Exhibit 99.12
INDEMNIFICATION AND DISCLOSURE AGREEMENT
THIS INDEMNIFICATION AND DISCLOSURE AGREEMENT dated February 27, 2006
(this "Agreement") is among Countrywide Home Loans, Inc. (the "Sponsor") and
Mortgage Guaranty Insurance Corporation (the "LPMI Provider").
WITNESSETH:
WHEREAS, the Sponsor and one or more special purpose affiliates of the
Sponsor (collectively, the "Sellers") intend to convey certain mortgage loans
to CWABS, Inc. (the "Depositor"), which in turn will convey these mortgage
loans to The Bank of New York (the "Trustee"), under a pooling and servicing
agreement dated as of February 1, 2006 (the "Pooling Agreement"), among the
Depositor, the Sellers, Countrywide Home Loans Servicing LP, as master
servicer, the Trustee, and The Bank of New York Trust Company, N.A., as
co-trustee (the "Co-Trustee");
WHEREAS, certain of the asset-backed certificates issued pursuant to the
Pooling Agreement (the "Certificates") will be offered to investors pursuant
to an Offering Document (as defined below); and
WHEREAS, the LPMI Provider intends to provide mortgage guaranty
insurance to the Co-Trustee with respect to some of the Mortgage Loans that
serve as security for the Certificates and the LPMI Provider intends to
provide certain information for inclusion in the Offering Document;
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as
follows:
AGREEMENT
1. Definitions.
"Act" shall mean the Securities Act of 1933, as amended.
"Additional Information" shall mean information set forth in Item
1114(b) of Regulation AB.
"Business Day" shall mean any day other than a Saturday or Sunday on
which national banks located in New York, New York are open to conduct general
business.
"Commission" shall mean the U.S. Securities and Exchange Commission.
"Disclosure Notice" shall have the meaning ascribed to such term in
Section 3 below.
"Disclosure Trigger Event" shall have the meaning ascribed to such term
in Section 2 below.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Indemnified Party" shall mean a Sponsor Indemnified Party or an LPMI
Provider Indemnified Party, as the case may be.
"Indemnifying Party" shall mean a party to this Agreement obligated to
indemnify an Indemnified Party under the terms of this Agreement.
"Issuing Entity" shall mean CWABS Asset-Backed Certificates Trust
2006-3, a New York common law trust formed pursuant to the Pooling Agreement.
"LPMI Provided Indemnified Party" shall mean the LPMI Provider, its
officers and directors, and each person, if any, who controls the LPMI
Provider within the meaning of Section 15 of the Act.
"LPMI Provider Information" shall mean (i) the information provided by
the LPMI Provider to the Sponsor or its agents for inclusion in the Offering
Document, a copy of which is attached hereto as Exhibit A, and (ii) the
Additional Information provided by the LPMI Provider to the Sponsor pursuant
to the terms of this Agreement.
"Mortgage Insurance Policy" shall mean the mortgage guaranty insurance
policy to be provided by the LPMI Provider with respect to certain of the
Mortgage Loans that serve as security for the Certificates.
"Notice Date" shall have the meaning ascribed to such term in Section 2
below.
"Offering Document" shall mean the Prospectus Supplement dated February
23, 2006 with respect to the publicly offered classes of Certificates.
"Regulation AB" shall mean Subpart 229.1100 - Asset Backed Securities
(Regulation AB), 17 C.F.R. xx.xx. 229.1100-229.1123, as such may be amended
from time to time, and subject to such clarification and interpretation as
have been provided by the Commission in the adopting release (Asset-Backed
Securities, Securities Act Release No. 33-8518, 70 Fed. Reg. 1,506, 1,531
(Jan. 7, 2005)) or by the staff of the Commission, or as may be provided by
the Commission or its staff from time to time.
"Required Filing Date" shall have the meaning ascribed to such term in
Section 3 below.
"Sponsor Indemnified Party" shall mean the Sponsor; the Depositor; each
person responsible for the preparation, execution or filing of any report
required to be filed with the Commission with respect to the Issuing Entity,
or for execution of a certification pursuant to Rule 13a-14(d) or Rule
15d-14(d) under the Exchange Act; each broker-dealer acting as an underwriter
of the Certificates; each person who controls any of such parties (within the
meaning of Section 15 of the Act and Section 20 of the Exchange Act); and the
respective present and former directors, officers, employees and agents of
each of the foregoing.
Capitalized terms not otherwise defined herein have the meanings
ascribed to such terms in the Pooling Agreement.
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2. Determination of Disclosure Trigger Event. On each Distribution
Date and on the first day of the fiscal year of the Issuing Entity (each, a
"Notice Date"), the Sponsor shall determine or cause to be determined on its
behalf whether the LPMI Provider and any of its affiliates are contingently
liable in the aggregate to the Issuing Entity, as of such Notice Date, to
provide payments representing either (a) 10% or more but less than 20%, or (b)
20% or more, of the cash flow supporting any publicly offered class of
Certificates (each, a "Disclosure Trigger Event") Such determination shall be
made in accordance with Item 1114(b) of Regulation AB.
3. Notice of Disclosure Trigger Event. If the Sponsor determines (or
causes to be determined on its behalf) that a Disclosure Trigger Event exists
as of such Notice Date, the Sponsor shall provide, or cause to be provided,
written notice of same (each, a "Disclosure Notice") to the LPMI Provider no
later than two (2) Business Days after such Notice Date. Such Disclosure
Notice shall include: (a) a description of the specific Disclosure Trigger
Event and (b) the required filing date (the "Required Filing Date") for the
applicable Additional Information.
4. Covenant to Provide Additional Information. If a Disclosure Notice
is provided to the LPMI Provider by the Sponsor, the LPMI Provider shall
provide to the Sponsor the Additional Information required by Item 1114(b)(1)
and (2)(i) or 1114(b)(1) and (2)(ii), as applicable, of Regulation AB. Subject
to Section 7 below, such Additional Information shall be provided by the LPMI
Provider to the Sponsor by the later of (a) five (5) Business Days after the
LPMI Provider's receipt of the Disclosure Notice or (b) three (3) Business
Days prior to the Required Filing Date.
5. Covenant to Provide Updates of Additional Information. If a
Disclosure Trigger Event occurs and a Disclosure Notice is provided to the
LPMI Provider by the Sponsor, then on each Notice Date subsequent to the date
of such Disclosure Notice, the Sponsor shall determine, in accordance with
Item 1114(b) of Regulation AB, whether any updates to the Additional
Information previously furnished by the LPMI Provider are required to be filed
with the Commission. If the Sponsor determines that updates are required to
filed with the Commission, the Sponsor shall provide to the LPMI Provider a
new Disclosure Notice in accordance with the requirements of Section 3 above
within five (5) Business Days after such Notice Date, and the LPMI Provider
shall the Sponsor with updates to the Additional Information as the same
becomes available in the normal course of business.
6. Indemnification.
(a) The LPMI Provider hereby agrees to indemnify and hold harmless
each Sponsor Indemnified Party against any losses, claims, damages or
liabilities to which such Sponsor Indemnified Party may become subject, under
the Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon (x) any untrue
statement or alleged untrue statement of any material fact contained in the
LPMI Provider Information provided by the LPMI Provider, (y) any omission or
alleged omission to state in the LPMI Provider Information a material fact
required to be stated therein or necessary to make the statements therein
(including by Item 1114 or Item 1119(a) of Regulation AB), in the light of the
circumstances under which they were made, not misleading or (z) any failure of
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the LPMI Provider to provide the Additional Information to the Sponsor
pursuant to this Agreement.
(b) The Sponsor hereby agrees to indemnify and hold harmless each
LPMI Provider Indemnified Party against any losses, claims, damages or
liabilities to which such LPMI Provider Indemnified Party may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (x)
any untrue statement or alleged untrue statement of any material fact
contained in the Offering Document (other than an untrue statement or alleged
untrue statement of material fact contained in the LPMI Provider Information),
or (y) any omission or alleged omission to state in the Offering Document a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (unless the material fact omitted or allegedly omitted
would constitute part of the LPMI Provider Information).
(c) With respect to each claim for indemnification made hereunder, the
Indemnified Party shall notify the Indemnifying Party in writing, giving
notice of the nature of the claim, within a reasonable time after service of a
summons or other first legal process that shall have been served upon such
Indemnified Party, but failure to notify the Indemnifying Party of any such
claim shall not relieve the Indemnifying Party from any liability which it may
have to the Indemnified Party (i) on account of the indemnity contained in
this Agreement, except to the extent that the Indemnifying Party has been
materially prejudiced by such failure, or (ii) otherwise than on account of
the indemnity contained in this Agreement.
(d) The Indemnifying Party will be entitled to participate at its own
expense in the defense or, if the Indemnifying Party so elects, to assume the
defense of any suit brought to enforce any such liability, but if the
Indemnifying Party elects to assume the defense, such defense shall be
conducted by counsel reasonably satisfactory to the Indemnified Party. In the
event the Indemnifying Party elects to assume the defense of any such suit and
retain such counsel, the Indemnified Party or persons, defendant or defendants
in the suit, may retain additional counsel but shall bear the fees and
expenses of such counsel unless: (1) the Indemnifying Party shall have agreed
to the retention of such counsel at the expense of the Indemnifying Party; or
(2) the named parties to any such proceeding (including any impleaded parties)
include both the Indemnifying Party and the Indemnified Party, and the
Indemnifying Party reasonably determines that representation of both the
Indemnified Party and the Indemnifying Party by the same counsel would be
inappropriate due to actual or potential differing interests between them. It
is understood that the Indemnifying Party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
fees and expenses of more than one counsel (separate from its own counsel) for
the Indemnified Party.
(e) The Indemnifying Party shall not be liable to indemnify any person
for any settlement of any claim effected without the Indemnifying Party's
consent, which consent shall not be unreasonably withheld. The Indemnifying
Party shall not, without the prior written consent of an Indemnified Party,
which consent will not be unreasonably withheld, effect any settlement of any
pending or threatened proceeding in respect of which such Indemnified Party is
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or could have been a party and indemnity is or could have been sought
hereunder by such Indemnified Party.
(f) If the indemnification provided for in this letter is
insufficient or unavailable to an Indemnified Party in respect of any losses,
claims, damages, liabilities or judgments referred to herein, then the
Indemnifying Party, in lieu of indemnifying the Indemnified Party, shall
contribute to the amount paid or payable by the Indemnified Party as a result
of such losses, claims, damages, liabilities and expenses in such proportion
as is appropriate equally to reflect (1) the relative fault and benefits of
(a) the Indemnifying Party on the one hand and (b) the Indemnified Party on
the other hand, as well as (2) any other relevant equitable considerations.
(g) Each Indemnified Party that is not a party to this Agreement shall
be an intended third-party beneficiary of this Agreement; provided, however,
that each such Indemnified Party hereby agrees to the appointment of the
Sponsor or the LPMI Provider, as the case may be, as its exclusive agent for,
on behalf of, and in the name of such Indemnified Party, to exercise any and
all rights of such Indemnified Party under this Agreement, without prejudice
to the right of any Indemnified Party to retain additional counsel at its own
expense, as provided in this Agreement. In no event, however, will an
Indemnifying Party be required to bear the expense of such additional counsel
on the grounds that representation of both the Sponsor or the LPMI Provider,
as the case may be, and its related Indemnified Parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them.
(h) The LPMI Provider acknowledges that, in addition to the
indemnification provisions set forth in Section 6 of this Agreement, any
failure to provide the Sponsor with Additional Information pursuant to Section
4 or 5 hereto will, as set forth in the Section 7 of the terms letter, dated
February 27, 2006, from the LPMI Provider to the Sponsor, the Trustee and the
Co-Trustee, permit the insured under the Mortgage Insurance Policy with
respect to the Certificates to cancel coverage for all mortgage loans under
such policy.
7. Survival of Terms. The agreements, indemnities and representations
of the parties hereto or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation, or statement as to the
results thereof, made by or on behalf of any parties hereto or any of the
third-party beneficiaries referred to herein, and will survive the sale of the
Certificates.
8. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF
THE NEW YORK GENERAL OBLIGATIONS LAW)AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS WITHOUT GIVING
EFFECT TO CONFLICT OF LAWS PRINCIPLES OTHER THAN SECTION 5-1401 OF THE NEW
YORK GENERAL OBLIGATIONS LAW.
9. Counterparts; Successors and Assigns. This Agreement may be executed
in any number of counterparts, each of which (including any copy hereof
delivered by facsimile) shall constitute one and the same original instrument,
and either party hereto may execute this
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Agreement by signing any such counterpart. This Agreement shall inure to the
benefit of and be binding upon the Sponsor and the LPMI Provider and their
respective successors and assigns. Notwithstanding the foregoing, no party
hereto shall assign its rights and obligations under this Agreement without
the prior written consent of the other party, which consent shall not be
unreasonably withheld or delayed; provided, however, that the Sponsor may
assign its rights and obligations under this Agreement to an affiliate without
the consent of the LPMI Provider.
10. Effectiveness. This Agreement shall not become effective and shall
not become enforceable against any party until executed by all parties hereto.
Third Party Beneficiary. Each of the Issuing Entity and the Depositor shall be
a third-party beneficiary hereof and shall be entitled to enforce the
provisions hereof as if a party hereto.
11. Limitation of Liability. TO THE FULLEST EXTENT PERMITTED UNDER
APPLICABLE LAW, NEITHER PARTY (NOR ITS PERMITTED SUCCESSORS OR ASSIGNS) SHALL
BE LIABLE TO THE OTHER PARTY FOR ANY PUNITIVE, EXEMPLARY, INDIRECT,
INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES OF ANY KIND UNDER OR IN
CONNECTION WITH THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO, ANY LOSS OF
REVENUE OR PROFITS, LOSS OF SAVINGS, LOSS OF OPPORTUNITY, OR DISRUPTIONS OF
BUSINESS, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SAME. EACH
PARTY EXPRESSLY ACKNOWLEDGES AND AGREES THAT THE LIMITATIONS AND EXCLUSIONS OF
LIABILITY CONTAINED HEREIN REPRESENT THE PARTIES' AGREEMENT AS TO THE
ALLOCATION OF RISK BETWEEN THE PARTIES AND THAT SUCH LIMITATIONS AND
EXCLUSIONS WERE FULLY BARGAINED AND ACCEPTED BY EACH PARTY AND FORM A MATERIAL
PART OF THIS AGREEMENT.
[Signatures commence on following page]
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EXECUTED as of the day and year first above written.
MORTGAGE GUARANTY INSURANCE CORPORATION
a Wisconsin corporation
By: ______________________________
Name: ______________________________
Title: ______________________________
COUNTRYWIDE HOME LOANS, INC.
a New York corporation
By: ------------------------------------
Name: ______________________________
Title: ______________________________
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Mortgage Insurance Policy
It is expected that the Mortgage Loans generally will not carry
borrower-paid mortgage insurance. Countrywide Home Loans will acquire a
mortgage insurance policy for the issuing entity (the "Mortgage Insurance
Policy") from Mortgage Guaranty Insurance Corporation ("MGIC" or the "Mortgage
Insurer") expected to cover approximately ____% of the Mortgage Loans in the
Mortgage Pool (in each case covering mortgages with loan-to-value ratios at
origination in excess of 95.00%) (such insured Mortgage Loans, the "Covered
Mortgage Loans"). The Mortgage Insurance Policy obtained by the trust fund
will only cover losses pursuant to formulas described in the policy down to
60.00% of the value of the related Mortgaged Property. The premium payable on
the Mortgage Insurance Policy (including any state taxes on such premium) to
the extent applicable to the Covered Mortgage Loans (the "Mortgage Insurance
Premium") will be paid monthly by the Co-Trustee with funds withdrawn from the
Distribution Account as provided in the Pooling and Servicing Agreement and
the Mortgage Insurance Policy. Approximately ___%, ___% and ___% of the
Mortgage Loans in the Statistical Calculation Pool in respect of Loan Group 1,
Loan Group 2 and Loan Group 3, respectively, in each case by Stated Principal
Balance of the Mortgage Loans in the Statistical Calculation Pool in respect
of the related Loan Group, are Covered Mortgage Loans.
The Mortgage Insurance Policy is subject to various limitations and
exclusions as herein or as provided in the Mortgage Insurance Policy, and will
provide only limited protection against losses on defaulted Covered Mortgage
Loans.
The Mortgage Insurance Policy covers approximately ____%, ____% and
____% of the Mortgage Loans in the Statistical Calculation Pool with
Loan-to-Value Ratios greater than 95% in Loan Group 1, Loan Group 2 and Loan
Group 3, respectively. The Mortgage Insurance Policy does not cover any
Mortgage Loans 60 days or more delinquent in payment as of the Cut-off Date.
Each Mortgage Loan covered by the Mortgage Insurance Policy is covered for
losses up to the policy limits; provided, however, that the Mortgage Insurance
Policy will not cover special hazard, bankruptcy or fraud losses or certain
other types of losses as provided in such Mortgage Insurance Policy. Claims on
Covered Mortgage Loans generally will reduce uninsured exposure to an amount
equal to ____% of the lesser of the appraised value as of the origination date
or the purchase price, as the case may be, of the related mortgaged property,
subject to conditions, exceptions and exclusions and assuming that any
pre-existing primary mortgage insurance policies covering such Covered
Mortgage Loans remain in effect and a full claim settlement is made
thereunder.
The Mortgage Insurance Policy is required to remain in force with
respect to each Covered Mortgage Loan until (i) the principal balance of the
Covered Mortgage Loan is paid in full; or (ii) the principal balance of the
Covered Mortgage Loan has amortized down to a level that results in a
loan-to-value ratio for the Covered Mortgage Loan of 55% or less (provided,
however, that no coverage of any Mortgage Loan under such Mortgage Insurance
Policy is required where prohibited by applicable law); or (iii) any event
specified in the Mortgage Insurance Policy occurs that allows for the
termination of the Mortgage Insurance Policy by MGIC or cancellation of the
Mortgage Insurance Policy by the insured.
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The Mortgage Insurance Policy may not be assigned or transferred without
the prior written consent of MGIC; provided, however, that MGIC has previously
provided written consent to (i) the assignment of coverage on individual
Covered Mortgage Loans from the Trustee to the Seller in connection with any
Covered Mortgage Loan repurchased or substituted for by the Seller and (ii)
the assignment of coverage on all Covered Mortgage Loans from the Trustee to
any successor Trustee, provided that in each case, prompt notice of such
assignment is provided to MGIC.
The Mortgage Insurance Policy generally requires that delinquencies on
any Covered Mortgage Loan insured thereunder must be reported to MGIC within
four months of default, that reports regarding the delinquency of the Covered
Mortgage Loan must be submitted to MGIC on a monthly basis thereafter, and
that appropriate proceedings to obtain title to the property securing such
Covered Mortgage Loan must be commenced within six months of default. As a
condition to submitting a claim under the Mortgage Insurance Policy, the
insured must have (i) acquired, and tendered to MGIC, good and merchantable
title to the property securing the Covered Mortgage Loan, free and clear of
all liens and encumbrances, including, but not limited to, any right of
redemption by the mortgagor unless such acquisition of good and merchantable
title is excused under the terms of such Mortgage Insurance Policy, and (ii)
if the Covered Mortgage Loan is covered by a pre-existing primary mortgage
insurance policy, a claim must be submitted and settled under such
pre-existing primary mortgage insurance policy within the time frames
specified in the Mortgage Insurance Policy.
The claim amount generally includes unpaid principal, accrued interest
to the date of such tender to MGIC by the insured, and certain expenses (less
the amount of a full claim settlement under any preexisting primary mortgage
insurance policy covering the Covered Mortgage Loan). When a claim is
presented, MGIC will have the option of either (i) paying the claim amount and
taking title to the property securing the Covered Mortgage Loan, (ii) paying
the insured a percentage of the claim amount (without deduction for a claim
settlement under any pre-existing primary mortgage insurance policy covering
the Covered Mortgage Loan) and with the insured retaining title to the
property securing such Covered Mortgage Loan, or (iii) if the property
securing the Covered Mortgage Loan has been sold to a third party with the
prior approval of MGIC, paying the claim amount reduced by the net sale
proceeds as described in the Mortgage Insurance Policy to reflect the actual
loss.
Claims generally must be filed within 60 days after the insured has
acquired good and merchantable title to the property securing the Covered
Mortgage Loan or such property has been sold to a third party with the prior
approval of MGIC. A claim generally must be paid within 60 days after the
claim is filed by the insured. No payment for a loss will be made under the
Mortgage Insurance Policy unless the property securing the Covered Mortgage
Loan is in the same physical condition as when such Covered Mortgage Loan was
originally insured, except for reasonable wear and tear, and unless premiums
on the standard homeowners' insurance policy, real estate taxes and
foreclosure protection and preservation expenses have been advanced by or on
behalf of the insured.
If a claim submitted under the Mortgage Insurance Policy is incomplete,
MGIC is required to provide notification of all information and documentation
required to perfect the claim within 20 days of MGIC's receipt of such
incomplete claim. In such case, payment of the
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claim will be suspended until such information and documentation are provided
to MGIC, provided that MGIC is not required to pay the claim if it is not
perfected within 180 days after its initial filing.
Unless approved in writing by MGIC, no changes may be made to the terms
of any Covered Mortgage Loan, including the borrowed amount, interest rate,
term or amortization schedule, except as specifically permitted by the terms
of the Covered Mortgage Loan; nor may the lender make any change in the
property or other collateral securing the Covered Mortgage Loan, nor may any
mortgagor be released under the Covered Mortgage Loan from liability. If a
Mortgage Loan is assumed with the insured's approval, MGIC's liability for
coverage of the Mortgage Loan under the Mortgage Insurance Policy generally
will terminate as of the date of such assumption unless MGIC approves the
assumption in writing. In addition, with respect to any Covered Mortgage Loan
covered by the Mortgage Insurance Policy, the applicable Servicer must obtain
the prior approval of MGIC in connection with any acceptance of a deed in lieu
of foreclosure or of any sale of the property securing the Covered Mortgage
Loan.
The Mortgage Insurance Policy excludes coverage of: (i) any claim where
the insurer under any pre-existing primary mortgage insurance policy has
acquired the property securing the Covered Mortgage Loan, (ii) any claim
resulting from a default occurring after lapse or cancellation of coverage,
(iii) certain claims resulting from a default existing at the inception of
coverage; (iv) certain claims resulting from a default due to the borrower's
failure to make the first monthly payment on the Covered Mortgage Loan from
the borrower's own funds, (v) certain claims where there is an environmental
condition which existed on the property securing the Covered Mortgage Loan
(whether or not known by the person or persons submitting an application for
coverage of the Covered Mortgage Loan) as of the effective date of coverage;
(vi) any claim, if the mortgage, deed of trust or other similar instrument did
not provide the insured at origination with a first lien on the property
securing the Covered Mortgage Loan; (vii) certain claims involving or arising
out of any breach by the insured of its obligations under, or its failure to
comply with, the terms of the Mortgage Insurance Policy or of its obligations
as imposed by operation of law; (viii) certain claims resulting from physical
damage to a property securing a Covered Mortgage Loan; (ix) any claim arising
from the failure of the borrower under a Covered Mortgage Loan to make any
balloon payment, if applicable, under such Covered Mortgage Loan, and (x) any
claim submitted in connection with a Covered Mortgage Loan if the Covered
Mortgage Loan did not meet MGIC's requirements applicable to the origination
of the Covered Mortgage Loan.
In issuing the Mortgage Insurance Policy, MGIC has relied upon certain
information and data regarding the Covered Mortgage Loans furnished to it by
the seller, insured or their respective representatives. The Mortgage
Insurance Policy will not insure against certain losses sustained by reason of
a default arising from or involving certain matters, including (i)
misrepresentation made, or knowingly participated in, by the lender, other
persons involved in the origination of the Covered Mortgage Loan or the
application for insurance, or made by any appraiser or other person providing
valuation information regarding the property securing the Covered Mortgage
Loan; (ii) negligence or fraud by the applicable Servicer of the Mortgage
Loan, and (iii) failure to construct a property securing a Covered Mortgage
Loan in accordance with specified plans. The Mortgage Insurance Policy permits
MGIC to cancel coverage of a Covered Mortgage Loan under the Mortgage
Insurance Policy or deny any claim submitted
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under the Mortgage Insurance Policy in connection with a Covered Mortgage Loan
if the insured fails to furnish MGIC with copies of all documents in
connection with the origination or servicing of the Covered Mortgage Loan.
The preceding description of the Mortgage Insurance Policy is only a
brief outline and does not purport to summarize or describe the provisions,
terms and conditions of the Mortgage Insurance Policy. For a more complete
description of these provisions, terms and conditions, reference is made to
the Mortgage Insurance Policy, a copy of which is available upon request from
the Trustee.
Mortgage Guaranty Insurance Corporation
MGIC is a wholly owned subsidiary of MGIC Investment Corporation. As of
the date of this prospectus supplement, MGIC had insurer financial strength
ratings of "AA" from S&P and "Aa2" from Xxxxx'x. The rating agencies issuing
the insurer financial strength rating with respect to MGIC can withdraw or
change its rating at any time. As of September 30, 2005, MGIC reported on a
statutory accounting basis, assets of approximately $7,098,347,000,
policyholders' surplus of approximately $1,530,732,000 and a statutory
contingency reserve of approximately $4,393,187,000. As of September 30, 2005,
MGIC reported direct primary insurance in force of approximately $170.2
billion and direct pool risk in force of approximately $7.6 billion. An Annual
Statement for MGIC for the year ended December 31, 2004, prepared on the
Convention Form prescribed by the National Association of Insurance
Commissioners, and a Quarterly Statement for MGIC for the quarter ended
September 30, 2005 are available upon written request from the Trustee. For
further information regarding MGIC, investors are directed to MGIC Investment
Corporation's periodic reports filed with the United States Securities and
Exchange Commission, which are publicly available.
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