EXHIBIT 10.1
STRUCTURED ASSET MORTGAGE INVESTMENTS II INC.
DEPOSITOR
WELLS FARGO BANK, NATIONAL ASSOCIATION,
TRUSTEE
AND
EMC MORTGAGE CORPORATION
SERVICER, SPONSOR AND COMPANY
POOLING AND SERVICING AGREEMENT
DATED AS OF NOVEMBER 1, 2006
STRUCTURED ASSET MORTGAGE INVESTMENTS II INC.
Bear Stearns Mortgage Funding Trust 2006-AR4
Mortgage Pass-Through Certificates, Series 2006-AR4
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS................................................................................2
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF
CERTIFICATES...........................42
Section 2.01.
Conveyance of Mortgage Loans to
Trustee..........................................42
Section 2.02.
Acceptance of Mortgage Loans by
Trustee..........................................44
Section 2.03.
Assignment of Interest in the Mortgage Loan Purchase
Agreement...................46
Section 2.04.
Substitution of Mortgage
Loans...................................................47
Section 2.05.
Issuance of
Certificates.........................................................49
Section 2.06.
Representations and Warranties Concerning the
Depositor..........................49
Section 2.07.
Reserved.........................................................................50
Section 2.08.
Purposes and Powers of the
Trust.................................................51
ARTICLE III
ADMINISTRATION AND SERVICING OF MORTGAGE
LOANS............................................52
Section 3.01.
Servicer to Act as
Servicer......................................................52
Section 3.02.
REMIC-Related
Covenants..........................................................53
Section 3.03.
Monitoring of
Subservicers.......................................................54
Section 3.04.
Fidelity
Bond....................................................................55
Section 3.05.
Power to Act;
Procedures.........................................................55
Section 3.06.
Due-on-Sale Clauses; Assumption
Agreements.......................................56
Section 3.07.
Release of Mortgage
Files........................................................57
Section 3.08.
Documents, Records and Funds in Possession of Servicer To Be
Held for
Trustee.................................................................58
Section 3.09.
Standard Hazard Insurance and Flood Insurance
Policies...........................58
Section 3.10.
Presentment of Claims and Collection of
Proceeds.................................59
Section 3.11.
Maintenance of the Primary Mortgage Insurance
Policies...........................59
Section 3.12.
Trustee to Retain Possession of Certain Insurance Policies and
Documents........................................................................60
Section 3.13.
Realization Upon Defaulted Mortgage
Loans........................................60
Section 3.14.
Compensation for the
Servicer....................................................61
Section 3.15.
REO
Property.....................................................................61
Section 3.16.
Annual Statement as to Compliance; Annual
Certification..........................62
Section 3.17.
Assessments of Compliance and Attestation
Reports................................63
Section 3.18.
Reports Filed with Securities and Exchange
Commission............................66
Section 3.19.
UCC..............................................................................72
Section 3.20.
Optional Purchase of Defaulted Mortgage
Loans....................................73
Section 3.21.
Books and
Records................................................................73
Section 3.22.
Intention of the Parties and
Interpretation......................................74
ARTICLE IV
ACCOUNTS..................................................................................75
Section 4.01.
Custodial
Account................................................................75
Section 4.02.
Permitted Withdrawals and Transfers from the Custodial
Account...................76
Section 4.03.
Distribution
Account.............................................................77
Section 4.04.
Permitted Withdrawals and Transfers from the Distribution
Account................78
Section 4.05.
Reserved.........................................................................79
Section 4.06.
Statements to the
Trustee........................................................79
Section 4.07.
The Certificate Insurance
Policy.................................................80
Section 4.08.
Reserve
Fund.....................................................................82
Section 4.09.
Class XP Reserve
Account.........................................................83
Section 4.10.
Reserved.........................................................................84
ARTICLE V
CERTIFICATES..............................................................................85
Section 5.01.
Certificates.....................................................................85
Section 5.02.
Registration of Transfer and Exchange of
Certificates............................90
Section 5.03.
Mutilated, Destroyed, Lost or Stolen
Certificates................................94
Section 5.04.
Persons Deemed
Owners............................................................94
Section 5.05.
Transfer Restrictions on Residual
Certificates...................................94
Section 5.06.
Restrictions on Transferability of
Certificates..................................95
Section 5.07.
ERISA
Restrictions...............................................................96
Section 5.08.
Rule 144A
Information............................................................97
ARTICLE VI
PAYMENTS TO
CERTIFICATEHOLDERS............................................................98
Section 6.01.
Distributions on the
Certificates................................................98
Section 6.02.
Allocation of Losses and Subsequent
Recoveries..................................102
Section 6.03.
Payments........................................................................102
Section 6.04.
Statements to
Certificateholders................................................103
Section 6.05.
Monthly
Advances................................................................106
Section 6.06.
Compensating Interest
Payments..................................................106
Section 6.07.
Distributions on REMIC Regular
Interests........................................106
ARTICLE VII
THE
SERVICER.............................................................................108
Section 7.01.
Liabilities of the
Servicer.....................................................108
Section 7.02.
Merger or Consolidation of the
Servicer.........................................108
Section 7.03.
Indemnification of the
Trustee..................................................108
Section 7.04.
Limitations on Liability of the Servicer and
Others.............................109
Section 7.05.
Servicer Not to
Resign..........................................................110
Section 7.06.
Successor
Servicer..............................................................110
Section 7.07.
Sale and Assignment of
Servicing................................................110
ARTICLE VIII
DEFAULT..................................................................................111
Section 8.01.
Events of
Default...............................................................111
Section 8.02.
Trustee to Act; Appointment of
Successor........................................112
Section 8.03.
Notification to
Certificateholders..............................................114
Section 8.04.
Waiver of
Defaults..............................................................114
Section 8.05.
List of
Certificateholders......................................................114
ARTICLE IX
CONCERNING THE
TRUSTEE...................................................................115
Section 9.01.
Duties of
Trustee...............................................................115
Section 9.02.
Certain Matters Affecting the
Trustee...........................................117
Section 9.03.
Trustee Not Liable for Certificates or Mortgage
Loans...........................118
Section 9.04.
Trustee May Own
Certificates....................................................119
Section 9.05.
Trustee's Fees and
Expenses.....................................................119
Section 9.06.
Eligibility Requirements for
Trustee............................................119
Section 9.07.
Insurance.......................................................................119
Section 9.08.
Resignation and Removal of the
Trustee..........................................110
Section 9.09.
Successor
Trustee...............................................................120
Section 9.10.
Merger or Consolidation of
Trustee..............................................121
Section 9.11.
Appointment of Co-Trustee or Separate
Trustee...................................121
Section 9.12.
Federal Information Returns and Reports to Certificateholders;
REMIC
Administration............................................................122
ARTICLE X
TERMINATION..............................................................................125
Section 10.01.
Termination Upon Repurchase by the Depositor or its Designee or
Liquidation of the Mortgage
Loans...............................................125
Section 10.02.
Additional Termination
Requirements.............................................127
ARTICLE XI
MISCELLANEOUS
PROVISIONS.................................................................129
Section 11.01.
Intent of
Parties...............................................................129
Section 11.02.
Amendment.......................................................................129
Section 11.03.
Recordation of
Agreement........................................................130
Section 11.04.
Limitation on Rights of
Certificateholders......................................130
Section 11.05.
Acts of
Certificateholders......................................................132
Section 11.06.
Governing
Law...................................................................133
Section 11.07.
Notices.........................................................................133
Section 11.08.
Severability of
Provisions......................................................133
Section 11.09.
Successors and
Assigns..........................................................134
Section 11.10.
Article and Section
Headings....................................................134
Section 11.11.
Counterparts....................................................................134
Section 11.12.
Notice to Rating
Agencies.......................................................134
Section 11.13.
Use of Subservicers and
Subcontractors..........................................134
EXHIBITS
Exhibit A-1
-
Form of Class A Certificates
Exhibit A-2
-
[Reserved]
Exhibit A-3
-
Form of Class B Certificates
Exhibit A-4
-
Form of Class B-IO Certificates
Exhibit A-5
-
Form of Class R Certificates
Exhibit A-6
-
Form of Class R-X Certificate
Exhibit A-7
-
[Reserved]
Exhibit A-8
-
Form of Class XP Certificate
Exhibit B
-
Mortgage Loan Schedule
Exhibit C
-
[Reserved]
Exhibit D
-
Request for Release of Documents
Exhibit E
-
Form of Affidavit pursuant to Section 860E(e)(4)
Exhibit F-1
-
Form of Investment Letter (Non-Rule 144A)
Exhibit F-2
-
Form of Rule 144A Investment Representation
Exhibit F-3
-
Form of Transferor Representation Letter
Exhibit G
-
Form of Custodial Agreement
Exhibit H
-
Form of Mortgage Loan Purchase Agreement
Exhibit I
-
Form of Trustee Limited Power of Attorney
Exhibit J
-
[Reserved]
Exhibit K
-
Loan Level Format for Tape Input, Servicer Period Reporting
Exhibit L
-
Reporting Data for Defaulted Loans
Exhibit M
-
[Reserved]
Exhibit N
-
Form of Cap Contracts
Exhibit O
-
Certificate Insurance Guarantee Policy Endorsement
Exhibit P
-
Servicing Criteria to be Addressed in Assessment of Compliance
Exhibit Q-1
-
Form of Servicer Back-Up Certification
Exhibit Q-2
-
Form of Trustee Back-Up Certification
Exhibit R
-
Form 10-D, Form 8-K and Form 10-K Reporting Responsibility
Exhibit S
-
Additional Disclosure Information
Exhibit T
-
Form of Servicer Certification
POOLING AND SERVICING AGREEMENT
Pooling and Servicing
Agreement dated as of November 1, 2006,
among
Structured
Asset Mortgage
Investments II Inc., a Delaware
corporation,
as depositor (the "Depositor"),
Wells Fargo Bank, National
Association,
a banking
association
organized under the laws of the United States, not in its
individual
capacity
but solely as trustee
(the
"Trustee")
and EMC
Mortgage
Corporation,
as
servicer
(in such
capacity,
the
"Servicer"),
as company (in such
capacity,
the
"Company" or "EMC") and, as sponsor (in
such capacity, the "Sponsor").
PRELIMINARY STATEMENT
On or prior to the Closing
Date,
the
Depositor
acquired the Mortgage
Loans from the Sponsor.
On the Closing Date,
the Depositor
will sell the Mortgage
Loans and certain other property to the Trust
Fund and
receive in
consideration
therefor
Certificates
evidencing
the entire
beneficial
ownership
interest in the Trust Fund.
The
Trustee on behalf of the Trust shall make an election
for the assets
constituting
REMIC I
to be treated
for
federal
income tax
purposes
as a REMIC.
On the
Startup
Day,
the REMIC I Regular
Interests will be designated "regular interests" in such REMIC.
The Trustee on behalf of the Trust shall make an election
for the assets
constituting
REMIC II
to be treated
for
federal
income tax
purposes as a REMIC.
On the
Startup
Day,
the REMIC II Regular
Interests will be designated "regular interests" in such REMIC.
The Trustee on behalf of the Trust shall make an election for the
assets
constituting
REMIC III
to be treated
for federal
income tax
purposes as a REMIC.
On the
Startup
Day,
the REMIC III Regular
Interest will be designated the single "regular interest" in such
REMIC.
The Class R
Certificates will evidence
ownership of the "residual
interest" in each of REMIC I
and REMIC II. The Class R-X
Certificates
will
evidence
ownership of the
"residual
interest" in REMIC
III.
The Mortgage
Loans will have an
Outstanding
Principal
Balance as of the Cut-off
Date,
after
deducting all Scheduled Principal due on or before the Cut-off
Date, of $510,658,032.44.
In consideration of the mutual
agreements
herein contained,
the Depositor,
the Servicer,
the
Sponsor, the Company and the Trustee agree as follows:
ARTICLE I
Definitions
Whenever used in this Agreement,
the following
words and phrases,
unless
otherwise
expressly
provided or unless the context otherwise requires, shall have the
meanings specified in this Article.
2006-AR4 REMIC: Any of REMIC I, REMIC II and REMIC III.
Accepted
Servicing
Practices:
The
procedures,
including
prudent
collection
and
loan
administration
procedures,
and the standard of care (i)
employed by prudent
mortgage
servicers
which
service
mortgage loans of the same type as the Mortgage Loans in the
jurisdictions
in which the related
Mortgage
Properties
are
located or (ii) in
accordance
with the Fannie Mae Guide or Freddie Mac Guide,
subject to any variances
negotiated with Fannie Mae or Freddie Mac and subject to the
express
provisions
of this
Agreement.
Such standard of care shall not be lower than that the Servicer
customarily
employs
and
exercises
in
servicing
and
administering
similar
mortgage
loans
for
its own
account
and
shall
be in full
compliance with all federal, state, and local laws, ordinances,
rules and regulations.
Account:
The
Custodial
Account,
the
Distribution
Account,
the Reserve Fund or the Class XP
Reserve Account as the context may require.
Actual Monthly Payments:
For any Mortgage Loan and each Due Period,
the actual monthly payments
of principal and interest received during such month on such
Mortgage Loan.
Additional Disclosure:
As defined in Section 3.18(a)(v).
Additional Form 10-D Disclosure:
As defined in Section 3.18(a)(i).
Additional Form 10-K Disclosure:
As defined in Section 3.18(a)(iv).
Adjusted
Rate Cap:
With respect to the
Certificates
(other than the Class A-2
Certificates),
each
Distribution
Date and the related Due Period,
the sum of (i) the
Scheduled
Payments
owed on the
Mortgage Loans for such Due Period less the Servicing Fees and (ii)
the Actual Monthly
Payments
received
in
excess
of the
Scheduled
Payments,
expressed
as a per annum
rate
calculated
on the basis of the
aggregate
Stated Principal
Balance of the Mortgage Loans for such Due Period and further
reflecting the
accrual of interest on an actual/360 basis.
With respect to the Class A-2
Certificates,
each Distribution Date and the related Due
Period,
the excess of (1) the sum of (i) the scheduled
Monthly
Payments owed on the Mortgage
Loans for
such Due Period less the Servicing
Fees and (ii) the Actual
Monthly
Payments
received in excess of the
Scheduled
Monthly
Payments,
expressed
as a per annum
rate
calculated
on the basis of the
aggregate
Stated Principal
Balance of the Mortgage Loans for such Due Period over (2) the
insurance
premium on the
Class A-2 Certificates expressed as a per annum rate adjusted to an
actual/360 basis.
Affiliate:
As to any
Person,
any
other
Person
controlling,
controlled
by or under
common
control with such Person.
"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.
"Controlled" and "Controlling"
have meanings
correlative to the foregoing.
The Trustee may conclusively
presume that a Person is not an Affiliate of another
Person unless a
Responsible
Officer of the Trustee
has actual knowledge to the contrary.
Aggregate
Premium
Amount:
As to any
Distribution
Date
and
the
Insured
Certificates,
the
product of
one-twelfth
of the Premium
Rate and the
aggregate of the Current
Principal
Amounts of the
Insured
Certificates
on the
immediately
preceding
Distribution
Date,
or,
in the case of the
first
Distribution
Date, the Closing Date, in each case after giving effect to
distributions of principal made
on such Distribution Date.
Agreement:
This
Pooling and
Servicing
Agreement
and all
amendments
hereof and
supplements
hereto.
Annual Certification:
As defined in Section 3.16(b) herein.
Annual Statement of Compliance:
As defined in Section 3.16(a).
Applicable
Credit
Rating:
For any long-term
deposit or security,
a credit rating of "AAA" in
the case of S&P or "Aaa" in the case of Moody's (or with
respect to
investments
in money market funds, a
credit
rating of "AAAm" or "AAAm-G" in the case of S&P and the highest
rating given by Moody's for money
market funds in the case of Moody's).
For any
short-term
deposit or security,
or a rating of "A-l+" in
the case of S&P or "Prime-1" in the case of Moody's.
Applicable
State Law: For purposes of
Section 9.12(e),
the
Applicable
State Law shall be (a)
the law of the
State of New York and (b) such
other
state
law
whose
applicability
shall
have
been
brought to the attention of the Trustee by either (i) an Opinion of
Counsel
reasonably
acceptable to the
Trustee
delivered to it by the Servicer or the Depositor,
or
(ii) written
notice from the
appropriate
taxing authority as to the applicability of such state law.
Applied
Realized
Loss
Amount:
With
respect to any
Distribution
Date and a Class of Class A
Certificates or Class B
Certificates,
the sum of the Realized Losses with respect to the Mortgage Loans,
which are to be
applied in
reduction
of the
Current
Principal
Amount of such
Class of
Certificates
pursuant to this Agreement in an amount equal to the amount,
if any, by which, (i) the aggregate
Current
Principal Amount of all of the
Certificates
(after all
distributions of principal on such
Distribution
Date)
exceeds
(ii)
the
aggregate
Stated
Principal
Balance
of all of the
Mortgage
Loans
for such
Distribution
Date.
The
Applied
Realized
Loss
Amount
with
respect to the
Mortgage
Loans
shall be
allocated
first
to the
Class
B-5,
Class
B-4,
Class
B-3,
Class
B-2 and
Class
B-1
Certificates,
sequentially
in that
order,
in each case
until the
Current
Principal
Amount of such
Class has been
reduced to zero.
Thereafter,
the
principal
portion of Realized
Losses on the
Mortgage
Loans will be
allocated
on any
Distribution
Date to the Class A-2 and Class A-1
Certificates,
sequentially
in that
order, until the Current Principal Amount of each such Class has
been reduced to zero.
Appraised Value:
For any Mortgaged
Property related to a Mortgage Loan, the amount set forth as
the
appraised
value of such
Mortgaged
Property in an
appraisal
made for the mortgage
originator
in
connection with its origination of the related Mortgage Loan.
Assessment of Compliance:
As defined in Section 3.17.
Attestation Report:
As defined in Section 3.17.
Attesting Party:
As defined in Section 3.17.
Available
Funds:
With respect to each
Distribution
Date,
the aggregate
Principal
Funds and
Interest Funds for such Distribution Date.
Back-Up Certification:
As defined in Section 3.18(a)(iv).
Bankruptcy
Code:
The
United
States
Bankruptcy
Code,
as amended
as
codified
in 11 U.S.C.
§§ 101-1330.
