Exhibit 10.1
STRUCTURED ASSET MORTGAGE INVESTMENTS II INC.
DEPOSITOR
WELLS FARGO BANK, NATIONAL ASSOCIATION,
TRUSTEE
AND
EMC MORTGAGE CORPORATION
SERVICER, SPONSOR AND COMPANY
POOLING AND SERVICING AGREEMENT
DATED AS OF OCTOBER 1, 2006
STRUCTURED ASSET MORTGAGE INVESTMENTS II INC.
Bear Stearns Mortgage Funding Trust 2006-AR3
Mortgage Pass-Through Certificates, Series 2006-AR3
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS................................................................................2
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF
CERTIFICATES...........................59
Section 2.01.
Conveyance of Mortgage Loans to
Trustee..........................................59
Section 2.02.
Acceptance of Mortgage Loans by
Trustee..........................................61
Section 2.03.
Assignment of Interest in the Mortgage Loan Purchase
Agreement...................63
Section 2.04.
Substitution of Mortgage
Loans...................................................65
Section 2.05.
Issuance of
Certificates.........................................................66
Section 2.06.
Representations and Warranties Concerning the
Depositor..........................67
Section 2.07.
Reserved.........................................................................68
Section 2.08.
Purposes and Powers of the
Trust.................................................68
ARTICLE III
ADMINISTRATION AND SERVICING OF MORTGAGE
LOANS............................................68
Section 3.01.
Servicer to Act as
Servicer......................................................68
Section 3.02.
REMIC-Related
Covenants..........................................................70
Section 3.03.
Monitoring of
Subservicers.......................................................70
Section 3.04.
Fidelity
Bond....................................................................71
Section 3.05.
Power to Act;
Procedures.........................................................71
Section 3.06.
Due-on-Sale Clauses; Assumption
Agreements.......................................72
Section 3.07.
Release of Mortgage
Files........................................................73
Section 3.08.
Documents, Records and Funds in Possession of Servicer To Be
Held for
Trustee.................................................................74
Section 3.09.
Standard Hazard Insurance and Flood Insurance
Policies...........................75
Section 3.10.
Presentment of Claims and Collection of
Proceeds.................................76
Section 3.11.
Maintenance of the Primary Mortgage Insurance
Policies...........................76
Section 3.12.
Trustee to Retain Possession of Certain Insurance Policies and
Documents........................................................................77
Section 3.13.
Reaization Upon Defaulted Mortgage
Loans.........................................77
Section 3.14.
Compensation for the
Servicer....................................................78
Section 3.15.
REO
Property.....................................................................78
Section 3.16.
Annual Statement as to Compliance; Annual
Certification..........................80
Section 3.17.
Assessments of Compliance and Attestation
Reports................................81
Section 3.18.
Reports Filed with Securities and Exchange
Commission............................82
Section 3.19.
UCC..............................................................................89
Section 3.20.
Optional Purchase of Defaulted Mortgage
Loans....................................89
Section 3.21.
Books and
Records................................................................90
Section 3.22.
Intention of the Parties and
Interpretation......................................90
ARTICLE IV
ACCOUNTS..................................................................................91
Section 4.01.
Custodial
Account................................................................91
Section 4.02.
Permitted Withdrawals and Transfers from the Custodial
Account...................92
Section 4.03.
Distribution
Account.............................................................93
Section 4.04.
Permitted Withdrawals and Transfers from the Distribution
Account................94
Section 4.05.
Adjustable Rate Supplemental
Fund................................................95
Section 4.06.
Statements to the
Trustee........................................................96
Section 4.07.
Reserved.........................................................................97
Section 4.08.
Reserve
Fund.....................................................................97
Section 4.09.
Class XP Reserve
Account.........................................................99
Section 4.10.
Final Maturity Reserve
Account...................................................99
ARTICLE V
CERTIFICATES.............................................................................101
Section 5.01.
Certificates....................................................................101
Section 5.02.
Registration of Transfer and Exchange of
Certificates...........................108
Section 5.03.
Mutilated, Destroyed, Lost or Stolen
Certificates...............................111
Section 5.04.
Persons Deemed
Owners...........................................................111
Section 5.05.
Transfer Restrictions on Residual
Certificates..................................112
Section 5.06.
Restrictions on Transferability of
Certificates.................................113
Section 5.07.
ERISA
Restrictions..............................................................113
Section 5.08.
Rule 144A
Information...........................................................114
ARTICLE VI
PAYMENTS TO
CERTIFICATEHOLDERS...........................................................115
Section 6.01.
Distributions on the
Certificates...............................................115
Section 6.02.
Allocation of Losses and Subsequent
Recoveries..................................124
Section 6.03.
Payments........................................................................125
Section 6.04.
Statements to
Certificateholders................................................125
Section 6.05.
Monthly
Advances................................................................128
Section 6.06.
Compensating Interest
Payments..................................................129
Section 6.07.
Distributions on REMIC Regular
Interests........................................129
ARTICLE VII
THE
SERVICER.............................................................................130
Section 7.01.
Liabilities of the
Servicer.....................................................130
Section 7.02.
Merger or Consolidation of the
Servicer.........................................130
Section 7.03.
Indemnification of the
Trustee..................................................130
Section 7.04.
Limitations on Liability of the Servicer and
Others.............................131
Section 7.05.
Servicer Not to
Resign..........................................................132
Section 7.06.
Successor
Servicer..............................................................132
Section 7.07.
Sale and Assignment of
Servicing................................................132
ARTICLE VIII
DEFAULT..................................................................................133
Section 8.01.
Events of
Default...............................................................133
Section 8.02.
Trustee to Act; Appointment of
Successor........................................135
Section 8.03.
Notification to
Certificateholders..............................................136
Section 8.04.
Waiver of
Defaults..............................................................136
Section 8.05.
List of
Certificateholders......................................................136
ARTICLE IX
CONCERNING THE
TRUSTEE...................................................................137
Section 9.01.
Duties of
Trustee...............................................................137
Section 9.02.
Certain Matters Affecting the
Trustee...........................................139
Section 9.03.
Trustee Not Liable for Certificates or Mortgage
Loans...........................140
Section 9.04.
Trustee May Own
Certificates....................................................141
Section 9.05.
Trustee's Fees and
Expenses.....................................................141
Section 9.06.
Eligibility Requirements for
Trustee............................................141
Section 9.07.
Insurance.......................................................................141
Section 9.08.
Resignation and Removal of the
Trustee..........................................142
Section 9.09.
Successor
Trustee...............................................................142
Section 9.10.
Merger or Consolidation of
Trustee..............................................143
Section 9.11.
Appointment of Co-Trustee or Separate
Trustee...................................143
Section 9.12.
Federal Information Returns and Reports to Certificateholders;
REMIC Administration; Grantor Trust
Administration..............................144
ARTICLE X
TERMINATION..............................................................................146
Section 10.01.
Termination Upon Repurchase by the Depositor or its Designee or
Liquidation of the Mortgage
Loans...............................................146
Section 10.02.
Additional Termination
Requirements.............................................149
ARTICLE XI
MISCELLANEOUS
PROVISIONS.................................................................150
Section 11.01.
Intent of
Parties...............................................................150
Section 11.02.
Amendment.......................................................................150
Section 11.03.
Recordation of
Agreement........................................................151
Section 11.04.
Limitation on Rights of
Certificateholders......................................151
Section 11.05.
Acts of
Certificateholders......................................................152
Section 11.06.
Governing
Law...................................................................153
Section 11.07.
Notices.........................................................................153
Section 11.08.
Severability of
Provisions......................................................154
Section 11.09.
Successors and
Assigns..........................................................154
Section 11.10.
Article and Section
Headings....................................................154
Section 11.11.
Counterparts....................................................................154
Section 11.12.
Notice to Rating
Agencies.......................................................154
Section 11.13.
Use of Subservicers and
Subcontractors..........................................155
EXHIBITS
Exhibit A-1
-
Form of Class A Certificates
Exhibit A-2
-
Reserved
Exhibit A-3
-
Form of Class B Certificates
Exhibit A-4
-
Form of Class B-IO Certificates
Exhibit A-5
-
Form of Class R Certificates
Exhibit A-6
-
Form of Class R-X Certificate
Exhibit A-7
-
Form of Class X Certificate
Exhibit A-8
-
Form of Class XP Certificate
Exhibit B
-
Mortgage Loan Schedule
Exhibit C
-
Reserved
Exhibit D
-
Request for Release of Documents
Exhibit E
-
Form of Affidavit pursuant to Section 860E(e)(4)
Exhibit F-1
-
Form of Investment Letter (Non-Rule 144A)
Exhibit F-2
-
Form of Rule 144A Investment Representation
Exhibit F-3
-
Form of Transferor Representation Letter
Exhibit G
-
Form of Custodial Agreement
Exhibit H
-
Form of Mortgage Loan Purchase Agreement
Exhibit I
-
Form of Trustee Limited Power of Attorney
Exhibit J
-
Reserved
Exhibit K
-
Loan Level Format for Tape Input, Servicer Period Reporting
Exhibit L
-
Reporting Data for Defaulted Loans
Exhibit M
-
Swap Agreements
Exhibit N
-
Form of Cap Contracts
Exhibit O
-
Reserved
Exhibit P
Servicing Criteria to be Addressed in Assessment of Compliance
Exhibit Q-1
-
Form of Servicer Back-Up Certification
Exhibit Q-2
-
Form of Trustee Back-Up Certification
Exhibit R
-
Form 10-D, Form 8-K and Form 10-K Reporting Responsibility
Exhibit S
-
Additional Disclosure Information
Exhibit T
-
Form of Servicer Certification
SCHEDULES
Schedule A
-
Coupon Strip Reserve Account Schedule
POOLING AND SERVICING AGREEMENT
Pooling and Servicing
Agreement
dated as of October 1, 2006,
among
Structured
Asset Mortgage
Investments II Inc., a Delaware
corporation,
as depositor (the "Depositor"),
Wells Fargo Bank, National
Association,
a banking
association
organized under the laws of the United States, not in its
individual
capacity
but solely as trustee
(the
"Trustee")
and EMC
Mortgage
Corporation,
as
servicer
(in such
capacity,
the
"Servicer"),
as company (in such
capacity,
the
"Company" or "EMC") and, as sponsor (in
such capacity, the "Sponsor").
PRELIMINARY STATEMENT
On or prior to the Closing
Date,
the
Depositor
acquired the Mortgage
Loans from the Sponsor.
On the Closing Date,
the Depositor
will sell the Mortgage
Loans and certain other property to the Trust
Fund and
receive in
consideration
therefor
Certificates
evidencing
the entire
beneficial
ownership
interest in the Trust Fund.
The
Trustee on behalf of the Trust shall make an election
for the assets
constituting
REMIC I
to be treated
for
federal
income tax
purposes
as a REMIC.
On the
Startup
Day,
the REMIC I Regular
Interests will be designated "regular interests" in such REMIC.
The Trustee on behalf of the Trust shall make an election
for the assets
constituting
REMIC II
to be treated
for
federal
income tax
purposes as a REMIC.
On the
Startup
Day,
the REMIC II Regular
Interests will be designated "regular interests" in such REMIC.
The Trustee on behalf of the Trust shall make an election for the
assets
constituting
REMIC III
to be treated
for federal
income tax
purposes as a REMIC.
On the
Startup
Day,
the REMIC III Regular
Interests will be designated "regular interests" in such REMIC.
The Trustee on behalf of the Trust shall make an election
for the assets
constituting
REMIC IV
to be treated
for
federal
income tax
purposes as a REMIC.
On the
Startup
Day,
the REMIC IV Regular
Interests will be designated the "regular interests" in such REMIC.
The Class R
Certificates will evidence ownership of the "residual
interest" in each of REMIC I,
REMIC II and REMIC III. The Class R-X
Certificates
will evidence
ownership of the
"residual
interest"
in REMIC IV.
The Group I Mortgage
Loans will have an
Outstanding
Principal
Balance as of the Cut-off Date,
after
deducting all
Scheduled
Principal
due on or before the Cut-off
Date,
of
$433,101,502.12.
The
Group II
Mortgage
Loans
will have an
Outstanding
Principal
Balance
as of the
Cut-off
Date,
after
deducting all Scheduled Principal due on or before the Cut-off
Date, of $378,339,472.62.
In consideration of the mutual
agreements
herein contained,
the Depositor,
the Servicer,
the
Sponsor, the Company and the Trustee agree as follows:
ARTICLE I
Definitions
Whenever used in this Agreement,
the following
words and phrases,
unless
otherwise
expressly
provided or unless the context otherwise requires, shall have the
meanings specified in this Article.
2006-AR3 REMIC: Any of REMIC I, REMIC II, REMIC III and REMIC IV.
Accepted
Servicing
Practices:
The
procedures,
including
prudent
collection
and
loan
administration
procedures,
and the standard of care (i)
employed by prudent
mortgage
servicers
which
service
mortgage loans of the same type as the Mortgage Loans in the
jurisdictions
in which the related
Mortgage
Properties
are
located or (ii) in
accordance
with the Fannie Mae Guide or Freddie Mac Guide,
subject to any variances
negotiated with Fannie Mae or Freddie Mac and subject to the
express
provisions
of this
Agreement.
Such standard of care shall not be lower than that the Servicer
customarily
employs
and exercises in servicing and
administering
similar
mortgage loans for its own account and shall be in
full compliance with all federal, state, and local laws,
ordinances, rules and regulations.
Account:
The
Custodial
Account,
the
Adjustable
Rate
Supplemental
Fund,
the
Distribution
Account,
the Reserve Fund, the Final Maturity
Reserve
Account or the Class XP Reserve
Account,
as the
context may require.
Actual Monthly Payments:
For any Mortgage Loan and each Due Period,
the actual monthly payments
of principal and interest received during such month on such
Mortgage Loan.
Additional Disclosure:
As defined in Section 3.18(a)(v).
Additional Form 10-D Disclosure:
As defined in Section 3.18(a)(i).
Additional Form 10-K Disclosure:
As defined in Section 3.18(a)(iv).
Adjustable
Rate
Supplemental
Fund:
An "outside
reserve
fund" within the meaning of Treasury
Regulation
1.860G-2(h),
which is not an asset of any
REMIC
and
which is
established
and
maintained
pursuant to Section 4.05.
Adjusted
Rate
Cap:
With
respect
to the Class I-A
Certificates
and Class I-B
Certificates,
each
Distribution
Date and the related Due Period,
the sum of (i) the
Scheduled
Payments
owed on the
Group I Mortgage
Loans for such Due Period less the related
Servicing
Fees and (ii) the related
Actual
Monthly Payments
received in excess of the Scheduled
Payments,
expressed as a per annum rate calculated
on the basis of the aggregate Stated
Principal
Balance of the Group I Mortgage Loans for such Due Period
and further
reflecting the accrual of interest on an actual/360 basis,
minus the sum of (a) the interest
payable
to the Class I-X
Certificates
and (b) the Coupon
Strip
with
respect to Loan Group I, if any,
payable to the Final Maturity Reserve Account with respect to such
Distribution
Date,
expressed as a per
annum rate.
With respect to the Group II Certificates,
each
Distribution
Date and the related Due
Period,
the sum of (i) the
Scheduled
Payments
owed on the Group II Mortgage
Loans for such Due Period
less the related
Servicing Fees and (ii) the related Actual
Monthly
Payments
received in excess of the
Scheduled
Payments,
expressed
as a per
annum
rate
calculated
on the basis of the
aggregate
Stated
Principal
Balance of the Group II Mortgage
Loans for such Due Period and further
reflecting the accrual
of interest on an actual/360 basis.
Affiliate:
As to any
Person,
any
other
Person
controlling,
controlled
by or under
common
control with such Person.
"Control"
means the power to direct the
management
and policies of a Person,
directly or
indirectly,
whether
through
ownership
of voting
securities,
by
contract or
otherwise.
"Controlled" and "Controlling"
have meanings
correlative to the foregoing.
The Trustee may conclusively
presume that a Person is not an Affiliate of another
Person unless a
Responsible
Officer of the Trustee
has actual knowledge to the contrary.
Agreement:
This
Pooling and
Servicing
Agreement
and all
amendments
hereof and
supplements
hereto.
Annual Certification:
As defined in Section 3.16(b) herein.
Applicable
Credit
Rating:
For any long-term
deposit or security,
a credit rating of "AAA" in
the case of S&P or "Aaa" in the case of Moody's (or with
respect to
investments
in money market funds, a
credit
rating of "AAAm" or "AAAm-G" in the case of S&P and the highest
rating given by Moody's for money
market funds in the case of Moody's).
For any
short-term
deposit or security,
or a rating of "A-l+" in
the case of S&P or "Prime-1" in the case of Moody's.
Applicable
State Law: For purposes of
Section 9.12(d),
the
Applicable
State Law shall be (a)
the law of the
State of New York and (b) such
other
state
law
whose
applicability
shall
have
been
brought to the attention of the Trustee by either (i) an Opinion of
Counsel
reasonably
acceptable to the
Trustee
delivered to it by the Servicer or the Depositor,
or
(ii) written
notice from the
appropriate
taxing authority as to the applicability of such state law.
Applied
Realized
Loss
Amount:
With
respect to any
Distribution
Date and a Class of Class A
Certificates
or Class B
Certificates
(and with respect to the Grantor
Trust
Certificates,
indirectly
through the related
Class of
Underlying
Certificates),
the sum of the Realized
Losses with respect to
the
Mortgage
Loans in the
related
Loan
Group,
which are to be applied in
reduction
of the
Current
Principal
Amount of such Class of
Certificates
pursuant
to this
Agreement
in an amount
equal to the
amount,
if any, by which,
(i) the aggregate
Current
Principal Amount of all of the Certificates in the
related Loan Group (after all
distributions
of principal
on such
Distribution
Date)
exceeds (ii) the
aggregate
Stated
Principal
Balance
of all of the
Mortgage
Loans in the
related
Loan Group for such
Distribution
Date.
The Applied
Realized Loss Amount with respect to the Group I Mortgage Loans
shall be
allocated
first to the Class I-B-9,
Class I-B-8,
Class I-B-7,
Class I-B-6,
Class I-B-5,
Class I-B-4,
Class I-B-3,
Class I-B-2 and Class I-B-1
Certificates,
sequentially
in that order,
in each case until
the
Current
Principal
Amount of each such Class has been
reduced to zero.
Thereafter,
the
principal
portion of
Realized
Losses on the Group I Mortgage
Loans will be
allocated
on any
Distribution
Date
first, to the Class I-A-3
Certificates,
then to the Class I-A-2A
Certificates
and the Underlying Class
I-A-2B
Certificates,
pro rata,
and then to the Class I-A-1
Certificates,
sequentially
in that order,
until
the
Current
Principal
Amount
of each
such
Class has been
reduced
to zero.
Realized
Losses
allocated to the
Underlying
Class
I-A-2B
Certificates
will be
allocated
to the Grantor
Trust Class
I-A-2B
Certificates.
The Applied
Realized Loss Amount with respect to the Group II Mortgage Loans
shall
be
allocated
first to the Class
II-B-5,
Class
II-B-4,
Class
II-B-3,
Class
II-B-2 and Class II-B-1
Certificates,
sequentially
in that order, in each case until the Current
Principal
Amount of each such
Class has been
reduced to zero.
Thereafter,
the
principal
portion of Realized
Losses on the Group II
Mortgage Loans will be allocated on any Distribution
Date first, to the Class II-A-3
Certificates,
then
to the Class II-A-2A
Certificates
and the Underlying Class II-A-2B
Certificates,
pro rata, and then to
the Class II-A-1
Certificates,
sequentially in that order,
until the Current
Principal
Amount of each
such
Class
has been
reduced
to
zero.
Realized
Losses
allocated
to the
Underlying
Class
II-A-2B
Certificates will be allocated to the Grantor Trust Class II-A-2B
Certificates.
Appraised Value:
For any Mortgaged
Property related to a Mortgage Loan, the amount set forth as
the
appraised
value of such
Mortgaged
Property in an
appraisal
made for the mortgage
originator
in
connection with its origination of the related Mortgage Loan.
Assessment of Compliance:
As defined in Section 3.17.
Attestation Report:
As defined in Section 3.17.
Attesting Party:
As defined in Section 3.17.
Available
Funds:
With respect to each
Distribution
Date,
the aggregate
Principal
Funds and
Interest Funds for such Distribution Date.
Back-Up Certification:
As defined in Section 3.18(a)(iv).
Bankruptcy
Code:
The
United
States
Bankruptcy
Code,
as amended
as
codified
in 11 U.S.C.
§§ 101-1330.
Bankruptcy
Loss:
Any loss
resulting
from a bankruptcy
court,
in connection
with a personal
bankruptcy of a mortgagor,
(1) establishing the value of a mortgaged
property at an amount less than the
Outstanding
Principal
Balance of the Mortgage
Loan secured by such
mortgaged
property or (2) reducing
the amount of the Monthly Payment on the related Mortgage Loan.
Basis Risk Shortfall:
On the Distribution Date, if any, of:
1.
the amount of Current
Interest
that such Class would have been
entitled to receive on
such
Distribution
Date had the applicable
Pass-Through
Rate been calculated at a per
annum rate equal to One-Month
LIBOR plus the related
Margin and (ii) 10.50% per annum,
over
2.
the amount of
Current
Interest
on such Class
calculated
using a
Pass-Through
Rate
equal to the related Net Rate Cap for such Distribution Date.
Basis Risk Shortfall Carry Forward Amount:
With respect to any Distribution
Date and each Class
of Class A
Certificates
and Class B
Certificates
(and with respect to the Grantor Trust
Certificates,
indirectly
through the related Class of
Underlying
Certificates),
the sum of the Basis Risk
Shortfall
for such
Distribution
Date and the
Basis
Risk
Shortfalls
for all
previous
Distribution
Dates
not
previously
paid from any source
including
the Excess
Cashflow
and payments
under the Cap
Contracts,
together
with
interest
thereon
at a rate
equal to the
related
Pass-Through
Rate for such
Class of
Certificates for such Distribution Date.
Book-Entry
Certificates:
Initially,
all
Classes
of
Certificates
other
than
the
Private
Certificates and the Residual Certificates.
Business
Day:
Any day other than
(i) a
Saturday
or a Sunday,
or (ii) a day on which the New
York Stock Exchange or Federal Reserve is closed or on which
banking
institutions in any
jurisdiction in
which the Trustee,
the Custodian or the Servicer are
authorized
or obligated by law or executive
order
to be closed.
Cap Contracts:
With respect to each Class of Class A Certificates and Class B
Certificates
(and
with
respect to the Grantor
Trust
Certificates,
indirectly
through the
related
Class of
Underlying
Certificates),
the
respective
cap
contracts,
dated as of October 31, 2006,
between the
Trustee,
on
behalf
of
the
Trust
for
the
benefit
of the
Holders
of
the
related
Certificates,
and
the
Cap
Counterparty,
together with any scheduling,
confirmations or other agreements related thereto,
attached
hereto as Exhibit N.
Cap Contract
Payment
Amount:
With respect to any
Distribution
Date and a Cap
Contract,
the
amounts received from such Cap Contract, if any, on such
Distribution Date.
Cap Counterparty: Bear Stearns Financial Products Inc.
Certificate:
Any mortgage
pass-through
certificate
evidencing a beneficial ownership interest
in the Trust Fund signed and
countersigned
by the Trustee in
substantially
the forms annexed hereto as
Exhibits A-1, A-2, A-3, A-4, A-5, A-6, A-7 and A-8 with the blanks
therein appropriately completed.
Certificateholder:
A Holder of a Certificate.
Certificate
Group:
With respect to Loan Group I, the Group I Certificates,
and with respect to
Loan Group II, the Group II Certificates.
Certificate
Owner:
Any Person who is the
beneficial
owner of a Certificate
registered in the
name of the Depository or its nominee.
Certificate Register:
The register maintained pursuant to Section 5.02.
Certificateholder:
A Holder of a Certificate.
Certification Parties:
As defined in Section 3.18(a)(iv).
Certifying Person:
As defined in Section 3.18(a)(iv).
Class:
With respect to the
Certificates,
any of Class I-A-1,
Class I-A-2A,
Underlying
Class
I-A-2B,
Grantor Trust Class I-A-2B,
Class I-A-3, Class I-X, Class I-B-1, Class I-B-2, Class I-B-3,
Class
I-B-4,
Class I-B-5,
Class I-B-6,
Class I-B-7, Class I-B-8, Class I-B-9, Class R, Class R-X, Class
I-XP,
Class I-B-IO, Class II-A-1, Class II-A-2A,
Underlying Class II-A-2B,
Grantor Trust Class II-A-2B,
Class
II-A-3,
Class II-B-1,
Class
II-B-2,
Class II-B-3,
Class II-B-4,
Class II-B-5,
Class II-XP and Class
II-B-IO Certificates.
Class I-A Certificates:
The Class I-A-1,
Class I-A-2A,
Underlying Class I-A-2B and Class I-A-3
Certificates.
Class I-A
Principal
Distribution
Amount:
For any
Distribution
Date on or after the
related
Stepdown
Date on which a Group I Trigger
Event is not in effect,
an amount equal to the excess (if any)
of (x) the aggregate
Current
Principal
Amount of the Class I-A Certificates
immediately
prior to such
Distribution
Date over (y) the lesser of (I) the excess of (a) the aggregate
Stated Principal
Balance of
the Group I Mortgage
Loans as of the last day of the related Due Period
(after
reduction
for Principal
Prepayments
and Realized
Losses on the Group I Mortgage
Loans
incurred
during the related
Prepayment
Period) over (b) the aggregate Stated
Principal
Balance of the Group I Mortgage Loans as of the last day
of the related Due Period (after
reduction for Principal
Prepayments
and Realized Losses on the Group I
Mortgage
Loans
incurred
during
the
related
Prepayment
Period)
multiplied
by
(i)
prior
to
the
Distribution
Date in October 2012,
26.000% and (ii) on or after the
Distribution
Date in October 2012,
20.800%,
and (II) the excess of (a) the aggregate Stated Principal
Balance of the Group I Mortgage Loans
as of the last day of the related Due Period
(after
reduction
for
Principal
Prepayments
and Realized
Losses on the Group I Mortgage
Loans
incurred
during the related
Prepayment
Period) over (b) 0.50% of
the Stated Principal Balance of the Group I Mortgage Loans as of
the Cut-off Date.
Class I-B Certificates:
The Class I-B-1,
Class I-B-2,
Class I-B-3,
Class I-B-4,
Class I-B-5,
Class I-B-6, Class I-B-7, Class I-B-8 and Class I-B-9 Certificates.
Class I-B-1 Principal
Distribution
Amount:
For any
Distribution
Date on or after the related
Stepdown
Date on which a Group I Trigger
Event is not in effect,
an amount equal to the excess (if any)
of (x)
the
Current
Principal
Amount
of
the
Class
I-B-1
Certificates
immediately
prior
to
such
Distribution
Date over (y) the lesser of (I) the excess of (a) the
aggregate
Stated
Principal
Balance
of the
Group I
Mortgage
Loans
as of the
last day of the
related
Due
Period
(after
reduction
for
Principal
Prepayments
and
Realized
Losses on the Group I Mortgage
Loans
incurred
during the related
Prepayment
Period)
over (b) the sum of (1) the
aggregate
Current
Principal
Amount
of the
Class I-A
Certificates
(after
taking into account the payment of the Class I-A Principal
Distribution
Amount for
such
Distribution
Date) and (2) the aggregate Stated Principal
Balance of the Group I Mortgage Loans as
of the last day of the related Due Period (after
reduction for Principal
Prepayments and Realized Losses
on the Group I Mortgage Loans incurred during the related
Prepayment
Period)
multiplied by (i) prior to
the
Distribution
Date in October
2012,
20.000% and (ii) on or after the
Distribution
Date in October
2012,
16.000%,
and (II) the excess of (a) the aggregate Stated Principal Balance
of the Group I Mortgage
Loans as of the last day of the
related
Due
Period
(after
reduction
for
Principal
Prepayments
and
Realized
Losses on the Group I Mortgage Loans
incurred
during the related
Prepayment
Period) over (b)
0.50% of the Stated Principal Balance of the Group I Mortgage Loans
as of the Cut-off Date.
Class I-B-2 Principal
Distribution
Amount:
For any
Distribution
Date on or after the related
Stepdown
Date on which a Group I Trigger
Event is not in effect,
an amount equal to the excess (if any)
of (x)
the
Current
Principal
Amount
of
the
Class
I-B-2
Certificates
immediately
prior
to
such
Distribution
Date over (y) the lesser of (I) the excess of (a) the
aggregate
Stated
Principal
Balance
of the
Group I
Mortgage
Loans
as of the
last day of the
related
Due
Period
(after
reduction
for
Principal
Prepayments
and
Realized
Losses on the Group I Mortgage
Loans
incurred
during the related
Prepayment
Period)
over (b) the sum of (1) the
aggregate
Current
Principal
Amount
of the
Class I-A
Certificates
(after
taking into account the payment of the Class I-A Principal
Distribution
Amount for
such
Distribution
Date),
(2) the aggregate
Current
Principal
Amount of the Class I-B-1
Certificates
(after
taking
into
account
the
payment of the Class
I-B-1
Principal
Distribution
Amounts for such
Distribution
Date) and (3) the aggregate
Stated
Principal
Balance of the Group I Mortgage
Loans as of
the last day of the related Due Period (after
reduction for Principal
Prepayments and Realized Losses on
the Group I Mortgage
Loans
incurred
during the related
Prepayment
Period)
multiplied by (i) prior to
the
Distribution
Date in October
2012,
15.250% and (ii) on or after the
Distribution
Date in October
2012,
12.200%,
and (II) the excess of (a) the aggregate Stated Principal Balance
of the Group I Mortgage
Loans as of the last day of the
related
Due
Period
(after
reduction
for
Principal
Prepayments
and
Realized
Losses on the Group I Mortgage Loans
incurred
during the related
Prepayment
Period) over (b)
0.50% of the Stated Principal Balance of the Group I Mortgage Loans
as of the Cut-off Date.
Class I-B-3 Principal
Distribution
Amount:
For any
Distribution
Date on or after the related
Stepdown
Date on which a Group I Trigger
Event is not in effect,
an amount equal to the excess (if any)
of (x)
the
Current
Principal
Amount
of
the
Class
I-B-3
Certificates
immediately
prior
to
such
Distribution
Date over (y) the lesser of (I) the excess of (a) the
aggregate
Stated
Principal
Balance
of the
Group I
Mortgage
Loans
as of the
last day of the
related
Due
Period
(after
reduction
for
Principal
Prepayments
and
Realized
Losses on the Group I Mortgage
Loans
incurred
during the related
Prepayment
Period)
over (b) the sum of (1) the
aggregate
Current
Principal
Amount
of the
Class I-A
Certificates
(after
taking into account the payment of the Class I-A Principal
Distribution
Amount for
such
Distribution
Date),
(2) the aggregate
Current
Principal
Amount of the Class I-B-1
Certificates
(after
taking
into
account
the
payment of the Class
I-B-1
Principal
Distribution
Amounts for such
Distribution
Date), (3) the aggregate
Current
Principal Amount of the Class I-B-2
Certificates
(after
taking into account the payment of the Class I-B-2 Principal
Distribution
Amounts for such
Distribution
Date) and (4) the aggregate Stated
Principal
Balance of the Group I Mortgage Loans as of the last day of
the related Due Period
(after
reduction
for Principal
Prepayments
and Realized
Losses on the Group I
Mortgage
Loans
incurred
during
the
related
Prepayment
Period)
multiplied
by
(i)
prior
to
the
Distribution
Date in October 2012,
13.500% and (ii) on or after the
Distribution
Date in October 2012,
10.800%,
and (II) the
excess of (a) the
aggregate
Stated
Principal
Balance
of the Group I
Mortgage
Loans as of the last day of the
related
Due
Period
(after
reduction
for
Principal
Prepayments
and
Realized
Losses on the Group I Mortgage Loans
incurred
during the related
Prepayment
Period) over (b)
0.50% of the Stated Principal Balance of the Group I Mortgage Loans
as of the Cut-off Date.
Class I-B-4 Principal
Distribution
Amount:
For any
Distribution
Date on or after the related
Stepdown
Date on which a Group I Trigger
Event is not in effect,
an amount equal to the excess (if any)
of (x)
the
Current
Principal
Amount
of
the
Class
I-B-4
Certificates
immediately
prior
to
such
Distribution
Date over (y) the lesser of (I) the excess of (a) the
aggregate
Stated
Principal
Balance
of the
Group I
Mortgage
Loans
as of the
last day of the
related
Due
Period
(after
reduction
for
Principal
Prepayments
and
Realized
Losses on the Group I Mortgage
Loans
incurred
during the related
Prepayment
Period)
over (b) the sum of (1) the
aggregate
Current
Principal
Amount
of the
Class I-A
Certificates
(after
taking into account the payment of the Class I-A Principal
Distribution
Amount for
such
Distribution
Date),
(2) the aggregate
Current
Principal
Amount of the Class I-B-1
Certificates
(after
taking
into
account
the
payment of the Class
I-B-1
Principal
Distribution
Amounts for such
Distribution
Date), (3) the aggregate
Current
Principal Amount of the Class I-B-2
Certificates
(after
taking into account the payment of the Class I-B-2 Principal
Distribution
Amounts for such
Distribution
Date),
(4) the aggregate
Current
Principal
Amount of the Class I-B-3
Certificates
(after taking into
account the payment of the Class I-B-3
Principal
Distribution
Amounts for such
Distribution
Date) and
(5) the
aggregate
Stated
Principal
Balance
of the
Group I
Mortgage
Loans as of the last day of the
related
Due
Period
(after
reduction
for
Principal
Prepayments
and
Realized
Losses on the Group I
Mortgage
Loans
incurred
during
the
related
Prepayment
Period)
multiplied
by
(i)
prior
to
the
Distribution
Date in October 2012,
10.375% and (ii) on or after the
Distribution
Date in October 2012,
8.300%,
and (II) the excess of (a) the aggregate Stated
Principal
Balance of the Group I Mortgage Loans
as of the last day of the related Due Period
(after
reduction
for
Principal
Prepayments
and Realized
Losses on the Group I Mortgage
Loans
incurred
during the related
Prepayment
Period) over (b) 0.50% of
the Stated Principal Balance of the Group I Mortgage Loans as of
the Cut-off Date.
Class I-B-5 Principal
Distribution
Amount:
For any
Distribution
Date on or after the related
Stepdown
Date on which a Group I Trigger
Event is not in effect,
an amount equal to the excess (if any)
of (x)
the
Current
Principal
Amount
of
the
Class
I-B-5
Certificates
immediately
prior
to
such
Distribution
Date over (y) the lesser of (I) the excess of (a) the
aggregate
Stated
Principal
Balance
of the
Group I
Mortgage
Loans
as of the
last day of the
related
Due
Period
(after
reduction
for
Principal
Prepayments
and
Realized
Losses on the Group I Mortgage
Loans
incurred
during the related
Prepayment
Period)
over (b) the sum of (1) the
aggregate
Current
Principal
Amount
of the
Class I-A
Certificates
(after
taking into account the payment of the Class I-A Principal
Distribution
Amount for
such
Distribution
Date),
(2) the aggregate
Current
Principal
Amount of the Class I-B-1
Certificates
(after
taking
into
account
the
payment of the Class
I-B-1
Principal
Distribution
Amounts for such
Distribution
Date), (3) the aggregate
Current
Principal Amount of the Class I-B-2
Certificates
(after
taking into account the payment of the Class I-B-2 Principal
Distribution
Amounts for such
Distribution
Date),
(4) the aggregate
Current
Principal
Amount of the Class I-B-3
Certificates
(after taking into
account the payment of the Class I-B-3 Principal
Distribution
Amounts for such
Distribution
Date), (5)
the aggregate
Current
Principal
Amount of the Class I-B-4
Certificates
(after taking into account the
payment
of the
Class
I-B-4
Principal
Distribution
Amounts
for such
Distribution
Date) and (6) the
aggregate
Stated
Principal
Balance of the Group I Mortgage
Loans as of the last day of the related Due
Period (after
reduction
for
Principal
Prepayments
and Realized
Losses on the Group I Mortgage
Loans
incurred
during the
related
Prepayment
Period)
multiplied
by (i) prior to the
Distribution
Date in
October 2012,
8.625% and (ii) on or after the
Distribution
Date in October 2012,
6.900%,
and (II) the
excess of (a) the
aggregate
Stated
Principal
Balance of the Group I Mortgage
Loans as of the last day
of the related Due Period (after
reduction for Principal
Prepayments
and Realized Losses on the Group I
Mortgage
Loans
incurred
during the related
Prepayment
Period) over (b) 0.50% of the Stated
Principal
Balance of the Group I Mortgage Loans as of the Cut-off Date.
Class I-B-6 Principal
Distribution
Amount:
For any
Distribution
Date on or after the related
Stepdown
Date on which a Group I Trigger
Event is not in effect,
an amount equal to the excess (if any)
of (x)
the
Current
Principal
Amount
of
the
Class
I-B-6
Certificates
immediately
prior
to
such
Distribution
Date over (y) the lesser of (I) the excess of (a) the
aggregate
Stated
Principal
Balance
of the
Group I
Mortgage
Loans
as of the
last day of the
related
Due
Period
(after
reduction
for
Principal
Prepayments
and
Realized
Losses on the Group I Mortgage
Loans
incurred
during the related
Prepayment
Period)
over (b) the sum of (1) the
aggregate
Current
Principal
Amount
of the
Class I-A
Certificates
(after
taking into account the payment of the Class I-A Principal
Distribution
Amount for
such
Distribution
Date),
(2) the aggregate
Current
Principal
Amount of the Class I-B-1
Certificates
(after
taking
into
account
the
payment of the Class
I-B-1
Principal
Distribution
Amounts for such
Distribution
Date), (3) the aggregate
Current
Principal Amount of the Class I-B-2
Certificates
(after
taking into account the payment of the Class I-B-2 Principal
Distribution
Amounts for such
Distribution
Date),
(4) the aggregate
Current
Principal
Amount of the Class I-B-3
Certificates
(after taking into
account the payment of the Class I-B-3 Principal
Distribution
Amounts for such
Distribution
Date), (5)
the aggregate
Current
Principal
Amount of the Class I-B-4
Certificates
(after taking into account the
payment of the Class I-B-4 Principal
Distribution
Amounts for such Distribution Date), (6) the aggregate
Current
Principal
Amount of the Class I-B-5
Certificates
(after taking into account the payment of the
Class I-B-5
Principal
Distribution
Amounts for such
Distribution
Date) and (7) the
aggregate
Stated
Principal
Balance
of the Group I Mortgage
Loans as of the last day of the
related
Due
Period
(after
reduction for Principal
Prepayments
and Realized
Losses on the Group I Mortgage Loans
incurred
during
the related
Prepayment
Period)
multiplied by (i) prior to the Distribution Date in October 2012,
7.375%
and (ii) on or after
the
Distribution
Date in
October
2012,
5.900%,
and (II) the
excess of (a) the
aggregate
Stated
Principal
Balance of the Group I Mortgage
Loans as of the last day of the related Due
Period (after
reduction
for
Principal
Prepayments
and Realized
Losses on the Group I Mortgage
Loans
incurred
during the related
Prepayment
Period)
over (b) 0.50% of the Stated
Principal
Balance of the
Group I Mortgage Loans as of the Cut-off Date.
Class I-B-7 Principal
Distribution
Amount:
For any
Distribution
Date on or after the related
Stepdown
Date on which a Group I Trigger
Event is not in effect,
an amount equal to the excess (if any)
of (x)
the
Current
Principal
Amount
of
the
Class
I-B-7
Certificates
immediately
prior
to
such
Distribution
Date over (y) the lesser of (I) the excess of (a) the
aggregate
Stated
Principal
Balance
of the
Group I
Mortgage
Loans
as of the
last day of the
related
Due
Period
(after
reduction
for
Principal
Prepayments
and
Realized
Losses on the Group I Mortgage
Loans
incurred
during the related
Prepayment
Period)
over (b) the sum of (1) the
aggregate
Current
Principal
Amount
of the
Class I-A
Certificates
(after
taking into account the payment of the Class I-A Principal
Distribution
Amount for
such
Distribution
Date),
(2) the aggregate
Current
Principal
Amount of the Class I-B-1
Certificates
(after
taking
into
account
the
payment of the Class
I-B-1
Principal
Distribution
Amounts for such
Distribution
Date), (3) the aggregate
Current
Principal Amount of the Class I-B-2
Certificates
(after
taking into account the payment of the Class I-B-2 Principal
Distribution
Amounts for such
Distribution
Date),
(4) the aggregate
Current
Principal
Amount of the Class I-B-3
Certificates
(after taking into
account the payment of the Class I-B-3 Principal
Distribution
Amounts for such
Distribution
Date), (5)
the aggregate
Current
Principal
Amount of the Class I-B-4
Certificates
(after taking into account the
payment of the Class I-B-4 Principal
Distribution
Amounts for such Distribution Date), (6) the aggregate
Current
Principal
Amount of the Class I-B-5
Certificates
(after taking into account the payment of the
Class I-B-5
Principal
Distribution
Amounts
for such
Distribution
Date),
(7) the
aggregate
Current
Principal
Amount of the Class B-6
Certificates
(after
taking into account the payment of the Class B-6
Principal
Distribution
Amounts
for such
Distribution
Date)
and (8) the
aggregate
Stated
Principal
Balance of the Group I Mortgage
Loans as of the last day of the related Due Period
(after
reduction for
Principal
Prepayments
and
Realized
Losses on the Group I Mortgage
Loans
incurred
during the related
Prepayment
Period)
multiplied by (i) prior to the Distribution
Date in October 2012, 6.000% and (ii) on
or after the Distribution
Date in October 2012,
4.800%,
and (II) the excess of (a) the aggregate Stated
Principal
Balance
of the Group I Mortgage
Loans as of the last day of the
related
Due
Period
(after
reduction for Principal
Prepayments
and Realized
Losses on the Group I Mortgage Loans
incurred
during
the related
Prepayment
Period)
over (b) 0.50% of the Stated
Principal
Balance of the Group I Mortgage
Loans as of the Cut-off Date.
Class I-B-8 Principal
Distribution
Amount:
For any
Distribution
Date on or after the related
Stepdown
Date on which a Group I Trigger
Event is not in effect,
an amount equal to the excess (if any)
of (x)
the
Current
Principal
Amount
of
the
Class
I-B-8
Certificates
immediately
prior
to
such
Distribution
Date over (y) the lesser of (I) the excess of (a) the
aggregate
Stated
Principal
Balance
of the
Group I
Mortgage
Loans
as of the
last day of the
related
Due
Period
(after
reduction
for
Principal
Prepayments
and
Realized
Losses on the Group I Mortgage
Loans
incurred
during the related
Prepayment
Period)
over (b) the sum of (1) the
aggregate
Current
Principal
Amount
of the
Class I-A
Certificates
(after
taking into account the payment of the Class I-A Principal
Distribution
Amount for
such
Distribution
Date),
(2) the aggregate
Current
Principal
Amount of the Class I-B-1
Certificates
(after
taking
into
account
the
payment of the Class
I-B-1
Principal
Distribution
Amounts for such
Distribution
Date), (3) the aggregate
Current
Principal Amount of the Class I-B-2
Certificates
(after
taking into account the payment of the Class I-B-2 Principal
Distribution
Amounts for such
Distribution
Date),
(4) the aggregate
Current
Principal
Amount of the Class I-B-3
Certificates
(after taking into
account the payment of the Class I-B-3 Principal
Distribution
Amounts for such
Distribution
Date), (5)
the aggregate
Current
Principal
Amount of the Class I-B-4
Certificates
(after taking into account the
payment of the Class I-B-4 Principal
Distribution
Amounts for such Distribution Date), (6) the aggregate
Current
Principal
Amount of the Class I-B-5
Certificates
(after taking into account the payment of the
Class I-B-5
Principal
Distribution
Amounts
for such
Distribution
Date),
(7) the
aggregate
Current
Principal
Amount of the Class B-6
Certificates
(after
taking into account the payment of the Class B-6
Principal
Distribution
Amounts for such
Distribution
Date), (8) the aggregate Current Principal Amount
of the Class
I-B-7
Certificates
(after
taking into
account
the payment of the Class I-B-7
Principal
Distribution
Amounts for such
Distribution
Date) and (9) the aggregate Stated Principal
Balance of the
Group I
Mortgage
Loans as of the last day of the
related
Due Period
(after
reduction
for
Principal
Prepayments
and Realized
Losses on the Group I Mortgage
Loans
incurred
during the related
Prepayment
Period)
multiplied by (i) prior to the
Distribution
Date in October
2012,
4.750% and (ii) on or after
the
Distribution
Date in
October
2012,
3.800%,
and
(II)
the
excess
of (a) the
aggregate
Stated
Principal
Balance
of the Group I Mortgage
Loans as of the last day of the
related
Due
Period
(after
reduction for Principal
Prepayments
and Realized
Losses on the Group I Mortgage Loans
incurred
during
the related
Prepayment
Period)
over (b) 0.50% of the Stated
Principal
Balance of the Group I Mortgage
Loans as of the Cut-off Date.
Class I-B-9 Principal
Distribution
Amount:
For any
Distribution
Date on or after the related
Stepdown
Date on which a Group I Trigger
Event is not in effect,
an amount equal to the excess (if any)
of (x)
the
Current
Principal
Amount
of
the
Class
I-B-9
Certificates
immediately
prior
to
such
Distribution
Date over (y) the lesser of (I) the excess of (a) the
aggregate
Stated
Principal
Balance
of the
Group I
Mortgage
Loans
as of the
last day of the
related
Due
Period
(after
reduction
for
Principal
Prepayments
and
Realized
Losses on the Group I Mortgage
Loans
incurred
during the related
Prepayment
Period)
over (b) the sum of (1) the
aggregate
Current
Principal
Amount
of the
Class I-A
Certificates
(after
taking into account the payment of the Class I-A Principal
Distribution
Amount for
such
Distribution
Date),
(2) the aggregate
Current
Principal
Amount of the Class I-B-1
Certificates
(after
taking
into
account
the
payment of the Class
I-B-1
Principal
Distribution
Amounts for such
Distribution
Date), (3) the aggregate
Current
Principal Amount of the Class I-B-2
Certificates
(after
taking into account the payment of the Class I-B-2 Principal
Distribution
Amounts for such
Distribution
Date),
(4) the aggregate
Current
Principal
Amount of the Class I-B-3
Certificates
(after taking into
account the payment of the Class I-B-3 Principal
Distribution
Amounts for such
Distribution
Date), (5)
the aggregate
Current
Principal
Amount of the Class I-B-4
Certificates
(after taking into account the
payment of the Class I-B-4 Principal
Distribution
Amounts for such Distribution Date), (6) the aggregate
Current
Principal
Amount of the Class I-B-5
Certificates
(after taking into account the payment of the
Class I-B-5
Principal
Distribution
Amounts
for such
Distribution
Date),
(7) the
aggregate
Current
Principal
Amount of the Class I-B-6
Certificates
(after
taking
into
account the payment of the Class
I-B-6 Principal
Distribution
Amounts for such
Distribution
Date), (8) the aggregate
Current Principal
Amount of the Class
I-B-7
Certificates
(after
taking
into
account
the
payment
of the Class
I-B-7
Principal
Distribution
Amounts for such
Distribution
Date), (9) the aggregate Current Principal Amount
of the Class
I-B-8
Certificates
(after
taking into
account
the payment of the Class I-B-8
Principal
Distribution
Amounts for such
Distribution
Date) and (10) the aggregate Stated Principal Balance of the
Group I
Mortgage
Loans as of the last day of the
related
Due Period
(after
reduction
for
Principal
Prepayments
and Realized
Losses on the Group I Mortgage
Loans
incurred
during the related
Prepayment
Period)
multiplied by (i) prior to the
Distribution
Date in October
2012,
3.500% and (ii) on or after
the
Distribution
Date in
October
2012,
2.800%,
and
(II)
the
excess
of (a) the
aggregate
Stated
Principal
Balance
of the Group I Mortgage
Loans as of the last day of the
related
Due
Period
(after
reduction for Principal
Prepayments
and Realized
Losses on the Group I Mortgage Loans
incurred
during
the related
Prepayment
Period)
over (b) 0.50% of the Stated
Principal
Balance of the Group I Mortgage
Loans as of the Cut-off Date.
Class I-B-IO Advances:
As defined in Section 6.01(c).
Class I-B-IO
Distribution
Amount:
With respect to any Distribution
Date, the Current Interest
for the Class I-B-IO
Certificates
for such
Distribution
Date (from REMIC III to REMIC IV on account of
REMIC III Regular
Interest
I-B-IO-I);
provided,
however,
that on and after the
Distribution
Date on
which the aggregate
Current
Principal Amount of the Class I-A or Class I-B Certificates has
been reduced
to zero,
the Class I-B-IO
Distribution
Amount shall
include the Group I
Overcollateralization
Amount
(which shall be deemed
distributable,
first,
from REMIC III to REMIC IV on account of REMIC III Regular
Interest
I-B-IO-I,
in respect of accrued
and unpaid
interest
thereon
until such
accrued
and unpaid
interest shall have been reduced to zero and,
thereafter,
from REMIC III to REMIC IV on account of REMIC
III Regular Interest I-B-IO-P, in respect of the principal balance
thereof).
Class
I-B-IO
Notional
Amount:
With
respect
to any
Distribution
Date and the Class
I-B-IO
Certificates, the aggregate of the Uncertificated Principal
Balances of the REMIC I Regular Interests.
Class
I-B-IO
Pass-Through
Rate:
With respect to the Class
I-B-IO
Certificates
or REMIC III
Regular
Interest
I-B-IO-I,
and any
Distribution
Date,
a per annum
rate
equal to the sum of (a) the
Maximum Coupon Strip Rate and (b) the percentage
equivalent of a fraction,
the numerator of which is the
sum of the amounts
calculated
pursuant to clauses (i) through (iii) below,
and the denominator of which
is the
aggregate
Uncertificated
Principal
Balance of the REMIC I
Regular
Interests.
For purposes of
calculating the
Pass-Through
Rate for the Class I-B-IO
Certificates,
the numerator is equal to the sum
of the following components:
(i)
the
Uncertificated
Pass-Through
Rate for
REMIC I
Regular
Interest
LT1
minus
the
related
Marker
Rate,
applied
to
a
notional
amount
equal
to
the
Uncertificated
Principal Balance of REMIC I Regular Interest LT1;
(ii)
the
Uncertificated
Pass-Through
Rate for
REMIC I
Regular
Interest
LT2
minus
the
related
Marker
Rate,
applied
to
a
notional
amount
equal
to
the
Uncertificated
Principal Balance of REMIC I Regular Interest LT2; and
(iii)
the
Uncertificated
Pass-Through
Rate for REMIC I Regular Interest LT4 minus twice the
related
Marker
Rate,
applied
to
a
notional
amount
equal
to
the
Uncertificated
Principal Balance of REMIC I Regular Interest LT4.
Class
I-X
Notional
Amount:
With
respect
to
any
Distribution
Date
and
the
Class
I-X
Certificates,
the aggregate Stated Principal
Balance
immediately prior to such Distribution Date of the
Group I Mortgage Loans having "hard" prepayment charges for a term
of three years from origination.
Class I-XP Certificates:
The Class I-XP-1 Certificates and the Class I-XP-2 Certificates.
Class II-A
Certificates:
The Class II-A-1,
Class II-A-2A,
Underlying
Class II-A-2B and Class
II-A-3 Certificates.
Class II-A
Principal
Distribution
Amount:
For any
Distribution
Date on or after the related
Stepdown Date on which a Group II Trigger
Event is not in effect,
an amount equal to the excess (if any)
of (x) the aggregate
Current
Principal Amount of the Class II-A
Certificates
immediately prior to such
Distribution
Date over (y) the lesser of (I) the excess of (a) the aggregate
Stated Principal
Balance of
the Group II Mortgage
Loans as of the last day of the related Due Period
(after
reduction for Principal
Prepayments
and Realized
Losses on the Group II Mortgage
Loans incurred
during the related
Prepayment
Period) over (b) the
aggregate
Stated
Principal
Balance of the Group II Mortgage
Loans as of the last
day of the related Due Period
(after
reduction
for
Principal
Prepayments
and Realized
Losses on the
Group II Mortgage
Loans incurred
during the related
Prepayment
Period)
multiplied by (i) prior to the
Distribution
Date in October 2012,
25.750% and (ii) on or after the
Distribution
Date in October 2012,
20.600%,
and (II) the excess of (a) the
aggregate
Stated
Principal
Balance
of the Group II
Mortgage
Loans as of the last day of the
related
Due
Period
(after
reduction
for
Principal
Prepayments
and
Realized
Losses on the Group II Mortgage Loans incurred
during the related
Prepayment
Period) over (b)
0.50% of the Stated Principal Balance of the Group II Mortgage
Loans as of the Cut-off Date.
Class II-B Certificates:
The Class II-B-1,
Class II-B-2,
Class II-B-3,
Class II-B-4 and Class
II-B-5 Certificates.
Class II-B-1 Principal
Distribution
Amount:
For any Distribution
Date on or after the related
Stepdown Date on which a Group II Trigger
Event is not in effect,
an amount equal to the excess (if any)
of (x)
the
Current
Principal
Amount
of the
Class
II-B-1
Certificates
immediately
prior
to
such
Distribution
Date over (y) the lesser of (I) the excess of (a) the
aggregate
Stated
Principal
Balance
of the
Group II
Mortgage
Loans as of the
last day of the
related
Due
Period
(after
reduction
for
Principal
Prepayments
and Realized
Losses on the Group II Mortgage
Loans
incurred
during the related
Prepayment
Period)
over (b) the sum of (1) the
aggregate
Current
Principal
Amount of the Class
II-A
Certificates
(after taking into account the payment of the Class II-A Principal
Distribution
Amount for
such
Distribution
Date) and (2) the aggregate Stated Principal Balance of the Group
II Mortgage Loans as
of the last day of the related Due Period (after
reduction for Principal
Prepayments and Realized Losses
on the Group II Mortgage
Loans incurred
during the related
Prepayment
Period)
multiplied by (i) prior
to the Distribution
Date in October 2012,
16.750% and (ii) on or after the Distribution
Date in October
2012,
13.400%,
and (II) the
excess
of (a) the
aggregate
Stated
Principal
Balance
of the
Group II
Mortgage
Loans as of the last day of the related Due Period (after
reduction
for Principal
Prepayments
and Realized
Losses on the Group II Mortgage Loans incurred
during the related
Prepayment
Period) over
(b) 0.50% of the Stated Principal Balance of the Group II Mortgage
Loans as of the Cut-off Date.
Class II-B-2 Principal
Distribution
Amount:
For any Distribution
Date on or after the related
Stepdown Date on which a Group II Trigger
Event is not in effect,
an amount equal to the excess (if any)
of (x)
the
Current
Principal
Amount
of the
Class
II-B-2
Certificates
immediately
prior
to
such
Distribution
Date over (y) the lesser of (I) the excess of (a) the
aggregate
Stated
Principal
Balance
of the
Group II
Mortgage
Loans as of the
last day of the
related
Due
Period
(after
reduction
for
Principal
Prepayments
and Realized
Losses on the Group II Mortgage
Loans
incurred
during the related
Prepayment
Period)
over (b) the sum of (1) the
aggregate
Current
Principal
Amount of the Class
II-A
Certificates
(after taking into account the payment of the Class II-A Principal
Distribution
Amount for
such
Distribution
Date), (2) the aggregate
Current
Principal
Amount of the Class II-B-1
Certificates
(after
taking into
account
the
payment of the Class
II-B-1
Principal
Distribution
Amounts for such
Distribution
Date) and (3) the aggregate
Stated
Principal
Balance of the Group II Mortgage Loans as of
the last day of the related Due Period (after
reduction for Principal
Prepayments and Realized Losses on
the Group II Mortgage
Loans incurred
during the related
Prepayment
Period)
multiplied by (i) prior to
the
Distribution
Date in October
2012,
11.750% and (ii) on or after the
Distribution
Date in October
2012,
9.400%,
and (II) the excess of (a) the aggregate Stated Principal Balance
of the Group II Mortgage
Loans as of the last day of the
related
Due
Period
(after
reduction
for
Principal
Prepayments
and
Realized
Losses on the Group II Mortgage Loans incurred
during the related
Prepayment
Period) over (b)
0.50% of the Stated Principal Balance of the Group II Mortgage
Loans as of the Cut-off Date.
Class II-B-3 Principal
Distribution
Amount:
For any Distribution
Date on or after the related
Stepdown Date on which a Group II Trigger
Event is not in effect,
an amount equal to the excess (if any)
of (x)
the
Current
Principal
Amount
of the
Class
II-B-3
Certificates
immediately
prior
to
such
Distribution
Date over (y) the lesser of (I) the excess of (a) the
aggregate
Stated
Principal
Balance
of the
Group II
Mortgage
Loans as of the
last day of the
related
Due
Period
(after
reduction
for
Principal
Prepayments
and Realized
Losses on the Group II Mortgage
Loans
incurred
during the related
Prepayment
Period)
over (b) the sum of (1) the
aggregate
Current
Principal
Amount of the Class
II-A
Certificates
(after taking into account the payment of the Class II-A Principal
Distribution
Amount for
such
Distribution
Date), (2) the aggregate
Current
Principal
Amount of the Class II-B-1
Certificates
(after
taking into
account
the
payment of the Class
II-B-1
Principal
Distribution
Amounts for such
Distribution
Date), (3) the aggregate
Current Principal Amount of the Class II-B-2
Certificates
(after
taking into account the payment of the Class II-B-2 Principal
Distribution
Amounts for such Distribution
Date) and (4) the aggregate
Stated
Principal
Balance of the Group II Mortgage
Loans as of the last day
of the related Due Period (after
reduction for Principal
Prepayments and Realized Losses on the Group II
Mortgage
Loans
incurred
during
the
related
Prepayment
Period)
multiplied
by
(i)
prior
to
the
Distribution
Date in October
2012,
8.125% and (ii) on or after the
Distribution
Date in October 2012,
6.500%,
and (II) the
excess of (a) the
aggregate
Stated
Principal
Balance
of the Group II
Mortgage
Loans as of the last day of the
related
Due
Period
(after
reduction
for
Principal
Prepayments
and
Realized
Losses on the Group II Mortgage Loans incurred
during the related
Prepayment
Period) over (b)
0.50% of the Stated Principal Balance of the Group II Mortgage
Loans as of the Cut-off Date.
Class II-B-4 Principal
Distribution
Amount:
For any Distribution
Date on or after the related
Stepdown Date on which a Group II Trigger
Event is not in effect,
an amount equal to the excess (if any)
of (x)
the
Current
Principal
Amount
of the
Class
II-B-4
Certificates
immediately
prior
to
such
Distribution
Date over (y) the lesser of (I) the excess of (a) the
aggregate
Stated
Principal
Balance
of the
Group II
Mortgage
Loans as of the
last day of the
related
Due
Period
(after
reduction
for
Principal
Prepayments
and Realized
Losses on the Group II Mortgage
Loans
incurred
during the related
Prepayment
Period)
over (b) the sum of (1) the
aggregate
Current
Principal
Amount of the Class
II-A
Certificates
(after taking into account the payment of the Class II-A Principal
Distribution
Amount for
such
Distribution
Date), (2) the aggregate
Current
Principal
Amount of the Class II-B-1
Certificates
(after
taking into
account
the
payment of the Class
II-B-1
Principal
Distribution
Amounts for such
Distribution
Date), (3) the aggregate
Current Principal Amount of the Class II-B-2
Certificates
(after
taking into account the payment of the Class II-B-2 Principal
Distribution
Amounts for such Distribution
Date),
(4) the aggregate
Current
Principal Amount of the Class II-B-3
Certificates
(after taking into
account the payment of the Class II-B-3 Principal
Distribution
Amounts for such
Distribution
Date) and
(5) the
aggregate
Stated
Principal
Balance
of the Group II
Mortgage
Loans as of the last day of the
related
Due Period
(after
reduction
for
Principal
Prepayments
and
Realized
Losses on the Group II
Mortgage
Loans
incurred
during
the
related
Prepayment
Period)
multiplied
by
(i)
prior
to
the
Distribution
Date in October
2012,
6.750% and (ii) on or after the
Distribution
Date in October 2012,
5.400%,
and (II) the
excess of (a) the
aggregate
Stated
Principal
Balance
of the Group II
Mortgage
Loans as of the last day of the
related
Due
Period
(after
reduction
for
Principal
Prepayments
and
Realized
Losses on the Group II Mortgage Loans incurred
during the related
Prepayment
Period) over (b)
0.50% of the Stated Principal Balance of the Group II Mortgage
Loans as of the Cut-off Date.
Class II-B-5 Principal
Distribution
Amount:
For any Distribution
Date on or after the related
Stepdown Date on which a Group II Trigger
Event is not in effect,
an amount equal to the excess (if any)
of (x)
the
Current
Principal
Amount
of the
Class
II-B-5
Certificates
immediately
prior
to
such
Distribution
Date over (y) the lesser of (I) the excess of (a) the
aggregate
Stated
Principal
Balance
of the
Group II
Mortgage
Loans as of the
last day of the
related
Due
Period
(after
reduction
for
Principal
Prepayments
and Realized
Losses on the Group II Mortgage
Loans
incurred
during the related
Prepayment
Period)
over (b) the sum of (1) the
aggregate
Current
Principal
Amount of the Class
II-A
Certificates
(after taking into account the payment of the Class II-A Principal
Distribution
Amount for
such
Distribution
Date), (2) the aggregate
Current
Principal
Amount of the Class II-B-1
Certificates
(after
taking into
account
the
payment of the Class
II-B-1
Principal
Distribution
Amounts for such
Distribution
Date), (3) the aggregate
Current Principal Amount of the Class II-B-2
Certificates
(after
taking into account the payment of the Class II-B-2 Principal
Distribution
Amounts for such Distribution
Date),
(4) the aggregate
Current
Principal Amount of the Class II-B-3
Certificates
(after taking into
account the payment of the Class II-B-3 Principal
Distribution
Amounts for such Distribution
Date), (5)
the aggregate
Current
Principal Amount of the Class II-B-4
Certificates
(after taking into account the
payment
of the Class
II-B-4
Principal
Distribution
Amounts
for such
Distribution
Date) and (6) the
aggregate
Stated
Principal
Balance of the Group II Mortgage Loans as of the last day of the
related Due
Period (after
reduction
for Principal
Prepayments
and Realized
Losses on the Group II Mortgage
Loans
incurred
during the
related
Prepayment
Period)
multiplied
by (i) prior to the
Distribution
Date in
October 2012,
1.875% and (ii) on or after the
Distribution
Date in October 2012,
1.500%,
and (II) the
excess of (a) the aggregate
Stated
Principal
Balance of the Group II Mortgage
Loans as of the last day
of the related Due Period (after
reduction for Principal
Prepayments and Realized Losses on the Group II
Mortgage
Loans
incurred
during the related
Prepayment
Period) over (b) 0.50% of the Stated
Principal
Balance of the Group II Mortgage Loans as of the Cut-off Date.
Class II-B-IO Advances:
As defined in Section 6.01(d).
Class II-B-IO
Distribution
Amount:
With respect to any Distribution Date, the Current Interest
for the Class II-B-IO
Certificates for such Distribution Date (which shall be deemed
distributable
from
REMIC III to REMIC IV on account of REMIC III Regular
Interest
II-B-IO-I);
provided,
however,
that on
and after the
Distribution
Date on which the
aggregate
Current
Principal
Amount of the Class II-A or
Class II-B
Certificates
has been reduced to zero,
the Class II-B-IO
Distribution
Amount shall include
the Group II Overcollateralization
Amount (which shall be deemed distributable,
first, from REMIC III to
REMIC IV on account of REMIC III Regular
Interest
II-B-IO-I,
in respect of accrued and unpaid
interest
thereon
until such
accrued and unpaid
interest
shall have been reduced to zero and,
thereafter,
from
REMIC III to REMIC IV on account of REMIC III
Regular
Interest
II-B-IO-P,
in respect of the
principal
balance thereof).
Class
II-B-IO
Notional
Amount:
With respect to any
Distribution
Date and the Class
II-B-IO
Certificates, the aggregate of the Uncertificated Principal
Balances of the REMIC II Regular Interests.
Class II-B-IO
Pass-Through
Rate:
With respect to the Class II-B-IO
Certificates
or REMIC III
Regular
Interest
II-B-IO-I,
and any
Distribution
Date,
a per
annum
rate
equal
to the
percentage
equivalent
of a
fraction,
the
numerator
of which is the sum of the
amounts
calculated
pursuant
to
clauses (i) through (iii) below,
and the denominator of which is the aggregate
Uncertificated
Principal
Balance of the REMIC II
Regular
Interests.
For purposes of calculating
the
Pass-Through
Rate for the
Class II-B-IO Certificates, the numerator is equal to the sum of
the following components:
(i)
the
Uncertificated
Pass-Through
Rate for
REMIC II
Regular
Interest
LT5
minus the
related
Marker
Rate,
applied
to
a
notional
amount
equal
to
the
Uncertificated
Principal Balance of REMIC II Regular Interest LT5;
(ii)
the
Uncertificated
Pass-Through
Rate for
REMIC II
Regular
Interest
LT6
minus the
related
Marker
Rate,
applied
to
a
notional
amount
equal
to
the
Uncertificated
Principal Balance of REMIC II Regular Interest LT6; and
(iii)
the
Uncertificated
Pass-Through Rate for REMIC II Regular Interest LT8 minus twice the
related
Marker
Rate,
applied
to
a
notional
amount
equal
to
the
Uncertificated
Principal Balance of REMIC II Regular Interest LT8.
Class A Certificates:
The
Class I-A Certificates and the Class II-A Certificates.
Class B Certificates:
The Class I-B Certificates and the Class II-B Certificates.
Class B-IO Certificates:
The Class I-B-IO Certificates and the Class II-B-IO Certificates.
Class R
Certificate:
The
Class R
Certificates
substantially
in the form
annexed
hereto as
Exhibit
A-5 and
evidencing
ownership
of
interests
designated
as
"residual
interests"
in REMIC I,
REMIC II and REMIC III for purposes of the REMIC
Provisions.
Component I of the Class R Certificates
is
designated as the sole class of "residual
interest" in REMIC I,
Component II of the Class R Certificates
is
designated
as the sole class of
"residual
interest" in REMIC II
and
Component III
of the Class R
Certificates is designated as the sole class of "residual interest"
in REMIC III.
Class R-X
Certificates:
The Class R-X
Certificates
substantially
in the form annexed
hereto
as Exhibit A-6 and evidencing
ownership of the "residual
interest" in REMIC IV for purposes of the REMIC
Provisions.
Class X Certificates:
The Class I-X Certificates.
Class XP Certificates:
The Class I-XP Certificates and the Class II-XP Certificates.
Class XP Reserve
Account:
The account
established
and
maintained by the Trustee
pursuant to
Section 4.09 hereof.
Closing Date:
October 31, 2006.
Code:
The Internal Revenue Code of 1986, as amended.
Commission or SEC:
The U.S. Securities and Exchange Commission.
Compensating Interest Payment: As defined in Section 6.06.
Corporate Trust Office:
The designated
office of the Trustee,
where at any particular time its
corporate
trust
business
with
respect to this
Agreement
shall be
administered.
For the
purpose of
registration
and transfer and exchange only,
the Corporate
Trust Office of the Trustee shall be located
at Sixth Street and Marquette
Avenue,
Minneapolis,
Minnesota 55479,
Attention:
Corporate Trust Group,
Bear Stearns
Mortgage
Funding Trust
2006-AR3.
The Corporate Trust Office of the Trustee at the date of
the execution of this
Agreement for all other purposes is located at 9062 Old Annapolis
Road,
Columbia,
Maryland 21045, Attention: Corporate Trust Group, Bear Stearns
Mortgage Funding Trust 2006-AR3.
Counterparty:
Each of the Cap Counterparties or the Swap Counterparty, as the
text requires.
Coupon
Strip:
With
respect to Loan Group I, shall be an amount
equal to the lesser of (a) the
product of (i) 1.00%,
(ii) the
aggregate
Stated
Principal
Balance of the Group I Mortgage
Loans with
original
terms to maturity in excess of 30 years as of the Due Date
occurring in the month prior to such
Distribution
Date and (iii)
one-twelfth
and (b) the excess of (i) the Final
Maturity
Reserve
Account
Target for such
Distribution
Date over (ii) the amount on deposit in the Final Maturity
Reserve Account
immediately prior to such Distribution Date.
Coupon Strip Rate:
With respect to Loan Group I, shall equal the related
Coupon Strip,
if any,
payable to the Final Maturity
Reserve
Account on any
Distribution
Date,
expressed as a per annum rate
calculated
on the basis of the aggregate
Stated
Principal
Balance of the Group I Mortgage
Loans as of
such Distribution Date.
Credit Enhancement
Percentage:
For any Distribution Date is the percentage obtained by dividing
(x) the aggregate
Current
Principal
Amount of the
Subordinate
Certificates
in the related Loan Group
(including the related
Overcollateralization
Amount) thereto by (y) the aggregate
Principal
Balance of
the Mortgage
Loans in the related Loan Group,
calculated
after
taking into
account
distributions
of
principal on the related
Mortgage Loans and
distribution
of the Principal
Distribution
Amounts to the
holders of the related
Certificates
then
entitled to
distributions
of principal on such
Distribution
Date.
Cumulative
Loss Test
Violation:
The Group I
Cumulative
Loss Test
Violation
or the Group II
Cumulative Loss Test Violation, as applicable.
Current
Interest:
As
of
any
Distribution
Date,
with
respect
to
each
Class
of
Offered
Certificates,
the Underlying Certificates and the Class II-B-5 Certificates,
(i) the interest accrued on
the
Current
Principal
Amount or
Notional
Amount
during the related
Interest
Accrual
Period at the
applicable
Pass-Through
Rate plus any amount
previously
distributed
with respect to interest for such
Certificate
that has been
recovered as a voidable
preference by a trustee in bankruptcy
minus (1) with
respect to the Class A Certificates or Class B Certificates,
(ii) the sum of (a) any Prepayment
Interest
Shortfall for such
Distribution
Date, to the extent not covered by
Compensating
Interest
Payments and
(b) any
shortfalls
resulting
from the
application
of the Relief Act during the
related
Due
Period;
provided,
however,
that for
purposes
of
calculating
Current
Interest
for any such
Class,
amounts
specified in clauses
(ii)(a) and (ii)(b) hereof for any such
Distribution
Date shall be allocated first
to the related
Class B-IO
Certificates
and the related
Residual
Certificates
in reduction of amounts
otherwise
distributable
to such
Certificates
on such
Distribution
Date and then any excess
shall be
allocated to each other Class of
Certificates
in the related Loan Group pro rata based on the respective
amounts of interest accrued pursuant to clause (i) hereof for each
such Class on such
Distribution
Date,
(c) any Net
Deferred
Interest
allocated
to such Class,
and (d) the
interest
portion of any Realized
Losses on the related
Mortgage
Loans
allocated to such Class in the manner as described
herein and (2)
with respect to the Grantor Trust
Certificates,
the sum of any shortfalls
described in clauses (a), (b)
and (d) herein,
and to the extent the related
Swap
Agreement
is
terminated
and no
replacement
swap
agreement
has been
entered
into,
clause (c)
herein,
allocated
to the
related
Class of
Underlying
Certificates.
Current
Principal
Amount:
With
respect to any Class of Offered
Certificates
(other than the
Grantor Trust
Certificates),
the Underlying
Certificates
and the Class II-B-5
Certificates
as of any
Distribution
Date, the initial
principal
amount of such Certificate plus the amount of any Net Deferred
Interest allocated thereto on the related
Distribution Date and all previous
Distribution Dates plus any
Subsequent
Recoveries
added to the Current
Principal
Amount of such
Certificates
pursuant to Section
6.02(h)
hereof,
and
reduced by (i) all
amounts
distributed
on
previous
Distribution
Dates on such
Certificate with respect to principal and (ii) any
Applied Realized Loss Amounts
allocated to such Class
on previous
Distribution
Dates. With respect to any Class of Certificates,
the Current Principal Amount
thereof
will equal the sum of the
Current
Principal
Amounts of all
Certificates
in such
Class.
The
initial
Current
Principal
Amount for each Class of
Certificates
is set forth in Section
5.01(c)(iv).
With respect to the Grantor Trust
Certificates as of any Distribution
Date, the Current Principal Amount
thereof will equal the initial
principal
amount of such
Certificate
on the Closing Date, as reduced by
(i) all amounts
distributed on previous
Distribution Dates on such Certificate with respect to principal
and (ii) any Applied
Realized Loss Amounts
allocated to the related Class of Underlying
Certificates on
Previous
Distribution
Dates.
To the
extent the
related
Swap
Agreement
has been
terminated
and no
replacement
swap
agreement
has been entered
into,
the Current
Principal
Amount of the Grantor Trust
Certificates will be increased by the amount of any Net Deferred
Interest
allocated to the related Class
of Underlying Certificates.
Curtailment:
Any Principal
Prepayment made by a Mortgagor
which is not a Principal
Prepayment
in full.
Custodial
Account:
The trust
account
or
accounts
created
and
maintained
by the
Servicer
pursuant to Section 4.01,
which shall be denominated "Wells Fargo Bank, National Association,
as Trustee
f/b/o holders of Structured
Asset
Mortgage
Investments
II Inc.,
Bear Stearns
Mortgage
Funding Trust
2006-AR3,
Mortgage
Pass-Through
Certificates,
Series
2006-AR3,
Custodial
Account."
The
Custodial
Account shall be an Eligible Account.
Custodial
Agreement:
An
agreement,
dated as of the
Closing
Date
among the
Depositor,
the
Servicer, the Trustee and the Custodian in substantially the form
of Exhibit G hereto.
Custodian:
Wells
Fargo
Bank,
National
Association,
or
any
successor
custodian
appointed
pursuant to the provisions hereof and of the Custodial Agreement.
Cut-off Date:
October 1, 2006.
Cut-off Date Balance:
$811,440,974.74.
Deferred
Interest:
The amount of accrued
interest on the Mortgage Loans,
the payment of which
is
deferred
and
added
to the
Outstanding
Principal
Balance
of a
Mortgage
Loan
due
to
negative
amortization on such Mortgage Loan.
Deficient
Valuation:
A Bankruptcy
Loss that results if a court,
in connection with a personal
bankruptcy
of a
Mortgagor,
establishes
the value of a
Mortgaged
Property
at an amount less than the
unpaid principal balance of the Mortgage Loan secured by such
Mortgaged Property.
Delinquency
Recognition
Policies:
The generally
accepted
industry
standard that defines the
proper means of reporting
delinquency
status when a loan is
determined
to be delinquent if the payment
is not received by the end of the day immediately preceding the
loan's next due date.
Delinquency
Test
Violation:
A Group I
Delinquency
Test
Violation or a Group II
Delinquency
Test Violation, as applicable.
Delinquent:
A Mortgage Loan is
"Delinquent"
if any payment due thereon is not made pursuant to
the terms of such
Mortgage
Loan by the close of business on the day such payment is scheduled
to be due.
A Mortgage
Loan is "30 days
delinquent"
if such payment has not been
received by the close of business
on the last
day of the
month
immediately
succeeding
the
month in which
such
payment
was due.
For
example,
a
Mortgage
Loan with a
payment
due on
December
1 that
remained
unpaid as of the close of
business on January 31 would then be
considered
to be 30 to 59 days
delinquent.
Similarly for "60 days
delinquent," "90 days delinquent" and so on.
Depositor:
Structured
Asset
Mortgage
Investments
II Inc.,
a
Delaware
corporation,
or its
successors in interest.
Depository:
The Depository
Trust Company,
the nominee of which is Cede & Co., or any successor
thereto.
Depository Agreement:
The meaning specified in Section 5.01(a) hereof.
Depository
Participant:
A broker,
dealer, bank or other financial
institution or other Person
for whom
from
time to time the
Depository
effects
book-entry
transfers
and
pledges
of
securities
deposited with the Depository.
Designated Depository
Institution:
A depository
institution
(commercial bank, federal savings
bank,
mutual
savings
bank or savings
and loan
association)
or trust
company
(which may include the
Trustee), the deposits of which are fully insured by the FDIC to
the extent provided by law.
Determination
Date:
The 15th day (or if such 15th day is not a Business
Day,
the Business Day
immediately preceding such 15th day) of the month of the
Distribution Date.
Disqualified
Organization:
Any
of
the
following:
(i) the
United
States,
any
State
or
political
subdivision
thereof,
any possession of the United States, or any agency or
instrumentality of
any of the foregoing
(other than an
instrumentality
which is a corporation if all of its activities are
subject to tax and,
except for the
Freddie
Mac or any
successor
thereto,
a majority
of its board of
directors is not selected by such
governmental
unit),
(ii) any foreign
government,
any
international
organization,
or any agency or instrumentality
of any of the foregoing,
(iii) any
organization
(other
than certain
farmers'
cooperatives
described in
Section 521
of the Code) which is exempt from the tax
imposed by
Chapter 1 of the Code
(including
the tax
imposed by
Section 511
of the Code on
unrelated
business
taxable
income),
(iv)
rural
electric
and
telephone
cooperatives
described
in
Section 1381(a)(2)(C)
of the Code or (v) any other
Person so
designated
by the
Trustee
based upon an
Opinion of Counsel
that the holding of an
ownership
interest in a Residual
Certificate
by such Person
may cause any
2006-AR3
REMIC
contained in the Trust or any Person
having an ownership
interest in the
Residual
Certificate
(other than such Person) to incur a liability for any federal tax
imposed under the
Code that would not
otherwise
be imposed
but for the
transfer of an
ownership
interest in a Residual
Certificate to such Person.
The terms "United States,"
"State" and
"international
organization"
shall
have the meanings set forth in Section 7701 of the Code or
successor provisions.
Distribution
Account:
The trust
account or
accounts
created
and
maintained
by the Trustee
pursuant to Section 4.03,
which shall be denominated "Wells Fargo Bank, National Association,
as Trustee
f/b/o holders of Structured
Asset
Mortgage
Investments
II Inc.,
Bear Stearns
Mortgage
Funding Trust
2006-AR3,
Mortgage Pass-Through
Certificates,
Series 2006-AR3 - Distribution Account." The Distribution
Account shall be an Eligible Account.
Distribution Account Deposit Date:
The second Business Day prior to each Distribution Date.
Distribution
Date: The 25th day of any month,
beginning in the month immediately
following the
month of the Closing
Date,
or, if such 25th day is not a Business
Day,
the
Business
Day
immediately
following.
Distribution
Report:
The
Asset-Backed
Issuer
Distribution
Report
pursuant to Section 13 or
15(d) of the Exchange Act.
DTC
Custodian:
Wells
Fargo
Bank,
National
Association,
or its
successors
in
interest as
custodian for the Depository.
Due Date:
With
respect to each
Mortgage
Loan,
the date in each month on which its
Scheduled
Payment
is due if such due date is the first day of a month and
otherwise
is deemed to be the first day
of the following month.
Due
Period:
With
respect
to
any
Distribution
Date
and
each
Mortgage
Loan,
the
period
commencing on the second day of the month
preceding
the calendar
month in which the
Distribution
Date
occurs and ending at the close of
business on the first day of the month in which the
Distribution
Date
occurs.
Eligible Account:
Any of (i) a segregated
account
maintained with a federal or state chartered
depository
institution
(A) the
short-term
obligations
of which are rated A-1 or better by
Standard &
Poor's
and P-1 by Moody's at the time of any
deposit
therein or (B)
insured by the FDIC (to the limits
established
by such
Corporation),
the uninsured
deposits in which
account are otherwise
secured such
that, as evidenced by an Opinion of Counsel
(obtained by the Person
requesting
that the account be held
pursuant to this clause (i))
delivered to the Trustee prior to the
establishment
of such
account,
the
Certificateholders
will have a claim with
respect to the funds in such
account
and a
perfected
first
priority security interest against any collateral (which shall be
limited to Permitted
Investments,
each
of which shall mature not later than the Business Day
immediately
preceding the
Distribution
Date next
following
the
date of
investment
in
such
collateral
or the
Distribution
Date
if
such
Permitted
Investment is an obligation of the
institution
that maintains the
Distribution
Account)
securing such
funds
that is
superior
to
claims
of any other
depositors
or
general
creditors
of the
depository
institution
with
which
such
account
is
maintained,
(ii) a
segregated
trust
account
or
accounts
maintained
with a federal or state
chartered
depository
institution or trust company with trust powers
acting in its fiduciary
capacity or (iii) a
segregated
account or accounts of a depository
institution
acceptable
to the Rating
Agencies (as
evidenced in writing by the Rating
Agencies that use of any such
account as the Distribution
Account will not have an adverse effect on the then-current
ratings assigned
to the Classes of Certificates then rated by the Rating Agencies).
Eligible Accounts may bear interest.
EMC: EMC Mortgage Corporation, and any successor thereto.
ERISA: The Employee Retirement Income Security Act of 1974, as
amended.
Event of Default: As defined in Section 8.01.
Excess
Cashflow:
With
respect to any
Distribution
Date and each Loan
Group,
the sum of (i)
Remaining
Excess
Spread for such Loan Group and such
Distribution
Date and (ii)
Overcollateralization
Release Amount for such Loan Group and for such Distribution Date.
Excess
Liquidation
Proceeds:
To the extent that such amount is not
required by law to be paid
to the related Mortgagor,
the amount, if any, by which Liquidation
Proceeds with respect to a Liquidated
Mortgage Loan exceed the sum of (i) the
Outstanding
Principal
Balance of such Mortgage Loan and accrued
but unpaid interest at the related
Mortgage
Interest Rate through the last day of the month in which the
related Liquidation Date occurs, plus (ii) related Liquidation
Expenses.
Excess
Overcollateralization:
With respect to any
Distribution
Date and each Loan Group,
the
excess,
if any, of the
Overcollateralization
Amount for such Loan Group over the
Overcollateralization
Target Amount for such Loan Group.
Excess Spread:
With respect to any Distribution
Date and each Loan Group,
the excess,
if any,
of the related
Interest
Funds for such
Distribution
Date over the sum (i) with respect to Loan Group I
only,
the Coupon Strip,
if applicable,
(ii) the Current
Interest on the related
Offered
Certificates
(other
than
the
Grantor
Trust
Certificates),
the
Underlying
Certificates
and
the
Class
II-B-5
Certificates
and (iii) any Interest
Carry Forward
Amounts on the related
Senior
Certificates
on such
Distribution Date.
Exchange Act:
Securities Exchange Act of 1934, as amended.
Exchange
Act Reports:
Any reports
required to be filed
pursuant to Sections
3.17 and 3.18 of
this Agreement.
Extra Principal
Distribution
Amount: With respect to any Distribution Date and each Loan Group,
the lesser of (i) the excess, if any, of the
Overcollateralization
Target Amount for such Loan Group and
such
Distribution
Date over the
Overcollateralization
Amount for such Loan Group and such Distribution
Date and (ii) the Excess Spread for such Loan Group and such
Distribution Date.
Fannie Mae:
Federal National Mortgage Association and any successor thereto.
Fannie
Mae
Guide:
The Fannie Mae
Selling
Guide and the
Fannie Mae
Servicing
Guide and all
amendments or additions thereto.
FDIC:
Federal Deposit Insurance Corporation and any successor thereto.
Final
Certification:
The
certification
substantially
in the
form
of
Exhibit Three
to the
Custodial Agreement.
Final Maturity
Reserve Account:
The separate account
established and maintained by the Trustee
pursuant to Section
4.10 hereof.
Amounts on deposit in the Final
Maturity
Reserve
Account will not be
an asset of any 2006-AR3 REMIC.
Final
Maturity
Reserve
Account
Target:
For
any
Distribution
Date
beginning
with
the
Distribution
Date in November 2016, the lesser of (a) the product of (i) the
aggregate
principal balance
of the Group I Mortgage
Loans with
original
terms to
maturity in excess of 30 years as of the Due Date
occurring in the month prior to such
Distribution
Date and (ii) the fraction,
the numerator of which is
1.00 and the denominator of which is 0.85, and (b) $19,423,675.
Fiscal
Quarter:
December 1 through
the last day of
February,
March 1 through
May 31, June 1
through August 31, or September 1 through November 30, as
applicable.
Form 8-K Disclosure Information:
As defined in Section 3.18(a)(iii).
Fractional
Undivided Interest:
With respect to any Class of
Certificates (other than the Class
XP
Certificates),
the
fractional
undivided
interest
evidenced by any
Certificate
of such Class the
numerator of which is the Current
Principal
Amount of such
Certificate
and the denominator of which is
the Current
Principal
Amount of such Class.
With respect to the Class XP
Certificates,
the percentage
interest
stated thereon.
With respect to the
Certificates
in the aggregate,
the fractional
undivided
interest
evidenced by (i) the Residual
Certificates
will be deemed to equal 1.0% and (ii) a Certificate
of any other Class will be deemed to equal 99.0%
multiplied by a fraction,
the numerator of which is the
Current
Principal
Amount of such
Certificate
and the
denominator
of which is the
aggregate
Current
Principal Amount of all the Certificates of such Class.
Freddie
Mac:
Freddie
Mac,
formerly
the
Federal
Home
Loan
Mortgage
Corporation,
and any
successor thereto.
Freddie Mac Guide:
The Freddie Mac
Selling
Guide and the Freddie Mac
Servicing
Guide and all
amendments or additions thereto.
Global
Certificate:
Any Private
Certificate
registered
in the name of the
Depository or its
nominee,
beneficial
interests in which are reflected on the books of the Depository or
on the books of a
Person maintaining an account with such Depository
(directly or as an indirect
participant in accordance
with the rules of such depository).
Grantor Trust:
The corpus of the Trust created under the Grantor Trust Agreement.
Grantor Trust
Agreement:
The grantor
trust
agreement,
dated as of October 31, 2006,
between
the Depositor and the Grantor Trustee.
Grantor Trust
Certificates:
The Grantor Trust Class I-A-2B
Certificates
and the Grantor Trust
Class II-A-2B
Certificates
issued by the Grantor Trust on the Closing Date pursuant to the
Grantor Trust
Agreement.
Grantor Trustee:
Wells Fargo Bank, National Association.
Gross Margin:
As to each Mortgage Loan, the fixed
percentage set forth in the related
Mortgage
Note and indicated on the Mortgage Loan
Schedule
which
percentage is added to the related Index on each
Interest
Adjustment Date to determine
(subject to rounding,
the minimum and maximum
Mortgage
Interest
Rate and the Periodic Rate Cap) the Mortgage Interest Rate until
the next Interest Adjustment Date.
Group I Certificates:
The Class I-A, Class I-X and Class I-B Certificates.
Group I Cumulative Loss Test Violation:
If on any
Distribution
Date if the aggregate amount of
Realized
Losses on the Group I Mortgage
Loans
incurred
since the Cut-off
Date through the last day of
the related
Prepayment
Period divided by the aggregate
Principal
Balance of the Group I Mortgage Loans
as of the
Cut-off
Date
exceeds
the
applicable
percentages
set
forth
below
with
respect
to such
Distribution Date:
Distribution Date Occurring in
Percentage
November 2009 through October 2010
0.45%
November 2010 through October 2011
075%
November 2011 through October 2012
1.10%
November 2012 through October 2013
1.50%
November 2013 and thereafter
1.65%
Group I Delinquency
Test
Violation:
If on any
Distribution
Date, the percentage
obtained by
dividing (x) the aggregate
Outstanding
Principal
Balance of Group I Mortgage
Loans that are 60 days or
more
Delinquent
or are in
bankruptcy
or
foreclosure
or
are
REO
Properties
by (y)
the
aggregate
Outstanding
Principal
Balance of the Group I
Mortgage
Loans,
in each case,
as of the last day of the
previous
calendar
month,
exceeds
(i) prior to the
Distribution
Date in October
2012,
26.75% of the
Credit Enhancement Percentage and (ii) on or after the Distribution
Date in October 2012, 33.50%.
Group I Mortgage Loans:
The Mortgage Loans identified as such on the Mortgage Loan
Schedule.
Group I Offered
Certificates:
The Class I-A-1, Class I-A-2A,
Grantor Trust Class I-A-2B, Class
I-A-3,
Class I-X,
Class I-B-1,
Class I-B-2,
Class I-B-3,
Class I-B-4, Class I-B-5, Class I-B-6, Class
I-B-7, Class I-B-8 and Class I-B-9 Certificates.
Group I
Overcollateralization
Amount:
With respect to any
Distribution
Date, the excess,
if
any,
of (i) the
aggregate
principal
balance
of the Group I
Mortgage
Loans as of the last day of the
related Due Period
(after
giving
effect to scheduled
payments of principal
due during the related Due
Period, to the extent received or advanced,
and unscheduled
collections of principal received during the
related
Prepayment
Period,
and after
reduction
for
Realized
Losses on the
Group I
Mortgage
Loans
incurred during the related
Prepayment
Period) over (ii) the aggregate
Current
Principal Amount of the
Class I-A
Certificates
and the
Class
I-B
Certificates,
taking
into
account
the
distributions
of
principal, less Net Deferred Interest, to be made on such
Distribution Date.
Group I
Overcollateralization
Release Amount: With respect to Loan Group I and any Distribution
Date for which the
related
Excess
Overcollateralization
Amount
is, or would
be,
after
taking
into
account all other
distributions to be made on that Distribution
Date, greater than zero, an amount equal
to the lesser of (i) the related Excess
Overcollateralization
Amount for such Distribution Date and (ii)
related Principal Funds for that Distribution Date.
Group I
Overcollateralization
Target Amount:
With respect to Loan Group I and any Distribution
Date,
(i) prior to the Stepdown
Date,
an amount equal to 1.40% of the
aggregate
principal
balance of
the Group I Mortgage
Loans as of the Cut-off
Date,
(ii) on or after the related
Stepdown Date provided
a Group I
Trigger
Event is not in
effect,
the
greater
of (x) (1) prior to the
Distribution
Date in
October 2012, 3.500% of the then current aggregate
outstanding
Principal Balance of the Group I Mortgage
Loans as of the last day of the
related
Due
Period
(after
giving
effect
to
scheduled
payments
of
principal
due during the
related
Due
Period,
to the extent
received
or
advanced,
and
unscheduled
collections of principal
received during the related
Prepayment Period, and after reduction for Realized
Losses on the Group I Mortgage Loans incurred
during the related
Prepayment
Period) and (2) on or after
the
Distribution
Date in
October
2012,
2.800% of the then
current
aggregate
Outstanding
Principal
Balance of the Group I Mortgage
Loans as of the last day of the related Due Period
(after
giving effect
to
scheduled
payments
of
principal
due during the
related
Due
Period,
to the extent
received
or
advanced,
and unscheduled
collections of principal
received during the related
Prepayment
Period, and
after reduction for Realized
Losses on the Group I Mortgage Loans incurred during the related
Prepayment
Period) and (y) 0.50% of the aggregate
principal
balance of the Group I Mortgage Loans as of the Cut-Off
Date
($2,165,507.51)
or (iii) on or after the related Stepdown Date and if a Group I
Trigger Event is in
effect, the Group I Overcollateralization Target Amount for the
immediately preceding Distribution Date.
Group I Principal
Distribution
Amount:
With respect to each Distribution Date, an amount equal
to (i) the
Principal
Funds for Loan Group I for such
Distribution
Date,
plus (ii) any Extra Principal
Distribution
Amount with respect to Loan Group I for such
Distribution
Date,
minus
(iii) any
Group I
Overcollateralization Release Amount for such Distribution Date.
Group I Significance
Estimate:
With respect to any
Distribution
Date, and in accordance
with
Item 1115 of Regulation AB, shall be an amount determined based on
the reasonable
good-faith
estimate by
the Depositor of the aggregate
maximum probable
exposure of (i) the outstanding
Group I Certificates to
the related Cap Contract and (ii) the outstanding
Grantor Trust Class I-A-2B
Certificates to the related
Swap Agreement, as applicable.
Group I Significance
Percentage:
With respect to any Distribution
Date, and in accordance with
Item 1115 of Regulation AB, shall be an percentage
equal to the Group I Significance
Estimate divided by
the
aggregate
outstanding
Certificate
Principal
Balance
of the
Group I
Certificates,
prior to the
distribution of the related Principal Distribution Amount on such
Distribution Date.
Group II Certificates:
The Class II-A Certificates and the Class II-B Certificates.
Group I Trigger
Event:
The
occurrence
of either a Group I
Delinquency
Test
Violation
or a
Group I Cumulative Loss Test Violation.
Group II Cumulative Loss Test Violation:
If on any
Distribution
Date, the aggregate
amount of
Realized
Losses on the Group II Mortgage
Loans
incurred
since the Cut-off Date through the last day of
the related
Prepayment
Period divided by the aggregate
Principal Balance of the Group II Mortgage Loans
as of the
Cut-off
Date
exceeds
the
applicable
percentages
set
forth
below
with
respect
to such
Distribution Date:
Distribution Date Occurring in
Percentage
November 2009 through October 2010
0.35%
November 2010 through October 2011
0.65%
November 2011 through October 2012
0.95%
November 2012 through October 2013
1.30%
November 2013 and thereafter
1.40%
Group II Delinquency
Test Violation:
If on any
Distribution
Date, the percentage
obtained by
dividing (x) the aggregate
Outstanding
Principal
Balance of Group II Mortgage Loans that are 60 days or
more
Delinquent
or are in
bankruptcy
or
foreclosure
or
are
REO
Properties
by (y)
the
aggregate
Outstanding
Principal
Balance of the Group II Mortgage
Loans,
in each case,
as of the last day of the
previous
calendar
month,
exceeds
(i) prior to the
Distribution
Date in October
2012,
27.00% of the
Credit Enhancement Percentage and (ii) on or after the Distribution
Date in October 2012, 33.75%.
Group II Mortgage Loans:
The Mortgage Loans identified as such on the Mortgage Loan
Schedule.
Group II Offered
Certificates:
The Class II-A-1,
Class II-A-2A,
Grantor Trust II-A-2B,
Class
II-A-3, Class II-B-1, Class II-B-2, Class II-B-3 and Class II-B-4
Certificates.
Group II
Overcollateralization
Amount:
With respect to any Distribution
Date, the excess,
if
any,
of (i) the
aggregate
principal
balance of the Group II
Mortgage
Loans as of the last day of the
related Due Period
(after
giving
effect to scheduled
payments of principal
due during the related Due
Period, to the extent received or advanced,
and unscheduled
collections of principal received during the
related
Prepayment
Period,
and after
reduction
for
Realized
Losses on the Group II
Mortgage
Loans
incurred during the related
Prepayment
Period) over (ii) the aggregate
Current
Principal Amount of the
Class II-A
Certificates and the Class II-B
Certificates,
after taking into account the distributions of
principal, less Net Deferred Interest, to be made on such
Distribution Date.
Group
II
Overcollateralization
Release
Amount:
With
respect
to
Loan
Group
II
and
any
Distribution
Date for
which the
related
Excess
Overcollateralization
Amount
is, or would be,
after
taking into account all other
distributions to be made on that Distribution
Date,
greater than zero, an
amount equal to the lesser of (i) the related Excess
Overcollateralization
Amount for that
Distribution
Date and (ii) related Principal Funds for that Distribution Date.
Group II
Overcollateralization
Target Amount: With respect to any Distribution Date,
(i) prior
to the related Stepdown Date, an amount equal to .75% of the
aggregate
principal
balance of the Group II
Mortgage
Loans as of the Cut-off
Date,
(ii) on or after the related
Stepdown
Date provided a Group II
Trigger
Event is not in effect,
the greater of (x) (1) prior to the
Distribution
Date in October 2012,
1.875% of the then current
aggregate
outstanding
Principal Balance of the Group II Mortgage Loans as of
the last day of the related Due Period
(after
giving
effect to
scheduled
payments
of
principal
due
during the
related
Due Period,
to the extent
received or
advanced,
and
unscheduled
collections
of
principal
received during the related
Prepayment
Period, and after reduction for Realized Losses on the
Group II
Mortgage
Loans
incurred
during
the
related
Prepayment
Period)
and
(2) on
or after
the
Distribution Date in October 2012, 1.500% of the then current
aggregate
Outstanding
Principal Balance of
the
Group II
Mortgage
Loans as of the last day of the
related
Due
Period
(after
giving
effect
to
scheduled
payments of principal
due during the related Due Period,
to the extent
received or advanced,
and
unscheduled
collections
of
principal
received
during the related
Prepayment
Period,
and after
reduction
for
Realized
Losses on the Group II Mortgage
Loans
incurred
during the related
Prepayment
Period)
and (y)
0.50% of the
aggregate
principal
balance
of the
Group II
Mortgage
Loans as of the
Cut-Off Date
($1,891,697.36)
or (iii) on or after the related Stepdown Date and if a Trigger
Event is in
effect, the Group II Overcollateralization Target Amount for the
immediately preceding Distribution Date.
Group II
Principal
Distribution
Amount:
With
respect to each
Distribution
Date,
an amount
equal to (i) the
Principal
Funds for Loan
Group II for such
Distribution
Date,
plus
(ii) any
Extra
Principal
Distribution
Amount with respect to Loan Group II for such Distribution
Date, minus (iii) any
Group II Overcollateralization Release Amount for such Distribution
Date.
Group II Significance
Estimate:
With respect to any
Distribution
Date, and in accordance with
Item 1115 of Regulation AB, shall be an amount determined based on
the reasonable
good-faith
estimate by
the Depositor of the aggregate
maximum probable
exposure of (i) the outstanding Group II Certificates to
the related
Cap
Contract
and (ii) the
outstanding
Grantor
Trust Class
II-A-2B
Certificates
to the
related Swap Agreement, as applicable.
Group II Significance
Percentage:
With respect to any Distribution Date, and in accordance with
Item 1115 of Regulation AB, shall be an percentage
equal to the Group II
Significance
Estimate
divided
by the aggregate
outstanding
Certificate
Principal
Balance of the Group II Certificates,
prior to the
distribution of the related Principal Distribution Amount on such
Distribution Date.
Group II Trigger
Event:
The
occurrence of either a Group II
Delinquency
Test
Violation or a
Group II Cumulative Loss Test Violation.
Hard
Prepayment
Charge Loan:
Any Group I Mortgage
Loan for which a "hard"
Prepayment
Charge
may be assessed, as indicated on the Mortgage Loan Schedule.
Holder:
The
Person in whose name a
Certificate
is
registered
in the
Certificate
Register,
except
that,
subject to Sections
11.02(b)
and
11.05(e),
solely for the purpose of giving any consent
pursuant to this Agreement,
any Certificate registered in the name of the Depositor,
the Servicer or the
Trustee or any
Affiliate
thereof
shall be deemed not to be
outstanding
and the
Fractional
Undivided
Interest
evidenced
thereby
shall
not be taken
into
account
in
determining
whether
the
requisite
percentage of Fractional Undivided Interests necessary to effect
any such consent has been obtained.
Indemnified
Persons:
The Trustee and the Custodian and their
officers,
directors,
agents and
employees and, with respect to the Trustee,
any separate co-trustee and its officers,
directors,
agents
and employees.
Independent:
When used with respect to any
specified
Person,
this term means that such Person
(a) is in fact
independent
of the Depositor or the Servicer and of any Affiliate of the
Depositor or the
Servicer,
(b) does not have any direct financial
interest or any material indirect financial interest in
the
Depositor or the Servicer or any
Affiliate of the Depositor or the Servicer and (c) is not connected
with the
Depositor
or the
Servicer or any
Affiliate as an officer,
employee,
promoter,
underwriter,
trustee, partner, director or person performing similar functions.
Index:
The
index,
if any,
specified
in a Mortgage
Note by
reference
to which the
related
Mortgage Interest Rate will be adjusted from time to time.
Individual
Certificate:
Any
Private
Certificate
registered
in the name of the Holder
other
than the Depository or its nominee.
Initial
Certification:
The
certification
substantially
in the
form
of
Exhibit One
to the
Custodial Agreement.
Institutional
Accredited Investor:
Any Person meeting the requirements of Rule 501(a)(l),
(2),
(3) or (7) of
Regulation
D under the
Securities
Act or any entity
all of the equity
holders in which
come within such paragraphs.
Insurance
Policy:
With respect to any Mortgage
Loan,
any standard
hazard
insurance
policy,
flood insurance policy or title insurance policy.
Insurance
Proceeds:
Amounts
paid by the
insurer
under
any
Insurance
Policy
covering
any
Mortgage
Loan or
Mortgaged
Property
other
than
amounts
required
to be paid
over to the
Mortgagor
pursuant to law or the
related
Mortgage
Note or
Security
Instrument
and other than
amounts
used to
repair or restore
the
Mortgaged
Property
or to
reimburse
insured
expenses,
including
the
related
Servicer's costs and expenses
incurred in connection with presenting
claims under the related
Insurance
Policies.
Interest
Accrual
Period:
For
each
of the
Offered
Certificates
(other
than
the
Class
X
Certificates),
the Underlying
Certificates
and the Class II-B-5
Certificates
and for any Distribution
Date,
the
period
commencing
on the
Distribution
Date in the
month
preceding
the
month in which a
Distribution
Date occurs (or the Closing
Date,
in the case of the first
Interest
Accrual
Period) and
ending on the day immediately
prior to such
Distribution
Date. For each of the Class X Certificates and
for any
Distribution
Date,
the one-month
period
preceding the month in which such
Distribution
Date
occurs.
Interest
Adjustment
Date:
With respect to a Mortgage Loan, the date, if any,
specified in the
related Mortgage Note on which the Mortgage Interest Rate is
subject to adjustment.
Interest
Carry Forward
Amount:
As of any
Distribution
Date and with respect to each Class of
Offered
Certificates,
the Underlying
Certificates and the Class II-B 5 Certificates and as of the first
Distribution
Date, zero, and for each Distribution Date thereafter,
the sum of (i) the excess of (a) the
Current
Interest for such Class with
respect to prior
Distribution
Dates over (b) the amount
actually
distributed
to such Class of
Certificates
with respect to interest on or after such prior
Distribution
Dates,
and (ii)
interest on such excess (to the extent
permitted by applicable
law) at the
applicable
Pass-Through
Rate for such Class for the related
Interest
Accrual Period including the Interest Accrual
Period relating to such Distribution Date.
Interest Funds:
With respect to each Loan Group and any Distribution
Date, (i) the sum, without
duplication,
of (a) all scheduled
interest collected in respect to the related Mortgage Loans during
the
related Due Period less the related
Servicing
Fee and any related
amounts to be
reimbursed to EMC, the
Servicer,
the Trustee
and the
Custodian
as
provided
herein,
(b) all
Monthly
Advances
relating to
interest with respect to the related Mortgage Loans made on or
prior to the related
Distribution
Account
Deposit
Date,
(c) all
Compensating
Interest
Payments with respect to the related
Mortgage
Loans and
required to be remitted by the
Servicer
pursuant to this
Agreement
with
respect to such
Distribution
Date,
(d)
Insurance
Proceeds,
Liquidation
Proceeds
and
Subsequent
Recoveries
with
respect to the
Mortgage Loans
collected
during the related
Prepayment
Period,
to the extent such proceeds
relate to
interest,
less all Nonrecoverable
Advances relating to interest and certain expenses, in each case,
with
respect to the
Mortgage
Loans in the Related
Loan
Group,
(e) all
amounts
relating to interest
with
respect to each
Mortgage Loan in the related Loan Group
purchased by the Depositor
pursuant to Sections
2.02, 2.03 or 3.21 during the related Due Period less all
Non-Recoverable
Advances relating to interest,
(f) all amounts in respect of interest
paid by the Depositor
pursuant to Section 10.01
allocated to the
related
Loan Group,
in each case to the extent
remitted by the
Servicer
to the
Distribution
Account
pursuant
to this
Agreement,
(g) the amount of any
Principal
Prepayments
in full,
partial
Principal
Prepayments,
Net Liquidation
Proceeds,
Repurchase Proceeds and scheduled
principal
payments,
in that
order,
allocated to the related Loan Group,
included in Available Funds for such
Distribution Date that
are applied in connection
with any Deferred
Interest in accordance
with the
definition of Net Deferred
Interest
to EMC,
the
Depositor,
the
Servicer or the
Trustee
and (h) any
amounts
deposited
in the
Adjustable
Rate
Supplemental
Fund and available for
distribution
to the Group I Certificates
and the
Group II Certificates,
as applicable,
on such
Distribution
Date in accordance with Section 4.05, minus
(ii) all amounts
relating to interest
required to be reimbursed
pursuant to Sections 4.01,
4.03,
4.04
and 4.05 and allocated to the related Loan Group or as otherwise
set forth in this Agreement.
Interest
Shortfall:
With respect to any
Distribution
Date and each
Mortgage Loan that during
the related
Prepayment
Period was the
subject of a Principal
Prepayment
or
constitutes
a Relief Act
Mortgage Loan, an amount determined as follows:
(a)
Partial principal
prepayments
(other than any collections on REO Property treated as a
Curtailment
pursuant
to
Section
3.15(b))
received
during
the
related
Prepayment
Period:
The
difference
between (i) one
month's
interest at the applicable Net Rate on the amount of such
prepayment
and (ii) the
amount of interest for the calendar
month of such
prepayment
(adjusted to the
applicable
Net Rate) received at the time of such prepayment;
(b)
Principal
prepayments
in full
received
during the relevant
Prepayment
Period:
The
difference
between (i) one month's
interest at the applicable Net Rate on the Stated
Principal
Balance
of such
Mortgage
Loan
immediately
prior to such
prepayment
and
(ii) the
amount of interest for the
calendar
month of such
prepayment
(adjusted to the
applicable
Net Rate)
received at the time of such
prepayment; and
(c)
Relief Act
Mortgage
Loans:
As to any Relief Act Mortgage
Loan,
the excess of (i) 30
days'
interest (or, in the case of a principal
prepayment in full,
interest to the date of
prepayment)
on the Stated
Principal
Balance
thereof
(or, in the case of a
principal
prepayment
in part,
on the
amount so prepaid) at the related Net Rate over
(ii) 30
days'
interest
(or, in the case of a principal
prepayment
in full,
interest to the date of
prepayment)
on such Stated
Principal
Balance (or, in the
case of a Principal
Prepayment
in part,
on the amount so prepaid) at the annual
interest rate required
to be paid by the Mortgagor as limited by application of the Relief
Act.
Interest-Only Certificates: The Class X Certificates and the Class
B-IO Certificates.
Interim
Certification:
The
certification
substantially
in the
form
of
Exhibit Two
to the
Custodial Agreement.
Investment
Letter: The letter to be furnished by each
Institutional
Accredited
Investor which
purchases any of the Private
Certificates
in connection
with such purchase,
substantially
in the form
set forth as Exhibit F-1 hereto.
LIBOR
Business
Day:
Any day
other
than a
Saturday
or a Sunday
or a day on
which
banking
institutions in the city of London, England are required or
authorized by law to be closed.
LIBOR
Determination
Date: With respect to each Class of Offered
Certificates and for the first
Interest
Accrual
Period,
October 27,
2006.
With
respect to each Class of Offered
Certificates,
the
Underlying
Certificates and the Class II-B-5
Certificates
and any Interest
Accrual Period
thereafter,
the second LIBOR Business Day preceding the commencement of such
Interest Accrual Period.
Liquidated
Mortgage
Loan:
Any defaulted
Mortgage Loan as to which the Servicer has determined
that all amounts it expects to recover from or on account of such
Mortgage Loan have been recovered.
Liquidation
Date:
With respect to any Liquidated
Mortgage Loan, the date on which the Servicer
has certified that such Mortgage Loan has become a Liquidated
Mortgage Loan.
Liquidation
Expenses:
With respect to a Mortgage
Loan in
liquidation,
unreimbursed
expenses
paid or
incurred
by or for the
account of the
Servicer
in
connection
with the
liquidation
of such
Mortgage
Loan and the related
Mortgaged
Property,
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 trustee's sale,
foreclosure sale,
Insurance
Proceeds,
condemnation
proceeds or
otherwise and Subsequent Recoveries.
Loan Group:
Loan Group I or Loan Group II, as applicable.
Loan
Group I: The
group of
Mortgage
Loans
designated
as
belonging
to Loan
Group I on the
Mortgage Loan Schedule.
Loan
Group II: The group of
Mortgage
Loans
designated
as
belonging
to Loan Group II on the
Mortgage Loan Schedule.
Loan-to-Value
Ratio:
With
respect
to
any
Mortgage
Loan,
the
fraction,
expressed
as
a
percentage,
the
numerator of which is the original
principal
balance of the related
Mortgage Loan and
the denominator of which is the Original Value of the related
Mortgaged Property.
Loss Allocation Limitation:
The meaning specified in Section 6.02(c) hereof.
Lost Notes:
The original
Mortgage
Notes that have been lost, as indicated on the Mortgage Loan
Schedule.
Margin:
With
respect
to any
Distribution
Date on or prior
to the
first
possible
Optional
Termination
Date for the related Loan Group and the Class I-A-1,
Class I-A-2A,
Underlying Class I-A-2B,
Grantor
Trust Class
I-A-2B,
Class I-A-3,
Class I-B-1,
Class I-B-2,
Class I-B-3,
Class I-B-4,
Class
I-B-5, Class I-B-6, Class I-B-7, Class I-B-8, Class I-B-9, Class
II-A-1,
Class II-A-2A,
Underlying Class
II-A-2B,
Grantor Trust Class
II-A-2B,
Class II-A-3,
Class II-B-1,
Class II-B-2,
Class II-B-3,
Class
II-B-4 and Class II-B-5 Certificates will be 0.180%,
0.240%,
0.240%,
0.240%,
0.270%,
0.370%,
0.400%,
0.430%,
0.540%,
0.590%,
0.630%, 1.150%, 1.400%, 2.100%, 0.200%, 0.240%, 0.230%, 0.230%,
0.290%, 0.370%,
0.550%,
1.400%,
2.150% and 2.150%,
per annum,
respectively,
provided
that,
after the first possible
related
Optional
Termination
Date,
the related
margin with respect to the Class I-A-1,
Class I-A-2A,
Underlying Class I-A-2B,
Grantor Trust Class I-A-2B,
Class I-A-3, Class I-B-1, Class I-B-2, Class I-B-3,
Class I-B-4,
Class I-B-5,
Class I-B-6 and Class I-B-7,
Class I-B-8,
Class I-B-9,
Class II-A-1,
Class
II-A-2A,
Underlying
Class
II-A-2B,
Grantor
Trust Class
II-A-2B,
Class II-A-3,
Class II-B-1,
Class
II-B-2, Class II-B-3, Class II-B-4 and Class II-B-5 Certificates
will be 0.360%,
0.480%,
0.480%, 0.480%,
0.540%,
0.555%,
0.600%,
0.645%, 0.810%, 0.885%, 0.945%, 1.725%, 2.100%, 3.150%, 0.400%,
0.480%, 0.460%,
0.460%, 0.580%, 0.555%, 0.825%, 2.100%, 3.225% and 3.225%,
per annum, respectively.
Marker
Rate:
With
respect
to the Class
I-B-IO
Certificates
or REMIC III
Regular
Interest
I-B-IO-I and any
Distribution
Date, a per annum rate equal to two (2) times the weighted
average of the
Uncertificated
REMIC I Pass-Through
Rates for REMIC I Regular
Interest LT2 and REMIC I Regular Interest
LT3.
With respect to the Class
II-B-IO
Certificates
or REMIC III Regular
Interest
II-B-IO-I
and any
Distribution
Date,
a per annum rate equal to two (2) times the
weighted
average of the
Uncertificated
REMIC II Pass-Through Rates for REMIC II Regular Interest LT6 and
REMIC II Regular Interest LT7.
Material Defect:
The meaning specified in Section 2.02(a).
Maximum
Coupon
Strip:
With respect to Loan Group I, shall be an amount equal to the
product of
(i) 1.00%,
(ii) the aggregate Stated Principal Balance of the Group I Mortgage
Loans
with original terms
to
maturity
in
excess
of
30
years
as
of
the
Due
Date
occurring
in
the
month
prior
to
such Distribution Date and (iii)one-twelfth.
Maximum Coupon Strip Rate: On any
Distribution
Date
occurring in or after
November
2016, the
Coupon Strip Rate
modified by replacing
the term "Coupon
Strip" with the term
"Maximum
Coupon
Strip"
wherever it appears in the definition of "Coupon Strip Rate."
Maximum
Lifetime
Mortgage Rate: The maximum level to which a Mortgage
Interest Rate can adjust
in accordance with its terms, regardless of changes in the
applicable Index.
MERS:
Mortgage
Electronic
Registration
Systems,
Inc., a
corporation
organized and existing
under the laws of the State of Delaware, or any successor thereto.
MERS® System: The system of recording
transfers of Mortgage Loans
electronically
maintained by
MERS.
MIN: The Mortgage
Identification
Number for Mortgage
Loans
registered
with MERS on the MERS®
System.
Minimum
Lifetime
Mortgage Rate: The minimum level to which a Mortgage
Interest Rate can adjust
in accordance with its terms, regardless of changes in the
applicable Index.
Modified
Net Rate Cap:
For any
Distribution
Date and Loan Group I, the
related
Net Rate Cap
modified by replacing
the term "Coupon
Strip Rate" with the term
"Maximum
Coupon Strip Rate"
wherever
it appears in the definition of "Net Rate Cap" with respect to Loan
Group I.
MOM Loan:
With
respect to any Mortgage
Loan,
MERS acting as the
mortgagee
of such
Mortgage
Loan,
solely as nominee for the originator of such Mortgage Loan and its
successors and assigns,
at the
origination thereof.
Monthly
Advance:
An advance of interest
required to be made by the
Servicer or the Trustee as
successor servicer pursuant to Section 6.05.
Monthly
Payments:
For any
Mortgage
Loan and any
month,
the
minimum
scheduled
payment
or
payments of principal
and interest
due during such month on such
Mortgage
Loan which either is payable
by a Mortgagor
in such month under the related
Mortgage
Note or in the case of any
Mortgaged
Property
acquired through
foreclosure or deed in lieu of foreclosure,
would otherwise have been payable under the
related Mortgage Note.
Monthly Statement:
The statement delivered to the Certificateholders pursuant to
Section 6.04.
Moody's:
Moody's Investors Service, Inc. or its successor in interest.
Mortgage:
The mortgage,
deed of trust or other instrument
creating a first priority lien on an
estate in fee simple or leasehold interest in real property
securing a Mortgage Loan.
Mortgage
File:
The mortgage
documents
listed in
Section 2.01(b)
pertaining
to a particular
Mortgage
Loan and any
additional
documents
required to be added to the Mortgage
File pursuant to this
Agreement.
Mortgage
Interest
Rate:
The annual
rate at which
interest
accrues
from time to time on any
Mortgage
Loan
pursuant to the related
Mortgage
Note,
which rate is initially
equal to the
"Mortgage
Interest Rate" set forth with respect thereto on the Mortgage Loan
Schedule.
Mortgage Loan: A mortgage loan
transferred
and assigned to the Trust
pursuant to
Section 2.01
and held as a part of the Trust Fund, as identified
in the Mortgage Loan Schedule
(which shall
include,
without
limitation,
with
respect to each
Mortgage
Loan,
each
related
Mortgage
Note,
Mortgage and
Mortgage
File and all rights
appertaining
thereto),
including a mortgage
loan the
property
securing
which has become an REO Property.
Mortgage Loan Purchase
Agreement:
The Mortgage Loan Purchase
Agreement dated as of October 31,
2006,
between EMC, as mortgage
loan seller,
and
Structured
Asset
Mortgage
Investments
II Inc.,
as
purchaser, and all amendments thereof and supplements thereto,
attached as Exhibit H.
Mortgage Loan Documents:
The original Mortgage Loan legal documents held by the Custodian.
Mortgage
Loan
Schedule:
The
schedule,
attached
hereto
as
Exhibit B
with
respect
to the
Mortgage
Loans,
as amended from time to time to reflect the repurchase or
substitution of Mortgage Loans
pursuant to this Agreement or the Mortgage Loan Purchase Agreement,
as the case may be.
Mortgage
Note:
The
originally
executed
note
or
other
evidence
of the
indebtedness
of a
Mortgagor under the related Mortgage Loan.
Mortgaged
Property:
Land and
improvements
securing the
indebtedness of a Mortgagor under the
related Mortgage Loan or, in the case of REO Property, such REO
Property.
Mortgagor:
The obligor on a Mortgage Note.
Net Deferred Interest:
On any Distribution
Date, for each Loan Group,
Deferred Interest on the
related
Mortgage
Loans
during the
related Due Period net of
Principal
Prepayments
in full,
partial
Principal
Prepayments,
Net Liquidation
Proceeds,
Repurchase Proceeds and scheduled principal payments,
in that order,
included in Available Funds for such Loan Group and such
Distribution
Date and available
to be
distributed
on
the
Certificates
on
such
Distribution
Date.
With
respect
to
any
Class
A
Certificate
or Class B Certificate
as of any
Distribution
Date,
the Net Deferred
Interest will be an
amount
equal
to the
product
of (1)
the
difference,
if
any,
between
(a)
the
lesser
of (i)
the
Pass-Through
Rate for such Class without regard to the related Net Rate Cap on
such Distribution Date and
(ii)
the
related
Net
Rate
Cap on such
Distribution
Date
and (b) the
Adjusted
Rate
Cap for
such
Distribution
Date,
(2) the
Current
Principal
Amount
of such
Certificate
immediately
prior to such
Distribution Date, and (3) the actual number of days in such
Interest Accrual Period divided by 360.
Net Interest Shortfall:
With respect to any Distribution Date, the Interest
Shortfall,
if any,
for such
Distribution
Date net of Compensating
Interest Payments made with respect to such Distribution
Date.
Net
Liquidation
Proceeds:
As to any
Liquidated
Mortgage
Loan,
Liquidation
Proceeds net of
(i) Liquidation
Expenses
which are payable
therefrom to the Servicer in accordance
with this Agreement
and (ii) unreimbursed advances by the Servicer and unreimbursed
Monthly Advances.
Net Rate:
With respect to each
Mortgage
Loan,
the Mortgage
Interest Rate in effect from time
to time less the Servicing Fee Rate, expressed as a per annum rate.
Net Rate Cap: For any
Distribution
Date,
(A) with respect to the Group I Offered
Certificates
(other than the Class X
Certificates)
and the
Underlying
Class
I-A-2B
Certificates,
is equal to the
weighted
average
of the Net
Rates
of the
Group I
Mortgage
Loans
less the
Coupon
Strip
Rate,
if
applicable
and less the
Pass-Through
Rate on the Class X
Certificates
multiplied by a fraction
whose
numerator
is the Class I-X
Notional
Amount and whose
denominator
is the
aggregate
Stated
Principal
Balance of the Group I Mortgage Loans
immediately
prior to such
Distribution
Date and (B) with respect
to the Group II Offered
Certificates,
the
Underlying
Class II-A-2B
Certificates
and the Class II-B-5
Certificates,
is equal to the weighted
average of the Net Rates of the Group II Mortgage
Loans, in each
case as adjusted to an effective rate reflecting the accrual of
interest on an actual/360 basis.
NIM Issuer:
The entity established as the issuer of the NIM Securities.
NIM
Securities:
Any debt
securities
issued by the NIM Issuer and secured or otherwise
backed
by some or all of the Certificates.
NIM Trustee:
The trustee for the NIM Securities.
Non-Offered
Certificates:
The Underlying Class I-A-2B,
Underlying Class II-A-2B, Class I-XP-1,
Class I-XP-2, Class R, Class R-X, Class II-XP, Class I-B-IO and
Class II-B-IO Certificates.
Nonrecoverable
Advance:
Any advance or Monthly
Advance
(i) which
was
previously
made or is
proposed to be made by the Servicer or the Trustee (as
successor
Servicer) and
(ii) which,
in the good
faith judgment of the Servicer or the Trustee,
will not or, in the case of a proposed
advance or Monthly
Advance,
would not, be
ultimately
recoverable
by the Servicer or the Trustee (as
successor
Servicer)
from
Liquidation
Proceeds,
Insurance
Proceeds or future
payments on the Mortgage
Loan for which such
advance or Monthly Advance was made or is proposed to be made.
Notional
Amount:
The Class I-X Notional
Amount,
the Class I-B-IO Notional Amount or the Class
II-B-IO Notional Amount, as applicable.
Offered Certificates:
The Group I Offered Certificates and the Group II Offered
Certificates.
Officer's
Certificate:
A certificate
signed by the Chairman of the Board, the Vice Chairman of
the Board,
the President or a Vice President or Assistant Vice President or
other
authorized
officer of
the
Servicer
or the
Depositor,
as
applicable,
and
delivered
to the
Trustee,
as
required by this
Agreement.
One-Month
LIBOR:
With
respect to any
Interest
Accrual
Period,
the rate
determined
by the
Trustee on the related
LIBOR
Determination
Date on the basis of the rate for U.S.
dollar
deposits for
one month
that
appears
on
Telerate
Screen
Page 3750 as of 11:00
a.m.
(London
time) on such
LIBOR
Determination
Date;
provided that the parties
hereto
acknowledge
that
One-Month
LIBOR for the first
Interest
Accrual
Period
shall be the rate
determined
by the
Trustee two
Business
Days prior to the
Closing
Date.
If such rate does not appear on such page (or such other page as
may replace
that page on
that service, or if such service is no longer offered,
such other service for displaying
One-Month LIBOR
or comparable
rates as may be reasonably
selected by the Trustee),
One-Month
LIBOR for the
applicable
Interest
Accrual
Period will be the Reference
Bank Rate. If no such
quotations
can be obtained by the
Trustee and no Reference Bank Rate is available,
One-Month
LIBOR will be One-Month
LIBOR
applicable to
the
preceding
Interest
Accrual
Period.
The
Trustee's
determination
of
One-Month
LIBOR
and
the
Pass-Through
Rate for each Class of Certificates,
if applicable,
for any Interest Accrual Period shall,
in the absence of manifest error, be final and binding.
Opinion of
Counsel:
A written
opinion of counsel who is or are
acceptable
to the Trustee and
who,
unless
required to be Independent (an "Opinion of Independent
Counsel"),
may be internal
counsel
for the Company, the Servicer or the Depositor.
Optional
Termination
Date:
With
respect to Loan Group I, the
Distribution
Date on which the
aggregate
Stated
Principal
Balance of the Group I Mortgage
Loans is less than 10% of the Cut-off
Date
Balance of the Group I Mortgage Loans, and with respect to Loan
Group II, the
Distribution
Date on which
the
aggregate
Stated
Principal
Balance of the Group II Mortgage
Loans is less than 10% of the Cut-off
Date Balance of the Group II Mortgage Loans.
Original
Value:
The lesser of (i) the
Appraised
Value or (ii) the
sales price of a Mortgaged
Property at the time of origination of a Mortgage
Loan,
except in instances
where either clauses (i) or
(ii) is
unavailable,
the other may be used to determine the Original
Value,
or if both clauses (i) and
(ii) are
unavailable,
Original Value may be determined from other sources
reasonably
acceptable to the
Depositor.
Outstanding
Mortgage
Loan:
With respect to any Due Date, a Mortgage Loan which,
prior to such
Due Date,
was not the subject of a Principal
Prepayment
in full,
did not become a Liquidated
Mortgage
Loan and was not purchased or replaced.
Outstanding
Principal Balance:
As of the time of any determination,
the principal balance of a
Mortgage Loan
remaining to be paid by the
Mortgagor,
or, in the case of an REO Property,
the principal
balance of the related
Mortgage Loan
remaining to be paid by the Mortgagor at the time such property was
acquired by the Trust Fund less any Net
Liquidation
Proceeds with respect
thereto to the extent applied
to principal.
Overcollateralization
Amount:
The
Group
I
Overcollateralization
Amount
or
the
Group
II
Overcollateralization Amount, as applicable.
Overcollateralization
Release Amount:
The Group I
Overcollateralization
Release Amount or the
Group II Overcollateralization Release Amount, as applicable.
Overcollateralization
Target
Amount:
The Group I
Overcollateralization
Target
Amount or the
Group II Overcollateralization Target Amount, as applicable.
Pass-Through
Rate:
As to each
Class
of
Certificates,
the
rate of
interest
determined
as
provided with respect thereto in Section 5.01(c).
Paying Agent:
The Trustee.
Periodic Rate Cap: With respect to each Mortgage
Loan, the maximum
adjustment
that can be made
to the Mortgage
Interest Rate on each Interest
Adjustment Date in accordance with its terms,
regardless
of changes in the applicable Index.
Permitted Investments: At any time, any one or more of the
following obligations and securities:
(i)
obligations
of the United
States or any agency
thereof,
provided
such
obligations
are
backed by the full faith and credit of the United States;
(ii) general
obligations of or
obligations
guaranteed by any state of the United States or the
District of Columbia
receiving the highest
long-term
debt rating of each Rating
Agency,
or such lower
rating
as will
not
result
in the
downgrading
or
withdrawal
of the
ratings
then
assigned
to the
Certificates by each Rating Agency;
(iii)
commercial
or finance
company paper which is then
receiving
the highest
commercial or
finance
company
paper
rating of each
Rating
Agency,
or such
lower
rating as will not result in the
downgrading or withdrawal of the ratings then assigned to the
Certificates by each Rating Agency;
(iv)
certificates of deposit,
demand or time deposits,
or bankers'
acceptances
issued by any
depository
institution or trust company
incorporated under the laws of the United States or of any state
thereof
and
subject
to
supervision
and
examination
by
federal
and/or
state
banking
authorities
(including
the Trustee in its commercial
banking
capacity),
provided that the commercial
paper and/or
long term unsecured debt
obligations of such
depository
institution or trust company are then rated one
of the two highest
long-term
and the
highest
short-term
ratings of each such
Rating
Agency for such
securities,
or such lower ratings as will not result in the
downgrading or withdrawal of the rating then
assigned to the Certificates by any Rating Agency;
(v) demand or time
deposits or
certificates
of deposit
issued by any bank or trust company or
savings institution to the extent that such deposits are fully
insured by the FDIC;
(vi)
guaranteed
reinvestment
agreements
issued
by
any
bank,
insurance
company
or
other
corporation
containing,
at the time of the issuance of such
agreements,
such terms and
conditions
as
will not result in the
downgrading or withdrawal of the rating then assigned to the
Certificates
by any
such Rating Agency;
(vii)
repurchase
obligations
with
respect to any
security
described in clauses (i) and (ii)
above,
in either case entered into with a depository
institution or trust company
(acting as principal)
described in clause (iv) above;
(viii)
securities
(other
than
stripped
bonds,
stripped
coupons
or
instruments
sold at a
purchase
price in excess of 115% of the face
amount
thereof)
bearing
interest
or sold at a
discount
issued by any
corporation
incorporated
under the laws of the United States or any state thereof
which,
at the time of such
investment,
have one of the two
highest
long term
ratings of each
Rating
Agency
(except if the Rating
Agency is Moody's,
such rating
shall be the highest
commercial
paper
rating of
Moody's
for any
such
securities),
or such
lower
rating
as will not
result
in the
downgrading
or
withdrawal
of the rating then
assigned to the
Certificates
by any Rating
Agency,
as
evidenced
by a
signed writing delivered by each Rating Agency;
(ix)
interests
in any money
market
fund
(including
any such fund
managed or advised by the
Trustee or Master
Servicer or any affiliate
thereof)
which at the date of
acquisition of the interests
in such fund and
throughout
the time such
interests
are held in such fund has the
highest
applicable
long term
rating by each
Rating
Agency or such lower
rating as will not result in the
downgrading
or
withdrawal of the ratings then assigned to the Certificates by each
Rating Agency;
(x)
short
term
investment
funds
sponsored
by
any
trust
company
or
banking
association
incorporated
under the laws of the United
States or any state thereof
(including
any such fund managed
or advised by the Trustee or any affiliate
thereof)
which on the date of
acquisition
has been rated by
each Rating Agency in their
respective
highest
applicable
rating category or such lower rating as will
not result in the
downgrading
or
withdrawal of the ratings then
assigned to the
Certificates
by each
Rating Agency; and
(xi) such other
investments
having a specified
stated maturity and bearing interest or sold at
a discount
acceptable
to each Rating Agency as will not result in the
downgrading
or withdrawal of the
rating
then
assigned
to the
Certificates
by any
Rating
Agency,
as
evidenced
by a signed
writing
delivered by each Rating Agency;
provided,
that no such
instrument
shall
be a
Permitted
Investment
if such
instrument
(i)
evidences the right to receive
interest only payments
with respect to the
obligations
underlying
such
instrument,
(ii) is purchased at a premium or (iii) is purchased
at a deep
discount;
provided
further
that no such instrument
shall be a Permitted
Investment (A) if such instrument
evidences
principal and
interest
payments
derived from
obligations
underlying such
instrument and the interest
payments with
respect to such
instrument
provide a yield to maturity of greater
than 120% of the yield to maturity at
par of such
underlying
obligations,
or (B) if it may be redeemed at a price
below the
purchase
price
(the
foregoing
clause (B) not to apply to
investments in units of money market funds pursuant to clause
(viii) above);
provided further that no amount
beneficially
owned by any 2006-AR3 REMIC may be invested
in
investments
(other than money
market
funds)
treated as equity
interests
for
federal
income tax
purposes,
unless the Trustee shall receive an Opinion of Counsel,
at the expense of the Trustee,
to the
effect that such
investment
will not adversely
affect the status of any such REMIC as a REMIC under the
Code or result in
imposition
of a tax on any such
REMIC.
Permitted
Investments
that are
subject
to
prepayment or call may not be purchased at a price in excess of
par.
Permitted
Transferee:
Any Person other than a Disqualified
Organization
or an "electing large
partnership" (as defined by Section 775 of the Code).
Person:
Any
individual,
corporation,
partnership,
joint
venture,
association,
limited
liability company,
joint-stock company,
trust,
unincorporated
organization or government or any agency
or political subdivision thereof.
Physical Certificates:
The Private Certificates.
Plan: The meaning specified in Section 5.07(a).
Prepayment
Charges:
With respect to any Mortgage Loan, the charges or premiums,
if any, due in
connection with a Principal Prepayment of such Mortgage Loan in
accordance with the terms thereof.
Prepayment
Charge Loan:
Any Mortgage Loan for which a Prepayment
Charge may be assessed and to
which such
Prepayment
Charge the
related
Class XP
Certificates
are
entitled,
as
indicated
on the
Mortgage Loan Schedule.
Prepayment
Interest
Shortfalls:
With respect to any Distribution
Date, for each Mortgage Loan
that was the
subject
of a
Principal
Prepayment
during
the
prior
calendar
month
or that
became a
Liquidated
Mortgage
Loan during the related
Prepayment
Period,
(other than a Principal
Prepayment in
full
resulting
from the
purchase of a Mortgage
Loan
pursuant
to Section
2.02,
2.03,
3.21 or 10.01
hereof),
the amount,
if any, by which (i) one month's
interest at the applicable Net Rate on the Stated
Principal
Balance
immediately
prior to such
prepayment
(or
liquidation)
or in the case of a partial
Principal
Prepayment on the amount of such prepayment (or liquidation
proceeds)
exceeds (ii) the amount
of interest paid or collected in connection with such Principal
Prepayment or such
Liquidation
Proceeds
less the sum of (a) any Prepayment Charges and (b) the Servicing
Fee.
Prepayment
Period:
With
respect to any
Distribution
Date and (i)
Principal
Prepayments
in
full, the period from the sixteenth day of the calendar
month
preceding the calendar month in which such
Distribution
Date occurs
through the close of business on the
fifteenth
day of the
calendar
month in
which
such
Distribution
Date
occurs,
and
(ii)
Liquidation
Proceeds,
Realized
Losses,
Subsequent
Recoveries and partial Principal Prepayments, the prior calendar
month.
Primary
Mortgage
Insurance
Policy:
Any primary mortgage
guaranty
insurance policy issued in
connection
with a Mortgage
Loan which
provides
compensation
to a Mortgage Note holder in the event of
default
by the
obligor
under such
Mortgage
Note or the
related
Security
Instrument,
if any or any
replacement
policy therefore
through the related Interest
Accrual Period for such
Class relating
to a
Distribution Date.
Prime Rate:
The prime rate of U.S.
money
center
banks as
published
from time to time in The
Wall Street Journal.
Principal
Distribution
Amount:
The
Group I
Principal
Distribution
Amount
or the
Group II
Principal Distribution Amount, as applicable.
Principal Funds: With respect to each Loan Group and each
Distribution
Date, (i) the greater of
zero and the sum, without
duplication,
of (a) all scheduled principal collected on the Mortgage Loans in
the related
Loan Group
during the related Due Period,
(b) all Monthly
Advances
relating to
principal
made on the Mortgage Loans in the related Loan Group on or before
the
Distribution
Account Deposit Date,
(c)
Principal
Prepayments
on the
Mortgage
Loans in the related Loan Group,
exclusive
of
Prepayment
Charges
collected
during
the
related
Prepayment
Period,
(d) the
Stated
Principal
Balance of each
Mortgage
Loan in the related Loan Group that was
repurchased
by the Sponsor
pursuant to Section
2.02,
2.03 or 3.21 during the related Due Period,
(e) the aggregate of all Substitution
Adjustment
Amounts in
connection
with the
substitution
of Mortgage
Loans in the related Loan Group
pursuant to Section 2.04
during the related
Due Period,
(f) amounts in respect of
principal
paid by the
Depositor
pursuant to
Section
10.01
allocated
to the
related
Loan
Group,
(g)
all
Liquidation
Proceeds
and
Subsequent
Recoveries
collected
during the related
Prepayment
Period on the
Mortgage
Loans in the related
Loan
Group,
to the extent
such
proceeds
relate to
principal,
in each case to the extent
remitted
by the
Servicer to the
Distribution
Account
pursuant to this
Agreement and (h) the principal
portions of the
amounts,
if any,
transferred from the Final Maturity
Reserve Account
allocated to Loan Group I on such
Distribution
Date minus (ii) (a) all amounts
required to be reimbursed
pursuant to Sections 4.01,
4.03
and 4.05 or as otherwise set forth in this
Agreement and (b) the amount of any Principal
Prepayments
in
full,
partial
Principal
Prepayments,
Net
Liquidation
Proceeds,
Repurchase
Proceeds and payments of
Scheduled
Principal,
in that order,
included in Available Funds allocated to the related Loan Group for
such
Distribution
Date that are applied as Interest
Funds in connection
with any Deferred
Interest in
accordance with the definition of Net Deferred Interest.
Principal
Prepayment:
Any payment
(whether
partial or full) or other recovery of principal on
a Mortgage
Loan which is
received
in advance
of its
scheduled
Due Date to the extent
that it is not
accompanied by an amount as to interest
representing
scheduled
interest due on any date or dates in any
month or months
subsequent
to the month of
prepayment,
including
Insurance
Proceeds
and
Repurchase
Proceeds,
but
excluding
the
principal
portion
of Net
Liquidation
Proceeds
received
at the time a
Mortgage Loan becomes a Liquidated Mortgage Loan.
Private Certificates:
The Non-Offered Certificates.
Prospectus:
The
prospectus,
dated
October
23,
2006,
as
supplemented
by
the
prospectus
supplement
dated October 30, 2006 (as the same may be
supplemented
from time to time),
relating to the
offering of the Offered Certificates.
QIB: A Qualified
Institutional
Buyer as defined in Rule 144A
promulgated
under the Securities
Act.
Qualified
Insurer:
Any insurance
company duly qualified as such under the laws of the state or
states
in
which
the
related
Mortgaged
Property
or
Mortgaged
Properties
is or are
located,
duly
authorized
and licensed in such state or states to transact
the type of
insurance
business in which it
is engaged and approved as an insurer by the Servicer,
so long as the claims
paying
ability of which is
acceptable
to
the
Rating
Agencies
for
pass-through
certificates
having
the
same
rating
as
the
Certificates rated by the Rating Agencies as of the Closing Date.
Rating Agencies:
Moody's and S&P.
Realized
Loss:
Any
(i) Bankruptcy
Loss or (ii) as to any
Liquidated
Mortgage
Loan, (x) the
Outstanding
Principal
Balance of such Liquidated
Mortgage Loan plus accrued and unpaid interest thereon
at the
Mortgage
Interest
Rate through the last day of the month of such
liquidation,
less (y) the Net
Liquidation
Proceeds with respect to such Mortgage Loan and the related
Mortgaged Property.
In addition,
to the extent the Servicer
receives
Subsequent
Recoveries with respect to any Mortgage Loan, the amount
of the Realized
Loss with
respect to that
Mortgage
Loan will be reduced to the extent such
recoveries
are
applied to reduce the Current
Principal
Amount of any Class of
Certificates
(other than the Class
XP, Class X, Class B-IO and Residual
Certificates)
on any
Distribution
Date.
As to any Mortgage
Loan
which has become the
subject of a
Deficient
Valuation,
if the
principal
amount due under the related
Mortgage Note has been reduced,
then "Realized Loss" is the difference
between the principal
balance of
such Mortgage Loan outstanding
immediately
prior to such Deficient
Valuation and the principal
balance
of such Mortgage Loan as reduced by the Deficient Valuation.
Record Date: For each Class of Offered
Certificates
(other than the Class X Certificates),
the
Underlying
Certificates and the Class II-B-5
Certificates
and for any
Distribution
Date, the close of
business on the Business Day prior to such
Distribution
Date. For the Class X
Certificates
and for any
Distribution Date, the last Business Day of the prior calendar
month.
Reference
Bank:
A leading
bank
selected by the
Trustee
that is engaged in
transactions
in
Eurodollar deposits in the international Eurocurrency market.
Reference Bank Rate: With respect to any Interest Accrual Period,
the arithmetic
mean,
rounded
upwards, if necessary,
to the nearest whole multiple of 0.03125%,
of the offered rates for United States
dollar
deposits
for one month that are quoted by the
Reference
Banks as of 11:00
a.m.,
New York City
time,
on the related
interest
determination
date to prime banks in the London
interbank
market for a
period of one month in
amounts
approximately
equal to the
aggregate
Current
Principal
Amount of the
Offered
Certificates
for such Interest
Accrual Period,
provided that at least two such Reference Banks
provide
such
rate.
If fewer
than two
offered
rates
appear,
the
Reference
Bank
Rate
will be the
arithmetic mean, rounded upwards,
if necessary,
to the nearest whole multiple of 0.03125%,
of the rates
quoted by one or more major banks in New York City,
selected by the Trustee,
as of 11:00 a.m.,
New York
City time, on such date for loans in U.S.
dollars to leading
European banks for a period of one month in
amounts approximately equal to the aggregate Current Principal
Amount of the Offered Certificates.
Regulation
AB:
Subpart
229.1100
-
Asset
Backed
Securities
(Regulation
AB),
17
C.F.R.
§§229.1100-229.1123,
as such may be amended
from time to time,
and
subject to such
clarification
and
interpretation as have been provided by the Commission in the
adopting release
(Asset-Backed
Securities,
Securities
Act Release No.
33-8518,
70 Fed.
Reg.
1,506,
1,531 (Jan. 7, 2005)) or by the staff of the
Commission, or as may be provided by the Commission or its staff
from time to time.
Reinvestment
Agreements:
One
or
more
reinvestment
agreements,
acceptable
to
the
Rating
Agencies, from a bank, insurance company or other corporation or
entity (including the Trustee).
Relief Act:
The Servicemembers' Civil Relief Act, as amended, or similar state
law.
Relief Act Mortgage
Loan: Any Mortgage Loan as to which the Scheduled
Payment
thereof has been
reduced due to the application of the Relief Act.
Remaining Excess Spread:
With respect to any Distribution
Date and each Loan Group, the related
Excess Spread
remaining after
distribution of any related Extra Principal
Distribution
Amount for such
Distribution Date.
REMIC: A "real estate
mortgage
investment
conduit"
within the meaning of
Section 860D of the
Code.
REMIC
Administrator:
The Trustee;
provided that if the REMIC Administrator is found by a court
of competent
jurisdiction
to no longer be able to fulfill its obligations as REMIC
Administrator
under
this Agreement the Servicer shall appoint a successor
REMIC
Administrator,
subject to assumption of the
REMIC Administrator obligations under this Agreement.
REMIC
Opinion:
An Opinion
of
Independent
Counsel,
to the effect
that the
proposed
action
described therein would not, under the REMIC
Provisions,
(i) cause any 2006-AR3 REMIC to fail to qualify
as a REMIC while any regular
interest in such
2006-AR3
REMIC is
outstanding,
(ii) result
in a tax on
prohibited
transactions with respect to any 2006-AR3 REMIC or (iii) constitute
a taxable
contribution to
any 2006-AR3 REMIC after the Startup Day.
REMIC
Provisions:
The
provisions
of the
federal
income tax law
relating
to REMICs,
which
appear at Sections
860A through 860G of the Code,
and related
provisions
and
regulations
promulgated
thereunder, as the foregoing may be in effect from time to time.
REMIC
Regular
Interest:
Any of the REMIC I
Regular
Interests,
REMIC II
Regular
Interests,
REMIC III Regular Interests and REMIC IV Regular Interests.
REMIC I:
The
segregated
pool of
assets,
with
respect
to
which a
REMIC
election
is made
pursuant
to
this
Agreement,
exclusive
of any
assets
held in the
Final
Maturity
Reserve
Account,
consisting of:
(a)
the Group I Mortgage Loans and the related
Mortgage Files and collateral
securing such
Mortgage Loans,
(b)
all payments on and
collections
in respect of the Group I Mortgage Loans due after the
Cut-off Date as shall be on deposit in the Custodial
Account or in the
Distribution
Account (other than
amounts
representing
Prepayment
Charges in respect
of
Prepayment
Charge
Loans)
and
identified
as
belonging to the Trust Fund,
(c)
property
that
secured
a Group I
Mortgage
Loan and that
has been
acquired
for the
benefit of the Certificateholders by foreclosure or deed in lieu of
foreclosure,
(d)
the hazard insurance policies and Primary Mortgage Insurance
Policy, if any, and
(e)
all proceeds of clauses (a) through (d) above.
REMIC I Available
Distribution
Amount:
For any
Distribution
Date,
the Available
Funds with
respect to Loan Group I.
REMIC I
Distribution
Amount:
On each
Distribution
Date,
the REMIC I Available
Distribution
Amount,
in the following
order of priority,
shall be
distributed by REMIC I to REMIC III on account of
the REMIC I Regular
Interests
and to the Holders of the Class R
Certificates
in respect of Component I
thereof:
(i)
to REMIC III as the holder of REMIC I Regular Interests,
pro rata, in
an
amount
equal to (A) the
Uncertificated
Accrued
Interest
for each
such
REMIC I
Regular
Interest
for
such
Distribution
Date
reduced,
in each
case,
by any Net
Deferred
Interest
allocated to such REMIC I Regular
Interest for such
Distribution
Date, plus (B) any amounts in
respect thereof remaining unpaid from previous Distribution Dates;
(ii)
to REMIC III as the holder of REMIC I Regular
Interests
LT1,
LT2,
LT3 and LT4, in an amount
equal to the
remainder
of the REMIC I
Available
Distribution
Amount after the distributions made pursuant to clause (i) above,
allocated as follows:
(A)
in
respect
of REMIC I Regular
Interests
LT2,
LT3 and LT4,
their respective Principal Distribution Amounts;
(B)
in respect of REMIC I Regular
Interest
LT1 any
remainder
until the
Uncertificated Principal Balance thereof is reduced to zero;
(C)
any remainder in respect of each of REMIC I Regular
Interests
(other
than
REMIC I
Regular
Interests
LT1 and W),
pro
rata
according
to
their
respective
Uncertificated
Principal
Balances as reduced by the distributions
deemed
made
pursuant
to (A) above,
until
their
respective
Uncertificated
Principal Balances are reduced to zero; and
(iii)
any
remaining
amounts
to
the
Holders
of
the
Class
R
Certificates in respect of Component I thereof.
REMIC I Interest:
The REMIC I Regular Interests and Component I of the Class R
Certificates.
REMIC I Net
Deferred
Interest:
Net
Deferred
Interest
for Loan Group I for any
Distribution
Date
shall
be
allocated
to
REMIC
I
Regular
Interest
LT1
in
reduction
of
the
portion
of
the
Uncertificated
Accrued Interest thereon
distributable on the related
Distribution Date and shall result
in an increase in the Uncertificated Principal Balance thereof to
the extent of such reduction.
REMIC I
Principal
Reduction
Amounts:
For any
Distribution
Date,
the
amounts
by which the
Uncertificated
Principal
Balances of the REMIC I Regular
Interests will be reduced on such Distribution
Date by the allocation of REMIC I Realized Losses and REMIC I Net
Deferred
Interest and the
distribution
of principal, determined as follows:
For purposes of the
succeeding
formulas the following
symbols shall have the meanings
set forth below:
Y1 =
the
Uncertificated
Principal
Balance of REMIC I
Regular
Interest LT1 after
distributions
and the
allocation
of REMIC I Net Deferred
Interest
and REMIC I Realized
Losses on the
prior Distribution Date.
Y2 =
the
Uncertificated
Principal
Balance of REMIC I
Regular
Interest LT2 after
distributions and the allocation of REMIC I Realized Losses on the
prior Distribution Date.
Y3 =
the
Uncertificated
Principal
Balance of REMIC I
Regular
Interest LT3 after
distributions and the allocation of REMIC I Realized Losses on the
prior Distribution Date.
Y4 =
the
Uncertificated
Principal
Balance of REMIC I
Regular
Interest LT4 after
distributions
and the allocation of REMIC I Realized
Losses on the prior
Distribution
Date (note: Y3 =
Y4).
ΔY1 =
the REMIC I Regular Interest LT1 Principal Reduction Amount.
ΔY2 =
the REMIC I Regular Interest LT2 Principal Reduction Amount.
ΔY3 =
the REMIC I Regular Interest LT3 Principal Reduction Amount.
ΔY4 =
the REMIC I Regular Interest LT4 Principal Reduction Amount.
P0 =
the
aggregate
Uncertificated
Principal
Balance
of
the
REMIC
