POOLING AND SERVICING AGREEMENT

 

STRUCTURED ASSET MORTGAGE INVESTMENTS II INC.,

DEPOSITOR

WELLS FARGO BANK, NATIONAL ASSOCIATION,

TRUSTEE

and

EMC MORTGAGE CORPORATION

SERVICER, SELLER AND COMPANY

 

POOLING AND SERVICING AGREEMENT

 

Dated as of July 1, 2005

 

STRUCTURED ASSET MORTGAGE INVESTMENTS II INC.

GreenPoint Mortgage Funding Trust 2005-AR4,

Mortgage Pass-Through Certificates, Series 2005-AR4

 

 

 

 

 

 

ARTICLE I

DEFINITIONS

 

ARTICLE II

CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF CERTIFICATES

Section 2.01                Conveyance of Mortgage Loans to Trustee	38
Section 2.02                Acceptance of Mortgage Loans by Trustee	40
Section 2.03                Assignment of Interest in the Mortgage Loan Purchase Agreement and
Subsequent Mortgage Loan Purchase Agreement	42
Section 2.04                Substitution of Mortgage Loans	43
Section 2.05                Issuance of Certificates	44
Section 2.06                Representations and Warranties Concerning the Depositor	44
Section 2.07                Conveyance of Subsequent Mortgage Loans	44

 

 

ARTICLE III

ADMINISTRATION AND SERVICING OF MORTGAGE LOANS

Section 3.01                Servicer	46
Section 3.02                REMIC-Related Covenants	47
Section 3.03                Monitoring of Servicers	47
Section 3.04                Fidelity Bond	48
Section 3.05                Power to Act; Procedures	48
Section 3.06                Due-on-Sale Clauses; Assumption Agreements	49
Section 3.07                Release of Mortgage Files	49
Section 3.08                Documents, Records and Funds in Possession of Servicer To Be Held
for Trustee	50
Section 3.09                Standard Hazard Insurance and Flood Insurance Policies	51
Section 3.10                Presentment of Claims and Collection of Proceeds	51
Section 3.11                Maintenance of the Primary Mortgage Insurance Policies	52
Section 3.12                Trustee to Retain Possession of Certain Insurance Policies and
Documents	52
Section 3.13                Realization Upon Defaulted Mortgage Loans	52
Section 3.14                Compensation for the Servicer	53
Section 3.15                REO Property	53
Section 3.16                Annual Officer’s Certificate as to Compliance	54
Section 3.17                Annual Independent Accountant’s Servicing Report	54
Section 3.18                Reports Filed with Securities and Exchange Commission	55
Section 3.19                UCC	55
Section 3.20                Optional Purchase of Defaulted Mortgage Loans	56

 

 

 

 

 

 

 

ARTICLE IV

ACCOUNTS

Section 4.01                Custodial Account	58
Section 4.02                Permitted Withdrawals and Transfers from the Custodial Account	59
Section 4.03                Distribution Account	60
Section 4.04                Permitted Withdrawals and Transfers from the Distribution Account	60
Section 4.05                Class A Reserve Fund	60
Section 4.06                Statements to the Trustee	60
Section 4.07                Pre-Funding Account and Pre-Funding Reserve Account	60
Section 4.08                Interest Coverage Account	60
Section 4.09                Class XP Reserve Account	60

 

ARTICLE V

CERTIFICATES

Section 5.01                Certificates	63
Section 5.02                Registration of Transfer and Exchange of Certificates	69
Section 5.03                Mutilated, Destroyed, Lost or Stolen Certificates	72
Section 5.04                Persons Deemed Owners	73
Section 5.05                Transfer Restrictions on Residual Certificates	73
Section 5.06                Restrictions on Transferability of Certificates	74
Section 5.07                ERISA Restrictions	75
Section 5.08                Rule 144A Information	76

 

 

ARTICLE VI

PAYMENTS TO CERTIFICATEHOLDERS

Section 6.01                Distributions on the Certificates	77
Section 6.02                Allocation of Losses and Subsequent Recoveries	82
Section 6.03                Payments	84
Section 6.04                Statements to Certificateholders	85
Section 6.05                Monthly Advances	87
Section 6.06                Compensating Interest Payments	87
Section 6.07                Distributions on REMIC I Regular Interests and REMIC II Regular
Interests	88

 

 

 

 

 

 

 

ARTICLE VII

THE SERVICER

Section 7.01                Liabilities of the Servicer	89
Section 7.02                Merger or Consolidation of the Servicer	89
Section 7.03                Indemnification of the Trustee, the Servicer and the Trustee	89
Section 7.04                Limitations on Liability of the Servicer and Others	90
Section 7.05                Servicer Not to Resign	91
Section 7.06                Successor Servicer	91
Section 7.07                Sale and Assignment of Servicing	91

 

ARTICLE VIII

DEFAULT

Section 8.01                Events of Default	93
Section 8.02                Trustee to Act; Appointment of Successor	94
Section 8.03                Notification to Certificateholders	95
Section 8.04                Waiver of Defaults	95
Section 8.05                List of Certificateholders	96

 

 

ARTICLE IX

CONCERNING THE TRUSTEE

Section 9.01                Duties of Trustee	97
Section 9.02                Certain Matters Affecting the Trustee	99
Section 9.03                Trustee Not Liable for Certificates or Mortgage Loans	100
Section 9.04                Trustee May Own Certificates	101
Section 9.05                Trustee’s Fees and Expenses	101
Section 9.06                Eligibility Requirements for Trustee	101
Section 9.07                Insurance	102
Section 9.08                Resignation and Removal of the Trustee	102
Section 9.09                Successor Trustee	103
Section 9.10                Merger or Consolidation of Trustee	104
Section 9.11                Appointment of Co-Trustee or Separate Trustee	104
Section 9.12                Federal Information Returns and Reports to Certificateholders; REMIC
Administration; Grantor Trust Administration	105

 

 

 

 

 

 

ARTICLE X

TERMINATION

Section 10.01                Termination Upon Repurchase by EMC or its
Designee or Liquidation of the Mortgage Loans	108
Section 10.02                Additional Termination Requirements	110

 

 

ARTICLE XI

MISCELLANEOUS PROVISIONS

Section 11.01                Intent of Parties	112
Section 11.02                Amendment	112
Section 11.03                Recordation of Agreement	113
Section 11.04                Limitation on Rights of Certificateholders	113
Section 11.05                Acts of Certificateholders	114
Section 11.06                Governing Law	115
Section 11.07                Notices	115
Section 11.08                Severability of Provisions	116
Section 11.09                Successors and Assigns	116
Section 11.10                Article and Section Headings	116
Section 11.11                Counterparts	116
Section 11.12                Notice to Rating Agencies	116

 

 

                                APPENDICES

Appendix 1	-                Calculation of Class Y Principal Reduction Amounts
Appendix 2	-                Calculation of REMIC II Principal Reduction Amounts

 

                                EXHIBITS

Exhibit A-1	-                Form of Class A Certificates
Exhibit A-2	-                Form of Class M Certificates
Exhibit A-3	-                Form of Class B-1, B-2 and B-3 Certificates
Exhibit A-4	-                Form of Class R Certificates
Exhibit A-5	-                Form of Senior Class X Certificates
Exhibit A-6	-                Form of Class M-X Certificates
Exhibit A-7	-                Form of Class B-4, B-5 and B-6 Certificates
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
Exhibit F-2	-                Form of Rule 144A and Related Matters Certificate
Exhibit G	-                Form of Custodial Agreement
Exhibit H	-                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	-                Form of Subsequent Mortgage Loan Purchase Agreement
Exhibit N	-                Form of Subsequent Transfer Instrument

 

 

 

 

 

POOLING AND SERVICING AGREEMENT

Pooling and Servicing Agreement dated as of July 1, 2005, 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 seller (in such capacity, the “Seller”).

PRELIMINARY STATEMENT

On or prior to the Closing Date, the Depositor acquired the Mortgage Loans from the Seller. 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 Interests will be designated “regular interests” in such REMIC.

The Class R Certificates will evidence ownership of the “residual interest” in each REMIC.

The Group I 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 approximately $645,442,514. The Group II 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 approximately $481,996,275. The Group III 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 approximately $352,718,157. The Group IV 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 approximately $827,129,635.

In consideration of the mutual agreements herein contained, the Depositor, the Servicer, the Seller, the Company and the Trustee agree as follows:

 

1

 

 

 

 

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.

Accepted Servicing Practices : With respect to any Mortgage Loan, as applicable, those customary mortgage servicing practices, including prudent collection and loan administration procedures, of prudent mortgage servicing institutions that service mortgage loans of the same type and quality as such Mortgage Loan in the jurisdiction where the related Mortgaged Property is located, to the extent applicable to the Servicer.

Account : The Custodial Account, the Distribution Account, the Pre-Funding Account, the Pre-Funding Reserve Account, the Interest Coverage Account, the Class XP Reserve Account or the Class A Reserve Fund as the context may require.

Accrued Certificate Interest : With respect to the Certificates of any Class (other than the Class R Certificates and the Class XP Certificates) on any Distribution Date, is equal to the amount of interest accrued during the related Interest Accrual Period at the applicable Pass-Through Rate on the Current Principal Amount or Notional Amount, as applicable, of such Certificate immediately prior to such Distribution Date, less (1) in the case of a Senior Certificate, such Certificate’s share of (a) Prepayment Interest Shortfalls on the related Mortgage Loans, to the extent not covered by Compensating Interest Payments paid by the Servicer, (b) interest shortfalls on the related Mortgage Loans resulting from the application of the Relief Act or similar state law, (c) after the applicable Cross-Over Date, the interest portion of any Realized Losses on the related Mortgage Loans, in each case, allocated thereto in accordance with Section 6.02(g) and (d) any shortfalls resulting from Net Deferred Interest on Mortgage Loans in the related Loan Group allocated thereto in accordance with Section 6.01(e), (2) in the case of a Subordinate Certificate, such Certificate’s share of (a) Prepayment Interest Shortfalls on the Mortgage Loans in each Loan Group, to the extent not covered by Compensating Interest Payment paid by the Servicer, (b) interest shortfalls on the Mortgage Loans in each Loan Group resulting from the application of the Relief Act or similar state law, (c) the interest portion of any Realized Losses on the Mortgage Loans in each Loan Group allocated thereto in accordance with Section 6.02(g) and (d) any shortfalls resulting from Net Deferred Interest on the Mortgage Loans in each Loan Group allocated thereto in accordance with Section 6.01(e), and (3) in the case of the Class X Certificates, the Accrued Certificate Interest for each Class on any Distribution Date will be reduced by the amount of any Carryover Shortfall Amount for the Class A Certificates (in the case of the Senior Class X Certificates) and any Carryover Shortfall Amount for the Class M Certificates and the Class B Certificates (in the case of the Class M-X Certificates). Accrued Certificate Interest is calculated on the basis of (i) a 360-day year consisting of twelve 30-day months for the Class III-A Certificates and the Class X Certificates and (ii) a 360-day year and the actual number of days elapsed in the Interest Accrual Period for the Class A (other than the Class III-A Certificates), Class M and Class B Certificates. No Accrued Certificate Interest will be payable with respect to any Class of Certificates if the outstanding Current Principal Amount of such Certificate (other than the Class X Certificates) has been reduced to zero.

 

2

 

 

 

 

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.

Agreement : This Pooling and Servicing Agreement and all amendments hereof and supplements hereto.

Allocable Share : With respect to any Class of Subordinate Certificates and any Distribution Date, an amount equal to the product of (i) the Subordinate Optimal Principal Amount after giving effect to the reduction of the Current Principal Amount of the Class M-X Certificates on such Distribution Date and (ii) the fraction, the numerator of which is the Current Principal Amount of such Class and the denominator of which is the aggregate Current Principal Amount of all Classes of the Subordinate Certificates; provided, however, that no Class of Subordinate Certificates (other than the outstanding Class M Certificates or if no Class M Certificates are outstanding, the Class of Class B Certificates with the lowest numerical designation) shall be entitled on any Distribution Date to receive distributions pursuant to clauses (ii), (iii) and (v) of the definition of Subordinate Optimal Principal Amount unless the related Class Prepayment Distribution Trigger for such Distribution Date has been satisfied (any amount distributable pursuant to clauses (ii), (iii) and (v) of the definition of Subordinate Optimal Principal Amount shall be distributed among the Classes entitled thereto, pro rata based on their respective Current Principal Amounts); provided, further, that if on a Distribution Date, the Current Principal Amount of any Class of Subordinate Certificates for which the related Class Prepayment Distribution Trigger has been satisfied is reduced to zero, such Class’s remaining Allocable Share shall be distributed to the remaining Classes of Subordinate Certificates which satisfy the related Class Prepayment Distribution Trigger in reduction of their respective Current Principal Amounts, sequentially, first to the Class M Certificates and then to the Class B Certificates, in each case, in the order of their numerical Class designations.

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(d), 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.

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.

 

3

 

 

 

 

Assumed Final Distribution Date : October 25, 2045, or if such day is not a Business Day, the next succeeding Business Day.

Available Funds : With respect to any Distribution Date and a Loan Group, an amount equal to the aggregate of the following amounts with respect to the Mortgage Loans in the related Loan Group: (a) all previously undistributed payments on account of principal (including the principal portion of Scheduled Payments, Principal Prepayments and the principal portion of Net Liquidation Proceeds) and all previously undistributed payments on account of interest received after the Cut-off Date or Subsequent Cut-Off Date, as the case may be, and on or prior to the related Determination Date from the Mortgage Loans in the related Loan Group, (b) any Monthly Advances and Compensating Interest Payments by the Servicer with respect to such Distribution Date in respect of the Mortgage Loans in the related Loan Group, (c) any reimbursed amount in connection with losses on investments of deposits in an account for the related Mortgage Loans, (d) any Remaining Pre-Funded Amount withdrawn from the Pre-Funding Reserve Account pursuant to Section 4.07(e)(ii) herein, (e) any Remaining Pre-Funded Amount withdrawn from the Pre-Funding Reserve Account in respect of such Loan Group pursuant to Section 4.07(e)(iii) herein, and (f) any amount allocated from the Available Funds of another Loan Group in accordance with Section 6.01(a)(F) except:

(i)         all payments that were received before the Cut-off Date or Subsequent Cut-Off Date, as the case may be;

(ii)         all Principal Prepayments and Liquidation Proceeds received after the applicable Prepayment Period;

(iii)        all payments, other than Principal Prepayments, that represent early receipt of Scheduled Payments due on a date or dates subsequent to the related Due Date;

(iv)        amounts received on particular Mortgage Loans as late payments of principal or interest and respecting which, and to the extent that, there are any unreimbursed Monthly Advances;

(v)        amounts representing Monthly Advances determined to be Nonrecoverable Advances;

(vi)        any investment earnings on amounts on deposit in the Custodial Account, the Class A Reserve Fund and the Distribution Account and amounts permitted to be withdrawn from the Custodial Account and the Distribution Account pursuant to this Agreement;

(vii)       amounts needed to pay the Servicing Fee or to reimburse the Servicer for amounts due under this Agreement to the extent such amounts have not been retained by, or paid previously to, the Servicer;

(viii)      amounts applied to pay any fees with respect to any lender-paid primary mortgage insurance policy (if any); and

(ix)        any expenses or other amounts reimbursable to the Trustee, the Servicer and the Custodian pursuant to Section 7.04(c) or Section 9.05.

 

4

 

 

 

 

Average Loss Severity Percentage : With respect to any Distribution Date and each Loan Group, the percentage equivalent of a fraction, the numerator of which is the sum of the Loss Severity Percentages for each Mortgage Loan in such Loan Group which had a Realized Loss and the denominator of which is the number of Mortgage Loans in the related Loan Group that had Realized Losses.

Bankruptcy Code : The United States Bankruptcy Code, as amended as codified in 11 U.S.C. §§ 101-1330.

Bankruptcy Loss : With respect to any Mortgage Loan, any Deficient Valuation or Debt Service Reduction related to such Mortgage Loan as reported by the Servicer.

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 the jurisdiction in which the Trustee, the Custodian or the Servicer are authorized or obligated by law or executive order to be closed.

Carryover Shortfall Amount : For any Distribution Date and for any Class of Certificate (other than the Class X Certificates), an amount equal to the sum of: (i) the excess, if any, of (a) the amount of Accrued Certificate Interest that would have accrued on such class at a pass-through rate equal to (1) in the case of the Class III-A Certificates only, One-Year MTA plus the related margin or (2) with respect to the remaining Certificates (other than the Grantor Trust Certificates) the lesser of (I) One-Month LIBOR plus the related Margin and (II) 10.50%, over (b) the amount of Accrued Certificate Interest on such Class for such Distribution Date less the amount of any Net Deferred Interest added to the Current Principal Amount of such Class on that Distribution Date; (ii) the portion of the amount described in clause (i) above remaining unpaid from prior Distribution Dates; and (iii) one month’s interest at the rate described in clause (i)(a) above on the amount described in clause (ii) above.

Cash Liquidation : As to any defaulted Mortgage Loan other than a Mortgage Loan as to which an REO Acquisition occurred, a determination by the Servicer that it has received all Insurance Proceeds, Liquidation Proceeds and other payments or cash recoveries which the Servicer reasonably and in good faith expects to be finally recoverable with respect to such Mortgage Loan.

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-2, A-3, A-4, A-5, A-6, A-7 and A-8 with the blanks therein appropriately completed.

Certificate Group : With respect to Loan Group I, the Group I Certificates, with respect to Loan Group II, the Group II Certificates, with respect to Loan Group III, the Group III Certificates, and with respect to Loan Group IV, the Group IV Certificates.

 

5

 

 

 

 

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.

Class : With respect to the Certificates, any of Class I-A-1, Class I-A-2a, Class I-A-2b, Class I-A-3, Class II-A-1, Class II-A-2, Class III-A-1, Class III-A-2, Class IV-A-1a, Class IV-A-1b, Class IV-A-2, Class IV-A-3, Class X-1, Class X-2, Class X-3, Class X-4, Class M-X, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, Class B-1, Class B-2, Class B-3, Class B-4, Class B-5, Class B-6, Class R and Class XP Certificates.

Class A Certificates : The Class I-A, Class II-A, Class III-A and Class IV-A Certificates.

Class A Reserve Fund : As described in Section 4.05 herein.

Class B Certificates : The Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Certificates.

Class I-A Certificates : The Class I-A-1, Class I-A-2a, Class I-A-2b and Class I-A-3 Certificates.

Class II-A Certificates : The Class II-A-1 Certificates and the Class II-A-2 Certificates.

Class III-A Certificates : The Class III-A-1 Certificates and the Class III-A-2 Certificates.

Class IV-A Certificates : The Class IV-A-1a, Class IV-A-1b, Class IV-A-2 and Class IV-A-3 Certificates.

Class M Certificates : The Class M-1, Class M-2, Class M-3, Class M-4, Class M-5 and Class M-6 Certificates.

Class M-X Notional Amount : With respect to any Distribution Date and the Class M-X Certificates, the aggregate Current Principal Amount of the Class M-X, Class M and the Class B Certificates (before taking into account the payment of principal on such Certificates on such Distribution Date).

Class Prepayment Distribution Trigger : For a Class of Subordinate Certificates for any Distribution Date, the Class Prepayment Distribution Trigger is satisfied if the fraction (expressed as a percentage), the numerator of which is the aggregate Current Principal Amount of such Class and each Class of Subordinate Certificates, respectively, subordinate thereto, if any, and the denominator of which is the Scheduled Principal Balance of all of the Mortgage Loans as of the related Due Date, equals or exceeds such percentage calculated as of the Closing Date.

Class R Certificate : Any one of the Class R Certificates substantially in the form annexed hereto as Exhibit A-4 and evidencing ownership of interests designated as “residual

 

6

 

 

 

interests” in REMIC I, REMIC II and REMIC III 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, Component II of the Class R Certificates is designated as the sole class of “residual interest” in REMIC II and Component III of the Class R Certificates is designated as the sole class of “residual interest” in REMIC III.