Bankruptcy
Loss:
Any loss
resulting
from a bankruptcy
court,
in connection
with a personal
bankruptcy of a mortgagor,
(1) establishing the value of a mortgaged
property at an amount less than the
Outstanding
Principal
Balance of the Mortgage
Loan secured by such
mortgaged
property or (2) reducing
the amount of the Monthly Payment on the related Mortgage Loan.
Basis Risk Shortfall:
On the Distribution Date, if any, of:
1.
the amount of Current
Interest
that such Class would have been
entitled to receive on
such
Distribution
Date had the applicable
Pass-Through
Rate been calculated at a per
annum rate equal to One-Month
LIBOR plus the related
Margin and (ii) 10.50% per annum,
over
2.
the amount of
Current
Interest
on such Class
calculated
using a
Pass-Through
Rate
equal to the Net Rate Cap for such Distribution Date.
Basis Risk Shortfall Carry Forward Amount:
With respect to any Distribution
Date and each Class
of
Class A
Certificates
and
Class B
Certificates,
the
sum of the
Basis
Risk
Shortfall
for
such
Distribution
Date and the Basis Risk Shortfalls for all previous
Distribution
Dates not previously paid
from any source
including
the Excess
Cashflow
and
payments
under the Cap
Contracts,
together
with
interest
thereon at a rate equal to the
related
Pass-Through
Rate for such Class of
Certificates
for
such Distribution Date.
Book-Entry
Certificates:
Initially,
all
Classes
of
Certificates
other
than
the
Private
Certificates and the Residual Certificates.
Business
Day:
Any day other than
(i) a
Saturday
or a Sunday,
or (ii) a day on which the New
York Stock Exchange or Federal Reserve is closed or on which
banking
institutions in any
jurisdiction in
which the Trustee,
the Custodian,
the Certificate Insurer or the Servicer are authorized or obligated
by
law or executive order to be closed.
Cap Contracts:
With respect to each Class of Class A Certificates and Class B
Certificates,
the
respective cap contracts,
dated as of November 30, 2006, between the Trustee,
on behalf of the Trust for
the
benefit of the Holders of the
related
Certificates,
and the Cap
Counterparty,
together
with any
scheduling, confirmations or other agreements related thereto,
attached hereto as Exhibit N.
Cap Contract
Payment
Amount:
With respect to any
Distribution
Date and a Cap
Contract,
the
amounts received from such Cap Contract, if any, on such
Distribution Date.
Cap Counterparty: Bear Stearns Financial Products Inc.
Certificate:
Any mortgage
pass-through
certificate
evidencing a beneficial ownership interest
in the Trust Fund signed and
countersigned
by the Trustee in
substantially
the forms annexed hereto as
Exhibits A-1, A-3, A-4, A-5, A-6 and A-8 with the blanks therein
appropriately completed.
Certificate
Insurance Policy: The certificate
insurance policy,
dated as of November 30, 2006,
endorsed
by the
Certificate
Insurer
to
the
Trustee
on
behalf
of the
Holders
of
the
Class
A-2
Certificates, the endorsement of which is attached hereto as
Exhibit O.
Certificate Insurer:
Ambac Assurance Corporation.
Certificate
Insurer
Default:
The
existence and
continuance
of any of the
following:
(a) a
failure by the Certificate
Insurer to make a payment
required under the Certificate
Insurance Policy in
accordance
with its terms;
(b) the entry of a decree or order of a court or agency
having
jurisdiction
in respect
of the
Certificate
Insurer in an
involuntary
case under any
present or future
federal or
state
bankruptcy,
insolvency or similar law
appointing a conservator or receiver or liquidator or other
similar official of the Certificate
Insurer or of any substantial
part of its property,
or the entering
of an
order
for the
winding
up or
liquidation
of the
affairs
of the
Certificate
Insurer
and the
continuance
of any such
decree
or order
undischarged
or
unstayed
and in
force
for a period
of 90
consecutive
days;
(c) the
Certificate
Insurer shall
consent to the
appointment
of a conservator
or
receiver or liquidator or other similar
official in any insolvency,
readjustment of debt,
marshaling of
assets
and
liabilities
or
similar
proceedings
of or
relating
to the
Certificate
Insurer or of or
relating to all or
substantially
all of its
property;
or (d) the
Certificate
Insurer
shall admit in
writing its
inability to pay its debts
generally as they become due,
file a petition to take
advantage
of or otherwise
voluntarily
commence a case or proceeding under any applicable
bankruptcy,
insolvency,
reorganization
or other
similar
statute,
make an
assignment
for the
benefit
of its
creditors,
or
voluntarily suspend payment of its obligations.
Certificate
Owner:
Any Person who is the
beneficial
owner of a Certificate
registered in the
name of the Depository or its nominee.
Certificate Register:
The register maintained pursuant to Section 5.02.
Certificateholder:
A Holder of a Certificate.
Certification Parties:
As defined in Section 3.18(a)(iv).
Certifying Person:
As defined in Section 3.18(a)(iv).
Class:
With respect to the
Certificates,
any of Class A-1,
Class A-2,
Class A-3,
Class B-1,
Class B-2, Class B-3, Class B-4, Class B-5, Class R, Class R-X,
Class XP and Class B-IO Certificates.
Class A Certificates: The Class A-1 Certificates and Class A-2
Certificates.
Class A Principal
Distribution
Amount:
For any Distribution Date on or after the Stepdown Date
on which a Trigger
Event is not in effect,
an amount
equal to the excess (if any) of (x) the
aggregate
Current
Principal Amount of the Class A Certificates
immediately
prior to such
Distribution
Date over
(y) the lesser of (I) the excess of (a) the aggregate
Stated
Principal
Balance of the Mortgage Loans as
of the last day of the related Due Period (after
reduction for Principal
Prepayments and Realized Losses
on the
Mortgage
Loans
incurred
during the related
Prepayment
Period) over (b) the
aggregate
Stated
Principal
Balance of the
Mortgage
Loans as of the last day of the related Due Period
(after
reduction
for
Principal
Prepayments
and
Realized
Losses on the
Mortgage
Loans
incurred
during
the
related
Prepayment
Period)
multiplied by (i) prior to the Distribution
Date in November 2012,
25.250% and (ii)
on or after the
Distribution
Date in November
2012,
20.200%,
and (II) the excess of (a) the aggregate
Stated
Principal
Balance of the
Mortgage
Loans as of the last day of the
related
Due
Period
(after
reduction
for
Principal
Prepayments
and Realized
Losses on the
Mortgage
Loans
incurred
during the
related
Prepayment
Period) over (b) 0.50% of the Stated
Principal
Balance of the Mortgage
Loans as of
the Cut-off Date.
Class B Certificates: The Class B-1, Class B-2, Class B-3, Class
B-4 and Class B-5 Certificates.
Class B-1
Principal
Distribution
Amount:
For any
Distribution
Date on or after the Stepdown
Date on which a
Trigger
Event is not in
effect,
an
amount
equal
to the
excess
(if any) of (x) the
Current
Principal Amount of the Class B-1 Certificates
immediately
prior to such Distribution Date over
(y) the lesser of (I) the excess of (a) the aggregate
Stated
Principal
Balance of the Mortgage Loans as
of the last day of the related Due Period (after
reduction for Principal
Prepayments and Realized Losses
on the
Mortgage
Loans
incurred
during
the
related
Prepayment
Period)
over
(b) the sum of (1) the
aggregate Current
Principal Amount of the Class A Certificates
(after taking into account the payment of
the Class A
Principal
Distribution
Amount
for such
Distribution
Date) and (2) the
aggregate
Stated
Principal
Balance of the
Mortgage
Loans as of the last day of the related Due Period
(after
reduction
for
Principal
Prepayments
and
Realized
Losses on the
Mortgage
Loans
incurred
during
the
related
Prepayment
Period)
multiplied by (i) prior to the Distribution
Date in November 2012,
16.250% and (ii)
on or after the
Distribution
Date in November
2012,
13.000%,
and (II) the excess of (a) the aggregate
Stated
Principal
Balance of the
Mortgage
Loans as of the last day of the
related
Due
Period
(after
reduction
for
Principal
Prepayments
and Realized
Losses on the
Mortgage
Loans
incurred
during the
related
Prepayment
Period) over (b) 0.50% of the Stated
Principal
Balance of the Mortgage
Loans as of
the Cut-off Date.
Class B-2
Principal
Distribution
Amount:
For any
Distribution
Date on or after the Stepdown
Date on which a
Trigger
Event is not in
effect,
an
amount
equal
to the
excess
(if any) of (x) the
Current
Principal Amount of the Class B-2 Certificates
immediately
prior to such Distribution Date over
(y) the lesser of (I) the excess of (a) the aggregate
Stated
Principal
Balance of the Mortgage Loans as
of the last day of the related Due Period (after
reduction for Principal
Prepayments and Realized Losses
on the
Mortgage
Loans
incurred
during
the
related
Prepayment
Period)
over
(b) the sum of (1) the
aggregate Current
Principal Amount of the Class A Certificates
(after taking into account the payment of
the
Class A
Principal
Distribution
Amount
for such
Distribution
Date),
(2) the
aggregate
Current
Principal
Amount of the Class B-1
Certificates
(after
taking into account the payment of the Class B-1
Principal
Distribution
Amounts
for such
Distribution
Date)
and (3) the
aggregate
Stated
Principal
Balance
of the
Mortgage
Loans
as of the
last day of the
related
Due
Period
(after
reduction
for
Principal
Prepayments and Realized
Losses on the Mortgage Loans incurred
during the related
Prepayment
Period)
multiplied by (i) prior to the Distribution
Date in November 2012,
11.375% and (ii) on or after
the
Distribution
Date in
November
2012,
9.100%,
and
(II) the
excess
of (a) the
aggregate
Stated
Principal
Balance of the
Mortgage
Loans as of the last day of the related Due Period
(after
reduction
for
Principal
Prepayments
and
Realized
Losses on the
Mortgage
Loans
incurred
during
the
related
Prepayment
Period)
over (b)
0.50% of the
Stated
Principal
Balance
of the
Mortgage
Loans as of the
Cut-off Date.
Class B-3
Principal
Distribution
Amount:
For any
Distribution
Date on or after the Stepdown
Date on which a
Trigger
Event is not in
effect,
an
amount
equal
to the
excess
(if any) of (x) the
Current
Principal Amount of the Class B-3 Certificates
immediately
prior to such Distribution Date over
(y) the lesser of (I) the excess of (a) the
aggregate
Stated
Principal
Balance of the
Mortgage
Loans
as of the last day of the related Due Period
(after
reduction
for
Principal
Prepayments
and Realized
Losses on the Mortgage Loans incurred
during the related
Prepayment
Period) over (b) the sum of (1) the
aggregate Current
Principal Amount of the Class A Certificates
(after taking into account the payment of
the
Class A
Principal
Distribution
Amount
for such
Distribution
Date),
(2) the
aggregate
Current
Principal
Amount of the Class B-1
Certificates
(after
taking into account the payment of the Class B-1
Principal
Distribution
Amounts for such
Distribution
Date), (3) the aggregate Current Principal Amount
of the Class
B-2
Certificates
(after
taking
into
account
the
payment
of the
Class B-2
Principal
Distribution
Amounts for such
Distribution
Date) and (4) the aggregate Stated Principal
Balance of the
Mortgage
Loans as of the last day of the related Due Period (after
reduction
for Principal
Prepayments
and Realized Losses on the Mortgage Loans incurred
during the related
Prepayment
Period)
multiplied by
(i) prior to the Distribution
Date in November 2012,
8.250% and (ii) on or after the
Distribution
Date
in
November
2012,
6.600%,
and (II) the excess of (a) the
aggregate
Stated
Principal
Balance of the
Mortgage
Loans as of the last day of the related Due Period (after
reduction
for Principal
Prepayments
and Realized
Losses on the Mortgage Loans incurred during the related
Prepayment
Period) over (b) 0.50%
of the Stated Principal Balance of the Mortgage Loans as of the
Cut-off Date.
Class B-4
Principal
Distribution
Amount:
For any
Distribution
Date on or after the Stepdown
Date on which a
Trigger
Event is not in
effect,
an
amount
equal
to the
excess
(if any) of (x) the
Current
Principal Amount of the Class B-4 Certificates
immediately
prior to such Distribution Date over
(y) the lesser of (I) the excess of (a) the
aggregate
Stated
Principal
Balance of the
Mortgage
Loans
as of the last day of the related Due Period
(after
reduction
for
Principal
Prepayments
and Realized
Losses on the Mortgage Loans incurred
during the related
Prepayment
Period) over (b) the sum of (1) the
aggregate Current
Principal Amount of the Class A Certificates
(after taking into account the payment of
the
Class A
Principal
Distribution
Amount
for such
Distribution
Date),
(2) the
aggregate
Current
Principal
Amount of the Class B-1
Certificates
(after
taking into account the payment of the Class B-1
Principal
Distribution
Amounts for such
Distribution
Date), (3) the aggregate Current Principal Amount
of the Class
B-2
Certificates
(after
taking
into
account
the
payment
of the
Class B-2
Principal
Distribution
Amounts for such
Distribution
Date),
(4) the aggregate
Current
Principal
Amount of the
Class B-3
Certificates
(after
taking into account the payment of the Class B-3
Principal
Distribution
Amounts for such
Distribution
Date) and (5) the aggregate Stated Principal Balance of the
Mortgage Loans
as of the last day of the related Due Period
(after
reduction
for
Principal
Prepayments
and Realized
Losses on the Mortgage Loans incurred
during the related
Prepayment
Period)
multiplied by (i) prior to
the
Distribution
Date in November 2012,
6.875% and (ii) on or after the
Distribution
Date in November
2012,
5.500%,
and (II) the excess of (a) the aggregate
Stated
Principal
Balance of the Mortgage Loans
as of the last day of the related Due Period
(after
reduction
for
Principal
Prepayments
and Realized
Losses on the Mortgage Loans incurred during the related
Prepayment
Period) over (b) 0.50% of the Stated
Principal Balance of the Mortgage Loans as of the Cut-off Date.
Class B-5
Principal
Distribution
Amount:
For any
Distribution
Date on or after the Stepdown
Date on which a
Trigger
Event is not in
effect,
an
amount
equal
to the
excess
(if any) of (x) the
Current
Principal Amount of the Class B-5 Certificates
immediately
prior to such Distribution Date over
(y) the lesser of (I) the excess of (a) the aggregate
Stated
Principal
Balance of the Mortgage Loans as
of the last day of the related Due Period (after
reduction for Principal
Prepayments and Realized Losses
on the
Mortgage
Loans
incurred
during
the
related
Prepayment
Period)
over
(b) the sum of (1) the
aggregate Current
Principal Amount of the Class A Certificates
(after taking into account the payment of
the
Class A
Principal
Distribution
Amount
for such
Distribution
Date),
(2) the
aggregate
Current
Principal
Amount of the Class B-1
Certificates
(after
taking into account the payment of the Class B-1
Principal
Distribution
Amounts for such
Distribution
Date), (3) the aggregate Current Principal Amount
of the Class
B-2
Certificates
(after
taking
into
account
the
payment
of the
Class B-2
Principal
Distribution
Amounts for such
Distribution
Date),
(4) the aggregate
Current
Principal
Amount of the
Class B-3
Certificates
(after
taking into account the payment of the Class B-3
Principal
Distribution
Amounts
for such
Distribution
Date),
(5) the
aggregate
Current
Principal
Amount
of the
Class B-4
Certificates
(after taking into account the payment of the Class B-4 Principal
Distribution
Amounts for
such
Distribution
Date) and (6) the aggregate Stated
Principal
Balance of the Mortgage Loans as of the
last day of the related Due Period (after
reduction for Principal
Prepayments and Realized Losses on the
Mortgage
Loans
incurred
during
the
related
Prepayment
Period)
multiplied
by
(i)
prior
to
the
Distribution
Date in November 2012,
1.875% and (ii) on or after the Distribution
Date in November 2012,
1.500%,
and (II) the excess of (a) the aggregate
Stated
Principal
Balance of the Mortgage
Loans as of
the last day of the related Due Period (after
reduction for Principal
Prepayments and Realized Losses on
the Mortgage Loans incurred during the related
Prepayment
Period) over (b) 0.50% of the Stated Principal
Balance of the Mortgage Loans as of the Cut-off Date.
Class B-IO Advances:
As defined in Section 6.01(d).
Class B-IO Distribution
Amount:
With respect to any Distribution Date, the Current Interest for
the Class B-IO
Certificates
for such
Distribution
Date (from REMIC II to REMIC III on account of REMIC
II Regular Interest
B-IO-I);
provided,
however,
that on and after the
Distribution
Date on which the
aggregate
Current
Principal
Amount of the Class A or Class B Certificates has been reduced to
zero, the
Class B-IO
Distribution
Amount shall
include the
Overcollateralization
Amount
(which shall be deemed
distributable,
first,
from
REMIC II to REMIC III on account of REMIC II
Regular
Interest
B-IO-I,
in
respect of accrued and unpaid
interest
thereon
until such accrued and unpaid
interest
shall have been
reduced to zero and,
thereafter,
from
REMIC II to REMIC III on
account
of REMIC II
Regular
Interest
B-IO-P, in respect of the principal balance thereof).
Class B-IO
Pass-Through
Rate: With respect to the Class B-IO
Certificates or REMIC II
Regular
Interest B-IO-I,
and any
Distribution
Date, a per annum rate equal to the sum of (a) the Maximum Coupon
Strip Rate and (b) the
percentage
equivalent
of a fraction,
the
numerator
of which is the sum of the
amounts
calculated
pursuant to clauses (i) through
(iii)
below,
and the
denominator
of which is the
aggregate
Uncertificated
Principal
Balance
of
the
REMIC I
Regular
Interests.
For
purposes
of
calculating the Pass-Through
Rate for the Class B-IO
Certificates,
the numerator is equal to the sum of
the following components:
(i)
the
Uncertificated
Pass-Through
Rate for
REMIC I
Regular
Interest
LT1
minus
the
related
Marker
Rate,
applied
to
a
notional
amount
equal
to
the
Uncertificated
Principal Balance of REMIC I Regular Interest LT1;
(ii)
the
Uncertificated
Pass-Through
Rate for
REMIC I
Regular
Interest
LT2
minus
the
related
Marker
Rate,
applied
to
a
notional
amount
equal
to
the
Uncertificated
Principal Balance of REMIC I Regular Interest LT2; and
(iii)
the
Uncertificated
Pass-Through
Rate for REMIC I Regular Interest LT4 minus twice the
related
Marker
Rate,
applied
to
a
notional
amount
equal
to
the
Uncertificated
Principal Balance of REMIC I Regular Interest LT4.
