-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GhuwhWZ+KBnqUEzfbY3pcTFO+038tcQL5z6mp8nVxpxqdbt1O6xUeQSEEiMWk79Y CXMEKQjQnQi3mgXy9iAcIw== 0000950116-99-001907.txt : 19991022 0000950116-99-001907.hdr.sgml : 19991022 ACCESSION NUMBER: 0000950116-99-001907 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19991020 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHASE FUNDING INC CENTRAL INDEX KEY: 0000825309 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 133436103 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-89425 FILM NUMBER: 99731430 BUSINESS ADDRESS: STREET 1: 300 TICE BOULEVARD CITY: WOODCLIFF LAKE STATE: NJ ZIP: 07675 BUSINESS PHONE: 2017829084 MAIL ADDRESS: STREET 1: 343 THORNALL ST CITY: EDISON STATE: NJ ZIP: 08837 FORMER COMPANY: FORMER CONFORMED NAME: CHEMICAL MORTGAGE SECURITIES INC DATE OF NAME CHANGE: 19940414 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHASE MANHATTAN ACCEPTANCE CORP /DE/ CENTRAL INDEX KEY: 0000832329 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 133456395 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-89425-01 FILM NUMBER: 99731431 BUSINESS ADDRESS: STREET 1: 343 THORNWALL STREET CITY: EDISON STATE: NJ ZIP: 08837 BUSINESS PHONE: 2123106161 MAIL ADDRESS: STREET 1: 270 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10017 FORMER COMPANY: FORMER CONFORMED NAME: CHEMICAL ACCEPTANCE CORP DATE OF NAME CHANGE: 19930915 S-3 1 As filed with the Securities and Exchange Commission on October 20, 1999 Registration No. ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 -------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------- CHASE FUNDING, INC. (Seller) CHASE MANHATTAN ACCEPTANCE CORPORATION (Seller) (Exact names of the registrants as specified in their respective charters) --------------
New York 343 Thornall Street 13-3840732 (State or other jurisdiction of Edison, New Jersey 08837 (I.R.S. Employer incorporation or organization) (732) 205-0600 Identification Number) (Address, including zip code, and telephone number, including area code, of registrant Chase Funding, Inc.'s principal executive offices) Delaware 343 Thornall Street 13-3456395 (State or other jurisdiction of Edison, New Jersey 08837 (I.R.S. Employer incorporation or organization) (732) 205-0600 Identification Number) (Address, including zip code, and telephone number, including area code, of registrant Chase Manhattan Acceptance Corporation's principal executive offices) -------------- PAUL E. MULLINGS c/o Chase Manhattan Mortgage Corporation 343 Thornall Street Edison, New Jersey 08837 (732) 205-0600 (Name, address, including zip code, and telephone number, including area code, of agent for service) -------------- Copy to: STEVEN J. MOLITOR, ESQ. Morgan, Lewis & Bockius LLP 101 Park Avenue New York, New York 10178 -------------- Approximate date of commencement of proposed sale to the public: From time to time after this Registration Statement becomes effective. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box.|_| If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection withdividend or interest reinvestment plans, check the following box. |X| If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_| __________ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_| __________ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. |_| CALCULATION OF REGISTRATION FEE
==================================================================================================================================== Proposed Maximum Proposed Title of Each Class of Securities to be Amount to be Offering Price Per Maximum Aggregate Amount of Registered Registered Certificate* Offering Price Registration Fee - ------------------------------------------------------------------------------------------------------------------------------------ Mortgage Pass-Through Certificates... $1,000,0000 100% $1,000,000 $278.00 ==================================================================================================================================== * Estimated for the purpose of calculating the registration fee.
The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This Prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any state of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. SUBJECT TO COMPLETION DATED OCTOBER 20, 1999 Prospectus Supplement (to Prospectus dated [DATE]) [LOGO] $_______(Approximate) Chase Funding Mortgage Loan Asset-Backed Certificates, Series [________] [Chase Manhattan Funding Logo] Chase Funding Trust, Series [_______] Issuer Chase Funding, Inc. Depositor [Advanta Mortgage Corp. USA] Subservicer Chase Manhattan Mortgage Corporation Seller and Master Servicer - -------------------------------------------------------------------------------- Investing in these certificates involves risks. You should not purchase these certificates unless you fully understand their risks and structure. See "Risk Factors" beginning on page S-__ of this prospectus supplement and page __ of the attached prospectus These certificates will be beneficial interests in a trust fund, and will be backed only by the assets of the trust. Neither these certificates nor the assets of the trust will be obligations of Chase Funding, Inc., [Advanta Mortgage Corp. USA], Chase Manhattan Mortgage Corporation or any of their affiliates. These certificates will not be insured or guaranteed by any governmental agency. - -------------------------------------------------------------------------------- Chase Funding Trust, Series [______] will issue [thirteen] classes of certificates, [twelve] of which are offered by this prospectus supplement and the attached prospectus. The table on page S-3 identifies the various classes and specifies certain characteristics of each class, including each class's initial certificate principal balance, interest rate and rating. The trust fund will consist primarily of sub-prime mortgage loans secured by first liens on real properties which were originated or acquired by Chase Manhattan Mortgage Corporation and cash on deposit in an account used to purchase additional sub-prime mortgage loans originated or acquired by Chase Manhattan Mortgage Corporation. Underwriting Proceeds to Price to Public(1) Discount(1) Depositor(2) - ------------------ ------------ ------------ $ $ $ ------------ ---------- ---------- % % ----- ----- - ---------- (1) The price to public and underwriting discount shown are for all classes of offered certificates in the aggregate. This information is shown for each individual class on page S-3. See "Underwriting." (2) Less expenses (estimated at $_______) and plus accrued interest. See "Underwriting." Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus supplement and the attached prospectus. Any representation to the contrary is a criminal offense. [UNDERWRITER] The date of this Prospectus Supplement is [DATE] Where to Find Information in this Prospectus Supplement and the Attached Prospectus Information about the offered certificates is contained in (a) the attached prospectus, which provides general information, some of which may not apply to the certificates; and (b) this prospectus supplement, which describes the specific terms of the certificates. This prospectus supplement and the attached prospectus include cross references to sections in these materials where you can find further related discussions. The Tables of Contents in this prospectus supplement and the attached prospectus identify the pages where those sections are located. In addition, an index of defined terms can be found beginning on page S-__ of this prospectus supplement. In this prospectus supplement, the terms "Depositor," "we," "us" and "our" refer to Chase Funding, Inc. - -------------------------------------------------------------------------------- To understand the structure of these certificates, you must read carefully both the attached prospectus and this prospectus supplement in their entirety. - -------------------------------------------------------------------------------- TABLE OF CONTENTS
THE SERIES [______] CERTIFICATES..................S-_ Overcollateralization Provisions..............................S-__ SUMMARY INFORMATION...............................S-_ Prepayment Considerations and Risks...........................S-__ Principal Parties..............................S-_ Risk of Higher Delinquencies Associated with Cut-off Date...................................S-_ Underwriting Guidelines.................................S-__ Closing Date...................................S-_ Effect of Mortgage Loan Yield on the Group II Distribution Date..............................S-_ Certificates Pass-Through Rate; Basis Risk..............S-__ The Trust Fund.................................S-_ Pass-Through Rates With Respect to the Class IA-1, The Series [______] Certificates...............S-_ Class IA-4, Class IA-5, Class IM-1, Class IM-2 Interest Distributions.........................S-_ and Class IB Certificates...............................S-__ Principal Distributions........................S-_ Subordination--Limited Protection Afforded to Denominations..................................S-_ Offered Certificates....................................S-__ Book-Entry Registration........................S-_ Subordination--Allocation of Losses to the Class M Mandatory Prepayments..........................S-_ and Class B Certificates................................S-__ Credit Enhancement.............................S-_ Cash Flow Considerations and Risks............................S-__ Optional Termination...........................S-_ Certificate Rating on the Certificates........................S-__ Legal Investment...............................S-_ Bankruptcy and Insolvency Risks...............................S-__ Federal Income Tax Consequences................S-_ Certificates May Not Be Appropriate For Individual ERISA Considerations...........................S-_ Investors...............................................S-__ Ratings........................................S-_ Geographic Concentration......................................S-__ Pre-Funding Account............................S-_ Risk of Higher Default Rates for Mortgage Loans The Mortgage Loans.............................S-_ with Balloon Payments...................................S-__ RISK FACTORS.....................................S-__ Delinquent Mortgage Loans.....................................S-__ Forward-Looking Statements....................S-__ The Subsequent Mortgage Loans.................................S-__
S-2
Mandatory Prepayment.......................................S-__ Overcollateralization and Crosscollateralization Optional Termination Could Reduce Benefits Provisions............................................S-__ of Crosscollateralization...............................S-__ Calculation of One-Month LIBOR...........................S-__ Limited Liquidity; Lack of SMMEA Eligibility...............S-__ Mandatory Prepayments on the Certificates................S-__ Risks Associated with Year 2000 Compliance.................S-__ Capitalized Interest Account.............................S-__ THE MORTGAGE POOL.............................................S-__ Reports to Certificateholders............................S-__ General.......................................................S-__ Amendment................................................S-__ Mortgage Loans.............................................S-__ Optional Termination.....................................S-__ Assignment of the Mortgage Loans...........................S-__ Optional Purchase of Defaulted Loans.....................S-__ Representations and Warranties.............................S-__ Events of Default........................................S-__ Conveyance of Subsequent Mortgage Loans and Rights upon Event of Default.............................S-__ the Pre-Funding Account.................................S-__ The Trustee..............................................S-__ CHASE MANHATTAN MORTGAGE CORPORATION..........................S-__ YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS...............S-__ Underwriting Standards.....................................S-__ General..................................................S-__ SERVICING OF THE MORTGAGE LOANS...............................S-__ Prepayments and Yields for Offered Certificates..........S-__ General....................................................S-__ Additional Information..................................S-___ The Subservicer............................................S-__ FEDERAL INCOME TAX CONSEQUENCES............................S-___ Servicing Compensation and Payment of Original Issue Discount.................................S-___ Expenses................................................S-__ Special Tax Attributes of the Offered Certificates......S-___ Adjustment to Servicing Fee in Connection Prohibited Transactions Tax and Other Taxes.............S-___ with Certain Prepaid Mortgage Loans.....................S-__ STATE TAXES................................................S-___ Advances...................................................S-__ ERISA CONSIDERATIONS.......................................S-___ Master Servicer............................................S-__ LEGAL INVESTMENT MATTERS...................................S-___ DESCRIPTION OF THE CERTIFICATES...............................S-__ USE OF PROCEEDS............................................S-___ General....................................................S-__ METHOD OF DISTRIBUTION.....................................S-___ Book-Entry Certificates....................................S-__ LEGAL MATTERS..............................................S-___ Payments on Mortgage Loans; Collection Account; RATINGS....................................................S-___ Certificate Account; Distribution Account..............S-__ INDEX OF DEFINED TERMS.....................................A-___ Distributions..............................................S-__ ANNEX I......................................................A-_
S-3 THE SERIES [_______] CERTIFICATES
Class IA-1 Class IA-2 Class IA-3 Class IA-4 Class IA-5 Class IM-1 Class IM-2 Adjustable Fixed Fixed Fixed Fixed Fixed Fixed ---------- ---------- ---------- ---------- ---------- ---------- ---------- Loan Group: Initial Certificate Principal Balance(1): $_________ $__________ $__________ $_________ $_________ $__________ $________ Pass Through Rate: (4) ____% ______% ______(2) _______% _______% ______% ERISA Eligible: Yes Yes Yes Yes Yes No No Prepayment Assumption(5): __% HEP __% HEP __% HEP __% HEP __% HEP __% HEP __% HEP First Principal Payment Date(6): ____ ____ ____ ____ ____ ____ ____ Weighted Avg. Life At Issuance: to call (yrs.)(6): ___ ___ ___ ___ ___ ___ ___ to maturity (yrs.)(6): ___ ___ ___ ___ ___ ___ ___ Expected Maturity (to call)(6): ___ ___ ___ ___ ___ ___ ___ Expected Maturity (to maturity)(6): ___ ___ ___ ___ ___ ___ ___ Last Scheduled Distribution Date: ___ ___ ___ ___ ___ ___ ___ Interest Accrual Method: actual/360 30/360 30/360 30/360 30/360 30/360 30/360 Interest Rate Index Reset Date: (7) N/A N/A N/A N/A N/A N/A Payment Delay: 0 days 24 days 24 days 24 days 24 days 24 days 24 days Anticipated Ratings [Ratings Agency]: Aaa/AAA Aaa/AAA Aaa/AAA Aaa/AAA Aaa/AAA Aa2/AA A2/A
[RESTUBBED]
Class IB Class IIA-1 Class IIM-1 Class IIM-2 Class IIB Fixed Adjustable Adjustable Adjustable Adjustable -------- ----------- ----------- ----------- --------- Loan Group: Initial Certificate Principal Balance(1): $_________ $__________ $__________ $__________ $_________ Pass Through Rate: ______%(3) (4) (4) (4) (4) ERISA Eligible: No Yes No No No Prepayment Assumption(5): __% HEP __% CPR __% CPR __% CPR __% CPR First Principal Payment Date(6): ____ ____ ____ ____ ____ Weighted Avg. Life At Issuance: to call (yrs.)(6): ___ ___ ___ ___ ___ to maturity (yrs.)(6): ___ ___ ___ ___ ___ Expected Maturity (to call)(6): ___ ___ ___ ___ ___ Expected Maturity (to maturity)(6): ___ ___ ___ ___ ___ Last Scheduled Distribution Date: ___ ___ ___ ___ ___ Interest Accrual Method: 30/360 actual/360 actual/360 actual/360 actual/360 Interest Rate Index Reset Date: N/A (7) (7) (7) (7) Payment Delay: 24 days 0 days 0 days 0 days 0 days Anticipated Ratings [Ratings Agency]: Baa2/BBB Aaa/AAA Aa2/AA A2/A Baa2/BBB
Agency]: - --------------- (1) Subject to a permitted variance of plus or minus 10%. (2) After the optional termination date described herein, the pass-through rate for the Class IA-4, Class IIA-1, Class IIM-1, Class IIM-2 and Class IIB Certificates will increase to [____]%. (3) Subject to adjustment. Under certain circumstances, your pass-through rate may be lower. See "Description of the Certificates--Distributions-- Distributions of Interest." (4) One-month LIBOR plus the applicable pass through margin. Subject to adjustment. Under certain circumstances your pass-through rate may be lower. See "Description of the Certificates--Distributions--Distributions of Interest." (5) See "Yield, Prepayment and Maturity Considerations" for a description of HEP and CPR. (6) Based on the modeling assumptions described on page S-__ and [__]% HEP or [__]% CPR, as applicable. (7) Two business days prior to the start of each interest accrual period. Credit Enhancement:
Group I Group II Excess Interest Excess Interest Overcollateralization Overcollateralization Crosscollateralization Crosscollateralization Subordination Subordination Overcollateralization Requirements: Group I Group II Initial Percentage: [__] Initial Percentage: [__]% Stepdown Percentage: [__]% of current balance Stepdown Percentage: [__]% of current balance Targeted Percentage: [__]% of original balance Targeted Percentage: [__]% of original balance Minimum Required Percentage: [__]% of original Minimum Required Percentage: [__]% of original balance Earliest Possible Stepdown Date: Earliest Possible Stepdown Date:
S-4 SUMMARY INFORMATION This section briefly summarizes certain major characteristics of the certificates and the mortgage loans. It does not contain all of the information that you need to consider in making your investment decision. To fully understand the terms of the certificates, you should read both this prospectus supplement and the attached prospectus in their entirety. Principal Parties Issuer: Chase Funding Trust, Series [_______]. Depositor: Chase Funding, Inc., a New York corporation. The Depositor's address is 343 Thornall Street, Edison, NJ 08837 and its telephone number is (732) 205-0600. Seller and Master Servicer: Chase Manhattan Mortgage Corporation, a New Jersey corporation whose address is 343 Thornall Street, Edison, NJ 08837 and whose telephone number is (732) 205-0600. See "Chase Manhattan Mortgage Corporation." Subservicer: [Advanta Mortgage Corp. USA], a Delaware corporation whose address is [10790 Rancho Bernardo Road, San Diego, CA 92127 and whose telephone number is (619) 674-1800.] See "Servicing of the Mortgage Loans--The Subservicer." Trustee: [TRUSTEE]. The corporate trust office of the Trustee is [ADDRESS] and its telephone number is [______________]. Cut-off Date The cut-off date will be [DATE]. Closing Date The closing date will be on or about [DATE]. Distribution Date The 25th day of each month, beginning in [DATE]. If the 25th day is not a business day, then the distribution date will be the next business day. The Trust Fund The name of the trust fund is Chase Funding Trust, Series [_______]. We are forming the trust to own a pool of sub-prime mortgage loans secured by first liens on real properties and $[______ _]on deposit in an account used to purchase additional sub-prime mortgage loans. The mortgage pool is divided into two loan groups: a group of the fixed rate mortgage loans (group I), and a group of the adjustable rate mortgage loans (group II). Each class of certificates represents an interest in one of these loan groups. However, due to the crosscollateralization features of the trust fund, certificates of one group may receive credit support payments from mortgage loans in the other group. The Series [_______] Certificates The certificates represent beneficial ownership interests in the underlying trust fund assets. The certificates will have the original certificate principal balance, pass-through rate and other features set forth in the table on page S-3. The trust fund will issue the certificates under a Pooling and Servicing Agreement dated as of [DATE] among Chase Funding, Inc., as depositor, [Advanta Mortgage Corp. USA], as subservicer, Chase Manhattan Mortgage Corporation, as master servicer and Citibank, N.A., as trustee. When we refer to the group I certificates or the group II certificates, we mean the certificates representing interests in the fixed rate mortgage loans or the adjustable rate mortgage loans, respectively (and their respective interests in the cash on deposit in the account used to purchase additional mortgage loans). Any collections on the mortgage loans will be used to pay a servicing fee to [Advanta Morgage Corp. USA] and Chase Manhattan Mortgage Corporation and to make interest or principal payments. All principal collections will be paid to one or more classes of the certificates offered through this prospectus supplement or to the residual certificates, based on the outstanding certificate balances and the remaining principal amount in each loan group. Any interest collections in excess of the amount paid to certificateholders--either as interest or principal--or the servicers will be paid to the owner of the residual certificates. See "Description of the Certificates-- Distributions." S-5 Interest Distributions Interest will accrue on each class of certificates at the pass-through rate for that class. Interest will accrue on each class of certificates (other than the Class IA-1 Class IIA-1, Class IIM-1, Class IIM-2 and Class IIB Certificates) during the calendar month preceding each distribution date. Interest will accrue on the Class IA-1, Class IIA-1, Class IIM-1, Class IIM-2 and Class IIB Certificates from the prior distribution date (or the closing date, in the case of the first distribution date) to the day prior to the current distribution date. The pass-through rates on the Class IA-1, Class IA-4, Class IA-5, Class IM-1, Class IM-2 and Class IB Certificates will be subject to a cap based on the weighted average net mortgage rate of the fixed rate mortgage loans and such Certificates will not carry over or be reimbursed for interest shortfalls resulting from the imposition of that interest rate cap. The pass-through rates on the Class IIA-1, Class IIM-1, Class IIM-2 and Class IIB Certificates will be subject to an available amount interest rate cap. If the amount of interest due on the mortgage loans in group II, less certain amounts, is insufficient to pay the interest accrued on the group II certificates, the interest payment on the Class IIA-1, Class IIM-1, Class IIM-2 and Class IIB Certificates, as applicable, on the related distribution date will be reduced by the amount of such interest shortfall for such loan group. In the case of the group II certificates, interest shortfall will be carried over on a subordinated basis with accrued interest at the then applicable pass-through rate and paid from excess cash flow in a later distribution, if available. The pass-through rates on the Class IIA-1, Class IIM-1, Class IIM-2 and Class IIB Certificates will also be subject to a maximum interest rate cap based on the weighted average of the net maximum lifetime rate on the adjustable rate mortgage loans. Any interest shortfall due to the maximum amount cap will not be reimbursed. See "Description of the Certificates-- Distributions--Distributions of Interest." Principal Distributions Principal payments to the group I certificates and the group II certificates will generally reflect principal collections on the loans in the related loan group. Principal payments will also include a portion of interest collections to the extent necessary to reach or maintain the required overcollateralization percentage, as described below and may include distributions from the pre-funding account. Denominations The trust fund will issue the offered certificates in minimum denominations of [$25,000] in original principal amount and integral multiples of $1,000 in excess thereof. Book-Entry Registration The trust fund will initially issue the certificates in book-entry form. You may elect to hold your interest in the certificates through The Depository Trust Company in the United States, or Cedelbank, societe anonyme or the Euroclear System in Europe, or indirectly through participants in such systems. You will not be entitled to receive a definitive certificate representing your interest except under limited circumstances. See "Description of the Certificates--Book-Entry Certificates" in this prospectus supplement and "Description of the Certificates" in the attached prospectus. Mandatory Prepayments The group I certificates and the group II certificates will be prepaid in part on the distribution date in [MONTH/YEAR] to the extent any cash allocable to the related loan group remains on deposit in the account used for the purpose of purchasing additional mortgage loans. See "Description of the Certificates--Mandatory Prepayments on the Certificates" in this prospectus supplement. Credit Enhancement Credit enhancement is intended to reduce the harm caused to holders of the certificates as a result of shortfalls in payments received and losses realized on the mortgage loans. The credit enhancement for the group I certificates and the group II certificates will consist of the overcollateralization, crosscollateralization and subordination features described in this prospectus supplement. S-6 Overcollateralization. Generally, because more interest is required to be paid by the mortgagors than is necessary to pay the interest accrued on the certificates and the expenses of the trust fund, there is expected to be excess interest each month. The trust fund will apply some or all of such excess interest as principal payments on the senior certificates in the related loan group until certain overcollateralization targets are reached, resulting in a limited acceleration of principal of the certificates relative to the mortgage loans in the related loan group. This acceleration feature creates overcollateralization, which equals the excess of the outstanding principal balance of the mortgage loans in a loan group over the outstanding principal balance of the related certificates. Once the required level of overcollateralization is reached, the acceleration feature will cease, unless it becomes necessary again to maintain the required level of overcollateralization. The actual level of overcollateralization may increase or decrease over time based upon whether the stepdown criteria of the trust have been met or, in the case of the group II certificates, whether a step-up trigger exists. This could result in a temporarily faster or slower amortization of one or both groups of the certificates. See "Description of the Certificates-- Overcollateralization and Crosscollateralization Provisions." Crosscollateralization. The trust fund provides for crosscollateralization through the application of excess interest generated by one loan group to fund shortfalls in available funds and the required level of overcollateralization in the other loan group. See "Description of the Certificates-- Overcollateralization and Crosscollateralization Provisions." Subordination. The rights of the holders of the more junior classes of certificates relating to each loan group to receive distributions will be subordinated to the rights of the holders of the more senior classes of certificates relating to such loan group to receive distributions. See "Description of the Certificates--Distributions." In general, the protection afforded the holders of more senior classes of certificates by means of this subordination will be effected in two ways: Priority of Distributions. By the preferential right of the holders of such classes to receive, prior to any distribution being made on any distribution date to the holders of the more junior classes of certificates, the amount of interest and principal due on the more senior classes of certificates and, if necessary, by the right of such more senior holders to receive future distributions on the mortgage loans that would otherwise have been allocated to the holders of the more junior classes of certificates; and Allocation of Losses. By the allocation to the more junior classes of certificates (in inverse order of seniority) of losses resulting from the liquidation of defaulted mortgage loans or the bankruptcy of mortgagors prior to the allocation of such losses to the more senior classes of certificates until their respective certificate principal balances have been reduced to zero. The chart below summarizes the relative seniority of the various classes of certificates and indicates the initial level of credit support provided to the various classes of certificates: Initial Credit Credit Support Support -------------- ------- IA Class IM-1, [_____]% Class IM-2 and Class IB IM-1 Class IM-2 [_____]% and Class IB IM-2 Class IB [_____]% S-7 Group II Credit Initial Credit Class(es) Support Support --------- ------- -------------- IIA Class IIM-1, [____]% Class IIM-2 and Class IIB IIM-1 Class IIM-2 [____]% and Class IIB IIM-1 Class IIB [____]% Optional Termination Subject to certain restrictions, Chase Manhattan Mortgage Corporation will have the option (but not the obligation) to purchase all of the mortgage loans in a loan group after the aggregate unpaid principal balance of such mortgage loans is reduced to less than [10%] of the aggregate principal balance of the certificates in such loan group as of [DATE]. See "Description of the Certificates--Optional Termination." Legal Investment As of the closing date, the Class IA, Class IIA, Class IM-1 and Class IIM-1 Certificates will constitute "mortgage related securities" under the Secondary Mortgage Market Enhancement Act of 1984, as amended. The Class IM-2, Class IB, Class IIM-2 and Class IIB Certificates will not constitute "mortgage related securities." You should consult your own counsel as to whether you have the legal authority to invest in securities such as the offered certificates. See "Risk Factors--Limited Liquidity; Lack of SMMEA Eligibility" and "Legal Investment Matters" in this prospectus supplement and "Legal Investment Matters" in the attached prospectus. Federal Income Tax Consequences For federal income tax purposes, the trust fund will elect to be treated as two Real Estate Mortgage Investment Conduits. The certificates will represent ownership of regular interests in the trust fund and will generally be treated as debt instruments of the trust fund for federal income tax purposes. You will be required to include in income all interest and original issue discount, if any, on your certificates in accordance with the accrual method of accounting regardless of your usual method of accounting. See "Federal Income Tax Consequences" in this prospectus supplement and in the attached prospectus. ERISA Considerations In general, the certificates (except for the Class IM-1, Class IM-2, Class IB, Class IIM-1, Class IIM-2 and Class IIB Certificates) will be eligible for purchase by retirement or other employee benefit plans subject to the Employee Retirement Income Security Act of 1986, as amended. You should consult with your counsel with respect to the legal consequences of an ERISA plan's acquisition and ownership of the Certificates. See "ERISA Considerations" in this prospectus supplement and in the attached prospectus. Ratings The certificates are required to receive the ratings indicated under the heading "Anticipated Ratings" in the chart shown on page S-3 of this prospectus supplement. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by any rating agency. The ratings on the certificates address the likelihood of the receipt by holders of the certificates of all distributions on the underlying mortgage loans to which they are entitled. They do not represent any assessment of the likelihood or rate of principal prepayments or the likelihood that any interest carry forward amount will be paid. See "Ratings." Pre-Funding Account Subject to certain conditions described herein, the trust fund will be obligated to purchase from Chase Manhattan Mortgage Corporation on or before [DATE], additional fixed rate mortgage loans having an aggregate outstanding principal balance of up to $[________], and additional adjustable rate mortgage loans having an aggregate outstanding principal balance of up to $[________]. On [DATE], Chase Funding, Inc. will pay to the trustee approximately $[_______], to provide the trust fund with sufficient cash to purchase the additional mortgage loans. See "The Mortgage Pool--Conveyance of Subsequent Mortgage Loans and the Pre-Funding Account" in this prospectus supplement. S-8 The Mortgage Loans We will divide the mortgage loans into two separate groups based on whether the interest rate for the related mortgage loan is fixed or adjustable. The following tables summarize certain approximate characteristics of each mortgage group as of [DATE]. When we refer to percentages of mortgage loans in the following tables, we are describing the percentage of the aggregate principal balance of the mortgage loans in the related mortgage group as of [DATE]. The mortgage pool as of the closing date will include approximately $[___________]in aggregate principal balance of mortgage loans (approximately $[__________]of fixed rate mortgage loans and approximately $[__________]of adjustable rate mortgage loans) that are not included in the statistical information in this prospectus supplement; furthermore, approximately $[__________]in aggregate principal balance of mortgage loans (approximately $[_________]of fixed rate mortgage loans and $[_________]of adjustable rate mortgage loans) that are included in the statistical information in this prospectus supplement will be deleted from the final mortgage pool. Other than increasing the aggregate principal balance of the mortgage loans, we do not expect the inclusion or deletion of these mortgage loans to change the material characteristics of either mortgage loan group. In addition, as described in this prospectus supplement under "The Mortgage Pool--Conveyance of Subsequent Mortgage Loans and the Pre-Funding Account" up to $[_________]in aggregate outstanding principal balance of fixed rate mortgage loans and up to $[________]in aggregate outstanding principal balance of adjustable rate mortgage loans will be added to the mortgage pool after the closing date, but before [DATE]. Within fifteen days of the closing date and within fifteen days of the end of the funding period, we will file a Form 8-K with the Securities and Exchange Commission which will include the statistical characteristics of the mortgage pool. For additional information on the mortgage loans, see "The Mortgage Loans." S-9 Initial Fixed Rate Mortgage Loan Group Number of loans ______ Aggregate outstanding principal balance $[___________] Number of loans with prepayment penalties _____ Average or Weighted Average Range Outstanding principal balance $[______] $[_____] - $[_______] Original principal balance $[______] $[______] - $[_______] Mortgage rate [_____]% [_____]% - [______]% Loan-to-value ratio [_____]% [_____]% - [______]% Stated remaining term to maturity [___] [___] - [___] [Bar Graph showing Mortgage Rates for the Initial Fixed Rate Loan Group] S-10 [Bar Graph showing Original Principal Balances the Initial Fixed Rate Loan Group] [Pie Graph showing Product Types for the Initial Fixed Rate Loan Group] S-11 [Pie Graph showing Credit Grades for the Initial Fixed Rate Loan Group] [Bar Graph showing Loan-to-Value Ratios for the Initial Fixed Rate Loan Group] S-12 Initial Adjustable Rate Loan Group Number of loans _____ Aggregate outstanding principal balance $[___________] Number of loans with prepayment penalties ____ Average or Weighted Average Range Outstanding principal balance $[_______] $[______]- $[_______] Original principal balance $[_______] $[______]- $[_______] Current mortgage rates [_____]% [_____]%- [______]% Maximum mortgage rates [______]% [______]%- [______]% Minimum mortgage rates [_____]% [_____]%- [______]% Loan-to-value ratio [_____]% [_____]%- [_____]% Stated remaining term to maturity [___] [___]- [___] Gross Margin [_____]% [_____]%- [_____]% Initial Rate Cap [_____]% [_____]%- [_____]% Periodic Rate Cap [_____]% [_____]%- [_____]% [Bar Graph showing Mortgage Rates for the Initial Adjustable Rate Loan Group] S-13 [Bar Graph showing Original Principal Balances the Initial Adjustable Rate Loan Group] [Pie Graph showing Product Types for the Initial Adjustable Rate Loan Group] S-14 [Pie Graph showing Credit Grades for the Initial Adjustable Rate Loan Group] [Bar Graph showing Loan-to-Value Ratios for the Initial Adjustable Rate Loan Group] S-15 RISK FACTORS Forward-Looking Statements In this prospectus supplement and the attached prospectus, we use certain forward-looking statements. Such forward-looking statements are found in the material, including each of the tables, set forth under "Risk Factors" and "Yield, Prepayment and Maturity Considerations." Forward-looking statements are also found elsewhere in this prospectus supplement and prospectus and include words like "expects," "intends," "anticipates," "estimates" and other similar words. Such statements are inherently subject to a variety of risks and uncertainties. Actual results differ materially from those we anticipate due to changes in, among other things: o economic conditions and industry competition; political, social and economic conditions; o the law and government regulatory initiatives; and o interest rate fluctuations. We will not update or revise any forward-looking statements to reflect changes in our expectations or changes in the conditions or circumstances on which such statements were originally based. Overcollateralization Provisions The overcollateralization provisions of the trust will affect the weighted average life of the certificates of each certificate group and consequently the yield to maturity of such certificates. Unless and until the required amount of overcollateralization for such certificate group is reached, net excess cashflow for the related loan group and, due to the cross-collateralization feature, in some cases the other mortgage loan group, will be applied as distributions of principal of the Class A certificates of such certificate group, thereby reducing the weighted average lives of the certificates in the related certificate group. The actual required amount of overcollateralization for a certificate group may change from distribution date to distribution date, producing uneven distributions of accelerated payments in respect of principal for such certificate group. We cannot predict when or whether the required amount of overcollateralization for a certificate group will be reached. "Net excess cashflow" for a particular loan group generally is the excess of interest collected or advanced on the mortgage loans in such loan group over the interest required to pay interest on the certificates in the related certificate group and certain trust fund expenses allocable to such certificate group. Mortgage loans with higher interest rates will contribute more interest to the net excess cashflow. Mortgage loans with higher interest rates may prepay faster than mortgage loans with relatively lower interest rates in response to a given change in market interest rates. Any such disproportionate prepayments of mortgage loans in a loan group that have higher interest rates may adversely affect the amount of net excess cashflow for such loan group. As a result of the interaction of the foregoing factors, the effect of the overcollateralization provisions on the weighted average life of the offered certificates may vary significantly over time. See "Yield, S-16 Prepayment and Maturity Considerations" in this prospectus supplement and "Yield, Maturity and Weighted Average Life Considerations" in the attached Prospectus. Prepayment Considerations and Risks Each loan group's prepayment experience may be affected by many factors, including general economic conditions, interest rates and the availability of alternative financing, homeowner mobility and the solicitation of mortgagors to refinance their mortgage loans. In addition, substantially all of the mortgage loans contain due-on-sale provisions. The subservicer intends to enforce such provisions unless (i) such enforcement is not permitted by applicable law or (ii) the subservicer, in a manner consistent with accepted servicing practices, permits the purchaser of the related mortgaged property to assume the mortgage loan. To the extent permitted by applicable law, such assumption will not release the original borrower from its obligation under any such mortgage loan. See "Yield, Prepayment and Maturity Considerations" in this prospectus supplement and "Material Legal Aspects of the Mortgage Loans-Enforceability of Due-on-Sale Clauses" in the attached Prospectus for a description of certain provisions of the mortgage loans that may affect the prepayment experience thereof. The yield to maturity and weighted average life of the offered certificates in each certificate group will be affected primarily by the rate and timing of principal payments (including prepayments, liquidations, repurchases and defaults) of, and losses on, the mortgage loans in the related loan group. The yield to investors on the group II certificates and the Class IA-1 Certificates will also be sensitive to the level of one-month LIBOR, the level of the mortgage index and the additional limitations on the pass-through rate for such class described in this prospectus supplement. In addition, the yield to maturity of the offered certificates purchased at a discount or premium will be more sensitive to the rate and timing of payments thereon. You should consider, in the case of the offered certificates purchased at a discount, the risk that a slower than anticipated rate of principal payments could result in an actual yield that is lower than the anticipated yield and, in the case of the offered certificates purchased at a premium, the risk that a faster than anticipated rate of principal payments could result in an actual yield that is lower than the anticipated yield. Because approximately [____]% of the initial fixed rate mortgage loans and approximately [____]% of the initial adjustable rate mortgage loans contain prepayment penalties, the rate of principal prepayments may be less than the rate of principal prepayments for mortgage loans which do not contain prepayment penalties. See "Material Legal Aspects of the Mortgage Loans--Late Charges, Default Interest and Limitations on Prepayment" in the attached Prospectus. We cannot make any representation as to the anticipated rate of prepayments on the mortgage loans, the amount and timing of losses on the loans, the level of one-month LIBOR or the mortgage index or the resulting yield to maturity of any offered certificates. Any reinvestment risks resulting from a faster or slower incidence of prepayments on the mortgage loans will be borne entirely by the offered certificateholders as described in this prospectus supplement. See "Yield, Prepayment and Maturity Considerations" in this prospectus supplement and "Yield, Maturity and Weighted Average Life Considerations" in the attached Prospectus. S-17 Risk of Higher Delinquencies Associated with Underwriting Guidelines The B&C Underwriting Guidelines (as described under "Chase Manhattan Mortgage Corporation--Underwriting Standards--B&C Quality Loans") consider the credit quality of a mortgagor and the value of the mortgaged property. The originators provide loans primarily to mortgagors who do not qualify for loans conforming to FNMA or FHLMC guidelines. Furthermore, the B&C Underwriting Guidelines do not prohibit a borrower from obtaining secondary financing on the mortgaged property. Secondary financing would reduce the borrower's equity in the related mortgaged property. As a result of the B&C Underwriting Guidelines, the mortgage loans are likely to experience rates of delinquency, foreclosure and bankruptcy that are higher, and that may be substantially higher, than those experienced by mortgage loans underwritten to FNMA and FHLMC conforming guidelines. Furthermore, changes in the values of mortgaged properties may have a greater effect on the delinquency, foreclosure, bankruptcy and loss experience of the mortgage loans than on mortgage loans originated in a more traditional manner. Similarly, an overall general decline in residential real estate values could cause a particularly severe decline in the value of the mortgaged properties relating to mortgage loans in the trust fund. We cannot provide any assurance that the mortgaged properties will not experience an overall decline in value. Effect of Mortgage Loan Yield on the Group II Certificates Pass-Through Rate; Basis Risk The calculation of the pass-through rates on the group II certificates is based upon the value of an index (one-month LIBOR) which is different from the value of the index applicable to substantially all of the adjustable rate mortgage loans (six-month LIBOR) as described under "The Mortgage Pool--General" and is subject to an available amount interest rate cap and a maximum rate cap. The available amount interest rate cap effectively limits the amount of interest accrued on each class of group II certificates to the amount of interest accruing on the adjustable rate mortgage loans. Various factors may cause the interest rate cap described above to limit the amount of interest that would otherwise accrue on the group II certificates. First, this can result if one-month LIBOR increases more rapidly than six month LIBOR. In addition, the pass-through rates on the group II certificates adjust monthly, while the interest rates of the adjustable rate mortgage loans adjust less frequently, with the result that the operation of the interest rate cap described above may cause the pass-through rates to be reduced for extended periods in a rising interest rate environment. The adjustable rate mortgage loans are also subject to periodic (i.e., semi-annual) adjustment caps and maximum rate caps, and the weighted average margin is subject to change based upon prepayment experience, which also may result in the interest rate cap described above limiting increases in the pass-through rates for the group II Certificates. Finally, the adjustable rate mortgage loans accrue interest on the basis of a 360-day year assumed to consist of twelve 30-day months, while calculations of interest on the group II Certificates will be made on the basis of the actual number of days elapsed and a year of 360 days. This may result in the interest rate cap described above limiting the pass-through rates for the group II certificates in certain periods. Consequently, the interest which becomes due on the adjustable rate mortgage loans (net of the sum of the servicing fee and the master servicer fee) with respect to any distribution date may not equal the amount of interest that would accrue at one-month LIBOR plus the applicable margin on the group II Certificates during the related period. Furthermore, if the interest rate cap described above determines the pass-through rates for the group II Certificates for a distribution date, the market value of such class of certificates may be temporarily or permanently reduced. S-18 In addition, the pass-through rate on each class of group II certificates, is subject to a maximum rate cap, which limits such pass-through rates based on the maximum lifetime interest rates on the adjustable rate mortgage loans less the servicing fee rate and the master servicing fee rate. This maximum rate cap may limit increases in the pass-through rates on such classes of the group II Class A Certificates. This can occur even if there is sufficient interest collected on the adjustable rate mortgage loans, net of trust fund expenses, to pay interest on the Group II Certificates without giving effect to such maximum rate cap. Pass-Through Rates With Respect to the Class IA-1, Class IA-4, Class IA-5, Class IM-1, Class IM-2 and Class IB Certificates On any distribution date, the pass-through rate for the Class IA-1 Certificates will equal the lesser of (i) one month LIBOR plus [____]% and (ii) the weighted average net mortgage rate on the fixed rate mortgage loans. Therefore, to the extent that the weighted average net mortgage rate on the fixed rate mortgage loans is ever reduced to less than one month LIBOR plus [____]%, investors in the Class IA-1 Certificates may experience a lower than anticipated yield. In addition, on any distribution date, the pass-through rates for the Class IA-4, Class IA-5, Class IM-1, Class IM-2 and Class IB Certificates will equal the lesser of (A) the rate set forth for such class in the table on page S-3 and (B) the weighted average net mortgage rate on the fixed rate mortgage loans. Therefore, to the extent that the weighted average net mortgage rate on the fixed rate mortgage loans is ever reduced to less than the applicable rate described in clause (A), investors in the Class IA-4, Class IA-5, Class IM-1, Class IM-2 or Class IB Certificates may experience a lower than anticipated yield. This limitation on the payment of interest on such group I Certificates can occur even if there is sufficient interest collected on the fixed rate mortgage loans, net of trust fund expenses, to pay interest on the Class IA-1, Class IA-4, Class IA-5, Class IM-1, Class IM-2 and Class IB Certificates without giving effect to such weighted average net interest rate caps. Subordination--Limited Protection Afforded to Offered Certificates The rights of the Class M-1 Certificates of each certificate group to receive distributions with respect to the mortgage loans of the related loan group will be subordinate to the rights of the Class A Certificates of such certificate group to receive such distributions; the rights of the Class M-2 Certificates of each certificate group to receive distributions with respect to the mortgage loans of the related loan group will be subordinate to the rights of the Class A and the Class M-1 Certificates of such certificate group to receive such distributions; and the rights of the Class B Certificates of each certificate group to receive distributions with respect to the mortgage loans of the related loan group will be subordinate to the rights of the Class A, Class M-1 and Class M-2 Certificates of such certificate group to receive such distributions. This subordination is intended to enhance the likelihood of regular receipt by higher-ranking classes of certificates of the full amount of the monthly distributions allocable to them, and to afford protection against losses. S-19 Subordination--Allocation of Losses to the Class M and Class B Certificates If realized losses are incurred with respect to the mortgage loans in a loan group to the extent that the aggregate principal balance of the certificates of the related certificate group exceeds the stated principal balances of the mortgage loans in such loan group, the principal balances of the Class M and Class B Certificates of the related certificate group will be reduced in reverse order of seniority (first Class B, second Class M-2 and third Class M-1) by the amount of the excess. Consequently, the yields to maturity on the Class M Certificates and Class B Certificates of each certificate group will be sensitive, in varying degrees, to defaults on the mortgage loans in such loan group (and the timing thereof). Investors should fully consider the risks associated with an investment in the Class M or Class B Certificates, including the possibility that such investors may not fully recover their initial investment as a result of realized losses. Cash Flow Considerations and Risks Even assuming that the mortgaged properties provide adequate security for the mortgage loans, there could be substantial delays in connection with the liquidation of mortgage loans that are delinquent and resulting shortfalls in distributions to you could occur. Further, liquidation expenses (such as legal fees, real estate taxes and maintenance and preservation expenses) will reduce the security for such mortgage loans and thereby reduce the proceeds payable to you. If any of the mortgaged properties fail to provide adequate security for the related mortgage loans, you could experience a loss (particularly if you are a holder of one of the most subordinate classes). Certificate Rating on the Certificates The rating of each class of certificates will depend primarily on an assessment by the rating agencies of the mortgage loans as well as the structure of the transaction. The rating by the rating agencies of any class of certificates is not a recommendation to purchase, hold or sell any such certificates, inasmuch as such rating does not comment as to the market price or suitability for a particular investor. There is no assurance that the ratings will remain in place for any given period of time or that the ratings will not be qualified, lowered or withdrawn by the rating agencies. In general, the ratings address credit risk and do not address the likelihood of prepayments or the likelihood that any interest carryforward amounts will be paid. See "Ratings." Bankruptcy and Insolvency Risks The initial sale of the mortgage loans from Chase Manhattan Mortgage Corporation to Chase Funding, Inc. And any subsequent sales between those entities using the funds in the pre-funding account, will be treated as a sale of the mortgage loans. However, in the event of an insolvency of Chase Manhattan Mortgage Corporation, the trustee in bankruptcy of Chase Manhattan Mortgage Corporation may attempt to recharacterize such mortgage loan sales as a borrowing by such company, secured by a pledge of the applicable mortgage loans. If the trustee in bankruptcy decided to challenge such transfers, delays in payments of the certificates and reductions in the amounts thereof could occur. S-20 In the event of a bankruptcy or insolvency of [Advanta Mortgage Corp. USA], as subservicer, the bankruptcy trustee or receiver may have the power to prevent Citibank, N.A., as trustee or the certificateholders from appointing a successor subservicer. Regardless of whether a successor subservicer is appointed, any termination of [Advanta Mortgage Corp. USA] as subservicer (whether due to bankruptcy or insolvency or otherwise) could adversely affect the servicing of the mortgage loans, including the delinquency experience of the mortgage loans. Certificates May Not Be Appropriate For Individual Investors The certificates may not be an appropriate investment for individual investors who do not have sufficient resources or expertise to evaluate the particular characteristics of the applicable class of certificates. This may be the case because, among other things: o The yield to maturity of offered certificates purchased at a price other than par will be sensitive to the uncertain rate and timing of principal prepayments on the mortgage loans; o The rate of principal distributions on, and the weighted average life of, the offered certificates will be sensitive to the uncertain rate and timing of principal prepayments on the mortgage loans and the priority of principal distributions among the classes of certificates, and as such the certificates may be inappropriate investments for you if you require a distribution of a particular amount of principal on a specific date or an otherwise predictable stream of distributions; o You may not be able to reinvest amounts distributed in respect of principal on a certificate (which, in general, are expected to be greater during periods of relatively low interest rates) at a rate at least as high as the pass-through rates on the certificates; or o It is possible that a secondary market for the certificates will not develop or that your investment may not be liquid. Lack of liquidity could result in a substantial decrease in the market value of your certificates. You should also carefully consider the further risks and other special considerations discussed above and under the heading "Yield, Prepayment and Maturity Considerations" in this prospectus supplement and in the attached prospectus under the heading "Risk Factors." Geographic Concentration As of the cut-off date, approximately [___]% of the mortgaged properties of the initial fixed rate mortgage loan group and approximately [___]% of the mortgaged properties of the initial adjustable rate mortgage loan group were located in [STATE]. Approximately [___]% of the mortgaged properties of the initial fixed rate mortgage loan group were located in [STATE] and approximately [___]% of the initial adjustable rate mortgage loan group were located in [STATE]. An overall decline in the [STATE], [STATE] or [STATE] residential real estate market could adversely affect the values of the mortgaged properties securing such mortgage loans. As the residential real estate market is influenced by many factors, including the general condition of the economy and interest rates, we cannot assure you that the [STATE], [STATE] or [STATE] residential real estate market will not weaken. If the Florida, New York or California residential real estate market should experience an overall decline in property values, the rates of losses on such mortgage loans would be expected to increase, and could increase substantially. S-21 Risk of Higher Default Rates for Mortgage Loans with Balloon Payments Approximately [___]% of the aggregate principal balance of the initial mortgage loans as of the cut-off date are "balloon loans" that provide for the payment of the unamortized principle balance of such initial mortgage loan in a single payment at maturity. The balloon loans provide for equal monthly payments, consisting of principal and interest, generally based on a 30-year amortization schedule, and a single payment of the remaining balance of the balloon loan generally up to 15 years after origination. Amortization of a balloon loan based on a scheduled period that is longer than the term of the loan results in a remaining principal balance at maturity that is substantially larger than the regular scheduled payments. We do not have any information regarding the default history or prepayment history of payments on balloon loans. Because borrowers of balloon loans are required to make substantial single payments upon maturity, it is possible that the default risk associated with the balloon loans is greater than that associated with fully-amortizing loans. Delinquent Mortgage Loans The trust fund may include mortgage loans which are 59 or fewer days delinquent as of the cut-off date. It is expected that not more than approximately [___]% of the mortgage loans (by cut-off date principal balance or subsequent cut-off date principal balance, as the case may be) will be between 30 days and 59 days delinquent. If there are not sufficient funds from amounts collected on the mortgage loans, the aggregate amount of principal returned to any class of offered certificateholders may be less than the certificate principal balance thereof on the day that such class of offered certificates were issued. The Subsequent Mortgage Loans The subsequent mortgage loans may have characteristics different from those of the initial mortgage loans and such differing characteristics may effect the weighted average life and yield of the certificates. However, each subsequent mortgage loan must satisfy the eligibility criteria referred to herein under "The Mortgage Pool--Conveyance of Subsequent Mortgage Loans and the Pre-Funding Account" at the time of its conveyance to the trust fund and be underwritten in accordance with the criteria set forth under "Chase Manhattan Mortgage Corporation--Underwriting Standards" in this prospectus supplement. Mandatory Prepayment To the extent that the $[_________]]on deposit in the pre-funding account (of which $[__________]]is allocable to group I and $[__________] is allocable to group II) has not been fully applied to the purchase of subsequent mortgage loans by [DTATE], the holders of the group I certificates and the group II certificates will receive on the distribution date immediately following such date, as a distribution of principal, any cash in the account allocable to the related loan group after giving effect to any purchase of subsequent mortgage loans. S-22 Optional Termination Could Reduce Benefits of Crosscollateralization As described in this prospectus supplement under "Description of the Certificates--Optional Termination," Chase Manhattan Mortgage Corporation will have the option to repurchase all of the remaining mortgage loans in either mortgage group when the principal balance of those mortgage loans is reduced to less than or equal to 10% of the aggregate principal balance of the certificates of such loan group as of [DATE]. To the extent that such mortgage loans were providing credit enhancement in the form of crosscollateralization to the certificates related to the mortgage loans in the other mortgage group, the exercise by Chase Manhattan Mortgage Corporation of its repurchase option will reduce the amount of credit enhancement then available to the remaining classes of certificates. Limited Liquidity; Lack of SMMEA Eligibility The underwriters intend to make a secondary market in the offered certificates, but will have no obligation to do so. We cannot assure you that a secondary market for any class of offered certificates will develop, or if one does develop, that it will continue or provide sufficient liquidity of investment or that it will remain for the term of the related class of offered certificates. The Class IM-2, Class IB, Class IIM-2 and Class IIB certificates will not constitute "mortgage related securities" for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended. Accordingly, many institutions with legal authority to invest in SMMEA securities will not be able to invest in such certificates, thereby limiting the market for such certificates. In light of the foregoing, you should consult your own counsel as to whether you have the legal authority to invest in non-SMMEA securities such as the Class IM-2, Class IB, Class IIM-2 and Class IIB certificates. See "Legal Investment Matters" in this prospectus supplement and in the attached Prospectus. Risks Associated with Year 2000 Compliance We are aware of the issues associated with the programming code in existing computer systems as the year 2000 approaches. The "year 2000 problem" is pervasive and complex; virtually every computer operation will be affected in some way by the rollover of the two digit year value to 00. The issue is whether computer systems will properly recognize date-sensitive information when the year changes to 2000. Systems that do not properly recognize such information could generate erroneous data or cause a system to fail. We have been advised by each of Chase Manhattan Mortgage Corporation, [Advanta Mortgage Corp. USA] and Citibank, N.A. that they each are committed to either (i) implementing modifications to their respective existing systems to the extent required to cause them to be year 2000 compliant or (ii) acquiring computer systems that are year 2000 compliant, in each case prior to January 1, 2000. However, neither we nor any of our affiliates have made any independent investigation of the computer systems of [Advanta Mortgage Corp. USA] or Citibank, N.A. In the event that computer problems arise out of a failure of such efforts to be completed on time, or in the event that the computer systems of Chase Manhattan Mortgage Corporation, [Advanta Mortgage Corp. USA] or Citibank, N.A. are not fully year 2000 compliant, the resulting disruptions in the collection or distribution of receipts on the mortgage loans could materially adversely affect the holders of the offered certificates. With respect to the year 2000 problem, The Depository Trust Company has informed members of the financial community that it has developed and is implementing a program so that its systems, as they relate to the timely payment of distributions, including principal and interest payments, to security holders, book-entry deliveries, and settlement of trades within The Depository Trust Company, continue to function appropriately on and after January 1, 2000. This program includes a technical assessment and a remediation plan, each of which is complete. Additionally, The Depository Trust Company's plan includes a testing phase, which is expected to be completed within appropriate time frames. However, The Depository Trust Company's ability to perform properly its services is also dependent upon other parties, including but not limited to, its participating organizations, through which you will hold your Certificates, as well as the computer systems of third party service providers. The Depository Trust Company has informed the financial community that it is contacting and will continue to contact third party vendors from whom The Depository Trust Company acquires services to: S-23 o impress upon them the importance of such services being year 2000 compliant; and o determine the extent of their efforts for year 2000 remediation, and, as appropriate, testing, of their services. In addition, The Depository Trust Company has stated that it is in the process of developing such contingency plans as it deems appropriate. If problems associated with the year 2000 problem were to occur with respect to The Depository Trust Company and the services described above, payments to you could be delayed or otherwise adversely affected. For a discussion of additional risks pertaining to the offered certificates, see "Risk Factors" in the attached Prospectus. S-24 THE MORTGAGE POOL General The mortgage pool with respect to the Certificates (the "Mortgage Pool") consisted as of [DATE] (the "Cut-off Date") of approximately [_____] conventional mortgage loans evidenced by promissory notes (each, a "Mortgage Note") having an aggregate principal balance of approximately $[___________] (the "Statistical Mortgage Pool"). The Mortgage Loans will be divided into two groups (each, a "Loan Group") based on whether the interest rate for the related Mortgage Loan is fixed (each, a "Fixed Rate Mortgage Loan") or adjustable (each, an "Adjustable Rate Mortgage Loan"). The Mortgage Pool as of [_____________]](the "Closing Date") will include approximately $[___________]in aggregate principal balance of Mortgage Loans (approximately $[__________]]of Fixed Rate Mortgage Loans and approximately $[__________ ]f Adjustable Rate Mortgage Loans) that are not included in the Statistical Mortgage Pool; furthermore, approximately $[__________]in aggregate principal balance of Mortgage Loans (approximately $[_________]of Fixed Rate Mortgage Loans and $[_________]of Adjustable Rate Mortgage Loans) that are included in the Statistical Mortgage Pool will be deleted from the Statistical Mortgage Pool. Updated statistical information on the final composition of the Initial Mortgage Loans (defined below) (giving effect to such additions and deletions) and statistical information on the Subsequent Mortgage Loans will be attached as an exhibit to the Current Report on Form 8-K of the Depositor that will be available to purchasers of the Certificates at, and will be filed with the Securities and Exchange Commission within fifteen days of, the initial delivery of the Certificates in the case of the Initial Mortgage Loans and within 15 days of the end of the Funding Period (defined herein) in the case of the Subsequent Mortgage Loans). The Mortgage Pool ultimately will consist of (i) the Mortgage Loans included in the Trust Fund (defined herein) as of the Closing Date (the "Initial Mortgage Loans"), which Mortgage Loans will in turn consist of the Mortgage Loans in the Statistical Mortgage Pool plus any Mortgage Loans added to the Mortgage Pool [and minus any Mortgage Loans deleted from the Mortgage Pool, in each case] on or before the Closing Date and (ii) the Mortgage Loans purchased by the Trust Fund after the Closing Date as described herein under "--Conveyance of Subsequent Mortgage Loans and the Pre-Funding Account" (the "Subsequent Mortgage Loans"). The Initial Mortgage Loans and the Subsequent Mortgage Loans are collectively referred to herein as the "Mortgage Loans". The statistical information presented in this Prospectus Supplement describes only the Statistical Mortgage Pool and does not include statistical information with respect to either the final composition of the Initial Mortgage Loans (giving effect to additions to and deletions from the Statistical Mortgage Pool) or the Subsequent Mortgage Loans. References herein to percentages of Mortgage Loans refer in each case to the percentage of the aggregate principal balance of the Mortgage Loans in the Statistical Mortgage Pool or, as the case may be, the Mortgage Loans in the Statistical Mortgage Pool in the applicable Loan Group, as of the Cut-off Date, based on the outstanding principal balances of such Mortgage Loans as of the Cut-off Date, after giving effect to Scheduled Payments (defined herein) due on or prior to the Cut-off Date, whether or not received. References to percentages of Mortgaged Properties (defined herein) refer, in each case, to the percentages of aggregate principal balances of the related Mortgage Loans in the Statistical Mortgage Pool (determined as described in the preceding sentence). The Mortgage Notes are secured by mortgages or deeds of trust or other similar security instruments creating first liens on real properties (the "Mortgaged Properties"), including single-family residences, two- to-four family dwelling units, attached planned unit developments, condominiums, detached planned unit developments, manufactured housing and small mixed use properties. The Trust Fund includes, in addition to the Mortgage Pool, (i) certain amounts held from time to time in one or more accounts including the Pre-Funding Account (defined herein) and the Capitalized Interest Account (defined herein) S-25 (collectively, the "Accounts") maintained in the name of the Trustee pursuant to the Pooling and Servicing Agreement (the "Pooling and Servicing Agreement") to be dated as of [DATE] by and among Chase Funding, Inc., as depositor (the "Depositor"), [Advanta Mortgage Corp. USA], as subservicer ("Advanta" or the "Subservicer"), Chase Manhattan Mortgage Corporation, as master servicer (the "Master Servicer") and Citibank, N.A., as trustee (the "Trustee"), (ii) any property which initially secured a Mortgage Loan and which is acquired by foreclosure or deed-in-lieu of foreclosure, (iii) all insurance policies and the proceeds thereof described below and (iv) certain rights to require repurchase of the Mortgage Loans by the Seller for breach of representation or warranty. Subsequent Mortgage Loans are intended to be purchased by the Trust Fund from the Seller from time to time on or before [DATE] from funds on deposit in the Pre-Funding Account. The Subsequent Mortgage Loans, if available, will be purchased by the Depositor and sold by the Depositor to the Trust Fund for deposit in the Mortgage Pool. The Subsequent Mortgage Loans will become part of either the fixed rate Loan Group (in such case a "Subsequent Fixed Rate Mortgage Loan" and together with the Fixed Rate Mortgage Loans, the "Fixed Rate Mortgage Loans") or the adjustable rate Loan Group (in such case a "Subsequent Adjustable Rate Mortgage Loan" and together with the Adjustable Rate Mortgage Loans, the "Adjustable Rate Mortgage Loans"). The Pooling and Servicing Agreement will provide that each Mortgage Loan must conform to certain specified characteristics and, following the conveyance of the Subsequent Mortgage Loans, the Mortgage Pool must conform to certain specified characteristics, as described below under "--Conveyance of Subsequent Mortgage Loans and the Pre-Funding Account." The Mortgage Loans to be included in the Trust Fund will have been originated or purchased by Chase Manhattan Mortgage Corporation (the "Seller") and will have been originated substantially in accordance with the Seller's underwriting criteria for sub-prime ("B&C") quality mortgage loans described herein under "Chase Manhattan Mortgage Corporation--Underwriting Standards--B&C Quality Mortgage Loans." Sub-prime mortgage loans are generally mortgage loans made to borrowers who do not qualify for financing under conventional underwriting criteria due to prior credit difficulties, the inability to satisfy conventional documentation standards and/or conventional debt to income ratios. Approximately [____]% of the Mortgage Loans in the Statistical Mortgage Pool were purchased by the Seller under its small lender program (the "Small Lender Program"). All loans purchased under this program were originated by third parties and subsequently purchased by the Seller on an individual loan basis or included in a small bulk acquisition of generally less than $5,000,000. Each Mortgage Loan purchased through the Small Lender Program was re-underwritten substantially in accordance with the B&C Underwriting Guidelines, as described herein under "Chase Mortgage Corporation--Underwriting Standards--B&C Quality Mortgage Loans." Scheduled monthly payments made by the obligors (the "Mortgagors") on the Mortgage Loans ("Scheduled Payments") either earlier or later than the scheduled due dates thereof will not affect the amortization schedule or the relative application of such payments to principal and interest. Substantially all of the Mortgage Notes will provide for a fifteen (15) day grace period for monthly payments. Any Mortgage Loan may be prepaid in full or in part at any time; however, approximately [____]% of the Fixed Rate Mortgage Loans in the Statistical Mortgage Pool and approximately [____]% of the Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool provide for the payment by the borrower of a prepayment charge in limited circumstances on full or partial prepayments made during the prepayment penalty term. The weighted average prepayment penalty term is approximately 40 months with respect to the Fixed Rate Mortgage Loans in the Statistical Mortgage Pool which have prepayment penalties and approximately 31 months with respect S-26 to the Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool which have prepayment penalties. In general, the related Mortgage Note will provide that a prepayment charge will apply if, during the prepayment penalty term, the borrower prepays such Mortgage Loan in full or in part. The amount of the prepayment charge will generally be equal to six months' interest calculated on the basis of the rate in effect at the time of such prepayment on the amount prepaid in excess of 20% of the original balance of such Mortgage Loan. The enforceability of prepayment penalties is unclear under the laws of many states. Prepayment penalties will be paid to the Master Servicer as additional servicing compensation. See "Material Legal Aspects of the Mortgage Loans--Late Charges, Default Interest and Limitations on Prepayment" in the attached Prospectus. Approximately [__]% of the Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool as of the Cut-off Date (the "Six Month LIBOR Loans") will have a Mortgage Rate which is generally subject to semi-annual adjustment on the first day of the months specified in the related Mortgage Note (each such date, an "Adjustment Date") to equal the sum, rounded to the nearest 0.125%, of (i) the average of the London interbank offered rates for six-month U.S. dollar deposits in the London market, as set forth in The Wall Street Journal, or, if such rate ceases to be published in The Wall Street Journal or becomes unavailable for any reason, then based upon a new index selected by the Trustee, as holder of the related Mortgage Note, based on comparable information, in each case as most recently announced as of a date 45 days prior to such Adjustment Date (the "Mortgage Index"), and (ii) a fixed percentage amount specified in the related Mortgage Note (the "Gross Margin"); provided, however, that the Mortgage Rate on substantially all the Six Month LIBOR Loans will not increase or decrease by more than [___]% on any Adjustment Date (the "Periodic Rate Cap") and, provided further, that it will not be higher than the Maximum Mortgage Rate or lower than the Minimum Mortgage Rate (each as defined below). Substantially all of the Six Month LIBOR Loans were originated with Mortgage Rates less than the sum of the then applicable Mortgage Index and the related Gross Margin. Substantially all of the Six Month LIBOR Loans will provide that the related Mortgage Rate will never exceed the initial Mortgage Rate plus [____]% (such sum, the "Maximum Mortgage Rate"). Substantially all of the Six Month LIBOR Loans provide that the related Mortgage Rate will never be less than the initial Mortgage Rate (such rate, the "Minimum Mortgage Rate"). Effective with the first payment due on an Adjustable Rate Mortgage Loan after each related Adjustment Date, the monthly payment will be adjusted to an amount which will fully amortize the outstanding principal balance of the Mortgage Loan over its remaining term. [Approximately [___]% of the Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool as of the Cut-off Date (the "1/29 Loans"), bear interest at a fixed rate for a period of one year after origination and thereafter have semiannual interest rate and payment adjustments in substantially the same manner as the Six-Month LIBOR Loans. Substantially all of the 1/29 Loans are subject to a [____]% Periodic Rate Cap with respect to the first Adjustment Date and a [____]% Periodic Rate Cap with respect to each Adjustment Date thereafter, have a Maximum Mortgage Rate equal to the initial Mortgage Rate plus [____]% and have a Minimum Mortgage Rate equal to the initial Mortgage Rate. Approximately[___]% of the Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool as of the Cut-off Date (the "2/28 Loans"), bear interest at a fixed rate of interest for a period of two years after origination and thereafter have semiannual interest rate and payment adjustments in substantially the same manner as the Six-Month LIBOR Loans. Substantially all of the 2/28 Loans are subject to a[____]% Periodic Rate Cap with respect to the first Adjustment Date and a [____]% Periodic Rate Cap with respect to each Adjustment Date thereafter, have a Maximum Mortgage Rate equal to the initial Mortgage Rate plus [____]% and have a Minimum Mortgage Rate equal to the initial Mortgage Rate. S-27 Approximately [____]% of the Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool as of the Cut-off Date (the "3/27 Loans"), bear interest at a fixed rate of interest for a period of three years after origination and thereafter have semiannual interest rate and payment adjustments in substantially the same manner as the Six-Month LIBOR Loans. Substantially all of the 3/27 Loans are subject to a [____]% Periodic Rate Cap with respect to the first Adjustment Date and a [____]% Periodic Rate Cap with respect to each Adjustment Date thereafter, have a Maximum Mortgage Rate equal to the initial Mortgage Rate plus [____]% and have a Minimum Mortgage Rate equal to the initial Mortgage Rate. Approximately [___]% of the Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool as of the Cut-off Date (the "5/25 Loans"), bear interest at a fixed rate for a period of five years after origination and thereafter substantially all have semiannual interest rate and payment adjustments in substantially the same manner as the Six-Month LIBOR Loans. Substantially all of the 5/25 Loans are subject to a [___]% Periodic Rate Cap with respect to the first Adjustment Date and a [___]% Periodic Rate Cap with respect to each Adjustment Date thereafter, have a Maximum Mortgage Rate equal to the initial Mortgage Rate plus [___]% and have a Minimum Mortgage Rate equal to the initial Mortgage Rate. Fixed Rate Mortgage Loan Group. As of the Cut-off Date, the aggregate principal balance of the Fixed Rate Mortgage Loans in the Statistical Mortgage Pool was approximately $[___________]. As of the Cut-off Date, the average outstanding principal balance of the Fixed Rate Mortgage Loans in the Statistical Mortgage Pool was approximately $[______], the minimum outstanding principal balance was approximately $[_____], the maximum outstanding principal balance was approximately $[_____], the lowest Mortgage Rate and the highest Mortgage Rate were [____]% and [____]% per annum, respectively, and the weighted average Mortgage Rate was approximately [_____]% per annum. Approximately [___%] of the Fixed Rate Mortgage Loans in the Statistical Mortgage Pool (each, a "Balloon Loan") have original terms to stated maturity of approximately 15 years and provide for level monthly payments based on a 30-year amortization schedule with a balloon payment of the remaining outstanding principal balance (a "Balloon Amount") due on each such Mortgage Loan at its stated maturity. Adjustable Rate Mortgage Loan Group. As of the Cut-off Date, the aggregate principal balance of the Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool was approximately $[___________]. As of the Cut-off Date the average outstanding principal balance of the Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool was approximately $[________], the minimum outstanding principal balance was approximately $[_______], the maximum outstanding principal balance was approximately $[________], the lowest current Mortgage Rate and the highest current Mortgage Rate were approximately [_____]% and [______]% per annum, respectively, and the weighted average Mortgage Rate was approximately [____]% per annum. The "Loan-to-Value Ratio" of a Mortgage Loan is equal to (i) the principal balance of such Mortgage Loan at the date of origination, divided by (ii) the Collateral Value of the related Mortgaged Property. With respect to a Mortgage Loan the proceeds of which were used to purchase the related Mortgage Property, the "Collateral Value" of a Mortgaged Property is the lesser of (x) the appraised value based on an appraisal made for the Seller by an independent fee appraiser at the time of the origination of the related Mortgage Loan, and (y) the sales price of such Mortgaged Property at such time of origination. With respect to a Mortgage Loan the proceeds of which were used to refinance an existing mortgage loan, the "Collateral Value" is the appraised value of the Mortgaged Property based upon the appraisal obtained at the time of refinancing. The weighted average Loan-to-Value Ratio as of the Cutoff Date for the Fixed Rate Mortgage Loans in the Statistical Mortgage Pool was approximately [____]% and the weighted average Loan-to-Value Ratio as of the Cut-off Date for the Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool was approximately [____]%. Mortgage Loans The following tables describe the Mortgage Loans in the Statistical Mortgage Pool and the related Mortgaged Properties as of the close of business on the Cut-off Date. The sum of the columns below may not equal the total indicated due to rounding. S-28 INITIAL FIXED RATE LOAN GROUP STATISTICAL MORTGAGE POOL
Mortgage Rates for the Initial Fixed Rate Mortgage Loan Group(1) Number of Aggregate Principal Percent of Mortgage Rate Mortgage Loans Balance Outstanding Loan Group - ------------- -------------- ------------------- ---------- -------------- ------------------- ---------- Totals............. % ============== =================== ==========
- ----------- (1) As of the Cut-off Date, the interest rates (the "Mortgage Rates") borne by the Fixed Rate Mortgage Loans in the Statistical Mortgage Pool ranged from [______]% per annum to [_______]% per annum and the weighted average Mortgage Rate of the Initial Fixed Rate Mortgage Loans in the Statistical Mortgage Pool was approximately [_______]% per annum. S-29
Remaining Months to Stated Maturity for the Initial Fixed Rate Mortgage Loan Group(1) Number of Aggregate Principal Percent of Remaining Rate Mortgage Loans Balance Outstanding Loan Group - -------------- -------------- ------------------- ---------- -------------- ------------------- ---------- Totals............. 100.0% ============== =================== ==========
- ----------- (1) As of the Cut-off Date, the remaining terms to stated maturity of the Fixed Rate Mortgage Loans in the Statistical Mortgage Pool ranged from [___]months to [___]months and the weighted average remaining term to stated maturity of the Fixed Rate Mortgage Loans in the Statistical Mortgage Pool was approximately [___]months.
Original Mortgage Loan Principal Balances for the Fixed Rate Mortgage Loan Group(1) Number of Aggregate Principal Percent of Range of Original Mortgage Loan Principal Balances Mortgage Loans Balance Outstanding Loan Group - -------------------------------------------------- -------------- ------------------- ---------- -------------- ------------------- ---------- Totals............. 100.0% ============== =================== ==========
- ----------- (1) As of the Cut-off Date, the outstanding principal balances of the Fixed Rate Mortgage Loans in the Statistical Mortgage Pool ranged from approximately $[_______]to approximately $[_______]and the average outstanding principal balance of the Fixed Rate Mortgage Loans in the Statistical Mortgage Pool was approximately $[______]. S-30
Product Type for the Fixed Rate Mortgage Loan Group Number of Aggregate Principal Percent of Loan Type Mortgage Loans Balance Outstanding Loan Group - --------- -------------- ------------------- ---------- 10 year Fixed....................................... 15 year Fixed....................................... 20 year Fixed....................................... 25 year Fixed....................................... 30 year Fixed....................................... Balloon Loan........................................ -------------- ------------------- ---------- Totals.................................... 100.0% ============== =================== ==========
S-31
State Distributions of Initial Fixed Rate Mortgaged Properties(1) Number of Aggregate Principal Percent of State Mortgage Loans Balance Outstanding Loan Group - ----- -------------- ------------------- ---------- Alaska...................................... Arizona..................................... Arkansas.................................... California.................................. Colorado.................................... Connecticut................................. Delaware.................................... District of Columbia........................ Florida..................................... Georgia..................................... Idaho....................................... Illinois.................................... Indiana..................................... Iowa........................................ Kansas...................................... Kentucky.................................... Louisiana................................... Maine....................................... Maryland.................................... Massachusetts............................... Michigan.................................... Minnesota................................... Mississippi................................. Missouri.................................... Montana..................................... Nebraska.................................... Nevada...................................... New Hampshire............................... New Jersey.................................. New Mexico.................................. New York.................................... North Carolina.............................. Ohio........................................ Oklahoma.................................... Oregon...................................... Pennsylvania................................ Rhode Island................................ South Carolina.............................. South Dakota................................
S-32
Number of Aggregate Principal Percent of State Mortgage Loans Balance Outstanding Loan Group - ----- -------------- ------------------- ---------- Tennessee................................... Texas....................................... Utah........................................ Vermont..................................... Virginia.................................... Washington.................................. West Virginia............................... Wisconsin................................... -------------- ------------------- ---------- Totals............................ 100.0% ============== =================== ==========
- --------------- (1) No more than approximately [___]% of the Fixed Rate Mortgage Loans in the Statistical Mortgage Pool will be secured by Mortgaged Properties located in any one zip code area.
Loan-to-Value Ratios for the Fixed Rate Mortgage Loan Group(1) Number of Aggregate Principal Percent of Range of Loan-to-Value Ratio Mortgage Loans Balance Outstanding Loan Group - ---------------------------- -------------- ------------------- ---------- % or less.................................. % %.......................................... %.......................................... %.......................................... %.......................................... %.......................................... %.......................................... %.......................................... %.......................................... %.......................................... -------------- ------------------- ---------- Totals........................... 100.0% ============== =================== ==========
- --------------- (1) As of the Cut-off Date, the Loan-to-Value Ratios of the Fixed Rate Mortgage Loans in the Statistical Mortgage Pool ranged from [____]% to [____]% and the weighted average Loan-to-Value Ratio of the Fixed Rate Mortgage Loans in the Statistical Mortgage Pool was approximately [____]%. S-33
Loan Purpose for the Initial Fixed Rate Mortgage Loan Group Number of Aggregate Principal Percent of Loan Purpose Mortgage Loans Balance Outstanding Loan Group - ------------ -------------- ------------------- ---------- Refinance--Rate/Term......................... Purchase..................................... Refinance--Cashout........................... -------------- ------------------- ---------- Totals............................. 100.0% ============== =================== ========== Type of Mortgaged Properties for the Fixed Rate Mortgage Loan Group Number of Aggregate Principal Percent of Property Type Mortgage Loans Balance Outstanding Loan Group - ------------- -------------- ------------------- ---------- Planned Unit Development.................... % Condominium................................. Detached Planned Unit Development........... Manufactured Housing........................ Single-family Detached...................... Small Mixed Use............................. Two- to Four-Family Dwelling Unit........... -------------- ------------------- ---------- Totals............................ 100.0% ============== =================== ========== Documentation Summary for the Fixed Rate Mortgage Loan Group Number of Aggregate Principal Percent of Documentation Mortgage Loans Balance Outstanding Loan Group - ------------- -------------- ------------------- ---------- 24 Month Bank Statement........................ Full Documentation............................. Reduced Documentation.......................... Stated Documentation........................... -------------- ------------------- ---------- Totals............................... 100.0% ============== =================== ==========
S-34
Occupancy Types for the Fixed Rate Mortgage Loan Group(1) Number of Aggregate Principal Percent of Occupancy Mortgage Loans Balance Outstanding Loan Group - --------- -------------- ------------------- ---------- Investment.................................... Owner-occupied................................ Second Home................................... -------------- ------------------- ---------- Totals............................... 100.0% ============== =================== ==========
- --------------- (1) Based upon representations of the related Mortgagor at the time of origination.
Mortgage Loan Age Summary for the Fixed Rate Mortgage Loan Group(1) Number of Aggregate Principal Percent of Mortgage Loan Age (Months) Mortgage Loans Balance Outstanding Loan Group - -------------------------- -------------- ------------------- ---------- 0............................................. 1 ............................................ 2............................................. 3............................................. 4............................................. 5............................................. 6............................................. 7............................................. 8............................................. 9............................................. 10............................................ 11............................................ 12............................................ 13............................................ 14............................................ 15............................................ 16............................................ -------------- ------------------- ---------- Totals............................... 100.0% ============== =================== ==========
- --------------- (1) The weighted average age of the Fixed Rate Mortgage Loans in the Statistical Mortgage Pool is approximately [__]months. S-35
Credit Grade Summary for the Fixed Rate Mortgage Loan Group Number of Aggregate Principal Percent of Credit Grade Mortgage Loans Balance Outstanding Loan Group - ------------ -------------- ------------------- ---------- AO............................................ A-............................................ B............................................. B-............................................ C............................................. C-............................................ -------------- ------------------- ---------- Totals............................... 100.0% ============== =================== ========== Year of Origination for the Fixed Rate Mortgage Loan Group Number of Aggregate Principal Percent of Year of Origination Mortgage Loans Balance Outstanding Loan Group - ------------------- -------------- ------------------- ---------- [YEAR]........................................ [YEAR]........................................ -------------- ------------------- ---------- Totals............................... 100.0% ============== =================== ==========
S-36
Prepayment Penalties for the Fixed Rate Mortgage Loan Group(1) Number of Aggregate Principal Percent of Prepayment Penalty Term Mortgage Loans Balance Outstanding Loan Group - ----------------------- -------------- ------------------- ---------- None ...................................... 12 months..................................... 18 months..................................... 24 months..................................... 36 months..................................... 60 months..................................... -------------- ------------------- ---------- Totals............................... 100.0% ============== =================== ==========
- --------------- (1) The weighted average prepayment penalty term with respect to the Fixed Rate Mortgage Loans in the Statistical Mortgage Pool having prepayment penalties is approximately [__]months. With respect to those Fixed Rate Mortgage Loans in the Statistical Mortgage Pool which have prepayment penalties, [___]% of such Mortgage Loans are subject to a prepayment penalty which will equal six months interest calculated on the basis of the rate in effect at the time of such prepayment on the amount prepaid in excess of 20% of the original principal balance of such mortgage loan. S-37 ADJUSTABLE RATE LOAN GROUP STATISTICAL MORTGAGE POOL
Current Mortgage Rates for the Adjustable Rate Mortgage Loan Group(1) Number of Aggregate Principal Percent of Mortgage Rate Mortgage Loans Balance Outstanding Loan Group - ------------- -------------- ------------------- ---------- -------------- ------------------- ---------- Totals............................... 100.0% ============== =================== ==========
- ----------- (1) As of the Cut-off Date, the current Mortgage Rates borne by the Initial Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool ranged from [____]% per annum to [_____]% per annum and the weighted average Mortgage Rate borne by the Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool was approximately [____]% per annum. S-38
Remaining Months to Stated Maturity for the Adjustable Rate Mortgage Loan Group(1) Number of Aggregate Principal Percent of Remaining Term Mortgage Loans Balance Outstanding Loan Group - -------------- -------------- ------------------- ---------- -------------- ------------------- ---------- Totals............................... 100.0% ============== =================== ==========
- ----------- (1) As of the Cut-off Date, the remaining terms to stated maturity of the Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool ranged from [___]months to [___]months and the weighted average remaining term to stated maturity of the Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool was approximately [___]months.
Original Mortgage Loan Principal Balances for the Adjustable Rate Mortgage(1) Range of Original Mortgage Loan Principal Number of Aggregate Principal Percent of Balances Mortgage Loans Balance Outstanding Loan Group - ----------------------------------------- -------------- ------------------- ---------- -------------- ------------------- ---------- Totals............................... 100.0% ============== =================== ==========
- ----------- (1) As of the Cut-off Date, the outstanding principal balances of the Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool ranged from approximately $[_____]to approximately $[_______]and the average outstanding principal balance of the Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool was approximately $[______]. S-39
State Distributions of Adjustable Rate Mortgaged Properties(1) Number of Aggregate Principal Percent of State Mortgage Loans Balance Outstanding Loan Group - ----- -------------- ------------------- ---------- Arizona..................................... Arkansas.................................... California.................................. Colorado.................................... Connecticut................................. Delaware.................................... District of Columbia........................ Florida..................................... Georgia..................................... Hawaii...................................... Idaho....................................... Illinois.................................... Indiana..................................... Iowa........................................ Kansas...................................... Kentucky.................................... Louisiana................................... Maine....................................... Maryland.................................... Massachusetts............................... Michigan.................................... Minnesota................................... Mississippi................................. Missouri.................................... Nevada...................................... New Hampshire...............................
S-40
Number of Aggregate Principal Percent of State Mortgage Loans Balance Outstanding Loan Group - ----- -------------- ------------------- ---------- New Jersey.................................. New Mexico.................................. New York.................................... North Carolina.............................. North Dakota................................ Ohio........................................ Oklahoma.................................... Oregon...................................... Pennsylvania................................ Rhode Island................................ South Carolina.............................. South Dakota................................ Tennessee................................... Texas....................................... Utah........................................ Vermont..................................... Virginia.................................... Washington.................................. West Virginia............................... Wisconsin................................... -------------- ------------------- ---------- Totals............................... 100.0% ============== =================== ==========
- --------------- (1) No more than approximately [___]% of the Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool will be secured by Mortgaged Properties located in any one zip code area.
Loan-to-Value Ratios for the Adjustable Rate Mortgage Loan Group(1) Number of Aggregate Principal Percent of Range of Loan-to-Value Ratio Mortgage Loans Balance Outstanding Loan Group - ---------------------------- -------------- ------------------- ---------- -------------- ------------------- ---------- Totals............................... 100.0% ============== =================== ==========
- --------------- (1) As of the Cut-off Date, the Loan-to-Value Ratios of the Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool ranged from [____]% to [____]% and the weighted average Loan-to-Value Ratio of the Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool was approximately [_____]%. S-41
Loan Purpose for the Adjustable Rate Mortgage Loan Group Number of Aggregate Principal Percent of Loan Purpose Mortgage Loans Balance Outstanding Loan Group - ------------ -------------- ------------------- ---------- Purchase.................................... Refinance--Rate/Term......................... Refinance--Cashout........................... -------------- ------------------- ---------- Totals............................... 100.0% ============== =================== ========== Type of Mortgaged Properties for the Adjustable Rate Mortgage Loan Group Number of Aggregate Principal Percent of Property Type Mortgage Loans Balance Outstanding Loan Group - ------------- -------------- ------------------- ---------- Single-family Detached...................... Two- to Four-Family Dwelling Unit........... Detached Planned Unit Development........... Condominium................................. Planned Unit Development.................... Manufactured Housing........................ -------------- ------------------- ---------- Totals............................... 100.0% ============== =================== ==========
S-42
Documentation Summary for the Adjustable Rate Mortgage Loan Group Number of Aggregate Principal Percent of Documentation Mortgage Loans Balance Outstanding Loan Group - ------------- -------------- ------------------- ---------- Full Documentation............................. 24 Month Bank Statement........................ Reduced Documentation.......................... Stated Documentation........................... -------------- ------------------- ---------- Totals............................... 100.0% ============== =================== ========== Occupancy Types for the Adjustable Rate Mortgage Loan Group(1) Number of Aggregate Principal Percent of Occupancy Mortgage Loans Balance Outstanding Loan Group - --------- -------------- ------------------- ---------- Owner-occupied................................ Second Home................................... Investment.................................... -------------- ------------------- ---------- Totals.............................. 100.0% ============== =================== ==========
- --------------- (1) Based upon representations of the related Mortgagor at the time of origination.
Mortgage Loan Age Summary for the Adjustable Rate Mortgage Loan Group(1) Number of Aggregate Principal Percent of Mortgage Loan Age (Months) Mortgage Loans Balance Outstanding Loan Group - -------------------------- -------------- ------------------- ---------- 0............................................. 1............................................. 2............................................. 3............................................. 4............................................. 5............................................. 6............................................. 7............................................. 8............................................. 9............................................. 10............................................ 11............................................ 12............................................ 13............................................ 14............................................ 15............................................ 24 ........................................... -------------- ------------------- ---------- Totals.............................. 100.0% ============== =================== ==========
- --------------- (1) The weighted average age of the Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool is approximately [__]months. S-43
Credit Grade Summary for the Adjustable Rate Mortgage Loan Group Number of Aggregate Principal Percent of Credit Grade Mortgage Loans Balance Outstanding Loan Group - ------------ -------------- ------------------- ---------- AO............................................ A-............................................ B............................................. B-............................................ C............................................. C- ........................................... -------------- ------------------- ---------- Totals.............................. 100.0% ============== =================== ========== Year of Origination for the Adjustable Rate Mortgage Loan Group Number of Aggregate Principal Percent of Year of Origination Mortgage Loans Balance Outstanding Loan Group - ------------------- -------------- ------------------- ---------- [YEAR]........................................ [YEAR]........................................ [YEAR]........................................ -------------- ------------------- ---------- Totals.............................. 100.0% ============== =================== ==========
S-44
Maximum Mortgage Rates for the Adjustable Rate Mortgage Loan Group(1) Number of Aggregate Principal Percent of Range of Maximum Mortgage Rates Mortgage Loans Balance Outstanding Loan Group - ------------------------------- -------------- ------------------- ---------- %- %................ %- %................ %- %................ %- %................ %- %................ %- %................ %- %................ %- %................ %- %................ %- %................ %- %................ %- %................ %- %................ %- %................ %- %................ %- %................ %- %................ -------------- ------------------- ---------- Totals....................... 100.0% ============== =================== ==========
- --------------- (1) As of the Cut-off Date, the Maximum Mortgage Rates for the Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool ranged from [____]% per annum to [____]% per annum and the weighted average Maximum Mortgage Rate for the Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool was [____]% per annum. S-45
Prepayment Penalties for the Adjustable Rate Mortgage Loan Group(1) Number of Aggregate Principal Percent of Prepayment Penalty Term Mortgage Loans Balance Outstanding Loan Group - ----------------------- -------------- ------------------- ---------- None ...................................... 12 months..................................... 24 months..................................... 36 months..................................... 60 months..................................... -------------- ------------------- ---------- Totals................................... 100.0% ============== =================== ==========
- --------------- (1) The weighted average prepayment penalty term with respect to the Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool having prepayment penalties is approximately [__]months. With respect to those Adjustable Rate Mortgage Loans in the Statistical Mortgage Pool which have prepayment penalties, approximately [___]% of such Mortgage Loans are subject to a prepayment penalty which will equal six months interest calculated on the basis of the rate in effect at the time of such prepayment on the amount prepaid in excess of 20% of the original principal balance of such mortgage loan.
Product Type for the Adjustable Rate Mortgage Loan Group Number of Aggregate Principal Percent of Loan Type Mortgage Loans Balance Outstanding Loan Group - --------- -------------- ------------------- ---------- Six Month LIBOR Loan.......................... 1/29 Loan ................................ 2/28 Loan..................................... 3/27 Loan..................................... 5/25 Loan..................................... Other......................................... -------------- ------------------- ---------- Totals................................... 100.0% ============== =================== ==========
S-46
Next Adjustment Date for the Adjustable Rate Mortgage Loan Group Number of Aggregate Principal Percent of Next Adjustment Date Mortgage Loans Balance Outstanding Loan Group - -------------------- -------------- ------------------- ---------- [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... [MONTH/YEAR]............................... -------------- ------------------- ---------- Totals................................ 100.0% ============== =================== ==========
S-47 Assignment of the Mortgage Loans On the Closing Date (or any Subsequent Transfer Date with respect to the Subsequent Mortgage Loans), the Depositor will cause the Initial Mortgage Loans (or the Subsequent Mortgage Loans, as the case may be) to be assigned to the Trustee, together with the rights to all principal and interest due on or with respect to the related Mortgage Loans after the Cut-off Date (or Subsequent Cut-off Date (defined herein), as applicable) other than interest accrued on such Mortgage Loans prior to the Cut-off Date (or Subsequent Cut-off Date, as applicable). The Chase Manhattan Bank, as authenticating agent, will, concurrently with the assignment of the Initial Mortgage Loans, authenticate and deliver the Certificates. Each Initial Mortgage Loan will be identified in a schedule appearing as an exhibit to the Pooling and Servicing Agreement (the "Mortgage Loan Schedule"). The Mortgage Loan Schedule will specify, among other things, with respect to each Initial Mortgage Loan as of the close of business on the Cut-off Date, the original principal balance and the unpaid principal balance; the Monthly Payment; the months remaining to stated maturity of the Mortgage Note; and the Mortgage Rate. At the conclusion of the Funding Period (defined herein), the Depositor will deliver to the Trustee and the Servicer a revised Mortgage Loan Schedule which will reflect the addition of the Subsequent Mortgage Loans to the Mortgage Pool. In addition, the Depositor will, as to each Mortgage Loan, deliver or cause to be delivered to the Trustee the Mortgage Note (together with all amendments and modifications thereto) endorsed without recourse to the Trustee or its designee, the original or a certified copy of the mortgage (together with all amendments and modifications thereto) with evidence of recording indicated thereon and an original or certified copy of an assignment of the Mortgage in recordable form. The Depositor will cause the assignments to be recorded in the appropriate public records. Representations and Warranties The Depositor will make certain representations and warranties for the benefit of the Trustee with respect to the Mortgage Loans as described in the Prospectus under "The Pooling and Servicing Agreement--Assignment of Mortgage Loans; Warranties" and will be obligated to repurchase any S-48 Mortgage Loan as to which there is a material breach of any such representation or warranty. Such repurchase will constitute the sole remedy available to Certificate Owners for a breach of such representations or warranties. The Trustee will enforce the repurchase obligations of the Depositor. In lieu of such repurchase obligation, the Depositor may, within two years after the date of initial delivery of the Certificates, substitute for the affected Mortgage Loans substitute mortgage loans, as described under "The Pooling and Servicing Agreement--Assignment of Mortgage Loans; Warranties" in the Prospectus. Conveyance of Subsequent Mortgage Loans and the Pre-Funding Account Under and to the extent provided in the Pooling and Servicing Agreement, following the initial issuance of the Certificates, the Trust Fund will be obligated to purchase from the Depositor during the Funding Period, subject to the availability thereof, the Subsequent Mortgage Loans. Each Subsequent Mortgage Loan shall have been underwritten in accordance with the criteria set forth under "Chase Manhattan Mortgage Corporation--Underwriting Standards" herein. The Subsequent Mortgage Loans will be transferred to the Trust Fund pursuant to subsequent transfer instruments (the "Subsequent Transfer Instruments") between the Depositor and the Trust Fund. In connection with the purchase of Subsequent Mortgage Loans on such dates of transfer (the "Subsequent Transfer Dates"), the Trust Fund will be required to pay to the Depositor from amounts on deposit in the Pre-Funding Account (defined herein) a cash purchase price of 100% of the principal balance thereof as of the related Subsequent Cut-off Date (defined below). The Depositor will designate the first day of the month in which the related Subsequent Transfer Date occurs as the cut-off date with respect to the related Subsequent Mortgage Loans (the "Subsequent Cut-off Date"). The amount paid from the Pre-Funding Account on each Subsequent Transfer Date will not include accrued interest on the related Subsequent Mortgage Loans. Following each Subsequent Transfer Date, the aggregate principal balance of the Mortgage Loans in the related Loan Group will increase by an amount equal to the aggregate principal balance of the related Subsequent Mortgage Loans so purchased for such Loan Group and the amount in the Pre-Funding Account will decrease accordingly. An account (the "Pre-Funding Account") will be established by, or on behalf of the Trustee and funded on the Closing Date by the Depositor with approximately $[_________](the "Original Pre-Funded Amount"), subject to a permitted variance equal to plus or minus five percent, to provide the Trust Fund with sufficient funds to purchase Subsequent Mortgage Loans, provided that the Original Pre-Funded Amount will not exceed 25% of the aggregate initial Certificate Principal Balance of the Certificates. The Original Pre-Funded Amount will be comprised of the "Group I Original Pre-Funded Amount," which will equal approximately $[_________]on the Closing Date, and the "Group II Original Pre-Funded Amount," which will equal approximately $[__________]on the Closing Date. The Group I Original Pre-Funded Amount will be reduced during the Funding Period by the amount used to purchase Subsequent Fixed Rate Mortgage Loans in accordance with the Pooling and Servicing Agreement and the Group II Original Pre-Funded Amount will be reduced during the Funding Period by the amount used to purchase Subsequent Adjustable Rate Mortgage Loans in S-49 accordance with the Pooling and Servicing Agreement. During the period (the "Funding Period") from the Closing Date until the earlier of (i) the date on which the amount on deposit in the Pre-Funding Account is reduced to zero or (ii) [DATE], such Original Pre-Funded Amount, reduced as described herein, will be maintained in the Pre-Funding Account. Any conveyance of Subsequent Mortgage Loans on a Subsequent Transfer Date is subject to certain conditions including, but not limited to: (a) each such Subsequent Mortgage Loan must satisfy the representations and warranties specified in the related Subsequent Transfer Instrument and the Pooling and Servicing Agreement; (b) the Depositor will not select such Subsequent Mortgage Loans in a manner that it believes to be adverse to the interests of the Certificateholders; (c) the Depositor will deliver certain opinions of counsel with respect to the validity of the conveyance of such Subsequent Mortgage Loans; and (d) as of the applicable Subsequent Cut-off Date each Subsequent Mortgage Loan will satisfy the following criteria: [(i) the Subsequent Mortgage Loan may not be 30 or more days delinquent as of the related Subsequent Cut-off Date (except with respect to approximately [___]% of the Subsequent Mortgage Loans, by aggregate principal balance as of the related Subsequent Cut-off Date, which may be 30 or more days delinquent but less than 60 days delinquent as of the related Subsequent Cut-off Date); (ii) the term to stated maturity of the Subsequent Mortgage Loan will not be less than 120 months and will not exceed 360 months; (iii) the Subsequent Mortgage Loan may not provide for negative amortization; (iv) the Subsequent Mortgage Loan will not have a loan-to-value ratio greater than 95%; (v) the Subsequent Mortgage Loans will have, as of the Subsequent Cut-off Date, a weighted average term since origination not in excess of 6 months; (vi) the Subsequent Mortgage Loan must have a first payment date occurring on or before [DATE]; and (vii) the Subsequent Mortgage Loan shall have been underwritten in accordance with the criteria set forth under "Chase Manhattan Mortgage Corporation--Underwriting Standards" herein. In addition, following the purchase of any Subsequent Mortgage Loan by the Trust Fund, the Mortgage Loans (including the Subsequent Mortgage Loans) will as of the Subsequent Cut-off Date not be materially inconsistent with the Statistical Mortgage Pool. Notwithstanding the foregoing, any Subsequent Mortgage Loan may be rejected by either Moody's or Fitch if the inclusion of such Subsequent Mortgage Loan would adversely affect the rating on any Class of Certificates. CHASE MANHATTAN MORTGAGE CORPORATION Chase Manhattan Mortgage Corporation ("Chase Manhattan Mortgage") is a New Jersey corporation, formed in 1920. It is a wholly-owned indirect subsidiary of Chase Manhattan Bank USA, National Association. Chase Manhattan Mortgage is engaged in the mortgage origination and servicing businesses. Chase Manhattan Mortgage is a HUD-approved mortgagee. Chase Manhattan Mortgage is subject to supervision, examination and regulation by the Office of the Comptroller of the Currency and various state regulatory bodies. The address of Chase Manhattan Mortgage is 343 Thornall Street, Edison, New Jersey 08837 and its telephone number is (732) 205-0600. Chase Manhattan Mortgage makes loans in all 50 states and the District of Columbia primarily for the purpose of enabling S-50 borrowers to purchase or refinance residential real property, secured by first liens on such property. Chase Manhattan Mortgage's real estate loans primarily are made to homeowners based on the security of one- to four-family residences. Underwriting Standards B&C Quality Mortgage Loans. The following is a description of the underwriting procedures customarily employed by Chase Manhattan Mortgage with respect to B&C quality mortgage loans (the "B&C Underwriting Guidelines"). Prior to the funding or acquiring of any B&C quality mortgage loan, Chase Manhattan Mortgage underwrites the related mortgage loan in accordance with the then-current underwriting standards established by Chase Manhattan Mortgage. The B&C Underwriting Guidelines consider the value and adequacy of the mortgaged property as collateral for the proposed mortgage loan but also take into consideration the borrower's credit standing and repayment ability. On a case by case basis, Chase Manhattan Mortgage may determine that, based upon compensating factors, a prospective borrower not strictly qualifying under the underwriting risk category guidelines described below warrants an underwriting exception. Compensating factors may include, without limitation, relatively low loan-to-value ratio, relatively low debt-to-income ratio, stable employment and time in the same residence. It is expected that a significant number of the Mortgage Loans underwritten in accordance with the B&C Underwriting Guidelines will have been originated based on such underwriting exceptions. The B&C Underwriting Guidelines permit loans with loan-to-value ratios at origination of up to 95%, depending on among other things, the program, the type and use of the property, the creditworthiness of the borrower and the debt-to-income ratio. Chase Manhattan Mortgage requires title insurance on all B&C quality mortgage loans secured by liens on real property. Chase Manhattan Mortgage also requires that fire and hazard insurance coverage be maintained on the mortgaged property in an amount at least equal to the principal balance of the mortgage loan or the replacement cost of the mortgaged property, whichever is less. Flood insurance is also required for any mortgage loan if the related mortgaged property is located in either flood zone "A" or "V" as determined by the Federal Emergency Management Agency. The B&C Underwriting Guidelines are less stringent than the standards generally acceptable to FNMA and FHLMC with regard to the borrower's credit standing and repayment ability. Borrowers under the B&C Underwriting Guidelines who qualify generally would not satisfy FNMA and FHLMC underwriting guidelines for any number of reasons, including, without limitation, original principal balance, unsatisfactory payment histories or debt-to-income ratios, or a record of major derogatory credit items such as outstanding judgments or prior bankruptcies. S-51 Chase Manhattan Mortgage offers four types of income documentation programs under the B&C Underwriting Guidelines: Full Documentation, 24 Month Bank Statement, Reduced Documentation and Stated Income. In general, for mortgage loans underwritten pursuant to the Full Documentation program, Chase Manhattan Mortgage verifies income and assets through alternate documentation or written third party verifications. The 24 Month Bank Statement program utilizes the last 24 months of bank statements to support income. In general, this documentation type is available to AO, A-, B and B- credit grades. In general, the Reduced Documentation program is available for AO through D credit grades in the case of self-employed borrowers and AO, A- and B credit grades in the case of salaried borrowers. Under the Reduced Documentation program the loan-to-value ratio for non-self employed borrowers is 70%, and asset verification for source of down payment is required if the loan-to-value ratio is 70% or greater. In general, the Stated Income program is a no income/no asset verification (except that asset verification is required if the loan-to-value ratio is 70% or greater) program for credit grades AO through C, in the case of self-employed borrowers, and for credit grades AO, A- and B, for all others. The maximum loan-to-value ratio for non-self employed borrowers is 70%. Income from the application as stated by the borrower is used to qualify. The B&C Underwriting Guidelines utilize various credit grade categories to grade the likelihood that the mortgagor will satisfy the repayment conditions of the mortgage loan. These credit grade categories establish the maximum permitted loan-to-value ratio, debt-to-income ratio and loan amount, given the borrower's credit history considered in a manner generally consistent with subprime mortgage industry practice, the occupancy status of the mortgaged property, the type of mortgaged property and documentation type. A summary of such categories is set forth below. Credit Grade Category: "AO" Debt-to-Income Ratio: Maximum of 45% Mortgage History: No delinquencies of 30 days or more during the previous 12 months; no more than one such delinquency during the previous 24 months. Consumer/Revolving Credit History: No more than one delinquency (in the case of "major" credit) or two delinquencies (in the case of "minor" credit) during the previous 12 months; provided that no such delinquencies may have exceeded 59 days; no more than two ("major" credit) or three ("minor" credit) such delinquencies during the previous 24 months ("major" credit being defined as installment debt with monthly payments over $100 and revolving accounts with credit limits over $2,500). Collections/Chargeoffs: All in previous 36 months must be satisfied. S-52 Bankruptcy/Foreclosure: Must be discharged over three years from the date of application; substantial re-establishment of credit required. Credit Grade Category: "A-" Debt-to-Income Ratio: Maximum of 45% Mortgage History: No more than two delinquencies of 30 days or more during the previous 12 months; provided that no such delinquencies may have exceeded 59 days. Consumer/Revolving Credit History: No delinquencies of 60 days or more during the previous 12 months (during the case of "major" credit) or no delinquencies of 90 days or more during the previous 12 months (in the case of "minor" credit). Collections/Chargeoffs: All except for up to $1,000 in previous 36 months must be satisfied. Bankruptcy/Foreclosure: Must be discharged over two years from the date of application (or three years, if the loan-to-value ratio exceeds 85%); substantial re-establishment of credit required. Credit Grade Category: "B" Debt-to-Income Ratio: Maximum of 50% Mortgage History: No more than three delinquencies of 30 days or more during the previous 12 months; provided that no such delinquencies may have exceeded 59 days. Consumer/Revolving Credit History: No delinquencies of 90 days or more during the previous 12 months (in the case of "major" credit) and no delinquencies of 120 days or more during the previous 12 months (in the case of "minor" credit). Collections/Chargeoffs: All except for up to $2,500 in previous 36 months must be satisfied. Bankruptcy/Foreclosure: Must be discharged over eighteen months from the date of application; substantial re-establishment of credit required. S-53 Credit Grade Category: "B-" Debt-to-Income Ratio: Maximum of 50% Mortgage History: No more than four delinquencies of 30 days or more during the previous 12 months, provided that no such delinquency may have exceeded 59 days; and no more than one delinquency of 60 days or more during the previous 12 months, provided that no such delinquency may have exceeded 89 days. Consumer/Revolving Credit History: No delinquencies of 90 days or more during the previous 12 months (in the case of "major" credit) and no delinquencies of 120 days or more during the previous 12 months (in the case of "minor" credit). Collections/Chargeoffs: All except for up to $2,500 in previous 36 months must be satisfied. Bankruptcy/Foreclosure: Must be discharged over eighteen months from the date of application; substantial re-establishment of credit required. Credit Grade Category: "C" Debt-to-Income Ratio: Maximum of 55% Mortgage History: No more than five delinquencies of 30 days or more during the previous 12 months, provided that no such delinquency may have exceeded 59 days; and no more than two delinquencies of 60 days or more during the previous 12 months, provided that no such delinquency may have exceeded 89 days; and no more than one delinquency of 90 days or more during the previous 12 months, provided that; such delinquency may not have exceeded 119 days. Consumer/Revolving Credit History: No delinquencies of 120 days or more on any "major" credit during the previous 12 months. Collections/Chargeoffs: All except for up to $5,000 in previous 36 months must be satisfied. Bankruptcy/Foreclosure: Must be discharged over one year from date of application; substantial re-establishment of credit required. Credit Grade Category: "C-" Debt-to-Income Ratio: Maximum of 55% Mortgage History: Borrower cannot be more than four months delinquent at time of loan closing. S-54 Consumer/Revolving Credit History: Borrower exhibits significant past or present credit problems. Collections/Chargeoffs: All except for up to $5,000 in previous 36 months must be satisfied. Bankruptcy/Foreclosure: Chapter 13 and foreclosures must be discharged or consummated prior to loan application. Chapter 7 must be discharged or consummated over one year from date of application. Credit Grade Category: "D" Debt-to-Income Ratio: Maximum of 60% Mortgage History: History disregarded; default action allowable. Consumer/Revolving Credit History: "Major" and "minor" credit disregarded. Collections/Chargeoffs: All except for up to $5,000 in previous 36 months must be satisfied. Bankruptcy/Foreclosure: Current Chapter 13 bankruptcy and foreclosures paid through loan. Chapter 7 bankruptcy must be discharged prior to loan application. SERVICING OF THE MORTGAGE LOANS General The Subservicer will service the Mortgage Loans in accordance with the terms set forth in the Pooling and Servicing Agreement. The Subservicer may perform any of its obligations under the Pooling and Servicing Agreement through one or more subservicers, which may be affiliates of the Subservicer. Notwithstanding any such subservicing arrangement, the Subservicer will remain liable for its servicing duties and obligations under the Pooling and Servicing Agreement as if the Subservicer alone were servicing the Mortgage Loans. The Subservicer The information set forth below concerning the Subservicer has been provided to the Depositor by the Subservicer. Neither the Depositor, the Seller, the Trustee, the Underwriters nor any of their respective affiliates have made any independent investigation of such information. S-55 [Advanta [Advanta Mortgage Corp. USA] ("Advanta") will act as the Subservicer of the Mortgage Loans pursuant to the Pooling and Servicing Agreement. Advanta is an indirect subsidiary of Advanta Corp., a Delaware corporation ("Advanta Parent"), a publicly traded company based in Springhouse, Pennsylvania with assets as of June 30, 1999 in excess of $3.7 billion. Advanta Parent, through its subsidiaries (including Advanta) had managed assets (including mortgage loans) in excess of $12.3 billion as of June 30, 1999. As of June 30, 1999, Advanta and its subsidiaries were servicing approximately 112,000 closed-end fixed rate and adjustable rate mortgage loans in the Owned and Managed Servicing Portfolio (defined below) representing an aggregate outstanding principal balance of approximately $7.6 billion, and approximately 144,000 mortgage loans in the Third-Party Servicing Portfolio (defined below) representing an aggregate outstanding principal balance of approximately $9.4 billion. Recent Developments related to Advanta Parent On January 22, 1999, Fleet Financial Group, Inc. and certain of its affiliates ("Fleet") filed a complaint (the "Complaint") against Advanta Parent and certain other affiliates (but not including Advanta) relating to the transaction with Fleet which closed on February 20, 1998 in which Advanta Parent contributed substantially all of its consumer credit card business to a limited liability company owned by Fleet (the "Fleet Transaction"). The Complaint centers around post-closing adjustments and other matters relating to the Fleet Transaction. Advanta Parent has filed an answer to the Complaint denying the material allegations of the Complaint. Advanta Parent has also filed a countersuit against Fleet seeking damages from Fleet. Advanta Parent does not expect this suit to have any material adverse effect on the financial position or future operating results of Advanta Parent. This Prospectus Supplement contains forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. The most significant among these risks and uncertainties is the uncertainty of the legal process. Additional risks that may affect Advanta Parent's performance are detailed in Advanta Parent's filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. The ability of Advanta Parent's subsidiaries to honor their financial and other obligations is to some extent influenced by the financial conditions of Advanta Parent. Such obligations of Advanta, insofar as they relate to the Trust with respect to the Mortgage Loans, primarily consist of Advanta's S-56 limited advancing obligation and its obligation to service the Mortgage Loans. To the extent that Advanta's ability to perform such obligations is adversely affected, the Mortgage Loans may experience an increased level of delinquencies and losses. The Certificates will not represent an interest in or obligation of, nor are the Mortgage Loans guaranteed by, Advanta or the Advanta Parent. Additional information with respect to Advanta and Advanta Parent is available in the various reports filed by Advanta and Advanta Parent with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. Owned and Managed Servicing Portfolio. The following tables set forth information relating to the delinquency, foreclosure and loan loss experience of Advanta for its servicing portfolio, excluding certain loans serviced by Advanta that were not originated or purchased and re-underwritten by affiliates of Advanta (the "Owned and Managed Servicing Portfolio"), of closed-end fixed and adjustable rate mortgage loans as of June 30, 1999, and for each of the three prior year ends. The Owned and Managed Servicing Portfolio includes, but is not limited to, the mortgage loans originated or purchased on or prior to June 30, 1999. In addition to the Owned and Managed Servicing Portfolio, Advanta serviced as of June 30, 1999, approximately 144,000 mortgage loans with an aggregate principal balance as of such date of approximately $9.4 billion; such loans were not originated by Advanta or affiliates of Advanta but are being serviced for third parties on a contract servicing basis (the "Third Party Servicing Portfolio"). No loans in the Third Party Servicing Portfolio are included in the tables set forth below. S-57 DELINQUENCY AND FORECLOSURE EXPERIENCE OF ADVANTA'S OWNED AND MANAGED SERVICING PORTFOLIO OF CLOSED-END MORTGAGE LOANS (Dollars in Thousands)
Six Months Ended June 30, ------------------------------------------------------------------------------------ 1996 1997 1998 1999 ------------------------------------------------------------------------------------ By By By By Dollar Dollar Dollar Dollar By No. Amount By No. Amount By No. Amount By No. Amount of Loans of Loans of Loans of Loans of Loans of Loans of Loans of Loans ------------------------------------------------------------------------------------- Portfolio 43,303 $2,595,981 74,525 $4,888,936 111,707 $7,664,919 112,132 $7,660,254 Delinquency percentage(1) 6 30-59 days 3.07% 2.90% 3.13% 2.99% 3.05% 2.76% 3.18% 2.89% 60-89 days 0.85 0.90 0.98 0.98 1.10 1.08 1.10 1.01 90 days or more 1.45 1.26 1.39 1.28 1.45 1.22 1.94 1.73 - -- ---- ---- ---- ---- ---- ---- ---- ---- Total 5.37% 5.06% 5.50% 5.25% 5.60% 5.06% 6.22% 5.63% Foreclosure rate(2) 1.62% 1.92% 2.10% 2.32% 2.85% 2.98% 3.46% 3.54% REO properties(3) 0.42% -- 0.40% -- 0.78% -- 1.00% --
- ------------------ (1) The period of delinquency is based on the number of days payments are contractually past due. The delinquency statistics for the period exclude loans in foreclosure. (2) "Foreclosure Rate" is the number of mortgage loans or the dollar amount of mortgage loans in foreclosure as a percentage of the total number of mortgage loans or the dollar amount of mortgage loans, as the cases may be, as of the date indicated. (3) REO Properties (i.e., "real estate owned" properties -- properties relating to foreclosed mortgages or for which deeds in lieu of foreclosure have been accepted, and held by Advanta pending disposition) percentages are calculated using the number of loans, not the dollar amount. LOAN LOSS EXPERIENCE OF ADVANTA'S OWNED AND MANAGED SERVICING PORTFOLIO OF CLOSED-END MORTGAGE LOANS
Six Months Ended June 30, -------------------------------------------------------------------- 1996 1997 1998 1999 -------------------------------------------------------------------- Average amount outstanding(1) $2,102,643 $3,677,342 $6,233,870 $7,728,766 Net losses(2) $15,067 $18,435 $35,640 $23,374 Net losses as a percentage of average amount outstand ing(s) 0.72% 0.50% 0.57% 0.60%(3)
- ------------------ (1) "Average Amount Outstanding" during the period is the arithmetic average of the principal balances of the mortgage loans outstanding on the last business day of each month during the period. (2) "Net Losses" are amounts relating to mortgage loans which have been determined by Advanta to be uncollectible less amounts received by Advanta as recoveries from liquidation proceeds and deficiency judgments. (3) This represents an annualized number. S-58 There can be no assurance that the delinquency, foreclosure and loan loss experience on the Mortgage Loans will correspond to the delinquency, foreclosure and loan loss experience set forth in the foregoing tables, in part because the mortgage loans reflected in the foregoing tables may have been underwritten pursuant to different underwriting guidelines and may represent mortgage loans of a different character and mix than the Mortgage Loans, which may impact the delinquency, foreclosure and loan loss experience of such mortgage loans and how such mortgage loans are serviced. In addition, while the Mortgage Loans will be serviced in accordance with accepted servicing practices, Advanta may from time to time service each portfolio or group of mortgage loans (whether the Owned and Managed Portfolio or Third Party Servicing Portfolio) differently based in part on the seasoning, character and mix of the mortgage loans. Therefore, the delinquency, foreclosure and loan loss experience set forth in the foregoing tables may not necessarily be material to your decision to invest. In general, during periods in which the residential real estate market is experiencing an overall decline in property values such that the principal balances of the Mortgage Loans and any secondary financing on the related Mortgaged Properties become equal to or greater than the value of the related Mortgaged Properties, rates of delinquencies, foreclosure and losses could be significantly higher than might otherwise be the case. In addition, adverse economic conditions (which may affect real property values) may affect the timely payment by Mortgagors of Monthly Payments, and accordingly, the actual rates of delinquencies, foreclosures and losses with respect to the Mortgage Pool. Collection Procedures. Advanta employs a variety of collection techniques during the various stages of delinquency. The primary purpose of all collection efforts performed by Advanta is to bring a delinquent mortgage loan current in as short a time as possible. Phone calls are used as the principal form of contacting a mortgagor. Advanta utilizes a predictive dialing system for the management of collection calling activity. Prior to initiating foreclosure proceedings, Advanta makes every reasonable effort to determine the reason for the default; whether the delinquency is a temporary or permanent condition; and the mortgagor's attitude toward the obligation. Advanta will take action to foreclose a mortgage only once every reasonable effort to cure the default has been made and a projection of the ultimate gain or loss on REO sale is determined. Pursuant to accepted servicing practices, foreclosures are processed within individual state guidelines and in accordance with the provisions of the mortgage and applicable state law.] Servicing Compensation and Payment of Expenses The Subservicer will be paid a monthly fee from interest collected with respect to each Mortgage Loan (as well as from any liquidation proceeds from a liquidated Mortgage Loan that are applied to accrued and unpaid interest) generally equal to the unpaid principal balance thereof (after giving effect to any Advances (defined herein) made with respect thereto) (the "Stated Principal Balance") multiplied by one-twelfth of the Servicing Fee Rate (such product, the "Servicing Fee"). The "Servicing Fee Rate" for each Mortgage Loan will equal 0.50% per annum. The amount of the S-59 monthly Servicing Fee is subject to adjustment with respect to prepaid Mortgage Loans, as described below under "--Adjustment to Servicing Fee in Connection with Certain Prepaid Mortgage Loans." The Subservicer is also entitled to receive, as additional servicing compensation, all assumption fees and other similar charges and all investment income earned on amounts on deposit in the Collection Account. The Subservicer is obligated to pay certain ongoing expenses associated with the Mortgage Loans in connection with its responsibilities under the Pooling and Servicing Agreement. Adjustment to Servicing Fee in Connection with Certain Prepaid Mortgage Loans When a Mortgagor prepays all or a portion of a Mortgage Loan between scheduled monthly payment dates ("Due Dates"), the Mortgagor pays interest on the amount prepaid only to the date of such prepayment. Prepayments received during the prior Prepayment Period (defined herein) are included in the distribution to Certificateholders on the related Distribution Date thereby causing a shortfall in interest. In order to mitigate the effect of any such shortfall in interest distributions to Certificateholders on any Distribution Date, the amount of the Servicing Fee otherwise payable to the Subservicer for such month shall, to the extent of such shortfall, be deposited by the Subservicer in the Collection Account for distribution to the Certificateholders on such Distribution Date (the amount of such deposit, "Compensating Interest"). However, any such reduction in the Servicing Fee otherwise payable with respect to such Distribution Date will be limited to the product of (i) one-twelfth of 0.35% and (ii) the aggregate Stated Principal Balance of the Mortgage Loans with respect to the related Distribution Date. Any such deposit by the related Subservicer will be reflected in the distributions to the Certificateholders made on the Distribution Date to which such Due Period relates. Any such shortfall in excess of Compensating Interest (such excess, the "Prepayment Interest Shortfall") will be allocated on such Distribution Date pro rata among the outstanding Classes of Certificates based upon the amount of interest each such Class would otherwise be paid on such Distribution Date. Advances Subject to the following limitations described below, on each Servicer Remittance Date, the Subservicer will be required to advance its own funds, or funds in the Collection Account that are not required to be distributed on the related Distribution Date, in an amount equal to the aggregate of payments of principal and interest on the Mortgage Loans (adjusted to the applicable Net Mortgage Rate) that were due on the related Due Date and delinquent on the related Servicer Remittance Date, together with an amount equivalent to interest (adjusted to the applicable Net Mortgage Rate) deemed due on each Mortgage Loan as to which the related Mortgaged Property has been acquired by the Subservicer through foreclosure or deed-in-lieu of foreclosure in connection with a defaulted Mortgage Loan ("REO Property"), such latter amount to be calculated after taking into account any rental income from such Mortgaged Property (any such advance, an "Advance", and the date of any such Advance, as described herein, a "Servicer Advance Date"). Advances are intended to maintain a regular flow of scheduled interest and principal payments on the Offered Certificates rather than to guarantee or insure against losses. The Subservicer is obligated to make Advances with respect to delinquent payments of principal of or interest on each Mortgage Loan (with such payments of interest adjusted to the related Net Mortgage Rate) to the S-60 extent that such Advances are, in its judgment, reasonably recoverable from future payments and collections or insurance payments or proceeds of liquidation of the related Mortgage Loan; provided, however, that the Subservicer need not make Advances with respect to the principal portion of any Balloon Amount but the Subservicer will be required to Advance monthly interest on a Balloon Loan until the principal balance thereof is reduced to zero subject to the Servicer's determination of nonrecoverability. In the event the Subservicer previously made Advances which later are determined to be nonrecoverable, the Subservicer will be entitled to reimbursement of such Advances prior to distributions to Certificateholders. If the Subservicer determines on any Servicer Remittance Date to make an Advance, such Advance will be included with the distribution to holders of the Offered Certificates on the related Distribution Date. Any failure by the Subservicer to make an Advance as required under the Pooling and Servicing Agreement will constitute an event of default thereunder, in which case the Trustee, as successor servicer, or such other entity as may be appointed as successor servicer, will be obligated to make any such Advance in accordance with the terms of the Pooling and Servicing Agreement. Master Servicer Chase Manhattan Mortgage will act as "Master Servicer." The Master Servicer will (a) provide certain administrative services and file certain reports with regard to the Certificates, (b) provide certain reports to the Trustee regarding the Mortgage Loans and the Certificates and (c) receive payments with respect to the Mortgage Loans from the Subservicer and, in its capacity as paying agent for the Certificates, remit such payments to the Certificateholders as described herein. The Master Servicer will pay certain administrative expenses of the Trust including the fees of the Trustee. The Master Servicer will be entitled to a monthly "Master Servicer Fee" with respect to each Mortgage Loan, payable with respect to each Distribution Date, in an amount equal to the sum of (i) one-twelfth of the Master Servicer Fee Rate multiplied by the principal balance of such Mortgage Loan and (ii) all late payment fees and prepayment penalties and all investment income earned on funds in the Certificate Account and the Distribution Account. The "Master Servicer Fee Rate" is [______]% per annum. S-61 DESCRIPTION OF THE CERTIFICATES General The Certificates will represent the entire beneficial ownership interest in a trust fund (the "Trust Fund") to be created pursuant to the Pooling and Servicing Agreement. A copy of the Pooling and Servicing Agreement will be attached as an exhibit to the Current Report on Form 8-K of the Depositor that will be available to purchasers of the Certificates at, and will be filed with, the Securities and Exchange Commission within 15 days of the initial delivery of the Certificates. Reference is made to the attached prospectus (the "Prospectus") for additional information regarding the terms and conditions of the Pooling and Servicing Agreement. The following summaries do not purport to be complete and are subject to, and are qualified in their entirety by reference to, the provisions of the Pooling and Servicing Agreement. When particular provisions or terms used in the Pooling and Servicing Agreement are referred to, the actual provisions (including definitions of terms) are incorporated by reference. The Chase Funding Mortgage Loan Asset-Backed Certificates, Series [_________](the "Certificates") will consist of: (a) the Class IA-1, Class IA-2, Class IA-3, Class IA-4 and Class IA- 5 Certificates (collectively, the "Class A Group I Certificates"), the Class IM-1 Certificates (the "Class IM-1 Certificates") and Class IM-2 Certificates (the "Class IM-2 Certificates" and together with the Class IM-1 Certificates, the "Mezzanine Group I Certificates") and the Class IB Certificates (the "Class IB Certificates" and together with the Mezzanine Group I Certificates, the "Subordinated Group I Certificates" and the Subordinated Group I Certificates together with the Class A Group I Certificates, the "Group I Certificates"); (b) the Class IIA-1 Certificates (the "Class A Group II Certificates," and together with the Class A Group I Certificates, the "Class A Certificates"), the Class IIM-1 Certificates (the "Class IIM-1 Certificates" and together with the Class IM-1 Certificates, the "Class M-1 Certificates") and Class IIM-2 Certificates (the "Class IIM-2 Certificates" and together with the Class IIM-1 Certificates, the "Mezzanine Group II Certificates," and together with the Class IM-2 Certificates, the "Class M-2 Certificates") and the Class IIB Certificates (the "Class IIB Certificates," and together with the Mezzanine Group II Certificates, the "Subordinated Group II Certificates," and together with the Class IB Certificates, the "Class B Certificates", and the Subordinated Group II Certificates together with the Class A Group II Certificates, the "Group II Certificates"); and (c) the Class R Certificates (the "Residual Certificates"). The Mezzanine Group I Certificates and the Mezzanine Group II Certificates are referred to collectively as the "Mezzanine Certificates". The Subordinated Group I Certificates and the Subordinated Group II Certificates are referred to collectively as the "Subordinated Certificates." The Group I Certificates and the Group II Certificates are referred to as the "Offered Certificates". As used herein, a "Certificate Group" is either the Group I Certificates or the Group II Certificates, as the context requires. The Offered Certificates will be issued in book-entry form as described below. The Offered Certificates will be issued in minimum dollar denominations of [$25,000] and integral multiples of $1,000 in excess thereof. S-62 Book-Entry Certificates The Offered Certificates will be book-entry Certificates (the "Book-Entry Certificates"). Persons acquiring beneficial ownership interests in the Offered Certificates ("Certificate Owners") may elect to hold their Offered Certificates through The Depository Trust Company ("DTC") in the United States, or Cedelbank, societe anonyme ("CEDEL") or the Euroclear System ("Euroclear") in Europe, if they are participants of such systems, or indirectly through organizations which are participants in such systems. The Book-Entry Certificates will be issued in one or more certificates which equal the aggregate principal balance of the Offered Certificates and will initially be registered in the name of Cede & Co. ("Cede"), the nominee of DTC. CEDEL and Euroclear will hold omnibus positions on behalf of their participants through customers' securities accounts in CEDEL's and Euroclear's names on the books of their respective depositaries which in turn will hold such positions in customers' securities accounts in the depositaries' names on the books of DTC. Citibank, N.A. will act as depositary for CEDEL and Chase will act as depositary for Euroclear (in such capacities, individually the "Relevant Depositary" and collectively the "European Depositaries"). Investors may hold such beneficial interests in the Book-Entry Certificates in minimum denominations representing principal balances ("Certificate Principal Balances") of [$25,000] and integral multiples of $1,000 in excess thereof. Except as described below, no person acquiring a Book-Entry Certificate (each, a "beneficial owner") will be entitled to receive a physical certificate representing such Offered Certificate (a "Definitive Certificate"). Unless and until Definitive Certificates are issued, it is anticipated that the only Certificateholder of the Offered Certificates will be Cede & Co., as nominee of DTC. Certificate Owners will not be Certificateholders as that term is used in the Pooling and Servicing Agreement. Certificate Owners are only permitted to exercise their rights indirectly through the participating organizations that utilize the services of DTC, including securities brokers and dealers, banks and trust companies and clearing corporations and certain other organizations ("Participants") and DTC. The beneficial owner's ownership of a Book-Entry Certificate will be recorded on the records of the brokerage firm, bank, thrift institution or other financial intermediary (each, a "Financial Intermediary") that maintains the beneficial owner's account for such purpose. In turn, the Financial Intermediary's ownership of such Book-Entry Certificate will be recorded on the records of DTC (or of a participating firm that acts as agent for the Financial Intermediary, whose interest will in turn be recorded on the records of DTC, if the beneficial owner's Financial Intermediary is not a DTC participant and on the records of CEDEL or Euroclear, as appropriate). Certificate Owners will receive all distributions of principal of, and interest on, the Offered Certificates from the Trustee through DTC and DTC participants. While the Offered Certificates are outstanding (except under the circumstances described below), under the rules, regulations and procedures creating and affecting DTC and its operations (the "Rules"), DTC is required to make book-entry transfers among Participants on whose behalf it acts with respect to the Offered Certificates and is required to receive and transmit distributions of principal of, and interest on, the Offered Certificates. Participants and organizations which have indirect access to the DTC system, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly ("Indirect Participants"), with whom Certificate Owners have accounts with respect to Offered Certificates are similarly required to make book-entry transfers S-63 and receive and transmit such distributions on behalf of their respective Certificate Owners. Accordingly, although Certificate Owners will not possess certificates, the Rules provide a mechanism by which Certificate Owners will receive distributions and will be able to transfer their interest. Certificate Owners will not receive or be entitled to receive certificates representing their respective interests in the Offered Certificates, except under the limited circumstances described below. Unless and until Definitive Certificates are issued, Certificate Owners who are not Participants may transfer ownership of Offered Certificates only through Participants and Indirect Participants by instructing such Participants and Indirect Participants to transfer Offered Certificates, by book-entry transfer, through DTC for the account of the purchasers of such Offered Certificates, which account is maintained with their respective Participants. Under the Rules and in accordance with DTC's normal procedures, transfers of ownership of Offered Certificates will be executed through DTC and the accounts of the respective Participants at DTC will be debited and credited. Similarly, the Participants and Indirect Participants will make debits or credits, as the case may be, on their records on behalf of the selling and purchasing Certificate Owners. Because of time zone differences, credits of securities received in CEDEL, or Euroclear as a result of a transaction with a Participant will be made during, subsequent securities settlement processing and dated the business day (as defined in the Pooling and Servicing Agreement, a "Business Day") following, the DTC settlement date. Such credits or any transactions in such securities, settled during such processing will be reported to the relevant Euroclear or CEDEL Participants on such Business Day. Cash received in CEDEL or Euroclear, as a result of sales of securities by or through a CEDEL Participant (as defined, below) or Euroclear Participant (as defined below) to a DTC Participant, will be received with value on the DTC settlement date but will be available in the relevant CEDEL or Euroclear cash account only as of the Business Day following settlement in DTC. For information with respect to tax documentation procedures, relating to the Offered Certificates, see "Federal Income Tax Consequences---Foreign Investors" in the Prospectus and "Global, Clearance, Settlement And Tax Documentation Procedures--Certain U.S. Federal Income Tax Documentation Requirements" in Annex I hereto. Transfers between Participants will occur in accordance with DTC rules. Transfers between CEDEL Participants and Euroclear Participants will occur in accordance with their respective rules and operating procedures. Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and directly or indirectly through CEDEL Participants or Euroclear Participants, on the other, will be effected in DTC in accordance with DTC rules on behalf of the relevant European international clearing system by the Relevant Depositary; however, such cross market transactions will require delivery of instructions to the relevant European international clearing system by the counterpart in such system in accordance with its rules and procedures and within its established deadlines (European time). The relevant European international clearing system will, if the transaction meets its settlement requirements, deliver instructions to the Relevant Depositary to take action to effect final settlement on its behalf by delivering or receiving securities in DTC, and making or receiving payment in accordance with normal procedures for same day funds settlement applicable to DTC. CEDEL Participants and Euroclear Participants may not deliver instructions directly to the European Depositaries. S-64 DTC, which is a New York-chartered limited purpose trust company, performs services for its participants, some of which (and/or their representatives) own DTC. In accordance with its normal procedures, DTC is expected to record the positions held by each DTC participant in the Book-Entry Certificates, whether held for its own account or as a nominee for another person. In general, beneficial ownership of Book-Entry Certificates will be subject to the rules, regulations and procedures governing DTC and DTC participants as in effect from time to time. CEDEL is incorporated under the laws of Luxembourg as a professional depository. CEDEL holds securities for its participating organizations ("CEDEL Participants") and facilitates the clearance and settlement of securities transactions between CEDEL Participants through electronic book-entry changes in accounts of CEDEL Participants, thereby eliminating the need for physical movement of certificates. Transactions may be settled in CEDEL in any of 28 currencies, including United States dollars. CEDEL provides to its CEDEL Participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. CEDEL interfaces with domestic markets in several countries. As a professional depository, CEDEL is subject to regulation by the Luxembourg Monetary Institute. CEDEL participants are recognized financial institutions around the world, including underwriters, securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. Indirect access to CEDEL is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a CEDEL Participant, either directly or indirectly. Euroclear was created in 1968 to hold securities for participants of Euroclear ("Euroclear Participants") and to clear and settle transactions between Euroclear Participants through simultaneous electronic book-entry delivery against payment, thereby eliminating the need for physical movement of certificates and any risk from lack of simultaneous transfers of securities and cash. Transactions may now be settled in any of 32 currencies, including United States dollars. Euroclear includes various other services, including securities lending and borrowing and interfaces with domestic markets in several countries generally similar to the arrangements for cross-market transfers with DTC described above. Euroclear is operated by the Brussels, Belgium office of Morgan Guaranty Trust Company of New York (the "Euroclear Operator"), under contract with Euroclear Clearance Systems S.C., a Belgian cooperative corporation (the "Cooperative"). All operations are conducted by the Euroclear Operator, and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the Euroclear Operator, not the Cooperative. The Cooperative establishes policy for Euroclear on behalf of Euroclear Participants. Euroclear Participants include banks (including central banks), securities brokers and dealers and other professional financial intermediaries. Indirect access to Euroclear is also available to other firms that clear through or maintain a custodial relationship with a Euroclear Participant, either directly or indirectly. The Euroclear Operator is the Belgian branch of a New York banking corporation which is a member bank of the Federal Reserve System. As such, it is regulated and examined by the Board of Governors of the Federal Reserve System and the New York State Banking Department, as well as the Belgian Banking Commission. S-65 Securities clearance accounts and cash accounts with the Euroclear Operator are governed by the Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of the Euroclear System and applicable Belgian law (collectively, the "Terms and Conditions"). The Terms and Conditions govern transfers of securities and cash within Euroclear, withdrawals of securities and cash from Euroclear, and receipts of payments with respect to securities in Euroclear. All securities in Euroclear are held on a fungible basis without attribution of specific certificates to specific securities clearance accounts. The Euroclear Operator acts under the Terms and Conditions only on behalf of Euroclear Participants, and has no record of or relationship with persons holding through Euroclear Participants. Distributions on the Book-Entry Certificates will be made on each Distribution Date by the Trustee to DTC. DTC will be responsible for crediting the amount of such payments to the accounts of the applicable DTC participants in accordance with DTC's normal procedures. Each DTC participant will be responsible for disbursing such payments to the beneficial owners of the Book-Entry Certificates that it represents and to each Financial Intermediary for which it acts as agent. Each such Financial Intermediary will be responsible for disbursing funds to the beneficial owners of the Book-Entry Certificates that it represents. Under a book-entry format, beneficial owners of the Book-Entry Certificates may experience some delay in their receipt of payments, since such payments will be forwarded by the Trustee to Cede. Distributions with respect to Offered Certificates held through CEDEL or Euroclear will be credited to the cash accounts of CEDEL Participants or Euroclear Participants in accordance with the relevant system's rules and procedures, to the extent received by the Relevant Depositary. Such distributions will be subject to tax reporting in accordance with relevant United States tax laws and regulations. See "Federal Income Tax Consequences--Foreign Investors" and "--Backup Withholding" in the Prospectus. Because DTC can only act on behalf of Financial Intermediaries, the ability of a beneficial owner to pledge Book-Entry Certificates to persons or entities that do not participate in the depository system, or otherwise take actions in respect of such Book-Entry Certificates, may be limited due to the lack of physical certificates for such Book-Entry Certificates. In addition, issuance of the Book-Entry Certificates in book-entry form may reduce the liquidity of such Offered Certificates in the secondary market since certain potential investors may be unwilling to purchase Offered Certificates for which they cannot obtain physical certificates. Monthly and annual reports on the Trust Fund provided by the Subservicer to Cede, as nominee of DTC, may be made available to beneficial owners upon request, in accordance with the rules, regulations and procedures creating and affecting DTC or the Relevant Depositary, and to the Financial Intermediaries to whose DTC accounts the Book-Entry Certificates of such beneficial owners are credited. DTC has advised the Depositor and the Trustee that, unless and until Definitive Certificates are issued, DTC will take any action permitted to be taken by the holders of the Book-Entry Certificates under the Pooling and Servicing Agreement only at the direction of one or more Financial Intermediaries to whose DTC accounts the Book-Entry Certificates are credited, to the extent that such actions are taken on behalf of Financial Intermediaries whose holdings include such Book-Entry Certificates. CEDEL or the Euroclear Operator, as the case may be, will take any other action S-66 permitted to be taken by a Holder of an Offered Certificate under the Pooling and Servicing Agreement on behalf of a CEDEL Participant or Euroclear Participant only in accordance with its relevant rules and procedures and subject to the ability of the Relevant Depositary to effect such actions on its behalf through DTC. DTC may take actions, at the direction of the related Participants, with respect to some Offered Certificates which conflict with actions taken with respect to other Offered Certificates. Definitive Certificates will be issued to beneficial owners of the Book-Entry Certificates, or their nominees, rather than to DTC, only if (a) DTC or the Depositor advises the Trustee in writing that DTC is no longer willing, qualified or able to discharge properly its responsibilities as nominee and depositary with respect to the Book-Entry Certificates and the Depositor or the Trustee is unable to locate a qualified successor, (b) the Depositor at its sole option, elects to terminate a book-entry system through DTC or (c) after the occurrence of an Event of Default (as defined herein), beneficial owners having not less than 51% of the voting rights evidenced by the Offered Certificates advise the Trustee and DTC through the Financial Intermediaries and the DTC participants in writing that the continuation of a book-entry system through DTC (or a successor thereto) is no longer in the best interests of beneficial owners of such Class. Upon the occurrence of any of the events described in the immediately preceding paragraph, the Trustee will be required to notify all beneficial owners of the occurrence of such event and the availability through DTC of Definitive Certificates. Upon surrender by DTC of the global certificate or certificates representing the Book-Entry Certificates and instructions for re-registration, the Trustee will issue Definitive Certificates, and thereafter the Trustee will recognize the holders of such Definitive Certificates as holders of the Offered Certificates under the Pooling and Servicing Agreement. Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of Certificates among participants of DTC, CEDEL and Euroclear, they are under no obligation to perform or continue to perform such procedures and such procedures may be discontinued at any time. Payments on Mortgage Loans; Collection Account; Certificate Account; Distribution Account The Pooling and Servicing Agreement provides that the Subservicer for the benefit of the Certificateholders shall establish and maintain a Collection Account (the "Collection Account"), into which the Subservicer is generally required to deposit or cause to be deposited, promptly upon receipt and in any event within two Business Days, the payments and collections described in "The Pooling and Servicing Agreement--Payments on Mortgage Loans; Collection Account" in the Prospectus, except that the Subservicer may deduct its Servicing Fee and any expenses of liquidating defaulted Mortgage Loans or property acquired in respect thereof. The Pooling and Servicing Agreement permits the Master Servicer to direct any depository institution maintaining the Collection Account to invest the funds in the Collection Account in one or more investments acceptable to Moody's and Fitch (as provided in the Pooling and Servicing Agreement), that mature, unless payable on demand, no later than the Business Day preceding the 18th day of each month, or, if such day is not a Business Day, the preceding Business Day (the "Servicer Remittance Date"). The Subservicer will be entitled to all income and gain realized from any such investment, and such income and gain will be subject to withdrawal by the Subservicer from time to time. The Subservicer will be required to deposit the S-67 amount of any losses incurred in respect to any such investments out of its own funds as such losses are realized. The Master Servicer will be obligated to establish an account (the "Certificate Account"), into which the Subservicer will deposit or cause to be deposited not later than 12:00 noon Pacific Time on the Servicer Remittance Date from amounts on deposit in the Collection Account, the Interest Funds (other than amounts withdrawn from the Capitalized Interest Account) and Principal Funds (other than amounts withdrawn from the Pre-Funding Account) for each Loan Group and the Master Servicer Fee with respect to such Distribution Date. Subject to the restrictions set forth in the Pooling and Servicing Agreement, the Master Servicer is permitted to direct that the funds in the Certificate Account be invested so long as such investments mature, unless maintained with the institution holding such account, no later than the Business Day prior to the Distribution Date. All income and gain realized from any such investment will belong to the Master Servicer and is subject to its withdrawal or order from the Certificate Account. The Master Servicer will be required to deposit in the Certificate Account out of its own funds the amount of any losses incurred in respect of any such investment, as such losses are realized. The Master Servicer, as initial paying agent, is obligated under the Pooling and Servicing Agreement to establish and maintain a separate trust account (the "Distribution Account"), into which the Master Servicer is obligated to deposit on the Business Day preceding each Distribution Date, an amount equal to the Interest Funds and Principal Funds for each Loan Group with respect to such Distribution Date. Subject to the restrictions set forth in the Pooling and Servicing Agreement, the Master Servicer is permitted to direct that the funds in the Distribution Account be invested so long as such investments mature, unless maintained with the institution holding such account, no later than the related Distribution Date. All income and gain realized from any such investment will belong to the Master Servicer and is subject to its withdrawal or order from the Distribution Account. The Master Servicer will be required to deposit in the Distribution Account out of its own funds the amount of any losses incurred in respect of any such investment, as such losses are realized. The "Interest Funds" with respect to each Loan Group are equal to the sum, without duplication, of (i) all scheduled interest due during the related Due Period less the Servicing Fee and Master Servicer Fee, (ii) all Advances relating to interest, (iii) all Compensating Interest, (iv) Liquidation Proceeds (to the extent such Liquidation Proceeds relate to interest) less all non-recoverable Advances relating to interest and certain expenses reimbursed during the related Due Period, and (v) the portion of any amounts removed from the Capitalized Interest Account (defined herein) applicable to such Loan Group. The "Principal Funds" with respect to each Loan Group are equal to the sum, without duplication, of (i) the scheduled principal due during the related Due Period and received before the related Servicer Remittance Date or advanced on or before the related Servicer Remittance Date, (ii) prepayments collected in the related Prepayment Period, (iii) the Stated Principal Balance of each Mortgage Loan that was repurchased by the Depositor, (iv) the amount, if any, by which the aggregate unpaid principal balance of any replacement Mortgage Loans is less than the aggregate unpaid principal balance of any Mortgage Loans delivered by the Seller in connection with a substitution of a Mortgage Loan, (v) all Liquidation Proceeds collected during the related Due Period (to the extent such S-68 Liquidation Proceeds related to principal) less all non-recoverable Advances relating to principal and all non-recoverable servicing advances reimbursed during the related Due Period, and (vi) with respect to the Distribution Date immediately following the end of the Funding Period, the portion, if any, of the Original Pre-Funded Amount relating to such Loan Group remaining in the Pre-Funding Account after giving effect to the purchase of the Subsequent Mortgage Loans. The "Due Period" with respect to any Distribution Date is the period beginning on the second day of the calendar month preceding the calendar month in which such Distribution Date occurs (or, in the case of the first Distribution Date, on the Cut-off Date) and ending on the Due Date in the month in which such Distribution Date occurs. The "Prepayment Period" with respect to any Distribution Date is the calendar month preceding the month in which such Distribution Date occurs. Distributions General. Distributions on the Certificates will be made by The Chase Manhattan Bank, as paying agent on the 25th day of each month, or if such day is not a Business Day, on the first Business Day thereafter, commencing in [DATE] (each, a "Distribution Date"), to the persons in whose names such Certificates are registered at the close of business on the last Business Day of the month preceding the month of such Distribution Date (the "Record Date"). Distributions on each Distribution Date will be made by check mailed to the address of the person entitled thereto as it appears on the Certificate Register or, in the case of any Certificateholder that holds 100% of a Class of Certificates or who holds a Class of Certificates with an aggregate initial Certificate Principal Balance of $1,000,000 or more and that has so notified the Master Servicer in writing in accordance with the Pooling and Servicing Agreement, by wire transfer in immediately available funds to the account of such Certificateholder at a bank or other depository institution having appropriate wire transfer facilities; provided, however, that the final distribution in retirement of the Certificates will be made only upon presentation and surrender of such Certificates at the Corporate Trust Office of the Master Servicer. On each Distribution Date, a Holder of a Certificate will receive such Holder's Percentage Interest of the amounts required to be distributed with respect to the applicable Class of Certificates. The "Percentage Interest" evidenced by a Certificate will equal the percentage derived by dividing the denomination of such Certificate by the aggregate denominations of all Certificates of the applicable Class. Distributions of Interest. On each Distribution Date, the interest distributable with respect to the Group I Certificates (other than the Class IA-1 Certificates) is the interest which has accrued thereon at the related Pass-Through Rate during the calendar month immediately preceding the calendar month in which such Distribution Date occurs less Prepayment Interest Shortfalls, if any, and the interest distributable with respect to the Group II Certificates and the Class IA-1 Certificates is the interest which has accrued thereon at the then applicable related Pass-Through Rate from and including the preceding Distribution Date (or from the Closing Date in the case of the first Distribution Date) to and including the day prior to the current Distribution Date less Prepayment Interest Shortfalls, if any. Each period referred to in the prior sentence relating to the accrual of interest is the "Accrual Period" for the related Class of Offered Certificates. S-69 All calculations of interest of the Group I Certificates (other than the Class IA-1 Certificates) will be made on the basis of a 360-day year assumed to consist of twelve 30-day months. All calculations of interest on the Group II Certificates and the Class IA-1 Certificates will be made on the basis of a 360-day year and the actual number of days elapsed in the applicable Accrual Period. On each Distribution Date, the Interest Funds for such Distribution Date with respect to each Loan Group are required to be distributed in the following order of priority, until such Interest Funds have been fully distributed: (i) to each Class of the Class A Certificates of the Certificate Group related to such Loan Group, the Current Interest and any Interest Carry Forward Amount with respect to each such Class; provided, however, that if the Interest Funds for the Group I Certificates are insufficient to make a full distribution of the aggregate Current Interest and the aggregate Interest Carry Forward Amount to the Class A Group I Certificates, the Interest Funds for such Certificate Group will be distributed pro rata among each Class of the Class A Group I Certificates based upon the ratio of (x) the Current Interest and Interest Carry Forward Amount for each Class of the Class A Certificates of such Certificate Group to (y) the total amount of Current Interest and any Interest Carry Forward Amount for the Class A Certificates of such Certificate Group; (ii) to the Class M-1 Certificates of such Certificate Group, the Current Interest for such Class and any Interest Carry Forward Amount with respect to such Class; (iii) to the Class M-2 Certificates of such Certificate Group, the Current Interest for such Class and any Interest Carry Forward Amount with respect to such Class; (iv) to the Class B Certificates of such Certificate Group, the Current Interest for such Class and any Interest Carry Forward Amount with respect to such Class; and (v) any remainder to be distributed as described below under "--Overcollateralization and Crosscollateralization Provisions". "Current Interest", with respect to each Class of the Offered Certificates and each Distribution Date, is the interest accrued at the applicable Pass-Through Rate for the applicable Accrual Period on the Certificate Principal Balance of such Class as of the first day of such Accrual Period (after giving effect to all distributions of principal made or deemed to be made as of such first day) plus any amount previously distributed with respect to interest for such Class that is recovered as a voidable preference by a trustee in bankruptcy less any Prepayment Interest Shortfalls allocated to such Class on such Distribution Date. For purposes of calculating interest on the Group I Certificates (other than the Class IA-1 Certificates), principal distributions on a Distribution Date will be deemed to have been made on the first day of the Accrual Period in which such Distribution Date occurs. "Interest Carry Forward Amount", with respect to each Class of the Offered Certificates and each Distribution Date, is the sum of (i) the excess of (A) Current Interest for such Class with respect to prior Distribution Dates (excluding any Adjustable Rate Certificate Carryover, if applicable) over (B) the amount actually distributed to such Class with respect to interest on such prior Distribution S-70 Dates and (ii) interest on such excess (to the extent permitted by applicable law) at the applicable Pass-Through Rate. The "Pass-Through Rate" with respect to the Class IA-2 Certificates and Class IA-3 Certificates is the per annum rate set forth for each such Class in the table on page S-3; the "Pass-Through Rate" for the Class IA-4, Class IA-5, Class IM-1, Class IM-2 and Class IB Certificates on any Distribution Date will equal the lesser of (i) the per annum rate for such Class set forth in the table on page S-3 and (ii) the weighted average Net Mortgage Rates on the Fixed Rate Mortgage Loans and the "Pass-Through Rate" for the Class IA-1 Certificates will equal the lesser of (i) One-Month LIBOR (defined below) plus the Pass-Through Margin (defined below) for such Class and (ii) the weighted average Net Mortgage Rates on the Fixed Rate Mortgage Loans; provided, further, that the Pass-Through Rate for the Class IA-4 Certificates on any Distribution Date after the Optional Termination Date will equal [______]%. The "Pass Through Rate" with respect to each Class of Group II Certificates will be determined as described below. The "Pass-Through Rate" for the Group II Certificates will be equal to the least of (i) the London interbank offered rate for one month United States dollar deposits, calculated as described below under "--Calculation of One-Month LIBOR" ("One-Month LIBOR"), plus the Pass-Through Margin for such Class, (ii) the "Group II Maximum Rate Cap," which is defined as the weighted average of the maximum lifetime Mortgage Rates on the Adjustable Rate Mortgage Loans less the Servicing Fee Rate and the Master Servicer Fee Rate and (iii) the "Group II Available Funds Cap" for the Group II Certificates, which is defined as a per annum rate equal to 12 times the quotient of (x) the sum of (A) the total scheduled interest on the Adjustable Rate Mortgage Loans in the Adjustable Rate Mortgage Loan Group based on the Net Mortgage Rates in effect on the related Due Date and (B)(I) with respect to the Distribution Date in [DATE], 50% of the amount in the Capitalized Interest Account as of such Distribution Date allocable to Loan Group II immediately prior to such Distribution Date, (II) with respect to the Distribution Date in [DATE], 100% of the amount in the Capitalized Interest Account allocable to Loan Group II immediately prior to such Distribution Date and (III) with respect to the Distribution Date in [DATE] and thereafter, 0% of the amount in the Capitalized Interest Account allocable to Loan Group II immediately prior to such Distribution Date divided by (y) the aggregate principal balance of the Group II Certificates as of the first day of the applicable Accrual Period. With respect to any Mortgage Loan, the "Net Mortgage Rate" is the Mortgage Rate with respect to such Mortgage Loan less the sum of (i) the Servicing Fee Rate and (ii) the Master Servicer Fee Rate. The "Pass-Through Margin" for each Class of Group II Certificates is as follows: for any Distribution Date on or before the applicable Optional Termination Date: Class IIA-1, [____]%; Class IIM-1, [____]%; Class IIM-2, [____]%; Class IIB, [____]% and Class IA-1, [____]%; and for any Distribution Date after the applicable Optional Termination Date: Class IIA-1, [____]%; Class IIM-1, [____]%; Class IIM-2, [____]%; Class IIB, [_____]%; and Class IA-1, [____]%. The "Pass-Through Margin" for the Class IA-1 Certificates is [____]%. S-71 If on any Distribution Date, the Pass-Through Rate for a Class of Group II Certificates is based upon its Group II Available Funds Cap, the excess of (i) the amount of interest that such Class would have been entitled to receive on such Distribution Date had the Pass-Through Rate for that Class not been calculated based on the Group II Available Funds Cap, up to but not exceeding the Group II Maximum Rate Cap over (ii) the amount of interest such Class received on such Distribution Date based on the Group II Available Funds Cap, up to but not exceeding the Group II Maximum Rate Cap, together with the unpaid portion of any such excess from prior Distribution Dates (and interest accrued thereon at the then applicable Pass-Through Rate, without giving effect to the Group II Available Funds Cap) is the "Adjustable Rate Certificate Carryover" for such Class. Any Adjustable Rate Certificate Carryover will be paid on future Distribution Dates from and to the extent of funds available therefor as described herein. The ratings of the Group II Certificates do not address the likelihood of the payment of any Adjustable Rate Certificate Carryover. Distributions of Principal. On each Distribution Date, the Principal Distribution Amount (as defined below) with respect to each Certificate Group for such Distribution Date is required to be distributed as follows until such Principal Distribution Amount has been fully distributed: [Describe principal payment methodology] The "Principal Distribution Amount", with respect to each Distribution Date and a Certificate Group, is the sum of (i) the Principal Funds for such Distribution Date for such Certificate Group and (ii) any Extra Principal Distribution Amount (defined below) for such Distribution Date for the related Certificate Group. The "Class A Principal Distribution Amount", for a Certificate Group is (i) with respect to any Distribution Date prior to the related Stepdown Date (defined below) or as to which a Trigger Event (defined below) exists, 100% of the Principal Distribution Amount for such Certificate Group for such Distribution Date and (ii) with respect to any Distribution Date on or after the Stepdown Date and as to which a Trigger Event does not exist, the excess of (A) the Certificate Principal Balance of the Class A Certificates for such Certificate Group immediately prior to such Distribution Date over (B) the lesser of (i) approximately [_____]% for the Fixed Rate Mortgage Loan Group and approximately [_____]% (or approximately [_____]%, if a Stepup Trigger Event (defined below) has occurred) for the Adjustable Rate Mortgage Loan Group, of the Stated Principal Balances of the Mortgage Loans in such Loan Group on the preceding Due Date, and (iii) the Stated Principal Balances of the Mortgage Loans in such Loan Group on the preceding Due Date less approximately $1,000,000 for the Fixed Rate Mortgage Loan Group and approximately $[_________]for the Adjustable Rate Mortgage Loan Group. The "Class IA-5 Distribution Amount", for any Distribution Date prior to the Distribution Date in [DATE], is the product of (i) a fraction, the numerator of which is the Certificate Principal Balance of the Class IA-5 Certificates and the denominator of which is the aggregate Certificate Principal Balance of all Class A Group I Certificates, in each case immediately prior to such Distribution Date, (ii) the Class A Principal Distribution Amount with respect to the Fixed Rate Mortgage Loan Group for such Distribution Date and (iii) the applicable percentage for such Distribution Date set forth in the following table: S-72 Distribution Date Occurring In Percentage [MONTH/DATE] through [MONTH/DATE]............... 0% [MONTH/DATE] through [MONTH/DATE]............... 45% [MONTH/DATE] through [MONTH/DATE]............... 80% [MONTH/DATE] through [MONTH/DATE]............... 100% [MONTH/DATE] through [MONTH/DATE]............... 300% With respect to the Distribution Date occurring in [MONTH/DATE] and each Distribution Date thereafter until the Certificate Principal Balance of the Class IA-5 Certificates has been reduced to zero, the Class IA-5 Principal Distribution Amount will equal the Class A Principal Distribution Amount with respect to the Fixed Rate Mortgage Loan Group for such Distribution Date. The "Class M-1 Principal Distribution Amount", for a Certificate Group and with respect to any Distribution Date on or after the related Stepdown Date is 100% of the Principal Distribution Amount for the related Certificate Group if the Certificate Principal Balance of each Class of Class A Certificates for such Certificate Group has been reduced to zero and a Trigger Event exists, or, if any Class A Certificates for such Certificate Group are still outstanding, and as long as a Trigger Event does not exist for such Certificate Group, is the excess of (i) the sum for such Certificate Group of (A) the Certificate Principal Balance of the related Class A Certificates (after taking into account distributions of the Class A Principal Distribution Amount to such Class A Certificates for such Distribution Date) and (B) the Certificate Principal Balance of the related Class M-1 Certificates immediately prior to such Distribution Date over (ii) the lesser of (A) approximately [_____]% for the Fixed Rate Mortgage Loan Group and approximately [_____]% (or approximately [_____]%, if a Stepup Trigger Event has occurred) for the Adjustable Rate Mortgage Loan Group of the Stated Principal Balances of the Mortgage Loans in such Loan Group on the preceding Due Date, and (B) the Stated Principal Balances of the Mortgage Loans in such Loan Group on the preceding Due Date less approximately $1,000,000 for the Fixed Rate Mortgage Loan Group and approximately $[________]for the Adjustable Rate Mortgage Loan Group. Notwithstanding the foregoing, on any Distribution Date prior to the Stepdown Date on which the Certificate Principal Balance of each Class of Class A Certificates for a Certificate Group has been reduced to zero, the Class M-1 Principal Distribution Amount for such Certificate Group will equal the lesser of (A) the outstanding Certificate Principal Balance of the related Class M-1 Certificates and (B) 100% of the Principal Distribution Amount for such Certificate Group remaining after any distributions on such Class A Certificates. The "Class M-2 Principal Distribution Amount", for a Certificate Group and with respect to any Distribution Date on or after the related Stepdown Date, is 100% of the Principal Distribution Amount for the related Certificate Group if the Certificate Principal Balance of each Class of Class A and Class M-1 Certificates for such Certificate Group has been reduced to zero and a Trigger Event exists, or, if the Class A and Class M-1 Certificates for such Certificate Group are still outstanding and as long as a Trigger Event does not exist for such Certificate Group, is the excess of (i) of the sum for such Certificate Group of (A) the Certificate Principal Balance of the Class A Certificates (after taking into account distributions of the Class A Principal Distribution Amount to such Class A Certificates for such Distribution Date), (B) the Certificate Principal Balance of the related Class M-1 Certificates S-73 (after taking into account distribution of the Class M-1 Principal Distribution Amount to such Class M- 1 Certificates for such Distribution Date) and (C) the Certificate Principal Balance of the related Class M-2 Certificates immediately prior to such Distribution Date over (ii) the lesser of (A) approximately [_____]% for the Fixed Rate Mortgage Loan Group and approximately [_____]% (or approximately [_____]%, if a Stepup Trigger Event has occurred) for the Adjustable Rate Mortgage Loan Group, of the aggregate Stated Principal Balances of the Mortgage Loans in such Loan Group on the preceding Due Date, and (B) the Stated Principal Balances of the Mortgage Loans in such Loan Group on the preceding Due Date less approximately $1,900,000 for the Adjustable Rate Mortgage Loan Group. Notwithstanding the foregoing, on any Distribution Date prior to the Stepdown Date on which the aggregate Certificate Principal Balance of each class of Class A Certificates and the Class M-1 Certificates for a Certificate Group has been reduced to zero, the Class M-2 Principal Distribution Amount for such Certificate Group will equal the lesser of (A) the outstanding Certificate Principal Balance of the related Class M-2 Certificates and (B) 100% of the Principal Distribution Amount for such Certificate Group remaining after any distributions on such Class A and Class M-1 Certificates. The "Class B Principal Distribution Amount", for a Certificate Group and with respect to any Distribution Date on or after the related Stepdown Date and as long as a Trigger Event does not exist for such Certificate Group, is the excess of (i) of the sum for such Certificate Group of (A) the Certificate Principal Balance of the related Class A Certificates (after taking into account distributions of the Class A Principal Distribution Amount for such Distribution Date), (B) the Certificate Principal Balance of the Class M-1 Certificates (after taking into account distribution of the Class M-1 Principal Distribution Amount to such Class M-1 Certificates for such Distribution Date), (C) the Certificate Principal Balance of the related Class M-2 Certificates (after taking into account distributions of the Class M-2 Principal Distribution Amount to such Class M-2 Certificates for such Distribution Date) and (D) the Certificate Principal Balance of the related Class B Certificates immediately prior to such Distribution Date over (ii) the lesser of (A) approximately [_____]% for the Fixed Rate Mortgage Loan Group and approximately [_____]% (or approximately [_____]%, if a Stepup Trigger Event has occurred) for the Adjustable Rate Mortgage Loan Group, of the Stated Principal Balances of the Mortgage Loans in such Loan Group on the preceding Due Date, and (B) the Stated Principal Balances of the Mortgage Loans in such Loan Group on the preceding Due Date less approximately $1,000,000 for the Fixed Rate Mortgage Loan Group and approximately $[________]for the Adjustable Rate Mortgage Loan Group, provided, however, that after the Certificate Principal Balances of the Class A, Class M-1 and Class M-2 Certificates for such Certificate Group are reduced to zero, the Class B Principal Distribution Amount for such Distribution Date will equal 100% of the Principal Distribution Amount for the related Loan Group remaining after any distributions on such Class A, Class M-1 and Class M-2 Certificates. The "Extra Principal Distribution Amount", for a Mortgage Loan Group and with respect to any Distribution Date, is (i) prior to the Stepdown Date, the excess of (A) the sum of (i) the aggregate Certificate Principal Balances of the Certificates of the related Certificate Group and (ii) approximately $[_______]for the Fixed Rate Mortgage Loan Group and approximately $[_________](or $[_________], if a Stepup Trigger Event has occurred) for the Adjustable Rate Mortgage Loan Group over (B) the Stated Principal Balances of the Mortgage Loans in such Loan Group, and (ii) on and after the Stepdown Date, the excess of (A) the sum of (i) the aggregate Certificate Principal Balances of the Certificates of such Certificate Group and (ii) the greater of (x) [___]% for the Fixed Rate Mortgage Loan Group and [___]% (or [___]%, if a Stepup Trigger Event has S-74 occurred) for the Adjustable Rate Mortgage Loan Group of the Stated Principal Balances of the Mortgage Loans in the related Loan Group, and (y) approximately $[_______]for the Fixed Rate Mortgage Loan Group and approximately $[_________]for the Adjustable Rate Mortgage Loan Group over (B) the Stated Principal Balances of the Mortgage Loans in the related Loan Group; provided, however, that if on any Distribution Date, a Trigger Event is in effect, the Extra Principal Distribution Amount for the related Loan Group will not be reduced to the applicable percentage of the then-current Stated Principal Balance of such Loan Group (and will remain fixed at the applicable percentage of the Stated Principal Balance of the Mortgage Loans in the related Loan Group as of the Due Date immediately prior to the occurrence of the Trigger Event) until the next Distribution Date on which the Trigger Event is not in effect. The "Stepdown Date", with respect to each Certificate Group, is the later to occur of (i) the Distribution Date in [DATE] or (ii) the first Distribution Date on which (A) the Certificate Principal Balance of the Class A Certificates in such Certificate Group is less than or equal to (B) [_____]%, for the Fixed Rate Mortgage Loan Group, and [_____]% (or [_____]%, if a Stepup Trigger Event has occurred and is continuing), for the Adjustable Rate Mortgage Loan Group, of the Stated Principal Balances of the Mortgage Loans in the related Loan Group, plus the amount on deposit in the Pre-Funding Account on the preceding Due Date allocable to such Loan Group. A "Trigger Event", with respect to each Certificate Group and a Distribution Date after the Stepdown Date, exists if the product of (i) [___], for the Fixed Rate Mortgage Loan Group, and [___], for the Adjustable Rate Mortgage Loan Group and (ii) the quotient of (A) the aggregate Stated Principal Balance of all Mortgage Loans 60 or more days delinquent for each Loan Group (including Mortgage Loans in foreclosure and REO Properties) and (B) the Stated Principal Balance of that Loan Group as of the preceding Servicer Advance Date equals or exceeds the Required Percentage. The "Required Percentage," with respect to each Certificate Group and a Distribution Date after the Stepdown Date is equal to the quotient of (x) the excess of (i) the Stated Principal Balances of the Mortgage Loans in such Loan Group, over (ii) the Certificate Principal Balance of the most senior Class of Certificates of such Certificate Group outstanding as of the preceding Servicer Advance Date and (y) the Stated Principal Balances of the Mortgage Loans in such Loan Group. As used herein, the Certificate Principal Balance of the most senior Class of Certificates of the Group I Certificates will equal the aggregate Certificate Principal Balance of the Class A Group I Certificates for such date of calculation. In addition, a "Trigger Event" exists with respect to each Certificate Group and a Distribution Date after the Stepdown Date, if Realized Losses with respect to the Fixed Rate Mortgage Loans or the Adjustable Rate Mortgage Loans, as applicable, as of such Distribution Date equal or exceed the following levels (expressed as a percentage of aggregate principal balance of the related Mortgage Loans, plus the amount on deposit in the Pre-Funding Account on the preceding Due Date allocable to such Loan Group, as of the Cut-off Date): S-75 Distribution Date Occurring In Percentage [MONTH/YEAR] through [MONTH/YEAR]....................... % [MONTH/YEAR] through [MONTH/YEAR]....................... % [MONTH/YEAR] through [MONTH/YEAR]....................... % [MONTH/YEAR] through [MONTH/YEAR]....................... % [MONTH/YEAR] and thereafter............................. % With respect to the Adjustable Rate Mortgage Loan Group, a "Stepup Trigger Event" exists with respect to a Distribution Date (and thereafter will exist with respect to each subsequent Distribution Date) if either (A) Realized Losses with respect to the Adjustable Rate Mortgage Loans as of such Distribution Date equal or exceed the following levels (expressed as a percentage of aggregate principal balance of the Adjustable Rate Mortgage Loans, plus the amount on deposit in the Pre-Funding Account on the preceding Due Date allocable to such Loan Group, as of the Cutoff Date) Distribution Date Occurring In Percentage [MONTH/YEAR] through [MONTH/YEAR]....................... % [MONTH/YEAR] through [MONTH/YEAR]....................... % [MONTH/YEAR] through [MONTH/YEAR]....................... % [MONTH/YEAR] through [MONTH/YEAR]....................... % [MONTH/YEAR] and thereafter............................. % or (B) the three month rolling average of Adjustable Rate Mortgage Loans that are 60 days or more delinquent (calculated as set forth in the Pooling and Servicing Agreement) as of such Distribution Date equals or exceeds the following levels (expressed as a percentage of the aggregate principal balance of the Adjustable Rate Mortgage Loans, plus the amount on deposit in the Pre-Funding Account on the preceding Due Date allocable to such Loan Group, as of such Distribution Date): Distribution Date Occurring In Percentage [MONTH/YEAR] through [MONTH/YEAR]..................... % [MONTH/YEAR] through [MONTH/YEAR]..................... % [MONTH/YEAR] through [MONTH/YEAR]..................... % [MONTH/YEAR] through [MONTH/YEAR]..................... % [MONTH/YEAR] and thereafter........................... % S-76 Overcollateralization and Crosscollateralization Provisions As set forth below, Interest Funds and Principal Funds with respect to a Certificate Group not otherwise required to be distributed with respect to principal of and interest on the Certificates of such Certificate Group ("Net Excess Cashflow") will be required to be applied as an Extra Principal Distribution Amount with respect to the other Mortgage Loan Group whenever the Stated Principal Balances of the Mortgage Loans in such Loan Group, plus the amount on deposit in the Pre-Funding Account allocable to such Loan Group as of such Distribution Date, do not exceed, by the required amount, the aggregate Certificate Principal Balances of the related Certificates. If on any Distribution Date, after giving effect to any Extra Principal Distribution Amount, the aggregate Certificate Principal Balances of the Offered Certificates with respect to a Mortgage Loan Group exceed the sum of (i) the Stated Principal Balances of the Mortgage Loans in the related Loan Group and (ii) the amount on deposit in the Pre-Funding Account allocable to such Loan Group as if such Distribution Date, the Certificate Principal Balances of the Subordinated Certificates of such Group will be reduced, in inverse order of seniority (beginning with the Class B Certificates) by an amount equal to such excess. If the Certificate Principal Balance of a Class of Subordinated Certificates is reduced, that Class thereafter will be entitled to distributions of interest and principal only with respect to the Certificate Principal Balance as so reduced. On subsequent Distribution Dates, however, as described below, Interest Funds and Principal Funds with respect to each Certificate Group not otherwise required to be distributed with respect to principal of and interest on the Certificates of such Certificate Group will be applied to reduce Unpaid Realized Loss Amounts previously allocated to such Certificates in order of seniority. On each Distribution Date, Interest Funds and Principal Funds with respect to each Loan Group not otherwise required to be distributed with respect to principal of and interest on the Certificates in the related Certificate Group as described above will be required to be distributed in respect of the following amounts until fully distributed: (i) the Extra Principal Distribution Amount for such Loan Group; (ii) to the Class M-1 Certificates of such Certificate Group, any Unpaid Realized Loss Amount for such Class; (iii) to the Class M-2 Certificates of such Certificate Group, any Unpaid Realized Loss Amount for such Class; (iv) to the Class B Certificates of such Certificate Group, the Unpaid Realized Loss Amount for such Class; (v) except in the case of Optional Termination Amounts (defined herein), for distribution to the Certificates in the other Certificate Group to the extent that any of the following amounts with respect to the other Certificate Group have not otherwise been funded in full for such Distribution Date in accordance with the priorities set forth herein; S-77 (A) to each Class of the Class A Certificates of such other Loan Group, the Current Interest and any Interest Carry Forward Amount for such Class; (B) the Extra Principal Distribution Amount for such other Loan Group; (C) to the Class M-1 Certificates of such other Certificate Group, the Current Interest and any Interest Carry Forward Amount for such Class; (D) to the Class M-1 Certificates of such other Certificate Group any Unpaid Realized Loss Amount for such Class; (E) to the Class M-2 Certificates of such other Certificate Group, the Current Interest and any Interest Carry Forward Amount for such Class; (F) to the Class M-2 Certificates of such other Certificate Group any Unpaid Realized Loss Amount for such Class; (G) to the Class B Certificates of such other Certificate Group, the Current Interest and any Interest Carry Forward Amount for such Class; (H) to the Class B Certificates of such other Certificate Group any Unpaid Realized Loss Amount for such Class; (vi) in the case of the Adjustable Rate Mortgage Loan Group, to the Group II Certificates, on a pro rata basis, the Adjustable Rate Certificate Carryover; and (vii) to the Residual Certificates, the remaining amount. "Unpaid Realized Loss Amount", with respect to any Class of the Subordinated Certificates and as to any Distribution Date, is the excess of (i) Applied Realized Loss Amounts with respect to such Class over (ii) the sum of all distributions in reduction of the Applied Realized Loss Amounts on all previous Distribution Dates. Any amounts distributed to a Class of Subordinated Certificates in respect of any Unpaid Realized Loss Amount will not be applied to reduce the Certificate Principal Balance of such Class. "Applied Realized Loss Amount", with respect to any Class of the Subordinated Certificates and as to any Distribution Date, means the sum of the Realized Losses with respect to Mortgage Loans which have been applied in reduction of the Certificate Principal Balance of such Class. "Realized Loss" is the excess of the Stated Principal Balance of a defaulted Mortgage Loan plus accrued interest over the net liquidation proceeds with respect thereto that are allocated to principal. "Optional Termination Amount" with respect to either Loan Group, is the Repurchase Price (defined herein) paid by the Master Servicer in connection with any repurchase of all of the Mortgage Loans in such Loan Group. S-78 Calculation of One-Month LIBOR On the second LIBOR Business Day (as defined below) preceding the commencement of each Accrual Period for the Group II Certificates and the Class IA-1 Certificates (each such date, an "Interest Determination Date"), the Master Servicer will determine the London interbank offered rate for one-month United States dollar deposits ("One-Month LIBOR") for such Accrual Period on the basis of the (i) offered rates for one-month United States dollar deposits, as such rates appear on Telerate page 3750, as of 11:00 a.m. (London time) on such Interest Determination Date or (ii) if such rate does not appear on Telerate Page 3750 as of 11:00 a.m., (London time), the Master Servicer will determine such rate on the basis of the offered rates of the Reference Banks for one-month United States dollar deposits, as such rates appear on the Reuters Screen LIBO Page, as of 11:00 a.m. (London time) on such Interest Determination Date. As used in this section, "LIBOR Business Day" means a day on which banks are open for dealing in foreign currency and exchange in London and New York City; "Reuters Screen LIBO Page" means the display designated as page "LIBO" on the Reuters Monitor Money Rates Service (or such other page as may replace the LIBO page on that service for the purpose of displaying London interbank offered rates of major banks); and "Reference Banks" means leading banks selected by the Master Servicer and engaged in transactions in Eurodollar deposits in the international Eurocurrency market (i) with an established place of business in London, (ii) whose quotations appear on the Reuters Screen LIBO Page on the Interest Determination Date in question, (iii) which have been designated as such by the Master Servicer and (iv) not controlling, controlled by, or under common control with, the Depositor, the Master Servicer, the Seller or any successor Subservicer. If One-Month LIBOR is determined pursuant to clause (ii) above, on each Interest Determination Date, One-Month LIBOR for the related Accrual Period for the Group II Certificates and the Class IA-1 Certificates, will be established by the Master Servicer as follows: (a) If on such Interest Determination Date two or more Reference Banks provide such offered quotations, One-Month LIBOR for the related Accrual Period for the Group II Certificates and the Class IA-1 Certificates shall be the arithmetic mean of such offered quotations (rounded upwards if necessary to the nearest whole multiple of 0.03125%). (b) If on such Interest Determination Date fewer than two Reference Banks provide such offered quotations, One-Month LIBOR for the related Accrual Period shall be the higher of (x) One-Month LIBOR as determined on the previous Interest Determination Date and (y) the Reserve Interest Rate. The "Reserve Interest Rate" shall be the rate per annum that the Master Servicer determines to be either (i) the arithmetic mean (rounded upwards if necessary to the nearest whole multiple of 0.03125%) of the one-month United States dollar lending rates which New York City banks selected by the Master Servicer are quoting on the relevant Interest Determination Date to the principal London offices of leading banks in the London interbank market or, in the event that the Master Servicer can determine no such arithmetic mean, (ii) the lowest one-month United States dollar lending rate which New York City banks selected by the Master Servicer are quoting on such Interest Determination Date to leading European banks. S-79 The establishment of One-Month LIBOR on each Interest Determination Date by the Master Servicer and the Master Servicer's calculation of the rate of interest applicable to the Group II Certificates and the Class IA-1 Certificates, for the related Accrual Period for such Group II Certificates and Class IA-1 Certificates shall (in the absence of manifest error) be final and binding. Mandatory Prepayments on the Certificates The Group I Certificates and the Group II Certificates will be prepaid in part on the Distribution Date immediately following the end of the Funding Period to the extent of any amounts remaining on deposit in the Pre-Funding Account on such Distribution Date. Although no assurance can be given, it is anticipated by the Depositor that the principal amount of Subsequent Mortgage Loans sold to the Trust Fund will require the application of substantially all of the Original Pre-Funded Amount and that there will be no material amount of principal prepaid to the holders of the Group I or Group II Certificates from the Pre-Funding Account. It is unlikely, however, that the Depositor will be able to deliver Subsequent Mortgage Loans with an aggregate principal balance identical to the related Original Pre-Funded Amount. Accordingly, a small amount of principal is likely to be prepaid on the Group I and Group II Certificates on the Distribution Date immediately following the end of the Funding Period. Capitalized Interest Account The Depositor will establish for the benefit of the holders of the Certificates a trust account (the "Capitalized Interest Account"). On the Closing Date, the Depositor will deposit in the Capitalized Interest Account a cash amount as specified in the Pooling and Servicing Agreement. On each Distribution Date during the Funding Period and on the Distribution Date immediately following the end of the Funding Period, funds on deposit in the Capitalized Interest Account will be applied to cover shortfalls in the amount of interest accrued on the Certificates in the Trust Fund attributable to the pre-funding feature. Such shortfall will exist during the Funding Period because the interest accruing on the aggregate principal balance of the Mortgage Loans in each Loan Group during such period will be less than the amount of interest which would have accrued on the Mortgage Loans in each Loan Group if the related Subsequent Mortgage Loans were included in the Trust Fund as of the Closing Date. On the first Distribution Date following the termination of the Funding Period (after the distribution on the Certificates to be made on such Distribution Date), funds on deposit in the Capitalized Interest Account will be released by the Trustee to the Depositor or its designee. Reports to Certificateholders On each Distribution Date, the Master Servicer will forward to each Certificateholder, the Subservicer, the Trustee and the Depositor a statement generally setting forth with respect to each Loan Group or Certificate Group, where applicable, among other information: (i) the amount of the related distribution to holders of each Class of Certificates allocable to principal, separately identifying (A) the aggregate amount of any principal prepayments included therein, (B) the aggregate amount of all scheduled payments of principal included therein and (C) any Extra Principal Distribution Amount; S-80 (ii) the amount of such distribution to holders of each Class of Certificates allocable to interest; (iii) the Interest Carry-Forward Amount for each Class of Certificates; (iv) the Certificate Principal Balance of each Class of Certificates after giving effect to the distribution of principal on such Distribution Date; (v) the aggregate outstanding principal balance of each Class of Certificates for the following Distribution Date; (vi) the amount of the Servicing Fee paid to or retained by the Subservicer for the related Due Period; (vii) the Pass-Through Rate for each Class of Certificates for such Distribution Date; (viii) the amount of Advances included in the distribution on such Distribution Date; (ix) the number and aggregate principal amounts of Mortgage Loans in each Loan Group (A) delinquent (exclusive of Mortgage Loans in foreclosure) (1) 31 to 60 days, (2) 61 to 90 days and (3) 91 or more days, and (B) in foreclosure and delinquent (1) 31 to 60 days, (2) 61 to 90 days and (3) 91 or more days, in each case as of the close of business on the last day of the calendar month preceding such Distribution Date; (x) with respect to any Mortgage Loan that became an REO Property in each Loan Group during the preceding calendar month, the loan number and Stated Principal Balance of such Mortgage Loan as of the close of business on the fifteenth day of the month of such Distribution Date (or, if not a Business Day, the immediately preceding Business Day) (the "Determination Date") and the date of acquisition thereof; (xi) with respect to each Loan Group, whether a Trigger Event or, if applicable, a Stepup Trigger Event has occurred; (xii) the total number and principal balance of any REO Properties in each Loan Group as of the close of business on the related Determination Date; (xiii) any Adjustable Rate Certificate Carryover paid and all remaining Adjustable Rate Certificate Carryover remaining on each Class of the Adjustable Rate Certificate on such Distribution Date; (xiv) the number and aggregate principal balance of all Subsequent Mortgage Loans added during the preceding Due Period; S-81 (xv) the amount on deposit in the Pre-Funding Account and the Capitalized Interest Account (both in the aggregate and with respect to each Loan Group); and (xvi) for the Distribution Date immediately following the end of the Funding Period, the current balance on deposit in the Pre-Funding Account, if any, that has not been used to purchase Subsequent Mortgage Loans and that is being distributed to Certificateholders as a mandatory prepayment of principal on such Distribution Date. In addition, within a reasonable period of time after the end of each calendar year, the Master Servicer will prepare and deliver to each Certificateholder of record during the previous calendar year a statement containing information necessary to enable Certificateholders to prepare their tax returns. Such statements will not have been examined and reported upon by an independent public accountant. Amendment The Pooling and Servicing Agreement may be amended by the Depositor, the Subservicer, the Master Servicer and the Trustee, without the consent of Certificateholders, for any of the purposes set forth under "The Pooling and Servicing Agreement-Amendment" in the Prospectus. In addition, the Pooling and Servicing Agreement may be amended by the Depositor, the Subservicer, the Master Servicer and the Trustee and the holders of a Majority in Interest of each Class of Certificates affected thereby for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Pooling and Servicing Agreement or of modifying in any manner the rights of the Certificateholders; provided, however, that no such amendment may (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 clause (i) above, 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 percentage of aggregate outstanding principal amounts of Certificates of each Class, the holders of which are required to consent to any such amendment, without the consent of the holders of all Certificates of such Class. Optional Termination The Master Servicer will have the right (but not the obligation) to repurchase all remaining Mortgage Loans and REO Properties in either Loan Group and thereby effect early retirement of all the Certificates of the related Certificate Group, subject to the Stated Principal Balance of the Mortgage Loans and REO Properties in such Loan Group at the time of repurchase being less than or equal to 10% of the aggregate principal balance of the Certificates in such Loan Group as of the Closing Date (an "Optional Termination Date"). In the event such option is exercised by the Master Servicer, the repurchase will be made at a price (the "Repurchase Price") equal to the sum of (i) 100% of the Stated Principal Balance of each Mortgage Loan in the related Loan Group (other than in respect of REO Property) plus accrued interest thereon at the applicable Mortgage Rate, (ii) the appraised value of any REO Property (up to the Stated Principal Balance of the related Mortgage Loan), and (iii) any unreimbursed out-of-pocket costs and expenses and the principal portion of any unreimbursed Advances, in each case previously incurred by the Subservicer in the performance of its servicing S-82 obligations with respect to such Mortgage Loans. Proceeds from such repurchase will be distributed to the Certificateholders in the related Certificate Group in the priority described above. The proceeds from any such distribution may not be sufficient to distribute the full amount to which each Class of Certificates is entitled if the purchase price is based in part on the appraised value of any REO Property and such appraised value is less than the Stated Principal Balance of the related Mortgage Loan. Any repurchase of the Mortgage Loans and REO Properties will result in an early retirement of the Certificates in the related Certificate Group. Optional Purchase of Defaulted Loans As to any Mortgage Loan which is delinquent in payment by 91 days or more, the Master Servicer may, at its option, purchase such Mortgage Loan at a price equal to 100% of the Stated Principal Balance thereof plus accrued interest thereon at the applicable Mortgage Rate, from the date through which interest was last paid by the related mortgagor or advanced to the first day of the month in which such amount is to be distributed. Events of Default Events of Default will consist of: (i) any failure by the Subservicer to deposit in the Collection Account or the Certificate Account the required amounts or remit to the Trustee any payment (including an Advance required to be made under the terms of the Pooling and Servicing Agreement) which continues unremedied for five Business Days after written notice of such failure shall have been given to the Subservicer and the Depositor by the Trustee or the Depositor, or to the Subservicer, the Depositor and the Trustee by the holders of Certificates evidencing not less than 25% of the Voting Rights evidenced by the Certificates; (ii) any failure by the Subservicer to observe or perform in any material respect any other of its covenants or agreements, or any breach of a representation or warranty made by the Subservicer in the Pooling and Servicing Agreement, which continues unremedied for 60 days after the giving of written notice of such failure to the Subservicer by the Trustee, the Master Servicer or the Depositor, or to the Subservicer, the Depositor, the Master Servicer and the Trustee by the holders of Certificates evidencing not less than 25% of the Voting Rights evidenced by the Certificates or (iii) insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings, and certain actions by or on behalf of the Subservicer indicating its insolvency or inability to pay its obligations. As of any date of determination, (i) holders of the Offered Certificates will be allocated 95% of all Voting Rights, allocated among the Offered Certificates in proportion to their respective outstanding Certificate Principal Balances and (ii) holders of the Residual Certificates will be allocated all of the remaining Voting Rights. Voting Rights will be allocated among the Certificates of each such Class in accordance with their respective Percentage Interests. Rights upon Event of Default So long as an Event of Default under the Pooling and Servicing Agreement remains unremedied, the Trustee may, or upon the receipt of instructions