STANWICH ASSET ACCEPTANCE COMPANY, L.L.C.
Depositor
FREMONT INVESTMENT & LOAN,
Servicer
and
WELLS FARGO BANK N.A.,
Trustee
POOLING AND SERVICING AGREEMENT
Dated as of October 1, 2006
Carrington Mortgage Loan Trust, Series 2006-FRE2
Asset-Backed Pass-Through Certificates
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS;
USAGE.............................................................................4
SECTION 1.01
Defined
Terms..........................................................................4
SECTION 1.02
Allocation of Certain Interest
Shortfalls.............................................51
SECTION 1.03
Rules of
Usage........................................................................52
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF
CERTIFICATES...............................52
SECTION 2.01
Conveyance of the Mortgage
Loans......................................................52
SECTION 2.02
Acceptance of REMIC I by
Trustee......................................................55
SECTION 2.03
Repurchase or Substitution of Mortgage Loans by the Responsible
Party
and the
Seller........................................................................56
SECTION 2.04
[Reserved]............................................................................59
SECTION 2.05
Representations, Warranties and Covenants of the
Servicer.............................59
SECTION 2.06
Issuance of the REMIC I Regular Interests and the Class R-I
Interest..................61
SECTION 2.07
Conveyance of the REMIC I Regular Interests; Acceptance of REMIC II
by the
Trustee........................................................................61
SECTION 2.08
Issuance of Class R
Certificates......................................................62
ARTICLE III
ADMINISTRATION AND SERVICING OF THE MORTGAGE
LOANS............................................62
SECTION 3.01
Servicer to Act as
Servicer...........................................................62
SECTION 3.02
Sub-Servicing Agreements Between Servicer and
Sub-Servicers...........................64
SECTION 3.03
Successor
Sub-Servicers...............................................................65
SECTION 3.04
Liability of the
Servicer.............................................................65
SECTION 3.05
No Contractual Relationship Between Sub-Servicers, the Trustee or
the
Certificateholders....................................................................66
SECTION 3.06
Assumption or Termination of Sub-Servicing Agreements by the
Trustee..................66
SECTION 3.07
Collection of Certain Mortgage Loan
Payments..........................................66
SECTION 3.08
Sub-Servicing
Accounts................................................................67
SECTION 3.09
Collection of Taxes, Assessments and Similar Items; Servicing
Accounts................67
SECTION 3.10
Custodial Account and Certificate
Account.............................................68
SECTION 3.11
Withdrawals from the Custodial Account and Certificate
Account........................71
SECTION 3.12
Investment of Funds in the Custodial Account and the Certificate
Account...............................................................................72
SECTION 3.13
[Reserved]............................................................................74
SECTION 3.14
Maintenance of Hazard Insurance and Errors and Omissions and
Fidelity
Coverage..............................................................................74
SECTION 3.15
Enforcement of Due-On-Sale Clauses; Assumption
Agreements.............................75
-i-
TABLE OF CONTENTS
(continued)
PAGE
SECTION 3.16
Realization Upon Defaulted Mortgage
Loans.............................................76
SECTION 3.17
Trustee to Cooperate; Release of Mortgage
Files.......................................78
SECTION 3.18
Servicing
Compensation................................................................79
SECTION 3.19
Reports to the Trustee and Others; Custodial Account
Statements.......................80
SECTION 3.20
[Reserved]............................................................................80
SECTION 3.21
[Reserved]............................................................................80
SECTION 3.22
Access to Certain
Documentation.......................................................80
SECTION 3.23
Title, Management and Disposition of REO
Property.....................................80
SECTION 3.24
Obligations of the Servicer in Respect of Prepayment Interest
Shortfalls............................................................................84
SECTION 3.25
Obligations of the Servicer in Respect of Mortgage Rates and
Monthly
Payments..............................................................................84
SECTION 3.26
Advance
Facility......................................................................84
ARTICLE IV
PAYMENTS TO
CERTIFICATEHOLDERS................................................................85
SECTION 4.01
Distributions.........................................................................85
SECTION 4.02
Statements to
Certificateholders......................................................92
SECTION 4.03
Remittance Reports;
Advances..........................................................96
SECTION 4.04
Allocation of Realized
Losses.........................................................97
SECTION 4.05
Compliance with Withholding
Requirements..............................................99
SECTION 4.06
Exchange Commission; Additional
Information...........................................99
SECTION 4.07
The Swap
Agreement...................................................................104
SECTION 4.08
Tax Treatment of Swap Payments and Swap Termination
Payments.........................106
ARTICLE V
THE
CERTIFICATES.............................................................................107
SECTION 5.01
The
Certificates.....................................................................107
SECTION 5.02
Registration of Transfer and Exchange of
Certificates................................109
SECTION 5.03
Mutilated, Destroyed, Lost or Stolen
Certificates....................................115
SECTION 5.04
Persons Deemed
Owners................................................................115
SECTION 5.05
Certain Available
Information........................................................115
ARTICLE VI
THE DEPOSITOR AND THE
SERVICER...............................................................116
SECTION 6.01
Respective Liabilities of the Depositor and the
Servicer.............................116
SECTION 6.02
Merger or Consolidation of the Depositor or the
Servicer.............................116
SECTION 6.03
Limitation on Liability of the Depositor, the Servicer and
Others....................117
SECTION 6.04
Limitation on Resignation of the
Servicer............................................118
SECTION 6.05
Rights of the Depositor in Respect of the
Servicer...................................118
ARTICLE VII
DEFAULT......................................................................................119
SECTION 7.01
Servicer Events of
Default...........................................................119
SECTION 7.02
Trustee to Act; Appointment of
Successor.............................................121
-ii-
TABLE OF CONTENTS
(continued)
PAGE
SECTION 7.03
Notification to
Certificateholders...................................................122
SECTION 7.04
Waiver of Servicer Events of
Default.................................................122
ARTICLE VIII
CONCERNING THE
TRUSTEE.......................................................................122
SECTION 8.01
Duties of
Trustee....................................................................123
SECTION 8.02
Certain Matters Affecting the
Trustee................................................124
SECTION 8.03
Trustee Not Liable for Certificates or Mortgage
Loans................................125
SECTION 8.04
Trustee May Own
Certificates.........................................................126
SECTION 8.05
Trustee's Fees and
Expenses..........................................................126
SECTION 8.06
Eligibility Requirements for
Trustee.................................................126
SECTION 8.07
Resignation and Removal of the
Trustee...............................................127
SECTION 8.08
Successor
Trustee....................................................................127
SECTION 8.09
Merger or Consolidation of
Trustee...................................................128
SECTION 8.10
Appointment of Co-Trustee or Separate
Trustee........................................128
SECTION 8.11
Trustee to Execute Swap
Agreement....................................................129
SECTION 8.12
Appointment of Office or
Agency......................................................129
SECTION 8.13
Representations and Warranties of the
Trustee........................................129
SECTION 8.14
Valid, Legal and Binding
Obligation..................................................130
ARTICLE IX
TERMINATION..................................................................................130
SECTION 9.01
Termination Upon Repurchase or Liquidation of All Mortgage
Loans.....................130
SECTION 9.02
Additional Termination
Requirements..................................................132
ARTICLE X
REMIC
PROVISIONS.............................................................................133
SECTION 10.01
REMIC
Administration.................................................................133
SECTION 10.02
Prohibited Transactions and
Activities...............................................135
SECTION 10.03
Servicer and Trustee
Indemnification.................................................136
ARTICLE XI
TRUSTEE COMPLIANCE WITH REGULATION
AB........................................................136
SECTION 11.01
Intent of the Parties;
Reasonableness................................................136
SECTION 11.02
Additional Representations and Warranties of the
Trustee.............................136
SECTION 11.03
Information to Be Provided by the
Trustee............................................137
SECTION 11.04
Report on Assessment of Compliance and
Attestation...................................138
SECTION 11.05
Indemnification;
Remedies............................................................138
ARTICLE XII
SERVICER COMPLIANCE WITH REGULATION
AB.......................................................139
SECTION 12.01
[Reserved]...........................................................................139
SECTION 12.02
[Reserved]...........................................................................139
SECTION 12.03
Information to Be Provided by the
Servicer...........................................139
SECTION 12.04
Servicer Compliance
Statement........................................................140
SECTION 12.05
Report on Assessment of Compliance and
Attestation...................................140
SECTION 12.06
Use of Sub-Servicers and
Subcontractors..............................................141
SECTION 12.07
Indemnification;
Remedies............................................................142
-iii-
TABLE OF CONTENTS
(continued)
PAGE
ARTICLE XIII
MISCELLANEOUS
PROVISIONS.....................................................................144
SECTION 13.01
Amendment............................................................................144
SECTION 13.02
Recordation of Agreement;
Counterparts...............................................146
SECTION 13.03
Limitation on Rights of
Certificateholders...........................................146
SECTION 13.04
Governing
Law........................................................................147
SECTION 13.05
Notices..............................................................................147
SECTION 13.06
Severability of
Provisions...........................................................148
SECTION 13.07
Notice to Rating
Agencies............................................................148
SECTION 13.08
Article and Section
References.......................................................149
SECTION 13.09
Grant of Security
Interest...........................................................149
SECTION 13.10
Intention of
Parties.................................................................150
SECTION 13.11
Assignment...........................................................................150
SECTION 13.12
Inspection and Audit
Rights..........................................................150
SECTION 13.13
Certificates Nonassessable and Fully
Paid............................................150
SECTION 13.14
Third-Party
Beneficiaries............................................................151
SECTION 13.15
Perfection
Representations...........................................................151
SECTION 13.16
Notice to Holder of Class CE
Certificate.............................................151
ARTICLE XIV
RIGHTS OF THE CLASS CE
CERTIFICATEHOLDER.....................................................151
SECTION 14.01
Reports and
Notices..................................................................151
SECTION 14.02
Class CE Certificateholder's Directions With Respect to Defaulted
Mortgage
Loans.......................................................................153
-iv-
Exhibits
--------
Exhibit A-1
Form of Class A-1 Certificates
Exhibit A-2
Form of Class A-2 Certificates
Exhibit A-3
Form of Class A-3 Certificates
Exhibit A-4
Form of Class A-4 Certificates
Exhibit A-5
Form of Class A-5 Certificates
Exhibit A-6
Form of Class M-1 Certificates
Exhibit A-7
Form of Class M-2 Certificates
Exhibit A-8
Form of Class M-3 Certificates
Exhibit A-9
Form of Class M-4 Certificates
Exhibit A-10
Form of Class M-5 Certificates
Exhibit A-11
Form of Class M-6 Certificates
Exhibit A-12
Form of Class M-7 Certificates
Exhibit A-13
Form of Class M-8 Certificates
Exhibit A-14
Form of Class M-9 Certificates
Exhibit A-15
Form of Class M-10 Certificates
Exhibit A-16
Form of Class CE Certificate
Exhibit A-17
Form of Class P Certificate
Exhibit A-18
Form of Class R-I Certificate
Exhibit A-19
Form of Class R-II Certificate
Exhibit B
[Reserved]
Exhibit C-1
Form of Trustee's Initial Certification
Exhibit C-2
Form of Trustee's Final Certification
Exhibit D
Form of Mortgage Loan Purchase Agreement
Exhibit E
Request for Release
Exhibit F-1
Form of Transferor Representation Letter and Form of Transferee
Representation Letter in Connection with Transfer of the
Private Certificates Pursuant to Rule 144A Under the 1933 Act
Exhibit F-2
Form of Transfer Affidavit and Agreement and Form of Transferor
Affidavit in Connection with Transfer of Residual Certificates
Exhibit G
Form of Certification with respect to ERISA and the Code
Exhibit H
Form of Lost Note Affidavit
Exhibit I-1
Form of Servicer's 10-K Certification
Exhibit I-2
Form of Certification to be Provided to Servicer by the Trustee
Exhibit J
Form Servicing Criteria to be Addressed in Assessment of
Compliance
Exhibit K-1
Form of Swap Agreement
Exhibit K-2
Schedule of Swap Agreement Notional Balances
Exhibit L
Form of Report Pursuant to Section 13.01
Schedule 1
Mortgage Loan Schedule
Schedule 2
Prepayment Charge Schedule
Schedule 3
Perfection Representations, Warranties and Covenants
Schedule 4
Standard File Layout Data Elements
-v-
This Pooling and Servicing Agreement, is dated and effective as of
October
1, 2006, among STANWICH ASSET ACCEPTANCE COMPANY, L.L.C. as
Depositor, FREMONT
INVESTMENT & LOAN as Servicer and WELLS FARGO BANK, N.A. as
Trustee.
PRELIMINARY STATEMENT:
The Depositor intends to sell pass-through certificates to be
issued
hereunder in multiple classes, which in the aggregate will evidence
the entire
beneficial ownership interest in each REMIC (as defined herein)
created
hereunder. The Trust Fund (as defined herein) will consist of a
segregated pool
of assets comprised of the Mortgage Loans and certain other related
assets
subject to this Agreement.
REMIC I
As provided herein, the Trustee will elect to treat the segregated
pool of
assets consisting of the Mortgage Loans and certain other related
assets (other
than any Servicer Prepayment Charge Payment Amounts, the Swap
Account and the
Swap Agreement) subject to this Agreement as a REMIC for federal
income tax
purposes, and such segregated pool of assets will be designated as
"REMIC I."
The Class R-I Interest will be the sole class of "residual
interests" in REMIC I
for purposes of the REMIC Provisions (as defined herein). The
following table
irrevocably sets forth the designation, the REMIC I Remittance
Rate, the initial
Uncertificated Balance and, for purposes of satisfying Treasury
regulation
Section 1.860G-1(a)(4)(iii), the "latest possible maturity date"
for each of the
REMIC I Regular Interests (as defined herein). None of the REMIC I
Regular
Interests will be certificated.
REMIC I
INITIAL
LATEST POSSIBLE
DESIGNATION
REMITTANCE RATE
UNCERTIFICATED BALANCE
MATURITY DATE(1)
---------------
-------------------
---------------------------
-------------------
I-LTAA
Variable (2)
$965,331,753.58
October 2036
I-LTA1
Variable (2)
$1,622,380
October 2036
I-LTA2
Variable (2)
$1,037,540
October 2036
I-LTA3
Variable (2)
$1,252,320
October 2036
I-LTA4
Variable (2)
$956,890
October 2036
I-LTA5
Variable (2)
$2,809,200
October 2036
I-LTM1
Variable (2)
$438,340
October 2036
I-LTM2
Variable (2)
$320,140
October 2036
I-LTM3
Variable (2)
$187,160
October 2036
I-LTM4
Variable (2)
$172,380
October 2036
I-LTM5
Variable (2)
$167,460
October 2036
I-LTM6
Variable (2)
$157,610
October 2036
I-LTM7
Variable (2)
$147,750
October 2036
I-LTM8
Variable (2)
$128,050
October 2036
I-LTM9
Variable (2)
$98,500
October 2036
I-LTM10
Variable (2)
$98,500
October 2036
I-LTZZ
Variable (2)
$10,106,430.08
October 2036
I-LTP
Variable (2)
$100.00
October 2036
_____________________
(1)
For purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
regulations,
the Distribution Date immediately following the maturity date for
the
Mortgage Loan with the latest maturity date has been designated as
the
"latest possible maturity date" for each REMIC I Regular Interest.
(2)
Calculated in accordance with the definition of "REMIC I Remittance
Rate"
herein.
2
REMIC II
As provided herein, the Trustee will elect to treat the segregated
pool of
assets consisting of the REMIC I Regular Interests as a REMIC for
federal income
tax purposes, and such segregated pool of assets will be designated
as "REMIC
II." The Class R-II Interest will evidence the sole class of
"residual
interests" in REMIC II for purposes of the REMIC Provisions under
federal income
tax law. The following table irrevocably sets forth the
designation, the
Pass-Through Rate, the initial aggregate Certificate Principal
Balance and, for
purposes of satisfying Treasury regulation Section
1.860G-1(a)(4)(iii), the
"latest possible maturity date" for the indicated Classes of
Certificates.
INITIAL AGGREGATE
CERTIFICATE PRINCIPAL
LATEST POSSIBLE MATURITY
DESIGNATION
PASS-THROUGH RATE
BALANCE
DATE(1)
----------------
---------------------
-------------------------
----------------------------
Class A-1(2)
Variable(2)
$162,238,000
May 25, 2030
Class A-2(2)
Variable(2)
$103,754,000
March 25, 2035
Class A-3(2)
Variable(2)
$125,232,000
September 25, 2036
Class A-4(2)
Variable(2
$95,689,000
September 25, 2036
Class A-5(2)
Variable(2)
$280,920,000
March 25, 2035
Class M-1(2)
Variable(2)
$43,834,000
October 25, 2036
Class M-2(2)
Variable(2)
$32,014,000
October 25, 2036
Class M-3(2)
Variable(2)
$18,716,000
October 25, 2036
Class M-4(2)
Variable(2)
$17,238,000
October 25, 2036
Class M-5(2)
Variable(2)
$16,746,000
October 25, 2036
Class M-6(2)
Variable(2)
$15,761,000
October 25, 2036
Class M-7(2)
Variable(2)
$14,775,000
October 25, 2036
Class M-8(2)
Variable(2)
$12,805,000
October 25, 2036
Class M-9(2)
Variable(2)
$9,850,000
October 25, 2036
Class M-10(2)
Variable(2)
$9,850,000
October 25, 2036
Class CE(3)
Variable(4)
$25,610,503.66
N/A
Class P
N/A(5)
$100.00
N/A
____________________
(1)
For purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
regulations,
the Distribution Date immediately following the maturity date for
the
Mortgage Loans with the latest maturity date has been designated as
the
"latest possible maturity date" for each Class of Certificates.
(2)
Calculated in accordance with the definition of "Pass-Through Rate"
herein. The Class A and Class M Certificates represent ownership of
REMIC
II Regular Interests, together with certain rights to payments to
be made
from amounts received under the Swap Agreement which payments are
treated
for federal income tax purposes as being made outside of REMIC II
by the
holder of the Class CE Certificates, as the owner of the Swap
Agreement.
(3)
The Class CE Certificates will be comprised of two REMIC II Regular
Interests, a principal only regular interest designated REMIC II
Regular
Interest CE-PO and an interest only regular interest designated
REMIC II
Regular Interest CE-IO, each of which will be entitled to
distributions as
set forth herein.
(4)
The Class CE Certificates will accrue interest at its variable
Pass-Through Rate on the Notional Amount of the Class CE-IO
outstanding
from time to time which notional amount shall equal the aggregate
Uncertificated Balance of the REMIC I Regular Interests. The Class
CE
Certificates will not accrue interest on its Certificate Principal
Balance. The rights of the Holder of the Class CE Certificates to
payments
from the Swap Agreement shall be outside and apart from its rights
under
the REMIC II Regular Interests CE-IO and CE-PO.
(5)
The Class P Certificates will not accrue interest.
As of the Cut-off Date, the Mortgage Loans had an aggregate Stated
Principal Balance equal to $985,032,503.66.
3
In consideration of the mutual agreements herein contained, the
Depositor,
the Servicer and the Trustee agree as follows:
ARTICLE I
DEFINITIONS; USAGE
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. Unless otherwise specified, all
calculations
described herein shall be made on the basis of a 360-day year
consisting of
twelve 30-day months.
"Accepted Servicing Practices": The servicing standards set forth
in
Section 3.01.
"Accrued Certificate Interest": With respect to any Class A
Certificate,
Mezzanine Certificate and the Class CE Certificates and each
Distribution Date,
interest accrued during the related Interest Accrual Period at the
Pass-Through
Rate for such Certificate for such Distribution Date on the
Certificate
Principal Balance, in the case of the Class A Certificates and the
Mezzanine
Certificates, or on the Notional Amount, in the case of the Class
CE
Certificates, of such Certificate immediately prior to such
Distribution Date.
The Class P Certificates are not entitled to distributions in
respect of
interest and, accordingly, will not accrue interest. All
distributions of
interest on the Class A Certificates and the Mezzanine Certificates
will be
calculated on the basis of a 360-day year and the actual number of
days in the
applicable Interest Accrual Period. All distributions of interest
on the Class
CE Certificates will be based on a 360-day year consisting of
twelve 30-day
months. Accrued Certificate Interest with respect to each
Distribution Date, as
to any Class A Certificate, Mezzanine Certificate or the Class CE
Certificates,
shall be reduced by an amount equal to the portion allocable to
such Certificate
pursuant to Section 1.02 hereof of the sum of (a) the aggregate
Prepayment
Interest Shortfall, if any, for such Distribution Date to the
extent not covered
by payments pursuant to Section 3.24 and (b) the aggregate amount
of any Relief
Act Interest Shortfall, if any, for such Distribution Date. In
addition, Accrued
Certificate Interest with respect to each Distribution Date, as to
the Class CE
Certificates, shall be reduced by an amount equal to the portion
allocable to
the Class CE Certificates of Realized Losses, if any, pursuant to
Section 4.04
hereof.
"Additional Form 10-D Disclosure" has the meaning set forth in
Section
4.06(a).
"Additional Form 10-K Disclosure" has the meaning set forth in
Section
4.06(b).
"Additional Servicer" means (i) each affiliated servicer meeting
the
requirements of Item 1108(a)(2)(ii) of Regulation AB that services
any of the
Mortgage Loans, and (ii) each unaffiliated servicer meeting the
requirements of
Item 1108(a)(2)(iii) of Regulation AB (other than the Trustee), who
services 10%
or more of the Mortgage Loans.
"Adjustable-Rate Mortgage Loan": Each of the Mortgage Loans
identified on
the Mortgage Loan Schedule as having a Mortgage Rate that is
subject to
adjustment.
4
"Adjustment Date": With respect to each Adjustable-Rate Mortgage
Loan, the
first day of the month in 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": As to any Mortgage Loan or REO Property, any advance
made by
the Servicer in respect of any Distribution Date pursuant to
Section 4.03.
"Advance Facility": As defined in Section 3.26(a).
"Advance Facility Trustee": As defined in Section 3.26(b).
"Advancing Person": As defined in Section 3.26(a) hereof.
"Affected Party": As defined in the Swap Agreement.
"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.
"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 Class A Certificates or Mezzanine Certificates, an
amount equal
to (x) the sum of (i) any Realized Losses allocated to such Class
of
Certificates on such Distribution Date and (ii) the amount of any
Allocated
Realized Loss Amount for such Class of Certificates remaining
unpaid from
previous Distribution Dates minus (y) the amount of the increase in
the related
Certificate Principal Balance due to the receipt of Subsequent
Recoveries as
provided in Section 4.01.
"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), 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.
"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 Custodial Account and Certificate 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
Certificate Account for such Distribution Date pursuant to Section
5
3.23, (c) the aggregate of any amounts deposited in the Certificate
Account by
the Servicer in respect of Prepayment Interest Shortfalls for such
Distribution
Date pursuant to Section 3.24, (d) the aggregate of any Advances
made by the
Servicer for such Distribution Date pursuant to Section 4.03 and
(e) the
aggregate of any Advances made by the Trustee as successor Servicer
or any other
successor Servicer for such Distribution Date pursuant to Section
7.02, 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) (other than Prepayment
Charges),
(iii) Liquidation Proceeds and Insurance Proceeds received in
respect of the
Mortgage Loans after the related Prepayment Period, (iv) amounts
reimbursable or
payable to the Depositor, the Servicer, the Trustee, the Seller or
any
Sub-Servicer pursuant to Section 3.11, Section 3.12, Section 8.05
or otherwise
payable in respect of Extraordinary Trust Fund Expenses, (v) the
Trustee Fee
payable from the Certificate Account pursuant to Section 8.05, (vi)
amounts
deposited in the Custodial Account or the Certificate Account in
error, (vii)
the amount of any Prepayment Charges collected by the Servicer in
connection
with the Principal Prepayment of any of the Mortgage Loans or any
Servicer
Prepayment Charge Payment Amount and (viii) any Net Swap Payment
owed to the
Swap Counterparty and Swap Termination Payments owed to the Swap
Counterparty
not due to a Swap Counterparty Trigger Event for such Distribution
Date.
"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 or Debt Service Reduction.
"Bloomberg":
As defined in Section 4.02.
"Book-Entry Certificate": The Class A Certificates and the
Mezzanine
Certificates for so long as the Certificates of such Class shall be
registered
in the name of the Depository or its nominee.
"Book-Entry Custodian": The custodian appointed pursuant to Section
5.01.
"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 or in any city in which the Corporate Trust Office of
the Trustee is
located, are authorized or obligated by law or executive order to
be closed.
"Cash-Out Refinancing": A Refinanced Mortgage Loan the proceeds of
which
are more than a nominal amount in excess of the principal balance
of any
existing first mortgage or subordinate mortgage on the related
Mortgaged
Property and any closing costs related to such Refinance Mortgage
Loan.
6
"Certificate": Any one of the Carrington Mortgage Loan Trust,
Series
2006-FRE2 Asset-Backed Pass-Through Certificates, Class A-1, Class
A-2, Class
A-3, Class A-4, Class A-5, Class M-1, Class M-2, Class M-3, Class
M-4, Class
M-5, Class M-6, Class M-7, Class M-8, Class M-9, Class M-10, Class
CE, Class P
and Class R issued under this Agreement.
"Certificate Account": The trust account or accounts created and
maintained by the Trustee pursuant to Section 3.10(b), which shall
be entitled
"Wells Fargo Bank, N.A., as Trustee, in trust for the registered
holders of
Carrington Mortgage Loan Trust, Series 2006-FRE2 Asset-Backed
Pass-Through
Certificates." The Certificate Account must be an Eligible Account.
"Certificate Factor": With respect to any Class of Regular
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
(or the Notional Amount, in the case of the Class CE Certificates)
of such Class
of Certificates on such Distribution Date (after giving effect to
any
distributions of principal and in the case of the Class A
Certificates, the
Mezzanine Certificates and the Class CE Certificates, the
allocations of
Realized Losses in reduction of the Certificate Principal Balance
(or the
Notional Amount, in the case of the Class CE Certificates) of such
Class of
Certificates to be made on such Distribution Date), and the
denominator of which
is the initial aggregate Certificate Principal Balance (or the
Notional Amount,
in the case of the Class CE Certificates) of such Class of
Certificates as of
the Closing Date.
"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 purpose hereof and, solely for the purpose 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 13.01. 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.
"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 each Class A
Certificate,
Mezzanine Certificate or Class P Certificate as of any date of
determination,
the Certificate Principal Balance of such Certificate on the
Distribution Date
immediately prior to such date of determination plus any Subsequent
Recoveries
added to the Certificate Principal Balance of such Certificate
pursuant to
Section 4.01, minus all distributions allocable to principal made
thereon
7
and, in the case of the Class A Certificates and the Mezzanine
Certificates,
Realized Losses allocated thereto on such immediately prior
Distribution Date
(or, in the case of any date of determination up to and including
the first
Distribution Date, the initial Certificate Principal Balance of
such
Certificate, as stated on the face thereof). With respect to the
Class CE
Certificates as of any date of determination, an amount equal to
the Percentage
Interest evidenced by such Certificate times the excess, if any, of
(A) the then
aggregate Uncertificated Balance of the REMIC I Regular Interests
over (B) the
then aggregate Certificate Principal Balance of the Class A
Certificates, the
Mezzanine Certificates and the Class P Certificates then
outstanding.
"Certificate Register":
The register maintained pursuant to Section 5.02.
"Class": Collectively, all of the Certificates bearing the same
class
designation.
"Class A-1 Certificates": Any one of the Class A-1 Certificates
executed,
authenticated and delivered by the Trustee, substantially in the
form annexed
hereto as Exhibit A-1 and evidencing (i) a Regular Interest in
REMIC II for
purposes of the REMIC Provisions and (ii) the right to receive
payments from the
Swap Account to the extent described herein.
"Class A-2 Certificates": Any one of the Class A-2 Certificates
executed,
authenticated and delivered by the Trustee, substantially in the
form annexed
hereto as Exhibit A-2 and evidencing (i) a Regular Interest in
REMIC II for
purposes of the REMIC Provisions and (ii) the right to receive
payments from the
Swap Account to the extent described herein.
"Class A-3 Certificates": Any one of the Class A-3 Certificates
executed,
authenticated and delivered by the Trustee, substantially in the
form annexed
hereto as Exhibit A-3 and evidencing (i) a Regular Interest in
REMIC II for
purposes of the REMIC Provisions and (ii) the right to receive
payments from the
Swap Account to the extent described herein.
"Class A-4 Certificates": Any one of the Class A-4 Certificates
executed,
authenticated and delivered by the Trustee, substantially in the
form annexed
hereto as Exhibit A-4 and evidencing (i) a Regular Interest in
REMIC II for
purposes of the REMIC Provisions and (ii) the right to receive
payments from the
Swap Account to the extent described herein.
"Class A-5 Certificates": Any one of the Class A-5 Certificates
executed,
authenticated and delivered by the Trustee, substantially in the
form annexed
hereto as Exhibit A-5 and evidencing (i) a Regular Interest in
REMIC II for
purposes of the REMIC Provisions and (ii) the right to receive
payments from the
Swap Account to the extent described herein.
"Class A Certificates": Collectively, the Class A-1 Certificates,
the
Class A-2 Certificates, the Class A-3 Certificates, the Class A-4
Certificates
and the Class A-5 Certificates.
"Class A Principal Distribution Amount": With respect to 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) the applicable Subordination Percentage
and (ii) the
aggregate Stated Principal Balance of the Mortgage Loans as of the
last day of
the related Due Period and (B) the excess, if any, of the aggregate
Stated
8
Principal Balance of the Mortgage Loans as of the last day of the
related Due
Period over the Overcollateralization Floor Amount.
"Class CE Certificate": Any one of the Class CE Certificates
executed,
authenticated and delivered by the Trustee, substantially in the
form annexed
hereto as Exhibit A-16 and evidencing two Regular Interests in
REMIC II for
purposes of the REMIC Provisions together with certain rights to
payments under
the Swap Agreement.
"Class M-1 Certificate": Any one of the Class M-1 Certificates
executed,
authenticated and delivered by the Trustee, substantially in the
form annexed
hereto as Exhibit A-6 and evidencing (i) a Regular Interest in
REMIC II for
purposes of the REMIC Provisions and (ii) the right to receive
payments from the
Swap Account to the extent described herein.
"Class M-1 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
distribution of the Class A Principal Distribution Amount on such
Distribution
Date) and (ii) the Certificate Principal Balance of the Class M-1
Certificates
immediately prior to such Distribution Date over (y) the lesser of
(A) the
product of (i) the applicable Subordination Percentage and (ii) the
aggregate
Stated Principal Balance of the Mortgage Loans as of the last day
of the related
Due Period and (B) the excess, if any, of the aggregate Stated
Principal Balance
of the Mortgage Loans as of the last day of the related Due Period
over the
Overcollateralization Floor Amount.
"Class M-2 Certificate": Any one of the Class M-2 Certificates
executed,
authenticated and delivered by the Trustee, substantially in the
form annexed
hereto as Exhibit A-7 and evidencing (i) a Regular Interest in
REMIC II for
purposes of the REMIC Provisions and (ii) the right to receive
payments from the
Swap Account to the extent described herein.
"Class M-2 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
distribution of the Class A Principal Distribution Amount on such
Distribution
Date), (ii) the Certificate Principal Balance of the Class M-1
Certificates
(after taking into account the distribution of the Class M-1
Principal
Distribution Amount on such Distribution Date) and (iii) the
Certificate
Principal Balance of the Class M-2 Certificates immediately prior
to such
Distribution Date over (y) the lesser of (A) the product of (i) the
applicable
Subordination Percentage and (ii) the aggregate Stated Principal
Balance of the
Mortgage Loans as of the last day of the related Due Period and (B)
the excess,
if any, of the aggregate Stated Principal Balance of the Mortgage
Loans as of
the last day of the related Due Period over the
Overcollateralization Floor
Amount.
"Class M-3 Certificate": Any one of the Class M-3 Certificates
executed,
authenticated and delivered by the Trustee, substantially in the
form annexed
hereto as Exhibit A-8 and evidencing (i) a Regular Interest in
REMIC II for
purposes of the REMIC Provisions and (ii) the right to receive
payments from the
Swap Account to the extent described herein.
9
"Class M-3 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
distribution of the Class A Principal Distribution Amount on such
Distribution
Date), (ii) the Certificate Principal Balance of the Class M-1
Certificates
(after taking into account the distribution of the Class M-1
Principal
Distribution Amount on such Distribution Date), (iii) the
Certificate Principal
Balance of the Class M-2 Certificates (after taking into account
the
distribution of the Class M-2 Principal Distribution Amount on such
Distribution
Date) and (iv) the Certificate Principal Balance of the Class M-3
Certificates
immediately prior to such Distribution Date over (y) the lesser of
(A) the
product of (i) the applicable Subordination Percentage and (ii) the
aggregate
Stated Principal Balance of the Mortgage Loans as of the last day
of the related
Due Period and (B) the excess, if any, of the aggregate Stated
Principal Balance
of the Mortgage Loans as of the last day of the related Due Period
over the
Overcollateralization Floor Amount.
"Class M-4 Certificate": Any one of the Class M-4 Certificates
executed,
authenticated and delivered by the Trustee, substantially in the
form annexed
hereto as Exhibit A-9 and evidencing (i) a Regular Interest in
REMIC II for
purposes of the REMIC Provisions and (ii) the right to receive
payments from the
Swap Account to the extent described herein.
"Class M-4 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
distribution of the Class A Principal Distribution Amount on such
Distribution
Date), (ii) the Certificate Principal Balance of the Class M-1
Certificates
(after taking into account the distribution of the Class M-1
Principal
Distribution Amount on such Distribution Date), (iii) the
Certificate Principal
Balance of the Class M-2 Certificates (after taking into account
the
distribution of the Class M-2 Principal Distribution Amount on such
Distribution
Date), (iv) the Certificate Principal Balance of the Class M-3
Certificates
(after taking into account the distribution of the Class M-3
Principal
Distribution Amount on such Distribution Date) and (v) the
Certificate Principal
Balance of the Class M-4 Certificates immediately prior to such
Distribution
Date over (y) the lesser of (A) the product of (i) the applicable
Subordination
Percentage and (ii) the aggregate Stated Principal Balance of the
Mortgage Loans
as of the last day of the related Due Period and (B) the excess, if
any, of the
aggregate Stated Principal Balance of the Mortgage Loans as of the
last day of
the related Due Period over the Overcollateralization Floor Amount.
"Class M-5 Certificate": Any one of the Class M-5 Certificates
executed,
authenticated and delivered by the Trustee, substantially in the
form annexed
hereto as Exhibit A-10 and evidencing (i) a Regular Interest in
REMIC II for
purposes of the REMIC Provisions and (ii) the right to receive
payments from the
Swap Account to the extent described herein.
"Class M-5 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
distribution of the Class A Principal Distribution Amount on such
Distribution
Date), (ii) the Certificate Principal Balance of the Class M-1
Certificates
(after taking into account the distribution of the Class M-1
Principal
Distribution Amount on such Distribution Date), (iii) the
Certificate Principal
Balance of the Class M-2 Certificates (after
10
taking into account the distribution of the Class M-2 Principal
Distribution
Amount on such Distribution Date), (iv) the Certificate Principal
Balance of the
Class M-3 Certificates (after taking into account the distribution
of the Class
M-3 Principal Distribution Amount on such Distribution Date), (v)
the
Certificate Principal Balance of the Class M-4 Certificates (after
taking into
account the distribution of the Class M-4 Principal Distribution
Amount on such
Distribution Date) and (vi) the Certificate Principal Balance of
the Class M-5
Certificates immediately prior to such Distribution Date over (y)
the lesser of
(A) the product of (i) the applicable Subordination Percentage and
(ii) the
aggregate Stated Principal Balance of the Mortgage Loans as of the
last day of
the related Due Period and (B) the excess, if any, of the aggregate
Stated
Principal Balance of the Mortgage Loans as of the last day of the
related Due
Period over the Overcollateralization Floor Amount.
"Class M-6 Certificate": Any one of the Class M-6 Certificates
executed,
authenticated and delivered by the Trustee, substantially in the
form annexed
hereto as Exhibit A-11 and evidencing (i) a Regular Interest in
REMIC II for
purposes of the REMIC Provisions and (ii) the right to receive
payments from the
Swap Account to the extent described herein.
"Class M-6 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
distribution of the Class A Principal Distribution Amount on such
Distribution
Date), (ii) the Certificate Principal Balance of the Class M-1
Certificates
(after taking into account the distribution of the Class M-1
Principal
Distribution Amount on such Distribution Date), (iii) the
Certificate Principal
Balance of the Class M-2 Certificates (after taking into account
the
distribution of the Class M-2 Principal Distribution Amount on such
Distribution
Date), (iv) the Certificate Principal Balance of the Class M-3
Certificates
(after taking into account the distribution of the Class M-3
Principal
Distribution Amount on such Distribution Date), (v) the Certificate
Principal
Balance of the Class M-4 Certificates (after taking into account
the
distribution of the Class M-4 Principal Distribution Amount on such
Distribution
Date), (vi) the Certificate Principal Balance of the Class M-5
Certificates
(after taking into account the distribution of the Class M-5
Principal
Distribution Amount on such Distribution Date) and (vii) the
Certificate
Principal Balance of the Class M-6 Certificates immediately prior
to such
Distribution Date over (y) the lesser of (A) the product of (i) the
applicable
Subordination Percentage and (ii) the aggregate Stated Principal
Balance of the
Mortgage Loans as of the last day of the related Due Period and (B)
the excess,
if any, of the aggregate Stated Principal Balance of the Mortgage
Loans as of
the last day of the related Due Period over the
Overcollateralization Floor
Amount.
"Class M-7 Certificate": Any one of the Class M-7 Certificates
executed,
authenticated and delivered by the Trustee, substantially in the
form annexed
hereto as Exhibit A-12 and evidencing (i) a Regular Interest in
REMIC II for
purposes of the REMIC Provisions and (ii) the right to receive
payments from the
Swap Account to the extent described herein.
"Class M-7 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
distribution of the Class A Principal Distribution Amount on such
Distribution
Date), (ii) the Certificate Principal Balance of the Class M-1
Certificates
(after
11
taking into account the distribution of the Class M-1 Principal
Distribution
Amount on such Distribution Date), (iii) the Certificate Principal
Balance of
the Class M-2 Certificates (after taking into account the
distribution of the
Class M-2 Principal Distribution Amount on such Distribution Date),
(iv) the
Certificate Principal Balance of the Class M-3 Certificates (after
taking into
account the distribution of the Class M-3 Principal Distribution
Amount on such
Distribution Date), (v) the Certificate Principal Balance of the
Class M-4
Certificates (after taking into account the distribution of the
Class M-4
Principal Distribution Amount on such Distribution Date), (vi) the
Certificate
Principal Balance of the Class M-5 Certificates (after taking into
account the
distribution of the Class M-5 Principal Distribution Amount on such
Distribution
Date), (vii) the Certificate Principal Balance of the Class M-6
Certificates
(after taking into account the distribution of the Class M-6
Principal
Distribution Amount on such Distribution Date) and (viii) the
Certificate
Principal Balance of the Class M-7 Certificates immediately prior
to such
Distribution Date over (y) the lesser of (A) the product of (i) the
applicable
Subordination Percentage and (ii) the aggregate Stated Principal
Balance of the
Mortgage Loans as of the last day of the related Due Period and (B)
the excess,
if any, of the aggregate Stated Principal Balance of the Mortgage
Loans as of
the last day of the related Due Period over the
Overcollateralization Floor
Amount.
"Class M-8 Certificate": Any one of the Class M-8 Certificates
executed,
authenticated and delivered by the Trustee, substantially in the
form annexed
hereto as Exhibit A-13 and evidencing (i) a Regular Interest in
REMIC II for
purposes of the REMIC Provisions and (ii) the right to receive
payments from the
Swap Account to the extent described herein.
"Class M-8 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
distribution of the Class A Principal Distribution Amount on such
Distribution
Date), (ii) the Certificate Principal Balance of the Class M-1
Certificates
(after taking into account the distribution of the Class M-1
Principal
Distribution Amount on such Distribution Date), (iii) the
Certificate Principal
Balance of the Class M-2 Certificates (after taking into account
the
distribution of the Class M-2 Principal Distribution Amount on such
Distribution
Date), (iv) the Certificate Principal Balance of the Class M-3
Certificates
(after taking into account the distribution of the Class M-3
Principal
Distribution Amount on such Distribution Date), (v) the Certificate
Principal
Balance of the Class M-4 Certificates (after taking into account
the
distribution of the Class M-4 Principal Distribution Amount on such
Distribution
Date), (vi) the Certificate Principal Balance of the Class M-5
Certificates
(after taking into account the distribution of the Class M-5
Principal
Distribution Amount on such Distribution Date), (vii) the
Certificate Principal
Balance of the Class M-6 Certificates (after taking into account
the
distribution of the Class M-6 Principal Distribution Amount on such
Distribution
Date), (viii) the Certificate Principal Balance of the Class M-7
Certificates
(after taking into account the distribution of the Class M-7
Principal
Distribution Amount on such Distribution Date) and (ix) the
Certificate
Principal Balance of the Class M-8 Certificates immediately prior
to such
Distribution Date over (y) the lesser of (A) the product of (i) the
applicable
Subordination Percentage and (ii) the aggregate Stated Principal
Balance of the
Mortgage Loans as of the last day of the related Due Period and (B)
the excess,
if any, of the aggregate Stated Principal Balance of the Mortgage
Loans as of
the last day of the related Due Period over the
Overcollateralization Floor
Amount.
12
"Class M-9 Certificate": Any one of the Class M-9 Certificates
executed,
authenticated and delivered by the Trustee, substantially in the
form annexed
hereto as Exhibit A-14 and evidencing (i) a Regular Interest in
REMIC II for
purposes of the REMIC Provisions and (ii) the right to receive
payments from the
Swap Account to the extent described herein.
"Class M-9 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
distribution of the Class A Principal Distribution Amount on such
Distribution
Date), (ii) the Certificate Principal Balance of the Class M-1
Certificates
(after taking into account the distribution of the Class M-1
Principal
Distribution Amount on such Distribution Date), (iii) the
Certificate Principal
Balance of the Class M-2 Certificates (after taking into account
the
distribution of the Class M-2 Principal Distribution Amount on such
Distribution
Date), (iv) the Certificate Principal Balance of the Class M-3
Certificates
(after taking into account the distribution of the Class M-3
Principal
Distribution Amount on such Distribution Date), (v) the Certificate
Principal
Balance of the Class M-4 Certificates (after taking into account
the
distribution of the Class M-4 Principal Distribution Amount on such
Distribution
Date), (vi) the Certificate Principal Balance of the Class M-5
Certificates
(after taking into account the distribution of the Class M-5
Principal
Distribution Amount on such Distribution Date), (vii) the
Certificate Principal
Balance of the Class M-6 Certificates (after taking into account
the
distribution of the Class M-6 Principal Distribution Amount on such
Distribution
Date), (viii) the Certificate Principal Balance of the Class M-7
Certificates
(after taking into account the distribution of the Class M-7
Principal
Distribution Amount on such Distribution Date), (ix) the
Certificate Principal
Balance of the Class M-8 Certificates (after taking into account
the
distribution of the Class M-8 Principal Distribution Amount on such
Distribution
Date) and (x) the Certificate Principal Balance of the Class M-9
Certificates
immediately prior to such Distribution Date over (y) the lesser of
(A) the
product of (i) the applicable Subordination Percentage and (ii) the
aggregate
Stated Principal Balance of the Mortgage Loans as of the last day
of the related
Due Period and (B) the excess, if any, of the aggregate Stated
Principal Balance
of the Mortgage Loans as of the last day of the related Due Period
over the
Overcollateralization Floor Amount.
"Class M-10 Certificate": Any one of the Class M-10 Certificates
executed,
authenticated and delivered by the Trustee, substantially in the
form annexed
hereto as Exhibit A-15 and evidencing (i) a Regular Interest in
REMIC II for
purposes of the REMIC Provisions and (ii) the right to receive
payments from the
Swap Account to the extent described herein.
"Class M-10 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
distribution of the Class A Principal Distribution Amount on such
Distribution
Date), (ii) the Certificate Principal Balance of the Class M-1
Certificates
(after taking into account the distribution of the Class M-1
Principal
Distribution Amount on such Distribution Date), (iii) the
Certificate Principal
Balance of the Class M-2 Certificates (after taking into account
the
distribution of the Class M-2 Principal Distribution Amount on such
Distribution
Date), (iv) the Certificate Principal Balance of the Class M-3
Certificates
(after taking into account the distribution of the Class M-3
Principal
Distribution Amount on such Distribution Date), (v) the Certificate
Principal
Balance of the Class M-4 Certificates (after
13
taking into account the distribution of the Class M-4 Principal
Distribution
Amount on such Distribution Date), (vi) the Certificate Principal
Balance of the
Class M-5 Certificates (after taking into account the distribution
of the Class
M-5 Principal Distribution Amount on such Distribution Date), (vii)
the
Certificate Principal Balance of the Class M-6 Certificates (after
taking into
account the distribution of the Class M-6 Principal Distribution
Amount on such
Distribution Date), (viii) the Certificate Principal Balance of the
Class M-7
Certificates (after taking into account the distribution of the
Class M-7
Principal Distribution Amount on such Distribution Date), (ix) the
Certificate
Principal Balance of the Class M-8 Certificates (after taking into
account the
distribution of the Class M-8 Principal Distribution Amount on such
Distribution
Date), (x) the Certificate Principal Balance of the Class M-9
Certificates
(after taking into account the distribution of the Class M-9
Principal
Distribution Amount on such Distribution Date) and (xi) the
Certificate
Principal Balance of the Class M-10 Certificates immediately prior
to such
Distribution Date over (y) the lesser of (A) the product of (i) the
applicable
Subordination Percentage and (ii) the aggregate Stated Principal
Balance of the
Mortgage Loans as of the last day of the related Due Period and (B)
the excess,
if any, of the aggregate Stated Principal Balance of the Mortgage
Loans as of
the last day of the related Due Period over the
Overcollateralization Floor
Amount.
"Class M Principal Distribution Amount": The Class M-1 Principal
Distribution Amount, the Class M-2 Principal Distribution Amount,
the Class M-3
Principal Distribution Amount, the Class M-4 Principal Distribution
Amount, the
Class M-5 Principal Distribution Amount, the Class M-6 Principal
Distribution
Amount, the Class M-7 Principal Distribution Amount, the Class M-8
Principal
Distribution Amount, the Class M-9 Principal Distribution Amount or
the Class
M-10 Principal Distribution Amount, as applicable.
"Class P Certificate": Any one of the Class P Certificates
executed,
authenticated and delivered by the Trustee, substantially in the
form annexed
hereto as Exhibit A-17 evidencing a Regular Interest in REMIC II
for purposes of
the REMIC Provisions.
"Class R Certificate": Any one of the Class R Certificates
executed,
authenticated and delivered by the Trustee, substantially in the
form annexed
hereto as Exhibit A-18 and Exhibit A-9 evidencing the ownership of
the Class R-I
Interest and the Class R-II Interest, respectively.
"Class R-I Interest": The uncertificated Residual Interest in REMIC
I.
"Class R-II Interest": The uncertificated Residual Interest in
REMIC II.
"Closing Date": October 18, 2006.
"Code": The Internal Revenue Code of 1986, as amended.
"Commission": The Securities and Exchange Commission.
"Controlling Person" means, with respect to any Person, any other
Person
who "controls" such Person within the meaning of the Securities
Act.
14
"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 office
at the date
of the execution of this Agreement is located at (i) for purposes
of the
transfer and exchange of the certificates, Sixth Street and
Marquette Avenue,
Minneapolis, Minnesota 55479-0113, Attention: Corporate Trust
Services -
Carrington 2006-FRE2, and (ii) for all other purposes, 9062 Old
Annapolis Road,
Columbia, Maryland 21045, Attention: Client Manager - Carrington
2006-FRE2.
"Corresponding Certificate": With respect to each REMIC I Regular
Interest
set forth below, the Regular Certificate set forth in the table
below:
REMIC I REGULAR INTEREST
CERTIFICATE
--------------------------------------------------
I-LTA1
Class A-1
I-LTA2
Class A-2
I-LTA3
Class A-3
I-LTA4
Class A-4
I-LTA5
Class A-5
I-LTM1
Class M-1
I-LTM2
Class M-2
I-LTM3
Class M-3
I-LTM4
Class M-4
I-LTM5
Class M-5
I-LTM6
Class M-6
I-LTM7
Class M-7
I-LTM8
Class M-8
I-LTM9
Class M-9
I-LTM10
Class M-10
I-LTP
Class P
"Credit Enhancement Percentage": For any Distribution Date and for
any
Class of Certificates, the percentage equivalent of a fraction, the
numerator of
which is the sum of the aggregate Certificate Principal Balance of
the Classes
of Certificates with a lower distribution priority than such Class
(including
the Class CE Certificates), calculated after taking into account
payments of
principal on the Mortgage Loans and distribution of the Principal
Distribution
Amount to the Holders of the Certificates then entitled to
distributions of
principal on such Distribution Date, and the denominator of which
is the
aggregate Stated Principal Balance of the Mortgage Loans as of the
last day of
the related Due Period (after giving effect to scheduled payments
of principal
due during the related Due Period, to the extent received or
advanced, and
unscheduled collections of principal received during the related
Prepayment
Period).
"Credit Support Depletion Date": The first Distribution Date on
which the
Certificate Principal Balances of the Mezzanine Certificates and
the Class CE
Certificates have been reduced to zero.
"Custodial Account": The account or accounts created and
maintained, or
caused to be created and maintained, by the Servicer pursuant to
Section
3.10(a), which shall be entitled "Fremont Investment & Loan, as
Servicer for
Wells Fargo Bank, N.A., as Trustee, in trust for the registered
holders of
Carrington Mortgage Loan Trust, Series 2006-FRE2, Asset-Backed
Pass-Through
Certificates." The Custodial Account must be an Eligible Account.
15
"Cut-off Date": With respect to each Original Mortgage Loan,
October 1,
2006. 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 each such Mortgage Loan.
"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.
"Defaulting Party": As defined in the Swap 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 Stated 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).
"Deleted Mortgage Loan": A Mortgage Loan replaced or to be replaced
by a
Qualified Substitute Mortgage Loan.
"Delinquency Percentage": As of the last day of the related Due
Period,
the percentage equivalent of a fraction, the numerator of which is
the aggregate
unpaid principal balance of the Rolling Three-Month Delinquency
Average of the
Mortgage Loans and the denominator of which is the aggregate unpaid
principal
balance of the Mortgage Loans and REO Properties as of the last day
of the
previous calendar month; provided, however, that any Mortgage Loan
purchased by
the Servicer pursuant to Section 3.16(c) shall not be included in
either the
numerator or the denominator for purposes of calculating the
Delinquency
Percentage.
"Depositor": Stanwich Asset Acceptance Company, L.L.C., a Delaware
limited
liability company, or its successor in interest.
"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 (or,
in the case of a depository institution that is the principal
subsidiary of a
holding company, such holding company has unsecured commercial
paper or other
short-term unsecured debt
16
obligations) that are rated at least P-1 by Moody's, F-1 by Fitch
(if rated by
Fitch) and A-1+ by S&P.
"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 REMIC I 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, makes
payment on or otherwise discharges tax or insurance obligations, or
makes
decisions as to repairs or capital expenditures with respect to
such REO
Property.
"Disqualified Organization": Any organization defined as a
"disqualified
organization" under Section 860E(e)(5) of the Code, including, if
not otherwise
included, 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" and (vi) any other
Person as set
forth in an Opinion of Counsel delivered to the Trustee and the
Depositor to the
effect that the holding of an Ownership Interest in a Residual
Certificate by
such Person may cause any Trust REMIC 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 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 November 2006.
17
"Due Date": With respect to each Mortgage Loan and any Distribution
Date,
the first day of the calendar month in which such Distribution Date
occurs on
which the Monthly Payment for such Mortgage Loan was due (or, in
the case of any
Mortgage Loan under terms of which the Monthly Payment for such
Mortgage Loan
was due on a day other than the first day of the calendar month in
which such
Distribution Date occurs, the day during the related Due Period on
which such
Monthly Payment was due), in each case exclusive of any days of
grace.
"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
of such
Distribution Date.
"EDGAR": As defined in Section 4.06.
"Eligible Account": Any of (i) an account or accounts maintained
with a
Depository Institution, (ii) an account or accounts the deposits in
which are
fully insured by the FDIC or (iii) a segregated non-interest
bearing 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.
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Payments": As defined in Section 3.09.
"Excess Overcollateralized Amount": With respect to the Class A
Certificates and the Mezzanine Certificates and any Distribution
Date, the
excess, if any, of (i) the Overcollateralization Amount for such
Distribution
Date (calculated for this purpose only after assuming that 100% of
the Principal
Remittance Amount on such Distribution Date has been distributed)
over (ii) the
Overcollateralization Target Amount for such Distribution Date.
"Exchange Act": As defined in Section 4.06.
"Expense Adjusted 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 thereon as of
the first day
of the related Due Period minus the sum of (i) the Trustee Fee Rate
and (ii) the
Servicing Fee Rate.
"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 8.05 or Section 10.01(c) and any
amounts payable
from the Certificate Account in respect of taxes pursuant to
Section
10.01(g)(iii) and any costs of the Trustee for the recording of the
Assignments
pursuant to Section 2.01 (to the extent the Seller is unable to pay
such costs).
"Fannie Mae": Fannie Mae, a federally chartered and privately owned
corporation organized and existing under the Federal National
Mortgage
Association Charter Act, or any successor thereto.
18
"FDIC": Federal Deposit Insurance Corporation or any successor
thereto.
"Final Recovery Determination": With respect to any defaulted
Mortgage
Loan or any REO Property (other than a Mortgage Loan or REO
Property purchased
by the Responsible Party, the Depositor or the Servicer pursuant to
or as
contemplated by Section 2.03, Section 3.16(c) or Section 9.01), 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.
"Fitch": Fitch Ratings, or its successor in interest.
"Fixed Swap Payment": With respect to the Business Day prior to any
Distribution Date on or prior to the Distribution Date in June
2010, an amount
equal to the product of (x) a fixed rate equal to 5.076% per annum,
(y) the Swap
Agreement Notional Balance for that Distribution Date and (z)(i)
with respect to
the Business Day prior to the initial Distribution Date, a
fraction, the
numerator of which is the number of days from and including the
Closing Date to
and including the day preceding the initial Distribution Date and
the
denominator of which is 360 and (ii) with respect to the Business
day prior to
each Distribution Date thereafter, a fraction, the numerator of
which is 30 and
the denominator of which is 360.
"Floating Swap Payment": With respect to the Business Day prior to
any
Distribution Date on or prior to the Distribution Date in June
2010, an amount
equal to the product of (x) Swap LIBOR (y) the Swap Agreement
Notional Balance
for that Distribution Date and (z) a fraction, the numerator of
which is equal
to the actual number of days in the related calculation period as
provided in
the Swap Agreement and the denominator of which is 360.
"Fixed-Rate Mortgage Loan": Each of the Mortgage Loans identified
on the
Mortgage Loan Schedule as having a fixed Mortgage Rate.
"Formula Rate": For any Distribution Date and the Class A
Certificates and
the Mezzanine Certificates, One-Month LIBOR plus the related
Margin.
"Freddie Mac": Freddie Mac, a corporate instrumentality of the
United
States created and existing under Title III of the Emergency Home
Finance Act of
1970, as amended, or any successor thereto.
"Gross Margin": With respect to each Adjustable-Rate Mortgage Loan,
the
fixed percentage 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
Adjustable-Rate
Mortgage Loan.
"Highest Priority": As of any date of determination, the Class of
Mezzanine Certificates then outstanding with a Certificate
Principal Balance
greater than zero, with the highest priority for payments pursuant
to Section
4.01, in the following order: Class M-1, Class M-2, Class M-3,
19
Class M-4, Class M-5, Class M-6, Class M-7, Class M-8, Class M-9
and Class M-10
Certificates.
"Indenture": An indenture relating to the issuance of notes secured
by the
Class CE Certificates, the Class P Certificates and/or the Class R
Certificates
(or any portion thereof).
"Independent": When used with respect to any specified Person, any
such
Person who (i) is in fact independent of the Depositor, the
Servicer, the Seller
and their respective Affiliates, (ii) does not have any direct
financial
interest in or any material indirect financial interest in the
Depositor, the
Servicer, the Seller or any Affiliate thereof, and (iii) is not
connected with
the Depositor, the Servicer, the Seller 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, the Seller 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, the Servicer, the Seller 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 REMIC I
within the
meaning of Section 856(d)(3) of the Code if REMIC I 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 REMIC I does
not receive
or derive any income from such Person and provided that the
relationship between
such Person and REMIC I 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 specified in the related
Mortgage Note.
"Insurance Proceeds": Proceeds of any title policy, hazard policy
or other
insurance policy covering a Mortgage Loan, to the extent such
proceeds are not
to be applied to the restoration of the related Mortgaged Property
or released
to the Mortgagor in accordance with the procedures that the
Servicer would
follow in servicing mortgage loans held for its own account,
subject to the
terms and conditions of the related Mortgage Note and Mortgage.
"Interest Accrual Period": With respect to any Distribution Date
and the
Class A Certificates and the Mezzanine Certificates, the period
commencing on
the Distribution Date of the month immediately preceding the month
in which such
Distribution Date occurs (or, in the case of the first Distribution
Date,
commencing on the Closing Date) and ending on the day preceding
such
Distribution Date. With respect to any Distribution Date and the
Class CE
20
Certificates and the REMIC I Regular Interests, the one-month
period ending on
the last day of the calendar month preceding the month in which
such
Distribution Date occurs.
"Interest Carry Forward Amount": With respect to any Distribution
Date and
the Class A Certificates or the Mezzanine Certificates, the sum of
(i) the
amount, if any, by which (a) the Interest Distribution Amount for
such Class of
Certificates as of the immediately preceding Distribution Date
exceeded (b) the
actual amount distributed on such Class of Certificates in respect
of interest
on such immediately preceding Distribution Date, (ii) the amount of
any Interest
Carry Forward Amount for such Class of Certificates remaining
unpaid from
previous Distribution Dates and (iii) accrued interest on the sum
of (i) and
(ii) above calculated at the related Pass-Through Rate for the most
recently
ended Interest Accrual Period.
"Interest Determination Date": With respect to the Class A
Certificates,
the Mezzanine Certificates, REMIC I Regular Interest I-LTA1, REMIC
I Regular
Interest I-LTA2, REMIC I Regular Interest I-LTA3, REMIC I Regular
Interest
I-LTA4, REMIC I Regular Interest I-LTA5, REMIC I Regular Interest
I-LTM1, REMIC
I Regular Interest I-LTM2, REMIC I Regular Interest I-LTM3, REMIC I
Regular
Interest I-LTM4, REMIC I Regular Interest I-LTM5, REMIC I Regular
Interest
I-LTM6, REMIC I Regular Interest I-LTM7, REMIC I Regular Interest
I-LTM8, REMIC
I Regular Interest I-LTM9, REMIC I Regular Interest I-LTM10 and any
Interest
Accrual Period therefor, the second London Business Day preceding
the
commencement of such Interest Accrual Period.
"Interest Distribution Amount": With respect to any Distribution
Date and
the Class A Certificates, the Mezzanine Certificates and the Class
CE
Certificates, the aggregate Accrued Certificate Interest on the
Certificates of
such Class for such Distribution Date.
"Interest Remittance Amount": For any Distribution Date, the
excess, if
any, of (i) that portion of the Available Distribution Amount
(without giving
effect to any Net Swap Payment owed to the Swap Counterparty or any
Swap
Termination Payment owed to the Swap Counterparty not due to a Swap
Counterparty
Trigger Event) for that Distribution Date that represents interest
received or
advanced on the Mortgage Loans over (ii) any Net Swap Payment owed
to the Swap
Counterparty or Swap Termination Payment not due to a Swap
Counterparty Trigger
Event owed to the Swap Counterparty.
"Investment Account": As defined in Section 3.12.
"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.
"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; or (iii) such
Mortgage Loan is
removed from REMIC I, by reason of its being
21
purchased, sold or replaced pursuant to or as contemplated by
Section 2.03,
Section 3.16(c) or Section 9.01. 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 REMIC I by
reason of its
being purchased pursuant to Section 9.01.
"Liquidation Proceeds": The amount (other than Insurance Proceeds
or
amounts received in respect of the rental of any REO Property prior
to REO
Disposition) received by the Servicer in connection with (i) the
taking of all
or a part of a Mortgaged Property by exercise of the power of
eminent domain or
condemnation, (ii) the liquidation of a defaulted Mortgage Loan
through a
trustee's sale, foreclosure sale or otherwise, or (iii) the
repurchase,
substitution or sale of a Mortgage Loan or an REO Property pursuant
to or as
contemplated by Section 2.03, Section 3.16(c), Section 3.23 or
Section 9.01.
"Loan-to-Value Ratio": 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.
"London Business Day": Any day on which banks in the City of London
and
New York are open and conducting transactions in United States
dollars.
"Margin": With respect to each class of the Class A Certificates
and
Mezzanine Certificates and, for purposes of the Marker Rate and the
Maximum
I-LTZZ Uncertificated Interest Deferral Amount, the specified REMIC
I Regular
Interest, as follows:
Class
REMIC I Regular Interest
Margin
-------
--------------------------
----------------------
(1) (%)
(2) (%)
---------
----------
A-1
I-LTA1
0.070%
0.140%
A-2
I-LTA2
0.120%
0.240%
A-3
I-LTA3
0.160%
0.320%
A-4
I-LTA4
0.250%
0.500%
A-5
I-LTA5
0.080%
0.160%
M-1
I-LTM1
0.310%
0.465%
M-2
I-LTM2
0.320%
0.480%
M-3
I-LTM3
0.340%
0.510%
M-4
I-LTM4
0.400%
0.600%
M-5
I-LTM5
0.420%
0.630%
M-6
I-LTM6
0.480%
0.720%
M-7
I-LTM7
0.850%
1.275%
M-8
I-LTM8
1.050%
1.575%
M-9
I-LTM9
2.000%
3.000%
M-10
I-LTM10
2.000%
3.000%
______________
(1)
For each Interest Accrual Period for each Distribution Date on or
prior to the Optional Termination Date.
(2)
For each Interest Accrual Period thereafter.
"Marker Rate": With respect to the Class CE Certificates or the
REMIC II
Regular Interest CE-IO and any Distribution Date, a per annum rate
equal to two
(2) multiplied by the weighted average of the REMIC I Remittance
Rates for the
REMIC I Regular Interests (other than REMIC I Regular Interest
I-LTP and REMIC I
Regular Interest I-LTAA), with the rate on each such REMIC I
Regular Interest
(other than REMIC I Regular Interest I-LTZZ) subject to a
22
cap equal to the Pass-Through Rate for the related Corresponding
Certificate and
with the rate on REMIC I Regular Interest I-LTZZ subject to a cap
of zero, in
each case for purposes of this calculation; provided, however, each
cap shall be
multiplied by a fraction, the numerator of which is the actual
number of days
elapsed in the related Interest Accrual Period and the denominator
of which is
30.
"Maximum I-LTZZ Uncertificated Interest Deferral Amount": With
respect to
any Distribution Date, the excess of (i) accrued interest at the
REMIC I
Remittance Rate applicable to REMIC I Regular Interest I-LTZZ for
such
Distribution Date on a balance equal to the Uncertificated Balance
of REMIC I
Regular Interest I-LTZZ minus the REMIC I Overcollateralized
Amount, in each
case for such Distribution Date, over (ii) Uncertificated Interest
on REMIC I
Regular Interest I-LTA1, REMIC I Regular Interest I-LTA2, REMIC I
Regular
Interest I-LTA3, REMIC I Regular Interest I-LTA4, REMIC I Regular
Interest
I-LTA5, REMIC I Regular Interest I-LTM1, REMIC I Regular Interest
I-LTM2, REMIC
I Regular Interest I-LTM3, REMIC I Regular Interest I-LTM4, REMIC I
Regular
Interest I-LTM5, REMIC I Regular Interest I-LTM6, REMIC I Regular
Interest
I-LTM7, REMIC I Regular Interest I-LTM8, REMIC I Regular Interest
I-LTM9 and
REMIC I Regular Interest I-LTM10 for such Distribution Date, with
the rate on
each such REMIC I Regular Interest subject to a cap equal to the
lesser of (i)
One-Month LIBOR plus the related Margin for the related
Corresponding
Certificate and (ii) the Net WAC Pass-Through Rate for the related
Corresponding
Certificate; provided, however, each cap shall be multiplied by a
fraction, the
numerator of which is the actual number of days elapsed in the
related Interest
Accrual Period and the denominator of which is 30.
"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.
"Mezzanine Certificates": Collectively, the Class M-1 Certificates,
the
Class M-2 Certificates, the Class M-3 Certificates, the Class M-4
Certificates,
the Class M-5 Certificates, the Class M-6 Certificates, the Class
M-7
Certificates, the Class M-8 Certificates, the Class M-9
Certificates and the
Class M-10 Certificates.
"Minimum Mortgage Rate": With respect to each Adjustable-Rate
Mortgage
Loan, the percentage set forth in the related Mortgage Note as the
minimum
Mortgage Rate thereunder.
"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 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.
23
"Mortgage": With respect to each Mortgage Note, the mortgage, deed
of
trust or other instrument creating a first lien 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 and delivered to the Trustee pursuant to Section 2.01 or
Section 2.03(b)
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.
"Mortgage Loan Purchase Agreement": The agreement among the Seller,
the
Responsible Party and the Depositor, regarding the sale of the
Mortgage Loans by
the Seller to the Depositor, substantially in the form of Exhibit D
annexed
hereto.
"Mortgage Loan Schedule": As of any date, the list of Mortgage
Loans
included in REMIC I 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 Mortgage Loan identifying number;
(ii)
the state and zip code of the Mortgaged Property;
(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 original date of the Mortgage Loan and the remaining
months to maturity from the Cut-off Date, based on the original
amortization schedule;
(vii)
with respect to each Mortgage Loan secured by a first
lien, the Loan-to-Value Ratio at origination;
(viii)
with respect to each Mortgage Loan secured by a second
lien, the combined Loan-to-Value Ratio at origination;
(ix)
the Mortgage Rate in effect immediately following the
Cut-off Date;
(x)
the date on which the first Monthly Payment was due on the
Mortgage Loan;
(xi)
the stated maturity date;
(xii)
the amount of the Monthly Payment at origination;
24
(xiii)
the amount of the Monthly Payment due on the first Due
Date after the Cut-off Date;
(xiv)
the last Due Date on which a Monthly Payment was actually
applied to the unpaid Stated Principal Balance;
(xv)
the original principal amount of the Mortgage Loan;
(xvi)
the Stated Principal Balance of the Mortgage Loan as of
the close of business on the Cut-off Date;
(xvii)
with respect to each Adjustable-Rate Mortgage Loan, the
Adjustment Dates, the Gross Margin, the Maximum Mortgage Rate, the
Minimum
Mortgage Rate, the Periodic Rate Cap, the maximum first Adjustment
Date
Mortgage Rate adjustment, the first Adjustment Date immediately
following
the origination date and the rounding code (i.e., nearest 0.125%,
next
highest 0.125%);
(xviii)
a code indicating the purpose of the Mortgage Loan (i.e.,
purchase financing, Rate/Term Refinancing, Cash-Out Refinancing);
(xix)
the Mortgage Rate at origination;
(xx)
the date on which the first Monthly Payment was due on the
Mortgage Loan and, if such date is not consistent with the Due Date
currently in effect, such Due Date;
(xxi)
a code indicating whether the Mortgage Loan is an
Adjustable Rate Mortgage Loan or a Fixed Rate Mortgage Loan;
(xxii)
a code indicating the documentation program (i.e., Full
Documentation, Limited Documentation, Stated Income Documentation);
(xxiii)
the risk grade;
(xxiv)
the Value of the Mortgaged Property;
(xxv)
the sale price of the Mortgaged Property, if applicable;
(xxvi)
the actual unpaid principal balance of the Mortgage Loan
as of the Cut-off Date;
(xxvii)
the type and term of the related Prepayment Charge;
(xxviii)
the product type (e.g., 2/28, 15 year fixed, 30 year
fixed, 15/30 balloon, etc.);
(xxix)
the program code;
25
(xxx)
the total amount of points and fees charged such Mortgage
Loan;
(xxxi)
the mortgagor's debt to income ratio;
(xxxii)
a code indicating whether the Mortgaged Property is
subject to a first lien or a second lien;
(xxxiii)
a code indicating the credit score of the mortgagor at the
time of origination of the Mortgage Loan;
(xxxiv)
the Mortgage Loan's payment history;
(xxxv)
a code indicating the type of appraisal (i.e. checklist,
drive-by, desk, full, etc.);
(xxxvi)
a code indicating if the Mortgage Loan is an interest-only
Mortgage Loan (and if for any Mortgage Loan the term is other than
5
years, a code indicating the term of the interest-only period of
such
Mortgage Loan);
(xxxvii)
the mortgagor's income at origination;
(xxxviii) the amortized original term to maturity as of the Cut-off
Date;
(xxxix)
with respect to each Adjustable Rate Mortgage Loan, a code
indicating the frequency of adjustment of the related Mortgage
Rate;
(xl)
the number of units in the related Mortgaged Property;
(xli)
a code indicating whether the related Mortgagor is
self-employed; and
(xlii)
a code indicating the credit grade.
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 Stated Principal Balance of the Mortgage Loans;
(3)
the weighted average Mortgage Rate of the Mortgage Loans;
(4)
weighted average maturity of the Mortgage Loans; and
(5)
the delinquency status as of the Cut off Date.
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
26
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 and
existing from time to time thereafter, 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, which rate (i)
with respect to
each Fixed-Rate Mortgage Loan shall remain constant at the rate set
forth in the
Mortgage Loan Schedule as the Mortgage Rate in effect immediately
following the
Cut-off Date and (ii) with respect to the Adjustable-Rate Mortgage
Loans, (A) as
of any date of determination until the first Adjustment Date
following the
Cut-off Date shall be the rate set forth in the Mortgage Loan
Schedule as the
Mortgage Rate in effect immediately following the Cut-off Date and
(B) as of any
date of determination thereafter shall be the rate as adjusted on
the most
recent Adjustment Date equal to the sum, rounded as provided in the
Mortgage
Note, of the Index, as most recently available as of a date prior
to the
Adjustment Date as set forth in the related Mortgage Note, plus the
related
Gross Margin; provided that the Mortgage Rate on such
Adjustable-Rate Mortgage
Loan on any Adjustment Date shall never be more than the lesser of
(i) the sum
of the Mortgage Rate in effect immediately prior to the Adjustment
Date plus the
related Periodic Rate Cap, if any, and (ii) the related Maximum
Mortgage Rate,
and shall never be less than the greater of (i) the Mortgage Rate
in effect
immediately prior to the Adjustment Date less the Periodic Rate
Cap, if any, and
(ii) the related Minimum Mortgage Rate. 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 a fee simple estate in a
parcel of
land improved by a Residential Dwelling.
"Mortgagor": The obligor on a Mortgage Note.
"Net Monthly Excess Cashflow": With respect to any Distribution
Date, the
sum of (i) any Overcollateralization Reduction Amount and (ii) the
excess of (x)
the Available Distribution Amount for such Distribution Date over
(y) the sum
for such Distribution Date of (A) the Senior Interest Distribution
Amount
distributable to the holders of the Class A Certificates, (B) the
Interest
Distribution Amount distributable to the holders of the Mezzanine
Certificates
and (C) the Principal Remittance Amount.
"Net Swap Payment": With respect to each Distribution Date, the net
payment required to be made on the Business Day prior to such
Distribution Date
pursuant to the terms of the
27
Swap Agreement by either the Swap Counterparty or the Trustee, on
behalf of the
Trust, which net payment shall not take into account any Swap
Termination
Payment.
"Net WAC Pass-Through Rate": With respect to the Class A
Certificates and
the Mezzanine Certificates and any Distribution Date, a rate per
annum (which
will not be less than zero) equal to the excess, if any, of (a) the
product of
(i) a per annum rate equal to the weighted average of the Expense
Adjusted
Mortgage Rates on the then outstanding Mortgage Loans, weighted on
the basis of
the respective Stated Principal Balances of the Mortgage Loans as
of the first
day of the related Due Period and (ii) a fraction expressed as a
percentage, the
numerator of which is 30 and the denominator of which is the actual
number of
days in the related Interest Accrual Period, over (b) the product
of (i) a
fraction expressed as a percentage the numerator of which is the
amount of any
Net Swap Payments owed to the Swap Counterparty or Swap Termination
Payment owed
to the Swap Counterparty not due to a Swap Counterparty Trigger
Event, and the
denominator of which is equal to the Stated Principal Balance of
the outstanding
Mortgage Loans as of the first day of the related Due Period and
(ii) a fraction
expressed as a percentage, the numerator of which is 360 and the
denominator of
which is the actual number of days in the related Interest Accrual
Period. For
federal income tax purposes, however, the foregoing shall be
expressed as a per
annum rate equal to the weighted average of the REMIC I Remittance
Rates on the
REMIC I Regular Interests, weighted on the basis of the
Uncertificated Balance
of each such REMIC I Regular Interests.
"Net WAC Rate Carryover Amount": With respect to any Class of the
Class A
Certificates and the Mezzanine Certificates and any Distribution
Date, the sum
of (A) the positive excess of (i) the amount of interest that would
have accrued
on such Class of Certificates for such Distribution Date had the
Pass-Through
Rate been calculated at the related Formula Rate (not to exceed
12.50% per
annum) over (ii) the amount of interest that accrued on such Class
of
Certificates at the Net WAC Pass-Through Rate for such Distribution
Date and (B)
the undistributed portion of any related Net WAC Rate Carryover
Amount from
prior Distribution Dates, together with interest accrued on such
undistributed
portion for the most recently ended Interest Accrual Period at the
Formula Rate
(not to exceed 12.50% per annum) applicable for such Class of
Certificates for
such Interest Accrual Period.
"New Lease": Any lease of REO Property entered into on behalf of
REMIC I,
including any lease renewed or extended on behalf of REMIC I, if
REMIC I has the
right to renegotiate the terms of such lease.
"Nonrecoverable Advance": Any 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, will not or, in the case of a
proposed
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, will not or, in
the case of a
proposed Servicing Advance,
28
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.
"Notional Amount": With respect to the Class CE Certificates and
any
Distribution Date, the aggregate Uncertificated Balance of the
REMIC I Regular
Interests for such Distribution Date.
"Officers' Certificate": A certificate signed by the Chairman of
the
Board, the Vice Chairman of the Board, the President or a vice
president
(however denominated), and by the Treasurer, the Secretary, or one
of the
assistant treasurers or assistant secretaries of the Servicer, the
Seller or the
Depositor, as applicable.
"One-Month LIBOR": With respect to the Class A Certificates, the
Mezzanine
Certificates and for purposes of the Marker Rate and Maximum I-LTZZ
Uncertificated Interest Deferral Amount, REMIC I Regular Interest
I-LTA1, REMIC
I Regular Interest I-LTA2, REMIC I Regular Interest I-LTA3, REMIC I
Regular
Interest I-LTA4, REMIC I Regular Interest I-LTA5, REMIC I Regular
Interest
I-LTM1, REMIC I Regular Interest I-LTM2, REMIC I Regular Interest
I-LTM3, REMIC
I Regular Interest I-LTM4, REMIC I Regular Interest I-LTM5, REMIC I
Regular
Interest I-LTM6, REMIC I Regular Interest I-LTM7, REMIC I Regular
Interest
I-LTM8, REMIC I Regular Interest I-LTM9 and REMIC I Regular
Interest I-LTM10 and
any Interest Accrual Period therefor, the rate determined by the
Trustee 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) LIBOR as determined on the previous Interest
Determination Date
and (ii) the Reserve Interest Rate. Notwithstanding the foregoing,
if, under the
priorities described above, LIBOR for an Interest Determination
Date would be
based on LIBOR for the previous Interest Determination Date for the
third
consecutive Interest Determination Date, the Trustee, after
consultation with
the Depositor, 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. The establishment of One-Month LIBOR by the Trustee and the
Trustee's
subsequent calculation of the interest rates applicable to the
Certificates for
the relevant Interest Accrual Period, in the absence of manifest
error, shall be
final and binding.
29
"Opinion of Counsel": A written opinion of counsel, who may,
without
limitation, be salaried counsel for the Depositor or the Servicer,
acceptable to
the Trustee, if such opinion is delivered to the Trustee, except
that any
opinion of counsel relating to (a) the qualification of any Trust
REMIC as a
REMIC or (b) compliance with the REMIC Provisions must be an
opinion of
Independent counsel.
"Original Mortgage Loan": Any of the Mortgage Loans included in
REMIC I as
of the Closing Date.
"Originator": Fremont Investment & Loan, a California
industrial bank, or
its successor in interest.
"Overcollateralization Amount": With respect to 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 over (b)
the sum of the aggregate Certificate Principal Balance of the Class
A
Certificates, the Mezzanine Certificates and the Class P
Certificates, after
giving effect to distributions to be made 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 (calculated for this
purpose only
after assuming that 100% of the Principal Remittance Amount on such
Distribution
Date has been distributed).
"Overcollateralization Floor Amount": With respect to any
Distribution
Date, the amount equal to 0.50% of the aggregate Stated Principal
Balance of the
Mortgage Loans as of the Cut-off Date.
"Overcollateralization Increase Amount": With respect to any
Distribution
Date, the lesser of (a) the Overcollateralization Deficiency Amount
as of such
Distribution Date (calculated for this purpose only after assuming
that 100% of
the Principal Remittance Amount on such Distribution Date has been
distributed)
and (b) the sum of (i) the Net Monthly Excess Cash Flow for such
Distribution
Date and (ii) payments made by the Swap Counterparty and available
for
distribution pursuant to Section 4.07(a)(G).
"Overcollateralization Reduction Amount": With respect to any
Distribution
Date, an amount equal to the lesser of (a) the Principal Remittance
Amount on
such Distribution Date and (b) the Excess Overcollateralized
Amount.
"Overcollateralization Target Amount": With respect to any
Distribution
Date, (i) prior to the Stepdown Date, an amount equal to 2.60% of
the aggregate
outstanding Stated Principal Balance of the Mortgage Loans as of
the Cut-off
Date, (ii) on or after the Stepdown Date provided a Trigger Event
is not in
effect, the greater of (x) 5.20% of the then current aggregate
outstanding
Stated Principal Balance of the Mortgage Loans as of the last day
of the related
Due Period and (y) the Overcollateralization Floor Amount, or (iii)
on or after
the Stepdown Date and if a Trigger Event is in effect, the
Overcollateralization
Target Amount for the immediately preceding Distribution Date.
Notwithstanding
the foregoing, on and after any Distribution Date
30
following the reduction of the aggregate Certificate Principal
Balance of the
Class A Certificates, the Mezzanine Certificates and the Class P
Certificates to
zero, the Overcollateralization Target Amount shall be zero.
"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": With respect to the Class A Certificates and
the
Mezzanine Certificates and any Distribution Date, the least of (x)
the related
Formula Rate for such Distribution Date, (y) the Net WAC
Pass-Through Rate for
such Distribution Date and (z) 12.50% per annum. With respect to
the Class CE
Certificates and any Distribution Date, (i) a per annum rate equal
to the
percentage equivalent of a fraction, the numerator of which is (x)
the interest
on the Uncertificated Balance of each REMIC I Regular Interest
described in
clause (y) below computed at a rate equal to the related REMIC I
Remittance Rate
minus the Marker Rate and the denominator of which is (y) the
aggregate
Uncertificated Balance of REMIC I Regular Interest I-LTAA, I-LTA1,
I-LTA2,
I-LTA3, I-LTA4, I-LTA5, I-LTM1, I-LTM2, I-LTM3, I-LTM4, I-LTM5,
I-LTM6, I-LTM7,
I-LTM8, I-LTM9, I-LTM10 and I-LTZZ and (ii) 100% of the interest on
REMIC I
Regular Interest I-LTP, expressed as a per annum rate.
"Percentage Interest": With respect to any Class of Certificates
(other
than the Residual Certificates), the undivided percentage ownership
in such
Class evidenced by such Certificate, expressed as a percentage, the
numerator of
which is the initial Certificate Principal Balance or Notional
Amount
represented by such Certificate and the denominator of which is the
aggregate
initial Certificate Principal Balance or initial Notional Amount of
all of the
Certificates of such Class. The Class A Certificates and the Class
M-1
Certificates are issuable only in minimum Percentage Interests
corresponding to
minimum initial Certificate Principal Balances of $100,000 and
integral
multiples of $1.00 in excess thereof. The Mezzanine Certificates
(other than the
Class M-1 Certificates) are issuable only in minimum Percentage
Interests
corresponding to minimum initial Certificate Principal Balances of
$250,000 and
integral multiples of $1 in excess thereof. The Class P
Certificates are
issuable only in Percentage Interests corresponding to initial
Certificate
Principal Balances of $20 and integral multiples thereof. The Class
CE
Certificates are issuable only in minimum Percentage Interests
corresponding to
minimum initial Certificate Principal Balances of $100,000 and
integral
multiples of $1.00 in excess thereof; provided, however, that a
single
Certificate of each such Class of Certificates may be issued having
a Percentage
Interest corresponding to the remainder of the aggregate initial
Certificate
Principal Balance or Notional Amount of such Class or to an
otherwise authorized
denomination for such Class plus such remainder. With respect to
any Residual
Certificate, the undivided percentage ownership in such Class
evidenced by such
Certificate, as set forth on the face of such Certificate. The
Residual
Certificates are issuable in Percentage Interests of 20% and
multiples thereof.
"Perfection Representations": The representations, warranties and
covenants set forth in Schedule 3 attached hereto.
31
"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; provided,
however,
that the Periodic Rate Cap for the first Adjustment Date for each
Adjustable-Rate Mortgage Loan shall be subject to adjustment by the
Servicer
pursuant to Section 3.07.
"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 or managed by the Depositor, the Servicer, the
Trustee or any of
their respective Affiliates:
(i)
direct obligations of, or obligations fully guaranteed as to
timely payment of principal and interest by, the United States or
any
agency or instrumentality thereof, provided such obligations are
backed by
the full faith and credit of the United States;
(ii)
demand and time deposits in, certificates of deposit of, or
bankers' acceptances issued by, any Depository Institution;
(iii)
repurchase obligations with respect to any security
described in clause (i) above entered into with a Depository
Institution
(acting as principal);
(iv)
securities bearing interest or sold at a discount that are
issued by any corporation incorporated under the laws of the United
States
of America or any state thereof and that are rated by each Rating
Agency
that rates such securities in its highest long-term unsecured
rating
categories at the time of such investment or contractual commitment
providing for such investment, which securities mature in 365 days
or
less;
(v)
commercial paper (including both non-interest-bearing
discount obligations and interest-bearing obligations payable on
demand or
on a specified date not more than 30 days after the date of
acquisition
thereof) that is rated by each Rating Agency that rates such
securities in
its highest short-term unsecured debt rating available at the time
of such
investment;
(vi)
units of money market funds, including those managed or
advised by the Trustee or its Affiliates, that have been rated
"AAA" by
Fitch (if rated by Fitch) and "AAAm" or "AAAm-G" by S&P and
"Aaa" by
Moody's; and
(vii)
if previously confirmed in writing to the Trustee, any other
demand, money market or time deposit, or any other obligation,
security or
investment, as may be acceptable to the Rating Agencies as a
permitted
investment of funds backing securities having ratings equivalent to
its
highest initial rating of the Class A Certificates;
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
32
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.
"Plan": Any "employee benefit plan" as defined in Section 3(3) of
ERISA
that is subject to Title I of ERISA, any "plan" as defined in
Section 4975(e)(1)
of the Code that is subject to Section 4975 of the Code or any
entity deemed to
hold plan assets of any of the foregoing.
"Prepayment Assumption": As defined in the Prospectus Supplement.
"Prepayment Charge": With respect to any Prepayment Period, any
prepayment
premium, penalty or charge payable by a Mortgagor in connection
with any
Principal Prepayment on a Mortgage Loan pursuant to the terms of
the related
Mortgage Note (other than any Servicer Prepayment Charge Payment
Amount).
"Prepayment Charge Schedule": As of any date, the list of
Prepayment
Charges included in the Trust Fund on such date, attached hereto as
Schedule 2
(including the prepayment charge summary attached thereto). The
Prepayment
Charge Schedule shall set forth the following information with
respect to each
Prepayment Charge:
(i)
the Mortgage Loan identifying number;
(ii)
a code indicating the type of Prepayment Charge;
(iii)
the date on which the first Monthly Payment was due on the
related Mortgage Loan;
(iv)
the term of the related Prepayment Charge;
(v)
the original Stated Principal Balance of the related
Mortgage Loan; and
(vi)
remaining prepayment term in months.
"Prepayment Interest Shortfall": With respect to any Principal
Prepayments
in full on the Mortgage Loans and any Distribution Date, any
interest shortfall
resulting from Principal Prepayments occurring between the first
day of the
related Prepayment Period and the last day of the prior calendar
month. 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 and
Principal
Prepayments in full, the period beginning on the 16th day of the
calendar month
immediately preceding the
33
month in which such Distribution Date occurs (or in the case of the
first
Distribution Date, commencing on the Cut-off Date) to the 15th day
of the then
current calendar month and, with respect to Principal Prepayments
in part, the
Prepayment Period shall be the preceding calendar month.
"Principal Distribution Amount": With respect to any Distribution
Date, an
amount, not less than zero, equal to the sum of:
(i)
the principal portion of each Monthly Payment on the
Mortgage Loans due during the related Due Period, actually received
on or
prior to the related Determination Date or Advanced on or prior to
the
related Distribution Date;
(ii)
the Stated Principal Balance of any Mortgage Loan that was
purchased during the related Prepayment Period 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 Custodial Account in
connection
with the substitution of a Deleted Mortgage Loan pursuant to
Section 2.03
during the related Prepayment Period;
(iii)
the principal portion of all other unscheduled collections
(including, without limitation, Principal Prepayments, Insurance
Proceeds,
Liquidation Proceeds, Subsequent Recoveries and REO Principal
Amortization) received during the related Prepayment Period, 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
(iv)
the amount of any Overcollateralization Increase Amount for
such Distribution Date; minus
(v)
the amount of any Overcollateralization Reduction Amount for
such Distribution Date; and
(vi)
any Swap Payment Shortfall 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 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, the
sum of the amounts set forth in (i) through (iii) of the definition
of Principal
Distribution Amount.
"Private Certificates": As defined in Section 5.02(b).
"Prospectus Supplement": The Prospectus Supplement, dated October
10,
2006, relating to the public offering of the Class A Certificates
and the
Mezzanine Certificates (other than the Class M-10 Certificates).
34
"PTCE": A Prohibited Transaction Class Exemption issued by the
United
States Department of Labor which provides that exemptive relief is
available to
any party to any transaction which satisfies the conditions of the
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 confirmed by a certification from a Servicing
Officer 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 Expense Adjusted
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, which
payment or
Advance had as of the date of purchase been distributed pursuant to
Section
4.01, through the end of the calendar month in which the purchase
is to be
effected plus and (y) an REO Property, the sum of (1) accrued
interest on such
Stated Principal Balance at the applicable Expense Adjusted
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 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 Advances (including
Nonrecoverable
Advances and Nonrecoverable Servicing Advances) and any unpaid
Servicing Fees
allocable to such Mortgage Loan or REO Property, (iv) any amounts
previously
withdrawn from the Custodial Account in respect of such Mortgage
Loan or REO
Property pursuant to Section 3.11(a)(ix) and Section 3.16(b), and
(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 including
any costs and damages incurred by the Trust Fund in connection with
any
violation by such loan of any predatory or abusive lending law.
"Qualified Correspondent": Any Person from which the Servicer
purchased
Mortgage Loans, provided that the following conditions are
satisfied: (i) such
Mortgage Loans were originated pursuant to an agreement between the
Servicer and
such Person that contemplated that such Person would underwrite
mortgage loans
from time to time, for sale to the Servicer, in accordance with
underwriting
guidelines designated by the Servicer ("Designated Guidelines") or
guidelines
that do not vary materially from such Designated Guidelines; (ii)
such Mortgage
Loans were in fact underwritten as described in clause (i) above
and were
acquired by the Servicer within 180 days after origination; (iii)
either (x) the
Designated Guidelines were, at the time such Mortgage Loans were
originated,
used by the Servicer in origination of mortgage loans of the same
type as the
Mortgage Loans for the Servicer's own account or (y) the Designated
Guidelines
were, at the time such Mortgage Loans were underwritten, designated
by the
Servicer on a consistent basis for use by lenders in originating
mortgage loans
to be purchased by the Servicer; and (iv) the Servicer employed, at
the time
such Mortgage Loans were acquired by the Servicer, pre-purchase or
post-purchase
quality assurance procedures (which may involve,
35
among other things, review of a sample of mortgage loans purchased
during a
particular time period or through particular channels) designed to
ensure that
Persons from which it purchased mortgage loans properly applied the
underwriting
criteria designated by the Servicer.
"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 Stated 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 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 any 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 any 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 any Adjustable-Rate
Mortgage Loan,
have a Gross Margin equal to the Gross Margin of the Deleted
Mortgage Loan, (vi)
with respect to any Adjustable-Rate Mortgage Loan, have a next
Adjustment Date
not more than two months later than the next Adjustment Date on 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 determined by the Originator at least equal to the
risk grading
assigned on the Deleted Mortgage Loan and (xi) conform to each
representation
and warranty set forth in Section 6 of the Mortgage Loan Purchase
Agreement
applicable to the Deleted Mortgage Loan. 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 (xi) hereof must
be satisfied
as to each Qualified Substitute Mortgage Loan or in the aggregate,
as the case
may be.
"Rate/Term Refinancing": A Refinanced Mortgage Loan, the proceeds
of which
are not more than a nominal amount in excess of the existing first
mortgage loan
and any subordinate mortgage loan on the related Mortgaged Property
and related
closing costs, and were used exclusively (except for such nominal
amount) to
satisfy the then existing first mortgage loan and any subordinate
mortgage loan
of the Mortgagor on the related Mortgaged Property and to pay
related closing
costs.
"Rating Agency or Rating Agencies": Fitch, Moody's and S&P or
their
successors. If such agencies or their successors are no longer in
existence,
"Rating Agencies" shall be such
36
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 Custodial 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), plus (v) any Swap Payment Shortfall.
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 REMIC I, 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 Custodial 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 Advances and Servicing Advances (in the
case of
Servicing Advances, without duplication of amounts netted out of
the rental
income, Insurance Proceeds and Liquidation Proceeds described in
clause (vi)
below) 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 Certificate Account pursuant to Section 3.23.
With respect to each Mortgage Loan which has become the subject of
a
Deficient Valuation, the difference between the principal balance
of the
Mortgage Loan outstanding
37
immediately prior to such Deficient Valuation and the principal
balance of the
Mortgage Loan as reduced by the Deficient Valuation.
With respect to each Mortgage Loan which 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.
With respect to any allocation of a Realized Loss to a Certificate
related
to a Swap Payment Shortfall, such Realized Loss will be made by
reducing the
Certificate Principal Balance of that Certificate by the amount so
allocated as
of the Distribution Date in the month in which the Swap Payment
Shortfall was
incurred.
If the Servicer receives Subsequent Recoveries with respect to any
Mortgage Loan, the amount of the Realized Loss with respect to that
Mortgage
Loan will be reduced to the extent such recoveries are applied to
principal
distributions on any Distribution Date.
Realized Losses allocated to the Class CE Certificates shall be
allocated
first to the REMIC II Regular Interest CE-IO in reduction of the
accrued but
unpaid interest thereon until such accrued and unpaid interest
shall have been
reduced to zero and then to the REMIC II Regular Interest CE-PO in
reduction of
the Principal Balance thereof.
"Record Date": With respect to each Distribution Date and any
Book-Entry
Certificate, the Business Day immediately preceding such
Distribution Date. With
respect to each Distribution Date and any other Certificates,
including any
Definitive Certificates, the last Business Day of the month
immediately
preceding the month in which such Distribution Date occurs, except
in the case
of the first Record Date which shall be the Closing Date.
"Reference Banks": Deutsche Bank AG, 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 suitable
to serve as a Reference Bank, then any leading banks selected by
the Trustee,
after consultation with the Depositor, which are engaged in
transactions in
Eurodollar deposits in the international Eurocurrency market (i)
with an
established place of business in London and (ii) not controlling,
under the
control of or under common control with the Depositor or any
Affiliate thereof.
"Refinanced Mortgage Loan": A Mortgage Loan the proceeds of which
were not
used to purchase the related Mortgaged Property.
"Regular Certificate": Any Class A Certificate, Mezzanine
Certificate,
Class CE Certificate or Class P Certificate.
"Regular Interest": A "regular interest" in a REMIC within the
meaning of
Section 860G(a)(1) of the Code.
38
"Regulation AB": Subpart 229.1100 - Asset Backed Securities
(Regulation
AB), 17 C.F.R. ss.ss.229.1100-229.1123, as such may be amended from
time to
time, and subject to such clarification and interpretation as have
been provided
by the Commission in the adopting release (Asset-Backed Securities,
Securities
Act Release No. 33-8518, 70 Fed. Reg. 1,506, 1,531 (Jan. 7, 2005))
or by the
staff of the Commission, or as may be provided by the Commission or
its staff
from time to time.
"Relief Act": The Servicemembers Civil Relief Act.
"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 (exclusive
of the
Swap Account and the Swap Agreement, each of which is not an asset
of any
REMIC), 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 and Prepayment Charges related thereto 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 (including any security interest created thereby); and
(v) the
Custodial Account (other than any amounts representing any Servicer
Prepayment
Charge Payment Amount), the Certificate Account (other than any
amounts
representing any Servicer Prepayment Charge 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 Charges
payable in
connection with Principal Prepayments on the Mortgage Loans made
before the
Cut-off Date.
"REMIC I Interest Loss Allocation Amount": With respect to any
Distribution Date, an amount equal to (a) the product of (i) the
aggregate
Stated Principal Balance of the Mortgage Loans and REO Properties
then
outstanding and (ii) the REMIC I Remittance Rate for REMIC I
Regular Interest
I-LTAA minus the Marker Rate, divided by (b) 12.
"REMIC I Overcollateralized Amount": With respect to any date of
determination, (i) 1% of the aggregate Uncertificated Balance of
the REMIC I
Regular Interests (other than REMIC I Regular Interest I-LTP) minus
(ii) the
aggregate Uncertificated Balance of REMIC I Regular Interest
I-LTA1, REMIC I
Regular Interest I-LTA2, REMIC I Regular Interest I-LTA3, REMIC I
Regular
Interest I-LTA4, REMIC I Regular Interest I-LTA5, REMIC I Regular
Interest
I-LTM1, REMIC I Regular Interest I-LTM2, REMIC I Regular Interest
I-LTM3, REMIC
I
39
Regular Interest I-LTM4, REMIC I Regular Interest I-LTM5, REMIC I
Regular
Interest I-LTM6, REMIC I Regular Interest I-LTM7, REMIC I Regular
Interest
I-LTM8, REMIC I Regular Interest I-LTM9, REMIC I Regular Interest
I-LTM10, in
each case as of such date of determination.
"REMIC I Principal Loss Allocation Amount": With respect to any
Distribution Date, an amount equal to the product of (i) the
aggregate Stated
Principal Balance of the Mortgage Loans and REO Properties then
outstanding and
(ii) 1 minus a fraction, the numerator of which is two times the
aggregate
Uncertificated Balance of REMIC I Regular Interest I-LTA1, REMIC I
Regular
Interest I-LTA2, REMIC I Regular Interest I-LTA3, REMIC I Regular
Interest
I-LTA4, REMIC I Regular Interest I-LTA5, REMIC I Regular Interest
I-LTM1, REMIC
I Regular Interest I-LTM2, REMIC I Regular Interest I-LTM3, REMIC I
Regular
Interest I-LTM4, REMIC I Regular Interest I-LTM5, REMIC I Regular
Interest
I-LTM6, REMIC I Regular Interest I-LTM7, REMIC I Regular Interest
I-LTM8, REMIC
I Regular Interest I-LTM9 and REMIC I Regular Interest I-LTM10 and
the
denominator of which is the aggregate Uncertificated Balance of
REMIC I Regular
Interest I-LTA1, REMIC I Regular Interest I-LTA2, REMIC I Regular
Interest
I-LTA3, REMIC I Regular Interest I-LTA4, REMIC I Regular Interest
I-LTM1, REMIC
I Regular Interest I-LTM2, REMIC I Regular Interest I-LTM3, REMIC I
Regular
Interest I-LTM4, REMIC I Regular Interest I-LTM5, REMIC I Regular
Interest
I-LTM6, REMIC I Regular Interest I-LTM7, REMIC I Regular Interest
I-LTM8, REMIC
I Regular Interest I-LTM9, REMIC I Regular Interest I-LTM10 and
REMIC I Regular
Interest I-LTZZ.
"REMIC I Regular Interest": Any of the separate non-certificated
beneficial ownership interests in REMIC I issued hereunder and
designated as a
"regular interest" in REMIC I. Each REMIC I Regular Interest shall
accrue
interest at the related REMIC I Remittance Rate in effect from time
to time or
shall otherwise be entitled to interest as set forth herein, and
shall be
entitled to distributions of principal, subject to the terms and
conditions
hereof, in an aggregate amount equal to its initial Uncertificated
Balance as
set forth in the Preliminary Statement hereto. The REMIC I Regular
Interests are
as follows: REMIC I Regular Interest I-LTAA, REMIC I Regular
Interest I-LTA1,
REMIC I Regular Interest I-LTA2, REMIC I Regular Interest I-LTA3,
REMIC I
Regular Interest I-LTA4, REMIC I Regular Interest I-LTA5, REMIC I
Regular
Interest I-LTM1, REMIC I Regular Interest I-LTM2, REMIC I Regular
Interest
I-LTM3, REMIC I Regular Interest I-LTM4, REMIC I Regular Interest
I-LTM5, REMIC
I Regular Interest I-LTM6, REMIC I Regular Interest I-LTM7, REMIC I
Regular
Interest I-LTM8, REMIC I Regular Interest I-LTM9, REMIC I Regular
Interest
I-LTM10, REMIC I Regular Interest I-LTZZ and REMIC I Regular
Interest I-LTP.
"REMIC I Remittance Rate": With respect to each REMIC I Regular
Interest
and any Distribution Date, the weighted average of the Expense
Adjusted Mortgage
Rates of the Mortgage Loans, weighted based on their Stated
Principal Balances
as of the first day of the related Due Period.
"REMIC I Required Overcollateralized Amount": 1% of the
Overcollateralization Target Amount.
40
"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 Class
A Certificates, the Mezzanine Certificates, the Class CE
Certificates, the Class
P Certificates and the Class R-II Interest and all amounts
deposited therein,
with respect to which a separate REMIC election is to be made.
"REMIC II Regular Interests": Any Regular Interest issued by REMIC
II, the
ownership of which is evidenced by a Class A Certificate, Mezzanine
Certificate
or Class CE Certificate.
"REMIC II Regular Interest CE-IO": A separate non-certificated
regular
interest of REMIC II designated as a REMIC II Regular Interest.
REMIC II Regular
Interest CE-IO shall have no entitlement to principal and shall be
entitled to
distributions of interest subject to the terms and conditions
hereof, in an
aggregate amount equal to interest distributable with respect to
the Class CE
Certificates pursuant to the terms and conditions hereof.
"REMIC II Regular Interest CE-PO": A separate non-certificated
regular
interest of REMIC II designated as a REMIC II Regular Interest.
REMIC II Regular
Interest CE-PO shall have no entitlement to interest and shall be
entitled to
distributions of principal subject to the terms and conditions
hereof, in an
aggregate amount equal to principal distributable with respect to
the Class CE
Certificates pursuant to the terms and conditions hereof.
"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 and substance acceptable to
the
Trustee on an electronic data file or tape prepared by the Servicer
pursuant to
Section 4.03 containing the data elements specified on Schedule 4,
hereto, 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": The account or 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 REMIC I.
"REO Imputed Interest": As to any REO Property, for any calendar
month
during which such REO Property was at any time part of REMIC I, one
month's
interest at the applicable Expense Adjusted 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.
41
"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 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
REMIC I through foreclosure or deed-in-lieu of foreclosure, as
described in
Section 3.23.
"Request for Release": A release signed by a Servicing Officer, in
the
form of Exhibit E hereto.
"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, after consultation with the Depositor, 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, after consultation with
the Depositor,
are quoting on such Interest Determination Date to leading European
banks.
"Residential Dwelling": Any one of the following: (i) an attached,
detached or semi-detached one-family dwelling, (ii) an attached,
detached or
semi-detached two-to four-family dwelling, (iii) a one-family
dwelling unit in a
Fannie Mae eligible condominium project, or (iv) an attached,
detached or
semi-detached one-family dwelling in a planned unit development,
none of which
is a co-operative or mobile home (as defined in 42 United States
Code, Section
5402(6)).
"Residual Certificates":
The Class R Certificates.
"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, any
vice
president, managing director, director, any assistant vice
president, the
Secretary, any assistant secretary, the Treasurer, any assistant
treasurer, any
associate, any trust officer or assistant trust officer or any
other officer of
the Trustee having direct responsibility over this Agreement or
otherwise
engaged in performing functions similar to those performed by any
of the above
designated
42
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.
"Responsible Party": Fremont Investment & Loan, a California
industrial
bank, or its successor in interest, in its capacity as responsible
party under
the Mortgage Loan Purchase Agreement.
"Rolling Three-Month Delinquency Average": With respect to any
Distribution Date, the average aggregate unpaid principal balance
of the
Mortgage Loans delinquent 60 days or more (including Mortgage Loans
that (i) are
in foreclosure, (ii) have been converted to REO Properties or (iii)
have been
discharged due to bankruptcy) for each of the three (or one and
two, in the case
of the Distribution Dates in November 2006 and December 2006,
respectively)
immediately preceding months.
"S&P": Standard & Poor's Ratings Services, a division of
the McGraw-Hill
Companies, Inc., or its successor in interest.
"Sarbanes Certification": As defined in Section 12.05(a)(iv).
"Securitization Transaction": Any transaction involving either (1)
a sale
or other transfer of some or all of the Mortgage Loans directly or
indirectly to
an issuing entity in connection with an issuance of publicly
offered or
privately placed, rated or unrated mortgage-backed securities or
(2) an issuance
of publicly offered or privately placed, rated or unrated
securities, the
payments on which are determined primarily by reference to one or
more
portfolios of residential mortgage loans consisting, in whole or in
part, of
some or all of the Mortgage Loans.
"Seller": Carrington Securities, LP, a Delaware limited
partnership, or
its successor in interest, in its capacity as seller under the
Mortgage Loan
Purchase Agreement.
"Senior Interest Distribution Amount": With respect to any
Distribution
Date, an amount equal to the sum of (i) the Interest Distribution
Amount for
such Distribution Date for the Class A Certificates and (ii) the
Interest Carry
Forward Amount, if any, for such Distribution Date for the Class A
Certificates.
"Servicer": Fremont Investment & Loan, a California industrial
bank, or
any successor servicer appointed as herein provided, in its
capacity as Servicer
hereunder.
"Servicer Disclosure Information": As defined in Section
12.07(a)(i).
"Servicer Event of Default": One or more of the events described in
Section 7.01.
"Servicer Prepayment Charge Payment Amount": The amounts payable by
the
Servicer in respect of any waived Prepayment Charges pursuant to
Section 3.01.
"Servicer Remittance Date": With respect to any Distribution Date,
by 1:00
p.m. New York time on the Business Day preceding such Distribution
Date.
43
"Servicer Termination Test": The Servicer Termination Test will be
failed
with respect to any Distribution Date if the aggregate amount of
Realized Losses
incurred, with respect to the Mortgage Loans, since the Cut-off
Date through the
last day of the related Due Period (reduced by the aggregate amount
of
Subsequent Recoveries received from the Cut-off Date through the
last day of the
related Due Period) divided by aggregate Stated Principal Balance
of the
Mortgage Loans as of the Cut-off Date exceeds the applicable
percentages set
forth below with respect to such Distribution Date:
DISTRIBUTION DATE OCCURRING IN
PERCENTAGE
----------------------------------
-------------------------------------
November 2009 through October 2010
4.50% for the first distribution date
of this period, plus an additional
1/12th of 2.00% for each distribution
date thereafter
November 2010 through October 2011
6.50% for the first distribution date
of this period, plus an additional
1/12th of 1.50% for each distribution
date thereafter
November 2011 through October 2012
8.00% for the first distribution date
of this period, plus an additional
1/12th of 0.90% for each distribution
date thereafter
November 2012 and thereafter
8.90%
"Servicing Account": The account or accounts created and maintained
pursuant to Section 3.09.
"Servicing Advances": The reasonable "out-of-pocket" costs and
expenses
(including legal fees) incurred by the Servicer in connection with
a default,
delinquency or other unanticipated event by the Servicer in the
performance of
its servicing obligations, including, but not limited to, the cost
of (i) the
preservation, restoration, inspection and protection of a Mortgaged
Property,
(ii) any enforcement or judicial proceedings, including but not
limited to
foreclosures and litigation, in respect of a particular Mortgage
Loan, (iii) the
management (including reasonable fees in connection therewith) and
liquidation
of any REO Property and (iv) the performance of its obligations
under Section
3.01, Section 3.09, Section 3.14, Section 3.16 and Section 3.23.
The Servicer
shall not be required to make any Nonrecoverable Servicing
Advances.
"Servicing Criteria": The "servicing criteria" set forth in Item
1122(d)
of Regulation AB, as such may be amended from time to time.
"Servicing Fee": With respect to each Mortgage Loan and for any
calendar
month, an amount equal to the Servicing Fee Rate accrued for one
month (or in
the event of any payment of interest which accompanies a Principal
Prepayment in
full made by the Mortgagor during such calendar month, interest for
the number
of days covered by such payment of interest) on the same principal
amount on
which interest on such Mortgage Loan accrues for such calendar
month, calculated
on the basis of a 360-day year consisting of twelve 30-day months.
A portion of
such Servicing Fee may be retained by any Sub-Servicer as its
servicing
compensation.
"Servicing Fee Rate":
0.500% per annum.
"Servicing Officer": Any officer of the Servicer involved in, or
responsible for, the administration and servicing of Mortgage
Loans, whose name
and specimen signature appear on
44
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.
"Servicing Transfer Costs": Shall mean all reasonable costs and
expenses
incurred by the Trustee in connection with the transfer of
servicing from a
predecessor servicer, including, without limitation, any reasonable
costs or
expenses associated with the complete transfer of all servicing
data and the
completion, correction or manipulation of such servicing data as
may be required
by the Trustee to correct any errors or insufficiencies in the
servicing data or
otherwise to enable the Trustee (or any successor servicer
appointed pursuant to
Section 7.02) to service the Mortgage Loans properly and
effectively.
"Short Pay-off": As defined in Section 3.07.
"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 of
$1,000. With
respect to the Class P Certificates and the Residual Certificates,
a
hypothetical Certificate of such Class evidencing a 100% Percentage
Interest in
such Class.
"Startup Day": With respect to each Trust REMIC, 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 on 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 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 REMIC I, 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
45
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 later to occur of (a) the Distribution Date
occurring
in November 2009 and (b) the first Distribution Date on which the
Credit
Enhancement Percentage with respect to the Class A Certificates
(calculated for
this purpose only prior to any distribution of the Principal
Distribution Amount
to the holders of the Certificates then entitled to distributions
of principal
on such Distribution Date) is equal to or greater than 44.10%.
"Subcontractor": Any vendor, subcontractor or other Person (but not
including the Trustee, except to the extent described in Article
XI) that is not
responsible for the overall servicing (as "servicing" is commonly
understood by
participants in the mortgage-backed securities market) of Mortgage
Loans but
performs one or more discrete functions identified in Item 1122(d)
of Regulation
AB with respect to Mortgage Loans under the direction or authority
of the
Servicer or a Sub-Servicer.
"Subordination Percentage": With respect to each class of Class A
and
Mezzanine Certificates, the applicable approximate percentage set
forth in the
table below.
CLASS
PERCENTAGE
CLASS
PERCENTAGE
A
55.90%
M-6
85.20%
M-1
64.80%
M-7
88.20%
M-2
71.30%
M-8
90.80%
M-3
75.10%
M-9
92.80%
M-4
78.60%
M-10
94.80%
M-5
82.00%
"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":
As defined in Section 3.08.
"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.
"Subsequent Recoveries": As of any Distribution Date, unexpected
amounts
received by the Servicer (net of any related expenses permitted to
be reimbursed
to the Servicer) specifically related to a Mortgage Loan that was
the subject of
a liquidation or an REO Disposition prior to the related Prepayment
Period that
resulted in a Realized Loss. If Subsequent Recoveries are received,
they will be
included as part of the Principal Remittance Amount for the
following
Distribution Date. In addition, after giving effect to all
distributions on a
Distribution Date, the amount of such Subsequent Recoveries will
increase the
Certificate Principal Balance first, of the Class A Certificates
then
outstanding, if a Realized Loss had been allocated to the Class A
Certificates,
on a pro rata basis by the amount of such Subsequent Recoveries,
and second, of
46
the class of Mezzanine Certificates then outstanding with the
highest
distribution priority to which a Realized Loss was allocated.
Thereafter, such
class of Class A and Mezzanine Certificates will accrue interest on
the
increased Certificate Principal Balance.
"Substitution Shortfall Amount":
As defined in Section 2.03(b).
"Swap Account": The separate trust account created and maintained
by the
Trustee.
"Swap Agreement": The interest rate swap agreement between the Swap
Counterparty and the Trustee, on behalf of the Trust, which
agreement provides
for Net Swap Payments and Swap Termination Payments to be paid, as
provided
therein, together with any schedules, confirmations or other
agreements relating
thereto, attached hereto as Exhibit K-1.
"Swap Agreement Notional Balance": As to the Swap Agreement and
each
"Floating Rate Payer Payment Date" (as defined in the Swap
Agreement), the
amount set forth on Exhibit K-2 hereto for such Floating Rate Payer
Payment
Date.
"Swap Counterparty": The swap counterparty under the Swap Agreement
either
(a) entitled to receive payments from the Trustee from amounts
payable by the
Trust Fund under this Agreement or (b) required to make payments to
the Trustee
for payment to the Trust Fund, in either case pursuant to the terms
of the Swap
Agreement, and any successor in interest or assign. Initially, the
Swap
Counterparty shall be Swiss Re Financial Corporation.
"Swap LIBOR":
LIBOR as determined pursuant to the Swap Agreement.
"Swap Counterparty Trigger Event": With respect to any Distribution
Date,
(i) an "Event of Default" (as defined in the Swap Agreement) with
respect to
which the Swap Counterparty is a "Defaulting Party" (as defined in
the Swap
Agreement) or a "Termination Event" (as defined in the Swap
Agreement)
(including an "Additional Termination Event" (as defined in the
Swap Agreement))
under the Swap Agreement with respect to which the Swap
Counterparty is the sole
"Affected Party" (as defined in the Swap Agreement).
"Swap Payment Shortfall": A Swap Payment Shortfall is a Realized
Loss
resulting from any Net Swap Payment owed to the Swap Counterparty
or Swap
Termination Payment on any Distribution Date not due to a Swap
Counterparty
Trigger Event owed to the Swap Counterparty to the extent not
covered by that
portion of the Available Distribution Amount (without giving effect
to any Net
Swap Payment owed to the Swap Counterparty or any Swap Termination
Payment owed
to the Swap Counterparty not due to a Swap Counterparty Trigger
Event) for that
Distribution Date that represents interest received or advanced on
the Mortgage
Loans.
"Swap Termination Payment": Upon the designation of an "Early
Termination
Date" (as defined in the Swap Agreement), the payment to be made by
the Trustee
on behalf of the Trust to the Swap Counterparty from payments from
the Trust
Fund, or by the Swap Counterparty to the Trustee for payment to the
Trust Fund,
as applicable, pursuant to the terms of the Swap Agreement.
47
"Tax Returns": The 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 the classification of portions
thereof as
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.
"Terminator": As defined in Section 9.01.
"Third-Party Originator": Each Person, other than a Qualified
Correspondent, that originated Mortgage Loans acquired by the
Servicer.
"Transaction Party": As defined in Section 11.02.
"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 is in effect on any Distribution
Date on
or after the Stepdown Date if:
(a)
the Delinquency Percentage exceeds 36.00% of the then current
Credit Enhancement Percentage with respect to the Class A
Certificates for
the prior Distribution Date; or
(b)
the aggregate amount of Realized Losses incurred, with respect
to the Mortgage Loans, since the Cut-off Date through the last day
of the
related Due Period (after giving effect to scheduled payments of
principal
due during the related Due Period, to the extent received or
advanced, and
unscheduled collections of principal received during the related
Prepayment Period, reduced by the aggregate amount of Subsequent
Recoveries received since the Cut-off Date through the last day of
the
related Due Period) divided by aggregate Stated Principal Balance
of the
Mortgage Loans as of the Cut-off Date exceeds the applicable
percentages
set forth below with respect to such Distribution Date:
48
DISTRIBUTION DATE OCCURRING IN
PERCENTAGE
----------------------------------
-------------------------------------
November 2009 through October 2010
3.50% for the first distribution date
of this period, plus an additional
1/12th of 2.00% for each distribution
date thereafter
November 2010 through October 2011
5.50% for the first distribution date
of this period, plus an additional
1/12th of 1.50% for each distribution
date thereafter
November 2011 through October 2012
7.00% for the first distribution date
of this period, plus an additional
1/12th of 0.90% for each distribution
date thereafter
November 2012 and thereafter
7.90%
"Trust Fund": Collectively, all of the assets of each Trust REMIC,
the
Swap Account, the Swap Agreement and the other assets conveyed by
the Depositor
to the Trustee pursuant to Section 2.01.
"Trust REMIC": Any of REMIC I or REMIC II.
"Trustee": Wells Fargo Bank, N.A., a national banking association,
or its
successor in interest, or any successor trustee appointed as herein
provided.
"Trustee Information": As defined in Section 11.05.
"Trustee Fee": The amount payable to the Trustee on each
Distribution Date
pursuant to Section 8.05 as compensation for all services rendered
by it in the
execution of the trust hereby created and in the exercise and
performance of any
of the powers and duties of the Trustee hereunder, which amount
shall equal the
Trustee Fee Rate accrued for one month on the aggregate Stated
Principal Balance
of the Mortgage Loans and any REO Properties as of the first day of
the related
Due Period (or, in the case of the initial Distribution Date, as of
the Cut-off
Date), calculated on the basis of a 360-day year consisting of
twelve 30-day
months.
"Trustee Fee Rate": 0.0025% per annum.
"Uncertificated Balance": The amount of any REMIC I Regular
Interest
outstanding as of any date of determination. As of the Closing
Date, the
Uncertificated Balance of each REMIC I Regular Interest shall equal
the amount
set forth in the Preliminary Statement hereto as its initial
uncertificated
balance. On each Distribution Date, the Uncertificated Balance of
each REMIC I
Regular Interest shall be reduced by all distributions of principal
made on such
REMIC I Regular Interest on such Distribution Date pursuant to
Section 4.01 and,
if and to the extent necessary and appropriate, shall be further
reduced on such
Distribution Date by Realized Losses as provided in Section 4.04.
The
Uncertificated Balance of REMIC I Regular Interest I-LTZZ shall be
increased by
interest deferrals as provided in Section 4.01(a)(1)(i)(A). The
Uncertificated
Balance of each REMIC I Regular Interest shall never be less than
zero.
"Uncertificated Interest": With respect to any REMIC I Regular
Interest
for any Distribution Date, one month's interest at the REMIC I
Remittance Rate
applicable to such REMIC I Regular Interest for such Distribution
Date, accrued
on the Uncertificated Balance thereof immediately prior to such
Distribution
Date. Uncertificated Interest in respect of any REMIC I Regular
Interest shall
accrue on the basis of a 360-day year consisting of twelve 30-day
49
months. Uncertificated Interest with respect to each Distribution
Date, as to
any REMIC I Regular Interest, shall be reduced by an amount equal
to the sum of
(a) the aggregate Prepayment Interest Shortfall, if any, for such
Distribution
Date to the extent not covered by payments pursuant to Section 3.24
and (b) the
aggregate amount of any Relief Act Interest Shortfall, if any
allocated, in each
case, to such REMIC I Regular Interest pursuant to Section 1.02. In
addition,
Uncertificated Interest with respect to each Distribution Date, as
to any REMIC
I Regular Interest shall be reduced by Realized Losses, if any,
allocated to
such REMIC I Regular Interest pursuant to Section 1.02 and Section
4.04.
"Underwriters' Exemption": An individual exemption issued by the
United
States Department of Labor, Final Authorization Number (FAN)
2004-03E, as
amended, to Barclays Capital Inc, for specific offerings in which
Barclays
Capital Inc. or any person directly or indirectly, through one or
more
intermediaries, controlling, controlled by or under common control
with Barclays
Capital Inc. is an underwriter, placement agent or a manager or
co-manager of
the underwriting syndicate or selling group where the trust and the
offered
certificates meet specified conditions. The Underwriters'
Exemption, as amended,
provides a partial exemption for transactions involving
certificates
representing a beneficial interest in a trust and entitling the
holder to
pass-through payments of principal, interest and/or other payments
with respect
to the trust's assets.
"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 citizen or resident of the United States,
a
corporation, partnership (or other entity treated as a corporation
or
partnership for United States federal income tax purposes) created
or organized
in, or under the laws of, the United States, any state thereof, or
the District
of Columbia (except in the case of a partnership, to the extent
provided in
Treasury regulations) provided that, for purposes solely of the
restrictions on
the transfer of Class R Certificates, no partnership or other
entity treated as
a partnership for United States federal income tax purposes shall
be treated as
a United States Person unless all persons that own an interest in
such
partnership either directly or through any entity that is not a
corporation for
United States federal income tax purposes are required by the
applicable
operative agreement to be United States Persons, or an estate the
income of
which from sources without the United States is includible in gross
income for
United States federal income tax purposes regardless of its
connection with the
conduct of a trade or business within the United States, or a trust
if a court
within the United States is able to exercise primary supervision
over the
administration of the trust and one or more United States persons
have authority
to control all substantial decisions of the trust. The term "United
States"
shall have the meaning set forth in Section 7701 of the Code or
successor
provisions.
"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
and (b) the value thereof as determined by a review appraisal
conducted by the
Originator in accordance with the Originator's underwriting
guidelines, and (ii)
the purchase price paid for the related Mortgaged Property by the
Mortgagor
50
with the proceeds of the Mortgage Loan; provided, however, (A) in
the case of a
Refinanced Mortgage Loan, such value of the Mortgaged Property is
based solely
upon the lesser of (1) the value determined by an appraisal made
for the
Originator of such Refinanced Mortgage Loan at the time of
origination of such
Refinanced Mortgage Loan and (2) the value thereof as determined by
a review
appraisal conducted by the Originator in accordance with the
Originator's
underwriting guidelines, and (B) in the case of a Mortgage Loan
originated in
connection with a "lease-option purchase," such value of the
Mortgaged Property
is based on the lower of the value determined by an appraisal made
for the
Originator of such Mortgage Loan at the time 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 which is allocated to any Certificate. With respect to
any date of
determination, 98% of all Voting Rights will be allocated among the
holders of
the Class A Certificates, the Mezzanine Certificates and the Class
CE
Certificates in proportion to the then outstanding Certificate
Principal
Balances of their respective Certificates, 1% of all Voting Rights
will be
allocated to the holders of the Class P Certificates and 1% of all
Voting Rights
will be allocated among the holders of the Residual Certificates.
The Voting
Rights allocated to each Class of Certificate shall be allocated
among Holders
of each such Class in accordance with their respective Percentage
Interests as
of the most recent Record Date.
SECTION 1.02 Allocation of Certain Interest Shortfalls. For
purposes of
calculating the amount of Accrued Certificate Interest and the
amount of the
Interest Distribution Amount for the Class A Certificates, the
Mezzanine
Certificates and the Class CE Certificates for any Distribution
Date, (1) 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 first, to the Class CE
Certificates based
on, and to the extent of, one month's interest at the then
applicable
Pass-Through Rate on the Notional Amount of the Class CE
Certificates and,
thereafter, among the Class A Certificates and the Mezzanine
Certificates on a
pro rata basis based on, and to the extent of, one month's interest
at the then
applicable respective Pass-Through Rate on the respective
Certificate Principal
Balance of each such Certificate and (2) the aggregate amount of
any Realized
Losses incurred for any Distribution Date shall be allocated to the
Class CE
Certificates based on, and to the extent of, one month's interest
at the then
applicable Pass-Through Rate on the Notional Amount of the Class CE
Certificates.
For purposes of calculating the amount of Uncertificated Interest
for the
REMIC I Regular Interests 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
Shortfalls
incurred in respect of the Mortgage Loans for any Distribution Date
shall be
allocated among REMIC I Regular Interest I-LTAA, REMIC I Regular
Interest
I-LTA1, REMIC I Regular Interest I-LTA2, REMIC I Regular Interest
I-LTA3, REMIC
I Regular Interest I-LTA4, REMIC I Regular Interest I-LTA5, REMIC I
Regular
Interest I-LTM1, REMIC I Regular Interest I-LTM2, REMIC I Regular
Interest
I-LTM3, REMIC I Regular Interest I-
51
LTM4, REMIC I Regular Interest I-LTM5, REMIC I Regular Interest
I-LTM6, REMIC I
Regular Interest I-LTM7, REMIC I Regular Interest I-LTM8, REMIC I
Regular
Interest I-LTM9, REMIC I Regular Interest I-LTM10 and REMIC I
Regular Interest
I-LTZZ pro rata based on, and to the extent of, one month's
interest at the then
applicable respective Pass-Through Rate on the respective
Uncertificated Balance
of each such REMIC I Regular Interest.
SECTION 1.03 Rules of Usage. The foregoing definitions shall be
equally
applicable to both the singular and plural forms of the defined
terms. Unless
otherwise inconsistent with the terms of this Agreement, all
accounting terms
used herein shall be interpreted, and all accounting determinations
hereunder
shall be made, in accordance with generally accepted accounting
principles in
the USA. The words "hereof," "herein," "hereunder" and words of
similar import
when used in an agreement or instrument refer to such agreement or
instrument as
a whole and not to any particular provision or subdivision thereof;
references
in an agreement or instrument to "Article," "Section" or another
subdivision or
to an attachment are, unless the context otherwise requires, to an
article,
section or subdivision of or an attachment to such agreement or
instrument; and
the term "including" and its variations means "including without
limitation."
Any agreement, instrument or statute defined or referred to below
or in any
agreement or instrument that is governed by this Article I means
such agreement
or instrument or statute as from time to time amended, modified or
supplemented,
including (in the case of agreements or instruments) by waiver or
consent and
(in the case of statutes) by succession of comparable successor
statutes and
includes (in the case of agreements or instruments) references to
all
attachments thereto and instruments incorporated therein.
References to a Person
are also to its permitted successors and assigns.
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
SECTION 2.01 Conveyance of the Mortgage Loans. On the Closing Date,
the
Depositor will 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
Mortgage Loan
Purchase Agreement, and all other assets included or to be included
in REMIC I.
Such assignment includes all interest and principal received by the
Depositor or
the Servicer on or with respect to the Mortgage Loans (other than
payments of
principal and interest due on such Mortgage Loans on or before the
Cut-off
Date). The Depositor herewith delivers to the Trustee an executed
copy of the
Mortgage Loan Purchase Agreement. In addition, on the Closing Date,
the Trustee
is hereby directed to enter into the Swap Agreement on behalf of
the Trust Fund
with the Swap Counterparty.
In connection with such transfer and assignment, the Depositor
shall
deliver to and deposit with the Trustee the following documents or
instruments
with respect to each Mortgage Loan so transferred and assigned (in
each case, a
"Mortgage File"):
52
(i)
the original Mortgage Note, endorsed in blank or in the
following form "Pay to the order of Wells Fargo Bank, N.A., 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;
(ii)
the original Mortgage with evidence of recording thereon,
and the original recorded power of attorney, if the Mortgage was
executed
pursuant to a power of attorney, with evidence of recording
thereon;
(iii)
an original Assignment in blank;
(iv)
the original recorded Assignment or Assignments showing a
complete chain of assignment from the originator to the Person
assigning
the Mortgage to the Trustee as contemplated by the immediately
preceding
clause (iii);
(v)
the original or copies of each assumption, modification or
substitution agreement, if any; and
(vi)
the original lender's title insurance policy or certified
copy thereof or, if the original title policy has not been issued,
the
irrevocable commitment to issue the same.
With respect to a maximum of approximately 2.0% of the Original
Mortgage
Loans by outstanding Stated Principal Balance of the Original
Mortgage Loans as
of the Cut-off Date, if any original Mortgage Note referred to in
Section
2.01(i) above cannot be located, the obligations of the Depositor
to deliver
such documents shall be deemed to be satisfied upon delivery to the
Trustee of a
photocopy of such Mortgage Note, if available, with a lost note
affidavit
substantially in the form of Exhibit H attached hereto. If any of
the original
Mortgage Notes for which a lost note affidavit was delivered to the
Trustee is
subsequently located, such original Mortgage Note shall be
delivered to the
Trustee within three Business Days.
If any of the documents referred to in Sections 2.01(ii), (iii) or
(iv)
above 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 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, delivery to the Trustee, 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. Notice shall be provided to the Trustee and the Rating
Agencies by the
Depositor if delivery pursuant to clause (2) above will be made
more than 180
days after the Closing Date. If the original lender's title
insurance policy was
not delivered pursuant to Section 2.01(vi) above, the Depositor
shall deliver or
cause to be delivered to the Trustee, promptly after receipt
thereof, the
original lender's title insurance policy. The Depositor shall
deliver or cause
to be delivered to the Trustee promptly upon receipt
53
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.
The Trustee shall enforce the obligations of the Seller under the
Mortgage
Loan Purchase Agreement to promptly (within sixty Business Days
following the
later of the Closing Date and the date of receipt by the Trustee of
the
recording information for a Mortgage, but in no event later than
ninety days
following the Closing Date) submit or cause to be submitted for
recording, at
the expense of the Responsible Party and at no expense to the Trust
Fund, the
Trustee or the Depositor, in the appropriate public office for real
property
records, each Assignment referred to in Sections 2.01(iii) and (iv)
above and
the Depositor shall execute each original Assignment or cause each
original
Assignment to be executed in the following form: "Wells Fargo Bank,
N.A., as
Trustee under the applicable agreement." In the event that any such
Assignment
is lost or returned unrecorded because of a defect therein, the
Seller shall
promptly prepare or cause to be prepared (at the expense of the
Responsible
Party) a substitute Assignment or cure or cause to be cured such
defect, as the
case may be, and thereafter cause each such Assignment to be duly
recorded. If
the Responsible Party is unable to pay the cost of recording the
Assignments,
such expense will be paid by the Trustee and shall be reimbursable
to the
Trustee as an Extraordinary Trust Fund Expense. Notwithstanding the
foregoing,
the Trustee shall not be responsible for determining whether any
Assignment
delivered by the Depositor hereunder is in recordable form.
Notwithstanding the foregoing, however, for administrative
convenience and
facilitation of servicing and to reduce closing costs, the
Assignments shall not
be required to be submitted for recording (except with respect to
any Mortgage
Loan located in Maryland) unless the Trustee or the Depositor
receives written
notice that failure to record would result in a withdrawal or a
downgrading by
any Rating Agency of the rating on any Class of Certificates;
provided, however,
the Trustee shall enforce the obligations of the Seller under the
Mortgage Loan
Purchase Agreement to submit or cause to be submitted each
Assignment for
recording in the manner described above, at no expense to the Trust
Fund or the
Trustee, upon the earliest to occur of: (i) reasonable direction by
Holders of
Certificates entitled to at least 25% of the Voting Rights, (ii)
the occurrence
of a Servicer Event of Default, (iii) the occurrence of a
bankruptcy, insolvency
or foreclosure relating to the Servicer, (iv) the occurrence of a
servicing
transfer as described in Section 7.02 hereof, (v) with respect to
any one
Assignment, the occurrence of a bankruptcy, insolvency or
foreclosure relating
to the Mortgagor under the related Mortgage and (vi) any Mortgage
Loan that is
90 days or more delinquent. Upon receipt of written notice by the
Trustee from
the Servicer that recording of the Assignments is required pursuant
to one or
more of the conditions set forth in the preceding sentence, the
Depositor shall
be required to deliver such Assignments or shall cause such
Assignments to be
delivered within 30 days following receipt of such notice.
All original documents relating to the Mortgage Loans that are not
delivered to the Trustee are and shall be held by or on behalf of
the Seller,
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
2.01 to be a
part of a Mortgage File, such document shall be delivered promptly
to the
Trustee. Any such
54
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 parties hereto understand and agree that it is not intended
that any
Mortgage Loans be included in the Trust that are (a) "high cost"
loans under the
Home Ownership and Equity Protection Act of 1994 or (b) "high
cost,"
"threshold," "covered" or "predatory" loans under any other
applicable federal,
state or local law (including without limitation any regulation or
ordinance)
(or a similarly classified loan using different terminology under a
law imposing
heightened regulatory scrutiny or additional legal liability for
residential
mortgage loans having high interest rates, points and/or fees).
SECTION 2.02 Acceptance of REMIC I by Trustee. The Trustee
acknowledges
receipt subject to the provisions of Section 2.01 above and subject
to any
exceptions noted on the exception report described in the next
paragraph below,
of the documents referred to in Section 2.01 (other than such
documents
described in Section 2.01(v)) and all other assets included in the
definition of
"REMIC I" under clauses (i), (iii), (iv) and (v) (to the extent of
amounts
attributable thereto deposited into the Certificate Account) and
declares that
it holds and will hold such documents and the other documents
delivered to it
constituting a Mortgage File, 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, for the benefit of the Certificateholders, shall
review each
Mortgage File on or before the Closing Date, and the Trustee shall
certify in
substantially the form attached hereto as Exhibit C-1 that, as to
each Mortgage
Loan listed in the Mortgage Loan Schedule (other than any Mortgage
Loan paid in
full or any Mortgage Loan specifically identified in the exception
report
annexed thereto as not being covered by such certification), (i)
all documents
constituting part of such Mortgage File (other than such documents
described in
Section 2.01(v)) required to be delivered to it pursuant to this
Agreement are
in its possession, (ii) such documents have been reviewed by the
Trustee and
appear regular on their face and relate to such Mortgage Loan and
(iii) based on
the Trustee's examination and only as to the foregoing, the
information set
forth in the Mortgage Loan Schedule that corresponds to items (i),
(ii), (iii),
(xii), (xiii) and (xvi) of the definition of "Mortgage Loan
Schedule" accurately
reflects information set forth in the Mortgage File. It is herein
acknowledged
that, in conducting such review, the Trustee is under no duty or
obligation (i)
to inspect, review or examine any such documents, instruments,
certificates or
other papers to determine whether they are genuine, enforceable,
valid, legally
binding, effective or appropriate for the represented purpose or
whether they
have actually been recorded or are in recordable form or that they
are other
than what they purport to be on their face, (ii) to determine
whether any
Mortgage File should include any of the documents specified in
clause (v) of
Section 2.01 or (iii) to determine the perfection or priority of
any security
interest in any such documents or instruments. Notwithstanding the
foregoing, in
conducting the review described in this Section 2.02, the Trustee
shall not be
responsible for determining (i) if an Assignment is sufficient
under the laws of
the jurisdiction wherein the related Mortgaged Property is located
to reflect of
record the sale of the Mortgage or (ii) if a Mortgage creates a
first or second
lien on, or first or second priority security interest in, a
Mortgaged Property.
55
Prior to the first anniversary date of this Agreement, the Trustee
shall
deliver to the Depositor and the Servicer a final certification in
the form
attached hereto as Exhibit C-2 evidencing the completeness of the
Mortgage
Files, with any applicable exceptions noted thereon, and the
Servicer shall
forward a copy thereof to any Sub-Servicer.
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 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 and the Servicer. In addition, upon
the discovery
by the Depositor, the Servicer or the Trustee of a breach of any of
the
representations and warranties made by either the Responsible Party
or the
Seller in the related Mortgage Loan Purchase Agreement in respect
of any
Mortgage Loan which materially adversely affects such Mortgage Loan
or the
interests of the Certificateholders in such Mortgage Loan, the
party discovering
such breach shall give prompt written notice to the other parties.
The Trustee shall, at the written request and expense of any
Certificateholder, forward a written report to such
Certificateholder of all
Mortgage Files released to the Servicer for servicing purposes.
The Depositor and the Trustee intend that the assignment and
transfer
herein contemplated is absolute and constitutes a sale of the
Mortgage Loans,
the related Mortgage Notes and the related documents, conveying
good title
thereto free and clear of any liens and encumbrances, from the
Depositor to the
Trustee in trust for the benefit of the Certificateholders and that
such
property not be part of the Depositor's estate or property of the
Depositor in
the event of any insolvency by the Depositor. In the event that
such conveyance
is deemed to be, or to be made as security for, a loan, the parties
intend that
the Depositor shall be deemed to have granted and does hereby grant
to the
Trustee a first priority perfected security interest in all of the
Depositor's
right, title and interest in and to the Mortgage Loans, the related
Mortgage
Notes and the related documents, and that this Agreement shall
constitute a
security agreement under applicable law.
SECTION 2.03 Repurchase or Substitution of Mortgage Loans by the
Responsible Party and the Seller. (a) Upon discovery or receipt of
notice of any
materially defective document in, or that a document is missing
from, a Mortgage
File or of the breach by the Responsible Party or the Seller of any
representation, warranty or covenant under the Mortgage Loan
Purchase Agreement
in respect of any Mortgage Loan that materially adversely affects
the value of
such Mortgage Loan or the interest therein of the
Certificateholders, the
Trustee shall promptly notify the Seller, the Responsible Party and
the Servicer
of such defect, missing document or breach and request that the
Responsible
Party or the Seller, as applicable, deliver such missing document
or cure such
defect or breach within 60 days from the date the Responsible Party
or the
Seller, as applicable, was notified of such missing document,
defect or breach,
and if the Responsible Party or the Seller, as applicable, 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
Responsible Party
or the Seller, as applicable, under the Mortgage Loan Purchase
Agreement to
repurchase such Mortgage Loan from REMIC I at the Purchase Price
within 90 days
after the date on which the Responsible Party or the Seller, as
applicable, was
56
notified (subject to Section 2.03(c)) of such missing document,
defect or
breach, if and to the extent that the Responsible Party or the
Seller, as
applicable, is obligated to do so under the Mortgage Loan Purchase
Agreement.
The Purchase Price for the repurchased Mortgage Loan shall be
remitted to the
Servicer for deposit in the Custodial Account and the Trustee, upon
receipt of
written certification from the Servicer of such deposit, shall
release to the
Responsible Party or the Seller, as applicable, the related
Mortgage File and
the Trustee shall execute and deliver such instruments of transfer
or
assignment, in each case without recourse, as the Responsible Party
or the
Seller, as applicable, shall furnish to it and as shall be
necessary to vest in
the Responsible Party or the Seller, as applicable, any Mortgage
Loan released
pursuant hereto. The Trustee shall not have any 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
Responsible Party or the Seller, as applicable, may cause such
Mortgage Loan to
be removed from REMIC I (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(b); provided,
however, the
Responsible Party may not substitute a Qualified Substitute
Mortgage Loan for
any Deleted Mortgage Loan that violates any predatory or abusive
lending law. It
is understood and agreed that the obligation of the Responsible
Party and the
Seller 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
and the Certificateholders.
(b)
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 which is two years after the Startup Day for REMIC I.
As to any Deleted Mortgage Loan for which the Responsible Party or
the
Seller, as applicable, substitutes a Qualified Substitute Mortgage
Loan or
Loans, such substitution shall be effected by the Responsible Party
or the
Seller, as applicable, delivering to the Trustee 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 shall acknowledge receipt for such Qualified Substitute
Mortgage Loan or
Loans and, within ten Business Days thereafter, shall review such
documents as
specified in Section 2.02 and deliver to the Depositor 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 shall deliver to the Depositor and the Servicer a
certification
substantially in the form of Exhibit C-2 attached 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 REMIC I
and will be
retained by the Responsible Party or the Seller, as applicable. For
the month of
substitution, distributions to Certificateholders will reflect the
Monthly
Payment due on such Deleted
57
Mortgage Loan on or before the Due Date in the month of
substitution, and the
Responsible Party or the Seller, as applicable, shall thereafter be
entitled to
retain all amounts subsequently received in respect of such Deleted
Mortgage
Loan. The Depositor shall give or cause to be given written notice
to the
Certificateholders that such substitution has taken place, 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. 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 and the
Mortgage Loan
Purchase Agreement, including, all applicable representations and
warranties
thereof included in the Mortgage Loan Purchase Agreement.
For any month in which the Responsible Party or the Seller, as
applicable,
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 Expense Adjusted Mortgage Rate,
plus all
outstanding Advances and Servicing Advances (including
Nonrecoverable Advances
and Nonrecoverable Servicing Advances) related thereto. On the date
of such
substitution, the Responsible Party or the Seller, as applicable,
will deliver
or cause to be delivered to the Servicer for deposit in the
Custodial Account an
amount equal to the Substitution Shortfall Amount, if any, and upon
receipt by
the Trustee of the related Qualified Substitute Mortgage Loan or
Loans and
certification by the Servicer to the Trustee of such deposit, the
Trustee shall
release to the Responsible Party or the Seller, as applicable, the
related
Mortgage File or Files and the Trustee shall execute and deliver
such
instruments of transfer or assignment, in each case without
recourse, the
Responsible Party or the Seller, as applicable, shall deliver to it
and as shall
be necessary to vest therein any Deleted Mortgage Loan released
pursuant hereto.
In addition, the Responsible Party or the Seller, as applicable,
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 Trust REMIC, 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 Trust REMIC to fail to qualify as a REMIC at any time that
any
Certificate is outstanding.
(c)
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 Responsible Party shall repurchase or,
subject to the
limitations set forth in Section 2.03(b), 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. Such repurchase or substitution shall be made by (i)
the
Responsible Party or the Seller, as the case may be, if the
affected Mortgage
Loan's status as a non-qualified mortgage is or results from a
breach of any
58
representation, warranty or covenant made by the Responsible Party
or the
Seller, as the case may be, under the Mortgage Loan Purchase
Agreement, or (ii)
the Depositor, if the affected Mortgage Loan's status as a
non-qualified
mortgage is a breach of no representation or warranty. 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 Responsible Party 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 [Reserved].
SECTION 2.05 Representations, Warranties and Covenants of the
Servicer.
The Servicer hereby represents, warrants and covenants to the
Trustee, for the
benefit of the Certificateholders and to the Depositor that as of
the Closing
Date or as of such date specifically provided herein:
(i)
The Servicer is an industrial bank duly organized and
validly existing under the laws of the State of California 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 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 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,
all
transactions contemplated by this Agreement. The Servicer has duly
authorized the execution, delivery and performance of this
Agreement, has
duly executed and delivered this Agreement, and this Agreement,
assuming
due authorization, execution and delivery by the Depositor and the
Trustee, constitutes a legal, valid and binding obligation of the
Servicer, enforceable against it in accordance with its terms
except as
the enforceability thereof may be limited by bankruptcy,
insolvency,
reorganization or similar laws affecting the enforcement of
creditors'
rights generally and by general principles of equity;
(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 charter or
by-laws 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,
59
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 a HUD-approved non-supervised mortgagee
pursuant to Section 203 and Section 211 of the National Housing
Act, and
no event has occurred, including but not limited to a change in
insurance
coverage, that would make the Servicer unable to comply with HUD
eligibility requirements or which would require notification to
HUD;
(v)
The Servicer does not believe, nor does it have any reason
or cause to believe, that it cannot perform each and every covenant
made
by it and contained in this Agreement;
(vi)
No litigation is pending 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;
(vii)
There are no actions or proceedings against, or
investigations known to it of, the Servicer before any court,
administrative or other tribunal (A) that is likely to prohibit its
entering into this Agreement, (B) seeking to prevent the
consummation of
the transactions contemplated by this Agreement or (C) that is
likely to
prohibit or materially and adversely affect the performance by the
Servicer of its obligations under, or validity or enforceability
of, this
Agreement;
(viii)
No consent, approval, authorization or order of or
registration or filing with or notice to 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 it 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;
(ix)
The Servicer will not waive any Prepayment Charge unless it
is waived in accordance with the standard set forth in Section
3.01;
(x)
The Servicer has fully furnished and will continue to fully
furnish, in accordance with the Fair Credit Reporting Act and its
implementing regulations, accurate and complete information (e.g.,
favorable and unfavorable) on its borrower credit files to Equifax,
Experian and Trans Union Credit Information Company or their
successors on
a monthly basis; and
(xi)
No information, certificate of an officer, statement
furnished or to be furnished in writing or report delivered to the
Depositor, any Affiliate of the Depositor or
60
the Trustee by the Servicer will, to the knowledge of the Servicer,
contain any untrue statement of a material fact.
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 Trustee,
the
Depositor and the Certificateholders. Upon discovery by any of the
Depositor,
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 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 Trustee.
Subject to
Section 7.01, unless such breach shall not be susceptible of cure
within 90
days, the obligation of the Servicer set forth in this Section 2.05
to cure
breaches shall constitute the sole remedy against the Servicer
available to the
Certificateholders, the Depositor and the Trustee on behalf of the
Certificateholders respecting a breach of the representations,
warranties and
covenants contained in this Section 2.05. Notwithstanding the
foregoing, within
90 days of the earlier of discovery by the Servicer or receipt of
notice by the
Servicer of the breach of the representation or covenant of the
Servicer set
forth in Section 2.05(ix) above, which breach materially and
adversely affects
the interests of the Holders of the Class P Certificates in any
Prepayment
Charge, the Servicer shall pay the amount of such waived Prepayment
Charge, for
the benefit of the Holders of the Class P Certificates, by
depositing such
amount into the Custodial Account.
SECTION 2.06 Issuance of the REMIC I Regular Interests and the
Class R-I
Interest. The Trustee acknowledges the assignment to it of the
Mortgage Loans
and the delivery to it of the Mortgage Files, subject to the
provisions of
Section 2.01 and Section 2.02, together with the assignment to it
of all other
assets included in REMIC I, the receipt of which is hereby
acknowledged.
Concurrently with such assignment and delivery and in exchange
therefor, the
Trustee, pursuant to the written request of the Depositor executed
by an officer
of the Depositor, has executed, authenticated and delivered to or
upon the order
of the Depositor, the Class R Certificates (in respect of the Class
R-I
Interest) in authorized denominations. The interests evidenced by
the Class R-I
Interest, together with the REMIC I Regular Interests, constitute
the entire
beneficial ownership interest in REMIC I. The rights of the Class
R-I Interest
and REMIC II (as holder of the REMIC I Regular Interest) to receive
distributions from the proceeds of REMIC I in respect of the Class
R-I Interest
and the REMIC I Regular Interests, and all ownership interests
evidenced or
constituted by the Class R-I Interest and the REMIC I Regular
Interests, shall
be as set forth in this Agreement.
SECTION 2.07 Conveyance of the 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
Class R-II
Interest and REMIC II (as holder of the REMIC I Regular Interests).
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 all present
and future holders of the Class R-II Interest and REMIC II (as
holder of the
REMIC I Regular Interests). The rights of the holders of the Class
R-II Interest
and REMIC II (as holder of the REMIC I Regular Interests) to
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receive distributions from the proceeds of REMIC II in respect of
the Class R-II
Interest and REMIC II Regular Interests, respectively, and all
ownership
interests evidenced or constituted by the Class R-II Interest and
the REMIC II
Regular Interests, shall be as set forth in this Agreement.
SECTION 2.08 Issuance of Class R Certificates. The Trustee
acknowledges
the assignment to it of the REMIC Regular Interests and,
concurrently therewith
and in exchange therefor, pursuant to the written request of the
Depositor
executed by an officer of the Depositor, the Trustee has executed,
authenticated
and delivered to or upon the order of the Depositor, the Class R
Certificates in
authorized denominations.
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 its reasonable judgment) in accordance with the terms
of this
Agreement and the respective Mortgage Loans and, to the extent
consistent with
such terms, in the same manner in which it services and administers
similar
mortgage loans for its own portfolio, and in accordance with
customary and usual
standards of practice of mortgage lenders and loan servicers
administering
similar mortgage loans but without regard to:
(i)
any relationship that the Servicer, any Sub-Servicer or any
Affiliate of the Servicer or any 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 Advances or Servicing
Advances; or
(iv)
the Servicer's or any 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 (a) shall
seek
to maximize the timely and complete recovery of principal and
interest on the
Mortgage Notes and (b) shall waive (or permit a Sub-Servicer to
waive) a
Prepayment Charge only under the following circumstances: (i) such
waiver is
standard and customary in servicing similar Mortgage Loans and (ii)
such waiver
would, in the reasonable judgment of the Servicer, maximize
recovery of total
proceeds taking into account the value of such Prepayment Charge
and the related
Mortgage Loan and, if such waiver is made in connection with a
refinancing of
the related Mortgage Loan, such refinancing is related to a default
or a
reasonably foreseeable default or (iii) collection of the related
Prepayment
Charge would violate applicable law. If a Prepayment Charge is
waived as
permitted by meeting both of the standards described in clauses (i)
and (ii)
above, then the Servicer is required to pay the amount of such
waived Prepayment
Charge, for the benefit of the Holders of the Class P Certificates,
by
depositing such amount into the Custodial Account
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together with and at the time that the amount prepaid on the
related Mortgage
Loan is required to be deposited into the Custodial Account.
Notwithstanding any
other provisions of this Agreement, any payments made by the
Servicer in respect
of any waived Prepayment Charges pursuant to clauses (i) and (ii)
shall be
deemed to be paid outside of the Trust Fund.
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 Sub-Servicers 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
its own name
or in the name of a Sub-Servicer is hereby authorized and empowered
by the
Trustee when the Servicer believes it appropriate in its best
judgment, for the
benefit of the Certificateholders, in accordance with the servicing
standards
set forth above, to execute and deliver, on behalf of the Trust
Fund, the
Certificateholders and the Trustee or any of them, and upon written
notice to
the Trustee, any and all instruments of satisfaction or
cancellation, or of
partial or full release or discharge, and all other comparable
instruments, with
respect to the Mortgage Loans and the Mortgaged Properties and to
institute
foreclosure proceedings or obtain a deed-in-lieu of foreclosure so
as to convert
the ownership of such properties, and to hold or cause to be held
title to such
properties, on behalf of the Trustee and Certificateholders. The
Servicer shall
service and administer the Mortgage Loans in accordance with
applicable state
and federal law and shall provide to the Mortgagors any reports
required to be
provided to them thereby. 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. Subject to Section 3.17, the
Trustee shall
execute, at the written request of the Servicer, and furnish to the
Servicer and
any Sub-Servicer any special or limited powers of attorney and
other documents
necessary or appropriate to enable the Servicer or any Sub-Servicer
to carry out
their servicing and administrative duties hereunder and the Trustee
shall not be
liable for the actions of the Servicer or any Sub-Servicers under
such powers of
attorney.
Subject to Section 3.09 hereof, in accordance with the standards of
the
preceding paragraph, 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 Sub-Servicers 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 Mortgage Loan
(except as
provided in Section 4.03) and the Servicer shall not (i) permit any
modification
with respect to any Mortgage Loan that would change the Mortgage
Rate, reduce or
increase the principal balance (except for reductions resulting
from actual
payments of principal) or change the final maturity date on such
Mortgage Loan
(unless, as provided in Section 3.07, the Mortgagor is in default
with respect
to the Mortgage Loan or such default is, in the judgment of the
Servicer,
reasonably foreseeable) or
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(ii) permit any modification, waiver or amendment of any term of
any Mortgage
Loan that would both (A) effect an exchange or reissuance of such
Mortgage Loan
under Section 1001 of the Code (or Treasury regulations promulgated
thereunder)
and (B) cause any Trust 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 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 Servicer and
Sub-Servicers.
(a)Subject to Section 14.01(d), the Servicer may enter into
Sub-Servicing
Agreements with Sub-Servicers for the servicing and administration
of the
Mortgage Loans; provided, however, that such agreements would not
result in a
withdrawal or a downgrading by any Rating Agency of the rating on
any Class of
Certificates. The Trustee is hereby authorized to acknowledge, at
the request of
the Servicer, any Sub-Servicing Agreement that, based on an
Officers'
Certificate of the Servicer delivered to the Trustee (upon which
the Trustee can
conclusively rely), 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 authorized to transact business in the
state or
states where the related Mortgaged Properties it is to service are
situated, if
and to the extent required by applicable law to enable the
Sub-Servicer to
perform its obligations hereunder and under the Sub-Servicing
Agreement. Each
Sub-Servicing Agreement must impose on the Sub-Servicer
requirements conforming
to the provisions set forth in Section 3.08 and provide for
servicing of the
Mortgage Loans consistent with the terms of this Agreement. The
Servicer will
examine each Sub-Servicing Agreement 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 the
Sub-Servicers may
enter into and make amendments to the Sub-Servicing Agreements 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; provided,
further, that the consent of the Holders of Certificates entitled
to at least
66% of the Voting Rights shall not be required (i) to cure any
ambiguity or
defect in a Sub-Servicing Agreement, (ii) to correct, modify or
supplement any
provisions of a Sub-Servicing Agreement, or (iii) to make any other
provisions
with respect to matters or questions arising under a Sub-Servicing
Agreement,
which, in each case, shall not be inconsistent with the provisions
of this
Agreement. 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 the Sub-Servicers to the Servicer, are
conclusively
deemed to be inconsistent with this Agreement and therefore
prohibited. The
Servicer shall deliver to the Trustee, upon its request, copies of
all Sub-
64
Servicing Agreements, and any amendments or modifications thereof,
promptly upon
the Servicer's execution and delivery of such instruments.
(b)
As part of its servicing activities hereunder, the Servicer, for
the benefit of the Trustee and the Certificateholders, shall
enforce the
obligations of each Sub-Servicer under the related Sub-Servicing
Agreement,
including, without limitation, any obligation of a Sub-Servicer to
make advances
in respect of delinquent payments as required by a 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 shall pay the
costs of
enforcing the obligations of a Sub-Servicer at its own expense, and
shall be
reimbursed therefor only (i) from a general recovery resulting from
such
enforcement, to the extent, if any, that such recovery exceeds all
amounts due
in respect of the related Mortgage Loans, or (ii) from a specific
recovery of
costs, expenses or attorneys' fees against the party against whom
such
enforcement is directed.
SECTION 3.03 Successor Sub-Servicers. The Servicer shall be
entitled to
terminate any Sub-Servicing Agreement and the rights and
obligations of any
Sub-Servicer pursuant to any 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 (if the
Trustee is acting
as Servicer) without fee, in accordance with the terms of this
Agreement, in the
event that the Servicer (or the Trustee, if it is 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 or 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, the Servicer shall
remain obligated
and primarily liable to the Trustee and the Certificateholders for
the servicing
and administering of the Mortgage Loans in accordance with the
provisions of
Section 3.01 without diminution of such obligation or liability by
virtue of
such Sub-Servicing Agreements or arrangements or by virtue of
indemnification
from the Sub-Servicer and to the same extent and under the same
terms and
conditions as if the Servicer alone were servicing and
administering the
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.
65
SECTION 3.05 No Contractual Relationship Between Sub-Servicers, the
Trustee or the Certificateholders. Any Sub-Servicing Agreement that
may be
entered into and any other transactions or services relating to the
Mortgage
Loans involving a Sub-Servicer in its capacity as such shall be
deemed to be
between the Sub-Servicer and the Servicer alone, and the Trustee
and the
Certificateholders shall not be deemed parties thereto and shall
have no claims,
rights, obligations, duties or liabilities with respect to the
Sub-Servicer
except as set forth in Section 3.06. The Servicer shall be solely
liable for all
fees owed by it to any Sub-Servicer, irrespective of whether the
Servicer's
compensation pursuant to this Agreement is sufficient to pay such
fees. The
foregoing provision shall not in any way limit a Sub-Servicer's
obligation to
cure an omission or defect.
SECTION 3.06 Assumption or Termination of Sub-Servicing Agreements
by the
Trustee. In the event 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, its designee or other successor Servicer shall
thereupon assume all
of the rights and obligations of the Servicer under each
Sub-Servicing Agreement
that the Servicer may have entered into, unless the Trustee, such
designee or
other successor Servicer 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 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 each
Sub-Servicing
Agreement to the assuming party.
The Servicing Fee payable to the Trustee as successor Servicer or
other
successor Servicer shall be payable from payments received on the
Mortgage Loans
in the amount and in the manner set forth in this Agreement.
SECTION 3.07 Collection of Certain Mortgage Loan Payments. 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,
however, that
any extension pursuant to clause (ii) above shall not affect the
66
amortization schedule of any Mortgage Loan for purposes of any
computation
hereunder, except as provided below. In the event of any such
arrangement
pursuant to clause (ii) above, the Servicer shall make timely
advances on such
Mortgage Loan during such extension pursuant to Section 4.03 and in
accordance
with the amortization schedule of such Mortgage Loan without
modification
thereof by reason of such arrangement. Notwithstanding the
foregoing, in the
event that any 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
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 (such payment, a "Short Pay-off"), or consent to the
postponement of strict
compliance with any such term or otherwise grant indulgence to any
Mortgagor.
Notwithstanding anything contained in this Section 3.07 or any
other
provisions of this Agreement to the contrary, for each
Adjustable-Rate Mortgage
Loan for which the related Mortgage Note permits an increase to the
related
Mortgage Rate on the first Adjustment Date of greater than 1.5% per
annum, the
Servicer shall service such Adjustable-Rate Mortgage Loan as if the
maximum
Mortgage Rate on the first Adjustment Date is limited to the
related initial
Mortgage Rate plus 1.5% per annum. Without limiting the foregoing,
all notices
sent by the Servicer to the Mortgagors of such Adjustable-Rate
Mortgage Loans
prior to the first Adjustment Date (including at least one such
notice sent no
later than six months prior to such first Adjustment Date)
notifying such
Mortgagors of the applicable Mortgage Rate and Monthly Payment
effective as of
the first Adjustment Date shall not reflect a rate in excess of the
maximum
Mortgage Rate as set forth in the preceding sentence.
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
Sub-Servicer will be required to establish and maintain one or more
accounts
(collectively, the "Sub-Servicing Account"). The Sub-Servicing
Account shall be
an Eligible Account and shall comply with all requirements of this
Agreement
relating to the Custodial Account. The Sub-Servicer shall deposit
in the
clearing 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
Sub-Servicer's
receipt thereof, all proceeds of Mortgage Loans received by the
Sub-Servicer
less its servicing compensation to the extent permitted by the
Sub-Servicing
Agreement, and shall thereafter deposit such amounts in the
Sub-Servicing
Account, in no event more than two Business Days after the receipt
of such
amounts. The Sub-Servicer shall thereafter deposit such proceeds in
the
Custodial Account or remit such proceeds to the Servicer for
deposit in the
Custodial Account not later than two Business Days after the
deposit of such
amounts in the Sub-Servicing Account. For purposes of this
Agreement, the
Servicer shall be deemed to have received payments on the Mortgage
Loans when
the 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 (the "Servicing Accounts"),
into which all
collections from the Mortgagors
67
(or related advances from Sub-Servicers) for the payment of taxes,
assessments,
hazard insurance premiums and comparable items for the account of
the Mortgagors
("Escrow Payments") shall be deposited and retained. Servicing
Accounts shall be
Eligible Accounts. The Servicer shall deposit in the clearing
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 Escrow
Payments collected on account of the Mortgage Loans and shall
thereafter deposit
such Escrow Payments in the Servicing Accounts, in no event more
than two
Business Days after the receipt of such Escrow Payments, all Escrow
Payments
collected on account of the Mortgage Loans for the purpose of
effecting the
timely 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
in a manner and at a time that assures that the lien priority of
the Mortgage is
not jeopardized (or, with respect to the payment of taxes, in a
manner and at a
time that avoids the loss of the Mortgaged Property due to a tax
sale or the
foreclosure as a result of a tax lien); (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, if required and as described below, to
Mortgagors
on balances in the Servicing Account; or (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. As part of its servicing duties, the Servicer or Sub-Servicers
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.
SECTION 3.10 Custodial Account and Certificate 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 (such account or
accounts, the
"Custodial Account"), held in trust for the benefit of the Trustee
and the
Certificateholders. On behalf of the Trust Fund, the Servicer shall
deposit or
cause to be deposited in the clearing 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
Custodial Account, in no event more than two Business Days after
the Servicer's
receipt thereof, as and when received or as otherwise required
hereunder, the
following payments and collections received or made by it
subsequent to the
Cut-off Date (other than in respect of principal or interest on the
related
Mortgage Loans due on or before the Cut-off Date), or payments
(other than
Principal Prepayments) received by it on or prior to the Cut-off
Date but
allocable to a Due Period subsequent thereto:
(i)
all payments on account of principal, including Principal
Prepayments (but not Prepayment Charges), on the Mortgage Loans;
(ii)
all payments on account of interest (net of the related
Servicing Fee) on each Mortgage Loan;
68
(iii)
all Insurance Proceeds, Liquidation Proceeds (other than
proceeds collected in respect of any particular REO Property and
amounts
paid in connection with a purchase of Mortgage Loans and REO
Properties
pursuant to Section 9.01) and Subsequent Recoveries;
(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 Custodial 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 or Section 9.01;
(vii)
all amounts required to be deposited in connection with
shortfalls in principal amount of Qualified Substitute Mortgage
Loans
pursuant to Section 2.03; and
(viii)
all Prepayment Charges collected by the Servicer and any
Servicer Prepayment Charge Payment Amounts in connection with the
Principal Prepayment of any of the Mortgage Loans.
The foregoing requirements for deposit in the Custodial Account
shall be
exclusive, it being understood and agreed that, without limiting
the generality
of the foregoing, payments in the nature of late payment charges,
modification
or assumption fees, or insufficient funds charges need not be
deposited by the
Servicer in the Custodial Account and may be retained by the
Servicer as
additional compensation. In the event the Servicer shall deposit in
the
Custodial Account any amount not required to be deposited therein,
it may at any
time withdraw such amount from the Custodial 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
"Certificate
Account"), held in trust for the benefit of the Trustee, 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
Certificate
Account by 3:00 p.m. New York time (i) 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 Certificate Account) for the related
Distribution Date then
on deposit in the Custodial Account and the amount of all
Prepayment Charges
collected during the applicable Prepayment Period by the Servicer
and Servicer
Prepayment Charge Payment Amounts in connection with the Principal
Prepayment of
any of the Mortgage Loans then on deposit in the Custodial Account
and the
amount of any funds reimbursable to an Advancing Person pursuant to
Section 3.26
and (ii) on each Business Day as of the commencement of which the
balance on
deposit in the Custodial Account exceeds $75,000 following any
withdrawals
pursuant to the next succeeding sentence, the amount of such
excess, but only if
the Custodial Account constitutes an Eligible Account solely
pursuant to clause
(ii) of the definition of "Eligible Account." If the balance on
deposit in the
Custodial Account exceeds
69
$75,000 as of the commencement of business on any Business Day and
the Custodial
Account constitutes an Eligible Account solely pursuant to clause
(ii) of the
definition of "Eligible Account," the Servicer shall, by 3:00 p.m.
New York time
on such Business Day, withdraw from the Custodial Account any and
all amounts
payable or reimbursable to the Depositor, the Servicer, the
Trustee, the
Responsible Party, the Seller or any Sub-Servicer pursuant to
Section 3.11 and
shall pay such amounts to the Persons entitled thereto.
(c)
On or prior to the Business Day immediately following each
Determination Date, the Swap Counterparty shall determine any
amounts owed by
the Swap Counterparty under the Swap Agreement and inform the
Trustee in writing
of the amount so calculated.
(d)
Funds in the Custodial Account and the Certificate 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 of the
location of
the Custodial 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 Certificate Account when established and prior to
any change
thereof.
(e)
Funds held in the Custodial Account at any time may be delivered by
the Servicer to the Trustee for deposit in an account (which may be
the
Certificate Account and must satisfy the standards for the
Certificate Account
as set forth in the definition thereof) and for all purposes of
this Agreement
shall be deemed to be a part of the Custodial Account (and in such
event, the
Servicer shall provide the Trustee with written instructions
regarding the
investment of such funds); provided, however, that the Trustee
shall have the
sole authority to withdraw any funds held pursuant to this
subsection (e). In
the event the Servicer shall deliver to the Trustee for deposit in
the
Certificate Account any amount not required to be deposited
therein, it may at
any time request in writing that the Trustee withdraw such amount
from the
Certificate Account and remit to it any such amount, any provision
herein to the
contrary notwithstanding. In no event shall the Trustee incur
liability as a
result of withdrawals from the Certificate Account at the direction
of the
Servicer in accordance with the immediately preceding sentence. In
addition, the
Servicer shall deliver to the Trustee from time to time for
deposit, and the
Trustee shall so deposit, in the Certificate Account:
(i)
any 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 in connection with a purchase of
Mortgage Loans and REO Properties pursuant to Section 9.01; and
(iv)
any amounts required to be deposited pursuant to Section
3.24 in connection with any Prepayment Interest Shortfall.
(f)
The Servicer shall deposit in the Custodial Account any amounts
required to be deposited pursuant to Section 3.12(b) in connection
with losses
realized on Permitted
70
Investments with respect to funds held in the Custodial Account
(and the
Certificate Account to the extent that funds therein are deemed to
be part of
the Custodial Account).
(g)
The Trustee shall deposit in the Certificate Account any amounts
required to be deposited pursuant to Section 3.12(b) in connection
with losses
realized on Permitted Investments with respect to funds held in the
Certificate
Account.
SECTION 3.11 Withdrawals from the Custodial Account and Certificate
Account. (a) The Servicer shall, from time to time, make
withdrawals from the
Custodial Account for any of the following purposes or as described
in Section
4.03:
(i)
to remit to the Trustee for deposit in the Certificate
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(e);
(ii)
subject to Section 3.16(d), to reimburse the Servicer for
Advances, but only to the extent of amounts received which
represent Late
Collections (net of the related Servicing Fees) of Monthly Payments
on
Mortgage Loans with respect to which such Advances were made in
accordance
with the provisions of Section 4.03;
(iii)
subject to Section 3.16(d), to pay the Servicer or any
Sub-Servicer, as applicable, (a) any unpaid Servicing Fees, (b) any
unreimbursed Servicing Advances with respect to each Mortgage Loan,
but
only to the extent of any Late Collections, Liquidation Proceeds,
Insurance Proceeds and Subsequent Recoveries received with respect
to such
Mortgage Loan and (c) any Nonrecoverable Servicing Advances with
respect
to the final liquidation of a Mortgage Loan, but only to the extent
that
Late Collections, Liquidation Proceeds, Insurance Proceeds and
Subsequent
Recoveries received with respect to such Mortgage Loan are
insufficient to
reimburse the Servicer or any Sub-Servicer for Servicing Advances;
(iv)
to pay to the Servicer 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
Custodial
Account;
(v)
to pay to the Servicer, the Depositor, the Responsible Party
or the Seller, 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) all amounts received thereon subsequent to the date
of
purchase or substitution, as the case may be;
(vi)
to reimburse the Servicer for any Advance previously made
which the Servicer has determined to be a Nonrecoverable Advance in
accordance with the provisions of Section 4.03;
(vii)
to reimburse the Servicer or the Depositor for expenses
incurred by or reimbursable to the Servicer or the Depositor, as
the case
may be, pursuant to Section 3.02(b) and Section 6.03;
71
(viii)
to reimburse the Servicer or Trustee for expenses
reasonably incurred in connection with any breach or defect giving
rise to
the purchase obligation under Section 2.03 of this Agreement,
including
any expenses arising out of the enforcement of the purchase
obligation;
(ix)
to pay, or to reimburse the Servicer for Servicing Advances
in respect of, expenses incurred in connection with any Mortgage
Loan
pursuant to Section 3.16(b); and
(x)
to clear and terminate the Custodial Account pursuant to
Section 9.01.
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 Custodial Account, to the extent held by or on behalf of it,
pursuant to
subclauses (ii), (iii), (iv), (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
Custodial Account pursuant to subclauses (vi) and (vii) above;
provided that an
Officers' Certificate in the form described under Section 4.03(d)
shall suffice
for such written notification to the Trustee in respect of clause
(vi) hereof.
(b)
The Trustee shall, from time to time, make withdrawals from the
Certificate Account, for any of the following purposes, without
priority:
(i)
to make distributions to Certificateholders in accordance
with Section 4.01;
(ii)
to pay to itself amounts to which it is entitled pursuant
to Section 8.05 or for Extraordinary Trust Fund Expenses;
(iii)
to reimburse itself pursuant to Section 7.02;
(iv)
to pay any amounts in respect of taxes pursuant to Section
10.01(g)(iii);
(v)
to pay to an Advancing Person reimbursements for Advances
and/or Servicing Advances pursuant to Section 3.26; and
(vi)
to clear and terminate the Certificate Account pursuant to
Section 9.01.
SECTION 3.12 Investment of Funds in the Custodial Account and the
Certificate Account. (a) The Servicer may direct any depository
institution
maintaining the Custodial Account (for purposes of this Section
3.12, an
"Investment Account") and, so long as the Trustee's long-term
senior unsecured
debt is assigned a minimum rating of "A" by Fitch, "A" by S&P
or "A2" by
Moody's, the Trustee may direct any depository institution
maintaining the
Certificate Account (also for purposes of this Section 3.12, 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
72
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 for the benefit of
the
Certificateholders. The Trustee shall be entitled to sole
possession (except
with respect to investment direction of funds held in the Custodial
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
party with
investment discretion over such Investment Account shall:
(x)
consistent with any notice required to be given thereunder,
demand that payment thereon be made on the last day such Permitted
Investment may otherwise mature hereunder in an amount equal to the
lesser
of (1) all amounts then payable thereunder and (2) the amount
required to
be withdrawn on such date; and
(y)
demand payment of all amounts due thereunder 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 Custodial 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 Custodial Account or any REO Account,
as
applicable, the amount of any loss of principal incurred in respect
of any such
Permitted Investment made with funds in such accounts immediately
upon
realization of such loss. All income and gain realized from the
investment of
funds deposited in the Certificate Account held by or on behalf of
the Trustee,
shall be for the benefit of the Trustee and shall be subject to its
withdrawal
in accordance with Section 3.11. The Trustee shall deposit in the
Certificate
Account the amount of any loss of principal incurred in respect of
any such
Permitted Investment made with funds in such account immediately
upon
realization of such loss.
(c)
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 (of which a Responsible Officer of the Trustee obtains
actual
knowledge), 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.
(d)
The Trustee or its Affiliates are permitted to receive additional
compensation that could be deemed to be in the Trustee's economic
self-interest
for (i) serving as investment
73
adviser, administrator, shareholder servicing agent, custodian or
sub-custodian
with respect to certain of the Permitted Investments and (ii)
effecting or using
Affiliates to effect transactions in certain Permitted Investments.
Such
compensation shall not be considered an amount that is reimbursable
or payable
to the Trustee pursuant to Section 3.11 or 3.12 or otherwise
payable in respect
of Extraordinary Trust Fund Expenses.
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 lesser of the
current
principal balance of such Mortgage Loan and 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, 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 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 or amounts to be released
to the
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 and Mortgage Note) shall be deposited in the
Custodial
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. 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 having a General Policy Rating of B or better in
Best's Key
Rating Guide (or such other rating that is comparable to such
rating) insuring
against hazard losses on all of the Mortgage Loans, it
74
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 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
Custodial 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
the FDIC. The Servicer shall also maintain a fidelity bond in the
form and
amount that would meet the requirements of the FDIC. 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 policy of
insurance covering errors and omissions and a fidelity bond which
would meet
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 the
Mortgagor
remains or is to remain liable under the Mortgage Note and/or the
Mortgage),
exercise its rights to accelerate the maturity of such Mortgage
Loan under the
"due-on-sale" clause, if any, applicable thereto; provided,
however, that 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 Mortgage Note and, to the extent
permitted by
applicable state law, the 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 Mortgagor is released from liability
and such
person is substituted as the Mortgagor and becomes liable under the
Mortgage
Note, provided that no such substitution shall be effective unless
such person
satisfies the underwriting criteria of the Originator and has a
credit risk
rating at least equal to that of the original Mortgagor. In
connection with any
assumption or substitution, the Servicer shall apply the
Originator's
underwriting standards and follow such practices and procedures as
shall be
normal and usual in its general mortgage servicing activities and
as it applies
to other mortgage loans owned solely by it. The Servicer
75
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. Any fee collected by the Servicer in
respect of an
assumption, modification or substitution of liability agreement
shall be
retained by the Servicer as additional servicing compensation. In
connection
with any such assumption, no material term of the Mortgage Note
(including but
not limited to the related Mortgage Rate and the amount of the
Monthly Payment)
may be amended or modified, except as otherwise required pursuant
to the terms
thereof. The Servicer shall notify the Trustee that any such
substitution,
modification or assumption agreement has been completed by
forwarding to the
Trustee the executed original of such substitution, 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 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 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 exercise its discretion, consistent with customary servicing
procedures
and the terms of this Agreement, with respect to the enforcement
and servicing
of defaulted Mortgage Loans in such manner as will maximize the
receipt of
principal and interest with respect thereto, including, but not
limited to, the
modification of such Mortgage Loan, or foreclosure upon the related
Mortgaged
Property and disposition thereof.
In furtherance of the foregoing, the Servicer shall use its best
efforts,
consistent with Accepted Servicing Practices, to foreclose upon or
otherwise
comparably convert the ownership of properties securing such of the
Mortgage
Loans as come into and continue in default and as to which no
satisfactory
arrangements can be made for collection of delinquent payments
pursuant to
Section 3.07. 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 by the Servicer
as
contemplated in Section 3.11 and Section 3.23 (provided that any
costs and
expenses of removing such Mortgage Loans from the MERS system shall
be at the
expense of the Servicer and shall not be recoverable as a Servicing
Advance).
The foregoing is subject to the provision that, in any case in
which 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 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
76
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 an Independent
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
the Mortgaged Property into compliance therewith; and
(2)
there are no circumstances present at such Mortgaged
Property relating to the use, management or disposal of any
hazardous
substances, hazardous materials, hazardous wastes, or
petroleum-based
materials for which investigation, testing, monitoring,
containment,
clean-up or remediation could be required under any federal, state
or
local law or regulation, or that if any such materials are present
for
which such action could be required, that it would be in the best
economic
interest of the Trust Fund to take such actions with respect to the
affected Mortgaged Property.
The cost of the environmental audit report contemplated by this
Section
3.16 shall be advanced by the Servicer, subject to the Servicer's
right to be
reimbursed therefor from the Custodial Account as provided in
Section
3.11(a)(ix), such right of reimbursement being prior to the rights
of
Certificateholders to receive any amount in the Custodial Account
received in
respect of the affected Mortgage Loan or other Mortgage Loans.
If the Servicer determines, as described above, that it is in the
best
economic interest of the Trust Fund to take such actions as are
necessary to
bring any such Mortgaged Property into compliance with applicable
environmental
laws, or to take such action with respect to the containment,
clean-up or
remediation of hazardous substances, hazardous materials, hazardous
wastes or
petroleum-based materials affecting any such Mortgaged Property,
then the
Servicer shall take such action as it deems to be in the best
economic interest
of the Trust Fund; provided that any amounts disbursed by the
Servicer pursuant
to this Section 3.16(b) shall constitute Servicing Advances,
subject to Section
4.03(d). The cost of any such compliance, containment, cleanup or
remediation
shall be advanced by the Servicer, subject to the Servicer's right
to be
reimbursed therefor from the Custodial Account as provided in
Section
3.11(a)(iii) and (a)(ix), such right of reimbursement being prior
to the rights
of Certificateholders to receive any amount in the Custodial
Account received in
respect of the affected Mortgage Loan or other Mortgage Loans.
77
(c)
The Servicer or its designee may at its option, with ten (10)
Business Days prior written notice to the Depositor and the Seller,
purchase
from REMIC I any Mortgage Loan or related REO Property that is 90
days or more
delinquent, which the Servicer, or its designee, as applicable,
determines in
good faith will otherwise become subject to foreclosure proceedings
(evidence of
such determination to be delivered in writing to the Trustee, in
form and
substance satisfactory to the Trustee prior to purchase), at a
price equal to
the Purchase Price; provided, however, that the Servicer, or its
designee, as
applicable, shall purchase any such Mortgage Loans or related REO
Properties on
the basis of delinquency, purchasing the most delinquent Mortgage
Loans or
related REO Properties first. The Purchase Price for any Mortgage
Loan or
related REO Property purchased hereunder shall be deposited in the
Custodial
Account by the Servicer (if such optional purchase is exercised by
a designee of
the Servicer, the Purchase Price for any Mortgage Loan or related
REO Property
purchased hereunder shall be paid by such designee to the Servicer
and the
Servicer shall deposit such Purchase Price in the Custodial
Account), and the
Trustee, upon receipt of written certification from the Servicer of
such
deposit, shall release or cause to be released to the Servicer, or
its designee,
as applicable, the related Mortgage File and the Trustee shall
execute and
deliver such instruments of transfer or assignment, in each case
without
recourse, as the Servicer, or its designee, as applicable, shall
furnish and as
shall be necessary to vest in the Servicer, or its designee, as
applicable,
title to any Mortgage Loan or related REO Property released
pursuant hereto.
(d)
Proceeds received in connection with any Final Recovery
Determination, as well as any recovery resulting from a partial
collection of
Insurance Proceeds, Liquidation Proceeds or Subsequent Recoveries,
in respect of
any Mortgage Loan, will be applied in the following order of
priority: first, to
reimburse the Servicer or any Sub-Servicer for any related
unreimbursed
Servicing Advances and Advances, pursuant to Section 3.11(a)(ii) or
(a)(iii);
second, to accrued and unpaid interest on the Mortgage Loan, to the
date of the
Final Recovery Determination, or to the Due Date prior to the
Distribution Date
on which such amounts are to be distributed if not in connection
with a Final
Recovery Determination; and third, as a recovery of principal of
the Mortgage
Loan. If the amount of the recovery so allocated to interest is
less than the
full amount of accrued and unpaid interest due on such Mortgage
Loan, the amount
of such recovery will be allocated by the Servicer as follows:
first, to unpaid
Servicing Fees; and second, to the balance of the interest then due
and owing.
The portion of the recovery so allocated to unpaid Servicing Fees
shall be
reimbursed to the Servicer or any Sub-Servicer pursuant to Section
3.11(a)(iii).
SECTION 3.17 Trustee to Cooperate; Release of Mortgage Files. (a)
Upon the
payment in full of any Mortgage Loan, or upon the receipt by the
Servicer of a
notification that payment in full shall be escrowed in a manner
customary for
such purposes, the Servicer shall immediately notify or cause to be
notified the
Trustee by a certification in the form of Exhibit E (which
certification may be
in electronic form and shall include a statement to the effect that
all amounts
received or to be received in connection with such payment which
are required to
be deposited in the Custodial Account pursuant to Section 3.10 have
been or will
be so deposited) of a Servicing Officer and shall request delivery
to it of the
Mortgage File. Upon receipt of such certification and request, the
Trustee shall
promptly release the related Mortgage File to the Servicer at no
cost to the
Trustee or the Trust Fund. No expenses incurred in connection with
78
any instrument of satisfaction or deed of reconveyance shall be
chargeable to
the Custodial Account or the Certificate Account.
(b)
From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan, including, for this purpose,
collection under
any insurance policy relating to the Mortgage Loans, the Trustee
shall, upon any
request made by or on behalf of the Servicer and delivery to the
Trustee of a
Request for Release in the form of Exhibit E, release the related
Mortgage File
to the Servicer, and the Trustee shall, at the direction of the
Servicer,
execute such documents as shall be necessary to the prosecution of
any such
proceedings. Such Request for Release shall obligate the Servicer
to return each
and every document previously requested from the Mortgage File to
the Trustee
when the need therefor by the Servicer no longer exists, unless (i)
the Mortgage
Loan has been liquidated and the Liquidation Proceeds relating to
the Mortgage
Loan have been deposited in the Custodial Account or (ii) the
Mortgage File or
such document has been delivered to an attorney, or to a public
trustee or other
public official as required by law, for purposes of initiating or
pursuing legal
action or other proceedings for the foreclosure of the Mortgaged
Property either
judicially or non-judicially, and the Servicer has delivered, or
caused to be
delivered, to the Trustee an additional Request for Release
certifying as to
such liquidation or action or proceedings. Upon the request of the
Trustee, the
Servicer shall provide notice to the Trustee of the name and
address of the
Person to which such Mortgage File or such document was delivered
and the
purpose or purposes of such delivery. Upon receipt of a certificate
of a
Servicing Officer stating that such Mortgage Loan was liquidated
and that all
amounts received or to be received in connection with such
liquidation that are
required to be deposited into the Custodial Account have been so
deposited, or
that such Mortgage Loan has become an REO Property, any outstanding
Requests for
Release with respect to such Mortgage Loan shall be released by the
Trustee to
the Servicer or its designee.
(c)
Upon written certification of a Servicing Officer, the Trustee
shall execute and deliver to the Servicer or the Sub-Servicer, as
the case may
be, any court pleadings, requests for trustee's sale or other
documents
necessary to the foreclosure or trustee's sale in respect of a
Mortgaged
Property or to any legal action brought to obtain judgment against
any Mortgagor
on the Mortgage Note or Mortgage or to obtain a deficiency
judgment, or to
enforce any other remedies or rights provided by the Mortgage Note
or Mortgage
or otherwise available at law or in equity. Each such certification
shall
include a request that such pleadings or documents be executed by
the Trustee
and a statement as to the reason such documents or pleadings are
required and
that the execution and delivery thereof by the Trustee will not
invalidate or
otherwise affect the lien of the Mortgage, except for the
termination of such a
lien upon completion of the foreclosure or trustee's sale.
SECTION 3.18 Servicing Compensation. As compensation for the
activities of
the Servicer hereunder, the Servicer shall be entitled to the
Servicing Fee with
respect to each Mortgage Loan payable solely from payments of
interest in
respect of such Mortgage Loan, subject to Section 3.24. In
addition, the
Servicer shall be entitled to recover unpaid Servicing Fees out of
Insurance
Proceeds, Liquidation Proceeds or Subsequent Recoveries to the
extent permitted
by Section 3.11(a)(iii) and out of amounts derived from the
operation and sale
of an REO Property to the extent permitted by Section 3.23. Except
as provided
in Sections 3.26, the right to receive the Servicing Fee may not be
transferred
in whole or in part except in connection
79
with the transfer of all of the Servicer's responsibilities and
obligations
under this Agreement; provided, however, that the Servicer may pay
from the
Servicing Fee any amounts due to a Sub-Servicer pursuant to a
Sub-Servicing
Agreement entered into under Section 3.02.
Additional servicing compensation in the form of assumption fees,
late
payment charges, insufficient funds charges or otherwise (subject
to Section
3.24 and other than Prepayment Charges) shall be retained by the
Servicer only
to the extent such fees or charges are received by the Servicer.
The Servicer
shall also be entitled pursuant to Section 3.11(a)(iv) to withdraw
from the
Custodial Account and pursuant to Section 3.23(b) to withdraw from
any REO
Account, as additional servicing compensation, interest or other
income earned
on deposits therein, subject to Section 3.12 and Section 3.24. The
Servicer
shall be required to pay all expenses incurred by it in connection
with its
servicing activities hereunder (including premiums for the
insurance required by
Section 3.14, to the extent such premiums are not paid by the
related Mortgagors
or by a Sub-Servicer, servicing compensation of each Sub-Servicer,
and to the
extent provided herein in Section 8.05, the expenses of the
Trustee) and shall
not be entitled to reimbursement therefor except as specifically
provided
herein.
SECTION 3.19 Reports to the Trustee and Others; Custodial Account
Statements. Not later than twenty days after each Distribution
Date, the
Servicer shall forward to the Trustee (upon the Trustee's request)
and the
Depositor the most current available bank statement for the
Custodial Account.
Copies of such statement shall be provided by the Trustee to any
Certificateholder and to any Person identified to the Trustee as a
prospective
transferee of a Certificate, upon request at the expense of the
requesting
party, provided such statement is delivered by the Servicer to the
Trustee.
SECTION 3.20 [Reserved].
SECTION 3.21 [Reserved].
SECTION 3.22 Access to Certain Documentation. The Servicer shall
provide
to the Office of Thrift Supervision, the FDIC, and any other
federal or state
banking or insurance regulatory authority that may exercise
authority over any
Certificateholder or Certificate Owner, access to the documentation
in the
Servicer's possession regarding the Mortgage Loans required by
applicable laws
and regulations. Such access shall be afforded without charge, but
only upon
reasonable request and during normal business hours at the offices
of the
Servicer designated by it. In addition, access to the documentation
in the
Servicer's possession regarding the Mortgage Loans will be provided
to any
Certificateholder or Certificate Owner, the Trustee and to any
Person identified
to the Servicer as a prospective transferee of a Certificate;
provided, however,
that providing access to such Person will not violate any
applicable laws, upon
reasonable request during normal business hours at the offices of
the Servicer
designated by it at the expense of the Person requesting such
access.
SECTION 3.23 Title, Management and Disposition of REO Property. (a)
The
deed or certificate of sale of any REO Property shall be taken in
the name of
the Trustee, or its nominee, on behalf of the Trust Fund and for
the benefit of
the Certificateholders. The Servicer, on behalf of REMIC I, shall
either sell
any REO Property prior to the end of the third taxable year after
80
REMIC I acquires ownership of such REO Property for purposes of
Section
860G(a)(8) of the Code or request from the Internal Revenue
Service, no later
than 60 days before the day on which the three-year grace period
would otherwise
expire, an extension of the three-year grace period, unless the
Servicer shall
have delivered to the Trustee an Opinion of Counsel, addressed to
the Trustee
and the Depositor, to the effect that the holding by REMIC I of
such REO
Property subsequent to three years after its acquisition will not
result in the
imposition on any Trust REMIC of taxes on "prohibited transactions"
thereof, as
defined in Section 860F of the Code, or cause any Trust REMIC to
fail to qualify
as a REMIC under Federal law at any time that any Certificates are
outstanding.
The Servicer shall manage, conserve, protect and operate each REO
Property for
the Certificateholders solely for the purpose of its prompt
disposition and sale
in a manner which does not cause such REO Property to fail to
qualify as
"foreclosure property" within the meaning of Section 860G(a)(8) of
the Code or
result in the receipt by any Trust REMIC of any "income from
non-permitted
assets" within the meaning of Section 860F(a)(2)(B) of the Code, or
any "net
income from foreclosure property" which is subject to taxation
under the REMIC
Provisions.
(b)
The Servicer shall segregate and hold all funds collected and
received in connection with the operation of any REO Property
separate and apart
from its own funds and general assets and shall establish and
maintain, or cause
to be established and maintained, with respect to REO Properties,
an account
held in trust for the Trustee for the benefit of the
Certificateholders (the
"REO Account"), which shall be an Eligible Account. The Servicer
shall be
permitted to allow the Custodial Account to serve as the REO
Account, subject to
separate ledgers for each REO Property. The Servicer shall be
entitled to retain
or withdraw any interest income paid on funds deposited in the REO
Account.
(c)
The Servicer shall have the sole discretion to determine whether an
immediate sale of an REO Property or continued management of such
REO Property
is in the best interests of the Certificateholders. In furtherance
of the
foregoing, the Servicer shall have full power and authority,
subject only to the
specific requirements and prohibitions of this Agreement, to do any
and all
things in connection with any REO Property as are consistent with
the manner in
which the Servicer manages and operates similar property owned by
the Servicer
or any of its Affiliates, all on such terms and for such period as
the Servicer
deems to be in the best interests of Certificateholders. In
connection
therewith, the Servicer shall deposit, or cause to be deposited in
the clearing
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 REO Account, in no
event more than
two Business Days after the Servicer's receipt thereof, all
revenues received by
it with respect to an REO Property and shall withdraw therefrom
funds necessary
for the proper operation, management and maintenance of such REO
Property
including, without limitation:
(i)
all insurance premiums due and payable in respect of such
REO Property;
(ii)
all real estate taxes and assessments in respect of such
REO Property that may result in the imposition of a lien thereon;
and
81
(iii)
all costs and expenses necessary to maintain such REO
Property.
To the extent that amounts on deposit in the REO Account with
respect to
an REO Property are insufficient for the purposes set forth in
clauses (i)
through (iii) above with respect to such REO Property, the Servicer
shall
advance from its own funds such amount as is necessary for such
purposes if, but
only if, the Servicer would make such advances if the Servicer
owned the REO
Property and if in the Servicer's judgment, the payment of such
amounts will be
recoverable from the rental or sale of the REO Property.
Notwithstanding the foregoing, the Servicer shall not and the
Trustee
shall not knowingly authorize the Servicer to:
(i)
authorize the Trust Fund to enter into, renew or extend any
New Lease with respect to any REO Property, if the New Lease by its
terms
will give rise to any income that does not constitute Rents from
Real
Property;
(ii)
authorize any amount to be received or accrued under any
New Lease other than amounts that will constitute Rents from Real
Property;
(iii)
authorize any construction on any REO Property, other than
the completion of a building or other improvement thereon, and then
only
if more than ten percent of the construction of such building or
other
improvement was completed before default on the related Mortgage
Loan
became imminent, all within the meaning of Section 856(e)(4)(B) of
the
Code; or
(iv)
authorize any Person to Directly Operate any REO Property
on any date more than 90 days after its date of acquisition by the
Trust
Fund;
unless, in any such case, the Servicer has obtained an Opinion of
Counsel,
provided to the Servicer and the Trustee, to the effect that such
action will
not cause such REO Property to fail to qualify as "foreclosure
property" within
the meaning of Section 860G(a)(8) of the Code at any time that it
is held by
REMIC I, in which case the Servicer may take such actions as are
specified in
such Opinion of Counsel.
The Servicer may contract with any Independent Contractor for the
operation and management of any REO Property, provided that:
(i)
the terms and conditions of any such contract shall not be
inconsistent herewith;
(ii)
any such contract shall require, or shall be administered
to require, that the Independent Contractor pay all costs and
expenses
incurred in connection with the operation and management of such
REO
Property, including those listed above and remit all related
revenues (net
of such costs and expenses) to the Servicer as soon as practicable,
but in
no event later than thirty days following the receipt thereof by
such
Independent Contractor;
82
(iii)
none of the provisions of this Section 3.23(c) relating to
any such contract or to actions taken through any such Independent
Contractor shall be deemed to relieve the Servicer of any of its
duties
and obligations to the Trustee on behalf of the Certificateholders
with
respect to the operation and management of any such REO Property;
and
(iv)
the Servicer shall be obligated with respect thereto to the
same extent as if it alone were performing all duties and
obligations in
connection with the operation and management of such REO Property.
The Servicer shall be entitled to enter into any agreement with any
Independent Contractor performing services for it related to its
duties and
obligations hereunder for indemnification of the Servicer by such
Independent
Contractor, and nothing in this Agreement shall be deemed to limit
or modify
such indemnification. The Servicer shall be solely liable for all
fees owed by
it to any such Independent Contractor, irrespective of whether the
Servicer's
compensation pursuant to Section 3.18 is sufficient to pay such
fees; provided,
however, that to the extent that any payments made by such
Independent
Contractor would constitute Servicing Advances if made by the
Servicer, such
amounts shall be reimbursable as Servicing Advances made by the
Servicer.
(d)
In addition to the withdrawals permitted under Section 3.23(c), the
Servicer may from time to time make withdrawals from the REO
Account for any REO
Property: (i) to pay itself or any Sub-Servicer unpaid Servicing
Fees in respect
of the related Mortgage Loan; and (ii) to reimburse itself or any
Sub-Servicer
for unreimbursed Servicing Advances and Advances made in respect of
such REO
Property or the related Mortgage Loan. On the Servicer Remittance
Date, the
Servicer shall withdraw from each REO Account maintained by it and
deposit into
the Certificate Account in accordance with Section 3.10(d)(ii), for
distribution
on the related Distribution Date in accordance with Section 4.01,
the income
from the related REO Property received during the prior calendar
month, net of
any withdrawals made pursuant to Section 3.23(c) or this Section
3.23(d).
(e)
Subject to the time constraints set forth in Section 3.23(a), each
REO Disposition shall be carried out by the Servicer at such price
and upon such
terms and conditions as the Servicer shall deem necessary or
advisable, as shall
be normal and usual in its Accepted Servicing Practices.
(f)
The proceeds from the REO Disposition, net of any amount required
by law to be remitted to the Mortgagor under the related Mortgage
Loan and net
of any payment or reimbursement to the Servicer or any Sub-Servicer
as provided
above, shall be deposited in the Certificate Account in accordance
with Section
3.10(d)(ii) on the Servicer Remittance Date in the month following
the receipt
thereof for distribution on the related Distribution Date in
accordance with
Section 4.01. Any REO Disposition shall be for cash only (unless
changes in the
REMIC Provisions made subsequent to the Startup Day allow a sale
for other
consideration).
(g)
The Servicer shall file information returns with respect to the
receipt of mortgage interest received in a trade or business,
reports of
foreclosures and abandonments of any
83
Mortgaged Property and cancellation of indebtedness income with
respect to any
Mortgaged Property as required by Sections 6050H, 6050J and 6050P
of the Code,
respectively. Such reports shall be in form and substance
sufficient to meet the
reporting requirements imposed by such Sections 6050H, 6050J and
6050P of the
Code.
SECTION 3.24 Obligations of the Servicer in Respect of Prepayment
Interest
Shortfalls. The Servicer shall deliver to the Trustee for deposit
into the
Certificate Account by 1:00 p.m. New York time on the Servicer
Remittance Date
from its own funds an amount equal to the lesser of (i) the
aggregate of the
Prepayment Interest Shortfalls for the related Distribution Date
resulting from
full Principal Prepayments during the related Prepayment Period and
(ii) the
aggregate Servicing Fee for the related Prepayment Period. Any
amounts paid by
the Servicer pursuant to this Section 3.24 shall not be reimbursed
by any Trust
REMIC or the Trust Fund.
SECTION 3.25 Obligations of the Servicer in Respect of Mortgage
Rates and
Monthly Payments. In the event that a shortfall in any collection
on or
liability with respect to any Mortgage Loan results from or is
attributable to
adjustments to Mortgage Rates, Monthly Payments or Stated Principal
Balances
that were made by the Servicer in a manner not consistent with the
terms of the
related Mortgage Note applicable laws, regulations and rulings and
this
Agreement, the Servicer, upon discovery or receipt of notice
thereof, shall
immediately deliver to the Trustee for deposit in the Certificate
Account from
its own funds the amount of any such shortfall and shall indemnify
and hold
harmless the Trust Fund, the Trustee, the Depositor and any
successor Servicer
in respect of any such liability. Such indemnities shall survive
the termination
or discharge of this Agreement. Notwithstanding the foregoing, this
Section 3.25
shall not limit the ability of the Servicer to seek recovery of any
such amounts
from the related Mortgagor under the terms of the related Mortgage
Note, as
permitted by law.
SECTION 3.26 Advance Facility. (a) The Servicer is hereby
authorized to
enter into a financing or other facility (any such arrangement an
"Advance
Facility") with any Person which provides that such Person (an
"Advancing
Person") may fund Advances and/or Servicing Advances to the Trust
Fund under
this Agreement, although no such facility shall reduce or otherwise
affect the
Servicer's obligation to fund such Advances and/or Servicing
Advances. If the
Servicer enters into such an Advance Facility pursuant to this
Section 3.26,
upon reasonable request of the Advancing Person, the Trustee shall
execute a
letter of acknowledgment, confirming its receipt of notice of the
existence of
such Advance Facility. To the extent that an Advancing Person funds
any Advance
or any Servicing Advance and the Servicer provides the Trustee with
an Officers'
Certificate that such Advancing Person is entitled to
reimbursement, such
Advancing Person shall be entitled to receive reimbursement
pursuant to this
Agreement for such amount to the extent provided in Section
3.26(b). Such
Officers' Certificate must specify the amount of the reimbursement,
the Section
of this Agreement that permits the applicable Advance or Servicing
Advance to be
reimbursed and the section(s) of the Advance Facility that entitle
the Advancing
Person to request reimbursement from the Trustee, rather than the
Servicer or
proof of an event of default under the Advance Facility. The
Trustee shall have
no duty or liability with respect to any calculation of any
reimbursement to be
paid to an Advancing Person and shall be entitled to rely without
independent
investigation on the Advancing Person's notice provided pursuant to
this Section
3.26. The Trustee shall have no responsibility to track or monitor
the
administration of the Advance Facility. An Advancing Person whose
obligations
84
hereunder are limited to the funding of Advances and/or Servicing
Advances shall
not be required to meet the qualifications of the Servicer or a
Sub-Servicer
pursuant to Section 3.02 hereof and will not be deemed to be a
Sub-Servicer
under this Agreement.
(b)
If an advancing facility is entered into, then the Servicer shall
not be permitted to reimburse itself therefor under Section
3.11(a)(ii), Section
3.11(a)(iii) and Section 3.11(a)(vi) prior to the remittance to the
Trust Fund,
but instead the Servicer shall remit such amounts in accordance
with the
documentation establishing the Advance Facility to such Advancing
Person or to a
trustee, agent or custodian (an "Advance Facility Trustee")
designated by such
Advancing Person. The Trustee is hereby authorized to pay to the
Advancing
Person, reimbursements for Advances and Servicing Advances from the
Certificate
Account to the same extent the Servicer would have been permitted
to reimburse
itself for such Advances and/or Servicing Advances in accordance
with Section
3.11(a)(ii), Section 3.11(a)(iii) and Section 3.11(a)(vi), as the
case may be,
had the Servicer itself funded such Advance or Servicing Advance.
The Trustee is
hereby authorized to pay directly to the Advancing Person such
portion of the
Servicing Fee as the parties to any advancing facility agree in
writing.
(c)
All Advances and Servicing Advances made pursuant to the terms of
this Agreement shall be deemed made and shall be reimbursed on a
"first in-first
out" (FIFO) basis.
(d)
Any amendment to this Section 3.26 or to any other provision of
this Agreement that may be necessary or appropriate to effect the
terms of an
Advance Facility as described generally in this Section 3.26,
including
amendments to add provisions relating to a successor Servicer, may
be entered
into by the Trustee and the Servicer without the consent of any
Certificateholder, notwithstanding anything to the contrary in this
Agreement;
provided, however, such amendment shall otherwise comply with
Section 13.01
hereof. All costs and expenses (including attorneys' fees) of each
party hereto
related to such amendment shall be borne by the Servicer without
reimbursement
from the Trust Fund.
ARTICLE IV
PAYMENTS TO CERTIFICATEHOLDERS
SECTION 4.01 Distributions. (a) (1) On each Distribution Date, the
following amounts, in the following order of priority, shall be
distributed by
REMIC I to REMIC II on account of the REMIC I Regular Interests or
withdrawn
from the Certificate Account and distributed to the holders of the
Class R-I
Interest, as the case may be:
(i)
first, to Holders of REMIC I Regular Interest I-LTAA,
REMIC I Regular Interest I-LTA1, REMIC I Regular Interest I-LTA2,
REMIC I Regular Interest I-LTA3, REMIC I Regular Interest I-LTA4,
REMIC I Regular Interest I-LTA5, REMIC I Regular Interest I-LTM1,
REMIC I Regular Interest I-LTM2, REMIC I Regular Interest I-LTM3,
REMIC I Regular Interest I-LTM4, REMIC I Regular Interest I-LTM5,
REMIC I Regular Interest I-LTM6, REMIC I Regular Interest I-LTM7,
REMIC I Regular Interest I-LTM8, REMIC I Regular Interest I-LTM9,
REMIC I Regular Interest I-LTM10 and REMIC I Regular Interest I-
85
LTZZ, in an amount equal to (A) the Uncertificated Interest for
such
Distribution Date, plus (B) any amounts in respect thereof
remaining
unpaid from previous Distribution Dates. Amounts payable as
Uncertificated Interest in respect of REMIC I Regular Interest
I-LTZZ shall be reduced when the sum of the REMIC I
Overcollateralized Amount is less than the REMIC I Required
Overcollateralized Amount, by the lesser of (x) the amount of such
difference and (y) the Maximum I-LTZZ Uncertificated Interest
Deferral Amount and such amounts will be payable to the Holders of
REMIC I Regular Interest I-LTA1, REMIC I Regular Interest I-LTA2,
REMIC I Regular Interest I-LTA3, REMIC I Regular Interest I-LTA4,
REMIC I Regular Interest I-LTA5, REMIC I Regular Interest I-LTM1,
REMIC I Regular Interest I-LTM2, REMIC I Regular Interest I-LTM3,
REMIC I Regular Interest I-LTM4, REMIC I Regular Interest I-LTM5,
REMIC I Regular Interest I-LTM6, REMIC I Regular Interest I-LTM7,
REMIC I Regular Interest I-LTM8, REMIC I Regular Interest I-LTM9
and
REMIC Regular Interest I-LTM10 in the same proportion as the
Overcollateralization Increase Amount is allocated to the
Corresponding Certificates and the Uncertificated Balance of REMIC
I
Regular Interest I-LTZZ shall be increased by such amount;
(ii)
second, to the Holders of REMIC I Regular Interests, in
an amount equal to the remainder of the Available Distribution
Amount for such Distribution Date after the distributions made
pursuant to clause (i) above, allocated as follows:
(a)
98.00% of such remainder (less the amount payable
in clause (e) below), to the Holders of REMIC I Regular
Interest I-LTAA, until the Uncertificated Balance of such
REMIC I Regular Interest is reduced to zero;
2% of such remainder, first to the Holders of REMIC I
Regular Interest I-LTA1, REMIC I Regular Interest I-LTA2,
REMIC I Regular Interest I-LTA3, REMIC I Regular Interest
I-LTA4, REMIC I Regular Interest I-LTA5, REMIC I Regular
Interest I-LTM1, REMIC I Regular Interest I-LTM2, REMIC I
Regular Interest I-LTM3, REMIC I Regular Interest I-LTM4,
REMIC I Regular Interest I-LTM5, REMIC I Regular Interest
I-LTM6, REMIC I Regular Interest I-LTM7, REMIC I Regular
Interest I-LTM8, REMIC I Regular Interest I-LTM9 and REMIC
Regular Interest I-LTM10, 1.00% of and in the same proportion
as principal payments are allocated to the Corresponding
Certificates, until the Uncertificated Balances of such REMIC
I Regular Interests are reduced to zero; and second, to the
Holders of REMIC I Regular Interest I-LTZZ, (less the amount
payable in clause (c) below), until the Uncertificated Balance
of such REMIC I Regular Interest is reduced to zero; then
(b)
to the Holders of REMIC I Regular Interest I-LTP,
on the Distribution Date immediately following the expiration
of the latest Prepayment Charge as identified on the
Prepayment Charge Schedule or
86
any Distribution Date thereafter until $100 has been
distributed pursuant to this clause; and
(c)
any remaining amount to the Holders of the Class R
Certificates (as Holder of the Class R-I Interest);
provided, however, that 98.00% and 2.00% of any principal payments
that are
attributable to an Overcollateralization Reduction Amount shall be
allocated to
Holders of REMIC I Regular Interest I-LTAA and REMIC I Regular
Interest I-LTZZ,
respectively.
(2)
On each Distribution Date, the Trustee shall withdraw from the
Certificate Account an amount equal to the Interest Remittance
Amount and
distribute to the Certificateholders the following amounts, in the
following order of priority:
(i)
to the Holders of each Class of the Class A
Certificates, on a pro rata basis based on the entitlement of each
such Class, an amount equal to the Senior Interest Distribution
Amount allocable to such Class of the Class A Certificates; and
(ii)
sequentially, to the Holders of the Class M-1
Certificates, Class M-2 Certificates, Class M-3 Certificates, Class
M-4 Certificates, Class M-5 Certificates, Class M-6 Certificates,
Class M-7 Certificates, Class M-8 Certificates, Class M-9
Certificates, Class M-10 Certificates, in that order, an amount
equal to the Interest Distribution Amount allocable to each such
Class.
(3)
On each Distribution Date, the Trustee shall withdraw from the
Certificate Account an amount equal to the Principal Distribution
Amount
and distribute to the Certificateholders the following amounts, in
the
following order of priority:
(A)
On each Distribution Date (a) prior to the Stepdown Date or
(b) on which a Trigger Event is in effect, the Principal
Distribution
Amount shall be distributed in the following order of priority:
(i)
concurrently, on a pro rata basis (based on the
Certificate Principal Balance of the Class A-5 Certificates, on the
one hand, and the aggregate Certificate Principal Balance of the
Class A-1 Certificates and Class A-2 Certificates, on the other
hand), as follows:
(a)
to the Holders of the Class A-5 Certificates,
until the Certificate Principal Balance of the Class A-5
Certificates has been reduced to zero; and
(b)
sequentially, to the Holders of the Class A-1
Certificates and Class A-2 Certificates, in that order, until
the Certificate Principal Balance of each such Class has been
reduced to zero;
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(ii)
sequentially, to the Holders of the Class A-3
Certificates and Class A-4 Certificates, in that order, until the
Certificate Principal Balance of each such Class has been reduced
to
zero; and
(iii) sequentially, to the holders of the Class M-1
Certificates, Class M-2 Certificates, Class M-3 Certificates, Class
M-4 Certificates, Class M-5 Certificates, Class M-6 Certificates,
Class M-7 Certificates, Class M-8 Certificates, Class M-9
Certificates and Class M-10 Certificates, in that order, until the
Certificate Principal Balance of each such Class has been reduced
to
zero.
(B)
On each Distribution Date (a) on or after the Stepdown Date
and (b) on which a Trigger Event is not in effect, the Principal
Distribution Amount shall be distributed in the following order of
priority:
(i)
to the holders of the Class A-1 Certificates, Class A-2
Certificates, Class A-3 Certificates, Class A-4 Certificates and
Class A-5 Certificates, up to an amount equal to the Class A
Principal Distribution Amount, in the following order of priority:
(a)
concurrently, on a pro rata basis (based on the
Certificate Principal Balance of the Class A-5 Certificates,
on the one hand, and the aggregate Certificate Principal
Balance of the Class A-1 Certificates and Class A-2
Certificates, on the other hand), as follows:
(1)
to the Holders of the Class A-5
Certificates, until the Certificate Principal Balance of
the Class A-5 Certificates has been reduced to zero; and
(2)
sequentially, to the Holders of the Class
A-1 Certificates and Class A-2 Certificates, in that
order, until the Certificate Principal Balance of each
such Class has been reduced to zero; and
(b)
sequentially, to the Holders of the Class A-3
Certificates and Class A-4 Certificates, in that order, until
the Certificate Principal Balance of each such Class has been
reduced to zero; and
(ii)
sequentially, to the Holders of the Class M-1
Certificates, Class M-2 Certificates, Class M-3 Certificates, Class
M-4 Certificates, Class M-5 Certificates, Class M-6 Certificates,
Class M-7 Certificates, Class M-8 Certificates, Class M-9
Certificates and Class M-10 Certificates, in that order, up to an
amount equal to the related Class M Principal Distribution Amount
until the Certificate Principal Balance of each such class has been
reduced to zero.
On or after the occurrence of the Credit Support Depletion Date,
all
priorities relating to distributions as described in Section
4.01(a)(3) of this
Agreement in respect of principal among
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the Class A Certificates will be disregarded, and the Principal
Distribution
Amount will be distributed to the remaining Class A Certificates on
a pro rata
basis in accordance with their respective outstanding Certificate
Principal
Balances.
(4)
On each Distribution Date, the Net Monthly Excess Cashflow
shall be distributed by the Trustee as follows:
(i)
to the Holders of the Class or Classes of Certificates
then entitled to receive distributions in respect of principal, as
part of the Principal Distribution Amount in an amount equal to the
Overcollateralization Increase Amount for the Certificates, applied
to reduce the Certificate Principal Balance of such Certificates
until the aggregate Certificate Principal Balance of such
Certificates is reduced to zero;
(ii)
sequentially, to the Holders of the Class M-1
Certificates, Class M-2 Certificates , Class M-3 Certificates ,
Class M-4 Certificates, Class M-5 Certificates , Class M-6
Certificates, Class M-7 Certificates, Class M-8 Certificates, Class
M-9 Certificates and Class M-10 Certificates in that order, in each
case, up to an amount equal to the Interest Carry Forward Amount
allocable to such Class of Certificates;
(iii) concurrently, on a pro rata basis, based on the amount
of any Allocated Realized Loss Amounts previously allocated thereto
that remain unreimbursed, to the Holders of the Class A-1
Certificates, Class A-2 Certificates, Class A-3 Certificates, Class
A-4 Certificates and Class A-5 Certificates, and then sequentially
to the Holders of the Class M-1 Certificates, Class M-2
Certificates, Class M-3 Certificates, Class M-4 Certificates, Class
M-5 Certificates, Class M-6 Certificates, Class M-7 Certificates,
Class M-8 Certificates, Class M-9 Certificates and Class M-10
Certificates, in that order, in each case up to the related
Allocated Realized Loss Amount related to each such Class of
Certificates for such Distribution Date;
(iv)
to the Holders of the Class A Certificates and the
Mezzanine Certificates, any related unpaid Net WAC Rate Carryover
Amount distributed to the Holders of the Class A Certificates on a
pro rata basis based on the remaining Net WAC Rate Carryover Amount
for each such Class and then to the Holders of the Class of
Mezzanine Certificates in order of Highest Priority;
(v)
to pay any Swap Termination Payments owed to the Swap
Counterparty due to a Swap Counterparty Trigger Event;
(vi)
to the Holders of the Class CE Certificates, (a) the
Interest Distribution Amount and any Overcollateralization
Reduction
Amount for such Distribution Date and (b) on any Distribution Date
on which the aggregate Certificate Principal Balance of the Class A
Certificates and the Mezzanine Certificates have been reduced to
zero, any remaining amounts in reduction of the