Class R
Certificates:
The Class R
Certificates
substantially
in the form
annexed
hereto as
Exhibit A-5 and
evidencing
ownership of interests
designated
as
"residual
interests"
in REMIC I and
REMIC II for purposes of the REMIC
Provisions.
Component I of the Class R Certificates
is designated as
the sole
class of
"residual
interest"
in
REMIC I
and
Component II
of the Class R
Certificates
is
designated as the sole class of "residual interest" in REMIC II.
Class R-X
Certificates:
The Class R-X
Certificates
substantially
in the form annexed
hereto
as Exhibit A-6 and
evidencing
ownership of the
"residual
interest"
in
REMIC III
for purposes of the
REMIC Provisions.
Class XP Reserve
Account:
The account
established
and
maintained by the Trustee
pursuant to
Section 4.09 hereof.
Closing Date:
November 30, 2006.
Code:
The Internal Revenue Code of 1986, as amended.
Commission or SEC:
The U.S. Securities and Exchange Commission.
Compensating Interest Payment: As defined in Section 6.06.
Corporate Trust Office:
The designated
office of the Trustee,
where at any particular time its
corporate
trust
business
with
respect to this
Agreement
shall be
administered.
For the
purpose of
registration
and transfer and exchange only,
the Corporate
Trust Office of the Trustee shall be located
at Sixth Street and Marquette
Avenue,
Minneapolis,
Minnesota 55479,
Attention:
Corporate Trust Group,
Bear Stearns
Mortgage
Funding Trust
2006-AR4.
The Corporate Trust Office of the Trustee at the date of
the execution of this
Agreement for all other purposes is located at 9062 Old Annapolis
Road,
Columbia,
Maryland 21045, Attention: Corporate Trust Group, Bear Stearns
Mortgage Funding Trust 2006-AR4.
Credit Enhancement
Percentage:
For any Distribution Date is the percentage obtained by dividing
(x)
the
aggregate
Current
Principal
Amount
of
the
Class
B
Certificates
(including
the
Overcollateralization
Amount)
thereto by (y) the
aggregate
Principal
Balance of the
Mortgage
Loans,
calculated
after taking into account
distributions
of principal on the Mortgage Loans and
distribution
of the Principal
Distribution
Amounts to the holders of the Certificates
then entitled to distributions
of principal on such Distribution Date.
Cumulative Loss Test Violation:
If on any
Distribution
Date, the aggregate
amount of Realized
Losses on the
Mortgage
Loans
incurred
since the Cut-off
Date
through the last day of the related Due
Period
divided by the aggregate
Principal
Balance of the Mortgage
Loans as of the Cut-off Date exceeds
the applicable percentages set forth below with respect to such
Distribution Date:
Distribution Date Occurring in
Percentage
December 2008 through November 2009
0.20%
December 2009 through November 2010
0.40%
December 2010 through November 2011
0.75%
December 2011 through November 2012
1.05%
December 2012 and thereafter
1.45%
Current
Interest:
As
of
any
Distribution
Date,
with
respect
to
each
Class
of
Offered
Certificates
and the Class B-5
Certificates,
(i) the interest
accrued on the Current
Principal Amount
(or in the case of the Class B-IO
Certificates,
the Notional Amount) during the related Interest Accrual
Period at the
applicable
Pass-Through
Rate plus any
amount
previously
distributed
with
respect
to
interest
for such
Certificate
that
has
been
recovered
as a
voidable
preference
by a
trustee
in
bankruptcy
minus, in the case of the Class A Certificates
or Class B
Certificates,
(ii) the sum of (a)
any Prepayment
Interest
Shortfall for such Distribution
Date, to the extent not covered by Compensating
Interest
Payments and (b) any
shortfalls
resulting
from the
application
of the Relief Act during the
related Due Period;
provided,
however,
that for purposes of calculating
Current
Interest for any such
Class,
amounts
specified in clauses (ii)(a) and (ii)(b) hereof for any such
Distribution
Date shall be
allocated
first to the Class B-IO
Certificates
and the
Residual
Certificates
in reduction of amounts
otherwise
distributable
to such
Certificates
on such
Distribution
Date and then any excess
shall be
allocated
to each other Class of
Certificates,
pro rata,
based on the
respective
amounts of interest
accrued
pursuant
to
clause
(i)
hereof
for each such
Class on such
Distribution
Date,
(c) any Net
Deferred
Interest
allocated to such Class,
and (d) the interest
portion of any Realized
Losses on the
Mortgage Loans allocated to such Class in the manner as described
herein.
Current
Principal
Amount:
With respect to any Class A Certificate or Class B Certificate as
of
any
Distribution
Date,
the
initial
principal
amount of such
Certificate
plus the amount of any Net
Deferred Interest allocated thereto on the related
Distribution Date and all previous
Distribution Dates
plus any Subsequent
Recoveries
added to the Current
Principal Amount of such
Certificates
pursuant to
Section
6.02(h)
hereof,
and reduced by (i) all amounts
distributed on previous
Distribution
Dates on
such Certificate
with respect to principal and (ii) any
Applied Realized Loss Amounts
allocated to such
Class on previous
Distribution
Dates.
With respect to any Class of Certificates,
the Current Principal
Amount
thereof will equal the sum of the Current
Principal
Amounts of all
Certificates
in such Class.
The initial Current Principal Amount for each Class of Certificates
is set forth in Section 5.01(c)(iv).
Curtailment:
Any Principal
Prepayment made by a Mortgagor
which is not a Principal
Prepayment
in full.
Custodial
Account:
The trust
account
or
accounts
created
and
maintained
by the
Servicer
pursuant to Section 4.01,
which shall be denominated "Wells Fargo Bank, National Association,
as Trustee
f/b/o holders of Structured
Asset
Mortgage
Investments
II Inc.,
Bear Stearns
Mortgage
Funding Trust
2006-AR4,
Mortgage
Pass-Through
Certificates,
Series
2006-AR4,
Custodial
Account."
The
Custodial
Account shall be an Eligible Account.
Custodial
Agreement:
An
agreement,
dated as of the
Closing
Date
among the
Depositor,
the
Servicer, the Trustee and the Custodian in substantially the form
of Exhibit G hereto.
Custodian:
Wells
Fargo
Bank,
National
Association,
or
any
successor
custodian
appointed
pursuant to the provisions hereof and of the Custodial Agreement.
Cut-off Date:
November 1, 2006.
Cut-off Date Balance:
$510,658,032.44.
Deferred
Interest:
The amount of accrued
interest on the Mortgage Loans,
the payment of which
is
deferred
and
added
to the
Outstanding
Principal
Balance
of a
Mortgage
Loan
due
to
negative
amortization on such Mortgage Loan.
Deficiency Amount:
As defined in the Certificate Insurance Policy.
Deficient
Valuation:
A Bankruptcy
Loss that results if a court,
in connection with a personal
bankruptcy
of a
Mortgagor,
establishes
the value of a
Mortgaged
Property
at an amount less than the
unpaid principal balance of the Mortgage Loan secured by such
Mortgaged Property.
Delinquency
Recognition
Policies:
The generally
accepted
industry
standard that defines the
proper means of reporting
delinquency
status when a loan is
determined
to be delinquent if the payment
is not received by the end of the day immediately preceding the
loan's next due date.
Delinquency
Test Violation:
If on any
Distribution
Date, the percentage
obtained by dividing
(x) the aggregate
outstanding principal balance of the mortgage loans that are 60
days or more Delinquent
or are in bankruptcy or
foreclosure
or are REO
Properties
by (y) the aggregate
Outstanding
Principal
Balance of the Mortgage
Loans, in each case, as of the last day of the previous
calendar month,
exceeds
(i) prior to the
Distribution
Date in November
2012,
27.72% of the Credit
Enhancement
Percentage and
(ii) on or after the Distribution Date in November 2012, 34.65%.
Delinquent:
A Mortgage Loan is
"Delinquent"
if any payment due thereon is not made pursuant to
the terms of such
Mortgage
Loan by the close of business on the day such payment is scheduled
to be due.
A Mortgage
Loan is "30 days
delinquent"
if such payment has not been
received by the close of business
on the last
day of the
month
immediately
succeeding
the
month in which
such
payment
was due.
For
example,
a
Mortgage
Loan with a
payment
due on
December
1 that
remained
unpaid as of the close of
business on January 31 would then be
considered
to be 30 to 59 days
delinquent.
Similarly for "60 days
delinquent," "90 days delinquent" and so on.
Depositor:
Structured
Asset
Mortgage
Investments
II Inc.,
a
Delaware
corporation,
or its
successors in interest.
Depository:
The Depository
Trust Company,
the nominee of which is Cede & Co., or any successor
thereto.
Depository Agreement:
The meaning specified in Section 5.01(a) hereof.
Depository
Participant:
A broker,
dealer, bank or other financial
institution or other Person
for whom
from
time to time the
Depository
effects
book-entry
transfers
and
pledges
of
securities
deposited with the Depository.
Designated Depository
Institution:
A depository
institution
(commercial bank, federal savings
bank,
mutual
savings
bank or savings
and loan
association)
or trust
company
(which may include the
Trustee), the deposits of which are fully insured by the FDIC to
the extent provided by law.
Determination
Date:
The 15th day (or if such 15th day is not a Business
Day,
the Business Day
immediately preceding such 15th day) of the month of the
Distribution Date.
Disqualified
Organization:
Any
of
the
following:
(i) the
United
States,
any
State
or
political
subdivision
thereof,
any possession of the United States, or any agency or
instrumentality of
any of the foregoing
(other than an
instrumentality
which is a corporation if all of its activities are
subject to tax and,
except for the
Freddie
Mac or any
successor
thereto,
a majority
of its board of
directors is not selected by such
governmental
unit),
(ii) any foreign
government,
any
international
organization,
or any agency or instrumentality
of any of the foregoing,
(iii) any
organization
(other
than certain
farmers'
cooperatives
described in
Section 521
of the Code) which is exempt from the tax
imposed by
Chapter 1 of the Code
(including
the tax
imposed by
Section 511
of the Code on
unrelated
business
taxable
income),
(iv)
rural
electric
and
telephone
cooperatives
described
in
Section 1381(a)(2)(C)
of the Code or (v) any other
Person so
designated
by the
Trustee
based upon an
Opinion of Counsel
that the holding of an
ownership
interest in a Residual
Certificate
by such Person
may cause any
2006-AR4
REMIC
contained in the Trust or any Person
having an ownership
interest in the
Residual
Certificate
(other than such Person) to incur a 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.
The terms "United States,"
"State" and
"international
organization"
shall
have the meanings set forth in Section 7701 of the Code or
successor provisions.
Distribution
Account:
The trust
account or
accounts
created
and
maintained
by the Trustee
pursuant to Section 4.03,
which shall be denominated "Wells Fargo Bank, National Association,
as Trustee
f/b/o holders of Structured
Asset
Mortgage
Investments
II Inc.,
Bear Stearns
Mortgage
Funding Trust
2006-AR4,
Mortgage Pass-Through
Certificates,
Series 2006-AR4 - Distribution Account." The Distribution
Account shall be an Eligible Account.
Distribution Account Deposit Date:
The second Business Day prior to each Distribution Date.
Distribution
Date: The 25th day of any month,
beginning in the month immediately
following the
month of the Closing
Date,
or, if such 25th day is not a Business
Day,
the
Business
Day
immediately
following.
Distribution
Report:
The
Asset-Backed
Issuer
Distribution
Report
pursuant to Section 13 or
15(d) of the Exchange Act.
DTC
Custodian:
Wells
Fargo
Bank,
National
Association,
or its
successors
in
interest as
custodian for the Depository.
Due Date:
With
respect to each
Mortgage
Loan,
the date in each month on which its
Scheduled
Payment
is due if such due date is the first day of a month and
otherwise
is deemed to be the first day
of the following month.
Due
Period:
With
respect
to
any
Distribution
Date
and
each
Mortgage
Loan,
the
period
commencing on the second day of the month
preceding
the calendar
month in which the
Distribution
Date
occurs and ending at the close of
business on the first day of the month in which the
Distribution
Date
occurs.
Eligible Account:
Any of (i) a segregated
account
maintained with a federal or state chartered
depository
institution
(A) the
short-term
obligations
of which are rated A-1 or better by
Standard &
Poor's
and P-1 by Moody's at the time of any
deposit
therein or (B)
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
(obtained by the Person
requesting
that the account be held
pursuant to this clause (i))
delivered to the Trustee prior to the
establishment
of such
account,
the
Certificateholders
will have a claim with
respect to the funds in such
account
and a
perfected
first
priority security interest against any collateral (which shall be
limited to Permitted
Investments,
each
of which shall mature not later than the Business Day
immediately
preceding the
Distribution
Date next
following
the
date of
investment
in
such
collateral
or the
Distribution
Date
if
such
Permitted
Investment is an obligation of the
institution
that maintains the
Distribution
Account)
securing such
funds
that is
superior
to
claims
of any other
depositors
or
general
creditors
of the
depository
institution
with
which
such
account
is
maintained,
(ii) a
segregated
trust
account
or
accounts
maintained
with a federal or state
chartered
depository
institution or trust company with trust powers
acting in its fiduciary
capacity or (iii) a
segregated
account or accounts of a depository
institution
acceptable
to the Rating
Agencies (as
evidenced in writing by the Rating
Agencies that use of any such
account as the Distribution
Account will not have an adverse effect on the then-current
ratings assigned
to the Classes of Certificates then rated by the Rating Agencies).
Eligible Accounts may bear interest.
EMC: EMC Mortgage Corporation, and any successor thereto.
ERISA: The Employee Retirement Income Security Act of 1974, as
amended.
Event of Default: As defined in Section 8.01.
Excess
Cashflow:
With respect to any
Distribution
Date,
the sum of (i) the Remaining
Excess
Spread
for
such
Distribution
Date
and
(ii)
the
Overcollateralization
Release
Amount
for
such
Distribution Date.
Excess
Liquidation
Proceeds:
To the extent that such amount is not
required by law to be paid
to the related Mortgagor,
the amount, if any, by which Liquidation
Proceeds with respect to a Liquidated
Mortgage Loan exceed the sum of (i) the
Outstanding
Principal
Balance of such Mortgage Loan and accrued
but unpaid interest at the related
Mortgage
Interest Rate through the last day of the month in which the
related Liquidation Date occurs, plus (ii) related Liquidation
Expenses.
Excess
Overcollateralization
Amount:
With respect to any
Distribution
Date,
the excess,
if
any, of the Overcollateralization Amount over the
Overcollateralization Target Amount.
Excess
Spread:
With
respect to any
Distribution
Date , the excess,
if any, of the
Interest
Funds
for
such
Distribution
Date
over
the sum of any
amounts
owed to the
Certificate
Insurer
in
accordance
with
Section
6.01(a)
clauses
Second (A) and (B) herein,
(ii) the Current
Interest on the
Offered
Certificates
and the Class B-5
Certificates and (iii) any Interest Carry Forward Amounts on the
Class A Certificates on such Distribution Date.
Exchange Act:
Securities Exchange Act of 1934, as amended.
Exchange
Act Reports:
Any reports
required to be filed
pursuant to Sections
3.17 and 3.18 of
this Agreement.
Extra Principal
Distribution
Amount:
With respect to any Distribution Date , the lesser of (i)
the
excess,
if any,
of the
Overcollateralization
Target
Amount for such
Distribution
Date over the
Overcollateralization
Amount for such
Distribution Date and (ii) the Excess Spread for such Distribution
Date.
Fannie Mae:
Federal National Mortgage Association and any successor thereto.
Fannie
Mae
Guide:
The Fannie Mae
Selling
Guide and the
Fannie Mae
Servicing
Guide and all
amendments or additions thereto.
FDIC:
Federal Deposit Insurance Corporation and any successor thereto.
Final
Certification:
The
certification
substantially
in the
form
of
Exhibit Three
to the
Custodial Agreement.
Final Distribution Date:
The Distribution Date occurring in December 2037.
Fiscal
Quarter:
December 1 through
the last day of
February,
March 1 through
May 31, June 1
through August 31, or September 1 through November 30, as
applicable.
Form 8-K Disclosure Information:
As defined in Section 3.18(a)(iii).
Fractional
Undivided Interest:
With respect to any Class of
Certificates (other than the Class
XP
Certificates),
the
fractional
undivided
interest
evidenced by any
Certificate
of such Class the
numerator of which is the Current
Principal
Amount of such
Certificate
and the denominator of which is
the Current
Principal
Amount of such Class.
With respect to the Class XP
Certificates,
the percentage
interest
stated thereon.
With respect to the
Certificates
in the aggregate,
the fractional
undivided
interest
evidenced by (i) the Residual
Certificates
will be deemed to equal 1.0% and (ii) a Certificate
of any other Class will be deemed to equal 99.0%
multiplied by a fraction,
the numerator of which is the
Current
Principal
Amount of such
Certificate
and the
denominator
of which is the
aggregate
Current
Principal Amount of all the Certificates of such Class.
Freddie
Mac:
Freddie
Mac,
formerly
the
Federal
Home
Loan
Mortgage
Corporation,
and any
successor thereto.
Freddie Mac Guide:
The Freddie Mac
Selling
Guide and the Freddie Mac
Servicing
Guide and all
amendments or additions thereto.
Global
Certificate:
Any Private
Certificate
registered
in the name of the
Depository or its
nominee,
beneficial
interests in which are reflected on the books of the Depository or
on the books of a
Person maintaining an account with such Depository
(directly or as an indirect
participant in accordance
with the rules of such depository).
Gross Margin:
As to each Mortgage Loan, the fixed
percentage set forth in the related
Mortgage
Note and indicated on the Mortgage Loan
Schedule
which
percentage is added to the related Index on each
Interest
Adjustment Date to determine
(subject to rounding,
the minimum and maximum
Mortgage
Interest
Rate and the Periodic Rate Cap) the Mortgage Interest Rate until
the next Interest Adjustment Date.
