EXECUTION COPY
POOLING AND SERVICING AGREEMENT
Dated as of March 1, 1997
and
Amended and Restated as of April 1, 1997
among
FINANCIAL ASSET SECURITIES CORP.
(Depositor)
EMPIRE FUNDING CORP.
(Transferor, Servicer and Claims Administrator)
EFC SECURITIZED ASSETS, L.C.
(Contract of Insurance Holder)
and
FIRST BANK NATIONAL ASSOCIATION
(Trustee)
EMPIRE FUNDING HOME LOAN REMIC TRUST 1997-A
ASSET BACKED CERTIFICATES
SERIES 1997-A
TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
Page
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Section 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . 2
Section 1.02 Other Definitional Provisions . . . . . . . . . . . . 29
ARTICLE III
TRANSFER AND ASSIGNMENT OF THE HOME LOANS;
ISSUANCE OF CERTIFICATES
Section 2.01 Transfer and Assignment of the Home Loans. . . . . . 31
Section 2.04 Books and Records . . . . . . . . . . . . . . . . . . 31
Section 2.05 Delivery of Home Loan Documents . . . . . . . . . . . 32
Section 2.06 Receipt of Home Loan Files; Certain Substitutions;
Initial
Certification by Custodian . . . . . . . . . . . . . . . . 34
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Depositor . . . 37
Section 3.02 Representations and Warranties of the Transferor . . 39
Section 3.03 Representations, Warranties and Covenants of the
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 3.04 Representations and Warranties regarding Individual
Home
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 3.05 (Reserved) . . . . . . . . . . . . . . . . . . . . . 52
Section 3.06 Purchase and Substitution . . . . . . . . . . . . . . 52
ARTICLE V
ADMINISTRATION AND SERVICING OF THE HOME LOANS
Section 4.01 Duties of the Servicer . . . . . . . . . . . . . . . 56
Section 4.02 Payment of Taxes, Insurance and Other Charges . . . . 58
Section 4.03 Fidelity Bond; Errors and Omission Insurance . . . . 58
Section 4.04 Filing of Continuation Statements . . . . . . . . . . 58
Section 4.05 . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 4.06 Superior Liens . . . . . . . . . . . . . . . . . . . 59
Section 4.07 Subservicing . . . . . . . . . . . . . . . . . . . . 59
Section 4.08 Successor Servicers . . . . . . . . . . . . . . . . . 61
Section 4.09 Maintenance of Insurance . . . . . . . . . . . . . . 62
Section 4.10 Inspections . . . . . . . . . . . . . . . . . . . . . 62
Section 4.11 Reports to the Securities and Exchange Commission . . 62
Section 4.12 Claim for FHA Insurance and Foreclosure . . . . . . . 63
Section 4.13 Title, Management and Disposition of Foreclosure
Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE VI
ESTABLISHMENT OF ACCOUNTS
Section 5.01 Collection Account and Certificate Distribution
Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 5.02 Distributions to Certificateholders . . . . . . . . . 76
Section 5.03 Accounts; Trust Account Property . . . . . . . . . . 76
Section 5.04 Allocation of Losses . . . . . . . . . . . . . . . . 78
ARTICLE VI
THE CERTIFICATES
Section 6.01 The Certificates . . . . . . . . . . . . . . . . . . 83
Section 6.02 Registration of Transfer and Exchange of
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 6.03 Mutilated, Destroyed, Lost or Stolen Certificates . . 86
Section 6.04 Persons Deemed Owners . . . . . . . . . . . . . . . . 87
ARTICLE VII
GENERAL SERVICING PROCEDURE
Section 7.01 Due-On-Sale; Due-on-Encumbrance . . . . . . . . . . . 91
Section 7.02 Release of Home Loan Files . . . . . . . . . . . . . 92
Section 7.03 Servicing Compensation . . . . . . . . . . . . . . . 93
Section 7.04 Statement as to Compliance and Financial Statements . 93
Section 7.05 Independent Public Accountants' Servicing Report . . 94
Section 7.06 Right to Examine Servicer Records . . . . . . . . . . 94
Section 7.07 Reports to the Trustee; Collection Account
Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Section 7.08 Financial Statements . . . . . . . . . . . . . . . . 95
ARTICLE VIII
CONCERNING THE CONTRACT OF INSURANCE HOLDER
Section 8.01 Compliance with Title I and Filing of FHA Claims . . 96
Section 8.02 Contract of Insurance Holder . . . . . . . . . . . . 97
ARTICLE IX
THE SERVICER
Section 9.01 Indemnification; Third Party Claims . . . . . . . . . 99
Section 9.02 Merger or Consolidation of the Servicer . . . . . . . 100
Section 9.03 Limitation on Liability of the Servicer and Others . 101
Section 9.04 Servicer Not to Resign; Assignment . . . . . . . . . 101
Section 9.05 Relationship of Servicer to the Trustee . . . . . . . 102
Section 9.06 Servicer May Own Certificates . . . . . . . . . . . . 102
ARTICLE X
DEFAULT
Section 10.01 Events of Default . . . . . . . . . . . . . . . . . . 103
Section 10.02 Trustee to Act; Appointment of Successor . . . . . . 104
Section 10.03 Waiver of Defaults . . . . . . . . . . . . . . . . . 106
ARTICLE XI
CONCERNING THE TRUSTEE
Section 11.01 Duties of the Trustee and Contract of Insurance
Holder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Section 11.02 Certain Matters Affecting the Trustee. . . . . . . . 109
Section 11.03 Trustee Not Liable for Certificates or Home Loans. . 111
Section 11.04 Trustee May Own Certificates. . . . . . . . . . . . . 111
Section 11.05 Trustee's Fees and Expenses; Indemnification. . . . . 112
Section 11.06 Eligibility Requirements for Trustee. . . . . . . . 112
Section 11.07 Resignation and Removal of the Trustee. . . . . . . . 112
Section 11.08 Successor Trustee. . . . . . . . . . . . . . . . . . 113
Section 11.09 Merger or Consolidation of the Trustee. . . . . . . . 114
Section 11.10 Appointment of Co-Trustee or Separate Trustee. . . . 114
Section 11.11 Appointment of Custodians. . . . . . . . . . . . . . 115
Section 11.12 Certain Tax Matters. . . . . . . . . . . . . . . . . 116
Section 11.13 Representations and Warranties of the Trustee. . . . 118
Section 11.14 Xxxxxx Act. . . . . . . . . . . . . . . . . . . . . . 119
Section 11.15 Rights to Direct Trustee. . . . . . . . . . . . . . . 120
Section 11.16 Reports to the Securities and Exchange Commission. . 120
ARTICLE XII
TERMINATION
Section 12.01 Termination . . . . . . . . . . . . . . . . . . . . . 121
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.01 Acts of Certificateholders . . . . . . . . . . . . . 124
Section 13.02 Amendment . . . . . . . . . . . . . . . . . . . . . . 124
Section 13.03 Recordation of Agreement . . . . . . . . . . . . . . 125
Section 13.04 Duration of Agreement . . . . . . . . . . . . . . . . 125
Section 13.05 Governing Law . . . . . . . . . . . . . . . . . . . . 125
Section 13.06 Notices . . . . . . . . . . . . . . . . . . . . . . . 125
Section 13.07 Severability of Provisions . . . . . . . . . . . . . 126
Section 13.08 No Partnership . . . . . . . . . . . . . . . . . . . 126
Section 13.09 Counterparts . . . . . . . . . . . . . . . . . . . . 126
Section 13.10 Successors and Assigns . . . . . . . . . . . . . . . 126
Section 13.11 Headings . . . . . . . . . . . . . . . . . . . . . . 126
Section 13.12 Actions of Certificateholders . . . . . . . . . . . . 126
Section 13.13 Reports to Rating Agencies. . . . . . . . . . . . . . 127
EXHIBITS
EXHIBIT A Home Loan Schedule
EXHIBIT B Form of Servicer's Monthly Remittance Report to Trustee
EXHIBIT C (Reserved)
EXHIBIT D Form of Senior Certificate
EXHIBIT E Form of Mezzanine Certificate
EXHIBIT F Form of Class B Certificate
EXHIBIT G Form of Class R Certificate
EXHIBIT H Form of Agreement of Appointment and
Acceptance of Separate Trustee
This Pooling and Servicing Agreement is entered into effective as of
March 1, 1997, and amended and restated as of April 1, 1997 with effect from
and as of March 1, 1997, among EMPIRE FUNDING CORP., an Oklahoma corporation
("Empire Funding"), as Transferor (in such capacity, the "Transferor"),
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Servicer (in such capacity, the "Servicer") and as Claims Administrator (in
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such capacity, the "Claims Administrator"), FINANCIAL ASSET SECURITIES CORP.,
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a Delaware corporation, as Depositor (the "Depositor"), EFC SECURITIZED
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ASSETS, L.C., a Texas limited liability company, as Contract of Insurance
Holder (in such capacity, the "Contract of Insurance Holder"), and FIRST BANK
----------------------------
NATIONAL ASSOCIATION, a national banking association, as Trustee (in such
capacity, the "Trustee").
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W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Empire Funding, as Transferor, Servicer and Claims
Administrator, the Depositor, the Trustee and the Contract of Insurance
Holder have heretofore executed and delivered a Pooling and Servicing
Agreement dated as of March 1, 1997 (the "Original Pooling and Servicing
Agreement"); and
WHEREAS, Section 13.02 of the Original Pooling and Servicing
Agreement provides that it may be amended from time to time by the Depositor,
the Servicer and the Transferor by written agreement, with the prior written
consent of the Majority Certificateholders, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
thereof, or of modifying in any manner the rights of the Certificateholders
thereunder; and
WHEREAS, the Depositor, the Servicer and the Transfer or deem it
advisable to amend and restate the Original Pooling and Servicing Agreement;
and
WHEREAS, Empire Funding, as Transferor, Servicer and Claims
Administrator, the Depositor, the Trustee and the Contract of Insurance
Holder have duly authorized the execution and delivery of this amendment and
restatement of the Original Pooling and Servicing Agreement and have done all
things necessary to make this amended and restated Pooling and Servicing
Agreement a valid agreement of the parties hereto, in accordance with its
terms.
NOW THEREFORE, in consideration of the mutual agreements herein
contained, Empire Funding, as Transferor, Servicer and Claims Administrator,
the Depositor, the Trustee and the Contract of Insurance Holder agree as
follows for the benefit of each of them and for the benefit of the Holders
from time to time of the Empire Funding Home Loan REMIC Trust 1997-A, Asset
Backed Certificates, Series 1997-A, issued hereunder:
ARTICLE II
DEFINITIONS
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Section 1.01 Definitions. Whenever used in this Agreement, the
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following words and phrases, unless the context otherwise requires, shall
have the meanings specified in this Article. Unless otherwise specified, all
calculations of interest described herein shall be made on the basis of a
360-day year consisting of twelve 30-day months.
Accepted Servicing Procedures: Servicing procedures that meet at least
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the same standards the Servicer would follow in servicing mortgage loans such
as the Home Loans held for its own account, giving due consideration to
standards of practice of prudent mortgage lenders and loan servicers that
originate and service mortgage loans comparable to the Home Loans, applicable
FHA regulations and to the reliance placed by the Certificateholders on the
Servicer for the servicing of the Home Loans but without regard to:
(i) any relationship that the Servicer, any Subservicer or any
Affiliate of the Servicer or any Subservicer may have with the related
Obligor;
(ii) the ownership of any Certificates by the Servicer or any
Affiliate of the Servicer;
(iii) the Servicer's obligation to make Servicing Advances; or
(iv) the Servicer's or any Subservicer's right to receive
compensation for its services hereunder with respect to any particular
transaction.
Accounts: The Certificate Distribution Account, the FHA Premium Account
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and the Collection Account.
Acquisition Date: With respect to any Foreclosure Property, the first
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day on which such Foreclosure Property is considered to be acquired by the
Trust within the meaning of Treasury Regulation Section 1.856-6(b)(1) (i.e.,
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the first day on which the Trust is treated as the owner of such Foreclosure
Property for federal income tax purposes).
Aggregate Certificate Principal Balance: With respect to any
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Distribution Date, the aggregate of the Class Principal Balances of the
Certificates.
Agreement: This Pooling and Servicing Agreement and all amendments
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hereof and supplements hereto.
Allocable Loss Amount: With respect to each Distribution Date, the
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excess, if any, of (a) the aggregate of the Class Principal Balances of all
Classes of Certificates (after giving effect to all distributions on such
Distribution Date) over (b) the Pool Principal Balance as of the end of
the preceding Due Period.
Allocable Loss Amount Priority: With respect to any Distribution Date,
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sequentially, to the Class B Certificates, the Class M-2 Certificates and the
Class M-1 Certificates, in that order.
Anticipated Termination Date: The Distribution Date specified in a
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Notice of Termination delivered to the Trustee pursuant to Section 12.01.
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Assignment of Mortgage: With respect to each Home Loan secured by a
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Mortgage, an assignment, notice of transfer or equivalent instrument
sufficient under the laws of the jurisdiction wherein the related Mortgaged
Property is located to reflect or record the sale of the related Home Loan
which assignment, notice of transfer or equivalent instrument may be in the
form of one or more blanket assignments covering mortgages secured by
Mortgaged Properties located in the same county, if permitted by law.
Available Collection Amount: With respect to any Distribution Date, an
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amount without duplication equal to the sum of: (i) all amounts received on
the Home Loans or required to be paid by the Servicer, the Transferor or the
Depositor during the related Due Period (exclusive of amounts not required to
be deposited by the Servicer in the Collection Account pursuant to Section
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5.01(b)(1) and amounts permitted to be withdrawn by the Trustee from the
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Collection Account pursuant to Section 5.01(b)(3) of this Agreement) as
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reduced by any portion thereof that may not be withdrawn therefrom pursuant
to an order of a United States bankruptcy court of competent jurisdiction
imposing a stay pursuant to Xxxxxxx 000 xx xxx Xxxxxx Xxxxxx Bankruptcy Code;
(ii) FHA Insurance Premiums in respect of FHA Loans received during the
related Due Period; (iii) payments of FHA Insurance in respect of FHA Loans
received during the related Due Period; (iv) with respect to the final
Distribution Date, the Termination Price; (v) any and all income or gain from
investments in the Collection Account; and (vi) the Purchase Price paid for
any Home Loans required to be purchased pursuant to Section 3.06 prior to the
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related Determination Date.
Available Distribution Amount: With respect to any Distribution Date,
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the Available Collection Amount minus the amount required to be paid from the
Certificate Distribution Account pursuant to Section 5.01(c)(i).
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Book-Entry Certificate: Any of the Certificates (other than the Class
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R Certificates), which shall be registered in the name of the Depository or
its nominee, the ownership of which is reflected on the books of the
Depository or on the books of a person maintaining an account with such
Depository (directly or as an indirect participant in accordance with the
rules of such Depository).
Business Day: Any day other than (i) a Saturday or Sunday, or (ii) a
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day on which banking institutions in New York City or in the city in which
the corporate trust office of the Trustee is located or the city in which the
Servicer's servicing operations are located and are authorized or obligated
by law or executive order to be closed.
Certificate: Any one of the Empire Funding Home Loan REMIC Trust 1997-A,
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Asset Backed Certificates, Series 1997-A, executed by the Trustee on behalf
of the Trust and countersigned by the Trustee.
Certificate Distribution Account: The account established and
--------------------------------
maintained pursuant to Section 5.01(a)(2).
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Certificate Interest Rate: With respect to each Class of Certificates
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(other than the Class R Certificates), the per annum rate of interest payable
to the holders of such Class of Certificates. The Certificate Interest Rates
with respect to the Classes of Certificates (other than the Class R
Certificates) are as follows: Class A-1: 7.20%; Class A-2: 7.04%; Class A-3:
7.77%; Class M-1: 7.88%; Class M-2: 8.08%; and Class B: 8.47%.
Certificate Register and Certificate Registrar: The register
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established, and the registrar appointed, pursuant to Section 6.02.
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Certificateholder or Holder: A holder of a Certificate.
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Claims Administrator: Empire Funding, in its capacity as the claims
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administrator hereunder.
Class: With respect to the Certificates, all Certificates bearing the
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same class designation.
Class B Certificateholders' Interest Carry-Forward Amount: With respect
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to any Distribution Date, the excess, if any, of (A) the Class B
Certificateholders' Monthly Interest Distribution Amount for the preceding
Distribution Date plus any outstanding Class B Certificateholders' Interest
Carry-Forward Amount for preceding Distribution Dates, over (B) the amount in
respect of interest that is actually deposited in the Certificate
Distribution Account on such preceding Distribution Date net of the sum of
the Senior Certificateholders' Interest Carry-Forward Amount and the
Mezzanine Certificateholders' Interest Carry-Forward Amount for such
preceding Distribution Date.
Class B Certificateholders' Interest Distribution Amount: With respect
--------------------------------------------------------
to any Distribution Date, the sum of the Class B Certificateholders' Monthly
Interest Distribution Amount for such Distribution Date and the Class B
Certificateholders' Interest Carry-Forward Amount for such Distribution Date;
provided however, that on the Distribution Date, if any, on which the Class
Principal Balance of the Class B Certificates is reduced to zero through
application of an Allocable Loss Amount, the Class B Certificateholders'
Interest Distribution Amount shall be equal to the Class B
Certificateholders' Interest Distribution Amount calculated without giving
effect to this proviso, minus the portion, if any, of the Allocable Loss
Amount that otherwise would be applied to the Classes of Mezzanine
Certificates on such date in the absence of this proviso.
Class B Certificateholders' Monthly Interest Distribution Amount: With
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respect to any Distribution Date, thirty (30) days' accrued interest at
applicable Certificate Interest Rate on the Class Principal Balance of the
Class B Certificates immediately preceding such Distribution Date (or, in
the case of the first Distribution Date, on the Closing Date).
Class B Optimal Principal Balance: With respect to any Distribution
---------------------------------
Date prior to the Stepdown Date, zero; and with respect to any other
Distribution Date, the Pool Principal Balance as of the related Determination
Date minus the sum of (i) the aggregate Class Principal Balance of the Senior
Certificates and the Mezzanine Certificates (after taking into account any
distributions made on such Distribution Date in reduction of the Class
Principal Balances of such Classes of Certificates prior to such
determination) and (ii) the Overcollateralization Target Amount for such
Distribution Date; provided however, that such amount shall never be less
than zero or greater than the Original Class Principal Balance of the Class B
Certificates.
Class Factor: With respect to each Class and any date of determination,
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the then applicable Class Principal Balance of such Class divided by the
Original Class Principal Balance thereof.
Class M-1 Optimal Principal Balance: With respect to any Distribution
-----------------------------------
Date prior to the Stepdown Date, zero; and with respect to any other
Distribution Date, the Pool Principal Balance as of the related Determination
Date minus the sum of (i) the aggregate Class Principal Balance of the Senior
Certificates (after taking into account distributions made on such
Distribution Date in reduction of the Class Principal Balances of the Classes
of Senior Certificates prior to such determination) and (ii) the greater of
(x) the sum of (1) 23.50% of the Pool Principal Balance as of the related
Determination Date and (2) the Overcollateralization Target Amount for such
Distribution Date (calculated without giving effect to the proviso in the
definition thereof) and (y) 0.50% of the Original Pool Principal Balance;
provided however, that such amount shall never be less than zero or greater
than the Original Class Principal Balance of the Class M-1 Certificates.
Class M-2 Optimal Principal Balance: With respect to any Distribution
-----------------------------------
Date prior to the Stepdown Date, zero; with respect to any other Distribution
Date, the Pool Principal Balance as of the related Determination Date minus
the sum of (i) the aggregate Class Principal Balance of the Senior
Certificates (after taking into account any distributions made on such
Distribution Date in reduction of the Class Principal Balances of the Classes
of Senior Certificates prior to such determination) plus the Class Principal
Balance of the Class M-1 Certificates (after taking into account any
distributions made on such Distribution Date in reduction of the Class
Principal Balance of the Class M-1 Certificates prior to such determination)
and (ii) the greater of (x) the sum of (1) 2.00% of the Pool Principal
Balance as of the related Determination Date and (2) the
Overcollateralization Target Amount for such Distribution Date (without
giving effect to the proviso in the definition thereof) and (y) 0.50% of the
Original Pool Principal Balance; provided, however, that such amount shall
never be less than zero or greater than the Original Class Principal Balance
of the Class M-2 Certificates.
Class Principal Balance: With respect to each Class (other than the
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Class R Certificates) and as of any date of determination, the Original Class
Principal Balance of such Class reduced by the sum of (i) all amounts
previously distributed in respect of principal of such Class on all previous
Distribution Dates and (ii) with respect to the Class M-1, Class M-2 and
Class B Certificates, all Allocable Loss Amounts applied in reduction of
principal of such Classes on all previous Distribution Dates. The Class R
Certificates have no Class Principal Balance.
Class R Certificate: Any one of the Certificates designated on the face
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thereof as a Class R Certificate, executed, countersigned and delivered by
the Trustee, representing the right to distributions as set forth herein and
evidencing an interest designated as the "residual interest" in the Trust for
the purposes of the REMIC Provisions.
Class Vote: As long as Certificates of any Class of Senior, Mezzanine
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or Class B Certificates is Outstanding, a determination by the Holders of
Outstanding Certificates of such Class representing more than 50% of the
aggregate of the Percentage Interests of such Class (or such higher
percentage for such Classes as shall be specified in the applicable
provisions hereunder) with respect to which votes are cast on the issue on or
prior to 30 days after receipt of notice, and after all such Classes of
Certificates are no longer Outstanding, by the Holders of Outstanding Class R
Certificates representing more than 50% of the Residual Interests of such
Class R Certificates.
Clearing Agency: An organization registered as a "clearing agency"
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pursuant to Section 17A of the Securities Exchange Act of 1934, as amended.
Closing Date: March 31, 1997.
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Code: The Internal Revenue Code of 1986, as amended from time to time,
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and Treasury Regulations promulgated thereunder.
Collection Account: The account established and maintained by the
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Servicer in accordance with Section 5.01.
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Combination Loan: A loan, the proceeds of which were used by the
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Obligor in combination to finance property improvements and for debt
consolidation or other purposes.
Contract of Insurance: The contract of insurance under Title I covering
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the FHA Loans held under the name EFC Securitized Assets, L.C., or any
successor thereto, as Contract of Insurance Holder hereunder.
Contract of Insurance Holder: EFC Securitized Assets, L.C., its
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successors in interest, and any successor thereto pursuant to the terms of
this Agreement.
Corporate Trust Office: The office of the Trustee at which at any
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particular time its corporate trust business shall be principally
administered, located on the Closing Date at First Bank National Association,
000 Xxxx 0xx Xxxxxx, Xx. Xxxx, Xxxxxxxxx 00000, Attention: Structured
Finance.
Custodial Agreement: The custodial agreement dated as of March 1, 1997
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by and between the Depositor, Empire Funding, as the Transferor and the
Servicer, the Trustee, and First Bank National Association, a national
banking association, as the Custodian providing for the retention of the Home
Loan Files by the Custodian on behalf of the Trustee.
Custodian: Any custodian appointed by the Trustee pursuant to the
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Custodial Agreement, which shall not be affiliated with the Servicer, the
Transferor, any Subservicer, or the Depositor. First Bank National
Association shall be the initial Custodian pursuant to the terms of the
Custodial Agreement.
Custodian Fee: If applicable, the annual fee payable to the Custodian,
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calculated and payable monthly on each Distribution Date pursuant to Section
5.01(c)(i) equal to the fee, if any, set forth in the Custodial Agreement.
Cut-Off Date: Close of business on February 28, 1997; except with
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respect to 12 Home Loans for which the latest Cut-Off Date is March 26, 1997.
DCR: Duff & Xxxxxx Credit Rating Co.
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Debt Consolidation Loan: A loan, the proceeds of which were primarily
-----------------------
used by the related Obligor for debt consolidation purposes or purposes other
than to finance property improvements.
Debt Instrument: The note or other evidence of indebtedness evidencing
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the indebtedness of an Obligor under a Home Loan.
Defaulted Home Loan: With respect to any date of determination, any
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Home Loan, including without limitation any Liquidated Home Loan, with
respect to which any of the following has occurred as of the end of the
preceding Due Period: (a) a claim has been paid or finally rejected pursuant
to the Contract of Insurance; (b) foreclosure or similar proceedings have
been commenced; (c) any portion of a Monthly Payment becomes 180 days past
due by the related Obligor; or (d) the Servicer or any Subservicer has
determined in good faith and in accordance with customary servicing practices
that such Home Loan is in default or imminent default.
Defective Home Loan: As defined in Section 3.06 hereof.
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Deleted Home Loan: A Home Loan replaced or to be replaced by one or
-----------------
more Qualified Substitute Home Loans.
Delinquent: A Home Loan is "Delinquent" if any Monthly Payment due
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thereon is not made by the close of business on the day such Monthly Payment
is scheduled to be paid. A Home Loan is "30 days Delinquent" if such Monthly
Payment has not been received by the close of business on the corresponding
day of the month immediately succeeding the month in which such Monthly
Payment was due, or, if there is no such corresponding day (e.g., as when a
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30-day month follows a 31-day month in which a payment was due on the 31st
day of such month) then on the last day of such immediately succeeding month.
The determination of whether a Home Loan is "60 days Delinquent," "90 days
Delinquent", etc., shall be done in like manner.
Delivery: When used with respect to Trust Account Property means:
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(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that constitute
"instruments" within the meaning of Section 9-105(1)(i) of the UCC and
are susceptible of physical delivery, transfer thereof to the Trustee or
its nominee or custodian by physical delivery to the Trustee or its
nominee or custodian endorsed to, or registered in the name of, the
Trustee or its nominee or custodian or endorsed in blank, and, with
respect to a certificated security (as defined in Section 8-102 of the
UCC) transfer thereof (i) by delivery of such certificated security
endorsed to, or registered in the name of, the Trustee or its nominee or
custodian or endorsed in blank to a financial intermediary (as defined
in Section 8-313 of the UCC) and the making by such financial
intermediary of entries on its books and records identifying such
certificated securities as belonging to the Trustee or its nominee or
custodian and the sending by such financial intermediary of a
confirmation of the purchase of such certificated security by the
Trustee or its nominee or custodian, or (ii) by delivery thereof to a
"clearing corporation" (as defined in Section 8-102(3) of the UCC) and
the making by such clearing corporation of appropriate entries on its
books reducing the appropriate securities account of the transferor and
increasing the appropriate securities account of a financial
intermediary by the amount of such certificated security, the
identification by the clearing corporation of the certificated
securities for the sole and exclusive account of the financial
intermediary, the maintenance of such certificated securities by such
clearing corporation or a "custodian bank" (as defined in
Section 8-102(4) of the UCC) or the nominee of either subject to the
clearing corporation's exclusive control, the sending of a confirmation
by the financial intermediary of the purchase by the Trustee or its
nominee or custodian of such securities and the making by such financial
intermediary of entries on its books and records identifying such
certificated securities as belonging to the Trustee or its nominee or
custodian (all of the foregoing, "Physical Property"), and, in any
event, any such Physical Property in registered form shall be in the
name of the Trustee or its nominee or custodian; and such additional or
alternative procedures as may hereafter become appropriate to effect the
complete transfer of ownership of any such Trust Account
Property (as defined herein) to the Trustee or its nominee or custodian,
consistent with changes in applicable law or regulations or the
interpretation thereof;
(b) with respect to any securities issued by the U.S. Treasury,
FNMA or FHLMC that is a book-entry security held through the Federal
Reserve System pursuant to federal book-entry regulations, the following
procedures, all in accordance with applicable law, including applicable
federal regulations and Articles 8 and 9 of the UCC: book-entry
registration of such Trust Account Property to an appropriate book-entry
account maintained with a Federal Reserve Bank by a financial
intermediary that is also a "depository" pursuant to applicable federal
regulations and issuance by such financial intermediary of a deposit
advice or other written confirmation of such book-entry registration to
the Trustee or its nominee or custodian of the purchase by the Trustee
or its nominee or custodian of such book-entry securities; the making by
such financial intermediary of entries in its books and records
identifying such book-entry security held through the Federal Reserve
System pursuant to federal book-entry regulations as belonging to the
Trustee or its nominee or custodian and indicating that such custodian
holds such Trust Account Property solely as agent for the Trustee or its
nominee or custodian; and such additional or alternative procedures as
may hereafter become appropriate to effect complete transfer of
ownership of any such Trust Account Property to the Trustee or its
nominee or custodian, consistent with changes in applicable law or
regulations or the interpretation thereof; and
(c) with respect to any item of Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not
governed by clause (b) above, registration on the books and records of
the issuer thereof in the name of the financial intermediary, the
sending of a confirmation by the financial intermediary of the purchase
by the Trustee or its nominee or custodian of such uncertificated
security, the making by such financial intermediary of entries on its
books and records identifying such uncertificated certificates as
belonging to the Trustee or its nominee or custodian.
Denomination: With respect to the Certificates (other than the Class
------------
R Certificates), the portion of the Original Class Principal Balance
represented by such Certificate as specified on the face thereof.
Depositor: Financial Asset Securities Corp., a Delaware corporation,
---------
and any successor thereto.
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(3) of the Uniform Commercial Code of
the State of New York.
Depository Agreement: The agreement entered among the Depositor, the
--------------------
Trustee, and the Depository, in connection with the issuance of the
Certificates.
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: With respect to any Distribution Date, the
------------------
fourteenth calendar day of the month in which such Distribution Date occurs
or if such day is not a Business Day, the immediately preceding Business Day.
Distribution Date: The 25th day of any month or if such 25th day is not
-----------------
a Business Day, the first Business Day immediately following such day,
commencing in April 1997.
Distribution Statement: As defined in Section 5.05.
---------------------- ------------
DTC: The Depository Trust Company.
---
Due Date: The day of the month on which the Monthly Payment is due from
--------
the Obligor on a Home Loan.
Due Period: With respect to any Determination Date or Distribution
----------
Date, the calendar month immediately preceding such Determination Date or
Distribution Date, as the case may be.
Early Termination Notice Date: Any date on which the Aggregate
-----------------------------
Certificate Principal Balance is less than 10% of the aggregate of the Class
Principal Balances of the Certificates as of the Closing Date.
Eligible Account: At any time, an account which is any of the
----------------
following: (i) an account maintained with a depository institution (A) the
long-term debt obligations of which are at such time rated by each Rating
Agency in one of their two highest long-term rating categories, or (B) the
short-term debt obligations of which are then rated by each Rating Agency in
their highest short-term rating category; (ii) an account or accounts the
deposits in which are fully insured by either the Bank Insurance Fund or the
Savings Association Insurance Fund of the FDIC; (iii) a trust account (which
shall be a "segregated trust account") maintained with the corporate trust
department of a federal or state chartered depository institution or trust
company with trust powers and acting in its fiduciary capacity for the
benefit of the Trustee, which depository institution or trust company shall
have capital and surplus of not less than $50,000,000; or (iv) an account
that will not cause any Rating Agency to downgrade or withdraw its
then-current rating(s) assigned to the Certificates or the Class B
Certificates, as evidenced in writing by such Rating Agency. (Each reference
in this definition of "Eligible Account" to the Rating Agency shall be
construed as a reference to Standard & Poor's and DCR.)
Eligible Servicer: A Person that (i) is servicing a portfolio of Title
-----------------
I mortgage loans, (ii) is legally qualified to service, and is capable of
servicing, the FHA Loans and has all licenses required to service Title I
mortgage loans, (iii) has demonstrated the ability professionally and
competently to service a portfolio of FHA insured mortgage loans similar to
the FHA Loans with reasonable skill and care, (iv) has demonstrated the
ability professionally and competently to service a portfolio of mortgage
loans similar to the Home Loans, and (v) has a net worth calculated in
accordance with generally accepted accounting principles of at least
$500,000.
Empire Funding: Empire Funding Corp.
--------------
Event of Default: As described in Section 10.01 hereof.
---------------- -------------
Excess Spread: With respect to any Distribution Date, the excess of (a)
-------------
the Available Distribution Amount over (b) the Regular Distribution Amount.
FDIC: The Federal Deposit Insurance Corporation and any successor
----
thereto.
FHA: The Federal Housing Administration and any successor thereto.
---
FHA Insurance: Insurance issued by FHA pursuant to Title I of the
-------------
National Housing Act of 1934, as amended.
FHA Insurance Coverage Insufficiency: At the time of a prospective
------------------------------------
claim for reimbursement under the Contract of Insurance for an FHA Loan
pursuant to Section 4.12, the amount by which the sum of all claims
-------------
previously paid by the FHA in respect of all FHA Loans and the amount
expected to be received in respect of such prospective claim for such FHA
Loan exceeds the Trust Designated Insurance Amount.
FHA Insurance Coverage Reserve Account: The account established by the
--------------------------------------
FHA pursuant to the Contract of Insurance which is adjusted and maintained
under Title I (see 24 C.F.R. 201.32(a)).
FHA Insurance Payment Amount: With respect to any Distribution Date and
----------------------------
with respect to an FHA Loan for which an insurance claim has been made by the
Contract of Insurance Holder or the Claims Administrator and paid by the FHA
or rejected, in part, by the FHA, an amount equal to the sum of such of the
following as are appropriate: (i) the amount, if any, received from the FHA,
(ii) with respect to claims rejected in part, the amount, if any, received
from Empire Funding or the Servicer pursuant to Section 4.12 and (iii) the
------------
amount received from the sale of FHA Pending Claims sold pursuant to Section
-------
12.01(d).
--------
FHA Loans: The Home Loans designated as FHA Loans on the Home Loan
---------
Schedule.
FHA Pending Claims: As defined in Section 12.01(d).
------------------ ----------------
FHA Premium Account: The account which is an Eligible Account
-------------------
established and maintained by the Trustee pursuant to Section 5.01(a)(3).
------------------
FHA Premium Account Deposit: With respect to any Distribution Date, an
---------------------------
amount equal to the greater of (i) 1/12 times 0.75% times the aggregate
Principal Balance of all FHA Loans, other than Invoiced Loans for which
premiums for FHA Insurance have been received, as of the first day of the
calendar month preceding the month of such Distribution Date (or the original
Principal Balance of such Loans as of the applicable Cut-Off Date with
respect to the first Distribution Date) and (ii) the positive excess, if any,
of (A) the projected amount of premium and other charges due under the
Contract of Insurance for the next succeeding Due Period over (B) the balance
in the FHA Premium Account as of the related Determination Date.
FHA Reserve Amount: As to each FHA Loan, 10% of the Principal Balance
------------------
as of the Cut-Off Date of such FHA Loan.
FHLMC: The Federal Home Loan Mortgage Corporation and any successor
-----
thereto.
FICO Score: The credit evaluation scoring methodology developed by
----------
Fair, Xxxxx and Company.
Fidelity Bond: As described in Section 4.03 hereof.
------------- ------------
Final Date: The later of:
----------
(i) two years after the last insurance claim with respect to
an FHA Loan filed with the FHA was certified for payment by FHA, or
(ii) the final settlement date with respect to any insurance
claim for an FHA Loan rejected by the FHA.
Final Residual Distribution Amount: With respect to the Distribution
----------------------------------
Date which coincides with the Termination Date, all amounts, if any,
remaining in the Certificate Distribution Account and the FHA Premium Account
and all other assets, if any, held by the Trust after all payments required
to be made pursuant to Section 5.01(d)(vii) through 5.01(e)(iii)) have been
-------------------- ------------
made or provided for on such Distribution Date.
Final Scheduled Distribution Date: For each Class of Certificates
---------------------------------
(other than the Class R Certificates), the following Distribution Dates:
Class A-1: February 25, 2002;
Class A-2: March 25, 2008
Class A-3: June 25, 2018
Class M-1: June 25, 2018
Class M-2: June 25, 2018
Class B: June 25, 2018
FNMA: The Federal National Mortgage Association and any successor
----
thereto.
Foreclosed Loan: As of any date of determination, any Mortgage Loan,
---------------
other than a Mortgage Loan for which a claim is pending under the Contract of
Insurance, that has been discharged as a result of (i) the completion of
foreclosure or comparable proceedings; (ii) the Trustee's acceptance of the
deed or other evidence of title to the related Property in lieu of
foreclosure or other comparable proceeding; or (iii) the acquisition by the
Trustee of title to the related Property by operation of law.
Foreclosure Property: Any real property securing a Foreclosed Loan that
--------------------
has been acquired by the Servicer through foreclosure, deed in lieu of
foreclosure or similar proceedings in respect of the related Home Loan.
Home Loan: An individual Home Loan that is conveyed to the Trust
---------
pursuant to this Agreement on the Closing Date, together with the rights and
obligations of a holder thereof and payments thereon and proceeds therefrom
received after the Cut-off Date, the Home Loans subject to this Agreement
being identified on the Home Loan Schedule annexed hereto as Exhibit A. As
---------
applicable, a Home Loan shall be deemed to refer to the related Debt
Instrument, the Mortgage, if any, and any related Foreclosure Property.
Home Loan File: As defined in Section 2.05.
-------------- ------------
Home Loan Interest Rate: The fixed annual rate of interest borne by a
-----------------------
Debt Instrument, as shown on the related Home Loan Schedule as the same may
be modified by the Servicer in accordance with Section 4.01(c) hereof.
---------------
Home Loan Pool: The pool of Home Loans.
--------------
Home Loan Purchase Agreement: The home loan purchase agreement between
----------------------------
the Transferor, EFC Securitized Assets, L.C., and the Depositor, dated as of
March 1, 1997.
Home Loan Schedule: The schedule of Home Loans specifying with respect
------------------
to each Home Loan, the information set forth on Exhibit A attached hereto, as
amended or supplemented from time to time.
HUD: The United States Department of Housing and Urban Development and
---
any successor thereto.
Independent: When used with respect to any specified Person, such
-----------
Person (i) is in fact independent of Empire Funding, the Servicer, the Claims
Administrator, the Depositor or any of their respective affiliates, (ii) does
not have any direct financial interest in or any material indirect financial
interest in any of Empire Funding, the Servicer, the Claims Administrator,
the Depositor or any of their respective affiliates and (iii) is not
connected with any of Empire Funding, the Servicer, the Claims Administrator,
the Depositor or any of their respective affiliates, as an officer, employee,
promoter, underwriter, trustee, partner, director or Person performing
similar functions; provided, however, that a Person shall not fail to be
Independent
-------- -------
of Empire Funding, the Servicer, the Claims Administrator, the Depositor or
any of their respective affiliates merely because such Person is the
beneficial owner of 1% or less of any class of securities issued by Empire
Funding, the Servicer, the Claims Administrator, the Depositor or any of
their respective affiliates, as the case may be.
Independent Accountants: A firm of nationally recognized certified
-----------------------
public accountants which is Independent.
Insurance Policies: With respect to any Property, any related insurance
------------------
policy other than the Contract of Insurance.
Insurance Proceeds: With respect to any Property, all amounts collected
------------------
in respect of Insurance Policies and not required to be applied to the
restoration of the related Property or paid to the related Obligor.
Insurance Record: The record established and maintained by the Claims
----------------
Administrator (in a manner consistent with the Title I provisions set forth
in 24 C.F.R. Section 201.32) setting forth the FHA insurance coverage and the
Trust Designated Insurance Amount attributable to the FHA Loans hereunder.
To the extent consistent with adjustments pursuant to Title I to the FHA
Insurance Coverage Reserve Account, the Insurance Record shall be reduced by
the amount of claims approved for payment by the FHA with respect to any FHA
Loan or Related Series Loan after the date of transfer of the related FHA
reserve account to the Contract of Insurance Holder.
Invoiced Loan: An FHA Loan with respect to which the related Obligor
-------------
is required to pay the FHA premium on FHA Insurance with respect to such FHA
Loan.
Liquidated Home Loan: With respect to any date of determination, any
--------------------
Home Loan or Foreclosure Property in respect of a Home Loan on which a
Monthly Payment is in excess of 30 days past due and as to which the Servicer
has determined that all amounts which it reasonably and in good faith expects
to collect have been recovered from or on account of such Home Loan or the
related Foreclosure Property; provided that, in any event, such Home Loan or
the related Foreclosure Property shall be deemed uncollectible and therefore
deemed a Liquidated Home Loan upon the earlier of: (a) the liquidation of
the related Foreclosure Property, (b) the determination by the Servicer in
accordance with customary servicing practices that no further amounts are
collectible from the Home Loan and any related Mortgaged Property, or (c) the
date on which any portion of a Monthly Payment on any Home Loan is in excess
of 180 days past due.
Liquidation Proceeds: With respect to a Liquidated Home Loan, any cash
--------------------
amounts received in connection with the liquidation of such Liquidated Home
Loan, whether through trustee's sale, foreclosure sale or other disposition,
and any other amounts required to be deposited in the Collection Account
pursuant to Section 5.01(b) other than Insurance Proceeds and Released
---------------
Mortgaged Property Proceeds.
Loss Reimbursement Deficiency: With respect to any Distribution Date
-----------------------------
and the Class M-1 Certificates, Class M-2 Certificates or Class B
Certificates, the amount of Allocable Loss Amounts applied to the reduction
of the Class Principal Balance of such Class and not reimbursed pursuant to
Section 5.01 hereof as of such Distribution Date plus, in the case of the
------------
Class M-1 Certificates and Class M-2 Certificates, interest accrued on the
unreimbursed portion thereof at the applicable Certificate Interest Rate
through the end of the Due Period immediately preceding such Distribution
Date; however, no interest shall accrue on any amount of any such accrued and
unpaid interest.
Majority Certificateholders: Until such time as the sum of the Class
---------------------------
Principal Balances of all Classes of Certificates has been reduced to zero,
the holder or holders of in excess of 50% of the Class Principal Balance of
all Classes of Certificates (accordingly, the holders of the Class R
Certificates shall be excluded from any rights or actions of the Majority
Certificateholders during such period); and thereafter, by the holder or
holders of Class R Certificates representing more than 50% of the Residual
Interests of the Class R Certificates.
Mezzanine Certificateholders' Interest Carry-Forward Amount: With
-----------------------------------------------------------
respect to any Distribution Date, the excess, if any, of (A) the Mezzanine
Certificateholders' Monthly Interest Distribution Amount for the preceding
Distribution Date plus any outstanding Mezzanine Certificateholders' Interest
Carry-Forward Amount for preceding Distribution Dates, over (B) the amount in
respect of interest that is actually deposited in the Certificate
Distribution Account on such preceding Distribution Date net of the Senior
Certificateholders' Interest Carry-Forward Amount for such preceding
Distribution Date.
Mezzanine Certificateholders' Interest Distribution Amount: With
----------------------------------------------------------
respect to any Distribution Date, the sum of the Mezzanine
Certificateholders' Monthly Interest Distribution Amount for such
Distribution Date and the Mezzanine Certificateholders' Interest Carry-
Forward Amount for such Distribution Date.
Mezzanine Certificateholders' Monthly Interest Distribution Amount:
------------------------------------------------------------------
With respect to each Distribution Date and the Classes of Mezzanine
Certificates, the aggregate amount of thirty (30) days' accrued interest at
the respective Certificate Interest Rates on the respective Class Principal
Balances of such Classes immediately preceding such Distribution Date (or,
in the case of the first Distribution Date, on the Closing Date).
Mezzanine Certificates: The Class M-1 Certificates and Class M-2
----------------------
Certificates.
Monthly Cut-Off Date: The last day of any calendar month, and with
--------------------
respect to any Distribution Date, the last day of the calendar month
immediately preceding such Distribution Date.
Monthly Payment: The scheduled monthly payment of principal and/or
---------------
interest required to be made by an Obligor on the related Home Loan,
including any premium for FHA Insurance included in such payment, as set
forth in the related Debt Instrument.
Mortgage: The mortgage, deed of trust or other security instrument
--------
creating a lien in accordance with applicable law on a Mortgaged Property to
secure the Debt Instrument which evidences a secured Home Loan.
Mortgage Loan: As of any date of determination, each of the Home Loans,
-------------
secured by an interest in a Property, transferred and assigned to the Trustee
pursuant to Section 2.01(a).
---------------
Mortgaged Property: The real property encumbered by the Mortgage which
------------------
secures the Debt Instrument evidencing a secured Home Loan.
Mortgaged Property States: Each state in which any Mortgaged Property
-------------------------
securing a Home Loan is located as set forth in the Home Loan Schedule.
Net Delinquency Calculation Amount: With respect to any Distribution
----------------------------------
Date, the excess, if any, of (x) the product of 2.5 and the Six-Month Rolling
Delinquency Average over (y) the aggregate of the amounts of Excess Spread
for the three preceding Distribution Dates.
Net Liquidation Proceeds: With respect to any Distribution Date, any
------------------------
cash amounts received from Liquidated Home Loan during the related Due
Period, whether through trustee's sale, foreclosure sale, disposition of
Mortgaged Properties or otherwise (other than Insurance Proceeds and Released
Mortgaged Property Proceeds), and any other cash amounts received in
connection with the management of the Mortgaged Properties from Defaulted
Home Loans, in each case, net of any reimbursements to the Servicer made from
such amounts for any unreimbursed Servicing Compensation and Servicing
Advances (including Nonrecoverable Servicing Advances) made and any other
fees and expenses paid in connection with the foreclosure, conservation and
liquidation of the related Liquidated Home Loans or Foreclosure Property
pursuant to Section 4.13 hereof.
------------
Net Loan Losses: With respect to any Defaulted Home Loan that is subject
---------------
to a modification pursuant to Section 4.01(c), an amount equal to the portion
---------------
of the Principal Balance, if any, released in connection with such
modification.
Net Loan Rate: With respect to each Home Loan, the related Home Loan
-------------
Interest Rate, less the rate at which the Servicing Fee is calculated.
Non-FHA Loans: The Home Loans designated as Non-FHA Loans on the Home
-------------
Loan Schedule.
Nonrecoverable Servicing Advance: With respect to any Foreclosure
--------------------------------
Property, (a) any Servicing Advance previously made and not reimbursed from
late collections, Liquidation
Proceeds, Insurance Proceeds or the Released Mortgaged Property Proceeds, or
(b) a Servicing Advance proposed to be made in respect of a Home Loan or
Foreclosure Property either of which, in the good faith business judgment of
the Servicer, as evidenced by an Officer's Certificate delivered to the
Trustee would not be ultimately recoverable.
Notice of Termination: Notice given to the Trustee by the Servicer
---------------------
pursuant to Section 12.01(e).
----------------
Obligor: Each obligor on a Debt Instrument.
-------
Officer's Certificate: A certificate delivered to the Trustee signed
---------------------
by the President or a Vice President or an Assistant Vice President of the
Depositor, the Servicer or the Transferor, in each case, as required by this
Agreement.
Opinion of Counsel: A written opinion of counsel (who is acceptable to
------------------
the Rating Agencies), who may be employed by Empire Funding, the Servicer,
the Depositor or any of their respective affiliates.
Original Class Principal Balance: With respect to the Classes of
--------------------------------
Certificates, as follows: Class A-1: $8,400,000.00; Class A-2:
$18,300,000.00; Class A-3: $11,442,000.00; Class M-1: $6,003,000.00; Class M-
2: $5,377,000.00; and Class B: $500,795.54.
Original Pool Principal Balance: $50,023,311.83, which is the Pool
-------------------------------
Principal Balance as of the Cut-Off Date.
Outstanding: With respect to any Class of Certificates as of any date
-----------
of determination, all Certificates of such Class theretofore executed,
countersigned and delivered pursuant to this Agreement except:
(i) Certificates theretofore cancelled by the Certificate
Registrar or delivered to the Certificate Registrar for cancellation;
(ii) Certificates or portions thereof for which the amount of
the final distribution to be made thereon has been previously deposited
with the Trustee in trust for the Holders of such Certificates;
(iii) Certificates in exchange for or in lieu of which other
Certificates have been executed, countersigned and delivered pursuant to
this Agreement; and
(iv) Certificates alleged to have been destroyed, lost or
stolen for which replacement Certificates have been issued as provided
for in Section 6.03;
------------
provided, however, that, in determining whether the Holders of the requisite
percentage of any Class of Certificates have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Certificates
owned by Empire Funding, the Depositor, any Holder of a Class R
Certificate or any affiliate of any of the foregoing shall be disregarded
and deemed not to be Outstanding, except that, in determining whether
the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent, or waiver, only Certificates
which the Trustee knows to be so owned shall be so disregarded; provided
further that in the event that 100% of the Certificates are owned by Empire
Funding, the Depositor or any affiliate of any of the foregoing, such
certificates shall be deemed to be Outstanding.
Overcollateralization Amount: With respect to any Distribution Date,
----------------------------
the amount equal to the excess of (A) the Pool Principal Balance over (B) the
aggregate of the Class Principal Balances of the Certificates (after giving
effect to the distributions made on such date pursuant to Section 5.01(d)).
---------------
Overcollateralization Deficiency Amount: With respect to any
---------------------------------------
Distribution Date, the excess, if any, of the Overcollateralization Target
Amount over the Overcollateralization Amount (after giving effect to all
prior distributions on the Classes of Certificates and to any prior
distributions on the Class R Certificates on such Distribution Date pursuant
to Section 5.01(d) hereof).
---------------
Overcollateralization Target Amount: With respect to any Distribution
-----------------------------------
Date occurring prior to the Stepdown Date, an amount equal to the greater of
(x) 8% of the Original Pool Principal Balance and (y) the Net Delinquency
Calculation Amount; with respect to any other Distribution Date, an amount
equal to the greater of (x) 16% of the Pool Principal Balance as of the end
of the related Due Period and (y) the Net Delinquency Calculation Amount;
provided, however, that the Overcollateralization Target Amount shall in no
event be less than 0.50% of the Original Pool Principal Balance or greater
than the sum of the aggregate Class Principal Balances of all Classes of
Certificates.
Ownership Interest: Any record or beneficial ownership interest in any
------------------
Class R Certificate.
Percentage Interest: As to any Certificate (other than a Class R
-------------------
Certificate), the percentage interest obtained by dividing the Denomination
of such Certificate by the Original Class Principal Balance of all
Certificates of such Class. As to any Class R Certificate, the percentage
interest set forth on the face of such Certificate.
Permitted Investments: Each of the following:
---------------------
(1) obligations of, or guaranteed as to principal and interest by,
the United States or any agency or instrumentality thereof when such
obligations are backed by the full faith and credit of the United
States;
(2) a repurchase agreement that satisfies the following criteria:
(1) must be between the Trustee and either (a) primary dealers on the
Federal Reserve reporting dealer list which are rated in one of the two
highest categories for long-term unsecured debt obligations by each
Rating Agency, or (b) banks rated in one of the two highest categories
for long-term unsecured debt obligations by each Rating Agency; and
(2) the written repurchase agreement must include the following:
(a) securities which are acceptable for transfer and are either
(I) direct U.S. government obligations, or (II) obligations of a federal
agency that are backed by the full faith and credit of the U.S.
government, or FNMA or FHLMC; (b) a term no greater than 60 days for
any repurchase transaction;
(c) the collateral must be delivered to the Trustee or a third party
custodian acting as agent for the Trustee by appropriate book entries
and confirmation statements, and must have been delivered before or
simultaneous with payment (i.e., perfection by possession of
certificated securities); and (d) the securities sold thereunder must be
valued weekly, marked-to-market at current market price plus accrued
interest and the value of the collateral must be equal to at least 104%
of the amount of cash transferred by the Trustee under the repurchase
agreement and if the value of the securities held as collateral declines
to an amount below 104% of the cash transferred by the Trustee plus
accrued interest (i.e., a margin call), then additional cash and/or
acceptable securities must be transferred to the Trustee to satisfy such
margin call; provided, however, that if the securities used as
collateral are obligations of FNMA or FHLMC, then the value of the
securities held as collateral must equal at least 105% of the cash
transferred by the Trustee under such repurchase agreement;
(3) certificates of deposit, time deposits and bankers acceptances
of any United States depository institution or trust company
incorporated under the laws of the United States or any state, including
the Trustee; provided that the debt obligations of such depository
institution or trust company at the date of the acquisition thereof have
been rated by each Rating Agency in one of its two highest long-term
rating categories;
(4) deposits, including deposits with the Trustee, which are fully
insured by the Bank Insurance Fund or the Savings Association Insurance
Fund of the FDIC, as the case may be;
(5) commercial paper of any corporation incorporated under the
laws of the United States or any state thereof, including corporate
affiliates of the Trustee, which at the date of acquisition is rated by
each Rating Agency in its highest short-term rating category and which
has an original maturity of not more than 365 days;
(6) debt obligations rated by each Rating Agency at the time at
which the investment is made in its highest long-term rating category
(or those investments specified in (3) above with depository
institutions which have debt obligations rated by each Rating Agency in
one of its two highest long-term rating categories);
(7) money market funds which are rated by each Rating Agency at
the time at which the investment is made in its highest long-term rating
category, any such money market funds which provide for demand
withdrawals being conclusively deemed to satisfy any maturity
requirements for Permitted Investments set forth in this Agreement; or
(8) any other demand, money market or time deposit obligation,
security or investment as may be acceptable to each Rating Agency at the
time at which the investment is made;
provided that no instrument described in the foregoing subparagraphs shall
evidence either the right to receive (a) only interest with respect to the
obligations underlying such instrument or (b) both principal and interest
payments derived from obligations underlying such instrument where the
interest and principal payments with respect to such instrument provide a
yield to maturity at par greater than 120% of the yield to maturity at par of
the underlying obligations; and provided, further, that no instrument
described in the foregoing subparagraphs may be purchased at a price greater
than par if such instrument may be prepaid or called at a price less than its
purchase price prior to stated maturity.
Each reference in this definition of "Permitted Investments" to the
Rating Agency shall be construed, in the case of each subparagraph above
referring to each Rating Agency, as a reference to each of Standard & Poor's
and DCR.
Permitted Transferee: Any Person other than (i) the United States, any
--------------------
state or any political subdivision thereof, any possession of the United
States, or any agency or instrumentality of any of the foregoing (other than
an instrumentality that is a corporation if all of its activities are subject
to tax and a majority of its board of directors is not selected by any such
governmental unit), (ii) a foreign government, international organization or
any agency or instrumentality of either of the foregoing (other than an
instrumentality that is a corporation if all of its activities are subject to
tax and a majority of its board of directors is not selected by any such
governmental unit), (iii) an organization (except certain farmers'
cooperatives described in Code Section 521) 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
Code Section 860E(c)(1)) with respect to any Class R Certificate, (iv) rural
electric and telephone cooperatives described in Code Section 1381(a)(2)(c),
(v) any other Person so designated by the Trustee based upon an Opinion of
Counsel that the holding of an ownership interest in a Class R Certificate by
such Person may cause the Trust or any Person having an ownership interest in
any Class R Certificate, other than such Person, to incur a liability for any
tax imposed under the Code that would not otherwise be imposed but for the
transfer of an ownership interest in a Class R Certificate to such Person and
(vi) a Person that is not a citizen or resident of the United States, a
corporation, partnership, or other entity created or organized in or under
the laws of the United States or any political subdivision thereof, or an
estate the income of which is subject to United States federal income
taxation regardless of its source, or 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 trustees have authority to control all
substantial decisions of the trust, unless such person provides the Trustee
with a duly completed Internal Revenue Service Form 4224. The terms "United
States," "state" and "international organization" shall have the meanings
set forth in Code Section 7701 or successor provisions.
Person: Any individual, corporation, partnership, joint venture,
------
limited liability company, association, joint-stock company, trust, national
banking association, unincorporated organization or government or any agency
or political subdivision thereof.
Physical Property: As defined in the definition of "Delivery" above.
-----------------
Plan of Complete Liquidation: A written plan adopted by the Trustee,
----------------------------
as attorney-in-fact for the Certificateholders, authorizing and instructing
the Trustee to liquidate the REMIC Pool within the meaning of Section
860F(a)(4) of the Code by (i) selling all the Home Loans and Foreclosure
Properties then held by the REMIC Pool on the terms specified therein, and
(ii) making a final distribution to Certificateholders of the cash proceeds
of such sale and of all other cash then held by the REMIC Pool (less amounts
retained to meet any expenses of, and any claims against, the REMIC Pool),
all in accordance with the provisions of Section 12.01.
-------------
Pool Principal Balance: With respect to any date of determination, the
----------------------
aggregate Principal Balances of the Home Loans as of the end of the preceding
Due Period provided, however, that the Pool Principal Balance on any
Distribution Date on which the Termination Price is to be paid to
Certificateholders will be deemed to have been equal to zero as of such date.
Principal Balance: With respect to any Home Loan or related Foreclosure
-----------------
Property, (i) at the Cut-Off Date, the outstanding unpaid principal balance
of the Home Loan as of the Cut-Off Date and (ii) with respect to any date of
determination, the outstanding unpaid principal balance of the Home Loan as
of the last day of the preceding Due Period (after giving effect to all
payments received thereon and the allocation of any Net Loan Losses with
respect thereto for a Defaulted Home Loan which relates to such Due Period),
without giving effect to amounts received in respect of such Home Loan or
related Foreclosure Property after such Due Period; provided, however, that
any Liquidated Home Loan shall have a Principal Balance of zero.
Principal Prepayment: With respect to any Home Loan and any Due Period,
--------------------
any principal amount received on a Home Loan in excess of the principal of
the Monthly Payment due in such Due Period.
Property: The property (real, personal or mixed) encumbered by the
--------
Mortgage which secures the Debt Instrument evidencing a secured Home Loan.
Prospectus: The Depositor's final Prospectus as supplemented by the
----------
Prospectus Supplement.
Prospectus Supplement: The Prospectus Supplement to be prepared by the
---------------------
Depositor in connection with the issuance and sale of the Certificates.
Purchase Price: As defined in Section 3.06 herein.
-------------- ------------
Qualified Substitute Home Loan: A home loan or home loans substituted
------------------------------
for a Deleted Home Loan pursuant to Section 2.06 or 3.06, which (i) has or
------------ ----
have an interest rate or rates of not less than, and not more than two
percentage points greater than, the Home Loan Interest Rate for the Deleted
Home Loan, (ii) matures or mature not more than one year later than and not
more than one year earlier than the Deleted Home Loan, (iii) has or have a
principal balance or principal balances (after application of all payments
received on or prior to the date of substitution) equal to or less than the
Principal Balance of the Deleted Home Loan as of such date, (iv) has or have
a lien priority equal or superior to that of the Deleted Home Loan, (v) has a
borrower with a comparable credit grade classification to the credit grade
classification of the borrower with respect to the Deleted Home Loans,
including a FICO Score that is no more than 10 points below that of such
Deleted Home Loan; and (vi) complies or comply as of the date of substitution
with each representation and warranty set forth in Section 3.04 and is not
------------
more than 29 days delinquent as of the date of substitution for such loan.
For purposes of determining whether multiple mortgage loans proposed to be
substituted for one or more Deleted Home Loans pursuant to Section 2.06 or
------------
3.06 are in fact "Qualified Substitute Home Loans" as provided above, the
----
criteria specified in clauses (i) and (iii) above may be considered on an
aggregate or weighted average basis, rather than on a loan-by-loan basis
(i.e., so long as the weighted average Home Loan Interest Rate of any loans
proposed to be substituted is not less than two percentage points fewer than
and not more than two percentage points greater than the Home Loan Interest
Rate for the designated Deleted Home Loan or Home Loans, the requirements of
clause (i) above would be deemed satisfied).
Rating Agencies: Standard & Poor's and DCR. If no such organization
---------------
or successor is any longer in existence, "Rating Agency" shall be a
nationally recognized statistical rating organization or other comparable
person designated by the Servicer, notice of which designation shall have
been given to the Trustee.
Ratings: The ratings initially assigned to the Certificates by the
-------
Rating Agencies, as evidenced by letters from the Rating Agencies.
Record Date: With respect to each Distribution Date, the close of
-----------
business on the last Business Day of the month immediately preceding the
month in which such Distribution Date occurs.
Regular Distribution Amount: With respect to any Distribution Date, the
---------------------------
lesser of (a) the Available Distribution Amount and (b) the sum of (i) the
Senior Certificateholders' Interest Distribution Amount, (ii) the Mezzanine
Certificateholders' Interest Distribution Amount, (iii) the Class B
Certificateholders' Interest Distribution Amount and (iv) the Regular
Principal Distribution Amount.
Regular Principal Distribution Amount: On each Distribution Date, an
-------------------------------------
amount equal to the lesser of:
(A) the aggregate of the Class Principal Balances of the Classes of
Certificates immediately prior to such Distribution Date; and
(B) the sum of (i) each scheduled payment of principal collected by the
Servicer in the related Due Period, (ii) all partial and full principal
prepayments applied by the Servicer during such related Due Period, (iii) the
principal portion of all Net Liquidation Proceeds, FHA Insurance Payment
Amounts, Insurance Proceeds and Released Mortgaged Property Proceeds received
during the related Due Period, (iv) that portion of the Purchase Price of any
repurchased Home Loan which represents principal received prior to the
related Determination Date; (v) the principal portion of any Substitution
Adjustments required to be deposited in the Collection Account as of the
related Determination Date and (vi) on the Distribution Date on which the
Trust is to be terminated pursuant to Section 12.01 hereof, the Termination
-------------
Price.
Rejected Claim: With respect to any FHA Loan, a claim for payment made
--------------
to the FHA under the Contract of Insurance that has been finally rejected
after all appeals with FHA have been exhausted for any reason (including a
rejection of a previously paid claim and a demand by the FHA of a return of
the FHA Insurance Payment Amount for the related FHA Loan) other than a
refusal or rejection due to clerical error in computing the claim amount or
because the amount of the FHA Insurance Coverage Reserve Account as shown in
the Insurance Record is zero.
Related Series: Means (i) the Trust, (ii) Empire Funding Home Loan
--------------
Owner Trust 0000-0, Xxxxx Backed Securities, Series 1997-1 and (iii) each of
the subsequent series of trusts, of which the Trustee is the trustee, to
which Related Series Loans are sold directly or indirectly by Empire Funding,
established pursuant to pooling and servicing agreements and/or trust
agreements and sale and servicing agreements.
Related Series Loans: Means FHA Loans related to a Related Series
--------------------
which: (i) are sold by Empire Funding, directly or indirectly, to a trust
and (ii) the Title I insurance coverage attributable to which is made
available to cover claims with respect to the FHA Loans and the Related
Series Loans in each other Related Series by virtue of terms relating to the
administration of the FHA Insurance Coverage Reserve Account substantially
similar to the terms hereof.
Released Mortgaged Property Proceeds: With respect to any secured Home
------------------------------------
Loan, proceeds received by the Servicer in connection with (i) a taking of an
entire Mortgaged Property by exercise of the power of eminent domain or
condemnation or (ii) any release of part of the Mortgaged Property from the
lien of the related Mortgage, whether by partial condemnation, sale or
otherwise; which in either case are not released to the Obligor in accordance
with applicable law, Accepted Servicing Procedures and this Agreement.
REMIC: A "real estate mortgage investment conduit," as defined in the
-----
REMIC Provisions.
REMIC Pool: The pool of assets consisting of the Trust Estate for which
----------
an election shall be made to be treated as a REMIC under the REMIC
Provisions.
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 (either proposed, temporary or final) and related
revenue rulings and procedures, as the foregoing may be in effect from time
to time.
Residual Interest: The fractional undivided interest evidenced by a
-----------------
Class R Certificate in all amounts distributable to holders of Class R
Certificates pursuant to Sections 5.01(d) and 5.01(e).
---------------- -------
Responsible Officer: When used with respect to the Trustee, any officer
-------------------
within the Corporate Trust Office of the Trustee, including any Vice
President, Assistant Vice President, Secretary, Assistant Secretary or any
other officer of the Trustee customarily performing functions similar to
those performed by any of the above designated officers and also, with
respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject. When used with respect to the Depositor, the Transferor,
the Servicer or the Custodian, the President or any Vice President, Assistant
Vice President, or any Secretary or Assistant Secretary.
Senior Certificateholders' Interest Carry-Forward Amount: With respect
--------------------------------------------------------
to any Distribution Date, the excess, if any, of (A) the Senior
Certificateholders' Monthly Interest Distribution Amount for the preceding
Distribution Date plus any outstanding Senior Certificateholders' Interest
Carry-Forward Amount for preceding Distribution Dates, over (B) the amount in
respect of interest that is actually deposited in the Certificate
Distribution Account on such preceding Distribution Date.
Senior Certificateholders' Interest Distribution Amount: With respect
-------------------------------------------------------
to any Distribution Date, the sum of the Senior Certificateholders' Monthly
Interest Distribution Amount for such Distribution Date and the Senior
Certificateholders' Interest Carry-Forward Amount for such Distribution Date.
Senior Certificateholders' Monthly Interest Distribution Amount: With
---------------------------------------------------------------
respect to each Distribution Date and the Classes of Senior Certificates, the
aggregate amount of thirty (30) days' accrued interest at the respective
Certificate Interest Rates on the respective Class Principal Balances of such
Classes immediately preceding such Distribution Date (or, in the case of the
first Distribution Date, on the Closing Date).
Senior Certificates: The Class A-1, Class A-2 and Class A-3
-------------------
Certificates.
Senior Optimal Principal Balance: With respect to any Distribution Date
--------------------------------
prior to the Stepdown Date, zero; with respect to any other Distribution
Date, an amount equal to the Pool Principal Balance as of the related
Determination Date minus the greater of (a) the sum of (1) 47.50% of the Pool
Principal Balance as of the related Determination Date and (2) the
Overcollateralization Target Amount for such Distribution Date (without
giving effect to the proviso in the definition thereof) and (b) 0.50% of the
Original Pool Principal Balance; provided however, that such amount shall
never be less than zero or greater than the sum of the Original Class
Principal Balances of the Senior Certificates.
Series or Series 1997-A: Empire Funding Home Loan REMIC Trust 1997-A,
------ -------------
Asset Backed Certificates, Series 1997-A.
Servicer: Empire Funding, in its capacity as the servicer hereunder,
--------
or any successor appointed as herein provided.
Servicer Termination Event: The termination of the Servicer pursuant
--------------------------
to Section 10.01(b).
----------------
Servicer's Fiscal Year: January 1st through December 31st of each year.
----------------------
Servicer's Home Loan Files: In respect of each Home Loan, all documents
--------------------------
customarily included in the servicer's loan file for the related type of Home
Loan in accordance with the servicing standard set forth in Section 4.01.
------------
Servicer's Monthly Remittance Report: A report prepared and computed
------------------------------------
by the Servicer in substantially the form of Exhibit B attached hereto.
---------
Servicing Advances: Subject to Section 4.01(b), all reasonable,
------------------ ---------------
customary and necessary "out of pocket" costs and expenses advanced or paid
by the Servicer with respect to the Home Loans in accordance with the
performance by the Servicer of its servicing obligations hereunder,
including, but not limited to, the costs and expenses for (i) the
preservation, restoration and protection of the Mortgaged Property, including
without limitation advances in respect of real estate taxes and assessments,
(ii) any collection, enforcement or judicial proceedings, including without
limitation foreclosures, collections and liquidations pursuant to Section
-------
4.12, (iii) the conservation, management and sale or other disposition of a
----
Foreclosure Property pursuant to Section 4.13, (iv) the preservation of the
------------
security for a Home Loan if any lienholder under a Superior Lien has
accelerated or intends to accelerate the obligations secured by such Superior
Lien pursuant to Section 4.06; provided that such Servicing Advances are
------------
reimbursable to the Servicer out of Net Liquidation Proceeds.
Servicing Advance Reimbursement Amount: With respect to any date of
--------------------------------------
determination, the amount of any Servicing Advances that have not been
reimbursed as of such date including, Nonrecoverable Servicing Advances.
Servicing Compensation: The Servicing Fee and other amounts to which
----------------------
the Servicer is entitled pursuant to Section 7.03.
------------
Servicing Fee: As to each Home Loan (including any Home Loan that has
-------------
been foreclosed and has become a Foreclosure Property, but excluding any
Liquidated Home Loan), the fee payable monthly to the Servicer on each
Distribution Date, which shall be the product of, in the case of any FHA
Loan, 1.00% (100 basis points) and, in the case of any Non-FHA Loan, 0.75%
(75 basis points) and the Principal Balance of such Home Loan as of the
beginning of the immediately preceding Due Period, divided by 12. The
Servicing Fee includes any servicing fees owed or payable to any Subservicer
which fees shall be paid from the Servicing Fee.
Servicing Officer: Any officer of the Servicer or Subservicer involved
-----------------
in, or responsible for, the administration and servicing of the Home Loans
whose name and specimen signature appears on a list of servicing officers
annexed to an Officer's Certificate furnished by the Servicer or the
Subservicer, respectively, to the Trustee, on behalf of the
Certificateholders, as such list may from time to time be amended.
Six-Month Rolling Delinquency Average: With respect to any Distribution
-------------------------------------
Date, the average of the applicable 60-Day Delinquency Amounts for each of
the six immediately preceding Due Periods, where the 60-Day Delinquency
Amount for any Due Period is the aggregate of the Principal Balances of all
Home Loans, other than FHA Loans covered by FHA Insurance, that are 60 or
more days delinquent, in foreclosure or Foreclosure Property as of the end of
such Due Period.
Standard & Poor's: Standard & Poor's Ratings Group, a division of The
-----------------
XxXxxx-Xxxx Companies, Inc., or any successor thereto.
Start-up Day: The day designated as such in Section 11.12.
------------ -------------
Stepdown Date: The first Distribution Date occurring after March 2000,
-------------
upon which all of the following conditions exist:
(1) the Pool Principal Balance has been reduced to 50.00% of the
Original Pool Principal Balance;
(2) the Net Delinquency Calculation Amount is less than 8% of the
Original Pool Principal Balance; and
(3) the aggregate of the Class Principal Balances of the Senior Notes
(after giving effect to distribution of principal on such Distribution
Date) has been reduced to the excess of:
(I) the Pool Principal Balance as of the related Determination
Date over
(II) the greater of (a) the sum of
(1) 47.50% of the Pool Principal Balance as of the
related Determination Date and
(2) the Overcollateralization Target Amount for such
Distribution Date (such amount to be calculated (x)
without giving effect to the proviso in the definition
thereof and (y) pursuant only to clause (II) of the
definition thereof); and
(b) 0.50% of the Original Pool Balance.
Subservicer: Any Person with whom the Servicer has entered into a
-----------
Subservicing Agreement and who is an Eligible Servicer and who satisfies any
requirements set forth in Section 4.07(a) in respect of the qualifications
---------------
of a Subservicer.
Subservicing Account: An account established by a Subservicer pursuant
--------------------
to a Subservicing Agreement, which account must be an Eligible Account.
Subservicing Agreement: Any agreement between the Servicer and any
----------------------
Subservicer relating to subservicing and/or administration of any or all Home
Loans as provided in Section 4.07(a), copies of which shall be made
---------------
available, along with any modifications thereto, to the Trustee.
Substitution Adjustment: As to any date on which a substitution occurs
-----------------------
pursuant to Sections 2.06 or 3.06, the amount, if any, by which (a) the sum
------------- ----
of the aggregate principal balance (after application of principal payments
received on or before the date of substitution) of any Qualified Substitute
Home Loans as of the date of substitution plus any accrued and unpaid
interest thereon to the date of substitution, is less than (b) the sum of the
aggregate of the Principal Balances, together with accrued and unpaid
interest thereon to the date of substitution, of the related Deleted Home
Loans.
Superior Lien: With respect to any Home Loan which is secured by a lien
-------------
other than a first priority lien, the mortgage loan(s) relating to the
corresponding Mortgaged Property having a superior priority lien.
Tax Return: The federal income tax return on Internal Revenue Service
----------
Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return,
including Schedule Q thereto, Quarterly Notice to Residual Interest Holders
of REMIC Taxable Income or Net Loss Allocation, or any successor forms, to be
filed on behalf of the Trust due to its classification as a REMIC under the
REMIC Provisions, together with any and all other information, reports or
returns that may be required to be furnished to the Certificateholders or
filed with the Internal Revenue Service or any other governmental taxing
authority under any applicable provisions of federal, state or local
tax laws.
Termination Date: The earlier of (a) the Distribution Date in April
----------------
2018 and (b) the Distribution Date next following the Monthly Cut-Off Date
coinciding with or next following the date of the liquidation or disposition
of the last asset held by the Trust pursuant to Section 12.01.
-------------
Termination Price: As of any date of determination, an amount without
-----------------
duplication equal to the sum of (i) the then outstanding Class Principal
Balances of the Classes of Certificates plus all accrued and unpaid interest
thereon, (ii) any Trust Fees and Expenses due and unpaid on such date and
(iii) any Servicing Advance Reimbursement Amount.
Title Document. The evidence of title to or ownership of the Property
--------------
required by Title I. (See 24 C.F.R. 201.26(a)(1) and 201.20).
Title I: Section 2 of Title I of the National Housing Act of 1934, as
-------
amended, and the rules and regulations promulgated thereunder as each may be
amended from time to time and any successor statute, rules or regulations
thereto.
Transfer: Any direct or indirect purchase, transfer, sale, assignment
--------
or other form of disposition of any Ownership Interest in a Certificate other
than any pledge of such Certificate for security.
Transferee: Any Person who is acquiring by Transfer any Ownership
----------
Interest in a Certificate.
Transferor: Empire Funding, in its capacity as the transferor hereunder.
----------
Trust: The trust established hereby and evidenced by the Empire Funding
-----
Home Loan REMIC Trust 1997-A, Series 1997-A, Asset Backed Certificates,
designated as the "Empire Funding Home Loan REMIC Trust 1997-A."
Trust Account Property: The Accounts, all amounts and investments held
----------------------
from time to time in the Accounts and all proceeds of the foregoing.
Trust Designated Insurance Amount: $2,749,082.52.
---------------------------------
Trust Estate: The assets subject to this Agreement assigned to the
------------
Trust, which assets consist of: (i) such Home Loans as from time to time are
subject to this Agreement as listed in the Home Loan Schedule, as the same
may be amended or supplemented from time to time including the removal of
Deleted Home Loans and the addition of Qualified Substitute Home Loans,
together with the Servicer's Home Loan Files and the Trustee's Home Loan
Files relating thereto and all proceeds thereof, (ii) the Mortgages and
security interests in Mortgaged Properties, (iii) all payments in respect of
interest due with respect to the Home Loans on or after the Cut-
Off Date, all payments received with respect to principal after the Cut-Off
Date and all payments of premiums on FHA Insurance after the Cut-Off Date,
(iv) the rights to FHA Insurance reserves attributable to the FHA Loans as of
the Cut-Off Date, (v) such assets as from time to time are identified as
Foreclosure Property, (vi) such assets and funds as are from time to time are
deposited in the Collection Account, the Certificate Distribution Account and
the FHA Reserve Account, including amounts on deposit in such accounts which
are invested in Permitted Investments, (vii) the Trust's rights under all
insurance policies with respect to the Home Loans and any Insurance Proceeds,
(viii) Net Liquidation Proceeds and Released Mortgaged Property Proceeds, and
(ix) all right, title and interest of the Depositor in and to the obligations
of the Transferor under the Home Loan Purchase Agreement in which the
Depositor acquired the Home Loans from the Transferor, and all proceeds of
any of the foregoing.
Trust Fees and Expenses: As of each Distribution Date, an amount equal
-----------------------
to the Servicing Compensation, the Trustee Fee and the Custodian Fee, if any.
Trustee: First Bank National Association, its successors in interest
-------
or any successor trustee appointed as herein provided.
Trustee Fee: As to any Distribution Date, the greater of (a) one
-----------
twelfth of 0.04% times the Pool Principal Balance as of the opening of
business on the first day of the calendar month preceding the calendar month
of such Distribution Date (or, with respect to the first Distribution Date,
the Original Pool Principal Balance) and (b) one-twelfth of the annual fee
of $15,000.
Trustee's Home Loan File: As defined in Section 2.05(f).
------------------------ ---------------
Underwriter: Greenwich Capital Markets, Inc.
-----------
Voting Rights: The portion of the aggregate voting rights of all the
-------------
Certificates evidenced by a Class of Certificates. At all times during the
term of this Agreement, 99% of all of the Voting Rights shall be allocated
among Holders of the Class of Certificates (with such Voting Rights being
allocated among such Classes pro rata on the basis of their respective Class
--- ----
Principal Balances) and the Holders of the Class R Certificates shall be
entitled to 1% of all of the Voting Rights. Voting Rights allocated to a
Class of Certificates shall be allocated among the Certificates of each such
Class in accordance with their respective Percentage Interests.
Section 1.02 Other Definitional Provisions.
-----------------------------
(a) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant
hereto unless otherwise defined therein.
(b) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given
to them under generally accepted accounting principles. To the extent
that the definitions of accounting terms in this Agreement or in any
such certificate or other document are inconsistent with the meanings of
such terms under generally accepted accounting principles, the definitions
contained in this Agreement or in any such certificate or other document shall
control.
(c) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement; Article, Section,
Schedule and Exhibit references contained in this Agreement are references to
Articles, Sections, Schedules and Exhibits in or to this Agreement unless
otherwise specified; and the term "including" shall mean "including without
limitation."
(d) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
(e) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means
such agreement, instrument or statute as from time to time amended, modified
or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
ARTICLE III
TRANSFER AND ASSIGNMENT OF THE HOME LOANS;
------------------------------------------
ISSUANCE OF CERTIFICATES
------------------------
Section 2.01 Transfer and Assignment of the Home Loans.
-----------------------------------------
The Depositor as of the Closing Date does hereby, sell, transfer, assign
and otherwise convey to the Trustee for the benefit of the Holders of the
Certificates, in accordance with their terms and the terms hereof, without
recourse other than as expressly provided herein, and in accordance with the
requirements for transfer of an insured loan in Title I and 24 C.F.R. Section
201.32(c), all the right, title and interest of the Depositor in and to the
Trust Estate.
Section 2.02 (Reserved).
----------
Section 2.03 Acceptance by the Trustee.
-------------------------
The Trustee hereby acknowledges conveyance of the Home Loans, each Debt
Instrument, any related Mortgage and the contents of the related Servicer's
Home Loan File and the Trustee's Home Loan File, and declares that it holds
and will hold the Home Loans, each Debt Instrument, any related Mortgage and
the contents of the related Servicer's Home Loan File and the Trustee's Home
Loan File, all proceeds of any of the foregoing and all other rights, titles
or interests of the Trustee in any asset included in the Trust Property from
time to time, in trust for the use and benefit of all present and future
Holders of the Certificates of each Class.
Section 2.04 Books and Records.
-----------------
The sale of each Home Loan shall be reflected on the Depositor's or the
Transferor's, as the case may be, balance sheets and other financial
statements as a sale of assets by the Depositor or the Transferor, as the
case may be, under generally accepted accounting principles ("GAAP"). Each
----
of the Servicer and the Custodian shall be responsible for maintaining, and
shall maintain, a complete set of books and records for each Home Loan which
shall be clearly marked to reflect the ownership of each Home Loan by the
Trustee.
It is the intention of the parties hereto that the transfers and
assignments contemplated by this Agreement shall constitute a sale of the
Home Loans and the other property specified in Section 2.01 from the
------------
Depositor to the Trust and such property shall not be property of the
Depositor. If the assignment and transfer of the Home Loans and the other
property specified in Section 2.01 to the Trustee pursuant to this Agreement
------------
or the conveyance of the Home Loans or any of such other property to the
Trustee is held or deemed not to be a sale or is held or deemed to be a
pledge of security for a loan, the Depositor intends that the rights and
obligations of the parties shall be established pursuant to the terms of the
Agreement and that, in such event, (i) the Depositor shall be deemed to have
granted and does hereby grant to the Trustee a first
priority security interest in the entire right, title and interest of the
Depositor in and to the Home Loans and all other property conveyed to the
Trustee pursuant to Section 2.01 and all proceeds thereof, and (ii) this
------------
Agreement shall constitute a security agreement under applicable law. Within
ten (10) days of the Closing Date, the Depositor shall cause to be filed UCC-
1 financing statements naming the Trustee as a "secured party" and describing
the Home Loans being sold by the Depositor to the Trust with the office of
the Secretary of State of the State in which the Depositor is located.
Section 2.05 Delivery of Home Loan Documents.
-------------------------------
(a) With respect to each Home Loan, on the Closing Date the Transferor
and/or the Depositor, as applicable, have delivered or caused to be delivered
to the Custodian as the designated agent of the Trustee each of the following
documents (collectively, the "Home Loan Files"):
---------------
(i) The original Debt Instrument, endorsed by the Transferor in
blank or in the following form: "Pay to the order of First Bank National
Association, as Trustee under the Pooling and Servicing Agreement, dated
as of March 1, 1997, Empire Funding Home Loan REMIC Trust 1997-A,
without recourse", with all prior and intervening endorsements showing a
complete chain of endorsement from origination of the Home Loan to the
Transferor;
(ii) If such Home Loan is a Mortgage Loan, the original Mortgage
with evidence of recording thereon (or, if the original Mortgage has not
been returned from the applicable public recording office or is not
otherwise available, a copy of the Mortgage certified by a Responsible
Officer of the Transferor or by the closing attorney or by an officer of
the title insurer or agent of the title insurer which issued the related
title insurance policy, if any, or commitment therefor to be a true and
complete copy of the original Mortgage submitted for recording) and, if
the Mortgage was executed pursuant to a power of attorney, the original
power of attorney with evidence of recording thereon (or, if the
original power of attorney has not been returned from the applicable
public recording office or is not otherwise available, a copy of the
power of attorney certified by a Responsible Officer of the Transferor
or by the closing attorney or by an officer of the title insurer or
agent of the title insurer which issued the related title insurance
policy, if any, or commitment therefor, to be a true and complete copy
of the original power of attorney submitted for recording);
(iii) If such Home Loan is a Mortgage Loan, the original
executed Assignment of Mortgage, in recordable form. Such assignments
may be blanket assignments, to the extent such assignments are effective
under applicable law, for Mortgages covering Mortgaged Properties
situated within the same county. If the Assignment of Mortgage is in
blanket form an assignment of Mortgage need not be included in the
individual Home Loan File;
(iv) If such Home Loan is a Mortgage Loan, all original intervening
Assignments of Mortgage, with evidence of recording thereon, showing a
complete chain of assignment from origination of the Home Loan to the
Transferor (or, if any such Assignment of Mortgage has not been returned
from the applicable public recording office or is not otherwise
available, a copy of such Assignment of Mortgage certified by a
Responsible Officer of the Transferor or by the closing attorney or by
an officer of the title insurer or agent of the title insurer which
issued the related title insurance policy, if any, or commitment
therefor to be a true and complete copy of the original Assignment
submitted for recording);
(v) The original, or a copy certified by the Transferor to be a
true and correct copy of the original, of each assumption, modification,
written assurance or substitution agreement, if any; and
(b) With respect to each Home Loan, on the Closing Date, the Transferor
and the Depositor have delivered or caused to be delivered to the Servicer,
as the designated agent of the Trustee each of the following documents
(collectively, the "Servicer's Home Loan Files"): (A) If such Home Loan is
--------------------------
an FHA Loan, an original or copy of notice signed by the Obligor
acknowledging HUD insurance, (B) an original or copy of truth-in-lending
disclosure, (C) an original or copy of the credit application, (D) an
original or copy of the consumer credit report, (E) an original or copy of
verification of employment and income, or verification of self-employment
income, (F) if such Home Loan is an FHA Loan, an original or copy of evidence
of the Obligor's interest in the Property, (G) an original or copy of
contract of work or written description with cost estimates, if any,
(H)(i) if such Home Loan is an FHA Loan either (a) an original or copy of the
completion certificate (or, if such certificate is not yet due, a notice to
that effect) or an original or copy of notice of non-compliance, if
applicable or (b) an original or copy of report of inspection of improvements
to the Property (or if such report is not yet due, a notice to that effect)
or an original or copy of notice of non-compliance, if applicable, or (ii) if
such Home Loan is a Non-FHA Loan in respect of a home improvement for which
the Transferor prepares an inspection report, an original or copy of report
of inspection of improvements to the Property, (I) to the extent not included
in (C), an original or a copy of a written verification (or a notice of
telephonic verification, written verification to follow) that the Mortgagor
at the time of origination was not more than 30 days delinquent on any senior
mortgage or deed of trust on the Mortgaged Property, (J) (i) if such Home
Loan is an FHA Loan for which an appraisal is required pursuant to the
applicable regulations, an original or a copy of an appraisal of the Property
as of the time of origination of such FHA Loan or (ii) if such Home Loan is a
Non-FHA Loan and secured by a Mortgage, a copy of the HUD-1 or HUD 1-A
Closing Statement indicating the sale price, or an existing Uniform
Residential Appraisal Report, or a Drive-by Appraisal documented on Xxxxxxx
Mac form 704, or a tax assessment in accordance with the Transferor's
guidelines, or a full Uniform Residential Appraisal Report prepared by a
national appraisal firm, (K) an original or a copy of a title search as of
the time of origination with respect to the Property in accordance with the
Transferor's guidelines, and (L) if such Home Loan is an FHA Loan, any other
documents required for the submission of a claim with respect to such FHA
Loan to the FHA.
(c) the Transferor, at the direction of the Depositor, concurrently
with the execution and delivery hereof, has delivered to the Trustee cash in
an amount equal to (i) the accrued annual FHA premium due on each FHA Loan to
the applicable Cut-Off Date, and (ii) the amount of FHA premium collected in
respect of the Invoiced Loans after the applicable Cut-Off Date. The Trustee
shall distribute the amount referred to in clause (i) of the previous
sentence into the FHA Premium Account and shall distribute the amount
referred to in clause (ii) of the previous sentence into the Certificate
Distribution Account.
(d) The Trustee shall cause the Custodian to take and maintain
continuous physical possession of the Trustee's Home Loan Files in the State
of Minnesota, and in connection therewith, shall act solely as agent for the
holders of the in accordance with the terms hereof and not as agent for the
Transferor or any other party.
(e) Within 60 days of the Closing Date, the Transferor, at its own
expense, shall record each Assignment of Mortgage (which may be a blanket
assignment if permitted by applicable law) in the appropriate real property
or other records; provided, however, the Transferor need not record any such
Assignment which relates to a Mortgage Loan in any jurisdiction under the
laws of which, as evidenced by an Opinion of Counsel delivered by the
Transferor (at the Transferor's expense) to the Trustee and the Rating
Agencies, the recordation of such Assignment of Mortgage is not necessary to
protect the Trustee's interest in the related Mortgage Loan. With respect to
any Assignment of Mortgage as to which the related recording information is
unavailable within 60 days following the Closing Date, such Assignment of
Mortgage shall be submitted for recording within 30 days after receipt of
such information but in no event later than one year after the Closing Date.
The Trustee shall be required to retain a copy of each Assignment of Mortgage
submitted for recording. In the event that any such Assignment of Mortgage
is lost or returned unrecorded because of a defect therein, the Transferor
shall promptly prepare a substitute Assignment of Mortgage or cure such
defect, as the case may be, and thereafter the Transferor shall be required
to submit each such Assignment of Mortgage Loan for recording.
(f) All Home Loan documents held by the Custodian on behalf of the
Trustee are referred to herein as the "Trustee's Home Loan File." All
------------------------
recordings required pursuant to this Section 2.05 shall be accomplished by
------------
and at the expense of the Transferor.
Section 2.06 Receipt of Home Loan Files; Certain Substitutions;
---------------------------------------------------
Initial Certification by Custodian.
___________________________________
(a) The Trustee agrees to cause the Custodian to execute and deliver on
the Closing Date an acknowledgment of receipt of the Trustee's Home Loan File
for each Home Loan. The Trustee declares that it will cause the Custodian to
hold such documents and any amendments, replacements or supplements thereto,
as well as any other assets included in the Trust Estate and delivered to the
Custodian in trust, upon and subject to the conditions set forth herein for
the benefit of the Certificateholders. The Trustee agrees, for the benefit
of the Certificateholders, to cause the Custodian to review each Trustee's
Home Loan File within 45 days after the Closing Date (or, with respect to any
Qualified Substitute Home Loan, within 45 days after the conveyance of the
related Home Loan to the Trust) and to cause the Custodian to deliver to
the Transferor, the Depositor, the Trustee and the Servicer a certification
to the effect that, as to each Home Loan listed in the Home Loan Schedule,
(i) all documents required to be delivered to the Trustee pursuant to this
Agreement are in its possession or in the possession of the Custodian on its
behalf (other than as expressly permitted by Section 2.05), (ii) all documents
-------
delivered by the Depositor and the Transferor to ---- the Custodian pursuant to
Section 2.05 have been reviewed by the Custodian
------------
and have not been mutilated or damaged and appear regular on their face
(handwritten additions, changes or corrections shall not constitute
irregularities if initialed by the Obligor) and relate to such Home Loan,
(iii) based on the examination of the Custodian on behalf of the Trustee, and
only as to the foregoing documents, the information set forth on the Home
Loan Schedule accurately reflects the information set forth in the Trustee's
Home Loan File and (iv) each Debt Instrument has been endorsed as provided in
Section 2.05. The Custodian shall not be under any duty or obligation (i)
------------
to inspect, review or examine any such documents, instruments, certificates
or other papers to determine that they are genuine, enforceable, or
appropriate for the represented purpose or that they are other than what they
purport to be on their face or (ii) to determine whether any Trustee's Home
Loan File should include any of the documents specified in
Section 2.05(a)(v).
------------------
(b) The Servicer's Home Loan File shall be held in the custody of the
Servicer for the benefit of, and as agent for, the Certificateholders and the
Trustee as the owner thereof. It is intended that by the Servicer's
agreement pursuant to this Section 2.06(b) the Trustee shall be deemed to
---------------
have possession of the Servicer's Home Loan Files for purposes of Section 9-
305 of the Uniform Commercial Code of the State in which such documents or
instruments are located. the Servicer shall promptly report to the Trustee
any failure by it to hold the Servicer's Home Loan File as herein provided
and shall promptly take appropriate action to remedy any such failure. In
acting as custodian of such documents and instruments, the Servicer agrees
not to assert any legal or beneficial ownership interest in the Home Loans or
such documents or instruments. The Servicer agrees to indemnify the
Certificateholders and the Trustee for any and all liabilities, obligations,
losses, damages, payments, costs, or expenses of any kind whatsoever which
may be imposed on, incurred by or asserted against the Certificateholders or
the Trustee as the result of any act or omission by the Servicer relating to
the maintenance and custody of such documents or instruments which have been
delivered to the Servicer; provided, however, that the Servicer will not be
-------- -------
liable for any portion of any such amount resulting from the negligence or
misconduct of any Certificateholder or the Trustee and provided, further,
-------- -------
that the Servicer will not be liable for any portion of any such amount
resulting from the Servicer's compliance with any instructions or directions
consistent with this Agreement issued to the Servicer by the Trustee. The
Trustee shall have no duty to monitor or otherwise oversee the Servicer's
performance as custodian hereunder.
(c) If the Custodian, during the process of reviewing the Trustee's
Home Loan Files, finds any document constituting a part of a Trustee's Home
Loan File which is not executed, has not been received, is unrelated to any
Home Loan identified in the Home Loan Schedule, does not conform to the
requirements of Section 2.05 or does not conform, in all material respects,
------------
to the description thereof as set forth in the Home Loan Schedule, then the
Custodian shall promptly so notify the Transferor, the Servicer, the Trustee
and the Depositor. In performing any such review, the Custodian may
conclusively rely on the Transferor as to the purported genuineness of any
such document and any signature thereon. It is understood that the scope of
the Custodian's review of the Trustee's Home Loan Files is limited solely to
-----------------
confirming that the documents listed in Section 2.05 have been received and
------------
further confirming that any and all documents delivered pursuant to Section
-------
2.05 have been executed and relate to the Home Loans identified in the Home
----
Loan Schedule. The Custodian shall not have any responsibility for
determining whether any document is valid and binding, whether the text of
any assignment or endorsement is in proper or recordable form, whether any
document has been recorded in accordance with the requirements of any
applicable jurisdiction, or whether a blanket assignment is permitted in any
applicable jurisdiction or whether the requirements for transfer of an
insured loan specified in Title I, 24 C.F.R. Section 201.32(c) or elsewhere
have been complied with. If a material defect in a document constituting
part of a Trustee's Home Loan File is discovered, then the Depositor and
Transferor shall comply with the cure, substitution and repurchase provisions
of Section 3.06 hereof.
------------
Section 2.07 Execution, Countersignature and Delivery of Certificates.
--------------------------------------------------------
Concurrently with, and in consideration for, the sale, transfer, assignment
and conveyance by the Depositor of the Home Loans listed in the Home Loan
Schedule on the Closing Date, the delivery by the Depositor of the related
Home Loan Files pursuant to Section 2.05(a), the delivery of the cash
---------------
required by Section 2.05(c) to be deposited in the Certificate Distribution
---------------
Account and the FHA Premium Account, the Trustee has executed, authenticated
and delivered to or upon the order of the Depositor, Class A-1 Certificates,
the Class A-2 Certificates, the Class A-3 Certificates, the Class M-1
Certificates, the Class M-2 Certificates, the Class B Certificates and the
Class R Certificates specified in Section 6.01.
------------
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
Section 3.01 Representations and Warranties of the Depositor.
-----------------------------------------------
The Depositor hereby represents and warrants to the Transferor, the
Trustee, the Trustee and the Certificateholders that as of the Closing Date:
(a) The Depositor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has, and had at all relevant times, full power to own its property,
to carry on its business as presently conducted, to enter into and
perform its obligations under this Agreement and to create the Trust
pursuant hereto;
(b) The execution and delivery of this Agreement by the Depositor
and its performance of and compliance with the terms of this Agreement
will not violate the Depositor's articles of incorporation or by-laws or
constitute a default (or an event which, with notice or lapse of time,
or both, would constitute a default) under, or result in the breach or
acceleration of, any material contract, agreement or other instrument to
which the Depositor is a party or which may be applicable to the
Depositor or any of its assets;
(c) The Depositor has the full power and authority to enter into
and consummate the transactions contemplated by this Agreement, has duly
authorized the execution, delivery and performance of this Agreement,
and has duly executed and delivered this Agreement. This Agreement,
assuming due authorization, execution and delivery by the Trustee, the
Transferor and the Servicer, constitutes a valid, legal and binding
obligation of the Depositor, enforceable against it in accordance with
the terms hereof, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, receivership, moratorium or
other similar laws relating to or affecting the rights of creditors
generally, and by general equity principles (regardless of whether such
enforcement is considered in a proceeding in equity or at law);
(d) The Depositor is not in violation of, and the execution and
delivery of this Agreement by the Depositor and its performance and
compliance with the terms of this Agreement will not constitute a
violation with respect to, any order or decree of any court or any order
or regulation of any federal, state, municipal or governmental agency
having jurisdiction, which violation would materially and adversely
affect the condition (financial or otherwise) or operations of the
Depositor or its properties or materially and adversely affect the
performance of its duties hereunder;
(e) There are no actions or proceedings against, or investigations
of, the Depositor pending with regard to which the Depositor has
received service of process, or, to the knowledge of the Depositor,
threatened, before any court, administrative agency or
other tribunal (A) that, if determined adversely, would prohibit its
entering into this Agreement or render the Certificates invalid, (B)
seeking to prevent the issuance of the Certificates or the consummation
of any of the transactions contemplated by this Agreement or (C) that,
if determined adversely, would prohibit or materially and adversely
affect the performance by the Depositor of its obligations under, or the
validity or enforceability of, this Agreement or the Certificates;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Depositor of, or compliance by the Depositor with,
this Agreement or the Certificates, or for the consummation of the
transactions contemplated by this Agreement, except for such consents,
approvals, authorizations and orders, if any, that have been obtained
prior to the Closing Date;
(g) The Depositor is solvent, is able to pay its debts as they
become due and has capital sufficient to carry on its business and its
obligations hereunder; it will not be rendered insolvent by the
execution and delivery of this Agreement or its obligations hereunder;
no petition of bankruptcy (or similar insolvency proceeding) has been
filed by or against the Depositor prior to the date hereof;
(h) The Depositor did not sell the Home Loans to the Trust with
any intent to hinder, delay or defraud any of its creditors; the
Depositor will not be rendered insolvent as a result of the sale of the
Home Loans to the Trust;
(i) As of the Closing Date, the Depositor had good title to, and
was the sole owner of, each Home Loan free and clear of any Lien other
than any such Lien released simultaneously with the sale contemplated
herein, and, immediately upon each transfer and assignment herein
contemplated, the Depositor will have taken all steps necessary so that
the Trust will have good title to, and will be the sole owner of, each
Home Loan free and clear of any lien;
(j) The Depositor acquired title to each of the Home Loans in good
faith, without notice of any adverse claim;
(k) No Officers' Certificate, statement, report or other document
prepared by the Depositor and furnished or to be furnished by it
pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of material fact or
omits to state a material fact necessary to make the statements
contained herein or therein not misleading;
(l) The Depositor is not required to be registered as an
"investment company" under the Investment Company Act of 1940, as
amended; and
(m) The transfer, assignment and conveyance of the Debt
Instruments and the Mortgages by the Depositor pursuant to this
Agreement are not subject to the bulk transfer laws or any similar
statutory provisions in effect in any applicable jurisdiction.
Section 3.02 Representations and Warranties of the Transferor.
------------------------------------------------
The Transferor hereby represents and warrants to the Trustee, the
Trustee, the Certificateholders and the Depositor that as of the Closing Date
or as of such date specifically provided herein:
(a) The Transferor is a corporation licensed as a mortgage lender
duly organized, validly existing and in good standing under the laws of
the State of Oklahoma and has, and had at all relevant times, full
corporate power to originate or purchase the Home Loans, to own its
property, to carry on its business as presently conducted and to enter
into and perform its obligations under this Agreement;
(b) The execution and delivery of this Agreement by the Transferor
and its performance of and compliance with the terms of this Agreement
will not violate the Transferor's articles of incorporation or by-laws
or constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, or result in the
breach or acceleration of, any material contract, agreement or other
instrument to which the Transferor is a party or which may be applicable
to the Transferor or any of its assets;
(c) The Transferor has the full power and authority to enter into
and consummate all transactions contemplated by this Agreement to be
consummated by it, has duly authorized the execution, delivery and
performance of this Agreement, and has duly executed and delivered this
Agreement. This Agreement, assuming due authorization, execution and
delivery by the Trustee and the Depositor, constitutes a valid, legal
and binding obligation of the Transferor, enforceable against it in
accordance with the terms hereof, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, receivership, xxxx-
torium or other similar laws relating to or affecting the rights of
creditors generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at
law);
(d) The Transferor is not in violation of, and the execution and
delivery of this Agreement by the Transferor and its performance and
compliance with the terms of this Agreement will not constitute a
violation with respect to, any order or decree of any court or any order
or regulation of any federal, state, municipal or governmental agency
having jurisdiction, which violation would materially and adversely
affect the condition (financial or otherwise) or operations of the
Transferor or its properties or materially and adversely affect the
performance of its duties hereunder;
(e) There are no actions or proceedings against, or investigations
of, the Transferor pending or, to the knowledge of the Transferor,
threatened, before any court, administrative agency or other tribunal
(A) that, if determined adversely, would prohibit its entering into
this Agreement or render the Certificates invalid, (B) seeking to
prevent the issuance of the Certificates or the consummation of any
of the transactions contemplated by this Agreement or (C) that, if
determined adversely, would prohibit or materially and adversely affect
the sale of the Home Loans to the Depositor, the performance by the
Transferor of its obligations under, or the validity or enforceability
of, this Agreement or the Certificates;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for: (1) the execution, delivery
and performance by the Transferor of, or compliance by the Transferor
with, this Agreement, (2) the transfer of all FHA insurance reserves
relating to the FHA Loans to the Contract of Insurance Holder, (3) the
issuance of the Certificates, (4) the sale of the Home Loans under the
Home Loan Purchase Agreement or (5) the consummation of the transactions
required of it by this Agreement, except: (A) such as shall have been
obtained before the Closing Date and (B) the transfer of the FHA
insurance reserves by the FHA to the Contract of Insurance Holder with
respect to the FHA Loans as to which an FHA case number has not been
assigned as of the Closing Date;
(g) The Transferor acquired title to the Home Loans in good faith,
without notice of any adverse claim;
(h) The collection practices used by the Transferor with respect
to the Home Loans have been, in all material respects, legal, proper,
prudent and customary in the non-conforming mortgage servicing business;
(i) No Officers' Certificate, statement, report or other document
prepared by the Transferor and furnished or to be furnished by it
pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of material fact or
omits to state a material fact necessary to make the statements
contained herein or therein not misleading;
(j) The Transferor is solvent, is able to pay its debts as they
become due and has capital sufficient to carry on its business and its
obligations hereunder; it will not be rendered insolvent by the
execution and delivery of this Agreement or by the performance of its
obligations hereunder; no petition of bankruptcy (or similar insolvency
proceeding) has been filed by or against the Transferor prior to the
date hereof;
(k) The Prospectus Supplement (other than (i) any statements on
the cover page and inside cover page relating to Greenwich Capital
Markets, Inc. and (ii) the statements under the following captions:
"SUMMARY - Securities Issued", "- Priority of Distributions", "- Final
Scheduled Distribution Date", "- Credit Enhancement," "- Certain Federal
Income Tax Considerations", "- ERISA", "- Legal Investment",
"DESCRIPTION OF THE OFFERED SECURITIES", "DESCRIPTION OF CREDIT
ENHANCEMENT",
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES", "STATE TAX CONSEQUENCES",
"ERISA CONSIDERATIONS", "LEGAL INVESTMENT MATTERS" and "METHOD OF
DISTRIBUTION", as to which the Transferor makes no representation) does
not contain an untrue statement of a material fact and does not omit to
state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(l) HUD has approved in writing the transfer to the Contract of
Insurance Holder of the FHA Reserve Amount relating to each FHA Loan and
all actions have been taken by the Transferor (other than the filing of
the Transfer of Note Report Form 27030 with HUD) and all required
consents have been obtained (other than approval upon HUD's receipt of
such Transfer of Note Report), in either case, necessary to effect
transfer to the Contract of Insurance Holder of the FHA Reserve Amount
relating to each FHA Loan (except for FHA Loans with respect to which a
case number has not been assigned as of the Closing Date). The FHA
Reserve Amounts with respect to the FHA Loans transferred to the
Contract of Insurance Holder both prior to and following the transfer of
the FHA Loans to the Trustee will be available to satisfy claims with
respect to such FHA Loans. The amount in the FHA Insurance Coverage
Reserve Account, together with all amounts to be requested for transfer
with respect to the FHA Loans, will equal $3,025,615.67. The amount to
be requested for transfer with respect to the FHA Loans is
$2,749,082.52, which is the sum of approximately 10% of the aggregate of
the Principal Balances of the FHA Loans as of the Cut-Off Date;
(m) the Transferor is a non-supervised lender in good standing
with HUD under 24 CFR Section202.5 and is authorized to originate,
purchase, hold, service and/or sell loans insured under 24 CFR Part 201
pursuant to a valid contract of insurance, Number 505842; and
(n) the Transferor has transferred the Home Loans without any
intent to hinder, delay or defraud any of its creditors.
It is understood and agreed that the representations and warranties set
forth in this Section 3.02 shall survive delivery of the respective Home Loan
Files to the Custodian (as the agent of the Trustee) and shall inure to the
benefit of the Certificateholders, the Depositor, the Servicer, the Trustee,
the Trustee and the Trust. Upon discovery by any of the Transferor, the
Depositor, the Servicer or the Trustee of a breach of any of the foregoing
representations and warranties that materially and adversely affects the
value of any Home Loan or the interests of the Certificateholders therein,
the party discovering such breach shall give prompt written notice (but in no
event later than two Business Days following such discovery) to the other
parties. The obligations of the Transferor set forth in Section 3.06 to cure
any breach or to substitute for or repurchase an affected Home Loan shall
constitute the sole remedies available to the Certificateholders, the
Depositor, to the Servicer, the Trustee, or to the Trustee respecting a
breach of the representations and warranties contained in this Section 3.02.
Section 3.03 Representations, Warranties and Covenants of the
------------------------------------------------
Servicer.
---------
The Servicer hereby represents and warrants to and covenants with the
Trustee, the Certificateholders, the Depositor and the Transferor that as of
the Closing Date or as of such date specifically provided herein:
(a) The Servicer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Oklahoma and is or
will be in compliance with the laws of each state in which any Mortgaged
Property is located to the extent necessary to ensure the enforceability
of each Home Loan in accordance with the terms of this Agreement;
(b) The execution and delivery of this Agreement by the Servicer
and its performance of and compliance with the terms of this Agreement
will not violate the Servicer's articles of incorporation or by-laws or
constitute a default (or an event which, with notice or lapse of time,
or both, would constitute a default) under, or result in the breach or
acceleration of, any material contract, agreement or other instrument to
which the Servicer is a party or which may be applicable to the Servicer
or any of its assets;
(c) The Servicer has the full power and authority to enter into
and consummate all transactions contemplated by this Agreement, has duly
authorized the execution, delivery and performance of this Agreement,
and has duly executed and delivered this Agreement. This Agreement,
assuming due authorization, execution and delivery by the Trustee, the
Trustee, constitutes a valid, legal and binding obligation of the Ser-
vicer, enforceable against it in accordance with the terms hereof,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws relating
to or affecting the rights of creditors generally, and by general equity
principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(d) The Servicer is not in violation of, and the execution and
delivery of this Agreement by the Servicer and its performance and
compliance with the terms of this Agreement will not constitute a
violation with respect to, any order or decree of any court or any order
or regulation of any federal, state, municipal or governmental agency
having jurisdiction, which violation would materially and adversely
affect the condition (financial or otherwise) or operations of the
Servicer or materially and adversely affect the performance of its
duties hereunder;
(e) There are no actions or proceedings against, or investigations
of, the Servicer pending, or, to the knowledge of the Servicer,
threatened, before any court, administrative agency or other tribunal
(A) that, if determined adversely, would prohibit its entering into this
Agreement or render the Certificates invalid, (B) seeking to prevent the
issuance of the Certificates or the consummation of any of the transac-
tions contemplated by this Agreement or (C) that, if determined
adversely, would prohibit or materially and adversely affect the
performance by the Servicer of its obligations under, or the validity or
enforceability of, this Agreement or the Certificates;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Servicer of, or compliance by the Servicer with, this
Agreement or the Certificates, or for the consummation of the
transactions contemplated by this Agreement, except for such consents,
approvals, authorizations and orders, if any, that have been obtained
prior to the Closing Date;
(g) The Servicer is duly licensed where required as a "Licensee"
or is otherwise qualified in each state in which it transacts business
and is not in default of such state's applicable laws, rules and
regulations, except where the failure to so qualify or such default
would not have a material adverse effect on the ability of the Servicer
to conduct its business or perform its obligations hereunder;
(h) The Servicer is an Eligible Servicer and services mortgage
loans in accordance with Accepted Servicing Procedures;
(i) (Reserved);
(j) No Officers' Certificate, statement, report or other document
prepared by the Servicer and furnished or to be furnished by it pursuant
to this Agreement or in connection with the transactions contemplated
hereby contains any untrue statement of material fact or omits to state
a material fact necessary to make the statements contained herein or
therein not misleading;
(k) The Servicer is solvent and will not be rendered insolvent as
a result of the performance of its obligations pursuant to this
Agreement;
(l) The Servicer has not waived any default, breach, violation or
event of acceleration existing under any Debt Instrument or the related
Mortgage;
(m) The Servicer will cause to be performed any and all acts
required to be performed by the Servicer to preserve the rights and
remedies of the Trust and the Trustee in any Insurance Policies
applicable to the Home Loans or with respect to any FHA Loan, any
Insurance Policy required to be maintained pursuant to Title I,
including, without limitation, in each case, any necessary notifications
of insurers, assignments of policies or interests therein, and
establishments of co-insured, joint loss payee and mortgagee rights in
favor of the Trust and the Trustee;
(n) The Servicer shall comply with, and shall service, or cause to
be serviced, each Home Loan, in accordance with all applicable laws,
and, in particular, in accordance with any applicable provisions of the
National Housing Act, as amended and supplemented, all rules and
regulations issued thereunder, and all administrative publications
published pursuant thereto including, in the case of the FHA Loans, all
FHA requirements of FHA Title I loans; and
(o) The Servicer agrees that, so long as it shall continue to
serve in the capacity contemplated under the terms of this Agreement, it
shall remain in good standing under the laws governing its creation and
existence and qualified under the laws of each state in which it is
necessary to perform its obligations under this Agreement or in which
the nature of its business requires such qualification, it shall
maintain all licenses, permits and other approvals required by any law
or regulations, including, without limitation Title I, as may be
necessary to perform its obligations under this Agreement and to retain
all rights to service the Loans, and it shall not dissolve or otherwise
dispose of all or substantially all of its assets.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.03 shall survive delivery of the
------------
respective Home Loan Files to the Trustee and shall inure to the benefit of
the Depositor, the Certificateholders and the Trustee. Upon discovery by any
of the Transferor, the Depositor, the Servicer or the Trustee of a breach of
any of the foregoing representations, warranties and covenants that mate-
rially and adversely affects the value of any Home Loan or the interests of
the Certificateholders therein, the party discovering such breach shall give
prompt written notice (but in no event later than two Business Days following
such discovery) to the other parties. The obligations of the Servicer set
forth in (x) Section 3.06 to cure any breach or to purchase an affected Home
------------
Loan, (y) Section 3.06 to indemnify and hold harmless the Trust and (z)
------------
Section 9.01(a) to indemnify and hold harmless the Trust, the Depositor, the
---------------
Transferor, the Trustee, and the Certificateholders shall constitute the sole
remedies available to the Transferor, the Certificateholders, the Trust, the
depositor, or the Trustee respecting a breach of the representations,
warranties and covenants contained in this Section 3.03.
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Section 3.04 Representations and Warranties regarding Individual Home
--------------------------------------------------------
Loans.
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The Transferor hereby represents and warrants to the Depositor, the
Trustee and the Certificateholders, with respect to each Home Loan, as of the
Closing Date:
(a) The information pertaining to each Home Loan set forth in the
Home Loan Schedule was true and correct in all material respects as of
the Cut-Off Date;
(b) As of the Cut-Off Date, not more than 0.96% of the Home Loans
(by aggregate initial Pool Principal Balance) are between 30 and 59 days
past due (without giving effect to any grace period), and none of the
Home Loans are between 60 and 89 days past due (without giving effect to
any grace period); the Transferor has not advanced funds, induced,
solicited or knowingly received any advance of funds from a party other
than the Obligor, directly or indirectly, for the payment of any amount
required by the Home Loan;
(c) The terms of the Debt Instrument and any related Mortgage
contain the entire agreement of the parties and have not been impaired,
waived, altered or modified in any respect, except by written
instruments reflected in the related File and recorded, if necessary, to
maintain the lien priority of the any related Mortgage; if such Home
Loan is an FHA Loan the substance of each such waiver, alteration and
modification has been approved by the FHA to the extent required under
Title I; no other instrument of waiver, alteration, expansion or
modification has been executed, and no Obligor has been released, in
whole or in part, except in connection with an assumption agreement
which assumption agreement is part of the related Home Loan File and the
payment terms of which are reflected in the related Home Loan Schedule
and; if such Home Loan is an FHA Loan, has been approved by the FHA to
the extent required under Title I;
(d) The Debt Instrument and any related Mortgage are not subject
to any set-off, claims, counterclaim or defense and will not have such
in the future with respect to the goods and services provided under the
Debt Instrument, including the defense of usury or of fraud in the
inducement, nor will the operation of any of the terms of the Debt
Instrument and any related Mortgage, or the exercise of any right
thereunder, render such Debt Instrument or Mortgage unenforceable, in
whole or in part, or subject to any right of rescission, set-off,
counterclaim or defense, including the defense of usury, and no such
right of rescission, set-off, counterclaim or defense has been asserted
with respect thereto;
(e) Any and all requirements of any federal, state or local law
applicable to the Home Loan (including any law applicable to the
origination, servicing and collection practices with respect thereto)
have been complied with;
(f) No Debt Instrument or Mortgage has been satisfied, cancelled,
rescinded or subordinated, in whole or part; and the Transferor has not
waived the performance by the Obligor of any action, if the Obligor's
failure to perform such action would cause the Debt Instrument or
Mortgage Loan to be in default, except as otherwise permitted by clause
(c); and with respect to a Mortgage Loan, the related Property has not
been released from the lien of the Mortgage, in whole or in part, nor
has any instrument been executed that would effect any such
satisfaction, subordination, release, cancellation or rescission;
(g) Each related Mortgage is a valid, subsisting and enforceable
lien on the related Property, including the land and all buildings on
the Property;
(h) The Debt Instrument and any related Mortgage are genuine and
each is the legal, valid and binding obligation of the maker thereof,
enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization or other similar
laws affecting creditors' rights in general and by general principles of
equity;
(i) To the best of the Transferor's knowledge, all parties to the
Debt Instrument and any related Mortgage had legal capacity at the time
to enter into the Home Loan and to execute and deliver the Debt
Instrument and any related Mortgage, and the Debt Instrument and any
related Mortgage have been duly and properly executed by such parties;
(j) As of the applicable Cut-Off Date, the proceeds of the Home
Loan have been fully disbursed and there is no requirement for future
advances thereunder, and any and all applicable requirements set forth
in the Home Loan documents have been complied with; the Obligor is not
entitled to any refund of any amounts paid or due under the Debt
Instrument or any related Mortgage;
(k) Immediately prior to the sale, transfer and assignment to the
Depositor, the Transferor will have good and indefeasible legal title to
the Home Loan, the related Debt Instrument and any related Mortgage and
the full right to transfer such Home Loan, the related Debt Instrument
and any related Mortgage, and the Transferor will have been the sole
owner thereof, subject to no liens, pledges, charges, mortgages,
encumbrances or rights of others, except for such liens as will be
released simultaneously with the transfer and assignment of the Home
Loans to the Depositor (and the Home Loan File will contain no evidence
inconsistent with the foregoing); and immediately upon the sale,
transfer and assignment contemplated by the Home Loan Purchase
Agreement, the Depositor will hold good title to, and be the sole owner
of each Home Loan, the related Debt Instrument and any related Mortgage,
free of all liens, pledges, charges, mortgages, encumbrances or rights
of others;
(l) Except for those Home Loans referred to in Section 3.04(b)
---------------
above that are delinquent as of the Cut-Off Date, there is no
default, breach, violation or event of acceleration known to the
Transferor under the Home Loan, the related Debt Instrument and any
related Mortgage and there is no event known to the Transferor which,
with the passage of time or with notice and the expiration of any
grace or cure period, would constitute a default, breach, violation
or event of acceleration and neither the Transferor nor its predecessors
have waived any default, breach, violation or event of acceleration;
(m) The Debt Instrument and any related Mortgage contain customary
and enforceable provisions such as to render the rights and remedies of
the holder thereof adequate for the realization against the Property of
the benefits of the security provided thereby, including, (A) in the
case of any Mortgage designated as a deed of trust, by trustee's sale,
and (B) otherwise by judicial foreclosure;
(n) Each FHA Loan is an FHA Title I property improvement loan (as
defined in 24 C.F.R. Section 201.2) underwritten by the Transferor in
accordance with FHA requirements for the Title I Loan program as set
forth in 24 C.F.R. Parts 201 and 202, and the Transferor has transmitted
a loan report with respect to such FHA Loan to FHA so that such FHA Loan
will be included in the Title I program;
(o) Each Home Loan is a fixed rate loan; the Debt Instrument shall
mature within not more than (a) for an FHA Loan, 20 years and 32 days
and (b) for a Non-FHA Loan, 25 years, from the date of origination of
the Home Loan; the Debt Instrument is payable in substantially equal
Monthly Payments, with interest payable in arrears, and requires a
Monthly Payment which is sufficient to fully amortize the original
principal balance over the original term and to pay interest at the
related Home Loan Interest Rate; interest on each Home Loan is
calculated on the basis of a 360 day year consisting of twelve 30-day
months, and the Debt Instrument does not provide for any extension of
the original term;
(p) The related Debt Instrument is not and has not been secured by
any collateral except, in the case of a Mortgage Loan, the lien of the
corresponding Mortgage;
(q) With respect to any Mortgage Loan, if the related Mortgage
constitutes a deed of trust, a trustee, duly qualified under applicable
law to serve as such, has been properly designated and currently so
serves and is named in the Mortgage, or a valid substitution of trustee
has been recorded, and no extraordinary fees or expenses are or will
become payable to the trustee under the deed of trust, except in
connection with default proceedings and a trustee's sale after default
by the Obligor;
(r) With respect to any Mortgage Loan, the Transferor has no
knowledge of any circumstances or conditions not reflected in the
representations set forth herein, or in the Home Loan Schedule, or in
the related Home Loan File with respect to the related Mortgage, the
related Property or the Obligor which could reasonably be expected to
materially and adversely affect the value of the related Property, or
the marketability of the Mortgage Loan or to cause the Mortgage Loan to
become delinquent or otherwise in default;
(s) Assuming no material change to the applicable law or
regulations in effect as of the Closing Date, after the consummation of
the transactions contemplated by this Agreement, the Trustee will have
the ability to foreclose or otherwise realize upon a Property, if the
Home Loan is a Mortgage Loan, or to enforce the provisions of the
related Home Loan against the Obligor thereunder, if the foreclosure
upon any such Property or enforcement of the provisions of the related
Home Loan against the Obligor are undertaken as set forth in Section
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4.12;
----
(t) With respect to any FHA Loan that is a Mortgage Loan, the
improvements to the Property relating to such FHA Loan, have been or
shall be completed and inspected by the Servicer within the time period
and to the extent required under the applicable Title I regulations, and
evidence of such inspection shall be placed in the Servicer's Home Loan
File or, if not, a letter of non-compliance shall be delivered to HUD
(with a copy placed in the Servicer's Home Loan File) promptly upon the
completion of such inspection;
(u) Each FHA Loan has been originated in compliance with the
provisions of 24 C.F.R. Section 201.20, and, if required by Title I, the
market value of the any related Property has been ascertained in
accordance with the procedures established by HUD;
(v) There exists a Home Loan File relating to each Home Loan and
such Home Loan File contains all of the original or certified
documentation listed in Section 2.05 for such Home Loan. Each Trustee's
------------
Home Loan File has been delivered to the Custodian and each Servicer's
Home Loan File is being held in trust by the Transferor for the benefit
of, and as agent for, the Certificateholders and the Trustee as the owner
thereof. Each document included in the Home Loan File which is required
to be executed by the Obligor has been executed by the Obligor in the
appropriate places. With respect to each Mortgage Loan, the related
Assignment of Mortgage to the Trustee is in recordable form and is
acceptable for recording under the laws of the jurisdiction in which the
Property is located. All blanks on any form required to be completed have
been so completed;
(w) Each FHA Loan is in respect of a home improvement loan or a
retail installment sale contract, and each Property is improved by a
residential dwelling and is not a Home Loan in respect of a manufactured
home or mobile home or the land on which a manufactured home or mobile
home has been placed;
(x) Each FHA Loan was underwritten by the Transferor in accordance
with the applicable underwriting criteria established by the FHA and
HUD; each Non-FHA Loan was underwritten by the Transferor in accordance
with the Transferor's underwriting guidelines;
(y) Any Property securing an FHA Loan is covered by any insurance
required by Title I; if the Property securing any Mortgage Loan is in an
area identified by the Federal Emergency Management Agency ("FEMA") as
having special flood hazards, unless the community in which the area is
situated is not participating in the National Flood Insurance Program
and the regulations thereunder or less than a year has passed since FEMA
notification regarding such hazards, a flood insurance policy is in
effect with respect to such Property with a generally acceptable carrier
which complies with Section 102(a) of the Flood Disaster Protection Act
of 1973; all improvements upon each Property securing a Non-FHA Loan are
insured by a generally acceptable insurer against loss by fire hazards
of extended coverage and such other hazards as are customary in the area
where the Property is located pursuant to insurance policies conforming
to the requirements of the Agreement; all such policies contain a
standard mortgage clause naming the Transferor or its predecessor in
interest, its successors and assigns, as loss payee;
(z) All costs, fees and expenses incurred in originating and
closing the Home Loan and in recording any related Mortgage were paid
and the Obligor is not entitled to any refund of any amounts, paid or
due to the Obligee pursuant to the Debt Instrument or any related
Mortgage;
(aa) Except for the related FHA Premium Amount, if applicable,
there is no obligation on the part of the Transferor or any other party
other than the Obligor to make payments with respect to the Home Loan;
(ab) At the time of origination of the Home Loan, each related
prior lien, if any, was certified by the Obligor as not 30 or more days
delinquent;
(ac) To the best of the Transferor's knowledge, all parties which
have had any interest in the Home Loan, whether as mortgagee, assignee,
pledgee or otherwise, are (or, during the period in which they held and
disposed of such interest, were) (i) in compliance with any and all
applicable licensing requirements of the laws of the state wherein the
Property is located, and (ii) (A) organized under the laws of such
state, or (B) qualified to do business in such state, or (C) federal
savings and loan associations or national banks having principal offices
in such state, or (D) not doing business in such state;
(ad) With respect to each Mortgage Loan, the related Mortgage
contains an enforceable provision requiring the consent of the Mortgagee
to assumption of the related Mortgage Loan upon sale of the Property;
(ae) With respect to any Mortgage Loan, there is no homestead or
other exemption available to the Mortgagor which would materially
interfere with the right to sell the related Property at a trustee's
sale or the right to foreclose the Mortgage; no relief has been
requested or allowed to the Mortgagor under the Civil Relief Act;
(af) Subject to Section 3.06, each FHA Loan has been submitted to
------------
the FHA for insurance pursuant to the FHA Title I loan program and each
FHA Loan has been or will be assigned a case number by the FHA for the
FHA Title I loan program;
(ag) Subject to Section 3.06, the FHA Reserve Amount with respect
------------
to each FHA Loan, has been or will be transferred to the FHA
Insurance Coverage Reserve Account;
(ah) The related Home Loan File for each Home Loan that is a
Mortgage Loan contains a Title Document with respect to such Home Loan
reflecting that title to the related Property is vested at least 50% in
the Obligor under such Home Loan;
(ai) To the best of the Transferor's knowledge, each Property
(including each residential dwelling improvement thereon) was at the
time the Home Loan was made free of damage which materially and
adversely affects the value thereof and, if the related Home Loan is an
FHA Loan, impairs the ability to insure the related Home Loan under
the Title I program;
(aj) Each Home Loan was originated in compliance with all
applicable laws and, to the best of the Transferor's knowledge, no fraud
or misrepresentation was committed by any Person in connection therewith
or, if the related loan is an FHA Loan, in the application for any
insurance required by Title I in relation to such FHA Loan;
(ak) Each Home Loan has been serviced in accordance with all
applicable laws and, to the best of the Transferor's knowledge, no fraud
or misrepresentation was committed by any Person in connection
therewith;
(al) The transfer, assignment and conveyance of the Debt
Instruments and the Mortgages by the Transferor to the Depositor were
not subject to the bulk transfer laws or any similar statutory
provisions in effect in any applicable jurisdiction;
(am) Any Home Loan originated in the State of Texas, was originated
pursuant to either Chapter 3 or Chapter 6 of the Texas Consumer Credit
Code;
(an) As of the applicable Cut-Off Date, no Obligor is a debtor
under proceedings under the Bankruptcy Code, and no such Obligor has
defaulted in payments on a Home Loan after the filing of such bankruptcy
case, whether under a plan or reorganization or otherwise;
(ao) To the best of the Transferor's knowledge, the Transferor has
not advanced funds, or induced, solicited or knowingly received any
advance of loan payments from a party other than, with respect to a
Mortgage Loan, the owner of the Property subject to the Mortgage;
(ap) The Home Loans were originated by the Transferor or through
the Transferor's network of dealers and correspondents (including Home
Loans acquired by such correspondents);
(aq) (Reserved);
(ar) With respect to FHA Loans secured by a Mortgage, the
representations and warranties of the Mortgagor in each mortgage loan
application and in connection with the related FHA Loan are true and
correct in all material respects (and it shall be deemed that a breach
is material only if a claim for payment made to the FHA under the
Contract of Insurance in respect of such FHA Loan is a Rejected Claim as
a result of such breach);
(as) Each Home Loan either complies with the Home Ownership and
Equity Protection Act of 1994 or is not subject to such act;
(at) the Transferor has caused to be performed or shall cause to be
performed within one month of the Closing Date any and all acts required
to preserve the rights and remedies of the Trust and the Trustee in any
insurance policies applicable to each Home Loan or, if such Home Loan is
an FHA Loan, only if required by Title I, including, without limitation,
any necessary notifications of insurers, assignments of policies or
interests therein, and establishment of coinsured, joint loss payee and
mortgagee rights in favor of the Trustee;
(au) With respect to any Mortgage Loan, to the best of the
Transferor's knowledge, there exists no violation of any environmental
law (either local, state or federal), rule or regulation in respect of
the Property which violation has or could have a material adverse effect
on the market value of such Property. The Transferor has no knowledge
of any pending action or proceeding directly involving the related
Property in which compliance with any environmental law, rule or
regulation is in issue; and, to the Transferor's best knowledge, nothing
further remains to be done to satisfy in full all requirements of each
such law, rule or regulation constituting a prerequisite to the use and
enjoyment of such Property;
(av) At the time of their origination, not more than 0.10% of the
FHA Loans (by aggregate Initial Principal Balance) and none of the Non-
FHA Loans were secured by Mortgages on non-owner occupied Mortgaged
Properties;
(aw) (Reserved);
(ax) (Reserved);
(ay) No Home Loan was selected from the Transferor's assets in a
manner which would cause it to be adversely selected as to credit risk
from the pool of home loans owned by the Transferor;
(az) With respect to each Home Loan that is not a first mortgage
loan, either (i) no consent for the Home Loan is required by the holder
of the related prior lien or (ii) such consent has been obtained and has
been delivered to the Trustee;
(ba) Each Home Loan is either a retail installment contract for
goods or services, home improvement loan for goods or services, debt
consolidation loan or a home equity loan. All Home Loans that are not
debt consolidation loans are either home equity loans, retail
installment sale contracts for goods and services or home improvement
loans for goods and services that are either "consumer credit contracts"
or "purchase money loans" as such terms are defined in 16 C.F.R. Part
433.1;
(bb) Each Debt Instrument is comprised of an original promissory
note and each promissory note constitutes an "instrument" or "chattel
paper" for purposes of Article 9 of the UCC. Each Debt Instrument has
been delivered to the Custodian; and
(bc) With respect to each Home Loan either (i) it has a combined
loan-to-value ratio less than 125% or (ii) substantially all the
proceeds thereof were used to acquire, improve or protect the related
Mortgaged Property. For purposes of this representation or warranty,
the term substantially all shall mean 80% or more.
Section 3.05 (Reserved).
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Section 3.06 Purchase and Substitution.
-------------------------
(a) It is understood and agreed that the representations and warranties
set forth in Section 3.04, shall survive the conveyance of the Home Loans to
------------
the Trust and the delivery of the Certificates to the Certificateholders.
Upon discovery by the Depositor, the Servicer, the Transferor, the Custodian,
the Trustee or any Certificateholder of a breach of any of such
representations and warranties which materially and adversely affects the
value of the Home Loans or the interest of the Certificateholders, or which
materially and adversely affects the interests of the Certificateholders in
the related Home Loan in the case of a representation and warranty relating
to a particular Home Loan (notwithstanding that such representation and
warranty was made to the Transferor's best knowledge), the party discovering
such breach shall give prompt written notice to the others. The Transferor
shall within 60 days of the earlier of its discovery or its receipt of notice
of any breach of a representation or warranty, promptly cure such breach in
all material respects. Except with respect to a breach of the
representations made by the Transferor pursuant to Section 3.04(af) and
----------------
3.04(ag), if within 60 days after the earlier of the Transferor's discovery
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of such breach or the Transferor's receiving notice thereof such breach has
not been remedied by the Transferor and such breach materially and adversely
affects the interests of the Certificateholders or in the related Home Loan
(the "Defective Home Loan"), the Transferor shall on or before the
-------------------
Determination Date next succeeding the end of such 60-day period either
(i) remove such Defective Home Loan from the Trust (in which case it shall
become a Deleted Home Loan) and substitute one or more Qualified Substitute
Home Loans in the manner and subject to the conditions set forth in this
Section 3.06 or (ii) purchase such Defective Home Loan at a purchase price
------------
equal to the Purchase Price (as defined below) by depositing such Purchase
Price in the Collection Account. The Transferor shall provide the Servicer
and the Trustee with a certification of a Responsible Officer on the
Determination Date next succeeding the end of such 60-day period indicating
whether the Transferor is purchasing the Defective Home Loan or substituting
in lieu of such Defective Home Loan a Qualified Substitute Home Loan. With
respect to the purchase of a Defective Home Loan pursuant to this Section,
the "Purchase Price" shall be equal to the Principal Balance of such
--------------
Defective Home Loan as of the date of purchase, plus all accrued and unpaid
interest on such Defective Home Loan to but not including the Due Date in the
Due Period most recently ended prior to such Determination Date computed at
the applicable Home Loan Interest Rate, plus the amount of any unreimbursed
Servicing Advances made by the Servicer with respect to such Defective Home
Loan, which Purchase Price shall be deposited in the Collection Account
(after deducting therefrom any amounts received in respect of such
repurchased Defective Home Loan and being held in the Collection Account for
future distribution to the extent such amounts represent recoveries of
principal not yet applied to reduce the related Principal Balance or interest
(net of the Servicing Fee) for the period from and after the Due Date in the
Due Period most recently ended prior to such Determination Date).
Any substitution of Home Loans pursuant to this Section 3.06(a) shall
---------------
be accompanied by payment by the Transferor of the Substitution Adjustment,
if any, to be deposited in the Collection Account. For purposes of
calculating the Available Collection Amount for any Distribution Date,
amounts paid by the Transferor pursuant to this Section 3.06 in connection
------------
with the repurchase or substitution of any Defective Home Loan that are on
deposit in the Collection Account as of the Determination Date for such
Distribution Date shall be deemed to have been paid during the related Due
Period and shall be transferred to the Certificate Distribution Account as
part of the Available Collection Amount to be retained therein or transferred
to the Certificate Distribution Account, if applicable, pursuant to Section
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5.01(c).
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The Trustee on behalf of the Certificateholders agrees that if an FHA
Loan is a Defective Home Loan because a document is not included in the
Servicer's Home Loan File as of the 60th day after the discovery or receipt
of notice thereof, such defect shall be deemed to be cured if the Trustee
shall have received during the sixty-day period after such date a written
statement addressed to it from the Director of HUD Title I Insurance Division
that such document would not be required in connection with a claim for FHA
Insurance with respect to such FHA Loan. It is understood and agreed that
the obligation of the Transferor to repurchase or substitute any such Home
Loan pursuant to this Section 3.06 shall constitute the sole remedy against
------------
it with respect to such breach of the foregoing representations or warranties
or the existence of the foregoing conditions. For purposes of calculating 60
days with respect to a Defective Loan that is an FHA Loan because a document
is not included in the Servicer's Home Loan File, any day on which the FHA is
officially closed for reasons other than as specified in the definition of
Business Day shall not be counted in making such calculation. With respect
to representations and warranties made by the Transferor pursuant to Section
3.04 that are made to the Transferor's best knowledge,
------------
if it is discovered by any of the Depositor, the Transferor 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 Loan,
notwithstanding the Transferor's lack of knowledge, such inaccuracy shall be
deemed a breach of the applicable representation and warranty.
With respect to a breach of the representations made by the Transferor
pursuant to Section 3.04(af) and 3.04(ag), if the FHA has not assigned a case
---------------- --------
number under the Contract of Insurance to an FHA Loan to indicate that such
FHA Loan is eligible for Title I Insurance coverage under the Contract of
Insurance on or before the 120th day after the Closing Date, the Transferor
shall be obligated, on the last day of the Due Period next succeeding such
120th day, to repurchase such FHA Loan. If the FHA Reserve Amount with
respect to an FHA Loan has not been transferred to the FHA Insurance Coverage
Reserve Account on or before the 150th day after the Closing Date, the
Transferor shall be obligated, on the last day of the Due Period next
succeeding such 150th day, to repurchase such FHA Loan. The Claims
Administrator shall give notice in writing to each of the Depositor, the
Transferor and the Trustee of (i) any FHA Loan with respect
to which there has not been assigned a case number under the Contract of
Insurance on or before the 120th day after the Closing Date and (ii) any FHA
Loan that has not been transferred to the FHA Insurance Coverage Reserve
Account on or before the 150th day after the Closing Date. For purposes of
calculating either 120 or 150 days from the Closing Date in this Section
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3.06(a), any day on which the FHA is officially closed for reasons other than
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such day being a Saturday, Sunday or a day on which banking institutions in
Washington, D.C. are authorized or obligated by law, executive order or
governmental decree to be closed, shall not be counted in making such
calculation.
(b) As to any Deleted Home Loan for which the Transferor substitutes a
Qualified Substitute Home Loan or Loans, the Transferor shall effect such
substitution by delivering to the Trustee (i) a certification executed by a
Responsible Officer of the Transferor to the effect that the Substitution
Adjustment has been credited to the Collection Account and (ii) the documents
constituting the Trustee's Home Loan File for such Qualified Substitute Home
Loan or Loans.
The Servicer shall deposit in the Collection Account all payments
received in connection with such Qualified Substitute Home Loan or Loans
after the date of such substitution. Monthly Payments received with respect
to Qualified Substitute Home Loans on or before the date of substitution will
be retained by the Transferor. The Trust will be entitled to all payments
received on the Deleted Home Loan on or before the date of substitution, and
the Transferor shall thereafter be entitled to retain all amounts
subsequently received in respect of such Deleted Home Loan. The Transferor
shall give written notice to the Servicer (if the Transferor is not then
acting as such) and the Trustee that such substitution has taken place and
the Servicer shall amend the Home Loan Schedule to reflect (i) the removal of
such Deleted Home Loan from the terms of this Agreement and (ii) the
substitution of the Qualified Substitute Home Loan. The Transferor shall
promptly deliver to the Servicer (if the Transferor is not then acting as
such) and the Trustee, a copy of the amended Home Loan Schedule. Upon such
substitution, such Qualified Substitute Home Loan or Loans shall be subject
to the terms of this Agreement in all respects, and the Transferor shall be
deemed to have made with respect to such Qualified Substitute Home Loan or
Loans, as of the date of substitution, the covenants, representations and
warranties set forth in Section 3.04. On the date of such substitution, the
------------
Transferor will deposit into the Collection Account an amount equal to the
related Substitution Adjustment, if any. In addition, on the date of such
substitution, the Servicer shall cause the Trustee to release the Deleted
Home Loan from the lien of the Trust and the Servicer will cause such
Qualified Substitute Home Loan to be assigned to the Trust as part of the
Trust Estate.
(c) With respect to all Defective Home Loans or other Home Loans
repurchased by the Transferor pursuant to this Agreement, upon the deposit of
the Purchase Price therefor to the Collection Account, the Trustee shall
assign to the Transferor, without recourse, representation or warranty, all
the Trustee's right, title and interest in and to such Defective Home Loans
or Home Loans, which right, title and interest were conveyed to the Trustee
pursuant to Section 2.01, including, without limitation, the rights to any
------------
FHA Insurance reserves attributable to such Home Loans. The Trustee shall
take any actions as shall be reasonably requested by the Transferor to effect
the repurchase of any such Home Loans.
(d) It is understood and agreed that the obligations of the Transferor
set forth in this Section 3.06 to cure, purchase or substitute for a
------------
Defective Home Loan (and to indemnify the Trust for certain losses as
described herein in connection with a Defective Home Loan) constitute the
sole remedies of the Depositor, the Trustee and the Certificateholders
hereunder respecting a breach of the representations and warranties contained
in Section 3.04. Any cause of action against the Transferor relating to or
------------
arising out of a defect in a Trustee's Home Loan File as contemplated by
Section 2.06 or against the Transferor relating to or arising out of a breach
------------
of any representations and warranties made in Section 3.04 shall accrue as
------------
to any Home Loan upon (i) discovery of such defect or breach by any party and
notice thereof to the Transferor or notice thereof by the Transferor to the
Trustee, (ii) failure by the Transferor to cure such defect or breach or
purchase or substitute such Home Loan as specified above, and (iii) demand
upon the Transferor, as applicable, by the Majority Certificateholders for
all amounts payable in respect of such Home Loan.
(e) The Trustee shall not have any duty to conduct any affirmative
investigation other than as specifically set forth in this Agreement as to
the occurrence of any condition requiring the repurchase or substitution of
any Home Loan pursuant to this Section or the eligibility of any Home Loan
for purposes of this Agreement.
(f) In connection with any Loan for which the Transferor elects to
substitute a Qualified Substitute Home Loan, the Transferor shall deliver to
the Trustee an Opinion of Counsel to the effect that such actions will not
cause (x) any federal tax to be imposed on the Trust, including without
limitation, any federal tax imposed on "prohibited transactions" under
Section 860F(a)(1) of the Code or on "contributions after the start-up day"
under Section 860G(d)(1) of the Code or (y) any portion of the Trust to fail
to qualify as a REMIC at any time that any Certificate is outstanding. In
the event that such opinion indicates that such substitution will result in
the imposition of a prohibited transaction tax, give rise to net taxable
income or be deemed a contribution to the REMIC after the "start-up day", the
Transferor shall not be permitted to substitute for such Home Loan but shall
repurchase such Home Loan in accordance with this Section 3.06.
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ARTICLE V
ADMINISTRATION AND SERVICING OF THE HOME LOANS
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Section 4.01 Duties of the Servicer.
----------------------
(a) Servicing Standard. The Servicer, as an independent contractor,
------------------
shall service and administer the Home Loans and shall have full power and
authority, acting alone, to do any and all things in connection with such
servicing and administration which the Servicer may deem necessary or
desirable and consistent with the terms of this Agreement. Notwithstanding
anything to the contrary contained herein, the Servicer, in servicing and
administering the Home Loans, shall employ or cause to be employed procedures
(including collection, foreclosure, liquidation and Foreclosure Property
management and liquidation procedures) and exercise the same care that it
customarily employs and exercises in servicing and administering loans of the
same type as the Home Loans for its own account, all in accordance with
Accepted Servicing Procedures of prudent lending institutions and servicers
of loans of the same type as the Home Loans and giving due consideration to
the Certificateholders' reliance on the Servicer. The Servicer has and shall
maintain the facilities, procedures and experienced personnel necessary to
comply with the servicing standard set forth in this subsection (a) and the
duties of the Servicer set forth in this Agreement relating to the servicing
and administration of the Home Loans.
In performing its obligations hereunder the Servicer shall at all times
act in good faith in a commercially reasonable manner in accordance with all
requirements of the FHA applicable to the servicing of the FHA Loans and
otherwise in accordance with applicable law and the Debt Instruments and
Mortgages. The Servicer shall at all times service and administer the FHA
Loans in accordance with Title I, and shall have full power and authority,
acting alone and/or through the Subservicer as provided in Section 4.07,
------------
subject only to this Agreement, the respective Home Loans, and, in the case
of the FHA Loans, the specific requirements and prohibitions of Title I, to
do any and all things in connection with such servicing and administration
which are consistent with the manner in which prudent servicers service FHA
Title I home improvement loans and which are consistent with the ordinary
practices of prudent mortgage lending institutions.
(b) Servicing Advances. In accordance with the preceding general
------------------
servicing standard, the Servicer, or any Subservicer on behalf of the
Servicer, shall make all Servicing Advances in connection with the servicing
of each Home Loan hereunder. Notwithstanding any provision to the contrary
herein, neither the Servicer, nor any Subservicer on behalf of the Servicer,
shall have any obligation to advance its own funds for any delinquent
scheduled payments of principal and interest on any Home Loan or to satisfy
or keep current the indebtedness secured by any Superior Liens on the related
Mortgaged Property. No costs incurred by the Servicer or any Subservicer in
respect of Servicing Advances shall, for the purposes of distributions to
Certificateholders, be added to the amount owing under the related Home Loan.
Notwithstanding any obligation by the Servicer to make a Servicing Advance
hereunder with respect to a Home Loan, before making any Servicing Advance
that is material in relation to the outstanding principal balance thereof,
the Servicer shall assess the reasonable likelihood of (i) recovering such
Servicing Advance and any prior Servicing Advances for such Home Loan, and
(ii) recovering any amounts attributable to outstanding interest and principal
owing on such Home Loan for the benefit of the Certificateholders in excess
of the costs, expenses and other deductions to obtain such recovery,
including without limitation any Servicing Advances therefor and, if
applicable, the outstanding indebtedness of all Superior Liens. The Servicer
shall only make a Servicing Advance with respect to a Home Loan to the
extent that the Servicer determines in its reasonable, good faith judgment
that such Servicing Advance would likely be recovered as aforesaid; provided,
however, that the Servicer will be entitled to be reimbursed for any
Nonrecoverable Servicing Advance pursuant to this Agreement.
(c) Waivers, Modifications and Extensions. The Servicer shall make
-------------------------------------
reasonably diligent efforts to collect all payments called for under the
terms and provisions of the Home Loans, and shall, to the extent such
procedures shall be consistent with this Agreement, follow Accepted Servicing
Procedures. The Servicer may in its discretion waive or permit to be waived
any penalty interest or any other fee or charge which the Servicer would be
entitled to retain hereunder as servicing compensation and extend the Due
Date on a Debt Instrument for a period (with respect to each payment as to
which the Due Date is extended) not greater than 90 days after the initially
scheduled due date for such payment. Notwithstanding anything in this
Agreement to the contrary, the Servicer shall not permit any additional
extension or modification with respect to any Home Loan other than that
permitted by the immediately preceding sentence unless the Home Loan is a
Defaulted Home Loan or, in the case of any FHA Loan, such extension or
modification complies with the requirements of Title I or is required by
Title I and such FHA Loan is a Defaulted Home Loan or a payment default is
reasonably foreseeable by the Servicer.
(d) Instruments of Satisfaction or Release. Without limiting the
--------------------------------------
generality of Section 4.01(c), the Servicer, in its own name or in the name
of a Subservicer, is hereby authorized and empowered when the Servicer
believes it appropriate in its best judgment to execute and deliver, on
behalf of the Certificateholders and the Trust or any of them, and upon
notice to the Trustee, any and all instruments of satisfaction or cancella-
tion, or of partial or full release or discharge, and all other comparable
instruments, with respect to the Home Loans and the Mortgaged Properties and
to institute foreclosure proceedings or obtain a deed-in-lieu of foreclosure
so as to convert the ownership of such properties, and to hold or cause to be
held title to such properties, on behalf of the Trust and Certificateholders.
The Servicer shall service and administer the Home Loans in accordance with
applicable state and federal law and shall provide to the Obligors any
reports required to be provided to them thereby. The Trustee shall execute,
at the written direction of the Servicer, any limited or special powers of
attorney and other documents reasonably acceptable to the Trustee to enable
the Servicer or any Subservicer to carry out their servicing and administra-
tive duties hereunder, including, without limitation, limited or special
powers of attorney with respect to any Foreclosure Property, and the Trustee
shall not be accountable for the actions of the Servicer or any Subservicers
under such powers of attorney and shall be indemnified by such parties with
respect to such actions.
Section 4.02 Payment of Taxes, Insurance and Other Charges.
---------------------------------------------
The Servicer may and, if required by the Servicer, the Subservicers
shall, establish and maintain one or more accounts (the "Servicing
Accounts"), into which any collections from the Obligors (or related advances
from Subservicers) for the payment of taxes, assessments, hazard insurance
premiums, and comparable items for the account of the Obligors shall be
deposited and retained. Servicing Accounts shall be Eligible Accounts.
Withdrawals of amounts so collected from a Servicing Account may be made only
to (i) effect timely payment of taxes, assessments, hazard insurance
premiums, and comparable items; (ii) reimburse the Servicer (or a Subservicer
to the extent provided in the related Sub-Servicing Agreement) out of related
collections for any advances with respect to taxes, assessments and insurance
premiums and with respect to hazard insurance; (iii) refund to Obligors any
sums as may be determined to be overages; (iv) pay interest, if required and
as described below, to Obligors on balances in the Servicing Account; or (v)
clear and terminate the Servicing Account at the termination of this
Agreement in accordance with Section 12.01. As part of its servicing duties,
-------------
the Servicer or Subservicers shall pay to the Obligors interest on funds in
Servicing Accounts, to the extent required by law and, to the extent that
interest earned on funds in the Servicing Accounts is insufficient, to pay
such interest from its or their own funds, without any reimbursement from the
Trust, the Trustee, the Depositor, or any Certificateholder therefor. Upon
request of the Trustee, the Transferor or the Servicer shall cause the bank,
savings association or other depository for each Servicing Account to forward
to the Trustee copies of such statements or reports as the Trustee, the
Depositor, or any Certificateholder shall reasonably request.
Section 4.03 Fidelity Bond; Errors and Omission Insurance.
--------------------------------------------
The Servicer shall maintain a fidelity bond in such form and amount as
is customary for entities acting as custodian of funds and documents in
respect of loans on behalf of institutional investors. The Servicer shall
obtain and maintain at all times during the term of this Agreement errors and
omissions insurance coverage covering the Servicer and its employees issued
by a responsible insurance company. The issuer, policy terms and forms and
amounts of coverage, including applicable deductibles, shall be in such form
and amount as is customary for entities acting as servicers. The Servicer
agrees to notify the Trustee in writing within five (5) days of the
Servicer's receipt of notice of the cancellation or termination of any such
errors and omissions insurance coverage. The Servicer shall provide to the
Trustee or any Certificateholder upon request written evidence of such
insurance coverage.
Section 4.04 Filing of Continuation Statements.
---------------------------------
On or before the fifth anniversary of the filing of any financing
statements by Empire Funding and the Depositor, respectively, with respect to
the assets conveyed to the Trust, Empire Funding and the Depositor shall
prepare, have executed by the necessary parties and file in the proper
jurisdictions all financing and continuation statements necessary to maintain
the liens, security interests, and priorities of such liens and security
interests that have been granted by Empire Funding and the Depositor,
respectively, and Empire Funding and the Depositor shall
continue to file on or before each fifth anniversary of the filing of any
financing and continuation statements such additional financing and
continuation statements until the Trust has terminated pursuant to Section
-------
12.01 hereof. The Trustee agrees to cooperate with Empire Funding and the
-----
Depositor in preparing, executing and filing such statements. The Trustee
agrees to notify Empire Funding and the Depositor on the third Distribution
Date prior to each such fifth anniversary of the requirement to file such
financing and continuation statements. The filing of any such statement with
respect to Empire Funding and the Depositor shall not be construed as any
indication of an intent of any party contrary to the expressed intent set
forth in Section 2.04 hereof. If Empire Funding or the Depositor has ceased
------------
to do business whenever any such financing and continuation statements must
be filed or Empire Funding or the Depositor fails to file any such financing
statements or continuation statements at least one month prior to the
expiration thereof, each of Empire Funding and the Depositor does hereby
make, constitute and appoint the Trustee its attorney-in-fact, with full
power and authority to execute and file in its name and on its behalf any
such financing statements or continuation statements required under this
Section 4.04.
------------
Section 4.05 (Reserved).
Section 4.06 Superior Liens.
--------------
If the Servicer is notified that any lienholder under a Superior Lien
has accelerated or intends to accelerate the obligations secured by such
Superior Lien, or has declared or intends to declare a default under the
related mortgage or promissory note secured thereby, or has filed or intends
to file an election to have any Mortgaged Property sold or foreclosed, the
Servicer shall take, on behalf of the Trustee, all reasonable actions that
are necessary to protect the interests of the Certificateholders and/or to
preserve the security of the related Home Loan, including making any
Servicing Advances that are necessary to cure the default or reinstate the
Superior Lien. The Servicer shall promptly notify the Trustee if it takes
any such action. Any Servicing Advances by the Servicer pursuant to its
obligations in this Section 4.06 shall comply with requirements set forth in
------------
Section 4.01(b) hereof.
---------------
Section 4.07 Subservicing.
------------
(a) The Servicer may enter into Subservicing Agreements for any
servicing and administration of Home Loans with any institution which is in
compliance with the laws of each state necessary to enable it to perform its
obligations under such Subservicing Agreement and is an Eligible Servicer.
The Servicer shall give prior written notice to the Trustee of the
appointment of any Subservicer. The Servicer shall be entitled to terminate
any Subservicing Agreement in accordance with the terms and conditions of
such Subservicing Agreement and to either directly service the related Home
Loans or enter into a Subservicing Agreement with a successor subservicer
which qualifies hereunder.
In the event of termination of any Subservicer, and unless a successor
Subservicer has otherwise been appointed, all servicing obligations of such
Subservicer shall be assumed simultaneously by the Servicer without any
additional act or deed on the part of such Subservicer or the Servicer, and
the Servicer shall service directly the related Home Loans.
Each Sub-Servicing Agreement shall include the provision that such
agreement may be immediately terminated by the Trustee in the event that the
Servicer shall, for any reason, no longer be the Servicer. In no event shall
any Sub-Servicing Agreement require the Trustee, as Successor Servicer, for
any reason whatsoever to pay compensation to a Subservicer in order to
terminate such Subservicer.
(b) Notwithstanding any Subservicing Agreement, any of the provisions
of this Agreement relating to agreements or arrangements between the Servicer
and a Subservicer or reference to actions taken through a Subservicer or
otherwise, the Servicer shall remain obligated and primarily liable to the
Trustee and Certificateholders for the servicing and administering of the
Home 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 Servicer alone were servicing and administering the Home Loans. For
purposes of this Agreement, the Servicer shall be deemed to have received
payments on Home Loans when the Subservicer has actually received such
payments and, unless the context otherwise requires, references in this
Agreement to actions taken or to be taken by the Servicer in servicing the
Home Loans include actions taken or to be taken by a Subservicer on behalf of
the Servicer. The Servicer shall be entitled to enter into any agreement
with a Subservicer for indemnification of the Servicer by such Subservicer,
and nothing contained in this Agreement shall be deemed to limit or modify
such indemnification.
(c) In the event the Servicer shall for any reason no longer be the
Servicer (including by reason of an Event of Default), the successor
Servicer, on behalf of the Trustee and the Certificateholders pursuant to
Section 4.08, shall thereupon assume all of the rights and obligations of the
------------
Servicer under each Subservicing Agreement that the Servicer may have entered
into, unless the successor Servicer elects to terminate any Subservicing
Agreement in accordance with its terms. The successor Servicer shall be
deemed to have assumed all of the Servicer's interest therein and to have
replaced the Servicer as a party to each Subservicing Agreement to the same
extent as if the Subservicing Agreements had been assigned to the assuming
party, except that the Servicer shall not thereby be relieved of any
liability or obligations under the Subservicing Agreements which accrued
prior to the transfer of servicing to the successor Servicer. The Servicer
at its expense and without right of reimbursement therefor, shall, upon
request of the successor Servicer, deliver to the assuming party all
documents and records relating to each Subservicing Agreement and the Home
Loans then being serviced and an accounting of amounts collected and held by
it and otherwise use its best efforts to effect the orderly and efficient
transfer of the Subservicing Agreements to the assuming party.
(d) As part of its servicing activities hereunder, the Servicer, for
the benefit of the Trustee and the Certificateholders, shall enforce the
obligations of each Subservicer under the related Subservicing Agreement.
Such enforcement, including, without limitation, the legal
prosecution of claims and the pursuit of other appropriate remedies, shall be
in such form and carried out to such an extent and at such time as the
Servicer, in its good faith business judgment, would require were it the
owner of the related Home Loans. The Servicer shall pay the costs of such
enforcement at its own expense, and shall be reimbursed therefor only (i)
from a general recovery resulting from such enforcement to the extent, if
any, that such recovery exceeds all amounts due in respect of the related
Home Loan or (ii) from a specific recovery of costs, expenses or attorneys
fees against the party against whom such enforcement is directed.
(e) Any Subservicing Agreement that may be entered into and any other
transactions or services relating to the Home Loans involving a Subservicer
shall be deemed to be between the Subservicer and the Servicer alone and none
of the Trustee or the Certificateholders shall be deemed parties thereto or
shall have any claims, rights, obligations, duties or liabilities with
respect to the Subservicer in its capacity as such except as set forth in
Section 4.07(c) above.
---------------
(f) In those cases where a Subservicer is servicing a Home Loan
pursuant to a Sub-Servicing Agreement, the Subservicer will be required to
establish and maintain one or more accounts (collectively, the "Sub-Servicing
Account"). The Sub-Servicing Account shall be an Eligible Account. The
Subservicer will be required to deposit into the Sub-Servicing Account no
later than the first Business Day after receipt all proceeds of Home Loans
received by the Subservicer and remit such proceeds to the Servicer for
deposit in the Collection Account not later than the Business Day following
receipt thereof by the Subservicer. Notwithstanding anything in this clause
(f) to the contrary, the Subservicer shall only be able to withdraw funds
from the Sub-Servicing Account for the purpose of remitting such funds to the
Servicer for deposit into the Collection Account. The Servicer shall require
the Subservicer to cause any collection agent of the Subservicer to send a
copy to the Servicer of each statement of monthly payments collected by or on
behalf of the Subservicer within five Business Days after the end of every
month, and the Servicer shall compare the information provided in such
reports with the deposits made by the Subservicer into the Collection Account
for the same period. The Servicer shall be deemed to have received payments
on the Home Loans on the date on which the Subservicer has received such
payments.
Section 4.08 Successor Servicers.
-------------------
In the event that the Servicer is terminated pursuant to Section 10.01
-------------
hereof, or resigns pursuant to Section 9.04 hereof or otherwise becomes
------------
unable to perform its obligations under this Agreement, the Trustee will
become the successor servicer or will appoint a successor servicer in
accordance with the provisions of Section 10.02 hereof; provided that any
-------------
successor servicer, excluding the Trustee, shall satisfy the requirements of
an Eligible Servicer and shall be approved by the Rating Agencies.
Section 4.09 Maintenance of Insurance.
------------------------
(a) The Servicer shall maintain or cause to be maintained with respect
to each Mortgaged Property securing an FHA Loan such insurance as is required
with respect thereto by Title I. The Servicer shall cause to be maintained
for each Foreclosure Property acquired by the Trust such types and amounts of
insurance coverage as the Servicer shall deem reasonable. The Servicer shall
cause to be maintained for each Mortgaged Property securing a Non-FHA Loan,
such fire and hazard insurance as the Servicer shall deem reasonable.
(b) Any amounts collected by the Servicer under any Insurance Policies,
shall be paid over or applied by the Servicer as follows:
(i) In the case of amounts received in respect of any Home
Loan:
(A) for the restoration or repair of the affected Property,
in which event such amounts shall be released to the Obligor in
accordance with the terms of the related Debt Instrument or
(B) to the extent not so used, in reduction of the Principal
Balance of the related Home Loan, in which event such amounts shall
be deposited into the Collection Account, unless the related
instruments require a different application, in which case such
amounts shall be applied in the manner provided therein; and
(ii) Subject to Section 4.12, in the case of amounts received
------------
in respect of any Foreclosure Property, for the restoration or repair of
such Foreclosure Property, unless the Servicer determines, consistent
with the servicing standard set forth in Section 4.01, that such
restoration or repair is not in the best economic interest of the Trust,
in which event such amounts shall be deposited into the Collection Account
as a Payment received from the operation of such Foreclosure Property.
Section 4.10 Inspections.
-----------
The Servicer shall inspect or cause to be inspected each Mortgaged
Property that secures any FHA Loan at such times and in such manner as are
consistent with Accepted Servicing Procedures.
Section 4.11 Reports to the Securities and Exchange Commission.
-------------------------------------------------
The Trustee shall, on behalf of the Trust, cause to be filed with the
Securities and Exchange Commission all monthly collateral reports on Forms 8-
K and 10-K required to be filed under the provisions of the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Securities and Exchange Commission thereunder. Upon the request of the
Trustee, each of the Servicer and the Transferor shall cooperate with the
Trustee in the preparation of any such report and shall provide to the
Trustee in a timely manner all such information or documentation as the
Trustee may reasonably request in connection with the performance of its
duties and obligations under this Section.
Section 4.12 Claim for FHA Insurance and Foreclosure.
---------------------------------------
(a) (x) If any Monthly Payment due under any FHA Loan is not paid when
the same becomes due and payable, or if the Obligor fails to perform any
other covenant or obligation under such FHA Loan and such failure continues
beyond any applicable grace period, the Servicer shall take such action
(consistent with Title I, including efforts to cure the default of such FHA
Loan pursuant to 24 C.F.R. Section 201.50) as it shall deem to be in the best
interest of the Trust. If the maturity of the related note has been
accelerated pursuant to the requirements under Title I following the
Servicer's efforts to cure the default of such FHA Loan (and such FHA Loan is
not required to be purchased pursuant to Section 2.06), and (i) if an FHA
------------
Insurance Coverage Insufficiency does not exist at the time, the Claims
Administrator, unless not in the best interests of the Trust, shall initiate,
on behalf of the Trust and the Contract of Insurance Holder, a claim under
the Contract of Insurance for reimbursement for loss on such FHA Loan
pursuant to Title I (see 24 C.F.R. Section 201.54), or (ii) if an FHA
Insurance Coverage Insufficiency exists at the time, the Servicer shall
determine within 90 days in accordance with Section 4.12(c) whether or not
---------------
to proceed against the Mortgaged Property securing such FHA Loan, if such FHA
Loan is a Mortgage Loan or against the Obligor, if such FHA Loan is
unsecured, and if thereafter an FHA Insurance Coverage Insufficiency does not
exist, the Claims Administrator may submit a claim under the Contract of
Insurance with respect to such FHA Loan if it has obtained the prior approval
of the Secretary of HUD pursuant to 24 C.F.R. Section 201.51; or (y) if any
monthly payment due under any Non-FHA Loan is not paid when the same is due
and payable, or if the Obligor fails to perform any other covenant or
obligation under such Non-FHA Loan and such failure continues beyond any
applicable grace period, the Servicer shall take such action as it shall deem
to be in the best interest of the Trust; including but not limited to
proceeding against the Property securing such Non-FHA Loan.
In the event that in accordance with clauses (a)(x)(ii) and (y) above
the Servicer determines not to proceed against the Mortgaged Property or
Obligor, as applicable, on or before the Determination Date following such
determination the Servicer shall determine in good faith in accordance with
customary servicing practices that all amounts which it expects to receive
with respect to such Home Loan have been received. If the Servicer makes such
a determination, it shall give notice to such effect pursuant to Section
-------
5.05.
----
(b) If the Claims Administrator initiates a claim for reimbursement for
loss on any FHA Loan under this Section, the Claims Administrator shall
comply with applicable provisions of Title I and diligently pursue such claim
and, in any event, shall initiate such claim no later than the last day
permitted under Title I (see 24 C.F.R. Section 201.54(b)). For purposes of
this Agreement, the term "initiate a claim for reimbursement" shall mean the
filing of the claim application pursuant to the requirements set forth in 24
C.F.R. Section 201.54, including the filing of all related assignments and
documents and materials required for file review. For the purposes of
such filing, the Claims Administrator shall request, and the Trustee within
5 calendar days of request shall deliver to the Claims Administrator, the
Debt Instrument and the related Mortgage for such FHA Loan and each other
item in the related File necessary to make such claim. Each Certificateholder
hereby consents to the assignment of such FHA Loan for the sole purpose of
initiating a claim under the Contract of Insurance for reimbursement with
respect to such FHA Loan. Pursuant to Section 4.12(h), the Contract of
Insurance Holder shall furnish the Claims ---------------
Administrator a power of attorney to file claims under the Contract of
Insurance. The Contract of Insurance Holder agrees to execute and deliver to
the Claims Administrator, within 5 Business Days of receipt from the Claims
Administrator, all documents, if any, necessary to initiate and file a claim
under the Contract of Insurance for such FHA Loan, which documents shall be
prepared by the Claims Administrator. If any claim to the FHA becomes a
Rejected Claim, upon receipt of the FHA's rejection notice by the Claims
Administrator directly from the FHA or from the Contract of Insurance Holder
pursuant to Section 4.12(e) and a determination by the Claims
---------------
Administrator that the rejection was not due to clerical error or lack of
insurance, then the Claims Administrator shall promptly notify the Contract
of Insurance Holder (if such notice has not already been given) and the
Trustee of the notice of a Rejected Claim.
If the FHA indicates in writing that the claim is a Rejected Claim due
to reasons other than a failure to service the related FHA Loan in accordance
with Title I after the Closing Date, Empire Funding shall repurchase the FHA
Loan on or before the Monthly Cut-Off Date next following the date of such
notice from the Claims Administrator to repurchase such FHA Loan, either
directly from FHA or from the Trust, for the Purchase Price. If FHA
indicates in writing that the claim is a Rejected Claim due to a failure to
service such FHA Loan in accordance with Title I after the Closing Date, the
Claims Administrator shall immediately notify the Servicer, the Contract of
Insurance Holder, the Trust and the Trustee of such determination, and the
Servicer shall on or before the later to occur of (i) the next succeeding
Monthly Cut-Off Date and (ii) ten Business Days from the date on which such
rejection notice is received by the Claims Administrator, purchase such FHA
Loan either directly from FHA or from the Trust, for the Purchase Price. In
the event that the FHA fails to indicate in writing why the claim is a
Rejected Claim, the Claims Administrator shall determine why the claim is a
Rejected Claim. If the Claims Administrator determines that the claim is a
Rejected Claim for reasons other than a servicing failure that occurred after
the Closing Date, Empire Funding shall be obligated to repurchase such FHA
Loan for the Purchase Price. If the Claims Administrator determines that the
claim is a Rejected Claim due to a servicing failure that occurred after the
Closing Date, the Servicer shall be obligated to repurchase such FHA Loan for
the Purchase Price. Notwithstanding any provisions herein to the contrary,
neither Empire Funding nor the Servicer shall be required to repurchase or
purchase, as applicable, any FHA Loan subject to a Rejected Claim as a result
of the depletion of the amount of the FHA Insurance Coverage Reserve Account
as shown in the Insurance Record.
(c) In accordance with the criteria for proceeding against the
Mortgaged Property set forth in Section 4.12(a), with respect to an FHA Loan
---------------
that is a Mortgage Loan that has been accelerated pursuant to the
requirements of Title I following the Servicer's efforts to cure the
default of the FHA Loan, and with respect to a Non-FHA Loan that is a
Mortgage Loan, unless otherwise prohibited by applicable law or court or
administrative order, the Servicer, on behalf of the Trust and the Trustee,
may, at any time, institute foreclosure proceedings to the extent permitted
by law, exercise any power of sale to the extent permitted by law, obtain a
deed in lieu of foreclosure, or otherwise acquire possession of or title to
the related Mortgaged Property, by operation of law or otherwise; provided,
--------
however, that the Servicer shall not acquire any personal property pursuant
-------
to this Section 4.12 unless either:
------------
(x) such personal property is incident to real property (within
the meaning of section 856(e)(1) of the Code) so acquired by the
Servicer; or
(y) the Trustee shall have received an Opinion of Counsel not
employed by the Servicer, Empire Funding or its affiliates to the effect
that the holding of such personal property by the Trust will not cause
the imposition of a tax on the Trust under the REMIC Provisions or cause
the Trust to fail to qualify as a REMIC at any time that any Certificate
are outstanding.
In accordance with the criteria for proceeding against the Mortgaged
Property set forth in Section 4.12(a), with respect to FHA Loans that are
---------------
Mortgage Loans and with respect to the Non-FHA Loans, the Servicer shall
institute foreclosure proceedings, repossess, exercise any power of sale to
the extent permitted by law, obtain a deed in lieu of foreclosure, or
otherwise acquire possession of or title to any Property, by operation of law
or otherwise only in the event that in the Servicer's reasonable judgement
such action is likely to result in a positive economic benefit to the Trust
by creating net liquidation proceeds (after reimbursement of all amounts owed
with respect to such Home Loan to the Servicer) and provided that, with
respect to any Property, prior to taking title thereto, the Servicer has
requested that the Trustee obtain, and the Trustee shall have obtained, an
environmental review to be performed on such Property by a company with
recognized expertise, the scope of which is limited to the review of public
records and documents for information regarding whether such Mortgaged
Property has on it, under it or is near, hazardous or toxic material or
waste. If such review reveals that such Mortgaged Property has on it, under
it or is near hazardous or toxic material or waste or reveals any other
environmental problem, the Trustee shall provide a copy of the related report
to the Servicer.
In connection with any foreclosure proceeding on an FHA Loan, the
Servicer shall comply with the requirements under Title I, shall follow such
practices and procedures in a manner which is consistent with the Servicer's
procedure for foreclosure with respect to similar FHA Title I loans held in
the Servicer's portfolio for its own account or, if there are no such loans,
FHA Title I loans serviced by the Servicer for others. If, in following such
foreclosure procedures, title to the Foreclosure Property is acquired, the
deed or certificate of sale shall be issued to the Trustee.
(d) With respect to any FHA Loan, the Trustee and the Contract of
Insurance Holder shall deposit in the Certificate Distribution Account on the
day of receipt all amounts received from the FHA or any other Person with
respect to such FHA Loans or any other assets of the Trust and shall transmit
by facsimile, or such other method requested by the Servicer or Claims
Administrator, to the Servicer and Claims Administrator on each such day the
letter of transmittal received from the FHA and any other documents with
respect to such receipt. The Trustee and the Contract of Insurance Holder
shall also promptly deliver to the Claims Administrator copies of any other
correspondence received from the FHA or sent to the FHA by the Trustee or the
Contract of Insurance Holder, as the case may be, including, but not limited
to, any correspondence regarding the balance of the FHA Insurance Coverage
Reserve Account, premiums due and claims rejected.
(e) If the FHA rejects an insurance claim, in whole or part, under the
Contract of Insurance after previously paying such insurance claim and the
FHA demands that the Contract of Insurance Holder repurchase such FHA Loan,
the Claims Administrator shall pursue such appeals with the FHA as are
reasonable. If the FHA continues to demand that the Contract of Insurance
Holder repurchase such FHA Loan after the Claims Administrator exhausts such
administrative appeals as are reasonable, then notwithstanding that Empire
Funding, the Servicer or any other person is required to repurchase such FHA
Loan under this Agreement, the Claims Administrator shall notify the Contract
of Insurance Holder of such fact and the Trustee shall repurchase such FHA
Loan from funds available in the Certificate Distribution Account. The
Claims Administrator shall, to the extent possible, direct the Trustee to
make all such repurchases of FHA Loans once a month and to repurchase any and
all such FHA Loans from the FHA in that portion of the calendar month after
each Distribution Date. To the extent allowed by FHA, Empire Funding may
repurchase directly from the FHA any FHA Loan for which an insurance claim
has been paid and later rejected by the FHA. If the FHA indicates in writing
in connection with its rejection or refusal to pay a claim that such
rejection or refusal is due to other than (i) a failure to service the FHA
Loan in accordance with Title I after the Closing Date or (ii) the amount in
the FHA Insurance Coverage Reserve Account is insufficient to pay such claim,
or if the FHA does not indicate in writing the reason for its rejection or
refusal, Empire Funding shall be liable to reimburse the Trust for any
amounts paid by the Trustee to the FHA in order to repurchase such FHA Loan.
Subject to Section 4.12(b), if the FHA indicates in writing, or it is agreed
---------------
by the Servicer, in connection with its rejection or refusal to pay a claim
that such rejection or refusal is due to a failure to service such Loan in
accordance with Title I after the Closing Date, the Servicer shall be liable
to reimburse the Trust or Empire Funding for any amounts paid by the Trust or
Empire Funding, as the case may be, to FHA in order to repurchase FHA Loans
for which the FHA has rejected an insurance claim as a result of a failure to
service such FHA Loan in accordance with Title I.
(f) (Reserved).
(g) The Claims Administrator shall be entitled to reimbursement of
expenses associated with the filing of any FHA Insurance claim from and to
the extent that such amounts are reimbursed by HUD.
(h) The Trustee shall furnish the Claims Administrator or the Servicer,
as applicable, within 5 days of request of the Claims Administrator or the
Servicer therefor any powers of attorney and other documents necessary and
appropriate to carry out its respective duties hereunder, including any
documents or powers of attorney necessary to foreclose or file a claim
with respect to any FHA Loan and to file claims with the FHA under the
Contract of Insurance. The forms of any such powers or documents shall be
appended to such requests. The Contract of Insurance Holder shall furnish
the Claims Administrator or the Servicer, as applicable, within 5 days of
request of the Claims Administrator or the Servicer therefor any powers of
attorney and other documents necessary and appropriate to carry out its
administrative duties pursuant to Section 4.12.
------------
(i) In the event the Trust acquires any Foreclosure Property, the
Trustee shall elect to treat such Foreclosure Property as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code, in accordance
with such rules as are then applicable; and the Servicer, pursuant to Section
------------
4.13, shall sell such Foreclosure Property in its entirety prior to the date
which is two years after its Acquisition Date, unless, in any such case,
either (i) the Servicer on behalf of the REMIC Pool has applied for and
received an extension of such two-year period pursuant to Code Sections
856(e)(3) and 860G(a)(8)(A) in which case the Servicer shall sell such
Foreclosure Property within the applicable extension period or (ii) the
Servicer shall have provided and the Trustee shall have received an
opinion of counsel not employed by the Servicer, the Depositor or either
of their affiliates to the effect that the holding of such Foreclosure
Property (subject to any conditions set forth in such Opinion) for an
additional specified period will not cause such Foreclosure Property
to fail to qualify as "foreclosure property" within the meaning of
Section 860G(a)(8) of the Code (determined without regard to the exception
applicable for purposes of Section 860D(a) of the Code) at any time that
any Certificate is Outstanding, in which event such two-year period shall
be extended by such additional specified period, subject to any conditions
set forth in such Opinion of Counsel.
Section 4.13 Title, Management and Disposition of Foreclosure
-------------------------------------
Property.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure (a "Foreclosure Property"), the
--------------------
deed or certificate of sale shall be taken in the name of the Trustee for the
benefit of the Certificateholders. The Servicer shall manage, conserve,
protect and operate each Foreclosure Property for the Trustee and the
Certificateholders solely for the purpose of its prudent and prompt
disposition and sale. The Servicer shall, either itself or through an agent
selected by the Servicer, manage, conserve, protect and operate the
Foreclosure Property in the same manner that it manages, conserves, protects
and operates other foreclosure property for its own account.
Subject to Section 4.12, the Servicer shall, consistent with the
------------
servicing standards set forth herein, foreclose upon or otherwise comparably
convert the ownership of properties securing such of the Home 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
realization upon defaulted Home Loans, the Servicer shall follow such
practices and procedures as it shall deem necessary or advisable, as shall be
normal and usual in accordance with Accepted Servicing Procedures and the
requirements of insurers under any insurance policy required to be maintained
hereunder with respect to the related Home Loan. The Servicer shall be
responsible for all costs and expenses incurred by it in any such
proceedings; provided, however, that such costs and expenses will be
-------- -------
recoverable as Servicing Advances by the Servicer as contemplated herein.
The Servicer shall not be required to make any Servicing Advance, to
foreclose upon any Mortgaged Property, or otherwise expend its own funds
toward the restoration of any Mortgaged Property that shall have suffered
damage from any cause of damage to a Mortgaged Property such that the
complete restoration of such property is not fully reimbursable by the hazard
insurance policies required to be maintained pursuant to this Agreement.,
unless it shall determine in its reasonable judgment, as evidenced by a
certificate of a Servicing Officer, that such foreclosure or restoration, as
the case may be, will increase the proceeds of liquidation of the related
Home Loan after reimbursement to itself for Servicing Advances. Any
Servicing Advances made with respect to a Home Loan shall be recoverable by
the Servicer only from recoveries on such Home Loan except to the extent such
Servicing Advance is deemed a Nonrecoverable Servicing Advance.
The Servicer may offer to sell to any Person any Foreclosure Property,
if and when the Servicer determines consistent with the Accepted Servicing
Procedures and that such a sale would be in the best interests of the Trust,
but shall, with respect to the FHA Loans, in any event, so offer to sell any
Foreclosure Property in accordance with the criteria set forth in Section
-------
4.12 and no later than the time determined by the Servicer to be sufficient
----
to result in the sale of such Foreclosure Property on or prior to the date
specified in Section 4.12(d). The Servicer shall give the Trustee not less
---------------
than five days' prior notice of its intention to sell any Foreclosure
Property, and shall accept the highest bid received from any Person for any
Foreclosure Property in an amount at least equal to the sum of:
(1) the Principal Balance of the related foreclosed Home Loan
plus the outstanding amount of any liens superior in priority, if any,
to the lien of the foreclosed Home Loan; and
(2) all unpaid interest accrued thereon at the related Home
Loan Interest Rate through the date of sale.
In the absence of any such bid, the Servicer shall accept the highest bid
received from any Person that is determined to be a fair price for such
Foreclosure Property by the Servicer, if the highest bidder is a Person other
than an Interested Person, or by an Independent appraiser retained by the
Servicer, if the highest bidder is an Interested Person. In the absence of
any bid determined to be fair as aforesaid, the Servicer shall offer the
affected Foreclosure Property for sale to any Person, other than an
Interested Person, in a commercially reasonable manner for a period of not
less than 10 or more than 30 days, and shall accept the highest cash bid
received therefor in excess of the highest bid previously submitted. If no
such bid is received, any Interested Person may resubmit its original bid,
and the Servicer shall accept the highest outstanding cash bid, regardless of
from whom received. No Interested Person shall be obligated to submit a bid
to purchase any Foreclosure Property, and notwithstanding anything to the
contrary herein, neither the Trustee, in its individual capacity, nor any of
its affiliates may bid for or purchase any Foreclosure Property pursuant
hereto.
In determining whether any bid constitutes a fair price for any
Foreclosure Property or to effectuate the payment of a claim under the
Contract of Insurance, the Servicer shall take into account, and any
appraiser or other expert in real estate matters shall be instructed to take
into account, as applicable, among other factors, the financial standing of
any tenant of the Foreclosure Property, the physical condition of the
Foreclosure Property, the state of the local and national economies and, with
respect to the FHA Loans which are Mortgage Loans, the Trust's obligation to
dispose of any Foreclosure Property within the time period specified in
Section 4.12(i).
---------------
Subject to the provisions of Section 4.12, the Servicer shall act on
------------
behalf of the Trustee in negotiating and taking any other action necessary or
appropriate in connection with the sale of any Foreclosure Property,
including the collection of all amounts payable in connection therewith. Any
sale of a Foreclosure Property shall be without recourse to the Trustee, the
Servicer or the Trust, and if consummated in accordance with the terms of
this Agreement, neither the Servicer nor the Trustee shall have any liability
to any Certificateholder with respect to the purchase price therefor accepted
by the Servicer or the Trustee.
Prior to acquiring any Foreclosure Property, the Servicer shall cause a
review to be performed, in accordance with Accepted Servicing Procedures, on
the related Mortgaged Property by a company such as Equifax, Inc. or
Toxicheck, and the scope of such review shall be limited to the review of
public records and documents for indications that such Mortgaged Property has
on it, under it or is near, hazardous or toxic material or waste. If such
review reveals that the Mortgaged Property has on it, under it or is near
hazardous or toxic material or waste or reveals any other environmental
problem, the Servicer shall provide a copy to the Trustee of the related
report with an attached certification of a Responsible Officer that based on
an analysis of all available information (including potential clean up costs
and liability claims) at the time it is the best judgment of such Responsible
Officer that such foreclosure shall increase Net Liquidation Proceeds to the
Trustee and the Trust shall take title to such Mortgaged Property. The
Trustee shall promptly forward such report and certification to the
Certificateholders.
Notwithstanding the foregoing, the Servicer will not manage, conserve,
protect and operate (or cause to be managed, conserved, protected and
operated) each Foreclosure Property for disposition and sale in a manner that
causes such Foreclosure Property to fail to qualify as "foreclosure property"
within the meaning of the REMIC Provisions (determined without regard to the
exception applicable for purposes of Section 860D(a) of the Code) or results
in the receipt by the REMIC of any "income from nonpermitted assets" within
the meaning of the REMIC Provisions or any "net income from foreclosure
property" subject to taxation under the REMIC Provisions.
The Servicer may contract with any independent contractor for the
operation and management of any Foreclosure Property, provided that:
(i) the terms and conditions of any such contract shall not be
inconsistent with this Agreement;
(ii) any such contract shall require, or shall be administered to
require, that the independent contractor pay all costs and expenses
incurred in connection with the operation and management of such
Foreclosure Property, remit all related revenues (net of such costs and
expenses) to the Servicer as soon as practicable, but in no event later
than thirty days following the receipt thereof by such independent
contractor;
(iii) none of the provisions of this Section 4.13 relating to any
------------
such contract or to actions taken through any such independent contractor
shall be deemed to relieve the Servicer of any of its duties and obligations
hereunder with respect to the operation and management of any such
Foreclosure Property; and
(iv) the Servicer shall be obligated with respect thereto to the
same extent as if it alone were performing all duties and obligations in
connection with the operation and management of such Foreclosure
Property.
The Servicer shall be entitled to enter into any agreement with any
Independent Contractor performing services for it related to its duties and
obligations hereunder for indemnification of the Servicer by such Independent
Contractor, and nothing in this Agreement shall be deemed to limit or modify
such indemnification. The Servicer shall not be liable for all fees owed by
it to any such Independent Contractor, and that any amounts so expended shall
be deemed Servicing Advances. Each liquidation of a Foreclosure Property
shall be carried by the Servicer at such price and upon such terms and
conditions as the Servicer shall deem necessary or advisable, as shall be
normal and usual in its several servicing activities, and the resulting
Liquidation Proceeds shall be distributed in accordance with Section 5.01
------------
hereof.
Section 4.14 Certain Tax Matters
-------------------
The Trustee shall maintain records as to investments and other assets of
the Trust sufficient to show compliance with the REMIC Provisions during each
taxable year of the Trust. Empire Funding shall maintain the information
necessary to prepare any Tax Returns, and any other federal, state or local
tax or information returns or reports that are required to be filed, or so
provided to Certificateholders, by the Trust and make such information
available as required by Section 11.12.
-------------
ARTICLE VI
ESTABLISHMENT OF ACCOUNTS
-------------------------
Section 5.01 Collection Account and Certificate Distribution Account.
-------------------------------------------------------
(a)(1) Establishment of Collection Account. The Servicer, for the
-----------------------------------
benefit of the Certificateholders, shall cause to be established and
maintained one or more Collection Accounts, which shall be separate Eligible
Accounts, which may be interest-bearing, entitled "Collection Account, First
Bank National Association, as Trustee, in trust for the Empire Funding Home
Loan Asset Backed Certificates, Series 1997-A". The Collection Account may
be maintained with the Trustee or any other depository institution which
satisfies the requirements set forth in the definition of Eligible Account.
The creation of any Collection Account other than one maintained with the
Trustee shall be evidenced by a letter agreement between the Servicer and the
depository institution acceptable to the Trustee. A copy of such letter
agreement shall be furnished to the Trustee and, upon request of any
Certificateholder, to such Certificateholder. Funds in the Collection
Account shall be invested in accordance with Section 5.03.
------------
The Collection Account shall be established, as of the Closing Date,
with the Trustee as an Eligible Account pursuant to the definition thereof.
The Collection Account may, upon written notice to the Trustee, be
transferred to a different depository institution so long as such transfer is
to an Eligible Account acceptable to the Trustee.
(2) Establishment of Certificate Distribution Account. No later than
-------------------------------------------------
the Closing Date, the Servicer, for the benefit of the Certificateholders,
shall cause to be established and maintained with the Trustee one or more
Certificate Distribution Accounts, which shall be separate Eligible Accounts,
which may be interest-bearing and which shall be entitled "Certificate
Distribution Account, First Bank National Association, as Trustee, in trust
for the Empire Funding Home Loan Asset Backed Certificates, Series 1997-A".
Funds in the Certificate Distribution Account shall be invested in accordance
with Section 5.03.
------------
(3) FHA Premium Account. No later than the Closing Date, the Servicer,
-------------------
for the benefit of the Certificateholders, shall cause to be established and
maintained with the Trustee in its trust capacity at its corporate trust
department a segregated trust account referred to herein as the "FHA Premium
Account" for the benefit of the Certificateholders. The Trustee shall at all
times maintain the FHA Premium Account as an Eligible Account and shall cause
such accounts to be designated as "FHA Premium Account, First Bank National
Association, as Trustee in trust for the Empire Funding Home Loan Asset
Backed Certificates, Series 1997-A". No later than the second Business Day
preceding each Distribution Date, all amounts on deposit in the Certificate
Distribution Account and Collection Account representing payments by Obligors
on Invoiced Loans in respect of premium on FHA Insurance shall be withdrawn
by the Trustee and deposited to the FHA Premium Account. Any and all moneys
transferred to the FHA Premium Account pursuant to this Section 5.01(a)(3)
------------------
shall be held by the Trustee in the FHA Premium Account subject to
disbursement and withdrawal as herein provided. Amounts deposited to an
FHA Premium Account shall be invested in accordance with Section 5.03.
------------
Amounts on deposit in an FHA Premium Account shall be withdrawn by the
Trustee, in the amounts required, for application as follows:
(i) to payment to the FHA of any premiums due on the Contract
of Insurance in respect of FHA Loans, in such amounts and on such dates
as directed by the Servicer or Empire Funding; the Trustee shall apply
all amounts on deposit in the related FHA Premium Account to payment to
the FHA of any premiums due under the Contract of Insurance as invoiced
by FHA and, if, in connection with an FHA Loan, the FHA Insurance with
respect to which shall not yet have been transferred to the Contract of
Insurance Holder, Empire Funding instructs the Trustee to pay FHA
insurance with respect to such FHA Loan to the related Contract of
Insurance Holder, the Trustee shall make such payment, and Empire
Funding and not the Trustee shall be liable in the event of the failure
of such funds to be applied to payment of the premium with respect to
such FHA Loan; and
(ii) on the Business Day preceding a Distribution Date that is
also the Termination Date, the Trustee shall withdraw from each FHA
Premium Account and deposit in the Certificate Distribution Account all
amounts then on deposit in the FHA Premium Account, whereupon the FHA
Premium Account shall terminate.
(b)(1) Deposits to Collection Account. The Servicer shall use its
------------------------------
best efforts to deposit or cause to be deposited (without duplication) within
two (2) Business Days, of receipt thereof in the Collection Account and
retain therein in trust for the benefit of the Certificateholders:
(i) all payments on account of principal on the Home Loans
collected after the Cut-Off Date;
(ii) all payments on account of interest on the Home Loans due
after the Cut-Off Date;
(iii) all Net Liquidation Proceeds pursuant to Section 4.02;
------------
(iv) all Insurance Proceeds;
(v) all Released Mortgaged Property Proceeds;
(vi) any amounts payable in connection with the repurchase of any
Home Loan and the amount of any Substitution Adjustment pursuant to
Sections 2.06, 3.06 and 4.12(b);
------------- ---- -------
(vii) any amount required to be deposited in the Collection
Account pursuant to the receipt of proceeds from any insurance policies
under Section 4.02 or the deposit of the Termination Price under Section
------------
12.01;
(viii) all payments by Obligors in respect of premiums on FHA
Insurance;
(ix) all FHA Insurance Payment Amounts; and
(x) interest and gains on funds held in the Collection Account.
The Servicer shall be entitled to retain and not deposit into the
Collection Account any amounts received with respect to a Home Loan that
constitute additional servicing compensation pursuant to Section 7.03, and
------------
such amounts retained by the Servicer during a Due Period shall be excluded
from the calculation of the Servicing Compensation that is distributable to
the Servicer from the Certificate Distribution Account on the next
Distribution Date following such Due Period. All Payments from Obligors
received on FHA Loans from or on behalf of an Obligor shall be allocated in
accordance with Title I.
(2) Deposits to Certificate Distribution Account. On the second
--------------------------------------------
Business Day prior to the Distribution Date, the Trustee (based on
information provided by the Servicer for such Distribution Date) shall
withdraw from the Collection Account the Available Collection Amount and
deposit such into the Certificate Distribution Account for such Distribution
Date.
(3) Withdrawals from Collection Account. The Trustee, at the direction
-----------------------------------
of the Servicer shall also make the following withdrawals from the Collection
Account, in no particular order of priority:
(i) to withdraw any amount not required to be deposited in the
Collection Account or deposited therein in error;
(ii) to withdraw the Servicer Reimbursement Amount;
(iii) to clear and terminate the Collection Account in
connection with the termination of this Agreement; and
(iv) make payments set forth in Section 9.01(e).
---------------
(c) Withdrawals from Certificate Distribution Account. To the extent
-------------------------------------------------
funds are available in the Certificate Distribution Account, the Trustee
(based on the information provided by the Servicer contained in the
Servicer's Monthly Remittance Report for such Distribution Date) shall make
withdrawals therefrom by 9:00 a.m. (New York City time) on each Distribution
Date, for application in the following order of priority:
(i) to distribute on such Distribution Date the following amounts
in the following order: (a) for deposit in the FHA Premium Account, an
amount equal to the FHA Premium Account Deposit for such Distribution
Date, (b) to the Servicer, an amount equal to (i) the Servicing
Compensation (net of any amounts retained prior to deposit into the
Collection Account pursuant to subsection (b)(1) above) and all unpaid
Servicing Compensation from prior Distribution Dates and (ii) all
Nonrecoverable Servicing Advances not previously reimbursed, (c) to the
Trustee, an amount equal to the Trustee Fee and all unpaid Trustee Fees
from prior Distribution Dates, and (d) to the Custodian, an amount equal
to the Custodian Fee, if any, and all unpaid Custodian Fees from prior
Distribution Dates; and
(ii) to deposit into the Certificate Distribution Account the
applicable portions of the Available Distribution Amount distributable
in respect of the Certificates calculated pursuant to 5.01(d) and (e)
below on such Distribution Date;
Notwithstanding that the Certificates have been paid in full, the
Trustee and the Servicer shall continue to maintain the Collection Account
and the Certificate Distribution Account hereunder until the Class Principal
Balance of each Class of Certificates has been reduced to zero.
(d) On each Distribution Date, the Trustee (based on the information
provided by the Servicer contained in the Servicer's Monthly Remittance
Report for such Distribution Date) shall distribute the Regular Distribution
Amount from the Certificate Distribution Account in the following order of
priority:
(i) to the holders of the Senior Certificates, pro rata, the
Senior Certificateholders Interest Distribution Amount for such
Distribution Date;
(ii) sequentially, to the holders of the Class M-1 and Class M-2
Certificates, in that order, their respective portions of the Mezzanine
Certificateholders' Interest Distribution Amount for such Distribution
Date;
(iii) to the holders of the Class B Certificates, the Class B
Certificateholders' Interest Distribution Amount for such Distribution
Date;
(iv) sequentially, to the holders of the Class A-1, Class A-2 and
Class A-3 Certificates, in that order, until the respective Class
Principal Balances thereof are reduced to zero, the amount necessary to
reduce the aggregate Class Principal Balance of the Senior Certificates
to the Senior Optimal Principal Balance for such Distribution Date,
provided, however, that on each Distribution Date occurring on or after
any reduction of the Class Principal Balances of the Mezzanine and Class
B Certificates to zero through the application of Allocable Loss
Amounts, amounts shall be distributed among the remaining Senior
Certificates pro rata in accordance with their outstanding Class
Principal Balances and not sequentially;
(v) sequentially, to the holders of the Class M-1 and the Class M-
2 Certificates in that order, the amount necessary to reduce the Class
Principal Balances thereof to the
Class M-1 Optimal Principal Balance and the Class M-2 Optimal Principal
Balance, respectively, for such Distribution Date;
(vi) to the holders of the Class B Certificates, the amount
necessary to reduce the Class Principal Balance thereof to the Class B
Optimal Principal Balance for such Distribution Date;
(vii) sequentially, to the Class M-1 Certificates, Class M-2
Certificates and the Class B Certificates, in that order, until their
respective Loss Reimbursement Deficiencies have been paid in full (in
the case of the Class M-1 and Class M-2 Certificates: first to the
reimbursement of Allocable Loss Amounts, until completely reimbursed,
and then to any accrued interest thereon); and
(viii) any remaining amount to the holders of the Class R
Certificates.
(e) On each Distribution Date, the Trustee (based on the information
provided by the Servicer contained in the Servicer's Monthly Remittance
Report for such Distribution Date) shall distribute the Excess Spread, if
any, in the following order of priority:
(i) in an amount equal to the Overcollateralization
Deficiency Amount, if any, as follows:
(A) sequentially, to the holders of the Class A-1, Class
A-2 and Class A-3 Certificates, in that order, until the
respective Class Principal Balances thereof are reduced to
zero, and until the aggregate of their Class Balances have
been reduced to the Senior Optimal Principal Balance for such
Distribution Date;
(B) sequentially, to the holders of the Class M-1 and
Class M-2 Certificates, in that order, until the respective
Class Principal Balances thereof have been reduced to the
Class M-1 Optimal Principal Balance and the Class M-2 Optimal
Principal Balance, respectively, for such Distribution Date;
and
(C) to the holders of the Class B Certificates, until
the Class Principal Balance thereof has been reduced to the
Class B Optimal Principal Balance for such Distribution Date;
and
(ii) sequentially, to the Class M-1 Certificates, the Class M-
2 Certificates and the Class B Certificates, in that order, until
their respective Loss Reimbursement Deficiencies, if any, have been
paid in full (in the case of the Class M-1 and Class M-2
Certificates: first to the reimbursement of Allocable Loss Amounts,
until completely reimbursed, and then to any accrued interest
thereon); and
(iii) any remaining amount to the holders of the Class R
Certificates.
Section 5.02 Distributions to Certificateholders
-----------------------------------
(a) All distributions made on each Class of Certificates (other than
the Class R Certificates) on each Distribution Date will be made on a pro
rata basis among the Certificateholders of record of such Class of
Certificates on the preceding Record Date based on the Percentage Interest
represented by their respective Certificates, without preference or priority
of any kind, and except as otherwise provided in the next succeeding
sentence, shall be made by wire transfer of immediately available funds to
the account of such Certificateholder, if such Certificateholder shall own of
record Certificates which have original denominations aggregating at least
$250,000 and shall have so notified the Trustee, and otherwise by check
mailed 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
location specified in the notice to Certificateholders of such final
distribution.
(b) All distributions made on the Class R Certificates on each
Distribution Date will be made on a pro rata basis among the holders of the
Class R Certificates of record on the preceding Record Date based on their
respective Residual Interests, without preference or priority of any kind,
and except as otherwise provided in the next succeeding sentence, shall be
made by wire transfer of immediately available funds to the account of each
such holder, if such holder shall own of record Class R Certificates having
an original Denomination aggregating at least a 50% undivided interest
thereof and shall have so notified the Trustee, and otherwise by check mailed
to the address of such Class R Certificateholder appearing in the Certificate
Register. The final distribution on each Class R Certificates will be made
in like manner, but only upon presentment and surrender of the Class R
Certificates at the location specified in the notice to holders of the Class
R Certificates of such final distribution. Any amount distributed to the
holders of the Class R Certificates on any Distribution Date shall not be
subject to any claim or interest of holders of the other Classes of
Certificates.
Section 5.03 Accounts; Trust Account Property.
--------------------------------
(a) Control of Accounts. The Trustee shall possess all right, title
-------------------
and interest in all funds on deposit from time to time in the Accounts (other
than the Certificate Distribution Account) and in all proceeds thereof
(including all income thereon) and all such funds, investments, proceeds and
income shall be part of the Trust Account Property and the Trust Estate. If,
at any time, any Account ceases to be an Eligible Account, the Trustee (or
the Servicer on its behalf) shall within 10 Business Days (or such longer
period, not to exceed 30 calendar days, as to which each Rating Agency may
consent) (i) establish a new Account as an Eligible Account, (ii) terminate
the ineligible Account, and (iii) transfer any cash and investments from such
ineligible Account to such new Account.
With respect to the Accounts (other than the Certificate Distribution
Account), the Trustee agrees, by its acceptance hereof, that each such
Account shall be subject to the sole and exclusive
custody and control of the Trustee for the benefit of the Certificateholders,
and the Trustee shall have sole signature and withdrawal authority with
respect thereto.
Subject to rights of the Trustee hereunder, the Trustee shall possess
all right, title and interest for the benefit of the Certificateholders in
all funds on deposit from time to time in the Certificate Distribution
Account and in all proceeds thereof (including all income thereon) and all
such funds, investments, proceeds and income shall be part of the Trust
Account Property and the Trust Estate. Subject to the rights of the Trustee,
the Trustee agrees, by its acceptance hereof, that the Certificate
Distribution Account shall be subject to the sole and exclusive custody and
control of the Trustee for the benefit of the Trust and the parties entitled
to distributions therefrom, including without limitation, the
Certificateholders, and the Trustee shall have sole signature and withdrawal
authority with respect to the Certificate Distribution Account.
(b)(1) Investment of Funds. So long as no Event of Default shall
-------------------
have occurred and be continuing, the funds held in any Account may be
invested (to the extent practicable and consistent with any requirements of
the Code) in Permitted Investments, as directed by the Transferor in writing
or by telephone or facsimile transmission confirmed in writing by the
Servicer. In any case, funds in any Account must be available for withdrawal
without penalty, and any Permitted Investments must mature or otherwise be
available for withdrawal, not later than the Business Day immediately
preceding the Distribution Date next following the date of such investment
and shall not be sold or disposed of prior to its maturity subject to Section
-------
5.03(b)(2) below. All interest and any other investment earnings on amounts
----------
or investments held in any Account shall be deposited into such Account
immediately upon receipt by the Trustee and may be withdrawn from the
Collection Account pursuant to Section 5.01. All Permitted Investments in
------------
which funds in any Account (other than the Certificate Distribution Account)
are invested must be held by or registered in the name of "First Bank
National Association, as Trustee, in trust for the Empire Funding Home Loan
REMIC Trust, Asset Backed Certificates, Series 1997-A".
(2) Insufficiency and Losses in Accounts. If any amounts are needed
------------------------------------
for disbursement from any Account held by or on behalf of the Trustee and
sufficient uninvested funds are not available to make such disbursement, the
Trustee shall cause to be sold or otherwise converted to cash a sufficient
amount of the investments in such Account. The Trustee shall not be liable
for any investment loss or other charge resulting therefrom, unless such loss
or charge is caused by the failure of the Trustee to perform in accordance
with this Section 5.03.
------------
If any losses are realized in connection with any investment in any
Account pursuant to this Agreement, then the Transferor shall deposit the
amount of such losses (to the extent not offset by income from other
investments in such Account) in such Account immediately upon the realization
of such loss. All interest and any other investment earnings on amounts held
in any Account shall be taxed to the Trust and for federal and state income
tax purposes the Trust shall be deemed to be the owner of each Account.
(c) The Trustee shall not in any way be held liable by reason of any
insufficiency in any Account held by the Trustee resulting from any
investment loss on any Permitted Investment included therein (except to the
extent that the Trustee is the obligor and has defaulted thereon).
(d) With respect to the Trust Account Property, the Trustee
acknowledges and agrees that:
(1) any Trust Account Property that is held in deposit accounts
shall be held solely in the Eligible Accounts; and each such Eligible
Account, subject to Section 5.03(e), shall be subject to the exclusive
---------------
custody and control of the Trustee, and the Trustee shall have sole signature
authority with respect thereto;
(2) any Trust Account Property that constitutes Physical Property
shall be delivered to the Trustee in accordance with paragraph (a) of
the definition of "Delivery" and shall be held, pending maturity or
disposition, solely by the Trustee or a financial intermediary (as such
term is defined in Section 8-313(4) of the UCC) acting solely for the
Trustee;
(3) any Trust Account Property that is a book-entry security held
through the Federal Reserve System pursuant to federal book-entry
regulations shall be delivered in accordance with paragraph (b) of the
definition of "Delivery" and shall be maintained by the Trustee, pending
maturity or disposition, through continued book-entry registration of
such Trust Account Property as described in such paragraph; and
(4) any Trust Account Property that is an "uncertificated
security" under Article VIII of the UCC and that is not governed by
clause (3) above shall be delivered to the Trustee in accordance with
paragraph (c) of the definition of "Delivery" and shall be maintained by
the Trustee, pending maturity or disposition, through continued
registration of the Trustee's (or its nominee's) ownership of such
security.
(e) The Servicer shall have the power, revocable by the Trustee, to
instruct the Trustee to make withdrawals and payments from the Accounts for
the purpose of permitting the Servicer to carry out its duties hereunder.
Section 5.04 Allocation of Losses.
--------------------
(a) In the event that Net Liquidation Proceeds, Insurance Proceeds or
Released Mortgaged Property Proceeds on a Liquidated Home Loan are less than
the related Principal Balance plus accrued interest thereon, or any Obligor
makes a partial payment of any Monthly Payment due on a Home Loan, such Net
Liquidation Proceeds, Insurance Proceeds, Released Mortgaged Property
Proceeds or partial payment shall be applied to payment of the related Debt
Instrument, first to interest accrued at the Home Loan Interest Rate and then
to principal.
(b) On any Distribution Date, any Allocable Loss Amounts shall be
applied to the reduction of the Class Principal Balances of the Class B
Certificates, the Class M-1 and Class M-2 Certificates in accordance with the
Allocable Loss Amount Priority.
Section 5.05 Statements.
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(a) No later than each Determination Date, the Servicer shall deliver
to the Trustee by facsimile, the receipt and legibility of which shall be
confirmed by telephone, and with hard copy thereof to be delivered no later
than one (1) Business Day after such Determination Date, the Servicer's
Monthly Remittance Report, setting forth the date of such Report (day, month
and year), the name of the Trust (i.e. "Empire Funding Home Loan REMIC Trust
1997-A"), the Series designation of the Certificates (i.e. "Series 1997-A"),
and the date of this Agreement, all in substantially the form set out in
Exhibit B. Furthermore, no later than each Determination Date, the Servicer
shall deliver to the Trustee a magnetic tape or computer disk providing such
information regarding the Servicer's activities in servicing the Home Loans
during the related Due Period as the Trustee may reasonably require.
(b) On each Distribution Date, Trustee shall distribute, based on
information provided by the Servicer, a monthly statement (the "Distribution
------------
Statement"), to the Depositor, the Certificateholders and the Rating
---------
Agencies, stating the date of original issuance of the Certificates (day,
month and year), the name of the Trust (i.e. "Empire Funding Home Loan REMIC
Trust 1997-A"), the series designation of the Certificates (i.e. "Series
------
1997-A"), the date of this Agreement and the following information:
------
(i) the Available Collection Amount and Available Distribution
Amount for the related Distribution Date;
(ii) the Class Principal Balance of each Class of Certificates
before and after giving effect to distributions made to the holders of
such Certificates on such Distribution Date, and the Pool Principal
Balance as of the first and last day of the related Due Period;
(iii) the Class Factor with respect to each Class of the
Certificates then outstanding;
(iv) the amount of principal, if any, and interest to be
distributed to each Class of Certificates on the related Distribution
Date;
(v) with respect to each Class of Certificates, the Optimal
Principal Balance thereof;
(vi) the Overcollateralization Deficiency Amount, and any amount to
be distributed to the Certificateholders or the holders of the Class R
Certificates on such Distribution Date;
(vii) the Servicing Compensation, the Trustee Fee and the
Custodian Fee, if any, for such Distribution Date;
(viii) the Overcollateralization Amount on such Distribution Date,
the Overcollateralization Target Amount as of such Distribution Date,
the Net Loan Losses incurred during the related Due Period, the
cumulative Net Loan Losses as of such Distribution Date, the Allocable
Loss Amount for such Distribution Date and the application of the
Allocable Loss Amount in accordance with the Allocable Loss Amount
Priority for such Distribution Date;
(ix) the weighted average maturity of the Home Loans and the
weighted average Home Loan Interest Rate of the Home Loans;
(x) certain performance information, including, without
limitation, delinquency and foreclosure information with respect to the
Home Loans and 60-Day Delinquency Amounts (as defined in "Six-Month
Rolling Delinquency Average"), as set forth in the Servicer's Monthly
Remittance Report;
(xi) the amount deposited into the Collection Account for the
preceding Due Period representing payments by the related Obligors on
Invoiced Loans in respect of premium on FHA Insurance;
(xii) the amount remaining in the FHA Insurance Coverage Reserve
Account with respect to all FHA Loans and the Related Series Loans, if
any, and the number and amount of claims for FHA Insurance filed and/or
paid pursuant to Section 4.12;
------------
(xiii) the number of and aggregate Principal Balance of all Home
Loans in foreclosure proceedings and the percent of the aggregate
Principal Balances of such Home Loans to the aggregate Principal
Balances of all Home Loans, all as of the close of business on the last
day of the related Due Period;
(xiv) the number of and the aggregate Principal Balance of the
Home Loans in bankruptcy proceedings and the percent of the aggregate
Principal Balances of such Home Loans to the aggregate Principal
Balances of all Home Loans, all as of the close of business on the last
day of the related Due Period;
(xv) the number of Foreclosure Properties, the aggregate Principal
Balance of the related Home Loans, the book value of such Foreclosure
Properties and the percent of the aggregate Principal Balances of such
Home Loans to the aggregate Principal Balances of all Home Loans, all as
of the close of business on the last day of the related Due Period;
(xvi) during the related Due Period, the number and aggregate
Principal Balance of Home Loans for each of the following: (A) that
became Defaulted Home Loans, (B) that became Liquidated Home Loans, (C)
that became Deleted Home Loans pursuant to
Section 3.06 as a result of such Deleted Home loans being Defective Home
------------
Loans, and (D) that became Deleted Home loans pursuant to Section 3.06 as a
------------
result of such Deleted Home Loans being Defaulted Home Loans or a Home Loan
in default or imminent default, including the foregoing amounts by loan type
(i.e., Combination Loans, or Debt Consolidation Loans);
(xvii) from the Closing Date through the most current Due Period,
the number and cumulative aggregate Principal Balance of Home Loans for
each of the following: (A) that became Defaulted Home Loans, (B) that
became Liquidated Home Loans, (C) that became Deleted Home Loans
pursuant to Section 3.06 as a result of such Deleted Home loans being
------------
Defective Home Loans, and (D) that became Deleted Home Loans pursuant to
Section 3.06 as a result of such Deleted Home Loans being Defaulted Home
------------
Loans or a Home Loan in default or imminent default, including the
foregoing amounts by loan type (i.e. Combination Loans or Debt
Consolidation Loans);
(xviii) the Principal Balance of each FHA Loan with respect to
which the Servicer has determined under the circumstances described in
the penultimate sentence of Section 4.12(a) that in good faith in
---------------
accordance with customary mortgage loan servicing practices that all
amounts which it expects to receive with respect to such FHA Loans
have been received;
(xix) the scheduled principal payments and the principal
prepayments received with respect to the Home Loans during the Due
Period; and
(xx) the number and aggregate Principal Balance of Home Loans that
were thirty, sixty or ninety days delinquent as of the close of business
on the last day of the related Due Period.
In the case of information furnished to Certificateholders (other than
the holder or holders of the Class R Certificates) pursuant to subclause
(b)(iv) above, the amounts shall be expressed as a dollar amount per
Certificate with a $1,000 Denomination.
All reports prepared by the Trustee of the withdrawals from and deposits
in the Collection Account will be based in whole or in part upon the
information provided to the Trustee by the Servicer, and the Trustee may
fully rely upon and shall have no liability with respect to such information
provided by the Servicer.
(c) Within a reasonable period of time after the end of each calendar
year, the Trustee shall prepare and distribute to each Person who at any time
during the calendar year was a Certificateholder, such information as is
reasonably necessary to provide to such Person a statement containing the
information set forth in subclause (b)(iv) above, aggregated for such
calendar year or applicable portion thereof during which such Person was a
Certificateholder.
(d) On or before each Distribution Date, the Servicer will determine,
based on the date of origination of the FHA Loans as set forth in the Home
Loan Schedule, the amount of FHA insurance premium, if any, due on or prior
to the next succeeding Distribution Date with respect to each FHA Loan. On
or before such Distribution Date, the Servicer will compare such amounts with
respect to each FHA Loan against amounts invoiced by FHA with respect to the
Contract of Insurance as due on or prior to such next succeeding Distribution
Date and report all discrepancies to the Trustee.
(e) On each Distribution Date, the Trustee shall forward to the holder
or holders of the Class R Certificates a copy of the Distribution Statement
in respect of such Distribution Date and a statement setting forth the
amounts actually distributed to such holders of the Class R Certificates on
such Distribution Date, together with such other information as the Trustee
deems necessary or appropriate.
(f) Within a reasonable period of time after the end of each calendar
year, the Trustee shall prepare and distribute to each Person who at any time
during the calendar year was a holder of a Class R Certificate, if requested
in writing by such Person, such information as is reasonably necessary to
provide to such Person a statement containing the information provided
pursuant to the previous paragraph aggregated for such calendar year or
applicable portion thereof during which such Person was a holder of a Class R
Certificate
(g) The Trustee shall forward to each Certificateholder and the holder
of a Class R Certificate, during the term of this Agreement, such periodic,
special, or other reports, including information tax returns or reports
required with respect to the Certificates and the Class R Certificates,
including Internal Revenue Service Forms 1099 and (if instructed in writing
by the Depositor on the basis of the advice of legal counsel) Form 1066,
Schedule Q and other similar reports that are required to be filed by the
Trustee or its agent and the holder of a Class R Certificate, whether or not
provided for herein, as shall be necessary, reasonable, or appropriate with
respect to the Certificateholders or the holder of Class R Certificates, or
otherwise with respect to the purposes of this Agreement, all such reports or
information to be provided by and in accordance with such applicable
instructions and directions as the Certificateholders or the holder of Class
R Certificates may reasonably require.
(h) Reports and computer tapes furnished by the Servicer pursuant to
this Agreement shall be deemed confidential and of a proprietary nature, and
shall not be copied or distributed except in connection with the purposes and
requirements of this Agreement. No Person entitled to receive copies of such
reports or tapes shall use the information therein for the purpose of
soliciting the customers of the Depositor or the Servicer or for any other
purpose except as set forth in this Agreement.
Section 5.06 Specification of Certain Tax Matters.
------------------------------------
The Trustee shall comply with all requirements of the Code, and
applicable state and local law, with respect to the withholding from any
distributions made to any Certificateholder of any
applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith.
ARTICLE VI
THE CERTIFICATES
----------------
Section 6.01 The Certificates.
----------------
(a) Each Senior Certificate shall be substantially in the form of
Exhibit D hereto, each Mezzanine Certificate shall be substantially in the
form of Exhibit E hereto, each Class B Certificate shall be substantially in
the form of Exhibit F hereto and each Class R Certificate shall be
substantially in the form of Exhibit G hereto, in each case with such
appropriate insertions and substitutions as are required or permitted
hereunder, and shall, on original issue, be executed on behalf of the Trust
by manual or facsimile signature of a Responsible Officer of the Trustee
having such authority under the Trustee's seal imprinted or otherwise affixed
therein and attested on behalf of the Trustee by the manual or facsimile
signature of any other Responsible Officer of the Trustee. The maximum and
initial Class Principal Balance of each Class of Certificates authorized to
be issued hereunder shall be equal to the Original Class Principal Balance of
such Class of Certificates, and each Class of Certificates shall bear
interest at the applicable Certificate Interest Rate. The Certificates
(other than the Class R Certificates) shall be issued in minimum
denominations of $25,000 and integral multiples of $1,000 in excess thereof
(except that one Certificate may be issued in an amount that is not an
integral multiple of $1,000). One Class of residual certificates is
authorized to be issued hereunder, designated as the "Class R Certificates."
The Class R Certificates shall be issued in minimum denominations
representing a one twentieth (i.e., 5%) Residual Interest. No Certificate
----
shall be entitled to any benefit under this Agreement, or be valid for any
purpose, unless there appears on such Certificate a execution by the Trustee
by manual or facsimile signature, and such signature upon any Certificate
shall be conclusive evidence, and the only evidence, that such Certificate
has been duly executed and delivered hereunder. Each Certificate shall be
dated the date of its signature. Certificates of each Class shall be
numbered consecutively beginning with 0001 and each number shall be preceded
by an "A" for Class A Certificates, an "M" for Class M Certificates, an "B"
for Class B Certificates, and an "R" for Class R Certificates. The Trustee
shall cause to be executed and delivered to or upon the order of the
Depositor, in exchange for the Home Loans and the other property of the
Trust, simultaneously with the sale, assignment and transfer to the Trustee
of the Home Loans and the other property of the Trust, Certificates duly
executed by the Trustee evidencing the entire ownership of the Trust Estate.
(b) Any Certificate as to which the Trustee has made the final
distribution thereon shall be deemed cancelled and shall no longer be
Outstanding for any purpose of this Agreement, whether or not such
Certificate is ever returned to the Trustee.
Section 6.02 Registration of Transfer and Exchange of Certificates.
-----------------------------------------------------
(a) The Trustee shall keep or cause to be kept at an office or agency
in the city where the Corporate Trust Office is located, a Certificate
Register for each Class of Certificates in which, subject to such reasonable
regulations as it may prescribe, the Trustee shall provide for
the registration of Certificates of such Class and of transfers and exchanges
of such Certificates as herein provided. The Trustee shall also designate
and cause to be kept in the City of New York an office at and through which
Certificates may be delivered to and received from the Trustee for purposes
of transfers and exchanges as herein provided. The Trustee shall initially
serve as Certificate Registrar for the purpose of registering Certificates as
herein provided. The Trustee may appoint, by a written instrument delivered
to the Servicer, any other bank or trust company to act as Certificate
Registrar under such conditions as the Servicer may prescribe. If the
Trustee shall at any time not be the Certificate Registrar, the Trustee shall
have and maintain the right to inspect the Certificate Register or to obtain
a copy thereof at all reasonable times, and to rely conclusively upon a
certificate of the Certificate Registrar as to the information set forth in
the Certificate Register.
(b) (1) No transfer of a Class R Certificate shall be made unless such
transfer is exempt from the registration requirements of the Securities Act
of 1933, as amended, and any applicable state securities laws or is made in
accordance with said Act and laws. In the event of any such transfer, (i)
unless such transfer is made in reliance upon Rule 144A under the 1933 Act,
the Trustee or the Depositor may require a written Opinion of Counsel (which
may be in-house counsel) acceptable to and in form and substance reasonably
satisfactory to the Trustee and the Depositor that such transfer may be made
pursuant to an exemption, describing the applicable exemption and the basis
therefor, from said Act and laws or is being made pursuant to said Act and
laws, which Opinion of Counsel shall not be an expense of the Trustee or the
Depositor and (ii) the Trustee shall require the transferee to execute an
investment letter acceptable to and in form and substance reasonably
satisfactory to the Depositor and the Trustee certifying to the Depositor and
the Trustee the facts surrounding such transfer, which investment letter
shall not be an expense of the Trustee or the Depositor. The Holder of a
Class R Certificate 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.
(2) 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 Book-Entry Certificates may not be
transferred by the Trustee except to another Depository; (ii) the Depository
shall maintain book-entry records with respect to the Certificateholders 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 Certificateholders 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 Certificateholders; and (vi) the Trustee may rely and
shall be fully protected in relying upon information furnished by the
Depository with respect to its Depository Participants and furnished by the
Depository Participants with respect to indirect participating
firms and persons shown on the books of such indirect participating firms as
direct or indirect Certificateholders.
All transfers by Certificateholders of Book-Entry Certificates
shall be made in accordance with the procedures established by the Depository
Participant or brokerage firm representing such Certificateholder. Each
Depository Participant shall only transfer Book-Entry Certificates of
Certificateholders 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, Certificateholders representing at least 51% of the Voting Rights
evidenced by the Certificates 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
Certificateholders, the Trustee shall notify all Certificateholders, through
the Depository, of the occurrence of any such event and of the availability
of definitive, fully-registered Certificates (the "Definitive Certificates")
to Certificateholders requesting the same. Upon surrender to the Trustee of
such Book-Entry Certificates by the Depository, accompanied by the
instructions from the Depository for registration, the Trustee shall issue
the Definitive Certificates. None of the Transferor, the Servicer, the
Depositor or 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. 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.
Neither the Trustee nor the Certificate Registrar shall have any
responsibility to monitor or restrict the transfer of beneficial ownership in
any Certificate an interest in which is transferable through the facilities
of the Depository.
(3) No Transfer of a Mezzanine Certificate, Class B Certificate or
Class R Certificate shall be made unless the Trustee shall have received
either (i) a representation letter from the transferee of such Certificate
acceptable to and in form and substance satisfactory to the Trustee, to the
effect that such transferee is not an employee benefit plan or arrangement
subject to Section 406 of ERISA or a plan 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) 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
PTCE 95-60 or (iii) in the case of any such Class R 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 or the Trust, addressed to the Trustee, to
the effect that the purchase or holding of such Class R Certificate will not
result in the assets of the Trust being deemed to be "plan assets" and
subject to the prohibited transaction provisions of ERISA and the Code
and will not subject the Trustee to any obligation in addition to those
expressly undertaken in this Agreement or to any liability.
(c) Subject to subsection (b) of this Section, upon surrender for
registration of transfer of a Certificate of any Class at the office or
agency of the Trustee maintained for such purpose pursuant to Section
-------
6.02(a), the Trustee shall execute, authenticate and deliver, in the name of
-------
the designated transferee or transferees, one or more new Certificates of the
same Class in authorized denominations of the same Percentage Interest.
(d) At the option of Certificateholders, Certificates of any Class may
be exchanged for other Certificates of the same Class and aggregate
Percentage Interests, upon surrender of the Certificates to be exchanged at
any such office or agency. 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 transfer or exchange
shall be duly endorsed by, or 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.
(e) No service charge shall be made for any transfer or exchange of
Certificates, but the Trustee may require 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.
(f) All Certificates surrendered for transfer, exchange or payment
shall be disposed of by the Certificate Registrar in accordance with its
standard procedures.
Section 6.03 Mutilated, Destroyed, Lost or Stolen Certificates. If
-------------------------------------------------
(a) any mutilated Certificate is surrendered to the Certificate Registrar or
the Trustee, or the Certificate Registrar, the Trustee and the Depositor
receive evidence to their satisfaction of the destruction, loss or theft of
any Certificate, and (b) there is delivered to the Certificate Registrar, the
Trustee, the Transferor and the Depositor such security or indemnity as may
be required by them to save each of them harmless (which in the case of a
Certificateholder that is an institutional investor with a minimum net worth
of $250,000,000, will be deemed to be satisfied by a written agreement of
indemnity from such Certificateholder), then, in the absence of notice to the
Certificate Registrar or the Trustee that such Certificate has been acquired
by a bona fide purchaser, the Trustee shall execute on behalf of the Trust
and the Trustee shall countersign and deliver, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Certificate, a new Certificate
of the same Class and Percentage Interest, as such mutilated, destroyed,
lost or stolen Certificate, in each case bearing a number not borne by any
then Outstanding Certificate of any Class. Upon the issuance of any new
Certificate under this Section 6.03, the
------------
Trustee may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Certificate Registrar)
connected therewith. Any Certificate issued pursuant to this Section 6.03
------------
shall constitute complete and indefeasible evidence of the same interest in
the Trust, and shall be entitled to the same benefits under this Agreement,
as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.
Section 6.04 Persons Deemed Owners. Prior to due presentation of a
---------------------
Certificate for registration of transfer, the Trustee, the Certificate
Registrar and any agent of the Trustee or the Certificate Registrar may treat
the Person in whose name any Certificate is registered (i) on any Record Date
for purposes of making distributions on the following Distribution Date,
whether or not any distribution required to be made on such Certificate shall
have been made when scheduled, and (ii) on any date for any other purpose, as
the owner of such Certificate, and neither the Trustee, the Certificate
Registrar nor any agent of the Trustee or the Certificate Registrar shall be
affected by notice to the contrary, except, with respect to a Class R
Certificate, for notice by the Servicer pursuant to Section 6.06 that the
------------
record holder is not a Permitted Transferee, and in such case the provisions
of Section 6.06 shall apply.
------------
Section 6.05 Trustee to Make Payments From Trust Only. All
----------------------------------------
distributions to be made by the Trustee in respect of the Certificates or
under this Agreement shall be made only from the Trust Estate. Each
Certificateholder, by its acceptance of a Certificate, agrees that it will
look solely to the Trust Estate to the extent available for distribution to
it as herein provided and that the Trustee is not personally liable to it for
any amount distributable in respect of any Certificate or for any other
liability in respect of any Certificate. This Section is intended solely to
limit the liability of the Trustee and shall have no effect on the
obligations of the Depositor, Empire Funding or the Servicer under this
Agreement. This Section 6.05 does not limit the liability of the Trustee set
------------
forth elsewhere in this Agreement for violations of its representations,
warranties and covenants contained herein.
Section 6.06 Restrictions on Transfer. Each Person who has or who
------------------------
acquires any Ownership Interest in a Class R Certificate shall be deemed by
the acceptance or acquisition of such Ownership Interest to have agreed to be
bound by the following provisions and to have irrevocably appointed the
Trustee or its designee as its attorney-in-fact to direct under clause (iv)
below the delivery of payments to a Person other than such Person and to
negotiate the terms of any mandatory sale under clause (v) below and to
execute all instruments of transfer and to do all other things necessary in
connection with any such sale, and the rights of each Person acquiring any
Ownership Interest in a Class R Certificate are expressly subject to the
following provisions:
(i) Only a Permitted Transferee may hold or acquire any
Ownership Interest in a Class R Certificate. Each Person holding or
acquiring any Ownership Interest in a Class R Certificate shall promptly
notify the Trustee and the Servicer of any change or impending change in
its status as a Permitted Transferee.
(ii) In connection with any proposed Transfer of any Ownership
Interest in a Class R Certificate, the Trustee shall, as a condition to
such consent, require delivery to the Trustee of a properly completed,
sworn, executed and acknowledged affidavit from the Transferee (the
"Transfer Affidavit") in the form attached hereto as Exhibit H and from
the transferor (the "Transferor Representation"), in the form attached
hereto as Exhibit I.
(iii) Notwithstanding the delivery of a Transfer Affidavit by a
proposed Transferee under clause (ii) above, if the Responsible Officer
or Responsible Officers of the Trustee has or have actual knowledge that
the proposed Transferee is not a Permitted Transferee, the Trustee shall
not register and, if the Trustee is not the Certificate Registrar, shall
direct to the Certificate Registrar not to register a Class R
Certificate in the name of the proposed Transferee, no Transfer of an
Ownership Interest in the Residual Interest to such proposed Transferee
shall be effected and the Trustee, and Certificate Registrar, shall have
no liability for failing to effect the proposed registration.
(iv) Any attempted or purported Transfer of any Ownership
Interest in a Class R Certificate in violation of the provisions of this
Section 6.06 shall be absolutely null and void and shall vest no rights
------------
in the purported Transferee. If any purported Transferee shall, in
violation of the provisions of this Section 6.06, become a Holder of a
Class R ------------
Certificate, then the prior Holder of such Class R Certificate shall,
upon discovery that the registration of Transfer of such Class R
Certificate was not in fact permitted by this Section 6.06, notify the
Trustee and the ------------
Trustee, upon receipt of such notice and upon verification of the facts
set forth in such notice or upon discovery by other means that the
registration of Transfer of such Class R Certificate was not in fact
permitted by this Section 6.06, shall notify the Servicer and the
Certificate Registrar of such ------------ improper Transfer (such
notice to be accompanied by an Opinion of Counsel to the effect that
such Transfer was improper and the retroactive restoration of the rights
of the last preceding Permitted Transferee as described in this
clause (iv) shall not be invalid, illegal or unenforceable) and, subject
to clause (v) below, shall make payments due on such Class R Certificate
to the last preceding Holder that is a Permitted Transferee (as described
in such written notice) and the last Holder that is a Permitted Transferee
shall be restored to all rights as Holder thereof retroactive to the date
of registration of Transfer of such Class R Certificate. The Trustee
shall be entitled, but shall not be obligated, to recover from any Holder
of a Class R Certificate that was in fact not a Permitted Transferee at
the time it became a Holder all payments made on such Class R Certificate.
Any such payments so recovered by the Trustee shall be paid and delivered
by the Trustee to the last preceding Holder that is a Permitted
Transferee who was a Holder of such Class R Certificate.
(v) If any Person that is not a Permitted Transferee acquires
any Ownership Interest in a Class R Certificate in violation of the
restrictions in this Section 6.06, and (A) to the extent that the
------------ retroactive restoration of the rights
of the last preceding Holder that is a Permitted Transferee as
described in clause (iv) above shall be invalid, illegal or
unenforceable or (B) if the Trustee is unable within a reasonable period
to obtain the Opinion of Counsel required by clause (iv) above then the
Trustee shall have the right, without notice to the Holder of such
Class R Certificate or any other Person having an Ownership Interest
therein, to sell such Class R Certificate to a purchaser selected by the
Trustee on such terms as the Trustee may choose. The proceeds of such
sale, net of commissions, expenses and taxes due, if any, will be
remitted to the Holder of such Class R Certificate by the Trustee, except
that in the event that the Trustee determines that the Holder of such
Class R Certificate may be liable for any amount due under this Section
6.06 or any other provisions of this ------------ Agreement,
the Trustee may withhold a corresponding amount from such remittance
security for such claim. The terms and conditions of any sale under
this clause (v) shall be determined in the sole discretion of the
Trustee, and it shall not be liable to any Person having an
Ownership Interest in a Class R Certificate as a result of its
exercise of such discretion.
(vi) The Trustee shall make available, upon receipt of written
requests, all information necessary to compute any tax imposed (A) as a
result of the Transfer of an Ownership Interest in Class R Certificates
to any Person who is not a Permitted Transferee, and (B) as a result of
any regulated investment company, real estate investment trust, common
trust fund, partnership, trust, estate or organizations described in
Code section 1381 that holds an Ownership Interest in a Class R
Certificate and having as among its record holders at any time any
Person who is not a Permitted Transferee. Reasonable compensation for
providing such information may be charged by the Trustee. The
information furnished must be sufficient to compute the present value of
the anticipated excess inclusions as required by Treasury Department
regulations. The information must be furnished to the requesting party
or such later time period as allowed by Treasury Department regulations
or the Internal Revenue Service.
(vii) No undivided interest of the Residual Interest may be
transferred to any Person unless the entire interest and rights relating
to such undivided interest in the Residual Interest under this Agreement
are transferred to such Person.
(viii) The provisions of this Section 6.06 set forth prior to
------------
this clause (viii) may be eliminated upon execution by the Trustee of
a certificate stating that the Trustee has received an Opinion of Counsel,
in form and substance satisfactory to the Trustee, to the effect that
the absence of such provisions will not cause the REMIC Pool to cease to
qualify as a REMIC and will not create a risk that (A) the Trust or the
REMIC Pool may be subject to an entity-level tax caused by the Transfer of
any Ownership Interest in a Class R Certificate to a Person which is
not a Permitted Transferee or (B) a Holder of a Senior Certificate,
Mezzanine Certificate, Class B Certificate or another Person will be
subject to a REMIC-related tax caused by the Transfer of any Ownership
Interest in a Class R Certificate to a Person which is not a Permitted
Transferee.
ARTICLE VII
GENERAL SERVICING PROCEDURE
---------------------------
Section 7.01 Due-On-Sale; Due-on-Encumbrance.
-------------------------------
(a) If any Home Loan contains a provision, in the nature of a "due-on-
sale" clause, which by its terms:
(i) provides that such Home Loan shall (or may at the
Obligee's option) become due and payable upon the sale or other transfer
of an interest in the related Property; or
(ii) provides that such Home Loan may not be assumed without
the consent of the related Obligee in connection with any such sale or
other transfer, then, for so long as such Home Loan is included in the
Trust, the Servicer, on behalf of the Trustee, shall exercise any right
the Trust or the Trustee may have as the Obligee of record with respect
to such Home Loan (x) to accelerate the payments thereon, or (y) to
withhold its consent to any such sale or other transfer, in a manner
consistent with Accepted Servicing Procedures.
(b) If any Home Loan contains a provision, in the nature of a "due-on-
encumbrance" clause, which by its terms:
(i) provides that such Home Loan shall (or may at the
Obligee's option) become due and payable upon the creation of any lien
or other encumbrance on the related Property; or
(ii) requires the consent of the related Obligee to the
creation of any such lien or other encumbrance on the related Property,
then, for so long as such Home Loan is included in the Trust, the
Servicer, on behalf of the Trust or the Trustee, shall exercise any
right the Trustee may have as the Obligee of record with respect to
such Home Loan (x) to accelerae the payments thereon, or (y) to
withhold its consent to the creation of any such lien or other
encumbrance, in a manner consistent with Accepted Servicing Standards.
(c) Nothing in this Section 7.01 shall constitute a waiver of the
------------
Trustee's right to receive notice of any assumption of a Home Loan, any
sale or other transfer of the related Mortgaged Property or the creation
of any lien or other encumbrance with respect to such Mortgaged Property.
Section 7.02 Release of Home Loan Files.
--------------------------
(a) If with respect to any Home Loan:
(i) the outstanding Principal Balance of such Home Loan plus
all interest accrued thereon shall have been paid;
(ii) the Servicer shall have received, in escrow, payment in
full of such Home Loan in a manner customary for such purposes;
(iii) such Home Loan has become a Defective Loan and has been
repurchased or a Qualified Substitute Home Loan has been conveyed to the
Trust pursuant to Section 3.06;
------------
(iv) such Home Loan or the related Foreclosure Property has
been sold in connection with the termination of the Trust pursuant to
Section 12.01;
-------------
(v) the FHA has paid a claim with respect to such Home Loan
that is an FHA Loan under the Contract of Insurance; or
(vi) the related Foreclosure Property has been sold pursuant
to Section 4.13.
------------
In each such case, the Servicer shall deliver a certificate to the effect
that the Servicer has complied with all of its obligations under this
Agreement with respect to such Home Loan and requesting that the Trustee
release to the Servicer the related Home Loan File, then the Trustee shall,
within five Business Days or such shorter period as may be required by
applicable law, release, or cause the Custodian to release (unless such Home
Loan File has previously been released), the related Home Loan File to the
Servicer and execute and deliver such instruments of transfer or assignment,
in each case without recourse, as shall be necessary to vest ownership of
such Home Loan in the Servicer or such other Person as may be specified in
such certificate, the forms of any such instrument to be appended to such
certificate.
(b) From time to time and as appropriate for the servicing or
foreclosure of any Home Loan or to effectuate the payment of a claim under
the Contract of Insurance, the Trustee shall, upon request of the Servicer,
release the related Home Loan File (or any requested portion thereof) to the
Servicer. Such receipt shall obligate the Servicer, to return the Home Loan
File (or such portion thereof) to the Trustee when the need therefor by the
Servicer, no longer exists unless any of the conditions specified in
subsection (a) above, is satisfied prior thereto. The Trustee shall release
such receipt to the Servicer (i) upon the Servicer's return of the Servicer's
Home Loan File (or such portion thereof) to the Trustee or (ii) if any of the
conditions specified in subsection (a) has been satisfied, and the Servicer
has not yet returned the Servicer's Home Loan File (or such portion thereof)
to the Trustee, upon receipt of a certificate certifying that any of such
condition has been satisfied.
Section 7.03 Servicing Compensation.
----------------------
As compensation for its services hereunder, the Servicer shall be
entitled to receive from the Collection Account, the Servicing Fee out of
which the Servicer shall pay any servicing fees owed or payable to any
Subservicer. Additional servicing compensation in the form of assumption
fees, modification fees, and other administrative fees, insufficient funds
charges, amounts remitted pursuant to Section 7.01 and late payment charges
------------
shall be part of the Servicing Compensation payable to the Servicer hereunder
and shall be paid either by the Servicer retaining such additional servicing
compensation prior to deposit in the Collection Account pursuant to
Section 5.01(b)(1) or if deposited into the Collection Account as part of the
------------------
Servicing Compensation withdrawn from the Certificate Distribution Account
pursuant to Section 5.01(c)(i).
------------------
The Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder and shall not be entitled
to reimbursement therefor except as specifically provided for herein. The
Transferor also agrees to pay (i) all reasonable costs and expenses incurred
by any successor servicer or the Trustee in replacing the Servicer in the
event of a default by the Servicer in the performance of its duties under the
terms and conditions of this Agreement, and (ii) the annual Rating Agency
monitoring fees.
Section 7.04 Statement as to Compliance and Financial Statements.
---------------------------------------------------
The Servicer will deliver to the Trustee, the Depositor and the
Transferor not later than 90 days following the end of each fiscal year
(beginning in 1998) of the Servicer, an Officers' Certificate stating, as to
each signatory thereof, that (i) a review of the activities of the Servicer
during the preceding year and of performance 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 Servicer has fulfilled all of 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 officers and the nature and status thereof and what
action the Servicer proposes to take with respect thereto.
Contemporaneously with the submission of the Officers' Certificate
required by the preceding paragraph, the Servicer shall deliver to the
Trustee a copy of its annual audited financial statements prepared in the
ordinary course of business. The Servicer shall, upon the request of the
Depositor, deliver to such party any unaudited quarterly financial statements
of the Servicer.
The Servicer agrees to make available on a reasonable basis to the
Depositor a knowledgeable officer of the Servicer for the purpose of
answering reasonable questions respecting recent developments affecting the
Servicer or the financial statements of the Servicer and to permit the
Depositor on reasonable notice to inspect the Servicer's servicing facilities
during normal business hours for the purpose of satisfying the Depositor that
the Servicer has the ability to service the Home Loans in accordance with
this Agreement.
The Servicer shall also furnish and certify to the requesting party such
other information as to (i) its organization, activities and personnel
relating to the performance of the obligations of the Servicer hereunder,
(ii) its financial condition, (iii) the Home Loans and (iv) the performance
of the obligations of any Subservicer under the related Subservicing
Agreement, in each case as the Trustee or the Depositor may reasonably
request from time to time.
Section 7.05 Independent Public Accountants' Servicing Report.
------------------------------------------------
Not later than 90 days following the end of each fiscal year (beginning
with fiscal year 1997) of the Servicer, the Servicer at its expense shall
cause any of Xxxxxx Xxxxxxxx & Co., Coopers & Xxxxxxx, Deloitte & Touche,
Ernst & Young, KPMG Peat Marwick and Price Waterhouse & Co. or such other
nationally recognized firm of Independent Certified Public Accountants (which
may also render other services to the Servicer) 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 Home Loans under this
Agreement or of mortgage loans under pooling and servicing agreements
(including the Home Loans and this Agreement) substantially similar to one
another (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 FHLMC, such firm confirms that 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
Attestation Program for Mortgages serviced for FHLMC requires it to report,
each of which errors and omissions shall be specified in such statement. In
rendering such statement, such firm may rely, as to matters relating to
direct servicing of mortgage loans by Subservicers, upon comparable
statements for examinations conducted substantially in compliance with the
Uniform Single Attestation Program for Mortgage Bankers or the Audit Program
for Mortgages serviced for FHLMC (rendered within one year of such statement)
of independent public accountants with respect to the related Subservicer.
Section 7.06 Right to Examine Servicer Records.
---------------------------------
Each Certificateholder, the Trustee and each of their respective agents
shall have the right upon reasonable prior notice, during normal business
hours and as often as reasonably required, to examine, audit and copy, at the
expense of the Person making such examination, any and all of the books,
records or other information of the Servicer (including without limitation
any Subservicer to the extent provided in the related Subservicing Agreement)
whether held by the Servicer or by another on behalf of the Servicer, which
may be relevant to the performance or observance by the Servicer of the
terms, covenants or conditions of this Agreement. In the case of the
supervisory agents and examiners of the Trustee and the Certificateholders,
access to the documentation regarding the Home Loans required by applicable
state and federal regulations shall be afforded without charge but only upon
reasonable request and during normal business hours at the offices of the
Servicer designated by it. Each Certificateholder and the Trustee agree
that any information obtained pursuant to the terms of this Agreement shall
be held confidential.
The Servicer also agrees to make available on a reasonable basis to the
Certificateholders or any prospective Certificateholder a knowledgeable
financial or accounting officer for the purpose of answering reasonable
questions respecting recent developments affecting the Servicer or the
financial statements of the Servicer and to permit the Certificateholders and
any prospective Certificateholder to inspect the Servicer's servicing
facilities during normal business hours for the purpose of satisfying the
Certificateholders and such prospective Certificateholder that the Servicer
has the ability to service the Home Loans in accordance with this Agreement.
Section 7.07 Reports to the Trustee; Collection Account Statements.
-----------------------------------------------------
If the Collection Account is not maintained with the Trustee, then not
later than 25 days after each Record Date, the Servicer shall forward to the
Trustee a statement, certified by a Servicing Officer, setting forth the
status of the Collection Account as of the close of business on the preceding
Record Date and showing, for the period covered by such statement, the
aggregate of deposits into the Collection Account for each category of
deposit specified in Section 5.01(b)(1), the aggregate of withdrawals from
------------------
the Collection Account for each category of withdrawal specified in Section
-------
5.01(b)(2) and (3), in each case, for the related Due Period.
------------------
Section 7.08 Financial Statements.
--------------------
The Servicer understands that, in connection with the transfer of the
Certificates, Certificateholders may request that the Servicer make available
to the Certificateholders and to prospective Certificateholders annual
audited financial statements of the Servicer for one or more of the most
recently completed five fiscal years for which such statements are available,
which request shall not be unreasonably denied.
ARTICLE VIII
CONCERNING THE CONTRACT OF INSURANCE HOLDER
-------------------------------------------
Section 8.01 Compliance with Title I and Filing of FHA Claims.
------------------------------------------------
(a) The Contract of Insurance Holder shall at all times while any
Certificates are outstanding have a valid Contract of Insurance with the FHA
covering the FHA Loans. To the extent applicable to the duties of the
Contract of Insurance Holder hereunder, the Contract of Insurance Holder
shall comply with the requirements of Title I and shall take or refrain from
taking such actions as are necessary or appropriate to maintain a valid
Contract of Insurance for the Trust with the FHA covering the FHA Loans.
(b) If and for so long as the Contract of Insurance covers any loans
other than the FHA Loans, and if HUD shall not have earmarked the coverage of
the Contract of Insurance with respect to the FHA Loans, the Contract of
Insurance Holder covenants and agrees not to submit any claim to FHA with
respect to an FHA Loan if the effect of approval of such claim would result
in the amount of claims paid by the FHA in respect of the FHA Loans to exceed
the Trust Designated Insurance Amount. Notwithstanding the foregoing, the
Claims Administrator shall promptly notify the Trustee and the Servicer if
the amount of claims submitted to FHA in respect of the FHA Loans under the
Contract of Insurance exceeds the Trust Designated Insurance Amount. As of
the Closing Date and at all times thereafter until the termination of this
Agreement, the Contract of Insurance Holder covenants and agrees that the
Contract of Insurance will only apply to the FHA Loans and Related Series
Loans, exclusively. Empire Funding, as Claims Administrator and Servicer,
covenants and agrees that it shall not take any action that would result in
the Contract of Insurance applying to loans other than the FHA Loans and
Related Series Loans, exclusively, unless HUD shall have agreed pursuant to
24 C.F.R. Section201.32(d)(1) to "earmark" the FHA insurance relating to the
FHA Loans and Related Series Loans in a manner satisfactory to the Trustee,
in its sole and absolute discretion.
(c) The Trustee hereby appoints Empire Funding as Claims Administrator.
Empire Funding, as Claims Administrator, shall perform on behalf of the
Contract of Insurance Holder the duties associated with the submission of
claims under Title I in connection with the Contract of Insurance, except to
the extent that certain documents must be signed by the Contract of Insurance
Holder (in which case the Contract of Insurance Holder shall only sign such
documents at the direction of the Claims Administrator) and shall not, in its
capacity as Claims Administrator, take any action or omit to take any action
that would cause the Contract of Insurance Holder to violate this Section
-------
8.01 or otherwise fail to maintain a valid Contract of Insurance or cause any
----
denial by FHA of an insurance claim under Title I.
(d) The Contract of Insurance Holder shall not be deemed to have
violated this Section 8.01 and shall otherwise incur no liability hereunder
------------
if any failure to maintain a valid Contract of Insurance or to comply with
the requirements of Title I or any denial by FHA of an insurance claim under
Title I shall have been caused by any act or omission of the Servicer or
Claims
Administrator in the performance of its duties hereunder. The Contract of
Insurance Holder shall be permitted to replace the Claims Administrator for
any failure of the Claims Administrator to perform its duties hereunder.
(e) The Contract of Insurance Holder hereby represents and warrants to
the Depositor, the Servicer, the Transferor and the Trustee that it is an
investing lender in good standing with HUD having authority to purchase,
hold, and sell loans insured under 24 CFR Part 201, pursuant to a valid
Contract of Insurance, Lender Number 72117 0000 5.
(f) The Transferor shall forward to the Contract of Insurance Holder a
fully executed Transfer of Note Report for each FHA Loan within 20 days of
the receipt by the Transferor of such FHA Loan's case number under the
Contract of Insurance. The Contract of Insurance Holder shall execute each
Transfer of Note Report, as investing lender, and submit such Transfer of
Note Report to HUD within 31 days of the transfer of the FHA Loans to the
Trust.
Section 8.02 Contract of Insurance Holder.
----------------------------
(a) The Contract of Insurance Holder shall not resign from the
obligations and duties imposed on it by this Agreement as Contract of
Insurance Holder except (i) upon a determination that by reason of a change
in legal requirements or requirements imposed by the FHA the performance of
its duties under this Agreement would cause it to be in violation of such
legal requirements or FHA imposed requirements in a manner which would result
in a material adverse effect on the Contract of Insurance Holder or cause it
to become ineligible to hold the Contract of Insurance and (ii) the Majority
Certificateholders do not elect to waive the obligations of the Contract of
Insurance Holder to perform the duties which render it legally unable to act
or to delegate those duties to another Person or if the circumstances giving
rise to such illegality cannot be waived or delegated. Any such
determination permitting the resignation of the Contract of Insurance Holder
shall be evidenced by an Opinion of Counsel to such effect delivered and
acceptable to the Trustee. Upon receiving such notice of resignation, the
Contract of Insurance shall be transferred to a qualified successor by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the resigning Contract of Insurance Holder and one copy to the
successor Contract of Insurance Holder. Notwithstanding the foregoing, the
Contract of Insurance Holder may resign, with the prior written consent of
the Majority Certificateholders, which may be withheld in their sole and
absolute discretion, upon transfer of the FHA insurance and related reserves
with respect to the FHA Loans and any Related Series Loans to a contract of
insurance held by a successor Contract of Insurance Holder provided, however,
that any Contract of Insurance held by such successor Contract of Insurance
Holder shall satisfy the criteria set forth in Section 8.01(b), and, at the
---------------
time of succession, shall have an FHA insurance coverage reserve account
balance not less than that of the FHA Insurance Coverage Reserve Account at
the time of succession.
(b) If at any time (i) the Contract of Insurance shall be revoked,
suspended or otherwise terminated, or (ii) the Contract of Insurance Holder
shall become incapable of acting, or shall be adjudged as bankrupt or
insolvent, or a receiver of the Contract of Insurance Holder
or of its property shall be appointed, or any public officer shall take
charge or control of the Contract of Insurance Holder or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then,
in any such case the Majority Certificateholders may remove the Contract of
Insurance Holder and appoint a successor contract of insurance holder by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the Contract of Insurance Holder so removed and one copy to the
successor contract of insurance holder. Upon removal of the Contract of
Insurance Holder, the outgoing Contract of Insurance Holder shall take any
action required to transfer the benefits of the FHA Insurance Coverage
Reserve Account to the successor contract of insurance holder.
(c) Any resignation or removal of the Contract of Insurance Holder and
appointment of a successor contract of insurance holder pursuant to any of
the provisions of this Section 8.02 shall become effective upon acceptance
------------
of appointment by the successor contract of insurance holder.
ARTICLE IX
THE SERVICER
------------
Section 9.01 Indemnification; Third Party Claims.
-----------------------------------
(a) The Servicer shall indemnify the Transferor, the Trust, the
Depositor and the Trustee (each an "Indemnified Party") and hold harmless
each of them against any and all claims, losses, damages, penalties, fines,
forfeitures, reasonable legal fees and related costs, judgments, and other
costs and expenses resulting from any claim, demand, defense or assertion
based on or grounded upon, or resulting from, a breach of any of the
Servicer's representations and warranties and covenants contained in this
Agreement or in any way relating to the failure of the Servicer to perform
its duties and service the Home Loans in compliance with the terms of this
Agreement; provided, however, that if the Servicer is not liable pursuant to
-------- -------
the provisions of Section 9.01(d) hereof for its failure to perform its
---------------
duties and service the Home Loans in compliance with the terms of this
Agreement, then the provisions of this Section 9.01 shall have no force and
effect with respect to such failure.
(b) The Transferor, the Depositor or the Trustee, as the case may be,
shall promptly notify the Servicer if a claim is made by a third party with
respect to a breach of any of the Servicer's representations and warranties
and covenants contained in this Agreement or in any way relating to the
failure of the Servicer to perform its duties and service the Home Loans in
compliance with the terms of this Agreement. The Servicer shall promptly
notify the Trustee and the Depositor of any claim of which it has been
notified pursuant to this Section 9.01 by a Person other than the Depositor,
------------
and, in any event, shall promptly notify the Depositor of its intended course
of action with respect to any claim.
(c) The Servicer shall be entitled to participate in and, upon notice
to the Indemnified Party, assume the defense of any such action or claim in
reasonable cooperation with, and with the reasonable cooperation of, the
Indemnified Party. The Indemnified Party will have the right to employ its
own counsel in any such action in addition to the counsel of the Servicer,
but the fees and expenses of such counsel will be at the expense of such
Indemnified Party, unless (a) the employment of counsel by the Indemnified
Party at its expense has been authorized in writing by the Servicer, (b) the
Servicer has not in fact employed counsel to assume the defense of such
action within a reasonable time after receiving notice of the commencement of
the action, or (c) the named parties to any such action or proceeding
(including any impleaded parties) include both the Servicer and one or more
Indemnified Parties, and the Indemnified Parties shall have been advised by
counsel that there may be one or more legal defenses available to them which
are different from or additional to those available to the Servicer. The
Servicer shall not be liable for any settlement of any such claim or action
unless the Servicer shall have consented thereto or be in default on its
obligations hereunder. Any failure by an Indemnified Party to comply with
the provisions of this Section shall relieve the Servicer of liability only
if such failure is materially prejudicial to the position of the Servicer and
then only to the extent of such prejudice.
(d) Neither the Transferor, the Depositor or the Servicer nor any of
the directors, officers, employees or agents of the Transferor, the Depositor
or the Servicer, or members or affiliates of the Depositor shall be under any
liability to the Trust or 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 Transferor, the Depositor, the Servicer or any such
person against the remedies provided herein for the breach of any warranties,
representations or covenants made herein, or against any specific liability
imposed on the Transferor, the Depositor or the Servicer herein, or against
any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or negligence in the performance of the duties of the
Servicer, the Depositor or the Transferor, as the case may be, or by reason
of reckless disregard of the obligations and duties of the Servicer, the
Depositor or the Transferor, as the case may be, hereunder. The Transferor,
the Depositor, the Servicer and any director, officer, employee or agent of
the Transferor, the Depositor or the Servicer, or any member or affiliate of
the Depositor may rely in good faith on any document of any kind which, prima
-----
facie, is properly executed and submitted by any Person respecting any
-----
matters arising hereunder.
(e) The Servicer, the Transferor and the Depositor and any director,
officer, employee or agent of the Servicer, the Transferor or the Depositor
shall be indemnified by the Trust 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 Home Loan or Home 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 negligence in the performance of
duties hereunder or by reason of reckless disregard of obligations and duties
hereunder. Except as otherwise provided herein, neither of the Transferor,
the Depositor nor the Servicer shall be under any obligation to appear in,
prosecute or defend any legal action that is not related to its respective
duties under this Agreement; provided, however, that, except as otherwise
-------- -------
provided herein, any of the Transferor, the Depositor, or the Servicer may,
with the prior consent of the Trustee, in its discretion undertake any such
action which it may deem necessary or desirable with respect to this
Agreement and the rights and duties of the parties hereto and the interests
of the Certificateholders hereunder. In such event, the legal expenses and
costs of such action and any liability resulting therefrom shall be,
expenses, costs and liabilities of the Trust, and the Transferor, the
Depositor and the Servicer shall be entitled to be reimbursed therefor out of
the Collection Account.
Section 9.02 Merger or Consolidation of the Servicer.
---------------------------------------
The Servicer shall keep in full effect its existence, rights and
franchises as a corporation, and will obtain and preserve its qualification
to do business as a foreign corporation and maintain such other licenses and
permits, in each jurisdiction necessary to protect the validity and
enforceability of this Agreement or any of the Home Loans and to perform its
duties under this Agreement; provided, that the Servicer may merge or
consolidate with any other corporation upon the satisfaction of the
conditions set forth in the following paragraph.
Any Person into which the Servicer may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which
the Servicer shall be a party, or any Person succeeding to the business of
the Servicer, shall be an Eligible Servicer and shall be the successor of the
Servicer, as applicable 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. The Servicer shall send notice of
any such merger, conversion, consolidation or succession to the Trustee.
Section 9.03 Limitation on Liability of the Servicer and Others.
--------------------------------------------------
The Servicer and any director, officer, employee or agent of the
Servicer may rely on any document of any kind which it in good faith
reasonably believes to be genuine and to have been adopted or signed by the
proper authorities respecting any matters arising hereunder. Subject to the
terms of Section 9.01 herein, the Servicer shall have no obligation to appear
------------
with respect to, prosecute or defend any legal action which is not incidental
to the Servicer's duty to service the Home Loans in accordance with this
Agreement.
Section 9.04 Servicer Not to Resign; Assignment.
----------------------------------
The Servicer shall not resign from the obligations and duties hereby
imposed on it except (a) with the consent of the Trustee or (b) upon
determination that its duties hereunder are no longer permissible under
applicable law. Any such determination pursuant to clause (b) of the
preceding sentence permitting the resignation of the Servicer shall be
evidenced by an independent opinion of counsel to such effect delivered (at
the expense of the Servicer) to the Trustee. No resignation of the Servicer
shall become effective until the Trustee or a successor servicer, appointed
pursuant to the provisions of Section 10.02 and satisfying the requirements
-------------
of Section 4.08 hereof with respect to the qualifications of a successor
------------
Servicer, shall have assumed the Servicer's responsibilities, duties,
liabilities (other than those liabilities arising prior to the appointment of
such successor) and obligations under this Agreement.
Except as expressly provided herein, the Servicer shall not assign or
transfer any of its rights, benefits or privileges hereunder to any other
Person, or delegate to or subcontract with, or authorize or appoint any other
Person to perform any of the duties, covenants or obligations to be performed
by the Servicer hereunder, without the prior written consent of the Trustee,
and absent such written consent any agreement, instrument or act purporting
to effect any such assignment, transfer, delegation or appointment shall be
void.
The Servicer agrees to cooperate with any successor Servicer in
effecting the transfer of the Servicer's servicing responsibilities and
rights hereunder pursuant to the first paragraph of this Section 9.04,
------------
including, without limitation, the transfer to such successor of all relevant
records and documents (including any Home Loan Files in the possession of the
Servicer) and all amounts received with respect to the Home Loans and not
otherwise permitted to be retained by the Servicer pursuant to this
Agreement. In addition, the Servicer, at its sole cost and expense, shall
prepare, execute and deliver any and all documents and instruments to the
successor Servicer including all Home Loan Files in its possession and do or
accomplish all other acts necessary or appropriate to effect such termination
and transfer of servicing responsibilities, including, without limitation,
assisting in obtaining any necessary approval under Title I from the FHA.
Section 9.05 Relationship of Servicer to the Trustee.
---------------------------------------
The relationship of the Servicer (and of any successor to the Servicer
as servicer under this Agreement) to the Trustee under this Agreement is
intended by the parties hereto to be that of an independent contractor and
not of a joint venturer, agent or partner of the Trustee.
Section 9.06 Servicer May Own Certificates.
-----------------------------
Each of the Servicer and any affiliate of the Servicer may in its
individual or any other capacity become the owner or pledgee of Certificates
with the same rights as it would have if it were not the Servicer or an
affiliate thereof except as otherwise specifically provided herein.
Certificates so owned by or pledged to the Servicer or such affiliate shall
have an equal and proportionate benefit under the provisions of this
Agreement, without preference, priority, or distinction as among all of the
Certificates, provided that any Certificates owned by the Servicer or any
affiliate thereof, during the time such Certificates are owned by them, shall
be without voting rights for any purpose set forth in this Agreement. The
Servicer shall notify the Trustee promptly after it or any of its affiliates
becomes the owner or pledgee of a Certificate.
ARTICLE X
DEFAULT
-------
Section 10.01 Events of Default.
-----------------
(a) In case one or more of the following Events of Default by the
Servicer shall occur and be continuing, that is to say:
(i) any failure by the Servicer to deposit in the Collection
Account in accordance with Section 5.01(b) any payments in respect of
---------------
the Home Loans received by the Servicer no later than the second Business Day
following the day on which such payments were received; or
(ii) failure by the Servicer duly to observe or perform, in any
material respect, any other covenants, obligations or agreements of the
Servicer as set forth in this Agreement, which failure continues
unremedied for a period of 60 days after the date on which written
notice of such failure, requiring the same to be remedied and stating
that such notice is a "Notice of Default" hereunder, shall have been
given (a) to the Servicer by the Trustee, or (b) to the Servicer or the
Trustee by any Majority Certificateholder; or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered
against the Servicer and such decree or order shall have remained in
force, undischarged or unstayed for a period of 60 days; or
(iv) the Servicer shall consent to the appointment of a conservator
or receiver or liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings of or
relating to the Servicer or of or relating to all or substantially all
of the Servicer's property; or
(v) the Servicer shall admit in writing its inability to pay its
debts as they become due, file a petition to take advantage of 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 Majority Certificateholders (A) shall receive notice from
the Servicer that the Servicer is no longer able to discharge its duties
under this Agreement or (B) shall determine, in their reasonable
judgment and based upon published reports (including wire services),
which they reasonably believe in good faith to be reliable, that the
Servicer
a) has experienced a material adverse change in its
business, assets, liabilities, operations, condition
(financial or otherwise) or prospects,
b) has defaulted on any of its material obligations, or
c) has ceased to conduct its business in the ordinary
course.
(b) then, and in each and every such case, so long as an Event of
Default shall not have been remedied, the Majority Certificateholders or the
Trustee by notice in writing to the Servicer may, in addition to whatever
rights such Person may have at law or equity to damages, including injunctive
relief and specific performance, may terminate all the rights and obligations
of the Servicer under this Agreement and in and to the Home Loans and the
proceeds thereof, as servicer under this Agreement. Upon receipt by the
Servicer of such written notice, all authority and power of the Servicer
under this Agreement, whether with respect to the Home Loans or otherwise,
shall, subject to Section 10.02, pass to and be vested in a successor
-------------
servicer, or the Trustee if a successor servicer cannot be retained in a
timely manner, and the successor servicer, or Trustee, as applicable, is
hereby authorized and empowered to execute and deliver, on behalf of the
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments and do or cause to be done all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, including,
but not limited to, the transfer and endorsement or assignment of the Home
Loans and related documents. The Servicer agrees to cooperate with the
successor servicer in effecting the termination of the Servicer's
responsibilities and rights hereunder, including, without limitation, the
transfer to the successor servicer for administration by it of all amounts
which shall at the time be credited by the Servicer to each Collection
Account or thereafter received with respect to the Home Loans.
Section 10.02 Trustee to Act; Appointment of Successor.
----------------------------------------
On and after the date the Servicer receives a notice of termination
pursuant to Section 10.01, or the Trustee receives the resignation of the
-------------
Servicer evidenced by an opinion of counsel or accompanied by the consents
required by Section 9.04, or the Servicer is removed as servicer pursuant to
------------
this Article X, then, subject to Section 4.08, the Trustee shall appoint a
--------- ------------
successor servicer to be the successor in all respects to the Servicer in its
capacity as 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 Servicer by the terms and
provisions hereof; provided, however, that the successor servicer shall not
be liable for any actions of any servicer prior to it; provided further,
however, that if a successor servicer cannot be retained in a timely manner,
the Trustee shall act as successor Servicer. In the event the Trustee
assumes the responsibilities of the Servicer pursuant to this Section 10.02,
-------------
the Trustee will make reasonable efforts consistent with applicable law to
become licensed, qualified and in good standing in each Mortgaged Property
State the laws of which require licensing or qualification, in order to
perform its obligations as Servicer hereunder or, alternatively, shall
retain an agent who is so licensed, qualified and in good standing in any
such Mortgaged Property State.
In the case that the Trustee serves as successor servicer, the Trustee
in such capacity shall not be liable for any servicing of the Home Loans
prior to its date of appointment, and shall not be subject to any obligations
to repurchase any Home Loans. The successor servicer shall be obligated to
make Servicing Advances hereunder. As compensation therefor, the successor
servicer appointed pursuant to the following paragraph, shall be entitled to
all funds relating to the Home Loans which the Servicer would have been
entitled to receive from the Certificate Distribution Account pursuant to
Section 5.01(c) as if the Servicer had continued to act as servicer
---------------
hereunder, together with other servicing compensation in the form of
assumption fees, late payment charges or otherwise as provided in Sections
--------
7.01 and 7.03. The Servicer shall not be entitled to any termination fee if
---- ----
it is terminated pursuant to Section 10.01, but shall be entitled to any
-------------
accrued and unpaid Servicing Fee to the date of termination.
Any collections received by the Servicer after removal or resignation
shall be endorsed by it to the Trustee and remitted directly to the Trustee
or, at the direction of the Trustee, to the successor servicer. The
compensation of any successor servicer (including, without limitation, the
Trustee) so appointed shall be the Servicing Fees, together with other
Servicing Compensation provided for herein. In the event the Trustee is
required to solicit bids to appoint a successor servicer, the Trustee shall
solicit, by public announcement, bids from Eligible Servicers. Such public
announcement shall specify that the successor servicer shall be entitled to
the full amount of the Servicing Fee and Servicing Compensation provided for
herein. Within thirty days after any such public announcement, the Trustee
shall negotiate and effect the sale, transfer and assignment of the servicing
rights and responsibilities hereunder to the qualified party submitting the
highest qualifying bid. The Trustee shall deduct from any sum received by
the Trustee from the successor to the Servicer in respect of such sale,
transfer and assignment all costs and expenses of any public announcement and
of any sale, transfer and assignment of the servicing rights and
responsibilities hereunder and the amount of any unpaid Servicing Fees and
unreimbursed Servicing Advances made by the Trustee. After such deductions,
the remainder of such sum shall be paid by the Trustee to the Servicer at the
time of such sale, transfer and assignment to the Servicer's successor. The
Trustee, any Custodian, the Servicer and any such successor servicer shall
take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession. The Servicer agrees to cooperate with the
Trustee and any successor servicer in effecting the termination of the
Servicer's servicing responsibilities and rights hereunder and shall promptly
provide the Trustee or such successor servicer, as applicable, all documents
and records reasonably requested by it to enable it to assume the Servicer's
functions hereunder and shall promptly also transfer to the Trustee or such
successor servicer, as applicable, all amounts which then have been or should
have been deposited in any Account maintained by the Servicer or which are
thereafter received with respect to the Home Loans. Neither the Trustee nor
any other successor servicer shall be held liable by reason of any failure to
make, or any delay in making, any distribution hereunder or any portion
thereof caused by (i) the failure of the Servicer to deliver, or any delay in
delivering, cash, documents or records to it, or (ii) restrictions imposed by
any regulatory authority having jurisdiction over the Servicer
hereunder. No appointment of a successor to the Servicer hereunder shall be
effective until written notice of such proposed appointment shall have been
provided by the Trustee to each Certificateholder and the Depositor and,
except in the case of the appointment of the Trustee as successor to the
Servicer (when no consent shall be required), the Depositor and the Majority
Certificateholders shall have consented thereto.
Pending appointment of a successor to the Servicer hereunder, the
Trustee shall act as servicer hereunder as hereinabove provided. In
connection with such appointment and assumption, the Trustee may make such
arrangements for the compensation of such successor servicer out of payments
on the Home Loans as it and such successor servicer shall agree; provided,
however, that no such compensation shall be in excess of that permitted the
Servicer pursuant to Section 7.03, together with other Servicing Compensation
------------
in the form of assumption fees, late payment charges or otherwise as provided
in this Agreement.
Section 10.03 Waiver of Defaults.
------------------
The Majority Certificateholders may waive any events permitting removal
of the Servicer as servicer pursuant to this Article X, provided, however,
---------
that the Majority Certificateholders may not waive a default in making a
required distribution on a Certificate without the consent of the related
Certificateholder. Upon any waiver of a past default, such default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent
thereto except to the extent expressly so waived.
Section 10.04 Accounting Upon Termination of Servicer.
---------------------------------------
Upon termination of the Servicer under this Article X, the Servicer
---------
shall, at its own expense:
(a) deliver to its successor or, if none shall yet have been appointed,
to the Trustee the funds in any Account maintained by the Servicer;
(b) deliver to its successor or, if none shall yet have been appointed,
to the Trustee all Home Loan Files and related documents and statements held
by it hereunder and a Home Loan portfolio computer tape;
(c) deliver to its successor or, if none shall yet have been appointed,
to the Trustee and the Certificateholders a full accounting of all funds,
including a statement showing the Monthly Payments collected by it and a
statement of monies held in trust by it for payments or charges with respect
to the Home Loans; and
(d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer of
servicing of the Home Loans to its successor
and to more fully and definitively vest in such successor all rights, powers,
duties, responsibilities, obligations and liabilities of the Servicer under
this Agreement.
ARTICLE XI
CONCERNING THE TRUSTEE
----------------------
Section 11.01 Duties of the Trustee and Contract of Insurance Holder.
------------------------------------------------------
(a) The Trustee, prior to the occurrence of a Servicer Termination
Event and after the curing of all Servicer Termination Events which may have
occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement. In case a Servicer Termination
Event has occurred and not been cured (the appointment of a successor
servicer (including the Trustee) shall for purposes of this Article be deemed
such a cure), 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 its
exercise as a prudent person would exercise or use under the circumstances in
the conduct of such person's own affairs. The Trustee shall not, except as
otherwise provided in this Agreement, sell or otherwise transfer any of the
Trust Estate.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, notices, 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 conform to the requirements of this Agreement;
provided, however, that the Trustee, in its capacity as such, shall not be
-------- -------
responsible for the accuracy or content of any such resolution, certificate,
statement, opinion, report, document, notice, order or other instrument
furnished to the Trustee pursuant to this Agreement.
(c) 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 bad faith or willful misconduct; provided, however,
-------- -------
that:
(i) Prior to the occurrence of a Servicer Termination Event,
and after the curing of all such Servicer Termination Events which may
have occurred, 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, in the absence of bad faith, willful
misconduct, or negligence on the part of the Trustee or actual knowledge
to the contrary of a Responsible Officer of the Trustee assigned to and
working in the Trustee's Corporate Trustee Administration Department,
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 that conform to the requirements of
this Agreement;
(ii) The Trustee shall not be personally liable for an error
of judgment made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
(iii) The Trustee shall not be personally liable with respect
to any action taken, suffered or omitted to be taken by it in good faith
in accordance with the direction given pursuant to a Class Vote,
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, with respect to such Class of Certificates
under this Agreement;
(iv) The Trustee shall not be personally liable for any
failure to ascertain whether a Certificateholder is an affiliate of the
Servicer or the Depositor for purposes of obtaining Certificateholder
consent pursuant to the terms of this Agreement;
(v) For all purposes of this Agreement, the Trustee shall not
be deemed to have knowledge of any Servicer Termination Event unless a
Responsible Officer of the Trustee assigned to and working in the
Trustee's Corporate Trustee Administration Department shall have actual
knowledge thereof or if written notice thereof is received by the
Trustee in accordance herewith, and in the absence of such knowledge no
provision hereof requiring the taking of any action or the assumption of
any duties or responsibility by the Trustee following the occurrence of
any Servicer Termination Event shall be effective as to the Trustee; and
(vi) None of the provisions contained in this Agreement shall
in any event require the Trustee to perform, or to be responsible for
the manner of performance of, any of the obligations of the Servicer
under this Agreement or to supervise or monitor the performance of such
obligations (other than to determine that any notices, reports or
statements required to be delivered to it by the Servicer hereunder
comply with the provisions of 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 Servicer in accordance with
the provisions of this Agreement.
(d) If the Trustee receives any funds from the FHA or any other
Person with respect to the Home Loans or any other assets of the Trust, the
provisions of Section 4.12(e) shall apply.
---------------
(e) In the event that any conservator or receiver shall be
appointed for the Transferor, the Trustee shall cause the Servicer to notify
the Obligors of the sale of the Home Loans to the Trust.
Section 11.02 Certain Matters Affecting the Trustee. Except as
-------------------------------------
otherwise provided in Section 11.01:
(i) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officer's Certificate,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval,
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;
(ii) The Trustee shall be under no obligation to exercise any
of the trusts 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, expend or use its own funds or
otherwise incur any financial liability in the performance of any of its
duties as Trustee hereunder, or in the exercise of any of its rights or
powers as such, unless either (A) payment within a reasonable time to
the Trustee of the costs, expenses or liabilities likely to be incurred
by it in taking such action is, in the opinion of the Trustee,
reasonably assured to the Trustee by the security afforded to it by the
terms of this Agreement, or (B) such Certificateholders shall have
offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which may be incurred therein or thereby
(which, in the case of a Certificateholder which is an institutional
investor, will be deemed satisfied by a written agreement of indemnity
from such Certificateholder); 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, bad faith or willful misconduct in the performance of any
such act; nothing contained herein shall, however, relieve the Trustee
of the obligation, upon the occurrence of a Servicer Termination Event
which has not been cured, to exercise such of the rights and powers
vested in it by this Agreement, and to use the same degree of care and
skill in their exercise as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs;
(iii) The Trustee shall not be personally 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 may consult with counsel and any Opinion of
Counsel or written advice 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 or written advice;
(v) Prior to the occurrence of a Servicer Termination Event
hereunder and after the curing of all such Servicer Termination Events
which may have occurred, 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 to do so pursuant to a Class Vote; 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
reasonably assured to the Trustee by the security afforded to it by the
terms of this Agreement, the Trustee may require reasonable indemnity
from the Certificateholders, as the case may be, giving such direction
against such expense or liability as a condition to so proceeding
(which, in the case of a Certificateholder which is an institutional
investor, will be deemed satisfied by a written agreement of indemnity
from such Certificateholder), except that, if a Servicer Termination
Event has occurred and is continuing, the expenses of any such
investigation shall be paid by the Servicer or, if paid by the
Trustee, shall be repaid by the Servicer upon demand, and the Trustee
shall not have any lien, claim or demand upon the Trust for the payment
thereof;
(vi) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or through
agents or attorneys; and
(vii) The Trustee shall not be required to give any bond or
surety in respect of the trust created hereby or the powers created
hereunder.
Section 11.03 Trustee Not Liable for Certificates or Home Loans. The
-------------------------------------------------
recitals contained herein and in the Certificates (other than the
countersignature of the Trustee on such Certificates) shall not be taken as
the statements of the Trustee, and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representations as to the validity
or sufficiency of this Agreement (other than as to the execution and delivery
of this Agreement by the Trustee) or of the Certificates (other than the
countersignature of the Trustee on such Certificates) or of any Home Loan or
related document. The Trustee shall not be accountable for the use or
application by the Depositor of any of the Certificates or of the proceeds of
such Certificates, or for the use or application of any funds paid to the
Servicer (unless the Trustee is acting as such) in respect of the Home Loans
or deposited in or withdrawn by the Servicer from the Collection Account,
other than funds so withdrawn and thereafter deposited in the Certificate
Distribution Account. Except as otherwise expressly provided herein, the
Trustee shall have no obligation to inspect, insure or pay taxes on any
Property, to investigate the state of title with respect to any Property, to
ensure the priority or perfection of any Mortgage or security interest or to
file or record any assignment, lien, financing statement, continuation
statement or security interest in relation to any Home Loan or Property or to
ensure the priority or perfection of any security referred to in this
Agreement or to prepare, file or record any assignment, lien, financing
statement or continuation statement with respect thereto or to prepare or
file any Securities and Exchange Commission filings for the Trust or to
record this Agreement.
Section 11.04 Trustee May Own Certificates. The Trustee in its
----------------------------
individual or any other capacity may become the owner or pledgee of
Certificates of any Class with the same rights as it would have if it were
not Trustee, except that no determination, vote or request as Holder of such
Certificates shall be included in the determination of a Class Vote. The
Trustee, in its individual capacity, may deal with either the Depositor and
the Servicer, each in their individual capacities, with the same rights it
would have if it were not Trustee.
Section 11.05 Trustee's Fees and Expenses; Indemnification.
--------------------------------------------
(a) The Trustee will disburse to itself pursuant to Section
-------
5.01(c)(i), to the extent funds are available therefor, the Trustee Fee for
----------
all services rendered by it in the execution of the trusts hereby created and
in the exercise and performance of any of the powers and duties hereunder of
the Trustee.
(b) Empire Funding shall indemnify the Trustee and its agent for,
and hold them harmless against, any loss, liability or expense (including
reasonable expenses, disbursements and advances incurred or made by the
Trustee in accordance with any of the provisions of this Agreement (including
the reasonable compensation and the expenses and disbursements of its counsel
and of all Persons not regularly in its employ and the fees and expenses of
any co-trustee appointed hereunder)) incurred by the Trustee or such agent
without negligence, willful misfeasance or bad faith on the part of the
Trustee or any such agent and arising out of or in connection with the
acceptance or administration of the trusts created hereby, including without
limitation the costs and expenses of defending the Trustee or any such agent
against any claim or liability incurred by them in connection with the
exercise or performance of any of their powers or duties hereunder, including
the signing of any document pursuant to this Agreement, and including without
limitation any liability incurred by the Trustee arising from the Depositor's
bad faith, willful misfeasance or negligence. The obligations set forth in
this Section 11.05(b) shall survive the termination of this Agreement.
----------------
Section 11.06 Eligibility Requirements for Trustee. The Trustee
------------------------------------
hereunder shall at all times be a corporation or national banking association
organized and doing business under the laws of the United States or of any
state, authorized under such laws to exercise corporate trust powers, subject
to supervision or examination by federal or state authority and either
(i) having a combined capital and surplus of at least $50,000,000 or
(ii) being the wholly-owned subsidiary of a bank holding company having such
a capital and surplus. If such corporation or national banking association
publishes reports of condition at least annually, pursuant to law or the
requirements of the aforesaid supervising or examining authority, then for
the purpose of this Section 11.06 the combined capital and surplus of such
-------------
corporation or national banking association shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published. By executing and delivering this Agreement, the
Trustee represents and warrants that it meets such requirements as of the
date hereof. In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 11.06, the Trustee shall
-------------
resign immediately in the manner and with the effect specified in Section
-------
11.07. Neither the Servicer nor any affiliate thereof shall be eligible to
-----
serve as Trustee at any time, except that the Trustee may serve as successor
servicer pursuant to Section 10.02.
-------------
Section 11.07 Resignation and Removal of the Trustee.
--------------------------------------
(a) The Trustee may resign and be discharged from the trust hereby
created by giving not less than 60 days' written notice thereof to the
Servicer. Upon receiving such notice of resignation, the Depositor shall
promptly appoint a successor trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor trustee. If no successor trustee shall
have been so appointed and have accepted appointment within sixty days after
the giving of such notice of resignation, the resigning Trustee may petition
any court of competent jurisdiction for the appointment of a successor
trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 11.06, or if the Trustee has failed
-------------
to perform any obligation hereunder and such failure materially and adversely
affects Certificateholders of any Class, and, in either such case, the
Trustee shall fail to resign after written request therefor by the Depositor,
or if at any time the Trustee shall become incapable of acting, or shall be
adjudged as bankrupt or insolvent, or a receiver or other conservator 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, then, in any such
case the Depositor may remove the Trustee and appoint a successor trustee by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee.
(c) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 11.07
-------------
shall become effective upon acceptance of appointment by the successor
trustee as provided in Section 11.08.
-------------
Section 11.08 Successor Trustee.
-----------------
(a) Any successor trustee appointed as provided in Section 11.07
-------------
shall execute, acknowledge and deliver to the Depositor and to its
predecessor trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor trustee shall become
effective and the acceptance of such successor trustee shall become
effective, and such successor trustee, without any further act, deed or
conveyance, shall become fully vested with all rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Trustee herein. The predecessor trustee shall upon payment of any
unpaid Trustee Fees deliver to the successor trustee all Files, related
documents, statements and funds held by it hereunder, including, without
limitation, the monies held in the Accounts and the Depositor and the
predecessor trustee shall execute and deliver such instruments and do such
other things as may reasonably be required more fully and certainly to vest
and confirm in the successor trustee all such rights, powers, duties and
obligations, provided, however, that the Trust shall remain liable to the
-------- -------
predecessor trustee for any unpaid outstanding fees and expenses of such
predecessor trustee.
(b) No successor trustee shall accept appointment as provided in
this Section 11.08 unless at the time of such acceptance such successor
-------------
trustee shall be eligible under the provisions of Section 11.06.
-------------
(c) Upon acceptance of appointment by a successor trustee as
provided in this Section 11.08, the Servicer shall mail notice of the
-------------
succession of such trustee hereunder to all Certifcateholders at their
respective addresses appearing in the Certificate Register and be entitled
to reimbursement of expenses for such mailing from Empire Funding.
Section 11.09 Merger or Consolidation of the Trustee. Any corporation
--------------------------------------
or national banking association into which the Trustee may be merged or
converted or with which it may be consolidated or any corporation or national
banking association resulting from any merger, conversion or consolidation to
which the Trustee shall be a party, or any corporation or national banking
association succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee 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 that such corporation or national banking
--------
association shall be eligible under the provisions of Section 11.06. The
-------------
Trustee or its successor hereunder shall provide the Depositor with prompt
notice of any such transaction.
Section 11.10 Appointment of Co-Trustee or Separate Trustee.
---------------------------------------------
(a) Notwithstanding any other provisions hereof at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust or property securing the same may at the time be
located, the Depositor 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, and to vest in such Person or Persons, in such capacity, such title to
the Trust, or any part thereof, and, subject to the other provisions of this
Section 11.10, such powers, duties, obligations, rights and trusts as
-------------
the Servicer and the Trustee may consider necessary or desirable. If the
Servicer shall not have joined in such appointment within fifteen days after
the receipt by it of a request so to do, or in case an Event of Default shall
have occurred and be continuing, the Trustee 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 11.06, and no notice to Certificateholders of the appointment of co
-------------
trustee(s) or separate trustee(s) shall be required under Section 11.08.
-------------
(b) In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 11.10, 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, 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 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 Trust 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.
(c) Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument of
appointment of any separate trustee or co-trustee shall refer
to this Agreement and the conditions of this Article XI. 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.
(d) 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.
(e) No trustee hereunder shall be held personally liable by reason
of any act or omission of any other trustee hereunder.
(f) The Trustee may at any time accept the resignation of or
remove any separate trustee or co-trustee.
(g) Notwithstanding any provision in this section to the contrary
and in order to comply with regulations promulgated by HUD, the Depositor and
the Trustee shall execute and deliver the Agreement of Appointment and
Acceptance of Separate Trustee in the form of Exhibit J hereto to appoint
EFC Securitized Assets, L.C., as separate trustee solely for the purpose of
holding record ownership of each FHA Loan for which an Assignment of Mortgage
is required to be recorded pursuant to Section 2.05. Beneficial ownership
------------
shall remain with the Trustee of any FHA Loan for which an Assignment of
Mortgage is recorded in the name of EFC Securitized Assets, L.C..
Section 11.11 Appointment of Custodians.
-------------------------
(a) Any provision of this Agreement notwithstanding, the Trustee
may, with the consent of the Servicer, appoint, as agents for the Trustee,
one or more Custodians to hold all or a portion of the Files, and to take
such other action with respect thereto as shall be consistent with the terms
of this Agreement, by entering into a Custodial Agreement, provided that none
--------
of the provisions of this Section 11.11 relating to agreements or
-------------
arrangements between the Trustee and any Custodian or to actions taken
through any such Custodian or otherwise shall be deemed to relieve the
Trustee of any of its duties and obligations hereunder, and the Trustee shall
be obligated with respect thereto to the same extent and under the same terms
and conditions as if it alone were performing all such duties and
obligations. Any Custodian shall have a combined capital and surplus of at
least $10,000,000. The Trustee shall be entitled to enter into any agreement
with any Custodian performing services on behalf of the Trustee related to
its duties and obligations hereunder for indemnification of the Trustee by
such Custodian, and nothing contained in this Agreement shall be deemed to
limit or modify such indemnification.
(b) The Custodian in its individual or any other capacity may
become the owner or pledgee of Certificates of any Class with the same rights
it would have if it were not Custodian.
(c) Subject to the provisions of this Article XI, the Trustee
agrees to comply with the terms of each such Custodial Agreement and to
enforce the terms and provisions thereof against the Custodian for the
benefit of Certificateholders. The Trustee shall be solely liable for all
fees owed by it to any Custodian performing services on behalf of the
Trustee, irrespective of whether the Trustee's compensation pursuant to this
Agreement is sufficient to pay such fees. Any Custodial Agreement shall
require that the Custodian thereunder maintain continuous custody of each
Home Loan File in the State of Minnesota, unless the Trustee shall obtain an
Opinion of Counsel from a firm of attorneys licensed to practice law in the
State in which custody of the Home Loan Files will be maintained to the
effect that, in the event that the intended transfer and sale to the Trustee
by the Depositor of the Home Loans is deemed to be the grant of a security
interest in the Trust rather than a sale, the Trustee will have a perfected
first priority security interest in the related notes despite the fact that
custody of the Home Loan Files no longer is maintained in the State of
Minnesota.
Section 11.12 Certain Tax Matters.
-------------------
(a) The Trustee is hereby authorized and directed by Empire
Funding to elect to treat the REMIC Pool, including the Collection Account,
the Certificate Distribution Account and the FHA Premium Account, as a REMIC
in accordance with the REMIC Provisions. In connection with such election,
(i) the Class R Certificates are hereby designated as the sole class of
"residual interests" in the REMIC Pool, (ii) the Certificates (other than the
Class R Certificates) are hereby designated as classes of "regular interests"
in the REMIC Pool, (iii) the latest possible maturity date of the
Certificates (other than the Class R Certificates) is the Final Scheduled
Distribution Date, and (iv) the Closing Date is hereby designated as the
"Start-Up Day" of the REMIC Pool, all within the meaning of the REMIC
Provisions. The taxable year of the REMIC Pool shall be the calendar year
and the first taxable year shall begin on the Closing Date. The books of the
REMIC Pool shall be maintained on an accrual basis for federal income tax
purposes.
(b) The Trustee as agent for Empire Funding, so long as it shall
be a Holder of a Class R Certificate, and otherwise the Residual Holder
appointed in accordance with the provisions of the Code, shall:
(i) in a timely manner, prepare, file with the Internal
Revenue Service or other appropriate authorities, and cause the Trustee
to mail to Certificateholders, as required, any Tax Returns, and any
other federal, state or local tax or information returns or reports that
are required to be so filed, or provided to Certificateholders, with
respect to the REMIC Pool;
(ii) in the first Tax Return, elect to treat the REMIC Pool,
as a REMIC;
(iii) in the Tax Return for each taxable year of the REMIC
Pool, designate as the tax matters person for the REMIC Pool (x) Empire
Funding or an affiliate thereof, if Empire Funding or such affiliate, as
the case may be, owned a Class R Certificate at any time during such
taxable year, or (y) if neither Empire Funding nor an affiliate thereof
owned a Class R Certificate at any time during such taxable year,
(A) the Holder of a Class R Certificate designated in a notice delivered
to the Trustee prior to the date of completion of such Tax Return by
Holders of Class R Certificates representing a majority of the Residual
Interests, or (B) if no such notice is received, the Person holding, at
the end of such taxable year, Class R Certificates representing, in the
aggregate, a greater percentage of the Residual Interests than Class R
Certificates then held by any other Person;
(iv) maintain or instruct the Trustee to maintain records as
to investments and other assets of the REMIC Pool sufficient to show
compliance with the REMIC Provisions during each taxable year of the
REMIC Pool; and
(v) take all actions necessary to ensure that the Tax Return
and such other returns or reports are signed by a Person that is both
authorized to sign such returns or reports hereunder and is an
appropriate Person to sign such returns or reports under the law
applicable to such returns or reports (including in the case of the Tax
Return, the Code, Treasury Regulations, and any official pronouncements
of the Internal Revenue Service).
The Trustee is hereby authorized under this Agreement to sign on behalf of
the REMIC Pool the Tax Return and any such other returns and reports. Each
Holder of a Class R Certificate hereby irrevocably appoints and authorizes
the Trustee to be its attorney-in-fact for purposes of signing any such
returns and reports. The Trustee shall (i) give notice to the Internal
Revenue Service on Internal Revenue Service Form 56 that it is acting in a
fiduciary capacity on behalf of the REMIC Pool in accordance with Treasury
Regulation Section 1.860F-4(c), and (ii) sign such return or report, provided
--------
that the Trustee shall be protected in signing such return or report to the
extent provided in Section 11.05(b). The Trustee shall cause the REMIC Pool
----------------
accountants to include in the first federal income tax return the information
required by Treasury Regulation Section 1.860D-1(d)(2) and Treasury
Regulation Section 1.860F-4(b)(2).
(c) This Agreement shall be construed so as to carry out the
intention of the parties that the REMIC Pool be a REMIC at all times from the
Start-up Day to the Termination Date. Neither the Servicer nor the Trustee
shall knowingly or intentionally take any action or omit to take any action
that would cause the imposition of a tax on the REMIC Pool or Trust under the
REMIC Provisions or cause the REMIC Pool to fail to qualify as a REMIC at any
time that any Certificate is outstanding. Without limiting the generality of
the foregoing, after the Start-up Day the Trustee shall not accept any
contribution of assets to the REMIC Pool unless the Trustee shall have
received an Opinion of Counsel to the effect that such contribution will
not cause the imposition of a tax on the REMIC Pool under the REMIC
Provisions or cause the REMIC Pool to fail to qualify as a REMIC at any time
that any Certificate is outstanding. There is no requirement for any holder
of a Residual Interest to contribute any amount to the Trust.
(d) The Trustee is hereby authorized and directed to make
information available to the Internal Revenue Service and to any Holder or
transferor of a Class R Certificate necessary for compliance with Section
860E(e) of the Code. The Servicer shall maintain records and information
related to the Home Loans and Monthly Payments sufficient to make any
calculations that may be required pursuant to such section and shall provide
such information to the Trustee; provided, however, that any calculations
-------- -------
necessary to provide such information to any Holder or the Internal Revenue
Service shall be performed by the accountants for the REMIC Pool. The
provisions of Section 11.02(vi) shall also apply.
-----------------
(e) The Trustee shall apply promptly to the Internal Revenue
Service for a Taxpayer Identification Number for the REMIC Pool and, promptly
upon receipt thereof, shall forward to the Servicer a copy of the "Notice of
New Employer Identification Number Assigned."
(f) In connection with assisting Empire Funding (or such other
Residual Holder as is referred to in Section 11.12(a) above) in the
----------------
preparation of, and in filing of, any Tax Returns or other returns or reports
pursuant to this Section, the Trustee may rely on information provided by
Empire Funding and the Servicer and Empire Funding or the Servicer, as
appropriate, shall indemnify and hold harmless the Trustee for any loss,
liability or expense incurred in connection with such preparation and filing
arising by reason of such person's bad faith, willful misfeasance or
negligence in providing or failing to provide such information. The Trustee
shall be entitled to reimbursement from Empire Funding for its reasonable
out-of-pocket expenses and disbursements except any such expenses or
disbursements as may arise from its negligence, willful misfeasance or bad
faith and except as provided in the following sentence.
(g) The Trustee shall file IRS Form 8811 within the time
prescribed by law and make available on a timely basis all information
required to be provided pursuant to Temporary Treasury Regulation Section
1.6049-7T(e) (or any successor provision) to persons entitled to receive
information pursuant thereto.
Section 11.13 Representations and Warranties of the Trustee.
---------------------------------------------
The Trustee represents and warrants to, and agrees with, the
parties hereto and Certificateholders that:
(a) The Trustee is duly organized as a national banking
association under the laws of the United States of America, is validly
existing and in good standing in such state and has the corporate power and
authority under United States law to conduct its corporate trust business as
now conducted.
(b) The Trustee has full corporate power and authority under
United States law to enter into and perform all transactions contemplated
herein and no consent, approval, authorization or order of any federal court
or governmental agency or body governing or having jurisdiction with respect
to the Trustee's trust powers is required for the Trustee to enter into this
Agreement and to perform its obligations hereunder.
(c) The Certificates when countersigned by the Trustee shall have
been duly and validly countersigned in accordance with this Agreement.
(d) The execution, delivery and performance by it of this
Agreement (a) do not violate any provision of any law or regulation governing
the banking and trust powers of the Trustee or any order, writ, judgment, or
decree of any court, arbitrator, or governmental authority applicable to the
Trustee or any of its assets, (b) do not violate any provision of its
corporate charter or by-laws, (c) do not violate any provision of, or
constitute, with or without notice or lapse of time, a default under, any
mortgage, indenture, contract, agreement or other undertaking other than this
Agreement to which it is a party and (d) have been duly authorized by the
Trustee.
(e) This Agreement has been duly executed and delivered by the
Trustee and constitutes the legal, valid and binding agreement of the
Trustee, enforceable in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally and by
equitable limitations on the availability of specific remedies, regardless of
whether such enforceability is considered in a proceeding in equity or at
law.
(f) The Trustee has taken actual possession of the Debt
Instruments, Mortgages and any other related documents delivered pursuant to
Section 2.03 in good faith, and without notice or knowledge: (i) of any
------------
adverse claims, lien, or encumbrance against any of the same; (ii) that any
Debt Instrument was overdue (except for those Home Loans that are delinquent
as of the Closing Date) or had been dishonored or subject to the
circumstances described in Section 3.304 of the Uniform Commercial Code as in
effect in the State of New York; or, (iii) of any other defense against or
claim to the Debt Instruments by any other person or entity. For purposes of
this subsection (f), the Trustee shall not be deemed to have had notice or
knowledge of the foregoing matters unless a Responsible Officer assigned to
and working in the Trustee's Corporate Trustee Administration Department
shall have actual knowledge thereof or written notice thereof is received by
the Trustee in accordance herewith.
(g) The Trustee has taken actual possession of the Debt
Instruments, Mortgages and other items in the Home Loan Files in the ordinary
course of its business.
Xxxxxxx 00.00 Xxxxxx Xxx. Any provisions required to be contained in
----------
this Agreement by Section 126 Article 4-A of the New York Real Property law
are hereby incorporated, and such provisions shall be in addition to those
conferred or imposed by this Agreement; provided, however, that to the extent
-------- -------
that such Section 126 shall not apply to this Agreement, said Section 126
shall not have any effect, and if said Section 126 should at any time
be repealed or cease to apply to this Agreement, or be construed by judicial
decision to be inapplicable, said Section 126 shall cease to have any further
effect upon the provisions of this Agreement. In case of a conflict between
the provisions of this Agreement and any mandatory provisions of Article 4-A
of the New York Real Property law, such mandatory provisions of said Article
4-A shall prevail, provided that if said Article 4-A shall not apply to this
--------
Agreement, should at any time be repealed, or cease to apply to this
Agreement, or be construed by judicial decision to be inapplicable, such
mandatory provision of such Article 4-A shall cease to have any further
effect upon the provisions of this Agreement; provided, however, that the
-------- -------
Trustee agrees to act in good faith in the exercise of its rights and powers
hereunder.
Section 11.15 Rights to Direct Trustee. Subject to Section 11.02(ii),
------------------------ -----------------
the Certificateholders pursuant to a Class Vote shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee; provided, however, that subject to Section 11.01, the Trustee shall
-------- ------- -------------
have the right to decline to follow any such direction if the Trustee being
advised by counsel determines that the action so directed may not lawfully be
taken, or if the Trustee in good faith shall, by a Responsible Officer,
determine that the proceedings so directed would be in violation of this
Agreement or would subject it to personal liability against which it has not
been provided reasonable indemnity (which, in the case of a Certificateholder
which is an institutional investor, will be deemed satisfied by a written
agreement of indemnity from such Certificateholder) or (in the case of
directions provided by a Class Vote) be unduly prejudicial to the rights of
Certificateholders not parties to such direction; and provided further that
nothing in this Agreement shall impair the right of the Trustee to take any
action deemed proper by the Trustee and which is not inconsistent with such
direction by the Certificateholders.
Section 11.16 Reports to the Securities and Exchange Commission. The
-------------------------------------------------
Trustee shall, on behalf of the Trust, cause to be filed with the Securities
and Exchange Commission any periodic reports required to be filed under the
provisions of the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the Securities and Exchange Commission thereunder. Upon
the request of the Trustee, each of the Transferor, the Depositor and the
Servicer shall cooperate with the Trustee in the preparation of any such
report and shall provide to the Trustee in a timely manner all such
information or documentation as the Trustee may reasonable request in
connection with the performance of its duties and obligations under this
Section.
ARTICLE XII
TERMINATION
-----------
Section 12.01 Termination.
-----------
(a) The respective obligations and responsibilities of Empire
Funding, the Servicer, the Depositor and the Trustee created hereby with
respect to the Certificates (other than the obligation to make certain
payments and to send certain notices to Certificateholders as hereinafter set
forth) shall terminate immediately following the occurrence of the last
action required to be taken by the Trustee pursuant to this Article XII on
the Termination Date; provided, however, that in no event shall the trust
-------- -------
created hereby, i.e., the Trust, continue beyond the expiration of twenty-one
----
years from the death of the last 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 Closing Date.
(b) The REMIC Pool shall be terminated and the assets of the REMIC
Pool shall be sold or otherwise disposed of in connection therewith, only
pursuant to a Plan of Complete Liquidation adopted by the Trustee at the
direction of the Depositor and having the terms set forth in Section
-------
12.01(c). Each Holder of a Certificate hereby irrevocably approves and
--------
appoints the Trustee, acting at the direction of the Depositor as its
attorney-in-fact for the purposes of the adoption of the Plan of Complete
Liquidation. The Trustee, acting at the direction of the Depositor, shall
adopt a Plan of Complete Liquidation promptly following the Trustee's receipt
of a Notice of Termination.
(c) The Plan of Complete Liquidation shall be adopted on the
earliest practicable date occurring not more than 90 days prior to the
Anticipated Termination Date specified in the Notice of Termination, and
shall provide:
(i) for the actions contemplated by the provisions hereof
pursuant to which the applicable Notice of Termination is given;
(ii) that the REMIC Pool shall terminate as a REMIC as
required by Section 860F(a)(4) of the Code on a Distribution Date
occurring not more than 90 days following the date of adoption of the
Plan of Complete Liquidation; and
(iii) that all assets of the REMIC Pool required to be sold
pursuant to the Plan of Complete Liquidation shall be sold after the
date of adoption thereof, such sale to be conducted by the Servicer on
behalf of the Trustee; provided that the Plan of Complete Liquidation may
be adopted prior to the -------- ninetieth day prior to the Anticipated
Termination Date and, to the extent consistent with the actions contem
plated by the provisions hereof pursuant to which the applicable Notice
of Termination is given, may provide for actions different from those set
forth in clauses (ii) or (iii) if an Opinion of Counsel shall have been
previously delivered to the Trustee to the effect that the adoption of a
Plan of Complete Liquidation that provides for such alternative actions as
are set forth in such Opinion of Counsel will not result in the
imposition of a tax on the REMIC Pool or pursuant to the REMIC
Provisions cause the REMIC Pool to fail to qualify as a REMIC at any
time that any Certificate is Outstanding. The Trustee shall deliver to
the Servicer a copy of the Plan of Complete Liquidation promptly
following its adoption.
(d) Subject to the provisions of the following sentence, the
holder or holders of Class R Certificates representing more than 50% of the
Residual Interests of the Class R Certificates may, at their option, upon not
less than thirty days' prior notice given to the Trustee at any time on or
after the Distribution Date on which the Pool Principal Balance declines to
10% or less of the Original Pool Principal Balance, purchase on the Monthly
Cut-Off Date specified in such notice, all, but not less than all, the Home
Loans, all claims made under the Contract of Insurance with respect to FHA
Loans that are pending with FHA ("FHA Pending Claims") and Foreclosed
Properties then included in the Trust, at a purchase price, payable in cash,
equal to the greater of the Termination Price or the sum of:
(i) the Principal Balance of each Home Loan included in the
Trust as of such Monthly Cut-Off Date;
(ii) all unpaid interest accrued on the Principal Balance of
each such Loan at the related Net Loan Rate to such Monthly Cut-Off
Date;
(iii) the aggregate fair market value of the FHA Pending Claims
for which a claim has been filed with the FHA included in the Trust on
such Monthly Cut-Off Date, as determined by an Independent appraiser
acceptable to the Trustee as of a date not more than thirty days prior
to such Monthly Cut-Off Date; and
(iv) the aggregate fair market value of each Foreclosure
Property included in the Trust on such Monthly Cut-Off Date, as
determined by an Independent appraiser acceptable to the Trustee as of a
date not more than thirty days prior to such Monthly Cut-Off Date.
Any amount received from such sale with respect to FHA Pending Claims shall
be considered FHA Insurance Payment Amounts. The expense of any Independent
appraiser required under this Section 12.01(d) shall be a nonreimbursable
----------------
expense of Empire Funding. Empire Funding or the Servicer shall effect the
purchase referred to in this Section 12.01(d) by deposit of the purchase
----------------
price into the Certificate Distribution Account.
(e) If the Trust has not been previously terminated pursuant to
subsection (d) of this Section 12.01 the Servicer shall give the Trustee
-------------
notice as soon as practicable (at least 45 days before the Distribution Date)
of the Distribution Date which is the earlier of (i) the Final Scheduled
Distribution Date and (ii) the Distribution Date on which the Servicer
anticipates the latest of the maturity or other liquidation of the last Home
Loan.
(f) Notice of any termination of the Trust pursuant to this
Section 12.01 shall be mailed, via first class mail, postage prepaid, by the
-------------
Trustee to affected Certificateholders at their addresses shown in the
Certificate Register as soon as practicable after the Trustee shall have
received a Notice of Termination, but in any event, not more than thirty
days, and not less than five days, prior to the Anticipated Termination Date
except that notice to Holders of Class R Certificates shall be made within
two Business Days after the Trustee shall have received a Notice of
Termination. The notice mailed by the Trustee to affected Certificateholders
shall:
(i) specify the Anticipated Termination Date on which the
final distribution is anticipated to be made to Holders of Certificates
of the Classes specified therein; and
(ii) specify the amount of any such final distribution, if
known.
If the Trust is not terminated on any Anticipated Termination Date for any
reason, the Trustee shall promptly mail, via first class mail, postage
prepaid, notice thereof to each affected Certificateholder.
(g) On the Termination Date, amounts on deposit in the Certificate
Distribution Account will be withdrawn and applied in the manner set forth in
Section 5.01.
------------
ARTICLE XIII
MISCELLANEOUS PROVISIONS
------------------------
Section 13.01 Acts of Certificateholders.
--------------------------
Except as otherwise specifically provided herein, whenever
Certificateholder action, consent or approval is required under this
Agreement, such action, consent or approval shall be deemed to have been
taken or given on behalf of, and shall be binding upon, all
Certificateholders if the Majority Certificateholders agree to take such
action or give such consent or approval.
Section 13.02 Amendment.
---------
(a) This Agreement may be amended from time to time by the Depositor,
the Servicer and the Transferor by written agreement with notice thereof to
the Certificateholders, without the consent of any of the Certificateholders,
to cure any error or ambiguity, to correct or supplement any provisions
hereof which may be defective or inconsistent with any other provisions
hereof or to add any other provisions with respect to matters or questions
arising under this Agreement; provided, however, that such action will not
adversely affect in any material respect the interests of the
Certificateholders. An amendment described above shall be deemed not to
adversely affect in any material respect the interests of the
Certificateholders if either (i) an opinion of counsel is obtained to such
effect, and (ii) the party requesting the amendment obtains a letter from
each of the Rating Agencies confirming that the amendment, if made, would not
result in the downgrading or withdrawal of the rating then assigned by the
respective Rating Agency to any Class of Certificates then outstanding.
(b) This Agreement may also be amended from time to time by the
Depositor, the Servicer and the Transferor by written agreement, with the
prior written consent of the Majority Certificateholders, 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
Certificateholders; provided, however, that no such amendment shall (i)
reduce in any manner the amount of, or delay the timing of, collections of
payments on Home Loans or distributions which are required to be made on any
Certificate, without the consent of the holders of 100% of each Class of
Certificates affected thereby, (ii) adversely affect in any material respect
the interests of the holders of any Class of Certificates in any manner other
than as described in (i), without the consent of the holders of 100% of such
Class of Certificates, or (iii) reduce the percentage of any Class of
Certificates, the holders of which are required to consent to any such
amendment, without the consent of the holders of 100% of such Class of
Certificates.
(c) 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.
Prior to the execution of any amendment to this Agreement, the Trustee
shall be entitled to receive and rely upon an opinion of counsel stating that
the execution of such amendment is authorized or permitted by this Agreement.
The Trustee may, but shall not be obligated to, enter into any such amendment
which affects the Trustee's own rights, duties or immunities under this
Agreement.
Section 13.03 Recordation of Agreement.
------------------------
To the extent permitted by applicable law, this Agreement, or a
memorandum thereof if permitted under applicable law, is subject to
recordation in all appropriate public offices for real property records in
all of the counties or other comparable jurisdictions in which any or all of
the Mortgaged Properties are situated, and in any other appropriate public
recording office or elsewhere, such recordation to be effected by the
Servicer at the Certificateholders' expense on direction of the Majority
Certificateholders but only when accompanied by an opinion of counsel to the
effect that such recordation materially and beneficially affects the
interests of the Certificateholders or is necessary for the administration or
servicing of the Home Loans.
Section 13.04 Duration of Agreement.
---------------------
This Agreement shall continue in existence and effect until terminated
as herein provided.
Section 13.05 Governing Law.
-------------
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
Section 13.06 Notices.
-------
All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered at or
mailed by overnight mail, certified mail or registered mail, postage prepaid,
to: (i) in the case of the Depositor, Financial Asset Securities Corp., 000
Xxxxxxxxx Xxxx, Xxxxxxxxx, Xxxxxxxxxxx 00000 Attention: Xxxxx XxXxxxxx, or
such other addresses as may hereafter be furnished to the Certificateholders
and the other parties hereto in writing by the Depositor, (ii) in the case of
the Transferor, Servicer and Claims Administrator, Empire Funding Corp., 0000
Xxxxx Xxxxx Xxxxx, Xxxxxx, Xxxxx 00000 Attention: Xxxxxxx X. Xxxxx, or such
other address as may hereafter be furnished to the Certificateholders and the
other parties hereto in writing by the Transferor, Servicer or Claims
Administrator, (iii) in the case of the Contract of Insurance Holder, EFC
Securitized Assets, L.C., 0000 Xxxxx Xxxxx Xxxxx, Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxx, or such other address as may hereafter be
furnished to the Certificateholders and the other parties hereto in writing
by the Contract of Insurance Holder, (iv) in the case of the Trustee, First
Bank National Association, 000 Xxxx Xxxxx Xxxxxx, Xx. Xxxx, Xxxxxxxxx
00000, Attention: Structured Finance/Empire Funding 1997-A, and (v) in the
case of the Certificateholders, as set forth in the applicable Certificate
Register and Certificate Register. Any such notices shall be deemed to be
effective with respect to any party hereto upon the receipt of such
noticeby such party, except that notices to the Certificateholders shall be
effective upon mailing or personal delivery.
Section 13.07 Severability of Provisions.
--------------------------
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be held invalid for any reason whatsoever, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.
Section 13.08 No Partnership.
--------------
Nothing herein contained shall be deemed or construed to create any
partnership or joint venture between the parties hereto and the services of
the Servicer shall be rendered as an independent contractor.
Section 13.09 Counterparts.
------------
This Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together,
shall constitute one and the same Agreement.
Section 13.10 Successors and Assigns.
----------------------
This Agreement shall inure to the benefit of and be binding upon the
Servicer, the Transferor, the Depositor, the Claims Administrator, the
Contract of Insurance Holder, the Trustee and the Certificateholders and
their respective successors and permitted assigns.
Section 13.11 Headings.
--------
The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part
of this Agreement.
Section 13.12 Actions of Certificateholders.
-----------------------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by
Certificateholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Certificateholders
in person or by agent duly appointed in writing; and except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments are
delivered to the Depositor or the Servicer. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for
any purpose of this Agreement and conclusive in favor of the Depositor and
the Servicer if made in the manner provided in this Section.
(b) The fact and date of the execution by any Certificateholder of any
such instrument or writing may be proved in any reasonable manner which the
Depositor or the Servicer deems sufficient.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Certificateholder shall bind every holder of every
Certificate issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, or omitted to be
done, by the Depositor or the Servicer in reliance thereon, whether or not
notation of such action is made upon such Certificate.
(d) The Depositor or the Servicer may require additional proof of any
matter referred to in this Section 13.12 as it shall deem necessary.
-------------
Section 13.13 Reports to Rating Agencies.
--------------------------
(a) The Trustee shall provide to each Rating Agency copies of
statements, reports and notices, to the extent received or prepared in
connection herewith, as follows:
(i) copies of amendments to this Agreement;
(ii) notice of any substitution or repurchase of any Home Loans;
(iii) notice of any termination, replacement, succession,
merger or consolidation of either the Servicer or any Custodian;
(iv) notice of final payment on the Certificates;
(v) notice of any Event of Default;
(vi) copies of the annual independent auditor s report delivered
pursuant to Section 7.05, and copies of any compliance reports delivered
------------
by the Servicer hereunder including Section 7.04; and
------------
(vii) copies of any Distribution Date Statement pursuant to
Section 5.05(b); and
---------------
(b) With respect to the requirement of the Trustee to provide
statements, reports and notices to the Rating Agencies such statements,
reports and notices shall be delivered to the Rating Agencies at the
following addresses: (i) if to Standard & Poor's, 00 Xxxxxxxx, 00xx Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000-0000, Attention: Asset-Backed Monitoring Department
and (ii) if to Duff & Xxxxxx, 00 Xxxx Xxxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxx,
Xxxxxxxx 00000, Attention: MBS Monitoring.
* * *
IN WITNESS WHEREOF, the Depositor, the Transferor, the Servicer, the
Contract of Insurance Holder and the Trustee have caused their names to be
signed by their respective officers thereunto duly authorized, as of the day
and year first above written, to this amended and restated Pooling and
Servicing Agreement .
FINANCIAL ASSET SECURITIES CORP., as
Depositor
By:
-----------------------------------------
Name:
Title:
EMPIRE FUNDING CORP., as
Transferor, Servicer and Claims Administrator
By:
-----------------------------------------
Name:
Title:
EFC SECURITIZED ASSETS, L.C., as
Contract of Insurance Holder
By:
-----------------------------------------
Name:
Title:
FIRST BANK NATIONAL ASSOCIATION, as
Trustee
By:
-----------------------------------------
Name:
Title:
THE STATE OF ________ )
)
COUNTY OF ________ )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared _______________________, known to me to be a person and
officer whose name is subscribed to the foregoing instrument and acknowledged
to me that the same was the act of the said FINANCIAL ASSET SECURITIES CORP.,
as the Depositor, and that he executed the same as the act of such
corporation for the purpose and consideration therein expressed, and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF FINANCIAL ASSET SECURITIES CORP., this
the ____ day of April, 1997.
--------------------------------------------
Notary Public, State of ________
THE STATE OF ________ )
)
COUNTY OF ________ )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared _______________________, known to me to be the person and
officer whose name is subscribed to the foregoing instrument and acknowledged
to me that the same was the act of the said EMPIRE FUNDING CORP., as the
Transferor, Servicer and Claims Administrator, and that he executed the same
as the act of such corporation for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF EMPIRE FUNDING CORP., this the ____ day
of April, 1997.
------------------------------
Notary Public, State of ________
THE STATE OF ________ )
)
COUNTY OF ________ )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared _______________________, known to me to be the person and
officer whose name is subscribed to the foregoing instrument and acknowledged
to me that the same was the act of the said EFC SECURITIZED ASSETS, L.C., as
the Contract of Insurance Holder, and that he executed the same as the act of
such corporation for the purposes and consideration therein expressed, and in
the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF EFC SECURITIZED ASSETS, L.C., this the
____ day of April, 1997.
------------------------------
Notary Public, State of ________
THE STATE OF ________ )
)
COUNTY OF ________ )
BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared ____________________, known to me to be the person and
officer whose name is subscribed to the foregoing instrument and acknowledged
to me that the same was the act of the said FIRST BANK NATIONAL ASSOCIATION,
a national banking association, as the Trustee, and that she executed the
same as the act of such entity for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF FIRST BANK NATIONAL ASSOCIATION, this
the ____ day of April, 1997.
------------------------------
Notary Public, State of ________
EXHIBIT A
HOME LOAN SCHEDULE
EXHIBIT B
FORM OF SERVICER'S MONTHLY REMITTANCE
EXHIBIT C
(Reserved)
EXHIBIT D
FORM OF SENIOR CERTIFICATE
EXHIBIT E
FORM OF MEZZANINE CERTIFICATE
EXHIBIT F
FORM OF CLASS B CERTIFICATE
EXHIBIT G
FORM OF CLASS R CERTIFICATE
EXHIBIT H
FORM OF AGREEMENT OF APPOINTMENT AND
ACCEPTANCE OF SEPARATE TRUSTEE
This AGREEMENT OF APPOINTMENT AND ACCEPTANCE OF SEPARATE TRUSTEE (the
Agreement) dated as of March 1, 1997, among FINANCIAL ASSET SECURITIES CORP.,
as Depositor (the "Company"), FIRST BANK NATIONAL ASSOCIATION, as Trustee
(the "Trustee"), and EFC SECURITIZED ASSETS, L.C., as Separate Trustee (the
"Separate Trustee").
RECITALS
--------
A. The Company and the Trustee have entered into a certain pooling and
servicing agreement (the "Pooling Agreement") dated as of March 1, 1997 with
Empire Funding Corp., as transferor, servicer and claims administrator, and
EFC Securitized Assets, L.C., as contract of insurance holder relating to the
Empire Funding Home Loan REMIC Trust 1997-A (the "Trust").
B. Pursuant to the terms and conditions of the Pooling Agreement, the
Company will assign and deliver to the Trustee certain loans and the
mortgages related thereto comprising part of the Trust.
C. Pursuant to the terms and conditions of the Pooling Agreement, the
Trustee shall act as trustee for, and on behalf and for the benefit of, the
Certificateholders (as defined in the Pooling Agreement).
D. Regulations promulgated by the United States Department of Housing
and Urban Development ("HUD") prohibit the transfer of mortgage loans insured
by the Federal Housing Administration of HUD except to certain transferees,
which transferees would not include the Trustee but would include a HUD
approved contract of insurance holder, such as the Separate Trustee.
E. In order to permit the Company to transfer to the Trust certain FHA
Loans secured by Mortgages, the parties hereto intend to appoint, pursuant to
Section 11.10 of the Pooling Agreement, the Separate Trustee who, as a
separate trustee with and on behalf of the Trustee under the Pooling
Agreement, will be the assignee of the mortgage assignments in connection
with the formation of the Trust (the "Assignments"), and the Separate Trustee
is so named in the Pooling Agreement and in the Assignments, for the limited
purpose of holding record ownership of the FHA Loans secured by Mortgages and
consequently exercising such duties and functions as may be prescribed herein
and under the Pooling Agreement.
NOW, THEREFORE, the Company, the Trustee and the Separate Trustee do
hereby agree as follows:
1. Appointment of the Separate Trustee: Acceptance of Appointment.
--------------------------------------------------------------
To the extent that the Trust consists of FHA Loans secured by Mortgages, the
Company and the Trustee hereby appoint the Separate Trustee, as of the date
hereof, as separate trustee under the Pooling Agreement, of that part of the
Trust consisting of such FHA Loans and the Separate Trustee is hereby vested
with legal title to such FHA Loans, as of such date, the power of the
Separate Trustee to be exercised subject to the provisions of this Agreement
and Section 11.10 of the Pooling Agreement.
The Separate Trustee hereby accepts the foregoing appointment and agrees
to act as separate trustee with the Trustee, its successors and assigns under
the Pooling Agreement and the Assignments, and to exercise its duties as
separate trustee, in and only in the event of a written request by the
Trustee.
2. Limited Scope of Appointment and Duties. The Separate Trustee
---------------------------------------
shall act as separate trustee under the Pooling Agreement and the Assignments
only upon, and to the extent of, written instructions from the Trustee and no
other party. The Separate Trustee shall not be required to take, nor shall
it be responsible for taking, any action as separate trustee under the
Pooling Agreement or the Assignments unless it has received such written
instructions from the Trustee. The Separate Trustee shall hold only the
record, and not the beneficial, ownership of the FHA Loans secured by
Mortgages.
The Separate Trustee shall owe no duty as separate trustee under the
Pooling Agreement and the Assignments to any party other than the Trustee and
the Certificateholders. The Trustee shall consult with the Separate Trustee
with respect to decisions deemed by the Trustee to be significant to be made
with respect to the exercise of any powers to be exercised by the Separate
Trustee and, upon request of the Separate Trustee, will provide the Separate
Trustee with copies of all notices and other documents pursuant to which it
exercises its duties as the Trustee.
Any provision of this Agreement or the Pooling Agreement or the
Assignments to the contrary notwithstanding, the Separate Trustee shall have
no power to act in any manner inconsistent with the terms of the Pooling
Agreement with respect to, or to vary the investment in, the trust created
hereby.
3. Appointment of the Trustee as Attorney-in-Fact. Wherever and to
----------------------------------------------
the fullest extent permitted by law, the Separate Trustee hereby irrevocably
appoints the Trustee as its agent and Attorney-in-Fact for the purpose of
executing any and all documents which the Separate Trustee may be required,
as separate trustee under the Pooling Agreement and the Assignments, to
execute; provided, however, that nothing in this Agreement shall be deemed an
admission that the Separate Trustee is required to execute any of such
documents in its capacity as separate trustee under the Pooling Agreement and
the Assignments.
4. Notices. Notices and instructions under this Agreement shall be
-------
deemed given under this Agreement when sent by overnight courier or when
mailed by Certified Mail, Return Receipt Requested, to the parties at their
addresses provided below or at such other addresses as the parties may
direct:
If to the Trustee:
-----------------
First Bank National Association
First Trust Center
000 Xxxx Xxxxx Xxxxxx
Xx. Xxxx, Xxxxxxxxx 00000
Attention: _______________
---------
If to the Separate Trustee:
--------------------------
EFC Securitized Assets, L.C.
0000 Xxxxx Xxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Attention: ____________
---------
(with copy to the Trustee)
If to the Company:
-----------------
Financial Asset Securities Corp.
000 Xxxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: _______________
5. Choice of Law. This Agreement shall be governed by, and construed
-------------
in accordance with, the laws of the State of New York.
6. Counterparts. This Agreement may be executed in one or more
------------
counterparts and by the different parties hereto on separate counterparts,
each of which, when so executed, shall be deemed to be an original; such
counterparts, together, shall constitute one and the same agreement.
* * *
IN WITNESS WHEREOF, the Company and the Trustee and the Separate Trustee
hereby execute this Agreement as of the date first set forth above.
COMPANY:
FINANCIAL ASSET SECURITIES CORP..
By:
---------------------------------------
Name:
Title:
TRUSTEE:
FIRST BANK NATIONAL ASSOCIATION,
as Trustee
By:
---------------------------------------
Name:
Title:
SEPARATE TRUSTEE:
EFC SECURITIZED ASSETS, L.C.,
By:
---------------------------------------
Name:
Title:
