ASSET BACKED SECURITIES
CORPORATION
Depositor
DLJ MORTGAGE CAPITAL, INC.
Seller
SAXON MORTGAGE SERVICES, INC.
Servicer
and
U.S. BANK NATIONAL ASSOCIATION
Trustee
_________________________________________
POOLING AND SERVICING
AGREEMENT
Dated as of March 1, 2005
_________________________________________
Asset Backed Securities Corporation Home
Equity Loan Trust, Series 2005-HE2
Asset Backed Pass-Through Certificates,
Series 2005-HE2
Table of Contents
Page
ARTICLE I DEFINITIONS
SECTION 1.01.
Defined Terms.
3
SECTION 1.02.
Allocation of Certain Interest
Shortfalls.
42
SECTION 1.03.
Designation of Interests in the
REMICs
43
ARTICLE II CONVEYANCE OF MORTGAGE
LOANS; ORIGINAL ISSUANCE OF CERTIFICATES
SECTION 2.01.
Conveyance of Mortgage Loans.
45
SECTION 2.02.
Acceptance of REMIC I by the
Trustee.
48
SECTION 2.03.
Repurchase or Substitution of Mortgage
Loans by the Originator, the
Seller or the Depositor; Payment of
Prepayment Premiums in the
Event of Breach.
49
SECTION 2.04.
Representations and Warranties of the
Depositor.
53
SECTION 2.05.
Representations, Warranties and Covenants
of the Servicer and the
Seller.
55
SECTION 2.06.
Issuance of the R-I Residual
Interest.
59
SECTION 2.07.
Conveyance of REMIC I Regular Interests;
Acceptance of REMIC II
by the Trustee.
59
ARTICLE III ADMINISTRATION AND
SERVICING OF THE MORTGAGE LOANS
SECTION 3.01.
Servicer to Act as Servicer.
59
SECTION 3.02.
Sub-Servicing Agreements Between the
Servicer and Sub-Servicers.
61
SECTION 3.03.
Successor Sub-Servicers.
63
SECTION 3.04.
Liability of the Servicer.
64
SECTION 3.05.
No Contractual Relationship Between
Sub-Servicers and Trustee or
Certificateholders.
64
SECTION 3.06.
Assumption or Termination of
Sub-Servicing Agreements by Trustee.
64
SECTION 3.07.
Collection of Certain Mortgage Loan
Payments.
65
SECTION 3.08.
Sub-Servicing Accounts.
66
SECTION 3.09.
Collection of Taxes, Assessments and
Similar Items; Servicing
Accounts.
66
SECTION 3.10.
Collection Account and Distribution
Account.
67
SECTION 3.11.
Withdrawals from the Collection Account
and Distribution Account.
69
SECTION 3.12.
Investment of Funds in the Collection
Account, the REO Account and
the Distribution Account.
72
SECTION 3.13.
[Reserved].
73
SECTION 3.14.
Maintenance of Hazard Insurance and
Errors and Omissions and
Fidelity Coverage.
73
SECTION 3.15.
Enforcement of Due-On-Sale Clauses;
Assumption Agreements.
74
SECTION 3.16.
Realization Upon Defaulted Mortgage
Loans.
75
SECTION 3.17.
Trustee to Cooperate; Release of Mortgage
Files.
78
SECTION 3.18.
Servicing Compensation.
79
SECTION 3.19.
Reports to the Trustee; Collection
Account Statements and Other
Reporting Obligations.
80
SECTION 3.20.
Statement as to Compliance.
81
SECTION 3.21.
Independent Public Accountants’
Servicing Report.
81
SECTION 3.22.
Access to Certain
Documentation.
82
SECTION 3.23.
Title, Management and Disposition of REO
Property.
82
SECTION 3.24.
Obligations of the Servicer in Respect of
Prepayment Interest
Shortfalls.
85
SECTION 3.25.
Obligations of the Servicer in Respect of
Mortgage Rates and Monthly
Payments.
86
SECTION 3.26.
Net WAC Reserve Fund; Yield Maintenance
Agreement.
86
SECTION 3.27.
[Reserved].
88
SECTION 3.28.
Advance Facility.
88
ARTICLE IV PAYMENTS TO
CERTIFICATEHOLDERS
SECTION 4.01.
Distributions.
90
SECTION 4.02.
Statements to
Certificateholders.
97
SECTION 4.03.
Remittance Reports; P&I
Advances.
102
SECTION 4.04.
Allocation of Realized Losses.
103
SECTION 4.05.
Compliance with Withholding
Requirements.
104
SECTION 4.06.
Commission Reporting.
104
SECTION 4.07.
Early Termination Fund.
106
ARTICLE V THE
CERTIFICATES
SECTION 5.01.
The Certificates.
107
SECTION 5.02.
Registration of Transfer and Exchange of
Certificates.
109
SECTION 5.03.
Mutilated, Destroyed, Lost or Stolen
Certificates.
114
SECTION 5.04.
Persons Deemed Owners.
115
SECTION 5.05.
Certain Available Information.
115
ARTICLE VI THE DEPOSITOR AND THE
SERVICER
SECTION 6.01.
Liability of the Depositor, the Seller
and the Servicer.
116
SECTION 6.02.
Merger or Consolidation of the Depositor,
the Seller or the Servicer.
116
SECTION 6.03.
Limitation on Liability of the Depositor,
the Seller, the Servicer and
Others.
116
SECTION 6.04.
Limitation on Resignation of the
Servicer.
118
SECTION 6.05.
Rights of the Depositor, the Seller and
the Trustee in Respect of the
Servicer.
118
ARTICLE VII DEFAULT
SECTION 7.01.
Servicer Events of Default.
119
SECTION 7.02.
Trustee to Act; Appointment of
Successor.
121
SECTION 7.03.
Notification to
Certificateholders.
123
SECTION 7.04.
Waiver of Servicer Events of
Default.
123
ARTICLE VIII CONCERNING THE
TRUSTEE
SECTION 8.01.
Duties of Trustee.
124
SECTION 8.02.
Certain Matters Affecting the
Trustee.
125
SECTION 8.03.
Trustee Not Liable for Certificates or
Mortgage Loans.
126
SECTION 8.04.
Trustee May Own Certificates.
126
SECTION 8.05.
Fees and Expenses of the
Trustee.
127
SECTION 8.06.
Eligibility Requirements for
Trustee.
128
SECTION 8.07.
Resignation and Removal of the
Trustee.
128
SECTION 8.08.
Successor Trustee.
129
SECTION 8.09.
Merger or Consolidation of
Trustee.
129
SECTION 8.10.
Appointment of Co-Trustee or Separate
Trustee.
130
SECTION 8.11.
Appointment of Custodians.
131
SECTION 8.12.
Appointment of Office or
Agency.
131
SECTION 8.13.
Representations and Warranties of the
Trustee.
131
SECTION 8.14.
Yield Maintenance Agreement.
132
ARTICLE IX TERMINATION
SECTION 9.01.
Termination Upon Repurchase or
Liquidation of All Mortgage Loans.
132
SECTION 9.02.
Additional Termination
Requirements.
134
ARTICLE X REMIC
PROVISIONS
SECTION 10.01.
REMIC Administration.
135
SECTION 10.02.
Prohibited Transactions and
Activities.
138
SECTION 10.03.
Servicer and Trustee
Indemnification.
138
ARTICLE XI MISCELLANEOUS
PROVISIONS
SECTION 11.01.
Amendment.
139
SECTION 11.02.
Recordation of Agreement;
Counterparts.
140
SECTION 11.03.
Limitation on Rights of
Certificateholders.
141
SECTION 11.04.
Governing Law.
141
SECTION 11.05.
Notices.
142
SECTION 11.06.
Severability of Provisions.
142
SECTION 11.07.
Notice to Rating Agencies and the
Counterparty.
142
SECTION 11.08.
Article and Section
References.
144
SECTION 11.09.
Third Party Rights.
144
SECTION 11.10.
Grant of Security Interest.
144
SECTION 11.11.
Protection of Assets.
144
SECTION 11.12.
Non-Solicitation
145
Exhibits
Exhibit A-1
Form of Class A Certificate
Exhibit A-2
Form of Mezzanine Certificate
Exhibit A-3
[Reserved]
Exhibit A-4
[Reserved]
Exhibit A-5
Form of Class X Certificate
Exhibit A-6
Form of Class P Certificate
Exhibit A-7
[Reserved]
Exhibit A-8
[Reserved]
Exhibit A-9
[Reserved]
Exhibit A-10
Form of Class R Certificate
Exhibit B
[Reserved]
Exhibit C-1
Form of Trust Receipt and Initial
Certification
Exhibit C-2
Form of Trustee Receipt and Final
Certification
Exhibit D
Form of Mortgage Loan Purchase
Agreement
Exhibit E-1
Form of Request for Release
Exhibit E-2
[Reserved]
Exhibit F-1
Forms of Transferor/Transferee
Representation Letter
Exhibit F-2
Form of Transfer Affidavit and
Agreement
Exhibit G
Form of ERISA Certification
Exhibit H
Form of Depositor
Certification
Exhibit I
Form of Trustee Certification
Exhibit J
Form of Servicer Certification
Schedules
Schedule 1
Mortgage Loan Schedule
Schedule 2
Prepayment Premium Schedule
This Pooling and Servicing Agreement, is
dated and effective as of March 1, 2005, among ASSET BACKED
SECURITIES CORPORATION, as Depositor, DLJ MORTGAGE CAPITAL, INC.,
as Seller, SAXON MORTGAGE SERVICES, INC., as Servicer and U.S. BANK
NATIONAL ASSOCIATION, as Trustee.
PRELIMINARY STATEMENT:
The Depositor intends to sell
pass-through certificates (collectively, the
“Certificates”), to be issued hereunder in multiple
classes, which in the aggregate will evidence the entire beneficial
ownership interest in multiple REMICs (as defined herein) created
hereunder. The Trust Fund will consist of a segregated pool
of assets consisting of the Mortgage Loans and certain other
related assets subject to this Agreement.
As of the Cut-off Date, the Mortgage
Loans had an aggregate Stated Principal Balance equal to
$717,027,009.63.
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 A1, Class A2 and Class A3 Certificates.
|
|
Class P Certificates
|
Class P Certificates.
|
|
ERISA-Restricted Certificates
|
Non-Offered Certificates and any Certificates that do not satisfy
the applicable ratings requirement under the Underwriter’s
Exemption.
|
|
LIBOR Certificates
|
Class A and Mezzanine Certificates.
|
|
Mezzanine Certificates
|
Class M1, Class M2, Class M3, Class M4, Class M5, Class M6, Class
M7 and Class M8 Certificates.
|
|
Non-Offered Certificates
|
Class M8, Class X, Class P and Residual Certificates.
|
|
Offered Certificates
|
Class A and Offered Subordinate Certificates.
|
|
Offered Subordinate Certificates
|
Mezzanine Certificates (other than the Class M8 Certificates).
|
|
Physical Certificates
|
Class X, Class P and Residual Certificates.
|
|
Regular Certificates
|
All Classes of Certificates other than the Residual
Certificates.
|
|
Residual Certificates
|
Class R Certificates.
|
|
Senior Certificates
|
Class A Certificates.
|
|
Subordinate Certificates
|
Class X Certificates, Residual Certificates and Mezzanine
Certificates.
|
In consideration of the mutual agreements
herein contained, the Depositor, the Seller, the Servicer and the
Trustee agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01.
Defined Terms.
Whenever used in this Agreement,
including, without limitation, in the Preliminary Statement hereto,
the following words and phrases, unless the context otherwise
requires, shall have the meanings specified in this
Article.
“1933 Act”: As defined in
Section 5.02(b) herein.
“Accepted Servicing
Practices”: With respect to any Mortgage Loan, those mortgage
servicing practices of prudent mortgage lending institutions which
service mortgage loans of the same type as such Mortgage Loan in
the jurisdiction where the related Mortgaged Property is
located.
“Adjustable Rate Mortgage
Loan”: Each of the Mortgage Loans identified in the Mortgage
Loan Schedule as having a Mortgage Rate that is subject to
adjustment.
“Adjustable Rate PPC”: 100%
Adjustable Rate PPC means a CPR of 4.00% per annum of the then
unpaid principal balance of a Mortgage Loan in the first month of
the life of such Mortgage Loan and an additional approximately
2.1818% (precisely 24%/11 expressed as a percentage) per annum in
each month thereafter until the 12 th month, remaining
at 28% per annum in each month thereafter until the 24
th month, then beginning in the 25 th month,
remaining at 55% per annum in each month thereafter until the 28
th month and in each month thereafter during the life of
such Mortgage Loan, a CPR of 35% per annum.
“Adjustment Date”: With
respect to each Adjustable Rate Mortgage Loan, the day of the month
on which the Mortgage Rate of such Mortgage Loan changes pursuant
to the related Mortgage Note. The first Adjustment Date
following the Cut-off Date as to each Adjustable Rate Mortgage Loan
is set forth in the Mortgage Loan Schedule.
“Advance Facility”: As
defined in Section 3.28(a) herein.
“Advance Facility Notice”: As
defined in Section 3.28(b) herein.
“Advance Facility Trustee”:
As defined in Section 3.28(b) herein.
“Advance Reimbursement
Amounts”: As defined in Section 3.28(a) herein.
“Advancing Person”: As
defined in Section 3.28(a) herein.
“Affiliate”: With respect to
any specified Person, any other Person controlling or controlled by
or under common control with such specified Person. For the
purposes of this definition, “control” when used with
respect to any specified Person 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.
“Aggregate Collateral
Balance”: As of any date of determination will be equal to
the aggregate Stated Principal Balance of the Mortgage Loans and
any REO Properties owned by the Trust.
“Agreement”: This Pooling and
Servicing Agreement and all amendments hereof and supplements
hereto.
“Applicable Regulations”: As
to any Mortgage Loan, all federal, state and local laws, statutes,
rules and regulations applicable thereto.
“Allocated Realized Loss
Amount”: With respect to any Distribution Date and any class
of Mezzanine Certificates, the amount by which (A) any
Realized Losses allocated to any such Class of Certificates on any
Distribution Date pursuant to Section 4.04 exceeds the sum of (B)
(i) any additions to the Certificate Principal Balance pursuant to
Section 4.04(d) on such Distribution Date or any previous
Distribution Date and (ii) the aggregate of the amounts paid
in respect of reimbursement of Allocated Realized Loss Amounts
pursuant to Section 4.01(a)(3) on previous Distribution
Dates.
“Assignment”: An assignment
of Mortgage, notice of transfer or equivalent instrument, in
recordable form (excepting therefrom, if applicable, the mortgage
recordation information which has not been required pursuant to
Section 2.01 hereof or returned by the applicable recorder’s
office and/or the assignee’s name), which is sufficient under
the laws of the jurisdiction wherein the related Mortgaged Property
is located to reflect of record the sale of the Mortgage, which
assignment, notice of transfer or equivalent instrument may be in
the form of one or more blanket assignments covering Mortgages
secured by Mortgaged Properties located in the same county, if
permitted by law.
“Assignment and Assumption
Agreement”: That certain assignment and assumption agreement
dated as of the Cut-off Date, by and between the Seller, as
assignor and the Depositor, as assignee, relating to the Mortgage
Loans.
“Available Distribution
Amount”: With respect to any Distribution Date, an amount
equal to (1) the sum of (a) the aggregate of the amounts on deposit
in the Collection Account and Distribution Account as of the close
of business on the related Determination Date, (b) the aggregate of
any amounts received in respect of an REO Property withdrawn from
any REO Account and deposited in the Distribution Account for such
Distribution Date pursuant to Section 3.23, (c) the aggregate of
any amounts deposited in the Distribution Account by the Servicer
in respect of Prepayment Interest Shortfalls for such Distribution
Date pursuant to Section 3.24 and (d) the aggregate of any P&I
Advances made by the Servicer for such Distribution Date pursuant
to Section 4.03 reduced (to not less than zero) by (2) the portion
of the amount described in clause (1)(a) above that represents (i)
Monthly Payments on the Mortgage Loans received from a Mortgagor on
or prior to the Determination Date but due during any Due Period
subsequent to the related Due Period, (ii) Principal Prepayments on
the Mortgage Loans received after the related Prepayment Period
(together with any interest payments received with such Principal
Prepayments to the extent they represent the payment of interest
accrued on the Mortgage Loans during a period subsequent to the
related Prepayment Period), (iii) Liquidation Proceeds, Insurance
Proceeds and proceeds from repurchases of and substitutions for
Mortgage Loans, if any, received in respect of such Mortgage Loans
after the calendar month preceding the month of such Distribution
Date, (iv) amounts reimbursable or payable to the Depositor, the
Originator, the Servicer, the Trustee or any Sub-Servicer pursuant
to Section 3.11 or Section 3.12 or otherwise payable in respect of
Extraordinary Trust Fund Expenses, (v) amounts deposited in the
Collection Account or the Distribution Account in error, and (vi)
the amount of any Prepayment Premiums collected by the Servicer in
connection with the voluntary Principal Prepayment in full of any
of the Mortgage Loans or the Servicer Prepayment Premium Payment
Amount.
“Bankruptcy Code”: The
Bankruptcy Reform Act of 1978 (Title 11 of the United States Code),
as amended.
“Bankruptcy Loss”: With
respect to any Mortgage Loan, a Realized Loss resulting from a
Deficient Valuation (i.e. “principal cramdown”) or Debt
Service Reduction (i.e., “interest
cramdown”).
“Basic Principal Distribution
Amount”: With respect to any Distribution Date the amounts in
clauses (b)(i) – (iv) of the definition of Principal
Distribution Amount.
“Book-Entry Certificate”: As
specified in the Preliminary Statement.
“Book-Entry Custodian”: The
custodian appointed pursuant to Section 5.01 herein.
“Business Day”: Any day other
than a Saturday, a Sunday or a day on which banking or savings and
loan institutions in the State of California, the State of New
York, the State of Delaware, the State of Minnesota or the cities
in which the Corporate Trust Office of the Trustee is located, are
authorized or obligated by law or executive order to be
closed.
“Carryover Termination
Payment”: For any Distribution Date, the portion of any
Termination Payment payable by the Trust to the Counterparty
previously due on a prior Distribution Date that remains unpaid on
such Distribution Date plus interest thereon at the Default Rate
for the period from the date such Termination Payment was due but
unpaid to but excluding the date such amount has been paid (such
interest to be compounded daily).
“Certificate”: Any one of the
certificates issued under this Agreement in substantially the forms
attached hereto as Exhibit A-1, Exhibit A-2, Exhibit A-5, Exhibit
A-6 and Exhibit A-10.
“Certificate Factor”: With
respect to any Class of LIBOR Certificates as of any Distribution
Date, a fraction, expressed as a decimal carried to six places, the
numerator of which is the aggregate Certificate Principal Balance
of such Class of Certificates on such Distribution Date (after
giving effect to any distributions of principal and allocations of
Realized Losses in reduction of the Certificate Principal Balance
of such Class of Certificates to be made on such Distribution
Date), and the denominator of which is the initial Original
Certificate Principal Balance of such Class of Certificates as of
the Closing Date.
“Certificate Margin”: As to
any Class of LIBOR Certificates, the respective amount set forth
below:
|
|
Certificate Margin
|
|
Class
|
|
|
|
A1
|
0.110%
|
0.220%
|
|
A2
|
0.250%
|
0.500%
|
|
A3
|
0.310%
|
0.620%
|
|
M1
|
0.450%
|
0.675%
|
|
M2
|
0.500%
|
0.750%
|
|
M3
|
0.730%
|
1.095%
|
|
M4
|
0.820%
|
1.230%
|
|
M5
|
1.250%
|
1.875%
|
|
M6
|
1.350%
|
2.025%
|
|
M7
|
2.200%
|
3.300%
|
|
M8
|
2.500%
|
3.750%
|
(1)
To and including the Optional Termination
Date.
(2)
After the Optional Termination
Date.
“Certificate Owner”: With
respect to a Book-Entry Certificate, the Person who is the
beneficial owner of such Certificate as reflected on the books of
the Depository or on the books of a Depository Participant or on
the books of an indirect participating brokerage firm for which a
Depository Participant acts as agent.
