EXHIBIT 4
MORGAN STANLEY ABS CAPITAL I INC.,
Depositor,
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,
Servicer,
COUNTRYWIDE HOME LOANS SERVICING LP,
Servicer,
HOMEQ SERVICING CORPORATION,
Servicer,
ACCREDITED HOME LENDERS, INC.,
Responsible Party,
FIRST NLC FINANCIAL SERVICES, LLC,
Responsible Party,
MILA, INC.,
Responsible Party,
and
DEUTSCHE BANK NATIONAL TRUST COMPANY,
Trustee
----------------------------
POOLING AND SERVICING AGREEMENT
Dated as of May 1, 2005
----------------------------
MORGAN STANLEY HOME EQUITY LOAN TRUST 2005-2
MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 2005-2
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
REPRESENTATIONS AND WARRANTIES
Section 2.01 Conveyance of Mortgage
Loans....................................
Section 2.02 Acceptance by the Trustee of the
Mortgage Loans.................
Section 2.03 Representations and Warranties;
Remedies for Breaches of
Representations and Warranties with Respect to the
Mortgage Loans.................................................
Section 2.04 Execution and Delivery of
Certificates..........................
Section 2.05 REMIC
Matters...................................................
Section 2.06 Representations and Warranties of
the Depositor.................
ARTICLE III
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
Section 3.01 Servicers to Service Mortgage
Loans.............................
Section 3.02 Subservicing Agreements between a
Servicer and
Subservicers...................................................
Section 3.03 Successor
Subservicers..........................................
Section 3.04 Liability of the
Servicers......................................
Section 3.05 No Contractual Relationship
between Subservicers and the
Trustee........................................................
Section 3.06 Assumption or Termination of
Subservicing Agreements by
Trustee........................................................
Section 3.07 Collection of Certain Mortgage
Loan Payments....................
Section 3.08 Subservicing
Accounts...........................................
Section 3.09 Collection of Taxes, Assessments
and Similar Items;
Escrow Accounts................................................
Section 3.10 Collection
Accounts.............................................
Section 3.11 Withdrawals from the Collection
Accounts........................
Section 3.12 Investment of Funds in the
Collection Accounts and the
Distribution Account...........................................
Section 3.13 Maintenance of Hazard Insurance
and Errors and Omissions
and Fidelity Coverage..........................................
Section 3.14 Enforcement of Due-on-Sale
Clauses; Assumption Agreements.......
Section 3.15 Realization upon Defaulted
Mortgage Loans.......................
Section 3.16 Release of Mortgage
Files.......................................
Section 3.17 Title, Conservation and
Disposition of REO Property.............
Section 3.18 Notification of
Adjustments.....................................
Section 3.19 Access to Certain Documentation
and Information Regarding
the Mortgage Loans.............................................
Section 3.20 Documents, Records and Funds in
Possession of the
Servicers to Be Held for the Trustee...........................
Section 3.21 Servicing
Compensation..........................................
Section 3.22 Annual Statement as to
Compliance...............................
Section 3.23 Annual Independent Public
Accountants' Servicing
Statement; Financial Statements................................
Section 3.24 Trustee to Act as
Servicer......................................
Section 3.25 Compensating
Interest...........................................
Section 3.26 Credit Reporting;
Gramm-Leach-Bliley Act........................
ARTICLE IV
DISTRIBUTIONS AND
ADVANCES BY THE SERVICERS
Section 4.01
Advances........................................................
Section 4.02 Priorities of
Distribution......................................
Section 4.03 Monthly Statements to
Certificateholders........................
Section 4.04 Certain Matters Relating to the
Determination of LIBOR..........
Section 4.05 Allocation of Applied Realized
Loss Amounts.....................
ARTICLE V
THE CERTIFICATES
Section 5.01 The
Certificates................................................
Section 5.02 Certificate Register; Registration
of Transfer and
Exchange of Certificates.......................................
Section 5.03 Mutilated, Destroyed, Lost or
Stolen Certificates...............
Section 5.04 Persons Deemed
Owners...........................................
Section 5.05 Access to List of
Certificateholders' Names and Addresses.......
Section 5.06 Maintenance of Office or
Agency.................................
ARTICLE VI
THE DEPOSITOR AND THE SERVICERS
Section 6.01 Respective Liabilities of the
Depositor and the Servicers.......
Section 6.02 Merger or Consolidation of the
Depositor or a Servicer..........
Section 6.03 Limitation on Liability of the
Depositor, the Servicers
and Others.....................................................
Section 6.04 Limitation on Resignation of a
Servicer.........................
Section 6.05 Additional Indemnification by the
Servicers; Third Party
Claims.........................................................
ARTICLE VII
DEFAULT
Section 7.01 Events of
Default...............................................
Section 7.02 Trustee to Act; Appointment of
Successor........................
Section 7.03 Notification to
Certificateholders..............................
ARTICLE VIII
CONCERNING THE TRUSTEE
Section 8.01 Duties of the
Trustee...........................................
Section 8.02 Certain Matters Affecting the
Trustee...........................
Section 8.03 Trustee Not Liable for
Certificates or Mortgage Loans...........
Section 8.04 Trustee May Own
Certificates....................................
Section 8.05 Trustee's Fees and
Expenses.....................................
Section 8.06 Eligibility Requirements for the
Trustee........................
Section 8.07 Resignation and Removal of the
Trustee..........................
Section 8.08 Successor
Trustee...............................................
Section 8.09 Merger or Consolidation of the
Trustee..........................
Section 8.10 Appointment of Co-Trustee or
Separate Trustee...................
Section 8.11 Tax
Matters.....................................................
Section 8.12 Periodic
Filings................................................
Section 8.13 Tax Classification of the Excess
Reserve Fund Account and
the Interest Rate Cap Agreements...............................
ARTICLE IX
TERMINATION
Section 9.01 Termination upon Liquidation or
Purchase of the Mortgage
Loans..........................................................
Section 9.02 Final Distribution on the
Certificates..........................
Section 9.03 Additional Termination
Requirements.............................
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.01
Amendment.......................................................
Section 10.02 Recordation of Agreement;
Counterparts..........................
Section 10.03 Governing
Law...................................................
Section 10.04 Intention of
Parties............................................
Section 10.05
Notices.........................................................
Section 10.06 Severability of
Provisions......................................
Section 10.07 Assignment; Sales; Advance
Facilities...........................
Section 10.08 Limitation on Rights of
Certificateholders......................
Section 10.09 Inspection and Audit
Rights.....................................
Section 10.10 Certificates Nonassessable
and Fully Paid.......................
Section 10.11 Rule of
Construction............................................
Section 10.12 Waiver of Jury
Trial............................................
SCHEDULES
Schedule I
Mortgage Loan Schedule
Schedule II
Representations and Warranties of JPMorgan, as Servicer
Schedule III
Representations and Warranties of Countrywide, as Servicer
Schedule IV
Representations and Warranties of HomEq, as Servicer
Schedule V
Representations and Warranties of the Depositor as to the
Mortgage Loans
Schedule VI
Representations and Warranties of First NLC as to the First
NLC
Mortgage Loans
Schedule VII
Representations and Warranties of MILA as to the MILA
Mortgage Loans
Schedule VIII Representations
and Warranties of Accredited as to the
Accredited Mortgage Loans
EXHIBITS
Exhibit A Form of Class A, Class M and
Class B Certificate
Exhibit B Form of Class P
Certificate
Exhibit C Form of Class R
Certificate
Exhibit D Form of Class X
Certificate
Exhibit E Form of Initial
Certification of Trustee
Exhibit F Form of Document
Certification and Exception Report of Trustee
Exhibit G Form of Residual Transfer
Affidavit
Exhibit H Form of Transferor
Certificate
Exhibit I Form of Rule 144A Letter
Exhibit J Form of Request for
Release
Exhibit K Form of Contents for Each
Mortgage File
Exhibit L Form of Certification to be
provided with Form 10-K
Exhibit M Form of Certification to be
provided by the Trustee to Depositor
Exhibit N Form of Certification to be
provided by the applicable Servicer
to
Depositor
Exhibit O Form of Servicer Power of
Attorney
Exhibit P Accredited Purchase
Agreement
Exhibit Q First NLC Purchase
Agreement
Exhibit R Meritage Agreements
Exhibit S MILA Purchase Agreement
Exhibit T Wilmington Finance
Agreements
<PAGE>
THIS POOLING AND SERVICING AGREEMENT, dated as of May 1, 2005,
among
MORGAN STANLEY ABS CAPITAL I INC., a
Delaware corporation (the "Depositor"),
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,
a national banking association
("JPMorgan"), COUNTRYWIDE HOME LOANS
SERVICING LP, a Texas limited partnership
("Countrywide"), HOMEQ SERVICING
CORPORATION, a New Jersey corporation ("HomEq"
and, together with JPMorgan and
Countrywide, the "Servicers"), ACCREDITED HOME
LENDERS, INC., a California corporation
("Accredited"), FIRST NLC FINANCIAL
SERVICES, LLC, a Florida limited liability
company ("First NLC"), MILA, INC., a
Washington corporation ("MILA" and,
together with Accredited and First NLC, the
"Responsible Parties"), and DEUTSCHE BANK
NATIONAL TRUST COMPANY, a national
banking association, as trustee (the
"Trustee").
W I T N E S S E T H:
In consideration of the mutual agreements herein contained, the
parties hereto agree as follows:
PRELIMINARY STATEMENT
The Trustee shall elect that two segregated asset pools within
the
Trust Fund be treated for federal income
tax purposes as comprising two REMICs
(each, a "REMIC" or, in the alternative,
the Lower Tier REMIC and the Upper Tier
REMIC, respectively). Each Class of
Certificates (other than the Class P and
Class R Certificates), other than the right
of each Class of LIBOR Certificates
to receive Basis Risk CarryForward Amounts
and the right of the Class X
Certificates to receive payments from the
Interest Rate Cap Agreements,
represents ownership of a regular interest
in the Upper Tier REMIC for purposes
of the REMIC Provisions. The Class R
Certificate represents ownership of the
sole class of residual interest in each of
the Lower Tier REMIC and the Upper
Tier REMIC for purposes of the REMIC
Provisions. The Startup Day for each REMIC
described herein is the Closing Date. The
latest possible maturity date for each
Certificate is the latest date referenced
in Section 2.05. The Upper Tier REMIC
shall hold as assets the several classes of
uncertificated Lower Tier Regular
Interests, set out below. Each such Lower
Tier Regular Interest is hereby
designated as a regular interest in the
Lower Tier REMIC. The Class LT-A-1ss,
Class LT-A-1mz, Class LT-A-2a, Class
LT-A-2b, Class LT-A-2c, Class LT-M-1, Class
LT-M-2, Class LT-M-3, Class LT-M-4, Class
LT-M-5, Class LT-M-6, Class LT-B-1,
Class LT-B-2 and Class LT-B-3 Interests are
hereby designated the LT-Accretion
Directed Classes (the "LT-Accretion
Directed Classes"). The Class P Certificates
represent beneficial ownership of the
Prepayment Charges, each Class of LIBOR
Certificates represents beneficial
ownership of a regular interest in the Upper
Tier REMIC and the right to receive Basis
Risk CarryForward Amounts and the
Class X Certificates represent beneficial
ownership of a regular interest in the
Upper Tier REMIC, the Excess Reserve Fund
Account and the Interest Rate Cap
Agreements, which portions of the Trust
Fund shall be treated as a grantor
trust.
Corresponding
Lower Tier
Lower Tier Initial
Lower Tier
Upper Tier
Class Designation Interest Rate Principal
Amount
REMIC Class
----------------- ------------- --------------------------
-------------
Class LT-A-1ss
(1) 1/2
initial Corresponding
A-1ss
Upper Tier REMIC Class
initial Class Certificate
Balance
Class LT-A-1mz
(1) 1/2
initial Corresponding
A-1mz
Upper Tier REMIC Class
initial Class Certificate
Balance
Class LT-A-2a
(1) 1/2
initial Corresponding
A-2a
Upper Tier REMIC Class
initial Class Certificate
Balance
Class LT-A-2b
(1) 1/2
initial Corresponding
A-2b
Upper Tier REMIC Class
initial Class Certificate
Balance
Class LT-A-2c
(1) 1/2
initial Corresponding
A-2c
Upper Tier REMIC Class
initial Class Certificate
Balance
Class LT-M-1
(1) 1/2
initial Corresponding
M-1
Upper Tier REMIC Class
initial Class Certificate
Balance
Class LT-M-2
(1) 1/2
initial Corresponding
M-2
Upper Tier REMIC Class
initial Class Certificate
Balance
Class LT-M-3
(1) 1/2
initial Corresponding
M-3
Upper Tier REMIC Class
initial Class Certificate
Balance
Class LT-M-4
(1) 1/2
initial Corresponding
M-4
Upper Tier REMIC Class
initial Class Certificate
Balance
Class LT-M-5
(1) 1/2
initial Corresponding
M-5
Upper Tier REMIC Class
initial Class Certificate
Balance
Class LT-M-6
(1) 1/2
initial Corresponding
M-6
Upper Tier REMIC Class
initial Class Certificate
Balance
Class LT-B-1
(1) 1/2
initial Corresponding
B-1
Upper Tier REMIC Class
initial Class Certificate
Balance
Class LT-B-2
(1) 1/2
initial Corresponding
B-2
Upper Tier REMIC Class
initial Class Certificate
Balance
Class LT-B-3
(1) 1/2
initial Corresponding
B-3
Upper Tier REMIC Class
initial Class Certificate
Balance
Class LT-Accrual
(1) 1/2
Pool Stated Principal
Balance plus 1/2 Subordinated
Amount, less aggregate
initial Lower Tier Principal
Amount of Class LT-Group I
and Class LT-Group II
Interests
Class LT-Group I
(2)
0.001% aggregate Stated
Principal Balance of Group I
Mortgage Loans(4)
Class LT-Group II (3)
0.001% aggregate Stated
Principal Balance of
Group II Mortgage Loans(4)
Class LT-R
(5)
(5)
------------
(1) The interest rate with
respect to any Distribution Date for these
interests
is a per annum variable rate equal to the WAC Cap.
(2) The interest rate with
respect to any Distribution Date for the Class
LT-Group I
Interest is a per annum variable rate (expressed as a
percentage
rounded to eight decimal places) equal to the Loan Group I Cap.
(3) The interest rate with
respect to any Distribution Date for the Class
LT-Group
II Interest is a per annum variable rate (expressed as a
percentage
rounded to eight decimal places) equal to the Loan Group II
Cap.
(4) For all Distribution Dates,
the Lower Tier Principal Amount of these Lower
Tier
Regular Interests shall be rounded to eight decimal places.
(5) The Class LT-R Interest is
the sole class of residual interest in the
Lower Tier
REMIC and it does not have a principal amount or an interest
rate.
The Lower Tier REMIC shall hold as assets all of the assets
included
in the Trust Fund other than Prepayment
Charges, the Interest Rate Cap
Agreements, the Excess Reserve Fund
Account, and the Lower Tier Regular
Interests.
On
each Distribution Date, 50% of the increase in the Subordinated
Amount will be payable as a reduction of
the Lower Tier Principal Amounts of the
LT-Accretion Directed Classes (each such
Class will be reduced by an amount
equal to 50% of any increase in the
Subordinated Amount that is attributable to
a reduction in the Class Certificate
Balance of its Corresponding Class) and
will be accrued and added to the Lower Tier
Principal Amount of the Class
LT-Accrual Interest. On each Distribution
Date, the increase in the Lower Tier
Principal Amount of the Class LT-Accrual
Interest may not exceed interest
accruals for such Distribution Date for the
Class LT-Accrual Interest. In the
event that: (i) 50% of the increase in the
Subordinated Amount exceeds (ii)
interest accruals on the Class LT-Accrual
Interest for such Distribution Date,
the excess for such Distribution Date
(accumulated with all such excesses for
all prior Distribution Dates) will be added
to any increase in the Subordinated
Amount for purposes of determining the
amount of interest accrual on the Class
LT-Accrual Interest payable as principal on
the LT-Accretion Directed Classes on
the next Distribution Date pursuant to the
first sentence of this paragraph. All
payments of scheduled principal and
prepayments of principal generated by the
Mortgage Loans and all Subsequent
Recoveries allocable to principal shall be
allocated (i) 50% to the Class LT-Accrual
Interest, the Class LT-Group I
Interest and the Class LT-Group II Interest
(and further allocated among these
Lower Tier Regular Interests in the manner
described below) and (ii) 50% to the
LT-Accretion Directed Classes (such
principal payments and Subsequent Recoveries
shall be allocated among such LT-Accretion
Directed Classes in an amount equal
to 50% of the principal amounts allocated
to their respective Corresponding
Classes), until paid in full.
Notwithstanding the above, principal payments
allocated to the Class X Certificates that
result in the reduction in the
Subordinated Amount shall be allocated to
the Class LT-Accrual Interest (until
paid in full). Realized Losses shall be
applied so that after all distributions
have been made on each Distribution Date
(i) the Lower Tier Principal Amount of
each LT-Accretion Directed Class is equal
to 50% of the Class Certificate
Balance of its Corresponding Class, and
(ii) the Class LT-Accrual Interest, the
Class LT-Group I Interest and the Class
LT-Group II Interest (and further
allocated among these Lower Tier Regular
Interests in the manner described
below) is equal to 50% of the aggregate
Stated Principal Balance of the Mortgage
Loans plus 50% of the Subordinated Amount.
Any increase in the Class Certificate
Balance of a Class of LIBOR Certificates as
a result of a Subsequent Recovery
shall increase the Lower Tier Principal
Amount of the Corresponding Lower Tier
Regular Interest by 50% of such increase
and the remaining 50% of such increase
shall increase the Class LT-Accrual
Interest, the Class LT-Group I Interest and
the Class LT-Group II Interest (such
increase shall be further allocated among
such Lower Tier Regular Interests in the
manner described below). As among the
Class LT-Accrual Interest, the Class
LT-Group I Interest and the Class LT-Group
II Interest, all payments of scheduled
principal and prepayments of principal
generated by the Mortgage Loans, all
Subsequent Recoveries and all Realized
Losses, allocable to such Lower Tier
Regular Interests and increases in the
Lower-Tier Principal Amount of such Lower
Tier Regular Interests as a result of
a Subsequent Recovery shall be allocated
(i) to the Class LT-Group I Interest
and the Class LT-Group II Interest, each
from the related Loan Group so that
their respective Lower Tier Principal
Amounts (computed to at least eight
decimal places) are equal to 0.001% of the
aggregate Stated Principal Balance of
the Mortgage Loans in the related Loan
Group and (ii) the remainder to the Class
LT-Accrual Interest.
The Upper Tier REMIC shall issue the following classes of Upper
Tier
Regular Interests and each such interest,
other than the Class UT-R Interest, is
hereby designated as a regular interest in
the Upper Tier REMIC.
<TABLE>
<CAPTION>
Upper Tier Interest Initial Upper
Tier
Rate and
Principal
Amount and
Corresponding
Corresopnding
Upper Tier
Class Pass-Through Class
Certificate
Corresponding
Class Designation
Rate
Balance
Certificate Class
----------------- -------------------
-------------------- -----------------
<S>
<C>
<C>
<C>
Class A-1ss
(1)
$209,431,000
Class A-1ss(9)
Class A-1mz
(2)
$52,358,000
Class A-1mz(9)
Class A-2a
(3)
$288,963,000
Class A-2a(9)
Class A-2b
(4)
$100,000,000
Class A-2b(9)
Class A-2c
(5)
$80,000,000
Class A-2c(9)
Class M-1
(6)
$35,366,000
Class M-1(9)
Class M-2
(6)
$25,721,000
Class M-2(9)
Class M-3
(6)
$17,913,000
Class M-3(9)
Class M-4
(6)
$16,535,000
Class M-4(9)
Class M-5
(6)
$14,698,000
Class M-5(9)
Class M-6
(6)
$14,698,000
Class M-6(9)
Class B-1
(6)
$12,400,000
Class B-1(9)
Class B-2
(6)
$11,942,000
Class B-2(9)
Class B-3
(6)
$10,105,000
Class B-3(9)
Class X
(7)
$
0(7)
Class X(7)
Class UT-R
(8)
$
0
Class R
</TABLE>
------------
(1) The Class A-1ss Interest
will bear interest during each Interest Accrual
Period at
a per annum rate equal to (a) on or prior to the Optional
Termination Date, the least of (i) LIBOR plus 0.225%, (ii) the Loan
Group
I Cap and
(iii) the WAC Cap or (b) after the Optional Termination Date,
the least
of (i) LIBOR plus 0.450%, (ii) the Loan Group I Cap and (iii)
the WAC
Cap.
(2) The Class A-1mz Interest
will bear interest during each Interest Accrual
Period at
a per annum rate equal to (a) on or prior to the Optional
Termination Date, the least of (i) LIBOR plus 0.260%, (ii) the Loan
Group
I Cap and
(iii) the WAC Cap or (b) after the Optional Termination Date,
the least
of (i) LIBOR plus 0.520%, (ii) the Loan Group I Cap and (iii)
the WAC
Cap.
(3) The Class A-2a Interest will
bear interest during each Interest Accrual
Period at
a per annum rate equal to (a) on or prior to the Optional
Termination Date, the least of (i) LIBOR plus 0.090%, (ii) the Loan
Group
II Cap and
(iii) the WAC Cap or (b) after the Optional Termination Date,
the least
of (i) LIBOR plus 0.180%, (ii) the Loan Group II Cap and (iii)
the WAC
Cap.
(4) The Class A-2b Interest will
bear interest during each Interest Accrual
Period at
a per annum rate equal to (a) on or prior to the Optional
Termination Date, the least of (i) LIBOR plus 0.220%, (ii) the Loan
Group
II Cap and
(iii) the WAC Cap or (b) after the Optional Termination Date,
the least
of (i) LIBOR plus 0.440%, (ii) the Loan Group II Cap and (iii)
the WAC
Cap.
(5) The Class A-2c Interest will
bear interest during each Interest Accrual
Period at
a per annum rate equal to (a) on or prior to the Optional
Termination Date, the least of (i) LIBOR plus 0.320%, (ii) the Loan
Group
II Cap and
(iii) the WAC Cap or (b) after the Optional Termination Date,
the least
of (i) LIBOR plus 0.640%, (ii) the Loan Group II Cap and (iii)
the WAC
Cap.
(6) The Class M-1, Class M-2,
Class M-3, Class M-4, Class M-5, Class M-6,
Class B-1,
Class B-2 and Class B-3 Interests will bear interest during
each
Interest Accrual Period at a per annum rate equal to (a) on or
prior
to the
Optional Termination Date, the lesser of (i) LIBOR plus 0.410%,
0.430%,
0.450%, 0.630%, 0.660%, 0.710%, 1.200%, 1.280% and 1.670%,
respectively, and (ii) the WAC Cap or (b) after the Optional
Termination
Date, the
lesser of (i) LIBOR plus 0.615%, 0.645%, 0.675%, 0.945%,
0.990%,
1.065%,
1.800%, 1.920% and 2.505%, respectively, and (ii) the WAC Cap.
(7) The Class X Interest has an
initial principal balance of $28,477,345 but
it will
not accrue interest on such balance but will accrue interest on
a
notional
principal balance. As of any Distribution Date, the Class X
Interest
shall have a notional principal balance equal to the aggregate
of
the
principal balances of the Lower Tier Regular Interests as of the
first
day of the
related Interest Accrual Period. With respect to any Interest
Accrual
Period, the Class X Interest shall bear interest at a rate
equal
to the
excess, if any, of the WAC Cap over the product of (i) 2 and
(ii)
the
weighted average Lower Tier Interest Rates of the Lower Tier
Regular
Interests,
where the Lower Tier Interest Rate on each of the Class
LT-Accrual
Interest, Class LT-Group I Interest and Class LT-Group II
Interest
is subject to a cap equal to zero and each LT Accretion
Directed
Class is
subject to a cap equal to the Pass-Through Rate on its
Corresponding Class. With respect to any Distribution Date,
interest that
so accrues
on the notional principal balance of the Class X Interest shall
be
deferred in an amount equal to any increase in the Subordinated
Amount
on such
Distribution Date. Such deferred interest shall not itself bear
interest.
The Class X Certificates will represent beneficial ownership of
the Class
X Interest, the Interest Rate Cap Agreements, and amounts in
the
Excess
Reserve Fund Account, subject to the obligation to make
payments
from the
Excess Reserve Fund Account in respect of Basis Risk
CarryForward
Amounts.
For federal income tax purposes, the Trustee will treat a Class
X
Certificateholder's obligation to make payments from the Excess
Reserve
Fund
Account as payments made pursuant to an interest rate cap
contract
written by
the Class X Certificateholders in favor of each Class of LIBOR
Certificates. Such rights of the Class X Certificateholders and
LIBOR
Certificateholders shall be treated as held in a portion of the
Trust Fund
that is
treated as a grantor trust under subpart E, Part I of subchapter
J
of the
Code.
(8) The Class UT-R Interest is
the sole class of residual interest in the
Upper Tier
REMIC. The Class UT-R Interest does not have an interest rate.
(9 )Each of these
Certificates will represent not only the ownership of the
Corresponding Class of Upper Tier Regular Interest but also the
right to
receive
payments from the Excess Reserve Fund Account in respect of any
Basis Risk
CarryForward Amounts. For federal income tax purposes, the
Trustee
will treat a Certificateholder's right to receive payments from
the Excess
Reserve Fund Account as payments made pursuant to an interest
rate cap
contract written by the Class X Certificateholders.
The minimum denomination for each Class of Certificates, other
than
the Class P, Class R and the Class X
Certificates, will be $25,000 with integral
multiples of $1 in excess thereof. The
minimum denomination for the Class P and
the Class X Certificates will each be a 1%
Percentage Interest in such Class.
The Class R Certificate will represent a
100% Percentage Interest in such Class.
It is expected that each Class of Certificates will receive its
final distribution of principal and
interest on or prior to the Final Scheduled
Distribution Date.
Set forth below are designations of Classes of Certificates to
the
categories used herein:
Book-Entry Certificates....... All
Classes of Certificates other than the
Physical Certificates.
Class A Certificates.......... Class A-1ss, Class A-1mz,
Class A-2a, Class
A-2b and Class A-2c Certificates.
Delay Certificates............
None.
ERISA-Restricted Certificates.
Class R Certificates, Class P Certificates
and Class X Certificates; any certificate
with a rating below the lowest applicable
permitted rating under the Underwriters'
Exemption.
LIBOR Certificates............
Class A and
Subordinated Certificates.
Non-Delay Certificates........
Class A, Class X and Subordinated
Certificates.
Offered Certificates.......... All
Classes of Certificates other than the
Private Certificates.
Physical Certificates.........
Class P, Class X and Class R Certificates.
Private Certificates..........
Class P, Class X and Class R Certificates.
Rating Agencies...............
DBRS, Fitch, Moody's and Standard & Poor's.
Regular Certificates.......... All
Classes of Certificates other than the
Class P and Class R Certificates.
Residual Certificates.........
Class R Certificates.
Subordinated Certificates.....
Class M-1, Class M-2, Class M-3, Class M-4,
Class M-5, Class M-6, Class B-1, Class B-2
and Class B-3 Certificates.
<PAGE>
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases,
unless the context otherwise requires,
shall have the following meanings:
Accepted Servicing Practices: With respect to any Mortgage
Loan,
those mortgage servicing practices set
forth in Section 3.01(a) of this
Agreement.
Account: Any of the Collection Accounts, the Distribution
Account,
any Escrow Account or the Excess Reserve
Fund Account. Each Account shall be an
Eligible Account.
Accredited: Accredited Home Lenders, Inc., a California
corporation,
and its successors in interest.
Accredited Mortgage Loans: The Mortgage Loans purchased by the
Purchaser pursuant to the Accredited
Purchase Agreement for which Accredited is
identified as Originator on the Mortgage
Loan Schedule.
Accredited Purchase Agreement: The Third Amended and Restated
Mortgage Loan Purchase and Warranties
Agreement, dated as of February 1, 2004,
as amended by Amendment No. 1, dated as of
April 2, 2004, Amendment No. 2, dated
as of July 2, 2004, Amendment No. 3, dated
as of February 15, 2005 and Amendment
No. 4, dated as of April 15, 2005 each by
and between Accredited and the
Purchaser, each of which are attached
hereto as Exhibit P.
Accrued Certificate Interest Distribution Amount: With respect
to
any Distribution Date for each Class of
LIBOR Certificates, the amount of
interest accrued during the related
Interest Accrual Period at the applicable
Pass-Through Rate on the related Class
Certificate Balance immediately prior to
such Distribution Date, as reduced by such
Class's share of Net Prepayment
Interest Shortfalls and Relief Act Interest
Shortfalls for such Distribution
Date allocated to such Class pursuant to
Section 4.02.
Adjustable Rate Mortgage Loan: An adjustable rate Mortgage
Loan.
Adjusted Net Mortgage Rate: As to each Mortgage Loan and at any
time, the per annum rate equal to the
Mortgage Rate less the Expense Fee Rate.
Adjustment Date: As to any Adjustable Rate Mortgage Loan, the
first
Due Date on which the related Mortgage Rate
adjusts as set forth in the related
Mortgage Note and each Due Date thereafter
on which the Mortgage Rate adjusts as
set forth in the related Mortgage Note.
Advance: Any P&I Advance or Servicing Advance.
Advance Facility: A financing or other facility as described in
Section 10.07.
Advancing Person: The Person to whom any Servicer's rights
under
this Agreement to be reimbursed for any
P&I Advances or Servicing Advances have
been assigned pursuant to Section
10.07.
Affiliate: With
respect to any Person, any other Person controlling,
controlled by or under common control with
such first Person. For the purposes
of this definition, "control" means the
power to direct the management and
policies of such Person, directly or
indirectly, whether through the ownership
of voting securities, by contract or
otherwise; and the terms "controlling" and
"controlled" have meanings correlative to
the foregoing.
Agreement: This Pooling and Servicing Agreement and all
amendments
or supplements hereto.
Amount Held for Future Distribution: As to the Certificates on
any
Distribution Date, the aggregate amount
held in each Collection Account at the
close of business on the related
Determination Date on account of (i) Principal
Prepayments, Insurance Proceeds,
Condemnation Proceeds and Liquidation Proceeds
on the Mortgage Loans received after the
end of the related Prepayment Period
and (ii) all Scheduled Payments on the
Mortgage Loans due after the end of the
related Due Period.
Applied Realized Loss Amount: With respect to any Distribution
Date,
the amount, if any, by which the aggregate
Class Certificate Balance of the
LIBOR Certificates after distributions of
principal on such Distribution Date
exceeds the aggregate Stated Principal
Balance of the Mortgage Loans for such
Distribution Date.
Appraised Value: The value set forth in an appraisal made in
connection with the origination of the
related Mortgage Loan as the value of the
Mortgaged Property.
Assignment of Mortgage: An assignment of the Mortgage, notice
of
transfer or equivalent instrument in
recordable form (other than the assignee's
name and recording information not yet
returned from the recording office),
reflecting the sale of the Mortgage to the
Trustee.
Available Funds: With respect to any Distribution Date and the
Mortgage Loans to the extent received by
the Trustee (x) the sum of (i) all
scheduled installments of interest (net of
the related Expense Fees) and
principal due on the Due Date on such
Mortgage Loans in the related Due Period
and received by the Servicers on or prior
to the related Determination Date,
together with any P&I Advances in
respect thereof; (ii) all Condemnation
Proceeds, Insurance Proceeds and
Liquidation Proceeds received by the Servicers
during the related Prepayment Period (in
each case, net of unreimbursed expenses
incurred in connection with a liquidation
or foreclosure and unreimbursed
Advances, if any); (iii) all partial or
full prepayments on the Mortgage Loans
received by the Servicers during the
related Prepayment Period together with all
Compensating Interest, if applicable,
thereon (excluding any Prepayment
Charges); (iv) all Substitution Adjustment
Amounts with respect to the
substitutions of Mortgage Loans that occur
during the month in which such
Distribution Date occurs; (v) amounts
received with respect to such Distribution
Date as the Repurchase Price in respect of
a Mortgage Loan repurchased by the
Depositor or any of the Originators, as
applicable, during the related
Prepayment Period; (vi) the proceeds
received with respect to the termination of
the Trust Fund pursuant to clause (a) of
Section 9.01; and (vii) the Closing
Date Deposit Amount; reduced by (y) amounts
in reimbursement for Advances
previously made with respect to the
Mortgage Loans and other amounts as to which
the Servicers, the Depositor or the Trustee
are entitled to be paid or
reimbursed pursuant to this Agreement.
Balloon Loan: Any Mortgage Loan that requires only payments of
interest until the stated maturity date of
the Mortgage Loan or Scheduled
Payments of principal which (not including
the payment due on its stated
maturity date) are based on an amortization
schedule that would be insufficient
to fully amortize the principal thereof by
the stated maturity date of the
Mortgage Loan.
Basic Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the
Principal Remittance Amount for such
Distribution Date over (ii) the Excess
Subordinated Amount, if any, for such
Distribution Date.
Basis Risk CarryForward Amount: With respect to each Class of
LIBOR
Certificates, as of any Distribution Date,
the sum of (A) if on such
Distribution Date the Pass-Through Rate for
any Class of LIBOR Certificates is
based upon a Loan Group Cap or the WAC Cap,
the excess of (i) the amount of
interest such Class of Certificates would
otherwise be entitled to receive on
such Distribution Date had such rate been
calculated as the sum of LIBOR and the
applicable Pass-Through Margin on such
Class of Certificates for such
Distribution Date, over (ii) the amount of
interest payable on such Class of
Certificates at, with respect to the Group
I Class A Certificates, the lesser of
the Loan Group I Cap or the WAC Cap, with
respect to the Group II Class A
Certificates, the lesser of the Loan Group
II Cap or the WAC Cap, and with
respect to each other Class of LIBOR
Certificates, the WAC Cap, as applicable,
for such Distribution Date and (B) the
Basis Risk CarryForward Amount for such
Class of Certificates for all previous
Distribution Dates not previously paid,
together with interest thereon at a rate
equal to the sum of LIBOR and the
applicable Pass-Through Margin for such
Class of Certificates for such
Distribution Date.
Basis Risk Payment: For any Distribution Date, an amount equal
to
the lesser of (i) the aggregate of the
Basis Risk CarryForward Amounts for such
Distribution Date and (ii) the Class X
Distributable Amount (prior to any
reduction for Basis Risk Payments).
Best's: Best's Key Rating Guide, as the same shall be amended
from
time to time.
Book-Entry Certificates: As specified in the Preliminary
Statement.
Business Day: Any day
other than (i) Saturday or Sunday, or (ii) a
day on which banking and savings and loan
institutions, in (a) the States of
Arizona, New York, New Jersey, California
or Delaware, (b) a State in which any
Servicer's servicing operations are
located, or (c) the State in which the
Trustee's operations are located, are
authorized or obligated by law or
executive order to be closed.
Cap Provider: Morgan Stanley Capital Services, Inc., a Delaware
corporation, and its successors in
interest.
Certificate: Any one of the Certificates executed by the Trustee
in
substantially the forms attached hereto as
exhibits.
Certificate Balance: With respect to any Class of Certificates,
other than the Class X, Class P or Class R
Certificates, at any date, the
maximum dollar amount of principal to which
the Holder thereof is then entitled
hereunder, such amount being equal to the
Denomination thereof minus all
distributions of principal previously made
with respect thereto and in the case
of any Subordinated Certificates, reduced
by any Applied Realized Loss Amounts
applicable to such Class of Subordinated
Certificates; provided, however, that
immediately following the Distribution Date
on which a Subsequent Recovery is
distributed, the Class Certificate Balances
of any Class or Classes of
Subordinated Certificates that have been
previously reduced by Applied Realized
Loss Amounts will be increased, in order of
seniority, by the amount of the
Subsequent Recovery distributed on such
Distribution Date (up to the amount of
Applied Realized Loss Amounts allocated to
such Class or Classes). The Class X,
Class P and Class R Certificates have no
Certificate Balance.
Certificate Owner: With respect to a Book-Entry Certificate,
the
Person who is the beneficial owner of such
Book-Entry Certificate.
Certificate Register: The register maintained pursuant to
Section
5.02.
Certificateholder or Holder: The person in whose name a
Certificate
is registered in the Certificate Register,
except that, solely for the purpose
of giving any consent pursuant to this
Agreement, any Certificate registered in
the name of the Depositor or any affiliate
of the Depositor shall be deemed not
to be Outstanding and the Percentage
Interest evidenced thereby shall not be
taken into account in determining whether
the requisite amount of Percentage
Interests necessary to effect such consent
has been obtained; provided, however,
that if any such Person (including the
Depositor) owns 100% of the Percentage
Interests evidenced by a Class of
Certificates, such Certificates shall be
deemed to be Outstanding for purposes of
any provision hereof that requires the
consent of the Holders of Certificates of a
particular Class as a condition to
the taking of any action hereunder. The
Trustee is entitled to rely conclusively
on a certification of the Depositor or any
affiliate of the Depositor in
determining which Certificates are
registered in the name of an affiliate of the
Depositor.
Certification: As defined in Section 8.12.
Class: All Certificates bearing the same class designation as
set
forth in the Preliminary Statement.
Class A Certificate Group: The Group I Class A Certificates or
the
Group II Class A Certificates, as
applicable.
Class A Certificates: The Group I Class A Certificates and the
Group
II Class A Certificates.
Class A Principal Allocation Percentage: With respect to any
Distribution Date, the percentage
equivalent of a fraction, determined as
follows: (A) with respect to the Group I
Class A Certificates, a fraction, the
numerator of which is (x) the portion of
the Principal Remittance Amount for
such Distribution Date that is attributable
to the principal received or
advanced on the Group I Mortgage Loans and
the denominator of which is (y) the
Principal Remittance Amount for such
Distribution Date; and (B) with respect to
the Group II Class A Certificates, a
fraction, the numerator of which is (x) the
portion of the Principal Remittance Amount
for such Distribution Date that is
attributable to the principal received or
advanced on the Group II Mortgage
Loans and the denominator of which is (y)
the Principal Remittance Amount for
such Distribution Date.
Class A Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the
aggregate Class Certificate Balances of
the Class A Certificates immediately prior
to such Distribution Date over (ii)
the lesser of (A) 59.10% of the aggregate
Stated Principal Balance of the
Mortgage Loans for such Distribution Date
and (B) the excess, if any, of the
aggregate Stated Principal Balance of the
Mortgage Loans for such Distribution
Date over $4,593,037.
Class A-1mz Certificates: All Certificates bearing the class
designation of "Class A-1mz".
Class A-1ss Certificates: All Certificates bearing the class
designation of "Class A-1ss".
Class A-2a Certificates: All Certificates bearing the class
designation of "Class A-2a".
Class A-2b Certificates: All Certificates bearing the class
designation of "Class A-2b".
Class A-2c Certificates: All Certificates bearing the class
designation of "Class A-2c".
Class B Cap Agreement: The interest rate cap agreement, dated
May
26, 2005, between Morgan Stanley Capital
Services Inc. and the Trustee, relating
to the Class B Certificates.
Class B Certificates: The Class B-1, Class B-2 and Class B-3
Certificates.
Class B-1
Certificates: All Certificates bearing the class
designation of "Class B-1".
Class B-1 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the
sum of (A) the aggregate Class
Certificate Balances of the Class A
Certificates (after taking into account the
distribution of the Class A Principal
Distribution Amount for such Distribution
Date), (B) the Class Certificate Balance of
the Class M-1 Certificates (after
taking into account the distribution of the
Class M-1 Principal Distribution
Amount for such Distribution Date), (C) the
Class Certificate Balance of the
Class M-2 Certificates (after taking into
account the distribution of the Class
M-2 Principal Distribution Amount for such
Distribution Date), (D) the Class
Certificate Balance of the Class M-3
Certificates (after taking into account the
distribution of the Class M-3 Principal
Distribution Amount for such
Distribution Date), (E) the Class
Certificate Balance of the Class M-4
Certificates (after taking into account the
distribution of the Class M-4
Principal Distribution Amount for such
Distribution Date), (F) the Class
Certificate Balance of the Class M-5
Certificates (after taking into account the
distribution of the Class M-5 Principal
Distribution Amount for such
Distribution Date), (G) the Class
Certificate Balance of the Class M-6
Certificates (after taking into account the
distribution of the Class M-6
Principal Distribution Amount for such
Distribution Date) and (H) the Class
Certificate Balance of the Class B-1
Certificates immediately prior to such
Distribution Date over (ii) the lesser of
(A) 89.00% of the aggregate Stated
Principal Balance of the Mortgage Loans for
such Distribution Date and (B) the
excess, if any, of the aggregate Stated
Principal Balance of the Mortgage Loans
for such Distribution Date over
$4,593,037.
Class B-2 Certificates: All Certificates bearing the class
designation of "Class B-2".
Class B-2 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the
sum of (A) the aggregate Class
Certificate Balances of the Class A
Certificates (after taking into account the
distribution of the Class A Principal
Distribution Amount for such Distribution
Date), (B) the Class Certificate Balance of
the Class M-1 Certificates (after
taking into account the distribution of the
Class M-1 Principal Distribution
Amount for such Distribution Date), (C) the
Class Certificate Balance of the
Class M-2 Certificates (after taking into
account the distribution of the Class
M-2 Principal Distribution Amount for such
Distribution Date), (D) the Class
Certificate Balance of the Class M-3
Certificates (after taking into account the
distribution of the Class M-3 Principal
Distribution Amount for such
Distribution Date), (E) the Class
Certificate Balance of the Class M-4
Certificates (after taking into account the
distribution of the Class M-4
Principal Distribution Amount for such
Distribution Date), (F) the Class
Certificate Balance of the Class M-5
Certificates (after taking into account the
distribution of the Class M-5 Principal
Distribution Amount for such
Distribution Date), (G) the Class
Certificate Balance of the Class M-6
Certificates (after taking into account the
distribution of the Class M-6
Principal Distribution Amount for such
Distribution Date), (H) the Class
Certificate Balance of the Class B-1
Certificates (after taking into account the
distribution of the Class B-1 Principal
Distribution Amount for such
Distribution Date), and (I) the Class
Certificate Balance of the Class B-2
Certificates immediately prior to such
Distribution Date over (ii) the lesser of
(A) 91.60% of the aggregate Stated
Principal Balance of the Mortgage Loans for
such Distribution Date and (B) the excess,
if any, of the aggregate Stated
Principal Balance of the Mortgage Loans for
such Distribution Date over
$4,593,037.
Class B-3 Certificates: All Certificates bearing the class
designation of "Class B-3".
Class B-3 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the
sum of (A) the aggregate Class
Certificate Balances of the Class A
Certificates (after taking into account the
distribution of the Class A Principal
Distribution Amount for such Distribution
Date), (B) the Class Certificate Balance of
the Class M-1 Certificates (after
taking into account the distribution of the
Class M-1 Principal Distribution
Amount for such Distribution Date), (C) the
Class Certificate Balance of the
Class M-2 Certificates (after taking into
account the distribution of the Class
M-2 Principal Distribution Amount for such
Distribution Date), (D) the Class
Certificate Balance of the Class M-3
Certificates (after taking into account the
distribution of the Class M-3 Principal
Distribution Amount for such
Distribution Date), (E) the Class
Certificate Balance of the Class M-4
Certificates (after taking into account the
distribution of the Class M-4
Principal Distribution Amount for such
Distribution Date), (F) the Class
Certificate Balance of the Class M-5
Certificates (after taking into account the
distribution of the Class M-5 Principal
Distribution Amount for such
Distribution Date), (G) the Class
Certificate Balance of the Class M-6
Certificates (after taking into account the
distribution of the Class M-6
Principal Distribution Amount for such
Distribution Date), (H) the Class
Certificate Balance of the Class B-1
Certificates (after taking into account the
distribution of the Class B-1 Principal
Distribution Amount for such
Distribution Date), (I) the Class
Certificate Balance of the Class B-2
Certificates (after taking into account the
distribution of the Class B-2
Principal Distribution Amount for such
Distribution Date) and (J) the Class
Certificate Balance of the Class B-3
Certificates immediately prior to such
Distribution Date over (ii) the lesser of
(A) 93.80% of the aggregate Stated
Principal Balance of the Mortgage Loans for
such Distribution Date and (B) the
excess, if any, of the aggregate Stated
Principal Balance of the Mortgage Loans
for such Distribution Date over
$4,593,037.
Class Certificate Balance: With respect to any Class and as to
any
date of determination, the aggregate of the
Certificate Balances of all
Certificates of such Class as of such
date.
Class M Cap Agreement: The interest rate cap agreement, dated
May
26, 2005, between Morgan Stanley Capital
Services Inc. and the Trustee, relating
to the Class M 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-1 Certificates: All Certificates bearing the class
designation of "Class M-1".
Class M-1 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the
sum of (A) the aggregate Class
Certificate Balances of the Class A
Certificates (after taking into account the
distribution of the Class A Principal
Distribution Amount for such Distribution
Date), and (B) the Class Certificate
Balance of the Class M-1 Certificates
immediately prior to such Distribution Date
over (ii) the lesser of (A) 66.80%
of the aggregate Stated Principal Balance
of the Mortgage Loans for such
Distribution Date and (B) the excess, if
any, of the aggregate Stated Principal
Balance of the Mortgage Loans for such
Distribution Date over $4,593,037.
Class M-2 Certificates: All Certificates bearing the class
designation of "Class M-2".
Class M-2 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the
sum of (A) the aggregate Class
Certificate Balances of the Class A
Certificates (after taking into account the
distribution of the Class A Principal
Distribution Amount for such Distribution
Date), (B) the Class Certificate Balance of
the Class M-1 Certificates (after
taking into account the distribution of the
Class M-1 Principal Distribution
Amount for such Distribution Date) and (C)
the Class Certificate Balance of the
Class M-2 Certificates immediately prior to
such Distribution Date over (ii) the
lesser of (A) 72.40% of the aggregate
Stated Principal Balance of the Mortgage
Loans for such Distribution Date and (B)
the excess, if any, of the aggregate
Stated Principal Balance of the Mortgage
Loans for such Distribution Date over
$4,593,037.
Class M-3 Certificates: All Certificates bearing the class
designation of "Class M-3".
Class M-3 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the
sum of (A) the aggregate Class
Certificate Balances of the Class A
Certificates (after taking into account the
distribution of the Class A Principal
Distribution Amount for such Distribution
Date), (B) the Class Certificate Balance of
the Class M-1 Certificates (after
taking into account the distribution of the
Class M-1 Principal Distribution
Amount for such Distribution Date), (C) the
Class Certificate Balance of the
Class M-2 Certificates (after taking into
account the distribution of the Class
M-2 Principal Distribution Amount for such
Distribution Date) and (D) the Class
Certificate Balance of the Class M-3
Certificates immediately prior to such
Distribution Date over (ii) the lesser of
(A) 76.30% of the aggregate Stated
Principal Balance of the Mortgage Loans for
such Distribution Date and (B) the
excess, if any, of the aggregate Stated
Principal Balance of the Mortgage Loans
for such Distribution Date over
$4,593,037.
Class M-4 Certificates: All Certificates bearing the class
designation of "Class M-4".
Class M-4 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the
sum of (A) the aggregate Class
Certificate Balances of the Class A
Certificates (after taking into account the
distribution of the Class A Principal
Distribution Amount for such Distribution
Date), (B) the Class Certificate Balance of
the Class M-1 Certificates (after
taking into account the distribution of the
Class M-1 Principal Distribution
Amount for such Distribution Date), (C) the
Class Certificate Balance of the
Class M-2 Certificates (after taking into
account the distribution of the Class
M-2 Principal Distribution Amount for such
Distribution Date), (D) the Class
Certificate Balance of the Class M-3
Certificates (after taking into account the
distribution of the Class M-3 Principal
Distribution Amount for such
Distribution Date), and (E) the Class
Certificate Balance of the Class M-4
Certificates immediately prior to such
Distribution Date over (ii) the lesser of
(A) 79.90% of the aggregate Stated
Principal Balance of the Mortgage Loans for
such Distribution Date and (B) the excess,
if any, of the aggregate Stated
Principal Balance of the Mortgage Loans for
such Distribution Date over
$4,593,037.
Class M-5 Certificates: All Certificates bearing the class
designation of "Class M-5".
Class M-5 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the
sum of (A) the aggregate Class
Certificate Balances of the Class A
Certificates (after taking into account the
distribution of the Class A Principal
Distribution Amount for such Distribution
Date), (B) the Class Certificate Balance of
the Class M-1 Certificates (after
taking into account the distribution of the
Class M-1 Principal Distribution
Amount for such Distribution Date), (C) the
Class Certificate Balance of the
Class M-2 Certificates (after taking into
account the distribution of the Class
M-2 Principal Distribution Amount for such
Distribution Date), (D) the Class
Certificate Balance of the Class M-3
Certificates (after taking into account the
distribution of the Class M-3 Principal
Distribution Amount for such
Distribution Date), (E) the Class
Certificate Balance of the Class M-4
Certificates (after taking into account the
distribution of the Class M-4
Principal Distribution Amount for such
Distribution Date) and (F) the Class
Certificate Balance of the Class M-5
Certificates immediately prior to such
Distribution Date over (ii) the lesser of
(A) 83.10% of the aggregate Stated
Principal Balance of the Mortgage Loans for
such Distribution Date and (B) the
excess, if any, of the aggregate Stated
Principal Balance of the Mortgage Loans
for such Distribution Date over
$4,593,037.
Class M-6 Certificates: All Certificates bearing the class
designation of "Class M-6".
Class M-6 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the
sum of (A) the aggregate Class
Certificate Balances of the Class A
Certificates (after taking into account the
distribution of the Class A Principal
Distribution Amount for such Distribution
Date), (B) the Class Certificate Balance of
the Class M-1 Certificates (after
taking into account the distribution of the
Class M-1 Principal Distribution
Amount for such Distribution Date), (C) the
Class Certificate Balance of the
Class M-2 Certificates (after taking into
account the distribution of the Class
M-2 Principal Distribution Amount for such
Distribution Date), (D) the Class
Certificate Balance of the Class M-3
Certificates (after taking into account the
distribution of the Class M-3 Principal
Distribution Amount for such
Distribution Date), (E) the Class
Certificate Balance of the Class M-4
Certificates (after taking into account the
distribution of the Class M-4
Principal Distribution Amount for such
Distribution Date), (F) the Class
Certificate Balance of the Class M-5
Certificates (after taking into account the
distribution of the Class M-5 Principal
Distribution Amount for such
Distribution Date) and (G) the Class
Certificate Balance of the Class M-6
Certificates immediately prior to such
Distribution Date over (ii) the lesser of
(A) 86.30% of the aggregate Stated
Principal Balance of the Mortgage Loans for
such Distribution Date and (B) the excess,
if any, of the aggregate Stated
Principal Balance of the Mortgage Loans for
such Distribution Date over
$4,593,037.
Class P Certificates: All Certificates bearing the class
designation
of "Class P".
Class R Certificates: All Certificates bearing the class
designation
of "Class R".
Class X Certificates: All Certificates bearing the class
designation
of "Class X".
Class X Distributable Amount: On any Distribution Date, the sum
of
(i) as a distribution in respect of
interest, the amount of interest that has
accrued on the Class X Interest and not
applied as an Extra Principal
Distribution Amount on such Distribution
Date, plus any such accrued interest
remaining undistributed from prior
Distribution Dates, plus, without
duplication, (ii) as a distribution in
respect of principal, any portion of the
principal balance of the Class X Interest
which is distributable as a
Subordination Reduction Amount, minus (iii)
any amounts paid as a Basis Risk
Payment.
Class X Interest: The Upper Tier Regular Interest represented by
the
Class X Certificates as specified and
described in the Preliminary Statement and
the related footnote thereto.
Closing Date: May 26, 2005.
Closing Date Deposit Amount: $19,900.35 (all of which is
allocable
to principal) deposited by the Depositor
into the Distribution Account on the
Closing Date. $6,254.72 of the Closing Date
Deposit Amount shall be attributable
to the Group I Mortgage Loans and
$13,645.63 of the Closing Date Deposit Amount
shall be attributable to the Group II
Mortgage Loans.
Code: The Internal Revenue Code of 1986, including any successor
or
amendatory provisions.
Collection Account: As defined in Section 3.10(a).
Combined Loan to Value Ratio or CLTV: As of any date and as to
any
Second Lien Mortgage Loan, the ratio,
expressed as a percentage, of the (a) sum
of (i) the outstanding principal balance of
the Second Lien Mortgage Loan and
(ii) the outstanding principal balance as
of such date of any mortgage loan or
mortgage loans that are senior or equal in
priority to the Second Lien Mortgage
Loan and which are secured by the same
Mortgaged Property to (b) the Appraised
Value as determined pursuant to the
Underwriting Guidelines of the related
Mortgaged Property as of the origination of
the Second Lien Mortgage Loan.
Compensating Interest: For any Distribution Date, the lesser of
(a)
the Prepayment Interest Shortfall, if any,
for such Distribution Date, with
respect to voluntary Principal Prepayments
in Full (excluding any payments made
upon liquidation of the Mortgage Loan) (or,
in the case of HomEq, the amount by
which such Prepayment Interest Shortfall
exceeds all Prepayment Interest
Excesses for such Distribution Date) and
(b) the amount of the Servicing Fee
payable to the applicable Servicer for such
Distribution Date.
Condemnation Proceeds: All awards of settlements in respect of
a
Mortgaged Property, whether permanent or
temporary, partial or entire, by
exercise of the power of eminent domain or
condemnation.
Convertible Mortgage Loan: Any individual Adjustable Rate
Mortgage
Loan which contains a provision whereby the
Mortgagor is permitted to convert
the Adjustable Rate Mortgage Loan to a
Fixed Rate Mortgage Loan in accordance
with the terms of the related Mortgage
Note.
Corporate Trust Office: The designated office of the Trustee in
the
State of California at which at any
particular time its corporate trust business
with respect to this Agreement is
administered, which office at the date of the
execution of this Agreement is located at
1761 East St. Andrew Place, Santa Ana,
California 92705, Attn: Trust
Administration-MS05X2, facsimile no. (714)
247-6329 and which is the address to which
notices to and correspondence with
the Trustee should be directed.
