CERTIFICATE GUARANTY INSURANCE POLICY
OBLIGATIONS: $110,078,000 POLICY NUMBER: 24481
Block Mortgage Finance
Asset Backed Certificates, Series 1997-2
Class A-1, Class A-2, Class A-3,
Class A-4, and Class A-5 Certificates
MBIA Insurance Corporation (the "Insurer"), in consideration of the payment
of the premium and subject to the terms of this Certificate Guaranty Insurance
Policy (this "Policy"), hereby unconditionally and irrevocably guarantees to any
Owner that an amount equal to each full and complete Insured Payment will be
received by Bankers Trust Company of California, N.A., or its successors, as
trustee for the Owners (the "Trustee"), on behalf of the Owners from the
Insurer, for distribution by the Trustee to each Owner of each Owner's
proportionate share of the Insured Payment. The Insurer's obligations hereunder
with respect to a particular Insured Payment shall be discharged to the extent
funds equal to the applicable Insured Payment are received by the Trustee from
the Insurer, whether or not such funds are properly applied by the Trustee.
Insured Payments shall be made only at the time set forth in this Policy, and no
accelerated Insured Payments shall be made regardless of any acceleration of the
Obligations, unless such acceleration is at the sole option of the Insurer.
Notwithstanding the foregoing paragraph, this Policy does not cover
shortfalls, if any, attributable to the liability of the Trust, any REMIC or the
Trustee for withholding taxes, if any (including interest and penalties in
respect of any such liability).
The Insurer will pay any Insured Payment that is a Preference Amount on the
Business Day following receipt on a Business Day by the Fiscal Agent (as
described below) of (i) a certified copy of the order requiring the return of
such Preference Amount, (ii) an opinion of counsel satisfactory to the Insurer
that such order is final and not subject to appeal, (iii) an assignment in such
form as is reasonably required by the Insurer, irrevocably assigning to the
Insurer all rights and claims of the Owner relating to or arising under the
Obligations against the debtor which made such preference payment or otherwise
with respect to such preference payment and (iv) appropriate instruments to
effect the appointment of the Insurer as agent for such Owner in any legal
proceeding related to such preference payment, such instruments being in a form
satisfactory to the Insurer, provided that, if such documents are received after
12:00 noon, New York City time, on such Business Day, they will be deemed to be
received on the following Business Day. Such payments shall be disbursed to the
receiver or trustee in bankruptcy named in the final order of the court
exercising jurisdiction on behalf of the Owner and not to any Owner directly
unless such Owner has returned principal or interest paid on the Obligations to
such receiver or trustee in bankruptcy, in which case such payment shall be
disbursed to such Owner.
The Insurer will pay any other amount payable hereunder no later than 12:00
noon, New York City time, on the later of the Distribution Date on which the
related Insured Payment is
due or the second Business Day following receipt in New York, New York on a
Business Day by State Street Bank and Trust Company, N.A., as Fiscal Agent for
the Insurer, or any successor fiscal agent appointed by the Insurer (the "Fiscal
Agent") of a Notice (as described below), provided that, if such Notice is
received after 12:00 noon, New York City time, on such Business Day, it will be
deemed to be received on the following Business Day. If any such Notice received
by the Fiscal Agent is not in proper form or is otherwise insufficient for the
purpose of making claim hereunder, it shall be deemed not to have been received
by the Fiscal Agent for purposes of this paragraph, and the Insurer or the
Fiscal Agent, as the case may be, shall promptly so advise the Trustee and the
Trustee may submit an amended Notice.
Insured Payments due hereunder, unless otherwise stated herein, will be
disbursed by the Fiscal Agent to the Trustee on behalf of the Owners by wire
transfer of immediately available funds in the amount of the Insured Payment
less, in respect of Insured Payments related to Preference Amounts, any amount
held by the Trustee for the payment of such Insured Payment and legally
available therefor.
The Fiscal Agent is the agent of the Insurer only, and the Fiscal Agent
shall in no event be liable to Owners for any acts of the Fiscal Agent or any
failure of the Insurer to deposit, or cause to be deposited, sufficient funds to
make payments due under this Policy.
As used herein, the following terms shall have the following meanings:
"Agreement" means the Pooling and Servicing Agreement dated as of July 1,
1997 by and among Block Mortgage Finance Inc., as Depositor, Block Financial
Corporation, as Master Servicer, Companion Mortgage Corporation, as Seller, and
the Trustee, as trustee, without regard to any amendment or supplement thereto
unless such amendment or supplement has been approved in writing by the Insurer.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which the Insurer or banking institutions in New York City or in the city in
which the corporate trust office of the Trustee under the Agreement is located
are authorized or obligated by law or executive order to close.
"Insured Payments" means, with respect to the Related Loan Group and any
Distribution Date, without duplication, (A) the excess, if any, of (i) the sum
of (a) the aggregate amount of interest accrued at the related Pass-Through Rate
during the preceding Accrual Period on the Class A Certificate Principal Balance
of the related Class A Certificates (net of any Prepayment Interest Shortfall
and the interest portion of reductions due to the Relief Act), (b) the
Preference Amount as it relates to interest previously paid on each Class of the
related Class A Certificates prior to such Distribution Date, (c) the portion of
the Carry Forward Amount related to interest with respect to each Class of the
related Class A Certificates (net of any Prepayment Interest Shortfall and the
interest portion of reductions due to the Relief Act) and (d) the then existing
Subordination Deficit for the Related Loan Group, if any, over (ii) Total
Available Funds (net of the Insurance Premium Amount for the Related Loan Group)
after taking into account any
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Principal Distribution Amount to be actually distributed on such Distribution
Date and the cross-collateralization provisions of the Trust Fund plus (B) an
amount equal to the principal portion of the Preference Amount with respect to
the Related Loan Group.
"Notice" means the telephonic or telegraphic notice, promptly confirmed in
writing by telecopy substantially in the form of Exhibit A attached hereto, the
original of which is subsequently delivered by registered or certified mail,
from the Trustee specifying the Insured Payment which shall be due and owing on
the applicable Distribution Date.
"Owner" means each Owner (as defined in the Agreement) who, on the
applicable Distribution Date, is entitled under the terms of the applicable
Obligations to payment thereunder.
"Preference Amount" means any amount previously distributed to an Owner on
the Obligations that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the United States Bankruptcy
Code (11 U.S.C.), as amended from time to time, in accordance with a final
nonappealable order of a court having competent jurisdiction.
"Related Loan Group" means the Fixed Rate Group.
Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings set forth in the Agreement as of the date of execution
of this Policy, without giving effect to any subsequent amendment to or
modification of the Agreement unless such amendment or modification has been
approved in writing by the Insurer.
Any notice hereunder or service of process on the Fiscal Agent of the
Insurer may be made at the address listed below for the Fiscal Agent of the
Insurer or such other address as the Insurer shall specify in writing to the
Trustee.
The notice address of the Fiscal Agent is 61 Broadway, 15th Floor, New
York, New York 10006, Attention: Municipal Registrar and Paying Agency, or such
other address as the Fiscal Agent shall specify to the Trustee in writing.
This Policy is being issued under and pursuant to, and shall be construed
under, the laws of the State of New York, without giving effect to the conflict
of laws principles thereof.
The insurance provided by this Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
This Policy is not cancelable for any reason. The premium on this Policy is
not refundable for any reason including payment, or provision being made for
payment, prior to maturity of the Obligations.
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IN WITNESS WHEREOF, the Insurer has caused this Policy to be executed and
attested this 30th day of July, 1997.
MBIA INSURANCE CORPORATION
By
Attest
By
Secretary
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EXHIBIT A
TO CERTIFICATE GUARANTY INSURANCE POLICY
NUMBER 24481
NOTICE UNDER CERTIFICATE GUARANTY
INSURANCE POLICY NUMBER 24481
State Street Bank and Trust Company, N.A.,
as Fiscal Agent for MBIA Insurance Corporation
15th Floor
61 Broadway
New York, NY 10006
Attention: Municipal Registrar and Paying Agency
MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
The undersigned, a duly authorized officer of ___________________________,
as trustee (the "Trustee"), hereby certifies to State Street Bank and Trust
Company, N.A. (the "Fiscal Agent") and MBIA Insurance Corporation (the
"Insurer"), with reference to Certificate Guaranty Insurance Policy Number:
24481 (the "Policy") issued by the Insurer in respect of the Block Mortgage
Finance Asset Backed Certificates, Series 1997-2, Class A-1, Class A-2, Class
A-3, Class A-4, and Class A-5 Certificates (the "Obligations"), that:
(i) the Trustee is the trustee under the Pooling and Servicing
Agreement dated as of July 1, 1997 by and among Block Mortgage Finance Inc., as
Depositor, Block Financial Corporation, as Master Servicer, Companion Mortgage
Corporation, as Seller, and the Trustee, as trustee for the Owners;
(ii) the Class A-1 interest accrued at the Pass Through Rate during the
preceding Accrual Period (net of any Prepayment Interest Shortfall and the
interest portion of reductions due to the Relief Act) for the Distribution Date
occurring on ____________________ (the "Applicable Distribution Date") is
$____________________ (the "Class A-1 Interest");
(iii) the Class A-2 interest accrued at the Pass Through Rate during
the preceding Accrual Period (net of any Prepayment Interest Shortfall and the
interest portion of reductions due to the Relief Act) for the Distribution Date
occurring on ___________________(the "Applicable Distribution Date") is
$__________________(the "Class A-2 Interest");
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(iv) the Class A-3 interest accrued at the Pass Through Rate during the
preceding Accrual Period (net of any Prepayment Interest Shortfall and the
interest portion of reductions due to the Relief Act) for the Distribution Date
occurring on ________________________(the "Applicable Distribution Date") is
$___________________(the "Class A-3 Interest");
(v) the Class A-4 interest accrued at the Pass Through Rate during the
preceding Accrual Period (net of any Prepayment Interest Shortfall and the
interest portion of reductions due to the Relief Act) for the Distribution Date
occurring on ________________________(the "Applicable Distribution Date") is
$___________________(the "Class A-4 Interest");
(vi) the Class A-5 interest accrued at the Pass Through Rate during the
preceding Accrual Period (net of any Prepayment Interest Shortfall and the
interest portion of reductions due to the Relief Act) for the Distribution Date
occurring on ________________________(the "Applicable Distribution Date") is
$___________________(the "Class A-5 Interest");
(vii) the sum of the Class A-1 Interest, Class A-2 Interest, the Class
A-3 Interest, the Class A-4 Interest, and the Class A-5 Interest in (ii), (iii),
(iv), (v), and (vi) above for the Applicable Distribution Date is
$________________ (the related "Class A Interest");
(viii) the interest portion of the Preference Amount related to Class
A-1 for the Applicable Distribution Date is $_________________(the "Class A-1
Preference
Interest");
(ix) the interest portion of the Preference Amount related to Class A-2
for the Applicable Distribution Date is $_______________(the "Class A-2
Preference Interest");
(x) the interest portion of the Preference Amount related to Class A-3
for the Applicable Distribution Date is $_______________(the "Class A-3
Preference Interest");
(xi) the interest portion of the Preference Amount related to Class A-4
for the Applicable Distribution Date is $_______________(the "Class A-4
Preference Interest");
(xii) the interest portion of the Preference Amount related to Class
A-5 for the Applicable Distribution Date is $_______________(the "Class A-5
Preference Interest");
(xiii) the sum of the Class A-1 Preference Interest, the Class A-2
Preference Interest, the Class A-3 Preference Interest, the Class A-4 Preference
Interest, and the Class A-5 Preference Interest in (viii), (ix), (x), (xi), and
(xii) above for the Applicable Distribution Date is $__________________(the
"Preference Interest");
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(xiv) the portion of the Carry Forward Amount related to interest with
respect to Class A-1 (net of any Prepayment Interest Shortfall and the interest
portion of reductions due to the Relief Act) (the "Class A-1 Carry Forward
Amount') for the Applicable Distribution Date is $______________;
(xv) the portion of the Carry Forward Amount related to interest with
respect to Class A-2 (net of Prepayment Interest Shortfall and the interest
portion of reductions due to the Relief Act) (the "Class A-2 Carry Forward
Amount") for the Applicable Distribution Date is $________________;
(xvi) the portion of the Carry Forward Amount related to interest with
respect to Class A-3 (net of Prepayment Interest Shortfall and the interest
portion of reductions due to the Relief Act) (the "Class A-3 Carry Forward
Amount") for the Applicable Distribution Date is $_______________;
(xvii) the portion of the Carry Forward Amount related to interest with
respect to Class A-4 (net of Prepayment Interest Shortfall and the interest
portion of reductions due to the Relief Act) (the "Class A-4 Carry Forward
Amount") for the Applicable Distribution Date is $_______________;
(xviii) the portion of the Carry Forward Amount related to interest
with respect to Class A-5 (net of Prepayment Interest Shortfall and the interest
portion of reductions due to the Relief Act) (the "Class A-5 Carry Forward
Amount") for the Applicable Distribution Date is $_______________;
(xix) the sum of the Class A-1 Carry Forward Amount, the Class A-2
Carry Forward Amount, the Class A-3 Carry Forward Amount, the Class A-4 Carry
Forward Amount, and the Class A-5 Carry Forward Amount set forth in (xiv), (xv),
(xvi), (xvii), and (xviii) above is $_____________(the related "Carry Forward
Amount");
(xx) the Subordination Deficit, if any, for
the Applicable Distribution Date is
$____________________ (the "Subordination Deficit");
(xxi) the sum of the Class A Interest in (vii), the Preference Interest
in (xiii), the Carry Forward Amount in (xix), and the Subordination Deficit in
(xx) is $____________________ (the "Required Distribution");
(xxii) the amount of Total Available Funds
for the Applicable Distribution Date is
$______________________(the "Total Available Funds")
(xxiii) the Required Distribution in (xxi)
minus Total Available Funds in (xxii) is
$___________________,
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(xxiv) the principal portion any Preference Amount which is payable
under the Policy and not heretofore paid is $____________________ (the
"Applicable Principal Preference Amount");
(xxv) the sum of the amount set forth in
(xxiii) plus the Applicable Principal Preference
Amount in (xxiv) is $____________________ (the
"Insured Payment");
(xxvi) the Trustee is making a claim under and pursuant to the terms of
the Policy for the dollar amount of the Insured Payment set forth in (xxv) above
to be applied to the payment of the Required Distribution for the Applicable
Distribution Date in accordance with the Agreement and for the dollar amount of
the Insured Payment set forth in (xxv) above to be applied to the payment of any
Preference Amount; and
(xxvii) the Trustee directs that payment of the
Insured Payment be made to the following account by
bank wire transfer of federal or other immediately
available funds in accordance with the terms of the
Policy: [TRUSTEE'S ACCOUNT].
Any Person Who Knowingly And With Intent to Defraud Any Insurance Company
Or Other Person Files An Application For Insurance Or Statement Of Claim
Containing Any Materially False Information, Or Conceals For The Purpose Of
Misleading, Information Concerning Any Fact material Thereto, Commits A
Fraudulent Insurance Act, Which Is A Crime, And Shall Also Be Subject To A Civil
Penalty Not To Exceed Five Thousand Dollars And The Stated Value Of The Claim
for Each Such Violation.
Any capitalized term used in this Notice and not otherwise defined herein
shall have the meaning assigned thereto in the Policy.
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice
under the Policy as of the ____ day of ____________, ____.
, as Trustee
By
Title
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