Holder:
The
Person in whose name a
Certificate
is
registered
in the
Certificate
Register,
except
that,
subject to Sections
11.02(b)
and
11.05(e),
solely for the purpose of giving any consent
pursuant to this Agreement,
any Certificate registered in the name of the Depositor,
the Servicer or the
Trustee or any
Affiliate
thereof
shall be deemed not to be
outstanding
and the
Fractional
Undivided
Interest
evidenced
thereby
shall
not be taken
into
account
in
determining
whether
the
requisite
percentage of Fractional Undivided Interests necessary to effect
any such consent has been obtained.
Indemnified
Persons:
The Trustee and the Custodian and their
officers,
directors,
agents and
employees and, with respect to the Trustee,
any separate co-trustee and its officers,
directors,
agents
and employees.
Independent:
When used with respect to any
specified
Person,
this term means that such Person
(a) is in fact
independent
of the Depositor or the Servicer and of any Affiliate of the
Depositor or the
Servicer,
(b) does not have any direct financial
interest or any material indirect financial interest in
the
Depositor or the Servicer or any
Affiliate of the Depositor or the Servicer and (c) is not connected
with the
Depositor
or the
Servicer or any
Affiliate as an officer,
employee,
promoter,
underwriter,
trustee, partner, director or person performing similar functions.
Index:
The
index,
if any,
specified
in a Mortgage
Note by
reference
to which the
related
Mortgage Interest Rate will be adjusted from time to time.
Individual
Certificate:
Any
Private
Certificate
registered
in the name of the Holder
other
than the Depository or its nominee.
Initial
Certification:
The
certification
substantially
in the
form
of
Exhibit One
to the
Custodial Agreement.
Insolvency Proceeding: As defined in Section 4.07(g).
Institutional
Accredited Investor:
Any Person meeting the requirements of Rule 501(a)(l),
(2),
(3) or (7) of
Regulation
D under the
Securities
Act or any entity
all of the equity
holders in which
come within such paragraphs.
Insurance
Policy:
With respect to any Mortgage
Loan,
any standard
hazard
insurance
policy,
flood insurance policy or title insurance policy.
Insurance
Proceeds:
Amounts
paid by the
insurer
under
any
Insurance
Policy
covering
any
Mortgage
Loan or
Mortgaged
Property
other
than
amounts
required
to be paid
over to the
Mortgagor
pursuant to law or the
related
Mortgage
Note or
Security
Instrument
and other than
amounts
used to
repair or restore
the
Mortgaged
Property
or to
reimburse
insured
expenses,
including
the
related
Servicer's costs and expenses
incurred in connection with presenting
claims under the related
Insurance
Policies.
Insured Amount:
As defined in the Certificate Insurance Policy.
Insured Certificates:
The Class A-2 Certificates.
Interest
Accrual Period:
For each of the Offered
Certificates
and the Class B-5
Certificates
and for any Distribution
Date, the period
commencing on the Distribution Date in the month preceding the
month in which a
Distribution
Date
occurs
(or the
Closing
Date,
in the case of the
first
Interest
Accrual Period) and ending on the day immediately prior to such
Distribution Date.
Interest
Adjustment
Date:
With respect to a Mortgage Loan, the date, if any,
specified in the
related Mortgage Note on which the Mortgage Interest Rate is
subject to adjustment.
Interest
Carry Forward
Amount:
As of any
Distribution
Date and with respect to each Class of
Certificates
(other than the Class XP Certificates,
Class B IO Certificates
and Residual
Certificates)
and as of the first
Distribution
Date, zero, and for each Distribution
Date thereafter,
the sum of (i)
the excess of (a) the Current
Interest for such Class with respect to prior
Distribution
Dates over (b)
the amount actually
distributed to such Class of
Certificates
with respect to interest on or after such
prior
Distribution
Dates,
and (ii) interest on such excess (to the extent
permitted by applicable law)
at the
applicable
Pass-Through
Rate for such
Class for the
Interest
Accrual
Period,
including
the
Interest Accrual Period relating to such Distribution Date.
Interest Funds: With respect to any Distribution Date, (i) the sum,
without
duplication,
of (a)
all scheduled
interest
collected in respect to the related
Mortgage Loans during the related Due Period
less the
related
Servicing
Fee and any related
amounts to be
reimbursed
to EMC,
the
Servicer,
the
Trustee and the Custodian as provided herein,
(b) all Monthly Advances
relating to interest with respect
to the related Mortgage Loans made on or prior to the related
Distribution
Account Deposit Date, (c) all
Compensating
Interest
Payments with respect to the related Mortgage Loans and required to
be remitted by
the Servicer
pursuant to this Agreement with respect to such Distribution
Date, (d) Insurance
Proceeds,
Liquidation
Proceeds and Subsequent
Recoveries with respect to the Mortgage Loans
collected
during the
related
Prepayment
Period,
to the extent such
proceeds
relate to
interest,
less all
Nonrecoverable
Advances relating to interest and certain expenses,
in each case, with respect to the Mortgage Loans, (e)
all amounts
relating to interest with respect to each Mortgage Loan
purchased by the Depositor
pursuant
to Sections 2.02, 2.03 or 3.21 during the related Due Period less
all
Non-Recoverable
Advances
relating
to interest,
(f) all amounts in respect of interest paid by the Depositor
pursuant to Section 10.01,
in
each case to the extent remitted by the Servicer to the
Distribution
Account
pursuant to this Agreement
and (g) the amount of any Principal
Prepayments in full, partial Principal
Prepayments,
Net Liquidation
Proceeds,
Repurchase
Proceeds and scheduled
principal
payments,
in that order,
included in Available
Funds for such
Distribution
Date that are applied in connection with any Deferred Interest in
accordance
with the
definition of Net Deferred
Interest to EMC, the Depositor,
the Servicer or the Trustee,
minus
(ii) all amounts
relating to interest
required to be reimbursed
pursuant to Sections 4.01,
4.03,
4.04
and 4.05 or as otherwise
set forth in this
Agreement
and the portion of the
Aggregate
Premium
Amount
payable to the Certificate Insurer as provided in Section
4.04(a)(xii).
Interest
Shortfall:
With respect to any
Distribution
Date and each
Mortgage Loan that during
the related
Prepayment
Period was the
subject of a Principal
Prepayment
or
constitutes
a Relief Act
Mortgage Loan, an amount determined as follows:
(a)
Partial
principal
prepayments
(other than any
collections
on REO
Property
treated as a Curtailment
pursuant to Section
3.15(b))
received during the relevant
Prepayment
Period:
The
difference
between
(i) one
month's
interest
at the
applicable
Net Rate on the
amount
of such
prepayment
and (ii) the
amount of interest for the calendar
month of such
prepayment
(adjusted to the
applicable Net Rate) received at the time of such prepayment;
(b)
Principal
prepayments
in full
received
during the relevant
Prepayment
Period:
The
difference
between (i) one month's
interest at the applicable Net Rate on the Stated
Principal
Balance
of such
Mortgage
Loan
immediately
prior to such
prepayment
and
(ii) the
amount of interest for the
calendar
month of such
prepayment
(adjusted to the
applicable
Net Rate)
received at the time of such
prepayment; and
(c)
Relief Act
Mortgage
Loans:
As to any Relief Act Mortgage
Loan,
the excess of (i) 30
days'
interest (or, in the case of a principal
prepayment in full,
interest to the date of
prepayment)
on the Stated
Principal
Balance
thereof
(or, in the case of a
principal
prepayment
in part,
on the
amount so prepaid) at the related Net Rate over
(ii) 30
days'
interest
(or, in the case of a principal
prepayment
in full,
interest to the date of
prepayment)
on such Stated
Principal
Balance (or, in the
case of a Principal
Prepayment
in part,
on the amount so prepaid) at the annual
interest rate required
to be paid by the Mortgagor as limited by application of the Relief
Act.
Interim
Certification:
The
certification
substantially
in the
form
of
Exhibit Two
to the
Custodial Agreement.
Investment
Letter: The letter to be furnished by each
Institutional
Accredited
Investor which
purchases any of the Private
Certificates
in connection
with such purchase,
substantially
in the form
set forth as Exhibit F-1 hereto.
LIBOR
Business
Day:
Any day
other
than a
Saturday
or a Sunday
or a day on
which
banking
institutions in the city of London, England are required or
authorized by law to be closed.
LIBOR
Determination
Date: With respect to each Class of Offered
Certificates and for the first
Interest
Accrual Period,
November 30, 2006. With respect to each Class of Offered
Certificates
and the
Class B-5
Certificates
and any
Interest
Accrual
Period
thereafter,
the second
LIBOR
Business
Day
preceding the commencement of such Interest Accrual Period.
Liquidated
Mortgage
Loan:
Any defaulted
Mortgage Loan as to which the Servicer has determined
that all amounts it expects to recover from or on account of such
Mortgage Loan have been recovered.
Liquidation
Date:
With respect to any Liquidated
Mortgage Loan, the date on which the Servicer
has certified that such Mortgage Loan has become a Liquidated
Mortgage Loan.
Liquidation
Expenses:
With respect to a Mortgage
Loan in
liquidation,
unreimbursed
expenses
paid or
incurred
by or for the
account of the
Servicer
in
connection
with the
liquidation
of such
Mortgage
Loan and the related
Mortgaged
Property,
such
expenses
including
(a)
property
protection
expenses,
(b)
property
sales
expenses,
(c)
foreclosure
and sale
costs,
including
court costs and
reasonable
attorneys'
fees,
and (d) similar
expenses
reasonably
paid or incurred in connection
with
liquidation.
Liquidation
Proceeds:
Cash received in connection with the liquidation of a defaulted
Mortgage
Loan,
whether through trustee's sale,
foreclosure sale,
Insurance
Proceeds,
condemnation
proceeds or
otherwise and Subsequent Recoveries.
Loan-to-Value
Ratio:
With
respect
to
any
Mortgage
Loan,
the
fraction,
expressed
as
a
percentage,
the
numerator of which is the original
principal
balance of the related
Mortgage Loan and
the denominator of which is the Original Value of the related
Mortgaged Property.
Lost Notes:
The original
Mortgage
Notes that have been lost, as indicated on the Mortgage Loan
Schedule.
Margin:
With
respect
to any
Distribution
Date on or prior
to the
first
possible
Optional
Termination
Date and the Class A-1,
Class A-2,
Class B-1,
Class B-2,
Class B-3,
Class B-4, Class B-5
Certificates will be 0.210%, 0.180%,
0.370%, 0.550%, 1.400%, 2.150% and 2.150%, per annum,
respectively,
provided that,
after the first
possible
Optional
Termination
Date, the related margin with respect to
the Class A-1, Class A-2, Class B-1,
Class B-2, Class B-3, Class B-4 and Class B-5
Certificates
will be
0.420%, 0.360%, 0.555%, 0.825%, 2.100%, 3.225% and 3.225%, per
annum, respectively.
Marker Rate:
With respect to the Class B-IO
Certificates
or REMIC II Regular
Interest
B-IO-I
and any
Distribution
Date,
a per
annum
rate
equal
to two (2)
times
the
weighted
average
of the
Uncertificated
REMIC I Pass-Through
Rates for REMIC I Regular
Interest LT2 and REMIC I Regular Interest
LT3.
Material Defect:
The meaning specified in Section 2.02(a).
Maximum
Lifetime
Mortgage Rate: The maximum level to which a Mortgage
Interest Rate can adjust
in accordance with its terms, regardless of changes in the
applicable Index.
MERS:
Mortgage
Electronic
Registration
Systems,
Inc., a
corporation
organized and existing
under the laws of the State of Delaware, or any successor thereto.
MERS® System: The system of recording
transfers of Mortgage Loans
electronically
maintained by
MERS.
MIN: The Mortgage
Identification
Number for Mortgage
Loans
registered
with MERS on the MERS®
System.
Minimum
Lifetime
Mortgage Rate: The minimum level to which a Mortgage
Interest Rate can adjust
in accordance with its terms, regardless of changes in the
applicable Index.
MOM Loan:
With
respect to any Mortgage
Loan,
MERS acting as the
mortgagee
of such
Mortgage
Loan,
solely as nominee for the originator of such Mortgage Loan and its
successors and assigns,
at the
origination thereof.
Monthly
Advance:
An advance of interest
required to be made by the
Servicer or the Trustee as
successor servicer pursuant to Section 6.05.
Monthly
Payments:
For any
Mortgage
Loan and any
month,
the
minimum
scheduled
payment
or
payments of principal
and interest
due during such month on such
Mortgage
Loan which either is payable
by a Mortgagor
in such month under the related
Mortgage
Note or in the case of any
Mortgaged
Property
acquired through
foreclosure or deed in lieu of foreclosure,
would otherwise have been payable under the
related Mortgage Note.
Monthly Statement:
The statement delivered to the Certificateholders pursuant to
Section 6.04.
Moody's:
Moody's Investors Service, Inc. or its successor in interest.
Mortgage:
The mortgage,
deed of trust or other instrument
creating a first priority lien on an
estate in fee simple or leasehold interest in real property
securing a Mortgage Loan.
Mortgage
File:
The mortgage
documents
listed in
Section 2.01(b)
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:
The annual
rate at which
interest
accrues
from time to time on any
Mortgage
Loan
pursuant to the related
Mortgage
Note,
which rate is initially
equal to the
"Mortgage
Interest Rate" set forth with respect thereto on the Mortgage Loan
Schedule.
Mortgage Loan: A mortgage loan
transferred
and assigned to the Trust
pursuant to
Section 2.01
and held as a part of the Trust Fund, as identified
in the Mortgage Loan Schedule
(which shall
include,
without
limitation,
with
respect to each
Mortgage
Loan,
each
related
Mortgage
Note,
Mortgage and
Mortgage
File and all rights
appertaining
thereto),
including a mortgage
loan the
property
securing
which has become an REO Property.
Mortgage Loan Purchase
Agreement:
The Mortgage
Loan
Purchase
Agreement
dated as of November
30, 2006,
between EMC, as mortgage loan seller,
and Structured
Asset
Mortgage
Investments II Inc., as
purchaser, and all amendments thereof and supplements thereto,
attached as Exhibit H.
Mortgage Loan Documents:
The original Mortgage Loan legal documents held by the Custodian.
Mortgage
Loan
Schedule:
The
schedule,
attached
hereto
as
Exhibit B
with
respect
to the
Mortgage
Loans,
as amended from time to time to reflect the repurchase or
substitution of Mortgage Loans
pursuant to this Agreement or the Mortgage Loan Purchase Agreement,
as the case may be.
Mortgage
Note:
The
originally
executed
note
or
other
evidence
of the
indebtedness
of a
Mortgagor under the related Mortgage Loan.
Mortgaged
Property:
Land and
improvements
securing the
indebtedness of a Mortgagor under the
related Mortgage Loan or, in the case of REO Property, such REO
Property.
Mortgagor:
The obligor on a Mortgage Note.
Net Deferred
Interest:
On any
Distribution
Date,
Deferred
Interest on the related
Mortgage
Loans during the related Due Period net of Principal
Prepayments in full, partial Principal
Prepayments,
Net Liquidation
Proceeds,
Repurchase Proceeds and scheduled principal payments,
in that order, included
in Available
Funds and such
Distribution
Date and available to be
distributed on the
Certificates
on
such
Distribution
Date.
With
respect
to any
Class A
Certificate
or Class B
Certificate
as of any
Distribution
Date,
the
Net
Deferred
Interest
will
be an
amount
equal
to the
product
of (1) the
difference,
if any between
(a) the lesser of (i) the
pass-through
rate for such Class of
Certificates
without
regard
to the Net
Rate
Cap on such
Distribution
Date
and
(ii)
the
Net
Rate
Cap on such
Distribution
Date,
(b) the
Adjusted
Rate Cap for such
Distribution
Date,
(2) the Current
Principal
Amount of such
Certificate
immediately
prior to such
Distribution
Date,
and (3) the actual number of
days in such Interest Accrual Period divided by 360.
Net Interest Shortfall:
With respect to any Distribution Date, the Interest
Shortfall,
if any,
for such
Distribution
Date net of Compensating
Interest Payments made with respect to such Distribution
Date.
Net
Liquidation
Proceeds:
As to any
Liquidated
Mortgage
Loan,
Liquidation
Proceeds net of
(i) Liquidation
Expenses
which are payable
therefrom to the Servicer in accordance
with this Agreement
and (ii) unreimbursed advances by the Servicer and unreimbursed
Monthly Advances.
Net Rate:
With respect to each
Mortgage
Loan,
the Mortgage
Interest Rate in effect from time
to time less the Servicing Fee Rate, expressed as a per annum rate.
Net Rate Cap: For any Distribution
Date, with respect to the Offered
Certificates and the Class
B-5 Certificates
(and in the case of the Class A-2
Certificates,
as further adjusted for the portion of
the Aggregate
Premium Amount payable to the
Certificate
Insurer),
is equal to the weighted
average of
the Net Rates of the
Mortgage
Loans,
in each case as
adjusted
to an
effective
rate
reflecting
the
accrual of interest on an actual/360 basis.
NIM Issuer:
The entity established as the issuer of the NIM Securities.
NIM
Securities:
Any debt
securities
issued by the NIM Issuer and secured or otherwise
backed
by some or all of the Certificates.
NIM Trustee:
The trustee for the NIM Securities.
Non-Offered Certificates:
The Class B-5, Class XP, Class B-IO and Residual Certificates.
Nonrecoverable
Advance:
Any advance or Monthly
Advance
(i) which
was
previously
made or is
proposed to be made by the Servicer or the Trustee (as
successor
Servicer) and
(ii) which,
in the good
faith judgment of the Servicer or the Trustee,
will not or, in the case of a proposed
advance or Monthly
Advance,
would not, be
ultimately
recoverable
by the Servicer or the Trustee (as
successor
Servicer)
from
Liquidation
Proceeds,
Insurance
Proceeds or future
payments on the Mortgage
Loan for which such
advance or Monthly Advance was made or is proposed to be made.
Notional Amount:
With respect to any Distribution
Date and the Class B-IO Certificates or REMIC
II Regular
Interest
B-IO-I,
the
aggregate
of the
Uncertificated
Principal
Balances
of the REMIC I
Regular Interests.
Offered
Certificates:
The Class A-1,
Class A-2,
Class B-1, Class B-2, Class B-3 and Class B-4
Certificates.
Officer's
Certificate:
A certificate
signed by the Chairman of the Board, the Vice Chairman of
the Board,
the President or a Vice President or Assistant Vice President or
other
authorized
officer of
the
Servicer
or the
Depositor,
as
applicable,
and
delivered
to the
Trustee,
as
required by this
Agreement.
