Exhibit 99.2
FINANCIAL GUARANTY
INSURANCE POLICY
FINANCIAL
[LOGO] SECURITY
ASSURANCE SM
Trust: As described in Endorsement No. 1 Policy No.: 51324-N
Certificates: $50,000 Equity One ABS, Inc. Date of Issuance: 08/27/2002
Mortgage Pass-Through
Certificates, Series 2002-4,
Class Av-1A Certificates
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for consideration
received, hereby UNCONDITIONALLY AND IRREVOCABLY GUARANTEES to the Trustee for
the benefit of each Holder, subject only to the terms of this Policy (which
includes each endorsement hereto), the full and complete payment of Guaranteed
Distributions with respect to the Certificates of the Trust referred to above.
For the further protection of each Holder, Financial Security irrevocably
and unconditionally guarantees payment of the amount of any distribution of
principal or interest with respect to the Certificates made during the Term of
this Policy to such Holder that is subsequently avoided in whole or in part as a
preference payment under applicable law.
Payment of any amount required to be paid under this Policy will be made
following receipt by Financial Security of notice as described in Endorsement
No. 1 hereto.
Financial Security shall be subrogated to the rights of each Holder to
receive distributions with respect to each Certificate held by such Holder to
the extent of any payment by Financial Security hereunder.
Except to the extent expressly modified by Endorsement No. 1 hereto, the
following terms shall have the meanings specified for all purposes of this
Policy. "Holder" means the registered owner of any Certificate as indicated on
the registration books maintained by or on behalf of the Trustee for such
purpose or, if the Certificate is in bearer form, the holder of the Certificate.
"Trustee," "Guaranteed Distributions" and "Term of this Policy" shall have the
meanings set forth in Endorsement No. 1 hereto.
This Policy sets forth in full the undertaking of Financial Security, and
shall not be modified, altered or affected by any other agreement or instrument,
including any modification or amendment thereto. Except to the extent expressly
modified by an endorsement hereto, the premiums paid in respect of this Policy
are nonrefundable for any reason whatsoever. This Policy may not be canceled or
revoked during the Term of this Policy. An acceleration payment shall not be due
under this Policy unless such acceleration is at the sole option of Financial
Security. THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY
FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.
In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has caused this
Policy to be executed on its behalf by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By /Russell B. Brewer/
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AUTHORIZED OFFICER
A subsidiary of Financial Security Assurance Holdings Ltd.
350 Park Avenue, New York, N.Y. 10022-6022 (212) 826-0100
Form 101 NY (5/89)
ENDORSEMENT NO. 1 TO
FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL SECURITY 350 Park Avenue
ASSURANCE INC. New York, New York 10022
TRUST: The Trust Fund created by the Pooling and Servicing Agreement,
dated as of July 31, 2002 among by and among Equity One ABS,
Inc., as depositor, Equity One, Inc., as a seller and as the
servicer, JPMorgan Chase Bank, as trustee, Equity One, Inc. (MN),
as a seller, Equity One Consumer Loan Company, Inc., as a seller,
Equity One, Incorporated, as a seller, and Popular Financial
Services, as a seller.
CERTIFICATES: $50,000,000 Equity One ABS, Inc. Mortgage Pass-Through
Certificates, Series 2002-4, Class AV-1A Certificates
Policy No.: 51324-N
Date of Issuance: August 27, 2002
1. Definitions. For all purposes of this Policy, the terms specified below
shall have the meanings or constructions provided below. Capitalized terms used
herein and not otherwise defined herein shall have the meanings provided in the
Pooling and Servicing Agreement unless the context shall otherwise require.
"Business Day" means any day other than (i) a Saturday or Sunday, or (ii) a
day on which banking institutions in New York City are authorized or obligated
by law, executive order or governmental decree to be closed.
"Financial Security" means Financial Security Assurance, Inc.
"Guaranteed Distributions" means, with respect to each Distribution Date,
the distribution to be made to Holders in an aggregate amount equal to (1) the
Interest Distribution Amount for the Guaranteed Certificates for each
Distribution Amount and (2) the aggregate Class Certificate Balance of the
Guaranteed Certificates to the extent unpaid on the Last Scheduled Distribution
Date or earlier termination of the Trust Fund pursuant to the terms of the
Pooling and Servicing Agreement, in each case in accordance with the original
terms of the Certificates when issued and without regard to any amendment or
modification of the Certificates or the Pooling and Servicing Agreement except
amendments or modifications to which Financial Security has given its prior
written consent. Guaranteed Distributions shall not include, nor shall coverage
be provided under this Policy in respect of, any basis risk shortfall, any
prepayment interest shortfall or any taxes, withholding or other charge imposed
by any governmental authority due in connection with the payment of any
Guaranteed Distribution to a Holder.
