<PAGE>
EXECUTION COPY
================================================================================
MERRILL LYNCH MORTGAGE INVESTORS, INC.,
Depositor
CREDIT-BASED ASSET SERVICING AND SECURITIZATION LLC,
Seller
LITTON LOAN SERVICING LP,
Servicer
and
U.S. BANK NATIONAL ASSOCIATION,
Trustee
POOLING AND SERVICING AGREEMENT
Dated as of October 1, 2006
2006-CB8 Trust
C-BASS Mortgage Loan Asset-Backed Certificates, Series 2006-CB8
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS.................................................
10
Section 1.01
Defined
Terms......................................... 10
Section 1.02
Accounting............................................ 51
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF
CERTIFICATES................................................
52
Section 2.01
Conveyance
of Mortgage Loans.......................... 52
Section 2.02
Acceptance
by Trustee................................. 54
Section 2.03
Repurchase
or Substitution of Mortgage Loans by the
Seller................................................ 55
Section 2.04
Representations and Warranties of the Seller with
Respect to the Mortgage Loans......................... 58
Section 2.05
Representations, Warranties
and Covenants of the
Servicer.............................................. 59
Section 2.06
Representations and Warranties of the Depositor....... 60
Section 2.07
Issuance
of Certificates and the Uncertificated
Regular Interests..................................... 61
Section 2.08
Representations and Warranties of the Seller.......... 62
Section 2.09
Covenants
of the Seller............................... 63
ARTICLE III
ADMINISTRATION AND SERVICING OF THE TRUST FUND..............
64
Section 3.01
Servicer
to Act as Servicer........................... 64
Section 3.02
Collection
of Mortgage Loan Payments.................. 65
Section 3.03 Realization Upon
Defaulted Mortgage Loans............. 66
Section 3.04
Collection
Account and Distribution Account........... 67
Section 3.05
Permitted
Withdrawals From the Collection Account..... 68
Section 3.06
Establishment of Escrow Account; Deposits in
Escrow Account........................................ 69
Section 3.07
Permitted
Withdrawals From Escrow Account............. 70
Section 3.08
Payment of
Taxes, Insurance and Other Charges;
Collections Thereunder................................ 70
Section 3.09
Transfer
of Accounts.................................. 71
Section 3.10
Maintenance of Hazard Insurance....................... 71
Section 3.11
Maintenance of Mortgage Impairment Insurance Policy... 72
Section 3.12
Fidelity
Bond, Errors and Omissions Insurance......... 72
Section 3.13
Title,
Management and Disposition of REO Property
and
Certain Delinquent Mortgage Loans................. 73
Section 3.14
Due-on-Sale Clauses; Assumption and Substitution
Agreements............................................ 74
Section 3.15
Notification of Adjustments........................... 75
Section 3.16
Optional
Purchases of Mortgage Loans by Servicer...... 76
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
PAGE
----
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
Reports on
Assessment of Compliance and Attestation... 78
Section 3.21
Access to
Certain Documentation and Information
Regarding the Mortgage Loans.......................... 80
Section 3.22
Reserved.............................................. 80
Section 3.23
Obligations of the Servicer in Respect of
Compensating Interest................................. 80
Section 3.24
Obligations of the Servicer in Respect of Mortgage
Interest Rates and Monthly Payments................... 81
Section 3.25 Investment of Funds in
the Collection Account and
the Distribution Account.............................. 81
Section 3.26
Liability
of Servicer; Indemnification................ 82
Section 3.27
Reports of
Foreclosure and Abandonment of Mortgaged
Properties............................................ 83
Section 3.28
Protection
of Assets.................................. 83
Section 3.29
Periodic
Filings...................................... 83
Section 3.30
Advance
Facility...................................... 86
ARTICLE IV FLOW
OF FUNDS...............................................
89
Section 4.01
Interest
Distributions................................ 89
Section 4.02
Distributions of Principal and Monthly Excess
Cashflow Amounts...................................... 90
Section 4.03
Allocation
of Losses.................................. 99
Section 4.04
Method of
Distribution................................ 99
Section 4.05
Distributions on Book-Entry Certificates.............. 99
Section 4.06
Statements............................................ 99
Section 4.07
Remittance
Reports; Advances.......................... 102
ARTICLE V
THE CERTIFICATES............................................
104
Section 5.01
The
Certificates...................................... 104
Section 5.02
Registration of Transfer and Exchange of
Certificates.......................................... 104
Section 5.03
Mutilated,
Destroyed, Lost or Stolen Certificates..... 110
Section 5.04
Persons
Deemed Owners................................. 110
Section 5.05
Appointment of Paying Agent........................... 110
ARTICLE VI THE
SELLER, THE SERVICER AND THE DEPOSITOR..................
111
Section 6.01
Liability
of the Seller, the Servicer and the
Depositor............................................. 111
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
PAGE
----
Section 6.02
Merger or
Consolidation of, or Assumption of the
Obligations of, the Seller, the Servicer or the
Depositor............................................. 111
Section 6.03
Limitation
on Liability of the Servicer and Others.... 111
Section 6.04
Servicer
Not to Resign................................ 112
Section 6.05
Delegation
of Duties.................................. 113
ARTICLE VII
DEFAULT.....................................................
113
Section 7.01
Servicer
Events of Termination........................ 113
Section 7.02
Trustee to
Act; Appointment of Successor.............. 114
Section 7.03
Waiver of
Defaults.................................... 116
Section 7.04
Notification to Certificateholders.................... 116
Section 7.05
Survivability of Servicer Liabilities................. 116
ARTICLE VIII THE
TRUSTEE.................................................
116
Section 8.01
Duties of
Trustee..................................... 116
Section 8.02
Certain
Matters Affecting the Trustee................. 118
Section 8.03
Trustee
Not Liable for Certificates or Mortgage
Loans................................................. 119
Section 8.04
Trustee
May Own Certificates.......................... 119
Section 8.05
Seller to
Pay Trustee Fees and Expenses............... 120
Section 8.06
Eligibility Requirements for Trustee.................. 120
Section 8.07
Resignation or Removal of Trustee..................... 121
Section 8.08
Successor
Trustee..................................... 121
Section 8.09
Merger or
Consolidation of Trustee.................... 122
Section 8.10
Appointment of Co-Trustee or Separate Trustee......... 122
Section 8.11
Limitation
of Liability............................... 123
Section 8.12
Trustee
May Enforce Claims Without Possession of
Certificates.......................................... 123
Section 8.13
Suits for
Enforcement................................. 123
Section 8.14
Waiver of
Bond Requirement............................ 124
Section 8.15
Waiver of
Inventory, Accounting and Appraisal
Requirement........................................... 124
ARTICLE IX REMIC
AND GRANTOR TRUST ADMINISTRATION...................... 124
Section 9.01
REMIC
Administration.................................. 124
Section 9.02
Prohibited
Transactions and Activities................ 130
Section 9.03
Indemnification with Respect to Certain Taxes and Loss
of REMIC Status....................................... 130
Section 9.04
REO
Property.......................................... 130
-iii-
<PAGE>
TABLE OF CONTENTS
(continued)
PAGE
----
ARTICLE X
TERMINATION.................................................
131
Section 10.01
Termination........................................... 131
Section 10.02
Additional
Termination Requirements................... 133
ARTICLE XI
MISCELLANEOUS PROVISIONS....................................
133
Section 11.01
Amendment............................................. 133
Section 11.02
Recordation of
Agreement; Counterparts................ 135
Section 11.03
Limitation on
Rights of Certificateholders............ 135
Section 11.04
Governing Law;
Jurisdiction........................... 136
Section 11.05
Notices............................................... 136
Section 11.06
Severability of
Provisions............................ 136
Section 11.07
Article and
Section References........................ 136
Section 11.08
Notice to the
Rating Agencies......................... 137
Section 11.09
Further
Assurances.................................... 137
Section 11.10
Benefits of
Agreement................................. 137
Section 11.11
Acts of
Certificateholders............................ 138
Section 11.12
Compliance with
Regulation AB......................... 138
-iv-
<PAGE>
EXHIBITS:
Exhibit A-1 Form of
Class A-1 Certificates
Exhibit A-2 Form of
Class A-2A Certificates
Exhibit A-3 Form of
Class A-2B Certificates
Exhibit A-4 Form of
Class A-2C Certificate
Exhibit A-5 Form of
Class A-2D Certificates
Exhibit B-1-1 Form of Class B-1
Certificates (144A)
Exhibit B-1-2 Form of Class B-1
Certificates (Regulation S)
Exhibit B-2-1 Form of Class B-2
Certificates (144A)
Exhibit B-2-2 Form of Class B-2
Certificates (Regulation S)
Exhibit B-3-1 Form of Class B-3
Certificates (144A)
Exhibit B-3-2 Form of Class B-3
Certificates (Regulation S)
Exhibit C-1-1 Form of Class R
Certificate
Exhibit C-1-2 Form of Class R-X
Certificates
Exhibit C-2 Form of
Class M-1 Certificates
Exhibit C-3 Form of
Class M-2 Certificates
Exhibit C-4 Form of
Class M-3 Certificates
Exhibit C-5 Form of
Class M-4 Certificates
Exhibit C-6 Form of
Class M-5 Certificates
Exhibit C-7 Form of
Class M-6 Certificates
Exhibit C-8 Form of
Class M-7 Certificates
Exhibit C-9 Form of
Class M-8 Certificates
Exhibit C-10 Form of Class P
Certificates
Exhibit C-11-1
Form of Class CE-1 Certificates
Exhibit C-11-2
Form of Class CE-2 Certificates
Exhibit D-1 Mortgage
Loan Schedule
Exhibit D-2 Group I
Mortgage Loans
Exhibit D-3 Group II
Mortgage Loans
Exhibit E
Form of Request for Release of Documents
Exhibit F-1 Form of
Custodian's Initial Certification
Exhibit F-2 Form of
Custodian's Final Certification
Exhibit F-3 Form of
Receipt of Mortgage Note
Exhibit G
Mortgage Loan Purchase Agreement
Exhibit H
Form of Lost Note Affidavit
Exhibit I
Form of ERISA Representation
Exhibit J
Forms of Investment Letters
Exhibit K
Form of Residual Certificate Transfer Affidavit
Exhibit L
Form of Transferor Certificate
Exhibit M
Monthly Information Provided by Servicer
Exhibit N-1 Form of
Swap Agreement
Exhibit N-2 Form of
Cap Agreement
Exhibit O
Form of Power of Attorney
Exhibit P-1 Form of
1122(d) Servicing Criteria Letter
Exhibit P-2 Servicing
Criteria (Exhibit A to Form of Assessment of
Compliance)
Exhibit P-3 Form of
Sarbanes-Oxley Certification (Servicer)
Exhibit P-4 Form of
Item 1123 Certification (Servicer)
Exhibit P-5 Form of
Officer's Certificate (Trustee)
Exhibit Q
Form of Officer's Certificate with Respect to Prepayments
Exhibit R
Form 8-K Disclosure
Exhibit S
Form 10-D Disclosure
Exhibit T
Form 10-K Disclosure
-v-
<PAGE>
This
Pooling and Servicing Agreement is dated as of October 1, 2006
(the
"Agreement"), among MERRILL LYNCH MORTGAGE INVESTORS, INC., as
depositor (the
"Depositor"), CREDIT-BASED ASSET SERVICING AND SECURITIZATION LLC,
as seller
(the "Seller"), LITTON LOAN SERVICING LP, as servicer ("Litton" or
the
"Servicer") and U.S. BANK NATIONAL ASSOCIATION, 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 twenty-one
Classes of
Certificates, designated as (i) the Class A-1, Class A-2A, Class
A-2B, Class
A-2C and Class A-2D Certificates, (ii) the Class M-1, Class M-2,
Class M-3,
Class M-4, Class M-5, Class M-6, Class M-7 and Class M-8
Certificates, (iii) the
Class B-1, Class B-2 and Class B-3 Certificates, (iv) the Class P
Certificates,
(v) the Class CE-1 and Class CE-2 Certificates, (vi) the Class R
Certificates
and the Class R-X Certificates.
As
provided herein, the Trustee shall elect that the Trust Fund (other
than
amounts distributable to the Class P Certificates, the Swap
Agreement, the Cap
Agreement and the Supplemental Interest Trust) be treated for
federal income tax
purposes as nine separate real estate mortgage investment conduits
(each a
"REMIC" or, in the alternative, the "SWAP REMIC," "REMIC 1," "REMIC
2," "REMIC
B-1," "REMIC B-2," "REMIC B-3," "REMIC CE-1," "REMIC IO" and "REMIC
CE-2"
respectively). The REMIC CE-2 Regular Interests represent all of
the "regular
interests" in REMIC CE-2. The REMIC IO Regular Interests represent
all of the
"regular interests" in REMIC IO. The REMIC CE-1 Regular Interests
represent all
of the "regular interests" in REMIC CE-1. The REMIC B-3 Regular
Interests
represent all of the "regular interests" in REMIC B-3. The REMIC
B-2 Regular
Interests represent all of the "regular interests" in REMIC B-2.
The REMIC B-1
Regular Interests represent all of the "regular interests" in REMIC
B-1. The
REMIC 2 Regular Interests represent all of the "regular interests"
in REMIC 2.
The REMIC 1 Regular Interests represent all of the "regular
interests" in REMIC
1. The SWAP REMIC Regular Interests represent all of the "regular
interests" in
the SWAP REMIC. Each Class of Cap Carryover Certificates (other
than the Class B
Certificates) represents beneficial ownership of the Corresponding
REMIC 2
Regular Interest, the right to receive payments in respect of
Excess Interest
and obligations with respect to Class Payment Shortfalls. The Class
B-1
Certificates represent beneficial ownership of the REMIC B-1
Regular Interest,
the right to receive payments in respect of Excess Interest and
obligations with
respect to Class Payment Shortfalls. The Class B-2 Certificates
represent
beneficial ownership of the REMIC B-2 Regular Interest, the right
to receive
payments in respect of Excess Interest and obligations with respect
to Class
Payment Shortfalls. The Class B-3 Certificates represent beneficial
ownership of
the REMIC B-3 Regular Interest and the right to receive payments in
respect of
Excess Interest and obligations with respect to Class Payment
Shortfalls.
For
federal income tax purposes, the Class CE-2 Certificates shall
represent a "regular interest" in REMIC CE-2 entitled to 100% of
the payments on
the REMIC 2 CE-2 Interest. For federal income tax purposes, the
Class CE-1
Certificates shall represent (i) the right to receive all
distributions with
respect to the REMIC Regular Interests represented by the REMIC
CE-1 CE-1
Interest and the REMIC IO IO Interest, (ii) the obligation to pay
amounts in
respect of Excess Interest and the right to receive amounts in
respect of Class
Payment Shortfalls as described in Section 9.01(l) and (iii)
ownership of the
Swap Agreement, the Cap Agreement and the Supplemental Interest
Trust. The Class
P Certificates shall be entitled to the amounts distributable in
respect of
prepayment penalties on the Mortgage Loans pursuant to Section 4.01
hereof and
shall not represent a REMIC regular interest. Each of the Class
R-SW, Class R-1
and Class R-2 Interests, represented collectively by the Class R
Certificates,
represents the sole Class of "residual interest" in the SWAP REMIC,
REMIC 1 and
REMIC 2, respectively, for purposes of the
<PAGE>
REMIC Provisions. Each of the Class R-B-1, Class R-B-2, Class
R-B-3, Class
R-CE-1, Class R-IO and Class R-CE-2 Interests, represented
collectively by the
Class R-X Certificates, represent the sole Class of "residual
interest" in REMIC
B-1, REMIC B-2, REMIC B-3, REMIC CE-1, REMIC IO and REMIC CE-2,
respectively,
for purposes of the REMIC provisions.
The
assets of the Trust Fund (other than the Supplemental Interest
Trust,
the Swap Agreement, the Cap Agreement and the rights to payments
distributable
to the Class P Certificates) will be held as assets of the SWAP
REMIC. The SWAP
REMIC Regular Interests will be held as assets of REMIC 1. The
REMIC 1 Regular
Interests will be held as assets of REMIC 2. The REMIC 2 B-1
Interest will be
held as the sole asset of REMIC B-1. The REMIC 2 B-2 Interest will
be held as
the sole asset of REMIC B-2. The REMIC 2 B-3 Interest will be held
as the sole
asset of REMIC B-3. The REMIC 2 CE-1 Interest will be held as the
sole asset of
REMIC CE-1. The REMIC 2 IO Interest will be held as the sole asset
of REMIC IO.
The REMIC 2 CE-2 Interest will be held as the sole asset of REMIC
CE-2. The
"latest possible maturity date" for federal income tax purposes of
all interests
created hereby will be the Distribution Date in May 2046.
THE SWAP REMIC
The
following table sets forth the designations, initial principal
balances
and interest rates for each interest in the SWAP REMIC:
Class
Initial
Principal Balance Interest Rate
------
------------------------- -------------
SW-Z
$56,469,720.780
(1)
SW-1A
$ 5,248,669.500
(2)
SW-1B
$ 5,248,669.500
(3)
SW-2A
$ 6,195,309.500
(2)
SW-2B
$ 6,195,309.500
(3)
SW-3A
$ 7,119,259.000
(2)
SW-3B
$ 7,119,259.000
(3)
SW-4A
$ 8,016,460.500
(2)
SW-4B
$ 8,016,460.500
(3)
SW-5A
$ 8,819,628.500
(2)
SW-5B
$ 8,819,628.500
(3)
SW-6A
$ 9,565,219.000
(2)
SW-6B
$ 9,565,219.000
(3)
SW-7A
$10,026,225.500
(2)
SW-7B
$10,026,225.500
(3)
SW-8A
$10,101,866.000
(2)
SW-8B
$10,101,866.000
(3)
SW-9A
$10,008,117.000
(2)
SW-9B
$10,008,117.000
(3)
SW-10A
$ 9,882,412.500
(2)
SW-10B
$ 9,882,412.500
(3)
SW-11A
$ 9,455,237.000
(2)
SW-11B
$ 9,455,237.000
(3)
SW-12A
$ 9,259,408.500
(2)
SW-12B
$ 9,259,408.500
(3)
SW-13A
$ 8,805,980.500
(2)
2
<PAGE>
Class
Initial
Principal Balance Interest Rate
------
------------------------- -------------
SW-13B
$ 8,805,980.500
(3)
SW-14A
$ 8,380,384.000
(2)
SW-14B
$ 8,380,384.000
(3)
SW-15A
$ 7,966,257.500
(2)
SW-15B
$ 7,966,257.500
(3)
SW-16A
$ 7,628,820.000
(2)
SW-16B
$ 7,628,820.000
(3)
SW-17A
$ 8,217,131.000
(2)
SW-17B
$ 8,217,131.000
(3)
SW-18A
$ 9,925,857.500
(2)
SW-18B
$ 9,925,857.500
(3)
SW-19A
$ 9,933,114.000
(2)
SW-19B
$ 9,933,114.000
(3)
SW-20A
$ 9,182,628.500
(2)
SW-20B
$ 9,182,628.500
(3)
SW-21A
$10,217,192.000
(2)
SW-21B
$10,217,192.000
(3)
SW-22A
$ 8,939,693.500
(2)
SW-22B
$ 8,939,693.500
(3)
SW-23A
$ 7,048,552.500
(2)
SW-23B
$ 7,048,552.500
(3)
SW-24A
$ 6,048,985.500
(2)
SW-24B
$ 6,048,985.500
(3)
SW-25A
$ 487,192.000
(2)
SW-25B
$ 487,192.000
(3)
SW-26A
$ 2,709,588.500
(2)
SW-26B
$ 2,709,588.500
(3)
SW-27A
$ 2,559,395.500
(2)
SW-27B
$ 2,559,395.500
(3)
SW-28A
$ 2,417,787.000
(2)
SW-28B
$ 2,417,787.000
(3)
SW-29A
$ 2,283,716.000
(2)
SW-29B
$ 2,283,716.000
(3)
SW-30A
$ 2,157,877.500
(2)
SW-30B
$ 2,157,877.500
(3)
SW-31A
$ 2,039,193.500
(2)
SW-31B
$ 2,039,193.500
(3)
SW-32A
$ 1,926,766.500
(2)
SW-32B
$ 1,926,766.500
(3)
SW-33A
$ 1,821,248.500
(2)
SW-33B
$ 1,821,248.500
(3)
SW-34A
$ 1,721,757.000
(2)
SW-34B
$ 1,721,757.000
(3)
SW-35A
$ 1,627,795.500
(2)
SW-35B
$ 1,627,795.500
(3)
SW-36A
$ 1,539,258.000
(2)
SW-36B
$ 1,539,258.000
(3)
SW-37A
$ 1,455,716.500
(2)
3
<PAGE>
Class
Initial
Principal Balance Interest Rate
------
------------------------- -------------
SW-37B
$ 1,455,716.500
(3)
SW-38A
$ 1,376,872.500
(2)
SW-38B
$ 1,376,872.500
(3)
SW-39A
$ 1,302,483.000
(2)
SW-39B
$ 1,302,483.000
(3)
SW-40A
$ 1,232,275.000
(2)
SW-40B
$ 1,232,275.000
(3)
SW-41A
$ 1,166,006.000
(2)
SW-41B
$ 1,166,006.000
(3)
SW-42A
$ 1,103,449.500
(2)
SW-42B
$ 1,103,449.500
(3)
SW-43A
$ 1,044,391.000
(2)
SW-43B
$ 1,044,391.000
(3)
SW-44A
$ 988,586.000
(2)
SW-44B
$ 988,586.000
(3)
SW-45A
$18,660,360.500
(2)
SW-45B
$18,660,360.500
(3)
R-SW
(4)
(4)
SW-CE2
(5)
(5)
(1) The interest rate
on the Class SW-Z Interest shall be a per annum rate
equal to the Net WAC.
(2) For any
Distribution Date, the interest rate on each SWAP REMIC Regular
Interest ending with the designation "A" shall be a per annum rate
equal to
2
times the Net WAC, subject to a maximum rate of 2 times the REMIC
Swap
Rate
for such Distribution Date.
(3) For any
Distribution Date, the interest rate on each SWAP REMIC Regular
Interest ending with the designation "B" shall be a per annum rate
equal to
the
greater of (x) the excess, if any, of (i) 2 times the Net WAC over
(ii)
2
times the REMIC Swap Rate for such Distribution Date and (y)
0.00%.
(4) The Class R-SW
Interest shall have no principal amount and shall bear no
interest.
(5) The Class SW-CE2
Interest shall be entitled to distributions in the same
amounts as all distributions on the Class CE-2 Certificates.
REMIC 1
The
following table specifies the class designation, interest rate,
initial
principal amount and Class of Related Certificate for each class of
REMIC 1
Interests.
4
<PAGE>
Designation
Interest Rate
Initial Principal Amount Related Certificate
-----------
-------------
------------------------ -------------------
LT1-A1
(1)
(3)
Class A-1
LT1-A2A
(1)
(3)
Class A-2A
LT1-A2B
(1)
(3)
Class A-2B
LT1-A2C
(1)
(3)
Class A-2C
LT1-A2D
(1)
(3)
Class A-2D
LT1-M1
(1)
(3)
Class M-1
LT1-M2
(1)
(3)
Class M-2
LT1-M3
(1)
(3)
Class M-3
LT1-M4
(1)
(3)
Class M-4
LT1-M5
(1)
(3)
Class M-5
LT1-M6
(1)
(3)
Class M-6
LT1-M7
(1)
(3)
Class M-7
LT1-M8
(1)
(3)
Class
M-8
LT1-B1
(1)
(3)
Class B-1
LT1-B2
(1)
(3)
Class B-2
LT1-B3
(1)
(3)
Class B-3
LT1-X1
(1)
(4)
N/A
LT1-IO
(5)
(5)
N/A
LT1-CE2
(6)
(6)
N/A
R-1
(2)
(2)
N/A
----------
(1) For any
Distribution Date, the interest rate for these interests shall be
a
per
annum rate (but not less than zero) equal to the product of (i)
the
weighted average of the interest rates on the SWAP REMIC Regular
Interests
(other than the Class SW-CE2 Interest) for such Distribution Date
and (ii)
a
fraction the numerator of which is 30 and the denominator of which
is the
actual number of days in the Interest Accrual Period for the Class
A-1
Certificates, provided however, that for any Distribution Date on
which the
Class LT1-IO Interest is entitled to a portion of interest accruals
on a
SWAP
REMIC Regular Interest ending with a designation "A" as described
in
footnote 5 below, such weighted average shall be computed by
first
subjecting the rate on such SWAP REMIC Regular Interest to a cap
equal to
Swap
LIBOR for such Distribution Date.
(2) The Class R-1
Interest shall represent the sole class of residual interest
in
REMIC 1. The Class R-1 Interest will not have a principal amount or
an
interest rate. The Class R-1 Interest shall be represented by the
Class R
Certificate.
(3) The initial
principal amount of these interests shall be an amount equal to
50%
of the initial principal amount of the related certificates.
(4) The initial
principal amount of this interest shall be an amount equal to
the
excess of (i) the aggregate Cut-off Date Principal Balance of
the
Mortgage Loans over (ii) the aggregate initial principal amount of
the
Marker Interests.
(5) The Class LT1-IO
Interest is an interest-only class that does not have a
principal balance. For only those Distribution Dates listed in the
first
column of the table below, the Class LT1-IO Interest shall be
entitled to
interest accrued on the SWAP REMIC Regular Interest listed in the
second
column below at a per annum rate equal to the excess, if any, of
(i) the
interest rate for such SWAP REMIC Regular Interest for such
Distribution
Date over (ii) Swap
LIBOR for such Distribution Date.
5
<PAGE>
Distribution Date SWAP REMIC Regular
Interest
-----------------
---------------------------
1
Class SW-1A
1-2
Class SW-2A
1-3
Class SW-3A
1-4
Class SW-4A
1-5
Class SW-5A
1-6
Class SW-6A
1-7
Class SW-7A
1-8
Class SW-8A
1-9
Class SW-9A
1-10
Class SW-10A
1-11
Class SW-11A
1-12
Class SW-12A
1-13
Class SW-13A
1-14
Class SW-14A
1-15
Class SW-15A
1-16
Class SW-16A
1-17
Class SW-17A
1-18
Class SW-18A
1-19
Class SW-19A
1-20
Class SW-20A
1-21
Class SW-21A
1-22
Class SW-22A
1-23
Class SW-23A
1-24
Class SW-24A
1-28
Class SW-25A
1-29
Class SW-26A
1-30
Class SW-27A
1-31
Class SW-28A
1-32
Class SW-29A
1-33
Class SW-30A
1-34
Class SW-31A
1-35
Class SW-32A
1-36
Class SW-33A
1-37
Class SW-34A
1-38
Class SW-35A
1-39
Class SW-36A
1-40
Class SW-37A
1-41
Class SW-38A
1-42
Class SW-39A
1-43
Class SW-40A
1-44
Class SW-41A
1-45
Class SW-42A
1-46
Class SW-43A
1-47
Class SW-44A
1-48
Class SW-45A
6
<PAGE>
(6) The Class LT1-CE2
Interest shall be entitled to distributions in the same
amounts as all distributions on the Class CE-2 Certificates.
All
computations with respect to any REMIC 1 Interest shall be taken
out to
ten decimal places.
REMIC 2
The
sole assets of REMIC 2 shall be the REMIC 1 Regular Interests.
The
regular interests in REMIC 2 shall be the REMIC 2 Regular
Interests. The
residual interest in REMIC 2 will be the Class R-2 Interest, which
will be
represented by the Class R Certificate.
REMIC B-1
The
sole asset of REMIC B-1 shall be the REMIC 2 B-1 Interest. The
sole
regular interest in REMIC B-1 will be the REMIC B-1 B-1 Interest.
The residual
interest in REMIC B-1 will be the Class R-B-1 Interest, which will
be
represented by the Class R-X Certificate.
REMIC B-2
The
sole asset of REMIC B-2 shall be the REMIC 2 B-2 Interest. The
sole
regular interest in REMIC B-2 will be the REMIC B-2 B-2 Interest.
The residual
interest in REMIC B-2 will be the Class R-B-2 Interest, which will
be
represented by the Class R-X Certificate.
REMIC B-3
The
sole asset of REMIC B-3 shall be the REMIC 2 B-3 Interest. The
sole
regular interest in REMIC B-3 will be the REMIC B-3 B-3 Interest.
The residual
interest in REMIC B-3 will be the Class R-B-3 Interest, which will
be
represented by the Class R-X Certificate.
REMIC CE-1
The
sole asset of REMIC CE-1 shall be the REMIC 2 CE-1 Interest. The
sole
regular interest in REMIC CE-1 will be the REMIC CE-1 CE-1
Interest. The
residual interest in REMIC CE-1 will be the Class R-CE-1 Interest,
which will be
represented by the Class R-X Certificate.
REMIC IO
The
sole asset of REMIC IO shall be the REMIC 2 IO Interest. The
sole
regular interest in REMIC IO will be the REMIC IO IO Interest. The
residual
interest in REMIC IO will be the Class R-IO Interest, which will be
represented
by the Class R-X Certificate.
REMIC CE-2
The
sole asset of REMIC CE-2 shall be the REMIC 2 CE-2 Interest. The
sole
regular interest in REMIC CE-2 will be the Class CE-2 Certificates.
The residual
interest in REMIC CE-2 will be the Class R-CE-2 Interest, which
will be
represented by the Class R-X Certificate.
The
following table sets forth (or describes) the Class
designation,
Pass-Through Rate and Original Class Certificate Principal Balance,
for each
Class of Certificates comprising the interests in the Trust Fund
created
hereunder:
7
<PAGE>
Original Class
Certificate
Principal Balance or Pass-Through
Final
Class Notional
Amount
Rate
Maturity Dates
-----
-------------------- ------------ --------------
A-1
$183,951,000
(1) October
25, 2036
A-2A
$144,285,000
(2) October
25, 2036
A-2B $
29,890,000
(3) October
25, 2036
A-2C $
38,412,000
(4) October
25, 2036
A-2D $
10,796,000
(5) October
25, 2036
M-1
$ 22,296,000
(6) October
25, 2036
M-2
$ 30,012,000
(7) October
25, 2036
M-3
$ 11,436,000
(8) October
25, 2036
M-4
$ 11,719,000
(9) October
25, 2036
M-5
$ 13,720,000
(10) October
25, 2036
M-6
$ 8,003,000
(11) October
25, 2036
M-7
$ 10,576,000
(12) October
25, 2036
M-8
$ 2,858,000
(13)
October
25, 2036
B-1
$ 15,435,000
(14) October
25, 2036
B-2
$ 10,576,000
(15) October
25, 2036
B-3
$ 9,718,000
(16) October
25, 2036
CE-1
N/A
(17)
N/A
CE-2
N/A
(18)
N/A
P
N/A
(19)
N/A
R
N/A
N/A
N/A
R-X
N/A
N/A
N/A
Total
$553,683,000
(1) Interest will
accrue on the Class A-1 Certificates during each Interest
Accrual Period at a rate equal to the least of: (i) the Class
A-1
Pass-Through Rate, (ii) the Net WAC Cap for such Distribution Date
and
(iii) the Maximum Rate Cap.
(2) Interest will
accrue on the Class A-2A Certificates during each Interest
Accrual Period at a rate equal to the least of: (i) the Class
A-2A
Pass-Through Rate, (ii) the Net WAC Cap for such Distribution Date
and
(iii) the Maximum Rate Cap.
(3) Interest will
accrue on the Class A-2B Certificates during each Interest
Accrual Period at a rate equal to the least of: (i) the Class
A-2B
Pass-Through Rate, (ii) the Net WAC Cap for such Distribution Date
and
(iii) the Maximum Rate Cap.
(4) Interest will
accrue on the Class A-2C Certificates during each Interest
Accrual Period at a rate equal to the least of: (i) the Class
A-2C
Pass-Through Rate, (ii) the Net WAC Cap for such Distribution Date
and
(iii) the Maximum Rate Cap.
(5) Interest will
accrue on the Class A-2D Certificates during each Interest
Accrual Period at a rate equal to the least of: (i) the Class
A-2D
Pass-Through Rate, (ii) the Net WAC Cap for such Distribution Date
and
(iii) the Maximum Rate
Cap.
(6) Interest will
accrue on the Class M-1 Certificates during each Interest
Accrual Period at a rate equal to the least of: (i) the Class
M-1
Pass-Through Rate, (ii) the Net WAC Cap for such Distribution Date
and
(iii) the Maximum Rate Cap.
(7) Interest will
accrue on the Class M-2 Certificates during each Interest
Accrual Period at a rate equal to the least of: (i) the Class
M-2
Pass-Through Rate, (ii) the Net WAC Cap for such Distribution Date
and
(iii) the Maximum Rate Cap.
8
<PAGE>
(8) Interest will
accrue on the Class M-3 Certificates during each Interest
Accrual Period at a rate equal to the least of: (i) the Class
M-3
Pass-Through Rate, (ii) the Net WAC Cap for such Distribution Date
and
(iii) the Maximum Rate Cap.
(9) Interest will
accrue on the Class M-4 Certificates during each Interest
Accrual Period at a rate equal to the least of: (i) the Class
M-4
Pass-Through Rate, (ii) the Net WAC Cap for such Distribution Date
and
(iii) the Maximum Rate Cap.
(10) Interest will accrue on the Class M-5 Certificates during each
Interest
Accrual Period at a rate equal to the least of: (i) the Class
M-5
Pass-Through Rate, (ii) the Net WAC Cap for such Distribution Date
and
(iii) the Maximum Rate Cap.
(11) Interest will accrue on the Class M-6 Certificates during each
Interest
Accrual Period at a rate equal to the least of: (i) the Class
M-6
Pass-Through Rate, (ii) the Net WAC Cap for such Distribution Date
and
(iii) the Maximum Rate Cap.
(12) Interest will accrue on the Class M-7 Certificates during each
Interest
Accrual Period at a rate equal to the least of: (i) the Class
M-7
Pass-Through Rate, (ii) the Net WAC Cap for such Distribution Date
and
(iii) the Maximum Rate Cap.
(13) Interest will accrue on the Class M-8 Certificates during each
Interest
Accrual Period at a rate equal to the least of: (i) the Class
M-8
Pass-Through Rate, (ii) the Net WAC Cap for such Distribution Date
and
(iii) the Maximum Rate Cap.
(14) Interest will accrue on the Class B-1 Certificates during each
Interest
Accrual Period at a rate equal to the least of: (i) the Class
B-1
Pass-Through Rate, (ii) the Net WAC Cap for such Distribution Date
and
(iii) the Maximum Rate Cap.
(15) Interest will accrue on the Class B-2 Certificates during each
Interest
Accrual Period at a rate equal to the least of: (i) the Class
B-2
Pass-Through Rate, (ii) the Net WAC Cap for such Distribution Date
and
(iii) the Maximum Rate Cap.
(16) Interest will accrue on the Class B-3 Certificates during each
Interest
Accrual Period at a rate equal to the least of: (i) the Class
B-3
Pass-Through Rate,
(ii) the Net WAC Cap for such Distribution Date and
(iii) the Maximum Rate Cap.
(17) For federal income tax purposes, the Class CE-1 Certificate
shall represent
(i)
the right to receive all distributions with respect to the
REMIC
Regular Interests represented by the REMIC CE-1 CE-1 Interest and
the REMIC
IO
IO Interest, (ii) the obligation to pay amounts in respect of
Excess
Interest and the right to receive amounts in respect of Class
Payment
Shortfalls as described in Section 9.01(l) and (iii) ownership of
the Swap
Agreement, the Cap Agreement and the Supplemental Interest
Trust.
(18) The Class CE-2 Certificate shall represent the right to
receive the Excess
Servicing Fee.