from the holders of Certificates having not less than 25% of the Voting Rights evidenced by the Certificates, shall, terminate all of the rights and obligations of the Subservicer under the Pooling and Servicing Agreement and in and to the Mortgage Loans, whereupon the Trustee will succeed to all of the responsibilities and duties of the S-83 Subservicer under the Pooling and Servicing Agreement, including the obligation to make Advances. No assurance can be given that termination of the rights and obligations of the Subservicer under the Pooling and Servicing Agreement would not adversely affect the servicing of the Mortgage Loans, including the delinquency experience of the Mortgage Loans. No Certificateholder, solely by virtue of such Holder's status as a Certificateholder, will have any right under the Pooling and Servicing Agreement to institute any proceeding with respect thereto, unless such Holder previously has given to the Trustee written notice of the continuation of an Event of Default and unless the holders of Certificates having not less than 25% of the Voting Rights evidenced by the Certificates have made written request to the Trustee to institute such proceeding in its own name as Trustee thereunder and have offered to the Trustee reasonable indemnity and the Trustee for 60 days has neglected or refused to institute any such proceeding. The Trustee Citibank, N.A. will be the Trustee under the Pooling and Servicing Agreement. The Depositor, the Master Servicer and the Subservicer may maintain other banking relationships in the ordinary course of business with the Trustee. The Corporate Trust Office of the Trustee is located at 111 Wall Street, New York, New York 10043, or at such other addresses as the Trustee may designate from time to time. YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS General The weighted average life of, and the yield to maturity on each Class of the Offered Certificates will be directly related to the rate of payment of principal (including prepayments) of the Mortgage Loans in the related Loan Group. The actual rate of principal prepayments on pools of mortgage loans is influenced by a variety of economic, tax, geographic, demographic, social, legal and other factors and has fluctuated considerably in recent years. In addition, the rate of principal prepayments may differ among pools of mortgage loans at any time because of specific factors relating to the mortgage loans in the particular pool, including, among other things, the age of the mortgage loans, the geographic locations of the properties securing the loans, the extent of the mortgagor's equity in such properties, and changes in the mortgagors' housing needs, job transfers and employment status, as well as whether the related mortgage loan is subject to a prepayment penalty. In addition, the Seller may solicit mortgagors to refinance their Mortgage Loans for a variety of reasons. Any such refinancings will affect the rate of principal prepayments on the Mortgage Pool. The timing of changes in the rate of prepayments may significantly affect the actual yield to investors who purchase the Offered Certificates at prices other than par, even if the average rate of principal prepayments is consistent with the expectations of investors. In general, the earlier the payment of principal of the Mortgage Loans the greater the effect on an investor's yield to maturity. As a result, the effect on an investor's yield of principal prepayments occurring at a rate higher (or lower) than the rate anticipated by the investor during the period immediately following the issuance of the Offered Certificates may not be offset by a subsequent like reduction (or increase) in the rate of S-84 principal prepayments. Investors must make their own decisions as to the appropriate prepayment assumptions to be used in deciding whether to purchase any of the Offered Certificates. The Depositor does not make any representations or warranties as to the rate of prepayment or the factors to be considered in connection with such determinations. The weighted average life and yield to maturity of each Class of Offered Certificates will also be influenced by the amount of Net Excess Cashflow generated by the Mortgage Loans and applied in reduction of the Certificate Principal Balances of such Certificates. The level of Net Excess Cashflow available on any Distribution Date to be applied in reduction of the Certificate Principal Balances of the Class A Certificates will be influenced by, among other factors, (i) the overcollateralization level of the assets in the related Loan Group at such time (i.e., the extent to which interest on the related Mortgage Loans is accruing on a higher Stated Principal Balance than the Certificate Principal Balance of the related Class A Certificates), (ii) the delinquency and default experience of the related Mortgage Loans, (iii) the level of One-Month LIBOR, (iv) the Mortgage Index for the Adjustable Rate Mortgage Loans and (v) the provisions of the Pooling and Servicing Agreement that permit Net Excess Cashflow to be distributed to the Residual Certificates when required overcollateralization levels have been met. To the extent that greater (or lesser) amounts of Net Excess Cashflow are distributed in reduction of the Certificate Principal Balances of a Class of Offered Certificates, the weighted average life thereof can be expected to shorten (or lengthen). No assurance, however, can be given as to the amount of Net Excess Cashflow distributed at any time or in the aggregate. See "Description of the Certificates--Overcollateralization and Crosscollateralization Provisions." [The Class IA-5 Certificates are not expected to receive distributions of principal until the Distribution Date in [DATE] (except as otherwise described herein). Thereafter, the relative entitlement of the Class IA-5 Certificates to payments in respect of principal is subject to increase in accordance with the calculation of the Class IA-5 Distribution Amount. See "Description of the Certificates--Distributions."] To the extent that the Original Pre-Funded Amount has not been fully applied to the purchase of Subsequent Mortgage Loans by the end of the Funding Period, the holders of the Group I and Group II Certificates will receive on the Distribution Date immediately following the end of the Funding Period a prepayment of principal in an amount equal to the lesser of (i) any amounts remaining in the Pre-Funding Account allocable to such Loan Group and (ii) the outstanding Certificate Principal Balance of the Group I and Group II Certificates. Although no assurance can be given, it is anticipated by the Depositor that the principal amount of Subsequent Mortgage Loans sold to the Trust Fund will require the application of substantially all amounts on deposit in the Pre-Funding Account and that there will be no material amount of principal prepaid to the holders of the Group I and Group II Certificates. However, it is unlikely that the Depositor will be able to deliver Subsequent Mortgage Loans with an aggregate principal balance identical to the Pre-Funded Amount. Accordingly, a small amount of principal is likely to be prepaid on the Group I and Group II Certificates on the Distribution Date immediately following the end of the Funding Period. S-85 Prepayments and Yields for Offered Certificates Generally, if purchased at other than par, the yield to maturity on the Offered Certificates will be affected by the rate of the payment of principal of the Mortgage Loans in the related Loan Group. If the actual rate of payments on the Mortgage Loans in a Loan Group is slower than the rate anticipated by an investor who purchases related Offered Certificates at a discount, the actual yield to such investor will be lower than such investor's anticipated yield. If the actual rate of payments on the Mortgage Loans in a Loan Group is faster than the rate anticipated by an investor who purchases related Offered Certificates at a premium, the actual yield to such investor will be lower than such investor's anticipated yield. All the Mortgage Loans in the Fixed Rate Mortgage Loan Group are fixed rate mortgage loans. In general, if prevailing interest rates fall significantly below the interest rates on fixed rate mortgage loans, such mortgage loans are likely to be subject to higher prepayment rates than if prevailing rates remain at or above the interest rates on such mortgage loans. Conversely, if prevailing interest rates rise appreciably above the interest rates on fixed rate mortgage loans, such mortgage loans are likely to experience a lower prepayment rate than if prevailing rates remain at or below the interest rates on such mortgage loans. All the Mortgage Loans in the Adjustable Rate Mortgage Loan Group are adjustable rate Mortgage Loans. As is the case with conventional fixed rate mortgage loans, adjustable rate mortgage loans may be subject to a greater rate of principal prepayments in a declining interest rate environment. For example, if prevailing interest rates fall significantly, adjustable rate mortgage loans could be subject to higher prepayment rates than if prevailing interest rates remain constant because the availability of fixed rate mortgage loans at lower interest rates may encourage mortgagors to refinance their adjustable rate mortgage loans to a lower fixed interest rate. In addition, depending on prevailing interest rates, adjustable rate mortgage loans could experience higher prepayment rates at or near the time of any interest rate adjustment. Nevertheless, no assurance can be given as to the level of prepayment that the Mortgage Loans will experience. Although the Mortgage Rates on the Mortgage Loans in the Adjustable Rate Mortgage Loan Group are subject to adjustment, the Mortgage Rates adjust less frequently than the Pass-Through Rate on the Group II Certificates and adjust by reference to the Mortgage Index. Changes in One-Month LIBOR may not correlate with changes in the Mortgage Index and also may not correlate with prevailing interest rates. It is possible that an increased level of One-Month LIBOR could occur simultaneously with a lower level of prevailing interest rates which would be expected to result in faster prepayments, thereby reducing the weighted average life of the Group II Certificates. The Mortgage Rate applicable to the Mortgage Loans in the Adjustable Rate Mortgage Loan Group and any Adjustment Date will be based on the Mortgage Index value most recently announced generally as of a date 45 days prior to such Adjustment Date. Thus, if the Mortgage Index value with respect to a Mortgage Loan in the Adjustable Rate Mortgage Loan Group rises, the lag in time before the corresponding Mortgage Rate increases will, all other things being equal, slow the upward adjustment of the Group II Available Funds Cap. See "The Mortgage Pool." The calculation of the Pass-Through Rate on each Class of the Group II Certificates is based upon the value of an index (One-Month LIBOR) which is different from the value of the index applicable to substantially all the Adjustable Rate Mortgage Loans (Six-Month LIBOR) as described S-86 under "The Mortgage Pool--General" and is subject to the Group II Available Funds Cap. The Group II Available Funds Cap effectively limits the amount of interest accrued on each Class of the Group II Certificates to the amount of interest accruing on the Adjustable Rate Mortgage Loans at a rate equal to the weighted average of the Mortgage Rates of such Mortgage Loans, less the Servicing Fee Rate and the Master Servicer Fee Rate. Furthermore, even if One-Month LIBOR and Six-Month LIBOR were at the same level, various factors may cause the Group II Available Funds Cap to limit the amount of interest that would otherwise accrue on each Class of the Group II Certificates. In particular, the Pass-Through Rate on each Class of the Group II Certificates adjusts monthly, while the interest rates of the Adjustable Rate Mortgage Loans adjust less frequently, with the result that the operation of the Group II Available Funds Cap may cause the Pass-Through Rates to be reduced for extended periods in a rising interest rate environment. In addition, the Adjustable Rate Mortgage Loans are subject to periodic (i.e., semiannual) adjustment caps and maximum rate caps, and the weighted average margin is subject to change based upon prepayment experience, which also may result in the Group II Available Funds Cap limiting increases in the Pass-Through Rate for such Classes of the Group II Certificates. Finally, the Adjustable Rate Mortgage Loans accrue interest on the basis of a 360-day year assumed to consist of twelve 30-day months, while calculations of interest on each Class of the Group II Certificates will be made on the basis of the actual number of days elapsed in the related Accrual Period and a year of 360 days. This may result in the Group II Available Funds Cap limiting the Pass-Through Rate for such Classes of Certificates in Accrual Periods that have more than 30 days. Consequently, the interest which becomes due on the Adjustable Rate Mortgage Loans (net of the sum of the Servicing Fee and the Master Servicer Fee) with respect to any Distribution Date may not equal the amount of interest that would accrue at One-Month LIBOR plus the margin on each Class of the Group II Certificates. Furthermore, if the Group II Available Funds Cap determines the Pass-Through Rate for a Class of the Group II Certificates for a Distribution Date, the market value of such Class of Certificates may be temporarily or permanently reduced. Although the Pooling and Servicing Agreement provides a mechanism to pay, on a subordinated basis, any Adjustable Rate Certificate Carryover, there is no assurance that funds will be available to pay such amount. The ratings assigned to the Group II Certificates do not address the likelihood of the payment of any such amount. In addition, the Pass-Through Rate on each Class of the Group II Certificates is subject to the Group II Maximum Rate Cap, which is defined as the weighted average of the maximum lifetime Mortgage Rate on the Adjustable Rate Mortgage Loans less the Servicer Fee Rate and the Master Servicing Fee Rate. The Group II Maximum Rate Cap may limit increases in the Pass-Through Rates on such Class of the Group II Certificates and any shortfall of interest will not be recovered. On any Distribution Date, the Pass-Through Rate for the Class IA-1 Certificates will equal the lesser of (i) One-Month LIBOR plus [___]% and (ii) the weighted average Net Mortgage Rate on the Group I Mortgage Loans. Therefore, to the extent that the weighted average Net Mortgage Rate on the Group I Mortgage Loans is ever reduced to less than One-Month LIBOR plus [___]%, investors in the Class IA-1 Certificates may experience a lower than anticipated yield and any shortfall of interest will not be recovered. On any Distribution Date, the Pass-Through Rates for the Class IA-4, Class IA-5, Class IM-1, Class IM-2 and Class IB Certificates will equal the lesser of the rate set forth for such Class in the table on page S-3 and (ii) the weighted average Net Mortgage Rate on the Group I Mortgage Loans. S-87 Therefore, to the extent that the weighted average Net Mortgage Rate on the Group I Mortgage Loans is ever reduced to less than the applicable rate described in clause (i), investors in the Class IA-4, Class IA-5, Class IM-1, Class IM-2 or Class IB Certificates may experience a lower than anticipated yield and any shortfall of interest will not be recovered. The extent to which the yield to maturity of the Offered Certificates may vary from the anticipated yield will depend upon the degree to which it is purchased at a discount or premium and, correspondingly, the degree to which the timing of payments thereon is sensitive to prepayments, liquidations and purchases of the Mortgage Loans in the related Loan Group. In particular, in the case of an Offered Certificate purchased at a discount, an investor should consider the risk that a slower than anticipated rate of principal payments, liquidations and purchases of the Mortgage Loans in the related Loan Group could result in an actual yield to such investor that is lower than the anticipated yield and, in the case of an Offered Certificate purchased at a premium, the risk that a faster than anticipated rate of principal payments, liquidations and purchases of such Mortgage Loans in the related Loan Group could result in an actual yield to such investor that is lower than the anticipated yield. The "Last Scheduled Distribution Date" for each Class of the Offered Certificates is the date on which the Certificate Principal Balance thereof would be reduced to zero assuming, among other things, that no prepayments are received on the Mortgage Loans in the related Loan Group and that scheduled monthly payments of principal of and interest on each of such Mortgage Loans are timely received and that excess interest is not used to make accelerated payments of principal. The Last Scheduled Distribution Date for each Class of Offered Certificates is set forth in the chart appearing on page S-3. The actual final Distribution Date with respect to each Class of Offered Certificates could occur significantly earlier than its Last Scheduled Distribution Date because (i) prepayments are likely to occur which will be applied to the payment of the Certificate Principal Balances thereof, (ii) excess interest to the extent available will be applied as an accelerated payment of principal on the Offered Certificates as described herein and (iii) the Master Servicer may purchase all the Mortgage Loans in a Loan Group when outstanding Stated Principal Balances thereof has declined to 10% or less of the aggregate Certificate Principal Balance of all of the Certificates of such Loan Group, as of the Cutoff Date. Prepayments on mortgage loans are commonly measured relative to a prepayment model or standard. The models used in this Prospectus Supplement ("Prepayment Models") are based on an assumed rate of prepayment each month of the then unpaid principal balance of a pool of mortgage loans similar to the Mortgage Loans in each Loan Group. For the Fixed Rate Mortgage Loan Group, the Prepayment Model used in this Prospectus Supplement ("Home Equity Prepayment" or "HEP") is a prepayment assumption which represents an assumed rate of prepayment each month relative to the then outstanding principal balance of a pool of mortgage loans for the life of such mortgage loans. [__]% HEP, which represents 100% of the Prepayment Model for the Fixed Rate Mortgage Loan Group, assumes prepayment rates of [___]% per annum of the then outstanding principal balance of the related Mortgage Loans in the first month of the life of such Mortgage Loans and an additional [___]% per annum in each month thereafter up to and including the tenth month. Beginning in the eleventh month and in each month thereafter during the life of such Mortgage Loans, [__]% HEP assumes a constant prepayment rate of [__]% per annum. For the Adjustable Rate Mortgage Loan Group, the Prepayment Model used in this Prospectus Supplement ("Constant Prepayment S-88 Rate" or "CPR") is a prepayment assumption which represents a constant assumed rate of prepayment each month relative of the then outstanding principal balance of a pool of mortgage loans for the life of such mortgage loans. [__]% CPR, which represents 100% of the Prepayment Model for the Adjustable Rate Mortgage Loan Group, assumes a constant prepayment rate of [__]% per annum. As used in the following tables "0% of the Prepayment Model" assumes no prepayments on the Mortgage Loans; "80% of the Prepayment Model" assumes the Mortgage Loans will prepay at rates equal to 80% of the related Prepayment Model; "100% of the Prepayment Model" assumes the Mortgage Loans will prepay at rates equal to 100% of the related Prepayment Model; "150% of the Prepayment Model" assumes the Mortgage Loans will prepay at rates equal to 150% of the related Prepayment Model; and "200% of the Prepayment Model" assumes the Mortgage Loans will prepay at rates equal to 200% of the Prepayment Model assumed prepayment rates. There is no assurance, however, that prepayments on the Mortgage Loans will conform to any level of the Prepayment Model, and no representation is made that the Mortgage Loans will prepay at the prepayment rates shown or any other prepayment rate. The rate of principal payments on pools of mortgage loans is influenced by a variety of economic, geographic, social and other factors, including the level of interest rates. Other factors affecting prepayment of mortgage loans include changes in obligors' housing needs, job transfers, unemployment, the solicitation of mortgagors to refinance their mortgage loans and the existence of prepayment penalties. In the case of mortgage loans in general, if prevailing interest rates fall significantly below the interest rates on such mortgage loans, the mortgage loans are likely to be subject to higher prepayment rates than if prevailing interest rates remain at or above the rates borne by such mortgage loans. Conversely, if prevailing interest rates rise above the interest on such mortgage loans, the rate of prepayment would be expected to decrease. The following tables have been prepared on the basis of the following assumptions (collectively, the "Modeling Assumptions"): (i) the Mortgage Loans of the related Loan Group prepay at the indicated percentage of the related Prepayment Model; (ii) distributions on the Offered Certificates are received, in cash, on the 25th day of each month, commencing [DATE], in accordance with the payment priorities defined herein; (iii) no defaults or delinquencies in, or modifications, waivers or amendments respecting, the payment by the Mortgagors of principal and interest on the Mortgage Loans occur; (iv) scheduled payments are assumed to be received on the related Due Date commencing on [DATE], and prepayments represent payment in full of individual Mortgage Loans and are assumed to be received on the last day of each month, commencing in [MONTH/YEAR], and include 30 days' interest thereon; (v) the level of Six-Month LIBOR remains constant at [_____]%, and the level of One-Month LIBOR remains constant at [_______]%; (vi) the Pass-Through Rates for the Group II Certificates remain constant at the rates applicable prior to the related Optional Termination Date; (vii) the Closing Date for the Certificates is June 18, 1999; (viii) the Mortgage Rate for each Adjustable Rate Mortgage Loan is adjusted on its next Mortgage Rate Adjustment Date (and on any subsequent Mortgage Rate Adjustment Dates, if necessary) to equal the sum of (a) the assumed level of the Mortgage Index and (b) the respective Gross Margin (such sum being subject to the applicable periodic adjustment caps and floors); (ix) overcollateralization levels are initially set as specified in the Pooling and Servicing Agreement, and thereafter decrease in accordance with the provisions of the Pooling and Servicing Agreement; (x) the Mortgage Loans in the Fixed Rate Mortgage Loan Group are purchased on the first applicable Optional Termination Date and the Mortgage Loans in the Adjustable S-89 Rate Mortgage Loan Group are purchased on the first applicable Optional Termination Date; [(xi) the Subsequent Mortgage Loans are purchased on [DATE] resulting in no mandatory prepayment from the Pre-Funding Account on the Distribution Date immediately following the end of the Funding Period; and (xii) each Loan Group consists of Mortgage Loans having the approximate characteristics described below: Fixed Rate Mortgage Loan Group
Original Amortization Remaining Net Mortgage Original Term Term Term Current Balance Mortgage Rate Rate (in months) (in months) (in months) --------------- ------------- ------------- ------------- ------------ ----------- $ % % % % % % % % % %
Adjustable Rate Mortgage Loan Group
Number of Months Net Original Remaining Reset Until Mortgage Mortgage Term Term Gross Periodic Change Next Rate Current Balance Rate Rate (in months) (in months) Margin Cap Frequency Adjustment Date Index - --------------- -------- -------- ----------- ----------- ------ -------- --------- --------------- ----- $ % % % % 6 mo. LIBOR $ % % % % 6 mo. LIBOR $ % % % % 6 mo. LIBOR $ % % % % 6 mo. LIBOR
S-90 Percentage of Initial Principal Balance Outstanding at the Respective Percentages of the Prepayment Model Set Forth Below
Class IA-1 Class IA-2 ---------- ---------- Distribution Date 0% 80% 100% 150% 200% 0% 80% 100% 150% 200% - ----------------- -- --- ---- ---- ---- -- --- ---- ---- ---- Initial............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. Weighted Average Life in years(1).........................
- ----------- (1) The weighted average lives of the Offered Certificates as shown above are determined by (i) multiplying the amount of each assumed principal distribution by the number of years from the date of issuance of the Certificates to the related Distribution Date, (ii) summing the results and (iii) dividing the sum by the total principal distribution on such Certificates. S-91 Percentage of Initial Principal Balance Outstanding at the Respective Percentages of the Prepayment Model Set Forth Below
Class IA-3 Class IA-4 ---------- ---------- Distribution Date 0% 80% 100% 150% 200% 0% 80% 100% 150% 200% - ----------------- -- --- ---- ---- ---- -- --- ---- ---- ---- Initial ........................... [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. Weighted Average Life in years(1).........................
- ----------- (1) The weighted average lives of the Offered Certificates as shown above are determined by (i) multiplying the amount of each assumed principal distribution by the number of years from the date of issuance of the Certificates to the related Distribution Date, (ii) summing the results and (iii) dividing the sum by the total principal distribution on such Certificates. S-92 Percentage of Initial Principal Balance Outstanding at the Respective Percentages of the Prepayment Model Set Forth Below
Class IA-5 Class IM-1 ---------- ---------- Distribution Date 0% 80% 100% 150% 200% 0% 80% 100% 150% 200% - ----------------- -- --- ---- ---- ---- -- --- ---- ---- ---- Initial ........................... [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. Weighted Average Life in years(1).........................
- ----------- (1) The weighted average lives of the Offered Certificates as shown above are determined by (i) multiplying the amount of each assumed principal distribution by the number of years from the date of issuance of the Certificates to the related Distribution Date, (ii) summing the results and (iii) dividing the sum by the total principal distribution on such Certificates. S-93 Percentage of Initial Principal Balance Outstanding at the Respective Percentages of the Prepayment Model Set Forth Below
Class IM-2 Class IB ---------- -------- Distribution Date 0% 80% 100% 150% 200% 0% 80% 100% 150% 200% - ----------------- -- --- ---- ---- ---- -- --- ---- ---- ---- Initial ........................... [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. Weighted Average Life in years(1).........................
- ----------- (1) The weighted average lives of the Offered Certificates as shown above are determined by (i) multiplying the amount of each assumed principal distribution by the number of years from the date of issuance of the Certificates to the related Distribution Date, (ii) summing the results and (iii) dividing the sum by the total principal distribution on such Certificates. S-94 Percentage of Initial Principal Balance Outstanding at the Respective Percentages of the Prepayment Model Set Forth Below
Class IIA-1 Class IIM-1 ----------- ----------- Distribution Date 0% 80% 100% 150% 200% 0% 80% 100% 150% 200% - ----------------- -- --- ---- ---- ---- -- --- ---- ---- ---- Initial ........................... [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. Weighted Average Life in years(1).........................
- ----------- (1) The weighted average lives of the Offered Certificates as shown above are determined by (i) multiplying the amount of each assumed principal distribution by the number of years from the date of issuance of the Certificates to the related Distribution Date, (ii) summing the results and (iii) dividing the sum by the total principal distribution on such Certificates. S-95 Percentage of Initial Principal Balance Outstanding at the Respective Percentages of the Prepayment Model Set Forth Below
Class IIM-2 Class IIB ----------- --------- Distribution Date 0% 80% 100% 150% 200% 0% 80% 100% 150% 200% - ----------------- -- --- ---- ---- ---- -- --- ---- ---- ---- Initial ........................... [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. [DATE].............................. Weighted Average Life in years(1).........................
- ----------- (1) The weighted average lives of the Offered Certificates as shown above are determined by (i) multiplying the amount of each assumed principal distribution by the number of years from the date of issuance of the Certificates to the related Distribution Date, (ii) summing the results and (iii) dividing the sum by the total principal distribution on such Certificates. S-96 Additional Information The Depositor has filed certain additional yield tables and other computational materials with respect to the Certificates with the Securities and Exchange Commission in a report on Form 8-K. Such tables and materials were prepared by the Underwriters for certain prospective investors. Such tables and assumptions may be based on assumptions that differ from the Modeling Assumptions. Accordingly, such tables and other materials may not be relevant to or appropriate for investors other than those specifically requesting them. FEDERAL INCOME TAX CONSEQUENCES For federal income tax purposes, the Trust Fund will include two segregated asset pools, with respect to which elections will be made to treat each as a separate REMIC. One REMIC (the "Subsidiary REMIC") will issue uncertificated subclasses of nonvoting interest ("Subsidiary REMIC Regular Interests"), which will be designated as the regular interests in the Subsidiary REMIC. The assets of the Subsidiary REMIC will consist of the Mortgage Loans and all other property in the Trust Fund except for the property in the Trust Fund allocated to the second REMIC (the "Master REMIC"). The Master REMIC will issue the Regular Certificates, which will be designated as the regular interests in the Master REMIC. The Residual Certificates will represent the beneficial ownership of the residual interest in the Subsidiary REMIC and the residual interest in the Master REMIC. The assets of the Master REMIC will consist of the Subsidiary REMIC Regular Interests. Aggregate distributions on the Subsidiary REMIC Regular Interests will equal the aggregate distributions on the Regular Certificates issued by the Master REMIC. Holders of Subordinate Certificates may be required to accrue income currently even though their distributions may be reduced due to defaults and delinquencies on the related Mortgage Loans. See "Federal Income Tax Consequences" in the Prospectus. Original Issue Discount Certain Classes of the Offered Certificates may be treated as being issued with original issue discount. For purposes of determining the amount and rate of accrual of original issue discount and market discount, the Depositor intends to assume that there will be prepayments on the Mortgage Loans in each Loan Group at a rate equal to 100% of the applicable Prepayment Model, as described above. No representation is made as to whether the Mortgage Loans will prepay at that rate or any other rate. See "Yield, Prepayment and Maturity Considerations" herein and "Federal Income Tax Consequences" in the Prospectus. Certain Classes of the Offered Certificates may be treated as being issued at a premium. In such case, the Offered Certificateholders may elect under Section 171 of the Code to amortize such premium under the constant yield method and to treat such amortizable premium as an offset to interest income on the Certificates. Such election, however, applies to all the Certificateholder's debt S-97 instruments held during or after the first taxable year in which the election is first made, and should only be made after consulting with a tax adviser. If the method for computing original issue discount described in the Prospectus results in a negative amount for any period with respect to a Certificateholder, such Certificateholder will be permitted to offset such excess amounts only against the respective future income, if any, from such Certificate. Although the tax treatment is uncertain, a Certificateholder may be permitted to deduct a loss to the extent that such Holder's respective remaining basis in such Certificate exceeds the maximum amount of future payments to which such Holder is entitled, assuming no further Principal Prepayments on the Mortgage Loans are received. Although the matter is not free from doubt, any such loss might be treated as a capital loss. Special Tax Attributes of the Offered Certificates As is described more fully under "Federal Income Tax Consequences" in the Prospectus, the Certificates will represent qualifying assets under Sections 856(c)(5)(B) and 7701(a)(19)(C)(v) of the Code, and net interest income attributable to the Offered Certificates will be "interest on obligations secured by mortgages on real property" within the meaning of Section 856(c)(3)(B) of the Code, to the extent the assets of the Trust Fund are assets described in such sections. The Offered Certificates will represent qualifying assets under Section 860G(a)(3) if acquired by a REMIC within the prescribed time periods of the Code. Prohibited Transactions Tax and Other Taxes The Code imposes a tax on REMICs equal to 100% of the net income derived from "prohibited transactions" (the "Prohibited Transactions Tax"). In general, subject to certain specified exceptions, a prohibited transaction means the disposition of a Mortgage Loan, the receipt of income from a source other than a Mortgage Loan or certain other permitted investments, the receipt of compensation for services, or gain from the disposition of an asset purchased with the payments on the Mortgage Loans for temporary investment pending distribution on the Certificates. It is not anticipated that the Trust Fund will engage in any prohibited transactions in which it would recognize a material amount of net income. In addition, certain contributions to a trust fund that elects to be treated as a REMIC made after the day on which such trust fund issues all of its interests could result in the imposition of a tax on the trust fund equal to 100% of the value of the contributed property (the "Contributions Tax"). The Trust Fund will not accept contributions that would subject it to such tax. In addition, a trust fund that elects to be treated as a REMIC may also be subject to federal income tax at the highest corporate rate on "net income from foreclosure property," determined by reference to the rules applicable to real estate investment trusts. "Net income from foreclosure property" generally means gain from the sale of a foreclosure property other than qualifying rents and other qualifying income for a real estate investment trust. It is not anticipated that the Trust Fund will recognize net income from foreclosure property subject to federal income tax. S-98 Where any Prohibited Transactions Tax, Contributions Tax, tax on net income from foreclosure property or state or local income or franchise tax that may be imposed on the REMIC arises out of a breach of the Subservicer's or the Trustee's obligations, as the case may be, under the Pooling and Servicing Agreement and in respect of compliance with then applicable law, such tax will be borne by the Subservicer or Trustee in either case out of its own funds. In the event that either the Subservicer or the Trustee, as the case may be, fails to pay or is not required to pay any such tax as provided above, such tax will be paid by the Trust Fund first with amounts that might otherwise be distributable to the holders of Certificates in the manner provided in the Pooling and Servicing Agreement. It is not anticipated that any material state or local income or franchise tax will be imposed on the Trust Fund. For further information regarding the federal income tax consequences of investing in the Offered Certificates, see "Federal Income Tax Consequences--REMIC Certificates" in the Prospectus. STATE TAXES The Depositor makes no representations regarding the tax consequences of purchase, ownership or disposition of the Offered Certificates under the tax laws of any state. Investors considering an investment in the Offered Certificates should consult their own tax advisors regarding such tax consequences. All investors should consult their own tax advisors regarding the federal, state, local or foreign income tax consequences of the purchase, ownership and disposition of the Offered Certificates. ERISA CONSIDERATIONS Section 406 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), prohibits "parties in interest" with respect to an employee benefit plan subject to ERISA and Section 4975 of the Code prohibits a "disqualified person" with respect to a plan or other arrangement subject to the excise tax provisions set forth under Section 4975 of the Code (each of the foregoing, a "Plan") from engaging in certain transactions involving such Plan and its assets unless a statutory, regulatory or administrative exemption applies to the transaction. Section 4975 of the Code imposes certain excise taxes on prohibited transactions involving plans described under that Section. ERISA authorizes the imposition of civil penalties for prohibited transactions involving plans not covered under Section 4975 of the Code. Any Plan fiduciary which proposes to cause a Plan to acquire the Offered Certificates should consult with its counsel with respect to the potential consequences under ERISA and the Code of the Plan's acquisition and ownership of such Certificates. See "ERISA Considerations" in the Prospectus. Certain employee benefit plans, including governmental plans and certain church plans, are not subject to ERISA's requirements. Accordingly, assets of such plans may be invested in the Class A Certificates without regard to the ERISA considerations described herein and in the Prospectus, subject to the provisions of other applicable federal and state law. Any such plan which is qualified and exempt from taxation under Sections 401(a) and 501(a) of the Code may nonetheless be subject to the prohibited transaction rules set forth in Section 503 of the Code. S-99 Except as noted above, investments by Plans are subject to ERISA's general fiduciary requirements, including the requirement of investment prudence and diversification and the requirement that a Plan's investments be made in accordance with the documents governing the Plan. A fiduciary which decides to invest the assets of a Plan in the Class A Certificates should consider, among other factors, the extreme sensitivity of the investments to the rate of principal payments (including prepayments) on the Mortgage Loans. The U.S. Department of Labor has granted administrative exemptions to[Underwriter] (Transaction Exemption ____, __ Fed. Reg. _______ (____)), to [Underwriter] (Prohibited Transaction Exemption _____, __ Fed. Reg. ____ (1991)) ___and to [Underwriter] (Prohibited Transaction Exemption _____, __ Fed. Reg. ______ (1990)) (together, the "Exemptions") from certain of the prohibited transaction rules of ERISA and the related excise tax provisions of Section 4975 of the Code with respect to the initial purchase, the holding and the subsequent resale by Plans of certificates in pass-through trusts that consist of certain receivables, loans and other obligations that meet the conditions and requirements of the Exemptions. The Exemptions apply to mortgage loans such as the Mortgage Loans in the Trust Fund. Among the conditions that must be satisfied for the Exemptions to apply are the following: (1) the acquisition of the certificates by a Plan is on terms (including the price for the certificates) that are at least as favorable to the Plan as they would be in an arm's length transaction with an unrelated party; (2) the rights and interests evidenced by the certificates acquired by the Plan are not subordinated to the rights and interests evidenced by other certificates of the trust fund; (3) the certificates acquired by the Plan have received a rating at the time of such acquisition that is one of the three highest generic rating categories from Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), Moody's Investors Service, Inc. ("Moody's"), Duff & Phelps Credit Rating Co. ("DCR") or Fitch IBCA, Inc. ("Fitch"); (4) the trustee must not be an affiliate of any other member of the Restricted Group (as defined below); (5) the sum of all payments made to and retained by the underwriters in connection with the distribution of the certificates represents not more than reasonable compensation for underwriting the certificates; the sum of all payments made to and retained by the seller pursuant to the assignment of the loans to the trust fund represents not more than the fair market value of such loans; the sum of all payments made to and retained by the servicer and any other servicer represents not more than reasonable compensation for such person's services under the agreement pursuant to which the loans are pooled and reimbursements of such person's reasonable expenses in connection therewith; and S-100 (6) the Plan investing in the certificates is an "accredited investor" as defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange Commission under the Securities Act of 1933. The trust fund must also meet the following requirements: (i) the corpus of the trust fund must consist solely of assets of the type that have been included in other investment pools; (ii) certificates in such other investment pools must have been rated in one of the three highest rating categories of S&P, Moody's, Fitch or DCR for at least one year prior to the Plan's acquisition of certificates; and (iii) certificates evidencing interests in such other investment pools must have been purchased by investors other than Plans for at least one year prior to any Plan's acquisition of certificates. Each of the Exemptions was amended by Prohibited Transaction Exemption 97-34, 62 Fed. Reg. 39021 (1997), which, among other changes, permits the inclusion of a pre-funding account in a trust fund, provided that the following conditions are met: (a) the pre-funding account may not exceed 25% of the total amount of certificates being offered; (b) additional obligations purchased generally must meet the same terms and conditions as those of the original obligations used to create the trust fund; (c) the transfer of additional obligations to the trust during the pre-funding period must not result in the certificates receiving a lower rating at the termination of the pre-funding period than the rating that was obtained at the time of the initial issuance of the certificates; (d) the weighted average interest rate for all of the obligations in the trust at the end of the pre-funding period must not be more than 100 basis points less than the weighted average interest rate for the obligations which were transferred to the trust on the closing date; (e) the characteristics of the additional obligations must be monitored to confirm that they are substantially similar to those which were acquired as of the closing date either by a credit support provider or insurance provider independent of the sponsor or by an independent accountant retained by the sponsor that confirms such conformance in writing; (f) the pre-funding period must be described in the prospectus or private placement memorandum provided to investing plans; and S-101 (g) the trustee of the trust must be a substantial financial institution or trust company experienced in trust activities and familiar with its duties, responsibilities and liabilities as a fiduciary under ERISA. Further, the pre-funding period must be a period beginning on the closing date and ending no later than the earliest to occur of (x) the date the amount on deposit in the pre-funding account is less than the minimum dollar amount specified in the pooling and servicing agreement; (y) the date on which an event of default occurs under the pooling and servicing agreement; or (z) the date which is the later of three months or 90 days after the closing date. It is expected that the Pre-Funding Account will meet all of these requirements. Moreover, the Exemptions provide relief from certain self-dealing/conflict of interest prohibited transactions that may occur when the Plan fiduciary causes a Plan to acquire certificates in a trust and the fiduciary (or its affiliate) is an obligor on the receivables held in the trust provided that, among other requirements, (i) in the case of an acquisition in connection with the initial issuance of certificates, at least fifty percent (50%) of each class of certificates in which Plans have invested is acquired by persons independent of the Restricted Group; (ii) such fiduciary (or its affiliate) is an obligor with respect to five percent (5%) or less of the fair market value of the obligations contained in the trust; (iii) the Plan's investment in certificates of any class does not exceed twenty-five percent (25%) of all of the certificates of that class outstanding at the time of the acquisition; and (iv) immediately after the acquisition, no more than twenty-five percent (25%) of the assets of any Plan with respect to which such person is a fiduciary are invested in certificates representing an interest in one or more trusts containing assets sold or serviced by the same entity. The Exemptions would not apply to Plans sponsored by either Underwriter, the Trustee, the Master Servicer, the Subservicer, any obligor with respect to Mortgage Loans included in the Trust Fund constituting more than five percent of the aggregate unamortized principal balance of the assets in the Trust Fund, or any affiliate of such parties (the "Restricted Group"). It is expected that the Exemptions will apply to the acquisition and holding of the Class A Certificates by Plans and that all conditions of the Exemptions other than those within the control of the investors will be met. In addition, as of the date hereof, there is no single Mortgagor that is the obligor on five percent (5%) of the Mortgage Loans included in the Trust Fund by aggregate unamortized principal balance of the assets of the Trust Fund. The Exemptions do not apply to the initial purchase, the holding or the subsequent resale of the Subordinated Certificates because the Subordinated Certificates are subordinate to certain other Classes of Certificates. Consequently, transfers of the Subordinated Certificates will not be registered by the Trustee unless the Trustee receives: (i) a representation from the transferee of such Certificate, acceptable to and in form and substance satisfactory to the Trustee, to the effect that such transferee is not an employee benefit plan 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) 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 S-102 purchase and holding of such Certificates are covered under PTCE 95-60; or (iii) an opinion of counsel satisfactory to the Trustee that the purchase or holding of such Certificate by a Plan, any person acting on behalf of a Plan or using such Plan's assets, will not result in the assets of the Trust Fund being deemed to be "plan assets" and subject to the prohibited transaction requirements of ERISA and the Code and will not subject the Trustee to any obligation in addition to those undertaken in the Pooling and Servicing Agreement. Such representation as described above shall be deemed to have been made to the Trustee by the transferee's acceptance of a Subordinated Certificate. In the event that such representation is violated, or any attempt to transfer to a Plan or person acting on behalf of a Plan or using such Plan's assets is attempted without such opinion of counsel, such attempted transfer or acquisition shall be void and of no effect. Prospective Plan investors should consult with their legal advisors concerning the impact of ERISA and the Code, the applicability of PTCE 83-1 described in the Prospectus and the Exemptions, and the potential consequences in their specific circumstances, prior to making an investment in the Offered Certificates. Moreover, each Plan fiduciary should determine whether under the general fiduciary standards of investment prudence and diversification, an investment in the Offered Certificates is appropriate for the Plan, taking into account the overall investment policy of the Plan and the composition of the Plan's investment portfolio. LEGAL INVESTMENT MATTERS The Class A and Class M-1 Certificates offered hereby will constitute "mortgage related securities" for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended ("SMMEA"), for so long as they are rated in one of the two highest rating categories by at least one nationally recognized statistical rating organization and, as such, will be legal investments for certain entities to the extent provided in SMMEA. However, institutions subject to the jurisdiction of the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, the National Credit Union Administration or federal or state banking, insurance or other regulatory authorities should review applicable rules, supervisory policies and guidelines, since certain restrictions may apply to investments in such classes. It should also be noted that certain states have enacted legislation limiting to varying extents the ability of certain entities (in particular insurance companies) to invest in mortgage related securities. Investors should consult with their own legal advisors in determining whether, and to what extent the Class A and Class M-1 Certificates constitute legal investments for such investors. See "Legal Investment Matters" in the Prospectus. The Class M-2 and Class B Certificates will not constitute "mortgage related securities" under SMMEA. The appropriate characterization of the Class M-2 and Class B Certificates under various legal investment restrictions, and thus the ability of investors subject to these restrictions to purchase Class M-2 and Class B Certificates, may be subject to significant interpretive uncertainties. All investors whose investment authority is subject to legal restrictions should consult their own legal advisors to determine whether, and to what extent, the Class M-2 and Class B Certificates will constitute legal investments for them. S-103 Except as to the status of the Class A and Class M-1 Certificates as "mortgage related securities," no representations are made as to the proper characterization of the Offered Certificates for legal investment or financial institution regulatory purposes, or other purposes, or as to the ability of particular investors to purchase the Offered Certificates under applicable legal investment restrictions. The uncertainties described above (and any unfavorable future determinations concerning legal investment or financial institution regulatory characteristics of the Offered Certificates) may adversely affect the liquidity of the Offered Certificates. USE OF PROCEEDS Substantially all of the net proceeds to be received from the sale of the Offered Certificates will be applied by the Depositor to the purchase price of the Mortgage Loans. METHOD OF DISTRIBUTION Subject to the terms and conditions of the underwriting agreement dated [DATE]and the terms agreement dated [DATE] between the Depositor and [UNDERWRITER]. ("Underwriter"), as underwriter, the Offered Certificates are being purchased from the Seller by the Underwriter in the respective initial Certificate Principal Balance of each Class of Offered Certificates set forth below, in each case upon issuance thereof. [Underwriter] is referred to herein as an "Underwriter." Class of Certificate [Underwriter] -------------------- ------------- Class IA-1 Certificates.......... Class IA-2 Certificates.......... Class IA-3 Certificates.......... Class IA-4 Certificates.......... Class IA-5 Certificates.......... Class IM-1 Certificates.......... Class IM-2 Certificates.......... Class IB Certificates............ Class IIA-1 Certificates......... Class IIM-1 Certificates......... Class IIM-2 Certificates......... Class IIB Certificates........... Total................... The Depositor has been advised that the Underwriter proposes initially to offer the Offered Certificates to the public at the offering prices set forth below. The Depositor has been advised that the Underwriter proposes initially to offer the Offered Certificates to certain dealers at such offering prices less a selling concession not to exceed the percentage of the Certificate denomination set forth below, and that the Underwriter may allow and such dealers may reallow a reallowance discount not to exceed the percentage of the Certificate denomination set forth below: S-104
Price to Underwriting Selling Reallowance Class of Certificate Public Discount Concession Discount -------------------- ------ ------------ ---------- ------------ Class IA-1 Certificates............. Class IA-2 Certificates............. Class IA-3 Certificates............. Class IA-4 Certificates............. Class IA-5 Certificates............. Class IM-1 Certificates............. Class IM-2 Certificates............. Class IB Certificates............... Class IIA-1 Certificates............ Class IIM-1 Certificates............ Class IIM-2 Certificates............ Class IIB Certificates..............
After the initial public offering, the public offering price, such concessions and such discounts may be changed. The Depositor has been advised by the Underwriter that it intends to make a market in the Offered Certificates, but the Underwriter has no obligation to do so. There can be no assurance that a secondary market for the Offered Certificates (or any particular Class thereof) will develop or, if it does develop, that it will continue or that such market will provide sufficient liquidity to Certificateholders. Until the distribution of the Offered Certificates is completed, rules of the Securities and Exchange Commission may limit the ability of the Underwriter and certain selling group members to bid for and purchase the Offered Certificates. As an exception to these rules, the Underwriter is permitted to engage in certain transactions that stabilize the price of the Offered Certificates. Such transactions consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of the Offered Certificates. In general, purchases of a security for the purpose of stabilization or to reduce a short position could cause the price of the security to be higher than it might be in the absence of such purchases. Neither the Depositor nor of the Underwriter makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the prices of the Offered Certificates. In addition, neither the Depositor nor Underwriter makes any representation that the Underwriter will engage in such transactions or that such transactions, once commenced, will not be discontinued without notice. The Depositor has agreed to indemnify the Underwriter against, or make contributions to the Underwriter with respect to, certain liabilities, including liabilities under the Securities Act of 1933, as amended. S-105 LEGAL MATTERS Certain legal matters will be passed upon for the Depositor by Morgan, Lewis & Bockius LLP, New York, New York and for the Underwriters by [________________________________________]. The material federal income tax consequences of the Certificates will be passed upon for the Depositor by Morgan, Lewis & Bockius LLP. RATINGS It is a condition of the issuance of the Offered Certificates that they be assigned the ratings designated below by [Rating Agency] and [Rating Agency]. [RATING [RATING CLASS AGENCY] AGENCY] ----- ------- ------- IA-1................................ IA-2................................ IA-3................................ IA-4................................ IA-5................................ IM-1................................ IM-2................................ IB.................................. IIA-1............................... IIM-1............................... IIM-2............................... IIB................................. The security ratings assigned to the Offered Certificates should be evaluated independently from similar ratings on other types of securities. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the Rating Agencies. The ratings on the Offered Certificates do not, however, constitute statements regarding the likelihood or frequency of prepayments on the Mortgage Loans, the payment of the Adjustable Rate Certificate Carryover or the anticipated yields in light of prepayments. The ratings of [Rating Agency] on mortgage pass-through certificates addressed the likelihood of the receipt by Certificateholders of all distributions to which such Certificateholders are entitled. [Rating Agency] rating opinions address the structural and legal issues and tax-related aspects associated with the Certificates, including the nature of the underlying mortgage loans. [Rating Agency] ratings on pass-through certificates do not represent any assessment of the likelihood that principal prepayments may differ from those originally anticipated nor do they address the possibility that, as a result of principal prepayments, Certificateholders may receive a lower than anticipated yield. S-106 The ratings assigned by [Rating Agency] to mortgage pass-through certificates address the likelihood of the receipt of all distributions on the mortgage loans by the related certificateholders under the agreements pursuant to which such certificates are issued. [Rating Agency] ratings take into consideration the credit quality of the related mortgage pool, including any credit support providers, structural and legal aspects associated with such certificates, and the extent to which the payment stream on the mortgage pool is adequate to make the payments required by such certificates. [Rating Agency] ratings on such certificates do not, however, constitute a statement regarding frequency of prepayments of the mortgage loans or address the likelihood of receipt of Interest Carryover Amounts. The Depositor has not requested a rating of the Offered Certificates by any rating agency other than [Rating Agency] and [Rating Agency]. However, there can be no assurance as to whether any other rating agency will rate the Offered Certificates or, if it does, what ratings would be assigned by such other rating agency. The ratings assigned by any such other rating agency to the Offered Certificates could be lower than the respective ratings assigned by the Rating Agencies. S-107 INDEX OF DEFINED TERMS
1/29 Loans.............................................S-__ Class M-1 Certificates.................................S-__ 2/28 Loans.............................................S-__ Class M-1 Principal Distribution Amount................S-__ 3/27 Loans.............................................S-__ Class M-2 Certificates.................................S-__ 5/25 Loans.............................................S-__ Class M-2 Principal Distribution Amount................S-__ Accounts...............................................S-__ Closing Date .....................................S-__ Accrual Period.........................................S-__ Collateral Value .....................................S-__ Adjustable Rate Certificate Carryover..................S-__ Collection Account.....................................S-__ Adjustable Rate Mortgage Loan..........................S-__ Compensating Interest..................................S-__ Adjustable Rate Mortgage Loans.........................S-__ Constant Prepayment Rate...............................S-__ Adjustment Date........................................S-__ Contributions Tax.....................................S-___ Advance................................................S-__ Cooperative............................................S-__ Advanta................................................S-__ CPR....................................................S-__ Advanta Parent.........................................S-__ CSI...................................................S-___ Applied Realized Loss Amount...........................S-__ Current Interest.......................................S-__ B&C....................................................S-__ Cut-off Date...........................................S-__ B&C Underwriting Guidelines............................S-__ DCR...................................................S-___ Balloon Amount.........................................S-__ Definitive Certificate.................................S-__ Balloon Loan...........................................S-__ Depositor..............................................S-__ Book-Entry Certificates................................S-__ Determination Date.....................................S-__ Cede...................................................S-__ Distribution Account...................................S-__ CEDEL..................................................S-__ Distribution Date .....................................S-__ CEDEL Participants.....................................S-__ DTC....................................................S-__ Certificate Account....................................S-__ Due Dates..............................................S-__ Certificate Group......................................S-__ Due Period.............................................S-__ Certificate Owners.....................................S-__ ERISA.................................................S-___ Certificate Principal Balances.........................S-__ Euroclear..............................................S-__ Certificates...........................................S-__ Euroclear Operator.....................................S-__ Class A Certificates...................................S-__ Euroclear Participants.................................S-__ Class A Group I Certificates...........................S-__ European Depositaries..................................S-__ Class A Group II Certificates..........................S-__ Exemptions............................................S-___ Class A Principal Distribution Amount..................S-__ Extra Principal Distribution Amount....................S-__ Class B Certificates...................................S-__ Financial Intermediary.................................S-__ Class B Principal Distribution Amount..................S-__ Fitch.................................................S-___ Class IA-5 Distribution Amount.........................S-__ Fixed Rate Mortgage Loan...............................S-__ Class IB Certificates..................................S-__ Fixed Rate Mortgage Loans..............................S-__ Class IIB Certificates.................................S-__ Foreclosure Rate.......................................S-__ Class IIM-1 Certificates...............................S-__ Funding Period.........................................S-__ Class IIM-2 Certificates...............................S-__ Gross Margin...........................................S-__ Class IM-1 Certificates................................S-__ Group I Certificates...................................S-__ Class IM-2 Certificates................................S-__ Group I Original Pre-Funded Amount.....................S-__
S-108
Group II Available Funds Cap...........................S-__ Percentage Interest....................................S-__ Group II Certificates..................................S-__ Periodic Rate Cap......................................S-__ Group II Maximum Rate Cap..............................S-__ Plan..................................................S-___ Group II Original Pre-Funded Amount....................S-__ Pooling and Servicing Agreement........................S-__ HEP....................................................S-__ Pre-Funding Account....................................S-__ Home Equity Prepayment.................................S-__ Prepayment Interest Shortfall..........................S-__ Indirect Participants..................................S-__ Prepayment Models .....................................S-__ Initial Mortgage Loans.................................S-__ Prepayment Period .....................................S-__ Interest Carry Forward Amount..........................S-__ Principal Distribution Amount..........................S-__ Interest Coverage Account..............................S-__ Principal Funds........................................S-__ Interest Determination Date............................S-__ Prohibited Transactions Tax...........................S-___ Interest Funds .....................................S-__ Prospectus.............................................S-__ Last Scheduled Distribution Date.......................S-__ PTCE 95-60............................................S-___ LIBOR Business Day.....................................S-__ Realized Loss..........................................S-__ Loan Group.............................................S-__ Record Date............................................S-__ Loan-to-Value Ratio....................................S-__ Reference Banks........................................S-__ Master REMIC..........................................S-___ Relevant Depositary....................................S-__ Master Servicer........................................S-__ REO Property...........................................S-__ Master Servicer Fee....................................S-__ Repurchase Price.......................................S-__ Maximum Mortgage Rate..................................S-__ Required Percentage....................................S-__ Mezzanine Certificates.................................S-__ Reserve Interest Rate..................................S-__ Mezzanine Group I Certificates.........................S-__ Residual Certificates..................................S-__ Mezzanine Group II Certificates........................S-__ Restricted Group......................................S-___ Minimum Mortgage Rate..................................S-__ Reuters Screen LIBO Page...............................S-__ Modeling Assumptions..................................S-___ Rules..................................................S-__ Mortgage Index.........................................S-__ S&P...................................................S-___ Mortgage Loan Schedule.................................S-__ Seller.................................................S-__ Mortgage Loans.........................................S-__ Servicer Advance Date..................................S-__ Mortgage Note..........................................S-__ Servicer Remittance Date...............................S-__ Mortgage Pool..........................................S-__ Servicing Fee..........................................S-__ Mortgage Rates.........................................S-__ Servicing Fee Rate.....................................S-__ Mortgaged Properties...................................S-__ Six Month LIBOR Loans..................................S-__ Mortgagors.............................................S-__ SMMEA.................................................S-___ Net Excess Cashflow....................................S-__ Stated Principal Balance...............................S-__ Net Mortgage Rate......................................S-__ Statistical Mortgage Pool..............................S-__ One-Month LIBOR........................................S-__ Stepdown Date..........................................S-__ Optional Termination Amount............................S-__ Stepup Trigger Event...................................S-__ Optional Termination Date..............................S-__ Subordinated Certificates..............................S-__ Original Pre-Funded Amount.............................S-__ Subordinated Group I Certificates......................S-__ Owned and Managed Servicing Subordinated Group II Certificates.....................S-__ Portfolio..............................................S-__ Subsequent Adjustable Rate Mortgage Participants...........................................S-__ Loan...................................................S-__ Pass-Through Margin....................................S-__ Subsequent Cut-off Date................................S-__ Pass-Through Rate......................................S-__ Subsequent Fixed Rate Mortgage Loan....................S-__
S-109
Subsequent Mortgage Loans.......................S-__ Terms and Conditions............................S-__ Subsequent Transfer Dates.......................S-__ Third Party Servicing Portfolio.................S-__ Subsequent Transfer Instruments.................S-__ Trigger Event...................................S-__ Subservicer.....................................S-__ Trust Fund......................................S-__ Subsidiary REMIC...............................S-___ Trustee.........................................S-__ Subsidiary REMIC Regular Interests.............S-___ Underwriter....................................S-___ Unpaid Realized Loss Amount.....................S-__
ANNEX I GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES Except in certain limited circumstances, the globally offered Chase Funding Mortgage Loan Asset-Backed Certificates, Series [______] (the "Global Securities") will be available only in book-entry form. Investors in the Global Securities may hold such Global Securities through any of The Depository Trust Company ("DTC"), CEDEL or Euroclear. The Global Securities will be tradeable as home market instruments in both the European and U.S. domestic markets. Initial settlement and all secondary trades will settle in same-day funds. Secondary market trading between investors holding Global Securities through CEDEL and Euroclear will be conducted in the ordinary way in accordance with their normal rules and operating procedures and in accordance with conventional Eurobond practice (i.e., seven calendar day settlement). Secondary market trading between investors holding Global Securities through DTC will be conducted according to the rules and procedures applicable to U.S. corporate debt obligations and prior mortgage pass-through certificate issues. Secondary cross-market trading between CEDEL or Euroclear and DTC Participants holding Certificates will be effected on a delivery-against-payment basis through the respective Depositaries of CEDEL and Euroclear (in such capacity) and as DTC Participants. Non-U.S. holders (as described below) of Global Securities will be subject to U.S. withholding taxes unless such holders meet certain requirements and deliver appropriate U.S. tax documents to the securities clearing organizations or their participants. Initial Settlement All Global Securities will be held in book-entry form by DTC in the name of Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will be represented through financial institutions acting on their behalf as direct and indirect Participants in DTC. As a result, CEDEL and A-1 Euroclear will hold positions on behalf of their participants through their respective Depositaries, which in turn will hold such positions in accounts as DTC Participants. Investors electing to hold their Global Securities through DTC will follow the settlement practices applicable to prior mortgage pass-through certificate issues. Investor securities custody accounts will be credited with their holdings against payment in same-day funds on the settlement date. Investors electing to hold their Global Securities through CEDEL or Euroclear accounts will follow the settlement procedures applicable to conventional Eurobonds, except that there will be no temporary global security and no "lock-up" or restricted period. Global Securities will be credited to the securities custody accounts on the settlement date against payment in same-day funds. Secondary Market Trading Since the purchaser determines the place of delivery, it is important to establish at the time of the trade where both the purchaser's and seller's accounts are located to ensure that settlement can be made on the desired value date. Trading between DTC Participants. Secondary market trading between DTC Participants will be settled using the procedures applicable to prior mortgage pass-through certificate issues in same-day funds. Trading between CEDEL and/or Euroclear Participants. Secondary market trading between CEDEL Participants or Euroclear Participants will be settled using the procedures applicable to conventional Eurobonds in same-day funds. Trading between DTC Seller and CEDEL or Euroclear Purchaser. When Global Securities are to be transferred from the account of a DTC Participant to the account of a CEDEL Participant or a Euroclear Participant, the purchaser will send instructions to CEDEL or Euroclear through a CEDEL Participant or Euroclear Participant at least one business day prior to settlement. CEDEL or Euroclear will instruct the respective Depositary, as the case may be, to receive the Global Securities against payment. Payment will include interest accrued on the Global Securities from and including the last coupon payment date to and excluding the settlement date, on the basis of either the actual number of days in such accrual period and a year assumed to consist of 360 days or a 360-day year of twelve 30- day months, as applicable to the related Class of Global Securities. For transactions settling on the 31st of the month, payment will include interest accrued to and excluding the first day of the following month. Payment will then be made by the respective Depositary of the DTC Participant's account against delivery of the Global Securities. After settlement has been completed, the Global Securities will be credited to the respective clearing system and by the clearing system, in accordance with its usual procedures, to the CEDEL Participant's or Euroclear Participant's account. The securities credit will appear the next day (European time) and the cash debt will be back-valued to, and the interest on the Global Securities will accrue from, the value date (which would be the preceding day when settlement occurred in New York). If settlement is not completed on the intended value date (i.e., the trade fails), the CEDEL or Euroclear cash debt will be valued instead as of the actual settlement date. A-2 CEDEL Participants and Euroclear Participants will need to make available to the respective clearing systems the funds necessary to process same-day funds settlement. The most direct means of doing so is to preposition funds for settlement, either from cash on hand or existing lines of credit, as they would for any settlement occurring within CEDEL or Euroclear. Under this approach, they may take on credit exposure to CEDEL or Euroclear until the Global Securities are credited to their accounts one day later. As an alternative, if CEDEL or Euroclear has extended a line of credit to them, CEDEL Participants or Euroclear Participants can elect not to preposition funds and allow that credit line to be drawn upon the finance settlement. Under this procedure, CEDEL Participants or Euroclear Participants purchasing Global Securities would incur overdraft charges for one day, assuming they cleared the overdraft when the Global Securities were credited to their accounts. However, interest on the Global Securities would accrue from the value date. Therefore, in many cases the investment income on the Global Securities earned during that one-day period may substantially reduce or offset the amount of such overdraft charges, although this result will depend on each CEDEL Participant's or Euroclear Participant's particular cost of funds. Since the settlement is taking place during New York business hours, DTC Participants can employ their usual procedures for sending Global Securities to the respective European Depositary for the benefit of CEDEL Participants or Euroclear Participants. The sale proceeds will be available to the DTC seller on the settlement date. Thus, to the DTC Participants a cross-market transaction will settle no differently than a trade between two DTC Participants. Trading between CEDEL or Euroclear Seller and DTC Purchaser. Due to time zone differences in their favor, CEDEL Participants and Euroclear Participants may employ their customary procedures for transactions in which Global Securities are to be transferred by the respective clearing system, through the respective Depositary, to a DTC Participant. The seller will send instructions to CEDEL or Euroclear through a CEDEL Participant or Euroclear Participant at least one business day prior to settlement. In these cases CEDEL or Euroclear will instruct the respective Depositary, as appropriate, to deliver the Global Securities to the DTC Participant's account against payment. Payment will include interest accrued on the Global Securities from and including the last coupon payment to and excluding the settlement date on the basis of either the actual number of days in such accrual period and a year assumed to consist of 360 days or a 360-day year of twelve 30-day months, as applicable to the related Class of Global Securities. For transactions settling on the 31st of the month, payment will include interest accrued to and excluding the first day of the following month. The payment will then be reflected in the account of the CEDEL Participant or Euroclear Participant the following day, and receipt of the cash proceeds in the CEDEL Participant's or Euroclear Participant's account would be back-valued to the value date (which would be the preceding day, when settlement occurred in New York). Should the CEDEL Participant or Euroclear Participant have a line of credit with its respective clearing system and elect to be in debt in anticipation of receipt of the sale proceeds in its account, the back-valuation will extinguish any overdraft incurred over that one-day period. If settlement is not completed on the intended value date (i.e., the trade fails), receipt of the cash proceeds in the CEDEL Participant's or Euroclear Participant's account would instead be valued as of the actual settlement date. A-3 Finally, day traders that use CEDEL or Euroclear and that purchase Global Securities from DTC Participants for delivery to CEDEL Participants or Euroclear Participants should note that these trades would automatically fail on the sale side unless affirmative action were taken. At least three techniques should be readily available to eliminate this potential problem: (a) borrowing through CEDEL or Euroclear for one day (until the purchase side of the day trade is reflected in their CEDEL or Euroclear accounts) in accordance with the clearing system's customary procedures; (b) borrowing the Global Securities in the U.S. from a DTC Participant no later than one day prior to settlement, which would give the Global Securities sufficient time to be reflected in their CEDEL or Euroclear account in order to settle the sale side of the trade; or (c) staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC Participant is at least one day prior to the value date for the sale to the CEDEL Participant or Euroclear Participant. Certain U.S. Federal Income Tax Documentation Requirements A beneficial owner of Global Securities holding securities through CEDEL or Euroclear (or through DTC if the holder has an address outside the U.S.) will be subject to the 30% U.S. withholding tax that generally applies to payments of interest (including original issue discount) on registered debt issued by U.S. Persons, unless (i) each clearing system, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business in the chain of intermediaries between such beneficial owner and the U.S. entity required to withhold tax complies with applicable certification requirements and (ii) such beneficial owner takes one of the following steps to obtain an exemption or reduced tax rate: Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Global Securities that are non-U.S. Persons can obtain a complete exemption from the withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If the information shown on Form W-8 changes, a new Form W-8 must be filed within 30 days of such change. Exemption for non-U.S. Persons with Effectively Connected Income (Form 4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S. branch, for which the interest income is effectively connected with its conduct of a trade or business in the United States, can obtain an exemption from the withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income Effectively Connected with the Conduct of a Trade or Business in the United States). Exemption or Reduced Rate for non-U.S. Persons Resident in Treaty Countries (Form 1001). Non-U.S. Persons that are Certificate Owners residing in a country that has a tax treaty with the United States can obtain an exemption or reduced tax rate (depending on the treaty terms) by filing Form 1001 (Ownership, Exemption or Reduced Rate Certificate). If the treaty provides only for a reduced rate, withholding tax will be imposed at that rate unless the filer alternatively files Form W-8. Form 1001 may be filed by the Certificate owners or his agent. A-4 Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete exemption from the withholding tax by filing Form W-9 (Payer's Request for Taxpayer Identification Number and Certification). U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of a Global Security or, in the case of a Form 1001 or a Form 4224 filer, his agent, files by submitting the appropriate form to the person through whom it holds (the clearing agency, in the case of persons holding directly on the books of the clearing agency). Form W-8 and Form 1001 are effective for three calendar years and Form 4224 is effective for one calendar year. The term "U.S. Person" means (i) a citizen or resident of the United States, (ii) a corporation or partnership organized in or 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), including an entity treated as a corporation or partnership for federal income tax purposes, (iii) an estate the income of which is includible in gross income for United , States tax purposes, regardless of its source or (iv) a trust if a court within the United States is able to exercise primary supervision of the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust. Notwithstanding the preceding sentence, to the extent provided in Treasury regulations, certain trusts in existence on August 20, 1996, and treated as United States persons prior to such date, that elect to continue to be treated as United States persons will also be a U.S. Person. This summary does not deal with all aspects of U.S. Federal income tax withholding that may be relevant to foreign holders of the Global Securities. Investors are advised to consult their own tax advisors for specific tax advice concerning their holding and disposing of the Global Securities. A-5 [________] (Approximate) Chase Funding Mortgage Loan Asset-Backed Certificates, Series [______] [Chase Logo] Chase Funding, Inc. Depositor [Advanta Mortgage Corp. USA] Subservicer Chase Manhattan Mortgage Corporation Seller and Master Servicer --------------------------------------- PROSPECTUS SUPPLEMENT --------------------------------------- (UNDERWRITER) You should rely on the information contained or incorporated by reference in this prospectus supplement and the attached prospectus. We have not authorized anyone to provide you with different information. We are not offering these certificates in any state where the offer is not permitted. We represent the accuracy of the information in this prospectus supplement and the attached prospectus only as of the dates stated on their respective covers. Dealers will be required to deliver a prospectus supplement and prospectus when acting as underwriters of these certificates and with respect to their unsold allotments or subscriptions. In addition, all dealers selling these certificates will deliver a prospectus supplement and prospectus until (DATE]. (DATE] The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION DATED OCTOBER 20, 1999 PROSPECTUS SUPPLEMENT [LOGO] (To Prospectus dated [DATE]) $[__________] (Approximate) Chase Mortgage Trust, Series [_____] Issuer Chase Manhattan Acceptance Corporation Seller [Chase Manhattan Mortgage Corporation] Servicer Multi-Class Mortgage Pass-Through Certificates, Series [_________] Investing in these certificates involves risks. You should not purchase these certificates unless you fully understand their risks and structure. See "Risk Factors" beginning on page S-__ of this prospectus supplement and page __ of the accompanying prospectus. Neither these certificates nor the underlying mortgage loans are obligations of Chase Manhattan Acceptance Corporation, Chase Manhattan Mortgage Corporation, or any of their affiliates. These certificates are not insured or guaranteed by any governmental agency. Chase Mortgage Trust, Series [_________] will issue [sixteen] classes of certificates, of which [twelve] classes are offered by this prospectus supplement and the accompanying prospectus. The table on page S-3 identifies the various classes and specifies certain characteristics of each class, including each class's initial principal balance (or notional balance), interest rate and rating. The trust fund will consist primarily of a pool of fixed rate one- to four-family first lien mortgage loans with original terms to stated maturity of approximately [15] [30] years. The underwriter, [UNDERWRITER], will purchase the offered certificates from Chase Manhattan Acceptance Corporation and will offer them to the public at negotiated prices determined at the time of sale. Chase Manhattan Acceptance Corporation will receive proceeds of approximately $[________], plus accrued interest, less expenses of approximately $[_______]. The underwriter expects to deliver the offered certificates to investors on or about [DATE]. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the offered certificates or passed upon the adequacy or accuracy of this prospectus supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense. [UNDERWRITER] The date of this Prospectus Supplement is [DATE] Important Notice about the Information in this Prospectus Supplement and the Accompanying Prospectus Information about the offered certificates is contained in (a) the accompanying prospectus, which provides general information, some of which may not apply to the offered certificates, and (b) this prospectus supplement, which describes the specific terms of the offered certificates. This prospectus supplement and the accompanying prospectus include cross references to sections in these materials where you can find further related discussions. The tables of contents in this prospectus supplement and the prospectus identify the pages where those sections are located. In addition, an index of defined terms can be found beginning on page S-__ of this prospectus supplement and on page iii of the prospectus. In this prospectus supplement, the terms "Seller," "we," "us" and "our" refer to Chase Manhattan Acceptance Corporation. TABLE OF CONTENTS THE SERIES [_________] CERTIFICATES..........................................S-_ SUMMARY INFORMATION..........................................................S-_ RISK FACTORS.................................................................S-_ THE MORTGAGE POOL...........................................................S-__ General..................................................................S-__ Representations and Warranties...........................................S-__ Mortgage Loans...........................................................S-__ PREPAYMENT AND YIELD CONSIDERATIONS..............................................................S-__ Yield Considerations with Respect to the Class A-P Certificates...................................................S-__ CHASE MANHATTAN MORTGAGE CORPORATION.................................................................S-__ THE POOLING AND SERVICING AGREEMENT...................................................................S-__ Assignment of Mortgage Loans.............................................S-__ Servicing................................................................S-__ Servicing Compensation and Payment of Expenses.................................................................S-__ Adjustment to Servicing Fee in Connection with Prepaid Mortgage Loans..............................................S-__ Payments on Mortgage Loans; Collection Account; Certificate Account.............................................S-__ Advances.................................................................S-__ Trustee..................................................................S-__ Optional Termination.....................................................S-__ Special Servicing Agreements.............................................S-__ DESCRIPTION OF THE CERTIFICATES.............................................S-__ General..................................................................S-__ Book-Entry Registration..................................................S-__ Definitive Certificates..................................................S-__ Restrictions on Transfer of the Class A-R, Class M and Offered Class B Certificates.................................S-__ Distributions to Certificateholders......................................S-__ Interest.................................................................S-__ [Determination of LIBOR..................................................S-__ Principal (Including Prepayments)........................................S-__ Additional Rights of the Class A-R Certificateholder........................................................S-__ Subordinated Certificates and Shifting Interests................................................................S-__ FEDERAL INCOME TAX CONSIDERATIONS..............................................................S-__ Class A-R Certificate....................................................S-__ ERISA CONSIDERATIONS........................................................S-__ LEGAL INVESTMENT MATTERS....................................................S-__ USE OF PROCEEDS.............................................................S-__ UNDERWRITING................................................................S-__ LEGAL MATTERS...............................................................S-__ RATINGS.....................................................................S-__ INDEX OF DEFINED TERMS......................................................S-__ S-2 THE SERIES [_________] CERTIFICATES
Original Expected Certificate Ratings(3) Principal Certificate ---------- Balance(1) Rate Principal Type(2) Interest Type(2) [Agency] [Agency] ---------- ----------- ----------------- ---------------- ---------------- Offered Certificates Class A-1.................. $________ ____% Senior, Sequential Pay Fixed Rate AAA AAA Class A-2.................. $________ ____% Senior, Sequential Pay Fixed Rate AAA AAA Class A-3.................. $________ ____% Senior, Sequential Pay Fixed Rate AAA AAA Class A-4.................. $________ ____% Senior, Sequential Pay Fixed Rate AAA AAA Class A-5.................. $________ (4) Senior, Sequential Pay Floating Rate Class AAA AAA Class A-6.................. $________ (4) Senior, Sequential Pay Inverse Floating Rate Class AAA AAA Class A-7.................. $________ ____% Senior, Lock-out Class Fixed Rate AAA AAA Class A-P.................. $________ (5) Senior Principal-Only Class AAA AAA Class A-R.................. $________ ____% Senior, Sequential Pay Fixed Rate AAA AAA Class M.................... $________ ____% Mezzanine Fixed Rate AA N/A Class B-1.................. $________ ____% Subordinated Fixed Rate A N/A Class B-2.................. $________ ____% Subordinated Fixed Rate BBB N/A Non-Offered Certificates(6) Class A-X.................. (7) (7) Senior, Notional Amount Interest Only N/A N/A Class B-3.................. $________ ____% Subordinated Fixed Rate N/A N/A Class B-4.................. $________ ____% Subordinated Fixed Rate N/A N/A Class B-5.................. $________ ____% Subordinated Fixed Rate N/A N/A
- --------------- (1) These amounts are approximate. We may adjust the original certificate principal balances upward or downward by up to 5%. (2) See "Description of the Certificates--Categories of Classes of Certificates" in the prospectus for a description of the principal types and interest types. (3) See "Ratings." (4) The certificate rate on the Class A-5 and Class A-6 Certificates are adjustable based on LIBOR as described herein under "Description of the Certificates--Distributions to Certificateholders--Interest." (5) The Class A-P Certificates are principal-only Certificates and are not entitled to payments of interest. (6) The information presented for the non-offered certificates is provided solely to assist your understanding of the offered certificates. (7) The Class A-X Certificates are interest-only certificates, have no principal balance, and will bear interest on their notional amount (initially, approximately $__________). S-3 SUMMARY INFORMATION This section briefly summarizes certain major characteristics of the certificates and the mortgage loans. It does not contain all of the information that you need to consider in making your investment decision. To fully understand the terms of the certificates, you should read both this prospectus supplement and the accompanying prospectus in their entirety. The Trust Fund The name of the trust fund is Chase Mortgage Trust, Series [______]. We are forming a trust to own a pool of fixed rate one- to four-family first lien mortgage loans. The certificates represent beneficial ownership interests in the underlying trust fund assets. All payments to you will come only from the amounts received in connection with those assets. The certificates will have the original certificate principal balance, certificate rate and other features set forth in the table on page S-3. The trust fund will issue the certificates under a Pooling and Servicing Agreement dated as of [DATE] among Chase Manhattan Acceptance Corporation, as depositor, [Chase Manhattan Mortgage Corporation], as servicer and [TRUSTEE], as trustee. See "The Pooling and Servicing Agreement" and "Description of the Certificates." Principal Parties Issuer: Chase Mortgage Trust, Series [______]. Seller: Chase Manhattan Acceptance Corporation, a Delaware corporation whose address is 343 Thornall Street, Edison, New Jersey 08837 and whose telephone number is (732) 205-0600. Servicer: [Chase Manhattan Mortgage Corporation, a New Jersey corporation whose address is 343 Thornall Street, Edison, New Jersey 08837 and whose telephone number is (732) 205- 0600]. See "Chase Manhattan Mortgage Corporation" and "The Pooling and Servicing Agreement--Servicing." Trustee: [TRUSTEE], a _______ association whose corporate trust office is [ADDRESS] and whose telephone number is [NUMBER]. See "The Pooling and Servicing Agreement--The Trustee." Cut-off Date The cut-off date will be [DATE]. Closing Date The closing date will be on or about [DATE]. Forms of Certificates; Denominations Your certificates will be issued either in book-entry form or in fully registered, certificated form. The table under "Description of the Certificates--General" in this prospectus supplement sets forth the original certificate form, the minimum denomination and the incremental denomination of the offered certificates. Description of the Certificates The certificates will have an approximate aggregate initial principal balance of $___________, subject to a permitted variance of plus or minus five percent. The certificates will consist of: o [Ten] classes of Class A Certificates, which initially will have an approximate aggregate initial principal balance of $[_______] and evidence an approximate undivided beneficial interest of [____]% of the trust fund assets; o The Class M Certificates, which initially will have an approximate initial principal balance of $[_______] and evidence an approximate undivided beneficial interest of [____]% of the trust fund assets; and o Five classes of Class B Certificates, which S-4 initially will have an approximate aggregate initial principal balance of $[_______] and evidence an approximate undivided beneficial interest of [____]% of the trust fund assets. Only the Class A (excluding Class A-X), Class M, Class B-1 and Class B-2 Certificates are being offered by this prospectus supplement and the accompanying prospectus. We will sell or otherwise transfer the Class A-X, Class B-3, Class B-4 and Class B-5 Certificates to a limited number of institutional investors (which may include one or more of our affiliates) in a privately placed offering. The Mortgage Pool The mortgage pool will consist of fixed rate one- to four-family first lien residential mortgage loans with original terms to stated maturity of approximately [15] [30] years. We expect the mortgage loans to have the following approximate characteristics as of [DATE]: Number of Mortgage Loans [_____] Aggregate Unpaid Principal Balance [_____] Range of Unpaid Principal Balances $[_____] - $[_____] Average Unpaid Principal Balance $[_____] Range of Mortgage Rates [_____]% - [_____]% Weighted Average Mortgage Rate [_____]% Range of Remaining Terms to Stated [___] months-[___] months Maturity Weighted Average Remaining Term to [___] months Stated Maturity Range of Remaining Terms to Expected [___] months-[___] months Maturity(1) Weighted Average Remaining Term to Expected Maturity(1) [___] months Weighted Average Loan Age(2) [___] month[s] Range of Original Loan-to-Value Ratios [_____]% - [_____]% Weighted Average Original Loan-to- [_____]% Value Ratio Weighted Average Credit Score(3) [_____] - ---------- (1) Based on payments actually received (or scheduled to be received) on each mortgage loan as of the cut-off date. (2) Based on the number of months from and including the first monthly payment to and including the cut-off date. (3) FICO scores are described on page S-__. Before we issue the certificates, we may remove some mortgage loans from the mortgage pool. We also may substitute other loans for some mortgage loans. This may result in changes in the mortgage pool characteristics shown above and could affect the weighted average lives and yields of the certificates. See "The Mortgage Pool." Distributions on the Certificates The first distribution date will be [DATE]. Thereafter, distributions will be made on the 25th day of each month, or on the next business day if the 25th day is not a business day. In general, amounts available for distribution each month will be distributed by the Servicer in the following order of priority: First, the holders of the Class A Certificates will receive, on a pro rata basis, the interest payments to which they are entitled on that distribution date; Second, the holders of the Class A Certificates will receive the payments of principal to which they are entitled on that distribution date (however, not every class of Class A Certificates will receive a principal distribution on each distribution date; instead, principal payments will be allocated among the various classes of Class A Certificates as described under "Description of the Certificates--Distributions to Certificateholders--Principal (Including Prepayments)"; Third, the holders of the Class M Certificates will receive the payments of interest and then principal to which they are entitled on that distribution date; and Fourth, the holders of the Class B Certificates will receive, in numerical order (that is, first to the Class B-1 Certificates, then to the Class B-2 Certificates, etc.) the payments of interest and then principal to which they are entitled on that distribution date. Credit Enhancement Credit enhancement reduces the harm caused to holders of the certificates as a result of shortfalls in payments received and losses realized on the mortgage loans. The credit enhancement for the offered certificates will consist of subordination utilizing a shifting interest structure. S-5 Subordination. The rights of the holders of each class of Class B Certificates to receive distributions will be subordinated to the rights of the holders of the Class A and Class M Certificates and the holders of the classes of Class B Certificates, if any, with lower numerical designations to receive distributions. The rights of the holders of the Class M Certificates to receive distributions will be subordinated to the rights of the holders of the Class A Certificates to receive distributions. In general, the protection afforded the holders of more senior classes of certificates by means of this subordination will be effected in two ways: Priority of Distributions. By the preferential right of the holders of such classes to receive, prior to any distribution being made on any distribution date to the holders of the more junior classes of certificates, the amount of interest and principal due on the more senior classes of certificates and, if necessary, by the right of such more senior holders to receive future distributions on the mortgage loans that would otherwise have been allocated to the holders of the more junior classes of certificates; and Allocation of Losses. By the allocation to the more junior classes of certificates (in inverse order of seniority), until their respective certificate principal balances have been reduced to zero, of losses resulting from the liquidation of defaulted mortgage loans or the bankruptcy of mortgagors prior to the allocation of such losses to the more senior classes of certificates (other than the certain excess losses arising from special hazards, mortgagor fraud or mortgagor bankruptcy). The chart below summarizes the relative seniority of the various classes of certificates and indicates the initial level of credit enhancement provided to the various classes of offered certificates: Initial Credit Credit Enhancement Class Enhancement Percentage A Class M and Class B [____]% M Class B [____]% B-1 Class B-2, Class B-3, [____]% Class B-4 and Class B-5 B-2 Class B-3, Class B-4 [____]% and Class B-5 Shifting of Interests. In order to increase the period during which the Class M and Class B Certificates remain available as credit enhancement to the Class A Certificates, the Class A Certificates in the aggregate will receive 100% of principal prepayments and certain unscheduled recoveries with respect to the mortgage loans until the fifth anniversary of the first distribution date. During the four years following that anniversary, the Class A Certificates in the aggregate will receive a disproportionately large, but decreasing, share of principal prepayments and such other unscheduled recoveries. This will result in an accelerated amortization of principal to the Class A Certificates and, in the absence of realized losses on the mortgage loans, an increase in the percentage interest in the principal balance of the mortgage loans evidenced by the Class M and Class B Certificates, thereby increasing the likelihood that holders of the Class A Certificates will be paid the full amount of principal to which they are entitled. Optional Termination Subject to certain restrictions, [Chase Manhattan Mortgage Corporation] will have the option (but not the obligation) to purchase all of the mortgage loans in the mortgage pool after the aggregate unpaid principal balance of such mortgage loans is reduced to less than [10%] of the aggregate unpaid principal balance of such mortgage loans as of the cut-off date. See "The Pooling and Servicing Agreement-- Optional Termination." Legal Investment As of the closing date, the Class A and Class M Certificates will constitute "mortgage related securities" under the Secondary Mortgage Market S-6 Enhancement Act of 1984, as amended. The Class B-1 and Class B-2 Certificates will not constitute "mortgage related securities." You should consult your own counsel as to whether and to what extent the offered certificates constitute legal investments for you. See "Legal Investment Matters" in this prospectus supplement and "Legal Investment Matters" in the accompanying prospectus. Federal Income Tax Consequences For federal income tax purposes, the trust fund will elect to be treated as a Real Estate Mortgage Investment Conduit. The certificates (other than the Class A-R Certificates) will represent ownership of regular interests in the trust fund and will generally be treated as debt instruments of the trust fund for federal income tax purposes. You will be required to include in income all interest and original issue discount, if any, on your certificates in accordance with the accrual method of accounting regardless of your usual method of accounting. The Class A-R Certificates will represent ownership of the residual interest in the trust fund. See "Federal Income Tax Considerations" in this prospectus supplement and in the accompanying prospectus. ERISA Considerations In general, subject to important considerations described under "ERISA Considerations" in this prospectus supplement and the accompanying prospectus, the Class A Certificates (other than the Class A-R Certificates) will be eligible for purchase by retirement or other employee benefit plans subject to the Employee Retirement Income Security Act of 1986, as amended. You should consult with your own counsel with respect to the legal consequences of an ERISA plan's acquisition and ownership of the certificates. See "ERISA Considerations" in this prospect supplement and in the accompanying prospectus. Ratings The offered certificates are required to receive the ratings from [RATING AGENCY] and [RATING AGENCY] indicated under the heading "Expected Ratings" in the chart shown on page S-3 of this prospectus supplement. The ratings on the offered certificates address the likelihood of the receipt by holders of offered certificates of all distributions on the underlying mortgage loans to which they are entitled. They do not address the likely actual rate of prepayments. Such rate of prepayments, if different than you originally anticipated, could adversely affect your yield. See "Ratings." S-7 RISK FACTORS Forward-Looking Statements In this prospectus supplement and the accompanying prospectus, we use certain forward-looking statements. Such forward-looking statements are found in the material, including each of the tables, set forth under "Risk Factors" and "Prepayment and Yield Considerations." Forward-looking statements are also found elsewhere in this prospectus supplement and prospectus and include words like "expects," "intends," "anticipates," "estimates" and other similar words. Such statements are inherently subject to a variety of risks and uncertainties. Actual results differ materially from those we anticipate due to changes in, among other things: o economic conditions and industry competition; o political, social and economic conditions; o the law and government regulatory initiatives; and o interest rate fluctuations. We will not update or revise any forward-looking statements to reflect changes in our expectations or changes in the conditions or circumstances on which such statements were originally based. Prepayments May Adversely Affect Yield The rate of distributions in reduction of the principal balance of any class of offered certificates, the aggregate amount of distributions of principal and interest on any class of offered certificates and the yield to maturity of any class of offered certificates will be directly related to the rate of payments of principal on the mortgage loans and to the amount and timing of mortgagor defaults resulting in realized losses. The rate of principal payments on the mortgage loans will in turn be affected by, among other things: o the amortization schedules of the mortgage loans; o the rate of principal prepayments (including partial prepayments and prepayments resulting from refinancing) thereon by mortgagors; o liquidations of defaulted mortgage loans; o repurchases of mortgage loans by us as a result of defective documentation or breaches of representations and warranties; and o optional purchase by [Chase Manhattan Mortgage Corporation] of all of the mortgage loans in connection with the termination of the trust fund. See "Prepayment and Yield Considerations" and "The Pooling and Servicing Agreement--Optional Termination" herein and "The Pooling and Servicing Agreement--Assignment of Mortgage Loans; Warranties," "--Repurchase or Substitution" and "--Termination; Purchase of Mortgage Loans" in the prospectus. Mortgagors are permitted to prepay the mortgage loans, in whole or in part, at any time without penalty. S-8 The rate of payments (including prepayments, liquidations and defaults) on pools of mortgage loans is influenced by a variety of economic, geographic, social and other factors. o If prevailing rates for similar mortgage loans fall below the mortgage interest rates on the mortgage loans, the rate of prepayment generally would be expected to increase. o Conversely, if interest rates on similar mortgage loans rise above the mortgage interest rates on the mortgage loans, the rate of prepayment generally would be expected to decrease. If you purchase any offered certificates at a discount, you should consider the risk that a slower than anticipated rate of principal payments (including prepayments, liquidations and defaults) on the mortgage loans in the related mortgage group will result in an actual yield that is lower than your expected yield. If you purchase any offered certificates at a premium, you should consider the risk that a faster than anticipated rate of principal payments (including prepayments, liquidations and defaults) on the mortgage loans will result in an actual yield that is lower than your expected yield and, under certain circumstances, you might not recoup your initial investment. Subordination of Subordinated Certificates Increases Risk of Loss to Such Classes The rights of the holders of the Class M Certificates to receive distributions with respect to the mortgage loans will be subordinated to such rights of the holders of the Class A Certificates and the rights of the holders of a Class of Class B Certificates to receive distributions with respect to the mortgage loans will be subordinated to such rights of the holders of the Class A Certificates, the Class M Certificates and the Classes of Class B Certificates with lower numerical designations, all to the extent described herein under "Description of the Certificates--Subordination Certificates and Shifting Interests." Geographic Concentration of the Mortgaged Properties May Increase Risk of Loss We expect approximately [____]%, [___]% and [___]% of the mortgage loans (by aggregate principal balance as of the cut-off date) to be secured by mortgaged properties located in the states of __________, ________ and _______, respectively. Consequently, losses and prepayments on the mortgage loans and resultant payments on the offered certificates may, both generally and particularly, be affected significantly by changes in the housing markets and regional economies of, and the occurrence of natural disasters (such as earthquakes, fires, floods or hurricanes) in, the states of __________, ________ and ________. Certificates May Not Be Appropriate for Individual Investors The offered certificates may not be an appropriate investment for individual investors who do not have sufficient resources or expertise to evaluate the particular characteristics of the applicable class of offered certificates. This may be the case because, among other things: S-9 o The yield to maturity of offered certificates purchased at a price other than par will be sensitive to the uncertain rate and timing of principal prepayments on the mortgage loans; o The rate of principal distributions on, and the weighted average life of, the offered certificates will be sensitive to the uncertain rate and timing of principal prepayments on the mortgage loans and the priority of principal distributions among the classes of certificates, and as such the offered certificates may be inappropriate investments for you if you require a distribution of a particular amount of principal on a specific date or an otherwise predictable stream of distributions; o You may not be able to reinvest amounts distributed in respect of principal on an offered certificate (which, in general, are expected to be greater during periods of relatively low interest rates) at a rate at least as high as the certificate rate on the offered certificates; or o It is possible that a secondary market for the offered certificates will not develop or that your investment may not be liquid. Lack of liquidity could result in a substantial decrease in the market value of your certificates. You should also carefully consider the further risks and other special considerations discussed above and under the heading "Prepayment and Yield Considerations" in this prospectus supplement and in the accompanying prospectus under the heading "Risk Factors." Risks Associated with Year 2000 Compliance We are aware of the issues associated with the programming code in existing computer systems as the millennium (year 2000) approaches. The "year 2000 problem" is pervasive and complex; virtually every computer operation will be affected in some way by the rollover of the two digit year value to 00. The issue is whether computer systems will properly recognize date-sensitive information when the year changes to 2000. Systems that do not properly recognize such information could generate erroneous data or cause a system to fail. We have been advised by [Chase Manhattan Mortgage Corporation] and [TRUSTEE] that they are committed to either (i) implementing modifications to their respective existing systems to the extent required to cause them to be year 2000 compliant or (ii) acquiring computer systems that are year 2000 compliant in each case prior to January 1, 2000. However, neither we nor any of our affiliates have made any independent investigation of the computer systems of [TRUSTEE]. In the event that computer problems arise out of a failure of such efforts to be completed on time, or in the event that the computer systems of [Chase Manhattan Mortgage Corporation] or [TRUSTEE] are not fully year 2000 compliant, the resulting disruptions in the collection or distribution of receipts on the mortgage loans could materially adversely affect the holders of the offered certificates. With respect to the year 2000 problem, The Depository Trust Company has informed members of the financial community that it has developed and is implementing a program so that its systems, as they relate to the timely payment of distributions, including principal and interest payments to certificateholders, book-entry deliveries, and settlement of trades within The Depository Trust Company, S-10 continue to function appropriately on and after January 1, 2000. This program includes a technical assessment and a remediation plan, each of which is complete. Additionally, The Depository Trust Company's plan includes a testing phase, which is expected to be completed within appropriate time frames. However, The Depository Trust Company's ability to perform properly its services is also dependent upon other parties, including but not limited to, its participating organizations, through which you will hold your certificates, as well as the computer systems of third party service providers. The Depository Trust Company has informed the financial community that it is contacting and will continue to contact third party vendors from whom The Depository Trust Company acquires services to: o impress upon them the importance of such services being year 2000 compliant; and o determine the extent of their efforts for year 2000 remediation, and, as appropriate, testing, of their services. In addition, The Depository Trust Company has stated that it is in the process of developing such contingency plans as it deems appropriate. If problems associated with the year 2000 problem were to occur with respect to The Depository Trust Company and the services described above, payments to you could be delayed or otherwise adversely affected. See "Risk Factors" in the accompanying prospectus for a description of certain other risks and special considerations applicable to the offered certificates. S-11 THE MORTGAGE POOL General The mortgage pool with respect to the Certificates (the "Mortgage Pool") will consist of approximately _____ conventional mortgage loans (the "Mortgage Loans") evidenced by fixed interest rate promissory notes (each, a "Mortgage Note") having an aggregate principal balance on [DATE], (the "Cut-off Date") of approximately $[___________]. References herein to percentages of Mortgage Loans refer in each case to the percentage of the aggregate principal balance of the Mortgage Loans as of the Cut-off Date, based on the outstanding principal balances of the Mortgage Loans as of the Cut-off Date, after giving effect to Monthly Payments (defined herein) due on or prior to the Cut-off Date, whether or not received. References to percentages of Mortgaged Properties (defined herein) refer, in each case, to the percentages of aggregate principal balances of the related Mortgage Loans (determined as described in the preceding sentence). The Mortgage Notes are secured by mortgages or deeds of trust or other similar security instruments creating first liens on one- to four-family residential properties (the "Mortgaged Properties"). The Mortgaged Properties consist of individual dwelling units, individual cooperative apartment dwelling units, individual condominium units, two- to four-family dwelling units, attached planned unit developments and detached planned unit developments. The Trust Fund includes, in addition to the Mortgage Pool, (i) the amounts held from time to time in one or more accounts (collectively, the "Accounts") maintained in the name of the Trustee pursuant to the Pooling and Servicing Agreement (the "Agreement") to be dated as of [DATE] by and among Chase Manhattan Acceptance Corporation (the "Seller"), [Chase Manhattan Mortgage Corporation ("Chase Manhattan Mortgage")], as servicer (in such capacity, the "Servicer") and [TRUSTEE], as trustee (the "Trustee"), (ii) any property which initially secured a Mortgage Loan and which is acquired by foreclosure or deed-in-lieu of foreclosure, (iii) all insurance policies and the proceeds thereof described below and (iv) certain rights to require repurchase of the Mortgage Loans by the Seller for breach of representation or warranty. The Seller will cause the Mortgage Loans to be assigned to the Trustee. The Servicer will service the Mortgage Loans either by itself or through other mortgage servicing institutions (the "Subservicers"), pursuant to the Agreement. With respect to those Mortgage Loans serviced by the Servicer through a Subservicer, the Servicer will remain liable for its servicing obligations under the Agreement as if the Servicer alone were servicing such Mortgage Loans. Representations and Warranties The Seller will make certain representations and warranties for the benefit of the Trustee with respect to the Mortgage Loans as described in the Prospectus under "The Mortgage Pools" and "The Pooling and Servicing Agreement--Assignment of Mortgage Loans; Warranties" and "--Repurchase or Substitution" and will be obligated to repurchase any Mortgage Loan as to which there is a material breach of any such representation or warranty. Such repurchase will constitute the sole remedy available to Certificateholders for a breach of such representations or warranties. The Trustee will enforce the repurchase obligations of the Seller. In lieu of such repurchase obligation, the Seller may, within two years after the date of initial delivery of the Certificates, substitute for the affected Mortgage Loans substitute mortgage loans, as described under "The Pooling and Servicing Agreement--Assignment of Mortgage Loans; Warranties" and "--Repurchase or Substitution" in the Prospectus. S-12 Mortgage Loans Statistical data with respect to the Mortgage Loans are set forth below. The Mortgage Loans were originated between [DATE] and [DATE]. All of the Mortgage Loans had original terms to stated maturity of [360] [180] months or less. The weighted average number of months from and including the first Monthly Payment on the Mortgage Loans to and including the Cut-off Date was approximately __ month[s]. Monthly payments of principal and interest on the Mortgage Loans ("Monthly Payments") will be due on the first day of each month (each, a "Due Date"). All of the Mortgage Loans having original loan-to-value ratios of greater than [___]% are insured under Primary Mortgage Insurance Policies (as defined in the Prospectus). Not more than approximately [___]% of the Mortgage Loans are insured by any one Primary Mortgage Insurance Policy insurer. At the time of origination of the Mortgage Loans, each of the Primary Mortgage Insurance Policy insurers was approved by the Federal National Mortgage Association ("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC"). See "Servicing of the Mortgage Loans--Private Mortgage Insurance" in the Prospectus. Approximately [_____]% of the Mortgage Loans have Credit Scores. The weighted average Credit Score for the Mortgage Loans that were scored is [___] and the range of such Credit Scores is [___] to [____]. "Credit Scores" are statistical credit scores obtained by many mortgage lenders in connection with the loan application to help assess a borrower's credit-worthiness. Credit Scores are generated by models developed by a third party and are made available to lenders through three national credit bureaus. The models were derived by analyzing data on consumers in order to establish patterns which are believed to be indicative of the borrower's probability of default. The Credit Score is based on a borrower's historical credit data, including, among other things, payment history, delinquencies on accounts, levels of outstanding indebtedness, length of credit history, types of credit, and bankruptcy experience. Credit Scores range from approximately 250 to approximately 900, with higher scores indicating an individual with a more favorable credit history compared to an individual with a lower score. However, a Credit Score purports only to be a measurement of the relative degree of risk a borrower represents to a lender, i.e., that a borrower with a higher score is statistically expected to be less likely to default in payment than a borrower with a lower score. In addition, it should be noted that Credit Scores were developed to indicate a level of default probability over a two-year period which does not correspond to the life of a mortgage loan. Furthermore, Credit Scores were not developed specifically for use in connection with mortgage loans, but for consumer loans in general. Therefore, a Credit Score does not take into consideration the effect of mortgage loan characteristics on the probability of repayment by the borrower. Neither the Seller nor Chase Manhattan Mortgage makes any representations or warranties as to the actual performance of any Mortgage Loan or that a particular Credit Score should be relied upon as a basis for an expectation that the borrower will repay the Mortgage Loan according to its terms. Additional data with respect to the Mortgage Loans are set forth in the following tables (totals may not sum due to rounding): S-13 Mortgage Rates(1)