One-Month
LIBOR:
With
respect to any
Interest
Accrual
Period,
the rate
determined
by the
Trustee on the related
LIBOR
Determination
Date on the basis of the rate for U.S.
dollar
deposits for
one month
that
appears
on
Telerate
Screen
Page 3750 as of 11:00
a.m.
(London
time) on such
LIBOR
Determination
Date;
provided that the parties
hereto
acknowledge
that
One-Month
LIBOR for the first
Interest
Accrual
Period
shall be the rate
determined
by the
Trustee two
Business
Days prior to the
Closing
Date.
If such rate does not appear on such page (or such other page as
may replace
that page on
that service, or if such service is no longer offered,
such other service for displaying
One-Month LIBOR
or comparable
rates as may be reasonably
selected by the Trustee),
One-Month
LIBOR for the
applicable
Interest
Accrual
Period will be the Reference
Bank Rate. If no such
quotations
can be obtained by the
Trustee and no Reference Bank Rate is available,
One-Month
LIBOR will be One-Month
LIBOR
applicable to
the
preceding
Interest
Accrual
Period.
The
Trustee's
determination
of
One-Month
LIBOR
and
the
Pass-Through
Rate for each Class of Certificates,
if applicable,
for any Interest Accrual Period shall,
in the absence of manifest error, be final and binding.
Opinion of
Counsel:
A written
opinion of counsel who is or are
acceptable
to the Trustee and
who,
unless
required to be Independent (an "Opinion of Independent
Counsel"),
may be internal
counsel
for the Company, the Servicer or the Depositor.
Optional
Termination
Date:
The
Distribution
Date on which
the
aggregate
Stated
Principal
Balance of the Mortgage Loans is less than 10% of the Cut-off Date
Balance of the Mortgage Loans.
Original
Value:
The lesser of (i) the
Appraised
Value or (ii) the
sales price of a Mortgaged
Property at the time of origination of a Mortgage
Loan,
except in instances
where either clauses (i) or
(ii) is
unavailable,
the other may be used to determine the Original
Value,
or if both clauses (i) and
(ii) are
unavailable,
Original Value may be determined from other sources
reasonably
acceptable to the
Depositor.
Outstanding
Mortgage
Loan:
With respect to any Due Date, a Mortgage Loan which,
prior to such
Due Date,
was not the subject of a Principal
Prepayment
in full,
did not become a Liquidated
Mortgage
Loan and was not purchased or replaced.
Outstanding
Principal Balance:
As of the time of any determination,
the principal balance of a
Mortgage Loan
remaining to be paid by the
Mortgagor,
or, in the case of an REO Property,
the principal
balance of the related
Mortgage Loan
remaining to be paid by the Mortgagor at the time such property was
acquired by the Trust Fund less any Net
Liquidation
Proceeds with respect
thereto to the extent applied
to principal.
Overcollateralization
Amount:
With respect to any Distribution Date, the excess, if any, of (i)
the
aggregate
principal
balance
of the
Mortgage
Loans as of the last day of the
related
Due Period
(after giving effect to scheduled
payments of principal due during the related Due Period,
to the extent
received or advanced,
and unscheduled
collections of principal
received
during the related
Prepayment
Period,
and after reduction for Principal
Prepayments and Realized Losses on the Mortgage Loans incurred
during
the
related
Due
Period)
over
(ii) the
aggregate
Current
Principal
Amount
of the
Class A
Certificates
and the Class B
Certificates,
after taking into account the
distributions
of
principal,
less Net Deferred Interest, to be made on such Distribution Date.
Overcollateralization
Release
Amount:
With
respect
to any
Distribution
Date for
which the
Excess
Overcollateralization
Amount is, or would be, after
taking into account all other
distributions
to be made on that Distribution
Date,
greater than zero, an amount equal to the lesser of (i) the Excess
Overcollateralization
Amount
for
that
Distribution
Date
and
(ii)
the
Principal
Funds
for
that
Distribution Date.
Overcollateralization
Target Amount:
With respect to any
Distribution
Date,
(i) prior to the
Stepdown
Date, an amount equal to 0.75% of the aggregate
principal
balance of the Mortgage
Loans as of
the Cut-off
Date,
(ii) on or after the
Stepdown
Date
provided a Trigger
Event is not in effect,
the
greater
of (x)
(1)
prior
to the
Distribution
Date in
November
2012,
1.875%
of the
then
current
aggregate
Outstanding
Principal
Balance of the
Mortgage
Loans as of the last day of the
related
Due
Period
(after
giving
effect to scheduled
payments of principal
due during the related Due Period,
to
the extent
received or advanced,
and
unscheduled
collections of principal
received during the related
Prepayment
Period,
and after
reduction for Principal
Prepayments
and Realized
Losses on the Mortgage
Loans incurred
during the prior
calendar
month) and (2) on or after the
Distribution
Date in November
2012, 1.500% of the then current aggregate
Outstanding
Principal Balance of the Mortgage Loans as of the
last day of the related Due Period
(after
giving
effect to scheduled
payments of principal
due during
the related Due Period,
to the extent
received or advanced,
and
unscheduled
collections
of principal
received
during the
related
Prepayment
Period,
and after
reduction
for
Principal
Prepayments
and
Realized
Losses on the Mortgage
Loans
incurred
during the prior
calendar
month) and (y) 0.50% of the
aggregate
principal balance of the Mortgage Loans as of the Cut-Off Date
($2,553,290.16)
or (iii) on or
after the Stepdown Date and if a Trigger Event is in effect, the
Overcollateralization
Target Amount for
the immediately preceding Distribution Date.
Pass-Through
Rate:
As to each
Class
of
Certificates,
the
rate of
interest
determined
as
provided with respect thereto in Section 5.01(c).
Paying Agent:
The Trustee.
Periodic Rate Cap: With respect to each Mortgage
Loan, the maximum
adjustment
that can be made
to the Mortgage
Interest Rate on each Interest
Adjustment Date in accordance with its terms,
regardless
of changes in the applicable Index.
Permitted Investments: At any time, any one or more of the
following obligations and securities:
(i)
obligations
of the United
States or any agency
thereof,
provided
such
obligations
are
backed by the full faith and credit of the United States;
(ii) general
obligations of or
obligations
guaranteed by any state of the United States or the
District of Columbia
receiving the highest
long-term
debt rating of each Rating
Agency,
or such lower
rating
as will
not
result
in the
downgrading
or
withdrawal
of the
ratings
then
assigned
to the
Certificates by each Rating Agency;
(iii)
commercial
or finance
company paper which is then
receiving
the highest
commercial or
finance
company
paper
rating of each
Rating
Agency,
or such
lower
rating as will not result in the
downgrading or withdrawal of the ratings then assigned to the
Certificates by each Rating Agency;
(iv)
certificates of deposit,
demand or time deposits,
or bankers'
acceptances
issued by any
depository
institution or trust company
incorporated under the laws of the United States or of any state
thereof
and
subject
to
supervision
and
examination
by
federal
and/or
state
banking
authorities
(including
the Trustee in its commercial
banking
capacity),
provided that the commercial
paper and/or
long term unsecured debt
obligations of such
depository
institution or trust company are then rated one
of the two highest
long-term
and the
highest
short-term
ratings of each such
Rating
Agency for such
securities,
or such lower ratings as will not result in the
downgrading or withdrawal of the rating then
assigned to the Certificates by any Rating Agency;
(v) demand or time
deposits or
certificates
of deposit
issued by any bank or trust company or
savings institution to the extent that such deposits are fully
insured by the FDIC;
(vi)
guaranteed
reinvestment
agreements
issued
by
any
bank,
insurance
company
or
other
corporation
containing,
at the time of the issuance of such
agreements,
such terms and
conditions
as
will not result in the
downgrading or withdrawal of the rating then assigned to the
Certificates
by any
such Rating Agency;
(vii)
repurchase
obligations
with
respect to any
security
described in clauses (i) and (ii)
above,
in either case entered into with a depository
institution or trust company
(acting as principal)
described in clause (iv) above;
(viii)
securities
(other
than
stripped
bonds,
stripped
coupons
or
instruments
sold at a
purchase
price in excess of 115% of the face
amount
thereof)
bearing
interest
or sold at a
discount
issued by any
corporation
incorporated
under the laws of the United States or any state thereof
which,
at the time of such
investment,
have one of the two
highest
long term
ratings of each
Rating
Agency
(except if the Rating
Agency is Moody's,
such rating
shall be the highest
commercial
paper
rating of
Moody's
for any
such
securities),
or such
lower
rating
as will not
result
in the
downgrading
or
withdrawal
of the rating then
assigned to the
Certificates
by any Rating
Agency,
as
evidenced
by a
signed writing delivered by each Rating Agency;
(ix)
interests
in any money
market
fund
(including
any such fund
managed or advised by the
Trustee or Master
Servicer or any affiliate
thereof)
which at the date of
acquisition of the interests
in such fund and
throughout
the time such
interests
are held in such fund has the
highest
applicable
long term
rating by each
Rating
Agency or such lower
rating as will not result in the
downgrading
or
withdrawal of the ratings then assigned to the Certificates by each
Rating Agency;
(x)
short
term
investment
funds
sponsored
by
any
trust
company
or
banking
association
incorporated
under the laws of the United
States or any state thereof
(including
any such fund managed
or advised by the Trustee or any affiliate
thereof)
which on the date of
acquisition
has been rated by
each Rating Agency in their
respective
highest
applicable
rating category or such lower rating as will
not result in the
downgrading
or
withdrawal of the ratings then
assigned to the
Certificates
by each
Rating Agency; and
(xi) such other
investments
having a specified
stated maturity and bearing interest or sold at
a discount
acceptable
to each Rating Agency as will not result in the
downgrading
or withdrawal of the
rating
then
assigned
to the
Certificates
by any
Rating
Agency,
as
evidenced
by a signed
writing
delivered by each Rating Agency;
provided,
that no such
instrument
shall
be a
Permitted
Investment
if such
instrument
(i)
evidences the right to receive
interest only payments
with respect to the
obligations
underlying
such
instrument,
(ii) is purchased at a premium or (iii) is purchased
at a deep
discount;
provided
further
that no such instrument
shall be a Permitted
Investment (A) if such instrument
evidences
principal and
interest
payments
derived from
obligations
underlying such
instrument and the interest
payments with
respect to such
instrument
provide a yield to maturity of greater
than 120% of the yield to maturity at
par of such
underlying
obligations,
or (B) if it may be redeemed at a price
below the
purchase
price
(the
foregoing
clause (B) not to apply to
investments in units of money market funds pursuant to clause
(viii) above);
provided further that no amount
beneficially
owned by any 2006-AR4 REMIC may be invested
in
investments
(other than money
market
funds)
treated as equity
interests
for
federal
income tax
purposes,
unless the Trustee shall receive an Opinion of Counsel,
at the expense of the Trustee,
to the
effect that such
investment
will not adversely
affect the status of any such REMIC as a REMIC under the
Code or result in
imposition
of a tax on any such
REMIC.
Permitted
Investments
that are
subject
to
prepayment or call may not be purchased at a price in excess of
par.
Permitted
Transferee:
Any Person other than a Disqualified
Organization
or an "electing large
partnership" (as defined by Section 775 of the Code).
Person:
Any
individual,
corporation,
partnership,
joint
venture,
association,
limited
liability company,
joint-stock company,
trust,
unincorporated
organization or government or any agency
or political subdivision thereof.
Physical Certificates:
The Private Certificates.
Plan: The meaning specified in Section 5.07(a).
Policy Account:
The account established and maintained pursuant to Section 4.07(a).
Preference Claim: As defined in Section 4.07(g).
Premium Rate:
0.080%
Prepayment
Charge:
With respect to any Mortgage Loan,
the charges or premiums,
if any, due in
connection with a Principal Prepayment of such Mortgage Loan in
accordance with the terms thereof.
Prepayment
Charge Loan:
Any Mortgage Loan for which a Prepayment
Charge may be assessed and to
which such
Prepayment
Charge the Class XP Certificates
are entitled,
as indicated on the Mortgage Loan
Schedule.
Prepayment
Interest
Shortfalls:
With respect to any Distribution
Date, for each Mortgage Loan
that was the
subject of a
Principal
Prepayment
or that became a
Liquidated
Mortgage
Loan during the
related
Prepayment
Period,
(other than a Principal
Prepayment in full resulting from the purchase of a
Mortgage Loan pursuant to Section 2.02,
2.03,
3.21 or 10.01
hereof),
the amount,
if any, by which (i)
one month's
interest at the
applicable Net Rate on the Stated
Principal
Balance
immediately
prior to
such prepayment (or
liquidation) or in the case of a partial
Principal
Prepayment on the amount of such
prepayment (or liquidation
proceeds)
exceeds (ii) the amount of interest paid or collected in connection
with such Principal
Prepayment or such
Liquidation
Proceeds less the sum of (a) any Prepayment
Charges
and (b) the Servicing Fee.
Prepayment
Period:
With
respect to any
Distribution
Date and (i)
Principal
Prepayments
in
full, the period from the sixteenth day of the calendar
month
preceding the calendar month in which such
Distribution
Date occurs
through the close of business on the
fifteenth
day of the
calendar
month in
which such Distribution Date occurs or (ii) Liquidation Proceeds,
Realized Losses,
Subsequent Recoveries
and partial Principal Prepayments, the prior calendar month.
Primary
Mortgage
Insurance
Policy:
Any primary mortgage
guaranty
insurance policy issued in
connection
with a Mortgage
Loan which
provides
compensation
to a Mortgage Note holder in the event of
default
by the
obligor
under such
Mortgage
Note or the
related
Security
Instrument,
if any or any
replacement
policy therefore
through the related Interest
Accrual Period for such
Class relating
to a
Distribution Date.
Prime Rate:
The prime rate of U.S.
money
center
banks as
published
from time to time in The
Wall Street Journal.
Principal
Distribution
Amount:
With
respect to each
Distribution
Date,
an amount
equal to
(i) the Principal Funds for such Distribution Date, plus (ii) any
Extra Principal
Distribution Amount for
such Distribution Date, minus (iii) any Overcollateralization
Release Amount for such Distribution Date.
Principal
Funds:
With respect to each
Distribution
Date, (i) the greater of zero and the sum,
without
duplication,
of (a) all scheduled
principal
collected on the Mortgage Loans during the related
Due Period,
(b) all Monthly
Advances
relating to principal
made on the Mortgage Loans on or before the
Distribution
Account
Deposit
Date,
(c)
Principal
Prepayments
on the
Mortgage
Loans,
exclusive of
Prepayment
Charges collected during the related
Prepayment
Period,
(d) the Stated Principal Balance of
each Mortgage Loan that was
repurchased by the Sponsor
pursuant to Section 2.02, 2.03 or 3.21 during the
related Due Period,
(e) the
aggregate of all
Substitution
Adjustment
Amounts in
connection
with the
substitution
of Mortgage
Loans
pursuant to Section
2.04 during the related Due Period,
(f) amounts in
respect of principal
paid by the
Depositor
pursuant to Section
10.01 and (g) all
Insurance
Proceeds,
Liquidation
Proceeds and Subsequent
Recoveries
collected
during the related
Prepayment
Period on the
Mortgage Loans,
to the extent such proceeds
relate to principal,
in each case to the extent remitted by
the Servicer to the
Distribution
Account
pursuant to this Agreement minus (ii) (a) all amounts required
to be reimbursed
pursuant to Sections
4.01,
4.03 and 4.05 or as otherwise set forth in this
Agreement,
(b) any Aggregate
Premium Amount
payable to the
Certificate
Insurer,
to the extent not available from
Interest Funds and as provided in Section
4.04(a)(xiii),
and (c) the amount of any Principal Prepayments
in full, partial Principal
Prepayments,
Net Liquidation
Proceeds,
Repurchase
Proceeds and payments of
Scheduled
Principal,
in that order,
included in Available
Funds allocated for such
Distribution
Date
that are applied as Interest
Funds in
connection
with any
Deferred
Interest
in
accordance
with the
definition of Net Deferred Interest.
Principal
Prepayment:
Any payment
(whether
partial or full) or other recovery of principal on
a Mortgage
Loan which is
received
in advance
of its
scheduled
Due Date to the extent
that it is not
accompanied by an amount as to interest
representing
scheduled
interest due on any date or dates in any
month or months
subsequent
to the month of
prepayment,
including
Insurance
Proceeds
and
Repurchase
Proceeds,
but
excluding
the
principal
portion
of Net
Liquidation
Proceeds
received
at the time a
Mortgage Loan becomes a Liquidated Mortgage Loan.
Private
Certificates:
The Residual
Certificates,
the Class XP Certificates and the Class B-IO
Certificates.
Prospectus:
The
prospectus,
dated
October
23,
2006,
as
supplemented
by
the
prospectus
supplement
dated November 28, 2006 (as the same may be supplemented
from time to time),
relating to the
offering of the Offered Certificates.
QIB: A Qualified
Institutional
Buyer as defined in Rule 144A
promulgated
under the Securities
Act.
Qualified
Insurer:
Any insurance
company duly qualified as such under the laws of the state or
states
in
which
the
related
Mortgaged
Property
or
Mortgaged
Properties
is or are
located,
duly
authorized
and licensed in such state or states to transact
the type of
insurance
business in which it
is engaged and approved as an insurer by the Servicer,
so long as the claims
paying
ability of which is
acceptable
to
the
Rating
Agencies
for
pass-through
certificates
having
the
same
rating
as
the
Certificates rated by the Rating Agencies as of the Closing Date.
Rating Agencies:
Moody's and S&P.
Realized
Loss:
Any
(i) Bankruptcy
Loss or (ii) as to any
Liquidated
Mortgage
Loan, (x) the
Outstanding
Principal
Balance of such Liquidated
Mortgage Loan plus accrued and unpaid interest thereon
at the
Mortgage
Interest
Rate through the last day of the month of such
liquidation,
less (y) the Net
Liquidation
Proceeds with respect to such Mortgage Loan and the related
Mortgaged Property.
In addition,
to the extent the Servicer
receives
Subsequent
Recoveries with respect to any Mortgage Loan, the amount
of the Realized
Loss with
respect to that
Mortgage
Loan will be reduced to the extent such
recoveries
are
applied to reduce the Current
Principal
Amount of any Class of
Certificates
(other than the Class
XP, Class B-IO and Residual
Certificates)
on any
Distribution
Date.
As to any Mortgage Loan which has
become the subject of a Deficient
Valuation,
if the principal amount due under the related Mortgage Note
has been reduced,
then "Realized Loss" is the difference
between the principal
balance of such Mortgage
Loan
outstanding
immediately
prior
to such
Deficient
Valuation
and the
principal
balance
of such
Mortgage Loan as reduced by the Deficient Valuation.
Record Date: For each Class of Offered
Certificates
and the Class B-5
Certificates and for any
Distribution Date, the close of business on the Business Day prior
to such Distribution Date.
Reference
Bank:
A leading
bank
selected by the
Trustee
that is engaged in
transactions
in
Eurodollar deposits in the international Eurocurrency market.
Reference Bank Rate: With respect to any Interest Accrual Period,
the arithmetic
mean,
rounded
upwards, if necessary,
to the nearest whole multiple of 0.03125%,
of the offered rates for United States
dollar
deposits
for one month that are quoted by the
Reference
Banks as of 11:00
a.m.,
New York City
time,
on the related
interest
determination
date to prime banks in the London
interbank
market for a
period of one month in
amounts
approximately
equal to the
aggregate
Current
Principal
Amount of the
Offered
Certificates
for such Interest
Accrual Period,
provided that at least two such Reference Banks
provide
such
rate.
If fewer
than two
offered
rates
appear,
the
Reference
Bank
Rate
will be the
arithmetic mean, rounded upwards,
if necessary,
to the nearest whole multiple of 0.03125%,
of the rates
quoted by one or more major banks in New York City,
selected by the Trustee,
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 Current Principal
Amount of the Offered Certificates.
Regulation
AB:
Subpart
229.1100
-
Asset
Backed
Securities
(Regulation
AB),
17
C.F.R.
§§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 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
Commission, or as may be provided by the Commission or its staff
from time to time.
Reimbursement Amount:
As defined in the Certificate Insurance Policy.
Reinvestment
Agreements:
One
or
more
reinvestment
agreements,
acceptable
to
the
Rating
Agencies, from a bank, insurance company or other corporation or
entity (including the Trustee).
Relief Act:
The Servicemembers' Civil Relief Act, as amended, or similar state
law.
Relief Act Mortgage
Loan: Any Mortgage Loan as to which the Scheduled
Payment
thereof has been
reduced due to the application of the Relief Act.
Remaining
Excess
Spread:
With respect to any
Distribution
Date , the related
Excess
Spread
remaining
after
distribution of any related Extra Principal
Distribution
Amount for such
Distribution
Date.
REMIC: A "real estate
mortgage
investment
conduit"
within the meaning of
Section 860D of the
Code.
REMIC
Administrator:
The Trustee,
provided that if the REMIC Administrator is found by a court
of competent
jurisdiction
to no longer be able to fulfill its obligations as REMIC
Administrator
under
this Agreement the Servicer shall appoint a successor
REMIC
Administrator,
subject to assumption of the
REMIC Administrator obligations under this Agreement.
REMIC
Opinion:
An Opinion
of
Independent
Counsel,
to the effect
that the
proposed
action
described therein would not, under the REMIC
Provisions,
(i) cause any 2006-AR4 REMIC to fail to qualify
as a REMIC while any regular
interest in such
2006-AR4
REMIC is
outstanding,
(ii) result
in a tax on
prohibited
transactions with respect to any 2006-AR4 REMIC or (iii) constitute
a taxable
contribution to
any 2006-AR4 REMIC after the Startup Day.
REMIC
Provisions:
The
provisions
of the
federal
income tax law
relating
to REMICs,
which
appear at Sections
860A through 860G of the Code,
and related
provisions
and
regulations
promulgated
thereunder, as the foregoing may be in effect from time to time.
REMIC Regular Interest:
Any of the REMIC I Regular Interests,
REMIC II Regular Interests or the
REMIC III Regular Interest.
REMIC I:
The
segregated
pool of
assets,
with
respect
to
which a
REMIC
election
is made
pursuant to this Agreement, consisting of:
(a)
the
Mortgage
Loans
and the
related
Mortgage
Files
and
collateral
securing
such
Mortgage Loans,
(b)
all payments on and
collections
in respect of the Mortgage Loans due after the Cut-off
Date as shall be on deposit in the Custodial
Account or in the
Distribution
Account (other than amounts
representing
Prepayment
Charges in respect of Prepayment
Charge
Loans) and
identified as belonging to
the Trust Fund,
(c)
property
that
secured a Mortgage
Loan and that has been
acquired
for the benefit of
the Certificateholders and the Certificate Insurer by foreclosure
or deed in lieu of foreclosure,
(d)
the hazard insurance policies and Primary Mortgage Insurance
Policy, if any, and
(e)
all proceeds of clauses (a) through (d) above.
REMIC I Available Distribution Amount:
For any Distribution Date, the Available Funds.
REMIC I
Distribution
Amount:
On each
Distribution
Date,
the REMIC I Available
Distribution
Amount,
in the following
order of priority,
shall be
distributed
by REMIC I to REMIC II on account of
the REMIC I Regular
Interests
and to the Holders of the Class R
Certificates
in respect of Component I
thereof:
(i)
to REMIC II as the holder of the REMIC I Regular Interests,
pro rata,
in an amount
equal to (A) the
Uncertificated
Accrued
Interest
for each such
REMIC I Regular
Interest
for
such
Distribution
Date
reduced,
in each
case,
by any Net
Deferred
Interest
allocated to such REMIC I Regular
Interest for such
Distribution
Date, plus (B) any amounts in
respect thereof remaining unpaid from previous Distribution Dates;
(ii)
to REMIC II as the
holder of the
REMIC I Regular
Interests,
in an amount
equal to the
remainder
of the REMIC I
Available
Distribution
Amount
after the
distributions made pursuant to clause (i) above, allocated as
follows:
(A)
in
respect
of REMIC I Regular
Interests
LT2,
LT3 and LT4,
their respective Principal Distribution Amounts;
(B)
in respect of REMIC I Regular
Interest
LT1 any
remainder
until the
Uncertificated Principal Balance thereof is reduced to zero;
(C)
any
remainder
in
respect
of each of the REMIC I Regular
Interests
(other
than
REMIC I
Regular
Interest
LT1),
pro
rata
according
to their
respective
Uncertificated
Principal
Balances as reduced by the distributions
deemed
made
pursuant
to (A) above,
until
their
respective
Uncertificated
Principal Balances are reduced to zero; and
(iii)
any
remaining
amounts
to
the
Holders
of
the
Class
R
Certificates in respect of Component I thereof.
REMIC I Interest:
The REMIC I Regular Interests and Component I of the Class R
Certificates.
REMIC I Net
Deferred
Interest:
Net
Deferred
Interest
for any
Distribution
Date
shall
be
allocated
to REMIC I Regular
Interest
LT1 in
reduction
of the portion of the
Uncertificated
Accrued
Interest
thereon
distributable on the related
Distribution
Date and shall result in an increase in the
Uncertificated Principal Balance thereof to the extent of such
reduction.
REMIC I
Principal
Reduction
Amounts:
For any
Distribution
Date,
the
amounts
by which the
Uncertificated
Principal
Balances of the REMIC I Regular
Interests will be reduced on such Distribution
Date by the allocation of REMIC I Realized Losses and REMIC I Net
Deferred
Interest and the
distribution
of principal, determined as follows:
For purposes of the
succeeding
formulas the following
symbols shall have the meanings
set forth below:
Y1 =the
Uncertificated
Principal
Balance
of
REMIC I
Regular
Interest
LT1
after
distributions
and the
allocation
of REMIC I Net Deferred
Interest
and REMIC I Realized
Losses on the
prior Distribution Date.
Y2 =the
Uncertificated
Principal
Balance
of
REMIC I
Regular
Interest
LT2
after
distributions and the allocation of REMIC I Realized Losses on the
prior Distribution Date.
Y3 =
the
Uncertificated
Principal
Balance of REMIC I
Regular
Interest LT3 after
distributions and the allocation of REMIC I Realized Losses on the
prior Distribution Date.
Y4 =the
Uncertificated
Principal
Balance
of
REMIC I
Regular
Interest
LT4
after
distributions
and the allocation of REMIC I Realized
Losses on the prior
Distribution
Date (note: Y3 =
Y4).
ΔY1 =
the REMIC I Regular Interest LT1 Principal Reduction Amount.
ΔY2 =
the REMIC I Regular Interest LT2 Principal Reduction Amount.
ΔY3 =
the REMIC I Regular Interest LT3 Principal Reduction Amount.
ΔY4 =
the REMIC I Regular Interest LT4 Principal Reduction Amount.
P0 =the
aggregate
Uncertificated
Principal
Balance of the REMIC I Regular
Interests
after
distributions
and the allocation of REMIC I Realized
Losses and REMIC I Net Deferred
Interest on
the prior Distribution Date.
P1 =the
aggregate
Uncertificated
Principal
Balance of the REMIC I Regular
Interests
after
distributions
and the allocation of REMIC I Realized
Losses and REMIC I Net Deferred
Interest to
be made on such Distribution Date.
ΔP =P0 - P1 = the aggregate of the REMIC I Principal Reduction
Amounts.
=
the aggregate of the REMIC I Net Deferred
Interest and
principal
portions of
REMIC I
Realized
Losses
to be
allocated
to,
and the
principal
distributions
to be
made
on,
the
Certificates
on such
Distribution
Date (including
distributions
of accrued and unpaid interest on the
Class B-IO Certificates for prior Distributions Dates).
R0 =
the Net Rate Cap
after
giving
effect
to
amounts
distributed
and
REMIC I
Realized Losses and REMIC I Net Deferred Interest allocated on the
prior Distribution Date.
R1 =
the Net Rate Cap after giving effect to amounts to be
distributed
and REMIC I
Realized Losses and REMIC I Net Deferred Interest to be allocated
on such Distribution Date.
α =(Y2 +
Y3)/P0.
The
initial
value of α on the
Closing
Date
for use on the
first
Distribution Date shall be 0.0001.
γ0 =
the
lesser of (A) the sum for all
Classes
of
Certificates
(other
than the
Class B-IO
Certificates)
of the product for each Class of (i) the monthly
interest
rate (as limited by
the Net
Rate
Cap,
if
applicable)
for
such
Class
applicable
for
distributions
to be made on such
Distribution Date and (ii) the aggregate
Current Principal Amount for such Class after
distributions and
the
allocation
of REMIC I Realized
Losses and REMIC I Net Deferred
Interest on the prior
Distribution
Date and (B) R0*P0.
γ1
=
the
lesser of (A) the sum for all
Classes
of
Certificates
(other
than the
Class B-IO
Certificates)
of the product for each Class of (i) the monthly
interest
rate (as limited by
the Net Rate Cap,
if
applicable)
for such Class
applicable
for
distributions
to be made on the next
succeeding
Distribution
Date and (ii) the
aggregate
Current
Principal
Amount
for such
Class
after
distributions
and the allocation of REMIC I Realized Losses and REMIC I Net
Deferred
Interest to be made
on such Distribution Date and (B) R1*P1.
Then, based on the foregoing definitions:
ΔY1 =
ΔP - ΔY2 - ΔY3 - ΔY4;
ΔY2 =
(α/2){( γ0R1 - γ1R0)/R0R1};
ΔY3 =
αΔP - ΔY2; and
ΔY4 =
ΔY3.
if both ΔY2 and ΔY3, as so determined, are non-negative
numbers.
Otherwise:
(1)If ΔY2, as so determined, is negative, then
ΔY2 = 0;
ΔY3 = α{γ1R0P0 - γ0R1P1}/{γ1R0};
ΔY4 = ΔY3; and
ΔY1 = ΔP - ΔY2 - ΔY3 - ΔY4.
(2)If ΔY3, as so determined, is negative, then
ΔY3 = 0;
ΔY2 = α{γ1R0P0 - γ0R1P1}/{2R1R0P1 -
γ1R0};
ΔY4 = ΔY3; and
ΔY1 = ΔP - ΔY2 - ΔY3 - ΔY4.
REMIC I Realized
Losses:
For any Distribution
Date,
Realized Losses on Mortgage Loans for the
related Due Period
shall be
allocated
to REMIC I Regular
Interests
LT1,
LT2, LT3 and LT4 as follows:
The
interest
portion
of such
Realized
Losses,
if any,
shall be
allocated
to such
REMIC I Regular
Interests,
pro rata
according
to the amount of
interest
accrued
but
unpaid
thereon,
in
reduction
thereof.
Any interest portion of such Realized Losses in excess of the
amount
allocated
pursuant to the
preceding
sentence shall be treated as a principal
portion of Realized
Losses not
attributable
to any
specific Mortgage Loan and allocated pursuant to the succeeding
sentences.
The principal portion of such
Realized
Losses shall be allocated to such REMIC I Regular
Interests as follows:
(1) first,
to REMIC I
Regular
Interests LT2, LT3 and LT4, pro rata according to their
respective
REMIC I Principal
Reduction
Amounts,
provided
that
such
allocation
to such
REMIC I Regular
Interests
shall
not
exceed
their
respective REMIC I Principal
Reduction Amounts for such Distribution
Date, and (2) second,
any Realized
Losses not allocated to such REMIC I Regular
Interests
pursuant to the proviso of clause (1) above shall
be allocated to REMIC I Regular Interest LT1.
REMIC I Regular Interest:
Any of the separate
non-certificated
beneficial
ownership interests
in REMIC I set forth in
Section 5.01(c)
and issued
hereunder and designated as a "regular
interest" in
REMIC I.
Each REMIC I Regular
Interest shall accrue
interest at the
Uncertificated
Pass-Through
Rate
specified for such REMIC I Regular
Interest in
Section 5.01(c),
and shall be entitled to
distributions
of principal,
subject to the terms and
conditions
hereof,
in an aggregate
amount equal to its initial
Uncertificated
Principal
Balance as set forth in
Section 5.01(c).
The
designations for the respective
REMIC I Regular Interests are set forth in Section 5.01(c).
REMIC I Regular
Interest LT1 Principal
Distribution
Amount:
For any
Distribution
Date,
the
excess,
if any, of the REMIC I Regular
Interest LT1
Principal
Reduction
Amount for such
Distribution
Date over the REMIC I
Realized
Losses and REMIC I Net
Deferred
Interest
allocated
to REMIC I Regular
Interest LT1 on such Distribution Date.
REMIC I Regular
Interest LT2 Principal
Distribution
Amount:
For any
Distribution
Date,
the
excess,
if any, of the REMIC I Regular
Interest LT2
Principal
Reduction
Amount for such
Distribution
Date over the REMIC I Realized
Losses
allocated
to REMIC I Regular
Interest
LT2 on such
Distribution
Date.
REMIC I Regular
Interest LT3 Principal
Distribution
Amount:
For any
Distribution
Date,
the
excess,
if any, of the REMIC I Regular
Interest LT3
Principal
Reduction
Amount for such
Distribution
Date over the REMIC I Realized
Losses
allocated
to REMIC I Regular
Interest
LT3 on such
Distribution
Date.
REMIC I Regular
Interest LT4 Principal
Distribution
Amount:
For any
Distribution
Date,
the
excess,
if any, of the REMIC I Regular
Interest LT4
Principal
Reduction
Amount for such
Distribution
Date over the REMIC I Realized
Losses
allocated
to REMIC I Regular
Interest
LT4 on such
Distribution
Date.
REMIC II: That group of assets
contained in the Trust Fund
designated as a REMIC
consisting of
the REMIC I Regular Interests and any proceeds thereof.
REMIC
II
Available
Distribution
Amount:
For
any
Distribution
Date,
the
amounts
deemed
distributed with respect to the REMIC I Regular Interests pursuant
to Section 6.07.
REMIC II Distribution
Amount:
For any
Distribution
Date, the REMIC II Available
Distribution
Amount shall be deemed
distributed by REMIC II to the holders of the
Certificates
(other than the Class
R, Class R-X, Class B-IO and Class XP
Certificates)
on account of the REMIC II Regular
Interests (other
than REMIC II Regular
Interests B-IO and B-IO-P),
to REMIC III on account of REMIC II Regular
Interests
B-IO-I and B-IO-P and to the
holders of Class R
Certificates
in respect of
Component
II
thereof,
as
follows:
to each REMIC II Regular
Interest in respect of
Uncertificated
Accrued
Interest
thereon and
the
Uncertificated
Principal
Balance
thereof,
the
amount
distributed
in respect
of
interest
and
principal on the Class or Classes of Certificates
bearing the same designation
(with such amounts having
the same
character
as interest or principal
with respect to the REMIC II Regular
Interest as they have
with respect to such
Certificates),
except that (1) no amount paid to any
Certificate in respect of any
Basis Risk
Shortfall or Basis Risk
Shortfall
Carry Forward
Amount shall be included in the amount paid
in
respect of the
related
REMIC II Regular
Interest
and (2) any amount
paid in respect of Basis Risk
Shortfalls
and Basis Risk
Shortfall
Carryforward
Amounts shall be deemed paid with respect to REMIC II
Regular
Interest B-IO-I in respect of accrued and unpaid interest
thereon.
Any remaining
amount of the
REMIC II Available
Distribution
Amount shall be
distributed
to the holders of the Class R Certificates
in respect of Component II thereof.
REMIC
II
Interests:
The
REMIC
II
Regular
Interests
and
Component
II
of
the
Class
R
Certificates.
REMIC II Net
Deferred
Interest:
Net
Deferred
Interest
for any
Distribution
Date
shall be
allocated to the REMIC II Regular
Interests
to the same extent that Net
Deferred
Interest is allocated
to the Class of Certificates bearing the same designation.
REMIC II Regular Interest:
Any of the separate
beneficial
ownership
interests in REMIC II set
forth in
Section 5.01(c)
and issued hereunder and designated as a "regular
interest" in REMIC II.
Each
REMIC II
Regular
Interest
(other
than
REMIC II Regular
Interests
B-IO-I and
B-IO-P)
shall
accrue
interest at the Pass-Through
Rate for the Class of Certificates
bearing the same
designation
specified
in
Section 5.01(c),
modified as provided in the footnotes of the REMIC II table,
if
applicable.
REMIC
II Regular
Interest B-IO-I shall accrue interest at the Class B-IO
Pass-Through
Rate.
REMIC II Regular
Interest
B-IO-P
shall accrue no interest.
Each REMIC II Regular
Interest
(other than REMIC II Regular
Interest
B-IO-I) shall be entitled to
distributions
of principal,
subject to the terms and
conditions
hereof,
in an
aggregate
amount
equal to the
Current
Principal
Amount of the
Class of
Certificates
bearing
the same
designation
as set
forth in
Section 5.01(c).
The
designations
for the
respective
REMIC II Regular Interests are set forth in Section 5.01(c).
REMIC III:
That group of assets
contained in the Trust Fund
designated
as a REMIC
consisting
of REMIC II Regular Interests B-IO-I and B-IO-P and any proceeds
thereof.
REMIC
III
Available
Distribution
Amount:
For
any
Distribution
Date,
the
amounts
deemed
distributed with respect to REMIC II Regular Interests B-IO-I and
B-IO-P pursuant to Section 6.07.
REMIC III Distribution
Amount: For any Distribution
Date, the REMIC III Available
Distribution
Amount
shall be
deemed
distributed
by REMIC III to the
holders
of the Class
B-IO
Certificates
the
amounts deemed distributed with respect to REMIC II Regular
Interests B-IO-I and B-IO-P.
REMIC III Interests:
The REMIC III Regular Interest and the Class R-X Certificates.
REMIC III Regular Interest:
The separate
beneficial
ownership
interest in REMIC III set forth
in
Section 5.01(c)
and issued
hereunder and designated as the single
"regular
interest" in REMIC III.
The REMIC III
Regular Interest shall accrue interest at the
Uncertificated
Pass-Through
Rate specified
for the
REMIC III
Regular
Interest
in
Section 5.01(c).
The
designation
for the
REMIC III
Regular
Interest is set forth in Section 5.01(c).
REO
Acquisition:
The
acquisition
by the
Servicer on behalf of the Trustee for the benefit of
the Certificateholders and the Certificate Insurer of any REO
Property pursuant to Section 3.15.
REO
Disposition:
As to any REO Property,
a determination
by the Servicer that it has received
all Insurance Proceeds,
Liquidation
Proceeds,
REO Proceeds and other payments and recoveries (including
proceeds of a final
sale) which the
Servicer
expects to be finally
recoverable
from the sale or other
disposition of the REO Property.
REO Proceeds:
Proceeds, net of expenses, received in respect of any REO Property.
REO
Property:
A
Mortgaged
Property
acquired
in the name of the
Trust,
for the
benefit of
Certificateholders,
by
foreclosure
or
deed-in-lieu
of
foreclosure
in
connection
with a
defaulted
Mortgage Loan.
Reportable Event:
As defined in Section 3.18(a)(iii).
Repurchase
Price:
With respect to any
Mortgage
Loan (or any
property
acquired
with respect
thereto)
required to be
repurchased by the Sponsor
pursuant to the Mortgage Loan Purchase
Agreement or
Article
II of
this
Agreement,
an
amount
equal
to the
excess
of (i)
the
sum of (a)
100%
of the
Outstanding
Principal
Balance of such
Mortgage
Loan as of the date of
repurchase
(or if the
related
Mortgaged
Property was acquired with respect thereto,
100% of the Outstanding
Principal
Balance at the
date of the
acquisition),
(b) accrued but unpaid
interest on the Outstanding
Principal
Balance at the
related
Mortgage
Interest
Rate,
through and
including
the last day of the month of
repurchase,
and
(c) any
costs and
damages
(if any)
incurred
by the Trust in
connection
with any
violation
of such
Mortgage
Loan
of any
predatory
or
abusive
lending
laws
over
(ii)
any
portion
of the
Servicing
Compensation, Monthly Advances and advances payable to the
purchaser of the Mortgage Loan.
Repurchase
Proceeds:
The Repurchase
Price in connection with any repurchase of a Mortgage Loan
by the Sponsor and any cash deposit in connection with the
substitution of a Mortgage Loan.
Request for Release:
A request for release in the form attached hereto as Exhibit D.
Required
Insurance
Policy:
With respect to any Mortgage
Loan,
any insurance
policy which is
required to be maintained from time to time under this Agreement
with respect to such Mortgage Loan.
Reserve Fund:
The separate
trust
account
created and
maintained
by the Trustee
pursuant to
Section 4.08 hereof.
Residual Certificates:
The Class R Certificates and the Class R-X Certificates.
Responsible
Officer:
Any officer
assigned to the Corporate Trust Office of the Trustee (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 having direct
responsibility
for
the
administration
of this
Agreement,
and any other
officer of the
Trustee to whom a matter
arising
hereunder may be referred.
Rule
144A
Certificate:
The
certificate
to
be
furnished
by
each
purchaser
of a
Private
Certificate
(which is also a Physical
Certificate) which is a Qualified
Institutional
Buyer as defined
under Rule 144A promulgated
under the Securities Act,
substantially in the form set forth as Exhibit F-2
hereto.
S&P:
Standard & Poor's,
a division of The
McGraw-Hill
Companies,
Inc., and its successors in
interest.
Sarbanes-Oxley
Act:
The
Sarbanes-Oxley
Act of
2002
and the
rules
and
regulations
of the
Commission promulgated thereunder (including any interpretation
thereof by the Commission's staff).
Sarbanes-Oxley Certification:
As defined in Section 3.18(a)(iv).
Scheduled
Payment:
With respect to any Mortgage Loan and any Due Period,
the scheduled payment
or payments of principal
and interest
due during such Due Period on such
Mortgage
Loan which either is
payable
by a
Mortgagor
in such Due
Period
under
the
related
Mortgage
Note or,
in the case of REO
Property, would otherwise have been payable under the related
Mortgage Note.
Scheduled Principal:
The principal portion of any Scheduled Payment.
Securities Act:
The Securities Act of 1933, as amended.
Securities
Legend:
"THIS
CERTIFICATE
HAS NOT
BEEN
AND
WILL
NOT BE
REGISTERED
UNDER
THE
SECURITIES
ACT OF 1933,
AS AMENDED (THE
"SECURITIES
ACT"),
OR UNDER ANY STATE
SECURITIES
LAWS.
THE
HOLDER HEREOF,
BY PURCHASING THIS
CERTIFICATE,
AGREES THAT THIS
CERTIFICATE MAY BE REOFFERED,
RESOLD,
PLEDGED OR OTHERWISE
TRANSFERRED
ONLY IN COMPLIANCE
WITH THE SECURITIES ACT AND OTHER
APPLICABLE
LAWS
AND ONLY (1)
PURSUANT
TO RULE 144A UNDER THE
SECURITIES
ACT ("RULE
144A") TO A PERSON THAT THE HOLDER
REASONABLY
BELIEVES
IS A
QUALIFIED
INSTITUTIONAL
BUYER
WITHIN
THE
MEANING
OF RULE 144A (A "QIB"),
PURCHASING
FOR ITS OWN
ACCOUNT
OR A QIB
PURCHASING
FOR THE
ACCOUNT
OF A QIB,
WHOM THE
HOLDER
HAS
INFORMED,
IN EACH CASE, THAT THE REOFFER,
RESALE,
PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A OR (2) IN
CERTIFICATED
FORM TO AN
"INSTITUTIONAL
ACCREDITED
INVESTOR"
WITHIN
THE
MEANING
THEREOF IN RULE
501(a)(1),
(2),
(3) or (7) OF
REGULATION D UNDER THE ACT OR ANY ENTITY IN WHICH ALL OF
THE EQUITY
OWNERS COME
WITHIN SUCH
PARAGRAPHS
PURCHASING
NOT FOR
DISTRIBUTION
IN
VIOLATION
OF THE
SECURITIES ACT,
SUBJECT TO (A) THE RECEIPT BY THE TRUSTEE OF A LETTER
SUBSTANTIALLY IN THE FORM PROVIDED
IN THE
AGREEMENT
AND (B) THE RECEIPT BY THE
TRUSTEE OF SUCH OTHER
EVIDENCE
ACCEPTABLE
TO THE TRUSTEE
THAT
SUCH
REOFFER,
RESALE,
PLEDGE OR
TRANSFER
IS IN
COMPLIANCE
WITH THE
SECURITIES
ACT AND OTHER
APPLICABLE
LAWS OR IN EACH CASE IN ACCORDANCE
WITH ALL APPLICABLE
SECURITIES
LAWS OF THE UNITED STATES
AND ANY OTHER APPLICABLE
JURISDICTION.
THIS
CERTIFICATE MAY NOT BE ACQUIRED
DIRECTLY OR INDIRECTLY BY,
OR ON BEHALF OF, AN EMPLOYEE
BENEFIT PLAN OR OTHER
RETIREMENT
ARRANGEMENT (A "PLAN") THAT IS SUBJECT TO
TITLE I OF THE EMPLOYEE
RETIREMENT
INCOME
SECURITY ACT OF 1974, AS AMENDED,
AND/OR SECTION 4975 OF THE
INTERNAL
REVENUE CODE OF 1986,
AS AMENDED (THE
"CODE"),
OR BY A PERSON USING "PLAN
ASSETS" OF A PLAN,
UNLESS THE
PROPOSED
TRANSFEREE
PROVIDES
THE TRUSTEE
WITH AN OPINION OF COUNSEL FOR THE BENEFIT OF THE
TRUSTEE
AND THE
SERVICER
AND ON WHICH
THEY MAY RELY
WHICH IS
SATISFACTORY
TO THE
TRUSTEE
THAT THE
PURCHASE OF THIS
CERTIFICATE
IS
PERMISSIBLE
UNDER
APPLICABLE
LAW, WILL NOT CONSTITUTE OR RESULT IN A
NON-EXEMPT
PROHIBITED
TRANSACTION
UNDER SECTION 406 OF THE EMPLOYEE
RETIREMENT
INCOME SECURITY ACT OF
1974,
AS AMENDED,
OR SECTION
4975 OF THE CODE AND WILL NOT
SUBJECT THE
SERVICER OR THE TRUSTEE TO ANY
OBLIGATION OR LIABILITY IN ADDITION TO THOSE UNDERTAKEN IN THE
AGREEMENT.
Security
Instrument:
A written
instrument
creating a valid first lien on a Mortgaged Property
securing a Mortgage Note,
which may be any
applicable
form of mortgage,
deed of trust,
deed to secure
debt or security deed, including any riders or addenda thereto.
Servicer:
As of the Closing Date,
EMC Mortgage
Corporation
and,
thereafter,
its
respective
successors in interest that meet the qualifications of this
Agreement.
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: As to any Mortgage Loan and a
Distribution
Date, an amount equal to the product
of (i) the Stated
Principal
Amount of such Mortgage
Loan as of the Due Date in the month
preceding the
month in which such
Distribution
Date occurs and (ii) the
Servicing
Fee Rate,
or, in the event of any
payment of interest
that
accompanies
a Principal
Prepayment in full during the related Due Period made
by the Mortgagor
immediately prior to such prepayment,
interest at the related Servicing Fee Rate on the
Stated Principal Amount of such Mortgage Loan for the period
covered by such payment of interest.
Servicing Fee Rate:
As to any Mortgage Loan, 0.375% per annum.
Servicing
Officer:
The
President
or a Vice
President or
Assistant
Vice
President or other
authorized officer of the Servicer having direct
responsibility for the administration of this Agreement,
and any other authorized officer of the Servicer to whom a matter
arising hereunder may be referred.
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 of the aggregate
maximum probable
exposure of the outstanding
Certificates to the related Cap
Contract.
Significance
Percentage:
With respect to any
Distribution
Date,
and in accordance
with Item
1115 of
Regulation
AB,
shall
be an
percentage
equal
to the
Significance
Estimate
divided
by the
aggregate
outstanding
Certificate
Principal Balance of the
Certificates,
prior to the distribution of
the related Principal Distribution Amount on such Distribution
Date.
Sponsor:
EMC, as mortgage loan seller under the Mortgage Loan Purchase
Agreement.
Startup Day:
November 30, 2006.
Stated
Principal
Balance:
With
respect to any
Mortgage
Loan or related REO Property and any
Distribution
Date, the
Outstanding
Principal
Balance thereof as of the Cut-off Date (taking account of
the Principal
Payment to be made on such Due Date and
irrespective
of any
delinquency in its payment),
as specified in the
amortization
schedule at the time relating
thereto
(before any
adjustment to such
amortization
schedule by reason of any bankruptcy or similar proceeding
occurring after the Cut-Off Date
(other than a Deficient
Valuation) or any
moratorium or similar
waiver or grace period) plus any amount
by which the Principal
Balance thereof has been increased for Deferred
Interest pursuant to the terms of
the
related
Mortgage
Note on or prior to such
Distribution
Date,
minus the sum of (i) the
principal
portion of the
Scheduled
Payments due with respect to such
Mortgage
Loan during each Due Period ending
prior
to such
Distribution
Date
(and
irrespective
of any
delinquency
in their
payment),
(ii) all
Principal
Prepayments
with
respect
to such
Mortgage
Loan
received
prior to or during
the
related
Prepayment Period,
(iii) all Liquidation
Proceeds to the extent applied by the Servicer as recoveries of
principal in accordance
with this
Agreement
with respect to such Mortgage
Loan,
that were received by
the
Servicer
as of the
close
of
business
on the
last
day of the
calendar
month
related
to such
Distribution
Date and (iv) any Realized
Losses on such
Mortgage
Loan
incurred
prior to or during the
preceding calendar month. The Stated Principal Balance of a
Liquidated Mortgage Loan equals zero.
Stepdown Date: The earlier to occur of (i) the Distribution
Date on which the aggregate
Current
Principal
Amount of the Class A Certificates
has been reduced to zero and (ii) the later to occur of (x)
the
Distribution
Date
occurring
in
December
2009 and (y) the first
Distribution
Date for which the
aggregate
Current
Principal
Amount of the Class B Certificates
plus the
Overcollateralization
Amount
divided by the
aggregate
Stated
Principal
Balance of the
Mortgage
Loans is greater than or equal (i)
prior to the Distribution
Date in November 2012,
25.250% and (ii) on or after the
Distribution
Date in
November 2012, 20.200%.
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.
Subsequent
Recoveries:
As of
any
Distribution
Date,
amounts
received
during
the
related
Prepayment
Period by the Servicer (net of any related
expenses
permitted to be
reimbursed
pursuant to
Section 4.02) or surplus
amounts held by the Servicer to cover
estimated
expenses
(including,
but not
limited to,
recoveries in respect of the
representations
and warranties made by the Sponsor pursuant to
the
Mortgage
Loan
Purchase
Agreement)
specifically
related
to a
Liquidated
Mortgage
Loan
or the
disposition
of an REO Property prior to the related
Prepayment
Period that resulted in a Realized Loss,
after liquidation or disposition of such 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
Subcontractors) of a substantial
portion of the material servicing
functions required to be performed by
the Servicer under this Agreement or any
Reconstitution
Agreement that are identified in Item 1122(d) of
Regulation AB.
Substitute
Mortgage
Loan: A mortgage loan
tendered to the Trust
pursuant to the Mortgage Loan
Purchase
Agreement or
Section 2.04
of this
Agreement,
as applicable,
in each case,
(i) which has an
Outstanding
Principal
Balance not greater nor materially
less than the Mortgage Loan for which it is to
be
substituted;
(ii) which
has a Mortgage
Interest Rate and Net Rate not less than, and not materially
greater than,
such Mortgage Loan;
(iii) which
has a maturity date not materially
earlier or later than
such Mortgage
Loan and not later than the latest
maturity
date of any Mortgage
Loan;
(iv) which is of
the same property type and occupancy type as such Mortgage Loan;
(v) which has a
Loan-to-Value
Ratio not
greater
than the
Loan-to-Value
Ratio of such
Mortgage
Loan;
(vi) which
is
current
in
payment
of
principal
and interest as of the date of
substitution;
(vii) as to which the payment
terms do not vary
in any material
respect from the payment
terms of the Mortgage
Loan for which it is to be
substituted,
(viii) which has a Gross Margin,
Periodic Rate Cap and Maximum Lifetime
Mortgage Rate no less than those
of such
Mortgage
Loan,
has the same
Index
and
interval
between
Interest
Adjustment
Dates as such
Mortgage
Loan,
and a Minimum
Lifetime
Mortgage
Rate no lower than that of such Mortgage Loan and (ix)
has a
negative
amortization
cap of no more
than
that
of the
Mortgage
Loan
for
which
it is to be
substituted.
Substitution
Adjustment
Amount:
The amount,
if any, required to be paid by the Sponsor to the
Trustee
for
deposit
in the
Distribution
Account
pursuant
to
Section
2.04 in
connection
with the
substitution of a Mortgage Loan.
Tax
Administration
and Tax Matters
Person:
The Trustee and any successor
thereto or assignee
thereof shall serve as tax
administrator
hereunder and as agent for the Tax Matters
Person.
The Holder
of the
largest
percentage
interest
of each Class of
Residual
Certificates
shall be the Tax
Matters
Person for the related REMIC, as more particularly set forth in
Section 9.12 hereof.
Termination
Purchase Price: The price,
calculated as set forth in Section 10.01,
to be paid in
connection with the repurchase of the Mortgage Loans pursuant to
Section 10.01.
Trigger Event:
The occurrence of either a Delinquency
Test Violation or a Cumulative
Loss Test
Violation.
Trust
Fund or Trust:
The
corpus of the trust
created
by this
Agreement,
consisting
of the
Mortgage Loans and the other assets described in Section 2.01(a).
Trustee:
Wells
Fargo
Bank,
National
Association,
or
its
successor
in
interest,
or
any
successor trustee appointed as herein provided.
Trustee Fee:
As defined in Section 9.05.
Trustee Fee Rate: 0.0095% per annum.
Uncertificated
Accrued
Interest:
With respect to any
Uncertificated
Regular Interest for any
Distribution
Date,
one
month's
interest
at the
related
Uncertificated
Pass-Through
Rate
for such
Distribution
Date,
accrued
on
the
Uncertificated
Principal
Balance
immediately
prior
to
such
Distribution Date.
