicer
Event of Termination arising therefrom shall be deemed to have been remedied
106
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 7.04. Notification to Certificateholders.
-----------------------------------
(a) Upon any termination or appointment of a successor the Servicer
pursuant to this Article VII or Section 6.04, the Trustee shall give prompt
written notice thereof to the Certificateholders at their respective addresses
appearing in the Certificate Register and each Rating Agency.
(b) No later than 60 days after the occurrence of any event which
constitutes or which, with notice or a lapse of time or both, would constitute a
Servicer Event of Termination for five Business Days after a Responsible Officer
of the Trustee becomes aware of the occurrence of such an event, the Trustee
shall transmit by mail to all Certificateholders notice of such occurrence
unless such default or Servicer Event of Termination shall have been waived or
cured. Such notice shall be given to the Rating Agencies promptly after any such
occurrence.
Section 7.05. Survivability of Servicer Liabilities.
--------------------------------------
Notwithstanding anything herein to the contrary, upon termination of
the Servicer hereunder, any liabilities of the Servicer which accrued prior to
such termination shall survive such termination.
ARTICLE VIII
THE TRUSTEE
Section 8.01. Duties of Trustee.
------------------
The Trustee, prior to the occurrence of a Servicer Event of Termination
of which a Responsible Officer of the Trustee shall have actual knowledge and
after the curing of all Servicer Events of Termination which may have occurred,
undertakes to perform such duties and only such duties as are specifically set
forth in this Agreement. If a Servicer Event of Termination has occurred (which
has not been cured) of which a Responsible Officer 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
such person's 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
conform to the requirements of this Agreement; provided, however, that that the
Trustee shall not be responsible for the accuracy or content of any resolution,
certificate, statement, opinion, report, document,
107
order or other instrument furnished by the Servicer, the Seller or the Depositor
hereunder. If any such instrument is found not to conform in any material
respect to the requirements of this Agreement, the Trustee shall notify the
Certificateholders of such instrument in the event that the Trustee, after so
requesting, does not receive a satisfactorily corrected instrument.
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 misconduct; provided, however, that:
(i) prior to the occurrence of a Servicer Event of Termination, and
after the curing of all such Servicer Events of Termination 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 direction of the Majority Certificateholders relating
to the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising or omitting to exercise any trust
or power conferred upon the Trustee, under this Agreement; and
(iv) the Trustee shall not be charged with knowledge of any failure by
the Servicer to comply with the obligations of the Servicer referred to in
clauses (i) and (ii) of Section 7.01 or any Servicer Event of Termination
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 Servicer or the Majority
Certificateholders. In the absence of such receipt of such notice, the
Trustee may conclusively assume that there is no Servicer Event of
Termination.
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
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any event require the Trustee to perform, or be responsible for the manner of
performance of, any of the obligations of the 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 Servicer in
accordance with the terms of this Agreement.
The Trustee shall have no duty (A) to see any recording, filing, or
depositing of this Agreement or any agreement referred to herein or any
financing statement or continuation statement evidencing a security interest, or
to see to the maintenance of any such recording or filing or depositing or to
any rerecording, refiling or redepositing of any thereof, (B) to see to any
insurance or (C) to see to the payment or discharge of any tax, assessment, or
other governmental charge or any lien or encumbrance of any kind owing with
respect to, assessed or levied against, any part of the Trust Fund other than
from funds available in the Distribution Account.
Section 8.02. Certain Matters Affecting the Trustee.
--------------------------------------
(a) Except as otherwise provided in Section 8.01:
(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;
(ii) the Trustee may consult with counsel and any advice or 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 the Certificateholders pursuant to the provisions of
this Agreement, unless such Certificateholders 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 willful misconduct in the performance of any
such act;
(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 a Servicer Event of Termination and
after the curing of all Servicer Events of Termination which may have
occurred,
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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 Majority
Certificateholder; 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 Servicer or, if paid by the Trustee, shall be reimbursed by
the Servicer upon demand. Nothing in this clause (v) shall derogate from
the obligation of the 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
Servicer until such time as the Trustee may be required to act as Servicer
pursuant to Section 7.02;
(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 and the Trustee shall not be responsible for any
misconduct or negligence on the part of any such agent, attorney or
custodian appointed by the Trustee with due care; and
(viii) 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 willful
misconduct in the performance of such act.
Section 8.03. 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 Seller, 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 Servicer, or for the use or application of any funds
paid to the Servicer in respect of the Mortgage Loans or deposited in or
withdrawn from the Collection Account by the 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,
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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 Servicer pursuant to Section 7.02); 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 Servicer
pursuant to Section 7.02); the compliance by the Depositor, the Seller or the
Servicer with any warranty or representation made under this Agreement or in any
related document or the accuracy of any such warranty or representation prior to
the Trustee's receipt of notice or other discovery of any non-compliance
therewith or any breach thereof; any investment of monies by or at the direction
of the 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 Servicer (other than if
the Trustee shall assume the duties of the Servicer pursuant to Section 7.02),
or any Mortgagor; any action of the Servicer (other than if the Trustee shall
assume the duties of the Servicer pursuant to Section 7.02), taken in the name
of the Trustee; the failure of the Servicer to act or perform any duties
required of it as agent of the Trustee hereunder; or any action by the Trustee
taken at the instruction of the Servicer (other than if the Trustee shall assume
the duties of the Servicer pursuant to Section 7.02); provided, however, that
the foregoing shall not relieve the Trustee of its obligation to perform its
duties under this Agreement. 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.
Section 8.04. 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 trust business with the
Seller, the Servicer, the Depositor or their Affiliates.
Section 8.05. Seller to Pay Trustee Fees and Expenses.
----------------------------------------
Prior to disbursing the Available Funds, the Trustee shall withdraw
from the Distribution Account on each Distribution Date and pay to itself the
Trustee Fee and, to the extent funds therein are at any time insufficient for
such purpose, the Seller shall pay such fees as reasonable compensation (which
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust) for all services rendered by it in the execution of
the trusts hereby created and in the exercise and performance of any of the
powers and duties hereunder of the Trustee, and the Seller 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 (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
or the Trustee hereunder. Notwithstanding any other provision of this Agreement,
including Section 2.03(a) and
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Section 2.04, to the contrary, the Seller covenants and agrees to indemnify the
Trustee and its officers, directors, employees and agents from, and hold it
harmless against, any and all losses, liabilities, damages, claims or expenses
incurred in connection with any legal action relating to this Agreement, the
Certificates or incurred in connection with the administration of the Trust,
other than any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or negligence of the Trustee in the performance of its
duties hereunder or by reason of the Trustee's reckless disregard of obligations
and duties hereunder. Anything in this Agreement to the contrary
notwithstanding, in no event shall the Trustee be liable for special, indirect
or consequential loss or damage of any kind whatsoever (including but not
limited to lost profits), even if the Trustee has been advised of the likelihood
of such loss or damage and regardless of the form of action. The Trustee and any
director, officer, employee or agent of the Trustee shall be indemnified, to the
extent not paid by the Seller pursuant to this Section, by the Trust Fund and
held harmless against any loss, liability or expense (not including expenses,
disbursements and advances incurred or made by the Trustee, in the ordinary
course of the Trustee's performance in accordance with the provisions of this
Agreement) incurred by the Trustee or such party arising out of or in connection
with the acceptance or administration of its duties under this Agreement, other
than any loss, liability or expense incurred by reason of willful misfeasance,
bad faith or negligence in the performance by the Trustee of its duties under
this Agreement or by reason of the reckless disregard of the Trustee's
obligations and duties under this Agreement. This Section shall survive
termination of this Agreement or the resignation or removal of any Trustee
hereunder.
Section 8.06. Eligibility Requirements for Trustee.
-------------------------------------
The Trustee hereunder shall at all times be a Department of Housing and
Urban Development and Federal Housing Administration approved mortgagee, an
entity duly organized 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 and a minimum long-term debt rating of BBB by Fitch and S&P and Baa2
by Moody's, and subject to supervision or examination by federal or state
authority. If such entity 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 8.06, the combined capital and
surplus of such entity shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so 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
8.06, the Trustee shall resign immediately in the manner and with the effect
specified in Section 8.07.
Section 8.07. 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 Servicer
and each
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Rating Agency. Upon receiving such notice of resignation, the Depositor shall
promptly appoint a successor Trustee by written instrument, in duplicate, one
copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor Trustee. 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 8.06 and shall fail to resign after written
request therefor by the Depositor, 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, then the
Depositor may remove the Trustee. If the Depositor or the Servicer removes the
Trustee under the authority of the immediately preceding sentence, the Depositor
shall promptly appoint a successor Trustee 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.
The Majority Certificateholders may at any time remove the Trustee by
written instrument or instruments delivered to the Servicer, the Depositor and
the Trustee; the Depositor shall thereupon use its 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 8.07 shall
not become effective until acceptance of appointment by the successor Trustee as
provided in Section 8.08.
Section 8.08. Successor Trustee.
------------------
Any successor Trustee appointed as provided in Section 8.07 shall
execute, acknowledge and deliver to the Depositor, the Rating Agencies, the
Servicer and to its predecessor Trustee 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 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 8.08 unless at the time of such acceptance such successor Trustee shall
be eligible under the provisions of Section 8.06 and the appointment of such
successor Trustee shall not result in a downgrading of the Regular Certificates
by either Rating Agency, as evidenced by a letter from each Rating Agency.
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Upon acceptance of appointment by a successor Trustee as provided in
this Section 8.08, the successor Trustee shall mail notice of the appointment of
a successor Trustee hereunder to all Holders of Certificates at their addresses
as shown in the Certificate Register and to each Rating Agency.
Section 8.09. Merger or Consolidation of Trustee.
-----------------------------------
Any entity into which the Trustee may be merged or converted or with
which it may be consolidated, or any entity resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any entity
succeeding to the business of the Trustee, shall be the successor of the Trustee
hereunder, provided such entity shall be eligible under the provisions of
Section 8.06 and 8.08, 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 8.10. 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 acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee 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 8.10, such powers, duties, obligations,
rights and trusts as the Servicer and the Trustee may consider necessary or
desirable. Any such co-trustee or separate trustee shall be subject to the
written approval of the Servicer. If the 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 a Servicer Event of Termination 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 8.06, and no notice to Certificateholders
of the appointment of any co-trustee or separate trustee shall be required under
Section 8.08. The 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 Servicer hereunder), the Trustee shall be
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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 Servicer and the Trustee, acting jointly may at any time
accept the resignation of or remove any separate trustee or co-trustee
except that following the occurrence of a Servicer Event of Termination,
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 VIII. 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, the Rating Agencies and the Servicer.
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 8.11. 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 8.12. Trustee May Enforce Claims Without Possession of
------------------------------------------------
Certificates.
-------------
(a) 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
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proceeding instituted by the Trustee shall be brought in its own name or in its
capacity as Trustee for the benefit of all Holders of such Certificates, subject
to the provisions of this Agreement. 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
of the Certificateholders in respect of which such judgment has been recovered.
(b) The Trustee shall afford the Seller, the Depositor, the Servicer
and each Certificateholder upon reasonable notice during normal business hours,
access to all records maintained by the Trustee in respect of its duties
hereunder and access to officers of the Trustee responsible for performing such
duties. The Trustee shall cooperate fully with the Seller, the Servicer, the
Depositor and such Certificateholder and shall make available to the Seller, the
Servicer, the Depositor and such Certificateholder for review and copying at the
expense of the party requesting such copies, such books, documents or records as
may be requested with respect to the Trustee's duties hereunder. The Seller, the
Depositor, the Servicer and the Certificateholders shall not have any
responsibility or liability for any action or failure to act by the Trustee and
are not obligated to supervise the performance of the Trustee under this
Agreement or otherwise.
Section 8.13. Suits for Enforcement.
----------------------
In case a Servicer Event of Termination or other default by the
Servicer or the Seller hereunder shall occur and be continuing, the Trustee may
proceed to protect and enforce its rights and the rights of the
Certificateholders 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, and subject
to the foregoing, shall deem most effectual to protect and enforce any of the
rights of the Trustee and the Certificateholders.
Section 8.14. 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.
Section 8.15. 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.
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Section 8.16. Compliance with National Housing Act of 1934.
---------------------------------------------
In performing its duties hereunder with respect to FHA Loans, the
Trustee shall comply with all requirements of the National Housing Act of 1934,
as amended.
ARTICLE IX
REMIC AND GRANTOR TRUST ADMINISTRATION
Section 9.01. REMIC Administration.
---------------------
(a) The Trustee shall make or cause to be made REMIC elections for each
of REMIC 1, REMIC 2, REMIC 3 and REMIC 4 as set forth in the Preliminary
Statement on Forms 1066 or other appropriate federal tax or information return
for the taxable year ending on the last day of the calendar year in which the
Certificates are issued. The regular interests and residual interest in each
REMIC shall be as designated in the Preliminary Statement.
(b) The Closing Date is hereby designated as the "Startup Day" of each
REMIC within the meaning of Section 860G(a)(9) of the Code.
(c) The Servicer shall pay any and all tax related expenses (not
including taxes) of each REMIC, including, but not limited to, any professional
fees or expenses related to audits or any administrative or judicial proceedings
with respect to such REMIC that involve the Internal Revenue Service or state
tax authorities, but only to the extent that (i) such expenses are ordinary or
routine expenses, including expenses of a routine audit but not expenses of
litigation (except as described in (ii)); or (ii) such expenses or liabilities
(including taxes and penalties) are attributable to the negligence or willful
misconduct of the Servicer in fulfilling its duties hereunder. The Servicer
shall be entitled to reimbursement of expenses to the extent provided in clause
(i) above from the Collection Account.
(d) The Trustee shall prepare or cause to be prepared, sign and file or
cause to be filed, each REMIC's federal and state tax and information returns as
such REMIC's direct representative. The expenses of preparing and filing such
returns shall be borne by the Trustee.
(e) The Holder of the Class R Certificates holding the largest
Percentage Interest shall be the "tax matters person" as defined in the REMIC
Provisions (the "Tax Matters Person") with respect to each of REMIC 1, REMIC 2
and REMIC 3. The Holder of the Class R-4 Certificate holding the largest
Percentage Interest shall be the Tax Matters Person with respect to REMIC 4. The
Trustee is irrevocably designated as and shall act as attorney-in-fact and agent
for each Tax Matters Person for each REMIC. The Trustee, as agent for the Tax
Matters Person, shall perform, on behalf of each REMIC, all reporting and other
tax compliance duties that are the responsibility of such REMIC under the Code,
the REMIC Provisions, or other compliance guidance issued by the Internal
Revenue Service or any state or local taxing authority. Among its other duties,
if
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required by the Code, the REMIC Provisions, or other such guidance, the Trustee,
as agent for the Tax Matters Person, shall provide (i) to the Treasury or other
governmental authority such information as is necessary for the application of
any tax relating to the transfer of a Residual Certificate to any disqualified
person or organization and (ii) to the Certificateholders such information or
reports as are required by the Code or REMIC Provisions.
(f) The Trustee, the Servicer, and the Holders of Certificates shall
take any action or cause any REMIC to take any action necessary to create or
maintain the status of such REMIC as a REMIC under the REMIC Provisions and
shall assist each other as necessary to create or maintain such status. Neither
the Trustee, the Servicer, nor the Holder of any Residual Certificate shall take
any action or cause any REMIC to take any action or fail to take (or fail to
cause to be taken) any action that, under the REMIC Provisions, if taken or not
taken, as the case may be, could (i) endanger the status of such REMIC as a
REMIC or (ii) result in the imposition of a tax upon such REMIC (including, but
not limited to, the tax on prohibited transactions as defined in Code Section
860F(a)(2) and the tax on prohibited contributions set forth on Section 860G(d)
of the Code) (either such event, an "Adverse REMIC Event") unless the Trustee
and the Servicer have received an Opinion of Counsel (at the expense of the
party seeking to take such action) to the effect that the contemplated action
will not endanger such status or result in the imposition of such a tax. In
addition, prior to taking any action with respect to any REMIC or the assets
therein, or causing such REMIC to take any action, which is not expressly
permitted under the terms of this Agreement, any Holder of a Residual
Certificate will consult with the Trustee and the Servicer, or their respective
designees, in writing, with respect to whether such action could cause an
Adverse REMIC Event to occur with respect to such REMIC, and no such Person
shall take any such action or cause such REMIC to take any such action as to
which the Trustee or the Servicer has advised it in writing that an Adverse
REMIC Event could occur.
