FIRST HORIZON ASSET SECURITIES INC.
Depositor
FIRST HORIZON HOME LOAN CORPORATION
Master Servicer
and
THE BANK OF NEW YORK,
Trustee
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POOLING AND SERVICING AGREEMENT
Dated as of December 1, 2004
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FIRST HORIZON ABS TRUST 2004-HE4
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2004-HE4
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.............................................................................................5
ARTICLE II CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND WARRANTIES.........................................20
SECTION 2.1 Conveyance of Mortgage Loans......................................................................20
SECTION 2.2 Acceptance by Trustee of the Mortgage Loans.......................................................20
SECTION 2.3 Representations and Warranties of the Master Servicer; Covenants of the Seller...................20
SECTION 2.4 Representations and Warranties of the Depositor as to the Mortgage Loans..........................20
SECTION 2.5 Delivery of Opinion of Counsel in Connection with Substitutions...................................20
SECTION 2.6 Execution and Delivery of Certificates............................................................20
SECTION 2.7 REMIC Matters.....................................................................................20
SECTION 2.8 Covenants of the Master Servicer..................................................................20
ARTICLE III ADMINISTRATION AND SERVICING OF MORTGAGE LOANS.......................................................20
SECTION 3.1 Master Servicer to Service Mortgage Loans.........................................................20
SECTION 3.2 Subservicing; Enforcement of the Obligations of Servicers.........................................20
SECTION 3.3 Rights of the Depositor and the Trustee in Respect of the Master Servicer.........................20
SECTION 3.4 Trustee to Act as Master Servicer.................................................................20
SECTION 3.5 Collection of Mortgage Loan Payments; Certificate Account; Distribution Account...................20
SECTION 3.6 [RESERVED]........................................................................................20
SECTION 3.7 Access to Certain Documentation and Information Regarding the Mortgage Loans......................20
SECTION 3.8 Permitted Withdrawals from the Certificate Account and Distribution Account.......................20
SECTION 3.9 Maintenance of Hazard Insurance...................................................................20
SECTION 3.10 Enforcement of Due-on-Sale Clauses; Assumption Agreements........................................20
SECTION 3.11 Realization Upon Defaulted Mortgage Loans; Repurchase of Certain Mortgage Loans..................20
SECTION 3.12 Trustee to Cooperate; Release of Mortgage Files..................................................20
SECTION 3.13 Documents Records and Funds in Possession of Master Servicer to be Held for the Trustee..........20
SECTION 3.14 Master Servicing Compensation....................................................................20
SECTION 3.15 Access to Certain Documentation..................................................................20
SECTION 3.16 Annual Statement as to Compliance................................................................20
SECTION 3.17 Annual Independent Public Accountants' Servicing Statement; Financial Statements.................20
SECTION 3.18 Errors and Omissions Insurance; Fidelity Bonds...................................................20
ARTICLE IV DISTRIBUTIONS AND ADVANCES BY THE MASTER SERVICER.....................................................20
SECTION 4.1 Advances..........................................................................................20
SECTION 4.2 Priorities of Distribution........................................................................20
SECTION 4.3 Method of Distribution............................................................................20
SECTION 4.4 [Reserved]........................................................................................20
SECTION 4.5 Determination of Pass-Through Rates for LIBOR Certificates........................................20
SECTION 4.6 Monthly Statements to Certificateholders..........................................................20
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ARTICLE V THE CERTIFICATES.......................................................................................20
SECTION 5.1 The Certificates..................................................................................20
SECTION 5.2 Certificate Register; Registration of Transfer and Exchange of Certificates.......................20
SECTION 5.3 Mutilated, Destroyed, Lost or Stolen Certificates.................................................20
SECTION 5.4 Persons Deemed Owners.............................................................................20
SECTION 5.5 Access to List of Certificateholders' Names and Addresses.........................................20
SECTION 5.6 Maintenance of Office or Agency...................................................................20
ARTICLE VI THE DEPOSITOR AND THE MASTER SERVICER.................................................................20
SECTION 6.1 Respective Liabilities of the Depositor and the Master Servicer...................................20
SECTION 6.2 Merger or Consolidation of the Depositor or the Master Servicer...................................20
SECTION 6.3 Limitation on Liability of the Depositor, the Master Servicer and Others..........................20
SECTION 6.4 Limitation on Resignation of Master Servicer......................................................20
ARTICLE VII DEFAULT..............................................................................................20
SECTION 7.1 Events of Default.................................................................................20
SECTION 7.2 Trustee to Act; Appointment of Successor..........................................................20
SECTION 7.3 Notification to Certificateholders................................................................20
ARTICLE VIII CONCERNING THE TRUSTEE..............................................................................20
SECTION 8.1 Duties of Trustee.................................................................................20
SECTION 8.2 Certain Matters Affecting the Trustee.............................................................20
SECTION 8.3 Trustee Not Liable for Certificates or Mortgage Loans.............................................20
SECTION 8.4 Trustee May Own Certificates......................................................................20
SECTION 8.5 Trustee's Fees and Expenses.......................................................................20
SECTION 8.6 Eligibility Requirements for Trustee..............................................................20
SECTION 8.7 Resignation and Removal of Trustee................................................................20
SECTION 8.8 Successor Trustee.................................................................................20
SECTION 8.9 Merger or Consolidation of Trustee................................................................20
SECTION 8.10 Appointment of Co-Trustee or Separate Trustee....................................................20
SECTION 8.11 Tax Matters......................................................................................20
SECTION 8.12 Periodic Filings.................................................................................20
ARTICLE IX TERMINATION...........................................................................................20
SECTION 9.1 Termination upon Liquidation or Purchase of all Mortgage Loans....................................20
SECTION 9.2 Final Distribution on the Certificates............................................................20
SECTION 9.3 Additional Termination Requirements...............................................................20
ARTICLE X THE INSURER............................................................................................20
SECTION 10.1 Claims upon the Policy...........................................................................20
SECTION 10.2 Preference for Claims Under the Policy...........................................................20
SECTION 10.3 Subrogation and Cooperation......................................................................20
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ARTICLE XI MISCELLANEOUS PROVISIONS..............................................................................20
SECTION 11.1 Amendment........................................................................................20
SECTION 11.2 Recordation of Agreement; Counterparts...........................................................20
SECTION 11.3 Governing Law....................................................................................20
SECTION 11.4 Intention of Parties.............................................................................20
SECTION 11.5 Notices..........................................................................................20
SECTION 11.6 Severability of Provisions.......................................................................20
SECTION 11.7 Assignment.......................................................................................20
SECTION 11.8 Rights of the Insurer to Exercise Rights of Class A Certificateholders...........................20
SECTION 11.9 Reports to Insurer...............................................................................20
SECTION 11.10 Limitation on Rights of Certificateholders......................................................20
SECTION 11.11 Inspection and Audit Rights.....................................................................20
SECTION 11.12 Certificates Nonassessable and Fully Paid.......................................................20
SECTION 11.13 Limitations on Actions; No Proceedings..........................................................20
SECTION 11.14 Acknowledgment of Seller........................................................................20
SCHEDULES
Schedule I: Mortgage Loan Schedule S-I-1
Schedule II: Representations and Warranties of the Master Servicer S-II-1
Schedule III: Form of Monthly Master Servicer Report S-III-1
EXHIBITS
Exhibit A: Form of Class A Certificate A-1
Exhibit B: Form of Class C Certificate B-1
Exhibit C: Form of Residual Certificate C-1
Exhibit D: Form of Reverse of Certificates D-1
Exhibit E: Form of Initial Certification E-1
Exhibit F: [Reserved] F-1
Exhibit G: Form of Final Certification of Custodian G-1
Exhibit H: Transfer Affidavit H-1
Exhibit I: Form of Transferor Certificate I-1
Exhibit J: Form of Investment Letter [Non-Rule 144A] J-1
Exhibit K: Form of Rule 144A Letter K-1
Exhibit L: Request for Release (for Trustee) L-1
Exhibit M: Request for Release (Mortgage Loan) M-1
Exhibit N: Form of Policy N-1
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THIS POOLING AND SERVICING AGREEMENT, dated as of December 1, 2004, among
FIRST HORIZON ASSET SECURITIES INC., a Delaware corporation, as depositor (the
"Depositor"), FIRST HORIZON HOME LOAN CORPORATION, a Kansas corporation, as
master servicer (the "Master Servicer"), and THE BANK OF NEW YORK, a banking
corporation organized under the laws of the State of New York, as trustee (the
"Trustee").
WITNESSETH THAT
In consideration of the mutual agreements herein contained, the parties
hereto agree as follows:
PRELIMINARY STATEMENT
The Depositor is the owner of the Trust Fund that is hereby conveyed to
the Trustee in return for the Certificates. The Trust Fund for federal income
tax purposes will consist of two separate REMICs. The Certificates will
represent the entire beneficial ownership interest in the Trust Fund. The
Regular Certificates will represent "regular interests" in the Upper REMIC. The
Class R Certificates will represent the residual interests in the Lower REMIC
and Upper REMIC, as described in Section 2.7. The "latest possible maturity
date" for federal income tax purposes of all REMIC regular interests created
hereby will be the Latest Possible Maturity Date.
The following table sets forth characteristics of the Certificates, together
with the minimum denominations and integral multiples in excess thereof in which
such Classes shall be issuable (except that one Certificate of each Class of
Certificates may be issued in a different amount and, in addition, one Residual
Certificate representing the Tax Matters Person Certificate may be issued in a
different amount):
[Remainder of Page Intentionally Left Blank]
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Initial Class Minimum Integral Multiples
Class Designation Certificate Balance Pass-Through Rate Denominations in Excess of Minimum
----------------- ------------------- ----------------- ------------- --------------------
Class A-1 $ 132,632,000.00 Variable (1) $ 25,000 $ 1,000
Class A-2 $ 58,022,000.00 4.070% $ 25,000 $ 1,000
Class A-3 $ 14,267,000.00 4.685% $ 25,000 $ 1,000
Class A-4 $ 16,384,000.00 5.303% $ 25,000 $ 1,000
Class A-5 $ 15,000,000.00 4.610% $ 25,000 $ 1,000
Class C N/A N/A N/A N/A
Class R N/A N/A N/A N/A
(1) The pass-through rate for the Class A-1 Certificates will equal the least of
(x) LIBOR plus the Class A-1 Certificate Margin, (y) the Net WAC Cap and (z)
7.15% per annum. The initial pass-through rate for the Class A-1 Certificates
for the first interest accrual period will be approximately 2.55688% per annum.
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Accrual Certificates.................. None.
Accrual Components.................... None.
Book-Entry Certificates............... All Classes of Certificates other than the Physical Certificates.
Certificate Group..................... Not applicable.
COFI Certificates..................... None.
Component Certificates................ None.
Components............................ None.
Delay Certificates.................... All interest-bearing Classes of Certificates other than the Non-Delay
Certificates, if any.
ERISA-Restricted Certificates......... The Class C
Certificates, the Residual
Certificates and Certificates of any
Class that no longer satisfy the
applicable requirement of the
Underwriters' Exemption.
Floating Rate Certificates............ The Class A-1 Certificates.
Inverse Floating Rate Certificates....
None.
LIBOR Certificates.................... The Class A-1 Certificates.
NAS Certificates...................... The Class A-5 Certificates.
Non-Delay Certificates................ The Class A-1 Certificates.
Notional Certificates................. None.
Offered Certificates.................. The Class A-1, Class A-2, Class A-3, Class A-4 and Class A-5 Certificates.
Physical Certificates................. The Residual Certificates and the Class C Certificates.
Planned Principal Classes............. None.
Principal Only Certificates........... None.
Private Certificates.................. The Class C Certificates and the Class R Certificates.
Rating Agencies....................... S&P and Xxxxx'x.
Regular Certificates.................. All Classes of Certificates, other than the Residual Certificates.
Residual Certificates................. The Class R Certificates.
Scheduled Certificates................ None.
Senior Certificates................... None.
Subordinated Certificates............. None.
Support Classes....................... None.
Targeted Principal Classes............ None.
Underwriter........................... FTN Financial Capital Markets.
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With respect to any of the foregoing designations as to which the
corresponding reference is "None," all defined terms and provisions herein
relating solely to such designations shall be of no force or effect, and any
calculations herein incorporating references to such designations shall be
interpreted without reference to such designations and amounts. Defined terms
and provisions herein relating to statistical rating agencies not designated
above as Rating Agencies shall be of no force or effect.
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ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
Accrued Certificate Interest: For any Class of Certificates entitled to
distributions of interest for any Distribution Date, the interest accrued during
the related Interest Accrual Period at the applicable Pass-Through Rate on the
Class Certificate Balance of such Class of Certificates immediately prior to
such Distribution Date, less such Class' share of any Interest Shortfall.
Adjusted Mortgage Rate: As to each Mortgage Loan, and at any time, the per
annum rate equal to the Mortgage Rate less the Master Servicing Fee Rate.
Adjusted Net Mortgage Rate: As to each Mortgage Loan, and at any time, the
per annum rate equal to the Mortgage Rate less the related Expense Fee Rate.
Advance: A payment made by the Master Servicer, at its option and in its
sole discretion, with respect to any Distribution Date pursuant to Section 4.1,
the amount of any such payment being equal to the aggregate of payments of
principal and interest (net of the Master Servicing Fee and net of any net
income in the case of any REO Property) on the Mortgage Loans that were due
during the related Due Period and not received as of the end of the related Due
Period, less the aggregate amount of any such delinquent payments that the
Master Servicer has determined would constitute a Nonrecoverable Advance if
advanced.
Agreement: This Pooling and Servicing Agreement and all amendments or
supplements hereto.
Amount Held for Future Distribution: As to any Distribution Date, the
aggregate amount held in the Certificate Account at the close of business on the
related Determination Date on account of (i) Principal Prepayments received
after the related Prepayment Period and Net Liquidation Proceeds received in the
month of such Distribution Date and (ii) all Scheduled Payments due on or after
the related Due Date.
Appraised Value: With respect to any Mortgage Loan, the appraised value of
the related Mortgaged Property determined in the appraisal used in the
origination of that Mortgage Loan, which may have been obtained at an earlier
time; provided that if the Mortgage Loan was originated simultaneously with a
senior lien on the related Mortgaged Property, the Appraised Value shall be the
lesser of the appraised value at the origination of the senior lien and the
sales price for the related Mortgaged Property.
Assignment Event: (i) The long-term senior unsecured debt rating of First
Tennessee Bank National Association is not rated at least "BBB" by Standard &
Poor's and at least "Baa2" by Xxxxx'x, or (ii) the occurrence of an Event of
Default which results in the termination of First Horizon Home Loan Corporation
as Master Servicer hereunder.
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Available Funds: With respect to a Distribution Date, the sum of (a)
Interest Collections for such Distribution Date, (b) Principal Collections for
such Distribution Date, and (c) solely with respect to distributions on the
Class A Certificates, any Insured Payments made by the Insurer under the Policy.
Bankruptcy Code: The United States Bankruptcy Reform Act of 1978, as
amended.
Bankruptcy Loss: With respect to any Mortgage Loan, a Deficient Valuation
or Debt Service Reduction; provided, however, that a Bankruptcy Loss shall not
be deemed a Bankruptcy Loss hereunder so long as the Master Servicer has
notified the Trustee and the Insurer in writing that the Master Servicer is
diligently pursuing any remedies that may exist in connection with the related
Mortgage Loan and either (A) the related Mortgage Loan is not in default with
regard to payments due thereunder or (B) delinquent payments of principal and
interest under the related Mortgage Loan and any related escrow payments in
respect of such Mortgage Loan are being advanced on a current basis by the
Master Servicer, in either case without giving effect to any Debt Service
Reduction or Deficient Valuation.
Base Specified Overcollateralization Amount: The sum of (i) the product of
(a) the Target Percentage and (b) the Pool Principal Balance as of the Closing
Date and (ii) the aggregate principal balance of all Mortgage Loans that are
both (a) 180 days or more contractually delinquent and (b) in REO, foreclosure
or bankruptcy.
Blanket Mortgage: The mortgage or mortgages encumbering the Cooperative
Property.
Book-Entry Certificates: As specified in the Preliminary Statement.
Business Day: Any day other than (i) a Saturday or a Sunday, or (ii) a day
on which banking institutions in the States of New York or Texas or the city in
which the Corporate Trust Office of the Trustee is located are authorized or
obligated by law or executive order to be closed.
Certificate: Any one of the Certificates executed by the Trustee in
substantially the forms attached hereto as exhibits.
Certificate Account: The separate Eligible Account or Accounts created and
maintained by the Master Servicer pursuant to Section 3.5 with a depository
institution in the name of the Master Servicer for the benefit of the Trustee on
behalf of Certificateholders and the Insurer and designated "First Horizon Home
Loan Corporation in trust for the registered holders of First Horizon ABS Trust
Mortgage Pass-Through Certificates, Series 2004-HE4."
Certificate Owner: With respect to a Book-Entry Certificate, the Person
who is the beneficial owner of such Book-Entry Certificate.
Certificate Principal Balance: With respect to any Certificate and as of
any Distribution Date, the Certificate Principal Balance on the date of the
initial issuance of such Certificate, as reduced by:
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(a) all amounts distributed on previous Distribution Dates
on such Certificate on account of principal, and
(b) all Liquidation Loss Amounts previously allocated to
such Certificate.
Certificate Register: The register maintained pursuant to Section 5.2
hereof.
Certificateholder or Holder: The person in whose name a Certificate is
registered in the Certificate Register, except that, solely for the purpose of
giving any consent pursuant to this Agreement, any Certificate registered in the
name of the Depositor or the Seller or any affiliate or agent of the Depositor
or the Seller shall be deemed not to be Outstanding and the Percentage Interest
evidenced thereby shall not be taken into account in determining whether the
requisite amount of Percentage Interests necessary to effect such consent has
been obtained; provided, however, that if any such Person (including the
Depositor) owns 100% of the Percentage Interests evidenced by a Class of
Certificates, such Certificates shall be deemed to be Outstanding for purposes
of any provision hereof that requires the consent of the Holders of Certificates
of a particular Class as a condition to the taking of any action hereunder. The
Trustee is entitled to rely conclusively on a certification of the Depositor or
any affiliate of the Depositor in determining which Certificates are registered
in the name of an affiliate of the Depositor. Notwithstanding the foregoing, the
Insurer shall be deemed to be the Holder of 100% of the Class A Certificates so
long as no Insurer Default is then continuing.
Class: All Certificates bearing the same class designation as set forth in
the Preliminary Statement.
Class A Certificates: The Class A-1, Class A-2, Class A-3, Class A-4 and
Class A-5 Certificates, collectively.
Class A Principal Distribution Amount: With respect to any Distribution
Date, the lesser of (i) the aggregate Class Certificate Balance of the Class A
Certificates prior to such Distribution Date and (ii) the total Principal
Collections for that Distribution Date less any Overcollateralization Reduction
Amount for that Distribution Date.
Class A-1 Certificate Margin: With respect to the Class A-1 Certificates,
0.15%.
Class A-1 Interest Carry Forward Amount: For any Distribution Date and the
Class A-1 Certificates, the sum of:
(1) if on that Distribution Date the Pass-Through Rate on the
Class A-1 Certificates is limited to the Net WAC Cap, the
excess of:
(x) the amount of interest that the Class A-1 Certificates
would have been entitled to receive on that Distribution Date
had the applicable Pass-Through Rate been calculated as a per
annum rate equal to the lesser of (a) LIBOR plus the Class A-1
Certificate Margin; and (b) 7.15%; over
7
(y) the amount of interest that the Class A-1
Certificates were entitled to receive on that
Distribution Date because the applicable Pass-Through
Rate was calculated at the Net WAC Cap; and
(2) the Class A-1 Interest Carry Forward Amount for all
previous Distribution Dates not previously paid,
together with interest thereon at a rate equal to the
applicable Pass-Through Rate, without giving effect to
the Net WAC Cap, for that Distribution Date.
Class A-5 Lockout Distribution Amount: With respect to any Distribution
Date, the product of (a) the Class A-5 Lockout Percentage for that Distribution
Date and (b) the Class A-5 Pro Rata Distribution Amount for that Distribution
Date. In no event shall the Class A-5 Lockout Distribution Amount for a
Distribution Date exceed the Class A Principal Distribution Amount or the Class
Certificate Balance of the Class A-5 Certificates immediately prior to that
Distribution Date.
Class A-5 Lockout Percentage: With respect to each Distribution Date, the
applicable percentage set forth below:
CLASS A-5 LOCKOUT
DISTRIBUTION DATES PERCENTAGE
January 2005 through and including December 2007 0%
January 2008 through and including December 2009 45%
January 2010 through and including December 2010 80%
January 2011 through and including December 2011 100%
January 2012 and thereafter 300%
Class A-5 Pro Rata Distribution Amount: With respect to any Distribution
Date, an amount equal to the product of (a) a fraction, the numerator of which
is the Class Certificate Balance of the Class A-5 Certificates immediately prior
to that Distribution Date and the denominator of which is the aggregate Class
Certificate Balance of the Class A Certificates immediately prior to that
Distribution Date and (b) the Class A Principal Distribution Amount.
Class Certificate Balance: With respect to any Class of Certificates and
as of any Distribution Date the aggregate of the Certificate Principal Balances
of all Certificates of such Class as of such date.
Closing Date: December 30, 2004.
CLTV Ratio: With respect to each Mortgage Loan, the ratio, expressed as a
percentage, of:
(1) the sum of (a) the initial principal balance of that
Mortgage Loan; and (b) any outstanding principal
balance, at origination of that Mortgage Loan, of all
other Mortgage Loans, if any, secured by senior or
subordinate liens on the related Mortgaged Property;
over
8
(2) the Appraised Value, or, when not available, the
Stated Value of that Mortgage Loan.
Code: The Internal Revenue Code of 1986, including any successor or
amendatory provisions.
Combo Mortgage Loan: A Mortgage Loan that was originated in connection
with the origination of a first lien mortgage loan with respect to the same
Mortgaged Property.
Cooperative Corporation: The entity that holds title (fee or an acceptable
leasehold estate) to the real property and improvements constituting the
Cooperative Property and which governs the Cooperative Property, which
Cooperative Corporation must qualify as a Cooperative Housing Corporation under
Section 216 of the Code.
Coop Shares: Shares issued by a Cooperative Corporation.
Cooperative Loan: Any Mortgage Loan secured by Coop Shares and a
Proprietary Lease.
Cooperative Property: The real property and improvements owned by the
Cooperative Corporation, including the allocation of individual dwelling units
to the holders of the Coop Shares of the Cooperative Corporation.
Cooperative Unit: A single family dwelling located in a Cooperative
Property.
Corporate Trust Office: The designated office of the Trustee in the State
of New York at which at any particular time its corporate trust business with
respect to this Agreement shall be administered, which office at the date of the
execution of this Agreement is located at The Bank of New York, 000 Xxxxxxx
Xxxxxx, 0X, Xxx Xxxx, Xxx Xxxx 00000 (Attn: Corporate Trust Mortgage-Backed
Securities Group, First Horizon Asset Securities Inc. Series 2004-HE4),
facsimile no. (000) 000-0000, and which is the address to which notices to and
correspondence with the Trustee should be directed.
Corresponding Class of Certificates: As to any Lower REMIC Interest
identified in Section 2.7, the Class or Classes that are identified in Section
2.7 as corresponding to such Lower REMIC Interest.
Custodial Agreement: The Custodial Agreement dated as of December 30, 2004
by and among the Trustee, the Master Servicer and the Custodian.
Custodian: First Tennessee Bank National Association, a national banking
association, and its successors and assigns, as custodian under the Custodial
Agreement.
Cut-off Date: December 1, 2004.
Cut-off Date Pool Principal Balance: $236,305,552.93.
Cut-off Date Principal Balance: As to any Mortgage Loan, the actual
principal balance of such Mortgage Loan as reflected on the Mortgage Loan
Schedule.
9
Debt Service Reduction: With respect to any Mortgage Loan, a reduction by
a court of competent jurisdiction in a proceeding under the Bankruptcy Code in
the Scheduled Payment for such Mortgage Loan which became final and
non-appealable, except such a reduction resulting from a Deficient Valuation or
any reduction that results in a permanent forgiveness of principal.
Defective Mortgage Loan: Any Mortgage Loan which is required to be
repurchased pursuant to Section 2.2 or 2.3.
Deficient Valuation: With respect to any Mortgage Loan, a valuation by a
court of competent jurisdiction of the Mortgaged Property in an amount less than
the then-outstanding indebtedness under the Mortgage Loan and any senior lien on
the related Mortgaged Property, or any reduction in the amount of principal to
be paid in connection with any Scheduled Payment that results in a permanent
forgiveness of principal, which valuation or reduction results from an order of
such court which is final and non-appealable in a proceeding under the
Bankruptcy Code.
Deficiency Amount: With respect to the Class A Certificates and any
Distribution Date, an amount, if any, equal to the sum of (i) the excess, if
any, of (A) the aggregate amount of Accrued Certificate Interest on the Class A
Certificates for that Distribution Date, over (B) the amount on deposit in the
Distribution Account available for interest payments on the Certificates on that
Distribution Date, (ii) any Liquidation Loss Amount, to the extent not
distributed as part of the Liquidation Loss Distribution Amount or to the extent
not applied as a reduction to the Overcollateralization Amount, in each case,
for such Distribution Date and (iii) principal due on the Certificates on the
Final Scheduled Distribution Date, if outstanding.
Definitive Certificates: Any Certificate evidenced by a Physical
Certificate and any Certificate issued in lieu of a Book-Entry Certificate
pursuant to Section 5.2(e).
Delay Certificates: As specified in the Preliminary Statement.
Delay Delivery Mortgage Loans: The Mortgage Loans for which all or a
portion of a related Mortgage File is not delivered to Trustee on the Closing
Date. The number of Delay Delivery Mortgage Loans shall not exceed 25% of the
aggregate number of Mortgage Loans as of the Closing Date.
Deleted Mortgage Loan: As defined in Section 2.3(b) hereof.
Denomination: With respect to each Certificate, the amount set forth on
the face thereof as the "Initial Certificate Balance of this Certificate" or the
Percentage Interest appearing on the face thereof.
Depositor: First Horizon Asset Securities Inc., a Delaware corporation, or
its successor in interest.
Depository: The initial Depository shall be The Depository Trust Company,
the nominee of which is CEDE & Co., as the registered Holder of the Book-Entry
Certificates. The Depository shall at all times be a "clearing corporation" as
defined in Section 8-102(a)(5) of the Uniform Commercial Code of the State of
New York.
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Depository Participant: A broker, dealer, bank or other financial
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
Determination Date: As to any Distribution Date, the earlier of (i) the
third Business Day after the 15th day of each month, and (ii) the second
Business Day prior to the related Distribution Date.
Distribution Account: The separate Eligible Account created and maintained
by the Trustee pursuant to Section 3.5 in the name of the Trustee for the
benefit of the Certificateholders and the Insurer and designated "The Bank of
New York, in trust for registered Holders of First Horizon ABS Trust Mortgage
Pass-Through Certificates, Series 2004-HE4." Funds in the Distribution Account
shall be held in trust for the Certificateholders and the Insurer for the uses
and purposes set forth in this Agreement.
Distribution Account Deposit Date: As to any Distribution Date, 1:30 p.m.
Central time on the Business Day immediately preceding such Distribution Date.
Distribution Date: The 25th day of each calendar month after the initial
issuance of the Certificates, or if such 25th day is not a Business Day, the
next succeeding Business Day, commencing in January 2005.
Due Date: With respect to any Distribution Date, the first day of the
month in which the related Distribution Date occurs.
Due Period: With respect to a Distribution Date, the calendar month
immediately preceding the month in which such Distribution Date occurs.
Eligible Account: Any of (i) an account or accounts maintained with a
federal or state chartered depository institution or trust company the
short-term unsecured debt obligations of which (or, in the case of a depository
institution or trust company that is the principal subsidiary of a holding
company, the debt obligations of such holding company) have the highest
short-term ratings of each Rating Agency at the time any amounts are held on
deposit therein, or (ii) an account or accounts in a depository institution or
trust company in which such accounts are insured by the FDIC or the SAIF (to the
limits established by the FDIC or the SAIF, as applicable) and the uninsured
deposits in which accounts are otherwise secured such that, as evidenced by an
Opinion of Counsel delivered to the Trustee and to each Rating Agency, the
Certificateholders have a claim with respect to the funds in such account or a
perfected first priority security interest against any collateral (which shall
be limited to Permitted Investments) securing such funds that is superior to
claims of any other depositors or creditors of the depository institution or
trust company in which such account is maintained, or (iii) a trust account or
accounts maintained with (a) the trust department of a federal or state
chartered depository institution or (b) a trust company, acting in its fiduciary
capacity or (iv) any other account acceptable to each Rating Agency and the
Insurer. Eligible Accounts may bear interest, and may include, if otherwise
qualified under this definition, accounts maintained with the Trustee.
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
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ERISA-Qualifying Underwriting: With respect to any ERISA-Restricted
Certificate, a best efforts or firm commitment underwriting or private placement
that meets the requirements of the Underwriters' Exemption.
ERISA-Restricted Certificate: As specified in the Preliminary Statement.
Event of Default: As defined in Section 7.1 hereof.
Excess Overcollateralization Amount: For any Distribution Date, the
excess, if any, of the Overcollateralization Amount over the Specified
Overcollateralization Amount.
Excess Proceeds: With respect to any Liquidated Mortgage Loan, the amount,
if any, by which the sum of any Net Liquidation Proceeds of such Mortgage Loan
received in the calendar month in which such Mortgage Loan became a Liquidated
Mortgage Loan, net of any amounts previously reimbursed to the Master Servicer
as Nonrecoverable Advance(s) with respect to such Mortgage Loan pursuant to
Section 3.8(a)(iii), exceeds (i) the unpaid principal balance of such Liquidated
Mortgage Loan as of the Due Date in the month in which such Mortgage Loan became
a Liquidated Mortgage Loan plus (ii) accrued interest at the Mortgage Rate from
the Due Date as to which interest was last paid or advanced (and not reimbursed)
to Certificateholders up to the Due Date applicable to the Distribution Date
immediately following the calendar month during which such liquidation occurred.
Excess Spread: With respect to any Distribution Date and without taking
into account any draw on the Policy for that Distribution Date, the excess, if
any, of (x) Interest Collections for the related Distribution Date over (y) the
sum of (1) the Master Servicing Fee for that Distribution Date, (2) the Trustee
Fee for that Distribution Date, (3) the Premium due to the Insurer for that
Distribution Date; (4) the Accrued Certificate Interest due on the Class A
Certificates for that Distribution Date, (5) any reimbursement due the Insurer
for prior draws made under the Policy, and (6) any other amounts due the Insurer
under the Insurance Agreement on that Distribution Date.
Excess Spread Percentage: For any Distribution Date, the percentage
equivalent of a fraction (A) the numerator of which is the product of (i) the
Excess Spread for such Distribution Date and (ii) twelve, and (B) the
denominator of which is the Pool Principal Balance as of the beginning of the
related Due Period, expressed as a percentage. The Excess Spread Percentage for
the first Distribution Date will equal approximately 3.98%.
Expense Fee Rate: As to each Mortgage Loan, the sum of the related Master
Servicing Fee Rate, the Trustee Fee Rate and the Premium Percentage.
FDIC: The Federal Deposit Insurance Corporation, or any successor thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created and existing under Title III of the
Emergency Home Finance Act of 1970, as amended, or any successor thereto.
Final Scheduled Distribution Date: The Distribution Date in July 2019.
12
FIRREA: The Financial Institutions Reform, Recovery, and Enforcement Act
of 1989.
First Horizon: First Horizon Home Loan Corporation, a Kansas corporation
and an indirect wholly owned subsidiary of First Horizon National Corporation, a
Tennessee corporation.
Fiscal Agent: As defined in the Policy.
Fitch: Fitch Ratings or any successor thereto. If Fitch is designated as a
Rating Agency in the Preliminary Statement, for purposes of Section 11.5(b) the
address for notices to Fitch shall be Fitch, Inc., Xxx Xxxxx Xxxxxx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Residential Mortgage Surveillance Group, or
such other address as Fitch may hereafter furnish to the Depositor and the
Master Servicer.
FNMA: The Federal National Mortgage Association, a federally chartered and
privately owned corporation organized and existing under the Federal National
Mortgage Association Charter Act, or any successor thereto.
FTMSI: First Tennessee Mortgage Services, Inc., a Tennessee corporation
and an indirect wholly owned subsidiary of First Horizon National Corporation, a
Tennessee corporation.
Indemnification Agreement: The Indemnification Agreement dated as of
December 22, 2004, among the Insurer, the Seller, the Master Servicer and the
Underwriter.
Index: LIBOR.
Indirect Participant: A broker, dealer, bank or other financial
institution or other Person that clears through or maintains a custodial
relationship with a Depository Participant.
Insurance Agreement: The Insurance Agreement dated as of December 1, 2004
among the Trustee, the Seller, the Master Servicer, the Depositor and the
Insurer, including any amendments and supplements thereto in accordance with the
terms thereof.
Insurance Policy: With respect to any Mortgage Loan included in the Trust
Fund, any insurance policy, including all riders and endorsements thereto in
effect, including any replacement policy or policies for any Insurance Policies.
Insurance Proceeds: Proceeds paid by an insurer pursuant to any Insurance
Policy, in each case other than any amount included in such Insurance Proceeds
in respect of Insured Expenses.
Insured Expenses: Expenses covered by an Insurance Policy or any other
insurance policy with respect to the Mortgage Loans.
Insured Payment: With respect to any Distribution Date, the sum of (i) any
Deficiency Amount for such Distribution Date and (ii) any Preference Amount for
such Distribution Date.
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Insurer: MBIA Insurance Corporation and its successor and assigns.
Insurer Default: Any failure of the Insurer to make a payment required
under the Policy in accordance with its terms.
Interest Accrual Period: With respect to each Class of Delay Certificates
and any Distribution Date, the calendar month prior to the month of such
Distribution Date. With respect to any Non-Delay Certificates and any
Distribution Date, the one month period commencing on the 25th day of the month
preceding the month in which such Distribution Date occurs and ending on the
24th day of the month in which such Distribution Date occurs.
Interest Collections: With respect to any Distribution Date, an amount
equal to the sum of:
(a) the portion of all Scheduled Payments on the Mortgage Loans received
and applied to interest during the related Due Period, minus the
Master Servicing Fee and the Trustee Fee,
(b) the portion of all Net Liquidation Proceeds and prepayments
allocated to interest under the terms of the Mortgage Notes, reduced
by the Master Servicing Fee and Trustee Fee for that Due Period, and
(c) the interest portion of the Purchase Price of any Deleted Mortgage
Loans and the Purchase Price paid in connection with any Optional
Termination.
Interest Determination Date: With respect to any Interest Accrual Period
(other than the first Interest Accrual Period) for any LIBOR Certificates, the
second Business Day prior to the first day of such Interest Accrual Period. With
respect to the first Interest Accrual Period, LIBOR will be 2.40688%.
Interest Shortfall: For any Distribution Date and each Mortgage Loan, the
sum of (a) any Relief Act Shortfall in respect of such Mortgage Loan; and (b)
any Prepayment Interest Shortfall in respect of such Mortgage Loan.
Latest Possible Maturity Date: As to each Class of Certificates and each
Lower REMIC Interest, the Distribution Date following the third anniversary of
the scheduled maturity date of the Mortgage Loan having the latest scheduled
maturity date as of the Cut-off Date.
LIBOR: The London interbank offered rate for one month United States
dollar deposits calculated in the manner described in Section 4.5.
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 Certificates: As defined in the Preliminary Statement.
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Liquidated Mortgage Loan: With respect to any Distribution Date, a
defaulted Mortgage Loan (including any REO Property) which was liquidated in the
calendar month preceding the month of such Distribution Date and as to which the
Master Servicer has determined (in accordance with this Agreement) that it has
received all amounts it expects to receive in connection with the liquidation of
such Mortgage Loan, including the final disposition of an REO Property.
Liquidation Loss Amount: With respect to any Distribution Date and any
Liquidated Mortgage Loan, the unrecovered principal balance of the Liquidated
Mortgage Loan, after giving effect to the Net Liquidation Proceeds for that
Mortgage Loan. If a Bankruptcy Loss has occurred with respect to any Mortgage
Loan, the amount of the Bankruptcy Loss will constitute a Liquidation Loss
Amount.
Liquidation Loss Distribution Amount: With respect to any Distribution
Date, an amount equal to the sum of (A) the Liquidation Loss Amounts on such
Distribution Date, plus (B) any Liquidation Loss Amounts remaining undistributed
from any preceding Distribution Date. Any Liquidation Loss Amount remaining
undistributed from any preceding Distribution Date shall not be required to be
paid as a Liquidation Loss Distribution Amount to the extent that a Liquidation
Loss Amount was distributed in respect of the Class A Certificates by means of a
draw on the Policy or was covered by Excess Spread or through reduction of the
Overcollateralization Amount. The Policy will not cover the payment of a
Liquidation Loss Distribution Amount until the Overcollateralization Amount has
been reduced to zero.
Lost Mortgage Note: Any Mortgage Note, the original of which was
permanently lost or destroyed and has not been replaced.
Lower REMIC: The segregated pool of assets consisting of the Trust Fund,
the Lower REMIC Interests, the RL Interest and the RU Interest.
Lower REMIC Interests: The REMIC regular interests, within the meaning of
the REMIC Provisions, issued by the Lower REMIC as set forth in Section 2.7.
Maintenance: With respect to any Cooperative Unit, the rent paid by the
Mortgagor to the Cooperative Corporation pursuant to the Proprietary Lease.
Majority in Interest: As to any Class of Regular Certificates, the Holders
of Certificates of such Class evidencing, in the aggregate, at least 51% of the
Percentage Interests evidenced by all Certificates of such Class.
Master Servicer: First Horizon Home Loan Corporation, a Kansas
corporation, and its successors and assigns, in its capacity as master servicer
hereunder.
Master Servicer Advance Date: As to any Distribution Date, 1:30 p.m.
Central time on the Business Day immediately preceding such Distribution Date.
Master Servicing Fee: As to each Mortgage Loan and any Distribution Date,
an amount payable out of each full payment of interest received on such Mortgage
Loan and equal to one-twelfth of the Master Servicing Fee Rate multiplied by the
Stated Principal Balance of such Mortgage Loan as of the Due Date in the month
of such Distribution Date (prior to giving effect to any Scheduled Payments due
on such Mortgage Loan on such Due Date), subject to reduction as provided in
Section 3.14.
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Master Servicing Fee Rate: For each Mortgage Loan, a per annum rate equal
to 0.500%.
MERS: Mortgage Electronic Registration Systems, Inc., a corporation
organized and existing under the laws of the State of Delaware, or any successor
thereto.
MERS Mortgage Loan: Any Mortgage Loan registered with MERS on the MERS
System.
MERS(R) System: The system of recording transfers of mortgages
electronically maintained by MERS.
MIN: The Mortgage Identification Number for any MERS Mortgage Loan.
MLPAs: MLPA I and MLPA II, collectively.
MLPA I: The Mortgage Loan Purchase Agreement dated as of December 30,
2004, by and between First Horizon Home Loan Corporation, as seller, and First
Tennessee Bank National Association, as purchaser, as related to the transfer,
sale and conveyance of the Mortgage Loans.
MLPA II: The Mortgage Loan Purchase Agreement dated as of December 30,
2004, by and between First Tennessee Bank National Association, as seller, and
First Horizon Asset Securities Inc., as purchaser, as related to the transfer,
sale and conveyance of the Mortgage Loans.
MOM Loan: Any Mortgage Loan as to which MERS is acting as mortgagee,
solely as nominee for the originator of such Mortgage Loan and its successors
and assigns.