Percentage of Aggregate Mortgage Pool by Principal Balance Aggregate Principal Number of as of the Balance as of the Mortgage Rate Mortgage Loans Cut-off Date Cut-off Date - ------------- -------------- ----------------- -------------------- --------------------- ------------------------- -------------------------- Totals............................. $ % ===================== ========================= ==========================
- ----------- (1) The Mortgage Rates borne by the Mortgage Loans as of the Cut-off Date ranged from ____% per annum to _____% per annum, and the weighted average Mortgage Rate on the Mortgage Loans as of the Cut-off Date was approximately _____% per annum. Geographical Distribution of Mortgaged Properties
Percentage of Aggregate Mortgage Pool by Principal Balance Aggregate Principal Number of as of the Balance as of the State Mortgage Loans Cut-off Date Cut-off Date - ----- -------------- ----------------- -------------------
S-14
Percentage of Aggregate Mortgage Pool by Principal Balance Aggregate Principal Number of as of the Balance as of the State Mortgage Loans Cut-off Date Cut-off Date - ----- -------------- ----------------- ------------------- --------------------- ------------------------- ----------------------- Totals.............................. $ % ===================== ========================= =======================
S-15 Original Principal Balance(2)
Percentage of Aggregate Mortgage Pool by Principal Balance Aggregate Principal Number of as of the Balance as of the Original Principal Balance Mortgage Loans Cut-off Date Cut-off Date - -------------------------- -------------- ----------------- ------------------- --------------------- ------------------------- ----------------------- Totals................................ $ % ===================== ========================= =======================
- ----------- (2) The average outstanding principal balance of the Mortgage Loans as of the Cut-off Date was approximately $_______. The original principal balances of the Mortgage Loans ranged from $______ to $_________. S-16 Mortgage Loan Age (3)
Percentage of Aggregate Mortgage Pool by Principal Balance Aggregate Principal Number of as of the Balance as of the Mortgage Loan Age Mortgage Loans Cut-off Date Cut-off Date - ----------------- -------------- ---------------- ------------------ --------------------- ------------------------- -------------------------- Total................................... $ % ===================== ========================= ==========================
- ----------- (3) The weighted average age of the Mortgage Loans was approximately ___month[s] as of the Cut-off Date. S-17 Original Loan-to-Value Ratio(4)
Percentage of Aggregate Mortgage Pool by Principal Balance Aggregate Principal Number of as of the Balance as of the Original Loan-to-Value Ratio Mortgage Loans Cut-off Date Cut-off Date - ---------------------------- -------------- ----------------- -------------------- --------------------- ----------------------- ------------------------- Totals.................................. $ % ===================== ======================== =========================
- ----------- (4) The weighted average original loan-to-value ratio of the Mortgage Loans was approximately [______]% as of the Cut-off Date. S-18 Loan Purpose
Percentage of Aggregate Mortgage Pool by Principal Balance Aggregate Principal Number of as of the Balance as of the Loan Purpose Mortgage Loans Cut-off Date Cut-off Date - ------------ -------------- ---------------- ------------------- Purchase.................................... Cash-out Refinance.......................... Rate/Term Refinance......................... % --------------------- ----------------------- ------------------------ Totals................................... $ % ===================== ======================= ========================
Remaining Terms to Stated Maturity(5)
Percentage of Aggregate Mortgage Pool by Principal Balance Aggregate Principal Number of as of the Balance as of the Months Remaining Mortgage Loans Cut-off Date Cut-off Date - ---------------- --------------- ----------------- ------------------ % --------------------- ------------------------ ------------------- Totals................................... $ % ===================== ======================== ====================
- ----------- (5) The weighted average remaining term to stated maturity of the Mortgage Loans as of the Cut-off Date was approximately [___] months. S-19 Remaining Terms to Expected Maturity(6)
Percentage of Aggregate Mortgage Pool by Principal Balance Aggregate Principal Number of as of the Balance as of the Months Remaining Mortgage Loans Cut-off Date Cut-off Date - ---------------- -------------- ----------------- ------------------ --------------------- ------------------------------------------------- Totals........................... $ % ===================== ========================= =======================
- ----------- (6) Based on payments actually received (or scheduled to be received) on each Mortgage Loan as of the Cut-off Date. The weighted average remaining term to expected maturity of the Mortgage Loans as of the Cut-off Date was approximately [___] months. Types of Mortgaged Properties
Percentage of Aggregate Mortgage Pool by Principal Balance Aggregate Principal Number of as of the Balance as of the Property Type Mortgage Loans Cut-off Date Cut-off Date - ------------- --------------- ----------------- ------------------- Single-family Detached...................... Cooperative Unit(7)......................... Attached Planned Unit Development........... Detached Planned Unit Development........... Condominium................................. Two- to Four-Family Dwelling Unit........... --------------------- ----------------------------------------------- Totals.............................. $ % ===================== ===============================================
- ----------- (7) Mortgage Loans secured by "Cooperative Units" were made to finance or refinance the purchase of stock allocated to units in residential cooperative housing corporations (each, a "Co-op Loan"). S-20 Occupancy(8)
Percentage of Aggregate Mortgage Pool by Principal Balance Aggregate Principal Number of as of the Balance as of the Occupancy Mortgage Loans Cut-off Date Cut-off Date - --------- -------------- ----------------- -------------------- --------------------- ----------------------------------------------- Totals................................ $ % ===================== ======================== =====================
- ----------- (8) Based on representations by the Mortgagors at the time of origination of the related Mortgage Loans. Loan Documentation
Percentage of Aggregate Mortgage Pool by Principal Balance Aggregate Principal Number of as of the Balance as of the Loan Documentation Mortgage Loans Cut-off Date Cut-off Date - ------------------ -------------- ----------------- -------------------- -------------------- ----------------------- ------------------- Totals................................. $ % ==================== ======================= ===================
S-21 Credit Scores (9)
Percentage of Aggregate Mortgage Pool by Principal Balance Aggregate Principal Number of as of the Balance as of the Credit Score Mortgage Loans Cut-off Date Cut-off Date - ------------ -------------- ------------------ ------------------ -------------------- ---------------------- ------------------- Totals................................. $ % ==================== ====================== ===================
- ----------- (9) The Credit Scores of the Mortgage Loans as of the Cut-off Date ranged from [___] to [___] and the weighted average Credit Score of the Mortgage Loans as of the Cut-off Date was [_________]. At the date of issuance of the Certificates, no Mortgage Loan will be delinquent more than 30 days or will have had more than one delinquency in excess of 30 days as to any Monthly Payment during the preceding twelve months. No zip code area contains greater than approximately [___]% of the Mortgaged Properties. A Standard Hazard Insurance Policy is required to be maintained by the Mortgagor with respect to each Mortgage Loan in an amount equal to the maximum insurable value of the improvements securing such Mortgage Loan or the principal balance of such Mortgage Loan, whichever is less. See "Servicing of the Mortgage Loans--Hazard Insurance" in the Prospectus. No Mortgage Pool Insurance Policy, Special Hazard Insurance Policy or Mortgagor Bankruptcy Insurance will be maintained with respect to the Mortgage Pool, nor will any Mortgage Loan be insured by the FHA or guaranteed by the VA. The description in this Prospectus Supplement of the Mortgage Pool and the Mortgaged Properties is based upon the Mortgage Pool as presently constituted. Prior to the issuance of the Certificates, Mortgage Loans may be removed from the Mortgage Pool if the Seller deems such removal necessary or appropriate. Other mortgage loans may be included in the Mortgage Pool prior to the issuance of the Certificates unless including such mortgage loans would materially alter the characteristics of the Mortgage Pool as described herein. The information set forth herein is representative of the characteristics of the Mortgage Pool as it will be constituted at the time the Certificates are issued. If any of the characteristics as of the Cut-Off Date of the Mortgage Loans on the date of initial issuance of the Certificates vary materially from those described herein, revised information regarding such Mortgage Loans will be included in a Current Report on Form 8-K of the Seller that will be available to purchasers of the Certificates at, and filed with the Securities and Exchange Commission within 15 days of, the initial delivery of the Certificates. In any event, no S-22 more than 5% of the Mortgage Loans described herein will be removed from or added to the Mortgage Pool prior to the issuance of the Certificates unless a revised prospectus supplement is delivered to prospective investors in the Offered Certificates. PREPAYMENT AND YIELD CONSIDERATIONS The rate of principal payments on the Offered Certificates, the aggregate amount of each interest payment on the Offered Certificates (other than the [Class A-P] Certificates) and the yield to maturity of such Certificates are related to the rate and timing of payments of principal on the underlying Mortgage Loans. The principal payments on such Mortgage Loans may be in the form of scheduled principal payments or prepayments (for this purpose, the term "prepayment" includes prepayments in full, curtailments and liquidations due to default, casualty, condemnation and the like, as well as repurchases by a mortgage loan seller). Any such prepayments will result in distributions to holders of Certificates ("Certificateholders") of principal amounts which would otherwise be distributed over the remaining terms of the Mortgage Loans. In addition, because, for at least nine years after the issuance of the Certificates, the Offered Class A Certificateholders [(other than the [Class A-7] and [Class A-P] Certificateholders)] will be entitled to receive a percentage of certain amounts, including principal prepayments, which is greater than their proportionate interest in the Trust Fund, the rate of principal prepayments on the Mortgage Loans will have a greater effect on the rate of principal payments and the amount of interest payments on, and the yield to maturity of, such Certificates than if such Certificateholders were entitled only to their proportionate interest in such amounts. In general, the prepayment rate may be influenced by a number of factors, including general economic conditions and homeowner mobility. Mortgagors are permitted to prepay the Mortgage Loans, in whole or in part, at any time without penalty. The rate of payment of principal may also be affected by any repurchase of the Mortgage Loans as to which there has been a material breach of a representation or warranty or defect in documentation, or by a purchase by the Servicer of certain Mortgage Loans modified at the request of a Mortgagor (including Mortgagors with respect to which the Servicer has solicited such a request), or by the exercise by the Servicer of its right to purchase a defaulted Mortgage Loan. See "The Mortgage Pool--General" and "The Pooling and Servicing Agreement--Optional Termination." In such event, the repurchase price will be passed through to the Certificateholders as a prepayment of principal in the month following the month of such repurchase. The rate of prepayments with respect to mortgage loans on one- to four-family residences has fluctuated significantly in recent years. The Seller believes that in a fluctuating interest rate environment a predominant factor affecting the prepayment rate on a large pool of mortgage loans is the difference between the interest rates on the mortgage loans (giving consideration to the cost of any refinancing) and prevailing mortgage rates. In general, if mortgage interest rates were to fall below the interest rates on the Mortgage Loans, the rate of prepayment would be expected to increase. Conversely, in general, if mortgage interest rates were to rise above the interest rates on the Mortgage Loans, the rate of prepayment would be expected to decrease. Other factors affecting prepayment of mortgage loans include changes in mortgagors' housing needs, job transfers, unemployment, mortgagors' net equity in the mortgaged properties and servicing decisions. Additionally, in general, mortgage loans having relatively high principal balances and/or relatively S-23 low loan-to-value ratios may be more likely to prepay than mortgage loans having relatively low principal balances and/or relatively high loan-to-value ratios. Therefore, if a mortgage pool consists of mortgage loans which generally have relatively high principal balances and relatively low loan-to-value ratios, the rate of prepayments with respect to such mortgage pool could be higher than would otherwise be the case. In addition, prepayments generally will also result from home sales by mortgagors and from foreclosures due to defaults on mortgage loans. There is no historical prepayment data available for the Mortgage Pool, and comparable data is not available because the Mortgage Loans do not constitute a representative sample of mortgage loans generally. In addition, historical data available with respect to mortgage loans underlying mortgage pass-through certificates issued by GNMA, FNMA or FHLMC may not be comparable to prepayments expected to be experienced by the Mortgage Pool, because the Mortgage Loans have characteristics which differ from mortgage loans underlying pass-through certificates issued by GNMA, FNMA and FHLMC. The timing of changes in the rate of prepayments on the Mortgage Loans may significantly affect the total distributions received, the date of receipt of such distributions and the actual yield to maturity to an investor in the Offered Certificates, even if the average rate of principal payments is consistent with an investor's expectations. Because the rate of distribution of principal of the Certificates will be directly related to the actual amortization (including prepayments) of the Mortgage Loans, which may include Mortgage Loans that have remaining terms to maturity shorter or longer than those assumed and interest rates higher or lower than those assumed, the distributions of the Offered Certificates are likely to differ from those reflected in the following tables, even if all the Mortgage Loans prepay at the indicated percentages of the Prepayment Model (defined below). In addition, it is not likely that the Mortgage Loans will prepay at a constant rate until maturity or that all of the Mortgage Loans will prepay at the same rate. In general, the earlier a payment of principal on the Mortgage Loans, the greater the effect on an investor's yield to maturity. As a result, if principal payments occur at a rate higher (or lower) than the rate anticipated by an investor in the Offered Certificates during the period immediately following the issuance of the Certificates, the effect on such investor's yield will not be equally offset by a subsequent like reduction (or increase) in the rate of principal payments. If an Offered Certificate is offered at a discount from its original principal amount and if the purchaser of such Offered Certificate calculates its yield to maturity based on a faster assumed rate of payment of principal than that actually received on such Certificate, its actual yield to maturity will be lower than that so calculated. Conversely, if an Offered Certificate is offered at a premium to its original principal amount, and if the purchaser of such Offered Certificate calculates its yield to maturity based on a slower assumed rate of payment of principal than that actually received on such Certificate, its actual yield to maturity will be lower than that so calculated and, under certain circumstances, such a purchaser may fail to recoup its initial investment. No assurances can be given as to the rate of payments on the Mortgage Loans. [The yield to investors in the Class A-6 Certificates will be highly sensitive to LIBOR and increases in LIBOR will have a negative effect on the yield to investors in the Class A-6 Certificates. Investors in the Class A-6 Certificates should consider the risk that a high rate of LIBOR will have a negative effect on the yield to such investors.] S-24 [Investors in the Class A-7 Certificates should be aware that because the Class A-7 Certificates are not expected to receive distributions of payments of principal prior to the Distribution Date occurring in [MONTH/YEAR] (unless the principal balances of the Non-PO Class A Certificates (other than the Class A-7 Certificates) have been reduced to zero), the weighted average life of the Class A-7 Certificates will be longer than would otherwise be the case, and the effect on the market value of the Class A-7 Certificates of changes in market interest rates or market yields for similar securities will be greater than for other Classes of Class A Certificates entitled to such distributions.] If the aggregate principal balance of the Non-Offered Class B Certificates is reduced to zero, the yield to maturity on the Class B-2 Certificates will be extremely sensitive to losses on the Mortgage Loans (and the timing thereof), because the entire amount of any such losses (other than Excess Losses) which occur after the aggregate principal balance of the Non-Offered Class B Certificates has been reduced to zero will be allocable to the Class B-2 Certificates, as described herein. If the aggregate principal balance of the Class B-2 Certificates and the Non-Offered Class B Certificates is reduced to zero, the yield to maturity on the Class B-1 Certificates will be extremely sensitive to losses on the Mortgage Loans and the timing thereof because the entire amount of any such losses (other than Excess Losses) which occur after the aggregate principal balance of the Class B-2 Certificates and the Non-Offered Class B Certificates has been reduced to zero will be allocable to the Class B-1 Certificates, as described herein. If the aggregate principal balance of the Class B Certificates is reduced to zero, the yield to maturity on the Class M Certificates will be extremely sensitive to losses on the Mortgage Loans and the timing thereof because the entire amount of any such losses (other than Excess Losses) which occur after the aggregate principal balance of the Class B Certificates has been reduced to zero will be allocable to the Class M Certificates, as described herein. In addition, as described herein, for at least nine years after the issuance of the Certificates or such lesser time as the Class A Certificates are outstanding, each Class of Subordinated Certificates (defined herein), will be entitled to receive a percentage of certain amounts, including principal prepayments, which is generally less than their proportionate interest in the trust fund. See "Description of the Certificates--Subordinated Certificates and Shifting Interests." No assurance can be given as to the rate or timing of principal payments or prepayments on the Mortgage Loans. In addition, it is unlikely that prepayments on the Mortgage Loans will occur at a constant rate even if the average prepayment experience equals the indicated levels of the Prepayment Model. In the event of acceleration of Mortgage Loans as a result of enforcement of "due-on-sale" provisions in connection with transfers of the related Mortgaged Properties, the level of prepayments on the respective Mortgage Loans will be increased, thereby shortening the weighted average lives of the Offered Certificates. See "Yield, Maturity and Weighted Average Life Considerations" in the Prospectus. The yield to holders of the Offered Certificates will depend upon, among other things, the price at which such Offered Certificates are purchased and the amount of and rate at which principal, including both scheduled and unscheduled payments thereof, is paid to the respective Certificateholders. S-25 The yield to Certificateholders (other than the [Class A-P] Certificateholders) will be reduced by lags between the time interest income accrues to Certificateholders and the time the related interest income is received by Certificateholders. In addition, the yield to Certificateholders (other than the [Class A-P] Certificateholders) may be reduced as a result of Prepayment Interest Shortfalls (defined herein) to the extent described herein. See "The Pooling and Servicing Agreement--Adjustment to Servicing Fee in Connection with Prepaid Mortgage Loans." Prepayments on mortgage loans are commonly measured relative to a prepayment standard or model. The model used in this Prospectus Supplement (the "Prepayment Model") represents an assumed rate of prepayment each month relative to the then outstanding principal balance of a pool of mortgage loans. A prepayment assumption of 100% of the Prepayment Model assumes prepayment rates of 0.2% per annum of the then outstanding principal balance of such mortgage loans in the first month of the life of the mortgage loans and an additional 0.2% per annum in each month thereafter until the thirtieth month. Beginning in the thirtieth month and in each month thereafter during the life of the mortgage loans, 100% of the Prepayment Model assumes a constant prepayment rate of 6.0% per annum. The tables set forth below are based on the assumption that the Mortgage Loans prepay at the indicated percentages of the Prepayment Model. Neither the Prepayment Model nor any other prepayment model purports to be a historical description of prepayment experience or a prediction of the anticipated rate of prepayment of any pool of mortgage loans, including the Mortgage Pool. The tables set forth below have been prepared on the basis of the characteristics of the Mortgage Loans that are expected to be included in the Trust Fund and the respective expected initial principal balances of the Offered Certificates. For purposes of preparation of the tables, it has been assumed that the Mortgage Loans included in the Mortgage Pool on the Closing Date have the actual characteristics of the Mortgage Loans described herein and that [(i) scheduled payments on all Mortgage Loans are received on the first day of each month beginning in [MONTH/YEAR], (ii) any principal prepayments on the Mortgage Loans are received on the last day of each month beginning in [MONTH/YEAR] and include 30 days of interest thereon, (iii) there are no defaults or delinquencies on the Mortgage Loans, (iv) optional termination of the Trust Fund does not occur, (v) there are no partial prepayments on the Mortgage Loans and prepayments are computed after giving effect to scheduled payments received on the following day, (vi) the Mortgage Loans prepay at the indicated constant percentages of the Prepayment Model, (vii) the date of issuance for the Certificates is [DATE], (viii) cash distributions are received by the Certificateholders on the 25th day of each month when due and (ix) the scheduled monthly payments for the Mortgage Loans are computed based upon the amount of principal and interest contractually due each month under the Mortgage Note.] The assumptions set forth in this paragraph are referred to herein as the "Modeling Assumptions." Any discrepancy between the characteristics of the Mortgage Loans actually included in the Trust Fund and the characteristics of the Mortgage Loans expected to be so included may affect the percentages of the original principal balance outstanding set forth in the tables and the weighted average lives of the Offered Certificates. In addition, to the extent that the Mortgage Loans that actually are included in the Trust Fund have characteristics that differ from those assumed in S-26 preparing the following tables, the outstanding principal balance of any Offered Certificate will likely be reduced to zero earlier or later than indicated by the tables. Variations in actual prepayment experience and the principal balances of Mortgage Loans that prepay may increase or decrease the percentages of the original principal balances outstanding and the weighted average lives shown in the following tables. Such variations may occur even if the average prepayment experience of all such Mortgage Loans equals the indicated levels of the Prepayment Model. There is no assurance that the Mortgage Loans will prepay at any constant level of the Prepayment Model. Based on the foregoing assumptions, the following tables indicate the weighted average life of each Class of Offered Certificates and set forth the percentages of the original principal balance of each Class of Offered Certificates that would be outstanding after each of the dates shown at various percentages of the Prepayment Model. No assurance can be given as to the rate or timing of principal payments or prepayments on any of the Mortgage Loans. Percentage of Initial Principal Balance Outstanding at the Respective Percentages of the Prepayment Model Set Forth Below
Class A-1 Class A-2 --------- --------- Distribution Date _% ___% ___% ___% ___% _% ___% ___% ___% ___% - ----------------- -- ---- ---- ---- ---- -- ---- ---- ---- ----
S-27 Weighted Average Life in years(1).................... - ----------- (1) The weighted average lives of the Offered Certificates as shown above are determined by (i) multiplying the amount of each assumed principal distribution by the number of years from the date of issuance of the Certificates to the related Distribution Date, (ii) summing the results and (iii) dividing the sum by the total principal distribution on such Certificates. Percentage of Initial Principal Balance Outstanding at the Respective Percentages of the Prepayment Model Set Forth Below
Class A-3 Class A-4 --------- --------- Distribution Date 0% ___% ___% ___% ___% _% ___% ___% ___% ___% - ----------------- -- ---- ---- ---- ---- -- ---- ---- ---- ----
S-28 Weighted Average Life in years(1)................... - ----------- (1) The weighted average lives of the Offered Certificates as shown above are determined by (i) multiplying the amount of each assumed principal distribution by the number of years from the date of issuance of the Certificates to the related Distribution Date, (ii) summing the results and (iii) dividing the sum by the total principal distribution on such Certificates S-29 Percentage of Initial Principal Balance Outstanding at the Respective Percentages of the Prepayment Model Set Forth Below
Class A-5 Class A-6 --------- --------- Distribution Date _% ___% ___% ___% ___% _% ___% ___% ___% ___% - ----------------- -- ---- ---- ---- ---- -- ---- ---- ---- ----
Weighted Average Life in years(1).................... - ----------- (1) The weighted average lives of the Offered Certificates as shown above are determined by (i) multiplying the amount of each assumed principal distribution by the number of years from the date of issuance of the Certificates to the related Distribution Date, (ii) summing the results and (iii) dividing the sum by the total principal distribution on such Certificates. S-30 Percentage of Initial Principal Balance Outstanding at the Respective Percentages of the Prepayment Model Set Forth Below
Class A-7 Class A-P --------- --------- Distribution Date _% ___% ___% ___% ___% _% ___% ___% ___% ___% - ----------------- -- ---- ---- ---- ---- -- ---- ---- ---- ----
Weighted Average Life in years(1).................. - ----------- (1) The weighted average lives of the Offered Certificates as shown above are determined by (i) multiplying the amount of each assumed principal distribution by the number of years from the date of issuance of the Certificates to the related Distribution Date, (ii) summing the results and (iii) dividing the sum by the total principal distribution on such Certificates. S-31 Percentage of Initial Principal Balance Outstanding at the Respective Percentages of the Prepayment Model Set Forth Below
Class A-R Class M, Class B-1 and Class B-2 --------- -------------------------------- Distribution Date __% ___% ___% ___% ___% _% ___% ___% ___% ___% - ----------------- --- ---- ---- ---- ---- -- ---- ---- ---- ----
Weighted Average Life in years(1)............ - ----------- (1) The weighted average lives of the Offered Certificates as shown above are determined by (i) multiplying the amount of each assumed principal distribution by the number of years from the date of issuance of the Certificates to the related Distribution Date, (ii) summing the results and (iii) dividing the sum by the total principal distribution on such Certificates. S-32 Yield Considerations with Respect to the Class A-P Certificates The yield to maturity of the Class A-P Certificates will be extremely sensitive to the rate and timing of principal payments (including prepayments, liquidations, repurchases and defaults) on the Discount Mortgage Loans (defined herein), which may fluctuate significantly from time to time. A slower rate of principal payments on the Discount Mortgage Loans than that anticipated by investors will have a material negative effect on the yield to maturity of the Class A-P Certificates. An investor should fully consider the associated risks, including the risk that a relatively slow rate of principal payments (including prepayments, liquidations, repurchases and defaults) on the Discount Mortgage Loans will have a material negative effect on the yield to an investor in the Class A-P Certificates. The Discount Mortgage Loans will have lower Net Mortgage Rates than the other Mortgage Loans. In general, mortgage loans with lower mortgage interest rates may tend to prepay at a slower rate of payment in respect of principal than mortgage loans with relatively higher mortgage interest rates in response to changes in market interest rates. As a result, the Discount Mortgage Loans may prepay at a slower rate of payment in respect of principal than the other Mortgage Loans, resulting in a lower yield on the Class A-P Certificates than would be the case if the Discount Mortgage Loans prepaid at the same rate as the other Mortgage Loans. As of the Cut-off Date, there were approximately [__] Discount Mortgage Loans, with an aggregate outstanding principal balance of approximately $[_________]. The following table illustrates the significant effect that principal prepayments on the Discount Mortgage Loans have upon the yield to maturity of the Class A-P Certificates. The actual prices to be paid for the Class A-P Certificates have not been determined and will be dependent on the characteristics of the Mortgage Pool. The table shows the hypothetical pre-tax yields to maturity of the Class A-P Certificates, stated on a corporate bond equivalent basis, under five different prepayment assumptions based on the Prepayment Model described above. The table is based on the Modeling Assumptions and assumes further that the purchase price of the Class A-P Certificates is [____]%. Pre-Tax Yield Prepayment Model ---------------- [____]% [____]% [____]% [____]% [____]% [____]% [____]% [____]% [____]% [____]% Any change in the composition of the Mortgage Pool from that assumed could substantially alter the information set forth in the table above. No assurances can be given as to the rate or timing of principal payments or prepayments on the Discount Mortgage Loans. The pre-tax yields set forth in the preceding table were calculated by determining the monthly discount rates which, when applied to the assumed streams of cash flows to be paid on the Class A-P Certificates, would cause the discounted present value of such assumed streams of cash flows to equal the assumed offering price of [_____]% for the Class A-P Certificates. In all cases monthly rates are then converted to the corporate bond equivalent yields shown above. Implicit in S-33 the use of any discounted present value or internal rate of return calculation such as these is the assumption that intermediate cash flows are reinvested at the discount rate or internal rate of return. Thus, these calculations do not take into account the different interest rates at which investors may be able to reinvest funds received by them as distributed on the Class A-P Certificates. Consequently, these yields do not purport to reflect the return on any investment in the Class A-P Certificates when such reinvestment rates are considered. It is unlikely that the characteristics of the Discount Mortgage Loans will correspond exactly to those assumed in preparing the table above. The pre-tax yield of the Class A-P Certificates may therefore differ even if all the Discount Mortgage Loans prepay monthly at the assumed prepayment rate. In addition, it is highly unlikely that any Discount Mortgage Loan will prepay at a constant rate until maturity or that all the Discount Mortgage Loans will prepay at the same rate. The timing of changes in the rate of prepayments on the Discount Mortgage Loans may affect significantly the total distributions received, the date of receipt of such distributions and the actual yield received by a holder of a Class A-P Certificate even if the average rate of principal prepayments on the Discount Mortgage Loans is consistent with an investor's expectations. The Seller makes no representation that any of the Mortgage Loans will prepay in the manner or at any of the rates assumed in the tables set forth above. Each investor must make its own decision as to the appropriate prepayment assumption to be used in deciding whether or not to purchase any of the Offered Certificates. Since the rate of principal payments (including prepayments) and repurchases on the Mortgage Loans will significantly affect the yield to maturity on the Offered Certificates, prospective investors are urged to consult their investment advisors as to both the anticipated rate of future principal payments (including prepayments) on the Mortgage Loans and the suitability of the Offered Certificates to their investment objectives. The Seller intends to file certain additional yield tables and other computational materials with respect to one or more Classes of Offered Certificates with the Securities and Exchange Commission in a Report on Form 8-K. See "Incorporation of Certain Documents By Reference" in the Prospectus. Such tables and materials were prepared by the Underwriter at the request of certain prospective investors, based on assumptions provided by, and satisfying the special requirements of, such investors. Such tables and assumptions may be based on assumptions that differ from the Modeling Assumptions. Accordingly, such tables and other materials may not be relevant to or appropriate for investors other than those specifically requesting them. [CHASE MANHATTAN MORTGAGE CORPORATION Chase Manhattan Mortgage is a New Jersey corporation, formed in 1920. It is a wholly owned indirect subsidiary of Chase Manhattan Bank USA, National Association. Chase Manhattan Mortgage is engaged in the mortgage origination and servicing businesses. Chase Manhattan Mortgage is a HUD-approved mortgagee. Chase Manhattan Mortgage is subject to supervision, examination and regulation by the Office of the Comptroller of the Currency and various state regulatory bodies. The address of Chase Manhattan Mortgage is 343 Thornall Street, Edison, New Jersey 08837 and its telephone number is (732) 205-0600. Chase Manhattan Mortgage makes loans in all 50 states primarily for the purpose of enabling borrowers to purchase or refinance residential real property, secured by first liens on such property. Chase Manhattan Mortgage's real estate loans primarily are made to homeowners based on the security of one- to four-family residences. S-34 Loan Delinquency, Foreclosure and Loss Experience. The recent loan delinquency and loan foreclosure experience of Chase Manhattan Mortgage as servicer of first mortgage loans secured by one-to four-family residential properties which were originated by or for Chase Manhattan Mortgage (exclusive of any such mortgage loans as to which master servicing or subservicing arrangements exist) (expressed as percentages of the total portfolio of such loans as of such date) was as follows: S-35
As of June 30, As of December 31, -------------------------- ----------------------------------------------------------------- 1999 1998 1997 -------------------------- ------------------------------ ------------------------------ By By By By By By Number Principal Number of Principal Number of Principal Period of Delinquency of Loan Balance Loans Balance Loans Balance - ------------------------- ---------- ----------- ------------ ------------- ------------ ------------ 30 to 59 days............ 2.74% 2.24% 3.31% 2.74% 3.97% 3.28% 60 to 89 days............ 0.66 0.54 0.80 0.65 0.85 0.69 90 days or more.......... 0.53 0.42 0.61 0.50 0.56 0.48 ---- ----- ---- ---- ---- ---- Total............... 3.93% 3.20% 4.72% 3.89% 5.38% 4.45% ===== ==== ==== ==== ==== ==== Foreclosure.............. 1.36% 1.09% 1.51% 1.24% 1.67% 1.37%
The following table presents, for the portfolio of mortgage loans originated by or for Chase Manhattan Mortgage which are owned by The Chase Manhattan Bank or its affiliates, the net gains (losses) as a percentage of the average principal amount of such portfolio on the disposition of properties acquired in foreclosure or by deed-in-lieu of foreclosure during the periods indicated.
Six Month Period Year Ended Ended June 30, December 31, ---------------------- --------------------- 1999 1998 ---------------------- --------------------- (Dollars in Millions) Average portfolio principal amount..................... $24,553 $23,648 Six Month Period Year Ended Ended June 30, December 31 ---------------------- --------------------- 1999 1998 ---------------------- --------------------- Net gains (losses) (1)................................. (0.03%) (0.13%)
- --------------- (1) Losses are defined as unrealized losses on properties acquired in foreclosure by or deed-in-lieu of foreclosure and proceeds from sale less outstanding book balance (after recognition of such unrealized losses) less certain capitalized costs related to disposition of the related property (exclusive of accrued interest). If accrued interest were included in the calculation of losses, the level of losses could substantially increase. There can be no assurance that the delinquency, foreclosure and loss experience on the Mortgage Loans will correspond to the delinquency, foreclosure and loss experience set forth in the foregoing tables. In general, during periods in which the residential real estate market is experiencing an overall decline in property values such that the principal balances of the Mortgage Loans and any secondary financing on the related Mortgaged Properties become equal to or greater than the value of the related Mortgaged Properties, rates of delinquencies, foreclosure and losses could be significantly higher than might otherwise be the case. In addition, adverse economic conditions (which may affect real property values) may affect the timely payment by Mortgagors of Monthly Payments, and accordingly, the actual rates of delinquencies, foreclosures and losses with respect to the Mortgage Pool. Underwriting Policies. The following is a description of the underwriting policies customarily employed by Chase Manhattan Mortgage with respect to residential mortgage loans which it originated during the period of origination of the Mortgage Loans. Chase Manhattan Mortgage has represented to the Seller that the Mortgage Loans were originated generally in accordance with such policies. Chase Manhattan Mortgage's real estate lending process for one-to four- family residential mortgage loans follows procedures established to comply with applicable federal and state laws and regulations. Chase Manhattan Mortgage's S-36 underwriting standards are designed to evaluate a borrower's credit standing and repayment ability and the value and adequacy of the mortgaged property as collateral. The Mortgage Loans were originated in a manner generally consistent, except as to loan amounts, with FNMA or FHLMC published underwriting guidelines. Chase Manhattan Mortgage believes that each Mortgage Loan originated in such a manner generally meets the credit, appraisal and underwriting standards described in such published underwriting guidelines, except for the original principal balances of such Mortgage Loans. Initially, a prospective borrower is required to fill out an application designed to provide pertinent information about the borrower's assets, liabilities, income and credit, the property to be financed and the type of loan desired. Chase Manhattan Mortgage obtains a credit report which summarizes the prospective borrower's credit history with merchants, lenders and other creditors reporting such information as well as matters of public record. In addition, Chase Manhattan Mortgage verifies employment, income and assets. Self-employed prospective borrowers are generally required to submit their federal income tax returns for the last two years and/in certain cases a separate statement of income and expenses independently verified by a third party. Pursuant to Chase Manhattan Mortgage's Limited Documentation Program, written verification of the borrower's income is not required. The borrower must satisfy a 25% down-payment requirement from their own assets. These assets are verified through bank statements and may be supplemented by third-party verification. A residential mortgage credit report, or "in file" report, is obtained and reviewed to determine the borrower's repayment history. The maximum loan-to-value ratio of any mortgage loan originated under this program is approximately 80% (67% for "cash out" refinancings). Once the necessary information is received, a determination is made as to whether the prospective borrower has sufficient monthly income available to meet the borrower's monthly obligations on the proposed loan and other expenses related to the residence (such as property taxes and insurance) as well as to meet other financial obligations and monthly living expenses. For loans with a loan-to-value ratio of 80% or less, Chase Manhattan Mortgage's lending guidelines require that all current fixed obligations of the borrower (including mortgage payments based on Chase Manhattan Mortgage's mortgage rates at the time of the application and other expenses related to the residence) generally may not exceed 40% of the borrower's gross income in the case of a borrower with income of under $75,000, 42% of the borrower's gross income in the case of a borrower with income of between $75,000 and $150,000 and 44% of the borrower's gross income in the case of a borrower with income in excess of $150,000. For loans with a loan-to-value ratio between 80.01% and 90%, Chase Manhattan Mortgage's lending guidelines require that the mortgage payments (based on Chase Manhattan Mortgage's mortgage rates at the time of application) plus applicable real property taxes, any condominium common charges and hazard insurance, generally may not exceed 33% of the borrower's gross income and that all monthly payments, including those mentioned above and other fixed obligations, such as car payments, generally may not exceed 38% of the borrower's gross income. For loans with a loan-to-value ratio between 90.01% and 95%, Chase Manhattan Mortgage's lending guidelines require that the mortgage payments (based on Chase Manhattan Mortgage's mortgage rates at the time of application) plus applicable real property taxes, any condominium common charges and hazard insurance, generally may not exceed 28% of the borrower's gross income and that all monthly payments, including those mentioned above and other fixed obligations, such as car payments, generally may not exceed 36% of the borrower's gross income. Other credit considerations may cause Chase Manhattan Mortgage to depart from these guidelines in certain cases. Where there are two individuals signing the mortgage note, the income and debts of both are included in the computation. Chase Manhattan Mortgage requires an appraisal to be made of each property to be financed. The appraisal is conducted by an independent fee appraiser who visits the property and estimates its market value. The independent appraisers do not receive any compensation dependent upon either the amount of the loan or its consummation. In normal practice, the lower of purchase price or appraised value determines the maximum amount which will be lent on the property. From time to time, exceptions and/or variances to Chase Manhattan Mortgage's underwriting policies may be made. Such exceptions and/or variances may be made only if specifically approved on a loan-by-loan basis by certain credit personnel of Chase Manhattan Mortgage who have the authority to make such exceptions and/or variances. Exceptions and/or variances may be made only after careful consideration of certain mitigating factors such as borrower capacity, liquidity, employment and residential stability and local economic conditions. Chase Manhattan Mortgage obtains a search of the liens of record to which the property being financed is subject at the time of origination. Title insurance is required in the case of all mortgage loans. Servicing Activities. As of [DATE], Chase Manhattan Mortgage serviced approximately $___ billion of one- to four-family residential mortgage loans.] S-37 THE POOLING AND SERVICING AGREEMENT The Certificates will be issued pursuant to the Agreement. The following summaries, together with the summaries set forth under "The Pooling and Servicing Agreement" in the accompanying Prospectus, describe the material provisions of the Agreement. The summaries below do not purport to be complete and are subject to, and qualified in their entirety by reference to, the provisions of the Agreement. Where particular provisions or terms used in the Agreement are referred to, such provisions or terms are as specified in the Agreement. See "The Pooling and Servicing Agreement" in the Prospectus. Assignment of Mortgage Loans The Seller will cause the Mortgage Loans to be assigned to the Trustee, together with the rights to all principal and interest due on or with respect to the Mortgage Loans after the Cut-off Date other than interest accrued on the Mortgage Loans prior to the Cut-off Date. The [Chase Manhattan Bank], as authenticating agent, will, concurrently with such assignment, authenticate and deliver the Certificates. Each Mortgage Loan will be identified in a schedule appearing as an exhibit to the Agreement (the "Mortgage Loan Schedule"). The Mortgage Loan Schedule will specify, among other things, with respect to each Mortgage Loan, the original principal balance and the unpaid principal balance as of the close of business on the Cut-off Date; the Monthly Payment; the months remaining to stated maturity of the Mortgage Note; and the Mortgage Rate. In addition, the Seller will, as to each Mortgage Loan, deliver or cause to be delivered to the Trustee the Mortgage Note (together with all amendments and modifications thereto) endorsed without recourse to the Trustee or its designee, the original or a certified copy of the mortgage (together with all amendments and modifications thereto) with evidence of recording indicated thereon and an original or certified copy of an assignment of the mortgage in recordable form. The Seller will cause the assignments to be recorded in the appropriate public records. Servicing The Mortgage Loans will be serviced by the Servicer generally in accordance with procedures described in the accompanying Prospectus under the headings "Servicing of the Mortgage Loans" and "Description of the Certificates." When any Mortgaged Property is conveyed by the Mortgagor, the Servicer generally will enforce any "due-on-sale" clause contained in the Mortgage Loan, to the extent permitted under applicable law and governmental regulations. Acceleration of Mortgage Loans as a result of enforcement of such "due-on-sale" provisions in connection with transfers of the related Mortgaged Properties will affect the level of prepayments on the Mortgage Loans, thereby affecting the weighted average lives and yields to maturity of the Offered Certificates. See "Prepayment and Yield Considerations" herein and "Yield, Maturity and Weighted Average Life Considerations" in the Prospectus. The terms of the Mortgage Loans or applicable law, however, may provide that the Servicer is prohibited from exercising the "due-on-sale" clause if information is submitted so as to evaluate the intended buyer as if a new loan were being made to the buyer and it can reasonably be determined that the security under the related Mortgage Note will not be impaired by the assumption of the Mortgage Loan and that the risk of a breach of any covenant in the Mortgage Note is acceptable. Upon any such assumption, a fee equal to a specified percentage of the outstanding principal balance of the Mortgage Loan is typically required, which sum will be retained by the Servicer as additional servicing compensation. Servicing Compensation and Payment of Expenses The Servicer will be paid a monthly fee (the "Servicing Fee") (including sub-servicing compensation) with respect to each Mortgage Loan in an amount equal to [____]% (the "Servicing Fee Rate") per annum of the unpaid principal balance of each Mortgage Loan. The Servicer is obligated to pay certain ongoing expenses associated with the Mortgage Pool and incurred by the Servicer in connection with its responsibilities under the Agreement. See "The Pooling and Servicing Agreement--Servicing and Other Compensation and Payment of Expenses" in the Prospectus for information regarding other possible compensation to the Servicer and for information regarding expenses payable by the Servicer. Adjustment to Servicing Fee in Connection with Prepaid Mortgage Loans When a Mortgagor makes a full or partial principal prepayment of a Mortgage Loan between Due Dates, the Mortgagor generally is required to pay interest on the principal balance thereof only to the date of prepayment. In order to minimize any resulting shortfall in interest (such shortfall, a "Prepayment Interest Shortfall"), the aggregate amount of the Servicing Fee will be reduced to the extent necessary to include an amount in payments to the holders of the Offered Certificates equal to a full month's interest payment at the applicable Net Mortgage Rate (defined herein) with respect to such prepaid Mortgage Loan; provided, however, that such reductions in the Servicing Fee will be made only up to the product of [(i) one-twelfth of 0.125% and (ii) the aggregate scheduled principal balance of the Mortgage Loans with respect to the related S-38 Distribution Date]. Any Prepayment Interest Shortfalls (adjusted to the applicable Net Mortgage Rate) in excess of such amount (such excess, the "Non-Supported Interest Shortfall") will be allocated on such Distribution Date pro rata among the outstanding Classes of Certificates (including the Class A-X Certificates) based upon the amount of interest which each such Class would otherwise be paid on such Distribution Date and will consequently reduce the yield on the applicable Classes of Certificates. Any principal prepayment, together with a full month's interest thereon at the applicable Net Mortgage Rate (to the extent described in this paragraph), will be paid on the Distribution Date in the month following the month in which the last day of the related Principal Prepayment Period (defined herein) occurred. See "Yield, Maturity and Weighted Average Life Considerations" in the Prospectus. Payments on Mortgage Loans; Collection Account; Certificate Account The Agreement provides that the Servicer for the benefit of the Certificateholders shall establish and maintain a Collection Account (the "Collection Account"), into which the Servicer is generally required to deposit or cause to be deposited on a daily basis the payments and collections described in "The Pooling and Servicing Agreement--Payments on Mortgage Loans; Certificate Account" in the Prospectus, except that the Servicer may deduct its Servicing Fee and any expenses of liquidating defaulted Mortgage Loans or property acquired in respect thereof. The Agreement permits the Servicer to direct any depository institution maintaining the Collection Account to invest the funds in the Collection Account in one or more investments acceptable to [RATING AGENCY] and [RATING AGENCY] (as provided in the Agreement) that mature, unless payable on demand, no later than the Business Day preceding the 25th day of each month, or, if such day is not a business day, the preceding business day (the "Servicer Remittance Date"). The Servicer will be entitled to all income and gain realized from any such investment, and such income and gain will be subject to withdrawal by the Servicer from time to time. The Servicer will be required to deposit the amount of any losses incurred in respect of any such investments out of its own funds as such losses are realized. The Trustee will be obligated to establish an account (the "Certificate Account"), into which the Servicer will deposit or cause to be deposited on the Servicer Remittance Date the Available Distribution Amount (including any Advances with respect to such Servicer Remittance Date) for the related Distribution Date, together with certain other amounts specified in the Agreement. Subject to the restrictions set forth in the Agreement, the Trustee is permitted to direct the investment of funds in the Certificate Account. Any such investments are required to mature, unless payable on demand, no later than the related Distribution Date. The Trustee will be entitled to all income and gain realized from any such investment, and such income and gain will be subject to withdrawal by the Trustee from time to time. The Trustee will be required to deposit the amount of any losses incurred in respect of any such investments out of its own funds as such losses are realized. Advances In the event that any Mortgagor fails to make any payment of principal or interest required under the terms of a Mortgage Loan, the Servicer will advance the entire amount of such payment, net of the applicable Servicing Fee, less the amount of any such payment that the Servicer reasonably believes will not be recoverable out of liquidation proceeds or otherwise. The amount of any scheduled payment required to be advanced by the Servicer will not be affected by any agreement between the Servicer and a Mortgagor providing for the postponement or modification of the due date or amount of such scheduled payment. The Servicer will be entitled to reimbursement for any such advance from related late payments on the Mortgage Loan as to which such advance was made. Furthermore, in the event that any Mortgage Loan as to which an advance has been made is foreclosed while in the Trust Fund, the Servicer will be entitled to reimbursement for such advance from related liquidation proceeds or insurance proceeds prior to payment to Certificateholders of the related Mortgage Pool of the Scheduled Principal Balance of such Mortgage Loan. If the Servicer makes a good faith judgment that all or any portion of any advance made by it with respect to any Mortgage Loan may not ultimately be recoverable from related liquidation proceeds (a "Non-recoverable Advance"), the Servicer will so notify the Trustee and the Servicer will be entitled to reimbursement for such Non-recoverable Advance from recoveries on all other unrelated Mortgage Loans included in the related Mortgage Pool. The Servicer's judgment that it has made a Non-recoverable Advance with respect to any Mortgage Loan will be based upon its assessment of the value of the related Mortgaged Property and such other facts and circumstances as it may deem appropriate in evaluating the likelihood of receiving liquidation proceeds, net of expenses, equal to or greater than the aggregate amount of unreimbursed advances made with respect to such Mortgage Loan. Trustee The Trustee for the Certificates offered hereby will be [TRUSTEE], a __________. The Corporate Trust Office of the Trustee is located at [ADDRESS] (the "Corporate Trust Office"). The Servicer will pay to the Trustee a fee in consideration S-39 for its services as trustee under the Agreement. [The Trustee will appoint The Chase Manhattan Bank ("Chase") as certificate registrar and authenticating agent. Chase's office for such purposes is 450 West 33rd Street, New York, New York 10001.] Optional Termination The Servicer may, on any Distribution Date, repurchase from the Trust Fund all Mortgage Loans remaining outstanding at such time as the aggregate unpaid principal balance of such Mortgage Loans is less than [10%] of the aggregate unpaid scheduled principal balance of the Mortgage Pool on the Cut-off Date. The repurchase price will equal the greater of (A) the sum of (i) the unpaid principal amount of such Mortgage Loans (other than any such Mortgage Loans as to which the related Mortgaged Properties have been acquired and whose fair market values are included in clause (ii) below), plus accrued interest thereon at the Remittance Rate to the next Due Date and (ii) the fair market value of any such acquired properties (as determined by an appraisal to be conducted by an appraiser selected by the Trustee), in each case less any unreimbursed Advances made with respect to such Mortgage Loans and (B) the outstanding principal balance of the Offered Certificates plus accrued interest thereon at the Remittance Rate. Upon any such repurchase, the Offered Certificateholders will receive the outstanding principal balance of the Offered Certificates plus accrued interest thereon at their respective Certificate Rates. Such amounts will be distributed to Certificateholders on the Distribution Date in the month following the month of repurchase. Special Servicing Agreements The Agreement may permit the Servicer to enter into a special servicing agreement with an unaffiliated holder of a Class of Class B Certificates or of a class of securities representing interests in the Class B Certificates and/or other subordinated mortgage pass-through certificates. Pursuant to such agreement, such holder may instruct the Servicer to commence or delay foreclosure proceedings with respect to delinquent Mortgage Loans. Such commencement or delay at such holder's direction will be taken by the Servicer only after such holder deposits a specified amount of cash with the Servicer. Such cash will be available for distribution to Certificateholders if liquidation proceeds are less than the outstanding principal balance of the related Mortgage Loan. S-40 DESCRIPTION OF THE CERTIFICATES The Certificates will be issued pursuant to the Agreement. A copy of the Agreement will be attached as an exhibit to the Current Report on Form 8-K of the Seller that will be available to purchasers of the Certificates at, and will be filed with the Securities and Exchange Commission within 15 days of, the initial delivery of the Certificates. Reference is made to the Prospectus for additional information regarding the terms and conditions of the Agreement. The approximate initial principal amount of the Offered Certificates will be $[___________], subject to a permitted variance of plus or minus 5%. Any difference between the aggregate principal balance of the Certificates as of the date of issuance of the Certificates and the approximate aggregate initial principal balance thereof as of the date of this Prospectus Supplement will be allocated among the various Classes of Certificates so as to retain materially the characteristics thereof described herein. The following summaries do not purport to be complete and are subject to, and are qualified in their entirety by reference to, the provisions of the Agreement. When particular provisions or terms used in the Agreement are referred to, the actual provisions (including definitions of terms) are incorporated by reference. General Initially, the Class A Certificates will evidence in the aggregate a beneficial interest of approximately [_____]% in the aggregate principal balance of the Mortgage Loans in the Trust Fund (the "Class A Percentage"), the Class M Certificates will evidence a beneficial interest of approximately [____]% in the aggregate principal balance of the Mortgage Loans in the Trust Fund (the "Class M Percentage"), the Class B-1 Certificates will evidence a beneficial interest of approximately [____]% in the aggregate principal balance of the Mortgage Loans in the Trust Fund (the "Class B-1 Percentage"), the Class B-2 Certificates will evidence in the aggregate a beneficial interest of approximately [____]% in the aggregate principal balance of the Mortgage Loans in the Trust Fund (the "Class B-2 Percentage") and the Non-Offered Class B Certificates will evidence in the aggregate the remaining beneficial interest (the "Non-Offered Class B Percentage") in the aggregate principal balance of the Mortgage Loans in the Trust Fund. Initially, the Non-Offered Class B Percentage will be approximately [____]%. The Class A Percentage, the Class M Percentage, the Class B-1 Percentage and the Class B-2 Percentage will vary from time to time to the extent that the respective Class A, Class M, Class B-1 or Class B-2 Certificateholders do not receive amounts due to them on any Distribution Date, losses are realized on the Mortgage Loans, or principal prepayments are made or certain other unscheduled amounts of principal are received in respect of the Mortgage Loans. See "Description of the Certificates-- Subordinated Certificates and Shifting Interests." The Class A-X Certificates and the Non-Offered Class B Certificates will be sold or otherwise transferred to a limited number of institutional investors (which may include one or more affiliates of the Seller) and are not offered hereby. The following table sets forth the original certificate form, the minimum denomination and the incremental denomination of the Offered Certificates. S-41
Original Minimum Incremental Class Certificate Form Denomination Denomination ----- ---------------- ------------ ------------ Classes [A-1, A-2, A-3, A-4, A-5, Book-Entry $______ $1,000 A-6, A-7 and A-P] Class A-R Definitive $100 N/A Classes M, B-1 and B-2 Definitive $_______ $1,000
The [Class A-R, Class M, Class B-1 and Class B-2 Certificates], as well as other Definitive Certificates (defined herein), if any, will be transferable and exchangeable at the Corporate Trust Office. No service charge will be made for any registration or transfer of Offered Certificates, but the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge in connection with such transfer. The Offered Certificates, other than the Class A-R, Class M, Class B-1 and Class B-2 Certificates (such Classes of Certificates, the "Book-Entry Certificates") will be represented initially by one or more physical certificates registered in the name of Cede & Co. ("Cede") as the nominee of The Depository Trust Company ("DTC"). No person acquiring an interest in the Book-Entry Certificates (a "Certificate Owner") will be entitled to receive a certificate representing such person's interest in the Trust Fund, except as set forth below under "Description of the Certificates-Definitive Certificates." Unless and until Definitive Certificates are issued under the limited circumstances described herein, all references to actions by the Book-Entry Certificateholders shall refer to actions taken by DTC upon instructions from its Participants (as defined below) and all references herein to distributions, notices, reports and statements to the Book-Entry Certificateholders shall refer to distributions, notices, reports and statements to DTC or Cede, as the registered holder of the Book-Entry Certificates, as the case may be, for distribution to Certificate Owners in accordance with DTC procedures. See "Description of the Certificates Book-Entry Registration." The "Final Scheduled Distribution Date" of each Class of Offered Certificates is [DATE], which is the Distribution Date occurring in the month that is one month following the latest stated maturity date of any Mortgage Loan. The rate of principal payments of the Certificates will depend on the rate of principal payments of the Mortgage Loans (including prepayments, defaults, delinquencies and liquidations) which, in turn, will depend on the characteristics of the Mortgage Loans, the level of prevailing interest rates and other economic factors, and no assurance can be given as to the actual payment experience. The principal balance or notional amount, as applicable, of each Class of Certificates may be reduced to zero earlier or later than its Final Scheduled Distribution Date. Book-Entry Registration DTC is a limited purpose trust company organized under the laws of the State of New York and is a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to Section 17A of the Securities Exchange Act of 1934. DTC was created to hold securities for its participating organizations (each, a "Participant") and to facilitate the clearance and settlement of securities transactions between Participants through electronic book-entries, thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers (including [UNDERWRITER]), banks, trust companies and clearing corporations. Indirect access to the DTC system also is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly ("Indirect Participants"). Certificate Owners that are not Participants or Indirect Participants and that desire to purchase, sell or otherwise transfer ownership of, or other interests in, the Book-Entry Certificates may do so only through Participants and Indirect Participants. In addition, Certificate Owners will receive all distributions of principal and interest on the Book-Entry Certificates through a Participant or an Indirect Participant. Under a book-entry format, Certificate Owners may experience some delay in their receipt of payments, since such payments will be forwarded by the Trustee to Cede, as nominee for DTC. DTC will forward such payments to its Participants, which thereafter will forward them to Certificate Owners directly or through an Indirect Participant. It is anticipated that the only "Certificateholder" of a Book-Entry Certificate will be Cede, as nominee of DTC. Certificate Owners will not be recognized by the Trustee as Certificateholders, as such term is used in the Agreement, and Certificate Owners will be permitted to exercise the rights of Book-Entry Certificateholders only indirectly through DTC and its Participants. Under the rules, regulations and procedures creating and affecting DTC and its operations (the "Rules"), DTC will be required to make book-entry transfers of Book-Entry Certificates among Participants and to receive and transmit distributions of principal of, and interest on, Book-Entry Certificates. Participants and Indirect Participants with which Certificate Owners have accounts with respect to the Book-Entry Certificates similarly are required to make book-entry transfers and receive and transmit such payments on behalf of their respective Certificate Owners. Accordingly, although Certificate Owners will not possess S-42 physical certificates, the Rules provide a mechanism by which Participants and Certificate Owners will receive payments and will be able to transfer their interests. Because DTC can only act on behalf of Participants, who in turn act on behalf of Indirect Participants, and on behalf of certain banks, the ability of a Certificate Owner to pledge Book-Entry Certificates to persons or entities that do not participate in the DTC system, or to otherwise act with respect to such Certificates, may be limited due to the absence of physical certificates for such Certificates. DTC has advised the Seller that it will take any action permitted to be taken by a Certificateholder under the Agreement only at the direction of one or more Participants to whose accounts with DTC the Book-Entry Certificates are credited. Additionally, DTC has advised the Seller that it will take such action where the consent of specified percentages of the Offered Certificates is required under the Agreement only at the direction of and on behalf of Participants whose interests represent such specified percentages. DTC may take conflicting actions on behalf of other Participants. Neither the Seller, the Servicer nor the Trustee will have any liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of the Book-Entry Certificates held by Cede, as nominee for DTC, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Definitive Certificates The [Class A-R, Class M, Class B-1 and Class B-2] Certificates will be issued in fully registered, certificated form ("Definitive Certificates"). The Book-Entry Certificates will only be issued in fully registered, certificated form to Certificate Owners or their nominees, rather than to DTC or its nominee, if (i) the Seller advises the Servicer in writing that DTC is no longer willing or able to discharge properly its responsibilities as depository with respect to the Book-Entry Certificates and the Seller is unable to locate a qualified successor within 30 days or (ii) the Seller, at its option, elects to terminate the book-entry system through DTC. Upon the occurrence of either event described in the immediately preceding paragraph, the Trustee is required to notify DTC which in turn will notify all Certificate Owners through Participants of the availability of Definitive Certificates in exchange for Book-Entry Certificates. Upon surrender by Cede, as nominee of DTC, of the definitive certificates representing the Book-Entry Certificates and receipt of instructions for re-registration, the Trustee or its agent will reissue the Book-Entry Certificates as Definitive Certificates to Certificate Owners. Restrictions on Transfer of the Class A-R, Class M and Offered Class B Certificates The Class A-R Certificate will be subject to the following restrictions on transfer, and the Class A-R Certificate will contain a legend describing such restrictions. The REMIC provisions of the Internal Revenue Code of 1986, as amended (the "Code") impose certain taxes on (i) transferors of residual interests to, or agents that acquire residual interests on behalf of, Disqualified Organizations (as defined in the Prospectus) and (ii) certain Pass-Through Entities (as defined in the Prospectus) that have Disqualified Organizations as beneficial owners. No tax will be imposed on a Pass-Through Entity (other than an "electing large partnership" as defined in the Code) with respect to the Class A-R Certificate to the extent it has received an affidavit from the owner thereof that such owner is not a Disqualified Organization or a nominee for a Disqualified Organization. The Agreement will provide that no legal or beneficial interest in the Class A-R Certificate may be transferred to or registered in the name of any person unless (i) the proposed purchaser provides to the Trustee an affidavit to the effect that, among other items, such transferee is not a Disqualified Organization and is not purchasing the Class A-R Certificate as an agent for a Disqualified Organization (i.e., as a broker, nominee, or other middleman thereof) and (ii) the transferor states in writing to the Trustee that it has no actual knowledge that such affidavit or letter is false. Further, such affidavit or letter requires the transferee to affirm that it (i) historically has paid its debts as they have come due and intends to do so in the future, (ii) understands that it may incur tax liabilities with respect to the Class A-R Certificate in excess of cash flows generated thereby, (iii) intends to pay taxes associated with holding the Class A-R Certificate as such taxes become due and (iv) will not transfer the Class A-R Certificate to any person or entity that does not provide a similar affidavit or letter. In addition, the Class A-R Certificate may not be purchased by or transferred to any person that is not a "U.S. Person," unless (i) such person holds such Class A-R Certificate in connection with the conduct of a trade or business within the United States and furnishes the transferor and the Trustee with an effective Internal Revenue Service Form 4224 or (ii) the transferee delivers to both the transferor and the Trustee an opinion of a nationally recognized tax counsel to the effect that such transfer of the Class A-R Certificate will not be disregarded for federal income tax purposes. The term "U.S. Person" means a citizen or resident of the United States, a corporation, or partnership (unless, in the case of a partnership, Treasury regulations are adopted S-43 that provide otherwise) created or organized in or under the laws of the United States, any State thereof or the District of Columbia, including an entity treated as a corporation or partnership for federal income tax purposes, an estate whose income is subject to United States federal income tax regardless of its source, or a trust if a court within the United States is able to exercise primary supervision over the administration of such trust, and one or more such U.S. Persons have the authority to control all substantial decisions of such trust (or, to the extent provided in applicable Treasury regulations, certain trusts in existence on August 20, 1996 which are eligible to elect to be treated as U.S. Persons). The Agreement will provide that any attempted or purported transfer in violation of these transfer restrictions will be null and void and will vest no rights in any purported transferee. Any transferor or agent to whom the Trustee provides information as to any applicable tax imposed on such transferor or agent may be required to bear the cost of computing or providing such information. See "Federal Income Tax Consequences--REMIC Certificates; --Income from Residual Certificates; --Taxation of Certain Foreign Investors; --Transfers of Residual Certificates; --Servicing Compensation and Other REMIC Pool Expense" in the Prospectus. The Class A-R Certificate may not be purchased by or transferred to a Plan or a person acting on behalf of or investing the assets of a Plan. See "ERISA Considerations" herein and in the Prospectus. Because the Class M and Offered Class B Certificates are subordinated to the Class A Certificates, the Class M Certificates and the Offered Class B Certificates may not be transferred unless the transferee has delivered (i) a representation letter to the Trustee stating either (a) that the transferee is not a Plan and is not acting on behalf of a Plan or using the assets of Plan to effect such purchase or (b) subject to the conditions described herein, that the source of funds used to purchase the Class M or Offered Class B Certificates in an "insurance company general account" or (ii) an opinion of counsel and such other documentation as described herein under "ERISA Considerations." See "ERISA Considerations" herein and in the Prospectus. Distributions to Certificateholders Distributions of principal and interest on the Certificates will be made on the 25th day of each month or, if such day is not a business day, the next succeeding business day (each, a "Distribution Date"), beginning [DATE], to the persons in whose names the Certificates are registered at the close of business on the last business day of the month preceding the month in which payment is made (each, a "Record Date"). Distributions will be made to each Class as described below and on a pro rata basis among the Certificates of each Class. Distributions of principal and interest on the Book-Entry Certificates will initially be made by the Trustee directly to Cede by wire transfer. Distributions with respect to the Class A-R, Class M, Class B-1 and Class B-2 Certificates and, upon the issuance of Definitive Certificates to persons other than Cede, distributions of principal and interest on such Definitive Certificates will be made by the Trustee directly to holders in whose names such Certificates were registered at the close of business on the related Record Date. Such distributions will be made by check mailed to the address of the person entitled thereto as it appears on the certificate register, or, upon written request to the Trustee delivered at least ten business days prior to the first Distribution Date for which distribution by wire transfer is to be made, by a holder of an Offered Certificate having an original aggregate principal balance of at least $5,000,000 (or by a holder which holds all of the Certificates of a Class), by wire transfer to such Certificateholder, except that the final distribution in retirement of Certificates will be made only upon presentation and surrender of the Certificates at the office or agency of the Trustee specified in the final distribution notice to Certificateholders. Principal received or advanced as part of a regularly scheduled Monthly Payment on each Mortgage Loan will be passed through monthly on the Distribution Date occurring in the month in which the related Due Date occurs. The Non-PO Class A Certificateholders will be entitled to an amount equal to the Non-PO Class A Percentage (defined herein) of the applicable Non-PO Percentage (defined herein) of scheduled principal amounts due or advanced with respect to each Mortgage Loan. Principal prepayments and certain other unscheduled amounts of principal received during the period from the first day of any month to the last day of such month (each, a "Principal Prepayment Period") will be passed through on the Distribution Date occurring in the month following the month of receipt. The Non-PO Class A Certificateholders will be entitled to an amount equal to the Non-PO Class A Prepayment Percentage (defined herein) of the applicable Non-PO Percentage of such unscheduled amounts of principal. The aggregate amount available for distribution to Certificateholders on each Distribution Date will be the Available Distribution Amount. The "Available Distribution Amount" means, generally, as of any Distribution Date, an amount equal to the amount on deposit in the Collection Account as of the close of business on the related Servicer Remittance Date (including amounts to be advanced by the Servicer in respect of delinquent Monthly Payments), except: (a) amounts received as late payments or other recoveries of principal or interest (including liquidation proceeds and insurance proceeds) and applied to the reimbursement of unreimbursed Advances and amounts representing reimbursement for Advances determined to be non-recoverable and amounts representing reimbursement for certain losses and expenses incurred by the Servicer, as described in the Agreement; (b) the Servicing Fee, as adjusted as provided in the Agreement with respect to principal prepayments; (c) all S-44 amounts representing Monthly Payments due after the related Due Date; and (d) all principal prepayments, liquidation proceeds, insurance proceeds, condemnation proceeds and repurchase proceeds received after the related Principal Prepayment Period. On each Distribution Date, the Available Distribution Amount will be allocated among the Classes of Certificates and distributed to the holders of record thereof as of the related Record Date as follows: [first, to each Class of Non-PO Class A Certificates, the sum of (i) the Interest Accrual Amount with respect to such Class and (ii) any Interest Shortfall with respect to such Class; second, concurrently (i) to the Non-PO Class A Certificates, up to the Non-PO Class A Optimal Principal Amount (allocated among such Classes as described below under "--Principal (Including Prepayments)--Allocation of the Non-PO Class A Optimal Principal Amount"), and (ii) to Class A-P Certificates, the applicable PO Percentage (defined herein) of all principal received on or in respect of each Discount Mortgage Loan; third, to the Class A-P Certificates, the Class A-P Shortfall Amount (defined herein); provided, however, that any amounts distributed pursuant to this paragraph third will not cause a further reduction in the principal balance of Class A-P; fourth, to the Class M Certificates, the sum of (i) the Interest Accrual Amount with respect to such Class and (ii) any Interest Shortfall with respect to such Class; fifth, to the Class M Certificates, in an amount up to the portion of the Subordinated Optimal Principal Amount allocable to the Class M Certificates as described below under "--Principal (Including Prepayment)--Allocation of the Subordinated Optimal Principal Amount"; sixth, to the Class B-1 Certificates the sum of (i) the Interest Accrual Amount with respect such Class and (ii) any Interest Shortfall with respect to such Class; seventh, to the Class B-1 Certificates, in an amount up to the portion of the Subordinated Optimal Principal Amount allocable to the Class B-1 Certificates as described below under "--Principal (Including Prepayments)--Allocation of the Subordinated Optimal Principal Amount"; eighth, to the Class B-2 Certificates, the sum of (i) the Interest Accrual Amount with respect to such Class and (ii) any Interest Shortfall with respect to such Class; ninth, to the Class B-2 Certificates, in an amount up to the portion of the Subordinated Optimal Principal Amount allocable to the Class B-2 Certificates as described below under "--Principal (Including Prepayments)--Allocation of the Subordinated Optimal Principal Amount"; tenth, to the Class B-3 Certificates, the sum of (i) the Interest Accrual Amount with respect to such Class and (ii) any Interest Shortfall with respect to such Class; eleventh, to the Class B-3 Certificates, in an amount up to the portion of the Subordinated Optimal Principal Amount allocable to the Class B-3 Certificates as described below under "--Principal (Including Prepayments)--Allocation of the Subordinated Optimal Principal Amount"; twelfth, to the Class B-4 Certificates, the sum of (i) the Interest Accrual Amount with respect to such Class and (ii) any Interest Shortfall with respect to such Class; thirteenth, to the Class B-4 Certificates, in an amount up to the portion of the Subordinated Optimal Principal Amount allocable to the Class B-4 Certificates as described below under "--Principal (Including Prepayments)--Allocation of the Subordinated Optimal Principal Amount"; fourteenth, to the Class B-5 Certificates, the sum of (i) the Interest Accrual Amount with respect to such Class and (ii) any Interest Shortfall with respect to such Class; fifteenth, to the Class B-5 Certificates, in an amount up to the po ion of the Subordinated Optimal Distribution Amount allocable to the Class B-5 Certificates as described below under "--Principal (Including Prepayments)--Allocation of the Subordinated Optimal Principal Amount"; and S-45 sixteenth, to the Class A-R Certificates, the remaining portion, if any (which is expected to be zero), of the Available Distribution Amount for such Distribution Date.] "Class A Certificates" means [the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class A-P, Class A-R and Class A-X Certificates, referred to collectively.] The Class A Certificates (exclusive of the Class A-X Certificates), Class M Certificates, Class B-1 Certificates and Class B-2 Certificates are sometimes collectively referred to herein as the "Offered Certificates." The Class A Certificates (exclusive of the Class A-P Certificates) are sometimes collectively referred to herein as the "Non-PO Class A Certificates." "Class B Certificates" means the Class B-1, Class B-2, Class B-3, Class B-4 and Class B-5 Certificates, referred to collectively. "Non-Offered Class B Certificates" means the Class B-3, Class B-4 and Class B-5 Certificates, referred to collectively. "Subordinated Certificates" means the Class M and Class B Certificates, referred to collectively. The "Credit Support Depletion Date" is the first Distribution Date on which the aggregate outstanding principal balance of the Subordinated Certificates has been or will be reduced to zero. With respect to each Mortgage Loan, the "PO Percentage" will equal a fraction, expressed as a percentage (but not less than 0%), the numerator of which will equal the excess, if any, of [____]% per annum (the "Remittance Rate") over the applicable Net Mortgage Rate (defined herein) and the denominator of which will equal the Remittance Rate. The PO Percentage will be 0% with respect to Mortgage Loans for which the Net Mortgage Rate is greater than or equal to the Remittance Rate. As of the Cut-off Date, the weighted average Net Mortgage Rate of the Discount Mortgage Loans (defined below) was approximately [_____]%. With respect to each Mortgage Loan, the "Non-PO Percentage" will equal a fraction, expressed as a percentage (but not greater than 100%), the numerator of which will equal the applicable Net Mortgage Rate and the denominator of which will equal the Remittance Rate. The Non-PO Percentage will be 100% with respect to Mortgage Loans for which the Net Mortgage Rate is greater than or equal to the Remittance Rate. The "Discount Mortgage Loans" are those Mortgage Loans having Net Mortgage Rates less than the Remittance Rate. The "Non-Discount Mortgage Loans" are those Mortgage Loans having Net Mortgage Rates greater than the Remittance Rate. The Class A-P Certificates will not be entitled to receive interest and will be entitled to receive principal with respect to the Discount Mortgage Loans only. The Class A-X Certificates will not be entitled to receive principal and will be entitled to receive interest with respect to the Non-Discount Mortgage Loans only. With respect to each Mortgage Loan, the "Net Mortgage Rate" equals the applicable Mortgage Rate less the Servicing Fee Rate. Interest On each Distribution Date, interest will be payable to each Class (other than the [Class A-P] Certificates) in an amount equal to the sum of (i) the Interest Accrual Amount with respect to such Class and (ii) any Interest Shortfall with respect to such Class. As of any Distribution Date, the "Interest Accrual Amount" with respect to any Class of Certificates (other than the [Class A-P] Certificates) means generally one month's interest at the Certificate Rate on the outstanding principal balance thereof (or, in the case of the [Class A-X] Certificates, on the [Class A-X] Notional Amount), minus (i) any Non-Supported Interest Shortfalls allocated to such Class on such Distribution Date (as described herein under "The Pooling and Servicing Agreement--Adjustment to Servicing Fee in Connection with Prepaid Mortgage Loans") and (ii) the interest portion of any Realized Losses allocated to such Class as described herein. S-46 As of any Distribution Date, the "Interest Shortfall" with respect to any Class of Certificates (other than the [Class A-P] Certificates) means generally any portion of the Interest Accrual Amount with respect to any previous Distribution Amount which remains unpaid (before giving effect to distributions made on such Distribution Date). For any Class of Certificates (other than the [Class A-P, Class A-X and Non-Offered Class B Certificates]), the "Certificate Rate" is the per annum rate of interest specified or described for such Class on the table on page S-3 hereof. The "Certificate Rate" for each Class of Non-Offered Class B Certificates is equal to [____]%. The "Certificate Rate" for the Class A-X Certificates will equal, with respect to each Distribution Date, [the weighted average, expressed as a percentage, of the Stripped Interest Rate on each Non-Discount Mortgage Loan as of the Due Date in the month preceding the month in which such Distribution Date occurs, weighted as the basis of the respective principal balances of the Non-Discount Mortgage Loans]. The "Class A-X Notional Amount" with respect to any Distribution Date will equal [the aggregate Scheduled Principal Balance of the Non-Discount Mortgage Loans]. The "Stripped Interest Rate" means for each Mortgage Loan, the excess, if any, of the Net Mortgage Rate for such Mortgage Loan over the Remittance Rate. The "Scheduled Principal Balance" of a Mortgage Loan as of any Distribution Date is the unpaid principal balance of such Mortgage Loan as specified in the amortization schedule at the time relating thereto (before any adjustment to such schedule by reason of bankruptcy or similar proceeding or any moratorium or similar waiver or grace period) as of the first day of the month preceding the month of such Distribution Date, after giving effect to any previously applied prepayments, the payment of principal due on such first day of the month and any reduction of the principal balance of such Mortgage Loan by a bankruptcy court, irrespective of any delinquency in payment by the related Mortgagor. [Interest will accrue on the Class A-5 and Class A-6 Certificates at their respective Certificate Rates during the calendar month preceding the month of the related Distribution Date (each such period, an "Interest Accrual Period"). Such Certificate Rates will be calculated as follows: (i) the Certificate Rate on the Class A-5 Certificates with respect to the first Distribution Date will be [______]%, and as to any Distribution Date thereafter, the Certificate Rate on the Class A-5 Certificates will equal the lesser of (A) [____]% plus LIBOR (as determined below) ("LIBOR") and (B) [____]%. (ii) the Certificate Rate on the Class A-6 Certificates with respect to the first Distribution Date will be [________]%, and as to any Distribution Date thereafter, the Certificate Rate on the Class A-6 Certificates will equal the lesser of (A) [_____]% minus the product of (x) [____] and (y) LIBOR, but not less than 0.00% and (B) [_____]%.] [Determination of LIBOR LIBOR for any Interest Accrual Period (other than the first Interest Accrual Period) after the initial Interest Accrual Period will be determined as described below. On each Distribution Date, LIBOR shall be established by the Servicer and as to any Interest Accrual Period (other than the first Interest Accrual Period), LIBOR will equal the rate for United States dollar deposits for one month which appears on the Dow Jones Telerate Screen Page 3750 as of 11:00 A.M., London time, on the second LIBOR Business Day (defined below) prior to the first day of such Interest Accrual Period (each such day, a "Rate Adjustment Date"). "Telerate Screen Page 3750" means the display designated as page 3750 on the Telerate Service (or such other page as may replace page 3750 on that service for the purpose of displaying London interbank offered rates of major banks). If such rate does not appear on such page (or such other page as may replace that page on that service, or if such service is no longer offered, such other service for displaying LIBOR or comparable rates as may be selected by the Servicer), the rate will be the Reference Bank Rate. The "Reference Bank Rate" will be determined on the basis of the rates at which deposits in the U.S. Dollars are offered by the reference banks (which shall be three major banks that are engaged in transactions in the London interbank market, selected by the Servicer) as of 11:00 A.M., London time, on the day that is two LIBOR Business Days prior to the first date of the related Interest Accrual Period to prime banks in the London interbank market for a period of one month in amounts approximately equal to the aggregate outstanding principal balance of the Class A-8 and Class A-11 Certificates. The Servicer will request the principal London office of each of the reference banks to provide a quotation of its rate. If at least two such quotations are provided, the rate will be the arithmetic mean of the quotations. If on such date fewer than two quotations are provided as requested, the rate will be the arithmetic mean of the rates quoted by one or more major banks in New York City, selected by the Servicer, as of 11:00 A.M., New York City time, on such date for loans in the U.S. Dollars to leading European banks for a period of one month in amounts approximately equal to the aggregate outstanding principal balance of the Class A-8 and Class A-11 Certificates. If no such quotations can be obtained, the rate will be LIBOR for the prior Distribution Date, or in the case of S-47 the first Rate Adjustment Date, 4.95%. "LIBOR Business Day" means any day other than (i) a Saturday or a Sunday or (ii) a day on which banking institutions in the city of London, England are required or authorized by law to be closed. The establishment of LIBOR by the Servicer and its subsequent calculation of the Certificate Rates applicable to the Class A-8 and Class A-11 Certificates for the relevant Interest Accrual Period, in the absence of manifest error, will be final and binding.] Principal (Including Prepayments) [Distribution to the Class A-P Certificates On each Distribution Date, the Class A-P Certificates will receive a portion of the Available Distribution Amount attributable to principal received on or with respect to any Discount Mortgage Loan equal to the amount of such principal so attributable multiplied by the PO Percentage with respect to such Discount Mortgage Loan. In addition, on each Distribution Date prior to and including the Credit Support Depletion Date, the Class A-P Certificates also will be allocated principal, to the extent of amounts available to pay the Subordinated Optimal Principal Amount (without regard to clause (2) of the definition of such term) on such Distribution Date, in an amount (the "Class A-P Shortfall Amount") generally equal to (i) the applicable PO Percentage of the principal portion of any Realized Loss with respect to a Discount Mortgage Loan other than an Excess Loss and (ii) the sum of amounts, if any, by which the amounts specified in clause (i) with respect to each prior Distribution Date exceeded the amount actually distributed in respect thereof on such prior Distribution Date and not subsequently distributed to the Class A-P Certificates; provided, however, that such payments in respect of the Class A-P Shortfall Amount will not cause a further reduction in the principal balance of the Class A-P Certificates. The aggregate of the amounts payable to the Class A-P Certificates described in this paragraph are referred to herein as the "Class A-P Certificates Distribution Amount." Allocation of the Non-PO Class A Optimal Principal Amount Except after the Credit Support Depletion Date, distributions in respect of principal will be made on each Distribution Date to the Non-PO Class A Certificates as described below. On each Distribution Date, the Non-PO Class A Optimal Principal Amount (defined herein) will be distributed to the Non-PO Class A Certificateholders as follows: [DESCRIBE PRINCIPAL PAYMENT METHODOLOGY] On any Distribution Date after the Credit Support Depletion Date, distributions among the Classes of Non-PO Class A Certificates then outstanding will be made pro rata in accordance with their respective outstanding principal balances and not in accordance with the priorities set forth above.] [The "Lockout Principal Distribution Amount" for any Distribution Date will equal the sum of (i) the Adjusted Lockout Percentage (defined below) of the applicable Non-PO Percentage of the principal portion of all Monthly Payments, whether or not received, which were due on the related Due Date on outstanding Mortgage Loans as of such Due Date, (ii) the Lockout Prepayment Percentage (defined below) of the applicable Non-PO Percentage of (A) the principal portion of principal prepayments, (B) the sum of the principal portion of all insurance proceeds, condemnation awards and any other cash proceeds from a source other than the Mortgagor, to the extent required to be deposited in the Collection Account, which were received during the related Principal Prepayment Period, net of related unreimbursed servicing advances and net of any portion hereof which, as to any Mortgage Loan, constitutes a late collection with respect to which an Advance has previously been made and (C) the principal portion of the purchase price thereof (net of amounts with respect to which a distribution has previously been made to the Non-PO Class A Certificateholders), in each case received during the related Principal Prepayment Period and (iii) with respect to any Distribution Date on or after the Distribution Date in [MONTH/YEAR], the Lockout Liquidation Amount (defined below).] [The "Adjusted Lockout Percentage" will equal (i) for any Distribution Date prior to the Distribution Date in [MONTH/YEAR], 0% and (ii) for any Distribution Date on or after the Distribution Date in [MONTH/YEAR], the Lockout Percentage.] [The "Lockout Percentage" for any Distribution Date will equal (A) the outstanding principal balance of the Class A-7 Certificates divided by (B) the Non-PO Allocated Amount, in each case immediately prior to the Distribution Date, but in no event will the Lockout Percentage exceed 100%. The Lockout Percentage as of the Cut-Off Date will be approximately - ---------%.] S-48 [The "Lockout Liquidation Amount" is, with respect to any Distribution Date on or after the Distribution Date in [MONTH/YEAR], the aggregate, for each Mortgage Loan which became a Liquidated Mortgage Loan during the calendar month preceding the month of such Distribution Date, of the lesser of (i) the Lockout Percentage of the applicable Non-PO Percentage of the outstanding principal balance of such Mortgage Loan and (ii) the Lockout Prepayment Percentage (defined below) on such Distribution Date of the Liquidation Principal with respect to such Mortgage Loan.] ["Liquidation Principal" is, with respect to each Mortgage Loan which has become a Liquidated Mortgage Loan during the related Principal Prepayment Period, an amount equal to the applicable Non-PO Percentage of the net liquidation proceeds, if any, with respect to such Liquidated Mortgage Loan (net of any unreimbursed Advances).] [The "Lockout Prepayment Percentage" will equal the product of (a) the Lockout Percentage and (b) the Step Down Percentage.] [The "Step Down Percentage" for any Distribution Date will be the percentage indicated below: Step Down Distribution Date Occurring in Percentage - ------------------------------ ---------- [MONTH/YEAR] through [MONTH/YEAR]..................................... 