Exhibit 4.1
FIRST HORIZON ASSET SECURITIES INC.
Depositor
FIRST HORIZON HOME LOAN CORPORATION
Master Servicer
and
THE BANK OF NEW YORK,
Trustee
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POOLING AND SERVICING AGREEMENT
Dated as of May 1, 2004
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FIRST HORIZON MORTGAGE PASS-THROUGH TRUST 2004-4
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2004-4
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS........................................................................................5
ARTICLE II CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND WARRANTIES.....................................39
SECTION 2.1 Conveyance of Mortgage Loans.................................................................39
SECTION 2.2 Acceptance by Trustee of the Mortgage Loans..................................................45
SECTION 2.3 Representations and Warranties of the Master Servicer; Covenants of the Seller...............49
SECTION 2.4 Representations and Warranties of the Depositor as to the Mortgage Loans.....................51
SECTION 2.5 Delivery of Opinion of Counsel in Connection with Substitutions..............................51
SECTION 2.6 Execution and Delivery of Certificates.......................................................52
SECTION 2.7 REMIC Matters................................................................................52
SECTION 2.8 Covenants of the Master Servicer.............................................................55
ARTICLE III ADMINISTRATION AND SERVICING OF MORTGAGE LOANS..................................................55
SECTION 3.1 Master Servicer to Service Mortgage Loans....................................................55
SECTION 3.2 Subservicing; Enforcement of the Obligations of Servicers....................................56
SECTION 3.3 Rights of the Depositor and the Trustee in Respect of the Master Servicer....................57
SECTION 3.4 Trustee to Act as Master Servicer............................................................57
SECTION 3.5 Collection of Mortgage Loan Payments; Certificate Account; Distribution Account..............57
SECTION 3.6 Collection of Taxes, Assessments and Similar Items; Escrow Accounts..........................62
SECTION 3.7 Access to Certain Documentation and Information Regarding the Mortgage Loans.................63
SECTION 3.8 Permitted Withdrawals from the Certificate Account and Distribution Account..................63
SECTION 3.9 Maintenance of Hazard Insurance; Maintenance of Primary Insurance Policies...................65
SECTION 3.10 Enforcement of Due-on-Sale Clauses; Assumption Agreements...................................67
SECTION 3.11 Realization Upon Defaulted Mortgage Loans; Repurchase of Certain Mortgage Loans.............68
SECTION 3.12 Trustee to Cooperate; Release of Mortgage Files.............................................70
SECTION 3.13 Documents Records and Funds in Possession of Master Servicer to be Held for the Trustee.....71
SECTION 3.14 Master Servicing Compensation...............................................................72
SECTION 3.15 Access to Certain Documentation.............................................................72
SECTION 3.16 Annual Statement as to Compliance...........................................................72
SECTION 3.17 Annual Independent Public Accountants' Servicing Statement; Financial Statements............73
SECTION 3.18 Errors and Omissions Insurance; Fidelity Bonds..............................................73
ARTICLE IV DISTRIBUTIONS AND ADVANCES BY THE MASTER SERVICER................................................74
SECTION 4.1 Advances.....................................................................................74
SECTION 4.2 Priorities of Distribution...................................................................74
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SECTION 4.3 Method of Distribution.......................................................................80
SECTION 4.4 Allocation of Losses.........................................................................81
SECTION 4.5 [RESERVED]...................................................................................83
SECTION 4.6 Monthly Statements to Certificateholders.....................................................83
SECTION 4.7 Reserve Fund.................................................................................85
SECTION 4.8 Principal Distributions on the Insured Retail Certificates...................................86
ARTICLE V THE CERTIFICATES..................................................................................91
SECTION 5.1 The Certificates.............................................................................91
SECTION 5.2 Certificate Register; Registration of Transfer and Exchange of Certificates..................92
SECTION 5.3 Mutilated, Destroyed, Lost or Stolen Certificates............................................97
SECTION 5.4 Persons Deemed Owners........................................................................98
SECTION 5.5 Access to List of Certificateholders' Names and Addresses....................................98
SECTION 5.6 Maintenance of Office or Agency..............................................................98
ARTICLE VI THE DEPOSITOR AND THE MASTER SERVICER............................................................98
SECTION 6.1 Respective Liabilities of the Depositor and the Master Servicer..............................98
SECTION 6.2 Merger or Consolidation of the Depositor or the Master Servicer..............................98
SECTION 6.3 Limitation on Liability of the Depositor, the Master Servicer and Others.....................99
SECTION 6.4 Limitation on Resignation of Master Servicer.................................................99
ARTICLE VII DEFAULT........................................................................................100
SECTION 7.1 Events of Default...........................................................................100
SECTION 7.2 Trustee to Act; Appointment of Successor....................................................102
SECTION 7.3 Notification to Certificateholders..........................................................103
ARTICLE VIII CONCERNING THE TRUSTEE........................................................................103
SECTION 8.1 Duties of Trustee...........................................................................103
SECTION 8.2 Certain Matters Affecting the Trustee.......................................................105
SECTION 8.3 Trustee Not Liable for Certificates or Mortgage Loans.......................................106
SECTION 8.4 Trustee May Own Certificates................................................................106
SECTION 8.5 Trustee's Fees and Expenses.................................................................107
SECTION 8.6 Eligibility Requirements for Trustee........................................................107
SECTION 8.7 Resignation and Removal of Trustee..........................................................108
SECTION 8.8 Successor Trustee...........................................................................108
SECTION 8.9 Merger or Consolidation of Trustee..........................................................109
SECTION 8.10 Appointment of Co-Trustee or Separate Trustee..............................................109
SECTION 8.11 Tax Matters................................................................................110
SECTION 8.12 Periodic Filings...........................................................................112
ARTICLE IX TERMINATION.....................................................................................113
SECTION 9.1 Termination upon Liquidation or Purchase of all Mortgage Loans..............................113
SECTION 9.2 Final Distribution on the Certificates......................................................113
SECTION 9.3 Additional Termination Requirements.........................................................114
ARTICLE X CERTAIN MATTERS REGARDING MBIA...................................................................115
SECTION 10.1 Matters Concerning The Certificate Insurance Policy........................................115
SECTION 10.2 Matters Concerning MBIA....................................................................118
SECTION 10.3 Suspension and Termination of MBIA's Rights................................................119
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ARTICLE XI MISCELLANEOUS PROVISIONS........................................................................119
SECTION 11.1 Amendment..................................................................................119
SECTION 11.2 Recordation of Agreement; Counterparts.....................................................120
SECTION 11.3 Governing Law..............................................................................121
SECTION 11.4 Intention of Parties.......................................................................121
SECTION 11.5 Notices....................................................................................122
SECTION 11.6 Severability of Provisions.................................................................123
SECTION 11.7 Assignment.................................................................................123
SECTION 11.8 Limitation on Rights of Certificateholders.................................................123
SECTION 11.9 Inspection and Audit Rights................................................................124
SECTION 11.10 Certificates Nonassessable and Fully Paid.................................................124
SECTION 11.11 Limitations on Actions; No Proceedings....................................................124
SECTION 11.12 Acknowledgment of Seller..................................................................125
SCHEDULES
Schedule I: Mortgage Loan Schedule S-I-1
Schedule II: Representations and Warranties of the Master Servicer S-II-1
Schedule III: Form of Monthly Master Servicer Report S-III-1
EXHIBITS
Exhibit A-1: Form of Senior Certificate X-0-0
Xxxxxxx X-0: Form of Senior Certificate/Class I-A-PO Certificate A-2-1
Exhibit B: Form of Subordinated Certificate B-1
Exhibit C: Form of Residual Certificate C-1
Exhibit D: Form of Reverse of Certificates D-1
Exhibit E-1: Form of Initial Certification [Initial Mortgage Loans] E-1-1
Exhibit E-2 Form of Initial Certification [Subsequent Mortgage Loans] E-2-1
Exhibit F-1: Form of Delay Delivery Certification [Initial Mortgage Loans] F-1-1
Exhibit F-2 Form of Delay Delivery Certification [Subsequent Mortgage Loans] F-2-1
Exhibit G-1: Form of Final Certification of Custodian [Initial Mortgage Loans] G-1-1
Exhibit G-2: Form of Final Certification of Custodian [Subsequent Mortgage Loans] G-2-1
Exhibit H: Transfer Affidavit H-1
Exhibit I: Form of Transferor Certificate I-1
Exhibit J: Form of Investment Letter [Non-Rule 144A] J-1
Exhibit K: Form of Rule 144A Letter K-1
Exhibit L: Request for Release (for Trustee) L-1
Exhibit M: Request for Release (Mortgage Loan) M-1
Exhibit N: Form of Subsequent Transfer Agreement N-1
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THIS POOLING AND SERVICING AGREEMENT, dated as of May 1, 2004, among FIRST
HORIZON ASSET SECURITIES INC., a Delaware corporation, as depositor (the
"Depositor"), FIRST HORIZON HOME LOAN CORPORATION, a Kansas corporation, as
master servicer (the "Master Servicer"), and THE BANK OF NEW YORK, a banking
corporation organized under the laws of the State of New York, as trustee (the
"Trustee").
WITNESSETH THAT
In consideration of the mutual agreements herein contained, the parties
hereto agree as follows:
PRELIMINARY STATEMENT
The Depositor is the owner of the Trust Fund that is hereby conveyed to the
Trustee in return for the Certificates. The Trust Fund and the Rounding Account
for federal income tax purposes will consist of two separate REMICs. The
Certificates will represent the entire beneficial ownership interest in the
Trust Fund. The Regular Certificates will represent "regular interests" in the
Upper REMIC. The Class I-A-RU Certificates will represent the sole class of
residual interests in the Upper REMIC and the Class I-A-RL Certificates will
represent the sole class of residual interests in the Lower REMIC, as described
in Section 2.7. The "latest possible maturity date" for federal income tax
purposes of all REMIC regular interests created hereby will be the Latest
Possible Maturity Date.
The following table sets forth characteristics of the Certificates,
together with the minimum denominations and integral multiples in excess thereof
in which such Classes shall be issuable (except that one Certificate of each
Class of Certificates may be issued in a different amount and, in addition, one
Residual Certificate representing the Tax Matters Person Certificate may be
issued in a different amount):
[Remainder of Page Intentionally Left Blank]
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Initial Class Minimum Integral Multiples
Class Designation Certificate Balance Pass-Through Rate Denominations in Excess Minimum
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Class I-A-1 $218,120,057.48 5.250% $ 25,000 $1,000
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Class I-A-2 $ 23,000,000.00 5.250% $ 25,000 $1,000
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Class I-A-3 $ 23,500,000.00 5.250% $ 25,000 $1,000
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Class I-A-4 $ 2,142,858.00 (1) $ 25,000 $1,000
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Class I-A-5 $ 25,000,000.00 5.650% $ 1,000 $1,000
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Class I-A-6 $ 31,900,000.00 5.250% $ 25,000 $1,000
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Class I-A-7 $ 1,681,000.00 5.250% $ 25,000 $1,000
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Class I-A-PO $ 666,684.51 (1) $ 25,000 $1,000
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Class I-A-RU $ 50.00 5.250% $ 50 N/A
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Class I-A-RL $ 50.00 5.250% $ 50 N/A
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Class II-A-1 $ 37,991,000.00 4.500% $ 25,000 $1,000
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Class II-A-2 $ 17,809,000.00 4.500% $ 25,000 $1,000
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Class II-A-3 $ 10,019,000.00 4.500% $ 25,000 $1,000
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Class II-A-4 $ 7,313,000.00 4.500% $ 25,000 $1,000
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Class B-1 $ 5,731,000.00 variable(2) $100,000 $1,000
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Class B-2 $ 2,047,000.00 variable(2) $100,000 $1,000
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Class B-3 $ 819,000.00 variable(2) $100,000 $1,000
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Class B-4 $ 818,000.00 variable(2) $100,000 $1,000
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Class B-5 $ 410,000.00 variable(2) $100,000 $1,000
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Class B-6 $ 409,688.48 variable(2) $100,000 $1,000
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(1) The Class I-A-4 and Class I-A-PO Certificates will be Principal Only
Certificates and will not accrue interest.
(2) The Pass-Through Rate on each Class of Subordinated Certificates is variable
and will be equal to the weighted average of the Designated Mortgage Pool Rates,
weighted on the basis of the Group Subordinate Amount for each Mortgage Pool.
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Accrual Certificates................. None.
Accrual Components................... None.
Book-Entry Certificates.............. All Classes of Certificates other than
the Physical Certificates.
Certificate Group.................... With respect to Pool I, the Group I
Senior Certificates, and with respect to
Pool II, the Group II Senior
Certificates. The Subordinated
Certificates correspond to both Mortgage
Pools.
COFI Certificates.................... None.
Component Certificates............... None.
Components........................... None.
Delay Certificates................... All interest-bearing Classes of
Certificates other than the Non-Delay
Certificates, if any.
ERISA-Restricted Certificates........ The Residual Certificates, Class I-A-PO
Certificates, Private Certificates and
Certificates of any Class that no longer
satisfy the applicable rating
requirement of the Underwriters'
Exemption.
Group I NAS Certificates............. The Class I-A-6 and Class I-A-7
Certificates.
Group II NAS Certificates............ The Class II-A-4 Certificates
Group I Senior Certificates.......... The Class I-A-1, Class I-A-2, Class
I-A-3, Class I-A-4, Class I-A-5,
Class I-A-6, Class I-A-7, Class
I-A-PO, Class I-A-RU and Class
I-A-RL Certificates.
Group II Senior Certificates......... The Class II-A-1, Class II-A-2,
Class II-A-3 and Class II-A-4
Certificates.
Insured Retail Certificates.......... The Class I-A-5 Certificates.
Inverse Floating Rate Certificates... None.
LIBOR Certificates................... None.
Non-Delay Certificates............... None.
Notional Certificates................ None.
Offered Certificates................. All Classes of Certificates other
than the Class I-A-PO Certificates
and the Private Certificates.
Physical Certificates................ The Class I-A-PO Certificates, the
Residual Certificates and the
Private Certificates.
Planned Principal Classes............ None.
Principal Only Certificates.......... The Class I-A-4 and Class I-A-PO
Certificates.
Private Certificates................. The Class B-4, Class B-5 and Class
B-6 Certificates.
Rating Agencies...................... S&P and Fitch; except that, for purposes
of the Class X-0, X-0, Class B-3, Class
B-4 and Class B-5 Certificates, S&P
shall be the sole Rating Agency.
Regular Certificates................. All Classes of Certificates, other than
the Residual Certificates.
Residual Certificates................ The Class I-A-RU and Class I-A-RL
Certificates.
Scheduled Certificates............... None.
Senior Certificates.................. The Group I Senior Certificates and the
Group II Senior Certificates,
collectively.
Senior Support Certificates.......... The Class I-A-7 Certificates.
Subordinated Certificates............ The Class B-1, Class B-2, Class B-3,
Class B-4, Class B-5 and Class B-6
Certificates.
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Super Senior Certificates............ The Class I-A-6 Certificates.
Support Classes...................... None.
Targeted Principal Classes........... None.
Underwriters......................... Bear, Xxxxxxx & Co. Inc. and Banc of
America Securities LLC.
With respect to any of the foregoing designations as to which the
corresponding reference is "None," all defined terms and provisions herein
relating solely to such designations shall be of no force or effect, and any
calculations herein incorporating references to such designations shall be
interpreted without reference to such designations and amounts. Defined terms
and provisions herein relating to statistical rating agencies not designated
above as Rating Agencies shall be of no force or effect.
If the aggregate Stated Principal Balance of the Initial Mortgage Loans on
the Closing Date is equal to or greater than the aggregate Class Certificate
Balance of the Certificates as of such date, all references herein to "Aggregate
Subsequent Purchase Amount," "Aggregate Subsequent Transfer Amount,"
"Capitalized Interest Account," "Capitalized Interest Amount," "Funded Amount,"
"Funding Period," "Funding Period Distribution Date," "Pre-Funding Account,"
"Subsequent Cut-off Date," "Subsequent Mortgage Loan," "Subsequent Transfer
Agreement" and "Subsequent Transfer Date" shall be of no force or effect and all
provisions herein related thereto shall similarly be of no force or effect.
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ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
Accrual Certificates: Not applicable.
Accrual Components: Not applicable.
Accrued Certificate Interest: For any Class of Certificates entitled to
distributions of interest for any Distribution Date, the interest accrued during
the related Interest Accrual Period at the applicable Pass-Through Rate on the
Class Certificate Balance of such Class of Certificates immediately prior to
such Distribution Date, less such Class' share of any Net Interest Shortfall,
allocable among the outstanding Classes of Senior Certificates of the related
Certificate Group based on the Accrued Certificate Interest otherwise
distributable thereto, and allocable to the Subordinated Certificates based on
interest accrued on their related Apportioned Principal Balances.
Adjusted Mortgage Rate: As to each Mortgage Loan, and at any time, the per
annum rate equal to the Mortgage Rate less the Master Servicing Fee Rate.
Adjusted Net Mortgage Rate: As to each Mortgage Loan, and at any time, the
per annum rate equal to the Mortgage Rate less the related Expense Fee Rate.
Advance: The payment required to be made by the Master Servicer with
respect to any Distribution Date pursuant to Section 4.1, the amount of any such
payment being equal to the aggregate of payments of principal and interest (net
of the Master Servicing Fee and net of any net income in the case of any REO
Property) on the Mortgage Loans that were due on the related Due Date and not
received as of the close of business on the related Determination Date, less the
aggregate amount of any such delinquent payments that the Master Servicer has
determined would constitute a Nonrecoverable Advance if advanced.
Agreement: This Pooling and Servicing Agreement and all amendments or
supplements hereto.
Aggregate Subsequent Purchase Amount: With respect to any Subsequent
Transfer Date, the "Aggregate Subsequent Purchase Amount" identified in the
related Subsequent Transfer Agreement, which shall be equal to the aggregate
Stated Principal Balances of the Subsequent Mortgage Loans identified in such
Subsequent Transfer Agreement as of the applicable Subsequent Cut-off Date.
Aggregate Subsequent Transfer Amount: With respect to any Subsequent
Transfer Date, the aggregate Stated Principal Balances as of the related
Subsequent Cut-off Dates of the Subsequent Mortgage Loans conveyed on such
Subsequent Transfer Date, as listed on the revised Mortgage Loan Schedule
delivered pursuant to Section 2.1(d); provided, however, that such amount shall
not exceed the amount on deposit in the Pre-Funding Account.
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Allocable Share: With respect to any Class of Subordinated Certificates on
any Distribution Date, such Class' pro rata share (based on the Class
Certificate Balance of each Class entitled thereto) of each of the components of
the Subordinated Optimal Principal Amount for both Mortgage Pools; provided,
that, solely for purposes of this definition, the Subordinated Optimal Principal
Amount for Pool I will be reduced by the amounts required to be distributed to
the Class I-A-PO Certificates in respect of the Class I-A-PO Deferred Amount on
such Distribution Date, and any such reduction in the Subordinate Optimal
Principal Amount for Pool I shall reduce the amounts calculated pursuant to
clauses (1), (4), (2), (3) and (5) of the definition thereof, in that order, and
the Class Certificate Balances of each Class of Subordinated Certificates will
be reduced by such amounts in reverse order of priority until the respective
Class Certificate Balances of each Class of Subordinated Certificates has been
reduced to zero; provided further that, except as provided in this Agreement, no
Subordinated Certificates (other than the Class of Subordinated Certificates
with the highest priority of distribution) shall be entitled on any Distribution
Date to receive distributions pursuant to clauses (2), (3) and (5) of the
definition of Subordinated Optimal Principal Amount unless the Class Prepayment
Distribution Trigger for such Class is satisfied for such Distribution Date.
Amount Held for Future Distribution: As to any Distribution Date, the
aggregate amount held in the applicable subaccount of the Certificate Account at
the close of business on the related Determination Date on account of (i)
Principal Prepayments on the related Mortgage Pool received after the related
Prepayment Period and Liquidation Proceeds in the related Mortgage Pool received
in the month of such Distribution Date and (ii) all Scheduled Payments in the
related Mortgage Pool due after the related Due Date.
Apportioned Principal Balance: For any Class of Subordinated Certificates
and any Distribution Date, an amount equal to the Class Certificate Balance of
such Class immediately prior to that Distribution Date multiplied by a fraction,
the numerator of which is the applicable Group Subordinate Amount for such
Distribution Date and the denominator of which is the sum of the Group
Subordinate Amounts for such Distribution Date.
Appraised Value: With respect to any Mortgage Loan, the Appraised Value of
the related Mortgaged Property shall be: (i) with respect to a Mortgage Loan
other than a Refinancing Mortgage Loan, the lesser of (a) the value of the
Mortgaged Property based upon the appraisal made at the time of the origination
of such Mortgage Loan and (b) the sales price of the Mortgaged Property at the
time of the origination of such Mortgage Loan; (ii) with respect to a
Refinancing Mortgage Loan other than a Streamlined Documentation Mortgage Loan,
the value of the Mortgaged Property based upon the appraisal made at the time of
the origination of such Refinancing Mortgage Loan; and (iii) with respect to a
Streamlined Documentation Mortgage Loan, (a) if the loan-to-value ratio with
respect to the Original Mortgage Loan at the time of the origination thereof was
90% or less, the value of the Mortgaged Property based upon the appraisal made
at the time of the origination of the Original Mortgage Loan and (b) if the
loan-to-value ratio with respect to the Original Mortgage Loan at the time of
the origination thereof was greater than 90%, the value of the Mortgaged
Property based upon the appraisal (which may be a drive-by appraisal) made at
the time of the origination of such Streamlined Documentation Mortgage Loan.
Available Funds: For each Mortgage Pool, with respect to any Distribution
Date, an amount equal to the sum of:
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o all scheduled installments of interest, net of the Master
Servicing Fee, the Trustee Fee, the MBIA Premium and any amounts
due to First Horizon in respect of the Retained Yield on such
Distribution Date, and all scheduled installments of principal
due in respect of the Mortgage Loans in such Mortgage Pool on the
Due Date in the month in which the Distribution Date occurs and
received before the related Determination Date, together with any
Advances in respect thereof;
o all Insurance Proceeds and all Liquidation Proceeds received in
respect of the Mortgage Loans in such Mortgage Pool during the
calendar month before the Distribution Date, which in each case
is net of unreimbursed expenses incurred in connection with a
liquidation or foreclosure and unreimbursed Advances, if any;
o all Principal Prepayments received in respect of the Mortgage
Loans in such Mortgage Pool during the related Prepayment Period,
plus interest received thereon, net of any Prepayment Interest
Excess;
o any Compensating Interest in respect of Principal Prepayments in
Full received in respect of the Mortgage Loans in such Mortgage
Pool during the related Prepayment Period;
o any Substitution Adjustment Amount or the Purchase Price for any
Deleted Mortgage Loan in the related Mortgage Pool or a Mortgage
Loan in the related Mortgage Pool repurchased by the Seller or
the Master Servicer as of such Distribution Date, reduced by
amounts in reimbursement for Advances previously made and other
amounts that the Master Servicer is entitled to be reimbursed for
out of the Certificate Account pursuant to this Agreement; and
o in the case of Pool I, any amounts on deposit in the Pre-Funding
Account and the Capitalized Interest Account.
Bankruptcy Code: The United States Bankruptcy Reform Act of 1978, as
amended.
Bankruptcy Coverage Termination Date: The date on which the Bankruptcy Loss
Coverage Amount is reduced to zero.
Bankruptcy Loss: With respect to any Mortgage Loan, a Deficient Valuation
or Debt Service Reduction; provided, however, that a Bankruptcy Loss shall not
be deemed a Bankruptcy Loss hereunder so long as the Master Servicer has
notified the Trustee in writing that the Master Servicer is diligently pursuing
any remedies that may exist in connection with the related Mortgage Loan and
either (A) the related Mortgage Loan is not in default with regard to payments
due thereunder or (B) delinquent payments of principal and interest under the
related Mortgage Loan and any related escrow payments in respect of such
Mortgage Loan are being advanced on a current basis by the Master Servicer, in
either case without giving effect to any Debt Service Reduction or Deficient
Valuation.
Bankruptcy Loss Coverage Amount: As of any Determination Date, the
Bankruptcy Loss Coverage Amount shall equal the Initial Bankruptcy Coverage
Amount as reduced by (i) the aggregate amount of Bankruptcy Losses allocated to
the Certificates since the Cut-off Date
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and (ii) any permissible reductions in the Bankruptcy Loss Coverage Amount as
evidenced by a letter of each Rating Agency to the Trustee to the effect that
any such reduction will not result in a downgrading of the then current ratings
assigned to the Classes of Certificates rated by it (which shall be determined
without regard to the MBIA Policy). As of any Distribution Date on or after the
Cross-over Date, the Bankruptcy Loss Coverage Amount will be zero.
Blanket Mortgage: The mortgage or mortgages encumbering the Cooperative
Property.
Book-Entry Certificates: As specified in the Preliminary Statement.
Business Day: Any day other than (i) a Saturday or a Sunday, or (ii) a day
on which banking institutions in the City of Dallas, or the State of Texas or
the city in which the Corporate Trust Office of the Trustee or MBIA is located
are authorized or obligated by law or executive order to be closed.
Capitalized Interest Account: The separate Eligible Account designed as
such and created and maintained by the Trustee pursuant to Section 3.5 hereof.
The Capitalized Interest Account shall be treated as an "outside reserve fund"
under applicable Treasury regulations and shall not be part of either REMIC.
Except as provided in Section 3.5 hereof, any investment earnings on the amounts
on deposit in the Capitalized Interest Account shall be treated as owned by the
Seller and will be taxable to the Seller.
Capitalized Interest Amount: The amount deposited into the Capitalized
Interest Account on the Closing Date, which equals $1,074,683.64.
Certificate: Any one of the Certificates executed by the Trustee in
substantially the forms attached hereto as exhibits.
Certificate Account: The separate Eligible Account or Accounts created and
maintained by the Master Servicer pursuant to Section 3.5 with a depository
institution in the name of the Master Servicer for the benefit of the Trustee on
behalf of Certificateholders and designated "First Horizon Home Loan Corporation
in trust for the registered holders of First Horizon Asset Securities Inc.
Mortgage Pass-Through Certificates, Series 2004-4."
Certificate Owner: With respect to a Book-Entry Certificate, the Person who
is the beneficial owner of such Book-Entry Certificate.
Certificate Principal Balance: With respect to any Certificate and as of
any Distribution Date, the Certificate Principal Balance on the date of the
initial issuance of such Certificate, as reduced by:
(a) all amounts distributed on previous Distribution Dates on such
Certificate on account of principal,
(b) the principal portion of all Realized Losses previously allocated
to such Certificate, and
(c) in the case of a Subordinated Certificate, such Certificate's pro
rata share, if any, of the Subordinated Certificate Writedown
Amount for previous
8
Distribution Dates, provided that for the purpose of determining
the subrogation rights of MBIA arising under Section 10.1 hereof,
the Certificate Principal Balance shall not be reduced by the
amount of any payment made under the MBIA Policy in respect of
principal to Insured Retail Certificates except to the extent
such payments have been reimbursed to MBIA pursuant to the terms
of this Agreement.
Certificate Register: The register maintained pursuant to Section 5.2
hereof.
Certificateholder or Holder: The person in whose name a Certificate is
registered in the Certificate Register, except that, solely for the purpose of
giving any consent pursuant to this Agreement, any Certificate registered in the
name of the Depositor or the Seller or any affiliate or agent of the Depositor
or the Seller shall be deemed not to be Outstanding and the Percentage Interest
evidenced thereby shall not be taken into account in determining whether the
requisite amount of Percentage Interests necessary to effect such consent has
been obtained; provided, however, that if any such Person (including the
Depositor) owns 100% of the Percentage Interests evidenced by a Class of
Certificates, such Certificates shall be deemed to be Outstanding for purposes
of any provision hereof that requires the consent of the Holders of Certificates
of a particular Class as a condition to the taking of any action hereunder. The
Trustee is entitled to rely conclusively on a certification of the Depositor or
any affiliate of the Depositor in determining which Certificates are registered
in the name of an affiliate of the Depositor.
Class: All Certificates bearing the same class designation as set forth in
the Preliminary Statement.
Class Certificate Balance: With respect to any Class of Certificates and as
of any Distribution Date the aggregate of the Certificate Principal Balances of
all Certificates of such Class as of such date; provided, however, that solely
for purposes of determining MBIA's rights as subrogee to the Holders of Insured
Retail Certificates, the Class Certificate Balance of an Insured Retail
Certificate shall be deemed to not be reduced by any principal amounts paid to
the Holder thereof from MBIA Insurance Payments, unless such amounts have been
reimbursed to MBIA.
Class I-A-PO Deferred Amount: With respect to any Distribution Date through
the Cross-over Date, the sum of (1) the applicable PO Percentage of the
principal portion of Non-Excess Losses on a Discount Mortgage Loan in Pool I
allocated to the Class I-A-PO Certificates on such date, and (2) all amounts
previously allocated to the Class I-A-PO Certificates in respect of such losses
and not distributed to the Class I-A-PO Certificates on prior Distribution
Dates.
Class I-A-PO Deferred Payment Writedown Amount: For any Distribution Date,
the amount, if any, distributed on such date in respect of the Class I-A-PO
Deferred Amount pursuant to Section 4.2(a)(iv) herein. The Subordinated
Certificate Writedown Amount and the Class I-A-PO Deferred Payment Writedown
Amount will be allocated to the Classes of Subordinated Certificates in inverse
order of priority, until the Class Certificate Balance of each such Class has
been reduced to zero.
Class I-A-PO Principal Distribution Amount: With respect to each
Distribution Date, an amount equal to the sum of:
9
(1) the applicable PO Percentage of all Scheduled Payments of
principal due on each Mortgage Loan in Pool I on the first day of the month
in which the Distribution Date occurs, as specified in the amortization
schedule at the time applicable thereto, after adjustment for previous
principal prepayments and the principal portion of Debt Service Reductions
after the Bankruptcy Loss Coverage Amount has been reduced to zero, but
before any adjustment to such amortization schedule by reason of any other
bankruptcy or similar proceeding or any moratorium or similar waiver or
grace period;
(2) the applicable PO Percentage of the Stated Principal Balance of
each Mortgage Loan in Pool I which was the subject of a Principal
Prepayment in Full received by the Master Servicer during the related
Prepayment Period;
(3) the applicable PO Percentage of all partial prepayments of
principal for each Mortgage Loan in Pool I received by the Master Servicer
during the related Prepayment Period;
(4) the applicable PO Percentage of the sum of (a) the Liquidation
Proceeds allocable to principal on each Mortgage Loan in Pool I which
became a Liquidated Mortgage Loan during the related Prepayment Period,
other than Mortgage Loans described in clause (b), and (b) the principal
balance of each Mortgage Loan in Pool I that was purchased by a private
mortgage insurer during the related Prepayment Period as an alternative to
paying a claim under the related mortgage insurance policy; and
(5) the applicable PO Percentage of the sum of (a) the Stated
Principal Balance of each Mortgage Loan in Pool I which has repurchased by
the Seller in connection with such Distribution Date, and (b) the
difference, if any, between the Stated Principal Balance of a Mortgage Loan
in Pool I that has been replaced by the Seller with a Substitute Mortgage
Loan pursuant to this Agreement in connection with such Distribution Date
and the Stated Principal Balance of such Substitute Mortgage Loan.
For purposes of clauses (2) and (5) above, the Stated Principal Balance of
a Mortgage Loan will be reduced by the amount of any Deficient Valuation that
occurred prior to the reduction of the Bankruptcy Loss Coverage Amount to zero.
Class Prepayment Distribution Trigger: For a Class of Subordinated
Certificates (other than the Class of Subordinated Certificates with the highest
priority of distribution), a trigger that is satisfied on any Distribution Date
on which a fraction (expressed as a percentage), the numerator of which is the
aggregate Class Certificate Balance of such Class and each Class subordinate
thereto, if any, and the denominator of which is the aggregate Pool Principal
Balance for both Mortgage Pools with respect to such Distribution Date, equals
or exceeds such percentage calculated as of the Closing Date.
Closing Date: May 27, 2004.
Code: The Internal Revenue Code of 1986, including any successor or
amendatory provisions.
COFI: Not applicable.
10
COFI Certificates: Not applicable.
Compensating Interest: As to any Distribution Date and any Principal
Prepayment in respect of a Mortgage Loan that is received during the period from
the sixteenth day of the month (or, in the case of the first Distribution Date,
from the Cut-off Date) prior to the month of such Distribution Date through the
last day of such month, an additional payment to the related Mortgage Pool made
by the Master Servicer, to the extent funds are available from the Master
Servicing Fee, equal to the amount of interest at the Adjusted Net Mortgage Rate
for that Mortgage Loan from the date of the prepayment to the related Due Date;
provided that the aggregate of all such payments as to the Mortgage Loans in a
Mortgage Pool shall not exceed 0.0083% of the Pool Principal Balance of such
Mortgage Pool as of the related Determination Date, and provided further that if
a partial Principal Prepayment is applied on or after the first day of the month
following the month of receipt, no additional payment is required for such
Principal Prepayment.
Component: Not applicable.
Component Balance: Not applicable.
Component Certificates: Not applicable.
Cooperative Corporation: The entity that holds title (fee or an acceptable
leasehold estate) to the real property and improvements constituting the
Cooperative Property and which governs the Cooperative Property, which
Cooperative Corporation must qualify as a Cooperative Housing Corporation under
Section 216 of the Code.
Coop Shares: Shares issued by a Cooperative Corporation.
Cooperative Loan: Any Mortgage Loan secured by Coop Shares and a
Proprietary Lease.
Cooperative Property: The real property and improvements owned by the
Cooperative Corporation, including the allocation of individual dwelling units
to the holders of the Coop Shares of the Cooperative Corporation.
Cooperative Unit: A single family dwelling located in a Cooperative
Property.
Corporate Trust Office: The designated office of the Trustee in the State
of New York at which at any particular time its corporate trust business with
respect to this Agreement shall be administered, which office at the date of the
execution of this Agreement is located at The Bank of New York, 000 Xxxxxxx
Xxxxxx, 0X, Xxx Xxxx, Xxx Xxxx 00000 (Attn: Corporate Trust Mortgage-Backed
Securities Group, First Horizon Asset Securities Inc. Series 2004-4), facsimile
no. (000) 000-0000, and which is the address to which notices to and
correspondence with the Trustee should be directed.
Corresponding Classes of Certificates: As to any Lower REMIC Interest in
Section 2.7, the Class or Classes that are identified in Section 2.7 as
corresponding to such Lower REMIC interest.
11
Cross-over Date: The Distribution Date on which the respective Class
Certificate Balances of each Class of Subordinated Certificates have been
reduced to zero.
Custodial Agreement: The Custodial Agreement dated as of May 27, 2004 by
and among the Trustee, the Master Servicer and the Custodian.
Custodian: LaSalle Bank National Association, a national banking
association, and its successors and assigns, as custodian under the Custodial
Agreement.
Cut-off Date: With respect to any Initial Mortgage Loan, the Initial
Cut-off Date; with respect to any Subsequent Mortgage Loan, the related
Subsequent Cut-off Date.
Cut-off Date Pool Principal Balance: The sum of (i) the Initial Cut-off
Date Pool Principal Balance and (ii) the Pre-Funded Amount.
Cut-off Date Principal Balance: As to any Mortgage Loan, the Stated
Principal Balance thereof as of the close of business on the applicable Cut-off
Date.
Debt Service Reduction: With respect to any Mortgage Loan, a reduction by a
court of competent jurisdiction in a proceeding under the Bankruptcy Code in the
Scheduled Payment for such Mortgage Loan which became final and non-appealable,
except such a reduction resulting from a Deficient Valuation or any reduction
that results in a permanent forgiveness of principal.
Deceased Holder: With respect to a Holder of any Insured Retail
Certificate, as defined in Section 4.8(b).
Defective Mortgage Loan: Any Mortgage Loan which is required to be
repurchased pursuant to Section 2.2 or 2.3.
Deficient Valuation: With respect to any Mortgage Loan, a valuation by a
court of competent jurisdiction of the Mortgaged Property in an amount less than
the then-outstanding indebtedness under the Mortgage Loan, or any reduction in
the amount of principal to be paid in connection with any Scheduled Payment that
results in a permanent forgiveness of principal, which valuation or reduction
results from an order of such court which is final and non-appealable in a
proceeding under the Bankruptcy Code.
Definitive Certificates: Any Certificate evidenced by a Physical
Certificate and any Certificate issued in lieu of a Book-Entry Certificate
pursuant to Section 5.2(e).
Delay Certificates: Not applicable.
Delay Delivery Mortgage Loans: The Mortgage Loans for which all or a
portion of a related Mortgage File is not delivered to Trustee on the Closing
Date or Subsequent Transfer Date, as applicable. The number of Delay Delivery
Mortgage Loans shall not exceed 25% of the aggregate number of Mortgage Loans as
of the Closing Date (in the case of the Initial Mortgage Loans) or the
applicable Subsequent Transfer Date (in the case of the Subsequent Mortgage
Loans).
Deleted Mortgage Loan: As defined in Section 2.3(b) hereof.
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Denomination: With respect to each Certificate, the amount set forth on the
face thereof as the "Initial Certificate Balance of this Certificate" or the
Percentage Interest appearing on the face thereof.
Depositor: First Horizon Asset Securities Inc., a Delaware corporation, or
its successor in interest.
Depository: The initial Depository shall be The Depository Trust Company,
the nominee of which is CEDE & Co., as the registered Holder of the Book-Entry
Certificates. The Depository shall at all times be a "clearing corporation" as
defined in Section 8-102(a)(5) of the Uniform Commercial Code of the State of
New York.
Depository Participant: A broker, dealer, bank or other financial
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
Designated Mortgage Pool Rates: With respect to Pool I, 5.25%, and with
respect to Pool II, 4.50%.
Determination Date: As to any Distribution Date, the earlier of (i) the
third Business Day after the 15th day of each month, and (ii) the second
Business Day prior to the related Distribution Date.
Discount Mortgage Loan: Any Mortgage Loan in Pool I with an Adjusted Net
Mortgage Rate that is less than the related Designated Mortgage Pool Rate.
Distribution Account: The separate Eligible Account created and maintained
by the Trustee pursuant to Section 3.5 in the name of the Trustee for the
benefit of the Certificateholders and designated "The Bank of New York, in trust
for registered Holders of First Horizon Asset Securities Inc. Mortgage
Pass-Through Certificates, Series 2004-4." Funds in the Distribution Account
shall be held in trust for the Certificateholders for the uses and purposes set
forth in this Agreement.
Distribution Account Deposit Date: As to any Distribution Date, 1:30 p.m.
Central time on the Business Day immediately preceding such Distribution Date.
Distribution Date: The 25th day of each calendar month after the initial
issuance of the Certificates, or if such 25th day is not a Business Day, the
next succeeding Business Day, commencing in June 2004.
Due Date: With respect to any Distribution Date, the first day of the month
in which the related Distribution Date occurs.
Eligible Account: Any of (i) an account or accounts maintained with a
federal or state chartered depository institution or trust company the
short-term unsecured debt obligations of which (or, in the case of a depository
institution or trust company that is the principal subsidiary of a holding
company, the debt obligations of such holding company) have the highest
short-term ratings of each Rating Agency at the time any amounts are held on
deposit therein, or (ii) an account or accounts in a depository institution or
trust company in which such accounts are
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insured by the FDIC or the SAIF (to the limits established by the FDIC or the
SAIF, as applicable) and the uninsured deposits in which accounts are otherwise
secured such that, as evidenced by an Opinion of Counsel delivered to the
Trustee, MBIA and to each Rating Agency, the Certificateholders have a claim
with respect to the funds in such account or a perfected first priority security
interest against any collateral (which shall be limited to Permitted
Investments) securing such funds that is superior to claims of any other
depositors or creditors of the depository institution or trust company in which
such account is maintained, or (iii) a trust account or accounts maintained with
(a) the trust department of a federal or state chartered depository institution
or (b) a trust company, acting in its fiduciary capacity or (iv) any other
account acceptable to each Rating Agency. Eligible Accounts may bear interest,
and may include, if otherwise qualified under this definition, accounts
maintained with the Trustee.
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
ERISA-Qualifying Underwriting: With respect to any ERISA-Restricted
Certificate, a best efforts or firm commitment underwriting or private placement
that meets the requirements of the Underwriters' Exemption.
ERISA-Restricted Certificate: As specified in the Preliminary Statement.
Escrow Account: The Eligible Account or Accounts established and maintained
pursuant to Section 3.6(a) hereof.
Event of Default: As defined in Section 7.1 hereof.
Excess Loss: With respect to a Mortgage Pool, the amount of any (i) Fraud
Loss realized after the Fraud Loss Coverage Termination Date, (ii) Special
Hazard Loss realized after the Special Hazard Coverage Termination Date or (iii)
Deficient Valuation realized after the Bankruptcy Coverage Termination Date.
Excess Proceeds: With respect to any Liquidated Mortgage Loan, the amount,
if any, by which the sum of any Liquidation Proceeds of such Mortgage Loan
received in the calendar month in which such Mortgage Loan became a Liquidated
Mortgage Loan, net of any amounts previously reimbursed to the Master Servicer
as Nonrecoverable Advance(s) with respect to such Mortgage Loan pursuant to
Section 3.8(a)(iii), exceeds (i) the unpaid principal balance of such Liquidated
Mortgage Loan as of the Due Date in the month in which such Mortgage Loan became
a Liquidated Mortgage Loan plus (ii) accrued interest at the Mortgage Rate from
the Due Date as to which interest was last paid or advanced (and not reimbursed)
to Certificateholders up to the Due Date applicable to the Distribution Date
immediately following the calendar month during which such liquidation occurred.
Expense Fee Rate: As to each Mortgage Loan, the sum of the related Master
Servicing Fee Rate and the Trustee Fee Rate.
FDIC: The Federal Deposit Insurance Corporation, or any successor thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created and existing under Title III of the
Emergency Home Finance Act of 1970, as amended, or any successor thereto.
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FIRREA: The Financial Institutions Reform, Recovery, and Enforcement Act of
1989.
First Horizon: First Horizon Home Loan Corporation, a Kansas corporation
and an indirect wholly owned subsidiary of First Tennessee National Corporation,
a Tennessee corporation.
Fitch: Fitch Ratings or any successor thereto. If Fitch is designated as a
Rating Agency in the Preliminary Statement, for purposes of Section 11.5(b) the
address for notices to Fitch shall be Fitch, Inc., Xxx Xxxxx Xxxxxx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Residential Mortgage Surveillance Group, or
such other address as Fitch may hereafter furnish to the Depositor and the
Master Servicer.
FNMA: The Federal National Mortgage Association, a federally chartered and
privately owned corporation organized and existing under the Federal National
Mortgage Association Charter Act, or any successor thereto.
Fraud Loan: A Liquidated Mortgage Loan as to which a Fraud Loss has
occurred.
Fraud Losses: Realized Losses on Mortgage Loans as to which a loss is
sustained by reason of a default arising from fraud, dishonesty or
misrepresentation in connection with the related Mortgage Loan, including a loss
by reason of the denial of coverage under any related Primary Insurance Policy
because of such fraud, dishonesty or misrepresentation.
Fraud Loss Coverage Amount: As of the Closing Date, $3,274,967. As of any
Distribution Date from the first anniversary of the Cut-off Date and prior to
the third anniversary of the Cut-off Date, the Fraud Loss Coverage Amount will
equal $$3,274,967 minus the aggregate amount of Fraud Losses that would have
been allocated to the Subordinated Certificates in the absence of the Loss
Allocation Limitation since the Cut-off Date. As of any Distribution Date from
the third to the fifth anniversary of the Cut-off Date, the Fraud Loss Coverage
Amount will equal (1) the lesser of (a) the Fraud Loss Coverage Amount as of the
most recent anniversary of the Cut-off Date and (b) 0.5% of the aggregate
outstanding principal balance of all of the Mortgage Loans as of the most recent
anniversary of the Cut-off Date minus (2) the Fraud Losses that would have been
allocated to the Subordinated Certificates in the absence of the Loss Allocation
Limitations since the most recent anniversary of the Cut-off Date. As of any
Distribution Date on or after the earlier of the Cross-over Date or the fifth
anniversary of the Cut-off Date, the Fraud Loss Coverage Amount shall be zero.
Fraud Loss Coverage Termination Date: The date on which the Fraud Loss
Coverage Amount is reduced to zero.
Funding Period: The period from the Closing Date until the earlier of (i)
the date on which the amount on deposit in the Pre-Funding Account has been
reduced to $100,000, or (ii) August 26, 2004.
Funding Period Distribution Date: Each Distribution Date during the Funding
Period and, if the Funding Period ends after the Distribution Date in a month,
the immediately succeeding Distribution Date.
Group I NAS Certificates: As specified in the Preliminary Statement.
15
Group I NAS Distribution Percentage: 0% through the Distribution Date in
May 2009; 30% of the applicable Group I NAS Percentage thereafter through the
Distribution Date in May 2010; 40% of the applicable Group I NAS Percentage
thereafter through the Distribution Date in May 2011; 60% of the applicable
Group I NAS Percentage thereafter through the Distribution Date in May 2012; 80%
of the applicable Group I NAS Percentage thereafter through the Distribution
Date in May 2013; and 100% of the applicable Group I NAS Percentage thereafter.
Group I NAS Percentage: For any Distribution Date, the lesser of (x) 100%
and (y) the percentage (carried to six places rounded up) obtained by dividing
(1) the aggregate Class Certificate Balance of the Group I NAS Certificates
immediately prior to such Distribution Date by (2) the aggregate Pool Principal
Balance of all the Mortgage Loans in Pool I (excluding the applicable PO
Percentage of the Principal Balance of each Discount Mortgage Loan included
therein) for such Distribution Date.
Group I NAS Principal Distribution Amount: For any Distribution Date, the
sum of:
(a) the total of the amounts described in clause (1) of the definition
of Senior Optimal Principal Amount for Pool I for such date (determined
without the application of the related Senior Percentage) multiplied by the
Group I NAS Distribution Percentage for such date; and
(b) the total of the amounts described in clauses (2), (3), (4) and
(5) of the definition of Senior Optimal Principal Amount for Pool I for such
date (determined without the application of the related Senior Percentage and
Senior Prepayment Percentage) multiplied by the Group I NAS Distribution
Percentage for such date.
Group I Senior Certificates: As specified in the Preliminary Statement.
Group II NAS Certificates: As specified in the Preliminary Statement.
Group II NAS Distribution Percentage: 0% through the Distribution Date in
May 2009; 30% of the applicable Group II NAS Percentage thereafter through the
Distribution Date in May 2010; 40% of the applicable Group II NAS Percentage
thereafter through the Distribution Date in May 2011; 60% of the applicable
Group II NAS Percentage thereafter through the Distribution Date in May 2012;
80% of the applicable Group II NAS Percentage thereafter through the
Distribution Date in May 2013; and 100% of the applicable Group II NAS
Percentage thereafter.
Group II NAS Percentage: For any Distribution Date, the lesser of (x) 100%
and (y) the percentage (carried to six places rounded up) obtained by dividing
(1) the aggregate Class Certificate Balance of the Group II NAS Certificates
immediately prior to such Distribution Date by (2) the aggregate Pool Principal
Balance of all Mortgage Loans in Pool II.
Group II NAS Principal Distribution Amount: For any Distribution Date, the
sum of:
(a) the total of the amounts described in clause (1) of the definition
of Senior Optimal Principal Amount for Pool II for such date (determined
without the application of the related Senior Percentage) multiplied by the
Group II NAS Distribution Percentage for such date; and
16
(b) the total of the amounts described in clauses (2), (3), (4) and
(5) of the definition of Senior Optimal Principal Amount for Pool II for such
date (determined without the application of the related Senior Percentage)
multiplied by the Group II NAS Distribution Percentage for such date.
Group II Senior Certificates: As specified in the Preliminary Statement.
Group Subordinate Amount: For a Mortgage Pool and any Distribution Date;
the excess of (a) the Pool Principal Balance of such Mortgage Pool for the
immediately preceding Distribution Date, over (b) the aggregate Class
Certificate Balance of the Senior Certificates of the related Certificate Group
immediately prior to that Distribution Date.
Index: Not applicable.
Indirect Participant: A broker, dealer, bank or other financial institution
or other Person that clears through or maintains a custodial relationship with a
Depository Participant.
Initial Bankruptcy Coverage Amount: $100,000.
Initial Component Balance: Not applicable.
Initial Cut-off Date: May 1, 2004.
Initial Cut-off Date Pool Principal Balance: $327,496,730.11.
Initial MLPA: The Mortgage Loan Purchase Agreement dated as of May 27,
2004, by and between First Horizon Home Loan Corporation, as seller, and First
Horizon Asset Securities Inc., as purchaser, as related to the transfer, sale
and conveyance of the Mortgage Loans.
Initial Mortgage Loan: A Mortgage Loan conveyed to the Trust Fund on the
Closing Date pursuant to this Agreement as identified on the Mortgage Loan
Schedule delivered to the Trustee on the Closing Date.
Insurance Agreement: The agreement dated May 1, 2004 by and among MBIA, the
Seller, the Master Servicer, the Depositor and the Trustee.
Insurance Policy: With respect to any Mortgage Loan included in the Trust
Fund, any insurance policy, including all riders and endorsements thereto in
effect, including any replacement policy or policies for any Insurance Policies.
Insurance Proceeds: Proceeds paid by an insurer pursuant to any Insurance
Policy, in each case other than any amount included in such Insurance Proceeds
in respect of Insured Expenses.
Insured Expenses: Expenses covered by an Insurance Policy or any other
insurance policy with respect to the Mortgage Loans.
Insured Retail Certificates: As specified in the Preliminary Statement.
17
Interest Accrual Period: With respect to each Class of Delay Certificates
and any Distribution Date, the calendar month prior to the month of such
Distribution Date. With respect to any Non-Delay Certificates and any
Distribution Date, the one month period commencing on the 25th day of the month
preceding the month in which such Distribution Date occurs and ending on the
24th day of the month in which such Distribution Date occurs.
Interest Determination Date: Not applicable.
Latest Possible Maturity Date: As to each Class of Subordinated
Certificates and each Class of Senior Certificates in the Certificate Group
corresponding to Pool I, the fourth Distribution Date following the third
anniversary of the scheduled maturity date of the Mortgage Loan in Pool I having
the latest scheduled maturity date as of the Cut-off Date; as to each Class of
Senior Certificates in the Certificate Group corresponding to Pool II, the
Distribution Date following the third anniversary of the scheduled maturity date
of the Mortgage Loan in Pool II having the latest scheduled maturity date as of
the Cut-off Date.
Lender PMI Mortgage Loan: Not applicable.
LIBOR: Not applicable.
LIBOR Certificates: Not applicable.
Liquidated Mortgage Loan: With respect to any Distribution Date, a
defaulted Mortgage Loan (including any REO Property) which was liquidated in the
calendar month preceding the month of such Distribution Date and as to which the
Master Servicer has determined (in accordance with this Agreement) that it has
received all amounts it expects to receive in connection with the liquidation of
such Mortgage Loan, including the final disposition of an REO Property.
Liquidation Proceeds: Amounts, including Insurance Proceeds and any
Unanticipated Recoveries, received in connection with the partial or complete
liquidation of defaulted Mortgage Loans, whether through trustee's sale,
foreclosure sale or otherwise or amounts received in connection with any
condemnation or partial release of a Mortgaged Property and any other proceeds
received in connection with an REO Property, less the sum of related
unreimbursed Master Servicing Fees, Servicing Advances and Advances.
Living Holder: Any Certificate Owner of an Insured Retail Certificate,
other than a Deceased Holder.
Loan-to-Value Ratio: With respect to any Mortgage Loan and as to any date
of determination, the fraction (expressed as a percentage) the numerator of
which is the principal balance of the related Mortgage Loan at such date of
determination and the denominator of which is the Appraised Value of the related
Mortgaged Property.
Loss Allocation Limitation: As defined in Section 4.4(f).
Lost Mortgage Note: Any Mortgage Note, the original of which was
permanently lost or destroyed and has not been replaced.
18
Lower REMIC: The segregated pool of assets consisting of the Rounding
Account and the Trust Fund but excluding the Retained Yield, the Capitalized
Interest Account, the Pre-Funding Account and the Lower REMIC Interests.
Lower REMIC Interests: The regular REMIC interests issued by the Lower
REMIC as set forth in Section 2.7.
Lower REMIC Subordinated Balance Ratio: As to any Distribution Date, the
ratio of the principal balances of each of the Lower REMIC Interest L-I-A-1 and
Lower REMIC Interest L-II-A-1, which shall be maintained pursuant to Section
2.7, equal to the ratio of the Group Subordinate Amount for Pool I to the Group
Subordinate Amount for Pool II; after distributions are made on such
Distribution Date such ratio of Group Subordinate Amounts is determined assuming
distributions on the Certificates (and allocation of Realized Losses) have been
made on such Distribution Date.
Maintenance: With respect to any Cooperative Unit, the rent paid by the
Mortgagor to the Cooperative Corporation pursuant to the Proprietary Lease.
Majority in Interest: As to any Class of Regular Certificates, the Holders
of Certificates of such Class evidencing, in the aggregate, at least 51% of the
Percentage Interests evidenced by all Certificates of such Class.
Master Servicer: First Horizon Home Loan Corporation, a Kansas corporation,
and its successors and assigns, in its capacity as master servicer hereunder.
Master Servicer Advance Date: As to any Distribution Date, 1:30 p.m.
Central time on the Business Day immediately preceding such Distribution Date.
Master Servicing Fee: As to each Mortgage Loan and any Distribution Date,
an amount payable out of each full payment of interest received on such Mortgage
Loan and equal to one-twelfth of the Master Servicing Fee Rate multiplied by the
Stated Principal Balance of such Mortgage Loan as of the Due Date in the month
of such Distribution Date (prior to giving effect to any Scheduled Payments due
on such Mortgage Loan on such Due Date), subject to reduction as provided in
Section 3.14.
Master Servicing Fee Rate: For each Mortgage Loan, other than a Discount
Mortgage Loan, a per annum rate equal to 0.244%. For each Discount Mortgage
Loan, a per annum rate equal to the excess, if any, of the Mortgage Rate thereof
over 5.006%.
MBIA: MBIA Insurance Corporation, a stock insurance company organized and
created under the laws of the State of New York, and any successors thereto.
MBIA is the insurer of the Insured Retail Certificates under the MBIA Policy.
MBIA Default: The existence and continuance of a failure by MBIA to make a
payment required under the MBIA Policy in accordance with its terms.
MBIA Insurance Payment: Any payment made by MBIA with respect to any
Insured Retail Certificates under the MBIA Policy.
19
MBIA Policy: The Certificate Guaranty Insurance Policy issued by MBIA for
the benefit of the Holders of any Insured Retail Certificates, including any
endorsements thereto.
MBIA Policy Payments Account: The separate Eligible Account created and
maintained by the Trustee pursuant to Section 10.1(c) in the name of the Trustee
for the benefit of the Holders of the Insured Retail Certificates and designated
"The Bank of New York in trust for registered holders of First Horizon Mortgage
Pass-Through Trust 2004-4, Mortgage Pass-Through Certificates, Series 2004-4
$25,000,000 5.650% Class I-A-5 Certificates." Funds in the MBIA Policy Payments
Account shall be held in trust for the Holders of the Insured Retail
Certificates for the uses and purposes set forth in this Agreement.
MBIA Premium: As to the Closing Date and each Distribution Date thereafter,
the amount to be paid to MBIA pursuant to the Commitment Letter dated May 26,
2004 between MBIA and Bear, Xxxxxxx & Co. Inc.
MLPAs: The Initial MLPA and each Subsequent MLPA.
Monthly Statement: The statement delivered to the Certificateholders
pursuant to Section 4.6.
Moody's: Xxxxx'x Investors Service, Inc., or any successor thereto. If
Xxxxx'x is designated as a Rating Agency in the Preliminary Statement, for
purposes of Section 11.5(b) the address for notices to Moody's shall be Xxxxx'x
Investors Service, Inc., 00 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention:
Residential Pass-Through Monitoring, or such other address as Moody's may
hereafter furnish to the Depositor or the Master Servicer.
Mortgage: The mortgage, deed of trust or other instrument creating a first
lien on an estate in fee simple or leasehold interest in real property securing
a Mortgage Note.
Mortgage File: The mortgage documents listed in Section 2.1 hereof
pertaining to a particular Mortgage Loan and any additional documents delivered
to the Trustee to be added to the Mortgage File pursuant to this Agreement.
Mortgage Loan Schedule: The list of Mortgage Loans (as from time to time
amended by the Master Servicer to reflect the addition of Substitute Mortgage
Loans or the deletion of Deleted Mortgage Loans pursuant to this Agreement and
the addition of any Subsequent Mortgage Loans pursuant to the related Subsequent
Transfer Agreement) transferred to the Trustee as part of the Trust Fund and
from time to time subject to this Agreement, attached hereto as Schedule I,
setting forth the following information with respect to each Mortgage Loan:
(1) the loan number;
(2) the Mortgagor's name and the street address of the Mortgaged
Property, including the zip code;
(3) the maturity date;
(4) the original principal balance;
20
(5) the Cut-off Date Principal Balance;
(6) the first payment date of the Mortgage Loan;
(7) the Scheduled Payment in effect as of the Cut-off Date;
(8) the Loan-to-Value Ratio at origination;
(9) a code indicating whether the residential dwelling at the
time of origination was represented to be owner-occupied;
(10) a code indicating whether the residential dwelling is either
(a) a detached single family dwelling (b) a dwelling in a de
minimis PUD, (c) a condominium unit or PUD (other than a de
minimis PUD), (d) a two-to-four unit residential property or
(e) a Cooperative Unit;
(11) the Mortgage Rate;
(12) the purpose for the Mortgage Loan;
(13) the type of documentation program pursuant to which the
Mortgage Loan was originated; and
(14) the Master Servicing Fee for the Mortgage Loan.
Such schedule shall also set forth the total of the amounts described under
(4) and (5) above for all of the Mortgage Loans. The Seller shall update the
Mortgage Loan Schedule in connection with each Subsequent Transfer Agreement
within a reasonable period of time after delivery to it of the Schedule of
Subsequent Mortgage Loans attached to the related Subsequent Transfer Agreement
as Schedule A thereto.
Mortgage Loans: The Initial Mortgage Loans, the Subsequent Mortgage Loans
and such other mortgage loans transferred and assigned to the Trustee pursuant
to the provisions hereof as from time to time are held as a part of the Trust
Fund (including any REO Property), the mortgage loans so held being identified
in the Mortgage Loan Schedule, notwithstanding foreclosure or other acquisition
of title of the related Mortgaged Property.
Mortgage Note: The original executed note or other evidence of indebtedness
evidencing the indebtedness of a Mortgagor under a Mortgage Loan.
Mortgage Pool: Either Pool I or Pool II.
Mortgage Rate: The annual rate of interest borne by a Mortgage Note from
time to time, net of any insurance premium charged by the mortgagee to obtain or
maintain any Primary Insurance Policy.
Mortgaged Property: The underlying property securing a Mortgage Loan,
which, with respect to a Cooperative Loan, is the related Coop Shares and
Proprietary Lease.
21
Mortgagor: The obligor(s) on a Mortgage Note.
National Cost of Funds Index: The National Monthly Median Cost of Funds
Ratio to SAIF-Insured Institutions published by the Office of Thrift
Supervision.
Net Interest Shortfall: For any Distribution Date and each Mortgage Pool,
the sum of (a) the amount of interest which would otherwise have been received
for any Mortgage Loan in such Mortgage Pool that was the subject of (x) a Relief
Act Reduction or (y) a Special Hazard Loss, Fraud Loss, or Deficient Valuation,
after the exhaustion of the respective amounts of coverage for those types of
losses provided by the Subordinated Certificates; and (b) any Net Prepayment
Interest Shortfalls in respect of such Mortgage Pool.
Net Prepayment Interest Shortfalls: As to any Distribution Date and each
Mortgage Pool, the amount by which the aggregate of Prepayment Interest
Shortfalls in respect of the Mortgage Loans or such Mortgage Pool during the
related Prepayment Period exceeds an amount equal to the Compensating Interest
paid in respect of such Mortgage Loans, if any, for such Distribution Date.
Non-Delay Certificates: Not applicable.
Non-Discount Mortgage Loan: Any Mortgage Loan in Pool I with an Adjusted
Net Mortgage Rate that is equal to or greater than the related Designated
Mortgage Pool Rate.
Non-Excess Loss: Any Realized Loss other than an Excess Loss.
Non-PO Percentage: (a) With respect to a Discount Mortgage Loan, the
fraction, expressed as a percentage, equal to the Adjusted Net Mortgage Rate
divided by the related Designated Mortgage Pool Rate, and (b) with respect to
each Non-Discount Mortgage Loan, 100%.
Nonrecoverable Advance: Any portion of an Advance previously made or
proposed to be made by the Master Servicer that, in the good faith judgment of
the Master Servicer, will not be ultimately recoverable by the Master Servicer
from the related Mortgagor, related Liquidation Proceeds or otherwise.
Notice of Final Distribution: The notice to be provided pursuant to Section
9.2 to the effect that final distribution on any of the Certificates shall be
made only upon presentation and surrender thereof.
Notional Amount: Not applicable.
Notional Amount Component: Not applicable.
Notional Certificates: Not applicable.
Offered Certificates: As specified in the Preliminary Statement.
Officer's Certificate: A Certificate (i) signed by the Chairman of the
Board, the Vice Chairman of the Board, the President, a Managing Director, a
Vice President (however
22
denominated), an Assistant Vice President, the Treasurer, the Secretary, or one
of the Assistant Treasurers or Assistant Secretaries of the Depositor or the
Master Servicer, or (ii), if provided for in this Agreement, signed by a
Servicing Officer, as the case may be, and delivered to the Depositor, MBIA and
the Trustee, as the case may be, as required by this Agreement.
Opinion of Counsel: A written opinion of counsel, who may be counsel for
the Depositor or the Master Servicer, including, in-house counsel, reasonably
acceptable to the Trustee; provided, however, that with respect to the
interpretation or application of the REMIC Provisions, such counsel must (i) in
fact be independent of the Depositor and the Master Servicer, (ii) not have any
direct financial interest in the Depositor or the Master Servicer or in any
affiliate of either, and (iii) not be connected with the Depositor or the Master
Servicer as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions.
Optional Termination: The termination of the trust created hereunder in
connection with the purchase of the Mortgage Loans pursuant to Section 9.1(a)
hereof.
Original Group Subordinate Amount: With respect to a Mortgage Pool, the
related Group Subordinate Amount as of the Cut-off Date.
Original Mortgage Loan: The Mortgage Loan refinanced in connection with the
origination of a Refinancing Mortgage Loan.
Original Subordinated Principal Balance: The aggregate of the Class
Certificate Balances of the Subordinated Certificates as of the Closing Date.
OTS: The Office of Thrift Supervision.
Outside Reference Date: Not applicable.
Outstanding: With respect to the Certificates as of any date of
determination, all Certificates theretofore executed and authenticated under
this Agreement except:
(i) Certificates theretofore canceled by the Trustee or delivered to
the Trustee for cancellation; and
(ii) Certificates in exchange for which or in lieu of which other
Certificates have been executed and delivered by the Trustee
pursuant to this Agreement.
Outstanding Mortgage Loan: As of any Due Date, a Mortgage Loan with a
Stated Principal Balance greater than zero which was not the subject of a
Principal Prepayment in Full prior to such Due Date and which did not become a
Liquidated Mortgage Loan prior to such Due Date.
Ownership Interest: As to any Residual Certificate, any ownership interest
in such Certificate including any interest in such Certificate as the Holder
thereof and any other interest therein, whether direct or indirect, legal or
beneficial.
23
Pass-Through Rate: For any interest bearing Class of Certificates, the per
annum rate set forth or calculated in the manner described in the Preliminary
Statement.
Percentage Interest: As to any Certificate, the percentage interest
evidenced thereby in distributions required to be made on the related Class,
such percentage interest being set forth on the face thereof or equal to the
percentage obtained by dividing the Denomination of such Certificate by the
aggregate of the Denominations of all Certificates of the same Class.
Permitted Investments: At any time, any one or more of the following
obligations and securities:
(i) obligations of the United States or any agency thereof, provided
such obligations are backed by the full faith and credit of the
United States;
(ii) general obligations of or obligations guaranteed by any state of
the United States or the District of Columbia receiving the
highest long-term debt rating of each Rating Agency;
(iii) commercial or finance company paper which is then receiving the
highest commercial or finance company paper rating of each Rating
Agency;
(iv) certificates of deposit, demand or time deposits, or bankers'
acceptances issued by any depository institution or trust company
incorporated under the laws of the United States or of any state
thereof and subject to supervision and examination by federal
and/or state banking authorities, provided that the commercial
paper and/or long term unsecured debt obligations of such
depository institution or trust company (or in the case of the
principal depository institution in a holding company system, the
commercial paper or long-term unsecured debt obligations of such
holding company, but only if Xxxxx'x is not a Rating Agency) are
then rated one of the two highest long-term and/or the highest
short-term ratings of each Rating Agency for such securities;
(v) demand or time deposits or certificates of deposit issued by any
bank or trust company or savings institution to the extent that
such deposits are fully insured by the FDIC and receiving the
highest short-term debt rating of each Rating Agency;
(vi) guaranteed reinvestment agreements issued by any bank, insurance
company or other corporation and receiving the highest short-term
debt rating of each Rating Agency and containing, at the time of
the issuance of such agreements, such terms and conditions as
will not result in the downgrading or withdrawal of the rating
then assigned to the Certificates by either Rating Agency
(determined without regard to the MBIA Policy);
(vii) repurchase obligations with respect to any security described in
clauses (i) and (ii) above, in either case entered into with a
depository institution or trust company (acting as principal)
described in clause (iv) above;
24
(viii) securities (other than stripped bonds, stripped coupons or
instruments sold at a purchase price in excess of 115% of the
face amount thereof) bearing interest or sold at a discount
issued by any corporation incorporated under the laws of the
United States or any state thereof which, at the time of such
investment, have one of the two highest ratings of each Rating
Agency (except if the Rating Agency is Moody's or S&P, such
rating shall be the highest commercial paper rating of Moody's or
S&P, as applicable, for any such securities);
(ix) units of a taxable money-market portfolio having the highest
rating assigned by each Rating Agency (except if Fitch is a
Rating Agency and has not rated the portfolio, the highest rating
assigned by Moody's) and restricted to obligations issued or
guaranteed by the United States of America or entities whose
obligations are backed by the full faith and credit of the United
States of America and repurchase agreements collateralized by
such obligations; and
(x) such other investments bearing interest or sold at a discount
acceptable to each Rating Agency as will not result in the
downgrading or withdrawal of the rating then assigned to the
Certificates by either Rating Agency, as evidenced by a signed
writing delivered by each Rating Agency (determined without
regard to the MBIA Policy);
provided that no such instrument shall be a Permitted Investment if such
instrument evidences the right to receive interest only payments with respect to
the obligations underlying such instrument.
Permitted Transferee: Any person other than (i) the United States, any
State or political subdivision thereof, or any agency or instrumentality of any
of the foregoing, (ii) a foreign government, International Organization or any
agency or instrumentality of either of the foregoing, (iii) an organization
(except certain farmers' cooperatives described in section 521 of the Code)
which is exempt from tax imposed by Chapter 1 of the Code (including the tax
imposed by section 511 of the Code on unrelated business taxable income) on any
excess inclusions (as defined in section 860E(c)(l) of the Code) with respect to
any Residual Certificate, (iv) rural electric and telephone cooperatives
described in section 1381(a)(2)(C) of the Code, (v) an "electing large
partnership" as defined in section 775 of the Code, (vi) a Person that is not
(a) a citizen or resident of the United States, (b) a corporation, partnership,
or other entity created or organized in or under the laws of the United States,
any state thereof or the District of Columbia, (c) an estate whose income from
sources without the United States is includible in gross income for United
States federal income tax purposes regardless of its connection with the conduct
of a trade or business within the United States or (d) a trust if a court within
the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust, unless such Person
has furnished the transferor and the Trustee with a duly completed Internal
Revenue Service Form W-8ECI or any applicable successor form, and (vii) any
other Person so designated by the Depositor based upon an Opinion of Counsel
that the Transfer of an Ownership Interest in a Residual Certificate to such
Person may cause any REMIC created hereunder to fail to qualify as a REMIC at
any time that the Certificates are outstanding;
25
provided, however, that if a person is classified as a partnership under the
Code, such person shall only be a Permitted Transferee if all of its beneficial
owners are described in subclauses (a), (b), (c) or (d) of clause (vi) and the
governing documents of such person prohibits a transfer of any interest in such
person to any person described in clause (vi). The terms "United States,"
"State" and "International Organization" shall have the meanings set forth in
section 7701 of the Code or successor provisions. A corporation will not be
treated as an instrumentality of the United States or of any State or political
subdivision thereof for these purposes if all of its activities are subject to
tax and, with the exception of the Federal Home Loan Mortgage Corporation, a
majority of its board of directors is not selected by such government unit.
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government, or any agency or political subdivision thereof.
Physical Certificate: As specified in the Preliminary Statement.
Planned Balance: Not applicable.
Planned Principal Classes: Not applicable.
Pool I: The aggregate of the Mortgage Loans identified on the Mortgage Loan
Schedule as being included in Pool I.
Pool II: The aggregate of the Mortgage Loans identified on the Mortgage
Loan Schedule as being included in Pool II.
Pool Principal Balance: For each Mortgage Pool, with respect to any
Distribution Date, the aggregate of the Stated Principal Balances of the
Mortgage Loans which were Outstanding Mortgage Loans on the Due Date in the
month preceding the month of such Distribution Date, and for the first
Distribution Date, as of the Closing Date plus, in the case of Pool I, the
amount on deposit, if any, in the Pre-Funding Account.
PO Percentage: (a) With respect to any Discount Mortgage Loan in Pool I,
the fraction, expressed as a percentage, equal to (i) the positive excess of (A)
the related Designated Mortgage Pool Rate, over (B) the Adjusted Net Mortgage
Rate, divided by (ii) 5.25%, and (b) with respect to any Non-Discount Mortgage
Loan, 0%.
Pre-Funded Amount: The amount deposited in the Pre-Funding Account on the
Closing Date, which shall equal $81,880,658.37.
Pre-Funding Account: The separate Eligible Account created and maintained
by the Trustee pursuant to Section 3.5 in the name of the Trustee for the
benefit of the Certificateholders and designated "The Bank of New York, in trust
for registered Holders of First Horizon Asset Securities, Inc. Mortgage
Pass-Through Certificates, Series 2004-4." Funds in the Pre-Funding Account
shall be held in trust for the Certificateholders for the uses and purposes set
forth in this Agreement and shall not be a part of any REMIC created hereunder;
provided, however, that any investment income earned from Permitted Investments
made with funds in the Pre-Funding Account shall be for the account of the
Master Servicer.
26
Pre-Funding Interest Shortfall: With respect to a Funding Period
Distribution Date, the excess of (a) the sum of (i) the Master Servicing Fee,
(ii) the Trustee Fee, (iii) the MBIA Premium and (iv) the Accrued Certificate
Interest, in each case due and payable on such Funding Period Distribution Date,
over (b) the amount of payments attributable to interest collected by the Master
Servicer in respect of the Initial Mortgage Loans during the related Interest
Accrual Period.
Prepayment Interest Excess: As to any Principal Prepayment received by the
Master Servicer from the first day through the fifteenth day of any calendar
month (other than the calendar month in which the Cut-off Date occurs), all
amounts paid by the related Mortgagor in respect of interest on such Principal
Prepayment. All Prepayment Interest Excess shall be paid to the Master Servicer
as additional master servicing compensation.
Prepayment Interest Shortfall: As to any Distribution Date, Mortgage Loan
and Principal Prepayment received (a) during the period from the sixteenth day
of the month preceding the month of such Distribution Date (or, in the case of
the first Distribution Date, from the Cut-off Date) through the last day of such
month, in the case of a Principal Prepayment in Full, or (b) during the month
preceding the month of such Distribution Date, in the case of a partial
Principal Prepayment, the amount, if any, by which one month's interest at the
related Adjusted Mortgage Rate on such Principal Prepayment exceeds the amount
of interest actually paid by the Mortgagor in connection with such Principal
Prepayment.
Prepayment Period: (a) With respect to any Principal Prepayments in Full
and any Distribution Date, the period from the sixteenth day of the month
preceding the month of such Distribution Date (or, in the case of the first
Distribution Date, from the Initial Cut-off Date) through the fifteenth day of
the month of such Distribution Date, and (b) with respect to any other Principal
Prepayments and any Distribution Date, the month preceding the month of such
Distribution Date.
Primary Insurance Policy: Each policy of primary mortgage guaranty
insurance or any replacement policy therefor with respect to any Mortgage Loan.
Principal Balance Schedules: Not applicable.
Principal Distribution Request: Any request for a distribution in reduction
of the Certificate Principal Balance of any Insured Retail Certificate submitted
in writing to a Depository Participant or Indirect Participant (or, if such
Insured Retail Certificate is no longer represented by a Book-Entry Certificate,
to the Trustee) by the Holder of such Insured Retail Certificate pursuant to
Section 4.8(b) or 4.8(f), as applicable.
Principal Prepayment: Any payment of principal by a Mortgagor on a Mortgage
Loan that is received in advance of its scheduled Due Date and is not
accompanied by an amount representing scheduled interest due on any date or
dates in any month or months subsequent to the month of prepayment. Partial
Principal Prepayments shall be applied by the Master Servicer in accordance with
the terms of the related Mortgage Note.
Principal Prepayment in Full: Any Principal Prepayment made by a Mortgagor
of the entire principal balance of a Mortgage Loan.
27
Private Certificate: As specified in the Preliminary Statement.
Proprietary Lease: With respect to any Cooperative Unit, a lease or
occupancy agreement between a Cooperative Corporation and a holder of related
Coop Shares.
PUD: Planned Unit Development.
Purchase Price: With respect to any Mortgage Loan required to be purchased
by the Seller pursuant to Section 2.2 or 2.3 hereof or purchased at the option
of the Master Servicer pursuant to Section 3.11, an amount equal to the sum of
(i) 100% of the unpaid principal balance of the Mortgage Loan on the date of
such purchase, (ii) accrued interest thereon at the applicable Mortgage Rate (or
at the applicable Adjusted Mortgage Rate if the purchaser is the Master
Servicer) from the date through which interest was last paid by the Mortgagor to
the Due Date in the month in which the Purchase Price is to be distributed to
Certificateholders, and (iii) any costs and damages incurred by the Trust in
connection with the noncompliance of such Mortgage Loan with any specifically
applicable predatory or abusive lending law.
Qualified Insurer: A mortgage guaranty insurance company duly qualified as
such under the laws of the state of its principal place of business and each
state having jurisdiction over such insurer in connection with the insurance
policy issued by such insurer, duly authorized and licensed in such states to
transact a mortgage guaranty insurance business in such states and to write the
insurance provided by the insurance policy issued by it, approved as a
FNMA-approved mortgage insurer and having a claims paying ability rating of at
least "AA" or equivalent rating by a nationally recognized statistical rating
organization. Any replacement insurer with respect to a Mortgage Loan must have
at least as high a claims paying ability rating as the insurer it replaces had
on the Closing Date.
Random Lot: With respect to any Distribution Date, the method by which the
Depository will determine which Insured Retail Certificates will be paid, using
its established random lot procedures or, if the Insured Retail Certificates are
no longer represented by a Book-Entry Certificate, using the Trustee's
procedures.
Rating Agency: Each of the Rating Agencies specified in the Preliminary
Statement. If any such organization or a successor is no longer in existence,
"Rating Agency" shall be such nationally recognized statistical rating
organization, or other comparable Person, as is designated by the Depositor,
notice of which designation shall be given to the Trustee. References herein to
a given rating category of a Rating Agency shall mean such rating category
without giving effect to any modifiers.
Realized Loss: With respect to each Liquidated Mortgage Loan, an amount
(not less than zero or more than the Stated Principal Balance of the Mortgage
Loan) as of the date of such liquidation, equal to (i) the Stated Principal
Balance of the Liquidated Mortgage Loan as of the date of such liquidation, plus
(ii) interest at the Adjusted Net Mortgage Rate from the Due Date as to which
interest was last paid or advanced (and not reimbursed) to Certificateholders up
to the Due Date in the month in which Liquidation Proceeds are required to be
distributed on the Stated Principal Balance of such Liquidated Mortgage Loan
from time to time, minus (iii) the Liquidation Proceeds, if any, received during
the month in which such liquidation occurred, to the extent applied as
recoveries of interest at the Adjusted Net Mortgage Rate and to principal of
28
the Liquidated Mortgage Loan. With respect to each Mortgage Loan which has
become the subject of a Deficient Valuation, if the principal amount due under
the related Mortgage Note has been reduced, the difference between the principal
balance of the Mortgage Loan outstanding immediately prior to such Deficient
Valuation and the principal balance of the Mortgage Loan as reduced by the
Deficient Valuation.
Recognition Agreement: With respect to any Cooperative Loan, an agreement
between the Cooperative Corporation and the originator of such Mortgage Loan
which establishes the rights of such originator in the Cooperative Property.
Record Date: With respect to any Distribution Date, the close of business
on the last Business Day of the month preceding the month in which such
Distribution Date occurs.
Reference Bank: Not applicable.
Refinancing Mortgage Loan: Any Mortgage Loan originated in connection with
the refinancing of an existing mortgage loan.
Regular Certificates: As specified in the Preliminary Statement.
Relief Act: The Servicemembers Civil Relief Act or any similar state or
local legislation or regulations.
Relief Act Reductions: With respect to any Distribution Date and any
Mortgage Loan as to which there has been a reduction in the amount of interest
collectible thereon for the most recently ended calendar month as a result of
the application of the Relief Act, the amount, if any, by which interest
collectible on such Mortgage Loan for the most recently ended calendar month is
less than interest accrued thereon for such month pursuant to the Mortgage Note.
REMIC: A "real estate mortgage investment conduit" within the meaning of
section 860D of the Code.
REMIC Change of Law: Any proposed, temporary or final regulation, revenue
ruling, revenue procedure or other official announcement or interpretation
relating to REMICs and the REMIC Provisions issued after the Closing Date.
REMIC Provisions: Provisions of the federal income tax law relating to real
estate mortgage investment conduits, which appear at sections 860A through 860G
of Subchapter M of Chapter 1 of the Code, and related provisions, and
regulations promulgated thereunder, as the foregoing may be in effect from time
to time as well as provisions of applicable state laws.
REO Property: A Mortgaged Property acquired by the Trust Fund through
foreclosure or deed-in-lieu of foreclosure in connection with a defaulted
Mortgage Loan.
Request for Release: The Request for Release submitted by the Master
Servicer to the Trustee, substantially in the form of Exhibits L and M, as
appropriate.
Required Coupon: With respect to Pool I, 5.50% per annum, and with respect
to Pool II, 4.75% per annum.
29
Required Insurance Policy: With respect to any Mortgage Loan, any insurance
policy that is required to be maintained from time to time under this Agreement.
Required Recordation States: The states of Florida, Maryland and
Mississippi.
Reserve Fund: A fund established at the time of the issuance of the
Certificates solely for the benefit of the Class I-A-5 Certificates by an
initial deposit into the Reserve Fund of $20,000 by Bear, Xxxxxxx & Co. Inc.
Reserve Fund Deposit: $20,000.
Reserve Fund Withdrawal: As defined in Section 4.7.
Residual Certificates: As specified in the Preliminary Statement.
Responsible Officer: When used with respect to the Trustee, any Vice
President, any Assistant Vice President, the Secretary, any Assistant Secretary,
any Trust Officer or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
having direct responsibility for the administration of this Agreement and also
to whom, with respect to a particular matter, such matter is referred because of
such officer's knowledge of and familiarity with the particular subject.
Retained Yield: As to each Mortgage Loan and any Distribution Date, an
amount payable to First Horizon Home Loan Corporation out of each full payment
of interest received on such Mortgage Loan and equal to one-twelfth of the
Retained Yield Rate multiplied by the Stated Principal Balance of such Mortgage
Loan as of the Due Date in the month of such Distribution Date (prior to giving
effect to any Scheduled Payments due on such Mortgage Loan on such Due Date).
Retained Yield Rate: For any Non-Discount Mortgage Loan, a per annum rate
equal to the excess of (a) the applicable Mortgage Rate over (b) the Required
Coupon. For any Discount Mortgage Loan, 0%.
Scheduled Balances: Not applicable.
Scheduled Certificates: Not applicable.
Scheduled Payment: The scheduled monthly payment on a Mortgage Loan due on
any Due Date allocable to principal and/or interest on such Mortgage Loan which,
unless otherwise specified herein, shall give effect to any related Debt Service
Reduction and any Deficient Valuation that affects the amount of the monthly
payment due on such Mortgage Loan.
Securities Act: The Securities Act of 1933, as amended.
Security Agreement: The security agreement with respect to a Cooperative
Loan.
Seller: First Horizon Home Loan Corporation, a Kansas corporation, and its
successors and assigns, in its capacity as seller of the Mortgage Loans pursuant
to the MLPAs.
30
Senior Certificates: As specified in the Preliminary Statement.
Senior Final Distribution Date: For each Certificate Group, the
Distribution Date on which the Class Certificate Balance of each Class of
related Senior Certificates has been reduced to zero.
Senior Optimal Principal Amount: As to a Mortgage Pool and with respect to
each Distribution Date, an amount equal to the sum of:
(1) the related Senior Percentage of all Scheduled Payments of
principal (or, in the case of Pool I, the applicable Non-PO Percentage thereof)
due on each Mortgage Loan in such Mortgage Pool on the first day of the month in
which the Distribution Date occurs, as specified in the amortization schedule at
the time applicable thereto after adjustment for previous principal prepayments
and the principal portion of Debt Service Reductions after the Bankruptcy Loss
Coverage Amount has been reduced to zero, but before any adjustment to such
amortization schedule by reason of any other bankruptcy or similar proceeding or
any moratorium or similar waiver or grace period;
(2) the related Senior Prepayment Percentage of the Stated Principal
Balance of each Mortgage Loan in such Mortgage Pool (or, in the case of Pool I,
the applicable Non-PO Percentage thereof) which was the subject of a Principal
Prepayment in Full received by the Master Servicer during the applicable
Prepayment Period;
(3) the related Senior Prepayment Percentage of all partial Principal
Prepayments in respect of each Mortgage Loan in such Mortgage Pool (or, in the
case of Pool I, the applicable Non-PO Percentage thereof) received during the
applicable Prepayment Period;
(4) the lesser of:
(a) the related Senior Prepayment Percentage of the sum of (x) the
Liquidation Proceeds allocable to principal (or, in the case of
Pool I, the applicable Non-PO Percentage thereof) on each
Mortgage Loan in such Mortgage Pool which became a Liquidated
Mortgage Loan during the related Prepayment Period, other than
Mortgage Loans described in clause (y), and (y) the principal
balance (or, in the case of Pool I, the applicable Non-PO
Percentage thereof) of each Mortgage Loan in such Mortgage Pool
that was purchased by a private mortgage insurer during the
related Prepayment Period as an alternative to paying a claim
under the related Insurance Policy; and
(b) (i) the related Senior Percentage of the sum of (x) the Stated
Principal Balance (or, in the case of Pool I, the applicable
Non-PO Percentage thereof) of each Mortgage Loan in such Mortgage
Pool which became a Liquidated Mortgage Loan during the related
Prepayment Period, other than Mortgage Loans described in clause
(y), and (y) the Stated Principal Balance (or, in the case of
Pool I, the applicable Non-PO Percentage thereof) of each
Mortgage Loan in such Mortgage Pool that was purchased by a
private mortgage insurer during the related Prepayment Period as
an
31
alternative to paying a claim under the related Insurance Policy
minus (ii) the related Senior Percentage of the principal portion
of Excess Losses (other than Debt Service Reductions) for such
Mortgage Pool during the related Prepayment Period; and
(5) the related Senior Prepayment Percentage of the sum of (a) the
Stated Principal Balance (or, in the case of Pool I, the applicable Non-PO
Percentage thereof) of each Mortgage Loan in such Mortgage Pool which was
repurchased by the seller in connection with such Distribution Date and (b) the
difference, if any, between the Stated Principal Balance (or, in the case of
Pool I, the applicable Non-PO Percentage thereof) of a Mortgage Loan in such
Mortgage Pool that has been replaced by the seller with a Substitute Mortgage
Loan pursuant to this Agreement in connection with such Distribution Date and
the Stated Principal Balance of such Substitute Mortgage Loan.
Senior Percentage: On any Distribution Date for a Certificate Group, the
lesser of 100% and the percentage (carried to six places rounded up) obtained by
dividing the aggregate Class Certificate Balances of all Classes of Senior
Certificates (other than the Class I-A-PO Certificates, in the case of the Group
I Senior Certificates) of such Certificate Group immediately preceding such
Distribution Date by the Pool Principal Balance of the related Mortgage Pool
(excluding, in the case of Pool I, the aggregate of the applicable PO Percentage
of the Stated Principal Balance of each Discount Mortgage Loan included therein)
for the immediately preceding Distribution Date.
Senior Prepayment Percentage: On any Distribution Date occurring during the
periods set forth below, and as to each Certificate Group, the Senior Prepayment
Percentages, described below:
--------------------------------------------------------------------------------
Period (Dates Inclusive) Senior Prepayment Percentage
--------------------------------------------------------------------------------
June 2004 - May 2009 100%
--------------------------------------------------------------------------------
June 2009 - May 2010 the related Senior Percentage plus 70% of the related
Subordinated Percentage
--------------------------------------------------------------------------------
June 2010 - May 2011 the related Senior Percentage plus 60% of the related
Subordinated Percentage
--------------------------------------------------------------------------------
June 2011 - May 2012 the related Senior Percentage plus 40% of the related
Subordinated Percentage
--------------------------------------------------------------------------------
June 2012 - May 2013 the related Senior Percentage plus 20% of the related
Subordinated Percentage
--------------------------------------------------------------------------------
June 2013 and thereafter the related Senior Percentage
--------------------------------------------------------------------------------
Notwithstanding the foregoing, if the Senior Percentage for a Certificate
Group on any Distribution Date exceeds the initial Senior Percentage for that
Certificate Group, the Senior Prepayment Percentage for both Certificate Groups
for such Distribution Date will equal 100%.
In addition, no reduction of the Senior Prepayment Percentage for a
Certificate Group below the level in effect for the most recent prior period
specified in the table above shall be effective on any Distribution Date unless,
as of the last day of the month preceding such Distribution Date:
32
(1) the aggregate Stated Principal Balance of Mortgage Loans in any
Mortgage Pool delinquent 60 days or more (including for this purpose any
Mortgage Loans in foreclosure or subject to bankruptcy proceedings and Mortgage
Loans with respect to which the related Mortgaged Property, including REO
Property, has been acquired by the Trust) does not exceed 50% of the related
Group Subordinate Amount as of such date; and
(2) cumulative Realized Losses in any Mortgage Pool do not exceed:
(a) 30% of the related Original Group Subordinate Amount if such
Distribution Date occurs between and including June 2009 and May
2010;
(b) 35% of the related Original Group Subordinate Amount if such
Distribution Date occurs between and including June 2010 and May
2011;
(c) 40% of the related Original Group Subordinate Amount if such
Distribution Date occurs between and including June 2011 and May
2012;
(d) 45% of the related Original Group Subordinate Amount if such
Distribution Date occurs between and including June 2012 and May
2013; and
(e) 50% of the related Original Group Subordinate Amount if such
Distribution Date occurs during or after June 2013.
Senior Support Certificates: As specified in the Preliminary Statement.
Servicing Advances: All customary, reasonable and necessary "out of pocket"
costs and expenses incurred in the performance by the Master Servicer of its
servicing obligations, including, but not limited to, the cost of (i) the
preservation, restoration and protection of a Mortgaged Property, (ii) any
expenses reimbursable to the Master Servicer pursuant to Section 3.11 and any
enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of any REO Property and (iv) compliance with the
obligations under Section 3.9.
Servicing Agreement: The servicing agreement, dated as of November 26, 2002
by and between First Horizon Asset Securities Inc. and its assigns, as owner,
and First Tennessee Mortgage Services, Inc., as servicer.
Servicing Officer: Any officer of the Master Servicer involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name and facsimile signature appear on a list of servicing officers furnished to
the Trustee by the Master Servicer on the Closing Date pursuant to this
Agreement, as such list may from time to time be amended.
Servicing Rights Transfer and Subservicing Agreement: The servicing rights
transfer and subservicing agreement dated as of November 26, 2002, by and
between First Horizon Home Loan Corporation, as transferor and subservicer, and
First Tennessee Mortgage Services, Inc., as transferee and servicer.
Special Hazard Coverage Termination Date: The date on which the Special
Hazard Loss Coverage Amount is reduced to zero.
33
Special Hazard Loss: Any Realized Loss suffered by a Mortgaged Property on
account of direct physical loss but not including (i) any loss of a type covered
by a hazard insurance policy or a flood insurance policy required to be
maintained with respect to such Mortgaged Property pursuant to Section 3.9 to
the extent of the amount of such loss covered thereby, or (ii) any loss caused
by or resulting from:
(1) normal wear and tear;
(2) fraud, conversion or other dishonest act on the part of the
Trustee, the Master Servicer or any of their agents or employees (without regard
to any portion of the loss not covered by any errors and omissions policy);
(3) errors in design, faulty workmanship or faulty materials, unless
the collapse of the property or a part thereof ensues and then only for the
ensuing loss;
(4) nuclear or chemical reaction or nuclear radiation or radioactive
or chemical contamination, all whether controlled or uncontrolled, and whether
such loss be direct or indirect, proximate or remote or be in whole or in part
caused by, contributed to or aggravated by a peril covered by the definition of
the term "Special Hazard Loss";
(5) hostile or warlike action in time of peace and war, including
action in hindering, combating or defending against an actual, impending or
expected attack:
(i) by any government or sovereign power, de jure or de facto, or by
any authority maintaining or using military, naval or air forces;
(ii) by military, naval or air forces; or
(iii) by an agent of any such government, power, authority or forces;
(6) any weapon of war employing nuclear fission, fusion or other
radioactive force, whether in time of peace or war; or
(7) insurrection, rebellion, revolution, civil war, usurped power or
action taken by governmental authority in hindering, combating or defending
against such an occurrence, seizure or destruction under quarantine or customs
regulations, confiscation by order of any government or public authority or
risks of contraband or illegal transportation or trade.
Special Hazard Loss Coverage Amount: Upon the initial issuance of the
Certificates, $6,266,200. As of any Distribution Date, the Special Hazard Loss
Coverage Amount will equal the greater of
(a) 1.00% (or if greater than 1.00%, the highest percentage of
Mortgage Loans by principal balance secured by Mortgaged Properties in any
single California zip code) of the outstanding principal balance of all the
Mortgage Loans as of the related Determination Date; and
(b) twice the outstanding principal balance of the Mortgage Loan which
has the largest outstanding principal balance as of the related Determination
Date,
34
less, in each case, the aggregate amount of Special Hazard Losses that would
have been previously allocated to the Subordinated Certificates in the absence
of the Loss Allocation Limitation. As of any Distribution Date on or after the
Cross-over Date, the Special Hazard Loss Coverage Amount will be zero.
Special Hazard Mortgage Loan: A Liquidated Mortgage Loan as to which a
Special Hazard Loss has occurred.
S&P: Standard & Poor's Corporation, a division of The XxXxxx-Xxxx
Companies, Inc. If S&P is designated as a Rating Agency in the Preliminary
Statement, for purposes of Section 11.5(b) the address for notices to S&P shall
be Standard & Poor's, 00 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Mortgage Surveillance Monitoring, or such other address as S&P may
hereafter furnish to the Depositor and the Master Servicer.
Startup Day: The Closing Date.
Stated Principal Balance: As to any Mortgage Loan and Due Date, the unpaid
principal balance of such Mortgage Loan as of such Due Date as specified in the
amortization schedule at the time relating thereto (before any adjustment to
such amortization schedule by reason of any moratorium or similar waiver or
grace period) after giving effect to any previous partial Principal Prepayments
and Liquidation Proceeds allocable to principal (other than with respect to any
Liquidated Mortgage Loan) and to the payment of principal due on such Due Date
and irrespective of any delinquency in payment by the related Mortgagor.
Streamlined Documentation Mortgage Loan: Any Mortgage Loan originated
pursuant to the Seller's Streamlined Loan Documentation Program then in effect.
Subordinated Certificates: As specified in the Preliminary Statement.
Subordinated Certificate Writedown Amount: As of any Distribution Date, the
amount by which (a) the sum of the Class Certificate Balances of all of the
Certificates, after giving effect to the distribution of principal and the
allocation of Realized Losses in reduction of the Class Certificate Balances of
all of the Certificates on such Distribution Date, exceeds (b) the aggregate
Pool Principal Balance for both Mortgage Pools on the first day of the month of
such Distribution Date less any Deficient Valuations occurring before the
Bankruptcy Loss Coverage Amount has been reduced to zero.
Subordinated Optimal Principal Amount: With respect to each Mortgage Pool
and each Distribution Date, an amount equal to the sum of the following (but in
no event greater than the aggregate Class Certificate Balances of the
Subordinated Certificates immediately prior to such Distribution Date):
(1) the related Subordinated Percentage of all Scheduled Payments of
principal (or, in the case of Pool I, the applicable Non-PO Percentage thereof)
due on each outstanding Mortgage Loan in the related Mortgage Pool on the first
day of the month in which the Distribution Date occurs, as specified in the
amortization schedule at the time applicable thereto, after adjustment for
previous principal prepayments and the principal portion of Debt Service
Reductions after the Bankruptcy Loss Coverage Amount has been reduced to zero,
but
35
before any adjustment to such amortization schedule by reason of any other
bankruptcy or similar proceeding or any moratorium or similar waiver or grace
period;
(2) the related Subordinated Prepayment Percentage of the Stated
Principal Balance of each Mortgage Loan in the related Mortgage Pool (or, in the
case of Pool I, the applicable Non-PO Percentage thereof) which was the subject
of a Principal Prepayment in Full received by the Master Servicer during the
related Prepayment Period;
(3) the related Subordinated Prepayment Percentage of all partial
Principal Prepayments received in respect of each Mortgage Loan in the related
Mortgage Pool (or, in the case of Pool I, the applicable Non-PO Percentage
thereof) during the related Prepayment Period, plus, on the Senior Final
Distribution Date, 100% of any related Senior Optimal Principal Amount remaining
undistributed on such date;
(4) the amount, if any, by which the sum of (a) the net Liquidation
Proceeds allocable to principal received during the related Prepayment Period in
respect of each Liquidated Mortgage Loan in the related Mortgage Pool (or, in
the case of Pool I, the applicable Non-PO Percentage thereof), other than
Mortgage Loans described in clause (b), and (b) the principal balance of each
Mortgage Loan in the related Mortgage Pool (or, in the case of Pool I, the
applicable Non-PO Percentage thereof) that was purchased by a private mortgage
insurer during the related Prepayment Period as an alternative to paying a claim
under the related Insurance Policy exceeds (c) the sum of the amounts
distributable to the Senior Certificateholders (other than the Holders of the
Class I-A-PO Certificates) under clause (4) of the definition of applicable
Senior Optimal Principal Amount on such Distribution Date; and
(5) the related Subordinated Prepayment Percentage of the sum of (a)
the Stated Principal Balance of each Mortgage Loan in the related Mortgage Pool
which was repurchased by the seller in connection with such Distribution Date
and (b) the difference, if any, between the Stated Principal Balance of a
Mortgage Loan in the related Mortgage Pool (or, in the case of Pool I, the
applicable Non-PO Percentage thereof) that has been replaced by the seller with
a Substitute Mortgage Loan pursuant to the Agreement in connection with such
Distribution Date and the Stated Principal Balance of each such Substitute
Mortgage Loan.
Subordinated Percentage: For any Distribution Date and each Certificate
Group, 100% minus the related Senior Percentage.
Subordinated Prepayment Percentage: For any Distribution Date, 100% minus
the Senior Prepayment Percentage.
Subsequent Cut-off Date: With respect to any Subsequent Mortgage Loan, the
first day of the month in which the related Subsequent Transfer Date occurs.
Subsequent MLPA: A Subsequent Mortgage Loan Purchase Agreement in
substantially the form attached as Exhibit I to the Initial MLPA pursuant to
which the Seller will transfer Subsequent Mortgage Loans to the Depositor.
Subsequent Mortgage Loan: Any Mortgage Loan other than an Initial Mortgage
Loan conveyed to the Trust Fund pursuant to Section 2.1 hereof and to a
Subsequent Transfer
36
Agreement, which Mortgage Loan shall be listed on the revised Mortgage Loan
Schedule delivered pursuant to this Agreement and on Schedule A to such
Subsequent Transfer Agreement. When used with respect to a single Subsequent
Transfer Date, Subsequent Mortgage Loan shall mean a Subsequent Mortgage Loan
conveyed to the Trust Fund on that Subsequent Transfer Date.
Subsequent Transfer Agreement: A Subsequent Transfer Agreement
substantially in the form of Exhibit N hereto, executed and delivered by the
Depositor and the Trustee as provided in Section 2.1 hereof.
Subsequent Transfer Date: For any Subsequent Transfer Agreement, the date
the related Subsequent Mortgage Loans are transferred to the Trust Fund pursuant
to the related Subsequent Transfer Agreement.
Subservicer: Any person to whom the Master Servicer has contracted for the
servicing of all or a portion of the Mortgage Loans pursuant to Section 3.2
hereof.
Substitute Mortgage Loan: A Mortgage Loan substituted by the Seller for a
Deleted Mortgage Loan which must, on the date of such substitution, as confirmed
in a Request for Release, substantially in the form of Exhibit L, (i) have a
Stated Principal Balance, after deduction of the principal portion of the
Scheduled Payment due in the month of substitution, not in excess of, and not
more than 10% less than the Stated Principal Balance of the Deleted Mortgage
Loan; (ii) have an Adjusted Net Mortgage Rate not lower than the applicable
Required Coupon, provided that the Master Servicing Fee for the Substitute
Mortgage Loan shall be equal to or greater than that of the Deleted Mortgage
Loan; (iii) be accruing interest at a rate no lower than and not more than 1%
per annum higher than, that of the Deleted Mortgage Loan; (iv) have a
Loan-to-Value Ratio no higher than that of the Deleted Mortgage Loan; (v) have a
remaining term to maturity no greater than (and not more than one year less than
that of) the Deleted Mortgage Loan; (vi) not be a Cooperative Loan unless the
Deleted Mortgage Loan was a Cooperative Loan and (vii) comply with each
representation and warranty set forth in Section 2.3 hereof.
Substitution Adjustment Amount: The meaning ascribed to such term pursuant
to Section 2.3.
Super Senior Certificates: As specified in the Preliminary Statement.
Support Classes: Not applicable.
Targeted Balances: Not applicable.
Targeted Principal Classes: Not applicable.
Tax Matters Person: The person designated as "tax matters person" in the
manner provided under Treasury regulation 'SS' 1.860F-4(d) and Treasury
regulation 'SS' 301.6231(a)(7)-1. Initially, the Tax Matters Person shall be
the Trustee.
Tax Matters Person Certificate: The Class I-A-RU and Class I-A-RL
Certificates, each with a Denomination of $0.01.
37
Transfer: Any direct or indirect transfer or sale of any Ownership Interest
in a Residual Certificate.
Trust Fund: The corpus of the trust created hereunder consisting of (i) the
Initial Mortgage Loans and all interest and principal received on or with
respect thereto after the Initial Cut-off Date to the extent not applied in
computing the Cut-off Date Principal Balance thereof; (ii) the Subsequent
Mortgage Loans and all interest and principal received on or with respect
thereto after the related Subsequent Cut-off Date to the extent not applied in
computing the Cut-off Date Principal Balance thereof; (iii) all of the
Depositor's rights as purchaser under the MLPAs; (iv) the Certificate Account,
the Distribution Account, the Pre-Funding Account and the Capitalized Interest
Account and all amounts deposited therein pursuant to the applicable provisions
of this Agreement; (v) property that secured a Mortgage Loan and has been
acquired by foreclosure, deed-in-lieu of foreclosure or otherwise; (vi) the MBIA
Policy, with respect to the Class I-A-5 Certificates only; and (vii) all
proceeds of the conversion, voluntary or involuntary, of any of the foregoing;
provided that the Trust Fund shall exclude the Retained Yield and the Reserve
Fund.
Trustee: The Bank of New York and its successors and, if a successor
trustee is appointed hereunder, such successor.
Trustee Fee: As to any Distribution Date and a Mortgage Pool, an amount
equal to one-twelfth of the Trustee Fee Rate multiplied by the applicable Pool
Principal Balance with respect to such Distribution Date.
Trustee Fee Rate: With respect to each Mortgage Loan, the per annum rate
agreed upon in writing on or prior to the Closing Date by the Trustee and the
Depositor.
Unanticipated Recovery: As defined in Section 4.2(g).
Undercollateralization Distribution: As defined in Section 4.2(h).
Undercollateralized Group: With respect to any Distribution Date, the
Senior Certificates of any Certificate Group (other than the Class I-A-PO
Certificates, in the case of the Group I Senior Certificates) as to which the
aggregate Certificate Principal Balance thereof, after giving effect to
distributions pursuant to Section 4.2(a) on such date, is greater than the Pool
Principal Balance of the related Mortgage Pool (or, in the case of Pool I, the
Non-PO Percentage thereof) for such Distribution Date.
Underwriters: As specified in the Preliminary Statement.
Upper REMIC: The segregated pool of assets consisting of the Lower REMIC
Interests.
Voting Rights: The portion of the voting rights of all of the Certificates
which is allocated to any Certificate. As of any date of determination, (a) 98%
of all Voting Rights will be allocated among all Holders of the Certificates,
other than the Class I-A-RU and Class I-A-RL Certificates, in proportion to
their then outstanding Class Certificate Balances; and (b) 1.0% of all Voting
Rights will be allocated to each of the Class I-A-RU and Class I-A-RL
Certificates (such Voting Rights to be allocated among the Holders of
Certificates of each such Class in accordance with their respective Percentage
Interests).
38
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
REPRESENTATIONS AND WARRANTIES
SECTION 2.1 Conveyance of Mortgage Loans.
(a) The Depositor, concurrently with the execution and delivery hereof,
hereby sells, transfers, assigns, sets over and otherwise conveys to
the Trustee for the benefit of the Certificateholders, without
recourse, all the right, title and interest of the Depositor in and to
the Trust Fund together with (i) the Depositor's right to (A) require
the Seller to cure any breach of a representation or warranty made by
the Seller pursuant to the MLPA, or (B) to repurchase or substitute
for any affected Mortgage Loan in accordance herewith, and (ii) all
right, title and interest of the Depositor in, to and under the
Servicing Agreement, which right has been assigned to the Depositor
pursuant to the MLPA. On the related Subsequent Transfer Date,
pursuant to the terms of the related Subsequent Transfer Agreement,
the Depositor will sell, transfer, assign, set over and otherwise
convey to the Trustee for the benefit of the Certificateholders,
without recourse, all the right, title and interest of the Depositor
in and to the related Subsequent Mortgage Loans together with (i) the
Depositor's right to (A) require the Seller to cure any breach of a
representation or warranty made by the Seller pursuant to the related
Subsequent MLPA, or (B) to repurchase or substitute for any affected
Subsequent Mortgage Loan in accordance herewith, and (ii) all right,
title and interest of the Depositor in, to and under the Servicing
Agreement, which right will have been assigned to the Depositor
pursuant to the related Subsequent MLPA.
(b) In connection with the transfers and assignments set forth in clause
(a) above, the Depositor has delivered or caused to be delivered to
the Trustee or the Custodian on its behalf on the Closing Date (in the
case of the Initial Mortgage Loans) or the related Subsequent Transfer
Date (in the case of the Subsequent Mortgage Loans) or, in the case of
the Delay Delivery Mortgage Loans, will deliver or cause to be
delivered to the Trustee or the Custodian on its behalf within thirty
(30) days following the Closing Date (in the case of Delay Delivery
Mortgage Loans that are Initial Mortgage Loans) or the related
Subsequent Transfer Date (in the case of Delay Delivery Mortgage Loans
that are Subsequent Mortgage Loans) for the benefit of the
Certificateholders the following documents or instruments with respect
to each Mortgage Loan so assigned:
(i) (A) the original Mortgage Note endorsed by manual or facsimile
signature in blank in the following form: "Pay to the order of
________________, without recourse," with all intervening
endorsements showing a complete chain of endorsement from the
originator to the Person endorsing the Mortgage Note (each such
endorsement being sufficient to transfer all right, title and
interest of the party so endorsing, as noteholder or assignee
thereof, in and to that Mortgage Note); or
39
(B) with respect to any Lost Mortgage Note, a lost note affidavit
from the Seller stating that the original Mortgage Note was lost
or destroyed, together with a copy of such Mortgage Note;
(ii) except as provided below, the original recorded Mortgage or a
copy of such Mortgage certified by the Seller as being a true and
complete copy of the Mortgage;
(iii) a duly executed assignment of the Mortgage in blank (which may
be included in a blanket assignment or assignments), together
with, except as provided below, all interim recorded assignments
of such mortgage (each such assignment, when duly and validly
completed, to be in recordable form and sufficient to effect the
assignment of and transfer to the assignee thereof, under the
Mortgage to which the assignment relates); provided that, if the
related Mortgage has not been returned from the applicable public
recording office, such assignment of the Mortgage may exclude the
information to be provided by the recording office;
(iv) the original or copies of each assumption, modification, written
assurance or substitution agreement, if any;
(v) either the original or duplicate original title policy (including
all riders thereto) with respect to the related Mortgaged
Property, if available, provided that the title policy (including
all riders thereto) will be delivered as soon as it becomes
available, and if the title policy is not available, and to the
extent required pursuant to the second paragraph below or
otherwise in connection with the rating of the Certificates
(determined without regard to the MBIA Policy), a written
commitment or interim binder or preliminary report of the title
issued by the title insurance or escrow company with respect to
the Mortgaged Property, and
(vi) in the case of a Cooperative Loan, the originals of the following
documents or instruments:
(A) The Coop Shares, together with a stock power in blank;
(B) The executed Security Agreement;
(C) The executed Proprietary Lease;
(D) The executed Recognition Agreement;
(E) The executed UCC-1 financing statement with evidence of
recording thereon which have been filed in all places
required to perfect the Seller's interest in the Coop Shares
and the Proprietary Lease; and
(F) Executed UCC-3 financing statements or other appropriate UCC
financing statements required by state law, evidencing a
complete
40
and unbroken line from the mortgagee to the Trustee with
evidence of recording thereon (or in a form suitable for
recordation).
In the event that, in connection with any Mortgage Loan, the Depositor
cannot deliver (a) the original recorded Mortgage or (b) all interim recorded
assignments satisfying the requirements of clause (ii) or (iii) above,
respectively, concurrently with the execution and delivery hereof because such
document or documents have not been returned from the applicable public
recording office, the Depositor shall promptly deliver or cause to be delivered
to the Trustee or the Custodian on its behalf such original Mortgage or such
interim assignment, as the case may be, with evidence of recording indicated
thereon upon receipt thereof from the public recording office, or a copy
thereof, certified, if appropriate, by the relevant recording office, but in no
event shall any such delivery of the original Mortgage and each such interim
assignment or a copy thereof, certified, if appropriate, by the relevant
recording office, be made later than one year following the Closing Date (in the
case of the Initial Mortgage Loans) or the related Subsequent Transfer Date (in
the case of the Subsequent Mortgage Loans); provided, however, in the event the
Depositor is unable to deliver or cause to be delivered by such date each
Mortgage and each such interim assignment by reason of the fact that any such
documents have not been returned by the appropriate recording office, or, in the
case of each such interim assignment, because the related Mortgage has not been
returned by the appropriate recording office, the Depositor shall deliver or
cause to be delivered such documents to the Trustee or the Custodian on its
behalf as promptly as possible upon receipt thereof and, in any event, within
720 days following the Closing Date (in the case of the Initial Mortgage Loans)
or the related Subsequent Transfer Date (in the case of the Subsequent Mortgage
Loans). The Depositor shall forward or cause to be forwarded to the Trustee or
the Custodian on its behalf (a) from time to time additional original documents
evidencing an assumption or modification of a Mortgage Loan and (b) any other
documents required to be delivered by the Depositor or the Master Servicer to
the Trustee. In the event that the original Mortgage is not delivered and in
connection with the payment in full of the related Mortgage Loan and the public
recording office requires the presentation of a "lost instruments affidavit and
indemnity" or any equivalent document, because only a copy of the Mortgage can
be delivered with the instrument of satisfaction or reconveyance, the Master
Servicer shall execute and deliver or cause to be executed and delivered such a
document to the public recording office. In the case where a public recording
office retains the original recorded Mortgage or in the case where a Mortgage is
lost after recordation in a public recording office, the Depositor shall deliver
or cause to be delivered to the Trustee or the Custodian on its behalf a copy of
such Mortgage certified by such public recording office to be a true and
complete copy of the original recorded Mortgage.
In addition, in the event that in connection with any Mortgage Loan the
Depositor cannot deliver or cause to be delivered the original or duplicate
original lender's title policy (together with all riders thereto), satisfying
the requirements of clause (v) above, concurrently with the execution and
delivery hereof (in the case of the Initial Mortgage Loans) or on the related
Subsequent Transfer Date (in the case of the Subsequent Mortgage Loans) because
the related Mortgage has not been returned from the applicable public recording
office, the Depositor shall promptly deliver or cause to be delivered to the
Trustee or the Custodian on its behalf such original or duplicate original
lender's title policy (together with all riders thereto) upon receipt thereof
from the applicable title insurer, but in no event shall any such delivery of
the original or duplicate original lender's title policy be made later than one
year following the Closing Date (in
41
the case of the Initial Mortgage Loans) or the related Subsequent Transfer Date
(in the case of the Subsequent Mortgage Loans); provided, however, in the event
the Depositor is unable to deliver or cause to be delivered by such date the
original or duplicate original lender's title policy (together with all riders
thereto) because the related Mortgage has not been returned by the appropriate
recording office, the Depositor shall deliver or cause to be delivered such
documents to the Trustee or the Custodian on its behalf as promptly as possible
upon receipt thereof and, in any event, within 720 days following the Closing
Date (in the case of the Initial Mortgage Loans) or the related Subsequent
Transfer Date (in the case of the Subsequent Mortgage Loans). Notwithstanding
the preceding, in connection with any Mortgage Loan for which either the
original or duplicate original title policy has not been delivered to the Trust,
if at any time during the term of this Agreement the parent company of the
Seller does not have a long term senior debt rating of A- or higher from S&P and
A- or higher from Fitch (if rated by Fitch), then the Depositor shall within 30
days of the Closing Date (in the case of the Initial Mortgage Loans) or the
related Subsequent Transfer Date (in the case of the Subsequent Mortgage Loans)
deliver or cause to be delivered to the Trustee or the Custodian on its behalf
(if it has not previously done so) a written commitment or interim binder or
preliminary report of the title issued by the title insurance or escrow company
with respect to the Mortgaged Property.
Subject to the immediately following sentence, as promptly as practicable
subsequent to such transfer and assignment, and in any event, within thirty (30)
days thereafter, the Master Servicer shall (i) complete each assignment of
Mortgage, as follows: "First Horizon Mortgage Pass-Through Certificates, Series
2004-4, The Bank of New York, as trustee for the holders of the Certificates",
(ii) cause such assignment to be in proper form for recording in the appropriate
public office for real property records and (iii) cause to be delivered for
recording in the appropriate public office for real property records the
assignments of the Mortgages to the Trustee, except that, with respect to any
assignments of Mortgage as to which the Master Servicer has not received the
information required to prepare such assignment in recordable form, the Master
Servicer's obligation to do so and to deliver the same for such recording shall
be as soon as practicable after receipt of such information and in any event
within thirty (30) days after receipt thereof. Notwithstanding the foregoing,
the Master Servicer need not cause to be recorded any assignment which relates
to a Mortgage Loan in any state other than the Required Recordation States.
In the case of Mortgage Loans that have been prepaid in full as of the
Closing Date, the Depositor, in lieu of delivering the above documents to the
Trustee or the Custodian on its behalf, will deposit in the Certificate Account
the portion of such payment that is required to be deposited in the Certificate
Account pursuant to Section 3.8 hereof.
Notwithstanding anything to the contrary in this Agreement, within thirty
days after the Closing Date (in the case of the Initial Mortgage Loans) or the
related Subsequent Transfer Date (in the case of the Subsequent Mortgage Loans),
the Depositor shall either (i) deliver or cause to be delivered to the Trustee
or the Custodian on its behalf the Mortgage File as required pursuant to this
Section 2.1 for each Delay Delivery Mortgage Loan or (ii) (A) substitute or
cause to be substituted a Substitute Mortgage Loan for the Delay Delivery
Mortgage Loan or (B) repurchase or cause to be repurchased the Delay Delivery
Mortgage Loan, which substitution or repurchase shall be accomplished in the
manner and subject to the conditions set forth in Section 2.3 (treating each
Delay Delivery Mortgage Loan as a Deleted Mortgage Loan for purposes of such
Section 2.3), provided, however, that if the Depositor fails to deliver a
Mortgage File for any
42
Delay Delivery Mortgage Loan within the thirty-day period provided in the prior
sentence, the Depositor shall use its best reasonable efforts to effect or cause
to be effected a substitution, rather than a repurchase of, such Deleted
Mortgage Loan and provided further that the cure period provided for in Section
2.2 or in Section 2.3 shall not apply to the initial delivery of the Mortgage
File for such Delay Delivery Mortgage Loan, but rather the Depositor shall have
five (5) Business Days to cure or cause to be cured such failure to deliver. At
the end of such thirty-day period, the Trustee or the Custodian, on its behalf
shall send a Delay Delivery Certification in the form annexed hereto as Exhibit
F-1 for the Delay Delivery Mortgage Loans delivered during such thirty-day
period in accordance with the provisions of Section 2.2. Notwithstanding
anything to the contrary contained in this Agreement, none of the Mortgage Loans
in the Trust Fund is or will be Delay Delivery Mortgage Loans.
(c) Upon five (5) Business Days written notice to the Trustee, MBIA and
the Rating Agencies, on any Business Day during the Funding Period
designated by the Seller, the Depositor and the Trustee shall, subject
to the satisfaction of the conditions set forth below, complete,
execute and deliver a Subsequent Transfer Agreement pursuant to which
the Depositor shall sell, assign, transfer and convey Subsequent
Mortgage Loans and related property and rights to the Trust. The
transfer of Subsequent Mortgage Loans and the other property and
rights relating to them on a Subsequent Transfer Date shall be subject
to the satisfaction of each of the following conditions:
(i) each Subsequent Mortgage Loan conveyed on such Subsequent
Transfer Date satisfies the representations and warranties
applicable to it under this Agreement; provided, however, that
with respect to a breach of a representation and warranty with
respect to a Subsequent Mortgage Loan, the obligation under a
Subsequent MLPA of the Seller to cure, repurchase or replace such
Subsequent Mortgage Loan shall constitute the sole remedy against
the Seller respecting such breach available to
Certificateholders, the Depositor or the Trustee;
(ii) the Trustee and MBIA are provided with a "bring down" Opinion of
Counsel with respect to the true sale opinion delivered by
Xxxxxxx Xxxxx LLP on the Closing Date confirming the validity of
the conveyance of the Subsequent Mortgage Loans conveyed on such
Subsequent Transfer Date;
(iii) the execution and delivery of such Subsequent Transfer Agreement
or conveyance of the related Subsequent Mortgage Loans does not
result in a reduction or withdrawal of any ratings assigned to
the Certificates (determined without regard to the MBIA Policy)
by the Rating Agencies, as evidenced by a letter from each Rating
Agency to such effect;
(iv) the Subsequent Mortgage Loans conveyed on such Subsequent
Transfer Date were selected in a manner reasonably believed not
to be adverse to the interests of the Certificateholders
(determined without regard to the MBIA Policy);
43
(v) no Subsequent Mortgage Loan conveyed on such Subsequent Transfer
Date was 30 or more days delinquent;
(vi) following the conveyance of the Subsequent Mortgage Loans on such
Subsequent Transfer Date to the Trust Fund, the characteristics
of the Mortgage Loans will not vary by more than the amounts
indicated below; provided, however, that for the purpose of
making such calculations, the characteristics for any Initial
Mortgage Loan made will be taken as of the Initial Cut-off Date
and the characteristics for any Subsequent Mortgage Loan will be
taken as of the related Subsequent Cut-off Date:
---------------------------------------------------------------------------------
Permitted
Characteristic Variance
---------------------------------------------------------------------------------
Aggregate Stated Principal Balance............ $81,880,658.00 5%
---------------------------------------------------------------------------------
Weighted Average Mortgage Rate................ 5.950% 10 basis points
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Weighted Average Loan-to-Value Ratio.......... 67% 5%
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Weighted Average Remaining Term to Maturity... 360 months 4 months
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(vii) the Depositor shall not be insolvent and shall not be rendered
insolvent as a result of such transfer; and
(viii) the Depositor shall have delivered to the Trustee an Officer's
Certificate confirming the satisfaction of each of these
conditions precedent, as well as those described in Section
2.1(d).
(d) Upon (1) delivery to the Trustee by the Depositor or the Seller of the
"bring down" Opinion of Counsel referred to in Section 2.1(c)(ii), (2)
delivery to the Trustee of a revised Mortgage Loan Schedule reflecting
the Subsequent Mortgage Loans conveyed on such Subsequent Transfer
Date, and (3) delivery to the Trustee by the Depositor of an Officer's
Certificate confirming the satisfaction of each of the conditions
precedent set forth in Section 2.1(c) and this Section 2.1(d), the
Trustee shall pay the Seller the Aggregate Subsequent Purchase Amount
from the funds on deposit in the Pre-Funding Account. The positive
difference, if any, between the Aggregate Subsequent Transfer Amount
and the Aggregate Subsequent Purchase Amount shall be reinvested by
the Trustee in the Pre-Funding Account.
(e) The Trustee shall not be required to investigate or otherwise verify
compliance with the conditions set forth in Sections 2.1(c) and
2.1(d), except for its own receipt of documents specified above, and
shall be entitled to rely on the required Officer's Certificate.
(f) Within thirty days after the final Subsequent Transfer Date, the
Depositor shall deliver to the Trustee and MBIA a letter of a
nationally recognized firm of independent public accountants stating
whether or not the Subsequent Mortgage Loans conveyed on such
Subsequent Transfer Date conform to the characteristics in Section
2.1(c)(v) and(vi).
44
(g) The Depositor shall not exercise any discretion in the selection of
the Subsequent Mortgage Loans to be conveyed to the Trust Fund. On any
Subsequent Transfer Date, the Subsequent Mortgage Loans shall be
selected for inclusion in the Trust Fund by adhering to the following
procedures: first, the Subsequent Mortgage Loans will be purchased in
order by date of origination by the Seller (earliest originations
first); second, purchases of Subsequent Mortgage Loans originated on
the same date shall be in numeric order by loan number; and third, the
Subsequent Mortgage Loans must satisfy the eligibility requirements of
Section 2.1. In no event shall the aggregate of the Stated Principal
Balance of all Subsequent Mortgage Loans as of the related Subsequent
Cut-off Date exceed the Pre-Funded Amount.
(h) Once the potential Subsequent Mortgage Loans are identified in this
manner, the total potential loan pool shall be tested for compliance
with the pool characteristics covered by the representations and
warranties in Section 2.1(c)(i) and (vi) after taking into account the
addition of the potential Subsequent Mortgage Loans. If any pool
characteristic is outside any permitted parameter by more than the
variances permitted in Section 2.1(c)(vi), then beginning with the
last Mortgage Loan initially identified as a potential Subsequent
Mortgage Loan and progressing in reverse order, any potential
Subsequent Mortgage Loan having a characteristic that is outside of
the permitted variance of a parameter violated by the total potential
loan pool shall be removed. Then additional Mortgage Loans shall be
added as provided in the preceding paragraph except that no Mortgage
Loan shall be added if it has a characteristic that is outside of the
permitted variance of a parameter violated by the total potential loan
pool. This procedure shall be repeated until the pool characteristics
covered by the representations and warranties in Section 2.1(c)(i) and
(vi) are satisfied within the variances permitted in Section
2.1(c)(vi) of each parameter specified in those representations and
warranties after taking into account the addition of the potential
Subsequent Mortgage Loans.
SECTION 2.2 Acceptance by Trustee of the Mortgage Loans.
The Trustee or the Custodian, on behalf of the Trustee, acknowledges
receipt of the documents identified in the Initial Certification in the form
annexed hereto as Exhibit E-1 and declares that it or the Custodian holds and
will hold such documents and the other documents delivered to it or the
Custodian, as applicable, constituting the Mortgage Files, and that it or the
Custodian, as applicable, holds or will hold such other assets as are included
in the Trust Fund, in trust for the exclusive use and benefit of all present and
future Certificateholders. The Trustee acknowledges that the Custodian will
maintain possession of the Mortgage Notes in the State of Illinois, unless
otherwise permitted by the Rating Agencies.
The Trustee agrees to execute and deliver or to cause the Custodian to
execute and deliver on the Closing Date to the Depositor, the Master Servicer
and MBIA an Initial Certification in the form annexed hereto as Exhibit E-1.
Based on its or the Custodian's review and examination, and only as to the
documents identified in such Initial Certification, the Custodian, on behalf of
the Trustee, acknowledges that such documents appear regular on their face and
relate to such Initial Mortgage Loan. Neither the Trustee nor the Custodian
shall be
45
under any duty or obligation to inspect, review or examine said documents,
instruments, certificates or other papers to determine that the same are
genuine, enforceable or appropriate for the represented purpose or that they
have actually been recorded in the real estate records or that they are other
than what they purport to be on their face.
On or about the thirtieth (30th) day after the Closing Date, the Trustee
shall deliver or shall cause the Custodian to deliver to the Depositor, MBIA and
the Master Servicer a Delay Delivery Certification with respect to the Initial
Mortgage Loans in the form annexed hereto as Exhibit F-1, with any applicable
exceptions noted thereon. Notwithstanding anything to the contrary contained in
this Agreement, none of the Mortgage Loans in the Trust Fund is or will be Delay
Delivery Mortgage Loans.
Not later than 90 days after the Closing Date, the Trustee shall deliver or
shall cause the Custodian to deliver to the Depositor, the Master Servicer and
MBIA a Final Certification with respect to the Initial Mortgage Loans in the
form annexed hereto as Exhibit G-1, with any applicable exceptions noted
thereon.
If, in the course of such review of the Mortgage Files relating to the
Initial Mortgage Loans, the Trustee or the Custodian, on behalf of the Trustee
finds any document constituting a part of a Mortgage File which does not meet
the requirements of Section 2.1, the Trustee shall list or shall cause the
Custodian to list such as an exception in the Final Certification; provided,
however that neither the Trustee nor the Custodian shall make any determination
as to whether (i) any endorsement is sufficient to transfer all right, title and
interest of the party so endorsing, as noteholder or assignee thereof, in and to
that Mortgage Note or (ii) any assignment is in recordable form or is sufficient
to effect the assignment of and transfer to the assignee thereof under the
mortgage to which the assignment relates. The Seller shall promptly correct or
cure such defect within 90 days from the date it was so notified of such defect
and, if the Seller does not correct or cure such defect within such period, the
Seller shall either (a) substitute for the related Mortgage Loan a Substitute
Mortgage Loan, which substitution shall be accomplished in the manner and
subject to the conditions set forth in Section 2.3, or (b) purchase such
Mortgage Loan from the Trustee within 90 days from the date the Seller was
notified of such defect in writing at the Purchase Price of such Mortgage Loan;
provided, however, that in no event shall such substitution or purchase occur
more than 540 days from the Closing Date, except that if the substitution or
purchase of a Mortgage Loan pursuant to this provision is required by reason of
a delay in delivery of any documents by the appropriate recording office, and
there is a dispute between either the Master Servicer or the Seller and the
Trustee over the location or status of the recorded document, then such
substitution or purchase shall occur within 720 days from the Closing Date. The
Trustee shall deliver or shall cause the Custodian to deliver written notice to
each Rating Agency and MBIA within 270 days from the Closing Date indicating
each Mortgage Loan (a) which has not been returned by the appropriate recording
office or (b) as to which there is a dispute as to location or status of such
Mortgage Loan. Such notice shall be delivered every 90 days thereafter until the
related Mortgage Loan is returned to the Trustee or the Custodian on its behalf.
Any such substitution pursuant to (a) above or purchase pursuant to (b) above
shall not be effected prior to the delivery to the Trustee and MBIA of the
Opinion of Counsel required by Section 2.5 hereof, if any, and any substitution
pursuant to (a) above shall not be effected prior to the additional delivery to
the Trustee and MBIA of a Request for Release substantially in the form of
Exhibit L. No substitution is permitted to be made in any calendar month after
the Determination Date for such month. The Purchase Price for any such Mortgage
Loan shall be
46
deposited by the Seller in the Certificate Account on or prior to the
Distribution Account Deposit Date for the Distribution Date in the month
following the month of repurchase and, upon receipt of such deposit and
certification with respect thereto in the form of Exhibit M hereto, the Trustee
shall cause the Custodian to release the related Mortgage File to the Seller and
shall execute and deliver at the Seller's request such instruments of transfer
or assignment prepared by the Seller, in each case without recourse, as shall be
necessary to vest in the Seller, or a designee, the Trustee's interest in any
Mortgage Loan released pursuant hereto.
Upon delivery of the Subsequent Mortgage Loans pursuant to a Subsequent
Transfer Agreement, the Trustee shall acknowledge or shall cause the Custodian
to acknowledge receipt of the documents identified in any Subsequent
Certification in the form annexed hereto as Exhibit E-2 and declare that it will
hold such documents and the other documents delivered to it constituting the
Mortgage Files, and that it will hold such other assets as are included in the
Trust Fund, in trust for the exclusive use and benefit of all present and future
Certificateholders.
The Trustee agrees to execute and deliver or to cause the Custodian to
execute and deliver on the Subsequent Transfer Date to the Depositor, MBIA, the
Master Servicer and the Seller a Subsequent Certification in the form annexed
hereto as Exhibit E-2. Based on its review and examination, and only as to the
documents identified in such Subsequent Certification, the Custodian, on behalf
of the Trustee, shall acknowledge that such documents appear regular on their
face and relate to such Subsequent Mortgage Loan. Neither the Trustee nor the
Custodian shall be under any duty or obligation to inspect, review or examine
said documents, instruments, certificates or other papers to determine that the
same are genuine, enforceable or appropriate for the represented purpose or that
they have actually been recorded in the real estate records or that they are
other than what they purport to be on their face.
On or about the twentieth (20th) day after the Subsequent Transfer Date,
the Trustee shall deliver the Trustee shall deliver or shall cause the Custodian
to deliver to the Depositor, MBIA, the Master Servicer and the Seller a Delay
Delivery Certification with respect to the Subsequent Mortgage Loans in the form
annexed hereto as Exhibit F-2, with any applicable exceptions noted thereon.
Not later than 90 days after the final Subsequent Transfer Date, the
Trustee shall deliver or shall cause the Custodian to deliver to the Depositor,
MBIA, the Master Servicer and the Seller a Final Certification with respect to
the Subsequent Mortgage Loans in the form annexed hereto as Exhibit G-2, with
any applicable exceptions noted thereon.
If, in the course of such review of the Mortgage Files relating to the
Initial Mortgage Loans, the Trustee or the Custodian, on behalf of the Trustee
finds any document constituting a part of a Mortgage File which does not meet
the requirements of Section 2.1, the Trustee shall list or shall cause the
Custodian to list such as an exception in the Final Certification; provided,
however that neither the Trustee nor the Custodian shall make any determination
as to whether (i) any endorsement is sufficient to transfer all right, title and
interest of the party so endorsing, as noteholder or assignee thereof, in and to
that Mortgage Note or (ii) any assignment is in recordable form or is sufficient
to effect the assignment of and transfer to the assignee thereof under the
mortgage to which the assignment relates. The Seller shall promptly correct or
cure such defect within 90 days from the date it was so notified of such defect
and, if the Seller does not correct or cure such defect within such period, the
Seller shall either (a) substitute for the
47
related Mortgage Loan a Substitute Mortgage Loan, which substitution shall be
accomplished in the manner and subject to the conditions set forth in Section
2.3, or (b) purchase such Mortgage Loan from the Trustee within 90 days from the
date the Seller was notified of such defect in writing at the Purchase Price of
such Mortgage Loan; provided, however, that in no event shall such substitution
or purchase occur more than 540 days from the Closing Date, except that if the
substitution or purchase of a Mortgage Loan pursuant to this provision is
required by reason of a delay in delivery of any documents by the appropriate
recording office, and there is a dispute between either the Master Servicer or
the Seller and the Trustee over the location or status of the recorded document,
then such substitution or purchase shall occur within 720 days from the Closing
Date. The Trustee shall deliver or shall cause the Custodian to deliver written
notice to each Rating Agency and MBIA within 270 days from the Closing Date
indicating each Mortgage Loan (a) which has not been returned by the appropriate
recording office or (b) as to which there is a dispute as to location or status
of such Mortgage Loan. Such notice shall be delivered every 90 days thereafter
until the related Mortgage Loan is returned to the Trustee or the Custodian on
its behalf. Any such substitution pursuant to (a) above or purchase pursuant to
(b) above shall not be effected prior to the delivery to the Trustee and MBIA of
the Opinion of Counsel required by Section 2.5 hereof, if any, and any
substitution pursuant to (a) above shall not be effected prior to the additional
delivery to the Trustee and MBIA of a Request for Release substantially in the
form of Exhibit L. No substitution is permitted to be made in any calendar month
after the Determination Date for such month. The Purchase Price for any such
Mortgage Loan shall be deposited by the Seller in the Certificate Account on or
prior to the Distribution Account Deposit Date for the Distribution Date in the
month following the month of repurchase and, upon receipt of such deposit and
certification with respect thereto in the form of Exhibit M hereto, the Trustee
shall cause the Custodian to release the related Mortgage File to the Seller and
shall execute and deliver at the Seller's request such instruments of transfer
or assignment prepared by the Seller, in each case without recourse, as shall be
necessary to vest in the Seller, or a designee, the Trustee's interest in any
Mortgage Loan released pursuant hereto.
The Trustee shall retain or shall cause the Custodian to retain possession
and custody of each Mortgage File in accordance with and subject to the terms
and conditions set forth herein. The Master Servicer shall promptly deliver to
the Trustee or the Custodian on its behalf, upon the execution or receipt
thereof, the originals of such other documents or instruments constituting the
Mortgage File as come into the possession of the Master Servicer from time to
time.
It is understood and agreed that the obligation of the Seller to substitute
for or to purchase any Mortgage Loan which does not meet the requirements of
Section 2.1 above shall constitute the sole remedy respecting such defect
available to the Trustee, the Depositor and any Certificateholder against the
Seller.
The mortgage loans permitted by the terms of this Agreement to be included
in the Trust Fund are limited to (i) the Initial Mortgage Loans (which the
Depositor acquired pursuant to the MLPA, which contains, among other
representations and warranties, a representation and warranty of the Seller that
no Mortgage Loan is a "high cost loan" as defined by the specific applicable
predatory and abusive lending laws, which includes the term "High-Cost Home
Loan" as defined in the New Jersey Home Ownership Act, effective November 27,
2003, and the New Mexico Home Loan Protection Act, effective as of April 11,
2003 (collectively, the "Acts")); (ii) the Subsequent Mortgage Loans (which the
Depositor shall acquire pursuant to a Subsequent MLPA, which contains (or
incorporates by reference), among other representations and
48
warranties, a representation and warranty of the Seller that no Mortgage Loan is
a "high cost loan" as defined by the specific applicable predatory and abusive
lending laws, which includes the term "High-Cost Home Loan" as defined in the
New Jersey Home Ownership Act, effective November 27, 2003, and the New Mexico
Home Loan Protection Act, effective as of April 11, 2003 (collectively, the
"Acts")); and (iii) Substitute Mortgage Loans (which, by definition as set forth
in this Agreement and referred to in the MLPA, are required to conform to, among
other representations and warranties, a representation and warranty of the
Seller set forth in the MLPA that no Substitute Mortgage Loan is a "high cost
loan" as defined by the specific applicable predatory and abusive lending laws,
which includes the term "High-Cost Home Loan" as defined in the Acts). It is
therefore understood and agreed by the parties hereto that it is not intended
that any Mortgage Loan be included in the Trust Fund that is a "High-Cost Home
Loan" as defined in the Acts.
SECTION 2.3 Representations and Warranties of the Master Servicer;
Covenants of the Seller.
(a) The Master Servicer hereby makes the representations and warranties
set forth in Schedule II hereto and by this reference incorporated
herein, to the Depositor and the Trustee, as of the Closing Date (in
the case of the Initial Mortgage Loans) or the applicable Subsequent
Transfer Date (in the case of the Subsequent Mortgage Loans), or if so
specified therein, as of the applicable Cut-off Date.
(b) Upon discovery by any of the parties hereto of a breach of a
representation or warranty with respect to a Mortgage Loan made
pursuant to Schedule B of the Initial MLPA that materially and
adversely affects the interests of the Certificateholders in any
Mortgage Loan, the party discovering such breach shall give prompt
notice thereof to the other parties. The Seller hereby covenants that
within 90 days of the earlier of its discovery or its receipt of
written notice from any party of a breach of any representation or
warranty with respect to a Mortgage Loan made pursuant to Schedule B
to the Initial MLPA which materially and adversely affects the
interests of the Certificateholders in any Mortgage Loan, it shall
cure such breach in all material respects, and if such breach is not
so cured, shall, (i) if such 90-day period expires prior to the second
anniversary of the Closing Date, remove such Mortgage Loan (a "Deleted
Mortgage Loan") from the Trust Fund and substitute in its place a
Substitute Mortgage Loan, in the manner and subject to the conditions
set forth in this Section; or (ii) repurchase the affected Mortgage
Loan or Mortgage Loans from the Trustee at the Purchase Price in the
manner set forth below; provided, however, that any such substitution
pursuant to (i) above shall not be effected prior to the delivery to
the Trustee and MBIA of the Opinion of Counsel required by Section 2.5
hereof, if any, and any such substitution pursuant to (i) above shall
not be effected prior to the additional delivery to the Trustee and
MBIA or the Custodian on its behalf of a Request for Release
substantially in the form of Exhibit M and the Mortgage File for any
such Substitute Mortgage Loan. The Seller shall promptly reimburse the
Master Servicer and the Trustee for any expenses reasonably incurred
by the Master Servicer or the Trustee in respect of enforcing the
remedies for such breach. With respect to the representations and
warranties described in this Section which are made to the best of the
Seller's knowledge, if it is discovered by either the
49
Depositor, the Seller or the Trustee that the substance of such
representation and warranty is inaccurate and such inaccuracy
materially and adversely affects the value of the related Mortgage
Loan or the interests of the Certificateholders therein,
notwithstanding the Seller's lack of knowledge with respect to the
substance of such representation or warranty, such inaccuracy shall be
deemed a breach of the applicable representation or warranty.
With respect to any Substitute Mortgage Loan or Loans, the Seller shall
deliver to the Trustee or the Custodian on its behalf for the benefit of the
Certificateholders the Mortgage Note, the Mortgage, the related assignment of
the Mortgage, and such other documents and agreements as are required by Section
2.1, with the Mortgage Note endorsed and the Mortgage assigned as required by
Section 2.1. No substitution is permitted to be made in any calendar month after
the Determination Date for such month. Scheduled Payments due with respect to
Substitute Mortgage Loans in the month of substitution shall not be part of the
Trust Fund and will be retained by the Seller on the next succeeding
Distribution Date. For the month of substitution, distributions to
Certificateholders will include the monthly payment due on any Deleted Mortgage
Loan for such month and thereafter the Seller shall be entitled to retain all
amounts received in respect of such Deleted Mortgage Loan. The Master Servicer
shall amend the Mortgage Loan Schedule for the benefit of the Certificateholders
to reflect the removal of such Deleted Mortgage Loan and the substitution of the
Substitute Mortgage Loan or Loans and the Master Servicer shall deliver the
amended Mortgage Loan Schedule to the Trustee. Upon such substitution, the
Substitute Mortgage Loan or Loans shall be subject to the terms of this
Agreement in all respects, and the Seller shall be deemed to have made with
respect to such Substitute Mortgage Loan or Loans, as of the date of
substitution, the representations and warranties made pursuant to Schedule B to
the Initial MLPA with respect to such Mortgage Loan. Upon any such substitution
and the deposit to the Certificate Account of the amount required to be
deposited therein in connection with such substitution as described in the
following paragraph, the Trustee shall release or shall cause the Custodian to
release the Mortgage File held for the benefit of the Certificateholders
relating to such Deleted Mortgage Loan to the Seller and shall execute and
deliver at the Seller's direction such instruments of transfer or assignment
prepared by the Seller, in each case without recourse, as shall be necessary to
vest title in the Seller, or its designee, the Trustee's interest in any Deleted
Mortgage Loan substituted for pursuant to this Section 2.3.
For any month in which the Seller substitutes one or more Substitute
Mortgage Loans for one or more Deleted Mortgage Loans, the Master Servicer will
determine the amount (if any) by which the aggregate principal balance of all
such Substitute Mortgage Loans as of the date of substitution is less than the
aggregate Stated Principal Balance of all such Deleted Mortgage Loans (after
application of the scheduled principal portion of the monthly payments due in
the month of substitution). The amount of such shortage (the "Substitution
Adjustment Amount") plus an amount equal to the aggregate of any unreimbursed
Advances with respect to such Deleted Mortgage Loans shall be deposited in the
Certificate Account by the Seller on or before the Distribution Account Deposit
Date for the Distribution Date in the month succeeding the calendar month during
which the related Mortgage Loan became required to be purchased or replaced
hereunder.
In the event that the Seller shall have repurchased a Mortgage Loan, the
Purchase Price therefor shall be deposited in the Certificate Account pursuant
to Section 3.5 on or before the
50
Distribution Account Deposit Date for the Distribution Date in the month
following the month during which the Seller became obligated hereunder to
repurchase or replace such Mortgage Loan and upon such deposit of the Purchase
Price, the delivery of the Opinion of Counsel required by Section 2.5 and
receipt of a Request for Release in the form of Exhibit M hereto, the Trustee
shall release or shall cause the Custodian to release the related Mortgage File
held for the benefit of the Certificateholders to such Person, and the Trustee
shall execute and deliver or shall cause the Custodian to execute and deliver at
such Person's direction such instruments of transfer or assignment prepared by
such Person, in each case without recourse, as shall be necessary to transfer
title from the Trustee. It is understood and agreed that the obligation under
this Agreement of the Seller to cure, repurchase or replace any Mortgage Loan as
to which a breach has occurred and is continuing shall constitute the sole
remedy against the Seller respecting such breach available to
Certificateholders, the Depositor or the Trustee on their behalf.
After giving effect to the sale of the Certificates by the Depositor to the
Underwriters, and thereafter, so long as any Certificates remain outstanding,
the Seller, its affiliates and agents, collectively, shall not beneficially own
Certificates the aggregate fair value of which would represent 90% or more of
the beneficial interests in the Trust Fund.
The representations and warranties made pursuant to this Section 2.3 shall
survive delivery of the respective Mortgage Files to the Trustee or the
Custodian for the benefit of the Certificateholders.
SECTION 2.4 Representations and Warranties of the Depositor as to the
Mortgage Loans.
The Depositor hereby represents and warrants to the Trustee with respect to
each Initial Mortgage Loan as of the date hereof or such other date set forth
herein that as of the Closing Date, and following the transfer of the Initial
Mortgage Loans to it pursuant to the MLPA and immediately prior to the
conveyance of the Mortgage Loans by it to the Trustee pursuant to Section 2.1(a)
hereof, the Depositor had good title to the Mortgage Loans and the Mortgage
Notes were subject to no offsets, defenses or counterclaims.
It is understood and agreed that the representations and warranties set
forth in this Section 2.4 shall survive delivery of the Mortgage Files to the
Trustee. Upon discovery by the Depositor or the Trustee of a breach of any of
the foregoing representations and warranties set forth in this Section 2.4
(referred to herein as a "breach"), which breach materially and adversely
affects the interest of the Certificateholders, the party discovering such
breach shall give prompt written notice to the others, MBIA and to each Rating
Agency.
SECTION 2.5 Delivery of Opinion of Counsel in Connection with
Substitutions.
(a) Notwithstanding any contrary provision of this Agreement, no
substitution pursuant to Section 2.2 or Section 2.3 shall be made more
than 90 days after the Closing Date unless the Depositor delivers to
the Trustee and MBIA an Opinion of Counsel, which Opinion of Counsel
shall not be at the expense of either the Trustee, the Trust Fund or
MBIA, addressed to the Trustee and MBIA, to the effect that such
substitution will not (i) result in the imposition of the tax on
"prohibited transactions" on the Trust Fund or contributions after the
Startup
51
Date, as defined in Sections 860F(a)(2) and 860G(d) of the Code,
respectively, or (ii) cause any REMIC created hereunder to fail to
qualify as a REMIC at any time that any Certificates are outstanding.
(b) Upon discovery by the Depositor, the Master Servicer or the Trustee
that any Mortgage Loan does not constitute a "qualified mortgage"
within the meaning of Section 860G(a)(3) of the Code, the party
discovering such fact shall promptly (and in any event within five (5)
Business Days of discovery) give written notice thereof to the other
parties. In connection therewith, the Trustee shall require the
Depositor to cause the Seller, pursuant to the MLPA and at the
Seller's option, to either (i) substitute, if the conditions in
Section 2.3(b) with respect to substitutions are satisfied, a
Substitute Mortgage Loan for the affected Mortgage Loan, or (ii)
repurchase the affected Mortgage Loan within 90 days of such discovery
in the same manner as it would a Mortgage Loan for a breach of
representation or warranty made pursuant to Section 2.3. The Trustee
shall reconvey or shall cause the Custodian to reconvey to the Seller
the Mortgage Loan to be released pursuant hereto in the same manner,
and on the same terms and conditions, as it would a Mortgage Loan
repurchased for breach of a representation or warranty contained in
Section 2.3.
SECTION 2.6 Execution and Delivery of Certificates.
The Trustee acknowledges the transfer and assignment to it of the Trust
Fund and, concurrently with such transfer and assignment, has executed and
delivered to or upon the order of the Depositor, the Certificates in authorized
denominations evidencing directly or indirectly the entire ownership of the
Trust Fund. The Trustee agrees to hold the Trust Fund and exercise the rights
referred to above for the benefit of all present and future Holders of the
Certificates and to perform the duties set forth in this Agreement to the best
of its ability, to the end that the interests of the Holders of the Certificates
may be adequately and effectively protected.
SECTION 2.7 REMIC Matters.
The Preliminary Statement sets forth the designations and "latest possible
maturity date" for federal income tax purposes of all REMIC regular interests
created hereby. Each interest identified in the table below by a designation
beginning with "L" shall be a "regular interest" in the Lower REMIC and the
Class I-A-RL Certificates shall be the sole class of residual interest in the
Lower REMIC. The Lower REMIC Interests shall be uncertificated and shall be held
by the Trustee as assets of the Upper REMIC. The assets of the Lower REMIC shall
be as set forth in the definition thereof. The assets of the Upper REMIC shall
be as set forth in the definition thereof. The "Startup Day" for purposes of the
REMIC Provisions shall be the Closing Date. The Tax Matters Person with respect
to each REMIC hereunder shall be the Trustee and the Trustee shall hold the Tax
Matters Person Certificate. Each REMIC's taxable year shall be the calendar year
and its accounts shall be maintained using the accrual method.
52
----------------------------------------------------------------------
Corresponding
Lower REMIC Lower REMIC Class of Certificates
Interest or Interest Lower REMIC ---------------------
Certificate Balance Interest Rate Interest Principal
----------------------------------------------------------------------
L-I-A-1 $ 835.93 5.25% (1) (1)
----------------------------------------------------------------------
L-I-PO $ 666,684.51 0% N/A I-PO
----------------------------------------------------------------------
L-I-A-ZZZ $333,702,429.56 5.25% (1) (1)
----------------------------------------------------------------------
Class I-A-RL $ 50.00 5.25% N/A N/A
----------------------------------------------------------------------
L-II-A-1 $ 187.54 4.50% (1) (1)
----------------------------------------------------------------------
L-II-A-ZZZ $ 75,007,200.94 4.50% (1) (1)
----------------------------------------------------------------------
(1) The Lower REMIC Interest L-I-A-1 and Lower REMIC Interest L-I-A-ZZZ shall be
Corresponding Classes to these Classes of Certificates: X-X-0, X-X-0, X-X-0,
X-X-0, X-X-0, X-X-0, X-X-0, X-X-XX, X-0, X-0, X-0, X-0, B-5 and B-6 (provided
that with respect to the Subordinated Certificates such Lower REMIC Interests
shall only correspond to the portion supported by Pool I). Lower REMIC Interest
L-I-PO shall be a Corresponding Class to Class I-PO. The Lower REMIC Interest
L-II-A-1 and Lower REMIC Interest L-II-A-ZZZ shall be Corresponding Classes to
these Classes of Certificates: XX-X-0, XX-X-0, XX-X-0, XX-X-0, X-0, X-0, X-0,
X-0, B-5 and B-6 (provided that with respect to the Subordinated Certificates
such Lower REMIC Interests shall only correspond to the portion supported by
Pool II)
The Pass-Through Rate on each Class of Subordinated Certificates is
variable and will be equal to the weighted average of the Designated Mortgage
Pool Rates, weighted on the basis of the Group Subordinate Amount for each
Mortgage Pool. For federal income tax purposes, the Class B-1, Class B-2, Class
B-3, Class B-4, Class B-5 and Class B-6 Certificates will accrue interest at a
per annum rate equal to the weighted average of the Lower REMIC Interest Rates
on Lower REMIC Interest L-I-A-1 and Lower REMIC Interest L-II-A-1, weighted on
the basis of the principal balance of each such Lower REMIC Interest.
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On each Distribution Date Available Funds shall be distributed with respect
to the Lower REMIC Interests and the Class I-A-RL Certificate in a manner such
that:
(a) interest accrued, if any, on each Lower REMIC Interest is distributed
with respect to each such Lower REMIC Interest in the same manner that
Accrued Certificate Interest is distributed with respect to the
Corresponding Class or Classes of Certificates pursuant to Section
4.2(a)(i) and (ii);
(b) interest accrued on the Class I-A-RU and Class I-A-RL Certificates is
distributed in the manner provided in Section 4.2(a)(i) and (ii);
(c) principal is distributed as provided in the following paragraph.
Distributions of principal to the Lower REMIC Interests and the Class
I-A-RL Certificate on each Distribution Date shall be deemed to be made:
(i) first, as to Pool I, to Class I-A-RL Certificate as provided in
Section 4.2(b)(i),
(ii) second, to the Lower REMIC Interests, in each case from the
related Mortgage Pool, to Lower REMIC Interest L-I-A-1 and Lower REMIC Interest
L-II-A-1, as applicable, so that the principal balance of each such Lower REMIC
Interest is equal to 0.01% of the Group Subordinate Amount for the related
Mortgage Pool, assuming distributions on the Certificates (and allocation of
Realized Losses) have been made on such Distribution Date (except that if any
such Group Subordinate Amount is a larger number than on the previous
Distribution Date, the least amount of principal shall be distributed to such
Lower REMIC Interests such that the Lower REMIC Subordinated Balance Ratio is
maintained); and
(iii) third, any remaining principal in each Mortgage Pool, to Lower
REMIC Interest L-I-A-ZZZ and Lower REMIC Interest L-II-A-ZZZ, as applicable
(provided that a portion of the remaining principal equal to the Class I-A-PO
Principal Distribution Amount attributable to the Pool I will be distributed to
Lower REMIC Interest L-I-PO).
Realized Losses from each Mortgage Pool allocated to the Certificates pursuant
to Section 4.4 shall be applied after all distributions have been made on each
Distribution Date, first, to Lower REMIC Interest L-I-A-1 and Lower REMIC
Interest L-II-A-1, as applicable, so that the principal balance of each such
Lower REMIC Interest is equal to 0.01% of the Group Subordinate Amount for the
related Mortgage Pool, assuming distributions on the Certificates have been made
on such Distribution Date (except that if any such Group Subordinate Amount is a
larger number than on the previous Distribution Date, the least amount of
Realized Losses shall be applied to such Lower REMIC Interests such that the
Lower REMIC Subordinated Balance Ratio is maintained); and second, any remaining
Realized Losses from each Mortgage Pool shall be allocated to Lower REMIC
Interest L-I-A-ZZZ and Lower REMIC Interest L-II-A-ZZZ, as applicable (except
that if a Realized Loss is recognized with respect to a Discount Mortgage Loan
the applicable portion of such Realized Loss will be allocated to Lower REMIC
Interest L-I-PO).
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SECTION 2.8 Covenants of the Master Servicer.
The Master Servicer hereby covenants to the Depositor and the Trustee as
follows:
(a) the Master Servicer shall comply in the performance of its obligations
under this Agreement with all reasonable rules and requirements of the
insurer under each Required Insurance Policy; and
(b) no written information, certificate of an officer, statement furnished
in writing or written report delivered to the Depositor, any affiliate
of the Depositor or the Trustee and prepared by the Master Servicer
pursuant to this Agreement will contain any untrue statement of a
material fact or omit to state a material fact necessary to make such
information, certificate, statement or report not misleading.
ARTICLE III
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
SECTION 3.1 Master Servicer to Service Mortgage Loans.
For and on behalf of the Certificateholders, the Master Servicer shall
service and administer the Mortgage Loans in accordance with the terms of (i)
the Servicing Rights Transfer and Subservicing Agreement, pursuant to which
First Tennessee Mortgage Services, Inc. engaged the Master Servicer to
subservice the Mortgage Loans, (ii) this Agreement, and (iii) the customary and
usual standards of practice of prudent mortgage loan servicers; provided that if
there is a conflict between the terms of the Servicing Agreement and the
Servicing Rights Transfer and Subservicing Agreement, on the one hand, and this
Agreement, on the other hand, the terms of this Agreement shall prevail. In
connection with such servicing and administration, the Master Servicer shall
have full power and authority, acting alone and/or through Subservicers as
provided in Section 3.2 hereof, to do or cause to be done any and all things
that it may deem necessary or desirable in connection with such servicing and
administration, including but not limited to, the power and authority, subject
to the terms hereof (i) to execute and deliver, on behalf of the
Certificateholders and the Trustee, customary consents or waivers and other
instruments and documents, (ii) to consent to transfers of any Mortgaged
Property and assumptions of the Mortgage Notes and related Mortgages (but only
in the manner provided in this Agreement), (iii) to collect any Insurance
Proceeds and other Liquidation Proceeds, and (iv) to effectuate foreclosure or
other conversion of the ownership of the Mortgaged Property securing any
Mortgage Loan; provided that the Master Servicer shall not take any action that
is inconsistent with or prejudices the interests of the Trust Fund or the
Certificateholders in any Mortgage Loan or the rights and interests of the
Depositor, the Trustee and the Certificateholders under this Agreement. The
Master Servicer shall represent and protect the interests of the Trust Fund in
the same manner as it protects its own interests in mortgage loans in its own
portfolio in any claim, proceeding or litigation regarding a Mortgage Loan, and
shall not make or permit any modification, waiver or amendment of any Mortgage
Loan which would cause any REMIC created hereunder to fail to qualify as a REMIC
or result in the imposition of any tax under Section 860F(a) or Section 860G(d)
of the Code. Without limiting the generality of the foregoing, the Master
Servicer, in its own name or in the name of the Depositor and the Trustee, is
hereby authorized and empowered by the Depositor and the Trustee, when the
Master Servicer
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believes it appropriate in its reasonable judgment, to execute and deliver, on
behalf of the Trustee, the Depositor, the Certificateholders or any of them, any
and all instruments of satisfaction or cancellation, or of partial or full
release or discharge and all other comparable instruments, with respect to the
Mortgage Loans, and with respect to the Mortgaged Properties held for the
benefit of the Certificateholders. The Master Servicer shall prepare and deliver
to the Depositor and/or the Trustee such documents requiring execution and
delivery by either or both of them as are necessary or appropriate to enable the
Master Servicer to service and administer the Mortgage Loans to the extent that
the Master Servicer is not permitted to execute and deliver such documents
pursuant to the preceding sentence. Upon receipt of such documents, the
Depositor and/or the Trustee shall execute such documents and deliver them to
the Master Servicer.
In accordance with the standards of the preceding paragraph, the Master
Servicer shall advance or cause to be advanced funds as necessary for the
purpose of effecting the payment of taxes and assessments on the Mortgaged
Properties, which advances shall be reimbursable in the first instance from
related collections from the Mortgagors pursuant to Section 3.6, and further as
provided in Section 3.8. The costs incurred by the Master Servicer, if any, in
effecting the timely payments of taxes and assessments on the Mortgaged
Properties and related insurance premiums shall not, for the purpose of
calculating monthly distributions to the Certificateholders, be added to the
Stated Principal Balances of the related Mortgage Loans, notwithstanding that
the terms of such Mortgage Loans so permit.
SECTION 3.2 Subservicing; Enforcement of the Obligations of Servicers.
(a) The Master Servicer may arrange for the subservicing of any Mortgage
Loan by a Subservicer pursuant to a subservicing agreement; provided,
however, that such subservicing arrangement and the terms of the
related subservicing agreement must provide for the servicing of such
Mortgage Loans in a manner consistent with the servicing arrangements
contemplated hereunder. Unless the context otherwise requires,
references in this Agreement to actions taken or to be taken by the
Master Servicer in servicing the Mortgage Loans include actions taken
or to be taken by a Subservicer on behalf of the Master Servicer.
Notwithstanding the provisions of any subservicing agreement, any of
the provisions of this Agreement relating to agreements or
arrangements between the Master Servicer and a Subservicer or
reference to actions taken through a Subservicer or otherwise, the
Master Servicer shall remain obligated and liable to the Depositor,
the Trustee and the Certificateholders for the servicing and
administration of the Mortgage Loans in accordance with the provisions
of this Agreement without diminution of such obligation or liability
by virtue of such subservicing agreements or arrangements or by virtue
of indemnification from the Subservicer and to the same extent and
under the same terms and conditions as if the Master Servicer alone
were servicing and administering the Mortgage Loans. All actions of
each Subservicer performed pursuant to the related subservicing
agreement shall be performed as an agent of the Master Servicer with
the same force and effect as if performed directly by the Master
Servicer.
(b) For purposes of this Agreement, the Master Servicer shall be deemed to
have received any collections, recoveries or payments with respect to
the Mortgage
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Loans that are received by a Subservicer regardless of whether such
payments are remitted by the Subservicer to the Master Servicer.
SECTION 3.3 Rights of the Depositor and the Trustee in Respect of the
Master Servicer.
The Depositor may, but is not obligated to, enforce the obligations of the
Master Servicer hereunder and may, but is not obligated to, perform, or cause a
designee to perform, any defaulted obligation of the Master Servicer hereunder
and in connection with any such defaulted obligation to exercise the related
rights of the Master Servicer hereunder; provided that the Master Servicer shall
not be relieved of any of its obligations hereunder by virtue of such
performance by the Depositor or its designee. Neither the Trustee nor the
Depositor shall have any responsibility or liability for any action or failure
to act by the Master Servicer nor shall the Trustee or the Depositor be
obligated to supervise the performance of the Master Servicer hereunder or
otherwise.
SECTION 3.4 Trustee to Act as Master Servicer.
In the event that the Master Servicer shall for any reason no longer be the
Master Servicer hereunder (including by reason of an Event of Default), the
Trustee or its successor shall thereupon assume all of the rights and
obligations of the Master Servicer hereunder arising thereafter (except that the
Trustee shall not be (i) liable for losses of the Master Servicer pursuant to
Section 3.9 hereof or any acts or omissions of the predecessor Master Servicer
hereunder), (ii) obligated to make Advances if it is prohibited from doing so by
applicable law, (iii) obligated to effectuate repurchases or substitutions of
Mortgage Loans hereunder including, but not limited to, repurchases or
substitutions of Mortgage Loans pursuant to Section 2.2 or 2.3 hereof, (iv)
responsible for expenses of the Master Servicer pursuant to Section 2.3 or (v)
deemed to have made any representations and warranties of the Master Servicer
hereunder). Any such assumption shall be subject to Section 7.2 hereof. If the
Master Servicer shall for any reason no longer be the Master Servicer (including
by reason of any Event of Default), the Trustee or its successor shall succeed
to any rights and obligations of the Master Servicer under each subservicing
agreement.
The Master Servicer shall, upon request of the Trustee, but at the expense
of the Master Servicer, deliver to the assuming party all documents and records
relating to each subservicing agreement or substitute subservicing agreement and
the Mortgage Loans then being serviced thereunder and an accounting of amounts
collected or held by it and otherwise use its best efforts to effect the orderly
and efficient transfer of the substitute subservicing agreement to the assuming
party.
SECTION 3.5 Collection of Mortgage Loan Payments; Certificate Account;
Distribution Account; Pre-Funding Account; Capitalized Interest Account.
(a) The Master Servicer shall make reasonable efforts in accordance with
the customary and usual standards of practice of prudent mortgage
servicers to collect all payments called for under the terms and
provisions of the Mortgage Loans to the extent such procedures shall
be consistent with this Agreement and the terms and provisions of any
related Required Insurance Policy. Consistent with the
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foregoing, the Master Servicer may in its discretion (i) waive any
late payment charge or any prepayment charge or penalty interest in
connection with the prepayment of a Mortgage Loan and (ii) extend the
due dates for payments due on a Mortgage Note for a period not greater
than 180 days; provided, however, that the Master Servicer cannot
extend the maturity of any such Mortgage Loan past the date on which
the final payment is due on the latest maturing Mortgage Loan as of
the Cut-off Date. In the event of any such arrangement, the Master
Servicer shall make Advances on the related Mortgage Loan in
accordance with the provisions of Section 4.1 during the scheduled
period in accordance with the amortization schedule of such Mortgage
Loan without modification thereof by reason of such arrangements. The
Master Servicer shall not be required to institute or join in
litigation with respect to collection of any payment (whether under a
Mortgage, Mortgage Note or otherwise or against any public or
governmental authority with respect to a taking or condemnation) if it
reasonably believes that enforcing the provision of the Mortgage or
other instrument pursuant to which such payment is required is
prohibited by applicable law.
(b) The Master Servicer shall establish and maintain the Certificate
Account. The Certificate Account shall consist of two separate
subaccounts, each of which shall relate to a particular Mortgage Pool.
The Master Servicer shall deposit or cause to be deposited into the
appropriate subaccount of the Certificate Account no later than two
Business Days after receipt, except as otherwise specifically provided
herein, the following payments and collections remitted by
Subservicers or received by it in respect of the Mortgage Loans
subsequent to the Cut-off Date (other than in respect of principal and
interest due on the Mortgage Loans on or before the Cut-off Date) and
the following amounts required to be deposited hereunder:
(i) all payments on account of principal on the Mortgage Loans in the
related Mortgage Pool, including Principal Prepayments;
(ii) all payments on account of interest on the Mortgage Loans in the
related Mortgage Pool, net of the related Master Servicing Fee,
any Prepayment Interest Excess and, for so long as First Horizon
is the Master Servicer, any Retained Yield;
(iii) all Insurance Proceeds and Liquidation Proceeds in respect of
the related Mortgage Loans in the related Mortgage Pool, other
than proceeds to be applied to the restoration or repair of the
Mortgaged Property or released to the Mortgagor in accordance
with the Master Servicer's normal servicing procedures;
(iv) any amount required to be deposited by the Master Servicer in
respect of the related Mortgage Pool pursuant to Section 3.5(c)
in connection with any losses on Permitted Investments;
(v) any amounts required to be deposited by the Master Servicer in
respect of the related Mortgage Pool pursuant to Section 3.9(b),
3.9(d), and in
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respect of net monthly rental income from any related REO
Property pursuant to Section 3.11 hereof;
(vi) all Substitution Adjustment Amounts in respect of the related
Mortgage Pool;
(vii) all Advances in respect of the related Mortgage Pool made by the
Master Servicer pursuant to Section 4.1; and
(viii) any other amounts required to be deposited hereunder in respect
of the related Mortgage Pool.
In addition, with respect to any Mortgage Loan that is subject to a
buydown agreement, on each Due Date for such Mortgage Loan, in addition to
the monthly payment remitted by the Mortgagor, the Master Servicer shall
cause funds to be deposited into the applicable subaccount of the
Certificate Account in an amount required to cause an amount of interest to
be paid with respect to such Mortgage Loan equal to the amount of interest
that has accrued on such Mortgage Loan from the preceding Due Date at the
related Adjusted Mortgage Rate on such date.
The foregoing requirements for remittance by the Master Servicer shall
be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of prepayment
penalties, late payment charges, assumption fees or amounts attributable to
reimbursements of Advances, if collected, need not be remitted by the
Master Servicer. In the event that the Master Servicer shall remit any
amount not required to be remitted, it may at any time withdraw or direct
the institution maintaining the Certificate Account to withdraw such amount
from the Certificate Account, any provision herein to the contrary
notwithstanding. Such withdrawal or direction may be accomplished by
delivering written notice thereof to the Trustee or such other institution
maintaining the Certificate Account which describes the amounts deposited
in error in the Certificate Account. The Master Servicer shall maintain
adequate records with respect to all withdrawals made pursuant to this
Section. All funds deposited in the Certificate Account shall be held in
trust for the Certificateholders until withdrawn in accordance with Section
3.8.
(c) The Trustee shall establish and maintain, on behalf of the
Certificateholders, the Distribution Account. The Distribution Account
shall consist of two separate subaccounts, each of which shall relate
to a particular Mortgage Pool. The Trustee shall, promptly upon
receipt, deposit in the Distribution Account and retain therein the
following:
(i) the aggregate amount remitted by the Master Servicer to the
Trustee in respect of a Mortgage Pool pursuant to Section
3.8(a)(ix);
(ii) any amount deposited by the Master Servicer pursuant to this
Section 3.5(c) in connection with any losses on Permitted
Investments; and
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(iii) any other amounts deposited hereunder which are required to be
deposited in the Distribution Account.
In the event that the Master Servicer shall remit any amount not
required to be remitted, it may at any time direct the Trustee to withdraw
such amount from the applicable subaccount of the Distribution Account, any
provision herein to the contrary notwithstanding. Such direction may be
accomplished by delivering an Officer's Certificate to the Trustee which
describes the amounts deposited in error in the Distribution Account. All
funds deposited in the Distribution Account shall be held by the Trustee in
trust for the related Certificateholders until disbursed in accordance with
this Agreement or withdrawn in accordance with Section 3.8. In no event
shall the Trustee incur liability for withdrawals from the Distribution
Account at the direction of the Master Servicer.
(iv) The institutions at which the Certificate Account, the
Pre-Funding Account, the Capitalized Interest Account and the
Distribution Account are maintained shall invest funds as
directed by the Master Servicer in Permitted Investments which in
both cases shall mature not later than (i) in the case of the
Certificate Account, the Pre-Funding Account or the Capitalized
Interest Account, the second Business Day next preceding the
related Distribution Account Deposit Date (except that if such
Permitted Investment is an obligation of the institution that
maintains such account, then such Permitted Investment shall
mature not later than the Business Day next preceding such
Distribution Account Deposit Date) and (ii) in the case of the
Distribution Account, the Business Day next preceding the
Distribution Date (except that if such Permitted Investment is an
obligation of the institution that maintains such fund or
account, then such Permitted Investment shall mature not later
than such Distribution Date) and, in each case, shall not be sold
or disposed of prior to its maturity. All such Permitted
Investments shall be made in the name of the Trustee, for the
benefit of the Certificateholders. All income and gain net of any
losses realized from any such investment of funds on deposit in
the Certificate Account shall be for the benefit of the Master
Servicer as servicing compensation. All income and gain net of
any losses realized from any such investment of funds on deposit
in the Pre-Funding Account or Capitalized Interest Account shall
be for the benefit of First Horizon Home Loan Corporation. All
income and gain net of any losses realized from any such
investment of funds on deposit in the Distribution Account shall
be for the benefit of the Trustee. The amount of any Realized
Losses in the Certificate Account, Pre-Funding Account or
Capitalized Interest Account in respect of any such investments
shall promptly be deposited by the Master Servicer in the
Certificate Account, Pre-Funding Account or Capitalized Interest
Account, as applicable. The amount of any Realized Losses in the
Distribution Account in respect of any such investments shall
promptly be deposited by the Trustee into the Distribution
Account. All reinvestment income earned on amounts on deposit in
the Distribution Account shall be for the benefit of the Trustee.
The Trustee in its
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fiduciary capacity shall not be liable for the amount of any loss
incurred in respect of any investment or lack of investment of
funds held in the Certificate Account, Pre-Funding Account and
Capitalized Interest Account and made in accordance with this
Section 3.5.
(v) The Master Servicer shall give notice to the Trustee, the Seller,
MBIA, each Rating Agency and the Depositor of any proposed change
of the location of the Certificate Account prior to any change
thereof. The Trustee shall give notice to the Master Servicer,
the Seller, MBIA, each Rating Agency and the Depositor of any
proposed change of the location of the Distribution Account, the
Pre-Funding Account or the Capitalized Interest Account prior to
any change thereof.
(vi) The Trustee shall establish and maintain, on behalf of the
Certificateholders, the Pre-Funding Account. On the Closing Date
the Seller shall remit the Pre-Funded Amount to the Trustee for
deposit in the Pre-Funding Account. On each Subsequent Transfer
Date, upon satisfaction of the conditions for such Subsequent
Transfer Date set forth in Section 2.1(c), with respect to the
related Subsequent Transfer Agreement, the Trustee shall pay to
the Seller the Aggregate Subsequent Transfer Amount as payment of
the purchase price for the related Subsequent Mortgage Loans. If
at any time the Master Servicer becomes aware that the Stated
Principal Balance of Subsequent Mortgage Loans as of the related
Subsequent Cut-off Date reflected on any Subsequent Transfer
Agreement exceeds the actual Stated Principal Balance of such
Subsequent Mortgage Loans as of such Subsequent Cut-off Date, the
Master Servicer may so notify the Trustee and the Trustee shall
redeposit into the Pre-Funding Account the excess reported to it
by the Master Servicer.
If any funds remain in the Pre-Funding Account at the end of the
Funding Period, to the extent that they represent earnings on the
amounts originally deposited into the Pre-Funding Account, the
Trustee shall distribute them to the order of the Master
Servicer. The remaining funds shall be transferred to the
Distribution Account to be included as part of principal
distributions to the Certificates.
For federal income tax purposes, First Horizon Home Loan
Corporation shall be the owner of the Pre-Funding Account and
shall report all items of income, deduction, gain or loss arising
therefrom. Notwithstanding anything herein to the contrary, the
Pre-Funding Account shall not be an asset of any REMIC created
hereunder. To the extent that the Pre-Funding Account constitutes
a reserve fund for federal income tax purposes, (1) it shall be
an outside reserve fund and not an asset of any REMIC created
hereunder, and (2) it shall be owned by First Horizon Home Loan
Corporation, all within the meaning of Section 1.860G-2(h) of the
Treasury Regulations.
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(vii) The Trustee shall establish and maintain, on behalf of the
Certificateholders, the Capitalized Interest Account. On the
Closing Date the Depositor shall remit the aggregate Capitalized
Interest Amount to the Trustee for deposit in the Capitalized
Interest Account. On each Funding Period Distribution Date, the
Trustee shall transfer from the Capitalized Interest Account to
the Distribution Account an amount equal to the Pre-Funding
Interest Shortfall, if any, for such Funding Period Distribution
Date.
If any funds remain on deposit in the Capitalized Interest
Account at the end of the Funding Period, the Trustee shall make
the transfer described in the preceding paragraph if necessary
for the remaining Funding Period Distribution Date and the
Trustee shall distribute any remaining funds in the Capitalized
Interest Account to the order of the Seller.
For federal income tax purposes, First Horizon Home Loan
Corporation shall be the owner of the Capitalized Interest
Account and shall report all items of income, deduction, gain or
loss arising therefrom. Notwithstanding anything herein to the
contrary, the Capitalized Interest Account shall not be an asset
of any REMIC created hereunder. To the extent that the
Capitalized Interest Account constitutes a reserve fund for
federal income tax purposes, (1) it shall be an outside reserve
fund and not an asset of any REMIC created hereunder, and (2) it
shall be owned by First Horizon Home Loan Corporation, all within
the meaning of Section 1.860G-2(h) of the Treasury Regulations.
SECTION 3.6 Collection of Taxes, Assessments and Similar Items; Escrow
Accounts.
(a) To the extent required by the related Mortgage Note and not violative
of current law, the Master Servicer shall establish and maintain one
or more accounts (each, an "Escrow Account") and deposit and retain
therein all collections from the Mortgagors (or advances by the Master
Servicer) for the payment of taxes, assessments, hazard insurance
premiums or comparable items for the account of the Mortgagors.
Nothing herein shall require the Master Servicer to compel a Mortgagor
to establish an Escrow Account in violation of applicable law.
(b) Withdrawals of amounts so collected from the Escrow Accounts may be
made only to effect timely payment of taxes, assessments, hazard
insurance premiums, condominium or PUD association dues, or comparable
items, to reimburse the Master Servicer out of related collections for
any payments made pursuant to Sections 3.1 hereof (with respect to
taxes and assessments and insurance premiums) and 3.9 hereof (with
respect to hazard insurance), to refund to any Mortgagors any sums
determined to be overages, to pay interest, if required by law or the
terms of the related Mortgage or Mortgage Note, to Mortgagors on
balances in the Escrow Account or to clear and terminate the Escrow
Account at the termination of this Agreement in accordance with
Section 9.1 hereof. The Escrow Accounts shall not be a part of the
Trust Fund.
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(c) The Master Servicer shall advance any payments referred to in Section
3.6(a) that are not timely paid by the Mortgagors on the date when the
tax, premium or other cost for which such payment is intended is due,
but the Master Servicer shall be required so to advance only to the
extent that such advances, in the good faith judgment of the Master
Servicer, will be recoverable by the Master Servicer out of Insurance
Proceeds, Liquidation Proceeds or otherwise.
SECTION 3.7 Access to Certain Documentation and Information Regarding
the Mortgage Loans.
The Master Servicer shall afford the Depositor and the Trustee reasonable
access to all records and documentation regarding the Mortgage Loans and all
accounts, insurance information and other matters relating to this Agreement,
such access being afforded without charge, but only upon reasonable request and
during normal business hours at the office designated by the Master Servicer.
Upon reasonable advance notice in writing, the Master Servicer will provide
to each Certificateholder or Certificate Owner which is a savings and loan
association, bank or insurance company certain reports and reasonable access to
information and documentation regarding the Mortgage Loans sufficient to permit
such Certificateholder or Certificate Owner to comply with applicable
regulations of the OTS or other regulatory authorities with respect to
investment in the Certificates; provided that the Master Servicer shall be
entitled to be reimbursed by each such Certificateholder or Certificate Owner
for actual expenses incurred by the Master Servicer in providing such reports
and access.
SECTION 3.8 Permitted Withdrawals from the Certificate Account and
Distribution Account.
(a) The Master Servicer may from time to time make withdrawals from the
applicable subaccount of the Certificate Account for the following
purposes:
(i) to the extent not previously retained by the Master Servicer, to
pay to First Horizon the Retained Yield and to pay to the Master
Servicer the master servicing compensation to which it is
entitled pursuant to Section 3.14, and earnings on or investment
income with respect to funds in or credited to the Certificate
Account as additional master servicing compensation;
(ii) to the extent not previously retained by the Master Servicer, to
reimburse the Master Servicer for unreimbursed Advances made by
it in respect of the related Mortgage Pool, such right of
reimbursement pursuant to this subclause (ii) being limited to
amounts received on the Mortgage Loan(s) in respect of which any
such Advance was made;
(iii) to reimburse the Master Servicer for any Nonrecoverable Advance
previously made in respect of the related Mortgage Pool;
(iv) to reimburse the Master Servicer for Insured Expenses from the
related Insurance Proceeds in respect of the related Mortgage
Pool;
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(v) to reimburse the Master Servicer for (a) unreimbursed Servicing
Advances in respect of the related Mortgage Pool, the Master
Servicer's right to reimbursement pursuant to this clause (a)
with respect to any Mortgage Loan being limited to amounts
received on such Mortgage Loan(s) which represent late recoveries
of the payments for which such advances were made pursuant to
Section 3.1 or Section 3.6 and (b) for unpaid Master Servicing
Fees as provided in Section 3.11 hereof;
(vi) to pay to the Seller or Master Servicer, as applicable, with
respect to each Mortgage Loan in respect of the related Mortgage
Pool or property acquired in respect thereof that has been
purchased pursuant to Section 2.2, 2.3 or 3.11, all amounts
received thereon after the date of such purchase;
(vii) to reimburse the Seller, the Master Servicer or the Depositor
for expenses incurred by any of them and reimbursable pursuant to
Section 6.3 hereof;
(viii) to withdraw any amount deposited in the Certificate Account and
not required to be deposited therein;
(ix) on or prior to the Distribution Account Deposit Date, to withdraw
an amount equal to the related Available Funds, the Trustee Fee
and the MBIA Premium for such Distribution Date and remit such
amount to the Trustee for deposit in the Distribution Account;
and
(x) to clear and terminate the Certificate Account upon termination
of this Agreement pursuant to Section 9.1 hereof.
The Master Servicer shall keep and maintain separate accounting, on a
Mortgage Loan-by-Mortgage Loan basis and on a Mortgage Pool-by-Mortgage
Pool basis, for the purpose of justifying any withdrawal from the
Certificate Account pursuant to such subclauses (i), (ii), (iv), (v) and
(vi). Prior to making any withdrawal from the Certificate Account pursuant
to subclause (iii), the Master Servicer shall deliver to the Trustee an
Officer's Certificate of a Servicing Officer indicating the amount of any
previous Advance determined by the Master Servicer to be a Nonrecoverable
Advance and identifying the related Mortgage Loans(s), and their respective
portions of such Nonrecoverable Advance.
The Master Servicer shall distribute the Retained Yield, if any, to
First Horizon on each Distribution Account Deposit Date during the term of
this Agreement.
(b) The Trustee shall withdraw funds from the applicable subaccount of the
Distribution Account for distributions to the related
Certificateholders in the manner specified in this Agreement (and to
withhold from the amounts so withdrawn, the amount of any taxes that
it is authorized to withhold pursuant to the last paragraph of Section
8.11). In addition, the Trustee may (and with respect to clause (ii)
below, shall), prior to making the distribution pursuant to Section
4.2
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from time to time make withdrawals from the Distribution Account for
the following purposes:
(i) to pay to itself the Trustee Fee for the related Distribution
Date;
(ii) to pay the MBIA Premium to MBIA for the related Distribution
Date;
(iii) to pay to itself earnings on or investment income with respect
to funds in the Distribution Account;
(iv) to withdraw and return to the Master Servicer any amount
deposited in the Distribution Account and not required to be
deposited therein; and
(v) to clear and terminate the Distribution Account upon termination
of the Agreement pursuant to Section 9.1 hereof.
SECTION 3.9 Maintenance of Hazard Insurance; Maintenance of Primary
Insurance Policies.
(a) The Master Servicer shall cause to be maintained, for each Mortgage
Loan, hazard insurance with extended coverage in an amount that is at
least equal to the lesser of (i) the maximum insurable value of the
improvements securing such Mortgage Loan or (ii) the greater of (y)
the outstanding principal balance of the Mortgage Loan and (z) an
amount such that the proceeds of such policy shall be sufficient to
prevent the Mortgagor and/or the mortgagee from becoming a co-insurer.
Each such policy of standard hazard insurance shall contain, or have
an accompanying endorsement that contains, a standard mortgagee
clause. Any amounts collected by the Master Servicer under any such
policies (other than the amounts to be applied to the restoration or
repair of the related Mortgaged Property or amounts released to the
Mortgagor in accordance with the Master Servicer's normal servicing
procedures) shall be deposited in the applicable subaccount of the
Certificate Account. Any cost incurred by the Master Servicer in
maintaining any such insurance shall not, for the purpose of
calculating monthly distributions to the Certificateholders or
remittances to the Trustee for their benefit, be added to the
principal balance of the Mortgage Loan, notwithstanding that the terms
of the Mortgage Loan so permit. Such costs shall be recoverable by the
Master Servicer out of late payments by the related Mortgagor or out
of Liquidation Proceeds to the extent permitted by Section 3.8 hereof.
It is understood and agreed that no earthquake or other additional
insurance is to be required of any Mortgagor or maintained on property
acquired in respect of a Mortgage other than pursuant to such
applicable laws and regulations as shall at any time be in force and
as shall require such additional insurance. If the Mortgaged Property
is located at the time of origination of the Mortgage Loan in a
federally designated special flood hazard area and such area is
participating in the national flood insurance program, the Master
Servicer shall cause flood insurance to be maintained with respect to
such Mortgage Loan. Such flood insurance shall be in an amount equal
to the least of (i) the original principal balance of the related
Mortgage Loan, (ii) the replacement value of the
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improvements which are part of such Mortgaged Property, and (iii) the
maximum amount of such insurance available for the related Mortgaged
Property under the national flood insurance program.
(b) In the event that the Master Servicer shall obtain and maintain a
blanket policy insuring against hazard losses on all of the Mortgage
Loans, it shall conclusively be deemed to have satisfied its
obligations as set forth in the first sentence of this Section, it
being understood and agreed that such policy may contain a deductible
clause on terms substantially equivalent to those commercially
available and maintained by comparable servicers. If such policy
contains a deductible clause, the Master Servicer shall, in the event
that there shall not have been maintained on the related Mortgaged
Property a policy complying with the first sentence of this Section,
and there shall have been a loss that would have been covered by such
policy, deposit in the applicable subaccount of the Certificate
Account the amount not otherwise payable under the blanket policy
because of such deductible clause. In connection with its activities
as Master Servicer of the Mortgage Loans, the Master Servicer agrees
to present, on behalf of itself, the Depositor, and the Trustee for
the benefit of the Certificateholders, claims under any such blanket
policy.
(c) The Master Servicer shall not take any action which would result in
non-coverage under any applicable Primary Insurance Policy of any loss
which, but for the actions of the Master Servicer, would have been
covered thereunder. The Master Servicer shall not cancel or refuse to
renew any such Primary Insurance Policy that is in effect at the date
of the initial issuance of the Certificates and is required to be kept
in force hereunder unless the replacement Primary Insurance Policy for
such canceled or non-renewed policy is maintained with a Qualified
Insurer.
The Master Servicer shall not be required to maintain any Primary Insurance
Policy (i) with respect to any Mortgage Loan with a Loan-to-Value Ratio less
than or equal to 80% as of any date of determination or, based on a new
appraisal, the principal balance of such Mortgage Loan represents 80% or less of
the new appraised value or (ii) if maintaining such Primary Insurance Policy is
prohibited by applicable law.
The Master Servicer agrees to effect the timely payment of the premiums on
each Primary Insurance Policy, and such costs not otherwise recoverable shall be
recoverable by the Master Servicer from the related liquidation proceeds.
(d) In connection with its activities as Master Servicer of the Mortgage
Loans, the Master Servicer agrees to present on behalf of itself, the
Trustee and Certificateholders, claims to the insurer under any
Primary Insurance Policies and, in this regard, to take such
reasonable action as shall be necessary to permit recovery under any
Primary Insurance Policies respecting defaulted Mortgage Loans. Any
amounts collected by the Master Servicer under any Primary Insurance
Policies shall be deposited in the applicable subaccount of the
Certificate Account.
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SECTION 3.10 Enforcement of Due-on-Sale Clauses; Assumption
Agreements.
(a) Except as otherwise provided in this Section, when any property
subject to a Mortgage has been conveyed by the Mortgagor, the Master
Servicer shall to the extent that it has knowledge of such conveyance,
enforce any due-on-sale clause contained in any Mortgage Note or
Mortgage, to the extent permitted under applicable law and
governmental regulations, but only to the extent that such enforcement
will not adversely affect or jeopardize coverage under any Required
Insurance Policy. Notwithstanding the foregoing, the Master Servicer
is not required to exercise such rights with respect to a Mortgage
Loan if the Person to whom the related Mortgaged Property has been
conveyed or is proposed to be conveyed satisfies the terms and
conditions contained in the Mortgage Note and Mortgage related thereto
and the consent of the mortgagee under such Mortgage Note or Mortgage
is not otherwise so required under such Mortgage Note or Mortgage as a
condition to such transfer. In the event that the Master Servicer is
prohibited by law from enforcing any such due-on-sale clause, or if
coverage under any Required Insurance Policy would be adversely
affected, or if nonenforcement is otherwise permitted hereunder, the
Master Servicer is authorized, subject to Section 3.10(b), to take or
enter into an assumption and modification agreement from or with the
person to whom such property has been or is about to be conveyed,
pursuant to which such person becomes liable under the Mortgage Note
and, unless prohibited by applicable state law, the Mortgagor remains
liable thereon, provided that the Mortgage Loan shall continue to be
covered (if so covered before the Master Servicer enters such
agreement) by the applicable Required Insurance Policies. The Master
Servicer, subject to Section 3.10(b), is also authorized with the
prior approval of the insurers under any Required Insurance Policies
to enter into a substitution of liability agreement with such Person,
pursuant to which the original Mortgagor is released from liability
and such Person is substituted as Mortgagor and becomes liable under
the Mortgage Note. Notwithstanding the foregoing, the Master Servicer
shall not be deemed to be in default under this Section by reason of
any transfer or assumption which the Master Servicer reasonably
believes it is restricted by law from preventing, for any reason
whatsoever.
(b) Subject to the Master Servicer's duty to enforce any due-on-sale
clause to the extent set forth in Section 3.10(a) hereof, in any case
in which a Mortgaged Property has been conveyed to a Person by a
Mortgagor, and such Person is to enter into an assumption agreement or
modification agreement or supplement to the Mortgage Note or Mortgage
that requires the signature of the Trustee, or if an instrument of
release signed by the Trustee is required releasing the Mortgagor from
liability on the Mortgage Loan, the Master Servicer shall prepare and
deliver or cause to be prepared and delivered to the Trustee for
signature and shall direct, in writing, the Trustee to execute the
assumption agreement with the Person to whom the Mortgaged Property is
to be conveyed and such modification agreement or supplement to the
Mortgage Note or Mortgage or other instruments as are reasonable or
necessary to carry out the terms of the Mortgage Note or Mortgage or
otherwise to comply with any applicable laws regarding assumptions
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or the transfer of the Mortgaged Property to such Person. In
connection with any such assumption, no material term of the Mortgage
Note may be changed. In addition, the substitute Mortgagor and the
Mortgaged Property must be acceptable to the Master Servicer in
accordance with its underwriting standards as then in effect. Together
with each such substitution, assumption or other agreement or
instrument delivered to the Trustee for execution by it, the Master
Servicer shall deliver an Officer's Certificate signed by a Servicing
Officer stating that the requirements of this subsection have been met
in connection therewith. The Master Servicer shall notify the Trustee
that any such substitution or assumption agreement has been completed
by forwarding to the Trustee the original of such substitution or
assumption agreement, which in the case of the original shall be added
to the related Mortgage File and shall, for all purposes, be
considered a part of such Mortgage File to the same extent as all
other documents and instruments constituting a part thereof. Any fee
collected by the Master Servicer for entering into an assumption or
substitution of liability agreement will be retained by the Master
Servicer as additional servicing compensation.
SECTION 3.11 Realization Upon Defaulted Mortgage Loans; Repurchase of
Certain Mortgage Loans.
The Master Servicer shall use reasonable efforts to foreclose upon or
otherwise comparably convert the ownership of properties securing such of the
Mortgage Loans as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments. In
connection with such foreclosure or other conversion, the Master Servicer shall
follow such practices and procedures as it shall deem necessary or advisable and
as shall be normal and usual in its general mortgage servicing activities and
meet the requirements of the insurer under any Required Insurance Policy;
provided, however, that the Master Servicer shall not be required to expend its
own funds in connection with any foreclosure or towards the restoration of any
property unless it shall determine (i) that such restoration and/or foreclosure
will increase the proceeds of liquidation of the Mortgage Loan after
reimbursement to itself of such expenses and (ii) that such expenses will be
recoverable to it through Liquidation Proceeds (respecting which it shall have
priority for purposes of withdrawals from the Certificate Account). The Master
Servicer shall be responsible for all other costs and expenses incurred by it in
any such proceedings; provided, however, that it shall be entitled to
reimbursement thereof from the liquidation proceeds with respect to the related
Mortgaged Property, as provided in the definition of Liquidation Proceeds. If
the Master Servicer has knowledge that a Mortgaged Property which the Master
Servicer is contemplating acquiring in foreclosure or by deed in lieu of
foreclosure is located within a 1 mile radius of any site listed in the
Expenditure Plan for the Hazardous Substance Clean Up Bond Act of 1984 or other
site with environmental or hazardous waste risks known to the Master Servicer,
the Master Servicer will, prior to acquiring the Mortgaged Property, consider
such risks and only take action in accordance with its established environmental
review procedures.
With respect to any REO Property, the deed or certificate of sale shall be
taken in the name of the Trust Fund for the benefit of the Certificateholders,
or its nominee, on behalf of the Certificateholders. The Master Servicer shall
ensure that the title to such REO Property references the Pooling and Servicing
Agreement and the Trust Fund's capacity thereunder. Pursuant to its efforts to
sell such REO Property, the Master Servicer shall either itself or through
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an agent selected by the Master Servicer protect and conserve such REO Property
in the same manner and to such extent as is customary in the locality where such
REO Property is located and may, incident to its conservation and protection of
the interests of the Certificateholders, rent the same, or any part thereof, as
the Master Servicer deems to be in the best interest of the Certificateholders
for the period prior to the sale of such REO Property. The Master Servicer shall
prepare for and deliver to the Trustee a statement with respect to each REO
Property that has been rented showing the aggregate rental income received and
all expenses incurred in connection with the management and maintenance of such
REO Property at such times as is necessary to enable the Trustee to comply with
the reporting requirements of the REMIC Provisions. The net monthly rental
income, if any, from such REO Property shall be deposited in the Certificate
Account no later than the close of business on each Determination Date. The
Master Servicer shall perform the tax reporting and withholding required by
Sections 1445 and 6050J of the Code with respect to foreclosures and
abandonments, the tax reporting required by Section 6050H of the Code with
respect to the receipt of mortgage interest from individuals and any tax
reporting required by Section 6050P of the Code with respect to the cancellation
of indebtedness by certain financial entities, by preparing such tax and
information returns as may be required, in the form required, and delivering the
same to the Trustee for filing.
In the event that the Trust Fund acquires any Mortgaged Property as
aforesaid or otherwise in connection with a default or imminent default on a
Mortgage Loan, the Master Servicer shall dispose of such Mortgaged Property
prior to the close of the third taxable year after the taxable year of its
acquisition by the Trust Fund unless the Trustee and MBIA shall have been
supplied with an Opinion of Counsel to the effect that the holding by the Trust
Fund of such Mortgaged Property subsequent to such three-year period will not
result in the imposition of taxes on "prohibited transactions" of any REMIC
hereunder as defined in Section 860F of the Code or cause any REMIC created
hereunder to fail to qualify as a REMIC at any time that any Certificates are
outstanding, in which case the Trust Fund may continue to hold such Mortgaged
Property (subject to any conditions contained in such Opinion of Counsel).
Notwithstanding any other provision of this Agreement, no Mortgaged Property
acquired by the Trust Fund shall be rented (or allowed to continue to be rented)
or otherwise used for the production of income by or on behalf of the Trust Fund
in such a manner or pursuant to any terms that would (i) cause such Mortgaged
Property to fail to qualify as "foreclosure property" within the meaning of
Section 860G(a)(8) of the Code or (ii) subject any REMIC hereunder to the
imposition of any federal, state or local income taxes on the income earned from
such Mortgaged Property under Section 860G(c) of the Code or otherwise, unless
the Master Servicer has agreed to indemnify and hold harmless the Trust Fund
with respect to the imposition of any such taxes.
In the event of a default on a Mortgage Loan one or more of whose obligor
is not a United States Person, as that term is defined in Section 7701(a)(30) of
the Code, in connection with any foreclosure or acquisition of a deed in lieu of
foreclosure (together, "foreclosure") in respect of such Mortgage Loan, the
Master Servicer will cause compliance with the provisions of Treasury Regulation
Section 1.1445-2(d)(3) (or any successor thereto) necessary to assure that no
withholding tax obligation arises with respect to the proceeds of such
foreclosure except to the extent, if any, that proceeds of such foreclosure are
required to be remitted to the obligors on such Mortgage Loan.
The decision of the Master Servicer to foreclose on a defaulted Mortgage
Loan shall be subject to a determination by the Master Servicer that the
proceeds of such foreclosure would
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exceed the costs and expenses of bringing such a proceeding. The income earned
from the management of any REO Properties, net of reimbursement to the Master
Servicer for expenses incurred (including any property or other taxes) in
connection with such management and net of unreimbursed Master Servicing Fees,
Advances and Servicing Advances, shall be applied to the payment of principal of
and interest on the related defaulted Mortgage Loans (with interest accruing as
though such Mortgage Loans were still current) and all such income shall be
deemed, for all purposes in this Agreement, to be payments on account of
principal and interest on the related Mortgage Notes and shall be deposited into
the applicable subaccount of the Certificate Account. To the extent the net
income received during any calendar month is in excess of the amount
attributable to amortizing principal and accrued interest at the related
Mortgage Rate on the related Mortgage Loan for such calendar month, such excess
shall be considered to be a partial prepayment of principal of the related
Mortgage Loan.
The proceeds from any liquidation of a Mortgage Loan, as well as any income
from an REO Property, will be applied in the following order of priority: first,
to reimburse the Master Servicer for any related unreimbursed Servicing Advances
and Master Servicing Fees; second, to reimburse the Master Servicer for any
unreimbursed Advances; third, to reimburse the applicable subaccount of the
Certificate Account for any Nonrecoverable Advances (or portions thereof) that
were previously withdrawn by the Master Servicer pursuant to Section 3.8(a)(iii)
that related to such Mortgage Loan; fourth, to accrued and unpaid interest (to
the extent no Advance has been made for such amount or any such Advance has been
reimbursed) on the Mortgage Loan or related REO Property, at the Adjusted Net
Mortgage Rate to the Due Date occurring in the month in which such amounts are
required to be distributed; and fifth, as a recovery of principal of the
Mortgage Loan. Excess Proceeds, if any, from the liquidation of a Liquidated
Mortgage Loan will be retained by the Master Servicer as additional servicing
compensation pursuant to Section 3.14.
The Master Servicer, with the consent of the Trustee, shall have the right
to purchase for its own account from the Trust Fund any Mortgage Loan which is
91 days or more delinquent at a price equal to the Purchase Price. The Purchase
Price for any Mortgage Loan purchased hereunder shall be deposited in the
applicable subaccount of the Certificate Account and the Trustee, upon receipt
of a certificate from the Master Servicer in the form of Exhibit M hereto, shall
release or cause to be released to the purchaser of such Mortgage Loan the
related Mortgage File and shall execute and deliver such instruments of transfer
or assignment prepared by the purchaser of such Mortgage Loan, in each case
without recourse, as shall be necessary to vest in the purchaser of such
Mortgage Loan any Mortgage Loan released pursuant hereto and the purchaser of
such Mortgage Loan shall succeed to all the Trustee's right, title and interest
in and to such Mortgage Loan and all security and documents related thereto.
Such assignment shall be an assignment outright and not for security. The
purchaser of such Mortgage Loan shall thereupon own such Mortgage Loan, and all
security and documents, free of any further obligation to the Trustee or the
Certificateholders with respect thereto.
SECTION 3.12 Trustee to Cooperate; Release of Mortgage Files.
Upon the payment in full of any Mortgage Loan, or the receipt by the Master
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Master Servicer will immediately notify the
Trustee by delivering, or causing to be delivered a "Request for Release"
substantially in the form of Exhibit M. Upon receipt of such request, the
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Trustee shall or shall cause the Custodian to promptly release the related
Mortgage File to the Master Servicer, and the Trustee shall at the Master
Servicer's direction execute and deliver to the Master Servicer the request for
reconveyance, deed of reconveyance or release or satisfaction of mortgage or
such instrument releasing the lien of the Mortgage in each case provided by the
Master Servicer, together with the Mortgage Note with written evidence of
cancellation thereon. Expenses incurred in connection with any instrument of
satisfaction or deed of reconveyance shall be chargeable to the related
Mortgagor. From time to time and as shall be appropriate for the servicing or
foreclosure of any Mortgage Loan, including for such purpose, collection under
any policy of flood insurance, any fidelity bond or errors or omissions policy,
or for the purposes of effecting a partial release of any Mortgaged Property
from the lien of the Mortgage or the making of any corrections to the Mortgage
Note or the Mortgage or any of the other documents included in the Mortgage
File, the Trustee shall, upon delivery to the Trustee of a Request for Release
in the form of Exhibit L signed by a Servicing Officer, release the Mortgage
File to the Master Servicer. Subject to the further limitations set forth below,
the Master Servicer shall cause the Mortgage File or documents so released to be
returned to the Trustee or its Custodian when the need therefor by the Master
Servicer no longer exists, unless the Mortgage Loan is liquidated and the
proceeds thereof are deposited in the applicable subaccount of the Certificate
Account, in which case the Master Servicer shall deliver to the Trustee a
Request for Release in the form of Exhibit M, signed by a Servicing Officer.
If the Master Servicer at any time seeks to initiate a foreclosure
proceeding in respect of any Mortgaged Property as authorized by this Agreement,
the Master Servicer shall deliver or cause to be delivered to the Trustee, for
signature, as appropriate, any court pleadings, requests for trustee's sale or
other documents necessary to effectuate such foreclosure or any legal action
brought to obtain judgment against the Mortgagor on the Mortgage Note or the
Mortgage or to obtain a deficiency judgment or to enforce any other remedies or
rights provided by the Mortgage Note or the Mortgage or otherwise available at
law or in equity.
SECTION 3.13 Documents Records and Funds in Possession of Master
Servicer to be Held for the Trustee.
Notwithstanding any other provisions of this Agreement, the Master Servicer
shall transmit to the Trustee as required by this Agreement all documents and
instruments in respect of a Mortgage Loan coming into the possession of the
Master Servicer from time to time and shall account fully to the Trustee for any
funds received by the Master Servicer or which otherwise are collected by the
Master Servicer as Liquidation Proceeds or Insurance Proceeds in respect of any
Mortgage Loan. All Mortgage Files and funds collected or held by, or under the
control of, the Master Servicer in respect of any Mortgage Loans, whether from
the collection of principal and interest payments or from Liquidation Proceeds,
including but not limited to, any funds on deposit in the Certificate Account,
shall be held by the Master Servicer for and on behalf of the Trustee and shall
be and remain the sole and exclusive property of the Trustee, subject to the
applicable provisions of this Agreement. The Master Servicer also agrees that it
shall not create, incur or subject any Mortgage File or any funds that are
deposited in the Certificate Account, Distribution Account or any Escrow
Account, or any funds that otherwise are or may become due or payable to the
Trustee for the benefit of the Certificateholders, to any claim, lien, security
interest, judgment, levy, writ of attachment or other encumbrance, or assert by
legal action or otherwise any claim or right of setoff against any Mortgage File
or any funds collected on, or in connection with, a Mortgage Loan, except,
however, that the Master Servicer shall be entitled to
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set off against and deduct from any such funds any amounts that are properly due
and payable to the Master Servicer under this Agreement.
SECTION 3.14 Master Servicing Compensation.
As compensation for its activities as Master Servicer hereunder and as a
subservicer pursuant to the Servicing Rights Transfer and Subservicing
Agreement, the Master Servicer shall be entitled to retain or withdraw from the
Certificate Account an amount equal to the Master Servicing Fee for each
Mortgage Loan, provided that the aggregate Master Servicing Fee with respect to
any Distribution Date shall be reduced (i) by the amount of any Compensating
Interest paid by the Master Servicer with respect to such Distribution Date, and
(ii) with respect to the first Distribution Date, an amount equal to any amount
to be deposited into the Distribution Account by the Depositor pursuant to
Section 2.1(a) and not so deposited.
Additional servicing compensation in the form of (i) Retained Yield, Excess
Proceeds, Prepayment Interest Excess and all income and gain net of any losses
realized from Permitted Investments and (ii) prepayment penalties, assumption
fees and late payment charges in each case under the circumstances and in the
manner set forth in the applicable Mortgage Note or Mortgage shall be retained
by the Master Servicer to the extent not required to be deposited in the
Certificate Account pursuant to Section 3.5 hereof; provided that in the event
the Master Servicer is terminated pursuant to Section 7.1, the Retained Yield
shall be payable to First Horizon Home Loan Corporation in its individual
capacity and shall not be payable to the Trustee or any successor to the Master
Servicer. The Master Servicer shall be required to pay all expenses incurred by
it in connection with its master servicing activities hereunder (including
payment of any premiums for hazard insurance and any Primary Insurance Policy
and maintenance of the other forms of insurance coverage required by this
Agreement) and shall not be entitled to reimbursement therefor except as
specifically provided in this Agreement.
SECTION 3.15 Access to Certain Documentation.
The Master Servicer shall provide to the OTS and the FDIC and to comparable
regulatory authorities supervising Holders of Certificates or Certificate Owners
and the examiners and supervisory agents of the OTS, the FDIC and such other
authorities, access to the documentation regarding the Mortgage Loans required
by applicable regulations of the OTS and the FDIC. Such access shall be afforded
without charge, but only upon reasonable and prior written request and during
normal business hours at the offices designated by the Master Servicer. Nothing
in this Section shall limit the obligation of the Master Servicer to observe any
applicable law prohibiting disclosure of information regarding the Mortgagors
and the failure of the Master Servicer to provide access as provided in this
Section as a result of such obligation shall not constitute a breach of this
Section.
SECTION 3.16 Annual Statement as to Compliance.
The Master Servicer shall deliver to the Depositor, MBIA and the Trustee on
or before 120 days after the end of the Master Servicer's fiscal year,
commencing with its 2003 fiscal year, an Officer's Certificate stating, as to
the signer thereof, that (i) a review of the activities of the Master Servicer
during the preceding calendar year and of the performance of the Master Servicer
under this Agreement has been made under such officer's supervision and (ii) to
the
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best of such officer's knowledge, based on such review, the Master Servicer has
fulfilled all its obligations under this Agreement throughout such year, or, if
there has been a default in the fulfillment of any such obligation, specifying
each such default known to such officer and the nature and status thereof. The
Trustee shall forward a copy of each such statement to each Rating Agency.
SECTION 3.17 Annual Independent Public Accountants' Servicing
Statement; Financial Statements.
On or before 120 days after the end of the Master Servicer's fiscal year,
commencing with its 2003 fiscal year, the Master Servicer at its expense shall
cause a nationally or regionally recognized firm of independent public
accountants (who may also render other services to the Master Servicer, the
Seller or any affiliate thereof) which is a member of the American Institute of
Certified Public Accountants to furnish a statement to the Trustee, MBIA and the
Depositor to the effect that-such firm has examined certain documents and
records relating to the servicing of the Mortgage Loans under this Agreement or
of mortgage loans under pooling and servicing agreements substantially similar
to this Agreement (such statement to have attached thereto a schedule setting
forth the pooling and servicing agreements covered thereby) and that, on the
basis of such examination, conducted substantially in compliance with the
Uniform Single Attestation Program for Mortgage Bankers or the Audit Program for
Mortgages serviced for FNMA and FHLMC, such servicing has been conducted in
compliance with such pooling and servicing agreements except for such
significant exceptions or errors in records that, in the opinion of such firm,
the Uniform Single Attestation Program for Mortgage Bankers or the Audit Program
for Mortgages serviced for FNMA and FHLMC requires it to report. In rendering
such statement, such firm may rely, as to matters relating to direct servicing
of mortgage loans by Subservicers, upon comparable statements for examinations
conducted substantially in compliance with the Uniform Single Attestation
Program for Mortgage Bankers or the Audit Program for Mortgages serviced for
FNMA and FHLMC (rendered within one year of such statement) of independent
public accountants with respect to the related Subservicer. Copies of such
statement shall be provided by the Trustee to any Certificateholder or
Certificate Owner upon request at the Master Servicer's expense, provided such
statement is delivered by the Master Servicer to the Trustee.
SECTION 3.18 Errors and Omissions Insurance; Fidelity Bonds.
The Master Servicer shall for so long as it acts as master servicer under
this Agreement, obtain and maintain in force (a) a policy or policies of
insurance covering errors and omissions in the performance of its obligations as
Master Servicer hereunder and (b) a fidelity bond in respect of its officers,
employees and agents. Each such policy or policies and bond shall, together,
comply with the requirements from time to time of FNMA or FHLMC for persons
performing servicing for mortgage loans purchased by FNMA or FHLMC. In the event
that any such policy or bond ceases to be in effect, the Master Servicer shall
obtain a comparable replacement policy or bond from an insurer or issuer,
meeting the requirements set forth above as of the date of such replacement.
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ARTICLE IV
DISTRIBUTIONS AND ADVANCES BY THE MASTER SERVICER
SECTION 4.1 Advances.
The Master Servicer shall determine on the Business Day prior to each
Master Servicer Advance Date whether it is required to make an Advance pursuant
to the definition thereof. If the Master Servicer determines it is required to
make an Advance, it shall, on or before the Master Servicer Advance Date, either
(i) deposit into the applicable subaccount of the Certificate Account an amount
equal to the Advance or (ii) make an appropriate entry in its records relating
to the applicable subaccount of the Certificate Account that any Amount Held for
Future Distribution has been used by the Master Servicer in discharge of its
obligation to make any such Advance. Any funds so applied shall be replaced by
the Master Servicer by deposit in the applicable subaccount of the Certificate
Account no later than the close of business on the Business Day preceding the
next Master Servicer Advance Date. The Master Servicer shall be entitled to be
reimbursed from the applicable subaccount of the Certificate Account for all
Advances of its own funds made pursuant to this Section as provided in Section
3.8. The obligation to make Advances with respect to any Mortgage Loan shall
continue until the ultimate disposition of the REO Property or Mortgaged
Property relating to such Mortgage Loan. As to any Distribution Date, the Master
Servicer shall inform the Trustee in writing of the amount of the Advance to be
made by the Master Servicer on each Master Servicer Advance Date no later 1:30
p.m. Central time on the second Business Day immediately preceding such
Distribution Date.
The Master Servicer shall deliver to the Trustee on the related Master
Servicer Advance Date an Officer's Certificate of a Servicing Officer indicating
the amount of any proposed Advance determined by the Master Servicer to be a
Nonrecoverable Advance.
SECTION 4.2 Priorities of Distribution.
(a) On each Distribution Date, the Trustee shall withdraw the Available
Funds for each Certificate Group from the applicable subaccount of the
Distribution Account and apply such funds to distributions on the
Certificates of the related Certificate Group and to MBIA in the
following order and priority and, in each case, to the extent of
Available Funds remaining:
(i) to the Classes of Senior Certificates of the related Certificate
Group entitled to distributions of interest, the Accrued
Certificate Interest on each such Class for such Distribution
Date, any shortfall in available amounts being allocated among
such Classes in proportion to the amount of Accrued Certificate
Interest otherwise distributable thereon;
(ii) to the Classes of Senior Certificates of the related Certificate
Group entitled to distributions of interest, any Accrued
Certificate Interest thereon remaining undistributed from
previous Distribution Dates, to the extent of remaining Available
Funds from the related Mortgage Pool, any shortfall in available
amounts being allocated among such Classes in
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proportion to the amount of such Accrued Certificate Interest
remaining undistributed for each such Class for such Distribution
Date;
(iii) (1) to the Classes of Senior Certificates of the related
Certificate Group, other than the Class I-A-PO Certificates, in
reduction of the Class Certificate Balances thereof, to the
extent of remaining Available Funds from the related Mortgage
Pool, the related Senior Optimal Principal Amount for such
Distribution Date, in the order of priority set forth below in
Section 4.2(b), until the respective Class Certificate Balances
thereof have been reduced to zero, and (2) concurrently with the
Senior Certificates corresponding to Pool I, from the Available
Funds for such Mortgage Pool, to the Class I-A-PO Certificates,
the Class I-A-PO Principal Distribution Amount for such
Distribution Date;
(iv) to the Class I-A-PO Certificates, to the extent of remaining
Available Funds, the Class I-A-PO Deferred Amount for such
Distribution Date, until the Class Certificate Balance thereof
has been reduced to zero; provided that, (1) on any Distribution
Date, distributions pursuant to this Section 4.2(a)(iv) shall not
exceed the aggregate Subordinated Optimal Principal Amount for
both Mortgage Pools on such Distribution Date, (2) such
distributions shall not reduce the Class Certificate Balance of
the Class I-A-PO Certificates, and (3) no distribution will be
made in respect of the Class I-A-PO Deferred Amount after the
Cross-over Date;
(v) to MBIA, any reimbursement amounts due to MBIA under the
Insurance Agreement;
(vi) to the Class B-1 Certificates, to the extent of remaining
Available Funds for both Mortgage Pools, but subject to the prior
payment of amounts described under Section 4.2(h), in the
following order: (1) the Accrued Certificate Interest thereon for
such Distribution Date, (2) any Accrued Certificate Interest
thereon remaining undistributed from previous Distribution Dates
and (3) such Class' Allocable Share for such Distribution Date;
(vii) to the Class B-2 Certificates, to the extent of remaining
Available Funds for both Mortgage Pools, but subject to the prior
payment of amounts described under Section 4.2(h), in the
following order: (1) the Accrued Certificate Interest thereon for
such Distribution Date, (2) any Accrued Certificate Interest
thereon remaining undistributed from previous Distribution Dates
and (3) such Class' Allocable Share for such Distribution Date;
(viii) to the Class B-3 Certificates, to the extent of remaining
Available Funds for both Mortgage Pools, but subject to the prior
payment of amounts described under Section 4.2(h), in the
following order: (1) the Accrued Certificate Interest thereon for
such Distribution Date, (2) any Accrued Certificate Interest
thereon remaining undistributed from previous
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Distribution Dates and (3) such Class' Allocable Share for such
Distribution Date;
(ix) to the Class B-4 Certificates, to the extent of remaining
Available Funds for both Mortgage Pools, but subject to the prior
payment of amounts described under Section 4.2(h), in the
following order: (1) the Accrued Certificate Interest thereon for
such Distribution Date, (2) any Accrued Certificate Interest
thereon remaining undistributed from previous Distribution Dates
and (3) such Class' Allocable Share for such Distribution Date;
(x) to the Class B-5 Certificates, to the extent of remaining
Available Funds for both Mortgage Pools, but subject to the prior
payment of amounts described under Section 4.2(h), in the
following order: (1) the Accrued Certificate Interest thereon for
such Distribution Date, (2) any Accrued Certificate Interest
thereon remaining undistributed from previous Distribution Dates
and (3) such Class' Allocable Share for such Distribution Date;
and
(xi) to the Class B-6 Certificates, to the extent of remaining
Available Funds for both Mortgage Pools, but subject to the prior
payment of amounts described under Section 4.2(h), in the
following order: (1) the Accrued Certificate Interest thereon for
such Distribution Date, (2) any Accrued Certificate Interest
thereon remaining undistributed from previous Distribution Dates
and (3) such Class' Allocable Share for such Distribution Date.
To the extent that the amounts available for distribution for such
Distribution Date are insufficient so as to require an MBIA Insurance Payment
with respect to the Insured Retail Certificates, the Trustee shall (A) in the
case of such MBIA Insurance Payments relating to Net Interest Shortfalls (other
than any interest shortfalls resulting from Relief Act Reductions and Net
Prepayment Interest Shortfalls), first, make a Reserve Fund Withdrawal in
accordance with Section 4.7 and then, to the extent required, make a claim under
the MBIA Policy in accordance with Section 10.1 and (B) in the case of all other
MBIA Insurance Payments, make a claim under the MBIA Policy in accordance with
Section 10.1. Any amounts received by the Trustee with respect to a Reserve
Account Withdrawal and from MBIA with respect to a claim on the MBIA Policy,
shall be paid to the Insured Retail Certificates pursuant to this Section.
(b) Amounts allocated to the Group I Senior Certificates pursuant to
Section 4.2(a)(iii) above will be distributed in the following order
of priority:
(i) concurrently, to the Class I-A-RU and Class I-A-RL Certificates,
pro rata, until their respective Class Certificate Balances have
each been reduced to zero;
(ii) concurrently, to the Class I-A-6 and Class I-A-7 Certificates,
pro rata, in an amount up to their Group I NAS Principal
Distribution Amount for
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such Distribution Date, until their respective Class Certificate
Balances have each been reduced to zero;
(iii) to the Class I-A-4 and Class I-A-5 Certificates, on each
Distribution Date commencing after the Distribution Date in May
2007, an amount up to $2,142.86 and $25,000.00, respectively, on
such Distribution Date, until their respective Class Certificate
Balances have each been reduced to zero;
(iv) sequentially, to the Class I-A-1, Class I-A-2 and Class I-A-3
Certificates, in that order, until their respective Class
Certificate Balances have each been reduced to zero
(v) concurrently, to the Class I-A-4 and Class I-A-5 Certificates,
pro rata, in that order, until their respective Class Certificate
Balances have each been reduced to zero; and
(vi) concurrently, to the Class I-A-6 and Class I-A-7 Certificates,
pro rata, until their respective Class Certificate Balances have
each been reduced to zero.
(c) Amounts allocated to the Group II Senior Certificates pursuant to
Section 4.2(a)(iii) above will be distributed in the following order
of priority:
(i) to the Class II-A-4 Certificates, in an amount up to their Group
II NAS Principal Distribution Amount for such Distribution Date,
until the Class Certificate Balance thereof has been reduced to
zero;
(ii) sequentially, to the Class II-A-1, Class II-A-2 and Class II-A-3
Certificates, in that order, until their respective Class
Certificate Balances have each been reduced to zero; and
(iii) to the Class II-A-4 Certificates, until the Class Certificate
Balance thereof has been reduced to zero.
(d) On each Distribution Date, the Trustee shall distribute to the Holders
of the Class I-A-RU and Class I-A-RL Certificates any Available Funds
remaining in the related REMIC created hereunder for such Distribution
Date after application of all amounts described in clauses (a), (b)
and (c) of this Section 4.2 and the reimbursement of amounts due to
MBIA as the insurer of the Insured Retail Certificates are paid to
MBIA on such Distribution Date. Any distributions pursuant to this
subsection (d) shall not reduce the respective Class Certificate
Balances of the Class I-A-RU and Class I-A-RL Certificates.
(e) On and after the Cross-Over Date, the amount distributable to the
Senior Certificates of the related Certificate Group pursuant to
Section 4.2(a)(iii) for the related Distribution Date shall be
allocated among the related Classes of Senior Certificates, pro rata
(other than the Class I-A-PO Certificates, in the case of the Group I
Senior Certificates), on the basis of their respective Class
Certificate
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Balances immediately prior to such Distribution Date, regardless of
the priorities and amounts set forth in Section 4.2.
(f) If on any Distribution Date (i) the Class Certificate Balance of any
Class of Subordinated Certificates (other than the Class of
Subordinated Certificates with the highest priority of distribution)
for which the related Class Prepayment Distribution Trigger was
satisfied on such Distribution Date is reduced to zero and (ii)
amounts distributable to such Class or Classes of Subordinated
Certificates pursuant to clauses (2), (3) and (5) of the applicable
Subordinated Optimal Principal Amount remain undistributed on such
Distribution Date after all amounts otherwise distributable on such
date pursuant to clauses (v) through (x) of Section 4.2(a) have been
distributed, such amounts, to the extent of such Class' remaining
Allocable Share, shall be distributed on such Distribution Date to the
remaining Classes of Subordinated Certificates on a pro rata basis,
subject to the priority of payments described in Section 4.2(a).
(g) In the event that in any calendar month the Master Servicer recovers
an amount (an "Unanticipated Recovery") in respect of principal of a
Mortgage Loan which had previously been allocated as a Realized Loss
to any Class of Certificates pursuant to Section 4.4, on the
Distribution Date in the next succeeding calendar month, the Trustee,
subject to MBIA's subrogation rights, shall withdraw the Unanticipated
Recovery from the Distribution Account and sequentially increase the
Class Certificate Balance of each Class of Certificates to which such
Realized Losses were previously allocated by the amount of such
Unanticipated Recovery, but not to exceed the amount of such Realized
Loss previously allocated to such Class, and shall distribute the
amount of such Unanticipated Recovery to each such Class of
Certificates in the order of payment priority described in Section
4.2(a) of this Agreement. When the Class Certificate Balance of a
Class of Certificates has been reduced to zero, the Holders of such
Class shall not be entitled to any share of an Unanticipated Recovery,
and such Unanticipated Recovery shall be allocated among all
outstanding Classes of Certificates entitled thereto in accordance
with the preceding sentence, subject to the remainder of this
subsection (g). In the event that (i) any Unanticipated Recovery
remains undistributed in accordance with the preceding sentence or
(ii) the amount of an Unanticipated Recovery exceeds the amount of the
Realized Loss previously allocated to any outstanding Classes with
respect to the related Mortgage Loan, on the applicable Distribution
Date the Trustee shall distribute such Unanticipated Recoveries in
accordance with the priorities set forth in Section 4.2(a).
For purposes of the preceding paragraph, the share of an Unanticipated
Recovery allocable to any Class of Certificates with respect to a Mortgage
Loan shall be (i) with respect to the Class I-A-PO Certificates, based on
the applicable PO Percentage of the principal portion of the Realized Loss
previously allocated thereto with respect to such Mortgage Loan (or all
Mortgage Loans for purposes of the next to last sentence of the preceding
paragraph), and (ii) with respect to any other Class of Certificates, based
on its pro rata share (in proportion to the Class Certificate Balances
thereof with respect to such Distribution Date) of the principal portion
(or in the case of Pool I, the applicable Non-PO Percentage thereof) of any
such Realized Loss previously allocated with respect
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to such Mortgage Loan (or Loans); provided however, that (i) the share of
an Unanticipated Recovery allocable to a Class I-A-PO Certificate with
respect to any Mortgage Loan (or Loans) shall be reduced by the aggregate
amount previously distributed to such Class on account of the applicable
Class PO Deferred Amount in respect of such Mortgage Loan (or Loans) and
(ii) the amount by which the distributions to the Class I-A-PO Certificates
have been so reduced shall be distributed to the Classes of Certificates
described in clause (ii) of the preceding paragraph in the same proportion
as described in such clause (ii). For purposes of the preceding sentence,
any Class PO Deferred Amount distributable to a Class I-A-PO Certificate on
previous Distribution Dates shall be deemed to have been allocated in
respect of the Mortgage Loans as to which the applicable PO Percentage of
the principal portion of Realized Losses has previously been allocated to
such Class on a pro rata basis (based on the amount of Realized Losses so
allocated).
(h) On any Distribution Date on which any Certificate Group constitutes an
Undercollateralized Group, all amounts otherwise distributable as
principal on the Subordinated Certificates, in reverse order of
priority (or, following the Cross-over Date, such other amounts
described in the immediately following sentence), will be distributed
as principal to the Senior Certificates of such Undercollateralized
Group (other than the Class I-A-PO Certificates, in the case of the
Group I Senior Certificates) in accordance with the priorities set
forth in Sections 4.2(b) and (c), until the total Class Certificate
Balance of such Senior Certificates equals the Pool Principal Balance
of the related Mortgage Pool, and then to MBIA any reimbursement
amounts due MBIA (such distribution, an "Undercollateralization
Distribution"). If the Senior Certificates of a Certificate Group
(other than the Class I-A-PO Certificates, in the case of the Group I
Senior Certificates) constitute an Undercollateralized Group on any
Distribution Date following the Cross-over Date,
Undercollateralization Distributions will be made from the excess of
the Available Funds for the other Mortgage Pool remaining after all
required amounts for that Distribution Date have been distributed to
the Senior Certificates of the other Certificate Group (other than the
Class I-A-PO Certificates, in the case of the Group I Senior
Certificates) and to MBIA with respect to the Group I Senior
Certificates. In addition, the amount of any unpaid Net Interest
Shortfalls with respect to an Undercollateralized Group on any
Distribution Date (including any Net Interest Shortfalls for the
related Distribution Date) will be distributed to the Senior
Certificates of the Undercollateralized Group (other than the Class
I-A-PO Certificates, in the case of the Group I Senior Certificates)
prior to the payment of any Undercollateralization Distributions from
amounts otherwise distributable as principal on the Subordinated
Certificates, in reverse order of priority (or, following the
Cross-over Date, as provided in the preceding sentence).
In addition, if on any Distribution Date the total Class Certificate
Balance of the Senior Certificates of a Certificate Group (other than
the Class I-A-PO Certificates, in the case of the Group I Senior
Certificates) (after giving effect to distributions to be made on that
Distribution Date) has been reduced to zero, all amounts otherwise
distributable as prepayments of principal to the Subordinated
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Certificates, in reverse order of priority, will instead be
distributed as principal to the Senior Certificates of the other
Certificate Group (other than the Class I-A-PO Certificates, in the
case of the Group I Senior Certificates), and then to MBIA any
reimbursement amounts due to MBIA unless (a) the weighted average of
the Subordinated Percentages for both Mortgage Pools, weighted on the
basis of the Stated Principal Balance of the Mortgage Loans in the
related Mortgage Pool (or, in the case of Pool I, the Non-PO
Percentage thereof), is at least two times the weighted average of the
initial Subordinate Percentage for both Mortgage Pools (calculated on
such basis) and (b) the aggregate Stated Principal Balance of all of
the Mortgage Loans in both Mortgage Pools delinquent 60 days or more
(including for this purpose any such Mortgage Loans in foreclosure or
subject to bankruptcy proceedings and Mortgage Loans with respect to
which the related Mortgaged Property has been acquired by the Trust
Fund), averaged over the preceding six month period, as a percentage
of the then current aggregate Class Certificate Balance of the
Subordinated Certificates, is less than 50%. All distributions
described above will be made in accordance with the priorities set
forth in Sections 4.2(b) and (c) and to MBIA any reimbursement amounts
due to MBIA.
SECTION 4.3 Method of Distribution.
(a) Except as otherwise provided in Section 4.8, all distributions with
respect to each Class of Certificates on each Distribution Date shall
be made pro rata among the outstanding Certificates of such Class,
based on the Percentage Interest in such Class represented by each
Certificate. Payments to the Certificateholders on each Distribution
Date will be made by the Trustee to the Certificateholders of record
on the related Record Date by check or money order mailed to a
Certificateholder at the address appearing in the Certificate
Register, or upon written request by such Certificateholder to the
Trustee made not later than the applicable Record Date, by wire
transfer to a U.S. depository institution acceptable to the Trustee,
or by such other means of payment as such Certificateholder and the
Trustee shall agree. Payment to MBIA shall be by means of payment
acceptable to MBIA.
(b) Each distribution with respect to a Book-Entry Certificate shall be
paid to the Depository, which shall credit the amount of such
distribution to the accounts of its Depository Participants in
accordance with its normal procedures. Each Depository Participant
shall be responsible for disbursing such distribution to the
Certificate Owners that it represents and to each financial
intermediary for which it acts as agent. Each such financial
intermediary shall be responsible for disbursing funds to the
Certificate Owners that it represents. All such credits and
disbursements with respect to a Book-Entry Certificate are to be made
by the Depository and the Depository Participants in accordance with
the provisions of the applicable Certificates. Neither the Trustee nor
the Master Servicer shall have any responsibility therefor except as
otherwise provided by applicable law.
(c) The Trustee shall withhold or cause to be withheld such amounts as it
reasonably determines are required by the Code (giving full effect to
any exemptions from withholding and related certifications required to
be furnished by
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Certificateholders or Certificate Owners and any reductions to
withholding by virtue of any bilateral tax treaties and any applicable
certification required to be furnished by Certificateholders or
Certificate Owners with respect thereto) from distributions to be made
to Non-U.S. Persons. If the Trustee reasonably determines that a more
accurate determination of the amount required to be withheld for a
distribution can be made within a reasonable period after the
scheduled date for such distribution, it may hold such distribution in
trust for a Holder of a Residual Certificate until such determination
can be made. For the purposes of this paragraph, a "Non-U.S. Person"
is (i) an individual other than a citizen or resident of the United
States, (ii) a partnership, corporation or entity treated as a
partnership or corporation for U.S. federal income tax purposes not
formed under the laws of the United States, any state thereof or the
District of Columbia (unless, in the case of a partnership, Treasury
regulations provide otherwise), (iii) any estate, the income of which
is not subject to U.S. federal income taxation, regardless of source,
and (iv) any trust, other than a trust that a court within the United
States is able to exercise primary supervision over the administration
of the trust and one or more U.S. Persons have the authority to
control all substantial decisions of the trust.
SECTION 4.4 Allocation of Losses.
(a) On or prior to each Determination Date, the Master Servicer shall
determine the amount of any Realized Loss in respect of each Mortgage
Loan that occurred during the immediately preceding calendar month.
(b) With respect to any Distribution Date, the principal portion of each
Realized Loss (other than any Excess Loss) with respect to a Mortgage
Pool shall be allocated as follows:
(i) In the case of Pool I, the applicable PO Percentage of the
principal portion of any such Realized Loss shall be allocated to
the Class I-A-PO Certificates until the Class Certificate Balance
thereof has been reduced to zero; and
(ii) the principal portion of any such Realized Loss (or in the case
of Pool I, the Non-PO Percentage thereof) shall be allocated in
the following order of priority:
first, to the Class B-6 Certificates until the Class Certificate
Balance thereof has been reduced to zero;
second, to the Class B-5 Certificates until the Class Certificate
Balance thereof has been reduced to zero;
third, to the Class B-4 Certificates until the Class Certificate
Balance thereof has been reduced to zero;
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fourth, to the Class B-3 Certificates until the Class Certificate
Balance thereof has been reduced to zero;
fifth, to the Class B-2 Certificates until the Class Certificate
Balance thereof has been reduced to zero;
sixth, to the Class B-1 Certificates until the Class Certificate
Balance thereof has been reduced to zero;
seventh, to the Classes of Senior Certificates of the related
Certificate Group (other than the Class I-A-PO Certificates), pro
rata, in accordance with their Class Certificate Balances;
provided, that the principal portion of Realized Losses (other
than Excess Losses) on the Mortgage Loans in Pool I allocable to
the Super Senior Certificates will instead be borne by the Senior
Support Certificates (in addition to other Realized Losses
allocated to the Senior Support Certificates), and not by the
Super Senior Certificates, for so long as the Class Certificate
Balance of the Senior Support Certificates is greater than zero.
(c) With respect to any Distribution Date, the principal portion of any
Excess Loss with respect to a Mortgage Pool (other than Excess
Bankruptcy Losses attributable to Debt Service Reductions) shall be
allocated (i) in the case of Pool I, the PO Percentage of any such
loss shall be allocated to the Class I-A-PO Certificates, and (2) any
such loss (or in the case of Pool I, the applicable Non-PO Percentage
thereof) shall be allocated pro rata to each Class of Certificates of
the related Certificate Group (other than, in the case of Pool I, the
Class I-A-PO Certificates) based on their respective Class Certificate
Balances (in the case of the Senior Certificates) or Apportioned
Principal Balances (in the case of the Subordinated Certificates).
(d) Any Realized Losses allocated to a Class of Certificates pursuant to
Section 4.4(a) or (b) shall be allocated among the Certificates of
such Class in proportion to their respective Certificate Principal
Balances. Any allocation of Realized Losses pursuant to this paragraph
(c) shall be accomplished by reducing the Certificate Principal
Balances of the related Certificates on the related Distribution Date
in accordance with Section 4.4(d).
(e) Realized Losses allocated in accordance with this Section 4.4 shall be
allocated on the Distribution Date in the month following the month in
which such loss was incurred and, in the case of the principal portion
thereof, after giving effect to the distributions made on such
Distribution Date. The aggregate amount of Realized Losses to be
allocated to the Class I-A-PO Certificates on such Distribution Date
will be taken into account in determining distributions in respect of
any Class PO Deferred Amount for such Distribution Date.
(f) On each Distribution Date, the Master Servicer shall determine the
Subordinated Certificate Writedown Amount, if any. Any such
Subordinated Certificate Writedown Amount shall effect, without
duplication of any other provision in this
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Section 4.4 that provides for a reduction in the Class Certificate
Balance of the Subordinated Certificates, a corresponding reduction in
the Class Certificate Balance of the Subordinated Certificates, which
reduction shall occur on such Distribution Date after giving effect to
distributions made on such Distribution Date.
(g) Notwithstanding the foregoing, no such allocation of any Realized Loss
shall be made on a Distribution Date to a Class of Certificates to the
extent that such allocation would result in the reduction of the
aggregate Class Certificate Balances of all the Senior Certificates of
a related Certificate Group as of such Distribution Date plus the
Apportioned Principal Balances of the Subordinated Certificates of
such Certificate Group as of such Distribution Date, after giving
effect to all distributions and prior allocations of Realized Losses
on such date, to an amount less than the aggregate Stated Principal
Balance of the Mortgage Loans in the related Mortgage Pool as of the
first day of the month of such Distribution Date, less any Deficient
Valuations occurring on or prior to the Bankruptcy Coverage
Termination Date (such limitation, the "Loss Allocation Limitation").
SECTION 4.5 [RESERVED]
SECTION 4.6 Monthly Statements to Certificateholders.
(a) Not later than each Distribution Date, the Trustee shall prepare and
cause to be forwarded by first class mail to each Certificateholder,
the Master Servicer, the Depositor, MBIA and each Rating Agency a
statement setting forth with respect to the related distribution
and/or may post such statement on its website located at
xxx.xxxxxxxxxxxx.xxx:
(i) the amount thereof allocable to principal, separately identifying
the aggregate amount of any Principal Prepayments and Liquidation
Proceeds included therein;
(ii) the amount thereof allocable to interest, the amount of any
Compensating Interest included in such distribution and any
remaining Net Interest Shortfalls after giving effect to such
distribution;
(iii) if the distribution to the Holders of such Class of Certificates
is less than the full amount that would be distributable to such
Holders if there were sufficient funds available therefor, the
amount of the shortfall and the allocation thereof as between
principal and interest;
(iv) the Class Certificate Balance of each Class of Certificates after
giving effect to the distribution of principal on such
Distribution Date;
(v) the Pool Principal Balance for each Mortgage Pool for the
following Distribution Date;
(vi) the Senior Percentage and Subordinated Percentage for each
Certificate Group for the following Distribution Date;
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(vii) the amount of the Master Servicing Fees paid to or retained by
the Master Servicer with respect to such Distribution Date;
(viii) the Pass-Through Rate for each such Class of Certificates with
respect to such Distribution Date;
(ix) the amount of Advances for each Mortgage Pool included in the
distribution on such Distribution Date and the aggregate amount
of Advances for each Mortgage Pool outstanding as of the close of
business on such Distribution Date;
(x) the number and aggregate principal amounts of Mortgage Loans (A)
delinquent (exclusive of Mortgage Loans in foreclosure) (1) 1 to
30 days (2) 31 to 60 days (3) 61 to 90 days and (4) 91 or more
days and (B) in foreclosure and delinquent (1) 1 to 30 days (2)
31 to 60 days (3) 61 to 90 days and (4) 91 or more days, as of
the close of business on the last day of the calendar month
preceding such Distribution Date;
(xi) with respect to any Mortgage Loan in a Mortgage Pool that became
an REO Property during the preceding calendar month, the loan
number and Stated Principal Balance of such Mortgage Loan as of
the close of business on the Determination Date preceding such
Distribution Date and the date of acquisition thereof;
(xii) the total number and principal balance of any REO Properties
(and market value, if available) in each Mortgage Pool as of the
close of business on the Determination Date preceding such
Distribution Date;
(xiii) the Senior Prepayment Percentage for each Certificate Group for
the following Distribution Date;
(xiv) the aggregate amount of Realized Losses incurred in respect of
each Mortgage Pool during the preceding calendar month;
(xv) the cumulative amount of Realized Losses applied in reduction of
the principal balance of each class of Certificates since the
Closing Date;
(xvi) the Special Hazard Loss Coverage Amount, the Fraud Loss Coverage
Amount and the Bankruptcy Loss Coverage Amount, in each case as
of the related Determination Date;
(xvii) with respect to the second Distribution Date, the number and
aggregate balance of any Delay Delivery Mortgage Loans not
delivered within thirty days after the Closing Date; and
(xviii) the amount of any Reserve Fund Withdrawal and the amount
remaining on deposit in the Reserve Fund;
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(b) The Trustee's responsibility for disbursing the above information to
the Certificateholders is limited to the availability, timeliness and
accuracy of the information provided by the Master Servicer.
(c) On or before the fifth Business Day following the end of each
Prepayment Period (but in no event later than the third Business Day
prior to the related Distribution Date), the Master Servicer shall
deliver to the Trustee (which delivery may be by electronic data
transmission) a report in substantially the form set forth as Schedule
III hereto.
(d) Within a reasonable period of time after the end of each calendar
year, the Trustee shall cause to be furnished to each Person who at
any time during the calendar year was a Certificateholder, a statement
containing the information set forth in clauses (a)(i), (a)(ii) and
(a)(vii) of this Section 4.6 aggregated for such calendar year or
applicable portion thereof during which such Person was a
Certificateholder. Such obligation of the Trustee shall be deemed to
have been satisfied to the extent that substantially comparable
information shall be provided by the Trustee pursuant to any
requirements of the Code as from time to time in effect.
SECTION 4.7 Reserve Fund.
No later than the Closing Date, the Trustee will establish and maintain
with itself a segregated trust account that is an Eligible Account, which shall
be titled "Reserve Fund, The Bank of New York, as Trustee for the registered
Holders of First Horizon Mortgage Pass-Through Certificates, Series 2004-4,
Class I-A-5." Amounts on deposit in the Reserve Fund shall be held by the
Trustee in trust for the benefit of the Holders of the Insured Retail
Certificates, but such amounts shall not constitute part of the Trust Fund. On
the Closing Date, Bear, Xxxxxxx & Co. Inc. shall deposit with the Trustee, and
the Trustee shall deposit the Reserve Fund Deposit into the Reserve Fund. The
Reserve Fund will be beneficially owned by Bear, Xxxxxxx & Co. Inc. and will not
be an asset of the Trust Fund. The Trustee will make withdrawals of amounts on
deposit in the Reserve Fund (each, a "Reserve Fund Withdrawal"), to the extent
funds are available in the Reserve Fund, on each Distribution Date to cover any
Net Interest Shortfalls (other than any interest shortfalls resulting from
Relief Act Reductions) allocated to the Insured Retail Certificates. Any amount
remaining on deposit in the Reserve Fund on the Distribution Date on which the
Certificate Principal Balance of the Insured Retail Certificates has been
reduced to zero will be distributed to Bear, Xxxxxxx & Co. Inc.
For federal income tax purposes, Bear, Xxxxxxx & Co. Inc. shall be the
owner of the Reserve Fund and shall report all items of income, deduction, gain
or loss arising therefrom. Notwithstanding anything herein to the contrary, the
Reserve Fund shall not be an asset of any REMIC created hereunder. The Reserve
Fund shall be invested in Permitted Investments at the written direction of the
Master Servicer. If the Trustee does not receive such written investment
instructions it shall retain such funds uninvested. The Trustee shall have no
liability for investment losses in Permitted Investments in accordance with the
instructions of the Master Servicer. All income and gain realized from
investment of funds deposited in the Reserve Fund shall be deposited in the
Reserve Fund for the sole use and exclusive benefit of the Reserve Fund. The
balance, if any, remaining in the Reserve Fund on the Distribution Date on which
the
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Class Certificate Balance of the Insured Retail Certificates is reduced to zero
will be distributed by the Trustee to Bear, Xxxxxxx & Co. Inc. To the extent
that the Reserve Fund constitutes a reserve fund for federal income tax
purposes, (1) it shall be an outside reserve fund and not an asset of any REMIC
created hereunder, and (2) it shall be owned by Bear, Xxxxxxx & Co. Inc., all
within the meaning of Section 1.860G-2(h) of the Treasury Regulations.
SECTION 4.8 Principal Distributions on the Insured Retail
Certificates.
(a) Except as provided in subsections (d) and (f) below, on each
Distribution Date on which distributions in reduction of the Class
Certificate Balance of the Insured Retail Certificates are made, such
distributions will be made in the following order of priority:
(i) first, in respect of any Principal Distribution Request by the
personal representative of a Deceased Holder of such
Certificates, a surviving tenant by the entirety, a surviving
joint tenant, a surviving tenant in common or such other Person
empowered to act on behalf of such Deceased Holder upon his or
her death, in an amount up to but not exceeding $100,000 per
request; and
(ii) second, in respect of any Principal Distribution Request by a
Living Holder of such Certificates, in an amount up to but not
exceeding $10,000 per request.
Thereafter, distributions in respect of such Certificates submitted on
behalf of each Deceased Holder will be made as provided in clause (i) above
up to a second $100,000 per request and distributions in respect of such
Certificates submitted on behalf of each Living Holder will be made as
provided in clause (ii) above up to a second $10,000 per request. This
sequence of priorities will be repeated until all such requests have been
honored to the extent of amounts available for distribution in reduction of
the Class Certificate Balance of the Insured Retail Certificates.
Principal Distribution Requests presented on behalf of Deceased
Holders in accordance with the provisions of clause (i) above will be
accepted in the order of their receipt by the Depository. Principal
Distribution Requests presented in accordance with the provisions of clause
(ii) above will be accepted in the order of their receipt by the Depository
after all requests presented in accordance with clause (i) have been
honored. All Principal Distribution Requests with respect to any
Distribution Date shall be made in accordance with Section 4.8(c) below and
must be received by the Depository no later than the close of business on
the related Record Date. Principal Distribution Requests that are received
by the Depository after the related Record Date and requests, in either
case, for distributions timely received but not accepted with respect to
any Distribution Date, will be treated as Principal Distribution Requests
on the next succeeding Distribution Date, and each succeeding Distribution
Date thereafter, until each such request is accepted or is withdrawn as
provided in Section 4.8(c). Requests on behalf of Deceased Holders that are
not so withdrawn shall retain their order of priority, all in accordance
with the procedures of the Depository and the Trustee. Upon the transfer of
beneficial ownership of any Insured Retail Certificate, any Principal
Distribution Request
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previously submitted with respect to such Certificate will be deemed to
have been withdrawn only upon the receipt by the Trustee of notification of
such withdrawal using a form required by the Depository.
Principal Distribution Requests for the Insured Retail Certificates
will be applied, in the aggregate, in an amount equal to the portion of the
Available Funds distributable to such Certificates pursuant to Sections
4.2(b)(ii) and (v), plus any amounts available for distribution from the
Rounding Account pursuant to paragraph (e), provided that the aggregate
distribution in reduction of the Certificate Principal Balance of the
Insured Retail Certificates on any Distribution Date shall be made in an
integral multiple of $1,000, subject to Section 4.8(f).
(b) A "Deceased Holder" is a beneficial owner of an Insured Retail
Certificate who was living at the time such interest was acquired and
whose authorized personal representative, surviving tenant by the
entirety, surviving joint tenant or surviving tenant in common or
other Person empowered to act on behalf of such beneficial owner upon
his or her death, causes to be furnished to the Trustee a certified
copy of the death certificate of such Deceased Holder, evidence of
such person's status as an authorized representative of the Deceased
Holder, such as surviving tenant (whether by the entirety, joint
tenancy or tenancy in common), which evidence shall be satisfactory to
the Trustee, and any additional evidence of death required by and
satisfactory to the Trustee and any tax waivers requested by the
Trustee. Insured Retail Certificates beneficially owned by tenants by
the entirety, joint tenants or tenants in common will be considered to
be beneficially owned by a single owner. The death of a tenant by the
entirety, joint tenant or tenant in common will be deemed to be the
death of the beneficial owner, and any Insured Retail Certificates so
beneficially owned will be eligible for priority with respect to
distributions in reduction of the Certificate Principal Balance of
such Certificates, subject to the limitations contained in this
Section 4.8. Insured Retail Certificates beneficially owned by a trust
will be considered to be beneficially owned by each beneficiary of the
trust to the extent of such beneficiary's beneficial interest therein,
but in no event will a trust's beneficiaries collectively be deemed to
be beneficial owners of a number of individual Insured Retail
Certificates greater than the number of individual Insured Retail
Certificates of which such trust is the beneficial owner. The death of
a beneficiary of a trust will be deemed to be the death of a
beneficial owner of the Insured Retail Certificates beneficially owned
by the trust to the extent of such beneficiary's beneficial interest
in such trust. The death of an individual who was a tenant by the
entirety, joint tenant or tenant in common in a tenancy that is the
beneficiary of a trust will be deemed to be the death of the
beneficiary of the trust. The death of a person who, immediately prior
to his or her death, was entitled to substantially all of the
beneficial ownership interest in an Insured Retail Certificate will be
deemed to be the death of the beneficial owner of such Certificate
regardless of the registration of ownership of such Certificate, if
such beneficial ownership interest can be established to the
satisfaction of the Trustee. The Trustee's decision regarding whether
a Deceased Holder's beneficial interest is substantial for purposes of
the preceding sentence shall be conclusive and binding. Such
beneficial interest will
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be deemed to exist in typical cases of street name or nominee
ownership, ownership by a trustee, ownership under the applicable
Uniform Gifts to Minors Act or Uniform Transfers to Minors Act, as the
case may be, and community property or other joint ownership
arrangements between a husband and wife. Beneficial interests shall
include the power to sell, transfer or otherwise dispose of an Insured
Retail Certificate, and the right to receive the proceeds therefrom,
as well as interest and distributions in reduction of the Certificate
Principal Balance of such Certificates payable with respect thereto.
The Trustee shall not be under any duty to determine independently the
occurrence of the death of any beneficial owner. The Trustee may rely
entirely upon documentation delivered to it in establishing the
eligibility of any beneficial owner to receive the priority accorded
Deceased Holders in Section 4.8(a). Expenses incurred by the Trustee
in an effort to determine the beneficial ownership interest with
respect to any Principal Distribution Request presented on behalf of a
Deceased Holder, including, without limitation, attorneys fees, shall
be paid by the Person presenting such Principal Distribution Request.
Requests for distributions in reduction of the Certificate Principal
Balance of the Insured Retail Certificates must be made by delivering a
Principal Distribution Request therefor to the Depository Participant or
Indirect Participant that maintains the account evidencing the beneficial
owner's interest in such Certificate. Such Depository Participant or
Indirect Participant should in turn make the request of the Depository (or,
in the case of an Indirect Participant, such Indirect Participant should
notify the related Depository Participant of such request, which Depository
Participant should make the request of the Depository) on a form required
by the Depository and provided to the Depository Participant. In the case
of a request on behalf of a Deceased Holder, a certified copy of the death
certificate and any additional appropriate evidence of death and any tax
waivers must be forwarded to the Trustee under separate cover. Any such
requests of Deceased Holders that are incomplete may not be honored by the
Trustee and, if not honored, will lose their priority and must be
resubmitted in proper form. Upon receipt of such Principal Distribution
Request, the Depository will date and time stamp such request and forward
such request to the Trustee. Such requests will be honored on any
Distribution Date only to the extent that they are received by the
Depository on or before the Record Date for such Distribution Date. The
Depository may establish such procedures as it deems fair and equitable to
establish the order of receipt of requests for such distributions received
by it on the same day. Principal Distribution Requests delivered to the
Depository after the Record Date for a particular Distribution Date and
requests received in a timely manner but not accepted with respect to a
particular Distribution Date will be treated as Principal Distribution
Requests for the next succeeding Distribution Date and each succeeding
Distribution Date thereafter until each request is accepted or is withdrawn
as provided below. In the case of Principal Distribution Requests on behalf
of Living Holders, the Depository will establish a new order of priority
for each Distribution Date. This order will apply both to previously
unsatisfied Principal Distribution Requests and to newly submitted
requests. A Principal Distribution Request submitted on behalf of a Living
Holder who later dies will become entitled to the priority of a newly
submitted request on behalf of a Deceased Holder upon satisfaction of the
requirements set forth above for requests of a Deceased Holder. Such
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priority will be effective for each subsequent Distribution Date if the
Trustee has received a certified copy of the death certificate for such
Deceased Holder and any additional appropriate evidence of death and any
requested tax waivers by the last business day of the preceding calendar
month. Each Principal Distribution Request submitted by a beneficial owner
of a Insured Retail Certificate will be held by the Depository until such
request has been accepted or has been withdrawn in writing as provided
herein. None of the Trustee, the Master Servicer, MBIA or the Depositor
shall be liable for any delay in delivery of Principal Distribution
Requests or Withdrawals (as defined below) of such requests by the
Depository, a Depository Participant or any Indirect Participant.
In the event that any Principal Distribution Requests are rejected by
the Trustee for failure to comply with the requirements of this Section
4.8, the Trustee shall return such requests to the appropriate Depository
Participant with a copy to the Depository with an explanation as to the
reason for such rejection.
The Trustee shall maintain a list of those Depository Participants
representing the Certificate Owners of Insured Retail Certificates that
have submitted Principal Distribution Requests, together with the order of
receipt and the amounts of such requests. The Trustee shall notify the
Depository and the appropriate Depository Participants as to which requests
should be honored on each Distribution Date. Requests shall be honored by
the Depository in accordance with the procedures, and subject to the
priorities and limitations, described in this Section 4.8. The exact
procedures to be followed by the Trustee and the Depository for purposes of
determining such priorities and limitations shall be those established from
time to time by the Trustee or the Depository, as the case may be. The
decisions of the Trustee and the Depository concerning such matters shall
be final and binding on all affected Persons.
Any beneficial owner of an Insured Retail Certificate that has made a
Principal Distribution Request may withdraw its request by so notifying in
writing the Depository Participant or Indirect Participant that maintains
such beneficial owner's account (each such withdrawal, a "Withdrawal"). The
Depository Participant should forward the Withdrawal to the Depository on a
form required by the Depository. In the event that such account is
maintained by an Indirect Participant, such Indirect Participant should
notify the related Depository Participant which in turn should forward the
Withdrawal of such request, on a form required by the Depository, to the
Depository. If such Withdrawal has not been received by the Depository and
forwarded to the Trustee on or before the Record Date for the next
Distribution Date, the previously made Principal Distribution Request will
be irrevocable with respect to the making of distributions in reduction of
the Certificate Principal Balance of such Certificate on such Distribution
Date.
(c) To the extent, if any, that amounts available for distribution in
reduction of the Certificate Principal Balance of the Insured Retail
Certificates on a Distribution Date pursuant to Section 4.2 exceed the
dollar amount of Principal Distribution Requests that have been
received in respect of such Certificates by the related Record Date,
as provided in this Section 4.8(c), distributions in reduction of the
Certificate Principal Balance of such Certificates will be made by
mandatory distributions on a Random Lot basis, in integral multiples
equal to $1,000, in
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reduction thereof without regard to whether such Certificate Owners
have submitted Principal Distribution Requests. The Trustee shall
notify the Depository of the aggregate amount of the mandatory
distribution by Random Lot in reduction of the Certificate Principal
Balance of such Certificates to be made on the next Distribution Date.
The Depository shall then allocate such aggregate amount among its
Depository Participants on a Random Lot basis. Each Depository
Participant and, in turn, each Indirect Participant, will then select,
in accordance with its own procedures, Insured Retail Certificates
from among those held in its accounts to receive mandatory
distributions in reduction of the Certificate Principal Balance of
such Certificates, such that the total amount so selected is equal to
the aggregate amount of such mandatory distributions allocated to such
Depository Participant by the Depository and to such Indirect
Participant by its related Depository Participant, as the case may be.
Depository Participants and Indirect Participants that hold Insured
Retail Certificates selected for mandatory distributions in reduction
of the Certificate Principal Balance thereof should provide notice of
such mandatory distributions to the affected Certificate Owners.
(d) No later than the Closing Date, Bear, Xxxxxxx & Co. Inc. will
establish and maintain with the Trustee a segregated trust account
that is an Eligible Account, which shall be titled "Rounding Account,
The Bank of New York, as Trustee for the registered Holders of First
Horizon Mortgage Pass-Through Certificates, Series 2004-4, Class
I-A-5." On the Closing Date, Bear, Xxxxxxx & Co. Inc. shall deposit
with the Trustee, and the Trustee shall deposit into the Rounding
Account, cash in an amount equal to $999.99. Amounts held in the
Rounding Account shall not be invested in any investment which
produces income. The Rounding Account will be included in the Lower
REMIC.
On each Distribution Date on which a distribution is to be made in
reduction of the Certificate Principal Balance of the Insured Retail
Certificates pursuant to Section 4.2, funds on deposit in the Rounding
Account shall be, to the extent needed, withdrawn by the Trustee and
applied to round upward to an integral multiple of $1,000 the aggregate
distribution in reduction of the Certificate Principal Balance to be made
thereon. Rounding of such distribution on the Insured Retail Certificates
shall be accomplished, on the first such Distribution Date, by withdrawing
from the Rounding Account the amount of funds, if any, needed to round the
amount otherwise available for such distribution in reduction of the
Certificate Principal Balance of such Certificates upward to the next
integral multiple of $1,000. On each succeeding Distribution Date on which
distributions in reduction of the Certificate Principal Balance of the
Insured Retail Certificates are to be made pursuant to Section 4.2, the
aggregate amount of such distributions allocable to such Certificates shall
be applied first to repay any funds withdrawn from the Rounding Account and
not previously repaid, and then the remainder of such allocable amount, if
any, shall be similarly rounded upward to the next integral multiple of
$1,000 and applied as distributions in reduction of the Certificate
Principal Balance of the Insured Retail Certificates; this process shall
continue on succeeding principal Distribution Dates prior to the earlier to
occur of the Cross-over Date and the next Distribution Date after the
Distribution Date on which the principal portion of any
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Realized Loss is allocated to the Insured Retail Certificates until the
Class Certificate Balance thereof has been reduced to zero. On the earlier
of (1) the next Distribution Date after the Distribution Date on which the
principal portion of any Realized Loss is allocated to the Insured Retail
Certificates and MBIA defaults in its obligation to make a payment under
the MBIA Policy and (2) the first Distribution Date after the Certificate
Principal Balance of the Insured Retail Certificates has been reduced to
zero, any remaining amounts in the related Rounding Account shall be
distributed to the Holders of the Class I-A-RL Certificates.
(e) Notwithstanding any provisions herein to the contrary, on each
Distribution Date coinciding with the next Distribution Date after the
Distribution Date on which the principal portion of any Realized Loss
is allocated to the Insured Retail Certificates and MBIA defaults in
its obligation to make a payment under the MBIA Policy, all
distributions in reduction of the Certificate Principal Balance of the
Insured Retail Certificates will be made among the Holders and
Certificate Owners of such Certificates, pro rata, based on their
Certificate Principal Balances, and will not be made in integral
multiples of $1,000 or pursuant to requested distributions or
mandatory distributions by Random Lot.
(f) In the event that Definitive Certificates representing the Insured
Retail Certificates are issued pursuant to Section 5.2(e) (other than
Section 5.2(e)(z)), all requests for distributions or withdrawals of
such requests relating to such Certificates must be submitted in
writing to the Trustee, and the Trustee shall perform the functions
described in Section 4.8(a) through (d) using its own procedures,
which procedures shall, to the extent practicable, be consistent with
the procedures described in Section 4.8(a) through (d). In the event
that Definitive Certificates representing the Insured Retail
Certificates are issued pursuant to Section 5.2(e), all distributions
of principal shall be made pro rata in accordance with Section 4.8(f).
ARTICLE V
THE CERTIFICATES
SECTION 5.1 The Certificates.
The Certificates shall be substantially in the forms attached hereto as
exhibits. The Certificates shall be issuable in registered form, in the minimum
denominations, integral multiples in excess thereof (except that one Certificate
in each Class may be issued in a different amount which must be in excess of the
applicable minimum denomination) and aggregate denominations per Class set forth
in the Preliminary Statement.
Subject to Section 9.2 hereof respecting the final distribution on the
Certificates, on each Distribution Date the Trustee shall make distributions to
each Certificateholder of record on the preceding Record Date either (x) by wire
transfer in immediately available funds to the account of such Holder at a bank
or other entity having appropriate facilities therefor, if (i) such Holder has
so notified the Trustee at least five Business Days prior to the related Record
Date and (ii) such Holder shall hold (A) 100% of the Class Certificate Balance
of any Class of Certificates or (B) Certificates of any Class with aggregate
principal Denominations of not less than $1,000,000
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or (y) by check mailed by first class mail to such Certificateholder at the
address of such Holder appearing in the Certificate Register.
The Certificates shall be executed by manual or facsimile signature on
behalf of the Trustee by an authorized officer. Certificates bearing the manual
or facsimile signatures of individuals who were, at the time when such
signatures were affixed, authorized to sign on behalf of the Trustee shall bind
the Trustee, notwithstanding that such individuals or any of them have ceased to
be so authorized prior to the countersignature and delivery of such Certificates
or did not hold such offices at the date of such Certificate. No Certificate
shall be entitled to any benefit under this Agreement, or be valid for any
purpose, unless countersigned by the Trustee by manual signature, and such
countersignature upon any Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly executed and delivered hereunder.
All Certificates shall be dated the date of their countersignature. On the
Closing Date, the Trustee shall countersign the Certificates to be issued at the
direction of the Depositor, or any affiliate thereof.
The Depositor shall provide, or cause to be provided, to the Trustee on a
continuous basis, an adequate inventory of Certificates to facilitate transfers.
SECTION 5.2 Certificate Register; Registration of Transfer and
Exchange of Certificates.
(a) The Trustee shall maintain, or cause to be maintained in accordance
with the provisions of Section 5.6 hereof, a Certificate Register for
the Trust Fund in which, subject to the provisions of subsections (b)
and (c) below and to such reasonable regulations as it may prescribe,
the Trustee shall provide for the registration of Certificates and of
transfers and exchanges of Certificates as herein provided. Upon
surrender for registration of transfer of any Certificate, the Trustee
shall execute and deliver, in the name of the designated transferee or
transferees, one or more new Certificates of the same Class and
aggregate Percentage Interest.
At the option of a Certificateholder, Certificates may be exchanged
for other Certificates of the same Class in authorized denominations and
evidencing the same aggregate Percentage Interest upon surrender of the
Certificates to be exchanged at the office or agency of the Trustee.
Whenever any Certificates are so surrendered for exchange, the Trustee
shall execute, authenticate, and deliver the Certificates which the
Certificateholder making the exchange is entitled to receive. Every
Certificate presented or surrendered for registration of transfer or
exchange shall be accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed by the Holder thereof or his
attorney duly authorized in writing.
No service charge to the Certificateholders shall be made for any
registration of transfer or exchange of Certificates, but payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates may be required.
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All Certificates surrendered for registration of transfer or exchange
shall be cancelled and subsequently destroyed by the Trustee in accordance
with the Trustee's customary procedures.
(b) No transfer of a Private Certificate shall be made unless such
transfer is made pursuant to an effective registration statement under
the Securities Act and any applicable state securities laws or is
exempt from the registration requirements under said Act and such
state securities laws. In the event that a transfer is to be made in
reliance upon an exemption from the Securities Act and such laws, in
order to assure compliance with the Securities Act and such laws, the
Certificateholder desiring to effect such transfer and such
Certificateholder's prospective transferee shall each certify to the
Trustee in writing the facts surrounding the transfer in substantially
the forms set forth in Exhibit I (the "Transferor Certificate") and
(i) deliver a letter in substantially the form of either Exhibit J
(the "Investment Letter") or Exhibit K (the "Rule 144A Letter") or
(ii) there shall be delivered to the Trustee at the expense of the
transferor an Opinion of Counsel that such transfer may be made
pursuant to an exemption from the Securities Act. The Depositor shall
provide to any Holder of a Private Certificate and any prospective
transferee designated by any such Holder, information regarding the
related Certificates and the Mortgage Loans and such other information
as shall be necessary to satisfy the condition to eligibility set
forth in Rule 144A(d)(4) for transfer of any such Certificate without
registration thereof under the Securities Act pursuant to the
registration exemption provided by Rule 144A. The Trustee and the
Master Servicer shall cooperate with the Depositor in providing the
Rule 144A information referenced in the preceding sentence, including
providing to the Depositor such information regarding the
Certificates, the Mortgage Loans and other matters regarding the Trust
Fund as the Depositor shall reasonably request to meet its obligation
under the preceding sentence. Each Holder of a Private Certificate
desiring to effect such transfer shall, and does hereby agree to,
indemnify the Trustee and the Depositor, the Seller and the Master
Servicer against any liability that may result if the transfer is not
so exempt or is not made in accordance with such federal and state
laws.
No transfer of a Class I-A-PO Certificate shall be made unless the
transferee of such Certificate (i) is not an employee benefit plan or
arrangement subject to Section 406 of ERISA or Section 4975 of the Code,
nor a person acting on behalf of any such plan or arrangement, nor using
the assets of any such plan or arrangement to effect such transfer, (ii)
such Class I-A-PO Certificate has been subject to an ERISA-Qualified
Underwriting, or (iii) in the case of any such Class I-A-PO Certificate not
satisfying clause (ii) and 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 Fund, addressed to the Trustee to the effect that the purchase or
holding of such Class I-A-PO Certificate will not result in prohibited
transactions under Section 406 of ERISA and Section 4975 of the Code and
will not
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subject the Trustee, the Depositor or the Master Servicer to any obligation
in addition to those expressly undertaken in this Agreement or to any
liability.
No transfer of an ERISA-Restricted Certificate shall be made unless
the Trustee shall have received a Transferor Certificate from the related
transferor and either (i) a representation from the transferee of such
Certificate acceptable to and in form and substance satisfactory to the
Trustee (in the event such Certificate is a Private Certificate, such
requirement is satisfied only by the Trustee's receipt of a representation
letter from the transferee substantially in the form of Exhibit J or
Exhibit K), to the effect that such transferee is not an employee benefit
plan or arrangement subject to Section 406 of ERISA or a plan or
arrangement subject to Section 4975 of the Code, nor a person acting on
behalf of any such plan or arrangement, nor using the assets of any such
plan or arrangement to effect such transfer, (ii) in the case of a Private
Certificate (that has been subject to an ERISA-Qualified Underwriting) or a
Residual Certificate, if the purchaser is an insurance company, a
representation that the purchaser is an insurance company which is
purchasing such Certificates with funds contained in an "insurance company
general account" (as such term is defined in Section V(e) of Prohibited
Transaction Class Exemption 95-60 ("PTCE 95-60")) and that the purchase and
holding of such Certificates are covered under Sections I and III of PTCE
95-60 or (iii) in the case of any such ERISA-Restricted Certificate
presented for registration in the name of an employee benefit plan subject
to ERISA, or a plan or arrangement subject to Section 4975 of the Code (or
comparable provisions of any subsequent enactments), or a trustee of any
such plan or any other person acting on behalf of any such plan or
arrangement, or using such plan's or arrangement's assets, an Opinion of
Counsel satisfactory to the Trustee, which Opinion of Counsel shall not be
an expense of either the Trustee, the Depositor, the Master Servicer or the
Trust Fund, addressed to the Trustee to the effect that the purchase or
holding of such ERISA-Restricted Certificate will not result in prohibited
transactions under Section 406 of ERISA and Section 4975 of the Code and
will not subject the Trustee, the Depositor or the Master Servicer to any
obligation in addition to those expressly undertaken in this Agreement or
to any liability. Notwithstanding anything else to the contrary herein, any
purported transfer of an ERISA-Restricted Certificate to or on behalf of an
employee benefit plan subject to ERISA or to the Code without the delivery
to the Trustee of an Opinion of Counsel satisfactory to the Trustee as
described above shall be void and of no effect.
To the extent permitted under applicable law (including, but not
limited to, ERISA), the Trustee shall be under no liability to any Person
for any registration of transfer of any ERISA-Restricted Certificate that
is in fact not permitted by this Section 5.2(b) or for making any payments
due on such Certificate to the Holder thereof or taking any other action
with respect to such Holder under the provisions of this Agreement so long
as the transfer was registered by the Trustee in accordance with the
foregoing requirements.
(c) Each Person who has or who acquires any Ownership Interest in a
Residual Certificate shall be deemed by the acceptance or acquisition
of such Ownership Interest to have agreed to be bound by the following
provisions, and the rights of each Person acquiring any Ownership
Interest in a Residual Certificate are expressly subject to the
following provisions:
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(i) Each Person holding or acquiring any Ownership Interest in a
Residual Certificate shall be a Permitted Transferee and shall
promptly notify the Trustee of any change or impending change in
its status as a Permitted Transferee.
(ii) No Ownership Interest in a Residual Certificate may be registered
on the Closing Date or thereafter transferred, and the Trustee
shall not register the Transfer of any Residual Certificate
unless, in addition to the certificates required to be delivered
to the Trustee under subparagraph (b) above, the Trustee shall
have been furnished with an affidavit (a "Transfer Affidavit") of
the initial owner or the proposed transferee in the form attached
hereto as Exhibit H.
(iii) Each Person holding or acquiring any Ownership Interest in a
Residual Certificate shall agree (A) to obtain a Transfer
Affidavit from any other Person to whom such Person attempts to
Transfer its Ownership Interest in a Residual Certificate, (B) to
obtain a Transfer Affidavit from any Person for whom such Person
is acting as nominee, trustee or agent in connection with any
Transfer of a Residual Certificate and (C) not to Transfer its
Ownership Interest in a Residual Certificate or to cause the
Transfer of an Ownership Interest in a Residual Certificate to
any other Person if it has actual knowledge that such Person is
not a Permitted Transferee.
(iv) Any attempted or purported Transfer of any Ownership Interest in
a Residual Certificate in violation of the provisions of this
Section 5.2(c) shall be absolutely null and void and shall vest
no rights in the purported Transferee. If any purported
transferee shall become a Holder of a Residual Certificate in
violation of the provisions of this Section 5.2(c), then the last
preceding Permitted Transferee shall be restored to all rights as
Holder thereof retroactive to the date of registration of
Transfer of such Residual Certificate. The Trustee shall be under
no liability to any Person for any registration of Transfer of a
Residual Certificate that is in fact not permitted by Section
5.2(b) and this Section 5.2(c) or for making any payments due on
such Certificate to the Holder thereof or taking any other action
with respect to such Holder under the provisions of this
Agreement so long as the Transfer was registered after receipt of
the related Transfer Affidavit, Transferor Certificate and, in
the case of a Residual Certificate which is also a Private
Certificate, either the Rule 144A Letter or the Investment
Letter. The Trustee shall be entitled but not obligated to
recover from any Holder of a Residual Certificate that was in
fact not a Permitted Transferee at the time it became a Holder
or, at such subsequent time as it became other than a Permitted
Transferee, all payments made on such Residual Certificate at and
after either such time. Any such payments so recovered by the
Trustee shall be paid and delivered by the Trustee to the last
preceding Permitted Transferee of such Certificate.
(v) The Depositor shall use its best efforts to make available, upon
receipt of written request from the Trustee, all information
necessary to compute any
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tax imposed under Section 860E(e) of the Code as a result of a
Transfer of an Ownership Interest in a Residual Certificate to
any Holder who is not a Permitted Transferee.
The restrictions on Transfers of a Residual Certificate set forth in
this Section 5.2(c) shall cease to apply (and the applicable portions of
the legend on a Residual Certificate may be deleted) with respect to
Transfers occurring after delivery to the Trustee of an Opinion of Counsel,
which Opinion of Counsel shall not be an expense of the Trust Fund, the
Trustee, the Seller or the Master Servicer, to the effect that the
elimination of such restrictions will not cause any REMIC created hereunder
to fail to qualify as a REMIC at any time that the Certificates are
outstanding or result in the imposition of any tax on the Trust Fund, a
Certificateholder or another Person. Each Person holding or acquiring any
Ownership Interest in a Residual Certificate hereby consents to any
amendment of this Agreement which, based on an Opinion of Counsel furnished
to the Trustee, is reasonably necessary (a) to ensure that the record
ownership of, or any beneficial interest in, a Residual Certificate is not
transferred, directly or indirectly, to a Person that is not a Permitted
Transferee and (b) to provide for a means to compel the Transfer of a
Residual Certificate which is held by a Person that is not a Permitted
Transferee to a Holder that is a Permitted Transferee.
(d) The preparation and delivery of all certificates and opinions referred
to above in this Section 5.2 in connection with transfer shall be at
the expense of the parties to such transfers.
(e) Except as provided below, the Book-Entry Certificates shall at all
times remain registered in the name of the Depository or its nominee
and at all times: (i) registration of the Certificates may not be
transferred by the Trustee except to another Depository; (ii) the
Depository shall maintain book-entry records with respect to the
Certificate Owners and with respect to ownership and transfers of such
Book-Entry Certificates; (iii) ownership and transfers of registration
of the Book-Entry Certificates on the books of the Depository shall be
governed by applicable rules established by the Depository; (iv) the
Depository may collect its usual and customary fees, charges and
expenses from its Depository Participants; (v) the Trustee shall deal
with the Depository, Depository Participants and indirect
participating firms as representatives of the Certificate Owners of
the Book-Entry Certificates for purposes of exercising the rights of
holders under this Agreement, and requests and directions for and
votes of such representatives shall not be deemed to be inconsistent
if they are made with respect to different Certificate Owners; and
(vi) the Trustee may rely and shall be fully protected in relying upon
information furnished by the Depository with respect to its Depository
Participants and furnished by the Depository Participants with respect
to indirect participating firms and persons shown on the books of such
indirect participating firms as direct or indirect Certificate Owners.
All transfers by Certificate Owners of Book-Entry Certificates shall
be made in accordance with the procedures established by the Depository
Participant or brokerage firm representing such Certificate Owner. Each
Depository Participant shall only transfer
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Book-Entry Certificates of Certificate Owners it represents or of brokerage
firms for which it acts as agent in accordance with the Depository's normal
procedures.
If (x) (i) the Depository or the Depositor advises the Trustee in
writing that the Depository is no longer willing or able to properly
discharge its responsibilities as Depository, and (ii) the Trustee or the
Depositor is unable to locate a qualified successor, (y) the Depositor at
its option advises the Trustee in writing that it elects to terminate the
book-entry system through the Depository or (z) after the occurrence of an
Event of Default, Certificate Owners representing at least 51% of the Class
Certificate Balance of the Book-Entry Certificates together advise the
Trustee and the Depository through the Depository Participants in writing
that the continuation of a book-entry system through the Depository is no
longer in the best interests of the Certificate Owners, the Trustee shall
notify all Certificate Owners, through the Depository, of the occurrence of
any such event and of the availability of definitive, fully-registered
Certificates (the "Definitive Certificates") to Certificate Owners
requesting the same. Upon surrender to the Trustee of the related Class of
Certificates by the Depository, accompanied by the instructions from the
Depository for registration, the Trustee shall issue the Definitive
Certificates. Neither the Master Servicer, the Depositor nor the Trustee
shall be liable for any delay in delivery of such instruction and each may
conclusively rely on, and shall be protected in relying on, such
instructions. The Master Servicer shall provide the Trustee with an
adequate inventory of certificates to facilitate the issuance and transfer
of Definitive Certificates. Upon the issuance of Definitive Certificates
all references herein to obligations imposed upon or to be performed by the
Depository shall be deemed to be imposed upon and performed by the Trustee,
to the extent applicable with respect to such Definitive Certificates and
the Trustee shall recognize the Holders of the Definitive Certificates as
Certificateholders hereunder; provided that the Trustee shall not by virtue
of its assumption of such obligations become liable to any party for any
act or failure to act of the Depository.
SECTION 5.3 Mutilated, Destroyed, Lost or Stolen Certificates.
If (a) any mutilated Certificate is surrendered to the Trustee, or the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Certificate and (b) there is delivered to the Master Servicer and the
Trustee (and to MBIA with respect to the Insured Retail Certificates) such
security or indemnity as may be required by them to save each of them harmless,
then, in the absence of notice to the Trustee that such Certificate has been
acquired by a bona fide purchaser, the Trustee shall execute, countersign and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of like Class, tenor and Percentage
Interest. In connection with the issuance of any new Certificate under this
Section 5.3, the Trustee may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other expenses (including the fees and expenses of the Trustee) connected
therewith. Any replacement Certificate issued pursuant to this Section 5.3 shall
constitute complete and indefeasible evidence of ownership, as if originally
issued, whether or not the lost, stolen or destroyed Certificate shall be found
at any time.
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SECTION 5.4 Persons Deemed Owners.
The Master Servicer, the Trustee, MBIA and any agent of the Master Servicer
or the Trustee may treat the Person in whose name any Certificate is registered
as the owner of such Certificate for the purpose of receiving distributions as
provided in this Agreement and for all other purposes whatsoever, and neither
the Master Servicer, MBIA, the Trustee nor any agent of the Master Servicer or
the Trustee shall be affected by any notice to the contrary.
SECTION 5.5 Access to List of Certificateholders' Names and Addresses.
If three or more Certificateholders or Certificate Owners (a) request such
information in writing from the Trustee, (b) state that such Certificateholders
or Certificate Owners desire to communicate with other Certificateholders with
respect to their rights under this Agreement or under the Certificates, and (c)
provide a copy of the communication which such Certificateholders or Certificate
Owners propose to transmit, or if the Depositor or Master Servicer shall request
such information in writing from the Trustee, then the Trustee shall, within ten
Business Days after the receipt of such request, provide the Depositor, the
Master Servicer or such Certificateholders or Certificate Owners at such
recipients' expense the most recent list of the Certificateholders of such Trust
Fund held by the Trustee, if any. The Depositor and every Certificateholder or
Certificate Owner, by receiving and holding a Certificate, agree that the
Trustee shall not be held accountable by reason of the disclosure of any such
information as to the list of the Certificateholders hereunder, regardless of
the source from which such information was derived.
SECTION 5.6 Maintenance of Office or Agency.
The Trustee will maintain or cause to be maintained at its expense an
office or offices or agency or agencies in New York City where Certificates may
be surrendered for registration of transfer or exchange. The Trustee initially
designates its Corporate Trust Office for such purposes. The Trustee will give
prompt written notice to the Certificateholders of any change in such location
of any such office or agency.
ARTICLE VI
THE DEPOSITOR AND THE MASTER SERVICER
SECTION 6.1 Respective Liabilities of the Depositor and the Master
Servicer.
The Depositor and the Master Servicer shall each be liable in accordance
herewith only to the extent of the obligations specifically and respectively
imposed upon and undertaken by them herein.
SECTION 6.2 Merger or Consolidation of the Depositor or the Master
Servicer.
The Depositor and the Master Servicer will each keep in full effect its
existence, rights and franchises as a corporation under the laws of the United
States or under the laws of one of the states thereof and will each obtain and
preserve its qualification to do business as a foreign corporation in each
jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of this Agreement, or any of the Mortgage Loans and
to perform its respective duties under this Agreement.
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Any Person into which the Depositor or the Master Servicer may be merged or
consolidated, or any Person resulting from any merger or consolidation to which
the Depositor or the Master Servicer shall be a party, or any person succeeding
to the business of the Depositor or the Master Servicer, shall be the successor
of the Depositor or the Master Servicer, as the case may be, hereunder, without
the execution or filing of any paper or any further act on the part of any of
the parties hereto, anything herein to the contrary notwithstanding; provided,
however, that the successor or surviving Person to the Master Servicer shall be
qualified to sell mortgage loans to, and to service mortgage loans on behalf of,
FNMA or FHLMC.
SECTION 6.3 Limitation on Liability of the Depositor, the Master
Servicer and Others.
None of the Depositor, the Master Servicer or any of the directors,
officers, employees or agents of the Depositor or the Master Servicer shall be
under any liability to the Certificateholders for any action taken or for
refraining from the taking of any action in good faith pursuant to this
Agreement, or for errors in judgment; provided, however, that this provision
shall not protect the Depositor, the Master Servicer or any such Person against
any breach of representations or warranties made by it herein or protect the
Depositor, the Master Servicer or any such Person from any liability which would
otherwise be imposed by reasons of willful misfeasance, bad faith or gross
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties hereunder. The Depositor, the Master Servicer and any
director, officer, employee or agent of the Depositor or the Master Servicer may
rely in good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising hereunder. The Depositor,
the Master Servicer and any director, officer, employee or agent of the
Depositor or the Master Servicer shall be indemnified by the Trust Fund and held
harmless against any loss, liability or expense incurred in connection with any
audit, controversy or judicial proceeding relating to a governmental taxing
authority or any legal action relating to this Agreement or the Certificates,
other than any loss, liability or expense related to any specific Mortgage Loan
or Mortgage Loans (except as any such loss, liability or expense shall be
otherwise reimbursable pursuant to this Agreement) and any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or gross negligence
in the performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder. Neither the Depositor nor the Master Servicer
shall be under any obligation to appear in, prosecute or defend any legal action
that is not incidental to its respective duties hereunder and which in its
opinion may involve it in any expense or liability; provided, however, that
either the Depositor or the Master Servicer may in its discretion undertake any
such action that it may deem necessary or desirable in respect of this Agreement
and the rights and duties of the parties hereto and interests of the Trustee and
the Certificateholders hereunder. In such event, the legal expenses and costs of
such action and any liability resulting therefrom shall be expenses, costs and
liabilities of the Trust Fund, and the Depositor and the Master Servicer shall
be entitled to be reimbursed therefor out of the applicable subaccount of the
Certificate Account.
SECTION 6.4 Limitation on Resignation of Master Servicer.
The Master Servicer shall not resign from the obligations and duties hereby
imposed on it except (a) upon appointment of a successor servicer and receipt by
the Trustee of a letter from each Rating Agency that such a resignation and
appointment will not result in a downgrading of the rating of any of the
Certificates (determined without regard to the MBIA Policy), or (b) upon
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determination that its duties hereunder are no longer permissible under
applicable law. Any such determination under clause (b) permitting the
resignation of the Master Servicer shall be evidenced by an Opinion of Counsel
to such effect delivered to the Trustee and MBIA. No such resignation shall
become effective until the Trustee or a successor master servicer shall have
assumed the Master Servicer's responsibilities, duties, liabilities and
obligations hereunder.
ARTICLE VII
DEFAULT
SECTION 7.1 Events of Default.
"Event of Default," wherever used herein, means any one of the following
events:
(i) any failure by the Master Servicer to deposit in the applicable
subaccount of the Certificate Account or remit to the Trustee any
payment required to be made under the terms of this Agreement,
which failure shall continue unremedied for five days after the
date upon which written notice of such failure shall have been
given to the Master Servicer by the Trustee or the Depositor or
to the Master Servicer and the Trustee by the Holders of
Certificates having not less than 25% of the Voting Rights
evidenced by the Certificates; or
(ii) any failure by the Master Servicer to observe or perform in any
material respect any other of the covenants or agreements on the
part of the Master Servicer contained in this Agreement, which
failure materially affects the rights of Certificateholders,
which failure continues unremedied for a period of 60 days after
the date on which written notice of such failure shall have been
given to the Master Servicer by the Trustee or the Depositor, or
to the Master Servicer and the Trustee by the Holders of
Certificates evidencing not less than 25% of the Voting Rights
evidenced by the Certificates; provided, however, that the 60-day
cure period shall not apply to the initial delivery of the
Mortgage File for Delay Delivery Mortgage Loans nor the failure
to substitute or repurchase in lieu thereof; or
(iii) a decree or order of a court or agency or supervisory authority
having jurisdiction in the premises for the appointment of a
receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or
for the winding-up or liquidation of its affairs, shall have been
entered against the Master Servicer and such decree or order
shall have remained in force undischarged or unstayed for a
period of 60 consecutive days; or
(iv) the Master Servicer shall consent to the appointment of a
receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of
or relating to the Master Servicer or all or substantially all of
the property of the Master Servicer; or
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(v) the Master Servicer shall admit in writing its inability to pay
its debts generally as they become due, file a petition to take
advantage of, or commence a voluntary case under, any applicable
insolvency or reorganization statute, make an assignment for the
benefit of its creditors, or voluntarily suspend payment of its
obligations; or
(vi) the failure of the Master Servicer to remit any Advance required
to be remitted by the Master Servicer pursuant to Section 4.1
which failure continues unremedied at 11:00 a.m., Central time,
on the related Distribution Date.
If an Event of Default described in clauses (i) to (v) of this Section
shall occur, then, and in each and every such case, so long as such Event of
Default shall not have been remedied, the Trustee may, or at the direction of
the Holders of Certificates evidencing not less than 66 2/3% of the Voting
Rights evidenced by the Certificates, the Trustee shall by notice in writing to
the Master Servicer (with a copy to MBIA and each Rating Agency), terminate all
of the rights and obligations of the Master Servicer under this Agreement and in
and to the Mortgage Loans and the proceeds thereof, other than its rights as a
Certificateholder hereunder. If an Event of Default described in clause (vi) of
this Section shall occur, the Trustee shall immediately, by notice in writing to
the Master Servicer (with a copy to MBIA and each Rating Agency), terminate all
of the rights and obligations of the Master Servicer under this Agreement and in
and to the Mortgage Loans and proceeds thereof, other than its rights as a
Certificateholder hereunder. On and after the receipt by the Master Servicer of
such written notice, all authority and power of the Master Servicer hereunder,
whether with respect to the Mortgage Loans or otherwise, shall pass to and be
vested in the Trustee or another successor to the Master Servicer appointed by
the Trustee pursuant to Section 7.2. The Trustee, in its capacity as successor
to the Master Servicer, shall thereupon make any Advance which the Master
Servicer failed to make subject to Section 4.1 hereof. The Trustee is hereby
authorized and empowered to execute and deliver, on behalf of the Master
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement or assignment of the Mortgage Loans and
related documents, or otherwise. Unless expressly provided in such written
notice, no such termination shall affect any obligation of the Master Servicer
to pay amounts owed pursuant to Article VIII. The Master Servicer agrees to
cooperate with the Trustee in effecting the termination of the Master Servicer's
responsibilities and rights hereunder, including, without limitation, the
transfer to the Trustee of all cash amounts which shall at the time be credited
to the Certificate Account, or thereafter be received with respect to the
Mortgage Loans. All expenses incurred in the transferring of the servicing
duties from the Master Servicer to a Successor Servicer shall be paid by the
Master Servicer, and if not paid by the Master Servicer, shall be paid from
amounts on deposit in the Certificate Account.
Notwithstanding any termination of the activities of the Master Servicer
hereunder, the Master Servicer shall be entitled to receive, out of any late
collection of a Scheduled Payment on a Mortgage Loan which was due prior to the
notice terminating such Master Servicer's rights and obligations as Master
Servicer hereunder and received after such notice, that portion thereof to which
such Master Servicer would have been entitled pursuant to Sections 3.8(a)(i)
through (viii),and any other amounts payable to such Master Servicer hereunder
the entitlement to which arose prior to the termination of its activities
hereunder. Any termination of the activities of the
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Master Servicer hereunder will simultaneously result in the termination of the
Master Servicer's duties as a subservicer pursuant to the Servicing Rights
Transfer and Subservicing Agreement.
SECTION 7.2 Trustee to Act; Appointment of Successor.
On and after the time the Master Servicer receives a notice of termination
pursuant to Section 7.1 hereof, the Trustee shall, subject to and to the extent
provided in Section 3.4, be the successor to the Master Servicer under this
Agreement and the transactions set forth or provided for herein and shall be
subject to all the responsibilities, duties and liabilities relating thereto
placed on the Master Servicer by the terms and provisions hereof and applicable
law including the obligation to make Advances pursuant to Section 4.1. As
compensation therefor, the Trustee shall be entitled to all funds relating to
the Mortgage Loans that the Master Servicer would have been entitled to charge
to the Certificate Account or Distribution Account if the Master Servicer had
continued to act hereunder. Notwithstanding the foregoing, if the Trustee has
become the successor to the Master Servicer in accordance with Section 7.1
hereof, the Trustee may, if it shall be unwilling to so act, or shall, if it is
prohibited by applicable law from making Advances pursuant to Section 4.1 hereof
or if it is otherwise unable to so act, appoint, or petition a court of
competent jurisdiction to appoint, any established mortgage loan servicing
institution the appointment of which does not adversely affect the then current
rating of the Certificates by each Rating Agency (determined without regard to
the MBIA Policy) as the successor to the Master Servicer hereunder in the
assumption of all or any part of the responsibilities, duties or liabilities of
the Master Servicer hereunder. Any successor to the Master Servicer shall be an
institution which is a FNMA and FHLMC approved seller/servicer in good standing,
which has a net worth of at least $10,000,000, and which is willing to service
the Mortgage Loans and executes and delivers to the Depositor and the Trustee an
agreement accepting such delegation and assignment, which contains an assumption
by such Person of the rights, powers, duties, responsibilities, obligations and
liabilities of the Master Servicer (other than liabilities of the Master
Servicer under Section 6.3 hereof incurred prior to termination of the Master
Servicer under Section 7.1), with like effect as if originally named as a party
to this Agreement; and provided further that each Rating Agency acknowledges
that its rating of the Certificates in effect immediately prior to such
assignment and delegation will not be qualified or reduced (determined without
regard to the MBIA Policy), as a result of such assignment and delegation.
Pending appointment of a successor to the Master Servicer hereunder, the
Trustee, unless the Trustee is prohibited by law from so acting, shall, subject
to Section 3.4 hereof, act in such capacity as provided above. In connection
with such appointment and assumption, the Trustee may make such arrangements for
the compensation of such successor out of payments on Mortgage Loans as it and
such successor shall agree; provided, however, that no such compensation shall
be in excess of the Master Servicing Fee permitted the Master Servicer
hereunder. The Trustee and such successor shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession.
Neither the Trustee nor any other successor master servicer shall be deemed to
be in default hereunder by reason of any failure to make, or any delay in
making, any distribution hereunder or any portion thereof or any failure to
perform, or any delay in performing, any duties or responsibilities hereunder,
in either case caused by the failure of the Master Servicer to deliver or
provide, or any delay in delivering or providing, any cash, information,
documents or records to it.
Any successor to the Master Servicer as master servicer shall give notice
to the Mortgagors of such change of servicer and shall, during the term of its
service as master servicer
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maintain in force the policy or policies that the Master Servicer is required to
maintain pursuant to Section 3.18.
SECTION 7.3 Notification to Certificateholders.
(a) Upon any termination of or appointment of a successor to the Master
Servicer, the Trustee shall give prompt written notice thereof to
Certificateholders, MBIA and to each Rating Agency.
(b) Within 60 days after the occurrence of any Event of Default, the
Trustee shall transmit by mail to all Certificateholders and MBIA
notice of each such Event of Default hereunder known to the Trustee,
unless such Event of Default shall have been cured or waived.
ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.1 Duties of Trustee.
The Trustee, prior to the occurrence of an Event of Default of which a
Responsible Officer of the Trustee has actual knowledge and after the curing of
all Events of Default that may have occurred, shall undertake to perform such
duties and only such duties as are specifically set forth in this Agreement. In
case an Event of Default of which a Responsible Officer of the Trustee has
actual knowledge has occurred and remains uncured, the Trustee shall exercise
such of the rights and powers vested in it by this Agreement, and use the same
degree of care and skill in their exercise as a prudent person would exercise or
use under the circumstances in the conduct of such person's own affairs.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee that are specifically required to be furnished pursuant to any provision
of this Agreement shall examine them to determine whether they are in the form
required by this Agreement; provided, however, that the Trustee shall not be
responsible for the accuracy or content of any such resolution, certificate,
statement, opinion, report, document, order or other instrument. If any such
instrument is found not to conform in any material respect to the requirements
of this Agreement, the Trustee shall notify the Certificateholders of such
instrument in the event that the Trustee, after so requesting, does not receive
a satisfactorily corrected instrument.
No provision of this Agreement shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own willful misconduct; provided, however, that:
(i) unless an Event of Default of which a Responsible Officer of the
Trustee has actual knowledge shall have occurred and be
continuing, the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Agreement,
the Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this
Agreement, no implied covenants or obligations shall be read into
this
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Agreement against the Trustee and the Trustee may conclusively
rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions
furnished to the Trustee and conforming to the requirements of
this Agreement which it believed in good faith to be genuine and
to have been duly executed by the proper authorities respecting
any matters arising hereunder;
(ii) the Trustee shall not be liable for an error of judgment made in
good faith by a Responsible Officer or Responsible Officers of
the Trustee, unless it shall be finally proven that the Trustee
was negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any action
taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of Holders of Certificates
evidencing not less than 25% of the Voting Rights of Certificates
or MBIA, in the case of the Class I-A-5 Certificates, relating to
the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee under this Agreement;
(iv) the Trustee shall not be required to expend or risk its own funds
or otherwise incur financial liability in the performance of any
of its duties hereunder or the exercise of any of its rights or
powers if there is reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk
or liability is not assured to it, and none of the provisions
contained in this Agreement shall in any event require the
Trustee to perform, or be responsible for the manner of
performance of, any of the obligations of the Master Servicer
under this Agreement except during such time, if any, as the
Trustee shall be the successor to, and be vested with the rights,
duties, powers and privileges of, the Master Servicer; and
(v) without limiting the generality of this Section 8.1, the Trustee
shall have no duty (A) to see to any recording, filing, or
depositing of this Agreement or any agreement referred to herein
or any financing statement or continuation statement evidencing a
security interest, or to see to the maintenance of any such
recording or filing or deposit or to any rerecording, refiling or
redepositing of any thereof, (B) to see to any insurance, (C) to
see to the payment or discharge of any tax, assessment, or other
governmental charge or any lien or encumbrance of any kind owing
with respect to, assessed or levied against, any part of the
Trust Fund other than from funds available in the Distribution
Account (D) to confirm or verify the contents of any reports or
certificates of the Servicer delivered to the Trustee pursuant to
this Agreement believed by the Trustee to be genuine and to have
been signed or presented by the proper party or parties.
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SECTION 8.2 Certain Matters Affecting the Trustee.
Except as otherwise provided in Section 8.1:
(i) the Trustee may request and rely upon and shall be protected in
acting or refraining from acting upon any resolution, Officers'
Certificate, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent,
order, appraisal, bond or other paper or document believed by it
to be genuine and to have been signed or presented by the proper
party or parties and the Trustee shall have no responsibility to
ascertain or confirm the genuineness of any signature of any such
party or parties;
(ii) the Trustee may consult with counsel, financial advisers or
accountants and the advice of any such counsel, financial
advisers or accountants and any Opinion of Counsel shall be full
and complete authorization and protection in respect of any
action taken or suffered or omitted by it hereunder in good faith
and in accordance with such Opinion of Counsel;
(iii) the Trustee shall not be liable for any action taken, suffered
or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred
upon it by this Agreement;
(iv) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent,
order, approval, bond or other paper or document, unless
requested in writing so to do by Holders of Certificates
evidencing not less than 25% of the Voting Rights allocated to
each Class of Certificates; provided, however, that if the
payment within a reasonable time to the Trustee of the costs,
expenses or liabilities likely to be incurred by it in the making
of such investigation is, in the opinion of the Trustee, not
assured to the Trustee by the security afforded to it by the
terms of this Agreement, the Trustee may require indemnity
satisfactory to the Trustee against such cost, expense or
liability as a condition to taking any such action. The
reasonable expense of every such examination shall be paid by the
Master Servicer or, if paid by the Trustee, shall be repaid by
the Master Servicer upon demand from the Servicer's own funds.
(v) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through
agents, accountants or attorneys and the Trustee shall not be
responsible for any misconduct or negligence on the part of such
agent, accountant or attorney appointed by the Trustee with due
care;
(vi) the Trustee shall not be required to risk or expend its own funds
or otherwise incur any financial liability in the performance of
any of its duties or in the exercise of any of its rights or
powers hereunder if it shall
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have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not
assured to it;
(vii) the Trustee shall not be liable for any loss on any investment
of funds pursuant to this Agreement (other than as issuer of the
investment security);
(viii) the Trustee shall not be deemed to have knowledge of an Event
of Default until a Responsible Officer of the Trustee shall have
received written notice thereof and in the absence of such
notice, the Trustee may conclusively assume that there is no
Event of Default;
(ix) the Trustee shall be under no obligation to exercise any of the
trusts, rights or powers vested in it by this Agreement or to
institute, conduct or defend any litigation hereunder or in
relation hereto at the request, order or direction of any of the
Certificateholders, pursuant to the provisions of this Agreement,
unless such Certificateholders shall have offered to the Trustee
reasonable security or indemnity satisfactory to the Trustee
against the costs, expenses and liabilities which may be incurred
therein or thereby;
(x) the right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty,
and the Trustee shall not be answerable for other than its
negligence or willful misconduct in the performance of such act;
and
(xi) the Trustee shall not be required to give any bond or surety in
respect of the execution of the Trust Fund created hereby or the
powers granted hereunder.
SECTION 8.3 Trustee Not Liable for Certificates or Mortgage Loans.
The recitals contained herein and in the Certificates shall be taken as the
statements of the Depositor and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Agreement or of the Certificates or of any Mortgage Loan or
related document other than with respect to the Trustee's execution and
counter-signature of the Certificates. The Trustee shall not be accountable for
the use or application by the Depositor or the Master Servicer of any funds paid
to the Depositor or the Master Servicer in respect of the Mortgage Loans or
deposited in or withdrawn from the Certificate Account by the Depositor or the
Master Servicer.
SECTION 8.4 Trustee May Own Certificates.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Certificates with the same rights as it would have if it were not the
Trustee.
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SECTION 8.5 Trustee's Fees and Expenses.
The Trustee, as compensation for its activities prior to making the
distributions pursuant to Section 4.2 hereunder, shall be entitled to withdraw
from the Distribution Account on each Distribution Date an amount equal to the
Trustee Fee for such Distribution Date. The Trustee and any director, officer,
employee or agent of the Trustee shall be indemnified by the Master Servicer and
held harmless against any loss, liability or expense (including reasonable
attorney's fees) (i) incurred in connection with any claim or legal action
relating to (a) this Agreement, (b) the Certificates or (c) in connection with
the performance of any of the Trustee's duties hereunder, other than any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
negligence in the performance of any of the Trustee's duties hereunder or
incurred by reason of any action of the Trustee taken at the direction of the
Certificateholders and (ii) resulting from any error in any tax or information
return prepared by the Master Servicer. Such indemnity shall survive the
termination of this Agreement or the resignation or removal of the Trustee
hereunder. Without limiting the foregoing, the Master Servicer covenants and
agrees, except as otherwise agreed upon in writing by the Depositor and the
Trustee, and except for any such expense, disbursement or advance as may arise
from the Trustee's negligence, bad faith or willful misconduct, to pay or
reimburse the Trustee, for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any of the provisions of this
Agreement with respect to: (A) the reasonable compensation and the expenses and
disbursements of its counsel not associated with the closing of the issuance of
the Certificates, (B) the reasonable compensation, expenses and disbursements of
any accountant, engineer or appraiser that is not regularly employed by the
Trustee, to the extent that the Trustee must engage such persons to perform acts
or services hereunder and (C) printing and engraving expenses in connection with
preparing any Definitive Certificates. Except as otherwise provided herein, the
Trustee shall not be entitled to payment or reimbursement for any routine
ongoing expenses incurred by the Trustee in the ordinary course of its duties as
Trustee, Registrar, Tax Matters Person or Paying Agent hereunder or for any
other expenses.
SECTION 8.6 Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be a corporation or association
organized and doing business under the laws of a state or the United States of
America, authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000, subject to supervision or
examination by federal or state authority and with a credit rating which would
not cause either of the Rating Agencies to reduce their respective then current
ratings of the Certificates (or having provided such security from time to time
as is sufficient to avoid such reduction). If such corporation or association
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section 8.6 the combined capital and surplus of such
corporation or association shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 8.6, the Trustee shall resign immediately in the
manner and with the effect specified in Section 8.7 hereof. The entity serving
as Trustee may have normal banking and trust relationships with the Depositor
and its affiliates or the Master Servicer and its affiliates; provided, however,
that such entity cannot be an affiliate of the Master Servicer other than the
Trustee in its role as successor to the Master Servicer.
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SECTION 8.7 Resignation and Removal of Trustee.
The Trustee may at any time resign and be discharged from the trusts hereby
created by giving written notice of resignation to the Depositor and the Master
Servicer and each Rating Agency not less than 60 days before the date specified
in such notice when, subject to Section 8.8, such resignation is to take effect,
and acceptance by a successor trustee in accordance with Section 8.8 meeting the
qualifications set forth in Section 8.6. If no successor trustee meeting such
qualifications shall have been so appointed and have accepted appointment within
30 days after the giving of such notice or resignation, the resigning Trustee
may petition any court of competent jurisdiction for the appointment of a
successor trustee.
If at any time the Trustee shall cease to be eligible in accordance with
the provisions of Section 8.6 hereof and shall fail to resign after written
request thereto by the Depositor, or if at any time the Trustee shall become
incapable of acting, or shall be adjudged as bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, or a tax
is imposed with respect to the Trust Fund by any state in which the Trustee or
the Trust Fund is located and the imposition of such tax would be avoided by the
appointment of a different trustee, then the Depositor or the Master Servicer
may remove the Trustee and appoint a successor trustee by written instrument, in
triplicate, one copy of which instrument shall be delivered to the Trustee, one
copy of which shall be delivered to the Master Servicer and one copy to the
successor trustee.
The Holders of Certificates entitled to at least 51% of the Voting Rights
may at any time remove the Trustee and appoint a successor trustee by written
instrument or instruments, in triplicate, signed by such Holders or their
attorneys-in-fact duly authorized, one complete set of which instruments shall
be delivered by the successor Trustee to the Master Servicer, one complete set
to the Trustee so removed and one complete set to the successor so appointed.
Notice of any removal of the Trustee shall be given to each Rating Agency and
MBIA by the Successor Trustee.
Any resignation or removal of the Trustee and appointment of a successor
trustee pursuant to any of the provisions of this Section 8.7 shall become
effective upon acceptance of appointment by the successor trustee as provided in
Section 8.8 hereof.
SECTION 8.8 Successor Trustee.
Any successor trustee appointed as provided in Section 8.7 hereof shall
execute, acknowledge and deliver to the Depositor and to its predecessor trustee
and the Master Servicer an instrument accepting such appointment hereunder and
thereupon the resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as trustee herein. The Depositor, the Master Servicer and the predecessor
trustee shall execute and deliver such instruments and do such other things as
may reasonably be required for more fully and certainly vesting and confirming
in the successor trustee all such rights, powers, duties, and obligations.
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No successor trustee shall accept appointment as provided in this Section
8.8 unless at the time of such acceptance such successor trustee shall be
eligible under the provisions of Section 8.6 hereof and its appointment shall
not adversely affect the then current rating of the Certificates.
Upon acceptance of appointment by a successor trustee as provided in this
Section 8.8, the Depositor shall mail notice of the succession of such trustee
hereunder to all Holders of Certificates. If the Depositor fails to mail such
notice within 10 days after acceptance of appointment by the successor trustee,
the successor trustee shall cause such notice to be mailed at the expense of the
Depositor.
SECTION 8.9 Merger or Consolidation of Trustee.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to the business of the Trustee, shall be the successor of
the Trustee hereunder, provided that such corporation shall be eligible under
the provisions of Section 8.6 hereof without the execution or filing of any
paper or further act on the part of any of the parties hereto, anything herein
to the contrary notwithstanding.
SECTION 8.10 Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of the Trust Fund or property securing any Mortgage Note may at the time be
located, the Master Servicer and the Trustee acting jointly shall have the power
and shall execute and deliver all instruments to appoint one or more Persons
approved by the Trustee to act as co-trustee or co-trustees jointly with the
Trustee, or separate trustee or separate trustees, of all or any part of the
Trust Fund, and to vest in such Person or Persons, in such capacity and for the
benefit of the Certificateholders, such title to the Trust Fund or any part
thereof, whichever is applicable, and, subject to the other provisions of this
Section 8.10, such powers, duties, obligations, rights and trusts as the Master
Servicer and the Trustee may consider necessary or desirable. If the Master
Servicer shall not have joined in such appointment within 15 days after the
receipt by it of a request to do so, or in the case an Event of Default shall
have occurred and be continuing, the Trustee alone shall have the power to make
such appointment. No co-trustee or separate trustee hereunder shall be required
to meet the terms of eligibility as a successor trustee under Section 8.6 and no
notice to Certificateholders of the appointment of any co-trustee or separate
trustee shall be required under Section 8.8.
Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) To the extent necessary to effectuate the purposes of this
Section 8.10, all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or
imposed upon and exercised or performed by the Trustee and such
separate trustee or co-trustee jointly (it being understood that
such separate trustee or co-trustee is not authorized to act
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separately without the Trustee joining in such act), except to
the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed (whether as Trustee
hereunder or as successor to the Master Servicer hereunder), the
Trustee shall be incompetent or unqualified to perform such act
or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the applicable
Trust Fund or any portion thereof in any such jurisdiction) shall
be exercised and performed singly by such separate trustee or
co-trustee, but solely at the direction of the Trustee;
(ii) No trustee hereunder shall be held personally liable by reason of
any act or omission of any other trustee hereunder and such
appointment shall not, and shall not be deemed to, constitute any
such separate trustee or co-trustee as agent of the Trustee;
(iii) The Trustee may at any time accept the resignation of or remove
any separate trustee or co-trustee; and
(iv) The Master Servicer, and not the Trustee, shall be liable for the
payment of reasonable compensation, reimbursement and
indemnification to any such separate trustee or co-trustee.
Any notice, request or other writing given to the Trustee shall be deemed
to have been given to each of the separate trustees and co-trustees, when and as
effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article VIII. Each separate trustee and co-trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Master Servicer and the Depositor.
Any separate trustee or co-trustee may, at any time, constitute the Trustee
its agent or attorney-in-fact, with full power and authority, to the extent not
prohibited by law, to do any lawful act under or in respect of this Agreement on
its behalf and in its name. If any separate trustee or co-trustee shall die,
become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
SECTION 8.11 Tax Matters.
It is intended that the assets with respect to which each REMIC election is
to be made, as set forth in the preliminary statement shall constitute, and that
the conduct of matters relating to such assets shall be such as to qualify such
assets as, a "real estate mortgage investment conduit" as defined in and in
accordance with the REMIC Provisions. In furtherance of such intention, the
Trustee covenants and agrees that it shall act as agent (and the Trustee is
hereby appointed to act as agent) on behalf of any such REMIC and that in such
capacity it shall: (a) prepare and file, or
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cause to be prepared and filed, in a timely manner, a U.S. Real Estate Mortgage
Investment Conduit Income Tax Return (Form 1066 or any successor form adopted by
the Internal Revenue Service) and prepare and file or cause to be prepared and
filed with the Internal Revenue Service and applicable state or local tax
authorities income tax or information returns for each taxable year with respect
to any such REMIC, containing such information and at the times and in the
manner as may be required by the Code or state or local tax laws, regulations,
or rules, and furnish or cause to be furnished to Certificateholders the
schedules, statements or information at such times and in such manner as may be
required thereby; (b) within thirty days of the Closing Date, furnish or cause
to be furnished to the Internal Revenue Service, on Forms 8811 or as otherwise
may be required by the Code, the name, title, address, and telephone number of
the person that the Holders of the Certificates may contact for tax information
relating thereto, together with such additional information as may be required
by such Form, and update such information at the time or times in the manner
required by the Code; (c) make or cause to be made elections that such assets be
treated as a REMIC on the federal tax return for its first taxable year (and, if
necessary, under applicable state law); (d) prepare and forward, or cause to be
prepared and forwarded, to the Certificateholders and to the Internal Revenue
Service and, if necessary, state tax authorities, all information returns and
reports as and when required to be provided to them in accordance with the REMIC
Provisions, including without limitation, the calculation of any original issue
discount using the prepayment assumption; (e) provide information necessary for
the computation of tax imposed on the transfer of a Residual Certificate to a
Person that is not a Permitted Transferee, or an agent (including a broker,
nominee or other middleman) of a Non-Permitted Transferee, or a pass-through
entity in which a Non-Permitted Transferee is the record holder of an interest
(the reasonable cost of computing and furnishing such information may be charged
to the Person liable for such tax); (f) to the extent that they are under its
control conduct matters relating to such assets at all times that any
Certificates are outstanding so as to maintain the status as a REMIC under the
REMIC Provisions; (g) not knowingly or intentionally take any action or omit to
take any action that would cause the termination of any REMIC status; (h) pay,
from the sources specified in the last paragraph of this Section 8.11, the
amount of any federal or state tax, including prohibited transaction taxes as
described below, imposed on any such REMIC prior to its termination when and as
the same shall be due and payable (but such obligation shall not prevent the
Trustee or any other appropriate Person from contesting any such tax in
appropriate proceedings and shall not prevent the Trustee from withholding
payment of such tax, if permitted by law, pending the outcome of such
proceedings); (i) ensure that federal, state or local income tax or information
returns shall be signed by the Trustee or such other person as may be required
to sign such returns by the Code or state or local laws, regulations or rules;
(j) maintain records relating to any such REMIC, including but not limited to
the income, expenses, assets and liabilities thereof and the fair market value
and adjusted basis of the assets determined at such intervals as may be required
by the Code, as may be necessary to prepare the foregoing returns, schedules,
statements or information; and (k) as and when necessary and appropriate,
represent any such REMIC in any administrative or judicial proceedings relating
to an examination or audit by any governmental taxing authority, request an
administrative adjustment as to any taxable year of any such REMIC, enter into
settlement agreements with any governmental taxing agency, extend any statute of
limitations relating to any tax item of any such REMIC, and otherwise act on
behalf of any such REMIC in relation to any tax matter or controversy involving
it.
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In order to enable the Trustee to perform its duties as set forth herein,
the Depositor shall provide, or cause to be provided, to the Trustee within ten
(10) days after the Closing Date all information or data that the Trustee
requests in writing and determines to be relevant for tax purposes to the
valuations and offering prices of the Certificates, including, without
limitation, the price, yield, prepayment assumption and projected cash flows of
the Certificates and the Mortgage Loans. Thereafter, the Depositor shall provide
to the Trustee promptly upon written request therefor, any such additional
information or data that the Trustee may, from time to time, reasonably request
in order to enable the Trustee to perform its duties as set forth herein. The
Depositor hereby indemnifies the Trustee for any losses, liabilities, damages,
claims or expenses of the Trustee arising from any errors or miscalculations of
the Trustee that result from any failure of the Depositor to provide, or to
cause to be provided, accurate information or data to the Trustee on a timely
basis.
In the event that any tax is imposed on "prohibited transactions" of any
REMIC as defined in Section 860F(a)(2) of the Code, on the "net income from
foreclosure property" of any REMIC as defined in Section 860G(c) of the Code, on
any contribution to any REMIC after the Startup Day pursuant to Section 860G(d)
of the Code, or any other tax is imposed, if not paid as otherwise provided for
herein, such tax shall be paid by (i) the Trustee, if any such other tax arises
out of or results from a breach by the Trustee of any of its obligations under
this Agreement which breach was caused by its negligence or willful misconduct,
(ii) the Master Servicer, in the case of any such minimum tax, or if such tax
arises out of or results from a breach by the Master Servicer of any of their
obligations under this Agreement, (iii) the Seller, if any such tax arises out
of or results from the Seller's obligation to repurchase a Mortgage Loan
pursuant to Section 2.2 or 2.3 or (iv) in all other cases, or in the event that
the Trustee, the Master Servicer or the Seller fails to honor its obligations
under the preceding clauses (i), (ii) or (iii), any such tax will be paid with
amounts otherwise to be distributed to the Certificateholders, as provided in
Section 3.8(b).
SECTION 8.12 Periodic Filings.
The Depositor hereby directs the Trustee to prepare, execute (pursuant to a
limited power of attorney given to the Trustee by the Depositor) and file on
behalf of the Depositor all periodic reports required under the Securities
Exchange Act of 1934 in conformity with the terms of the "no-action" relief
granted by the SEC to issuers of asset-backed securities such as the
Certificates and the Trustee hereby agrees to do so. The Master Servicer will
also prepare and execute any certifications to be filed with the Form 10-K as
required under the Xxxxxxxx-Xxxxx Act of 2002. In connection with the
preparation and filing of such periodic reports, the Depositor and the Master
Servicer shall timely provide to the Trustee all material information available
to them which is required to be included in such reports and not known to them
to be in the possession of the Trustee and such other information as the Trustee
reasonably may request from either of them and otherwise reasonably shall
cooperate with the Trustee. The Trustee shall have no liability with respect to
any failure to properly prepare or file such periodic reports resulting from or
relating to the Trustee's inability or failure to obtain any information not
resulting from its own negligence or willful misconduct.
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ARTICLE IX
TERMINATION
SECTION 9.1 Termination upon Liquidation or Purchase of all Mortgage
Loans.
Subject to Section 9.3, the obligations and responsibilities of the
Depositor, the Master Servicer and the Trustee created hereby with respect to
the Trust Fund shall terminate upon the earlier of (a) the purchase by the
Master Servicer of all Mortgage Loans (and REO Properties) remaining in the
Trust Fund at the price equal to the sum of (i) all reimbursement amounts due to
MBIA as the insurer of the Insured Retail Certificates, (ii) 100% of the Stated
Principal Balance of each Mortgage Loan (other than a Mortgage Loan that has
been foreclosed and subject to clause (iii)) plus one month's accrued interest
thereon at the applicable Adjusted Mortgage Rate, (iii) the lesser of (x) the
appraised value of any REO Property as determined by the higher of two
appraisals completed by two independent appraisers selected by the Master
Servicer at the expense of the Master Servicer and (y) the Stated Principal
Balance of each Mortgage Loan related to any REO Property, plus accrued and
unpaid interest thereon at the applicable Adjusted Mortgage Rate, and (iv) any
costs and damages incurred by the Trust in connection with the noncompliance of
such Mortgage Loan with any specifically applicable predatory or abusive lending
law, and (b) the later of (i) the maturity or other liquidation (or any Advance
with respect thereto) of the last Mortgage Loan remaining in the Trust Fund and
the disposition of all REO Property and (ii) the distribution to
Certificateholders of all amounts required to be distributed to them pursuant to
this Agreement. In no event shall the trusts created hereby continue beyond the
earlier of (i) the expiration of 21 years from the death of the survivor of the
descendants of Xxxxxx X. Xxxxxxx, the late Ambassador of the United States to
the Court of St. James's, living on the date hereof, and (ii) the Latest
Possible Maturity Date. The right to purchase all Mortgage Loans and REO
Properties pursuant to clause (a) above shall be conditioned upon the Pool
Principal Balance for both Mortgage Pools, at the time of any such repurchase,
aggregating less than ten percent of the aggregate Cut-off Date Pool Principal
Balance.
SECTION 9.2 Final Distribution on the Certificates.
If on any Determination Date, the Master Servicer determines that there are
no Outstanding Mortgage Loans and no other funds or assets in the Trust Fund
other than the funds in the Certificate Account, the Master Servicer shall
direct the Trustee promptly to send a final distribution notice to each
Certificateholder and to MBIA. If the Master Servicer elects to terminate the
Trust Fund pursuant to clause (a) of Section 9.1, at least 20 days prior to the
date notice is to be mailed to the affected Certificateholders, the Master
Servicer shall notify the Depositor, MBIA and the Trustee of the date the Master
Servicer intends to terminate the Trust Fund and of the applicable repurchase
price of the Mortgage Loans and REO Properties.
Notice of any termination of the Trust Fund, specifying the Distribution
Date on which Certificateholders may surrender their Certificates for payment of
the final distribution and cancellation, shall be given promptly by the Trustee
by letter to Certificateholders and to MBIA mailed not earlier than the 10th day
and no later than the 15th day of the month next preceding the month of such
final distribution. Any such notice shall specify (a) the Distribution Date upon
which final distribution on the Certificates will be made upon presentation and
surrender of Certificates at the office therein designated, (b) the amount of
such final distribution, (c) the location of the office or agency at which such
presentation and surrender must be made, and (d)
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that the Record Date otherwise applicable to such Distribution Date is not
applicable, distributions being made only upon presentation and surrender of the
Certificates at the office therein specified. The Master Servicer will give such
notice to each Rating Agency at the time such notice is given to
Certificateholders.
In the event such notice is given, the Master Servicer shall cause all
funds in the Certificate Account to be remitted to the Trustee for deposit in
the applicable subaccounts of the Distribution Account on the Business Day prior
to the applicable Distribution Date in an amount equal to the final distribution
in respect of the Certificates. Upon such final deposit with respect to the
Trust Fund and the receipt by the Trustee of a Request for Release therefor, the
Trustee shall promptly release to the Master Servicer the Mortgage Files for the
Mortgage Loans.
Upon presentation and surrender of the Certificates, the Trustee shall
cause to be distributed to the Certificateholders of each Class, in the order
set forth in Section 4.2 hereof, on the final Distribution Date, in the case of
the Certificateholders, in proportion to their respective Percentage Interests,
with respect to Certificateholders of the same Class, an amount equal to (i) as
to each Class of Regular Certificates, the Class Certificate Balance thereof
plus accrued interest thereon in the case of an interest bearing Certificate,
and (ii) as to the Residual Certificates, the amount, if any, which remains on
deposit in the Distribution Account (other than the amounts retained to meet
claims) after application pursuant to clause (i) above. On the final
Distribution Date and in accordance with Section 4.2 hereof, the Trustee shall
cause to be distributed to MBIA any reimbursement amounts due to MBIA pursuant
to the Insurance Agreement.
In the event that any affected Certificateholders shall not surrender
Certificates for cancellation within six months after the date specified in the
above mentioned written notice, the Trustee shall give a second written notice
to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
six months after the second notice all the applicable Certificates shall not
have been surrendered for cancellation, the Trustee may take appropriate steps,
or may appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the funds and other assets which remain a part of
the Trust Fund. If within one year after the second notice all Certificates
shall not have been surrendered for cancellation, the Holders of each of the
Class I-A-RU and Class I-A-RL Certificates shall be entitled to all unclaimed
funds and other assets of the Trust Fund, held for distribution to such
Certificateholders, which remain subject hereto.
SECTION 9.3 Additional Termination Requirements.
(a) In the event the Master Servicer exercises its purchase option as
provided in Section 9.1, the Trust Fund and each REMIC created
hereunder shall be terminated in accordance with the following
additional requirements, unless the Trustee and MBIA have been
supplied with an Opinion of Counsel, at the expense of the Master
Servicer, to the effect that the failure to comply with the
requirements of this Section 9.3 will not (i) result in the imposition
of taxes on "prohibited transactions" on any REMIC as defined in
Section 860F of the Code, or (ii) cause any REMIC to fail to qualify
as a REMIC at any time that any Certificates are outstanding:
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(1) Within 90 days prior to the final Distribution Date set
forth in the notice given by the Master Servicer under Section
9.2, the Master Servicer shall prepare and the Trustee, at the
expense of the "tax matters person," shall adopt a plan of
complete liquidation within the meaning of Section 860F(a)(4) of
the Code for each REMIC created hereunder which, as evidenced by
an Opinion of Counsel addressed to the Trustee and MBIA (which
opinion shall not be an expense of the Trustee, MBIA or the Tax
Matters Person), meets the requirements of a qualified
liquidation; and
(2) Within 90 days after the time of adoption of such plans
of complete liquidation, the Trustee shall sell all of the assets
of the Trust Fund to the Master Servicer for cash in accordance
with Section 9.1.
(b) The Trustee as agent for any REMIC established hereunder hereby agrees
to adopt and sign such a plan of complete liquidation upon the written
request of the Master Servicer, and the receipt of the Opinion of
Counsel referred to in Section 9.3(a)(1) and to take such other action
in connection therewith as may be reasonably requested by the Master
Servicer.
(c) By their acceptance of the Certificates, the Holders thereof hereby
authorize the Master Servicer to prepare and the Trustee to adopt and
sign plans of complete liquidation.
ARTICLE X
CERTAIN MATTERS REGARDING MBIA
SECTION 10.1 Matters Concerning The Certificate Insurance Policy.
(a) If, on or prior to the second Business Day before any Distribution
Date, the Trustee determines that the funds available for such
Distribution Date distributable to the Holders of the Insured Retail
Certificates pursuant to Section 4.2(a) will be insufficient to pay
the MBIA Insurance Payment on such Distribution Date, the Trustee
shall determine the amount of any such deficiency and shall give
notice to MBIA and the Fiscal Agent (as defined in the MBIA Policy),
if any, by telephone or telecopy of the amount of such deficiency,
confirmed in writing by notice substantially in the form of Exhibit A
to the MBIA Policy by 12:00 noon, New York City time on such second
Business Day.
(b) In the event the Trustee receives a certified copy of an order of the
appropriate court that any scheduled payment of principal or interest
on an Insured Retail Certificate has been voided in whole or in part
as a preference payment under applicable bankruptcy law, the Trustee
shall (i) promptly notify MBIA and the Fiscal Agent, if any, and (ii)
comply with the provisions of the MBIA Policy to obtain payment by
MBIA of such voided scheduled payment. In addition, the Trustee shall
mail notice to all Holders of the Insured Retail Certificates so
affected that, in the event that any such Holder's scheduled payment
is so recovered, such Holder will be entitled to payment pursuant to
the terms of the
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MBIA Policy a copy of which shall be made available to such Holders by
the Trustee. The Trustee shall furnish to MBIA and the Fiscal Agent,
if any, its records listing the payments on the affected Insured
Retail Certificates, if any, that have been made by the Trustee and
subsequently recovered from the affected Holders, and the dates on
which such payments were made by the Trustee.
(c) At the time of the execution hereof, and for the purposes hereof, the
Trustee shall establish a separate special purpose trust account in
the name of the Trustee for the benefit of Holders of the Insured
Retail Certificates (the "MBIA Policy Payments Account") over which
the Trustee shall have exclusive control and sole right of withdrawal.
The MBIA Policy Payments Account shall be an Eligible Account. The
Trustee shall deposit any amount paid under the MBIA Policy into the
MBIA Policy Payments Account and distribute such amount only for the
purpose of making the payments to Holders of the Insured Retail
Certificates in respect of the Insured Payment for which the related
claim was made under the MBIA Policy. Such amounts shall be allocated
by the Trustee to Holders of the Insured Retail Certificates affected
by such shortfalls in the same manner as principal and interest
payments are to be allocated with respect to the Insured Retail
Certificates pursuant to Section 4.2(a). It shall not be necessary for
such payments to be made by checks or wire transfers separate from the
checks or wire transfers used to make regular payments hereunder with
funds withdrawn from the Distribution Account. However, any payments
made on the Insured Retail Certificates from funds in the MBIA Policy
Payments Account shall be noted as provided in subsection (e) below.
Funds held in the MBIA Policy Payments Account shall not be invested
by the Trustee.
(d) Any funds received from MBIA for deposit into the MBIA Policy Payments
Account pursuant to the MBIA Policy in respect of a Distribution Date
or otherwise as a result of any claim under the MBIA Policy shall be
applied by the Trustee directly to the payment in full of the MBIA
Insurance Payment due on such Distribution Date on the Insured Retail
Certificates. Funds received by the Trustee as a result of any claim
under the MBIA Policy shall be used solely for payment to the Holders
of the Insured Retail Certificates and may not be applied for any
other purpose, including, without limitation, satisfaction of any
costs, expenses or liabilities of the Trustee, the Master Servicer,
the Seller or the Depositor. Any funds remaining in the MBIA Policy
Payments Account on the first Business Day after each Distribution
Date shall be remitted promptly to MBIA pursuant to the written
instruction of MBIA.
(e) The Trustee shall keep complete and accurate records in respect of (i)
all funds remitted to it by MBIA and deposited into the MBIA Policy
Payments Account and (ii) the allocation of such funds to payments of
interest on and principal in respect of the Insured Retail
Certificates. MBIA shall have the right to inspect such records at
reasonable times during normal business hours upon three Business
Days' prior notice to the Trustee.
(f) The Trustee acknowledges, and each Holder of a Insured Retail
Certificate by its acceptance of the Insured Retail Certificate
agrees, that, without the need for any
116
further action on the part of MBIA or the Trustee, to the extent MBIA
makes payments, directly or indirectly, on account of principal of or
interest on any Insured Retail Certificates, MBIA will be fully
subrogated to the rights of the Holders of such Insured Retail
Certificates to receive such principal and interest from the Issuer.
The Holders of the Insured Retail Certificates, by acceptance of the
Insured Retail Certificates, assign their rights as Holders of the
Insured Retail Certificates to the extent of MBIA's interest with
respect to amounts paid under the MBIA Policy. Anything herein to the
contrary notwithstanding, solely for purposes of determining MBIA's
rights, as applicable, as subrogee for payments distributable pursuant
to Section 4.2(a), any payment with respect to distributions to the
Insured Retail Certificates which is made with funds received pursuant
to the terms of the MBIA Policy, shall not be considered payment of
the Insured Retail Certificates from the Issuer and shall not result
in the distribution or the provision for the distribution in reduction
of the Certificate Principal Balance of the Insured Retail
Certificates.
(g) The Trustee shall promptly notify MBIA of either of the following as
to which a Responsible Officer has actual knowledge: (A) the
commencement of any proceeding by or against the Depositor commenced
under the United States Bankruptcy Code or any other applicable
bankruptcy, insolvency, receivership, rehabilitation or similar law
(an "Insolvency Proceeding") and (B) the making of any claim in
connection with any Insolvency Proceeding seeking the avoidance as a
preferential transfer (a "Preference Claim") of any distribution made
with respect to the Insured Retail Certificates as to which a
Responsible Officer has actual knowledge. Each Holder of a Insured
Retail Certificate, by its purchase of the Insured Retail
Certificates, and the Trustee hereby agrees that MBIA may at any time
during the continuation of any proceeding relating to a Preference
Claim direct all matters relating to such Preference Claim, including,
without limitation, (i) the direction of any appeal of any order
relating to any Preference Claim and (ii) the posting of any surety,
supersedeas or performance bond pending any such appeal. In addition
and without limitation of the foregoing, MBIA shall be subrogated to
the rights of the Trustee and each Holder of a Insured Retail
Certificate in the conduct of any Preference Claim, including, without
limitation, all rights of any party to an adversary proceeding action
with respect to any court order issued in connection with any such
Preference Claim.
(h) With respect to this Section10.1(h), (i) the terms "Receipt" and
"Received" shall mean actual delivery to MBIA and the MBIA's Fiscal
Agent, if any, if any, prior to 12:00 noon, New York City time, on a
Business Day; delivery either on a day that is not a Business Day or
after 12:00 noon, New York City time, shall be deemed to be Receipt on
the next succeeding Business Day. If any notice or certificate given
under the MBIA Policy by the Trustee is not in proper form or is not
properly completed, executed or delivered, it shall be deemed not to
have been Received. MBIA or its Fiscal Agent, if any, shall promptly
so advise the Trustee and the Trustee may submit an amended notice,
and (ii) "Business Day" means any day other than (A) a Saturday or
Sunday or (B) a day on which MBIA or banking institutions in the City
of New York, New York, or the city in which
117
the Corporate Trust Office of the Trustee is located, are authorized
or obligated by law or executive order to be closed.
SECTION 10.2 Matters Concerning MBIA.
(a) Upon a Responsible Officer becoming aware of the occurrence of an
Event of Default, the Trustee shall promptly notify MBIA of such Event
of Default.
(b) The Master Servicer shall designate a contact person who shall be
available to MBIA to provide reasonable access to information
regarding the Mortgage Loans.
(c) The Trustee shall surrender the MBIA Policy to MBIA for cancellation
upon the reduction of the Certificate Principal Balance of the Insured
Retail Certificates to zero.
(d) The Trustee shall send to MBIA the reports prepared pursuant to
Section 4.6, as well as any other statements or communications sent to
Holders of the Class I-A-5 Certificates, in each case at the same time
such reports, statements and communications are otherwise sent. All
notices, statements reports, certificates or opinions required by this
Agreement to be sent to the Trustee, the Rating Agencies or the
Holders of the Insured Retail Certificates shall also be sent at such
time to MBIA at MBIA Insurance Corporation, 000 Xxxx Xxxxxx, Xxxxxx,
Xxx Xxxx 00000, Attention: Insured Portfolio Management--Structured
Finance (IPM-SF) (First Horizon 2004-4).
(e) Each Holder of an Insured Retail Certificate agrees that MBIA shall be
treated by the Depositor, the Seller, and the Master Servicer and the
Trustee as if MBIA were the Holder of all of the Insured Retail
Certificates for the purpose (and solely for the purpose) of the
giving of any consent, the making of any direction or the exercise of
any voting or other control rights otherwise given to the Holders of
the Insured Retail Certificates hereunder without any further consent
of any Holder of the Insured Retail Certificates. The Holders of the
Insured Retail Certificates may not exercise such right without the
prior written consent of MBIA. The rights of MBIA to direct certain
actions and consent to certain actions of the Holders of Insured
Retail Certificates hereunder will terminate at such time as the
Certificate Principal Balance of the Insured Retail Certificates has
been reduced to zero and MBIA has been reimbursed for all
reimbursement amounts and any other amounts owed under the MBIA Policy
and the Insurance Agreement and MBIA has no further obligation under
the MBIA Policy.
(f) MBIA shall be an express third party beneficiary of this the Agreement
for the purpose of enforcing the provisions hereof to the extent of
MBIA's rights explicitly specified herein as if a party hereto.
(g) All references herein to the ratings assigned to the Certificates and
to the interests of any Certificateholders shall be without regard to
the MBIA Policy.
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(h) The Master Servicer and the Trustee shall cooperate with any
reasonable request by MBIA to preserve or enforce the MBIA's rights.
(i) Any amendment to this Agreement shall require the prior written
consent of MBIA if such amendment could materially adversely affect
the interest of MBIA or of the Holders of the Insured Retail
Certificates.
SECTION 10.3 Suspension and Termination of MBIA's Rights.
During the continuation of an MBIA Default, rights granted or reserved to
MBIA hereunder shall vest instead in the Holders of the Insured Retail
Certificates; provided that MBIA shall be entitled to premiums due and any
reimbursement amounts owed to MBIA under the MBIA Policy, except that MBIA shall
retain those rights under Section 11.1 with respect to any amendment. MBIA shall
be reinstated with such rights when the MBIA Default has been corrected.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1 Amendment.
This Agreement may be amended from time to time by the Depositor, the
Master Servicer and the Trustee without the consent of any of the
Certificateholders or MBIA (i) to cure any ambiguity or mistake, (ii) to correct
any defective provision herein or to supplement any provision herein which may
be inconsistent with any other provision herein, (iii) to add to the duties of
the Depositor, the Seller or the Master Servicer, (iv) to add any other
provisions with respect to matters or questions arising hereunder or (v) to
modify, alter, amend, add to or rescind any of the terms or provisions contained
in this Agreement; provided that any action pursuant to clauses (iv) or (v)
above shall not, as evidenced by an Opinion of Counsel delivered to the Trustee
and MBIA (which Opinion of Counsel shall not be an expense of the Trustee, the
Trust Fund or MBIA), adversely affect in any material respect the interests of
any Certificateholder; provided, however, that the amendment shall not be deemed
to adversely affect in any material respect the interests of the
Certificateholders if the Person requesting the amendment obtains a letter from
each Rating Agency stating that the amendment would not result in the
downgrading or withdrawal of the respective ratings then assigned to the
Certificates; it being understood and agreed that any such letter in and of
itself will not represent a determination as to the materiality of any such
amendment and will represent a determination only as to the credit issues
affecting any such rating. The Trustee, the Depositor and the Master Servicer
also may at any time and from time to time amend this Agreement without the
consent of the Certificateholders to modify, eliminate or add to any of its
provisions to such extent as shall be necessary or helpful to (i) maintain the
qualification of any REMIC established hereunder as a REMIC under the Code, (ii)
avoid or minimize the risk of the imposition of any tax on any REMIC established
hereunder pursuant to the Code that would be a claim at any time prior to the
final redemption of the Certificates or (iii) comply with any other requirements
of the Code, provided that the Trustee and MBIA have been provided an Opinion of
Counsel, which opinion shall be an expense of the party requesting such opinion
but in any case shall not be an expense of the Trustee or the Trust Fund, to the
effect that such action is necessary or helpful to, as applicable, (i) maintain
such
119
qualification, (ii) avoid or minimize the risk of the imposition of such a tax
or (iii) comply with any such requirements of the Code.
This Agreement may also be amended from time to time by the Depositor, the
Master Servicer and the Trustee with the consent of the Holders of a Majority in
Interest of each Class of Certificates affected thereby (and MBIA, if such
amendment could materially adversely affect the interest of MBIA or of the
Holders of the Insured Retail Certificates) for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Holders of
Certificates; provided, however, that no such amendment shall (i) reduce in any
manner the amount of, or delay the timing of, payments required to be
distributed on any Certificate without the consent of the Holder of such
Certificate, (ii) adversely affect in any material respect the interests of the
Holders of any Class of Certificates in a manner other than as described in (i),
without the consent of the Holders of Certificates of such Class evidencing, as
to such Class, Percentage Interests aggregating 66%, or (iii) reduce the
aforesaid percentages of Certificates the Holders of which are required to
consent to any such amendment, without the consent of the Holders of all such
Certificates then outstanding.
Notwithstanding any contrary provision of this Agreement, the Trustee shall
not consent to any amendment to this Agreement unless it shall have first
received an Opinion of Counsel, which opinion shall not be an expense of the
Trustee or the Trust Fund, to the effect that such amendment will not cause the
imposition of any tax on any REMIC established hereunder or the
Certificateholders or cause any REMIC established hereunder to fail to qualify
as a REMIC at any time that any Certificates are outstanding.
Promptly after the execution of any amendment to this Agreement requiring
the consent of Certificateholders, the Trustee shall furnish written
notification of the substance or a copy of such amendment to each
Certificateholder, MBIA and each Rating Agency.
It shall not be necessary for the consent of Certificateholders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent shall approve the substance thereof. The manner of
obtaining such consents and of evidencing the authorization of the execution
thereof by Certificateholders shall be subject to such reasonable regulations as
the Trustee may prescribe.
Nothing in this Agreement shall require the Trustee to enter into an
amendment without receiving an Opinion of Counsel (which Opinion shall not be an
expense of the Trustee or the Trust Fund), satisfactory to the Trustee that (i)
such amendment is permitted and is not prohibited by this Agreement and that all
requirements for amending this Agreement have been complied with; and (ii)
either (A) the amendment does not adversely affect in any material respect the
interests of any Certificateholder or (B) the conclusion set forth in the
immediately preceding clause (A) is not required to be reached pursuant to this
Section 11.1.
SECTION 11.2 Recordation of Agreement; Counterparts.
This Agreement is subject to recordation in all appropriate public offices
for real property records in all the counties or other comparable jurisdictions
in which any or all of the properties subject to the Mortgages are situated, and
in any other appropriate public recording office or
120
elsewhere, such recordation to be effected by the Master Servicer at its
expense, but only upon direction a majority of the Certificateholders to the
effect that such recordation materially and beneficially affects the interests
of the Certificateholders.
For the purpose of facilitating the recordation of this Agreement as herein
provided and for other purposes, this Agreement may be executed (by facsimile or
otherwise) simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and such counterparts shall
constitute but one and the same instrument.
SECTION 11.3 Governing Law.
THIS AGREEMENT (OTHER THAN SECTION 2.1 HEREOF) SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HERETO AND THE
CERTIFICATEHOLDERS SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION 2.1
OF THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
SUBSTANTIVE LAWS OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND TO
BE PERFORMED IN THE STATE OF DELAWARE AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HERETO AND THE CERTIFICATEHOLDERS UNDER SUCH SECTION SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.4 Intention of Parties.
It is the express intent of the parties hereto that the conveyance of the
Trust Fund by the Depositor to the Trustee be, and be construed as, absolute
sales thereof to the Trustee. It is, further, not the intention of the parties
that such conveyances be deemed a pledge thereof by the Depositor to the
Trustee. However, in the event that, notwithstanding the intent of the parties,
such assets are held to be the property of the Depositor, or if for any other
reason this Agreement or any Subsequent Transfer Agreement is held or deemed to
create a security interest in such assets, then (i) this Agreement or any
Subsequent Transfer Agreement shall be deemed to be a security agreement within
the meaning of the Uniform Commercial Code of the State of New York and (ii) the
conveyance provided for in this Agreement or any Subsequent Transfer Agreement
shall be deemed to be an assignment and a grant by the Depositor to the Trustee,
for the benefit of the Certificateholders, of a security interest in all of the
assets that constitute the Trust Fund, whether now owned or hereafter acquired.
The Depositor, for the benefit of the Certificateholders, shall, to the
extent consistent with this Agreement, take such actions as may be necessary to
ensure that, if this Agreement were deemed to create a security interest in the
Trust Fund, such security interest would be deemed to be a perfected security
interest of first priority under applicable law and will be maintained as such
throughout the term of the Agreement. The Depositor shall arrange for filing any
Uniform Commercial Code continuation statements in connection with any security
interest granted or assigned to the Trustee for the benefit of the
Certificateholders.
121
SECTION 11.5 Notices.
(a) The Trustee shall use its best efforts to promptly provide notice to
each Rating Agency and MBIA with respect to each of the following of
which it has actual knowledge:
(1) Any material change or amendment to this Agreement;
(2) The occurrence of any Event of Default that has not been
cured;
(3) The resignation or termination of the Master Servicer or the
Trustee and the appointment of any successor;
(4) The repurchase or substitution of Mortgage Loans pursuant to
Section 2.3; and
(5) The final payment to Certificateholders.
(6) Any rating action involving the long-term credit rating of
the Master Servicer, which notice shall be made by
first-class mail within two Business Days after the Trustee
gains actual knowledge thereof.
In addition, the Trustee shall promptly furnish to each Rating Agency and
MBIA copies of the following:
(7) Each report to Certificateholders described in Section 4.6;
(8) Each annual statement as to compliance described in Section
3.16;
(9) Each annual independent public accountants' servicing report
described in Section 3.17; and
(10) Any notice of a purchase of a Mortgage Loan pursuant to
Section 2.2, 2.3 or 3.11.
(b) All directions, demands, authorizations, consents, waivers,
communications and notices hereunder shall be in writing and shall be
deemed to have been duly given when delivered to by first class mail,
facsimile or courier (a) in the case of the Depositor, First Horizon
Asset Securities Inc., 0000 Xxxxxxx Xxx, Xxxxxx, Xxxxx 00000,
Attention: Xxxx Xxxxxx; (b) in the case of the Master Servicer, First
Horizon Home Loan Corporation, 0000 Xxxxxxx Xxx, Xxxxxx, Xxxxx 00000,
Attention: Xxxxx X. Xxxx or such other address as may be hereafter
furnished to the Depositor and the Trustee by the Master Servicer in
writing; (c) in the case of the Trustee, The Bank of New York, 000
Xxxxxxx Xxxxxx, 0X, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxx
Xxxxxxx, or such other address as the Trustee may hereafter furnish to
the Depositor or Master Servicer; (d) in the case of MBIA, MBIA
Insurance Corporation, 000 Xxxx Xxxxxx, Xxxxxx, Xxx Xxxx 00000,
Attention: Insured Portfolio Management - Structured Finance (IPM-SF)
(First
122
Horizon 2004-4) or such other address as may hereafter be furnished to
the Depositor, the Master Servicer and the Trustee by MBIA in writing,
and (e) in the case of the Rating Agencies, the address specified
therefor in the definition corresponding to the name of such Rating
Agency. Notices to Certificateholders shall be deemed given when
mailed, first class postage prepaid, to their respective addresses
appearing in the Certificate Register.
SECTION 11.6 Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the Holders thereof.
SECTION 11.7 Assignment.
Notwithstanding anything to the contrary contained herein, except as
provided in Section 6.2, this Agreement may not be assigned by the Master
Servicer without the prior written consent of the Trustee and Depositor.
SECTION 11.8 Limitation on Rights of Certificateholders.
The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the trust created hereby, nor entitle such
Certificateholder's legal representative or heirs to claim an accounting or to
take any action or commence any proceeding in any court for a petition or
winding up of the trust created hereby, or otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.
No Certificateholder shall have any right to vote (except as provided
herein) or in any manner otherwise control the operation and management of the
Trust Fund, or the obligations of the parties hereto, nor shall anything herein
set forth or contained in the terms of the Certificates be construed so as to
constitute the Certificateholders from time to time as partners or members of an
association; nor shall any Certificateholder be under any liability to any third
party by reason of any action taken by the parties to this Agreement pursuant to
any provision hereof.
No Certificateholder shall have any right by virtue or by availing itself
of any provisions of this Agreement to institute any suit, action or proceeding
in equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a written notice of an Event
of Default and of the continuance thereof, as herein provided, and unless the
Holders of Certificates evidencing not less than 25% of the Voting Rights
evidenced by the Certificates shall also have made written request to the
Trustee to institute such action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to the Trustee such reasonable indemnity as it
may require against the costs, expenses, and liabilities to be incurred therein
or thereby, and the Trustee, for 60 days after its receipt of such notice,
request and offer of indemnity shall have neglected or refused to institute any
such action, suit or proceeding; it being understood and intended, and being
expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Holders
123
of Certificates shall have any right in any manner whatever by virtue or by
availing itself or themselves of any provisions of this Agreement to affect,
disturb or prejudice the rights of the Holders of any other of the Certificates,
or to obtain or seek to obtain priority over or preference to any other such
Holder or to enforce any right under this Agreement, except in the manner herein
provided and for the common benefit of all Certificateholders. For the
protection and enforcement of the provisions of this Section 11.8, each and
every Certificateholder and the Trustee shall be entitled to such relief as can
be given either at law or in equity.
SECTION 11.9 Inspection and Audit Rights.
The Master Servicer agrees that, on reasonable prior notice, it will permit
and will cause each Subservicer to permit any representative of the Depositor or
the Trustee during the Master Servicer's normal business hours, to examine all
the books of account, records, reports and other papers of the Master Servicer
relating to the Mortgage Loans, to make copies and extracts therefrom, to cause
such books to be audited by independent certified public accountants selected by
the Depositor or the Trustee and to discuss its affairs, finances and accounts
relating to the Mortgage Loans with its officers, employees and independent
public accountants (and by this provision the Master Servicer hereby authorizes
said accountants to discuss with such representative such affairs, finances and
accounts), all at such reasonable times and as often as may be reasonably
requested. Any out-of-pocket expense incident to the exercise by the Depositor
or the Trustee of any right under this Section 11.9 shall be borne by the party
requesting such inspection; all other such expenses shall be borne by the Master
Servicer or the related Subservicer.
SECTION 11.10 Certificates Nonassessable and Fully Paid.
It is the intention of the Depositor that Certificateholders shall not be
personally liable for obligations of the Trust Fund, that the interests in the
Trust Fund represented by the Certificates shall be nonassessable for any reason
whatsoever, and that the Certificates, upon due authentication thereof by the
Trustee pursuant to this Agreement, are and shall be deemed fully paid.
SECTION 11.11 Limitations on Actions; No Proceedings.
(a) Other than pursuant to this Agreement, or in connection with or
incidental to the provisions or purposes of this Agreement, the trust
created hereunder shall not (i) issue debt or otherwise borrow money,
(ii) merge or consolidate with any other entity reorganize, liquidate
or transfer all or substantially all of its assets to any other
entity, or (iii) otherwise engage in any activity or exercise any
power not provided for in this Agreement.
(b) Notwithstanding any prior termination of this Agreement, the Trustee,
the Master Servicer and the Depositor shall not, prior to the date
which is one year and one day after the termination of this Agreement,
acquiesce, petition or otherwise invoke or cause any Person to invoke
the process of any court or government authority for the purpose of
commencing or sustaining a case against the Depositor or the Trust
Fund under any federal or state bankruptcy, insolvency or other
similar law or appointing a receiver, liquidator, assignee, trustee,
custodian,
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sequestrator or other similar official of the Depositor or the Trust
Fund or any substantial part of their respective property, or ordering
the winding up or liquidation of the affairs of the Depositor or the
Trust Fund.
SECTION 11.12 Acknowledgment of Seller.
Seller hereby acknowledges the provisions of this Agreement, including the
obligations under Sections 2.1(a), 2.2, 2.3(b) and 8.11 of this Agreement and
further acknowledges the Depositor's assignment of its rights and remedies for
the breach of the representations and warranties made by the Seller under the
MLPA.
* * * * * *
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IN WITNESS WHEREOF, the Depositor, the Trustee and the Master Servicer
have caused their names to be signed hereto by their respective officers
thereunto duly authorized as of the day and year first above written.
FIRST HORIZON ASSET SECURITIES INC.,
as Depositor
By:
--------------------------------------------
Xxxx Xxxxxx
Senior Vice President - Asset Securitization
THE BANK OF NEW YORK,
not in its individual capacity, but solely as
Trustee
By:
--------------------------------------------
Xxxxx Xxxxxxx
Vice President
FIRST HORIZON HOME LOAN CORPORATION,
in its capacity as Master Servicer
By:
--------------------------------------------
Xxxx Xxxxxx
Senior Vice President - Asset Securitization
The foregoing agreement is hereby
acknowledged and accepted as of the
date first above written:
FIRST HORIZON HOME LOAN CORPORATION,
in its capacity as Seller
By:
--------------------------------------------
Xxxx Xxxxxx
Senior Vice President - Asset Securitization
SCHEDULE I
First Horizon Asset Securities Inc.
Mortgage Pass-Through Certificates Series 2004-4
Mortgage Loan Schedule
[Available Upon Request from Trustee]
I-1
SCHEDULE II
First Horizon Asset Securities Inc.
Mortgage Pass-Through Certificates Series 2004-4
Representations and Warranties of the Master Servicer
First Horizon Home Loan Corporation ("First Horizon") hereby makes the
representations and warranties set forth in this Schedule II to the Depositor
and the Trustee, as of the Closing Date, or if so specified herein, as of the
Cut-off Date. Capitalized terms used but not otherwise defined in this Schedule
II shall have the meanings ascribed thereto in the Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") relating to the
above-referenced Series, among First Horizon, as master servicer, First Horizon
Asset Securities Inc., as depositor, and The Bank of New York, as trustee.
(1) First Horizon is duly organized as a Kansas corporation and is
validly existing and in good standing under the laws of the State of Kansas
and is duly authorized and qualified to transact any and all business
contemplated by the Pooling and Servicing Agreement to be conducted by
First Horizon in any state in which a Mortgaged Property is located or is
otherwise not required under applicable law to effect such qualification
and, in any event, is in compliance with the doing business laws of any
such state, to the extent necessary to ensure its ability to enforce each
Mortgage Loan, to service the Mortgage Loans in accordance with the terms
of the Pooling and Servicing Agreement and to perform any of its other
obligations under the Pooling and Servicing Agreement in accordance with
the terms thereof.
(2) First Horizon has the full corporate power and authority to
service each Mortgage Loan, and to execute, deliver and perform, and to
enter into and consummate the transactions contemplated by the Pooling and
Servicing Agreement and has duly authorized by all necessary corporate
action on the part of First Horizon the execution, delivery and performance
of the Pooling and Servicing Agreement; and the Pooling and Servicing
Agreement, assuming the due authorization, execution and delivery thereof
by the other parties thereto, constitutes a legal, valid and binding
obligation of First Horizon, enforceable against First Horizon in
accordance with its terms, except that (a) the enforceability thereof may
be limited by bankruptcy, insolvency, moratorium, receivership and other
similar laws relating to creditors' rights generally and (b) the remedy of
specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(3) The execution and delivery of the Pooling and Servicing Agreement
by First Horizon, the servicing of the Mortgage Loans by First Horizon
under the Pooling and Servicing Agreement, the consummation of any other of
the transactions contemplated by the Pooling and Servicing Agreement, and
the fulfillment of or compliance with the terms thereof are in the ordinary
course of business of First Horizon and will not (A) result in a material
breach of any term or provision of the charter or by-laws of First Horizon
or (B) materially conflict with, result in a material breach, violation or
acceleration of, or result in a material default under, the terms of any
other material
II-1
agreement or instrument to which First Horizon is a party or by which it
may be bound, or (C) constitute a material violation of any statute, order
or regulation applicable to First Horizon of any court, regulatory body,
administrative agency or governmental body having jurisdiction over First
Horizon; and First Horizon is not in breach or violation of any material
indenture or other material agreement or instrument, or in violation of any
statute, order or regulation of any court, regulatory body, administrative
agency or governmental body having jurisdiction over it which breach or
violation may materially impair First Horizon's ability to perform or meet
any of its obligations under the Pooling and Servicing Agreement.
(4) No litigation is pending or, to the best of First Horizon's
knowledge, threatened against First Horizon that would prohibit the
execution or delivery of, or performance under, the Pooling and Servicing
Agreement by First Horizon.
II-2
SCHEDULE III
First Horizon Asset Securities Inc.
Mortgage Pass-Through Certificates Series 2004-4
Form of Monthly Master Servicer Report
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