Common use of Distribution shortfalls Clause in Contracts

Distribution shortfalls. If on a distribution day, payments on the mortgage loans in the target-rate strip for a pool are not sufficient to permit payments of any insurance premium due to an Insurer, and all interest and principal allocated to the senior target-rate classes of the related group, then the pool may receive insurance premium, interest and principal distributions from payments on the mortgage loans in another pool once any insurance premium due is paid to the Insurer, and full interest and principal distributions are made to the senior target-rate classes of the group related to the other pool. Example: Suppose that there are two groups of classes and that on a distribution day, cash available for distribution to the group I senior-target rate classes from payments on the pool I mortgage loans is $1,000 less than the aggregate interest and principal allocations to group I’s senior target-rate classes, while cash available for distribution to the group II senior-target rate classes from payments on the pool II mortgage loans exceeds the aggregate interest and principal allocations to group II’s senior target-rate classes by $1,500. Then $1,000 of the extra $1,500 available to group II will be used to make full interest and principal distributions to the group I senior target-rate classes, and only the remaining $500 will be distributed to the group II subordinated component classes. If there are several pools for which mortgage loan payments do not provide enough cash for full distributions to the senior target-rate classes and any Insurer, the related groups will receive cash from other pools in proportion to the aggregate amount by which any insurance premium due to an Insurer, and interest and principal distributions would otherwise fall short of interest and principal allocations. If there are several pools where mortgage loan payments provide cash in excess of the amount required for full distributions, they will provide cash to the senior target-rate classes, and any Insurer, of those groups related to the other pools in proportion to the amounts of the excess.