(g) Each Holder of a Residual Certificate shall pay when due its pro
rata share of any and all taxes imposed on any REMIC by federal or state
governmental authorities. To the extent that such REMIC taxes are not paid by
Residual Certificateholders, the Trustee shall pay any remaining REMIC taxes out
of current or future amounts otherwise distributable to the Holder of the
Residual Certificate in each REMIC or, if no such amounts are available, out of
other amounts held in the Collection Account, and shall reduce amounts otherwise
payable to Holders of the REMIC Regular Interests or the Certificates, as the
case may be.
(h) The Trustee, shall, for federal income tax purposes, maintain or
cause to be maintained books and records with respect to each REMIC on a
calendar year and on an accrual basis.
(i) No additional contributions of assets shall be made to any REMIC,
except as expressly provided in this Agreement with respect to Eligible
Substitute Mortgage Loans.
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(j) Neither the Trustee nor the Servicer shall enter into any
arrangement by which any REMIC will receive a fee or other compensation for
services.
(k) On or before April 15 of each calendar year beginning in 2002, the
Servicer shall deliver to the Trustee and each Rating Agency an Officer's
Certificate stating the Servicer's compliance with the provisions of this
Section 9.01.
(l) The Trustee shall account for the rights of the Offered
Certificates and the Class B-2 Certificates to receive Rate Payments as a right
in interest rate cap contracts written by the Class X and Class N
Certificateholders, as beneficial owners of the Class X/N Interest, in favor of
the Holders of the Offered Certificates and the Class B-2 Certificates, and the
Trustee shall account for such as property held separate and apart from the
regular interests it holds in the REMICs created hereunder. This provision is
intended to satisfy the requirements of Treasury Regulations Section 1.860G-2(i)
for the treatment of property rights coupled with regular interests to be
separately respected and shall be interpreted consistently with such regulation.
On each Distribution Date, to the extent the Offered Certificates and the Class
B-2 Certificates receive interest (excluding Class A-1A LIBOR Carryover Amounts)
in excess of the Class A-IO REMIC Pass-Through Rate, Class A-1A REMIC
Pass-Through Rate, Class M-1 REMIC Pass-Through Rate, Class M-2 REMIC
Pass-Through Rate, Class B-1 REMIC Pass-Through Rate, Class B-2 REMIC
Pass-Through Rate, as applicable, such interest will be treated as distributed
to the Class X/N Interest, pro rata, and then paid to the respective Class of
Offered Certificates and the Class B-2 Certificates pursuant to the related
interest rate cap agreement.
(m) The Trustee shall treat the Excess Reserve Fund Account as an
outside reserve fund within the meaning of Treasury Regulation Section
1.860G-2(h) that is owned by the Class X and Class N Certificateholders and that
is not an asset of any REMIC. The Trustee shall treat the rights of the Class
A-1A Certificateholders to receive payments from the Excess Reserve Fund Account
in respect of Class A-1A LIBOR Carryover Amounts as a right in interest rate cap
contracts written by the Class X and Class N Certificateholders, as beneficial
owners of the Class X/N Interest, in favor of the Class A-1A Certificateholders,
and the Trustee shall account for such as property held separate and apart from
the regular interests it holds in the REMICs created hereunder. This provision
is intended to satisfy the requirements of Treasury Regulation Section
1.860G-2(i) for the treatment of property rights coupled with regular interests
to be separately respected and shall be interpreted consistent with such
regulation. On each Distribution Date, to the extent the Class A-1A Certificates
receive interest in excess of the Pool Cap, such interest will be treated as
distributed to the Class X/N Interest, pro rata, and then paid to the Excess
Reserve Fund Account and then paid to the Class A-1A Certificates, respectively,
pursuant to the related interest rate cap agreement.
(n) [Reserved].
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Section 9.02. Prohibited Transactions and Activities.
---------------------------------------
Neither the Seller, the Depositor, the Servicer nor the Trustee shall
sell, dispose of, or substitute for any of the Mortgage Loans, except in a
disposition pursuant to (i) the foreclosure of a Mortgage Loan, (ii) the
bankruptcy of the Trust Fund, (iii) the termination of any REMIC pursuant to
Article X of this Agreement, (iv) a substitution pursuant to Article II of this
Agreement or (v) a repurchase of Mortgage Loans pursuant to Article II of this
Agreement, nor acquire any assets for any REMIC, nor sell or dispose of any
investments in the Distribution Account for gain, nor accept any contributions
to any REMIC after the Closing Date, unless it has received an Opinion of
Counsel (at the expense of the party causing such sale, disposition, or
substitution) that such disposition, acquisition, substitution, or acceptance
will not (a) affect adversely the status of such REMIC as a REMIC or of the
interests therein other than the Residual Certificates 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 Trust Fund (except pursuant to the provisions of this Agreement)
or (d) cause such REMIC to be subject to a tax on prohibited transactions or
prohibited contributions pursuant to the REMIC Provisions.
Section 9.03. Indemnification with Respect to Certain Taxes and Loss of
---------------------------------------------------------
REMIC Status.
-------------
In the event that any REMIC formed hereunder fails to qualify as a
REMIC, loses its status as a REMIC, or incurs federal, state or local taxes as a
result of a prohibited transaction or prohibited contribution under the REMIC
Provisions due to the negligent performance by the Servicer of its duties and
obligations set forth herein, the Servicer shall indemnify the Holder of the
related Residual Certificate against any and all losses, claims, damages,
liabilities or expenses ("Losses") resulting from such negligence; provided,
however, that the Servicer shall not be liable for any such Losses attributable
to the action or inaction of the Trustee, the Depositor or the Holder of such
Residual Certificate, as applicable, nor for any such Losses resulting from
misinformation provided by the Holder of such Residual Certificate on which the
Servicer has relied. The foregoing shall not be deemed to limit or restrict the
rights and remedies of the Holder of such Residual Certificate now or hereafter
existing at law or in equity. Notwithstanding the foregoing, however, in no
event shall the Servicer have any liability (1) for any action or omission that
is taken in accordance with and in compliance with the express terms of, or
which is expressly permitted by the terms of, this Agreement, (2) for any Losses
other than arising out of a negligent performance by the Servicer of its duties
and obligations set forth herein, and (3) for any special or consequential
damages to Certificateholders (in addition to payment of principal and interest
on the Certificates).
Section 9.04. REO Property.
-------------
(a) Subject to compliance with applicable laws and regulations as shall
at any time be in force, and notwithstanding any other provision of this
Agreement, the Servicer, acting on behalf of the Trustee hereunder, shall not
rent, lease, or otherwise earn
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income on behalf of any REMIC with respect to any REO Property which might cause
such REO 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 any REMIC
of any "income from non-permitted assets" within the meaning of Section
860F(a)(2) of the Code or any "net income from foreclosure property" which is
subject to tax under the REMIC Provisions unless the Servicer has advised, or
has caused the applicable Servicer to advise, the Trustee in writing to the
effect that, under the REMIC Provisions, such action would not adversely affect
the status of any REMIC as a REMIC and any income generated for such REMIC by
the REO Property would not result in the imposition of a tax upon such REMIC.
(b) The Servicer shall make reasonable efforts to sell any REO Property
for its fair market value. In any event, however, the Servicer shall dispose of
any REO Property before the close of the third calendar year beginning after the
year of its acquisition by the Trust Fund unless the Servicer has received a
grant of extension from the Internal Revenue Service to the effect that, under
the REMIC Provisions and any relevant proposed legislation and under applicable
state law, any REMIC may hold REO Property for a longer period without adversely
affecting its REMIC status or causing the imposition of a federal or state tax
upon any REMIC. If the Servicer has received such an extension, then the
Servicer shall continue to attempt to sell the REO Property for its fair market
value as determined in good faith by the Servicer for such longer period as such
extension permits (the "Extended Period"). If the Servicer has not received such
an extension and the Servicer is unable to sell the REO Property within 33
months after its acquisition by the Trust Fund or if the Servicer has received
such an extension, and the Servicer is unable to sell the REO Property within
the period ending three months before the close of the Extended Period, the
Servicer shall, before the end of the applicable period, (i) purchase such REO
Property at a price equal to the REO Property's fair market value as determined
in good faith by the Servicer or (ii) auction the REO Property to the highest
bidder (which may be the Servicer) in an auction reasonably designed to produce
a fair price prior to the expiration of the applicable period.
Section 9.05. Grantor Trust Administration.
-----------------------------
The parties intend that the portions of the Trust Fund consisting of
the Excess Reserve Fund Account be treated as a "grantor trust" under the Code,
and the provisions hereof shall be interpreted consistently with this intention.
In furtherance of such intention, the Trustee shall furnish or cause to be
furnished (i) to the Holders of the Offered Certificates and the Class B-2
Certificates and (ii) to the Holder of the Class X/N Interest, and shall file or
cause to be filed with the Internal Revenue Service together with Form 1041 or
such other form as may be applicable, their allocable shares of income with
respect to the property held by the Grantor Trust, at the time or times and in
the manner required by the Code.
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ARTICLE X
TERMINATION
Section 10.01. Termination.
------------
(a) The respective obligations and responsibilities of the Seller, the
Servicer, the Depositor 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 Servicer to send certain
notices as hereinafter set forth) shall terminate upon notice to the Trustee
upon the earliest of (i) the Distribution Date on which the Certificate
Principal Balance of each Class of Certificates has been reduced to zero, (ii)
the final payment or other liquidation of the last Mortgage Loan in the Trust,
and (iii) the optional purchase by the Servicer (or an affiliate of the
Servicer) of the Mortgage Loans in both Loan Groups as described below.
Notwithstanding the foregoing, in no event shall the trust created hereby
continue beyond the expiration of 21 years from the death of the last survivor
of the descendants of Joseph P. Kennedy, the late ambassador of the United
States to the Court of St. James, living on the date hereof and the Distribution
Date in January, 2039.
The Servicer (or an affiliate of the Servicer) may, at its option,
terminate the Mortgage Loans in the Trust Fund and retire the Certificates and
the X/N Interest on the next succeeding Distribution Date upon which the
aggregate current Pool Balance is less than 10% of the aggregate Pool Balance of
the Mortgage Loans as of the Cut-Off Date by purchasing all of the outstanding
(i) Mortgage Loans in the Trust Fund at a price equal to the sum of the
outstanding Principal Balance of the Mortgage Loans and except to the extent
previously advanced by the Servicer, accrued and unpaid interest thereon at the
weighted average of the Mortgage Interest Rates through the end of the
Collection Period preceding the final Distribution Date plus unreimbursed
Servicing Advances, Advances and any unpaid Servicing Fees and Special Servicing
Fees allocable to such Mortgage Loans and (ii) REO Properties in the Trust Fund
at a price equal to their fair market value as determined in good faith by the
Servicer (the "Termination Price").
In connection with any such purchase pursuant to the preceding
paragraph, the Servicer shall deliver to the Trustee for deposit in the
Distribution Account all amounts then on deposit in the Collection Account (less
amounts permitted to be withdrawn by the Servicer pursuant to Section 3.07),
which deposit shall be deemed to have occurred immediately following such
purchase.
Any such purchase shall be accomplished by delivery to the Trustee for
deposit into the Distribution Account as part of Available Funds on the
Determination Date before such Distribution Date of the Termination Price.
(b) Notice of any termination, specifying the Distribution Date (which
shall be a date that would otherwise be a Distribution Date) upon which the
Certificateholders may surrender their Certificates to the Trustee for payment
of the final distribution and cancellation, shall be given promptly by the
Trustee upon the Trustee
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receiving notice of such date from the Servicer, by letter to the
Certificateholders mailed not earlier than the 15th day of the month preceding
the month of such final distribution and not later than the 15th day of the
month of such final distribution specifying (1) the Distribution Date upon which
final distribution of the Certificates will be made upon presentation and
surrender of such Certificates at the office or agency of the Trustee therein
designated, (2) the amount of any such final distribution and (3) that the
Record Date otherwise applicable to such Distribution Date is not applicable,
distributions being made only upon presentation and surrender of the
Certificates at the office or agency of the Trustee therein specified.
(c) Upon presentation and surrender of the Certificates, the Trustee
shall cause to be distributed to the Holders of the Certificates on the
Distribution Date for such final distribution, in proportion to the Percentage
Interests of their respective Class and to the extent that funds are available
for such purpose, an amount equal to the amount required to be distributed to
such Holders in accordance with the provisions of Sections 4.01 and 4.02 for
such Distribution Date.
(d) In the event that all Certificateholders shall not surrender their
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
Certificateholders to be withdrawn therefrom and credited to the remaining
Certificateholders by depositing such funds in a separate escrow account for the
benefit of such Certificateholders, and the Servicer or an affiliate of the
Servicer (if the Servicer, or an affiliate of the 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 Certificateholders, to surrender
their 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
Certificateholders 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 Certificateholders for payment.
Section 10.02. Additional Termination Requirements.
------------------------------------
(a) In the event that the Servicer (or an affiliate of the Servicer)
exercises its purchase option as provided in Section 10.01, the Trust shall be
terminated in accordance with the following additional requirements, unless the
Trustee shall have been furnished with an Opinion of Counsel to the effect that
the failure of the Trust to comply with the requirements of this Section will
not (i) result in the imposition of taxes on "prohibited transactions" of the
Trust as defined in Section 860F of the Code or (ii) cause any REMIC
constituting part of the Trust Fund to fail to qualify as a REMIC at any time
that any Certificates are outstanding:
(i) The Trustee shall designate a date within 90 days prior to the
final Distribution Date as the date of adoption of plans of complete
liquidation of each
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REMIC and shall specify such date in the final federal income tax return of each
REMIC;
(ii) After the date of adoption of such plans of complete liquidation
and at or prior to the final Distribution Date, the Trustee shall sell all
of the assets of the Trust to the Servicer (or an affiliate of the
Servicer) for cash; and
(iii) At the time of the making of the final payment on the
Certificates, the Trustee shall distribute or credit, or cause to be
distributed or credited in the following order of priority (A) to the
Holders of each of the Class A-1A and the Class A-IO Certificates, one
month's interest thereon at the applicable Pass-Through Rate, and to the
Class A-1A Certificates, its Certificate Principal Balance, (B) to the
Holders of each of the Class M-1, Class M-2, Class B-1 and Class B-2
Certificates, the related Certificate Principal Balance, as applicable,
plus one month's interest thereon at the applicable Pass-Through Rate, (C)
to the Holders of the Class N and Class X Certificates in respect of the
Class X/N Interest, the amount of any remaining Monthly Excess Cash Flow
Amounts not previously distributed thereon, (C) to the remaining REMIC
Regular Interests the amounts allocable thereto pursuant to Section 4.10
and (D) to the Holders of the Class R Certificates, in respect of the Class
R-1 Interest, the Class R-2 Interest and the Class R-3 Interest, all cash
on hand after such payment (other than cash retained to meet claims),
except that any remaining amounts otherwise payable to the Class X/N
Interest shall be distributed to the Class R-4 Certificates, and the Trust
shall terminate at such time.
(b) By their acceptance of Certificates, the Holders thereof hereby
agree to appoint the Trustee as their attorney in fact to: (i) designate such
date of adoption of plans of complete liquidation and (ii) to take such other
action in connection therewith as may be reasonably required to carry out such
plans of complete liquidation all in accordance with the terms hereof.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. Amendment.
----------
This Agreement may be amended from time to time by Seller, the
Depositor, the Servicer and the Trustee; and without the consent of the
Certificateholders, (i) to cure any ambiguity, (ii) to correct or supplement any
provisions herein which may be defective or inconsistent with any other
provisions herein or (iii) to make any other provisions with respect to matters
or questions arising under this Agreement, which shall not be inconsistent with
the provisions of this Agreement; provided, however, that any such action listed
in clause (i) through (iii) above shall not adversely affect in any respect the
interests of any Certificateholder, as evidenced by (i) notice in writing to the
Depositor, the Servicer and the Trustee from the Rating Agencies that such
action will not result in the reduction or withdrawal of the rating of any
outstanding Class of
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Certificates with respect to which it is a Rating Agency,
or (ii) an Opinion of Counsel delivered to the Servicer and the Trustee.
In addition, this Agreement may be amended from time to time by Seller,
the Depositor, the Servicer and the Trustee, with the consent of the Majority
Certificateholders, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Holders of Certificates; provided,
however, that no such amendment or waiver shall (x) reduce in any manner the
amount of, or delay the timing of, payments on the Certificates which are
required to be made on any Certificate without the consent of the Holder of such
Certificate, (y) adversely affect in any material respect the interests of the
Holders of any Class of Certificates in a manner other than as described in
clause (x) above, without the consent of the Holders of Certificates of such
Class evidencing at least a 66% Percentage Interest in such Class, or (z) reduce
the percentage of Voting Rights required by clause (y) above without the consent
of the Holders of all Certificates of such Class then outstanding. Upon approval
of an amendment, a copy of such amendment shall be sent to the Rating Agencies.
Prior to the execution of any amendment to this Agreement, the Trustee shall be
entitled to receive and rely upon an Opinion of Counsel (at the expense of the
Person seeking such amendment) stating that the execution of such amendment is
authorized or permitted by this Agreement. 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.
Notwithstanding any provision of this Agreement to the contrary, the
Trustee shall not consent to any amendment to this Agreement unless it shall
have first received an Opinion of Counsel, delivered by (and at the expense of)
the Person seeking such Amendment, to the effect that such amendment will not
result in the imposition of a tax on any REMIC constituting part of the Trust
Fund pursuant to the REMIC Provisions or cause any REMIC constituting part of
the Trust to fail to qualify as a REMIC at any time that any Certificates are
outstanding and that the amendment is being made in accordance with the terms
hereof.
Promptly after the execution of any such amendment the Trustee shall
furnish, at the expense of the Person that requested the amendment if such
Person is the Seller or the Servicer (but in no event at the expense of the
Trustee), otherwise at the expense of the Trust, a copy of such amendment and
the Opinion of Counsel referred to in the immediately preceding paragraph to the
Servicer and each Rating Agency.
It shall not be necessary for the consent of Certificateholders under
this Section 11.01 to approve the particular form of any proposed amendment;
instead it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable regulations as the Trustee may prescribe.
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The Trustee may, but shall not be obligated to, enter into any
amendment pursuant to this 11.01 Section that affects its rights, duties and
immunities under this Agreement or otherwise.
Section 11.02. Recordation of Agreement; Counterparts.
---------------------------------------
To the extent permitted by applicable law, 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 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
Servicer at the expense of the Trust, but only upon direction of
Certificateholders, accompanied by an Opinion of Counsel to the effect that such
recordation materially and beneficially 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 together constitute but
one and the same instrument.
Section 11.03. Limitation on Rights of Certificateholders.
-------------------------------------------
The death or incapacity of any Certificateholder shall not (i) operate
to terminate this Agreement or the Trust, (ii) entitle such Certificateholder's
legal representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Trust, or (iii)
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.
Except as expressly provided for herein, no Certificateholder shall
have any right to vote 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 Certificateholder 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 of any provision 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 herein provided, and unless also the Holders of
Certificates entitled to at least 25% of the Voting Rights 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 15 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 is understood
and intended, and expressly covenanted by each Certificateholder with every
other Certificateholder and the Trustee, that no one or more
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Holders of Certificates shall have any right in any manner whatever by virtue of
any provision of this Agreement to affect, disturb or prejudice the rights of
the Holders of any other of such Certificates, or to obtain or seek to obtain
priority over or preference to any other such Holder, which priority or
preference is not otherwise provided for herein, 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 11.03 each and every Certificateholder and the
Trustee shall be entitled to such relief as can be given either at law or in
equity.
Section 11.04. Governing Law; Jurisdiction.
----------------------------
This Agreement shall be construed in accordance with the laws of the
State of New York, and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws. With respect to any
claim arising out of this Agreement, each party irrevocably submits to the
exclusive jurisdiction of the courts of the State of New York and the United
States District Court located in the Borough of Manhattan in The City of New
York, and each party irrevocably waives any objection which it may have at any
time to the laying of venue of any suit, action or proceeding arising out of or
relating hereto brought in any such courts, irrevocably waives any claim that
any such suit, action or proceeding brought in any such court has been brought
in any inconvenient forum and further irrevocably waives the right to object,
with respect to such claim, suit, action or proceeding brought in any such
court, that such court does not have jurisdiction over such party, provided that
service of process has been made by any lawful means.
Section 11.05. Notices.
--------
All directions, demands and notices hereunder shall be in writing and
shall be deemed to have been duly given if personally delivered at or mailed by
first class mail, postage prepaid, or by express delivery service, to (a) in the
case of the Seller, Credit-Based Asset Servicing and Securitization LLC, 335
Madison Avenue, 19th Floor, New York, New York, Attention: Director - Mortgage
Finance (telecopy number (212) 850-7760), or such other address or telecopy
number as may hereafter be furnished to the Depositor and the Trustee in writing
by the Seller, (b) in the case of the Trustee, The Chase Manhattan Bank, 450
West 33rd Street, 14th Floor, New York, New York 10001, Attention: Structured
Finance, C-BASS Mortgage Loan Asset-Backed Certificates, Series 2001-CB3, or
such other address as may hereafter be furnished to the Depositor, the Seller
and the Servicer in writing by the Trustee, (c) in the case of the Depositor,
Residential Asset Funding Corporation, 301 South College Street, TW-09,
Charlotte, North Carolina 28288-0610, Attention: C-BASS Mortgage Loan
Asset-Backed Certificates, Series 2001-CB3, or such other address as may be
furnished to the Seller, the Servicer and the Trustee in writing by the
Depositor, and (d) in the case of the Servicer, Litton Loan Servicing LP, 5373
W. Alabama, Suite 600, Houston, Texas 77056, Attention: Janice McClure, or such
other address as may be furnished to the Seller, the Depositor and the Trustee
in writing by the Servicer. 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. Notice of any
Servicer
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Event of Termination shall be given by telecopy and by certified mail.
Any notice so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have duly been given when mailed, whether or not the
Certificateholder receives such notice. A copy of any notice required to be
telecopied hereunder shall also be mailed to the appropriate party in the manner
set forth above.
Section 11.06. Severability of Provisions.
---------------------------
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall for any reason whatsoever be 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 11.07. Article and Section References.
-------------------------------
All article and Section references used in this Agreement,
unless otherwise provided, are to articles and Sections in this Agreement.
Section 11.08. Notice to the Rating Agencies.
------------------------------
(a) Each of the Trustee and the Servicer shall be obligated to use its
best reasonable efforts promptly to provide notice to the Rating Agencies with
respect to each of the following of which a Responsible Officer of the Trustee
or Servicer, as the case may be, has actual knowledge:
(i) any material change or amendment to this Agreement;
(ii) the occurrence of any Servicer Event of Termination that has not
been cured or waived;
(iii) the resignation or termination of the Servicer or the Trustee;
(iv) the final payment to Holders of the Certificates of any Class;
(v) any change in the location of any Account; and
(vi) if the Trustee is acting as successor Servicer pursuant to Section
7.02 hereof, any event that would result in the inability of the Trustee to
make Advances.
(vii) In addition, the Servicer shall promptly furnish to each Rating
Agency copies of the following:
(A) each annual statement as to compliance described in Section
3.19 hereof;
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(B) each annual independent public accountants' servicing report
described in Section 3.20 hereof; and
(C) each notice delivered pursuant to Section 7.01(a) hereof
which relates to the fact that the Servicer has not made an Advance.
Any such notice pursuant to this Section 11.08 shall be in writing and
shall be deemed to have been duly given if personally delivered or mailed by
first class mail, postage prepaid, or by express delivery service to Fitch,
Inc., One State Street Plaza, New York, New York 10004, Attention: Agnes Teng;
Standard & Poor's Ratings Services, 55 Water Street, New York, New York 10041,
Attention: Scott Mason; and Moody's Investors Services, Inc., 99 Church Street,
New York, New York 10007, Attention: Jasper Brice.
Section 11.09. Further Assurances.
-------------------
Notwithstanding any other provision of this Agreement, neither the
Regular Certificateholders nor the Trustee shall have any obligation to consent
to any amendment or modification of this Agreement unless they have been
provided reasonable security or indemnity against their out-of-pocket expenses
(including reasonable attorneys' fees) to be incurred in connection therewith.
Section 11.10. Benefits of Agreement.
----------------------
Nothing in this Agreement or in the Certificates, expressed or implied,
shall give to any Person, other than the Certificateholders and the parties
hereto and their successors hereunder, any benefit or any legal or equitable
right, remedy or claim under this Agreement.
Section 11.11. Acts of Certificateholders.
---------------------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by the
Certificateholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Certificateholders in person or by
agent duly appointed in writing; and such action shall become effective when
such instrument or instruments are delivered to the Trustee, Seller and the
Servicer. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "act" of the
Certificateholders signing such instrument or instruments. Proof of execution of
any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Agreement and conclusive in favor of the
Trustee and the Trust, if made in the manner provided in this Section 11.11.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of a notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Whenever
such execution is by a
129
signer acting in a capacity other than his or her individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other action by any Certificateholder shall bind every future Holder
of such Certificate and the Holder of every Certificate issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof, in
respect of anything done, omitted or suffered to be done by the Trustee or the
Trust in reliance thereon, whether or not notation of such action is made upon
such Certificate.
130
IN WITNESS WHEREOF, the Seller, the Depositor, the Servicer and the
Trustee have caused their names to be signed hereto by their respective officers
thereunto duly authorized, all as of the day and year first above written.
RESIDENTIAL ASSET FUNDING
CORPORATION, as Depositor
By: /s/ Robert J. Perret
------------------------------
Name: Robert J. Perret
Title: Director
CREDIT-BASED ASSET SERVICING
AND SECURITIZATION LLC, as Seller
By: /s/ Ivan Halpern
------------------------------
Name: Ivan Halpern
Title: Vice President
LITTON LOAN SERVICING LP, as
Servicer
By: /s/ Janice McClure
------------------------------
Name: Janice McClure
Title: Senior Vice President
THE CHASE MANHATTAN BANK, as
Trustee
By: /s/ Karen Schluter
------------------------------
Name: Karen Schluter
Title: Assistant Vice President
[Signature Page to Pooling and Servicing Agreement]
STATE OF )
) ss.:
COUNTY OF )
On the 17th day of September, 2001 before me, a notary public in and
for said State, personally appeared Robert Perret known to me to be a
____________ of Residential Asset Funding Corporation, a North Carolina
corporation that executed the within instrument, and also known to me to be the
person who executed it on behalf of said corporation, and acknowledged to me
that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public
STATE OF )
) ss.:
COUNTY OF )
On the 17th day of September, 2001 before me, a notary public in and
for said State, personally appeared Ivan Halpern known to me to be a Vice
President of Credit-Based Asset Servicing and Securitization LLC, a limited
liability company that executed the within instrument, and also known to me to
be the person who executed it on behalf of said limited liability company, and
acknowledged to me that such limited liability company executed the within
instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public
2
STATE OF )
) ss.:
COUNTY OF )
On the 17th day of September, 2001 before me, a notary public in and
for said State, personally appeared Karen Schluter, known to me to be Assistant
Vice President of The Chase Manhattan Bank, a New York banking corporation that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said association, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public
3
STATE OF )
) ss.:
COUNTY OF )
On the 17th day of September, 2001 before me, a notary public in and
for said State, personally appeared Janice McClure, known to me to be a Senior
Vice President of Litton Loan Servicing LP, a Delaware limited partnership, that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said limited partnership, and acknowledged to me that
such limited partnership executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
Notary Public
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