(19) The Class P Certificates shall be entitled to the amounts
distributable in
respect of prepayment penalties on the Mortgage Loans pursuant to
Section
4.01
hereof and shall not represent a REMIC regular 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 and Class M Certificates and on the REMIC 1 Regular
Interests and
the REMIC 2 CE-1 Interest will be calculated on the basis of the
actual number
of days in the related Interest Accrual Period and a 360-day year.
Interest on
the Class B Certificates and the SWAP
9
<PAGE>
REMIC Regular Interests will be calculated on the basis of a
360-day year
consisting of twelve 30-day months.
"1933 Act": The Securities Act of 1933, as amended.
"60+
Day Delinquent Loan": With respect to any date of determination,
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 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.
"Account": Any of the Collection Account, the Distribution Account,
the
Swap Account, the Cap Account and the Escrow Account.
"Accountant's Attestation": As defined in Section 3.20.
"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 for 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.
"Adjustment Date": With respect to each adjustable rate Mortgage
Loan, each
adjustment date, on which the Mortgage Interest Rate of an
adjustable rate
Mortgage Loan changes pursuant to the related Mortgage Note. The
first
Adjustment Date following the Cut-off Date as to each adjustable
rate Mortgage
Loan is set forth in the Mortgage Loan Schedule.
"Adjustment Period": As defined in the Preliminary Statement.
"Advance": As to any Mortgage Loan or REO Property, any advance
made by the
Servicer in respect of any Distribution Date pursuant to Section
4.07.
"Advance Facility": As defined in Section 3.30(a) hereof.
"Advance Facility Notice": As defined in Section 3.30(b)
hereof.
"Advance Financing Person": As defined in Section 3.30(a)
hereof.
"Advance Reimbursement Amounts": As defined in Section 3.30(b)
hereof.
"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.
"Agreement": This Pooling and Servicing Agreement and all
amendments and
supplements hereto.
10
<PAGE>
"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.
"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.
"Assessment of Compliance": As defined in Section 3.20.
"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 or
record the sale of the Mortgage.
"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 during
the related Collection Period and received by the Servicer on or
prior to the
related Determination Date, (b) Liquidation Proceeds, Insurance
Proceeds,
Condemnation 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, any
Reimbursement Amount or Subsequent Recovery deposited to the
Collection Account
and other unscheduled recoveries of principal and interest
(excluding prepayment
penalties) 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) expenses
reimbursable pursuant to Section 6.03 and fees, expenses and
indemnities due
pursuant to Section 8.05 and (d) 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 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, Class M and Class B Certificates shall be Book-Entry
Certificates.
"Book-Entry Regulation S Global Security": As defined in Section
5.01.
11
<PAGE>
"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 Minnesota 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.
"Cap": Either the Net WAC Cap or the Maximum Rate Cap.
"Cap
Account": The separate Eligible Account created and maintained
by
the Trustee pursuant to Section 4.02(i)(i) in the name of the
Trustee for the
benefit of the Trust Fund and designated "U.S. Bank, as trustee, in
trust for
registered holders of 2006-CB8 Trust, C-BASS Mortgage Loan
Asset-Backed
Certificates, Series 2006-CB8." Funds in the Cap Account shall be
held in trust
for the Trust Fund for the uses and purposes set forth in this
Agreement.
"Cap
Agreement": The interest rate cap agreement, dated October 30,
2006
between the Cap Counterparty and the Trustee on behalf of the
Supplemental
Interest Trust, relating to the Class A and Class M
Certificates.
"Cap
Carryover Certificates": The Class A, Class M and Class B
Certificates.
"Cap
Counterparty": Barclays Bank PLC.
"Cap
Payment": With respect to the Cap Agreement and for any
Distribution
Date, the amount, if any, required to be paid by the Cap
Counterparty on such
Distribution Date under the Cap Agreement.
"Certificate": Any Regular Certificate or Residual Certificate.
"Certificate Custodian": Initially, U.S. Bank National
Association;
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 P, Class CE-1, Class CE-2 and Residual
Certificates) and
any Distribution Date, 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 CE-1, Class CE-2, Class P and
Residual
Certificates do not have a Certificate Principal Balance. With
respect to any
Certificate (other than a Class CE-1, Class CE-2, Class P or a
Residual
Certificate) of a Class and any Distribution Date, the portion of
the
Certificate Principal Balance of such Class represented by such
Certificate
equal to the product of the Percentage Interest evidenced by such
Certificate
and the Certificate Principal Balance of such Class.
Notwithstanding the
foregoing on any Distribution Date relating to a Collection Period
in which a
Subsequent Recovery has been received by the Servicer, the
Certificate Principal
Balance of any Class of Certificates then outstanding for which any
Applied
Realized Loss Amount has been allocated will be increased, in order
of
seniority, by an amount equal to the lesser of (i) the Unpaid
Realized Loss
Amount for such Class of Certificates and (ii) the amount of any
Subsequent
Recovery allocable to principal distributed on such date to the
Certificateholders (reduced by the amount of the increase in the
Certificate
Principal Balance of any more senior Class of Certificates pursuant
to this
sentence on such Distribution Date).
"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 Disqualified Non-U.S. Person shall not be a Holder of a Residual
Certificate
for any purpose hereof.
12
<PAGE>
"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 Certificate": Any one of the Certificates with an "A"
designated
on the face thereof substantially in the form annexed hereto as
Exhibits A-1,
A-2, A-3, A-4 and A-5, executed by the Trustee on behalf of the
Trust and
authenticated and delivered by the Certificate Registrar,
representing the right
to distributions as set forth herein and therein.
"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 Certificates
for such
Distribution Date.
"Class A Principal Distribution Amount": As of any Distribution
Date, the
sum of the Group I Principal Distribution Amount and the Group II
Principal
Distribution Amount.
"Class A-1 Certificate Margin": For each Distribution Date (i) on
or prior
to the Optional Termination Date, 0.140% per annum, and (ii)
following the
Optional Termination Date, 0.280% per annum.
"Class A-1 Pass-Through Rate": For each Distribution Date, the
least of (i)
LIBOR as of the related LIBOR Determination Date, plus the Class
A-1 Certificate
Margin, (ii) the Net WAC Cap and (iii) the Maximum Rate Cap.
"Class A-2A Certificate Margin": For each Distribution Date, (i) on
or
prior to the Optional Termination Date, 0.050% per annum and (ii)
following the
Optional Termination Date, 0.100% per annum.
"Class A-2A Pass-Through Rate": For each Distribution Date, the
least of
(i) LIBOR as of the related LIBOR Determination Date plus the Class
A-2A
Certificate Margin, (ii) the Net WAC Cap and (iii) the Maximum Rate
Cap.
"Class A-2B Certificate Margin": For each Distribution Date, (i) on
or
prior to the Optional Termination Date, 0.110% per annum and (ii)
following the
Optional Termination Date, 0.220% per annum.
"Class A-2B Pass-Through Rate": For each Distribution Date, the
least of
(i) LIBOR as of the related LIBOR Determination Date plus the Class
A-2B
Certificate Margin, (ii) the Net WAC Cap and (iii) the Maximum Rate
Cap.
"Class A-2C Certificate Margin": For each Distribution Date, (i) on
or
prior to the Optional Termination Date, 0.150% per annum and (ii)
following the
Optional Termination Date, 0.300% per annum.
"Class A-2C Pass-Through Rate": For each Distribution Date, the
least of
(i) LIBOR as of the related LIBOR Determination Date plus the Class
A-2C
Certificate Margin, (ii) the Net WAC Cap and (iii) the Maximum Rate
Cap.
13
<PAGE>
"Class A-2D Certificate Margin": For each Distribution Date, (i) on
or
prior to the Optional Termination Date, 0.230% per annum and (ii)
following the
Optional Termination Date, 0.460% per annum.
"Class A-2D Pass-Through Rate": For each Distribution Date, the
least of
(i) LIBOR as of the related LIBOR Determination Date plus the Class
A-2D
Certificate Margin, (ii) the Net WAC Cap and (iii) the Maximum Rate
Cap.
"Class B Certificate": Any one of the Certificates with a "B"
designated on
the face thereof substantially in the form annexed hereto as
Exhibits B-1-1,
B-1-2, B-2-1, B-2-2, B-3-1 and B-3-2, executed by the Trustee on
behalf of the
Trust and authenticated and delivered by the Certificate Registrar,
representing
the right to distributions as set forth herein and therein.
"Class B Certificateholders": Collectively, the Holders of the
Class B
Certificates.
"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 Class B-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 B-2 Applied
Realized Loss
Amount and the Class B-3 Applied Realized Loss Amount, each case as
of such
Distribution Date.
"Class B-1 Pass-Through Rate": For each Distribution Date, the
least of (i)
(a) on or prior to the Optional Termination Date, 7.000% per annum
and (b)
following the Optional Termination Date, 7.500% per annum, (ii) the
Net WAC Cap
and (iii) the Maximum Rate Cap.
"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 sum of the Certificate Principal
Balances of
the Class A Certificates (after taking into account the payment of
the Class A
Principal Distribution Amount on such Distribution Date), (ii) the
aggregate
Certificate Principal Balance of the Class M-1, Class M-2 and Class
M-3
Certificates (after taking into account the payment of the Class
M-1/M-2/M-3
Principal Distribution Amount on such Distribution Date), (iii) the
Certificate
Principal Balance of the Class M-4 Certificates (after taking into
account the
payment of the Class M-4 Principal Distribution Amount on such
Distribution
Date), (iv) the Certificate Principal Balance of the Class M-5
Certificates
(after taking into account the payment of the Class M-5 Principal
Distribution
Amount on such Distribution Date), (v) the Certificate Principal
Balance of the
Class M-6 Certificates (after taking into account the payment of
the Class M-6
Principal Distribution Amount on such Distribution Date) (vi) the
Certificate
Principal Balance of the Class M-7 Certificates (after taking into
account the
payment of the Class M-7 Principal Distribution Amount on such
Distribution
Date), (vii) the Certificate Principal Balance of the Class M-8
Certificates
(after taking into account the payment of the Class M-8 Principal
Distribution
Amount on such Distribution Date) and (viii) 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) approximately 86.60% 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 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
14
<PAGE>
of the amounts described in Section 4.02(b)(i) through (xxix)
hereof, in each
case for such Distribution Date.
"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 Class B-2 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 Class B-3 Applied Realized Loss
Amount, in each
case as of such Distribution Date.
"Class B-2 Pass-Through Rate": For each Distribution Date, the
least of (i)
(a) on or prior to the Optional Termination Date, 7.000% per annum
and (b)
following the Optional Termination Date, 7.500% per annum, (ii) the
Net WAC Cap
and (iii) the Maximum Rate Cap.
"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 sum of the Certificate Principal
Balances of
the Class A Certificates (after taking into account the payment of
the Class A
Principal Distribution Amount on such Distribution Date), (ii) the
aggregate
Certificate Principal Balance of the Class M-1, Class M-2 and Class
M-3
Certificates (after taking into account the payment of the Class
M-1/M-2/M-3
Principal Distribution Amount on such Distribution Date), (iii) the
Certificate
Principal Balance of the Class M-4 Certificates (after taking into
account the
payment of the Class M-4 Principal Distribution Amount on such
Distribution
Date), (iv) the Certificate Principal Balance of the Class M-5
Certificates
(after taking into account the payment of the Class M-5 Principal
Distribution
Amount on such Distribution Date), (v) the Certificate Principal
Balance of the
Class M-6 Certificates (after taking into account the payment of
the Class M-6
Principal Distribution Amount on such Distribution Date) (vi) the
Certificate
Principal Balance of the Class M-7 Certificates (after taking into
account the
payment of the Class M-7 Principal Distribution Amount on such
Distribution
Date), (vii) the Certificate Principal Balance of the Class M-8
Certificates
(after taking into account the payment of the Class M-8 Principal
Distribution
Amount on such Distribution Date), (viii) 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
(ix) 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)
approximately 90.30% 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 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 (xxxii)
hereof, in each
case for such Distribution Date.
"Class B-3 Applied Realized Loss Amount": As to the Class B-3
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 B-3 Applied Realized Loss Amount, if any, on such
Distribution Date)
and (y) the Applied Realized Loss Amount as of such Distribution
Date.
15
<PAGE>
"Class B-3 Pass-Through
Rate": For each Distribution Date, the least of (i)
(a) on or prior to the Optional Termination Date, 7.000% per annum
and (b)
following the Optional Termination Date, 7.500% per annum, (ii) the
Net WAC Cap
and (iii) the Maximum Rate Cap.
"Class B-3 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 sum of the Certificate Principal
Balances of
the Class A Certificates (after taking into account the payment of
the Class A
Principal Distribution Amount on such Distribution Date), (ii) the
aggregate
Certificate Principal Balance of the Class M-1, Class M-2 and Class
M-3
Certificates (after taking into account the payment of the Class
M-1/M-2/M-3
Principal Distribution Amount on such Distribution Date), (iii) the
Certificate
Principal Balance of the Class M-4 Certificates (after taking into
account the
payment of the Class M-4 Principal Distribution Amount on such
Distribution
Date), (iv) the Certificate Principal Balance of the Class M-5
Certificates
(after taking into account the payment of the Class M-5 Principal
Distribution
Amount on such Distribution Date), (v) the Certificate Principal
Balance of the
Class M-6 Certificates (after taking into account the payment of
the Class M-6
Principal Distribution Amount on such Distribution Date) (vi) the
Certificate
Principal Balance of the Class M-7 Certificates (after taking into
account the
payment of the Class M-7 Principal Distribution Amount on such
Distribution
Date), (vii) the Certificate Principal Balance of the Class M-8
Certificates
(after taking into account the payment of the Class M-8 Principal
Distribution
Amount on such Distribution Date), (viii) 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), (ix)
the
Certificate Principal Balance of the Class B-2 Certificates (after
taking into
account the payment of the Class B-2 Principal Distribution Amount
on such
Distribution Date) and (x) the Certificate Principal Balance of the
Class B-3
Certificates immediately prior to such Distribution Date over (y)
the lesser of
(A) the product of (i) approximately 93.70% 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 (i)
0.50% and
(ii) the Pool Balance on the Cut-off Date.
"Class B-3 Realized Loss Amortization Amount": As to the Class
B-3
Certificates and as of any Distribution Date, the lesser of (x) the
Unpaid
Realized Loss Amount for the Class B-3 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 (xxxv)
hereof, in each
case for such Distribution Date.
"Class CE-1": Any one of the Class CE-1 Certificates as designated
on the
face thereof substantially in the form annexed hereto as Exhibit
C-11, executed
by the Trustee on behalf of the Trust and authenticated and
delivered by the
Certificate Registrar, representing the right to distributions as
set forth
herein and therein.
"Class CE-1 Distributable Amount": On any Distribution Date, the
excess of
(i) the sum of (x) the initial Overcollateralization Amount, (y)
the aggregate
REMIC 2 CE-1 Interest Current Interest for such Distribution Date
and all prior
Distribution Dates and (z) amounts treated as received by the Class
CE-1
Certificates in respect of Class Payment Shortfalls described in
Section
9.01(l)(ii) over (ii) the sum of (w) the aggregate payments in
respect of Excess
Interest for such Distribution Date and all prior Distribution
Dates, (x) all
prior distributions to the Class CE-1 Certificates under Section
4.02(b)(xl)
hereof, (y) all payments treated as distributed by REMIC CE-1 to
the REMIC CE-1
CE Interest then paid to the Swap Counterparty as described in
Section 9.01(o)
and (z) all payments treated as paid by the Class A, Class M and
Class B
Certificates to the Class CE-1 Certificates in respect of Class
Payment
Shortfalls then paid to the Swap Counterparty as described in
Section 9.01(o).
16
<PAGE>
"Class CE-2": Any one of the Class CE-2 Certificates as designated
on the
face thereof substantially in the form annexed hereto as Exhibit
C-11-2,
executed by the Trustee on behalf of the Trust and authenticated
and delivered
by the Certificate Registrar, representing the right to
distributions as set
forth herein and therein.
"Class CE-2 Distributable Amount": On any Distribution Date, the
Excess
Servicing Fee.
"Class M Certificate": Any one of the Certificates with an "M"
designated
on the face thereof substantially in the form annexed hereto as
Exhibits C-2,
C-3, C-4, C-5, C-6, C-7, C-8 and C-9, executed by the Trustee on
behalf of the
Trust and authenticated and delivered by the Certificate Registrar,
representing
the right to distributions as set forth herein and therein.
"Class M Certificateholders": Collectively, the Holders of the
Class M
Certificates.
"Class M-1/M-2/M-3 Principal Distribution Amount" means, 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 sum of the
Certificate
Principal Balances of the Class A Certificates (after taking into
account the
payment of the Class A Principal Distribution Amount on such
Distribution Date)
and (ii) the aggregate of the Certificate Principal Balances of the
Class M-1,
Class M-2 and Class M-3 Certificates immediately prior to such
Distribution Date
over (y) the lesser of (A) the product of (i) approximately 64.80%
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 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 M-3 Applied Realized Loss Amount, the Class M-4
Applied
Realized Loss Amount, the Class M-5 Applied Realized Loss Amount,
the Class M-6
Applied Realized Loss Amount, the Class M-7 Applied Realized Loss
Amount, the
Class M-8 Applied Realized Loss Amount, the Class B-1 Applied
Realized Loss
Amount, the Class B-2 Applied Realized Loss Amount and the Class
B-3 Applied
Realized Loss Amount, in each case as of such Distribution
Date.
"Class M-1 Certificate Margin": For each Distribution Date (i) on
or prior
to the Optional Termination Date, 0.250% per annum, and (ii)
following the
Optional Termination Date, 0.375% per annum.
"Class M-1 Pass-Through Rate": For each Distribution Date, the
least of (i)
LIBOR as of the related LIBOR Determination Date, plus the Class
M-1 Certificate
Margin, (ii) the Net WAC Cap and (iii) the Maximum Rate Cap.
"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 (v) hereof,
in each case
for such Distribution Date.
"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
17
<PAGE>
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
M-3 Applied Realized Loss Amount, the Class M-4 Applied Realized
Loss Amount,
the Class M-5 Applied Realized Loss Amount, the Class M-6 Applied
Realized Loss
Amount, the Class M-7 Applied Realized Loss Amount, the Class M-8
Applied
Realized Loss Amount, the Class B-1 Applied Realized Loss Amount,
the Class B-2
Applied Realized Loss Amount and the Class B-3 Applied Realized
Loss Amount, in
each case as of such Distribution Date.
"Class M-2 Certificate Margin": For each Distribution Date (i) on
or prior
to the Optional Termination Date, 0.300% per annum, and (ii)
following the
Optional Termination Date, 0.450% per annum.
"Class M-2 Pass-Through Rate": For each Distribution Date, the
least of (i)
LIBOR as of the related LIBOR Determination Date, plus the Class
M-2 Certificate
Margin, (ii) the Net WAC Cap and (iii) the Maximum Rate Cap.
"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 (viii)
hereof, in each
case for such Distribution Date.
"Class M-3 Applied Realized Loss Amount": As to the Class M-3
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-3 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 M-4 Applied
Realized Loss
Amount, the Class M-5 Applied Realized Loss Amount, the Class M-6
Applied
Realized Loss Amount, the Class M-7 Applied Realized Loss Amount,
the Class M-8
Applied Realized Loss Amount, the Class B-1 Applied Realized Loss
Amount, the
Class B-2 Applied Realized Loss Amount and the Class B-3 Applied
Realized Loss
Amount, in each case as of such Distribution Date.
"Class M-3 Certificate Margin": For each Distribution Date (i) on
or prior
to the Optional Termination Date, 0.330% per annum, and (ii)
following the
Optional Termination Date, 0.495% per annum.
"Class M-3 Pass-Through Rate": For each Distribution Date, the
least of (i)
LIBOR as of the related LIBOR Determination Date, plus the Class
M-3 Certificate
Margin, (ii) the Net WAC Cap and (iii) the Maximum Rate Cap.
"Class M-3 Realized Loss Amortization Amount": As to the Class
M-3
Certificates and as of any Distribution Date, the lesser of (x) the
Unpaid
Realized Loss Amount for the Class M-3 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 (xi) hereof,
in each case
for such Distribution Date.
"Class M-4 Applied Realized Loss Amount": As to the Class M-4
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
18
<PAGE>
the Class M-4 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 M-5 Applied
Realized Loss
Amount, the Class M-6 Applied Realized Loss Amount, the Class M-7
Applied
Realized Loss Amount, the Class M-8 Applied Realized Loss Amount,
the Class B-1
Applied Realized Loss Amount, the Class B-2 Applied Realized Loss
Amount and the
Class B-3 Applied Realized Loss Amount, in each case as of such
Distribution
Date.
"Class M-4 Certificate Margin": For each Distribution Date (i) on
or prior
to the Optional Termination Date, 0.350% per annum, and (ii)
following the
Optional Termination Date, 0.525% per annum.
"Class M-4 Pass-Through Rate": For each Distribution Date, the
least of (i)
LIBOR as of the related LIBOR Determination Date, plus the Class
M-4 Certificate
Margin, (ii) the Net WAC Cap and (iii) the Maximum Rate Cap.
"Class M-4 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 sum of the Certificate Principal
Balances of
the Class A Certificates (after taking into account the payment of
the Class A
Principal Distribution Amount on such Distribution Date), (ii) the
aggregate
Certificate Principal Balance of the Class M-1, Class M-2 and Class
M-3
Certificates (after taking into account the payment of the Class
M-1/M-2/M-3
Principal Distribution Amount on such Distribution Date) and (iii)
the
Certificate Principal Balance of the Class M-4 Certificates
immediately prior to
such Distribution Date over (y) the lesser of (A) the product of
(i)
approximately 68.90% 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 M-4 Realized Loss Amortization Amount": As to the Class
M-4
Certificates and as of any Distribution Date, the lesser of (x) the
Unpaid
Realized Loss Amount for the Class M-4 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 (xiv)
hereof, in each
case for such Distribution Date.
"Class M-5 Applied Realized Loss Amount": As to the Class M-5
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-5 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 M-6 Applied
Realized Loss
Amount, the Class M-7 Applied Realized Loss Amount, the Class M-8
Applied
Realized Loss Amount, the Class B-1 Applied Realized Loss Amount,
the Class B-2
Applied Realized Loss Amount and the Class B-3 Applied Realized
Loss Amount, in
each case as of such Distribution Date.
"Class M-5 Certificate Margin": For each Distribution Date (i) on
or prior
to the Optional Termination Date, 0.380% per annum, and (ii)
following the
Optional Termination Date, 0.570% per annum.
"Class M-5 Pass-Through Rate": For each Distribution Date, the
least of (i)
LIBOR as of the related LIBOR Determination Date, plus the Class
M-5 Certificate
Margin, (ii) the Net WAC Cap and (iii) the Maximum Rate Cap.
19
<PAGE>
"Class M-5 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 sum of the Certificate Principal
Balances of
the Class A Certificates (after taking into account the payment of
the Class A
Principal Distribution Amount on such Distribution Date), (ii) the
aggregate
Certificate Principal Balance of the Class M-1, Class M-2 and Class
M-3
Certificates (after taking into account the payment of the Class
M-1/M-2/M-3
Principal Distribution Amount on such Distribution Date), (iii) the
Certificate
Principal Balance of the Class M-4 Certificates (after taking into
account the
payment of the Class M-4 Principal Distribution Amount on such
Distribution
Date) and (iv) the Certificate Principal Balance of the Class M-5
Certificates
immediately prior to such Distribution Date over (y) the lesser of
(A) the
product of (i) approximately 73.70% 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 (i) 0.50% and
(ii) the Pool
Balance on the Cut-off Date.
"Class M-5 Realized Loss Amortization Amount": As to the Class
M-5
Certificates and as of any Distribution Date, the lesser of (x) the
Unpaid
Realized Loss Amount for the Class M-5 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 (xvii)
hereof, in each
case for such Distribution Date.
"Class M-6 Applied Realized Loss Amount": As to the Class M-6
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-6 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 M-7 Applied
Realized Loss
Amount, the Class M-8 Applied Realized Loss Amount, the Class B-1
Applied
Realized Loss Amount, the Class B-2 Applied Realized Loss Amount
and the Class
B-3 Applied Realized Loss Amount, in each case as of such
Distribution Date.
"Class M-6 Certificate Margin": For each Distribution Date (i) on
or prior
to the Optional Termination Date, 0.440% per annum, and (ii)
following the
Optional Termination Date, 0.660% per annum.
"Class M-6 Pass-Through Rate": For each Distribution Date, the
least of (i)
LIBOR as of the related LIBOR Determination Date, plus the Class
M-6 Certificate
Margin, (ii) the Net WAC Cap and (iii) the Maximum Rate Cap.
"Class M-6 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 sum of the Certificate Principal
Balances of
the Class A Certificates (after taking into account the payment of
the Class A
Principal Distribution Amount on such Distribution Date), (ii) the
aggregate
Certificate Principal Balance of the Class M-1, Class M-2 and Class
M-3
Certificates (after taking into account the payment of the Class
M-1/M-2/M-3
Principal Distribution Amount on such Distribution Date), (iii) the
Certificate
Principal Balance of the Class M-4 Certificates (after taking into
account the
payment of the Class M-4 Principal Distribution Amount on such
Distribution
Date), (iv) the Certificate Principal Balance of the Class M-5
Certificates
(after taking into account the payment of the Class M-5 Principal
Distribution
Amount on such Distribution Date) and (v) the Certificate Principal
Balance of
the Class M-6 Certificates immediately prior to such Distribution
Date over (y)
the lesser of (A) the product of (i) approximately 76.50% 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.
20
<PAGE>
"Class M-6 Realized Loss Amortization Amount": As to the Class
M-6
Certificates and as of any Distribution Date, the lesser of (x) the
Unpaid
Realized Loss Amount for the Class M-6 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 M-7 Applied Realized Loss Amount": As to the Class M-7
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-7 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 M-8 Applied
Realized Loss
Amount, the Class B-1 Applied Realized Loss Amount, the Class B-2
Applied
Realized Loss Amount and the Class B-3 Applied Realized Loss
Amount, in each
case as of such Distribution Date.
"Class M-7 Certificate Margin": For each Distribution Date (i) on
or prior
to the Optional Termination Date, 0.720% per annum, and (ii)
following the
Optional Termination Date, 1.080% per annum.
"Class M-7 Pass-Through Rate": For each Distribution Date, the
least of (i)
LIBOR as of the related LIBOR Determination Date, plus the Class
M-7 Certificate
Margin, (ii) the Net WAC Cap and (iii) the Maximum Rate Cap.
"Class M-7 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 sum of the Certificate Principal
Balances of
the Class A Certificates (after taking into account the payment of
the Class A
Principal Distribution Amount on such Distribution Date), (ii) the
aggregate
Certificate Principal Balance of the Class M-1, Class M-2 and Class
M-3
Certificates (after taking into account the payment of the Class
M-1/M-2/M-3
Principal Distribution Amount on such Distribution Date), (iii) the
Certificate
Principal Balance of the Class M-4 Certificates (after taking into
account the
payment of the Class M-4 Principal Distribution Amount on such
Distribution
Date), (iv) the Certificate Principal Balance of the Class M-5
Certificates
(after taking into account the payment of the Class M-5 Principal
Distribution
Amount on such Distribution Date), (v) the Certificate Principal
Balance of the
Class M-6 Certificates (after taking into account the payment of
the Class M-6
Principal Distribution Amount on such Distribution Date) and (vi)
the
Certificate Principal Balance of the Class M-7 Certificates
immediately prior to
such Distribution Date over (y) the lesser of (A) the product of
(i)
approximately 80.20% 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 (i) 0.50% and (ii) the Pool
Balance on
the Cut-off Date.
"Class M-7 Realized Loss Amortization Amount": As to the Class
M-7
Certificates and as of any Distribution Date, the lesser of (x) the
Unpaid
Realized Loss Amount for the Class M-7 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 (xxiii)
hereof, in each
case for such Distribution Date.
"Class M-8 Applied Realized Loss Amount": As to the Class M-8
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-8 Applied Realized Loss Amount, if any, on such
Distribution Date)
and (y) the excess of (i)
21
<PAGE>
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 B-3 Applied Realized Loss
Amount, in each
case as of such Distribution Date.
"Class M-8 Certificate Margin": For each Distribution Date (i) on
or prior
to the Optional Termination Date, 1.000% per annum, and (ii)
following the
Optional Termination Date, 1.500% per annum.
"Class M-8 Pass-Through Rate": For each Distribution Date, the
least of (i)
LIBOR as of the related LIBOR Determination Date, plus the Class
M-8 Certificate
Margin, (ii) the Net WAC Cap and (iii) the Maximum Rate Cap.
"Class M-8 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 sum of the Certificate Principal
Balances of
the Class A Certificates (after taking into account the payment of
the Class A
Principal Distribution Amount on such Distribution Date), (ii) the
aggregate
Certificate Principal Balance of the Class M-1, Class M-2 and Class
M-3
Certificates (after taking into account the payment of the Class
M-1/M-2/M-3
Principal Distribution Amount on such Distribution Date), (iii) the
Certificate
Principal Balance of the Class M-4 Certificates (after taking into
account the
payment of the Class M-4 Principal Distribution Amount on such
Distribution
Date), (iv) the Certificate Principal Balance of the Class M-5
Certificates
(after taking into account the payment of the Class M-5 Principal
Distribution
Amount on such Distribution Date), (v) the Certificate Principal
Balance of the
Class M-6 Certificates (after taking into account the payment of
the Class M-6
Principal Distribution Amount on such Distribution Date), (vi) the
Certificate
Principal Balance of the Class M-7 Certificates (after taking into
account the
payment of the Class M-7 Principal Distribution Amount on such
Distribution
Date) and (vii) the Certificate Principal Balance of the Class M-8
Certificates
immediately prior to such Distribution Date over (y) the lesser of
(A) the
product of (i) approximately 81.20% 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 (i) 0.50% and
(ii) the Pool
Balance on the Cut-off Date.
"Class M-8 Realized Loss Amortization Amount": As to the Class
M-8
Certificates and as of any Distribution Date, the lesser of (x) the
Unpaid
Realized Loss Amount for the Class M-8 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 (xxvi)
hereof, in each
case for such Distribution Date.
"Class P Certificate": Any one of the Certificates with an "P"
designated
on the face thereof substantially in the form annexed hereto as
Exhibit C-10,
executed by the Trustee on behalf of the Trust and authenticated
and delivered
by the Certificate Registrar, representing the right to
distributions as set
forth herein and therein.
"Class Payment Shortfall": As defined in Section 9.01(l)(ii)
herein.
"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-1-1 and
evidencing the ownership of the Residual Interest in each of the
SWAP REMIC,
REMIC 1 and REMIC 2. The Class R Certificate represents the
ownership of the
Class R-SW Interest, Class R-1 Interest and Class R-2 Interest.
"Class R-1 Interest": The uncertificated residual interest in REMIC
1.
22
<PAGE>
"Class R-2 Interest": The uncertificated residual interest in REMIC
2.
"Class R-B-1 Interest": The uncertificated residual interest in
REMIC B-1.
"Class R-B-2 Interest": The uncertificated residual interest in
REMIC B-2.
"Class R-B-3 Interest": The uncertificated residual interest in
REMIC B-3.
"Class R-CE-1 Interest": The uncertificated residual interest in
REMIC
CE-1.
"Class R-CE-2
Interest": The uncertificated residual interest in REMIC
CE-2.
"Class R-IO Interest": The uncertificated residual interest in
REMIC IO.
"Class R-SW Interest": The uncertificated residual interest in the
SWAP
REMIC.
"Class R-X Certificate": The Class R-X 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-1-2 and
evidencing the ownership of the Residual Interest in each of REMIC
B-1, REMIC
B-2, REMIC B-3, REMIC CE-1, REMIC IO and REMIC CE-2. The Class R-X
Certificate
represents the ownership of the Class R-B-1 Interest, Class R-B-2
Interest,
Class R-B-3 Interest, Class R-CE-1 Interest, Class R-IO Interest
and Class
R-CE-2 Interest.
"Closing Date": October 30, 2006.
"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
"Collection Account,
Litton Loan Servicing LP, as Servicer for the registered Holders of
the
2006-CB8, C-BASS Mortgage Loan Asset-Backed Certificates, Series
2006-CB8," 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.
"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 as of the Cut-off Date plus the
principal balance
of any related senior mortgage loan, if any, at origination of the
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.
"Corporate Trust Office": With respect to the Trustee, the
principal
corporate trust office of the Trustee at which at any particular
time (a) its
corporate trust business in connection with this Agreement shall
be
administered, and (b) certificates may be presented for transfer
and exchange
and for purpose of surrender for the final distribution thereon,
which office at
the date of execution of this Agreement is
23
<PAGE>
located at: 60 Livingston Avenue, Mail Code EP-MN-WS3D, St. Paul,
Minnesota
55107-2292, Attention: Structured Finance/C-BASS 2006-CB8, or at
such other
addresses as the Trustee may designate from time to time by notice
to the
Certificateholders, the Depositor, the Servicer and the Seller.
"Corresponding Cap Carryover Certificate" and "Corresponding REMIC
2
Regular Interest": For any REMIC 2 Regular Interest set forth
below, the
corresponding Cap Carryover Certificate set forth below, and for
any Cap
Carryover Certificate set forth below, the corresponding REMIC 2
Regular
Interest set forth below:
Corresponding Cap Carryover Certificate Corresponding REMIC 2
Regular Interest
---------------------------------------
--------------------------------------
Class A-1 Certificate
REMIC 2 A-1 Interest
Class A-2A Certificate
REMIC 2 A-2A Interest
Class A-2B Certificate
REMIC 2 A-2B Interest
Class A-2C Certificate
REMIC 2 A-2C Interest
Class A-2D Certificates
REMIC 2 A-2D Interest
Class M-1 Certificate
REMIC 2 M-1 Interest
Class M-2 Certificate
REMIC 2 M-2 Interest
Class M-3 Certificate
REMIC 2 M-3 Interest
Class M-4 Certificate
REMIC 2 M-4 Interest
Class M-5 Certificate
REMIC 2 M-5
Interest
Class M-6 Certificate
REMIC 2 M-6 Interest
Class M-7 Certificate
REMIC 2 M-7 Interest
Class M-8 Certificate
REMIC 2 M-8 Interest
Class B-1 Certificate
REMIC 2 B-1 Interest
Class B-2 Certificate
REMIC 2 B-2 Interest
Class B-3 Certificate
REMIC 2 B-3 Interest
"Custodial Agreement": The Custodial Agreement, dated as of October
1,
2006, 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, a New York banking corporation,
or any
successor custodian appointed pursuant to the terms of the
Custodial Agreement.
"Cut-off Date": October 1, 2006.
24
<PAGE>
"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).
"DBRS": Dominion Bond Rating Service, Inc. and its successors, and
if such
company shall for any reason no longer perform the functions of a
securities
rating agency, "DBRS" 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.
If DBRS is designated as a Rating Agency in the Preliminary
Statement, for
purposes of Section 11.08 the address for notices to DBRS shall be
Dominion Bond
Rating Service, 55 Broadway, 15th Floor, New York, New York 10006,
Attention:
Quincy Tang, or such other address as DBRS may hereafter furnish to
the
Depositor, the Trustee and the Servicer.
"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.
"Defaulted Swap Termination Payment": Any payment required to be
made by
the Supplemental Interest Trust to the Swap Counterparty pursuant
to the Swap
Agreement as a result of an "Event of Default" (as defined in the
Swap
Agreement) with respect to which the Swap Counterparty is the
defaulting party
or a termination event (including a Downgrade Termination Event)
under that
agreement (other than illegality or a tax event) with respect to
which the Swap
Counterparty is the sole "Affected Party" (as defined in the Swap
Agreement).