Class R Deposit : The $100 deposit into the Distribution Account by the Depositor on the Closing Date to pay the Class R Certificates in accordance with Section 6.01(a) on the Distribution Date occurring in August 2005.

Class X Certificates : The Senior Class X Certificates and the Class M-X Certificates.

Class X-1 Notional Amount : With respect to any Distribution Date and the Class X-1 Certificates, the Current Principal Amount of the Class I-A Certificates and the Class X-1 Certificates (before taking into account the payment of principal on such Certificates on such Distribution Date).

Class X-2 Notional Amount : With respect to any Distribution Date and the Class X-2 Certificates, the Current Principal Amount of the Class II-A Certificates and the Class X-2 Certificates (before taking into account the payment of principal on such Certificates on such Distribution Date).

Class X-3 Notional Amount : With respect to any Distribution Date and the Class X-3 Certificates, the Current Principal Amount of the Class III-A Certificates and the Class X-3 Certificates (before taking into account the payment of principal on such Certificates on such Distribution Date).

Class X-4 Notional Amount : With respect to any Distribution Date and the Class X-4 Certificates, the Current Principal Amount of the Class IV-A Certificates and the Class X-4 Certificates (before taking into account the payment of principal on such Certificates on such Distribution Date).

Class XP Reserve Account : The account established and maintained by the Trustee pursuant to Section 4.09 hereof.

Class Y Principal Reduction Amounts : For any Distribution Date, the amounts by which the Uncertificated Principal Balances of the Class Y Regular Interests will be reduced on such Distribution Date by the allocation of Realized Losses and the distribution of principal, determined as described in Appendix 1.

Class Y Regular Interests : The Class Y-1 Regular Interest, the Class Y-2 Regular Interest, the Class Y-3 Regular Interest and the Class Y-4 Regular Interest..

Class Y-1 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the Class Y-1 Principal Reduction Amount for such Distribution Date over the principal portion of Realized Losses allocated to the Class Y-1 Regular Interest on such Distribution Date.

 

7

 

 

 

 

Class Y-1 Principal Reduction Amount : The Class Y Principal Reduction Amount for the Class Y-1 Regular Interest as determined pursuant to the provisions of the Appendix 1.

Class Y-1 Regular Interest : The uncertificated undivided beneficial interest in REMIC I which constitutes a REMIC I Regular Interest and is entitled to distributions as set forth herein.

Class Y-2 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the Class Y-2 Principal Reduction Amount for such Distribution Date over the principal portion of Realized Losses allocated to the Class Y-2 Regular Interest on such Distribution Date.

Class Y-2 Principal Reduction Amount : The Class Y Principal Reduction Amount for the Class Y-2 Regular Interest as determined pursuant to the provisions of the Appendix 1.

Class Y-2 Regular Interest : The uncertificated undivided beneficial interest in REMIC I which constitutes a REMIC I Regular Interest and is entitled to distributions as set forth herein.

Class Y-3 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the Class Y-3 Principal Reduction Amount for such Distribution Date over the principal portion of Realized Losses allocated to the Class Y-3 Regular Interest on such Distribution Date.

Class Y-3 Principal Reduction Amount : The Class Y Principal Reduction Amount for the Class Y-3 Regular Interest as determined pursuant to the provisions of the Appendix 1.

Class Y-3 Regular Interest : The uncertificated undivided beneficial interest in REMIC I which constitutes a REMIC I Regular Interest and is entitled to distributions as set forth herein.

Class Y-4 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the Class Y-4 Principal Reduction Amount for such Distribution Date over the principal portion of Realized Losses allocated to the Class Y-4 Regular Interest on such Distribution Date.

Class Y-4 Principal Reduction Amount : The Class Y Principal Reduction Amount for the Class Y-4 Regular Interest as determined pursuant to the provisions of the Appendix 1.

Class Y-4 Regular Interest : The uncertificated undivided beneficial interest in REMIC I which constitutes a REMIC I Regular Interest and is entitled to distributions as set forth herein.

Class Z Principal Reduction Amounts : For any Distribution Date, the amounts by which the Uncertificated Principal Balances of the Class Z Regular Interests will be reduced on such Distribution Date by the allocation of Realized Losses and the distribution of principal, which shall be in each case the excess of (A) the sum of (x) the excess of the REMIC I Available Distribution Amount for the related Group (i.e. the “related Group” for the Class Z-1 Regular Interest is the Group I Loans, the “related Group” for the Class Z-2 Regular Interest is the Group II Loans, the “related Group” for the Class Z-3 Regular Interest is the Group III Loans and the “related Group” for the Class Z-4 Regular Interest is the Group IV Loans) over the sum of the amounts thereof distributable (i) in respect of interest on such Class Z Regular Interest and the related Class Y Regular Interest, (ii) to such Class Z Regular Interest and the related Class Y Regular Interest pursuant to clause (e)(i) of the definition of “REMIC I Distribution Amount” and (iii) in the case of the Group I Loans, to the Class R Certificates and (y) the amount of

 

8

 

 

 

Realized Losses allocable to principal for the related Group over (B) the Class Y Principal Reduction Amount for the related Group.  

Class Z Regular Interests : The Class Z-1 Regular Interest, the Class Z-2 Regular Interest, the Class Z-3 Regular Interest and the Class Z-4 Regular Interest.

Class Z-1 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the Class Z-1 Principal Reduction Amount for such Distribution Date over the principal portion of Realized Losses allocated to the Class Z-1 Regular Interest on such Distribution Date.

Class Z-1 Principal Reduction Amount : The Class Z Principal Reduction Amount for the Class Z-1 Regular Interest as determined pursuant to the provisions of the Appendix 1.

Class Z-1 Regular Interest : The uncertificated undivided beneficial interest in REMIC I which constitutes a REMIC I Regular Interest and is entitled to distributions as set forth herein.

Class Z-2 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the Class Z-2 Principal Reduction Amount for such Distribution Date over the principal portion of Realized Losses allocated to the Class Z-2 Regular Interest on such Distribution Date.

Class Z-2 Principal Reduction Amount : The Class Z Principal Reduction Amount for the Class Z-2 Regular Interest as determined pursuant to the provisions of the Appendix 1.

Class Z-2 Regular Interest : The uncertificated undivided beneficial interest in REMIC I which constitutes a REMIC I Regular Interest and is entitled to distributions as set forth herein.

Class Z-3 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the Class Z-3 Principal Reduction Amount for such Distribution Date over the principal portion of Realized Losses allocated to the Class Z-3 Regular Interest on such Distribution Date.

Class Z-3 Principal Reduction Amount : The Class Z Principal Reduction Amount for the Class Z-3 Regular Interest as determined pursuant to the provisions of the Appendix 1.

Class Z-3 Regular Interest : The uncertificated undivided beneficial interest in REMIC I which constitutes a REMIC I Regular Interest and is entitled to distributions as set forth herein.

Class Z-4 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the Class Z-4 Principal Reduction Amount for such Distribution Date over the principal portion of Realized Losses allocated to the Class Z-4 Regular Interest on such Distribution Date.

Class Z-4 Principal Reduction Amount : The Class Z Principal Reduction Amount for the Class Z-4 Regular Interest as determined pursuant to the provisions of the Appendix 1.

Class Z-4 Regular Interest : The uncertificated undivided beneficial interest in REMIC I which constitutes a REMIC I Regular Interest and is entitled to distributions as set forth herein.

Closing Date : July 29, 2005.

 

9

 

 

 

 

Code : The Internal Revenue Code of 1986, as amended.

Company : EMC.

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, GreenPoint Mortgage Funding 2005-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, GreenPoint Mortgage Funding 2005-AR4.

Cross-Over Date : The first Distribution Date on which the aggregate Current Principal Amount of the Subordinate Certificates has been reduced to zero.

Current Principal Amount : With respect to any Class A, Class X, Class M 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, in the case of the Subordinate Certificates, 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, (ii) the principal portion of all Realized Losses (other than Realized Losses resulting from Debt Service Reductions) allocated prior to such Distribution Date to such Certificate, taking account of the Loss Allocation Limitation, and (iii) in the case of a Subordinate Certificate, such Certificate’s pro rata share, if any, of the applicable Subordinate Certificate Writedown Amount for 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). Notwithstanding the foregoing, solely for purposes of giving consents, directions, waivers, approvals, requests and notices, the Class R Certificates after the Distribution Date on which the principal thereof has been paid in full shall be deemed to have a Current Principal Amount equal to the Current Principal Amount thereof on the day immediately preceding such Distribution Date.

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., GreenPoint Mortgage Funding Trust 2005-AR4, Mortgage Pass-Through Certificates, Series 2005-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.

 

10

 

 

 

 

Custodian : Wells Fargo Bank, National Association, or any successor custodian appointed pursuant to the provisions hereof and of the Custodial Agreement.

Cut-off Date : July 1, 2005.

Cut-off Date Balance : $2,307,286,531.

Debt Service Reduction : Any reduction of the Scheduled Payments which a Mortgagor is obligated to pay with respect to a Mortgage Loan as a result of any proceeding under the Bankruptcy Code or any other similar state law or other proceeding.

Deferred Interest : The amount of interest which is deferred and added to the Principal Balance of a Mortgage Loan due to negative amortization on such Mortgage Loan.

Deficient Valuation : With respect to any Mortgage Loan, a valuation of the Mortgaged Property by a court of competent jurisdiction in an amount less than the then outstanding indebtedness under the Mortgage Loan, which valuation results from a proceeding initiated under the Bankruptcy Code or any other similar state law or other proceeding.

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),

 

11

 

 

 

(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 2005-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., GreenPoint Mortgage Funding Trust 2005-AR4, Mortgage Pass-Through Certificates, Series 2005-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.

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

 

12

 

 

 

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 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.

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.

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.

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) a Residual Certificate 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.

Freddie Mac : Freddie Mac, formerly the Federal Home Loan Mortgage Corporation, and any successor thereto.

 

13

 

 

 

 

 

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).

Grantor Trust : The corpus of the Trust created under the Grantor Trust Agreement.

Grantor Trust Agreement : The grantor trust agreement, dated as of July 29, 2005, between the Depositor and Wells Fargo Bank, National Association, as grantor trustee.

Grantor Trust Certificates : The certificates issued pursuant to the Grantor Trust Agreement.

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.

Group I Certificates : The Class I-A-1, Class I-A-2a, Class I-A-2b, Class I-A-3 and Class X-1 Certificates.

Group I Loans : The Mortgage Loans identified as such on the Mortgage Loan Schedule.

Group II Certificates : The Class II-A-1, Class II-A-2 and Class X-2 Certificates.

Group II Loans : The Mortgage Loans identified as such on the Mortgage Loan Schedule.

Group III Certificates : The Class III-A-1, Class III-A-2 and Class X-3 Certificates.

Group III Loans : The Mortgage Loans identified as such on the Mortgage Loan Schedule.

Group IV Certificates : The Class IV-A-1a, Class IV-A-1b, Class IV-A-2, Class IV-A-3 and Class X-4 Certificates.

Group IV Loans : The Mortgage Loans identified as such on the Mortgage Loan Schedule.

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

 

14

 

 

 

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.

Initial 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.

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.

Interest Accrual Period : For each Class of Class A (other than the Class III-A Certificates), Class M and Class B 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

 

15

 

 

 

the day immediately prior to such Distribution Date. For each Class of Class III-A Certificates and Class X Certificates and for any Distribution Date, the one-month period preceding the month in which such Distribution Date occurs. For purposes of clarification, if the Closing Date occurs in a month that contains thirty one (31) days, the first Interest Accrual Period shall include the 31st day of such month.

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 Coverage Account : The account or sub-account established and maintained by the Trustee pursuant to Section 4.08(a) and which shall be an Eligible Account or a sub-account of an Eligible Account.

Interest Coverage Amount : The amount to be paid by the Depositor to the Paying Agent for deposit in the Interest Coverage Account on the Closing Date pursuant to Section 4.08, which amount is $4,328,707.85.

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 Scheduled 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 Scheduled 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 Scheduled 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.

Interest-Only Certificates : The Senior Class X Certificates and the Class M-X Certificates.

Interim Certification : The certification substantially in the form of Exhibit Two to the Custodial Agreement.

 

16

 

 

 

 

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, Ju ly 27, 2005. With respect to each Class of Offered 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 Mortgage 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 Group : Loan Group I, Loan Group II, Loan Group III or Loan Group IV, as applicable.

Loan Group I : The group of Mortgage Loans designated as belonging to Loan Group I on the Mortgage Loan Schedule and any Subsequent Mortgage Loans added to Loan Group I.

Loan Group II : The group of Mortgage Loans designated as belonging to Loan Group II on the Mortgage Loan Schedule and any Subsequent Mortgage Loans added to Loan Group II.

Loan Group III : The group of Mortgage Loans designated as belonging to Loan Group III on the Mortgage Loan Schedule and any Subsequent Mortgage Loans added to Loan Group III.

Loan Group IV : The group of Mortgage Loans designated as belonging to Loan Group IV on the Mortgage Loan Schedule and any Subsequent Mortgage Loans added to Loan Group IV.

 

17

 

 

 

 

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.

Loss Allocation Limitation : The meaning specified in Section 6.02(c) hereof.

Loss Severity Percentage : With respect to any Distribution Date, the percentage equivalent of a fraction, the numerator of which is the amount of Realized Losses incurred on a Mortgage Loan and the denominator of which is the Scheduled Principal Balance of such Mortgage Loan immediately prior to the liquidation of such Mortgage Loan.

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 (i) the Class I-A-1 Certificates, 0.260% per annum, (ii) the Class I-A-2a Certificates, 0.320% per annum, (iii) the Class I-A-2b Certificates, 0.310% per annum, (iv) the Class I-A-3 Certificates, 0.390% per annum, (v) the Class II-A-1 Certificates, 0.270% per annum, (vi) the Class II-A-2 Certificates, 0.390% per annum, (vii) the Class III-A-1 Certificates, 1.400% per annum, (viii) the Class III-A-2 Certificates, 1.400% per annum, (ix) the Class IV-A-1a Certificates, 0.310% per annum, (x) the Class IV-A-1b Certificates, 0.310% per annum, (xi) the Class IV-A-2 Certificates, 0.360% per annum, (xii) the Class IV-A-3 Certificates, 0.430% per annum, (xiii) the Class M-1 Certificates, 0.530% per annum, (xiv) the Class M-2 Certificates, 0.580% per annum; (xv) the Class M-3 Certificates, 0.630% per annum; (xvi) the Class M-4 Certificates, 0.750% per annum; (xvii) the Class M-5 Certificates, 0.770% per annum; (xviii) the Class M-6 Certificates, 0.820% per annum; (xix) the Class B-1 Certificates, 1.400% per annum; (xx) the Class B-2 Certificates, 1.550% per annum; (xxi) the Class B-3 Certificates, 2.100% per annum; (xxii) the Class B-4 Certificates, 2.150% per annum; (xxiii) the Class B-5 Certificates, 2.150% per annum; and (xxiv) the Class B-6 Certificates, 2.150% per annum; and with respect to any Distribution Date after the first possible Optional Termination Date and (i) the Class I-A-1 Certificates, 0.520% per annum, (ii) the Class I-A-2a Certificates, 0.640% per annum, (iii) the Class I-A-2b Certificates, 0.310% per annum, (iv) the Class I-A-3 Certificates, 0.780% per annum, (v) the Class II-A-1 Certificates, 0.540% per annum, (vi) the Class II-A-2 Certificates, 0.780% per annum, (vii) the Class III-A-1 Certificates, 1.400% per annum, (viii) the Class III-A-2 Certificates, 1.400% per annum, (ix) the Class IV-A-1a Certificates, 0.620% per annum, (x) the Class IV-A-1b Certificates, 0.310% per annum, (xi) the Class IV-A-2 Certificates, 0.720% per annum, (xii) the Class IV-A-3 Certificates, 0.860% per annum, (xiii) the Class M-1 Certificates, 0.795% per annum, (xiv) the Class M-2 Certificates, 0.870% per annum; (xv) the Class M-3 Certificates, 0.945% per annum; (xvi) the Class M-4 Certificates, 1.125% per annum; (xvii) the Class M-5 Certificates, 1.155% per annum; (xviii) the Class M-6 Certificates, 1.230% per annum; (xix) the Class B-1 Certificates, 2.100% per annum; (xx) the Class B-2 Certificates, 2.325% per annum; (xxi) the Class B-3 Certificates, 3.150% per annum; (xxii) the Class B-4 Certificates, 3.225% per annum; (xxiii) the Class B-5 Certificates, 3.225% per annum; and (xxiv) the Class B-6 Certificates, 3.225% per annum.

Marker Rate : With respect to the Class X-1 Certificates or the REMIC III Regular Interest X-1 and any Distribution Date, in relation to the REMIC II Regular Interests, a per

 

18

 

 

 

annum rate equal to two (2) times the weighted average of the Uncertificated REMIC II Pass Through Rates for REMIC II Regular Interest LT2 and REMIC II Regular Interest LT3. With respect to the Class X-2 Certificates or the REMIC III Regular Interest X-2 and any Distribution Date, in relation to the REMIC II Regular Interests, a per annum rate equal to two (2) times the weighted average of the Uncertificated REMIC II Pass Through Rates for REMIC II Regular Interest LT6 and REMIC II Regular Interest LT7. With respect to the Class X-3 Certificates or the REMIC III Regular Interest X-3 and any Distribution Date, in relation to the REMIC II Regular Interests, a per annum rate equal to two (2) times the weighted average of the Uncertificated REMIC II Pass Through Rates for REMIC II Regular Interest LT10 and REMIC II Regular Interest LT11. With respect to the Class X-4 Certificates or the REMIC III Regular Interest X-4 and any Distribution Date, in relation to the REMIC II Regular Interests, a per annum rate equal to two (2) times the weighted average of the Uncertificated REMIC II Pass Through Rates for REMIC II Regular Interest LT14 and REMIC II Regular Interest LT15. With respect to the Class M-X Certificates or the REMIC III Regular Interest M-X and any Distribution Date, in relation to the REMIC II Regular Interests, a per annum rate equal to two (2) times the weighted average of the Uncertificated REMIC II Pass-Through Rates for REMIC II Regular Interest LT17 and REMIC II Regular Interest LT18.

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.

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.

 

19

 

 

 

 

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 : Each Initial Mortgage Loan and Subsequent Mortgage Loan.

Mortgage Loan Purchase Agreement : The Mortgage Loan Purchase Agreement dated as of July 29, 2005, between EMC, as 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 Initial Mortgage Loans and divided into Loan Groups, and the schedule attached as Exhibit 1 to the related Subsequent Transfer Instrument with respect to the related Subsequent Mortgage Loans, each as amended from time to time to reflect the repurchase or substitution of Mortgage Loans or the addition of Subsequent Mortgage Loans pursuant to this Agreement, the Mortgage Loan Purchase Agreement or the Subsequent 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 for each Loan Group, 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, in that order included in Available Funds for such Distribution Date and available to make principal distributions on the related Certificates on that Distribution Date.

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.