Uncertificated
Accrued Interest for the Uncertificated Regular Interests shall
accrue
on the basis of a 360-day year
consisting of twelve
30-day
months except as otherwise
indicated in the
definition of the applicable
Uncertificated
Pass-Through Rate. For purposes of calculating the amount of
Uncertificated
Accrued
Interest
for the
REMIC I
Regular
Interests
for any
Distribution
Date,
any
Prepayment
Interest
Shortfalls
and Relief Act
Shortfalls
(to the extent not
covered by
Compensating
Interest
Payments) shall be allocated
among the REMIC I Regular
Interests,
pro rata,
based on, and to
the extent of, Uncertificated
Accrued Interest,
as calculated without application of this sentence.
For
purposes of calculating the amount of
Uncertificated
Accrued Interest for the REMIC II Regular Interests
for any
Distribution
Date, any Prepayment
Interest
Shortfalls and Relief Act Shortfalls (to the extent
not covered by Compensating
Interest
Payments)
shall be allocated among the REMIC II Regular
Interests
to the same extent such amounts are allocated to the Class of
Certificates bearing the same designation.
Uncertificated
Pass-Through
Rate:
The
Uncertificated
REMIC
I
Pass-Through
Rate,
the
Uncertificated
REMIC
II
Pass-Through
Rate and the
Uncertificated
REMIC
III
Pass-Through
Rate,
as
applicable.
Any monthly
calculation
of
interest
at a stated
rate for the REMIC I Regular
Interests,
REMIC II
Regular
Interest B-IO-I or the REMIC III
Regular
Interest shall be based upon annual interest
at such rate divided by twelve.
Uncertificated
Principal Balance:
The principal amount of any
Uncertificated
Regular Interest
outstanding as of any date of determination.
The
Uncertificated
Principal Balance of each REMIC Regular
Interest shall never be less than zero.
Uncertificated
Regular
Interests:
The REMIC I Regular Interests and REMIC II Regular Interests
B-IO-I and B-IO-P.
Uncertificated
REMIC I Pass-Through
Rate: With respect to any Distribution
Date and: (i) REMIC
I Regular
Interests LT1 and LT2, the weighted average of the Net Rates on the
Mortgage Loans,
(ii) REMIC
I Regular
Interest LT3, zero (0.00%),
and (iii) REMIC I Regular Interest LT4, twice the weighted average
of the Net Rates on the Mortgage Loans.
Uninsured
Cause:
Any cause of damage to a Mortgaged
Property or related REO Property such that
the complete
restoration of such Mortgaged
Property or related REO Property is not fully reimbursable by
the hazard
insurance
policies
required to be maintained
pursuant to this Agreement,
without regard to
whether or not such policy is maintained.
United States Person:
A citizen or resident of the United
States,
a corporation or partnership
(including an entity treated as a corporation or partnership
for federal income tax purposes)
created or
organized
in, or under the laws of, the United
States or any state
thereof or the
District of Columbia
(except,
in the case of a
partnership,
to the extent
provided
in
regulations),
provided
that,
for
purposes solely of the Class R
Certificates,
no partnership or other entity treated as a partnership for
United States
federal
income tax purposes
shall be treated as a United States Person unless all persons
that own an interest in such
partnership
either directly or through any entity that is not a corporation
for United
States
federal
income tax purposes are United States
Persons,
or an estate whose income is
subject to United States
federal
income tax
regardless of its source,
or 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 such United
States
Persons have the
authority to control all
substantial
decisions of the trust.
To the
extent
prescribed
in
regulations
by the
Secretary
of the
Treasury,
which have not yet been
issued,
a trust which was in existence
on
August 20,
1996 (other than a trust
treated as owned by the
grantor under
subpart E of part I of
subchapter J of chapter 1 of the Code),
and which was treated as a
United
States
person on
August 20,
1996 may elect to continue to be treated as a United
States person
notwithstanding the previous sentence.
Unpaid
Realized
Loss
Amount:
With respect to any
Distribution
Date and any Class of Class A
Certificates and Class B Certificates,
the excess of (i) Applied Realized Loss Amounts
allocated to such
Class over (ii) the sum of all
distributions
to such Class in reduction of such
Applied
Realized
Loss
Amounts on all
previous
Distribution
Dates.
Any
amounts
distributed
to a Class of
Certificates
in
respect of any Unpaid Realized Loss Amount will not be applied to
reduce the Current
Principal
Amount of
such Class.
ARTICLE II
Conveyance of Mortgage Loans;
Original Issuance of Certificates
Section 2.01.
Conveyance
of Mortgage
Loans to
Trustee.
(a)
The
Depositor,
concurrently
with the
execution
and delivery of this
Agreement,
sells,
transfers
and assigns to the Trust without
recourse all its right,
title and interest in and to (i) the
Mortgage
Loans
identified in the Mortgage
Loan
Schedule,
including
all interest due and
principal
received
with respect to the Mortgage
Loans
after the
Cut-off
Date but
excluding
any
payments of
interest
due on or prior to the Cut-off
Date;
(ii) such
assets as shall from time to time be credited or are required by
the terms of this Agreement to
be credited to the Custodial
Account,
(iii) such
assets
relating to the Mortgage Loans as from time to
time may be held by the Trustee in the
Distribution
Account and the Reserve
Fund for the benefit of the
Offered
Certificates,
the Class B-5 Certificates and the Class B-IO
Certificates,
as applicable,
(iv)
any REO
Property,
(v) the
Required
Insurance
Policies
and any amounts paid or payable by the insurer
under any
Insurance
Policy (to the extent the
mortgagee has a claim
thereto),
(vi) the
Mortgage Loan
Purchase
Agreement
to the extent
provided in Section
2.03(a),
(vii) such assets as shall from time to
time be credited
or are
required by the terms of this
Agreement
to be credited to any of the
Accounts
and (viii) any
proceeds of the
foregoing.
Although
it is the intent of the
parties to this
Agreement
that the conveyance of the
Depositor's
right,
title and interest in and to the Mortgage Loans and other
assets in the Trust Fund pursuant to this Agreement
shall
constitute a purchase and sale and not a loan,
in the
event
that
such
conveyance
is deemed to be a loan,
it is the
intent of the
parties
to this
Agreement
that the Depositor
shall be deemed to have granted to the Trustee a first
priority
perfected
security
interest in all of the
Depositor's
right,
title and
interest
in, to and under the
Mortgage
Loans and other assets in the Trust Fund, and that this Agreement
shall
constitute a security
agreement
under
applicable
law.
The Class A-2
Certificateholders
will also have the benefit of the
Certificate
Insurance Policy.
(b)
In connection with the above transfer and
assignment,
the Sponsor hereby deposits with
the Trustee or the Custodian, as its agent, with respect to each
Mortgage Loan:
(i)
the original
Mortgage Note,
endorsed without recourse (A) to the order of the
Trustee or (B) in the case of a Mortgage Loan
registered on the MERS system,
in blank,
and in each case
showing an unbroken chain of endorsements
from the originator
thereof to the Person
endorsing it to the
Trustee, or lost note affidavit together with a copy of the related
Mortgage Note,
(ii)
the original
Mortgage and, if the related Mortgage Loan is a MOM Loan,
noting
the presence of the MIN and language
indicating
that such Mortgage Loan is a MOM Loan,
which shall have
been recorded (or if the original is not available,
a copy),
with evidence of such
recording
indicated
thereon (or if clause (w) in the proviso below applies, shall be in
recordable form),
(iii)
unless the
Mortgage
Loan is a MOM Loan,
a certified
copy of the
assignment
(which
may be in the
form of a
blanket
assignment
if
permitted
in the
jurisdiction
in
which
the
Mortgaged Property is located) to "Wells Fargo Bank, National
Association,
as Trustee",
with evidence of
recording
with respect to each Mortgage Loan in the name of the Trustee
thereon (or if clause (w) in the
proviso
below
applies or for
Mortgage
Loans with
respect to which the related
Mortgaged
Property is
located in a state
other than
Maryland,
Tennessee,
South
Carolina,
Mississippi
and
Florida,
or an
Opinion of Counsel has been provided as set forth in this Section
2.01(b), shall be in recordable form),
(iv)
all intervening assignments of the Security Instrument,
if applicable and only
to the extent available to the Depositor with evidence of recording
thereon,
(v)
the
original
or a copy of the
policy
or
certificate
of
primary
mortgage
guaranty insurance, to the extent available, if any,
(vi)
the original
policy of title
insurance or
mortgagee's
certificate
of title
insurance or commitment or binder for title insurance, and
(vii)
originals of all modification agreements, if applicable and
available.
provided,
however,
that in lieu of the
foregoing,
the Depositor
may deliver the following
documents,
under the
circumstances
set forth below: (w) in lieu of the original
Security
Instrument,
assignments
to the Trustee or
intervening
assignments
thereof
which have been
delivered,
are being
delivered or
will, upon receipt of recording
information
relating to the Security
Instrument required to be included
thereon,
be delivered to recording
offices for
recording and have not been returned to the Depositor in
time to permit their
delivery as specified
above,
the
Depositor may deliver a true copy thereof with a
certification by the Depositor,
on the face of such copy,
substantially
as follows:
"Certified to be a
true and correct copy of the
original,
which has been
transmitted
for
recording";
(x) in lieu of the
Security
Instrument,
assignment to the Trustee or
intervening
assignments
thereof,
if the applicable
jurisdiction
retains the originals of such documents (as evidenced by a
certification
from the Depositor
to
such
effect)
the
Depositor
may
deliver
photocopies
of such
documents
containing
an
original
certification by the judicial or other
governmental
authority of the
jurisdiction
where such documents
were
recorded;
and (y) the
Depositor
shall not be
required
to
deliver
intervening
assignments
or
Mortgage
Note
endorsements
between the Sponsor and the
Depositor,
and between the
Depositor
and the
Trustee;
and provided,
further,
however,
that in the case of Mortgage Loans which have been prepaid in
full after the Cut-off
Date and prior to the Closing
Date,
the
Depositor,
in lieu of
delivering
the
above
documents,
may deliver to the Trustee or the
Custodian,
as its agent,
a
certification
to such
effect and shall
deposit all amounts paid in respect of such Mortgage
Loans in the Custodial
Account on
the Closing Date. The Depositor shall deliver such original
documents
(including any original
documents
as to which
certified
copies had
previously
been
delivered) to the Trustee or the
Custodian,
as its
agent,
promptly
after they are
received.
The
Depositor
shall cause the Sponsor,
at its expense,
to
cause each
assignment
of the Security
Instrument
to the Trustee to be recorded not later than 180 days
after the Closing Date,
unless (a) such
recordation is not required by the Rating Agencies or an Opinion
of Counsel
addressed
to the Trustee has been
provided
to the
Trustee
(with a copy to the
Custodian)
which states that
recordation
of such
Security
Instrument
is not required to protect the interests of
the
Certificateholders
in the related
Mortgage
Loans or (b) MERS is identified on the Mortgage or on a
properly
recorded
assignment
of the
Mortgage
as the
mortgagee
of record
solely as nominee
for the
Sponsor and its successor and assigns;
provided,
however,
that each
assignment
shall be submitted for
recording by the Sponsor in the manner
described
above, at no expense to the Trust or the Trustee or the
Custodian,
as its agent,
upon the
earliest
to occur of:
(i) reasonable
direction
by the
Holders of
Certificates
evidencing
Fractional
Undivided
Interests
aggregating
not less
than 25% of the
Trust,
(ii) the
occurrence
of an
Event
of
Default,
(iii) the
occurrence
of a
bankruptcy,
insolvency
or
foreclosure
relating to the Sponsor and (iv) the
occurrence
of a
servicing
transfer as
described
in
Section 8.02
hereof.
Notwithstanding
the
foregoing,
if the Sponsor fails to pay the cost of recording
the
assignments,
such expense will be paid by the Trustee and the Trustee shall be
reimbursed
for such
expenses by the Trust in accordance with Section 9.05.
Section 2.02.
Acceptance
of
Mortgage
Loans by
Trustee.
(a) The Trustee (on behalf of the
Trust)
acknowledges
the sale,
transfer
and
assignment
of the Trust Fund to it by the
Depositor
and
receipt of,
subject to further
review and the
exceptions
which may be noted pursuant to the procedures
described below,
and declares that it holds, the documents (or certified copies
thereof)
delivered to it
or the
Custodian,
as its agent,
pursuant to
Section 2.01,
and declares
that it will continue to hold
those
documents
and any
amendments,
replacements
or
supplements
thereto and all other assets of the
Trust Fund
delivered to it as Trustee in trust for the use and benefit of all
present and future
Holders
of the
Certificates.
On the Closing
Date,
with
respect to the Mortgage
Loans,
the
Custodian
shall
acknowledge
with
respect to each
Mortgage
Loan by
delivery
to the
Depositor
and the
Trustee of an
Initial
Certification
receipt of the Mortgage File, but without review of such Mortgage
File,
except to
the extent
necessary to confirm that such Mortgage
File contains the related
Mortgage Note or lost note
affidavit.
No later than 90 days after the
Closing
Date (or with
respect
to any
Substitute
Mortgage
Loan,
within five (5) Business Days after the receipt by the Trustee or
Custodian
thereof),
the Trustee
agrees, for the benefit of the
Certificateholders
and the Certificate
Insurer, to review or cause to be
reviewed by the Custodian on its behalf (under the Custodial
Agreement),
each Mortgage File delivered to
it and to execute and deliver,
or cause to be executed and
delivered,
to the
Depositor and the Trustee
an Interim
Certification.
In conducting
such review,
the Trustee or Custodian will
ascertain
whether
all required documents have been executed and received,
and based on the Mortgage Loan Schedule,
whether
those documents
relate,
determined on the basis of the Mortgagor name,
original
principal
balance and
loan number,
to the Mortgage
Loans it has received,
as identified
in the Mortgage
Loan
Schedule.
In
performing
any such review,
the Trustee or the Custodian,
as its agent,
may
conclusively
rely on the
purported due
execution and
genuineness
of any such
document and on the purported
genuineness
of any
signature thereon.
If the Trustee or the Custodian,
as its agent,
finds any document
constituting part
of the Mortgage
File has not been executed or received,
or to be
unrelated,
determined on the basis of
the Mortgagor
name,
original
principal
balance and loan number,
to the Mortgage
Loans
identified in
Exhibit B,
or to appear
defective on its face (a "Material
Defect"),
the Trustee or the Custodian,
as
its agent,
shall promptly
notify the Sponsor.
In accordance
with the Mortgage Loan Purchase
Agreement
the Sponsor
shall
correct or cure any such defect
within
ninety (90) days from the date of notice from
the Trustee or the
Custodian,
as its agent,
of the defect and if the
Sponsor
fails to correct or cure
the defect
within such period,
and such defect
materially
and
adversely
affects the interests of the
Certificateholders
in the related
Mortgage
Loan,
the
Trustee or the
Custodian,
as its agent,
shall
enforce the Sponsor's
obligation
pursuant to the Mortgage Loan
Purchase
Agreement
within 90 days from
the Trustee's or the
Custodian's
notification,
to purchase such Mortgage Loan at the Repurchase
Price;
provided
that,
if such defect would cause the Mortgage
Loan to be other than a "qualified
mortgage" as
defined in
Section 860G(a)(3)(A)
of the Code and Treasury Regulation Section
1.860G-2(a)(1),
(2), (4),
(5), (6), (7) and (9), without reliance on the provisions of
Treasury
Regulation
Section
1.860G-2(a)(3)
or Treasury
Regulation Section
1.860G-2(f)(2) or any other provision that would allow a Mortgage
Loan to
be treated as a
"qualified
mortgage"
notwithstanding
its failure to meet the
requirements
of Section
860G(a)(3)(A)
of the Code and Treasury
Regulation
Section
1.860G-2(a)(1),
(2), (4), (5), (6), (7) and
(9),
any such cure or
repurchase
must occur
within 90 days from the date such
breach was
discovered;
provided,
however,
that if such defect
relates
solely to the
inability
of the Sponsor to deliver the
original
Security
Instrument
or
intervening
assignments
thereof,
or a
certified
copy
because the
originals of such
documents,
or a certified copy have not been returned by the applicable
jurisdiction,
the Sponsor shall not be required to purchase
such
Mortgage
Loan if the Sponsor
delivers such original
documents or certified
copy promptly upon receipt,
but in no event later than 360 days after the Closing
Date.
The foregoing
repurchase
obligation
shall not apply in the event that the Sponsor cannot deliver
such original or copy of any document
submitted for recording to the appropriate
recording office in the
applicable
jurisdiction
because such
document has not been
returned by such office;
provided that the
Sponsor
shall instead
deliver a recording
receipt of such
recording
office or, if such receipt is not
available,
a certificate
confirming
that such documents have been accepted for recording,
and delivery
to the Trustee or the
Custodian,
as its agent,
shall be effected by the Sponsor
within
thirty days of
its receipt of the original recorded document.
(b)
No later
than 180 days
after
the
Closing
Date (or with
respect
to any
Substitute
Mortgage Loan,
within five (5) Business Days after the receipt by the Trustee or
the Custodian
thereof),
the Trustee or the Custodian,
as its agent, will review,
for the benefit of the
Certificateholders
and
the
Certificate
Insurer,
the Mortgage Files delivered to it and will execute and deliver or
cause to be
executed
and
delivered
to the
Depositor
and the Trustee a Final
Certification.
In
conducting
such
review,
the Trustee or the Custodian,
as its agent,
will ascertain whether an original of each document
required to be recorded has been
returned from the
recording
office with evidence of recording
thereon
or a certified
copy has been obtained
from the recording
office.
If the Trustee or the
Custodian,
as
its agent,
finds a Material
Defect,
the Trustee or the Custodian,
as its agent,
shall promptly notify
the Sponsor (provided,
however,
that with respect to those documents described in Sections
2.01(b)(iv),
(v) and (vii),
the
Trustee's and
Custodian's
obligations
shall extend only to the documents
actually
delivered to the Trustee or the Custodian
pursuant to such
Sections).
In
accordance
with the Mortgage
Loan
Purchase
Agreement,
the Sponsor shall correct or cure any such defect within 90 days
from the date
of notice from the Trustee or the Custodian,
as its agent,
of the Material
Defect and if the Sponsor is
unable to cure such defect within such period,
and if such defect
materially
and adversely
affects the
interests
of the
Certificateholders
in the
related
Mortgage
Loan,
the
Trustee
shall
enforce
the
Sponsor's
obligation under the Mortgage Loan Purchase Agreement to provide a
Substitute Mortgage Loan (if
within two years of the Closing Date) or purchase such Mortgage
Loan at the
Repurchase
Price;
