EXHIBIT 4.1
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 October 1, 2004
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FIRST HORIZON ALTERNATIVE MORTGAGE SECURITIES TRUST 2004-AA5
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2004-AA5
TABLE OF CONTENTS
ARTICLE I DEFINITIONS.........................................................................................5
ARTICLE II CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND WARRANTIES.....................................34
SECTION 2.1 Conveyance of Mortgage Loans..................................................................34
SECTION 2.2 Acceptance by Trustee of the Mortgage Loans...................................................38
SECTION 2.3 Representations and Warranties of the Master Servicer; Covenants of the Seller...............40
SECTION 2.4 Representations and Warranties of the Depositor as to the Mortgage Loans......................42
SECTION 2.5 Delivery of Opinion of Counsel in Connection with Substitutions...............................42
SECTION 2.6 Execution and Delivery of Certificates........................................................43
SECTION 2.7 REMIC Matters.................................................................................43
SECTION 2.8 Covenants of the Master Servicer..............................................................47
ARTICLE III ADMINISTRATION AND SERVICING OF MORTGAGE LOANS...................................................47
SECTION 3.1 Master Servicer to Service Mortgage Loans.....................................................47
SECTION 3.2 Subservicing; Enforcement of the Obligations of Servicers.....................................49
SECTION 3.3 Rights of the Depositor and the Trustee in Respect of the Master Servicer.....................49
SECTION 3.4 Trustee to Act as Master Servicer.............................................................50
SECTION 3.5 Collection of Mortgage Loan Payments; Certificate Account; Distribution Account...............50
SECTION 3.6 Collection of Taxes, Assessments and Similar Items; Escrow Accounts...........................53
SECTION 3.7 Access to Certain Documentation and Information Regarding the Mortgage Loans..................54
SECTION 3.8 Permitted Withdrawals from the Certificate Account and Distribution
Account.............................................................................................54
SECTION 3.9 Maintenance of Hazard Insurance; Maintenance of Primary Insurance
Policies............................................................................................56
SECTION 3.10 Enforcement of Due-on-Sale Clauses; Assumption Agreements....................................58
SECTION 3.11 Realization Upon Defaulted Mortgage Loans; Repurchase of Certain Mortgage Loans..............59
SECTION 3.12 Trustee to Cooperate; Release of Mortgage Files..............................................62
SECTION 3.13 Documents Records and Funds in Possession of Master Servicer to be Held for the Trustee......63
SECTION 3.14 Master Servicing Compensation................................................................63
SECTION 3.15 Access to Certain Documentation..............................................................64
SECTION 3.16 Annual Statement as to Compliance............................................................64
SECTION 3.17 Annual Independent Public Accountants' Servicing Statement; Financial Statements.............64
SECTION 3.18 Errors and Omissions Insurance; Fidelity Bonds...............................................65
SECTION 3.19 Notification of Adjustments..................................................................65
ARTICLE IV DISTRIBUTIONS AND ADVANCES BY THE MASTER SERVICER.................................................65
SECTION 4.1 Advances......................................................................................65
SECTION 4.2 Priorities of Distribution....................................................................66
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SECTION 4.3 Method of Distribution........................................................................70
SECTION 4.4 Allocation of Losses..........................................................................71
SECTION 4.5 [RESERVED]....................................................................................73
SECTION 4.6 Monthly Statements to Certificateholders......................................................73
ARTICLE V THE CERTIFICATES...................................................................................75
SECTION 5.1 The Certificates..............................................................................75
SECTION 5.2 Certificate Register; Registration of Transfer and Exchange of Certificates...................75
SECTION 5.3 Mutilated, Destroyed, Lost or Stolen Certificates.............................................80
SECTION 5.4 Persons Deemed Owners.........................................................................81
SECTION 5.5 Access to List of Certificateholders' Names and Addresses.....................................81
SECTION 5.6 Maintenance of Office or Agency...............................................................81
ARTICLE VI THE DEPOSITOR AND THE MASTER SERVICER.............................................................81
SECTION 6.1 Respective Liabilities of the Depositor and the Master Servicer...............................81
SECTION 6.2 Merger or Consolidation of the Depositor or the Master Servicer...............................82
SECTION 6.3 Limitation on Liability of the Depositor, the Master Servicer and Others......................82
SECTION 6.4 Limitation on Resignation of Master Servicer..................................................83
ARTICLE VII DEFAULT..........................................................................................83
SECTION 7.1 Events of Default.............................................................................83
SECTION 7.2 Trustee to Act; Appointment of Successor......................................................85
SECTION 7.3 Notification to Certificateholders............................................................86
ARTICLE VIII CONCERNING THE TRUSTEE..........................................................................87
SECTION 8.1 Duties of Trustee.............................................................................87
SECTION 8.2 Certain Matters Affecting the Trustee.........................................................88
SECTION 8.3 Trustee Not Liable for Certificates or Mortgage Loans.........................................90
SECTION 8.4 Trustee May Own Certificates..................................................................90
SECTION 8.5 Trustee's Fees and Expenses...................................................................90
SECTION 8.6 Eligibility Requirements for Trustee..........................................................91
SECTION 8.7 Resignation and Removal of Trustee............................................................91
SECTION 8.8 Successor Trustee.............................................................................92
SECTION 8.9 Merger or Consolidation of Trustee............................................................93
SECTION 8.10 Appointment of Co-Trustee or Separate Trustee................................................93
SECTION 8.11 Tax Matters..................................................................................94
SECTION 8.12 Periodic Filings.............................................................................96
ARTICLE IX TERMINATION.......................................................................................96
SECTION 9.1 Termination upon Liquidation or Purchase of all Mortgage Loans................................96
SECTION 9.2 Final Distribution on the Certificates........................................................97
SECTION 9.3 Additional Termination Requirements...........................................................98
ARTICLE X [RESERVED].........................................................................................99
ARTICLE XI MISCELLANEOUS PROVISIONS..........................................................................99
SECTION 11.1 Amendment....................................................................................99
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SECTION 11.2 Recordation of Agreement; Counterparts.......................100
SECTION 11.3 Governing Law................................................101
SECTION 11.4 Intention of Parties.........................................101
SECTION 11.5 Notices......................................................101
SECTION 11.6 Severability of Provisions...................................102
SECTION 11.7 Assignment...................................................103
SECTION 11.8 Limitation on Rights of Certificateholders...................103
SECTION 11.9 Inspection and Audit Rights..................................104
SECTION 11.10 Certificates Nonassessable and Fully Paid...................104
SECTION 11.11 Limitations on Actions; No Proceedings......................104
SECTION 11.12 Acknowledgment of Seller....................................104
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 Senior Certificate A-1
Exhibit B: Form of Subordinated 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: Form of Delay Delivery Certification 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
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THIS POOLING AND SERVICING AGREEMENT, dated as of October 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 three 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 I-A-R Certificates will represent the residual interests in the Lower
REMIC, Middle 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 Initial Integral Multiples
Class Designation Certificate Balance Pass Through Rate Minimum Denomination in Excess Minimum
------------------------- ----------------------- --------------------- ---------------------- ---------------------
Class I-A-1 $ 185,031,000.00 5.1983% (1) $ 25,000 $ 1,000
------------------------- ----------------------- --------------------- ---------------------- ---------------------
Class I-A-R $ 100.00 5.1983% (1) $ 100 $ N/A
------------------------- ----------------------- --------------------- ---------------------- ---------------------
Class II-A-1 $ 87,581,000.00 5.2011% (2) $ 25,000 $ N/A
------------------------- ----------------------- --------------------- ---------------------- ---------------------
Class II-A-2 $ (3) 0.2978% (4) $ 500,000 $ 1,000
------------------------- ----------------------- --------------------- ---------------------- ---------------------
Class B-1 $ 8,120,000.00 5.2949% (5) $ 100,000 $ 1,000
------------------------- ----------------------- --------------------- ---------------------- ---------------------
Class B-2 $ 3,190,000.00 5.2949% (5) $ 100,000 $ 1,000
------------------------- ----------------------- --------------------- ---------------------- ---------------------
Class B-3 $ 1,885,000.00 5.2949% (5) $ 100,000 $ 1,000
------------------------- ----------------------- --------------------- ---------------------- ---------------------
Class B-4 $ 1,885,000.00 5.2949% (5) $ 100,000 $ 1,000
------------------------- ----------------------- --------------------- ---------------------- ---------------------
Class B-5 $ 1,451,000.00 5.2949% (5) $ 100,000 $ 1,000
------------------------- ----------------------- --------------------- ---------------------- ---------------------
Class B-6 $ 870,057.00 5.2949% (5) $ 100,000 $ 1,000
------------------------- ----------------------- --------------------- ---------------------- ---------------------
(1) The Pass-Through Rates for the Class I-A-1 and Class I-A-R Certificates for
each subsequent Distribution Date will equal the Weighted Average Adjusted Net
Mortgage Rate for Pool I, as of the first day of the month immediately prior to
the month in which the relevant Distribution Date occurs, after taking into
account scheduled payments of principal on that date and any Principal
Prepayments received on or after such date and distributed to Certificateholders
on the prior Distribution Date.
(2) The Pass-Through Rate for the Class II-A-1 Certificates for each subsequent
Distribution Date will equal the excess, if any, of the Weighted Average
Adjusted Net Mortgage Rate for Pool II over 0.2978% per annum until the
Distribution Date in October 2009, and commencing with the Distribution Date in
November 2009, such Pass-Through Rate will equal the excess, if any, of the
Weighted Average Adjusted Net Mortgage Rate for Pool II over 0.1250% per annum.
(3) The Notional Amount of the Class II-A-2 Certificates with respect to any
Distribution Date will equal the Class Certificate Balance of the Class II-A-1
Certificates for such Distribution Date.
(4) The Pass-Through Rate for the Class II-A-2 Certificates for each subsequent
Distribution Date will be fixed at 0.2978% per annum until the Distribution Date
in October 2009, and commencing with the Distribution Date in November 2009,
such Pass-Through Rate will be fixed at 0.1250% per annum.
(5) The Pass-Through Rates for the Subordinated Certificates for each subsequent
Distribution Date will equal the weighted average of the Weighted Average
Adjusted Net Mortgage Rates for each Mortgage Pool, weighted on the basis of the
Group Subordinate Amount for each Mortgage Pool, as of the first day of the
month immediately prior to the month in which the relevant Distribution Date
occurs, after taking into account scheduled payments of principal on that date
and any Principal Prepayments received on or after such date and distributed to
Certificateholders on the prior Distribution Date.
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Accretion Directed Certificates....... None.
Accrual Certificates.................. None.
Accrual Components.................... None.
Book-Entry Certificates............... All Classes of Certificates other than the Physical Certificates.
Certificate Group..................... With respect to Pool I, the Group I Senior Certificates, and with respect
to Pool II, the Group II Senior Certificates. The Subordinated
Certificates correspond to all the Mortgage Pools.
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 Residual
Certificates, Private Certificates
and Certificates of any Class that no
longer satisfy the applicable rating
requirement of the Underwriters'
Exemption.
Floating Rate Certificates............ None.
Group I Senior Certificates........... The Class I-A-1 and Class I-A-R Certificates.
Group II Senior Certificates.......... The Class II-A-1 and Class II-A-2 Certificates.
Insured Retail Certificates........... None.
Inverse Floating Rate Certificates.... None.
LIBOR Certificates.................... None.
Non-Delay Certificates................ None.
Notional Amount Components............ None.
Notional Certificates................. The Class II-A-2 Certificates.
Offered Certificates.................. All Classes of the Certificates other than the Private Certificates.
Physical Certificates................. The Private Certificates and the Residual Certificates.
Planned Principal Classes............. None.
Principal Only Certificates........... None.
Private Certificates.................. The Class B-4, Class B-5 and Class B-6 Certificates.
Rating Agencies....................... S&P and Xxxxx'x; except that, for the purposes of the Class B-1, Class
B-2, Class B-3, Class B-4 and Class
B-5 Certificates, S&P shall be the
sole Rating Agency.
Regular Certificates.................. All Classes of Certificates, other than the Residual Certificates.
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Residual Certificates................. The Class I-A-R Certificates.
Scheduled Principal Classes........... None.
Senior Certificates................... The Group I Senior Certificates and the Group II Senior Certificates,
collectively.
Senior Support Certificates........... None
Subordinated Certificates............. The Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6
Certificates.
Super Senior Certificates............. None.
Support Classes....................... None.
Targeted Principal Classes............ None.
Underwriter........................... Credit Suisse First Boston LLC
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 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 (or Notional Amount, in the case of the Notional
Certificates) immediately prior to such Distribution Date, less such Class'
share of any Net Interest Shortfall, allocable among the outstanding Classes of
Senior Certificates of the related Certificate Group based on the Accrued
Certificate Interest otherwise distributable thereto, and allocable to the
Subordinated Certificates based on interest accrued on their related Apportioned
Principal Balances.
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.
Adjustment Date: A date specified in each Mortgage Note as a date on
which the Mortgage Rate on the related Mortgage Loan will be adjusted.
Advance: The payment required to be made by the Master Servicer 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 on the related Due Date and not
received as of the close of business on the related Determination Date, 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.
Allocable Share: With respect to any Class of Subordinated Certificates
on any Distribution Date, such Class' pro rata share (based on the Class
Certificate Balance of each Class entitled thereto) of each of the components of
the Subordinated Optimal Principal Amount for each Mortgage Pool; provided,
that, except as provided in this Agreement, no Subordinated Certificates (other
than the Class of Subordinated Certificates with the highest priority of
distribution) shall be entitled on any Distribution Date to receive
distributions pursuant to clauses (2), (3) and (5) of the definition of
Subordinated Optimal Principal Amount unless the Class Prepayment Distribution
Trigger for such Class is satisfied for such Distribution Date.
Amount Held for Future Distribution: As to any Distribution Date, the
aggregate amount held in the applicable subaccount of the Certificate Account at
the close of business on the related Determination Date on account of (i)
Principal Prepayments on the related Mortgage Pool received after the related
Prepayment Period and Liquidation Proceeds in the related Mortgage Pool received
5
in the month of such Distribution Date and (ii) all Scheduled Payments in the
related Mortgage Pool due after the related Due Date.
Apportioned Principal Balance: For any Class of Subordinated
Certificates and any Distribution Date, an amount equal to the Class Certificate
Balance of such Class immediately prior to that Distribution Date multiplied by
a fraction, the numerator of which is the applicable Group Subordinate Amount
for such Distribution Date and the denominator of which is the sum of the Group
Subordinate Amounts for such Distribution Date.
Appraised Value: With respect to any Mortgage Loan, the Appraised Value
of the related Mortgaged Property shall be: (i) with respect to a Mortgage Loan
other than a Refinancing Mortgage Loan, the lesser of (a) the value of the
Mortgaged Property based upon the appraisal made at the time of the origination
of such Mortgage Loan and (b) the sales price of the Mortgaged Property at the
time of the origination of such Mortgage Loan; (ii) with respect to a
Refinancing Mortgage Loan other than a Streamlined Documentation Mortgage Loan,
the value of the Mortgaged Property based upon the appraisal made at the time of
the origination of such Refinancing Mortgage Loan; and (iii) with respect to a
Streamlined Documentation Mortgage Loan, (a) if the loan-to-value ratio with
respect to the Original Mortgage Loan at the time of the origination thereof was
90% or less, the value of the Mortgaged Property based upon the appraisal made
at the time of the origination of the Original Mortgage Loan and (b) if the
loan-to-value ratio with respect to the Original Mortgage Loan at the time of
the origination thereof was greater than 90%, the value of the Mortgaged
Property based upon the appraisal (which may be a drive-by appraisal) made at
the time of the origination of such Streamlined Documentation Mortgage Loan.
Available Funds: For each Mortgage Pool, with respect to any
Distribution Date, an amount equal to the sum of:
o all scheduled installments of interest, net of the Master
Servicing Fee and the Trustee Fee, and all scheduled installments
of principal due in respect of the Mortgage Loans in such
Mortgage Pool on the Due Date in the month in which the
Distribution Date occurs and received before the related
Determination Date, together with any Advances in respect
thereof;
o all Insurance Proceeds and all Liquidation Proceeds received in
respect of the Mortgage Loans in such Mortgage Pool during the
calendar month before the Distribution Date, which in each case
is net of unreimbursed expenses incurred in connection with a
liquidation or foreclosure and unreimbursed Advances, if any;
o all Principal Prepayments received in respect of the Mortgage
Loans in such Mortgage Pool during the related Prepayment Period,
plus interest received thereon, net of any Prepayment Interest
Excess;
o any Compensating Interest in respect of Principal Prepayments in
Full received in respect of the Mortgage Loans in such Mortgage
Pool during the related Prepayment Period (or, in the case of the
first Distribution Date, from the Cut-off Date); and
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o any Substitution Adjustment Amount or the Purchase Price for any
Deleted Mortgage Loan in the related Mortgage Pool or a Mortgage
Loan in the related Mortgage Pool repurchased by the Seller or
the Master Servicer as of such Distribution Date, reduced by
amounts in reimbursement for Advances previously made and other
amounts that the Master Servicer is entitled to be reimbursed for
out of the Certificate Account pursuant to this Agreement.
Bankruptcy Code: The United States Bankruptcy Reform Act of 1978, as
amended.
Bankruptcy Coverage Termination Date: The date on which the Bankruptcy
Loss Coverage Amount is reduced to zero.
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 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.
Bankruptcy Loss Coverage Amount: As of any Determination Date, the
Bankruptcy Loss Coverage Amount shall equal the Initial Bankruptcy Coverage
Amount as reduced by (i) the aggregate amount of Bankruptcy Losses allocated to
the Certificates since the Cut-off Date and (ii) any permissible reductions in
the Bankruptcy Loss Coverage Amount as evidenced by a letter of each Rating
Agency to the Trustee to the effect that any such reduction will not result in a
downgrading of the then current ratings assigned to the Classes of Certificates
rated by it. As of any Distribution Date on or after the Cross-over Date, the
Bankruptcy Loss Coverage Amount will be zero.
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 City of Dallas, or the State of 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 designated "First Horizon Home Loan Corporation
in trust for the registered holders of First Horizon Asset Securities Inc.
Mortgage Pass-Through Certificates, Series 2004-AA5."
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Certificate Group: As specified in the Preliminary Statement.
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 (other
than the Notional Certificates) and as of any Distribution Date, the Certificate
Principal Balance on the date of the initial issuance of such Certificate, as
reduced by:
(a) all amounts distributed on previous Distribution Dates on such
Certificate on account of principal,
(b) the principal portion of all Realized Losses previously allocated
to such Certificate, and
(c) in the case of a Subordinated Certificate, such Certificate's pro
rata share, if any, of the Subordinated Certificate Writedown
Amount for previous Distribution Dates.
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.
Class: All Certificates bearing the same class designation as set forth
in the Preliminary Statement.
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.
Class Prepayment Distribution Trigger: For a Class of Subordinated
Certificates (other than the Class of Subordinated Certificates with the highest
priority of distribution), a trigger that is satisfied on any Distribution Date
on which a fraction (expressed as a percentage), the numerator of which is the
aggregate Class Certificate Balance of such Class and each Class subordinate
thereto, if any, and the denominator of which is the aggregate Pool Principal
Balance for both Mortgage Pools with respect to such Distribution Date, equals
or exceeds such percentage calculated as of the Closing Date.
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Closing Date: October 29, 2004.
Code: The Internal Revenue Code of 1986, including any successor or
amendatory provisions.
COFI: Not applicable.
COFI Certificates: Not applicable.
Compensating Interest: As to any Distribution Date and any Principal
Prepayment in respect of a Mortgage Loan that is received during the period from
the sixteenth day of the month (or, in the case of the first Distribution Date,
from the Cut-off Date) prior to the month of such Distribution Date through the
last day of such month, an additional payment to the related Mortgage Pool made
by the Master Servicer, to the extent funds are available from the Master
Servicing Fee, equal to the amount of interest at the Adjusted Net Mortgage Rate
for that Mortgage Loan from the date of the prepayment to the related Due Date;
provided that the aggregate of all such payments as to the Mortgage Loans in a
Mortgage Pool shall not exceed 0.0083% of the Pool Principal Balance of such
Mortgage Pool as of the related Determination Date, and provided further that if
a partial Principal Prepayment is applied on or after the first day of the month
following the month of receipt, no additional payment is required for such
Principal Prepayment.
Component: Not applicable.
Component Balance: Not applicable.
Component Certificates: Not applicable.
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
9
2004-AA5), 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 Middle REMIC Interest
identified in Section 2.7, the Class or Classes that are identified in Section
2.7 as corresponding to such Middle REMIC Interest.
Corresponding Classes of Middle REMIC Interests: As to any Lower REMIC
Interest identified in Section 2.7, the Middle REMIC Interest or Middle REMIC
Interests that are identified in Section 2.7 as corresponding to such Lower
REMIC Interest.
Cross-over Date: The Distribution Date on which the respective Class
Certificate Balances of each Class of Subordinated Certificates have been
reduced to zero.
Custodial Agreement: The Custodial Agreement dated as of October 29,
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: October 1, 2004.
Cut-off Date Pool Principal Balance: With respect to Pool I,
$196,841,838.85; and with respect to Pool II, $93,171,319.10.
Cut-off Date Principal Balance: As to any Mortgage Loan, the Stated
Principal Balance thereof as of the close of business on the Cut-off Date.
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, 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.
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: Not applicable.
10
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.
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 designated "The Bank of New York, in
trust for registered Holders of First Horizon Asset Securities Inc. Mortgage
Pass-Through Certificates, Series 2004-AA5." Funds in the Distribution Account
shall be held in trust for the Certificateholders 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 November 2004.
Due Date: With respect to any Distribution Date, the first day of the
month in which the related 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
11
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. 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.
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.
Escrow Account: The Eligible Account or Accounts established and
maintained pursuant to Section 3.6(a) hereof.
Event of Default: As defined in Section 7.1 hereof.
Excess Loss: With respect to a Mortgage Pool, the amount of any (i)
Fraud Loss realized after the Fraud Loss Coverage Termination Date, (ii) Special
Hazard Loss realized after the Special Hazard Coverage Termination Date or (iii)
Deficient Valuation realized after the Bankruptcy Coverage Termination Date.
Excess Proceeds: With respect to any Liquidated Mortgage Loan, the
amount, if any, by which the sum of any 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.
Expense Fee Rate: As to each Mortgage Loan, the sum of the related
Master Servicing Fee Rate and the Trustee Fee Rate.
FDIC: The Federal Deposit Insurance Corporation, or any successor
thereto.
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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.
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.
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.
Fraud Loan: A Liquidated Mortgage Loan as to which a Fraud Loss has
occurred.
Fraud Loss Coverage Amount: As of the Closing Date, $5,800,263. As of
any Distribution Date from the first anniversary of the Cut-off Date and prior
to the fifth anniversary of the Cut-off Date, the Fraud Loss Coverage Amount
will equal $5,800,263 minus the aggregate amount of Fraud Losses that would have
been allocated to the Subordinated Certificates in the absence of the Loss
Allocation Limitation since the Cut-off Date. As of any Distribution Date on or
after the earlier of the Cross-over Date or the fifth anniversary of the Cut-off
Date, the Fraud Loss Coverage Amount shall be zero.
Fraud Loss Coverage Termination Date: The date on which the Fraud Loss
Coverage Amount is reduced to zero.
Fraud Losses: Realized Losses on Mortgage Loans as to which a loss is
sustained by reason of a default arising from fraud, dishonesty or
misrepresentation in connection with the related Mortgage Loan, including a loss
by reason of the denial of coverage under any related Primary Insurance Policy
because of such fraud, dishonesty or misrepresentation.
Group I Senior Certificates: As specified in the Preliminary Statement.
Group II Senior Certificates: As specified in the Preliminary
Statement.
Group Subordinate Amount: For a Mortgage Pool and any Distribution
Date; the excess of (a) the Pool Principal Balance of such Mortgage Pool for the
immediately preceding Distribution Date, over (b) the aggregate Class
Certificate Balance of the Senior Certificates of the related Certificate Group
immediately prior to that Distribution Date.
Index: Not applicable.
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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.
Initial Bankruptcy Coverage Amount: $150,000.
Initial Component Balance: Not applicable.
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 Retail Certificates: Not applicable.
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 Determination Date: Not applicable.
Latest Possible Maturity Date: As to each Class of Senior Certificates
in the Certificate Group corresponding to Pool I, the Distribution Date
following the third anniversary of the scheduled maturity date of the Mortgage
Loan in Pool I having the latest scheduled maturity date as of the Cut-off Date.
As to each Class of Subordinated Certificates, each Class of Senior Certificates
in the Certificate Group corresponding to Pool II, each Lower REMIC Interest,
and each Middle REMIC Interest, the Distribution Date following the third
anniversary of the scheduled maturity date of the Mortgage Loan in Pool II
having the latest scheduled maturity date as of the Cut-off Date.
Lender PMI Mortgage Loan: Not applicable.
LIBOR: Not applicable.
LIBOR Certificates: Not applicable.
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
14
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 Proceeds: Amounts, including Insurance Proceeds and any
Unanticipated Recoveries, received in connection with the partial or complete
liquidation of defaulted Mortgage Loans, whether through trustee's sale,
foreclosure sale or otherwise or amounts received in connection with any
condemnation or partial release of a Mortgaged Property and any other proceeds
received in connection with an REO Property, less the sum of related
unreimbursed Master Servicing Fees, Servicing Advances and Advances.
Loan-to-Value Ratio: With respect to any Mortgage Loan and as to any
date of determination, the fraction (expressed as a percentage) the numerator of
which is the principal balance of the related Mortgage Loan at such date of
determination and the denominator of which is the Appraised Value of the related
Mortgaged Property.
Loss Allocation Limitation: As defined in Section 4.4(g).
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
but excluding the Retained Yield, the Middle REMIC Interests, the Lower REMIC
Interests, the RL Interest, the RM 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.
15
Master Servicing Fee Rate: Prior to the initial Adjustment Date for
each Mortgage Loan, a per annum rate equal to 0.386%. On and after the initial
Adjustment Date for each Mortgage Loan, 0.369%.
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.
Middle REMIC: The segregated pool of assets consisting of the Lower
REMIC Interests.
Middle REMIC Interests: The REMIC regular interests, within the meaning
of the REMIC Provisions, issued by the Middle REMIC as set forth in Section 2.7.
MIN: The Mortgage Identification Number for any MERS Mortgage Loan.
MLPA: The Mortgage Loan Purchase Agreement dated as of October 29,
2004, by and between First Horizon Home Loan Corporation, 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 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
first lien on an estate in fee simple or leasehold interest in real property
securing a Mortgage Note.
Mortgage File: The mortgage documents listed in Section 2.1 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:
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(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 Loan-to-Value 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.
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.
17
Mortgage Pool: Either Pool I or Pool II.
Mortgage Rate: The annual rate of interest borne by a Mortgage Note
from time to time, net of any insurance premium charged by the mortgagee to
obtain or maintain any Primary Insurance Policy.
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 Interest Shortfall: For any Distribution Date and each Mortgage
Pool, the sum of (a) the amount of interest which would otherwise have been
received for any Mortgage Loan in such Mortgage Pool that was the subject of (x)
a Relief Act Reduction or (y) a Special Hazard Loss, Fraud Loss, or Deficient
Valuation, after the exhaustion of the respective amounts of coverage for those
types of losses provided by the Subordinated Certificates; and (b) any Net
Prepayment Interest Shortfalls in respect of such Mortgage Pool.
Net Prepayment Interest Shortfalls: As to any Distribution Date and
each Mortgage Pool, the amount by which the aggregate of Prepayment Interest
Shortfalls in respect of the Mortgage Loans or such Mortgage Pool during the
related Prepayment Period exceeds an amount equal to the Compensating Interest
paid in respect of such Mortgage Loans, if any, for such Distribution Date.
Non-Delay Certificates: As specified in the Preliminary Statement.
Non-Excess Loss: Any Realized Loss other than an Excess Loss.
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 Liquidation Proceeds or otherwise.
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: As specified in the Preliminary Statement.
Notional Amount Component: Not applicable.
Notional Certificates: As specified in the Preliminary Statement.
Offered Certificates: As specified in the Preliminary Statement.
18
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 Group Subordinate Amount: With respect to a Mortgage Pool, the
related Group Subordinate Amount as of the Cut-off Date.
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
(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.
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.
19
Pass-Through Rate: For any 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:
(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;
20
(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);
(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 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
21
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, 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.
Pool I: The aggregate of the Mortgage Loans identified on the Mortgage
Loan Schedule as being included in Pool I.
Pool II: The aggregate of the Mortgage Loans identified on the Mortgage
Loan Schedule as being included in Pool II.
Pool Principal Balance: For each Mortgage Pool, 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.
Prepayment Interest Excess: As to any Principal Prepayment received by
the Master Servicer from the first day through the fifteenth day of any calendar
month (other than the calendar month in which the Cut-off Date occurs), all
amounts paid by the related Mortgagor in respect of interest on such Principal
Prepayment. All Prepayment Interest Excess shall be paid to the Master Servicer
as additional master servicing compensation.
Prepayment Interest Shortfall: As to any Distribution Date, Mortgage
Loan and Principal Prepayment received (a) during the period from the sixteenth
day of the month preceding the month of such Distribution Date (or, in the case
of the first Distribution Date, from the Cut-off Date) through the last day of
such month, in the case of a Principal Prepayment in Full, or (b) during the
month preceding the month of such Distribution Date, in the case of a partial
Principal Prepayment, 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.
22
Prepayment Period: (a) With respect to any Principal Prepayments in
Full and any Distribution Date, the period from the sixteenth day of the month
preceding the month of such Distribution Date (or, in the case of the first
Distribution Date, from the Cut-off Date) through the fifteenth day of the month
of such Distribution Date, and (b) with respect to any other Principal
Prepayments and any Distribution Date, the month preceding the month of such
Distribution Date.
Primary Insurance Policy: Each policy of primary mortgage guaranty
insurance or any replacement policy therefor with respect to any Mortgage Loan.
Principal Balance Schedules: Not applicable.
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.
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.
23
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.
Realized Loss: With respect to each Liquidated Mortgage Loan, an amount
(not less than zero or more than the Stated Principal Balance of the Mortgage
Loan) as of the date of such liquidation, equal to (i) the Stated Principal
Balance of the Liquidated Mortgage Loan as of the date of such liquidation, plus
(ii) interest at the Adjusted Net 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 in the month in which Liquidation Proceeds are required to be
distributed on the Stated Principal Balance of such Liquidated Mortgage Loan
from time to time, minus (iii) the Liquidation Proceeds, if any, received during
the month in which such liquidation occurred, to the extent applied as
recoveries of interest at the Adjusted Net Mortgage Rate and to principal of the
Liquidated Mortgage Loan. With respect to each Mortgage Loan which has become
the subject of a Deficient Valuation, if the principal amount due under the
related Mortgage Note has been reduced, the difference between the principal
balance of the Mortgage Loan outstanding immediately prior to such Deficient
Valuation and the principal balance of the Mortgage Loan as reduced by the
Deficient Valuation.
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: Not applicable.
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 Reductions: With respect to any Distribution Date and any
Mortgage Loan as to which there has been a reduction in the amount of interest
collectible thereon for the most recently ended calendar month as a result of
the application of the Relief Act, the amount, if any, by which 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.
24
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, Middle REMIC or Upper REMIC.
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 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.
Required Recordation States: The states of Florida, Maryland and
Mississippi.
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 I-A-R Certificate.
RM Interest: The REMIC residual interest, within the meaning of the
REMIC Provisions, issued by the Middle REMIC, which shall be represented by the
Class I-A-R Certificate.
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 I-A-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
which, unless otherwise specified herein, shall give effect to any related Debt
25
Service Reduction and any Deficient Valuation that affects the amount of the
monthly payment due on such Mortgage Loan.
Scheduled Principal Classes: Not applicable.
Securities Act: The Securities Act of 1933, as amended.
Security Agreement: The security agreement with respect to a
Cooperative Loan.
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 the MLPA.
Senior Certificates: As specified in the Preliminary Statement.
Senior Final Distribution Date: For each Certificate Group, the
Distribution Date on which the Class Certificate Balance of each Class of
related Senior Certificates has been reduced to zero.
Senior Optimal Principal Amount: As to a Mortgage Pool and with respect
to each Distribution Date, an amount equal to the sum of:
(1) the related Senior Percentage of all Scheduled Payments of
principal due on each Mortgage Loan in such Mortgage Pool on the first day of
the month in which the Distribution Date occurs, as specified in the
amortization schedule at the time applicable thereto after adjustment for
previous principal prepayments and the principal portion of Debt Service
Reductions after the Bankruptcy Loss Coverage Amount has been reduced to zero,
but before any adjustment to such amortization schedule by reason of any other
bankruptcy or similar proceeding or any moratorium or similar waiver or grace
period;
(2) the related Senior Prepayment Percentage of the Stated
Principal Balance of each Mortgage Loan in such Mortgage Pool which was the
subject of a Principal Prepayment in Full received by the Master Servicer during
the applicable Prepayment Period;
(3) the related Senior Prepayment Percentage of all partial
Principal Prepayments in respect of each Mortgage Loan in such Mortgage Pool
received during the applicable Prepayment Period;
(4) the lesser of:
(a) the related Senior Prepayment Percentage of the
sum of (x) the Liquidation Proceeds allocable to principal on
each Mortgage Loan in such Mortgage Pool which became a
Liquidated Mortgage Loan during the related Prepayment Period,
other than Mortgage Loans described in clause (y), and (y) the
principal balance of each Mortgage Loan in such Mortgage Pool
that was purchased by a private mortgage insurer during the
related Prepayment Period as an alternative to paying a claim
under the related Insurance Policy; and
26
(b)(i) the related Senior Percentage of the sum of
(x) the Stated Principal Balance of each Mortgage Loan in such
Mortgage Pool which became a Liquidated Mortgage Loan during
the related Prepayment Period, other than Mortgage Loans
described in clause (y), and (y) the Stated Principal Balance
of each Mortgage Loan in such Mortgage Pool that was purchased
by a private mortgage insurer during the related Prepayment
Period as an alternative to paying a claim under the related
Insurance Policy minus (ii) the related Senior Percentage of
the principal portion of Excess Losses (other than Debt
Service Reductions) for such Mortgage Pool during the related
Prepayment Period; and
(5) the related Senior Prepayment Percentage of the sum of (a)
the Stated Principal Balance of each Mortgage Loan in such Mortgage Pool which
was repurchased by the seller in connection with such Distribution Date and (b)
the difference, if any, between the Stated Principal Balance of a Mortgage Loan
in such Mortgage Pool that has been replaced by the seller with a Substitute
Mortgage Loan pursuant to this Agreement in connection with such Distribution
Date and the Stated Principal Balance of such Substitute Mortgage Loan.
Senior Percentage: On any Distribution Date for a Certificate Group,
the lesser of 100% and the percentage (carried to six places rounded up)
obtained by dividing the aggregate Class Certificate Balances of all Classes of
Senior Certificates of such Certificate Group immediately preceding such
Distribution Date by the Pool Principal Balance of the related Mortgage Pool for
the immediately preceding Distribution Date.
Senior Prepayment Percentage: On any Distribution Date occurring during
the periods set forth below, and as to each Certificate Group, the Senior
Prepayment Percentages, described below:
--------------------------------- -------------------------------------------------------------------
PERIOD (DATES INCLUSIVE) SENIOR PREPAYMENT PERCENTAGE
--------------------------------- -------------------------------------------------------------------
November 2004 - October 2011 100%
--------------------------------- -------------------------------------------------------------------
November 2011 - October 2012 The related Senior Percentage plus 70% of the related Subordinated
Percentage
--------------------------------- -------------------------------------------------------------------
November 2012 - October 2013 The related Senior Percentage plus 60% of the related Subordinated
Percentage
--------------------------------- -------------------------------------------------------------------
November 2013 - October 2014 The related Senior Percentage plus 40% of the related Subordinated
Percentage
--------------------------------- -------------------------------------------------------------------
November 2014 - October 2015 The related Senior Percentage plus 20% of the related Subordinated
Percentage
--------------------------------- -------------------------------------------------------------------
November 2015 and thereafter The related Senior Percentage
--------------------------------- -------------------------------------------------------------------
provided however, (i) if on any Distribution Date the Senior Percentage for a
Certificate Group exceeds the initial Senior Percentage for such Certificate
Group, the Senior Prepayment Percentage for each Certificate Croup for such
Distribution Date will equal 100%, (ii) if on any Distribution Date before the
27
Distribution Date in November 2007, prior to giving effect to any distributions
on such Distribution Date, the Subordinated Percentage for such Certificate
Group for such Distribution Date is equal to or greater than twice the initial
Subordinated Percentage for such Certificate Group, then the Senior Prepayment
Percentage for such Certificate Group for such Distribution Date will equal the
Senior Percentage for such Certificate Group plus 50% of the Subordinated
Percentage for such Certificate Group and (iii) if on any Distribution Date on
or after the Distribution Date in November 2007, prior to giving effect to any
distributions on such Distribution Date, the Subordinated Percentage for such
Certificate Group for such Distribution Date is equal to or greater than twice
the initial Subordinated Percentage for such Certificate Group, then the Senior
Prepayment Percentage for such Certificate Group for such Distribution Date will
equal the Senior Percentage for such Certificate Group.
The reductions in the Senior Prepayment Percentage for each Certificate
Group described above will not occur, and the Senior Prepayment Percentage or
each Certificate Group for such prior period will be calculated without regard
to clause (ii) or (iii) of the paragraph above, unless, as of the last day of
the month preceding the Distribution Date:
(1) the aggregate Stated Principal Balance of Mortgage Loans in
both of the Mortgage Pools delinquent 60 days or more
(including for this purpose any Mortgage Loans in foreclosure
or subject to bankruptcy proceedings and Mortgage Loans with
respect to which the related Mortgaged Property, including REO
Property, has been acquired by the Trust Fund) does not exceed
50% of the aggregate Certificate Principal Balances of the
Subordinated Certificates as of that date; and
(2) cumulative aggregate Realized Losses in both of the Mortgage
Pools do not exceed:
(a) 20% of the aggregate Original Group Subordinate Amount of
both Mortgage Pools if such Distribution Date occurs between
and including November 2004 and October 2007; and
(b) 30% of the aggregate Original Group Subordinate Amount of
both Mortgage Pools if such Distribution Date occurs on or
after November 2007.
Senior Support Certificates: Not applicable.
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, dated as of November 26,
2002 by and between First Horizon Asset Securities Inc. and its assigns, as
owner, and First Tennessee Mortgage Services, Inc., as servicer.
28
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, dated as of November 26, 2002, by
and between First Horizon Home Loan Corporation, as transferor and subservicer,
and First Tennessee Mortgage Services, Inc., as transferee and servicer.
Special Hazard Coverage Termination Date: The date on which the Special
Hazard Loss Coverage Amount is reduced to zero.
Special Hazard Loss: Any Realized Loss suffered by a Mortgaged Property
on account of direct physical loss but not including (i) any loss of a type
covered by a hazard insurance policy or a flood insurance policy required to be
maintained with respect to such Mortgaged Property pursuant to Section 3.9 to
the extent of the amount of such loss covered thereby, or (ii) any loss caused
by or resulting from:
(1) normal wear and tear;
(2) fraud, conversion or other dishonest act on the part of
the Trustee, the Master Servicer or any of their agents or employees (without
regard to any portion of the loss not covered by any errors and omissions
policy);
(3) errors in design, faulty workmanship or faulty materials,
unless the collapse of the property or a part thereof ensues and then only for
the ensuing loss;
(4) nuclear or chemical reaction or nuclear radiation or
radioactive or chemical contamination, all whether controlled or uncontrolled,
and whether such loss be direct or indirect, proximate or remote or be in whole
or in part caused by, contributed to or aggravated by a peril covered by the
definition of the term "Special Hazard Loss";
(5) hostile or warlike action in time of peace and war,
including action in hindering, combating or defending against an actual,
impending or expected attack:
(i) by any government or sovereign power, de jure or
de facto, or by any authority maintaining or using military,
naval or air forces;
(ii) by military, naval or air forces; or
(iii) by an agent of any such government, power,
authority or forces;
(6) any weapon of war employing nuclear fission, fusion or
other radioactive force, whether in time of peace or war; or
(7) insurrection, rebellion, revolution, civil war, usurped
power or action taken by governmental authority in hindering, combating or
defending against such an occurrence, seizure or destruction under quarantine or
29
customs regulations, confiscation by order of any government or public authority
or risks of contraband or illegal transportation or trade.
Special Hazard Loss Coverage Amount: Upon the initial issuance of the
Certificates, $3,000,000. As of any Distribution Date, the Special Hazard Loss
Coverage Amount will equal the greater of
(a) 1.00% (or if greater than 1.00%, the highest percentage of
Mortgage Loans by principal balance secured by Mortgaged Properties in any
single California zip code) of the outstanding principal balance of all the
Mortgage Loans as of the related Determination Date; and
(b) twice the outstanding principal balance of the Mortgage
Loan which has the largest outstanding principal balance as of the related
Determination Date,
less, in each case, the aggregate amount of Special Hazard Losses that would
have been previously allocated to the Subordinated Certificates in the absence
of the Loss Allocation Limitation. As of any Distribution Date on or after the
Cross-over Date, the Special Hazard Loss Coverage Amount will be zero.
Special Hazard Mortgage Loan: A Liquidated Mortgage Loan as to which a
Special Hazard Loss has occurred.
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.
Startup Day: The Closing Date.
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.
Streamlined Documentation Mortgage Loan: Any Mortgage Loan originated
pursuant to the Seller's Streamlined Loan Documentation Program then in effect.
Subordinated Certificates: As specified in the Preliminary Statement.
Subordinated Certificate Writedown Amount: As of any Distribution Date,
the amount by which (a) the sum of the Class Certificate Balances of all of the
Certificates, after giving effect to the distribution of principal and the
allocation of Realized Losses in reduction of the Class Certificate Balances of
all of the Certificates on such Distribution Date, exceeds (b) the aggregate
30
Pool Principal Balance for both Mortgage Pools on the first day of the month of
such Distribution Date less any Deficient Valuations occurring before the
Bankruptcy Loss Coverage Amount has been reduced to zero.
Subordinated Optimal Principal Amount: With respect to each Mortgage
Pool and each Distribution Date, an amount equal to the sum of the following
(but in no event greater than the aggregate Class Certificate Balances of the
Subordinated Certificates immediately prior to such Distribution Date):
(1) the related Subordinated Percentage of all Scheduled
Payments of principal due on each outstanding Mortgage Loan in the related
Mortgage Pool on the first day of the month in which the Distribution Date
occurs, as specified in the amortization schedule at the time applicable
thereto, after adjustment for previous principal prepayments and the principal
portion of Debt Service Reductions after the Bankruptcy Loss Coverage Amount has
been reduced to zero, but before any adjustment to such amortization schedule by
reason of any other bankruptcy or similar proceeding or any moratorium or
similar waiver or grace period;
(2) the related Subordinated Prepayment Percentage of the
Stated Principal Balance of each Mortgage Loan in the related Mortgage Pool
which was the subject of a Principal Prepayment in Full received by the Master
Servicer during the related Prepayment Period;
(3) the related Subordinated Prepayment Percentage of all
partial Principal Prepayments received in respect of each Mortgage Loan in the
related Mortgage Pool during the related Prepayment Period, plus, on the Senior
Final Distribution Date, 100% of any related Senior Optimal Principal Amount
remaining undistributed on such date;
(4) the amount, if any, by which the sum of (a) the net
Liquidation Proceeds allocable to principal received during the related
Prepayment Period in respect of each Liquidated Mortgage Loan in the related
Mortgage Pool, other than Mortgage Loans described in clause (b), and (b) the
principal balance of each Mortgage Loan in the related Mortgage Pool that was
purchased by a private mortgage insurer during the related Prepayment Period as
an alternative to paying a claim under the related Insurance Policy exceeds (c)
the sum of the amounts distributable to the Senior Certificateholders under
clause (4) of the definition of applicable Senior Optimal Principal Amount on
such Distribution Date; and
(5) the related Subordinated Prepayment Percentage of the sum
of (a) the Stated Principal Balance of each Mortgage Loan in the related
Mortgage Pool which was repurchased by the seller in connection with such
Distribution Date and (b) the difference, if any, between the Stated Principal
Balance of a Mortgage Loan in the related Mortgage Pool that has been replaced
by the seller with a Substitute Mortgage Loan pursuant to the Agreement in
connection with such Distribution Date and the Stated Principal Balance of each
such Substitute Mortgage Loan.
Subordinated Percentage: For any Distribution Date and each Certificate
Group, 100% minus the related Senior Percentage.
31
Subordinated Prepayment Percentage: For any Distribution Date, 100%
minus the Senior Prepayment Percentage.
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 Adjusted Net
Mortgage Rate of the Deleted Mortgage Loan, provided that the Master Servicing
Fee for the Substitute Mortgage Loan shall be equal to or greater than that of
the Deleted Mortgage Loan; (iii) have a maximum mortgage rate not more than 1%
per annum higher or lower than the maximum mortgage rate of the Deleted Mortgage
Loan; (iv) have a minimum mortgage rate specified in its related Mortgage Note
not more than 1% per annum higher or lower than the minimum mortgage rate of the
Deleted Mortgage Loan; (v) have the same mortgage index, reset period and
periodic rate as the Deleted Mortgage Loan and a gross margin not more than 1%
per annum higher or lower than that of the Deleted Mortgage Loan (vi) be
accruing interest at a rate no lower than and not more than 1% per annum higher
than, that of the Deleted Mortgage Loan; (iv) have a Loan-to-Value Ratio no
higher than that of the Deleted Mortgage Loan; (vii) have a remaining term to
maturity no greater than (and not more than one year less than that of) the
Deleted Mortgage Loan; (viii) not be a Cooperative Loan unless the Deleted
Mortgage Loan was a Cooperative Loan and (ix) 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.
Super Senior Certificates: Not applicable.
Support Classes: Not applicable.
Targeted Balances: Not applicable.
Targeted Principal Classes: Not applicable.
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 I-A-R Certificates with a
Denomination of $0.01.
Transfer: Any direct or indirect transfer or sale of any Ownership
Interest in a Residual Certificate.
32
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 the MLPA; (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; and (v) 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 and a Mortgage Pool, an amount
equal to one-twelfth of the Trustee Fee Rate multiplied by the applicable 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.
Two Times Test: A test that is satisfied with respect to a Certificate
Group and any Distribution Date if the related Senior Prepayment Percentage for
such Distribution Date is determined in accordance with clause (ii) and (iii) of
the proviso in the definition of "Senior Prepayment Percentage."
Unanticipated Recovery: As defined in Section 4.2(f).
Undercollateralization Distribution: As defined in Section 4.2(g).
Undercollateralized Group: With respect to any Distribution Date, the
Senior Certificates of any Certificate Group as to which the aggregate
Certificate Principal Balance thereof, after giving effect to distributions
pursuant to Section 4.2(a) on such date, is greater than the Pool Principal
Balance of the related Mortgage Pool for such Distribution Date.
Underwriter: As specified in the Preliminary Statement.
Underwriters' Exemption: Prohibited Transaction Exemption 2002-41, 67
Fed. Reg. 54487 (2002), as amended (or any successor thereto), or any
substantially similar administrative exemption granted by the U.S. Department of
Labor.
Upper REMIC: The segregated pool of assets consisting of the Middle
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 I-A-R and Class II-A-2 Certificates,
in proportion to their then outstanding Class Certificate Balances; and (b) 1.0%
of all Voting Rights will be allocated to the Class I-A-R Certificates and 1.0%
of all Voting Rights will be allocated to the Class II-A-2 Certificates (such
33
Voting Rights to be allocated among the Holders of Certificates of each such
Class in accordance with their respective Percentage Interests).
Weighted Average Adjusted Net Mortgage Rate: For a Mortgage Pool, the
average of the Adjusted Net Mortgage Rates of the Mortgage Loans in the related
Loan Group, weighted on the basis of the Stated Principal Balances thereof.
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, without
recourse, all the right, title and interest of the Depositor in and
to the Trust Fund together with (i) the Depositor's right to (A)
require the Seller to cure any breach of a representation or
warranty made by the Seller pursuant to the MLPA, or (B) repurchase
or substitute for any affected Mortgage Loan in accordance herewith,
and (ii) 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.
(b) In connection with the transfer and assignment set forth in clause
(a) above, the Depositor has delivered or caused to be delivered 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 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
34
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;
(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) 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) 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 or otherwise in connection with the rating of
the Certificates, 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
35
mortgagee to the Trustee with evidence of recording
thereon (or in a form suitable for recordation).
In the event that in connection with any Mortgage Loan that is not a
MERS Mortgage Loan 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 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 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) 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
36
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 for which either the original or duplicate
original title policy has not been delivered to the Trust, 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.
Subject to the immediately following sentence, as promptly as
practicable subsequent to such transfer and assignment, and in any event, within
thirty (30) days thereafter, the Master Servicer shall (i) complete each
assignment of Mortgage, as follows: "First Horizon Mortgage Pass-Through
Certificates, Series 2004-AA5, 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. Notwithstanding the
foregoing, the Master Servicer need not cause to be recorded any assignment
which relates to a Mortgage Loan in any state other than the Required
Recordation States.
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. At the end of such thirty-day period, the Trustee
or the Custodian, on its behalf shall send a Delay Delivery Certification for
the Delay Delivery Mortgage Loans delivered during such thirty-day period in
37
accordance with the provisions of Section 2.2. 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.
The Trustee or the Custodian, on behalf of the Trustee, acknowledges
receipt of the documents identified in the Initial Certification in the form
annexed hereto as Exhibit E and declares that it or the Custodian holds and will
hold such documents and the other documents delivered to it or the Custodian, as
applicable, constituting the Mortgage Files, and that it or the Custodian, as
applicable, holds or will hold such other assets as are included in the Trust
Fund, in trust for the exclusive use and benefit of all present and future
Certificateholders. The Trustee acknowledges that the Custodian will maintain
possession of the Mortgage Notes in the State of Illinois, unless otherwise
permitted by the Rating Agencies.
The Trustee agrees to execute and deliver or to cause the Custodian to
execute and deliver on the Closing Date to the Depositor and the Master Servicer
an Initial Certification in the form annexed hereto as Exhibit E. Based on its
or the Custodian's review and examination, and only as to the documents
identified in such Initial Certification, the Custodian, on behalf of the
Trustee, acknowledges that such documents appear regular on their face and
relate to such Mortgage Loan. Neither the Trustee nor the Custodian shall be
under any 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.
On or about the thirtieth (30th) day after the Closing Date, the
Trustee shall deliver or shall cause the Custodian to deliver to the Depositor
and the Master Servicer a Delay Delivery Certification in the form annexed
hereto as Exhibit F, with any applicable exceptions noted thereon.
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.
Not later than 90 days after the Closing Date, the Trustee shall
deliver or shall cause the Custodian to deliver to the Depositor and the Master
Servicer a Final Certification in the form annexed hereto as Exhibit G, with any
applicable exceptions noted thereon.
If, in the course of such review, the Trustee or the Custodian, on
behalf of 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 or
shall cause the Custodian to list such as an exception in the Final
Certification; provided, however that neither the Trustee nor the Custodian
shall 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 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
38
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. The Trustee shall deliver or shall cause the Custodian to deliver written
notice to each Rating Agency within 270 days from the Closing Date 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. Such notice shall be delivered every 90 days thereafter until the
related Mortgage Loan is returned to the Trustee or the Custodian on its behalf.
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 cause the Custodian
to 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. If pursuant to the foregoing provisions the Seller repurchases
a Mortgage Loan that is a MERS Mortgage Loan, the Master Servicer shall either
(i) cause MERS to execute and deliver an assignment of the Mortgage in
recordable form to transfer the Mortgage from MERS to the Seller and shall cause
such Mortgage to be removed from registration on the MERS(R) System in
accordance with MERS' rules and regulations or (ii) cause MERS to designate on
the MERS(R) System the Seller as the beneficial holder of such Mortgage Loan.
The Trustee shall retain or 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 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 the MLPA, which contains, among other
representations and warranties, a representation and warranty of the Seller that
39
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 (collectively, the "Acts")), and (ii) Substitute Mortgage Loans (which, by
definition as set forth in this Agreement and referred to in the MLPA, are
required to conform to, among other representations and warranties, a
representation and warranty of the Seller set forth in the MLPA 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" 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 and the
Trustee, 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 the
MLPA that materially and adversely affects the interests of
the Certificateholders in any Mortgage Loan, the party
discovering such breach shall give prompt notice thereof to
the other parties. 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 the MLPA which
materially and adversely affects the interests of the
Certificateholders 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
40
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 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
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
the MLPA 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 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.
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
41
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
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.
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.
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.
SECTION 2.4 Representations and Warranties of the Depositor as to the Mortgage
Loans.
The Depositor hereby represents and warrants to the Trustee 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 the MLPA 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.
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 or the Trustee 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, the party discovering such
breach shall give prompt written notice to the others 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, 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
42
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. In
connection therewith, the Trustee shall require the Depositor
to cause the Seller, pursuant to the MLPA 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 Holders of the
Certificates and to perform the duties set forth in this Agreement to the best
of its ability, to the end that the interests of the Holders of the Certificates
may be adequately and effectively protected.
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 Middle REMIC.
The assets of the Middle REMIC shall be as set forth in the definition
thereof. Each interest identified in the second table below by a designation
beginning with "M" shall be a "regular interest" in the Middle REMIC and a
Middle REMIC Interest, and the RM Interests shall be the sole class of residual
interest in the Middle REMIC. The Middle REMIC Interests shall be uncertificated
and shall be held by the Trustee as assets of the Upper REMIC.
43
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 I-A-R Certificate shall represent ownership of the RL
Interest, RM Interest and RU Interest.
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.
-------------------------------------------------------------------------------------------------------------
Corresponding Class of Middle REMIC
Lower REMIC Interests
Interest or Lower REMIC Interest Lower REMIC Interest Rate ----------------------------------------
Residual Balance Interest Principal
------------------ ---------------------- -------------------------- ------------------------ ---------------
L-I-A-1 $ 106,296.65 Same as Class I-A-1 (1) (1)
------------------ ---------------------- -------------------------- ------------------------ ---------------
L-I-A-2 $ 11,810.74 Same as Class I-A-1 (1) (1)
------------------ ---------------------- -------------------------- ------------------------ ---------------
L-I-A-ZZZ $ 196,723,731.46 Same as Class I-A-1 (1) (1)
------------------ ---------------------- -------------------------- ------------------------ ---------------
RL $ 0.00 N/A N/A N/A
------------------ ---------------------- -------------------------- ------------------------ ---------------
L-II-A-1 $ 50,312.87 (2) (1) (1)
------------------ ---------------------- -------------------------- ------------------------ ---------------
L-II-A-2 $ 5,590.32 (2) (1) (1)
------------------ ---------------------- -------------------------- ------------------------ ---------------
L-II-A-ZZZ $ 93,115,415.91 (2) (1) (1)
------------------ ---------------------- -------------------------- ------------------------ ---------------
(1) The Lower REMIC Interest L-I-A-1, Lower REMIC Interest L-I-A-2 and Lower
REMIC Interest L-I-A-ZZZ shall be Corresponding Classes to these classes of
Middle REMIC Interests: X-X-X-0, X-X-X-XX, X-X-0, X-X-0, X-X-0, X-X-0, M-B-5 and
M-B-6 (provided that with respect to X-X-0, X-X-0, X-X-0, X-X-0, X-X-0 and
M-B-6, such Lower REMIC Interests shall only correspond to the portion supported
by Pool I). The Lower REMIC Interest L-II-A-1, Lower REMIC L-II-A-2 and Lower
REMIC Interest L-II-A-ZZZ shall be Corresponding Classes to these classes of
Middle REMIC Interests: M-II-A-1, X-X-0, X-X-0, X-X-0, X-X-0, X-X-0 and M-B-6
(provided that with respect to X-X-0, X-X-0, X-X-0, X-X-0, X-X-0 and M-B-6, such
Lower REMIC Interests shall only correspond to the portion supported by Pool
II).
(2) The Lower REMIC Interest Rate for the Lower REMIC Interests L-II-A-1,
L-II-A-2 and L-II-A-ZZZ will equal the Weighted Average Adjusted Net Mortgage
Rate for Pool II.
"L1 Interests" refers to the L-I-A-1 Lower REMIC Interest and the
L-II-A-1 Lower REMIC Interests. "L2 Interests" refers to the L-I-A-2 Lower REMIC
Interest and the L-II-A-2 Lower REMIC Interest. "LZZZ Interests" refers to
L-I-A-ZZZ Lower REMIC Interest and L-II-A-ZZZ Lower REMIC Interest. "Each L1
Interest shall have a principal balance initially equal to 0.9% of the Group
Subordinate Amount of its corresponding Mortgage Pool. Each L2 Interest shall
have a principal balance initially equal to 0.1% of the Group Subordinate Amount
of its corresponding Mortgage Pool. The initial principal balance of each LZZZ
Interest shall equal the excess of the Pool Principal Balance of its
corresponding Mortgage Pool over the sum of the initial principal balances of
the L1 Interests and L2 Interests corresponding to such Mortgage Pool.
Unless a Cross-over Situation (as defined below) exists, principal and
Realized Losses arising with respect to each Mortgage Pool shall be allocated
first to cause the L1 and L2 Interests corresponding to such Mortgage Pool to
44
equal 0.9% and 0.1% of the Group Subordinate Amount of such Mortgage Pool as of
such Distribution Date (after distributions of principal and allocation of
Realized Losses are made) and all excess principal and Realized Losses shall be
allocated to the LZZZ Interest corresponding to such Mortgage Pool. A L1, L2 or
LZZZ Interest that is allocated principal on any Distribution Date shall receive
such principal, and have its principal balance reduced by the amount of such
principal, on such Distribution Date. Similarly, a L1, L2 or LZZZ Interest that
is allocated a Realized Loss on any Distribution Date shall have its principal
balance reduced by the amount of such Realized Loss on such Distribution Date.
A "Cross-over Situation" exists if on any Distribution Date (after
taking into account distributions of principal and allocations of Realized
Losses on such Distribution Date) the L1 and L2 Interests corresponding to any
Mortgage Pool are in the aggregate less than 1% of the Group Subordinate Amount
of the corresponding Mortgage Pool. If a Cross-over Situation exists on any
Distribution Date, and the weighted average interest rate of the outstanding L1
and L2 Interests is less than the Pass-Through Rate for any Class of Subordinate
Certificates for the following Distribution Date, a Principal Reallocation
Payment (as defined below) shall be made proportionately to the outstanding L1
Interests prior to any other distributions of principal from each such Mortgage
Pool so that the Calculation Rate equals the Pass-Through Rate for each Class of
Subordinate Certificates. If a Cross-over Situation exists on any Distribution
Date, and the weighted average rate of the outstanding L1 and L2 Interests is
greater than the Pass-Through Rate for any Class of Subordinate Certificates for
the following Distribution Date, a Principal Reallocation Payment shall be made
proportionately to the outstanding L2 Interests prior to any other distributions
of principal from each such Mortgage Pool so that the Calculation Rate equals
the Pass-Through Rate for each Class of Subordinate Certificates. A "Principal
Reallocation Payment" is a distribution of the minimum amount of principal that
causes the Calculation Rate (as defined below) with respect to the outstanding
L1 and L2 Interests to equal the Pass-Through Rate for each Class of Subordinate
Certificates. The "Calculation Rate" shall equal the product of (i) 10 and (ii)
the weighted average interest rate of the outstanding L1 and L2 Interests,
treating each L1 Interest as capped at zero or reduced by a fixed percentage of
100% of the interest accruing on such class. Principal Reallocation Payments
shall be made from principal received on the Mortgage Loans from a Mortgage Pool
and shall also consist of a proportionate allocation of Realized Losses from the
Mortgage Loans of a Mortgage Pool. For purposes of making Principal Reallocation
Payments, to the extent that the principal received during the applicable
collection period from the related Mortgage Pool and related Realized Losses are
insufficient to make the necessary reduction of principal, then interest shall
accrue on the LZZZ Interest (and be added to its principal balance) of the
related Mortgage Pool to allow the necessary Principal Reallocation Payment to
be made. The Calculation Rate is designed to always equal the Pass-Through Rate
of each Class of Subordinated Certificates.
If a Cross-over Situation exists, the aggregate principal balances of
the outstanding L1 and L2 Interests of all of the Mortgage Pools shall not be
reduced below one percent of the aggregate Pool Principal Balance of all of the
Mortgage Pools for the following Distribution Date in excess of the Senior
Certificates as of the related Distribution Date (after taking into account
distributions of principal and allocations of Realized Losses on such
Distribution Date). To the extent this limitation prevents the distribution of
principal to the L1 and L2 Interests of a Mortgage Pool and the related LZZZ
Interest has already been reduced to zero, such excess principal from such
Mortgage Pool shall be paid proportionately to the LZZZ Interests of the
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Mortgage Pool whose aggregate L1 and L2 Interests are less than one percent of
the Group Subordinate Amount. Any such shortfall as a result of the Mortgage
Pool receiving the extra payment having a Weighted Average Adjusted Net Mortgage
Rate lower than the Weighted Average Adjusted Net Mortgage Rate of the Mortgage
Pool from which the payment was reallocated shall be treated as a Realized Loss
and if excess arises as result of the Mortgage Pool receiving the extra payment
having a Weighted Average Adjusted Net Mortgage Rate higher than the Mortgage
Pool from which the payment was reallocated it shall reimburse the Middle REMIC
for prior Realized Losses. If on any Distribution Date, the L1 Interest or L2
Interest remains outstanding after the related Pool Principal Balance is at zero
as of the beginning of the Accrual Period corresponding to such Distribution
Date, their Lower REMIC Interest Rate shall be the Weighted Average Adjusted Net
Mortgage Rate of the Mortgage Pool with the lowest Weighted Average Adjusted Net
Mortgage Rate that remains outstanding and the excess of interest at the
Pass-Through Rate for the Subordinated Certificates over interest at such
Weighted Average Adjusted Net Mortgage Rate shall be treated as paid from Lower
REMIC to the Middle REMIC as reimbursement for prior Realized Losses.
------------------ ---------------------- -------------------------- ----------------------------------------
Middle Corresponding Class or Interest
REMIC Interest Middle REMIC Middle REMIC Interest ----------------------------------------
or Residual Interest Balance Rate Interest Principal
------------------ ---------------------- -------------------------- ------------------------ ---------------
M-I-A-1 $ 185,031,000.00 Same as Class X-X-0 X-X-0 X-X-0
------------------ ---------------------- -------------------------- ------------------------ ---------------
M-I-A-RU $ 100.00 Same as Class I-A-1 RU Interest RU Interest
------------------ ---------------------- -------------------------- ------------------------ ---------------
M-II-A-1 $ 87,581,000.00 (1) II-A-1, II-A-2 (3) II-A-1
------------------ ---------------------- -------------------------- ------------------------ ---------------
M-B-1 $ 8,120,000.00 (2) B-1 B-1
------------------ ---------------------- -------------------------- ------------------------ ---------------
M-B-2 $ 3,190,000.00 (2) B-2 B-2
------------------ ---------------------- -------------------------- ------------------------ ---------------
M-B-3 $ 1,885,000.00 (2) B-3 B-3
------------------ ---------------------- -------------------------- ------------------------ ---------------
M-B-4 $ 1,885,000.00 (2) B-4 B-4
------------------ ---------------------- -------------------------- ------------------------ ---------------
M-B-5 $ 1,451,000.00 (2) B-5 B-5
------------------ ---------------------- -------------------------- ------------------------ ---------------
M-B-6 $ 870,057.95 (2) B-6 B-6
------------------ ---------------------- -------------------------- ------------------------ ---------------
RM $ 0.00 N/A N/A N/A
------------------ ---------------------- -------------------------- ------------------------ ---------------
(1) The Middle REMIC Interest Rate for the Middle REMIC Interest M-II-A-1 will
be equal to the interest rate on Lower REMIC Interest L-II-A-ZZZ.
(2) The Middle REMIC Interest Rate for the Middle REMIC Interest M-B-1, Middle
REMIC Interest M-B-2, Middle REMIC Interest M-B-3, Middle REMIC Interest M-B-4,
Middle REMIC Interest M-B-5, Middle REMIC Interest M-B-6 shall equal the
Calculation Rate as defined in this Section 2.7. The Pass-Through Rate on each
Class of Subordinated Certificates is variable and will be equal to the weighted
average of the Middle REMIC Interest Rates on Middle REMIC Interest M-B-1,
Middle REMIC Interest M-B-2, Middle REMIC Interest M-B-3, Middle REMIC Interest
M-B-4, Middle REMIC Interest M-B-5, Middle REMIC Interest M-B-6, weighted on the
basis of the principal balance of each such Middle REMIC Interest.
(3) Interest on the Middle REMIC Interest M-II-A-1 shall be allocated as
follows: (i) interest at a rate equal to the Pass-Through Rate on the Class
II-A-1 Certificates is allocated to the Class II-A-1 Certificates (ii) the
interest on the Class II-A-2 Certificates shall consist of two components, one
accruing at the per annum rate of 0.1728% on the Middle REMIC M-II-A-1 Balance
46
until the Distribution Date occurring in October 2009, then at a rate of 0.0%,
and one accruing at the per annum rate of 0.1250% on the Middle REMIC M-II-A-1
Balance, and the Class II-A-2 Certificates shall represent these two components.
On each Distribution Date Available Funds shall be distributed with
respect to the Middle REMIC Interests in a manner such that:
(a) interest accrued, if any, on each Middle REMIC Interest is
distributed with respect to each such Middle REMIC Interest in
the same manner that Accrued Certificate Interest is
distributed with respect to the Corresponding Class or Classes
of Certificates pursuant to Section 4.2; and
(b) principal is distributed (and Realized Losses shall be
allocated) with respect to each such Middle REMIC Interest in
the same manner that principal is distributed (and Realized
Losses is allocated) with respect to the Corresponding Classes
or Classes of Certificate pursuant to Section 4.2 and Section
4.4.
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. 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 and the Trustee
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 or the Trustee 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, 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; provided that if
there is a conflict between the terms of the Servicing Agreement and the
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Servicing Rights Transfer and Subservicing Agreement, on the one hand, and this
Agreement, on the other hand, the terms of 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 or the
Certificateholders in any Mortgage Loan or the rights and interests of the
Depositor, the Trustee and the Certificateholders 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 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. 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 shall 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 shall be reimbursable in the first instance from
related collections from the Mortgagors pursuant to Section 3.6, and further as
provided in Section 3.8. The costs incurred by the Master Servicer, if any, in
48
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.
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 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.
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.
49
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 make reasonable efforts in
accordance with the customary and usual standards of practice
of prudent mortgage servicers 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 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
shall 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
50
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 Certificate Account shall consist of
two separate subaccounts, each of which shall relate to a
particular Mortgage Pool. The Master Servicer shall deposit or
cause to be deposited into the appropriate subaccount of 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 payments on account of principal on the Mortgage
Loans in the related Mortgage Pool, including
Principal Prepayments;
(ii) all payments on account of interest on the Mortgage
Loans in the related Mortgage Pool, net of the
related Master Servicing Fee and any Prepayment
Interest Excess;
(iii) all Insurance Proceeds and Liquidation Proceeds in
respect of the related Mortgage Loans in the related
Mortgage Pool, other than proceeds to be applied to
the restoration or repair of the Mortgaged Property
or released to the Mortgagor in accordance with the
Master Servicer's normal servicing procedures;
(iv) any amount required to be deposited by the Master
Servicer in respect of the related Mortgage Pool
pursuant to Section 3.5(c) in connection with any
losses on Permitted Investments;
(v) any amounts required to be deposited by the Master
Servicer in respect of the related Mortgage Pool
pursuant to Section 3.9(b), 3.9(d), and in respect of
net monthly rental income from any related REO
Property pursuant to Section 3.11 hereof;
(vi) all Substitution Adjustment Amounts in respect of the
related Mortgage Pool;
(vii) all Advances in respect of the related Mortgage Pool
made by the Master Servicer pursuant to Section 4.1;
and
(viii) any other amounts required to be deposited hereunder
in respect of the related Mortgage Pool.
In addition, with respect to any Mortgage Loan that is subject
to a buydown agreement, on each Due Date for such Mortgage Loan, in
addition to the monthly payment remitted by the Mortgagor, the Master
Servicer shall cause funds to be deposited into the applicable
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subaccount of the Certificate Account in an amount required to cause an
amount of interest to be paid with respect to such Mortgage Loan equal
to the amount of interest that has accrued on such Mortgage Loan from
the preceding Due Date at the related Adjusted Mortgage Rate on such
date.
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 until withdrawn in accordance with Section
3.8.
(c) The Trustee shall establish and maintain, on behalf of the
Certificateholders, the Distribution Account. The Distribution
Account shall consist of two separate subaccounts, each of
which shall relate to a particular Mortgage Pool. 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 in respect of a Mortgage Pool pursuant
to Section 3.8(a)(ix);
(ii) any amount deposited by the Master Servicer pursuant
to this Section 3.5(c) in connection with any losses
on Permitted Investments; and
(iii) 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 applicable subaccount of 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.
52
(iv) 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. 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 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 Realized
Losses in the Certificate Account in respect of any
such investments shall promptly be deposited by the
Master Servicer in the Certificate Account and the
amount of any Realized Losses in 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.
(v) The Master Servicer shall give notice to the Trustee,
the Seller, 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, 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 Collection of Taxes, Assessments and Similar
Items; Escrow Accounts.
(a) To the extent required by the related Mortgage Note and not
violative of current law, the Master Servicer shall establish
and maintain one or more accounts (each, an "Escrow Account")
and deposit and retain therein all collections from the
Mortgagors (or advances by the Master Servicer) for the
53
payment of taxes, assessments, hazard insurance premiums or
comparable items for the account of the Mortgagors. Nothing
herein shall require the Master Servicer to compel a Mortgagor
to establish an Escrow Account in violation of applicable law.
(b) Withdrawals of amounts so collected from the Escrow Accounts
may be made only to effect timely payment of taxes,
assessments, hazard insurance premiums, condominium or PUD
association dues, or comparable items, to reimburse the Master
Servicer out of related collections for any payments made
pursuant to Sections 3.1 hereof (with respect to taxes and
assessments and insurance premiums) and 3.9 hereof (with
respect to hazard insurance), to refund to any Mortgagors any
sums determined to be overages, to pay interest, if required
by law or the terms of the related Mortgage or Mortgage Note,
to Mortgagors on balances in the Escrow Account or to clear
and terminate the Escrow Account at the termination of this
Agreement in accordance with Section 9.1 hereof. The Escrow
Accounts shall not be a part of the Trust Fund.
(c) The Master Servicer shall advance any payments referred to in
Section 3.6(a) that are not timely paid by the Mortgagors on
the date when the tax, premium or other cost for which such
payment is intended is due, but the Master Servicer shall be
required so to advance only to the extent that such advances,
in the good faith judgment of the Master Servicer, will be
recoverable by the Master Servicer out of Insurance Proceeds,
Liquidation Proceeds or otherwise.
SECTION 3.7 Access to Certain Documentation and Information
Regarding the Mortgage Loans.
The Master Servicer shall afford the Depositor and the Trustee
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.
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 applicable subaccount of 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
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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
unreimbursed Advances made by it in respect of the
related Mortgage Pool, 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 in respect of
the related Mortgage Pool;
(iv) to reimburse the Master Servicer for Insured Expenses
from the related Insurance Proceeds in respect of the
related Mortgage Pool;
(v) to reimburse the Master Servicer for (a) unreimbursed
Servicing Advances in respect of the related Mortgage
Pool, 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 or Section 3.6 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 in
respect of the related Mortgage Pool 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
(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 and on a Mortgage
Pool-by-Mortgage Pool 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
55
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 applicable
subaccount of 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; Maintenance of
Primary Insurance Policies.
(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 applicable subaccount of 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
recoverable by the Master Servicer out of late payments by the
related Mortgagor or out of Liquidation Proceeds to the extent
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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 applicable
subaccount of 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, claims under any such
blanket policy.
(c) The Master Servicer shall not take any action which would
result in non-coverage under any applicable Primary Insurance
Policy of any loss which, but for the actions of the Master
Servicer, would have been covered thereunder. The Master
Servicer shall not cancel or refuse to renew any such Primary
Insurance Policy that is in effect at the date of the initial
issuance of the Certificates and is required to be kept in
force hereunder unless the replacement Primary Insurance
Policy for such canceled or non-renewed policy is maintained
with a Qualified Insurer.
The Master Servicer shall not be required to maintain any Primary
Insurance Policy (i) with respect to any Mortgage Loan with a Loan-to-Value
Ratio less than or equal to 80% as of any date of determination or, based on a
new appraisal, the principal balance of such Mortgage Loan represents 80% or
less of the new appraised value or (ii) if maintaining such Primary Insurance
Policy is prohibited by applicable law.
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The Master Servicer agrees to effect the timely payment of the premiums
on each Primary Insurance Policy, and such costs not otherwise recoverable shall
be recoverable by the Master Servicer from the related liquidation proceeds.
(d) In connection with its activities as Master Servicer of the
Mortgage Loans, the Master Servicer agrees to present on
behalf of itself, the Trustee and Certificateholders, claims
to the insurer under any Primary Insurance Policies and, in
this regard, to take such reasonable action as shall be
necessary to permit recovery under any Primary Insurance
Policies respecting defaulted Mortgage Loans. Any amounts
collected by the Master Servicer under any Primary Insurance
Policies shall be deposited in the applicable subaccount of
the Certificate Account.
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 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.
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(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.
SECTION 3.11 Realization Upon Defaulted Mortgage Loans;
Repurchase of Certain Mortgage Loans.
The Master Servicer shall use reasonable efforts to foreclose upon or
otherwise comparably convert the ownership of properties securing such of the
Mortgage Loans as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments. In
connection with such foreclosure or other conversion, the Master Servicer shall
follow such practices and procedures as it shall deem necessary or advisable and
as shall be normal and usual in its general mortgage servicing activities and
meet the requirements of the insurer under any Required Insurance Policy;
provided, however, that the Master Servicer shall not be required to expend its
own funds in connection with any foreclosure or towards the restoration of any
property unless it shall determine (i) that such restoration and/or foreclosure
will increase the proceeds of liquidation of the Mortgage Loan after
reimbursement to itself of such expenses and (ii) that such expenses will be
recoverable to it through Liquidation Proceeds (respecting which it shall have
priority for purposes of withdrawals from the Certificate Account). The Master
Servicer shall be responsible for all other costs and expenses incurred by it in
59
any such proceedings; provided, however, that it shall be entitled to
reimbursement thereof from the liquidation proceeds with respect to the related
Mortgaged Property, as provided in the definition of Liquidation Proceeds. If
the Master Servicer has knowledge that a Mortgaged Property which the Master
Servicer is contemplating acquiring in foreclosure or by deed in lieu of
foreclosure is located within a 1 mile radius of any site listed in the
Expenditure Plan for the Hazardous Substance Clean Up Bond Act of 1984 or other
site with environmental or hazardous waste risks known to the Master Servicer,
the Master Servicer will, prior to acquiring the Mortgaged Property, consider
such risks and only take action in accordance with its established environmental
review procedures.
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, 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
interest of the Certificateholders for the period prior to the sale of such REO
Property. The Master Servicer shall prepare for and deliver to the Trustee a
statement with respect to each REO Property that has been rented showing the
aggregate rental income received and all expenses incurred in connection with
the management and maintenance of such REO Property at such times as is
necessary to enable the Trustee to comply with the reporting requirements of the
REMIC Provisions. The net monthly rental income, if any, from such REO Property
shall be deposited in the Certificate Account no later than the close of
business on each Determination Date. 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,
60
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 applicable subaccount of 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.
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 applicable subaccount of 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 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, 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 applicable subaccount of 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
61
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 applicable subaccount of 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.
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.
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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, 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 (i) by the amount of any Compensating
Interest paid by the Master Servicer with respect to such Distribution Date, and
(ii) with respect to the first Distribution Date, 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.
Additional servicing compensation in the form of (i) Excess Proceeds,
Prepayment Interest Excess 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
any Primary Insurance Policy 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.
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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 and the Trustee on
or before 120 days after the end of the Master Servicer's fiscal year,
commencing with its 2004 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 2004 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
Certified Public Accountants to furnish a statement to the Trustee and the
Depositor 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
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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.
SECTION 3.19 Notification of Adjustments.
On each Adjustment Date, the Master Servicer shall make interest rate
adjustments for each Mortgage Loan in compliance with the requirements of the
related Mortgage and Mortgage Note and applicable regulations. The Master
Servicer shall execute and deliver the notices required by each Mortgage and
Mortgage Note and applicable regulations regarding interest rate adjustments.
The Master Servicer also shall provide timely notification to the Trustee of all
applicable data and information regarding such interest rate adjustments and the
Master Servicer's methods of implanting such interest rate adjustments. Upon the
discovery by the Master Servicer or the Trustee that the Master Servicer has
failed to adjust or has incorrectly adjusted a Mortgage Rate or a monthly
payment pursuant to the terms of the related Mortgage Note and Mortgage, the
Master Servicer shall immediately deposit in the Certificate Account from its
own funds the amount of any interest loss caused thereby without reimbursement
therefor; provided, however, the Master Servicer shall be held harmless with
respect to any interest rate adjustments made by any servicer prior to the
Master Servicer.
ARTICLE IV
DISTRIBUTIONS AND ADVANCES BY THE MASTER SERVICER
SECTION 4.1 Advances.
The Master Servicer shall determine on the Business Day prior to each
Master Servicer Advance Date whether it is required to make an Advance pursuant
to the definition thereof. If the Master Servicer determines it is required to
make an Advance, it shall, on or before the Master Servicer Advance Date, either
(i) deposit into the applicable subaccount of the Certificate Account an amount
equal to the Advance or (ii) make an appropriate entry in its records relating
to the applicable subaccount of the Certificate Account that any Amount Held for
Future Distribution has been used by the Master Servicer in discharge of its
obligation to make any such Advance. Any funds so applied shall be replaced by
the Master Servicer by deposit in the applicable subaccount of the Certificate
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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 applicable subaccount of the Certificate Account for all
Advances of its own funds made pursuant to this Section as provided in Section
3.8. The obligation to make Advances with respect to any Mortgage Loan shall
continue until the ultimate disposition of the REO Property or Mortgaged
Property relating to such Mortgage Loan. 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.
The Master Servicer shall deliver to the Trustee on the related Master
Servicer Advance Date an Officer's Certificate of a Servicing Officer indicating
the amount of any proposed Advance determined by the Master Servicer to be a
Nonrecoverable Advance.
SECTION 4.2 Priorities of Distribution.
(a) On each Distribution Date, the Trustee shall withdraw the
Available Funds for each Certificate Group from the applicable
subaccount of the Distribution Account and apply such funds to
distributions on the Certificates of the related Certificate
Group in the following order and priority and, in each case,
to the extent of Available Funds remaining:
(i) to the Classes of Senior Certificates of the related
Certificate Group, the Accrued Certificate Interest
on each such Class for such Distribution Date;
(ii) to the Classes of Senior Certificates of the related
Certificate Group, any Accrued Certificate Interest
thereon remaining undistributed from previous
Distribution Dates, to the extent of remaining
Available Funds from the related Mortgage Pool;
(iii) to the Classes of Senior Certificates of the related
Certificate Group entitled to distributions of
principal, to the extent of remaining Available Funds
from the related Mortgage Pool, the related Senior
Optimal Principal Amount for such Distribution Date
and, in the case of the Group I Senior Certificates,
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 Class B-1 Certificates, to the extent of
remaining Available Funds for the Mortgage Pools, but
subject to the prior payment of amounts described
under Section 4.2(g), in the following order: (1) the
Accrued Certificate Interest thereon for such
Distribution Date, (2) any Accrued Certificate
Interest thereon remaining undistributed from
previous Distribution Dates and (3) such Class'
Allocable Share for such Distribution Date;
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(v) to the Class B-2 Certificates, to the extent of
remaining Available Funds for both Mortgage Pools,
but subject to the prior payment of amounts described
under Section 4.2(g), in the following order: (1) the
Accrued Certificate Interest thereon for such
Distribution Date, (2) any Accrued Certificate
Interest thereon remaining undistributed from
previous Distribution Dates and (3) such Class'
Allocable Share for such Distribution Date;
(vi) to the Class B-3 Certificates, to the extent of
remaining Available Funds for both Mortgage Pools,
but subject to the prior payment of amounts described
under Section 4.2(g), in the following order: (1) the
Accrued Certificate Interest thereon for such
Distribution Date, (2) any Accrued Certificate
Interest thereon remaining undistributed from
previous Distribution Dates and (3) such Class'
Allocable Share for such Distribution Date;
(vii) to the Class B-4 Certificates, to the extent of
remaining Available Funds for both Mortgage Pools,
but subject to the prior payment of amounts described
under Section 4.2(g), in the following order: (1) the
Accrued Certificate Interest thereon for such
Distribution Date, (2) any Accrued Certificate
Interest thereon remaining undistributed from
previous Distribution Dates and (3) such Class'
Allocable Share for such Distribution Date;
(viii) to the Class B-5 Certificates, to the extent of
remaining Available Funds for both Mortgage Pools,
but subject to the prior payment of amounts described
under Section 4.2(g), in the following order: (1) the
Accrued Certificate Interest thereon for such
Distribution Date, (2) any Accrued Certificate
Interest thereon remaining undistributed from
previous Distribution Dates and (3) such Class'
Allocable Share for such Distribution Date; and
(ix) to the Class B-6 Certificates, to the extent of
remaining Available Funds for both Mortgage Pool, but
subject to the prior payment of amounts described
under Section 4.2(g), in the following order: (1) the
Accrued Certificate Interest thereon for such
Distribution Date, (2) any Accrued Certificate
Interest thereon remaining undistributed from
previous Distribution Dates and (3) such Class'
Allocable Share for such Distribution Date.
(b) Amounts allocated to the Group I Senior Certificates pursuant
to Section 4.2(a)(iii) above will be distributed in the
following order of priority:
(i) to the Class I-A-R Certificates, until the Class
Certificate Balance thereof has been reduced to zero;
and
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(ii) to the Class I-A-1 Certificates, until the Class
Certificate Balance thereof has been reduced to zero.
(c) On each Distribution Date, the Trustee shall distribute to the
Holders of the Class I-A-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. Any distributions pursuant to
this subsection (d) shall not reduce the Class Certificate
Balances of the Class I-A-R Certificates.
(d) On and after the Cross-Over Date, the amount distributable to
the Senior Certificates of the related Certificate Group
pursuant to Section 4.2(a)(iii) for the related Distribution
Date shall be allocated among the related Classes of Senior
Certificates, pro rata, on the basis of their respective Class
Certificate Balances immediately prior to such Distribution
Date, regardless of the priorities and amounts set forth in
Section 4.2.
(e) If on any Distribution Date (i) the Class Certificate Balance
of any Class of Subordinated Certificates (other than the
Class of Subordinated Certificates with the highest priority
of distribution) for which the related Class Prepayment
Distribution Trigger was satisfied on such Distribution Date
is reduced to zero and (ii) amounts distributable to such
Class or Classes of Subordinated Certificates pursuant to
clauses (2), (3) and (5) of the applicable Subordinated
Optimal Principal Amount remain undistributed on such
Distribution Date after all amounts otherwise distributable on
such date pursuant to clauses (iv) through (ix) of Section
4.2(a) have been distributed, such amounts, to the extent of
such Class' remaining Allocable Share, shall be distributed on
such Distribution Date to the remaining Classes of
Subordinated Certificates on a pro rata basis, subject to the
priority of payments described in Section 4.2(a).
(f) In the event that in any calendar month the Master Servicer
recovers an amount (an "Unanticipated Recovery") in respect of
principal of a Mortgage Loan which had previously been
allocated as a Realized Loss to any Class of Certificates
pursuant to Section 4.4, on the Distribution Date in the next
succeeding calendar month, the Trustee shall withdraw the
Unanticipated Recovery from the Distribution Account and
sequentially increase the Class Certificate Balance of each
Class of Certificates to which such Realized Losses were
previously allocated by the amount of such Unanticipated
Recovery, but not to exceed the amount of such Realized Loss
previously allocated to such Class, and shall distribute the
amount of such Unanticipated Recovery to each such Class of
Certificates in the order of payment priority described in
Section 4.2(a) of this Agreement.. When the Class Certificate
Balance of a Class of Certificates has been reduced to zero,
the Holders of such Class shall not be entitled to any share
of an Unanticipated Recovery, and such Unanticipated Recovery
shall be allocated among all outstanding Classes of
Certificates entitled thereto in accordance with the preceding
sentence, subject to the remainder of this subsection (g). In
the event that (i) any Unanticipated Recovery remains
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undistributed in accordance with the preceding sentence or
(ii) the amount of an Unanticipated Recovery exceeds the
amount of the Realized Loss previously allocated to any
outstanding Classes with respect to the related Mortgage Loan,
on the applicable Distribution Date the Trustee shall
distribute such Unanticipated Recoveries in accordance with
the priorities set forth in Section 4.2(a).
For purposes of the preceding paragraph, the share of
an Unanticipated Recovery allocable to any Class of
Certificates with respect to a Mortgage Loan shall be based on
its pro rata share (in proportion to the Class Certificate
Balances thereof with respect to such Distribution Date) of
the principal portion of any such Realized Loss previously
allocated with respect to such Mortgage Loan (or Loans).
(g) On any Distribution Date on which any Certificate Group
constitutes an Undercollateralized Group, all amounts
otherwise distributable as principal on the Subordinated
Certificates, in reverse order of priority (or, following the
Cross-over Date, such other amounts described in the
immediately following sentence), will be distributed as
principal to the Senior Certificates of such
Undercollateralized Group in accordance with the priorities
set forth in Section 4.2(b), as applicable, until the total
Class Certificate Balance of such Senior Certificates (after
giving effect to distributions to be made on that Distribution
Date) equals the Stated Principal Balance of the related
Mortgage Pool (such distribution, an "Undercollateralization
Distribution"). If the Senior Certificates of a Certificate
Group constitute an Undercollateralized Group on any
Distribution Date following the Cross-over Date,
Undercollateralization Distributions will be made from the
excess of the Available Funds for the Mortgage Pool not
related to an Undercollateralized Group remaining after all
required amounts for that Distribution Date have been
distributed to the Senior Certificates of such other
Certificate Group. In addition, the amount of any unpaid
Accrued Certificate Interest with respect to any
Undercollateralized Group on any Distribution Date (including
any Accrued Certificate Interest for the related Distribution
Date) will be distributed to the Senior Certificates of such
Undercollateralized Group prior to the payment of any
Undercollateralization Distributions from amounts otherwise
distributable as principal on the Subordinated Certificates,
in reverse order of priority (or, following the Cross-over
Date, as provided in the preceding sentence). Except as
provided otherwise in this Section 4.2(g), no distribution of
principal will be made to any Class of Subordinated
Certificates until an Undercollateralized Group is no longer
undercollateralized. If more than one Undercollateralized
Group on any Distribution Date is entitled to an
Undercollateralization Distribution, such
Undercollateralization Distribution shall be allocated among
the Undercollateralized Groups, pro rata, on the basis of the
amount by which the aggregate Class Certificate Balance of the
related Senior Certificates is greater than the aggregate
Stated Principal Balance of the Mortgage Loans in the related
Undercollateralized Groups.
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In addition, if on any Distribution Date the total Class
Certificate Balance of the Senior Certificates of a
Certificate Group (after giving effect to distributions to be
made on that Distribution Date) has been reduced to zero, all
amounts otherwise distributable as prepayments of principal to
the Subordinated Certificates, in reverse order of priority,
will instead be distributed as principal to the Senior
Certificates of the other Certificate Group pro rata, on the
basis of the aggregate Class Certificate Balance of the
related Senior Certificates, unless (a) the weighted average
of the Subordinated Percentages for the Mortgage Pools,
weighted on the basis of the Stated Principal Balance of the
Mortgage Loans in the related Mortgage Pool, is at least two
times the weighted average of the initial Subordinate
Percentage for the Mortgage Pools (calculated on such basis)
and (b) the aggregate Stated Principal Balance of all of the
Mortgage Loans in the Mortgage Pools delinquent 60 days or
more (including for this purpose any such Mortgage Loans in
foreclosure or subject to bankruptcy proceedings and Mortgage
Loans with respect to which the related Mortgaged Property has
been acquired by the Trust Fund), averaged over the preceding
six month period, as a percentage of the then current
aggregate Class Certificate Balance of the Subordinated
Certificates, is less than 50%. Except as provided otherwise
in this Section 4.2(g), all distributions described above will
be made in accordance with the priorities set forth in Section
4.2(a) and (b).
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.
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(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 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 Allocation of Losses.
(a) On or prior to each Determination Date, the Master Servicer
shall determine the amount of any Realized Loss in respect of
each Mortgage Loan that occurred during the immediately
preceding calendar month.
(b) With respect to any Distribution Date, the principal portion
of each Realized Loss (other than any Excess Loss) with
respect to a Mortgage Pool shall be allocated in the following
order of priority:
(i) to the Class B-6 Certificates until the Class
Certificate Balance thereof has been reduced to zero;
(ii) to the Class B-5 Certificates until the Class
Certificate Balance thereof has been reduced to zero;
(iii) to the Class B-4 Certificates until the Class
Certificate Balance thereof has been reduced to zero;
(iv) to the Class B-3 Certificates until the Class
Certificate Balance thereof has been reduced to zero;
(v) to the Class B-2 Certificates until the Class
Certificate Balance thereof has been reduced to zero;
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(vi) to the Class B-1 Certificates until the Class
Certificate Balance thereof has been reduced to zero;
(vii) to the Classes of Senior Certificates of the related
Certificate Group, pro rata, in accordance with their
Class Certificate Balances.
(c) With respect to any Distribution Date, the principal portion
of any Excess Loss with respect to a Mortgage Pool (other than
Excess Bankruptcy Losses attributable to Debt Service
Reductions) shall be allocated pro rata to each Class of
Certificates of the related Certificate Group based on their
respective Class Certificate Balances (in the case of the
Senior Certificates) or Apportioned Principal Balances (in the
case of the Subordinated Certificates).
(d) Any Realized Losses allocated to a Class of Certificates
pursuant to Section 4.4(b) or (c) shall be allocated among the
Certificates of such Class in proportion to their respective
Certificate Principal Balances. Any allocation of Realized
Losses pursuant to this paragraph (d) shall be accomplished by
reducing the Certificate Principal Balances of the related
Certificates on the related Distribution Date in accordance
with Section 4.4(e).
(e) Realized Losses allocated in accordance with this Section 4.4
shall be allocated on the Distribution Date in the month
following the month in which such loss was incurred and, in
the case of the principal portion thereof, after giving effect
to the distributions made on such Distribution Date.
(f) On each Distribution Date, the Master Servicer shall determine
the Subordinated Certificate Writedown Amount, if any. Any
such Subordinated Certificate Writedown Amount shall effect,
without duplication of any other provision in this Section 4.4
that provides for a reduction in the Class Certificate Balance
of the Subordinated Certificates, a corresponding reduction in
the Class Certificate Balance of the Subordinated
Certificates, which reduction shall occur on such Distribution
Date after giving effect to distributions made on such
Distribution Date.
(g) Notwithstanding the foregoing, no such allocation of any
Realized Loss shall be made on a Distribution Date to a Class
of Certificates to the extent that such allocation would
result in the reduction of the aggregate Class Certificate
Balances of all the Senior Certificates of a related
Certificate Group as of such Distribution Date plus the
Apportioned Principal Balances of the Subordinated
Certificates of such Certificate Group as of such Distribution
Date, after giving effect to all distributions and prior
allocations of Realized Losses on such date, to an amount less
than the aggregate Stated Principal Balance of the Mortgage
Loans in the related Mortgage Pool as of the first day of the
month of such Distribution Date, less any Deficient Valuations
occurring on or prior to the Bankruptcy Coverage Termination
Date (such limitation, the "Loss Allocation Limitation").
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SECTION 4.5 [RESERVED]
SECTION 4.6 Monthly Statements to Certificateholders.
(a) Not later than each Distribution Date, the Trustee shall
prepare and cause to be forwarded by first class mail to each
Certificateholder, the Master Servicer, the Depositor and each
Rating Agency a statement setting forth with respect to the
related distribution and/or may post such statement on its
website located at xxx.xxxxxxxxxxxx.xxx:
(i) the amount thereof allocable to principal, separately
identifying the aggregate amount of any Principal
Prepayments and Liquidation Proceeds included
therein;
(ii) the amount thereof allocable to interest, the amount
of any Compensating Interest included in such
distribution and any remaining Net Interest
Shortfalls after giving effect to such distribution;
(iii) if the distribution to the Holders of such Class of
Certificates is less than the full amount that would
be distributable to such Holders if there were
sufficient funds available therefor, the amount of
the shortfall and the allocation thereof as between
principal and interest;
(iv) the Class Certificate Balance of each Class of
Certificates after giving effect to the distribution
of principal on such Distribution Date;
(v) the Pool Principal Balance for each Mortgage Pool for
the following Distribution Date;
(vi) the Senior Percentage and Subordinated Percentage for
each Certificate Group 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 for each Mortgage Pool
included in the distribution on such Distribution
Date and the aggregate amount of Advances for each
Mortgage Pool 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
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(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;
(xi) with respect to any Mortgage Loan in a Mortgage Pool
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) in each
Mortgage Pool as of the close of business on the
Determination Date preceding such Distribution Date;
(xiii) the Senior Prepayment Percentage for each Certificate
Group for the following Distribution Date;
(xiv) the aggregate amount of Realized Losses incurred in
respect of each Mortgage Pool during the preceding
calendar month;
(xv) the cumulative amount of Realized Losses applied in
reduction of the principal balance of each class of
Certificates since the Closing Date;
(xvi) the Special Hazard Loss Coverage Amount, the Fraud
Loss Coverage Amount and the Bankruptcy Loss Coverage
Amount, in each case as of the related Determination
Date; and
(xvii) 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.
(b) The Trustee's responsibility for disbursing the above
information to the Certificateholders 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
Prepayment 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 report in
substantially the form set forth as Schedule III hereto.
(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)(i), (a)(ii) 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
74
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.
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
75
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.
(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
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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 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.
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(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
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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.
(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
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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 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
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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 or Master Servicer 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 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.
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.
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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.
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
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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 applicable subaccount 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 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 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. 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.
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
applicable subaccount of 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
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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) the failure of the Master Servicer to remit any
Advance required to be remitted by the Master
Servicer pursuant to Section 4.1 which failure
continues unremedied at 11:00 a.m., Central time, on
the related Distribution Date.
If an Event of Default described in clauses (i) to (v) of this Section
shall occur, then, 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 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 clause (vi) of
this Section shall occur, the Trustee shall immediately, by notice in writing to
the Master Servicer (with a copy to 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 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
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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 the termination of the Master Servicer's duties as
a subservicer pursuant to the Servicing Rights Transfer and Subservicing
Agreement.
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 the appointment of which does not adversely affect the
then current 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, 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 rating of the
Certificates in effect immediately prior to such assignment and delegation will
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
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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 and to 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 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
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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
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.
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 and with a credit
rating which would not cause either of the Rating Agencies to reduce their
respective then current 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 and the
Master Servicer 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.
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
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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 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 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, 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 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
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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
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cause to be provided, accurate information or data to the Trustee on a timely
basis.
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, execute (pursuant
to a limited power of attorney given to the Trustee by the Depositor) 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. 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.
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
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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. 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 right to purchase all Mortgage Loans and REO Properties pursuant to clause
(a) above shall be conditioned upon the Pool Principal Balance for both Mortgage
Pools, at the time of any such repurchase, aggregating less than ten percent of
the aggregate Cut-off Date Principal Balance of the Mortgage Loans.
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 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 and the Trustee 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.
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 applicable subaccounts of 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.
97
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 (or on their Notional Amount, if applicable) 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 I-A-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
(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.
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(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.
ARTICLE X
[RESERVED]
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 (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 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 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 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.
99
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 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 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.
100
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, 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, 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.
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:
(1) Any material change or amendment to this Agreement;
101
(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: Xxxxx Xxxxxxx, or such other address as the Trustee
may hereafter furnish to the Depositor or Master Servicer; and
(d) 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.
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
102
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 and Depositor.
SECTION 11.8 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.
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. For the protection and enforcement of
the provisions of this Section 11.8, each and every Certificateholder and the
Trustee shall be entitled to such relief as can be given either at law or in
equity.
103
SECTION 11.9 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 or the Trustee 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 or the Trustee 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 or the Trustee 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 11.10 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.
SECTION 11.11 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 11.12 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
104
for the breach of the representations and warranties made by the Seller under
the MLPA.
* * * * * *
105
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 Asset Securities Inc.
Mortgage Pass-Through Certificates Series 2004-AA5
Mortgage Loan Schedule
[Available Upon Request from Trustee]
I-1
SCHEDULE II
First Horizon Asset Securities Inc.
Mortgage Pass-Through Certificates Series 2004-AA5
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
and the Trustee, 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
material 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
II-1
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.
(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 Asset Securities Inc.
Mortgage Pass-Through Certificates Series 2004-AA5
Form of Monthly Master Servicer Report
[Begins on Next Page]
III-1
EXHIBIT A
[FORM OF SENIOR 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").
[THIS CLASS [ ] CERTIFICATE SHALL NOT BE ENTITLED TO ANY PAYMENTS IN RESPECT OF
PRINCIPAL. INTEREST IS CALCULATED ON THIS CERTIFICATE BASED ON A NOTIONAL AMOUNT
DETERMINED AS DESCRIBED IN THE AGREEMENT. THE NOTIONAL AMOUNT OF THIS
CERTIFICATE AT ANY TIME MAY BE LESS THAN THE INITIAL AMOUNT OF THIS CERTIFICATE
AS SET FORTH HEREIN.]
A-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 Alternative Mortgage Securities Trust 2004-AA5
Mortgage Pass-Through Certificates, Series 2004-AA5
Class [________]
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 a pool of conventional mortgage loans (the
"Mortgage Loans") secured by first 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.
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.
A-2
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.
A-3
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: October __, 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
A-4
EXHIBIT B
[FORM OF SUBORDINATED 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").
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO CERTAIN CERTIFICATES AS
DESCRIBED IN THE AGREEMENT REFERRED TO HEREIN.
[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
B-1
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-2
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 Alternative Mortgage Securities Trust 2004-AA5
Mortgage Pass-Through Certificates, Series 2004-AA5
Class [___]
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 a pool of conventional mortgage loans (the
"Mortgage Loans") secured by first 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 the denominations 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-3
[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.]
[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.
B-4
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-5
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: October __, 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-6
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 :
Initial Certificate Balance of
this Certificate ("Denominations") : $
Initial Certificate
Balances of all
Certificate of this
Class : $
CUSIP :
First Horizon Alternative Mortgage Securities Trust 2004-AA5
Mortgage Pass-Through Certificates, Series 2004-AA5
evidencing the distributions allocable to the Class I-A-R
Certificates with respect to a Trust Fund consisting primarily of a
pool of conventional mortgage loans (the "Mortgage Loans") secured by
first 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 (obtained by dividing the denomination of this Certificate
by the aggregate Initial Certificate Balances of the denominations of all
Certificates of the Class to which this Certificate belongs) 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 I-A-R
Certificate at the Corporate Trust Office or the office or agency maintained by
C-2
the Trustee in New York, New York. This Class I-A-R Certificate represents an
ownership in the RL Interest and RU Interest, as defined in the Agreement.
No transfer of a Class I-A-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) 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 I-A-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 I-A-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 I-A-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 I-A-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 I-A-R Certificate must be a Permitted
Transferee, (ii) no Ownership Interest in this Class I-A-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 I-A-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 I-A-R Certificate must agree not
to transfer an Ownership Interest in this Class I-A-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
I-A-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.
C-3
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-4
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: October __, 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-5
[Form of Reverse of Certificates]
First Horizon Alternative Mortgage Securities Trust 2004-AA5
Mortgage Pass-Through Certificates
This Certificate is one of a duly authorized issue of Certificates
designated as First Horizon Alternative Mortgage Securities Trust 2004-AA5
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, 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
D-2
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.
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 Pool Principal Balance is less
than 10% of the aggregate Cut-off Date Pool Principal Balance of Pool I and Pool
II combined, the Master Servicer will have the option to repurchase, in whole,
from the Trust Fund all remaining Mortgage Loans and all property acquired in
respect of the Mortgage Loans in the Mortgage Pools at a purchase price
determined as provided in the Agreement. 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-3
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
The Bank of New York
000 Xxxxxxx Xxxxxx, 0X
Xxx Xxxx, Xxx Xxxx 00000
Re: Custodial Agreement dated as of October 29, 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 Custodian, 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 Custodian has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
Custodial Agreement. The Custodian 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.
FIRST TENNESSEE BANK NATIONAL
ASSOCIATION,
as Custodian
By:
--------------------------
Name:
------------------------
Title:
-----------------------
E-2
EXHIBIT F
FORM OF DELAY DELIVERY CERTIFICATION
[date]
First Horizon Asset Securities Inc.
First Horizon Home Loan Corporation
0000 Xxxxxxx Xxx
Xxxxxx, Xxxxx 00000
The Bank of New York
000 Xxxxxxx Xxxxxx, 0X
Xxx Xxxx, Xxx Xxxx 00000
Re: Custodial Agreement dated as of October 29, 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 3 of the above-captioned Custodial Agreement
(the "Custodial Agreement"), the undersigned, as Custodian, hereby certifies
that, as to each Delay Delivery Mortgage Loan listed in the Mortgage Loan
Schedule (other than any Delay Delivery 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";
(ii) in the case of each Mortgage Loan that is not a MERS Mortgage
Loan, the original recorded Mortgage, [and in the case of each Mortgage Loan
that is a MERS Mortgage Loan, the original Mortgage, noting thereon the presence
of the MIN of the Mortgage Loan and language indicating that the Mortgage Loan
is a MOM Loan if the Mortgage Loan is a MOM Loan, 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]; and
(iii) in the case of each Mortgage Loan that is not a MERS Mortgage
Loan, 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 Mortgage 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 Delay
Delivery Mortgage Loan.
The Custodian has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
Custodial Agreement. The Custodian makes no representations as to: (i) the
validity, legality, sufficiency, enforceability or genuineness of any of the
F-1
documents contained in each Mortgage File of any of the Delay Delivery Mortgage
Loans identified on the Mortgage Loan Schedule, or (ii) the collectability,
insurability, effectiveness or suitability of any such Delay Delivery Mortgage
Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Custodial Agreement.
FIRST TENNESSEE BANK NATIONAL
ASSOCIATION,
as Custodian
By:
--------------------------
Name:
------------------------
Title:
-----------------------
F-2
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
The Bank of New York
000 Xxxxxxx Xxxxxx, 0X
Xxx Xxxx, Xxx Xxxx 00000
Re: Custodial Agreement dated as of October 29, 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 Custodian 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
G-1
recording office in which such Mortgage has been
recorded;
(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) 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) 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 or otherwise in connection with the
rating of the Certificates, 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
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Article I of the Pooling and Servicing Agreement accurately
reflects information set forth in the Mortgage File.
The Custodian has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
Custodial Agreement. The Custodian 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 Custodian 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.
FIRST TENNESSEE BANK NATIONAL
ASSOCIATION,
as Custodian
By:
--------------------------
Name:
------------------------
Title:
-----------------------
G-3
EXHIBIT H
TRANSFER AFFIDAVIT
First Horizon Alternative Mortgage Securities Trust 2004-AA5
Mortgage Pass-Through Certificates
Series 2004-AA5
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 I-A-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.)
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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. The Transferee is aware that the Certificate may be a "noneconomic
residual interest" within the meaning of Treasury regulations promulgated
pursuant to the Code and that the transferor of a noneconomic residual interest
will remain liable for any taxes due with respect to the income on such residual
interest, unless no significant purpose of the transfer was to impede the
assessment or collection of tax.
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
H-2
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
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.
H-4
"Transferee": Any Person who is acquiring by Transfer any Ownership
Interest in a Certificate.
H-5
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, 0X
Xxx Xxxx, Xxx Xxxx 00000
Re: First Horizon Alternative Mortgage Securities Trust 2004-AA5
Mortgage Pass-Through Certificates, Series 2004-AA5, 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 October 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, 0X
Xxx Xxxx, Xxx Xxxx 00000
Attention: Mortgage-Backed Securities Group
Re: First Horizon Alternative Mortgage Securities Trust 2004-AA5
Mortgage Pass-Through Certificates, Series 2004-AA5, 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
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
J-1
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, 0X
Xxx Xxxx, Xxx Xxxx 00000
Attention: Mortgage-Backed Securities Group
Re: First Horizon Alternative Mortgage Securities Trust 2004-AA5
Mortgage Pass-Through Certificates, Series 2004-AA5, 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
distribution of the Certificates under the Act or that would render the
K-1
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.
___ 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
--------
(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
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.
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
K-4
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