 

20

 

 

 

 

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 Class A Certificates, the weighted average of the Net Rates of the Mortgage Loans in the related Loan Group, and with respect to the Class M Certificates and the Class B Certificates, the weighted average of (i) the weighted average of the Net Rates on the Mortgage Loans in Loan Group I, (ii) the weighted average of the Net Rates on the Mortgage Loans in Loan Group II, (iii) the weighted average of the Net Rates on the Mortgage Loans in Loan Group III and (iv) the weighted average of the Net Rates on the Mortgage Loans in Loan Group IV, weighted on the basis of (i) the excess of the aggregate Scheduled Principal Balance of the Mortgage Loans in Loan Group I over the aggregate Current Principal Amount of the Class I-A Certificates and the Class X-1 Certificates, (ii) the excess of the aggregate Scheduled Principal Balance of the Mortgage Loans in Loan Group II over the aggregate Current Principal Amount of the Class II-A Certificates and the Class X-2 Certificates, (iii) the excess of the aggregate Scheduled Principal Balance of the Mortgage Loans in Loan Group III over the aggregate Current Principal Amount of the Class III-A Certificates and Class X-3 Certificates and (iv) the excess of the aggregate Scheduled Principal Balance of the Mortgage Loans in Loan Group IV over the aggregate Current Principal Amount of the Class IV-A Certificates and the Class X-4 Certificates, respectively, in each case as adjusted to an effective rate reflecting the accrual of interest on the basis of a 360-day year and the actual number of days elapsed in the related Interest Accrual Period. For federal income tax purposes, the Net Rate Cap for the Class M Certificates and the Class B Certificates is equal to the weighted average of the Uncertificated REMIC II Pass-Through Rates for the REMIC II Regular Interests LT-Y1, LT-Y2, LT-Y3 and LT-Y4.

Non-Offered Subordinate Certificates : The Class XP, Class B-4, Class B-5 and Class B-6 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 : The Class X-1 Notional Amount, the Class X-2 Notional Amount, the Class X-3 Notional Amount, the Class X-4 Notional Amount and the Class M-X Notional Amount, as applicable.

Offered Certificates : The Class I-A-1, Class I-A-2a, Class I-A-3, Class II-A-1, Class II-A-2, Class III-A-1, Class III-A-2, Class IV-A-1a, Class IV-A-2, Class IV-A-3, Class X-1, Class X-2, Class X-3, Class X-4, Class M-X, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, Class B-1, Class B-2, Class B-3 and Class R Certificates and any Grantor Trust Certificate.

 

21

 

 

 

 

Offered Subordinate Certificates : The Class M-X, Class M, Class B-1, Class B-2 and Class B-3 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 (other than the Class R Certificates or the Class XP Certificates) for any Interest Accrual Period shall, in the absence of manifest error, be final and binding.

One-Year MTA : With respect to any Interest Accrual Period and the Class III-A Certificates, the rate of One-Year MTA determined by the Trustee for the related Interest Accrual Period as published by the Federal Reserve Board in the Federal Reserve Statistical Release 'Selected Interest Rates (H.15)', determined by averaging the monthly yields for the most recently available twelve months. The One-Year MTA figure used to determine the pass-through rate on the Class III-A Certificates will be based on One-Year MTA as of fifteen days before the beginning of the related Interest Accrual Period. If One-Year MTA is no longer available, the index used to determine the pass-through rate on the Class III-A Certificates will be the same index selected to determine the interest rates on the Group III Mortgage Loans. The establishment of One-Year MTA on each interest determination date by the Trustee and the Trustee’s calculation of the Pass-Through Rates applicable to the Class III-A Certificates for the related 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 Scheduled Principal Balance of the Mortgage Loans is less than 10% of the sum of (i) the Cut-off Date Balance and (ii) the Pre-Funded Amount.

Original Subordinate Principal Balance : The sum of the aggregate Current Principal Amounts of each Class of Subordinate Certificates as of the Closing Date.

 

22

 

 

 

 

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.

Pass-Through Rate : As to each Class of Certificates, the REMIC I Regular Interests, the REMIC II Regular Interests and REMIC III Regular Interests, the rate of interest determined as provided with respect thereto, in Section 5.01(c). Any monthly calculation of interest at a stated rate for the REMIC I Regular Interests, the REMIC II Regular Interests, REMIC III Regular Interest X-1, REMIC III Regular Interest X-2, REMIC III Regular Interest X-3, REMIC III Regular Interest X-4, REMIC III Regular Interest M-X, the Senior Class X Certificates and the Class M-X Certificates shall be based upon annual interest at such rate divided by twelve. Any monthly calculation of interest at a stated rate for the Class A, Class M or Class B Certificates shall be based on a year of 360 days and the actual number of days in the accrual period for which the calculation is being performed.

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 : Any one or more of the following obligations or securities held in the name of the Trustee for the benefit of the Certificateholders:

(i)         direct obligations of, and obligations the timely payment of which are fully guaranteed by the United States of America or any agency or instrumentality of the United States of America the obligations of which are backed by the full faith and credit of the United States of America;

(ii)         (a) demand or time deposits, federal funds or bankers’ acceptances issued by any depository institution or trust company incorporated under the laws of the United States of America or any state thereof (including the Trustee or its Affiliates acting in its commercial banking capacity) and subject to supervision and examination by federal and/or state banking authorities, provided that the commercial paper and/or the short-term debt rating and/or the long-term unsecured debt obligations of such depository institution or trust company at the time of such investment or contractual commitment providing for such investment have the

 

23

 

 

 

Applicable Credit Rating or better from each Rating Agency and (b) any other demand or time deposit or certificate of deposit that is fully insured by the Federal Deposit Insurance Corporation;

(iii)        repurchase obligations with respect to (a) any security described in clause (i) above or (b) any other security issued or guaranteed by an agency or instrumentality of the United States of America, the obligations of which are backed by the full faith and credit of the United States of America, in either case entered into with a depository institution or trust company (acting as principal) described in clause (ii)(a) above where the Trustee holds the security therefor;

(iv)        securities bearing interest or sold at a discount issued by any corporation (including the Trustee or the Servicer or their Affiliates) incorporated under the laws of the United States of America or any state thereof that have the Applicable Credit Rating or better from each Rating Agency at the time of such investment or contractual commitment providing for such investment; provided, however, that securities issued by any particular corporation will not be Permitted Investments to the extent that investments therein will cause the then outstanding principal amount of securities issued by such corporation and held as part of the Trust to exceed 10% of the aggregate Outstanding Principal Balances of all the Mortgage Loans and Permitted Investments held as part of the Trust;

(v)        commercial paper (including both non-interest-bearing discount obligations and interest-bearing obligations payable on demand or on a specified date not more than one year after the date of issuance thereof) having the Applicable Credit Rating or better from each Rating Agency at the time of such investment;

(vi)        a Reinvestment Agreement issued by any bank, insurance company or other corporation or entity;

(vii)       any other demand, money market or time deposit, obligation, security or investment as may be acceptable to each Rating Agency as evidenced in writing by each Rating Agency to the Trustee;

(viii)      any money market or common trust fund having the Applicable Credit Rating or better from each Rating Agency, including any such fund for which the Trustee or the Servicer, or any affiliate of the Trustee or the Servicer, acts as a manager or an advisor; provided, however, that no instrument or security shall be a Permitted Investment if such instrument or security evidences a right to receive only interest payments with respect to the obligations underlying such instrument or if such security provides for payment of both principal and interest with a yield to maturity in excess of 120% of the yield to maturity at par or if such instrument or security is purchased at a price greater than par; and

(ix)        interests in any money market fund (including any such fund managed or advised by the Trustee or the 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

 

24

 

 

 

in the downgrading or withdrawal of the ratings then assigned to the Certificates by each Rating Agency.

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 Residual Certificates and the Private Certificates.

Plan : The meaning specified in Section 5.07(a).

Pre-Funded Amount : The amount remitted by the Depositor to the Trustee and deposited by it in the Pre-Funding Account on the Closing Date with respect to the Subsequent Mortgage Loans for Loan Group IV, which amount is approximately $539,035,715.

Pre-Funding Account : The account or sub-account established and maintained by the Trustee pursuant to Section 4.07(a) and which shall be an Eligible Account or a sub-account of an Eligible Account.

Pre-Funding Period : The period from the Closing Date until the earliest of (i) the date on which the amount on deposit in the Pre-Funding Account (exclusive of investment income) is reduced to zero or (ii) October 17, 2005.

Pre-Funding Reserve Account : The account or sub-account established and maintained by the Trustee pursuant to Section 4.07(d) and which shall be an Eligible Account or a sub-account of an Eligible Account.

Prepayment Charge : With respect to any Mortgage Loan, the charges or premiums, if any, due in connection with a full or partial 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 partial Principal Prepayment or a Principal Prepayment in full during the related Prepayment Period, the amount, if any, by which (i) one month’s interest at the applicable Net Rate on the Scheduled Principal Balance immediately prior to such prepayment or in the case of a partial Principal Prepayment on the amount of such prepayment exceeds (ii) the amount of interest paid or collected in connection with such Principal Prepayment less the sum of (a) any Prepayment Charges and (b) the related Servicing Fee.

Prepayment Period : With respect to any Distribution Date, the period from the sixteenth day of the calendar month preceding the calendar month in which such Distribution Date occurs

 

25

 

 

 

through the close of business on the fifteenth day of the calendar month in which such Distribution Date occurs.

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 therefor 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 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.

Private Certificates : The Class XP, Class B-4, Class B-5 and Class B-6 Certificates.

Prospectus : The prospectus, dated December 20, 2004, as supplemented by the prospectus supplement dated July 27, 2005, 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 related Net Liquidation Proceeds with respect to such Mortgage Loan and the related Mortgage 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 on any Distribution Date.

Realized Losses on the Mortgage Loans shall be allocated to the REMIC I Regular Interests as follows: (1) The interest portion of Realized Losses and Net Interest Shortfalls on the Group I Loans, if any, shall be allocated between the Class Y-1 and Class Z-1 Regular Interests

 

26

 

 

 

pro rata according to the amount of interest accrued but unpaid thereon, in reduction thereof; (2) the interest portion of Realized Losses and Net Interest Shortfalls on the Group II Loans, if any, shall be allocated between the Class Y-2 and Class Z-2 Regular Interests pro rata according to the amount of interest accrued but unpaid thereon, in reduction thereof; (3) the interest portion of Realized Losses and Net Interest Shortfalls on the Group III Loans, if any, shall be allocated between the Class Y-3 and Class Z-3 Regular Interests pro rata according to the amount of interest accrued but unpaid thereon, in reduction thereof; and (4) the interest portion of Realized Losses and Net Interest Shortfalls on the Group IV Loans, if any, shall be allocated between the Class Y-4 and Class Z-4 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 in such Group and allocated pursuant to the succeeding sentences. The principal portion of Realized Losses with respect to the Mortgage Loans shall be allocated to the REMIC I Regular Interests as follows: (1) the principal portion of Realized Losses on the Group I Loans shall be allocated, first, to the Class Y-1 Regular Interest to the extent of the Class Y-1 Principal Reduction Amount in reduction of the Uncertificated Principal Balance of such Regular Interest and, second, the remainder, if any, of such principal portion of such Realized Losses shall be allocated to the Class Z-1 Regular Interest in reduction of the Uncertificated Principal Balance thereof; (2) the principal portion of Realized Losses on the Group II Loans shall be allocated, first, to the Class Y-2 Regular Interest to the extent of the Class Y-2 Principal Reduction Amount in reduction of the Uncertificated Principal Balance of such Regular Interest and, second, the remainder, if any, of such principal portion of such Realized Losses shall be allocated to the Class Z-2 Regular Interest in reduction of the Uncertificated Principal Balance thereof; (3) the principal portion of Realized Losses on the Group III Loans shall be allocated, first, to the Class Y-3 Regular Interest to the extent of the Class Y-3 Principal Reduction Amount in reduction of the Uncertificated Principal Balance of such Regular Interest and, second, the remainder, if any, of such principal portion of such Realized Losses shall be allocated to the Class Z-3 Regular Interest in reduction of the Uncertificated Principal Balance thereof; and (4) the principal portion of Realized Losses on the Group IV Loans shall be allocated, first, to the Class Y-4 Regular Interest to the extent of the Class Y-4 Principal Reduction Amount in reduction of the Uncertificated Principal Balance of such Regular Interest and, second, the remainder, if any, of such principal portion of such Realized Losses shall be allocated to the Class Z-4 Regular Interest in reduction of the Uncertificated Principal Balance thereof. For any Distribution Date, reductions in the Uncertificated Principal Balances of the Class Y and Class Z Regular Interest pursuant to this definition of Realized Loss shall be determined, and shall be deemed to occur, prior to any reductions of such Uncertificated Principal Balances by distributions on such Distribution Date.

Record Date : For each Class of Offered Certificates (other than the Class III-A Certificates and the Class X Certificates), and for any Distribution Date, the close of business on the Business Day prior to such Distribution Date. For the Class III-A Certificates and the Class X Certificates and for any Distribution Date, the close of business on the last Business Day of the month immediately preceding the month in which such Distribution Date occurs.

Reference Bank : A leading bank selected by the Trustee that is engaged in transactions in Eurodollar deposits in the international Eurocurrency market.

 

27

 

 

 

 

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 (other than the Class X Certificates and the Class R 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 (other than the Class X Certificates and the Class R Certificates).

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 Pre-Funded Amount : With respect to Loan Group IV, an amount equal to the Pre-Funded Amount for such Loan Group minus an amount equal to 100% of the aggregate Scheduled Principal Balances of the Subsequent Mortgage Loans transferred to such Loan Group during the Pre-Funding Period.

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 Interest : Any of REMIC I Interests, REMIC II Interests and REMIC III Interests.

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 2005-AR4 REMIC to fail to qualify as a REMIC while any regular interest in such 2005-AR4 REMIC is outstanding, (ii) result in a tax on prohibited transactions with respect to any 2005-AR4 REMIC or (iii) constitute a taxable contribution to any 2005-AR4 REMIC after the Startup Day.

 

28

 

 

 

 

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 and REMIC III Regular Interests.

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 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 each Loan Group for any Distribution Date, the Available Funds for such Loan Group.

REMIC I Distribution Amount : For any Distribution Date, the REMIC I Available Distribution Amounts shall be deemed distributed to REMIC II, as the holder of the REMIC I Regular Interests, and to Holders of the Class R Certificates in respect of Component I thereof, in the following amounts and priority:

(a)	To the extent of the REMIC I Available Distribution Amount for Loan Group I:

(i)  first, to Y-1 and Z-1 REMIC I Regular Interests, concurrently, the Uncertificated Accrued Interest (reduced in each case to account for any Net Deferred Interest allocated to such Regular Interests) for such Regular Interests remaining unpaid from previous Distribution Dates, pro rata according to their respective shares of such unpaid amounts;

(ii)  second, to the  Y-1 and  Z-1 REMIC I Regular Interests, concurrently, the Uncertificated Accrued Interest (reduced in each case to account for any Net Deferred Interest allocated to such Regular Interests) for such Regular Interests for the current Distribution Date, pro rata according to their respective Uncertificated Accrued Interest; and

 

29

 

 

 

 

(iii)  third, to the Y-1 and  Z-1 REMIC I Regular Interests, the REMIC I Regular Interest Y-1 Principal Distribution Amount and the REMIC I Regular Interest Z-1 Principal Distribution Amount, respectively;

(b)	To the extent of the REMIC I Available Distribution Amount for Loan Group II:

(i)  first, to the Y-2 and Z-2  REMIC I Regular Interests, concurrently, the Uncertificated Accrued Interest (reduced in each case to account for any Net Deferred Interest allocated to such Regular Interests) for such Regular Interests remaining unpaid from previous Distribution Dates, pro rata according to their respective shares of such unpaid amounts;

(ii)  second, to the Y-2 and Z-2 REMIC I Regular Interests, concurrently, the Uncertificated Accrued Interest (reduced in each case to account for any Net Deferred Interest allocated to such Regular Interests) for such Regular Interests for the current Distribution Date, pro rata according to their respective Uncertificated Accrued Interest; and

(iii)  third, to the Y-2 and Z-2 REMIC I Regular Interests, the REMIC I Regular Interest Y-2 Principal Distribution Amount and the REMIC I Regular Interest Z-2 Principal Distribution Amount, respectively;

(c)	To the extent of the REMIC I Available Distribution Amount for Loan Group III:

(i)  first, to the Y-3 and Z-3  REMIC I Regular Interests, concurrently, the Uncertificated Accrued Interest (reduced in each case to account for any Net Deferred Interest allocated to such Regular Interests) for such Regular Interests remaining unpaid from previous Distribution Dates, pro rata according to their respective shares of such unpaid amounts;

(ii)  second, to the Y-3 and Z-3 REMIC I Regular Interests, concurrently, the Uncertificated Accrued Interest (reduced in each case to account for any Net Deferred Interest allocated to such Regular Interests) for such Regular Interests for the current Distribution Date, pro rata according to their respective Uncertificated Accrued Interest; and

(iii)  third, to the Y-3 and Z-3 REMIC I Regular Interests, the REMIC I Regular Interest Y-3 Principal Distribution Amount and the REMIC I Regular Interest Z-3 Principal Distribution Amount, respectively;

(d)	To the extent of the REMIC I Available Distribution Amount for Loan Group IV:

(i)  first, to the Y-4 and Z-4  REMIC I Regular Interests, concurrently, the Uncertificated Accrued Interest (reduced in each case to account for any Net Deferred Interest allocated to such Regular Interests) for such Regular Interests remaining unpaid from previous Distribution Dates, pro rata according to their respective shares of such unpaid amounts;

 

30

 

 

 

 

(ii)  second, to the Y-4 and Z-4 REMIC I Regular Interests, concurrently, the Uncertificated Accrued Interest (reduced in each case to account for any Net Deferred Interest allocated to such Regular Interests) for such Regular Interests for the current Distribution Date, pro rata according to their respective Uncertificated Accrued Interest; and

(iii)  third, to the Y-4 and Z-4 REMIC I Regular Interests, the REMIC I Regular Interest Y-4 Principal Distribution Amount and the REMIC I Regular Interest Z-4 Principal Distribution Amount, respectively; and

(e)        To the extent of the REMIC I Available Distribution Amounts for such Distribution Date remaining after payment of the amounts pursuant to paragraphs (a) through (d) of this definition of “REMIC I Distribution Amount”:

(i)  first, to each of the REMIC I Class Y and Class Z Regular Interests, pro rata according to the amount of unreimbursed Realized Losses allocable to principal previously allocated to each such Regular Interests; provided , however , that any amounts distributed pursuant to this paragraph (e)(i) of this definition of “REMIC I Distribution Amount” shall not cause a reduction in the Uncertificated Principal Balances of any of the Class Y and Class Z Regular Interests; and

(ii)  second, to the Class R Certificates in respect of Component I thereof, any remaining amount.

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 Loan Group I for any Distribution Date shall be allocated to REMIC I Regular Interest Z-1, Net Deferred Interest for Loan Group II for any Distribution Date shall be allocated to REMIC I Regular Interest Z-2, Net Deferred Interest for Loan Group III for any Distribution Date shall be allocated to REMIC I Regular Interest Z-3 and Net Deferred Interest for Loan Group IV for any Distribution Date shall be allocated to REMIC I Regular Interest Z-4.

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 II Available Distribution Amount : For any Distribution Date, the amount deemed distributed on such Distribution Date from REMIC I to REMIC II in respect of the REMIC I Regular Interests.

 

31

 

 

 

 

REMIC II Distribution Amount : On each Distribution Date, the following amounts, in the following order of priority, shall be distributed by REMIC II to REMIC III on account of the REMIC II Regular Interests:

(i)          to the extent of the REMIC II Available Distribution Amount, to REMIC III as the holder of REMIC II Regular Interests, pro rata, in an amount equal to (A) the Uncertificated Accrued Interest for each such REMC II Regular Interest for such Distribution Date reduced, in each case, by any Net Deferred Interest allocated to such REMIC II Regular Interest for such Distribution Date, plus (B) any amounts in respect thereof remaining unpaid from previous Distribution Dates; and

(ii)         on each Distribution Date, to REMIC III as the holder of the REMIC II Regular Interests, in an amount equal to the remainder of the REMIC II Available Distribution Amount after the distributions made pursuant to clause (i) above, allocated as follows (except as provided below):

(A)      in respect of each of the REMIC II Regular Interests, their respective Principal Distribution Amounts;

(B)      in respect of REMIC II 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 II Regular Interests (other than REMIC II 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

(D)      any remaining amounts to the Holders of the Class R Certificates in respect of Component II thereof.