Corresponding Class: The class of interests in any REMIC
created
under this Agreement that corresponds to
the class of interests in another such
REMIC or to a Class of Certificates in the
manner set out below:
Corresponding Lower Tier
Corresponding Upper Tier Corresponding Class
Class
Designation
Regular Interest
of Certificates
------------------------
------------------------ -------------------
Class LT-A-1ss
Class A-1ss
Class A-1ss
Class LT-A-1mz
Class A-1mz
Class A-1mz
Class LT-A-2a
Class A-2a
Class A-2a
Class LT-A-2b
Class A-2b
Class A-2b
Class LT-A-2c
Class A-2c
Class A-2c
Class LT-M-1
Class M-1
Class M-1
Class LT-M-2
Class M-2
Class M-2
Class LT-M-3
Class M-3
Class M-3
Class LT-M-4
Class M-4
Class M-4
Class LT-M-5
Class M-5
Class M-5
Class LT-M-6
Class M-6
Class M-6
Class LT-B-1
Class B-1
Class B-1
Class LT-B-2
Class B-2
Class B-2
Class LT-B-3
Class B-3
Class B-3
N/A
Class X
Class X
Countywide: Countrywide Home Loans Servicing LP, a Texas
limited
partnership, and its successors in
interest.
Cumulative Loss Percentage: With respect to any Distribution
Date,
the percentage equivalent of a fraction,
the numerator of which is the aggregate
amount of Realized Losses incurred from the
Cut-off Date to the last day of the
calendar month preceding the month in which
such Distribution Date occurs and
the denominator of which is the Cut-off
Date Pool Principal Balance of the
Mortgage Loans.
Cumulative Loss Trigger Event: With respect to any Distribution
Date, a Cumulative Loss Trigger Event
exists if the quotient (expressed as a
percentage) of (x) the aggregate amount of
Realized Losses incurred since the
Cut-off Date through the last day of the
related Prepayment Period divided by
(y) the Cut-off Date Pool Principal Balance
exceeds the applicable cumulative
loss percentages set forth below with
respect to such Distribution Date:
Distribution Date Occurring In
Cumulative Loss Percentage
-------------------------------
----------------------------------------------
June 2007 through May 2008 1.250% for the first month,
plus an additional
1/12th of 1.750% for each month thereafter
(e.g., 2.125% in December 2007)
June 2008 through May 2009
3.000% for the first month, plus an additional
1/12th of 2.000% for each month thereafter
(e.g., 4.000% in December 2008)
June 2009 through May 2010
5.000% for the first month, plus an additional
1/12th of 1.500% for each month thereafter
(e.g., 5.750% in December 2009)
June 2010 through May 2011
6.500% for the first month, plus an additional
1/12th of 0.750% for each month thereafter
(e.g., 6.875% in December 2010)
June 2011 and thereafter
7.250%
Custodial File: With respect to each Mortgage Loan, the file
retained by the Trustee consisting of items
(i) - (viii) as listed on Exhibit K
hereto.
Cut-off Date: May 1,
2005.
Cut-off Date Pool Principal Balance: The aggregate Stated
Principal
Balances of all Mortgage Loans as of the
Cut-off Date plus the portion of the
Closing Date Deposit Amount allocable to
principal.
Cut-off Date Principal Balance: As to any Mortgage Loan, the
Stated
Principal Balance thereof as of the close
of business on the Cut-off Date (after
giving effect to payments of principal due
on that date, whether or not
received).
Data Tape Information: The information provided by the
Originators
as of the Cut-off Date to the Depositor or
the Purchaser setting forth the
following information with respect to each
Mortgage Loan: (1) the Mortgagor's
name; (2) as to each Mortgage Loan, the
Scheduled Principal Balance as of the
Cut-off Date; (3) the Mortgage Rate Cap;
(4) the Index; (5) a code indicating
whether the Mortgaged Property is owner
occupied; (6) the type of Mortgaged
Property; (7) the first date on which the
Scheduled Payment was due on the
Mortgage Loan and, if such date is not
consistent with the Due Date currently in
effect, such Due Date; (8) the "paid
through date" based on payments received
from the related Mortgagor; (9) the
original principal amount of the Mortgage
Loan; (10) with respect to Adjustable Rate
Mortgage Loans, the Maximum Mortgage
Rate; (11) the type of Mortgage Loan (i.e.,
Fixed Rate or Adjustable Rate
Mortgage Loan); (12) a code indicating the
purpose of the loan (i.e., purchase,
rate and term refinance, equity take out
refinance); (13) a code indicating the
documentation style (i.e., full, asset
verification, income verification and no
documentation); (14) the credit risk score
(FICO score); (15) the loan credit
grade classification (as described in the
underwriting guidelines); (16) with
respect to each Adjustable Rate Mortgage
Loan, the Minimum Mortgage Rate; (17)
the Mortgage Rate at origination; (18) with
respect to each Adjustable Rate
Mortgage Loan, the first Adjustment Date
immediately following the Cut-off Date;
(19) the value of the Mortgaged Property;
(20) a code indicating the type of
Prepayment Charges applicable to such
Mortgage Loan (including any prepayment
penalty term), if any; (21) with respect to
each Adjustable Rate Mortgage Loan,
the Periodic Mortgage Rate Cap; (22) the
applicable Originator of such Mortgage
Loan; (23) with respect to each First Lien
Mortgage Loan, the LTV at
origination, and with respect to each
Second Lien Mortgage Loan, the CLTV at
origination; and (24) if such Mortgage Loan
is covered by a primary mortgage
insurance policy or a lender-paid primary
mortgage insurance policy, the primary
mortgage insurance rate. With respect to
the Mortgage Loans in the aggregate,
the Data Tape Information shall set forth
the following information, as of the
Cut-off Date: (1) the number of Mortgage
Loans; (2) the current aggregate
outstanding principal balance of the
Mortgage Loans; (3) the weighted average
Mortgage Rate of the Mortgage Loans; and
(4) the weighted average maturity of
the Mortgage Loans.
DBRS: Dominion Bond Rating Service, Inc., and its successors in
interest. If DBRS is designated as a Rating
Agency in the Preliminary Statement,
for purposes of Section 10.05(b) the
address for notices to DBRS shall be
Dominion Bond Rating Service, Inc., 55
Broadway, 15th Floor, New York, NY 10006,
or such other address as DBRS may hereafter
furnish to the Depositor and the
Servicers.
Debt Service Reduction: With respect to any Mortgage Loan, a
reduction by a court of competent
jurisdiction in a proceeding under the United
States Bankruptcy Code in the Scheduled
Payment for such Mortgage Loan which
became final and non-appealable, except
such a reduction resulting from a
Deficient Valuation or any reduction that
results in a permanent forgiveness of
principal.
Deficient Valuation: With respect to any Mortgage Loan, a
valuation
of the related Mortgaged Property by a
court of competent jurisdiction in an
amount less than the then outstanding
principal balance of the Mortgage Loan,
which valuation results from a proceeding
initiated under the United States
Bankruptcy Code.
Definitive Certificates: Any Certificate evidenced by a
Physical
Certificate and any Certificate issued in
lieu of a Book-Entry Certificate
pursuant to Section 5.02(e).
Delay Certificates: As
specified in the Preliminary Statement.
Deleted Mortgage Loan:
As defined in Section 2.03.
Delinquency Trigger Event: With respect to any Distribution Date,
a
Delinquency Trigger Event exists if the
quotient (expressed as a percentage) of
(x) the rolling three month average of the
Stated Principal Balances of 60+ Day
Delinquent Mortgage Loans for such
Distribution Date, divided by (y) the
aggregate Stated Principal Balance of the
Mortgage Loans for such Distribution
Date equals or exceeds 42.00% of the prior
period's Senior Enhancement
Percentage.
Denomination: With respect to each Certificate, the amount set
forth
on the face thereof as the "Initial
Certificate Balance of this Certificate" or
the Percentage Interest appearing on the
face thereof.
Depositor:
Morgan Stanley
ABS Capital I Inc., a Delaware
corporation, and its successors in
interest.
Depository: The initial Depository shall be The Depository
Trust
Company, the nominee of which is CEDE &
Co., as the registered Holder of the
Book-Entry Certificates. The Depository
shall at all times be a "clearing
corporation" as defined in Section
8-102(a)(5) of the Uniform Commercial Code of
the State of New York.
Depository Institution: Any depository institution or trust
company,
including the Trustee, that (a) is
incorporated under the laws of the United
States of America or any State thereof, (b)
is subject to supervision and
examination by federal or state banking
authorities and (c) has outstanding
unsecured commercial paper or other
short-term unsecured debt obligations that
are rated "P-1" by Moody's, "F1+" by Fitch,
"R-1" by DBRS and "A-1" by Standard
& Poor's (to the extent they are
designated as Rating Agencies hereunder).
Depository Participant: A broker, dealer, bank or other
financial
institution or other Person for whom from
time to time a Depository effects
book-entry transfers and pledges of
securities deposited with the Depository.
Determination Date: With respect to each Distribution Date, the
18th
day (or if such day is not a Business Day,
the immediately preceding Business
Day) in the calendar month in which such
Distribution Date occurs.
Distribution Account: The separate Eligible Account created and
maintained by the Trustee pursuant to
Section 3.07(d) in the name of the Trustee
for the benefit of the Certificateholders
and designated "Deutsche Bank National
Trust Company in trust for registered
holders of Morgan Stanley Home Equity Loan
Trust 2005-2 Mortgage Pass-Through
Certificates, Series 2005-2." Funds in the
Distribution Account shall be held in trust
for the Certificateholders for the
uses and purposes set forth in this
Agreement.
Distribution Account Deposit Date: As to any Distribution Date,
12:00 noon New York City time on the third
Business Day immediately preceding
such Distribution Date.
Distribution Date: The 25th day of each calendar month, or if
such
day is not a Business Day in New York City,
the next succeeding Business Day in
New York City, commencing in June 2005.
Document Certification and Exception Report: The report attached
to
Exhibit F hereto.
Due Date: The day of the month on which the Scheduled Payment is
due
on a Mortgage Loan, exclusive of any days
of grace.
Due Period: With respect to any Distribution Date, the period
commencing on the second day of the
calendar month preceding the month in which
such Distribution Date occurs and ending on
the first day of the calendar month
in which such Distribution Date occurs.
Eligible Account: Either (i) an account maintained with a federal
or
state chartered depository institution or
trust company the short-term unsecured
debt obligations of which (or, in the case
of a depository institution or trust
company that is a subsidiary of a holding
company, the short-term unsecured debt
obligations of such holding company) are
rated "A-1+" by Standard & Poor's,
"F-1" by Fitch, "R-1" by DBRS and "P-1" by
Moody's (to the extent they are
designated as Rating Agencies hereunder)
(or a comparable rating if another
Rating Agency is specified by the Depositor
by written notice to each Servicer)
at the time any amounts are held on deposit
therein, (ii) an account or accounts
the deposits in which are fully insured by
the FDIC, (iii) a trust account or
accounts maintained with a federal or state
chartered depository institution or
trust company acting in its fiduciary
capacity or (iv) any other account
acceptable to each Rating Agency. Eligible
Accounts may bear interest, and may
include, if otherwise qualified under this
definition, accounts maintained with
the Trustee.
ERISA: The Employee
Retirement
Income Security Act of 1974, as
amended.
ERISA-Qualifying Underwriting: A best efforts or firm
commitment
underwriting or private placement that
meets the requirements of Prohibited
Transaction Exemption ("PTE") 2002-41, 67
Fed. Reg. 54487 (2002) (or any
successor thereto), or any substantially
similar administrative exemption
granted by the U.S. Department of
Labor.
ERISA-Restricted Certificate: As specified in the Preliminary
Statement.
Escrow Account: The Eligible Account or Accounts established
and
maintained pursuant to Section 3.09(b).
Escrow Payments: As defined in Section 3.09(b).
Event of Default: As defined in Section 7.01.
Excess Reserve Fund Account: The separate Eligible Account
created
and maintained by the Trustee pursuant to
Sections 3.07(b) and 3.07(c) in the
name of the Trustee for the benefit of the
Regular Certificateholders and
designated "Deutsche Bank National Trust
Company in trust for registered holders
of Morgan Stanley Home Equity Loan Trust
2005-2, Mortgage Pass-Through
Certificates, Series 2005-2." Funds in the
Excess Reserve Fund Account shall be
held in trust for the Regular
Certificateholders for the uses and purposes set
forth in this Agreement. Amounts on deposit
in the Excess Reserve Fund Account
shall not be invested.
Excess Subordinated Amount: With respect to any Distribution
Date,
the excess, if any, of (a) the Subordinated
Amount on such Distribution Date
over (b) the Specified Subordinated Amount
for such Distribution Date.
Exchange Act: As defined in Section 8.12(a).
Expense Fee Rate: As to each Mortgage Loan, a per-annum rate
equal
to the sum of the Servicing Fee Rate, the
Trustee Fee Rate and any lender-paid
primary mortgage insurance fee rate, if
applicable.
Expense Fees: As to each Mortgage Loan, the sum of the
Servicing
Fee, the Trustee Fee and any lender-paid
primary mortgage insurance fee, if
applicable.
Extra Principal Distribution Amount: As of any Distribution
Date,
the lesser of (x) the related Total Monthly
Excess Spread for such Distribution
Date and (y) the related Subordination
Deficiency for such Distribution Date.
Fannie Mae: The Federal National Mortgage Association, or any
successor thereto.
Fannie Mae Guides: The Fannie Mae Sellers' Guide and the Fannie
Mae
Servicers' Guide and all amendments or
additions thereto.
FDIC: The Federal Deposit Insurance Corporation, or any
successor
thereto.
Final Recovery Determination: With respect to any defaulted
Mortgage
Loan or any REO Property (other than a
Mortgage Loan or REO Property purchased
by the applicable Responsible Party,
Meritage, Wilmington Finance or the
Depositor, as applicable, as contemplated
by this Agreement, the Meritage
Agreements or the Wilmington Finance
Agreements, as applicable), a determination
made by the applicable Servicer that all
Insurance Proceeds, Condemnation
Proceeds, Liquidation Proceeds and other
payments or recoveries which the
applicable Servicer, in its reasonable good
faith judgment, expects to be
finally recoverable in respect thereof have
been so recovered. Each Servicer
shall maintain records, prepared by a
Servicing Officer, of each Final Recovery
Determination made thereby.
Final Scheduled Distribution Date: The Final Scheduled
Distribution
Date for each Class of Certificates is the
Distribution Date in May 2035.
First Lien Mortgage Loan: A Mortgage Loan secured by a first
lien
Mortgage on the related Mortgaged
Property.
First NLC: First NLC Financial Services, LLC, a Florida limited
liability company, and its successors in
interest.
First NLC Mortgage Loans: The Mortgage Loans purchased by the
Purchaser pursuant to the First NLC
Purchase Agreement for which First NLC is
identified as Originator on the Mortgage
Loan Schedule.
First NLC Purchase Agreement: The Mortgage Loan Purchase and
Warranties Agreement, dated as of September
1, 2004, as amended by Amendment No.
1, dated as of February 4, 2005, each by
and between First NLC and the
Purchaser, each of which are attached
hereto as Exhibit Q.
Fitch: Fitch, Inc., or any successor thereto. If Fitch is
designated
as a Rating Agency in the Preliminary
Statement, for purposes of Section
10.05(b) the address for notices to Fitch
shall be Fitch, Inc., One State Street
Plaza, New York, New York 10004, Attention:
MBS Monitoring - Morgan Stanley Home
Equity Loan Trust 2005-2, or such other
address as Fitch may hereafter furnish
to the Depositor, the Trustee and the
Servicers.
Fixed Rate Mortgage Loan: A fixed rate Mortgage Loan.
Freddie Mac: The Federal Home Loan Mortgage Corporation, a
corporate
instrumentality of the United States
created and existing under Title III of the
Emergency Home Finance Act of 1970, as
amended, or any successor thereto.
Gross Margin: With respect to each Adjustable Rate Mortgage
Loan,
the fixed percentage amount set forth in
the related Mortgage Note to be added
to the applicable Index to determine the
Mortgage Rate.
Group I Class A Cap Agreement: The interest rate cap agreement,
dated May 26, 2005, between Morgan Stanley
Capital Services Inc. and the
Trustee, relating to the Group I Class A
Certificates.
Group I Class A Certificates: The Class A-1ss and Class A-1mz
Certificates.
Group I Mortgage Loans: The Mortgage Loans identified on the
Mortgage Loan Schedule as Group I Mortgage
Loans.
Group I Sequential Trigger Event: (a) With respect to any
Distribution Date occurring before June
2008, the circumstances in which the
aggregate amount of Realized Losses
incurred since the Cut-off Date through the
last day of the related Prepayment Period
divided by the aggregate Stated
Principal Balance of the Mortgage Loans as
of the Cut-off Date exceeds 3.00%,
and (b) with respect to any Distribution
Date occurring in or after June 2008, a
Trigger Event.
Group II Class A Certificates: The Class A-2a, Class A-2b and
Class
A-2c Certificates.
Group II Class A Cap Agreement: The interest rate cap
agreement,
dated May 26, 2005, between Morgan Stanley
Capital Services Inc. and the
Trustee, relating to the Group II Class A
Certificates.
Group II Mortgage Loans: The Mortgage Loans identified on the
Mortgage Loan Schedule as Group II Mortgage
Loans.
HomEq: HomEq Servicing Corporation, a New Jersey corporation,
and
its successors in interest.
Index: As to each Adjustable Rate Mortgage Loan, the index from
time
to time in effect for the adjustment of the
Mortgage Rate set forth as such on
the related Mortgage Note.
Insurance Policy: With respect to any Mortgage Loan included in
the
Trust Fund, any insurance policy, including
all riders and endorsements thereto
in effect, including any replacement policy
or policies for any Insurance
Policies.
Insurance Proceeds: With respect to each Mortgage Loan, proceeds
of
insurance policies insuring the Mortgage
Loan or the related Mortgaged Property.
Interest Accrual Period: With respect to each Class of
Non-Delay
Certificates and the Corresponding Class of
Lower Tier Regular Interests and any
Distribution Date, the period commencing on
the Distribution Date occurring in
the month preceding the month in which the
current Distribution Date occurs and
ending on the day immediately preceding the
current Distribution Date (or, in
the case of the first Distribution Date,
the period from and including the
Closing Date to but excluding such first
Distribution Date). For purposes of
computing interest accruals on each Class
of Non-Delay Certificates, each
Interest Accrual Period has the actual
number of days in such month and each
year is assumed to have 360 days.
Interest Rate Adjustment Date: With respect to each Adjustable
Rate
Mortgage Loan, the date, specified in the
related Mortgage Note and the Mortgage
Loan Schedule, on which the Mortgage Rate
is adjusted.
Interest Rate Cap Agreements: The Group I Class A Cap Agreement,
the
Group II Class A Cap Agreement, the Class M
Cap Agreement and the Class B Cap
Agreement.
Interest Rate Cap Payment: (a) With respect to the Group I Class
A
Certificates and the first 27 Distribution
Dates, the amount, if any, equal to
the product, determined on an "actual/360"
basis, of (i) the excess, if any, of
the lesser of (A) the one-month LIBOR rate
as of the related reset date under
the Group I Class A Cap Agreement and (B)
the applicable cap ceiling rate set
forth on Schedule A to such Interest Rate
Cap Agreement for such Distribution
Date over the applicable cap strike rate
set forth on Schedule A to such
Interest Rate Cap Agreement for such
Distribution Date, (ii) the applicable
Group I Class A notional amount set forth
on Schedule A to the Group I Class A
Cap Agreement for such Distribution Date
and (iii) the multiplier set forth on
Schedule A to such Interest Rate Cap
Agreement; (b) with respect to the Group II
Class A Certificates and the first 32
Distribution Dates, the amount, if any,
equal to the product, determined on an
"actual/360" basis, of (i) the excess, if
any, of the lesser of (A) the one-month
LIBOR rate as of the related reset date
under the Group II Class A Cap Agreement
and (B) the applicable cap ceiling rate
set forth on Schedule A to such Interest
Rate Cap Agreement for such
Distribution Date over the applicable cap
strike rate set forth on Schedule A to
such Interest Rate Cap Agreement for such
Distribution Date, (ii) the applicable
Group II Class A notional amount set forth
on Schedule A to the Group II Class A
Cap Agreement for such Distribution Date
and (iii) the multiplier set forth on
Schedule A to such Interest Rate Cap
Agreement; (c) with respect to the Class M
Certificates and the first 33 Distribution
Dates, the amount, if any, equal to
the product, determined on an "actual/360"
basis, of (i) the excess, if any, of
the lesser of (A) the one-month LIBOR rate
as of the related reset date under
the Class M Cap Agreement and (B) the
applicable cap ceiling rate set forth on
Schedule A to such Interest Rate Cap
Agreement for such Distribution Date over
the applicable cap strike rate set forth on
Schedule A to such Interest Rate Cap
Agreement for such Distribution Date, (ii)
the applicable Class M notional
amount set forth on Schedule A to the Class
M Cap Agreement for such
Distribution Date and (iii) the multiplier
set forth on Schedule A to such
Interest Rate Cap Agreement; and (d) with
respect to the Class B Certificates
and the first 33 Distribution Dates, the
amount, if any, equal to the product,
determined on an "actual/360" basis, of (i)
the excess, if any, of the lesser of
(A) the one-month LIBOR rate as of the
related reset date under the Class B Cap
Agreement and (B) the applicable cap
ceiling rate set forth on Schedule A to
such Interest Rate Cap Agreement for such
Distribution Date over the applicable
cap strike rate set forth on Schedule A to
such Interest Rate Cap Agreement for
such Distribution Date, (ii) the applicable
Class B notional amount set forth on
Schedule A to the Class B Cap Agreement for
such Distribution Date and (iii) the
multiplier set forth on Schedule A to such
Interest Rate Cap Agreement.
Interest Remittance Amount: With respect to any Distribution
Date
and the Mortgage Loans in a Loan Group,
that portion of Available Funds
attributable to interest relating to
Mortgage Loans in that Loan Group.
Investment Account: As defined in Section 3.12(a).
Investor: With respect to each MERS Designated Mortgage Loan,
the
Person named on the MERS System as the
investor pursuant to the MERS Procedures
Manual.
JPMorgan: JPMorgan Chase Bank, National Association, a national
banking association, and its successors in
interest.
Late Collections: With respect to any Mortgage Loan and any Due
Period, all amounts received after the
Determination Date immediately following
such Due Period, whether as late payments
of Scheduled Payments or as Insurance
Proceeds, Condemnation Proceeds,
Liquidation Proceeds or otherwise, which
represent late payments or collections of
principal and/or interest due (without
regard to any acceleration of payments
under the related Mortgage and Mortgage
Note) but delinquent for such Due Period
and not previously recovered.
LIBOR: With respect to any Interest Accrual Period for the
LIBOR
Certificates, the rate determined by the
Trustee on the related LIBOR
Determination Date on the basis of the
offered rate for one-month U.S. dollar
deposits as such rate appears on Telerate
Page 3750 as of 11:00 a.m. (London
time) on such date; provided that if such
rate does not appear on Telerate Page
3750, the rate for such date will be
determined on the basis of the rates at
which one-month U.S. dollar deposits are
offered by the Reference Banks at
approximately 11:00 a.m. (London time) on
such date to prime banks in the London
interbank market. In such event, the
Trustee shall request the principal London
office of each of the Reference Banks to
provide a quotation of its rate. If at
least two such quotations are provided, the
rate for that date will be the
arithmetic mean of the quotations (rounded
upwards if necessary to the nearest
whole multiple of 1/16%). If fewer than two
quotations are provided as
requested, the rate for that date will be
the arithmetic mean of the rates
quoted by major banks in New York City,
selected by the Trustee (after
consultation with the Depositor), at
approximately 11:00 a.m. (New York City
time) on such date for one-month U.S.
dollar loans to leading European banks.
LIBOR Certificates: As specified in the Preliminary Statement.
LIBOR Determination Date: With respect to any Interest Accrual
Period for the LIBOR Certificates, the
second London Business Day preceding the
commencement of such Interest Accrual
Period.
Liquidated Mortgage Loan: With respect to any Distribution Date,
a
defaulted Mortgage Loan (including any REO
Property) which either (a) was
liquidated in the calendar month preceding
the month of such Distribution Date
and as to which the applicable Servicer has
certified to the Trustee that it has
received all amounts it expects to receive
in connection with the liquidation of
such Mortgage Loan including the final
disposition of an REO Property, or (b) is
a Second Lien Mortgage Loan (1) that is
delinquent 180 days or longer, (2) for
which the related first lien mortgage loan
is not a Mortgage Loan, and (3) as to
which the applicable Servicer has certified
to the Trustee that it does not
believe there is a reasonable likelihood
that any further net proceeds will be
received or recovered with respect to such
Second Lien Mortgage Loan.
Liquidation Proceeds: Cash received in connection with the
liquidation of a Liquidated Mortgage Loan,
whether through a trustee's sale,
foreclosure sale or otherwise, including
any Subsequent Recoveries.
Loan Group: The Group I Mortgage Loans or the Group II Mortgage
Loans, as applicable.
Loan Group Cap: The Loan Group I Cap or the Loan Group II Cap,
as
applicable.
Loan Group I Cap: With respect to the Group I Mortgage Loans as
of
any Distribution Date, the product of (i)
the weighted average of the Adjusted
Net Mortgage Rates then in effect on the
beginning of the related Due Period on
the Group I Mortgage Loans and (ii) a
fraction, the numerator of which is 30 and
the denominator of which is the actual
number of days in the Interest Accrual
Period related to such Distribution
Date.
Loan Group II Cap: With respect to the Group II Mortgage Loans as
of
any Distribution Date, the product of (i)
the weighted average of the Adjusted
Net Mortgage Rates then in effect on the
beginning of the related Due Period on
the Group II Mortgage Loans and (ii) a
fraction, the numerator of which is 30
and the denominator of which is the actual
number of days in the Interest
Accrual Period related to such Distribution
Date.
Loan-to-Value Ratio or LTV: With respect to any First Lien
Mortgage
Loan, the ratio (expressed as a percentage)
of the original outstanding
principal amount of the First Lien Mortgage
Loan as of the Cut-off Date (unless
otherwise indicated), to the lesser of (a)
the Appraised Value of the Mortgaged
Property at origination, and (b) if the
First Lien Mortgage Loan was made to
finance the acquisition of the related
Mortgaged Property, the purchase price of
the Mortgaged Property.
London Business Day: Any day on which dealings in deposits of
United
States dollars are transacted in the London
interbank market.
Lower Tier Interest Rate: As described in the Preliminary
Statement.
Lower Tier Principal Amount: As described in the Preliminary
Statement.
Lower Tier Regular Interest: Each of the Class LT-A-1ss, Class
LT-A-1mz, Class LT-A-2a, Class LT-A-2b,
Class LT-A-2c, Class LT-M-1, Class
LT-M-2, Class LT-M-3, Class LT-M-4, Class
LT-M-5, Class LT-M-6, Class LT-B-1,
Class LT-B-2, Class LT-B-3, Class LT-Group
I, Class LT-Group II and Class
LT-Accrual Interests as described in the
Preliminary Statement.
Lower Tier REMIC: As described in the Preliminary Statement.
Maximum Mortgage Rate: With respect to each Adjustable Rate
Mortgage
Loan, a rate that (i) is set forth on the
Data Tape Information and in the
related Mortgage Note and (ii) is the
maximum interest rate to which the
Mortgage Rate on such Adjustable Rate
Mortgage Loan may be increased during the
lifetime of such Adjustable Rate Mortgage
Loan.
Meritage: Meritage Mortgage Corporation, an Oregon corporation,
and
its successors in interest.
Meritage
Agreements: The Meritage Purchase Agreement and the
Meritage Assignment Agreement, each of
which are attached hereto as Exhibit R.
Meritage Assignment Agreement: The Assignment and Recognition
Agreement, dated as of the Closing Date,
among the Purchaser, the Depositor and
Meritage.
Meritage Mortgage Loans: The Mortgage Loans purchased by the
Purchaser pursuant to the Meritage Purchase
Agreement for which Meritage is
identified as Originator on the Mortgage
Loan Schedule.
Meritage Purchase Agreement: The Mortgage Loan Purchase and
Warranties Agreement, dated as of August 1,
2004, as amended by Amendment No. 1,
dated as of March 29, 2005, each by and
between Meritage and the Purchaser,
solely insofar as such agreement relates to
the Meritage Mortgage Loans.
MERS: Mortgage Electronic Registration System, Inc.
MERS Designated Mortgage Loan: Mortgage Loans for which (a) the
Originators have designated or will
designate MERS as, and have taken or will
take such action as is necessary to cause
MERS to be, the mortgagee of record,
as nominee for the Originators, in
accordance with MERS Procedure Manual and (b)
the Originators have designated or will
designate the Trustee as the Investor on
the MERS(R) System.
MERS Procedures Manual: The MERS Procedures Manual, as it may
be
amended, supplemented or otherwise modified
from time to time.
MERS(R) System: MERS mortgage electronic registry system, as
more
particularly described in the MERS
Procedures Manual.
MILA: MILA, Inc., a Washington corporation, and its successors
in
interest.
MILA Mortgage Loans: The Mortgage Loans purchased by the
Purchaser
pursuant to the MILA Purchase Agreement for
which MILA is identified as
Originator on the Mortgage Loan
Schedule.
MILA Purchase Agreement: The Mortgag Loan Purchase and
Warranties
Agreement, dated February 1, 2005, by and
between the Purchaser and MILA, which
is attached hereto to as Exhibit S.
Minimum Mortgage Rate: With respect to each Adjustable Rate
Mortgage
Loan, a rate that (i) is set forth on the
Data Tape Information and in the
related Mortgage Note and (ii) is the
minimum interest rate to which the
Mortgage Rate on such Adjustable Rate
Mortgage Loan may be decreased during the
lifetime of such Adjustable Rate Mortgage
Loan.
Monthly Statement: The statement delivered to the
Certificateholders
pursuant to Section 4.03.
Moody's: Moody's Investors Service, Inc., and its successors in
interest. If Moody's is designated as a
Rating Agency in the Preliminary
Statement, for purposes of Section
10.05(b), the address for notices to Moody's
shall be Moody's Investors Service, Inc.,
99 Church Street, New York, New York
10007, Attention: Residential Mortgage
Pass-Through Group, or such other address
as Moody's may hereafter furnish to the
Depositor and the Servicers.
Mortgage: The mortgage, deed of trust or other instrument
identified
on the Mortgage Loan Schedule as securing a
Mortgage Note.
Mortgage File: The items pertaining to a particular Mortgage
Loan
contained in either the Servicing File or
Custodial File.
Mortgage Loan: An individual Mortgage Loan which is the subject
of
this Agreement, each Mortgage Loan
originally sold and subject to this Agreement
being identified on the Mortgage Loan
Schedule, which Mortgage Loan includes,
without limitation, the Mortgage File, the
Scheduled Payments, Principal
Prepayments, Liquidation Proceeds,
Condemnation Proceeds, Insurance Proceeds,
REO Disposition proceeds, Prepayment
Charges, and all other rights, benefits,
proceeds and obligations arising from or in
connection with such Mortgage Loan,
excluding replaced or repurchased Mortgage
Loans.
Mortgage Loan Schedule: A schedule of Mortgage Loans annexed
hereto
as Schedule I, such schedule setting forth
the following information with
respect to each Mortgage Loan: (1) the
Mortgage Loan number; (2) the city, state
and zip code of the Mortgaged Property; (3)
the number and type of residential
units constituting the Mortgaged Property;
(4) the current Mortgage Rate; (5)
the current net Mortgage Rate; (6) the
current Scheduled Payment; (7) with
respect to each Adjustable Rate Mortgage
Loan, the Gross Margin; (8) the
original term to maturity; (9) the
scheduled maturity date; (10) the principal
balance of the Mortgage Loan as of the
Cut-off Date after deduction of payments
of principal due on or before the Cut-off
Date whether or not collected; (11)
with respect to each Adjustable Rate
Mortgage Loan, the next Interest Rate
Adjustment Date; (12) with respect to each
Adjustable Rate Mortgage Loan, the
lifetime Mortgage Interest Rate Cap; (13)
whether the Mortgage Loan is
convertible or not; (14) the Servicing Fee;
(15) whether such Mortgage Loan is a
Group I Mortgage Loan or a Group II
Mortgage Loan; (16) the applicable
Originator's name, (17) the date such
Mortgage Loan was sold by the applicable
Originator to the Purchaser, (18) whether
such Mortgage Loan provides for a
Prepayment Charge as well as the term and
amount of such Prepayment Charge, if
any; (19) with respect to each First Lien
Mortgage Loan, the LTV at origination,
and with respect to each Second Lien
Mortgage Loan, the CLTV at origination;
(20) the applicable Servicer's name; and
(21) the date on which servicing of the
mortgage loan was transferred to the
applicable Servicer.
Mortgage Note: The note or other evidence of the indebtedness of
a
Mortgagor under a Mortgage Loan.
Mortgage Rate: The annual rate of interest borne on a Mortgage
Note,
which shall be adjusted from time to time
in the case of an Adjustable Rate
Mortgage Loan.
Mortgage Rate Caps: With respect to an Adjustable Rate Mortgage
Loan, the Periodic Mortgage Rate Cap, the
Maximum Mortgage Rate, and the Minimum
Mortgage Rate for such Mortgage Loan.
Mortgaged Property: With respect to each Mortgage Loan, the
real
property (or leasehold estate, if
applicable) identified on the Mortgage Loan
Schedule as securing repayment of the debt
evidenced by the related Mortgage
Note.
Mortgagor: The obligor(s) on a Mortgage Note.
Net Monthly Excess Cash Flow: For any Distribution Date the
amount
remaining for distribution pursuant to
subsection 4.02(a)(iii) (before giving
effect to distributions pursuant to such
subsection).
Net Prepayment Interest Shortfall: For any Distribution Date,
the
amount by which the sum of the Prepayment
Interest Shortfalls for such
Distribution Date exceeds the sum of (i)
the Compensating Interest payments made
with respect to such Distribution Date and
(ii) in the case of HomEq, all
Prepayment Interest Excesses for such
Distribution Date.
NIM Issuer: The entity established as the issuer of the NIM
Securities.
NIM Securities: Any debt securities secured or otherwise backed
by
some or all of the Class X and Class P
Certificates that are rated by one or
more Rating Agencies.
NIM Trustee: The
trustee for the NIM Securities.
Non-Delay Certificates: As specified in the Preliminary
Statement.
Non-Permitted Transferee: A Person other than a Permitted
Transferee.
Nonrecoverable P&I Advance: Any P&I Advance previously made
or
proposed to be made in respect of a
Mortgage Loan or REO Property that, in the
good faith business judgment of the
applicable Servicer, will not or, in the
case of a proposed P&I Advance, would
not be ultimately recoverable from related
late payments, Insurance Proceeds,
Condemnation Proceeds, or Liquidation
Proceeds on such Mortgage Loan or REO
Property as provided herein.
Nonrecoverable Servicing Advance: Any Servicing Advances
previously
made or proposed to be made in respect of a
Mortgage Loan or REO Property,
which, in accordance with Accepted
Servicing Practices, will not or, in the case
of a proposed Servicing Advance, would not
be ultimately recoverable from
related Insurance Proceeds, Condemnation
Proceeds, Liquidation Proceeds or
otherwise. The determination by a Servicer
that it has made a Nonrecoverable
Servicing Advance or that any proposed
Servicing Advances, if made, would
constitute a Nonrecoverable Servicing
Advance, shall be evidenced by an
Officer's Certificate delivered to the
Trustee.
Notice of Final Distribution: The notice to be provided pursuant
to
Section 9.02 to the effect that final
distribution on any of the Certificates
shall be made only upon presentation and
surrender thereof.
Offered Certificates:
As specified in the Preliminary Statement.
Officer's Certificate: A certificate signed by an officer of
any
Servicer with responsibility for the
servicing of the Mortgage Loans required to
be serviced by such Servicer and listed on
a list delivered to the Trustee
pursuant to this Agreement.
Opinion of Counsel: A written opinion of counsel, who may be
in-house counsel for a Servicer or a
Subservicer, reasonably acceptable to the
Trustee, provided that any Opinion of
Counsel relating to (a) qualification of
either the Lower Tier REMIC or Upper Tier
REMIC or (b) compliance with the REMIC
Provisions, must be (unless otherwise
stated in such Opinion of Counsel) an
opinion of counsel who (i) is in fact
independent of such Servicer of the
Mortgage Loans, (ii) does not have any
material direct or indirect financial
interest in such Servicer of the Mortgage
Loans or in an affiliate of either and
(iii) is not connected with such Servicer
of the Mortgage Loans as an officer,
employee, director or person performing
similar functions.
Optional Termination Date: The Distribution Date on which the
aggregate Stated Principal Balance of the
Mortgage Loans, as of the last day of
the related Due Period, is equal to 10% or
less of the Cut-off Date Pool
Principal Balance.
Originators: Each of Accredited, Meritage, Wilmington Finance,
First
NLC and MILA.
OTS: Office of Thrift Supervision, and any successor thereto.
Outstanding: With
respect to the Certificates as of any date of
determination, all Certificates theretofore
executed and authenticated under
this Agreement except:
(a) Certificates theretofore canceled by the Trustee or delivered
to
the
Trustee for cancellation; and
(b) Certificates in exchange for which or in lieu of which
other
Certificates have been executed and delivered by the Trustee
pursuant to
this
Agreement.
Outstanding Mortgage Loan: As of any Due Date, a Mortgage Loan
with
a Stated Principal Balance greater than
zero which was not the subject of a
Principal Prepayment in Full prior to such
Due Date and which did not become a
Liquidated Mortgage Loan prior to such Due
Date.
Ownership Interest: As to any Residual Certificate, any
ownership
interest in such Certificate including any
interest in such Certificate as the
Holder thereof and any other interest
therein, whether direct or indirect, legal
or beneficial.
P&I Advance: As to any Mortgage Loan or REO Property, any
advance
made by the applicable Servicer in respect
of any Remittance Date representing
the aggregate of all payments of principal
and interest, net of the Servicing
Fee, that were due during the related Due
Period on the Mortgage Loans and that
were delinquent on the related
Determination Date, plus certain amounts
representing assumed payments not covered
by any current net income on the
Mortgaged Properties acquired by
foreclosure or deed in lieu of foreclosure as
determined pursuant to Section 4.01.
Pass-Through Margin: With respect to each Class of Regular
Certificates, the following percentages:
Class A-1ss Certificates, 0.225%; Class
A-1mz Certificates, 0.260%; Class A-2a
Certificates, 0.090%; Class A-2b
Certificates, 0.220%; Class A-2c
Certificates, 0.320%; Class M-1 Certificates,
0.410%; Class M-2 Certificates, 0.430%;
Class M-3 Certificates, 0.450%; Class
M-4 Certificates, 0.630%; Class M-5
Certificates, 0.660%; Class M-6
Certificates, 0.710%; Class B-1
Certificates, 1.200%; Class B-2 Certificates,
1.280% and Class B-3 Certificates, 1.670%.
On the first Distribution Date after
the Optional Termination Date, the
Pass-Through Margins shall increase to: Class
A-1ss Certificates, 0.450%; Class A-1mz
Certificates, 0.520%; Class A-2a
Certificates, 0.180%; Class A-2b
Certificates, 0.440%; Class A-2c Certificates,
0.640%; Class M-1 Certificates, 0.615%;
Class M-2 Certificates, 0.645%; Class
M-3 Certificates, 0.675%; Class M-4
Certificates, 0.945%; Class M-5
Certificates, 0.990%; Class M-6
Certificates, 1.065%; Class B-1 Certificates,
1.800%; Class B-2 Certificates, 1.920%; and
Class B-3 Certificates, 2.505%.
Pass-Through Rate: For each Class of Certificates and each
Lower
Tier Regular Interest, the per annum rate
set forth or calculated in the manner
described in the Preliminary Statement.
Percentage Interest: As to any Certificate, the percentage
interest
evidenced thereby in distributions required
to be made on the related Class,
such percentage interest being set forth on
the face thereof or equal to the
percentage obtained by dividing the
Denomination of such Certificate by the
aggregate of the Denominations of all
Certificates of the same Class.
Periodic Mortgage Rate Cap: With respect to an Adjustable Rate
Mortgage Loan, the periodic limit on each
Mortgage Rate adjustment as set forth
in the related Mortgage Note.
Permitted Investments: Any one or more of the following
obligations
or securities acquired at a purchase price
of not greater than par, regardless
of whether issued by the Servicers, the
Trustee or any of their respective
Affiliates:
(i) direct obligations of, or obligations fully guaranteed as
to timely payment of principal and interest by, the United States
or
any agency or instrumentality thereof, provided such obligations
are
backed by the full faith and credit of the United States;
(ii) demand and time deposits in, certificates of deposit of,
or bankers' acceptances (which shall each have an original
maturity
of not more than 90 days and, in the case of bankers'
acceptances,
shall in no event have an original maturity of more than 365 days
or
a remaining maturity of more than 30 days) denominated in
United
States dollars and issued by, any Depository Institution and
rated
"P-1" by Moody's, "F1+" by Fitch and "A-1+" by Standard &
Poor's (to
the extent they are Rating Agencies hereunder);
(iii) repurchase obligations with respect to any security
described in clause (i) above entered into with a Depository
Institution (acting as principal);
(iv) securities bearing interest or sold at a discount that
are issued by any corporation incorporated under the laws of
the
United States of America or any State thereof and that are rated
by
each Rating Agency that rates such securities in its highest
long-term unsecured rating categories at the time of such
investment
or contractual commitment providing for such investment;
(v) commercial paper (including both non-interest-bearing
discount obligations and interest-bearing obligations payable
on
demand or on a specified date not more than 30 days after the
date
of acquisition thereof) that is rated by each Rating Agency
that
rates such securities in its highest short-term unsecured debt
rating available at the time of such investment;
(vi) units of money market funds, including money market funds
advised by the Depositor or an Affiliate thereof, that have
been
rated "Aaa" by Moody's, "AAA" by Standard & Poor's and at least
"AA"
by Fitch (to the extent they are designated as Rating Agencies
hereunder); and
(vii) if previously confirmed in writing to the Trustee, any
other demand, money market or time deposit, or any other
obligation,
security or investment, as may be acceptable to the Rating
Agencies
as a permitted investment of funds backing "Aaa" or "AAA" rated
securities;
provided, however, that no instrument
described hereunder shall evidence either
the right to receive (a) only interest with
respect to the obligations
underlying such instrument or (b) both
principal and interest payments derived
from obligations underlying such instrument
and the interest and principal
payments with respect to such instrument
provide a yield to maturity at par
greater than 120% of the yield to maturity
at par of the underlying obligations.
Permitted Transferee: Any Person other than (i) the United
States,
any State or political subdivision thereof,
or any agency or instrumentality of
any of the foregoing, (ii) a foreign
government, international organization or
any agency or instrumentality of either of
the foregoing, (iii) an organization
(except certain farmers' cooperatives
described in Section 521 of the Code)
which is exempt from tax imposed by Chapter
1 of the Code (including the tax
imposed by Section 511 of the Code on
unrelated business taxable income) on any
excess inclusions (as defined in Section
860E(c)(1) of the Code) with respect to
any Residual Certificate, (iv) rural
electric and telephone cooperatives
described in Section 1381(a)(2)(C) of the
Code, (v) a Person that is not a U.S.
Person or a U.S. Person with respect to
whom income from a Residual Certificate
is attributable to a foreign permanent
establishment or fixed base, within the
meaning of an applicable income tax treaty
of such Person or any other U.S.
Person, (vi) an "electing large
partnership" within the meaning of Section 775
of the Code and (vii) any other Person so
designated by the Depositor based upon
an Opinion of Counsel that the Transfer of
an Ownership Interest in a Residual
Certificate to such Person may cause either
the Lower Tier REMIC or the Upper
Tier REMIC to fail to qualify as a REMIC at
any time that the Certificates are
outstanding. The terms "United States",
"State" and "international organization"
shall have the meanings set forth in
Section 7701 of the Code or successor
provisions. A corporation will not be
treated as an instrumentality of the
United States or of any State or political
subdivision thereof for these
purposes if all of its activities are
subject to tax and, with the exception of
Freddie Mac, a majority of its board of
directors is not selected by such
government unit.
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: As specified in the Preliminary
Statement.
Pool Stated Principal Balance: As to any Distribution Date, the
aggregate of the Stated Principal Balances
of the Mortgage Loans for such
Distribution Date that were Outstanding
Mortgage Loans on the Due Date in the
related Due Period.
Prepayment Charge: Any prepayment premium, penalty or charge
collected by any Servicer with respect to a
Mortgage Loan from a Mortgagor in
connection with any voluntary Principal
Prepayment pursuant to the terms of the
related Mortgage Note.
Prepayment Interest Excess: With respect to any Distribution
Date,
any interest collected by HomEq with
respect to any Mortgage Loan serviced by
HomEq as to which a voluntary Principal
Prepayment in Full occurs from the 1st
day of the month through the 15th day of
the month in which such Distribution
Date occurs and that represents interest
that accrues from the 1st day of such
month to the date of such Principal
Prepayment in Full.
Prepayment Interest Shortfall: With respect to any Distribution
Date, the sum of, for each Mortgage Loan
that was, during the related Prepayment
Period (in the case of any Mortgage Loan
serviced by JPMorgan or Countrywide) or
during the portion of the Prepayment Period
from and including the 16th day of
the month preceding the month in which such
Distribution Date occurs (or from
the day following the Cut-off Date, in the
case of the first Distribution Date)
through the last day of such month (in the
case of any Mortgage Loan serviced by
HomEq), the subject of a voluntary
Principal Prepayment in Full which is not
accompanied by an amount equal to one month
of interest that would have been due
on such Mortgage Loan on the Due Date in
the following month and which was
applied by the applicable Servicer to
reduce the outstanding principal balance
of such Mortgage Loan on a date preceding
such Due Date an amount equal to the
product of (a) the Mortgage Rate net of the
Servicing Fee Rate for such Mortgage
Loan, (b) the amount of the Principal
Prepayment for such Mortgage Loan, (c)
1/360 and (d) the number of days commencing
on the date on which such Principal
Prepayment was applied and ending on the
last day of the calendar month in which
the related Prepayment Period begins.
Prepayment Period: With respect to any Distribution Date, either
(a)
in the case of any Mortgage Loan serviced
by JPMorgan or Countrywide, the
calendar month preceding the month in which
such Distribution Date occurs, or
(b) in the case of any Mortgage Loan
serviced by HomEq, either (i) with respect
to any voluntary Principal Prepayments in
Full, the period from and including
the 16th day of the month preceding the
month in which such Distribution Date
occurs (or, in the case of the first
Distribution Date, from and including the
Cut-off Date) to and including the 15th day
of the month in which such
Distribution Date occurs, or (ii) with
respect to any partial Principal
Prepayments or any involuntary Principal
Prepayments, the calendar month
preceding the month in which such
Distribution Date occurs.
Principal Distribution
Amount: For any Distribution Date, the
sum of (i) the Basic Principal Distribution Amount for such
Distribution Date
and (ii) the Extra Principal Distribution
Amount for such Distribution Date.
Principal Prepayment: Any full or partial payment or other
recovery
of principal on a Mortgage Loan (including
upon liquidation of a Mortgage Loan)
which is received in advance of its
scheduled Due Date, excluding any Prepayment
Charge thereon.
Principal Prepayment in Full: Any Principal Prepayment made by
a
Mortgagor of the entire principal balance
of a Mortgage Loan.
Principal Remittance Amount: With respect to any Distribution
Date,
the amount equal to the sum of the
following amounts (without duplication) with
respect to the related Due Period: (i) each
scheduled payment of principal on a
Mortgage Loan due during such Due Period
and received by the Servicers on or
prior to the related Determination Date or
advanced by the applicable Servicer
for the related Remittance Date, and all
Principal Prepayments received during
the related Prepayment Period; (ii) all
Liquidation Proceeds, Condemnation
Proceeds and Insurance Proceeds on the
Mortgage Loans allocable to principal
actually collected by the Servicers during
the related Prepayment Period; (iii)
the portion of the Repurchase Price
allocable to principal with respect to each
Mortgage Loan repurchased during the
related Prepayment Period; (iv) all
Substitution Adjustment Amounts allocable
to principal with respect to the
substitutions of Mortgage Loans that occur
during the month in which such
Distribution Date occurs; (v) with respect
to the Distribution Date in June 2005
only, the portion of the Closing Date
Deposit Amount allocable to principal; and
(vi) the allocable portion of the proceeds
received with respect to the
termination of the Trust Fund pursuant to
clause (a) of Section 9.01 (to the
extent such proceeds relate to
principal).
Private Certificates: As specified in the Preliminary
Statement.
Prospectus Supplement: The Prospectus Supplement, dated May 19,
2005, relating to the Offered
Certificates.
PTCE 95-60: As defined in Section 5.02(b).
Purchase Agreements: Collectively, the Accredited Purchase
Agreement, Wilmington Finance Purchase
Agreement, the Meritage Purchase
Agreement, the First NLC Purchase Agreement
and the MILA Purchase Agreement.
Purchaser: Morgan Stanley Mortgage Capital Inc., a New York
corporation, and its successors in
interest, as purchaser of the Mortgage Loans
under each of the Purchase Agreements.
Rating Agency: Each of the Rating Agencies specified in the
Preliminary Statement. If such organization
or a successor is no longer in
existence, "Rating Agency" shall be such
nationally recognized statistical
rating organization, or other comparable
Person, as is designated by the
Depositor, notice of which designation
shall be given to the Trustee. References
herein to a given rating or rating category
of a Rating Agency shall mean such
rating category without giving effect to
any modifiers. For purposes of Section
10.05(b), the addresses for notices to each
Rating Agency shall be the address
specified therefor in the definition
corresponding to the name of such Rating
Agency, or such other address as either
such Rating Agency may hereafter furnish
to the Depositor and the Servicers.
Realized Losses: With respect to any date of determination and
any
Liquidated Mortgage Loan, the amount, if
any, by which (a) the unpaid principal
balance of such Liquidated Mortgage Loan
together with accrued and unpaid
interest thereon exceeds (b) the
Liquidation Proceeds with respect thereto net
of the expenses incurred by the applicable
Servicer in connection with the
liquidation of such Liquidated Mortgage
Loan and net of the amount of
unreimbursed Servicing Advances with
respect to such Liquidated Mortgage Loan.
Record Date: With respect to any Distribution Date, the close
of
business on the Business Day immediately
preceding such Distribution Date;
provided, however, that for any Certificate
issued in definitive form, the
Record Date shall be the close of business
on the last Business Day of the month
preceding the month in which such
applicable Distribution Date occurs.
Reference Bank: As defined in Section 4.04.
Regular Certificates: As specified in the Preliminary
Statement.
Relief Act Interest Shortfall: With respect to any Distribution
Date
and any Mortgage Loan, any reduction in the
amount of interest collectible on
such Mortgage Loan for the most recently
ended Due Period as a result of the
application of the Servicemembers Civil
Relief Act or any similar state
statutes.
REMIC: A "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
REMIC Provisions: Provisions of the federal income tax law
relating
to real estate mortgage investment
conduits, which appear at Sections 860A
through 860G of Subchapter M of Chapter 1
of the Code, and related provisions,
and regulations promulgated thereunder, as
the foregoing may be in effect from
time to time as well as provisions of
applicable state laws.
Remittance Date: With respect to any Distribution Date, the
second
Business Day immediately preceding such
Distribution Date.
REO Disposition: The final sale by the applicable Servicer of
any
REO Property.
REO Imputed Interest: As to any REO Property, for any period,
an
amount equivalent to interest (at the
Mortgage Rate net of the Servicing Fee
Rate that would have been applicable to the
related Mortgage Loan had it been
outstanding) on the unpaid principal
balance of the Mortgage Loan as of the date
of acquisition thereof (as such balance is
reduced pursuant to Section 3.17 by
any income from the REO Property treated as
a recovery of principal).
REO Mortgage Loan: A Mortgage Loan where title to the related
Mortgaged Property has been obtained by the
applicable Servicer in the name of
the Trustee on behalf of the
Certificateholders.
REO Property: A Mortgaged Property acquired by the Trust Fund
through foreclosure or deed-in-lieu of
foreclosure in connection with a
defaulted Mortgage Loan.
Repurchase Price: With respect to any Mortgage Loan, (a) in the
case
of any Mortgage Loan repurchased by the
Depositor or a Responsible Party, an
amount equal to the sum of (i) the unpaid
principal balance of such Mortgage
Loan as of the date of repurchase, (ii)
interest on such unpaid principal
balance of such Mortgage Loan at the
Mortgage Rate from the last date through
which interest has been paid and
distributed to the Trustee to the date of
repurchase, (iii) all unreimbursed
Servicing Advances and (iv) all costs and
expenses incurred by the Trustee arising
out of or based upon such breach,
including without limitation, costs and
expenses relating to the Trustee's
enforcement of the repurchase obligation of
the Depositor or such Responsible
Party hereunder, and (b) in the case of any
Mortgage Loan repurchased by
Meritage or Wilmington Finance, the
repurchase price specified in the Meritage
Agreements or the Wilmington Finance
Agreements, as applicable. In addition to
the Repurchase Price, each of Accredited,
First NLC and MILA is obligated to
make certain indemnification payments for
material breaches of representations
and warranties as further set forth in
Section 2.03(n) in this Agreement, and
each of Meritage and Wilmington Finance is
obligated to make certain
indemnification payments for material
breaches of representations and warranties
as further set forth in the Meritage
Agreements and the Wilmington Finance
Agreements, as applicable.
Request for Release: The Request for Release submitted by the
applicable Servicer to the Trustee,
substantially in the form of Exhibit J.
Residual Certificates: As specified in the Preliminary
Statement.
Responsible Officer: When used with respect to the Trustee, any
vice
president, any assistant vice president,
any assistant secretary, any assistant
treasurer, any associate, or any other
officer of the Trustee customarily
performing functions similar to those
performed by any of the above designated
officers who at such time shall be officers
to whom, with respect to a
particular matter, such matter is referred
because of such officer's knowledge
of and familiarity with the particular
subject and who shall have direct
responsibility for the administration of
this Agreement.
Responsible Parties: Accredited, First NLC and MILA.
Rule 144A Letter: As defined in Section 5.02(b).
Scheduled Payment: The scheduled monthly payment on a Mortgage
Loan
due on any Due Date allocable to principal
and/or interest on such Mortgage Loan
which, unless otherwise specified herein,
shall give effect to any related Debt
Service Reduction and any Deficient
Valuation that affects the amount of the
monthly payment due on such Mortgage
Loan.
Second Lien Mortgage Loan: A Mortgage Loan secured by a second
lien
Mortgage on the related Mortgaged
Property.
Securities Act: The Securities Act of 1933, as amended.
Senior Enhancement Percentage: With respect to any Distribution
Date, the percentage obtained by dividing
(x) the sum of (i) the aggregate Class
Certificate Balance of the Subordinated
Certificates and (ii) the Subordinated
Amount (in each case after taking into
account the distribution of the Principal
Distribution Amount for such Distribution
Date) by (y) the aggregate Stated
Principal Balance of the Mortgage Loans for
such Distribution Date.
Senior Specified Enhancement Percentage: As of any date of
determination, 40.90%.
Servicer: JPMorgan, Countrywide or HomEq, and if a successor to
any
Servicer is appointed hereunder, such
successor. When the term "Servicer" is
used in this Agreement in connection with
the administration of servicing
obligations with respect to any Mortgage
Loan, Mortgaged Property, REO Property
or Mortgage File, "Servicer" shall mean (i)
in connection with the Mortgage
Loans for which JPMorgan is identified on
the Mortgage Loan Schedule as the
Servicer, JPMorgan, (ii) in connection with
the Mortgage Loans for which
Countrywide is identified on the Mortgage
Loan Schedule as the Servicer,
Countrywide and (iii) in connection with
the Mortgage Loans for which HomEq is
identified on the Mortgage Loan Schedule as
the Servicer, HomEq.
Servicer Remittance Report: As defined in Section 4.03(d).
Servicing Advances: The reasonable "out-of-pocket" costs and
expenses (including legal fees) incurred by
the applicable Servicer in the
performance of its servicing obligations in
connection with a default,
delinquency or other unanticipated event,
including, but not limited to, the
cost of (i) the preservation, restoration,
inspection and protection of a
Mortgaged Property, (ii) any enforcement,
administrative or judicial
proceedings, including foreclosures and
litigation, in respect of a particular
Mortgage Loan, (iii) the management
(including reasonable fees in connection
therewith) and liquidation of any REO
Property and (iv) the performance of its
obligations under Sections 3.01, 3.09, 3.13
and 3.15. The Servicing Advances
shall also include any reasonable
"out-of-pocket" costs and expenses (including
legal fees) incurred by the applicable
Servicer in connection with executing and
recording instruments of satisfaction,
deeds of reconveyance or Assignments of
Mortgage in connection with any foreclosure
in respect of any Mortgage Loan to
the extent not recovered from the Mortgagor
or otherwise payable under this
Agreement. None of the Servicers shall be
required to make any Nonrecoverable
Servicing Advances.
Servicing Fee: With respect to a Servicer, each Mortgage Loan
serviced by such Servicer and for any
calendar month, an amount equal to one
month's interest (or in the event of any
payment of interest which accompanies a
Principal Prepayment in Full made by the
Mortgagor during such calendar month,
interest for the number of days covered by
such payment of interest) at the
Servicing Fee Rate on the applicable Stated
Principal Balance of such Mortgage
Loan as of the first day of such calendar
month. Such fee shall be payable
monthly, and shall be pro rated for any
portion of a month during which the
Mortgage Loan is serviced by such Servicer
under this Agreement. The Servicing
Fee is payable solely from the interest
portion (including recoveries with
respect to interest from Liquidation
Proceeds, Insurance Proceeds, Condemnation
Proceeds and proceeds received with respect
to REO Properties, to the extent
permitted by Section 3.11) of such
Scheduled Payment collected by such Servicer,
or as otherwise provided under Section
3.11.
Servicing Fee Rate: With respect to each Mortgage Loan, 0.50%
per
annum.
Servicing File: With respect to each Mortgage Loan, the file
retained by the applicable Servicer
consisting of originals or copies of all
documents in the Mortgage File which are
not delivered to the Trustee in the
Custodial File and copies of the Mortgage
Loan Documents set forth in Exhibit K
hereto.
Servicing Officer: Any officer of any Servicer involved in, or
responsible for, the administration and
servicing of the Mortgage Loans whose
name and facsimile signature appear on a
list of servicing officers furnished to
the Trustee by such Servicer on the Closing
Date pursuant to this Agreement, as
such list may from time to time be
amended.
Similar Law: As defined in Section 5.02(b).
60+ Day Delinquent Mortgage Loan: Each Mortgage Loan with respect
to
which any portion of a Scheduled Payment
is, as of the last day of the prior Due
Period, two months or more past due
(without giving effect to any grace period),
each Mortgage Loan in foreclosure and all
REO Property.
Specified Subordinated Amount: Prior to the Stepdown Date, an
amount
equal to 3.10% of the Cut-off Date Pool
Principal Balance. On and after the
Stepdown Date, an amount equal to 6.20% of
the aggregate Stated Principal
Balance of the Mortgage Loans for such
Distribution Date, subject, until the
Class Certificate Balance of each Class of
LIBOR Certificates has been reduced
to zero, to a minimum amount equal to 0.50
% of the aggregate Stated Principal
Balance of the Mortgage Loans as of the
Cut-off Date; provided, however, that
if, on any Distribution Date, a Trigger
Event exists, the Specified Subordinated
Amount shall not be reduced to the
applicable percentage of the then current
aggregate Stated Principal Balance of the
Mortgage Loans until the Distribution
Date on which a Trigger Event no longer
exists. When the Class Certificate
Balance of each Class of LIBOR Certificates
has been reduced to zero, the
Specified Subordinated Amount will
thereafter equal zero.
Standard & Poor's: Standard & Poor's Ratings Services, a
division of
The McGraw-Hill Companies, Inc., and its
successors in interest. If Standard &
Poor's is designated as a Rating Agency in
the Preliminary Statement, for
purposes of Section 10.05(b) the address
for notices to Standard & Poor's shall
be Standard & Poor's, 55 Water Street,
New York, New York 10041, Attention:
Residential Mortgage Surveillance Group -
Morgan Stanley Home Equity Loan Trust
2005-2, or such other address as Standard
& Poor's may hereafter furnish to the
Depositor and the Servicers.
Standard & Poor's Glossary: The Standard & Poor's
LEVELS(R)
Glossary, as may be in effect from time to
time.
Startup Day: The Closing Date.
Stated Principal Balance: As to each Mortgage Loan and as of
any
date of determination, (i) the principal
balance of the Mortgage Loan at the
Cut-off Date after giving effect to
payments of principal due on or before such
date, minus (ii) all amounts previously
remitted to the Trustee with respect to
the related Mortgage Loan representing
payments or recoveries of principal
including advances in respect of scheduled
payments of principal. For purposes
of any Distribution Date, the Stated
Principal Balance of any Mortgage Loan will
give effect to any scheduled payments of
principal received by the related
Servicer on or prior to the related
Determination Date or advanced by the
related Servicer for the related Remittance
Date and any unscheduled principal
payments and other unscheduled principal
collections received during the related
Prepayment Period, and the Stated Principal
Balance of any Mortgage Loan that
has prepaid in full or has become a
Liquidated Mortgage Loan during the related
Prepayment Period shall be zero.
Stepdown Date: The later to occur of (i) the earlier to occur of
(a)
the Distribution Date in June 2008 and (b)
the Distribution Date following the
Distribution Date on which the aggregate
Class Certificate Balances of the Class
A Certificates have been reduced to zero
and (ii) the first Distribution Date on
which the Senior Enhancement Percentage
(calculated for this purpose only after
taking into account payments of principal
on the Mortgage Loans applied to
reduce the Stated Principal Balance of the
Mortgage Loans for the applicable
Distribution Date but prior to any
allocation of the Principal Distribution
Amount to the Certificates on such
Distribution Date) is greater than or equal
to the Senior Specified Enhancement
Percentage.
Subordinated Amount: As of any Distribution Date, the excess,
if
any, of (a) the aggregate Stated Principal
Balance of the Mortgage Loans for
such Distribution Date over (b) the
aggregate of the Class Certificate Balances
of the LIBOR Certificates as of such
Distribution Date (after giving effect to
the payment of the Principal Remittance
Amount on such Certificates on such
Distribution Date).
Subordinated Certificates: As specified in the Preliminary
Statement.
Subordination Deficiency: With respect to any Distribution Date,
the
excess, if any, of (a) the Specified
Subordinated Amount applicable to such
Distribution Date over (b) the Subordinated
Amount applicable to such
Distribution Date.
Subordination Reduction Amount: With respect to any
Distribution
Date, on or after the Stepdown Date on
which no Trigger Event exists, an amount
equal to the lesser of (a) the Excess
Subordinated Amount and (b) the Net
Monthly Excess Cash Flow.
Subsequent Recovery: With respect to any Mortgage Loan or
related
Mortgaged Property that became a Liquidated
Mortgage Loan or was otherwise
disposed of, all amounts received in
respect of such Liquidated Mortgage Loan
after an Applied Realized Loss Amount
related to such Mortgage Loan or Mortgaged
Property is allocated to reduce the Class
Certificate Balance of any Class of
Subordinated Certificates. Any Subsequent
Recovery that is received during a
Prepayment Period will be treated as
Liquidation Proceeds and included as part
of the Principal Remittance Amount for the
related Distribution Date.
Subservicer: As defined in Section 3.02(a).
Subservicing Account: As defined in Section 3.08.
Subservicing Agreements: As defined in Section 3.02(a).
Substitute Mortgage Loan: A Mortgage Loan (i) substituted by
Accredited, First NLC, Meritage or
Wilmington Finance for a Deleted Mortgage
Loan that satisfies the criteria set forth
in the definition of "Qualified
Substitute Mortgage Loan" in the applicable
Purchase Agreement or (ii)
substituted by the Depositor for a Deleted
Mortgage Loan, which, if substituted
by the Depositor, must, on the date of such
substitution, as confirmed in a
Request for Release, substantially in the
form of Exhibit J, (a) have a Stated
Principal Balance, after deduction of the
principal portion of the Scheduled
Payment due in the month of substitution,
not in excess of, and not more than
10% less than, the Stated Principal Balance
of the Deleted Mortgage Loan; (b) be
accruing interest at a rate no lower than
and not more than 1% per annum higher
than, that of the Deleted Mortgage Loan;
(c) have a Loan-to-Value Ratio no
higher than that of the Deleted Mortgage
Loan; (d) have a remaining term to
maturity no greater than (and not more than
one year less than that of) the
Deleted Mortgage Loan; and (e) comply with
each representation and warranty set
forth in Section 2.03.
Substitution Adjustment Amount: As defined in Section 2.03.
Tax Matters Person: The Holder of the Class R Certificates
designated as "tax matters person" of the
Lower Tier REMIC and the Upper Tier
REMIC, respectively, in the manner provided
under Treasury Regulations Section
1.860F-4(d) and Treasury Regulations
Section 301.6231(a)(7)-1.
Tax Service Contract: As defined in Section 3.09(a).
Telerate Page 3750: The display page currently so designated on
the
Bridge Telerate Service (or such other page
as may replace that page on that
service for displaying comparable rates or
prices).
Total Monthly Excess Spread: As to any Distribution Date, an
amount
equal to the excess if any, of (i) the
interest on the Mortgage Loans (other
than Prepayment Interest Excesses) received
by the Servicers on or prior to the
related Determination Date or advanced by
the Servicers for the related
Remittance Date (net of Expense Fees) over
(ii) the sum of the amounts payable
to the Certificates pursuant to Section
4.02(a)(i) on such Distribution Date.
Transfer: Any direct or indirect transfer or sale of any
Ownership
Interest in a Residual Certificate.
Transfer Affidavit: As defined in Section 5.02(c).
Transferor Certificate: As defined in Section 5.02(b).
Trigger Event: Either a Cumulative Loss Trigger Event or a
Delinquency Trigger Event.
Trust: The express trust created hereunder in Section 2.01(c).
Trust Fund: The corpus of the trust created hereunder consisting
of
(i) the Mortgage Loans and all interest and
principal with respect thereto
received on or after the related Cut-off
Date, other than such amounts which
were due on the Mortgage Loans on or prior
to the related Cut-off Date; (ii) the
Collection Accounts, Excess Reserve Fund
Account, the Distribution Account, and
all amounts deposited therein pursuant to
the applicable provisions of this
Agreement; (iii) property that secured a
Mortgage Loan and has been acquired by
foreclosure, deed-in-lieu of foreclosure or
otherwise; (iv) the Meritage
Agreements and the Wilmington Finance
Agreements (solely insofar as such
agreements relate to the Meritage Mortgage
Loans or the Wilmington Finance
Mortgage Loans, as applicable); (v) the
Interest Rate Cap Agreements; (vi) the
Closing Date Deposit Amount; and (vii) all
proceeds of the conversion, voluntary
or involuntary, of any of the
foregoing.
Trustee: Deutsche Bank National Trust Company, a national
banking
association, and its successors in interest
and, if a successor trustee is
appointed hereunder, such successor.
Trustee Fee: As to any Distribution Date, an amount equal to
the
product of (a) one-twelfth of the Trustee
Fee Rate and (b) (i) the aggregate
Stated Principal Balance of the Mortgage
Loans as of the first day of the
related Interest Accrual Period and (ii)
with respect to the Distribution Date
in June 2005 only, the portion of the
Closing Date Deposit Amount allocable to
principal.
Trustee Fee Rate: With respect to each Mortgage Loan, 0.0049%
per
annum.
Trustee Float Period: With respect to the Distribution Date and
the
related amounts in the Distribution
Account, the period commencing on the
Business Day immediately preceding such
Distribution Date and ending on such
Distribution Date.
Underwriters' Exemption: Any exemption listed under footnote 1
of,
and amended by, Prohibited Transaction
Exemption 2002-41, 67 Fed. Reg. 54487
(2002), or any successor exemption.
Unpaid Interest Amount: As of any Distribution Date and any Class
of
Certificates, the sum of (a) the portion of
the Accrued Certificate Interest
Distribution Amount from Distribution Dates
prior to the current Distribution
Date remaining unpaid immediately prior to
the current Distribution Date and (b)
interest on the amount in clause (a) above
at the applicable Pass-Through Rate
(to the extent permitted by applicable
law).
Unpaid Realized Loss Amount: With respect to any Class of
Subordinated Certificates and as to any
Distribution Date, is the excess of (i)
the Applied Realized Loss Amount with
respect to such Class over (ii) the sum of
(a) all distributions in reduction of such
Applied Realized Loss Amounts on all
previous Distribution Dates, and (b) the
amount by which the Class Certificate
Balance of such Class has been increased
due to the distribution of any
Subsequent Recovery on all previous
Distribution Dates. Any amounts distributed
to a Class of Subordinated Certificates in
respect of any Unpaid Realized Loss
Amount will not be applied to reduce the
Class Certificate Balance of such
Class.
Upper Tier Regular Interest: As described in the Preliminary
Statement.
Upper Tier REMIC: As described in the Preliminary Statement.
U.S. Person: (i) A citizen or resident of the United States; (ii)
a
corporation (or entity treated as a
corporation for tax purposes) created or
organized in the United States or under the
laws of the United States or of any
State thereof, including, for this purpose,
the District of Columbia; (iii) a
partnership (or entity treated as a
partnership for tax purposes) organized in
the United States or under the laws of the
United States or of any State
thereof, including, for this purpose, the
District of Columbia (unless provided
otherwise by future Treasury regulations);
(iv) an estate whose income is
includible in gross income for United
States income tax purposes regardless of
its source; or (v) 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 U.S. Persons have authority to control
substantial decisions of the trust.
Notwithstanding the last clause of the
preceding sentence, to the extent
provided in Treasury regulations, certain
trusts in existence on August 20,
1996, and treated as U.S. Persons prior to
such date, may elect to continue to
be U.S. Persons.
Voting Rights: The portion of the voting rights of all of the
Certificates which is allocated to any
Certificate. As of any date of
determination, (a) 1% of all Voting Rights
shall be allocated to the Class X
Certificates, if any (such Voting Rights to
be allocated among the holders of
Certificates of each such Class in
accordance with their respective Percentage
Interests), (b) 1% of all Voting Rights
shall be allocated to the Class P
Certificates, if any, and (c) the remaining
Voting Rights shall be allocated
among Holders of the remaining Classes of
Certificates in proportion to the
Certificate Balances of their respective
Certificates on such date.
WAC Cap: With respect to the Mortgage Loans as of any
Distribution
Date, the product of (i) the weighted
average of the Adjusted Net Mortgage Rates
then in effect on the beginning of the
related Due Period on the Mortgage Loans
and (ii) a fraction, the numerator of which
is 30 and the denominator of which
is the actual number of days in the
Interest Accrual Period related to such
Distribution Date.
Wilmington Finance: Collectively, Wilmington Finance Inc., a
Delaware corporation, and its successors in
interest, and Wilmington Finance, a
division of AIG Federal Savings Bank, a
federally chartered savings bank, and
its successors in interest.
Wilmington Finance Agreements: The Wilmington Finance Purchase
Agreement and the Wilmington Finance
Assignment Agreement, each of which are
attached hereto as Exhibit T.
Wilmington Finance Assignment Agreement: The Assignment and
Recognition Agreement, dated as of the
Closing Date, among the Purchaser, the
Depositor and Wilmington Finance.
Wilmington Finance Mortgage Loans: The Mortgage Loans purchased
by
the Purchaser pursuant to the Wilmington
Finance Purchase Agreement for which
Wilmington Finance is identified as
Originator on the Mortgage Loan Schedule.
Wilmington Finance Purchase Agreement: The Mortgage Loan
Purchase
and Warranties Agreement, dated as of
August 1, 2004, as amended by Amendment to
Mortgage Loan Purchase and Warranties
Agreement, dated as of January 27, 2005,
Amendment No. 2, dated as of Feburary 4,
2005 and Amendment No. 3, dated as of
April 28, 2005, each by and between
Wilmington Finance and the Purchaser, solely
insofar as such agreement relates to the
Wilmington Finance Mortgage Loans.
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
REPRESENTATIONS AND WARRANTIES
Section 2.01 Conveyance of Mortgage Loans. (a) The Depositor,
concurrently with the execution and
delivery hereof, hereby sells, transfers,
assigns, sets over and otherwise conveys to
the Trustee for the benefit of the
Certificateholders, without recourse, all
the right, title and interest of the
Depositor in and to the Trust Fund, and the
Trustee, on behalf of the Trust,
hereby accepts the Trust Fund. On the
Closing Date, the Depositor shall pay,
without any right of reimbursement from the
Trust, to the Cap Provider each
"Fixed Amount" (as defined in the related
Interest Rate Cap Agreement) due and
payable to the Cap Provider pursuant to the
terms of the related Interest Rate
Cap Agreement.
(b) In connection with the transfer and assignment of each
Mortgage
Loan, the Depositor has delivered or caused
to be delivered to the Trustee for
the benefit of the Certificateholders the
following documents or instruments
with respect to each Mortgage Loan so
assigned:
(i) the original Mortgage Note bearing all intervening
endorsements,
endorsed
"Pay to the order of _____________, without recourse" and
signed
(which may
be by facsimile signature) in the name of the last endorsee by
an
authorized officer. To the extent that there is no room on the face
of
the
Mortgage Notes for endorsements, the endorsement may be contained
on
an
allonge, unless the Trustee is advised in writing by the
applicable
Originator
(pursuant to the applicable Purchase Agreement) that state law
does not
so allow;
(ii) the original of any guaranty executed in connection with
the
Mortgage
Note;
(iii) the original Mortgage with evidence of recording thereon or
a
certified
true copy of such Mortgage submitted for recording. If, in
connection
with any Mortgage Loan, the original Mortgage cannot be
delivered
with evidence of recording thereon on or prior to the Closing
Date
because of a delay caused by the public recording office where
such
Mortgage
has been delivered for recordation or because such Mortgage has
been lost or
because such public recording office retains the original
recorded
Mortgage, the Trustee shall notify the applicable Originator to
deliver or
cause to be delivered to the Trustee, as required under the
applicable
Purchase Agreement, a photocopy of such Mortgage, together with
(i) in the
case of a delay caused by the public recording office, an
Officer's
Certificate of the applicable Originator (delivered pursuant to
the
applicable Purchase Agreement) or a certificate from an escrow
company, a
title company or closing attorney stating that such Mortgage
has been
dispatched to the appropriate public recording office for
recordation and that the original recorded Mortgage or a copy of
such
Mortgage
certified by such public recording office to be a true and
complete
copy of the original recorded Mortgage will be promptly
delivered
to the
Trustee upon receipt thereof by the applicable Originator; or
(ii)
in the
case of a Mortgage where a public recording office retains the
original
recorded Mortgage or in the case where a Mortgage is lost after
recordation in a public recording office, a copy of such
Mortgage
certified
by such public recording office to be a true and complete copy
of the
original recorded Mortgage;
(iv) the originals of all assumption, modification, consolidation
or
extension
agreements, with evidence of recording thereon;
(v) the original Assignment of Mortgage for each Mortgage Loan
endorsed
in blank (except with respect to MERS Designated Mortgage
Loans);
(vi) the originals of all intervening assignments of Mortgage
(if
any)
evidencing a complete chain of assignment from the applicable
originator
(or MERS with respect to each MERS Designated Mortgage Loan) to
the last
endorsee with evidence of recording thereon, or if any such
intervening assignment has not been returned from the applicable
recording
office or
has been lost or if such public recording office retains the
original
recorded assignments of Mortgage, the Trustee shall notify the
applicable
Originator, to deliver, as required under the applicable
Purchase
Agreement, a photocopy of such intervening assignment, together
with (A)
in the case of a delay caused by the public recording office,
an
Officer's
Certificate of the applicable Originator or a certificate from
an escrow
company, a title company or a closing attorney stating that
such
intervening assignment of Mortgage has been dispatched to the
appropriate
public
recording office for recordation and that such original
recorded
intervening assignment of Mortgage or a copy of such
intervening
assignment
of Mortgage certified by the appropriate public recording
office to
be a true and complete copy of the original recorded
intervening
assignment
of Mortgage will be promptly delivered to the Trustee upon
receipt
thereof by the applicable Originator; or (B) in the case of an
intervening assignment where a public recording office retains
the
original
recorded intervening assignment or in the case where an
intervening assignment is lost after recordation in a public
recording
office, a
copy of such intervening assignment certified by such public
recording
office to be a true and complete copy of the original recorded
intervening assignment;
(vii) the original mortgagee title insurance policy or
attorney's
opinion of
title and abstract of title, or, in the event such original
title
policy is unavailable, a certified true copy of the related
policy
binder or
commitment for title certified to be true and complete by the
title
insurance company; and
(viii) the original of any security agreement, chattel mortgage
or
equivalent
document executed in connection with the Mortgage (if
provided).
The Depositor will use its reasonable efforts to assist the
Trustee
and the Servicers in enforcing the
obligations of each Responsible Party under
this Agreement, the obligations of Meritage
under the Meritage Agreements and
the obligations of Wilmington Finance under
the Wilmington Finance Agreements.
The Depositor shall cause to be delivered to the Trustee the
applicable recorded document promptly upon
receipt from the respective recording
office but in no event later than 180 days
from the Closing Date.
If any Mortgage has been recorded in the name of Mortgage
Electronic
Registration System, Inc. ("MERS") or its
designee, no Assignment of Mortgage in
favor of the Trustee will be required to be
prepared or delivered and instead,
the applicable Servicer shall take all
reasonable actions as are necessary at
the expense of the applicable Originator to
the extent permitted under the
related Purchase Agreement and otherwise at
the expense of the Depositor to
cause the Trust to be shown as the owner of
the related Mortgage Loan on the
records of MERS for the purpose of the
system of recording transfers of
beneficial ownership of mortgages
maintained by MERS.
From time to time, the Depositor or the applicable Servicer, as
applicable, shall forward to the Trustee
additional original documents,
additional documents evidencing an
assumption, modification, consolidation or
extension of a Mortgage Loan in accordance
with the terms of this Agreement upon
receipt of such documents. All such
mortgage documents held by the Trustee as to
each Mortgage Loan shall constitute the
"Custodial File".
No later than thirty (30) Business Days following the later of
the
Closing Date and the date of receipt by the
applicable Servicer of the complete
recording information for a Mortgage, the
applicable Servicer shall promptly
submit or cause to be submitted for
recording, at the expense of the applicable
Originator as required pursuant to the
related Purchase Agreement and at no
expense to the Trust Fund, the Trustee, the
applicable Servicer, or the
Depositor, in the appropriate public office
for real property records, each
Assignment of Mortgage referred to in
Section 2.01(b)(v). Notwithstanding the
foregoing, however, for administrative
convenience and facilitation of servicing
and to reduce closing costs, the
Assignments of Mortgage shall not be required
to be completed and submitted for recording
with respect to any Mortgage Loan
(i) if the Trustee and each Rating Agency
have received an Opinion of Counsel,
satisfactory in form and substance to the
Trustee and each Rating Agency to the
effect that the recordation of such
Assignments of Mortgage in any specific
jurisdiction is not necessary to protect
the Trustee's interest in the related
Mortgage Note, (ii) if such Mortgage Loan
is a MERS Designated Mortgage Loan or
(iii) if the Rating Agencies have each
notified the Depositor in writing that
not recording any such Assignments of
Mortgage would not cause the initial
ratings on any LIBOR Certificates to be
downgraded or withdrawn; provided,
however, that the Servicer shall not be
held responsible or liable for any loss
that occurs because an Assignment of
Mortgage was not recorded, but only to the
extent such Servicer does not have prior
knowledge of the act or omission that
causes such loss. However, with respect to
the Assignments of Mortgage referred
to in clauses (i) and (ii) above, if
foreclosure proceedings occur against a
Mortgaged Property, the Depositor shall
notify the applicable Servicer and such
Servicer shall record such Assignment of
Mortgage at the expense of the related
Originator as required pursuant to the
related Purchase Agreement. If the
Assignment of Mortgage is to be recorded,
the Mortgage shall be assigned to
"Deutsche Bank National Trust Company, as
trustee under the Pooling and
Servicing Agreement dated as of May 1,
2005, Morgan Stanley Home Equity Loan
Trust 2005-2". In the event that any such
Assignment of Mortgage is lost or
returned unrecorded because of a defect
therein, the Depositor shall promptly
cause to be delivered a substitute
Assignment of Mortgage to cure such defect
and thereafter cause each such assignment
to be duly recorded. If there is such
a defect with respect to a Meritage
Mortgage Loan or a Wilmington Finance
Mortgage Loan, the Trustee shall take such
actions, with the Depositor's
consent, to enforce the rights of the Trust
as "Purchaser" under the Meritage
Agreements or the Wilmington Finance
Agreements, as applicable.
On or prior to the Closing Date, the Depositor shall deliver to
the
Trustee a copy of the Data Tape Information
in an electronic, machine readable
medium in a form mutually acceptable to the
Trustee. Within twenty (20) Business
Days of the Closing Date, the Depositor
shall deliver copies of the complete
Mortgage Loan Schedule, the Purchase
Agreements, the Wilmington Finance
Assignment Agreement and the Meritage
Assignment Agreement to the Trustee and
each Servicer, and the Trustee and each
Servicer shall promptly acknowledge
receipt thereof.
(c) The
Depositor does hereby establish, pursuant to the further
provisions of this Agreement and the laws
of the State of New York, an express
trust (the "Trust") to be known, for
convenience, as "MORGAN STANLEY HOME EQUITY
LOAN TRUST 2005-2" and Deutsche Bank
National Trust Company is hereby appointed
as Trustee in accordance with the
provisions of this Agreement. The parties
hereto acknowledge and agree that it is the
policy and intention of the Trust to
acquire only Mortgage Loans meeting the
requirements set forth in this
Agreement, including without limitation,
the representations and warranties set
forth in paragraph (aaa) of Schedule VI,
paragraph (ff) of Schedule VII to this
Agreement and paragraph (50) of Schedule
VIII to this Agreement.
(d)
The Trust shall have the capacity, power and authority, and the
Trustee on behalf of the Trust is hereby
authorized, to accept the sale,
transfer, assignment, set over and
conveyance by the Depositor to the Trust of
all the right, title and interest of the
Depositor in and to the Trust Fund
(including, without limitation, the
Mortgage Loans, the Meritage Agreements and
the Wilmington Finance Agreements) pursuant
to Section 2.01(a). The Trustee on
behalf of the Trust is hereby authorized to
enter into the Interest Rate Cap
Agreements.
Section 2.02 Acceptance by the Trustee of the Mortgage Loans.
The
Trustee shall acknowledge, on the Closing
Date, receipt by the Trustee of the
documents identified in the Initial
Certification in the form annexed hereto as
Exhibit E, and declares that it holds and
will hold such documents and the other
documents delivered to it pursuant to
Section 2.01, and that it holds or will
hold such other assets as are included in
the Trust Fund, in trust for the
exclusive use and benefit of all present
and future Certificateholders. The
Trustee shall maintain possession of the
related Mortgage Notes in the State of
California, unless otherwise permitted by
the Rating Agencies.
In connection with the Closing Date, the Trustee shall be
required
to deliver via facsimile (with original to
follow the next Business Day) to the
Depositor and the Servicers an Initial
Certification prior to the Closing Date,
or, as the Depositor agrees to, on the
Closing Date, certifying receipt of a
Mortgage Note and Assignment of Mortgage
for each Mortgage Loan. The Trustee
shall not be responsible to verify the
validity, sufficiency or genuineness of
any document in any Custodial File.
Within 90 days after the Closing Date, the Trustee shall, for
the
benefit of the Holders of the Certificates,
ascertain that all documents
identified in the Document Certification
and Exception Report in the form
attached hereto as Exhibit F are in its
possession, and shall deliver to the
Depositor and the Servicers a Document
Certification and Exception Report, in
the form annexed hereto as Exhibit F, to
the effect that, as to each Mortgage
Loan listed in the Mortgage Loan Schedule
(other than any Mortgage Loan paid in
full or any Mortgage Loan specifically
identified in such certification as an
exception and not covered by such
certification): (i) all documents identified
in the Document Certification and Exception
Report and required to be reviewed
by it are in its possession; (ii) such
documents have been reviewed by it and
appear regular on their face and relate to
such Mortgage Loan; (iii) based on
its examination and only as to the
foregoing documents, the information set
forth in items (1), (2), (7) and (9) of the
Mortgage Loan Schedule and items
(1), (9) and (17) of the Data Tape
Information respecting such Mortgage Loan
accurately reflects the information set
forth in the Custodial File; and (iv)
each Mortgage Note has been endorsed as
provided in Section 2.01 of this
Agreement. The Trustee shall not be
responsible to verify the validity,
sufficiency or genuineness of any document
in any Custodial File.
Within 90 days after the Closing Date, the Trustee shall, for
the
benefit of the Holders of the Certificates,
based solely on the list of MERS
Designated Loans and screen printouts from
the MERS System provided to the
Trustee by each Responsible Party (such to
be provided to the Trustee no later
than 45 days from the Closing Date), the
Trustee shall confirm, on behalf of the
Trust, that the Trustee is shown as the
Investor with respect to each MERS
Designated Mortgage Loan on such screen
printouts. If the Trustee is not shown
as the Investor with respect to any MERS
Designated Mortgage Loans on such
screen printouts, the Trustee shall
promptly notify the related Responsible
Party of such fact and the related
Responsible Party shall then either cure such
defect or repurchase such Mortgage Loan in
accordance with Section 2.03.
The Trustee shall retain possession and custody of each
Custodial
File in accordance with and subject to the
terms and conditions set forth
herein. The applicable Servicer shall
promptly deliver to the Trustee, upon the
execution or receipt thereof, the originals
of such other documents or
instruments constituting the Custodial File
as come into the possession of the
Servicer from time to time.
Each Responsible Party shall deliver (or the Depositor, as
applicable, shall use reasonable efforts to
cause Meritage and Wilmington
Finance to deliver) to the applicable
Servicer copies of all trailing documents
required to be included in the Custodial
File at the same time the original or
certified copies thereof are delivered to
the Trustee, including but not limited
to such documents as the title insurance
policy and any other Mortgage Loan
documents upon return from the public
recording office. Such documents shall be
delivered by the applicable Responsible
Party at the Responsible Party's expense
(or the Depositor, as applicable, shall use
reasonable efforts to cause Meritage
and Wilmington Finance to deliver such
documents at Meritage's expense or
Wilmington Finance's expense, as
applicable, pursuant to the Meritage Agreements
or the Wilmington Finance Agreements, as
applicable) to such Servicer.
Section 2.03 Representations and Warranties; Remedies for
Breaches
of Representations and Warranties with
Respect to the Mortgage Loans. (a)
JPMorgan hereby makes the representations
and warranties set forth in Schedule
II hereto to the Depositor and the Trustee
as of the date set forth in such
Schedule, Countrywide hereby makes the
representations and warranties set forth
in Schedule III hereto to the Depositor and
the Trustee as of the dates set
forth in such Schedule and HomEq hereby
makes the representations and warranties
set forth in Schedule IV hereto to the
Depositor and the Trustee as of the dates
set forth in such Schedule. Upon discovery
by any of the parties hereto of a
breach of any of the foregoing
representations and warranties, the party
discovering such breach shall give prompt
written notice to the other.
(b) The Depositor hereby makes the representations and
warranties
set forth in Schedule V hereto to the
Trustee as of the dates set forth in such
Schedule.
(c) First NLC hereby makes the representations and warranties
set
forth in Schedule VI hereto to the
Depositor, the Servicers and the Trustee as
of the dates set forth in such Schedule.
MILA hereby makes the representations
and warranties set forth in Schedule VII
hereto to the Depositor, the Servicers
and the Trustee as of the dates set forth
in such Schedule. Accredited hereby
makes the representations and warranties
set forth in Schedule VIII hereto to
the Depositor, the Servicers and the
Trustee as of the dates set forth in such
Schedule.
(d) It is understood and agreed by the parties hereto that the
representations and warranties set forth in
this Section 2.03 shall survive the
transfer of the Mortgage Loans by the
Depositor to the Trustee, and shall inure
to the benefit of the parties to whom the
representations and warranties were
made notwithstanding any restrictive or
qualified endorsement on any Mortgage
Note or Assignment of Mortgage or the
examination or failure to examine any
Mortgage File.
(e) Upon discovery by any of the parties hereto of a breach of
a
representation or warranty made by the
Depositor, Accredited, First NLC or MILA,
as applicable, under this Agreement, that
materially and adversely affects the
value of any Mortgage Loan or the interests
of the Trustee or the
Certificateholders therein, the party
discovering such breach shall give prompt
written notice thereof to the other
parties. Upon receiving written notice of a
breach of a representation and warranty or
written notice that a Mortgage Loan
does not constitute a "qualified mortgage"
within the meaning of Section
860G(a)(3) of the Code, the Trustee shall
in turn notify Accredited, First NLC
or MILA, as applicable, in writing to
correct or cure, in accordance with this
Agreement, any such breach of a
representation or warranty made by Accredited,
First NLC or MILA under this Agreement,
within sixty (60) days from the date of
notice from the Trustee or the discovery by
Accredited, First NLC or MILA of the
breach, and if Accredited, First NLC or
MILA fails or is unable to correct or
cure the defect or breach within such
period, the Trustee shall notify the
Depositor of such failure to correct or
cure. Unless otherwise directed by the
Depositor within five (5) Business Days
after notifying the Depositor of such
failure by Accredited, First NLC or MILA to
correct or cure, the Trustee shall
notify Accredited, First NLC or MILA to
repurchase the Mortgage Loan (a "Deleted
Mortgage Loan") at the Repurchase Price or
substitute a Substitute Mortgage Loan
for such Mortgage Loan, in each case,
pursuant to this Agreement, as applicable.
Notwithstanding anything to the contrary
contained herein, in the event that the
Trustee receives notice of a breach by (i)
First NLC of any of the
representations and warranties set forth in
paragraphs (rr), (zz), (aaa), (ccc),
(jjj), (kkk), (lll), (mmm), (nnn), (ooo)
and (ppp) of Schedule VI, (ii) MILA of
any of the representations and warranties
set forth in paragraphs (ff), (qq),
(rr), (tt), (uu), (vv), (ww), (xx), (yy),
(zz), (aaa) or (ccc) of Schedule VII
or (iii) Accredited of any of the
representations and warranties set forth in
paragraphs (49), (50), (51), (53), (55),
(56), (57), (58), (59), (60), (61) or
(62) of Schedule VIII, the Trustee shall
notify Accredited. First NLC or MILA to
repurchase the Mortgage Loan at the
Repurchase Price within sixty (60) days of
Accredited's, First NLC's or MILA's receipt
of such notice. If, within ten (10)
Business Days of receipt of such notice by
Accredited, First NLC or MILA,
Accredited, First NLC or MILA fails to
repurchase such Mortgage Loan, the
Trustee shall notify the Depositor of such
failure. The Trustee shall pursue all
legal remedies available to the Trustee
against Accredited, First NLC or MILA
under this Agreement, if the Trustee has
received written notice from the
Depositor directing the Trustee to pursue
such remedies.
(f) In the event any Mortgage Loan does not conform to the
requirements as determined in the Trustee's
review of the related Custodial
File, the Trustee shall notify the
applicable Originator, the applicable
Servicer and the Depositor in writing, and
request that such Originator correct
or cure such defect as required under this
Agreement, the Wilmington Finance
Agreements or the Meritage Agreements, as
applicable, and if such Originator
fails or is unable to correct or cure the
defect within the period set forth in
this Agreement, the Wilmington Finance
Agreements or the Meritage Agreements, as
applicable, the Trustee shall notify the
Depositor of such failure to correct or
cure. Unless otherwise directed by the
Depositor within five (5) Business Days
after notifying the Depositor of such
failure by such Originator to correct or
cure, the Trustee shall notify the
applicable Originator to repurchase the
Mortgage Loan at the Repurchase Price or
substitute a Substitute Mortgage Loan
for such Mortgage Loan, in each case,
pursuant to the terms of this Agreement
(or if applicable, the Wilmington Finance
Agreements or the Meritage
Agreements), as applicable. If, within ten
(10) Business Days of receipt of such
notice by such Originator, such Originator
fails to repurchase such Mortgage
Loan, the Trustee shall notify the
Depositor of such failure. The Trustee shall
pursue all legal remedies available to the
Trustee against such Originator under
this Agreement (or if applicable, the
Wilmington Finance Agreements or the
Meritage Agreements), as applicable, if the
Trustee has received written notice
from the Depositor directing the Trustee to
pursue such remedies.
(g) Within 90 days of the earlier of either discovery by or
notice
to the Depositor of any breach of a
representation or warranty set forth on
Schedule V hereto, the Depositor shall use
its best efforts to promptly cure
such breach in all material respects and,
if such defect or breach cannot be
remedied, the Depositor shall purchase such
Mortgage Loan at the Repurchase
Price or substitute a Substitute Mortgage
Loan for such Mortgage Loan. Within 90
days of the earlier of discovery by the
Depositor or receipt of notice by the
Depositor of the breach of a representation
and warranty set forth in Schedule
VI, Schedule VII or Schedule VIII to this
Agreement, Exhibit B to the Meritage
Assignment Agreement or Exhibit B to the
Wilmington Finance Assignment
Agreement, that (1) materially and
adversely affects the interests of the
Certificateholders in any Mortgage Loan and
(2) has not been cured, repurchased
or substituted for by the applicable
Originator in accordance with the terms of
this Agreement, the Meritage Assignment
Agreement or the Wilmington Finance
Assignment Agreement, as applicable, (i)
the Depositor shall, within the time
period permitted therefor under such
agreement, (A) in the case of a breach by
Accredited, First NLC or MILA, take such
action described in Section 2.03(e) of
this Agreement in respect of such Mortgage
Loan, (B) in the case of Meritage,
take such action described in Section 5 of
the Meritage Assignment Agreement in
respect of such Mortgage Loan, or (C) in
the case of Wilmington Finance, take
such action described in Section 5 of the
Wilmington Finance Assignment
Agreement in respect of such Mortgage Loan,
in each case of clauses (A), (B) or
(C), as if the Depositor were the
applicable Originator, and (ii) the Trustee
shall promptly deliver to the Depositor or
its designee the related Mortgage
File in accordance with the Servicer's
direction in a Request for Release and,
upon Depositor's request, shall assign to
the Depositor all of its rights
with respect to such Originator's breach
under this Agreement, the Meritage
Assignment Agreement or the Wilmington
Finance Assignment Agreement, as
applicable, which assignment shall be
evidenced by a writing prepared by the
Depositor and executed by the Trustee in
favor of the Depositor. Any obligation
of the Depositor under this subsection
shall terminate upon receipt by the
Trustee of a confirmation from each Rating
Agency that such termination will not
cause a downgrade, qualification or
withdrawal of the rating then assigned to
any Class of Certificates by any Rating
Agency.
(h) Within 90 days of the earlier of either discovery by or
notice
to the applicable Responsible Party of any
breach of a representation or
warranty set forth on Schedule VI, Schedule
VII or Schedule VIII, as applicable,
that materially and adversely affects the
value of any Mortgage Loan or the
interest of the Trustee or the
Certificateholders therein, the applicable
Responsible Party shall use its best
efforts to promptly cure such breach in all
material respects and, if such defect or
breach cannot be remedied, the
applicable Responsible Party shall, at the
Depositor's option, purchase such
Mortgage Loan at the Repurchase Price or
substitute a Substitute Mortgage Loan
for such Mortgage Loan, if applicable.
(i) Any substitution of a Substitute Mortgage Loan by a
Responsible
Party shall be made in accordance with the
substitution procedures set forth in
the applicable Purchase Agreement, which
provisions shall be as set forth in
such agreements as if they were set forth
herein. With respect to any Substitute
Mortgage Loan or Loans substituted by the
Depositor or any Responsible Party,
the Depositor or such Responsible Party, as
applicable, shall deliver to the
Trustee for the benefit of the
Certificateholders the Mortgage Note, the
Mortgage, the related Assignment of
Mortgage, and such other documents and
agreements as are required by Section 2.01,
with the Mortgage Note endorsed and
the Mortgage assigned as required by
Section 2.01. With respect to any
Substitute Mortgage Loan or Loans
substituted by Meritage or Wilmington Finance,
the Depositor shall use reasonable efforts
to cause Meritage or Wilmington
Finance, as applicable, to deliver to the
Trustee for the benefit of the
Certificateholders the Mortgage Note, the
Mortgage, the related Assignment of
Mortgage, and such other documents and
agreements as are required by Section
2.01, with the Mortgage Note endorsed and
the Mortgage assigned as required by
Section 2.01. No substitution is permitted
to be made in any calendar month
after the Determination Date for such
month. Scheduled Payments due with respect
to Substitute Mortgage Loans in the Due
Period of substitution shall not be part
of the Trust Fund and will be retained by
the Depositor or the applicable
Responsible Party on the next succeeding
Distribution Date. For the Due Period
of substitution, distributions to
Certificateholders will include the Scheduled
Payment due on any Deleted Mortgage Loan
for such Due Period and thereafter the
Depositor or the applicable Responsible
Party shall be entitled to retain all
amounts received in respect of such Deleted
Mortgage Loan.
(j) In connection with any repurchase or substitution of a
Mortgage
Loan pursuant to this Section 2.03 or
Section 2.07, the applicable Servicer,
based upon information provided by the
Depositor or the applicable Originator,
as applicable, shall amend the Mortgage
Loan Schedule for the benefit of the
Certificateholders to reflect the removal
of such Deleted Mortgage Loan and the
substitution of the Substitute Mortgage
Loan or Loans and the Servicer shall
deliver the amended Mortgage Loan Schedule
to the Trustee. Upon such
substitution, the Substitute Mortgage Loan
or Loans shall be subject to the
terms of this Agreement in all respects,
and, if the substitution is made by the
Depositor or the applicable Originator, as
applicable, such Person shall be
deemed to have made with respect to such
Substitute Mortgage Loan or Loans, as
of the date of substitution, the
representations and warranties made pursuant to
Section 2.03(b) with respect to such
Mortgage Loan. Upon any such substitution
and the deposit into the related Collection
Account of the amount required to be
deposited therein in connection with such
substitution as described in Section
2.03(k), the Trustee shall release the
Mortgage File held for the benefit of the
Certificateholders relating to such Deleted
Mortgage Loan to the Depositor or
the applicable Originator, as applicable,
and shall execute and deliver at the
direction of the Depositor or the
applicable Originator, as applicable, such
instruments of transfer or assignment
prepared by the Depositor or the
applicable Originator, as applicable, in
each case without recourse, as shall be
necessary to vest title in the Depositor or
the applicable Originator, as
applicable, of the Trustee's interest in
any Deleted Mortgage Loan substituted
for pursuant to this Section 2.03.
(k) For any month in which the Depositor substitutes one or
more
Substitute Mortgage Loans for one or more
Deleted Mortgage Loans, the applicable
Servicer will determine the amount (if any)
by which the aggregate unpaid
principal balance of all such Substitute
Mortgage Loans as of the date of
substitution is less than the aggregate
unpaid principal balance of all such
Deleted Mortgage Loans. The amount of such
shortage, plus an amount equal to the
sum of (i) any accrued and unpaid interest
on the Deleted Mortgage Loans and
(ii) all unreimbursed Servicing Advances
with respect to such Deleted Mortgage
Loans, or the amount of any similar
shortage with respect to a Substitute
Mortgage Loan substituted by a Responsible
Party under this Agreement
(collectively, the "Substitution Adjustment
Amount"), shall be remitted by the
Depositor to the applicable Servicer for
deposit into the related Collection
Account on or before the Distribution
Account Deposit Date for the Distribution
Date following the Prepayment Period during
which the related Mortgage Loan
became required to be purchased or replaced
hereunder. The Depositor shall use
reasonable efforts to cause Meritage or
Wilmington Finance, as the case may be,
to remit to the applicable Servicer for
deposit into the related Collection
Account any Substitution Adjustment Amount
on or before the Distribution Account
Deposit Date for the Distribution Date
following the Prepayment Period during
which the related Mortgage Loan became
required to be purchased or replaced
hereunder.
(l) Any Mortgage Loan repurchased pursuant to this Section 2.03
will
be removed from the Trust Fund. The
applicable Servicer shall amend the Mortgage
Loan Schedule for the benefit of the
Certificateholders to reflect the removal
of any Mortgage Loan repurchased and such
Servicer shall deliver the amended
Mortgage Loan Schedule to the Trustee. For
purposes of determining the
applicable Repurchase Price, any such
repurchase shall occur or shall be deemed
to occur as of the last day of the
applicable Prepayment Period.
(m) In the event that the Depositor or any Responsible Party
shall
have repurchased a Mortgage Loan pursuant
to this Agreement, the Repurchase
Price therefor shall be deposited by the
Servicer in the Collection Account of
the related Servicer pursuant to Section
3.10 on or before the Distribution
Account Deposit Date for the Distribution
Date following the Prepayment Period
during which the Depositor or such
Responsible Party, as applicable, repurchased
such Mortgage Loan and upon such deposit of
the Repurchase Price and receipt of
a Request for Release in the form of
Exhibit J hereto, the Trustee shall release
the related Custodial File held for the
benefit of the Certificateholders to
such Person as directed by the applicable
Servicer, and the Trustee shall
execute and deliver at such Person's
direction such instruments of transfer or
assignment prepared by such Person, in each
case without recourse, as shall be
necessary to transfer title from the
Trustee.
(n) In
addition to any repurchase or substitution obligation by any
Responsible Party under this Agreement,
each Responsible Party shall indemnify
the Depositor and its Affiliates, the
Servicers, the Purchaser, the Trustee and
the Trust for any breach of any
representation and warranty of such Responsible
Party set forth in this Agreement, in
accordance with the indemnification
provisions relating to breaches of
representations and warranties (including
without limitation, the representations and
warranties set forth in paragraph
(aaa) of Schedule V, paragraph (46) of
Schedule VI, paragraph (50) of Schedule
VII to this Agreement and paragraph (50) of
Schedule VIII to this Agreement) and
defective Mortgage Loans set forth in the
Accredited Purchase Agreement, First
NLC Purchase Agreement or the MILA Purchase
Agreement, as applicable, as if such
indemnification provisions were set forth
herein for the benefit of the
Depositor and its Affiliates, the
Servicers, the Purchaser, the Trustee and the
Trust. Each of Meritage and Wilmington
Finance is obligated to make certain
indemnification payments for material
breaches of representations and warranties
as further set forth in the Meritage
Agreements and the Wilmington Finance
Agreements, as applicable.
(o) It is
understood and agreed by the parties hereto that the
obligation of the Depositor, any
Responsible Party under this Agreement,
Meritage under the Meritage Agreements, or
Wilmington Finance under the
Wilmington Finance Agreements, to cure,
repurchase or substitute any Mortgage
Loan as to which a breach of a
representation and warranty has occurred and is
continuing, together with any related
indemnification obligations set forth
therein or herein, shall constitute the
sole remedies against such Persons
respecting such breach available to
Certificateholders, the Depositor (if
applicable) or the Trustee on their
behalf.
(p) Upon discovery by any of the parties hereto of a breach of
a
representation or warranty made by Meritage
or Wilmington Finance pursuant to
the Meritage Agreements or the Wilmington
Finance Agreements, as applicable, the
party discovering such breach shall give
prompt written notice thereof to the
other parties to this Agreement and
Meritage or Wilmington Finance, as
applicable. The Trustee shall take such
action, with the Depositor's consent,
with respect to such breach under the
Meritage Agreements or Wilmington Finance
Agreements, as the case may be, as may be
necessary or appropriate to enforce
the rights of the Trust with respect
thereto.
The provisions of this Section 2.03 shall survive delivery of
the
respective Custodial Files to the Trustee
for the benefit of the
Certificateholders.
Section 2.04 Execution and Delivery of Certificates. The
Trustee
acknowledges the transfer and assignment to
it of the Trust Fund and,
concurrently with such transfer and
assignment, has executed and delivered to or
upon the order of the Depositor, the
Certificates in authorized denominations
evidencing directly or indirectly the
entire ownership of the Trust Fund. The
Trustee agrees to hold the Trust Fund and
exercise the rights referred to above
for the benefit of all present and future
Holders of the Certificates.
Section 2.05 REMIC Matters. The Preliminary Statement sets forth
the
designations for federal income tax
purposes of all interests created hereby.
The "Startup Day" for purposes of the REMIC
Provisions shall be the Closing
Date. The "latest possible maturity date"
is the Distribution Date occurring in
May 2035, which is the Distribution Date in
the month following the month in
which the latest maturity date of any
Mortgage Loan occurs.
Section 2.06 Representations and Warranties of the Depositor.
The
Depositor hereby represents, warrants and
covenants to the Trustee and the
Servicers that as of the date of this
Agreement or as of such date specifically
provided herein:
(a) The Depositor is a corporation duly organized, validly
existing
and in good standing under the laws of the
State of Delaware;
(b) The Depositor has the corporate power and authority to
convey
the Mortgage Loans and to execute, deliver
and perform, and to enter into and
consummate the transactions contemplated
by, this Agreement;
(c) This Agreement has been duly and validly authorized,
executed
and delivered by the Depositor, all
requisite corporate action having been
taken, and, assuming the due authorization,
execution and delivery hereof by the
other parties hereto, constitutes or will
constitute the legal, valid and
binding agreement of the Depositor,
enforceable against the Depositor in
accordance with its terms, except as such
enforcement may be limited by
bankruptcy, insolvency, reorganization,
moratorium or other similar laws
relating to or affecting the rights of
creditors generally, and by general
equity principles (regardless of whether
such enforcement is considered in a
proceeding in equity or at law);
(d) No consent, approval, authorization or order of or
registration
or filing with, or notice to, any
governmental authority or court is required
for the execution, delivery and performance
of or compliance by the Depositor
with this Agreement or the consummation by
the Depositor of any of the
transactions contemplated hereby, except as
have been made on or prior to the
Closing Date;
(e) None of the execution and delivery of this Agreement, the
consummation of the transactions
contemplated hereby or thereby, or the
fulfillment of or compliance with the terms
and conditions of this Agreement,
(i) conflicts or will conflict with or
results or will result in a breach of, or
constitutes or will constitute a default or
results or will result in an
acceleration under (A) the charter or
bylaws of the Depositor, or (B) of any
term, condition or provision of any
material indenture, deed of trust, contract
or other agreement or instrument to which
the Depositor or any of its
subsidiaries is a party or by which it or
any of its subsidiaries is bound; (ii)
results or will result in a violation of
any law, rule, regulation, order,
judgment or decree applicable to the
Depositor of any court or governmental
authority having jurisdiction over the
Depositor or its subsidiaries; or (iii)
results in the creation or imposition of
any lien, charge or encumbrance which
would have a material adverse effect upon
the Mortgage Loans or any documents or
instruments evidencing or securing the
Mortgage Loans;
(f) There are no actions, suits or proceedings before or against
or
investigations of, the Depositor pending,
or to the knowledge of the Depositor,
threatened, before any court,
administrative agency or other tribunal, and no
notice of any such action, which, in the
Depositor's reasonable judgment, might
materially and adversely affect the
performance by the Depositor of its
obligations under this Agreement, or the
validity or enforceability of this
Agreement;
(g) The Depositor is not in default with respect to any order
or
decree of any court or any order,
regulation or demand of any federal, state,
municipal or governmental agency that may
materially and adversely affect its
performance hereunder; and
(h) Immediately prior to the transfer and assignment by the
Depositor to the Trustee on the Closing
Date, the Depositor had good title to,
and was the sole owner of each Mortgage
Loan, free of any interest of any other
Person, and the Depositor has transferred
all right, title and interest in each
Mortgage Loan to the Trustee. The transfer
of the Mortgage Note and the Mortgage
as and in the manner contemplated by this
Agreement is sufficient either (i)
fully to transfer to the Trustee, for the
benefit of the Certificateholders, all
right, title, and interest of the Depositor
thereto as note holder and mortgagee
or (ii) to grant to the Trustee, for the
benefit of the Certificateholders, the
security interest referred to in Section
10.04.
It is understood and agreed that the representations, warranties
and
covenants set forth in this Section 2.06
shall survive delivery of the
respective Custodial Files to the Trustee
and shall inure to the benefit of the
Trustee.
<PAGE>
ARTICLE III
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
Section 3.01 Servicers to Service Mortgage Loans. (a) For and
on
behalf of the Certificateholders, the
Servicers shall service and administer the
Mortgage Loans in accordance with the terms
of this Agreement and the respective
Mortgage Loans and, to the extent
consistent with such terms, in the same manner
in which it services and administers
similar mortgage loans for its own
portfolio, giving due consideration to
customary and usual standards of practice
of mortgage lenders and loan servicers
administering similar mortgage loans but
without regard to:
(i) any relationship that such Servicer, any Subservicer or any
Affiliate
of such Servicer or any Subservicer may have with the related
Mortgagor;
(ii) the ownership or non-ownership of any Certificate by such
Servicer
or any Affiliate of such Servicer;
(iii) such Servicer's obligation to make P&I Advances or
Servicing
Advances;
or
(iv) such Servicer's or any Subservicer's right to receive
compensation for its services hereunder or with respect to any
particular
transaction.
To the extent consistent with the foregoing, each Servicer
shall
seek to maximize the timely and complete
recovery of principal and interest on
the Mortgage Notes. Subject only to the
above-described servicing standards and
the terms of this Agreement and of the
respective Mortgage Loans, each Servicer
shall have full power and authority, acting
alone or through Subservicers as
provided in Section 3.02, to do or cause to
be done any and all things in
connection with such servicing and
administration which it may deem necessary or
desirable. Without limiting the generality
of the foregoing, each Servicer in
its own name or in the name of a
Subservicer is hereby authorized and empowered
by the Trustee when the applicable Servicer
believes it appropriate in its best
judgment in accordance with Accepted
Servicing Practices, to execute and deliver
any and all instruments of satisfaction or
cancellation, or of partial or full
release or discharge, and all other
comparable instruments, with respect to the
Mortgage Loans and the Mortgaged Properties
and to institute foreclosure
proceedings or obtain a deed-in-lieu of
foreclosure so as to convert the
ownership of such properties, and to hold
or cause to be held title to such
properties, on behalf of the Trustee. Each
Servicer shall service and administer
the Mortgage Loans in accordance with
applicable state and federal law and shall
provide to the Mortgagors any reports
required to be provided to them thereby.
Each Servicer covenants that its computer
and other systems used in servicing
the Mortgage Loans operate in a manner such
that the Servicer can service the
Mortgage Loans in accordance with the terms
of this Pooling and Servicing
Agreement. Each Servicer shall also comply
in the performance of this Agreement
with all reasonable rules and requirements
of each insurer under any standard
hazard insurance policy. Subject to Section
3.16, the Trustee shall execute, at
the written request of a Servicer, and
furnish to such Servicer and any
Subservicer such documents provided to the
Trustee as are necessary or
appropriate to enable such Servicer or any
Subservicer to carry out its
servicing and administrative duties
hereunder, and the Trustee hereby grants to
each Servicer, and this Agreement shall
constitute, a power of attorney to carry
out such duties, including a power of
attorney in the form of Exhibit O hereto
to take title to Mortgaged Properties after
foreclosure in the name of and on
behalf of the Trustee. The Trustee shall
execute a separate power of attorney in
favor of each Servicer for the purposes
described herein to the extent necessary
or desirable to enable each Servicer to
perform its duties hereunder. The
Trustee shall not be liable for the actions
of any Servicer or any Subservicers
under such powers of attorney.
Notwithstanding anything contained herein to the
contrary, no Servicer or Subservicer shall
without the Trustee's consent: (i)
initiate any action, suit or proceeding
solely under the Trustee's name without
indicating such Servicer's or
Subservicer's, as applicable, representative
capacity, or (ii) take any action with the
intent to, or which actually does
cause, the Trustee to be registered to do
business in any state.
(b) Subject to Section 3.09(b), in accordance with the standards
of
the preceding paragraph, each Servicer
shall advance or cause to be advanced
funds as necessary for the purpose of
effecting the timely payment of taxes and
assessments on the Mortgaged Properties,
which advances shall be Servicing
Advances reimbursable in the first instance
from related collections from the
Mortgagors pursuant to Section 3.09(b), and
further as provided in Section 3.11.
Any cost incurred by the Servicer or by
Subservicers in effecting the timely
payment of taxes and assessments on a
Mortgaged Property shall not be added to
the unpaid principal balance of the related
Mortgage Loan, notwithstanding that
the terms of such Mortgage Loan so
permit.
(c) Notwithstanding anything in this Agreement to the contrary,
a
Servicer may not make any future advances
with respect to a Mortgage Loan
(except as provided in Section 4.01) and
none of the Servicers shall (i) permit
any modification with respect to any
Mortgage Loan that would change the
Mortgage Rate, reduce or increase the
principal balance (except for reductions
resulting from actual payments of
principal) or change the final maturity date
on such Mortgage Loan (except for a
reduction of interest payments resulting
from the application of the Servicemembers
Civil Relief Act or any similar state
statutes) or (ii) permit any modification,
waiver or amendment of any term of
any Mortgage Loan that would both (A)
effect an exchange or reissuance of such
Mortgage Loan under Section 1001 of the
Code (or final, temporary or proposed
Treasury regulations promulgated
thereunder) and (B) cause either the Upper Tier
REMIC or the Lower Tier REMIC to fail to
qualify as a REMIC under the Code or
the imposition of any tax on "prohibited
transactions" or "contributions after
the startup date" under the REMIC
Provisions, or (iii) except as provided in
Section 3.07(a), waive any Prepayment
Charges.
(d) Each Servicer may delegate its responsibilities under this
Agreement; provided, however, that no such
delegation shall release that
Servicer from the responsibilities or
liabilities arising under this Agreement.
(e) In the event that the Mortgage Loan Documents relating to
any
Mortgage Loan contain provisions requiring
the related Mortgagor to submit to
binding arbitration any disputes arising in
connection with such Mortgage Loan,
the applicable Servicer shall be entitled
to waive any such provisions on behalf
of the Trust and to send written notice of
such waiver to the related Mortgagor,
although the Mortgagor may still require
arbitration of such disputes at its
option.
Section 3.02 Subservicing Agreements between a Servicer and
Subservicers. (a) Each Servicer may enter
into subservicing agreements with
subservicers (each, a "Subservicer"), for
the servicing and administration of
the Mortgage Loans ("Subservicing
Agreements"). The applicable Servicer shall,
within a reasonable period of time, give
notice to the Trustee of any such
Subservicing Agreement. The Trustee shall
not be required to review or consent
to such Subservicing Agreements and shall
have no liability in connection
therewith.
(b) Each Subservicer shall be (i) authorized to transact business
in
the state or states in which the related
Mortgaged Properties it is to service
are situated, if and to the extent required
by applicable law to enable the
Subservicer to perform its obligations
hereunder and under the Subservicing
Agreement, (ii) an institution approved as
a mortgage loan originator by the
Federal Housing Administration or an
institution that has deposit accounts
insured by the FDIC and (iii) a Freddie Mac
or Fannie Mae approved mortgage
servicer. Each Subservicing Agreement must
impose on the Subservicer
requirements conforming to the provisions
set forth in Section 3.08 and provide
for servicing of the Mortgage Loans
consistent with the terms of this Agreement.
Each Servicer will examine each
Subservicing Agreement to which it is a party
and will be familiar with the terms
thereof. The terms of any Subservicing
Agreement will not be inconsistent with any
of the provisions of this Agreement.
Each Servicer and the respective
Subservicers may enter into and make amendments
to the Subservicing Agreements or enter
into different forms of Subservicing
Agreements; provided, however, that any
such amendments or different forms shall
be consistent with and not violate the
provisions of this Agreement, and that no
such amendment or different form shall be
made or entered into which could be
reasonably expected to be materially
adverse to the interests of the Trustee,
without the consent of the Trustee. Any
variation without the consent of the
Trustee from the provisions set forth in
Section 3.08 relating to insurance or
priority requirements of Subservicing
Accounts, or credits and charges to the
Subservicing Accounts or the timing and
amount of remittances by the
Subservicers to such Servicer, are
conclusively deemed to be inconsistent with
this Agreement and therefore prohibited.
Each Servicer shall deliver to the
Trustee and the Depositor copies of all
Subservicing Agreements, and any
amendments or modifications thereof,
promptly upon such Servicer's execution and
delivery of such instruments.
(c) As part of its servicing activities hereunder, each
Servicer
(except as otherwise provided in the last
sentence of this paragraph), for the
benefit of the Trustee, shall enforce the
obligations of each Subservicer under
the related Subservicing Agreement to which
such Servicer is a party, including,
without limitation, any obligation to make
advances in respect of delinquent
payments as required by a Subservicing
Agreement. Such enforcement, including,
without limitation, the legal prosecution
of claims, termination of Subservicing
Agreements, and the pursuit of other
appropriate remedies, shall be in such form
and carried out to such an extent and at
such time as such Servicer, in its good
faith business judgment, would require were
it the owner of the related Mortgage
Loans. Each Servicer shall pay the costs of
such enforcement at its own expense,
and shall be reimbursed therefor only (i)
from a general recovery resulting from
such enforcement, to the extent, if any,
that such recovery exceeds all amounts
due in respect of the related Mortgage
Loans or (ii) from a specific recovery of
costs, expenses or attorneys' fees against
the party against whom such
enforcement is directed.
Section 3.03 Successor Subservicers. Each Servicer shall be
entitled
to terminate any Subservicing Agreement to
which such Servicer is a party and
the rights and obligations of any
Subservicer pursuant to any such Subservicing
Agreement in accordance with the terms and
conditions of such Subservicing
Agreement. In the event of termination of
any Subservicer, all servicing
obligations of such Subservicer shall be
assumed simultaneously by the
applicable Servicer party to the related
Subservicing Agreement without any act
or deed on the part of such Subservicer or
such Servicer, and such Servicer
either shall service directly the related
Mortgage Loans or shall enter into a
Subservicing Agreement with a successor
Subservicer which qualifies under
Section 3.02.
Any Subservicing Agreement shall include the provision that
such
agreement may be immediately terminated by
the Depositor or the Trustee without
fee, in accordance with the terms of this
Agreement, in the event that the
Servicer party to the related Subservicing
Agreement shall, for any reason, no
longer be a Servicer (including termination
due to an Event of Default).
Section 3.04 Liability of the Servicers. Notwithstanding any
Subservicing Agreement, any of the
provisions of this Agreement relating to
agreements or arrangements between a
Servicer and a Subservicer or reference to
actions taken through a Subservicer or
otherwise, such Servicer shall remain
obligated and primarily liable to the
Trustee for the servicing and
administering of the Mortgage Loans in
accordance with the provisions of Section
3.01 without diminution of such obligation
or liability by virtue of such
Subservicing Agreements or arrangements or
by virtue of indemnification from the
Subservicer and to the same extent and
under the same terms and conditions as if
such Servicer alone were servicing and
administering such Mortgage Loans. Each
Servicer shall be entitled to enter into
any agreement with a Subservicer for
indemnification of such Servicer by such
Subservicer and nothing contained in
this Agreement shall be deemed to limit or
modify such indemnification.
Section 3.05 No Contractual Relationship between Subservicers
and
the Trustee. Any Subservicing Agreement
that may be entered into and any
transactions or services relating to the
Mortgage Loans involving a Subservicer
in its capacity as such shall be deemed to
be between the Subservicer and the
related Servicer alone, and the Trustee (or
any successor to such Servicer)
shall not be deemed a party thereto and
shall have no claims, rights,
obligations, duties or liabilities with
respect to the Subservicer except as set
forth in Section 3.06. Each Servicer shall
be solely liable for all fees owed by
it to any Subservicer, irrespective of
whether such Servicer's compensation
pursuant to this Agreement is sufficient to
pay such fees.
Section 3.06 Assumption or Termination of Subservicing Agreements
by
Trustee. In the event a Servicer at any
time shall for any reason no longer be a
Servicer (including by reason of the
occurrence of an Event of Default), the
Trustee, or its designee, or the successor
Servicer if the successor is not the
Trustee, shall thereupon assume all of the
rights and obligations of such
Servicer under each Subservicing Agreement
that such Servicer may have entered
into, with copies thereof provided to the
Trustee, or the successor Servicer if
the successor is not the Trustee, prior to
the Trustee, or the successor
Servicer if the successor is not the
Trustee, assuming such rights and
obligations, unless the Trustee elects to
terminate any Subservicing Agreement
in accordance with its terms as provided in
Section 3.03.
Upon such assumption, the Trustee, its designee or the
successor
Servicer shall be deemed, subject to
Section 3.03, to have assumed all of such
Servicer's interest therein and to have
replaced such Servicer as a party to
each Subservicing Agreement to which the
predecessor Servicer was a party to the
same extent as if each Subservicing
Agreement had been assigned to the assuming
party, except that (i) such Servicer shall
not thereby be relieved of any
liability or obligations under any such
Subservicing Agreement that arose before
it ceased to be a Servicer and (ii) none of
the Depositor, the Trustee, their
designees or any successor to such Servicer
shall be deemed to have assumed any
liability or obligation of such Servicer
that arose before it ceased to be a
Servicer.
Such Servicer at its expense shall, upon request of the Trustee,
its
designee or the successor Servicer deliver
to the assuming party all documents
and records relating to each Subservicing
Agreement to which it is a party and
the Mortgage Loans then being serviced by
it and an accounting of amounts
collected and held by or on behalf of it,
and otherwise use its best efforts to
effect the orderly and efficient transfer
of the Subservicing Agreements to the
assuming party.
Section 3.07 Collection of Certain Mortgage Loan Payments. (a)
Each
Servicer shall make reasonable efforts to
collect all payments called for under
the terms and provisions of the Mortgage
Loans, and shall, to the extent such
procedures shall be consistent with this
Agreement and the terms and provisions
of any applicable Insurance Policies,
follow such collection procedures as it
would follow with respect to mortgage loans
comparable to the Mortgage Loans and
held for its own account. Consistent with
the foregoing and Accepted Servicing
Practices, each Servicer may (i) waive any
late payment charge or, if
applicable, any penalty interest, or (ii)
extend the due dates for the Scheduled
Payments due on a Mortgage Note for a
period of not greater than 180 days;
provided that any extension pursuant to
clause (ii) above shall not affect the
amortization schedule of any Mortgage Loan
for purposes of any computation
hereunder, except as provided below. In the
event of any such arrangement
pursuant to clause (ii) above, the Servicer
shall make timely advances on such
Mortgage Loan during such extension
pursuant to Section 4.01 and in accordance
with the amortization schedule of such
Mortgage Loan without modification
thereof by reason of such arrangements,
subject to Section 4.01(d) pursuant to
which the Servicer shall not be required to
make any such advances that are
Nonrecoverable P&I Advances.
Notwithstanding the foregoing, the Servicer may
waive, in whole or in part, a Prepayment
Charge only under the following
circumstances: (i) such waiver relates to a
default or a reasonably foreseeable
default and would, in the reasonable
judgment of the Servicer, maximize recovery
of total proceeds taking into account the
value of such Prepayment Charge and
the related Mortgage Loan, (ii) such
Prepayment Charge is not permitted to be
collected by applicable federal, state or
local law or regulation or (iii) the
collection of such Prepayment Charge would
be considered "predatory" pursuant to
written guidance published or issued by any
applicable federal, state or local
regulatory authority acting in its official
capacity and having jurisdiction
over such matters. If a Prepayment Charge
is waived other than as permitted by
the prior sentence, then the applicable
Servicer is required to pay the amount
of such waived Prepayment Charge, for the
benefit of the Holders of the Class P
Certificates, by depositing such amount
into the related Collection Account
together with and at the time that the
amount prepaid on the related Mortgage
Loan is required to be deposited into the
Collection Account; provided, however,
that the applicable Servicer shall not have
an obligation to pay the amount of
any uncollected Prepayment Charge if the
failure to collect such amount is the
direct result of inaccurate or incomplete
information on the Mortgage Loan
Schedule in effect at such time.
(b) (i) The Trustee shall establish and maintain the Excess
Reserve
Fund Account, on behalf of the Class X
Certificateholders, to receive any Basis
Risk Payment and any Interest Rate Cap
Payment and to secure their limited
recourse obligation to pay to the LIBOR
Certificateholders Basis Risk
CarryForward Amounts.
(ii) On each Distribution Date, the Trustee shall deposit the
amount
of any
Basis Risk Payment and any Interest Rate Cap Payment for such
date
into the
Excess Reserve Fund Account.
(c) (i) On each Distribution Date on which there exists a Basis
Risk
CarryForward Amount on any Class of
Certificates, the Trustee shall (1) withdraw
from the Distribution Account and deposit
in the Excess Reserve Fund Account, as
set forth in Section 4.02(a)(iii)(S), the
lesser of (x) the Class X
Distributable Amount (without regard to the
reduction in the definition thereof
with respect to the Basis Risk Payment) (to
the extent remaining after the
distributions specified in Sections
4.02(a)(iii)(A)-(R)) and (y) the aggregate
Basis Risk CarryForward Amounts for such
Distribution Date and (2) withdraw from
the Excess Reserve Fund Account amounts
necessary to pay to such Class or
Classes of Certificates the Basis Risk
CarryForward Amount. Such payments shall
be allocated to those Classes on a pro rata
basis based upon the amount of Basis
Risk CarryForward Amount owed to each such
Class and shall be paid in the
priority set forth in Sections
4.02(a)(iii)(T)-(U).
(ii) The Trustee shall account for the Excess Reserve Fund
Account
as an
asset of a grantor trust under subpart E, Part I of the subchapter
J
of the
Code and not an asset of any REMIC created pursuant to this
Agreement. The
beneficial owners of the Excess Reserve Fund Account are
the Class
X Certificateholders. For all federal tax purposes, amounts
transferred by the Upper Tier REMIC to the Excess Reserve Fund
Account
shall be
treated as distributions by the Trustee to the Class X
Certificateholders.
(iii) Any Basis Risk CarryForward Amounts paid by the Trustee to
the
LIBOR
Certificateholders shall be accounted for by the Trustee as
amounts
paid first
to the Holders of the Class X Certificates and then to the
respective
Class or Classes of LIBOR Certificates. In addition, the
Trustee
shall account for the LIBOR Certificateholders' rights to
receive
payments
of Basis Risk CarryForward Amounts as rights in a limited
recourse
interest rate cap contract written by the Class X
Certificateholders in favor of the LIBOR Certificateholders.
(iv) Notwithstanding any provision contained in this Agreement,
the
Trustee
shall not be required to make any payments from the Excess
Reserve
Fund
Account except as expressly set forth in this Section 3.07(c)
and
Sections
4.02(a)(iii)(T)-(V).
(d) The Trustee shall establish and maintain the Distribution
Account on behalf of the
Certificateholders. The Depositor shall cause the
Closing Date Deposit Amount to be deposited
into the Distribution Account on the
Closing Date. The Trustee shall, promptly
upon receipt, deposit in the
Distribution Account and retain therein the
following:
(i) the aggregate amount remitted by the Servicers to the
Trustee
pursuant
to Section 3.11;
(ii) any amount deposited by the Servicers pursuant to Section
3.12(b) in
connection with any losses on Permitted Investments; and
(iii) any other amounts deposited hereunder which are required to
be
deposited
in the Distribution Account.
In the event that any Servicer shall remit any amount not
required
to be remitted, it may at any time direct
the Trustee in writing to withdraw
such amount from the Distribution Account,
any provision herein to the contrary
notwithstanding. Such direction may be
accomplished by delivering notice to the
Trustee which describes the amounts
deposited in error in the Distribution
Account. All funds deposited in the
Distribution Account shall be held by the
Trustee in trust for the Certificateholders
until disbursed in accordance with
this Agreement or withdrawn in accordance
with Section 4.02.
(e)
The Trustee may invest the funds in the Distribution Account,
in
one or more Permitted Investments, in
accordance with Section 3.12. Each
Servicer shall direct the Trustee to
withdraw from the Distribution Account and
to remit to such Servicer no less than
monthly, all income and gain realized
from the investment of the portion of funds
deposited in the Distribution
Account by such Servicer (except during the
Trustee Float Period). The Trustee
may withdraw from the Distribution Account
any income or gain earned from the
investment of funds deposited therein
during the Trustee Float Period for its
own benefit.
(f) Each Servicer shall give notice to the Trustee of any
proposed
change of the location of the related
Collection Account within a reasonable
period of time prior to any change thereof
and the Trustee shall forward such
notice to the Rating Agencies and the
Depositor.
(g) In order to comply with its duties under the USA Patriot Act
of
2001, the Trustee shall obtain and verify
certain information and documentation
from the other parties to this Agreement
including, but not limited to, each
such party's name, address, and other
identifying information.
Section 3.08 Subservicing Accounts. In those cases where a
Subservicer is servicing a Mortgage Loan
pursuant to a Subservicing Agreement,
the Subservicer will be required to
establish and maintain one or more accounts
(collectively, the "Subservicing Account").
The Subservicing Account shall be an
Eligible Account and shall otherwise be
acceptable to the related Servicer. The
Subservicer shall deposit in the clearing
account (which account must be an
Eligible Account) in which it customarily
deposits payments and collections on
mortgage loans in connection with its
mortgage loan servicing activities on a
daily basis, and in no event more than one
Business Day after the Subservicer's
receipt thereof, all proceeds of Mortgage
Loans received by the Subservicer less
its servicing compensation to the extent
permitted by the Subservicing
Agreement, and shall thereafter deposit
such amounts in the Subservicing
Account, in no event more than two Business
Days after the deposit of such funds
into the clearing account. The Subservicer
shall thereafter deposit such
proceeds in the Collection Account of the
related Servicer or remit such
proceeds to the related Servicer for
deposit in the Collection Account of the
related Servicer not later than two
Business Days after the deposit of such
amounts in the Subservicing Account. For
purposes of this Agreement, such
Servicer shall be deemed to have received
payments on the Mortgage Loans when
the Subservicer receives such payments.
Section 3.09 Collection of Taxes, Assessments and Similar
Items;
Escrow Accounts. (a) Each Servicer shall
enforce the obligations under each
paid-in-full, life-of-the-loan tax service
contract in effect with respect to
each First Lien Mortgage Loan (each, a "Tax
Service Contract") serviced by such
Servicer. Each Tax Service Contract shall
be assigned to the Trustee, or a
successor Servicer at the applicable
Servicer's expense in the event that the
Servicer is terminated as Servicer of the
related Mortgage Loan.
(b) To the extent that the services described in this paragraph
(b)
are not otherwise provided pursuant to the
Tax Service Contracts described in
paragraph (a) above, each Servicer
undertakes to perform such functions with
respect to the Mortgage Loans serviced by
such Servicer. To the extent the
related Mortgage provides for Escrow
Payments, the related Servicer shall
establish and maintain, or cause to be
established and maintained, one or more
accounts (the "Escrow Accounts"), which
shall be Eligible Accounts. Each
Servicer shall deposit in the clearing
account (which account must be an
Eligible Account) in which it customarily
deposits payments and collections on
mortgage loans in connection with its
mortgage loan servicing activities on a
daily basis, and in no event more than one
Business Day after the Servicer's
receipt thereof, all collections from the
Mortgagors (or related advances from
Subservicers) for the payment of taxes,
assessments, hazard insurance premiums
and comparable items for the account of the
Mortgagors ("Escrow Payments")
collected on account of the Mortgage Loans
and shall thereafter deposit such
Escrow Payments in the Escrow Accounts, in
no event more than two Business Days
after the deposit of such funds in the
clearing account, for the purpose of
effecting the payment of any such items as
required under the terms of this
Agreement. Withdrawals of amounts from an
Escrow Account may be made only to (i)
effect payment of taxes, assessments,
hazard insurance premiums, and comparable
items; (ii) reimburse such Servicer (or a
Subservicer to the extent provided in
the related Subservicing Agreement) out of
related collections for any advances
made pursuant to Section 3.01 (with respect
to taxes and assessments) and
Section 3.13 (with respect to hazard
insurance); (iii) refund to Mortgagors any
sums as may be determined to be overages;
(iv) pay interest, if required and as
described below, to Mortgagors on balances
in the Escrow Account; (v) clear and
terminate the Escrow Account at the
termination of such Servicer's obligations
and responsibilities in respect of the
Mortgage Loans under this Agreement or
(vi) recover amounts deposited in error. As
part of its servicing duties, such
Servicer or Subservicers shall pay to the
Mortgagors interest on funds in Escrow
Accounts, to the extent required by law
and, to the extent that interest earned
on funds in the Escrow Accounts is
insufficient, to pay such interest from its
or their own funds, without any
reimbursement therefor. To the extent that a
Mortgage does not provide for Escrow
Payments, the applicable Servicer shall
determine whether any such payments are
made by the Mortgagor in a manner and at
a time that avoids the loss of the
Mortgaged Property due to a tax sale or the
foreclosure of a tax lien. The applicable
Servicer assumes full responsibility
for the payment of all such bills within
such time and shall effect payments of
all such bills irrespective of the
Mortgagor's faithful performance in the
payment of same or the making of the Escrow
Payments and shall make advances
from its own funds to effect such payments;
provided, however, that such
advances are deemed to be Servicing
Advances.
Section 3.10 Collection Accounts. (a) On behalf of the Trustee,
each
Servicer shall establish and maintain, or
cause to be established and
maintained, one or more separate Eligible
Accounts (each such account or
accounts, a "Collection Account"), held in
trust for the benefit of the Trustee.
On behalf of the Trustee, each Servicer
shall deposit or cause to be deposited
in the clearing account (which account must
be an Eligible Account) in which it
customarily deposits payments and
collections on mortgage loans in connection
with its mortgage loan servicing activities
on a daily basis, and in no event
more than one Business Day after such
Servicer's receipt thereof, and shall
thereafter deposit in the related
Collection Account, in no event more than two
Business Days after the deposit of such
funds into the clearing account, as and
when received or as otherwise required
hereunder, the following payments and
collections received or made by it
subsequent to the Cut-off Date (other than in
respect of principal or interest on the
related Mortgage Loans due on or before
the Cut-off Date), or payments (other than
Principal Prepayments) received by it
on or prior to the related Cut-off Date but
allocable to a Due Period subsequent
thereto:
(i) all payments on account of principal, including Principal
Prepayments, on the Mortgage Loans;
(ii) all payments on account of interest (net of the related
Servicing
Fee) on each Mortgage Loan;
(iii) all Insurance Proceeds and Condemnation Proceeds to the
extent
such
Insurance Proceeds and Condemnation Proceeds are not to be applied
to
the
restoration of the related Mortgaged Property or released to
the
related
Mortgagor in accordance with the express requirements of law or
in
accordance
with Accepted Servicing Practices and Liquidation Proceeds;
(iv) any amounts required to be deposited pursuant to Section
3.12
in
connection with any losses realized on Permitted Investments
with
respect to
funds held in the related Collection Account;
(v) any amounts required to be deposited by such Servicer
pursuant
to the
second paragraph of Section 3.13(a) in respect of any blanket
policy
deductibles;
(vi) all proceeds of any Mortgage Loan repurchased or purchased
in
accordance
with this Agreement; and
(vii) all Prepayment Charges collected or paid (pursuant to
Section
3.07(a))
by such Servicer.
The foregoing requirements for deposit in the Collection
Accounts
shall be exclusive, it being understood and
agreed that, without limiting the
generality of the foregoing, payments in
the nature of late payment charges, NSF
fees, reconveyance fees, assumption fees
and other similar fees and charges need
not be deposited by each Servicer in the
related Collection Account and shall,
upon collection, belong to the applicable
Servicer as additional compensation
for its servicing activities. In the event
a Servicer shall deposit in the
related Collection Account any amount not
required to be deposited therein, it
may at any time withdraw such amount from
its Collection Account, any provision
herein to the contrary notwithstanding.
(b) Funds in the Collection Accounts may be invested in
Permitted
Investments in accordance with the
provisions set forth in Section 3.12. Each
Servicer shall give notice to the Trustee
of the location of the related
Collection Account maintained by it when
established and prior to any change
thereof in accordance with Section
3.07(f).
Section 3.11 Withdrawals from the Collection Accounts. (a) Each
Servicer shall, from time to time, make
withdrawals from the related Collection
Account for any of the following purposes
or as described in Section 4.01:
(i) on or prior to each Remittance Date, to remit to the Trustee
(A)
the
Trustee Fee with respect to such Distribution Date and (B) all
Available
Funds in respect of the related Distribution Date together with
all
amounts representing Prepayment Charges from the Mortgage Loans
received
during the related Prepayment Period;
(ii) to reimburse such Servicer for P&I Advances, but only to
the
extent of
amounts received which represent Late Collections (net of the
related
Servicing Fees) of Scheduled Payments on Mortgage Loans with
respect to
which such P&I Advances were made in accordance with the
provisions
of Section 4.01 (such Servicer's right for recovery or
reimbursement has priority over the Trust);
(iii) to pay such Servicer or any Subservicer (a) any unpaid
Servicing
Fees or (b) any unreimbursed Servicing Advances with respect to
each
Mortgage Loan serviced by such Servicer or Subservicer, but only
to
the extent
of any Late Collections, Liquidation Proceeds, Condemnation
Proceeds,
Insurance Proceeds or other amounts as may be collected by the
Servicer
from a Mortgagor, or otherwise received with respect to such
Mortgage
Loan (or the related REO Property) (such Servicer's right for
recovery
or reimbursement has priority over the Trust);
(iv) to pay to such Servicer as servicing compensation (in
addition
to the
Servicing Fee) on the Remittance Date any interest or
investment
income
earned on funds deposited in its Collection Account;
(v) to pay to the applicable Responsible Party or the Depositor,
as
applicable, with respect to each Mortgage Loan that has previously
been
repurchased or replaced pursuant to this Agreement, all amounts
received
thereon
subsequent to the date of purchase or substitution, as further
described herein;
(vi) to reimburse such Servicer for (A) any P&I Advance or
Servicing
Advance
previously made which such Servicer has determined to be a
Nonrecoverable P&I Advance or Nonrecoverable Servicing Advance
in
accordance
with the provisions of Section 4.01 and (B) any unpaid
Servicing
Fees related to any Second Lien Mortgage Loan to the extent not
recoverable from Liquidation Proceeds, Insurance Proceeds or other
amounts
received
with respect to the related Second Lien Mortgage Loan under
Section
3.11(a)(iii) (such Servicer's right for recovery or
reimbursement
has
priority over the Trust);
(vii) to pay, or to reimburse such Servicer for advances in
respect
of,
expenses incurred in connection with any Mortgage Loan serviced
by
such
Servicer pursuant to Section 3.15 (such Servicer's right for
recovery
or
reimbursement has priority over the Trust);
(viii) to reimburse such Servicer or the Depositor for expenses
incurred
by or reimbursable to such Servicer or the Depositor, as the
case
may be,
pursuant to Section 6.03 (such Servicer's right for recovery or
reimbursement has priority over the Trust);
(ix) to reimburse such Servicer or the Trustee, as the case may
be,
for
expenses reasonably incurred in respect of the breach or defect
giving
rise to
the repurchase obligation of any Responsible Party or the
Depositor,
as applicable, that were included in the Repurchase Price of
the
Mortgage Loan, including any expenses arising out of the
enforcement
of the
repurchase obligation, to the extent not otherwise paid pursuant
to
the terms
hereof (such Servicer's right for recovery or reimbursement has
priority
over the Trust);
(x) to withdraw any amounts deposited in the related Collection
Account in
error;
(xi) to withdraw any amounts held in the related Collection
Account
and not
required to be remitted to the Trustee on the Remittance Date
occurring
in the month in which such amounts are deposited into such
Collection
Account, to reimburse such Servicer for unreimbursed P&I
Advances;
(xii) to invest funds in Permitted Investments in accordance
with
Section
3.12; and
(xiii) to clear and terminate the related Collection Account
upon
termination of this Agreement;
(b) Each Servicer shall keep and maintain separate accounting, on
a
Mortgage Loan by Mortgage Loan basis, for
the purpose of justifying any
withdrawal from the related Collection
Account, to the extent held by or on
behalf of it, pursuant to subclauses
(a)(ii), (iii), (v), (vi), (vii), (viii)
and (ix) above. Each Servicer shall provide
written notification (as set forth
in Section 4.01(d)) to the Trustee, on or
prior to the next succeeding
Remittance Date, upon making any
withdrawals from the related Collection Account
pursuant to subclause (a)(vi) above.
Section 3.12 Investment of Funds in the Collection Accounts and
the
Distribution Account. (a) Each Servicer may
invest the funds in the related
Collection Account and the Trustee may (but
is not obligated to) invest funds in
the Distribution Account during the Trustee
Float Period, and, with respect to
the portion of funds in the Distribution
Account deposited by a Servicer, shall
(except during the Trustee Float Period)
invest such funds in the Distribution
Account at the direction of such Servicer
(for purposes of this Section 3.12,
such Accounts are referred to as an
"Investment Account"), in one or more
Permitted Investments bearing interest or
sold at a discount, and maturing,
unless payable on demand no later than the
Business Day immediately preceding
the date on which such funds are required
to be withdrawn from such account
pursuant to this Agreement; provided,
however, that the Trustee shall have no
obligation to invest funds deposited into
the Distribution Account by a Servicer
on the Remittance Date later than 10:00
a.m. (Pacific Standard Time). If no
investment instruction is given in a timely
manner, the Trustee shall hold the
funds in the Distribution Account
uninvested. All such Permitted Investments
shall be held to maturity, unless payable
on demand. Any investment of funds in
an Investment Account (other than
investments made during the Trustee Float
Period) shall be made in the name of the
applicable Servicer. The applicable
Servicer shall be entitled to sole
possession (except with respect to investment
direction of funds and any income and gain
realized on any investment in the
Distribution Account during the Trustee
Float Period) over each such related
investment, and any certificate or other
instrument evidencing any such
investment shall be delivered directly to
the applicable Servicer (with a copy
to the Trustee or its agent if related to
investment of funds in the
Distribution Account not during the Trustee
Float Period), or with respect to
investments during the Trustee Float
Period, the Trustee or its agent, together
with any document of transfer necessary to
transfer title to such investment to
the applicable Servicer, or with respect to
investments during the Trustee Float
Period, the Trustee or its agent. In the
event amounts on deposit in an
Investment Account are at any time invested
in a Permitted Investment payable on
demand, the applicable Servicer, or with
respect to investments during the
Trustee Float Period, the Trustee may:
(x) consistent
with any notice required to be given thereunder,
demand that payment thereon be made on the last day such
Permitted Investment may otherwise mature hereunder in an
amount equal to the lesser of (1) all amounts then payable
thereunder and (2) the amount required to be withdrawn on such
date; and
(y) demand
payment of all amounts due thereunder that such
Permitted Investment would not constitute a Permitted
Investment in respect of funds thereafter on deposit in an
Investment Account.
(b) All income and gain realized from the investment of funds
deposited in the related Collection Account
held by or on behalf of the related
Servicer, shall be for the benefit of such
Servicer and shall be subject to its
withdrawal in the manner set forth in
Section 3.11. Such Servicer shall deposit
in its Collection Account the amount of any
loss of principal incurred in
respect of any such Permitted Investment
made with funds in such accounts
immediately upon realization of such
loss.
(c) All income and gain realized from the investment of the
portion
of funds deposited in the Distribution
Account by a Servicer and held by the
Trustee, shall be for the benefit of such
Servicer (except for any income or
gain realized from the investment of funds
on deposit in the Distribution
Account during the Trustee Float Period,
which shall be for the benefit of the
Trustee) and shall be subject to the
Trustee's withdrawal in the manner set
forth in Section 3.07(e). Each Servicer
shall deposit in the Distribution
Account (except with respect to losses
incurred during the Trustee Float Period)
the amount of any loss of principal
incurred in respect of any such related
Permitted Investment made with funds in
such accounts immediately upon
realization of such loss.
(d) Except as otherwise expressly provided in this Agreement, if
any
default occurs in the making of a payment
due under any Permitted Investment, or
if a default occurs in any other
performance required under any Permitted
Investment, the Trustee shall take such
action as may be appropriate to enforce
such payment or performance, including the
institution and prosecution of
appropriate proceedings.
(e) The Trustee shall not be liable for the amount of any loss
incurred with respect of any investment or
lack of investment of funds held in
any Investment Account or the Distribution
Account (except that if any losses
are incurred from the investment of funds
deposited in the Distribution Account
during the Trustee Float Period, the
Trustee shall be responsible for
reimbursing the Trust for such loss) if
made in accordance with this Section
3.12.
(f) The Trustee or its Affiliates shall be permitted to receive
additional compensation that could be
deemed to be in the Trustee's economic
self-interest for (i) serving as investment
adviser, administrator, shareholder,
servicing agent, custodian or sub-custodian
with respect to certain of the
Permitted Investments, (ii) using
Affiliates to effect transactions in certain
Permitted Investments and (iii) effecting
transactions in certain Permitted
Investments. Such compensation shall not be
considered an amount that is
reimbursable or payable pursuant to this
Agreement.
Section 3.13 Maintenance of Hazard Insurance and Errors and
Omissions and Fidelity Coverage. (a) Each
Servicer shall cause to be maintained
for each Mortgage Loan serviced by such
Servicer fire insurance with extended
coverage on the related Mortgaged Property
in an amount which is at least equal
to the least of (i) the outstanding
principal balance of such Mortgage Loan,
(ii) the amount necessary to fully
compensate for any damage or loss to the
improvements that are a part of such
property on a replacement cost basis and
(iii) the maximum insurable value of the
improvements which are a part of such
Mortgaged Property, in each case in an
amount not less than such amount as is
necessary to avoid the application of any
coinsurance clause contained in the
related hazard insurance policy. Each
Servicer shall also cause to be maintained
fire insurance with extended coverage on
each REO Property serviced by such
Servicer in an amount which is at least
equal to the lesser of (i) the maximum
insurable value of the improvements which
are a part of such property and (ii)
the outstanding principal balance of the
related Mortgage Loan at the time it
became an REO Property, plus accrued
interest at the Mortgage Rate and related
Servicing Advances. Each Servicer will
comply in the performance of this
Agreement with all reasonable rules and
requirements of each insurer under any
such hazard policies. Any amounts to be
collected by any Servicer under any such
policies (other than amounts to be applied
to the restoration or repair of the
property subject to the related Mortgage or
amounts to be released to the
Mortgagor in accordance with the procedures
that such Servicer would follow in
servicing loans held for its own account,
subject to the terms and conditions of
the related Mortgage and Mortgage Note)
shall be deposited in the related
Collection Account, subject to withdrawal
pursuant to Section 3.11. Any cost
incurred by the Servicer in maintaining any
such insurance shall not, for the
purpose of calculating distributions to the
Trustee, be added to the unpaid
principal balance of the related Mortgage
Loan, notwithstanding that the terms
of such Mortgage Loan so permit. It is
understood and agreed that no earthquake
or other additional insurance is to be
required of any Mortgagor other than
pursuant to such applicable laws and
regulations as shall at any time be in
force and as shall require such additional
insurance. If the Mortgaged Property
or REO Property is at any time in an area
identified in the Federal Register by
the Federal Emergency Management Agency as
having special flood hazards and
flood insurance has been made available,
the applicable Servicer will cause to
be maintained a flood insurance policy in
respect thereof. Such flood insurance
shall be in an amount equal to the lesser
of (i) the unpaid principal balance of
the related Mortgage Loan and (ii) the
maximum amount of such insurance
available for the related Mortgaged
Property under the national flood insurance
program (assuming that the area in which
such Mortgaged Property is located is
participating in such program).
In the event that any Servicer shall obtain and maintain a
blanket
policy with an insurer either (i)
acceptable to Fannie Mae or Freddie Mac or
(ii) having a General Policy Rating of A:X
or better from Best's (or such other
rating that is comparable to such rating)
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 two
sentences of this Section 3.13, it
being understood and agreed that such
policy may contain a deductible clause, in
which case the Servicer shall, in the event
that there shall not have been
maintained on the related Mortgaged
Property or REO Property a policy complying
with the first two sentences of this
Section 3.13, and there shall have been one
or more losses which would have been
covered by such policy, deposit to the
related Collection Account from its own
funds the amount not otherwise payable
under the blanket policy because of such
deductible clause. In connection with
its activities as administrator and
servicer of the Mortgage Loans, each
Servicer agrees to prepare and present, on
behalf of itself and the Trustee
claims under any such blanket policy in a
timely fashion in accordance with the
terms of such policy.
(b) Each Servicer shall keep in force during the term of this
Agreement a policy or policies of insurance
covering errors and omissions for
failure in the performance of such
Servicer's obligations under this Agreement,
which policy or policies shall be in such
form and amount that would meet the
requirements of Fannie Mae or Freddie Mac
if it were the purchaser of the
Mortgage Loans, unless such Servicer has
obtained a waiver of such requirements
from Fannie Mae or Freddie Mac. Each
Servicer shall also maintain a fidelity
bond in the form and amount that would meet
the requirements of Fannie Mae or
Freddie Mac, unless the Servicer has
obtained a waiver of such requirements from
Fannie Mae or Freddie Mac. Each Servicer
shall provide the Trustee upon request
with copies of any such insurance policies
and fidelity bond. Each Servicer
shall be deemed to have complied with this
provision if an Affiliate of the
Servicer has such errors and omissions and
fidelity bond coverage and, by the
terms of such insurance policy or fidelity
bond, the coverage afforded
thereunder extends to such Servicer. Any
such errors and omissions policy and
fidelity bond shall by its terms not be
cancelable without thirty days' prior
written notice to the Trustee. Each
Servicer shall also cause each Subservicer
to maintain a policy of insurance covering
errors and omissions and a fidelity
bond which would meet such
requirements.
Section 3.14 Enforcement of Due-on-Sale Clauses; Assumption
Agreements. Each Servicer will, to the
extent it has knowledge of any conveyance
or prospective conveyance of any Mortgaged
Property by any Mortgagor (whether by
absolute conveyance or by contract of sale,
and whether or not the Mortgagor
remains or is to remain liable under the
Mortgage Note and/or the Mortgage),
exercise its rights to accelerate the
maturity of such Mortgage Loan under the
"Due-on-Sale" clause, if any, applicable
thereto; provided, however, that no
Servicer shall be required to take such
action if, in its sole business
judgment, the Servicer believes it is not
in the best interests of the Trust
Fund and shall not exercise any such rights
if prohibited by law from doing so.
If a Servicer reasonably believes it is
unable under applicable law to enforce
such "Due-on-Sale" clause or if any of the
other conditions set forth in the
proviso to the preceding sentence apply,
such Servicer will enter into an
assumption and modification agreement from
or with the person to whom such
property has been conveyed or is proposed
to be conveyed, pursuant to which such
person becomes liable under the Mortgage
Note and, to the extent permitted by
applicable state law, the Mortgagor remains
liable thereon. Each Servicer is
also authorized 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 the Mortgagor
and becomes liable under the
Mortgage Note; provided, that no such
substitution shall be effective unless
such person satisfies the underwriting
criteria of such Servicer and such
substitution is in the best interest of the
Certificateholders as determined by
such Servicer. In connection with any
assumption, modification or substitution,
such Servicer shall apply such underwriting
standards and follow such practices
and procedures as shall be normal and usual
in its general mortgage servicing
activities and as it applies to other
mortgage loans owned solely by it. No
Servicer shall take or enter into any
assumption and modification agreement,
however, unless (to the extent practicable
in the circumstances) it shall have
received confirmation, in writing, of the
continued effectiveness of any
applicable hazard insurance policy, or a
new policy meeting the requirements of
this Section is obtained. Any fee collected
by a Servicer in respect of an
assumption or substitution of liability
agreement will be retained by such
Servicer as additional servicing
compensation. In connection with any such
assumption, no material term of the
Mortgage Note (including but not limited to
the related Mortgage Rate and the amount of
the Scheduled Payment) may be
amended or modified, except as otherwise
required pursuant to the terms thereof.
Each Servicer shall notify the Trustee that
any such substitution, modification
or assumption agreement has been completed
by forwarding to the Trustee the
executed original of such substitution or
assumption agreement, which document
shall be added to the related Mortgage File
and shall, for all purposes, be
considered a part of such Mortgage File to
the same extent as all other
documents and instruments constituting a
part thereof.
Notwithstanding the foregoing paragraph or any other provision
of
this Agreement, a Servicer shall not be
deemed to be in default, breach or any
other violation of its obligations
hereunder by reason of any assumption of a
Mortgage Loan by operation of law or by the
terms of the Mortgage Note or any
assumption which such Servicer may be
restricted by law from preventing, for any
reason whatsoever. For purposes of this
Section 3.14, the term "assumption" is
deemed to also include a sale (of the
Mortgaged Property) subject to the
Mortgage that is not accompanied by an
assumption or substitution of liability
agreement.
Section 3.15 Realization upon Defaulted Mortgage Loans. Each
Servicer shall use its best efforts,
consistent with Accepted Servicing
Practices, to foreclose upon or otherwise
comparably convert (which may include
an acquisition of REO Property) the
ownership of 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 3.07, and which are not
released from this Agreement
pursuant to any other provision hereof.
Each Servicer shall use reasonable
efforts to realize upon such defaulted
Mortgage Loans in such manner as will
maximize the receipt of principal and
interest by the Trustee, taking into
account, among other things, the timing of
foreclosure proceedings; provided,
however, with respect to any Second Lien
Mortgage Loan for which the related
first lien mortgage loan is not included in
the Trust Fund, if, after such
Mortgage Loan becomes 180 days or more
delinquent, the applicable Servicer
determines that a significant net recovery
is not possible through foreclosure,
such Mortgage Loan may be charged off and
the Mortgage Loan will be treated as a
Liquidated Mortgage Loan giving rise to a
Realized Loss. The foregoing is
subject to the provisions that, in any case
in which Mortgaged Property shall
have suffered damage from an uninsured
cause, a Servicer shall not be required
to expend its own funds toward the
restoration of such property unless it shall
determine in its sole discretion (i) that
such restoration will increase the net
proceeds of liquidation of the related
Mortgage Loan to the Trustee, after
reimbursement to itself for such expenses,
and (ii) that such expenses will be
recoverable by such Servicer through
Insurance Proceeds, Condemnation Proceeds
or Liquidation Proceeds from the related
Mortgaged Property, as contemplated in
Section 3.11. Each Servicer shall be
responsible for all other costs and
expenses incurred by it in any such
proceedings; provided, however, that it
shall be entitled to reimbursement thereof
from the related property, as
contemplated in Section 3.11.
The proceeds of any liquidation or REO Disposition, as well as
any
recovery resulting from a partial
collection of Insurance Proceeds, Condemnation
Proceeds or Liquidation Proceeds or any
income from an REO Property, will be
applied in the following order of priority:
first, to reimburse the applicable
Servicer or any Subservicer for any related
unreimbursed Servicing Advances,
pursuant to Section 3.11 or 3.17; second,
to reimburse the applicable Servicer
for any related unreimbursed P&I
Advances, pursuant to Section 3.11; third, to
accrued and unpaid interest on the Mortgage
Loan or REO Imputed Interest, at the
Mortgage Rate, to the date of the
liquidation or REO Disposition, or to the Due
Date prior to the Remittance Date on which
such amounts are to be distributed if
not in connection with a liquidation or REO
Disposition; and fourth, as a
recovery of principal of the Mortgage Loan.
If the amount of the recovery so
allocated to interest is less than a full
recovery thereof, that amount will be
allocated as follows: first, to unpaid
Servicing Fees; and second, as interest
at the Mortgage Rate (net of the Servicing
Fee Rate). The portion of the
recovery so allocated to unpaid Servicing
Fees shall be reimbursed to the
applicable Servicer or any Subservicer
pursuant to Section 3.11 or 3.17. The
portions of the recovery so allocated to
interest at the Mortgage Rate (net of
the Servicing Fee Rate) and to principal of
the Mortgage Loan shall be applied
as follows: first, to reimburse the
applicable Servicer or any Subservicer for
any related unreimbursed Servicing Advances
in accordance with Section 3.11 or
3.17, and second, to the Trustee in
accordance with the provisions of Section
4.02, subject to the last paragraph of
Section 3.17 with respect to certain
excess recoveries from an REO
Disposition.
Notwithstanding anything to the contrary contained herein, in
connection with a foreclosure or acceptance
of a deed in lieu of foreclosure, in
the event a Servicer has received actual
notice of, or has actual knowledge of
the presence of, hazardous or toxic
substances or wastes on the related
Mortgaged Property, or if the Trustee
otherwise requests, such Servicer shall
cause an environmental inspection or review
of such Mortgaged Property to be
conducted by a qualified inspector. Upon
completion of the inspection, such
Servicer shall promptly provide the Trustee
and the Depositor with a written
report of the environmental inspection.
After reviewing the environmental inspection report, the
applicable
Servicer shall determine, consistent with
Accepted Servicing Practices, how to
proceed with respect to the Mortgaged
Property. In the event (a) the
environmental inspection report indicates
that the Mortgaged Property is
contaminated by hazardous or toxic
substances or wastes and (b) such Servicer
determines, consistent with Accepted
Servicing Practices, to proceed with
foreclosure or acceptance of a deed in lieu
of foreclosure, such Servicer shall
be reimbursed for all reasonable costs
associated with such foreclosure or
acceptance of a deed in lieu of foreclosure
and any related environmental
clean-up costs, as applicable, from the
related Liquidation Proceeds, or if the
Liquidation Proceeds are insufficient to
fully reimburse such Servicer, such
Servicer shall be entitled to be reimbursed
from amounts in the related
Collection Account pursuant to Section
3.11. In the event such Servicer
determines not to proceed with foreclosure
or acceptance of a deed in lieu of
foreclosure, such Servicer shall be
reimbursed from general collections for all
Servicing Advances made with respect to the
related Mortgaged Property from the
related Collection Account pursuant to
Section 3.11.
In the event that HomEq elects to charge-off a Second Lien
Mortgage
Loan 180 days or more delinquent pursuant
to this Section 3.15, no Second Lien
Mortgage Loan shall be characterized as a
Liquidated Mortgage Loan, unless the
Depositor consents in writing to such
characterization after HomEq has provided
the Depositor with a combined equity
analysis of such Second Lien Mortgage Loan
and the related first lien mortgage loan;
provided, that if the Depositor has
failed to notify HomEq within 3 Business
Days of receipt of such combined equity
analysis, then the Depositor shall be
deemed to have consented to such
characterization. JPMorgan may elect to
charge-off a Second Lien Mortgage Loan
pursuant to this Section 3.15 without such
written consent, so long as such
Second Lien Mortgage Loan is 180 days or
more delinquent.
Section 3.16 Release of Mortgage Files. (a) Upon the payment in
full
of any Mortgage Loan, or the receipt by a
Servicer of a notification that
payment in full shall be escrowed in a
manner customary for such purposes, such
Servicer will, on or before the last day of
the month in which such payment in
full occurs, notify the Trustee by a
certification (which certification shall
include a statement to the effect that all
amounts received or to be received in
connection with such payment which are
required to be deposited in the related
Collection Account pursuant to Section 3.10
have been or will be so deposited)
of a Servicing Officer and shall request
delivery to it of the Custodial File by
submitting a Request for Release to the
Trustee. Upon receipt of such
certification and Request for Release, the
Trustee shall promptly release the
related Custodial File to such Servicer
within two (2) Business Days. No
expenses incurred in connection with any
instrument of satisfaction or deed of
reconveyance shall be chargeable to the
related Collection Account.
(b) From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan,
including, for this purpose, collection under
any Insurance Policy relating to the
Mortgage Loans, the Trustee shall, upon
request of such Servicer and delivery to
the Trustee of a Request for Release,
release the related Custodial File to such
Servicer, and the Trustee shall, at
the direction of such Servicer, execute
such documents as shall be necessary to
the prosecution of any such proceedings and
the Servicer shall retain the
Mortgage File in trust for the benefit of
the Trustee. Such Request for Release
shall obligate the applicable Servicer to
return each and every document
previously requested from the Custodial
File to the Trustee when the need
therefor by such Servicer no longer exists,
unless the Mortgage Loan has been
charged-off or liquidated and the
Liquidation Proceeds relating to the Mortgage
Loan have been deposited in the related
Collection Account or the Mortgage File
or such document has been delivered to an
attorney, or to a public trustee or
other public official as required by law,
for purposes of initiating or pursuing
legal action or other proceedings for the
foreclosure of the Mortgaged Property
either judicially or non-judicially, and
such Servicer has delivered to the
Trustee a certificate of a Servicing
Officer certifying as to the name and
address of the Person to which such
Mortgage File or such document was delivered
and the purpose or purposes of such
delivery. Upon receipt of a certificate of a
Servicing Officer stating that such
Mortgage Loan was charged-off or liquidated
and that all amounts received or to be
received in connection with such
liquidation that are required to be
deposited into the related Collection
Account have been so deposited, or that
such Mortgage Loan has become an REO
Property, a copy of the Request for Release
shall be released by the Trustee to
the applicable Servicer or its designee
upon request therefor. Upon receipt of a
Request for Release under this Section
3.16, the Trustee shall deliver the
related Custodial File to the requesting
Servicer by regular mail, unless such
Servicer requests that the Trustee deliver
such Custodial File to such Servicer
by overnight courier (in which case such
delivery shall be at such Servicer's
expense); provided, however, that in the
event the Servicer has not previously
received copies of the relevant Mortgage
Loan Documents necessary to service the
related Mortgage Loan in accordance with
Accepted Servicing Practices, the
applicable Responsible Party shall
reimburse the applicable Servicer for any
overnight courier charges incurred for the
requested Custodial Files.
Upon written certification of a Servicing Officer, the Trustee
shall
execute and deliver to the applicable
Servicer copies of any court pleadings,
requests for trustee's sale or other
documents reasonably necessary to the
foreclosure or trustee's sale in respect of
a Mortgaged Property or to any legal
action brought to obtain judgment against
any Mortgagor on the Mortgage Note or
Mortgage or to obtain a deficiency
judgment, or to enforce any other remedies or
rights provided by the Mortgage Note or
Mortgage or otherwise available at law
or in equity, or shall exercise and deliver
to such Servicer a power of attorney
sufficient to authorize such Servicer to
execute such documents on its behalf.
Each such certification shall include a
request that such pleadings or documents
be executed by the Trustee and a statement
as to the reason such documents or
pleadings are required and that the
execution and delivery thereof by the
Trustee will not invalidate or otherwise
affect the lien of the Mortgage, except
for the termination of such a lien upon
completion of the foreclosure or
trustee's sale.
Section 3.17 Title, Conservation and Disposition of REO
Property.
(a) This Section shall apply only to REO
Properties acquired for the account of
the Trustee and shall not apply to any REO
Property relating to a Mortgage Loan
which was purchased or repurchased from the
Trustee pursuant to any provision
hereof. In the event that title to any such
REO Property is acquired, the
applicable Servicer shall cause the deed or
certificate of sale to be issued in
the name of the Trustee, on behalf of the
Certificateholders. Upon written
request by the applicable Servicer, the
Trustee shall provide such Servicer with
a power of attorney prepared by such
Servicer with respect to such REO Property.
(b) Each Servicer shall manage, conserve, protect and operate
each
REO Property for the Trustee solely for the
purpose of its prompt disposition
and sale. Each Servicer, either itself or
through an agent selected by such
Servicer, shall manage, conserve, protect
and operate the 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 similar property in
the same locality as the REO Property is
managed. Each Servicer shall attempt to
sell the same (and may temporarily rent the
same for a period not greater than
o