Monthly Master Servicer Report: A report in substantially the form
attached hereto as Schedule III.
Monthly Statement: The statement delivered to the Certificateholders
pursuant to Section 4.6.
Moody's: Xxxxx'x Investors Service, Inc., or any successor thereto. If
Xxxxx'x is designated as a Rating Agency in the Preliminary Statement, for
purposes of Section 11.5(b) the address for notices to Moody's shall be Xxxxx'x
Investors Service, Inc., 00 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention:
Residential Pass-Through Monitoring, or such other address as Moody's may
hereafter furnish to the Depositor or the Master Servicer.
Mortgage: The mortgage, deed of trust or other instrument creating a
second lien on an estate in fee simple or leasehold interest in real property
securing a Mortgage Note.
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Mortgage File: The mortgage documents listed in Section 2.1(b) hereof
pertaining to a particular Mortgage Loan and any additional documents delivered
to the Trustee to be added to the Mortgage File pursuant to this Agreement.
Mortgage Loan Schedule: The list of Mortgage Loans (as from time to time
amended by the Master Servicer to reflect the addition of Substitute Mortgage
Loans and the deletion of Deleted Mortgage Loans pursuant to the provisions of
this Agreement) transferred to the Trustee as part of the Trust Fund and from
time to time subject to this Agreement, attached hereto as Schedule I, setting
forth the following information with respect to each Mortgage Loan:
(1) the loan number;
(2) the Mortgagor's name and the street address of the Mortgaged
Property, including the zip code;
(3) the maturity date;
(4) the original principal balance;
(5) the Cut-off Date Principal Balance;
(6) the first payment date of the Mortgage Loan;
(7) the Scheduled Payment in effect as of the Cut-off Date;
(8) the CLTV Ratio at origination;
(9) a code indicating whether the residential dwelling at the time of
origination was represented to be owner-occupied;
(10) a code indicating whether the residential dwelling is either (a) a
detached single family dwelling (b) a dwelling in a de minimis PUD,
(c) a condominium unit or PUD (other than a de minimis PUD), (d) a
two-to-four unit residential property or (e) a Cooperative Unit;
(11) the Mortgage Rate;
(12) the purpose for the Mortgage Loan;
(13) the type of documentation program pursuant to which the Mortgage
Loan was originated;
(14) the Master Servicing Fee for the Mortgage Loan; and
(15) a code indicating whether the Mortgage Loan is a MERS Mortgage Loan.
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Such schedule shall also set forth the total of the amounts described
under (4) and (5) above for all of the Mortgage Loans.
Mortgage Loans: Such of the mortgage loans transferred and assigned to the
Trustee pursuant to the provisions hereof as from time to time are held as a
part of the Trust Fund (including any REO Property), the mortgage loans so held
being identified in the Mortgage Loan Schedule, notwithstanding foreclosure or
other acquisition of title of the related Mortgaged Property.
Mortgage Note: The original executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan.
Mortgage Rate: The annual rate of interest borne by a Mortgage Note from
time to time.
Mortgaged Property: The underlying property securing a Mortgage Loan,
which, with respect to a Cooperative Loan, is the related Coop Shares and
Proprietary Lease.
Mortgagor: The obligor(s) on a Mortgage Note.
National Cost of Funds Index: The National Monthly Median Cost of Funds
Ratio to SAIF-Insured Institutions published by the Office of Thrift
Supervision.
Net Liquidation Proceeds: With respect to any Liquidated Mortgage Loan,
the proceeds, excluding draws on the Policy, received in connection with the
liquidation of that Mortgage Loan, whether through Trustee's sale, foreclosure
sale or otherwise, and including Insurance Proceeds and Subsequent Recoveries,
reduced by the sum of related unreimbursed Master Servicing Fees, Servicing
Advances and Advances, but not including the portion, if any, of the amount that
exceeds the principal balance of, plus accrued and unpaid interest on, the
Mortgage Loan at the end of the calendar month in which the Mortgage Loan became
a Liquidated Mortgage Loan.
Net Mortgage Rate: With respect to each Mortgage Loan, the related
Mortgage Rate minus the sum of (a) the Expense Fee Rates and (b) the Premium
Percentage; provided, however, that for purposes of this calculation, the
Premium Percentage will be multiplied by a fraction equal to the aggregate Class
Certificate Balance of the Class A Certificates over the then current Pool
Principal Balance.
Net WAC Cap: With respect to any Distribution Date, a per annum rate equal
to the weighted average of the Net Mortgage Rates of the Mortgage Loans for that
Distribution Date (using the Net Mortgage Rates in effect for the Scheduled
Payments due on such Mortgage Loans during the related Due Period), multiplied
by a fraction, the numerator of which is 30 and the denominator of which is the
actual number of days in the related Interest Accrual Period.
Non-Delay Certificates: As specified in the Preliminary Statement.
Nonrecoverable Advance: Any portion of an Advance previously made or
proposed to be made by the Master Servicer that, in the good faith judgment of
the Master Servicer, will not be ultimately recoverable by the Master Servicer
from the related Mortgagor, related Net Liquidation Proceeds or otherwise.
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Notice of Final Distribution: The notice to be provided pursuant to
Section 9.2 to the effect that final distribution on any of the Certificates
shall be made only upon presentation and surrender thereof.
Notional Amount: Not applicable.
Notional Amount Component: Not applicable.
Notional Certificates: Not applicable.
Offered Certificates: As specified in the Preliminary Statement.
Officer's Certificate: A Certificate (i) signed by the Chairman of the
Board, the Vice Chairman of the Board, the President, a Managing Director, a
Vice President (however denominated), an Assistant Vice President, the
Treasurer, the Secretary, or one of the Assistant Treasurers or Assistant
Secretaries of the Depositor or the Master Servicer, or (ii), if provided for in
this Agreement, signed by a Servicing Officer, as the case may be, and delivered
to the Depositor and the Trustee, as the case may be, as required by this
Agreement.
Opinion of Counsel: A written opinion of counsel, who may be counsel for
the Depositor or the Master Servicer, including, in-house counsel, reasonably
acceptable to the Trustee; provided, however, that with respect to the
interpretation or application of the REMIC Provisions, such counsel must (i) in
fact be independent of the Depositor and the Master Servicer, (ii) not have any
direct financial interest in the Depositor or the Master Servicer or in any
affiliate of either, and (iii) not be connected with the Depositor or the Master
Servicer as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions.
Optional Termination: The termination of the trust created hereunder in
connection with the purchase of the Mortgage Loans pursuant to Section 9.1(a)
hereof.
Original Mortgage Loan: The Mortgage Loan refinanced in connection with
the origination of a Refinancing Mortgage Loan.
OTS: The Office of Thrift Supervision.
Outside Reference Date: Not applicable.
Outstanding: With respect to the Certificates as of any date of
determination, all Certificates theretofore executed and authenticated under
this Agreement except:
(i) Certificates theretofore canceled by the Trustee or delivered to the
Trustee for cancellation; and
19
(ii) Certificates in exchange for which or in lieu of which other
Certificates have been executed and delivered by the Trustee
pursuant to this Agreement.
Outstanding Mortgage Loan: As of any Due Date, a Mortgage Loan with a
Stated Principal Balance greater than zero which was not the subject of a
Principal Prepayment in Full prior to such Due Date and which did not become a
Liquidated Mortgage Loan prior to such Due Date.
Overcollateralization Amount: For any Distribution Date, the excess, if
any, of the Pool Principal Balance as of the end of the related Due Period over
the aggregate Class Certificate Balance of the Class A Certificates as of such
Distribution Date, after taking into account the distribution of the Principal
Collections to the Class A Certificates on that Distribution Date.
Overcollateralization Floor: An amount equal to the sum of (i) product of
(x) 0.65% and (y) the Pool Principal Balance as of the Closing Date and (ii) of
the aggregate Stated Principal Balance of all Mortgage Loans that are both (a)
180 days or more contractually delinquent and (b) in REO, foreclosure or
bankruptcy.
Overcollateralization Increase Amount: For any Distribution Date,
beginning on February 25, 2005, an amount equal to the lesser of (i) the Excess
Spread not distributed on that Distribution Date to cover Liquidation Loss
Amounts or as reimbursement to the Insurer for prior draws on the Policy and any
other amounts due and owing to the Insurer under the Insurance Agreement and
(ii) the excess, if any, of (x) the Specified Overcollateralization Amount for
that Distribution Date over (y) the Overcollateralization Amount for that
Distribution Date.
Overcollateralization Reduction Amount: For any Distribution Date for
which the 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 Excess Overcollateralization
Amount for that Distribution Date and (ii) Principal Collections for that
Distribution Date.
Ownership Interest: As to any Residual Certificate, any ownership interest
in such Certificate including any interest in such Certificate as the Holder
thereof and any other interest therein, whether direct or indirect, legal or
beneficial.
Pass-Through Rate: For any interest bearing Class of Certificates, the per
annum rate set forth or calculated in the manner described in the Preliminary
Statement.
Percentage Interest: As to any Certificate, the percentage interest
evidenced thereby in distributions required to be made on the related Class,
such percentage interest being set forth on the face thereof or equal to the
percentage obtained by dividing the Denomination of such Certificate by the
aggregate of the Denominations of all Certificates of the same Class.
Permitted Investments: At any time, any one or more of the following
obligations and securities:
20
(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;
(iii) commercial or finance company paper which is then receiving the
highest commercial or finance company paper rating of 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, provided that the commercial paper and/or
long term unsecured debt obligations of such depository institution
or trust company (or in the case of the principal depository
institution in a holding company system, the commercial paper or
long-term unsecured debt obligations of such holding company, but
only if Xxxxx'x is not a Rating Agency) are then rated one of the
two highest long-term and/or the highest short-term ratings of each
Rating Agency for such securities;
(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 and receiving the highest
short-term debt rating of each Rating Agency;
(vi) guaranteed reinvestment agreements issued by any bank, insurance
company or other corporation and receiving the highest short-term
debt rating of each Rating Agency and 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 either 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 ratings of each Rating Agency (except if the Rating
Agency is Moody's or S&P, such rating shall be the highest
commercial paper rating of Moody's or S&P, as applicable, for any
such securities);
21
(ix) units of a taxable money-market portfolio having the highest rating
assigned by each Rating Agency (except if Fitch is a Rating Agency
and has not rated the portfolio, the highest rating assigned by
Moody's) and restricted to obligations issued or guaranteed by the
United States of America or entities whose obligations are backed by
the full faith and credit of the United States of America and
repurchase agreements collateralized by such obligations; and
(x) such other investments bearing interest or sold at a discount
acceptable to each Rating Agency as will not result in the
downgrading or withdrawal of the shadow rating then assigned to the
Certificates by either 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 evidences the right to
receive interest only payments with respect to the
obligations underlying such instrument.
Permitted Transferee: Any person other than (i) the United States, any
State or political subdivision thereof, or any agency or instrumentality of any
of the foregoing, (ii) a foreign government, International Organization or any
agency or instrumentality of either of the foregoing, (iii) an organization
(except certain farmers' cooperatives described in section 521 of the Code)
which is exempt from tax imposed by Chapter 1 of the Code (including the tax
imposed by section 511 of the Code on unrelated business taxable income) on any
excess inclusions (as defined in section 860E(c)(l) of the Code) with respect to
any Residual Certificate, (iv) rural electric and telephone cooperatives
described in section 1381(a)(2)(C) of the Code, (v) an "electing large
partnership" as defined in section 775 of the Code, (vi) a Person that is not
(a) a citizen or resident of the United States, (b) a corporation, partnership,
or other entity created or organized in or under the laws of the United States,
any state thereof or the District of Columbia, (c) an estate whose income from
sources without the United States is includible in gross income for United
States federal income tax purposes regardless of its connection with the conduct
of a trade or business within the United States or (d) a trust if a court within
the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust, unless such Person
has furnished the transferor and the Trustee with a duly completed Internal
Revenue Service Form W-8ECI or any applicable successor form, and (vii) any
other Person so designated by the Depositor based upon an Opinion of Counsel
that the Transfer of an Ownership Interest in a Residual Certificate to such
Person may cause any REMIC created hereunder to fail to qualify as a REMIC at
any time that the Certificates are outstanding; provided, however, that if a
person is classified as a partnership under the Code, such person shall only be
a Permitted Transferee if all of its beneficial owners are described in
subclauses (a), (b), (c) or (d) of clause (vi) and the governing documents of
such person prohibits a transfer of any interest in such person to any person
described in clause (vi). The terms "United States," "State" and "International
Organization" shall have the meanings set forth in section 7701 of the Code or
successor provisions. A corporation will not be treated as an instrumentality of
the United States or of any State or political subdivision thereof for these
purposes if all of its activities are subject to tax and, with the exception of
the Federal Home Loan Mortgage Corporation, a majority of its board of directors
is not selected by such government unit.
22
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government, or any agency or political subdivision thereof.
Physical Certificate: As specified in the Preliminary Statement.
Planned Balance: Not applicable.
Planned Principal Classes: Not applicable.
Policy: The financial guaranty insurance policy (No. 45549) with respect
to the Class A Certificates and all endorsements thereto, if any, dated the
Closing Date, issued by the Insurer for the benefit of the Class A
Certificateholders, a copy of which is attached hereto as Exhibit N.
Pool Principal Balance: With respect to any Distribution Date, the
aggregate of the Stated Principal Balances of the Mortgage Loans which were
Outstanding Mortgage Loans on the Due Date in the month preceding the month of
such Distribution Date, and for the first Distribution Date, as of the Closing
Date, less any Principal Prepayments received on or after such Due Date and
distributed to Certificateholders on the prior Distribution Date.
Preference Amount: As defined in Section 10.2(a).
Premium: As specified in the Insurance Agreement.
Premium Letter: The letter agreement dated December 30, 2004 between the
Insurer and the Depositor.
Premium Percentage: As specified in the Premium Letter.
Prepayment Interest Shortfall: As to any Distribution Date, Mortgage Loan
and Principal Prepayment received during the related Prepayment Period, the
amount, if any, by which one month's interest at the related Adjusted Mortgage
Rate on such Principal Prepayment exceeds the amount of interest actually paid
by the Mortgagor in connection with such Principal Prepayment.
Prepayment Period: With respect to any Distribution Date, the month
preceding the month of such Distribution Date.
Principal Balance Schedules: Not applicable.
Principal Collections: With respect to any Distribution Date, an amount
equal to the sum of:
23
(a) the amount collected during the related Due Period, including Net
Liquidation Proceeds, and applied to principal of the Mortgage Loans
pursuant to the terms of the related Mortgage Notes;
(b) the principal portion of the Purchase Price for any Deleted Mortgage
Loans, including any Substitution Adjustment Amounts required to be
deposited in the Certificate Account by the Seller pursuant to
Section 2.3;
(c) the principal portion of the Purchase Price paid in connection with
any Optional Termination; and
(d) the principal portion of the Purchase Price paid in connection with
the optional purchase by the Master Servicer of any Mortgage Loan
which is 91 days or more delinquent pursuant to Section 3.11.
Principal Prepayment: Any payment of principal by a Mortgagor on a
Mortgage Loan that is received in advance of its scheduled Due Date and is not
accompanied by an amount representing scheduled interest due on any date or
dates in any month or months subsequent to the month of prepayment. Partial
Principal Prepayments shall be applied by the Master Servicer in accordance with
the terms of the related Mortgage Note.
Principal Prepayment in Full: Any Principal Prepayment made by a Mortgagor
of the entire principal balance of a Mortgage Loan.
Private Certificate: As specified in the Preliminary Statement.
Proceeding: Any suit in equity, action at law or other judicial or
administrative proceeding.
Proprietary Lease: With respect to any Cooperative Unit, a lease or
occupancy agreement between a Cooperative Corporation and a holder of related
Coop Shares.
PUD: Planned Unit Development.
Purchase Price: With respect to any Mortgage Loan required to be purchased
by the Seller pursuant to Section 2.2 or 2.3 hereof or purchased at the option
of the Master Servicer pursuant to Section 3.11, an amount equal to the sum of
(i) 100% of the unpaid principal balance of the Mortgage Loan on the date of
such purchase, (ii) accrued interest thereon at the applicable Mortgage Rate (or
at the applicable Adjusted Mortgage Rate if the purchaser is the Master
Servicer) from the date through which interest was last paid by the Mortgagor to
the Due Date in the month in which the Purchase Price is to be distributed to
Certificateholders, and (iii) any costs and damages incurred by the Trust in
connection with the noncompliance of such Mortgage Loan with any specifically
applicable predatory or abusive lending law.
Qualified Insurer: A mortgage guaranty insurance company duly qualified as
such under the laws of the state of its principal place of business and each
state having jurisdiction over such insurer in connection with the insurance
policy issued by such insurer, duly authorized and licensed in such states to
transact a mortgage guaranty insurance business in such states and to write the
insurance provided by the insurance policy issued by it, approved as a
FNMA-approved mortgage insurer and having a claims paying ability rating of at
least "AA" or equivalent rating by a nationally recognized statistical rating
organization. Any replacement insurer with respect to a Mortgage Loan must have
at least as high a claims paying ability rating as the insurer it replaces had
on the Closing Date.
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Rating Agency: Each of the Rating Agencies specified in the Preliminary
Statement. If any such organization or a successor is no longer in existence,
"Rating Agency" shall be such nationally recognized statistical rating
organization, or other comparable Person, as is designated by the Depositor,
notice of which designation shall be given to the Trustee. References herein to
a given rating category of a Rating Agency shall mean such rating category
without giving effect to any modifiers.
Recognition Agreement: With respect to any Cooperative Loan, an agreement
between the Cooperative Corporation and the originator of such Mortgage Loan
which establishes the rights of such originator in the Cooperative Property.
Record Date: With respect to any Distribution Date, the close of business
on the last Business Day of the month preceding the month in which such
Distribution Date occurs.
Reference Bank: A leading bank with an established place of business in
London engaged in transactions in Eurodollar deposits in the international
Eurocurrency market, not controlled by, or under the common control with, the
Trustee.
Refinancing Mortgage Loan: Any Mortgage Loan originated in connection with
the refinancing of an existing mortgage loan.
Regular Certificates: As specified in the Preliminary Statement.
Relief Act: The Servicemembers Civil Relief Act or any similar state or
local legislation or regulations.
Relief Act Shortfall: With respect to any Distribution Date and any
Mortgage Loan as to which there has been a reduction in the amount of interest
collectible thereon for the most recently ended calendar month as a result of
the application of the Relief Act, the amount, if any, by which interest
collectible on such Mortgage Loan for the most recently ended calendar month is
less than interest accrued thereon for such month pursuant to the Mortgage Note.
REMIC: A "real estate mortgage investment conduit" within the meaning of
section 860D of the Code.
REMIC Change of Law: Any proposed, temporary or final regulation, revenue
ruling, revenue procedure or other official announcement or interpretation
relating to REMICs and the REMIC Provisions issued after the Closing Date.
REMIC Pool: Any of the Lower REMIC or Upper REMIC.
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REMIC Provisions: Provisions of the federal income tax law relating to
real estate mortgage investment conduits, which appear at sections 860A through
860G of Subchapter M of Chapter 1 of the Code, and related provisions, and
regulations promulgated thereunder, as the foregoing may be in effect from time
to time as well as provisions of applicable state laws.
REO Loan: A Mortgage Loan where title to the related Mortgaged Property
has been obtained by the Trustee or its nominee on behalf of the
Certificateholders.
REO Property: A Mortgaged Property acquired by the Trust Fund through
foreclosure or deed-in-lieu of foreclosure in connection with a defaulted
Mortgage Loan.
Request for Release: The Request for Release submitted by the Master
Servicer to the Trustee, substantially in the form of Exhibits L and M, as
appropriate.
Required Insurance Policy: With respect to any Mortgage Loan, any
insurance policy that is required to be maintained from time to time under this
Agreement.
Residual Certificates: As specified in the Preliminary Statement.
Responsible Officer: When used with respect to the Trustee, any Vice
President, any Assistant Vice President, the Secretary, any Assistant Secretary,
any Trust Officer or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
having direct responsibility for the administration of this Agreement and also
to whom, with respect to a particular matter, such matter is referred because of
such officer's knowledge of and familiarity with the particular subject.
RL Interest: The REMIC residual interest, within the meaning of the REMIC
Provisions, issued by the Lower REMIC, which shall be represented by the Class R
Certificate.
Rolling Three-Month Excess Spread Percentage: For any Distribution Date,
the average of the Excess Spread Percentages determined for that Distribution
Date and for each of the two preceding Distribution Dates.
RU Interest: The REMIC residual interest, within the meaning of the REMIC
Provisions, issued by the Upper REMIC, which shall be represented by the Class R
Certificate.
Scheduled Balances: Not applicable.
Scheduled Certificates: Not applicable.
Scheduled Payment: The scheduled monthly payment on a Mortgage Loan due on
any Due Date allocable to principal and/or interest on such Mortgage Loan.
Securities Act: The Securities Act of 1933, as amended.
Security Agreement: The security agreement with respect to a Cooperative
Loan.
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Seller: First Horizon Home Loan Corporation, a Kansas corporation, and its
successors and assigns, in its capacity as seller of the Mortgage Loans pursuant
to MLPA I.
Servicing Advances: All customary, reasonable and necessary "out of
pocket" costs and expenses incurred in the performance by the Master Servicer of
its servicing obligations, including, but not limited to, the cost of (i) the
preservation, restoration and protection of a Mortgaged Property, (ii) any
expenses reimbursable to the Master Servicer pursuant to Section 3.11 and any
enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of any REO Property and (iv) compliance with the
obligations under Section 3.9.
Servicing Agreement: The Servicing Agreement (Home Equity Loans), dated as
of December 1, 2004 by and between First Tennessee Bank National Association and
its assigns, as owner, and First Tennessee Mortgage Services, Inc., as servicer.
Servicing Officer: Any officer of the Master Servicer involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name and facsimile signature appear on a list of servicing officers furnished to
the Trustee by the Master Servicer on the Closing Date pursuant to this
Agreement, as such list may from time to time be amended.
Servicing Rights Transfer and Subservicing Agreement: The Servicing Rights
Transfer and Subservicing Agreement (Home Equity Loans), dated as of December 1,
2004, by and between First Horizon Home Loan Corporation, as transferor and
subservicer, and First Tennessee Mortgage Services, Inc., as transferee and
servicer.
S&P: Standard & Poor's Corporation, a division of The XxXxxx-Xxxx
Companies, Inc. If S&P is designated as a Rating Agency in the Preliminary
Statement, for purposes of Section 11.5(b) the address for notices to S&P shall
be Standard & Poor's, 00 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Mortgage Surveillance Monitoring, or such other address as S&P may
hereafter furnish to the Depositor and the Master Servicer.
Specified Overcollateralization Amount: For any Distribution Date, (a) if
such Distribution Date is prior to the Stepdown Date, the Base Specified
Overcollateralization Amount, or (b) if such Distribution Date is on or after
the Stepdown Date, the greater of (A) the sum of (i) the product of (x) two
times the Target Percentage and (y) the Pool Principal Balance as of the end of
the related Due Period and (ii) the aggregate Stated Principal Balance of all
Mortgage Loans that are both (a) 180 days or more contractually delinquent and
(b) in REO, foreclosure or bankruptcy, and (B) the Overcollateralization Floor;
provided, however, that for the first Distribution Date, the Specified
Overcollateralization Amount will equal 0.00%; provided, further, that if either
of the Spread Squeeze Step-Down Freeze or Total Loss Freeze Test is not
satisfied, the Specified Overcollateralization Amount will equal the Base
Specified Overcollateralization Amount.
Spread Squeeze Step-Down Freeze Test: For any Distribution Date, a test
that is satisfied if the Rolling Three Month Excess Spread Percentage for that
Distribution Date equals or exceeds 2.00%.
Startup Day: The Closing Date.
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Stated Principal Balance: As to any Mortgage Loan and Due Date, the unpaid
principal balance of such Mortgage Loan as of such Due Date as specified in the
amortization schedule at the time relating thereto (before any adjustment to
such amortization schedule by reason of any moratorium or similar waiver or
grace period) after giving effect to any previous partial Principal Prepayments
and Liquidation Proceeds allocable to principal (other than with respect to any
Liquidated Mortgage Loan) and to the payment of principal due on such Due Date
and irrespective of any delinquency in payment by the related Mortgagor.
Stated Value: With respect to each Mortgage Loan for which the
documentation type is known, the stated value of the related Mortgaged Property
given by the related Mortgagor in his or her application.
Step-down Date: The Distribution Date which is the later to occur of (x)
the Distribution Date in July 2007 and (y) the first Distribution Date on which
the Pool Principal Balance as of the end of the related Due Period is less than
one-half of the Cut-off Date Pool Principal Balance.
Subsequent Recoveries: With respect to Liquidated Mortgage Loans that have
resulted in a Liquidation Loss Amount , any subsequent recoveries, net of
reimbursable expenses.
Subservicer: Any person to whom the Master Servicer has contracted for the
servicing of all or a portion of the Mortgage Loans pursuant to Section 3.2
hereof.
Substitute Mortgage Loan: A Mortgage Loan substituted by the Seller for a
Deleted Mortgage Loan which must, on the date of such substitution, as confirmed
in a Request for Release, substantially in the form of Exhibit L, (i) have a
Stated Principal Balance, after deduction of the principal portion of the
Scheduled Payment due in the month of substitution, not in excess of, and not
more than 10% less than the Stated Principal Balance of the Deleted Mortgage
Loan; (ii) have an Adjusted Net Mortgage Rate not lower than the lower of (a)
the Adjusted Net Mortgage Rate of the Deleted Mortgage Loan or (b) 5.865%;
provided that the Master Servicing Fee for the Substitute Mortgage Loan shall be
the same as that of the Deleted Mortgage Loan; (iii) have a CLTV Ratio no higher
than that of the Deleted Mortgage Loan; (iv) have a remaining term to maturity
no greater than (and not more than one year less than that of) the Deleted
Mortgage Loan; (v) not be a Cooperative Loan unless the Deleted Mortgage Loan
was a Cooperative Loan and (vi) comply with each representation and warranty set
forth in Section 2.3 hereof.
Substitution Adjustment Amount: The meaning ascribed to such term pursuant
to Section 2.3.
Target Percentage: 3.40%.
Tax Matters Person: The person designated as "tax matters person" in the
manner provided under Treasury regulation ss. 1.860F-4(d) and Treasury
regulation ss. 301.6231(a)(7)-1. Initially, the Tax Matters Person shall be the
Trustee.
Tax Matters Person Certificate: The Class R Certificates with a Percentage
Interest of 0.01%.
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Total Loss Freeze Test: For any Distribution Date, a test that is
satisfied when the percentage equivalent of a fraction, (A) the numerator of
which is the cumulative Liquidation Loss Amounts since the Closing Date and (B)
the denominator of which is the Pool Principal Balance as of the Closing Date,
is equal to or less than the following percentages:
DISTRIBUTION DATES PERCENTAGE
July 2007 to and including December 2007 2.00%
January 2008 to and including December 2008 2.50%
January 2009 and thereafter 3.00%
Transfer: Any direct or indirect transfer or sale of any Ownership
Interest in a Residual Certificate.
Trust Fund: The corpus of the trust created hereunder consisting of (i)
the Mortgage Loans and all interest and principal received on or with respect
thereto after the Cut-off Date to the extent not applied in computing the
Cut-off Date Principal Balance thereof; (ii) all of the Depositor's rights as
purchaser under MLPA II; (iii) the Certificate Account and the Distribution
Account and all amounts deposited therein pursuant to the applicable provisions
of this Agreement; (iv) property that secured a Mortgage Loan and has been
acquired by foreclosure, deed-in-lieu of foreclosure or otherwise; (v) upon the
resignation or termination of First Horizon as Master Servicer, the servicing
rights with respect to the Mortgage Loans that are automatically transferred
pursuant to Section 10 of the Servicing Rights Transfer and Subservicing
Agreement; (vi) the Depositor's right to (A) require the Seller to cure any
breach of a representation or warranty made by the Seller pursuant to MLPA I,
which right has been assigned to the Depositor pursuant to MLPA II, or (B)
repurchase or substitute for any affected Mortgage Loan in accordance with this
Agreement; (vii) all right, title and interest of the Depositor in, to and under
the Servicing Agreement, which right has been assigned to the Depositor pursuant
to the MLPA II, and (viii) all proceeds of the conversion, voluntary or
involuntary, of any of the foregoing.
Trustee: The Bank of New York and its successors and, if a successor
trustee is appointed hereunder, such successor.
Trustee Fee: As to any Distribution Date, an amount equal to one-twelfth
of the Trustee Fee Rate multiplied by the Pool Principal Balance with respect to
such Distribution Date.
Trustee Fee Rate: With respect to each Mortgage Loan, the per annum rate
agreed upon in writing on or prior to the Closing Date by the Trustee and the
Depositor.
Underwriter: As specified in the Preliminary Statement.
Upper REMIC: The segregated pool of assets consisting of the Lower REMIC
Interests.
Voting Rights: The portion of the voting rights of all of the Certificates
which is allocated to any Certificate. As of any date of determination, (a) 98%
of all Voting Rights will be allocated among all Holders of the Certificates,
other than the Class C Certificates and the Class R Certificates, in proportion
to their then outstanding Class Certificate Balances; (b) 1% of all Voting
Rights will be allocated to the Class C Certificates; and (c) 1% of all Voting
Rights will be allocated to the Class R Certificates. Notwithstanding the
foregoing, the Insurer shall be deemed to be the Holder of 100% of the Class A
Certificates, for purposes of exercising Voting Rights hereunder, so long as no
Insurer Default is then continuing.
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ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
REPRESENTATIONS AND WARRANTIES
SECTION 2.1 Conveyance of Mortgage Loans.
(a) The Depositor, concurrently with the execution and delivery hereof,
hereby sells, transfers, assigns, sets over and otherwise conveys to
the Trustee for the benefit of the Certificateholders and the
Insurer, without recourse, all the right, title and interest of the
Depositor in and to the Trust Fund. In addition, on or prior to the
Closing Date, the Depositor shall cause the Insurer to deliver the
Policy to the Trustee for the benefit of the Class A
Certificateholders.
(b) In connection with the transfer and assignment set forth in clause
(a) above, the Depositor has delivered or caused the Seller to
deliver to the Trustee or the Custodian on its behalf (or, in the
case of the Delay Delivery Mortgage Loans, will deliver or cause to
be delivered to the Trustee or the Custodian on its behalf within
thirty (30) days following the Closing Date) for the benefit of the
Certificateholders and the Insurer the following documents or
instruments with respect to each Mortgage Loan so assigned:
(i) (A) the original Mortgage Note endorsed by manual or facsimile
signature in blank in the following form: "Pay to the order of
________________, without recourse," with all intervening
endorsements showing a complete chain of endorsement from the
originator to the Person endorsing the Mortgage Note (each
such endorsement being sufficient to transfer all right, title
and interest of the party so endorsing, as noteholder or
assignee thereof, in and to that Mortgage Note); or
(B) with respect to any Lost Mortgage Note, a lost note
affidavit from the Seller stating that the original Mortgage
Note was lost or destroyed, together with a copy of such
Mortgage Note;
(ii) except as provided below and for each Mortgage Loan that is
not a MERS Mortgage Loan, the original recorded Mortgage or a
copy of such Mortgage certified by the Seller as being a true
and complete copy of the Mortgage and in the case of each MERS
Mortgage Loan, the original Mortgage, noting the presence of
the MIN of the Mortgage Loans and either language indicating
that the Mortgage Loan is a MOM Loan if the Mortgage Loan is a
MOM Loan or if the Mortgage Loan was not a MOM Loan at
origination, the original Mortgage and the assignment thereof
to MERS, with evidence of recording indicated thereon, or a
copy of the Mortgage certified by the public recording office
in which such Mortgage has been recorded;
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(iii) in the case of a Mortgage Loan that is not a MERS Mortgage
Loan, a duly executed assignment of the Mortgage in blank
(which may be included in a blanket assignment or
assignments), together with, except as provided below, all
interim recorded assignments of such mortgage (each such
assignment, when duly and validly completed, to be in
recordable form and sufficient to effect the assignment of and
transfer to the assignee thereof, under the Mortgage to which
the assignment relates); provided that, if the related
Mortgage has not been returned from the applicable public
recording office, such assignment of the Mortgage may exclude
the information to be provided by the recording office;
(iv) the original or copies of each assumption, modification,
written assurance or substitution agreement, if any;
(v) for any Mortgage Loan other than a Combo Mortgage Loan, either
the original or duplicate original title policy (including all
riders thereto) with respect to the related Mortgaged
Property, if available, provided that the title policy
(including all riders thereto) for any Mortgage Loan other
than a Combo Mortgage Loan will be delivered as soon as it
becomes available, and if the title policy is not available,
and to the extent required pursuant to the second paragraph
below, a written commitment or interim binder or preliminary
report of the title issued by the title insurance or escrow
company with respect to the Mortgaged Property, and
(vi) in the case of a Cooperative Loan, the originals of the
following documents or instruments:
(A) The Coop Shares, together with a stock power in blank;
(B) The executed Security Agreement;
(C) The executed Proprietary Lease;
(D) The executed Recognition Agreement;
(E) The executed UCC-1 financing statement with evidence of
recording thereon which have been filed in all places
required to perfect the Seller's interest in the Coop
Shares and the Proprietary Lease; and
(F) Executed UCC-3 financing statements or other appropriate
UCC financing statements required by state law,
evidencing a complete and unbroken line from the
mortgagee to the Trustee with evidence of recording
thereon (or in a form suitable for recordation).
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In the event that the Depositor cannot deliver (a) the original recorded
Mortgage or (b) all interim recorded assignments satisfying the requirements of
clause (ii) or (iii) above, respectively, concurrently with the execution and
delivery hereof because such document or documents have not been returned from
the applicable public recording office, the Depositor shall promptly deliver or
cause to be delivered to the Trustee or the Custodian on its behalf such
original Mortgage or such interim assignment, as the case may be, with evidence
of recording indicated thereon upon receipt thereof from the public recording
office, or a copy thereof, certified, if appropriate, by the relevant recording
office, but in no event shall any such delivery of the original Mortgage and
each such interim assignment or a copy thereof, certified, if appropriate, by
the relevant recording office, be made later than one year following the Closing
Date; provided, however, in the event the Depositor is unable to deliver or
cause to be delivered by such date each Mortgage and each such interim
assignment by reason of the fact that any such documents have not been returned
by the appropriate recording office, or, in the case of each such interim
assignment, because the related Mortgage has not been returned by the
appropriate recording office, the Depositor shall deliver or cause to be
delivered such documents to the Trustee or the Custodian on its behalf (unless
an Assignment Event has occurred, in which case the Depositor shall deliver or
cause to be delivered such documents to the Trustee) as promptly as possible
upon receipt thereof and, in any event, within 720 days following the Closing
Date. The Depositor shall forward or cause to be forwarded to the Trustee or the
Custodian on its behalf (a) from time to time additional original documents
evidencing an assumption or modification of a Mortgage Loan and (b) any other
documents required to be delivered by the Depositor or the Master Servicer to
the Trustee. In the event that the original Mortgage is not delivered and in
connection with the payment in full of the related Mortgage Loan and the public
recording office requires the presentation of a "lost instruments affidavit and
indemnity" or any equivalent document, because only a copy of the Mortgage can
be delivered with the instrument of satisfaction or reconveyance, the Master
Servicer shall execute and deliver or cause to be executed and delivered such a
document to the public recording office. In the case where a public recording
office retains the original recorded Mortgage or in the case where a Mortgage is
lost after recordation in a public recording office, the Depositor shall deliver
or cause to be delivered to the Trustee or the Custodian on its behalf a copy of
such Mortgage certified by such public recording office to be a true and
complete copy of the original recorded Mortgage.
In addition, in the event that in connection with any Mortgage Loan (other
than a Combo Mortgage Loan) the Depositor cannot deliver or cause to be
delivered the original or duplicate original lender's title policy (together
with all riders thereto), satisfying the requirements of clause (v) above,
concurrently with the execution and delivery hereof because the related Mortgage
has not been returned from the applicable public recording office, the Depositor
shall promptly deliver or cause to be delivered to the Trustee or the Custodian
on its behalf such original or duplicate original lender's title policy
(together with all riders thereto) upon receipt thereof from the applicable
title insurer, but in no event shall any such delivery of the original or
duplicate original lender's title policy be made later than one year following
the Closing Date; provided, however, in the event the Depositor is unable to
deliver or cause to be delivered by such date the original or duplicate original
lender's title policy (together with all riders thereto) for any Mortgage Loan
(other than a Combo Mortgage Loan) because the related Mortgage has not been
returned by the appropriate recording office, the Depositor shall deliver or
cause to be delivered such documents to the Trustee or the Custodian on its
behalf as promptly as possible upon receipt thereof and, in any event, within
720 days following the Closing Date. Notwithstanding the preceding, in
connection with any Mortgage Loan (other than a Combo Mortgage Loan) for which
32
either the original or duplicate original title policy has not been delivered to
the Trustee or the Custodian on its behalf, if at any time during the term of
this Agreement the parent company of the Seller does not have a long term senior
debt rating of A- or higher from S&P and A- or higher from Fitch (if rated by
Fitch), then the Depositor shall within 30 days deliver or cause to be delivered
to the Trustee or the Custodian on its behalf (if it has not previously done so)
a written commitment or interim binder or preliminary report of the title issued
by the title insurance or escrow company with respect to the Mortgaged Property.
Within thirty (30) days after the occurrence of an Assignment Event, the
Master Servicer shall (i) complete each assignment of Mortgage, as follows:
"First Horizon Mortgage Pass-Through Certificates, Series 2004-HE4, The Bank of
New York, as trustee for the holders of the Certificates", (ii) cause such
assignment to be in proper form for recording in the appropriate public office
for real property records and (iii) cause to be delivered for recording in the
appropriate public office for real property records the assignments of the
Mortgages to the Trustee, except that, with respect to any assignments of
Mortgage as to which the Master Servicer has not received the information
required to prepare such assignment in recordable form, the Master Servicer's
obligation to do so and to deliver the same for such recording shall be as soon
as practicable after receipt of such information and in any event within thirty
(30) days after receipt thereof.
In the case of Mortgage Loans that have been prepaid in full as of the
Closing Date, the Depositor, in lieu of delivering the above documents to the
Trustee or the Custodian on its behalf, will deposit in the Certificate Account
the portion of such payment that is required to be deposited in the Certificate
Account pursuant to Section 3.8 hereof.
Notwithstanding anything to the contrary in this Agreement, within thirty
days after the Closing Date, the Depositor shall either (i) deliver or cause to
be delivered to the Trustee or the Custodian on its behalf the Mortgage File as
required pursuant to this Section 2.1 for each Delay Delivery Mortgage Loan or
(ii) (A) substitute or cause to be substituted a Substitute Mortgage Loan for
the Delay Delivery Mortgage Loan or (B) repurchase or cause to be repurchased
the Delay Delivery Mortgage Loan, which substitution or repurchase shall be
accomplished in the manner and subject to the conditions set forth in Section
2.3 (treating each Delay Delivery Mortgage Loan as a Deleted Mortgage Loan for
purposes of such Section 2.3), provided, however, that if the Depositor fails to
deliver a Mortgage File for any Delay Delivery Mortgage Loan within the
thirty-day period provided in the prior sentence, the Depositor shall use its
best reasonable efforts to effect or cause to be effected a substitution, rather
than a repurchase of, such Deleted Mortgage Loan and provided further that the
cure period provided for in Section 2.2 or in Section 2.3 shall not apply to the
initial delivery of the Mortgage File for such Delay Delivery Mortgage Loan, but
rather the Depositor shall have five (5) Business Days to cure or cause to be
cured such failure to deliver. Notwithstanding anything to the contrary
contained in this Agreement, none of the Mortgage Loans in the Trust Fund is or
will be Delay Delivery Mortgage Loans.
SECTION 2.2 Acceptance by Trustee of the Mortgage Loans.
So long as no Assignment Event has occurred, neither the Trustee nor the
Custodian on its behalf will be required to deliver an Initial Certification or
a Final Certification with respect to the Mortgage Files. Upon the occurrence of
an Assignment Event, the Trustee shall cause the Custodian to promptly deliver
the Mortgage Files to the Trustee and as soon as practicable after its receipt
of the Mortgage Files but in any event, within 30 days thereof, the Trustee
agrees to execute and deliver to the Depositor, the Master Servicer and the
Insurer an Initial Certification in the form annexed hereto as Exhibit E. Based
on its review and examination, and only as to the documents identified in such
Initial Certification, the Trustee shall acknowledge that the such documents
appear regular on their face and relate to the Mortgage Loans. The Trustee shall
have no duty or obligation to inspect, review or examine said documents,
instruments, certificates or other papers to determine that the same are
genuine, enforceable or appropriate for the represented purpose or that they
have actually been recorded in the real estate records or that they are other
than what they purport to be on their face.
33
Not later than 90 days after the occurrence of an Assignment Event, the
Trustee shall deliver to the Depositor, the Master Servicer and the Insurer a
Final Certification in the form annexed hereto as Exhibit G, with any applicable
exceptions noted thereon.
If, in the course of its review of the Mortgage Files after the occurrence
of an Assignment Event, the Trustee finds any document constituting a part of a
Mortgage File which does not meet the requirements of Section 2.1, the Trustee
shall list such as an exception in the Final Certification; provided, however
that the Trustee shall not make any determination as to whether (i) any
endorsement is sufficient to transfer all right, title and interest of the party
so endorsing, as noteholder or assignee thereof, in and to that Mortgage Note or
(ii) any assignment is in recordable form or is sufficient to effect the
assignment of and transfer to the assignee thereof under the mortgage to which
the assignment relates. The Seller shall promptly correct or cure any such
defect within 90 days from the date it was so notified of such defect and, if
the Seller does not correct or cure such defect within such period, the Seller
shall either (a) substitute for the related Mortgage Loan a Substitute Mortgage
Loan, which substitution shall be accomplished in the manner and subject to the
conditions set forth in Section 2.3, or (b) purchase such Mortgage Loan from the
Trustee within 90 days from the date the Seller was notified of such defect in
writing at the Purchase Price of such Mortgage Loan; provided, however, that in
no event shall such substitution or purchase occur more than 540 days from the
Closing Date, except that if the substitution or purchase of a Mortgage Loan
pursuant to this provision is required by reason of a delay in delivery of any
documents by the appropriate recording office, and there is a dispute between
either the Master Servicer or the Seller and the Trustee over the location or
status of the recorded document, then such substitution or purchase shall occur
within 720 days from the Closing Date. As soon as practicable after the
occurrence of an Assignment Event, the Trustee shall deliver written notice to
each Rating Agency indicating each Mortgage Loan (a) which has not been returned
by the appropriate recording office or (b) as to which there is a dispute as to
location or status of such Mortgage Loan. The Trustee shall deliver such notice
to the Insurer and each Rating Agency and every 90 days thereafter until the
related Mortgage Loan is returned to the Trustee. Any such substitution pursuant
to (a) above or purchase pursuant to (b) above shall not be effected prior to
the delivery to the Trustee of the Opinion of Counsel required by Section 2.5
hereof, if any, and any substitution pursuant to (a) above shall not be effected
prior to the additional delivery to the Trustee of a Request for Release
substantially in the form of Exhibit L. No substitution is permitted to be made
in any calendar month after the Determination Date for such month. The Purchase
Price for any such Mortgage Loan shall be deposited by the Seller in the
Certificate Account on or prior to the Distribution Account Deposit Date for the
Distribution Date in the month following the month of repurchase and, upon
receipt of such deposit and certification with respect thereto in the form of
Exhibit M hereto, the Trustee shall release the related Mortgage File to the
Seller and shall execute and deliver at the Seller's request such instruments of
transfer or assignment prepared by the Seller, in each case without recourse, as
shall be necessary to vest in the Seller, or a designee, the Trustee's interest
in any Mortgage Loan released pursuant hereto.
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The Trustee shall retain or (so long as no Assignment Event has occurred)
shall cause the Custodian to retain possession and custody of each Mortgage File
in accordance with and subject to the terms and conditions set forth herein. The
Master Servicer shall promptly deliver to the Trustee or (so long as no
Assignment Event has occurred) the Custodian on its behalf, upon the execution
or receipt thereof, the originals of such other documents or instruments
constituting the Mortgage File as come into the possession of the Master
Servicer from time to time.
It is understood and agreed that the obligation of the Seller to
substitute for or to purchase any Mortgage Loan which does not meet the
requirements of Section 2.1 above shall constitute the sole remedy respecting
such defect available to the Trustee, the Depositor and any Certificateholder
against the Seller.
The mortgage loans permitted by the terms of this Agreement to be included
in the Trust Fund are limited to (i) the Mortgage Loans (which the Depositor
acquired pursuant to MLPA II, which contains an assignment of the
representations and warranties made by the Seller under MLPA I, which include,
among other representations and warranties, a representation and warranty of the
Seller that no Mortgage Loan is a "high cost loan" as defined by the specific
applicable predatory and abusive lending laws, which includes the term
"High-Cost Home Loan" as defined in the New Jersey Home Ownership Act, effective
November 27, 2003, and the New Mexico Home Loan Protection Act, effective as of
April 11, 2003, or a "High Cost Home Mortgage Loan" as defined in the
Massachusetts Predatory Home Loan Practices Act, effective as of November 7,
2004 (collectively, the "Acts")), and (ii) Substitute Mortgage Loans (which, by
definition as set forth in this Agreement and referred to in MLPA I, are
required to conform to, among other representations and warranties, a
representation and warranty of the Seller set forth in MLPA I that no Substitute
Mortgage Loan is a "high cost loan" as defined by the specific applicable
predatory and abusive lending laws, which includes the term "High-Cost Home
Loan" and "High Cost Home Mortgage Loan" as defined in the Acts). It is
therefore understood and agreed by the parties hereto that it is not intended
that any Mortgage Loan be included in the Trust Fund that is a "High-Cost Home
Loan" as defined in the Acts.
SECTION 2.3 Representations and Warranties of the Master Servicer;
Covenants of the Seller.
(a) The Master Servicer hereby makes the representations and warranties
set forth in Schedule II hereto and by this reference incorporated
herein, to the Depositor, the Trustee and the Insurer, as of the
Closing Date, or if so specified therein, as of the Cut-off Date.
(b) Upon discovery by any of the parties hereto of a breach of a
representation or warranty made pursuant to Schedule B to MLPA I
that materially and adversely affects the interests of the
Certificateholders or the Insurer in any Mortgage Loan, the party
discovering such breach shall give prompt notice thereof to the
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other parties and the Insurer. The Seller hereby covenants that
within 90 days of the earlier of its discovery or its receipt of
written notice from any party of a breach of any representation or
warranty made pursuant to Schedule B to MLPA I which materially and
adversely affects the interests of the Certificateholders or the
Insurer in any Mortgage Loan, it shall cure such breach in all
material respects, and if such breach is not so cured, shall, (i) if
such 90-day period expires prior to the second anniversary of the
Closing Date, remove such Mortgage Loan (a "Deleted Mortgage Loan")
from the Trust Fund and substitute in its place a Substitute
Mortgage Loan, in the manner and subject to the conditions set forth
in this Section; or (ii) repurchase the affected Mortgage Loan or
Mortgage Loans from the Trustee at the Purchase Price in the manner
set forth below; provided, however, that any such substitution
pursuant to (i) above shall not be effected prior to the delivery to
the Trustee of the Opinion of Counsel required by Section 2.5
hereof, if any, and any such substitution pursuant to (i) above
shall not be effected prior to the additional delivery to the
Trustee or the Custodian on its behalf of a Request for Release
substantially in the form of Exhibit M and the Mortgage File for any
such Substitute Mortgage Loan. The Seller shall promptly reimburse
the Master Servicer and the Trustee for any expenses reasonably
incurred by the Master Servicer or the Trustee in respect of
enforcing the remedies for such breach. With respect to the
representations and warranties described in this Section which are
made to the best of the Seller's knowledge, if it is discovered by
either the Depositor, the Seller or the Trustee that the substance
of such representation and warranty is inaccurate and such
inaccuracy materially and adversely affects the value of the related
Mortgage Loan or the interests of the Certificateholders therein,
notwithstanding the Seller's lack of knowledge with respect to the
substance of such representation or warranty, such inaccuracy shall
be deemed a breach of the applicable representation or warranty.
With respect to any Substitute Mortgage Loan or Loans, the Seller shall
deliver to the Trustee or the Custodian on its behalf for the benefit of the
Certificateholders and the Insurer the Mortgage Note, the Mortgage, the related
assignment of the Mortgage, and such other documents and agreements as are
required by Section 2.1, with the Mortgage Note endorsed and the Mortgage
assigned as required by Section 2.1. No substitution is permitted to be made in
any calendar month after the Determination Date for such month. Scheduled
Payments due with respect to Substitute Mortgage Loans in the month of
substitution shall not be part of the Trust Fund and will be retained by the
Seller on the next succeeding Distribution Date. For the month of substitution,
distributions to Certificateholders will include the monthly payment due on any
Deleted Mortgage Loan for such month and thereafter the Seller shall be entitled
to retain all amounts received in respect of such Deleted Mortgage Loan. The
Master Servicer shall amend the Mortgage Loan Schedule for the benefit of the
Certificateholders and the Insurer to reflect the removal of such Deleted
Mortgage Loan and the substitution of the Substitute Mortgage Loan or Loans and
the Master Servicer shall deliver the amended Mortgage Loan Schedule to the
Trustee. Upon such substitution, the Substitute Mortgage Loan or Loans shall be
subject to the terms of this Agreement in all respects, and the Seller shall be
deemed to have made with respect to such Substitute Mortgage Loan or Loans, as
of the date of substitution, the representations and warranties made pursuant to
Schedule B to MLPA I with respect to such Mortgage Loan. Upon any such
substitution and the deposit to the Certificate Account of the amount required
to be deposited therein in connection with such substitution as described in the
following paragraph, the Trustee shall release or shall cause the Custodian to
release the Mortgage File held for the benefit of the Certificateholders and the
Insurer relating to such Deleted Mortgage Loan to the Seller and shall execute
and deliver at the Seller's direction such instruments of transfer or assignment
prepared by the Seller, in each case without recourse, as shall be necessary to
vest title in the Seller, or its designee, the Trustee's interest in any Deleted
Mortgage Loan substituted for pursuant to this Section 2.3.
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For any month in which the Seller substitutes one or more Substitute
Mortgage Loans for one or more Deleted Mortgage Loans, the Master Servicer will
determine the amount (if any) by which the aggregate principal balance of all
such Substitute Mortgage Loans as of the date of substitution is less than the
aggregate Stated Principal Balance of all such Deleted Mortgage Loans (after
application of the scheduled principal portion of the monthly payments due in
the month of substitution). The amount of such shortage (the "Substitution
Adjustment Amount") plus an amount equal to the aggregate of any unreimbursed
Advances with respect to such Deleted Mortgage Loans shall be deposited in the
Certificate Account by the Seller on or before the Distribution Account Deposit
Date for the Distribution Date in the month succeeding the calendar month during
which the related Mortgage Loan became required to be purchased or replaced
hereunder.
In the event that the Seller shall have repurchased a Mortgage Loan, the
Purchase Price therefor shall be deposited in the Certificate Account pursuant
to Section 3.5 on or before the Distribution Account Deposit Date for the
Distribution Date in the month following the month during which the Seller
became obligated hereunder to repurchase or replace such Mortgage Loan and upon
such deposit of the Purchase Price, the delivery of the Opinion of Counsel
required by Section 2.5 and receipt of a Request for Release in the form of
Exhibit M hereto, the Trustee shall release or shall cause the Custodian to
release the related Mortgage File held for the benefit of the Certificateholders
and the Insurer to such Person, and the Trustee shall execute and deliver or
shall cause the Custodian to execute and deliver at such Person's direction such
instruments of transfer or assignment prepared by such Person, in each case
without recourse, as shall be necessary to transfer title from the Trustee. It
is understood and agreed that the obligation under this Agreement of the Seller
to cure, repurchase or replace any Mortgage Loan as to which a breach has
occurred and is continuing shall constitute the sole remedy against the Seller
respecting such breach available to Certificateholders, the Depositor or the
Trustee on their behalf.
The representations and warranties made pursuant to this Section 2.3 shall
survive delivery of the respective Mortgage Files to the Trustee or the
Custodian for the benefit of the Certificateholders and the Insurer.
SECTION 2.4 Representations and Warranties of the Depositor as to the
Mortgage Loans.
The Depositor hereby represents and warrants to the Trustee and the
Insurer with respect to each Mortgage Loan as of the date hereof or such other
date set forth herein that as of the Closing Date, and following the transfer of
the Mortgage Loans to it pursuant to MLPA II and immediately prior to the
conveyance of the Mortgage Loans by it to the Trustee pursuant to Section 2.1(a)
hereof, the Depositor had good title to the Mortgage Loans and the Mortgage
Notes were subject to no offsets, defenses or counterclaims.
37
It is understood and agreed that the representations and warranties set
forth in this Section 2.4 shall survive delivery of the Mortgage Files to the
Trustee. Upon discovery by the Depositor, the Trustee or the Insurer of a breach
of any of the foregoing representations and warranties set forth in this Section
2.4 (referred to herein as a "breach"), which breach materially and adversely
affects the interest of the Certificateholders or the Insurer, the party
discovering such breach shall give prompt written notice to the others, the
Insurer and to each Rating Agency.
SECTION 2.5 Delivery of Opinion of Counsel in Connection with
Substitutions.
(a) Notwithstanding any contrary provision of this Agreement, no
substitution pursuant to Section 2.2 or Section 2.3 shall be made
more than 90 days after the Closing Date unless the Depositor
delivers to the Trustee an Opinion of Counsel, which Opinion of
Counsel shall not be at the expense of either the Trustee or the
Trust Fund, addressed to the Trustee and the Insurer, to the effect
that such substitution will not (i) result in the imposition of the
tax on "prohibited transactions" on the Trust Fund or contributions
after the Startup Date, as defined in Sections 860F(a)(2) and
860G(d) of the Code, respectively, or (ii) cause any REMIC created
hereunder to fail to qualify as a REMIC at any time that any
Certificates are outstanding.
(b) Upon discovery by the Depositor, the Master Servicer or the Trustee
that any Mortgage Loan does not constitute a "qualified mortgage"
within the meaning of Section 860G(a)(3) of the Code, the party
discovering such fact shall promptly (and in any event within five
(5) Business Days of discovery) give written notice thereof to the
other parties and the Insurer. In connection therewith, the Trustee
shall require the Depositor to cause the Seller, pursuant to MLPA I
and at the Seller's option, to either (i) substitute, if the
conditions in Section 2.3(b) with respect to substitutions are
satisfied, a Substitute Mortgage Loan for the affected Mortgage
Loan, or (ii) repurchase the affected Mortgage Loan within 90 days
of such discovery in the same manner as it would a Mortgage Loan for
a breach of representation or warranty made pursuant to Section 2.3.
The Trustee shall reconvey or shall cause the Custodian to reconvey
to the Seller the Mortgage Loan to be released pursuant hereto in
the same manner, and on the same terms and conditions, as it would a
Mortgage Loan repurchased for breach of a representation or warranty
contained in Section 2.3.
SECTION 2.6 Execution and Delivery of Certificates.
The Trustee acknowledges the transfer and assignment to it of the Trust
Fund and, concurrently with such transfer and assignment, has executed and
delivered to or upon the order of the Depositor, the Certificates in authorized
denominations evidencing directly or indirectly the entire ownership of the
Trust Fund. The Trustee agrees to hold the Trust Fund and exercise the rights
referred to above for the benefit of all present and future Certificateholders
and the Insurer and to perform the duties set forth in this Agreement to the
best of its ability, to the end that the interests of the Certificateholders and
the Insurer may be adequately and effectively protected.
38
SECTION 2.7 REMIC Matters.
The Preliminary Statement sets forth the "latest possible maturity date"
for federal income tax purposes of all REMIC regular interests created hereby.
The assets of the Lower REMIC shall be as set forth in the definition
thereof. Each interest identified in the first table below by a designation
beginning with "L" shall be a "regular interest" in the Lower REMIC and a Lower
REMIC Interest, and the RL Interests shall be the sole class of residual
interest in the Lower REMIC. The Lower REMIC Interests shall be uncertificated
and shall be held by the Trustee as assets of the Upper REMIC.
The assets of the Upper REMIC shall be as set forth in the definition
thereof. The Regular Certificates shall represent "regular interests" in the
Upper REMIC. The RU Interest shall be the sole class of residual interest in the
Upper REMIC. The Class R Certificate shall represent ownership of the RL
Interest and RU Interest.
The Tax Interest Rate Cap Agreement shall not be a part of the Lower REMIC
or Upper REMIC. The Class A-1 Certificates shall be treated as representing
ownership of the related Upper REMIC regular interest and also ownership of an
interest in the Tax Interest Rate Cap Agreement.
The "Startup Day" for purposes of the REMIC Provisions for each REMIC
hereunder shall be the Closing Date. The Tax Matters Person with respect to each
REMIC hereunder shall be the Trustee and the Trustee shall hold the Tax Matters
Person Certificate. Each REMIC's taxable year shall be the calendar year and its
accounts shall be maintained using the accrual method.
Lower
REMIC
Interest or Lower REMIC Lower REMIC Corresponding Class of Certificate
Residual Interest Balance Interest Rate or Interest
----------------------------------------
Interest Principal
-------------------- -------------------- -------------------------- ------------------- --------------------
L-A-1 (1) (2) X-0 X-0
X-X-0 (1) (2) X-0 X-0
X-X-0 (1) (2) X-0 X-0
X-X-0 (1) (2) X-0 X-0
X-X-0 (1) (2) A-5 A-5
L-Accrual (1) (2) N/A N/A
RL N/A N/A (3) (3)
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(1) The L-A-1 Lower REMIC Interest, L-A-2 Lower REMIC Interest, L-A-3 Lower
REMIC Interest, L-A-4 Lower REMIC Interest, and L-A-5 Lower REMIC Interest (each
such class hereafter referred to as an "Accretion Directed Class") each have a
principal balance that is initially equal to 50% of its corresponding
Certificate Class issued by the Upper REMIC. Principal payments, both scheduled
and prepaid, Liquidation Loss Amounts, and interest accruing on the Mortgage
Loans will be allocated to each of the foregoing classes to maintain each Class'
size relative to its Corresponding Certificate Class (that is, 50%) with any
excess payments of principal and Liquidation Loss Amounts being allocated to the
L-Accrual Lower REMIC Interest in such manner as to cause the principal balance
of the L-Accrual Lower REMIC Interest to have a principal balance after the
first Distribution Date equal to (a) 50% of the Pool Principal Balance plus (b)
50% of the Overcollateralization Amount for such Distribution Date.
(2) The interest rate with respect to any Distribution Date (and the related
Interest Accrual Period) for this Lower REMIC Interest is a per annum rate equal
to the Net WAC Cap.
(3) The RL Interest is the sole class of residual interest in the Lower REMIC.
It pays neither principal nor interest and has no Corresponding Certificate
Class.
The following table specifies the class designation, interest rate, and
principal amount for each class of interest issued by the Upper REMIC:
Class Initial Class Pass-Through Rate
Certificate Balance
------------------ ---------------------- --------------------------
Class A-1 $132,632,000 (1)
Class A-2 $58,022,000 (1)
Class A-3 $14,267,000 (1)
Class A-4 $16,384,000 (1)
Class A-5 $15,000,000 (1)
Class C (2) (3)
Class RU (4) (4)
(1) The Certificates will accrue interest at the related Pass-Through Rates
identified in this Agreement. Any entitlement of the Class A-1 Certificates to
Accrued Certificate Interest in excess of the Net Wac Cap will be treated as
paid by the Upper REMIC to the Class C Certificates and then paid to the Class
A-1 Certificates, as applicable, pursuant to the Tax Interest Rate Cap
Agreement.
(2) The Class C Certificates do not have a Certificate Principal Balance. For
federal income tax purposes, the Class C Certificates will be treated as
comprised of two components, each of which is hereby designated a regular
interest in the Upper REMIC: (i) a principal only component equal to the excess
of the initial Pool Principal Balance over the initial Class Certificate Balance
of all classes other than the Class C Certificates, and (ii) an interest only
component having a notional balance equal to the principal balance of the Lower
REMIC Interests (other than the Class RL Interests) and bearing interest at the
rate described in Note (3).
(3) For each Interest Accrual Period the Class C Certificates are entitled to a
specified portion of the interest on the Mortgage Loans equal to the excess of
the per annum rate equal to the weighted average of the Adjusted Net Mortgage
Rate of each of the Mortgage Loans over the product of two and the weighted
average of the Lower REMIC Regular Interests with the Accretion Directed
Interests subject to a cap equal to the Pass-Through Rate of the corresponding
Certificate Class and the Lower REMIC L-Accrual Class subject to a cap of 0.00%.
The Pass-Through Rate of the Class C Certificates will be a rate sufficient to
entitle it to all interest accrued on the Mortgage Loans less the interest
accrued on the other interests issued by the Upper REMIC.
40
(4) The RU Interest represent the sole class of residual interest in each REMIC
created hereunder. The RU Interest are not entitled to distributions of
principal or interest. The Class R Certificates represent the ownership of the
RL Interest and RU Interest.
The foregoing REMIC structure is intended to cause all of the cash from
the Mortgage Loans to flow through to the Upper REMIC as cash flow on a REMIC
regular interest, without creating any shortfall-actual or potential (other than
for credit losses) to any REMIC regular interest. It is not intended that the
Class R Certificates be entitled to any cash flow pursuant to this Agreement. To
the extent that the structure is believed to diverge from such intention the
Trustee shall resolve ambiguities to accomplish such result and shall to the
extent necessary rectify any drafting errors or seek clarification to the
structure without Certificateholder approval (but with guidance of counsel) to
accomplish such intention.
SECTION 2.8 Covenants of the Master Servicer.
The Master Servicer hereby covenants to the Depositor, the Trustee and the
Insurer as follows:
(a) the Master Servicer shall comply in the performance of its
obligations under this Agreement with all reasonable rules and
requirements of the insurer under each Required Insurance Policy;
and
(b) no written information, certificate of an officer, statement
furnished in writing or written report delivered to the Depositor,
any affiliate of the Depositor, the Trustee or the Insurer and
prepared by the Master Servicer pursuant to this Agreement will
contain any untrue statement of a material fact or omit to state a
material fact necessary to make such information, certificate,
statement or report not misleading.
ARTICLE III
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
SECTION 3.1 Master Servicer to Service Mortgage Loans.
For and on behalf of the Certificateholders and the Insurer, the Master
Servicer shall service and administer the Mortgage Loans in accordance with the
terms of (i) the Servicing Rights Transfer and Subservicing Agreement, pursuant
to which First Tennessee Mortgage Services, Inc. engaged the Master Servicer to
subservice the Mortgage Loans, (ii) this Agreement and (iii) the customary and
usual standards of practice of prudent mortgage loan servicers of second lien
mortgage loans; provided that if there is a conflict between the terms of the
Servicing Agreement and the Servicing Rights Transfer and Subservicing
Agreement, on the one hand, and this Agreement, on the other hand, the terms of
41
this Agreement shall prevail. In connection with such servicing and
administration, the Master Servicer shall have full power and authority, acting
alone and/or through Subservicers as provided in Section 3.2 hereof, to do or
cause to be done any and all things that it may deem necessary or desirable in
connection with such servicing and administration, including but not limited to,
the power and authority, subject to the terms hereof (i) to execute and deliver,
on behalf of the Certificateholders and the Trustee, customary consents or
waivers and other instruments and documents, (ii) to consent to transfers of any
Mortgaged Property and assumptions of the Mortgage Notes and related Mortgages
(but only in the manner provided in this Agreement), (iii) to collect any
Insurance Proceeds and other Liquidation Proceeds, and (iv) to effectuate
foreclosure or other conversion of the ownership of the Mortgaged Property
securing any Mortgage Loan; provided that the Master Servicer shall not take any
action that is inconsistent with or prejudices the interests of the Trust Fund,
the Certificateholders or the Insurer in any Mortgage Loan or the rights and
interests of the Depositor, the Trustee, the Certificateholders and the Insurer
under this Agreement. The Master Servicer shall represent and protect the
interests of the Trust Fund in the same manner as it protects its own interests
in second lien mortgage loans in its own portfolio in any claim, proceeding or
litigation regarding a Mortgage Loan, and shall not make or permit any
modification, waiver or amendment of any Mortgage Loan which would cause any
REMIC created hereunder to fail to qualify as a REMIC or result in the
imposition of any tax under Section 860F(a) or Section 860G(d) of the Code.
Without limiting the generality of the foregoing, the Master Servicer, in its
own name or in the name of the Depositor and the Trustee, is hereby authorized
and empowered by the Depositor and the Trustee, when the Master Servicer
believes it appropriate in its reasonable judgment, to execute and deliver, on
behalf of the Trustee, the Depositor, the Certificateholders or any of them, any
and all instruments of satisfaction or cancellation, or of partial or full
release or discharge and all other comparable instruments, with respect to the
Mortgage Loans, and with respect to the Mortgaged Properties held for the
benefit of the Certificateholders and the Insurer. The Master Servicer shall
prepare and deliver to the Depositor and/or the Trustee such documents requiring
execution and delivery by either or both of them as are necessary or appropriate
to enable the Master Servicer to service and administer the Mortgage Loans to
the extent that the Master Servicer is not permitted to execute and deliver such
documents pursuant to the preceding sentence. Upon receipt of such documents,
the Depositor and/or the Trustee shall execute such documents and deliver them
to the Master Servicer. The Master Servicer further is authorized and empowered
by the Trustee, on behalf of the Certificateholders and the Trustee, in its own
name or in the name of a Subservicer, when the Master Servicer or a Subservicer
as the case may be, believes it appropriate in its best judgment to register any
Mortgage Loan on the MERS(R) System, or cause the removal from the registration
of any Mortgage Loan on the MERS(R) System, to execute and deliver, on behalf of
the Trustee and the Certificateholders or any of them, any and all instruments
of assignment and other comparable instruments with respect to such assignment
or re-recording of a Mortgage in the name of MERS, solely as nominee for the
Trustee and its successors and assigns.
In accordance with the standards of the preceding paragraph, the Master
Servicer may, at its option and in its sole discretion, advance or cause to be
advanced funds as necessary for the purpose of effecting the payment of taxes
and assessments on the Mortgaged Properties, which Advances, if any, shall be
reimbursable as provided in Section 3.8. The costs incurred by the Master
Servicer, if any, in effecting the timely payments of taxes and assessments on
the Mortgaged Properties and related insurance premiums shall not, for the
purpose of calculating monthly distributions to the Certificateholders, be added
to the Stated Principal Balances of the related Mortgage Loans, notwithstanding
that the terms of such Mortgage Loans so permit.
42
If a Mortgage had a lien senior to the related Mortgage Loan on the
related Mortgaged Property as of the related Cut-off Date, then the Master
Servicer, in such capacity, may not consent to the refinancing of such prior
senior lien, unless (i) the resulting CLTV Ratio of such Mortgage Loan is no
higher than the CLTV Ratio of such Mortgage Loan prior to such refinancing, (ii)
the interest rate for the mortgage loan evidencing the refinanced senior lien is
no higher than the interest rate on the loan evidencing the existing senior lien
immediately prior to the date of such refinancing (meaning, in the case of an
adjustable rate mortgage loan, a substantially similar index and a gross margin
no higher than that of the existing senior lien); provided, however, that if the
mortgage loan evidencing the existing senior lien prior to the date of
refinancing is an adjustable-rate mortgage loan and the mortgage loan evidencing
the refinanced senior lien is a fixed-rate mortgage loan, then the interest rate
on the mortgage loan evidencing the refinanced senior lien may be up to 2.0%
higher than the then-current mortgage rate of the mortgage loan evidencing the
existing senior lien, and (iii) the mortgage loan evidencing the refinanced
senior lien is not subject to negative amortization. In addition, the aggregate
number of Mortgage Loans with respect to which a new senior lien may be
consented to by the Master Servicer shall not exceed 5% of the number of
Mortgage Loans as of the Cut-off Date
SECTION 3.2 Subservicing; Enforcement of the Obligations of Servicers.
(a) The Master Servicer may arrange for the subservicing of any Mortgage
Loan by a Subservicer pursuant to a subservicing agreement;
provided, however, that such subservicing arrangement and the terms
of the related subservicing agreement must provide for the servicing
of such Mortgage Loans in a manner consistent with the servicing
arrangements contemplated hereunder. Unless the context otherwise
requires, references in this Agreement to actions taken or to be
taken by the Master Servicer in servicing the Mortgage Loans include
actions taken or to be taken by a Subservicer on behalf of the
Master Servicer. Notwithstanding the provisions of any subservicing
agreement, any of the provisions of this Agreement relating to
agreements or arrangements between the Master Servicer and a
Subservicer or reference to actions taken through a Subservicer or
otherwise, the Master Servicer shall remain obligated and liable to
the Depositor, the Trustee, the Insurer and the Certificateholders
for the servicing and administration of the Mortgage Loans in
accordance with the provisions of this Agreement without diminution
of such obligation or liability by virtue of such subservicing
agreements or arrangements or by virtue of indemnification from the
Subservicer and to the same extent and under the same terms and
conditions as if the Master Servicer alone were servicing and
administering the Mortgage Loans. All actions of each Subservicer
performed pursuant to the related subservicing agreement shall be
performed as an agent of the Master Servicer with the same force and
effect as if performed directly by the Master Servicer.
(b) For purposes of this Agreement, the Master Servicer shall be deemed
to have received any collections, recoveries or payments with
respect to the Mortgage Loans that are received by a Subservicer
regardless of whether such payments are remitted by the Subservicer
to the Master Servicer.
43
SECTION 3.3 Rights of the Depositor and the Trustee in Respect of the
Master Servicer.
The Depositor may, but is not obligated to, enforce the obligations of the
Master Servicer hereunder and may, but is not obligated to, perform, or cause a
designee to perform, any defaulted obligation of the Master Servicer hereunder
and in connection with any such defaulted obligation to exercise the related
rights of the Master Servicer hereunder; provided that the Master Servicer shall
not be relieved of any of its obligations hereunder by virtue of such
performance by the Depositor or its designee. Neither the Trustee nor the
Depositor shall have any responsibility or liability for any action or failure
to act by the Master Servicer nor shall the Trustee or the Depositor be
obligated to supervise the performance of the Master Servicer hereunder or
otherwise.
SECTION 3.4 Trustee to Act as Master Servicer.
In the event that the Master Servicer shall for any reason no longer be
the Master Servicer hereunder (including by reason of an Event of Default), the
Trustee or its successor shall thereupon assume all of the rights and
obligations of the Master Servicer hereunder arising thereafter (except that the
Trustee shall not be (i) liable for losses of the Master Servicer pursuant to
Section 3.9 hereof or any acts or omissions of the predecessor Master Servicer
hereunder, (ii) obligated to make Advances if it is prohibited from doing so by
applicable law, (iii) obligated to effectuate repurchases or substitutions of
Mortgage Loans hereunder including, but not limited to, repurchases or
substitutions of Mortgage Loans pursuant to Section 2.2 or 2.3 hereof, (iv)
responsible for expenses of the Master Servicer pursuant to Section 2.3 or (v)
deemed to have made any representations and warranties of the Master Servicer
hereunder). Any such assumption shall be subject to Section 7.2 hereof. If the
Master Servicer shall for any reason no longer be the Master Servicer (including
by reason of any Event of Default), the Trustee or its successor shall succeed
to any rights and obligations of the Master Servicer under each subservicing
agreement.
The Master Servicer shall, upon request of the Trustee, but at the expense
of the Master Servicer, deliver to the assuming party all documents and records
relating to each subservicing agreement or substitute subservicing agreement and
the Mortgage Loans then being serviced thereunder and an accounting of amounts
collected or held by it and otherwise use its best efforts to effect the orderly
and efficient transfer of the substitute subservicing agreement to the assuming
party.
SECTION 3.5 Collection of Mortgage Loan Payments; Certificate Account;
Distribution Account.
(a) The Master Servicer shall use commercially reasonable efforts, in
accordance with the customary and usual standards of practice of
prudent mortgage servicers of second lien mortgage loans, to collect
all payments called for under the terms and provisions of the
Mortgage Loans to the extent such procedures shall be consistent
with this Agreement and the terms and provisions of any related
Required Insurance Policy. Consistent with the foregoing, the Master
Servicer may in its discretion (i) waive any late payment charge or
any prepayment charge or penalty interest in connection with the
prepayment of a Mortgage Loan and (ii) extend the due dates for
44
payments due on a Mortgage Note for a period not greater than 180
days; provided, however, that the Master Servicer cannot extend the
maturity of any such Mortgage Loan past the date on which the final
payment is due on the latest maturing Mortgage Loan as of the
Cut-off Date. In the event of any such arrangement, the Master
Servicer may, at its option and in its sole discretion, make
Advances on the related Mortgage Loan in accordance with the
provisions of Section 4.1 during the scheduled period in accordance
with the amortization schedule of such Mortgage Loan without
modification thereof by reason of such arrangements. The Master
Servicer shall not be required to institute or join in litigation
with respect to collection of any payment (whether under a Mortgage,
Mortgage Note or otherwise or against any public or governmental
authority with respect to a taking or condemnation) if it reasonably
believes that enforcing the provision of the Mortgage or other
instrument pursuant to which such payment is required is prohibited
by applicable law.
(b) The Master Servicer shall establish and maintain the Certificate
Account. The Master Servicer shall deposit or cause to be deposited
into the Certificate Account no later than two Business Days after
receipt, except as otherwise specifically provided herein, the
following payments and collections remitted by Subservicers or
received by it in respect of the Mortgage Loans subsequent to the
Cut-off Date (other than in respect of principal and interest due on
the Mortgage Loans on or before the Cut-off Date) and the following
amounts required to be deposited hereunder:
(i) all Principal Collections;
(ii) all Interest Collections;
(iii) any amount required to be deposited by the Master Servicer
pursuant to Section 3.5(d) in connection with any losses on
Permitted Investments;
(iv) any amounts required to be deposited by the Master Servicer
pursuant to Section 3.9(b) and 3.9(d);
(v) all Substitution Adjustment Amounts;
(vi) all Advances, if any, made by the Master Servicer pursuant to
Section 4.1; and
(vii) any other amounts required to be deposited hereunder.
The foregoing requirements for remittance by the Master Servicer shall be
exclusive, it being understood and agreed that, without limiting the generality
of the foregoing, payments in the nature of prepayment penalties, late payment
charges, assumption fees or amounts attributable to reimbursements of Advances,
if collected, need not be remitted by the Master Servicer. In the event that the
Master Servicer shall remit any amount not required to be remitted, it may at
any time withdraw or direct the institution maintaining the Certificate Account
to withdraw such amount from the Certificate Account, any provision herein to
the contrary notwithstanding. Such withdrawal or direction may be accomplished
by delivering written notice thereof to the Trustee or such other institution
maintaining the Certificate Account which describes the amounts deposited in
error in the Certificate Account. The Master Servicer shall maintain adequate
records with respect to all withdrawals made pursuant to this Section. All funds
deposited in the Certificate Account shall be held in trust for the
Certificateholders and the Insurer until withdrawn in accordance with Section
3.8.
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(c) The Trustee shall establish and maintain, on behalf of the
Certificateholders and the Insurer, the Distribution Account.
The Trustee shall, promptly upon receipt, deposit in the
Distribution Account and retain therein the following:
(i) the aggregate amount remitted by the Master Servicer to
the Trustee pursuant to Section 3.8(a)(ix);
(ii) any amount deposited by the Master Servicer pursuant to
Section 3.5(b)(iii) in connection with any losses on
Permitted Investments;
(iii) solely for the benefit of the Class A
Certificateholders, any Insured Payment made by the
Insurer pursuant to the Policy; and
(iv) any other amounts deposited hereunder which are required
to be deposited in the Distribution Account.
In the event that the Master Servicer shall remit any amount not required
to be remitted, it may at any time direct the Trustee to withdraw such amount
from the Distribution Account, any provision herein to the contrary
notwithstanding. Such direction may be accomplished by delivering an Officer's
Certificate to the Trustee which describes the amounts deposited in error in the
Distribution Account. All funds deposited in the Distribution Account shall be
held by the Trustee in trust for the related Certificateholders until disbursed
in accordance with this Agreement or withdrawn in accordance with Section 3.8.
In no event shall the Trustee incur liability for withdrawals from the
Distribution Account at the direction of the Master Servicer.
(d) The institutions at which the Certificate Account and the
Distribution Account are maintained shall invest funds as directed
by the Master Servicer in Permitted Investments which in both cases
shall mature not later than (i) in the case of the Certificate
Account, the second Business Day next preceding the related
Distribution Account Deposit Date (except that if such Permitted
Investment is an obligation of the institution that maintains such
account, then such Permitted Investment shall mature not later than
the Business Day next preceding such Distribution Account Deposit
Date) and (ii) in the case of the Distribution Account, the Business
Day next preceding the Distribution Date (except that if such
Permitted Investment is an obligation of the institution that
maintains such fund or account, then such Permitted Investment shall
mature not later than such Distribution Date) and, in each case,
shall not be sold or disposed of prior to its maturity. All such
Permitted Investments shall be made in the name of the Trustee, for
the benefit of the Certificateholders and the Insurer. All income
and gain net of any losses realized from any such investment of
funds on deposit in the Certificate Account shall be for the benefit
of the Master Servicer as servicing compensation and all income and
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gain net of any losses realized from any such investment of funds on
deposit in the Distribution Account shall be for the benefit of the
Trustee. The amount of any losses incurred by the Certificate
Account in respect of any such investments shall promptly be
deposited by the Master Servicer in the Certificate Account and any
losses incurred by the Distribution Account in respect of any such
investments shall promptly be deposited by the Trustee into the
Distribution Account. All reinvestment income earned on amounts on
deposit in the Distribution Account shall be for the benefit of the
Trustee. The Trustee in its fiduciary capacity shall not be liable
for the amount of any loss incurred in respect of any investment or
lack of investment of funds held in the Certificate Account and made
in accordance with this Section 3.5.
(e) The Master Servicer shall give notice to the Trustee, the Seller,
the Insurer, each Rating Agency and the Depositor of any proposed
change of the location of the Certificate Account prior to any
change thereof. The Trustee shall give notice to the Master
Servicer, the Seller, the Insurer, each Rating Agency and the
Depositor of any proposed change of the location of the Distribution
Account prior to any change thereof.
SECTION 3.6 [RESERVED].
SECTION 3.7 Access to Certain Documentation and Information Regarding the
Mortgage Loans.
The Master Servicer shall afford the Depositor, the Trustee and the
Insurer reasonable access to all records and documentation regarding the
Mortgage Loans and all accounts, insurance information and other matters
relating to this Agreement, such access being afforded without charge, but only
upon reasonable request and during normal business hours at the office
designated by the Master Servicer.
Upon reasonable advance notice in writing, the Master Servicer will
provide to each Certificateholder or Certificate Owner which is a savings and
loan association, bank or insurance company certain reports and reasonable
access to information and documentation regarding the Mortgage Loans sufficient
to permit such Certificateholder or Certificate Owner to comply with applicable
regulations of the OTS or other regulatory authorities with respect to
investment in the Certificates; provided that the Master Servicer shall be
entitled to be reimbursed by each such Certificateholder or Certificate Owner
for actual expenses incurred by the Master Servicer in providing such reports
and access.
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SECTION 3.8 Permitted Withdrawals from the Certificate Account and
Distribution Account.
(a) The Master Servicer may from time to time make withdrawals from the
Certificate Account for the following purposes:
(i) to the extent not previously retained by the Master Servicer,
to pay to the Master Servicer the master servicing
compensation to which it is entitled pursuant to Section 3.14,
and earnings on or investment income with respect to funds in
or credited to the Certificate Account as additional master
servicing compensation;
(ii) to the extent not previously retained by the Master Servicer,
to reimburse the Master Servicer for any unreimbursed Advances
made by it, such right of reimbursement pursuant to this
subclause (ii) being limited to amounts received on the
Mortgage Loan(s) in respect of which any such Advance was
made;
(iii) to reimburse the Master Servicer for any Nonrecoverable
Advance previously made by it;
(iv) to reimburse the Master Servicer for Insured Expenses from the
related Insurance Proceeds;
(v) to reimburse the Master Servicer for (a) any unreimbursed
Servicing Advances, the Master Servicer's right to
reimbursement pursuant to this clause (a) with respect to any
Mortgage Loan being limited to amounts received on such
Mortgage Loan(s) which represent late recoveries of the
payments for which such advances were made pursuant to Section
3.1 and (b) for unpaid Master Servicing Fees as provided in
Section 3.11 hereof;
(vi) to pay to the Seller or Master Servicer, as applicable, with
respect to each Mortgage Loan or property acquired in respect
thereof that has been purchased pursuant to Section 2.2, 2.3
or 3.11, all amounts received thereon after the date of such
purchase;
(vii) to reimburse the Seller, the Master Servicer or the Depositor
for expenses incurred by any of them and reimbursable pursuant
to Section 6.3 hereof;
(viii)to withdraw any amount deposited in the Certificate Account
and not required to be deposited therein;
(ix) on or prior to the Distribution Account Deposit Date, to
withdraw an amount equal to the related Available Funds and
the Trustee Fee for such Distribution Date and remit such
amount to the Trustee for deposit in the Distribution Account;
and
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(x) to clear and terminate the Certificate Account upon
termination of this Agreement pursuant to Section 9.1 hereof.
The Master Servicer shall keep and maintain separate accounting, on a
Mortgage Loan-by-Mortgage Loan basis, for the purpose of justifying any
withdrawal from the Certificate Account pursuant to such subclauses (i), (ii),
(iv), (v) and (vi). Prior to making any withdrawal from the Certificate Account
pursuant to subclause (iii), the Master Servicer shall deliver to the Trustee an
Officer's Certificate of a Servicing Officer indicating the amount of any
previous Advance determined by the Master Servicer to be a Nonrecoverable
Advance and identifying the related Mortgage Loans(s), and their respective
portions of such Nonrecoverable Advance.
(b) The Trustee shall withdraw funds from the Distribution Account for
distributions to the related Certificateholders in the manner
specified in this Agreement (and to withhold from the amounts so
withdrawn, the amount of any taxes that it is authorized to withhold
pursuant to the last paragraph of Section 8.11). In addition, the
Trustee may (and with respect to clauses (i) and (ii) below, shall),
prior to making the distribution pursuant to Section 4.2 from time
to time make withdrawals from the Distribution Account for the
following purposes:
(i) to pay to itself the Trustee Fee for the related Distribution
Date;
(ii) to pay to itself earnings on or investment income with respect
to funds in the Distribution Account;
(iii) to withdraw and return to the Master Servicer any amount
deposited in the Distribution Account and not required to be
deposited therein; and
(iv) to clear and terminate the Distribution Account upon
termination of the Agreement pursuant to Section 9.1 hereof.
SECTION 3.9 Maintenance of Hazard Insurance.
(a) The Master Servicer shall cause to be maintained, for each Mortgage
Loan, hazard insurance with extended coverage in an amount that is
at least equal to the lesser of (i) the maximum insurable value of
the improvements securing such Mortgage Loan or (ii) the greater of
(y) the outstanding principal balance of the Mortgage Loan and (z)
an amount such that the proceeds of such policy shall be sufficient
to prevent the Mortgagor and/or the mortgagee from becoming a
co-insurer. Each such policy of standard hazard insurance shall
contain, or have an accompanying endorsement that contains, a
standard mortgagee clause. Any amounts collected by the Master
Servicer under any such policies (other than the amounts to be
applied to the restoration or repair of the related Mortgaged
Property or amounts released to the Mortgagor in accordance with the
Master Servicer's normal servicing procedures) shall be deposited in
the Certificate Account. Any cost incurred by the Master Servicer in
maintaining any such insurance shall not, for the purpose of
calculating monthly distributions to the Certificateholders or
remittances to the Trustee for their benefit, be added to the
principal balance of the Mortgage Loan, notwithstanding that the
terms of the Mortgage Loan so permit. Such costs shall be
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recoverable by the Master Servicer out of late payments by the
related Mortgagor or out of Liquidation Proceeds to the extent
permitted by Section 3.8 hereof. It is understood and agreed that no
earthquake or other additional insurance is to be required of any
Mortgagor or maintained on property acquired in respect of a
Mortgage other than pursuant to such applicable laws and regulations
as shall at any time be in force and as shall require such
additional insurance. If the Mortgaged Property is located at the
time of origination of the Mortgage Loan in a federally designated
special flood hazard area and such area is participating in the
national flood insurance program, the Master Servicer shall cause
flood insurance to be maintained with respect to such Mortgage Loan.
Such flood insurance shall be in an amount equal to the least of (i)
the original principal balance of the related Mortgage Loan, (ii)
the replacement value of the improvements which are part of such
Mortgaged Property, and (iii) the maximum amount of such insurance
available for the related Mortgaged Property under the national
flood insurance program.
(b) In the event that the Master Servicer shall obtain and maintain a
blanket policy insuring against hazard losses on all of the Mortgage
Loans, it shall conclusively be deemed to have satisfied its
obligations as set forth in the first sentence of this Section, it
being understood and agreed that such policy may contain a
deductible clause on terms substantially equivalent to those
commercially available and maintained by comparable servicers. If
such policy contains a deductible clause, the Master Servicer shall,
in the event that there shall not have been maintained on the
related Mortgaged Property a policy complying with the first
sentence of this Section, and there shall have been a loss that
would have been covered by such policy, deposit in the Certificate
Account the amount not otherwise payable under the blanket policy
because of such deductible clause. In connection with its activities
as Master Servicer of the Mortgage Loans, the Master Servicer agrees
to present, on behalf of itself, the Depositor, and the Trustee for
the benefit of the Certificateholders and the Insurer, claims under
any such blanket policy.
SECTION 3.10 Enforcement of Due-on-Sale Clauses; Assumption Agreements.
(a) Except as otherwise provided in this Section, when any property
subject to a Mortgage has been conveyed by the Mortgagor, the Master
Servicer shall to the extent that it has knowledge of such
conveyance, enforce any due-on-sale clause contained in any Mortgage
Note or Mortgage, to the extent permitted under applicable law and
governmental regulations, but only to the extent that such
enforcement will not adversely affect or jeopardize coverage under
any Required Insurance Policy. Notwithstanding the foregoing, the
Master Servicer is not required to exercise such rights with respect
to a Mortgage Loan if the Person to whom the related Mortgaged
Property has been conveyed or is proposed to be conveyed satisfies
the terms and conditions contained in the Mortgage Note and Mortgage
related thereto and the consent of the mortgagee under such Mortgage
Note or Mortgage is not otherwise so required under such Mortgage
Note or Mortgage as a condition to such transfer. In the event that
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the Master Servicer is prohibited by law from enforcing any such
due-on-sale clause, or if coverage under any Required Insurance
Policy would be adversely affected, or if nonenforcement is
otherwise permitted hereunder, the Master Servicer is authorized,
subject to Section 3.10(b), to take or enter into an assumption and
modification agreement from or with the person to whom such property
has been or is about to be conveyed, pursuant to which such person
becomes liable under the Mortgage Note and, unless prohibited by
applicable state law, the Mortgagor remains liable thereon, provided
that the Mortgage Loan shall continue to be covered (if so covered
before the Master Servicer enters such agreement) by the applicable
Required Insurance Policies. The Master Servicer, subject to Section
3.10(b), is also authorized with the prior approval of the insurers
under any Required Insurance Policies to enter into a substitution
of liability agreement with such Person, pursuant to which the
original Mortgagor is released from liability and such Person is
substituted as Mortgagor and becomes liable under the Mortgage Note.
Notwithstanding the foregoing, the Master Servicer shall not be
deemed to be in default under this Section by reason of any transfer
or assumption which the Master Servicer reasonably believes it is
restricted by law from preventing, for any reason whatsoever.
(b) Subject to the Master Servicer's duty to enforce any due-on-sale
clause to the extent set forth in Section 3.10(a) hereof, in any
case in which a Mortgaged Property has been conveyed to a Person by
a Mortgagor, and such Person is to enter into an assumption
agreement or modification agreement or supplement to the Mortgage
Note or Mortgage that requires the signature of the Trustee, or if
an instrument of release signed by the Trustee is required releasing
the Mortgagor from liability on the Mortgage Loan, the Master
Servicer shall prepare and deliver or cause to be prepared and
delivered to the Trustee for signature and shall direct, in writing,
the Trustee to execute the assumption agreement with the Person to
whom the Mortgaged Property is to be conveyed and such modification
agreement or supplement to the Mortgage Note or Mortgage or other
instruments as are reasonable or necessary to carry out the terms of
the Mortgage Note or Mortgage or otherwise to comply with any
applicable laws regarding assumptions or the transfer of the
Mortgaged Property to such Person. In connection with any such
assumption, no material term of the Mortgage Note may be changed. In
addition, the substitute Mortgagor and the Mortgaged Property must
be acceptable to the Master Servicer in accordance with its
underwriting standards as then in effect. Together with each such
substitution, assumption or other agreement or instrument delivered
to the Trustee for execution by it, the Master Servicer shall
deliver an Officer's Certificate signed by a Servicing Officer
stating that the requirements of this subsection have been met in
connection therewith. The Master Servicer shall notify the Trustee
that any such substitution or assumption agreement has been
completed by forwarding to the Trustee the original of such
substitution or assumption agreement, which in the case of the
original shall be added to the related Mortgage File and shall, for
all purposes, be considered a part of such Mortgage File to the same
extent as all other documents and instruments constituting a part
thereof. Any fee collected by the Master Servicer for entering into
an assumption or substitution of liability agreement will be
retained by the Master Servicer as additional servicing
compensation.
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SECTION 3.11 Realization Upon Defaulted Mortgage Loans; Repurchase of
Certain Mortgage Loans.
With respect to any Mortgage Loan that comes into and continues in
default, the Master Servicer shall decide whether to (i) foreclose upon the
related Mortgaged Property, (ii) write- off the unpaid principal balance thereof
as bad debt, (iii) take a deed in lieu of foreclosure, (iv) accept a short sale
(a payoff of the Mortgage Loan for an amount that is less than the total amount
contractually owed in order to facilitate a sale of the Mortgaged Property by
the related Mortgagor), (v) permit a short refinancing (a payoff of the Mortgage
Loan for an amount less than the total amount contractually owed in order to
facilitate refinancing transactions by the Mortgagor not involving a sale of the
Mortgaged Property), (vi) arrange for a repayment plan, (vii) agree to a
modification in accordance with this Agreement or (viii) take an unsecured note
in each case subject to the rights of any related first lien holder; provided,
that in connection with the foregoing, if the Master Servicer has actual
knowledge that any Mortgaged Property is affected by hazardous or toxic wastes
or substances and that the acquisition of such Mortgaged Property would not be
commercially reasonable, then the Master Servicer shall not cause the Trust Fund
or the Trustee to acquire title to such Mortgaged Property in a foreclosure or
similar proceeding. In connection with such decision, the Master Servicer shall
follow such practices (including, in the case of any default on a related senior
mortgage loan, the advancing of funds to correct such default if deemed to be
appropriate by the Master Servicer) and procedures as it shall deem necessary or
advisable and as shall be customary and usual standards of practice of prudent
mortgage loan servicers of second lien mortgage loans; provided, that the Master
Servicer shall not be liable in any respect hereunder if the Master Servicer is
acting in connection with any such foreclosure or attempted foreclosure which is
not completed or other conversion in a manner that is consistent with the
provisions of this Agreement. The foregoing is subject to the proviso that the
Master Servicer shall not be required to expend its own funds in connection with
any foreclosure or attempted foreclosure which is not completed or towards the
correction of any default on a related senior mortgage loan or restoration of
any property unless it shall determine that such expenditure will increase the
related Net Liquidation Proceeds. In the event of a determination by the Master
Servicer that any such expenditure previously made pursuant to this Section 3.11
will not be reimbursable from the related Net Liquidation Proceeds, the Master
Servicer shall be entitled to reimbursement of its funds so expended pursuant to
Section 3.8.
With respect to any REO Property, the deed or certificate of sale shall be
taken in the name of the Trust Fund for the benefit of the Certificateholders
and the Insurer, or its nominee, on behalf of the Certificateholders. The Master
Servicer shall ensure that the title to such REO Property references the Pooling
and Servicing Agreement and the Trust Fund's capacity thereunder. Pursuant to
its efforts to sell such REO Property, the Master Servicer shall either itself
or through an agent selected by the Master Servicer protect and conserve such
REO Property in the same manner and to such extent as is customary in the
locality where such REO Property is located and may, incident to its
conservation and protection of the interests of the Certificateholders, rent the
same, or any part thereof, as the Master Servicer deems to be in the best
52
interest of the Certificateholders for the period prior to the sale of such REO
Property. The Master Servicer shall perform the tax reporting and withholding
required by Sections 1445 and 6050J of the Code with respect to foreclosures and
abandonments, the tax reporting required by Section 6050H of the Code with
respect to the receipt of mortgage interest from individuals and any tax
reporting required by Section 6050P of the Code with respect to the cancellation
of indebtedness by certain financial entities, by preparing such tax and
information returns as may be required, in the form required, and delivering the
same to the Trustee for filing.
In the event that the Trust Fund acquires any Mortgaged Property as
aforesaid or otherwise in connection with a default or imminent default on a
Mortgage Loan, the Master Servicer shall dispose of such Mortgaged Property
prior to the close of the third taxable year after the taxable year of its
acquisition by the Trust Fund unless the Trustee shall have been supplied with
an Opinion of Counsel to the effect that the holding by the Trust Fund of such
Mortgaged Property subsequent to such three-year period will not result in the
imposition of taxes on "prohibited transactions" of any REMIC hereunder as
defined in Section 860F of the Code or cause any REMIC created hereunder to fail
to qualify as a REMIC at any time that any Certificates are outstanding, in
which case the Trust Fund may continue to hold such Mortgaged Property (subject
to any conditions contained in such Opinion of Counsel). Notwithstanding any
other provision of this Agreement, no Mortgaged Property acquired by the Trust
Fund shall be rented (or allowed to continue to be rented) or otherwise used for
the production of income by or on behalf of the Trust Fund in such a manner or
pursuant to any terms that would (i) cause such Mortgaged Property to fail to
qualify as "foreclosure property" within the meaning of Section 860G(a)(8) of
the Code or (ii) subject any REMIC hereunder to the imposition of any federal,
state or local income taxes on the income earned from such Mortgaged Property
under Section 860G(c) of the Code or otherwise, unless the Master Servicer has
agreed to indemnify and hold harmless the Trust Fund with respect to the
imposition of any such taxes.
In the event of a default on a Mortgage Loan one or more of whose obligor
is not a United States Person, as that term is defined in Section 7701(a)(30) of
the Code, in connection with any foreclosure or acquisition of a deed in lieu of
foreclosure (together, "foreclosure") in respect of such Mortgage Loan, the
Master Servicer will cause compliance with the provisions of Treasury Regulation
Section 1.1445-2(d)(3) (or any successor thereto) necessary to assure that no
withholding tax obligation arises with respect to the proceeds of such
foreclosure except to the extent, if any, that proceeds of such foreclosure are
required to be remitted to the obligors on such Mortgage Loan.
The decision of the Master Servicer to foreclose on a defaulted Mortgage
Loan shall be subject to a determination by the Master Servicer that the
proceeds of such foreclosure would exceed the costs and expenses of bringing
such a proceeding. The income earned from the management of any REO Properties,
net of reimbursement to the Master Servicer for expenses incurred (including any
property or other taxes) in connection with such management and net of
unreimbursed Master Servicing Fees, Advances and Servicing Advances, shall be
applied to the payment of principal of and interest on the related defaulted
Mortgage Loans (with interest accruing as though such Mortgage Loans were still
current) and all such income shall be deemed, for all purposes in this
Agreement, to be payments on account of principal and interest on the related
Mortgage Notes and shall be deposited into the Certificate Account. To the
extent the net income received during any calendar month is in excess of the
amount attributable to amortizing principal and accrued interest at the related
Mortgage Rate on the related Mortgage Loan for such calendar month, such excess
shall be considered to be a partial prepayment of principal of the related
Mortgage Loan.
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The proceeds from any liquidation of a Mortgage Loan, as well as any
income from an REO Property, will be applied in the following order of priority:
first, to reimburse the Master Servicer for any related unreimbursed Servicing
Advances and Master Servicing Fees; second, to reimburse the Master Servicer for
any unreimbursed Advances; third, to reimburse the Certificate Account for any
Nonrecoverable Advances (or portions thereof) that were previously withdrawn by
the Master Servicer pursuant to Section 3.8(a)(iii) that related to such
Mortgage Loan; fourth, to accrued and unpaid interest (to the extent no Advance
has been made for such amount or any such Advance has been reimbursed) on the
Mortgage Loan or related REO Property, at the Adjusted Net Mortgage Rate to the
Due Date occurring in the month in which such amounts are required to be
distributed; and fifth, as a recovery of principal of the Mortgage Loan. Excess
Proceeds, if any, from the liquidation of a Liquidated Mortgage Loan, to the
extent not required to reimburse the Insurer for any amounts due and owing to
the Insurer under the Insurance Agreement, will be retained by the Master
Servicer as additional servicing compensation pursuant to Section 3.14.
The Master Servicer, with the consent of the Trustee and the Insurer,
shall have the right to purchase for its own account from the Trust Fund any
Mortgage Loan which is 91 days or more delinquent at a price equal to the
Purchase Price. The Purchase Price for any Mortgage Loan purchased hereunder
shall be deposited in the Certificate Account and the Trustee, upon receipt of a
certificate from the Master Servicer in the form of Exhibit M hereto, shall
release or cause to be released to the purchaser of such Mortgage Loan the
related Mortgage File and shall execute and deliver such instruments of transfer
or assignment prepared by the purchaser of such Mortgage Loan, in each case
without recourse, as shall be necessary to vest in the purchaser of such
Mortgage Loan any Mortgage Loan released pursuant hereto and the purchaser of
such Mortgage Loan shall succeed to all the Trustee's right, title and interest
in and to such Mortgage Loan and all security and documents related thereto. The
purchaser of such Mortgage Loan shall thereupon own such Mortgage Loan, and all
security and documents, free of any further obligation to the Trustee or the
Certificateholders with respect thereto.
SECTION 3.12 Trustee to Cooperate; Release of Mortgage Files.
Upon the payment in full of any Mortgage Loan, or the receipt by the
Master Servicer of a notification that payment in full will be escrowed in a
manner customary for such purposes, the Master Servicer will immediately notify
the Trustee by delivering, or causing to be delivered a "Request for Release"
substantially in the form of Exhibit M. Upon receipt of such request, the
Trustee shall or shall cause the Custodian to promptly release the related
Mortgage File to the Master Servicer, and the Trustee shall at the Master
Servicer's direction execute and deliver to the Master Servicer the request for
reconveyance, deed of reconveyance or release or satisfaction of mortgage or
such instrument releasing the lien of the Mortgage in each case provided by the
Master Servicer, together with the Mortgage Note with written evidence of
cancellation thereon. Expenses incurred in connection with any instrument of
satisfaction or deed of reconveyance shall be chargeable to the related
Mortgagor. From time to time and as shall be appropriate for the servicing or
foreclosure of any Mortgage Loan, including for such purpose, collection under
any policy of flood insurance, any fidelity bond or errors or omissions policy,
or for the purposes of effecting a partial release of any Mortgaged Property
from the lien of the Mortgage or the making of any corrections to the Mortgage
Note or the Mortgage or any of the other documents included in the Mortgage
File, the Trustee shall, upon delivery to the Trustee of a Request for Release
in the form of Exhibit L signed by a Servicing Officer, release the Mortgage
File to the Master Servicer. Subject to the further limitations set forth below,
the Master Servicer shall cause the Mortgage File or documents so released to be
returned to the Trustee or its Custodian when the need therefor by the Master
Servicer no longer exists, unless the Mortgage Loan is liquidated and the
proceeds thereof are deposited in the Certificate Account, in which case the
Master Servicer shall deliver to the Trustee a Request for Release in the form
of Exhibit M, signed by a Servicing Officer.
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If the Master Servicer at any time seeks to initiate a foreclosure
proceeding in respect of any Mortgaged Property as authorized by this Agreement,
the Master Servicer shall deliver or cause to be delivered to the Trustee, for
signature, as appropriate, any court pleadings, requests for trustee's sale or
other documents necessary to effectuate such foreclosure or any legal action
brought to obtain judgment against the Mortgagor on the Mortgage Note or the
Mortgage or to obtain a deficiency judgment or to enforce any other remedies or
rights provided by the Mortgage Note or the Mortgage or otherwise available at
law or in equity.
SECTION 3.13 Documents Records and Funds in Possession of Master Servicer
to be Held for the Trustee.
Notwithstanding any other provisions of this Agreement, the Master
Servicer shall transmit to the Trustee as required by this Agreement all
documents and instruments in respect of a Mortgage Loan coming into the
possession of the Master Servicer from time to time and shall account fully to
the Trustee for any funds received by the Master Servicer or which otherwise are
collected by the Master Servicer as Liquidation Proceeds or Insurance Proceeds
in respect of any Mortgage Loan. All Mortgage Files and funds collected or held
by, or under the control of, the Master Servicer in respect of any Mortgage
Loans, whether from the collection of principal and interest payments or from
Liquidation Proceeds, including but not limited to, any funds on deposit in the
Certificate Account, shall be held by the Master Servicer for and on behalf of
the Trustee and shall be and remain the sole and exclusive property of the
Trustee, subject to the applicable provisions of this Agreement. The Master
Servicer also agrees that it shall not create, incur or subject any Mortgage
File or any funds that are deposited in the Certificate Account, Distribution
Account or any Escrow Account, or any funds that otherwise are or may become due
or payable to the Trustee for the benefit of the Certificateholders and the
Insurer, to any claim, lien, security interest, judgment, levy, writ of
attachment or other encumbrance, or assert by legal action or otherwise any
claim or right of setoff against any Mortgage File or any funds collected on, or
in connection with, a Mortgage Loan, except, however, that the Master Servicer
shall be entitled to set off against and deduct from any such funds any amounts
that are properly due and payable to the Master Servicer under this Agreement.
SECTION 3.14 Master Servicing Compensation.
As compensation for its activities as Master Servicer hereunder and as a
subservicer pursuant to the Servicing Rights Transfer and Subservicing
Agreement, the Master Servicer shall be entitled to retain or withdraw from the
Certificate Account an amount equal to the Master Servicing Fee for each
Mortgage Loan, provided that the aggregate Master Servicing Fee with respect to
any Distribution Date shall be reduced, in the case of the first Distribution
Date, by an amount equal to any amount to be deposited into the Distribution
Account by the Depositor pursuant to Section 2.1(a) and not so deposited.
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Additional servicing compensation in the form of (i) Excess Proceeds and
all income and gain net of any losses realized from Permitted Investments and
(ii) prepayment penalties, assumption fees and late payment charges in each case
under the circumstances and in the manner set forth in the applicable Mortgage
Note or Mortgage shall be retained by the Master Servicer to the extent not
required to be deposited in the Certificate Account pursuant to Section 3.5
hereof. The Master Servicer shall be required to pay all expenses incurred by it
in connection with its master servicing activities hereunder (including payment
of any premiums for hazard insurance and maintenance of the other forms of
insurance coverage required by this Agreement) and shall not be entitled to
reimbursement therefor except as specifically provided in this Agreement.
SECTION 3.15 Access to Certain Documentation.
The Master Servicer shall provide to the OTS and the FDIC and to
comparable regulatory authorities supervising Holders of Certificates or
Certificate Owners and the examiners and supervisory agents of the OTS, the FDIC
and such other authorities, access to the documentation regarding the Mortgage
Loans required by applicable regulations of the OTS and the FDIC. Such access
shall be afforded without charge, but only upon reasonable and prior written
request and during normal business hours at the offices designated by the Master
Servicer. Nothing in this Section shall limit the obligation of the Master
Servicer to observe any applicable law prohibiting disclosure of information
regarding the Mortgagors and the failure of the Master Servicer to provide
access as provided in this Section as a result of such obligation shall not
constitute a breach of this Section.
SECTION 3.16 Annual Statement as to Compliance.
The Master Servicer shall deliver to the Depositor, the Trustee and the
Insurer on or before 120 days after the end of the Master Servicer's fiscal
year, commencing with its 2005 fiscal year, an Officer's Certificate stating, as
to the signer thereof, that (i) a review of the activities of the Master
Servicer during the preceding calendar year and of the performance of the Master
Servicer under this Agreement has been made under such officer's supervision and
(ii) to the best of such officer's knowledge, based on such review, the Master
Servicer has fulfilled all its obligations under this Agreement throughout such
year, or, if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof. The Trustee shall forward a copy of each such statement to each Rating
Agency.
SECTION 3.17 Annual Independent Public Accountants' Servicing Statement;
Financial Statements.
On or before 120 days after the end of the Master Servicer's fiscal
year, commencing with its 2005 fiscal year, the Master Servicer at its expense
shall cause a nationally or regionally recognized firm of independent public
accountants (who may also render other services to the Master Servicer, the
Seller or any affiliate thereof) which is a member of the American Institute of
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Certified Public Accountants to furnish a statement to the Trustee, the
Depositor and the Insurer to the effect that-such firm has examined certain
documents and records relating to the servicing of the Mortgage Loans under this
Agreement or of mortgage loans under pooling and servicing agreements
substantially similar to this Agreement (such statement to have attached thereto
a schedule setting forth the pooling and servicing agreements covered thereby)
and that, on the basis of such examination, conducted substantially in
compliance with the Uniform Single Attestation Program for Mortgage Bankers or
the Audit Program for Mortgages serviced for FNMA and FHLMC, such servicing has
been conducted in compliance with such pooling and servicing agreements except
for such significant exceptions or errors in records that, in the opinion of
such firm, the Uniform Single Attestation Program for Mortgage Bankers or the
Audit Program for Mortgages serviced for FNMA and FHLMC requires it to report.
In rendering such statement, such firm may rely, as to matters relating to
direct servicing of mortgage loans by Subservicers, upon comparable statements
for examinations conducted substantially in compliance with the Uniform Single
Attestation Program for Mortgage Bankers or the Audit Program for Mortgages
serviced for FNMA and FHLMC (rendered within one year of such statement) of
independent public accountants with respect to the related Subservicer. Copies
of such statement shall be provided by the Trustee to any Certificateholder or
Certificate Owner upon request at the Master Servicer's expense, provided such
statement is delivered by the Master Servicer to the Trustee.
SECTION 3.18 Errors and Omissions Insurance; Fidelity Bonds.
The Master Servicer shall for so long as it acts as master servicer under
this Agreement, obtain and maintain in force (a) a policy or policies of
insurance covering errors and omissions in the performance of its obligations as
Master Servicer hereunder and (b) a fidelity bond in respect of its officers,
employees and agents. Each such policy or policies and bond shall, together,
comply with the requirements from time to time of FNMA or FHLMC for persons
performing servicing for mortgage loans purchased by FNMA or FHLMC. In the event
that any such policy or bond ceases to be in effect, the Master Servicer shall
obtain a comparable replacement policy or bond from an insurer or issuer,
meeting the requirements set forth above as of the date of such replacement.
ARTICLE IV
DISTRIBUTIONS AND ADVANCES BY THE MASTER SERVICER
SECTION 4.1 Advances.
The Master Servicer shall determine, in its sole discretion, on the
Business Day prior to each Master Servicer Advance Date whether it intends to
make an Advance. If the Master Servicer determines, in its sole discretion, that
it intends to make an Advance, it shall, on or before the Master Servicer
Advance Date, either (i) deposit into the Certificate Account an amount equal to
the Advance or (ii) make an appropriate entry in its records relating to the
Certificate Account that any Amount Held for Future Distribution has been used
by the Master Servicer for any such Advance. Any funds so applied shall be
replaced by the Master Servicer by deposit in the Certificate Account no later
than the close of business on the Business Day preceding the next Master
Servicer Advance Date. The Master Servicer shall be entitled to be reimbursed
from the Certificate Account for all Advances of its own funds made pursuant to
this Section as provided in Section 3.8. As to any Distribution Date, the Master
Servicer shall inform the Trustee in writing of the amount of the Advance to be
made by the Master Servicer on each Master Servicer Advance Date no later 1:30
p.m. Central time on the second Business Day immediately preceding such
Distribution Date.
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SECTION 4.2 Priorities of Distribution.
(a) On each Distribution Date, the Trustee shall withdraw the Available
Funds from the Distribution Account and apply such funds to
distributions on the Certificates in the following order and
priority and, in each case, to the extent of Available Funds
remaining:
(i) to the Insurer, the Premium for the Policy for such
Distribution Date and any previously unpaid Premiums, with
interest thereon as provided in the Insurance Agreement;
(ii) to the Holders of the Class A Certificates, pro rata, to the
extent of remaining Available Funds, the Accrued Certificate
Interest on each such Class for such Distribution Date, any
shortfall in available amounts being allocated among such
Classes in proportion to the amount of Accrued Certificate
Interest otherwise distributable thereon;
(iii) to the Holders of the Class A Certificates, in reduction of
the Class Certificate Balances thereof, to the extent of
remaining Available Funds, the Class A Principal Distribution
Amount for such Distribution Date, in the order of priority
set forth below in Section 4.2(b), until the respective Class
Certificate Balances thereof have been reduced to zero;
(iv) to the Holders of the Class A Certificates, in reduction of
the Class Certificate Balances thereof, to the extent of
remaining Available Funds, the Liquidation Loss Distribution
Amount for such Distribution Date (excluding Liquidation Loss
Amounts that have been allocated to the reduction of the Class
Certificate Balance of the Class A Certificates pursuant to
Section 4.2(c)(ii) below), in the order of priority set forth
below in Section 4.2(b), until the respective Class
Certificate Balances thereof have been reduced to zero;
(v) to the Insurer, to reimburse it for prior draws made on the
Policy, plus any other amount due and owing under the
Insurance Agreement, with interest thereon as provided in the
Insurance Agreement;
(vi) on each Distribution Date occurring on or after the
Distribution Date in February 2005, to the Holders of the
Class A Certificates, in reduction of the Class Certificate
Balances thereof, to the extent of remaining Available Funds,
the Overcollateralization Increase Amount for such
Distribution Date, if any, in the order of priority set forth
below in Section 4.2(b), until the respective Class
Certificate Balances thereof have been reduced to zero;
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(vii) to the Holders of the Class A Certificates, pro rata, to the
extent of remaining Available Funds, the amount of any
Prepayment Interest Shortfalls for such Distribution Date;
(viii)to the Holders of the Class A-1 Certificates, to the extent
of remaining Available Funds, any Class A-1 Interest Carry
Forward Amount; and
(ix) to the Holder of the Class C Certificate, to the extent of
remaining Available Funds, any amount remaining on deposit in
the Distribution Account on such Distribution Date;
provided, however, that on the Final Scheduled Distribution Date, the amount to
be distributed pursuant to clause (iii) above shall be equal to the aggregate
Class Certificate Balances of the Class A Certificates immediately prior to such
Distribution Date. For purposes of the foregoing, required distributions of
principal on the Class A Certificates on each Distribution Date will include the
portion allocable to the Class A Certificates of all Liquidation Loss Amounts
for such Distribution Date and for all previous Due Periods until paid or
covered in full, to the extent not otherwise covered by a Liquidation Loss
Distribution Amount, any Overcollateralization Reduction Amount, or a draw on
the Policy (up to the outstanding Class Certificate Balance).
(b) The Class A Principal Distribution Amount distributable pursuant to
Section 4.2(a)(iii), Liquidation Loss Distribution Amounts
distributable pursuant to Section 4.2(a)(iv) and
Overcollateralization Increase Amounts distributable pursuant to
Section 4.2(a)(vi) will be distributed in the following order of
priority:
(i) to the Class A-5 Certificates in an amount up to the Class A-5
Lockout Distribution Amount for such Distribution Date, until
the Class Certificate Balance thereof has been reduced to
zero; and
(ii) sequentially, to the Class X-0, Xxxxx X-0, Class A-3, Class
A-4 and Class A-5 Certificates, in that order, until their
respective Class Certificate Balances have each been reduced
to zero.
(c) On each Distribution Date, the Overcollateralization Amount
available to cover any Liquidation Loss Amounts on such Distribution
Date shall be deemed to be reduced by any Liquidation Loss Amounts
not distributed as Liquidation Loss Distribution Amounts pursuant to
Section 4.2(a)(iv). In the event that an Insurer Default has
occurred and is continuing, on each Distribution Date, the amount of
any Liquidation Loss Amounts with respect to the prior calendar
month that were not distributed as Liquidation Loss Distribution
Amounts pursuant to Section 4.2(a)(iv) will be applied as follows:
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(i) to reduce any Overcollateralization Amount (after the
allocation of Principal Collections for such Distribution
Date) until such amount has been reduced to zero; and
(ii) second, to reduce the Class Certificate Balance of each Class
of Class A Certificates then outstanding, pro rata, until the
Class Certificate Balance of each Class of Class A
Certificates has been reduced to zero.
(d) On each Distribution Date, the Trustee shall distribute to the
Holders of the Class R Certificates representing the RL Interest and
RU Interest, any Available Funds remaining in the related REMIC
created hereunder for such Distribution Date after application of
all amounts described in clauses (a), (b) and (c) of this Section
4.2.
SECTION 4.3 Method of Distribution.
(a) All distributions with respect to each Class of Certificates on each
Distribution Date shall be made pro rata among the outstanding
Certificates of such Class, based on the Percentage Interest in such
Class represented by each Certificate. Payments to the
Certificateholders on each Distribution Date will be made by the
Trustee to the Certificateholders of record on the related Record
Date by check or money order mailed to a Certificateholder at the
address appearing in the Certificate Register, or upon written
request by such Certificateholder to the Trustee made not later than
the applicable Record Date, by wire transfer to a U.S. depository
institution acceptable to the Trustee, or by such other means of
payment as such Certificateholder and the Trustee shall agree.
(b) Each distribution with respect to a Book-Entry Certificate shall be
paid to the Depository, which shall credit the amount of such
distribution to the accounts of its Depository Participants in
accordance with its normal procedures. Each Depository Participant
shall be responsible for disbursing such distribution to the
Certificate Owners that it represents and to each financial
intermediary for which it acts as agent. Each such financial
intermediary shall be responsible for disbursing funds to the
Certificate Owners that it represents. All such credits and
disbursements with respect to a Book-Entry Certificate are to be
made by the Depository and the Depository Participants in accordance
with the provisions of the applicable Certificates. Neither the
Trustee nor the Master Servicer shall have any responsibility
therefor except as otherwise provided by applicable law.
(c) The Trustee shall withhold or cause to be withheld such amounts as
it reasonably determines are required by the Code (giving full
effect to any exemptions from withholding and related certifications
required to be furnished by Certificateholders or Certificate Owners
and any reductions to withholding by virtue of any bilateral tax
treaties and any applicable certification required to be furnished
by Certificateholders or Certificate Owners with respect thereto)
from distributions to be made to Non-U.S. Persons. If the Trustee
reasonably determines that a more accurate determination of the
amount required to be withheld for a distribution can be made within
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a reasonable period after the scheduled date for such distribution,
it may hold such distribution in trust for a Holder of a Residual
Certificate until such determination can be made. For the purposes
of this paragraph, a "Non-U.S. Person" is (i) an individual other
than a citizen or resident of the United States, (ii) a partnership,
corporation or entity treated as a partnership or corporation for
U.S. federal income tax purposes not formed under the laws of the
United States, any state thereof or the District of Columbia
(unless, in the case of a partnership, Treasury regulations provide
otherwise), (iii) any estate, the income of which is not subject to
U.S. federal income taxation, regardless of source, and (iv) any
trust, other than a trust that a court within the United States is
able to exercise primary supervision over the administration of the
trust and one or more U.S. Persons have the authority to control all
substantial decisions of the trust.
SECTION 4.4 [Reserved].
SECTION 4.5 Determination of Pass-Through Rates for LIBOR Certificates.
(a) On each Interest Determination Date so long as any LIBOR
Certificates are outstanding, the Trustee will determine LIBOR on
the basis of the British Bankers' Association ("BBA") "Interest
Settlement Rate" for one-month deposits in U.S. dollars as found on
Telerate page 3750 as of 11:00 a.m. London time on each Interest
Determination Date. "Telerate Page 3750" means the display page
currently so designated on the Bridge Telerate Service (formerly the
Dow Xxxxx Markets) (or such other page as may replace that page on
that service for the purpose of displaying comparable rates or
prices.)
(b) If LIBOR cannot be determined as provided in paragraph (a) of this
Section 4.5, the Trustee shall either (i) request each Reference
Bank inform the Trustee of the quotation offered by such Reference
Bank's principal London office for making one-month United States
dollar deposits in leading banks in the London interbank market, as
of 11:00 a.m. (London time) on such Interest Determination Date or
(ii) in lieu of making any such request, rely on such Reference Bank
quotations that appear at such time on the Reuters Screen LIBO Page
(as defined in the International Swap Dealers Association Inc. Code
of Standard Wording, Assumptions and Provisions for Swaps, 1986
Edition), to the extent available. With respect to this Section
4.2(b), LIBOR for the next Interest Accrual Period will be
established by the Trustee on each Interest Determination Date as
follows:
(i) If on any Interest Determination Date two or more Reference
Banks provide such offered quotations, LIBOR for the next
Interest Accrual Period shall be the arithmetic mean of such
offered quotations (rounding such arithmetic mean upwards if
necessary to the nearest whole multiple of 1/32%).
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(ii) If on any Interest Determination Date only one or none of the
Reference Banks provides such offered quotations, LIBOR for
the next Interest Accrual Period shall be whichever is the
higher of (i) LIBOR as determined on the previous Interest
Determination Date or (ii) the Reserve Interest Rate. The
"Reserve Interest Rate" shall be the rate per annum which the
Trustee determines to be either (i) the arithmetic mean
(rounded upwards if necessary to the nearest whole multiple of
1/32%) of the one-month United States dollar lending rates
that New York City banks selected by the Trustee are quoting,
on the relevant Interest Determination Date, to the principal
London offices of at least two of the Reference Banks to which
such quotations are, in the opinion of the Trustee, being so
made, or (ii) in the event that the Trustee can determine no
such arithmetic mean, the lowest one-month United States
dollar lending rate which New York City banks selected by the
Trustee are quoting on such Interest Determination Date to
leading European banks.
(iii) If on any Interest Determination Date the Trustee is required
but is unable to determine the Reserve Interest Rate in the
manner provided in paragraph (b) above, LIBOR shall be LIBOR
as determined on the preceding Interest Determination Date.