REMIC II Interest : 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, first, to REMIC II Regular Interests LT2, LT6, LT10, LT14 and LT17, respectively, to the extent that their Principal Reduction Amounts for such Distribution Date are negative and, second, to REMIC II Regular Interests LT1, LT5, LT9 and LT13, pro rata according to their respective Uncertificated Principal Balances, to the extent of any remaining Net Deferred Interest.

REMIC II Principal Reduction Amounts : For any Distribution Date, the amounts by which the Uncertificated Principal Balances of the REMIC II Regular Interests will be reduced on such Distribution Date by the allocation of Realized Losses and the distribution of principal, determined as described in Appendix 2.

REMIC II Realized Losses : Realized Losses on Mortgage Loans shall be allocated to the REMIC II Regular Interests as follows: The interest portion of Realized Losses on Mortgage Loans, if any, shall be allocated among each of the REMIC II Regular Interests, pro rata

 

32

 

 

 

 

 

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 Realized Losses shall be allocated to the REMIC II Regular Interests as follows: (1) The principal portion of Realized Losses shall be allocated, first, to REMIC II Regular Interests LT-Y1, LT-Y2, LT-Y3 and LT-Y4, respectively in the same amounts as Realized Losses were allocated to the REMIC I Regular Interests Y-1, Y-2, Y-3 and Y-4, second, to each of the REMIC II Regular Interests (other than REMIC II Regular Interests LT1, LT-Y1, LT-Y2, LT-Y3 and LT-Y4), pro-rata according to their respective REMIC II Principal Reduction Amounts to the extent thereof in reduction of the Uncertificated Principal Balance of such REMIC II Regular Interests and, third, the remainder, if any, of such principal portion of such Realized Losses shall be allocated to REMIC II Regular Interest LT1 in reduction of the Uncertificated Principal Balance thereof.

REMIC II Regular Interest LT1 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the REMIC II Regular Interest LT1 Principal Reduction Amount for such Distribution Date over the Realized Losses allocated to the REMIC II Regular Interest LT1 on such Distribution Date.

REMIC II Regular Interest LT2 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the REMIC II Regular Interest LT2 Principal Reduction Amount for such Distribution Date over the Realized Losses allocated to the REMIC II Regular Interest LT2 on such Distribution Date.

REMIC II Regular Interest LT3 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the REMIC II Regular Interest LT3 Principal Reduction Amount for such Distribution Date over the Realized Losses allocated to the REMIC II Regular Interest LT3 on such Distribution Date.

REMIC II Regular Interest LT4 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the REMIC II Regular Interest LT4 Principal Reduction Amount for such Distribution Date over the Realized Losses allocated to the REMIC II Regular Interest LT4 on such Distribution Date.

REMIC II Regular Interest LT5 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the REMIC II Regular Interest LT5 Principal Reduction Amount for such Distribution Date over the Realized Losses allocated to the REMIC II Regular Interest LT5 on such Distribution Date.

REMIC II Regular Interest LT6 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the REMIC II Regular Interest LT6 Principal Reduction Amount for such Distribution Date over the Realized Losses allocated to the REMIC II Regular Interest LT6 on such Distribution Date.

REMIC II Regular Interest LT7 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the REMIC II Regular Interest LT7 Principal Reduction Amount for

 

33

 

 

 

such Distribution Date over the Realized Losses allocated to the REMIC II Regular Interest LT7 on such Distribution Date.

REMIC II Regular Interest LT8 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the REMIC II Regular Interest LT8 Principal Reduction Amount for such Distribution Date over the Realized Losses allocated to the REMIC II Regular Interest LT8 on such Distribution Date.

REMIC II Regular Interest LT9 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the REMIC II Regular Interest LT9 Principal Reduction Amount for such Distribution Date over the Realized Losses allocated to the REMIC II Regular Interest LT9 on such Distribution Date.

REMIC II Regular Interest LT10 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the REMIC II Regular Interest LT10 Principal Reduction Amount for such Distribution Date over the Realized Losses allocated to the REMIC II Regular Interest LT10 on such Distribution Date.

REMIC II Regular Interest LT11 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the REMIC II Regular Interest LT11 Principal Reduction Amount for such Distribution Date over the Realized Losses allocated to the REMIC II Regular Interest LT11 on such Distribution Date.

REMIC II Regular Interest LT12 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the REMIC II Regular Interest LT12 Principal Reduction Amount for such Distribution Date over the Realized Losses allocated to the REMIC II Regular Interest LT12 on such Distribution Date.

REMIC II Regular Interest LT13 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the REMIC II Regular Interest LT13 Principal Reduction Amount for such Distribution Date over the Realized Losses allocated to the REMIC II Regular Interest LT13 on such Distribution Date.

REMIC II Regular Interest LT14 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the REMIC II Regular Interest LT14 Principal Reduction Amount for such Distribution Date over the Realized Losses allocated to the REMIC II Regular Interest LT14 on such Distribution Date.

REMIC II Regular Interest LT15 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the REMIC II Regular Interest LT15 Principal Reduction Amount for such Distribution Date over the Realized Losses allocated to the REMIC II Regular Interest LT15 on such Distribution Date.

REMIC II Regular Interest LT16 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the REMIC II Regular Interest LT16 Principal Reduction Amount for such Distribution Date over the Realized Losses allocated to the REMIC II Regular Interest LT16 on such Distribution Date.

 

34

 

 

 

 

REMIC II Regular Interest LT17 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the REMIC II Regular Interest LT17 Principal Reduction Amount for such Distribution Date over the Realized Losses allocated to the REMIC II Regular Interest LT17 on such Distribution Date.

REMIC II Regular Interest LT18 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the REMIC II Regular Interest LT18 Principal Reduction Amount for such Distribution Date over the Realized Losses allocated to the REMIC II Regular Interest LT18 on such Distribution Date.

REMIC II Regular Interest LT19 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the REMIC II Regular Interest LT19 Principal Reduction Amount for such Distribution Date over the Realized Losses allocated to the REMIC II Regular Interest LT19 on such Distribution Date.

REMIC II Regular Interest LT-Y1 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the REMIC II Regular Interest LT-Y1 Principal Reduction Amount for such Distribution Date over the Realized Losses allocated to the REMIC II Regular Interest LT-Y1 on such Distribution Date.

REMIC II Regular Interest LT-Y2 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the REMIC II Regular Interest LT-Y2 Principal Reduction Amount for such Distribution Date over the Realized Losses allocated to the REMIC II Regular Interest LT-Y2 on such Distribution Date.

REMIC II Regular Interest LT-Y3 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the REMIC II Regular Interest LT-Y3 Principal Reduction Amount for such Distribution Date over the Realized Losses allocated to the REMIC II Regular Interest LT-Y3 on such Distribution Date.

REMIC II Regular Interest LT-Y4 Principal Distribution Amount : For any Distribution Date, the excess, if any, of the REMIC II Regular Interest LT-Y4 Principal Reduction Amount for such Distribution Date over the Realized Losses allocated to the REMIC II Regular Interest LT-Y4 on such Distribution Date.

REMIC II Regular Interest : Any of the separate non-certificated 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 shall accrue interest at the Uncertificated Pass-Through Rate specified for such REMIC II 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 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 the REMIC II Regular Interests and any proceeds thereof.

 

35

 

 

 

 

REMIC III Interests : The REMIC III Regular Interests and Component III of the Class R Certificate.

REMIC III Net Deferred Interest : Net Deferred Interest for any Distribution Date shall be allocated to REMIC III Regular Interests to the same extent that Net Deferred Interest is allocated to the related Class of Certificates.

REMIC III Regular Interest X-1 : A regular interest in REMIC III that has an initial principal balance equal to zero, that bears interest at the related Uncertificated REMIC III Pass-Through Rate on its Uncertificated Notional Amount, and that has such other terms as are described herein.

REMIC III Regular Interest X-2 : A regular interest in REMIC III that has an initial principal balance equal to zero, that bears interest at the related Uncertificated REMIC III Pass-Through Rate on its Uncertificated Notional Amount, and that has such other terms as are described herein.

REMIC III Regular Interest X-3 : A regular interest in REMIC III that has an initial principal balance equal to zero, that bears interest at the related Uncertificated REMIC III Pass-Through Rate on its Uncertificated Notional Amount, and that has such other terms as are described herein.

REMIC III Regular Interest X-4 : A regular interest in REMIC III that has an initial principal balance equal to zero, that bears interest at the related Uncertificated REMIC III Pass-Through Rate on its Uncertificated Notional Amount, and that has such other terms as are described herein.

REMIC III Regular Interest M-X : A regular interest in REMIC III that has an initial principal balance equal to zero, that bears interest at the related Uncertificated REMIC III Pass-Through Rate on its Uncertificated Notional Amount, and that has such other terms as are described herein.

REMIC III Regular Interest : Any of the separate beneficial ownership interests in REMIC III set forth in Section 5.01(c) and issued hereunder and designated as a “regular interest” in REMIC III. Each REMIC III Regular Interest shall accrue interest at the Pass-Through Rate or Uncertificated REMIC III Pass-Through Rate specified for such REMIC III 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 III Regular Interests are 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 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.

 

36

 

 

 

 

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.

Repurchase Price : With respect to any Mortgage Loan (or any property acquired with respect thereto) required to be repurchased by the Seller pursuant to the Mortgage Loan Purchase Agreement, a Subsequent Mortgage Loan Purchase Agreement or Article II of this Agreement, an amount equal to the sum of (i)(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), plus (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, plus (c) any unreimbursed Monthly Advances and servicing advances payable to the Servicer and (ii) 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.

Repurchase Proceeds : The Repurchase Price in connection with any repurchase of a Mortgage Loan by the Seller 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.

Residual Certificates : The Class R 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.

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

 

37

 

 

 

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.

Scheduled Principal Balance : With respect to any Mortgage Loan on any Distribution Date, (i) the unpaid principal balance of such Mortgage Loan as of the close of business on the related Due 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) including any Deferred Interest thereon and less (ii) any Principal Prepayments (including the principal portion of Net Liquidation Proceeds) received during or prior to the related Prepayment Period; provided that the Scheduled Principal Balance of a Liquidated Mortgage Loan is zero.

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

 

38

 

 

 

 

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.

Seller : EMC, as mortgage loan seller under the Mortgage Loan Purchase Agreement and the related Subsequent Mortgage Loan Purchase Agreement.

Senior Certificates : The Class A Certificates and the Senior Class X Certificates.

Senior Class X Certificates : The Class X-1, Class X-2, Class X-3 and Class X-4 Certificates.

Senior Optimal Principal Amount : With respect to each Distribution Date and a Loan Group, an amount equal to the sum, without duplication, of the following (after giving effect to the application of such amounts to cover Deferred Interest on the Mortgage Loans on such Distribution Date in accordance with the definition of Net Deferred Interest but in no event greater than the aggregate Current Principal Amounts of the related Certificate Group immediately prior to such Distribution Date):

(i)         the related Senior Percentage of the principal portion of all Scheduled Payments due on each Outstanding Mortgage Loan in the related Loan Group on the related Due Date as specified in the amortization schedule at the time applicable thereto (after adjustments for previous Principal Prepayments but before any adjustment to such amortization schedule by reason of any bankruptcy or similar proceeding or any moratorium or similar waiver or grace period if the related Distribution Date occurs prior to the Cross-Over Date);

(ii)        the related Senior Prepayment Percentage of the Scheduled Principal Balance of Mortgage Loan in the related Loan Group which was the subject of a Principal Prepayment in full received by the Servicer during the related Prepayment Period;

(iii)        the related Senior Prepayment Percentage of amount of all Principal Prepayments in part allocated to principal received by the Servicer during the related Prepayment Period in respect to each Mortgage Loan in the related Loan Group;

(iv)        the lesser of (a) the related Senior Prepayment Percentage of the sum of (A) all Net Liquidation Proceeds allocable to principal received in respect of each Mortgage Loan in the related Loan Group that became a Liquidated Mortgage Loan during the related Prepayment Period (other than Mortgage Loans described in the immediately following clause

 

39

 

 

 

(B)) and all Subsequent Recoveries received in respect of each Liquidated Mortgage Loan in the related Loan Group during the related Due Period and (B) the Scheduled Principal Balance of each such Mortgage Loan purchased by an insurer from the Trust during the related Prepayment Period pursuant to the related Primary Mortgage Insurance Policy, if any, or otherwise and (b) the related Senior Percentage of the sum of (A) the Scheduled Principal Balance of each Mortgage Loan in the related Loan Group which became a Liquidated Mortgage Loan during the related Prepayment Period (other than the Mortgage Loans described in the immediately following clause (B)) and all Subsequent Recoveries received in respect of each Liquidated Mortgage Loan in the related Loan Group during the related Due Period and (B) the Scheduled Principal Balance of each such Mortgage Loan that was purchased by an insurer from the Trust during the related Prepayment Period pursuant to the related Primary Mortgage Insurance Policy, if any or otherwise;

(v)        the related Senior Prepayment Percentage of the sum of (a) the Scheduled Principal Balance of each Mortgage Loan in the related Loan Group that was repurchased by the Seller in connection with such Distribution Date and (b) the excess, if any, of the Scheduled Principal Balance of a Mortgage Loan in the related Loan Group that has been replaced by the Seller with a substitute Mortgage Loan pursuant to the Mortgage Loan Purchase Agreement or a Subsequent Mortgage Loan Purchase Agreement in connection with such Distribution Date over the Scheduled Principal Balance of such substitute Mortgage Loan; and

(vi)        any amount allocated to the Available Funds of the related Loan Group pursuant to Section 6.01(a)(G).

Senior Percentage : With respect to each Certificate Group, initially 90.00%. With respect to any Distribution Date and a Certificate Group, the lesser of (i) 100% and (ii) the percentage obtained by dividing the aggregate Current Principal Amount of the Senior Certificates in such Certificate Group immediately preceding such Distribution Date by the aggregate Scheduled Principal Balance of the Mortgage Loans in the related Loan Group as of the beginning of the related Due Period.

Senior Prepayment Percentage : With respect to a Certificate Group and any Distribution Date occurring during the periods set forth below, as follows:

Period (dates inclusive)

Senior Prepayment Percentage

 

August 2005 - July 2015

100%

 

August 2015 - July 2016	Senior Percentage for the related Certificate Group plus 70% of the Subordinate Percentage for the related Loan Group.
August 2016 - July 2017	Senior Percentage for the related Certificate Group plus 60% of the Subordinate Percentage for the related Loan Group.
August 2017 - July 2018	Senior Percentage for the related Certificate Group plus 40% of the Subordinate Percentage for the related Loan Group.

 

 

40

 

 

 

 

August 2018 - July 2019	Senior Percentage for the related Certificate Group plus 20% of the Subordinate Percentage for the related Loan Group.
August 2019 and thereafter		Senior Percentage for the related Certificate Group

In addition, no reduction of the Senior Prepayment Percentage for the related Certificate Group shall occur on any Distribution Date unless, as of the last day of the month preceding such Distribution Date, (A) the aggregate Scheduled Principal Balance of the Mortgage Loans in all Loan Groups delinquent 60 days or more (including for this purpose any such Mortgage Loans in foreclosure and Mortgage Loans with respect to which the related Mortgaged Property has been acquired by the Trust), averaged over the last six months, as a percentage of the sum of the aggregate Current Principal Amount of the Subordinate Certificates does not exceed 50%; and (B) cumulative Realized Losses on the Mortgage Loans in all Loan Groups do not exceed (a) 30% of the Original Subordinate Principal Balance if such Distribution Date occurs between and including August 2015 and July 2016, (b) 35% of the Original Subordinate Principal Balance if such Distribution Date occurs between and including August 2016 and July 2017, (c) 40% of the Original Subordinate Principal Balance if such Distribution Date occurs between and including August 2017 and July 2018, (d) 45% of the Original Subordinate Principal Balance if such Distribution Date occurs between and including August 2018 and July 2019, and (e) 50% of the Original Subordinate Principal Balance if such Distribution Date occurs during or after August 2019.

In addition, if on any Distribution Date the weighted average of the Subordinate Percentages for such Distribution Date is equal to or greater than two times the initial weighted average of the Subordinate Percentages, and (a) the aggregate Scheduled Principal Balance of the Mortgage Loans for all Loan Groups delinquent 60 days or more (including for this purpose any such Mortgage Loans in foreclosure and such Mortgage Loans with respect to which the related Mortgaged Property has been acquired by the Trust), averaged over the last six months, as a percentage of the aggregate Current Principal Amount of the Subordinate Certificates does not exceed 50% and (b)(i) on or prior to the Distribution Date in July 2008, cumulative Realized Losses on the Mortgage Loans for all Loan Groups as of the end of the related Prepayment Period do not exceed 20% of the Original Subordinate Principal Balance and (ii) after the Distribution Date in July 2008 cumulative Realized Losses on the Mortgage Loans for all Loan Groups as of the end of the related Prepayment Period do not exceed 30% of the Original Subordinate Principal Balance, then, the Senior Prepayment Percentage for such Distribution Date will equal the Senior Percentage for the related Certificate Group; provided, however, if on such Distribution Date the Subordinate Percentage is equal to or greater than two times the initial Subordinate Percentage on or prior to the Distribution Date occurring in July 2008 and the above delinquency and loss tests are met, then the Senior Prepayment Percentage for the related Certificate Group for such Distribution Date will equal the related Senior Percentage plus 50% of the related Subordinate Percentage.

Notwithstanding the foregoing, if on any Distribution Date the percentage, the numerator of which is the aggregate Current Principal Amount of the Senior Certificates immediately preceding such Distribution Date, and the denominator of which is the Scheduled Principal Balance of the Mortgage Loans as of the beginning of the related Due Period, exceeds such

 

41

 

 

 

percentage as of the Cut-Off Date, the Senior Prepayment Percentage for the Senior Certificates will equal 100%.

Servicer : As of the Closing Date, EMC Mortgage Corporation and, thereafter, its respective successors in interest that meet the qualifications of this Agreement.

Servicer Certification : A written certification covering servicing of the Mortgage Loans by the Servicer and signed by an officer of the Servicer that complies with (i) the Sarbanes-Oxley Act of 2002, as amended from time to time, and (ii) the February 21, 2003 Statement by the Staff of the Division of Corporation Finance of the Securities and Exchange Commission Regarding Compliance by Asset-Backed Issuers with Exchange Act Rules 13a-14 and 15d-14, as in effect from time to time; provided that if, after the Closing Date (a) the Sarbanes-Oxley Act of 2002 is amended, (b) the Statement referred to in clause (ii) is modified or superceded by any subsequent statement, rule or regulation of the Securities and Exchange Commission or any statement of a division thereof, or (c) any future releases, rules and regulations are published by the Securities and Exchange Commission from time to time pursuant to the Sarbanes-Oxley Act of 2002, which in any such case affects the form or substance of the required certification and results in the required certification being, in the reasonable judgment of the Servicer, materially more onerous than the form of the required certification as of the Closing Date, the Servicer Certification shall be as agreed to by the Servicer and the Depositor following a negotiation in good faith to determine how to comply with any such new requirements.

Servicing Fee : As to any Mortgage Loan and Distribution Date, an amount equal to the product of (i) the Scheduled Principal Balance of such Mortgage Loan as of the Due Date in the preceding calendar month and (ii) the Servicing Fee Rate.

Servicing Fee Rate : As to any Mortgage Loan, a per annum rate as set forth in the Mortgage Loan Schedule.

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.

Startup Day : July 29, 2005.

Subordinate Certificate Writedown Amount : With respect to the Subordinate Certificates and as to any Distribution Date, the amount by which (i) the sum of the Current Principal Amounts of the Certificates (after giving effect to the distribution of principal and the allocation of applicable Realized Losses in reduction of the Current Principal Amounts of the Certificates on such Distribution Date in accordance with the definition of Net Deferred Interest) exceeds (y) the aggregate Scheduled Principal Balances of the Mortgage Loans on the Due Date related to such Distribution Date.

Subordinate Certificates : The Non-Offered Subordinate Certificates (other than the Class XP Certificates) and the Offered Subordinate Certificates.

 

42

 

 

 

 

Subordinate Optimal Principal Amount : With respect to the Subordinate Certificates and any Distribution Date, an amount equal to the sum, without duplication, of the following from each Loan Group (after giving effect to the application of such amounts to cover Deferred Interest on the Mortgage Loans on such Distribution Date but in no event greater than the aggregate Current Principal Amount of the Subordinate Certificates immediately prior to such Distribution Date):

(i)          the related Subordinate Percentage of the principal portion of all Scheduled Payments due on each Outstanding Mortgage Loan in the related Loan Group on the related Due Date as specified in the amortization schedule at the time applicable thereto (after adjustment for previous Principal Prepayments but before any adjustment to such amortization schedule by reason of any bankruptcy or similar proceeding or any moratorium or similar waiver or grace period);

(ii)         the related Subordinate Prepayment Percentage of the Scheduled Principal Balance of each Mortgage Loan in the related Loan Group that was the subject of a Principal Prepayment in full received by the Servicer during the related Prepayment Period;

(iii)        the related Subordinate Prepayment Percentage of the amount of all Principal Prepayments in part received by the Servicer in respect to the Mortgage Loan in the related Loan Group during the related Prepayment Period;

(iv)        the excess, if any, of (a) all Net Liquidation Proceeds allocable to principal received during the related Prepayment Period in respect of each Liquidated Mortgage Loan in the related Loan Group and all Subsequent Recoveries received in respect of each Liquidated Mortgage Loan during the related Due Period over (b) the sum of the amounts distributable to the Senior Certificates in the related Certificate Group pursuant to clause (iv) of the definition of Senior Optimal Principal Amount on such Distribution Date;

(v)        the related Subordinate Prepayment Percentage of the sum of (a) the Scheduled Principal Balance of each Mortgage Loan in the related Loan Group that was purchased by the Seller in connection with such Distribution Date and (b) the difference, if any, between the Scheduled Principal Balance of a Mortgage Loan in the related Loan Group that has been replaced by the Seller with a Substitute Mortgage Loan pursuant to the Mortgage Loan Purchase Agreement in connection with such Distribution Date over the Scheduled Principal Balance of such Substitute Mortgage Loan; and

(vi)        on the Distribution Date on which the Current Principal Amounts of the Senior Certificates in the related Certificate Group have all been reduced to zero, 100% of the Senior Optimal Principal Amount for the related Loan Group. After the aggregate Current Principal Amount of the Subordinate Certificates has been reduced to zero, the Subordinate Optimal Principal Amount shall be zero.

Subordinate Percentage : With respect to each Loan Group on any Distribution Date, 100% minus the Senior Percentage for the related Certificate Group as of such Distribution Date.

 

43

 

 

 

 

Subordinate Prepayment Percentage : With respect to each Loan Group on any Distribution Date, 100% minus the Senior Prepayment Percentage for the related Certificate Group as of such Distribution Date.

Subsequent Cut-off Date : With respect to the Subsequent Mortgage Loans sold to the Trust pursuant to a Subsequent Transfer Instrument, the later of (i) the first day of the month in which the related Subsequent Transfer Date occurs or (ii) the date of origination of such Mortgage Loan.

Subsequent Mortgage Loans : The Mortgage Loans which will be acquired by the Trust during the Pre-Funding Period pursuant to Section 2.07 with amounts on deposit in the Pre-Funding Account, which Mortgage Loans will be held as 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.

Subsequent Mortgage Loan Purchase Agreement : Each agreement between EMC, as seller, and Structured Asset Mortgage Investments II Inc., as purchaser, and all amendments thereof and supplements thereto, regarding the transfer of the Subsequent Mortgage Loans by EMC to Structured Asset Mortgage Investments II Inc., a form of which is attached as Exhibit M.

Subsequent Recoveries : As of any Distribution Date, amounts received during the related Due 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 Seller pursuant to the Mortgage Loan Purchase Agreement or any Subsequent 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.

Subsequent Transfer Date : With respect to each Subsequent Transfer Instrument, the date on which the related Subsequent Mortgage Loans are sold to the Trust.

Subsequent Transfer Instrument : Each Subsequent Transfer Instrument, dated as of a Subsequent Transfer Date, executed by the Trustee at the written direction of the Seller and substantially in the form attached hereto as Exhibit N, by which Subsequent Mortgage Loans are transferred to the Trust Fund.

Substitute Mortgage Loan : A mortgage loan tendered to the Trust pursuant to the Mortgage Loan Purchase Agreement, a Subsequent 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

 

44

 

 

 

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 110%.

Substitution Adjustment Amount : The amount, if any, required to be paid by the Seller 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.

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.

2005-AR4 REMIC : Any of REMIC I, REMIC II and REMIC III.

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 or Uncertificated Notional Amount, as applicable, 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. 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 REMIC I Regular Interests Y-1, Y-2, Y-3, Y-4, Z-1, Z-2, Z-3 and Z-4, 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 each of the REMIC II 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

 

45

 

 

 

Uncertificated Accrued Interest for the REMIC III 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 REMIC III Regular Interests to the same extent such amounts are allocated to the related Class of Certificates.

Uncertificated Notional Amount : With respect to REMIC III Regular Interest X-1, REMIC III Regular Interest X-2, REMIC III Regular Interest X-3, REMIC III Regular Interest X-4 and REMIC III Regular Interest M-X, the aggregate principal balance of the REMIC II Regular Interests.

Uncertificated Pass-Through Rate : The Uncertificated REMIC I Pass-Through Rate, the Uncertificated REMIC II Pass-Through Rate or the Uncertificated REMIC III Pass-Through Rate, as applicable.

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, the REMIC II Regular Interests, REMIC III Regular Interest X-1, REMIC III Regular Interest X-2, REMIC III Regular Interest X-3, REMIC III Regular Interest X-4 and REMIC III Regular Interest M-X.

Uncertificated REMIC I Pass-Through Rate : With respect to any Distribution Date and (i) REMIC I Regular Interests Y-1 and Z-1, the weighted average of the Net Mortgage Rates on the Group I Loans, (ii) REMIC I Regular Interests Y-2 and Z-2, the weighted average of the Net Mortgage Rates on the Group II Loans, (iii) REMIC I Regular Interests Y-3 and Z-3, the weighted average of the Net Mortgage Rates on the Group III Loans and (iv) REMIC I Regular Interests Y-4 and Z-4, the weighted average of the Net Mortgage Rates on the Group IV Loans.

Uncertificated REMIC II Pass-Through Rate : With respect to any Distribution Date and: (A) (i) REMIC II Regular Interests LT1 and LT2, the weighted average of the Net Mortgage Rates on the Group I Loans, (ii) REMIC II Regular Interest LT3, zero (0.00%), (iii) REMIC II Regular Interest LT4, twice the weighted average of the Net Mortgage Rates on the Group I Loans; (B) (i) REMIC II Regular Interests LT5 and LT6, the weighted average of the Net Mortgage Rates on the Group II Loans, (ii) REMIC II Regular Interest LT7, zero (0.00%), (iii) REMIC II Regular Interest LT8, twice the weighted average of the Net Mortgage Rates on the Group II Loans; (C) (i) REMIC II Regular Interests LT9 and LT10, the weighted average of the Net Mortgage Rates on the Group III Loans, (ii) REMIC II Regular Interest LT11, zero (0.00%), (iii) REMIC II Regular Interest LT12, twice the weighted average of the Net Mortgage Rates on the Group III Loans; (D) (i) REMIC II Regular Interests LT13 and LT14, the weighted average of the Net Mortgage Rates on the Group IV Loans, (ii) REMIC II Regular Interest LT15, zero (0.00%), (iii) REMIC II Regular Interest LT16, twice the weighted average of the Net Mortgage Rates on the Group IV Loans; (E) (i) REMIC II Regular Interest LT17, the weighted average of the Uncertificated REMIC I Pass-Through Rates on the REMIC I Regular Interests, Z-1, Z-2, Z-3 and Z-4, (ii) REMIC II Regular Interest LT18, zero (0.00%), (iii) REMIC II Regular Interest LT19, twice the weighted average of the Uncertificated REMIC I Pass-Through Rates on the REMIC I Regular Interests, Z-1, Z-2, Z-3 and Z-4; and (F) REMIC II Regular Interests LT-Y1,

 

46

 

 

 

LT-Y2, LT-Y3 and LT-Y4, the Uncertificated REMIC I Pass-Through Rates on the REMIC I Regular Interests Y-1, Y-2, Y-3 and Y-4, respectively.

Uncertificated REMIC III Pass-Through Rate : The Pass-Through Rate for REMIC III Regular Interest X-1, REMIC III Regular Interest X-2, REMIC III Regular Interest X-3, REMIC III Regular Interest X-4 or REMIC III Regular Interest M-X, as applicable.

Undercollateralized Amount : With respect any Certificate Group and Distribution Date, the excess of (i) the aggregate Current Principal Amount of such Certificate Group over (ii) the aggregate Scheduled Principal Balance of the Mortgage Loans in the related Loan Group.

Undercollateralized Certificate Group : With respect any Distribution Date, a Certificate Group for which the related Undercollateralized Amount (calculated on such Distribution Date after giving effect to distributions to be made thereon (other than amounts to be distributed pursuant to Section 6.01(a)(E) on such Distribution Date)) exceeds zero.

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.

 

47

 

 

 

 

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 or the Subsequent Transfer Instruments, as applicable, 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 Initial Mortgage Loans after the Cut-off Date and the Subsequent Mortgage Loans after the related Subsequent Cut-Off Date, as the case may be, 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, (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 and any Subsequent Mortgage Loan Purchase Agreements to the extent provided in Section 2.03(a), (vii) the Class R Deposit, (viii) 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 (ix) 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.

(b)        In connection with the above transfer and assignment, the Seller 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

 

48

 

 

 

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 Seller 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, and in the case of Subsequent Mortgage Loans which have been prepaid in full after the related Subsequent Cut-off Date and prior to the related Subsequent Transfer 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 or the related Subsequent Transfer Date, as the case may be. 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 Seller, 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 or the Subsequent Transfer Date, as applicable, 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

 

49

 

 

 

on a properly recorded assignment of the Mortgage as the mortgagee of record solely as nominee for the Seller and its successor and assigns; provided, however, that each assignment shall be submitted for recording by the Seller 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 Seller and (iv) the occurrence of a servicing transfer as described in Section 8.02 hereof. Notwithstanding the foregoing, if the Seller 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 Initial Mortgage Loans, or a Subsequent Transfer Date, with respect to any Subsequent 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 within 90 days of a Subsequent Transfer Date, with respect to any Subsequent Mortgage Loans, or with respect to any Substitute Mortgage Loan, within five Business Days after the receipt by the Trustee or Custodian thereof), the Trustee agrees, for the benefit of the Certificateholders, 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 Initial Mortgage Loans identified in Exhibit B, or the Subsequent Mortgage Loans identified on Exhibit 1 to the related Subsequent Transfer Instrument, as the case may be, or to appear defective on its face (a “Material Defect”), the Trustee or the Custodian, as its agent, shall promptly notify the Seller. In accordance with the Mortgage Loan Purchase Agreement or the Subsequent Mortgage Loan Purchase Agreement, as the case may be, the Seller 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 Seller fails to correct or cure the defect within such period, and such defect materially and adversely affects

 

50

 

 

 

the interests of the Certificateholders in the related Mortgage Loan, the Trustee or the Custodian, as its agent, shall enforce the Seller’s obligation pursuant to the Mortgage Loan Purchase Agreement or a Subsequent Mortgage Loan Purchase Agreement, as the case may be, 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 Seller 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 Seller shall not be required to purchase such Mortgage Loan if the Seller delivers such original documents or certified copy promptly upon receipt, but in no event later than 360 days after the Closing Date or the Subsequent Transfer Date, as applicable. The foregoing repurchase obligation shall not apply in the event that the Seller 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 Seller 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 Seller within thirty days of its receipt of the original recorded document.

(b) No later than 180 days after the Closing Date (or within 180 days of a Subsequent Transfer Date, with respect to any Subsequent Mortgage Loans, or with respect to any Substitute Mortgage Loan, within five 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, 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 Seller (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 or a Subsequent Mortgage Loan Purchase Agreement, as the case may be, the Seller 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 Seller 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 Seller’s obligation under the Mortgage Loan Purchase Agreement or a Subsequent Mortgage Loan Purchase Agreement, as the case may be, to provide a Substitute Mortgage Loan (if within two years of the Closing Date) or purchase such

 

51

 

 

 

 

 

Mortgage Loan at the Repurchase Price; provided, however, 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, repurchase or substitution must occur within 90 days from the date such breach was discovered; provided, further, that if such defect relates solely to the inability of the Seller 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 Seller shall not be required to purchase such Mortgage Loan, if the Seller delivers such original documents or certified copy promptly upon receipt, but in no event later than 360 days after the Closing Date or the Subsequent Transfer Date, as applicable. The foregoing repurchase obligation shall not apply in the event that the Seller 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 Seller 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 Seller within thirty days of its receipt of the original recorded document.

(c)        In the event that a Mortgage Loan is purchased by the Seller in accordance with Sections 2.02(a) or (b) above, the Seller shall remit to the Servicer the Repurchase Price for deposit in the Custodial Account and the Seller shall provide to the Trustee written notification detailing the components of the Repurchase Price. Upon deposit of the Repurchase Price in the Custodial Account, the Depositor shall notify the Trustee and the Custodian, as agent of the Trustee (upon receipt of a Request for Release in the form of Exhibit D attached hereto with respect to such Mortgage Loan), shall release to the Seller the related Mortgage File and the Trustee shall execute and deliver all instruments of transfer or assignment, without recourse, representation or warranty, furnished to it by the Seller, as are necessary to vest in the Seller title to and rights under the Mortgage Loan. Such purchase shall be deemed to have occurred on the date on which the Repurchase Price in available funds is received by the Trustee. The Servicer shall amend the Mortgage Loan Schedule, which was previously delivered to it by the Depositor in a form agreed to between the Depositor and the Servicer, to reflect such repurchase and shall promptly notify the Trustee of such amendment and the Trustee shall promptly notify the Rating Agencies and the Servicer of such amendment. The obligation of the Seller to repurchase any Mortgage Loan as to which such a defect in a constituent document exists shall be the sole remedy respecting such defect available to the Certificateholders or to the Trustee on their behalf.

Section 2.03      Assignment of Interest in the Mortgage Loan Purchase Agreement and Subsequent Mortgage Loan Purchase Agreement . (a) The Depositor hereby assigns to the Trustee, on behalf of Trust for the benefit of the Certificateholders, all of its right, title and interest in the Mortgage Loan Purchase Agreement and any Subsequent Mortgage Loan Purchase Agreement. The obligations of the Seller to substitute or repurchase, as applicable, a Mortgage

 

52

 

 

 

Loan shall be the Trustee’s and the Certificateholders’ sole remedy for any breach thereof. At the request of the Trustee, the Depositor shall take such actions as may be necessary to enforce the above right, title and interest on behalf of the Trust and the Certificateholders or shall execute such further documents as the Trustee may reasonably require in order to enable the Trustee to carry out such enforcement.

(b)        If the Depositor, the Servicer or the Trustee discovers a breach of any of the representations and warranties set forth in the Mortgage Loan Purchase Agreement or any Subsequent Mortgage Loan Purchase Agreement, as the case may be, which breach materially and adversely affects the value of the interests of Certificateholders or the Trustee in the related Mortgage Loan, the party discovering the breach shall give prompt written notice of the breach to the other parties. The Seller, within 90 days of its discovery or receipt of notice that such breach has occurred (whichever occurs earlier), shall cure the breach in all material respects or, subject to the Mortgage Loan Purchase Agreement, the applicable Subsequent Mortgage Loan Purchase Agreement or Section 2.04 of this Agreement, as applicable, shall purchase the Mortgage Loan or any property acquired with respect thereto from the Trust; provided, however, that if there is a breach of any representation set forth in the Mortgage Loan Purchase Agreement, a Subsequent Mortgage Loan Purchase Agreement or Section 2.04 of this Agreement, as applicable, and the Mortgage Loan or the related property acquired with respect thereto has been sold, then the Seller shall pay, in lieu of the Repurchase Price, any excess of the Repurchase Price over the Net Liquidation Proceeds received upon such sale. If the Net Liquidation Proceeds exceed the Repurchase Price, any excess shall be paid to the Seller to the extent not required by law to be paid to the borrower. Any such purchase by the Seller shall be made by providing an amount equal to the Repurchase Price to the Servicer for deposit in the Custodial Account and written notification detailing the components of such Repurchase Price. The Depositor shall notify the Trustee and submit to the Trustee or the Custodian, as its agent, a Request for Release, and the Trustee shall release, or the Trustee shall cause the Custodian to release, to the Seller the related Mortgage File and the Trustee shall execute and deliver all instruments of transfer or assignment furnished to it by the Seller, without recourse, representation or warranty as are necessary to vest in the Seller title to and rights under the Mortgage Loan or any property acquired with respect thereto. Such purchase shall be deemed to have occurred on the date on which the Repurchase Price in available funds is received by the Trustee. The Trustee shall amend the Mortgage Loan Schedule to reflect such repurchase and shall promptly notify the Rating Agencies of such amendment. Enforcement of the obligation of the Seller to purchase (or substitute a Substitute Mortgage Loan for) any Mortgage Loan or any property acquired with respect thereto (or pay the Repurchase Price as set forth in the above proviso) as to which a breach has occurred and is continuing shall constitute the sole remedy respecting such breach available to the Certificateholders or the Trustee on their behalf.

