ASSET BACKED SECURITIES
CORPORATION
Depositor
DLJ MORTGAGE CAPITAL, INC.
Seller
CENTEX HOME EQUITY COMPANY,
LLC
Servicer
MORTGAGERAMP INC.,
Loan Performance Advisor
and
U.S. BANK NATIONAL ASSOCIATION
Trustee
_________________________________________
POOLING AND SERVICING
AGREEMENT
Dated as of July 1, 2005
_________________________________________
Asset Backed Securities Corporation Home
Equity Loan Trust, Series 2005-HE7
Asset Backed Pass-Through Certificates,
Series 2005-HE7
Table of Contents
Page
ARTICLE I DEFINITIONS
3
SECTION 1.01.
Defined Terms.
3
SECTION 1.02.
Allocation of Certain Interest
Shortfalls.
42
SECTION 1.03.
Designation of Interests in
REMIC
42
ARTICLE II CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF
CERTIFICATES
44
SECTION 2.01.
Conveyance of Mortgage Loans.
44
SECTION 2.02.
Acceptance of REMIC I by the
Trustee.
47
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.
48
SECTION 2.04.
Representations and Warranties of the
Depositor.
52
SECTION 2.05.
Representations, Warranties and Covenants
of the Servicer and the
Seller.
54
SECTION 2.06.
Issuance of the R-I Residual
Interest.
58
SECTION 2.07.
Conveyance of REMIC I Regular Interests;
Acceptance of REMIC II
by the Trustee.
58
ARTICLE III ADMINISTRATION AND SERVICING
OF THE MORTGAGE LOANS
58
SECTION 3.01.
Servicer to Act as Servicer.
58
SECTION 3.02.
Sub-Servicing Agreements Between the
Servicer and Sub-Servicers.
60
SECTION 3.03.
Successor Sub-Servicers.
62
SECTION 3.04.
Liability of the Servicer.
62
SECTION 3.05.
No Contractual Relationship Between
Sub-Servicers and Trustee or
Certificateholders.
63
SECTION 3.06.
Assumption or Termination of
Sub-Servicing Agreements by Trustee.
63
SECTION 3.07.
Collection of Certain Mortgage Loan
Payments.
63
SECTION 3.08.
Sub-Servicing Accounts.
64
SECTION 3.09.
Collection of Taxes, Assessments and
Similar Items; Servicing
Accounts.
65
SECTION 3.10.
Collection Account and Distribution
Account.
66
SECTION 3.11.
Withdrawals from the Collection Account
and Distribution Account.
68
SECTION 3.12.
Investment of Funds in the Collection
Account, the REO Account and
the Distribution Account.
70
SECTION 3.13.
[Reserved].
71
SECTION 3.14.
Maintenance of Hazard Insurance and
Errors and Omissions and
Fidelity Coverage.
71
SECTION 3.15.
Enforcement of Due-On-Sale Clauses;
Assumption Agreements.
73
SECTION 3.16.
Realization Upon Defaulted Mortgage
Loans.
74
SECTION 3.17.
Trustee to Cooperate; Release of Mortgage
Files.
76
SECTION 3.18.
Servicing Compensation.
78
SECTION 3.19.
[Reserved.]
78
SECTION 3.20.
Statement as to Compliance.
78
SECTION 3.21.
Independent Public Accountants’
Servicing Report.
79
SECTION 3.22.
Access to Certain
Documentation.
79
SECTION 3.23.
Title, Management and Disposition of REO
Property.
80
SECTION 3.24.
Obligations of the Servicer in Respect of
Prepayment Interest
Shortfalls.
83
SECTION 3.25.
Obligations of the Servicer in Respect of
Mortgage Rates and Monthly
Payments.
83
SECTION 3.26.
Net WAC Reserve Fund; Yield Maintenance
Agreements.
84
SECTION 3.27.
[Reserved].
86
SECTION 3.28.
Advance Facility.
86
ARTICLE IV PAYMENTS TO
CERTIFICATEHOLDERS
88
SECTION 4.01.
Distributions.
88
SECTION 4.02.
Statements to
Certificateholders.
95
SECTION 4.03.
Remittance Reports; P&I
Advances.
99
SECTION 4.04.
Allocation of Realized Losses.
101
SECTION 4.05.
Compliance with Withholding
Requirements.
102
SECTION 4.06.
Commission Reporting.
102
ARTICLE V THE CERTIFICATES
104
SECTION 5.01.
The Certificates.
104
SECTION 5.02.
Registration of Transfer and Exchange of
Certificates.
106
SECTION 5.03.
Mutilated, Destroyed, Lost or Stolen
Certificates.
111
SECTION 5.04.
Persons Deemed Owners.
111
SECTION 5.05.
Certain Available Information.
112
ARTICLE VI THE DEPOSITOR, THE SERVICER
AND THE LOAN PERFORMANCE
ADVISOR
112
SECTION 6.01.
Liability of the Depositor, the Seller
and the Servicer.
112
SECTION 6.02.
Merger or Consolidation of the Depositor,
the Seller or the Servicer.
112
SECTION 6.03.
Limitation on Liability of the Depositor,
the Seller, the Servicer and
Others.
113
SECTION 6.04.
Limitation on Resignation of the
Servicer.
114
SECTION 6.05.
Rights of the Depositor, the Seller and
the Trustee in Respect of the
Servicer.
115
SECTION 6.06.
Duties of the Loan Performance
Advisor.
115
ARTICLE VII DEFAULT
116
SECTION 7.01.
Servicer Events of Default.
116
SECTION 7.02.
Trustee to Act; Appointment of
Successor.
118
SECTION 7.03.
Notification to
Certificateholders.
119
SECTION 7.04.
Waiver of Servicer Events of
Default.
120
ARTICLE VIII CONCERNING THE
TRUSTEE
120
SECTION 8.01.
Duties of Trustee.
120
SECTION 8.02.
Certain Matters Affecting the
Trustee.
121
SECTION 8.03.
Trustee Not Liable for Certificates or
Mortgage Loans.
122
SECTION 8.04.
Trustee May Own Certificates.
123
SECTION 8.05.
Fees and Expenses of the
Trustee.
123
SECTION 8.06.
Eligibility Requirements for
Trustee.
124
SECTION 8.07.
Resignation and Removal of the
Trustee.
124
SECTION 8.08.
Successor Trustee.
125
SECTION 8.09.
Merger or Consolidation of
Trustee.
126
SECTION 8.10.
Appointment of Co-Trustee or Separate
Trustee.
126
SECTION 8.11.
Appointment of Custodians.
127
SECTION 8.12.
Appointment of Office or
Agency.
127
SECTION 8.13.
Representations and Warranties of the
Trustee.
127
ARTICLE IX TERMINATION
128
SECTION 9.01.
Termination Upon Repurchase or
Liquidation of All Mortgage Loans.
128
SECTION 9.02.
Additional Termination
Requirements.
130
ARTICLE X REMIC PROVISIONS
131
SECTION 10.01.
REMIC Administration.
131
SECTION 10.02.
Prohibited Transactions and
Activities.
134
SECTION 10.03.
Servicer and Trustee
Indemnification.
135
ARTICLE XI MISCELLANEOUS
PROVISIONS
135
SECTION 11.01.
Amendment.
135
SECTION 11.02.
Recordation of Agreement;
Counterparts.
136
SECTION 11.03.
Limitation on Rights of
Certificateholders.
137
SECTION 11.04.
Governing Law.
137
SECTION 11.05.
Notices.
137
SECTION 11.06.
Severability of Provisions.
138
SECTION 11.07.
Notice to Rating Agencies.
138
SECTION 11.08.
Article and Section
References.
139
SECTION 11.09.
[Reserved].
139
SECTION 11.10.
Grant of Security Interest.
139
SECTION 11.11.
Protection of Assets.
140
SECTION 11.12.
Non-Solicitation.
140
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 July 1, 2005, among ASSET BACKED
SECURITIES CORPORATION, as Depositor, DLJ MORTGAGE CAPITAL, INC.,
as Seller, CENTEX HOME EQUITY COMPANY, LLC, as Servicer, MORTGAGE
RAMP INC., as Loan Performance Advisor, 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
$279,152,148.29.
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, Class M8 and Class M9
Certificates.
|
|
Non-Offered Certificates
|
Class M7, Class M8, Class M9, Class
X, Class P and Residual Certificates.
|
|
Offered Certificates
|
Class A and Offered Subordinate
Certificates.
|
|
Offered Subordinate
Certificates
|
Mezzanine Certificates (other than
the Class M7, Class M8 and Class M9 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
|
Mezzanine Certificates, Class X
Certificates and Residual Certificates.
|
In consideration of the mutual agreements
herein contained, the Depositor, the Seller, the Servicer, the Loan
Performance Advisor 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 the Adjustable Rate Mortgage Loans in
the first month of the life of such Mortgage Loans 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 Loans, 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 Principal
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.
“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.
“Applicable Regulations”: As
to any Mortgage Loan, all federal, state and local laws, statutes,
rules and regulations applicable thereto.
“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 amount
deposited in the Distribution Account by the Servicer in respect of
Compensating Interest 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), interest payments with Principal
Prepayments received on or prior to the Closing Date representing
interest accruals for periods prior to the Closing Date and
interest payments with Principal Prepayments in full received
during the first day through the fifteenth day of a calendar month
in a Prepayment Period representing interest accruals for the
portion of the Prepayment Period from such first day to such
fifteenth day, (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 Loan Performance Advisor, 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, the State of
Texas 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.
“Cap Counterparty”: Credit
Suisse First Boston International, or any successor in interest
thereto under the Yield Maintenance Agreements.
“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 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
|
(1)
|
(2)
|
|
A1
|
0.100%
|
0.200%
|
|
A2
|
0.230%
|
0.460%
|
|
A3
|
0.370%
|
0.740%
|
|
M1
|
0.450%
|
0.675%
|
|
M2
|
0.480%
|
0.720%
|
|
M3
|
0.650%
|
0.975%
|
|
M4
|
1.250%
|
1.875%
|
|
M5
|
1.400%
|
2.100%
|
|
M6
|
1.800%
|
2.700%
|
|
M7
|
2.500%
|
3.750%
|
|
M8
|
2.500%
|
3.750%
|
|
M9
|
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 thereof 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, 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) 46.60% and (ii) the Aggregate Principal Balance as of
the last day of the related Due Period and (B) the Aggregate
Principal Balance as of the last day of the related Due Period
minus $1,395,760.
“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) 58.80% and (ii) the Aggregate Principal Balance as
of the last day of the related Due Period and (B) the
Aggregate Principal Balance as of the last day of the related Due
Period minus $1,395,760.
“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) 68.40% and (ii) the Aggregate Principal Balance as
of the last day of the related Due Period and (B) the
Aggregate Principal Balance as of the last day of the related Due
Period minus $1,395,760.
“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) 78.80% and
(ii) the Aggregate Principal Balance as of the last day of the
related Due Period and (B) the Aggregate Principal Balance as
of the last day of the related Due Period minus
$1,395,760.
“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) 85.00% and
(ii) the Aggregate Principal Balance as of the last day of the
related Due Period and (B) the Aggregate Principal Balance as
of the last day of the related Due Period minus
$1,395,760.
“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) 88.00% and
(ii) the Aggregate Principal Balance as of the last day of the
related Due Period and (B) the Aggregate Principal Balance as
of the last day of the related Due Period minus
$1,395,760.
“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) 90.30% and
(ii) the Aggregate Principal Balance as of the last day of the
related Due Period and (B) the Aggregate Principal Balance as
of the last day of the related Due Period minus
$1,395,760.
“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 Principal Balance as of the last day of the
related Due Period and (B) the Aggregate Principal Balance as
of the last day of the related Due Period minus
$1,395,760.
“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) 94.30% and (ii) the Aggregate Principal
Balance as of the last day of the related Due Period and (B) the
Aggregate Principal Balance as of the last day of the related Due
Period minus $1,395,760.
“Class M9 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), (ix) the
Certificate Principal Balance of the Class M8 Certificates (after
taking into account the payment of the Class M8 Principal
Distribution Amount on such Distribution Date) and (x) the
Certificate Principal Balance of the Class M9 Certificates
immediately prior to such Distribution Date over (y) the lesser of
(A) the product of (i) 95.50% and (ii) the Aggregate Principal
Balance as of the last day of the related Due Period and (B) the
Aggregate Principal Balance as of the last day of the related Due
Period minus $1,395,760.
“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 Principal
Prepayments received and distributed in the month prior that
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)-(xxxi) on such Distribution Date.
“Closing Date”: July 29,
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 “Centex Home
Equity Company, LLC, 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-HE5, Series 2005-HE5”. 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, Attention: Structured
Finance, 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.
“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 which for the purposes of this
definition shall not be less than zero (after giving effect to the
distribution of the Principal Distribution Amount on such
Distribution Date) by (y) the Aggregate Principal 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), July 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.
“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 related 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, Series
2005-HE7”. 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
August 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.
“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 and “F-1+”
by Fitch (if rated by Fitch) 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, 7.02 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 Certification”: As
defined in Section 2.02.
“Final Distribution Date”:
The Distribution Date in July 2035.
“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, Inc., 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 the Fixed Rate Mortgage Loans in the first
month of the life of such Mortgage Loans 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 Loans, 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 for the
related Interest Accrual Period.
“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.
“Initial Certification”: As
defined in Section 2.02.
“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.
“Legal Fees”: As defined in
Section 8.05(b).
“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 Performance Advisor”:
MortgageRamp Inc., a Delaware corporation, and its successors in
interest.
“Loan Performance Advisor
Agreement”: The Loan Performance Advisor Agreement, dated as
of February 28, 2005, by and between the Depositor and the Loan
Performance Advisor.
“LPA Fee”: As to any
Distribution Date, an amount equal to the greater of (A) (i) the
product of (a) one-twelfth of the LPA Fee Rate and (b) the
aggregate Stated Principal Balance of the Mortgage Loans as of the
preceding Distribution Date or, in the case of the first
Distribution Date, the aggregate Stated Principal Balance of the
Mortgage Loans as of the Cut-off date; provided
however that the Loan Performance Advisor Fee for any
Distribution Date shall not be lower than $1,500.
“LPA Fee Rate”: With respect
to each Mortgage Loan, either (a) 0.015% per annum or (b) if the
Loan Performance Advisor Fee is the amount calculated pursuant to
the proviso in the definition of “Loan Performance Advisor
Fee”, a per annum rate determined by dividing such fee by the
average of the aggregate Stated Principal Balance of the Mortgage
Loans as of the preceding Distribution Date.
“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 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 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 the Originator, Harwood
Street Funding II, LLC and the Seller, regarding the sale of the
Mortgage Loans by the Originator and Harwood Street Funding II, LLC
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 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.
“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 LIBOR Certificates pursuant to
Section 4.01(a)(1), (B) any 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
sum of LPA Fee Rate and 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 any Class of LIBOR Certificates and any Distribution Date
(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 sum of (1)
the Servicing Fee Rate and (2) the LPA 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 related 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 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.
“NIM Note”: Any debt
instrument secured by distributions on any of the Certificates
issued by the Trust.
“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”: Centex Home
Equity Company, LLC, or its successor in interest.
“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 LIBOR 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 and giving effect to any distribution made
pursuant to Section 4.01(a)(3)(i) 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 Basic Principal Distribution Amount for such
Distribution Date.
“Overcollateralization Target
Amount”: With respect to any Distribution Date (1) prior
to the Stepdown Date, 2.25% 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) 4.50% of the aggregate Stated
Principal Balance of the Mortgage Loans as of the last day of the
related Due Period and (y) $1,395,760, 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 will equal
the lesser of (a) the related Formula Rate and (b) 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) Adjustable Rate Mortgage Loans, 100%
Adjustable-Rate PPC and (ii) Fixed Rate Mortgage Loans, 115%
Fixed-Rate PPC. The Prepayment Assumption is used solely for
determining the accrual of original issue discount on the
Certificates for federal income tax purposes.
“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 received on or prior to the Closing Date and
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 with respect to Principal
Prepayments in full or in part, 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, except with respect to the first
Distribution Date, the Prepayment Period for all prepayments will
commence on July 20, 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 from the
Available Distribution Account pursuant to Section 4.01(a)(1)(i)
– (xi); 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 writing by 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,
indemnities 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 or (ii) 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 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.
“Qualifying SPE”: As
set forth in SFAS 140.
“Rating Agency or Rating
Agencies”: S&P, Moody’s 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.
“Reconstitution Agreement”:
That certain reconstitution agreement dated as of the Closing Date
by and among the Seller, the Depositor and the Originator 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 LIBOR
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 Agreements.
“REMIC I Accretion Directed
Class”: As set forth in the Section 1.03 under the heading
entitled “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 2.07 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.
“Senior Yield Maintenance
Agreement”: The interest rate yield maintenance agreement
relating to the Senior Certificates consisting of a 1992 ISDA
Master Agreement (Multicurrency Border) and a Schedule dated as of
the Closing Date and a 1994 ISDA Credit Support Annex (Bilateral
Form New York Law) and the related Confirmation thereto, between
the Trustee on behalf of the Trust and the Cap 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.
“Servicer”: Centex Home
Equity Company, LLC, or any successor servicer appointed as herein
provided, in its capacity as servicer hereunder.
“Servicer Event of Default”:
One or more of the events described in Section 7.01(a)
herein.
“Servicer Certification”: As
defined in Section 4.06(d) herein, a form of which is attached
hereto as Exhibit J.
“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, 3:00 p.m. New York time on
the 18 th day of each month or, if such 18 th
day is not a Business Day, 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 there is any withdrawal or downgrade
of two or more levels (i.e., from “Above Average” to
“Below Average” or the equivalent) of the servicer
rating, as of the Closing Date, of the Servicer by any Rating
Agency which results in a downgrade, qualification or withdrawal of
the rating assigned to any Class of Certificates by any Rating
Agency.
“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
prior to, on or after the Cut-off Date 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, (v) locating documents missing from the Mortgage File
or Servicing File and (vi) obtaining any broker price opinion.
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.
“SFAS 140”: Statement
of Accounting Standards No. 140 of the Financial Accounting
Standards Board, as in effect as the date hereof.
“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 August 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 53.40%.
“Subordinate Certificates”:
As defined in the Preliminary Statement.
“Subordinate Yield Maintenance
Agreement”: The interest rate yield maintenance agreement
relating to the Mezzanine Certificates consisting of a 1992 ISDA
Master Agreement (Multicurrency Cross Border) and a Schedule dated
as of the Closing Date and a 1994 ISDA Credit Support Annex
(Bilateral Form New York Law) and the related Confirmation thereto,
between the Trustee on behalf of the Trust and the Cap
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.
“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 Price”: As
defined in Section 9.01 herein.
“Third Party Claims”: As
defined in Section 8.05(b)
“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
30% 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
|
|
August 2007 through July 2008
|
1.50%*
|
|
August 2008 through July 2009
|
3.50%*
|
|
August 2009 through July 2010
|
5.50%*
|
|
August 2010 through July 2011
|
7.00%*
|
|
August 2011 and thereafter
|
7.75%
|
_______________________
*
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-HE7, 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 Agreements, (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.
“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
Interest Accrual Period.
“Value”: With respect
to any Mortgaged Property, 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 or value determined by a third party insured
automated valuation method and (b) the value thereof as determined
by a review appraisal conducted by the Servicer in the event any
such review appraisal determines an appraised value ten percent or
more lower than the value thereof as determined by the appraisal
referred to in clause (i)(a) above, and (ii) the purchase price
paid for the related Mortgaged Property by the Mortgagor with the
proceeds of the Mortgage Loan, provided, however, (1) in the case
of a refinanced Mortgage Loan, such value of the Mortgaged Property
is based solely upon the lesser of (i) 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 or value determined by a third party insured automated
valuation method and (ii) the value thereof as determined by a
review appraisal conducted by the Originator in the event any such
review appraisal determines an appraised value ten percent or more
lower than the value thereof as determined by the appraisal
referred to in clause (ii)(a)(i) above and (2) 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 of 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 LIBOR Certificates in proportion to their then
outstanding Certificate Principal Balances (provided, however, that
98% of all voting rights shall be allocated to the LIBOR
Certificates at any time an outstanding NIM Note exists secured by
the Class X Certificates), 1% of all voting rights will be
allocated among the Holders of the Class X Certificates
(provided, however, that if such Certificates are securing any NIM
Note, the Class X Certificates shall have no voting rights while
such NIM Notes remain outstanding); 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 Senior Yield Maintenance Agreement and the
Subordinate Yield Maintenance Agreement, as applicable.
“Yield Maintenance Agreement
Notional Amount”: With respect to each Yield Maintenance
Agreement, the notional amount indicated in the “Additional
Terms” section of the Confirmation for the related 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
REMIC
(a)
Designation of Interests in
REMIC
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”):
|
|
|
|
Corresponding Class of REMIC V
Interest
|
|
LT1-A1 (1)
|
½ Corresponding Class
balance
|
(4)
|
A1
|
|
LT1-A2 (1)
|
½ Corresponding Class
balance
|
(4)
|
A2
|
|
LT1-A3 (1)
|
½ Corresponding Class
balance
|
(4)
|
A3
|
|
LT1-M1 (1)
|
½ Corresponding Class
balance
|
(4)
|
M1
|
|
LT1-M2 (1)
|
½ Corresponding Class
balance
|
(4)
|
M2
|
|
LT1-M3 (1)
|
½ Corresponding Class
balance
|
(4)
|
M3
|
|
LT1-M4 (1)
|
½ Corresponding Class
balance
|
(4)
|
M4
|
|
LT1-M5 (1)
|
½ Corresponding Class
balance
|
(4)
|
M5
|
|
LT1-M6 (1)
|
½ Corresponding Class
balance
|
(4)
|
M6
|
|
LT1-M7 (1)
|
½ Corresponding Class
balance
|
(4)
|
M7
|
|
LT1-M8 (1)
|
½ Corresponding Class
balance
|
(4)
|
M8
|
|
LT1-M9 (1)
|
½ Corresponding Class
balance
|
(4
|
M9
|
|
LT1-Accrual Interest (2)
|
(3)
|
(4)
|
N/A
|
|
R-I
|
(5)
|
(5)
|
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)
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.
(4)
This interest shall bear
interest at per annum rate equal to the weighted average Net
Mortgage Rate of the Mortgage Loans, weighted on the basis of the
outstanding principal balances of such Mortgage Loans as of the
beginning of the preceding calendar month and adjusted to take into
account any distribution of principal in such preceding calendar
month to the extent such principal was reflected in the outstanding
principal balances as of the beginning of such preceding calendar
month.
(5)
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.
On each Distribution Date, interest shall
be allocated with respect to the interests in REMIC I based on the
above-described interest rates, provided however , that
interest that accrues on the LT1-Accrual 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 LT1-Accrual
Interest.
On each Distribution Date the principal
distributed on the Mortgage Loans (together with an amount equal to
the interest deferred on the LT1-Accrual 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 remaining 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 LT1-Accrual Interest, any
remaining amounts.
Master REMIC or REMIC II:
The following table sets forth
characteristics of the Certificates:
|
|
Original Certificate Principal
Balance
|
|
|
Class A1
|
$97,738,000.00
|
(1)
|
|
Class A2
|
$97,411,000.00
|
(1)
|
|
Class A3
|
$9,469,000.00
|
(1)
|
|
Class M1
|
$17,028,000.00
|
(1)
|
|
Class M2
|
$13,399,000.00
|
(1)
|
|
Class M3
|
$14,516,000.00
|
(1)
|
|
Class M4
|
$8,654,000.00
|
(1)
|
|
Class M5
|
$4,187,000.00
|
(1)
|
|
Class M6
|
$3,210,000.00
|
(1)
|
|
Class M7
|
$2,792,000.00
|
(1)
|
|
Class M8
|
$2,792,000.00
|
(1)
|
|
Class M9
|
$1,675,000.00
|
(1)
|
|
Class X
|
(2)
|
(2)
|
|
Class P
|
$100.00
|
(3)
|
|
Class R (4)
|
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 Certificate
shall represent beneficial ownership of a regular interest in the
Master REMIC (the “Class X interest”). The Class
X interest has a notional balance equal to the aggregate Stated
Principal Balance of the Mortgage Loans. The initial interest
rate of the Class X interest shall be a rate sufficient to cause
all net interest from the Mortgage Loans to accrue on the Class X
interest that is in excess of the amount of interest that accrues
on the each other regular interest in REMIC II. For any
Distribution Date, the interest rate in respect of the Class X
interest shall be the excess of: (i) the weighted average
interest rate of all interests in REMIC I (other than any
interest-only regular interest) over (ii) the product of:
(A) two and (B) the weighted average pass-through rate of
the LT1-Accrual Interest and the REMIC I Accretion Directed
Classes, where the LT1-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 interest 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)
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
the Master REMIC 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, the Servicer or the Trustee 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 July
19, 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 Agreements 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, for the benefit of the Certificateholders, 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 substantially 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 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
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; and
(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 its incorporation 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;
provided, however, that the Servicer may waive such Prepayment
Premium in connection with a refinancing of a Mortgage Loan if the
Servicer deposits the amount of waived Prepayment Premium in the
Collection Account on the related Servicer Remittance Date.
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 any
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 5.6B 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(c)), 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 R-II interest and the
Regular Certificateholders. 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, to
hold or cause to be held title to such properties, on behalf of the
Trust Fund and Certificateholders and to market, sell and transfer
title of REO Properties held in the name of the Trust Fund to
third-party purchasers upon terms and conditions deemed reasonable
by the Servicer that are in the best interests of the
Certificateholders and in accordance with Accepted Servicing
Practices, to bring or respond to civil actions or complaints (in
its own name or that of the Trust and to execute any other document
necessary or appropriate to enable the Servicer to carry out its
duties. 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 subject to Section 3.17,
the Trustee shall execute and furnish to the Servicer and any
Sub-Servicer such documents as are necessary or appropriate to
enable the Servicer or any Sub-Servicer to carry out their
servicing and administrative duties hereunder, and the Trustee
hereby grants to the Servicer and each Sub-Servicer a special or
limited power of attorney to carry out such duties including a
power of attorney for each county in which a related Mortgaged
Property is located to enable the Servicer to take title and
dispose of the related Mortgaged Properties after foreclosure on
behalf of the Trustee and the Certificateholders. The Trustee
shall execute a separate power of attorney in favor of the Servicer
to the extent furnished to the Trustee by the Servicer and/or each
Sub-Servicer for the purposes described herein to the extent
necessary or desirable to enable the Servicer to perform its duties
hereunder. The Trustee shall not be liable for the actions of
the Servicer or any Sub-Servicer under such power of
attorney.
Subject to Section 3.09 hereof, in
accordance with the standards of the preceding paragraph, and
provided that the Servicer shall not be required make any non
recoverable Servicing Advance, the Servicer shall advance or cause
to be advanced funds as necessary for the purpose of effecting the
timely payment of taxes and assessments on the Mortgaged
Properties, which advances shall be Servicing Advances reimbursable
in the first instance from related collections from the Mortgagors
pursuant to Section 3.09, and further as provided in Section 3.11.
Any cost incurred by the Servicer or by a Sub-Servicer in
effecting the timely payment of taxes and assessments on a
Mortgaged Property shall not, for the purpose of calculating
distributions to Certificateholders, be added to the unpaid
principal balance of the related Mortgage Loan, notwithstanding
that the terms of such Mortgage Loan so permit.
Notwithstanding anything in this
Agreement to the contrary, the Servicer may not make any future
advances with respect to a related Mortgage Loan (except as
provided in Section 4.03) nor shall the Servicer (i) except as
provided in Section 3.07, when the related Mortgagor is in default
with respect to such Mortgage Loan or such default is, in the
judgment of the Servicer, reasonably foreseeable, permit any
modification with respect to any related Mortgage Loan that would
change the related Mortgage Rate, reduce or increase the principal
balance (except for reductions resulting from actual payments of
principal) or change the final maturity date on such Mortgage Loan
or (ii) permit any modification, waiver or amendment of any term of
any related Mortgage Loan that would both (A) effect an exchange or
reissuance of such Mortgage Loan under Section 1001 of the Code (or
final, temporary or proposed Treasury regulations promulgated
thereunder) and (B) cause any REMIC to fail to qualify as a REMIC
under the Code or the imposition of any tax on “prohibited
transactions” or “contributions after the startup
date” under the REMIC Provisions.
The Servicer, in its sole discretion, may
charge off such Mortgage Loan if it has made a Final Recovery
Determination in good faith with respect thereto (each such
Mortgage Loan, a “Charged-off Mortgage Loan”). Any such
Charged-off Mortgage Loan shall be treated as a liquidated Mortgage
Loan. The Servicer shall have no obligation to make any
P&I Advances or Servicing Advances with respect to any
Charged-off Mortgage Loan and shall not be entitled to the
Servicing Fee with respect to such Charged-off Mortgage Loan for
the period following the date on which such Mortgage Loan was
charged off. Any Liquidation Proceeds received in connection
with any recoveries received with respect to such Charged-off
Mortgage Loan shall be deposited in the Collection Account pursuant
to Section 3.10.
The Servicer may delegate its
responsibilities under this Agreement; provided, however ,
that no such delegation shall release the Servicer from the
responsibilities or liabilities arising under this
Agreement.
SECTION 3.02.
Sub-Servicing Agreements Between the
Servicer and Sub-Servicers.
(a)
The Servicer may enter into Sub-Servicing
Agreements (provided that such agreements would not result in a
withdrawal or a downgrading by any Rating Agency of the ratings on
any Class of Certificates, as evidenced by a letter to that effect
delivered by each Rating Agency to the Depositor and the Trustee)
with one or more Sub-Servicers, for the servicing and
administration of the related Mortgage Loans. The Trustee is
hereby authorized to acknowledge, at the request of the Servicer,
any Sub-Servicing Agreement that meets the requirements applicable
to Sub-Servicing Agreements set forth in this Agreement and that is
otherwise permitted under this Agreement.
Each Sub-Servicer shall be (i) authorized
to transact business in the state or states in which the related
Mortgaged Properties it is to service are situated, if and to the
extent required by applicable law to enable such Sub-Servicer to
perform its obligations hereunder and under the related
Sub-Servicing Agreement, (ii) an institution approved as a mortgage
loan originator by the Federal Housing Administration or an
institution the deposit accounts in which are insured by the FDIC
and (iii) a Freddie Mac or Fannie Mae approved mortgage servicer.
Each Sub-Servicing Agreement must impose on the related
Sub-Servicer requirements conforming to the provisions set forth in
Section 3.08 and provide for servicing of the related Mortgage
Loans consistent with the terms of this Agreement. The
Servicer will examine each Sub-Servicing Agreement to which the
Servicer is a party and will be familiar with the terms thereof.
The terms of any Sub-Servicing Agreement will not be
inconsistent with any of the provisions of this Agreement.
The Servicer and Sub-Servicer may enter into and make
amendments to the applicable Sub-Servicing Agreement or enter into
different forms of Sub-Servicing Agreements; provided,
however , that any such amendments or different forms shall be
consistent with and not violate the provisions of this Agreement,
and that no such amendment or different form shall be made or
entered into which could be reasonably expected to be materially
adverse to the interests of the Certificateholders, without the
consent of the Holders of Certificates entitled to at least 66% of
the Voting Rights. Any variation without the consent of the
Holders of Certificates entitled to at least 66% of the Voting
Rights from the provisions set forth in Section 3.08 relating to
insurance or priority requirements of Sub-Servicing Accounts, or
credits and charges to the Sub-Servicing Accounts or the timing and
amount of remittances by a Sub-Servicer to the Servicer, are
conclusively deemed to be inconsistent with this Agreement and
therefore prohibited. The Servicer shall deliver to the
Trustee copies of all Sub-Servicing Agreements, and any amendments
or modifications thereof, promptly upon the Servicer’s
execution and delivery of such instruments.
Any Sub-Servicing Agreement and any other
transactions or services relating to the Mortgage Loans involving a
Sub-Servicer shall be deemed to be between the Sub-Servicer and the
Servicer alone, and the Depositor and the Trustee shall have no
obligations, duties or liabilities with respect to a Sub-Servicer
including no obligation, duty or liability of the Depositor or
Trustee, to pay a Sub-Servicer’s fees and
expenses.
For purposes of this Agreement, the
Servicer shall be deemed to have received any collections,
recoveries or payments with respect to the related Mortgage Loans
that are received by a related Sub-Servicer regardless of whether
such payments are remitted by the Sub-Servicer to the
Servicer.
(b)
As part of its servicing activities
hereunder, the Servicer (except as otherwise provided in the last
sentence of this paragraph), for the benefit of the Trust Fund and
the Certificateholders, shall enforce the obligations of each
Sub-Servicer servicing the related Mortgage Loans under the related
Sub-Servicing Agreement, including, without limitation, any
obligation to make advances in respect of Delinquent payments as
required by the applicable Sub-Servicing Agreement. Such
enforcement, including, without limitation, the legal prosecution
of claims, termination of Sub-Servicing Agreements, and the pursuit
of other appropriate remedies, shall be in such form and carried
out to such an extent and at such time as the Servicer, in its good
faith business judgment, would require were it the owner of the
related Mortgage Loans. The Servicer, as applicable, shall
pay the costs of such enforcement at its own expense, and shall be
reimbursed therefor only (i) from a general recovery resulting from
such enforcement, to the extent, if any, that such recovery exceeds
all amounts due in respect of the related Mortgage Loans or (ii)
from a specific recovery of costs, expenses or attorneys’
fees against the party against whom such enforcement is directed.
The Servicer shall pay all fees, expenses
or penalties necessary in order to terminate the rights and
responsibilities of its Sub-Servicer from the Servicer’s own
funds without any right of reimbursement from the Depositor, the
Trustee, or the Collection Account.
(c)
Notwithstanding the foregoing, the
Servicer shall be entitled to outsource one or more separate
servicing functions to a Person (each, an “Outsourcer”)
that does not meet the eligibility requirements for a Sub-Servicer,
so long as such outsourcing does not constitute the delegation of
the Servicer’s obligation to perform all or substantially all
of the servicing of the related Mortgage Loans to such Outsourcer.
In such event, the use by the Servicer of any such Outsourcer
shall not release the Servicer from any of its obligations
hereunder and the Servicer shall remain responsible hereunder for
all acts and omissions of such Outsourcer as fully as if such acts
and omissions were those of the Servicer, and the Servicer shall
pay all fees and expenses of the Outsourcer from its own
funds.
SECTION 3.03.
Successor Sub-Servicers.
The Servicer shall be entitled to
terminate any Sub-Servicing Agreement and the rights and
obligations of any Sub-Servicer pursuant to the related
Sub-Servicing Agreement in accordance with the terms and conditions
of such Sub-Servicing Agreement. In the event of termination
of any Sub-Servicer, all servicing obligations of such Sub-Servicer
shall be assumed simultaneously by the Servicer without any act or
deed on the part of such Sub-Servicer or the Servicer, and the
Servicer either shall service directly the related Mortgage Loans
or shall enter into a Sub-Servicing Agreement with a successor
Sub-Servicer which qualifies under Section 3.02.
Any Sub-Servicing Agreement shall include
the provision that such agreement may be immediately terminated by
the Trustee without fee, in accordance with the terms of this
Agreement, in the event that the Servicer (or the Trustee, if then
acting as Servicer) shall, for any reason, no longer be the
Servicer (including termination due to a Servicer Event of
Default).
SECTION 3.04.
Liability of the Servicer.
Notwithstanding any Sub-Servicing
Agreement, any of the provisions of this Agreement relating to
agreements or arrangements between the Servicer and a Sub-Servicer
or reference to actions taken through a Sub-Servicer or otherwise
(including, without limitation, Section 3.02(c) and the first
paragraph of Section 3.18), the Servicer shall remain obligated and
primarily liable to the Trust Fund and the Certificateholders for
the servicing and administering of the related Mortgage Loans in
accordance with the provisions of Section 3.01 without diminution
of such obligation or liability by virtue of such Sub-Servicing
Agreements or arrangements or by virtue of indemnification from the
related Sub-Servicer and to the same extent and under the same
terms and conditions as if the Servicer alone were servicing and
administering the related Mortgage Loans. The Servicer shall
be entitled to enter into any agreement with a Sub-Servicer for
indemnification of the Servicer by such Sub-Servicer and nothing
contained in this Agreement shall be deemed to limit or modify such
indemnification; provided that no such indemnification shall be an
expense of the Trust.
SECTION 3.05.
No Contractual Relationship Between
Sub-Servicers and Trustee or Certificateholders.
Any Sub-Servicing Agreement that may be
entered into and any transactions or services relating to the
Mortgage Loans involving a Sub-Servicer in its capacity as such
shall be deemed to be between the related Sub-Servicer and the
Servicer alone, and the Trustee and Certificateholders shall not be
deemed parties thereto and shall have no claims, rights,
obligations, duties or liabilities with respect to the related
Sub-Servicer except as set forth in Section 3.06. The
Servicer shall be solely liable for all fees owed by it to any
related Sub-Servicer, irrespective of whether the Servicer’s
compensation pursuant to this Agreement is sufficient to pay such
fees.
SECTION 3.06.
Assumption or Termination of
Sub-Servicing Agreements by Trustee.
In the event that the Servicer shall for
any reason no longer be the Servicer (including by reason of the
occurrence of a Servicer Event of Default), the Trustee or its
designee shall thereupon assume all of the rights and obligations
of the Servicer subject to Section 7.02 under each Sub-Servicing
Agreement that the Servicer may have entered into, unless the
Trustee elects to terminate any Sub-Servicing Agreement in
accordance with its terms as provided in Section 3.03. Upon
such assumption, the Trustee, its designee or the successor
servicer for the Trustee appointed pursuant to Section 7.02 shall
be deemed, subject to Section 3.03, to have assumed all of the
Servicer’s interest therein and to have replaced the Servicer
as a party to each Sub-Servicing Agreement to the same extent as if
each Sub-Servicing Agreement had been assigned to the assuming
party, except that (i) the Servicer shall not thereby be relieved
of any liability or obligations under any related Sub-Servicing
Agreement that arose before it ceased to be the Servicer and (ii)
none of the Trustee, its designee or any successor servicer shall
be deemed to have assumed any liability or obligation of the
Servicer that arose before it ceased to be the Servicer.
The Servicer at its expense shall, upon
request of the Trustee, deliver to the assuming party all documents
and records relating to each Sub-Servicing Agreement and the
Mortgage Loans then being serviced and an accounting of amounts
collected and held by or on behalf of it, and otherwise use its
best efforts to effect the orderly and efficient transfer of the
related Sub-Servicing Agreements to the assuming party.
SECTION 3.07.
Collection of Certain Mortgage Loan
Payments.
(a)
The Servicer shall make reasonable
efforts to collect all payments called for under the terms and
provisions of the Mortgage Loans, and shall, to the extent such
procedures shall be consistent with this Agreement and the terms
and provisions of any applicable insurance policies, follow such
collection procedures as it would follow with respect to mortgage
loans comparable to the Mortgage Loans and held for its own
account. Consistent with the foregoing, the Servicer may in
its discretion (i) waive any late payment charge or, if applicable,
any penalty interest, or (ii) extend the due dates for the Monthly
Payments due on a Mortgage Note for a period of not greater than
180 days; provided that any extension pursuant to clause (ii) above
shall not affect the amortization schedule of any Mortgage Loan for
purposes of any computation hereunder, except as provided below and
provided further that unless the Mortgage Note is in default or
default is reasonably foreseeable, an opinion of tax counsel has
been obtained to the effect that such extension will not cause an
Adverse REMIC Event. In the event of any such arrangement
pursuant to clause (ii) above, the Servicer shall make timely
P&I Advances on such Mortgage Loan during such extension
pursuant to Section 4.03 and in accordance with the amortization
schedule of such Mortgage Loan without modification thereof by
reason of such arrangements, subject to Section 4.03(d) pursuant to
which the Servicer shall not be required to make any such P&I
Advances that are Nonrecoverable P&I Advances.
Notwithstanding the foregoing, in the event that a Mortgage
Loan is in default or, in the judgment of the Servicer, such
default is reasonably foreseeable, the Servicer, consistent with
the standards set forth in Section 3.01, may also waive, modify or
vary any term of such Mortgage Loan (including modifications that
would change the related Mortgage Rate, forgive the payment of
principal or interest or extend the final maturity date of such
Mortgage Loan), accept payment from the related Mortgagor of an
amount less than the Stated Principal Balance in final satisfaction
of such Mortgage Loan or consent to the postponement of strict
compliance with any such term or otherwise grant indulgence to any
related Mortgagor.
(b)
Notwithstanding anything herein to the
contrary, the Servicer may waive a Prepayment Premium pursuant to
the conditions set forth in Section 2.05(a)(vii). With
respect to any such waiver of a Prepayment Premium that is not
deposited into the Collection Account by the Servicer pursuant to
Section 2.05(a)(vii), the Servicer shall deliver to the Trustee an
Officer’s Certificate stating that the conditions set forth
in Section 2.05(a)(vii) have been met with respect to the related
Mortgage Loan.
(c)
Notwithstanding any provision in this
Agreement to the contrary, in the event the Prepayment Premium
payable under the terms of the Mortgage Note is less than the
amount of the Prepayment Premium set forth in the Mortgage Loan
Schedule, the Prepayment Premium Schedule or other information
provided to the Servicer, the Servicer shall not have liability or
obligation with respect to such difference, and in addition the
Servicer shall not have any liability or obligation to pay the
amount of any uncollected Prepayment Premium if the failure to
collect such amount is the direct result of inaccurate or
incomplete information on the Mortgage Loan Schedule.
SECTION 3.08.
Sub-Servicing Accounts.
In those cases where a Sub-Servicer is
servicing a Mortgage Loan pursuant to a Sub-Servicing Agreement,
the related Sub-Servicer will be required to establish and maintain
one or more accounts (each such account or accounts, a
“Sub-Servicing Account”). Each Sub-Servicing
Account shall be an Eligible Account. Each Sub-Servicer shall
deposit in the clearing account (which account must be an Eligible
Account) in which it customarily deposits payments and collections
on mortgage loans in connection with its mortgage loan servicing
activities on a daily basis, and in no event more than one Business
Day after such Sub-Servicer’s receipt thereof, all proceeds
of the related Mortgage Loans received by such Sub-Servicer less
its servicing compensation to the extent permitted by the related
Sub-Servicing Agreement, and shall thereafter deposit such amounts
in the related Sub-Servicing Account, in no event more than two
Business Days after the deposit of such funds into the clearing
account. Each Sub-Servicer shall thereafter deposit such
proceeds in the Collection Account or remit such proceeds to the
Servicer for deposit in the Collection Account not later than two
Business Days after the deposit of such amounts in the related
Sub-Servicing Account. For purposes of this Agreement, the
Servicer shall be deemed to have received payments on the related
Mortgage Loans when the related Sub-Servicer receives such
payments.
SECTION 3.09.
Collection of Taxes, Assessments and
Similar Items; Servicing Accounts.
The Servicer shall establish and
maintain, or cause to be established and maintained, one or more
accounts (each such account or accounts, a “Servicing
Account”). The Servicing Accounts shall be Eligible
Accounts. The Servicer shall deposit in the clearing account
(which account must be an Eligible Account) in which it customarily
deposits payments and collections on mortgage loans in connection
with its mortgage loan servicing activities on a daily basis, and
in no event more than one Business Day after the Servicer’s
receipt thereof, all collections from the Mortgagors (or related
advances from a related Sub-Servicer) for the payment of taxes,
assessments, hazard insurance premiums and comparable items for the
account of the Mortgagors (“Escrow Payments”) collected
on account of the Mortgage Loans and shall thereafter deposit such
Escrow Payments in the related Servicing Accounts, in no event more
than two Business Days after the deposit of good funds in the
clearing account, for the purpose of effecting the payment of any
such items as required under the terms of this Agreement.
Withdrawals of amounts from a Servicing Account may be made
only to (i) effect payment of taxes, assessments, hazard insurance
premiums, and comparable items; (ii) reimburse the Servicer (or a
Sub-Servicer to the extent provided in the related Sub-Servicing
Agreement) out of related collections for any advances made
pursuant to Section 3.01 (with respect to taxes and assessments)
and Section 3.14 (with respect to hazard insurance); (iii) refund
to Mortgagors any sums as may be determined to be overages; (iv)
pay interest to the Servicer or, if required and as described
below, to Mortgagors on balances in the Servicing Account; (v)
clear and terminate the Servicing Account at the termination of the
Servicer’s obligations and responsibilities in respect of the
Mortgage Loans under this Agreement in accordance with Article IX
or (vi) recover amounts deposited in error. As part of its
servicing duties, the Servicer or Sub-Servicer shall pay to the
Mortgagors interest on funds in the Servicing Accounts, to the
extent required by law and, to the extent that interest earned on
funds in the Servicing Accounts is insufficient, to pay such
interest from its or their own funds, without any reimbursement
therefor. The Servicer will be responsible for the
administration of the Servicing Accounts and will be obligated to
make Servicing Advances to the Servicing Account in respect of its
obligations under this Section 3.09, reimbursable from the
Servicing Accounts or Collection Account, when and as necessary to
avoid the lapse of insurance coverage on the Mortgaged Property, or
which the Servicer knows, or in the exercise of the required
standard of care of the Servicer hereunder should know, is
necessary to avoid the loss of the Mortgaged Property due to a tax
sale or the foreclosure as a result of a tax lien.
SECTION 3.10.
Collection Account and Distribution
Account.
(a)
On behalf of the Trust Fund, the Servicer
shall establish and maintain, or cause to be established and
maintained, one or more accounts (each such account or accounts, a
“Collection Account”), held in trust for the benefit of
the Trust Fund and the Certificateholders. On behalf of the
Trust Fund, the Servicer shall deposit or cause to be deposited in
the related clearing account (which account must be an Eligible
Account) in which it customarily deposits payments and collections
on mortgage loans in connection with its mortgage loan servicing
activities on a daily basis, and in no event more than one Business
Day after the Servicer’s receipt thereof, and shall
thereafter deposit in the Collection Account, in no event more than
two Business Days after the deposit of good funds into the clearing
account, as and when received or as otherwise required hereunder,
the following payments and collections received or made by it
subsequent to the related Cut-off Date (other than in respect of
principal or interest on the Mortgage Loans due on or before the
related Cut-off Date, or payments (other than Principal
Prepayments) received by it on or prior to the related Cut-off Date
but allocable to a Due Period subsequent thereto):
(i)
all payments on account of principal,
including Principal Prepayments, on the Mortgage Loans;
(ii)
all payments on account of interest (net
of the Servicing Fee) on each Mortgage Loan;
(iii)
all Insurance Proceeds and Net
Liquidation Proceeds (other than proceeds collected in respect of
any particular REO Property and amounts paid by the Servicer in
connection with a purchase of the Mortgage Loans and REO Properties
pursuant to Section 9.01);
(iv)
any amounts required to be deposited
pursuant to Section 3.12 in connection with any losses realized on
Permitted Investments with respect to funds held in the Collection
Account;
(v)
any amounts required to be deposited by
the Servicer pursuant to the second paragraph of Section 3.14(a) in
respect of any blanket policy deductibles;
(vi)
all proceeds of any Mortgage Loan
repurchased or purchased in accordance with Section 2.03, Section
3.16(c) or Section 9.01 and all Servicer Prepayment Premium Payment
Amounts pursuant to Section 2.03(b)(ii);
(vii)
all Substitution Shortfall Amounts;
and
(viii)
all Prepayment Premiums collected by the
Servicer.
For purposes of the immediately preceding
sentence, the Cut-off Date with respect to any Qualified Substitute
Mortgage Loan shall be deemed to be the date of
substitution.
The foregoing requirements for deposit in
the Collection Accounts shall be exclusive, it being understood and
agreed that, without limiting the generality of the foregoing,
payments in the nature of late payment charges, non sufficient
funds fees, reconveyance fees, assumption fees and other similar
fees and charges (other than Prepayment Premiums) need not be
deposited by the Servicer in the Collection Account and shall, upon
collection, belong to the Servicer as additional compensation for
its servicing activities. In the event the Servicer shall
deposit in the Collection Account any amount not required to be
deposited therein, it may at any time withdraw such amount from the
Collection Account, any provision herein to the contrary
notwithstanding.
(b)
On behalf of the Trust Fund, the Trustee
shall establish and maintain one or more accounts (such account or
accounts, the “Distribution Account”), held in trust
for the benefit of the Trust Fund and the Certificateholders.
On behalf of the Trust Fund, the Servicer shall deliver to
the Trustee in immediately available funds for deposit in the
Distribution Account on or by 3:00 p.m. New York time on the
Servicer Remittance Date, that portion of the Available
Distribution Amount (calculated without regard to the references in
clause (2) of the definition thereof to amounts that may be
withdrawn from the Distribution Account) for the related
Distribution Date then on deposit in the Collection Account, the
amount of all Prepayment Premiums on the Mortgage Loans collected
by the Servicer in connection with the voluntary Principal
Prepayment in full or in part of any of the Mortgage Loans and any
Servicer Prepayment Premium Payment Amounts then on deposit in the
Collection Account (other than any such Prepayment Premiums
received after the related Prepayment Period). If the
Servicer fails to remit to the Trustee for distribution to the
Certificateholders any payment, including any P&I Advance to be
made by the Servicer on the Servicer Remittance Date (without
regard to any grace period), the Servicer shall pay to the Trustee,
for the account of the Trustee, interest on such late remittance
from and including the Servicer Remittance Date to but excluding
the date on which such remittance is made, at an annual rate equal
to the Federal Funds Rate plus one percentage point (but in no
event greater than the maximum permitted by law).
(c)
Funds in the Collection Account and the
Distribution Account may be invested in Permitted Investments in
accordance with the provisions set forth in Section 3.12. The
Servicer shall give notice to the Trustee and the Depositor of the
location of the Collection Account maintained by it when
established and prior to any change thereof. The Trustee
shall give notice to the Servicer and the Depositor of the location
of the Distribution Account when established and prior to any
change thereof.
(d)
Funds held in a Collection Account at any
time may be delivered by the Servicer to the Trustee for deposit in
an account (which may be the Distribution Account and must satisfy
the standards for the Distribution Account as set forth in the
definition thereof) and for all purposes of this Agreement shall be
deemed to be a part of such Collection Account until the Servicer
Remittance Date when such amounts are required to be deposited into
the Distribution Account; provided, however, that the Trustee shall
have the sole authority to withdraw any funds held pursuant to this
subsection (d). In the event that the Servicer shall deliver
to the Trustee for deposit in the Distribution Account any amount
not required to be deposited therein, it may at any time request
that the Trustee withdraw such amount from the Distribution Account
and remit to it any such amount, any provision herein to the
contrary notwithstanding. In addition, the Servicer shall
deliver to the Trustee from time to time for deposit and in any
event shall remit all such amounts no later than the Servicer
Remittance Date, and the Trustee shall so deposit, in the
Distribution Account:
(i)
any P&I Advances, as required
pursuant to Section 4.03;
(ii)
any amounts required to be deposited
pursuant to Section 3.23(d) or (f) in connection with any REO
Property;
(iii)
any amounts to be paid by the Servicer in
connection with a purchase of the Mortgage Loans and REO Properties
pursuant to Section 9.01; and
(iv)
any related amounts required to be
deposited pursuant to Section 3.24 in connection with any
Compensating Interest.
SECTION 3.11.
Withdrawals from the Collection Account
and Distribution Account.
(a)
The Servicer shall, from time to time,
make withdrawals from the Collection Account for any of the
following purposes or as described in Section 4.03:
(i)
to remit to the Trustee for deposit in
the Distribution Account the amounts required to be so remitted
pursuant to Section 3.10(b) or permitted to be so remitted pursuant
to the first sentence of Section 3.10(d);
(ii)
subject to Section 3.16(d), to reimburse
itself for, without duplication, (a) P&I Advances, but only to
the extent of amounts received which represent Late Collections
(net of the Servicing Fees) of Monthly Payments, Liquidation
Proceeds, condemnation proceeds or Insurance Proceeds on the
Mortgage Loans with respect to which such P&I Advances were
made in accordance with the provisions of Section 4.03 or (b) any
unreimbursed P&I Advances remaining after the Final Recovery
Determination of a Mortgage Loan that are Nonrecoverable P&I
Advances not otherwise recoverable pursuant to subsection (ii)(a)
hereof;
(iii)
subject to Section 3.16(d), to pay itself
or any Sub-Servicer (a) any unpaid Servicing Fees or (b) any
unreimbursed Servicing Advances with respect to each Mortgage Loan,
but only to the extent of any Late Collections, Liquidation
Proceeds, condemnation proceeds, Insurance Proceeds or other
amounts as may be collected by the Servicer from a Mortgagor, or
otherwise received with respect to such Mortgage Loan or (c) any
unreimbursed Servicing Advances made remaining after the Final
Recovery Determination of a Mortgage Loan that are Nonrecoverable
Servicing Advances, but only to the extent that Late Collections,
Liquidation Proceeds, condemnation proceeds and Insurance Proceeds
received with respect to such Mortgage Loan are insufficient to
reimburse the Servicer or any related Sub-Servicer for Servicing
Advances;
(iv)
to pay itself as servicing compensation
(in addition to the Servicing Fee) on the Servicer Remittance Date
any interest or investment income earned on funds deposited in the
Collection Account pursuant to Section 3.12(b);
(v)
to pay itself, the Originator, the Seller
or the Depositor, as the case may be, with respect to each Mortgage
Loan that has previously been purchased or replaced pursuant to
Section 2.03 or Section 3.16(c), as applicable, all amounts
received thereon subsequent to the date of purchase or
substitution, as the case may be;
(vi)
to reimburse itself (A) for any P&I
Advance or Servicing Advance previously made which the Servicer has
determined to be a Nonrecoverable P&I Advance or Nonrecoverable
Servicing Advance in accordance with the provisions of Section 4.03
and (B) any unpaid Servicing Fees to the extent not recoverable
from Liquidation Proceeds, Insurance Proceeds or other amounts
received with respect to the related Mortgage Loans under Section
3.11(a)(iii);
(vii)
to reimburse itself, the Depositor or the
Seller for expenses incurred by or reimbursable to the Servicer,
the Seller or the Depositor, as the case may be, pursuant to
Section 6.03;
(viii)
to reimburse itself or the Trustee, as
the case may be, for expenses reasonably incurred in respect of the
breach or defect giving rise to the purchase obligation under
Section 2.03 or Section 2.04 of this Agreement that were included
in the Purchase Price of the Mortgage Loan, including any expenses
arising out of the enforcement of the purchase
obligation;
(ix)
to pay, or to reimburse itself for
advances in respect of, expenses incurred in connection with any
Mortgage Loan pursuant to Section 3.16(b);
(x)
to withdraw funds deposited in error or
for which amounts previously deposited are returned unpaid by the
related Mortgagor and to clear and terminate the Collection Account
pursuant to Section 9.01; and
(xi)
to pay to itself any interest income
earned on funds deposited in the Collection Account pursuant to
Section 3.12(b).
The Servicer shall keep and maintain
separate accounting, on a Mortgage Loan by Mortgage Loan basis, for
the purpose of justifying any withdrawal from the Collection
Account, to the extent held by or on behalf of it, pursuant to
subclauses (ii), (iii), (v), (vi), (viii) and (ix) above. The
Servicer shall provide written notification to the Trustee on or
prior to the next succeeding Servicer Remittance Date, upon making
any withdrawals from the Collection Account pursuant to subclause
(vii) above.
(b)
The Trustee shall, from time to time,
make withdrawals from the Distribution Account, for any of the
following purposes, without priority:
(i)
to make distributions to
Certificateholders and the Depositor in accordance with Section
4.01;
(ii)
to pay any Extraordinary Trust Fund
Expenses;
(iii)
on or prior to each Distribution Date, to
remit to the Loan Performance Advisor the LPA Fee with respect to
such Distribution Date;
(iv)
to reimburse itself pursuant to Section
7.01 to the extent such amounts in Section 7.01 were not reimbursed
by the Servicer;
(v)
to pay any amounts in respect of taxes
pursuant to Section 10.01(g)(iii);
(vi)
to remit to the Servicer any amount
deposited in the Distribution Account by the Servicer but not
required to be deposited therein in accordance with Section 3.10(b)
or (d);
(vii)
to clear and terminate the Distribution
Account pursuant to Section 9.01; and
(viii)
to pay to itself any interest income
earned on funds deposited in the Distribution Account pursuant to
Section 3.12(c).
SECTION 3.12.
Investment of Funds in the Collection
Account, the REO Account and the Distribution Account.
(a)
The Servicer may direct any depository
institution maintaining the Collection Account and any REO Account
(for purposes of this Section 3.12, each an “Investment
Account”), and the Trustee, in its individual capacity, may
direct any depository institution maintaining the Distribution
Account (for purposes of this Section 3.12, also an
“Investment Account”), to invest the funds in such
Investment Account in one or more Permitted Investments bearing
interest or sold at a discount, and maturing, unless payable on
demand, (i) no later than the Business Day immediately preceding
the date on which such funds are required to be withdrawn from such
account pursuant to this Agreement, if a Person other than the
Trustee is the obligor thereon and (ii) no later than the date on
which such funds are required to be withdrawn from such account
pursuant to this Agreement, if the Trustee is the obligor thereon.
All such Permitted Investments shall be held to maturity,
unless payable on demand. Any investment of funds in an
Investment Account shall be made in the name of the Trustee (in its
capacity as such) or in the name of a nominee of the Trustee, in
each case, for the benefit of the Certificateholders. The
Trustee shall be entitled to sole control (except with respect to
investment direction of funds held in the Collection Account and
any REO Account and any income and gain realized thereon) over each
such investment, and any certificate or other instrument evidencing
any such investment shall be delivered directly to the Trustee or
its agent, together with any document of transfer necessary to
transfer title to such investment to the Trustee or its nominee.
In the event amounts on deposit in an Investment Account are
at any time invested in a Permitted Investment payable on demand,
the Trustee shall:
(1)
consistent with any notice required to be
given thereunder, demand that payment thereon be made on the last
day such Permitted Investment may otherwise mature hereunder in an
amount equal to the lesser of (1) all amounts then payable
thereunder and (2) the amount required to be withdrawn on such
date; and
(2)
demand payment of all amounts due
thereunder promptly upon determination by a Responsible Officer of
the Trustee that such Permitted Investment would not constitute a
Permitted Investment in respect of funds thereafter on deposit in
the Investment Account.
(b)
All income and gain realized from the
investment of funds deposited in the Collection Account and any REO
Account held by or on behalf of the Servicer, shall be for the
benefit of the Servicer and shall be subject to its withdrawal in
accordance with Section 3.11 or Section 3.23, as applicable.
The Servicer shall deposit in the Collection Account or any
REO Account, as applicable, from its own funds, the amount of any
loss of principal incurred in respect of any such Permitted
Investment made with funds in the Collection Account or REO Account
immediately upon realization of such loss.
(c)
All income and gain realized from the
investment of funds deposited in the Distribution Account held by
or on behalf of the Trustee shall be for the benefit of the Trustee
and shall be subject to withdrawal by the Trustee at any time.
The Trustee shall deposit in the Distribution Account from
its own funds, the amount of any loss of principal incurred in
respect of any such Permitted Investment made with funds in such
accounts immediately upon realization of such loss.
(d)
Except as otherwise expressly provided in
this Agreement, if any default occurs in the making of a payment
due under any Permitted Investment, or if a default occurs in any
other performance required under any Permitted Investment, the
Trustee may and, subject to Section 8.01 and Section 8.02(v),
upon the request of the Holders of Certificates representing more
than 50% of the Voting Rights allocated to any Class of
Certificates, shall take such action as may be appropriate to
enforce such payment or performance, including the institution and
prosecution of appropriate proceedings.
SECTION 3.13.
[Reserved].
SECTION 3.14.
Maintenance of Hazard Insurance and
Errors and Omissions and Fidelity Coverage.
(a)
The Servicer shall cause to be maintained
for each Mortgage Loan fire insurance with extended coverage on the
related Mortgaged Property in an amount which is at least equal to
the least of (i) the then current principal balance of such
Mortgage Loan, (ii) the amount necessary to fully compensate for
any damage or loss to the improvements that are a part of such
property on a replacement cost basis and (iii) the maximum
insurable value of the improvements which are a part of such
Mortgaged Property, in each case in an amount not less than such
amount as is necessary to avoid the application of any coinsurance
clause contained in the related hazard insurance policy. The
Servicer shall also cause to be maintained fire insurance with
extended coverage on each REO Property in an amount which is at
least equal to the lesser of (i) the maximum insurable value of the
improvements which are a part of such property and (ii) the
outstanding principal balance of the related Mortgage Loan at the
time it became an REO Property, plus accrued interest at the
related Mortgage Rate and related Servicing Advances. The
Servicer will comply in the performance of this Agreement with all
reasonable rules and requirements of each insurer under any such
hazard policies. Any amounts to be collected by the Servicer
under any such policies (other than amounts to be applied to the
restoration or repair of the property subject to the related
Mortgage Loan or amounts to be released to the related Mortgagor in
accordance with the procedures that the Servicer would follow in
servicing loans held for its own account, subject to the terms and
conditions of the related Mortgage Loan and related Mortgage Note)
shall be deposited in the Collection Account, subject to withdrawal
pursuant to Section 3.11, if received in respect of a Mortgage
Loan, or in the REO Account, subject to withdrawal pursuant to
Section 3.23, if received in respect of an REO Property. Any
cost incurred by the Servicer in maintaining any such insurance
shall not, for the purpose of calculating distributions to
Certificateholders, be added to the unpaid principal balance of the
related Mortgage Loan, notwithstanding that the terms of such
Mortgage Loan so permit. Any insurance premiums not paid by
the related Mortgagor and advanced by the Servicer shall constitute
a Servicing Advance. It is understood and agreed that no
earthquake or other additional insurance is to be required of any
Mortgagor other than pursuant to such applicable laws and
regulations as shall at any time be in force and as shall require
such additional insurance. If the Mortgaged Property or REO
Property is at any time in an area identified in the Federal
Register by the Federal Emergency Management Agency as having
special flood hazards and flood insurance has been made available,
the Servicer will cause to be maintained a flood insurance policy
in respect thereof. Such flood insurance shall be in an
amount equal to the lesser of (i) the unpaid principal balance of
the related Mortgage Loan and (ii) the maximum amount of such
insurance available for the related Mortgaged Property under the
national flood insurance program (assuming that the area in which
such Mortgaged Property is located is participating in such
program).
In the event that the Servicer shall
obtain and maintain a blanket policy with an insurer that generally
would be acceptable under Fannie Mae or Freddie Mac servicing
guidelines insuring against hazard losses on all of the Mortgage
Loans, it shall conclusively be deemed to have satisfied its
obligations as set forth in the first two sentences of this Section
3.14, it being understood and agreed that such policy may contain a
deductible clause, in which case the Servicer shall, in the event
that there shall not have been maintained on the related Mortgaged
Property or related REO Property a policy complying with the first
two sentences of this Section 3.14, and there shall have been one
or more losses which would have been covered by such policy,
deposit to the Collection Account from its own funds the amount not
otherwise payable under the blanket policy because of such
deductible clause. In connection with its activities as
administrator and servicer of the Mortgage Loans, the Servicer
agrees to prepare and present, on behalf of itself, the Trustee and
Certificateholders, claims under any such blanket policy in a
timely fashion in accordance with the terms of such
policy.
(b)
The Servicer shall keep in force during
the term of this Agreement a policy or policies of insurance
covering errors and omissions for failure in the performance of the
Servicer’s obligations under this Agreement, which policy or
policies shall be in such form and amount that would meet the
requirements of Fannie Mae or Freddie Mac if it were the purchaser
of the Mortgage Loans, unless the Servicer has obtained a waiver of
such requirements from Fannie Mae or Freddie Mac. The
Servicer shall also maintain a fidelity bond in the form and amount
that would meet the requirements of Fannie Mae or Freddie Mac,
unless the Servicer has obtained a waiver of such requirements from
Fannie Mae or Freddie Mac. The Servicer shall provide the
Trustee (upon its reasonable request) with copies of or evidence of
any such insurance policies and fidelity bond. The Servicer
shall be deemed to have complied with this provision if an
Affiliate of the Servicer has such errors and omissions and
fidelity bond coverage and, by the terms of such insurance policy
or fidelity bond, the coverage afforded thereunder extends to the
Servicer. Any such errors and omissions policy and fidelity
bond shall by its terms not be cancelable without thirty
days’ prior written notice to the Trustee. The Servicer
shall also cause each Sub-Servicer to maintain a comparable policy
of insurance covering errors and omissions and a fidelity bond
meeting such requirements.
SECTION 3.15.
Enforcement of Due-On-Sale Clauses;
Assumption Agreements.
The Servicer will, to the extent it has
knowledge of any conveyance or prospective conveyance of any
Mortgaged Property by any Mortgagor (whether by absolute conveyance
or by contract of sale, and whether or not such Mortgagor remains
or is to remain liable under the applicable Mortgage Note and/or
the related Mortgage), exercise its rights to accelerate the
maturity of such Mortgage Loan under the “due-on-sale”
clause, if any, applicable thereto; provided, however , that
the Servicer shall not be required to take such action if in its
sole business judgment the Servicer believes it is not in the best
interests of the Trust Fund and shall not exercise any such rights
if prohibited by law from doing so. If the Servicer
reasonably believes it is unable under applicable law to enforce
such “due-on-sale” clause, or if any of the other
conditions set forth in the proviso to the preceding sentence
apply, the Servicer will enter into an assumption and modification
agreement from or with the person to whom such property has been
conveyed or is proposed to be conveyed, pursuant to which such
person becomes liable under the related Mortgage Note and, to the
extent permitted by applicable state law, the related Mortgagor
remains liable thereon. The Servicer is also authorized to
enter into a substitution of liability agreement with such person,
pursuant to which the original related Mortgagor is released from
liability and such person is substituted as the Mortgagor and
becomes liable under the related Mortgage Note, provided that no
such substitution shall be effective unless such person satisfies
the underwriting criteria of the Servicer and such substitution is
in the best interests of the Certificateholders, as determined by
the Servicer. In connection with any assumption, modification
or substitution, the Servicer shall apply such underwriting
standards and follow such practices and procedures as shall be
normal and usual in its general mortgage servicing activities.
The Servicer shall not take or enter into any assumption and
modification agreement, however, unless (to the extent practicable
in the circumstances) it shall have received confirmation, in
writing, of the continued effectiveness of any applicable hazard
insurance policy, or a new policy meeting the requirements of this
Section is obtained. Any fee collected by the Servicer in
respect of an assumption, modification or substitution of liability
agreement will be retained by the Servicer as additional servicing
compensation. In connection with any such assumption, no
material term of the related Mortgage Note (including but not
limited to the related Mortgage Rate and the amount of the related
Monthly Payment) may be amended or modified, except as otherwise
required pursuant to the terms thereof. The Servicer shall
notify the Trustee or the Custodian, as applicable, that any such
substitution, modification or assumption agreement has been
completed by forwarding to the Trustee or Custodian, as applicable,
the executed original of such substitution, modification or
assumption agreement, which document shall be added to the related
Mortgage File and shall, for all purposes, be considered a part of
such Mortgage File to the same extent as all other documents and
instruments constituting a part thereof. Notwithstanding the
foregoing, the Servicer may enforce the due on sale clause, or the
assumption and modification, or the substitution if it reasonably
believes that it is in the best interest of the Trust
Fund.
Notwithstanding the foregoing paragraph
or any other provision of this Agreement, the Servicer shall not be
deemed to be in default, breach or any other violation of its
obligations hereunder by reason of any assumption of a Mortgage
Loan by operation of law or by the terms of the related Mortgage
Note or any assumption which the Servicer may be restricted by law
from preventing, for any reason whatever. For purposes of
this Section 3.15, the term “assumption” is deemed to
also include a sale (of the Mortgaged Property) subject to the
Mortgage that is not accompanied by an assumption or substitution
of liability agreement.
SECTION 3.16.
Realization Upon Defaulted Mortgage
Loans.
(a)
The Servicer shall use its commercially
reasonable efforts consistent with the servicing standard set forth
in Section 3.01, to foreclose upon or otherwise comparably convert
the ownership of properties securing such of the Mortgage Loans
(including release of the lien on the related Mortgaged Property in
exchange for payment by the relevant Mortgagor of an amount at
least equal to what would be obtained through foreclosure or other
conversion of property ownership) as come into and continue in
default and as to which no satisfactory arrangements can be made
for collection of Delinquent payments pursuant to Section 3.07.
The Servicer shall be responsible for all costs and expenses
incurred by it in any such proceedings; provided, however, that
such costs and expenses will be recoverable as Servicing Advances
or Nonrecoverable Servicing Advances by the Servicer as
contemplated in Section 3.11 and Section 3.23. The foregoing
is subject to the provision that, in any case in which a Mortgaged
Property shall have suffered damage from an Uninsured Cause, the
Servicer shall not be required to expend its own funds toward the
restoration of such property unless it shall determine in its sole
and absolute discretion that such restoration will increase the
proceeds of liquidation of the related Mortgage Loan after
reimbursement to itself for such expenses.
(b)
Notwithstanding the foregoing provisions
of this Section 3.16 or any other provision of this Agreement, with
respect to any Mortgage Loan as to which the Servicer has received
actual notice of, or has actual knowledge of, the presence of any
toxic or hazardous substance on the related Mortgaged Property, the
Servicer shall not, on behalf of the Trust Fund, either (i) obtain
title to such Mortgaged Property as a result of or in lieu of
foreclosure or otherwise or (ii) otherwise acquire possession of,
or take any other action with respect to, such Mortgaged Property,
if, as a result of any such action, the Trustee, the Trust Fund or
the Certificateholders would be considered to hold title to, to be
a “mortgagee-in-possession” of, or to be an
“owner” or “operator” of such Mortgaged
Property within the meaning of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended from
time to time, or any comparable law, unless the Servicer has also
previously determined, based on its reasonable judgment and a
report prepared by a Person who regularly conducts environmental
audits using customary industry standards, that:
(1)
such Mortgaged Property is in compliance
with applicable environmental laws or, if not, that it would be in
the best economic interest of the Trust Fund to take such actions
as are necessary to bring such Mortgaged Property into compliance
therewith; and
(2)
there are no circums