The Master Servicer shall designate at least four Reference Banks. Until
all of the LIBOR Certificates are paid in full, the Trustee will refer to the
four Reference Banks designated by the Master Servicer to determine LIBOR with
respect to each Interest Determination Date. Each "Reference Bank" shall be a
leading bank engaged in transactions in Eurodollar deposits in the international
Eurocurrency market, shall not control, be controlled by, or be under common
control with, the Trustee and shall have an established place of business in
London. If any such Reference Bank should be unwilling or unable to act as such
or if the Master Servicer should terminate its appointment as Reference Bank,
the Master Servicer shall promptly appoint or cause to be appointed another
Reference Bank. The Trustee shall have no liability or responsibility to any
Person for (i) the selection of any Reference Bank for purposes of determining
LIBOR or (ii) any inability of the Master Servicer to designate at least four
Reference Banks.
(c) The Pass-Through Rate for each Class of LIBOR Certificates for
each Interest Accrual Period shall be determined by the
Trustee on each Interest Determination Date so long as the
LIBOR Certificates are outstanding on the basis of LIBOR and
the respective formulae appearing in footnotes corresponding
to the LIBOR Certificates in the table relating to the
Certificates in the Preliminary Statement.
In determining LIBOR, any Pass-Through Rate for the LIBOR Certificates,
any Interest Settlement Rate, or any Reserve Interest Rate, the Trustee may
conclusively rely and shall be protected in relying upon the offered quotations
(whether written, oral or on the Dow Xxxxx Markets) from the BBA designated
banks, the Reference Banks or the New York City banks as to LIBOR, the Interest
Settlement Rate or the Reserve Interest Rate, as appropriate, in effect from
time to time. The Trustee shall not have any liability or responsibility to any
Person for (i) the Trustee's selection of New York City banks for purposes of
determining any Reserve Interest Rate or (ii) its inability, following a
good-faith reasonable effort, to obtain such quotations from, the BBA designated
banks, the Reference Banks or the New York City banks or to determine such
arithmetic mean, all as provided for in this Section 4.5.
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The establishment of LIBOR and each Pass-Through Rate for the LIBOR
Certificates by the Trustee shall (in the absence of manifest error) be final,
conclusive and binding upon each Holder of a Certificate and the Trustee.
SECTION 4.6 Monthly Statements to Certificateholders.
(a) Not later than 12:00 noon, New York time, on the related
Distribution Date, the Trustee shall prepare and either (x) cause to
be forwarded by first class mail to each Certificateholder, the
Master Servicer, the Depositor, the Insurer and each Rating Agency
or (y) post on its website located at xxx.xxxxxxxxxxxx.xxx, a
statement setting forth the following information with respect to
the related distribution:
(i) The aggregate amount of (a) Interest Collections, (b)
Principal Collections, and (c) Substitution Adjustment Amounts
for such Due Period;
(ii) the amount of such distribution allocable to principal,
separately identifying the aggregate amount of any Principal
Prepayments and Net Liquidation Proceeds included therein;
(iii) the amount of such distribution allocable to interest, the
amount of any Class A-1 Interest Carry Forward Amount and any
remaining Interest Shortfalls after giving effect to such
distribution;
(iv) the Insured Amount, if any, for such Distribution Date and the
aggregate amount of prior draws on the Policy thereunder not
yet reimbursed;
(v) the Class Certificate Balance of each Class of Certificates
after giving effect to the distribution of principal on such
Distribution Date;
(vi) the Pool Principal Balance for the following Distribution
Date;
(vii) the amount of the Master Servicing Fees paid to or retained by
the Master Servicer with respect to such Distribution Date;
(viii)the Pass-Through Rate for each such Class of Certificates
with respect to such Distribution Date;
(ix) the amount of Advances included in the distribution on such
Distribution Date and the aggregate amount of Advances
outstanding as of the close of business on such Distribution
Date;
(x) the number and aggregate principal amounts of Mortgage Loans
(A) delinquent (exclusive of Mortgage Loans in foreclosure)
(1) 1 to 30 days (2) 31 to 60 days (3) 61 to 90 days and (4)
91 or more days and (B) in foreclosure and delinquent (1) 1 to
30 days (2) 31 to 60 days (3) 61 to 90 days and (4) 91 or more
days, as of the close of business on the last day of the
calendar month preceding such Distribution Date;
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(xi) with respect to any Mortgage Loan that became an REO Property
during the preceding calendar month, the loan number and
Stated Principal Balance of such Mortgage Loan as of the close
of business on the Determination Date preceding such
Distribution Date and the date of acquisition thereof;
(xii) the total number and principal balance of any REO Properties
(and market value, if available) as of the close of business
on the Determination Date preceding such Distribution Date;
(xiii)the aggregate Liquidation Loss Amounts with respect to the
related Due Period, the amount distribute as principal to
Class A Certificateholders in respect of Liquidation Loss
Amounts (minus any Subsequent Recovery Amounts) and the
aggregate of the Liquidation Loss Amounts from all Due Periods
to date expressed as a dollar amount and a percentage of the
aggregate Cut-off Date Pool Principal Balance;
(xiv) the Overcollateralization Amount as of the end of the
preceding Due Period;
(xv) the weighted average of the Net Mortgage Rates of the Mortgage
Loans for the related Due Period;
(xvi) the number and aggregate principal amounts of Mortgage Loans
purchased pursuant to Sections 2.2, 2.3 or 3.11 hereof during
the related Due Period
(xvii) the Net Liquidation Proceeds for the related Due Period;
(xviii) the aggregate Subsequent Recovery Amounts for such Due
Period;
(xix) with respect to the second Distribution Date, the number and
aggregate balance of any Delay Delivery Mortgage Loans not
delivered within thirty days after the Closing Date;
(xx) the Rolling Three Month Excess Spread Percentage for such
Distribution Date;
(xxi) the Excess Spread Percentage for such Distribution Date;
(xxii)whether the Total Loss Freeze Test has been satisfied on such
Distribution Date; and
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(xxiii) whether the Spread Squeeze Step-Down Freeze Test has been
satisfied for such Distribution Date.
(b) The Trustee's responsibility for disbursing the above information to
the Certificateholders, the Master Servicer, the Depositor, the
Insurer and each Rating Agency is limited to the availability,
timeliness and accuracy of the information provided by the Master
Servicer.
(c) On or before the fifth Business Day following the end of each Due
Period (but in no event later than the third Business Day prior to
the related Distribution Date), the Master Servicer shall deliver to
the Trustee (which delivery may be by electronic data transmission)
a Monthly Master Servicer Report.
(d) Within a reasonable period of time after the end of each calendar
year, the Trustee shall cause to be furnished to each Person who at
any time during the calendar year was a Certificateholder, a
statement containing the information set forth in clauses (a)(ii),
(a)(iii) and (a)(vii) of this Section 4.6 aggregated for such
calendar year or applicable portion thereof during which such Person
was a Certificateholder. Such obligation of the Trustee shall be
deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Trustee pursuant to
any requirements of the Code as from time to time in effect.
ARTICLE V
THE CERTIFICATES
SECTION 5.1 The Certificates.
The Certificates shall be substantially in the forms attached hereto as
exhibits. The Certificates shall be issuable in registered form, in the minimum
denominations, integral multiples in excess thereof (except that one Certificate
in each Class may be issued in a different amount which must be in excess of the
applicable minimum denomination) and aggregate denominations per Class set forth
in the Preliminary Statement.
Subject to Section 9.2 hereof respecting the final distribution on the
Certificates, on each Distribution Date the Trustee shall make distributions to
each Certificateholder of record on the preceding Record Date either (x) by wire
transfer in immediately available funds to the account of such Holder at a bank
or other entity having appropriate facilities therefor, if (i) such Holder has
so notified the Trustee at least five Business Days prior to the related Record
Date and (ii) such Holder shall hold (A) 100% of the Class Certificate Balance
of any Class of Certificates or (B) Certificates of any Class with aggregate
principal Denominations of not less than $1,000,000 or (y) by check mailed by
first class mail to such Certificateholder at the address of such Holder
appearing in the Certificate Register.
The Certificates shall be executed by manual or facsimile signature on
behalf of the Trustee by an authorized officer. Certificates bearing the manual
or facsimile signatures of individuals who were, at the time when such
signatures were affixed, authorized to sign on behalf of the Trustee shall bind
the Trustee, notwithstanding that such individuals or any of them have ceased to
be so authorized prior to the countersignature and delivery of such Certificates
or did not hold such offices at the date of such Certificate. No Certificate
shall be entitled to any benefit under this Agreement, or be valid for any
purpose, unless countersigned by the Trustee by manual signature, and such
countersignature upon any Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly executed and delivered hereunder.
All Certificates shall be dated the date of their countersignature. On the
Closing Date, the Trustee shall countersign the Certificates to be issued at the
direction of the Depositor, or any affiliate thereof.
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The Depositor shall provide, or cause to be provided, to the Trustee on a
continuous basis, an adequate inventory of Certificates to facilitate transfers.
SECTION 5.2 Certificate Register; Registration of Transfer and Exchange of
Certificates.
(a) The Trustee shall maintain, or cause to be maintained in accordance
with the provisions of Section 5.6 hereof, a Certificate Register
for the Trust Fund in which, subject to the provisions of
subsections (b) and (c) below and to such reasonable regulations as
it may prescribe, the Trustee shall provide for the registration of
Certificates and of transfers and exchanges of Certificates as
herein provided. Upon surrender for registration of transfer of any
Certificate, the Trustee shall execute and deliver, in the name of
the designated transferee or transferees, one or more new
Certificates of the same Class and aggregate Percentage Interest.
At the option of a Certificateholder, Certificates may be exchanged for
other Certificates of the same Class in authorized denominations and evidencing
the same aggregate Percentage Interest upon surrender of the Certificates to be
exchanged at the office or agency of the Trustee. Whenever any Certificates are
so surrendered for exchange, the Trustee shall execute, authenticate, and
deliver the Certificates which the Certificateholder making the exchange is
entitled to receive. Every Certificate presented or surrendered for registration
of transfer or exchange shall be accompanied by a written instrument of transfer
in form satisfactory to the Trustee duly executed by the Holder thereof or his
attorney duly authorized in writing.
No service charge to the Certificateholders shall be made for any
registration of transfer or exchange of Certificates, but payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates may be required.
All Certificates surrendered for registration of transfer or exchange
shall be cancelled and subsequently destroyed by the Trustee in accordance with
the Trustee's customary procedures.
After giving effect to the sale of the Certificates by the Depositor to
the Underwriter, and thereafter, so long as any Certificates remain outstanding,
the Seller, its affiliates and agents, collectively, shall not beneficially own
Certificates the aggregate fair value of which would represent 90% or more of
the beneficial interests in the Trust Fund.
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(b) No transfer of a Private Certificate shall be made unless such
transfer is made pursuant to an effective registration statement
under the Securities Act and any applicable state securities laws or
is exempt from the registration requirements under said Act and such
state securities laws. In the event that a transfer is to be made in
reliance upon an exemption from the Securities Act and such laws, in
order to assure compliance with the Securities Act and such laws,
the Certificateholder desiring to effect such transfer and such
Certificateholder's prospective transferee shall each certify to the
Trustee in writing the facts surrounding the transfer in
substantially the forms set forth in Exhibit I (the "Transferor
Certificate") and (i) deliver a letter in substantially the form of
either Exhibit J (the "Investment Letter") or Exhibit K (the "Rule
144A Letter") or (ii) there shall be delivered to the Trustee at the
expense of the transferor an Opinion of Counsel that such transfer
may be made pursuant to an exemption from the Securities Act. The
Depositor shall provide to any Holder of a Private Certificate and
any prospective transferee designated by any such Holder,
information regarding the related Certificates and the Mortgage
Loans and such other information as shall be necessary to satisfy
the condition to eligibility set forth in Rule 144A(d)(4) for
transfer of any such Certificate without registration thereof under
the Securities Act pursuant to the registration exemption provided
by Rule 144A. The Trustee and the Master Servicer shall cooperate
with the Depositor in providing the Rule 144A information referenced
in the preceding sentence, including providing to the Depositor such
information regarding the Certificates, the Mortgage Loans and other
matters regarding the Trust Fund as the Depositor shall reasonably
request to meet its obligation under the preceding sentence. Each
Holder of a Private Certificate desiring to effect such transfer
shall, and does hereby agree to, indemnify the Trustee and the
Depositor, the Seller and the Master Servicer against any liability
that may result if the transfer is not so exempt or is not made in
accordance with such federal and state laws.
No transfer of an ERISA-Restricted Certificate shall be made unless the
Trustee shall have received a Transferor Certificate from the related transferor
and either (i) a representation from the transferee of such Certificate
acceptable to and in form and substance satisfactory to the Trustee (in the
event such Certificate is a Private Certificate, such requirement is satisfied
only by the Trustee's receipt of a representation letter from the transferee
substantially in the form of Exhibit J or Exhibit K), to the effect that such
transferee is not an employee benefit plan or arrangement subject to Section 406
of ERISA or a plan or arrangement subject to Section 4975 of the Code, nor a
person acting on behalf of any such plan or arrangement, nor using the assets of
any such plan or arrangement to effect such transfer, (ii) in the case of a
Private Certificate (that has been subject to an ERISA-Qualified Underwriting)
or a Residual Certificate, if the purchaser is an insurance company, a
representation that the purchaser is an insurance company which is purchasing
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such Certificates with funds contained in an "insurance company general account"
(as such term is defined in Section V(e) of Prohibited Transaction Class
Exemption 95-60 ("PTCE 95-60")) and that the purchase and holding of such
Certificates are covered under Sections I and III of PTCE 95-60 or (iii) in the
case of any such ERISA-Restricted Certificate presented for registration in the
name of an employee benefit plan subject to ERISA, or a plan or arrangement
subject to Section 4975 of the Code (or comparable provisions of any subsequent
enactments), or a trustee of any such plan or any other person acting on behalf
of any such plan or arrangement, or using such plan's or arrangement's assets,
an Opinion of Counsel satisfactory to the Trustee, which Opinion of Counsel
shall not be an expense of either the Trustee, the Depositor, the Master
Servicer or the Trust Fund, addressed to the Trustee to the effect that the
purchase or holding of such ERISA-Restricted Certificate will not result in
prohibited transactions under Section 406 of ERISA and Section 4975 of the Code
and will not subject the Trustee, the Depositor or the Master Servicer to any
obligation in addition to those expressly undertaken in this Agreement or to any
liability. Notwithstanding anything else to the contrary herein, any purported
transfer of an ERISA-Restricted Certificate to or on behalf of an employee
benefit plan subject to ERISA or to the Code without the delivery to the Trustee
of an Opinion of Counsel satisfactory to the Trustee as described above shall be
void and of no effect.
To the extent permitted under applicable law (including, but not limited
to, ERISA), the Trustee shall be under no liability to any Person for any
registration of transfer of any ERISA-Restricted Certificate that is in fact not
permitted by this Section 5.2(b) or for making any payments due on such
Certificate to the Holder thereof or taking any other action with respect to
such Holder under the provisions of this Agreement so long as the transfer was
registered by the Trustee in accordance with the foregoing requirements.
(c) Each Person who has or who acquires any Ownership Interest in a
Residual Certificate shall be deemed by the acceptance or
acquisition of such Ownership Interest to have agreed to be bound by
the following provisions, and the rights of each Person acquiring
any Ownership Interest in a Residual Certificate are expressly
subject to the following provisions:
(i) Each Person holding or acquiring any Ownership Interest in a
Residual Certificate shall be a Permitted Transferee and shall
promptly notify the Trustee of any change or impending change
in its status as a Permitted Transferee.
(ii) No Ownership Interest in a Residual Certificate may be
registered on the Closing Date or thereafter transferred, and
the Trustee shall not register the Transfer of any Residual
Certificate unless, in addition to the certificates required
to be delivered to the Trustee under subparagraph (b) above,
the Trustee shall have been furnished with an affidavit (a
"Transfer Affidavit") of the initial owner or the proposed
transferee in the form attached hereto as Exhibit H.
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(iii) Each Person holding or acquiring any Ownership Interest in a
Residual Certificate shall agree (A) to obtain a Transfer
Affidavit from any other Person to whom such Person attempts
to Transfer its Ownership Interest in a Residual Certificate,
(B) to obtain a Transfer Affidavit from any Person for whom
such Person is acting as nominee, trustee or agent in
connection with any Transfer of a Residual Certificate and (C)
not to Transfer its Ownership Interest in a Residual
Certificate or to cause the Transfer of an Ownership Interest
in a Residual Certificate to any other Person if it has actual
knowledge that such Person is not a Permitted Transferee.
(iv) Any attempted or purported Transfer of any Ownership Interest
in a Residual Certificate in violation of the provisions of
this Section 5.2(c) shall be absolutely null and void and
shall vest no rights in the purported Transferee. If any
purported transferee shall become a Holder of a Residual
Certificate in violation of the provisions of this Section
5.2(c), then the last preceding Permitted Transferee shall be
restored to all rights as Holder thereof retroactive to the
date of registration of Transfer of such Residual Certificate.
The Trustee shall be under no liability to any Person for any
registration of Transfer of a Residual Certificate that is in
fact not permitted by Section 5.2(b) and this Section 5.2(c)
or for making any payments due on such Certificate to the
Holder thereof or taking any other action with respect to such
Holder under the provisions of this Agreement so long as the
Transfer was registered after receipt of the related Transfer
Affidavit, Transferor Certificate and, in the case of a
Residual Certificate which is also a Private Certificate,
either the Rule 144A Letter or the Investment Letter. The
Trustee shall be entitled but not obligated to recover from
any Holder of a Residual Certificate that was in fact not a
Permitted Transferee at the time it became a Holder or, at
such subsequent time as it became other than a Permitted
Transferee, all payments made on such Residual Certificate at
and after either such time. Any such payments so recovered by
the Trustee shall be paid and delivered by the Trustee to the
last preceding Permitted Transferee of such Certificate.
(v) The Depositor shall use its best efforts to make available,
upon receipt of written request from the Trustee, all
information necessary to compute any tax imposed under Section
860E(e) of the Code as a result of a Transfer of an Ownership
Interest in a Residual Certificate to any Holder who is not a
Permitted Transferee.
The restrictions on Transfers of a Residual Certificate set forth in this
Section 5.2(c) shall cease to apply (and the applicable portions of the legend
on a Residual Certificate may be deleted) with respect to Transfers occurring
after delivery to the Trustee of an Opinion of Counsel, which Opinion of Counsel
shall not be an expense of the Trust Fund, the Trustee, the Seller or the Master
Servicer, to the effect that the elimination of such restrictions will not cause
any REMIC created hereunder to fail to qualify as a REMIC at any time that the
Certificates are outstanding or result in the imposition of any tax on the Trust
Fund, a Certificateholder or another Person. Each Person holding or acquiring
any Ownership Interest in a Residual Certificate hereby consents to any
amendment of this Agreement which, based on an Opinion of Counsel furnished to
the Trustee, is reasonably necessary (a) to ensure that the record ownership of,
or any beneficial interest in, a Residual Certificate is not transferred,
directly or indirectly, to a Person that is not a Permitted Transferee and (b)
to provide for a means to compel the Transfer of a Residual Certificate which is
held by a Person that is not a Permitted Transferee to a Holder that is a
Permitted Transferee.
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(d) The preparation and delivery of all certificates and opinions
referred to above in this Section 5.2 in connection with
transfer shall be at the expense of the parties to such
transfers.
(e) Except as provided below, the Book-Entry Certificates shall at
all times remain registered in the name of the Depository or
its nominee and at all times: (i) registration of the
Certificates may not be transferred by the Trustee except to
another Depository; (ii) the Depository shall maintain
book-entry records with respect to the Certificate Owners and
with respect to ownership and transfers of such Book-Entry
Certificates; (iii) ownership and transfers of registration of
the Book-Entry Certificates on the books of the Depository
shall be governed by applicable rules established by the
Depository; (iv) the Depository may collect its usual and
customary fees, charges and expenses from its Depository
Participants; (v) the Trustee shall deal with the Depository,
Depository Participants and indirect participating firms as
representatives of the Certificate Owners of the Book-Entry
Certificates for purposes of exercising the rights of holders
under this Agreement, and requests and directions for and
votes of such representatives shall not be deemed to be
inconsistent if they are made with respect to different
Certificate Owners; and (vi) the Trustee may rely and shall be
fully protected in relying upon information furnished by the
Depository with respect to its Depository Participants and
furnished by the Depository Participants with respect to
indirect participating firms and persons shown on the books of
such indirect participating firms as direct or indirect
Certificate Owners.
All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Certificate Owner. Each Depository
Participant shall only transfer Book-Entry Certificates of Certificate Owners it
represents or of brokerage firms for which it acts as agent in accordance with
the Depository's normal procedures.
If (x) (i) the Depository or the Depositor advises the Trustee in writing
that the Depository is no longer willing or able to properly discharge its
responsibilities as Depository, and (ii) the Trustee or the Depositor is unable
to locate a qualified successor, (y) the Depositor at its option advises the
Trustee in writing that it elects to terminate the book-entry system through the
Depository or (z) after the occurrence of an Event of Default, Certificate
Owners representing at least 51% of the Class Certificate Balance of the
Book-Entry Certificates together advise the Trustee and the Depository through
the Depository Participants in writing that the continuation of a book-entry
system through the Depository is no longer in the best interests of the
Certificate Owners, the Trustee shall notify all Certificate Owners, through the
Depository, of the occurrence of any such event and of the availability of
definitive, fully-registered Certificates (the "Definitive Certificates") to
Certificate Owners requesting the same. Upon surrender to the Trustee of the
related Class of Certificates by the Depository, accompanied by the instructions
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from the Depository for registration, the Trustee shall issue the Definitive
Certificates. Neither the Master Servicer, the Depositor nor the Trustee shall
be liable for any delay in delivery of such instruction and each may
conclusively rely on, and shall be protected in relying on, such instructions.
The Master Servicer shall provide the Trustee with an adequate inventory of
certificates to facilitate the issuance and transfer of Definitive Certificates.
Upon the issuance of Definitive Certificates all references herein to
obligations imposed upon or to be performed by the Depository shall be deemed to
be imposed upon and performed by the Trustee, to the extent applicable with
respect to such Definitive Certificates and the Trustee shall recognize the
Holders of the Definitive Certificates as Certificateholders hereunder; provided
that the Trustee shall not by virtue of its assumption of such obligations
become liable to any party for any act or failure to act of the Depository.
SECTION 5.3 Mutilated, Destroyed, Lost or Stolen Certificates.
If (a) any mutilated Certificate is surrendered to the Trustee, or the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Certificate and (b) there is delivered to the Master Servicer and the
Trustee such security or indemnity as may be required by them to save each of
them harmless, then, in the absence of notice to the Trustee that such
Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute, countersign and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
Class, tenor and Percentage Interest. In connection with the issuance of any new
Certificate under this Section 5.3, the Trustee may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and expenses of the
Trustee) connected therewith. Any replacement Certificate issued pursuant to
this Section 5.3 shall constitute complete and indefeasible evidence of
ownership, as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.
SECTION 5.4 Persons Deemed Owners.
The Master Servicer, the Trustee and any agent of the Master Servicer or
the Trustee may treat the Person in whose name any Certificate is registered as
the owner of such Certificate for the purpose of receiving distributions as
provided in this Agreement and for all other purposes whatsoever, and neither
the Master Servicer, the Trustee nor any agent of the Master Servicer or the
Trustee shall be affected by any notice to the contrary.
SECTION 5.5 Access to List of Certificateholders' Names and Addresses.
If three or more Certificateholders or Certificate Owners (a) request such
information in writing from the Trustee, (b) state that such Certificateholders
or Certificate Owners desire to communicate with other Certificateholders with
respect to their rights under this Agreement or under the Certificates, and (c)
provide a copy of the communication which such Certificateholders or Certificate
Owners propose to transmit, or if the Depositor, the Master Servicer or the
Insurer shall request such information in writing from the Trustee, then the
Trustee shall, within ten Business Days after the receipt of such request,
provide the Depositor, the Master Servicer, the Insurer or such
Certificateholders or Certificate Owners, at such recipients' expense, the most
recent list of the Certificateholders of such Trust Fund held by the Trustee, if
any. The Depositor and every Certificateholder or Certificate Owner, by
receiving and holding a Certificate, agree that the Trustee shall not be held
accountable by reason of the disclosure of any such information as to the list
of the Certificateholders hereunder, regardless of the source from which such
information was derived.
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SECTION 5.6 Maintenance of Office or Agency.
The Trustee will maintain or cause to be maintained at its expense an
office or offices or agency or agencies in New York City where Certificates may
be surrendered for registration of transfer or exchange. The Trustee initially
designates its Corporate Trust Office for such purposes. The Trustee will give
prompt written notice to the Certificateholders of any change in such location
of any such office or agency.
ARTICLE VI
THE DEPOSITOR AND THE MASTER SERVICER
SECTION 6.1 Respective Liabilities of the Depositor and the Master
Servicer.
The Depositor and the Master Servicer shall each be liable in accordance
herewith only to the extent of the obligations specifically and respectively
imposed upon and undertaken by them herein.
SECTION 6.2 Merger or Consolidation of the Depositor or the Master
Servicer.
The Depositor and the Master Servicer will each keep in full effect its
existence, rights and franchises as a corporation under the laws of the United
States or under the laws of one of the states thereof and will each obtain and
preserve its qualification to do business as a foreign corporation in each
jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of this Agreement, or any of the Mortgage Loans and
to perform its respective duties under this Agreement.
Any Person into which the Depositor or the Master Servicer may be merged
or consolidated, or any Person resulting from any merger or consolidation to
which the Depositor or the Master Servicer shall be a party, or any person
succeeding to the business of the Depositor or the Master Servicer, shall be the
successor of the Depositor or the Master Servicer, as the case may be,
hereunder, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, however, that the successor or surviving Person to
the Master Servicer shall be qualified to sell mortgage loans to, and to service
mortgage loans on behalf of, FNMA or FHLMC.
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SECTION 6.3 Limitation on Liability of the Depositor, the Master Servicer
and Others.
None of the Depositor, the Master Servicer or any of the directors,
officers, employees or agents of the Depositor or the Master Servicer shall be
under any liability to the Certificateholders for any action taken or for
refraining from the taking of any action in good faith pursuant to this
Agreement, or for errors in judgment; provided, however, that this provision
shall not protect the Depositor, the Master Servicer or any such Person against
any breach of representations or warranties made by it herein or protect the
Depositor, the Master Servicer or any such Person from any liability which would
otherwise be imposed by reasons of willful misfeasance, bad faith or gross
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties hereunder. The Depositor, the Master Servicer and any
director, officer, employee or agent of the Depositor or the Master Servicer may
rely in good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising hereunder. The Depositor,
the Master Servicer and any director, officer, employee or agent of the
Depositor or the Master Servicer shall be indemnified by the Trust Fund and held
harmless against any loss, liability or expense incurred in connection with any
audit, controversy or judicial proceeding relating to a governmental taxing
authority or any legal action relating to this Agreement or the Certificates,
other than any loss, liability or expense related to any specific Mortgage Loan
or Mortgage Loans (except as any such loss, liability or expense shall be
otherwise reimbursable pursuant to this Agreement) and any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or gross negligence
in the performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder. Neither the Depositor nor the Master Servicer
shall be under any obligation to appear in, prosecute or defend any legal action
that is not incidental to its respective duties hereunder and which in its
opinion may involve it in any expense or liability; provided, however, that
either the Depositor or the Master Servicer may in its discretion undertake any
such action that it may deem necessary or desirable in respect of this Agreement
and the rights and duties of the parties hereto and interests of the Trustee and
the Certificateholders hereunder. In such event, the legal expenses and costs of
such action and any liability resulting therefrom shall be expenses, costs and
liabilities of the Trust Fund, and the Depositor and the Master Servicer shall
be entitled to be reimbursed therefor out of the Certificate Account.
SECTION 6.4 Limitation on Resignation of Master Servicer.
The Master Servicer shall not resign from the obligations and duties
hereby imposed on it except (a) upon appointment of a successor servicer
acceptable to the Insurer and receipt by the Trustee of a letter from each
Rating Agency that such a resignation and appointment will not result in a
downgrading of the shadow rating of any of the Certificates, or (b) upon
determination that its duties hereunder are no longer permissible under
applicable law. Any such determination under clause (b) permitting the
resignation of the Master Servicer shall be evidenced by an Opinion of Counsel
to such effect delivered to the Trustee and the Insurer. No such resignation
shall become effective until the Trustee or other successor master servicer
shall have assumed the Master Servicer's responsibilities, duties, liabilities
and obligations hereunder.
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ARTICLE VII
DEFAULT
SECTION 7.1 Events of Default.
"Event of Default," wherever used herein, means any one of the following
events:
(i) any failure by the Master Servicer to deposit in the
Certificate Account or remit to the Trustee any payment
required to be made under the terms of this Agreement, which
failure shall continue unremedied for five days after the date
upon which written notice of such failure shall have been
given to the Master Servicer by the Trustee or the Depositor
or to the Master Servicer and the Trustee by the Holders of
Certificates having not less than 25% of the Voting Rights
evidenced by the Certificates; or
(ii) any failure by the Master Servicer to observe or perform in
any material respect any other of the covenants or agreements
on the part of the Master Servicer contained in this
Agreement, which failure materially affects the rights of
Certificateholders, which failure continues unremedied for a
period of 60 days after the date on which written notice of
such failure shall have been given to the Master Servicer by
the Trustee or the Depositor, or to the Master Servicer and
the Trustee by the Holders of Certificates evidencing not less
than 25% of the Voting Rights evidenced by the Certificates;
provided, however, that the 60-day cure period shall not apply
to the initial delivery of the Mortgage File for Delay
Delivery Mortgage Loans nor the failure to substitute or
repurchase in lieu thereof; or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises for the
appointment of a receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of
its affairs, shall have been entered against the Master
Servicer and such decree or order shall have remained in force
undischarged or unstayed for a period of 60 consecutive days;
or
(iv) the Master Servicer shall consent to the appointment of a
receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar
proceedings of or relating to the Master Servicer or all or
substantially all of the property of the Master Servicer; or
(v) the Master Servicer shall admit in writing its inability to
pay its debts generally as they become due, file a petition to
take advantage of, or commence a voluntary case under, any
applicable insolvency or reorganization statute, make an
assignment for the benefit of its creditors, or voluntarily
suspend payment of its obligations; or
(vi) a draw under the Policy remains unreimbursed for a period of
90 days;
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(vii) the long term senior unsecured debt rating of First Tennessee
Bank National Association is not rated at least "BBB" by S&P
and at least "Baa2" by Xxxxx'x;
(viii)cumulative Liquidation Loss Amounts, as a percentage of the
Pool Principal Balance as of the Closing Date, exceed the
following percentages:
MONTH PERCENTAGE
0 - 24 2.00%
25 - 36 2.50%
37 - 48 3.00%
49 - 60 3.50%
61+ 4.00%
If an Event of Default described in clauses (i), (ii), (vi), (vii) and
(viii) of this Section shall occur, the Trustee shall promptly deliver written
notice of the occurrence of such Event of Default to the Insurer and, in each
and every such case, so long as such Event of Default shall not have been
remedied, the Trustee may, or at the direction of the Holders of Certificates
evidencing not less than 66 2/3% of the Voting Rights evidenced by the
Certificates, the Trustee shall by notice in writing to the Master Servicer
(with a copy to the Insurer and each Rating Agency), terminate all of the rights
and obligations of the Master Servicer under this Agreement and in and to the
Mortgage Loans and the proceeds thereof, other than its rights as a
Certificateholder hereunder. If an Event of Default described in clauses (iii),
(iv) or (v) of this Section shall occur, the Trustee shall immediately, by
notice in writing to the Master Servicer (with a copy to the Insurer and each
Rating Agency), terminate all of the rights and obligations of the Master
Servicer under this Agreement and in and to the Mortgage Loans and proceeds
thereof, other than its rights as a Certificateholder hereunder. On and after
the receipt by the Master Servicer of such written notice, all authority and
power of the Master Servicer hereunder, whether with respect to the Mortgage
Loans or otherwise, shall pass to and be vested in the Trustee or another
successor to the Master Servicer appointed by the Trustee pursuant to Section
7.2. The Trustee, in its capacity as successor to the Master Servicer, shall
thereupon make any Advance which the Master Servicer failed to make subject to
Section 4.1 hereof. The Trustee is hereby authorized and empowered to execute
and deliver, on behalf of the Master Servicer, as attorney-in-fact or otherwise,
any and all documents and other instruments, and to do or accomplish all other
acts or things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement or assignment of
the Mortgage Loans and related documents, or otherwise. Unless expressly
provided in such written notice, no such termination shall affect any obligation
of the Master Servicer to pay amounts owed pursuant to Article VIII. The Master
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Servicer agrees to cooperate with the Trustee in effecting the termination of
the Master Servicer's responsibilities and rights hereunder, including, without
limitation, the transfer to the Trustee of all cash amounts which shall at the
time be credited to the Certificate Account, or thereafter be received with
respect to the Mortgage Loans. All expenses incurred in the transferring of the
servicing duties from the Master Servicer to a Successor Servicer shall be paid
by the Master Servicer, and if not paid by the Master Servicer, shall be paid
from amounts on deposit in the Certificate Account.
Notwithstanding any termination of the activities of the Master Servicer
hereunder, the Master Servicer shall be entitled to receive, out of any late
collection of a Scheduled Payment on a Mortgage Loan which was due prior to the
notice terminating such Master Servicer's rights and obligations as Master
Servicer hereunder and received after such notice, that portion thereof to which
such Master Servicer would have been entitled pursuant to Sections 3.8(a)(i)
through (viii), and any other amounts payable to such Master Servicer hereunder
the entitlement to which arose prior to the termination of its activities
hereunder. Any termination of the activities of the Master Servicer hereunder
will simultaneously result in (i) the termination of the Master Servicer's
duties as a subservicer pursuant to the Servicing Rights Transfer and
Subservicing Agreement and (ii) the termination of FTMSI's rights under the
Servicing Rights Transfer and Subservicing Agreement, in each case, without
payment of any termination fee thereunder, and the servicing rights with respect
to the Mortgage Loans will automatically transfer to the Trust Fund.
SECTION 7.2 Trustee to Act; Appointment of Successor.
On and after the time the Master Servicer receives a notice of termination
pursuant to Section 7.1 hereof, the Trustee shall, subject to and to the extent
provided in Section 3.4, be the successor to the Master Servicer under this
Agreement and the transactions set forth or provided for herein and shall be
subject to all the responsibilities, duties and liabilities relating thereto
placed on the Master Servicer by the terms and provisions hereof and applicable
law including the obligation to make Advances pursuant to Section 4.1. As
compensation therefor, the Trustee shall be entitled to all funds relating to
the Mortgage Loans that the Master Servicer would have been entitled to charge
to the Certificate Account or Distribution Account if the Master Servicer had
continued to act hereunder. Notwithstanding the foregoing, if the Trustee has
become the successor to the Master Servicer in accordance with Section 7.1
hereof, the Trustee may, if it shall be unwilling to so act, or shall, if it is
prohibited by applicable law from making Advances pursuant to Section 4.1 hereof
or if it is otherwise unable to so act, appoint, or petition a court of
competent jurisdiction to appoint, any established mortgage loan servicing
institution acceptable to the Insurer, the appointment of which does not
adversely affect the then current shadow rating of the Certificates by each
Rating Agency as the successor to the Master Servicer hereunder in the
assumption of all or any part of the responsibilities, duties or liabilities of
the Master Servicer hereunder. Any successor to the Master Servicer shall be an
institution which is a FNMA and FHLMC approved seller/servicer in good standing,
which has a net worth of at least $10,000,000, which is acceptable to the
Insurer and which is willing to service the Mortgage Loans and executes and
delivers to the Depositor and the Trustee an agreement accepting such delegation
and assignment, which contains an assumption by such Person of the rights,
powers, duties, responsibilities, obligations and liabilities of the Master
Servicer (other than liabilities of the Master Servicer under Section 6.3 hereof
incurred prior to termination of the Master Servicer under Section 7.1), with
like effect as if originally named as a party to this Agreement; and provided
further that each Rating Agency acknowledges that its shadow rating of the
Certificates in effect immediately prior to such assignment and delegation will
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not be qualified or reduced, as a result of such assignment and delegation.
Pending appointment of a successor to the Master Servicer hereunder, the
Trustee, unless the Trustee is prohibited by law from so acting, shall, subject
to Section 3.4 hereof, act in such capacity as provided above. In connection
with such appointment and assumption, the Trustee may make such arrangements for
the compensation of such successor out of payments on Mortgage Loans as it and
such successor shall agree; provided, however, that no such compensation shall
be in excess of the Master Servicing Fee permitted the Master Servicer
hereunder. The Trustee and such successor shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession.
Neither the Trustee nor any other successor master servicer shall be deemed to
be in default hereunder by reason of any failure to make, or any delay in
making, any distribution hereunder or any portion thereof or any failure to
perform, or any delay in performing, any duties or responsibilities hereunder,
in either case caused by the failure of the Master Servicer to deliver or
provide, or any delay in delivering or providing, any cash, information,
documents or records to it.
Any successor to the Master Servicer as master servicer shall give notice
to the Mortgagors of such change of servicer and shall, during the term of its
service as master servicer maintain in force the policy or policies that the
Master Servicer is required to maintain pursuant to Section 3.18.
In connection with the termination or resignation of the Master Servicer
hereunder, either (i) the successor Master Servicer, including the Trustee if
the Trustee is acting as successor Master Servicer, shall represent and warrant
that it is a member of MERS in good standing and shall agree to comply in all
material respects with the rules and procedures of MERS in connection with the
servicing of the Mortgage Loans that are registered with MERS, or (ii) the
predecessor Master Servicer shall cooperate with the successor Master Servicer
either (x) in causing MERS to execute and deliver an assignment of Mortgage in
recordable form to transfer the Mortgage from MERS to the Trustee and to execute
and deliver such other notices, documents and other instruments as may be
necessary or desirable to effect a transfer of such Mortgage Loan or servicing
of such mortgage Loan on the MERS(R) System to the successor Master Servicer or
(y) in causing MERS to designate on the MERS(R) System the successor Master
Servicer as the servicer of such Mortgage Loan. The predecessor Master Servicer
shall file or cause to be filed any such assignment in the appropriate recording
office. The successor Master Servicer shall cause such assignment to be
delivered to the Trustee promptly upon receipt of the original with evidence of
recording thereon or a copy certified by the public recording office in which
such assignment was recorded.
SECTION 7.3 Notification to Certificateholders.
(a) Upon any termination of or appointment of a successor to the Master
Servicer, the Trustee shall give prompt written notice thereof to
Certificateholders, the Insurer and each Rating Agency.
(b) Within 60 days after the occurrence of any Event of Default, the
Trustee shall transmit by mail to all Certificateholders notice of
each such Event of Default hereunder known to the Trustee, unless
such Event of Default shall have been cured or waived.
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ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.1 Duties of Trustee.
The Trustee, prior to the occurrence of an Event of Default of which a
Responsible Officer of the Trustee has actual knowledge and after the curing of
all Events of Default that may have occurred, shall undertake to perform such
duties and only such duties as are specifically set forth in this Agreement. In
case an Event of Default of which a Responsible Officer of the Trustee has
actual knowledge has occurred and remains uncured, the Trustee shall exercise
such of the rights and powers vested in it by this Agreement, and use the same
degree of care and skill in their exercise as a prudent person would exercise or
use under the circumstances in the conduct of such person's own affairs.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee that are specifically required to be furnished pursuant to any provision
of this Agreement shall examine them to determine whether they are in the form
required by this Agreement; provided, however, that the Trustee shall not be
responsible for the accuracy or content of any such resolution, certificate,
statement, opinion, report, document, order or other instrument. If any such
instrument is found not to conform in any material respect to the requirements
of this Agreement, the Trustee shall notify the Certificateholders of such
instrument in the event that the Trustee, after so requesting, does not receive
a satisfactorily corrected instrument.
No provision of this Agreement shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own willful misconduct; provided, however, that:
(i) unless an Event of Default of which a Responsible Officer of
the Trustee has actual knowledge shall have occurred and be
continuing, the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Agreement,
the Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in
this Agreement, no implied covenants or obligations shall be
read into this Agreement against the Trustee and the Trustee
may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Agreement which it
believed in good faith to be genuine and to have been duly
executed by the proper authorities respecting any matters
arising hereunder;
(ii) the Trustee shall not be liable for an error of judgment made
in good faith by a Responsible Officer or Responsible Officers
of the Trustee, unless it shall be finally proven that the
Trustee was negligent in ascertaining the pertinent facts;
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(iii) the Trustee shall not be liable with respect to any action
taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of Holders of Certificates
evidencing not less than 25% of the Voting Rights of
Certificates relating to the time, method and place of
conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the
Trustee under this Agreement;
(iv) the Trustee shall not be required to expend or risk its own
funds or otherwise incur financial liability in the
performance of any of its duties hereunder or the exercise of
any of its rights or powers if there is reasonable ground for
believing that the repayment of such funds or adequate
indemnity against such risk or liability is not assured to it,
and none of the provisions contained in this Agreement shall
in any event require the Trustee to perform, or be responsible
for the manner of performance of, any of the obligations of
the Master Servicer under this Agreement except during such
time, if any, as the Trustee shall be the successor to, and be
vested with the rights, duties, powers and privileges of, the
Master Servicer; and
(v) without limiting the generality of this Section 8.1, the
Trustee shall have no duty (A) to see to any recording,
filing, or depositing of this Agreement or any agreement
referred to herein or any financing statement or continuation
statement evidencing a security interest, or to see to the
maintenance of any such recording or filing or deposit or to
any rerecording, refiling or redepositing of any thereof, (B)
to see to any insurance, (C) to see to the payment or
discharge of any tax, assessment, or other governmental charge
or any lien or encumbrance of any kind owing with respect to,
assessed or levied against, any part of the Trust Fund other
than from funds available in the Distribution Account (D) to
confirm or verify the contents of any reports or certificates
of the Servicer delivered to the Trustee pursuant to this
Agreement believed by the Trustee to be genuine and to have
been signed or presented by the proper party or parties.
SECTION 8.2 Certain Matters Affecting the Trustee.
Except as otherwise provided in Section 8.1:
(i) the Trustee may request and rely upon and shall be protected
in acting or refraining from acting upon any resolution,
Officers' Certificate, certificate of auditors or any other
certificate, statement, instrument, opinion, report, notice,
request, consent, order, appraisal, bond or other paper or
document believed by it to be genuine and to have been signed
or presented by the proper party or parties and the Trustee
shall have no responsibility to ascertain or confirm the
genuineness of any signature of any such party or parties;
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(ii) the Trustee may consult with counsel, financial advisers or
accountants and the advice of any such counsel, financial
advisers or accountants and any Opinion of Counsel shall be
full and complete authorization and protection in respect of
any action taken or suffered or omitted by it hereunder in
good faith and in accordance with such Opinion of Counsel;
(iii) the Trustee shall not be liable for any action taken, suffered
or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers
conferred upon it by this Agreement;
(iv) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request,
consent, order, approval, bond or other paper or document,
unless requested in writing so to do by the Insurer or by
Holders of Certificates evidencing not less than 25% of the
Voting Rights allocated to each Class of Certificates;
provided, however, that if the payment within a reasonable
time to the Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not assured
to the Trustee by the security afforded to it by the terms of
this Agreement, the Trustee may require indemnity satisfactory
to the Trustee against such cost, expense or liability as a
condition to taking any such action. The reasonable expense of
every such examination shall be paid by the Master Servicer
or, if paid by the Trustee, shall be repaid by the Master
Servicer upon demand from the Servicer's own funds.
(v) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or
through agents, accountants or attorneys and the Trustee shall
not be responsible for any misconduct or negligence on the
part of such agent, accountant or attorney appointed by the
Trustee with due care;
(vi) the Trustee shall not be required to risk or expend its own
funds or otherwise incur any financial liability in the
performance of any of its duties or in the exercise of any of
its rights or powers hereunder if it shall have reasonable
grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not assured to it;
(vii) the Trustee shall not be liable for any loss on any investment
of funds pursuant to this Agreement (other than as issuer of
the investment security);
(viii)the Trustee shall not be deemed to have knowledge of an Event
of Default until a Responsible Officer of the Trustee shall
have received written notice thereof and in the absence of
such notice, the Trustee may conclusively assume that there is
no Event of Default;
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(ix) the Trustee shall be under no obligation to exercise any of
the trusts, rights or powers vested in it by this Agreement or
to institute, conduct or defend any litigation hereunder or in
relation hereto at the request, order or direction of any of
the Certificateholders, pursuant to the provisions of this
Agreement, unless such Certificateholders shall have offered
to the Trustee reasonable security or indemnity satisfactory
to the Trustee against the costs, expenses and liabilities
which may be incurred therein or thereby;
(x) the right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty,
and the Trustee shall not be answerable for other than its
negligence or willful misconduct in the performance of such
act; and
(xi) the Trustee shall not be required to give any bond or surety
in respect of the execution of the Trust Fund created hereby
or the powers granted hereunder.
SECTION 8.3 Trustee Not Liable for Certificates or Mortgage Loans.
The recitals contained herein and in the Certificates shall be taken as
the statements of the Depositor and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representations as to the validity or
sufficiency of this Agreement or of the Certificates or of any Mortgage Loan or
related document or of MERS or the MERS(R) System other than with respect to the
Trustee's execution and counter-signature of the Certificates. The Trustee shall
not be accountable for the use or application by the Depositor or the Master
Servicer of any funds paid to the Depositor or the Master Servicer in respect of
the Mortgage Loans or deposited in or withdrawn from the Certificate Account by
the Depositor or the Master Servicer.
SECTION 8.4 Trustee May Own Certificates.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Certificates with the same rights as it would have if it were not
the Trustee.
SECTION 8.5 Trustee's Fees and Expenses.
The Trustee, as compensation for its activities prior to making the
distributions pursuant to Section 4.2 hereunder, shall be entitled to withdraw
from the Distribution Account on each Distribution Date an amount equal to the
Trustee Fee for such Distribution Date. The Trustee and any director, officer,
employee or agent of the Trustee shall be indemnified by the Master Servicer and
held harmless against any loss, liability or expense (including reasonable
attorney's fees) (i) incurred in connection with any claim or legal action
relating to (a) this Agreement, (b) the Certificates or (c) in connection with
the performance of any of the Trustee's duties hereunder, other than any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
negligence in the performance of any of the Trustee's duties hereunder or
incurred by reason of any action of the Trustee taken at the direction of the
Certificateholders and (ii) resulting from any error in any tax or information
return prepared by the Master Servicer. Such indemnity shall survive the
termination of this Agreement or the resignation or removal of the Trustee
hereunder. Without limiting the foregoing, the Master Servicer covenants and
agrees, except as otherwise agreed upon in writing by the Depositor and the
Trustee, and except for any such expense, disbursement or advance as may arise
from the Trustee's negligence, bad faith or willful misconduct, to pay or
reimburse the Trustee, for all reasonable expenses, disbursements and advances
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incurred or made by the Trustee in accordance with any of the provisions of this
Agreement with respect to: (A) the reasonable compensation and the expenses and
disbursements of its counsel not associated with the closing of the issuance of
the Certificates, (B) the reasonable compensation, expenses and disbursements of
any accountant, engineer or appraiser that is not regularly employed by the
Trustee, to the extent that the Trustee must engage such persons to perform acts
or services hereunder and (C) printing and engraving expenses in connection with
preparing any Definitive Certificates. Except as otherwise provided herein, the
Trustee shall not be entitled to payment or reimbursement for any routine
ongoing expenses incurred by the Trustee in the ordinary course of its duties as
Trustee, Registrar, Tax Matters Person or Paying Agent hereunder or for any
other expenses. Anything in this Agreement to the contrary notwithstanding, in
no event shall the Trustee be liable for special, indirect or consequential loss
or damage of any kind whatsoever (including but not limited to lost profits),
even if the Trustee has been advised of the likelihood of such loss or damage
and regardless of the form of action.
SECTION 8.6 Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be a corporation or association
organized and doing business under the laws of a state or the United States of
America, authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000, subject to supervision or
examination by federal or state authority, acceptable to the Insurer and with a
credit rating which would not cause either of the Rating Agencies to reduce
their respective then current shadow ratings of the Certificates (or having
provided such security from time to time as is sufficient to avoid such
reduction). If such corporation or association publishes reports of condition at
least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of this Section 8.6
the combined capital and surplus of such corporation or association shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Trustee shall cease to
be eligible in accordance with the provisions of this Section 8.6, the Trustee
shall resign immediately in the manner and with the effect specified in Section
8.7 hereof. The entity serving as Trustee may have normal banking and trust
relationships with the Depositor and its affiliates or the Master Servicer and
its affiliates; provided, however, that such entity cannot be an affiliate of
the Master Servicer other than the Trustee in its role as successor to the
Master Servicer.
SECTION 8.7 Resignation and Removal of Trustee.
The Trustee may at any time resign and be discharged from the trusts
hereby created by giving written notice of resignation to the Depositor, the
Master Servicer, the Insurer and each Rating Agency not less than 60 days before
the date specified in such notice when, subject to Section 8.8, such resignation
is to take effect, and acceptance by a successor trustee in accordance with
Section 8.8 meeting the qualifications set forth in Section 8.6. If no successor
trustee meeting such qualifications shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice or
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.
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If at any time the Trustee shall cease to be eligible in accordance with
the provisions of Section 8.6 hereof and shall fail to resign after written
request thereto by the Depositor, or if at any time the Trustee shall become
incapable of acting, or shall be adjudged as bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, or a tax
is imposed with respect to the Trust Fund by any state in which the Trustee or
the Trust Fund is located and the imposition of such tax would be avoided by the
appointment of a different trustee, then the Depositor or the Master Servicer
may remove the Trustee and appoint a successor trustee by written instrument, in
triplicate, one copy of which instrument shall be delivered to the Trustee, one
copy of which shall be delivered to the Master Servicer and one copy to the
successor trustee.
The Holders of Certificates entitled to at least 51% of the Voting Rights
may at any time remove the Trustee and appoint a successor trustee by written
instrument or instruments, in triplicate, signed by such Holders or their
attorneys-in-fact duly authorized, one complete set of which instruments shall
be delivered by the successor Trustee to the Master Servicer, one complete set
to the Trustee so removed and one complete set to the successor so appointed.
Notice of any removal of the Trustee shall be given to the Insurer and each
Rating Agency by the Successor Trustee.
Any resignation or removal of the Trustee and appointment of a successor
trustee pursuant to any of the provisions of this Section 8.7 shall become
effective upon acceptance of appointment by the successor trustee as provided in
Section 8.8 hereof.
SECTION 8.8 Successor Trustee.
Any successor trustee appointed as provided in Section 8.7 hereof shall
execute, acknowledge and deliver to the Depositor and to its predecessor trustee
and the Master Servicer an instrument accepting such appointment hereunder and
thereupon the resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as trustee herein. The Depositor, the Master Servicer and the predecessor
trustee shall execute and deliver such instruments and do such other things as
may reasonably be required for more fully and certainly vesting and confirming
in the successor trustee all such rights, powers, duties, and obligations.
No successor trustee shall accept appointment as provided in this Section
8.8 unless at the time of such acceptance such successor trustee shall be
eligible under the provisions of Section 8.6 hereof and its appointment shall
not adversely affect the then current shadow rating of the Certificates.
Upon acceptance of appointment by a successor trustee as provided in this
Section 8.8, the Depositor shall mail notice of the succession of such trustee
hereunder to all Holders of Certificates. If the Depositor fails to mail such
notice within 10 days after acceptance of appointment by the successor trustee,
the successor trustee shall cause such notice to be mailed at the expense of the
Depositor.
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SECTION 8.9 Merger or Consolidation of Trustee.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to the business of the Trustee, shall be the successor of
the Trustee hereunder, provided that such corporation shall be eligible under
the provisions of Section 8.6 hereof without the execution or filing of any
paper or further act on the part of any of the parties hereto, anything herein
to the contrary notwithstanding.
SECTION 8.10 Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of the Trust Fund or property securing any Mortgage Note may at the time be
located, the Master Servicer and the Trustee acting jointly shall have the power
and shall execute and deliver all instruments to appoint one or more Persons
approved by the Trustee to act as co-trustee or co-trustees jointly with the
Trustee, or separate trustee or separate trustees, of all or any part of the
Trust Fund, and to vest in such Person or Persons, in such capacity and for the
benefit of the Certificateholders and the Insurer, such title to the Trust Fund
or any part thereof, whichever is applicable, and, subject to the other
provisions of this Section 8.10, such powers, duties, obligations, rights and
trusts as the Master Servicer and the Trustee may consider necessary or
desirable. If the Master Servicer shall not have joined in such appointment
within 15 days after the receipt by it of a request to do so, or in the case an
Event of Default shall have occurred and be continuing, the Trustee alone shall
have the power to make such appointment. No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a successor
trustee under Section 8.6 and no notice to Certificateholders of the appointment
of any co-trustee or separate trustee shall be required under Section 8.8.
Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) To the extent necessary to effectuate the purposes of this
Section 8.10, all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or
imposed upon and exercised or performed by the Trustee and
such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in
such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be
performed (whether as Trustee hereunder or as successor to the
Master Servicer hereunder), the Trustee shall be incompetent
or unqualified to perform such act or acts, in which event
such rights, powers, duties and obligations (including the
holding of title to the applicable Trust Fund or any portion
thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but
solely at the direction of the Trustee;
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(ii) No trustee hereunder shall be held personally liable by reason
of any act or omission of any other trustee hereunder and such
appointment shall not, and shall not be deemed to, constitute
any such separate trustee or co-trustee as agent of the
Trustee;
(iii) The Trustee may at any time accept the resignation of or
remove any separate trustee or co-trustee; and
(iv) The Master Servicer, and not the Trustee, shall be liable for
the payment of reasonable compensation, reimbursement and
indemnification to any such separate trustee or co-trustee.
Any notice, request or other writing given to the Trustee shall be deemed
to have been given to each of the separate trustees and co-trustees, when and as
effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article VIII. Each separate trustee and co-trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Master Servicer and the Depositor.
Any separate trustee or co-trustee may, at any time, constitute the
Trustee its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
SECTION 8.11 Tax Matters.
It is intended that the assets with respect to which each REMIC election
is to be made, as set forth in the preliminary statement shall constitute, and
that the conduct of matters relating to such assets shall be such as to qualify
such assets as, a "real estate mortgage investment conduit" as defined in and in
accordance with the REMIC Provisions. In furtherance of such intention, the
Trustee covenants and agrees that it shall act as agent (and the Trustee is
hereby appointed to act as agent) on behalf of any such REMIC and that in such
capacity it shall: (a) prepare and file, or cause to be prepared and filed, in a
timely manner, a U.S. Real Estate Mortgage Investment Conduit Income Tax Return
(Form 1066 or any successor form adopted by the Internal Revenue Service) and
prepare and file or cause to be prepared and filed with the Internal Revenue
Service and applicable state or local tax authorities income tax or information
returns for each taxable year with respect to any such REMIC, containing such
information and at the times and in the manner as may be required by the Code or
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state or local tax laws, regulations, or rules, and furnish or cause to be
furnished to Certificateholders the schedules, statements or information at such
times and in such manner as may be required thereby; (b) within thirty days of
the Closing Date, furnish or cause to be furnished to the Internal Revenue
Service, on Forms 8811 or as otherwise may be required by the Code, the name,
title, address, and telephone number of the person that the Holders of the
Certificates may contact for tax information relating thereto, together with
such additional information as may be required by such Form, and update such
information at the time or times in the manner required by the Code; (c) make or
cause to be made elections that such assets be treated as a REMIC on the federal
tax return for its first taxable year (and, if necessary, under applicable state
law); (d) prepare and forward, or cause to be prepared and forwarded, to the
Certificateholders and to the Internal Revenue Service and, if necessary, state
tax authorities, all information returns and reports as and when required to be
provided to them in accordance with the REMIC Provisions, including without
limitation, the calculation of any original issue discount using the prepayment
assumption; (e) provide information necessary for the computation of tax imposed
on the transfer of a Residual Certificate to a Person that is not a Permitted
Transferee, or an agent (including a broker, nominee or other middleman) of a
Non-Permitted Transferee, or a pass-through entity in which a Non-Permitted
Transferee is the record holder of an interest (the reasonable cost of computing
and furnishing such information may be charged to the Person liable for such
tax); (f) to the extent that they are under its control conduct matters relating
to such assets at all times that any Certificates are outstanding so as to
maintain the status as a REMIC under the REMIC Provisions; (g) not knowingly or
intentionally take any action or omit to take any action that would cause the
termination of any REMIC status; (h) pay, from the sources specified in the last
paragraph of this Section 8.11, the amount of any federal or state tax,
including prohibited transaction taxes as described below, imposed on any such
REMIC prior to its termination when and as the same shall be due and payable
(but such obligation shall not prevent the Trustee or any other appropriate
Person from contesting any such tax in appropriate proceedings and shall not
prevent the Trustee from withholding payment of such tax, if permitted by law,
pending the outcome of such proceedings); (i) ensure that federal, state or
local income tax or information returns shall be signed by the Trustee or such
other person as may be required to sign such returns by the Code or state or
local laws, regulations or rules; (j) maintain records relating to any such
REMIC, including but not limited to the income, expenses, assets and liabilities
thereof and the fair market value and adjusted basis of the assets determined at
such intervals as may be required by the Code, as may be necessary to prepare
the foregoing returns, schedules, statements or information; and (k) as and when
necessary and appropriate, represent any such REMIC in any administrative or
judicial proceedings relating to an examination or audit by any governmental
taxing authority, request an administrative adjustment as to any taxable year of
any such REMIC, enter into settlement agreements with any governmental taxing
agency, extend any statute of limitations relating to any tax item of any such
REMIC, and otherwise act on behalf of any such REMIC in relation to any tax
matter or controversy involving it.
In order to enable the Trustee to perform its duties as set forth herein,
the Depositor shall provide, or cause to be provided, to the Trustee within ten
(10) days after the Closing Date all information or data that the Trustee
requests in writing and determines to be relevant for tax purposes to the
valuations and offering prices of the Certificates, including, without
limitation, the price, yield, prepayment assumption and projected cash flows of
the Certificates and the Mortgage Loans. Thereafter, the Depositor shall provide
to the Trustee promptly upon written request therefor, any such additional
information or data that the Trustee may, from time to time, reasonably request
in order to enable the Trustee to perform its duties as set forth herein. The
Depositor hereby indemnifies the Trustee for any losses, liabilities, damages,
claims or expenses of the Trustee arising from any errors or miscalculations of
the Trustee that result from any failure of the Depositor to provide, or to
cause to be provided, accurate information or data to the Trustee on a timely
basis.
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In the event that any tax is imposed on "prohibited transactions" of any
REMIC as defined in Section 860F(a)(2) of the Code, on the "net income from
foreclosure property" of any REMIC as defined in Section 860G(c) of the Code, on
any contribution to any REMIC after the Startup Day pursuant to Section 860G(d)
of the Code, or any other tax is imposed, if not paid as otherwise provided for
herein, such tax shall be paid by (i) the Trustee, if any such other tax arises
out of or results from a breach by the Trustee of any of its obligations under
this Agreement which breach was caused by its negligence or willful misconduct,
(ii) the Master Servicer, in the case of any such minimum tax, or if such tax
arises out of or results from a breach by the Master Servicer of any of their
obligations under this Agreement, (iii) the Seller, if any such tax arises out
of or results from the Seller's obligation to repurchase a Mortgage Loan
pursuant to Section 2.2 or 2.3 or (iv) in all other cases, or in the event that
the Trustee, the Master Servicer or the Seller fails to honor its obligations
under the preceding clauses (i), (ii) or (iii), any such tax will be paid with
amounts otherwise to be distributed to the Certificateholders, as provided in
Section 3.8(b).
SECTION 8.12 Periodic Filings.
The Depositor hereby directs the Trustee to prepare and file on behalf of
the Depositor all periodic reports required under the Securities Exchange Act of
1934 in conformity with the terms of the "no-action" relief granted by the SEC
to issuers of asset-backed securities such as the Certificates and the Trustee
hereby agrees to do so. The Master Servicer will also prepare and execute any
certifications to be filed with the Form 10-K as required under the
Xxxxxxxx-Xxxxx Act of 2002. The Trustee shall submit to the Depositor for
execution any Form 10-K. The Depositor shall execute such Form 10-K and return
it to the Trustee. In connection with the preparation and filing of such
periodic reports, the Depositor and the Master Servicer shall timely provide to
the Trustee all material information available to them which is required to be
included in such reports and not known to them to be in the possession of the
Trustee and such other information as the Trustee reasonably may request from
either of them and otherwise reasonably shall cooperate with the Trustee. The
Trustee shall have no liability with respect to any failure to properly prepare
or file such periodic reports resulting from or relating to the Trustee's
inability or failure to obtain any information not resulting from its own
negligence or willful misconduct.
ARTICLE IX
TERMINATION
SECTION 9.1 Termination upon Liquidation or Purchase of all Mortgage
Loans.
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Subject to Section 9.3, the obligations and responsibilities of the
Depositor, the Master Servicer and the Trustee created hereby with respect to
the Trust Fund shall terminate upon the earlier of (a) the purchase by the
Master Servicer of all Mortgage Loans (and REO Properties) remaining in the
Trust Fund at the price equal to the sum of (i) 100% of the Stated Principal
Balance of each Mortgage Loan (other than a Mortgage Loan that has been
foreclosed and subject to clause (ii)) plus one month's accrued interest thereon
at the applicable Adjusted Mortgage Rate, (ii) the lesser of (x) the appraised
value of any REO Property as determined by the higher of two appraisals
completed by two independent appraisers selected by the Master Servicer at the
expense of the Master Servicer and (y) the Stated Principal Balance of each
Mortgage Loan related to any REO Property, plus accrued and unpaid interest
thereon at the applicable Adjusted Mortgage Rate, and (iii) any costs and
damages incurred by the Trust in connection with the noncompliance of such
Mortgage Loan with any specifically applicable predatory or abusive lending law,
and (b) the later of (i) the maturity or other liquidation (or any Advance with
respect thereto) of the last Mortgage Loan remaining in the Trust Fund and the
disposition of all REO Property and (ii) the distribution to Certificateholders
of all amounts required to be distributed to them pursuant to this Agreement and
the distribution to the Insurer of all amounts due and owing to the Insurer
under the Insurance Agreement. In no event shall the trusts created hereby
continue beyond the earlier of (i) the expiration of 21 years from the death of
the survivor of the descendants of Xxxxxx X. Xxxxxxx, the late Ambassador of the
United States to the Court of St. James's, living on the date hereof, and (ii)
the Latest Possible Maturity Date. The Master Servicer's right to purchase all
Mortgage Loans and REO Properties pursuant to clause (a) above shall be
conditioned upon the aggregate outstanding Class Certificate Balance of the
Class A Certificates at the time of any such repurchase, being less than 10% of
the aggregate Class Certificate Balance of the Class A Certificates as of the
Cut-off Date. In addition, the Master Servicer shall only exercise its right to
purchase all Mortgage Loans and REO Properties pursuant to clause (a) above if
such purchase would not cause a draw to be made under the Policy.
SECTION 9.2 Final Distribution on the Certificates.
If on any Determination Date, the Master Servicer determines that there
are no Outstanding Mortgage Loans and no other funds or assets in the Trust Fund
other than the funds in the Certificate Account, the Master Servicer shall
direct the Trustee promptly to send a final distribution notice to the Insurer
and each Certificateholder. If the Master Servicer elects to terminate the Trust
Fund pursuant to clause (a) of Section 9.1, at least 20 days prior to the date
notice is to be mailed to the affected Certificateholders, the Master Servicer
shall notify the Depositor, the Trustee and the Insurer of the date the Master
Servicer intends to terminate the Trust Fund and of the applicable repurchase
price of the Mortgage Loans and REO Properties.
Notice of any termination of the Trust Fund, specifying the Distribution
Date on which Certificateholders may surrender their Certificates for payment of
the final distribution and cancellation, shall be given promptly by the Trustee
by letter to Certificateholders mailed not earlier than the 10th day and no
later than the 15th day of the month next preceding the month of such final
distribution. Any such notice shall specify (a) the Distribution Date upon which
final distribution on the Certificates will be made upon presentation and
surrender of Certificates at the office therein designated, (b) the amount of
such final distribution, (c) the location of the office or agency at which such
presentation and surrender must be made, and (d) that the Record Date otherwise
applicable to such Distribution Date is not applicable, distributions being made
only upon presentation and surrender of the Certificates at the office therein
specified. The Master Servicer will give such notice to each Rating Agency at
the time such notice is given to Certificateholders.
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In the event such notice is given, the Master Servicer shall cause all
funds in the Certificate Account to be remitted to the Trustee for deposit in
the Distribution Account on the Business Day prior to the applicable
Distribution Date in an amount equal to the final distribution in respect of the
Certificates. Upon such final deposit with respect to the Trust Fund and the
receipt by the Trustee of a Request for Release therefor, the Trustee shall
promptly release to the Master Servicer the Mortgage Files for the Mortgage
Loans.
Upon presentation and surrender of the Certificates, the Trustee shall
cause to be distributed to the Certificateholders of each Class, in the order
set forth in Section 4.2 hereof, on the final Distribution Date, in the case of
the Certificateholders, in proportion to their respective Percentage Interests,
with respect to Certificateholders of the same Class, an amount equal to (i) as
to each Class of Regular Certificates, the Class Certificate Balance thereof
plus accrued interest thereon in the case of an interest bearing Certificate,
and (ii) as to the Residual Certificates, the amount, if any, which remains on
deposit in the Distribution Account (other than the amounts retained to meet
claims) after application pursuant to clause (i) above.
In the event that any affected Certificateholders shall not surrender
Certificates for cancellation within six months after the date specified in the
above mentioned written notice, the Trustee shall give a second written notice
to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
six months after the second notice all the applicable Certificates shall not
have been surrendered for cancellation, the Trustee may take appropriate steps,
or may appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the funds and other assets which remain a part of
the Trust Fund. If within one year after the second notice all Certificates
shall not have been surrendered for cancellation, the Holders of each of the
Class R Certificates shall be entitled to all unclaimed funds and other assets
of the Trust Fund, held for distribution to such Certificateholders, which
remain subject hereto.
SECTION 9.3 Additional Termination Requirements.
(a) In the event the Master Servicer exercises its purchase option as
provided in Section 9.1, the Trust Fund and each REMIC created
hereunder shall be terminated in accordance with the following
additional requirements, unless the Trustee has been supplied with
an Opinion of Counsel, at the expense of the Master Servicer, to the
effect that the failure to comply with the requirements of this
Section 9.3 will not (i) result in the imposition of taxes on
"prohibited transactions" on any REMIC as defined in Section 860F of
the Code, or (ii) cause any REMIC to fail to qualify as a REMIC at
any time that any Certificates are outstanding:
(1) Within 90 days prior to the final Distribution Date set forth
in the notice given by the Master Servicer under Section 9.2,
the Master Servicer shall prepare and the Trustee, at the
expense of the "tax matters person," shall adopt a plan of
complete liquidation within the meaning of Section 860F(a)(4)
of the Code for each REMIC created hereunder which, as
evidenced by an Opinion of Counsel addressed to the Trustee
(which opinion shall not be an expense of the Trustee or the
Tax Matters Person), meets the requirements of a qualified
liquidation; and
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(2) Within 90 days after the time of adoption of such plans of
complete liquidation, the Trustee shall sell all of the assets
of the Trust Fund to the Master Servicer for cash in
accordance with Section 9.1.
(b) The Trustee as agent for any REMIC established hereunder hereby
agrees to adopt and sign such a plan of complete liquidation upon
the written request of the Master Servicer, and the receipt of the
Opinion of Counsel referred to in Section 9.3(a)(1) and to take such
other action in connection therewith as may be reasonably requested
by the Master Servicer.
(c) By their acceptance of the Certificates, the Holders thereof hereby
authorize the Master Servicer to prepare and the Trustee to adopt
and sign plans of complete liquidation.
(d) Upon payment in full of all amounts owed under the Insurance Policy
and cancellation of the Class A Certificates, the Trustee shall
provide the Insurer with notice of cancellation of the Class A
Certificates and surrender the Insurance Policy to the Insurer.
ARTICLE X
THE INSURER
SECTION 10.1 Claims upon the Policy.
(a) If the Monthly Statement to Certificateholders delivered pursuant to
Section 4.6 specifies a Deficiency Amount for any Distribution Date,
the Trustee shall make a draw on the Policy in an amount specified
in such Monthly Statement to Certificateholders for such
Distribution Date. The Trustee shall deposit or cause to be
deposited such draw on the Policy into the Distribution Account on
such Distribution Date. Any Insured Payment made by the Insurer
under the Policy will be applied solely to the payment of the Class
A Certificates and for no other purpose. The Insurer's payment
obligations under the Policy with respect to particular Deficiency
Amounts and Preference Amounts will be discharged to the extent
funds equal to the applicable Deficiency Amounts and Preference
Amounts are paid by the Insurer to, or at the direction of, the
Trustee in accordance with the Trustee's request, whether or not
such funds are properly applied by the Trustee. Payment of
Deficiency Amounts and Preference Amounts will be made only at the
time set forth in the Policy, and no accelerated Insured Payments
will be made except to the extent that the Insurer has specified an
earlier date for payment at its sole option.
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(b) The Trustee shall submit, if a Deficiency Amount is specified in any
Monthly Master Servicer Report furnished to the Trustee, the notice
(in the form attached as Exhibit A to the Policy) (the "Notice") to
the Insurer and the Fiscal Agent no later than 12:00 noon, New York
City time, on the second (2nd) Business Day prior to the applicable
Distribution Date; provided, that if such Notice is received by the
Fiscal Agent after 12:00 noon, New York City time, on such Business
Day, it will be deemed to be received before 12:00 noon, New York
City time, on the following Business Day. If any such Notice is not
in proper form or is otherwise insufficient for the purpose of
making a claim under the Policy, it will be deemed not to have been
received for purposes of making such claim, and the Insurer or the
Fiscal Agent, as the case may be, will promptly so advise the
Trustee in writing and the Trustee may submit an amended or
corrected Notice. If such an amended or corrected Notice is in
proper form and is otherwise sufficient for the purpose of making a
claim under the Policy, it will be deemed to have been timely
received on the Business Day of such resubmission; provided, that if
such notice is received by the Fiscal Agent after 12:00 noon, New
York City time, it shall be deemed to be received before 12:00 noon,
New York City time, on the following Business Day.
(c) The Insurer will have the right to inspect account statements for
the Distribution Account at reasonable times upon reasonable written
notice to the Trustee.
(d) Only the Trustee on behalf of the Class A Certificateholders
pursuant to the Monthly Statement to Certificateholders will be
entitled to make a claim for an Insured Payment under the Policy.
(e) The Trustee will surrender the Policy to the Insurer for
cancellation upon the expiration of such Policy in accordance with
Section 9.3(d) hereof.
SECTION 10.2 Preference for Claims Under the Policy.
(a) In the event that the Trustee has received a certified copy of a
final, nonappealable order of an appropriate court or other body
exercising jurisdiction that any amount which was previously
distributed to a Class A Certificateholder on the Class A
Certificates is recoverable and is sought to be recovered as a
voidable preference from such Class A Certificateholder by a trustee
in bankruptcy pursuant to Title 11 of the United States Code in
accordance with an Order (such amount, a "Preference Amount"), the
Trustee will so notify the Insurer, will comply with the provisions
of the Policy to obtain payment by the Insurer of such avoided
payment, and will, at the time it provides notice to the Insurer,
notify the Class A Certificateholders by mail that, in the event
that any Class A Certificateholder's payment is so recoverable, such
Class A Certificateholder will be entitled to payment pursuant to
the terms of the Policy. The Insurer will pay any Preference Amount
when due to be paid pursuant to an Order, but in any event no
earlier than one Business Day following actual receipt by the
Insurer of (i) a certified copy of a final, non-appealable order of
a court or other body exercising jurisdiction in such insolvency
proceeding to the effect that the Trustee, or Class A
Certificateholder, as applicable, is required to return such
Preference Amount paid during the term of the Policy because such
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Preference Amount was avoided as a preferential transfer or
otherwise rescinded or required to be restored by the Trustee or
Class A Certificateholder (the "Order"), (ii) an Opinion of Counsel
satisfactory to the Insurer that such order is final and not subject
to appeal, (iii) an assignment, in form and substance satisfactory
to the Insurer, duly executed and delivered by the Trustee or Class
A Certificateholder, irrevocably assigning to the Insurer all rights
and claims of the Trustee or Class A Certificateholder relating to
or arising under the Class A Certificates against the debtor which
paid such Preference Amount and (iv) appropriate instruments to
effect the appointment of the Insurer as agent for such Class A
Certificateholder in any legal proceeding related to such Preference
Amount; provided, that if such documents are received by the Insurer
after 12:00 noon, New York City time, on such Business Day, they
will be deemed to be received before 12:00 noon, New York City time,
on the following Business Day. Such payment will be disbursed to the
receiver, conservator, debtor-in-possession or trustee in bankruptcy
named in the Order, and not to the Trustee or the Class A
Certificateholder directly, unless the Trustee or the relevant Class
A Certificateholder has made a payment of the Preference Amount to
the court or such receiver, conservator, debtor-in-possession or
trustee in bankruptcy named in the Order, in which case the Insurer
will pay the Trustee, or as directed by the Trustee, to the extent
of the payment of the Preference Amount, subject to the delivery of
(a) the items referred to in clauses (i), (ii), (iii) and (iv) above
to the Insurer and (b) evidence satisfactory to the Insurer that
payment has been made to such court or receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order.
(b) The Trustee will promptly notify the Insurer of any proceeding or
the institution of any action (of which a Responsible Officer of the
Trustee has actual knowledge) seeking the avoidance as a
preferential transfer under applicable bankruptcy, insolvency,
receivership, rehabilitation or similar law (a "Certificate
Preference Claim") of any payment made to a Class A
Certificateholder that has been deemed a preferential transfer and
recoverable, or theretofore recovered, from such Class A
Certificateholder pursuant to Title 11 of United States Code in
accordance with an Order. Each Class A Certificateholder, by its
purchase of a Class A Certificate, and the Trustee hereby agree that
so long as no Insurer Default has occurred and is continuing, the
Insurer may at any time during the continuation of any proceeding
relating to a Certificate Preference Claim direct all matters
relating to such Certificate Preference Claim, including (i) the
direction of any appeal of any order relating to any Certificate
Preference Claim and (ii) the posting of any surety, supersedeas or
performance bond pending any such appeal at the expense of the
Insurer, but subject to reimbursement as provided in the Insurance
Agreement. In addition, and without limitation of the foregoing, as
set forth in Section 10.3, the Insurer will be subrogated to, and
each Class A Certificateholder and the Trustee hereby delegate and
assign, to the fullest extent permitted by law, the rights of the
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Trustee and each Class A Certificateholder in the conduct of any
proceeding with respect to a Certificate Preference Claim, including
all rights of any party to an adversary proceeding action with
respect to any court order issued in connection with any such
Certificate Preference Claim.
SECTION 10.3 Subrogation and Cooperation.
(a) Any and all Deficiency Amounts and Preference Amounts disbursed by
the Trustee from claims made under the Policy will not be considered
payment by the Trust with respect to the Class A Certificates, and
will not discharge the obligations of the Issuer with respect
thereto. The Insurer will, upon any payment pursuant to the Policy,
in furtherance and not in limitation of its equitable right of
subrogation and its rights under the Insurance Agreement, to the
extent it makes any payment with respect to the Class A
Certificates, become subrogated to the rights of any Class A
Certificateholders to receive any and all amounts due in respect of
the Class A Certificates as to which such payment was made. Subject
to and conditioned upon any payment with respect to the Class A
Certificates by or on behalf of the Insurer, the Trustee will assign
to the Insurer all rights to the payment of interest or principal
with respect to the Class A Certificates which are then due for
payment to the extent of all payments made by the Insurer, and the
Insurer may exercise any option, vote, right, power or the like with
respect to the Class A Certificates to the extent that it has made
payment pursuant to the Policy. To evidence such subrogation, the
Certificate Registrar will note the Insurer's rights as subrogee
upon the register of Class A Certificateholders. The foregoing
subrogation will in all cases be subject to the rights of the Class
A Certificateholders to receive all Deficiency Amounts in respect of
the Class A Certificates. Notwithstanding anything herein to the
contrary, the Insurer shall be paid such principal and interest only
from the sources and in the manner provided herein and in the
Insurance Agreement for the payment of such principal and interest.
(b) The Trustee shall cooperate in all respects with any reasonable
request by the Insurer for action to preserve or enforce the
Insurer's rights or interest under this Agreement or the Insurance
Agreement, consistent with the this Agreement and without limiting
the rights of the Class A Certificateholders as otherwise set forth
in this Agreement, including upon the occurrence and continuance of
an Event of Default hereunder, a request (which request shall be in
writing) to take any one or more of the following actions:
(i) institute Proceedings for the collection of all amounts then
payable on the Class A Certificates hereunder in respect to
the Class A Certificates and all amounts payable under the
Insurance Agreement and to enforce any judgment obtained and
collect from the Depositor monies adjudged due;
(ii) sell the Trust Fund or any portion thereof or rights or
interest therein, at one or more public or private sales
called and conducted in any manner permitted by law;
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(iii) file or record all assignments of Mortgage that have not
previously been recorded, if filing is required in accordance
with the Section 2.1; and
(iv) exercise any remedies of a secured party under the UCC and
take any other appropriate action to protect and enforce the
rights and remedies of the Insurer hereunder.
(c) Following the payment in full of the Class A Certificates, the
Insurer shall continue to have all rights and privileges provided to
it under this Section and in all other provisions of this Agreement
until all amounts owing to the Insurer under the Insurance Agreement
have been paid in full.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1 Amendment.
This Agreement may be amended from time to time by the Depositor, the
Master Servicer and the Trustee without the consent of any of the
Certificateholders, but with the written consent of the Insurer (i) to cure any
ambiguity or mistake, (ii) to correct any defective provision herein or to
supplement any provision herein which may be inconsistent with any other
provision herein, (iii) to add to the duties of the Depositor, the Seller or the
Master Servicer, (iv) to add any other provisions with respect to matters or
questions arising hereunder or (v) to modify, alter, amend, add to or rescind
any of the terms or provisions contained in this Agreement; provided that any
action pursuant to clauses (iv) or (v) above shall not, as evidenced by an
Opinion of Counsel delivered to the Trustee (which Opinion of Counsel shall not
be an expense of the Trustee or the Trust Fund), adversely affect in any
material respect the interests of any Certificateholder; provided, however, that
the amendment shall not be deemed to adversely affect in any material respect
the interests of the Certificateholders if the Person requesting the amendment
obtains a letter from each Rating Agency stating that the amendment would not
result in the downgrading or withdrawal of the respective shadow ratings then
assigned to the Certificates; it being understood and agreed that any such
letter in and of itself will not represent a determination as to the materiality
of any such amendment and will represent a determination only as to the credit
issues affecting any such shadow rating. The Trustee, the Depositor and the
Master Servicer also may at any time and from time to time amend this Agreement
without the consent of the Certificateholders but with the written consent of
the Insurer to modify, eliminate or add to any of its provisions to such extent
as shall be necessary or helpful to (i) maintain the qualification of any REMIC
established hereunder as a REMIC under the Code, (ii) avoid or minimize the risk
of the imposition of any tax on any REMIC established hereunder pursuant to the
Code that would be a claim at any time prior to the final redemption of the
Certificates or (iii) comply with any other requirements of the Code, provided
that the Trustee has been provided an Opinion of Counsel, which opinion shall be
an expense of the party requesting such opinion but in any case shall not be an
expense of the Trustee or the Trust Fund, to the effect that such action is
necessary or helpful to, as applicable, (i) maintain such qualification, (ii)
avoid or minimize the risk of the imposition of such a tax or (iii) comply with
any such requirements of the Code.
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This Agreement may also be amended from time to time by the Depositor, the
Master Servicer and the Trustee with the consent of the Holders of a Majority in
Interest of each Class of Certificates affected thereby and with the consent of
the Insurer for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or of modifying in
any manner the rights of the Holders of Certificates; provided, however, that no
such amendment shall (i) reduce in any manner the amount of, or delay the timing
of, payments required to be distributed on any Certificate without the consent
of the Holder of such Certificate, (ii) adversely affect in any material respect
the interests of the Holders of any Class of Certificates in a manner other than
as described in (i), without the consent of the Holders of Certificates of such
Class evidencing, as to such Class, Percentage Interests aggregating 66%, or
(iii) reduce the aforesaid percentages of Certificates the Holders of which are
required to consent to any such amendment, without the consent of the Holders of
all such Certificates then outstanding.
Notwithstanding any contrary provision of this Agreement, the Trustee
shall not consent to any amendment to this Agreement unless it shall have first
received an Opinion of Counsel, which opinion shall not be an expense of the
Trustee or the Trust Fund, to the effect that such amendment will not cause the
imposition of any tax on any REMIC established hereunder or the
Certificateholders or cause any REMIC established hereunder to fail to qualify
as a REMIC at any time that any Certificates are outstanding.
Promptly after the execution of any amendment to this Agreement requiring
the consent of Certificateholders, the Trustee shall furnish written
notification of the substance or a copy of such amendment to each
Certificateholder, the Insurer and each Rating Agency.
It shall not be necessary for the consent of Certificateholders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent shall approve the substance thereof. The manner of
obtaining such consents and of evidencing the authorization of the execution
thereof by Certificateholders shall be subject to such reasonable regulations as
the Trustee may prescribe.
Nothing in this Agreement shall require the Trustee to enter into an
amendment without receiving an Opinion of Counsel (which Opinion shall not be an
expense of the Trustee or the Trust Fund), satisfactory to the Trustee that (i)
such amendment is permitted and is not prohibited by this Agreement and that all
requirements for amending this Agreement have been complied with; and (ii)
either (A) the amendment does not adversely affect in any material respect the
interests of any Certificateholder or (B) the conclusion set forth in the
immediately preceding clause (A) is not required to be reached pursuant to this
Section 11.1.
SECTION 11.2 Recordation of Agreement; Counterparts.
This Agreement is subject to recordation in all appropriate public offices
for real property records in all the counties or other comparable jurisdictions
in which any or all of the properties subject to the Mortgages are situated, and
in any other appropriate public recording office or elsewhere, such recordation
to be effected by the Master Servicer at its expense, but only upon direction a
majority of the Certificateholders to the effect that such recordation
materially and beneficially affects the interests of the Certificateholders.
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For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed (by
facsimile or otherwise) simultaneously in any number of counterparts, each of
which counterparts shall be deemed to be an original, and such counterparts
shall constitute but one and the same instrument.
SECTION 11.3 Governing Law.
THIS AGREEMENT (OTHER THAN SECTION 2.1 HEREOF) SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HERETO AND THE
CERTIFICATEHOLDERS SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION 2.1
OF THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
SUBSTANTIVE LAWS OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND TO
BE PERFORMED IN THE STATE OF DELAWARE AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HERETO AND THE CERTIFICATEHOLDERS UNDER SUCH SECTION SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.4 Intention of Parties.
It is the express intent of the parties hereto that the conveyance of the
Trust Fund by the Depositor to the Trustee be, and be construed as, absolute
sales thereof to the Trustee. It is, further, not the intention of the parties
that such conveyances be deemed a pledge thereof by the Depositor to the
Trustee. However, in the event that, notwithstanding the intent of the parties,
such assets are held to be the property of the Depositor, or if for any other
reason this Agreement is held or deemed to create a security interest in such
assets, then (i) this Agreement shall be deemed to be a security agreement
within the meaning of the Uniform Commercial Code of the State of New York and
(ii) the conveyance provided for in this Agreement shall be deemed to be an
assignment and a grant by the Depositor to the Trustee, for the benefit of the
Certificateholders and the Insurer, of a security interest in all of the assets
that constitute the Trust Fund, whether now owned or hereafter acquired.
The Depositor, for the benefit of the Certificateholders and the Insurer,
shall, to the extent consistent with this Agreement, take such actions as may be
necessary to ensure that, if this Agreement were deemed to create a security
interest in the Trust Fund, such security interest would be deemed to be a
perfected security interest of first priority under applicable law and will be
maintained as such throughout the term of the Agreement. The Depositor shall
arrange for filing any Uniform Commercial Code financing and continuation
statements in connection with any security interest granted or assigned to the
Trustee for the benefit of the Certificateholders and the Insurer.
SECTION 11.5 Notices.
(a) The Trustee shall use its best efforts to promptly provide notice to each
Rating Agency with respect to each of the following of which it has actual
knowledge:
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(1) Any material change or amendment to this Agreement;
(2) The occurrence of any Event of Default that has not been cured;
(3) The resignation or termination of the Master Servicer or the Trustee
and the appointment of any successor;
(4) The repurchase or substitution of Mortgage Loans pursuant to Section
2.3; and
(5) The final payment to Certificateholders.
(6) Any rating action involving the long-term credit rating of the
Master Servicer, which notice shall be made by first-class mail
within two Business Days after the Trustee gains actual knowledge
thereof.
In addition, the Trustee shall promptly furnish to each Rating Agency
copies of the following:
(7) Each report to Certificateholders described in Section 4.6;
(8) Each annual statement as to compliance described in Section 3.16;
(9) Each annual independent public accountants' servicing report
described in Section 3.17; and
(10) Any notice of a purchase of a Mortgage Loan pursuant to Section 2.2,
2.3 or 3.11.
(b) All directions, demands, authorizations, consents, waivers, communications
and notices hereunder shall be in writing and shall be deemed to have been
duly given when delivered to by first class mail, facsimile or courier (a)
in the case of the Depositor, First Horizon Asset Securities Inc., 0000
Xxxxxxx Xxx, Xxxxxx, Xxxxx 00000, Attention: Xxxxxx Xxxxx; (b) in the case
of the Master Servicer, First Horizon Home Loan Corporation, 0000 Xxxxxxx
Xxx, Xxxxxx, Xxxxx 00000, Attention: Xxxxx X. Xxxx or such other address
as may be hereafter furnished to the Depositor and the Trustee by the
Master Servicer in writing; (c) in the case of the Trustee, The Bank of
New York, 000 Xxxxxxx Xxxxxx, 0X, Xxx Xxxx, Xxx Xxxx 00000, Attention: MBS
Structured Finance Group, or such other address as the Trustee may
hereafter furnish to the Depositor or Master Servicer, (d) in the case of
the insurer, MBIA Insurance Corporation, 000 Xxxx Xxxxxx, Xxxxxx, Xxx Xxxx
00000, Attention: Insured Portfolio Management - Structured Finance (First
Horizon ABS Trust 2004-HE4), and (e) in the case of the Rating Agencies,
the address specified therefor in the definition corresponding to the name
of such Rating Agency. Notices to Certificateholders shall be deemed given
when mailed, first class postage prepaid, to their respective addresses
appearing in the Certificate Register.
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SECTION 11.6 Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the Holders thereof.
SECTION 11.7 Assignment.
Notwithstanding anything to the contrary contained herein, except as
provided in Section 6.2, this Agreement may not be assigned by the Master
Servicer without the prior written consent of the Trustee, the Insurer and
Depositor.
SECTION 11.8 Rights of the Insurer to Exercise Rights of Class A
Certificateholders.
Each of the parties hereto, and by accepting its Class A Certificate, each
Class A Certificateholder, agrees that the Insurer is an express third party
beneficiary of this Agreement and, unless an Insurer Default exists, shall have
the right to exercise all rights of the Class A Certificateholders as specified
under this Agreement as if it were a party hereto without any further consent of
any party hereto or the Class A Certificateholders. Any right conferred to the
Insurer hereunder shall be suspended and shall run to the benefit of the Class A
Certificateholders during any period in which there exists an Insurer Default.
SECTION 11.9 Reports to Insurer.
The Depositor, the Master Servicer and the Trustee, as applicable shall
provide copies to the Insurer of all statements, reports, opinions, officer's
certificates, requests for consent, requests for amendments to any document
related hereto and notices delivered under this Agreement to any other party
hereto, any Rating Agency or any Class A Certificateholder.
SECTION 11.10 Limitation on Rights of Certificateholders.
The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the trust created hereby, nor entitle such
Certificateholder's legal representative or heirs to claim an accounting or to
take any action or commence any proceeding in any court for a petition or
winding up of the trust created hereby, or otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.
No Certificateholder shall have any right to vote (except as provided
herein) or in any manner otherwise control the operation and management of the
Trust Fund, or the obligations of the parties hereto, nor shall anything herein
set forth or contained in the terms of the Certificates be construed so as to
constitute the Certificateholders from time to time as partners or members of an
association; nor shall any Certificateholder be under any liability to any third
party by reason of any action taken by the parties to this Agreement pursuant to
any provision hereof.
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No Certificateholder shall have any right by virtue or by availing itself
of any provisions of this Agreement to institute any suit, action or proceeding
in equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a written notice of an Event
of Default and of the continuance thereof, as herein provided, and unless the
Holders of Certificates evidencing not less than 25% of the Voting Rights
evidenced by the Certificates shall also have made written request to the
Trustee to institute such action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to the Trustee such reasonable indemnity as it
may require against the costs, expenses, and liabilities to be incurred therein
or thereby, and the Trustee, for 60 days after its receipt of such notice,
request and offer of indemnity shall have neglected or refused to institute any
such action, suit or proceeding; it being understood and intended, and being
expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Holders of Certificates
shall have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb or prejudice
the rights of the Holders of any other of the Certificates, or to obtain or seek
to obtain priority over or preference to any other such Holder or to enforce any
right under this Agreement, except in the manner herein provided and for the
common benefit of all Certificateholders and the Insurer. For the protection and
enforcement of the provisions of this Section 11.8, each and every
Certificateholder, the Insurer and the Trustee shall be entitled to such relief
as can be given either at law or in equity.
SECTION 11.11 Inspection and Audit Rights.
The Master Servicer agrees that, on reasonable prior notice, it will
permit and will cause each Subservicer to permit any representative of the
Depositor, the Trustee or the Insurer during the Master Servicer's normal
business hours, to examine all the books of account, records, reports and other
papers of the Master Servicer relating to the Mortgage Loans, to make copies and
extracts therefrom, to cause such books to be audited by independent certified
public accountants selected by the Depositor, the Trustee or the Insurer and to
discuss its affairs, finances and accounts relating to the Mortgage Loans with
its officers, employees and independent public accountants (and by this
provision the Master Servicer hereby authorizes said accountants to discuss with
such representative such affairs, finances and accounts), all at such reasonable
times and as often as may be reasonably requested. Any out-of-pocket expense
incident to the exercise by the Depositor, the Trustee or the Insurer of any
right under this Section 11.9 shall be borne by the party requesting such
inspection; all other such expenses shall be borne by the Master Servicer or the
related Subservicer.
SECTION 11.12 Certificates Nonassessable and Fully Paid.
It is the intention of the Depositor that Certificateholders shall not be
personally liable for obligations of the Trust Fund, that the interests in the
Trust Fund represented by the Certificates shall be nonassessable for any reason
whatsoever, and that the Certificates, upon due authentication thereof by the
Trustee pursuant to this Agreement, are and shall be deemed fully paid.
99
SECTION 11.13 Limitations on Actions; No Proceedings.
(a) Other than pursuant to this Agreement, or in connection with or incidental
to the provisions or purposes of this Agreement, the trust created
hereunder shall not (i) issue debt or otherwise borrow money, (ii) merge
or consolidate with any other entity reorganize, liquidate or transfer all
or substantially all of its assets to any other entity, or (iii) otherwise
engage in any activity or exercise any power not provided for in this
Agreement.
(b) Notwithstanding any prior termination of this Agreement, the Trustee, the
Master Servicer and the Depositor shall not, prior to the date which is
one year and one day after the termination of this Agreement, acquiesce,
petition or otherwise invoke or cause any Person to invoke the process of
any court or government authority for the purpose of commencing or
sustaining a case against the Depositor or the Trust Fund under any
federal or state bankruptcy, insolvency or other similar law or appointing
a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Depositor or the Trust Fund or any
substantial part of their respective property, or ordering the winding up
or liquidation of the affairs of the Depositor or the Trust Fund.
SECTION 11.14 Acknowledgment of Seller.
Seller hereby acknowledges the provisions of this Agreement, including the
obligations under Sections 2.1(a), 2.2, 2.3(b) and 8.11 of this Agreement and
further acknowledges the Depositor's assignment of its rights and remedies for
the breach of the representations and warranties made by the Seller under MLPA
I.
* * * * * *
100
IN WITNESS WHEREOF, the Depositor, the Trustee and the Master Servicer
have caused their names to be signed hereto by their respective officers
thereunto duly authorized as of the day and year first above written.
FIRST HORIZON ASSET SECURITIES INC.,
as Depositor
By:_____________________________________
Xxxxxx Xxxxx
Vice President
THE BANK OF NEW YORK,
not in its individual capacity, but
solely as Trustee
By:____________________________________
Xxxxx Xxxxxxx
Vice President
FIRST HORIZON HOME LOAN CORPORATION, in
its capacity as Master Servicer
By:____________________________________
Xxxxx XxXxx
Senior Vice President
The foregoing agreement is hereby acknowledged and accepted as of the date first
above written:
FIRST HORIZON HOME LOAN CORPORATION,
in its capacity as Seller
By:____________________
Xxxxx XxXxx
Senior Vice President
SCHEDULE I
First Horizon ABS Trust 2004-HE4
Mortgage Pass-Through Certificates Series 2004-HE4
Mortgage Loan Schedule
[Available Upon Request from Trustee]
I-1
SCHEDULE II
First Horizon ABS Trust 2004-HE4
Mortgage Pass-Through Certificates Series 2004-HE4
Representations and Warranties of the Master Servicer
First Horizon Home Loan Corporation ("First Horizon") hereby makes the
representations and warranties set forth in this Schedule II to the Depositor,
the Trustee and the Insurer, as of the Closing Date, or if so specified herein,
as of the Cut-off Date. Capitalized terms used but not otherwise defined in this
Schedule II shall have the meanings ascribed thereto in the Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement") relating to the
above-referenced Series, among First Horizon, as master servicer, First Horizon
Asset Securities Inc., as depositor, and The Bank of New York, as trustee.
(1) First Horizon is duly organized as a Kansas corporation and is validly
existing and in good standing under the laws of the State of Kansas and is
duly authorized and qualified to transact any and all business
contemplated by the Pooling and Servicing Agreement to be conducted by
First Horizon in any state in which a Mortgaged Property is located or is
otherwise not required under applicable law to effect such qualification
and, in any event, is in compliance with the doing business laws of any
such state, to the extent necessary to ensure its ability to enforce each
Mortgage Loan, to service the Mortgage Loans in accordance with the terms
of the Pooling and Servicing Agreement and to perform any of its other
obligations under the Pooling and Servicing Agreement in accordance with
the terms thereof.
(2) First Horizon has the full corporate power and authority to service
each Mortgage Loan, and to execute, deliver and perform, and to enter into
and consummate the transactions contemplated by the Pooling and Servicing
Agreement and has duly authorized by all necessary corporate action on the
part of First Horizon the execution, delivery and performance of the
Pooling and Servicing Agreement; and the Pooling and Servicing Agreement,
assuming the due authorization, execution and delivery thereof by the
other parties thereto, constitutes a legal, valid and binding obligation
of First Horizon, enforceable against First Horizon in accordance with its
terms, except that (a) the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, receivership and other similar laws
relating to creditors' rights generally and (b) the remedy of specific
performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(3) The execution and delivery of the Pooling and Servicing Agreement by
First Horizon, the servicing of the Mortgage Loans by First Horizon under
the Pooling and Servicing Agreement, the consummation of any other of the
transactions contemplated by the Pooling and Servicing Agreement, and the
fulfillment of or compliance with the terms thereof are in the ordinary
course of business of First Horizon and will not (A) result in a material
breach of any term or provision of the charter or by-laws of First Horizon
or (B) materially conflict with, result in a material breach, violation or
acceleration of, or result in a material default under, the terms of any
other agreement or instrument to which First Horizon is a party or by
which it may be bound, or (C) constitute a material violation of any
statute, order or regulation applicable to First Horizon of any court,
regulatory body, administrative agency or governmental body having
jurisdiction over First Horizon; and First Horizon is not in breach or
violation of any material indenture or other material agreement or
instrument, or in violation of any statute, order or regulation of any
court, regulatory body, administrative agency or governmental body having
jurisdiction over it which breach or violation may materially impair First
Horizon's ability to perform or meet any of its obligations under the
Pooling and Servicing Agreement.
II-1
(4) No litigation is pending or, to the best of First Horizon's knowledge,
threatened against First Horizon that would prohibit the execution or
delivery of, or performance under, the Pooling and Servicing Agreement by
First Horizon.
(5) First Horizon is a member of MERS in good standing, and will comply in
all material respects with the rules and procedures of MERS in connection
with the servicing of the MERS Mortgage Loans for as along as such
Mortgage Loans are registered with MERS.
II-2
SCHEDULE III
First Horizon ABS Trust 2004-HE4
Mortgage Pass-Through Certificates Series 2004-HE4
Form of Monthly Master Servicer Report
[Begins on Next Page]
III-1
EXHIBIT A-1
[FORM OF CLASS A CERTIFICATE]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE").
A-I-1
Certificate No. :
Cut-off Date :
First Distribution Date :
Initial Certificate Balance of
this Certificate ("Denominations")
: $
Initial Certificate
Balances of all
Certificate of this
Class : $
CUSIP :
First Horizon ABS Trust 2004-HE4
Mortgage Pass-Through Certificates, Series 2004-HE4
Class A-[1][2][3][4][5]
evidencing a percentage interest in the distributions allocable to the
Certificates of the above-referenced Class with respect to a Trust Fund
consisting primarily of one or more pools of home equity mortgage loans
(the "Mortgage Loans") secured by second liens on one- to four-family
residential properties.
First Horizon Asset Securities Inc., as Depositor
[Principal in respect of this Certificate is distributable monthly as set
forth herein. Accordingly, the Certificate Balance at any time may be less than
the Certificate Balance as set forth herein.] This Certificate does not evidence
an obligation of, or an interest in, and is not guaranteed by the Depositor, the
Master Servicer or the Trustee referred to below or any of their respective
affiliates. Neither this Certificate nor the Mortgage Loans are guaranteed or
insured by any governmental agency or instrumentality.
This certifies that __________________ is the registered owner of the
Percentage Interest evidenced by this Certificate (obtained by dividing the
denomination of this Certificate by the aggregate Initial Certificate Balances
of all Certificates of the Class to which this Certificate belongs) in certain
monthly distributions with respect to a Trust Fund consisting primarily of the
Mortgage Loans deposited by First Horizon Asset Securities Inc. (the
"Depositor"). The Trust Fund was created pursuant to a Pooling and Servicing
Agreement dated as of the Cut-off Date specified above (the "Agreement") among
the Depositor, First Horizon Home Loan Corporation, as master servicer (the
"Master Servicer"), and The Bank of New York, as trustee (the "Trustee"). To the
extent not defined herein, the capitalized terms used herein have the meanings
assigned in the Agreement. This Certificate is issued under and is subject to
the terms, provisions and conditions of the Agreement, to which Agreement the
Holder of this Certificate by virtue of the acceptance hereof assents and by
which such Holder is bound.
B-1
Reference is hereby made to the further provisions of this Certificate set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate shall not be entitled to any benefit under the Agreement
or be valid for any purpose unless manually countersigned by an authorized
signatory of the Trustee.
B-2
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: December __, 0000
XXX XXXX XX XXX XXXX,
not in its individual capacity, but
solely as Trustee
By: ____________________________________
Authorized Signatory of
THE BANK OF NEW YORK
not in its individual capacity,
but solely as Trustee
Countersigned:
By ___________________________
Authorized Signatory of
THE BANK OF NEW YORK,
not in its individual capacity,
but solely as Trustee
B-3
EXHIBIT B
[FORM OF CLASS C CERTIFICATE]
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE").
[THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES ("BLUE SKY LAWS"), AND SUCH CERTIFICATE MAY NOT BE
OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) TO A PERSON WHOM
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (C) TO AN
INSTITUTIONAL ACCREDITED INVESTOR AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7)
OF REGULATION D UNDER THE SECURITIES ACT IN A TRANSACTION EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH
ANY APPLICABLE BLUE SKY LAWS. NO REPRESENTATION IS MADE AS TO THE AVAILABILITY
OF THE EXEMPTION PROVIDED BY RULE 144 FOR RESALES OF THIS CERTIFICATE.
NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
TRANSFEREE REPRESENTS TO THE TRUSTEE THAT SUCH TRANSFEREE IS NOT AN EMPLOYEE
BENEFIT PLAN OR ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY
ACT OF 1974, AS AMENDED ("ERISA"), OR A PLAN OR ARRANGEMENT SUBJECT TO SECTION
4975 OF THE CODE, OR, IF SUCH PURCHASER IS AN INSURANCE COMPANY AND THE
CERTIFICATE HAS BEEN SUBJECT TO AN ERISA-QUALIFYING UNDERWRITING, A
REPRESENTATION IN ACCORDANCE WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO
HEREIN, OR DELIVERS TO THE TRUSTEE AN OPINION OF COUNSEL IN ACCORDANCE WITH THE
PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN. SUCH REPRESENTATION SHALL BE
DEEMED TO HAVE BEEN MADE TO THE TRUSTEE BY THE TRANSFEREE'S ACCEPTANCE OF A
CERTIFICATE OF THIS CLASS AND BY A BENEFICIAL OWNER'S ACCEPTANCE OF ITS INTEREST
IN A CERTIFICATE OF THIS CLASS. NOTWITHSTANDING ANYTHING ELSE TO THE CONTRARY
HEREIN, ANY PURPORTED TRANSFER OF THIS CERTIFICATE TO OR ON BEHALF OF AN
EMPLOYEE BENEFIT PLAN SUBJECT TO ERISA OR TO THE CODE WITHOUT THE OPINION OF
COUNSEL SATISFACTORY TO THE TRUSTEE AS DESCRIBED ABOVE SHALL BE VOID AND OF NO
EFFECT.
B-4
Certificate No. :
Cut-off Date :
First Distribution Date :
Percentage Interest : ____%
First Horizon ABS Trust 2004-HE4
Mortgage Pass-Through Certificates, Series 2004-HE4
Class C
evidencing a percentage interest in the distributions allocable to
the Certificates of the above-referenced Class with respect to a
Trust Fund consisting primarily of one or more pools of home equity
mortgage loans (the "Mortgage Loans") secured by second liens on
one- to four-family residential properties.
First Horizon Asset Securities Inc., as Depositor
This Certificate does not evidence an obligation of, or an interest in,
and is not guaranteed by the Depositor, the Master Servicer or the Trustee
referred to below or any of their respective affiliates. Neither this
Certificate nor the Mortgage Loans are guaranteed or insured by any governmental
agency or instrumentality.
This certifies that ___________ is the registered owner of the Percentage
Interest evidenced by this Certificate (as set forth above) in certain monthly
distributions with respect to a Trust Fund consisting primarily of the Mortgage
Loans deposited by First Horizon Asset Securities Inc. (the "Depositor"). The
Trust Fund was created pursuant to a Pooling and Servicing Agreement dated as of
the Cut-off Date specified above (the "Agreement") among the Depositor, First
Horizon Home Loan Corporation, as master servicer (the "Master Servicer"), and
The Bank of New York, as trustee (the "Trustee"). To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
No transfer of a Certificate of this Class shall be made unless such
transfer is made pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws or is exempt from the
registration requirements under said Act and such laws. In the event that a
transfer is to be made in reliance upon an exemption from the Securities Act and
such laws, in order to assure compliance with the Securities Act and such laws,
the Certificateholder desiring to effect such transfer and such
Certificateholder's prospective transferee shall each certify to the Trustee in
writing the facts surrounding the transfer. In the event that such a transfer is
to be made within two years from the date of the initial issuance of
Certificates pursuant hereto, there shall also be delivered (except in the case
of a transfer pursuant to Rule 144A of the Securities Act) to the Trustee an
Opinion of Counsel that such transfer may be made pursuant to an exemption from
the Securities Act and such state securities laws, which Opinion of Counsel
shall not be obtained at the expense of the Trustee, the Seller, the Master
Servicer or the Depositor. The Holder hereof desiring to effect such transfer
shall, and does hereby agree to, indemnify the Trustee and the Depositor against
any liability that may result if the transfer is not so exempt or is not made in
accordance with such federal and state laws.
B-5
No transfer of a Certificate of this Class shall be made unless the
Trustee shall have received either (i) a representation [letter] from the
transferee of such Certificate, acceptable to and in form and substance
satisfactory to the Trustee, to the effect that such transferee is not an
employee benefit plan or arrangement subject to Section 406 of ERISA or Section
4975 of the Code, nor a person acting on behalf of any such plan, which
representation letter shall not be an expense of the Trustee , the Depositor or
the Master Servicer, (ii) if the purchaser is an insurance company and the
certificate has been subject to an ERISA-Qualifying Underwriting, a
representation that the purchaser is an insurance company which is purchasing
such Certificates with funds contained in an "insurance company general account"
(as such term is defined in Section V(e) of Prohibited Transaction Class
Exemption 95-60 ("PTCE 95-60")) and that the purchase and holding of such
Certificates are covered under Sections I and III of PTCE 95-60 or (iii) in the
case of any such Certificate presented for registration in the name of an
employee benefit plan subject to ERISA or Section 4975 of the Code (or
comparable provisions of any subsequent enactments), or a trustee of any such
plan or any other person acting on behalf of any such plan, an Opinion of
Counsel satisfactory to the Trustee to the effect that the purchase or holding
of such Certificate will not result in prohibited transactions under Section 406
of ERISA and Section 4975 of the Code and will not subject the Trustee, the
Depositor or the Master Servicer to any obligation in addition to those
undertaken in the Agreement, which Opinion of Counsel shall not be an expense of
the Trustee, the Depositor or the Master Servicer. [Such representation shall be
deemed to have been made to the Trustee by the Transferee's acceptance of a
Certificate of this Class and by a beneficial owner's acceptance of its interest
in a Certificate of this Class.] Notwithstanding anything else to the contrary
herein, any purported transfer of a Certificate of this Class to or on behalf of
an employee benefit plan subject to ERISA or to the Code without the opinion of
counsel satisfactory to the Trustee as described above shall be void and of no
effect. Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Reference is hereby made to the further provisions of this Certificate set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate shall not be entitled to any benefit under the Agreement
or be valid for any purpose unless manually countersigned by an authorized
signatory of the Trustee.
B-7
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: December __, 0000
XXX XXXX XX XXX XXXX,
not in its individual capacity, but
solely as Trustee
By: __________________________________
Authorized Signatory of
THE BANK OF NEW YORK
not in its individual capacity,
but solely as Trustee
Countersigned:
By ___________________________
Authorized Signatory of
THE BANK OF NEW YORK,
not in its individual capacity,
but solely as Trustee
B-7
EXHIBIT C
[FORM OF RESIDUAL CERTIFICATE]
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS ONE OR
MORE "RESIDUAL INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE").
NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
PROPOSED TRANSFEREE DELIVERS TO THE TRUSTEE A TRANSFER AFFIDAVIT IN ACCORDANCE
WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN.
[THIS CERTIFICATE REPRESENTS THE "TAX MATTERS PERSON RESIDUAL INTEREST" ISSUED
UNDER THE POOLING AND SERVICING AGREEMENT REFERRED TO BELOW AND MAY NOT BE
TRANSFERRED TO ANY PERSON EXCEPT IN CONNECTION WITH THE ASSUMPTION BY THE
TRANSFEREE OF THE DUTIES OF THE SERVICER UNDER SUCH AGREEMENT.]
NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
TRANSFEREE REPRESENTS TO THE TRUSTEE THAT SUCH TRANSFEREE IS NOT AN EMPLOYEE
BENEFIT PLAN OR ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY
ACT OF 1974, AS AMENDED ("ERISA"), OR A PLAN OR ARRANGEMENT SUBJECT TO SECTION
4975 OF THE CODE, OR, IF SUCH PURCHASER IS AN INSURANCE COMPANY, A
REPRESENTATION IN ACCORDANCE WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO
HEREIN, OR DELIVERS TO THE TRUSTEE AN OPINION OF COUNSEL IN ACCORDANCE WITH THE
PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN. SUCH REPRESENTATION SHALL BE
DEEMED TO HAVE BEEN MADE TO THE TRUSTEE BY THE TRANSFEREE'S ACCEPTANCE OF A
CERTIFICATE OF THIS CLASS AND BY A BENEFICIAL OWNER'S ACCEPTANCE OF ITS INTEREST
IN A CERTIFICATE OF THIS CLASS. NOTWITHSTANDING ANYTHING ELSE TO THE CONTRARY
HEREIN, ANY PURPORTED TRANSFER OF THIS CERTIFICATE TO OR ON BEHALF OF AN
EMPLOYEE BENEFIT PLAN SUBJECT TO ERISA OR TO THE CODE WITHOUT THE OPINION OF
COUNSEL SATISFACTORY TO THE TRUSTEE AS DESCRIBED ABOVE SHALL BE VOID AND OF NO
EFFECT.
C-1
Certificate No. :
Cut-off Date :
First Distribution Date :
Percentage Interest : ___%
First Horizon ABS Trust 2004-HE4
Mortgage Pass-Through Certificates, Series 2004-HE4
evidencing the distributions allocable to the Class R
Certificates with respect to a Trust Fund consisting primarily of one
or more pools of home equity mortgage loans (the "Mortgage Loans")
secured by second liens on one- to four-family residential properties.
First Horizon Asset Securities Inc., as Depositor
This Certificate does not evidence an obligation of, or an interest in,
and is not guaranteed by the Depositor, the Master Servicer or the Trustee
referred to below or any of their respective affiliates. Neither this
Certificate nor the Mortgage Loans are guaranteed or insured by any governmental
agency or instrumentality.
This certifies that _________________ is the registered owner of the
Percentage Interest (as set forth above) in certain monthly distributions with
respect to a Trust Fund consisting of the Mortgage Loans deposited by First
Horizon Asset Securities Inc. (the "Depositor"). The Trust Fund was created
pursuant to a Pooling and Servicing Agreement dated as of the Cut-off Date
specified above (the "Agreement") among the Depositor, First Horizon Home Loan
Corporation, as master servicer (the "Master Servicer"), and The Bank of New
York, as trustee (the "Trustee"). To the extent not defined herein, the
capitalized terms used herein have the meanings assigned in the Agreement. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
Any distribution of the proceeds of any remaining assets of the Trust Fund
will be made only upon presentment and surrender of this Class R Certificate at
the Corporate Trust Office or the office or agency maintained by the Trustee in
New York, New York. This Class R Certificate represents an ownership in the RL
Interest and RU Interest, as defined in the Agreement.
No transfer of a Class R Certificate shall be made unless the Trustee
shall have received either (i) a representation [letter] from the transferee of
such Certificate, acceptable to and in form and substance satisfactory to the
Trustee, to the effect that such transferee is not an employee benefit plan or
arrangement subject to Section 406 of ERISA or Section 4975 of the Code, nor a
person acting on behalf of any such plan, which representation letter shall not
be an expense of the Trustee, the Depositor or the Master Servicer, (ii) if the
purchaser is an insurance company, a representation that the purchaser is an
insurance company which is purchasing such Certificate with funds contained in
an "insurance company general account" (as such term is defined in Section V(e)
C-2
of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60")) and that the
purchase and holding of such Certificate are covered under Sections I and III of
PTCE 95-60 or (iii) in the case of any such Certificate presented for
registration in the name of an employee benefit plan subject to ERISA or Section
4975 of the Code (or comparable provisions of any subsequent enactments), or a
trustee of any such plan or any other person acting on behalf of any such plan,
an Opinion of Counsel satisfactory to the Trustee to the effect that the
purchase or holding of such Class R Certificate will not result in prohibited
transactions under Section 406 of ERISA and Section 4975 of the Code and will
not subject the Trustee, the Depositor and the Master Servicer to any obligation
in addition to those undertaken in the Agreement, which Opinion of Counsel shall
not be an expense of the Trustee, the Depositor or the Master Servicer. [Such
representation shall be deemed to have been made to the Trustee by the
Transferee's acceptance of this Class R Certificate and by a beneficial owner's
acceptance of its interest in such Certificate.] Notwithstanding anything else
to the contrary herein, any purported transfer of a Class R Certificate to or on
behalf of an employee benefit plan subject to ERISA or to the Code without the
opinion of counsel satisfactory to the Trustee as described above shall be void
and of no effect.
Each Holder of this Class R Certificate will be deemed to have agreed to
be bound by the restrictions of the Agreement, including but not limited to the
restrictions that (i) each person holding or acquiring any Ownership Interest in
this Class R Certificate must be a Permitted Transferee, (ii) no Ownership
Interest in this Class R Certificate may be transferred without delivery to the
Trustee of (a) a transfer affidavit of the proposed transferee and (b) a
transfer certificate of the transferor, each of such documents to be in the form
described in the Agreement, (iii) each person holding or acquiring any Ownership
Interest in this Class R Certificate must agree to require a transfer affidavit
and to deliver a transfer certificate to the Trustee as required pursuant to the
Agreement, (iv) each person holding or acquiring an Ownership Interest in this
Class R Certificate must agree not to transfer an Ownership Interest in this
Class R Certificate if it has actual knowledge that the proposed transferee is
not a Permitted Transferee and (v) any attempted or purported transfer of any
Ownership Interest in this Class R Certificate in violation of such restrictions
will be absolutely null and void and will vest no rights in the purported
transferee.
Reference is hereby made to the further provisions of this Certificate set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate shall not be entitled to any benefit under the Agreement
or be valid for any purpose unless manually countersigned by an authorized
signatory of the Trustee.
C-3
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: December __, 0000
XXX XXXX XX XXX XXXX,
not in its individual capacity, but
solely as Trustee
By: _______________________________
Authorized Signatory of
THE BANK OF NEW YORK
not in its individual capacity,
but solely as Trustee
Countersigned:
By ___________________________
Authorized Signatory of
THE BANK OF NEW YORK,
not in its individual capacity,
but solely as Trustee
C-4
EXHIBIT D
[Form of Reverse of Certificates]
First Horizon ABS Trust 2004-HE4
Mortgage Pass-Through Certificates
This Certificate is one of a duly authorized issue of Certificates
designated as First Horizon ABS Trust 2004-HE4 Mortgage Pass-Through
Certificates, of the Series specified on the face hereof (herein collectively
called the "Certificates"), and representing a beneficial ownership interest in
the Trust Fund created by the Agreement.
The Certificateholder, by its acceptance of this Certificate, agrees that
it will look solely to the funds on deposit in the Distribution Account for
payment hereunder and that the Trustee is not liable to the Certificateholders
for any amount payable under this Certificate or the Agreement or, except as
expressly provided in the Agreement, subject to any liability under the
Agreement.
This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for the interests, rights and limitations of rights,
benefits, obligations and duties evidenced thereby, and the rights, duties and
immunities of the Trustee.
Pursuant to the terms of the Agreement, a distribution will be made on the
25th day of each month or, if such 25th day is not a Business Day, the Business
Day immediately following (the "Distribution Date"), commencing on the first
Distribution Date specified on the face hereof, to the Person in whose name this
Certificate is registered at the close of business on the applicable Record Date
in an amount equal to the product of the Percentage Interest evidenced by this
Certificate and the amount required to be distributed to Holders of Certificates
of the Class to which this Certificate belongs on such Distribution Date
pursuant to the Agreement. The Record Date applicable to each Distribution Date
is the last Business Day of the month next preceding the month of such
Distribution Date.
Distributions on this Certificate shall be made by wire transfer of
immediately available funds to the account of the Holder hereof at a bank or
other entity having appropriate facilities therefor, if such Certificateholder
shall have so notified the Trustee in writing at least five Business Days prior
to the related Record Date and such Certificateholder shall satisfy the
conditions to receive such form of payment set forth in the Agreement, or, if
not, by check mailed by first class mail to the address of such
Certificateholder appearing in the Certificate Register. The final distribution
on each Certificate will be made in like manner, but only upon presentment and
surrender of such Certificate at the Corporate Trust Office or such other
location specified in the notice to Certificateholders of such final
distribution.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Trustee and the rights of the Certificateholders under the Agreement at any time
by the Depositor, the Master Servicer and the Trustee with the consent of the
Holders of Certificates affected by such amendment evidencing the requisite
Percentage Interest and the Insurer, as provided in the Agreement. Any such
consent by the Holder of this Certificate shall be conclusive and binding on
such Holder and upon all future Holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange therefor or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
The Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the Certificates,
but with the consent of the Insurer.
D-1
As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Certificate
Register of the Trustee upon surrender of this Certificate for registration of
transfer at the Corporate Trust Office or the office or agency maintained by the
Trustee in New York, New York, accompanied by a written instrument of transfer
in form satisfactory to the Trustee and the Certificate Registrar duly executed
by the holder hereof or such holder's attorney duly authorized in writing, and
thereupon one or more new Certificates of the same Class in authorized
denominations and evidencing the same aggregate Percentage Interest in the Trust
Fund will be issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class in authorized denominations
and evidencing the same aggregate Percentage Interest, as requested by the
Holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Depositor, the Master Servicer and the Trustee and any agent of the
Depositor or the Trustee may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and neither the Depositor, the
Trustee, nor any such agent shall be affected by any notice to the contrary.
On any Distribution Date on which the aggregate outstanding Class
Certificate Balance of the Class A Certificates, after allocation of principal
payments on such Distribution Date, is less than 10% of the aggregate Class
Certificate Balance of the Class A Certificates as of the Cut-off Date, the
Master Servicer will have the option to purchase, in whole, from the Trust Fund
all remaining Mortgage Loans and all property acquired in respect of the
Mortgage Loans at a purchase price determined as provided in the Agreement, so
long as any such optional purchase will not cause a draw to be made under the
Policy. In the event that no such optional termination occurs, the obligations
and responsibilities created by the Agreement will terminate upon the later of
the maturity or other liquidation (or any advance with respect thereto) of the
last Mortgage Loan remaining in the Trust Fund or the disposition of all
property in respect thereof and the distribution to Certificateholders of all
amounts required to be distributed pursuant to the Agreement. In no event,
however, will the trust created by the Agreement continue beyond the expiration
of 21 years from the death of the last survivor of the descendants living at the
date of the Agreement of a certain person named in the Agreement.
Any term used herein that is defined in the Agreement shall have the
meaning assigned in the Agreement, and nothing herein shall be deemed
inconsistent with that meaning.
D-2
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
------------------------------
(Please insert social security or
other identifying number of assignee)
------------------------------------------------------------------------
------------------------------------------------------------------------
(Please print or typewrite name and address
including postal zip code of assignee)
------------------------------------------------------------------------
the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to
assignee on the Certificate Register of the Trust Fund.
I (We) further direct the Trustee to issue a new Certificate of a like
denomination and Class, to the above named assignee and deliver such Certificate
to the following address:
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
Dated: __________________
--------------------------------------
Signature by or on behalf of assignor
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of distribution:
Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to ______________________________________, for the account of
_____________________, account number ___________, or, if mailed by check, to
___________________________. Applicable statements should be mailed to
___________________________.
This information is provided by ________________________________________,
the assignee named above, or _________________, as its agent.
D-3
EXHIBIT E
FORM OF INITIAL CERTIFICATION OF CUSTODIAN
[date]
First Horizon Asset Securities Inc.
First Horizon Home Loan Corporation
0000 Xxxxxxx Xxx
Xxxxxx, Xxxxx 00000
MBIA Insurance Corporation
000 Xxxx Xxxxxx
Xxxxxx, Xxx Xxxx 00000
Re: Custodial Agreement dated as of December 30, 2004 by and among the
Bank of New York, as Trustee, First Horizon Home Loan Corporation,
as Servicer and First Tennessee Bank National Association, as
Custodian
Gentlemen:
In accordance with Section 2 of the above-captioned Custodial Agreement
(the "Custodial Agreement"), the undersigned, as Trustee, hereby certifies that,
as to each Mortgage Loan listed in the Mortgage Loan Schedule (other than any
Mortgage Loan listed in the attached schedule), it has received:
(i) the original Mortgage Note, endorsed as provided in the following
form: "Pay to the order of ________, without recourse"; and
(ii) a duly executed assignment of the Mortgage (which may be included in
a blanket assignment or assignments); provided, however, that it has received no
assignment with respect to any Mortgage for which the related Mortgaged Property
is located in the Commonwealth of Puerto Rico.
Based on its review and examination and only as to the foregoing
documents, such documents appear regular on their face and related to such
Mortgage Loan.
The Trustee has made no independent examination of any documents contained
in each Mortgage File beyond the review specifically required in the Custodial
Agreement. The Trustee makes no representations as to: (i) the validity,
legality, sufficiency, enforceability or genuineness of any of the documents
contained in each Mortgage File of any of the Mortgage Loans identified on the
Mortgage Loan Schedule, or (ii) the collectability, insurability, effectiveness
or suitability of any such Mortgage Loan.
E-1
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Custodial Agreement.
THE BANK OF NEW YORK
as Trustee
By: ____________________________
Name: ____________________________
Title:____________________________
E-2
EXHIBIT F
[RESERVED]
F-1
EXHIBIT G
FORM OF FINAL CERTIFICATION OF CUSTODIAN
[date]
First Horizon Asset Securities Inc.
First Horizon Home Loan Corporation
0000 Xxxxxxx Xxx
Xxxxxx, Xxxxx 00000
MBIA Insurance Corporation_
000 Xxxx Xxxxxx
Xxxxxx, Xxx Xxxx 00000
Re: Custodial Agreement dated as of December 30, 2004 by and among the
Bank of New York, as Trustee, First Horizon Home Loan Corporation,
as Servicer, and First Tennessee Bank National Association, as
Custodian
Ladies and Gentlemen:
In accordance with Section 2 of the above-captioned Custodial Agreement
(the "Custodial Agreement"), the undersigned, as Trustee, hereby certifies that
as to each Mortgage Loan listed in the Mortgage Loan Schedule (other than any
Mortgage Loan paid in full or listed on the attached Document Exception Report)
it has received:
(i) (A) The original Mortgage Note endorsed by manual or facsimile
signature in blank in the following form: "Pay to the order of
____________ without recourse," with all intervening endorsements
showing a complete chain of endorsements from the originator to the
Person endorsing the Mortgage Note (each such endorsement being
sufficient to transfer all right, title and interest of the party so
endorsing, as noteholder or assignee thereof, in and to that
Mortgage Note); or
(B) with respect to any Lost Mortgage Note, a lost note affidavit
from the Seller stating that the original Mortgage Note was lost or
destroyed, together with a copy of such Mortgage Note;
(ii) except as provided below and for each Mortgage Loan that is not a
MERS Mortgage Loan, the original recorded Mortgage or a copy of such
Mortgage certified by the Seller as being a true and complete copy
of the Mortgage and in the case of each MERS Mortgage Loan, the
original Mortgage, noting the presence of the MIN of the Mortgage
Loans and either language indicating that the Mortgage Loan is a MOM
Loan if the Mortgage Loan is a MOM Loan or if the Mortgage Loan was
not a MOM Loan at origination, the original Mortgage and the
assignment thereof to MERS, with evidence of recording indicated
thereon, or a copy of the Mortgage certified by the public recording
office in which such Mortgage has been recorded;
G-1
(iii) in the case of each Mortgage Loan that is not a MERS Mortgage Loan,
a duly executed assignment of the Mortgage in blank (which may be
included in a blanket assignment or assignments), together with,
except as provided below, all interim recorded assignments of such
mortgage each such assignment, when duly and validly completed, to
be in recordable form and sufficient to effect the assignment of and
transfer to the assignee thereof, under the Mortgage to which the
assignment related); provided that, if the related Mortgage has not
been returned from the applicable public recording office, such
assignment of the Mortgage may exclude the information to be
provided by the recording office;
(iv) the original or copies of each assumption, modification, written
assurance or substitution agreement, if any;
(v) for any Mortgage Loan other than a Combo Mortgage Loan, either the
original or duplicate original title policy (including all riders
thereto) with respect to the related Mortgaged Property, if
available, provided that the title policy (including all riders
thereto) for a Mortgage Loan other than a Combo Mortgage Loan will
be delivered as soon as it becomes available, and if the title
policy is not available, and to the extent required pursuant to
Section 2.1(b) of the Custodial Agreement, a written commitment or
interim binder or preliminary report of the title issued by the
title insurance or escrow company with respect to the Mortgaged
Property, and
(vi) in the case of a Cooperative Loan, the originals of the following
documents or instruments:
(a) The Coop Shares, together with a stock power in blank;
(b) The executed Security Agreement;
(c) The executed Proprietary Lease;
(d) The executed UCC-1 financing statement with evidence of
recording thereon which have been filed in all places required
to perfect the Seller's interest in the Coop Shares and the
Proprietary Lease; and
(e) Executed UCC-3 financing statements or their appropriate UCC
financing statements required by state law, evidencing a
complete and unbroken line from the mortgagee to the Trustee
with evidence of recording thereon (or in a form suitable for
recordation).
Based on its review and examination and only as to the foregoing
documents, (a) such documents appear regular on their face and related to such
Mortgage Loan, and (b) the information set forth in items (i), (ii), (iii),
(iv), (vi) and (xi) of the definition of the "Mortgage Loan Schedule" in Article
I of the Pooling and Servicing Agreement accurately reflects information set
forth in the Mortgage File.
G-2
The Trustee has made no independent examination of any documents contained
in each Mortgage File beyond the review specifically required in the Custodial
Agreement. The Trustee makes no representations as to: (i) the validity,
legality, sufficiency, enforceability or genuineness of any of the documents
contained in each Mortgage File of any of the Mortgage Loans identified on the
Mortgage Loan Schedule, or (ii) the collectability, insurability, effectiveness
or suitability of any such Mortgage Loan. Notwithstanding anything herein to the
contrary, the Trustee has made no determination and makes no representations as
to whether (i) any endorsement is sufficient to transfer all right, title, and
interest of the party so endorsing, as noteholder or assignee thereof, in and to
that Mortgage Note or (ii) any assignment is in recordable form or sufficient to
effect the assignment of and transfer to the assignee thereof, under the
Mortgage to which the assignment relates.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Custodial Agreement.
THE BANK OF NEW YORK,
as Trustee
By: ___________________________
Name: ___________________________
Title: ___________________________
G-3
EXHIBIT H
TRANSFER AFFIDAVIT
First Horizon ABS Trust 2004-HE4
Mortgage Pass-Through Certificates
Series 2004-HE4
STATE OF _________ )
_________ ) ss.:
COUNTY OF _________ )
The undersigned, being first duly sworn, deposes and says as follows:
1. The undersigned is an officer of __________, the proposed Transferee of
an Ownership Interest in a Class R Certificate (the "Certificate") issued
pursuant to the Pooling and Servicing Agreement, (the "Agreement"), relating to
the above-referenced Series, by and among First Horizon Asset Securities Inc.,
as depositor (the "Depositor"), First Horizon Home Loan Corporation, as master
servicer, and The Bank of New York, as trustee. Capitalized terms used, but not
defined herein or in Exhibit 1 hereto, shall have the meanings ascribed to such
terms in the Agreement. The Transferee has authorized the undersigned to make
this affidavit on behalf of the Transferee.
2. The Transferee is, as of the date hereof, and will be, as of the date
of the Transfer, a Permitted Transferee. The Transferee is acquiring its
Ownership Interest in the Certificate either (i) for its own account or (ii) as
nominee, trustee or agent for another Person and has attached hereto an
affidavit from such Person in substantially the same form as this affidavit. The
Transferee has no knowledge that any such affidavit is false.
3. The Transferee has been advised of, and understands that (i) a tax may
be imposed on Transfers of the Certificate to Persons that are not Permitted
Transferees; (ii) such tax will be imposed on the transferor, or, if such
Transfer is through an agent (which includes a broker, nominee or middleman) for
a Person that is not a Permitted Transferee, on the agent; and (iii) the Person
otherwise liable for the tax shall be relieved of liability for the tax if the
subsequent transferee furnished to such Person an affidavit that such subsequent
transferee is a Permitted Transferee and, at the time of Transfer, such Person
does not have actual knowledge that the affidavit is false.
4. The Transferee has been advised of, and understands that a tax may be
imposed on a "pass-through entity" holding the Certificate if at any time during
the taxable year of the pass-through entity a Person that is not a Permitted
Transferee is the record holder of an interest in such entity. The Transferee
understands that such tax will not be imposed for any period with respect to
which the record holder furnishes to the pass-through entity an affidavit that
such record holder is a Permitted Transferee and the pass-through entity does
not have actual knowledge that such affidavit is false. (For this purpose, a
"pass-through entity" includes a regulated investment company, a real estate
investment trust or common trust fund, a partnership, trust or estate, and
certain cooperatives and, except as may be provided in Treasury Regulations,
persons holding interests in pass-through entities as a nominee for another
Person.)
H-1
5. The Transferee has reviewed the provisions of Section 5.2(c) of the
Agreement (attached hereto as Exhibit 2 and incorporated herein by reference)
and understands the legal consequences of the acquisition of an Ownership
Interest in the Certificate including, without limitation, the restrictions on
subsequent Transfers and the provisions regarding voiding the Transfer and
mandatory sales. The Transferee expressly agrees to be bound by and to abide by
the provisions of Section 5.2(c) of the Agreement and the restrictions noted on
the face of the Certificate. The Transferee understands and agrees that any
breach of any of the representations included herein shall render the Transfer
to the Transferee contemplated hereby null and void.
6. The Transferee agrees to require a Transfer Affidavit from any Person
to whom the Transferee attempts to Transfer its Ownership Interest in the
Certificate, and in connection with any Transfer by a Person for whom the
Transferee is acting as nominee, trustee or agent, and the Transferee will not
Transfer its Ownership Interest or cause any Ownership Interest to be
Transferred to any Person that the Transferee knows is not a Permitted
Transferee. In connection with any such Transfer by the Transferee, the
Transferee agrees to deliver to the Trustee a certificate substantially in the
form set forth as Exhibit I to the Agreement (a "Transferor Certificate") to the
effect that such Transferee has no actual knowledge that the Person to which the
Transfer is to be made is not a Permitted Transferee.
7. The Transferee does not have the intention to impede the assessment or
collection of any tax legally required to be paid with respect to the
Certificate.
8. The Transferee's taxpayer identification number is ______.
9. The Transferee is either a U.S. Person as defined in Code Section
7701(a)(30) or the Transferee has furnished the Transferor a properly completed
Internal Revenue Service Form W-8ECI.
10. Any distribution of the proceeds of any remaining assets of the Trust
Fund will be made only upon presentment and surrender of this Class R
Certificate at the Corporate Trust Office or the office or agency maintained by
the Trustee in New York, New York. This Class R Certificate represents an
ownership in the RL Interest and RU Interest, as defined in the Agreement.
11. The Transferee is not an employee benefit plan or arrangement subject
to Section 406 of ERISA or a plan or arrangement subject to Section 4975 of the
Code, nor a person acting on behalf of any such plan or arrangement, nor using
the assets of any such plan or arrangement to effect such transfer.
12. The Transferee has historically paid its debts as they came due and
the Transferee will continue to pay its debts as they come due in the future;
the Transferee understands that, as the holder of the Certificate, the
Transferee may incur tax liabilities in excess of any cash flows generated by
the Certificate and the Transferee intends to pay taxes associated with holding
the Certificate as they become due.
13. The Transferee is a domestic corporation taxable as a regular
corporation for U.S. federal income tax purposes (a "taxable domestic C
corporation") and is not a real estate investment trust, regulated investment
company or REMIC. The Transferee will not cause income from the Certificate to
be attributable, for U.S. federal income tax purposes, to a non-U.S. permanent
establishment or fixed base (within the meaning of an applicable income tax
treaty) of the Transferee or another U.S. taxpayer. At the time of the Transfer,
and at the close of each of the Transferee's two fiscal years preceding the year
of the Transfer, the Transferee's gross assets for financial reporting purposes
exceeded $10 million (together, the "Asset Requirements"), and the Transferee
hereby covenants that any subsequent Transfer of its Ownership Interest in the
Certificate will be to another taxable, domestic C corporation satisfying the
Asset Requirements
H-2
IN WITNESS WHEREOF, the Transferee has caused this instrument to be
executed on its behalf, pursuant to authority of its Board of Directors, by its
duly authorized officer and its corporate seal to be hereunto affixed, duly
attested, this ___ day of _________, 20__.
------------------------------
Print Name of Transferee
By:___________________________
Name:_________________________
Title:________________________
Personally appeared before me the above-named ________________, known or
proved to me to be the same person who executed the foregoing instrument and to
be the _________________ of the Transferee, and acknowledged that he executed
the same as his free act and deed and the free act and deed of the Transferee.
Subscribed and sworn before me this _____ day of ___________, 20____.
_____________________________________
NOTARY PUBLIC
My Commission expires the ___ day of
________________, 20___.
H-3
EXHIBIT 1 to EXHIBIT H
Certain Definitions
"Ownership Interest": As to any Certificate, any ownership interest in
such Certificate, including any interest in such Certificate as the Holder
thereof and any other interest therein, whether direct or indirect, legal or
beneficial.
"Permitted Transferee": Any Person other than (i) the United States, any
State or political subdivision thereof, or any agency or instrumentality of any
of the foregoing, (ii) a foreign government, International Organization or any
agency or instrumentality of either of the foregoing, (iii) an organization
(except certain farmers' cooperatives described in section 521 of the Code)
which is exempt from tax imposed by Chapter 1 of the Code (including the tax
imposed by section 511 of the Code on unrelated business taxable income) on any
excess inclusions (as defined in section 860E(c)(l) of the Code) with respect to
any Certificate, (iv) rural electric and telephone cooperatives described in
section 1381(a)(2)(C) of the Code, (v) an "electing large partnership" as
defined in section 775 of the Code, (vi) a Person that is not (a) a citizen or
resident of the United States, (b) a corporation, partnership, or other entity
created or organized in or under the laws of the United States, any state
thereof or the District of Columbia, (c) an estate whose income from sources
without the United States is includible in gross income for United States
federal income tax purposes regardless of its connection with the conduct of a
trade or business within the United States or (d) a trust if a court within the
United States is able to exercise primary supervision over the administration of
the trust and one or more United States persons have the authority to control
all substantial decisions of the trust, unless such Person has furnished the
transferor and the Trustee with a duly completed Internal Revenue Service Form
W-8ECI or any applicable successor form, and (vii) any other Person so
designated by the Depositor based upon an Opinion of Counsel that the Transfer
of an Ownership Interest in a Certificate to such Person may cause any REMIC
created pursuant to the Agreement to fail to qualify as a REMIC at any time that
the Certificates (as defined in the Agreement) are outstanding; provided,
however, that if a person is classified as a partnership or a disregarded entity
under the Code, such person shall only be a Permitted Transferee if all of its
beneficial owners are described in subclauses (a), (b), (c) or (d) of clause
(vi) and the governing documents of such person prohibits a transfer of any
interest in such person to any person described in clause (vi). The terms
"United States," "State" and "International Organization" shall have the
meanings set forth in section 7701 of the Code or successor provisions. A
corporation will not be treated as an instrumentality of the United States or of
any State or political subdivision thereof for these purposes if all of its
activities are subject to tax and, with the exception of the Federal Home Loan
Mortgage Corporation, a majority of its board of directors is not selected by
such government unit.
"Person": Any individual, corporation, partnership, joint venture,
association, bank, joint-stock company, trust (including any beneficiary
thereof), unincorporated organization or government or any agency or political
subdivision thereof.
"Transfer": Any direct or indirect transfer or sale of any Ownership
Interest in a Certificate, including the acquisition of a Certificate by the
Depositor.
"Transferee": Any Person who is acquiring by Transfer any Ownership
Interest in a Certificate.
H-4
EXHIBIT 2 to EXHIBIT H
Section 5.2(c) of the Agreement
(c) Each Person who has or who acquires any Ownership Interest in a
Residual Certificate shall be deemed by the acceptance or acquisition of such
Ownership Interest to have agreed to be bound by the following provisions, and
the rights of each Person acquiring any Ownership Interest in a Residual
Certificate are expressly subject to the following provisions:
(i) Each Person holding or acquiring any Ownership Interest in a
Residual Certificate shall be a Permitted Transferee and shall promptly notify
the Trustee of any change or impending change in its status as a Permitted
Transferee.
(ii) No Ownership Interest in a Residual Certificate may be
registered on the Closing Date or thereafter transferred, and the Trustee shall
not register the Transfer of any Residual Certificate unless, in addition to the
certificates required to be delivered to the Trustee under subparagraph (b)
above, the Trustee shall have been furnished with an affidavit (a "Transfer
Affidavit") of the initial owner or the proposed transferee in the form attached
hereto as Exhibit H.
(iii) Each Person holding or acquiring any Ownership Interest in a
Residual Certificate shall agree (A) to obtain a Transfer Affidavit from any
other Person to whom such Person attempts to Transfer its Ownership Interest in
a Residual Certificate, (B) to obtain a Transfer Affidavit from any Person for
whom such Person is acting as nominee, trustee or agent in connection with any
Transfer of a Residual Certificate and (C) not to Transfer its Ownership
Interest in a Residual Certificate or to cause the Transfer of an Ownership
Interest in a Residual Certificate to any other Person if it has actual
knowledge that such Person is not a Permitted Transferee.
(iv) Any attempted or purported Transfer of any Ownership Interest
in a Residual Certificate in violation of the provisions of this Section 5.2(c)
shall be absolutely null and void and shall vest no rights in the purported
Transferee. If any purported transferee shall become a Holder of a Residual
Certificate in violation of the provisions of this Section 5.2(c), then the last
preceding Permitted Transferee shall be restored to all rights as Holder thereof
retroactive to the date of registration of Transfer of such Residual
Certificate. The Trustee shall be under no liability to any Person for any
registration of Transfer of a Residual Certificate that is in fact not permitted
by Section 5.2(b) and this Section 5.2(c) or for making any payments due on such
Certificate to the Holder thereof or taking any other action with respect to
such Holder under the provisions of this Agreement so long as the Transfer was
registered after receipt of the related Transfer Affidavit, Transferor
Certificate, and in the case of a Residual Certificate which is also a Private
Certificate, either the Rule 144A Letter or the Investment Letter. The Trustee
shall be entitled but not obligated to recover from any Holder of a Residual
Certificate that was in fact not a Permitted Transferee at the time it became a
Holder or, at such subsequent time as it became other than a Permitted
Transferee, all payments made on such Residual Certificate at and after either
such time. Any such payments so recovered by the Trustee shall be paid and
delivered by the Trustee to the last preceding Permitted Transferee of such
Certificate.
H-6
(v) The Depositor shall use its best efforts to make available, upon
receipt of written request from the Trustee, all information necessary to
compute any tax imposed under Section 860E(e) of the Code as a result of a
Transfer of an Ownership Interest in a Residual Certificate to any Holder who is
not a Permitted Transferee.
The restrictions on Transfers of a Residual Certificate set forth in this
Section 5.2(c) shall cease to apply (and the applicable portions of the legend
on a Residual Certificate may be deleted) with respect to Transfers occurring
after delivery to the Trustee of an Opinion of Counsel, which Opinion of Counsel
shall not be an expense of the Trust Fund, the Trustee or the Master Servicer,
to the effect that the elimination of such restrictions will not cause any REMIC
created hereunder to fail to qualify as a REMIC at any time that the
Certificates are outstanding or result in the imposition of any tax on the Trust
Fund, a Certificateholder or another Person. Each Person holding or acquiring
any Ownership Interest in a Residual Certificate hereby consents to any
amendment of this Agreement which, based on an Opinion of Counsel furnished to
the Trustee, is reasonably necessary (a) to ensure that the record ownership of,
or any beneficial interest in, a Residual Certificate is not transferred,
directly or indirectly, to a Person that is not a Permitted Transferee and (b)
to provide for a means to compel the Transfer of a Residual Certificate which is
held by a Person that is not a Permitted Transferee to a Holder that is a
Permitted Transferee.
H-7
EXHIBIT I
FORM OF TRANSFEROR CERTIFICATE
_______________, 20___
First Horizon Asset Securities Inc.
First Horizon Home Loan Corporation
0000 Xxxxxxx Xxx
Xxxxxx, Xxxxx 00000
The Bank of New York_______
000 Xxxxxxx Xxxxxx, 8W_____
Xxx Xxxx, Xxx Xxxx 00000
Re: First Horizon ABS Trust 2004-HE4 Mortgage Pass-Through
Certificates, Series 2004-HE4, Class -----
Ladies and Gentlemen:
In connection with our disposition of the above Certificates we certify
that (a) to the extent we are disposing of a Private Certificate, we understand
that the Private Certificate has not been registered under the Securities Act of
1933, as amended (the "Act"), and is being disposed of by us in a transaction
that is exempt from the registration requirements of the Act, (b) we have not
offered or sold any Certificates to, or solicited offers to buy any Certificates
from, any person, or otherwise approached or negotiated with any person with
respect thereto, in a manner that would be deemed, or taken any other action
which would result in, a violation of Section 5 of the Act, and (c) to the
extent we are disposing of a Residual Certificate, we have no knowledge the
transferee is not a Permitted Transferee.
Capitalized terms used herein shall have the meaning ascribed to such
terms in the Pooling and Servicing Agreement dated as of December 1, 2004, by
and among First Horizon Asset Securities Inc., as depositor, First Horizon Home
Loan Corporation, as master servicer, and The Bank of New York, as trustee,
pursuant to which the Residual Certificates were issued.
Very truly yours,
________________________________
Print Name of Transferor
By:_____________________________
Authorized Officer
I-1
EXHIBIT J
FORM OF INVESTMENT LETTER (NON-RULE 144A)
_____________, 20___
First Horizon Asset Securities Inc.
0000 Xxxxxxx Xxx
Xxxxxx, Xxxxx 00000
The Bank of New York_______
000 Xxxxxxx Xxxxxx, 8W_____
Xxx Xxxx, Xxx Xxxx 00000__
Attention: Mortgage-Backed Securities Group
Re: First Horizon ABS Trust 2004-HE4 Mortgage Pass-Through
Certificates, Series 2004-HE4, Class ___
Ladies and Gentlemen:
In connection with our acquisition of the above Certificates we certify
that (a) we understand that the Certificates are not being registered under the
Securities Act of 1933, as amended (the "Act"), or any state securities laws and
are being transferred to us in a transaction that is exempt from the
registration requirements of the Act and any such laws, (b) we are an
"accredited investor," as defined in Regulation D under the Act, and have such
knowledge and experience in financial and business matters that we are capable
of evaluating the merits and risks of investments in the Certificates, (c) we
have had the opportunity to ask questions of and receive answers from the
Depositor concerning the purchase of the Certificates and all matters relating
thereto or any additional information deemed necessary to our decision to
purchase the Certificates, (d) either (i) we are not an employee benefit plan or
arrangement that is subject to the Employee Retirement Income Security Act of
1974, as amended, or a plan or arrangement that is subject to Section 4975 of
the Internal Revenue Code of 1986, as amended, nor are we acting on behalf of
any such plan or arrangement nor are we using the assets of any such plan or
arrangement to effect such acquisition or (ii) if, in the case of
ERISA-Restricted Certificates that have been the subject of an ERISA-Qualifying
Underwriting, we are an insurance company, a representation that we are an
insurance company which is purchasing such Certificates with funds contained in
an "insurance company general account" (as such term is defined in Section V(e)
of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60")) and that the
purchase and holding of such Certificates are covered under Sections I and III
of PTCE 95-60, (e) we are acquiring the Certificates for investment for our own
account and not with a view to any distribution of such Certificates (but
without prejudice to our right at all times to sell or otherwise dispose of the
Certificates in accordance with clause (g) below), (f) we have not offered or
sold any Certificates to, or solicited offers to buy any Certificates from, any
person, or otherwise approached or negotiated with any person with respect
thereto, or taken any other action which would result in a violation of Section
5 of the Act, and (g) we will not sell, transfer or otherwise dispose of any
J-1
Certificates unless (1) such sale, transfer or other disposition is made
pursuant to an effective registration statement under the Act or is exempt from
such registration requirements, and if requested, we will at our expense provide
an opinion of counsel satisfactory to the addressees of this Certificate that
such sale, transfer or other disposition may be made pursuant to an exemption
from the Act, (2) the purchaser or transferee of such Certificate has executed
and delivered to you a certificate to substantially the same effect as this
certificate, and (3) the purchaser or transferee has otherwise complied with any
conditions for transfer set forth in the Pooling and Servicing Agreement.
Very truly yours,
_____________________________
Print Name of Transferee
By:__________________________
Authorized Officer
J-2
EXHIBIT K
FORM OF RULE 144A LETTER
___________, 20__
First Horizon Asset Securities Inc.
0000 Xxxxxxx Xxx
Xxxxxx, Xxxxx 00000
The Bank of New York_______
000 Xxxxxxx Xxxxxx, 8W_____
Xxx Xxxx, Xxx Xxxx 00000__
Attention: Mortgage-Backed Securities Group
Re: First Horizon ABS Trust 2004-HE4 Mortgage Pass-Through
Certificates, Series 2004-HE4, Class ___
Ladies and Gentlemen:
In connection with our acquisition of the above Certificates we certify
that (a) we understand that the Certificates are not being registered under the
Securities Act of 1933, as amended (the "Act"), or any state securities laws and
are being transferred to us in a transaction that is exempt from the
registration requirements of the Act and any such laws, (b) we have such
knowledge and experience in financial and business matters that we are capable
of evaluating the merits and risks of investments in the Certificates, (c) we
have had the opportunity to ask questions of and receive answers from the
Depositor concerning the purchase of the Certificates and all matters relating
thereto or any additional information deemed necessary to our decision to
purchase the Certificates, (d) we are not an employee benefit plan or
arrangement that is subject to the Employee Retirement Income Security Act of
1974, as amended, or a plan or arrangement that is subject to Section 4975 of
the Internal Revenue Code of 1986, as amended, nor are we acting on behalf of
any such plan or arrangement nor using the assets of any such plan or
arrangement to effect such acquisition, (e) if an insurance company, in the case
of ERISA-restricted Certificates that have been the subject of an
ERISA-Qualifying Underwriting, we are purchasing the Certificates with funds
contained in an "insurance company general account" (as defined in Section V(e)
of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60")) and our purchase
and holding of the Certificates are covered under Sections I and III of PTCE
95-60, (f) we have not, nor has anyone acting on our behalf offered,
transferred, pledged, sold or otherwise disposed of the Certificates, any
interest in the Certificates or any other similar security to, or solicited any
offer to buy or accept a transfer, pledge or other disposition of the
Certificates, any interest in the Certificates or any other similar security
from, or otherwise approached or negotiated with respect to the Certificates,
any interest in the Certificates or any other similar security with, any person
in any manner, or made any general solicitation by means of general advertising
or in any other manner, or taken any other action, that would constitute a
K-1
distribution of the Certificates under the Act or that would render the
disposition of the Certificates a violation of Section 5 of the Act or require
registration pursuant thereto, nor will act, nor has authorized or will
authorize any person to act, in such manner with respect to the Certificates,
(g) we are a "qualified institutional buyer" as that term is defined in Rule
144A under the Act ("Rule 144A") and have completed either of the forms of
certification to that effect attached hereto as Annex 1 or Annex 2, (h) we are
aware that the sale to us is being made in reliance on Rule 144A, and (i) we are
acquiring the Certificates for our own account or for resale pursuant to Rule
144A and further, understand that such Certificates may be resold, pledged or
transferred only (A) to a person reasonably believed to be a qualified
institutional buyer that purchases for its own account or for the account of a
qualified institutional buyer to whom notice is given that the resale, pledge or
transfer is being made in reliance on Rule 144A, or (B) pursuant to another
exemption from registration under the Act.
Very truly yours,
_____________________________
Print Name of Transferee
By:__________________________
Authorized Officer
K-2
ANNEX 1 TO EXHIBIT K
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees Other Than Registered Investment Companies]
The undersigned (the "Buyer") hereby certifies as follows to the parties
listed in the Rule 144A Transferee Certificate to which this certification
relates with respect to the Certificates described therein:
1. As indicated below, the undersigned is the President, Chief Financial
Officer, Senior Vice President or other executive officer of the Buyer.
2. In connection with purchases by the Buyer, the Buyer is a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act of 1933, as amended ("Rule 144A") because (i) the Buyer owned and/or
invested on a discretionary basis $ ______1 in securities (except for the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year (such amount being calculated in accordance with Rule 144A and (ii)
the Buyer satisfies the criteria in the category marked below.
___ Corporation, etc. The Buyer is a corporation (other than a bank,
savings and loan association or similar institution), Massachusetts or similar
business trust, partnership, or charitable organization described in Section
501(c)(3) of the Internal Revenue Code of 1986, as amended.
___ Bank. The Buyer (a) is a national bank or banking institution
organized under the laws of any State, territory or the District of Columbia,
the business of which is substantially confined to banking and is supervised by
the State or territorial banking commission or similar official or is a foreign
bank or equivalent institution, and (b) has an audited net worth of at least
$25,000,000 as demonstrated in its latest annual financial statements, a copy of
which is attached hereto.
___ Savings and Loan. The Buyer (a) is a savings and loan
association, building and loan association, cooperative bank, homestead
association or similar institution, which is supervised and examined by a State
or Federal authority having supervision over any such institutions or is a
foreign savings and loan association or equivalent institution and (b) has an
audited net worth of at least $25,000,000 as demonstrated in its latest annual
financial statements, a copy of which is attached hereto.
___ Broker-dealer. The Buyer is a dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934.
--------
1 Buyer must own and/or invest on a discretionary basis at least
$100,000,000 in securities unless Buyer is a dealer, and, in that case,
Buyer must own and/or invest on a discretionary basis at least $10,000,000
in securities.
K-3
___ Insurance Company. The Buyer is an insurance company whose
primary and predominant business activity is the writing of insurance or the
reinsuring of risks underwritten by insurance companies and which is subject to
supervision by the insurance commissioner or a similar official or agency of a
State, territory or the District of Columbia.
___ State or Local Plan. The Buyer is a plan established and
maintained by a State, its political subdivisions, or any agency or
instrumentality of the State or its political subdivisions, for the benefit of
its employees.
___ ERISA Plan. The Buyer is an employee benefit plan within the
meaning of Title I of the Employee Retirement Income Security Act of 1974.
___ Investment Advisor. The Buyer is an investment advisor
registered under the Investment Advisors Act of 1940.
___ Small Business Investment Company. Buyer is a small business
investment company licensed by the U.S. Small Business Administration under
Section 301(c) or (d) of the Small Business Investment Act of 1958.
___ Business Development Company. Buyer is a business development
company as defined in Section 202(a)(22) of the Investment Advisors Act of 1940.
3. The term "securities" as used herein does not include (i) securities of
issuers that are affiliated with the Buyer, (ii) securities that are part of an
unsold allotment to or subscription by the Buyer, if the Buyer is a dealer,
(iii) securities issued or guaranteed by the U.S. or any instrumentality
thereof, (iv) bank deposit notes and certificates of deposit, (v) loan
participations, (vi) repurchase agreements, (vii) securities owned but subject
to a repurchase agreement and (viii) currency, interest rate and commodity
swaps.
4. For purposes of determining the aggregate amount of securities owned
and/or invested on a discretionary basis by the Buyer, the Buyer used the cost
of such securities to the Buyer and did not include any of the securities
referred to in the preceding paragraph, except (i) where the Buyer reports its
securities holdings in its financial statements on the basis of their market
value, and (ii) no current information with respect to the cost of those
securities has been published. If clause (ii) in the preceding sentence applies,
the securities may be valued at market. Further, in determining such aggregate
amount, the Buyer may have included securities owned by subsidiaries of the
Buyer, but only if such subsidiaries are consolidated with the Buyer in its
financial statements prepared in accordance with generally accepted accounting
principles and if the investments of such subsidiaries are managed under the
Buyer's direction. However, such securities were not included if the Buyer is a
majority-owned, consolidated subsidiary of another enterprise and the Buyer is
not itself a reporting company under the Securities Exchange Act of 1934, as
amended.
5. The Buyer acknowledges that it is familiar with Rule 144A and
understands that the seller to it and other parties related to the Certificates
are relying and will continue to rely on the statements made herein because one
or more sales to the Buyer may be in reliance on Rule 144A.
K-4
6. Until the date of purchase of the Rule 144A Securities, the Buyer will
notify each of the parties to which this certification is made of any changes in
the information and conclusions herein. Until such notice is given, the Buyer's
purchase of the Certificates will constitute a reaffirmation of this
certification as of the date of such purchase. In addition, if the Buyer is a
bank or savings and loan is provided above, the Buyer agrees that it will
furnish to such parties updated annual financial statements promptly after they
become available.
______________________________
Print Name of Transferee
By:___________________________
Name:_________________________
Title:________________________
Date:_________________________
K-5
ANNEX 2 TO EXHIBIT K
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees That are Registered Investment Companies]
The undersigned (the "Buyer") hereby certifies as follows to the parties
listed in the Rule 144A Transferee Certificate to which this certification
relates with respect to the Certificates described therein:
1. As indicated below, the undersigned is the President, Chief Financial
Officer or Senior Vice President of the Buyer or, if the Buyer is a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act of 1933, as amended ("Rule 144A") because Buyer is part of a Family of
Investment Companies (as defined below), is such an officer of the Adviser.
2. In connection with purchases by Buyer, the Buyer is a "qualified
institutional buyer" as defined in SEC Rule 144A because (i) the Buyer is an
investment company registered under the Investment Company Act of 1940, as
amended and (ii) as marked below, the Buyer alone, or the Buyer's Family of
Investment Companies, owned at least $100,000,000 in securities (other than the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year. For purposes of determining the amount of securities owned by the
Buyer or the Buyer's Family of Investment Companies, the cost of such securities
was used, except (i) where the Buyer or the Buyer's Family of Investment
Companies reports its securities holdings in its financial statements on the
basis of their market value, and (ii) no current information with respect to the
cost of those securities has been published. If clause (ii) in the preceding
sentence applies, the securities may be valued at market.
___ The Buyer owned $ in securities (other than the excluded
securities referred to below) as of the end of the Buyer's most recent fiscal
year (such amount being calculated in accordance with Rule 144A).
___ The Buyer is part of a Family of Investment Companies which
owned in the aggregate $ in securities (other than the excluded securities
referred to below) as of the end of the Buyer's most recent fiscal year (such
amount being calculated in accordance with Rule 144A).
3. The term "Family of Investment Companies" as used herein means two or
more registered investment companies (or series thereof) that have the same
investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).
4. The term "securities" as used herein does not include (i) securities of
issuers that are affiliated with the Buyer or are part of the Buyer's Family of
Investment Companies, (ii) securities issued or guaranteed by the U.S. or any
instrumentality thereof, (iii) bank deposit notes and certificates of deposit,
(iv) loan participations, (v) repurchase agreements, (vi) securities owned but
subject to a repurchase agreement and (vii) currency, interest rate and
commodity swaps.
K-6
5. The Buyer is familiar with Rule 144A and understands that the parties
listed in the Rule 144A Transferee Certificate to which this certification
relates are relying and will continue to rely on the statements made herein
because one or more sales to the Buyer will be in reliance on Rule 144A. In
addition, the Buyer will only purchase for the Buyer's own account.
6. Until the date of purchase of the Certificates, the undersigned will
notify the parties listed in the Rule 144A Transferee Certificate to which this
certification relates of any changes in the information and conclusions herein.
Until such notice is given, the Buyer's purchase of the Certificates will
constitute a reaffirmation of this certification by the undersigned as of the
date of such purchase.
_______________________________
Print Name of Transferee
By:_____________________________
Name:___________________________
Title:__________________________
IF AN ADVISER:
_______________________________
Print Name of Buyer
Date:__________________________
K-7
EXHIBIT L
REQUEST FOR RELEASE
[Substitution of Deleted Mortgage Loans
or
Mortgage Loans Paid in Full]
____________________________________ Mortgage Loan Files
_____________________ hereby certifies that he/she is an officer of
_____________________, holding the office set forth beneath his/her signature,
and hereby further certifies as follows:
(Check One)
|_| With respect to the mortgage loans described in the attached schedule,
each such mortgage loan constitutes a "Substitute Mortgage Loan" (as the
term is defined in the Pooling and Servicing Agreement).
|_| With respect to the "Mortgage Loans" (as the term is defined in the
custodial agreement) described in the attached schedule:
All payments of principal, premium (if any), and interest have been made
with respect to the following:
Loan Number:_________________________________
Borrower's Name: ____________________________
County: _____________________________________
We hereby certify that all amounts to be received in connection with such
payments have been received.
_____________________________
Dated: ______________________
/ / Vice President
/ / Assistant Vice President
L-1
EXHIBIT M
REQUEST FOR RELEASE AND RECEIPT
[For Servicing and Foreclosure]
________________________________Mortgage Loan Files
LOAN INFORMATION
Name of Mortgagor: __________________________________
Loan No.: _______ __________________________________
The undersigned hereby acknowledges that it has received from FIRST
TENNESSEE BANK NATIONAL ASSOCIATION, as Custodian for ____________________
Mortgage Loan Files, the documents referred to below (the "Documents"). All
capitalized terms not otherwise defined in this Request for Release and Receipt
shall have the meanings ascribed to them in the Custodial Agreement dated as of
__________________ among ___________________ and FIRST TENNESSEE BANK NATIONAL
ASSOCIATION, as Custodian (the "Custodial Agreement").
[COMPLETE AS NECESSARY]
The undersigned hereby acknowledges an agrees as follows:
(1) The undersigned shall hold and retain possession of the Documents in
trust for the benefit of __________________, solely for the purposes provided in
the Custodial Agreement.
(2) The undersigned shall not cause or permit the Documents to become
subject to, or encumbered by, any claim, liens, security interest, charges,
writs of attachment or other impositions nor shall the undersigned assert or
seek to assert any claims or rights of setoff to or against the Documents or any
proceeds thereof.
(3) The undersigned shall return each and every Document previously
requested from the Mortgage File to the Custodian when the need therefor no
longer exists, unless the Mortgage Loan relating to the Documents has been
liquidated.
Date: _____________________
NAME
By: _____________________
Name: _____________________
Title:_____________________
M-1