Section 2.04      Substitution of Mortgage Loans . Notwithstanding anything to the contrary in this Agreement, in lieu of purchasing a Mortgage Loan pursuant to the Mortgage Loan Purchase Agreement, a Subsequent Mortgage Loan Purchase Agreement or Sections 2.02 or 2.03 of this Agreement, the Seller may, no later than the date by which such purchase by the Seller would otherwise be required, tender to the Trustee (on behalf of the Trust) a Substitute Mortgage Loan accompanied by a certificate of an authorized officer of the Seller that such Substitute Mortgage Loan conforms to the requirements set forth in the definition of “Substitute Mortgage Loan” in the Mortgage Loan Purchase Agreement, any Subsequent Mortgage Loan Purchase

 

53

 

 

 

Agreement or this Agreement, as applicable; provided , however , that substitution pursuant to the Mortgage Loan Purchase Agreement, any Subsequent Mortgage Loan Purchase Agreement or Section 2.04 of this Agreement, as applicable, in lieu of purchase shall not be permitted after the termination of the two-year period beginning on the Startup Day; provided, further, that if the breach 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 substitution must occur within 90 days from the date the breach was discovered. The Trustee or the Custodian, as its agent, shall examine the Mortgage File for any Substitute Mortgage Loan in the manner set forth in Section 2.02(a) and the Trustee or the Custodian, as its agent, shall notify the Seller, in writing, within five Business Days after receipt, whether or not the documents relating to the Substitute Mortgage Loan satisfy the requirements of the fourth sentence of Section 2.02(a). Within two Business Days after such notification, the Seller shall provide to the Trustee for deposit in the Distribution Account the amount, if any, by which the Outstanding Principal Balance as of the next preceding Due Date of the Mortgage Loan for which substitution is being made, after giving effect to the Scheduled Principal due on such date, exceeds the Outstanding Principal Balance as of such date of the Substitute Mortgage Loan, after giving effect to Scheduled Principal due on such date, which amount shall be treated for the purposes of this Agreement as if it were the payment by the Seller of the Repurchase Price for the purchase of a Mortgage Loan by the Seller. After such notification to the Seller and, if any such excess exists, upon receipt of such deposit, the Trustee shall accept such Substitute Mortgage Loan which shall thereafter be deemed to be a Mortgage Loan hereunder. In the event of such a substitution, accrued interest on the Substitute Mortgage Loan for the month in which the substitution occurs and any Principal Prepayments made thereon during such month shall be the property of the Trust Fund and accrued interest for such month on the Mortgage Loan for which the substitution is made and any Principal Prepayments made thereon during such month shall be the property of the Seller. The Scheduled Principal on a Substitute Mortgage Loan due on the Due Date in the month of substitution shall be the property of the Seller and the Scheduled Principal on the Mortgage Loan for which the substitution is made due on such Due Date shall be the property of the Trust Fund. Upon acceptance of the Substitute Mortgage Loan (and delivery to the Trustee or the Custodian as agent of the Trustee, as applicable, of a Request for Release for such Mortgage Loan), the Trustee or the Custodian, as agent for the Trustee, shall release to the Seller the related Mortgage File related to any Mortgage Loan released pursuant to the Mortgage Loan Purchase Agreement, any Subsequent Mortgage Loan Purchase Agreement or Section 2.04 of this Agreement, as applicable, and shall execute and deliver all instruments of transfer or assignment, without recourse, representation or warranty in form as provided to it as are necessary to vest in the Seller title to and rights under any Mortgage Loan released pursuant to the Mortgage Loan Purchase Agreement, any Subsequent Mortgage Loan Purchase Agreement or Section 2.04 of this Agreement, as applicable. The Seller shall deliver the documents related to the Substitute Mortgage Loan in accordance with the provisions of the Mortgage Loan Purchase Agreement, any Subsequent Mortgage Loan Purchase Agreement or Sections 2.01(b) and 2.02(b) of this Agreement, as applicable, with the date of acceptance of the Substitute Mortgage Loan deemed

 

54

 

 

 

to be the Closing Date for purposes of the time periods set forth in those Sections. The representations and warranties set forth in the Mortgage Loan Purchase Agreement and any Subsequent Mortgage Loan Purchase Agreement shall be deemed to have been made by the Seller with respect to each Substitute Mortgage Loan as of the date of acceptance of such Mortgage Loan by the Trustee (on behalf of the Trust). The Servicer shall amend the Mortgage Loan Schedule to reflect such substitution and shall provide a copy of such amended Mortgage Loan Schedule to the Trustee, who shall then deliver such amended Mortgage Loan Schedule to the Rating Agencies.

Section 2.05

Issuance of Certificates .

(a)        The Trustee acknowledges the assignment to it (on behalf of the Trust) of the Mortgage Loans and the other assets comprising the Trust Fund and, concurrently therewith, has signed, and countersigned and delivered to the Depositor, in exchange therefor, Certificates in such authorized denominations representing such Fractional Undivided Interests as the Depositor has requested. The Trustee agrees that it will hold the Mortgage Loans and such other assets as may from time to time be delivered to it segregated on the books of the Trustee in trust for the benefit of the Certificateholders.

(b)        The Depositor, concurrently with the execution and delivery hereof, does hereby transfer, assign, set over and otherwise convey in trust to the Trustee without recourse all the right, title and interest of the Depositor in and to the REMIC I Regular Interests, and the other assets of REMIC II for the benefit of the holders of the REMIC II Certificates. The Trustee acknowledges receipt of the REMIC I Regular Interests (which are uncertificated) and the other assets of REMIC II and declares that it holds and will hold the same in trust for the exclusive use and benefit of the holders of the REMIC II Certificates.

Section 2.06      Representations and Warranties Concerning the Depositor . The Depositor hereby represents and warrants to the Servicer and the Trustee as follows:

(i)         the Depositor (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and (b) is qualified and in good standing as a foreign corporation to do business in each jurisdiction where such qualification is necessary, except where the failure so to qualify would not reasonably be expected to have a material adverse effect on the Depositor’s business as presently conducted or on the Depositor’s ability to enter into this Agreement and to consummate the transactions contemplated hereby;

(ii)         the Depositor has full corporate power to own its property, to carry on its business as presently conducted and to enter into and perform its obligations under this Agreement;

(iii)        the execution and delivery by the Depositor of this Agreement have been duly authorized by all necessary corporate action on the part of the Depositor; and neither the execution and delivery of this Agreement, nor the consummation of the transactions herein contemplated, nor compliance with the provisions hereof, will conflict with or result in a breach of, or constitute a default under, any of the provisions of any law, governmental rule, regulation, judgment, decree or order binding on the Depositor or its properties or the articles of

 

55

 

 

 

incorporation or by-laws of the Depositor, except those conflicts, breaches or defaults which would not reasonably be expected to have a material adverse effect on the Depositor’s ability to enter into this Agreement and to consummate the transactions contemplated hereby;

(iv)        the execution, delivery and performance by the Depositor of this Agreement and the consummation of the transactions contemplated hereby do not require the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any state, federal or other governmental authority or agency, except those consents, approvals, notices, registrations or other actions as have already been obtained, given or made;

(v)        this Agreement has been duly executed and delivered by the Depositor and, assuming due authorization, execution and delivery by the other parties hereto, constitutes a valid and binding obligation of the Depositor enforceable against it in accordance with its terms (subject to applicable bankruptcy and insolvency laws and other similar laws affecting the enforcement of the rights of creditors generally);

(vi)        there are no actions, suits or proceedings pending or, to the knowledge of the Depositor, threatened against the Depositor, before or by any court, administrative agency, arbitrator or governmental body (i) with respect to any of the transactions contemplated by this Agreement or (ii) with respect to any other matter which in the judgment of the Depositor will be determined adversely to the Depositor and will if determined adversely to the Depositor materially and adversely affect the Depositor’s ability to enter into this Agreement or perform its obligations under this Agreement; and the Depositor is not in default with respect to any order of any court, administrative agency, arbitrator or governmental body so as to materially and adversely affect the transactions contemplated by this Agreement; and

(vii)       immediately prior to the transfer and assignment to the Trust, each Mortgage Note and each Mortgage were not subject to an assignment or pledge, and the Depositor had good and marketable title to and was the sole owner thereof and had full right to transfer and sell such Mortgage Loan to the Trustee free and clear of any encumbrance, equity, lien, pledge, charge, claim or security interest.

Section 2.07.

Conveyance of the Subsequent Mortgage Loans .

(a)        Subject to the conditions set forth in paragraph (b) below, in consideration of the Paying Agent's delivery on a Subsequent Transfer Date to or upon the written order of the Depositor of all or a portion of the balance of funds in the Pre-Funding Account, the Depositor shall, on such Subsequent Transfer Date, sell, transfer, assign, set over and convey without recourse to the Trust Fund (subject to the other terms and provisions of this Agreement) all its right, title and interest in and to (i) the Subsequent Mortgage Loans identified on the Mortgage Loan Schedule attached to the related Subsequent Transfer Instrument delivered by the Seller on such Subsequent Transfer Date, (ii) all interest accruing thereon on and after the Subsequent Cut-off Date and all collections in respect of interest and principal due after the Subsequent Cut-off Date and (iii) all items with respect to such Subsequent Mortgage Loans to be delivered pursuant to Section 2.01 and the other items in the related Mortgage Files; provided, however, that the Seller reserves and retains all right, title and interest in and to principal received and interest

 

56

 

 

 

accruing on such Subsequent Mortgage Loans prior to the related Subsequent Cut-off Date. The transfer by the Depositor for deposit in the applicable Loan Group of the Subsequent Mortgage Loans identified on the related Mortgage Loan Schedule to the Trust Fund shall be absolute and is intended by the Depositor, the Seller, the Servicer, the Trustee and the Certificateholders to constitute and to be treated as a sale of the Subsequent Mortgage Loans by the Depositor to the Trust. The related Mortgage File for each Subsequent Mortgage Loan shall be delivered to the Trustee or the Custodian, as its agent, at least three Business Days prior to the related Subsequent Transfer Date.

The purchase price paid by the Trustee from amounts released from the Pre-Funding Account shall be 100% of the aggregate Scheduled Principal Balance of the Subsequent Mortgage Loans so transferred (as identified on the Mortgage Loan Schedule provided by the Depositor). This Agreement shall constitute a fixed price purchase contract in accordance with Section 860G(a)(3)(A)(ii) of the Code.

(b)        The Depositor shall transfer to the Trust Fund for deposit in the applicable Loan Group, the Subsequent Mortgage Loans, and the other property and rights related thereto as described in paragraph (a) above, and the Paying Agent shall release funds from the Pre-Funding Account only upon the satisfaction of each of the following conditions on or prior to the related Subsequent Transfer Date:

(i)         the Depositor shall have delivered to the Trustee a duly executed Subsequent Transfer Instrument, which shall include a Mortgage Loan Schedule listing the Subsequent Mortgage Loans, and the Seller shall cause to be delivered a computer file containing such Mortgage Loan Schedule to the Trustee and the Servicer at least three Business Days prior to the related Subsequent Transfer Date;

(ii)	[Reserved];

(iii)        as of each Subsequent Transfer Date, as evidenced by delivery of the Subsequent Transfer Instrument, substantially in the form of Exhibit N, the Depositor shall not be insolvent nor shall it have been rendered insolvent by such transfer nor shall it be aware of any pending insolvency with respect to it:

(iv)        such sale and transfer shall not result in a material adverse tax consequence to the Trust or the Certificateholders;

(v)	the Pre-Funding Period shall not have terminated;

(vi)        the Depositor shall not have selected the Subsequent Mortgage Loans in a manner that it believed to be adverse to the interests of the Certificateholders; and

(vii)       the Depositor shall have delivered to the Trustee a Subsequent Transfer Instrument confirming the satisfaction of the conditions precedent specified in this Section 2.07 and, pursuant to the Subsequent Transfer Instrument, assigned to the Trust without recourse for the benefit of the Certificateholders all the right, title and interest of the Depositor, in, to and under the Subsequent Mortgage Loan Purchase Agreement, to the extent of the Subsequent Mortgage Loans.

 

57

 

 

 

 

(c)        Any conveyance of Subsequent Mortgage Loans on a Subsequent Transfer Date is subject to certain conditions including, but not limited to, the following:

(i)         Each such Subsequent Mortgage Loan must satisfy the representations and warranties specified in the related Subsequent Transfer Instrument and this Agreement;

(ii)         The Depositor will not select such Subsequent Mortgage Loans in a manner that it believes to be adverse to the interests of the Certificateholders;

(iii)        As of the related Subsequent Cut-off Date, each such Subsequent Mortgage Loan will satisfy the following criteria:

(1)        Such Subsequent Mortgage Loan may not be 30 or more days delinquent as of the last day of the month preceding the related Subsequent Cut-off Date;

(2)        The original term to stated maturity of such Subsequent Mortgage Loan will not be less than 180 months and will not exceed 360 months;

(3)         Each subsequent mortgage loan must be (a) a One-Year MTA adjustable rate negative amortization Mortgage Loan with a first lien on the related Mortgaged Property and (b) must be subject to a negative amortization cap of no more than 110%;

(4)        No Subsequent Mortgage Loan will have a first payment date occurring after November 1, 2005;

(5)        The latest maturity date of any Subsequent Mortgage Loan will be no later than October 1, 2045;

(6)        Such Subsequent Mortgage Loan will have a credit score of not less than 620;

(7)        Such Subsequent Mortgage Loan will have a Gross Margin as of the related Subsequent Cut-off Date ranging from approximately 2.250% per annum to approximately 3.50% per annum;

(8)        Such Subsequent Mortgage Loan will have a maximum mortgage rate as of the related Subsequent Cut-Off Date greater than 9.95%; and

(9)        Such Subsequent Mortgage Loan shall have been underwritten in accordance with the underwriting guidelines of EMC;

(d)        As of the related Subsequent Cut-off Date, the Subsequent Mortgage Loans in the aggregate will satisfy the following criteria:

(i)         Have a weighted average Gross Margin ranging from 3.165% to 3.565% per annum;

 

58

 

 

 

 

(ii)	Have a weighted average credit score greater than 724;
(iii)	Have no less than 70% of the Mortgaged Properties be owner occupied;

(iv)        Have no less than 85% of the Mortgaged Properties be single family detached or planned unit developments;

(v)        Have no more than 35% of the Subsequent Mortgage Loans be cash out refinance;

(vi)        Have all of such Subsequent Mortgage Loans with a Loan-to-Value Ratio greater than 80% be covered by a Primary Mortgage Insurance Policy;

(vii)       Have a weighted average maximum mortgage rate greater than or equal to 11.800%; and

(viii)

Be acceptable to the Rating Agencies.

 

59

 

 

 

 

ARTICLE III

Administration and Servicing of Mortgage Loans

Section 3.01      Servicer to Act as Servicer . The Servicer shall service and administer the Mortgage Loans in accordance with this Agreement and with Accepted Servicing Practices and shall have full power and authority, acting alone, to do or cause to be done any and all things in connection with such servicing and administration which the Servicer may deem necessary or desirable and consistent with the terms of this Agreement and with Accepted Servicing Practices and shall exercise the same care that it customarily employs for its own account. Except as set forth in this Agreement, the Servicer shall service the Mortgage Loans in accordance with Accepted Servicing Practices in compliance with the servicing provisions of the Fannie Mae Guide, which include, but are not limited to, provisions regarding the liquidation of Mortgage Loans, the collection of Mortgage Loan payments, the payment of taxes, insurance and other charges, the maintenance of hazard insurance with a Qualified Insurer, the maintenance of fidelity bond and errors and omissions insurance, inspections, the restoration of Mortgaged Property, the maintenance of Primary Mortgage Insurance Policies, insurance claims, and title insurance, management of REO Property, permitted withdrawals with respect to REO Property, liquidation reports, and reports of foreclosures and abandonments of Mortgaged Property, the transfer of Mortgaged Property, the release of Mortgage Loan Documents, annual statements, and examination of records and facilities. In the event of any conflict, inconsistency or discrepancy between any of the servicing provisions of this Agreement and any of the servicing provisions of the Fannie Mae Guide, the provisions of this Agreement shall control and be binding upon the Depositor and the Servicer.

Consistent with the terms of this Agreement, the Servicer may waive, modify or vary any term of any Mortgage Loan or consent to the postponement of any such term or in any manner grant indulgence to any Mortgagor if in the Servicer's reasonable and prudent determination such waiver, modification, postponement or indulgence is not materially adverse to the Certificateholders, provided, however, the Servicer shall not permit any modification with respect to any Mortgage Loan that would change the Mortgage Interest Rate, forgive the payment of principal or interest (unless in connection with the liquidation of the related Mortgage Loan or except in connection with prepayments to the extent that such reamortization is not inconsistent with the terms of the Mortgage Loan), or extend the final maturity date of such Mortgage Loan, unless such Mortgage Loan is in default or, in the judgment of the Servicer, such default is reasonably foreseeable or waive a prepayment penalty or charge, without the written consent of the Depositor and, provided, further, that no such modification shall reduce the interest rate on a Mortgage Loan below the Servicing Fee Rate. Without limiting the generality of the foregoing, the Servicer shall continue, and is hereby authorized and empowered, to prepare, execute and deliver, all instruments of satisfaction or cancellation, or of partial or full release, discharge and all other comparable instruments, with respect to the Mortgage Loans and with respect to the Mortgaged Properties.

 

The Servicer shall provide to each Mortgagor of a Mortgage Loan all payment options listed in the related Mortgage Note that are available to such Mortgagor with respect to such payment, notwithstanding any provision in the related Mortgage Note that explicitly states or

 

60

 

 

 

implies that providing such options is optional for the servicer of such Mortgage Loan or the owner or holder of the related Mortgage Note.

Notwithstanding the foregoing, the Servicer shall not permit any modification with respect to any Mortgage Loan that would both constitute a sale or exchange of such Mortgage Loan within the meaning of Section 1001 of the Code and any proposed, temporary or final regulations promulgated thereunder (other than in connection with a proposed conveyance or assumption of such Mortgage Loan that is treated as a Principal Prepayment in Full) and cause any REMIC formed under this Agreement to fail to qualify as a REMIC under the Code. Upon request, the Trustee shall furnish the Servicer with any powers of attorney, in substantially the form attached hereto as Exhibit I, and other documents in form as provided to it necessary or appropriate to enable the Servicer to service and administer the related Mortgage Loans and REO Property.

The Trustee shall provide access to the records and documentation in possession of the Trustee regarding the related Mortgage Loans and REO Property and the servicing thereof to the Certificateholders, the FDIC, and the supervisory agents and examiners of the FDIC, such access being afforded only upon reasonable prior written request and during normal business hours at the office of the Trustee; provided , however , that, unless otherwise required by law, the Trustee shall not be required to provide access to such records and documentation if the provision thereof would violate the legal right to privacy of any Mortgagor. The Trustee shall allow representatives of the above entities to photocopy any of the records and documentation and shall provide equipment for that purpose at a charge that covers the Trustee’s actual costs.

The Trustee shall execute and deliver to the Servicer any court pleadings, requests for trustee’s sale or other documents prepared by the Servicer as necessary or desirable to (i) the foreclosure or trustee’s sale with respect to a Mortgaged Property; (ii) any legal action brought to obtain judgment against any Mortgagor on the Mortgage Note or Security Instrument; (iii) obtain a deficiency judgment against the Mortgagor; or (iv) enforce any other rights or remedies provided by the Mortgage Note or Security Instrument or otherwise available at law or equity.

Section 3.02      REMIC - Related Covenants . For as long as each 2005-AR4 REMIC shall exist, the Trustee shall act in accordance herewith to assure continuing treatment of such 2005-AR4 REMIC as a REMIC, and the Trustee shall comply with any directions of the Depositor or the Servicer to assure such continuing treatment. In particular, the Trustee shall not (a) sell or permit the sale of all or any portion of the Mortgage Loans or of any investment of deposits in an Account unless such sale is as a result of a repurchase of the Mortgage Loans pursuant to this Agreement or the Trustee has received a REMIC Opinion addressed to the Trustee prepared at the expense of the Trust Fund; and (b) other than with respect to a substitution pursuant to the Mortgage Loan Purchase Agreement, any Subsequent Mortgage Loan Purchase Agreement or Section 2.04 of this Agreement, as applicable, accept any contribution to any 2005-AR4 REMIC after the Startup Day without receipt of a REMIC Opinion addressed to the Trustee.

Section 3.03      Monitoring of Subservicers . (a) The Servicer shall perform all of its servicing responsibilities hereunder or may cause a subservicer to perform any such servicing responsibilities on its behalf, but the use by the Servicer of a subservicer shall not release the Servicer from any of its obligations hereunder and the Servicer shall remain responsible

 

61

 

 

 

hereunder for all acts and omissions of each subservicer as fully as if such acts and omissions were those of the Servicer. Any such subservicer must be a Fannie Mae approved seller/servicer or a Freddie Mac seller/servicer in good standing and no event shall have occurred, including but not limited to, a change in insurance coverage, which would make it unable to comply with the eligibility requirements for lenders imposed by Fannie Mae or for seller/servicers by Freddie Mac, or which would require notification to Fannie Mae or Freddie Mac. The Servicer shall pay all fees and expenses of each subservicer from its own funds, and a subservicer's fee shall not exceed the Servicing Fee.

(b) At the cost and expense of the Servicer, without any right of reimbursement from the Custodial Account, the Servicer shall be entitled to terminate the rights and responsibilities of a subservicer and arrange for any servicing responsibilities to be performed by a successor subservicer meeting the requirements in the preceding paragraph, provided, however, that nothing contained herein shall be deemed to prevent or prohibit the Servicer, at the Servicer's option, from electing to service the related Mortgage Loans itself. In the event that the Servicer's responsibilities and duties under this Agreement are terminated pursuant to Section 7.07, 8.01 or 10.01, and if requested to do so by the Depositor, the Servicer shall at its own cost and expense terminate the rights and responsibilities of each subservicer effective as of the date of termination of the Servicer. The Servicer shall pay all fees, expenses or penalties necessary in order to terminate the rights and responsibilities of each subservicer from the Servicer's own funds without reimbursement from the Depositor.

(c)Notwithstanding any of the provisions of this Agreement relating to agreements or arrangements between the Servicer and a subservicer or any reference herein to actions taken through a subservicer or otherwise, the Servicer shall not be relieved of its obligations to the Depositor and shall be obligated to the same extent and under the same terms and conditions as if it alone were servicing and administering the Mortgage Loans. The Servicer shall be entitled to enter into an agreement with a subservicer for indemnification of the Servicer by the subservicer and nothing contained in this Agreement shall be deemed to limit or modify such indemnification.

 

(d)Any subservicing agreement and any other transactions or services relating to the Mortgage Loans involving a subservicer shall be deemed to be between such subservicer and Servicer alone, and the Depositor shall have no obligations, duties or liabilities with respect to such Subservicer including no obligation, duty or liability of Depositor to pay such subservicer's fees and expenses. For purposes of distributions and advances by the Servicer pursuant to this Agreement, the Servicer shall be deemed to have received a payment on a Mortgage Loan when a subservicer has received such payment.

 

Section 3.04      Fidelity Bond . The Servicer, at its expense, shall maintain in effect a blanket fidelity bond and an errors and omissions insurance policy, affording coverage with respect to all directors, officers, employees and other Persons acting on the Servicer’s behalf, and covering errors and omissions in the performance of the Servicer’s obligations hereunder. The errors and omissions insurance policy and the fidelity bond shall be in such form and amount generally acceptable for entities serving as servicers.

 

62

 

 

 

 

Section 3.05      Power to Act; Procedures . The Servicer shall service the Mortgage Loans and shall have full power and authority, subject to the REMIC Provisions and the provisions of Article X hereof, to do any and all things that it may deem necessary or desirable in connection with the servicing and administration of the Mortgage Loans, including but not limited to the power and authority (i) to execute and deliver, on behalf of the Certificateholders and the Trustee, customary consents or waivers and other instruments and documents, (ii) to consent to transfers of any Mortgaged Property and assumptions of the Mortgage Notes and related Mortgages, (iii) to collect any Insurance Proceeds and Liquidation Proceeds, and (iv) to effectuate foreclosure or other conversion of the ownership of the Mortgaged Property securing any Mortgage Loan, in each case, in accordance with the provisions of this Agreement, as applicable; provided , however , that the Servicer shall not (and consistent with its responsibilities under 3.03, shall not permit any subservicer to) knowingly or intentionally take any action, or fail to take (or fail to cause to be taken) any action reasonably within its control and the scope of duties more specifically set forth herein, that, under the REMIC Provisions, if taken or not taken, as the case may be, would cause any 2005-AR4 REMIC to fail to qualify as a REMIC or result in the imposition of a tax upon the Trust Fund (including but not limited to the tax on prohibited transactions as defined in Section 860F(a)(2) of the Code and the tax on contributions to a REMIC set forth in Section 860G(d) of the Code) unless the Servicer has received an Opinion of Counsel (but not at the expense of the Servicer) to the effect that the contemplated action would not cause any 2005-AR4 REMIC to fail to qualify as a REMIC or result in the imposition of a tax upon any 2005-AR4 REMIC. The Trustee shall furnish the Servicer, upon written request from a Servicing Officer, with any powers of attorney empowering the Servicer to execute and deliver instruments of satisfaction or cancellation, or of partial or full release or discharge, and to foreclose upon or otherwise liquidate Mortgaged Property, and to appeal, prosecute or defend in any court action relating to the Mortgage Loans or the Mortgaged Property, in accordance with this Agreement, and the Trustee shall execute and deliver such other documents, as the Servicer may request, to enable the Servicer to service and administer the Mortgage Loans and carry out its duties hereunder, in each case in accordance with Accepted Servicing Practices (and the Trustee shall have no liability for misuse of any such powers of attorney by the Servicer). If the Servicer or the Trustee has been advised that it is likely that the laws of the state in which action is to be taken prohibit such action if taken in the name of the Trustee or that the Trustee would be adversely affected under the “doing business” or tax laws of such state if such action is taken in its name, the Servicer shall join with the Trustee in the appointment of a co-trustee pursuant to Section 9.11 hereof. In the performance of its duties hereunder, the Servicer shall be an independent contractor and shall not, except in those instances where it is taking action in the name of the Trustee, be deemed to be the agent of the Trustee.

Section 3.06

Due-on-Sale Clauses; Assumption Agreements .

(a)        When any Mortgaged Property is conveyed by a Mortgagor, the Servicer or subservicer, to the extent it has knowledge of such conveyance, shall enforce any due-on-sale clause contained in any Mortgage Note or Mortgage, to the extent permitted under applicable law and governmental regulations, but only to the extent that such enforcement will not adversely affect or jeopardize coverage under any Primary Mortgage Insurance Policy. Notwithstanding the foregoing, the Servicer is not required to exercise such rights with respect to a Mortgage Loan if the Person to whom the related Mortgaged Property has been conveyed or is proposed to be conveyed satisfies the terms and conditions contained in the Mortgage Note and

 

63

 

 

 

Mortgage related thereto and the consent of the Mortgagee under such Mortgage Note or Mortgage is not otherwise so required under such Mortgage Note or Mortgage as a condition to such transfer. In the event that the Servicer is prohibited by law from enforcing any such due-on-sale clause, or if coverage under any Primary Mortgage Insurance Policy would be adversely affected, or if nonenforcement is otherwise permitted hereunder, the Servicer is authorized, subject to Section 3.06(b), to take or enter into an assumption and modification agreement from or with the person to whom such property has been or is about to be conveyed, pursuant to which such person becomes liable under the Mortgage Note and, unless prohibited by applicable state law, the Mortgagor remains liable thereon, provided that the Mortgage Loan shall continue to be covered (if so covered before the Servicer enters such agreement) by the applicable Primary Mortgage Insurance Policy. The Servicer, subject to Section 3.06(b), is also authorized with the prior approval of the insurers under any Primary Mortgage Insurance Policy to enter into a substitution of liability agreement with such Person, pursuant to which the original Mortgagor is released from liability and such Person is substituted as Mortgagor and becomes liable under the Mortgage Note. Notwithstanding the foregoing, the Servicer shall not be deemed to be in default under this Section by reason of any transfer or assumption which the Servicer reasonably believes it is restricted by law from preventing, for any reason whatsoever.

(b)        Subject to the Servicer’s duty to enforce any due-on-sale clause to the extent set forth in Section 3.06(a), in any case in which a Mortgaged Property is to be conveyed to a Person by a Mortgagor, and such Person is to enter into an assumption or modification agreement or supplement to the Mortgage Note or Mortgage which requires the signature of the Trustee, or if an instrument of release signed by the Trustee is required releasing the Mortgagor from liability on the Mortgage Loan, the Servicer is authorized, subject to the requirements of the sentence next following, to execute and deliver, on behalf of the Trustee, the assumption agreement with the Person to whom the Mortgaged Property is to be conveyed and such modification agreement or supplement to the Mortgage Note or Mortgage or other instruments as are reasonable or necessary to carry out the terms of the Mortgage Note or Mortgage or otherwise to comply with any applicable laws regarding assumptions or the transfer of the Mortgaged Property to such Person; provided, however, that in connection with any such assumption, no material term of the Mortgage Note may be changed. Upon receipt of appropriate instructions from the Servicer in accordance with the foregoing, the Trustee shall execute any necessary instruments for such assumption or substitution of liability delivered to it by the Servicer and as directed in writing by the Servicer. Upon the closing of the transactions contemplated by such documents, the Servicer shall cause the originals or true and correct copies of the assumption agreement, the release (if any), or the modification or supplement to the Mortgage Note or Mortgage to be delivered to the Trustee or the Custodian and deposited with the Mortgage File for such Mortgage Loan. Any fee collected by the Servicer or such related subservicer for entering into an assumption or substitution of liability agreement will be retained by the Servicer or such subservicer as additional servicing compensation.

Section 3.07      Release of Mortgage Files . (a) Upon becoming aware of the payment in full of any Mortgage Loan, or the receipt by the Servicer of a notification that payment in full has been escrowed in a manner customary for such purposes for payment to Certificateholders on the next Distribution Date, the Servicer will, (or if the Servicer does not, the Trustee may), promptly furnish to the Custodian, on behalf of the Trustee, two copies of a certification substantially in the form of Exhibit D hereto signed by a Servicing Officer or in a mutually

 

64

 

 

 

agreeable electronic format which will, in lieu of a signature on its face, originate from a Servicing Officer (which certification shall include a statement to the effect that all amounts received in connection with such payment that are required to be deposited in the Custodial Account maintained by the Servicer pursuant to Section 4.01 have been or will be so deposited) and shall request that the Custodian, on behalf of the Trustee, deliver to the Servicer the related Mortgage File. Upon receipt of such certification and request, the Custodian, on behalf of the Trustee, shall promptly release the related Mortgage File to the Servicer and the Trustee and Custodian shall have no further responsibility with regard to such Mortgage File. Upon any such payment in full, the Servicer is authorized, to give, as agent for the Trustee, as the mortgagee under the Mortgage that secured the Mortgage Loan, an instrument of satisfaction (or assignment of mortgage without recourse) regarding the Mortgaged Property subject to the Mortgage, which instrument of satisfaction or assignment, as the case may be, shall be delivered to the Person or Persons entitled thereto against receipt therefor of such payment, it being understood and agreed that no expenses incurred in connection with such instrument of satisfaction or assignment, as the case may be, shall be chargeable to the Custodial Account.

In the event the Servicer satisfies or releases a Mortgage without having obtained payment in full of the indebtedness secured by the Mortgage or should it otherwise prejudice any right the Certificateholders or the Depositor may have under the Mortgage Loan Documents, the Servicer, upon written demand by the Depositor or the Trustee, shall remit within one Business Day the then outstanding principal balance of the related Mortgage Loan by deposit thereof in the Custodial Account.

(b)        From time to time and as appropriate for the servicing or foreclosure of any Mortgage Loan, the Trustee shall execute such documents as shall be prepared and furnished to the Trustee by the Servicer (in a form reasonably acceptable to the Trustee) and as are necessary to the prosecution of any such proceedings. The Custodian, on behalf of the Trustee, shall, upon the request of the Servicer, and delivery to the Custodian, on behalf of the Trustee, of two copies of a request for release signed by a Servicing Officer substantially in the form of Exhibit D (or in a mutually agreeable electronic format which will, in lieu of a signature on its face, originate from a Servicing Officer), release the related Mortgage File held in its possession or control to the Servicer. Such trust receipt shall obligate the Servicer to return the Mortgage File to the Custodian on behalf of the Trustee, when the need therefor by the Servicer no longer exists unless the Mortgage Loan shall be liquidated, in which case, upon receipt of a certificate of a Servicing Officer similar to that hereinabove specified, the Mortgage File shall be released by the Custodian, on behalf of the Trustee or to the Servicer.

Section 3.08      Documents, Records and Funds in Possession of Servicer To Be Held for Trustee .

(a)        The Servicer shall transmit to the Trustee or Custodian such documents and instruments coming into the possession of the Servicer from time to time as are required by the terms hereof, to be delivered to the Trustee or Custodian. Any funds received by the Servicer in respect of any Mortgage Loan or which otherwise are collected by the Servicer as Liquidation Proceeds or Insurance Proceeds in respect of any Mortgage Loan shall be held for the benefit of the Trustee and the Certificateholders subject to the Servicer’s right to retain or withdraw from the Custodial Account the Servicing Fee and other amounts as provided in this Agreement. The

 

65

 

 

 

Servicer shall provide access to information and documentation regarding the Mortgage Loans to the Trustee, its agents and accountants at any time upon reasonable request and during normal business hours, and to Certificateholders that are savings and loan associations, banks or insurance companies, the Office of Thrift Supervision, the FDIC and the supervisory agents and examiners of such Office and Corporation or examiners of any other federal or state banking or insurance regulatory authority if so required by applicable regulations of the Office of Thrift Supervision or other regulatory authority, such access to be afforded without charge but only upon reasonable request in writing and during normal business hours at the offices of the Servicer designated by it. In fulfilling such a request the Servicer shall not be responsible for determining the sufficiency of such information.

(b)        All Mortgage Files and funds collected or held by, or under the control of, the Servicer, in respect of any Mortgage Loans, whether from the collection of principal and interest payments or from Liquidation Proceeds or Insurance Proceeds, shall be held by the Servicer for and on behalf of the Trustee and the Certificateholders and shall be and remain the sole and exclusive property of the Trust; provided , however , that the Servicer shall be entitled to setoff against, and deduct from, any such funds any amounts that are properly due and payable to the Servicer under this Agreement.

Section 3.09

Standard Hazard Insurance and Flood Insurance Policies .

(a)        The Servicer shall cause to be maintained for each Mortgage Loan fire and hazard insurance with extended coverage as is customary in the area where the Mortgaged Property is located in an amount which is equal to the lesser of (i) the maximum insurable value of the improvements securing such Mortgage Loan or (ii) the greater of (a) the outstanding principal balance of the Mortgage Loan, and (b) the percentage such that the proceeds thereof shall be sufficient to prevent the Mortgagor and/or the Mortgagee from becoming a co-insurer. If the Mortgaged Property is in an area identified in the Federal Register by the Federal Emergency Management Agency as being a special flood hazard area that has federally-mandated flood insurance requirements, the Servicer will cause to be maintained a flood insurance policy meeting the requirements of the current guidelines of the Federal Insurance Administration with a generally acceptable insurance carrier, in an amount representing coverage not less than the least of (i) the outstanding principal balance of the Mortgage Loan, (ii) the maximum insurable value of the improvements securing such Mortgage Loan or (iii) the maximum amount of insurance which is available under the Flood Disaster Protection Act of 1973, as amended. The Servicer shall also maintain on the REO Property, fire and hazard insurance with extended coverage in an amount which is at least equal to the maximum insurable value of the improvements which are a part of such property, liability insurance and, to the extent required and available under the Flood Disaster Protection Act of 1973, as amended, flood insurance in an amount as provided above. It is understood and agreed that no other additional insurance need be required by the Servicer or the Mortgagor or maintained on property acquired in respect of the Mortgage Loans, other than pursuant to the Fannie Mae Guide or such applicable state or federal laws and regulations as shall at any time be in force and as shall require such additional insurance. All such policies shall be endorsed with standard mortgagee clauses with loss payable to the Servicer and its successors and/or assigns and shall provide for at least thirty days prior written notice of any cancellation, reduction in the amount or material change in coverage to the Servicer. The Servicer shall not interfere with the Mortgagor's freedom of choice in selecting a

 

66

 

 

 

insurance carrier or agent, provided, however, that the Servicer shall not accept any such insurance policies from insurance companies unless such companies currently reflect a General Policy Rating in Best's Key Rating Guide currently acceptable to Fannie Mae and are licensed to do business in the state wherein the property subject to the policy is located.

(b)        If the Servicer shall obtain and maintain a blanket hazard insurance policy with extended coverage insuring against hazard losses on all of the Mortgage Loans, it shall conclusively be deemed to have satisfied its obligations as set forth in the first sentence of Section 3.09(a), it being understood and agreed that such policy may contain a deductible clause, in which case the Servicer shall, in the event that there shall not have been maintained on the related Mortgaged Property a policy complying with the first sentence of Section 3.09(a) and there shall have been a loss which would have been covered by such policy, deposit in the Custodial Account the amount not otherwise payable under the blanket policy because of such deductible clause.

(c)        Pursuant to Section 4.01, any amounts collected by the Servicer, under any insurance policies (other than amounts to be applied to the restoration or repair of the property subject to the related Mortgage) shall be deposited into the Custodial Account, subject to withdrawal pursuant to Section  4.02. Any cost incurred by the Servicer in maintaining any such insurance if the Mortgagor defaults in its obligation to do so shall be added to the amount owing under the Mortgage Loan where the terms of the Mortgage Loan so permit; provided , however , that the addition of any such cost shall not be taken into account for purposes of calculating the distributions to be made to Certificateholders and shall be recoverable by the Servicer pursuant to Section 4.02.

Section 3.10      Presentment of Claims and Collection of Proceeds . The Servicer shall prepare and present on behalf of the Trustee and the Certificateholders all claims under the Insurance Policies and take such actions (including the negotiation, settlement, compromise or enforcement of the insured’s claim) as shall be necessary to realize recovery under such policies. Any proceeds disbursed to the Servicer in respect of such policies, bonds or contracts shall be promptly deposited in the Custodial Account upon receipt, except that any amounts realized that are to be applied to the repair or restoration of the related Mortgaged Property as a condition precedent to the presentation of claims on the related Mortgage Loan to the insurer under any applicable Insurance Policy need not be so deposited (or remitted).

Section 3.11

Maintenance of the Primary Mortgage Insurance Policies .

(a)        The Servicer shall not take, or permit any subservicer to take, any action that would result in noncoverage under any applicable Primary Mortgage Insurance Policy of any loss which, but for the actions of the Servicer or such subservicer, would have been covered thereunder. The Servicer shall cause to be kept in force and effect (to the extent that the Mortgage Loan requires the Mortgagor to maintain such insurance), primary mortgage insurance applicable to each Mortgage Loan in accordance with the provisions of this Agreement. The Servicer shall not, and shall not permit any subservicer to, cancel or refuse to renew any such Primary Mortgage Insurance Policy that is in effect at the date of the initial issuance of the Mortgage Note and is required to be kept in force hereunder except in accordance with the

 

67

 

 

 

provisions of this Agreement. Any such primary mortgage insurance policies shall be issued by a Qualified Insurer.

(b)        The Servicer agrees to present, or to cause each subservicer to present, on behalf of the Trustee and the Certificateholders, claims to the insurer under any Primary Mortgage Insurance Policies and, in this regard, to take such reasonable action as shall be necessary to permit recovery under any Primary Mortgage Insurance Policies respecting defaulted Mortgage Loans. Pursuant to Section 4.01, any amounts collected by the Servicer under any Primary Mortgage Insurance Policies shall be deposited in the Custodial Account, subject to withdrawal pursuant to Section 4.02.

Section 3.12      Trustee to Retain Possession of Certain Insurance Policies and Documents .

The Trustee (or the Custodian, as directed by the Trustee), shall retain possession and custody of the originals (to the extent available) of any Primary Mortgage Insurance Policies, or certificate of insurance if applicable, and any certificates of renewal as to the foregoing as may be issued from time to time as contemplated by this Agreement. Until all amounts distributable in respect of the Certificates have been distributed in full and the Servicer otherwise has fulfilled its obligations under this Agreement, the Trustee (or its Custodian, if any, as directed by the Trustee) shall also retain possession and custody of each Mortgage File in accordance with and subject to the terms and conditions of this Agreement. The Servicer shall promptly deliver or cause to be delivered to the Trustee (or the Custodian, as directed by the Trustee), upon the execution or receipt thereof the originals of any Primary Mortgage Insurance Policies, any certificates of renewal, and such other documents or instruments that constitute portions of the Mortgage File that come into the possession of the Servicer from time to time.

Section 3.13      Realization Upon Defaulted Mortgage Loans . The Servicer shall use its reasonable efforts, consistent with the procedures that the Servicer would use in servicing loans for its own account and the requirements of the Fannie Mae Guide, to foreclose upon or otherwise comparably convert the ownership of Mortgaged Properties securing such of the Mortgage Loans as come into and continue in default and as to which no satisfactory arrangements can be made for collection of delinquent payments pursuant to Section 4.01. The Servicer shall use its reasonable efforts to realize upon defaulted Mortgage Loans in such manner as will maximize the receipt of principal and interest by the Depositor, taking into account, among other things, the timing of foreclosure proceedings. The foregoing is subject to the provisions that, in any case in which Mortgaged Property shall have suffered damage, the Servicer shall not be required to expend its own funds toward the restoration of such property unless it shall determine in its discretion (i) that such restoration will increase the proceeds of liquidation of the related Mortgage Loan to the Depositor after reimbursement to itself for such expenses, and (ii) that such expenses will be recoverable by the Servicer through Insurance Proceeds or Liquidation Proceeds from the related Mortgaged Property, as contemplated in Section 4.02. The Servicer shall be responsible for all costs and expenses incurred by it in any such proceedings or functions as advances; provided, however, that it shall be entitled to reimbursement therefor as provided in Section 4.02. Notwithstanding anything to the contrary contained herein, in connection with a foreclosure or acceptance of a deed in lieu of foreclosure, in the event the Servicer has reasonable cause to believe that a Mortgaged Property is

 

68

 

 

 

contaminated by hazardous or toxic substances or wastes, or if the Trustee otherwise requests an environmental inspection or review of such Mortgaged Property, such an inspection or review is to be conducted by a qualified inspector. Upon completion of the inspection, the Servicer shall promptly provide the Depositor and the Trustee with a written report of the environmental inspection.

Section 3.14      Compensation for the Servicer . The Servicer will be entitled to the Servicing Fee and all income and gain realized from any investment of funds in the Custodial Account, pursuant to Article IV, for the performance of its activities hereunder. Servicing compensation in the form of assumption fees, if any, late payment charges, as collected, if any, or otherwise (but not including any Prepayment Charges) shall be retained by the Servicer and shall not be deposited in the Custodial Account. The Servicer will be entitled to retain, as additional compensation, any interest incurred in connection with a Principal Prepayment in full or otherwise in excess of amounts required to be remitted to the Distribution Account (such amounts together with the amounts specified in the first sentence of this Section 3.14, the “Servicing Compensation”) and any Excess Liquidation Proceeds. The Servicer shall be required to pay all expenses incurred by it in connection with its activities hereunder and shall not be entitled to reimbursement therefor except as provided in this Agreement.

Section 3.15

REO Property .

(a)        In the event the Trust Fund acquires ownership of any REO Property in respect of any related Mortgage Loan, the deed or certificate of sale shall be issued to the Trustee, or to its nominee, on behalf of the related Certificateholders. The Servicer shall ensure that the title to such REO Property references this Agreement and the Trustee’s capacity hereunder (and not in its individual capacity). The Servicer, however, shall not be required to expend its own funds or incur other reimbursable charges in connection with any foreclosure, or attempted foreclosure which is not completed, or towards the restoration of any property unless it shall determine (i) that such restoration and/or foreclosure will increase the proceeds of liquidation of the Mortgage Loan to Holders of Certificates of one or more Classes after reimbursement to itself for such expenses or charges and (ii) that such expenses or charges will be recoverable to it through Liquidation Proceeds, Insurance Proceeds, or REO Proceeds (respecting which it shall have priority for purposes of withdrawals from the Custodial Account pursuant to Section 4.02, whether or not such expenses and charges are actually recoverable from related Liquidation Proceeds, Insurance Proceeds or REO Proceeds). In the event of such a determination by the Servicer pursuant to this Section 3.15(a), the Servicer shall be entitled to reimbursement of such amounts pursuant to Section 4.02. If the Servicer has knowledge that a Mortgaged Property which the Servicer is contemplating acquiring in foreclosure or by deed in lieu of foreclosure is located within a one (1) mile radius of any site listed in the Expenditure Plan for the Hazardous Substance Clean Up Bond Act of 1984 or other site with environmental or hazardous waste risks known to the Servicer, the Servicer will, prior to acquiring the Mortgaged Property, consider such risks and only take action in accordance with its established environmental review procedures.

The Servicer shall, either itself or through an agent selected by the Servicer, manage, conserve, protect and operate each REO Property in the same manner that it manages, conserves, protects and operates other foreclosed property for its own account, and in the same manner that

 

69

 

 

 

similar property in the same locality as the REO Property is managed, including in accordance with the REMIC Provisions and in a manner that does not result in a tax on “net income from foreclosure property” (unless such result would maximize the Trust Fund’s after-tax return on such property) or cause such REO Property to fail to qualify as “foreclosure property” within the meaning of Section 860G(a)(8) of the Code. Each disposition of REO Property shall be carried out by the Servicer at such price and upon such terms and conditions as the Servicer deems to be in the best interest of the Certificateholders. The Servicer shall deposit all funds collected and received in connection with the operation of any REO Property in the Custodial Account pursuant to Section 4.01.

Upon the occurrence of a Cash Liquidation or REO Disposition, following the deposit in the Custodial Account of all Insurance Proceeds, Liquidation Proceeds and other payments and recoveries referred to in the definition of “Cash Liquidation” or “REO Disposition,” as applicable, upon receipt by the Trustee of written notification of such deposit signed by a Servicing Officer, the Trustee or any Custodian, as the case may be, shall release to the Servicer the related Mortgage File and the Trustee shall execute and deliver such instruments of transfer or assignment prepared by the Servicer, in each case without recourse, as shall be necessary to vest in the Servicer or its designee, as the case may be, the related Mortgage Loan, and thereafter such Mortgage Loan shall not be part of the Trust Fund.

(b)        If title to any Mortgaged Property is acquired by the Trust Fund as an REO Property by foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale shall be issued to the Trustee or to its nominee on behalf of Certificateholders. Notwithstanding any such acquisition of title and cancellation of the related Mortgage Loan, such REO Property shall (except as otherwise expressly provided herein) be considered to be an Outstanding Mortgage Loan held in the Trust Fund until such time as the REO Property shall be sold. Consistent with the foregoing for purposes of all calculations hereunder so long as such REO Property shall be considered to be an Outstanding Mortgage Loan it shall be assumed that, notwithstanding that the indebtedness evidenced by the related Mortgage Note shall have been discharged, such Mortgage Note and the related amortization schedule in effect at the time of any such acquisition of title (after giving effect to any previous Curtailments and before any adjustment thereto by reason of any bankruptcy or similar proceeding or any moratorium or similar waiver or grace period) remain in effect. To the extent the net income received during any calendar month is in excess of the amount attributable to amortizing principal and accrued interest at the related Mortgage Rate on the related Mortgage Loan for such calendar month, such excess shall be considered to be a Curtailment of the related Mortgage Loan.

(c) If the Trust Fund acquires any REO Property as aforesaid or otherwise in connection with a default or imminent default on a Mortgage Loan, the Servicer on behalf of the Trust Fund shall dispose of such REO Property within three full years after the taxable year of its acquisition by the Trust Fund for purposes of Section 860G(a)(8) of the Code (or such shorter period as may be necessary under applicable state (including any state in which such property is located) law to maintain the status of any portion of the applicable REMIC as a REMIC under applicable state law and avoid taxes resulting from such property failing to be foreclosure property under applicable state law) or, at the expense of the Trust Fund, request, more than 60 days before the day on which such grace period would otherwise expire, an extension of such grace period unless the Servicer obtains for the Trustee an Opinion of Counsel, addressed to the

 

70

 

 

 

 

 

Trustee and the Servicer, to the effect that the holding by the Trust Fund of such REO Property subsequent to such period will not result in the imposition of taxes on “prohibited transactions” as defined in Section 860F of the Code or cause the applicable REMIC to fail to qualify as a REMIC (for federal (or any applicable State or local) income tax purposes) at any time that any Certificates are outstanding, in which case the Trust Fund may continue to hold such REO Property (subject to any conditions contained in such Opinion of Counsel). The Servicer shall be entitled to be reimbursed from the Custodial Account for any costs incurred in obtaining such Opinion of Counsel, as provided in Section 4.02. Notwithstanding any other provision of this Agreement, no REO Property acquired by the Trust Fund shall be rented (or allowed to continue to be rented) or otherwise used by or on behalf of the Trust Fund in such a manner or pursuant to any terms that would (i) cause such REO Property to fail to qualify as “foreclosure property” within the meaning of Section 860G(a)(8) of the Code or (ii) subject the Trust Fund to the imposition of any federal income taxes on the income earned from such REO Property, including any taxes imposed by reason of Section 860G(c) of the Code, unless the Servicer has agreed to indemnify and hold harmless the Trust Fund with respect to the imposition of any such taxes.

Section 3.16

Annual Officer’s Certificate as to Compliance .

(a)        The Servicer shall deliver to the Trustee and the Rating Agencies on or before March 1 of each year, commencing on March 1, 2006, an Officer’s Certificate, certifying that with respect to the period ending December 31 of the prior year: (i) such Servicing Officer has reviewed the activities of the Servicer during the preceding calendar year or portion thereof and its performance under this Agreement, (ii) to the best of such Servicing Officer’s knowledge, based on such review, such Servicer has performed and fulfilled its duties, responsibilities and obligations under this Agreement in all material respects throughout such year, or, if there has been a default in the fulfillment of any such duties, responsibilities or obligations, specifying each such default known to such Servicing Officer and the nature and status thereof, (iii) nothing has come to the attention of such Servicing Officer to lead such Servicing Officer to believe that the Servicer has failed to perform any of its duties, responsibilities and obligations under this Agreement in all material respects throughout such year, or, if there has been a material default in the performance or fulfillment of any such duties, responsibilities or obligations, specifying each such default known to such Servicing Officer and the nature and status thereof.

(b)        Copies of such statements shall be provided to any Certificateholder upon request, by the Servicer or by the Trustee at the Servicer’s expense if the Servicer failed to provide such copies (unless (i) the Servicer shall have failed to provide the Trustee with such statement or (ii) the Trustee shall be unaware of the Servicer’s failure to provide such statement).

Section 3.17      Annual Independent Accountant’s Servicing Report . The Servicer at its expense shall cause a nationally recognized firm of independent certified public accountants to furnish a statement to the Trustee, the Rating Agencies and the Depositor on or before March 1 of each year, commencing on March 1, 2006 to the effect that, with respect to the most recently ended calendar year, such firm has examined certain records and documents relating to the Servicer’s performance of its servicing obligations under this Agreement and pooling and servicing and trust agreements in material respects similar to this Agreement and to each other and that, on the basis of such examination conducted substantially in compliance with the audit

 

71

 

 

 

program for mortgages serviced for Freddie Mac or the Uniform Single Attestation Program for Mortgage Bankers, such firm is of the opinion that the Servicer’s activities have been conducted in compliance with this Agreement, or that such examination has disclosed no material items of noncompliance except for (i) such exceptions as such firm believes to be immaterial, (ii) such other exceptions as are set forth in such statement and (iii) such exceptions that the Uniform Single Attestation Program for Mortgage Bankers or the Audit Program for Mortgages Serviced by Freddie Mac requires it to report. Copies of such statements shall be provided to any Certificateholder upon request by the Servicer, or by the Trustee at the expense of the Servicer if the Servicer shall fail to provide such copies. If such report discloses exceptions that are material, the Servicer shall advise the Trustee whether such exceptions have been or are susceptible of cure, and will take prompt action to do so.

Section 3.18      Reports Filed with Securities and Exchange Commission . Within 15 days after each Distribution Date, the Trustee shall, in accordance with industry standards, file with the Commission via the Electronic Data Gathering and Retrieval System (“EDGAR”), a Form 8-K (or other comparable form containing the same or comparable information or other information mutually agreed upon) with a copy of the statement to the Certificateholders for such Distribution Date as an exhibit thereto. Prior to January 30 of each year, the Trustee shall, in accordance with industry standards and only if instructed by the Depositor, file a Form 15 Suspension Notice with respect to the Trust Fund, if applicable. Prior to (i) March 15, 2006 and (ii) unless and until a Form 15 Suspension Notice shall have been filed, prior to March 15 of each year thereafter, the Servicer shall provide the Trustee with a Servicer Certification, together with a copy of the annual independent accountant’s servicing report and annual statement of compliance required to be delivered by the Servicer pursuant to Sections 3.16 and 3.17. Prior to (i) March 31, 2006, or such earlier filing date as may be required by the Commission, and (ii) unless and until a Form 15 Suspension Notice shall have been filed, March 31 of each year thereafter, or such earlier filing date as may be required by the Commission, the Trustee shall prepare and file a Form 10-K, in substance conforming to industry standards, with respect to the Trust. Such Form 10-K shall be executed on behalf of the Depositor by the Servicer and shall include the Servicer Certification and other documentation provided by the Servicer pursuant to the second preceding sentence. The Depositor hereby grants to the Trustee a limited power of attorney to execute each Form 8-K (or comparable form) and to file each Form 8-K and Form 10-K on behalf of the Depositor. Such power of attorney shall continue until either the earlier of (i) receipt by the Trustee from the Depositor of written termination of such power of attorney and (ii) the termination of the Trust Fund. The Depositor agrees to promptly furnish to the Trustee, from time to time upon request, such further information, reports and financial statements within its control related to this Agreement and the Mortgage Loans as the Trustee reasonably deems appropriate to prepare and file all necessary reports with the Commission. The Trustee shall have no responsibility to file any items other than those specified in this Section 3.18; provided , however , the Trustee will cooperate with the Depositor in connection with any additional filings with respect to the Trust Fund as the Depositor deems necessary under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Fees and expenses incurred by the Trustee in connection with this Section 3.18 shall not be reimbursable from the Trust Fund.

Section 3.19      UCC . The Depositor shall inform the Trustee in writing of any Uniform Commercial Code financing statements that were filed on the Closing Date and each Subsequent Transfer Date in connection with the Trust with stamped recorded copies of such financing

 

72

 

 

 

statements to be delivered to the Trustee promptly upon receipt by the Depositor. The Trustee agrees to monitor and notify the Depositor if any continuation statements for such Uniform Commercial Code financing statements need to be filed. If directed by the Depositor in writing, the Trustee will file any such continuation statements solely at the expense of the Depositor. The Depositor shall file any financing statements or amendments thereto required by any change in the Uniform Commercial Code.

Section 3.20

Optional Purchase of Defaulted Mortgage Loans .

(a)        With respect to any Mortgage Loan which as of the first day of a Fiscal Quarter is delinquent in payment by 90 days or more or is an REO Property, the Company shall have the right to purchase such Mortgage Loan from the Trust at a price equal to the Repurchase Price; provided however (i) that such Mortgage Loan is still 90 days or more delinquent or is an REO Property as of the date of such purchase and (ii) this purchase option, if not theretofore exercised, shall terminate on the date prior to the last day of the related Fiscal Quarter. This purchase option, if not exercised, shall not be thereafter reinstated unless the delinquency is cured and the Mortgage Loan thereafter again becomes 90 days or more delinquent or becomes an REO Property, in which case the option shall again become exercisable as of the first day of the related Fiscal Quarter.

(b)        If at any time the Company deposits, or remits to the Servicer (to the extent it is not the Servicer) for deposit, in the Custodial Account the amount of the Repurchase Price for a Mortgage Loan and the Company provides to the Trustee a certification signed by a Servicing Officer stating that the amount of such payment has been deposited in the Custodial Account, then the Trustee shall execute the assignment of such Mortgage Loan to the Company at the request of the Company without recourse, representation or warranty and the Company shall succeed to all of the Trustee’s right, title and interest in and to such Mortgage Loan, and all security and documents relative thereto. Such assignment shall be an assignment outright and not for security. The Company will thereupon own such Mortgage, and all such security and documents, free of any further obligation to the Trustee or the Certificateholders with respect thereto.

 

 

73

 

 

 

 

ARTICLE IV

Accounts

Section 4.01      Custodial Account . (a) The Servicer shall segregate and hold all funds collected and received pursuant to each Mortgage Loan separate and apart from any of its own funds and general assets and shall establish and maintain one or more Custodial Accounts held in trust for the Certificateholders. Each Custodial Account shall be an Eligible Account. The Custodial Account shall be maintained as a segregated account, separate and apart from trust funds created for mortgage pass-through certificates of other series, and the other accounts of the Servicer.

Within two Business Days of receipt, except as otherwise specifically provided herein, the Servicer shall deposit or cause to be deposited the following payments and collections remitted by subservicers or received by it in respect of the Mortgage Loans subsequent to the Cut-off Date (other than in respect of principal and interest due on such Mortgage Loans on or before the Cut-off Date) and the following amounts required to be deposited hereunder:

(i)         Scheduled Payments on the Mortgage Loans received or any related portion thereof advanced by the Servicer which were due during or before the related Due Period, net of the amount thereof comprising the Servicing Fee;

(ii)         Full Principal Prepayments and any Liquidation Proceeds received by the Servicer with respect to the Mortgage Loans in the related Prepayment Period (or, in the case of Subsequent Recoveries, during the related Due Period), with interest to the date of prepayment or liquidation, net of the amount thereof comprising the Servicing Fee;

(iii)        Partial Principal Prepayments received by the Servicer for the Mortgage Loans in the related Prepayment Period;

(iv)	Any Monthly Advance and any Compensating Interest Payments;

(v)        Any Insurance Proceeds or Net Liquidation Proceeds received by or on behalf of the Servicer;

(vi)        The Repurchase Price with respect to any Mortgage Loans purchased by the Seller pursuant to the Mortgage Loan Purchase Agreement or Sections 2.02 or 2.03 hereof, any amounts which are to be treated pursuant to Section 2.04 of this Agreement as the payment of a Repurchase Price in connection with the tender of a Substitute Mortgage Loan by the Seller, the Repurchase Price with respect to any Mortgage Loans purchased pursuant to Section 3.20, and all proceeds of any Mortgage Loans or property acquired with respect thereto repurchased by the Depositor or its designee pursuant to Section 10.01;

(vii)       Any amounts required to be deposited with respect to losses on investments of deposits in an Account;

 

74

 

 

 

 

(viii)       Any amounts received by the Servicer in connection with any Prepayment Charge on the Prepayment Charge Loans; and

(ix)        Any other amounts received by or on behalf of the Servicer and required to be deposited in the Custodial Account pursuant to this Agreement.

(b)        All amounts deposited to the Custodial Account shall be held by the Servicer in the name of the Trustee in trust for the benefit of the Certificateholders in accordance with the terms and provisions of this Agreement. The requirements for crediting the Custodial Account or the Distribution Account shall be exclusive, it being understood and agreed that, without limiting the generality of the foregoing, payments in the nature of (i) late payment charges or assumption, tax service, statement account or payoff, substitution, satisfaction, release and other like fees and charges and (ii) the items enumerated in Sections 4.04(a)(i) through (iv) and (vi) through (xi) with respect to the Trustee and the Servicer, need not be credited by the Servicer to the Distribution Account or the Custodial Account, as applicable. Amounts received by the Servicer in connection with Prepayment Charges on the Prepayment Charge Loans shall be remitted by the Servicer to the Trustee and deposited by the Trustee into the Class XP Reserve Account upon receipt thereof. In the event that the Servicer shall deposit or cause to be deposited to the Distribution Account any amount not required to be credited thereto, the Trustee, upon receipt of a written request therefor signed by a Servicing Officer of the Servicer, shall promptly transfer such amount to the Servicer, any provision herein to the contrary notwithstanding.

(c)        The amount at any time credited to the Custodial Account may be invested, in the name of the Trustee, or its nominee, for the benefit of the Certificateholders, in Permitted Investments as directed by the Servicer. All Permitted Investments shall mature or be subject to redemption or withdrawal on or before, and shall be held until, the next succeeding Distribution Account Deposit Date. Any and all investment earnings on amounts on deposit in the Custodial Account from time to time shall be for the account of the Servicer. The Servicer from time to time shall be permitted to withdraw or receive distribution of any and all investment earnings from the Custodial Account. The risk of loss of moneys required to be distributed to the Certificateholders resulting from such investments shall be borne by and be the risk of the Servicer. The Servicer shall deposit the amount of any such loss in the Custodial Account within two Business Days of receipt of notification of such loss but not later than the second Business Day prior to the Distribution Date on which the moneys so invested are required to be distributed to the Certificateholders.

Section 4.02    &n