EXHIBIT 4
MORGAN STANLEY ABS CAPITAL I INC.,
Depositor,
OPTION ONE MORTGAGE CORPORATION
Responsible Party and Servicer,
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,
AAMES CAPITAL CORPORATION,
Responsible Party,
WELLS FARGO BANK, NATIONAL ASSOCIATION
Custodian,
and
DEUTSCHE BANK NATIONAL TRUST COMPANY,
Trustee
---------------------------
POOLING AND SERVICING AGREEMENT
Dated as of March 1, 2005
---------------------------
MORGAN STANLEY ABS CAPITAL I INC. TRUST 2005-HE2
MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 2005-HE2
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
REPRESENTATIONS AND WARRANTIES
Section 2.01 Conveyance of Mortgage
Loans..................................
Section 2.02 Acceptance by the Trustee of the
Mortgage Loans...............
Section 2.03 Representations and Warranties;
Remedies for Breaches of
Representations and Warranties with Respect to the Mortgage
Loans.........................................................
Section 2.04 Execution and Delivery of
Certificates........................
Section 2.05 REMIC
Matters.................................................
Section 2.06 Representations and Warranties of
the Depositor...............
ARTICLE III
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
Section 3.01 Servicers to Service Mortgage
Loans...........................
Section 3.02 Subservicing Agreements between a
Servicer and Subservicers...
Section 3.03 Successor
Subservicers........................................
Section 3.04 Liability of the
Servicers....................................
Section 3.05 No Contractual Relationship
between Subservicers and the
Trustee.......................................................
Section 3.06 Assumption or Termination of
Subservicing Agreements by
Trustee.......................................................
Section 3.07 Collection of Certain Mortgage
Loan Payments..................
Section 3.08 Subservicing
Accounts.........................................
Section 3.09 Collection of Taxes, Assessments
and Similar Items; Escrow
Accounts......................................................
Section 3.10 Collection
Accounts...........................................
Section 3.11 Withdrawals from the Collection
Accounts......................
Section 3.12 Investment of Funds in the
Collection Accounts and the
Distribution Account..........................................
Section 3.13 Maintenance of Hazard Insurance
and Errors and Omissions and
Fidelity Coverage.............................................
Section 3.14 Enforcement of Due-on-Sale
Clauses; Assumption Agreements.....
Section 3.15 Realization upon Defaulted
Mortgage Loans.....................
Section 3.16 Release of Mortgage
Files.....................................
Section 3.17 Title, Conservation and
Disposition of REO Property...........
Section 3.18 Notification of
Adjustments...................................
Section 3.19 Access to Certain Documentation
and Information Regarding the
Mortgage Loans................................................
Section 3.20 Documents, Records and Funds in
Possession of the Servicers to
Be Held for the Trustee.......................................
Section 3.21 Servicing
Compensation........................................
Section 3.22 Annual Statement as to
Compliance.............................
Section 3.23 Annual Independent Public
Accountants' Servicing Statement;
Financial Statements..........................................
Section 3.24 Trustee to Act as
Servicer....................................
Section 3.25 Compensating
Interest.........................................
Section 3.26 Credit Reporting;
Gramm-Leach-Bliley Act......................
ARTICLE IV
DISTRIBUTIONS AND
ADVANCES BY THE SERVICERS
Section 4.01
Advances......................................................
Section 4.02 Priorities of
Distribution....................................
Section 4.03 Monthly Statements to
Certificateholders......................
Section 4.04 Certain Matters Relating to the
Determination of LIBOR........
Section 4.05 Allocation of Applied Realized
Loss Amounts...................
ARTICLE V
THE CERTIFICATES
Section 5.01 The
Certificates..............................................
Section 5.02 Certificate Register; Registration
of Transfer and Exchange of
Certificates..................................................
Section 5.03 Mutilated, Destroyed, Lost or
Stolen Certificates............
Section 5.04 Persons Deemed
Owners........................................
Section 5.05 Access to List of
Certificateholders' Names and Addresses....
Section 5.06 Maintenance of Office or
Agency..............................
ARTICLE VI
THE DEPOSITOR AND THE SERVICERS
Section 6.01 Respective Liabilities of the
Depositor and the Servicers....
Section 6.02 Merger or Consolidation of the
Depositor or a Servicer.......
Section 6.03 Limitation on Liability of the
Depositor, the Servicers and
Others.......................................................
Section 6.04 Limitation on Resignation of a
Servicer......................
Section 6.05 Additional Indemnification by the
Servicers; Third Party
Claims.......................................................
ARTICLE VII
DEFAULT
Section 7.01 Events of
Default............................................
Section 7.02 Trustee to Act; Appointment of
Successor.....................
Section 7.03 Notification to
Certificateholders...........................
ARTICLE VIII
CONCERNING THE TRUSTEE
Section 8.01 Duties of the
Trustee........................................
Section 8.02 Certain Matters Affecting the
Trustee 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
TERMINATION
Section 9.01 Termination upon Liquidation or
Purchase of the Mortgage Loans.
Section 9.02 Final Distribution on the
Certificates.......................
Section 9.03 Additional Termination
Requirements..........................
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.01
Amendment....................................................
Section 10.02 Recordation of Agreement;
Counterparts.......................
Section 10.03 Governing
Law................................................
Section 10.04 Intention of
Parties.........................................
Section 10.05
Notices......................................................
Section 10.06 Severability of
Provisions...................................
Section 10.07 Assignment; Sales; Advance
Facilities........................
Section 10.08 Limitation on Rights of
Certificateholders...................
Section 10.09 Inspection and Audit
Rights..................................
Section 10.10 Certificates Nonassessable
and Fully Paid....................
Section 10.11 Rule of
Construction.........................................
Section 10.12 Waiver of Jury
Trial.........................................
SCHEDULES
Schedule I Mortgage Loan
Schedule
Schedule II Representations and
Warranties of Option One Mortgage Corporation,
as Servicer
Schedule III Representations and Warranties of
Countrywide Home Loans Servicing
LP, as Servicer
Schedule IV Representations and
Warranties of HomEq Servicing Corporation, as
Servicer
Schedule V Representations and
Warranties of Morgan Stanley ABS Capital I
Inc. as to the Mortgage Loans
Schedule VI Representations and
Warranties of Option One as to the Option One
Mortgage Loans
Schedule VII Representations and Warranties of
NC Capital as to the NC Capital
Mortgage
Loans
Schedule VIII Representations and
Warranties of Accredited as to the Accredited
Mortgage Loans
Schedule IX Representations and
Warranties of Decision One, as to the Decision
One Mortgage Loans
Schedule X Representations and
Warranties of Aames, as to the Aames Mortgage
Loans
Schedule XI Representations and
Warranties of the Custodian
Schedule XII Class A-3a Target Balance
Schedule
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 Custodian
Exhibit F Form of Document Certification
and Exception Report of Trustee and
Custodian
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 Option One Purchase Agreement
Exhibit S Aames Purchase Agreement
Exhibit T Form of Servicer Power of
Attorney
<PAGE>
THIS POOLING AND SERVICING AGREEMENT, dated as of March 1,
2005,
among MORGAN STANLEY ABS CAPITAL I INC., a
Delaware corporation (the
"Depositor"), COUNTRYWIDE HOME LOANS
SERVICING LP, a Texas limited partnership
("Countrywide"), OPTION ONE MORTGAGE
CORPORATION, a California corporation
("Option One"), HOMEQ SERVICING
CORPORATION, a New Jersey corporation ("HomEq",
and together with Countrywide and Option
One in its capacity as servicer, the
"Servicers"), 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"), AAMES CAPITAL CORPORATION, a
California corporation ("Aames"), WELLS
FARGO BANK, NATIONAL ASSOCIATION, a
national banking association, as custodian
(the "Custodian"), and DEUTSCHE BANK
NATIONAL TRUST COMPANY, a national banking
association, as trustee (the
"Trustee").
W I T N E S S E T H:
In consideration of the mutual agreements herein contained, the
parties hereto agree as follows:
PRELIMINARY STATEMENT
The Trustee shall elect that two segregated asset pools within
the
Trust Fund be treated for federal income
tax purposes as comprising two REMICs
(each, a "REMIC" or, in the alternative,
the Lower Tier REMIC and the Upper Tier
REMIC, respectively). Each Class of
Certificates (other than the Class P and
Class R Certificates), other than the right
of each Class of LIBOR Certificates
to receive Basis Risk CarryForward Amounts
and the right of the Class X
Certificates to receive payments from the
Interest Rate Cap Agreements,
represents ownership of a regular interest
in the Upper Tier REMIC for purposes
of the REMIC Provisions. The Class R
Certificate represents ownership of the
sole class of residual interest in each of
the Lower Tier REMIC and the Upper
Tier REMIC for purposes of the REMIC
Provisions. The Startup Day for each REMIC
described herein is the Closing Date. The
latest possible maturity date for each
Certificate is the latest date referenced
in Section 2.05. The Upper Tier REMIC
shall hold as assets the several classes of
uncertificated Lower Tier Regular
Interests, set out below. Each such Lower
Tier Regular Interest is hereby
designated as a regular interest in the
Lower Tier REMIC. The Class LT-A-1ss,
Class LT-A-2ss, LT-A-1mz, Class LT-A-2mz,
Class LT-A-3a, Class LT-A-3b, Class
LT-A-3mz, 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>
Lower Tier
Lower Tier Interest
Initial Lower Tier
Corresponding Upper
Class Designation
Rate
Principal Amount
Tier REMIC Class
----------------- -------------------
------------------
-------------------
<S>
<C>
<C>
<C>
Class LT-A-1ss
(1)
1/2 initial Corresponding Upper Tier REMIC
A-1ss
Class initial Class Certificate Balance
Class LT-A-1mz
(1)
1/2 initial Corresponding Upper Tier REMIC
A-1mz
Class initial Class Certificate Balance
Class LT-A-2ss
(1)
1/2 initial Corresponding Upper Tier REMIC
A-2ss
Class initial Class Certificate Balance
Class LT-A-2mz
(1)
1/2 initial Corresponding Upper Tier REMIC
A-2mz
Class initial Class Certificate Balance
Class LT-A-3a
(1)
1/2 initial Corresponding Upper Tier REMIC
A-3a
Class initial Class Certificate Balance
Class LT-A-3b
(1)
1/2 initial Corresponding Upper Tier REMIC
A-3b
Class initial Class Certificate Balance
Class LT-A-3mz
(1)
1/2 initial Corresponding Upper Tier REMIC
A-3mz
Class initial Class Certificate Balance
Class LT-M-1
(1)
1/2 initial Corresponding Upper Tier REMIC
M-1
Class initial Class Certificate Balance
Class LT-M-2
(1)
1/2 initial Corresponding Upper Tier REMIC
M-2
Class initial Class Certificate Balance
Class LT-M-3
(1)
1/2 initial Corresponding Upper Tier REMIC
M-3
Class initial Class Certificate Balance
Class LT-M-4
(1)
1/2 initial Corresponding Upper Tier REMIC
M-4
Class initial Class Certificate Balance
Class LT-M-5
(1)
1/2 initial Corresponding Upper Tier REMIC
M-5
Class initial Class Certificate Balance
Class LT-M-6
(1)
1/2 initial Corresponding Upper Tier REMIC
M-6
Class initial Class Certificate Balance
Class LT-B-1
(1)
1/2 initial Corresponding Upper Tier REMIC
B-1
Class initial Class Certificate Balance
Class LT-B-2
(1)
1/2 initial Corresponding Upper Tier REMIC
B-2
Class initial Class Certificate Balance
Class LT-B-3
(1)
1/2 initial Corresponding Upper Tier REMIC
B-3
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, Class LT-Group II and
Class LT-Group III Interests
Class LT-Group I
(2)
0.001% aggregate Stated Principal Balance
of Group I Mortgage Loans (3)
Class LT-Group II
(4)
0.001% aggregate Stated Principal Balance
of Group II Mortgage Loans(3)
Class LT-Group III
(5)
0.001% aggregate Stated Principal Balance
of Group III Mortgage Loans(3)
Class LT-R
(6)
(6)
</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) For all Distribution Dates,
the Lower Tier Principal Amount of these Lower
Tier
Regular Interests shall be rounded to eight decimal places.
(4) 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.
(5) The interest rate with
respect to any Distribution Date for the Class
LT-Group
III Interest is a per annum variable rate (expressed as a
percentage
rounded to eight decimal places) equal to the Loan Group III
Cap.
(6) 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, the Class LT-Group II Interest
and the Class LT-Group III 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, the Class LT-Group II Interest
and the Class LT-Group III 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, the Class
LT-Group II Interest and the Class LT-Group
III 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,
the Class LT-Group II Interest and the
Class LT-Group III Interest, all payments
of scheduled principal and prepayments
of principal generated by the Mortgage
Loans, all Subsequent Recoveries and all
Realized Losses, allocable to such Lower
Tier Regular Interests and increases in
the Lower-Tier Principal Amount of such
Lower Tier Regular Interests as a result
of a Subsequent Recovery shall be allocated
(i) to the Class LT-Group I
Interest, the Class LT-Group II Interest
and the Class LT-Group III 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.
Upper Tier
Initial Upper Tier
Interest Rate Principal
Amount
and Corresponding and Corresponding
Upper Tier
Class Pass-Through Class Certificate
Corresponding
Class Designation
Rate
Balance
Certificate Class
----------------- ------------------
------------------ -----------------
Class A-1ss
(1)
$326,085,000
Class A-1ss(11)
Class A-1mz
(2)
$ 81,522,000
Class A-1mz(11)
Class A-2ss
(3)
$366,742,000
Class A-2ss(11)
Class A-2mz
(4)
$ 40,750,000
Class A-2mz(11)
Class A-3a
(5)
$240,000,000
Class A-3a(11)
Class A-3b
(6)
$191,902,000
Class A-3b(11)
Class A-3mz
(7)
$ 47,990,000
Class A-3mz(11)
Class M-1
(8)
$ 49,257,000
Class M-1(11)
Class M-2
(8)
$ 44,490,000
Class M-2(11)
Class M-3
(8)
$ 28,601,000
Class M-3(11)
Class M-4
(8)
$ 26,218,000
Class M-4(11)
Class M-5
(8)
$ 25,423,000
Class M-5(11)
Class M-6
(8)
$ 22,245,000
Class M-6(11)
Class B-1
(8)
$ 19,067,000
Class B-1(11)
Class B-2
(8)
$ 15,890,000
Class B-2(11)
Class B-3
(8)
$ 15,890,000
Class B-3(11)
Class X
(9)
$
0(9) Class
X(9)
Class UT-R
(10)
$
0
Class R
------------
(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 0.2100%, (ii) the
Loan Group
I Cap and
(iii) the WAC Cap or (b) after the Optional Termination Date,
the least
of (i) LIBOR plus 0.4200%, (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 0.2600%, (ii) the
Loan Group
I Cap and
(iii) the WAC Cap or (b) after the Optional Termination Date,
the least
of (i) LIBOR plus 0.5200%, (ii) the Loan Group I Cap and (iii)
the WAC
Cap.
(3) The Class A-2ss 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 0.2200%, (ii) the
Loan Group
II Cap and
(iii) the WAC Cap or (b) after the Optional Termination Date,
the least
of (i) LIBOR plus 0.4400%, (ii) the Loan Group II Cap and (iii)
the WAC
Cap.
(4) The Class A-2mz 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-3a 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 0.0900%, (ii) the
Loan Group
III Cap
and (iii) the WAC Cap or (b) after the Optional Termination
Date,
the least
of (i) LIBOR plus 0.1800%, (ii) the Loan Group III Cap and
(iii)
the WAC
Cap.
(6) The Class A-3b 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 0.2200%, (ii) the
Loan Group
III Cap
and (iii) the WAC Cap or (b) after the Optional Termination
Date,
the least
of (i) LIBOR plus 0.4400%, (ii) the Loan Group III Cap and
(iii)
the WAC
Cap.
(7) The Class A-3mz 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
III 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 III Cap and
(iii)
the WAC
Cap.
(8) 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
0.4000%,
0.4400%,
0.4800%, 0.6300%, 0.6800%, 0.7300%, 1.2000%, 1.3000% and
1.9000%,
respectively, and (ii) the WAC Cap or (b) after the Optional
Termination
Date, the
lesser of (i) LIBOR plus 0.6000%, 0.6600%, 0.7200%, 0.9450%,
1.0200%,
1.0950%, 1.8000%, 1.9500% and 2.8500%, respectively, and (ii)
the
WAC
Cap.
(9) The Class X Interest has an
initial principal balance of $46,874,277 but
it will
not accrue interest on such balance but will accrue interest on
a
notional
principal balance. As of any Distribution Date, the Class X
Interest
shall have a notional principal balance equal to the aggregate
of
the
principal balances of the Lower Tier Regular Interests as of the
first
day of the
related Interest Accrual Period. With respect to any Interest
Accrual
Period, the Class X Interest shall bear interest at a rate
equal
to the
excess, if any, of the WAC Cap over the product of (i) 2 and
(ii)
the
weighted average Lower-Tier Interest Rates of the Lower Tier
Regular
Interests,
where the Lower-Tier Interest Rate on each of the Class
LT-Accrual
Interest, Class LT-Group I Interest, Class LT-Group II Interest
and Class
LT-Group III Interest is subject to a cap equal to zero and
each
LT
Accretion Directed Class is subject to a cap equal to the
Pass-Through
Rate on
its Corresponding Class. With respect to any Distribution Date,
interest
that so accrues on the notional principal balance of the Class
X
Interest
shall be deferred in an amount equal to any increase in the
Subordinated Amount on such Distribution Date. Such deferred
interest
shall not
itself bear interest. The Class X Certificates will represent
beneficial
ownership of the Class X Interest, the Interest Rate Cap
Agreements, and amounts in the Excess Reserve Fund Account, subject
to the
obligation
to make payments from the Excess Reserve Fund Account in
respect of
Basis Risk CarryForward Amounts. For federal income tax
purposes,
the Trustee will treat a Class X Certificateholder's obligation
to make
payments from the Excess Reserve Fund Account as payments made
pursuant
to an interest rate cap contract written by the Class X
Certificateholders in favor of each Class of LIBOR Certificates.
Such
rights of
the Class X Certificateholders and LIBOR Certificateholders
shall be
treated as held in a portion of the Trust Fund that is treated
as
a grantor
trust under subpart E, Part I of subchapter J of the Code.
(10) 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.
(11) Each of these Certificates will
represent not only the ownership of the
Corresponding Class of Upper Tier Regular Interest but also the
right to
receive
payments from the Excess Reserve Fund Account in respect of any
Basis Risk
CarryForward Amounts. For federal income tax purposes, the
Trustee
will treat a Certificateholder's right to receive payments from
the Excess
Reserve Fund Account as payments made pursuant to an interest
rate cap
contract written by the Class X Certificateholders.
The minimum denomination for each Class of Certificates, other
than
the Class P, Class R and the Class X
Certificates, will be $25,000 with integral
multiples of $1 in excess thereof. The
minimum denomination for the Class P and
the Class X Certificates will each be a 1%
Percentage Interest in such Class.
The Class R Certificate will represent a
100% Percentage Interest in such Class.
It is expected that each Class of Certificates will receive its
final distribution of principal and
interest on or prior to the Final Scheduled
Distribution Date.
Set forth below are designations of Classes of Certificates to
the
categories used herein:
Book-Entry Certificates.........
All Classes of
Certificates other than the
Physical Certificates.
Class A Certificates............
Class A-1ss,
Class A-1mz, Class A-2ss, Class
A-2mz, Class A-3a, Class A-3b and Class A-3mz
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:
Aames: Aames Capital Corporation, a California corporation, and
its
successors in interest.
Aames Mortgage Loans: The Mortgage Loans purchased by the
Purchaser
pursuant to the Aames Purchase Agreement
for which Aames is identified as
Originator on the Mortgage Loan
Schedule.
Aames Purchase Agreement: The Second Amended and Restated
Mortgage
Loan Purchase and Warranties Agreement,
dated as of June 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
September 29, 2003, November 25, 2003,
December 16, 2003, February 26, 2004, March
30, 2004 and June 28, 2004,
respectively, each by and between Aames and
the Purchaser, a copy of which
(including all such amendments) is attached
hereto as Exhibit S.
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
April 2, 2004, Amendment No. 2, dated
as of July 2, 2004 and Amendment No. 3,
dated as of February 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 10.07.
Advancing Person: The Person to whom any Servicer's rights
under
this Agreement to be reimbursed for any
P&I Advances or Servicing Advances have
been assigned pursuant to Section
10.07.
Affiliate: With respect to any Person, any other Person
controlling,
controlled by or under common control with
such first Person. For the purposes
of this definition, "control" means the
power to direct the management and
policies of such Person, directly or
indirectly, whether through the ownership
of voting securities, by contract or
otherwise; and the terms "controlling" and
"controlled" have meanings correlative to
the foregoing.
Agreement: This Pooling and Servicing Agreement and all
amendments
or supplements hereto.
Amount Held for Future Distribution: As to the Certificates on
any
Distribution Date, the aggregate amount
held in each Collection Account at the
close of business on the related
Determination Date on account of (i) Principal
Prepayments, Insurance Proceeds,
Condemnation Proceeds and Liquidation Proceeds
on the Mortgage Loans received after the
end of the related Prepayment Period
and (ii) all Scheduled Payments on the
Mortgage Loans due after the end of the
related Due Period.
Applied Realized Loss Amount: With respect to any Distribution
Date,
the amount, if any, by which the aggregate
Class Certificate Balance of the
LIBOR Certificates after distributions of
principal on such Distribution Date
exceeds the aggregate Stated Principal
Balance of the Mortgage Loans for such
Distribution Date.
Appraised Value: The value set forth in an appraisal made in
connection with the origination of the
related Mortgage Loan as the value of the
Mortgaged Property.
Assignment of Mortgage: An assignment of the Mortgage, notice
of
transfer or equivalent instrument in
recordable form (other than the assignee's
name and recording information not yet
returned from the recording office),
reflecting the sale of the Mortgage to the
Trustee.
Available Funds: With respect to any Distribution Date and the
Mortgage Loans to the extent received by
the Trustee (x) the sum of (i) all
scheduled installments of interest (net of
the related Expense Fees) and
principal due on the Due Date on such
Mortgage Loans in the related Due Period
and received by the Servicers on or prior
to the related Determination Date,
together with any P&I Advances in
respect thereof; (ii) all Condemnation
Proceeds, Insurance Proceeds and
Liquidation Proceeds received by the Servicers
during the related Prepayment Period (in
each case, net of unreimbursed expenses
incurred in connection with a liquidation
or foreclosure and unreimbursed
Advances, if any); (iii) all partial or
full prepayments on the Mortgage Loans
received by the Servicers during the
related Prepayment Period together with all
Compensating Interest, if applicable,
thereon (excluding any Prepayment
Charges); (iv) all Substitution Adjustment
Amounts with respect to the
substitutions of Mortgage Loans that occur
during the month in which such
Distribution Date occurs; (v) amounts
received with respect to such Distribution
Date as the Repurchase Price in respect of
a Mortgage Loan repurchased during
the related Prepayment Period; (vi) the
proceeds received with respect to the
termination of the Trust Fund pursuant to
clause (a) of Section 9.01; and (vii)
the Closing Date Deposit Amount; reduced by
(y) amounts in reimbursement for
Advances previously made with respect to
the Mortgage Loans and other amounts as
to which the Servicers, the Depositor, the
Trustee or the Custodian are entitled
to be paid or reimbursed pursuant to this
Agreement.
Balloon Loan: Any Mortgage Loan that requires only payments of
interest until the stated maturity date of
the Mortgage Loan or Scheduled
Payments of principal which (not including
the payment due on its stated
maturity date) are based on an amortization
schedule that would be insufficient
to fully amortize the principal thereof by
the stated maturity date of the
Mortgage Loan.
Basic Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the
Principal Remittance Amount for such
Distribution Date over (ii) the Excess
Subordinated Amount, if any, for such
Distribution Date.
Basis Risk CarryForward Amount: With respect to each Class of
LIBOR
Certificates, as of any Distribution Date,
the sum of (A) if on such
Distribution Date the Pass-Through Rate for
any Class of LIBOR Certificates is
based upon a Loan Group Cap or the WAC Cap,
the excess of (i) the amount of
interest such Class of Certificates would
otherwise be entitled to receive on
such Distribution Date had such rate been
calculated as the sum of LIBOR and the
applicable Pass-Through Margin on such
Class of Certificates for such
Distribution Date, over (ii) the amount of
interest payable on such Class of
Certificates at, with respect to the Group
I Class A Certificates, the lesser of
the Loan Group I Cap or the WAC Cap, with
respect to the Group II Class A
Certificates, the lesser of the Loan Group
II Cap or the WAC Cap, with respect
to the Group III Class A Certificates, the
lesser of the Loan Group III 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 or Class
A-3a Accelerated Amortization
Amounts).
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, 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 Trustee
in
substantially the forms attached hereto as
exhibits.
Certificate Balance: With respect to any Class of Certificates,
other than the Class X, Class P or Class R
Certificates, at any date, the
maximum dollar amount of principal to which
the Holder thereof is then entitled
hereunder, such amount being equal to the
Denomination thereof minus all
distributions of principal previously made
with respect thereto and in the case
of any 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 Applied
Realized Loss Amounts allocated to such
Class or Classes). The Class X, Class P
and Class R Certificates have no
Certificate Balance.
Certificate Owner: With respect to a Book-Entry Certificate,
the
Person who is the beneficial owner of such
Book-Entry Certificate.
Certificate Register: The register maintained pursuant to
Section
5.02.
Certificateholder or Holder: The person in whose name a
Certificate
is registered in the Certificate Register,
except that, solely for the purpose
of giving any consent pursuant to this
Agreement, any Certificate registered in
the name of the Depositor or any affiliate
of the Depositor shall be deemed not
to be Outstanding and the Percentage
Interest evidenced thereby shall not be
taken into account in determining whether
the requisite amount of Percentage
Interests necessary to effect such consent
has been obtained; provided, however,
that if any such Person (including the
Depositor) owns 100% of the Percentage
Interests evidenced by a Class of
Certificates, such Certificates shall be
deemed to be Outstanding for purposes of
any provision hereof that requires the
consent of the Holders of Certificates of a
particular Class as a condition to
the taking of any action hereunder. The
Trustee is entitled to rely conclusively
on a certification of the Depositor or any
affiliate of the Depositor in
determining which Certificates are
registered in the name of an affiliate of the
Depositor.
Certification: As defined in Section 8.12.
Class: All Certificates bearing the same class designation as
set
forth in the Preliminary Statement.
Class A Certificate Group: The Group I Class A Certificates,
the
Group II Class A Certificates or the Group
III Class A Certificates, as
applicable.
Class A Certificates: The Group I Class A Certificates, the Group
II
Class A Certificates and the Group III
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; (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; and (C) with
respect to the Group III 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 III 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) 63.00% of the aggregate
Stated Principal Balance of the
Mortgage Loans for such Distribution Date
and (B) the excess, if any, of the
aggregate Stated Principal Balance of the
Mortgage Loans for such Distribution
Date over $7,944,731.
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-2ss Certificates: All Certificates bearing the class
designation of "Class A-2ss".
Class A-2mz Certificates: All Certificates bearing the class
designation of "Class A-2mz".
Class A-3a Accelerated Amortization Event: With respect to any
Distribution Date beginning with the
Distribution Date in March 2012, the
circumstance in which the Class Certificate
Balance of the Class A-3a
Certificates would exceed the Class A-3a
Target Balance for that Distribution
Date.
Class A-3a Accelerated Amortization Amount: With respect to any
Distribution Date on which a Class A-3a
Accelerated Amortization Event is in
effect, the lesser of (a) the amount of
funds remaining after making payments
pursuant to Section 4.02(a)(iii)(V) and (b)
the Class Certificate Balance of the
Class A-3a Certificates (after application
of the related Principal Distribution
Amount on such Distribution Date).
Class A-3a Cap Agreement: The interest rate cap agreement,
dated
March 30, 2005 between Morgan Stanley
Capital Services Inc. and the Trustee,
relating to the Class A-3a
Certificates.
Class A-3a Certificates: All Certificates bearing the class
designation of "Class A-3a".
Class A-3a Target Balance: With respect to each Distribution
Date
beginning in March 2012, the amount listed
on Schedule V for such Distribution
Date.
Class A-3b Certificates: All Certificates bearing the class
designation of "Class A-3b
Certificates".
Class A-3b and Class A-3mz Cap Agreement: The interest rate cap
agreement, dated March 30, 2005 between
Morgan Stanley Capital Services Inc. and
the Trustee, relating to the Class A-3b and
Class A-3mz Certificates.
Class A-3mz Certificates: All Certificates bearing the class
designation of "Class A-3mz".
Class B Cap Agreement: The interest rate cap agreement, dated
March
30, 2005, between Morgan Stanley Capital
Services Inc. and the Trustee, relating
to the Class B Certificates.
Class B Certificates: The Class B-1, Class B-2 and Class B-3
Certificates.
Class B-1 Certificates: All Certificates bearing the class
designation of "Class B-1".
Class B-1 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the
sum of (A) the aggregate Class
Certificate Balances of the Class A
Certificates (after taking into account the
distribution of the Class A Principal
Distribution Amount for such Distribution
Date), (B) the Class Certificate Balance of
the Class M-1 Certificates (after
taking into account the distribution of the
Class M-1 Principal Distribution
Amount for such Distribution Date), (C) the
Class Certificate Balance of the
Class M-2 Certificates (after taking into
account the distribution of the Class
M-2 Principal Distribution Amount for such
Distribution Date), (D) the Class
Certificate Balance of the Class M-3
Certificates (after taking into account the
distribution of the Class M-3 Principal
Distribution Amount for such
Distribution Date), (E) the Class
Certificate Balance of the Class M-4
Certificates (after taking into account the
distribution of the Class M-4
Principal Distribution Amount for such
Distribution Date), (F) the Class
Certificate Balance of the Class M-5
Certificates (after taking into account the
distribution of the Class M-5 Principal
Distribution Amount for such
Distribution Date), (G) the Class
Certificate Balance of the Class M-6
Certificates (after taking into account the
distribution of the Class M-6
Principal Distribution Amount for such
Distribution Date) and (H) the Class
Certificate Balance of the Class B-1
Certificates immediately prior to such
Distribution Date over (ii) the lesser of
(A) 90.10% 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
$7,944,731.
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) 92.10% 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
$7,944,731.
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) 94.10% 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
$7,944,731.
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
March
30, 2005, between Morgan Stanley Capital
Services Inc. and the Trustee, relating
to the Class M Certificates.
Class M Certificates: The Class M-1, Class M-2, Class M-3,
Class
M-4, Class M-5 and Class M-6
Certificates.
Class M-1 Certificates: All Certificates bearing the class
designation of "Class M-1".
Class M-1 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the
sum of (A) the aggregate Class
Certificate Balances of the Class A
Certificates (after taking into account the
distribution of the Class A Principal
Distribution Amount for such Distribution
Date), and (B) the Class Certificate
Balance of the Class M-1 Certificates
immediately prior to such Distribution Date
over (ii) the lesser of (A) 69.20%
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 $7,944,731.
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) 74.80% 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
$7,944,731.
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) 78.40% of the aggregate Stated
Principal Balance of the Mortgage Loans for
such Distribution Date and (B) the
excess, if any, of the aggregate Stated
Principal Balance of the Mortgage Loans
for such Distribution Date over
$7,944,731.
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) 81.70% 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
$7,944,731.
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) 84.90% 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
$7,944,731.
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) 87.70% 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
$7,944,731.
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 and any amounts paid as a Class
A-3a Accelerated Amortization Amount.
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: March 30, 2005.
Closing Date Deposit Amount: $1095.05 (all of which is allocable
to
principal) deposited by the Depositor into
the Distribution Account on the
Closing Date. $88.93 of the Closing Date
Deposit Amount shall be attributable to
the Group I Mortgage Loans, $755.37 of the
Closing Date Deposit Amount shall be
attributable to the Group II Mortgage
Loans, and $250.75 of the Closing Date
Deposit Amount shall be attributable to the
Group III Mortgage Loans.
Code: The Internal Revenue Code of 1986, including any successor
or
amendatory provisions.
Collection Account: As defined in Section 3.10(a).
Combined Loan to Value Ratio or CLTV: As of any date and as to
any
Second Lien Mortgage Loan, the ratio,
expressed as a percentage, of the (a) sum
of (i) the outstanding principal balance of
the Second Lien Mortgage Loan and
(ii) the outstanding principal balance as
of such date of any mortgage loan or
mortgage loans that are senior or equal in
priority to the Second Lien Mortgage
Loan and which are secured by the same
Mortgaged Property to (b) the Appraised
Value as determined pursuant to the
Underwriting Guidelines of the related
Mortgaged Property as of the origination of
the Second Lien Mortgage Loan.
Compensating Interest: For any Distribution Date, the lesser of
(a)
the Prepayment Interest Shortfall, if any,
for such Distribution Date, with
respect to voluntary Principal Prepayments
in Full (excluding any payments made
upon liquidation of the Mortgage Loan) (or,
in the case of HomEq, the amount by
which such Prepayment Interest Shortfall
exceeds all Prepayment Interest
Excesses for such Distribution Date) and
(b) the amount of the Servicing Fee
payable to the applicable Servicer for such
Distribution Date.
Condemnation Proceeds: All awards of settlements in respect of
a
Mortgaged Property, whether permanent or
temporary, partial or entire, by
exercise of the power of eminent domain or
condemnation.
Convertible Mortgage Loan: Any individual Adjustable Rate
Mortgage
Loan which contains a provision whereby the
Mortgagor is permitted to convert
the Adjustable Rate Mortgage Loan to a
Fixed Rate Mortgage Loan in accordance
with the terms of the related Mortgage
Note.
Corporate Trust Office: The designated office of the Trustee in
the
State of California at which at any
particular time its corporate trust business
with respect to this Agreement is
administered, which office at the date of the
execution of this Agreement is located at
1761 East St. Andrew Place, Santa Ana,
California 92705, Attn: Trust
Administration-MS05H2, facsimile no. (714)
247-6329 and which is the address to which
notices to and correspondence with
the Trustee should be directed.
Corresponding Class: The class of interests in any REMIC
created
under this Agreement that corresponds to
the class of interests in another such
REMIC or to a Class of Certificates in the
manner set out below:
Corresponding Lower Tier Corresponding Upper
Tier
Corresponding Class
Class Designation
Regular Interest
of Certificates
------------------------
------------------------ -------------------
Class LT-A-1ss
Class A-1ss
Class A-1ss
Class LT-A-1mz
Class A-1mz
Class A-1mz
Class LT-A-2ss
Class A-2ss
Class A-2ss
Class LT-A-2mz
Class A-2mz
Class A-2mz
Class LT-A-3a
Class A-3a
Class A-3a
Class LT-A-3b
Class A-3b
Class A-3b
Class LT-A-3mz
Class A-3mz
Class A-3mz
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:
Distribution Date Occurring In
Cumulative Loss Percentage
------------------------------
--------------------------
April 2008 through March 2009 3.000% for the
first month, plus an additional
1/12th of 1.500% for each month thereafter
(e.g., 3.750% in October 2008)
April 2009 through March 2010 4.500% for the
first month, plus an additional
1/12th of 1.500% for each month thereafter
(e.g., 5.250% in October 2009)
April 2010 through March 2011 6.000% for the
first month, plus an additional
1/12th of 0.750% for each month thereafter
(e.g., 6.375% in October 2010)
April 2011 and thereafter
6.750%
Custodial File: With respect to each Mortgage Loan, the file
retained by the Trustee or Custodian, as
applicable, consisting of items (i) -
(viii) as listed on Exhibit K hereto.
Custodian: Wells Fargo Bank, National Association, a national
banking association, and its successors in
interest.
Custodian Fee: With respect to each Distribution Date, the
aggregate
amount of fees and expenses that the
Custodian is entitled to receive, pursuant
to the fee schedule related to the Option
One Mortgage Loans to which the
Depositor and the Custodian have previously
agreed, for custodial services
rendered with respect to the Option One
Mortgage Loans during the related Due
Period. The Custodian shall inform the
Servicers and the Trustee of the
Custodian Fee on or prior to the related
Determination Date pursuant to Section
3.07(h).
Custodian Fee Rate: As to any Distribution Date, the Custodian
Fee
for such Distribution Date, converted to a
per annum rate on (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 Determination Date
in April 2005 only, the portion of the
Closing Date Deposit Amount allocable to
principal (calculated on an actual/360
basis).
Cut-off Date: March 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
Responsible
Parties 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 Responsible Party 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
Stated Principal Balances of 60+ Day
Delinquent Mortgage Loans for such
Distribution Date, divided by (y) the
aggregate Stated Principal Balance of the
Mortgage Loans for such Distribution
Date equals or exceeds 42.00% of the prior
period's Senior Enhancement
Percentage.
Denomination: With respect to each Certificate, the amount set
forth
on the face thereof as the "Initial
Certificate Balance of this Certificate" or
the Percentage Interest appearing on the
face thereof.
Depositor: Morgan Stanley ABS Capital I Inc., a Delaware
corporation, and its successors in
interest.
Depository: The initial Depository shall be The Depository
Trust
Company, the nominee of which is CEDE &
Co., as the registered Holder of the
Book-Entry Certificates. The Depository
shall at all times be a "clearing
corporation" as defined in Section
8-102(a)(5) of the Uniform Commercial Code of
the State of New York.
Depository Institution: Any depository institution or trust
company,
including the Trustee, that (a) is
incorporated under the laws of the United
States of America or any State thereof, (b)
is subject to supervision and
examination by federal or state banking
authorities and (c) has outstanding
unsecured commercial paper or other
short-term unsecured debt obligations that
are rated "P-1" by Moody's, "F1+" by Fitch
and "A-1" by Standard & Poor's.
Depository Participant: A broker, dealer, bank or other
financial
institution or other Person for whom from
time to time a Depository effects
book-entry transfers and pledges of
securities deposited with the Depository.
Determination Date: With respect to each Distribution Date, the
18th
day (or if such day is not a Business Day,
the immediately preceding Business
Day) in the calendar month in which such
Distribution Date occurs.
Distribution Account: The separate Eligible Account created and
maintained by the Trustee pursuant to
Section 3.07(d) in the name of the Trustee
for the benefit of the Certificateholders
and designated "Deutsche Bank National
Trust Company in trust for registered
holders of Morgan Stanley ABS Capital I
Inc. Trust 2005-HE2 Mortgage Pass-Through
Certificates, Series 2005-HE2." Funds
in the Distribution Account shall be held
in trust for the Certificateholders
for the uses and purposes set forth in this
Agreement.
Distribution Account Deposit Date: As to any Distribution Date,
12:00 noon New York City time on the third
Business Day immediately preceding
such Distribution Date.
Distribution Date: The 25th day of each calendar month, or if
such
day is not a Business Day, the next
succeeding Business Day, commencing in April
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 (or a
comparable rating if another Rating
Agency is specified by the Depositor by
written notice to each Servicer) at the
time any amounts are held on deposit
therein, (ii) an account or accounts the
deposits in which are fully insured by the
FDIC, (iii) a trust account or
accounts maintained with a federal or state
chartered depository institution or
trust company acting in its fiduciary
capacity or (iv) any other account
acceptable to each Rating Agency. Eligible
Accounts may bear interest, and may
include, if otherwise qualified under this
definition, accounts maintained with
the Trustee.
ERISA: The Employee Retirement Income Security Act of 1974, as
amended.
ERISA-Qualifying Underwriting: A best efforts or firm
commitment
underwriting or private placement that
meets the requirements of Prohibited
Transaction Exemption ("PTE") 2002-41, 67
Fed. Reg. 54487 (2002) (or any
successor thereto), or any substantially
similar administrative exemption
granted by the U.S. Department of
Labor.
ERISA-Restricted Certificate: As specified in the Preliminary
Statement.
Escrow Account: The Eligible Account or Accounts established
and
maintained pursuant to Section 3.09(b).
Escrow Payments: As defined in Section 3.09(b).
Event of Default: As defined in Section 7.01.
Excess Reserve Fund Account: The separate Eligible Account
created
and maintained by the Trustee pursuant to
Sections 3.07(b) and 3.07(c) in the
name of the Trustee for the benefit of the
Regular Certificateholders and
designated "Deutsche Bank National Trust
Company in trust for registered holders
of Morgan Stanley ABS Capital I Inc. Trust
2005-HE2, Mortgage Pass-Through
Certificates, Series 2005-HE2." Funds in
the Excess Reserve Fund Account shall
be held in trust for the Regular
Certificateholders for the uses and purposes
set forth in this Agreement. Amounts on
deposit in the Excess Reserve Fund
Account shall not be invested.
Excess Subordinated Amount: With respect to any Distribution
Date,
the excess, if any, of (a) the Subordinated
Amount on such Distribution Date
over (b) the Specified Subordinated Amount
for such Distribution Date.
Exchange Act: As defined in Section 8.12(a).
Expense Fee Rate: As to each Mortgage Loan, a per-annum rate
equal
to the sum of the Servicing Fee Rate, the
Trustee Fee Rate, the Custodian Fee
Rate and any lender-paid primary mortgage
insurance fee rate, if applicable.
Expense Fees: As to each Mortgage Loan, the sum of the
Servicing
Fee, the Trustee Fee, the Custodian 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 or the
Depositor, as applicable, as
contemplated by this Agreement), 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..................................
January 2035
Class A-1mz
Certificates..................................
January 2035
Class A-2ss
Certificates..................................
January 2035
Class A-2mz
Certificates..................................
January 2035
Class A-3a
Certificates...................................
January 2035
Class A-3b
Certificates...................................
January 2035
Class A-3mz
Certificates..................................
January 2035
Class M-1
Certificates....................................
January 2035
Class M-2
Certificates....................................
January 2035
Class M-3
Certificates....................................
January 2035
Class M-4
Certificates....................................
January 2035
Class M-5
Certificates....................................
January 2035
Class M-6
Certificates....................................
January 2035
Class B-1
Certificates....................................
January 2035
Class B-2
Certificates....................................
January 2035
Class B-3
Certificates....................................
January 2035
Class X
Certificates......................................
January 2035
Class P
Certificates......................................
January 2035
Class R
Certificates......................................
January 2035
First Lien Mortgage Loan: A Mortgage Loan secured by a first
lien
Mortgage on the related Mortgaged
Property.
Fitch: Fitch, Inc., or any successor thereto. If Fitch is
designated
as a Rating Agency in the Preliminary
Statement, for purposes of Section
10.05(b) the address for notices to Fitch
shall be Fitch, Inc., One State Street
Plaza, New York, New York 10004, Attention:
MBS Monitoring - Morgan Stanley ABS
Capital I Inc. Trust 2005-HE2, or such
other address as Fitch may hereafter
furnish to the Depositor, the Trustee and
the Servicers.
Fixed Rate Mortgage Loan: A fixed rate Mortgage Loan.
Freddie Mac: The Federal Home Loan Mortgage Corporation, a
corporate
instrumentality of the United States
created and existing under Title III of the
Emergency Home Finance Act of 1970, as
amended, or any successor thereto.
Gross Margin: With respect to each Adjustable Rate Mortgage
Loan,
the fixed percentage amount set forth in
the related Mortgage Note to be added
to the applicable Index to determine the
Mortgage Rate.
Group I Class A Cap Agreement: The interest rate cap agreement,
dated March 30, 2005 between Morgan Stanley
Capital Services Inc. and the
Trustee, relating to the Group I Class A
Certificates.
Group I Class A Certificates: The Class A-1ss and Class A-1mz
Certificates.
Group I Mortgage Loans: The Mortgage Loans identified on the
Mortgage Loan Schedule as Group I Mortgage
Loans.
Group II Class A Cap Agreement: The interest rate cap
agreement,
dated March 30, 2005 between Morgan Stanley
Capital Services Inc. and the
Trustee, relating to the Group II Class A
Certificates.
Group II Class A Certificates: The Class A-2ss and Class A-2mz
Certificates.
Group II Mortgage Loans: The Mortgage Loans identified on the
Mortgage Loan Schedule as Group II Mortgage
Loans.
Group III Class A Certificates: The Class A-3a, Class A-3b and
Class
A-3mz Certificates.
Group III Class A Sequential Certificates: The Class A-3a and
Class
A-3b Certificates.
Group III Mortgage Loans: The Mortgage Loans identified on the
Mortgage Loan Schedule as Group III
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
A-3a Cap Agreement, the Class A-3b and
Class A-3mz 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 32 Distribution
Dates, the amount, if any, equal to
the product, determined on an "actual/360"
basis, of (i) the excess, if any, of
the lesser of (A) the one-month LIBOR rate
as of the related reset date under
the Group I Class A Cap Agreement and (B)
the applicable cap ceiling rate set
forth on Schedule A to such Interest Rate
Cap Agreement for such Distribution
Date over the applicable cap strike rate
set forth on Schedule A to such
Interest Rate Cap Agreement for such
Distribution Date, (ii) the applicable
Group I Class A notional amount set forth
on Schedule A to the Group I Class A
Cap Agreement for such Distribution Date
and (iii) the multiplier set forth on
Schedule A to such Interest Rate Cap
Agreement; (b) with respect to the Group II
Class A Certificates and the first 32
Distribution Dates, the amount, if any,
equal to the product, determined on an
"actual/360" basis, of (i) the excess, if
any, of the lesser of (A) the one-month
LIBOR rate as of the related reset date
under the Group II Class A Cap Agreement
and (B) the applicable cap ceiling rate
set forth on Schedule A to such Interest
Rate Cap Agreement for such
Distribution Date over the applicable cap
strike rate set forth on Schedule A to
such Interest Rate Cap Agreement for such
Distribution Date, (ii) the applicable
Group II Class A notional amount set forth
on Schedule A to the Group II Class A
Cap Agreement for such Distribution Date
and (iii) the multiplier set forth on
Schedule A to such Interest Rate Cap
Agreement; (c) with respect to the Class
A-3a Certificates and the first 36
Distribution Dates, the amount, if any, equal
to the product, determined on an
"actual/360" basis, of (i) the excess, if any,
of the lesser of (A) the one-month LIBOR
rate as of the related reset date under
the Class A-3a 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 A-3a
notional amount set forth on Schedule A to
the Class A-3a Cap Agreement for such
Distribution Date and (iii) the multiplier
set forth on Schedule A to such
Interest Rate Cap Agreement; (d) with
respect to the Class A-3b and Class A-3mz
Certificates and the first 37 Distribution
Dates, the amount, if any, equal to
the product, determined on an "actual/360"
basis, of (i) the excess, if any, of
the lesser of (A) the one-month LIBOR rate
as of the related reset date under
the Class A-3b and Class A-3mz 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 A-3b and Class A-3mz notional amount
set forth on Schedule A to the Class
A-3b and Class A-3mz Cap Agreement for such
Distribution Date and (iii) the
multiplier set forth on Schedule A to such
Interest Rate Cap Agreement; (e) with
respect to the Class M Certificates and the
first 37 Distribution Dates, the
amount, if any, equal to the product,
determined on an "actual/360" basis, of
(i) the excess, if any, of the lesser of
(A) the one-month LIBOR rate as of the
related reset date under the Class M Cap
Agreement and (B) the applicable cap
ceiling rate set forth on Schedule A to
such Interest Rate Cap Agreement for
such Distribution Date over the applicable
cap strike rate set forth on Schedule
A to such Interest Rate Cap Agreement for
such Distribution Date, (ii) the
applicable Class M notional amount set
forth on Schedule A to the Class M Cap
Agreement for such Distribution Date and
(iii) the multiplier set forth on
Schedule A to such Interest Rate Cap
Agreement; and (f) with respect to the
Class B Certificates and the first 37
Distribution Dates, the amount, if any,
equal to the product, determined on an
"actual/360" basis, of (i) the excess, if
any, of the lesser of (A) the one-month
LIBOR rate as of the related reset date
under the Class B Cap Agreement and (B) the
applicable cap ceiling rate set
forth on Schedule A to such Interest Rate
Cap Agreement for such Distribution
Date over the applicable cap strike rate
set forth on Schedule A to such
Interest Rate Cap Agreement for such
Distribution Date, (ii) the applicable
Class B notional amount set forth on
Schedule A to the Class B Cap Agreement for
such Distribution Date and (iii) the
multiplier set forth on Schedule A to such
Interest Rate Cap Agreement.
Interest Remittance Amount: With respect to any Distribution
Date
and the Mortgage Loans in a Loan Group,
that portion of Available Funds
attributable to interest relating to
Mortgage Loans in that Loan Group.
Investment Account: As defined in Section 3.12(a).
Investor: With respect to each MERS Designated Mortgage Loan,
the
Person named on the MERS System as the
investor pursuant to the MERS Procedures
Manual.
Late
Collections: With respect to any Mortgage Loan and any Due
Period, all amounts received after the
Determination Date immediately following
such Due Period, whether as late payments
of Scheduled Payments or as Insurance
Proceeds, Condemnation Proceeds,
Liquidation Proceeds or otherwise, which
represent late payments or collections of
principal and/or interest due (without
regard to any acceleration of payments
under the related Mortgage and Mortgage
Note) but delinquent for such Due Period
and not previously recovered.
LIBOR: With respect to any Interest Accrual Period for the
LIBOR
Certificates, the rate determined by the
Trustee on the related LIBOR
Determination Date on the basis of the
offered rate for one-month U.S. dollar
deposits as such rate appears on Telerate
Page 3750 as of 11:00 a.m. (London
time) on such date; provided that if such
rate does not appear on Telerate Page
3750, the rate for such date will be
determined on the basis of the rates at
which one-month U.S. dollar deposits are
offered by the Reference Banks at
approximately 11:00 a.m. (London time) on
such date to prime banks in the London
interbank market. In such event, the
Trustee shall request the principal London
office of each of the Reference Banks to
provide a quotation of its rate. If at
least two such quotations are provided, the
rate for that date will be the
arithmetic mean of the quotations (rounded
upwards if necessary to the nearest
whole multiple of 1/16%). If fewer than two
quotations are provided as
requested, the rate for that date will be
the arithmetic mean of the rates
quoted by major banks in New York City,
selected by the Trustee (after
consultation with the Depositor), at
approximately 11:00 a.m. (New York City
time) on such date for one-month U.S.
dollar loans to leading European banks.
LIBOR Certificates: As specified in the Preliminary Statement.
LIBOR Determination Date: With respect to any Interest Accrual
Period for the LIBOR Certificates, the
second London Business Day preceding the
commencement of 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 Trustee that it has
received all amounts it expects to receive
in connection with the liquidation of
such Mortgage Loan including the final
disposition of an REO Property, or (b) is
a Second Lien Mortgage Loan (1) that is
delinquent 180 days or longer, (2) for
which the related first lien mortgage loan
is not a Mortgage Loan, and (3) as to
which the applicable Servicer has certified
to the Trustee that it does not
believe there is a reasonable likelihood
that any further net proceeds will be
received or recovered with respect to such
Second Lien Mortgage Loan.
Liquidation Proceeds: Cash received in connection with the
liquidation of a Liquidated Mortgage Loan,
whether through a trustee's sale,
foreclosure sale or otherwise, including
any Subsequent Recoveries.
Loan Group: The Group I Mortgage Loans, the Group II Mortgage
Loans
or the Group III Mortgage Loans, as
applicable.
Loan Group Cap:
The Loan Group I Cap, the Loan Group II Cap or the
Loan Group III 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 Group III Cap: With respect to the Group III 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 III 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-2ss, Class LT-A-2mz,
Class LT-A-3a, Class LT-A-3b, Class
LT-A-3mz, 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, Class LT-Group III and Class
LT-Accrual Interests as described in
the Preliminary Statement.
Lower Tier REMIC: As described in the Preliminary Statement.
Maximum Mortgage Rate: With respect to each Adjustable Rate
Mortgage
Loan, a rate that (i) is set forth on the
Data Tape Information and in the
related Mortgage Note and (ii) is the
maximum interest rate to which the
Mortgage Rate on such Adjustable Rate
Mortgage Loan may be increased during the
lifetime of such Adjustable Rate Mortgage
Loan.
MERS: Mortgage Electronic Registration System, Inc.
MERS Designated Mortgage Loan: Mortgage Loans for which (a) the
Responsible Parties 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 Responsible
Parties, in accordance with MERS
Procedure Manual and (b) the Responsible
Parties 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
10.05(b), the address for notices to Moody's
shall be Moody's Investors Service, Inc.,
99 Church Street, New York, New York
10007, Attention: Residential Mortgage
Pass-Through Group, or such other address
as Moody's may hereafter furnish to the
Depositor, 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
Responsible Party's name, (17) the date
such Mortgage Loan was sold by the
applicable Responsible Party 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; and (21) the date on which
servicing of the mortgage loan was
transferred to the applicable Servicer.
Mortgage Note: The note or other evidence of the indebtedness of
a
Mortgagor under a Mortgage Loan.
Mortgage Rate: The annual rate of interest borne on a Mortgage
Note,
which shall be adjusted from time to time
in the case of an Adjustable Rate
Mortgage Loan.
Mortgage Rate Caps: With respect to an Adjustable Rate Mortgage
Loan, the Periodic Mortgage Rate Cap, the
Maximum Mortgage Rate, and the Minimum
Mortgage Rate for such Mortgage Loan.
Mortgaged Property: With respect to each Mortgage Loan, the
real
property (or leasehold estate, if
applicable) identified on the Mortgage Loan
Schedule as securing repayment of the debt
evidenced by the related Mortgage
Note.
Mortgagor: The obligor(s) on a Mortgage Note.
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, March 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, will not or, in the
case of a proposed P&I Advance, would
not be ultimately recoverable from related
late payments, Insurance Proceeds,
Condemnation Proceeds, or Liquidation
Proceeds on such Mortgage Loan or REO
Property as provided herein.
Nonrecoverable Servicing Advance: Any Servicing Advances
previously
made or proposed to be made in respect of a
Mortgage Loan or REO Property,
which, in accordance with Accepted
Servicing Practices, will not or, in the case
of a proposed Servicing Advance, would not
be ultimately recoverable from
related Insurance Proceeds, Condemnation
Proceeds, Liquidation Proceeds or
otherwise. The determination by a Servicer
that it has made a Nonrecoverable
Servicing Advance or that any proposed
Servicing Advances, if made, would
constitute a Nonrecoverable Servicing
Advance, shall be evidenced by an
Officer's Certificate delivered to the
Trustee.
Notice of Final Distribution: The notice to be provided pursuant
to
Section 9.02 to the effect that final
distribution on any of the Certificates
shall be made only upon presentation and
surrender thereof.
Offered Certificates: As specified in the Preliminary
Statement.
Officer's Certificate: A certificate signed by an officer of
any
Servicer with responsibility for the
servicing of the Mortgage Loans required to
be serviced by such Servicer and listed on
a list delivered to the Trustee
pursuant to this Agreement.
Opinion of Counsel: A written opinion of counsel, who may be
in-house counsel for a Servicer or a
Subservicer, reasonably acceptable to the
Trustee, provided that any Opinion of
Counsel relating to (a) qualification of
either the Lower Tier REMIC or Upper Tier
REMIC or (b) compliance with the REMIC
Provisions, must be (unless otherwise
stated in such Opinion of Counsel) an
opinion of counsel who (i) is in fact
independent of such Servicer of the
Mortgage Loans, (ii) does not have any
material direct or indirect financial
interest in such Servicer of the Mortgage
Loans or in an affiliate of either and
(iii) is not connected with such Servicer
of the Mortgage Loans as an officer,
employee, director or person performing
similar functions.
Option One: Option One Mortgage Corporation, a California
corporation, and its successors in
interest.
Option One Mortgage Loans: The Mortgage Loans purchased by the
Purchaser pursuant to the Option One
Purchase Agreement for which Option One is
identified as Responsible Party in the
Mortgage Loan Schedule.
Option One Purchase Agreement: The Flow Mortgage Loan Purchase
and
Warranties Agreement, dated as of September
1, 2004, as amended by Amendment No.
1, dated as of October 14, 2004, each by
and between Option One and the
Purchaser, a copy of which (including all
such amendments) is attached hereto as
Exhibit R.
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.
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 Trustee or delivered
to
the Trustee for cancellation; and
(ii) Certificates in exchange for which or in lieu of which
other
Certificates have been executed and
delivered by the Trustee pursuant to this
Agreement.
Outstanding Mortgage Loan: As of any Due Date, a Mortgage Loan
with
a Stated Principal Balance greater than
zero which was not the subject of a
Principal Prepayment in Full prior to such
Due Date and which did not become a
Liquidated Mortgage Loan prior to such Due
Date.
Ownership Interest: As to any Residual Certificate, any
ownership
interest in such Certificate including any
interest in such Certificate as the
Holder thereof and any other interest
therein, whether direct or indirect, legal
or beneficial.
P&I Advance: As to any Mortgage Loan or REO Property, any
advance
made by the applicable Servicer in respect
of any Remittance Date representing
the aggregate of all payments of principal
and interest, net of the Servicing
Fee, that were due during the related Due
Period on the Mortgage Loans and that
were delinquent on the related
Determination Date, plus certain amounts
representing assumed payments not covered
by any current net income on the
Mortgaged Properties acquired by
foreclosure or deed in lieu of foreclosure as
determined pursuant to Section 4.01.
Pass-Through Margin: With respect to each Class of Regular
Certificates, the following percentages:
Class A-1ss Certificates, 0.2100%;
Class A-1mz Certificates, 0.2600%; Class
A-2ss Certificates, 0.2200%; Class
A-2mz Certificates, 0.2500%; Class A-3a
Certificates, 0.0900%; Class A-3b
Certificates, 0.2200%; Class A-3mz
Certificates, 0.2500%; Class M-1
Certificates, 0.4000%; Class M-2
Certificates, 0.4400%; Class M-3 Certificates,
0.4800%; Class M-4 Certificates, 0.6300%;
Class M-5 Certificates, 0.6800%; Class
M-6 Certificates, 0.7300%; Class B-1
Certificates, 1.2000%; Class B-2
Certificates, 1.3000%; 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, 0.4200%; Class A-1mz Certificates,
0.5200%; Class A-2ss Certificates, 0.4400%;
Class A-2mz Certificates, 0.5000%;
Class A-3a Certificates, 0.1800%; Class
A-3b Certificates, 0.4400%; Class A-3mz
Certificates, 0.5000%; Class M-1
Certificates, 0.6000%; Class M-2 Certificates,
0.6600%; Class M-3 Certificates, 0.7200%;
Class M-4 Certificates, 0.9450%; Class
M-5 Certificates, 1.0200%; Class M-6
Certificates, 1.0950%; Class B-1
Certificates, 1.8000%; Class B-2
Certificates, 1.9500%; 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);
(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
(vii) if previously confirmed in writing to the Trustee, any
other demand, money market or time deposit, or any other
obligation,
security or investment, as may be acceptable to the Rating
Agencies
as a permitted investment of funds backing "Aaa" or "AAA" rated
securities;
provided, however, that no instrument
described hereunder shall evidence either
the right to receive (a) only interest with
respect to the obligations
underlying such instrument or (b) both
principal and interest payments derived
from obligations underlying such instrument
and the interest and principal
payments with respect to such instrument
provide a yield to maturity at par
greater than 120% of the yield to maturity
at par of the underlying obligations.
Permitted Transferee: Any Person other than (i) the United
States,
any State or political subdivision thereof,
or any agency or instrumentality of
any of the foregoing, (ii) a foreign
government, international organization or
any agency or instrumentality of either of
the foregoing, (iii) an organization
(except certain farmers' cooperatives
described in Section 521 of the Code)
which is exempt from tax imposed by Chapter
1 of the Code (including the tax
imposed by Section 511 of the Code on
unrelated business taxable income) on any
excess inclusions (as defined in Section
860E(c)(1) of the Code) with respect to
any Residual Certificate, (iv) rural
electric and telephone cooperatives
described in Section 1381(a)(2)(C) of the
Code, (v) a Person that is not a U.S.
Person or a U.S. Person with respect to
whom income from a Residual Certificate
is attributable to a foreign permanent
establishment or fixed base, within the
meaning of an applicable income tax treaty
of such Person or any other U.S.
Person, (vi) an "electing large
partnership" within the meaning of Section 775
of the Code and (vii) any other Person so
designated by the Depositor based upon
an Opinion of Counsel that the Transfer of
an Ownership Interest in a Residual
Certificate to such Person may cause either
the Lower Tier REMIC or the Upper
Tier REMIC to fail to qualify as a REMIC at
any time that the Certificates are
outstanding. The terms "United States",
"State" and "international organization"
shall have the meanings set forth in
Section 7701 of the Code or successor
provisions. A corporation will not be
treated as an instrumentality of the
United States or of any State or political
subdivision thereof for these
purposes if all of its activities are
subject to tax and, with the exception of
Freddie Mac, a majority of its board of
directors is not selected by such
government unit.
Person: Any individual, corporation, partnership, joint
venture,
association, limited liability company,
joint-stock company, trust,
unincorporated organization or government,
or any agency or political
subdivision thereof.
Physical Certificates: As specified in the Preliminary
Statement.
Pool
Stated Principal Balance: As to any Distribution Date, the
aggregate of the Stated Principal Balances
of the Mortgage Loans for such
Distribution Date that were Outstanding
Mortgage Loans on the Due Date in the
related Due Period.
Prepayment Charge: Any prepayment premium, penalty or charge
collected by any Servicer with respect to a
Mortgage Loan from a Mortgagor in
connection with any voluntary Principal
Prepayment pursuant to the terms of the
related Mortgage Note.
Prepayment Interest Excess: With respect to any Distribution
Date,
any interest collected by HomEq with
respect to any Mortgage Loan serviced by
HomEq as to which a 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 either Countrywide or
Option One) 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)
the calendar month preceding the calendar
month in which such Distribution Date
occurs in the case of any Mortgage Loan
serviced by either Countrywide or Option
One, or (b) in the case of any Mortgage
Loan serviced by HomEq, either (i) with
respect to any Principal Prepayments
(including all unscheduled receipts of
principal on the Mortgage Loans other than
voluntary partial Principal
Prepayments), 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, the month preceding the
calendar 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 April
2005 only, the portion of the Closing Date
Deposit Amount allocable to
principal; and (vi) the allocable portion
of the proceeds received with respect
to the termination of the Trust Fund
pursuant to clause (a) of Section 9.01 (to
the extent such proceeds relate to
principal).
Private Certificates: As specified in the Preliminary
Statement.
Prospectus Supplement: The Prospectus Supplement, dated March
24,
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 Option One Purchase Agreement,
the Aames 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.
Rated Final Distribution Date: For each Class of Offered
Certificates other than the Class A-3a
Certificates, the Final Scheduled
Distribution Date for such Class. For the
Class A-3a Certificates, the
Distribution Date in March 2014.
Rating Agency: Each of the Rating Agencies specified in the
Preliminary Statement. If such organization
or a successor is no longer in
existence, "Rating Agency" shall be such
nationally recognized statistical
rating organization, or other comparable
Person, as is designated by the
Depositor, notice of which designation
shall be given to the Trustee. References
herein to a given rating or rating category
of a Rating Agency shall mean such
rating category without giving effect to
any modifiers. For purposes of Section
10.05(b), the addresses for notices to each
Rating Agency shall be the address
specified therefor in the definition
corresponding to the name of such Rating
Agency, or such other address as either
such Rating Agency may hereafter furnish
to the Depositor and the Servicers.
Realized Losses: With respect to any date of determination and
any
Liquidated Mortgage Loan, the amount, if
any, by which (a) the unpaid principal
balance of such Liquidated Mortgage Loan
together with accrued and unpaid
interest thereon exceeds (b) the
Liquidation Proceeds with respect thereto net
of the expenses incurred by the applicable
Servicer in connection with the
liquidation of such Liquidated Mortgage
Loan and net of the amount of
unreimbursed Servicing Advances with
respect to such Liquidated Mortgage Loan.
Record Date: With respect to any Distribution Date, the close
of
business on the Business Day immediately
preceding such Distribution Date;
provided, however, that for any Certificate
issued in definitive form, the
Record Date shall be the close of business
on the last Business Day of the month
preceding the month in which such
applicable Distribution Date occurs.
Reference Bank: As defined in Section 4.04.
Regular Certificates: As specified in the Preliminary
Statement.
Relief Act Interest Shortfall: With respect to any Distribution
Date
and any Mortgage Loan, any reduction in the
amount of interest collectible on
such Mortgage Loan for the most recently
ended Due Period as a result of the
application of the Servicemembers Civil
Relief Act or any similar state
statutes.
REMIC: A "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
REMIC Provisions: Provisions of the federal income tax law
relating
to real estate mortgage investment
conduits, which appear at Sections 860A
through 860G of Subchapter M of Chapter 1
of the Code, and related provisions,
and regulations promulgated thereunder, as
the foregoing may be in effect from
time to time as well as provisions of
applicable state laws.
Remittance Date: With respect to any Distribution Date, the
second
Business Day immediately preceding such
Distribution Date.
REO Disposition: The final sale by the applicable Servicer of
any
REO Property.
REO Imputed Interest: As to any REO Property, for any period,
an
amount equivalent to interest (at the
Mortgage Rate net of the Servicing Fee
Rate that would have been applicable to the
related Mortgage Loan had it been
outstanding) on the unpaid principal
balance of the Mortgage Loan as of the date
of acquisition thereof (as such balance is
reduced pursuant to Section 3.17 by
any income from the REO Property treated as
a recovery of principal).
REO Mortgage Loan: A Mortgage Loan where title to the related
Mortgaged Property has been obtained by the
applicable Servicer in the name of
the Trustee on behalf of the
Certificateholders.
REO Property: A Mortgaged Property acquired by the Trust Fund
through foreclosure or deed-in-lieu of
foreclosure in connection with a
defaulted Mortgage Loan.
Repurchase Price: With respect to any Mortgage Loan for which a
breach of a representation and warranty
made by the Depositor or any Responsible
Party hereunder exists, an amount equal to
the sum of (i) the unpaid principal
balance of such Mortgage Loan as of the
date of repurchase, (ii) interest on
such unpaid principal balance of such
Mortgage Loan at the Mortgage Rate from
the last date through which interest has
been paid and distributed to the
Trustee to the date of repurchase, (iii)
all unreimbursed Servicing Advances and
(iv) all costs and expenses incurred by the
Trustee arising out of or based upon
such breach, including without limitation,
costs and expenses relating to the
Trustee's enforcement of the repurchase
obligation of the Depositor or the
applicable Responsible Party hereunder. In
addition to the Repurchase Price,
each of Decision One, NC Capital, Option
One, Aames and Accredited, as
applicable, is obligated to make certain
payments for material breaches of
representations and warranties as further
set forth in Section 2.03(n) in this
Agreement.
Request for Release: The Request for Release submitted by the
applicable Servicer to the Trustee or
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, any
vice
president, any assistant vice president,
any assistant secretary, any assistant
treasurer, any associate, or any other
officer of the Trustee customarily
performing functions similar to those
performed by any of the above designated
officers who at such time shall be officers
to whom, with respect to a
particular matter, such matter is referred
because of such officer's knowledge
of and familiarity with the particular
subject and who shall have direct
responsibility for the administration of
this Agreement.
Responsible Parties: Decision One, NC Capital, Option One, Aames
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.
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, 37.00%.
Sequential Trigger Event: (a) With respect to any Distribution
Date
occurring before April 2008, the
circumstances in which the aggregate amount of
Realized Losses incurred since the Cut-off
Date through the last day of the
related Prepayment Period divided by the
aggregate Stated Principal Balance of
the Mortgage Loans as of the Cut-off Date
exceeds 2.30%, and (b) with respect to
any Distribution Date occurring in or after
April 2008, a Trigger Event.
Servicer: Option One, 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 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 2.95% of the Cut-off Date Pool
Principal Balance. On and after the
Stepdown Date, an amount equal to the
lesser of (x) 2.95% of the Cut-off Date
Pool Principal Balance or (y) 5.90% of the
aggregate Stated Principal Balance of
the Mortgage Loans as of the Cut-off Date;
provided, however, that if, on any
Distribution Date, a Trigger Event exists,
the Specified Subordinated Amount
shall not be reduced to the applicable
percentage of the then current aggregate
Stated Principal Balance of the Mortgage
Loans until the Distribution Date on
which a Trigger Event no longer exists.
When the Class Certificate Balance of
each Class of LIBOR Certificates has been
reduced to zero, the Specified
Subordinated Amount will thereafter equal
zero.
Standard & Poor's: Standard & Poor's Ratings Services, a
division of
The McGraw-Hill Companies, Inc., and its
successors in interest. If Standard &
Poor's is designated as a Rating Agency in
the Preliminary Statement, for
purposes of Section 10.05(b) the address
for notices to Standard & Poor's shall
be Standard & Poor's, 55 Water Street,
New York, New York 10041, Attention:
Residential Mortgage Surveillance Group -
Morgan Stanley ABS Capital I Inc.
Trust 2005-HE2, 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 Trustee with respect to
the related Mortgage Loan representing
payments or recoveries of principal
including advances in respect of scheduled
payments of principal. For purposes
of any Distribution Date, the Stated
Principal Balance of any Mortgage Loan will
give effect to any scheduled payments of
principal received by the related
Servicer on or prior to the related
Determination Date or advanced by the
related Servicer for the related Remittance
Date and any unscheduled principal
payments and other unscheduled principal
collections received during the related
Prepayment Period, and the Stated Principal
Balance of any Mortgage Loan that
has prepaid in full or has become a
Liquidated Mortgage Loan during the related
Prepayment Period shall be zero.
Stepdown Date: The later to occur of (i) the earlier to occur of
(a)
the Distribution Date in April 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 Responsible Party 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 Closing Date
Deposit Amount; and (vi) all proceeds of
the conversion, voluntary or involuntary,
of any of the foregoing.
Trustee: Deutsche Bank National Trust Company, a national
banking
association, and its successors in interest
and, if a successor trustee is
appointed hereunder, such successor.
Trustee Fee: As to any Distribution Date, an amount equal to
the
product of (a) one-twelfth of the Trustee
Fee Rate and (b) (i) the aggregate
Stated Principal Balance of the Mortgage
Loans as of the first day of the
related Interest Accrual Period and (ii)
with respect to the Distribution Date
in April 2005 only, the portion of the
Closing Date Deposit Amount allocable to
principal.
Trustee Fee Rate: With respect to each Mortgage Loan, 0.0018%
per
annum.
Trustee Float Period: With respect to the Distribution Date and
the
related amounts in the Distribution
Account, the period commencing on the
Business Day immediately preceding such
Distribution Date and ending on such
Distribution Date.
Underwriters' Exemption: Any exemption listed under footnote 1
of,
and amended by, Prohibited Transaction
Exemption 2002-41, 67 Fed. Reg. 54487
(2002), or any successor exemption.
Unpaid Interest Amount: As of any Distribution Date and any Class
of
Certificates, the sum of (a) the portion of
the Accrued Certificate Interest
Distribution Amount from Distribution Dates
prior to the current Distribution
Date remaining unpaid immediately prior to
the current Distribution Date and (b)
interest on the amount in clause (a) above
at the applicable Pass-Through Rate
(to the extent permitted by applicable
law).
Unpaid Realized Loss Amount: With respect to any Class of
Subordinated Certificates and as to any
Distribution Date, is the excess of (i)
the Applied Realized Loss Amount with
respect to such Class over (ii) the sum of
(a) all distributions in reduction of such
Applied Realized Loss Amounts on all
previous Distribution Dates, and (b) the
amount by which the Class Certificate
Balance of such Class has been increased
due to the distribution of any
Subsequent Recovery on all previous
Distribution Dates. Any amounts distributed
to a Class of Subordinated Certificates in
respect of any Unpaid Realized Loss
Amount will not be applied to reduce the
Class Certificate Balance of such
Class.
Upper Tier Regular Interest: As described in the Preliminary
Statement.
Upper Tier REMIC: As described in the Preliminary Statement.
U.S. Person: (i) A citizen or resident of the United States; (ii)
a
corporation (or entity treated as a
corporation for tax purposes) created or
organized in the United States or under the
laws of the United States or of any
State thereof, including, for this purpose,
the District of Columbia; (iii) a
partnership (or entity treated as a
partnership for tax purposes) organized in
the United States or under the laws of the
United States or of any State
thereof, including, for this purpose, the
District of Columbia (unless provided
otherwise by future Treasury regulations);
(iv) an estate whose income is
includible in gross income for United
States income tax purposes regardless of
its source; or (v) a trust, if a court
within the United States is able to
exercise primary supervision over the
administration of the trust and one or
more U.S. Persons have authority to control
substantial decisions of the trust.
Notwithstanding the last clause of the
preceding sentence, to the extent
provided in Treasury regulations, certain
trusts in existence on August 20,
1996, and treated as U.S. Persons prior to
such date, may elect to continue to
be U.S. Persons.
Voting Rights: The portion of the voting rights of all of the
Certificates which is allocated to any
Certificate. As of any date of
determination, (a) 1% of all Voting Rights
shall be allocated to the Class X
Certificates, if any (such Voting Rights to
be allocated among the holders of
Certificates of each such Class in
accordance with their respective Percentage
Interests), (b) 1% of all Voting Rights
shall be allocated to the Class P
Certificates, if any, and (c) the remaining
Voting Rights shall be allocated
among Holders of the remaining Classes of
Certificates in proportion to the
Certificate Balances of their respective
Certificates on such date.
WAC Cap: With respect to the Mortgage Loans as of any
Distribution
Date, the product of (i) the weighted
average of the Adjusted Net Mortgage Rates
then in effect on the beginning of the
related Due Period on the Mortgage Loans
and (ii) a fraction, the numerator of which
is 30 and the denominator of which
is the actual number of days in the
Interest Accrual Period related to such
Distribution Date.
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.
(b) In connection with the transfer and assignment of each
Mortgage
Loan, the Depositor has delivered or caused
to be delivered to the Trustee with
respect to the Mortgage Loans other than
the Option One Mortgage Loans, and to
the Custodian with respect to the Option
One 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
Responsible Party (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
Option
One
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
Responsible Party 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 Responsible
Party
(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
Responsible Party; 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 Option One 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
Option
One
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,
Option One shall deliver or cause to be delivered to the
Custodian
a photocopy of such Mortgage certified by Option One to be a
true and
complete copy of such Mortgage and shall forward to the
Custodian
such
original recorded Mortgage within 14 days following Option
One'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
Option
One
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
Responsible Party, 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 Responsible Party, 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
Responsible Party; 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 Option One 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, Option One shall
deliver or
cause to be delivered a photocopy of such intervening
assignment, certified by Option One to be a true and complete copy
of such
intervening assignment and shall forward to the Custodian such
original
recorded
intervening assignment within 14 days following Option One'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.
The Depositor shall cause to be delivered to the Trustee or
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
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 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
Responsible Party as required pursuant to
the related Purchase Agreement and at
no expense to the Trust Fund, the Trustee,
the applicable Servicer, or the
Depositor, in the appropriate public office
for real property records, each
Assignment of Mortgage referred to in
Section 2.01(b)(v). Notwithstanding the
foregoing, however, for administrative
convenience and facilitation of servicing
and to reduce closing costs, the
Assignments of Mortgage shall not be required
to be completed and submitted for recording
with respect to any Mortgage Loan
(i) if the Trustee and each Rating Agency
have received an Opinion of Counsel,
satisfactory in form and substance to the
Trustee and each Rating Agency to the
effect that the recordation of such
Assignments of Mortgage in any specific
jurisdiction is not necessary to protect
the Trustee's interest in the related
Mortgage Note, (ii) if such Mortgage Loan
is a MERS Designated Mortgage Loan or
(iii) if the Rating Agencies have each
notified the Depositor in writing that
not recording any such Assignments of
Mortgage would not cause the initial
ratings on any LIBOR Certificates to be
downgraded or withdrawn; provided,
however, that 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 Responsible Party 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 March 1, 2005, Morgan
Stanley ABS Capital I Inc. Trust 2005-HE2".
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.
On or
prior to the Closing Date, the Depositor shall deliver to the
Trustee and the 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 Custodian, as applicable.
(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-HE2" 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 (45) of Schedule VI,
paragraph (46) of Schedule VII,
paragraph (50) of Schedule VIII, paragraph
(yy) of Schedule IX to this Agreement
and paragraph (aaa) of Schedule X 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) pursuant to Section 2.01(a).
The Trustee on behalf of the Trust is
hereby authorized to enter into the
Interest Rate Cap Agreements.
Section 2.02 Acceptance by the Trustee of the Mortgage Loans.
The
Trustee and the Custodian shall
acknowledge, on the Closing Date, receipt by the
Trustee or the 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 Custodian shall
maintain possession of the related Mortgage
Notes in the State of California,
unless otherwise permitted by the Rating
Agencies.
In connection with the Closing Date, the Trustee and the
Custodian
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 Custodian, 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
Custodian
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 the 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 Custodian 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 Custodian 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 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 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 to the Custodian, 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. The documents
shall be delivered by the applicable
Responsible Party at the Responsible
Party's expense to such Servicer.
Section 2.03 Representations and Warranties; Remedies for
Breaches
of Representations and Warranties with
Respect to the Mortgage Loans. (a) Option
One, in its capacity as servicer, 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,
Countrywide hereby makes the
representations and warranties set forth in
Schedule III hereto to the Depositor
and the Trustee as of the dates set forth
in such Schedule, HomEq hereby makes
the representations and warranties set
forth in Schedule IV hereto to the
Depositor and the Trustee as of the dates
set forth in such Schedule. Upon
discovery by any of the parties hereto of a
breach of any of the foregoing
representations and warranties, the party
discovering such breach shall give
prompt written notice to the other.
(b) The Depositor hereby makes the representations and
warranties
set forth in Schedule V hereto to the
Trustee as of the dates set forth in such
Schedule.
(c) The Custodian hereby makes the representations and
warranties
set forth in Schedule X hereto to the
Depositor, the Servicers, the Trustee and
the Responsible Parties.
(d) Option One 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. NC
Capital hereby makes the
representations and warranties set forth in
Schedule VII hereto to the
Depositor, the Servicers and the Trustee as
of the dates set forth in such
Schedule. Accredited hereby makes the
representations and warranties set forth
in Schedule VIII hereto to the Depositor,
the Servicers and the Trustee as of
the dates set forth in such Schedule.
Decision One, in its capacity as
Responsible Party, hereby makes the
representations and warranties set forth in
Schedule IX hereto to the Depositor, the
Servicers and the Trustee as of the
dates set forth in such Schedule. Aames, in
its capacity as Responsible Party,
hereby makes the representations and
warranties set forth in Schedule X 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, Decision One, NC Capital,
Option One, Aames or Accredited, 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
Decision One, NC Capital, Option One, Aames
or Accredited, as applicable, in
writing to correct or cure, in accordance
with the this Agreement, any such
breach of a representation or warranty made
by Decision One, NC Capital, Option
One, Aames or Accredited, as applicable,
under this Agreement, within sixty (60)
days from the date of notice from the
Trustee or the discovery by Decision One,
NC Capital, Option One, Aames or Accredited
of the breach, and if Decision One,
NC Capital, Option One, Aames or
Accredited, as applicable, 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 Decision One,
NC Capital, Option One, Aames or
Accredited, as applicable, to correct or
cure, the Trustee shall notify Decision
One, NC Capital, Option One, Aames or
Accredited, as applicable, to repurchase
the Mortgage Loan (a "Deleted Mortgage
Loan") at the Repurchase Price or
substitute a Substitute Mortgage Loan for
such Mortgage Loan, in each case,
pursuant to this Agreement, as applicable.
Notwithstanding the foregoing, in the
event that the Trustee receives notice of a
breach by (i) Option One of any of
the representations and warranties set
forth in paragraphs (45), (46), (48),
(52), (56), (57), (58), (59), (60), (61),
(62), (63) or (64) of Schedule VI,
(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 VII, (iii)
Accredited of any of the representations and
warranties set forth in paragraphs (49),
(50), (51), (53), (55), (56), (57),
(58), (59), (60), (61) or (62) of Schedule
VIII, (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 IX or (v)
Aames of any representations and warranties
set forth in paragraphs (zz), (aaa),
(bbb), (ccc), (ddd), (eee), (fff), (ggg),
(hhh), (iii), (jjj), (kkk) or (lll) of
Schedule X. The Trustee shall notify
Decision One, NC Capital, Option One, Aames
or Accredited, as applicable, to repurchase
the Mortgage Loan at the Repurchase
Price within sixty (60) days of Decision
One's, NC Capital's, Option One's,
Aames's or Accredited's receipt of such
notice, as applicable. If, within ten
(10) Business Days of receipt of such
notice by Decision One, NC Capital, Option
One, Aames or Accredited, Decision One, NC
Capital, Option One, Aames or
Accredited, as applicable, 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
Decision One, NC Capital, Option One,
Aames or Accredited, as applicable, under
this Agreement, 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 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 Responsible
Party, the applicable Servicer, the Trustee
(if applicable) and the Depositor in
writing, and request that such Responsible
Party correct or cure such defect as
required under this Agreement, and if such
Responsible Party fails or is unable
to correct or cure the defect within the
period set forth in this Agreement, 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
Responsible Party to correct or cure, the
Trustee or the Custodian, as
applicable, shall notify the applicable
Responsible Party 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 Responsible Party, such Responsible
Party 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 Responsible
Party under this 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 V 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.
(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 VI, Schedule
VII, Schedule VIII, Schedule IX or
Schedule X, 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 Decision One Purchase Agreement, the NC
Capital Purchase Agreement, the
Accredited Purchase Agreement, the Aames
Purchase Agreement or the Option One
Purchase Agreement, as applicable, 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. 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 Responsible
Party, 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
Responsible Party and shall execute and
deliver at the direction of the
Depositor or the applicable Responsible
Party, such instruments of transfer or
assignment prepared by the Depositor or the
applicable Responsible Party, in
each case without recourse, as shall be
necessary to vest title in the Depositor
or the applicable Responsible Party, 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.
(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 in the
Collection Account of the related
Servicer pursuant to Section 3.10 on or
before the Distribution Account Deposit
Date for the Distribution Date following
the Prepayment Period during which the
Depositor or such Responsible Party, as
applicable, repurchased such Mortgage
Loan and upon such deposit of the
Repurchase Price and receipt of a Request for
Release in the form of Exhibit J hereto,
the Trustee 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 (45) of Schedule VI,
paragraph (46) of Schedule VII,
paragraph (50) of Schedule VIII, paragraph
(yy) of Schedule IX and paragraph
(aaa) of Schedule X , as applicable, to
this Agreement) and defective Mortgage
Loans set forth in the Decision One
Purchase Agreement, the NC Capital Purchase
Agreement, the Option One Purchase
Agreement, the Aames 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.
(p) It is understood and agreed that the obligation of the
Depositor
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.
The provisions of this Section 2.03 shall survive delivery of
the
respective Custodial Files to the Trustee
for the benefit of the
Certificateholders.
Section 2.04 Execution and Delivery of Certificates. The
Trustee
acknowledges the transfer and assignment to
it of the Trust Fund and,
concurrently with such transfer and
assignment, has executed and delivered to or
upon the order of the Depositor, the
Certificates in authorized denominations
evidencing directly or indirectly the
entire ownership of the Trust Fund. The
Trustee agrees to hold the Trust Fund and
exercise the rights referred to above
for the benefit of all present and future
Holders of the Certificates.
Section 2.05 REMIC Matters. The Preliminary Statement sets forth
the
designations for federal income tax
purposes of all interests created hereby.
The "Startup Day" for purposes of the REMIC
Provisions shall be the Closing
Date. The "latest possible maturity date"
is the Distribution Date occurring in
January 2035, which is the Distribution
Date in the month following the month in
which the latest maturity date of any
Mortgage Loan occurs.
Section 2.06 Representations and Warranties of the Depositor.
The
Depositor hereby represents, warrants and
covenants to the Trustee and the
Servicers that as of the date of this
Agreement or as of such date specifically
provided herein:
(a) The Depositor is a corporation duly organized, validly
existing
and in good standing under the laws of the
State of Delaware;
(b) The Depositor has the corporate power and authority to
convey
the Mortgage Loans and to execute, deliver
and perform, and to enter into and
consummate the transactions contemplated
by, this Agreement;
(c) This Agreement has been duly and validly authorized,
executed
and delivered by the Depositor, all
requisite corporate action having been
taken, and, assuming the due authorization,
execution and delivery hereof by the
other parties hereto, constitutes or will
constitute the legal, valid and
binding agreement of the Depositor,
enforceable against the Depositor in
accordance with its terms, except as such
enforcement may be limited by
bankruptcy, insolvency, reorganization,
moratorium or other similar laws
relating to or affecting the rights of
creditors generally, and by general
equity principles (regardless of whether
such enforcement is considered in a
proceeding in equity or at law);
(d) No consent, approval, authorization or order of or
registration
or filing with, or notice to, any
governmental authority or court is required
for the execution, delivery and performance
of or compliance by the Depositor
with this Agreement or the consummation by
the Depositor of any of the
transactions contemplated hereby, except as
have been made on or prior to the
Closing Date;
(e) None of the execution and delivery of this Agreement, the
consummation of the transactions
contemplated hereby or thereby, or the
fulfillment of or compliance with the terms
and conditions of this Agreement,
(i) conflicts or will conflict with or
results or will result in a breach of, or
constitutes or will constitute a default or
results or will result in an
acceleration under (A) the charter or
bylaws of the Depositor, or (B) of any
term, condition or provision of any
material indenture, deed of trust, contract
or other agreement or instrument to which
the Depositor or any of its
subsidiaries is a party or by which it or
any of its subsidiaries is bound; (ii)
results or will result in a violation of
any law, rule, regulation, order,
judgment or decree applicable to the
Depositor of any court or governmental
authority having jurisdiction over the
Depositor or its subsidiaries; or (iii)
results in the creation or imposition of
any lien, charge or encumbrance which
would have a material adverse effect upon
the Mortgage Loans or any documents or
instruments evidencing or securing the
Mortgage Loans;
(f) There are no actions, suits or proceedings before or against
or
investigations of, the Depositor pending,
or to the knowledge of the Depositor,
threatened, before any court,
administrative agency or other tribunal, and no
notice of any such action, which, in the
Depositor's reasonable judgment, might
materially and adversely affect the
performance by the Depositor of its
obligations under this Agreement, or the
validity or enforceability of this
Agreement;
(g) The Depositor is not in default with respect to any order
or
decree of any court or any order,
regulation or demand of any federal, state,
municipal or governmental agency that may
materially and adversely affect its
performance hereunder; and
(h) Immediately prior to the transfer and assignment by the
Depositor to the Trustee on the Closing
Date, the Depositor had good title to,
and was the sole owner of each Mortgage
Loan, free of any interest of any other
Person, and the Depositor has transferred
all right, title and interest in each
Mortgage Loan to the Trustee. The transfer
of the Mortgage Note and the Mortgage
as and in the manner contemplated by this
Agreement is sufficient either (i)
fully to transfer to the Trustee, for the
benefit of the Certificateholders, all
right, title, and interest of the Depositor
thereto as note holder and mortgagee
or (ii) to grant to the Trustee, for the
benefit of the Certificateholders, the
security interest referred to in Section
10.04.
It is understood and agreed that the representations, warranties
and
covenants set forth in this Section 2.06
shall survive delivery of the
respective Custodial Files to the Trustee
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 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, 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 Trustee shall establish and maintain the Excess
Reserve
Fund Account, on behalf of the Class X
Certificateholders, to receive any Basis
Risk Payment and any Interest Rate Cap
Payment and to secure their limited
recourse obligation to pay to the LIBOR
Certificateholders Basis Risk
CarryForward Amounts.
(ii) On each Distribution Date, the Trustee shall deposit the
amount
of any
Basis Risk Payment and any Interest Rate Cap Payment for such
date
into the
Excess Reserve Fund Account.
(c) (i) On each Distribution Date on which there exists a Basis
Risk
CarryForward Amount on any Class of
Certificates, the Trustee shall (1) withdraw
from the Distribution Account and deposit
in the Excess Reserve Fund Account, as
set forth in Section 4.02(a)(iii)(S), the
lesser of (x) the Class X
Distributable Amount (without regard to the
reduction in the definition thereof
with respect to the Basis Risk Payment or
with respect to the Class A-3a
Accelerated Amortization Amount
distributable pursuant to Section
4.02(a)(iii)(V)) (to the extent remaining
after the distributions specified in
Sections 4.02(a)(iii)(A)-(R)) and (y) the
aggregate Basis Risk CarryForward
Amounts for such Distribution Date and (2)
withdraw from the Excess Reserve Fund
Account amounts necessary to pay to such
Class or Classes of Certificates the
Basis Risk CarryForward Amount. Such
payments shall be allocated to those
Classes on a pro rata basis based upon the
amount of Basis Risk CarryForward
Amount owed to each such Class and shall be
paid in the priority set forth in
Sections 4.02(a)(iii)(T)-(U).
(ii) The Trustee shall account for the Excess Reserve Fund
Account
as an
asset of a grantor trust under subpart E, Part I of the subchapter
J
of the
Code and not an asset of any REMIC created pursuant to this
Agreement.
The beneficial owners of the Excess Reserve Fund Account are
the Class X Certificateholders.
For all federal tax purposes, amounts
transferred by the Upper Tier REMIC to the Excess Reserve Fund
Account
shall be
treated as distributions by the Trustee to the Class X
Certificateholders.
(iii) Any Basis Risk
CarryForward Amounts paid by the Trustee to the
LIBOR
Certificateholders shall be accounted for by the Trustee as
amounts
paid first
to the Holders of the Class X Certificates and then to the
respective
Class or Classes of LIBOR Certificates. In addition, the
Trustee
shall account for the LIBOR Certificateholders' rights to
receive
payments
of Basis Risk CarryForward Amounts as rights in a limited
recourse
interest rate cap contract written by the Class X
Certificateholders in favor of the LIBOR Certificateholders.
(iv) Notwithstanding any provision contained in this Agreement,
the
Trustee
shall not be required to make any payments from the Excess
Reserve
Fund
Account except as expressly set forth in this Section 3.07(c)
and
Sections
4.02(a)(iii)(T)-(U).
(d) The Trustee shall establish and maintain the Distribution
Account on behalf of the
Certificateholders. The Depositor shall cause the
Closing Date Deposit Amount to be deposited
into the Distribution Account on the
Closing Date. The Trustee shall, promptly
upon receipt, deposit in the
Distribution Account and retain therein the
following:
(i) the aggregate amount remitted by the Servicers to the
Trustee
pursuant
to Section 3.11;
(ii) any amount deposited by the Servicers pursuant to Section
3.12(b) in
connection with any losses on Permitted Investments; and
(iii) any other amounts deposited hereunder which are required to
be
deposited
in the Distribution Account.
In the event that any Servicer shall remit any amount not
required
to be remitted, it may at any time direct
the Trustee in writing to withdraw
such amount from the Distribution Account,
any provision herein to the contrary
notwithstanding. Such direction may be
accomplished by delivering notice to the
Trustee which describes the amounts
deposited in error in the Distribution
Account. All funds deposited in the
Distribution Account shall be held by the
Trustee in trust for the Certificateholders
until disbursed in accordance with
this Agreement or withdrawn in accordance
with Section 4.02.
(e) The Trustee may invest the funds in the Distribution Account,
in
one or more Permitted Investments, in
accordance with Section 3.12. Each
Servicer shall direct the Trustee to
withdraw from the Distribution Account and
to remit to such Servicer no less than
monthly, all income and gain realized
from the investment of the portion of funds
deposited in the Distribution
Account by such Servicer (except during the
Trustee Float Period). The Trustee
may withdraw from the Distribution Account
any income or gain earned from the
investment of funds deposited therein
during the Trustee Float Period for its
own benefit.
(f) Each Servicer shall give notice to the Trustee of any
proposed
change of the location of the related
Collection Account within a reasonable
period of time prior to any change thereof
and the Trustee shall forward such
notice to the Rating Agencies and the
Depositor.
(g) In order to comply with its duties under the USA Patriot Act
of
2001, the Trustee shall obtain and verify
certain information and documentation
from the other parties to this Agreement
including, but not limited to, each
such party's name, address, and other
identifying information.
(h) On or prior to the Determination Date, the Custodian shall
deliver an invoice to the Trustee, setting
forth the amount of the Custodian Fee
for the related Distribution Date. The
Trustee shall calculate the Custodian Fee
Rate for such Distribution Date, based upon
the Custodian Fee as set forth in
such invoice. On each Distribution Date,
the Trustee shall remit the Custodian
Fee to the Custodian from the Distribution
Account.
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 Trustee
(A)
the
Trustee Fee with respect to such Distribution Date and (B) all
Available
Funds in respect of the related Distribution Date together with
all
amounts representing Prepayment Charges from the Mortgage Loans
received
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);
(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);
(iv) to pay to such Servicer as servicing compensation (in
addition
to the
Servicing Fee) on the Remittance Date any interest or
investment
income
earned on funds deposited in its Collection Account;
(v) to pay to the applicable Responsible Party or the Depositor,
as
applicable, with respect to each Mortgage Loan that has previously
been
repurchased or replaced pursuant to this Agreement, all amounts
received
thereon
subsequent to the date of purchase or substitution, as further
described
herein;
(vi) to reimburse such Servicer for (A) any P&I Advance or
Servicing
Advance
previously made which such Servicer has determined to be a
Nonrecoverable P&I Advance or Nonrecoverable Servicing Advance
in
accordance
with the provisions of Section 4.01 and (B) any unpaid
Servicing
Fees related to any Second Lien Mortgage Loan to the extent not
recoverable from Liquidation Proceeds, Insurance Proceeds or other
amounts
received
with respect to the related Second Lien Mortgage Loan under
Section
3.11(a)(iii) (such Servicer's right for recovery or
reimbursement
has
priority over the Trust);
(vii) to pay, or to reimburse such Servicer for advances in
respect
of,
expenses incurred in connection with any Mortgage Loan serviced
by
such
Servicer pursuant to Section 3.15 (such Servicer's right for
recovery
or
reimbursement has priority over the Trust);
(viii)to reimburse such Servicer or the Depositor for expenses
incurred
by or reimbursable to such Servicer or the Depositor, as the
case
may be,
pursuant to Section 6.03 (such Servicer's right for recovery or
reimbursement has priority over the Trust);
(ix) to reimburse such Servicer or the Trustee, as the case may
be,
for
expenses reasonably incurred in respect of the breach or defect
giving
rise to
the repurchase obligation of any Responsible Party or the
Depositor,
as applicable, that were included in the Repurchase Price of
the
Mortgage Loan, including any expenses arising out of the
enforcement
of the
repurchase obligation, to the extent not otherwise paid pursuant
to
the terms
hereof (such Servicer's right for recovery or reimbursement has
priority
over the Trust);
(x) to withdraw any amounts deposited in the related Collection
Account in
error;
(xi) to withdraw any amounts held in the related Collection
Account
and not
required to be remitted to the Trustee on the Remittance Date
occurring
in the month in which such amounts are deposited into such
Collection
Account, to reimburse such Servicer for unreimbursed P&I
Advances;
(xii) to invest funds in Permitted Investments in accordance
with
Section 3.12; and
(xiii)to clear and terminate the related Collection Account
upon
termination of this Agreement;
(b) Each Servicer shall keep and maintain separate accounting, on
a
Mortgage Loan by Mortgage Loan basis, for
the purpose of justifying any
withdrawal from the related Collection
Account, to the extent held by or on
behalf of it, pursuant to subclauses
(a)(ii), (iii), (v), (vi), (vii), (viii)
and (ix) above. Each Servicer shall provide
written notification (as set forth
in Section 4.01(d)) to the Trustee, on or
prior to the next succeeding
Remittance Date, upon making any
withdrawals from the related Collection Account
pursuant to subclause (a)(vi) above.
Section 3.12 Investment of Funds in the Collection Accounts and
the
Distribution Account. (a) Each Servicer may
invest the funds in the related
Collection Account and the related Escrow
Account (to the extent permitted by
law and the related Mortgage Loan
documents) and the Trustee may (but is not
obligated to) invest funds in the
Distribution Account during the Trustee Float
Period, and, with respect to the portion of
funds in the Distribution Account
deposited by a Servicer, shall (except
during the Trustee Float Period) invest
such funds in the Distribution Account at
the direction of such Servicer (for
purposes of this Section 3.12, such
Accounts are referred to as an "Investment
Account"), in one or more Permitted
Investments bearing interest or sold at a
discount, and maturing, unless payable on
demand no later than the Business Day
immediately preceding the date on which
such funds are required to be withdrawn
from such account pursuant to this
Agreement; provided, however, that the
Trustee shall have no obligation to invest
funds deposited into the Distribution
Account by a Servicer on the Remittance
Date later than 10:00 a.m. (Pacific
Standard Time). If no investment
instruction is given in a timely manner, the
Trustee shall hold the funds in the
Distribution Account uninvested. All such
Permitted Investments shall be held to
maturity, unless payable on demand. Any
investment of funds in an Investment
Account (other than investments made during
the Trustee Float Period) shall be made in
the name of the applicable Servicer.
The applicable Servicer shall be entitled
to sole possession (except with
respect to investment direction of funds
and any income and gain realized on any
investment in the Distribution Account
during the Trustee Float Period) over
each such related investment, and any
certificate or other instrument evidencing
any such investment shall be delivered
directly to the applicable Servicer (with
a copy to the Trustee or its agent if
related to investment of funds in the
Distribution Account not during the Trustee
Float Period), or with respect to
investments during the Trustee Float
Period, the Trustee or its agent, together
with any document of transfer necessary to
transfer title to such investment to
the applicable Servicer, or with respect to
investments during the Trustee Float
Period, the Trustee or its agent. In the
event amounts on deposit in an
Investment Account are at any time invested
in a Permitted Investment payable on
demand, the applicable Servicer, or with
respect to investments during the
Trustee Float Period, the Trustee may:
(x) consistent
with any notice required to be given thereunder,
demand that payment thereon be made on the last day such
Permitted Investment may otherwise mature hereunder in an
amount equal to
the lesser of (1) all amounts then payable
thereunder and (2) the amount required to be withdrawn on such
date; and
(y) demand
payment of all amounts due thereunder that such
Permitted Investment would not constitute a Permitted
Investment in respect of funds thereafter on deposit in an
Investment Account.
(b) All income and gain realized from the investment of funds
deposited in the related Collection Account
or Escrow Account held by or on
behalf of the related Servicer, shall be
for the benefit of such Servicer and
shall be subject to its withdrawal in the
manner set forth in Section 3.11. Such
Servicer shall deposit in its Collection
Account or Escrow Account, as
applicable, the amount of any loss of
principal incurred in respect of any such
Permitted Investment made with funds in
such accounts immediately upon
realization of such loss.
(c) All income and gain realized from the investment of the
portion
of funds deposited in the Distribution
Account by a Servicer and held by the
Trustee, shall be for the benefit of such
Servicer (except for any income or
gain realized from the investment of funds
on deposit in the Distribution
Account during the Trustee Float Period,
which shall be for the benefit of the
Trustee) and shall be subject to the
Trustee's withdrawal in the manner set
forth in Section 3.07(e). Each Servicer
shall deposit in the Distribution
Account (except with respect to losses
incurred during the Trustee Float Period)
the amount of any loss of principal
incurred in respect of any such Permitted
Investment made with funds in such accounts
immediately upon realization of such
loss.
(d) Except as otherwise expressly provided in this Agreement, if
any
default occurs in the making of a payment
due under any Permitted Investment, or
if a default occurs in any other
performance required under any Permitted
Investment, the Trustee shall take such
action as may be appropriate to enforce
such payment or performance, including the
institution and prosecution of
appropriate proceedings.
(e) The Trustee shall not be liable for the amount of any loss
incurred with respect of any investment or
lack of investment of funds held in
any Investment Account or the Distribution
Account (except that if any losses
are incurred from the investment of funds
deposited in the Distribution Account
during the Trustee Float Period, the
Trustee shall be responsible for
reimbursing the Trust for such loss) if
made in accordance with this Section
3.12.
(f) The Trustee or its Affiliates shall be permitted to receive
additional compensation that could be
deemed to be in the Trustee's economic
self-interest for (i) serving as investment
adviser, administrator, shareholder,
servicing agent, custodian or sub-custodian
with respect to certain of the
Permitted Investments, (ii) using
Affiliates to effect transactions in certain
Permitted Investments and (iii) effecting
transactions in certain Permitted
Investments. Such compensation shall not be
considered an amount that is
reimbursable or payable pursuant to this
Agreement.
Section 3.13 Maintenance of Hazard Insurance and Errors and
Omissions and Fidelity Coverage. (a) Each
Servicer shall cause to be maintained
for each Mortgage Loan serviced by such
Servicer fire insurance with extended
coverage on the related Mortgaged Property
in an amount which is at least equal
to the least of (i) the outstanding
principal balance of such Mortgage Loan,
(ii) the amount necessary to fully
compensate for any damage or loss to the
improvements that are a part of such
property on a replacement cost basis and
(iii) the maximum insurable value of the
improvements which are a part of such
Mortgaged Property, in each case in an
amount not less than such amount as is
necessary to avoid the application of any
coinsurance clause contained in the
related hazard insurance policy. Each
Servicer shall also cause to be maintained
fire insurance with extended coverage on
each REO Property serviced by such
Servicer in an amount which is at least
equal to the lesser of (i) the maximum
insurable value of the improvements which
are a part of such property and (ii)
the outstanding principal balance of the
related Mortgage Loan at the time it
became an REO Property. Each Servicer will
comply in the performance of this
Agreement with all reasonable rules and
requirements of each insurer under any
such hazard policies. Any amounts to be
collected by any Servicer under any such
policies (other than amounts to be applied
to the restoration or repair of the
property subject to the related Mortgage or
amounts to be released to the
Mortgagor in accordance with the procedures
that such Servicer would follow in
servicing loans held for its own account,
subject to the terms and conditions of
the related Mortgage and Mortgage Note)
shall be deposited in the related
Collection Account, subject to withdrawal
pursuant to Section 3.11. Any cost
incurred by any Servicer in maintaining any
such insurance shall not, for the
purpose of calculating distributions to the
Trustee, be added to the unpaid
principal balance of the related Mortgage
Loan, notwithstanding that the terms
of such Mortgage Loan so permit. It is
understood and agreed that no earthquake
or other additional insurance is to be
required of any Mortgagor other than
pursuant to such applicable laws and
regulations as shall at any time be in
force and as shall require such additional
insurance. If the Mortgaged Property
or REO Property is at any time in an area
identified in the Federal Register by
the Federal Emergency Management Agency as
having special flood hazards and
flood insurance has been made available,
the applicable Servicer will cause to
be maintained a flood insurance policy in
respect thereof. Such flood insurance
shall be in an amount equal to the lesser
of (i) the unpaid principal balance of
the related Mortgage Loan and (ii) the
maximum amount of such insurance
available for the related Mortgaged
Property under the national flood insurance
program (assuming that the area in which
such Mortgaged Property is located is
participating in such program).
In the event that any Servicer shall obtain and maintain a
blanket
policy with an insurer either (i)
acceptable to Fannie Mae or Freddie Mac or
(ii) having a General Policy Rating of
B:III or better from Best's (or such
other rating that is comparable to such
rating) insuring against hazard losses
on all of the Mortgage Loans, it shall
conclusively be deemed to have satisfied
its obligations as set forth in the first
two sentences of this Section 3.13, it
being understood and agreed that such
policy may contain a deductible clause, in
which case such Servicer shall, in the
event that there shall not have been
maintained on the related Mortgaged
Property or REO Property a policy complying
with the first two sentences of this
Section 3.13, and there shall have been one
or more losses which would have been
covered by such policy, deposit to the
related Collection Account from its own
funds the amount not otherwise payable
under the blanket policy because of such
deductible clause. In connection with
its activities as administrator and
servicer of the Mortgage Loans, each
Servicer agrees to prepare and present, on
behalf of itself and the Trustee
claims under any such blanket policy in a
timely fashion in accordance with the
terms of such policy.
(b) Each Servicer shall keep in force during the term of this
Agreement a policy or policies of insurance
covering errors and omissions for
failure in the performance of such
Servicer's obligations under this Agreement,
which policy or policies shall be in such
form and amount that would meet the
requirements of Fannie Mae or Freddie Mac
if it were the purchaser of the
Mortgage Loans, unless such Servicer has
obtained a waiver of such requirements
from Fannie Mae or Freddie Mac. Each
Servicer shall also maintain a fidelity
bond in the form and amount that would meet
the requirements of Fannie Mae or
Freddie Mac, unless such Servicer has
obtained a waiver of such requirements
from Fannie Mae or Freddie Mac. Each
Servicer shall provide the Trustee upon
request with copies of any such insurance
policies and fidelity bond. Each
Servicer shall be deemed to have complied
with this provision if an Affiliate of
the applicable Servicer has such errors and
omissions and fidelity bond coverage
and, by the terms of such insurance policy
or fidelity bond, the coverage
afforded thereunder extends to such
Servicer. Any such errors and omissions
policy and fidelity bond shall by its terms
not be cancelable without thirty
days' prior written notice to the Trustee.
Each Servicer shall also cause each
Subservicer to maintain a policy of
insurance covering errors and omissions and
a fidelity bond which would meet such
requirements.
Section 3.14 Enforcement of Due-on-Sale Clauses; Assumption
Agreements. Each Servicer will, to the
extent it has knowledge of any conveyance
or prospective conveyance of any Mortgaged
Property by any Mortgagor (whether by
absolute conveyance or by contract of sale,
and whether or not the Mortgagor
remains or is to remain liable under the
Mortgage Note and/or the Mortgage),
exercise its rights to accelerate the
maturity of such Mortgage Loan under the
"Due-on-Sale" clause, if any, applicable
thereto; provided, however, that no
Servicer shall be required to take such
action if, in its sole business
judgment, such Servicer believes it is not
in the best interests of the Trust
Fund and shall not exercise any such rights
if prohibited by law from doing so.
If a Servicer reasonably believes it is
unable under applicable law to enforce
such "Due-on-Sale" clause or if any of the
other conditions set forth in the
proviso to the preceding sentence apply,
such Servicer will enter into an
assumption and modification agreement from
or with the person to whom such
property has been conveyed or is proposed
to be conveyed, pursuant to which such
person becomes liable under the Mortgage
Note and, to the extent permitted by
applicable state law, the Mortgagor remains
liable thereon. Each Servicer is
also authorized to enter into a
substitution of liability agreement with such
person, pursuant to which the original
Mortgagor is released from liability and
such person is substituted as the Mortgagor
and becomes liable under the
Mortgage Note; provided, that no such
substitution shall be effective unless
such person satisfies the underwriting
criteria of such Servicer and such
substitution is in the best interest of the
Certificateholders as determined by
such Servicer. In connection with any
assumption, modification or substitution,
such Servicer shall apply such underwriting
standards and follow such practices
and procedures as shall be normal and usual
in its general mortgage servicing
activities and as it applies to other
mortgage loans owned solely by it. No
Servicer shall take or enter into any
assumption and modification agreement,
however, unless (to the extent practicable
in the circumstances) it shall have
received confirmation, in writing, of the
continued effectiveness of any
applicable hazard insurance policy, or a
new policy meeting the requirements of
this Section is obtained. Any fee collected
by a Servicer in respect of an
assumption or substitution of liability
agreement will be retained by such
Servicer as additional servicing
compensation. In connection with any such
assumption, no material term of the
Mortgage Note (including but not limited to
the related Mortgage Rate and the amount of
the Scheduled Payment) may be
amended or modified, except as otherwise
required pursuant to the terms thereof.
Each Servicer shall notify the Trustee or
the Custodian, as applicable, that any
such substitution, modification or
assumption agreement has been completed by
forwarding to the Trustee or to the
Custodian, as applicable, the executed
original of such substitution or assumption
agreement, which document shall be
added to the related Mortgage File and
shall, for all purposes, be considered a
part of such Mortgage File to the same
extent as all other documents and
instruments constituting a part
thereof.
Notwithstanding the foregoing paragraph or any other provision
of
this Agreement, a Servicer shall not be
deemed to be in default, breach or any
other violation of its obligations
hereunder by reason of any assumption of a
Mortgage Loan by operation of law or by the
terms of the Mortgage Note or any
assumption which such Servicer may be
restricted by law from preventing, for any
reason whatsoever. For purposes of this
Section 3.14, the term "assumption" is
deemed to also include a sale (of the
Mortgaged Property) subject to the
Mortgage that is not accompanied by an
assumption or substitution of liability
agreement.
Section 3.15 Realization upon Defaulted Mortgage Loans. Each
Servicer shall use its best efforts,
consistent with Accepted Servicing
Practices, to foreclose upon or otherwise
comparably convert (which may include
an acquisition of REO Property) the
ownership of properties securing such of the
Mortgage Loans as come into and continue in
default and as to which no
satisfactory arrangements can be made for
collection of delinquent payments
pursuant to Section 3.07, and which are not
released from this Agreement
pursuant to any other provision hereof.
Each Servicer shall use reasonable
efforts to realize upon such defaulted
Mortgage Loans in such manner as will
maximize the receipt of principal and
interest by the Trustee, taking into
account, among other things, the timing of
foreclosure proceedings; provided,
however, with respect to any Second Lien
Mortgage Loan for which the related
first lien mortgage loan is not included in
the Trust Fund, if, after such
Mortgage Loan becomes 180 days or more
delinquent, the applicable Servicer
determines that a significant net recovery
is not possible through foreclosure,
such Mortgage Loan may be charged off and
the Mortgage Loan will be treated as a
Liquidated Mortgage Loan giving rise to a
Realized Loss. The foregoing is
subject to the provisions that, in any case
in which Mortgaged Property shall
have suffered damage from an uninsured
cause, a Servicer shall not be required
to expend its own funds toward the
restoration of such property unless it shall
determine in its sole discretion (i) that
such restoration will increase the net
proceeds of liquidation of the related
Mortgage Loan to the Trustee, after
reimbursement to itself for such expenses,
and (ii) that such expenses will be
recoverable by such Servicer through
Insurance Proceeds, Condemnation Proceeds
or Liquidation Proceeds from the related
Mortgaged Property, as contemplated in
Section 3.11. Each Servicer shall be
responsible for all other costs and
expenses incurred by it in any such
proceedings; provided, however, that it
shall be entitled to reimbursement thereof
from the related property, as
contemplated in Section 3.11.
The proceeds of any liquidation or REO Disposition, as well as
any
recovery resulting from a partial
collection of Insurance Proceeds, Condemnation
Proceeds or Liquidation Proceeds or any
income from an REO Property, will be
applied in the following order of priority:
first, to reimburse the applicable
Servicer or any Subservicer for any related
unreimbursed Servicing Advances,
pursuant to Section 3.11 or 3.17; second,
to reimburse the applicable Servicer
for any related unreimbursed P&I
Advances, pursuant to Section 3.11; third, to
accrued and unpaid interest on the Mortgage
Loan or REO Imputed Interest, at the
Mortgage Rate, to the date of the
liquidation or REO Disposition, or to the Due
Date prior to the Remittance Date on which
such amounts are to be distributed if
not in connection with a liquidation or REO
Disposition; and fourth, as a
recovery of principal of the Mortgage Loan.
If the amount of the recovery so
allocated to interest is less than a full
recovery thereof, that amount will be
allocated as follows: first, to unpaid
Servicing Fees; and second, as interest
at the Mortgage Rate (net of the Servicing
Fee Rate). The portion of the
recovery so allocated to unpaid Servicing
Fees shall be reimbursed to the
applicable Servicer or any Subservicer
pursuant to Section 3.11 or 3.17. The
portions of the recovery so allocated to
interest at the Mortgage Rate (net of
the Servicing Fee Rate) and to principal of
the Mortgage Loan shall be applied
as follows:
