POOLING AND SERVICING AGREEMENT

Exhibit 4.1

 

FBR SECURITIZATION, INC.,

as Depositor

 

MHC I, INC.,

as Seller

 

[ - ],

as Servicer

 

[ - ],

as Securities Administrator and as Master Servicer

 

and

 

[ - ],

as Trustee

 

 

POOLING AND SERVICING AGREEMENT

 

Dated as of              , 200   

 

 

FBR Securitization Trust 200    -   

Mortgage-Backed Certificates, Series 200    -   

 

TABLE OF CONTENTS

 

 

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TABLE OF CONTENTS

 

 

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TABLE OF CONTENTS

 

 

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TABLE OF CONTENTS

 

 

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This POOLING AND SERVICING AGREEMENT, dated as of                      , 200    , is by and among FBR SECURITIZATION, INC., a Delaware corporation, as depositor (the “ Depositor ”), MHC I, INC., a Delaware corporation, as seller (the “ Seller ”), [ - ], a [national banking association], as servicer (the “ Servicer ”), [ - ], a [national banking association], as securities administrator (the “ Securities Administrator ”) and as master servicer (the “ Master Servicer ”), and [ - ], a [national banking association], as trustee (the “ Trustee ”).

 

PRELIMINARY STATEMENT

 

WHEREAS, the Seller seeks to sell to the Depositor and the Depositor seeks to purchase from the Seller all of the right, title and interest of the Seller in certain adjustable-rate first [and second] lien mortgage loans and fixed-rate first [and second] lien mortgage loans identified in Schedule A hereto on a servicing-released basis pursuant to this Agreement;

 

WHEREAS, the Seller will make representations and warranties as set forth herein with respect to the Mortgage Loans and will assign to the Depositor certain representations and warranties that the Seller has received with respect to such Mortgage Loans;

 

WHEREAS, at the Closing Date the Depositor will be the owner of the Mortgage Loans and the other property being conveyed and assigned by it to the Issuing Entity hereunder for inclusion in the Trust Fund on the Closing Date;

 

WHEREAS, on the Closing Date, the Depositor will transfer to the Issuing Entity the Mortgage Loans and the other property constituting the Trust Fund, and the Issuing Entity will issue the Certificates evidencing the entire interest in the Issuing Entity;

 

WHEREAS, the Depositor will receive the Certificates in consideration for the Mortgage Loans and other property being conveyed and assigned by it to the Issuing Entity and will sell the Certificates to various purchasers.

 

WHEREAS, the Servicer is willing to service the Mortgage Loans for the benefit of the Issuing Entity;

 

WHEREAS, the Master Servicer is willing to master service the Mortgage Loans for the benefit of the Issuing Entity;

 

WHEREAS, the Securities Administrator is willing to provide certain services and reports with respect to the Certificates; and

 

WHEREAS, the descriptions of REMIC I, REMIC II, REMIC III and REMIC IV that follow are part of the Preliminary Statement.

 

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REMIC I

 

As provided herein, the Trustee will make an election to treat the segregated pool of assets consisting of the Mortgage Loans and certain other related assets subject to this Agreement (but exclusive of the Reserve Account, the Non-Mortgagor Prepayment Premium Payment Amount and the Cap Agreement) as a real estate mortgage investment conduit (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 represent the sole class of “residual interests” in REMIC I for purposes of the REMIC Provisions. The following table irrevocably sets forth the designation, the Uncertificated REMIC I Pass-Through Rate, the initial Uncertificated Principal Balance, and solely for purposes of satisfying Treasury Regulations Section 1.860G-1(a)(4)(iii), the “latest possible maturity date” for each of the Uncertificated REMIC I Regular Interests. None of the Uncertificated REMIC I Regular Interests will be certificated.

 

(1)	Solely 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 “Uncertificated REMIC I Pass-Through Rate” herein.

 

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REMIC II

 

As provided herein, the Trustee will make an election to treat the segregated pool of assets consisting of the Uncertificated 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 represent the sole class of “residual interests” in REMIC II for purposes of the REMIC Provisions. The following table irrevocably sets forth the designation, the Pass-Through Rate, the initial Certificate Principal Balance or Uncertificated Principal Balance, as the case may be and solely for purposes of satisfying Treasury Regulations Section 1.860G-1(a)(4)(iii), the “latest possible maturity date” for each of the Classes of Certificates and Uncertificated REMIC II Regular Interests. The Class A Certificates and Class M Certificates will be certificated. The Class C Interest and the Class P Interest will not be certificated.

 

(1)

Solely 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 Class of Certificates that represents one or more of the “regular interests” in REMIC II and each Uncertificated REMIC II Regular Interest.

 

(2)	Calculated in accordance with the definition of “Pass-Through Rate” herein.

 

(3)

The Class C Interest (i ) will have an initial Uncertificated Principal Balance equal to $              and (ii) will bear interest at its variable Pass-Through Rate on the Notional Amount of the Class C Interest outstanding from time to time. The Class C Interest will not accrue interest on its Uncertificated Principal Balance.

 

(4)	The Class P Interest will not accrue interest.

 

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REMIC III

 

As provided herein, the Trustee shall make an election to treat the segregated pool of assets consisting of the Class C Interest as a REMIC for federal income tax purposes, and such segregated pool of assets will be designated as “REMIC III.” The Class RX-III Interest represents the sole class of “residual interests” in REMIC III for purposes of the REMIC Provisions.

 

The following table sets forth (or describes) the Class designation, Pass-Through Rate and initial Certificate Principal Balance for the Class C Certificates that represents a “regular interest” in REMIC III created hereunder:

 

(1)	Solely 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 the Class C Certificates.

 

(2)	The Class C Certificates will receive 100% of amounts received in respect of the Class C Interest.

 

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REMIC IV

 

As provided herein, the Trustee shall make an election to treat the segregated pool of assets consisting of the Class P Interest as a REMIC for federal income tax purposes, and such segregated pool of assets will be designated as “REMIC IV.” The Class RX-IV Interest represents the sole class of “residual interests” in REMIC IV for purposes of the REMIC Provisions.

 

The following table sets forth (or describes) the Class designation, Pass-Through Rate and initial Certificate Principal Balance for the Class P Certificates that represents a “regular interest” in REMIC IV created hereunder:

 

(1)	Solely 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 the Class P Certificates.

 

(2)	The Class P Certificates will receive 100% of amounts received in respect of the Class P Interest.

 

NOW THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows:

 

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ARTICLE I

DEFINITIONS AND INTERPRETATION

 

SECTION 1.1 Definitions.

 

Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the meanings specified in this Section 1.1.

 

Accepted Master Servicing Practices : With respect to any Mortgage Loan, those customary mortgage loan master servicing practices of prudent mortgage servicing institutions that master service mortgage loans of the same type and quality as such Mortgage Loan in the jurisdiction where the related Mortgaged Property is located, to the extent applicable to the Master Servicer, and in accordance with the applicable state, local and federal laws, rules and regulations.

 

Accepted Servicing Practices : The servicing and administration of the Mortgage Loans for which the Servicer is responsible hereunder:

 

(a) in the same manner in which, and with the same care, skill, prudence and diligence with which, the Servicer generally services and administers similar mortgage loans with similar mortgagors (i) for other third parties, giving due consideration to customary and usual standards of practice of prudent institutional residential mortgage lenders servicing their own loans, or (ii) held in the Servicer’s own portfolio, whichever standard is higher;

 

(b) with a view to the maximization of the recovery on such Mortgage Loans on a net present value basis and the best interests of the Issuing Entity or any Person to which the Mortgage Loans may be transferred by the Issuing Entity;

 

(c) without regard to (i) any relationship that the Servicer or any affiliate thereof may have with the related Mortgagor or any other party to the transactions, (ii) the right of the Servicer to receive compensation or other fees for its services rendered pursuant to this Agreement, (iii) the obligations of the Servicer to make Monthly Advances and Servicing Advances, (iv) the ownership, servicing or management by the Servicer or any affiliate thereof for others of any other mortgage loans or mortgaged properties, and (v) any debt the Servicer or any of its affiliates has extended to any mortgagor; and

 

(d) in accordance with the applicable state, local and federal laws, rules and regulations.

 

Accountant : A person engaged in the practice of accounting who (except when this Agreement provides that an Accountant must be Independent) may be employed by or affiliated with a party hereto or an Affiliate thereof.

 

Adjustable Rate Mortgage Loan : A Mortgage Loan that contains a provision pursuant to which the Mortgage Rate is adjusted periodically.

 

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Adjusted Net Mortgage Rate: With respect to each Mortgage Loan, a rate equal to the per annum Mortgage Rate less the sum of the (i) Servicing Fee Rate and (ii) the Master Servicing Fee Rate.

 

Adjustment Date : As to each Adjustable Rate Mortgage Loan, the date on which the Mortgage Rate is adjusted in accordance with the terms of the related Mortgage Note and Mortgage.

 

Advance : Any Monthly Advance or Servicing Advance.

 

Adverse REMIC Event : As defined in Section 14.1(f).

 

Affiliate : With respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

 

Aggregate Overcollateralization Release Amount : With respect to any Distribution Date, the lesser of (i) the Principal Proceeds and (ii) the Overcollateralization Release Amount.

 

Agreement : This Pooling and Servicing Agreement, including all exhibits and schedules hereto, and all amendments or supplements hereto.

 

Applied Loss Amount : As defined in Section 10.6(a).

 

Appraised Value : With respect to any Mortgage Loan, the lesser of (a) the value set forth on the appraisal made in connection with the origination of the related Mortgage Loan as the value of the related Mortgaged Property, or (b) the amount paid by the Mortgagor for the Mortgaged Property, provided , however , that in the case of a refinanced Mortgage Loan or a Mortgage Loan that was not originated in connection with the borrower’s purchase of the Mortgaged Property, such value shall be based solely on the appraisal made in connection with the origination of such Mortgage Loan.

 

Assessment of Compliance : As defined in Section 5.1.

 

Assignment of Mortgage : An assignment of the Mortgage, notice of transfer or equivalent instrument, in recordable form, sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to reflect the assignment of the Mortgage to the Trustee, which assignment, notice of transfer or equivalent instrument may be in the form of one or more blanket assignments covering the Mortgage Loans secured by Mortgaged Properties in the same jurisdiction, if permitted by law.

 

Assignment and Recognition Agreement : The Assignment and Recognition Agreement, dated as of                      , 20      , by and among the Seller, as the assignor, the Issuing Entity as the assignee, and the Originator, attached hereto as Schedule E .

 

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Attestation Report : As defined in Section 5.1.

 

Available Funds : For each Distribution Date, the sum of the Principal Proceeds and the Interest Proceeds for such Distribution Date.

 

Backup SOX Certification : As defined in Section 5.3.

 

Bankruptcy Code : The United States Bankruptcy Code of 1986, as amended, as codified in 11 U.S.C. §§ 101-1330.

 

Benefit Plan Affidavit : An affidavit in substantially the form attached hereto as Exhibit J .

 

Book-Entry Certificates : Each Class of Certificates other than the Class C, P, R and RX Certificates.

 

Business Day : Any day other than (a) a Saturday or a Sunday or (b) a day on which banking institutions in the states of [ - ] and [ - ] are authorized or obligated by law or executive order to be closed.

 

Cap Agreement : The agreement entered into by and between the Trustee and the Cap Provider, dated as of [ - ], providing for certain payments to be made to the Securities Administrator on behalf of the Issuing Entity.

 

Cap Payment : The aggregate of all payments received by the Securities Administrator from the Cap Provider on a Distribution Date pursuant to the Cap Agreement.

 

Cap Provider : [ - ]

 

Certificate : Any one of the mortgage-backed certificates issued pursuant to this Agreement executed by the Trustee in substantially the forms attached hereto as Exhibit G-1 Exhibit G-2 , Exhibit G-3 , Exhibit G-4 , Exhibit G-5 and Exhibit G-6 .

 

Certificate Principal Balance : With respect to any Class of Certificates other than the Class C, R and RX Certificates and any Distribution Date, the maximum dollar amount of principal to which the Holder thereof is then entitled hereunder, such amount being equal to the initial principal balance of such Class of Certificates as of the Closing Date minus the sum of (a) all distributions of principal previously made with respect that Class of Certificates and (b) all Applied Loss Amounts previously allocated to that Class of Certificates and increased by any Subsequent Recoveries allocated to such Class for previous Distribution Dates. With respect to each Class C Certificate as of any Distribution Date, the Percentage Interest evidenced by such Certificate times the Uncertificated Principal Balance of the Class C Interest. For purposes of Article VIII hereof, unless specifically provided to the contrary, the Certificate Principal Balance shall be determined as of the close of business of the immediately preceding Distribution Date, after giving effect to all distributions made on such Distribution Date.

 

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Certificateholder or Holder : With respect to a Book-Entry Certificate, the beneficial owner of such Book-Entry Certificate, and with respect to a Definitive Certificate, the Holder of such Definitive Certificate and in whose name a Certificate is registered in the Certificate Register.

 

Certificate Registrar The Person appointed to maintain the Certificate Register.

 

Certificate Register: The register maintained pursuant to Section 11.2.

 

Class : All Certificates bearing the same class designation as set forth in the Preliminary Statement. In the case of the REMIC Regular Interests, the term “Class” refers to such REMIC Regular Interests having the same designation as set forth in the Preliminary Statement.

 

Class A Certificates : The FBR Securitization Trust 200    -    Mortgage-Backed Certificates, Series 200    -    , Class A Certificates having an initial Certificate Principal Balance and Pass-Through Rate as set forth herein and representing (i) a Regular Interest in REMIC II and (ii) the right to receive amounts in respect of its related Net WAC Cap Carryover Amount.

 

Class C Certificates : The FBR Securitization Trust 200    -    Mortgage-Backed Certificates, Series 200    -    , Class C Certificates having an initial Certificate Principal Balance, a Notional Amount and associated Pass-Through Rate as set forth herein and representing (i) a Regular Interest in REMIC III, and (ii) the obligation to pay the Net WAC Cap Carryover Amount.

 

Class C Distributable Amount : With respect to any Distribution Date and the Class C Interest, the sum of (i) the interest accrued on such Class C Interest at its Pass-Through Rate calculated on its Notional Amount less the amount (without duplication) of Net WAC Cap Carryover Amounts paid pursuant to Section 10.5(a)(iii)(E), (ii) any remaining Aggregate Overcollateralization Release Amounts and (iii) the aggregate of amounts remaining in the Reserve Account after the distributions in Section 10.5(a)(iii)(D), as specified in Section 10.2(b)(i) - (v). With respect to the Class C Certificate, 100% of the amount distributed to the Class C Interest.

 

Class C Interest : An uncertificated interest in the Trust Fund representing the right to distributions as set forth herein and evidencing (i) a Regular Interest in REMIC II and (ii) the obligation to pay the Net WAC Cap Carryover Amount.

 

Class M Certificates : The Class M-1 and M-2 Certificates.

 

Class M Interests: The Class M-1 Interest and the Class M-2 Interest.

 

Class M-1 Certificates : The FBR Securitization Trust 200    -    Mortgage-Backed Certificates, Series 200    -    , Class M-1 Certificates having an initial Certificate Principal Balance and Pass-Through Rate as set forth herein and representing (i) a Regular Interest in REMIC II and (ii) the right to receive amounts in respect of its related Net WAC Cap Carryover Amount.

 

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Class M-1 Principal Distribution Amount : As of any Distribution Date on or after the Stepdown Date and as long as a Trigger Event is not in effect, the excess of (a) the sum of (i) the aggregate Certificate Principal Balances of the Class A Certificates (after taking into account the payment of the Senior 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 (b) the lesser of (i) the product of (A) approximately [ - ]% and (B) the aggregate Scheduled Principal Balance of the Mortgage Loans as of the last day of the related Due Period and (ii) the amount by which the aggregate Scheduled Principal Balance of the Mortgage Loans as of the last day of the related Due Period exceeds the product of (A) [ - ]% and (B) the Cut-off Date Balance of the Mortgage Loans.

 

Class M-2 Certificates : The FBR Securitization Trust 200    -    Mortgage-Backed Certificates, Series 200    -    , Class M-2 Certificates having an initial Certificate Principal Balance and Pass-Through Rate as set forth herein and (i) representing a Regular Interest in REMIC II and (ii) the right to receive amounts in respect of its related Net WAC Cap Carryover Amount..

 

Class M-2 Principal Distribution Amount : As of any Distribution Date on or after the Stepdown Date and as long as a Trigger Event is not in effect, the excess of (a) the sum of (i) the aggregate Certificate Principal Balances of the Class A and M-1 Certificates (after taking into account the payment of the Senior Principal Distribution Amount and the Class Principal Distribution Amount for the Class M-1 Certificates on such Distribution Date) and (ii) the Certificate Principal Balance of the Class M-2 Certificates immediately prior to such Distribution Date over (b) the lesser of (i) the product of (A) approximately [ - ]% and (B) the aggregate Scheduled Principal Balance of the Mortgage Loans as of the last day of the related Due Period and (ii) the amount by which the aggregate Scheduled Principal Balance of the Mortgage Loans as of the last day of the related Due Period exceeds the product of (A) [ - ]% and (B) the Cut-off Date Balance of the Mortgage Loans.

 

Class P Certificates : The FBR Securitization Trust 200    -    Mortgage-Backed Certificates, Series 200    -    , Class P Certificates having an initial Certificate Principal Balance and Pass-Through Rate as set forth herein and representing a Regular Interest in REMIC IV.

 

Class P Interest : An uncertificated interest in the Trust Fund representing the right to distributions as set forth herein and evidencing a Regular Interest in REMIC II.

 

Class Principal Distribution Amount : With respect to each Distribution Date, each of the Class M-1 Principal Distribution Amount and the Class M-2 Principal Distribution Amount for such Distribution Date, as applicable.

 

Class R Certificates : The FBR Securitization Trust 200    -    Mortgage-Backed Certificates, Series 200    -    , Class R Certificates representing the Residual Interest in each of REMIC I and REMIC II.

 

Class R-I Interest : The uncertificated Residual Interest in REMIC I.

 

Class R-II Interest : The uncertificated Residual Interest in REMIC II.

 

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Class RX Certificates : The FBR Securitization Trust 200_-_ Mortgage-Backed Certificates, Series 200_-_, Class RX Certificates representing the Residual Interest in each of REMIC III and REMIC IV.

 

Class RX-III Interest : The uncertificated Residual Interest in REMIC III.

 

Class RX-IV Interest : The uncertificated Residual Interest in REMIC IV.

 

Clean-up Call : The termination of the Issuing Entity in connection with the purchase of the Mortgage Loans pursuant to Section 13.1.

 

Closing Date : [ - ].

 

Code : The Internal Revenue Code of 1986, as it may be amended from time to time, or any successor statutes thereto, and applicable U.S. Department of the Treasury regulations issued pursuant thereto.

 

Commission : The Securities and Exchange Commission.

 

Compensating Interest Payment : With respect to any Distribution Date, an amount equal to the lesser of (a) the aggregate Prepayment Interest Shortfall with respect to such Distribution Date and (b) the amount of the Servicing Fee actually paid to, or retained by, the Servicer in respect of such Distribution Date.

 

Compliance Statement : As defined in Section 5.2.

 

Condemnation Proceeds : All awards or settlements in respect of a Mortgaged Property, whether permanent or temporary, partial or entire, by exercise of the power of eminent domain or condemnation, to the extent not required to be released to a Mortgagor in accordance with the terms of the related Mortgage Loan Documents.

 

Control : The meaning specified in Section 8-106 of the UCC.

 

Corporate Trust Office : With respect to:

 

(a) the Securities Administrator, the principal corporate trust office 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 [ - ], or at such other address as the Securities Administrator may designate from time to time by notice to Certificateholders, the Trustee, the Depositor, the Seller, the Master Servicer and the Servicer; provided , however , that with respect to the Securities Administrator and presentment of the Certificates for registration of transfer, exchange or final payment: [ - ]; and

 

(b) the Trustee, the principal 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 execution of this Agreement is located at [ - ], or at such other address as the Trustee may designate from time to time by notice to the Certificateholders, the Securities Administrator, the Depositor, the Seller, the Master Servicer and the Servicer.

 

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Corresponding Class: The following chart illustrates the Corresponding Classes of Uncertificated REMIC I Regular Interests, Uncertificated REMIC II Regular Interests and Certificates:

 

 

Cumulative Realized Losses : The aggregate Realized Losses incurred in respect of Liquidated Mortgage Loans since the Cut-off Date, as reduced by the aggregate amount of Subsequent Recoveries received since the Cut-off Date.

 

Cumulative Realized Loss Percentage : With respect to any Distribution Date, a fraction, expressed as a percentage, obtained by dividing (a) the aggregate amount of Cumulative Realized Losses incurred on the Mortgage Loans from the Cut-off Date through the last day of the related Due Period by (b) the aggregate Cut-off Balance of the Mortgage Loans.

 

Current Interest : With respect to any Distribution Date and each Class of Certificates (other than the Class C, Class P, Class R and Class RX Certificates), the amount of interest, calculated in accordance with Section 1.3, accrued during the related Interest Accrual Period at the Pass-Through Rate for such Class on the related Certificate Principal Balance immediately prior to such Distribution Date.

 

Custodial Account : The account or accounts established and maintained pursuant to Section 4.5 hereof.

 

Custodian : [ - ], or its successor in interest or assigns.

 

Cut-off Date : [ - ].

 

Cut-off Date Balance : The aggregate Scheduled Principal Balance of the Mortgage Loans as of the close of business on the Cut-off Date.

 

Debt Service Reduction : With respect to any Mortgage Loan, a reduction of the Scheduled Monthly Payment that the related Mortgagor is obligated to pay on any Due Date as a result of any proceeding under bankruptcy law or any similar proceeding.

 

Deficient Valuation : With respect to any Mortgage Loan, a valuation by a court of competent jurisdiction of the Mortgaged Property in an amount less than the then-outstanding indebtedness under the Mortgage Loan, or any reduction in the amount of principal to be paid in connection with any Scheduled Monthly Payment that results in a permanent forgiveness of principal, which valuation or reduction results from an order of such court which is final and non-appealable in a proceeding under the Bankruptcy Code.

 

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Definitive Certificates : Any Certificate evidenced by a physical certificate and any Certificate issued in lieu of a Book-Entry Certificate pursuant to Section 11.2(e).

 

Deleted Mortgage Loan : A Mortgage Loan that is repurchased from the Trust Fund or as to which one or more Qualified Substitute Mortgage Loans are substituted therefor.

 

Delinquency Rate : For any Due Period, the fraction, expressed as a percentage, the numerator of which is the aggregate Scheduled Principal Balance of all Mortgage Loans that are 60 or more days delinquent (including all foreclosures and REO Properties) as of the close of business on the last day of the preceding calendar month, and the denominator of which is the aggregate Scheduled Principal Balance of the Mortgage Loans as of the close of business on the last day of such calendar month.

 

Depositor : FBR Securitization, Inc., a Delaware corporation, or its successors in interest.

 

Depository : The initial Depository shall be The Depository Trust Company, the nominee of which is Cede & Co., as the registered Holder of the Book-Entry Certificates. The Depository shall at all times be a “clearing corporation” as defined in Section 8-102(a)(5) of the UCC of the State of New York and registered as a “clearing agency” pursuant to Section 17A of the Exchange Act as amended.

 

Determination Date : With respect to any Distribution Date, the Business Day preceding the Servicer Remittance Date.

 

Disqualified Organization : (a) The United States, any State or political subdivision thereof, any foreign government, any international organization, or any agency or instrumentality of any of the foregoing; (b) any organization (other than a farmer’s cooperative as defined in Section 521 of the Code) that is exempt from federal income taxation (including taxation under the unrelated business taxable income provisions of the Code); (c) any rural telephone or electrical service cooperative described in Section 1381(a)(2)(C) of the Code; (d) any foreign permanent establishment or fixed base (within the meaning of an applicable income tax treaty) of a U.S. Person; (e) any “electing large partnership”; or (f) any other entity so designated by Treasury rulings or regulations promulgated or otherwise in effect as of the date hereof. In addition, a corporation will not be treated as an instrumentality of the United States or of any state or political subdivision thereof if all of its activities are subject to tax and, with the exception of Freddie Mac, a majority of its board of directors is not selected by such governmental unit.

 

Distribution Account : The separate account established and maintained pursuant to Section 10.1.

 

Distribution Date : The      day of each calendar month or if the [ - ] day is not a Business Day, the next succeeding Business Day, commencing in [ - ].

 

Distribution Date Report : As defined in Section 5.5.

 

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Due Date : The day of the month on which the Scheduled Monthly Payment is due on a Mortgage Loan, exclusive of any days of grace, as specified in the related Mortgage Note.

 

Due Period : With respect to any Distribution Date and a Mortgage Loan, the period commencing on the second day of the month immediately preceding the month in which such Distribution Date occurs (or the day following the Cut-off Date in respect of the first Due Period) and ending at the close of business on the first day of the calendar month in which such Distribution Date occurs.

 

EDGAR : The “Electronic Data Gathering, Analysis, and Retrieval” system of the Commission, which performs automated collection, validation, indexing, acceptance, and forwarding of submissions by companies and others who are required by law to file forms with the Commission.

 

Eligible Account : Any of (a) an account or accounts maintained with a federal or state chartered depository institution or trust company the short-term unsecured debt obligations of which (or, in the case of a depository institution or trust company that is the principal subsidiary of a holding company, the debt obligations of such holding company) have the highest short-term ratings of each Rating Agency at the time any amounts are held on deposit therein, (b) an account or accounts in a depository institution or trust company in which such accounts are insured by the FDIC (to the limits established by the FDIC), provided that any such deposits not so insured shall be maintained in an account at a depository institution or trust company whose commercial paper or other short term debt obligations (or, in the case of a depository institution or trust company which is the principal subsidiary of a holding company, the commercial paper or other short term debt obligations of such holding company) have been rated by each Rating Agency in its highest short-term rating category, (c) a trust account or accounts maintained with (i) the trust department of a federal or state chartered depository institution or (ii) a trust company, acting in its fiduciary capacity, or (d) any other account acceptable to each Rating Agency. Eligible Accounts may bear interest, and may include, if otherwise qualified under this definition, accounts maintained with the Trustee, the Securities Administrator or the Master Servicer.

 

Eligible Investments : Any dollar-denominated investment that is one or more of the following (and may include investments for which the Trustee, the Securities Administrator and/or their Affiliates, or the Master Servicer and/or its Affiliates, provides services or receives compensation):

 

(a) cash;

 

(b) direct registered obligations of, and registered obligations the timely payment of principal and interest on which is fully and expressly guaranteed by, the United States or any agency or instrumentality of the United States the obligations of which are expressly backed by the full faith and credit of the United States;

 

(c) demand and time deposits in, interest bearing trust accounts at, certificates of deposit of, bankers’ acceptances payable within 183 days of issuance issued by, or Federal funds sold by any depository institution or trust company incorporated under the laws of the United

 

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States or any state thereof and subject to supervision and examination by Federal and/or state banking authorities so long as the commercial paper and/or the debt obligations of such depository institution or trust company (or, in the case of the principal depository institution in a holding company system, the commercial paper or debt obligations of such holding company) at the time of such investment or contractual commitment providing for such investment have a credit rating of not less than “AA+” by S&P and “Aa2” by Moody’s (and if rated “Aa2”, such rating is not on watch for downgrade by Moody’s) in the case of long-term debt obligations, or “A-1+” by S&P and “P-1” by Moody’s (and if rated “P-1”, such rating is not on watch for downgrade by Moody’s) and in the case of commercial paper and short-term debt obligations; provided that (i) in each case, the issuer thereof must have at the time of such investment or contractual commitment providing for such investment a long-term credit rating of not less than “Aa2” by Moody’s (and if rated “Aa2”, such rating is not on watch for downgrade by Moody’s) and (ii) in the case of commercial paper and short-term debt obligations with a maturity of longer than 91 days, the issuer thereof must also have at the time of such investment or contractual commitment providing for such investment a long-term credit rating of not less than “AA+” by S&P;

 

(d) unleveraged repurchase obligations (if treated as debt for United States federal income tax purposes by the issuer) with respect to (i) any security described in clause (b) above or (ii) any other registered security issued or guaranteed by an agency or instrumentality of the United States (in each case without regard to the final maturity of such security), in either case entered into with a United States federal or state depository institution or trust company (acting as principal) described in clause (c) above or entered into with a corporation (acting as principal) whose long-term rating at the time of such investment or contractual commitment providing for such investment is not less than “AA+” by S&P and “Aa2” by Moody’s (and if rated “Aa2”, such rating is not on watch for downgrade by Moody’s) or whose short-term credit rating at the time of such investment or contractual commitment providing for such investment is “A-1+” by S&P and “P-1” by Moody’s (and if rated “P-1”, such rating is not on watch for downgrade by Moody’s) at the time of such investment; provided that (A) in each case, the issuer thereof must have at the time of such investment or contractual commitment providing for such investment a long-term credit rating of not less than “Aa2” by Moody’s (and if rated “Aa2”, such rating is not on watch for downgrade by Moody’s) and (B) if such security has a maturity of longer than 91 days, the issuer thereof must also have at the time of such investment or contractual commitment providing for such investment a long-term credit rating of not less than “AA+” by S&P and “Aa2” by Moody’s (and if rated “Aa2”, such rating is not on watch for downgrade by Moody’s);

 

(e) registered debt securities bearing interest or sold at a discount issued by any corporation incorporated under the laws of the United States or any state thereof that have a credit rating at the time of such investment or contractual commitment providing for such investment of not less than “AA” by S&P and “Aa2” by Moody’s (and if rated “Aa2”, such rating is not on watch for downgrade by Moody’s);

 

(f) commercial paper or other short-term obligations with a maturity of not more than 183 days from the date of issuance and having at the time of such investment or contractual commitment providing for such investment a credit rating of “A-1+” by S&P; provided , that (i) in each case, the issuer thereof must have at the time of such investment or contractual commitment providing for such investment a long-term credit rating of not less than “Aa2” by

 

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Moody’s (and if rated “Aa2”, such rating is not on watch for downgrade by Moody’s) and (ii) if such security has a maturity of longer than 91 days, the issuer thereof must also have at the time of such investment or contractual commitment providing for such investment a long-term credit rating of not less than “AA” by S&P;

 

(g) Reinvestment Agreements issued by any bank (if treated as a deposit by such bank), or a registered Reinvestment Agreement issued by any insurance company or other corporation or entity organized under the laws of the United States or any state thereof (if treated as debt for tax purposes by the issuer), in each case, that has a credit rating of not less than “A-1+” by S&P and “P-1” by Moody’s (and if rated “P-1”, such rating is not on watch for downgrade by Moody’s); provided , that (i) in each case, the issuer thereof must have at the time of such investment or contractual commitment providing for such investment a long-term credit rating of not less than “Aa2” by Moody’s (and if rated “Aa2”, such rating is not on watch for downgrade by Moody’s) and (ii) if such security has a maturity of longer than 91 days, the issuer thereof must also have at the time of such investment or contractual commitment providing for such investment a long-term credit rating of not less than “AA” by S&P; and

 

(h) interests in any money market fund or similar investment vehicle having at the time of investment therein the highest credit rating assigned by each of the Rating Agencies (which may include money market funds or common trust funds, including without limitation, any fund for which the Securities Administrator or its Affiliate serves as an investment adviser, administrator, shareholder servicing agent and/or from which such party collects fees).

 

In each case (other than clause (a)), such Eligible Investment shall have a final maturity (giving effect to any applicable grace period) no later than the Business Day immediately preceding the Distribution Date (or, if the Securities Administrator or an Affiliate is the obligor on such Eligible Investment, the Distribution Date) next following the Due Period in which the date of investment occurs; provided , that , Eligible Investments may not include (i) any interest-only security, any security purchased at a price in excess of 100% of the par value or any security that provides for payment of both principal and interest with a yield to maturity in excess of 120% of the yield to maturity at par, (ii) any floating rate security whose interest rate is inversely or otherwise not proportionately related to an interest rate index or is calculated as other than the sum of an interest rate index plus a spread, (iii) securities subject to an offer, (iv) any security with a rating from S&P which includes the subscript “p,” “pi,” “q,” “r” or “t”, or (v) any investment, the income from which is or will be subject to deduction or withholding for or on account of any withholding or similar tax.

 

ERISA : The Employee Retirement Income Security Act of 1974, as amended.

 

ERISA Restricted Certificates : Any of the Class R, Class RX, Class C and Class P Certificates and any Class of Certificates with a rating below the lowest applicable rating requirement of an exemption listed in footnote 1 of, and amended by, Prohibited Transaction Exemption 2002-41, 67 Fed. Reg. 54487 (2002), or any successor exemption.

 

Errors and Omissions Insurance Policy : An errors and omissions insurance policy to be maintained by the Servicer pursuant to Section 4.13 or by the Master Servicer pursuant to Section 8.3.

 

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Escrow Account : The separate account or accounts created and maintained by the Servicer pursuant to Section 4.7 hereof.

 

Escrow Payments : With respect to any Mortgage Loan, the amounts constituting ground rents, taxes, assessments, water rates, sewer rents, municipal charges, fire and hazard insurance premiums, condominium charges, and any other payments required to be escrowed by the Mortgagor with the mortgagee pursuant to the Mortgage or any other related document.

 

Excess Cashflow : With respect to any Distribution Date, an amount equal to Available Funds remaining after distribution of all amounts pursuant to Section 10.5(a)(i) and (ii).

 

Exchange Act : The Securities Exchange Act of 1934, as amended.

 

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.

 

FDIC : The Federal Deposit Insurance Corporation, or any successor thereto.

 

FICO : The credit score used for underwriting a Mortgage Loan.

 

Fidelity Bond : A fidelity bond to be maintained by the Servicer pursuant to Section 4.13 or by the Master Servicer pursuant to Section 8.3.

 

Final Certification : A certification as to the completeness of each Mortgage File provided by the Custodian within 90 days following the Closing Date in accordance with Section 2.5.

 

Final Scheduled Distribution Date : The Distribution Date following the month of the scheduled maturity date of the Mortgage Loan having the latest scheduled maturity date as of the Cut-off Date.

 

Fixed Rate Mortgage Loan: Any Mortgage Loan for which the Mortgage Rate is constant and is not determined by reference to an Index.

 

Formula Rate : For each Class of Certificates, a per annum rate equal to the lesser of (i) One-Month LIBOR plus the applicable Pass-Through Margin and (ii) 14.00%.

 

Freddie Mac : The Federal Home Loan Mortgage Corporation (FHLMC), or any successor thereto.

 

Gross Margin : With respect to each Adjustable Rate Mortgage Loan, the fixed percentage amount set forth in the related Mortgage Note which is added to the Index in order to determine the related Mortgage Rate, as set forth in the Mortgage Loan Schedules.

 

HUD : The United States Department of Housing and Urban Development, or any successor thereto.

 

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Indenture : An indenture relating to the issuance of notes secured by all or a portion of the Class C Certificates, the Class P Certificates and/or the Class R and Class RX Certificates.

 

Independent : When used with respect to any Accountants, a Person who is “independent” within the meaning of Rule 2-01(b) of the Securities and Exchange Commission’s Regulation S-X. When used with respect to any other Person, a Person who (a) is in fact independent of another specified Person and any Affiliate of such other Person, (b) does not have any material direct financial interest in such other Person or any Affiliate of such other Person, and (c) is not connected with such other Person or any Affiliate of such other Person as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions.

 

Index : The index specified in the related Mortgage Note for calculation of the Mortgage Rate thereof.

 

Initial Certification : A certification as to the completeness of each Mortgage File provided by the Custodian on the Closing Date in accordance with Section 2.5.

 

Insurance Proceeds : With respect to each Mortgage Loan, proceeds of insurance policies insuring the Mortgage Loan or the related Mortgaged Property, if applicable, including the proceeds of any hazard or flood insurance policy.

 

Interest Accrual Period : With respect to any Distribution Date and each Class of Certificates (other than the Class C Certificates) and the Uncertificated REMIC II Regular Interests (other than the Class C Interest), the period commencing on the Distribution Date in the month immediately preceding the month in which such Distribution Date occurs (or, in the case of the first Distribution Date, the Closing Date) and ending on the close of business on the calendar day immediately preceding such Distribution Date. With respect to any Distribution Date and the Class C Certificates, the Class C Interest and the REMIC I Regular Interests, the one month period ending on the last day of the calendar month immediately preceding the month in which such Distribution Date occurs.

 

Interest Distribution Amount : For each Class of Certificates, on any Distribution Date, an amount equal to the sum of (i) the Current Interest for such Class of Certificates for such Distribution Date, (ii) any unpaid Current Interest for such Class from a prior Distribution Date (together with any unpaid interest thereon), and (iii) interest accrued during the related Interest Accrual Period on the amount described in clause (ii) above at the Pass-Through Rate applicable to such Class of Certificates. The Interest Distribution Amount may be reduced by Prepayment Interest Shortfalls or Relief Act Reductions allocable to such Class of Certificates.

 

Interest Proceeds : With respect to any Distribution Date, the sum of all scheduled and unscheduled payments of interest on the Mortgage Loans, all Liquidation Proceeds in respect of interest from Liquidated Mortgage Loans, all Insurance Proceeds on the Mortgage Loans in respect of interest and the interest portion of the Repurchase Price of each Mortgage Loan that is repurchased upon a breach of representations regarding such Mortgage Loan, each as is received or advanced in the related Due Period or the related Prepayment Period, as applicable, less the Servicing Fee with respect to such Distribution Date and excluding, for the avoidance of doubt, any Prepayment Premiums.

 

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Investment Letter : As defined in Section 11.2.

 

Issuing Entity : FBR Securitization Trust 200_-_.

 

LIBOR : The London interbank offered rate for one-month United States dollar deposits established pursuant to Schedule C hereto.

 

LIBOR Business Day : As defined in Schedule C .

 

Liquidated Mortgage Loan : With respect to any Distribution Date, a defaulted Mortgage Loan (including any REO Property) which was liquidated in the Prepayment Period related to such Distribution Date and as to which the Servicer has certified to the Master Servicer and the Securities Administrator that it has received all amounts it expects to receive in connection with the liquidation of such Mortgage Loan, including the final disposition of any REO Property.

 

Liquidation Expenses : With respect to a Mortgage Loan in liquidation, unreimbursed expenses paid or incurred by or for the account of the Servicer, such expenses including (a) property protection expenses, (b) property sales expenses, (c) foreclosure and sale costs, including court costs and reasonable attorneys’ fees, and (d) similar expenses reasonably paid or incurred in connection with liquidation.

 

Liquidation Proceeds : Cash received in connection with the liquidation of a defaulted Mortgage Loan, whether through the sale or assignment of such Mortgage Loan, trustee’s sale, foreclosure sale or otherwise, or the sale of the related Mortgaged Property if the Mortgaged Property is acquired in satisfaction of the Mortgage Loan.

 

Loan-to-Value Ratio or LTV : With respect to Mortgage Loan secured by a first lien mortgage, the ratio of the original loan amount of such Mortgage Loan at its origination (unless otherwise indicated) to (a) the Appraised Value of the Mortgaged Property. With respect to any Mortgage Loan secured by a junior lien position, a fraction, expressed as a percentage, the numerator of which is the sum of (1) the original loan amount of the related Mortgage Loan and (2) any outstanding principal balance of mortgage loans the liens on which are equal in priority or senior to the lien on such related Mortgage Loan (each such sum calculated at the date of origination of such related Mortgage Loan), and the denominator of which is the Appraised Value of the Mortgaged Property.

 

Losses: As defined in Section 14.3.

 

Majority in Interest : As to the Certificates or any Class thereof, the Holders of Certificates or Certificates of such Class evidencing, in the aggregate, at least 51% of the Percentage Interests evidenced by all Certificates or all Certificates of such Class.

 

Margin Stepup Date : The first Distribution Date after the date on which the Clean-up Call may be exercised.

 

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Marker Rate : With respect to the Class C Interest and any Distribution Date, a per annum rate equal to two times the weighted average of the Uncertificated REMIC I Pass-Through Rates for each Uncertificated REMIC I Regular Interest (other than Uncertificated REMIC I Regular Interest LTAA and Uncertificated REMIC I Regular Interest LTP), with the rate on each such Uncertificated REMIC I Regular Interest (other than Uncertificated REMIC I Regular Interest LTZZ) subject to the lesser of (i) LIBOR plus the applicable Pass-Through Margin and (ii) the Net WAC Rate for the purpose of this calculation for such Distribution Date and with the rate on Uncertificated REMIC I Regular Interest LTZZ subject to a cap of zero for the purpose of this calculation; provided, however, that solely for this purpose, calculations of the Uncertificated REMIC I Pass-Through Rate and the related caps with respect to each Uncertificated REMIC I Regular Interest (other than Uncertificated REMIC I Regular Interest LTAA, Uncertificated REMIC I Regular Interest LTZZ and Uncertificated REMIC I Regular Interest LTP) shall be multiplied by a fraction, the numerator of which is the actual number of days in the Interest Accrual Period and the denominator of which is 30.

 

Master Servicer : [ - ] and its successors and assigns in its capacity as master servicer.

 

Master Servicer Event of Default : As defined in Section 7.9(a).

 

Master Servicing Fee : As to each Mortgage Loan and any Distribution Date, an amount equal to (i) one twelfth of the Master Servicing Fee Rate multiplied by (ii) the Scheduled Principal Balance of such Mortgage Loan as of the Due Date in the prior calendar month.

 

Master Servicing Fee Rate : [ - ]% per annum.

 

Material Defect : With respect to any Mortgage Loan, as defined in Section 2.5(c).

 

Maximum LTZZ Uncertificated Interest Deferral Amount: With respect to any Distribution Date, the excess of (i) accrued interest at the Uncertificated REMIC I Pass-Through Rate applicable to Uncertificated REMIC I Regular Interest LTZZ for such Distribution Date on a balance equal to the Uncertificated Principal Balance of Uncertificated REMIC I Regular Interest LTZZ minus the Uncertificated REMIC I Overcollateralization Amount, in each case for such Distribution Date, over (ii) the Uncertificated Interest on each Uncertificated REMIC I Regular Interest (other than Uncertificated REMIC I Regular Interest LTAA, Uncertificated REMIC I Regular Interest LTZZ and Uncertificated REMIC I Regular Interest LTP) for such Distribution Date, with the rate on each such Uncertificated REMIC I Regular Interest subject to a cap equal to the lesser of (i) LIBOR plus the applicable Pass-Through Margin and (ii) the Net WAC Rate; provided, however , that solely for this purpose, calculations of the Uncertificated REMIC I Remittance Rate and the related caps with respect to each Uncertificated REMIC I Regular Interest (other than Uncertificated REMIC I Regular Interest LTAA, Uncertificated REMIC I Regular Interest LTZZ and Uncertificated REMIC I Regular Interest LTP) shall be multiplied by a fraction, the numerator of which is the actual number of days in the Interest Accrual Period and the denominator of which is 30.

 

MERS : MERSCORP, Inc., its successor and assigns.

 

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MERS Designated Mortgage Loan : A Mortgage Loan for which (a) the Seller has designated or will designate MERS as, and have taken or will take such action as is necessary to cause MERS to be, the mortgagee of record, as nominee for the Seller and its successors and assigns, in accordance with MERS Procedures Manual and (b) the Seller has designated or will designate the Trustee as the Investor on the MERS® System.

 

MERS Procedures Manual : The MERS Procedures Manual, as it may be amended, supplemented or otherwise modified from time to time.

 

MERS® System : MERS mortgage electronic registry system, as more particularly described in the MERS Procedures Manual.

 

Monthly Advance : With respect to any Mortgage Loan on any Determination Date, an amount equal to the portion of each Scheduled Monthly Payment due in the Due Period to which such Determination Date relates that is delinquent at the close of business on such Determination Date, excluding any balloon payment or any shortfalls attributable to the Relief Act.

 

Moody’s : Moody’s Investors Service, Inc.

 

Mortgage : The mortgage, deed of trust or other instrument securing a Mortgage Note, which creates a lien on an estate in fee simple or leasehold estate in real property securing the Mortgage Note.

 

Mortgage File : The mortgage documents listed on Exhibit B hereto pertaining to a particular Mortgage Loan.

 

Mortgage Loan : An individual Mortgage Loan which is the subject of this Agreement, each Mortgage Loan sold and subject to this Agreement being identified on the Mortgage Loan Schedule hereto, which Mortgage Loan includes without limitation the Mortgage File, the Scheduled Monthly Payments, Principal Prepayments, Liquidation Proceeds, Condemnation Proceeds, Insurance Proceeds, REO Disposition Proceeds and all other rights, benefits, proceeds and obligations arising from or in connection with such Mortgage Loan.

 

Mortgage Loan Documents : The documents referred to in Section (a) of Exhibit B .

 

Mortgage Loan Remittance Rate : With respect to each Mortgage Loan, the related Mortgage Rate less the Servicing Fee Rate.

 

Mortgage Loan Schedule : The list of Mortgage Loans transferred to the Trustee, or the Custodian on its behalf, as part of the Trust Fund and from time to time subject to this Agreement attached hereto as Schedule A that sets forth the information required on Exhibit A for each Mortgage Loan.

 

Mortgage Note : The original executed note or other evidence of indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan, including any riders or addenda thereto.

 

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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.

 

Mortgaged Property : The real property securing repayment of the debt evidenced by a Mortgage Note.

 

Mortgagor : The obligor on a Mortgage Note.

 

Net Prepayment Interest Shortfalls : As to any Distribution Date, the amount by which the aggregate of Prepayment Interest Shortfalls during the related Prepayment Period exceeds the Compensating Interest Payments made with respect to such Distribution Date.

 

Net WAC Cap Carryover Amount : For each Class of Certificates on a Distribution Date, the sum of (i) the excess, if any, of (a) the amount that would have been the Current Interest for such Class of Certificates at the Formula Rate for such Distribution Date over (b) the actual amount of Current Interest distributable for such Class of Certificates on such Distribution Date, (ii) any excess described in clause (i) above for any prior Distribution Date that remains unpaid (together with any unpaid interest thereon) on such Distribution Date, and (iii) interest accrued during the Interest Accrual Period related to such Distribution Date on the amount described in clause (ii) above at the Formula Rate applicable to such Class of Certificates.

 

Net WAC Rate : As to any Distribution Date, a per annum rate equal to the weighted average Adjusted Net Mortgage Rate of the Mortgage Loans as of the first day of the Due Period for such Distribution Date, calculated on the basis of the actual number of days in the related Interest Accrual Period and a 360-day year.

 

Non-Mortgagor Prepayment Premium Payment Amount : The sum of (i) the amount payable by the Servicer in respect of any waived or uncollected Prepayment Premiums pursuant to Section 4.18, and (ii) the amount payable by the Originator in respect of any Prepayment Premium that was found to be unenforceable. The amounts payable by the Servicer or Originator shall equal the difference between the amount of Prepayment Premium due by a Mortgagor and the actual amount paid. Such amounts payable by the Servicer or Originator shall not be part of any REMIC formed hereunder.

 

Non-recoverable Advance : Any Servicing Advance (in respect of the Servicer only) or Monthly Advance previously made or proposed to be made in respect of a Mortgage Loan or REO Property by the Servicer or Master Servicer (in its capacity as successor servicer) which, in the reasonable discretion of the Servicer or Master Servicer in accordance with Accepted Servicing Practices will not or, in the case of a proposed Servicing Advance or Monthly Advance, would not, ultimately be recoverable by the Servicer or Master Servicer from the related Mortgagor, related Liquidation Proceeds, Condemnation Proceeds, Insurance Proceeds, REO Disposition Proceeds or otherwise. The determination by the Servicer that all or a portion of a Servicing Advance or Monthly Advance would be a Non-recoverable Advance shall be evidenced by an Officer’s Certificate delivered to the Master Servicer and the Securities Administrator setting forth such determination and a reasonable explanation thereof.

 

Non-permitted Foreign Holder : As defined in Section 11.2(f).

 

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Non-U.S. Person : A Person that is not a U.S. Person.

 

Notional Amount : With respect to the Class C Certificates, a notional amount equal to the aggregate principal balance of the Uncertificated REMIC I Regular Interests other than Uncertificated REMIC I Regular Interest LTP. With respect to the Class C Interest, a notional amount equal to the aggregate principal balance of the Uncertificated REMIC I Regular Interests other than Uncertificated REMIC I Regular Interest LTP.

 

Offered Certificates : The Class A and Class M Certificates.

 

Officer’s Certificate : A certificate (a) signed by the Chairman of the Board, the Vice Chairman of the Board, the President, a Managing Director, a Vice President, an Assistant Vice President, the Treasurer, the Secretary, or one of the Assistant Treasurers or Assistant Secretaries of the Depositor or the Servicer, as the case may be, or (b), if provided for in this Agreement, signed by a Servicing Officer and delivered to the Depositor, the Master Servicer, the Securities Administrator and the Trustee, as the case may be, as required by this Agreement.

 

Opinion of Counsel : A written opinion of counsel, which shall not be at the expense of the Master Servicer, the Securities Administrator or the Trustee, who may be counsel for the Seller, the Servicer, the Custodian, the Depositor, the Master Servicer, the Securities Administrator or the Trustee, including in-house counsel, reasonably acceptable to the Securities Administrator, the Trustee and/or the Master Servicer, as applicable; provided , however , that with respect to the interpretation or application of the federal income tax or ERISA matters, such counsel must be nationally recognized as expert in the federal income tax or ERISA aspects, as applicable, of asset securitization and must be Independent of the Securities Administrator, the Trustee and the Master Servicer.

 

Originator : [ - ] and its successors in interest and assigns.

 

Outstanding : As of the date of determination, all Certificates theretofore executed authenticated and delivered under this Agreement except:

 

(a) Certificates theretofore cancelled by the Certificate Registrar or delivered to the Certificate Registrar for cancellation;

 

(b) Certificates the payment for which money in the necessary amount has been theretofor deposited with the Trustee in trust for the Holders of such Certificates ( provided, however , that if such Certificates are to be redeemed, notice of such redemption has been duly given pursuant to this Agreement or provision for such notice has been made, satisfactory to the Trustee); and

 

(c) Certificates in exchange for or in lieu of which other Certificates have been authenticated and delivered pursuant to this Agreement unless proof satisfactory to the Trustee is presented that any such Certificates are held by a bona fide purchaser;

 

provided, that in determining whether the Certificateholders of the requisite Outstanding Balance of the Certificates have given any request, demand, authorization, direction, notice, consent or waiver hereunder. Certificates owned by the Depositor, any Servicer, or any Affiliate of any of

 

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the foregoing Persons shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Certificates that a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded (unless such action requires the consent, waiver, request or demand of 100% of the outstanding balance represented by a particular Class and 100% of the outstanding balance represented by such Class is registered in the name of one or more of the foregoing entities). Certificates so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right so to act with respect to such Certificates and that the pledgee is not the Depositor, any Servicer, or any Affiliate of any of the foregoing Persons.

 

Overcollateralization Amount : As of any Distribution Date, the excess, if any, of the aggregate Scheduled Principal Balance of the Mortgage Loans as of the last day of the related Due Period over the aggregate Certificate Principal Balance of all Classes of Certificates other than Class C Certificates (after taking into account all distributions of principal on such Distribution Date and the increase of any Certificate Principal Balance as a result of Subsequent Recoveries).

 

Overcollateralization Deficiency Amount : For any Distribution Date, the excess, if any, of (a) the Target Overcollateralization Amount for such Distribution Date over (b) the Overcollateralization Amount for such Distribution Date, after giving effect to the distribution of the Principal Distribution Amount on such Distribution Date.

 

Overcollateralization Release Amount : With respect to any Distribution Date on or after the Stepdown Date on which a Trigger Event is not in effect, the lesser of (a) the Principal Proceeds for such Distribution Date and (b) the excess, if any, of (i) the Overcollateralization Amount for such Distribution Date, assuming that 100% of the Principal Proceeds are applied as a principal payment on the Certificates on such Distribution Date over (ii) the Targeted Overcollateralization Amount for such Distribution Date. With respect to any Distribution Date on which a Trigger Event is in effect, the Overcollateralization Release Amount will be zero.

 

Pass-Through Margin : With respect to the Offered Certificates, the following percentages:

 

 

Pass-Through Rate : The Pass-Through Rate with respect to the Offered Certificates and any Distribution Date shall equal the lesser of (i) the related Formula Rate for such Distribution Date and (ii) the Net WAC Rate for such Distribution Date. For federal income tax purposes, the following Pass-Through Rates shall apply:

 

With respect to the Offered Certificates and any Distribution Date, the lesser of (x) the related Formula Rate for such Distribution Date and (y) the Net WAC Rate for such Distribution Date.

 

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With respect to the Class C Interest and any Distribution Date, a rate per annum equal to the percentage equivalent of a fraction, the numerator of which is (x) the sum of (i) 100% of the interest on Uncertificated REMIC I Regular Interest LTP and (ii) interest on the Uncertificated Principal Balance of each Uncertificated REMIC I Regular Interest listed in clause (y) at a rate equal to the related Uncertificated REMIC I Pass-Through Rate minus the Marker Rate and the denominator of which is (y) the aggregate Uncertificated Balance of each Uncertificated REMIC I Regular Interest (other than Uncertificated REMIC I Regular Interest LTP).

 

With respect to the Class C Certificate, 100% of the interest distributable on the Class C Interest.

 

The Class P Interest, the Class P Certificates, the Class R Certificates and the Class RX Certificates shall not have a Pass-Through Rate.

 

Paying Agent : The Person appointed to make distributions on the Certificates.

 

Percentage Interest : Shall equal in the case of any Certificate, the percentage interest set forth on the face thereof or equal to the percentage obtained by dividing the initial principal amount of such Certificate by the initial aggregate amount set forth on the face of all Certificates of the same Class.

 

Permitted Transferee : Any person other than:

 

(a) a Disqualified Organization;

 

(b) a Non-U.S. Person unless such Non-U.S. Person has furnished the transferor and the Trustee with a duly completed Internal Revenue Service Form W-8ECI or any applicable successor form; and

 

(c) any other Person so designated by the Depositor based upon an Opinion of Counsel that the Transfer of an ownership interest in a Residual Certificate to such Person may cause any Trust REMIC to fail to qualify as a REMIC at any time that the Certificates are outstanding.

 

Person : Any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization or government or any agency or political subdivision thereof.

 

Prepayment Interest Excess : With respect to any Distribution Date and each Mortgage Loan that was the subject of a Principal Prepayment in full during the portion of the related Prepayment Period beginning on the first day of the calendar month in which such Distribution Date occurs through the end of the Prepayment Period relating to such Distribution Date, an amount equal to interest (to the extent received) at the applicable Mortgage Loan Remittance Rate on the amount of such Principal Prepayment for the number of days commencing on the first day of the calendar month in which such Distribution Date occurs and ending on the date on which such Principal Prepayment is so applied.

 

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Prepayment Interest Shortfall : With respect to any Distribution Date, for each Mortgage Loan that was the subject of a Principal Prepayment in full or in part during the portion of the related Prepayment Period occurring between the first day of the related Prepayment Period and the last day of the calendar month preceding the month in which such Distribution Date occurs and that the Servicer applied to reduce the outstanding principal balance of such Mortgage Loan on a date preceding the Due Date in the succeeding calendar month, an amount equal to interest at the applicable Mortgage Loan Remittance Rate on the amount of such Principal Prepayment for the number of days commencing on the date on which the prepayment is applied and ending on the last day of the calendar month preceding such Distribution Date.

 

Prepayment Period : With respect to any Distribution Date [and (i) any Principal Prepayment in full, the period that commences on and includes the      day of the month immediately preceding the month in which such Distribution Date occurs (or from the Cut-off Date, in the case of the first Prepayment Period) and ends on and includes the      day of the month in which such Distribution Date occurs, and (ii) any partial Principal Prepayment], the calendar month preceding the month in which the Distribution Date occurs.

 

Prepayment Premium : With respect to a Mortgage Loan, the prepayment charge or penalty interest required to be paid by the Mortgagor in connection with a prepayment of the related Mortgage Loan, as provided in the related Mortgage Note or Mortgage, and as specified on the related Mortgage Loan Schedule.

 

Principal Proceeds : For any Distribution Date, the sum of all scheduled and unscheduled payments of principal on the Mortgage Loans, all Liquidation Proceeds in respect of principal from Liquidated Mortgage Loans, all Insurance Proceeds on the Mortgage Loans in respect of principal, and the principal portion of the Repurchase Price of each Mortgage Loan that is repurchased upon a breach of representations regarding such Mortgage Loan in such Mortgage Loan Group, each as is received or advanced in the related Due Period or the related Prepayment Period, as applicable, excluding, for the avoidance of doubt, any Prepayment Premiums.

 

Private Certificate : Any Class of Certificates that is not registered under the Securities Act.

 

Prospectus : Each of the (i) preliminary prospectus supplement, dated              , together with the accompanying prospectus dated              , and (ii) the prospectus supplement dated              , together with the accompanying prospectus dated              , in each case relating to the Offered Certificates.

 

Purchase Agreement : The Master Mortgage Loan and Interim Servicing Agreement, dated as of          , by and among the Seller,          and the Originator, attached hereto as Schedule D .

 

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Qualified Substitute Mortgage Loan : A mortgage loan eligible to be substituted by the Originator for a Deleted Mortgage Loan which must meet the following criteria:

 

(a) have a Scheduled Principal Balance, after deduction of all Scheduled Monthly Payments due in the month of substitution (or in the case of a substitution of more than one mortgage loan for a Deleted Mortgage Loan, an aggregate Scheduled Principal Balance), not in excess of the Scheduled Principal Balance of the Deleted Mortgage Loan;

 

(b) have a Mortgage Loan Remittance Rate not less than, and not more than 2% greater than, the Mortgage Loan Remittance Rate of the Deleted Mortgage Loan;

 

(c) have a remaining term to maturity not greater than and not more than one year less than that of the Deleted Mortgage Loan;

 

(d) comply with each representation and warranty set forth in Section 2.7;

 

(e) be of the same type as the Deleted Mortgage Loan;

 

(f) have a Gross Margin not less than that of the Deleted Mortgage Loan, if the Deleted Mortgage Loan was an Adjustable Rate Mortgage Loan;

 

(g) have the same lien priority as the lien priority of the replaced Mortgage Loan;

 

(h) have the same Index as the Deleted Mortgage Loan;

 

(i) have a FICO score not less than that of the Deleted Mortgage Loan;

 

(j) have an LTV not greater than that of the Deleted Mortgage Loan;

 

(k) have a Prepayment Premium with a term and an amount at least equal to the Prepayment Premium of the Deleted Mortgage Loan; and

 

(l) have a credit grade not lower in quality than that of the Deleted Mortgage Loan.

 

Rating Agency : Each of Moody’s and S&P, or any successor thereto.

 

Realized Loss : With respect to each Liquidated Mortgage Loan, an amount (not less than zero or more than the Scheduled Principal Balance of the Mortgage Loan) as of the date of such liquidation, equal to (a) the Scheduled Principal Balance of the Liquidated Mortgage Loan as of the date of such liquidation, plus (b) interest at the Adjusted Net Mortgage Rate from the Due Date as to which interest was last paid or advanced (and not reimbursed) to the Certificateholders up to the Due Date in the month in which Liquidation Proceeds are required to be distributed on the Scheduled Principal Balance of such Liquidated Mortgage Loan from time to time, minus (c) the Liquidation Proceeds, if any, received during the month in which such liquidation occurred, to the extent applied as recoveries of interest at the Adjusted Net Mortgage Rate and to principal of the Liquidated Mortgage Loan. With respect to each Mortgage Loan which has become the subject of a Deficient Valuation, if the principal amount due under the related Mortgage Note has been reduced, the difference between the principal balance of the Mortgage Loan outstanding 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 amount, if any, by which the principal portion of the related Scheduled Monthly Payment has been reduced.

 

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Record Date : As to any Distribution Date and with respect to all Certificates (other than the Class C Certificates, the Class P Certificates, the Class R Certificates and the Class RX Certificates), the last Business Day preceding such Distribution Date. With respect to the Class C Certificates, Class P Certificates, Class R Certificates and Class RX Certificates, the last Business Day of the calendar month preceding the month in which the Distribution Date occurs.

 

Regular Certificates : Any of the Class A Certificates, Class M Certificates, Class C Certificates or Class P Certificates.

 

Regulation AB: Subpart 229.1100 Asset Backed Securities (Regulation AB), 17 C.F.R. §§ 229.110-229.1123, 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.

 

Reinvestment Agreement : A guaranteed reinvestment agreement from a bank, insurance company or other corporation or entity organized under the laws of the United States or any state thereof under which no payments are subject to any withholding tax or, if subject to withholding tax imposed by any jurisdiction, the obligor thereunder is required to make “gross up” payments that cover the full amount of any such withholding tax on an after-tax basis; provided that such agreement provides that it is terminable by the purchaser, without premium or penalty, in the event that the rating assigned to such agreement by any Rating Agency is at any time lower than the rating required pursuant to the terms of this Agreement to be assigned to such agreement in order to permit the purchase thereof.

 

Relief Act : The Servicemembers Civil Relief Act, as such may be amended from time to time, or any similar state laws.

 

Relief Act Reductions : With respect to any Distribution Date and any Mortgage Loan as to which there has been a reduction in the amount of interest collectible thereon for the most recently ended calendar month as a result of the application of the Relief Act, the amount, if any, by which (a) interest collectible on such Mortgage Loan for the most recently ended calendar month is less than (b) interest accrued thereon for such month pursuant to the Mortgage Note.

 

Regular Interest : A “regular interest” in a REMIC within the meaning of Section 860G(a)(1) of the Code.

 

REMIC : A “real estate mortgage investment conduit” within the meaning of Section 860D of the Code.

 

REMIC I Interest Loss Allocation Amount: With respect to any Distribution Date, an amount (subject to adjustment based on the actual number of days elapsed in the respective Interest Accrual Periods for the indicated Uncertificated REMIC I Regular Interests for such Distribution Date) equal to (a) the product of (i) the aggregate Scheduled Principal Balance of the Mortgage Loans and REO Properties then outstanding and (ii) the Uncertificated REMIC I Pass-Through Rate for REMIC I Regular Interest LTAA minus the Marker Rate, divided by (b) 12.

 

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REMIC I Overcollateralization Target Amount: 1.0% of the Overcollateralization Target Amount.

 

REMIC I Overcollateralized Amount : With respect to any date of determination, (i) 1.0% of the aggregate Uncertificated Balance of the Uncertificated REMIC I Regular Interests minus (ii) the aggregate Uncertificated Principal Balance of each Uncertificated REMIC I Regular Interest (other than Uncertificated REMIC I Regular Interest LTAA and Uncertificated REMIC I Regular Interest LTZZ) 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) aggregate Scheduled Principal Balance of the Mortgage Loans and REO Properties then outstanding and (ii) one minus a fraction, the numerator of which is two times the aggregate Uncertificated Principal Balance of each Uncertificated REMIC I Regular Interest (other than Uncertificated REMIC I Regular Interest LTAA, Uncertificated REMIC I Regular Interest LTZZ and Uncertificated REMIC I Regular Interest LTP) and the denominator of which is the aggregate Uncertificated Principal Balance of each Uncertificated REMIC I Regular Interest (other than Uncertificated REMIC I Regular Interest LTAA and Uncertificated REMIC I Regular Interest LTP).

 

REMIC Provisions : Provisions of the federal income tax law relating to real estate mortgage investment conduits, which appear at Sections 860A through 860G of Subchapter M of Chapter 1 of the Code, and related provisions, and regulations promulgated thereunder, as the foregoing may be in effect from time to time as well as provisions of applicable state laws.

 

REMIC Regular Interest : Any Uncertificated REMIC I Regular Interest or Uncertificated REMIC II Regular Interest.

 

REO Disposition : The sale or other disposition of REO Property.

 

REO Disposition Proceeds : All amounts received with respect to an REO Property pursuant to Section 4.15.

 

REO Property : A Mortgaged Property acquired by the Servicer on behalf of the Issuing Entity through foreclosure or deed-in-lieu of foreclosure in connection with a defaulted Mortgage Loan.

 

Repurchase Price : With respect to any Mortgage Loan required to be purchased pursuant to this Agreement (other than pursuant to Section 13.1), an amount equal to the sum of (a) 100% of the Scheduled Principal Balance of the Mortgage Loan on the date of such purchase, (b) accrued interest thereon at the applicable Mortgage Rate from the date through which interest was last paid by the Mortgagor to the Due Date in the month in which the Repurchase Price is to be distributed to the Certificateholders, (c) any unreimbursed Advances and (d) any costs and damages incurred in connection with the violation by such Mortgage Loan of any predatory or anti-abusive lending law.

 

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Request for Release : The Request for Release submitted by the Servicer to the Trustee or the Custodian on behalf of the Trustee, in the form of Exhibit C .

 

Reserve Account : The trust account created and maintained by the Trustee pursuant to Section 10.2. The Reserve Account shall not be an asset of any REMIC formed under this Agreement.

 

Residual Certificates : The Class R Certificates and the Class RX 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 : With respect to:

 

(a) the Servicer, any officer of the Servicer with direct responsibility for the administration of this Agreement and any other officer to whom, with respect to a particular matter, such matter is referred due to such officer’s knowledge of an familiarity with the particular subject;

 

(b) the Trustee, any managing director, any director, vice president, any assistant vice president, any associate, any assistant secretary or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers who at such time shall be officers to whom, with respect to a particular matter, the matter is referred because of the officer’s knowledge of and familiarity with the particular subject and who has direct responsibility for the administration of this Agreement;

 

(c) the Securities Administrator, any vice president, any managing director, any director, any associate, any assistant vice president, any assistant secretary, any trust officer or any other officer or employee of the Securities Administrator customarily performing functions similar to those performed by any of the above designated officers and also to whom, with respect to a particular matter, such matter is referred because of such officer’s or employee’s knowledge of and familiarity with the particular subject and in each case who shall have direct responsibility for the administration of this Agreement; and

 

(d) the Master Servicer, any vice president, any managing director, any director, any associate, any assistant vice president, any assistant secretary, any trust officer or any other officer or employee of the Master Servicer customarily performing functions similar to those performed by any of the above designated officers and also to whom, with respect to a particular matter, such matter is referred because of such officer’s or employee’s knowledge of and familiarity with the particular subject and in each case who shall have direct responsibility for the administration of this Agreement.

 

Responsible Party :              ,              , and              , which are those Persons required to provide reports pursuant to Item 1122 of Regulation AB. Exhibit 1122 identifies the Servicing Criteria as to which the Responsible Parties have responsibility with respect to this transaction.

 

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Rolling Three Month Delinquency Rate : With respect to any Distribution Date, the average of the Delinquency Rates for each of the three (or a shorter period, in the case of the first and second Distribution Dates) immediately preceding months.

 

Rule 144A Letter : As defined in Section 11.2(b).

 

S&P : Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc.

 

Sarbanes-Oxley Act : The Sarbanes-Oxley Act of 2002, as amended from time to time.

 

Scheduled Monthly Payment : Each scheduled payment of principal and interest (or of interest only, if applicable) to be paid by the Mortgagor on a Mortgage Loan, as reduced (except where otherwise specified herein) by the amount of any related Debt Service Reduction or pursuant to the Relief Act (excluding all amounts of principal and interest that were due on or before the Cut-off Date whenever received) and, in the case of an REO Property, an amount equivalent to the Scheduled Monthly Payment that would have been due on the related Mortgage Loan if such Mortgage Loan had remained in existence.

 

Scheduled Principal Balance : With respect to any Mortgage Loan as of any date of determination will be generally equal to its outstanding principal balance as of the Cut-off Date, after giving effect to the principal portion of any Scheduled Monthly Payments due on or before such date, whether or not received, reduced by (a) the principal portion of all Scheduled Monthly Payments due on or before the Due Date in the Due Period immediately preceding such date of determination, whether or not received, and (b) all amounts allocable to unscheduled principal payments received on or before the last day of the Due Period immediately preceding such date of determination.

 

Securities Act : The Securities Act of 1933, as amended.

 

Securities Administrator : [ - ], or any successor or assigns under this Agreement.

 

Seller : MHC I, Inc., or any successor.

 

Senior Enhancement Percentage : For a Distribution Date, a fraction expressed, as a percentage, equal to (a) the sum of the aggregate Certificate Principal Balance of the Class M Certificates and the Overcollateralization Amount, in each case before taking into account any payments of principal to the Certificates on that Distribution Date, divided by (b) the aggregate Scheduled Principal Balance of the Mortgage Loans as of the last day of the related Due Period.

 

Senior Principal Distribution Amount : As of any Distribution Date on or after the Stepdown Date and as long as a Trigger Event is not in effect, the excess of (a) the aggregate Certificate Principal Balance of the Class A Certificates immediately prior to such Distribution Date over (b) the lesser of (i) the product of (1) [ - ]% and (2) the aggregate Scheduled Principal Balance of the Mortgage Loans as of the last day of the related Due Period and (ii) the amount by which the aggregate Scheduled Principal Balance of the Mortgage Loans as of the last day of the related Due Period exceeds the product of (1) [ - ]% and (2) the Cut-off Date Balance.

 

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Servicer : [ - ] and its successor in interest or assigns or any successor to the Servicer under this Agreement.

 

Servicer Event of Default : Any one of the conditions or circumstances enumerated in Section 6.5.

 

Servicer Remittance Amount : As defined in Section 4.24(a).

 

Servicer Remittance Date : The day in each calendar month on which the Servicer is required to remit payments to the Distribution Account, which is the      Business Day following the      day of such calendar month, commencing in                      .

 

Servicer Report : The reports provided by the Servicer to the Master Servicer and the Securities Administrator pursuant to Section 5.5

 

Servicing Advances : All customary, reasonable and necessary “out of pocket” costs and expenses (including reasonable attorneys’ fees and disbursements) other than Monthly Advances incurred prior to, on or after the Cut-off Date in the performance by the Servicer of its servicing obligations, including, but not limited to, the cost of (a) the inspection, maintenance, preservation, restoration and protection of any Mortgaged Property, (b) any enforcement or judicial proceedings, including foreclosures, in respect of a particular Mortgage Loan, including any expenses incurred in relation to any such proceedings that result from the Mortgage Loan being registered on the MERS® System, (c) the management (including reasonable fees in connection therewith) and liquidation of any REO Property, (d) compliance with the obligations under Section              and (e) obtaining any legal documentation required to be included in the Mortgage File and/or correcting any outstanding title issues ( i.e. , any lien or encumbrance on the Mortgaged Property that prevents the effective enforcement of the intended lien position) reasonably necessary for the Servicer to perform its obligations under this Agreement. Servicing Advances also include any reasonable “out-of-pocket” costs and expenses (including legal fees) incurred by the Servicer in connection with executing and recording instruments of satisfaction, deeds of reconveyance or an Assignment of Mortgage to the extent not recovered from the Mortgagor or otherwise payable under this Agreement.

 

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, the amount of the annual fee payable on account of servicing, which shall, for a period of one full month, be equal to one-twelfth of the product of (a) the Servicing Fee Rate and (b) the Scheduled Principal Balance of such Mortgage Loan as of the first day of the related Due Period. The Servicing Fee is payable solely from the interest portion (including recoveries with respect to interest from Liquidation Proceeds, Condemnation Proceeds and Insurance Proceeds of such Scheduled Monthly Payment collected by the Servicer, or as otherwise provided under Section 4.7.

 

Servicing Fee Rate : [ - ]% per annum.

 

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Servicing File : With respect to each Mortgage Loan, the file retained by the Servicer consisting of originals of all documents in the Mortgage File which are not delivered to the Custodian and copies of the Mortgage Loan Documents, the originals of which are delivered to the Custodian on behalf of the Trustee.

 

Servicing Officer : Any officer of a Servicer involved in or responsible for the administration and servicing of the Mortgage Loans whose name appears on a list of servicing officers furnished by the Servicer on the Closing Date to the Master Servicer upon request, as such list may from time to time be amended.

 

Startup Day : As defined in the Preliminary Statement.

 

Stepdown Date : The earlier to occur of (a) the Distribution Date on which the aggregate Certificate Principal Balance of the Class A Certificates is reduced to zero, and (b) the later to occur of (i) the Distribution Date in [ - ] or (ii) the first Distribution Date on which the Senior Enhancement Percentage is greater than or equal to [ - ]%.

 

Subcontractor : Any vendor, subcontractor or other Person that is not responsible for the overall servicing (as servicing is commonly understood by participants in the mortgage-backed securities market) of the Mortgage Loans but performs one or more discrete functions identified in Item 122(d) of Regulation AB with respect to the Mortgage Loans under the direction or authority of the Servicer or a Subservicer.

 

Subsequent Recovery : Any amount (net of reimbursable expenses) received on a Mortgage Loan subsequent to such Mortgage Loan being determined to be a Liquidated Mortgage Loan that resulted in a Realized Loss in a prior month. If Subsequent Recoveries are received, they will be included as part of the Principal Proceeds for the Distribution Date following the calendar month in which they are received and distributed in accordance with the priorities described herein. In addition, after giving effect to all distributions on a Distribution Date, the unpaid Applied Loss Amount for the Class M Certificates then outstanding with the highest distribution priority will be decreased by the amount of such Subsequent Recoveries until reduced to zero (with any remaining Subsequent Recoveries applied to reduce the Applied Loss Amount of the class with the next highest distribution priority), and the Certificate Principal Balance of such Class or Classes of Class M Certificates will be increased by the same amount.

 

Subservicer : Any Person that services the Mortgage Loans on behalf of the Servicer or any Subcontractor and is responsible for the performance (whether directly or through Subservicers or Subcontractors) of a substantial portion of the material servicing functions required to be performed by the Servicer under this Agreement that are identified in Item 1122(d) of Regulation AB.

 

Substituting Party : As defined in Section 2.10(a).

 

Substitution Adjustment Amount : As defined in Section 2.10(c).

 

Target Overcollateralization Amount : For any Distribution Date (a) prior to the Stepdown Date, an amount equal to [ - ]% of the Cut-off Date Balance. For any Distribution Date on or after the Stepdown Date, the lesser of (i) [ - ]% of the Cut-off Date Balance of the

 

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Mortgage Loans and (ii) [ - ]% of the aggregate Scheduled Principal Balance of the Mortgage Loans as of the last day of the related Due Period, subject to a floor equal to [ - ]% of the Cut-off Date Balance; provided , however , if a Trigger Event has occurred and is continuing on the related Distribution Date, the Target Overcollateralization Amount will be the same as the Target Overcollateralization Amount on the preceding Distribution Date.

 

Tax Matters Person : The person designated as “tax matters person” in the manner provided under Treasury regulation § 1.860F-4(d) and temporary Treasury regulation § 301.6231(a)(7)1T. Initially, the Tax Matters Person for REMICs I and II shall be the Holder of the Class R Certificates, and the Tax Matters Person for REMICs III and IV shall be the Holder of the Class RX Certificates. The Trustee should be appointed as agent of each such Tax Matters Person pursuant to Section 14.1(k) herein unless otherwise designated.

 

Termination Price : As defined in Section 13.1(a).

 

Transferor Certificate : As defined in Section 11.2(b).

 

Trigger Event : An event that is in effect on any Distribution Date on or after the Stepdown Date, if either (a) the Rolling Three Month Delinquency Rate as of the last day of the related Due Period equals or exceeds [ - ]% of the Senior Enhancement Percentage on such Distribution Date or (b) the Cumulative Realized Loss Percentage on such Distribution Date exceeds the applicable percentages set forth in the table below with respect to such Distribution Date:

 

 

Trust Fund : As defined in Section 2.5.

 

Trustee : [ - ] and, if a successor trustee is appointed hereunder, such successor.

 

Trust REMIC: Each REMIC created under the terms of this Agreement.

 

UCC : The Uniform Commercial Code as enacted in the relevant jurisdiction.

 

Uncertificated Interest: With respect to any REMIC Regular Interest for any Distribution Date, one month’s interest at the REMIC Remittance Rate applicable to such REMIC Regular Interest for such Distribution Date, accrued on the Uncertificated Principal thereof immediately prior to such Distribution Date. Uncertificated Interest in respect of any

 

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Uncertificated REMIC I Interest, and the Class C Interest shall accrue on the basis of a 360-day year consisting of twelve 30-day months. Uncertificated Interest with respect to each Distribution Date, as to any REMIC 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 otherwise covered and (b) the aggregate amount of any Relief Act Interest Shortfall, if any, allocated, in each case, to such REMIC Regular Interest. In addition, Uncertificated Interest with respect to each Distribution Date, as to any REMIC Regular Interest shall be reduced by Realized Losses, if any, allocated to such REMIC Regular Interest.

 

Uncertificated Principal Balance : With respect to the Class C Interest an amount equal to the excess, if any, of (A) the then aggregate Uncertificated Principal Balance of the Uncertificated REMIC I Regular Interests over (B) the then aggregate Certificate Principal Balance of the Class A Certificates, the Class M Certificates and the Class P Certificates then outstanding.

 

With respect to each other REMIC Regular Interest, the amount of any REMIC Regular Interest outstanding as of any date of determination. As of the Closing Date, the Uncertificated Principal Balance of each REMIC Regular Interest shall equal the amount set forth in the Preliminary Statement hereto as its initial Uncertificated Principal Balance. On each Distribution Date, the Uncertificated Principal Balance of each REMIC Regular Interest shall be reduced by all distributions of principal made on such REMIC Regular Interest on such Distribution Date and, if and to the extent necessary and appropriate, shall be further reduced on such Distribution Date by Realized Losses. The Uncertificated Principal Balance of REMIC I Regular Interest LTZZ shall be increased by interest deferrals as provided in Section 10.7. The Uncertificated Principal Balance of each REMIC Regular Interest shall never be less than zero.

 

Uncertificated REMIC I Pass-Through Rates : As of any Distribution Date, the weighted average of the Adjusted Net Mortgage Rates of the Mortgage Loans, weighted on the basis of the Uncertificated Principal Balance of such Uncertificated REMIC I Regular Interests for each such Distribution Date.

 

Uncertificated REMIC I Regular Interests : Uncertificated REMIC I Regular Interest LTAA, Uncertificated REMIC I Regular Interest LTA, Uncertificated REMIC I Regular Interest LTM1, Uncertificated REMIC I Regular Interest LTM2, Uncertificated REMIC I Regular Interest LTZZ and Uncertificated REMIC I Regular Interest LTP. Each such interest represents the beneficial ownership interests in REMIC I as a Regular Interest in REMIC I. Each REMIC I Regular Interest shall accrue interest at the related Uncertificated REMIC I Pass-Through Rate in effect from time to time, and shall be entitled to distributions of principal, subject to the terms and conditions hereof, in an aggregate amount equal to its initial Uncertificated Principal Balance as set forth in the Preliminary Statement hereto.

 

Uncertificated REMIC II Regular Interests : The Class C Interest and Class P Interest. Each such interest represents the beneficial ownership interests in REMIC II as a Regular Interest in REMIC II. Each REMIC II Regular Interest shall accrue interest at its related Pass-Through Rate in effect from time to time, and shall be entitled to distributions of principal, subject to the terms and conditions hereof, in an aggregate amount equal to its initial Uncertificated Principal Balance as set forth in the Preliminary Statement hereto.

 

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Underwriter’s Exemption : Any exemption listed in footnote 1 of, and amended by, PTE 2002-41 at 67 Fed. Reg. 54487 (August 22, 2002), or any substantially similar successor administrative exemption granted by the U.S. Department of Labor.

 

Underwriting Guidelines : Those underwriting guidelines employed by the Originator with respect to Mortgage Loans.

 

U.S. Person : (a) A citizen or resident of the United States, (b) a corporation created or organized in or under the laws of the United States, any state thereof or the District of Columbia, including an entity treated as a corporation for federal income tax purposes (c) a partnership (unless Treasury regulations are adopted that provide otherwise) created or organized in or under the laws of the United States, any state thereof or the District of Columbia, including an entity treated as a partnership for federal income tax purposes, none of the interests in which are owned, directly or indirectly through one or more intermediate entities, by a person that is not a U.S. Person within the meaning this paragraph, (d) an estate the income of which is includible in gross income for United States federal income tax purposes, regardless of its source, (e) a trust if a court within the United States is able to exercise primary supervision over the administration of such trust and one or more United States fiduciaries have the authority to control all substantial decisions of the trust (or to the extent provided in applicable Treasury regulations, certain trusts in existence on August 20, 1996 that are eligible to be treated as United States persons).

 

Voting Interests : The portion of the voting rights of all of the Certificates which is allocated to any Certificate. As of any date of determination, the Voting Interests shall be allocated 1% to the Residual Certificates, 1% to the Class P Certificates, and the balance among Holders of the Certificates in proportion to the Certificate Principal Balance of their respective Certificates on such date.

 

SECTION 1.2 Calculations With Respect to the Mortgage Loans.

 

Calculations required to be made pursuant to this Agreement with respect to any Mortgage Loan in the Trust Fund shall be made based upon current information as to the terms of the Mortgage Loans and reports of payments received from the Mortgagor on such Mortgage Loans provided by the Servicer to the Master Servicer and the Securities Administrator. Payments and distributions to be made by the Securities Administrator shall be based on information provided by the Servicer. Neither the Trustee, the Master Servicer nor the Securities Administrator shall be required to recompute, verify or recalculate the information supplied to it by the Servicer.

 

SECTION 1.3 Calculations With Respect to Accrued Interest.

 

All calculations of interest described herein with respect to any Class of Certificates, other than Class C Certificates, and the Uncertificated REMIC III Regular Interests (other than the Class C Interest), shall be made on the basis of an assumed 360-day year and the actual number of days in the related Interest Accrual Period. The Class C Certificates, the Class C Interest and the Uncertificated REMIC I and REMIC II Regular Interests shall accrue interest on the basis of an assumed 360-day year consisting of twelve 30-day months.

 

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SECTION 1.4 Rules of Construction.

 

Unless the context otherwise clearly requires:

 

(a) the definitions of terms herein shall apply equally to the singular and plural forms of the terms defined;

 

(b) whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms;

 

(c) the words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation;”

 

(d) the word “will” shall be construed to have the same meaning and effect as the word “shall;”

 

(e) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein);

 

(f) any reference herein to any Person, or to any Person in a specified capacity, shall be construed to include such Person’s permitted successors and assigns or such Person’s permitted successors in such capacity, as the case may be; and

 

(g) all references in this instrument to designated “Sections,” “clauses” and other subdivisions are to the designated Sections, clauses and other subdivisions of this instrument as originally executed, and the words “herein,” “hereof,” “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Section, clause or other subdivision.

 

ARTICLE II

CONVEYANCE OF MORTGAGE LOANS

 

SECTION 2.1 Conveyance of Mortgage Loans to the Depositor.

 

On the Closing Date, in exchange for the Certificates or the net proceeds thereof, the Seller does hereby sell, transfer, assign, or set over, deposit with and otherwise convey without recourse (except as provided herein), and the Depositor does hereby purchase, all right, title and interest of the Seller in and to (i) the Mortgage Loans listed on the Mortgage Loan Schedule, having a Cut-off Date Balance as set forth in such Mortgage Loan Schedule and (ii) the Purchase Agreement and the Assignment and Recognition Agreement. The Seller specifically reserves any right, title and interest in, to or under the Purchase Agreement to the extent it relates to any mortgage loans subject to the Purchase Agreement other than the Mortgage Loans. Notwithstanding the foregoing, it is understood that the Originator is not released from liability to the Seller for any breaches of any representations, warranties or covenants made by the Originator in the Purchase Agreement prior to the Closing Date regardless of when such breaches are discovered or made known.

 

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(a) The Depositor shall be entitled to (i) all Scheduled Monthly Payments of principal due after the Cut-off Date, (ii) all other recoveries of principal collected after the Cut-off Date (less scheduled payments of principal due on or before the Cut-off Date and collected after the Cut-off Date), (iii) all Scheduled Monthly Payments of interest due after the Cut-off Date (minus that portion of any such payment which is allocable to the period prior to the Cut-off Date) and (iv) all Prepayment Premiums. Scheduled Monthly Payments prepaid with respect to a Due Date after the Cut-off Date shall not be applied to the principal balance as of the Cut-off Date, but the Seller shall remit any such prepaid amounts to the Servicer for deposit into the Custodial Account for the benefit of the Depositor.

 

(b) In the case of Mortgage Loans that have been prepaid in full after the Cut-off Date and prior to the Closing Date, the Seller shall remit to the Servicer for deposit in the Custodial Account the portion of any amount so prepaid that is required to be deposited in the Custodial Account pursuant to Section 4.5.

 

(c) Upon the sale of the Mortgage Loans, the ownership of each Mortgage Note, the related Mortgage and the related Mortgage File shall vest immediately in the Depositor, and the ownership of all records and documents with respect to the related Mortgage Loan prepared by or which come into the possession of the Seller shall vest immediately in the Depositor and shall be retained and maintained by the Seller, in trust, at the will of the Depositor and only in such custodial capacity.

 

(d) The Seller shall deliver the Mortgage Loan Schedule, the Mortgage Loan File and Mortgage Loan Documents to be purchased on the related Closing Date to the Custodian at least three Business Days prior to such Closing Date.

 

SECTION 2.2 Conveyance of Mortgage Loans to the Issuing Entity.

 

(a) On the Closing Date, in exchange for the Certificates or the net proceeds thereof, the Depositor does hereby sell, transfer, assign, set over, deposit with and otherwise convey to the Issuing Entity, without recourse (except as otherwise provided herein), all right, title and interest of the Depositor in and to (i) the Mortgage Loans purchased by the Depositor from the Seller and (ii) the Purchase Agreement and the Assignment and Recognition Agreement, to the extent they relate to the Mortgage Loans.

 

(b) The Issuing Entity shall be entitled to all payments on the Mortgage Loans as provided in Section 2.1(b).

 

(c) Upon the issuance of the Certificates, the ownership of each Mortgage Note, the related Mortgage and the related Mortgage File shall vest immediately in the Issuing Entity, and the ownership of all records and documents with respect to the related Mortgage Loan prepared by or which come into the possession of the Seller shall vest immediately in the Issuing Entity and shall be retained and maintained by the Seller, in trust, at the will of the Issuing Entity and only in such custodial capacity. A

 

(d) In connection with such transfer and assignment of the Mortgage Loans, the Depositor does hereby deliver to, and deposit with, or cause to be delivered to and deposited with the Custodian, on behalf of the Trustee, for the benefit of the Certificateholders, the Mortgage

 

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File with respect to each Mortgage Loan, and the ownership of all records and documents with respect to the related Mortgage Loan prepared by or which come into the possession of the Depositor shall vest immediately in the Trustee for the benefit of the Certificateholders and shall be retained and maintained by the Depositor, in trust, at the will of the Trustee for the benefit of the Certificateholders and only in such custodial capacity.

 

SECTION 2.3 Assignment of Mortgage Loans.

 

(a) The Seller shall cause an Assignment of Mortgage with respect to each Mortgage Loan (other than a MERS Designated Mortgage Loan) to be completed in the form and substance acceptable for recording in the relevant jurisdiction, such assignment shall either be in blank or be endorsed to “[ - ], as Trustee of the FBR Securitization Trust 200    -    , Mortgage-Backed Certificates, Series 200    -    , without recourse,” on or prior to the Closing Date; provided, however , that such Assignments of Mortgage Loans need not be recorded unless and until the Trustee is advised by a Rating Agency that such Assignment of Mortgage is required to be recorded to protect the Trustee’s interest in the Mortgage Loans. Any such recordation of an Assignment of Mortgage shall be effected at the expense of the Seller.

 

(b) In connection with the assignment of any MERS Designated Mortgage Loan, the Seller agrees that, on or prior to the Closing Date, the Seller will cause the MERS ^® System to indicate that such Mortgage Loans have been assigned by the Seller to the Depositor which has assigned such Mortgage Loans to the Trustee in accordance with this Agreement for the benefit of the Certificateholders by including (or deleting, in the case of Mortgage Loans which are repurchased in accordance with this Agreement) in such computer files the code in the field that identifies the specific Trustee and the code in the field “Pool Field” that identifies the series of the Certificates for which such Mortgage Loans serve as collateral. The Seller further agrees that it will not, and will not permit the Servicer to, and each of the Servicer and the Master Servicer agrees that it will not, alter the codes referenced in this paragraph with respect to any MERS Designated Mortgage Loan during the term of this Agreement unless and until such MERS Designated Mortgage Loan is repurchased in accordance with the terms of this Agreement.

 

SECTION 2.4 Books and Records.

 

(a) The contents of each Servicing File are and shall be held in trust by the Servicer for the benefit of the Trustee on behalf of the Certificateholders. The Servicer shall take all necessary steps to ensure that the documents required to be included in the Servicing File are complete and shall maintain the Servicing File as required by this Agreement, Accepted Servicing Practices and applicable law. Possession of each Servicing File by the Servicer is at the will of the Trustee for the sole purpose of servicing the related Mortgage Loan and such retention and possession by the Seller is in a custodial capacity only. The Servicer shall release its custody of the contents of any Servicing File only in accordance with written instructions from the Trustee, unless such release is required as incidental to the Seller’s servicing of the Mortgage Loans or is in connection with the transfer of servicing or a repurchase of any Mortgage Loan.

 

(b) All original documents relating to the Mortgage Loans that are not delivered to the Custodian, to the extent delivered to the Servicer, are and shall be held by the Servicer in

 

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trust for the benefit of the Trustee on behalf of the Certificateholders. In the event that any such original document is required pursuant to the terms of this Section to be a part of a Mortgage File, such document shall be delivered promptly to the Custodian on behalf of the Trustee.

 

(c) Upon and after a sale of Mortgage Loans to the Trustee for the benefit of the Certificateholders, all proceeds arising out of the Mortgage Loans, as provided in Section 2.1(b) shall be received and held by the Servicer in trust for the benefit of the Trustee on behalf of the Certificateholders.

 

(d) Nothing in this Agreement shall be construed to constitute an assumption by the Trust Fund, the Trustee, the Servicer or the Certificateholders of any unsatisfied duty, claim or other liability on any Mortgage Loan or to any Mortgagor.

 

SECTION 2.5 Review of Documentation.

 

(a) On the Closing Date, the Custodian will execute and deliver to the Depositor, the Servicer and the Trustee an Initial Certification with respect to the Mortgage Loans. Based on its review and examination, and only as to the documents identified in the Initial Certification, the Custodian will acknowledge that (i) such documents appear regular on their face and relate to such Mortgage Loan and (ii) with respect to each MERS Designated Mortgage Loan, the MERS number on the Mortgage Loan Schedule matches the MERS number on the Mortgage for the related Mortgage File. The Custodian shall not be under any duty or obligation to inspect, review or examine such documents, instruments, certificates or other papers to determine that the same are genuine, enforceable, recordable or appropriate for the represented purpose or that they have actually been recorded in the real estate records or that they are other than what they purport to be on their face.

 

(b) Within 90 days after the Closing Date, the Custodian will execute and deliver to the Depositor, the Servicer, and the Trustee a Final Certification with any applicable exceptions noted therein. The Custodian shall (i) determine whether such documents are executed and endorsed, but shall be under no duty or obligation to inspect, review or examine any such documents, instruments, certificates or other papers to determine that the same are valid, binding, legally effective, properly endorsed, genuine, enforceable or appropriate for the represented purpose or that they have actually been recorded or are in recordable form or that they are other than what they purport to be on their face and (ii) with respect to each MERS Designated Mortgage Loan, certify that the MERS number on the Mortgage Loan Schedule matches the MERS number on the Mortgage for the related Mortgage File. The Custodian shall not have any responsibility for verifying the genuineness or the legal effectiveness of or authority for any signatures of or on behalf of any party or endorser.

 

(c) If in the course of the review described in paragraph (c) above, the Custodian discovers any document or documents constituting a part of a Mortgage File is missing, does not appear regular on its face ( i.e. , is mutilated, damaged, defaced, torn or otherwise physically altered) or appears to be unrelated to the Mortgage Loans identified in the Mortgage Loan Schedule, as applicable (each, a “ Material Defect ”), the Custodian shall identify the Mortgage Loan to which such Material Defect relates in the Final Certification. Within 90 days of its receipt of such notice, the Seller shall be required to cure such Material Defect (and, in such

 

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event, the Seller shall provide the Trustee and the Custodian with an Officer’s Certificate confirming that such cure has been effected). If the Seller does not effect a cure within such 90-day period, it shall repurchase the related Mortgage Loan from the Trust Fund at the Repurchase Price; provided , however , that the Seller may, in lieu of repurchasing a Mortgage Loan, substitute for such Mortgage Loan a Qualified Substitute Mortgage Loan subject to the provisions of Section 2.10, provided that such substitution occurs within two years of the Closing Date. The failure of the Trustee to deliver, or cause the Custodian to deliver, the Final Certification within 90 days from the Closing Date shall not affect or relieve the Seller of its obligation to repurchase any Mortgage Loan pursuant to this Section 2.5 or any other Section of this Agreement requiring the repurchase of Mortgage Loans from the Trust Fund.

 

SECTION 2.6 Execution and Delivery of Certificates.

 

The Trustee acknowledges the transfer and assignment to it of the assets conveyed and sold to it hereunder (the “ Trust Fund ”). Concurrently with such transfer and assignment, the Securities Administrator has executed the Certificates in authorized denominations evidencing directly or indirectly the entire ownership of the Trust Fund, and, upon the written order of the Depositor, has authenticated the same Certificates. The Trustee agrees to hold the Trust Fund and exercise the rights referred to above for the benefit of all present and future Holders of the Certificates and to perform the duties set forth in this Agreement in accordance with the standard of care set forth herein.

 

SECTION 2.7 Representations and Warranties with Respect to the Mortgage Loans.

 

(a) As of the Closing Date, the Originator will make certain representations and warranties relating to the Mortgage Loans pursuant to the terms of the Assignment and Recognition Agreement. The Seller hereby makes those representations and warranties as to the Mortgage Loans set forth in Schedule B hereto as of the Closing Date and, with respect to any Qualified Substitute Mortgage Loan originated by the Originator, as of the date of substitution of such Qualified Substitute Mortgage Loan.

 

(b) Upon discovery or receipt of written notice by the Seller, the Depositor, the Servicer, the Master Servicer, the Securities Administrator or the Trustee that the Originator has breached any representation or warranty set forth in the Assignment and Recognition Agreement (regardless of whether the Seller has made a substantially similar representation or warranty as set forth on Schedule B ), in respect of a Mortgage Loan that materially and adversely affects the value of such Mortgage Loan or the interest therein of the Certificateholders, the Seller, the Depositor, the Master Servicer, the Securities Administrator or the Trustee, as the case may be, promptly shall notify the Trustee in writing of such breach, and the Trustee shall enforce the Originator’s obligations under the Assignment and Recognition Agreement to repurchase the related Mortgage Loan.

 

(c) Upon discovery or receipt of written notice by the Depositor, the Servicer, the Master Servicer, the Securities Administrator or the Trustee that the Seller has breached any representation or warranty set forth on Schedule B in respect of a Mortgage Loan that materially and adversely affects the value of such Mortgage Loan or the interest therein of the

 

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Certificateholders, the Depositor, the Servicer, the Master Servicer, the Securities Administrator or the Trustee, as the case may be, promptly shall notify the Trustee in writing of such breach, and the Trustee shall enforce the Seller’s obligations under this Agreement and cause the Seller to repurchase or, subject to Section 2.10, substitute the related Mortgage Loan from the Trust Fund on or prior to the Determination Date following the expiration of the 90-day period following the earlier of the date on which the breach was discovered or notice of the breach was received by the Trustee; provided , however , that, if such breach cannot reasonably be cured within such 90-day period, subject to Section 2.7(e) below, if the Seller shall have commenced to cure such breach within such 90-day period, the Seller shall be permitted to proceed thereafter diligently and expeditiously to cure the breach within an additional 90-day period. Without limiting the foregoing, the Seller’s breach of a representation or warranty contained in clauses [(b)] through [(k)], inclusive, of Schedule B , shall be deemed to materially and adversely affect the interest of the Certificateholders, and shall require a repurchase or substitution as provided herein. In the event that the breach relates to a representation or warranty made by the Originator under the terms of the Assignment and Recognition Agreement and the Seller as set forth on Schedule B , the Trustee shall first enforce the Originator’s obligations under the Assignment and Recognition Agreement regarding repurchase before seeking satisfaction from the Seller pursuant to its obligations hereunder; provided , however , if such Originator indicates in writing to the Trustee that it does not intend to fulfill its obligations, the Trustee may immediately pursue its remedies against the Seller.

 

(d) It is understood and agreed that the obligations of the Seller to cure, repurchase or 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 available to the Trustee on behalf of the Certificateholders and the Certificateholder against such party respecting such omission, defect or breach. If the Seller is not a member of MERS at the time it repurchases a Mortgage Loan and the Mortgage is registered on the MERS ^® System, the Trustee shall cause the Seller, at the Seller’s own expense and without any right of reimbursement, to cause MERS to execute and deliver an assignment of the Mortgage in recordable form to transfer the Mortgage from MERS to the Seller and to cause such Mortgage to be removed from registration on the MERS ^® System in accordance with the MERS rules and regulations.

 

(e) Upon discovery by the Depositor or the Trustee that any Mortgage Loan does not constitute a “qualified mortgage” within the meaning of Section 860G(a)(3) and the related REMIC provisions of the Code, the party discovering such fact shall promptly (and in any event within five Business Days of discovery) give written notice thereof to the other parties. In connection therewith, the Depositor shall, or shall cause the Seller to repurchase or, subject to the limitations set forth in Section 2.10, substitute one or more Qualified Substitute Mortgage Loans for the affected Mortgage Loan within 75 days of the earlier of discovery or receipt of such notice with respect to such affected Mortgage Loan. Any such repurchase or substitution shall be made in the same manner as set forth above. The Trustee shall re-convey to the repurchasing 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.

 

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SECTION 2.8 Optional Repurchase.

 

The Seller may, at its option, repurchase a Mortgage Loan (i) that is 90 or more days delinquent or (ii) the related Mortgaged Property of which has suffered material damage (evidence of such determination to be delivered in writing to the Trustee and the Master Servicer in the form and substance satisfactory to the Servicer, the Trustee and the Master Servicer prior to purchase); provided that the Seller may not acquire more than [ - ]% of the Mortgage Loans by aggregate Cut-off Date Balance pursuant to this Section 2.8.

 

SECTION 2.9 Repurchase of Mortgage Loans.

 

(a) The purchase price for any Mortgage Loan repurchased by the Seller pursuant to this Agreement shall be the Repurchase Price for such Mortgage Loan. In connection with the repurchase of any Mortgage Loan by the Originator, the Seller will remit to the Securities Administrator for deposit into the Distribution Account the excess, if any, of the Repurchase Price for such Mortgage Loan over the amount payable by the Originator. The Repurchase Price for any Mortgage Loan repurchased pursuant to this Agreement shall be deposited into the Distribution Account.

 

(b) The Custodian, upon receipt of a Request for Release from the Seller (which Request for Release shall include a certification by the Seller of the repurchase and the remittance of the Repurchase Price to the Securities Administrator for deposit into the Distribution Account), shall release to the Seller or the Originator, as applicable, the related Mortgage File. The Trustee or its authorized designee shall execute and deliver such instruments of transfer or assignment, in each case without recourse, representation or warranty, as the Seller or Originator may furnish to the Trustee or the Custodian and as shall be necessary to vest in such party any Mortgage Loan released pursuant hereto. None of the Trustee, the Securities Administrator, the Master Servicer or the Custodian shall have any responsibility for determining the sufficiency of such assignment for its intended purpose, and upon such release, the Trustee and the Custodian shall have no further responsibility with regard to such Mortgage File.

 

SECTION 2.10 Substitution of Mortgage Loans.

 

(a) In lieu of repurchasing any such Mortgage Loan as provided above, the Seller (as such, the “ Substituting Party ”) may cause such Mortgage Loan to be removed from the Trust Fund (in which case it shall become a “ Deleted Mortgage Loan ”) and substitute one or more Qualified Substitute Mortgage Loans in the manner and subject to the limitations of this Section 2.10. Any substitution of Qualified Substitute Mortgage Loans for Deleted Mortgage Loans made pursuant to this Section 2.10 must be effected prior to the last Business Day that is within two years after the Closing Date. As to any Deleted Mortgage Loan for which the Substituting Party substitutes a Qualified Substitute Mortgage Loan or Loans, such substitution shall be effected by delivering to the Custodian, for such Qualified Substitute Mortgage Loan or Loans, the Mortgage Note, the Mortgage, the assignment to the Substituting Party, and such other documents and agreements, with all necessary endorsements thereon, together with an Officers’ Certificate stating that each such Qualified Substitute Mortgage Loan satisfies the definition thereof and specifying the Substitution Adjustment Amount (as described below), if any, in connection with such substitution. The Custodian shall acknowledge receipt for such

 

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Qualified Substitute Mortgage Loan and, within 45 days thereafter, shall review such Mortgage Files and deliver to the Substituting Party, the Trustee and the Depositor, with respect to such Qualified Substitute Mortgage Loans, a certification substantially in the form of a revised Initial Certification, with any exceptions noted thereon. Within 90 days of the date of substitution, the Custodian shall deliver to the Substituting Party, the Trustee and the Depositor a certification substantially in the form of a revised Final Certification, with respect to such Qualified Substitute Mortgage Loans, with any exceptions noted thereon. Scheduled Monthly Payments due with respect to Qualified Substitute Mortgage Loans in the month of substitution shall not be included as part of the Trust Fund and shall be retained by the Substituting Party. For the month of substitution, payments to the Certificateholders shall reflect the collections and recoveries in respect of such Deleted Mortgage Loan in the related Due Period and the Substituting Party shall thereafter be entitled to retain all amounts subsequently received in respect of such Deleted Mortgage Loan. Upon such substitution, such Qualified Substitute Mortgage Loan shall constitute part of the Trust Fund and shall be subject in all respects to the terms of this Agreement as of the date of substitution.

 

(b) The Depositor shall amend the related Mortgage Loan Schedule to reflect the removal of such Deleted Mortgage Loan and the substitution of the Qualified Substitute Mortgage Loan or Loans and the Seller shall deliver the amended Mortgage Loan Schedule to the Trustee, the Master Servicer, the Securities Administrator, the Custodian and the Servicer. Upon such substitution, the Qualified Substitute Mortgage Loan shall be subject to the terms of this Agreement in all respects, and the Seller shall be deemed to have made with respect to such Qualified Substitute Mortgage Loan, as of the date of substitution, the representations and warranties made pursuant to Section 2.7 with respect to such Mortgage Loan.

 

(c) For any month in which any Substituting Party substitutes one or more Qualified Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the Seller shall deposit the excess (each, a “ Substitution Adjustment Amount ”), if any, by which the aggregate Scheduled Principal Balances of all such Deleted Mortgage Loans exceeds the aggregate Scheduled Principal Balances of the Qualified Substitute Mortgage Loans replacing such Deleted Mortgage Loans, together with (i) amounts specified in clause (c) of the definition of Repurchase Price and (ii) one month’s interest on such excess amount at the applicable Net Mortgage Rate. On the date of such substitution, the Seller shall deliver or cause to be delivered to the Securities Administrator for deposit in the Distribution Account an amount equal to the related Substitution Adjustment Amount, if any, and the Custodian, upon receipt of the related Qualified Substitute Mortgage Loan or Loans and a Request for Release from the Seller, which includes a written certification of the Seller of delivery of such amount to the Securities Administrator, shall release to the Substituting Party the related Mortgage File or Files. The Custodian shall execute and deliver such instruments of transfer or assignment, in each case without recourse, representation or warranty, as the Substituting Party shall deliver to the Trustee with respect to any Deleted Mortgage Loan to be released pursuant hereto.

 

(d) In addition, the Trustee shall cause the Substituting Party to obtain at its own expense and deliver to the Trustee an Opinion of Counsel to the effect that such substitution (either specifically or as a class of transactions) shall not cause (a) any federal tax to be imposed on the Trust Fund, including without limitation, any federal tax imposed on “prohibited transactions” under Section 860F(a)(l) of the Code or on “contributions after the Startup Date”

 

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under Section 860G(d)(l) of the Code, or (b) any REMIC created hereunder to fail to qualify as a REMIC at any time that any Certificate is outstanding. If such Opinion of Counsel can not be delivered, then such substitution may only be effected at such time as the required Opinion of Counsel can be given.

 

SECTION 2.11 Granting Clause.

 

(a) It is intended that the conveyance of the Mortgage Loans by the Seller to the Depositor and by the Depositor to the Trustee for the benefit of the Certificateholders, as provided for in Sections 2.1 and 2.2, be construed as a sale of the Mortgage Loans and other assets in the Trust Fund by the Seller to the Depositor and by the Depositor to the Trustee for the benefit of the Certificateholders. Further, it is not intended that any such conveyances be deemed a pledge of the Mortgage Loans by the Seller to the Depositor to secure a debt or other obligation of the Seller, or a pledge of the Mortgage Loans by the Depositor to the Trustee for the benefit of the Certificateholders to secure a debt or other obligation of the Depositor. However, in the event that the Mortgage Loans are held to be property of the Seller or the Depositor or if for any reason this Agreement is held or deemed to create a security interest in the Mortgage Loans and other assets in the Trust Fund, then it is intended that:

 

(i) this Agreement shall also be deemed to be a security agreement within the meaning of Articles 8 and 9 of the UCC;

 

(ii) the conveyances provided for in Sections 2.1 and 2.2 shall be deemed a grant by the Seller to the Depositor, and by the Depositor to the Trustee for the benefit of the Certificateholders, as the case may be, of (1) a security interest in all of the Seller’s right and Depositor’s right, as applicable, (including the power to convey title thereto), title and interest, whether now owned or hereafter acquired, in and to (A) the Mortgage Loans, including the Mortgage Notes, the Mortgages, any related insurance policies and all other documents in the related Mortgage Files, (B) all amounts payable pursuant to the Mortgage Loans in accordance with the terms thereof and (C) any and all general intangibles consisting of, arising from or relating to any of the foregoing, and all proceeds of the conversion, voluntary or involuntary, of the foregoing into cash, instruments, securities or other property, including without limitation all Liquidation Proceeds, all Insurance Proceeds and all amounts from time to time held or invested in the Distribution Account and the Custodial Account, whether in the form of cash, instruments, securities or other property and (2) an assignment by the Seller to the Depositor and by the Depositor to the Trustee for the benefit of the Certificateholders of any security interest in any and all of the Seller’s and Depositor’s right (including the power to convey title thereto), title and interest, whether now owned or hereafter acquired, in and to the property described in the foregoing clauses (1)(A) through (C);

 

(iii) the possession by the Trustee, the Custodian or any other agent of the Trustee of Mortgage Notes, and such other items of property as constitute instruments, money, negotiable documents or chattel paper shall be deemed to be “possession by the secured party,” or possession by a purchaser or a person designated by such secured party, for purposes of perfecting the security interest pursuant to the UCC and any other UCC (including, without limitation, Sections 9-313, 8-313 or 8-321 thereof); and

 

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(iv) notifications to persons holding such property, and acknowledgments, receipts or confirmations from persons holding such property, shall be deemed notifications to, or acknowledgments, receipts or confirmations from, financial intermediaries, bailees or agents (as applicable) of the Issuing Entity for the purpose of perfecting such security interest under applicable law.

 

(b) The Seller and the Depositor shall, to the extent consistent with this Agreement, take such reasonable actions as may be necessary to ensure that, if this Agreement were deemed to create a security interest in the Mortgage Loans and the other property of the Trust Fund, such security interest would be deemed to be a perfected security interest of first priority under applicable law and will be maintained as such throughout the term of this Agreement. Without limiting the generality of the foregoing, the Seller and the Depositor shall prepare and file any UCC financing statements that are necessary to perfect the Depositor’s and the Trustee’s security interest in or lien on the Mortgage Loans, as evidenced by an Officer’s Certificate of the Seller and the Depositor, and furnish a copy of each such filed financing statement to the Trustee. The Seller and the Depositor shall prepare and file, at the expense of the Trust Fund, all filings necessary to maintain the effectiveness of any original filings necessary under the relevant UCC to perfect the Trustee’s security interest in or lien on the Mortgage Loans for the benefit of the Certificateholders, including without limitation (i) continuation statements, and (ii) to the extent that a Responsible Officer of the Depositor has received written notice of such change or transfer, such other statements as may be occasioned by (A) any change of name of the Seller, the Depositor or the Trustee, (B) any change of location of the domicile or the chief executive office of the Seller or the Depositor, or (C) any transfer of any interest of the Seller or the Depositor in any Mortgage Loan.

 

(c) Neither the Seller nor the Depositor shall organize under the law of any jurisdiction other than the State under which each is organized as of the Closing Date (whether changing its jurisdiction of organization or organizing under an additional jurisdiction) without giving 30 days prior written notice of such action to the Servicer and the Trustee. Before effecting such change, each of the Seller or the Depositor proposing to change its jurisdiction of organization shall prepare and file in the appropriate filing office any financing statements or other statements necessary to continue the perfection of the interests of its transferees, including the Trustee for the benefit of the Certificateholders, in the Mortgage Loans.

 

(d) Neither the Seller nor the Depositor shall take any action inconsistent with the sale by the Seller or the Depositor of its right, title and interest in and to the Mortgage Loans or Trust Fund and shall indicate or shall cause to be indicated in its records and records held on its behalf that ownership of each Mortgage Loan and the other property of the Trust Fund is held by the Trustee for the benefit of the Certificateholders. In addition, the Seller and the Depositor shall respond to any inquiries from third parties with respect to ownership of a Mortgage Loan or any other property of the Trust Fund by stating that it is not the owner of such Mortgage Loan and that ownership of such Mortgage Loan or other property of the Trust Fund is held by the Trustee for the benefit of the Certificateholders.

 

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ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

SECTION 3.1 Representations and Warranties of the Seller.

 

The Seller hereby represents and warrants to the other parties hereto as of the Closing Date that:

 

(a) The Seller has been duly organized and is validly existing as a corporation in good standing under the laws of Delaware, with full power and authority to own its assets and conduct its business as presently being conducted.

 

(b) The Seller has the full corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and the execution, delivery and performance of this Agreement (including all instruments of transfer to be delivered pursuant to this Agreement) by the Seller and the consummation of the transactions contemplated hereby have been duly and validly authorized.

 

(c) This Agreement constitutes a legal, valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors’ rights in general and except as such enforceability may be limited by general principles of equity (whether considered in a proceeding at law or in equity).