EXHIBIT 4
EXECUTION COPY
MORGAN STANLEY ABS CAPITAL I INC.,
Depositor,
WELLS FARGO BANK, NATIONAL ASSOCIATION,
Master Servicer, Securities Administrator and Custodian,
COUNTRYWIDE HOME LOANS SERVICING LP,
Servicer,
HOMEQ SERVICING CORPORATION,
Servicer,
DECISION ONE MORTGAGE COMPANY LLC,
Responsible Party,
NC CAPITAL CORPORATION,
Responsible Party,
ACCREDITED HOME LENDERS, INC.,
Responsible Party,
WMC MORTGAGE CORP.,
Responsible Party,
LASALLE BANK NATIONAL ASSOCIATION
Custodian,
and
DEUTSCHE BANK NATIONAL TRUST COMPANY,
Trustee
---------------------------
POOLING AND SERVICING AGREEMENT
Dated as of July 1, 2005
---------------------------
MORGAN STANLEY ABS CAPITAL I INC. TRUST 2005-HE3
MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 2005-HE3
<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 Master Servicer.................
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 Master Servicer 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 Master Servicer 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 and the Custodian......
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.............................
Section 8.14 Custodial
Responsibilities...................................
ARTICLE IX
ADMINISTRATION OF THE MORTGAGE LOANS
BY THE MASTER SERVICER
Section 9.01 Duties of the Master Servicer;
Enforcement of
Countrywide's Obligations....................................
Section 9.02 Maintenance of Fidelity Bond and
Errors and Omissions
Insurance....................................................
Section 9.03 Representations and Warranties of
the Master Servicer........
Section 9.04 Master Servicer Events of
Default............................
Section 9.05 Waiver of
Default............................................
Section 9.06 Successor to the Master
Servicer.............................
Section 9.07 Compensation of the Master
Servicer..........................
Section 9.08 Merger or
Consolidation......................................
Section 9.09 Resignation of the Master
Servicer...........................
Section 9.10 Assignment or Delegation of Duties
by the Master Servicer....
Section 9.11 Limitation on Liability of the
Master Servicer...............
Section 9.12 Indemnification; Third Party
Claims..........................
ARTICLE X
CONCERNING THE SECURITIES ADMINISTRATOR
Section 10.01 Duties of Securities
Administrator...........................
Section 10.02 Certain Matters Affecting the
Securities Administrator.......
Section 10.03 Securities Administrator Not
Liable for Certificates or
Mortgage Loans...............................................
Section 10.04 Securities Administrator May
Own Certificates................
Section 10.05 Securities Administrator's
Fees and Expenses.................
Section 10.06 Eligibility Requirements for
Securities Administrator........
Section 10.07 Resignation and Removal of
Securities Administrator..........
Section 10.08 Successor Securities
Administrator...........................
Section 10.09 Merger or Consolidation of
Securities Administrator..........
Section 10.10 Assignment or Delegation of
Duties by the Securities
Administrator................................................
ARTICLE XI
TERMINATION
Section 11.01 Termination upon Liquidation
or Purchase of the Mortgage
Loans........................................................
Section 11.02 Final Distribution on the
Certificates.......................
Section 11.03 Additional Termination
Requirements..........................
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01
Amendment....................................................
Section 12.02 Recordation of Agreement;
Counterparts.......................
Section 12.03 Governing
Law................................................
Section 12.04 Intention of
Parties.........................................
Section 12.05
Notices......................................................
Section 12.06 Severability of
Provisions...................................
Section 12.07 Assignment; Sales; Advance
Facilities........................
Section 12.08 Limitation on Rights of
Certificateholders...................
Section 12.09 Inspection and Audit
Rights..................................
Section 12.10 Certificates Nonassessable
and Fully Paid....................
Section 12.11 Rule of
Construction.........................................
Section 12.12 Waiver of Jury
Trial.........................................
SCHEDULES
Schedule I Mortgage Loan
Schedule
Schedule II Representations and
Warranties of Countrywide Home Loans
Servicing LP, as Servicer
Schedule III Representations and
Warranties of HomEq Servicing Corporation,
as Servicer
Schedule IV Representations and
Warranties of Morgan Stanley ABS Capital I
Inc. as to the Mortgage Loans
Schedule V Representations
and Warranties of WMC as to the WMC Mortgage
Loans
Schedule VI Representations and
Warranties of NC Capital as to the NC
Capital Mortgage Loans
Schedule VII Representations and
Warranties of Accredited as to the
Accredited Mortgage Loans
Schedule VIII Representations and Warranties of
Decision One, as to the
Decision One Mortgage Loans
Schedule IX Representations and
Warranties of Wells Fargo, as Custodian
Schedule X Representations
and Warranties of LaSalle, as Custodian
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 and Custodians
Exhibit F Form of
Document Certification and Exception Report of Trustee
and Custodians
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 Decision
One Purchase Agreement
Exhibit P NC Capital
Purchase Agreement
Exhibit Q Accredited
Purchase Agreement
Exhibit R WMC
Purchase Agreement
Exhibit S Fremont
Agreements
Exhibit T Form of
Servicer Power of Attorney
Exhibit U Wells
Fargo Forms
<PAGE>
THIS POOLING AND SERVICING AGREEMENT, dated as of July 1, 2005,
among MORGAN STANLEY ABS CAPITAL I INC., a
Delaware corporation (the
"Depositor"), WELLS FARGO BANK, NATIONAL
ASSOCIATION, a national banking
association, as master servicer (in such
capacity, the "Master Servicer"),
securities administrator (in such capacity,
the "Securities Administrator") and
custodian (in such capacity, "Wells
Fargo"), COUNTRYWIDE HOME LOANS SERVICING
LP, a Texas limited partnership
("Countrywide"), HOMEQ SERVICING CORPORATION, a
New Jersey corporation ("HomEq", and
together with Countrywide, the
"Servicers"), WMC MORTGAGE CORP., a
California corporation ("WMC"), NC CAPITAL
CORPORATION, a California corporation ("NC
Capital"), ACCREDITED HOME LENDERS,
INC., a California corporation
("Accredited"), DECISION ONE MORTGAGE COMPANY
LLC, a California limited liability company
("Decision One"), LASALLE BANK
NATIONAL ASSOCIATION, a national banking
association, as custodian ("LaSalle"
and, together with Wells Fargo, the
"Custodians"), 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 Securities Administrator on behalf of the Trust 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.
<TABLE>
<CAPTION>
Corresponding
Lower Tier
Lower Tier
Initial
Lower Tier
Upper Tier REMIC
Class
Designation
Interest Rate
Principal Amount
Class
------------------------
-------------------
-----------------------------------------
--------------------
<S>
<C>
<C>
<C>
Class LT-A-1ss
(1)
1/2 initial Corresponding Upper Tier
A-1ss
REMIC Class initial Class Certificate
Balance
Class LT-A-1mz
(1)
1/2 initial Corresponding Upper Tier
A-1mz
REMIC Class initial Class Certificate
Balance
Class LT-A-2a
(1)
1/2 initial Corresponding Upper Tier
A-2a
REMIC Class initial Class Certificate
Balance
Class LT-A-2b
(1)
1/2 initial Corresponding Upper Tier
A-2b
REMIC Class initial Class Certificate
Balance
Class LT-A-2c
(1)
1/2 initial Corresponding Upper Tier
A-2c
REMIC Class initial Class Certificate
Balance
Class LT-M-1
(1)
1/2 initial Corresponding Upper Tier
M-1
REMIC Class initial Class Certificate
Balance
Class LT-M-2
(1)
1/2 initial Corresponding Upper Tier
M-2
REMIC Class initial Class Certificate
Balance
Class LT-M-3
(1)
1/2 initial Corresponding Upper Tier
M-3
REMIC Class initial Class Certificate
Balance
Class LT-M-4
(1)
1/2 initial Corresponding Upper Tier
M-4
REMIC Class initial Class Certificate
Balance
Class LT-M-5
(1)
1/2 initial Corresponding Upper Tier
M-5
REMIC Class initial Class Certificate
Balance
Class LT-M-6
(1)
1/2 initial Corresponding Upper Tier
M-6
REMIC Class initial Class Certificate
Balance
Class LT-B-1
(1)
1/2 initial Corresponding Upper Tier
B-1
REMIC Class initial Class Certificate
Balance
Class LT-B-2
(1)
1/2 initial Corresponding Upper Tier
B-2
REMIC Class initial Class Certificate
Balance
Class LT-B-3
(1)
1/2 initial Corresponding Upper Tier
B-3
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
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)
</TABLE>
------------
(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
Subsequent Recoveries 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
Corresponding
and Corresponding
Corresponding
Upper Tier
Class Pass-Through Class
Certificate
Class of
Class Designation
Rate
Balance
Certificates
------------------------ -------------------
------------------
----------------
<S>
<C>
<C>
<C>
Class A-1ss
(1)
$
283,769,000
Class A-1ss(9)
Class A-1mz
(2)
$
70,943,000
Class A-1mz(9)
Class A-2a
(3)
$
280,000,000 Class A-2a(9)
Class A-2b
(4)
$
95,831,000
Class A-2b(9)
Class A-2c
(5)
$
69,000,000
Class A-2c(9)
Class M-1
(6)
$
37,976,000
Class M-1(9)
Class M-2
(6)
$
34,384,000
Class M-2(9)
Class M-3
(6)
$
20,527,000
Class M-3(9)
Class M-4
(6)
$
18,475,000
Class M-4(9)
Class M-5
(6)
$
16,935,000
Class M-5(9)
Class M-6
(6)
$
16,935,000
Class M-6(9)
Class B-1
(6)
$
15,396,000
Class B-1(9)
Class B-2
(6)
$
13,343,000
Class B-2(9)
Class B-3
(6)
$
11,290,000
Class B-3(9)
Class X
(7)
$
0 (7) Class
X(7)
Class UT-R
(8)
$
0 (8) 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 0.2400%, (ii) the
Loan Group
I Cap and
(iii) the WAC Cap or (b) after the Optional Termination Date,
the least
of (i) LIBOR plus 0.4800%, (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 0.2900%, (ii) the
Loan Group
I Cap and
(iii) the WAC Cap or (b) after the Optional Termination Date,
the least
of (i) LIBOR plus 0.5800%, (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 0.1000%, (ii) the
Loan Group
II Cap and
(iii) the WAC Cap or (b) after the Optional Termination Date,
the least
of (i) LIBOR plus 0.2000%, (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 0.2500%, (ii) the
Loan Group
II Cap and
(iii) the WAC Cap or (b) after the Optional Termination Date,
the least
of (i) LIBOR plus 0.5000%, (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 0.3800%, (ii) the
Loan Group
II Cap and
(iii) the WAC Cap or (b) after the Optional Termination Date,
the least
of (i) LIBOR plus 0.7600%, (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
0.4900%,
0.5200%,
0.5300%, 0.6500%, 0.6900%, 0.7400%, 1.3500%, 1.5500% and
1.9000%,
respectively, and (ii) the WAC Cap or (b) after the Optional
Termination
Date, the
lesser of (i) LIBOR plus 0.7350%, 0.7800%, 0.7950%, 0.9750%,
1.0350%,
1.1100%, 2.0250%, 2.3250% and 2.8500%, respectively, and (ii)
the
WAC
Cap.
(7) The Class X Interest has an
initial principal balance of $41,568,175, 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 Rates 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 Securities Administrator
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 Certificates. Such rights of the Class X Certificateholders
and
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
Securities
Administrator 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....................
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.
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 Responsible Party in 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
August 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, a copy of which (including
all such amendments) is attached
hereto as Exhibit Q.
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 12.07.
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
12.07.
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 Master Servicer (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, with respect to such
Distribution Date; (vi) the proceeds
received with respect to the termination of
the Trust Fund pursuant to clause (a) of
Section 11.01; 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, the Trustee,
the Securities Administrator, the
Master Servicer or the Custodians 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
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
Pass-Through Rate not been subject to any Loan
Group Cap or WAC Cap (that is, 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 and the resulting amount
being reduced by any Net Prepayment
Interest Shortfalls and Relief Act Interest
Shortfalls allocated to such Class)
over (ii) the amount of interest received
on such Distribution Date such Class
of Certificates at, with respect to each
Class of Group I Class A Certificates,
the lesser of the Loan Group I Cap or the
WAC Cap, with respect to each Class of
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 New
York, California, Texas, Maryland,
Minnesota, New Jersey or Delaware or the
Commonwealth of Pennsylvania, (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
Securities
Administrator 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 Certificates, reduced by any Applied
Realized Loss Amounts allocated to
such Class of Certificates pursuant to
Section 4.05; 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
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 the Unpaid
Realized Loss Amount for such Class or
Classes for such Distribution Date). 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
Securities Administrator 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) 55.80% 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 $5,131,861.
Class A-1ss Certificates: All Certificates bearing the class
designation of "Class A-1ss".
Class A-1mz Certificates: All Certificates bearing the class
designation of "Class A-1mz".
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
Certificates".
Class A-2c Certificates: All Certificates bearing the class
designation of "Class A-2c".
Class B Cap Agreement: The interest rate cap agreement, dated
July
21, 2005, between Morgan Stanley Capital
Services Inc. and the Securities
Administrator, 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) 87.10% 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
$5,131,861.
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) 89.70% 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
$5,131,861.
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) 91.90% 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
$5,131,861.
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
July
21, 2005, between Morgan Stanley Capital
Services Inc. and the Securities
Administrator, 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 Enhancement Percentage: For any Distribution Date, the
percentage obtained by dividing (x) the sum
of (i) the aggregate Class
Certificate Balances of the Class M and
Class B Certificates (other than the
Class M-1 Certificates) and (ii) the
Subordinated Amount (in each case after
taking into account the allocation of the
related Principal Distribution Amount
for such Distribution Date) by (y) the
aggregate Stated Principal Balance of the
Mortgage Loans for that Distribution
Date.
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) 63.20%
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 $5,131,861.
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) 69.90% 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
$5,131,861.
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) 73.90% 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
$5,131,861.
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) 77.50% 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
$5,131,861.
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) 80.80% 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
$5,131,861.
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) 84.10% 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
$5,131,861.
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: July 21, 2005.
Closing Date Deposit Amount: $67.38 (all of which is allocable
to
principal) deposited by the Depositor into
the Distribution Account on the
Closing Date. $136.09 of the Closing Date
Deposit Amount shall be attributable
to the Group I Mortgage Loans and $203.47
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: With respect to the Securities
Administrator, the principal office of the
Securities Administrator at Sixth
Street and Marquette Avenue, Minneapolis,
Minnesota 55479, Attention: Corporate
Trust, MSM 2005-HE3, or such other address
as the Securities Administrator may
designate from time to time by notice to
the Certificateholders. 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-MS05H3, 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 either REMIC
created
under this Agreement that corresponds to
the class of interests in the other
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
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:
<TABLE>
<CAPTION>
Distribution Date
Occurring In
Cumulative Loss Percentage
------------------------------------
--------------------------------------------------------
<S>
<C>
August 2007 through July 2008
1.500% for the first month, plus an additional 1/12th of
1.50% for each month thereafter (e.g., 2.250% in
February 2008)
August 2008 through July 2009
3.000% for the first month, plus an additional 1/12th of
1.50% for each month thereafter (e.g., 3.750% in
February 2009)
August 2009 through July 2010
4.500% for the first month, plus an additional 1/12th of
1.50% for each month thereafter (e.g., 5.250% in
February 2010)
August 2010 through July 2011
6.000% for the first month, plus an additional 1/12th of
0.75% for each month thereafter (e.g., 6.375% in
February 2011)
August 2011 and thereafter
6.750%
</TABLE>
Custodial File: With respect to each Mortgage Loan, the file
retained by the Trustee or the applicable
Custodian, as applicable, consisting
of items (i) - (viii) as listed on Exhibit
K hereto.
Custodian: Wells Fargo and LaSalle, and their respective
successors
in interest. When the term "Custodian" is
used in this Agreement in connection
with custodial responsibilities with
respect to the Mortgage Loans, "Custodian"
shall mean the Person identified as the
Custodian of such Mortgage Loan on the
Mortgage Loan Schedule.
Cut-off Date: July 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.
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.
Decision One: Decision One Mortgage Company LLC, a California
limited liability company, and its
successors in interest.
Decision One Mortgage Loans: The Mortgage Loans purchased by
the
Purchaser pursuant to the Decision One
Purchase Agreement for which Decision One
is identified as Responsible Party on the
Mortgage Loan Schedule.
Decision One Purchase Agreement: The Mortgage Loan Purchase and
Warranties Agreement dated as of October 1,
2004, by and between Decision One
and the Purchaser, a copy of which
(including all such amendments) is attached
hereto as Exhibit O.
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
aggregate Stated Principal Balance of
Mortgage Loans that are 60 days or more
Delinquent (including Mortgage Loans in
foreclosure and Mortgage Loans related to
REO Property) and (y) (1) until the
aggregate Class Certificate Balance of the
Class A Certificates have been
reduced to zero, the aggregate Stated
Principal Balance of the Mortgage Loans,
as of the last day of the related Due
Period, equals or exceeds 36.20% of the
prior period's Senior Enhancement
Percentage and (2) after the aggregate Class
Certificate Balance of the Class A
Certificates have been reduced to zero, the
aggregate Stated Principal Balance of the
Mortgage Loans, as of the last day of
the related Due Period, equals or exceeds
43.50% of the prior period's Class M
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 and the Securities
Administrator, 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 and "A-1" by
Standard & Poor's (to the extent they
are 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 Master Servicer pursuant
to Section 3.07(d) in the name of the
Securities Administrator as paying agent
for the benefit of the Trustee and the
Certificateholders and designated "Wells
Fargo Bank, N.A. as paying agent in
trust for registered holders of Morgan
Stanley ABS Capital I Inc. Trust 2005-HE3
Mortgage Pass-Through Certificates, Series
2005-HE3." 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 second
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, the next
succeeding Business Day, commencing in
August 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 and "P-1" by Moody's (to the
extent they are 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 as
specified in writing. Eligible Accounts may
bear interest, and may include, if
otherwise qualified under this definition,
accounts maintained with the
Securities Administrator.
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 Securities
Administrator pursuant to Sections 3.07(b) and
3.07(c) in the name of the Securities
Administrator as paying agent for the
benefit of the Regular Certificateholders
and designated "Wells Fargo Bank, N.A.
as paying agent in trust for registered
holders of Morgan Stanley ABS Capital I
Inc. Trust 2005-HE3, Mortgage Pass-Through
Certificates, Series 2005-HE3." 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
Master Servicing 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 Master Servicing 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,
Fremont or the Depositor, as applicable, as
contemplated by this Agreement or the
Fremont Agreement, 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 each of the
following months:
Month of Final
Scheduled
Distribution Date
---------------------
Class A-1ss
Certificates.................................. July
2035
Class A-1mz
Certificates.................................. July
2035
Class A-2a
Certificates................................... July
2035
Class A-2b
Certificates................................... July 2035
Class A-2c
Certificates................................... July
2035
Class M-1
Certificates.................................... July
2035
Class M-2
Certificates.................................... July
2035
Class M-3
Certificates.................................... July
2035
Class M-4
Certificates.................................... July
2035
Class M-5
Certificates.................................... July
2035
Class M-6
Certificates.................................... July
2035
Class B-1
Certificates.................................... July
2035
Class B-2
Certificates.................................... July
2035
Class B-3
Certificates.................................... July
2035
Class X
Certificates...................................... July
2035
Class P
Certificates...................................... July
2035
Class R
Certificates...................................... July
2035
First Lien Mortgage Loan: A Mortgage Loan secured by a first
lien
Mortgage on the related Mortgaged
Property.
Fitch: Fitch, Inc., and its successors in interest. If Fitch is
designated as a Rating Agency in the
Preliminary Statement, for purposes of
Section 12.05(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 ABS Capital I Inc. Trust 2005-HE3,
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.
Fremont Agreements: The Fremont Purchase Agreement and the
Fremont
Assignment Agreement, each of which are
attached hereto as Exhibit S.
Fremont Assignment Agreement: The Assignment and Recognition
Agreement, dated as of the Closing Date,
among the Purchaser, the Depositor and
Fremont.
Fremont Mortgage Loans: The Mortgage Loans purchased by the
Purchaser pursuant to the Fremont Purchase
Agreement for which Fremont is
identified as Originator on the Mortgage
Loan Schedule.
Fremont Purchase Agreement: The Mortgage Loan Purchase and
Warranties Agreement, dated as of May 1,
2005, by and between Fremont and the
Purchaser, solely insofar as such agreement
relates to the Fremont Mortgage
Loans.
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 July 21, 2005 between Morgan Stanley
Capital Services Inc. and the
Securities Administrator, 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 II Class A Cap Agreement: The interest rate cap
agreement,
dated July 21, 2005 between Morgan Stanley
Capital Services Inc. and the
Securities Administrator, relating to the
Group II Class A Certificates.
Group II Class A Certificates: The Class A-2a, Class A-2b and
Class
A-2c 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 26 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
(determined in accordance with the
related Interest Rate Cap Agreement) 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 26 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
(determined in accordance with the
related Interest Rate Cap Agreement) 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
(determined in accordance with the
related Interest Rate Cap Agreement) 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 (determined in
accordance with the related Interest
Rate Cap Agreement) 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.
LaSalle Mortgage Loans: The Mortgage Loans for which LaSalle is
identified as the Custodian on the Mortgage
Loan Schedule.
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
Securities Administrator 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 Securities Administrator 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 Securities
Administrator (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 the 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 Securities
Administrator 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 Securities Administrator
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, the Group II Mortgage
Loans
or the Group III 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.
Master Servicing Fee: As to any Distribution Date, an amount
equal
to 1/12th the product of (a) the Master
Servicing Fee Rate and (b) the sum of
(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 August 2005 only, the
portion of the Closing Date Deposit
Amount allocable to principal.
Master Servicing Fee Rate: With respect to any Mortgage Loan, a
per
annum rate equal to 0.015%.
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.
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.
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
12.05(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, the Trustee 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 Servicer's name; (21) the
applicable Custodian's name; and (22) 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.
NC Capital: NC Capital Corporation, a California corporation,
and
its successors in interest.
NC Capital Mortgage Loans: The Mortgage Loans purchased by the
Purchaser pursuant to the NC Capital
Purchase Agreement for which NC Capital is
identified as Responsible Party on the
Mortgage Loan Schedule.
NC Capital Purchase Agreement: The Second Amended and Restated
Mortgage Loan Purchase and Warranties
Agreement, dated as of July 1, 2003, as
amended by Amendment No. 1, Amendment No.
2, Amendment No. 3, Amendment No. 4,
Amendment No. 5 and Amendment No. 6, dated
as of October 22, 2003, December 30,
2003, January 29, 2004, July 30, 2004, June
28, 2004 and January 28, 2005,
respectively, each by and between NC
Capital and the Purchaser, a copy of which
(including all such amendments) is attached
hereto as Exhibit P.
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 Compensating
Interest payments made with respect
to such Distribution Date.
New Century: New Century Mortgage Corporation, a California
corporation, and its successors in
interest.
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, the Master Servicer or
any successor Master Servicer including the
Trustee, as applicable, 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, the Master Servicer or
any successor Master Servicer including the
Trustee, as applicable, 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
Securities Administrator and the Master
Servicer.
Notice of Final Distribution: The notice to be provided pursuant
to
Section 11.02 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 and
Securities Administrator 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 and/or the Securities
Administrator, as applicable (and/or such other
Persons as may be set forth herein),
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 or the
Master Servicer, (ii) does not have
any material direct or indirect financial
interest in such Servicer of the
Mortgage Loans or the Master Servicer or in
an affiliate of either and (iii) is
not connected with such Servicer of the
Mortgage Loans or the Master Servicer 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: The Responsible Parties and Fremont.
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:
(i) Certificates theretofore canceled by the Securities
Administrator or delivered to the
Securities Administrator for cancellation; and
(ii) Certificates in exchange for which or in lieu of which
other
Certificates have been executed and
delivered by the Securities Administrator
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, 0.2400%;
Class A-1mz Certificates, 0.2900%; Class
A-2a Certificates, 0.1000%; Class A-2b
Certificates, 0.2500%; Class A-2c
Certificates, 0.3800%; Class M-1 Certificates,
0.4900%; Class M-2 Certificates, 0.5200%;
Class M-3 Certificates, 0.5300%; Class
M-4 Certificates, 0.6500%; Class M-5
Certificates, 0.6900%; Class M-6
Certificates, 0.7400%; Class B-1
Certificates, 1.3500%; Class B-2 Certificates,
1.5500%; and Class B-3 Certificates,
1.9000%. On the first Distribution Date
after the Optional Termination Date, the
Pass-Through Margins shall increase to:
Class A-1ss Certificates, 0.4800%; Class
A-1mz Certificates, 0.5800%; Class A-2a
Certificates, 0.2000%; Class A-2b
Certificates, 0.5000%; Class A-2c
Certificates, 0.7600%; Class M-1
Certificates, 0.7350%; Class M-2 Certificates,
0.7800%; Class M-3 Certificates, 0.7950%;
Class M-4 Certificates, 0.9750%; Class
M-5 Certificates, 1.0350%; Class M-6
Certificates, 1.1100%; Class B-1
Certificates, 2.0250%; Class B-2
Certificates, 2.3250%; and Class B-3
Certificates, 2.8500%.
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 and are so rated
by
such Rating Agency);
(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, "AAAm" by Standard & Poor's and at
least
"AA" by Fitch (to the extent they are Rating Agencies hereunder
and
are so rated by such Rating Agency); and
(vii) if previously confirmed in writing to the Securities
Administrator, 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 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 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 Principal Prepayment 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 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 voluntary 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 August
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 11.01 (to
the extent such proceeds relate to
principal).
Private Certificates: As specified in the Preliminary
Statement.
Prospectus Supplement: The Prospectus Supplement, dated July
19,
2005, relating to the Offered
Certificates.
PTCE 95-60: As defined in Section 5.02(b).
Purchase Agreements: Collectively, the Decision One Purchase
Agreement, the NC Capital Purchase
Agreement, the Fremont Purchase Agreement,
the WMC Purchase Agreement and the
Accredited 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 and the
Securities Administrator. 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
12.05(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, the Securities
Administrator 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 Securities Administrator 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 Fremont, the repurchase
price specified in the Fremont
Agreements. In addition to the Repurchase
Price, each Responsible Party 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 Fremont is obligated to make
certain indemnification payments for
material breaches of representations and
warranties as further set forth in the
Fremont Agreements.
Request for Release: The Request for Release submitted by the
applicable Servicer to the Trustee or the
applicable Custodian, as applicable,
substantially in the form of Exhibit J.
Residual Certificates: As specified in the Preliminary
Statement.
Responsible Officer: When used with respect to the Trustee, the
Securities Administrator, the Master
Servicer, any vice president, any assistant
vice president, any assistant secretary,
any assistant treasurer, any associate,
or any other officer of the Trustee, the
Securities Administrator or the Master
Servicer 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: Decision One, NC Capital, WMC, Fremont and
Accredited.
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.
Securities Administrator: Wells Fargo Bank, National Association
and
if a successor securities administrator is
appointed hereunder, such successor.
Securities Administrator 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.
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, 44.20%.
Sequential Trigger Event: (a) With respect to any Distribution
Date
occurring before August 2007, 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
Cut-off Date Pool Principal Balance
equals or exceeds 1.50%, and (b) with
respect to any Distribution Date occurring
in or after August 2007, a Trigger
Event.
Servicer: Countrywide or HomEq, and if a successor Servicer to
any
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 the Person identified
as the Servicer of such Mortgage
Loan on the Mortgage Loan Schedule.
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 each 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 or
applicable Custodian 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: (i) 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), including, without
limitation, such Mortgage Loans that are
subject to bankruptcy proceedings, (ii)
each Mortgage Loan in foreclosure and
(iii) all REO Property.
Specified Subordinated Amount: Prior to the Stepdown Date, an
amount
equal to 4.05% of the Cut-off Date Pool
Principal Balance. On and after the
Stepdown Date, an amount equal to 8.10% of
the aggregate Stated Principal
Balance of the Mortgage Loans as of the
Cut-off Date, subject, until the Class
Certificate Balance of each Class of
Offered Certificates has been reduced to
zero, to a minimum amount equal to 0.50% of
the Cut-off Date Pool Principal
Balance; 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 Offered 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 12.05(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 ABS Capital I Inc.
Trust 2005-HE3, or such other address as
Standard & Poor's may hereafter furnish
to the Depositor, the Trustee 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 Securities Administrator
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 August 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, 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
the
applicable Originator 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 received
by the Servicers on or prior to the related
Determination Date (other than
Prepayment Interest Excesses) 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 Interest Rate
Cap Agreements; (v) the Fremont Agreements
(solely insofar as such agreements
relate to the Fremont Mortgage Loans); (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.
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 Recoveries 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.
Wells Fargo Mortgage Loans: Mortgage Loans for which Wells Fargo
is
identified as the Custodian on the Mortgage
Loan Schedule.
WMC: WMC Mortgage Corp., a California corporation, and its
successors in interest.
WMC Mortgage Loans: The Mortgage Loans purchased by the
Purchaser
pursuant to the WMC Mortgage Corp. Purchase
Agreement for which WMC Mortgage
Corp. is identified as Responsible Party in
the Mortgage Loan Schedule.
WMC Purchase Agreement: The Mortgage Loan Purchase and
Warranties
Agreement, dated as of April 1, 2004, as
amended by Amendment No. 1, dated as of
October 29, 2004, and Amendment No. 2,
dated as of February 28, 2005, each by
and between the Purchaser, as purchaser,
and WMC, as seller (a copy of which is
attached hereto as Exhibit R).
WMC Underwriting Guidelines: The underwriting guidelines attached
to
the WMC Purchase Agreement.
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 the
"Fixed Amount" (as defined in each Interest
Rate Cap Agreement) due and payable
to the Cap Provider pursuant to the terms
of such 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 Wells Fargo with
respect to the Wells Fargo Mortgage Loans,
to LaSalle with respect to the
LaSalle Mortgage Loans, and to the Trustee
with respect to any other Mortgage
Loans, 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) (A) with respect to the Mortgage Loans other than the
Wells
Fargo and
LaSalle Mortgage Loans, the original Mortgage with evidence of
recording
thereon or a certified true copy of such Mortgage submitted for
recording.
If, in connection with any such 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
evidence
of certification on the face of such photocopy of such
mortgage,
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;
(B) with respect to the Wells Fargo and LaSalle Mortgage Loans,
the
original
Mortgage with evidence of recording thereon or a certified true
copy of
such Mortgage submitted for recording. If, in connection with
any
Wells
Fargo or LaSalle 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 applicable Originator shall deliver or cause to
be
delivered
to the applicable Custodian a photocopy of such Mortgage
certified
by the applicable Originator to be a true and complete copy of
such
Mortgage and shall forward to the applicable Custodian such
original
recorded
Mortgage within 14 days following the applicable Originator's
receipt of
such Mortgage from the applicable public recording office; or
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) (A) with respect to the Mortgage Loans other than the
Wells
Fargo and
LaSalle Mortgage Loans (except with respect to MERS Designated
Mortgage Loans), 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 evidence of
certification on the face of such photocopy of such intervening
assignment, 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;
(B) With respect to the Wells Fargo and LaSalle Mortgage Loans,
the
originals
of all intervening assignments of Mortgage (if any) evidencing
a
complete
chain of assignment from the applicable originator to the last
endorsee
with evidence of recording thereon or a certified true copy of
such intervening assignments of
Mortgage submitted for recording, 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 applicable
Originator
shall deliver or cause to be delivered a photocopy of such
intervening assignment, certified by the applicable Originator to
be a
true and
complete copy of such intervening assignment and shall forward
to
the
applicable Custodian such original recorded intervening
assignment
within 14
days following the applicable Originator's receipt of such from
the
applicable public recording office; or 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 and the obligations of
Fremont under the Fremont Agreements.
The Depositor shall cause to be delivered to the Trustee or
applicable Custodian, as applicable, 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 Responsible
Party 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 or
applicable Custodian, as applicable,
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 or applicable
Custodian, as applicable, 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, the Custodians 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 no Servicer shall
be held responsible or liable for any
loss that occurs because an Assignment of
Mortgage was not recorded, but only to
the extent the applicable 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
July 1, 2005, Morgan Stanley ABS
Capital I Inc. Trust 2005-HE3". 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 Fremont Mortgage
Loan, the Trustee shall take such actions,
with the Depositor's consent, to
enforce the rights of the Trust as
"Purchaser" under the Fremont Agreements.
On or prior to the Closing Date, the Depositor shall deliver to
the
Trustee and the applicable Custodian, as
applicable, a copy of the Data Tape
Information in an electronic, machine
readable medium in a form mutually
acceptable to the Trustee or applicable
Custodian, as applicable. Within twenty
(20) Business Days of the Closing Date, the
Depositor shall deliver copies of
the complete Mortgage Loan Schedule to the
Trustee, each Custodian and each
Servicer, and the Trustee, each Custodian
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 ABS CAPITAL
I INC. TRUST 2005-HE3" 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 (43) of Schedule V,
paragraph (46) of Schedule VI, paragraph
(50) of Schedule VII, paragraph (yy) of
Schedule VIII to this Agreement and
paragraph (aaa) of Schedule IX 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 and the Fremont Agreements)
pursuant to Section 2.01(a). The Securities
Administrator 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 and the Custodians shall
acknowledge, on the Closing Date, receipt by
the Trustee or the applicable Custodian, as
applicable, 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 and the
Custodians shall maintain possession of the
related Mortgage Notes in the State
of California, Utah or Minnesota, unless
otherwise permitted by the Rating
Agencies.
In connection with the Closing Date, the Trustee and the
Custodians
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
applicable Mortgage Loan. Neither the
Trustee nor the Custodians, shall 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 and the
Custodians 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, the Servicers and
to the Trustee, if delivered by a
Custodian, a Document Certification and
Exception Report, in the form annexed
hereto as Exhibit F, to the effect that, as
to each applicable 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) and (7) 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. Neither
the Trustee nor the Custodians shall 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 Mortgage 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 and the Custodians shall retain possession and
custody
of each applicable Custodial File in
accordance with and subject to the terms
and conditions set forth herein. The
applicable Servicer shall promptly deliver
to the Trustee or to the applicable
Custodian, as applicable, 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 Fremont 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 or the applicable
Custodian, as applicable, 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 Fremont to
deliver such documents at Fremont's
expense pursuant to the Fremont Agreements)
to such Servicer.
Section 2.03 Representations and Warranties; Remedies for
Breaches
of Representations and Warranties with
Respect to the Mortgage Loans. (a)
Countrywide hereby makes the
representations and warranties set forth in
Schedule II 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 III 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 IV hereto to the
Trustee as of the dates set forth in such
Schedule.
(c) Wells Fargo hereby makes the representations and warranties
set
forth in Schedule IX hereto to the Trustee
as of the dates set forth in such
Schedule, and LaSalle hereby makes the
representations and warranties set forth
in Schedule X hereto to the Trustee as of
the dates set forth in such Schedule.
(d) WMC hereby makes the representations and warranties set forth
in
Schedule V hereto to the Depositor, the
Servicers and the Trustee as of the
dates set forth in such Schedule. NC
Capital 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. Accredited 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. Decision One, in its capacity as
Responsible Party, 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.
(e) 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.
(f) Upon discovery by any of the parties hereto of a breach of
a
representation or warranty made by the
Depositor or an Originator, 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 the applicable
Originator, in writing to correct or cure,
in accordance with the this
Agreement, any such breach of a
representation or warranty made by the
applicable Originator under this Agreement
or the Fremont Agreements, as
applicable, within sixty (60) days from the
date of notice from the Trustee or
the discovery by the applicable Originator
of the breach, and if the applicable
Originator, 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 the applicable Originator
to correct or cure, the Trustee shall
notify the applicable Originator 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 or the Fremont
Agreements, as applicable.
Notwithstanding the foregoing, in the event
that the Trustee receives notice of
a breach by (i) WMC of any of the
representations and warranties set forth in
paragraphs (43), (44), (46), (48), (50),
(52), (53), (54), (55), (56), (57),
(58), (59) or (69) of Schedule V, (ii) NC
Capital of any of the representations
and warranties set forth in paragraphs
(46), (47), (50), (57), (59), (60), (61),
(62), (63), (64), (65), (66) or (67) of
Schedule VI, (iii) Accredited of any of
the representations and warranties set
forth in paragraphs (49), (50), (51),
(53), (55), (56), (57), (58), (59), (61) or
(62) of Schedule VII, or (iv)
Decision One of any representations and
warranties set forth in paragraphs (xx),
(yy), (zz), (aaa), (ggg), (hhh), (iii),
(jjj), (kkk), (lll), (mmm) and (nnn) of
Schedule VIII, the Trustee shall notify the
applicable Originator to repurchase
the Mortgage Loan at the Repurchase Price
within sixty (60) days of the
applicable Originator's receipt of such
notice, as applicable. If, within ten
(10) Business Days of receipt of such
notice by the applicable 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 the applicable Originator under
this Agreement or the Fremont
Agreements, as applicable, if the Trustee
has received written notice from the
Depositor directing the Trustee to pursue
such remedies.
(g) In the event any Mortgage Loan does not conform to the
requirements as determined in the Trustee's
or the applicable Custodian's review
of the related Custodial File pursuant to
Section 2.01(b) of this Agreement, the
Trustee or the Custodian, as applicable,
shall notify the applicable Originator,
the applicable Servicer, the Trustee (if
applicable) and the Depositor in
writing, and request that such Originator
correct or cure such defect as
required under this Agreement or the
Fremont Agreement, as applicable, and if
such Originator fails or is unable to
correct or cure the defect within the
period set forth in this Agreement or the
Fremont Agreement, as applicable, the
Trustee or the Custodian, as applicable,
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
or the Custodian, as applicable,
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, 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 the Fremont
Agreement, as applicable, if the Trustee
has received written notice from the
Depositor directing the Trustee to pursue
such remedies.
(h) 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 IV hereto that materially and
adversely affects the value of any
Mortgage Loan or the interest of the
Trustee or the Certificateholders therein,
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 representation and
warranty (g) or (yy) set forth in Section
9.02 to the Fremont Purchase 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
or the Fremont Assignment Agreement,
as applicable, (i) the Depositor shall,
within the time period permitted
therefor under such agreement, take such
action described in Section 5 of the
Fremont Assignment Agreement in respect of
such Mortgage Loan, as if the
Depositor were the applicable Originator,
and (ii) the Trustee or applicable
Custodian shall promptly deliver to the
Depositor or its designee the related
Mortgage File in accordance with the
applicable Servicer's direction in a
Request for Release and, upon Depositor's
request, the Trustee shall assign to
the Depositor all of its rights with
respect to such Originator's breach under
this Agreement or the Fremont 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.
(i) 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 V, 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.
(j) 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 or the Custodian, as applicable,
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 Fremont, the Depositor shall use
reasonable efforts to cause Fremont to
deliver to the Trustee or applicable
Custodian 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.
(k) The applicable Servicer, based upon information provided by
the
Depositor or the applicable Originator,
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
such Servicer shall deliver the amended
Mortgage Loan Schedule to the Trustee or
Custodian, as applicable. 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, the Depositor 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 or the Custodian, as
applicable, 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 and shall execute
and deliver at the direction of the
Depositor or the applicable Originator, such
instruments of transfer or assignment
prepared by the Depositor or the
applicable Originator, in each case without
recourse, as shall be necessary to
vest title in the Depositor or the
applicable Originator, of the Trustee's
interest in any Deleted Mortgage Loan
substituted for pursuant to this Section
2.03.
(l) 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 deposited into
the related Collection Account by the
Depositor 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 Fremont
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.
(m) 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 or
Custodian, as applicable. 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.
(n) 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
applicable Servicer in the applicable
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 or Custodian, as
applicable, 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.
(o) 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, the
Custodian 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 (43) of Schedule V,
paragraph (46) of Schedule VI, paragraph
(50) of Schedule VII and paragraph (yy) of
Schedule VIII, as applicable, to this
Agreement) and defective Mortgage Loans set
forth in the Decision One Purchase
Agreement, the NC Capital Purchase
Agreement, the WMC Purchase Agreement or the
Accredited 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. This
indemnity shall survive the termination of
this Agreement. Fremont is obligated
to make certain indemnification payments
for material breaches of
representations and warranties as further
set forth in the Fremont Agreements.
(p) It is understood and agreed by the parties hereto that the
obligation of the Depositor, Fremont under
the Fremont Agreements or any
Responsible Party under this Agreement, 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 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.
(q) Upon discovery by
any of the parties hereto of a breach of a
representation or warranty made by Fremont
pursuant to the Fremont Agreements,
the party discovering such breach shall
give prompt written notice thereof to
the other parties to this Agreement and
Fremont. The Trustee shall pursue all
legal remedies available to the Trustee
against Fremont with respect to such
breach under the Fremont Agreements if the
Trustee has received written notice
from the Depositor directing the Trustee to
pursue such remedies.
The provisions of this Section 2.03 shall survive delivery of
the
respective Custodial Files to the Trustee
or the applicable Custodian 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, the Securities Administrator 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
July 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
12.04.
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
or to a Custodian, as the case may be,
and shall inure to the benefit of the
Trustee.
ARTICLE III
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
Section 3.01 Servicers to Service Mortgage Loans. (a) For and
on
behalf of the Certificateholders, each
Servicer shall service and administer the
Mortgage Loans for which it is acting as
Servicer 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 and the Custodian
shall execute, at the written request of a
Servicer, and furnish to such
Servicer and any Subservicer such documents
provided to the Trustee or the
Custodian, as applicable, 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 R
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 a 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
Department of the 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 such
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, the Securities Administrator 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
applicable 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 such Servicer shall not
be required to make any such advances
that are Nonrecoverable P&I Advances.
Notwithstanding the foregoing, a Servicer
may waive, or permit a Subservicer to
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 such 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 Securities Administrator 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 Securities Administrator
shall
deposit
the amount of any Basis Risk Payment received and any Interest
Rate Cap
Payment received 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 Securities Administrator
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 Securities Administrator 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
Securities
Administrator to the Class X Certificateholders.
(iii) Any Basis Risk CarryForward Amounts distributed by the
Securities
Administrator to the LIBOR Certificateholders shall be
accounted
for by the Securities Administrator 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 Securities Administrator
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
Securities
Administrator 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 Securities Administrator 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 Securities
Administrator shall, promptly upon
receipt, deposit in the Distribution
Account and retain therein the following:
(i) the aggregate amount remitted by the Servicers to the
Securities
Administrator 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 Securities Administrator 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 Securities
Administrator which describes the amounts
deposited in error in the Distribution
Account. All funds deposited in the
Distribution Account shall be held by the
Securities Administrator in trust for
the Certificateholders until disbursed in
accordance with this Agreement or
withdrawn in accordance with Section
4.02.
(e) The Securities Administrator 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 Securities Administrator 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
Securities Administrator Float Period). The
Securities Administrator may
withdraw from the Distribution Account any
income or gain earned from the
investment of funds deposited therein
during the Securities Administrator Float
Period for its own benefit.
(f) Each Servicer shall give notice to the Securities
Administrator
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 Securities
Administrator 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.
(h) On or prior to the Determination Date, each Custodian shall
deliver an invoice to the Securities
Administrator, setting forth the amount of
the fees payable to such Custodian for the
related Distribution Date. The
Securities Administrator shall calculate
such fees for such Distribution Date,
based upon the fee schedule set forth in
each such invoice. On each Distribution
Date, the Securities Administrator shall
remit the fees so calculated to the
Custodians. On or prior to the
Determination Date, the Trustee shall deliver an
invoice to the Securities Administrator,
setting forth the amount of the fee
payable to the Trustee for the related
Distribution Date. The Securities
Administrator shall calculate such fee for
such Distribution Date, based upon a
separate fee schedule with the Trustee. On
each Distribution Date, the
Securities Administrator shall remit the
invoiced fee to the Trustee. The fees
of the Custodians and the Trustee shall be
payable solely by the Master Servicer
from its own funds.
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 a
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; (vi)
to transfer such funds to a replacement
Escrow Account that meets the
requirements hereof; (vii) recover amounts
deposited in error. As part of its
servicing duties, each 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 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 Master
Servicer
(A) the Master Servicing 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 by the applicable Servicer 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 as stated in the
definition of
"Available
Funds");
(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 such
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 as stated in the
definition
of "Available Funds");
(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 as stated in the definition of
"Available
Funds");
(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 as stated in the
definition of
"Available
Funds");
(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 as
stated in the definition of "Available Funds");
(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 Master Servicer 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 Master Servicer,
on or prior to the next succeeding
Remittance Date, upon making any
withdrawals from the related Collection Account
pursuant to subclause (a)(vi) above.
(c) Each Servicer shall be responsible for reviewing and
reconciling
the applicable Collection Account in
accordance with Accepted Servicing
Practices. Each Servicer shall act to
promptly to resolve any discrepancies.
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 related Escrow
Account (to the extent permitted by
law and the related Mortgage Loan
documents) and the Securities Administrator
may (but is not obligated to) invest funds
in the Distribution Account during
the Securities Administrator Float Period,
and, with respect to the portion of
funds in the Distribution Account deposited
by a Servicer, shall (except during
the Securities Administrator 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 Securities Administrator
shall have no obligation to invest funds
deposited into the Distribution Account
by the Master 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
Securities Administrator 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 Securities
Administrator 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 Securities Administrator
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 Securities Administrator or its
agent if related to investment of funds
in the Distribution Account not during the
Securities Administrator Float
Period), or with respect to investments
during the Securities Administrator
Float Period, the Securities Administrator
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 Securities
Administrator Float Period, the Securities
Administrator 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 Securities
Administrator 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