“Certificate Principal
Balance”: With respect to any Class of Certificates, other
than the Class R and Class X Certificates, as of any Distribution
Date, the Original Certificate Principal Balance reduced by the sum
of (a) all amounts actually distributed in respect of principal of
such Class and (b) with respect to the Mezzanine Certificates, any
reductions in their respective Certificate Principal Balances
deemed to have occurred in connection with allocations of Realized
Losses on all prior Distribution Dates pursuant to Section 4.04(b)
plus any increase to a Certificate Principal Balance pursuant to
Section 4.04(d).
“Certificate Register” and
“Certificate Registrar”: The register maintained and
the registrar appointed pursuant to Section 5.02 herein.
“Certificateholder” or
“Holder”: The Person in whose name a Certificate is
registered in the Certificate Register, except that a Disqualified
Organization or a Non-United States Person shall not be a Holder of
a Residual Certificate for any purposes hereof and, solely for the
purposes of giving any consent pursuant to this Agreement, any
Certificate registered in the name of the Depositor or the Servicer
or any Affiliate thereof shall be deemed not to be outstanding and
the Voting Rights to which it is entitled shall not be taken into
account in determining whether the requisite percentage of Voting
Rights necessary to effect any such consent has been obtained,
except as otherwise provided in Section 11.01. The Trustee
may conclusively rely upon a certificate of the Depositor or the
Servicer in determining whether a Certificate is held by an
Affiliate thereof. All references herein to
“Holders” or “Certificateholders” shall
reflect the rights of Certificate Owners as they may indirectly
exercise such rights through the Depository and participating
members thereof, except as otherwise specified herein; provided,
however, that the Trustee shall be required to recognize as a
“Holder” or “Certificateholder” only the
Person in whose name a Certificate is registered in the Certificate
Register.
“Charged-off Mortgage Loan”:
As defined in Section 3.01 herein.
“Class”: All of the
Certificates bearing the same class designation as set forth in the
Preliminary Statement.
“Class A Principal Distribution
Amount”: For any Distribution Date (a) prior to the Stepdown
Date or (b) on which a Trigger Event is in effect, is an amount
equal to the Principal Distribution Amount for such Distribution
Date. For any Distribution Date (a) on or after the Stepdown
Date or (b) on which a Trigger Event is not in effect, the excess
of (x) the aggregate Certificate Principal Balance of the Class A
Certificates immediately prior to such Distribution Date over (y)
the lesser of (A) the product of (i) 53.40% and (ii) the
Aggregate Collateral Balance as of the last day of the related Due
Period and (B) the Aggregate Collateral Balance as of the last day
of the related Due Period minus $3,585,135.
“Class Exemption”: A class
exemption granted by the U.S. Department of Labor, which provides
relief from certain of the prohibited transaction provisions of
ERISA and the related excise tax provisions of the Code.
“Class M1 Principal Distribution
Amount”: With respect to any Distribution Date, the excess of
(x) the sum of (i) the aggregate Certificate Principal Balance of
the Class A Certificates (after taking into account the payment of
the Class A Principal Distribution Amount on such Distribution
Date) and (ii) the Certificate Principal Balance of the Class M1
Certificates immediately prior to such Distribution Date over (y)
the lesser of (A) the product of (i) 70.80% and (ii) the
Aggregate Collateral Balance as of the last day of the related Due
Period and (B) the Aggregate Collateral Balance as of the last day
of the related Due Period minus $3,585,135.
“Class M2 Principal Distribution
Amount”: With respect to any Distribution Date, the excess of
(x) the sum of (i) the aggregate Certificate Principal Balance of
the Class A Certificates (after taking into account the payment of
the related Class A Principal Distribution Amount on such
Distribution Date), (ii) the Certificate Principal Balance of the
Class M1 Certificates (after taking into account the payment of the
Class M1 Principal Distribution Amount on such Distribution Date)
and (iii) the Certificate Principal Balance of the Class M2
Certificates immediately prior to such Distribution Date over (y)
the lesser of (A) the product of (i) 75.50% and (ii) the Aggregate
Collateral Balance as of the last day of the related Due Period and
(B) the Aggregate Collateral Balance as of the last day of the
related Due Period minus $3,585,135.
“Class M3 Principal Distribution
Amount”: With respect to any Distribution Date, the excess of
(x) the sum of (i) the aggregate Certificate Principal Balance of
the Class A Certificates (after taking into account the payment of
the Class A Principal Distribution Amount on such Distribution
Date), (ii) the Certificate Principal Balance of the Class M1
Certificates (after taking into account the payment of the Class M1
Principal Distribution Amount on such Distribution Date), (iii) the
Certificate Principal Balance of the Class M2 Certificates (after
taking into account the payment of the Class M2 Principal
Distribution Amount on such Distribution Date) and (iv) the
Certificate Principal Balance of the Class M3 Certificates
immediately prior to such Distribution Date over (y) the lesser of
(A) the product of (i) 83.30% and (ii) the Aggregate Collateral
Balance as of the last day of the related Due Period and (B) the
Aggregate Collateral Balance as of the last day of the related Due
Period minus $3,585,135.
“Class M4 Principal Distribution
Amount”: With respect to any Distribution Date, the excess of
(x) the sum of (i) the aggregate Certificate Principal Balance of
the Class A Certificates (after taking into account the payment of
the Class A Principal Distribution Amount on such Distribution
Date), (ii) the Certificate Principal Balance of the Class M1
Certificates (after taking into account the payment of the Class M1
Principal Distribution Amount on such Distribution Date), (iii) the
Certificate Principal Balance of the Class M2 Certificates (after
taking into account the payment of the Class M2 Principal
Distribution Amount on such Distribution Date), (iv) the
Certificate Principal Balance of the Class M3 Certificates (after
taking into account the payment of the Class M3 Principal
Distribution Amount on such Distribution Date) and (v) the
Certificate Principal Balance of the Class M4 Certificates
immediately prior to such Distribution Date over (y) the lesser of
(A) the product of (i) 85.60% and (ii) the Aggregate Collateral
Balance as of the last day of the related Due Period and (B) the
Aggregate Collateral Balance as of the last day of the related Due
Period minus $3,585,135.
“Class M5 Principal Distribution
Amount”: With respect to any Distribution Date, the excess of
(x) the sum of (i) the aggregate Certificate Principal Balance of
the Class A Certificates (after taking into account the payment of
the Class A Principal Distribution Amount on such Distribution
Date), (ii) the Certificate Principal Balance of the Class M1
Certificates (after taking into account the payment of the Class M1
Principal Distribution Amount on such Distribution Date), (iii) the
Certificate Principal Balance of the Class M2 Certificates (after
taking into account the payment of the Class M2 Principal
Distribution Amount on such Distribution Date), (iv) the
Certificate Principal Balance of the Class M3 Certificates (after
taking into account the payment of the Class M3 Principal
Distribution Amount on such Distribution Date), (v) the Certificate
Principal Balance of the Class M4 Certificates (after taking into
account the payment of the Class M4 Principal Distribution Amount
on such Distribution Date) and (vi) the Certificate Principal
Balance of the Class M5 Certificates immediately prior to such
Distribution Date over (y) the lesser of (A) the product of (i)
88.50% and (ii) the Aggregate Collateral Balance as of the last day
of the related Due Period and (B) the Aggregate Collateral Balance
as of the last day of the related Due Period minus
$3,585,135.
“Class M6 Principal Distribution
Amount”: With respect to any Distribution Date, the excess of
(x) the sum of (i) the aggregate Certificate Principal Balance of
the Class A Certificates (after taking into account the payment of
the Class A Principal Distribution Amount on such Distribution
Date), (ii) the Certificate Principal Balance of the Class M1
Certificates (after taking into account the payment of the Class M1
Principal Distribution Amount on such Distribution Date), (iii) the
Certificate Principal Balance of the Class M2 Certificates (after
taking into account the payment of the Class M2 Principal
Distribution Amount on such Distribution Date), (iv) the
Certificate Principal Balance of the Class M3 Certificates (after
taking into account the payment of the Class M3 Principal
Distribution Amount on such Distribution Date), (v) the Certificate
Principal Balance of the Class M4 Certificates (after taking into
account the payment of the Class M4 Principal Distribution Amount
on such Distribution Date), (vi) the Certificate Principal Balance
of the Class M5 Certificates (after taking into account the payment
of the Class M5 Principal Distribution Amount on such Distribution
Date) and (vii) the Certificate Principal Balance of the Class M6
Certificates immediately prior to such Distribution Date over (y)
the lesser of (A) the product of (i) 90.10% and (ii) the Aggregate
Collateral Balance as of the last day of the related Due Period and
(B) the Aggregate Collateral Balance as of the last day of the
related Due Period minus $3,585,135.
“Class M7 Principal Distribution
Amount”: With respect to any Distribution Date, the excess of
(x) the sum of (i) the aggregate Certificate Principal Balance of
the Class A Certificates (after taking into account the payment of
the Class A Principal Distribution Amount on such Distribution
Date), (ii) the Certificate Principal Balance of the Class M1
Certificates (after taking into account the payment of the Class M1
Principal Distribution Amount on such Distribution Date), (iii) the
Certificate Principal Balance of the Class M2 Certificates (after
taking into account the payment of the Class M2 Principal
Distribution Amount on such Distribution Date), (iv) the
Certificate Principal Balance of the Class M3 Certificates (after
taking into account the payment of the Class M3 Principal
Distribution Amount on such Distribution Date), (v) the Certificate
Principal Balance of the Class M4 Certificates (after taking into
account the payment of the Class M4 Principal Distribution Amount
on such Distribution Date), (vi) the Certificate Principal Balance
of the Class M5 Certificates (after taking into account the payment
of the Class M5 Principal Distribution Amount on such Distribution
Date), (vii) the Certificate Principal Balance of the Class M6
Certificates (after taking into account the payment of the Class M6
Principal Distribution Amount on such Distribution Date) and (viii)
the Certificate Principal Balance of the Class M7 Certificates
immediately prior to such Distribution Date over (y) the lesser of
(A) the product of (i) 92.30% and (ii) the Aggregate Collateral
Balance as of the last day of the related Due Period and (B) the
Aggregate Collateral Balance as of the last day of the related Due
Period minus $3,585,135.
“Class M8 Principal Distribution
Amount”: With respect to any Distribution Date, the excess of
(x) the sum of (i) the aggregate Certificate Principal Balance of
the Class A Certificates (after taking into account the payment of
the Class A Principal Distribution Amount on such Distribution
Date), (ii) the Certificate Principal Balance of the Class M1
Certificates (after taking into account the payment of the Class M1
Principal Distribution Amount on such Distribution Date), (iii) the
Certificate Principal Balance of the Class M2 Certificates (after
taking into account the payment of the Class M2 Principal
Distribution Amount on such Distribution Date), (iv) the
Certificate Principal Balance of the Class M3 Certificates (after
taking into account the payment of the Class M3 Principal
Distribution Amount on such Distribution Date), (v) the Certificate
Principal Balance of the Class M4 Certificates (after taking into
account the payment of the Class M4 Principal Distribution Amount
on such Distribution Date), (vi) the Certificate Principal Balance
of the Class M5 Certificates (after taking into account the payment
of the Class M5 Principal Distribution Amount on such Distribution
Date), (vii) the Certificate Principal Balance of the Class M6
Certificates (after taking into account the payment of the Class M6
Principal Distribution Amount on such Distribution Date), (viii)
the Certificate Principal Balance of the Class M7 Certificates
(after taking into account the payment of the Class M7 Principal
Distribution Amount on such Distribution Date) and (ix) the
Certificate Principal Balance of the Class M8 Certificates
immediately prior to such Distribution Date over (y) the lesser of
(A) the product of (i) 95.20% and (ii) the Aggregate Collateral
Balance as of the last day of the related Due Period and (B) the
Aggregate Collateral Balance as of the last day of the related Due
Period minus $3,585,135.
“Class X Distribution
Amount”: With respect to any Distribution Date the sum of (i)
the Overcollateralization Release Amount for that Distribution
Date, if any, and (ii) the product of (x) a notional amount, equal
to the aggregate Stated Principal Balance of the Mortgage Loans as
of the first day of the month preceding the month of such
Distribution Date (after giving effect to Monthly Payments of
principal due on such date and reduced by prepayments made after
such first day that are distributed on the preceding Distribution
Date), and (y) the Pass-Through Rate for such Class for such
Distribution Date as set forth in footnote (2) to “Master
REMIC” under Section 1.03 herein, less (iii) distributions
made pursuant to Section 4.01(a)(3)(i)-(xxvii) on such Distribution
Date.
“Closing Date”: March 4,
2005.
“Code”: The Internal Revenue
Code of 1986, including any successor or amendatory
provisions.
“Collection Account”: The
account or accounts created and maintained by the Servicer pursuant
to Section 3.10(a), which shall be entitled “Saxon Mortgage
Services, Inc., as Servicer for U.S. Bank National Association, as
Trustee, in trust for the registered holders of Asset Backed
Securities Corporation Home Equity Loan Trust 2005-HE2, Series
2005-HE2”. The Collection Account must be an Eligible
Account.
“Commission”: The Securities
and Exchange Commission.
“Compensating Interest”: As
defined in Section 3.24 herein.
“Controlling Person”: The
Holders of the majority Percentage Interest of the Class X
Certificates.
“Corporate Trust Office”: The
principal corporate trust office of the Trustee at which at any
particular time its corporate trust business in connection with
this Agreement shall be administered, which offices at the date of
the execution of this instrument is located at 60 Livingston
Avenue, St. Paul, Minnesota, 55107-2292, or at such other
address as the Trustee may designate from time to time by notice to
the Certificateholders, the Depositor and the Servicer.
“Corresponding Classes of
Certificates”: With respect to each REMIC Regular Interest,
any Class of Certificates appearing opposite such REMIC Regular
Interest in Section 1.03 hereof.
“Counterparty”: Credit Suisse
First Boston International, or any successor in interest thereto
under the Yield Maintenance Agreement.
“CPR”: A prepayment
assumption that represents an annualized constant assumed rate of
prepayment each month of a pool of mortgage loans relative to its
outstanding principal balance for the life of such pool.
“Credit Enhancement
Percentage”: For any Distribution Date, the percentage
obtained by dividing (x) the sum of (i) the aggregate Certificate
Principal Balance of the Mezzanine Certificates (after giving effect to the distribution of the
Principal Distribution Amount on such Distribution Date) and (ii)
the Overcollateralization Amount (after giving effect to the
distribution of the Principal Distribution Amount on such
Distribution Date) by (y) the Aggregate Collateral Balance as of
the last day of the related Due Period.
“Credit Repositories”: Each
of Equifax, Transunion, and Experian, or their respective
successors in interest.
“Custodial Agreement”: Any
custodial agreement between the Trustee and the related Custodian
providing for the safekeeping of any documents or instruments
referred to in Section 2.01 on behalf of the
Certificateholders.
“Custodial File”: A Mortgage
File held by a Custodian on behalf of the Trustee.
“Custodian”: A custodian that
is appointed pursuant to a Custodial Agreement. Any Custodian
so appointed shall act as agent on behalf of the Trustee, and shall
be compensated by the Trustee. The Trustee shall remain at
all times responsible under the terms of this Agreement,
notwithstanding the fact that certain duties have been assigned to
a Custodian.
“Cut-off Date”: With respect
to each Mortgage Loan (other than a Qualified Substitute Mortgage
Loan), March 1, 2005. With respect to all Qualified
Substitute Mortgage Loans, their respective dates of substitution.
References herein to the “Cut-off Date,” when
used with respect to more than one Mortgage Loan, shall be to the
respective Cut-off Dates for such Mortgage Loans.
“DBRS”: Dominion Bond Rating
Service, Inc., or its successor in interest.
“Debt Service Reduction”:
With respect to any Mortgage Loan, a reduction in the scheduled
Monthly Payment for such Mortgage Loan by a court of competent
jurisdiction in a proceeding under the Bankruptcy Code, except such
a reduction resulting from a Deficient Valuation.
“Default Rate”: As defined in
the Yield Maintenance Agreement.
“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
Bankruptcy Code.
“Definitive Certificates”: As
defined in Section 5.01(b) herein.
“Deleted Mortgage Loan”: A
Mortgage Loan replaced or to be replaced by a Qualified Substitute
Mortgage Loan.
“Delinquency Percentage”:
With respect to the last day of a Due Period, the percentage
equivalent of a fraction, the numerator of which is the aggregate
Stated Principal Balance of all Mortgage Loans that, as of the last
day of the previous calendar month, are 60 or more days Delinquent,
are in foreclosure, have been converted to REO Properties or have
been discharged by reason of bankruptcy, and the denominator of
which is the aggregate Stated Principal Balance of the Mortgage
Loans and REO Properties as of the last day of the previous
calendar month.
“Delinquent”: A Mortgage Loan
is “Delinquent” if any Monthly Payment due on a Due
Date is not made by the close of business on the next scheduled Due
Date for that Mortgage Loan (including all foreclosures,
bankruptcies and REO Properties). A Mortgage Loan is
“30 days Delinquent” if the Monthly Payment has not
been received by the close of business on the corresponding day of
the month immediately succeeding the month in which that Monthly
Payment was due or, if there was no corresponding date (e.g., as
when a 30-day month follows a 31-day month in which the payment was
due on the 31st day of that month), then on the last day of that
immediately succeeding month; and similarly for “60 days
Delinquent” and “90 days Delinquent,” etc.
“Depositor”: Asset Backed
Securities Corporation, a Delaware corporation, or its successor in
interest.
“Depositor Certification”: As
defined in Section 4.06(b) herein, a form of which is attached
hereto as Exhibit H.
“Depository”: The Depository
Trust Company, or any successor Depository hereafter named.
The nominee of the initial Depository, for purposes of
registering those Certificates that are to be Book-Entry
Certificates, is CEDE & Co. 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
and a “clearing agency” registered pursuant to the
provisions of Section 17A of the Exchange Act.
“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 “F-1” by
Fitch (if rated by Fitch), “A-1” by S&P and
“P-1” by Moody’s (or comparable ratings if Fitch,
S&P and Moody’s are not the Rating Agencies).
“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 15th day of the calendar
month in which such Distribution Date occurs or, if such 15th day
is not a Business Day, the Business Day immediately preceding such
15th day.
“Directly Operate”: With
respect to any REO Property, the furnishing or rendering of
services to the tenants thereof, the management or operation of
such REO Property, the holding of such REO Property primarily for
sale to customers, the performance of any construction work thereon
or any use of such REO Property in a trade or business conducted by
the Trust Fund other than through an Independent Contractor;
provided, however, that the Trustee (or the Servicer on behalf of
the Trustee) shall not be considered to Directly Operate an REO
Property solely because the Trustee (or the Servicer on behalf of
the Trustee) establishes rental terms, chooses tenants, enters into
or renews leases, deals with taxes and insurance, or makes
decisions as to repairs or capital expenditures with respect to
such REO Property.
“Disqualified Organization”:
Any of the following: (i) the United States, any State or political
subdivision thereof, any possession of the United States, or any
agency or instrumentality of any of the foregoing (other than an
instrumentality which is a corporation if all of its activities are
subject to tax and, except for Freddie Mac, a majority of its board
of directors is not selected by such governmental unit), (ii) any
foreign government, any international organization, or any agency
or instrumentality of any of the foregoing, (iii) any organization
(other than certain farmers’ cooperatives described in
Section 521 of the Code) which is exempt from the tax imposed by
Chapter 1 of the Code (including the tax imposed by Section 511 of
the Code on unrelated business taxable income), (iv) rural electric
and telephone cooperatives described in Section 1381(a)(2)(C) of
the Code, (v) an “electing large partnership” within
the meaning of Section 775 of the Code and (vi) any other Person so
designated by the Trustee based upon an Opinion of Counsel that the
holding of an Ownership Interest in a Residual Certificate by such
Person may cause any REMIC created hereunder, or any Person having
an Ownership Interest in any Class of Certificates (other than such
Person) to incur a liability for any federal tax imposed under the
Code that would not otherwise be imposed but for the Transfer of an
Ownership Interest in a Residual Certificate to such Person.
The terms “United States,” “State”
and “international organization” shall have the
meanings set forth in Section 7701 of the Code or successor
provisions.
“Distribution Account”: The
trust account or accounts created and maintained by the Trustee
pursuant to Section 3.10(b) which shall be entitled
“Distribution Account, U.S. Bank National Association, as
Trustee, in trust for the registered holders of Asset Backed
Securities Corporation Home Equity Loan Trust 2005-HE2, Series
2005-HE2”. The Distribution Account must be an Eligible
Account.
“Distribution Date”: The 25th
day of any month, or if such 25th day is not a Business Day, the
Business Day immediately following such 25th day, commencing in
April 2005.
“Due Date”: With respect to
each Distribution Date and each Mortgage Loan (a) that has a
Monthly Payment due on the first day of the month, the first day of
the month and (b) that has a Monthly Payment due on a day other
than the first day of the month, such Mortgage Loan will be treated
as if the Monthly Payment is due on the first day of the
immediately succeeding month, in each case, exclusive of any days
of grace in the related Due Period.
“Due Period”: With respect to
any Distribution Date, the period commencing on the second day of
the month immediately preceding the month in which such
Distribution Date occurs and ending on the first day of the month
in which such Distribution Date occurs.
“Early Termination Date”: As
defined in the Yield Maintenance Agreement.
“Early Termination Fund”: The
separate Eligible Account created and initially maintained by the
Trustee pursuant to Section 4.07 in the name of the Trustee for the
benefit of the Certificateholders and designated “U.S. Bank
National Association, in trust for registered holders of Asset
Backed Securities Corporation, Asset Backed Pass-Through
Certificates, Series 2005-HE2.” The Early Termination
Fund shall not be part of any REMIC. Funds in the Early
Termination Fund shall be held in trust for the Class X
Certificateholders for the uses and purposes set forth in this
Agreement.
“EDGAR”: The
Commission’s Electronic Data Gathering and Retrieval
System.
“Eligible Account”: Either
(1) an account or accounts maintained with a federal or
state-chartered Depository Institution or trust company acceptable
to the Rating Agencies and shall be: (a) commercial paper,
short-term debt obligation, or other short-term deposits rated at
least “A-1+” by S&P, “F-1+” by Fitch
(if rated by Fitch) and “R-1” by DBRS (if rated by
DBRS) if the deposits are to be held in the account for less than
30 days; or (b) long term unsecured debt obligations rated at least
“AA-” by S&P if the deposits are to be held in the
account more than 30 days; following a downgrade, withdrawal, or
suspension of such institution’s rating, each account should
promptly (and in any case within not more than 10 calendar days) be
moved to a qualifying institution or to one or more segregated
trust accounts in the trust department of such institution, if
permitted; or (2) a segregated trust account or accounts maintained
with the corporate trust department of a federal depository
institution or state-chartered depository institution subject to
regulations regarding fiduciary funds on deposit similar to Title
12 of the Code of Federal Regulation Section 9.10(b), which, in
either case, has corporate trust powers, acting in its fiduciary
capacity. Eligible Accounts may bear interest.
“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 (without regard to
the ratings requirements) of an Underwriter’s
Exemption.
“Estate in Real Property”: A
fee simple estate in a parcel of land.
“Excess Overcollateralization
Amount”: With respect to any Distribution Date, the excess,
if any, of (i) the Overcollateralization Amount for such
Distribution Date (assuming that 100% of the Principal Remittance
Amount is applied as a principal payment on such Distribution Date)
over (ii) the Overcollateralization Target Amount for such
Distribution Date.
“Exchange Act”: The
Securities Exchange Act of 1934, as amended.
“Extraordinary Trust Fund
Expense”: Any amounts reimbursable to the Trustee, or any
director, officer, employee or agent of the Trustee, from the Trust
Fund pursuant to Section 2.02, 2.03, 7.01(c) or 8.05(a) and any
amounts payable from the Distribution Account in respect of taxes
pursuant to Section 10.01(g)(iii), any amounts payable from the
Distribution Account in respect of any REMIC administration
pursuant to Section 10.01(c).
“Fannie Mae”: Fannie Mae,
formerly known as Federal National Mortgage Association, or any
successor thereto.
“FDIC”: Federal Deposit
Insurance Corporation or any successor thereto.
“Federal Funds Rate”: The
interest rate at which depository institutions lend balances at the
Federal Reserve to other depository institutions
overnight.
“Final Distribution Date”:
The Distribution Date in (i) February 2035 with respect to all
Classes of Certificates other than the Class A1 Certificates and
(ii) April 2014 with respect to the Class A1
Certificates.
“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 Seller, the Depositor or the Servicer, as the case
may be, pursuant to or as contemplated by Section 2.03, Section
3.16(c) or Section 9.01, as applicable), a determination made by
the Servicer that all Insurance Proceeds, Liquidation Proceeds and
other payments or recoveries which the Servicer, in its reasonable
good faith judgment, expects to be finally recoverable in respect
thereof have been so recovered. The Servicer shall maintain
records, prepared by a Servicing Officer, of each Final Recovery
Determination made thereby.
“First Lien”: With respect to
any second lien Mortgage Loan, the mortgage loan relating to the
corresponding Mortgaged Property having a first priority
lien.
“Fitch”: Fitch Ratings, or
its successor in interest thereto.
“Fixed Rate Mortgage Loan”:
Each of the Mortgage Loans identified in the Mortgage Loan Schedule
as having a Mortgage Rate that is fixed.
“Fixed Rate PPC”: 100% Fixed
Rate PPC means a CPR of 4.00% per annum of the then unpaid
principal balance of a Mortgage Loan in the first month of the life
of such Mortgage Loan and an additional approximately 1.4545%
(precisely 16%/11 expressed as a percentage) per annum in each
month thereafter until the 12th month, and then beginning in the
12th month and in each month thereafter during the life of such
Mortgage Loan, a CPR of 20% per annum.
“Formula Rate”: As to any
Class of LIBOR Certificates and any Distribution Date, the sum of
One-Month LIBOR and the applicable Certificate Margin.
“Freddie Mac”: Freddie Mac,
formerly known as Federal Home Loan Mortgage Corporation, or any
successor thereto.
“Gross Margin”: With respect
to each Adjustable Rate Mortgage Loan, the fixed percentage set
forth in the related Mortgage Note that is added to the Index on
each Adjustment Date in accordance with the terms of the related
Mortgage Note used to determine the Mortgage Rate for such Mortgage
Loan.
“Independent”: When used with
respect to any specified Person, any such Person who (a) is in fact
independent of the Depositor, the Servicer and their respective
Affiliates, (b) does not have any direct financial interest in or
any material indirect financial interest in the Depositor, the
Servicer or any Affiliate thereof, and (c) is not connected with
the Depositor, the Servicer or any Affiliate thereof as an officer,
employee, promoter, underwriter, trustee, partner, director or
Person performing similar functions; provided, however, that a
Person shall not fail to be Independent of the Depositor, the
Servicer or any Affiliate thereof merely because such Person is the
beneficial owner of 1% or less of any Class of securities issued by
the Depositor or the Servicer or any Affiliate thereof, as the case
may be.
“Independent Contractor”:
Either (i) any Person (other than the Servicer) that would be an
“independent contractor” with respect to the Trust Fund
within the meaning of Section 856(d)(3) of the Code if the Trust
Fund were a real estate investment trust (except that the ownership
tests set forth in that section shall be considered to be met by
any Person that owns, directly or indirectly, 35% or more of any
Class of Certificates), so long as the Trust Fund does not receive
or derive any income from such Person and provided that the
relationship between such Person and the Trust Fund is at
arm’s length, all within the meaning of Treasury Regulation
Section 1.856-4(b)(5), or (ii) any other Person (including the
Servicer) if the Trustee has received an Opinion of Counsel to the
effect that the taking of any action in respect of any REO Property
by such Person, subject to any conditions therein specified, that
is otherwise herein contemplated to be taken by an Independent
Contractor will not cause such REO Property to cease to qualify as
“foreclosure property” within the meaning of Section
860G(a)(8) of the Code (determined without regard to the exception
applicable for purposes of Section 860D(a) of the Code), or cause
any income realized in respect of such REO Property to fail to
qualify as Rents from Real Property.
“Index”: With respect to each
Adjustable Rate Mortgage Loan and each related Adjustment Date, the
index as specified in the related Mortgage Note.
“Insurance Proceeds”:
Proceeds of any title policy, hazard policy or other insurance
policy covering a Mortgage Loan, to the extent such proceeds are
not to be applied to the restoration of the related Mortgaged
Property or released to the Mortgagor in accordance with the
procedures that the Servicer would follow in servicing Mortgage
Loans held for its own account, subject to the terms and conditions
of the related Mortgage Note and Mortgage.
“Interest Accrual Period”:
With respect to any Distribution Date and the LIBOR Certificates,
will be the actual number of days (based on a 360-day year)
included in the period commencing on the immediately preceding
Distribution Date (or, in the case of the first such Interest
Accrual Period, commencing on the Closing Date) and ending on the
day immediately preceding such Distribution Date.
“Interest Determination
Date”: With respect to the LIBOR Certificates and any
Interest Accrual Period therefor, the second London Business Day
preceding the commencement of such Interest Accrual
Period.
“Interest Remittance Amount”:
With respect to any Distribution Date, that portion of the
Available Distribution Amount for such Distribution Date
attributable to interest received or advanced with respect to the
Mortgage Loans and to Compensating Interest paid by the Servicer
with respect to the Mortgage Loans.
“Late Collections”: With
respect to any Mortgage Loan and any Due Period, all amounts
received subsequent to the Determination Date immediately following
such Due Period, whether as late payments of Monthly Payments or as
Insurance 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 Certificates”: As
specified in the Preliminary Statement.
“Liquidation Event”: With
respect to any Mortgage Loan, any of the following events: (i) such
Mortgage Loan is paid in full; (ii) a Final Recovery Determination
is made as to such Mortgage Loan; (iii) such Mortgage Loan is
removed from the Trust Fund by reason of its being purchased, sold
or replaced pursuant to or as contemplated by Section 2.03, Section
3.16(c), Section 3.23 or Section 9.01; or (iv) such Mortgage Loan
becomes a Charged-off Mortgage Loan. With respect to any REO
Property, either of the following events: (i) a Final Recovery
Determination is made as to such REO Property; or (ii) such REO
Property is removed from the Trust Fund by reason of its being
purchased pursuant to Section 9.01.
“Liquidation Proceeds”: The
amount (other than Insurance Proceeds, Recoveries or amounts
received in respect of the rental of any REO Property prior to REO
Disposition) received by the Servicer in connection with (i) the
taking of all or a part of a Mortgaged Property by exercise of the
power of eminent domain or condemnation, (ii) the liquidation of a
defaulted Mortgage Loan through a trustee’s sale, foreclosure
sale or otherwise, or (iii) the repurchase, substitution or sale of
a Mortgage Loan or an REO Property pursuant to or as contemplated
by Section 2.03, Section 3.16(c), Section 3.23 or Section
9.01.
“Loan-to-Value Ratio” or
“LTV”: With respect to any first lien Mortgage Loan and
as of any date of determination, the fraction, expressed as a
percentage, the numerator of which is the principal balance of the
related Mortgage Loan at such date and the denominator of which is
the Value of the related Mortgaged Property. With respect to
any second lien Mortgage Loan and as of any date of determination,
the fraction, expressed as a percentage, the numerator of which is
the sum of (a) the principal balance of the related Mortgage Loan
at the date of origination plus (b) the principal balance of the
related First Lien at the date of origination of such mortgage loan
and the denominator of which is the Value of the related Mortgaged
Property.
“London Business Day”: Any
day on which banks in the City of London and The City of New York
are open and conducting transactions in United States
dollars.
“Master REMIC”: As defined in
Section 1.03 of this Agreement.
“Maximum Mortgage Rate”: With
respect to each Adjustable Rate Mortgage Loan, the percentage set
forth in the related Mortgage Note as the maximum Mortgage Rate
thereunder.
“Minimum Mortgage Rate”: With
respect to each Adjustable Rate Mortgage Loan, the greater of (a)
the Gross Margin set forth in the related Mortgage Note and (b) the
percentage set forth in the related Mortgage Note as the minimum
Mortgage Rate thereunder.
“Monthly Interest Distributable
Amount”: With respect to any Distribution Date and each Class
of Certificates, other than the Class P, Class R and Class X
Certificates, an amount equal to the amount of interest accrued
during the related Interest Accrual Period at the related
Pass-Through Rate on the Certificate Principal Balance or Notional
Amount of such Class of Certificates immediately prior to such
Distribution Date, in each case, reduced by any Net Prepayment
Interest Shortfalls allocated to such Class of Certificates and any
Relief Act Interest Shortfalls allocated to such Class of
Certificates, in each such case, as such shortfalls are allocated
pursuant to Section 1.02 herein.
“Monthly Payment”: With
respect to any Mortgage Loan, the scheduled monthly payment of
principal and interest on such Mortgage Loan which is payable by
the related Mortgagor from time to time under the related Mortgage
Note, determined: (a) after giving effect to (i) any Deficient
Valuation and/or Debt Service Reduction with respect to such
Mortgage Loan and (ii) any reduction in the amount of interest
collectible from the related Mortgagor pursuant to the Relief Act;
(b) without giving effect to any extension granted or agreed to by
the Servicer pursuant to Section 3.07(a); and (c) on the assumption
that all other amounts, if any, due under such Mortgage Loan are
paid when due.
“Moody’s”:
Moody’s Investors Service, Inc. or its successor in
interest.
“Mortgage”: The mortgage,
deed of trust or other instrument creating a first or second lien
on, or first or second priority security interest in, a Mortgaged
Property securing a Mortgage Note.
“Mortgage File”: The mortgage
documents listed in Section 2.01 pertaining to a particular
Mortgage Loan and any additional documents required to be added to
the Mortgage File pursuant to this Agreement.
“Mortgage Loan”: Each
mortgage loan originated or acquired by New Century that is
transferred and assigned to the Trustee pursuant to Section 2.01 or
Section 2.03(c) of this Agreement, as held from time to time as a
part of the Trust Fund; the Mortgage Loans so held being identified
in the Mortgage Loan Schedule, including each REO Property unless
the context otherwise requires.
“Mortgage Loan Purchase
Agreement”: The agreement among NC Capital, New Century and
DLJ Mortgage Capital, Inc., regarding the sale of the Mortgage
Loans by NC Capital to the Seller.
“Mortgage Loan Schedule”: As
of any date, the list of Mortgage Loans included in the Trust Fund
on such date, attached hereto as Schedule 1. The Mortgage
Loan Schedule shall set forth the following information with
respect to each Mortgage Loan:
(i)
the Mortgagor’s name and the
Originator’s Mortgage Loan identifying number;
(ii)
the street address of the Mortgaged
Property including the state and zip code;
(iii)
a code indicating whether the Mortgaged
Property is owner-occupied;
(iv)
the type of Residential Dwelling
constituting the Mortgaged Property;
(v)
the original months to
maturity;
(vi)
the Loan-to-Value Ratio, at
origination;
(vii)
the Mortgage Rate in effect immediately
following the Cut-off Date;
(viii)
the date on which the first Monthly
Payment was due on the Mortgage Loan;
(ix)
the stated maturity date of such Mortgage
Loan and of the related First Lien, if applicable;
(x)
the amount of the Monthly Payment (a) at
origination and (b) due on the first Due Date after the Cut-off
Date;
(xi)
the last Due Date on which a Monthly
Payment was actually applied to the unpaid Stated Principal
Balance;
(xii)
the original principal amount of the
Mortgage Loan and the original principal balance of the related
First Lien, if applicable, as of the date of
origination;
(xiii)
the Stated Principal Balance of the
Mortgage Loan and the Stated Principal Balance of the related First
Lien, if applicable, as of the close of business on the Cut-off
Date;
(xiv)
with respect to each Adjustable Rate
Mortgage Loan, the applicable Index and Gross Margin;
(xv)
a code indicating the purpose of the
Mortgage Loan (i.e., purchase financing, rate/term refinancing,
cash-out refinancing);
(xvi)
with respect to each Adjustable Rate
Mortgage Loan, the Maximum Mortgage Rate;
(xvii)
with respect to each Adjustable Rate
Mortgage Loan, the Minimum Mortgage Rate;
(xviii)
the Mortgage Rate at
origination;
(xix)
with respect to each Adjustable Rate
Mortgage Loan, the Periodic Rate Cap and the maximum first
Adjustment Date Mortgage Rate adjustment;
(xx)
a code indicating the documentation
program;
(xxi)
with respect to each Adjustable Rate
Mortgage Loan, the first Adjustment Date immediately following the
Cut-off Date and the Adjustment Date frequency;
(xxii)
the Value of the Mortgaged
Property;
(xxiii)
the sale price of the Mortgaged Property,
if applicable;
(xxiv)
the Originator’s risk grade and the
FICO or other credit score;
(xxv)
the actual interest “paid to
date” of the Mortgage Loan as of the Cut-off Date;
(xxvi)
the number of years any Prepayment
Premium is in effect;
(xxvii)
the loan type (e.g. fixed,
adjustable; 2/28, 2/28 IO, 3/27, 3/27 IO, 5/25, 5/25 IO,
etc.);
(xxviii)
the actual unpaid principal balance
of the Mortgage Loan as of the Cut-off Date;
(xxix)
a code indicating whether the Mortgage
Loan is a second lien Mortgage Loan; and
(xxx)
a code indicating whether the Mortgage
Loan is subject to a Prepayment Premium, if any.
The Mortgage Loan Schedule shall set
forth the following information with respect to the Mortgage Loans
in the aggregate as of the Cut-off Date: (1) the number of Mortgage
Loans; (2) the current 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.
The Mortgage Loan Schedule shall set forth the aggregate
Stated Principal Balance of the Mortgage Loans. The Mortgage
Loan Schedule shall be amended from time to time by the Depositor
in accordance with the provisions of this Agreement. With
respect to any Qualified Substitute Mortgage Loan, the Cut-off Date
shall refer to the related Cut-off Date for such Mortgage Loan,
determined in accordance with the definition of Cut-off Date
herein.
“Mortgage Note”: The original
executed note or other evidence of the indebtedness of a Mortgagor
under a Mortgage Loan.
“Mortgage Pool”: The pool of
Mortgage Loans, identified on Schedule 1 from time to time, and any
REO Properties acquired in respect thereof.
“Mortgage Rate”: With respect
to each Mortgage Loan, the annual rate at which interest accrues on
such Mortgage Loan from time to time in accordance with the
provisions of the related Mortgage Note. With respect to each
Mortgage Loan that becomes an REO Property, as of any date of
determination, the annual rate determined in accordance with the
immediately preceding sentence as of the date such Mortgage Loan
became an REO Property.
“Mortgaged Property”: The
underlying property securing a Mortgage Loan, including any REO
Property, consisting of an Estate in Real Property or a leasehold
interest improved by a Residential Dwelling.
“Mortgagor”: The obligor on a
Mortgage Note.
“NC Capital”: NC Capital
Corporation, a California corporation, or its successor in
interest.
“Net Liquidation Proceeds”:
With respect to any liquidation of a Mortgage Loan or any other
disposition of related Mortgaged Property (including REO Property),
the related Liquidation Proceeds, net of P&I Advances,
Servicing Advances, Servicing Fees and any other fees, received and
retained in connection with the liquidation of such Mortgage Loan
or Mortgaged Property in accordance with the terms of this
Agreement.
“Net Monthly Excess
Cashflow”: With respect to any Distribution Date, an amount
equal to the sum of (i) any Overcollateralization Release Amount
for such Distribution Date and (ii) the positive excess of (x) the
Available Distribution Amount for such Distribution Date over (y)
the sum for such Distribution Date of (A) the Monthly Interest
Distributable Amounts for the Senior Certificates and Mezzanine
Certificates, each pursuant to Section 4.01(a)(1), (B) the Unpaid
Interest Shortfall Amounts for the Class A Certificates and (C) the
Principal Remittance Amount.
“Net Mortgage Rate”: With
respect to any Mortgage Loan (or the related REO Property) as of
any date of determination, a per annum rate of interest equal to
the then applicable Mortgage Rate for such Mortgage Loan minus the
Servicing Fee Rate.
“Net Prepayment Interest
Shortfall”: With respect to any Distribution Date, the
excess, if any, of any Prepayment Interest Shortfalls for such date
over the related Compensating Interest.
“Net WAC Rate”: With respect
to the Certificates (and any corresponding REMIC interest created
pursuant to Section 1.03 hereof), a per annum rate (subject to
adjustment based on the actual number of days elapsed in the
related Interest Accrual Period) equal to the difference between
(A) the weighted average Mortgage Rates of the Mortgage Loans as of
the first day of the month preceding the month of such Distribution
Date, weighted on the basis of the related Stated Principal
Balances as of such date (subject to adjustment for prepayments
received and distributed in the month prior to that Distribution
Date) and (B) the Servicing Fee Rate.
“Net WAC Rate Carryover
Amount”: For any Distribution Date on which the Pass-Through
Rate for any Class of LIBOR Certificates is equal to the Net WAC
Rate, an amount equal to the sum of (i) the excess of (x) the
amount of interest such Class accrued for such Distribution Date at
the related Formula Rate, over (y) the amount of interest such
Class accrued for such Distribution Date at the Net WAC Rate and
(ii) the unpaid portion of any Net WAC Rate Carryover Amount from
the prior Distribution Date together with interest accrued on such
unpaid portion for the most recently ended Interest Accrual Period
at the Formula Rate applicable for such Class for such Interest
Accrual Period.
“Net WAC Reserve Fund”: The
Eligible Account established pursuant to Section 3.26.
“New Century”: New Century
Mortgage Corporation, a California corporation, or its successor in
interest.
“New Lease”: Any lease of REO
Property entered into on behalf of the Trust Fund, including any
lease renewed or extended on behalf of the Trust Fund, if the Trust
Fund has the right to renegotiate the terms of such
lease.
“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 Servicer using Accepted
Servicing Practices, will not or, in the case of a proposed P&I
Advance, would not be ultimately recoverable from related Late
Collections, Insurance Proceeds or Liquidation Proceeds on such
Mortgage Loan or REO Property as provided herein.
“Nonrecoverable Servicing
Advance”: Any Servicing 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 Servicer using Accepted
Servicing Practices, will not or, in the case of a proposed
Servicing Advance, would not be ultimately recoverable from related
Late Collections, Insurance Proceeds or Liquidation Proceeds on
such Mortgage Loan or REO Property as provided herein.
“Non-United States Person”:
Any Person other than a United States Person.
“Offered Certificates”: As
defined in the Preliminary Statement.
“Offered Subordinate
Certificates”: As specified in the Preliminary
Statement.
“Officers’
Certificate”: With respect to the Depositor and the Seller, a
certificate signed by the Chairman of the Board, the Vice Chairman
of the Board, the President, a vice president (however denominated)
or an authorized agent, and by the Treasurer, the Secretary, or one
of the assistant treasurers or assistant secretaries of the
Depositor or Seller, as applicable. With respect to the
Servicer, any officer who is authorized to act for the Servicer in
matters relating to this Agreement, and whose action is binding
upon the Servicer, initially including those individuals whose
names appear on the list of authorized officers delivered at the
closing.
“One-Month LIBOR”: With
respect to the LIBOR Certificates and any Interest Accrual Period
therefor, the rate determined by the Trustee on the related
Interest Determination Date (or with respect to the initial
Interest Accrual Period, on the Closing Date based on information
available on the related Interest 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 Interest Determination 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 offered rates of the Reference
Banks for one-month U.S. dollar deposits, as of 11:00 a.m. (London
time) on such Interest Determination Date. In such event, the
Trustee will request the principal London office of each of the
Reference Banks to provide a quotation of its rate. If on
such Interest Determination Date, two or more Reference Banks
provide such offered quotations, One-Month LIBOR for the related
Interest Accrual Period shall be the arithmetic mean of such
offered quotations (rounded upwards if necessary to the nearest
whole multiple of 1/16%). If on such Interest Determination
Date, fewer than two Reference Banks provide such offered
quotations, One-Month LIBOR for the related Interest Accrual Period
shall be the higher of (i) One-Month LIBOR as determined on the
previous Interest Determination Date and (ii) the Reserve Interest
Rate. Notwithstanding the foregoing, if, under the priorities
described above, One-Month LIBOR for an Interest Determination Date
would be based on One-Month LIBOR for the previous Interest
Determination Date for the third consecutive Interest Determination
Date, the Trustee shall select an alternative comparable index
(over which the Trustee has no control), used for determining
one-month Eurodollar lending rates that is calculated and published
(or otherwise made available) by an independent party.
“Operative Documents”: This
Agreement, the Mortgage Loan Purchase Agreement, the Reconstitution
Agreement, the Assignment and Assumption Agreement and any other
documents related hereto or thereto.
“Opinion of Counsel”: A
written opinion of counsel, who may, without limitation, be
salaried counsel for the Depositor or the Servicer and which shall
be acceptable to the Trustee (which acceptance shall not be
unreasonably withheld), except that any opinion of counsel relating
to (a) the qualification of any REMIC created hereunder or (b)
compliance with the REMIC Provisions must be an opinion of
Independent counsel.
“Optional Termination Date”:
The first Distribution Date that the Servicer shall be permitted to
purchase the Mortgage Loans and REO Properties pursuant to Section
9.01(b).
“Original Certificate Principal
Balance”: With respect to any Class of Certificates, other
than the Class R and Class X Certificates, the Certificate
Principal Balance thereof on the Closing Date and as specified in
Section 1.03 hereof.
“Originator”: New Century;
provided that, with respect to the cure, repurchase or substitution
obligations of New Century under Section 2.03, the
“Originator” shall mean NC Capital.
“Outsourcer”: As defined in
Section 3.02(c) herein.
“Overcollateralization
Amount”: As of any Distribution Date, the excess, if any, of
(a) the aggregate Stated Principal Balances of the Mortgage Loans
and REO Properties as of the last day of the related Due Period for
such Distribution Date over (b) the sum of the aggregate
Certificate Principal Balances of the Class A, Mezzanine and Class
P Certificates as of such Distribution Date (after taking into
account the payment of the amounts described in clauses (b)(i)
through (iv) of the definition of Principal Distribution Amount on
such Distribution Date).
“Overcollateralization Deficiency
Amount”: With respect to any Distribution Date, the excess,
if any, of (a) the Overcollateralization Target Amount applicable
to such Distribution Date over (b) the Overcollateralization Amount
applicable to such Distribution Date (assuming that 100% of the
Principal Remittance Amount is applied as a payment of principal on
such Distribution Date).
“Overcollateralization Increase
Amount”: With respect to any Distribution Date, the lesser of
(a) the Overcollateralization Deficiency Amount for such
Distribution Date and (b) Net Monthly Excess Cash Flow available
for distribution on that Distribution Date pursuant to Section
4.01(a)(3)(i).
“Overcollateralization Release
Amount”: With respect to any Distribution Date, an amount
equal to the lesser of (a) the Excess Overcollateralization Amount
and (b) the Principal Remittance Amount for such Distribution
Date.
“Overcollateralization Target
Amount”: With respect to any Distribution Date (1) prior to
the Stepdown Date, 2.40% of the aggregate Stated Principal Balance
of the Mortgage Loans as of the Cut-off Date, (2) on or after the
Stepdown Date provided a Trigger Event is not in effect, the
greater of (x) 4.80% of the aggregate Stated Principal Balance of
the Mortgage Loans as of the last day of the related Due Period and
(y) $3,585,135, and (3) on or after the Stepdown Date if a Trigger
Event is in effect, the Overcollateralization Target Amount for the
immediately preceding Distribution Date.
“Ownership Interest”: As to
any Certificate, any ownership or security 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, as owner or as pledgee.
“Pass-Through Rate”: For any
Distribution Date and any Class of LIBOR Certificates, the lesser
of (i) the related Formula Rate and (ii) the Net WAC Rate for such
Distribution Date. For any Distribution Date and the Class X
Certificates, the rate set forth for the Class X Certificates in
footnote (2) to “Master REMIC” under section 1.03
herein.
“Percentage Interest”: As to
any Certificate, either the percentage set forth on the face
thereof or the percentage obtained by dividing the initial
Certificate Principal Balance or initial Notional Amount
represented by such Certificate by the aggregate initial
Certificate Principal Balance or aggregate initial Notional Amount
of all of the Certificates of such Class.
“Periodic Rate Cap”: With
respect to each Adjustable Rate Mortgage Loan and any Adjustment
Date therefor, the fixed percentage set forth in the related
Mortgage Note, which is the maximum amount by which the Mortgage
Rate for such Mortgage Loan may increase or decrease (without
regard to the Maximum Mortgage Rate or the Minimum Mortgage Rate)
on such Adjustment Date from the Mortgage Rate in effect
immediately prior to such Adjustment Date.
“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 Depositor, the Servicer, the Trustee or any of their
respective Affiliates:
(a)
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;
(b)
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 that are rated in the
highest ratings categories by each Rating Agency and issued by any
Depository Institution;
(c)
repurchase obligations with respect to
any security described in clause (a) above entered into with a
Depository Institution (acting as principal);
(d)
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 category at the time of such
investment or contractual commitment providing for such
investment;
(e)
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;
(f)
units of money market funds, including
money market funds managed or advised by the Trustee or an
Affiliate thereof, that have been rated “AAA” by Fitch
(if rated by Fitch), “Aaa” by Moody’s (if rated
by Moody’s) and “AAA” by S&P (if rated by
S&P); and
(g)
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
securities having ratings equivalent to its highest initial rating
of the Class A Certificates; provided, however, that any Permitted
Investment pursuant to this clause (g) which solely contains a
short-term rating shall be a Permitted Investment rated in the
highest category for such short-term rating;
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
Transferee of a Residual Certificate other than a Disqualified
Organization or Non-United States Person.
“Person”: Any individual,
corporation, partnership, limited liability company, joint venture,
association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision
thereof.
“P&I Advance”: As to any
Mortgage Loan or REO Property, any advance made by the Servicer in
respect of any Distribution 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 related 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 4.03. The Servicer will not be required to make
any Nonrecoverable P&I Advances as described in Section
4.03.
“Plan”: Any employee benefit
plan (as defined in Section 3(3) of ERISA) or other plan as defined
in Section 4975(e)(1) of the Code that is subject to Title I of
ERISA or Section 4975 of the Code, or any entity deemed to hold the
plan assets of the foregoing.
“Pool Principal Balance”: As
of any Distribution Date, the aggregate Stated Principal Balance of
the Mortgage Loans.
“Prepayment Assumption”: With
respect to the (i) Fixed Rate Mortgage Loans, 115% Fixed Rate PPC
and (ii) the Adjustable Rate Mortgage Loans, 100% Adjustable Rate
PPC.
“Prepayment Interest
Shortfall”: With respect to any Determination Date, for each
Mortgage Loan that was during the related Prepayment Period subject
to a Principal Prepayment in full (other than a Principal
Prepayment in full during that portion of the related Prepayment
Period occurring between the first day of the calendar month in
which the such Determination Date occurs and the last day of such
Prepayment Period) that was applied by the Servicer to reduce the
outstanding principal balance of such Mortgage Loan on a date
preceding the Due Date in the succeeding Prepayment Period, an
amount equal to the product of (a) the Net Mortgage 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 the prepayment is applied and ending on the last
day of the calendar month preceding the month of such Determination
Date. The obligations of the Servicer in respect of any
Prepayment Interest Shortfall are set forth in Section
3.24.
“Prepayment Period”: With
respect to any Distribution Date, is (i) with respect to Principal
Prepayments in full, the period beginning on the sixteenth day of
the calendar month preceding the month of such Distribution Date
and ending on the fifteenth day of the month of such Distribution
Date and (ii) with respect to Principal Prepayments in part, the
calendar month preceding the month of such Distribution Date,
except with respect to the first Distribution Date, the Prepayment
Period for all prepayments will commence on February 22,
2005.
“Prepayment Premium”: With
respect to any Mortgage Loan and Prepayment Period, any prepayment
premium, penalty or charge collected by the Servicer from a
Mortgagor in connection with any voluntary Principal Prepayment and
held from time to time as a part of the Trust Fund. The
Servicer shall calculate, in good faith using Accepted Servicing
Practices, the amount of any Prepayment Premium solely pursuant to
the terms of the related Mortgage Note.
“Prepayment Premium
Schedule”: As of the Cut-off Date, a list attached hereto as
Schedule 2 (including the Prepayment Premium Summary attached
thereto) in an electronic format, setting forth the following
information with respect to each Prepayment Premium:
(i)
the Mortgage Loan identifying
number;
(ii)
a code indicating the type of Prepayment
Premium;
(iii)
the state of origination of the related
Mortgage Loan;
(iv)
the date on which the first monthly
payment was due on the related Mortgage Loan;
(v)
the term of the related Prepayment
Premium;
(vi)
the principal balance of the related
Mortgage Loan as of the Cut-off Date; and
(vii)
such other information as is reasonably
requested by the Trustee.
Upon notice to the Trustee, the Servicer
shall amend the Prepayment Premium Schedule (i) if the Servicer has
waived a Prepayment Premium or (ii) upon the substitution of any
Mortgage Loan. The Servicer shall furnish a copy of the
amended Prepayment Premium Schedule to the Trustee. With
respect to a waived Prepayment Premium, the Servicer may deliver to
the Trustee an Officer’s Certificate as described in Section
3.07(b) in lieu of an amended Prepayment Premium
Schedule.
“Prime Rate”: The rate of
interest equal to the prime rate as reported in The Wall Street
Journal .
“Principal Distribution
Amount”: With respect to any Distribution Date, the lesser
of:
(a)
the excess of the Available Distribution
Amount over the amount payable on the Certificates pursuant to
Section 4.01(a)(1)(i) - (ix); and
(b)
the sum of
(i)
the principal portion of each Monthly
Payment on the Mortgage Loans due during the related Due Period,
whether or not received on or prior to the related Determination
Date;
(ii)
the Stated Principal Balance of any
Mortgage Loan that was purchased during the calendar month
preceding the month of such Distribution Date pursuant to or as
contemplated by Section 2.03, Section 3.16(c) or Section 9.01 and
the amount of any shortfall deposited in the Collection Account in
connection with the substitution of a Deleted Mortgage Loan
pursuant to Section 2.03 during the calendar month preceding the
month of such Distribution Date;
(iii)
the principal portion of all other
unscheduled collections in respect of Insurance Proceeds,
Liquidation Proceeds and REO Principal Amortization received during
the calendar month preceding the month of such Distribution Date,
net of any portion thereof that represents a recovery of principal
for which an advance was made by the Servicer pursuant to Section
4.03 in respect of a preceding Distribution Date and any Recoveries
received during the calendar month preceding the month of such
Distribution Date;
(iv)
the principal portion of all unscheduled
collections in respect of Principal Prepayments received during the
related Prepayment Period; and
(v)
the amount of any Overcollateralization
Increase Amount for such Distribution Date to the extent covered by
Net Monthly Excess Cashflow for such Distribution Date;
minus:
(c)
the amount of any Overcollateralization
Release Amount for such Distribution Date.
“Principal Prepayment”: Any
payment of principal made by the Mortgagor on a Mortgage Loan which
is received in advance of its scheduled Due Date and which is not
accompanied by an amount of interest (without regard to any
Prepayment Premium that may have been collected by the Servicer in
connection with such payment of principal) representing the full
amount of scheduled interest due on any Due Date in any month or
months subsequent to the month of prepayment.
“Principal Remittance
Amount”: With respect to any Distribution Date, that portion
of the Available Distribution Amount equal to the sum of (i) all
scheduled payments of principal collected or advanced on the
Mortgage Loans by the Servicer that were due during the related Due
Period, (ii) the principal portion of all Principal Prepayments of
the Mortgage Loans, if any, applied by the Servicer during the
related Prepayment Period, (iii) the principal portion of all
related Net Liquidation Proceeds, Insurance Proceeds and Recoveries
received during the calendar month preceding the month of such
Distribution Date, (iv) that portion of the Purchase Price
representing principal of any purchased or repurchased Mortgage
Loan, deposited to the Collection Account during the calendar month
preceding the month of such Distribution Date, (v) the principal
portion of the amount of any shortfall deposited in the Collection
Account in connection with the substitution of a Deleted Mortgage
Loan pursuant to Section 2.03 during the calendar month preceding
the month of such Distribution Date and (vi) on the Distribution
Date on which the Trust is to be terminated in accordance with this
Agreement, that portion of the Termination Price in respect of
principal.
“PTCE”: A Prohibited
Transaction Class Exemption.
“Purchase Price”: With
respect to any Mortgage Loan or REO Property to be purchased
pursuant to or as contemplated by Section 2.03, Section 3.16(c) or
Section 9.01, and as calculated and confirmed in an Officers’
Certificate from the Servicer to the Trustee, an amount equal to
the sum of (i) 100% of the Stated Principal Balance thereof as of
the date of purchase (or such other price as provided in Section
9.01), (ii) in the case of (x) a Mortgage Loan, accrued interest on
such Stated Principal Balance at the applicable Mortgage Rate in
effect from time to time from the Due Date as to which interest was
last covered by a payment by the Mortgagor or an advance by the
Servicer through the end of the calendar month in which the
purchase is to be effected and (y) an REO Property, the sum of (1)
accrued interest on such Stated Principal Balance at the applicable
Mortgage Rate in effect from time to time from the Due Date as to
which interest was last covered by a payment by the Mortgagor or an
advance by the Servicer through the end of the calendar month
immediately preceding the calendar month in which such REO Property
was acquired, plus (2) REO Imputed Interest for such REO Property
for each calendar month commencing with the calendar month in which
such REO Property was acquired and ending with the calendar month
in which such purchase is to be effected, net of the total of all
net rental income, Insurance Proceeds, Liquidation Proceeds and
P&I Advances that as of the date of purchase had been
distributed as or to cover REO Imputed Interest pursuant to Section
4.01, (iii) any unreimbursed Servicing Advances and P&I
Advances and any unpaid Servicing Fees allocable to such Mortgage
Loan or REO Property and any P&I Advances previously reimbursed
to the Servicer pursuant to Section 3.11(a)(vi) (except in the case
of a purchase by the Servicer), (iv) any amounts previously
withdrawn from the Collection Account in respect of such Mortgage
Loan or REO Property pursuant to Section 3.11(a)(ix) and Section
3.16(b), (v) in the case of a Mortgage Loan required to be
purchased pursuant to Section 2.03, expenses reasonably incurred or
to be incurred by the Servicer or the Trustee in respect of the
breach or defect giving rise to the purchase obligation and (vi) in
the case of a Mortgage Loan required to be purchased pursuant to
Section 2.03, any costs and damages actually incurred and paid by
or on behalf of the Trust in connection with any violation by such
Mortgage Loan of (i) the representation and warranties set
forth in Section 2.05(b)(vii) or (viii) of this Agreement,
(ii) Section 2(i)(viii) of Schedule B to the
Reconstitution Agreement or (iii) the representations and
warranties made in Schedule B to the Reconstitution Agreement in
connection with “high-cost” home loans or a mortgage
loan’s compliance with applicable law, including any
predatory or abusive lending laws.
“Qualified Substitute Mortgage
Loan”: A Mortgage Loan substituted for a Deleted Mortgage
Loan pursuant to the terms of this Agreement which must, on the
date of such substitution, (i) have an outstanding principal
balance, after application of all scheduled payments of principal
and interest due during or prior to the month of substitution, not
in excess of and not more than 5% less than the Stated Principal
Balance of the Deleted Mortgage Loan as of the Due Date in the
calendar month during which the substitution occurs, (ii) have a
Mortgage Rate not less than (and not more than one percentage point
in excess of) the Mortgage Rate of the Deleted Mortgage Loan, (iii)
with respect to each Adjustable Rate Mortgage Loan have a Maximum
Mortgage Rate not less than the Maximum Mortgage Rate on the
Deleted Mortgage Loan, (iv) with respect to each Adjustable Rate
Mortgage Loan have a Minimum Mortgage Rate not less than the
Minimum Mortgage Rate of the Deleted Mortgage Loan, (v) with
respect to each Adjustable Rate Mortgage Loan have a Gross Margin
equal to or greater than the Gross Margin of the Deleted Mortgage
Loan, (vi) with respect to each Adjustable Rate Mortgage Loan,
adjust in accordance with the Index and have a next Adjustment Date
not more than two months later than the next Adjustment Date on the
Deleted Mortgage Loan, and have the same intervals between
Adjustment Dates as the Deleted Mortgage Loan, (vii) have a
remaining term to maturity not greater than (and not more than one
year less than) that of the Deleted Mortgage Loan, (viii) have the
same Due Date as the Due Date on the Deleted Mortgage Loan, (ix)
have a Loan-to-Value Ratio as of the date of substitution equal to
or lower than the Loan-to-Value Ratio of the Deleted Mortgage Loan
as of such date, (x) have a risk grading certified by the Seller at
least equal to the risk grading assigned on the Deleted Mortgage
Loan, (xi) have been underwritten or reunderwritten by the
Originator in accordance with the same underwriting criteria and
guidelines as the Mortgage Loans being replaced, (xii) be of the
same or better credit quality as the Mortgage Loan being replaced,
(xiii) have a lien priority equal to or superior to that of the
Deleted Mortgage Loan, (xiv) be secured by the same property type
as the Deleted Mortgage Loan and (xv) conform to each
representation and warranty in the Mortgage Loan Purchase Agreement
and the Reconstitution Agreement. In the event that one or
more Mortgage Loans are substituted for one or more Deleted
Mortgage Loans, the amounts described in clause (i) hereof shall be
determined on the basis of aggregate principal balances, the
Mortgage Rates described in clause (ii) hereof shall be determined
on the basis of weighted average Mortgage Rates, the terms
described in clause (vii) hereof shall be determined on the basis
of weighted average remaining term to maturity, the Loan-to-Value
Ratios described in clause (ix) hereof shall be satisfied as to
each such Mortgage Loan, the risk gradings described in clause (x)
hereof shall be satisfied as to each such Mortgage Loan and, except
to the extent otherwise provided in this sentence, the
representations and warranties described in clause (xv) hereof must
be satisfied as to each Qualified Substitute Mortgage Loan or in
the aggregate, as the case may be.
“Rating Agency or Rating
Agencies”: S&P, Moody’s, DBRS and Fitch or their
successors. If such agencies or their successors are no
longer in existence, “Rating Agencies” shall be such
nationally recognized statistical rating agencies, or other
comparable Persons, designated by the Depositor, notice of which
designation shall be given to the Trustee and the
Servicer.
“Realized Loss”: With respect
to each Mortgage Loan as to which a Final Recovery Determination
has been made, an amount (not less than zero) equal to (i) the
unpaid principal balance of such Mortgage Loan as of the
commencement of the calendar month in which the Final Recovery
Determination was made, plus (ii) accrued interest from the Due
Date as to which interest was last paid by the Mortgagor through
the end of the calendar month in which such Final Recovery
Determination was made, calculated in the case of each calendar
month during such period (A) at an annual rate equal to the annual
rate at which interest was then accruing on such Mortgage Loan and
(B) on a principal amount equal to the Stated Principal Balance of
such Mortgage Loan as of the close of business on the Distribution
Date during such calendar month, plus (iii) any amounts previously
withdrawn from the Collection Account in respect of such Mortgage
Loan pursuant to Section 3.11(a)(ix) and Section 3.16(b), minus
(iv) the proceeds, if any, received in respect of such Mortgage
Loan during the calendar month in which such Final Recovery
Determination was made, net of amounts that are payable therefrom
to the Servicer with respect to such Mortgage Loan pursuant to
Section 3.11(a)(iii).
With respect to any REO Property as to
which a Final Recovery Determination has been made, an amount (not
less than zero) equal to (i) the unpaid principal balance of the
related Mortgage Loan as of the date of acquisition of such REO
Property on behalf of the Trust Fund, plus (ii) accrued interest
from the Due Date as to which interest was last paid by the
Mortgagor in respect of the related Mortgage Loan through the end
of the calendar month immediately preceding the calendar month in
which such REO Property was acquired, calculated in the case of
each calendar month during such period (A) at an annual rate equal
to the annual rate at which interest was then accruing on the
related Mortgage Loan and (B) on a principal amount equal to the
Stated Principal Balance of the related Mortgage Loan as of the
close of business on the Distribution Date during such calendar
month, plus (iii) REO Imputed Interest for such REO Property for
each calendar month commencing with the calendar month in which
such REO Property was acquired and ending with the calendar month
in which such Final Recovery Determination was made, plus (iv) any
amounts previously withdrawn from the Collection Account in respect
of the related Mortgage Loan pursuant to Section 3.11(a)(ix) and
Section 3.16(b), minus (v) the aggregate of all P&I Advances
made by the Servicer in respect of such REO Property or the related
Mortgage Loan for which the Servicer has been or, in connection
with such Final Recovery Determination, will be reimbursed pursuant
to Section 3.23 out of rental income, Insurance Proceeds and
Liquidation Proceeds received in respect of such REO Property,
minus (vi) the total of all net rental income, Insurance Proceeds
and Liquidation Proceeds received in respect of such REO Property
that has been, or in connection with such Final Recovery
Determination, will be transferred to the Distribution Account
pursuant to Section 3.23.
With respect to each Mortgage Loan that
has become the subject of a Deficient Valuation, the difference
between the principal balance of such Mortgage Loan outstanding
immediately prior to such Deficient Valuation and the principal
balance of such Mortgage Loan as reduced by the Deficient
Valuation.
With respect to each Mortgage Loan that
has become the subject of a Debt Service Reduction, the portion, if
any, of the reduction in each affected Monthly Payment attributable
to a reduction in the Mortgage Rate imposed by a court of competent
jurisdiction. Each such Realized Loss shall be deemed to have
been incurred on the Due Date for each affected Monthly
Payment.
“Realized Loss Percentage”:
For purposes of the Servicer Termination Test, the percentage
produced by the following calculation: (i) the aggregate amount of
cumulative Realized Losses incurred on the Mortgage Loans since the
Cut-off Date through the last day of the related Due Period, minus
(ii) any amount received with respect to Realized Losses on the
Mortgage Loans subsequent to a Final Recovery Determination being
made with respect to the Mortgage Loans, divided by (iii) the
aggregate Stated Principal Balance of the Mortgage Loans as of the
Cut-off Date; provided however, that for purposes of this
definition, the term “Realized Losses” shall not
include Debt Service Reductions or Deficient Valuations.
“Reconstitution Agreement”:
That certain reconstitution agreement dated as of the Closing Date
by and among the Seller, the Depositor, New Century and NC Capital
related to the Mortgage Loan Purchase Agreement.
“Record Date”: With respect
to any Distribution Date and any Definitive Certificates, the close
of business on the last Business Day of the month immediately
preceding the month in which such applicable Distribution Date
occurs. With respect to any Distribution Date and the Offered
Certificates and the Class M8 Certificates (other than any
Definitive Certificates), the Business Day prior to such
Distribution Date.
“Recovery”: With respect to
any Liquidated Mortgage Loan, an amount received in respect of
principal on such Mortgage Loan which has previously been allocated
as a Realized Loss to a Class or Classes of Certificates net of
reimbursable expenses.
“Reference Banks”: Deutsche
Bank, Barclays Bank PLC, The Tokyo Mitsubishi Bank and National
Westminster Bank PLC and their successors in interest; provided,
however, that if any of the foregoing banks are not able to serve
as a Reference Bank, then any leading banks selected by the Trustee
which are engaged in transactions in Eurodollar deposits in the
international Eurocurrency market (i) with an established place of
business in London, (ii) not controlling, under the control of or
under common control with the Depositor or any Affiliate thereof
and (iii) which have been designated as such by the
Trustee.
“Refinanced Mortgage Loan”: A
Mortgage Loan the proceeds of which were not used to purchase the
related Mortgaged Property.
“Regular Certificate”: As
specified in the Preliminary Statement.
“Regular Interest”: A
“regular interest” in a REMIC within the meaning of
Section 860G(a)(1) of the Code.
“Relief Act”: The
Servicemembers Civil Relief Act or any similar state or local
law.
“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 calendar month as
a result of the application of the Relief Act.
“REMIC”: A “real estate
mortgage investment conduit” within the meaning of Section
860D of the Code.
“REMIC I”: The segregated
pool of assets subject hereto, constituting the primary trust
created hereby and to be administered hereunder, with respect to
which a REMIC election is to be made, consisting of (i) such
Mortgage Loans as from time to time are subject to this Agreement,
together with the Mortgage Files relating thereto, and together
with all collections thereon and proceeds thereof, (ii) any REO
Property, together with all collections thereon and proceeds
thereof, (iii) the Trustee’s rights with respect to the
Mortgage Loans under all insurance policies required to be
maintained pursuant to this Agreement and any proceeds thereof,
(iv) the Depositor’s rights under the Mortgage Loan Purchase
Agreement and the Reconstitution Agreement (including any security
interest created thereby) and (v) the Collection Account (other
than any amounts representing any Servicer Prepayment Premium
Payment Amount), the Distribution Account (other than any amounts
representing any Servicer Prepayment Premium Payment Amount) and
any REO Account and such assets that are deposited therein from
time to time and any investments thereof, together with any and all
income, proceeds and payments with respect thereto.
Notwithstanding the foregoing, however, REMIC I specifically
excludes all payments and other collections of principal and
interest due on the Mortgage Loans on or before the Cut-off Date
and all Prepayment Premiums payable in connection with Principal
Prepayments made on or before the Cut-off Date, the Net WAC Reserve
Fund and the Yield Maintenance Agreement.
“REMIC I Accretion Directed
Class”: As set forth in the Section 1.03 under the heading
entitled “REMIC I.”
“REMIC I Regular Interest”:
Any of the separate non-certificated beneficial ownership interests
in REMIC I issued hereunder and designated as a “regular
interest” in REMIC I.
“REMIC II”: The segregated
pool of assets consisting of all of the REMIC I Regular Interests
conveyed in trust to the Trustee for the benefit of the
Certificateholders pursuant to Section 2.10 and all amounts
deposited therein, with respect to which a separate REMIC election
is to be made.
“REMIC Provisions”:
Provisions of the federal income tax law relating to real estate
mortgage investment conduits, which appear at Section 860A through
860G of the Code, and related provisions, and proposed, temporary
and final regulations and published rulings, notices and
announcements promulgated thereunder, as the foregoing may be in
effect from time to time.
“Remittance Report”: A report
in form mutually agreed to between the Trustee and the Servicer on
a magnetic disk or tape or in electronic format prepared by the
Servicer pursuant to Section 4.03 with such additions, deletions
and modifications as agreed to by the Trustee and the
Servicer.
“Rents from Real Property”:
With respect to any REO Property, gross income of the character
described in Section 856(d) of the Code as being included in the
term “rents from real property.”
“REO Account”: Each of the
accounts maintained, or caused to be maintained, by the Servicer in
respect of an REO Property pursuant to Section 3.23.
“REO Disposition”: The sale
or other disposition of an REO Property on behalf of the Trust
Fund.
“REO Imputed Interest”: As to
any REO Property, for any calendar month during which such REO
Property was at any time part of the Trust Fund, one month’s
interest at the applicable Mortgage Rate on the Stated Principal
Balance of such REO Property (or, in the case of the first such
calendar month, of the related Mortgage Loan, if appropriate) as of
the close of business on the Distribution Date in such calendar
month.
“REO Principal Amortization”:
With respect to any REO Property, for any calendar month, the
excess, if any, of (a) the aggregate of all amounts received in
respect of such REO Property during such calendar month, whether in
the form of rental income, sale proceeds (including, without
limitation, that portion of the Termination Price paid in
connection with a purchase of all of the Mortgage Loans and REO
Properties pursuant to Section 9.01 that is allocable to such REO
Property) or otherwise, net of any portion of such amounts (i)
payable pursuant to Section 3.23(c) in respect of the proper
operation, management and maintenance of such REO Property or (ii)
payable or reimbursable to the Servicer pursuant to Section 3.23(d)
for unpaid Servicing Fees in respect of the related Mortgage Loan
and unreimbursed Servicing Advances and P&I Advances in respect
of such REO Property or the related Mortgage Loan, over (b) the REO
Imputed Interest in respect of such REO Property for such calendar
month.
“REO Property”: A Mortgaged
Property acquired by the Servicer on behalf of the Trust Fund
through foreclosure or deed-in-lieu of foreclosure, as described in
Section 3.23.
“Request for Release”: A
release signed by a Servicing Officer, or in a mutually agreeable
electronic format which will, in lieu of a signature on its face,
originate from a Servicing Officer, in the form of Exhibit E-1
attached hereto.
“Required Net WAC Reserve Fund
Deposit”: With respect to any Distribution Date the excess,
if any, of (i) $1,000 over (ii) the amount of funds on deposit in
the Net WAC Reserve Fund prior to deposits thereto on such
Distribution Date.
“Reserve Interest Rate”: With
respect to any Interest Determination Date, the rate per annum that
the Trustee determines to be either (i) the arithmetic mean
(rounded upwards if necessary to the nearest whole multiple of
1/16%) of the one-month U.S. dollar lending rates which New York
City banks selected by the Trustee are quoting on the relevant
Interest Determination Date to the principal London offices of
leading banks in the London interbank market or (ii) in the event
that the Trustee can determine no such arithmetic mean, the lowest
one-month U.S. dollar lending rate which New York City banks
selected by the Trustee are quoting on such Interest Determination
Date to leading European banks.
“Residential Dwelling”: Any
one of the following: (i) an attached or detached one-family
dwelling, (ii) an attached or detached two- to four-family
dwelling, (iii) an attached or detached one-family dwelling unit in
a condominium project, (iv) an attached or detached one-family
dwelling in a planned unit development, none of which is a
cooperative or mobile home (as defined in 42 United States Code,
Section 5402(6)), or (v) a manufactured home.
“Residual Certificates”: As
specified in the Preliminary Statement.
“Residual Interest”: The sole
class of “residual interests” in a REMIC within the
meaning of Section 860G(a)(2) of the Code.
“Responsible Officer”: When
used with respect to the Trustee, the President, any vice
president, any assistant vice president, the Secretary, any
assistant secretary, the Treasurer, any assistant treasurer, any
trust officer or assistant trust officer, the Controller and any
assistant controller or any other officer of the Trustee
customarily performing functions similar to those performed by any
of the above designated officers and, with respect to a particular
matter, to whom such matter is referred because of such
officer’s knowledge of and familiarity with the particular
subject.
“S&P”: Standard and
Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc., or its successor in interest.
“Seller”: DLJ Mortgage
Capital, Inc., or its successor in interest, in its capacity as
seller.
“Servicer”: Saxon Mortgage
Services, Inc., or any successor servicer appointed as herein
provided, in its capacity as servicer hereunder.
“Servicer Certification”: As
defined in Section 4.06(d) herein, a form of which is attached
hereto as Exhibit J.
“Servicer Event of Default”:
One or more of the events described in Section 7.01(a)
herein.
“Servicer Prepayment Premium
Payment Amount”: The amounts payable by the Servicer in
respect of any waived Prepayment Premiums pursuant to Section
2.03(b)(ii).
“Servicer Remittance Date”:
With respect to any Distribution Date, 1:00 p.m. New York time on
the 21 st day of each month or, if such 21 st
day is a Saturday, the immediately preceding Business Day; and if
such date is a Sunday or holiday, the Business Day immediately
following such date.
“Servicer Termination Test”:
With respect to any Distribution Date, the Servicer will fail the
Servicer Termination Test if the Realized Loss Percentage for the
Mortgage Loans exceeds the applicable percentages set forth below
with respect to such Distribution Date:
|
Distribution Date Occurring In
|
Percentage
|
|
April 2008 through March 2009
|
3.00%
|
|
April 2009 through March 2010
|
4.50%
|
|
April 2010 through March 2011
|
6.00%
|
|
April 2011 and thereafter
|
6.75%
|
“Servicing Account”: The
account or accounts created and maintained pursuant to Section
3.09.
“Servicing Advances”: The
reasonable “out-of-pocket” costs and expenses incurred
by the Servicer in the performance of its servicing obligations
(including the reasonable fees of counsel) in connection with a
default, delinquency or other unanticipated event, including, but
not limited to, the cost of (i) the inspection, preservation,
restoration and protection of a Mortgaged Property, (ii) any
enforcement or judicial proceedings, including foreclosures, in
respect of a particular Mortgage Loan, (iii) the reasonable fees in
connection with the management and liquidation of any REO Property
(including default management and similar services, appraisal
services and real estate broker services), (iv) the performance of
its obligations under Section 3.01, Section 3.09, Section 3.13,
Section 3.14, Section 3.16 and Section 3.23, and (v) locating
documents missing from the Mortgage File or Servicing File.
Servicing Advances also include any reasonable
“out-of-pocket” cost and expenses (including legal
fees) incurred by the Servicer in connection with executing and
recording instruments of satisfaction, deeds of reconveyance or
Assignments of Mortgage to the extent not recovered from the
Mortgagor or otherwise payable under this Agreement. The
Servicer shall not be required to make any Nonrecoverable Servicing
Advances.
“Servicing Fee”: With respect
to each Mortgage Loan and for any calendar month, an amount equal
to one month’s interest at the Servicing Fee Rate on the same
principal amount on which interest on such Mortgage Loan accrues
for such calendar month, subject to reduction as provided in
Section 3.24. A portion of such Servicing Fee may be retained
by any Sub-Servicer as its servicing compensation.
“Servicing Fee Rate”: 0.50%
per annum.
“Servicing File”: With
respect to each Mortgage Loan, the Servicing File for such Mortgage
Loan shall consist of copies of each item required to be in the
Mortgage File (for the avoidance of doubt, the original of each
such document shall be maintained in the Mortgage File for such
Mortgage Loan unless otherwise permitted to be released in
accordance with this Agreement) and the following documents listed
below.
(i)
Residential loan application.
(ii)
Mortgage Loan closing
statement.
(iii)
Verification of employment and income, if
applicable.
(iv)
Verification of acceptable evidence of
source and amount of downpayment.
(v)
Credit report on Mortgagor.
(vi)
Residential appraisal report.
(vii)
Photograph of the Mortgaged
Property.
(viii)
Survey of the Mortgaged
Property.
(ix)
Copy of each instrument necessary to
complete identification of any exception set forth in the exception
schedule in the title policy, i.e., map or plat, restrictions,
easements, sewer agreements, home association declarations,
etc.
(x)
All required disclosure
statements.
(xi)
If required in an appraisal, termite
report, structural engineer’s report, water potability and
septic certification.
(xii)
Sales Contract, if applicable.
“Servicing Officer”: Any
employee of the Servicer involved in, or responsible for, the
administration and servicing of the Mortgage Loans, whose name and
specimen signature appear on a list of Servicing Officers furnished
by the Servicer to the Trustee and the Depositor on the Closing
Date, as such list may from time to time be amended.
“Single Certificate”: With
respect to any Class of Certificates (other than the Class P
Certificates and the Residual Certificates), a hypothetical
Certificate of such Class evidencing a Percentage Interest for such
Class corresponding to an initial Certificate Principal Balance or
Notional Amount of $1,000. With respect to the Class P
Certificates and the Residual Certificates, a hypothetical
Certificate of such Class evidencing a 20% Percentage Interest in
such Class.
“Special Servicer”: As
defined in Section 3.16(e) herein.
“Startup Day”: With respect
to each REMIC formed hereby, the day designated as such pursuant to
Section 10.01(b) hereof.
“Stated Principal Balance”:
With respect to any Mortgage Loan: (a) as of any date of
determination up to but not including the Distribution Date on
which the proceeds, if any, of a Liquidation Event with respect to
such Mortgage Loan would be distributed, the principal balance of
such Mortgage Loan as of the Cut-off Date, as shown in the Mortgage
Loan Schedule, minus the sum of (i) the principal portion of each
Monthly Payment due on a Due Date subsequent to the Cut-off Date,
to the extent received from the Mortgagor or advanced by the
Servicer and distributed pursuant to Section 4.01 on or before such
date of determination, (ii) all Principal Prepayments received
after the Cut-off Date, to the extent distributed pursuant to
Section 4.01 on or before such date of determination, (iii) all
Liquidation Proceeds and Insurance Proceeds applied by the Servicer
as recoveries of principal in accordance with the provisions of
Section 3.16, to the extent distributed pursuant to Section 4.01 on
or before such date of determination and (iv) any Realized Loss
incurred with respect thereto as a result of a Deficient Valuation
or Debt Service Reduction made during or prior to the Prepayment
Period for the most recent Distribution Date coinciding with or
preceding such date of determination; and (b) as of any date of
determination coinciding with or subsequent to the Distribution
Date on which the proceeds, if any, of a Liquidation Event with
respect to such Mortgage Loan would be distributed, zero.
With respect to any REO Property: (a) as of any date of
determination up to but not including the Distribution Date on
which the proceeds, if any, of a Liquidation Event with respect to
such REO Property would be distributed, an amount (not less than
zero) equal to the Stated Principal Balance of the related Mortgage
Loan as of the date on which such REO Property was acquired on
behalf of the Trust Fund, minus the sum of (i) if such REO Property
was acquired before the Distribution Date in any calendar month,
the principal portion of the Monthly Payment due on the Due Date in
the calendar month of acquisition, to the extent advanced by the
Servicer and distributed pursuant to Section 4.01 on or before such
date of determination, and (ii) the aggregate amount of REO
Principal Amortization in respect of such REO Property for all
previously ended calendar months, to the extent distributed
pursuant to Section 4.01 on or before such date of determination;
and (b) as of any date of determination coinciding with or
subsequent to the Distribution Date on which the proceeds, if any,
of a Liquidation Event with respect to such REO Property would be
distributed, zero.
“Stepdown Date”: The earlier
to occur of (1) the Distribution Date on which the aggregate
Certificate Principal Balance of the Class A Certificates has been
reduced to zero and (2) the later to occur of (x) the Distribution
Date occurring in April 2008 and (y) the first Distribution Date on
which the Credit Enhancement Percentage (calculated for this
purpose after giving effect to payments or other recoveries in
respect of the Mortgage Loans during the related Due Period but
before giving effect to distributions on the Certificates on such
Distribution Date) is greater than 46.60%.
“Subordinate Certificates”:
As defined in the Preliminary Statement.
“Sub-Servicer”: Any Person
with which the Servicer has entered into a Sub-Servicing Agreement
and which meets the qualifications of a Sub-Servicer pursuant to
Section 3.02.
“Sub-Servicing Account”: An
account established by a Sub-Servicer which meets the requirements
set forth in Section 3.08 and is otherwise acceptable to the
Servicer.
“Sub-Servicing Agreement”:
The written contract between the Servicer and a Sub-Servicer
relating to servicing and administration of certain Mortgage Loans
as provided in Section 3.02.
“Substitution Shortfall
Amount”: As defined in Section 2.03(c) herein.
“Tax Returns”: Each federal
income tax return on Internal Revenue Service Form 1066, U.S. Real
Estate Mortgage Investment Conduit Income Tax Return, including
Schedule Q thereto, Quarterly Notice to Residual Interest Holders
of REMIC Taxable Income or Net Loss Allocation, or any successor
forms, to be filed on behalf of the Trust Fund due to its
classification as multiple REMICs under the REMIC Provisions,
together with any and all other information reports or returns that
may be required to be furnished to the Certificateholders or filed
with the Internal Revenue Service or any other governmental taxing
authority under any applicable provisions of federal, state or
local tax laws.
“Telerate Page 3750”: The
display designated as page “3750” on the Dow Jones
Telerate Capital Markets Report (or such other page as may replace
page 3750 on that report for the purpose of displaying London
interbank offered rates of major banks).
“Termination Payment”: The
amount, if any, payable in respect of an Early Termination Date (as
defined in the Yield Maintenance Agreement) and determined pursuant
to Section 6 of the Yield Maintenance Agreement.
“Termination Price”: As
defined in Section 9.01 herein.
“Transfer”: Any direct or
indirect transfer, sale, pledge, hypothecation, or other form of
assignment of any Ownership Interest in a Certificate.
“Transferee”: Any Person who
is acquiring by Transfer any Ownership Interest in a
Certificate.
“Transferor”: Any Person who
is disposing by Transfer of any Ownership Interest in a
Certificate.
“Trigger Event”: A Trigger
Event has occurred with respect to any Distribution Date on or
after the Stepdown Date if (i) the Delinquency Percentage exceeds
33.00% of the Credit Enhancement Percentage for such Distribution
Date or (ii) the cumulative Realized Losses as a percentage of the
aggregate Stated Principal Balance of the Mortgage Loans as of the
Cut-off Date is greater than the percentage set forth in the
following table:
|
Range of Distribution Dates
|
Percentage*
|
|
April 2008 - March 2009
|
3.00%
|
|
April 2009 - March 2010
|
4.50%
|
|
April 2010 - March 2011
|
6.00%
|
|
April 2011 and thereafter
|
6.75%
|
_______________________
*
The percentages set forth in the table
above are the percentages applicable for the first Distribution
Date in the corresponding range of Distribution Dates. The
percentage for each succeeding Distribution Date in a range
increases incrementally by 1/12 of the positive difference between
the percentage applicable to the first Distribution Date in that
range and the percentage applicable to the first Distribution Date
in the succeeding range.
“Trust”: Asset Backed
Securities Corporation Home Equity Loan Trust, Series 2005-HE2, the
trust created under this Agreement.
“Trust Fund”: The corpus of
the trust created hereunder consisting of (i) the Mortgage Loans
and all interest and principal received on or with respect thereto
after the related Cut-off Date, other than such amounts which were
due on the Mortgage Loans on or before the related Cut-off Date,
(ii) the Collection Account, the Distribution Account and the Net
WAC Reserve Fund and all amounts deposited therein pursuant to the
applicable provisions of this Agreement (including, without
limitation, amounts received from the Seller on the Closing Date
which shall be deposited by the Trustee in the Collection Account
pursuant to Section 2.01), (iii) the Depositor’s rights under
the Mortgage Loan Purchase Agreement, the Assignment and Assumption
Agreement and the Reconstitution Agreement, (iv) the Trust’s
rights under the Yield Maintenance Agreement, (v) property that
secured a Mortgage Loan and has been acquired by foreclosure,
deed-in-lieu of foreclosure or otherwise and (vi) all proceeds of
the conversion, voluntary or involuntary, of any of the
foregoing.
“Trustee”: U.S. Bank National
Association, a national banking association, not in its individual
capacity, but solely in its capacity as Trustee for the benefit of
the Certificateholders under this Agreement, or its successor in
interest, or any successor trustee appointed as herein
provided.
“Trustee Certification”: As
defined in Section 4.06(d) herein.
“Underwriter”: Credit Suisse
First Boston LLC.
“Underwriter’s
Exemption”: Prohibited Transaction Exemption 2002-41, 67 Fed.
Reg. 54487 (2002), as amended (or any successor thereto), or any
substantially similar administrative exemption granted by the U.S.
Department of Labor.
“Uninsured Cause”: Any cause
of damage to a Mortgaged Property such that the complete
restoration of such property is not fully reimbursable by the
hazard insurance policies required to be maintained pursuant to
Section 3.14.
“United States Person”: A
“United States person” within the meaning set forth in
Section 7701 of the Code.
“Unpaid Interest Shortfall
Amount”: For (i) the first Distribution Date and with respect
to the Senior Certificates and the Mezzanine Certificates, zero,
and for such Class of Certificates and any Distribution Date after
the first Distribution Date, the amount, if any, by which (a) the
sum of (1) the Monthly Interest Distributable Amount for such Class
of Certificates for the immediately preceding Distribution Date and
(2) the outstanding Unpaid Interest Shortfall Amount, if any, for
such Class of Certificates for such preceding Distribution Date
exceeds (b) the aggregate amount distributed on such Class of
Certificates in respect of interest on such preceding Distribution
Date, plus interest on the amount of interest due but not paid on
the Class of Certificates on such preceding Distribution Date, to
the extent permitted by law, at the Pass-Through Rate on such
Distribution Date for such Class of Certificates for the related
Accrual Period.
“Value”: With respect to any
Mortgaged Property related to a Mortgage Loan, the lesser of (i)
the lesser of (a) the value thereof as determined by an appraisal
made for the Originator of the Mortgage Loan at the time of
origination of the Mortgage Loan by an appraiser who met the
minimum requirements of Fannie Mae and Freddie Mac and (b) the
value thereof as determined by a review appraisal conducted by the
Originator in the event any such review appraisal determines an
appraised value more than ten percent (10%) lower than the value
thereof as determined by the appraisal referred to in clause (i)(a)
above in the case of a Mortgage Loan with an LTV less than or equal
to eighty percent (80%), or more than five percent (5%) lower than
the value thereof as determined by the appraisal referred to in
clause (i)(a) above, in the case of a Mortgage Loan with an LTV
greater than eighty percent (80%), as determined by an appraisal
referred to in clause (i)(a), and (ii) the purchase price paid for
the related Mortgaged Property by the Mortgagor with the proceeds
of the Mortgage Loan, provided, however, (A) in the case of a
Refinanced Mortgage Loan, such value of the Mortgaged Property is
based solely upon the lesser of (1) the value determined by an
appraisal made for the Originator of such Refinanced Mortgage Loan
at the time of origination of such Refinanced Mortgage Loan by an
appraiser who met the minimum requirements of Fannie Mae and
Freddie Mac and (2) the value thereof as determined by a review
appraisal conducted by the Originator in the event any such review
appraisal determines an appraised value more than ten percent (10%)
lower than the value thereof as determined by the appraisal
referred to in clause (ii)(A)(1) above, in the case of a Mortgage
Loan with an LTV less than or equal to eighty percent (80%), or
more than five percent (5%) lower than the value thereof as
determined by the appraisal referred to in clause (ii)(a)(1) above,
in the case of a Mortgage Loan with an LTV greater than eighty
percent (80%), as determined by the appraisal referred to in clause
(ii)(A)(1) and (B) in the case of a Mortgage Loan originated in
connection with a “lease-option purchase”, such value
of the Mortgaged Property is based on the lower of the value
determined by an appraisal made for the Originator of such Mortgage
Loan at the time or origination or the sale price of such Mortgaged
Property if the “lease option purchase price” was set
less than 12 months prior to origination, and is based on the value
determined by an appraisal made for the Originator of such Mortgage
Loan at the time of origination if the “lease option purchase
price” was set 12 months or more prior to
origination.
“Voting Rights”: The portion
of the voting rights of all of the Certificates that is allocated
to any Certificate. With respect to any date of
determination, 97% of all voting rights will be allocated among all
Holders of the Offered Certificates in proportion to their then
outstanding Certificate Principal Balances, 1% of all voting rights
will be allocated among the Holders of the Class X Certificates; 1%
of all voting rights will be allocated among the Holders of the
Class P Certificates, and 1% of all voting rights will be allocated
among Holders of the Residual Certificates. Voting Rights
allocated to a Class shall be allocated among the Certificates of
such Class in proportion to the outstanding Percentage Interests
evidenced by their respective Certificates.
“Yield Maintenance
Agreement”: The interest rate yield maintenance agreement
consisting of a 1992 ISDA Master Agreement (Multicurrency-Cross
Border), a Schedule and an ISDA Credit Support Annex (Bilateral
Form-New York Law), each dated as of the Closing Date and the
related Confirmations thereto, between the Trustee on behalf of the
Trust and the Counterparty, as such agreement may be amended and
supplemented in accordance with its terms and any replacement
interest yield maintenance agreement acceptable to the Depositor
and the Trustee.
“Yield Maintenance Agreement
Notional Amount”: The notional amount indicated in the
“Additional Terms” section of the Confirmation for the
Yield Maintenance Agreement.
SECTION 1.02.
Allocation of Certain Interest
Shortfalls.
For purposes of calculating the amount of
the Monthly Interest Distributable Amount for the Senior and
Subordinate Certificates for any Distribution Date, the aggregate
amount of any Prepayment Interest Shortfalls (to the extent not
covered by payments by the Servicer pursuant to Section 3.24) and
any Relief Act Interest Shortfall incurred in respect of the
Mortgage Loans for any Distribution Date shall be allocated to the
Class X Certificates in reduction of the Class X Distribution
Amount and thereafter, among the Class A Certificates and the other
Classes of Subordinate Certificates on a pro rata basis based on
such Monthly Interest Distributable Amount prior to giving effect
to any such reduction.
SECTION 1.03.
Designation of Interests in the REMICs
(a)
Designation of Interests in the REMICs.
The Trustee shall elect that each of
REMIC I and REMIC II be treated as a REMIC under Section 860D of
the Code. Any inconsistencies or ambiguities in this
Agreement or in the administration of this Agreement shall be
resolved in a manner that preserves the validity of such REMIC
elections. The assets of REMIC I shall include the Mortgage
Loans, the accounts (other than the Net WAC Reserve Fund), any REO
Property, and any proceeds of the foregoing. The REMIC I
Regular Interests shall constitute the assets of REMIC II (the
“Master REMIC”).
REMIC I:
The following table sets forth the
designations, principal balances, and interest rates for each
interest in REMIC I, each of which (other than the R-I interest) is
hereby designated as a regular interest in REMIC I (the
“REMIC I Regular Interests”). The R-I Interest is
hereby designated as the Residual Interest in REMIC I.
|
|
|
|
Corresponding Class of REMIC II Interest
|
|
T1-A1
(1)
|
½
Corresponding Class balance
|
Net WAC
Rate
|
A1
|
|
T1-A2
(1)
|
½
Corresponding Class balance
|
Net WAC
Rate
|
A2
|
|
T1-A3
(1)
|
½
Corresponding Class balance
|
Net WAC
Rate
|
A3
|
|
T1-M1
(1)
|
½
Corresponding Class balance
|
Net WAC
Rate
|
M1
|
|
T1-M2
(1)
|
½
Corresponding Class balance
|
Net WAC
Rate
|
M2
|
|
T1-M3
(1)
|
½
Corresponding Class balance
|
Net WAC
Rate
|
M3
|
|
T1-M4
(1)
|
½
Corresponding Class balance
|
Net WAC
Rate
|
M4
|
|
T1-M5
(1)
|
½
Corresponding Class balance
|
Net WAC
Rate
|
M5
|
|
T1-M6
(1)
|
½
Corresponding Class balance
|
Net WAC
Rate
|
M6
|
|
T1-M7
(1)
|
½
Corresponding Class balance
|
Net WAC
Rate
|
M7
|
|
T1-M8
(1)
|
½
Corresponding Class balance
|
Net WAC
Rate
|
M8
|
|
T1-Accrual
Interest (2)
|
(4)
|
Net WAC
Rate
|
N/A
|
|
R-I
|
(3)
|
(3)
|
N/A
|
(1)
This interest is a
REMIC I Accretion Directed Class.
(2)
This interest shall
also be entitled to all Prepayment Premiums received in respect of
the Mortgage Loans.
(3)
The R-I interest shall
not have a principal amount and shall not bear interest. The
R-I interest is hereby designated as the sole class of residual
interest in REMIC I.
(4)
This interest shall
have an initial principal balance equal to the aggregate principal
balance of all the Mortgage Loans as of the Cut-off Date minus the
aggregate initial principal balance of each other regular interest
in REMIC I.
On each Distribution Date, interest shall
be distributed with respect to the interests in REMIC I based on
the above-described interest rates, provided however, that interest
that accrues on the T1-Accural Interest shall be deferred to the
extent necessary to make the distributions of principal described
below. Any interest so deferred shall itself bear interest at
the interest rate for the T1-Accural Interest.
On each Distribution Date all payments of
principal (together with an amount equal to the interest deferred
on the T1-Accural Interest for such Distribution Date) shall be
distributed, and Realized Losses shall be allocated, among the
interests in REMIC I in the following order of priority:
(a)
First, to each interest in REMIC I having
a Corresponding Class in REMIC II until the outstanding principal
amount of each such interest equals one-half of the outstanding
principal amount of the Corresponding Class of Certificates for
such interest immediately after such Distribution Date;
(b)
Second, to the T1-Accural Interest, any
remaining amounts.
Master REMIC:
The following table sets forth
characteristics of the Certificates, each of which, except for the
Class R Certificates, is hereby designated as a “regular
interest” in the Master REMIC. The Class R-2 interest
is hereby designated as the Residual Interest in the Master
REMIC:
|
|
Original Certificate Principal Balance
|
|
|
|
|
|
|
Class A1
|
$254,675,000
|
(1)
|
|
Class A2
|
$265,285,000
|
(1)
|
|
Class A3
|
$30,000,000
|
(1)
|
|
Class M1
|
$62,381,000
|
(1)
|
|
Class M2
|
$16,850,000
|
(1)
|
|
Class M3
|
$27,964,000
|
(1)
|
|
Class M4
|
$8,246,000
|
(1)
|
|
Class M5
|
$10,397,000
|
(1)
|
|
Class M6
|
$5,736,000
|
(1)
|
|
Class M7
|
$7,887,000
|
(1)
|
|
Class M8
|
$10,397,000
|
(1)
|
|
Class X
|
(2)
|
(2)
|
|
Class P
|
$100
|
(3)
|
|
Class R (5)
|
N/A
|
N/A
|
(1)
The lesser of the
related Formula Rate and the Net WAC Rate. Any entitlement to
Net WAC Rate Carryover Amounts shall not be an obligation of any
REMIC created hereunder.
(2)
The Class X
Certificates have a notional balance equal to the aggregate Stated
Principal Balance of the Mortgage Loans. The initial interest
rate of the Class X Certificate shall be a rate sufficient to cause
all net interest from the Mortgage Loans to accrue on the Class X
Certificate that is in excess of the amount of interest that
accrues on the Class A Certificates and the Class M Certificates.
For any Distribution Date, the Pass-Through Rate in respect
of the Class X Certificates shall be the excess of: (i) the
weighted average of the interest rates of the REMIC I Regular
Interests (other than any such interest that is an interest-only
regular interest) over (ii) the product of: (A) two and (B) the
weighted average Pass-Through Rate of the REMIC I Accretion
Directed Classes and the T1-Accrual Interest, where the T1-Accrual
Interest is subject to a cap equal to zero and each REMIC I
Accretion Directed Class is subject to a cap equal to the
Pass-Through Rate on its Corresponding Class. The Class X
Certificates shall also be entitled to principal equal to the
excess of the aggregate Stated Principal Balance of the Mortgage
Loans as of the Cut-off Date (less $100.00) over the aggregate
Certificate Principal Balance of the Class A Certificates and Class
M Certificates as of the Closing Date. Such principal balance
shall not bear interest.
(3)
The Class P
Certificates shall not be entitled to payments of interest, but
shall be entitled to receive all Prepayment Premiums in respect of
the Mortgage Loans.
(4)
REMIC II shall also
issue the R-II interest, which shall not have a principal amount
and shall not bear interest. The R-II interest is hereby
designated as the sole class of residual interest in REMIC II.
The Class R Certificates shall represent the beneficial
ownership of the R-I and R-II interests.
The foregoing REMIC structure is intended
to cause all of the cash from the Mortgage Loans to flow through to
REMIC II as cash flow on a REMIC regular interest, without creating
any shortfall, actual or potential (other than for credit losses),
to any REMIC regular interest. To the extent that the
structure is believed to diverge from such intention, the party
identifying any ambiguity or drafting error shall notify the other
parties hereto, and the parties hereto shall attempt to resolve
such ambiguity or correct such drafting error in accordance with
Section 11.01 to accomplish such intention.
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF
CERTIFICATES
SECTION 2.01.
Conveyance of Mortgage Loans.
(a)
The Depositor, as of the date of this
Agreement, does hereby establish the Trust, and, concurrently with
the delivery of this Agreement, does hereby transfer, assign, set
over and otherwise convey to the Trustee without recourse for the
benefit of the Certificateholders all the right, title and interest
of the Depositor, including any security interest therein for the
benefit of the Depositor, in and to the Mortgage Loans identified
on the Mortgage Loan Schedule, the rights of the Depositor under
the Assignment and Assumption Agreement, the Mortgage Loan Purchase
Agreement and the Reconstitution Agreement, and all other assets
included or to be included in the Trust Fund. Such assignment
includes all interest and principal received by the Seller, the
Depositor or the Servicer on or with respect to the Mortgage Loans
(other than payments of principal and interest due on such Mortgage
Loans on or before the Cut-off Date) including Principal
Prepayments, and interest thereon, received after February 21,
2005, by the Seller, the Depositor or the Servicer on or with
respect to the Mortgage Loans. The Depositor
herewith delivers to the Trustee an executed copy of the
Reconstitution Agreement. In addition, on or prior to the
Closing Date, the Trustee shall execute the Yield Maintenance
Agreement and the Depositor hereby directs the Trustee to do so.
With respect to any Mortgage Loan that does not have a first
payment date during the Due Period related to the first
Distribution Date, the Depositor shall deposit into the
Distribution Account on or before the Servicer Remittance Date
relating to the first Distribution Date, an amount equal to one
month’s interest at the related Net Mortgage Rate on the
Cut-off Date Principal Balance of such Mortgage Loan.
If the assignment and transfer of the
Mortgage Loans and the other property specified in this Section
2.01 from the Depositor to the Trustee pursuant to this Agreement
is held or deemed not to be a sale or is held or deemed to be a
pledge of security for a loan, the Depositor intends that the
rights and obligations of the parties shall be established pursuant
to the terms of this Agreement and that, in such event, (i) the
Depositor shall be deemed to have granted and does hereby grant to
the Trustee as of the Closing Date a perfected, first priority
security interest in the entire right, title and interest of the
Depositor in and to the Mortgage Loans and all other property
conveyed to the Trust Fund pursuant to this Section 2.01 and all
proceeds thereof, and (ii) this Agreement shall constitute a
security agreement under applicable law.
In connection with such transfer and
assignment, the Depositor does hereby deliver to, and deposit with
the Trustee or the Custodian, as applicable, a copy of the related
Mortgage Loan Schedule in an electronic, machine readable medium,
and the following documents or instruments with respect to each
Mortgage Loan so transferred and assigned (each, a “Mortgage
File”):
(i)
the original Mortgage Note, endorsed in
blank or in the following form: “Pay to the order of U.S.
Bank National Association, as Trustee under the applicable
agreement, without recourse,” with all prior and intervening
endorsements showing a complete chain of endorsement from the
Originator to the Person so endorsing to the Trustee or a copy of
such original Mortgage Note with an accompanying lost note
affidavit executed by the Seller;
(ii)
the original Mortgage with evidence of
recording thereon, and a copy, certified by the appropriate
recording office, of the recorded power of attorney, if the
Mortgage was executed pursuant to a power of attorney, with
evidence of recording thereon;
(iii)
an original Assignment of the Mortgage in
blank;
(iv)
the original recorded Assignment or
Assignments of the Mortgage showing a complete chain of assignment
from the Originator to the Person assigning the Mortgage to the
Trustee or in blank;
(v)
the original or copies of each
assumption, modification, written assurance or substitution
agreement, if any; and
(vi)
with respect to any first lien Mortgage
Loan, the original lender’s title insurance policy, if
available, together with all endorsements or riders which were
issued with or subsequent to the issuance of such policy, insuring
the priority of the Mortgage as a first lien on the Mortgaged
Property represented therein as a fee interest vested in the
Mortgagor, or in the event such original title policy is
unavailable, a written commitment or uniform binder or preliminary
report of title issued by the title insurance or escrow company, if
available.
Notwithstanding the foregoing, the
Trustee, if applicable, acknowledges receipt of items listed under
clause (v) above only to the extent that it has received a written
schedule of the items to be delivered to the Trustee or the
Custodian pursuant to such clause (v).
The Depositor hereby represents that, on
the Closing Date (i) no more than 1% of the Mortgage Loans by
Stated Principal Balance as of the Cut-off Date may have lost note
affidavits in lieu of the original Mortgage Notes and (ii) the
Depositor shall cause the Originator to deliver to the Trustee or
the Custodian, as applicable, a copy of the original Mortgage Note
for each Mortgage Loan with respect to which a lost note affidavit
is delivered.
If any of the documents referred to in
clauses (ii), (iii), (iv) or (v) above in this Section 2.01(a) has
as of the Closing Date been submitted for recording but either (x)
has not been returned from the applicable public recording office
or (y) has been lost or such public recording office has retained
the original of such document, the obligations of the Depositor to
deliver such documents shall be deemed to be satisfied upon (1)
delivery to the Trustee or the Custodian, as applicable, of a copy
of each such document certified by the Originator, in the case of
(x) above or the applicable public recording office in the case of
(y) above to be a true and complete copy of the original that was
submitted for recording and (2) if such copy is certified by the
Originator or delivery to the Trustee or the Custodian, as
applicable, promptly upon receipt thereof of either the original or
a copy of such document certified by the applicable public
recording office to be a true and complete copy of the original.
If the original lender’s title insurance policy was not
delivered pursuant to clause (vii) above in this Section 2.01(a),
the Depositor shall deliver or cause to be delivered to the Trustee
or the Custodian, as applicable, promptly after receipt thereof,
the original lender’s title insurance policy, if available.
The Depositor shall deliver or cause to be delivered to the
Trustee or the Custodian, as applicable, promptly upon receipt
thereof any other original documents constituting a part of a
Mortgage File received with respect to any Mortgage Loan,
including, but not limited to, any original documents evidencing an
assumption or modification of any Mortgage Loan.
All original documents relating to the
Mortgage Loans that are not delivered to the Trustee or the
Custodian, as applicable, are and shall be held by or on behalf of
the Depositor or the Servicer, as the case may be, in trust for the
benefit of the Trustee on behalf of the Certificateholders.
In the event that any such original document is required
pursuant to the terms of this Section to be a part of a Mortgage
File, such document shall be delivered promptly to the Trustee or
the Custodian, as applicable. Any such original document
delivered to or held by the Depositor that is not required pursuant
to the terms of this Section to be a part of a Mortgage File, shall
be delivered promptly to the Servicer.
The Depositor shall deliver or cause the
Originator, the Trustee or the Custodian to deliver to the Servicer
copies of all trailing documents required to be included in the
Servicing File at the same time the originals or certified copies
thereof are delivered to the Trustee or Custodian, as applicable,
which documents shall include, but are not limited to, the
mortgagee policy of title insurance and any Mortgage Loan documents
upon return from the recording office. The Servicer shall not
be responsible for any custodial fees other than costs incurred in
obtaining such documents, and the Servicer shall be entitled to
reimbursement from the Seller for any reasonable costs incurred in
obtaining such documents.
(b)
It is agreed and understood by the
Depositor, the Seller, the Servicer and the Trustee that it is not
intended that any Mortgage Loan be included in the Trust Fund that
is a “High-Cost Home Loan” as defined by the Home
Ownership and Equity Protection Act of 1994 or any other applicable
predatory lending laws, including, but not limited to (i) a
“High-Cost Home Loan” as defined in the New Jersey Home
Ownership Act effective November 27, 2003, (ii) a “High-Cost
Home Loan” as defined in the New Mexico Home Loan Protection
Act effective January 1, 2004, (iii) a “High Cost Home
Mortgage Loan” as defined in the Massachusetts Predatory Home
Loan Practices Act effective November 7, 2004 or (iv) a
“High-Cost Home Loan” as defined by the Indiana High
Cost Home Loan Law effective January 1, 2005.
SECTION 2.02.
Acceptance of REMIC I by the
Trustee.
Subject to the provisions of Section 2.01
and subject to any exceptions noted on the exception report
described in the next paragraph below, the Trustee or the Custodian
acknowledges receipt of the documents referred to in Section 2.01
(other than such documents described in Section 2.01(a)(iv)) above
and all other assets included under clauses (i), (iii), (iv) and
(v) of the definition of “REMIC I” (to the extent of
amounts deposited into the Distribution Account) and declares that
the Trustee or the Custodian, as applicable, holds and will hold
such documents and the other documents delivered to it constituting
the Mortgage File on behalf of the Trust, and that it holds or will
hold all such assets and such other assets included in the
definition of “REMIC I” in trust for the exclusive use
and benefit of all present and future Certificateholders. The
Trustee also acknowledges receipt of the amounts on deposit in the
Net WAC Reserve Fund in trust for the exclusive use and benefit of
all present and future Certificateholders.
The Trustee agrees on or before the
Closing Date, for the benefit of the Certificateholders, to review,
or cause the Custodian to review, each Mortgage File and to
certify, or cause the Custodian to certify, to the Depositor, the
Seller, the Servicer and the Trustee in substantially the form
attached hereto as Exhibit C-1. It is herein acknowledged
that, in conducting such review, neither the Trustee nor the
Custodian was under any duty or obligation (i) to inspect, review
or examine any such documents, instruments, certificates or other
papers to determine whether they are genuine, enforceable, or
appropriate for the represented purpose (including with respect to
Section 2.01(a)(vi), whether such title insurance policy insures
the priority of the Mortgage as a first lien) or whether they have
actually been recorded or that they are other than what they
purport to be on their face or (ii) to determine whether any
Mortgage File should include any of the documents specified in
Section 2.01(a)(iv).
Prior to the first anniversary date of
this Agreement, the Trustee shall cause the Custodian to deliver to
the Depositor, the Trustee, the Seller and the Servicer a final
certification in the form annexed hereto as Exhibit C-2 evidencing
the completeness of the Mortgage Files, with any applicable
exceptions noted thereon.
If in the process of reviewing the
Mortgage Files and making or preparing, as the case may be, the
certifications referred to above, the Trustee or the Custodian
finds any document or documents constituting a part of a Mortgage
File to be missing or defective in any material respect, at the
conclusion of its review the Trustee shall so notify the Depositor,
the Seller and the Servicer. In addition, upon the discovery
by the Depositor, the Servicer, the Custodian or the Trustee of a
breach of any of the representations and warranties made by the
Originator or the Seller in the Mortgage Loan Purchase Agreement or
this Agreement, respectively, in respect of any Mortgage Loan which
materially adversely affects such Mortgage Loan or the interests of
the related Certificateholders in such Mortgage Loan, the party
discovering such breach shall give prompt written notice to the
other parties.
Enforcement of the Mortgage Loan Purchase
Agreement or this Agreement against the Originator or the Seller,
respectively, shall be effected by the Trustee. The Trustee
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 Person against which such
enforcement is directed; provided, however, if the sources of
reimbursement described in clauses (i) and (ii) are insufficient,
the Trustee may seek reimbursement for any remaining unreimbursed
costs of such enforcement from the Trust Fund as an Extraordinary
Trust Fund Expense.
SECTION 2.03.
Repurchase or Substitution of Mortgage
Loans by the Originator, the Seller or the Depositor; Payment of
Prepayment Premiums in the Event of Breach.
(a)
(i)Upon discovery by any of the parties
hereto or receipt of notice by a Responsible Officer in the
Corporate Trust Office of the Trustee of any materially defective
document in, or that a document is missing from, the Mortgage File
or of the breach by the Originator of any representation, warranty
or covenant under the Mortgage Loan Purchase Agreement or the
Reconstitution Agreement in respect of any Mortgage Loan that
materially adversely affects the value of such Mortgage Loan or the
interest therein of the Certificateholders (in the case of any such
representation or warranty made in the Mortgage Loan Purchase
Agreement or the Reconstitution Agreement to the knowledge or the
best of knowledge of the Originator as to which the Originator has
no knowledge, without regard to the Originator’s lack of
knowledge with respect to the substance of such representation or
warranty being inaccurate at the time it was made), the Trustee
shall promptly notify the Seller and the Servicer of such defect,
missing document or breach and cause the Originator to deliver such
missing document or cure such defect or breach within 90 days from
the date the Originator was notified of such missing document,
defect or breach; provided that such missing document was not
previously delivered to the Custodian by the Originator under the
Mortgage Loan Purchase Agreement and the Reconstitution Agreement.
Notwithstanding the foregoing, if applicable, any breach by
the Originator of the Fannie Mae Representations or the Freddie Mac
Representations (as defined and set forth in the Reconstitution
Agreement), if applicable, shall be deemed to materially and
adversely affect the interests of the Certificateholders in that
Mortgage Loan. If the Originator does not deliver such
missing document or cure such defect or breach in all material
respects during such period, the Trustee shall enforce the
obligations of the Originator under the Mortgage Loan Purchase
Agreement and the Reconstitution Agreement to repurchase such
Mortgage Loan from the Trust Fund at the Purchase Price, to the
extent that the Originator is obligated to do so under the Mortgage
Loan Purchase Agreement and the Reconstitution Agreement. In
the event that the Originator shall fail to cure the applicable
breach or repurchase a Mortgage Loan in accordance with the
preceding sentence, the Seller shall do so. The Purchase
Price for the repurchased Mortgage Loan shall be deposited in the
Distribution Account, and the Trustee, upon receipt of such
deposit, shall release or cause the Custodian to release to the
Originator or the Seller, as the case may be, the related Mortgage
File and the Trustee shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, (provided,
however, that in the instruments of transfer or assignment, the
Trustee shall represent and warrant to the Originator or the
Seller, as applicable, that the repurchased Mortgage Loan is free
and clear of any encumbrance, equity, lien, pledge, charge, claim
or security interest created by the Trustee and its successors,
assigns and transferees), as the Originator or the Seller, as
applicable, shall furnish to it and as shall be necessary to vest
in the Originator or the Seller, as the case may be, any Mortgage
Loan released pursuant hereto, and the Trustee shall have no
further responsibility with regard to such Mortgage File. In
lieu of repurchasing any such Mortgage Loan as provided above, if
so provided in the Mortgage Loan Purchase Agreement, the
Reconstitution Agreement or this Agreement, the Originator or the
Seller, as applicable, may cause such Mortgage Loan to be removed
from the Trust Fund (in which case it shall become a Deleted
Mortgage Loan) and substitute one or more Qualified Substitute
Mortgage Loans in the manner and subject to the limitations set
forth in Section 2.03(c). It is understood and agreed that
the obligation of the Originator or the Seller, as applicable, to
cure or to repurchase (or to substitute for) any Mortgage Loan as
to which a document is missing, a material defect in a constituent
document exists or as to which such a breach has occurred and is
continuing shall constitute the sole remedy respecting such
omission, defect or breach available to the Trustee on behalf of
the Certificateholders.
(ii)
Upon discovery by any of the parties
hereto or receipt of notice by a Responsible Officer in the
Corporate Trust Office of the Trustee of any breach by the Seller
of any representation, warranty or covenant made by the Seller in
Section 2.05(b)(vii) through (viii) in respect of any Mortgage Loan
that materially adversely affects the value of such Mortgage Loan
or the interest therein of the Certificateholders (in the case of
any such representation or warranty made to the knowledge or the
best of knowledge of the Seller as to which the Seller has no
knowledge, without regard to the Seller’s lack of knowledge
with respect to the substance of such representation or warranty
being inaccurate at the time it was made), the Trustee shall
promptly notify the Seller and the Servicer of such breach and
cause the Seller to cure such breach within 90 days from the date
the Seller was notified of such breach. If the Seller fails
to cure such breach in all material respects during such period,
the Seller shall repurchase such Mortgage Loan from the Trust Fund
at the Purchase Price. In the event that the Seller shall
fail to cure the applicable breach or repurchase a Mortgage Loan in
accordance with the preceding sentence, the Depositor shall do so.
The Purchase Price for the repurchased Mortgage Loan shall be
deposited in the Distribution Account, and the Trustee, upon
receipt of such deposit, shall release or cause the Custodian to
release to the Seller or the Depositor, as the case may be, the
related Mortgage File and the Trustee shall execute and deliver
such instruments of transfer or assignment, in each case without
recourse, ( provided, however , that in the instruments of
transfer or assignment, the Trustee shall represent and warrant to
the Seller or the Depositor, as applicable, that the repurchased
Mortgage Loan is free and clear of any encumbrance, equity, lien,
pledge, charge, claim or security interest created by the Trustee
and its successors, assigns and transferees), as the Seller or the
Depositor, as applicable, shall furnish to it and as shall be
necessary to vest in the Seller or the Depositor, as the case may
be, any Mortgage Loan released pursuant hereto, and the Trustee
shall have no further responsibility with regard to such Mortgage
File. In lieu of repurchasing any such Mortgage Loan as
provided above, if so provided in the Mortgage Loan Purchase
Agreement, the Reconstitution Agreement or this Agreement, the
Seller or the Depositor, as applicable, may cause such Mortgage
Loan to be removed from the Trust Fund (in which case it shall
become a Deleted Mortgage Loan) and substitute one or more
Qualified Substitute Mortgage Loans in the manner and subject to
the limitations set forth in Section 2.03(c). It is
understood and agreed that the obligation of the Seller or the
Depositor, as applicable, to cure or to repurchase (or to
substitute for) any Mortgage Loan as to which such a breach has
occurred and is continuing shall constitute the sole remedy
respecting such breach available to the Trustee on behalf of the
Certificateholders.
(b)
(i)
As promptly as practicable (and no later
than 90 days) after the earlier of discovery by the Servicer or
receipt of notice by the Servicer of the breach of any
representation, warranty or covenant of the Servicer set forth in
Section 2.05(a) which materially and adversely affects the
interests of the Certificateholders in any Mortgage Loan, the
Servicer shall cure such breach in all material
respects.
(ii)
If the covenant made by the Servicer in
Section 2.05(a)(vii) is breached and remains uncured, the Servicer
shall pay into the Collection Account the amount of the waived
Prepayment Premium. If the Servicer shall fail to make any
payment required pursuant to this Section 2.03(b)(ii), either the
Trustee or the Seller may enforce such obligation.
(c)
Any substitution of Qualified Substitute
Mortgage Loans for Deleted Mortgage Loans made pursuant to Section
2.03(a) must be effected prior to the date that is two years after
the Closing Date for the Trust Fund.
As to any Deleted Mortgage Loan for which
the Originator, the Seller or the Depositor substitutes a Qualified
Substitute Mortgage Loan or Loans, such substitution shall be
effected by the Originator, the Seller or the Depositor, as the
case may be, delivering to the Trustee, or the Custodian on behalf
of the Trustee, as applicable, for such Qualified Substitute
Mortgage Loan or Loans, the Mortgage Note, the Mortgage, the
Assignment to the Trustee, and such other documents and agreements,
with all necessary endorsements thereon, as are required by Section
2.01, together with an Officers’ Certificate providing that
each such Qualified Substitute Mortgage Loan satisfies the
definition thereof and specifying the Substitution Shortfall Amount
(as described below), if any, in connection with such substitution.
The Trustee or the Custodian, as applicable, shall
acknowledge receipt for such Qualified Substitute Mortgage Loan or
Loans and, within ten Business Days thereafter, review such
documents as specified in Section 2.02 and deliver to the Trustee
(if delivered by the Custodian), the Depositor, the Seller and the
Servicer, with respect to such Qualified Substitute Mortgage Loan
or Loans, a certification substantially in the form attached hereto
as Exhibit C-1, with any applicable exceptions noted thereon.
Within one year of the date of substitution, the Trustee or
the Custodian shall deliver to the Trustee (if delivered by the
Custodian), the Depositor, the Seller and the Servicer a
certification substantially in the form of Exhibit C-2 hereto with
respect to such Qualified Substitute Mortgage Loan or Loans, with
any applicable exceptions noted thereon. Monthly Payments due
with respect to Qualified Substitute Mortgage Loans in the month of
substitution are not part of the Trust Fund and will be retained by
the Originator, the Seller or the Depositor, as the case may be.
For the month of substitution, distributions to
Certificateholders will reflect the Monthly Payment due on such
Deleted Mortgage Loan on or before the Due Date in the month of
substitution, and the Originator, the Seller or the Depositor, as
the case may be, shall thereafter be entitled to retain all amounts
subsequently received in respect of such Deleted Mortgage Loan.
The Trustee shall give or cause to be given written notice to
the Certificateholders that such substitution has taken place, and
the Servicer shall amend the Mortgage Loan Schedule to reflect the
removal of such Deleted Mortgage Loan from the terms of this
Agreement and the substitution of the Qualified Substitute Mortgage
Loan or Loans and shall deliver a copy of such amended Mortgage
Loan Schedule to the Trustee in an electronic format. Upon
such substitution, such Qualified Substitute Mortgage Loan or Loans
shall constitute part of the Mortgage Pool and shall be subject in
all respects to the terms of this Agreement, including, in the case
of a substitution effected by the Originator or the Seller, all
applicable representations and warranties thereof included in the
Mortgage Loan Purchase Agreement or this Agreement, respectively,
and in the case of a substitution effected by the Depositor, all
applicable representations and warranties thereof set forth in
Section 2.04.
For any month in which the Originator,
the Seller or the Depositor substitutes one or more Qualified
Substitute Mortgage Loans for one or more Deleted Mortgage Loans,
the Servicer will determine the amount (the “Substitution
Shortfall Amount”), if any, by which the aggregate Purchase
Price of all such Deleted Mortgage Loans exceeds the aggregate of,
as to each such Qualified Substitute Mortgage Loan, the Stated
Principal Balance thereof as of the date of substitution, together
with one month’s interest on such Stated Principal Balance at
the applicable Net Mortgage Rate, plus all outstanding P&I
Advances and Servicing Advances and any costs and damages actually
incurred and paid by or on behalf of the Trust in connection with
any violation by such Mortgage Loan of (i) the representations and
warranties set forth in Section 2.05(b)(vii) or (viii) of this
Agreement, (ii) Section 2(a)(viii) of Schedule B to the
Reconstitution Agreement or (iii) the representations and
warranties made in connection with “high-cost” home
loans or any predatory or abusive lending laws in Schedule B to the
Reconstitution Agreement, as applicable. On the date of such
substitution, which shall be on or prior to the next succeeding
Determination Date, the Originator, the Seller or the Depositor, as
the case may be, will deliver or cause to be delivered to the
Servicer for deposit in the Collection Account an amount equal to
the Substitution Shortfall Amount, if any, and the Trustee, upon
receipt of the related Qualified Substitute Mortgage Loan or Loans
and certification by the Servicer of such deposit, shall release to
the Originator or the Depositor, as the case may be, the related
Mortgage File or Files and the Trustee shall execute and deliver
such instruments of transfer or assignment, in each case without
recourse, as the Originator, the Seller or the Depositor, as the
case may be, shall deliver to it and as shall be reasonably
necessary to vest therein any Deleted Mortgage Loan released
pursuant hereto.
In addition, the Originator, the Seller
or the Depositor, as the case may be, shall obtain at its own
expense and deliver to the Trustee an Opinion of Counsel to the
effect that such substitution will not cause (a) any federal tax to
be imposed on any of the REMICs, created hereunder, including
without limitation, any federal tax imposed on “prohibited
transactions” under Section 860F(a)(1) of the Code or on
“contributions after the startup date” under Section
860G(d)(1) of the Code, or (b) any REMIC hereunder to fail to
qualify as a REMIC at any time that any Certificate is
outstanding.
(d)
Upon discovery by the Depositor, the
Servicer or the Trustee that any Mortgage Loan does not constitute
a “qualified mortgage” within the meaning of Section
860G(a)(3) of the Code, the party discovering such fact shall
within two Business Days give written notice thereof to the other
parties. In connection therewith, the Originator, the Seller
or the Depositor, as the case may be, shall repurchase or, subject
to the limitations set forth in Section 2.03(c), substitute one or
more Qualified Substitute Mortgage Loans for the affected Mortgage
Loan within 90 days of the earlier of discovery or receipt of such
notice with respect to such affected Mortgage Loan. The
Depositor shall cause such repurchase or substitution to be made by
(i) the Originator, if the affected Mortgage Loan’s status as
a non-qualified mortgage is or results from a breach of any
representation, warranty or covenant made by the Originator under
the Mortgage Loan Purchase Agreement, (ii) the Depositor, if the
affected Mortgage Loan’s status as a non-qualified mortgage
is a breach of any representation or warranty of the Depositor set
forth in Section 2.04, or if its status as a non-qualified mortgage
is a breach of any representation or warranty (other than a
representation and warranty of the Originator or the Seller) or
(iii) the Seller, if the affected Mortgage Loan’s status as a
non-qualified mortgage is a breach of any representation or
warranty of the Seller set forth in Section 2.05(b)(vii) or (viii),
or if its status as a non-qualified mortgage is a breach of any
representation or warranty (other than a representation and
warranty of the Originator or the Depositor). Any such
repurchase or substitution shall be made in the same manner as set
forth in Section 2.03(a). The Trustee shall reconvey to the
Originator, the Seller or the Depositor, as the case may be, the
Mortgage Loan to be released pursuant hereto in the same manner,
and on the same terms and conditions, as it would a Mortgage Loan
repurchased for breach of a representation or warranty.
SECTION 2.04.
Representations and Warranties of the
Depositor.
The Depositor hereby represents, warrants
and covenants to the Trustee and the Servicer that as of the
Closing Date:
(i)
The Depositor is a corporation duly
formed and validly existing under the laws governing its creation
and existence, is in compliance with the laws of each state in
which any Mortgaged Property or the Depositor is located or doing
business and is in good standing in each jurisdiction in which the
nature of its business, or the properties owned or leased by it
make such qualification necessary. The Depositor has all
requisite authority to own and operate its properties, to carry out
its business as presently conducted and as proposed to be conducted
and to enter into and discharge its obligations under this
Agreement and the other Operative Documents to which it is a
party.
(ii)
The execution and delivery of this
Agreement and the other Operative Documents to which it is a party
by the Depositor and its performance and compliance with the terms
of this Agreement and the other Operative Documents to which it is
a party have been duly authorized by all necessary corporate action
on the part of the Depositor and will not violate the
Depositor’s Charter or Bylaws or constitute a default (or an
event which, with notice or lapse of time, or both, would
constitute a default) under, or result in a breach of, any material
contract, agreement or other instrument to which the Depositor is a
party or by which the Depositor is bound or violate any statute or
any order, rule or regulation of any court, governmental agency or
body or other tribunal having jurisdiction over the Depositor or
any of its properties.
(iii)
This Agreement and the other Operative
Documents to which the Depositor is a party, assuming due
authorization, execution and delivery by the other parties hereto
and thereto, each constitutes a valid, legal and binding obligation
of the Depositor, enforceable against it in accordance with the
terms hereof and thereof, except as the enforcement hereof and
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting
creditors’ rights generally and by general principles of
equity (whether considered in a proceeding or action in equity or
at law).
(iv)
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, which default could materially and adversely
affect the condition (financial or other) or operations of the
Depositor or its properties or the consequences of which could
materially and adversely affect its performance hereunder and under
the other Operative Documents to which the Depositor is a
party.
(v)
No litigation, proceeding or
investigation is pending with respect to which the Depositor has
received service of process or, to the best of the
Depositor’s knowledge, threatened against the Depositor which
litigation, proceeding or investigation might have consequences
that would prohibit its entering into this Agreement or any other
Operative Documents to which it is a party or that would materially
and adversely affect the condition (financial or otherwise) or
operations of the Depositor or its properties or might have
consequences that would materially and adversely affect the
validity or enforceability of the Mortgage Loans, the issuance of
the Certificates or the Depositor’s performance hereunder and
under the other Operative Documents to which the Depositor is a
party.
(vi)
[Reserved].
(vii)
Immediately prior to the sale and
assignment by the Depositor to the Trustee on behalf of the Trust
Fund of each Mortgage Loan, the Depositor had good and equitable
title to each Mortgage Loan subject to no prior lien (except, with
respect to any second lien Mortgage Loan, the related First Lien),
claim, participation interest, mortgage, security interest, pledge,
charge or other encumbrance or other interest of any
nature.
(viii)
As of the Closing Date, the Depositor has
transferred all right, title and interest in the Mortgage Loans to
the Trustee on behalf of the Trust Fund.
(ix)
The Depositor is solvent and will not be
made insolvent by the transfer of the Mortgage Loans, and the
Depositor is not aware of any impending insolvency. The
Depositor has not transferred the Mortgage Loans to the Trustee on
behalf of the Trust Fund with any intent to hinder, delay or
defraud any of its creditors.
(x)
All actions, approvals, consents,
waivers, exemptions, variances, franchises, orders, permits,
authorizations, rights and licenses required to be taken, given or
obtained, as the case may be, by or from any federal, state or
other governmental authority or agency (other than any such
actions, approvals, etc. under any state securities laws, real
estate syndication or “Blue Sky” statutes, as to which
the Depositor makes no such representation or warranty), that are
necessary or advisable in connection with the purchase and sale of
the Certificates and the execution and delivery by the Depositor of
the Operative Documents to which it is a party, have been duly
taken, given or obtained, as the case may be, are in full force and
effect on the date hereof, are not subject to any pending
proceedings or appeals (administrative, judicial or otherwise) and
either the time within which any appeal therefrom may be taken or
review thereof may be obtained has expired or no review thereof may
be obtained or appeal therefrom taken, and are adequate to
authorize the consummation of the transactions contemplated by this
Agreement and the other Operative Documents on the part of the
Depositor and the performance by the Depositor of its obligations
under this Agreement and such of the other Operative Documents to
which it is a party.
(xi)
The transfer, assignment and conveyance
of the Mortgage Notes and the Mortgages by the Depositor hereunder
are not subject to the bulk transfer laws of any similar statutory
provisions in effect in any applicable jurisdiction.
SECTION 2.05.
Representations, Warranties and Covenants
of the Servicer and the Seller.
(a)
The Servicer hereby represents, warrants
and covenants to the Trustee, the Seller and the Depositor that as
of the Closing Date or as of such date specifically provided
herein:
(i)
The Servicer is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Texas and is duly authorized and qualified to transact
any and all business contemplated by this Agreement to be conducted
by the Servicer in any state in which a Mortgaged Property related
to a Mortgage Loan is located or is otherwise not required under
applicable law to effect such qualification and, in any event, is
in compliance with the doing business laws of any such State, to
the extent necessary to ensure its ability to enforce each Mortgage
Loan serviced and to service the Mortgage Loans in accordance with
the terms of this Agreement;
(ii)
The Servicer has the full power and
authority to service each Mortgage Loan which the Servicer is
required to service hereunder, and to execute, deliver and perform,
and to enter into and consummate the transactions contemplated by
this Agreement and has duly authorized by all necessary action on
the part of the Servicer the execution, delivery and performance of
this Agreement; and this Agreement, assuming the due authorization,
execution and delivery thereof by the Depositor, the Seller and the
Trustee, constitutes a legal, valid and binding obligation of the
Servicer, enforceable against the Servicer in accordance with its
terms, except to the extent that (a) the enforceability hereof may
be limited by bankruptcy, insolvency, moratorium, receivership and
other similar laws relating to creditors’ rights generally
and (b) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to the equitable defenses
and to the discretion of the court before which any proceeding
therefor may be brought;
(iii)
The execution and delivery of this
Agreement by the Servicer, the servicing of the Mortgage Loans by
the Servicer hereunder, the consummation by the Servicer of any
other of the transactions herein contemplated, and the fulfillment
of or compliance with the terms hereof are in the ordinary course
of business of the Servicer and will not (A) result in a breach of
any term or provision of the organizational documents of the
Servicer or (B) conflict with, result in a breach, violation or
acceleration of, or result in a default under, the terms of any
other material agreement or instrument to which the Servicer is a
party or by which it may be bound, or any statute, order or
regulation applicable to the Servicer of any court, regulatory
body, administrative agency or governmental body having
jurisdiction over the Servicer; and the Servicer is not a party to,
bound by, or in breach or violation of any indenture or other
agreement or instrument, or subject to or in violation of any
statute, order or regulation of any court, regulatory body,
administrative agency or governmental body having jurisdiction over
it, which materially and adversely affects or, to the
Servicer’s knowledge, would in the future materially and
adversely affect, (x) the ability of the Servicer to perform its
obligations under this Agreement or (y) the business, operations,
financial condition, properties or assets of the Servicer taken as
a whole;
(iv)
The Servicer is an approved servicer for
Fannie Mae and Freddie Mac in good standing, and no event has
occurred, including but not limited to a change in insurance
coverage, that would make the Servicer unable to comply with Fannie
Mae or Freddie Mac eligibility requirements or which would require
notification to Fannie Mae or Freddie Mac;
(v)
No litigation is pending or, to the best
knowledge of the Servicer, threatened against the Servicer that
would materially and adversely affect the execution, delivery or
enforceability of this Agreement or the ability of the Servicer to
service the Mortgage Loans or to perform any of its other
obligations hereunder in accordance with the terms
hereof;
(vi)
No consent, approval, authorization or
order of any court or governmental agency or body is required for
the execution, delivery and performance by the Servicer of, or
compliance by the Servicer with, this Agreement or the consummation
by the Servicer of the transactions contemplated by this Agreement,
except for such consents, approvals, authorizations or orders, if
any, that have been obtained prior to the Closing Date;
(vii)
The Servicer will not waive any
Prepayment Premium or part of a Prepayment Premium unless such
waiver would, in the reasonable opinion of the Servicer, maximize
recovery of total proceeds taking into account the value of such
Prepayment Premium and related Mortgage Loan and doing so is
standard and customary in servicing mortgage loans similar to the
Mortgage Loans (including any waiver of a Prepayment Premium in
connection with a refinancing of a Mortgage Loan that is related to
a default or an imminent default), and in no event will it waive a
Prepayment Premium in connection with a refinancing of a Mortgage
Loan that is not related to a default or an imminent default.
Notwithstanding the previous sentence, if the Servicer
determines that any Prepayment Premium is not legally enforceable
under the circumstances in which the related Principal Prepayment
occurs, then the Servicer shall not be required to attempt to
collect the applicable Prepayment Premium, and shall have no
liability or obligation with respect to such Prepayment Premium
pursuant to Section 2.03(b)(ii) hereof;
(viii)
For each Mortgage Loan, the Servicer will
accurately, fully and in a timely manner report its borrower credit
files to each of the Credit Repositories; and
(ix)
The Servicer shall review the Mortgage
Loan documents in accordance with its customary servicing
procedures to verify the existence of all documents necessary to
enforce any Prepayment Premiums. If the Servicer cannot
verify the existence of such documents it shall immediately notify
the Originator, the Seller and the Depositor. Upon receipt of
such notice, the Originator shall provide the Servicer with any
outstanding documents required to verify the existence of the
Prepayment Premium. In the event the Servicer is unable to
verify the existence of Prepayment Premium, the Servicer shall not
be obligated to pay such Prepayment Premiums into the Collection
Account.
(b)
The Seller hereby represents, warrants
and covenants to the Trustee, the Servicer and the Depositor that
as of the Closing Date or as of such date specifically provided
herein:
(i)
The Seller is a corporation duly
organized, validly existing and in good standing under the laws of
the state of its incorporation;
(ii)
The Seller has full corporate power to
own its property, to carry on its business as presently conducted
and to enter into and perform its obligations under this
Agreement;
(iii)
The execution and delivery by the Seller
of this Agreement have been duly authorized by all necessary
corporate action on the part of the Seller; and neither the
execution and delivery of this Agreement, nor the consummation of
the transactions contemplated herein, nor compliance with the
provisions hereof, will conflict with or result in a breach of, or
constitute a default under, any of the provisions of any law,
governmental rule, regulation, judgment, decree or order binding on
the Seller or its properties or the certificate of incorporation or
by-laws of the Seller, except those conflicts, breaches or defaults
which would not reasonably be expected to have a material adverse
effect on the Seller’s ability to enter into this Agreement
and to consummate the transactions contemplated hereby;
(iv)
The execution, delivery and performance
by the Seller of this Agreement and the consummation of the
transactions contemplated hereby do not require the consent or
approval of, the giving of notice to, the registration with, or the
taking of any other action in respect of, any state, federal or
other governmental authority or agency, except those consents,
approvals, notices, registrations or other actions as have already
been obtained, given or made and, in connection with the
recordation of the Mortgages, powers of attorney or assignments of
Mortgages not yet completed;
(v)
This Agreement has been duly executed and
delivered by the Seller and, assuming due authorization, execution
and delivery by the Trustee, the Servicer and the Depositor,
constitutes a valid and binding obligation of the Seller,
enforceable against it in accordance with its terms (subject to
applicable bankruptcy and insolvency laws and other similar laws
affecting the enforcement of the rights of creditors
generally);
(vi)
There are no actions, litigation, suits
or proceedings pending or, to the best knowledge of the Seller,
threatened against the Seller before or by any court,
administrative agency, arbitrator or governmental body (i) with
respect to any of the transactions contemplated by this Agreement
or (ii) with respect to any other matter which in the judgment of
the Seller if determined adversely to the Seller would reasonably
be expected to materially and adversely affect the Seller’s
ability to perform its obligations under this Agreement; and the
Seller is not in default with respect to any order of any court,
administrative agency, arbitrator or governmental body so as to
materially and adversely affect the transactions contemplated by
this Agreement;
(vii)
Each Mortgage Loan at the time is was
made complied in all material respects with applicable federal,
state or local law including, without limitation, usury,
truth-in-lending, real estate settlement procedures, consumer
credit protection, equal credit opportunity, disclosure and
predatory and abusive lending laws applicable to the Mortgage Loan;
and
(viii)
None of the Mortgage Loans included in
the transaction are “high cost”, “covered”
or similarly classified loans as defined by the applicable federal,
state or local predatory and abusive lending laws nor is any loan a
High Cost Loan or Covered Loan, as applicable (as such terms are
defined in the then current Standard & Poor’s
LEVELS® Glossary which is now Version 5.6 Revised, Appendix E)
and no mortgage loan originated on or after October 1, 2002 through
March 6, 2003 is governed by the Georgia Fair Lending
Act.
(c)
It is understood and agreed that the
representations, warranties and covenants set forth in this Section
2.05 shall survive delivery of the Mortgage Files to the Trustee,
and shall inure to the benefit of the Seller (with respect to
Section 2.05(a)), the Servicer (with respect to Section 2.05(b)),
the Trustee and the Depositor. Upon discovery by any of the
Depositor, the Seller, the Servicer or the Trustee of a breach of
any of the foregoing representations, warranties and covenants
which materially and adversely affects the value of any Mortgage
Loan, Prepayment Premium or the interests therein of the
Certificateholders, the party discovering such breach shall give
prompt written notice (but in no event later than two Business Days
following such discovery) to the other such parties. The
obligation of the Servicer set forth in Section 2.03(b) to cure
breaches (or, in the case of Section 2.05(a)(vii), to pay the
amount of the waived Prepayment Premium) shall constitute the sole
remedy against the Servicer available to the Certificateholders,
the Depositor, the Seller or the Trustee on behalf of the
Certificateholders respecting a breach of the representations,
warranties and covenants contained in this Section 2.05. In
the event of a breach of the representations and warranties in
Section 2.05(b) (vii) or (viii), the Seller shall be obligated to
cure such breach or repurchase such Mortgage Loan at the Purchase
Price in accordance with Section 2.03(a)(ii).
SECTION 2.06.
Issuance of the R-I Residual
Interest.
The Trustee acknowledges the assignment
to it of the Mortgage Loans and the delivery to it or to the
Custodian on its behalf, as applicable, of the Mortgage Files,
subject to the provisions of Section 2.01 and Section 2.02,
together with the assignment to the Trustee of all other assets
included in REMIC I, receipt of which is hereby acknowledged.
The R-I residual interest, together with the REMIC I Regular
Interests, constitute the entire beneficial ownership interest in
REMIC I.
SECTION 2.07.
Conveyance of REMIC I Regular Interests;
Acceptance of REMIC II by the Trustee.
The Depositor, concurrently with the
execution and delivery hereof, does hereby transfer, assign, set
over and otherwise convey to the Trustee without recourse all the
right, title and interest of the Depositor in and to the REMIC I
Regular Interests for the benefit of the Regular Certificateholders
and the R-II residual interest. The Trustee acknowledges
receipt of the REMIC I Regular Interests and declares that it holds
and will hold the same in trust for the exclusive use and benefit
of REMIC II.
ARTICLE III
ADMINISTRATION AND SERVICING
OF THE MORTGAGE LOANS
SECTION 3.01.
Servicer to Act as Servicer.
The Servicer shall service and administer
the Mortgage Loans on behalf of the Trust Fund and in the best
interests of and for the benefit of the Certificateholders (as
determined by the Servicer in accordance with Accepted Servicing
Practices) in accordance with the terms of this Agreement, the
Mortgage Loans and Accepted Servicing Practices but without regard
to:
(i)
any relationship that the Servicer, any
related Sub-Servicer or any Affiliate of the Servicer or any
related Sub-Servicer may have with the related
Mortgagor;
(ii)
the ownership or non-ownership of any
Certificate by the Servicer or any Affiliate of the
Servicer;
(iii)
the Servicer’s obligation to make
P&I Advances or Servicing Advances; or
(iv)
the Servicer’s or any related
Sub-Servicer’s right to receive compensation for its services
hereunder or with respect to any particular transaction.
To the extent consistent with the
foregoing, the 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,
the Servicer shall have full power and authority, acting alone or
through a Sub-Servicer or Sub-Servicers, as the case may be, 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, the Servicer in the name of the Trust
is hereby authorized and empowered by the Trustee when the Servicer
believes it appropriate in its best judgment in accordance with the
servicing standards set forth above, to execute and deliver, on
behalf of the Certificateholders and the Trust Fund, 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 Trust Fund and Certificateholders. Subject to Section
6.03, the Servicer shall represent and protect the interests of the
Trust Fund in the same manner as it protect its own interests in
mortgage loans in its own portfolio with respect to any claim,
proceeding or litigation regarding the Mortgage Loans. The
Servicer shall service and administer the Mortgage Loans in
accordance with applicable law and shall provide to the Mortgagors
any reports required to be provided to them thereby. The
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. Within fifteen (15)
days of the Closing Date, but su