Policy No.: 51324-N Date of Issuance: August 27, 2002
"Policy" means this Financial Guaranty Insurance Policy and includes each
endorsement thereto.
"Pooling and Servicing Agreement" means the Pooling and Servicing Agreement
dated as of July 31, 2002 among by and among Equity One ABS, Inc., as Depositor,
Equity One, Inc., as Seller and as Servicer, JPMorgan Chase Bank, as Trustee,
Equity One, Inc. (MN), as Seller, Equity One Consumer Loan Company, Inc., as
Seller, Equity One, Incorporated, as Seller, and Popular Financial Services, as
Seller, as amended from time to time with the consent of Financial Security.
"Receipt" and "Received" mean actual delivery to Financial Security and to
the Fiscal Agent (as defined below), if any, prior to 12:00 noon, New York City
time, on a Business Day; delivery either on a day that is not a Business Day, or
after 12:00 noon, New York City time, shall be deemed to be receipt on the next
succeeding Business Day. If any notice or certificate given hereunder by the
Trustee is not in proper form or is not properly completed, executed or
delivered, it shall be deemed not to have been Received, and Financial Security
or its Fiscal Agent shall promptly so advise the Trustee and the Trustee may
submit an amended notice.
"Term Of This Policy" means the period from and including the Date of
Issuance to and including the date on which (i) the unpaid principal balances of
all of the Certificates is zero, (ii) any period during which any payment on the
Certificates could have been avoided in whole or in part as a preference payment
under applicable bankruptcy, insolvency, receivership or similar law has
expired, and (iii) if any proceedings requisite to avoidance as a preference
payment have been commenced prior to the occurrence of (i) and (ii), a final and
nonappealable order in resolution of each such proceeding has been entered.
"Trustee" means JPMorgan Chase Bank in its capacity as Trustee under the
Pooling and Servicing Agreement and any successor in such capacity.
2. Notices and Conditions to Payment in Respect of Guaranteed
Distributions. Following Receipt by Financial Security of a notice and
certificate from the Trustee in the form attached as Exhibit A to this
Endorsement, Financial Security will pay any amount payable hereunder in respect
of Guaranteed Distributions out of the funds of Financial Security on the later
to occur of (a) 12:00 noon, New York City time, on the second Business Day
following such Receipt; and (b) 12:00 noon, New York City time, on the
Distribution Date to which such claim relates. Payments due hereunder in respect
of Guaranteed Distributions will be disbursed by wire transfer of immediately
available funds to the Distribution Account.
Financial Security shall be entitled to pay any amount hereunder in respect
of Guaranteed Distributions, including any acceleration payment, whether or not
any notice and certificate shall have been Received by Financial Security as
provided above, provided, however, that by acceptance of this Policy the Trustee
agrees to provide to Financial Security, upon Financial Security's request to
the Trustee, a notice and certificate in respect of any such payments made by
Financial Security. Financial Security shall be entitled to pay principal
hereunder on an accelerated basis if Financial Security shall so elect in its
sole discretion, at any time or from time to time, in whole or in part, at an
earlier Distribution Date than provided in the definition of "Guaranteed
Distributions," if such principal would have been payable under the Pooling and
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Policy No.: 51324-N Date of Issuance: August 27, 2002
Servicing Agreement were funds sufficient to make such payment available to the
Trustee for such purpose. Guaranteed Distributions insured hereunder shall not
include interest, in respect of principal paid hereunder on an accelerated
basis, accruing from after the date of such payment of principal. Financial
Security's obligations hereunder in respect of Guaranteed Distributions shall be
discharged to the extent funds are disbursed by Financial Security as provided
herein whether or not such funds are properly applied by the Trustee.
3. Notices and Conditions to Payment in Respect of Guaranteed Distributions
Avoided as Preference Payments. If any Guaranteed Distribution is avoided as a
preference payment under applicable bankruptcy, insolvency, receivership or
similar law, Financial Security will pay such amount out of the funds of
Financial Security on the later of (a) the date when due to be paid pursuant to
the Order referred to below or (b) the first to occur of (i) the fourth Business
Day following Receipt by Financial Security from the Trustee of (A) a certified
copy of the order of the court or other governmental body which exercised
jurisdiction to the effect that the Holder is required to return principal or
interest distributed with respect to the Certificates during the Term Of This
Policy because such distributions were avoidable as preference payments under
applicable bankruptcy law (the "Order"), (B) a certificate of the Holder that
the Order has been entered and is not subject to any stay and (C) an assignment
duly executed and delivered by the Holder, in such form as is reasonably
required by Financial Security and provided to the Holder by Financial Security,
irrevocably assigning to Financial Security all rights and claims of the Holder
relating to or arising under the Certificates against the debtor which made such
preference payment or otherwise with respect to such preference payment or (ii)
the date of Receipt by Financial Security from the Trustee of the items referred
to in clauses (A), (B) and (C) above if, at least four Business Days prior to
such date of Receipt, Financial Security shall have Received written notice from
the Trustee that such items were to be delivered on such date and such date was
specified in such notice. Such payment shall be disbursed to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the Order
and not to the Trustee or any Holder directly (unless a Holder has previously
paid such amount to the receiver, conservator, debtor-in-possession or trustee
in bankruptcy named in the Order, in which case such payment shall be disbursed
to the Trustee for distribution to such Holder upon proof of such payment
reasonably satisfactory to Financial Security). In connection with the
foregoing, Financial Security shall have the rights provided pursuant to
Sections 3A.01 and 10.13 of the Pooling and Servicing Agreement.
4. Governing Law. This Policy shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
5. Fiscal Agent. At any time during the Term Of This Policy, Financial
Security may appoint a fiscal agent (the "Fiscal Agent") for purposes of this
Policy by written notice to the Trustee at the notice address specified in the
Pooling and Servicing Agreement specifying the name and notice address of the
Fiscal Agent. From and after the date of receipt of such notice by the Trustee,
(i) copies of all notices and documents required to be delivered to Financial
Security pursuant to this Policy shall be simultaneously delivered to the Fiscal
Agent and to Financial Security and shall not be deemed Received until Received
by both and (ii) all payments required to be made by Financial Security under
this Policy may be made directly by Financial Security or by the Fiscal Agent on
behalf of Financial Security. The Fiscal Agent is the agent of Financial
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Policy No.: 51324-N Date of Issuance: August 27, 2002
Security only and the Fiscal Agent shall in no event be liable to any Holder for
any acts of the Fiscal Agent or any failure of Financial Security to deposit, or
cause to be deposited, sufficient funds to make payments due under this Policy.
6. Waiver of Defenses. To the fullest extent permitted by applicable law,
Financial Security agrees not to assert, and hereby waives, for the benefit of
each Holder, all rights (whether by counterclaim, setoff or otherwise) and
defenses (including, without limitation, the defense of fraud), whether acquired
by subrogation, assignment or otherwise, to the extent that such rights and
defenses may be available to Financial Security to avoid payment of its
obligations under this Policy in accordance with the express provisions of this
Policy.
7. Notices. All notices to be given hereunder shall be in writing (except
as otherwise specifically provided herein) and shall be mailed by registered
mail or personally delivered or telecopied to Financial Security as follows:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Managing Director - Transaction Oversight
Re: Equity One Mortgage Pass-Through Trust 2002-4
Policy No.: 51324-N
Telecopy No.: (212)339-3518
Confirmation: (212)826-0100
Financial Security may specify a different address or addresses by writing
mailed or delivered to the Trustee.
8. Priorities. In the event any term or provision on the face of this
Policy is inconsistent with the provisions of this Endorsement, the provisions
of this Endorsement shall take precedence and shall be binding.
9. Exclusions From Insurance Guaranty Funds. This Policy is not covered by
the Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law. This Policy is not covered by the Florida Insurance Guaranty
Association created under Part II of Chapter 631 of the Florida Insurance Code.
In the event Financial Security were to become insolvent, any claims arising
under this Policy are excluded from coverage by the California Insurance
Guaranty Association, established pursuant to Article 14.2 of Chapter 1 of Part
2 of Division 1 of the California Insurance Code.
10. Surrender of Policy. The Trustee shall surrender this Policy to
Financial Security for cancellation upon expiration of the Term Of This Policy.
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Policy No.: 51324-N Date of Issuance: August 27, 2002
IN WITNESS WHEREOF, FINANCIAL SECURITY ASSURANCE INC. has caused this
Endorsement No. 1 to be executed by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By: /Russell B. Brewer/
-------------------------------------
Authorized Officer
5
Exhibit A
To Endorsement 1
NOTICE OF CLAIM AND CERTIFICATE
-------------------------------
(Letterhead of Trustee)
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Re: Equity One Mortgage Pass-Through Trust 2002-4
The undersigned, a duly authorized officer of JPMorgan Chase Bank (the
"Trustee"), hereby certifies to Financial Security Assurance Inc. ("Financial
Security"), with reference to Financial Guaranty Insurance Policy No. 51324-N
dated August 27, 2002 (the "Policy") issued by Financial Security in respect of
the Equity One ABS, Inc. Mortgage Pass-Through Certificates, Series 2002-4 (the
"Certificates"), that:
(i) The Trustee is the Trustee for the Holders under the Pooling and
Servicing Agreement.
(ii) The sum of all amounts on deposit (or scheduled to be on deposit)
in the Distribution Account and available for distribution to the Holders
pursuant to the Pooling and Servicing Agreement will be $___________ (the
"Shortfall") less than the Guaranteed Distributions with respect to the
Distribution Date.
(iii) The Trustee is making a claim under the Policy for the Shortfall
to be applied to distributions of principal or interest or both with
respect to the Certificates.
(iv) The Trustee agrees that, following receipt of funds from
Financial Security, it shall (a) hold such amounts in trust and apply the
same directly to the payment of Guaranteed Distributions on the
Certificates when due; (b) not apply such funds for any other purpose; (c)
not commingle such funds with other funds held by the Trustee and (d)
maintain an accurate record of such payments with respect to each
Certificate and the corresponding claim on the Policy and proceeds thereof
and, if the Certificate is required to be surrendered or presented for such
payment, shall stamp on each such Certificate the legend "$ [insert
applicable amount] paid by Financial Security and the balance hereof has
been cancelled and reissued" and then shall deliver such Certificate to
Financial Security.
(v) The Trustee, on behalf of the Holders, hereby assigns to Financial
Security the rights of the Holders with respect to the Certificates to the
extent of any payments under the Policy, including, without limitation, any
amounts due to the Holders in respect of securities law violations arising
from the offer and sale of the Certificates. The foregoing assignment is in
addition to, and not in limitation of, rights of subrogation otherwise
available to Financial Security in respect of such payments. The Trustee
shall take such action and deliver such instruments as may be reasonably
requested or required by Financial Security to effectuate the purpose or
provisions of this clause (v).
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Policy No.: 51324-N Date of Issuance: August 27, 2002
(vi) The Trustee, on its behalf and on behalf of the Holders, hereby
appoints Financial Security as agent and attorney-in-fact for the Trustee
and each such Holder in any legal proceeding with respect to the
Certificates. The Trustee hereby agrees that Financial Security may at any
time during the continuation of any proceeding by or against the Issuer
under the United States Bankruptcy Code or any other applicable bankruptcy,
insolvency, receivership, rehabilitation or similar law (an "Insolvency
Proceeding") direct all matters relating to such Insolvency Proceeding,
including without limitation, (A) all matters relating to any claim in
connection with an Insolvency Proceeding seeking the avoidance as a
preferential transfer of any distribution made with respect to the
Certificates (a "Preference Claim"), (B) the direction of any appeal of any
order relating to any Preference Claim and (C) the posting of any surety,
supersedeas or performance bond pending any such appeal. In addition, the
Trustee hereby agrees that Financial Security shall be subrogated to, and
the Trustee on its behalf and on behalf of each Holder, hereby delegates
and assigns, to the fullest extent permitted by law, the rights of the
Trustee and each Holder in the conduct of any Insolvency Proceeding,
including, without limitation, all rights of any party to an adversary
proceeding or action with respect to any court order issued in connection
with any such Insolvency Proceeding.
(vii) Payment should be made by wire transfer directed to the
Distribution Account.
Unless the context otherwise requires, capitalized terms used in this
Notice of Claim and Certificate and not defined herein shall have the meanings
provided in the Policy.
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice of
Claim and Certificate as of the ____________ day of ___________, _____.
JPMORGAN CHASE BANK
By _____________________________________
Title __________________________________
- --------------------------------------------------------------------------------
For Financial Security or Fiscal Agent Use Only
Wire transfer sent on ____________________ by _______________________
Confirmation Number _____________________
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