"Defective Mortgage Loan": A Mortgage Loan replaced or to be
replaced by
one or more Eligible Substitute Mortgage Loans.
"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 with respect to which the Monthly
Payment
and/or any Escrow Payment due on a Due Date is not made by the
close of business
on the next scheduled Due Date for such Mortgage Loan or any
Mortgage Loan with
respect to which any Servicing Advances made on or before the
Cut-off Date has
not been reimbursed by the related Mortgagor.
"Depositor": Merrill Lynch Mortgage Investors, Inc., a Delaware
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.
25
<PAGE>
"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
16th day
of the calendar month in which such Distribution Date occurs or, if
such 16th
day is not a Business Day, the Business Day immediately following
such 16th day.
"Disqualified Non-U.S. Person": With respect to a Residual
Certificate, any
(A) non-U.S. Person or agent thereof or (B) U.S. Person with
respect to whom
income from a Residual Certificate is attributable to a foreign
permanent
establishment or fixed base, within the meaning of an applicable
income tax
treaty, of such Person or any other U.S. Person.
"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 Residual
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 a Residual
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, U.S. Bank National Association, as Trustee,
in trust for
the registered Holders of the 2006-CB8 Trust, C-BASS Mortgage Loan
Asset-Backed
Certificates, Series 2006-CB8" 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 November 2006.
"Distribution Information": The items calculated and reported by
the
Trustee pursuant to Section 4.06(a)(i)-(iv), (xii), (xiv),
(xvi)-(xix),
(xxi)-(xxvi), (xxx)-(xxxii) and any other information included in
the Monthly
Statement aggregated or calculated by the Trustee from (a)
information contained
in the Remittance Report or (b) other information furnished to the
Trustee by
the Servicer pursuant to Section 4.06(a).
"Downgrade Termination Event": An event whereby (x) the Swap
Counterparty
(or its guarantor) ceases to have short term unsecured and/or long
term debt
ratings at least equal to the levels specified in the Swap
Agreement, and (y) at
least one of the following events has not occurred (except to the
extent
otherwise approved by the Rating Agencies): (i) within the time
period specified
in the Swap Agreement with respect to such downgrade, the Swap
Counterparty
shall transfer the Swap Agreement, in whole, but not in part, to a
substitute
swap counterparty that satisfies the requirements set forth in
the
26
<PAGE>
Swap Agreement, subject to the satisfaction of the Rating Agency
Condition or
(ii) within the time period specified in the Swap Agreement with
respect to such
downgrade, the Swap Counterparty shall collateralize its exposure
to the Trust
Fund pursuant to an ISDA Credit Support Annex, subject to the
satisfaction of
the Rating Agency Condition; provided that such ISDA Credit Support
Annex shall
be made a credit support document for the Swap Counterparty
pursuant to an
amendment to the Swap Agreement.
"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
commercial paper, demand deposit or other 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-2" (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 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 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 an adjustable rate 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 an adjustable rate Mortgage Loan, have a Maximum Loan Rate
not less
than the Maximum Loan Rate for the Defective Mortgage Loan, (iv) if
an
adjustable rate Mortgage Loan, have a Minimum Loan Rate not less
than the
Minimum Loan Rate of the Defective Mortgage Loan, (v) if an
adjustable rate
Mortgage Loan, have a Gross Margin equal to or greater than the
Gross Margin of
the Defective Mortgage Loan, (vi) if an adjustable rate Mortgage
Loan, have the
same Index as the Defective Mortgage Loan, (vii) if an adjustable
rate Mortgage
Loan, have a next Adjustment Date not more than two months later
than the next
Adjustment Date on the Defective Mortgage Loan, (viii) have a
remaining term to
maturity not greater than (and not more than one year less than)
that of the
Defective Mortgage Loan, (ix) be current as of the date of
substitution, (x)
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, (xi) have a risk grading determined by the Seller at
least equal to
the risk grading assigned on the Defective Mortgage Loan, (xii)
have been
reunderwritten by the Seller in accordance with the same
underwriting criteria
and guidelines as the Defective Mortgage Loan, (xiii) have the same
Due Date as
the Defective
27
<PAGE>
Mortgage Loan and (xiv) 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 (xi) hereof
shall be
satisfied as to each such mortgage loan, the terms described in
clause (viii)
hereof shall be determined on the basis of weighted average
remaining term to
maturity, the Combined Loan-to-Value Ratios described in clause (x)
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 (xiv) hereof must be satisfied as to each Eligible
Substitute Mortgage
Loan or in the aggregate, as the case may be.
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended.
"ERISA-Qualifying Underwriting": A best efforts or firm
commitment
underwriting or private placement that would satisfy the
requirements of
Prohibited Transaction Exemption 90-25, 55 Fed. Reg. 21459 (1990),
as amended,
granted to the Underwriter by the United States Department of Labor
(or any
other applicable underwriter's exemption granted by the United
States Department
of Labor), except, in relevant part, for the requirement that the
certificates
have received a rating at the time of acquisition that is in one of
the three
(or four, in the case of a "designated transaction") highest
generic rating
categories by at least one of the Rating Agencies.
"ERISA-Restricted Certificate": The Class B, Class P, Class CE-1
and Class
CE-2 Certificates and any other Certificate, as long as the
acquisition and
holding of such Certificate is not covered by and exempt under
Prohibited
Transaction Exemption 90-25, 55 Fed. Reg. 21459 (1990), as amended,
granted to
the Underwriter by the United States Department of Labor (or any
other
applicable underwriter's exemption granted by the United States
Department of
Labor).
"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 Interest": On any Distribution Date, for each Class of the
Class A,
Class M and Class B Certificates, the excess, if any, of (1) the
amount of
interest such Class of Certificates is entitled to receive on such
Distribution
Date over (2) the amount of interest such Class of Certificates
would have been
entitled to receive on such Distribution Date at an interest rate
equal to the
REMIC Pass-Through Rate.
"Excess Servicing Fee": For any Distribution Date that Litton is
the
servicer of the Mortgage Loans, one-twelfth of the product of (i)
the excess of
the Servicing Fee Rate over the Litton Servicing Fee, if any,
multiplied by (ii)
the Principal Balance of the related Mortgage Loan on which
interest on such
Mortgage Loan accrues as of the Distribution Date in the preceding
calendar
month; for any Distribution Date that Litton is not the servicer of
the Mortgage
Loans, zero.
"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).
28
<PAGE>
"Extra Principal Distribution Amount": As of any Distribution Date,
the
lesser of (x) the excess of (i) the Monthly Excess Cashflow Amount
for such
Distribution Date over (ii) amounts distributed pursuant to Section
4.02(b)(i)
and 4.02(b)(ii) on such Distribution Date and (y) the
Overcollateralization
Deficiency for such Distribution Date.
"FDIC": Federal Deposit Insurance Corporation or any successor
thereto.
"Fidelity Bond": Shall have the meaning assigned thereto in Section
3.12.
"Final Maturity Date": As to each Class of Certificates, the date
set forth
as such in the Preliminary Statement.
"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.
"First Lien Mortgage Loan": Any of the Mortgage Loans which are
secured by
a first mortgage lien that is senior to a Second Lien Mortgage Loan
on the
related Mortgaged Property.
"Fitch": Fitch Ratings 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.
"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.
"Gross Margin": With respect to each adjustable rate Mortgage Loan,
the
fixed percentage, if any, 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 I Interest Remittance Amount" means, as of any Distribution
Date,
the sum, without duplication, of (i) all interest received by the
Servicer on or
prior to the related Determination Date for such Distribution Date
or advanced
with respect to Monthly Payments due during the related Collection
Period on the
Group I Mortgage Loans (less the portion of the Servicing Fee
relating to Group
I Mortgage Loans, certain amounts available for reimbursement of
Advances and
Servicing Advances and certain other reimbursable expenses), (ii)
the portion of
any full or partial principal prepayment related to interest with
respect to a
Group I Mortgage Loan received during the related Prepayment
Period, (iii) all
Compensating Interest paid by the Servicer on the related
Determination Date
with respect to the Group I Mortgage Loans, (iv) the portion of any
payment in
connection with any Purchase Price, substitution, Subsequent
Recoveries,
liquidation proceeds (net of certain expenses), insurance proceeds
or
condemnation proceeds relating to interest with respect to the
Group I Mortgage
Loans received during the related Prepayment Period, (v) with
respect to the
related Distribution Date on which the Trust is to be terminated in
accordance
with this Agreement, that portion of the Termination Price with
respect to the
29
<PAGE>
Group I Mortgage Loans in respect of interest and (vi) the portion
of any
Reimbursement Amount related to the Group I Mortgage Loans received
during the
related Prepayment Period.
"Group I Mortgage Loan": Any Mortgage Loan listed in Exhibit D-2
attached
hereto.
"Group I Principal Distribution Amount": As of any Distribution
Date, the
product of (x) the Group I Senior Principal Allocation Percentage
and (y) the
Senior Principal Distribution Amount.
"Group I Principal Remittance Amount": With respect to any
Distribution
Date, to the extent of funds available therefor, the amount equal
to the sum
(less, with respect to the Group I Mortgage Loans, certain amounts
available for
reimbursement of Advances and Servicing Advances pursuant to
Sections 3.05 and
6.03) of the following amounts (without duplication) with respect
to the Group I
Mortgage Loans and the immediately preceding Collection Period: (i)
each payment
of principal on a Group I Mortgage Loan due during such Collection
Period and
received by the Servicer on or prior to the related Determination
Date,
including any Advances with respect thereto, (ii) all full and
partial principal
prepayments received by the Servicer during the related Prepayment
Period on the
Group I Mortgage Loans, (iii) the insurance proceeds or
condemnation proceeds,
Subsequent Recoveries and liquidation proceeds (net of certain
expenses)
allocable to principal actually collected by the Servicer during
the related
Prepayment Period on the Group I Mortgage Loans, (iv) the portion
of the
Purchase Price allocable to principal of all repurchased Defective
Mortgage
Loans in Loan Group I with respect to such Prepayment Period, (v)
any
Substitution Adjustments allocable to principal received during the
related
Prepayment Period, and (vi) on the Distribution Date on which the
Trust is to be
terminated in accordance with this Agreement, that portion of the
Termination
Price in respect of principal on the Group I Mortgage Loans.
"Group I Senior Principal Allocation Percentage": With respect to
any
Distribution Date, the percentage equivalent of a fraction, the
numerator of
which is (x) the Group I Principal Remittance Amount for that
Distribution Date
and the denominator of which is (y) the Principal Remittance Amount
for that
Distribution Date.
"Group II Interest Remittance Amount" means, as of any Distribution
Date,
the sum, without duplication, of (i) all interest received by the
Servicer on or
prior to the related Determination Date for such Distribution Date
or advanced
with respect to Monthly Payments due during the related Collection
Period on the
Group II Mortgage Loans (less the portion of the Servicing Fee
relating to Group
II Mortgage Loans, certain amounts available for reimbursement of
Advances and
Servicing Advances and certain other reimbursable expenses), (ii)
the portion of
any full or partial principal prepayment related to interest with
respect to a
Group II Mortgage Loan received during the related Prepayment
Period, (iii) all
Compensating Interest paid by the Servicer on the related
Determination Date
with respect to the Group II Mortgage Loans, (iv) the portion of
any payment in
connection with any Purchase Price, substitution, Subsequent
Recoveries,
liquidation proceeds (net of certain expenses), insurance proceeds
or
condemnation proceeds relating to interest with respect to the
Group II Mortgage
Loans received during the related Prepayment Period, (v) with
respect to the
related Distribution Date on which the Trust is to be terminated in
accordance
with this Agreement, that portion of the Termination Price with
respect to the
Group II Mortgage Loans in respect of interest and (vi) the portion
of any
Reimbursement Amount related to the Group II Mortgage Loans
received during the
related Prepayment Period.
"Group II Mortgage Loan": Any Mortgage Loan listed in Exhibit D-3
attached
hereto.
"Group II Principal Distribution Amount": As of any Distribution
Date, the
product of (x) the Group II Senior Principal Allocation Percentage
and (y) the
Senior Principal Distribution Amount.
30
<PAGE>
"Group II Principal Remittance Amount": With respect to any
Distribution
Date, to the extent of funds available therefor, the amount equal
to the sum
(less, with respect to the Group II Mortgage Loans, certain amounts
available
for reimbursement of Advances and Servicing Advances pursuant to
Sections 3.05
and 6.03) of the following amounts (without duplication) with
respect to the
Group II Mortgage Loans and the immediately preceding Collection
Period: (i)
each payment of principal on a Group II Mortgage Loan due during
such Collection
Period and received by the Servicer on or prior to the related
Determination
Date, including any Advances with respect thereto, (ii) all full
and partial
principal prepayments received by the Servicer during the related
Prepayment
Period on the Group II Mortgage Loans, (iii) the insurance proceeds
or
condemnation proceeds, Subsequent Recoveries and liquidation
proceeds (net of
certain expenses) allocable to principal actually collected by the
Servicer
during the related Prepayment Period on the Group II Mortgage
Loans, (iv) the
portion of the Purchase Price allocable to principal of all
repurchased
Defective Mortgage Loans in Loan Group II with respect to such
Prepayment
Period, (v) any Substitution Adjustments allocable to principal
received during
the related Prepayment Period, and (vi) on the Distribution Date on
which the
Trust is to be terminated in accordance with this Agreement, that
portion of the
Termination Price in respect of principal on the Group II Mortgage
Loans.
"Group II Senior Principal Allocation Percentage": With respect to
any
Distribution Date, the percentage equivalent of a fraction, the
numerator of
which is (x) the Group II Principal Remittance Amount for that
Distribution Date
and the denominator of which is (y) the Principal Remittance Amount
for that
Distribution Date.
"HUD": The United States Department of Housing and Urban
Development, or
any successor thereto, 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.
31
<PAGE>
"Index": With respect to each adjustable rate Mortgage Loan and
with
respect to each related Adjustment Date, the index as specified in
the related
Mortgage Note.
"Initial Certificate
Principal Balance": With respect to any Certificate of
a Class other than a Class P, Class CE-1, Class CE-2 or Residual
Certificate,
the amount designated "Initial Certificate Principal Balance" on
the face
thereof.
"Initial Delinquency Date": As defined in Section 3.16
"Initial Overcollateralization Amount": $18,014,969.78.
"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 and Class M Certificates and the REMIC
1 Regular
Interests and the REMIC 2 CE-1 Interest, the period from the
preceding
Distribution Date through the day prior to the current Distribution
Date (or, in
the case of the first Distribution Date, the period from the
Closing Date
through and including November 26, 2006), and (ii) with respect to
the Class B
Certificates, the Class CE-2 Certificates and the SWAP REMIC
Regular Interests,
the calendar month immediately preceding the month in which such
Distribution
Date occurs.
"Interest Carry Forward Amount": For any Class of Certificates
(other than
the Residual 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 each Class 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 at the applicable
Pass-Through
Rate (x) with respect to the Class A and Class M Certificates, on
the basis of
the actual number of days elapsed on the basis of a 360-day year
since the prior
Distribution Date, and (y) with respect to the Class B
Certificates, on the
basis of a 360-day year consisting of twelve 30-day months.
"Interest Percentage": With respect to any Class of Certificates
and any
Distribution Date, the ratio (expressed as a decimal carried to ten
places) of
the Accrued Certificate Interest for such Class to the sum of the
Accrued
Certificate Interest for all Classes of Certificates, in each case
with respect
to such Distribution Date and without regard to shortfalls caused
by the Relief
Act or similar state law.
"Interest Remittance Amount": As of any Distribution Date, the sum
of the
Group I Interest Remittance Amount and the Group II Interest
Remittance Amount.
"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.
"Lender": As defined in Section 3.30(a) hereof.
32
<PAGE>
"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 an
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 quotations as to the rate at which deposits in U.S.
Dollars are
offered as of 11:00 a.m. (London time) to prime banks in the London
interbank
market for a period of one month in amounts approximately equal to
the aggregate
Certificate Principal Balance of the Class A and Class M
Certificates, 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 and Class M 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.
"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 and Class
M
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.
33
<PAGE>
"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.
"Litton Servicing Fee": For
so long as Litton is the servicer of the
Mortgage Loans and with respect to each Mortgage Loan, 0.15% per
annum.
"Loan Group": Either of Loan Group I or Loan Group II, as
applicable.
"Loan Group I": The group of Mortgage Loans listed in Exhibit D-2
attached
hereto.
"Loan Group II": The group of Mortgage Loans listed in Exhibit D-3
attached
hereto.
"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.
"Marker Interest": Each of the Class LT1-A1 Interest, the Class
LT1-A2A
Interest, the Class LT1-A2B Interest, the Class LT1-A2C Interest,
the Class
LT1-A2D Interest, the Class LT1-M1 Interest, the Class LT1-M2
Interest, the
Class LT1-M3 Interest, the Class LT1-M4 Interest, the Class LT1-M5
Interest, the
Class LT1-M6 Interest, the Class LT1-M7 Interest, the Class LT1-M8
Interest, the
Class LT1-B1 Interest, the Class LT1-B2 Interest and the Class
LT1-B3 Interest.
"Maximum Loan Rate": With respect to each adjustable rate Mortgage
Loan,
the percentage set forth in the related Mortgage Note as the
maximum Mortgage
Interest Rate thereunder.
"Maximum Rate Cap": With respect to any Distribution Date, will be
a per
annum rate equal to 12 times the quotient of (x) the total
scheduled interest
that would have accrued on the Mortgage Loans at their maximum
lifetime Net
Mortgage Interest Rates plus any Net Swap Payment and Swap
Termination Payment
(other than a Defaulted Swap Termination Payment), if any, made to
the
Supplemental Interest Trust and (y) the aggregate Principal Balance
of the
Mortgage Loans (as of the first day of the related Collection
Period) expressed
in the case of the Class A and Class M Certificates on the basis of
a 360 day
year and the actual number of days elapsed in the related Interest
Accrual
Period and, with respect to the Class B Certificates, on the basis
of an assumed
360 day year consisting of twelve 30 day months.
"Minimum Loan Rate": With respect to each adjustable rate Mortgage
Loan,
the percentage set forth in the related Mortgage Note as the
minimum Mortgage
Interest Rate thereunder or if no such percentage is set forth in
the related
Mortgage Note, the Gross Margin set forth in the related Mortgage
Note.
34
<PAGE>
"Monthly Excess Cashflow Allocation": Shall have the meaning
assigned
thereto in Section 4.02.
"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 Class A, Class M and Class B Certificates.
"Monthly Excess Interest Amount": With respect to each Distribution
Date,
the amount, if any, by which the Group I Interest Remittance Amount
and Group II
Interest Remittance Amount for such Distribution Date exceeds the
aggregate
amount distributed on such Distribution Date pursuant to the first
paragraph of
Section 4.01 and paragraphs (i) through (xvi) under such 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 or similar state laws; (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.
"Moody's": Moody's Investors Service, 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 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 adjustable rate 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 and (ii) in the case of each fixed rate
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. 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 and set forth in Exhibit D-1 attached hereto.
35
<PAGE>
"Mortgage Loan Purchase Agreement": The agreement between the
Seller and
the Depositor, dated as of October 1, 2006, regarding the transfer
of the
Mortgage Loans by the Seller to or at the direction of the
Depositor attached
hereto as Exhibit G.
"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.
The Mortgage Loan Schedule shall be prepared by 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 Mortgage Interest Rate of the Mortgage Loan as of the
Cut-off
Date;
(13)
the current principal and interest payment of the Mortgage Loan as
of
the Cut-off Date;
(14)
the contractual interest paid to date of the Mortgage Loan;
(15)
if the Mortgage Loan is not owner-financed, the Combined
Loan-to-Value
Ratio at origination;
(16)
a code indicating the loan performance status of the Mortgage Loan
as
of the Cut-off Date;
(17) a code indicating
whether the Mortgaged Property is in bankruptcy or
in its forbearance period as of the Cut-off Date;
(18)
[reserved;]
(19)
a code indicating the Index that is associated with such
Mortgage
Loan;
(20)
the Gross Margin;
36
<PAGE>
(21)
the Periodic Rate Cap;
(22)
the Minimum Loan Rate;
(23)
the Maximum Loan Rate;
(24)
a code indicating whether the Mortgage Loan has a prepayment
penalty
and the type of prepayment penalty;
(25)
the first Adjustment Date immediately following the Cut-off
Date;
(26)
the rate adjustment frequency;
(27)
the payment adjustment frequency;
(28)
a code indicating whether the Mortgage Loan is owner-financed;
(29)
a code indicating whether the Mortgage Loan is an interest only
Mortgage Loan and, if so, the interest only period at origination;
and
(30)
a code indicating whether the Mortgage Loan is a Second Lien
Mortgage
Loan.
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: (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.
"Mortgagor": The obligor on a Mortgage Note.
"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
Expense Fee Rate.
37
<PAGE>
"Net
Rate": The per annum rate set forth in footnote 1 to the
description
of REMIC 1 in the Preliminary Statement hereto (such rate being
based on the
weighted average of the interest rates on the SWAP REMIC Regular
Interests as
adjusted and as set forth in such footnote).
"Net
Swap Payment": With respect to any Distribution Date, any net
payment
(other than a Swap Termination Payment or Defaulted Swap
Termination Payment)
made by the Supplemental Interest Trust to the Swap Counterparty on
the related
Fixed Rate Payer Payment Date (as defined in the Swap Agreement) or
made by the
Swap Counterparty to the Supplemental Interest Trust on the related
Floating
Rate Payer Payment Date (as defined in the Swap Agreement). In each
case, the
Net Swap Payment shall not be less than zero.
"Net
WAC": With respect to any Distribution Date, a per annum rate equal
to
12 times the quotient of (x) the total scheduled interest on the
Mortgage Loans
for the related Collection Period at their Net Mortgage Rates and
(y) the
aggregate Principal Balance of the Mortgage Loans (as of the first
day of the
related Collection Period).
"Net
WAC Cap": With respect to any Distribution Date, a per annum
rate
equal to 12 times the quotient of (x) the total scheduled interest
on the
Mortgage Loans for the related Collection Period at their Net
Mortgage Interest
Rate less any Net Swap Payment or any Swap Termination Payment
(other than a
Defaulted Swap Termination Payment) owed to the Swap Counterparty
and (y) the
aggregate Principal Balance of the Mortgage Loans (as of the first
day of the
related Collection Period), expressed in the case of the Class A
and Class M
Certificates on the basis of a 360 day year and the actual number
of days
elapsed in the related Interest Accrual Period and, with respect to
the Class B
Certificates, on the basis of an assumed 360-day year consisting of
twelve
30-day months.
"Net
WAC Carryover Amount": If on any Distribution Date, the Accrued
Certificate Interest for any class of the Class A, Class M or Class
B
Certificates is based on the Net WAC Cap, the excess of (i) the
amount of
interest such class would have been entitled to receive on such
Distribution
Date based on clauses (i) and (iii) only of its Pass-Through Rate
over (ii) the
amount of interest such class was entitled to receive on such
Distribution Date
based on the Net WAC Cap, together with the unpaid portion of any
such excess
from prior Distribution Dates (and interest accrued thereon at the
then
applicable Pass-Through Rate (based on clauses (i) and (iii) only
of its
Pass-Through Rate) on such class).
"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 or REO
Property 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 or REO Property as provided
herein.
"Officer's Certificate": A certificate signed by the Chairman of
the Board,
the Vice Chairman of the Board, the President or a vice president
(however
denominated), or 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 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.
38
<PAGE>
"Optional Termination Date": The first Distribution Date on which
the
Servicer may elect to terminate the Mortgage Pool pursuant to
Section 10.01.
"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 P, Class CE-1, Class CE-2 and Residual
Certificates, which
have an Original Class Certificate Principal Balance of zero.
"Originator": Any originator contemplated by Item 1110 (Section
229.1110)
of Regulation AB.
"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
the Class A, Class M and Class B 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 the Class A, Class M and Class B 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 Class A, Class M and Class B
Certificates
on such Distribution Date, over (ii) the Targeted
Overcollateralization 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-1 Pass-Through Rate, the
Class A-2A
Pass-Through Rate, the Class A-2B Pass-Through Rate, the Class A-2C
Pass-Through
Rate, the Class A-2D Pass-Through Rate, the Class M-1 Pass-Through
Rate, the
Class M-2 Pass-Through Rate, the Class M-3 Pass-Through Rate, the
Class M-4
Pass-Through Rate, the Class M-5 Pass-Through Rate, the Class M-6
Pass-Through
Rate, the Class M-7 Pass-Through Rate, the Class M-8 Pass-Through
Rate, the
Class B-1 Pass-Through Rate, the Class B-2 Pass-Through Rate and
the Class B-3
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
P, Class CE-1, Class CE-2 or Residual Certificate), a fraction,
expressed as a
percentage, the numerator of which is the Initial Certificate
Principal Balance
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 CE-1, Class CE-2, Class P or Residual Certificate, the
portion of the
Class evidenced thereby, expressed as a percentage, as stated
39
<PAGE>
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 adjustable rate 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 agents
acting in
their respective commercial capacities) incorporated under the laws
of the
United States of America or any state 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 DBRS 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-1+ or
higher by S&P and Fitch and rated A2 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;
40
<PAGE>
(vi) units of money market funds registered under the
Investment
Company Act of 1940 including funds managed or advised by the
Trustee or
affiliates thereof having the highest rating category by each
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 (i) 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
and (ii) each
such investment must be a "permitted investment" within the meaning
of Section
860G(a)(5) of the Code.
"Permitted Transferee": Any transferee of a Residual Certificate
other than
a Disqualified Organization or a Disqualified 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.
"Prepayment Interest Excess": With respect to any Servicer
Remittance Date,
for each Mortgage Loan that was the subject of a Principal
Prepayment in full
during the portion of the related Prepayment Period occurring
between the first
day of the calendar month in which such Servicer Remittance Date
occurs and the
last day of the related Prepayment Period, an amount equal to
interest at the
applicable Net Mortgage Interest Rate on the amount of such
Principal Prepayment
for the number of days commencing on the first day of the calendar
month in
which such Servicer Remittance Date occurs and ending on the date
on which such
Principal Prepayment is so applied.
"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 prior calendar month.
"Prepayment Period": With respect to any Distribution Date, Date
means the
period commencing on the 16th day of the calendar month preceding
the calendar
month in which such Distribution Date occurs (or, in the case of
the first
Distribution Date, from October 1, 2006) and ending on the 15th day
of the
calendar 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.
41
<PAGE>
"Principal Balance": As to any Mortgage Loan and any day, other
than a
Liquidated Mortgage Loan, the related Cut-off Date Principal
Balance, minus the
sum of (i) all collections and other amounts credited against the
principal
balance of any such Mortgage Loan, (ii) the principal portion of
Advances, (iii)
any Deficient Valuation and (iv) any principal reduction resulting
from a
Servicer Modification. 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
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, the
sum of the Group I Principal Remittance Amount and the Group II
Principal
Remittance Amount.
"Private Certificates": Any of the Class B-1, Class B-2, Class B-3,
Class
P, Class CE-1, Class CE-2 and Residual 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
October
26, 2006, relating to the public offering of the Class A and Class
M
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 Officer's 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 value, determined in good faith by the Servicer, (iii) any
unreimbursed
Servicing Advances and Advances and any unpaid 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, (x) any costs and damages incurred by the
Trust in
connection with any violation by such Mortgage Loan of any
predatory and abusive
lending
42
<PAGE>
law and (y) 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 Fannie Mae
or
Freddie Mac.
"Rating Agency" or "Rating Agencies": DBRS, Fitch, Moody's 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.
"Rating Agency Condition": As defined in the Swap Agreement.
"Realized Loss": With respect to a Liquidated Mortgage Loan, the
amount by
which the remaining unpaid Principal Balance of the Mortgage Loan
plus accrued
and unpaid interest thereon at the Mortgage Interest Rate through
the last day
of the month of liquidation, exceeds the amount of Net Liquidation
Proceeds
applied to the principal balance of the related Mortgage Loan. With
respect to
any Mortgage Loan, a Deficient Valuation or a reduction in the
Principal Balance
thereof resulting from a Servicer Modification.
"Realized Loss Amortization Amount": Any of the Class M-1 Realized
Loss
Amortization Amount, the Class M-2 Realized Loss Amortization
Amount, the Class
M-3 Realized Loss Amortization Amount, the Class M-4 Realized Loss
Amortization
Amount, the Class M-5 Realized Loss Amortization Amount, the Class
M-6 Realized
Loss Amortization Amount, Class M-7 Realized Loss Amortization
Amount, the Class
M-8 Realized Loss Amortization Amount, the Class B-1 Realized Loss
Amortization
Amount, the Class B-2 Realized Loss Amortization Amount and the
Class B-3
Realized Loss Amortization Amount.
"Record Date": With respect to Class A and Class M Certificates,
the
Business Day immediately preceding such Distribution Date;
provided, however,
that if any such 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.
With respect
to the Class B, Class P, Class CE-1, Class CE-2, Class R and Class
R-X
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.
"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) that have been
designated as
such by the Trustee, after consultation with the Servicer and (iv)
that are
engaged in transactions in the London interbank market.
"Regular Certificate": Any of the Class A, Class M, Class B, Class
P, Class
CE-1 and Class CE-2 Certificates.
"Regulation AB": Subpart 22.1100 - Asset Backed Securities
(Regulation AB),
17 C.F.R. Sections 229.1100-229.1123, as such may be amended from
time to time,
and subject to such clarification and interpretation as have been
provided by
the Securities and Exchange Commission in the adopting release
(Asset-Backed
Securities, Securities Act Release No. 33-8518, 70 Fed Reg. 1,506,
1.531 (Jan.
7, 2005)) or by the staff of the Securities and Exchange
Commission, or as may
be provided by the Securities and Exchange Commission or its staff
from time to
time.
43
<PAGE>
"Regulation S": Regulation S promulgated under the Securities Act
or any
successor provision thereto, in each case as the same may be
amended from time
to time; and all references to any rule, section or subsection of,
or definition
or term contained in, Regulation S means such rule, section,
subsection,
definition or term, as the case may be, or any successor thereto,
in each case
as the same may be amended from time to time.
"Regulation S Global Securities": The Book-Entry Regulation S
Global
Securities and the Definitive Regulation S Global Securities.
"Reimbursement Amount": As defined in Section 2.03.
"Related Documents": With respect to any Mortgage Loan, the
related
Mortgage Notes, Mortgages and other related documents.
"Relief Act": The Servicemembers Civil Relief Act and similar state
laws.
"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 or similar state
laws, 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 or similar state
laws.
"REMIC": A "real estate mortgage investment conduit" within the
meaning of
Section 860D of the Code.
"REMIC Pass-Through Rate": In the case of a Class of the Class A,
Class M
and Class B Certificates, the REMIC 2 Net WAC Cap.
"REMIC Provisions": Provisions of the federal income tax law
relating to
real estate mortgage investment conduits which appear at Section
860A through
860G of 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": Any SWAP REMIC Regular Interest, REMIC 1
Regular
Interest, REMIC 2 Regular Interest, REMIC B-1 Regular Interest,
REMIC B-2
Regular Interest, REMIC B-3 Regular Interest, REMIC CE-1 Regular
Interest, REMIC
IO Regular Interest or REMIC CE-2 Regular Interest.
"REMIC Swap Rate": For each Distribution Date (and the related
Interest
Accrual Period), a per annum rate equal to the Fixed Rate used to
compute the
obligation of the Supplemental Interest Trust under the Swap
Agreement for such
Distribution Date.
"REMIC 1": As defined in the Preliminary Statement.
"REMIC 1 Interest": Each interest in REMIC 1 as described in
the
Preliminary Statement.
"REMIC 1 Regular Interest": Each REMIC 1 Interest other than the
Class R-1
Interest.
"REMIC 2": As defined in the Preliminary Statement.
44
<PAGE>
"REMIC 2 Interest": Each of the REMIC 2 Regular Interests and the
Class R-2
Interest.
"REMIC 2 Net WAC Cap": For each Distribution Date, the Net Rate
as
adjusted, in the case of any Class of Certificates that accrues
interest on a
"30/360" basis, to reflect accruals on such basis.
"REMIC 2 Regular Interest": Each of the REMIC 2 A-1 Interest, the
REMIC 2
A-2A Interest, the REMIC 2 A-2B Interest, the REMIC 2 A-2C
Interest, the REMIC 2
A-2D Interest, the REMIC 2 M-1 Interest, the REMIC 2 M-2 Interest,
the REMIC 2
M-3 Interest, the REMIC 2 M-4 Interest, the REMIC 2 M-5 Interest,
the REMIC 2
M-6 Interest, the REMIC 2 M-7 Interest, the REMIC 2 M-8 Interest,
the REMIC 2
B-1 Interest, the REMIC 2 B-2 Interest, the REMIC 2 B-3 Interest,
the REMIC 2
CE-1 Interest, the REMIC 2 IO Interest and the REMIC 2 CE-2
Interest.
"REMIC 2 A-1 Interest": An uncertificated "regular interest" in
REMIC 2
represented by the Class A-1 Certificates having the same rights to
payments as
the Class A-1 Certificates other than the right to any payments in
respect of
Excess Interest and other than the obligation to make payments in
respect of
Class Payment Shortfalls.
"REMIC 2 A-2A Interest": An uncertificated "regular interest" in
REMIC 2
represented by the Class A-2A Certificates having the same rights
to payments as
the Class A-2A Certificates other than the right to any payments in
respect of
Excess Interest and other than the obligation to make payments in
respect of
Class Payment Shortfalls.
"REMIC 2 A-2B Interest": An uncertificated "regular interest" in
REMIC 2
represented by the Class A-2B Certificates having the same rights
to payments as
the Class A-2B Certificates other than the right to any payments in
respect of
Excess Interest and other than the obligation to make payments in
respect of
Class Payment Shortfalls.
"REMIC 2 A-2C Interest": An uncertificated "regular interest" in
REMIC 2
represented by the Class A-2C Certificates having the same rights
to payments as
the Class A-2C Certificates other than the right to any payments in
respect of
Excess Interest and other than the obligation to make payments in
respect of
Class Payment Shortfalls.
"REMIC 2 A-2D Interest": An uncertificated "regular interest" in
REMIC 2
represented by the Class A-2D Certificates having the same rights
to payments as
the Class A-2D Certificates other than the right to any payments in
respect of
Excess Interest and other than the obligation to make payments in
respect of
Class Payment Shortfalls.
"REMIC 2 M-1 Interest": An uncertificated "regular interest" in
REMIC 2
represented by the Class M-1 Certificates having the same rights to
payments as
the Class M-1 Certificates other than the right to any payments in
respect of
Excess Interest and other than the obligation to make payments in
respect of
Class Payment Shortfalls.
"REMIC 2 M-2 Interest": An uncertificated "regular interest" in
REMIC 2
represented by the Class M-2 Certificates having the same rights to
payments as
the Class M-2 Certificates other than the right to any payments in
respect of
Excess Interest and other than the obligation to make payments in
respect of
Class Payment Shortfalls.
"REMIC 2 M-3 Interest": An uncertificated "regular interest" in
REMIC 2
represented by the Class M-3 Certificates having the same rights to
payments as
the Class M-3 Certificates other than the
45
<PAGE>
right to any payments in respect of Excess Interest and other than
the
obligation to make payments in respect of Class Payment
Shortfalls.
"REMIC 2 M-4 Interest": An uncertificated "regular interest" in
REMIC 2
represented by the Class M-4 Certificates having the same rights to
payments as
the Class M-4 Certificates other than the right to any payments in
respect of
Excess Interest and other than the obligation to make payments in
respect of
Class Payment Shortfalls.
"REMIC 2 M-5 Interest": An uncertificated "regular interest" in
REMIC 2
represented by the Class M-5 Certificates having the same rights to
payments as
the Class M-5 Certificates other than the right to any payments in
respect of
Excess Interest and other than the obligation to make payments in
respect of
Class Payment Shortfalls.
"REMIC 2 M-6 Interest": An uncertificated "regular interest" in
REMIC 2
represented by the Class M-6 Certificates having the same rights to
payments as
the Class M-6 Certificates other than the right to any payments in
respect of
Excess Interest and other than the obligation to make payments in
respect of
Class Payment Shortfalls.
"REMIC 2 M-7 Interest": An uncertificated "regular interest" in
REMIC 2
represented by the Class M-7 Certificates having the same rights to
payments as
the Class M-7 Certificates other than the right to any payments in
respect of
Excess Interest and other than the obligation to make payments in
respect of
Class Payment Shortfalls.
"REMIC 2 M-8 Interest": An uncertificated "regular interest" in
REMIC 2
represented by the Class M-8 Certificates having the same rights to
payments as
the Class M-8 Certificates other than the right to any payments in
respect of
Excess Interest and other than the obligation to make payments in
respect of
Class Payment Shortfalls.
"REMIC 2 B-1 Interest": An uncertificated "regular interest" in
REMIC 2
held by REMIC B-1 having the same rights to payments as the Class
B-1
Certificates other than the right to any payments in respect of
Excess Interest
and other than the obligation to make payments in respect of Class
Payment
Shortfalls.
"REMIC 2 B-2 Interest": An uncertificated "regular interest" in
REMIC 2
held by REMIC B-2 having the same rights to payments as the Class
B-2
Certificates other than the right to any payments in respect of
Excess Interest
and other than the obligation to make payments in respect of Class
Payment
Shortfalls.
"REMIC 2 B-3 Interest": An uncertificated "regular interest" in
REMIC 2
held by REMIC B-3 having the same rights to payments as the Class
B-3
Certificates other than the right to any payments in respect of
Excess Interest
and other than the obligation to make payments in respect of Class
Payment
Shortfalls.
"REMIC 2 CE-1 Interest": An uncertificated "regular interest" in
REMIC 2
held by REMIC CE-1 having an initial principal balance equal to the
Initial
Overcollateralization Amount and bearing interest at the REMIC 2
CE-1 Interest
Distributable Interest Rate on a notional balance equal to the
aggregate of the
Principal Balance of the Mortgage Loans outstanding as of the
beginning of the
related Interest Accrual Period.
46
<PAGE>
"REMIC 2 CE-1 Interest Current Interest": As of any Distribution
Date, the
interest accrued during the related Interest Accrual Period at the
REMIC 2 CE-1
Interest Distributable Interest Rate on a notional amount equal to
the aggregate
of the Principal Balance of the Mortgage Loans outstanding as of
the beginning
of such Interest Accrual Period (such amount of interest
representing a
"specified portion" (within the meaning of Treasury Regulations
Section
1.860G-1(a)(2)(i)(C)) of interest payments on the REMIC 1 Regular
Interests
(other than the Class LT1-IO Interest and Class LT1-CE2
Interest)).
"REMIC 2 CE-1 Interest Distributable Interest Rate": The excess, if
any, of
(a) the weighted average of the interest rates on the REMIC 1
Regular Interests
(other than the Class LT1-IO Interest and Class LT1-CE2 Interest)
over (b) two
times the weighted average of the interest rates on the Marker
Interests and the
Class LT1-X1 Interest (treating for purposes of this clause (b) the
interest
rate on each of the Marker Interests as being subject to a cap
equal to the
interest rate (as adjusted, if necessary, to reflect accruals on an
"actual/360"
basis) or the Corresponding REMIC 2 Regular Interest of the Related
Certificate
of such Marker Interest (as described in the Preliminary Statement)
and treating
the interest rate on the Class LT1-X1 Interest as being capped at
zero). The
averages described in the preceding sentence shall be weighted on
the basis of
the respective principal balances of the relevant REMIC 1 Regular
Interests
immediately prior to any date of determination.
"REMIC 2 CE-2 Interest": An uncertificated "regular interest" in
REMIC 2
held by REMIC CE-2 which shall not have a principal amount or an
interest rate,
but which shall be entitled to 100% of the interest accrued with
respect to the
Class LT1-CE2 Interest.
"REMIC 2 IO Interest": An uncertificated "regular interest" in
REMIC 2 held
by REMIC IO which shall not have a principal amount or an interest
rate, but
which shall be entitled to 100% of the interest accrued with
respect to the
Class LT1-IO Interest.
"REMIC B-1": As defined in the Preliminary Statement.
"REMIC B-1 Interest": Each of the REMIC B-1 Regular Interests and
the Class
R-B-1 Interest.
"REMIC B-1 Regular Interest": The REMIC B-1 B-1 Interest.
"REMIC B-1 B-1 Interest": An uncertificated "regular interest" in
REMIC B-1
represented by the Class B-1 Certificates having the same rights to
payments as
the Class B-1 Certificates other than the right to any payments in
respect of
Excess Interest and other than the obligation to make payments in
respect of
Class Payment Shortfalls.
"REMIC B-2": As defined in the Preliminary Statement.
"REMIC B-2 Interest": Each of the REMIC B-2 Regular Interests and
the Class
R-B-2 Interest.
"REMIC B-2 Regular Interest": The REMIC B-2 B-2 Interest.
"REMIC B-2 B-2 Interest": An uncertificated "regular interest" in
REMIC B-2
represented by the Class B-2 Certificates having the same rights to
payments as
the Class B-2 Certificates other than the right to any payments in
respect of
Excess Interest and other than the obligation to make payments in
respect of
Class Payment Shortfalls.
"REMIC B-3": As defined in the Preliminary Statement.
47
<PAGE>
"REMIC B-3 Interest": Each of the REMIC B-3 Regular Interests and
the Class
R-B-3 Interest.
"REMIC B-3 Regular Interest": The REMIC B-3 B-3 Interest.
"REMIC B-3 B-3 Interest": An uncertificated "regular interest" in
REMIC B-3
represented by the Class B-3 Certificates having the same rights to
payments as
the Class B-3 Certificates other than the right to any payments in
respect of
Excess Interest and other than the obligation to make payments in
respect of
Class Payment Shortfalls.
"REMIC CE-1": As defined in the Preliminary Statement.
"REMIC CE-1 Interest": Each of the REMIC CE-1 Regular Interests and
the
Class R-CE-1 Interest.
"REMIC CE-1 Regular Interest": The REMIC CE-1 CE-1 Interest.
"REMIC CE-1 CE-1 Interest": An uncertificated "regular interest" in
REMIC
CE-1 represented by the Class CE-1 Certificates and entitled to all
payments in
respect of the REMIC 2 CE-1 Interest.
"REMIC CE-2": As defined in the Preliminary Statement.
"REMIC CE-2 Interest": Each of the REMIC CE-2 Regular Interests and
the
Class R-CE-2 Interest.
"REMIC CE-2 Regular Interest": The Class CE-2 Certificates.
"REMIC IO": As defined in the Preliminary Statement.
"REMIC IO Interest": Each of the REMIC IO Regular Interests and the
Class
R-IO Interest.
"REMIC IO Regular Interest": The REMIC IO IO Interest.
"REMIC IO IO Interest": An uncertificated "regular interest" in
REMIC IO
represented by the Class CE-1 Certificates and entitled to all
payments in
respect of the REMIC 2 IO Interest.
"Remittance Report": A report prepared by the Servicer and
delivered to the
Trustee pursuant to Section 4.07, containing the information
attached hereto as
Exhibit M.
"Rents from Real Property": With respect to any REO Property, gross
income
of the character described in Section 856(d) of the Code.
"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
48
<PAGE>
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.
"Request for Release": A release signed by a Servicing Officer, in
the form
of Exhibit E attached hereto.
"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 Fannie Mae 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 Certificates and the Class
R-X
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, a division of The McGraw-Hill
Companies, Inc.,
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.
"Second Lien Mortgage Loan": Any of the Mortgage Loans which are
secured by
a second mortgage lien that is junior to a First Lien Mortgage Loan
on the
related Mortgaged Property.
"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 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 before 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 Principal Distribution Amount": As of any Distribution Date
(i)
before the Stepdown Date or on which a Trigger Event is in effect,
the Principal
Distribution Amount and (ii) 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 Certificates immediately prior to that
Distribution Date
over (y) the lesser of (A) the product of (1) approximately 42.50%
and (2) the
Pool Balance of the Mortgage Loans as of the last day of the
related Collection
Period after giving effect to principal prepayments in the related
Prepayment
Period and (B) the Pool Balance of the Mortgage Loans 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.
49
<PAGE>
"Senior Specified Enhancement Percentage": On any date of
determination
thereof, 57.50%.
"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 Modification": A modification to the terms of a Mortgage
Loan, in
accordance with the terms of Section 3.01, as to which the
Mortgagor is in
default or as to which, in the judgment of the Servicer, default is
reasonably
foreseeable.
"Servicer Remittance Date": With respect to any Distribution Date,
one
Business Day prior to such Distribution Date. "Servicer's
Assignee": As defined
in Section 3.30(b) hereof.
"Servicing Advances": All customary, reasonable and necessary "out
of
pocket" costs and expenses incurred by the Servicer in the
performance of its
servicing obligations to the extent such costs or expenses
constitute
"unanticipated expenses" within the meaning of Treasury
Regulations
1.860G-1(b)(3)(ii), 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 Criteria": The "servicing criteria" set forth in Item
1122(d) of
Regulation AB, as such may be amended from time to time.
"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 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 may pledge and assign all of its right, title
and interest
in, to and under this Agreement, including JPMorgan Chase Bank,
National
Association, as the representative of certain lenders.
"Servicing Standard": Shall mean the standards set forth in Section
3.01.
50
<PAGE>
"Significance Estimate": With respect to any Distribution Date, and
in
accordance with Item 1115 of Regulation AB, shall be an amount
determined based
on the reasonable good-faith estimate by the Depositor or its
affiliate of the
aggregate maximum probable exposure of the outstanding Certificates
to the Swap
Agreement.
"Significance Percentage": With respect to any Distribution Date,
and in
accordance with Item 1115 of Regulation AB, shall be a percentage
equal to the
Significance Estimate divided by the aggregate outstanding
Certificate Principal
Balance of the Certificates, prior to the distribution of the
Principal
Distribution Amount on such Distribution Date.
"Special Hazard Loss": Any 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.
"SPV": As defined in Section 3.30(a) hereof.
"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 earlier to occur of (x) the Distribution Date
on which
the aggregate Certificate Principal Balance of the Class A
Certificates is
reduced to zero, and (y) the later of (A) the Distribution Date in
November 2009
and (B) the first Distribution Date on which the Senior Enhancement
Percentage
is greater than or equal to the Senior Specified Enhancement
Percentage.
"Subcontractor": Any vendor, subcontractor or other Person that is
not
responsible for the overall servicing (as "servicing" is commonly
understood by
participants in the mortgage-backed securities market) of Mortgage
Loans but
performs one or more discrete functions identified in Item 1122(d)
of Regulation
AB with respect to Mortgage Loans under the direction or authority
of the
Servicer or a Subservicer.
"Subordinated Certificates": The Class M-1, Class M-2, Class M-3,
Class
M-4, Class M-5, Class M-6, Class M-7, Class M-8, Class B-1, Class
B-2, Class
B-3, Class P, Class CE-1, Class CE-2, Class R and Class R-X
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 the Class
A, Class M
and Class B Certificates and (ii) the remaining Initial
Overcollateralization
Amount.
"Subsequent Recovery": Any amount received on a Mortgage Loan
subsequent to
such Mortgage Loan being determined to be a Liquidated Mortgage
Loan.
"Subservicer": Any Person that services Mortgage Loans on behalf of
the
Servicer or any Subservicer and is responsible for the performance
(whether
directly or through Subservicers or
51
<PAGE>
Subcontractors) of a substantial portion of the material servicing
functions
required to be performed by the Servicer under this Agreement, with
respect to
some or all of the Mortgage Loans, that are identified in Item
1122(d) of
Regulation AB.
"Substitution Adjustment Amount": As defined in Section 2.03(d)
hereof.
"Supplemental Interest Trust": The separate trust, established
pursuant to
Section 4.02(i) of this Agreement and held by the Trustee for the
benefit of the
holders of the Certificates as a segregated subtrust of the Trust
Fund, in which
the Swap Agreement, the Cap Agreement, the Swap Account and the Cap
Account will
be held, out of which any Swap Termination Payments or Net Swap
Payments owed to
the Swap Counterparty will be paid, certain distributions to
Certificateholders
will be made, and into which any Swap Termination Payments or Net
Swap Payments
received from the Swap Counterparty and any payments received on
the Cap
Contract will be deposited as set forth in Section 4.02 hereof.
"Swap Account": The separate Eligible Account created and
maintained by the
Trustee pursuant to Section 4.02(i)(i) in the name of the Trustee
for the
benefit of the Trust Fund and designated "U.S. Bank, as trustee, in
trust for
registered holders of 2006-CB8 Trust, C-BASS Mortgage Loan
Asset-Backed
Certificates, Series 2006-CB8." Funds in the Swap Account shall be
held in trust
for the Trust Fund for the uses and purposes set forth in this
Agreement.
"Swap Agreement": The confirmation to the master agreement, dated
as of
October 30, 2006, between the Swap Counterparty and the trustee of
the
Supplemental Interest Trust for the benefit of the Issuing Entity
or any other
cap agreement or swap agreement (including any related schedules)
held by the
Supplemental Interest Trust pursuant to Section 4.02(i) hereof.
"Swap Counterparty": The Merrill Lynch Capital Services, Inc. or
any
successor counterparty who meets the requirements set forth in the
Swap
Agreement.
"Swap LIBOR": With respect to any Distribution Date (and the
related
Interest Accrual Period) the product of (i) the Floating Rate
Option (as defined
in the Swap Agreement for the related Swap Payment Date), (ii) two
and (iii) the
quotient of (a) the actual number of days in the Interest Accrual
Period for the
REMIC 1 Regular Interests divided by (b) 30.
"Swap Payment Date": For so long as the Swap Agreement is in effect
or
amounts remain unpaid thereunder, the second Business Day preceding
each
Distribution Date.
"SWAP REMIC": As defined in the Preliminary Statement.
"SWAP REMIC Interests": Each interest in the SWAP REMIC as
described in the
Preliminary Statement.
"SWAP REMIC Regular Interests": Each SWAP REMIC Interest other than
the
Class R-SW Interest.
"Swap Termination Payment": Any payment payable by the
Supplemental
Interest Trust or the Swap Counterparty upon termination of the
Swap Agreement
as a result of termination of the Swap Agreement.
"Targeted Overcollateralization Amount": As of any Distribution
Date, (x)
prior to the Stepdown Date, 3.15% of the Pool Balance on the
Cut-off Date and
(y) on and after the Stepdown Date, (i) if a
52
<PAGE>
Trigger Event has not occurred, the lesser of (a) 3.15% of the Pool
Balance on
the Cut-off Date and (b) the greater of (A) 6.30% of the Pool
Balance as of the
last day of the related Collection Period and (B) 0.50% of the Pool
Balance on
the Cut-off Date and (ii) if a Trigger Event has occurred, the
Targeted
Overcollateralization Amount for the immediately preceding
Distribution Date.
Notwithstanding the foregoing, on and after any Distribution Date
following the
reduction of the aggregate Certificate Principal Balance of the
Class A, Class M
and Class B Certificates to zero, the Targeted
Overcollateralization Amount
shall be zero.
"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 for each of the REMICs created
pursuant to this
Agreement under the REMIC Provisions, together with any and all
other
information reports or returns that may be required to be furnished
to the
Certificateholders 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
Moneyline 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 27.85%
of the Senior Enhancement Percentage 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 Pool Balance as of the Cut-off
Date exceeds the
applicable percentages set forth below with respect to such
Distribution Date:
DISTRIBUTION DATE
OCCURRING IN PERCENTAGE
---------------------------------- ----------
November 2008 through October 2009 1.55%
November 2009 through October 2010 3.65%
November 2010 through October 2011 5.70%
November 2011 through October 2012 7.40%
November 2012 through October 2013 8.25%
November 2013 and thereafter
8.30%
"Trust": 2006-CB8 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 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), (v) the Supplemental Interest
Trust, which
in turns holds the Swap Agreement, the Cap Agreement, the Swap
Account and the
Cap Account, and (vi) the Collection Account,
53
<PAGE>
the Distribution 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.
"Trustee": U.S. Bank National Association, a banking association
organized
and existing under the laws of United States of America, or any
successor
Trustee appointed as herein provided.
"Trustee's Certification" shall have the meaning ascribed to such
term in
Section 3.29(a) of this Agreement.
"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.
"Trustee Fee Rate": With respect to any Distribution Date, 0.0050%
per
annum.
"Underwriter": Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as
underwriter with respect to the Class A and Class M
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 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) 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 M-1, Class M-2, Class
M-3,
Class M-4, Class M-5, Class M-6, Class M-7, Class M-8, Class B-1,
Class B-2 and
Class B-3 Certificates and as to any Distribution Date, the excess
of (1) the
cumulative amount of related Applied Realized Loss Amounts with
respect to such
Class for all prior Distribution Dates over (2) the sum of (x) the
cumulative
amount of related Realized Loss Amortization Amounts with respect
to such Class
for all prior Distribution Dates, (y) all increases in the
Certificate Principal
Balance of such Class pursuant to the last sentence of the
definition of
"Certificate Principal Balance", and (z) the cumulative amount of
distributions
with respect to such Class for all prior Distribution Dates
pursuant to clause
(viii) pursuant to Section 4.02(i).
"Value": With respect to any Mortgaged Property, the lower of 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 Class A, Class M and Class B 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
54
<PAGE>
Certificates of such Class then outstanding and the denominator of
which is the
aggregate Certificate Principal Balance of all the Class A, Class M
and Class B
Certificates then 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; provided
that only
such Certificates as are known by a Responsible Officer of the
Trustee to be so
registered will be so excluded. On each Distribution Date, the
percentage of all
the Voting Rights allocated among the Holders of the Class P
Certificates and
the Class CE-1 Certificates shall be 2%. The Residual Certificates
and the Class
CE-2 Certificates shall have no Voting Rights.
"Written Order to Authenticate": A written order by which the
Depositor
directs the Trustee to execute, authenticate and deliver the
Certificates.
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.
55
<PAGE>
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, on behalf
of the Trust, 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. 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.
The
Depositor, the Seller, the Servicer and the Trustee hereto agree
and
understand that it is not intended that any Mortgage Loan be
included in the
Trust Fund that is, without limitation, a "High-Cost Home Loan" as
defined by
the Home Ownership and Equity Protection Act of 1994 or any other
applicable
anti-predatory lending laws, including but not limited to (i) a
"High-Cost Home
Loan" as defined in the New Jersey Home Ownership Act effective
November 27,
2003; (ii) a "High-Cost Home Loan" as defined in the New Mexico
Home Loan
Protection Act effective January 1, 2004; (iii) a "High-Cost Home
Loan" as
defined in the Massachusetts Predatory Home Loan Practices Act
effective
November 7, 2004 (iv) a "High-Cost Home Loan" as defined by the
Indiana High
Cost Home Loan Law effective January 1, 2005; or (v) a "High-Cost
Home Loan" as
defined by the Illinois High-Risk Home Loan Act effective January
1, 2004.
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 including any riders thereto,
endorsed either (A) in blank or (B) in the following form: "Pay to
the order of
U.S. Bank National Association, as Trustee for the C-BASS Mortgage
Loan
Asset-Backed Certificates, Series 2006-CB8, 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 including any riders thereto, 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;
56
<PAGE>
(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 "U.S. Bank National Association, as Trustee for the C-BASS
Mortgage Loan
Asset-Backed Certificates, Series 2006-CB8, without recourse";
(iv) an original or a certified 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; and
(vi) the original or copies of each assumption, modification,
written assurance or substitution agreement, if any.
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.
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 within such time period, and such failure to
deliver or
cure, as applicable, would have a material and adverse effect
on
Certificateholders, the Seller shall either repurchase or
substitute for such
Mortgage Loan in accordance with Section 2.03.
The
Servicer 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 at the Servicer's expense and of no cost to the Trust
Fund; provided,
however, the Servicer 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 Servicer to the Trustee and
the Rating
Agencies, the recordation of such assignment is not necessary to
protect the
Trustee's interest, on behalf of the Trust, in the related Mortgage
Loan. The
Servicer shall be required to deliver such assignments for
recording within 30
days of the Closing Date. The Servicer 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 Servicer shall promptly have a
substitute
Assignment prepared or have
57
<PAGE>
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
Servicer shall
cause to be completed such endorsements "Pay to the order of U.S.
Bank National
Association, as Trustee for the C-BASS Mortgage Loan Asset-Backed
Certificates,
Series 2006-CB8, without recourse."
In
the event that any Assignments of Mortgage is not recorded or
is
improperly recorded (as a result of actions taken or not taken by a
person other
than the Servicer), neither the Servicer nor the Trustee shall have
any
liability for its failure to receive notices related to such
Assignment of
Mortgage.
The
Depositor herewith delivers to the Trustee executed copies of
the
Mortgage Loan Purchase Agreement.
Section 2.02 Acceptance by Trustee.
The
Trustee acknowledges the Custodian's 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 the Custodian
holds and will
hold such documents and the other documents delivered to it
constituting a
Mortgage File, and that the Custodian 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
Custodian shall 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 the Custodian
shall 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 to Section 2.01 of this
Agreement are in
its 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
Custodian 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 Custodian
shall
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
Custodian 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
Custodian shall so notify the Seller, the Depositor and the
Servicer. In
addition, upon the discovery by the Seller, Depositor, the Trustee
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
58
<PAGE>
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, on behalf
of the Trust, 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.
The
Trustee is hereby directed to execute, deliver and perform its
obligations under the Swap Agreement and the Cap Agreement on the
Closing Date
and thereafter on behalf of the Supplemental Interest Trust for the
benefit of
the Holders of the Class A and Class M Certificates. The Seller,
the Servicer,
the Depositor and the Holders of the Class A and Class M
Certificates by
acceptance of their Certificates acknowledge and agree that the
Trustee shall
execute, deliver and perform its obligations under the Swap
Agreement and the
Cap Agreement and shall do so solely in its capacity as Trustee of
the
Supplemental Interest Trust and not in its individual capacity. The
Trustee
shall not, individually or personally, have any liability to
perform any
covenant either express or implied contained in the Swap Agreement
or the Cap
Agreement and under no circumstance shall the Trustee be personally
liable for
the payment of any amounts payable by or on behalf of the
Supplemental Interest
Trust under the Swap Agreement or the Cap Agreement or expenses by
or on behalf
of the Supplemental Interest Trust or be liable for the breach or
failure of any
obligation, representation, warranty or covenant made or undertaken
by or on
behalf of the Supplemental Interest Trust under the Swap Agreement
or the Cap
Agreement.
The
Trustee is hereby directed to represent and warrant on behalf of
the
Supplemental Interest Trust to the Swap Counterparty under the Swap
Agreement
that the beneficial owner for United States federal income tax
purposes of
payments made under each of the Swap Agreements is either:
(A) a "U.S. person" (as that term is used in section
1.1441-4(a)(3)(ii) of United States Treasury Regulations (the
"Regulations")) for United States federal income tax purposes,
or
(B) a "non-U.S. branch of a foreign person" as that term is used
in
section 1.1441-4(a)(3)(ii) of the Regulations for United States
federal income tax purposes, and a "foreign person" as that term
is
used in section 1.6041-4(a)(4) of the Regulations for United
States
federal income tax purposes.
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 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, the Servicer and the
Trustee 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, and such
missing document,
defect or breach will have a material and adverse effect on the
Certificateholders, the Trustee shall enforce the Seller's
obligation under the
Mortgage Loan Purchase Agreement and inform the Seller of its
obligation to
repurchase such Mortgage Loan from the Trust Fund at the Purchase
Price on or
prior
59
<PAGE>
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 is susceptible to cure but 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 120
days. 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, representation or
warranty, 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). In
addition to the foregoing, in the case of a breach of the
Seller's
representation set forth in Section 3.01(6) of the Mortgage Loan
Purchase
Agreement, the Seller shall reimburse the Trust for all costs or
damages
incurred by the Trust as a result of the violation of such law
(such amount, the
"Reimbursement Amount"). The Reimbursement Amount shall be
delivered to the
Servicer for deposit into the Collection Account within 10 days
from the date
the Seller was notified by the Trustee of the amount of such costs
and damages.
It is understood and agreed that the obligation of the Seller to
pay the
Reimbursement Amount and to either cure or repurchase (or
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 and the Trustee
on behalf of
the Certificateholders.
(b) [Reserved].
(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 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 Officer's 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 (or cause the Custodian to review) such
documents as
specified in Section 2.02 and deliver (or cause the Custodian to
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 (or cause the Custodian to
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
60
<PAGE>
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 by it or the Custodian 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,
representation or warranty, as the Seller shall deliver to it and
as shall be
necessary to vest therein any Defective Mortgage Loan released
pursuant hereto.
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 formed under this
Agreement to
fail to qualify as a REMIC at any time that any Certificate is
outstanding. If
such Opinion of Counsel cannot 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.
61
<PAGE>
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 and Exhibit F-2 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
payments under the Mortgage Loan (such modified Mortgage Loan, a
"Modified
Mortgage Loan") involved 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) and (c)
to cure, substitute for or repurchase a Mortgage Loan pursuant to
the Mortgage
Loan Purchase Agreement and to reimburse the Trust the
Reimbursement Amount,
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.
62
<PAGE>
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 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 have a material adverse effect on the
ability of the
Servicer to conduct its business as it is presently conducted, and
is licensed,
qualified and in good standing in the states where the Mortgaged
Property is
located if the laws of such state require licensing or
qualification in order to
conduct business of the type conducted by the Servicer or to ensure
the
enforceability or validity of each Mortgage Loan; 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 servicer of conventional
mortgage loans for Fannie Mae 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 to service
mortgage
loans for HUD, Fannie Mae or Freddie Mac, 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, Fannie Mae or Freddie Mac eligibility
requirements or
which would require notification to any of HUD, Fannie Mae or
Freddie Mac;
(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;
(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
63
<PAGE>
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;
(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; and
(ix) The Servicer has fully furnished, and shall continue to
fully furnish for so long as it is servicing the Mortgage Loans
hereunder, in
accordance with the Fair Credit Reporting Act and its implementing
regulations,
accurate and complete information on the Mortgagor credit files to
Equifax,
Experian and Trans Union Credit Information Company on a monthly
basis.
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);
(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;
64
<PAGE>
(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 certificate 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
certificate
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 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, and the
Trustee acknowledges the assignment to it of all other assets
included in the
Trust Fund, receipt of which is hereby acknowledged. Concurrently
with such
assignment and
65
<PAGE>
delivery and in exchange therefor, the Trustee, pursuant to the
Written Order to Authenticate executed by an officer of the
Depositor, has
executed, and the Certificate Registrar has authenticated and
delivered to or
upon the order of the Depositor, the Certificates (other than the
Class CE-1 and
Residual Certificates) in minimum dollar denominations or $25,000
and integral
dollar multiples of $1 in excess. The Class CE-1 and Class R
Certificates are
issuable only in minimum Percentage Interests of 10%. The Class R-X
Certificates
are issuable only in minimum Percentage Interests of 50%. The
Trustee
acknowledges the issuance of the uncertificated SWAP REMIC Regular
Interests,
the uncertificated REMIC 1 Regular Interests, the uncertificated
REMIC 2 Regular
Interests, the uncertificated REMIC B-1 Regular Interests, the
uncertificated
REMIC B-2 Regular Interests, the uncertificated REMIC B-3 Regular
Interests, the
uncertificated REMIC CE-1 Regular Interests and the uncertificated
REMIC IO
Regular Interests and declares that it holds the SWAP REMIC Regular
Interests as
assets of REMIC 1, the REMIC 1 Regular Interests as assets of REMIC
2, the REMIC
2 B-1 Interest as the asset of REMIC B-1, the REMIC 2 B-2 Interest
as the asset
of REMIC B-2, the REMIC 2 B-3 Interest as the asset of REMIC B-3,
the REMIC 2
CE-1 Interest as the asset of REMIC CE-1, the REMIC 2 IO Interest
as the asset
of REMIC IO and the REMIC 2 CE-2 Interest as the asset of REMIC
CE-2. 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:
(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
66
<PAGE>
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.
(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.
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
67
<PAGE>
defend 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.
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
and consistent with the standard of care which the Servicer uses
and/or would
use in servicing mortgage loans for its own account (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)
affect
adversely the status of any REMIC constituting part of the Trust
Fund as a REMIC
or (iii) cause any REMIC to be subject to a tax on "prohibited
transactions" or
"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 Mortgagors any reports required to be provided to them thereby.
If
reasonably required by the Servicer, the Trustee shall furnish the
Servicer a
power of attorney (substantially in the form annexed hereto as
Exhibit O) and
other documents necessary or appropriate to enable the Servicer to
carry out its
servicing and administrative duties under this Agreement.
68
<PAGE>
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 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, which action purports 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, the Servicer may not waive any
prepayment
penalty or portion thereof required by the terms of the related
Mortgage Note
unless (i) the related Mortgage Loan is in default or foreseeable
default and
such waiver (a) is standard and customary in servicing mortgage
loans similar to
the Mortgage Loans and (b) would, in the reasonable judgment of the
Servicer,
maximize recovery of total proceeds taking into account the value
of such
prepayment penalty and the related Mortgage Loan, (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 or
(iii) if the Servicer has not been provided with information
sufficient to
enable it to collect the prepayment penalty. 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. For the avoidance of doubt, the Servicer may
waive a
prepayment penalty in connection with a short sale or short payoff
on a
defaulted Mortgage Loan. If the Servicer has waived all or a
portion of a
prepayment penalty relating to a Principal Prepayment, other than
as provided
above, the Servicer shall deliver to the Trustee as soon as
possible after the
date of payoff, but in no event later than five business days from
such date,
for deposit into the Distribution Account the amount of such
prepayment penalty
(or such portion thereof as had been waived) for distribution in
accordance with
the terms of this Agreement.
Based solely on information provided to it by the Servicer, the
Trustee
shall prepare and deliver to the Depositor and the owners of the
Class P
Certificates, on a monthly basis, a statement setting forth the
amounts received
with respect to prepayment penalties.
During the period when reports are required to be filed for the
Trust under
the Exchange Act, the Servicer shall not permit a Subservicer to
perform any
servicing responsibilities hereunder with respect to the Mortgage
Loans unless
that Subservicer first agrees in writing with the Servicer to
deliver an
Assessment of Compliance and an Accountant's Attestation in such
manner and at
such times that permits the Servicer to comply with Section 3.20 of
this
Agreement.
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
69
<PAGE>
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.
Section 3.03 Realization Upon Defaulted Mortgage Loans.
In
the event that any payment due under any 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.
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;
including,
extending the Mortgage Loan repayment date for a period of one
year, which
period will not go beyond the latest Final Maturity Date.
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 Fannie Mae 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
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(ii).
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
70
<PAGE>
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(ii).
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 determining the proper application
after receipt of
such funds, 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;
(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;
(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(v). 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
71
<PAGE>
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 in accordance with the REMIC
distributions
set forth in Section 9.01. Funds on deposit in the Distribution
Account will
remain uninvested.
(c) Funds in the Collection 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 certifying 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 in writing 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 the
SWAP REMIC
(provided, however, that notwithstanding the foregoing, any
amounts
distributable to the Class P Certificates shall not, for federal
income tax
purposes, be treated as part of any REMIC):
(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;
(iii) any prepayment penalties or amounts in connection with
the
waiver of such prepayment penalties, 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 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.
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:
(i) to remit to the Trustee for deposit in the Distribution
Account (a) the amounts required to be so remitted pursuant to
Section 3.04(b),
(b) the amounts permitted to be so remitted pursuant to the first
sentence of
Section 3.04(d) or clause (ii) of the first sentence of the
second
72
<PAGE>
paragraph of Section 4.07(b), (c) any amounts required to be so
remitted
pursuant to Section 6.03 and (d) any amounts required to be so
remitted pursuant
to Section 8.05;
(ii) to reimburse itself for (a) Advances and Servicing
Advances
to the extent of amounts received on the related Mortgage Loan
which represent
payments of (x) principal and/or interest respecting which any such
Advance was
made or (y) Condemnation Proceeds, Insurance Proceeds or
Liquidation Proceeds
respecting which any such Servicing Advance was made; or (b) any
unreimbursed
Advances to the extent of funds held in the Collection Account for
future
distributions that were not included in Available Funds for the
preceding
Distribution Date (provided, however, any funds so applied will be
replaced by
the Servicer by deposit in the Collection Account no later than one
Business Day
prior to the Distribution Date on which such funds are required to
be
distributed) and to reimburse itself for Advances and Servicing
Advances made in
connection with the modification of a Mortgage Loan;
(iii) 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 the related REO Property or have been written-off
pursuant to
Section 3.13 hereof;
(iv) to reimburse itself for any amounts paid pursuant to
Section
3.03 (and not otherwise previously reimbursed);
(v) 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 payment or recovery as to interest to a
particular
Mortgage Loan to the extent not retained pursuant to Section
3.04(d);
(vi) to pay or reimburse itself for any amounts payable or paid
pursuant to Section 6.03 (and not otherwise previously reimbursed)
and to
reimburse itself as set forth in Section 9.01(c); and
(vii) 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 Account; Deposits in Escrow
Account.
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 such letter agreement shall be furnished to the
Trustee upon
request. The Escrow Account shall be an Eligible Account.
The
Servicer shall deposit in the Escrow Account 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
73
<PAGE>
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 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, or (viii) to transfer to the
Collection
Account any insurance proceeds. 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 a Mortgage does not provide for Escrow Payments, the Servicer
shall (i)
determine whether any such payments are made by the Mortgagor in a
manner and at
a time that is necessary to avoid the loss of the Mortgaged
Property due to a
tax sale or the foreclosure as a result of a tax lien and (ii)
ensure that all
insurance required to be maintained on the Mortgaged Property
pursuant to this
Agreement is maintained. If any such payment has not been made and
the Servicer
receives notice of a tax lien with respect to the Mortgage Loan
being imposed,
the Servicer will, to the extent required to avoid loss of the
Mortgaged
Property, advance or cause to be advanced funds necessary to
discharge such lien
on the Mortgaged Property. The Servicer assumes full
74
<PAGE>
responsibility for the payment of all such bills and shall effect
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 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 first lien 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 and (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. 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
75
<PAGE>
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 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 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
76
<PAGE>
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 Fannie
Mae in the
Fannie Mae MBS Selling and Servicing Guide or by Freddie Mac in the
Freddie Mac
Servicer's Guide. Upon the request of any party hereto, each year
the Servicer
shall cause to be delivered to such party proof of coverage of the
Fidelity Bond
and errors and omissions insurance policy and a statement from the
surety and
the insurer that the surety and the insurer shall endeavor to
notify the Trustee
within 30 days prior to such Fidelity Bond's errors and omissions
insurance
policy's termination or material modification.
Section 3.13 Title, Management and Disposition of REO Property and
Certain
Delinquent Mortgage Loans.
(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 or a nominee
thereof, on
behalf of the Certificateholders, or in the event the Trustee or a
nominee
thereof 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 if the Trust
Fund has
received (at the expense of the Trust Fund) from the Internal
Revenue Service an
extension of the period during which it may hold such REO Property
without such
REO Property failing to be treated as "foreclosure property"
(within the meaning
of Section 860G(a)(8) of the Code), before the end of such
extension, 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 part of the Trust Fund to fail to qualify as
a REMIC at
any time 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.
77
<PAGE>
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