0% [MONTH/YEAR] through [MONTH/YEAR]..................................... 30% [MONTH/YEAR] through [MONTH/YEAR]..................................... 40% [MONTH/YEAR] through [MONTH/YEAR]..................................... 60% [MONTH/YEAR] through [MONTH/YEAR]..................................... 80% [MONTH/YEAR] and thereafter........................................... 100%] Principal distributions made on each Class of Certificates will be paid pro rata among the Certificates of such Class in accordance with their respective outstanding principal balances. The "Non-PO Class A Optimal Principal Amount" means generally as of any Distribution Date, an amount, not in excess of the Non-PO Class A Principal Balance equal to the sum of: (a) an amount equal to the Non-PO Class A Percentage of the applicable Non-PO Percentage of the principal portion of all Monthly Payments whether or not received, which were due on the related Due Date on outstanding Mortgage Loans as of such Due Date; (b) an amount equal to the Non-PO Class A Prepayment Percentage of the applicable Non-PO Percentage of all principal prepayments received during the related Principal Prepayment Period; (c) with respect to each Mortgage Loan not described in (d) below, an amount equal to the Non-PO Class A Percentage of the applicable Non-PO Percentage of the sum of the principal portion of all insurance proceeds, condemnation awards and any other cash proceeds from a source other than the Mortgagor, to the extent required to be deposited in the Collection Account, which were received during the related Principal Prepayment Period, net of related unreimbursed servicing advances and net of any portion thereof which, as to any Mortgage Loan, constitutes a late collection with respect to which an Advance has previously been made; (d) with respect to each Mortgage Loan which has become a Liquidated Mortgage Loan (defined below) during the related Principal Prepayment Period, an amount equal to the lesser of (i) the Non-PO Class A Percentage of the applicable Non-PO Percentage of an amount equal to the principal balance of such Mortgage Loan (net of Advances with respect to principal) as of the Due Date immediately preceding the date on which it became a Liquidated Mortgage Loan and (ii) the Non-PO Class A Prepayment Percentage of the applicable Non-PO Percentage of the net liquidation proceeds, if any, with respect to such Liquidated Mortgage Loan (net of any unreimbursed Advances); (e) with respect to each Mortgage Loan repurchased during the related Principal Prepayment Period, an amount equal to the Non-PO Class A Prepayment Percentage of the applicable Non-PO Percentage of the principal portion of the purchase price thereof (net of amounts with respect to which a distribution has previously been made to the Non-PO Class A Certificateholders); and (f) while none of the Subordinated Certificates remains outstanding, the excess of the outstanding principal balance of the Non-PO Class A Certificates (calculated after giving effect to reductions thereof on such Distribution Date with respect to amounts described in (a)-(e) above) over the Non-PO Allocated Amount (defined below). A "Liquidated Mortgage Loan" is a Mortgage Loan as to which the Servicer has determined that all amounts which it expects to recover from or on account of such Mortgage Loan, whether from insurance proceeds, liquidation proceeds or otherwise, have been recovered. As of any Distribution Date, the "Non-PO Class A Percentage" will equal a fraction, expressed as a percentage, the numerator of which is the Non-PO Class A Principal Balance and the denominator of which is the Non-PO Allocated Amount immediately prior to the Due Date in the month of such Distribution Date. The "Non-PO Allocated Amount" will be calculated as of any date by (i) multiplying the outstanding principal balance of each Mortgage Loan as of such date (giving effect to any Advances but prior to giving effect to any principal S-49 prepayments received with respect to such Mortgage Loan that have not been passed through to the Certificateholders) by the Non-PO Percentage with respect to such Mortgage Loan and (ii) summing the results. The "Non-PO Class A Principal Balance" means, generally, as of any Distribution Date, (a) the Non-PO Class A Principal Balance for the preceding Distribution Date less (b) amounts distributed to the Non-PO Class A Certificateholders on such preceding Distribution Date allocable to principal (including Advances) and any losses allocated to the Non-PO Class A Certificates; provided that the Non-PO Class A Principal Balance on the first Distribution Date will be the initial Non-PO Class A Principal Balance, which is expected to be approximately [_________]. The "Non-PO Class A Prepayment Percentage" means, generally, as of any Distribution Date up to and including the Distribution Date in [MONTH/YEAR], 100%; as of any Distribution Date in the first year thereafter, the Non-PO Class A Percentage plus [___]% of the Subordinated Percentage for such Distribution Date; as of any Distribution Date in the second year thereafter, the Non-PO Class A Percentage plus [__]% of the Subordinated Percentage for such Distribution Date; as of any Distribution Date in the third year thereafter, the Non-PO Class A Percentage plus [__]% of the Subordinated Percentage for such Distribution Date; as of any Distribution Date in the fourth year thereafter, the Non-PO Class A Percentage plus [__]% of the Subordinated Percentage for such Distribution Date; and as of any Distribution Date after the fourth year thereafter, the Non-PO Class A Percentage; provided that, if the Non-PO Class A Percentage as of any such Distribution Date is greater than the initial Non-PO Class A Percentage, the Non-PO Class A Prepayment Percentage shall be 100%; and provided further, however, that no reduction of the Non-PO Class A Prepayment Percentage below the level in effect for the most recent period shall occur with respect to any Distribution Date unless, as of the last day of the month preceding such Distribution Date, (i) the aggregate outstanding principal balance of Mortgage Loans delinquent 60 days or more (including for this purpose any Mortgage Loans in foreclosure and Mortgage Loans with respect to which the related Mortgaged Property has been acquired by the Trust Fund) does not exceed [__]% of the aggregate principal balance of the Subordinated Certificates as of such date and (ii) cumulative Realized Losses do not exceed (a) [__]% of the aggregate principal balance of the Subordinated Certificates as of the date of issuance of the Certificates (the "Original Subordinated Principal Balance") if such Distribution Date occurs in the year beginning with and including the fifth anniversary of the first Distribution Date, (b) [__]% of the Original Subordinated Principal Balance if such Distribution Date occurs in the year beginning with and including the sixth anniversary of the first Distribution Date, (c) [__]% of the Original Subordinated Principal Balance if such Distribution Date occurs in the year beginning with and including the seventh anniversary of the first Distribution Date, (d) [__]% of the Original Subordinated Principal Balance if such Distribution Date occurs in the year beginning with and including the eighth anniversary of the first Distribution Date, and (e) [__]% of the Original Subordinated Principal Balance if such Distribution Date occurs in the year beginning with and including the ninth anniversary of the first Distribution Date and thereafter. As of any Distribution Date, the "Subordinated Percentage" means the difference between 100% and the Non-PO Class A Percentage, and the "Subordinated Prepayment Percentage" means the difference between 100% and the Non-PO Class A Prepayment Percentage. Allocation of the Subordinated Optimal Principal Amount On each Distribution Date, distributions in respect of principal will be made to each Class of Subordinated Certificates up to an amount equal to the portion of the Subordinated Optimal Principal Amount (defined below) allocable to such Class, calculated as described below. The "Subordinated Optimal Principal Amount" means generally as of any Distribution Date, an amount, not in excess of the aggregate outstanding principal balance of the Subordinated Certificates, equal to (1) the sum of: (a) an amount equal to the Subordinated Percentage of the applicable Non-PO Percentage of the principal portion of all Monthly Payments whether or not received, which were due on the related Due Date on outstanding Mortgage Loans as of such Due Date; (b) an amount equal to the Subordinated Prepayment Percentage of the applicable Non-PO Percentage of all principal prepayments received during the related Principal Prepayment Period; (c) with respect to each Mortgage Loan not described in (d) below, an amount equal to the Subordinated Percentage of the applicable Non-PO Percentage of the sum of the principal portion of all insurance proceeds, condemnation awards and any other cash proceeds from a source other than the Mortgagor, to the extent required to be deposited in the Collection Account, which were received during the related Principal Prepayment Period, net of related unreimbursed servicing advances and net of any portion thereof which, as to any Mortgage Loan, constitutes a late collection with respect to which an Advance has previously been made; (d) with respect to each Mortgage Loan which has become a Liquidated Mortgage Loan during the related Principal Prepayment Period, an amount equal to the portion (if any) of the net liquidation proceeds with respect to such Liquidated Mortgage Loan (net of any unreimbursed Advances) that was not included in the Class A-P Distribution Amount or the Non-PO Class A Optimal Principal Amount with respect to such Distribution Date; and (e) with respect to each Mortgage Loan repurchased during the related Principal Prepayment Period, an amount equal to the Subordinated Prepayment Percentage of the applicable Non-PO Percentage of the principal portion of the S-50 purchase price thereof (net of amounts with respect to which a distribution has previously been made to the Subordinated Certificateholders), minus (2) the Class A-P Shortfall Amount with respect to such Distribution Date. On each Distribution Date, the Subordinated Optimal Principal Amount will be allocated among the outstanding Classes of Subordinated Certificates entitled to receive distributions in respect thereof on such Distribution Date, as described in the second succeeding sentence. Each such Class will be allocated its pro rata portion of the Subordinated Optimal Principal Amount based upon the outstanding principal balances of all Classes of Subordinated Certificates entitled to distributions in respect of the Subordinated Optimal Principal Amount on such Distribution Date. On each Distribution Date, the Subordinated Optimal Principal Amount will be allocated among the following Classes of Certificates: (i) any Class of Subordinated Certificates which has current Credit Support (defined herein) (before giving effect to any distribution of principal thereon on such Distribution Date) greater than or equal to the original Credit Support for such Class; (ii) the Class of Subordinated Certificates having the lowest numerical class designation of any outstanding Class of Subordinated Certificates which does not meet the criteria in (i) above; and (iii) the Class B-5 Certificates if all other outstanding Classes of Subordinated Certificates meet the criteria in (i) above or if no other Class of Subordinated Certificates is outstanding; provided, however, that no Class of Subordinated Certificates will receive any distribution in respect of the Subordinated Optimal Principal Amount on any Distribution Date if on such Distribution Date any Class of Subordinated Certificates having a lower numerical class designation than such Class fails to meet the criteria in (i) above. For the purposes of (ii) above, the Class M Certificates will be deemed to have a lower numerical class designation than each Class of Class B Certificates. Each Class of Subordinated Certificates (other than the Class B-5 Certificates) will have the benefit of a level of credit support, expressed as a percentage of the aggregate outstanding principal balance of the Certificates ("Credit Support"). Credit Support for such Classes of Certificates will equal in each case the percentage obtained by dividing the aggregate outstanding principal balance of all Classes of Subordinated Certificates having higher numerical class designations than such Class by the aggregate outstanding principal balance of all outstanding Classes of Certificates (exclusive of the outstanding principal balance of Class A-P Certificates) (for this purpose, the Class M Certificates shall be deemed to have a lower numerical class designation than each Class of Class B Certificates). Generally, the level of Credit Support for any Class will decrease to the extent Realized Losses are allocated to any Class of Subordinated Certificates having a higher numerical class designation and will increase to the extent that any Class or Classes of Certificates not subordinated to such Class receives a disproportionate portion of payments (including prepayments) of principal on the Mortgage Loans. Additional Rights of the Class A-R Certificateholder The Class A-R Certificate will remain outstanding for so long as the Trust Fund shall exist, whether or not such Certificate is receiving current distributions of principal or interest. In addition to distributions of principal and interest distributable as described under "Distributions on the Certificateholders," the holder of the Class A-R Certificate will be entitled to receive (i) the amounts, if any, of the Available Distribution Amount remaining in the Certificate Account on any Distribution Date after distributions of principal and interest on the Certificates on such date and (ii) the proceeds of the assets of the Trust Fund, if any, remaining in the Trust Fund on the final Distribution Date for the Certificates, after distributions in respect of any accrued and unpaid interest on such Certificates, and after distributions in respect of principal have reduced the Certificate Principal Balances of the Certificates to zero. It is not anticipated that there will be any material assets remaining in the Trust Fund at any such time or that any material distributions will be made with respect to the Class A-R Certificate at any time. See "Federal Income Tax Consequences--Residual Certificates" in the Prospectus. Subordinated Certificates and Shifting Interests The rights of the Class M Certificateholders to receive distributions with respect to the Mortgage Loans will be subordinated to the rights of the Class A Certificateholders and the rights of the holders of each Class of Class B Certificates to receive distributions with respect to the Mortgage Loans will be subordinated to the rights of the holders of the Class A Certificates, the Class M Certificates, and each Class of Class B Certificates having a lower numerical class designation than such Class of Class B Certificates, each to the extent described below. The subordination provided by the Class M and Class B Certificates is intended to enhance the likelihood of regular receipt by the Class A Certificateholders of the full amount of monthly distributions due them and to protect the Class A Certificateholders against losses. The subordination provided by each Class of Class B Certificates is intended to enhance the likelihood of regular receipt by the holders of the Class A Certificates, the Class M Certificates, and each Class of Class B Certificates having a lower numerical class designation than such Class of Class B Certificates of the full amount of monthly distributions due them and to protect such Certificateholders against losses. On each Distribution Date payments to the Class A Certificateholders will be made prior to payments to the Class M and Class B Certificateholders, payments to the Class M Certificateholders will be made prior to payments to the Class B Certificateholders, payments to the Class B-1 Certificateholders will be S-51 made prior to payments to the Class B-2 Certificateholders and the Non-Offered Class B Certificateholders and payments to the Class B-2 Certificateholders will be made prior to payments to the Non-Offered Class B Certificateholders. If on any Distribution Date on which the aggregate outstanding principal balance of the Class M and Class B Certificates is greater than zero the Non-PO Class A Certificateholders are paid less than the Non-PO Class A Optimal Principal Amount for such date, the interest of the Non-PO Class A Certificateholders in the Trust Fund will vary so as to preserve the entitlement of the Non-PO Class A Certificateholders to unpaid principal of the Mortgage Loans and interest thereon. This may have the effect of increasing the proportionate interest of the Non-PO Class A Certificateholders in the Trust Fund. The Non-PO Class A Certificateholders will be entitled to receive the Non-PO Class A Prepayment Percentage of the applicable Non-PO Percentage of the amount of principal prepayments and certain other unscheduled amounts of principal received on the Mortgage Loans as described above. This will have the effect of initially accelerating principal payments to the Non-PO Class A Certificateholders and reducing their proportionate interest in the Trust Fund and correspondingly increasing (in the absence of offsetting Realized Losses) the Credit Support of each Class of Subordinated Certificates having Credit Support. See "Description of the Certificates--Distributions to Certificateholders; and Principal (Including Prepayments) herein." Increasing the interest of the Class M and Class B Certificates in the Trust Fund relative to that of the Class A Certificates is intended to preserve the availability of the benefits of the subordination provided by the Class M and Class B Certificates. All Realized Losses on the Mortgage Loans (other than Excess Losses (defined below)) generally will be allocated first, to the Non-Offered Class B Certificates until the principal balance of the Non-Offered Class B Certificates has been reduced to zero; second, to the Class B-2 Certificates until the principal balance of the Class B-2 Certificates has been reduced to zero; third, to the Class B-1 Certificates until the principal balance of the Class B-1 Certificates has been reduced to zero; fourth, to the Class M Certificates until the principal balance of the Class M Certificates has been reduced to zero; and fifth, to the Non-PO Class A Certificates pro rata based upon their respective outstanding principal balances until the principal balance of the Non-PO Class A Certificates has been reduced to zero; provided, however, that if a Realized Loss occurs with respect to a Discount Mortgage Loan (A) the amount of such Realized Loss equal to the product of (i) the amount of such Realized Loss and (ii) the PO Percentage with respect to such Discount Mortgage Loan will be allocated to the Class A-P Certificates and (B) the remainder of such Realized Loss will be allocated as described above. A "Realized Loss" is generally the amount, if any, with respect to any defaulted Mortgage Loan which has been liquidated in accordance with the Agreement, by which the unpaid principal balance and accrued interest thereon at a rate equal to the Net Mortgage Rate exceeds the amount actually recovered by the Servicer with respect thereto (net of reimbursement of certain expenses) at the time such defaulted Mortgage Loan was liquidated. Excess Fraud Losses, Excess Bankruptcy Losses and Excess Special Hazard Losses (collectively, "Excess Losses") will be allocated to all Classes pro rata based upon their respective outstanding principal balances; provided, however, that the applicable PO Percentage of any Excess Losses on the Discount Mortgage Loans will be allocated to the Class A-P Certificates. The aggregate amount of Realized Losses that may be allocated in connection with Special Hazard Losses (defined below) on the Mortgage Loans (the "Special Hazard Amount") to the Subordinated Certificates will initially be equal to approximately $[_________]. As of each anniversary of the Cut-off Date, the Special Hazard Amount generally will be reduced, but not increased, to an amount equal to the lesser of (i) the Special Hazard Amount as of the previous anniversary of the Cut-off Date less the sum of all amounts allocated to the Certificates in respect of Special Hazard Losses on the Mortgage Loans since such previous anniversary or (ii) the Adjustment Amount. The "Adjustment Amount" with respect to each anniversary of the Cut-off Date will be equal to the greatest of (i) [____]% multiplied by the aggregate outstanding principal balance of the Mortgage Loans, (ii) the aggregate outstanding principal balance of the Mortgage Loans secured by Mortgaged Properties located in the [California] postal zip code area in which the highest percentage of the Mortgage Loans are located and (iii) twice the outstanding principal balance of the Mortgage Loan having the largest outstanding principal balance, in each case as of such anniversary of the Cut-off Date. A "Special Hazard Loss" is a loss incurred in respect of any defaulted Mortgage Loan as a result of direct physical loss or damage to the Mortgaged Property, which is not insured against under the standard hazard insurance policy or blanket policy insuring against hazard losses which the Servicer is required to cause to be maintained on each Mortgage Loan. See "Servicing of the Mortgage Loans-Hazard Insurance" in the Prospectus. "Excess Special Hazard Losses" are Special Hazard Losses in excess of the Special Hazard Amount. The aggregate amount of Realized Losses incurred on defaulted Mortgage Loans as to which there was fraud in the origination of such Mortgage Loan ("Fraud Losses") which may be allocated to the Subordinated Certificates (the "Fraud Loss Amount") will initially be equal to approximately $[_________]. As of any date of determination after the Cut-off Date, the Fraud Loss Amount generally will be equal to (X) prior to the first anniversary of the Cut-off Date an amount equal to [____]% of S-52 the aggregate principal balance of all of the Mortgage Loans as of the Cut-off Date minus the aggregate amounts allocated to the Certificates with respect to Fraud Losses on the Mortgage Loans up to such date of determination and (Y) from the first to the fifth anniversary of the Cut-off Date, an amount equal to (1) [____]% of the aggregate principal balance of all of the Mortgage Loans as of the most recent anniversary of the Cut-off Date minus (2) the aggregate amounts allocated to the Certificates with respect to Fraud Losses on the Mortgage Loans since the most recent anniversary of the Cut-off Date up to such date of determination. On and after the fifth anniversary of the Cut-off Date, the Fraud Loss Amount will be zero. "Excess Fraud Losses" are Fraud Losses in excess of the Fraud Loss Amount. The aggregate amount of Realized Losses which may be allocated in connection with Bankruptcy Losses on the Mortgage Loans (the "Bankruptcy Amount") to the Subordinate Certificates will initially be equal to approximately $[______]. As of any date of determination, the Bankruptcy Amount will equal approximately $[______] less the sum of any amounts allocated to the Certificates for such losses up to such date of determination. A "Bankruptcy Loss" is a Deficient Valuation or a Debt Service Reduction. With respect to any Mortgage Loan, a "Deficient Valuation" is 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, which valuation results from a proceeding initiated under the United States Bankruptcy Code. A "Debt Service Reduction" is any reduction in the amount which a mortgagor is obligated to pay on a monthly basis with respect to a Mortgage Loan as a result of any proceeding initiated under the United States Bankruptcy Code, other than a reduction attributable to a Deficient Valuation. S-53 "Excess Bankruptcy Losses" are Bankruptcy Losses in excess of the Bankruptcy Amount. Amounts actually paid at any time to the Class M and Class B Certificateholders in accordance with the terms of the Agreement will not be subsequently recoverable from the Class M and Class B Certificateholders. FEDERAL INCOME TAX CONSIDERATIONS The Seller intends to cause an election to be made to treat the assets of the Trust Fund as a real estate mortgage investment conduit (a "REMIC") for federal income tax purposes. The Offered Certificates (other than the Class A-R Certificate) will constitute "regular interests" in the REMIC. The Class A-R Certificate will represent the "residual interest" in the REMIC. All Certificateholders will be required to use the accrual method of accounting with respect to interest income on the Certificates, regardless of their normal method of accounting. Holders of Offered Certificates that have original issue discount will be required to include amounts in income with respect to such Certificates in advance of the receipt of cash attributable to such income. It is anticipated that the Class ______________ Certificates will be issued with original issue discount for federal income tax purposes. It is also anticipated that the Class ____________________ Certificates will be issued at a premium, and that the Class ___________ Certificates will be issued with de minimis original issue discount for federal income tax purposes. The prepayment assumption that will be used in computing the amount and rate of accrual of original issue discount includible periodically will be [___]% of the Prepayment Model set forth herein. See "Prepayment and Yield Considerations." No representation is made that payments on the Offered Certificates will occur at that rate or any other rate. The Offered Certificates will be treated as (i) assets described in section 7701(a)(19)(C) of the Code and (ii) "real estate assets" within the meaning of section 856(c)(5)(B) of the Code, in each case to the extent described herein and in the Prospectus. Interest on the Offered Certificates will be treated as "interest on obligations secured by mortgages on real property" within the meaning of section 856(c)(3)(B) of the Code to the same extent that the Offered Certificates are treated as "real estate assets" within the meaning of section 856(c)(5)(B) of the Code. Class A-R Certificate The holder of the Class A-R Certificate must include the taxable income or loss of the REMIC in determining its federal taxable income. The Class A-R Certificate will remain outstanding for federal income tax purposes until there are no Certificates of any other Class outstanding. Prospective investors are cautioned that the Class A-R Certificateholder's REMIC taxable income and the tax liability thereon may exceed, and may substantially exceed, cash distributions to such holder during certain periods, in which event, the holder thereof must have sufficient alternative sources of funds to pay such tax liability. Furthermore, it is anticipated that all or a substantial portion of the taxable income of the REMIC includible by the holder of the Class A-R Certificate will be treated as "excess inclusion" income, resulting in (i) the inability of such holder to use net operating losses to offset such income from the REMIC, (ii) the treatment of such income as "unrelated business taxable income" to certain holders who are otherwise tax-exempt, and (iii) the treatment of such income as subject to 30% withholding tax to certain non-U.S. investors, with no exemption or treaty reduction. The Class A-R Certificate will be considered a "noneconomic residual interest," with the result that transfers thereof would be disregarded for federal income tax purposes if any significant purpose of the transferor was to impede the assessment or collection of tax. Accordingly, the transferee affidavit used for transfer of the Class A-R Certificate will require the transferee to affirm that it (i) historically has paid its debts as they have come due and intends to do so in the future, (ii) understands that it may incur tax liabilities with respect to the Class A-R Certificate in excess of cash flows generated thereby, (iii) intends to pay taxes associated with holding the Class A-R Certificate as such taxes become due and (iv) will not transfer the Class A-R Certificate to any person or entity that does not provide a similar affidavit. The transferor must certify in writing to the Trustee that, as of the date of the transfer, it had no knowledge or reason to know that the affirmations made by the transferee pursuant to the preceding sentence were false. Additionally, the Class A-R Certificate generally may not be transferred to certain persons who are not U.S. Persons (as defined herein). See "Description of the Certificates --Restrictions on Transfer of the Class A-R, Class M and Offered Class B Certificates" herein and "Federal Income Tax Consequences --REMIC Certificates;--Income from Residual Certificates; Taxation of Certain Foreign Investors;--Transfers of Residual Certificates" in the Prospectus. An individual, trust or estate that holds the Class A-R Certificate (whether such Certificate is held directly or indirectly through certain pass-through entities) also may have additional gross income with respect to, but may be subject to limitations on the deductibility of, Servicing Fees on the Mortgage Loans and other administrative expenses of the Trust Fund in computing such holder's regular tax liability, and may not be able to deduct such fees or expenses to any extent in computing such holder's alternative minimum tax liability. In addition, some portion of a purchaser's basis, if any, in the Class A-R Certificate may not be recovered until termination of the Trust Fund. Furthermore, the federal income tax consequences of any consideration paid to a S-54 transferee on a transfer of the Class A-R Certificate are unclear. The preamble to the REMIC Regulations indicates that the Internal Revenue Service anticipates providing guidance with respect to the federal tax treatment of such consideration. Any transferee receiving consideration with respect to the Class A-R Certificate should consult its tax advisors. Due to the special tax treatment of residual interests, the effective after-tax return of the Class A-R Certificate may be significantly lower than would be the case if the Class A-R Certificate were taxed as a debt instrument, or may be negative. For further information regarding the federal income tax consequences of investing in the Offered Certificates, see "Certain Federal Income Tax Consequences" in the Prospectus. ERISA CONSIDERATIONS A fiduciary of an employee benefit plan subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or section 4975 of the Code, including an individual retirement account (each, a "Plan"), or any other person investing "plan assets" of any Plan, should carefully review with its legal advisors whether the purchase or holding of Class A Certificates could give rise to a transaction prohibited or not otherwise permissible under ERISA or the Code. See "ERISA Considerations" in the Prospectus. The Class A-R Certificate may not be purchased by or transferred to a Plan or any other person investing "plan assets" of any Plan. Accordingly, the following discussion does not purport to discuss any considerations under ERISA with respect to the purchase, acquisition or resale of the Class A-R Certificate and for purposes of the following discussion all references to the Offered Certificates are deemed to exclude the Class A-R Certificate. The U.S. Department of Labor ("DOL") has issued Prohibited Transaction Class Exemption 83-1 ("PTCE 83-1") exempting certain transactions involving mortgage pool investment entities holding mortgages on certain residential property from the prohibited transaction provisions of ERISA and the Code. See "ERISA Considerations" in the Prospectus for a discussion of PTCE 83-1 and the prohibited transaction provisions of ERISA and the Code. Prohibited Transaction Exemption _____, __ Fed. Reg. _____ [DATE] granted by the DOL [UNDERWRITER] (the "Exemption"), exempts the purchase and holding of the Class A Certificates by or with "plan assets" of a Plan from certain of the prohibited transaction provisions of section 406(a) of ERISA (and the excise taxes imposed by section 4975(c)(1)(A) of the Code) provided that certain conditions are met. Among the conditions are the following: (i) the Underwriter is the sole underwriter, or the manager or co-manager of the underwriting syndicate for such Class A Certificates, (ii) the Class A Certificates are rated in one of the three highest generic rating categories by Standard & Poor's, a division of The McGraw-Hill Companies, Inc., Moody's Investors Service, Inc. ("Moody's"), Duff & Phelps Credit Rating Co. ("DCR") or Fitch IBCA, Inc., (iii) the Class A Certificates are collateralized by, among other things, obligations that bear interest or are purchased at a discount and which are secured by single-family residential, multifamily residential or commercial real property (including obligations secured by leasehold interests on commercial real property), or fractional undivided interests in such obligations, (iv) the Class A Certificates are not subordinated to other Certificates of the Trust Fund, (v) the Plan is an "accredited investor" (as defined under Rule 501(a)(1) of Regulation D under the Securities Act of 1933, as amended (the "Act")), (vi) the acquisition of the Class A Certificates by a Plan is on terms that are at least as favorable to the Plan as they would be in an arm's length transaction with an unrelated third party, and (vii) the compensation to the Underwriter represents reasonable compensation, the proceeds to the Seller represent no more than the fair market value of the obligations securing such Class A Certificates and the sum of all payments made to and retained by the Servicer represents not more than reasonable compensation for the Servicer's services under the Agreement and reimbursement of the Servicer's reasonable expenses in connection therewith. The Underwriter expects that the Class A Certificates will satisfy the conditions of the Exemption set forth above in clauses (i), (iii), (iv) and (vii). Whether the remaining conditions of the Exemption will be satisfied with respect to the Class A Certificates will depend on the circumstances at the time "plan assets" of a Plan are used to acquire such Certificates. In that connection, the Class A Certificates will, on the date of their original issue, satisfy the condition set forth in clause (ii). In addition, if certain additional conditions specified in the Exemption are met, the Exemption would provide an exemption from the prohibited transaction provisions of ERISA section 406(b) (and the excise taxes imposed by section 4975(c)(1)(E) of the Code) relating to possible self-dealing transactions by fiduciaries who have discretionary authority, or render investment advice, with respect to assets of Plans used to purchase Class A Certificates where the fiduciary (or its affiliate) is an obligor on the obligations or receivables held in the Trust Fund. The Exemption would not apply to certain otherwise prohibited transactions with respect to Plans sponsored by the following entities (or any affiliate of any such entity): (a) the Seller, (b) [UNDERWRITER], (c) the Trustee, (d) the Servicer or (e) any obligor with respect to obligations or receivables included in the Seller constituting more than five percent of the aggregate unamortized principal balance of the assets in the Seller. Before purchasing a Class A Certificate, a fiduciary of a Plan or any other person investing "plan assets" of any Plan, should itself confirm that (a) the Class A Certificates constitute "certificates" for the purposes of the Exemption and (b) that the S-55 specific and general conditions set forth in the Exemption would be satisfied. In addition to making its own determination as to the availability of the exemptive relief provided in the Exemption, the fiduciary or other Plan investor should consider its general fiduciary obligations under ERISA in determining whether to purchase a Certificate on behalf or with "plan assets" of a Plan. Neither the Exemption nor PTCE 83-1 will apply to the Class M, the Class B-1 or the Class B-2 Certificates; therefore, the purchase or holding of a Class M, a Class B-1 or a Class B-2 Certificate by or with "plan assets" of a Plan may result in prohibited transactions or the imposition of excise taxes or civil penalties. Accordingly, transfer of the Class M, Class B-1 or Class B-2 Certificates will not be made unless the transferee (i) executes a representation letter in form and substance satisfactory to the Trustee and the Seller stating that (a) it is not, and is not acting on behalf of, any such Plan or using the "plan assets" of any such Plan to effect such purchase or (b) if it is an insurance company, that the source of funds used to purchase the Class M, Class B-1 or Class B-2 Certificates is an "insurance company general account" (as such term is defined in Section V(e) of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60"), 60 Fed. Reg. 35925 (July 12, 1995) and the terms and conditions of Section III of PTCE 95-60 applicable to the acquisition and holding of such certificates will be met or (ii) provides an opinion of counsel in form and substance satisfactory to the Trustee and the Seller that the purchase or holding of the Class M, Class B-1 or Class B-2 Certificates by or on behalf of such Plan will not result in the assets of the Trust Fund being deemed to be "plan assets" and subject to the prohibited transaction provisions of ERISA and the Code and will not subject the Seller, the Servicer or the Trustee to any obligation in addition to those undertaken in the Agreement. The Class M, Class B-1 and Class B-2 Certificates will contain a legend describing such restrictions on transfer and the Agreement will provide that any attempted or purported transfer in violation of these transfer restrictions will be null and void and will vest no rights in any purported transferee. Prospective Plan investors should consult with their legal advisors concerning the impact of ERISA and the Code, the applicability of PTCE 83-1, the Exemption or other exemptions, and the potential consequences to their specific circumstances prior to making an investment in the Class A Certificates. Moreover, each Plan fiduciary should determine whether under the general fiduciary standards of investment procedure and diversification an investment in the Class A Certificates is appropriate for the Plan, taking into account the overall investment policy of the Plan and the composition of the Plan's investment portfolio. The sale of Certificates to a Plan is in no respect a representation by the Seller or the Underwriter that this investment meets all relevant legal requirements with respect to investments by Plans generally or by any particular Plan, or that this investment is appropriate for Plans generally or for any particular Plan. LEGAL INVESTMENT MATTERS [The Class A and Class M Certificates offered hereby will constitute "mortgage related securities" for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended ("SMMEA"), for so long as they are rated in one of the two highest rating categories by at least one nationally recognized statistical rating organization and, as such, will be legal investments for certain entities to the extent provided in SMMEA. However, institutions subject to the jurisdiction of the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, the National Credit Union Administration or federal or state banking, insurance or other regulatory authorities should review applicable rules, supervisory policies and guidelines, since certain restrictions may apply to investments in such classes. It should also be noted that certain states have enacted legislation limiting to varying extents the ability of certain entities (in particular insurance companies) to invest in mortgage related securities. Investors should consult with their own legal advisors in determining whether, and to what extent the Class A and Class M Certificates constitute legal investments for such investors. See "Legal Investment Matters" in the Prospectus. The Class B-1 and Class B-2 Certificates will not constitute "mortgage related securities" under SMMEA. The appropriate characterization of the Class B-1 and Class B-2 Certificates under various legal investment restrictions, and thus the ability of investors subject to these restrictions to purchase Class B-1 and Class B-2 Certificates, may be subject to significant interpretive uncertainties. All investors whose investment authority is subject to legal restrictions should consult their own legal advisors to determine whether, and to what extent, the Class B-1 and Class B-2 Certificates will constitute legal investments for them. Except as to the status of the Class A and Class M Certificates as "mortgage related securities," no representations are made as to the proper characterization of the Offered Certificates for legal investment or financial institution regulatory purposes, or other purposes, or as to the ability of particular investors to purchase the Offered Certificates under applicable legal investment restrictions. The uncertainties described above (and any unfavorable future determinations concerning legal investment or financial institution regulatory characteristics of the Offered Certificates) may adversely affect the liquidity of the Offered Certificates.] S-56 USE OF PROCEEDS Substantially all of the net proceeds to be received from the sale of the Offered Certificates will be applied by the Seller to the purchase price of the Mortgage Loans. UNDERWRITING Subject to the terms and conditions of the underwriting agreement dated [DATE] and the terms agreement, dated [DATE] (together, the "Underwriting Agreement") between the Seller and [UNDERWRITER], as underwriter (the "Underwriter"), the Offered Certificates are being purchased from the Seller by the Underwriter. The Underwriting Agreement provides that the Underwriter's obligations thereunder are subject to certain conditions precedent. The Underwriter is committed to purchase all of the Offered Certificates if any such Certificates are purchased. The Underwriter has advised the Seller that it proposes to offer the Offered Certificates purchased by the Underwriter, from time to time in one or more negotiated transactions, or otherwise, at varying prices to be determined, in each case, at the time of sale. The Underwriter may effect such transactions by selling the Offered Certificates purchased by the Underwriter to or through dealers, and such dealers may receive from such Underwriter, for whom they act as agents, compensation in the form of underwriting discounts, concessions or commissions. The Underwriter and any dealers that participate with the Underwriter in the distribution of the Offered Certificates may be deemed to be underwriters, and any discounts, concessions or commissions received by them, and any profit on the resale of the Offered Certificates by them, may be deemed to be underwriting discounts and commissions under the Act. The Underwriting Agreement provides that the Seller will indemnify the Underwriter against certain civil liabilities, including liabilities under the Act. S-57 LEGAL MATTERS Certain legal matters will be passed upon for the Seller by Morgan, Lewis & Bockius LLP, New York, New York and for the Underwriter by _________________. The material federal income tax consequences of the Certificates will be passed upon for the Seller by Morgan, Lewis & Bockius LLP. RATINGS It is a condition to the issuance of the Offered Certificates that the Class A Certificates be rated ["AAA" by each of [RATING AGENCY] and [RATING AGENCY], and that the Class M, Class B-1 and Class B-2 Certificates be rated at least "AA", "A" and "BBB", respectively, by [RATING AGENCY]. The ratings of [RATING AGENCY] on mortgage pass-through certificates address [the likelihood of the receipt by Certificateholders of all distributions to which such Certificateholders are entitled. [RATING AGENCY] rating opinions address the structural and legal issues and tax-related aspects associated with the Certificates, including the nature of the underlying mortgage loans. [RATING AGENCY] ratings on pass-through certificates do not represent any assessment of the likelihood that principal prepayments may differ from those originally anticipated nor do they address the possibility that, as a result of principal prepayments, Certificateholders may receive a lower than anticipated yield.] The ratings by [RATING AGENCY] assigned to the Offered Certificates [do not constitute a recommendation to purchase or sell such Certificates. Rather, they are an indication of the likelihood of the payment of principal and interest as set forth in the transaction documentation. The ratings do not address the effect on the Offered Certificates' yield attributable to prepayments or recoveries on the underlying Mortgage Loans. Further the ratings on the [Class A-X] Certificates do not address whether investors will recoup their initial investment. Additionally, the rating on the Class A-R Certificates addresses only the return of the Class A-R Certificate's principal balance and interest thereon at the stated rate. The ratings on the Class A-P certificates do not assess the likelihood of return to investors except to the extent of the principal balance thereof.] The ratings of the Offered Certificates should be evaluated independently from similar ratings on other types of securities. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency. The Seller has not requested a rating of the Offered Certificates by any rating agency other than [RATING AGENCY] and [RATING AGENCY] and the Seller has not provided information relating to the Certificates offered hereby or the Mortgage Loans to any rating agency other than [RATING AGENCY] and [RATING AGENCY]. However, there can be no assurance as to whether any other rating agency will rate the Offered Certificates or, if another rating agency rates such Certificates, what rating would be assigned to such Certificates by such rating agency. Any such unsolicited rating assigned by another rating agency to the Offered Certificates may be lower than the rating assigned to such Certificates by either, or both, of [RATING AGENCY] and [RATING AGENCY]. S-58 INDEX OF DEFINED TERMS Accounts ...................................................................S-__ Act ........................................................................S-__ Adjusted Lockout Percentage.................................................S-__ Agreement ..................................................................S-__ Available Distribution Amount...............................................S-__ Bankruptcy Amount ..........................................................S-__ Bankruptcy Loss ..........................................................S-__ Book-Entry Certificates.....................................................S-__ Cede .......................................................................S-__ Certificate Account.........................................................S-__ Certificate Owner ..........................................................S-__ Certificate Rate ..........................................................S-__ Certificateholders..........................................................S-__ Chase ......................................................................S-__ Chase Manhattan Mortgage....................................................S-__ Class A Certificates........................................................S-__ Class A Percentage..........................................................S-__ Class A-X Notional Amount...................................................S-__ Class B Certificates........................................................S-__ Class B-1 Percentage........................................................S-__ Class B-2 Percentage........................................................S-__ Class M Percentage..........................................................S-__ Code .......................................................................S-__ Collection Account..........................................................S-__ Corporate Trust Office......................................................S-__ Credit Scores...............................................................S-__ Credit Support .............................................................S-__ Credit Support Depletion Date...............................................S-__ Cut-off Date ...............................................................S-__ DCR ........................................................................S-__ Definitive Certificates.....................................................S-__ Discount Mortgage Loans.....................................................S-__ Distribution Date ..........................................................S-__ DOL ........................................................................S-__ DTC ........................................................................S-__ Due Date ...................................................................S-__ ERISA ......................................................................S-__ Excess Bankruptcy Losses....................................................S-__ Excess Fraud Losses.........................................................S-__ Excess Losses ..............................................................S-__ Excess Special Hazard Losses................................................S-__ Exemption ..................................................................S-__ FHLMC ......................................................................S-__ Final Scheduled Distribution Date...........................................S-__ FNMA .......................................................................S-__ Fraud Loss Amount ..........................................................S-__ Fraud Losses ...............................................................S-__ Indirect Participants.......................................................S-__ Interest Accrual Amount.....................................................S-__ Interest Accrual Period.....................................................S-__ Interest Shortfall..........................................................S-__ LIBOR ......................................................................S-__ LIBOR Business Day..........................................................S-__ Liquidated Mortgage Loan....................................................S-__ Liquidation Principal.......................................................S-__ Lockout Liquidation Amount..................................................S-__ Lockout Percentage..........................................................S-__ Lockout Prepayment Percentage...............................................S-__ INDEX OF DEFINED TERMS Lockout Principal Distribution Amount.......................................S-__ Monthly Payments ..........................................................S-__ Moody's ....................................................................S-__ Mortgage Loan Schedule......................................................S-__ Mortgage Loans .............................................................S-__ Mortgage Note ..............................................................S-__ Mortgage Pool ..............................................................S-__ Mortgaged Properties........................................................S-__ Net Mortgage Rate ..........................................................S-__ Non-Discount Mortgage Loans.................................................S-__ Non-Offered Class B Certificates............................................S-__ Non-Offered Class B Percentage..............................................S-__ Non-PO Allocated Amount.....................................................S-__ Non-PO Class A Certificates.................................................S-__ Non-PO Class A Optimal Principal Amount .....................................................................S-__ Non-PO Class A Prepayment Percentage........................................S-__ Non-PO Class A Principal Balance............................................S-__ Non-PO Percentage ..........................................................S-__ Non-recoverable Advance.....................................................S-__ Non-Supported Interest Shortfall............................................S-__ Offered Certificates........................................................S-__ Participant ................................................................S-__ PO Percentage ..........................................................S-__ Prepayment Interest Shortfall...............................................S-__ Prepayment Model ..........................................................S-__ Principal Prepayment Period.................................................S-__ PTCE 83-1 ..................................................................S-__ PTCE 95-60 .................................................................S-__ Rate Adjustment Date........................................................S-__ Realized Loss ..............................................................S-__ Record Date ................................................................S-__ Reference Bank Rate.........................................................S-__ REMIC ......................................................................S-__ Remittance Rate ..........................................................S-__ Rules ......................................................................S-__ Scheduled Principal Balance.................................................S-__ Seller .....................................................................S-__ Servicer ...................................................................S-__ Servicer Remittance Date....................................................S-__ Servicing Fee ..............................................................S-__ Servicing Fee Rate..........................................................S-__ SMMEA ......................................................................S-__ Special Hazard Amount.......................................................S-__ Special Hazard Loss.........................................................S-__ Step Down Percentage........................................................S-__ Stripped Interest Rate......................................................S-__ Subordinated Certificates...................................................S-__ Subordinated Optimal Principal Amount.......................................S-__ Subordinated Percentage.....................................................S-__ Subordinated Prepayment Percentage..........................................S-__ Subservicers ...............................................................S-__ Telerate Screen Page 3750...................................................S-__ Trustee ....................................................................S-__ U.S. Person ................................................................S-__ Underwriter ................................................................S-__ Underwriting Agreement......................................................S-__ S-59 $___________ (Approximate) Chase Mortgage Trust, Series [_________] Issuer Chase Manhattan Acceptance Corporation Seller [Chase Manhattan Mortgage Corporation] Servicer [LOGO] Multi-Class Mortgage Pass-Through Certificates, Series [_________] ----------------------------- PROSPECTUS SUPPLEMENT ----------------------------- [UNDERWRITER] You should rely on the information contained or incorporated by reference in this prospectus supplement and the attached prospectus. We have not authorized anyone to provide you with different information. We are not offering these certificates in any state where the offer is not permitted. Dealers will be required to deliver a prospectus supplement and prospectus when acting as underwriters of these certificates and with respect to their unsold allotments or subscriptions. In addition, all dealers selling these certificates will deliver a prospectus supplement and prospectus until [DATE]. [DATE] PROSPECTUS SUBJECT TO COMPLETION DATED OCTOBER 20, 1999 Chase Manhattan Acceptance Corporation Chase Funding, Inc. Seller, as specified in the related Prospectus Supplement Mortgage Pass-Through Certificates (Issuable in Series) The Mortgage Pass-Through Certificates offered hereby and by the Prospectus Supplement (as defined below) (the "Certificates") will be offered from time to time in series. The Seller with respect to any series of Certificates will be either Chase Manhattan Acceptance Corporation or Chase Funding, Inc. as specified in the related Prospectus Supplement (as to either, the "Seller"). Each series of Certificates will represent in the aggregate the entire beneficial ownership interest, minus any interest retained by the Seller, in a segregated pool of various types of conventional one- to four-family residential first mortgage loans (the "Mortgage Loans") which may, if so specified in the related Prospectus Supplement, include cooperative apartment loans ("Cooperative Loans"), together with other assets described herein (collectively, a "Trust Fund"). Information regarding the Mortgage Loans in a Trust Fund, including the approximate aggregate principal amount and general characteristics of such Mortgage Loans and the applicable Certificate Rate (as defined herein), will be furnished in a supplement to this Prospectus at the time of offering (a "Prospectus Supplement"). Each series of Certificates will include one or more classes. Each class of Certificates of any series will represent the right, which may be senior or subordinate to the rights of one or more of the other classes of Certificates, to receive a specified portion of distributions of principal or interest (or both) on the Mortgage Loans in the related Trust Fund in the manner described herein and in the related Prospectus Supplement. A series may include one or more classes of Certificates entitled to principal distributions, with disproportionate, nominal or no interest distributions, or to interest distributions, with disproportionate, nominal or no principal distributions. See "Description of the Certificates". A series may include two or more classes of Certificates which differ as to the timing, sequential order, priority of payment, pass-through rate or amount of distributions of principal or interest or both. Distributions of principal and interest will be made on the 25th day of each month or, if such day is not a business day, on the next succeeding business day, commencing with the month following delivery unless otherwise specified in the related Prospectus Supplement. The only obligations of the Seller with respect to a series of Certificates will be pursuant to its representations and warranties with respect to such Certificates as described herein. Unless otherwise specified in the related Prospectus Supplement, the Servicer for each series of Certificates will be Chase Manhattan Mortgage Corporation. The principal obligations of the Servicer with respect to a series of Certificates will be Chase Manhattan Mortgage Corporation. The principal obligations of the services with respect to a series of Certificates will be limited to its contractual servicing obligations, and its obligation in the event of payment delinquencies on the Mortgage Loans, to make certain cash advances with respect to the Mortgage Loans to the extent described herein and in the related Prospectus Supplement. The Trust Fund for a series of Certificates may include any combination of a mortgage pool insurance policy, letter of credit, bankruptcy bond, special hazard insurance policy, reserve fund or other form of credit support. In addition to or in lieu of the foregoing, credit enhancement may be provided by means of subordination as described herein and in the related Prospectus Supplement. See "Description of the Certificates" and "Credit Support". Each Trust Fund will be held in trust for the benefit of the holders of the related series of Certificates pursuant to a Pooling and Servicing Agreement as more fully described herein. If so provided in the Prospectus Supplement for a series of Certificates, one or more separate elections will be made to treat the related Trust Fund (or designated portions thereof) as one or more "real estate mortgage investment conduits" (each, a "REMIC") for federal income tax purposes. See "Federal Income Tax Consequences". A series of Certificates may include one or more senior classes and one or more subordinate classes. Each such class will represent the right to receive a specified portion of payments of principal and interest on the Mortgage Loans in the related Trust Fund in the manner described herein and in the related Prospectus Supplement. See "Description of Certificates". THE CERTIFICATES OF EACH SERIES WILL NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE SELLER, THE CHASE MANHATTAN BANK OR CHASE MANHATTAN MORTGAGE CORPORATION OR ANY OF THEIR RESPECTIVE AFFILIATES, EXCEPT AS SET FORTH HEREIN AND IN THE RELATED PROSPECTUS SUPPLEMENT, NEITHER THE CERTIFICATES NOR THE UNDERLYING MORTGAGE LOANS WILL BE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY THE SELLER, THE CHASE MANHATTAN BANK OR CORPORATION OR ANY OF THEIR AFFILIATES. The yield on each class of Certificates of a series will be affected by the rate of payment of principal (including prepayments) on the assets in the related Trust Fund and the timing of receipt of such payments as described herein and in the related Prospectus Supplement. Each series of Certificates may be subject to early termination only under the circumstances described herein and in the related Prospectus Supplement. Prospective investors in the Certificates should consider the factors discussed under "Risk Factors" beginning on page __. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Offers of the Certificates may be made through one or more different methods, including offerings through underwriters, as more fully described under "Plan of Distribution") herein and in the related Prospectus Supplement. There will have been no public market for any series of Certificates prior to the offering thereof. Accordingly, once an offering of any Series of Certificates has been made, there can be no assurance that a secondary market for Certificates of such Series will develop or, if it does develop, that such market will continue. No application will be made to list the Certificates on any securities exchange. This Prospectus may not be used to consummate sales of Certificates unless accompanied by a Prospectus Supplement. --------------------- The date of this Prospectus is [DATE]. PROSPECTUS SUPPLEMENT The Prospectus Supplement relating to a series of Certificates being offered hereby will, among other things, set forth with respect to such series of Certificates (i) information as to the assets comprising the Trust Fund, including the characteristics of the Mortgage Loans and, if applicable, the insurance, guarantees or other instruments or agreements included in the Trust Fund and the amount and source of any reserve accounts; (ii) the aggregate original principal balance of each class of Certificates entitled to distributions allocable to principal and, if a fixed rate of interest, the interest rate for each class of such Certificates entitled to distributions allocable to interest; (iii) information as to any class of Certificates that has a rate of interest that is subject to change from time to time and the basis on which such interest rate will be determined; (iv) information as to any class of Certificates on which interest will accrue and be added to the principal or, if applicable, the notional principal balance thereof; (v) information as to the method used to calculate the amount of interest to be paid on any class entitled to distributions of interest only; (vi) information as to the nature and extent of subordination with respect to any class of Certificates that is subordinate in right of payment to any other class; (vii) the circumstances, if any, under which the Trust Fund is subject to early termination; (viii) if applicable, the final distribution date and the first mandatory principal distribution date of each class of such Certificates; (ix) the method used to calculate the aggregate amounts of principal and interest required to be distributed on each distribution date in respect of each class of such Certificates and, with respect to any series consisting of more than one class, the basis on which such amounts will be allocated among the classes of such series; (x) the distribution date for each class of the Certificates, the date on which payments received in respect of the assets included in the Trust Fund during the related period will be deposited in the related Collection Account (as defined herein) and, if applicable, the assumed reinvestment rate applicable to payments received in respect of such assets and the date on which such payments are assumed to be received for such series of Certificates; (xi) the name of the trustee of the Trust Fund; (xii) information with respect to the administrator, if any, of the Trust Fund; (xiii) whether an election will be made to treat all or a portion of the Trust Fund as a REMIC or a double REMIC and, if applicable, the designation of the regular interests and residual interests therein; and (xiv) information with respect to the plan of distribution of such Certificates. AVAILABLE INFORMATION The Seller will be subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), with respect to the series of Certificates offered hereby and by the related Prospectus Supplement, and in accordance therewith will file reports and other information with the Securities and Exchange Commission (the "Commission"). Such reports and other information can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices at Seven World Trade Center, Suite 1300, New York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained upon written request addressed to the Commission, Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such material can also be obtained from the web site that the Commission maintains at http://www.sec.gov. The Seller has filed with the Commission a Registration Statement under the Securities Act of 1933, as amended, with respect to the Certificates. This Prospectus, which forms a part of the Registration Statement, omits certain information contained in such Registration Statement pursuant to the rules and regulations of the Commission. The Registration Statement can be inspected and copied at prescribed rates at the public reference facilities maintained by the Commission as described in the preceding paragraph. ii INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE All documents filed by the Seller pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act with respect to a series of Certificates subsequent to the date of this Prospectus and the related Prospectus Supplement and prior to the termination of the offering of such series of Certificates shall be deemed to be incorporated by reference in this Prospectus as supplemented by the related Prospectus Supplement. If so specified in any such document, such document shall also be deemed to be incorporated by reference in the Registration Statement of which this Prospectus forms a part. Any statement contained herein or in a Prospectus Supplement for a series of Certificates or in a document incorporated or deemed to be incorporated by reference herein or therein shall be deemed to be modified or superseded for purposes of this Prospectus and such Prospectus Supplement to the extent that a statement contained herein or in such Prospectus Supplement or in any subsequently filed document which also is or is deemed to be incorporated by reference herein or in such Prospectus Supplement modifies or supersedes such statement, except to the extent that such subsequently filed document expressly states otherwise. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus or the related Prospectus Supplement or, if applicable, the Registration Statement. The Seller will provide without charge to each person, including any beneficial owner, to whom a copy of this Prospectus and the related Prospectus Supplement is delivered, on the written or oral request of any such person, a copy of any and all of the documents incorporated herein by reference, except the exhibits to such documents (unless such exhibits are specifically incorporated by reference in such documents). Written requests for such copies should be directed to the Seller c/o Chase Manhattan Mortgage Corporation, 343 Thornall Street, Edison, New Jersey 08837, Attention: Structured Finance. Telephone requests for such copies should be directed to the Seller at (732) 205-0600. ---------------- Until 90 days after the date of each Prospectus Supplement, all dealers effecting transactions in the series of Certificates covered by such Prospectus Supplement, whether or not participating in the distribution thereof, may be required to deliver such Prospectus Supplement and this Prospectus. This is in addition to the obligation of dealers to deliver a Prospectus Supplement and Prospectus when acting as underwriters of the series of Certificates covered by such Prospectus Supplement and with respect to their unsold allotments or subscriptions. No person has been authorized to give any information or to make any representations other than those contained in this Prospectus and any Prospectus Supplement with respect hereto and, if given or made, such information or representations must not be relied upon as having been authorized. This Prospectus and any Prospectus Supplement with respect hereto do not constitute an offer to sell or a solicitation of an offer to buy any securities other than the Certificates offered hereby and thereby nor an offer to sell or a solicitation of an offer to buy the Certificates to any person in any state or other jurisdiction in which such offer or solicitation would be unlawful. Neither the delivery of this Prospectus or any Prospectus Supplement with respect hereto nor any sale made hereunder and thereunder shall, under any circumstances, create any implication that the information herein or therein is correct as of any time subsequent to the date of such information. ---------------- REPORTS TO CERTIFICATEHOLDERS The Servicer will provide to the holders of Certificates of each series, annually and on each Distribution Date, reports concerning the Trust Fund related to such Certificates. See "The Pooling and Servicing Agreement--Reports to Certificateholders". The Servicer will file with the Commission such reports with respect to the Trust Fund for a series of Certificates as are required under the Exchange Act and the rules and regulations of the Commission thereunder until the completion of the reporting period required by Rule 15d-1 under the Exchange Act. ---------------- iii TABLE OF CONTENTS SUMMARY OF PROSPECTUS ............................ _ RISK FACTORS ..................................... _ DESCRIPTION OF THE CERTIFICATES .................. __ General ....................................... __ Classes of Certificates ....................... __ Distributions of Principal and Interest ....... __ THE MORTGAGE POOLS ............................... __ CREDIT SUPPORT ................................... __ General ....................................... __ Limited Guarantee of the Guarantor ............ __ Subordination ................................. __ Certificate Guaranty Insurance Policies ....... __ Overcollateralization ......................... __ Cross-Support ................................. __ Pool Insurance ................................ __ Special Hazard Insurance ...................... __ Bankruptcy Bond ............................... __ Repurchase Bond ............................... __ Guaranteed Investment Contracts ............... __ Reserve Accounts .............................. __ Other Insurance and Guarantees ................ __ YIELD, MATURITY AND WEIGHTED AVERAGE LIFE CONSIDERATIONS ................... __ CHASE MANHATTAN ACCEPTANCE CORPORATION ................................... __ CHASE FUNDING, INC. .............................. __ SERVICING OF THE MORTGAGE LOANS . __ Collection and Other Servicing Procedures ..... __ Private Mortgage Insurance .................... __ Hazard Insurance .............................. __ Advances ...................................... __ Servicing and Other Compensation and Payment of Expenses ........................ __ Resignation, Succession and Indemnification of the Servicer ............................ __ THE POOLING AND SERVICING AGREEMENT ..................................... __ Assignment of Mortgage Loans; Warranties . __ Payments on Mortgage Loans; Collection Account .................................... __ Repurchase or Substitution .................... __ Certain Modifications and Refinancings ........ __ Forward Commitments; Pre-Refunding ............ __ Evidence as to Compliance ..................... __ The Trustee ................................... __ Reports to Certificateholders ................. __ Events of Default ............................. __ Rights Upon Event of Default .................. __ Amendment ..................................... __ Termination; Purchase of Mortgage Loans ....... __ MATERIAL LEGAL ASPECTS OF THE MORTGAGE LOANS ................................ __ General ....................................... __ Foreclosure ................................... __ Right of Redemption ........................... __ Anti-Deficiency Legislation and Other Limitations on Lenders ..................... __ Consumer Protection Laws ...................... __ Enforceability of Due-on-Sale Clauses ......... __ Applicability of Usury Laws ................... __ Soldiers' and Sailors' Civil Relief Act ....... __ Late Charges, Default Interest and Limitations on Prepayment .................. __ Environmental Considerations .................. __ Forfeiture in Drug and RICO Proceedings ....... __ LEGAL INVESTMENT MATTERS ......................... __ ERISA CONSIDERATIONS ............................. __ FEDERAL INCOME TAX CONSEQUENCES General ....................................... __ REMIC Elections ............................... __ REMIC Certificates ............................ __ Tax Opinion ................................... __ Status of Certificates ........................ __ Income from Regular Certificates .............. __ Income from Residual Certificates ............. __ Sale or Exchange of Certificates .............. __ Taxation of Certain Foreign Investors ......... __ Transfers of Residual Certificates ............ __ Servicing Compensation and Other REMIC Pool Expenses .............................. __ Reporting and Administrative Matters .......... __ Non-REMIC Certificates ........................ __ Trust Fund as Grantor Trust ................... __ Status of the Certificates .................... __ Possible Application of Stripped Bond Rules Taxation of Certificates if Stripped Bond Rules Do Not Apply ......................... __ Taxation of Certificates if Stripped Bond Rules Apply ................................ __ Sales of Certificates ......................... __ Foreign Investors ............................. __ Reporting ..................................... __ Backup Withholding ............................ __ PLAN OF DISTRIBUTION ............................. __ USE OF PROCEEDS .................................. __ LEGAL MATTERS .................................... __ iv SUMMARY OF PROSPECTUS The following summary is qualified in its entirety by reference to the detailed information appearing elsewhere in this Prospectus and by reference to the Prospectus Supplement to be prepared in connection with each Series of Certificates. Unless otherwise specified, capitalized terms used and not defined in this Summary of Prospectus have the meanings given to them in this Prospectus and in the related Prospectus Supplement. Title of Securities...... Mortgage Pass-Through Certificates, issuable in series. Seller; Servicer......... Chase Funding, Inc. or Chase Manhattan Acceptance Corporation (either such entity, as specified in the related Prospectus Supplement, the "Seller"). See "Chase Funding, Inc." and "Chase Manhattan Acceptance Corporation." Chase Manhattan Mortgage Corporation ("Chase Manhattan Mortgage" or the "Servicer"), or such other entity or entities specified in the Prospectus Supplement will service, and may act as master servicer with respect to, the Mortgage Loans included in the Trust Fund. Description of Certificates............. Each Certificate will represent a beneficial ownership interest in one of a number of trusts to be created by the Seller from time to time pursuant to a pooling and servicing agreement (each, an "Agreement") among the Seller, the Servicer and the commercial bank or trust company acting as trustee specified in the Prospectus Supplement. The property of each trust (a "Trust Fund") will consist of a pool (a "Mortgage Pool") of residential one- to four-family mortgage loans (the "Mortgage Loans") and related property and interests (including, for example, (i) amounts received as Monthly Payments or principal prepayments which are on deposit in the Collection Account from time to time, (ii) property which secured a Mortgage Loan which has been acquired by foreclosure or (iii) proceeds of the liquidation of a Mortgaged Property) conveyed to each Trust Fund by the Seller. As specified in the related Prospectus Supplement, each Mortgage Pool will consist entirely of fixed-rate or adjustable-rate Mortgage Loans originated by the Servicer, either directly or through correspondent originators, or originated by other originators and, in any such case, acquired by the Servicer or an affiliate thereof. If specified in the related Prospectus Supplement, a Trust Fund may also include one or more of the following: reinvestment income, reserve accounts, insurance policies, guarantees or similar instruments or agreements intended to decrease the likelihood that Certificateholders will experience delays in distributions of scheduled payments on, or losses in respect of, the assets in such Trust Fund. The Certificates of any series will be entitled to payment only from the assets of the related Trust Fund. The Certificates of any series may be issued in a single class or in two or more classes, as specified in the Prospectus Supplement. One or more classes of Certificates of each series (i) may be entitled to receive distributions allocable only to principal, only to interest or to any combination thereof; (ii) may be entitled to receive distributions only of prepayments of principal throughout the lives of the Certificates or during specified periods; (iii) may be subordinated in the right to receive 1 distributions of scheduled payments of principal, prepayments of principal, interest or any combination thereof to one or more other classes of Certificates of such series throughout the lives of the Certificates or during specified periods; (iv) may be entitled to receive such distributions only after the occurrence of events specified in the Prospectus Supplement; (v) may be entitled to receive distributions in accordance with a schedule or formula or on the basis of collections from designated portions of the assets in the Trust Fund; (vi) as to Certificates entitled to distributions allocable to interest, may be entitled to receive interest at a fixed rate or a rate that is subject to change from time to time; and (vii) as to Certificates entitled to distributions allocable to interest, may be entitled to distributions allocable to interest only after the occurrence of events specified in the Prospectus Supplement and may accrue interest until such events occur, in each case as specified in the Prospectus Supplement. The timing and amounts of such distributions may vary among classes, over time, or otherwise as specified in the related Prospectus Supplement. The Certificates will be offered in fully-registered form only in the denominations specified in the Prospectus Supplement. The Certificates will not be guaranteed or insured by any governmental agency or instrumentality or any other issuer and, except as described in the Prospectus Supplement, the Mortgage Loans included in the related Trust Fund will not be guaranteed or insured by any governmental agency or instrumentality or any other person. Distributions on the Certificates............ Distributions on the Certificates entitled thereto will be made on the 25th day (or, if such day is not a business day, the business day immediately following such 25th day) of each month or such other date specified in the Prospectus Supplement solely out of the payments received in respect of the assets of the related Trust Fund. The amount allocable to payments of principal and interest on any distribution date will be determined as specified in the Prospectus Supplement. All distributions will be made pro rata to Certificateholders of the class entitled thereto or by the other method specified in the Prospectus Supplement. See "Description of the Certificates." The aggregate original principal balance of the Certificates will equal the aggregate distributions allocable to principal that such Certificates will be entitled to receive. If specified in the Prospectus Supplement, the Certificates of a series will have an aggregate original principal balance equal to the aggregate unpaid principal balance of the related Mortgage Loans as of the first day of the month of creation of the Trust Fund and will bear interest in the aggregate at a rate equal to the interest rate borne by the underlying Mortgage Loans, net of servicing fees payable to the Servicer and any primary or sub-services of the Mortgage Loans and any other amounts (including fees payable to the Servicer as master Servicer, if applicable) specified in the Prospectus Supplement (as to each Mortgage Loan, the "Remittance Rate"). See "Description of the Certificates--Distributions of Principal and Interest." 2 The rate at which interest will be passed through to holders of Certificates entitled thereto may be a fixed rate or a rate that is subject to change from time to time, in each case as specified in the Prospectus Supplement. Any such rate may be calculated on a loan-by-loan, weighted average or other basis, in each case as described in the Prospectus Supplement. See "Description of the Certificates--Distributions of Principal and Interest." The Mortgage Pools....... As specified in the Prospectus Supplement, each Mortgage Pool will consist of Mortgage Loans which were represented to the Seller as meeting certain standards. Each Mortgage Pool will contain one or more of the following types of Mortgage Loans:(1) 20- to 30-year ("30-year") fixed-rate, fully amortizing Mortgage Loans providing for level monthly payments of principal and interest; (2) 10- to 15-year ("15-year") fixed-rate, fully amortizing Mortgage Loans providing for level monthly payments of principal and interest; (3) adjustable-rate Mortgage Loans ("ARMs" or "ARM Loans"), which may include loans providing for negative amortization; (4) another type of Mortgage Loan, as described in the applicable Prospectus Supplement. If specified in the applicable Prospectus Supplement, a Mortgage Pool may contain Mortgage Loans subject to buy-down plans ("Buy-Down Mortgage Loans"). See "The Mortgage Pools." Primary Mortgage Insurance................ To the extent specified in the applicable Prospectus Supplement, each Mortgage Loan having a Loan-to-Value Ratio above a specified level will be covered by a Primary Mortgage Insurance Policy insuring against default by the Borrower with respect to all or a specified portion of the principal amount thereof until the principal balance of such Mortgage Loan is reduced below a specified percentage of the lesser of the sales price or appraised value of the Mortgaged Property. See "The Mortgage Pools." Purchase of Mortgage Loans........... As described in the applicable Prospectus Supplement, the Agreement for each series may permit, but not require, the Seller, the Servicer or another party to purchase from the Trust Fund for such series all remaining Mortgage Loans and all property acquired in respect of the Mortgage Loans, at a price described in the Prospectus Supplement, subject to the condition that the aggregate outstanding principal balance of the Mortgage Loans for such series at the time of purchase shall be less than a percentage of the aggregate principal balance at the Cut-Off Date specified in the Prospectus Supplement. The exercise of such right will result in the early retirement of the Certificates of that series. See "The Pooling and Servicing Agreement--Termination; Purchase of Mortgage Loans." Collection Account....... With respect to each Trust Fund, the Servicer will be obligated to establish an account into which it will deposit on the dates specified in the related Prospectus Supplement payments received in respect of the assets in such Trust Fund. See "The Pooling and Servicing Agreement--Payments on Mortgage Loans; Collection Account." Advances................. If specified in the Prospectus Supplement, the Servicer, as Servicer or master servicer of the Mortgage Loans, will be obligated to advance, using its own funds, delinquent installments of principal and interest (the latter adjusted to the applicable Remittance Rate) 3 on the Mortgage Loans in a Trust Fund. Any such obligation to make advances may be limited to amounts due holders of certain classes of Certificates of the related series, to amounts deemed to be recoverable from late payments or liquidation proceeds, for specified periods or any combination thereof, in each case as specified in the related Prospectus Supplement. Any such advance will be recoverable by the Servicer as specified in the related Prospectus Supplement. See "Servicing of the Mortgage Loans--Advances." Credit Support........... If specified in the Prospectus Supplement, a series of Certificates, or certain classes within such series, may have the benefit of one or more of the following types of credit support. The protection against losses afforded by any such credit support will be limited. See "Credit Support." A. Limited Guarantee..... If specified in the Prospectus Supplement, certain obligations of the Servicer under the related Agreement, including obligations of the Servicer to cover certain deficiencies in principal or interest payments on the Mortgage Loans resulting from the bankruptcy of the related borrower, may be covered by a financial guarantee policy, limited guarantee or other similar instrument (the "Limited Guarantee"), limited in scope and amount, issued by an entity named in the Prospectus Supplement (the "Guarantor"). If so specified, the Guarantor may be obligated to take either or both of the following actions in the event the Servicer fails to do so: make deposits to the Collection Account (a "Deposit Guarantee"); or make advances (an "Advance Guarantee"). Any such Limited Guarantee will be limited in amount and a portion of the coverage of any such Limited Guarantee may be separately allocated to certain events. The scope, amount and, if applicable, the allocation of any Limited Guarantee will be described in the related Prospectus Supplement. See "Credit Support--Limited Guarantee of the Guarantor." B. Subordination......... A series of Certificates may include one or more classes that are subordinate in the right to receive distributions on such Certificates to one or more senior classes of Certificates of the same series, to the extent described in the related Prospectus Supplement. If so specified in the related Prospectus Supplement, subordination may apply only in the event of certain types of losses not covered by other forms of credit support, such as hazard losses not covered by standard hazard insurance policies or losses resulting from the bankruptcy of the borrower. If specified in the Prospectus Supplement, a reserve fund may be established and maintained by the deposit therein of distributions allocable to the holders of subordinate Certificates until a specified level is reached. The related Prospectus Supplement will set forth information concerning the amount of subordination of a class or classes of subordinate Certificates in a series, the circumstances in which such subordination will be applicable, the manner, if any, in which the amount of subordination will decrease over time, the 4 manner of funding the related reserve fund, if any, and the conditions under which amounts in any such reserve fund will be used to make distributions to holders of senior Certificates or released from the related Trust Fund. See "Credit Support-- Subordination." C. Certificate Guaranty Insurance Policies..... If specified in the related Prospectus Supplement, one or more certificate guaranty insurance policies (each, a "Certificate Guaranty Insurance Policy") will be obtained and maintained for one or more Classes or Series of Certificates. The issuer of any such Certificate Guaranty Insurance Policy (the "Certificate Insurer") will be named int he related Prospectus Supplement. In general, Certificate Guaranty Insurance Policies unconditionally and irrevocably guarantee that the full amount of the distributions of principal and interest to which the holders of the related Certificates are entitled under the related Agreement, as well as any other amounts specified in the related Prospectus Supplement, will be received by an agent of the Trustee for distribution by the Trustee to such holders. D. Overcollateralization.. If specified in the related Prospectus Supplement, the aggregate principal balance of the Mortgage Assets included in a Trust Fund may exceed the original principal balance of the related Certificates. In addition, if so specified in the related Prospectus Supplement, certain Classes of Certificates may be entitled to receive distributions, creating a limited acceleration of the payment of the principal of such Certificates relative to the amortization of the related Mortgage Loans by applying excess interest collected on the Mortgage Loans to distributions of principal on such Classes of Certificates. Such acceleration feature may continue for the life of the applicable Classes of Certificates or may be limited. In the case of limited acceleration, once the required level of overcollateralization is reached, and subject to certain provisions specified in the related Prospectus Supplement, the acceleration feature will cease unless necessary to maintain the required overcollateralization level. E. Cross-Support......... If specified in the Prospectus Supplement, the beneficial ownership of separate groups of assets included in a Trust Fund may be evidenced by separate classes of the related series of Certificates. In such case, and if so specified, credit support may be provided by a cross-support feature which requires that distributions be made with respect to Certificates evidencing beneficial ownership of one or more asset groups prior to distributions to subordinate Certificates evidencing a beneficial ownership interest in other asset groups within the same Trust Fund. If specified in the Prospectus Supplement, the coverage provided by one or more forms of credit support may apply concurrently to two or more separate Trust Funds. If applicable, the Prospectus Supplement will identify the Trust Funds to which such credit support relates and the manner of determining the amount of the coverage provided thereby and of the application of such coverage to the identified Trust Funds. See "Credit Support--Cross Support." 5 F. Pool and Special Hazard Insurance ..... In order to decrease the likelihood that Certificateholders will experience losses in respect of the Mortgage Loans, if specified in the Prospectus Supplement, the Seller will obtain one or more insurance policies to cover (i) losses by reason of defaults by borrowers (a "Mortgage Pool Insurance Policy") and (ii) losses by reason of hazards not covered under the standard form of hazard insurance (a "Special Hazard Insurance Policy"), in each case up to the amounts, for the periods and subject to the conditions specified in the Prospectus Supplement. See "Credit Support--Pool Insurance" and "--Special Hazard Insurance." G. Reserve Accounts, Other Insurance, Guarantees and Similar Instruments and Agreements......... In order to decrease the likelihood that Certificateholders will experience delays in the receipt of scheduled payments on, and losses in respect of, the assets in a Trust Fund, if specified in the related Prospectus Supplement, such Trust Fund may also include reserve accounts, other insurance, guarantees and similar instruments and agreements entered into with the entities, in the amounts, for the purposes and subject to the conditions specified in the Prospectus Supplement. See "Credit Support--Reserve Accounts" and "--Other Insurance, Guarantees and Similar Instruments or Agreements." Pre-Funding Account...... A Trust Fund may enter into an agreement (each, a "Pre-Funding Agreement") with the Depositor whereby the Depositor will agree to transfer additional Mortgage Assets to such Trust Fund following the date on which such Trust Fund is established and the related Securities are issued. Any Pre-Funding Agreement will require that any Mortgage Loans so transferred conform to the requirements specified in such Pre-Funding Agreement. If a Pre-Funding Agreement is to be utilized, the related Trustee will be required to deposit in a segregated account (each, a "Pre-Funding Account") all or a portion of the proceeds received by the Trustee in connection with the sale of one or more classes of Securities of the related series; subsequently, the additional Mortgage Assets will be transferred to the related Trust Fund in exchange for money released to the Depositor from the related Pre-Funding Account. Each Pre-Funding Agreement will set a specified period during which any such transfers must occur, which period will not exceed 90 days from the date the Trust Fund is established. If all moneys originally deposited to such Pre-Funding Account are not used by the end of such specified period, then any remaining moneys will be applied as a mandatory prepayment of a class or classes of Securities as specified in the related Prospectus Supplement. The specified period for the acquisition by a Trust Fund of additional Mortgage Loans will generally not exceed three months form the date such Trust Fund is established. Federal Income Tax Consequences............ The federal income tax consequences to Certificateholders will depend on, among other factors, whether an election is made to treat 6 the Trust Fund or specified portions thereof as a "real estate mortgage investment conduit" ("REMIC") under the provisions of the Internal Revenue Code of 1986, as amended (the "Code"). See "Federal Income Tax Consequences". ERISA Considerations..... A fiduciary of any employee benefit plan subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or a plan subject to Section 4975 of the Code should carefully review with its own legal advisors whether the purchase or holding of Certificates could give rise to a transaction prohibited or otherwise impermissible under ERISA or the Code. See "ERISA Considerations". Legal Investment Matters.................. The Prospectus Supplement for each series of Certificates will specify which, if any, of the classes of Certificates offered thereby will constitute "mortgage related securities" under the Secondary Mortgage Market Enhancement Act of 1984, as amended ("SMMEA"). Classes of Certificates that qualify as "mortgage related securities" will be legal investments for certain types of institutional investors to the extent provided in SMMEA, subject, in any case, to any other regulations which may govern investments by such institutional investors. Institutions whose investment authority is subject to legal restrictions should consult with their own legal advisors or the applicable authorities to determine whether and to what extent an investment in a particular class of Certificates (whether or not such class constitutes a "mortgage related security") constitutes a legal investment for them. See "Legal Investment Matters". 7 RISK FACTORS Prospective Certificateholders should consider, among other things, the following factors in connection with the purchase of the Certificates: l. Losses on the Mortgage Pool. An investment in Certificates evidencing interests in Mortgage Loans may be affected, among other things, by a decline in real estate values or changes in mortgage market rates. If the residential real estate market in the locale of properties securing the Mortgage Loans should experience an overall decline in property values such that the outstanding balances of the Mortgage Loans, and any secondary financing on the Mortgaged Properties in a particular Mortgage Pool, become equal to or greater than the value of Mortgaged Properties, the actual rates of delinquencies, foreclosures and losses could be higher than those now generally experienced in the mortgage lending industry. To the extent that such losses are not covered by any subordination feature, applicable insurance policies or other credit enhancement, holders of the Certificates of a Series evidencing interests in such Mortgage Pool will bear all risk of loss resulting from default by mortgagors and will have to look primarily to the value of the Mortgaged Properties for recovery of the outstanding principal and unpaid interest of the defaulted Mortgage Loans. See "The Mortgage Pools." 2. Limited Obligations. The Certificates will not represent an interest in or obligation of the Seller. The Certificates will not be insured or guaranteed by any government agency or instrumentality, nor, unless expressly provided in the related Prospectus Supplement, by The Chase Manhattan Bank, Chase Manhattan Mortgage Corporation, Chase Funding, Inc., Chase Manhattan Acceptance Corporation or any of their affiliates. 3. Limited Liquidity. There can be no assurance that a secondary market will develop for the Certificates of any Series or, if it does develop, that it will provide the holders of Certificates of such Series with liquidity of investment or that it will remain for the term of such series of Certificates. Although the Certificateholders of each series receive monthly statements containing certain statistical information with respect to the related Mortgage Pool, neither the Company nor the Servicer publishes any information relating to the Certificates of any series or any Mortgage Pool. The limited availability of any such published information may influence the liquidity of the Certificates. The Certificates will not be listed on any securities exchange. 4. Prepayment Considerations. The prepayment experience on the Mortgage Loans will affect the average life of the Certificates or each class of Certificates. Prepayments on the Mortgage Loans may be influenced by a variety of economic, geographic, social and other factors, including the difference between the interest rates on the Mortgage Loans and prevailing mortgage rates (giving consideration to the cost of refinancing). In general, if mortgage interest rates fall below the interest rates on the Mortgage Loans, the rate of prepayment would be expected to increase, and the yields at which an investor in the Certificates may be able to reinvest amounts received as payments on such investor's Certificates may be lower than the yield on such Certificates. Conversely, if mortgage interest rates rise above the interest rates on the Mortgage Loans, the rate of prepayment would be expected to decrease, and the amount of payments available to a Certificateholder for reinvestment may be relatively low. Other factors affecting prepayment of mortgage loans include changes in housing needs, job transfers, unemployment and servicing decisions. See "Yield, Maturity and Weighted Average Life Considerations." 5. Yield, Maturity and Weighted Average Life Considerations. The yield of the Certificates of each series will depend in part on the rate of principal payment on the Mortgage Loans (including prepayments, liquidations due to defaults and mortgage loan repurchases). Such yield may be adversely affected, depending upon whether a particular Certificate is purchased at a premium or discount price, by a higher or lower than anticipated rate of prepayments on the related Mortgage Loans. In particular, the yield on Classes of Certificates entitling the holders thereof primarily or exclusively to payments of interest or primarily or exclusively to payments of principal will be extremely sensitive to the rate of prepayments on the related Mortgage Loans. In addition, the yield on certain Classes of Certificates may be relatively more sensitive to the rate of prepayment of specified Mortgage Loans than other Classes of Certificates. Furthermore, the yield to investors may be adversely affected by interest shortfalls which may result from the timing of the receipt of prepayments or liquidations to the extent that such interest shortfalls are not covered by aggregate Servicing Fees or other mechanisms specified in the applicable Prospectus Supplement. The yield to investors in Classes of Certificates will be adversely affected to the extent that losses on the Mortgage Loans in the related Trust Fund are allocated to such Classes 8 and may be adversely affected to the extent of unadvanced delinquencies on the Mortgage Loans in the related Trust Fund. Classes of Certificates identified in the applicable Prospectus Supplement as subordinated Certificates are more likely to be affected by delinquencies and losses than other Classes of Certificates. See "Yield, Maturity and Weighted Average Life Considerations." 6. Subordination. With respect to Certificates of a series having one or more classes of subordinated Certificates, while the subordination feature is intended to enhance the likelihood of timely payment of principal and interest to senior Certificateholders, such subordination will be limited as specified in the Prospectus Supplement, any reserve fund could be depleted under certain circumstances, and payments applied to the senior Certificates which are otherwise due to the subordinated Certificates may be less than losses. 9 DESCRIPTION OF THE CERTIFICATES Each Series of Certificates will be issued pursuant to a separate pooling and servicing agreement (each, an "Agreement") entered into among the Seller, the Servicer and a commercial bank or trust company named in the Prospectus Supplement, as trustee (the "Trustee") for the benefit of holders of Certificates of that Series. The provisions of each Agreement will vary depending upon the nature of the Certificates to be issued thereunder and the nature of the related Trust Fund. The Agreement will be substantially in the form filed as an exhibit to the Registration Statement of which this Prospectus is a part, or in such similar form as will reflect the terms of a series of Certificates described in the Prospectus Supplement. The following summaries describe the material provisions which may appear in each Agreement. The Prospectus Supplement for a series of Certificates will describe any provision of the Agreement relating to such series that materially differs from the description thereof contained in this Prospectus. The summaries do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all of the provisions of the Agreement for each series of Certificates and the applicable Prospectus Supplement. The Seller will provide any Certificateholder, without charge, on written request a copy of the Agreement for any series. Requests should be addressed to the Seller c/o Chase Manhattan Mortgage Corporation, 343 Thornall Street, Edison, New Jersey 08837, Attention: Structured Finance. The Agreement relating to a series of Certificates will be filed with the Securities and Exchange Commission in a report on Form 8-K within 15 days after the date of issuance of such series of Certificates (the "Delivery Date"). The Certificates of a series will be entitled to payment only from the assets included in the Trust Fund related to such series and will not be entitled to payments in respect of the assets included in any other trust fund established by the Seller. The Certificates will not represent obligations of the Seller, the Servicer or any of their affiliates and will not be insured or guaranteed by any governmental agency or any other person. The Seller's only obligations with respect to the Certificates will consist of its obligations pursuant to certain representations and warranties made by it. The Servicer's only obligations with respect to the Certificates will consist of its contractual servicing and/or master servicing obligations, including any obligation to make advances under certain limited circumstances specified herein of delinquent installments of principal and interest (adjusted to the applicable Remittance Rate), and its obligations pursuant to certain representations and warranties made by it. The Mortgage Loans will not be insured or guaranteed by any governmental entity or, except as specified in the Prospectus Supplement, by any other person. To the extent that delinquent payments on or losses in respect of defaulted Mortgage Loans are not advanced by the Servicer or any other entity or paid from any applicable credit support arrangement, such delinquencies may result in delays in the distribution of payments to the holders of one or more classes of Certificates, and such losses will be borne by the holders of one or more classes of Certificates. General The Certificates of each series will be issued in fully-registered form only. The minimum original Certificate Principal Balance or Notional Principal Balance that may be represented by a Certificate (the "denomination") will be specified in the Prospectus Supplement. The original Certificate Principal Balance of each Certificate will equal the aggregate distributions allocable to principal to which such Certificate is entitled. Distributions allocable to interest on each Certificate that is not entitled to distributions allocable to principal will be calculated based on the Notional Principal Balance of such Certificate. The Notional Principal Balance of a Certificate will not evidence an interest in or entitlement to distributions allocable to principal but will be used solely for convenience in expressing the calculation of interest and for certain other purposes. The Certificates of a series will be transferable and exchangeable on a Certificate Register to be maintained at the corporate trust office of the Trustee for the related series or such other office or agency maintained for such purposes by the Trustee in New York City (or at the office of the certificate registrar specified in the related Prospectus Supplement). No service charge will be made for any registration of transfer or exchange of Certificates, but payment of a sum sufficient to cover any tax or other governmental charge may be required. Classes of Certificates Each series of Certificates will be issued in a single class or in two or more classes. The Certificates of each class will evidence the beneficial ownership of (i) any distributions in respect of the assets of the Trust Fund that 10 are allocable to principal, in the aggregate amount of the original Certificate Principal Balance, if any, of such class of Certificates as specified in the Prospectus Supplement and (ii) any distributions in respect of the assets of the Trust Fund that are allocable to interest on the Certificate Principal Balance or Notional Principal Balance of such Certificates from time to time at the Certificate Rate, if any, applicable to such class of Certificates as specified in the Prospectus Supplement. If specified in the Prospectus Supplement, one or more classes of a series of Certificates may evidence beneficial ownership interests in separate groups of assets included in the related Trust Fund. If specified in the Prospectus Supplement, the Certificates will have an aggregate original Certificate Principal Balance equal to the aggregate unpaid principal balance of the Mortgage Loans as of the close of business on the first day of the month of creation of the Trust Fund (the "Cut-Off Date") after deducting payments of principal due on or before, and prepayments of principal received on or before, the Cut-Off Date and in the aggregate will bear interest equal to the weighted average of the Remittance Rates. The Remittance Rate will equal the rate of interest payable on each Mortgage Loan minus the Servicer's servicing fee as described herein, the servicing fee of any third party servicer of the Mortgage Loans and such other amounts (including fees payable to the Servicer as master servicer, if applicable) as are specified in the Prospectus Supplement. The Certificates may have an original Certificate Principal Balance as determined in the manner specified in the Prospectus Supplement. Each class of Certificates that is entitled to distributions allocable to interest will bear interest at a fixed rate or a rate that is subject to change from time to time (a) in accordance with a schedule, (b) in reference to an index, or (c) otherwise (each, a "Certificate Rate"), in each case as specified in the Prospectus Supplement. One or more classes of Certificates may provide for interest that accrues, but is not currently payable ("Accrual Certificates"). With respect to any class of Accrual Certificates, if specified in the Prospectus Supplement, any interest that has accrued but is not paid on a given Distribution Date (as defined below under "Distributions of Principal and Interest") will be added to the aggregate Certificate Principal Balance of such class of Certificates on that Distribution Date. A series of Certificates may include one or more classes entitled only to distributions (i) allocable to interest, (ii) allocable to principal (and allocable as between scheduled payments of principal and Principal Prepayments, as defined below) or (iii) allocable to both principal (and allocable as between scheduled payments of principal and Principal Prepayments) and interest. A series of Certificates may consist of one or more classes as to which distributions will be allocated (i) on the basis of collections from designated portions of the assets of the Trust Fund, (ii) in accordance with a schedule or formula, (iii) in relation to the occurrence of events, or (iv) otherwise, in each case as specified in the Prospectus Supplement. The timing and amounts of such distributions may vary among classes, over time or otherwise, in each case as specified in the Prospectus Supplement. The taking of action with respect to certain matters under the Agreement, including certain amendments thereto, will require the consent of the holders of the Certificates. The voting rights allocated to each class of Certificates will be specified in the Prospectus Supplement. Votes may be allocated in different proportions among classes of Certificates depending on whether the Certificates of a class have a Notional Principal Balance or a Certificate Principal Balance. Distributions of Principal and Interest Distributions of principal and interest at the applicable Certificate Rate (if any) on the Certificates will be made to the extent of funds available from the related Trust Fund on the 25th day (or if such 25th day is not a business day, on the business day next following such 25th day) of each calendar month (each, a "Distribution Date"), commencing in the month following the issuance of the related series, or on such other date as is specified in the Prospectus Supplement. Distributions will be made to the persons in whose names the Certificates are registered at the close of business on the dates specified in the Prospectus Supplement (each, a "Record Date"). Distributions will be made by check or money order mailed to the person entitled thereto at the address appearing in the Certificate Register or, if specified in the Prospectus Supplement, in the case of Certificates that are of a certain minimum denomination as specified in the Prospectus Supplement, upon written request by the Cer-tificateholder, by wire transfer or by such other means as are agreed upon with the person entitled thereto; pro- 11 vided, however, that the final distribution in retirement of the Certificates will be made only upon presentation and surrender of the Certificates at the office or agency of the Trustee specified in the notice to Certificateholders of such final distribution. Distributions allocable to principal and interest on the Certificates will be made by the entity specified in the Prospectus Supplement as the paying agent (the "Paying Agent") out of, and only to the extent of, funds in a separate account established and maintained under the Agreement for the benefit of holders of the Certificates of the related series (the "Collection Account"), including any funds transferred from any Reserve Account. As between Certificates of different classes and as between distributions of principal (and, if applicable, between distributions of Principal Prepayments and scheduled payments of principal) and interest, distributions made on any Distribution Date will be applied as specified in the Prospectus Supplement. Distributions to any class of Certificates will be made pro rata to all Certificateholders of that class or by the other method described in the Prospectus Supplement. If so specified in the Prospectus Supplement, the amounts deposited into the Collection Account as described below under "The Pooling and Servicing Agreement--Payments on Mortgage Loans; Collection Account" will be invested in the eligible investments specified in the Agreement and all income or other gain from such investments will be deposited in the Collection Account and will be for the benefit of the Servicer or other entity specified in the Prospectus Supplement and subject to withdrawal from time to time. Distributions of Interest. Interest will accrue on the aggregate Certificate Principal Balance (or, in the case of Certificates entitled only to distributions allocable to interest, the aggregate Notional Principal Balance) of each class of Certificates entitled to interest from the date, at the Certificate Rate and for the periods (each, an "Interest Accrual Period") specified in the Prospectus Supplement. To the extent funds are available therefor, interest accrued during each Interest Accrual Period on each class of Certificates entitled to interest (other than a class of Accrual Certificates) will be distributable on the Distribution Dates specified in the Prospectus Supplement until the aggregate Certificate Principal Balance of the Certificates of such class has been distributed in full or, in the case of Certificates entitled only to distributions allocable to interest, until the aggregate Notional Principal Balance of such Certificates is reduced to zero or for the period of time designated in the Prospectus Supplement. Distributions of interest on each class of Accrual Certificates will commence only after the occurrence of the events specified in the Prospectus Supplement. Prior to such time, the beneficial ownership interest of such class of Accrual Certificates in the Trust Fund, as reflected in the aggregate Certificate Principal Balance of such class of Accrual Certificates, will increase on each Distribution Date by the amount of interest that accrued on such class of Accrual Certificates during the preceding Interest Accrual Period but that was not required to be distributed to such class on such Distribution Date. Any such class of Accrual Certificates will thereafter accrue interest on its outstanding Certificate Principal Balance as so adjusted. Distributions of Principal. The aggregate Certificate Principal Balance of any class of Certificates entitled to distributions of principal generally will be the aggregate original Certificate Principal Balance of such class of Certificates specified in the Prospectus Supplement, reduced by all distributions reported to the holders of such Certificates as allocable to principal, and, in the case of Accrual Certificates, as specified in the Prospectus Supplement, increased on each Distribution Date by all interest accrued but not then distributable on such Accrual Certificates. The Prospectus Supplement will specify the method by which the amount of principal to be distributed on the Certificates on each Distribution Date will be calculated and the manner in which such amount will be allocated among the classes of Certificates entitled to distributions of principal. If so specified in the Prospectus Supplement, one or more classes of senior Certificates will be entitled to receive all or a disproportionate percentage of the payments or other recoveries of principal on a Mortgage Loan which are received in advance of their scheduled due dates and not accompanied by amounts of interest representing scheduled interest due after the month of such payments ("Principal Prepayments") in the percentages and under the circumstances or for the periods specified in the Prospectus Supplement. Any such allocation of Principal Prepayments to such class or classes of Certificateholders will have the effect of accelerating the amortization of such Certificates while increasing the interests evidenced by the remaining Certificates in the Trust Fund. 12 THE MORTGAGE POOLS Each mortgage pool (a "Mortgage Pool") will consist of one- to four-family residential mortgage loans evidenced by promissory notes (each, a "Note") secured by first mortgages or first deeds of trust or other similar security instrument (each, a "Mortgage") creating a first lien on properties (the "Mortgaged Properties"). When each series of Certificates is issued, the Seller will cause the Mortgage Loans comprising each Mortgage Pool to be assigned to the Trustee for the benefit of the holders of the Certificates of that series, and will receive the Certificates in exchange therefor. Certain Certificates evidencing interests in a Trust Fund may not form part of the offering made pursuant to this Prospectus and the related Prospectus Supplement. The Mortgaged Properties in each Mortgage Pool may consist of single-unit dwellings, two-, three- and four-unit detached, townhouse or rowhouse dwellings, condominium and planned-unit development ("PUD") units and such other types of homes or units as are described in the applicable Prospectus Supplement, and may include vacation and second homes and investment properties (i.e. one-to-four family properties owned for investment and rented to generate income). The applicable Prospectus Supplement will contain information concerning the originators of the Mortgage Loans and the underwriting standards employed by such originators. All Mortgage Loans will (i) be secured by Mortgaged Properties located in one of the states of the United States or the District of Columbia, and (ii) be of one or more of the following types of Mortgage Loans: (1) Fully-amortizing Mortgage Loans, each with a 20-to 30-year ("30-Year") term at origination, interest (the "Mortgage Rate") at a fixed rate and level monthly payments over the term of the Mortgage Loan. (2) Fully-amortizing Mortgage Loans, each with a 10-to 15-year ("15-Year") term at origination, a fixed Mortgage Rate and level monthly payments over the term of the Mortgage Loan. (3) Mortgage Loans, each with an adjustable Mortgage Rate. Mortgage Loans with certain Loan-to-Value Ratios and/or certain principal balances may be covered wholly or partially by primary mortgage guaranty insurance policies (each, a "Primary Mortgage Insurance Policy"). The existence, extent and duration of any such coverage will be described in the applicable Prospectus Supplement. The "Loan-to-Value Ratio" is the ratio, expressed as a percentage, of the principal amount of the Mortgage Loan to the lesser of (i) the sales price for such property at the time the Mortgage Loan is closed and (ii) the appraised value at origination or, in the case of refinancings, the value set forth in the appraisal, if any, obtained by the loan originator in connection with such refinancing. Each Mortgage Loan will also be covered by a Standard Hazard Insurance Policy, as described under "Servicing of the Mortgage Loans--Hazard Insurance" below. In addition, other credit enhancements acceptable to the rating agency (or agencies) rating the Certificates may be provided for coverage of certain risks of default or losses. See "Credit Support" herein. If specified in the applicable Prospectus Supplement, a Mortgage Pool may contain Mortgage Loans subject to buy-down plans ("Buy-Down Mortgage Loans") pursuant to which the monthly payments made by the Borrower will be less than the scheduled monthly payments on the Buy-Down Mortgage Loan, the resulting difference to be drawn from an amount contributed by the seller of the Mortgaged Property or another source at the time of origination of the Buy-Down Mortgage Loan and placed in a trust or custodial account (the "Buy-Down Fund") (such amount hereinafter referred to as the "Buy-Down Reserve"). The applicable Prospectus Supplement or Current Report (as defined below) will contain information, with respect to any Buy-Down Mortgage Loans, concerning limitations on the interest rate payable by the Borrower initially, on annual increases in the interest rate, on the length of the buy-down period, and on the Buy-Down Fund. The repayment of a temporary Buy-Down Mortgage Loan is dependent on the ability of the Borrower to make larger monthly payments after the Buy-Down Reserves have been depleted and, for certain Buy-Down Mortgage Loans, while such funds are being depleted. The inability of the Borrower to make larger monthly payments may lead to a default on the Buy-Down Mortgage Loan or, if the Borrower is able to obtain refinancing on favorable terms, a prepayment of such loan. See "Yield, Maturity and Weighted Average Life Considerations." The Prospectus Supplement for a series of Certificates may specify that the related Mortgage Pool contains Mortgage Loans that have been used for refinancing for the purpose of removing equity from the related Mortgaged Properties ("Cash-Out Refinance Loans"). 13 The Prospectus Supplement for each series of Certificates will specify the approximate aggregate principal balance of the Mortgage Loans (within the percentage or dollar range specified therein). The Prospectus Supplement for each series of Certificates will contain information regarding the Mortgage Loans which are expected to be included in the related Mortgage Pool, including among other things, information, as of the applicable Cut-Off Date and to the extent then specifically known to the Seller, as to (i) the aggregate principal balance of the Mortgage Loans, (ii) the aggregate principal balance or percentage by aggregate principal balance of Mortgage Loans secured by each type of property, (iii) the original terms to maturity of the Mortgage Loans, (iv) the smallest and largest in principal balance at origination of the Mortgage Loans, (v) the earliest origination date and latest maturity date of the Mortgage Loans, (vi) the aggregate principal balance or percentage by aggregate principal balance of Mortgage Loans having Loan-to-Value Ratios at origination exceeding 80%, (vii) the Mortgage Rate or range of Mortgage Rates borne by the Mortgage Loans and (viii) the average outstanding principal balance of the Mortgage Loans. If specific information with respect to the Mortgage Loans is not known at the time the related series of Certificates is initially offered, more general information of the nature described above will be provided in the Prospectus Supplement, and specific information will be set forth in a report on Form 8-K to be filed with the Securities and Exchange Commission within fifteen days after the initial issuance of such Certificates (the "Current Report"). A copy of the Agreement with respect to a series of Certificates will be attached to the related Current Report and will be available for inspection at the corporate trust office of the Trustee specified in the related Prospectus Supplement. The Seller's assignment of the Mortgage Loans to the Trustee will be without recourse. The Seller or another party identified in the applicable Prospectus Supplement will make certain representations concerning the Mortgage Loans, including that no Mortgage Loan in a Mortgage Pool evidenced by Certificates will be more than one month delinquent as of the date of the initial issuance of the Certificates. For a description of other representations that will be made by the party specified in the applicable Prospectus Supplement concerning the Mortgage Loans, see "The Pooling and Servicing Agreement--Assignment of Mortgage Loans; Warranties." The Seller's obligations with respect to the Mortgage Loans will be limited to any representations and warranties made by it in, as well as its contractual obligations under, the Agreement for each series of Certificates. These obligations consist primarily of the obligation under certain circumstances to repurchase or replace Mortgage Loans as to which there has been a material breach of the Seller's representations and warranties which materially and adversely affects the interests of the Certificateholders in a Mortgage Loan or to cure such breach, and of the obligation, under certain circumstances, to ensure the timely payment of premiums on certain insurance policies and bonds. See "The Pooling and Servicing Agreement--Assignment of Mortgage Loans; Warranties." In addition, to the extent specified in the applicable Prospectus Supplement, in the event of delinquencies in payments of principal and interest on the Mortgage Loans in any Mortgage Pool, the Servicer (or, if so indicated in the applicable Prospectus Supplement, another entity) will advance cash in amounts described herein under "The Pooling and Servicing Agreement-Advances" and "--Payments on Mortgage Loans; Collection Account." The Servicer is not required to make any advance which it determines in its good faith judgment not to be ultimately recoverable under any applicable policy of insurance ("Insurance Proceeds") or out of the proceeds of liquidation of a Mortgage Loan ("Liquidation Proceeds"). Each month, the Trustee (or such other paying agent as may be specified in the applicable Prospectus Supplement) will be obligated to remit to Certificateholders of each series all amounts relating to the Mortgage Loans due to the Certificateholders to the extent such amounts have been collected or advanced by the Servicer or such other entity and remitted to the Trustee pursuant to the terms of the Agreement for such series. See "Description of the Certificates--Distributions of Principal and Interest." There can be no assurance that real estate values will remain at present levels in the areas in which the Mortgaged Properties will be located. If the residential real estate market should experience an overall decline in property values such that the outstanding balances of the Mortgage Loans, and any secondary financing on the Mortgaged Properties, in a particular Mortgage Pool become equal to or greater than the value of the properties subject to the Mortgage Loans included in such Mortgage Pool, the actual rates of delinquencies, foreclosures and losses could be significantly higher than those now generally experienced in the mortgage lending industry. To the extent that such delinquencies, foreclosures and losses are not covered by applicable credit enhancements described in the Prospectus Supplement, the losses resulting therefrom will be borne by holders of the Certificates of the series evidencing interests in such Mortgage Pool. With respect to any series as to which 14 subordinated Certificates shall have been issued, such losses will first be borne by the holders of subordinated Certificates as a result and to the extent of the subordination in right of payment of the subordinated Certificates to the senior Certificates and as a result of first allocating such losses to reduce the Certificate Principal Balance of such subordinated Certificates. Because the principal amounts of Mortgage Loans decline monthly as principal payments, including prepayments, are received, the fractional undivided interest in principal evidenced by each Certificate in a series multiplied by the aggregate principal balance of the Mortgage Loans in the related Mortgage Pool will decline correspondingly. The principal balance represented by a Certificate, therefore, ordinarily will decline over time. CREDIT SUPPORT General Credit support may be provided with respect to one or more classes of a series of Certificates or with respect to the assets in the related Trust Fund. Credit support may be in the form of a limited financial guarantee policy, limited guarantee or other similar instrument (a "Limited Guarantee") issued by an entity named in the Prospectus Supplement (the "Guarantor"), the subordination of one or more classes of the Certificates of such series, the establishment of one or more reserve accounts, the use of a pool insurance policy, bankruptcy bond, special hazard insurance policy, repurchase bond, guaranteed investment contract or another method of credit support described in the related Prospectus Supplement, or any combination of the foregoing. Any credit support will not provide protection against all risks of loss and will not guarantee repayment of the entire principal balance of the Certificates and interest thereon. If losses occur which exceed the amount covered by credit support or which are not covered by the credit support, Certificateholders will bear their allocable share of the resulting deficiencies. Limited Guarantee of the Guarantor If specified in the Prospectus Supplement, certain obligations of the Servicer under the related Agreement may be covered by a Limited Guarantee, limited in scope and amount, issued by the Guarantor. If so specified, the Guarantor may be obligated to take either or both of the following actions in the event the Servicer fails to do so: make deposits to the Collection Account (a "Deposit Guarantee"); or make advances (an "Advance Guarantee"). Any such Limited Guarantee will be limited in amount and a portion of the coverage of any such Limited Guarantee may be separately allocated to certain events. The scope, amount and, if applicable, the allocation of any Limited Guarantee will be described in the related Prospectus Supplement. Subordination If so specified in the Prospectus Supplement, distributions in respect of scheduled principal, Principal Prepayments, interest or any combination thereof that otherwise would have been payable to one or more classes of Certificates of a series (the "subordinated Certificates") will instead be payable to holders of one or more other classes of such series (the "senior Certificates") under the circumstances and to the extent specified in the Prospectus Supplement. If specified in the Prospectus Supplement, delays in receipt of scheduled payments on the Mortgage Loans and losses on defaulted Mortgage Loans will be borne first by the various classes of subordinated Certificates and thereafter by the various classes of senior Certificates, in each case under the circumstances and subject to the limitations specified in the Prospectus Supplement. The aggregate distributions in respect of delinquent payments on the Mortgage Loans over the lives of the Certificates or at any time, the aggregate losses in respect of defaulted Mortgage Loans which must be borne by the subordinated Certificates by virtue of subordination and the amount of the distributions otherwise distributable to the subordinated Certificateholders that will be distributable to senior Certificateholders on any Distribution Date may be limited as specified in the Prospectus Supplement. If aggregate distributions in respect of delinquent payments on the Mortgage Loans or aggregate losses in respect of such Mortgage Loans were to exceed the total amounts payable and available for distribution to holders of subordinated Certificates or, if applicable, were to exceed the specified maximum amount, holders of senior Certificates could experience losses on the Certificates. 15 In addition to or in lieu of the foregoing, if so specified in the Prospectus Supplement, all or any portion of distributions otherwise payable to holders of subordinated Certificates on any Distribution Date may instead be deposited into one or more reserve accounts (a "Reserve Account") established by the Trustee. If so specified in the Prospectus Supplement, such deposits may be made on each Distribution Date, on each Distribution Date for specified periods or until the balance in the Reserve Account has reached a specified amount and, following payments from the Reserve Account to holders of senior Certificates or otherwise, thereafter to the extent necessary to restore the balance in the Reserve Account to required levels, in each case as specified in the Prospectus Supplement. If so specified in the Prospectus Supplement, amounts on deposit in the Reserve Account may be released to the Servicer or the holders of any class of Certificates at the times and under the circumstances specified in the Prospectus Supplement. If specified in the Prospectus Supplement, one or more classes of Certificates may bear the risk of certain losses on defaulted Mortgage Loans not covered by other forms of credit support prior to other classes of Certificates. Such subordination might be effected by reducing the Certificate Principal Balance of the subordinated Certificates on account of such losses, thereby decreasing the proportionate share of distributions allocable to such Certificates, or by another means specified in the Prospectus Supplement. If specified in the Prospectus Supplement, various classes of senior Certificates and subordinated Certificates may themselves be subordinate in their right to receive certain distributions to other classes of senior and subordinated Certificates, respectively, through a cross-support mechanism or otherwise. As between classes of senior Certificates and as between classes of subordinated Certificates, distributions may be allocated among such classes (i) in the order of their scheduled final distribution dates, (ii) in accordance with a schedule or formula, (iii) in relation to the occurrence of events, or (iv) otherwise, in each case as specified in the Prospectus Supplement. As between classes of subordinated Certificates, payments to holders of senior Certificates on account of delinquencies or losses and payments to any Reserve Account will be allocated as specified in the Prospectus Supplement. Certificate Guaranty Insurance Policies If specified in the related Prospectus Supplement, one or more certificate guaranty insurance policies (each, a "Certificate Guaranty Insurance Policy") will be obtained and maintained for one or more Classes or Series of Certificates. The issuer of any such Certificate Guaranty Insurance Policy (the "Certificate Insurer") will be named in the related Prospectus Supplement. In general, Certificate Guaranty Insurance Policies unconditionally and irrevocably guarantee that the full amount of the distributions of principal and interest to which the holders of the related Certificates are entitled under the related Agreement, as well as any other amounts specified in the related Prospectus Supplement, will be received by an agent of the Trustee for distribution by the Trustee to such holders. The specific terms of any Certificate Guaranty Insurance Policy will be set forth in the related Prospectus Supplement. Certificate Guaranty Insurance Policies may have limitations including, but not limited to, limitations on the obligation of the Certificate Insurer to guarantee any Servicer's obligation to repurchase or substitute for any specified date. The Certificate Insurer may be subrogated to the rights of the holders of the related Certificates to receive distributions to which they are entitled, as well as certain other amounts specified in the related Prospectus Supplement, to the extent of any payments made by such Certificate Insurer under the related Certificate Guaranty Insurance Policy. Overcollateralization If specified in the related Prospectus Supplement, the aggregate principal balance of the Mortgage Assets included in a Trust Fund may exceed the original principal balance of the related Certificates. In addition, if so specified in the related Prospectus Supplement, certain Classes of Certificates may be entitled to receive distributions, creating a limited acceleration of the payment of the principal of such Certificates relative to the amortization of the related Mortgage Loans by applying excess interest collected on the Mortgage Loans to distributions of principal on such Classes of Certificates. Such acceleration feature may continue for the life of the 16 applicable Classes of Certificates or may be limited. In the case of limited acceleration, once the required level of overcollateralization is reached, and subject to certain provisions specified in the related Prospectus Supplement, the acceleration feature will cease unless necessary to maintain the required overcollateralization level. Cross-Support If specified in the Prospectus Supplement, the beneficial ownership of separate groups of assets included in a Trust Fund may be evidenced by separate classes of the related series of Certificates. In such case, credit support may be provided by a cross-support feature which may require that distributions be made with respect to Certificates evidencing beneficial ownership of one or more asset groups prior to distributions to subordinated Certificates evidencing a beneficial ownership interest in other asset groups within the same Trust Fund. The Prospectus Supplement for a series which includes a cross-support feature will describe the manner and conditions for applying such cross-support feature. If specified in the Prospectus Supplement, the coverage provided by one or more forms of credit support may apply concurrently to two or more separate Trust Funds. If applicable, the Prospectus Supplement will identify the Trust Funds to which such credit support relates and the manner of determining the amount of the coverage provided thereby and of the application of such coverage to the identified Trust Funds. Pool Insurance In order to decrease the likelihood that Certificateholders will experience losses in respect of the Mortgage Loans, if specified in the Prospectus Supplement, the Seller will obtain one or more pool insurance policies. Any such policies may be in lieu of or in addition to any obligations of the Seller or the Servicer in respect of the Mortgage Loans. Such pool insurance policy will, subject to the limitations described below and in the Prospectus Supplement, cover loss by reason of default in payments on the Mortgage Loans up to the amounts specified in the Prospectus Supplement or the Detailed Description and for the periods specified in the Prospectus Supplement. The Servicer will agree to use its best reasonable efforts to maintain in effect any such pool insurance policy and to present claims thereunder to the pool insurer on behalf of itself, the Trustee and the Certificateholders. The pool insurance policy, however, is not a blanket policy against loss, since claims thereunder may only be made respecting particular defaulted Mortgage Loans and only upon satisfaction of certain conditions precedent described below. The pool insurance policy, if any, will not cover losses due to a failure to pay or denial of a claim under a primary mortgage insurance policy, irrespective of the reason therefor. The related Prospectus Supplement will describe any provisions of a pool insurance policy that are materially different from those described below. Any pool insurance policy may provide that no claims may be validly presented thereunder unless (i) any required primary mortgage insurance policy is in effect for the defaulted Mortgage Loan and a claim thereunder has been submitted and settled; (ii) hazard insurance on the related Mortgaged Property has been kept in force and real estate taxes and other protection and preservation expenses have been paid; (iii) if there has been physical loss or damage to the Mortgaged Property, it has been restored to its condition (reasonable wear and tear excepted) at the Cut-Off Date; (iv) the insured has acquired good and merchantable title to the Mortgaged Property free and clear of liens, except certain permitted encumbrances; and (v) the Servicer has advanced foreclosure costs. Upon satisfaction of these conditions, the pool insurer will have the option either (a) to purchase the Mortgaged Property at a price equal to the Principal Balance thereof plus accrued and unpaid interest at the Mortgage Rate to the date of purchase and certain expenses incurred by the Servicer on behalf of the Trustee and the Certificateholders, or (b) to pay the amount by which the sum of the Principal Balance of the defaulted Mortgage Loan plus accrued and unpaid interest at the Mortgage Rate to the date of payment of the claim and the aforementioned expenses exceeds the proceeds received from an approved sale of the Mortgaged Property, in either case net of certain amounts paid or assumed to have been paid under any related primary mortgage insurance policy. If any property securing a defaulted Mortgage Loan is damaged and proceeds, if any, from the related hazard insurance policy or any applicable special hazard insurance policy are insufficient to restore the damaged property to a condition sufficient to permit recovery under the pool insurance policy, the Servicer will not be required to expend its own funds to restore the damaged property unless it determines (i) that such restoration will increase the proceeds to Certificateholders on liquidation of the Mortgage Loan after reimbursement of the Servicer for its expenses, and (ii) that such expenses will be recoverable by it through proceeds of the sale of the property or proceeds of the pool insurance policy or any primary mortgage insurance policy. 17 In general, no pool insurance policy will insure (and many primary mortgage insurance policies may not insure) against loss sustained by reason of a default arising from, among other things, (i) fraud or negligence in the origination or servicing of a Mortgage Loan, including misrepresentation by the Mortgagor or persons involved in the origination thereof, or (ii) failure to construct a Mortgaged Property in accordance with plans and specifications. If so specified in the related Prospectus Supplement, a failure of coverage attributable to one of the foregoing events might result in a breach of a representation of the Seller (or another party) and in such event might give rise to an obligation on the part of the Seller (or such other party) to purchase or replace the defaulted Mortgage Loan if the breach materially and adversely affects the interests of Certificateholders and cannot be cured. As specified in the Prospectus Supplement, the original amount of coverage under any pool insurance policy will be reduced over the life of the related series of Certificates by the aggregate dollar amount of claims paid less the aggregate of the net amounts realized by the pool insurer upon disposition of all foreclosed properties. The amount of claims paid will include certain expenses incurred by the Servicer as well as accrued interest on delinquent Mortgage Loans to the date of payment of the claim. See "Material Legal Aspects of the Mortgage Loans --Foreclosure". Accordingly, if aggregate net claims paid under any pool insurance policy reach the original policy limit, coverage under that pool insurance policy will be exhausted and any further losses will be borne by one or more classes of Certificateholders unless assumed by some other entity, if and to the extent specified in the Prospectus Supplement. Since any mortgage pool insurance policy may require that the property subject to a defaulted Mortgage Loan be restored to its original condition prior to claiming against the pool insurer, such policy may not provide coverage against hazard losses. The hazard policies concerning the Mortgage Loans typically exclude from coverage physical damage resulting from a number of causes and, even when the damage is covered, may afford recoveries which are significantly less than the full replacement cost of such losses. Even if special hazard insurance is applicable as specified in the Prospectus Supplement, no coverage in respect of special hazard losses will cover all risks, and the amount of any such coverage will be limited. See "Special Hazard Insurance" below. As a result, certain hazard risks will not be insured against and will therefore be borne by Certificateholders, unless otherwise assumed by some other entity, as specified in the Prospectus Supplement. Special Hazard Insurance In order to decrease the likelihood that Certificateholders will experience losses in respect of the Mortgage Loans, if specified in the Prospectus Supplement, the Seller will obtain one or more special hazard insurance policies with respect to the Mortgage Loans. Such a special hazard insurance policy will, subject to limitations described below and in the Prospectus Supplement, protect holders of Certificates from (i) loss by reason of damage to Mortgaged Properties caused by certain hazards (including earthquakes and, to a limited extent, tidal waves and related water damage) not covered by the standard form of hazard insurance policy for the respective states in which the Mortgaged Properties are located or under flood insurance policies, if any, covering the Mortgaged Properties, and (ii) loss from partial damage caused by reason of the application of the co-insurance clause contained in hazard insurance policies. See "Servicing of the Mortgage Loans--Hazard Insurance" below. Any special hazard insurance policy may not cover losses occasioned by war, civil insurrection, certain governmental actions, errors in design, faulty workmanship or materials (except under certain circumstances), nuclear reaction, flood (if the Mortgaged Property is located in a federally designated flood area), chemical contamination and certain other risks. Aggregate claims under each special hazard insurance policy may be limited to a specified percentage of the aggregate principal balance as of the Cut-Off Date of the Mortgage Loans. Any special hazard insurance policy may also provide that no claim may be paid unless hazard and, if applicable, flood insurance on the Mortgaged Property has been kept in force and other protection and preservation expenses have been paid by the Servicer. Subject to the foregoing limitations, any special hazard insurance policy may provide that, where there has been damage to property securing a foreclosed Mortgage Loan (title to which has been acquired by the insured) and to the extent such damage is not covered by the hazard insurance policy or flood insurance policy, if any, maintained by the mortgagor or the Servicer, the special hazard insurer will pay the lesser of (i) the cost of repair or replacement of such property or (ii) upon transfer of the property to the special hazard insurer, the unpaid 18 principal balance of such Mortgage Loan at the time of acquisition of such property by foreclosure or deed in lieu of foreclosure, plus accrued interest to the date of claim settlement and certain expenses incurred by the Servicer with respect to such property. If the unpaid principal balance plus accrued interest and certain expenses is paid by the insurer, the amount of further coverage under the related special hazard insurance policy will be reduced by such amount less any net proceeds from the sale of the property. Any amount paid as the cost of repair or replacement of the property will also reduce coverage by such amount. Restoration of the property with the proceeds described under clause (i) above will satisfy the condition under any pool insurance policy that the property be restored before a claim under such pool insurance policy may be validly presented with respect to the defaulted Mortgage Loan secured by such property. The payment described under clause (ii) above will render unnecessary presentation of a claim in respect of such Mortgage Loan under the related pool insurance policy. Therefore, so long as a pool insurance policy remains in effect, the payment by the insurer under a special hazard insurance policy of the cost of repair or replacement or the unpaid principal balance of the Mortgage Loan plus accrued interest and certain expenses will not affect the total insurance proceeds paid to Certificateholders, but will affect the relative amounts of coverage remaining under the related special hazard insurance policy and pool insurance policy. Bankruptcy Bond In the event of a bankruptcy of a borrower, the bankruptcy court may establish the value of the Mortgaged Property securing the related Mortgage Loan at an amount less than the then outstanding principal balance of such Mortgage Loan secured by such Mortgaged Property and could reduce the secured debt to such value. In such case, the holder of such Mortgage Loan would become an unsecured creditor to the extent of the difference between the outstanding principal balance of such Mortgage Loan and such reduced secured debt. In addition, certain other modifications of the terms of a Mortgage Loan can result from a bankruptcy proceeding, including the reduction in monthly payments required to be made by the borrower. See "Material Legal Aspects of the Mortgage Loans -- Enforceability of Certain Provisions". If so provided in the related Prospectus Supplement, the Servicer will obtain a bankruptcy bond or similar insurance contract (the "bankruptcy bond") for proceedings with respect to borrowers under the Bankruptcy Code. Any such bankruptcy bond will cover certain losses resulting from a reduction by a bankruptcy court of scheduled payments of principal of and interest on a Mortgage Loan or a reduction by such court of the secured principal amount of a Mortgage Loan and will cover certain unpaid interest on the amount of such a principal reduction from the date of the filing of a bankruptcy petition. Any such bankruptcy bond will provide coverage in the aggregate amount specified in the related Prospectus Supplement. Such amount will be reduced by payments made under such bankruptcy bond in respect of the related Mortgage Loans, to the extent specified in the related Prospectus Supplement, and will not be restored. In lieu of a bankruptcy bond, the Servicer may obtain a Limited Guarantee to cover such bankruptcy-related losses. Repurchase Bond If so specified in the related Prospectus Supplement, the Servicer will be obligated to purchase any Mortgage Loan up to an aggregate dollar amount specified in the related Prospectus Supplement) for which insurance coverage is denied due to dishonesty, misrepresentation or fraud in connection with the origination or sale of such Mortgage Loan. Such obligation may be secured by a surety bond or other instrument or mechanism guaranteeing payment of the amount to be paid by the Servicer. Guaranteed Investment Contracts If so specified in the Prospectus Supplement, on or prior to the Delivery Date, the Trustee will enter into a guaranteed investment contract (a "GIC") pursuant to which all amounts deposited in the Collection Account, and if so specified the Reserve Accounts, will be invested by the Trustee and under which the issuer of the GIC will pay to the Trustee interest at an agreed rate per annum with respect to the amounts so invested. 19 Reserve Accounts If specified in the Prospectus Supplement, cash, U.S. Treasury securities, instruments evidencing ownership of principal or interest payments thereon, letters of credit, demand notes, certificates of deposit, other instruments or obligations or a combination thereof in the aggregate amount specified in the Prospectus Supplement will be deposited by the Servicer on the Delivery Date in one or more Reserve Accounts established by the Trustee. Such cash and the principal and interest payments on such other instruments will be used to enhance the likelihood of timely payment of principal of, and interest on, or, if so specified in the Prospectus Supplement, to provide additional protection against losses in respect of, the assets in the related Trust Fund, to pay the expenses of the Trust Fund or for such other purposes specified in the Prospectus Supplement. Whether or not the Servicer has any obligation to make such a deposit, certain amounts to which the subordinated Certificateholders, if any, will otherwise be entitled may instead be deposited into the Reserve Account from time to time and in the amounts as specified in the Prospectus Supplement. Any cash in the Reserve Account and the proceeds of any other instrument upon maturity will be invested in Eligible Investments, which will include obligations of the United States and certain agencies thereof, certificates of deposit, certain commercial paper, time deposits and bankers acceptances sold by eligible commercial banks, certain repurchase agreements of United States government securities with eligible commercial banks and certain other Eligible Investments described in the Agreement. If a letter of credit is deposited with the Trustee, such letter of credit will be irrevocable. Any instrument deposited therein will name the Trustee, in its capacity as trustee for the holders of the related Certificates, as beneficiary and will be issued by an entity acceptable to each rating agency that rates the Certificates. Additional information with respect to such instruments deposited in the Reserve Accounts will be set forth in the Prospectus Supplement. Any amounts so deposited and payments on instruments so deposited will be available for withdrawal from the Reserve Account for distribution to the holders of Certificates for the purposes, in the manner and at the times specified in the Prospectus Supplement. Other Insurance and Guarantees If specified in the Prospectus Supplement, the related Trust Fund may also include insurance, guarantees or letters of credit for the purpose of (i) maintaining timely payments or providing additional protection against losses on the assets included in such Trust Fund, (ii) paying administrative expenses or (iii) establishing a minimum reinvestment rate on the payments made in respect of such assets or principal payment rate on such assets. Such arrangements may include agreements under which Certificateholders are entitled to receive amounts deposited in various accounts held by the Trustee upon the terms specified in the Prospectus Supplement. Such arrangements may be in lieu of any obligation of the Servicer to advance delinquent installments in respect of the Mortgage Loans. YIELD, MATURITY AND WEIGHTED AVERAGE LIFE CONSIDERATIONS The yields to maturity and weighted average lives of the Certificates will be affected primarily by the rate and timing of principal payments received on or in respect of the Mortgage Loans included in the related Trust Fund. Such principal payments will include scheduled payments as well as Principal Prepayments (including refinancings) and prepayments resulting from foreclosure, condemnation and other dispositions of the Mortgaged Properties (including amounts paid by insurers under applicable insurance policies), from purchase by the Seller of any Mortgage Loan as to which there has been a material breach of warranty or defect in documentation (or deposit of certain amounts in respect of delivery of a substitute Mortgage Loan), purchase by the Servicer of Mortgage Loans modified by it in lieu of refinancing thereof and from the repurchase by the Seller of all of the Mortgage Loans in certain circumstances. See "The Pooling and Servicing Agreement--Termination; Purchase of Mortgage Loans." The yield to maturity and weighted average lives of the Certificates may also be affected by the amount and timing of delinquencies and losses on the Mortgage Loans. A number of social, economic, tax, geographic, demographic, legal and other factors may influence prepayments, delinquencies and losses. For a Trust Fund comprised of Mortgage Loans, these factors may include the age of the Mortgage Loans, the geographic distribution of the Mortgaged Properties, the payment terms of the Mortgages, the characteristics of the mortgagors, homeowner mobility, economic conditions generally and in the 20 geographic area in which the Mortgaged Properties are located, enforceability of due-on-sale clauses, servicing decisions, prevailing mortgage market interest rates in relation to the interest rates on the Mortgage Loans, the availability of mortgage funds, the use of second or "home equity" mortgage loans by mortgagors, the availability of refinancing opportunities (including refinancing opportunities offered by Chase Manhattan Mortgage Corporation to existing borrowers or to its affiliates), the use of the properties as second or vacation homes, the extent of the mortgagors' net equity in the Mortgaged Properties and, where investment properties are securing the Mortgage Loans, tax-related considerations and the availability of other investments. The rate of principal payment may also be subject to seasonal variations. The rate of principal prepayments on pools of conventional housing loans has fluctuated significantly in recent years. Generally, if prevailing interest rates were to fall significantly below the interest rates on the Mortgage Loans, the Mortgage Loans would be expected to prepay at higher rates than if prevailing rates were to remain at or above the interest rates on the Mortgage Loans. Conversely, if interest rates were to rise above the interest rates on the Mortgage Loans, the Mortgage Loans would be expected to prepay at lower rates than if prevailing rates were to remain at or below interest rates on the Mortgage Loans. The timing of changes in the rate of prepayments may significantly affect a Certificateholder's actual yield to maturity, even if the average rate of principal payments is consistent with a Certificateholder's expectation. In general, the earlier a prepayment of principal the greater the effect on a Certificateholder's yield to maturity. As a result, the effect on a Certificateholder's yield of principal payments occurring at a rate higher (or lower) than the rate anticipated by the investor during the period immediately following the issuance of the related series of Certificates will not be offset by a subsequent like reduction (or increase) in the rate of principal payments. To the extent described in the applicable Prospectus Supplement, the effective yields to Certificateholders will be lower than the yields produced by the interest rates on the Certificates because, while interest will accrue on each Mortgage Loan from the first day of each month, the distribution of such interest to Certificateholders will be made in the month following the month of accrual. When a Mortgage Loan prepays in full, the borrower will generally be required to pay interest on the amount of prepayment only to the prepayment date. When a partial prepayment of principal is made on a Mortgage Loan, the borrower generally will not be required to pay interest on the amount of the partial prepayment during the month in which such prepayment is made. In addition, a full or partial prepayment will not be required to be passed through to Certificateholders until the month following receipt. If and to the extent specified in the applicable Prospectus Supplement, under the Agreement, if a full or partial voluntary prepayment of a Mortgage Loan is made and does not include the full amount of interest on such Mortgage Loan which would have been due but for such prepayment to and including the end of the month in which the prepayment takes place, the servicer will be obligated to pay the interest thereon at the Remittance Rate from the date of prepayment through the end of such month (each such payment, a "Compensating Interest Payment"), provided that the aggregate of such Compensating Interest Payments by the Servicer with respect to any Distribution Date will not exceed the aggregate Servicing Fee to which the Servicer is entitled in connection with such Distribution Date. The Servicer will not be entitled to reimbursement for such Compensating Interest Payments. Consequently, to the extent the Servicer is so obligated, neither partial nor full prepayments will reduce the amount of interest passed through to Certificateholders the following month from the amount which would have been passed through in the absence of such prepayments. If the Servicer is not obligated to make Compensating Interest Payments, or if such payments are insufficient to cover the interest shortfall, partial or full prepayments will reduce the amount of interest passed through to Certificateholders, as described in the applicable Prospectus Supplement. Factors other than those identified herein and in the Prospectus Supplement could significantly affect principal prepayments at any time and over the lives of the Certificates. The relative contribution of the various factors affecting prepayment may also vary from time to time. There can be no assurance as to the rate of payment of principal of the Mortgage Loans at any time or over the lives of the Certificates. The Prospectus Supplement relating to a series of Certificates will discuss in greater detail the effect of the rate and timing of principal payments (including prepayments), delinquencies and losses on the yield, weighted average lives and maturities of such Certificates. 21 CHASE MANHATTAN ACCEPTANCE CORPORATION Chase Manhattan Acceptance Corporation was incorporated in the State of Delaware on March 1, 1988 and is a direct wholly-owned subsidiary of The Chase Manhattan Bank. The principal office of Chase Manhattan Acceptance Corporation is located at 343 Thornall Street, Edison, New Jersey 08837 and its telephone number is (732) 205-0600. It is not expected that Chase Manhattan Acceptance Corporation will have any business operations other than acquiring and pooling mortgage loans and other receivables and instruments, offering Certificates of the type described herein or other mortgage-related or asset-backed securities, and related activities. CHASE FUNDING, INC. Chase Funding, Inc. was incorporated in the State of New York on November 17, 1987 and is a direct wholly-owned subsidiary of The Chase Manhattan Corporation. The principal office of Chase Funding, Inc. is located at 343 Thornall Street, Edison, New Jersey 08837 and its telephone number is (732) 205-0600. It is not expected that Chase Funding, Inc. will have any business operations other than acquiring and pooling mortgage loans and other receivables and instruments, offering Certificates of the type described herein or other mortgage-related or asset-backed securities, and related activities. 22 SERVICING OF THE MORTGAGE LOANS With respect to each series of Certificates, the related Mortgage Loans will be serviced by Chase Manhattan Mortgage (or such other entity identified in the Prospectus Supplement), acting alone or, as master servicer, through one or more direct servicers. If Chase Manhattan Mortgage acts as master servicer with respect to a series, the related Agreement will provide that Chase Manhattan Mortgage shall not be released from its obligations to the Trustee and Certificateholders with respect to the servicing and administration of the Mortgage Loans, that any servicing agreement entered into between Chase Manhattan Mortgage and a direct servicer will be deemed to be between Chase Manhattan Mortgage and the direct servicer alone and that the Trustee and the Certificateholders will have no claims, obligations, duties or liabilities with respect to any such agreement. Collection and Other Servicing Procedures Subject to the terms of the Agreement, the Servicer generally will be obligated to service and administer the Mortgage Loans in accordance with the specific procedures set forth in the Fannie Mae Seller's Guide and Fannie Mae Servicing Guide, as amended or supplemented from time to time, and, to the extent such procedures are unavailable, in accordance with the mortgage servicing practices of prudent mortgage lending institutions. The Servicer will be responsible for using its best reasonable efforts to collect all payments called for under the Mortgage Loans and shall, consistent with each Agreement, follow such collection procedures as it deems necessary and advisable with respect to the Mortgage Loans. Consistent with the above, the Servicer, may, in its discretion, (i) waive any late payment charge and (ii) if a default on the related Mortgage Loan has occurred or is reasonably foreseeable, arrange with the mortgagor a schedule for the liquidation of a delinquency. In the event of any such arrangement the Servicer will be responsible for distributing funds with respect to such Mortgage Loan during the scheduled period in accordance with the original amortization schedule thereof and without regard to the temporary modification thereof. The Servicer will be obligated to use it best reasonable efforts to realize upon a defaulted Mortgage Loan in such manner as will maximize the payments to Certificateholders. In this regard, the Servicer may (directly or through a local assignee) sell the property at a foreclosure or trustee's sale, negotiate with the mortgagor for a deed in lieu of foreclosure or, in the event a deficiency judgment is available against the mortgagor or other person, foreclose against such property and proceed for the deficiency against the appropriate person. See "Material Legal Aspects of the Mortgage Loans--Anti-Deficiency Legislation and Other Limitations on Lenders" for a description of the limited availability of deficiency judgments. The amount of the ultimate net recovery (including the proceeds of any pool insurance or other guarantee), after reimbursement to the Servicer of its expenses incurred in connection with the liquidation of any such defaulted Mortgage Loan will be distributed to the related Certificateholders on the next Distribution Date following the month of receipt. If specified in the Prospectus Supplement, if such net recovery exceeds the Principal Balance of such Mortgage Loan plus one month's interest thereon at the Remittance Rate, the excess will be paid to the Servicer as additional servicing compensation. The Servicer will not be required to expend its own funds in connection with any foreclosure or towards the restoration of any Mortgaged Property unless it shall determine (i) that such restoration or foreclosure will increase the Liquidation Proceeds in respect of the related Mortgaged Loan to Certificateholders after reimbursement to itself for such expenses and (ii) that such expenses will be recoverable to it either through Liquidation Proceeds or Insurance Proceeds in respect of the related Mortgage Loan. If a Mortgaged Property has been or is about to be conveyed by the mortgagor, the Servicer will be obligated to accelerate the maturity of the Mortgage Loan, unless it reasonably believes it is unable to enforce that Mortgage Loan's "due-on-sale" clause under applicable law or such enforcement would adversely affect or jeopardize coverage under any related primary mortgage insurance policy or pool insurance policy. If it reasonably believes it may be restricted by law, for any reason, from enforcing such a "due-on-sale" clause, the Servicer, with the consent of the insurer under any insurance policy implicated thereby, may enter into an assumption and modification agreement 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. Any fee collected by the Servicer for entering into an assumption agreement will be retained by the Servicer as additional servicing compensation. For a description of circumstances in which the Servicer may be unable to enforce "due-on-sale" clauses, see "Material Legal Aspects of the Mortgage Loans--Enforceability of Certain Provisions". In connection with any such assumption, the Mortgage Rate borne by the related Mortgage Note may not be decreased. 23 The Servicer will maintain with one or more depository institutions one or more accounts into which it will deposit all payments of taxes, insurance premiums, assessments or comparable items received for the account of the mortgagors. Withdrawals from such account or accounts may be made only to effect payment of taxes, insurance premiums, assessments or comparable items, to reimburse the Servicer out of related collections for any cost incurred in paying taxes, insurance premiums and assessments or otherwise preserving or protecting the value of the Mortgages, to refund to mortgagors any amounts determined to be overages and to pay interest to mortgagors on balances in such account or accounts to the extent required by law. Private Mortgage Insurance If so specified in the related Prospectus Supplement, each Agreement will obligate the Servicer to exercise its best reasonable efforts to maintain and keep in full force and effect a private mortgage insurance policy on all Mortgage Loans that have a Loan-to-Value Ratio in excess of 80%. A private mortgage insurance policy may provide that, as an alternative to paying a claim thereunder, the mortgage insurer will have the right to purchase the Mortgage Loan following the receipt of a notice of default, at a purchase price equal to the sum of the principal balance of the Mortgage Loan, accrued interest thereon and the amount of certain advances made by the Servicer with respect to the Mortgage Loan. The mortgage insurer may have such purchase right after the borrower has failed to make three scheduled monthly payments (or one payment if it is the first payment due on the Mortgage Loan) or after any foreclosure or other proceeding affecting the Mortgage Loan or the Mortgaged Property has been commenced. The proceeds of any such purchase will be distributed to Certificateholders on the applicable Distribution Date. A mortgage insurer may be more likely to exercise such purchase option when prevailing interest rates are low relative to the interest rate borne by the defaulted Mortgage Loan, in order to reduce the aggregate amount of accrued interest that the insurer would be obligated to pay upon payment of a claim. Hazard Insurance The Servicer will cause to be maintained for each Mortgaged Property a standard hazard insurance policy. The coverage of such policy is required to be in an amount at least equal to the maximum insurable value of the improvements which are a part of such property from time to time or the principal balance owing on such Mortgage Loan from time to time, whichever is less. All amounts collected by the Servicer under any hazard policy (except for amounts to be applied to the restoration or repair of property subject to the related Mortgage or property acquired by foreclosure or amounts released to the related mortgagor in accordance with the Servicer's normal servicing procedures) will be deposited in the Collection Account. In general, the standard form of fire and extended coverage policy covers physical damage to or destruction of the improvements on the property by fire, lightning, explosion, smoke, windstorm and hail, riot, strike and civil commotion, subject to the conditions and exclusions particularized in each policy. Although the policies relating to the Mortgage Loans will be underwritten by different insurers and, therefore, will not contain identical terms and conditions, the basic terms thereof are dictated by state law. Such policies typically do not cover any physical damage resulting from the following: war, revolution, governmental actions, floods and other water-related causes, earth movement (including earthquakes, landslides and mud flow), nuclear reactions, pollution, wet or dry rot, vermin, rodents, insects or domestic animals, theft and, in certain cases, vandalism. The foregoing list is merely indicative of certain kinds of uninsured risks and is not intended to be all-inclusive. If the property securing a Mortgage Loan is located in a federally designated flood area, the Agreement will require that flood insurance be maintained in an amount representing coverage not less than the least of (i) the principal balance owing on such Mortgage Loan from time to time, (ii) the maximum insurable value of the improvements which are a part of such property from time to time or (iii) the maximum amount of insurance which is available under the Flood Disaster Protection Act of 1973, as amended. The Seller may also purchase special hazard insurance against certain of the uninsured risks described above. See "Credit Support--Special Hazard Insurance." Most of the properties securing the Mortgage Loans will be covered by homeowners' insurance policies, which, in addition to the standard form of fire and extended coverage, provide coverage for certain other risks. These homeowners' policies typically contain a "coinsurance" clause which in effect requires the insured at all 24 times to carry insurance of a specified percentage (generally 80% to 90%) of the full replacement value of the improvements on the property in order to recover the full amount of any partial loss. If the insured's coverage falls below this specified percentage, then the insurer's liability in the event of partial loss will not exceed the lesser of (i) the actual cash value (generally defined as replacement cost at the time and place of loss, less physical depreciation) of the improvements damaged or destroyed, or (ii) such proportion of the loss as the amount of insurance carried bears to the specified percentage of the full replacement cost of such improvements. Since the amount of hazard insurance the Servicer is required to cause to be maintained on the improvements securing the Mortgage Loans declines as the principal balances owing thereon decrease, if the residential properties securing the Mortgage Loans appreciate in value over time, the effect of coinsurance in the event of partial loss may be that hazard insurance proceeds will be insufficient to restore fully the damaged property. The Servicer will cause to be maintained on any Mortgaged Property acquired upon foreclosure, or by deed in lieu of foreclosure, hazard insurance with extended coverage in an amount which is at least equal to the lesser of (i) the maximum insurable value from time to time of the improvements which are a part of such property or (ii) the unpaid principal balance of the related Mortgage Loan at the time of such foreclosure or deed in lieu of foreclosure, plus accrued interest and the Servicer's good-faith estimate of the related liquidation expenses to be incurred in connection therewith. The Servicer may maintain, in lieu of causing individual hazard insurance policies to be maintained with respect to each Mortgage Loan, one or more blanket insurance policies covering hazard losses on the Mortgage Loans. The Servicer will pay the premium for such policy on the basis described therein and will pay any deductible amount with respect to claims under such policy relating to the Mortgage Loans. Advances To the extent specified in the Prospectus Supplement, in the event that any borrower fails to make any payment of principal or interest required under the terms of a Mortgage Loan, the Servicer will be obligated to advance the entire amount of such payment adjusted in the case of any delinquent interest payment to the applicable Net Mortgage Rate. This obligation to advance will be limited to amounts which the Servicer reasonably believes will be recoverable by it out of liquidation proceeds or otherwise in respect of such Mortgage Loan. The Servicer will be entitled to reimbursement for any such advance from related late payments on the Mortgage Loan as to which such advance was made. Furthermore, the Servicer will be entitled to reimbursement for any such advance (i) from Liquidation Proceeds or Insurance Proceeds received if such Mortgage Loan is foreclosed prior to any payment to Certificateholders in respect of the repossession or foreclosure and (ii) from receipts or recoveries on all other Mortgage Loans or from any other assets of the Trust Fund, for all or any portion of such advance which the Servicer determines, in good faith, may not be ultimately recoverable from such liquidation or insurance proceeds (a "Nonrecoverable Advance"). Any Nonrecoverable Advance will be reimbursable out of the assets of the Trust Fund. The amount of any scheduled payment required to be advanced by the Servicer will not be affected by any agreement between the Servicer and a borrower providing for the postponement or modification of the due date or amount of such scheduled payment. If specified in the Prospectus Supplement, the Trustee for the related series will make advances of delinquent payments of principal and interest in the event of a failure by the Servicer to perform such obligation. Any such obligation to make advances may be limited to amounts due holders of certain classes of Certificates of the related series or may be limited to specified periods or otherwise as specified in the Prospectus Supplement. Servicing and Other Compensation and Payment of Expenses The Servicer's primary compensation for its servicing activities will come from the payment to it, with respect to each interest payment on a Mortgage Loan, of all or a portion of the difference between the Mortgage Rate for such Mortgage Loan and the related Remittance Rate. In addition to its primary compensation, the Servicer will retain all assumption fees, late payment charges and other miscellaneous charges, all to the extent collected from borrowers. In the event the Servicer is acting as master servicer under an Agreement, it will receive compensation with respect to the performance of its activities as master servicer. 25 The Servicer generally will be responsible for paying all expenses incurred in connection with the servicing of the Mortgage Loans (subject to limited reimbursement as described under "The Pooling and Servicing Agreement---Payments on Mortgage Loans; Collection Account"), including, without limitation, payment of any premium for any Advance Guarantee, Deposit Guarantee, bankruptcy bond, repurchase bond or other guarantee or surety, payment of the fees and the disbursements of the Trustee and the and independent accountants, payment of the compensation of any direct servicers of the Mortgage Loans, payment of all fees and expenses in connection with the realization upon defaulted Mortgage Loans and payment of expenses incurred in connection with distributions and reports to Certificateholders. The Servicer may assign any of its primary servicing compensation in excess of that amount customarily retained as servicing compensation for similar assets. Resignation, Succession and Indemnification of the Servicer The Agreement will provide that the Servicer may not resign from its obligations and duties as servicer or master servicer thereunder, except upon determination that its performance of such duties is no longer permissible under applicable law. No such resignation will become effective until the Trustee or a successor has assumed the Servicer's servicing obligations and duties under such Agreement. The Guarantor's obligations under any Advance Guarantee or Deposit Guarantee will, upon issuance thereof, be irrevocable, subject to certain limited rights of assignment as described in the Prospectus Supplement if applicable. The Agreement will provide that neither the Seller nor the Servicer nor, if applicable, the Guarantor, nor any of their respective directors, officers, employees or agents, shall be under any liability to the Trust Fund or the Certificateholders of the related series for taking any action, or for refraining from taking any action, in good faith pursuant to such Agreement, or for errors in judgment; provided, however, that neither the Servicer nor, if applicable, the Guarantor, nor any such person, will be protected against any liability which would otherwise be imposed by reason of willful misfeasance, bad faith or gross negligence in the performance of duties or by reason of reckless disregard of obligations and duties thereunder. The Agreement will also provide that the Seller, the Servicer and, if applicable, the Guarantor and their respective directors, officers, employees and agents are entitled to indemnification by the related Trust Fund and will be held harmless against any loss, liability or expense incurred in connection with any legal action relating to the Agreement or the Certificates, other than any loss, liability or expense incurred by reason of willful misfeasance, bad faith or gross negligence in the performance of duties thereunder or by reason of reckless disregard of obligations and duties thereunder. In addition, each Agreement will provide that neither the Seller nor the Servicer nor, if applicable, the Guarantor is under any obligation to appear in, prosecute or defend any legal action which is not incidental to the Servicer's servicing responsibilities under such Agreement or the Guarantor's payment obligations under any Limited Guarantee, respectively, and which in its respective opinion may involve it in any expense or liability. Each of the Seller, the Servicer and, if applicable, the Guarantor may, however, in its respective discretion undertake any such action which it may deem necessary or desirable in respect of such Agreement and the rights and duties of the parties thereto and the interests of the Certificateholders thereunder. In such event, the legal expenses and costs of such action and any liability resulting therefrom will be expenses, costs and liabilities of the Trust Fund, and the Seller, the Servicer and, if applicable, the Guarantor, will be entitled to be reimbursed therefor from amounts deposited in the Collection Account. Any corporation into which the Servicer may be merged or consolidated or any corporation resulting from any merger, conversion or consolidation to which the Servicer is a party, or any corporation succeeding to the business of the Servicer, which assumes the obligations of the Servicer, will be the successor of the Servicer under each Agreement. 26 THE POOLING AND SERVICING AGREEMENT This prospectus summarizes the material provisions of the Agreement. The summaries do not purport to be complete and are subject to, and qualified in their entirety by reference to, the provisions of the Agreement applicable to a particular series of Certificates. Where particular provisions or terms used in the Agreements are referred to, such provisions or terms are as specified in the Agreements. Assignment of Mortgage Loans; Warranties At the time of issuance of each series of Certificates, the Seller will cause the Mortgage Loans in the Trust Fund represented by that series of Certificates to be assigned to the Trustee, together with all principal and interest due on or with respect to such Mortgage Loans, other than principal and interest due on or before the Cut-Off Date and prepayments of principal received before the Cut-Off Date. The Trustee, concurrently with such assignment, will execute and deliver Certificates evidencing such Trust Fund to the Seller in exchange for the Mortgage Loans. Each Mortgage Loan will be identified in a schedule appearing as an exhibit to the Agreement for that series (the "Mortgage Loan Schedule"). The Mortgage Loan Schedule will include, as to each Mortgage Loan, information as to the outstanding principal balance as of the close of business on the Cut-Off Date, as well as information respecting the Mortgage Rate, the current scheduled monthly payment, the number of months remaining until the stated maturity date of each Note and the location of the related Mortgaged Property. In addition, the Seller will, as to each Mortgage Loan, deliver to the Trustee (i) the Note, endorsed to the order of the Trustee by the holder/payee thereof without recourse; (ii) the "buy-down" agreement (if applicable); (iii) a Mortgage and Mortgage assignment meeting the requirements of the Agreement; (iv) all Mortgage assignments from the original holder of the Mortgage Loan, through any subsequent transferees to the transferee to the Trustee; (v) the original Lender's Title Insurance Policy, or other evidence of title, or if a policy has not been issued, a written commitment or interim binder or preliminary report of title issued by the title insurance or escrow company ; (vi) as to each Mortgage Loan, an original certificate of Primary Mortgage Insurance Policy (or copy certified to be true by the originator) to the extent required under the applicable requirements for the Mortgage Pool; and (vii) such other documents as may be described in the applicable Prospectus Supplement. Except as expressly permitted by the Agreement, all documents so delivered are to be original executed documents; provided, however, that in instances where the original recorded document has been retained by the applicable jurisdiction or has not yet been returned from recordation, the Seller may deliver a photocopy containing a certification of the appropriate judicial or other governmental authority of the jurisdiction, and the Servicer shall cause the originals of each Mortgage and Mortgage assignment which is so unavailable to be delivered to the Trustee as soon as available. The Trustee will hold such documents for each series of Certificates in trust for the benefit of all Certificateholders of such series. The Trustee is obligated to review such documents for each Mortgage Loan within 270 days after the conveyance of the Mortgage Loan to it. If any document is found by the Trustee not to have been executed or received or to be unrelated to the Mortgage Loan identified in the Agreement, the Trustee will promptly notify the Seller. The Seller, or another party specified in the applicable Prospectus Supplement, will be required to cure such defect or to repurchase the Mortgage Loan or to provide a substitute Mortgage Loan. See "Repurchase or Substitution" below. In the Agreement for each series, the Seller or another party described in the Agreement (the "Representing Party") will make certain representations and warranties with respect to the Mortgage Loans. The representations and warranties in each Agreement will generally include that (i) the information set forth in the Mortgage Loan Schedule is true and correct in all material respects at the date or dates with respect to which such information is furnished; (ii) each Mortgage constitutes a valid and enforceable first lien on the Mortgaged Property, including all improvements thereon (subject only to (A) the lien of current real property taxes and assessments, (B) covenants, conditions and restrictions, rights of way, easements and other matters of public record as of the date of recording of such Mortgage, such exceptions appearing of record being acceptable to mortgage lending institutions generally and specifically referred to in the Lender's Title Insurance Policy delivered to the originator of the Mortgage Loan and not adversely affecting the value of the Mortgaged Property and (C) other matters to which like properties are commonly subject which do not materially interfere with the benefits of the security intended to be provided by such Mortgage); (iii) at the date of initial issuance of the Certificates, no more than the percentage of the Mortgage Loans specified in the applicable Prospectus Supplement 27 were more than 30 days delinquent in payment and no more than the percentage of the Mortgage Loans specified in the applicable Prospectus Supplement had more than one delinquency in excess of 30 days during the preceding 12-month period; (iv) at the time each Mortgage Loan was originated and, to the best knowledge of the Representing Party, at the date of initial issuance of the Certificates, there are no delinquent taxes, assessments or other outstanding charges affecting the Mortgaged Property; (v) each Mortgage Loan was originated in compliance with and complied at the time of origination in all material respects with applicable laws, including usury, equal credit opportunity and disclosure laws; (vi) each Mortgage Loan is covered by a lender's title insurance policy insuring the priority of the lien of the Mortgage in the original principal amount of such Mortgage Loan (subject to exceptions acceptable in the industry, including exceptions with respect to surveys and endorsements), and each such policy is in full force and effect; and (vii) immediately prior to the assignment to the Trust Fund the Seller had good title to, and was the sole owner of, each Mortgage Loan free and clear of any lien, claim, charge, encumbrance or security interest of any kind. Upon the discovery or notice of a breach of any of such representations or warranties which materially and adversely affects the interests of the Certificateholders in a Mortgage Loan, the Seller or the applicable party will cure the breach or repurchase such Mortgage Loan or will provide a substitute Mortgage Loan in the manner described under "Repurchase or Substitution" below. This obligation to repurchase or substitute constitutes the sole remedy available to the Certificateholders or the Trustee for any such breach of representations and warranties. The Agreement for a Series of Certificates may provide that the Servicer may, at its sole option, purchase from the Trust Fund, at the price specified in the Agreement, any Mortgage Loan as to which the related Borrower has failed to make full payments as required under the related Note for three consecutive months. Payments on Mortgage Loans; Collection Account It is expected that the Agreement for each series of Certificates will provide that the Servicer will establish and maintain a trust account or accounts (the "Collection Account") in the name of the Trustee for the benefit of the Certificateholders. The amount at any time credited to the Collection Account will be fully-insured to the maximum coverage possible or shall be invested in Permitted Investments, all as described in the applicable Prospectus Supplement. In addition, a Certificate Account may be established for the purpose of making distributions to Certificateholders if and as described in the applicable Prospectus Supplement. The Servicer will deposit in the Collection Account, as described more fully in the applicable Prospectus Supplement, amounts representing the following collections and payments (other than in respect of principal of or interest on the Mortgage Loans due on or before the Cut-Off Date and prepayments of principal received before the Cut-Off Date): (i) all installments of principal and interest on the applicable Mortgage Loans and any principal and/or interest required to be advanced by the Servicer that were due on the immediately preceding Due Date, net of servicing fees due the Servicer and other amounts, if any, specified in the applicable Prospectus Supplement; (ii) all amounts received in respect of such Mortgage Loans representing late payments of principal and interest to the extent such amounts were not previously advanced by the Servicer with respect to such Mortgage Loans, net of servicing fees due the Servicer; (iii) all principal prepayments (whether full or partial) on such Mortgage Loans received, together with interest calculated at the Mortgage Rate (net of servicing fees due the Servicer) to the end of the calendar month during which such principal prepayment shall have been received by the Servicer, to the extent received from the mortgagor or advanced by the Servicer, as described under "Servicing of the Mortgage Loans--Advances" herein; and (iv) any amounts received by the Servicer as Insurance Proceeds (to the extent not applied to the repair or restoration of the Mortgaged Property) or Liquidation Proceeds. Repurchase or Substitution The Trustee will review the documents delivered to it with respect to the assets of the applicable Trust Fund within 270 days after execution and delivery of the related Agreement. If any document required to be delivered by the Seller is not delivered or is found to be defective in any material respect, then within 90 days after notice of such defect, the Seller will (a) cure such defect, (b) remove the affected Mortgage Loan from the Trust Fund 28 and substitute one or more other mortgage loans therefor or (c) repurchase the Mortgage Loan from the Trustee for a price equal to 100% of its Principal Balance plus interest thereon at the applicable Remittance Rate from the date on which interest was last paid to the first day of the month in which such purchase price is to be distributed to the related Certificateholders. This repurchase and substitution obligation constitutes the sole remedy available to Certificateholders or the Trustee on behalf of Certificateholders against the Seller for a material defect in a document relating to a Mortgage Loan. The Seller will agree, within 90 days of the earlier of the discovery by the Seller or receipt by the Seller of notice from the Trustee or the Servicer of its discovery of any breach of any representation or warranty of the Seller set forth in the related Agreement with respect to the Mortgage Loans that materially and adversely affects the interests of the Certificateholders in a Mortgage Loan (a "Defective Mortgage Loan") or the value of a Mortgage Loan, to either (a) cure such breach in all material respects, (b) repurchase such Defective Mortgage Loan at a price equal to 100% of its Principal Balance plus interest thereon at the applicable Remittance Rate from the date on which interest was last paid to the first day of the month in which such purchase price is to be distributed or (c) remove the affected Mortgage Loan from the Trust Fund and substitute one or more other mortgage loans or contracts therefor. This repurchase or substitution obligation will constitute the sole remedy available to Certificateholders or the Trustee on behalf of Certificateholders for any such breach. If so specified in the Prospectus Supplement for a series where the Seller has acquired the related Mortgage Loans, in lieu of agreeing to repurchase or substitute Mortgage Loans as described above, the Seller may obtain such an agreement from the entity which sold such mortgage loans, which agreement will be assigned to the Trustee for the benefit of the holders of the Certificates of such series. In such event, the Seller will have no obligation to repurchase or substitute mortgage loans if such entity defaults in its obligation to do so. If a mortgage loan is substituted for another Mortgage Loan as described above, the new mortgage loan will have the following characteristics, or such other characteristics as may be specified in the Prospectus Supplement: (i) a Principal Balance (together with any other new mortgage loan so substituted), as of the first Distribution Date following the month of substitution, after deduction of all payments due in the month of substitution, not in excess of the Principal Balance of the removed Mortgage Loan as of such Distribution Date (the amount of any difference, plus one month's interest thereon at the applicable Net Mortgage Rate, to be deposited in the Collection Account on the business day prior to the applicable Distribution Date), (ii) a Mortgage Rate not less than, and not more than one percentage point greater than, that of the removed Mortgage Loan, (iii) a remaining term to stated maturity not later than, and not more than one year less than, the remaining term to stated maturity of the removed Mortgage Loan, (iv) a Loan-to Value Ratio at origination not greater than that of the removed Mortgage Loan, and (v) in the reasonable determination of the Seller, be of the same type, quality and character (including location of the Mortgaged Property) as the removed Mortgage Loan (as if the defect or breach giving rise to the substitution had not occurred) and be, as of the substitution date, in compliance with the representations and warranties contained in the Agreement. If a REMIC election is to be made with respect to all or a portion of a Trust Fund, any such substitution will occur within two years after the initial issuance of the related Certificates. Certain Modifications and Refinancings The Agreement will permit the Servicer to modify any Mortgage Loan upon the request of the related Mortgagor, and will also permit the Servicer to solicit such requests by offering Mortgagors the opportunity to refinance their Mortgage Loans, provided in either case that the Servicer purchases such Mortgage Loan from the Trust Fund immediately following such modification. Any such modification may not be made unless the modification includes a change in the interest rate on the related Mortgage Loan to approximately a prevailing market rate. Any such purchase will be for a price equal to 100% of the Principal Balance of such Mortgage Loan, plus accrued and unpaid interest thereon to the date of purchase at the applicable Remittance Rate, net of any unreimbursed advances of principal and interest thereon made by the Servicer. Such purchases may occur when prevailing interest rates are below the interest rates on the Mortgage Loans and Mortgagors request (and/or the Servicer offers) modifications as an alternative to refinancings through other mortgage originators. If a REMIC election is made with respect to all or a portion of the related Trust Fund, the Servicer will indemnify the REMIC against liability for any prohibited transactions taxes and any related interest, additions or penalties imposed on the REMIC as a result of any such modification or purchase. 29 The Agreement will provide that if the Servicer in its individual capacity agrees to refinance any Mortgage Loan as described above, such Mortgage Loan will be assigned to the Servicer by the Trustee upon certification that the Principal Balance of such Mortgage Loan and accrued and unpaid interest thereon at the Remittance Rate has been deposited in the Collection Account. Forward Commitments; Pre-Funding The Trustee of a Trust Fund may enter into a Pre-Funding Agreement for the transfer of additional Mortgage Loans and Contracts to such Trust following the date on which such Trust is established and the related Securities are issued. The Trustee of a Trust may enter into Pre-Funding Agreements to permit the acquisition of additional Mortgage Loans that could not be delivered by the Depositor or have not formally completed the origination process, in each case prior to the Delivery Date. Any Pre-Funding Agreement will require that any Mortgage Loans so transferred to a Trust conform the requirements specified in such Pre-Funding Agreement. If a Pre-Funding Agreement is to be utilized, the related Trustee will be required to deposit in the Purchase Account all or a portion of the proceeds received by the Trustee in connection with the sale of one or more classes of Securities of the related series; the additional Mortgage Loans will be transferred to the related Trust in exchange for money released from the related Pre-Funding Account. Each Pre-Funding Agreement will set a specified period during which any such transfers must occur. The Pre-Funding Agreement or the related Agreement will require that, if all moneys originally deposited to such Pre-Funding Account are not so used by the end of such specified period, then any remaining moneys will be applied as a mandatory prepayment of the related class or classes of Securities as specified in the related Prospectus Supplement. The specified period for the acquisition by a Trust of additional Mortgage Loans is not expected to exceed three months from the date such Trust is established. Evidence as to Compliance The Agreement will provide that a firm of independent public accountants will furnish to the Trustee on or before April 15 of each year, beginning with April 15 in the fiscal year which begins not less than three months after the date of the initial issue of Certificates, a statement as to compliance by the Servicer with certain standards relating to the servicing of the Mortgage Loans. The Agreement will also provide for delivery to the Trustee on or before April 15 of each fiscal year, beginning with April 15 in the fiscal year which begins not less than three months after the date of the initial issue of the Certificates, a statement signed by an officer of the Servicer to the effect that, to the best of such officer's knowledge, the Servicer has fulfilled its obligations under the Agreement throughout the preceding year or, if there has been a default in the fulfillment of any such obligation, describing each such default. The Trustee Any commercial bank or trust company serving as Trustee may have normal banking relationships with the Seller and the Servicer. In addition, the Seller and the Trustee acting jointly will have the power and the responsibility for appointing co-trustees or separate trustees of all or any part of the Trust Fund relating to a particular series of Certificates. In the event of such appointment, all rights, powers, duties and obligations conferred or imposed upon the Trustee by the Agreement shall be conferred or imposed upon the Trustee and such separate trustee or co-trustee jointly, or, in any jurisdiction in which the Trustee shall be incompetent or unqualified to perform certain acts, singly upon such separate trustee or co-trustee who shall exercise and perform such rights, powers, duties and obligations solely at the direction of the Trustee. The Trustee will make no representations as to the validity or sufficiency of the Agreement, the Certificates (other than the signature and countersignature of the Trustee on the Certificates) or of any Mortgage Loan or related document, and will not be accountable for the use or application by the Seller or Servicer of any funds paid to the Seller or Servicer in respect of the Certificates or the related assets, or amounts deposited into the Collection Account. If no Event of Default has occurred, the Trustee will be required to perform only those duties specifically required of it under the Agreement. However, upon receipt of the various certificates, reports or other instruments required to be furnished to it, the Trustee will be required to examine them to determine whether they conform to the requirements of the Agreement. 30 The Trustee may resign at any time, and the Seller may remove the Trustee if the Trustee ceases to be eligible to continue as such under the Agreement, if the Trustee becomes insolvent or in such other instances, if any, as are set forth in the Agreement. Following any resignation or removal of the Trustee, the Seller will be obligated to appoint a successor Trustee, any such successor to be approved by the Guarantor if so specified in the Prospectus Supplement in the event that the Guarantor has issued any Limited Guarantee with respect to the Certificates. Any resignation or removal of the Trustee and appointment of a successor Trustee does not become effective until acceptance of the appointment by the successor Trustee. Reports to Certificateholders On each Distribution Date, the Servicer or the paying agent will mail to Certificateholders a statement prepared by it and generally setting forth, to the extent applicable to any series, among other things: (i) The aggregate amount of the related distribution allocable to principal, separately identifying the amount allocable to each class; (ii) The amount of such distribution allocable to interest separately identifying the amount allocable to each class; (iii) The amount of servicing compensation received by the Servicer in respect of the Mortgage Loans during the month preceding the month of the Distribution Date; (iv) The aggregate Certificate Principal Balance (or Notional Principal Balance) of each class of Certificates after giving effect to distributions and allocations, if any, of losses on the Mortgage Loans on such Distribution Date; (v) The aggregate Certificate Principal Balance of any class of Accrual Certificates after giving effect to any increase in such Certificate Principal Balance that results from the accrual of interest that is not yet distributable thereon; (vi) The aggregate amount of any advances made by the Servicer included in the amounts distributed to Certificateholders on such Distribution Date; (vii) If any class of Certificates has priority in the right to receive Principal Prepayments, the amount of Principal Prepayments in respect of the Mortgage Loans; and (viii) The aggregate Principal Balance of Mortgage Loans which were delinquent as to a total of one, two or three or more installments of principal and interest or were in foreclosure. The Servicer will provide Certificateholders which are federally insured savings and loan associations with certain reports and with access to information and documentation regarding the Mortgage Loans included in the Trust Fund sufficient to permit such associations to comply with applicable regulations of the Office of Thrift Supervision. Events of Default Events of Default under the Agreement with respect to a series of Certificates will consist of: (i) any failure by the Servicer in the performance of any obligation under the Agreement which causes any payment required to be made under the terms of the Certificates or the Agreement not to be timely made, which failure continues unremedied for a period of three business days after the date upon which written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer by the Trustee or the Seller, or to the Servicer, the Seller and the Trustee by Certificateholders representing not less than 25% of the Voting Rights of any class of Certificates; (ii) any failure on the part of the Servicer duly to observe or perform in any material respect any other of the covenants or agreements on the part of the Servicer in the Certificates or in the Agreement which failure continues unremedied for a period of 60 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer by the Trustee, or to the Servicer and the Trustee by Certificateholders representing not less than 25% of the Voting Rights of all classes of Certificates; (iii) the entering against the Servicer of a decree or order of a court, agency or supervisory authority having jurisdiction in the premises for the appointment of a conservator, receiver or liquidator in any 31 insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, provided that any such decree or order shall have remained in force undischarged or unstayed for a period of 60 days; (iv) the consent by the Servicer to the appointment of a conservator, receiver, liquidator or liquidating committee in any insolvency, readjustment of debt, marshalling of assets and liabilities, voluntary liquidation or similar proceedings of or relating to the Servicer or of or relating to all or substantially all of its property; (v) the admission by the Servicer in writing of its inability to pay its debts generally as they become due, the filing by the Servicer of a petition to take advantage of any applicable insolvency or reorganization statute, the making of an assignment for the benefit of its creditors or the voluntary suspension of the payment of its obligations; and (vi) notice by the Servicer that it is unable to make an Advance required to be made pursuant to the Agreement. Rights Upon Event of Default As long as an Event of Default under the Agreement remains unremedied by the Servicer, the Trustee, or holders of Certificates evidencing interests aggregating more than 50% of such Certificates, may terminate all of the rights and obligations of the Servicer under the Agreement, whereupon the Trustee will succeed to all the responsibilities, duties and liabilities of the Servicer under the Agreement and will be entitled to similar compensation arrangements, provided that if the Trustee had no obligation under the Agreement to make advances of delinquent principal and interest on the Mortgage Loans upon the failure of the Servicer to do so, or if the Trustee had such obligation but is prohibited by law or regulation from making such advances, the Trustee will not be required to assume such obligation of the Servicer. The Servicer shall be entitled to payment of certain amounts payable to it under the Agreement, notwithstanding the termination of its activities as servicer. No such termination will affect in any manner the Guarantor's obligations under any Limited Guarantee, except that the obligation of the Servicer to make advances of delinquent payments of principal and interest (adjusted to the applicable Remittance Rate) will become the direct obligations of the Guarantor under the Advance Guarantee until a new servicer is appointed. In the event that the Trustee is unwilling or unable so to act, it may appoint, or petition a court of competent jurisdiction for the appointment of, a housing and home finance institution with a net worth of at least $15,000,000 and is a FNMA or FHLMC approved seller/servicer in good standing and, if the Guarantor has issued any Limited Guarantee with respect to the Certificates, approved by the Guarantor, to act as successor to the Company, as servicer, under such Agreement. In addition, if the Guarantor has issued any Limited Guarantee with respect to the related series of Certificates, the Guarantor will have the right to replace any successor servicer with an institution meeting the requirements described in the preceding sentence. The Trustee and such successor may agree upon the servicing compensation to be paid, which in no event may be greater than the compensation to the Servicer under such Agreement. No holder of Certificates will have any right under the Agreement to institute any proceeding with respect to the Agreement, unless such holder previously has given to the Trustee written notice of default and unless the holders of Certificates of any class evidencing, in the aggregate, 25% or more of the interests in such class have made written request to the Trustee to institute such proceeding in its own name as Trustee thereunder and have offered to the Trustee reasonable indemnity and the Trustee for 60 days after receipt of such notice, request and offer of indemnity has neglected or refused to institute any such proceedings. However, the Trustee is under no obligation to exercise any of the trusts or powers vested in it by the Agreement or to make any investigation of matters arising thereunder or to institute, conduct or defend any litigation thereunder or in relation thereto at the request, order or direction of any of the Certificateholders, unless such Certificateholders have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby. Amendment The Agreement may be amended by the Seller, the Servicer and the Trustee, and if the Guarantor has issued any Limited Guarantee with respect to the Certificates, with the consent of the Guarantor, but without Certificateholder consent, to cure any ambiguity, to correct or supplement any provision therein which may be inconsistent with any other provision therein, to take any action necessary to maintain REMIC status of any Trust Fund as to which a REMIC election has been made, to avoid or minimize the risk of the imposition of any tax on the Trust Fund pursuant to the Code or to make any other provisions with respect to matters or questions 32 arising under the Agreement which are not materially inconsistent with the provisions of the Agreement; provided that such action will not, as evidenced by an opinion of counsel satisfactory to the Trustee, adversely affect in any material respect the interests of any Certificateholders of that series. The Agreement may also be amended by the Seller, the Servicer and the Trustee with the consent of holders of Certificates evidencing interests aggregating not less than 66 2/3% of all interests of each class affected by such amendment, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of such Agreement or of modifying in any manner the rights of Certificateholders of that series; provided, however, that no such amendment may (i) reduce in any manner the amount of, or delay the timing of, payments received on Mortgage Loans which are required to be distributed in respect of any Certificate without the consent of the holder of such Certificate, or (ii) reduce the aforesaid percentage of Certificates, the holders of which are required to consent to any such amendment, without the consent of the holders of all Certificates of such affected class then outstanding. Termination; Purchase of Mortgage Loans The obligations of the parties to the Agreement for each Series will terminate upon (i) the purchase of all the Mortgage Loans, as described in the applicable Prospectus Supplement or (ii) the later of (a) the distribution to Certificateholders of that series of final payment with respect to the last outstanding Mortgage Loan, or (b) the disposition of all property acquired upon foreclosure or deed-in-lieu of foreclosure with respect to the last outstanding Mortgage Loan and the remittance to the Certificateholders of all funds due under the Agreement. In no event, however, will the trust created by an Agreement continue beyond the expiration of 21 years from the death of the survivor of the descendants living on the date of the Agreement of a specific person named in such Agreement. With respect to each series, the Trustee will give or cause to be given written notice of termination of the Agreement to each Certificateholder, and the final distribution under the Agreement will be made only upon surrender and cancellation of the related Certificates at an office or agency specified in the notice of termination. As described in the applicable Prospectus Supplement, the Agreement for each series may permit, but not require, the Seller, the Servicer or another party to purchase from the Trust Fund for such series all remaining Mortgage Loans and all property acquired in respect of the Mortgage Loans, at a price described in the Prospectus Supplement, subject to the condition that the aggregate outstanding principal balance of the Mortgage Loans for such series at the time of purchase shall be less than a percentage of the aggregate principal balance at the Cut-Off Date specified in the Prospectus Supplement. The exercise of such right will result in the early retirement of the Certificates of that series. 33 MATERIAL LEGAL ASPECTS OF THE MORTGAGE LOANS The following discussion contains summaries of the material legal aspects of mortgage loans. General The Mortgages will be either deeds of trust or mortgages. A mortgage creates a lien upon the real property encumbered by the mortgage. It is not prior to the lien for real estate taxes and assessments. Priority between mortgages depends on their terms and generally on the order of filing with a state or county office. There are two parties to a mortgage: the mortgagor, who is the borrower and homeowner or the land trustee or the trustee of an inter vivos revocable trust (as described below), and the mortgagee, who is the lender. Under the mortgage instrument, the mortgagor delivers to the mortgagee a note or bond and the mortgage. In the case of a land trust, there are three parties because title to the property is held by a land trustee under a land trust agreement of which the borrower/homeowner is the beneficiary; at origination of a mortgage loan, the borrower executes a separate undertaking to make payments on the mortgage note. In the case of an inter vivos revocable trust, there are three parties because title to the property is held by the trustee under the trust instrument of which the home occupant is the primary beneficiary; at origination of a mortgage loan, the primary beneficiary and the trustee execute a mortgage note and the trustee executes a mortgage or deed of trust, with the primary beneficiary agreeing to be bound by its terms. Although a deed of trust is similar to a mortgage, a deed of trust normally has three parties, the borrower-homeowner called the trustor (similar to a mortgagor), a lender (similar to a mortgagee) called the beneficiary, and a third-party grantee called the trustee. Under a deed of trust, the borrower grants the property, irrevocably until the debt is paid, in trust and generally with a power of sale, to the trustee to secure payment of the obligation. The trustee's authority under a deed of trust and the mortgagee's authority under a mortgage are governed by the law of the state in which the real property is located, as well as by federal law, the express provisions of the deed of trust or mortgage and, in some cases, the directions of the beneficiary. Foreclosure Foreclosure of a deed of trust is generally accomplished by a non-judicial trustee's sale under a specific provision in the deed of trust that authorizes the trustee to sell the property to a third party upon any default by the borrower under the terms of the note or deed of trust. In some states, the trustee must record a notice of default and send a copy to the borrower-trustor and any person who has recorded a request for a copy of a notice of default and notice of sale. In addition, the trustee must provide notice in some states to any other individual having an interest in the real property, including any junior lien holders. The borrower, or any other person having a junior encumbrance on the real estate, may, during a reinstatement period, cure the default by paying the entire amount in arrears plus the costs and expenses incurred in enforcing the obligation. Generally, state law controls the amount of foreclosure expenses and costs, including attorney's fees, which may be recovered by a lender. If the deed of trust is not reinstated, a notice of sale must be posted in a public place and, in most states, published for a specific period of time in one or more newspapers. In addition, some state laws require that a copy of the notice of sale be posted on the property and sent to all parties having an interest in the real property. Foreclosure of a mortgage is generally accomplished by judicial action. The action is initiated by the service of legal pleadings upon all parties having an interest in the real property. Delays in completion of the foreclosure may occasionally result from difficulties in locating necessary parties defendant. Judicial foreclosure proceedings are often not protested by any of the parties defendant. However, when the mortgagee's right to foreclose is contested, the legal proceedings necessary to resolve the issue can be time consuming. After the completion of judicial foreclosure, the court generally issues a judgment of foreclosure and appoints a referee or other court officer to conduct the sale of the property. A junior mortgagee may not foreclose on the property securing a junior mortgage unless it forecloses subject to the senior mortgages, in which case it must either pay the entire amount due on the senior mortgages to the senior mortgagees prior to or at the time of the foreclosure sale or undertake the obligation to make payments on the senior mortgages in the event the mortgagor is in default thereunder. In either event, the amounts expended are added to the balance due on the junior loan, and the rights of the junior mortgagee may be subrogated to the rights of the senior mortgagees. In addition, in the event that the foreclosure of a junior mortgage 34 triggers the enforcement of a "due-on-sale" clause, the junior mortgagee may be required to pay the full amount of the senior mortgages to the senior mortgagees. Accordingly, with respect to those Mortgage Loans which are junior mortgage loans, if the lender purchases the property, the lender's title will be subject to all senior liens and claims and certain governmental liens. The proceeds received by the referee or trustee from the sale are applied first to the costs, fees and expenses of sale and then in satisfaction of the indebtedness secured by the mortgage or deed of trust under which the sale was conducted. Any remaining proceeds are generally payable to the holders of junior mortgages or deeds of trust and other liens and claims in order of their priority, whether or not the borrower is in default. Any additional proceeds are generally payable to the mortgagor or trustor. The payment of the proceeds to the holders of junior mortgages may occur in the foreclosure action of the senior mortgagee or may require the institution of separate legal proceeds. In case of foreclosure under either a mortgage or a deed of trust, the sale by the referee or other designated officer or by the trustee is a public sale. However, because of the difficulty a potential buyer at the sale would have in determining the exact status of title and because the physical condition of the property may have deteriorated during the foreclosure proceedings, it is uncommon for a third party to purchase the property at the foreclosure sale. Rather, it is common for the lender to purchase the property from the trustee or referee for an amount equal to the principal amount of the mortgage or deed of trust, accrued and unpaid interest and expenses of foreclosure. Thereafter, the lender will assume the burdens of ownership, including obtaining casualty insurance, paying taxes and making such repairs at its own expense as are necessary to render the property suitable for sale. The lender will commonly obtain the services of a real estate broker and pay the broker's commission in connection with the sale of the property. Depending upon market conditions, the ultimate proceeds of the sale of the property may not equal the lender's investment in the property. Any loss may be reduced by the receipt of any mortgage insurance proceeds. In foreclosure, courts have imposed general equitable principles. The equitable principles are generally designed to relieve the borrower from the legal effect of its defaults under the loan documents. Examples of judicial remedies that have been fashioned include judicial requirements that the lender undertake affirmative and expensive actions to determine the causes for the borrower's default and the likelihood that the borrower will be able to reinstate the loan. In some cases, courts have substituted their judgment for the lender's judgment and have required that the lenders reinstate loans or recast payment schedules in order to accommodate borrowers who are suffering from temporary financial disability. In other cases, courts have limited the right of a lender to foreclose if the default under the mortgage instrument is not monetary, such as the borrower's failure to adequately maintain the property or the borrower's execution of a second mortgage or deed of trust affecting the property. Some courts have been faced with the issue of whether or not federal or state constitutional provisions reflecting due process concerns for adequate notice require that borrowers under deeds of trust or mortgages receive notices in addition to the statutorily prescribed minimum. For the most part, these cases have upheld the notice provisions as being reasonable or have found that the sale by a trustee under a deed of trust, or under a mortgage having a power of sale, does not involve sufficient state action to afford constitutional protections to the borrower. Right of Redemption In some states, after sale pursuant to a deed of trust or foreclosure of a mortgage, the borrower and foreclosed junior lienors are given a statutory period in which to redeem the property from the foreclosure sale. In some states, the right to redeem is an equitable right. The equity of redemption, which is a non-statutory right that must be exercised prior to a foreclosure sale, should be distinguished from statutory rights of redemption. In some states, redemption may occur only upon payment of the entire principal balance of the loan, accrued interest and expenses of foreclosure. In other states, redemption may be authorized if the former borrower pays only a portion of the sums due. The effect of a statutory right of redemption is to diminish the ability of the lender to sell the foreclosed property. The rights of redemption would defeat the title of any purchaser from the lender subsequent to foreclosure or sale under a deed of trust. Consequently, the practical effect of the redemption right is to force the lender to retain the property and pay the expenses of ownership until the redemption period has run. 35 Anti-Deficiency Legislation and Other Limitations on Lenders Anti-Deficiency Statutes Certain states have imposed statutory prohibitions that limit the remedies of a beneficiary under a deed of trust or a mortgagee under a mortgage. In some states, statutes limit the right of the beneficiary or mortgagee to obtain a deficiency judgment against the borrower following foreclosure or sale under a deed of trust. A deficiency judgment would be a personal judgment against the former borrower equal in most cases to the difference between the net amount realized upon the public sale of the real property and the amount due to the lender. Other statutes require the beneficiary or mortgagee to exhaust the security afforded under a deed of trust or mortgage by foreclosure in an attempt to satisfy the full debt before bringing a personal action against the borrower. Finally, other statutory provisions limit any deficiency judgment against the former borrower following a judicial sale to the excess of the outstanding debt over the fair market value of the property at the time of the public sale. The purpose of these statutes is generally to prevent a beneficiary or a mortgagee from obtaining a large deficiency judgment against the former borrower as a result of low or no bids at the judicial sale. Bankruptcy Laws In addition to laws limiting or prohibiting deficiency judgments, numerous other statutory provisions, including the federal bankruptcy laws and state laws affording relief to debtors, may interfere with or affect the ability of the secured mortgage lender to realize upon collateral and/or enforce a deficiency judgment. For example, with respect to federal bankruptcy law, the filing of a petition acts as a stay against the enforcement of remedies in connection with the collection of a debt. Moreover, a court with federal bankruptcy jurisdiction may permit a debtor through his or her Chapter 11 or Chapter 13 plan of reorganization to cure a monetary default in respect of a mortgage loan on a debtor's residence by paying arrearages within a reasonable time period and reinstating the original mortgage loan payment schedule even though the lender accelerated the mortgage loan and final judgment of foreclosure had been entered in state court (provided no sale of the residence had yet occurred) prior to the filing of the debtor's petition. Some courts with federal bankruptcy jurisdiction have approved plans, based on the particular facts of the reorganization case, that effected the curing of a mortgage loan default by paying arrearages over a number of years. Courts with federal bankruptcy jurisdiction have also indicated that the terms of a mortgage loan secured by property of the debtor may be modified if the borrower has filed a petition under Chapter 11 or Chapter 13. These courts have suggested that such modifications may include reducing the amount of each monthly payment, changing the rate of interest, altering the repayment schedule and reducing the lender's security interest to the value of the residence, thus leaving the lender a general unsecured creditor for the difference between the value of the residence and the outstanding balance of the loan. If the borrower has filed a petition under Chapter 13, federal bankruptcy law and limited case law indicate that the foregoing modifications could not be applied to the terms of a loan secured solely by property that is the principal residence of the debtor. In all cases, the secured creditor is entitled to the value of its security plus post-petition interest, attorneys' fees, if specifically provided for, and costs to the extent the value of the security exceeds the debt. Tax Liens The Internal Revenue Code of 1986, as amended, provides priority to certain tax liens over the lien of the mortgage. This may have the effect of delaying or interfering with the enforcement of rights with respect to a defaulted Mortgage Loan. Consumer Protection Laws Substantive requirements are imposed upon mortgage lenders in connection with the origination and the servicing of mortgage loans by numerous federal and some state consumer protection laws. These laws and their implementing regulations include the federal Truth in Lending Act (and Regulation Z), Real Estate Settlement Procedures Act (and Regulation X), Equal Credit Opportunity Act (and Regulation B), Fair Credit Billing Act, Fair Credit Reporting Act, Fair Housing Act, as well as other related statutes and regulations. These federal laws impose specific statutory liabilities upon lenders who originate mortgage loans and who fail to comply with the provisions of the law. In some cases, this liability may affect assignees of the mortgage loans In particular, the 36 originators' failure to comply with certain requirements of the federal Truth-in-Lending Act, as implemented by Regulation Z, could subject both originators and assignees of such obligations to monetary penalties and could result in obligors rescinding the mortgage loans against either the originators or assignees. For Truth in Lending violations, one of the remedies available to the borrowers under certain affected non-purchase money mortgage loans is rescission, which, if elected by the borrower, would serve to cancel the loan and merely require the borrower to pay the principal balance of the mortgage loan, less a credit for interest paid, closing costs and prepaid finance charges. The Seller or another Representing Party will represent in the Agreement that all applicable laws, including the Truth in Lending Act, were complied with in connection with origination of the Mortgage Loans. In the event that such representation is breached in respect of any Mortgage Loan in a manner that materially and adversely affects Certificateholders, the Seller or such Representing Party will be obligated to repurchase the affected Mortgage Loan at a price equal to the unpaid principal balance thereof plus accrued interest as provided in the Agreement or to substitute a new mortgage loan in place of the affected Mortgage Loan. Enforceability of Due-on-Sale Clauses Unless the Prospectus Supplement indicates otherwise, all of the Mortgage Loans will contain due-on-sale clauses. These clauses permit the lender to accelerate the maturity of a loan if the borrower sells, transfers, or conveys the property. The enforceability of these clauses was the subject of legislation or litigation in many states, and in some cases the enforceability of these clauses was limited or denied. However, the Garn-St Germain Depository Institutions Act of 1982 (the "Garn-St Germain Act") preempts state constitutional, statutory and case law prohibiting the enforcement of due-on-sale clauses and permits lenders to enforce these clauses in accordance with their terms, subject to certain limited exceptions contained in the Garn-St Germain Act and regulations promulgated by Office of Thrift Supervision (the "OTS"), as successor to the Federal Home Loan Bank Board. The Garn-St Germain Act does "encourage" lenders to permit assumption of loans at the original rate of interest or at some other rate less than the average of the original rate and the market rate. Due-on-sale clauses contained in mortgage loans originated by federal savings and loan associations or federal savings banks are fully enforceable pursuant to regulations of the OTS which preempt state law restrictions on the enforcement of due-on-sale clauses. The Garn-St Germain Act also sets forth nine specific instances in which a mortgage lender covered by the Garn-St Germain Act (including federal savings and loan associations and federal savings banks) may not exercise a due-on-sale clause, notwithstanding the fact that a transfer of the property may have occurred. These include intra-family transfers, certain transfers by operation of law, leases of three years or less and the creation of a junior encumbrance. Regulations promulgated under the Garn-St Germain Act by the Federal Home Loan Bank Board as succeeded by the OTS also prohibit the imposition of a prepayment penalty upon the acceleration of a loan pursuant to a due-on-sale clause. If interest rates were to rise above the interest rates on the Mortgage Loans, then any inability of the Servicer to enforce due-on-sale clauses may result in the Trust Fund including a greater number of loans bearing below-market interest rates than would otherwise be the case, since a transferee of the property underlying a Mortgage Loan would have a greater incentive in such circumstances to assume the transferor's Mortgage Loan. Any inability of the Servicer to enforce due-on-sale clauses may affect the average life of the Mortgage Loans and the number of Mortgage Loans that may be outstanding until maturity. Applicability of Usury Laws Title V of the Depository Institutions Deregulation and Monetary Control Act of 1980, enacted in March 1980 ("Title V"), provides that state usury limitations shall not apply to certain types of residential first mortgage loans originated by certain lenders after March 31, 1980. The OTS, as successor to the Federal Home Loan 37 Bank Board, is authorized to issue rules and regulations and to publish interpretations governing implementation of Title V. The statute authorized any state to reimpose interest rate limits by adopting, before April 1, 1983, a law or constitutional provision which expressly rejects application of the federal law. In addition, even where Title V is not so rejected, any state is authorized by the law to adopt a provision limiting discount points or other charges on mortgage loans covered by Title V. Under the Agreement for each series of Certificates, the Seller will represent and warrant to the Trustee that the Mortgage Loans have been originated in compliance in all material respects with applicable state laws, including usury laws. Soldiers' and Sailors' Civil Relief Act Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as amended (the "Relief Act"), a borrower who enters military service after the origination for such borrower's Mortgage Loan (including a borrower who was in reserve status and is called to active duty after origination of the Mortgage Loan), may not be charged interest (including fees and charges) above an annual rate of 6% during the period of such borrower's active duty status, unless a court orders otherwise upon application of the lender. The Relief Act applies to borrowers who are members of the Army, Navy, Air Force, Marines, National Guard, Reserves, Coast Guard, and officers of the U.S. Public Health Service ordered to federal duty with the military. Because the Relief Act applies to borrowers who enter military service (including reservists who are called to active duty) after origination of the related Mortgage Loan, no information can be provided as to the number of loans that may be affected by the Relief Act. Application of the Relief Act would adversely affect, for an indeterminate period of time, the ability for the Master Servicer to collect full amounts of interest on certain of the Mortgage Loans. Any shortfalls in interest collections resulting from the application for the Relief Act will be allocated on a pro rata basis to the Certificates. In addition, the Relief Act imposes limitations that would impair the ability of the Master Servicers to foreclose on an affected Mortgage Loan during the borrower's period of active duty status, and, under certain circumstances, during an additional three month period thereafter. Thus, in the event that such a Mortgage Loan goes into default, there may be delays and losses occasioned thereby. Under the applicable Agreement, the Servicer will not be required to make deposits to the Collection Account for a series of Certificates in respect of any Mortgage Loan as to which the Relief Act has limited the amount of interest the related borrower is required to pay each month, and Certificateholders will bear such loss. Late Charges, Default Interest and Limitations on Prepayment Notes and mortgages may contain provisions that obligate the borrower to pay a late charge or additional interest if payments are not timely made, and in some circumstances, may prohibit prepayments for a specified period and/or condition prepayments upon the borrower's payment of prepayment fees or yield maintenance penalties. In certain states, there are or may be specific limitations upon the late charges which a lender may collect from a borrower for delinquent payments. Certain states also limit the amounts that a lender may collect from a borrower as an additional charge if the loan is prepaid. In addition, the enforceability of provisions that provide for prepayment fees or penalties upon involuntary prepayment is unclear under the laws of many states. Most conventional single-family mortgage loans may be prepaid in full or in part without penalty. The regulations of the Federal Home Loan Bank Board, as succeeded by the OTS, prohibit the imposition of a prepayment penalty or equivalent fee for or in connection with the acceleration of a loan by exercise of a due-on-sale clause. A mortgagee to whom a prepayment in full has been tendered may be compelled to give either a release of the mortgage or an instrument assigning the existing mortgage. The absence of a restraint on prepayment, particularly with respect to Mortgage Loans having higher mortgage rates, may increase the likelihood of refinancing or other early retirements of the Mortgage Loans. Environmental Considerations Under the federal Comprehensive Environmental Response, Compensation and Liability Act, as amended ("CERCLA"), and under state law in certain states, a secured party which takes a deed-in-lieu of foreclosure, purchases a mortgaged property at a foreclosure sale, or operates a mortgaged property may become liable in 38 certain circumstances for the costs of cleaning up hazardous substances regardless of whether they have contaminated the property. CERCLA imposes strict, as well as joint and several, liability on several classes of potentially responsible parties, including current owners and operators of the property who did not cause or contribute to the contamination. Furthermore, liability under CERCLA is not limited to the original or unamortized principal balance of a loan or to the value of the property securing a loan. Lenders may be held liable under CERCLA as owners or operators unless they qualify for the secured creditor exemption to CERCLA. This exemption exempts from the definition of owners and operators those who, without participating in the management of a facility, hold indicia of ownership primarily to protect a security interest in the facility. The Asset Conservation, Lender Liability and Deposit Insurance Act of 1996 (the "Conservation Act") amended, among other things, the provisions of CERCLA with respect to lender liability and the secured creditor exemption. The Conservation Act offers substantial protection to lenders by defining the activities in which a lender can engage and still have the benefit of the secured creditor exemption. In order for lender to be deemed to have participated in the management of a mortgaged property, the lender must actually participate in the operational affairs of the property of the borrower. The Conservation Act provides that "merely having the capacity to influence, or unexercised right to control" operations does not constitute participation management. A lender will lose the protection of the secured creditor exemption only if it exercises decision-making control over the borrower's environmental compliance and hazardous substance handling and disposal practices, or assumes day-to-day management of all operational functions of the mortgaged property. The Conservation Act also provides that a lender will continue to have the benefit of the secured creditor exemption even if it forecloses on a mortgaged property, purchases it at a foreclosure sale or accepts a deed-in-lieu of foreclosure provided that the lender seeks to sell the mortgaged property at the earliest practicable commercially reasonable time on commercially reasonable terms. Other federal and state laws in certain circumstances may impose liability on a secured party which takes a deed-in-lieu of foreclosure, purchases a mortgaged property at a foreclosure sale, or operates a mortgaged property on which contaminants other than CERCLA hazardous substances are present, including petroleum, agricultural chemicals, hazardous wastes, asbestos, radon, and lead-based paint. Such cleanup costs may be substantial. It is possible that such cleanup costs could become a liability of a Trust Fund and reduce the amounts otherwise distributable to the holders of the related series of Certificates. Moreover, certain federal statutes and certain states by statute impose a lien for any cleanup costs incurred by such state on the property that is the subject of such cleanup costs (an "Environmental Lien"). All subsequent liens on such property generally are subordinated to Environmental Liens. In the latter states, the security interest of the Trustee in a related parcel of real property that is subject to such an Environmental Lien could be adversely affected. Traditionally, many residential mortgage lenders have not taken steps to evaluate whether contaminants are present with respect to any mortgaged property prior to the origination of the mortgage loan or prior to foreclosure or accepting a deed-in-lieu of foreclosure. Neither the Seller nor any replacement Servicer will be required by any Agreement to undertake any such evaluations prior to foreclosure or accepting a deed-in-lieu of foreclosure. The Seller does not make any representations or warranties or assume any liability with respect to the absence or effect of contaminants on any related real property or any foreclose on related real property or accept a deed-in-lieu of foreclosure if it knows or reasonably believes that there are material contaminated conditions on such property. A failure so to foreclose may reduce the amounts otherwise available to Certificateholders of the related series. Except as otherwise specified in the applicable Prospectus Supplement, at the time the Mortgage Loans were originated, no environmental assessment or a very limited environment assessment of the Mortgaged Properties will have been conducted. Forfeiture in Drug and RICO Proceedings Federal law provides that property owned by persons convicted of drug-related crimes or criminal violations of the Racketeer Influenced and Corrupt Organizations ("RICO") statute can be seized by the government if the property was used in, or purchased with the proceeds of, such crimes. Under procedures contained in the Comprehensive Crime Control Act of 1984, the government may seize the property even before conviction. The government must publish notice of the forfeiture proceeding and may give notice to all parties "known to have an alleged interest in the property," including the holders of mortgage loans. 39 A lender may avoid forfeiture of its interest in the property if it establishes that: (i) its mortgage was executed and recorded before commission of the crime upon which the forfeiture is based, or (ii) the lender was, at the time of execution of the mortgage, "reasonably without cause to believe" that the property was used in, or purchased with the proceeds of, illegal drug or RICO activities. 40 LEGAL INVESTMENT MATTERS The Prospectus Supplement for each series of Certificates will specify, which, if any, of the classes of Certificates offered thereby will constitute "mortgage related securities" for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended ("SMMEA"). The appropriate characterization of those Certificates not qualifying as "mortgage related securities" ("Non-SMMEA Certificates") under various legal investment restrictions, and thus the ability of investors subject to these restrictions to purchase such Certificates, may be subject to interpretive uncertainties. Accordingly, investors whose investment authority is subject to legal restrictions should consult their own legal advisors to determine whether and to what extent the Non-SMMEA Certificates constitute legal investments for them. Generally, only classes of Certificates that (i) are rated in one of the two highest rating categories by one or more nationally recognized statistical rating organizations and (ii) are part of a series evidencing interests in a Trust Fund consisting of Mortgage Loans, each secured by, among other things, first liens on a single parcel of real estate upon which is located a dwelling or mixed residential and commercial structure, such as certain multifamily loans, originated by certain types of originators as specified in SMMEA, will be "mortgage related securities" for purposes of SMMEA. As "mortgage related securities", such classes will constitute legal investments for persons, trusts, corporations, partnerships, associations, business trusts and business entities (including but not limited to, state-chartered depository institutions and insurance companies, as well as trustees and state government employee retirement systems) created pursuant to or existing under the laws of the United States or of any state (including the District of Columbia and Puerto Rico) whose authorized investments are subject to state regulation to the same extent that, under applicable law, obligations issued by or guaranteed as to principal and interest by the United States or any agency or instrumentality thereof constitute legal investments for such entities. Pursuant to SMMEA, a number of states enacted legislation, on or before the October 3, 1991 cutoff for such enactments, limiting to varying extents the ability of certain entities (in particular, insurance companies) to invest in "mortgage related securities", in most cases by requiring the affected investors to rely solely upon existing state law, and not SMMEA. Accordingly, the investors affected by such legislation will be authorized to invest in Certificates qualifying as "mortgage related securities" only to the extent provided in such legislation. SMMEA also amended the legal investment authority of federally-chartered depository institutions as follows: federal savings and loan associations and federal savings banks may invest in, sell or otherwise deal in mortgage related securities without limitation as to the percentage of their assets represented thereby, federal credit unions may invest in such securities, and national banks may purchase such securities for their own account without regard to the limitations generally applicable to investment securities set forth in 12 U.S.C. Section 24 (Seventh), subject in each case to such regulations as the applicable federal regulatory authority may prescribe. In this connection, the Office of the Comptroller of the Currency (the "OCC") amended 12 C.F.R. Part 1 to authorize national banks to purchase and sell for their own account, without limitation as to a percentage of the bank's capital and surplus (but subject to compliance with certain general standards in 12 C.F.R. Section 1.5 concerning "safety and soundness" and retention of credit information), certain "Type IV securities," defined in 12 C.F.R. Section 1.2(1) to include certain "residential mortgage-related securities." As so defined, "residential mortgage-related security" means, in relevant part, "mortgage related security" within the meaning of SMMEA. The National Credit Union Administration ("NCUA") has adopted rules, codified at 12 C.F.R. Part 703, which permit federal credit unions to invest in "mortgage related securities" under certain limited circumstances, other than stripped mortgage related securities and residual interests in mortgage related securities, unless the credit union has obtained written approval from the NCUA to participate in the "investment pilot program" described in 12 C.F.R. Section 703.140. The OTS has issued Thrift Bulletin 13a (December 1, 1998), "Management of Interest Rate Risk, Investment Securities and Derivative Activities," which thrift institutions subject to the jurisdiction of the OTS should consider before investing in any of the Certificates. All depository institutions considering an investment in the Certificates should review the "Supervisory Policy Statement on Investment Securities and End-User Derivatives Activities" (the "1998 Policy Statement") of the Federal Financial Institutions Examination Council, which has been adopted by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the OCC and OTS, effective May 26, 1998, and by the NCUA, effective October 1, 1998. The 1998 Policy Statement sets forth general guidelines 41 which depository institutions must follow in managing risks (including market, credit, liquidity, operational (transaction), and legal risks) applicable to all securities (including mortgage pass-through securities and mortgage-derivative products) used for investment purposes. Institutions whose investment activities are subject to regulation by federal or state authorities should review rules, policies and guidelines adopted from time to time by such authorities before purchasing any Certificates, as certain series or classes may be deemed to be unsuitable investments, or may otherwise be restricted, under such rules, policies or guidelines (in certain instances irrespective of SMMEA). The foregoing does not take into consideration the applicability of statutes, rules, regulations, orders, guidelines, or agreements generally governing investments made by a particular investor, including, but not limited to, "prudent investor" provisions, percentage-of-assets limits, provisions which may restrict or prohibit investment in securities which are not "interest bearing" or "income paying", and with regard to any Certificates issued in book-entry form, provisions which may restrict or prohibit investments in securities which are issued in book-entry form. Except as to the status of certain Certificates as "mortgage related securities," no representation is made as to the proper characterization of the Certificates for legal investment purposes, financial institution regulatory purposes, or other purposes, or as to the ability of particular investors to purchase Certificates under applicable legal investment restrictions. The uncertainties described above (and any unfavorable future determinations concerning legal investment or financial regulatory characteristics of the Certificates) may adversely affect the liquidity of the Certificates. Investors should consult their own legal advisors in determining whether and to what extent the Certificates constitute legal investments for such investors or are subject to investment, capital or other restrictions and, if applicable, whether SMMEA has been overridden in any jurisdiction relevant to such investor. ERISA CONSIDERATIONS The Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the Internal Revenue Code of 1986, as amended, (the "Code") impose requirements on employee benefit plans (including retirement plans and arrangements, collective investment funds and separate accounts in which such plans, accounts or arrangements are invested) subject to ERISA or the Code (collectively, "Plans") and on persons who are fiduciaries with respect to such Plans. Among other things, ERISA requires that the assets of a Plan subject to ERISA be held in trust and that the trustee, or other duly authorized fiduciary, have exclusive authority and discretion to manage and control the assets of such Plan. ERISA also imposes certain duties on persons who are fiduciaries with respect to a Plan. Under ERISA, any person who exercises any authority or control respecting the management or disposition of the assets of a Plan generally is considered to be a fiduciary of such Plan. In addition to the imposition by ERISA of general fiduciary standards of investment prudence and diversification, ERISA and Section 4975 of the Code prohibit a broad range of transactions involving Plan assets and persons having certain specified relationships to a Plan ("Parties in Interest") and impose additional prohibitions where Parties in Interest are fiduciaries with respect to such Plan. The United States Department of Labor (the "DOL") has issued regulations concerning the definition of what constitutes the assets of a Plan (DOL Reg. Section 2510.3-101). Under this regulation, the underlying assets and properties of corporations, partnerships and certain other entities in which a Plan makes an "equity" investment could be deemed for purposes of ERISA and Section 4975 of the Code to be assets of the investing Plan in certain circumstances. In such a case, the fiduciary making such an investment for the Plan could be deemed to have delegated the fiduciary's asset management responsibility, the underlying assets and properties could be subject to the reporting and disclosure requirements of ERISA, and transactions involving the underlying assets and properties could be subject to the fiduciary responsibility requirements of ERISA and Section 4975 of the Code. Certain exceptions to the regulation may apply in the case of a Plan's investment in the Certificates, but it cannot be predicted in advance whether such exceptions will apply due to the factual nature of the conditions to be met. Accordingly, because the Mortgage Loans may be deemed Plan assets of each Plan that purchases Certificates, an investment in the Certificates by a Plan might give rise to a prohibited transaction under ERISA Sections 406 or 407 and be subject to an excise tax under Code Section 4975 unless a statutory or administrative exemption applies. 42 DOL Prohibited Transaction Class Exemption 83-1 ("PTE 83-1") exempts from the prohibited transaction rules of ERISA and Section 4975 of the Code certain transactions relating to the operation of residential mortgage pool investment trusts and the direct or indirect sale, exchange, transfer and holding of "mortgage pool pass-through certificates" in the initial issuance of such certificates. PTE 83-1 permits, subject to certain conditions, transactions which might otherwise be prohibited between Plans and Parties in Interest with respect to those Plans involving the origination, maintenance and termination of mortgage pools consisting of mortgage loans secured by either first or second mortgages, or deeds of trust on single-family residential property, and the acquisition and holding of certain mortgage pool pass-through certificates representing an interest in such mortgage pools by Plans. PTE 83-1 sets forth three general conditions which must be satisfied for any transaction to be eligible for exemption: (i) the maintenance of a system of insurance or other protection for the pooled mortgage loans and property securing such loans, and for indemnifying certificateholders against reductions in pass-through payments due to property damage or defaults in loan payments in an amount not less than the greater of one percent of the aggregate principal balance of all covered pooled mortgage loans or the principal balance of the largest covered pooled mortgage loan; (ii) the existence of a pool trustee who is not an affiliate of the pool sponsor (other than generally in the event of a default by the pool sponsor which causes the pool trustee to assume duties of the sponsor); and (iii) a limitation on the amount of the payments retained by the pool sponsor, together with other funds inuring to its benefit, to not more than adequate consideration for selling the mortgage loans plus reasonable compensation for services provided by the pool sponsor to the mortgage pool. Although the Trustee for any series of Certificates will be unaffiliated with the Servicer, there can be no assurance that the first or third conditions of PRE 83-1 referred to above will be satisfied with respect to any Certificates. In addition, the nature of a trust fund's assets or the characteristics of one or more classes of the related series of Certificates may not be included within the scope of PTE 83-1 or any other class exemption under ERISA. Several underwriters of mortgage-backed securities have applied for and obtained individual prohibited transaction exemptions which are in some respects broader than PTE 83-1. Such exemptions only apply to mortgage-backed securities which, in addition to satisfying other conditions, are sold in an offering with respect to which such underwriter serves as the sole or a managing underwriter, or as a selling or placement agent. If such an exemption might be applicable to a series of Certificates, the related Prospectus Supplement will refer to such possibility. In addition, there may also be other class exemptions that are available to provide relief from the prohibited transaction provisions of ERISA and the Code. Each Plan fiduciary who is responsible for making the investment decisions whether to purchase or commit to purchase and to hold Certificates must make its own determination as to whether the general and the specific conditions of PTE 83-1 have been satisfied, or as to the availability of any other prohibited transaction exemptions. Each Plan fiduciary should also determine whether, under the general fiduciary standards of investment prudence and diversification, an investment in the Certificates is appropriate for the Plan, taking into account the overall investment policy of the Plan and the composition of the Plan's investment portfolio. Any Plan proposing to invest in Certificates should consult with its counsel to confirm that such investment will not result in a prohibited transaction and will satisfy the other requirements of ERISA and the Code. The sale of Certificates to a Plan is in no respect a representation by any party that this investment meets all relevant legal requirements with respect to investments by Plans generally or by any particular Plan, or that this investment is appropriate for Plans generally or for any particular Plan. 43 FEDERAL INCOME TAX CONSEQUENCES General The following discussion represents the opinion of Morgan, Lewis & Bockius LLP as to the material federal income tax consequences of purchasing, owning and disposing of Certificates. It does not address special rules which may apply to particular types of investors. The authorities on which this discussion is based are subject to change or differing interpretations, and any such change or interpretation could apply retroactively. It is recommended that investors consult their own tax advisors regarding the Certificates. For purposes of this discussion, unless otherwise specified, the term "Owner" will refer to the beneficial owner of a Certificate. REMIC Elections Under the Internal Revenue Code of 1986, as amended (the "Code"), an election may be made to treat the Trust Fund related to each Series of Certificates (or segregated pools of assets within the Trust Fund) as a "real estate mortgage investment conduit" ("REMIC") within the meaning of Section 860D(a) of the Code. If one or more REMIC elections are made, the Certificates of any class will be either "regular interests" in a REMIC within the meaning of Section 860G(a)(1) of the Code ("Regular Certificates") or "residual interests" in a REMIC within the meaning of Section 860G(a)(2) of the Code ("Residual Certificates"). The Prospectus Supplement for each Series of Certificates will indicate whether an election will be made to treat the Trust Fund as one or more REMICs, and if so, which Certificates will be Regular Certificates and which will be Residual Certificates. If a REMIC election is made, the Trust Fund, or each portion thereof that is treated as a separate REMIC, will be referred to as a "REMIC Pool". If the Trust Fund is comprised of two REMIC Pools, one will be an "Upper-Tier REMIC" and one a "Lower-Tier REMIC". The assets of the Lower-Tier REMIC will consist of the Mortgage Loans and related Trust Fund assets. The assets of the Upper-Tier REMIC will consist of all of the regular interests issued by the Lower-Tier REMIC. The discussion below under the heading "REMIC Certificates" considers Series for which a REMIC election will be made. Series for which no such election will be made are addressed under "Non-REMIC Certificates". REMIC Certificates The discussion in this section applies only to a Series of Certificates for which a REMIC election is made. Tax Opinion. Qualification as a REMIC requires ongoing compliance with certain conditions. Upon the issuance of each Series of Certificates for which a REMIC election is made, Morgan, Lewis & Bockius LLP, counsel to the Seller, will deliver an additional opinion, dated as of the date of such issuance, that with respect to each such Series of Certificates, under then existing law and assuming compliance by the Seller, the Servicer and the Trustee for such Series with all of the provisions of the related Agreement (and such other agreements and representations as may be referred to in such opinion), each REMIC Pool will be a REMIC, and the Certificates of such Series will be treated as either Regular Certificates or Residual Certificates. Status of Certificates. The Certificates will be: o assets described in Code Section 7701(a)(19)(C) (relating to the qualification of certain corporations, trusts, or associations as real estate investment trusts); and o "real estate assets" under Code Section 856(c)(5)(B) (relating to real estate interests, interests in real estate mortgages, and shares or certificates of beneficial interests in real estate investment trusts), to the extent the assets of the related REMIC Pool are so treated. Interest on the Regular Certificates will be 44 "interest on obligations secured by mortgages on real property or on interests in real property" within the meaning of Code Section 856(c)(3)(B) in the same proportion that the income of the REMIC Pool is so treated. If at all times 95% or more of the assets or income of the REMIC Pool qualifies under the foregoing Code sections, the Certificates (and income thereon) will so qualify in their entirety. The rules described in the two preceding paragraphs will be applied to a Trust Fund consisting of two REMIC Pools as if the Trust Fund were a single REMIC holding the assets of the Lower-Tier REMIC. Income from Regular Certificates. General. Except as otherwise provided in this tax discussion, Regular Certificates will be taxed as newly originated debt instruments for federal income tax purposes. Interest, original issue discount and market discount accrued on a Regular Certificate will be ordinary income to the Owner. All Owners must account for interest income under the accrual method of accounting, which may result in the inclusion of amounts in income that are not currently distributed in cash. Except as otherwise noted, the discussion below is based upon regulations adopted by the Internal Revenue Service applying the original issue discount rules of the Code ("the OID Regulations"). Original Issue Discount. Certain Regular Certificates may have "original issue discount." An Owner must include original issue discount in income as it accrues, without regard to the timing of payments. The total amount of original issue discount on a Regular Certificate is the excess of its "stated redemption price at maturity" over its "issue price." The issue price for any Regular Certificate is the price (including any accrued interest) at which a substantial portion of the class of Certificates including such Regular Certificate are first sold to the public. In general, the stated redemption price at maturity is the sum of all payments made on the Regular Certificate, other than payments of interest that (i) are actually payable at least annually over the entire life of the Certificates and (ii) are based on a single fixed rate or variable rate (or certain combinations of fixed and variable rates). The stated redemption price at maturity of a Regular Certificate always includes its original principal amount, but generally does not include distributions of stated interest, except in the case of Accrual Certificates, and, as discussed below, Interest Only Certificates. An "Interest Only Certificate" is a Certificate entitled to receive distributions of some or all of the interest on the Mortgage Loans or other assets in a REMIC Pool and that has either a notional or nominal principal amount. Special rules for Regular Certificates that provide for interest based on a variable rate are discussed below in "Income from Regular Certificates -- Variable Rate Regular Certificates". With respect to an Interest Only Certificate, the stated redemption price at maturity is likely to be the sum of all payments thereon, determined in accordance with the Prepayment Assumption (as defined below). In that event, Interest Only Certificates would always have original issue discount. Alternatively, in the case of an Interest Only Certificate with some principal amount, the stated redemption price at maturity might be determined under the general rules described in the preceding paragraph. If, applying those rules, the stated redemption price at maturity were considered to equal the principal amount of such Certificate, then the rules described below under "Premium" would apply. The Prepayment Assumption is the assumed rate of prepayment of the Mortgage Loans used in pricing the Regular Certificates. The Prepayment Assumption will be set forth in the related Supplement. Under a de minimis rule, original issue discount on a Regular Certificate will be considered zero if it is less than 0.25% of the Certificate's stated redemption price at maturity multiplied by the Certificate's weighted average maturity. The weighted average maturity of a Regular Certificate is computed based on the number of full years (i.e., rounding down partial years) each distribution of principal (or other amount included in the stated redemption price at maturity) is scheduled to be outstanding. The schedule of such distributions should be determined in accordance with the Prepayment Assumption. The Owner of a Regular Certificate must include in income the original issue discount that accrues for each day on which the Owner holds such Certificate, including the date of purchase, but excluding the date of disposition. The original issue discount accruing in any period equals: PV End + Dist - PV Beg 45 Where: PV End = present value of all remaining distributions to be made as of the end of the period; Dist = distributions made during the period includible in the stated redemption price at maturity; and PV Beg = present value of all remaining distributions as of the beginning of the period. The present value of the remaining distributions is calculated based on (i) the original yield to maturity of the Regular Certificate, (ii) events (including actual prepayments) that have occurred prior to the end of the period and (iii) the Prepayment Assumption. For these purposes, the original yield to maturity of a Regular Certificate will be calculated based on its issue price, assuming that the Certificate will be prepaid in all periods in accordance with the Prepayment Assumption, and with compounding at the end of each accrual period used in the formula. Assuming the Regular Certificates have monthly Distribution Dates, discount would be computed under the formula generally for the one-month periods (or shorter initial period) ending on each Distribution Date. The original issue discount accruing during any accrual period is divided by the number of days in the period to determine the daily portion of original issue discount for each day. The daily portions of original issue discount will increase if prepayments on the underlying Mortgage Loans exceed the Prepayment Assumption and decrease if prepayments are slower than the Prepayment Assumption (changes in the rate of prepayments having the opposite effect in the case of an Interest Only Certificate). If the relative principal payment priorities of the classes of Regular Certificates of a Series change, any increase or decrease in the present value of the remaining payments to be made on any such class will affect the computation of original issue discount for the period in which the change in payment priority occurs. If original issue discount computed as described above is negative for any period, the Owner generally will not be allowed a current deduction for the negative amount but instead will be entitled to offset such amount only against future positive original issue discount from such Certificate. Acquisition Premium. If an Owner of a Regular Certificate acquires such Certificate at a price greater than its "adjusted issue price," but less than its remaining stated redemption price at maturity, the daily portion for any day (as computed above) is reduced by an amount equal to the product of (i) such daily portion and (ii) a fraction, the numerator of which is the amount by which the price exceeds the adjusted issue price and the denominator of which is the sum of the daily portions for such Regular Certificate for all days on and after the date of purchase. The adjusted issue price of a Regular Certificate on any given day is its issue price, increased by all original issue discount that has accrued on such Certificate and reduced by the amount of all previous distributions on such Certificate of amounts included in its stated redemption price at maturity. Market Discount. A Regular Certificate may have market discount (as defined in the Code). Market discount equals the excess of the adjusted issue price of a Certificate over the Owner's adjusted basis in the Certificate. The Owner of a Certificate with market discount must report ordinary interest income, as the Owner receives distributions on the Certificate of principal or other amounts included in its stated redemption price at maturity, equal to the lesser of (a) the excess of the amount of those distributions over the amount, if any, of accrued original issue discount on the Certificate or (b) the portion of the market discount that has accrued and not previously been included in income. Also, such Owner must treat gain from the disposition of the Certificate as ordinary income to the extent of any accrued, but unrecognized, market discount. Alternatively, an Owner may elect in any taxable year to include market discount in income currently as it accrues on all market discount instruments acquired by the Owner in that year or thereafter. An Owner may revoke such an election only with the consent of the Internal Revenue Service. In general terms, market discount on a Regular Certificate may be treated, at the Owner's election, as accruing either (a) on the basis of a constant yield (similar to the method described above for accruing original issue discount) or (b) alternatively, either (i) in the case of a Regular Certificate issued without original issue discount, in the ratio of stated interest distributable in the relevant period to the total stated interest remaining to be distributed from the beginning of such period (computed taking into account the Prepayment Assumption) 46 or (ii) in the case of a Regular Certificate issued with original issue discount, in the ratio of the amount of original issue discount accruing in the relevant period to the total remaining original issue discount at the beginning of such period. An election to accrue market discount on a Regular Certificate on a constant yield basis is irrevocable with respect to that Certificate. An Owner may be required to defer a portion of the deduction for interest expense on any indebtedness that the Owner incurs or maintains in order to purchase or carry a Regular Certificate that has market discount. The deferred amount would not exceed the market discount that has accrued but not been taken into income. Any such deferred interest expense is, in general, allowed as a deduction not later than the year in which the related market discount income is recognized. Market discount with respect to a Regular Certificate will be considered to be zero if such market discount is de minimis under a rule similar to that described above in the fourth paragraph under "Original Issue Discount". Owners should consult their own tax advisors regarding the application of the market discount rules as well as the advisability of making any election with respect to market discount. Discount on a Regular Certificate that is neither original issue discount nor market discount, as defined above, must be allocated ratably among the principal payments on the Certificate and included in income (as gain from the sale or exchange of the Certificate) as the related principal payments are made (whether as scheduled payments or prepayments). Premium. A Regular Certificate, other than an Accrual Certificate or, as discussed above under "Original Issue Discount", an Interest Only Certificate, purchased at a cost (net of accrued interest) greater than its principal amount is considered to be purchased at a premium. The Owner may elect under Code Section 171 to amortize such premium under the constant yield method, using the Prepayment Assumption. To the extent the amortized premium is allocable to interest income from the Regular Certificate, it is treated as an offset to such interest rather than as a separate deduction. An election made by an Owner would apply to all its debt instruments and may not be revoked without the consent of the Internal Revenue Service. Special Election to Apply OID Rules. In lieu of the rules described above with respect to de minimis discount, acquisition premium, market discount and premium, an Owner of a Regular Certificate may elect to accrue such discount, or adjust for such premium, by applying the principles of the OID rules described above. An election made by a taxpayer with respect to one obligation can affect other obligations it holds. Owners should consult with their tax advisors regarding the merits of making this election. Retail Regular Certificates. For purposes of the original issue and market discount rules, a repayment in full of a Retail Certificate that is subject to payment in units or other increments, rather than on a pro rata basis with other Retail Certificates, will be treated in the same manner as any other prepayment. Variable Rate Regular Certificates. The Regular Certificates may provide for interest that varies based on an interest rate index. The OID Regulations provide special rules for calculating income from certain "variable rate debt instruments" or "VRDIs." A debt instrument must meet certain technical requirements to qualify as a VRDI, which are outlined in the next paragraph. Under the regulations, income on a VRDI is calculated by (1) creating a hypothetical debt instrument that pays fixed interest at rates equivalent to the variable interest, (2) applying the original issue discount rules of the Code to that fixed rate instrument, and (3) adjusting the income accruing in any accrual period by the difference between the assumed fixed interest amount and the actual amount for the period. In general, where a variable rate on a debt instrument is based on an interest rate index (such as LIBOR), a fixed rate equivalent to a variable rate is determined based on the value of the index as of the issue date of the debt instrument. In cases where rates are reset at different intervals over the life of a VRDI, adjustments are made to ensure that the equivalent fixed rate for each accrual period is based on the same reset interval. A debt instrument must meet a number of requirements in order to qualify as a VRDI. A VRDI cannot be issued at a premium above its principal amount that exceeds a specified percentage of its principal amount (15% or if less, 1.5% times its weighted average life). As a result, Interest Only Certificates will never be VRDIs. Also, a debt instrument that pays interest based on a multiple of an interest rate index is not a VRDI if the multiple is less than or equal to 0.65 or greater than 1.35, unless, in general, interest is paid based on a single formula 47 that lasts over the life of the instrument. A debt instrument is not a VRDI if it is subject to caps and floors, unless they remain the same over the life of the instrument or are not expected to change significantly the yield on the instrument. Variable rate Regular Certificates other than Interest Only Certificates may or may not qualify as VRDIs depending on their terms. In a case where a variable rate Regular Certificate does not qualify as a VRDI, it will be treated under the OID Regulations as a contingent payment debt instrument. The Internal Revenue Service has issued final regulations addressing contingent payment debt instruments, but such regulations are not applicable by their terms to REMIC regular interests. Until further guidance is forthcoming, one method of calculating income on such a Regular Certificate that appears to be reasonable would be to apply the principles governing VRDIs outlined above. Subordinated Certificates. Certain Series of Certificates may contain one or more classes of subordinated Certificates. In the event there are defaults or delinquencies on the related Mortgage Loans, amounts that otherwise would be distributed on a class of subordinated Certificates may instead be distributed on other more senior classes of Certificates. Since Owners of Regular Certificates are required to report income under an accrual method, Owners of subordinated Certificates will be required to report income without giving effect to delays and reductions in distributions on such Certificates attributable to defaults or delinquencies on the Mortgage Loans, except to the extent that it can be established that amounts are uncollectible. As a result, the amount of income reported by an Owner of a subordinated Certificate in any period could significantly exceed the amount of cash distributed to such Owner in that period. The Owner will eventually be allowed a loss (or be allowed to report a lesser amount of income) to the extent that the aggregate amount of distributions on the subordinated Certificate is reduced as a result of defaults and delinquencies on the Mortgage Loans. Such a loss could in some circumstances be a capital loss. Also, the timing and amount of such losses or reductions in income are uncertain. Owners of subordinated Certificates should consult their tax advisors on these points. Income from Residual Certificates. Taxation of REMIC Income. Owners of Residual Certificates in a REMIC Pool ("Residual Owners") must report ordinary income or loss equal to their pro rata shares (based on the portion of all Residual Certificates they own) of the taxable income or net loss of the REMIC. Such income must be reported regardless of the timing or amounts of distributions on the Residual Certificates. The taxable income of a REMIC Pool is determined under the accrual method of accounting in the same manner as the taxable income of an individual taxpayer. Taxable income is generally gross income, including interest and original issue discount income, if any, on the assets of the REMIC Pool and income from the amortization of any premium on Regular Certificates, minus deductions. Market discount (as defined in the Code) with respect to Mortgage Loans held by a REMIC Pool is recognized in the same fashion as if it were original issue discount. Deductions include interest and original issue discount expense on the Regular Certificates, reasonable servicing fees attributable to the REMIC Pool, other administrative expenses and amortization of any premium on assets of the REMIC Pool. As previously discussed, the timing of recognition of "negative original issue discount," if any, on a Regular Certificate is uncertain; as a result, the timing of recognition of the corresponding income to the REMIC Pool is also uncertain. If the Trust Fund consists of an Upper-Tier REMIC and a Lower-Tier REMIC, the OID Regulations provide that the regular interests issued by the Lower-Tier REMIC to the Upper- Tier REMIC will be treated as a single debt instrument for purposes of the original issue discount provisions. A determination that these regular interests are not treated as a single debt instrument would have a material adverse effect on the Owners of Residual Certificates issued by the Lower-Tier REMIC. A Residual Owner may not amortize the cost of its Residual Certificate. Taxable income of the REMIC Pool, however, will not include cash received by the REMIC Pool that represents a recovery of the REMIC Pool's initial basis in its assets, and such basis will include the issue price of the Residual Certificates (assuming the issue price is positive). Such recovery of basis by the REMIC Pool will have the effect of amortization of the issue price of the Residual Certificate over its life. The period of time over which such issue price is 48 effectively amortized, however, may be longer than the economic life of the Residual Certificate. The issue price of a Residual Certificate is the price at which a substantial portion of the class of Certificates including the Residual Certificate are first sold to the public (or if the Residual Certificate is not publicly offered, the price paid by the first buyer). A subsequent Residual Owner must report the same amounts of taxable income or net loss attributable to the REMIC Pool as an original Owner. No adjustments are made to reflect the purchase price. Losses. A Residual Owner that is allocated a net loss of the REMIC Pool may not deduct such loss currently to the extent it exceeds the Owner's adjusted basis (as defined in "Sale or Exchange of Certificates" below) in its Residual Certificate. A Residual Owner that is a U.S. person (as defined below in "Taxation of Certain Foreign Investors"), however, may carry over any disallowed loss to offset any taxable income generated by the same REMIC Pool. Excess Inclusions. A portion of the taxable income allocated to a Residual Certificate is subject to special tax rules. That portion, referred to as an "excess inclusion," is calculated for each calendar quarter and equals the excess of such taxable income for the quarter over the daily accruals for the quarter. The daily accruals equal the product of (i) 120% of the federal long-term rate under Code Section 1274(d) for the month which includes the Closing Date (determined on the basis of quarterly compounding and properly adjusted for the length of the quarter) and (ii) the adjusted issue price of the Certificate at the beginning of such quarter. The adjusted issue price of a Residual Certificate at the beginning of a quarter is the issue price of the Certificate, plus the amount of daily accruals on the Certificate for all prior quarters, decreased (but not below zero) by any prior distributions on the Certificate. If the aggregate value of the Residual Certificates is not considered to be "significant," then to the extent provided in Treasury regulations, a Residual Owner's entire share of REMIC taxable income will be treated as an excess inclusion. The regulations that have been adopted under Code Sections 860A through 860G (the "REMIC Regulations") do not contain such a rule. Excess inclusions generally may not be offset by unrelated losses or loss carryforwards or carrybacks of a Residual Owner. In addition, for all taxable years beginning after August 20, 1996, and unless a Residual Owner elects otherwise for all other taxable years, the alternate minimum taxable income of a Residual Owner for a taxable year may not be less than the Residual Owner's excess inclusions for the taxable year and excess inclusions are disregarded when calculating a Residual Owner's alternate minimum tax operating loss deduction. Excess inclusions are treated as unrelated business taxable income for an organization subject to the tax on unrelated business income. In addition, under Treasury regulations yet to be issued, if a real estate investment trust, regulated investment company or certain other pass-through entities are Residual Owners, a portion of the distributions made by such entities may be treated as excess inclusions. Distributions. Distributions on a Residual Certificate (whether at their scheduled times or as a result of prepayments) generally will not result in any taxable income or loss to the Residual Owner. If the amount of any distribution exceeds a Residual Owner's adjusted basis in its Residual Certificate, however, the Residual Owner will recognize gain (treated as gain from the sale or exchange of its Residual Certificate) to the extent of such excess. See "Sale or Exchange of Certificates" below. Prohibited Transactions; Special Taxes. Net income recognized by a REMIC Pool from "prohibited transactions" is subject to a 100% tax and is disregarded in calculating the REMIC Pool's taxable income. In addition, a REMIC Pool is subject to federal income tax at the highest corporate rate on "net income from foreclosure property." A 100% tax also applies to certain contributions to a REMIC Pool made after it is formed. It is not anticipated that any REMIC Pool will (i) engage in prohibited transactions in which it recognizes a significant amount of net income, (ii) receive contributions of property that are subject to tax, or (iii) derive a significant amount of net income from foreclosure property that is subject to tax. Negative Value Residual Certificates. The federal income tax treatment of any consideration paid to a transferee on a transfer of a Residual Certificate is unclear. Such a transferee should consult its tax advisor. The preamble to the REMIC Regulations indicates that the Internal Revenue Service may issue future guidance on the tax treatment of such payments. 49 In addition, on December 23, 1996, the Internal Revenue Service released final regulations under Code Section 475 relating to the requirement that a dealer mark certain securities to market. These regulations provide that a REMIC residual interest that is acquired on or after January 4, 1995 is not a "security" for the purposes of Section 475 of the Code, and thus is not subject to the mark to market rules. The method of taxation of Residual Certificates described in this section can produce a significantly less favorable after-tax return for a Residual Certificate than would be the case if the Certificate were taxable as a debt instrument. Also, a Residual Owner's return may be adversely affected by the excess inclusions rules described above. In certain periods, taxable income and the resulting tax liability for a Residual Owner may exceed any distributions it receives. In addition, a substantial tax may be imposed on certain transferors of a Residual Certificate and certain Residual Owners that are "pass-thru" entities. See "Transfers of Residual Certificates" below. Investors should consult their tax advisors before purchasing a Residual Certificate. Sale or Exchange of Certificates. An Owner will recognize gain or loss upon sale or exchange of a Regular or Residual Certificate equal to the difference between the amount realized and the Owner's adjusted basis in the Certificate. The adjusted basis in a Certificate will equal the cost of the Certificate, increased by income previously recognized, and reduced (but not below zero) by previous distributions, and by any amortized premium in the case of a Regular Certificate, or net losses allowed as a deduction in the case of a Residual Certificate. Except as described below, any gain or loss on the sale or exchange of a Certificate held as a capital asset will be capital gain or loss and will be long-term or short-term depending on whether the Certificate has been held for more than one year or one year or less. Such gain or loss will be ordinary income or loss (i) for a bank or thrift institution, and (ii) in the case of a Regular Certificate, (a) to the extent of any accrued, but unrecognized, market discount, or (b) to the extent income recognized by the Owner is less than the income that would have been recognized if the yield on such Certificate were 110% of the applicable federal rate under Code Section 1274(d). A Residual Owner should be allowed a loss upon termination of the REMIC Pool equal to the amount of the Owner's remaining adjusted basis in its Residual Certificates. Whether the termination will be treated as a sale or exchange (resulting in a capital loss) is unclear. Except as provided in Treasury regulations, the wash sale rules of Code Section 1091 (relating to the disallowance of losses on the sale or disposition of certain stock or securities) will apply to dispositions of a Residual Certificate where the seller of the interest, during the period beginning six months before the sale or disposition of the interest and ending six months after such sale or disposition, acquires (or enters into any other transaction that results in the application of Code Section 1091) any REMIC residual interest, or any interest in a "taxable mortgage pool" (such as a non-REMIC owner trust) that is economically comparable to a residual interest. Taxation of Certain Foreign Investors. Regular Certificates. A Regular Certificate held by an Owner that is a non-U.S. person (as defined below), and that has no connection with the United States other than owning the Certificate, will not be subject to U.S. withholding or income tax with respect to the Certificate provided such Owner (i) is not a "10-percent shareholder", related to the issuer, within the meaning of Code Section 871(h)(3)(B) or a controlled foreign corporation, related to the issuer, described in Code Section 881(c)(3)(C), and (ii) provides an appropriate statement, signed under penalties of perjury, identifying the Owner and stating, among other things, that the Owner is a non-U.S. person. If these conditions are not met, a 30% withholding tax will apply to interest (including original issue discount) unless an income tax treaty reduces or eliminates such tax or unless the interest is effectively connected with the conduct of a trade or business within the United States by such Owner. In the latter case, such Owner will be subject to United States federal income tax with respect to all income from the Certificate at regular rates then applicable to U.S. taxpayers (and in the case of a corporation, possibly also the "branch profits tax"). 50 The term "non-U.S. person" means any person other than a U.S. person. A U.S. person is a citizen or resident of the United States, a corporation, or partnership (unless, in the case of a partnership, Treasury regulations are adopted that provide otherwise) created or organized in or under the laws of the United States, any State thereof or the District of Columbia, including an entity treated as a corporation or partnership for federal income tax purposes, an estate whose income is subject to United States federal income tax regardless of its source, or a trust if a court within the United States is able to exercise primary supervision over the administration of such trust, and one or more such U.S. Persons have the authority to control all substantial decisions of such trust (or, the extent provided in applicable Treasury regulations, certain trusts in existence on August 20, 1996 which are elibible to elect to be treated as U.S. Persons). Residual Certificates. A Residual Owner that is a non-U.S. person, and that has no connection with the United States other than owning a Residual Certificate, will not be subject to U.S. withholding or income tax with respect to the Certificate (other than with respect to excess inclusions) provided that (i) the conditions described in the second preceding paragraph with respect to Regular Certificates are met and (ii) in the case of a Residual Certificate in a REMIC Pool holding Mortgage Loans, the Mortgage Loans were originated after July 18, 1984. Excess inclusions are subject to a 30% withholding tax in all events (notwithstanding any contrary tax treaty provisions) when distributed to the Residual Owner (or when the Residual Certificate is disposed of). The Code grants the Treasury Department authority to issue regulations requiring excess inclusions to be taken into account earlier if necessary to prevent avoidance of tax. The REMIC Regulations do not contain such a rule. The preamble thereto states that the Internal Revenue Service is considering issuing regulations concerning withholding on distributions to foreign holders of residual interests to satisfy accrued tax liability due to excess inclusions. With respect to a Residual Certificate that has been held at any time by a non-U.S. person, the Trustee (or its agent) will be entitled to withhold (and to pay to the Internal Revenue Service) any portion of any payment on such Residual Certificate that the Trustee reasonably determines is required to be withheld. If the Trustee (or its agent) reasonably determines that a more accurate determination of the amount required to be withheld from a distribution can be made within a reasonable period after the scheduled date for such distribution, it may hold such distribution in trust for the Residual Owner until such determination can be made. Special tax rules and restrictions that apply to transfers of Residual Certificates to and from non-U.S. persons are discussed in the next section. Transfers of Residual Certificates. Special tax rules and restrictions apply to transfers of Residual Certificates to disqualified organizations or foreign investors, and to transfers of noneconomic Residual Certificates. Disqualified Organizations. In order to comply with the REMIC rules of the Code, the Agreement will provide that no legal or beneficial interest in a Residual Certificate may be transferred to, or registered in the name of, any person unless (i) the proposed purchaser provides to the Trustee an "affidavit" (within the meaning of the REMIC Regulations) to the effect that, among other items, such transferee is not a "disqualified organization" (as defined below), is not purchasing a Residual Certificate as an agent for a disqualified organization (i.e., as a broker, nominee, or other middleman) and is not an entity that holds REMIC residual securities as nominee to facilitate the clearance and settlement of such securities through electronic book-entry changes in accounts of participating organizations (a "Book-Entry Nominee") and (ii) the transferor states in writing to the Trustee that it has no actual knowledge that such affidavit is false. If, despite these restrictions, a Residual Certificate is transferred to a disqualified organization, the transfer may result in a tax equal to the product of (i) the present value of the total anticipated future excess inclusions with respect to such Certificate and (ii) the highest corporate marginal federal income tax rate. Such a tax generally is imposed on the transferor, except that if the transfer is through an agent for a disqualified organization, the agent is liable for the tax. A transferor is not liable for such tax if the transferee furnishes to the transferor an affidavit that the transferee is not a disqualified organization and, as of the time of the transfer, the transferor does not have actual knowledge that the affidavit is false. A disqualified organization may hold an interest in a REMIC Certificate through a "pass-thru entity" (as defined below). In that event, the pass-thru entity is subject to tax (at the highest corporate marginal federal income tax rate) on excess inclusions allocable to the disqualified organization. However, such tax will not apply 51 to the extent the pass-thru entity receives affidavits from record holders of interests in the entity stating that they are not disqualified organizations and the entity does not have actual knowledge that the affidavits are false; provided that all partners of an "electing large partnership" (as defined in the Code) are deemed to be disqualified organizations for purposes of such tax. For these purposes, (i) "disqualified organization" means the United States, any state or political subdivision thereof, any foreign government, any international organization, any agency or instrumentality of any of the foregoing, certain organizations that are exempt from taxation under the Code (including tax on excess inclusions) and certain corporations operating on a cooperative basis, and (ii) "pass-thru entity" means any regulated investment company, real estate investment trust, common trust fund, partnership, trust or estate and certain corporations operating on a cooperative basis. Except as may be provided in Treasury regulations, any person holding an interest in a pass-thru entity as a nominee for another will, with respect to that interest, be treated as a pass-thru entity. Foreign Investors. Under the REMIC Regulations, a transfer of a Residual Certificate to a non-U.S. person that will not hold the Certificate in connection with a U.S. trade or business will be disregarded for all federal tax purposes if the Certificate has "tax avoidance potential." A Residual Certificate has tax avoidance potential unless, at the time of transfer, the transferor reasonably expects that: (i) for each excess inclusion, the REMIC will distribute to the transferee residual interest holder an amount that will equal at least 30 percent of the excess inclusion, and (ii) each such amount will be distributed at or after the time at which the excess inclusion accrues and not later than the close of the calendar year following the calendar year of accrual. A transferor has such reasonable expectation if the above test would be met assuming that the REMIC's Mortgage Loans will prepay at each rate between 50 percent and 200 percent of the Prepayment Assumption. The REMIC Regulations also provide that a transfer of a Residual Certificate from a non-U.S. person to a U.S. person (or to a non-U.S. person that will hold the Certificate in connection with a U.S. trade or business) is disregarded if the transfer has "the effect of allowing the transferor to avoid tax on accrued excess inclusions." In light of these provisions, the Agreement provides that a Residual Certificate may not be purchased by or transferred to any person that is not a U.S. person, unless (i) such person holds the Certificate in connection with the conduct of a trade or business within the United States and furnishes the transferor and the Trustee with an effective Internal Revenue Service Form 4224, or (ii) the transferee delivers to both the transferor and the Trustee an opinion of nationally recognized tax counsel to the effect that such transfer is in accordance with the requirements of the Code and the regulations promulgated thereunder and that such transfer will not be disregarded for federal income tax purposes. Noneconomic Residual Certificates. Under the REMIC Regulations, a transfer of a "noneconomic" Residual Certificate will be disregarded for all federal income tax purposes if a significant purpose of the transfer is to impede the assessment or collection of tax. Such a purpose exists if the transferor, at the time of the transfer, either knew or should have known that the transferee would be unwilling or unable to pay taxes due on its share of the taxable income of the REMIC. A transferor is presumed to lack such knowledge if: (i) the transferor conducted, at the time of the transfer, a reasonable investigation of the financial condition of the transferee and found that the transferee had historically paid its debts as they came due and found no significant evidence to indicate that the transferee will not continue to pay its debts as they become due, and (ii) the transferee represents to the transferor that it understands that, as the holder of the noneconomic residual interest, it may incur tax liabilities in excess of any cash flows generated by the interest and that it intends to pay taxes associated with holding the residual interest as they become due. A Residual Certificate (including a Certificate with significant value at issuance) is noneconomic unless, at the time of the transfer, (i) the present value of the expected future distributions on the Certificate at least equals the product of the present value of the anticipated excess inclusions and the highest corporate income tax rate in effect for the year in which the transfer occurs, and (ii) the transferor reasonably expects that the transferee will receive distributions on the Certificate, at or after the time at which taxes accrue, in an amount sufficient to pay the taxes. 52 The Agreement will provide that no legal or beneficial interest in a Residual Certificate may be transferred to, or registered in the name of, any person unless the transferor represents to the Trustee that it has conducted the investigation of the transferee, and made the findings, described in the preceding paragraph, and the proposed transferee provides to the Trustee the transferee representations described in the preceding paragraph, and agrees that it will not transfer the Certificate to any person unless that person agrees to comply with the same restrictions on future transfers. Servicing Compensation and Other REMIC Pool Expenses. Under Code Section 67, an individual, estate or trust is allowed certain itemized deductions only to the extent that such deductions, in the aggregate, exceed 2% of the Owner's adjusted gross income, and such a person is not allowed such deductions to any extent in computing its alternative minimum tax liability. Under Treasury regulations, if such a person is an Owner of a REMIC Certificate, the REMIC Pool is required to allocate to such a person its share of the servicing fees and administrative expenses paid by a REMIC together with an equal amount of income. Those fees and expenses are deductible as an offset to the additional income, but subject to the 2% floor. In the case of a REMIC Pool that has multiple classes of Regular Certificates with staggered maturities, fees and expenses of the REMIC Pool would be allocated entirely to the Owners of Residual Certificates. However, if the REMIC Pool were a "single-class REMIC" as defined in applicable Treasury regulations, such deductions would be allocated proportionately among the Regular and Residual Certificates. Reporting and Administrative Matters. Annual reports will be made to the Internal Revenue Service, and to Holders of record of Regular Certificates, and Owners of Regular Certificates holding through a broker, nominee or other middleman, that are not excepted from the reporting requirements, of accrued interest, original issue discount, information necessary to compute accruals of market discount, information regarding the percentage of the REMIC Pool's assets meeting the qualified assets tests described above under "Status of Certificates" and, where relevant, allocated amounts of servicing fees and other Code Section 67 expenses. Holders not receiving such reports may obtain such information from the related REMIC by contacting the person designated in IRS Publication 938. Quarterly reports will be made to Residual Holders showing their allocable shares of income or loss from the REMIC Pool, excess inclusions, and Code Section 67 expenses. The Trustee will sign and file federal income tax returns for each REMIC Pool. To the extent allowable, the Trustee will act as the tax matters person for each REMIC Pool. Each Owner of a Residual Certificate, by the acceptance of its Residual Certificate, agrees that the Trustee will act as the Owner's agent in the performance of any duties required of the Owner in the event that the Owner is the tax matters person. An Owner of a Residual Certificate is required to treat items on its federal income tax return consistently with the treatment of the items on the REMIC Pool's return, unless the Owner owns 100% of the Residual Certificate for the entire calendar year or the Owner either files a statement identifying the inconsistency or establishes that the inconsistency resulted from incorrect information received from the REMIC Pool. The Internal Revenue Service may assess a deficiency resulting from a failure to comply with the consistency requirement without instituting an administrative proceeding at the REMIC level. Any person that holds a Residual Certificate as a nominee for another person may be required to furnish the REMIC Pool, in a manner to be provided in Treasury regulations, the name and address of such other person and other information. Non-REMIC Certificates The discussion in this Section applies only to a series of Certificates for which no REMIC election is made. Trust Fund as Grantor Trust. Upon issuance of each series of Certificates, Morgan, Lewis & Bockius LLP, counsel to the Seller, will deliver an additional opinion, dated as of the date of such issuance, to the effect that, under then current law, 53 assuming compliance by the Seller, the Servicer and the Trustee with all the provisions of the Agreement (and such other agreements and representations as may be referred to in the opinion), the Trust Fund will be classified for federal income tax purposes as a grantor trust and not as an association taxable as a corporation. Under the grantor trust rules of the Code, each Owner of a Certificate will be treated for federal income tax purposes as the owner of an undivided interest in the Mortgage Loans (and any related assets) included in the Trust Fund. The Owner will include in its gross income, gross income from the portion of the Mortgage Loans allocable to the Certificate, and may deduct its share of the expenses paid by the Trust Fund that are allocable to the Certificate, at the same time and to the same extent as if it had directly purchased and held such interest in the Mortgage Loans and had directly received payments thereon and paid such expenses. If an Owner is an individual, trust or estate, the Owner will be allowed deductions for its share of Trust Fund expenses (including reasonable servicing fees) only to the extent that the sum of those expenses and the Owner's other miscellaneous itemized deductions exceeds 2% of adjusted gross income, and will not be allowed to deduct such expenses for purposes of the alternative minimum tax. Distributions on a Certificate will not be taxable to the Owner, and the timing or amount of distributions will not affect the timing or amount of income or deductions relating to a Certificate. Status of the Certificates. The Certificates, other than Interest Only Certificates, will be: o "real estate assets" under Code Section 856(c)(5)(B) (relating to the qualification of certain corporations, trusts, or associations as real estate investment trusts); and o assets described in Section 7701(a)(19)(B) of the Code (relating to real estate interests, interests in real estate mortgages, and shares or certificates of beneficial interests in real estate investment trusts), to the extent the assets of the Trust Fund are so treated. Interest income from such Certificates will be "interest on obligations secured by mortgages on real property" under Code Section 856(c)(3)(B) to the extent the income of the Trust Fund qualifies under that section. An "Interest Only Certificate" is a Certificate which is entitled to receive distributions of some or all of the interest on the Mortgage Loans or other assets in a REMIC Pool and that has either a notional or nominal principal amount. Although it is not certain, Certificates that are Interest Only Certificates should qualify under the foregoing Code sections to the same extent as other Certificates. Possible Application of Stripped Bond Rules. In general, the provisions of Section 1286 of the Code (the "Stripped Bond Rules") apply to all or a portion of those Certificates where there has been a separation of the ownership of the rights to receive some or all of the principal payments on a Mortgage Loan from the right to receive some or all of the related interest payments. Certain Non-REMIC Certificates may be subject to these rules either because they represent specifically the right to receive designated portions of the interest or principal paid on the Mortgage Loans, or because the Servicing Fee is determined to be excessive (each, a "Stripped Certificate"). Each Stripped Certificate will be considered to have been issued with original issue discount for federal income tax purposes. Original issue discount with respect to a Stripped Certificate must be included in ordinary income as it accrues, which may be prior to the receipt of the cash attributable to such income. For these purposes, under original issue discount regulations, each Stripped Certificate should be treated as a single installment obligation for purposes of calculating original issue discount and gain or loss on disposition. The Internal Revenue Service has indicated that with respect to certain mortgage loans, original issue discount would be considered zero either if (i) the original issue discount did not exceed an amount that would be eligible for the de minimis rule described above under "REMIC Certificates -- Income From Regular Certificates -- Original Issue Discount", or (ii) the annual stated rate of interest on the mortgage loan was not more than 100 basis points lower than on the loan prior to its being stripped. In either such case the rules described above under "REMIC Certificates--Income From Regular Certificates--Market Discount" (including the applicable de minimis rule) would apply with respect to the mortgage loan. 54 Taxation of Certificates if Stripped Bond Rules Do Not Apply. If the stripped bond rules do not apply to a Certificate, then the Owner will be required to include in income its share of the interest payments on the Mortgage Loans held by the Trust Fund in accordance with its tax accounting method. The Owner must also account for discount or premium on the Mortgage Loans if it is considered to have purchased its interest in the Mortgage Loans at a discount or premium. An Owner will be considered to have purchased an interest in each Mortgage Loan at a price determined by allocating its purchase price for the Certificate among the Mortgage Loans in proportion to their fair market values at the time of purchase. It is likely that discount would be considered to accrue and premium would be amortized, as described below, based on an assumption that there will be no future prepayments of the Mortgage Loans, and not based on a reasonable prepayment assumption. Legislative proposals which are currently pending would, however, generally require a reasonable prepayment assumption. Discount. The treatment of any discount relating to a Mortgage Loan will depend on whether the discount is original issue discount or market discount. Discount at which a Mortgage Loan is purchased will be original issue discount only if the Mortgage Loan itself has original issue discount; the issuance of Certificates is not considered a new issuance of a debt instrument that can give rise to original issue discount. A Mortgage Loan will be considered to have original issue discount if the greater of the amount of points charged to the borrower, or the amount of any interest foregone during any initial teaser period, exceeds 0.25% of the stated redemption price at maturity times the number of full years to maturity, or if interest is not paid at a fixed rate or a single variable rate (disregarding any initial teaser rate) over the life of the Mortgage Loan. It is not anticipated that the amount of original issue discount, if any, accruing on the Mortgage Loans in each month will be significant relative to the interest paid currently on the Mortgage Loans, but there can be no assurance that this will be the case. In the case of a Mortgage Loan that is considered to have been purchased with market discount that exceeds a de minimis amount (generally, 0.25% of the stated redemption price at maturity times the number of whole years to maturity remaining at the time of purchase), the Owner will be required to include in income in each month the amount of such discount that has accrued through such month and not previously been included in income, but limited to the amount of principal on the Mortgage Loan that is received by the Trust Fund in that month. Because the Mortgage Loans will provide for monthly principal payments, such discount may be required to be included in income at a rate that is not significantly slower than the rate at which such discount accrues. Any market discount that has not previously been included in income will be recognized as ordinary income if and when the Mortgage Loan is prepaid in full. For a more detailed discussion of the market discount rules of the Code, see "REMIC Certificates -- Income from Regular Certificates -- Market Discount" above. In the case of market discount that does not exceed a de minimis amount, the Owner will be required to allocate ratably the portion of such discount that is allocable to a Mortgage Loan among the principal payments on the Mortgage Loan and to include the discount in ordinary income as the related principal payments are made (whether as scheduled payments or prepayments). Premium. In the event that a Mortgage Loan is purchased at a premium, the Owner may elect under Section 171 of the Code to amortize such premium under a constant yield method based on the yield of the Mortgage Loan to such Owner, provided that such Mortgage Loan was originated after September 27, 1985. Premium allocable to a Mortgage Loan originated on or before that date should be allocated among the principal payments on the Mortgage Loan and allowed as an ordinary deduction as principal payments are made (whether as scheduled payments or prepayments). Taxation of Certificates if Stripped Bond Rules Apply. If the stripped bond rules apply to a Certificate, income on the Certificate will be treated as original issue discount and will be included in income as it accrues under a constant yield method. More specifically, for purposes of applying the original issue discount rules of the Code, the Owner will likely be taxed as if it had purchased a newly issued, single debt instrument providing for payments equal to the payments on the interests in the Mortgage Loans allocable to the Certificate, and having original issue discount equal to the excess of the sum of such payments over the Owner's purchase price for the Certificate (which would be treated as the issue 55 price). The amount of original issue discount income accruing in any taxable year will be computed as described above under "REMIC Certificates -- Income from Regular Certificates -- Original Issue Discount". It is possible, however, that the calculation must be made using as the Prepayment Assumption an assumption of zero prepayments. If the calculation is made assuming no future prepayments, then the Owner would be allowed to deduct currently any negative amount of original issue discount produced by the accrual formula. Different approaches could be applied in calculating income under the stripped bond rules. For example, a Certificate could be viewed as a collection of separate debt instruments (one for each payment allocable to the Certificate) rather than a single debt instrument. Also, in the case of an Interest-Only Certificate, it could be argued that certain proposed regulations governing contingent payment debt obligations apply. It is recommended that Owners consult their own tax advisors regarding the calculation of income under the stripped bond rules. Sales of Certificates. A Certificateholder that sells a Certificate will recognize gain or loss equal to the difference between the amount realized in the sale and its adjusted tax basis in the Certificate. In general, such adjusted basis will equal the Certificateholder's cost for the Certificate, increased by the amount of any income previously reported with respect to the Certificate and decreased (but not below zero) by the amount of any distributions received thereon, the amount of any losses previously allowable to such Owner with respect to such Certificate and any premium amortization thereon. Any such gain or loss would be capital gain or loss if the Certificate was held as a capital asset, subject to the potential treatment of gain as ordinary income to the extent of any accrued but unrecognized market discount under the market discount rules of the Code, if applicable. Foreign Investors. Except as described in the following paragraph, an Owner that is not a U.S. person (as defined under "REMIC Certificates -- Taxation of Foreign Investors" above) and that is not subject to federal income tax as a result of any direct or indirect connection to the United States in addition to its ownership of a Certificate will not be subject to United States income or withholding tax in respect of a Certificate (assuming the underlying Mortgage Loans were originated after July 18, 1984), if the Owner provides an appropriate statement, signed under penalties of perjury, identifying the Owner and stating, among other things, that the Owner is not a U.S. person. If these conditions are not met, a 30% withholding tax will apply to interest (including original issue discount) unless an income tax treaty reduces or eliminates such tax or unless the interest is effectively connected with the conduct of a trade or business within the United States by such Owner. Income effectively connected with a U.S. trade or business will be subject to United States federal income tax at regular rates then applicable to U.S. taxpayers (and in the case of a corporation, possibly also the branch profits tax). In the event the Trust Fund acquires ownership of real property located in the United States in connection with a default on a Mortgage Loan, then any rental income from such property allocable to an Owner that is not a U.S. person generally will be subject to a 30% withholding tax. In addition, any gain from the disposition of such real property allocable to an Owner that is not a U.S. person may be treated as income that is effectively connected with a U.S. trade or business under special rules governing United States real property interests. The Trust Fund may be required to withhold tax on gain realized upon a disposition of such real property by the Trust Fund at a 35% rate. Reporting Tax information will be reported annually to the Internal Revenue Service and to Holders of Certificates that are not excluded from the reporting requirements. Backup Withholding Distributions made on a Certificate and proceeds from the sale of a Certificate to or through certain brokers may be subject to a "backup" withholding tax of 31% unless, in general, the Owner of the Certificate complies with certain procedures or is a corporation or other person exempt from such withholding. Any amounts so withheld from distributions on the Certificates would be refunded by the Internal Revenue Service or allowed as a credit against the Owner's federal income tax. 56 PLAN OF DISTRIBUTION The Seller may sell Certificates of each series to or through underwriters (the "Underwriters") by a negotiated firm commitment underwriting and public reoffering by the Underwriters, and also may sell and place Certificates directly to other purchasers or through agents. The Seller intends that Certificates will be offered through such various methods from time to time and that offerings may be made concurrently through more than one of these methods or that an offering of a particular series of Certificates may be made through a combination of such methods. The distribution of the Certificates may be effected from time to time in one or more transactions at a fixed price or prices, which may be changed, or at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. If so specified in the Prospectus Supplement relating to a series of Certificates, the Seller or any affiliate thereof may purchase some or all of one or more classes of Certificates of such series from the Underwriter or Underwriters at a price specified in such Prospectus Supplement. Such purchaser may thereafter from time to time offer and sell, pursuant to this Prospectus, some or all of such Certificates so purchased directly, through one or more underwriters to be designated at the time of the offering of such Certificates or through broker-dealers acting as agent and/or principal. Such offering may be restricted in the manner specified in such Prospectus Supplement and may be effected from time to time in one or more transactions at a fixed price or prices, which may be changed, or at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. In connection with the sale of the Certificates, Underwriters may receive compensation from the Seller or from the purchasers of Certificates for whom they may act as agents in the form of discounts, concessions or commissions. Underwriters may sell the Certificates of a series to or through dealers and such dealers may receive compensation in the form of discounts, concessions or commissions from the Underwriters and/or commissions from the purchasers for whom they may act as agents. Underwriters, dealers and agents that participate in the distribution of the Certificates of a series may be deemed to be Underwriters and any discounts or commissions received by them from the Seller and any profit on the resale of the Certificates by them may be deemed to be underwriting discounts and commissions, under the Securities Act of 1933, as amended (the "Act"). Any such Underwriters or agents will be identified, and any such compensation received from the Seller will be described, in the applicable Prospectus Supplement. It is anticipated that the underwriting agreement pertaining to the sale of any series or class of Certificates will provide that the obligations of the underwriters will be subject to certain conditions precedent and that the underwriters will be obligated to purchase all such Certificates if any are purchased. Under agreements which may be entered into by the Seller, Underwriters and agents who participate in the distribution of the Certificates may be entitled to indemnification by the Seller against certain liabilities, including liabilities under the Act. If so indicated in the Prospectus Supplement, the Seller will authorize Underwriters or other persons acting as the Seller's agents to solicit offers by certain institutions to purchase the Certificates from the Seller pursuant to contracts providing for payment and delivery on a future date. Institutions with which such contracts may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational charitable institutions and others, but in all cases such institutions must be approved by the Seller. The obligation of any purchaser under any such contract will be subject to the condition that the purchaser of the offered Certificates shall not at the time of delivery be prohibited under the laws of the jurisdiction to which such purchaser is subject from purchasing such Certificates. The Underwriters and such other agents will not have responsibility in respect of the validity or performance of such contracts. The Underwriters may, from time to time, buy and sell Certificates, but there can be no assurance that an active secondary market will develop and there is no assurance that any market, if established, will continue. 57 USE OF PROCEEDS Substantially all of the net proceeds from the sale of each series of Certificates will be applied by the Seller to the purchase price of the Mortgage Loans underlying the Certificates of such Series. LEGAL MATTERS Certain legal matters in connection with the Certificates offered hereby, including certain federal income tax matters, will be passed upon for the Seller by Morgan, Lewis & Bockius LLP, New York, New York. 58 INDEX OF PROSPECTUS DEFINITIONS Defined Term Page - ------------ ---- 1998 Policy Statement .......................... __ Accrual Certificates ........................... __ Act ............................................ __ Advance Guarantee .............................. __ Agreement ...................................... __ ARM Loans ...................................... __ ARMs ........................................... __ Book-Entry Nominee ............................. __ Buy-Down Fund .................................. __ Buy-Down Mortgage Loans ........................ __ Buy-Down Reserve ............................... __ Cash-Out Refinance Loans ....................... __ Certificates ................................... __ Certificate Guaranty Insurance Policy .......... __ Certificate Issurer ............................ __ Certificate Rate ............................... __ CERCLA ......................................... __ Chase Manhattan Mortgage ....................... __ Code ........................................... __ Collection Account ............................. __ Commission ..................................... __ Compensating Interest Payment .................. __ Conservation Act ............................... __ Cooperative Loans .............................. __ Current Report ................................. __ Cut-Off Date ................................... __ Defective Mortgage Loan ........................ __ Delivery Date .................................. __ Denomination ................................... __ Deposit Guarantee .............................. __ Distribution Date .............................. __ DOL ............................................ __ Environmental Lien ............................. __ ERISA .......................................... __ Exchange Act ................................... __ Garn-St. Germain Act ........................... __ GIC ............................................ __ Guarantor ...................................... __ Insurance Proceeds ............................. __ Interest Accrual Period ........................ __ Interest Only Certificate ...................... __ Limited Guarantee .............................. __ Liquidation Proceeds ........................... __ Mortgage ....................................... __ Mortgage Loan Schedule ......................... __ Mortgage Loans ................................. __ Mortgage Pool .................................. __ Mortgage Rate .................................. __ Mortgage Pool Insurance Policy ................. __ Mortgaged Properties ........................... __ NCUA ........................................... __ 59 Defined Term Page - ------------ ---- Nonrecoverable Advance ........................ __ Non-SMMEA Certificates ........................ __ Non-U.S. Person ............................... __ Note .......................................... __ OCC ........................................... __ OID Regulations ............................... __ OTS ........................................... __ Parties in Interest ........................... __ Paying Agent .................................. __ Plans ......................................... __ Pre-Funding Account ........................... __ Pre-Funding Agreement ......................... __ Primary Mortgage Insurance Policy ............. __ Principal Prepayments ......................... __ Prospectus Supplement ......................... __ PTE 83-1 ...................................... __ PUD ........................................... __ Record Date ................................... __ Regular Certificates .......................... __ Relief Act .................................... __ REMIC ......................................... __ REMIC Regulations ............................. __ Remittance Rate ............................... __ Representing Party ............................ __ Reserve Account ............................... __ Residual Certificates ......................... __ Residual Owners ............................... __ RICO .......................................... __ Seller ........................................ __ Senior Certificates ........................... __ Servicer ...................................... __ SMMEA ......................................... __ Special Hazard Insurance Policy ............... __ Stripped Bond Rules ........................... __ Stripped Certificate .......................... __ Subordinated Certificates ..................... __ Title V ....................................... __ Trustee ....................................... __ Trust Fund .................................... __ Underwriters .................................. __ 60 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution The expenses expected to be incurred in connection with the issuance and distribution of the securities being registered, other than underwriting compensation, are as set forth below. All such expenses, except for the filing fee, are estimated. SEC Registration Fee.............. * Legal Fees and Expenses........... * Accounting Fees and Expenses...... * Trustee's Fees and Expenses....... * Printing and Engraving Fees....... * Rating Agency Fees................ * Miscellaneous..................... * --------- Total............................ $ * - ------------------- * To be filed by amendment Item 15. Indemnification of Directors and Officers. (a) Chase Manhattan Acceptance Corporation ("CMAC") The CMAC Bylaws provide for indemnification of directors and officers of CMAC and provide, in substance, that CMAC shall, under specified circumstances, indemnify its directors and officers in connection with actions or proceedings brought against them by a third party or in the right of the corporation, by reason of the fact that they were or are such directors or officers, against expenses incurred in any such action, suit or proceeding. (b) Chase Funding, Inc. ("CFI"). CFI's Certificate of Incorporation provides for indemnification of its directors and officers to the full extent permitted by the Delaware General Corporation Law ("DGCL"). Section 145 of the DGCL provides, in substance, that Delaware corporations shall have the power, under specified circumstances, to indemnify their directors, officers, employees and agents in connection with actions, suits or proceedings brought against them by a third party or in the right of the corporation, by reason of the fact that they were or are such directors, officers, employees or agents, against expenses incurred in any such action, suit or proceeding. The DGCL also provides that CFI may purchase insurance on behalf of any such director, officer, employee or agent. Item 16. Exhibits. 1.1 Form of Underwriting Agreement with respect to CFI. 1.2 Form of Underwriting Agreement with respect to CMAC. 4.1 Form of Pooling and Servicing Agreement with respect to CFI. 4.2 Form of Pooling and Servicing Agreement with respect to CMAC. 5.1 Opinion of Morgan, Lewis & Bockius LLP regarding the legality of the securities being registered. 8.1 Opinion of Morgan, Lewis & Bockius LLP regarding certain federal income tax matters with respect to the securities being registered. 23.1 Consent of Morgan, Lewis & Bockius LLP (incorporated in Exhibits 5.1 and 8.1). 24.1 Powers of Attorney (incorporated in Signatures). Item 17. Undertakings. (a) Undertaking pursuant to Rule 415. The undersigned Registrants hereby undertake: (1) to file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the Prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; (iii) to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement. (2) that, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (3) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) Undertaking in respect of indemnification. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrants pursuant to the foregoing provisions, or otherwise, the Registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrants of expenses incurred or paid by a director, officer or controlling person of either Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrants will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. (c) The undersigned Registrants hereby undertake that, for purposes of determining any liability under the Securities Act of 1933, each filing of either Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3, that it reasonably believes that the security rating requirement set forth in Transaction Requirement B-5 will be met by the time of sale of the registered securities and that it has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Edison, New Jersey, on the 18th day of October, 1999. CHASE FUNDING, INC. By: /s/ Samuel Cooper ------------------ Name: Samuel Cooper Title: President POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Samuel Cooper and Michael D. Katz, and both of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as might or could be done in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in their capacities as directors and officers of Chase Funding, Inc. in the capacities and on the date indicated below.
Signature Title Date --------- ----- ---- /s/ Luke S. Hayden Principal Executive October 20, 1999 - ------------------------------ Officer and Director Luke S. Hayden /s/ Stephen J. Fortunato Treasurer (Principal October 20, 1999 - ------------------------------ Financial and Accounting Stephen J. Fortunato Officer) /s/ Samuel Cooper Director October 20, 1999 - ------------------------------ Samuel Cooper /s/ Michael D. Katz Director October 20, 1999 - ------------------------------ Michael D. Katz /s/ Douglas A. Potolsky Director October 20, 1999 - ------------------------------ Douglas A. Potolsky /s/ Matthew Whalen Director October 20, 1999 - ------------------------------ Matthew Whalen
SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3, that it reasonably believes that the security rating requirement set forth in Transaction Requirement B-5 will be met by the time of sale of the registered securities and that it has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Edison, New Jersey, on the 18th day of October, 1999. CHASE MANHATTAN ACCEPTANCE CORPORATION By: /s/ Paul Mullings --------------------------------- Name: Paul Mullings Title: President POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Paul E. Mullings and Michael D. Katz, and both of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as might or could be done in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitute or substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in their capacities as directors and officers of Chase Manhattan Acceptance Corporation in the capacities and on the date indicated below.
Signature Title Date --------- ----- ---- /s/ Luke S. Hayden Principal Executive October 20, 1999 - ------------------------------ Officer and Director Luke S. Hayden /s/ Stephen J. Fortnato Treasurer (Principal October 20, 1999 - ------------------------------ Financial and Accounting Stephen J. Fortunato Officer) /s/ Samuel Cooper Director October 20, 1999 - ------------------------------ Samuel Cooper /s/ Michael D. Katz Director October 20, 1999 - ------------------------------ Michael D. Katz
EXHIBIT INDEX EXHIBIT DESCRIPTION ------- ----------- 1.1 Form of Underwriting Agreement with respect to Chase Funding, Inc. ("CFI"). 1.2 Form of Underwriting Agreement with respect to Chase Manhattan Acceptance Corporation ("CMAC"). 4.1 Form of Pooling and Servicing Agreement with respect to CFI. 4.2 Form of Pooling and Servicing Agreement with respect to CMAC. 5.1 Opinion of Morgan, Lewis & Bockius LLP regarding the legality of the securities being registered. 8.1 Opinion of Morgan, Lewis & Bockius LLP regarding certain federal income tax matters with respect to the securities being registered. 23.1 Consent of Morgan, Lewis & Bockius LLP (incorporated in Exhibits 5.1 and 8.1). 24.1 Powers of Attorney (incorporated in Signatures). EX-1.1 2 FORM OF UNDERWRITING AGREEMENT WITH RESPECT TO CFI Chase Funding, Inc. Pass-Through Certificates UNDERWRITING AGREEMENT [DATE] [Underwriter] [Address] Ladies and Gentlemen: Chase Funding, Inc. (the "Company"), a New York corporation, has authorized the issuance and sale of Pass-Through Certificates (such certificates evidencing interests in pools of Mortgage Loans, the "Certificates") evidencing interests in pools of mortgage loans (the "Mortgage Loans"). The Certificates may be issued in various series, and, within each series, in one or more classes, and, within each class, in one or more sub-classes, in one or more offerings on terms determined at the time of sale (each such series, a "Series" and each such class, a "Class"). Each Series of the Certificates will be issued under a separate Pooling and Servicing Agreement (each, a "Pooling and Servicing Agreement") with respect to such Series among the Company, as depositor, a servicer to be identified in the prospectus supplement for each such Series (the "Servicer") and a trustee to be identified in the prospectus supplement for each such Series (the "Trustee"). The Certificates of each Series will evidence specified interests in separate pools of Mortgage Loans (each a "Mortgage Pool") or separate pools of Agency Securities, and certain other property held in trust with respect to such Series (each, a "Trust Fund"). The Certificates are more fully described in a Registration Statement which the Company has furnished to you. Capitalized terms used but not defined herein shall have the meanings given to them in the Pooling and Servicing Agreement. The term "you" as used herein, unless the context otherwise requires, shall mean you and such persons as are named as co-managers in the applicable Terms Agreement (defined below). Whenever the Company determines to make an offering of Certificates pursuant to this Agreement through you or through an underwriting syndicate managed by you it will enter into an agreement (the "Terms Agreement") providing for the sale of such Certificates to, and the purchase and offering thereof by, you and such other underwriters, if any, selected by you as have authorized you to enter into such Terms Agreement on their behalf (the "Underwriters," which term shall include you whether acting alone in the sale of Certificates or as a member of an underwriting syndicate; as the context requires, [Underwriter] is sometimes referred to individually herein as ["Underwriter"]). The Terms Agreement relating to each offering of Certificates shall specify, among other things, the stated balance or balances of Certificates to be issued, the price or prices at which the Certificates are to be purchased by the Underwriters from the Company and the initial public offering price or prices or the method by which the price or prices at which such Certificates are to be sold will be determined. A Terms Agreement, which shall be substantially in the form of Exhibit A hereto, may take the form of an exchange of any standard form of written telecommunication between you and the Company. Each such offering of Certificates which the Company elects to make pursuant to this Agreement will be governed by this Agreement, as supplemented by the applicable Terms Agreement, and this Agreement and such Terms Agreement shall inure to the benefit of and be binding upon the Underwriters participating in the offering of such Certificates. SECTION 1. Representations and Warranties. The Company represents and warrants to you as of the date hereof, and to the Underwriters named in the applicable Terms Agreement, all as of the date of such Terms Agreement (in each case, the "Representation Date"), as follows (any representations and warranties so made to the Underwriters named in an applicable Terms Agreement respecting the Certificates being deemed to relate only to the Certificates described therein): (1) The Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3 (No. 33-92950), relating to the offering of Certificates from time to time in accordance with Rule 415 under the Securities Act of 1933, as amended (the "1933 Act"), and has filed, and proposes to file, such amendments thereto as may have been required to the date hereof and the same has become effective under the 1933 Act and the rules of the Commission thereunder (the "Regulations") and no stop order suspending the effectiveness of such registration statement has been issued and no proceedings for that purpose have been initiated or, to the Company's knowledge, threatened, by the Commission. Such registration statement, including incorporated documents, exhibits and financial statements, as amended at the time when it became effective under the 1933 Act, and the prospectus relating to the sale of Certificates by the Company constituting a part thereof, as from time to time each is amended or supplemented pursuant to the 1933 Act or otherwise, are referred to herein as the "Registration Statement" and the "Prospectus," respectively; provided, however, that a supplement to the Prospectus contemplated by Section 3(a) hereof (a "Prospectus Supplement") shall be deemed to have supplemented the Prospectus only with respect to the offering or offerings of Certificates to which it relates. Any reference herein to the Registration Statement, a preliminary prospectus, the Prospectus or the Prospectus Supplement shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 which were filed under the Securities Exchange Act of 1934, as amended (the "1934 Act") on or before the date on which the Registration Statement, as amended, became effective or the issue date of such preliminary prospectus, Prospectus, or Prospectus Supplement, as the case may be; and any reference herein to the terms "amend," -2- "amendment" or supplement with respect to the Registration Statement, any preliminary prospectus, the Prospectus or the Prospectus Supplement shall be deemed to refer to and include the filing of any document under the 1934 Act after the date on which the Registration Statement became effective or the issue date of any preliminary prospectus, the Prospectus or the Prospectus Supplement, as the case may be, deemed to be incorporated therein by reference. The Registration Statement and Prospectus, at the time the Registration Statement became effective did, and as of the applicable Representation Date will, conform in all material respects to the requirements of the 1933 Act and the Regulations. The Registration Statement, at the time it became effective did not, and as of the applicable Representation Date and the applicable Closing Time (as defined in Section 2 hereof) will not, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. The Prospectus, as amended or supplemented as of the applicable Representation Date and the applicable Closing Time (as defined in Section 2 hereof), will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the representations and warranties in this subsection shall not apply to statements in, or omissions from, (i) the Registration Statement or Prospectus made in reliance upon and in conformity with information furnished to the Company in writing by the Underwriters expressly for use in the Registration Statement or Prospectus or (ii) the [Underwriter] Information (as defined in Section 10 hereof). The conditions to the use by the Company of a registration statement on Form S-3 under the 1933 Act, as set forth in the General Instructions to Form S-3, have been satisfied with respect to the Registration Statement and the Prospectus. There are no contracts or documents of the Company which are required to be filed as exhibits to the Registration Statement pursuant to the 1933 Act or the Regulations which have not been so filed. (2) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of New York with corporate power and authority to enter into and perform its obligations under this Agreement, the applicable Pooling and Servicing Agreement, and with respect to a Series of Certificates, the Certificates and the applicable Terms Agreement; and the Company is duly qualified or registered as a foreign corporation to transact business and is in good standing in each jurisdiction in which the ownership or lease of its properties or the conduct of its business requires such qualification. (3) The Company is not in violation of its certificate of incorporation or by-laws or in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any material contract, indenture, mortgage, loan agreement, note, lease or other material instrument to which it is a party or by which it or its properties may be bound, which default might result in any material adverse change in the financial condition, earnings, affairs or business of the Company or which might materially and adversely affect the properties -3- or assets thereof or the Company's ability to perform its obligations under this Agreement, the applicable Terms Agreement or the applicable Pooling and Servicing Agreement. (4) The execution and delivery by the Company of this Agreement, the applicable Terms Agreement and the applicable Pooling and Servicing Agreement and the signing of the Registration Statement by the Company are within the corporate power of the Company and have been duly authorized by all necessary corporate action on the part of the Company; and with respect to a Series of Certificates described in the applicable Terms Agreement, neither the issuance and sale of the Certificates to the Underwriters, nor the execution and delivery by the Company of this Agreement, such Terms Agreement and the related Pooling and Servicing Agreement, nor the consummation by the Company of the transactions herein or therein contemplated, nor compliance by the Company with the provisions hereof or thereof, will conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company other than as contemplated by a Pooling and Servicing Agreement, pursuant to any material indenture, mortgage, contract or other material instrument to which the Company is a party or by which it is bound or to which the property or assets of the Company are subject, or result in the violation of the provisions of the certificate of incorporation or by-laws of the Company or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its properties. (5) This Agreement has been, and each applicable Terms Agreement when executed and delivered as contemplated hereby and thereby will have been, duly authorized, executed and delivered by the Company, and each constitutes, or will constitute when so executed and delivered, a legal, valid and binding instrument enforceable against the Company in accordance with its terms (assuming due authorization, execution and delivery by the other parties thereto), subject (a) to applicable bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors' rights generally, (b) as to enforceability to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law) and (c) as to enforceability with respect to rights of indemnity thereunder, to limitations of public policy under applicable securities laws. (6) Each applicable Pooling and Servicing Agreement when executed and delivered as contemplated hereby and thereby will have been duly authorized, executed and delivered by the Company, and will constitute when so executed and delivered, a legal, valid and binding instrument enforceable against the Company in accordance with its terms (assuming due authorization, execution and delivery by the other parties thereto), subject (a) to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and (b) as to enforceability to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law); and as of the Closing Date, the -4- representations and warranties made by the Company in the applicable Pooling and Servicing Agreement will be true and correct as of the date made. (7) As of the Closing Time (as defined in Section 2 hereof) with respect to a Series of Certificates, the Certificates will have been duly and validly authorized by the Company, and, when executed and authenticated as specified in the related Pooling and Servicing Agreement, will be validly issued and outstanding and will be entitled to the benefits of the related Pooling and Servicing Agreement. (8) There are no actions, proceedings or investigations now pending against the Company or, to the knowledge of the Company, threatened against the Company, before any court, administrative agency or other tribunal (i) asserting the invalidity of this Agreement, the applicable Terms Agreement, the applicable Pooling and Servicing Agreement or with respect to a Series of Certificates, the Certificates, (ii) seeking to prevent the issuance of such Certificates or the consummation of any of the transactions contemplated by this Agreement, the applicable Terms Agreement or such Pooling and Servicing Agreement, (iii) which would be likely to materially and adversely affect the performance by the Company of its obligations under, or which would if adversely determined materially and adversely affect the validity or enforceability of, this Agreement, the applicable Terms Agreement, such Pooling and Servicing Agreement or such Certificates or (iv) seeking to adversely affect the federal income tax attributes of such Certificates described in the Prospectus and the related Prospectus Supplement. (9) Any taxes, fees and other governmental charges that are assessed and due in connection with the execution, delivery and issuance of this Agreement, the applicable Terms Agreement, the applicable Pooling and Servicing Agreement and with respect to a Series of Certificates, the Certificates, shall have been paid at or prior to the Closing Time. (10) No filing or registration with, notice to or consent, approval, authorization, order or qualification of or with any court or governmental agency or body is required for the issuance and sale of the Certificates or the consummation by the Company of the transactions contemplated by this Agreement, the applicable Pooling and Servicing Agreement or the applicable Terms Agreement, except the registration under the 1933 Act of the Certificates, and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Certificates by the Underwriters. (11) The Company possesses all material licenses, certificates, authorities or permits issued by the appropriate state, federal or foreign regulatory agencies or bodies deemed by the Company to be reasonably necessary to conduct the business now operated by it and as described in the Prospectus and the Company has received no notice of proceedings relating to -5- the revocation or modification of any such license, certificate, authority or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would materially and adversely affect the conduct of the business, operations, financial condition or income of the Company. (12) As of the Closing Time, with respect to a Series of Certificates described in the relevant Terms Agreement evidencing interests in a Mortgage Pool, the Trustee will have either good and marketable title, free and clear of all prior liens, charges and encumbrances, to or a validly perfected first priority security interest in the Mortgage Notes and the related Mortgages included in the Trust Fund, with respect to (a) the Mortgage Notes, upon delivery thereof to the Trustee and (b) the Mortgages, upon delivery to the Trustee of instruments of assignment in recordable form assigning each Mortgage to the Trustee and the recording of each such instrument of assignment in the appropriate recording office in which the Mortgaged Property is located, or if supported by an opinion of counsel, without recording. (13) As of the Closing Time, with respect to a Series of Certificates as to which there is a Reserve Fund, to the extent that the Reserve Fund does not constitute part of the Trust Fund for such Series, the Trustee will have acquired either good and marketable title to or a duly and validly perfected security interest in the Reserve Fund with respect to such Series, if any, subject to no prior lien, mortgage, security interest, pledge, charge or other encumbrance. (14) As of the Closing Time, with respect to a Series of Certificates, the Mortgage Pool will have substantially the characteristics described in the Prospectus Supplement and in the Form 8-K of the Company prepared with respect to such Certificates, if the Mortgage Pool is described in such Form 8-K. (15) Neither the Company nor the Trust Fund created by the applicable Pooling and Servicing Agreement will be subject to registration as an "investment company" under the Investment Company Act of 1940, as amended (the "1940 Act"). (16) The Certificates, the applicable Pooling and Servicing Agreement, the applicable Terms Agreement and any Primary Insurance Policies, Mortgage Pool Insurance Policies, Standard Hazard Insurance Policies, Special Hazard Insurance Policies, Mortgagor Bankruptcy Insurance and Alternate Credit Enhancement related to the Certificates described in the relevant Terms Agreement conform in all material respects to the descriptions thereof contained in the Prospectus. SECTION 2. Purchase and Sale. The commitment of each Underwriter to purchase Certificates pursuant to any Terms Agreement shall be several and not joint and shall be deemed to have been made on the basis of the representations and warranties herein contained and shall be subject to the terms and conditions herein set forth. -6- Payment of the purchase price for, and delivery of, any Certificates to be purchased by the Underwriters shall be made at the offices of Morgan, Lewis & Bockius LLP, New York, New York, or at such other place as shall be agreed upon by you and the Company, at such time or date as shall be agreed upon by you and the Company in the Terms Agreement (each such time and date being referred to as a "Closing Time"). Unless otherwise specified in the applicable Terms Agreement, payment shall be made to the Company in immediately available Federal funds wired to such bank as may be designated by the Company. Such Certificates shall be in such denominations and registered in such names as you may request in writing at least two business days prior to the applicable Closing Time. Such Certificates will be made available for examination and packaging by you no later than 12:00 noon on the first business day prior to the applicable Closing Time. It is understood that the Underwriters intend to offer the Certificates for sale to the public as set forth in the Prospectus Supplement. SECTION 3. Covenants of the Company. The Company covenants with each of you and each Underwriter participating in an offering of Certificates pursuant to a Terms Agreement, with respect to such Certificates and such offering, as follows: (a) Immediately following the execution of each Terms Agreement, the Company will prepare a Prospectus Supplement setting forth the principal amount of Certificates covered thereby, the price or prices at which the Certificates are to be purchased by the Underwriters, either the initial public offering price or prices or the method by which the price or prices by which the Certificates are to be sold will be determined, the selling concession(s) and reallowance(s), if any, any delayed delivery arrangements, and such other information as you and the Company deem appropriate in connection with the offering of the Certificates. The Company will promptly transmit copies of the Prospectus Supplement to the Commission for filing pursuant to Rule 424 under the 1933 Act and will furnish to the Underwriters as many copies of the Prospectus and such Prospectus Supplement as you shall reasonably request. (b) If the delivery of a prospectus is required at any time in connection with the offering or sale of the Certificates described in the relevant Terms Agreement and if at such time any event shall have occurred as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus is delivered, not misleading, or, if for any other reason it shall be necessary during such period of time to amend or supplement the Prospectus in order to comply with the 1933 Act, the Company agrees to notify you promptly and upon your request so to amend or supplement the Prospectus and to prepare and furnish without charge to each Underwriter and to any dealer in securities as many copies as you may from time to time reasonably request of an amended Prospectus or a supplement to the Prospectus which will correct such statement or omission or effect such compliance. -7- (c) During any period in which the delivery of a prospectus is required at any time in connection with the offering or sale of the Certificates described in the relevant Terms Agreement the Company will give you reasonable notice of its intention to file any amendment to the Registration Statement or any amendment or supplement to the Prospectus, whether pursuant to the 1933 Act or otherwise, and will furnish you with copies of any such amendment or supplement or other documents proposed to be filed a reasonable time in advance of filing. (d) During any period in which the delivery of a prospectus is required at any time in connection with the offering or sale of the Certificates described in the relevant Terms Agreement the Company will notify you promptly (i) of the effectiveness of any amendment to the Registration Statement, (ii) of the mailing or the delivery to the Commission for filing of any supplement to the Prospectus or any document other than quarterly and annual reports to be filed pursuant to the 1934 Act, (iii) of the receipt of any comments from the Commission with respect to the Registration Statement, the Prospectus or any Prospectus Supplement, (iv) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information, (v) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Certificates for sale in any jurisdiction or the threat of any proceeding for that purpose and (vi) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose. The Company will use its best efforts to prevent the issuance of any such stop order and, if any stop order is issued, to obtain the lifting thereof as soon as possible. (e) The Company will deliver to you as many conformed copies of the Registration Statement (as originally filed) and of each amendment thereto (including exhibits filed therewith or incorporated by reference therein and documents incorporated by reference in the Prospectus) as you may reasonably request. (f) The Company will endeavor, in cooperation with you, to qualify the Certificates for offering and sale under the applicable securities laws of such states and other jurisdictions of the United States as you may designate, and will maintain or cause to be maintained such qualifications in effect for as long as may be required for the distribution of the Certificates, provided that in connection therewith the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction. The Company will file or cause the filing of such statements and reports as may be required by the laws of each jurisdiction in which the Certificates have been qualified as above provided. (g) If the Company has elected to cause the applicable Mortgage Pool to be treated as a real estate mortgage investment conduit (a "REMIC"), the Company will prepare, or cause to be prepared, and file, or cause to be filed a timely election to treat the Mortgage Pool as a REMIC for federal income tax purposes and will file, or cause to be filed, such tax -8- returns and take such actions, all on a timely basis, as are required to elect and maintain such status. SECTION 4. Conditions of Underwriters' Obligations. The obligations of the Underwriters to purchase Certificates pursuant to any Terms Agreement shall be subject to the accuracy of the representations and warranties on the part of the Company herein contained, to the accuracy of the statements of the Company's officers made pursuant hereto, to the performance by the Company of all of its obligations hereunder and to the following additional conditions precedent: (a) At the applicable Closing Time (i) no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the Commission, (ii) the Certificates shall have received the rating or ratings specified in the applicable Terms Agreement, and (iii) there shall not have come to your attention any facts that would cause you to believe that the Prospectus, together with the applicable Prospectus Supplement at the time it was required to be delivered to a purchaser of the Certificates, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances existing at such time, not misleading. No challenge by the Commission shall have been made to the accuracy or adequacy of the Registration Statement and any request of the Commission for inclusion of additional information in the Registration Statement or the Prospectus or the Prospectus Supplement shall have been complied with and the Company shall not have filed with the Commission any amendment or supplement to the Registration Statement, the Prospectus or the Prospectus Supplement without the consent of the Underwriters. (b) At the applicable Closing Time you shall have received: (1) The opinion, dated as of the applicable Closing Time, of Morgan, Lewis & Bockius LLP, counsel for the Company, in form and substance satisfactory to such of you as may be named in the applicable Terms Agreement, to the effect that: (i) The Company is validly existing as a corporation in good standing under the laws of the State of New York. (ii) This Agreement and the applicable Terms Agreement have been duly authorized, executed and delivered by the Company, and each is a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except that (A) such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally, (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 -9- therefor may be brought, and (C) the enforceability as to rights to indemnity thereunder may be subject to limitations of public policy under applicable securities laws. (iii) The applicable Pooling and Servicing Agreement has been duly authorized, executed and delivered by the Company, and is a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except that (A) such enforceability thereof may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect 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. (iv) The execution and delivery by the Company of this Agreement, the applicable Terms Agreement and applicable Pooling and Servicing Agreement and the signing of the Registration Statement by the Company are within the corporate power of the Company and have been duly authorized by all necessary corporate action on the part of the Company; and neither the issue and sale of the Certificates nor the consummation of the transactions contemplated herein or therein nor the fulfillment of the terms hereof or thereof will, conflict with or constitute a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company pursuant to, any contract, indenture, mortgage, or other instrument to which the Company is a party or by which it may be bound of which such counsel is aware, other than the lien or liens created by the applicable Pooling and Servicing Agreement, nor will such action result in any violation of the provisions of the certificate of incorporation or by-laws of the Company or, any statute, rule or regulation to which the Company is subject or by which it is bound or any writ, injunction or decree of any court, governmental authority or regulatory body to which it is subject or by which it is bound of which such counsel is aware. (v) The Certificates have been duly authorized and, when executed and authenticated as specified in the related Pooling and Servicing Agreement and delivered and paid for, will be validly issued and entitled to the benefits of the related Pooling and Servicing Agreement. (vi) To the best of such counsel's knowledge, no filing or registration with or notice to or consent, approval, authorization, order or qualification of or with any court or governmental agency or body is required for the issuance and sale of the Certificates or the consummation by the Company of the transactions contemplated by this Agreement, the applicable Pooling and Servicing Agreement or the applicable Terms Agreement, except the registration under the 1933 Act of the -10- Certificates, and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Certificates by the Underwriters. (vii) To the best of such counsel's knowledge, there is no action, suit or proceeding of which such counsel is aware before or by any court or governmental agency or body, domestic or foreign, now pending or threatened against the Company which might result in any material adverse change in the financial condition, earnings, affairs or business of the Company, or which might materially and adversely affect the properties or assets thereof or might materially and adversely affect the performance by the Company of its obligations under, or the validity or enforceability of, the Certificates, this Agreement or the Pooling and Servicing Agreement, or which is required to be disclosed in the Registration Statement. (viii) The Registration Statement is effective under the 1933 Act and, to the best of such counsel's knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued under the 1933 Act or proceedings therefor initiated or threatened by the Commission. (ix) The applicable Pooling and Servicing Agreement is not required to be qualified under the Trust Indenture Act of 1939, as amended. (x) The Registration Statement and the Prospectus (other than the financial statements and other financial and statistical information included therein, as to which no opinion need be rendered) as of their respective effective or issue dates, complied as to form in all material respects with the requirements of the 1933 Act and the Regulations thereunder. (xi) The statements in the Prospectus under the headings "ERISA Considerations" and "Federal Income Tax Consequences" and the statements in the applicable Prospectus Supplement under the headings "Federal Income Tax Considerations" and "ERISA Considerations", to the extent that they describe matters of United States federal income tax law or ERISA or legal conclusions with respect thereto, have been prepared or reviewed by such counsel and are accurate in all material respects with respect to those consequences or matters discussed therein. (xii) The statements in the Prospectus and the applicable Prospectus Supplement under the caption "Description of the Certificates", insofar as they purport to summarize certain terms of the Certificates and the applicable Pooling and Servicing Agreement, constitute a fair summary of the provisions purported to be summarized. -11- (xiii) The Trust Fund created by the applicable Pooling and Servicing Agreement is not, and will not as a result of the offer and sale of the Certificates as contemplated in the Prospectus and in this Agreement become, an "investment company" required to be registered under the 1940 Act. (xiv) The Classes of Certificates so designated in the Prospectus Supplement will be "mortgage related securities", as defined in ss.3(a)(41) of the 1934 Act, so long as the Certificates are rated in one of the two highest grades by at least one nationally recognized statistical rating organization. (xv) If a REMIC election is to be made with respect to the Trust Fund, assuming (a) ongoing compliance with all of the provisions of the Pooling and Servicing Agreement and (b) the filing of an election, in accordance with the Pooling and Servicing Agreement, to be treated as a "real estate mortgage investment conduit" (a "REMIC") pursuant to Section 860D of the Internal Revenue Code of 1986, as amended (the "Code") for Federal income tax purposes, the Trust Fund will qualify as a REMIC as of the Closing Date and will continue to qualify as a REMIC for so long as it complies with amendments after the date hereof to any applicable provisions of the Code and applicable Treasury Regulations. Such counsel shall deliver to you such additional opinions addressing the transfer by the Company to the Trustee of its right, title and interest in and to the Mortgage Loans and other property included in the Trust Fund at the Closing Time as may be required by each Rating Agency rating the Certificates. Such counsel shall state that it has participated in conferences with officers and other representatives of the Company, your counsel, representatives of the independent accountants for the Company and you at which the contents of the Registration Statement and the Prospectus and related matters were discussed and, although such counsel is not passing upon and does not assume responsibility for, the factual accuracy, completeness or fairness of the statements contained in the Registration Statement or the Prospectus (except as stated in paragraphs (xi) and (xii) above) and has made no independent check or verification thereof for the purpose of rendering its opinion, on the basis of the foregoing, nothing has come to their attention that leads such counsel to believe that either the Registration Statement, at the time it became effective and at the applicable Closing Time, contained, an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or that the Prospectus contained or contains as of the date thereof and at the applicable Closing Time any untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that such counsel need express no view with respect to the -12- financial statements, schedules and other financial and statistical data included in or incorporated by reference into the Registration Statement, the Prospectus or the Prospectus Supplement. Such counsel may state that their opinions relate only to laws of the State of New York, the Federal laws of the United States and the General Corporation Law of the State of Delaware. In rendering such opinions, such counsel may rely, as to matters of fact, to the extent deemed proper and stated therein, on certificates of responsible officers of the Company, the Trustee or public officials. (2) The favorable opinion of counsel to the Trustee, dated as of the applicable Closing Time, addressed to you and in form and scope satisfactory to your counsel, to the effect that: (i) The Trustee is a ____________, duly authorized and validly existing in good standing under the laws of the ___________, and has all requisite power and authority to enter into the Pooling and Servicing Agreement and to perform its obligations thereunder. (ii) To the knowledge of such counsel, there is no action, suit, proceeding or investigation pending or threatened against the Trustee that could materially adversely affect the ability of the Trustee to perform its obligations under the Pooling and Servicing Agreement. (iii) The Trustee has duly authorized, executed and delivered the applicable Pooling and Servicing Agreement and such Pooling and Servicing Agreement will constitute the legal, valid and binding obligation of the Trustee. (iv) The Trustee has full power and authority to execute and deliver the applicable Pooling and Servicing Agreement and to perform its obligations thereunder. (v) No consent, approval or authorization of, or registration, declaration or filing with, any court or governmental agency or body of the jurisdiction of its organization is required for the execution, delivery or performance by the Trustee of the Pooling and Servicing Agreement. (vi) The Certificates have been duly and validly executed, authenticated and delivered by the Trustee in accordance with the Pooling and Servicing Agreement. -13- (vii) The performance by the Trustee of its duties pursuant to the Pooling and Servicing Agreement does not conflict with or result in a breach or violation of any term or provision of, or constitute a default under, any statute or regulation currently governing the Trustee. In rendering such opinion, such counsel may rely, as to matters of fact, to the extent deemed proper and stated therein, on certificates of responsible officers of the Trustee or public officials. (3) The favorable opinion of counsel to the Servicer, dated as of the applicable Closing Time, addressed to you and in form and scope satisfactory to your counsel, to the effect that: (i) The Servicer is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation. (ii) The execution and delivery by the Servicer of the applicable Pooling and Servicing Agreement is within the corporate power of the Servicer and has been duly authorized by all necessary corporate action on the part of the Servicer; and to the knowledge of such counsel, neither the execution and delivery of such instrument, nor the consummation of the transactions provided for therein, nor compliance with the provisions thereof, will conflict with or constitute a breach of, or default under, any contract, indenture, mortgage, loan agreement, note, lease, deed of trust, or other instrument to which the Servicer is a party or by which it may be bound, nor will such action result in any violation of the provisions of the charter or by-laws of the Servicer or to the knowledge of such counsel, any law, administrative regulation or administrative or court decree. (iii) The applicable Pooling and Servicing Agreement has been duly executed and delivered by the Servicer and constitutes a valid and binding obligation of the Servicer enforceable against the Servicer in accordance with its terms, except that such enforceability thereof may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and subject, as to enforceability, to general principles of equity (regardless whether enforcement is sought in a proceeding in equity or at law). (iv) To the knowledge of such counsel, the execution, delivery and performance by the Servicer of the applicable Pooling and Servicing Agreement do not require the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of any federal, state or other governmental agency or authority which has not previously been effected. -14- (v) To the knowledge of such counsel, there is no action, suit or proceeding of which such counsel is aware before or by any court or governmental agency or body, domestic or foreign, now pending or threatened against the Servicer which might materially and adversely affect the performance by the Servicer under, or the validity or enforceability of, the applicable Pooling and Servicing Agreement. (vi) The description of the Servicer in the applicable Prospectus Supplement is true and correct in all material respects. (4) The favorable opinion or opinions, dated as of the applicable Closing Time, of counsel for the Underwriters, acceptable to the Underwriters. (c) At the applicable Closing Time you shall have received a certificate of the President or a Vice President and the Treasurer or the Secretary of the Company, dated as of such Closing Time, to the effect that the representations and warranties of the Company contained in Section 1 are true and correct with the same force and effect as though such Closing Time were a Representation Date and that the Company has complied with all agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Closing Time. (d) You shall have received from Price Waterhouse LLP, or other independent certified public accountants acceptable to you, letters, dated as of the date of the applicable Terms Agreement and as of the applicable Closing Time, delivered at such times, in the form and substance reasonably satisfactory to you. (e) At the applicable Closing Time, with respect to a Series of Certificates, each of the representations and warranties of the Servicer set forth in the related Pooling and Servicing Agreement will be true and correct and you shall have received a Certificate of an Executive Vice President, Senior Vice President or Vice President of the Servicer, dated as of such Closing Time, to such effect. (f) At the applicable Closing Time, with respect to a Series of Certificates, the Certificates shall have received the certificate rating or ratings specified in the related Terms Agreement. (g) At the applicable Closing Time, counsel for the Underwriters shall have been furnished with such other documents and opinions as they may reasonably require for the purpose of enabling them to pass upon the issuance and sale of the Certificates as herein contemplated and related proceedings or in order to evidence the accuracy and completeness of any of the representations and warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and -15- sale of the Certificates as herein contemplated shall be reasonably satisfactory in form and substance to you and counsel for the Underwriters. If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, the applicable Terms Agreement may be terminated by you by notice to the Company at any time at or prior to the applicable Closing Time, and such termination shall be without liability of any party to any other party except as provided in Section 5. SECTION 5. Payment of Expenses. The Company covenants and agrees with the Underwriters that the Company will pay or cause to be paid all expenses incident to the performance of its obligations under this Agreement, including without limitation: (i) expenses related to the preparation and filing of the Registration Statement and all amendments thereto, (ii) the cost of printing and delivery to the Underwriters, in such quantities as you may reasonably request, of copies of this Agreement, each Terms Agreement, any agreements among Underwriters and selling agreement and the Underwriters' questionnaires and powers of attorney, (iii) the cost of preparation, issuance and delivery of the Certificates to the Underwriters, (iv) the fees and disbursements of the Company's counsel and accountants for the Company, (v) all expenses (other than legal fees) in connection with the qualification of the Certificates under securities and Blue Sky laws and the determination of the eligibility of the Certificates for investment in accordance with the provisions of Section 3(f), including filing fees, (vi) the cost of printing and delivery to the Underwriters, in such quantities as you may reasonably request, hereinabove stated, of copies of the Registration Statement and Prospectus and all amendments and supplements thereto, and of any Blue Sky survey and legal investment survey, (vii) the cost of printing and delivery to the Underwriters, in such quantities as you may reasonably request, of copies of each Pooling and Servicing Agreement, (viii) the fees charged by not more than two investment rating agencies for rating the Certificates, (ix) the fees and expenses, if any, incurred in connection with the listing of the Certificates on any national securities exchange, (x) any filing fees and expenses incident to any required review by the National Association of Securities Dealers, Inc., and (xi) the fees and expenses of the Trustee and its counsel. It is understood, however, that except as provided in this Section and Section 6 hereof, the Underwriters will pay all of their own costs and expenses, including the fees of counsel, transfer taxes on resale of any of the Certificates by them and any advertising expenses connected with any offers they may make. If a Terms Agreement is terminated by you in accordance with the provisions of Section 4 or Section 8(i), the Company shall reimburse you for all reasonable out-of-pocket expenses, including the reasonable fees and disbursements of counsel for the Underwriters. SECTION 6. Indemnification. (a) The Company will indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which such Underwriter or such -16- controlling person may become subject, under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto) or the Prospectus (or any amendment or supplement thereto), or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading in each case in respect of the relevant Certificates, and will reimburse each Underwriter and each such controlling person for any legal or other expenses reasonably incurred by such Underwriter or controlling person in connection with investigating or defending any such action or claim; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any such document in reliance upon and in conformity with written information furnished to the Company by any Underwriter expressly for use therein. This indemnity agreement will be in addition to any liability which the Company may otherwise have. (b) [Underwriter] will indemnify and hold harmless the Company, each of its officers who signed the Registration Statement in the case of the Company, their respective directors, and any person controlling the Company within the meaning of the 1933 Act against any losses, claims, damages or liabilities to which the Company or any such officer, director or controlling person may become subject, under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto) or the Prospectus (or any amendment or supplement thereto), or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by or on behalf of [Underwriter] expressly for use therein and will reimburse the Company or any such director, officer or controlling person for any legal or other expenses reasonably incurred by the Company, any such officer, director or controlling person in connection with investigating or defending any such action or claim. This indemnity agreement is in addition to any liability which [Underwriter] may otherwise have. The Company acknowledges that, unless otherwise set forth in the applicable Terms Agreement, the statements set forth [in the last paragraph of the cover page, the first and second sentences of the third paragraph under the caption "Underwriting" and in the third to last paragraph of the cover page relating to [Underwriter]'s intention to create a secondary market], each as included in the applicable Prospectus Supplement relating to a Series of Certificates, together with the [Underwriter] Information (as defined in Section 10 hereof) relating to a Series of Certificates -17- constitute the only information furnished in writing by or on behalf of [Underwriter] expressly for use in the Registration Statement relating to such Series of Certificates as originally filed or in any amendment thereof, any related preliminary prospectus or the Prospectus or in any amendment thereof or supplement thereto, as the case may be. (c) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party under this Section, notify such indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under this Section. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party); and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. Notwithstanding the foregoing, the indemnified party or parties shall have the right to employ its or their own counsel in any such case and the fees and expenses of such counsel shall be at the expense of the indemnifying party if (i) the employment of such counsel shall have been authorized in writing by the indemnifying party in connection with the defense of such action, (ii) the indemnifying party shall not have employed counsel to have charge of the defense of such action within a reasonable time after notice of commencement of the action, or (iii) the indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them and/or other indemnified parties which are different from or additional to those available to the indemnifying party (in which case the indemnifying party shall not have the right to direct the defense of such action on behalf of the indemnified party). Anything in this subsection to the contrary notwithstanding, an indemnifying party shall not be liable for any settlement of any claim or action effected without its written consent; provided, however, that such consent was not unreasonably withheld. (e) If the indemnification provided for in this Section 6 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the offering of the Certificates to which -18- such loss, claim, damage or liability (or actions in respect thereof) relates. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from such offering (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions (or in the case of a public offering in negotiated transactions, the difference between the proceeds to the Company and the aggregate price received from the public) received by such Underwriters. The relative fault of the Company on the one hand and the Underwriters on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or such Underwriters on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Notwithstanding anything to the contrary in this Section 6(d), if the losses, claims, damages or liabilities (or actions in respect thereof) referred to in this Section 6(d) arise out of an untrue statement or alleged untrue statement of a material fact contained in any [Underwriter] 8-K (as such term is defined in Section 10 hereof) then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Underwriters on the other (determined in accordance with the preceding sentence) in connection with the statements or omissions in such [Underwriter] 8-K which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other equitable considerations. The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation even if the Underwriters were treated as one entity for such purpose or by any other method of allocation which does not take account of the equitable considerations referred to in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigation or defending any such action or claim. Notwithstanding the provisions of this subsection (d), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Certificates underwritten by it and distributed to the public were sold to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be -19- entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The obligations of the Underwriters to contribute pursuant to this subsection (d) are several in proportion to their respective underwriting obligations with respect to such Certificates and not joint. SECTION 7. Representations, Warranties, and Agreements to Survive Delivery. All representations, warranties and agreements contained in this Agreement, or contained in certificates of officers of the Company submitted pursuant hereto, shall remain operative and in full force and effect, regardless of any termination of this Agreement, or the applicable Terms Agreement or any investigation made by or on behalf of the Underwriters or any controlling person thereof, or by or on behalf of the Company, its officers or directors and shall survive delivery of any Certificates to the Underwriters. SECTION 8. Termination of Agreement. This Agreement may be terminated for any reason at any time by either the Company or you upon the giving of thirty days' notice of such termination to the other party hereto; provided, however, that if a Terms Agreement has been entered into with respect to a particular transaction, this Agreement and the Terms Agreement may not be terminated in the manner set forth in this sentence with respect to such particular transaction. You, as Representative of the Underwriters named in any Terms Agreement may also terminate such Terms Agreement, immediately upon notice to the Company, at any time at or prior to the applicable Closing Time (i) if there has been, since the date of such Terms Agreement or since the respective dates as of which information is given in the Registration Statement or Prospectus, any change, or any development involving a prospective change, in or affecting the condition, financial or otherwise, earnings, affairs or business of the Company, whether or not arising in the ordinary course of business, which in your judgment would materially impair the market for, or the investment quality of, the Certificates, or (ii) if there has occurred any material outbreak or escalation of hostilities or other calamity or crisis the effect of which on the financial markets of the United States is such as to make it, in your reasonable judgment, impracticable to market the Certificates or enforce contracts for the sale of the Certificates, or (iii) if trading in securities generally on either the New York Stock Exchange or the American Stock Exchange has been suspended or any setting of minimum prices shall have been established, or (iv) if a general moratorium of commercial banking activities has been declared by either Federal or New York State authorities. In the event of any such termination, (A) the covenants set forth in Section 3 with respect to any offering of Certificates shall remain in effect so long as the Underwriters own any such Certificates purchased from the Company pursuant to the applicable Terms Agreement and (B) the covenant set forth in Section 3(c), the provisions of Section 5, the indemnity agreement and contribution provisions set forth in Section 6, and the provisions of Sections 7 and 12 shall remain in effect. SECTION 9. Default by One or More of the Underwriters. (a) If one or more of the Underwriters participating in an offering of Certificates shall fail at the applicable Closing Time to purchase the Certificates which it or they are obligated to purchase hereunder and under the applicable Terms Agreement (the "Defaulted -20- Certificates"), then such of you as are named therein may in your discretion arrange for you or another party or other parties to purchase the Defaulted Certificates upon the terms contained herein. If within thirty-six hours after such default by any Underwriter you do not arrange for the purchase of such Defaulted Certificates, then the Company shall be entitled to a further period of thirty-six hours within which to procure another party or other parties satisfactory to you to purchase such Defaulted Certificates on the terms contained herein. In the event that, within the respective prescribed periods, you notify the Company that you have so arranged for the purchase of such Defaulted Certificates, or the Company notifies you that it has so arranged for the purchase of such Defaulted Certificates, you or the Company shall have the right to postpone the Closing Time for a period of not more than seven days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus, or in any other documents or arrangements, and the Company agrees to file promptly any amendments to the Registration Statement or the Prospectus which in your opinion may thereby be made necessary. The term "Underwriter" as used in this Agreement shall include any person substituted under this Section with like effect as if such person had originally been party to this Agreement with respect to the Certificate. (b) If, after giving effect to any arrangements for the purchase of Defaulted Certificates of a defaulting Underwriter or Underwriters by you and the Company as provided in subsection (a) above, the aggregate principal amount of such Defaulted Certificates which remains unpurchased does not exceed 10% of the aggregate principal amount of the Certificates to be purchased pursuant to the applicable Terms Agreement, then the Company shall have the right to require each non-defaulting Underwriter to purchase the principal amount of Certificates which such Underwriter agreed to purchase hereunder and, in addition, to require each non-defaulting Underwriter to purchase its pro rata share (based on the principal amount of Certificates which such Underwriter agreed to purchase pursuant to the applicable Terms Agreement) of the Defaulted Certificates of the defaulting Underwriter or Underwriters for which such arrangements have not been made; but nothing herein shall relieve a defaulting Underwriter from liability for its default. (c) If, after giving effect to any arrangements for the purchase of the Defaulted Certificates of the defaulting Underwriter or Underwriters by you and the Company as provided in subsection (a) above, the aggregate principal amount of such Defaulted Certificates which remains unpurchased exceeds 10% of the aggregate principal amount of the Certificates to be purchased pursuant to the applicable Terms Agreement, or if the Company shall not exercise the right described in subsection (b) above to require non-defaulting Underwriters to purchase Defaulted Certificates of a defaulting Underwriter or Underwriters, then this Agreement shall thereupon terminate, without liability on the part of any non-defaulting Underwriter or the Company, except for the expenses to be borne by the Company and the Underwriters as provided in Section 5 hereof and the indemnity agreement and contribution -21- provisions in Section 6 hereof; but nothing herein shall relieve a defaulting Underwriter from liability for its default. SECTION 10. Computational Materials and ABS Term Sheets. (a) The parties acknowledge that, subsequent to the date on which the Registration Statement became effective and up to and including the date on which the Prospectus Supplement and Prospectus with respect to a Series of Certificates is first made available to the Underwriters, the Underwriters may furnish to various potential investors in such Series of Certificates, in writing: (i) "Computational Materials", as defined in a no-action letter (the "Kidder No-Action Letter") issued by the staff of the Commission on May 20, 1994 to Kidder, Peabody Acceptance Corporation I, et al., as modified by a no-action letter (the "First PSA No-Action Letter") issued by the staff of the Commission on May 27, 1994 to the Public Securities Association (the "PSA") and as further modified by a no-action letter (the "Second PSA No-Action Letter", and together with the Kidder No-Action Letter and the First PSA No-Action Letter, the "No-Action Letters") issued by the staff of the Commission on February 17, 1995 to the PSA; (ii) "Structural Term Sheets" as defined in the Second PSA No-Action Letter; and/or (iii) "Collateral Term Sheets" as defined in the Second PSA No-Action Letter. (b) In connection with each Series of Certificates, [Underwriter] shall furnish to the Company, at least one (1) business day prior to the time of filing of the Prospectus pursuant to Rule 424 under the 1933 Act, all Computational Materials used by [Underwriter] and required to be filed with the Commission in order for [Underwriter] to avail itself of the relief granted in the No-Action Letters (such Computational Materials, the "[Underwriter] Furnished Computational Materials"). (c) In connection with each Series of Certificates, [Underwriter] shall furnish to the Company, at least one (1) business day prior to the time of filing of the Prospectus pursuant to Rule 424 under the Act, all Structural Term Sheets used by [Underwriter] and required to be filed with the Commission in order for [Underwriter] to avail itself of the relief granted in the No-Action Letters (such Structural Term Sheets, the "[Underwriter] Furnished Structural Term Sheets"). (d) In connection with each Series of Certificates, [Underwriter] shall furnish to the Company, within one (1) business day after the first use thereof, all Collateral Term Sheets used by [Underwriter] and required to be filed with the Commission in order for [Underwriter] to avail itself of the relief granted in the No-Action Letters (such Collateral Term Sheets, the "[Underwriter] Furnished Collateral Term Sheets") and shall advise the Company of the date on which each such Collateral Term Sheet was first used. -22- (e) [Underwriter] covenants to prepare for signature by the Company and filing and (following signature by the Company) cause to be delivered for filing to the Commission one or more current reports on Form 8-K (collectively, together with any amendments and supplements thereto, the "[Underwriter] 8-K," and each a "[Underwriter] 8-K") such that [Underwriter] may avail itself of the relief granted in the No-Action Letters. In particular, [Underwriter] covenants to cause to be filed with the Commission (i) all [Underwriter] Furnished Computational Materials and all [Underwriter] Furnished Structural Term Sheets on a [Underwriter] 8-K concurrently with the filing of the Prospectus Supplement and Prospectus with respect to the related Series of Certificates pursuant to Rule 424 under the 1933 Act; and (ii) all [Underwriter] Furnished Collateral Term Sheets on a [Underwriter] 8-K not later than two (2) business days after the first use thereof. Any [Underwriter] 8-K containing Furnished Structural Term Sheets and/or Furnished Collateral Term Sheets shall be filed electronically via EDGAR. Any [Underwriter] 8-K containing Furnished Computational Materials shall be filed in paper under cover of Form SE in accordance with Rule 311(i) of Resolution S-T. (f) [Underwriter] shall cooperate with the Company and with Price Waterhouse LLP in obtaining a letter, in form and substance satisfactory to the Company and [Underwriter], of Price Waterhouse LLP regarding the information in any [Underwriter] 8-K consisting of [Underwriter] Furnished Computational Materials and/or [Underwriter] Furnished Structural Term Sheets. Any such letter shall be obtained prior to the filing of any such [Underwriter] 8- K with the Commission at [Underwriter]'s sole expense. (g) [Underwriter] represents and warrants to, and covenants with, the Company that as presented in the [Underwriter] 8-K, the [Underwriter] Information (defined below) is not misleading and not inaccurate in any material respect and that any Pool Information (defined below) contained in any [Underwriter] 8-K which is not otherwise inaccurate in any material respect is not presented in the [Underwriter] 8-K in a way that is either misleading or inaccurate in any material respect. [Underwriter] further covenants with the Company that if any Computational Materials or ABS Term Sheets (as such term is defined in the Second PSA No-Action Letter) contained in any [Underwriter] 8-K are found to include any information that is misleading or inaccurate in any material respect, [Underwriter] promptly shall inform the Company of such finding, provide the Company with revised and/or corrected Computational Materials or ABS Term Sheets, as the case may be, and promptly prepare for signature by the Company and filing and (following signature by the Company) cause to be delivered for filing to the Commission in accordance herewith, revised and/or corrected Computational Materials or ABS Term Sheets, as the case may be. (h) [Underwriter] covenants that all Computational Materials and ABS Term Sheets used by it shall contain the following legend: -23- "THIS INFORMATION IS FURNISHED TO YOU SOLELY BY [THE UNDERWRITER] AND NOT BY CHASE FUNDING, INC. OR ANY OF ITS AFFILIATES. [THE UNDERWRITER] IS NOT ACTING AS CHASE FUNDING, INC.'S AGENT." (i) [Underwriter] covenants that all Collateral Term Sheets used by it shall contain the following additional legend: "THE INFORMATION CONTAINED HEREIN WILL BE SUPERSEDED BY THE DESCRIPTION OF THE MORTGAGE LOANS CONTAINED IN THE PROSPECTUS SUPPLEMENT." (j) [Underwriter] covenants that all Collateral Term Sheets (other than the initial Collateral Term Sheet) shall contain the following additional legend: "THE INFORMATION CONTAINED HEREIN SUPERSEDES THE INFORMATION IN ALL PRIOR COLLATERAL TERM SHEETS, IF ANY." (k) [Underwriter] shall deliver to the Company a copy of each [Underwriter] 8-K (including written evidence of filing) promptly upon filing the same with the Commission (but in any event not later than the earlier to occur of (i) the second business day after filing and (ii) the Closing Time). (l) For purposes of this Agreement, the term "[Underwriter] Information" means such portion, if any, of the information contained in the [Underwriter] 8-K that is not Pool Information. "Pool Information" means the information furnished to the Underwriters by the Company regarding the Mortgage Loans; provided, however, that if any information that would otherwise constitute Pool Information is presented in the [Underwriter] 8-K in a way that is either inaccurate or misleading in any material respect, such information shall not be Pool Information. SECTION 11. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed, delivered, telexed, or telegraphed and confirmed or transmitted by any standard form of telecommunication. Notices to the Underwriters shall be directed to you at the respective addresses set forth on the first page hereof, to the attention of [the General Counsel]. Notices to the Company shall be directed to Chase Funding, Inc., 343 Thornall Street, Edison, New Jersey 8837, Attention: Luke S. Hayden. SECTION 12. Parties. This Agreement shall be binding upon and inure solely to the benefit of you and the Company and to the extent provided in Section 6 hereof, the officers and directors of the Company and each person who controls the Company or any Underwriter and their respective heirs, -24- executors, administrators, successors and assigns and any Terms Agreement shall be binding upon and inure solely to the benefit of the Company and any Underwriter who becomes a party to a Terms Agreement and to the extent provided in Section 6 hereof, the officers and directors of the Company and each person who controls the Company or any Underwriter and their respective heirs, executors, administrators, successors and assigns. Nothing expressed or mentioned in this Agreement or a Terms Agreement is intended or shall be construed to give any person, firm or corporation, other than the parties hereto or thereto and their respective successors and the controlling person and officers and directors referred to in Section 6 hereof and their heirs any legal or equitable right, remedy or claim under or with respect to this Agreement or a Terms Agreement or any provision herein or therein contained. SECTION 13. Governing Law and Time. This Agreement and each Terms Agreement shall be governed by and construed in accordance with the laws of the State of New York. Specified times of day refer to New York City time. SECTION 14. Counterparts. This Agreement and any Terms Agreement may be executed in any number of counterparts (which execution may take the form of an exchange of any standard form of written telecommunication between you and the Company), each of which shall constitute an original of any party whose signature appears on it, and all of which shall together constitute a single instrument. [SIGNATURES COMMENCE ON FOLLOWING PAGE] -25- If the foregoing is in accordance with your understanding of our agreement, please sign and return to us a counterpart hereof, whereupon this instrument along with all counterparts will become a binding agreement between you and the Company in accordance with its terms. Very truly yours, CHASE FUNDING, INC. By:________________________ Name: Title: CONFIRMED AND ACCEPTED, as of the date first above written: [UNDERWRITER] By:_______________________________ Name: Title: -26- EXHIBIT A PASS-THROUGH CERTIFICATES CHASE FUNDING, INC., SELLER TERMS AGREEMENT Dated: _________, 19__ To: Chase Funding, Inc. Re: Underwriting Agreement, dated as of [DATE] (the "Underwriting Agreement") Ladies and Gentlemen: The undersigned (being herein called the "Underwriters"), understand that Chase Funding, Inc., a New York corporation (the "Company"), proposes to issue and sell $_________ original principal amount of Pass-Through Certificates described below (the "Certificates"). The Certificates will be issued under a Pooling and Servicing Agreement dated as of _______________ among the Company, as seller, _______________, as servicer and _____________ as trustee. The terms of the Certificates are summarized below and are more fully described in the Company's Prospectus supplement prepared with respect to the Certificates. All the provisions (including defined terms) contained in the Underwriting Agreement are incorporated by reference herein in their entirety and shall be deemed to be part of this Terms Agreement to the same extent as if such provisions had been set forth in full herein. The Closing Time referred to in Section 2 of the Underwriting Agreement shall be _______ a.m., New York City time, on _____________. Subject to the terms and conditions set forth or incorporated by reference herein, the Company hereby agrees to sell and the Underwriters agree to purchase [, severally and not jointly,] the [respective] original principal amount[ s] of Certificates set forth opposite [its] [their] name[s] in Exhibit I hereto at the purchase price set forth below. The Underwriters will offer the Certificates for sale upon the terms and conditions set forth in the Prospectus. Subject to the terms and conditions set forth or incorporated by reference herein, the Underwriters will pay for the Certificates at the time and place and in the manner set forth in the Underwriting Agreement. Series Designation:____________ -1- Terms of the Certificates and Underwriting Compensation: Original Principal Remittance Price to Classes Amount* Rate Public - ------- --------- ---------- -------- ** * Approximate. Subject to permitted variance in each case of plus or minus 5%. ** The [Class A] Certificates are being offered by the Underwriter from time to time in negotiated transactions or otherwise at varying prices to be determined, in each case, at the time of sale. Certificate Rating: _____ by [Rating Agency] _____ by [Rating Agency] REMIC Election: The Company [does not] intend[s] to cause the Mortgage Pool to be treated as a REMIC. Credit Enhancement: Cut-off Date: The Cut-off Date is ___________, 19__. -2- Remittance Date: The ____ day of each month (or, if such ____ day is not a business day, the business day immediately following) commencing __________, 19__. Purchase Price: The purchase price payable by the Underwriter for the [Class A] Certificates is ___% of the aggregate principal balance of the [Class A] Certificates as of the Closing Date plus accrued interest at the per annum rate of ___% from __________, 19__ up to but not including the Closing Date. Underwriting Commission: Notwithstanding anything to the contrary in the Underwriting Agreement, no additional underwriting commission shall be payable by the Company to the Underwriter in connection with the purchase of the Certificates. Information Provided by Underwriter: Closing Date and Location: __________ 19__ at the offices of Morgan, Lewis & Bockius LLP. -3- Please confirm your agreement by having an authorized Officer sign a copy of this Agreement in the space set forth below and returning a signed copy to us. [UNDERWRITER] By:________________________ Name: Title: ACCEPTED: CHASE FUNDING, INC. By:___________________________ Name: Title: -4- Exhibit I Original Principal Amount of Name Certificates - ---- ------------ Total ============== -5- EX-1.2 3 FORM OF UNDERWRITING AGREEMENT WITH CMAC CHASE MANHATTAN ACCEPTANCE CORPORATION Pass-Through Certificates UNDERWRITING AGREEMENT ---------------------- [DATE] [Underwriter] [Address] Ladies and Gentlemen: Chase Manhattan Acceptance Corporation (the "Company"), a Delaware corporation, has authorized the issuance and sale of Pass-Through Certificates (such certificates evidencing interests in pools of Mortgage Loans, the "Certificates") evidencing interests in pools of mortgage loans (the "Mortgage Loans"). The Certificates may be issued in various series, and, within each series, in one or more classes, and, within each class, in one or more sub-classes, in one or more offerings on terms determined at the time of sale (each such series, a "Series" and each such class, a "Class"). Each Series of the Certificates will be issued under a separate Pooling and Servicing Agreement (each, a "Pooling and Servicing Agreement") with respect to such Series among the Company, as depositor, a servicer to be identified in the prospectus supplement for each such Series (the "Servicer") and a trustee to be identified in the prospectus supplement for each such Series (the "Trustee"). The Certificates of each Series will evidence specified interests in separate pools of Mortgage Loans (each a "Mortgage Pool") or separate pools of Agency Securities, and certain other property held in trust with respect to such Series (each, a "Trust Fund"). The Certificates are more fully described in a Registration Statement which the Company has furnished to you. Capitalized terms used but not defined herein shall have the meanings given to them in the Pooling and Servicing Agreement. The term "you" as used herein, unless the context otherwise requires, shall mean you and such persons as are named as co-managers in the applicable Terms Agreement (defined below). Whenever the Company determines to make an offering of Certificates pursuant to this Agreement through you or through an underwriting syndicate managed by you it will enter into an agreement (the "Terms Agreement") providing for the sale of such Certificates to, and the purchase and offering thereof by, you and such other underwriters, if any, selected by you as have authorized you to enter into such Terms Agreement on their behalf (the "Underwriters," which term shall include you whether acting alone in the sale of Certificates or as a member of an underwriting syndicate; as the context requires, [Underwriter] is sometimes referred to individually herein as ["Underwriter"]). The Terms Agreement relating to each offering of Certificates shall specify, among other things, the stated balance or balances of Certificates to be issued, the price or prices at which the Certificates are to be purchased by the Underwriters from the Company and the initial public offering price or prices or the method by which the price or prices at which such Certificates are to be sold will be determined. A Terms Agreement, which shall be substantially in the form of Exhibit A hereto, may take the form of an exchange of any standard form of written telecommunication between you and the Company. Each such offering of Certificates which the Company elects to make pursuant to this Agreement will be governed by this Agreement, as supplemented by the applicable Terms Agreement, and this Agreement and such Terms Agreement shall inure to the benefit of and be binding upon the Underwriters participating in the offering of such Certificates. SECTION 1. Representations and Warranties. The Company represents and warrants to you as of the date hereof, and to the Underwriters named in the applicable Terms Agreement, all as of the date of such Terms Agreement (in each case, the "Representation Date"), as follows (any representations and warranties so made to the Underwriters named in an applicable Terms Agreement respecting the Certificates being deemed to relate only to the Certificates described therein): (1) The Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3 (No. 33-92950), relating to the offering of Certificates from time to time in accordance with Rule 415 under the Securities Act of 1933, as amended (the "1933 Act"), and has filed, and proposes to file, such amendments thereto as may have been required to the date hereof and the same has become effective under the 1933 Act and the rules of the Commission thereunder (the "Regulations") and no stop order suspending the effectiveness of such registration statement has been issued and no proceedings for that purpose have been initiated or, to the Company's knowledge, threatened, by the Commission. Such registration statement, including incorporated documents, exhibits and financial statements, as amended at the time when it became effective under the 1933 Act, and the prospectus relating to the sale of Certificates by the Company constituting a part thereof, as from time to time each is amended or supplemented pursuant to the 1933 Act or otherwise, are referred to herein as the "Registration Statement" and the "Prospectus," respectively; provided, however, that a supplement to the Prospectus contemplated by Section 3(a) hereof (a "Prospectus Supplement") shall be deemed to have supplemented the Prospectus only with respect to the offering or offerings of Certificates to which it relates. Any reference herein to the Registration Statement, a preliminary prospectus, the Prospectus or the Prospectus Supplement shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 which were filed under the Securities Exchange Act of 1934, as amended (the "1934 Act") on or before the date on which the Registration Statement, as amended, became effective or the issue date of such preliminary prospectus, Prospectus, or Prospectus Supplement, as the case may be; and any reference herein to the terms "amend," -2- "amendment" or supplement with respect to the Registration Statement, any preliminary prospectus, the Prospectus or the Prospectus Supplement shall be deemed to refer to and include the filing of any document under the 1934 Act after the date on which the Registration Statement became effective or the issue date of any preliminary prospectus, the Prospectus or the Prospectus Supplement, as the case may be, deemed to be incorporated therein by reference. The Registration Statement and Prospectus, at the time the Registration Statement became effective did, and as of the applicable Representation Date will, conform in all material respects to the requirements of the 1933 Act and the Regulations. The Registration Statement, at the time it became effective did not, and as of the applicable Representation Date and the applicable Closing Time (as defined in Section 2 hereof) will not, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. The Prospectus, as amended or supplemented as of the applicable Representation Date and the applicable Closing Time (as defined in Section 2 hereof), will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the representations and warranties in this subsection shall not apply to statements in, or omissions from, (i) the Registration Statement or Prospectus made in reliance upon and in conformity with information furnished to the Company in writing by the Underwriters expressly for use in the Registration Statement or Prospectus or (ii) the [Underwriter] Information (as defined in Section 10 hereof). The conditions to the use by the Company of a registration statement on Form S-3 under the 1933 Act, as set forth in the General Instructions to Form S-3, have been satisfied with respect to the Registration Statement and the Prospectus. There are no contracts or documents of the Company which are required to be filed as exhibits to the Registration Statement pursuant to the 1933 Act or the Regulations which have not been so filed. (2) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware with corporate power and authority to enter into and perform its obligations under this Agreement, the applicable Pooling and Servicing Agreement, and with respect to a Series of Certificates, the Certificates and the applicable Terms Agreement; and the Company is duly qualified or registered as a foreign corporation to transact business and is in good standing in each jurisdiction in which the ownership or lease of its properties or the conduct of its business requires such qualification. (3) The Company is not in violation of its certificate of incorporation or by-laws or in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any material contract, indenture, mortgage, loan agreement, note, lease or other material instrument to which it is a party or by which it or its properties may be bound, which default might result in any material adverse change in the financial condition, earnings, affairs or business of the Company or which might materially and adversely affect the properties -3- or assets thereof or the Company's ability to perform its obligations under this Agreement, the applicable Terms Agreement or the applicable Pooling and Servicing Agreement. (4) The execution and delivery by the Company of this Agreement, the applicable Terms Agreement and the applicable Pooling and Servicing Agreement and the signing of the Registration Statement by the Company are within the corporate power of the Company and have been duly authorized by all necessary corporate action on the part of the Company; and with respect to a Series of Certificates described in the applicable Terms Agreement, neither the issuance and sale of the Certificates to the Underwriters, nor the execution and delivery by the Company of this Agreement, such Terms Agreement and the related Pooling and Servicing Agreement, nor the consummation by the Company of the transactions herein or therein contemplated, nor compliance by the Company with the provisions hereof or thereof, will conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company other than as contemplated by a Pooling and Servicing Agreement, pursuant to any material indenture, mortgage, contract or other material instrument to which the Company is a party or by which it is bound or to which the property or assets of the Company are subject, or result in the violation of the provisions of the certificate of incorporation or by-laws of the Company or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its properties. (5) This Agreement has been, and each applicable Terms Agreement when executed and delivered as contemplated hereby and thereby will have been, duly authorized, executed and delivered by the Company, and each constitutes, or will constitute when so executed and delivered, a legal, valid and binding instrument enforceable against the Company in accordance with its terms (assuming due authorization, execution and delivery by the other parties thereto), subject (a) to applicable bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors' rights generally, (b) as to enforceability to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law) and (c) as to enforceability with respect to rights of indemnity thereunder, to limitations of public policy under applicable securities laws. (6) Each applicable Pooling and Servicing Agreement when executed and delivered as contemplated hereby and thereby will have been duly authorized, executed and delivered by the Company, and will constitute when so executed and delivered, a legal, valid and binding instrument enforceable against the Company in accordance with its terms (assuming due authorization, execution and delivery by the other parties thereto), subject (a) to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and (b) as to enforceability to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law); and as of the Closing Date, the -4- representations and warranties made by the Company in the applicable Pooling and Servicing Agreement will be true and correct as of the date made. (7) As of the Closing Time (as defined in Section 2 hereof) with respect to a Series of Certificates, the Certificates will have been duly and validly authorized by the Company, and, when executed and authenticated as specified in the related Pooling and Servicing Agreement, will be validly issued and outstanding and will be entitled to the benefits of the related Pooling and Servicing Agreement. (8) There are no actions, proceedings or investigations now pending against the Company or, to the knowledge of the Company, threatened against the Company, before any court, administrative agency or other tribunal (i) asserting the invalidity of this Agreement, the applicable Terms Agreement, the applicable Pooling and Servicing Agreement or with respect to a Series of Certificates, the Certificates, (ii) seeking to prevent the issuance of such Certificates or the consummation of any of the transactions contemplated by this Agreement, the applicable Terms Agreement or such Pooling and Servicing Agreement, (iii) which would be likely to materially and adversely affect the performance by the Company of its obligations under, or which would if adversely determined materially and adversely affect the validity or enforceability of, this Agreement, the applicable Terms Agreement, such Pooling and Servicing Agreement or such Certificates or (iv) seeking to adversely affect the federal income tax attributes of such Certificates described in the Prospectus and the related Prospectus Supplement. (9) Any taxes, fees and other governmental charges that are assessed and due in connection with the execution, delivery and issuance of this Agreement, the applicable Terms Agreement, the applicable Pooling and Servicing Agreement and with respect to a Series of Certificates, the Certificates, shall have been paid at or prior to the Closing Time. (10) No filing or registration with, notice to or consent, approval, authorization, order or qualification of or with any court or governmental agency or body is required for the issuance and sale of the Certificates or the consummation by the Company of the transactions contemplated by this Agreement, the applicable Pooling and Servicing Agreement or the applicable Terms Agreement, except the registration under the 1933 Act of the Certificates, and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Certificates by the Underwriters. (11) The Company possesses all material licenses, certificates, authorities or permits issued by the appropriate state, federal or foreign regulatory agencies or bodies deemed by the Company -5- 1-PH/1077598.1 to be reasonably necessary to conduct the business now operated by it and as described in the Prospectus and the Company has received no notice of proceedings relating to the revocation or modification of any such license, certificate, authority or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would materially and adversely affect the conduct of the business, operations, financial condition or income of the Company. (12) As of the Closing Time, with respect to a Series of Certificates described in the relevant Terms Agreement evidencing interests in a Mortgage Pool, the Trustee will have either good and marketable title, free and clear of all prior liens, charges and encumbrances, to or a validly perfected first priority security interest in the Mortgage Notes and the related Mortgages included in the Trust Fund, with respect to (a) the Mortgage Notes, upon delivery thereof to the Trustee and (b) the Mortgages, upon delivery to the Trustee of instruments of assignment in recordable form assigning each Mortgage to the Trustee and the recording of each such instrument of assignment in the appropriate recording office in which the Mortgaged Property is located, or if supported by an opinion of counsel, without recording. (13) As of the Closing Time, with respect to a Series of Certificates as to which there is a Reserve Fund, to the extent that the Reserve Fund does not constitute part of the Trust Fund for such Series, the Trustee will have acquired either good and marketable title to or a duly and validly perfected security interest in the Reserve Fund with respect to such Series, if any, subject to no prior lien, mortgage, security interest, pledge, charge or other encumbrance. (14) As of the Closing Time, with respect to a Series of Certificates, the Mortgage Pool will have substantially the characteristics described in the Prospectus Supplement and in the Form 8-K of the Company prepared with respect to such Certificates, if the Mortgage Pool is described in such Form 8-K. (15) Neither the Company nor the Trust Fund created by the applicable Pooling and Servicing Agreement will be subject to registration as an "investment company" under the Investment Company Act of 1940, as amended (the "1940 Act"). (16) The Certificates, the applicable Pooling and Servicing Agreement, the applicable Terms Agreement and any Primary Insurance Policies, Mortgage Pool Insurance Policies, Standard Hazard Insurance Policies, Special Hazard Insurance Policies, Mortgagor Bankruptcy Insurance and Alternate Credit Enhancement related to the Certificates described in the relevant Terms Agreement conform in all material respects to the descriptions thereof contained in the Prospectus. SECTION 2. Purchase and Sale. The commitment of each Underwriter to purchase Certificates pursuant to any Terms Agreement shall be several and not -6- joint and shall be deemed to have been made on the basis of the representations and warranties herein contained and shall be subject to the terms and conditions herein set forth. Payment of the purchase price for, and delivery of, any Certificates to be purchased by the Underwriters shall be made at the offices of Morgan, Lewis & Bockius LLP, New York, New York, or at such other place as shall be agreed upon by you and the Company, at such time or date as shall be agreed upon by you and the Company in the Terms Agreement (each such time and date being referred to as a "Closing Time"). Unless otherwise specified in the applicable Terms Agreement, payment shall be made to the Company in immediately available Federal funds wired to such bank as may be designated by the Company. Such Certificates shall be in such denominations and registered in such names as you may request in writing at least two business days prior to the applicable Closing Time. Such Certificates will be made available for examination and packaging by you no later than 12:00 noon on the first business day prior to the applicable Closing Time. It is understood that the Underwriters intend to offer the Certificates for sale to the public as set forth in the Prospectus Supplement. SECTION 3. Covenants of the Company. The Company covenants with each of you and each Underwriter participating in an offering of Certificates pursuant to a Terms Agreement, with respect to such Certificates and such offering, as follows: (a) Immediately following the execution of each Terms Agreement, the Company will prepare a Prospectus Supplement setting forth the principal amount of Certificates covered thereby, the price or prices at which the Certificates are to be purchased by the Underwriters, either the initial public offering price or prices or the method by which the price or prices by which the Certificates are to be sold will be determined, the selling concession(s) and reallowance(s), if any, any delayed delivery arrangements, and such other information as you and the Company deem appropriate in connection with the offering of the Certificates. The Company will promptly transmit copies of the Prospectus Supplement to the Commission for filing pursuant to Rule 424 under the 1933 Act and will furnish to the Underwriters as many copies of the Prospectus and such Prospectus Supplement as you shall reasonably request. (b) If the delivery of a prospectus is required at any time in connection with the offering or sale of the Certificates described in the relevant Terms Agreement and if at such time any event shall have occurred as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus is delivered, not misleading, or, if for any other reason it shall be necessary during such period of time to amend or supplement the Prospectus in order to comply with the 1933 Act, the Company agrees to notify you promptly and upon your request so to amend or supplement the Prospectus and to prepare and furnish -7- without charge to each Underwriter and to any dealer in securities as many copies as you may from time to time reasonably request of an amended Prospectus or a supplement to the Prospectus which will correct such statement or omission or effect such compliance. (c) During any period in which the delivery of a prospectus is required at any time in connection with the offering or sale of the Certificates described in the relevant Terms Agreement the Company will give you reasonable notice of its intention to file any amendment to the Registration Statement or any amendment or supplement to the Prospectus, whether pursuant to the 1933 Act or otherwise, and will furnish you with copies of any such amendment or supplement or other documents proposed to be filed a reasonable time in advance of filing. (d) During any period in which the delivery of a prospectus is required at any time in connection with the offering or sale of the Certificates described in the relevant Terms Agreement the Company will notify you promptly (i) of the effectiveness of any amendment to the Registration Statement, (ii) of the mailing or the delivery to the Commission for filing of any supplement to the Prospectus or any document other than quarterly and annual reports to be filed pursuant to the 1934 Act, (iii) of the receipt of any comments from the Commission with respect to the Registration Statement, the Prospectus or any Prospectus Supplement, (iv) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information, (v) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Certificates for sale in any jurisdiction or the threat of any proceeding for that purpose and (vi) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose. The Company will use its best efforts to prevent the issuance of any such stop order and, if any stop order is issued, to obtain the lifting thereof as soon as possible. (e) The Company will deliver to you as many conformed copies of the Registration Statement (as originally filed) and of each amendment thereto (including exhibits filed therewith or incorporated by reference therein and documents incorporated by reference in the Prospectus) as you may reasonably request. (f) The Company will endeavor, in cooperation with you, to qualify the Certificates for offering and sale under the applicable securities laws of such states and other jurisdictions of the United States as you may designate, and will maintain or cause to be maintained such qualifications in effect for as long as may be required for the distribution of the Certificates, provided that in connection therewith the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction. The Company will file or cause the filing of such statements and reports as may be required by the laws of each -8- jurisdiction in which the Certificates have been qualified as above provided. (g) If the Company has elected to cause the applicable Mortgage Pool to be treated as a real estate mortgage investment conduit (a "REMIC"), the Company will prepare, or cause to be prepared, and file, or cause to be filed a timely election to treat the Mortgage Pool as a REMIC for federal income tax purposes and will file, or cause to be filed, such tax returns and take such actions, all on a timely basis, as are required to elect and maintain such status. (h) With respect to a Series, so long as the Certificates of such Series are outstanding, the Company will furnish, or cause to be furnished, to you, copies of all reports and statements available to Certificateholders pursuant to the Pooling and Servicing Agreement. SECTION 4. Conditions of Underwriters' Obligations. The obligations of the Underwriters to purchase Certificates pursuant to any Terms Agreement shall be subject to the accuracy of the representations and warranties on the part of the Company herein contained, to the accuracy of the statements of the Company's officers made pursuant hereto, to the performance by the Company of all of its obligations hereunder and to the following additional conditions precedent: (a) At the applicable Closing Time (i) no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the Commission, (ii) the Certificates shall have received the rating or ratings specified in the applicable Terms Agreement, and (iii) there shall not have come to your attention any facts that would cause you to believe that the Prospectus, together with the applicable Prospectus Supplement at the time it was required to be delivered to a purchaser of the Certificates, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances existing at such time, not misleading. No challenge by the Commission shall have been made to the accuracy or adequacy of the Registration Statement and any request of the Commission for inclusion of additional information in the Registration Statement or the Prospectus or the Prospectus Supplement shall have been complied with and the Company shall not have filed with the Commission any amendment or supplement to the Registration Statement, the Prospectus or the Prospectus Supplement without the consent of the Underwriters. (b) At the applicable Closing Time you shall have received: -9- (1) The opinion, dated as of the applicable Closing Time, of Morgan, Lewis & Bockius LLP, counsel for the Company, in form and substance satisfactory to such of you as may be named in the applicable Terms Agreement, to the effect that: (i) The Company is validly existing as a corporation in good standing under the laws of the State of Delaware. (ii) This Agreement and the applicable Terms Agreement have been duly authorized, executed and delivered by the Company, and each is a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except that (A) such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally, (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, and (C) the enforceability as to rights to indemnity thereunder may be subject to limitations of public policy under applicable securities laws. (iii) The applicable Pooling and Servicing Agreement has been duly authorized, executed and delivered by the Company, and is a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except that (A) such enforceability thereof may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect 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. (iv) The execution and delivery by the Company of this Agreement, the applicable Terms Agreement and applicable Pooling and Servicing Agreement and the signing of the Registration Statement by the Company are within the corporate power of the Company and have been duly authorized by all necessary corporate action on the part of the Company; and neither the issue and sale of the Certificates nor the consummation of the transactions contemplated herein or therein nor the fulfillment of the terms hereof or thereof will, conflict with or constitute a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company pursuant to, any contract, indenture, mortgage, or other instrument to which the Company is a party or by which it may be bound of which such counsel is aware, other than the lien or liens created by the applicable Pooling and Servicing Agreement, nor will such action result in any violation of the provisions of the certificate of incorporation or by-laws of the Company or, any statute, rule or regulation to which the -10- Company is subject or by which it is bound or any writ, injunction or decree of any court, governmental authority or regulatory body to which it is subject or by which it is bound of which such counsel is aware. (v) The Certificates have been duly authorized, executed and authenticated as specified in the related Pooling and Servicing Agreement and when delivered and paid for, will be validly issued and entitled to the benefits of the related Pooling and Servicing Agreement. (vi) To the best of such counsel's knowledge, no filing or registration with or notice to or consent, approval, authorization, order or qualification of or with any court or governmental agency or body is required for the issuance and sale of the Certificates or the consummation by the Company of the transactions contemplated by this Agreement, the applicable Pooling and Servicing Agreement or the applicable Terms Agreement, except the registration under the 1933 Act of the Certificates, and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Certificates by the Underwriters. (vii) To the best of such counsel's knowledge, there is no action, suit or proceeding of which such counsel is aware before or by any court or governmental agency or body, domestic or foreign, now pending or threatened against the Company which might result in any material adverse change in the financial condition, earnings, affairs or business of the Company, or which might materially and adversely affect the properties or assets thereof or might materially and adversely affect the performance by the Company of its obligations under, or the validity or enforceability of, the Certificates, this Agreement or the Pooling and Servicing Agreement, or which is required to be disclosed in the Registration Statement. (viii) The Registration Statement is effective under the 1933 Act and, to the best of such counsel's knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued under the 1933 Act or proceedings therefor initiated or threatened by the Commission. (ix) The applicable Pooling and Servicing Agreement is not required to be qualified under the Trust Indenture Act of 1939, as amended. (x) The Registration Statement and the Prospectus (other than the financial statements and other financial and statistical information included therein, as to which no -11- opinion need be rendered) as of their respective effective or issue dates, complied as to form in all material respects with the requirements of the 1933 Act and the Regulations thereunder. (xi) The statements in the Prospectus under the headings "ERISA Considerations" and "Federal Income Tax Consequences" and the statements in the applicable Prospectus Supplement under the headings "Federal Income Tax Considerations" and "ERISA Considerations", to the extent that they describe matters of United States federal income tax law or ERISA or legal conclusions with respect thereto, have been prepared or reviewed by such counsel and are accurate in all material respects with respect to those consequences or matters discussed therein. (xii) The statements in the Prospectus and the applicable Prospectus Supplement under the caption "Description of the Certificates", insofar as they purport to summarize certain terms of the Certificates and the applicable Pooling and Servicing Agreement, constitute a fair summary of the provisions purported to be summarized. (xiii) The Trust Fund created by the applicable Pooling and Servicing Agreement is not, and will not as a result of the offer and sale of the Certificates as contemplated in the Prospectus and in this Agreement become, an "investment company" required to be registered under the 1940 Act. (xiv) The Classes of Certificates so designated in the Prospectus Supplement will be "mortgage related securities", as defined in ss.3(a)(41) of the 1934 Act, so long as the Certificates are rated in one of the two highest grades by at least one nationally recognized statistical rating organization. (xv) If a REMIC election is to be made with respect to the Trust Fund, assuming (a) ongoing compliance with all of the provisions of the Pooling and Servicing Agreement and (b) the filing of an election, in accordance with the Pooling and Servicing Agreement, to be treated as a "real estate mortgage investment conduit" (a "REMIC") pursuant to Section 860D of the Internal Revenue Code of 1986, as amended (the "Code") for Federal income tax purposes, the Trust Fund will qualify as a REMIC as of the Closing Date and will continue to qualify as a REMIC for so long as it complies with amendments after the date hereof to any applicable provisions of the Code and applicable Treasury Regulations. Such counsel shall deliver to you such additional opinions addressed to you addressing the transfer by the Company to the Trustee of its right, title and interest in and to the Mortgage Loans and other property included in the Trust Fund at the Closing Time as may be required by each Rating Agency rating the Certificates. -12- Such counsel shall state that it has participated in conferences with officers and other representatives of the Company, your counsel, representatives of the independent accountants for the Company and you at which the contents of the Registration Statement and the Prospectus and related matters were discussed and, although such counsel is not passing upon and does not assume responsibility for, the factual accuracy, completeness or fairness of the statements contained in the Registration Statement or the Prospectus (except as stated in paragraphs (xi) and (xii) above) and has made no independent check or verification thereof for the purpose of rendering its opinion, on the basis of the foregoing, nothing has come to their attention that leads such counsel to believe that either the Registration Statement, at the time it became effective and at the applicable Closing Time, contained, an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or that the Prospectus contained or contains as of the date thereof and at the applicable Closing Time any untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that such counsel need express no view with respect to the financial statements, schedules and other financial and statistical data included in or incorporated by reference into the Registration Statement, the Prospectus or the Prospectus Supplement. Such counsel may state that their opinions relate only to laws of the State of New York, the Federal laws of the United States and the General Corporation Law of the State of Delaware. In rendering such opinions, such counsel may rely, as to matters of fact, to the extent deemed proper and stated therein, on certificates of responsible officers of the Company, the Trustee or public officials. (2) The favorable opinion of counsel to the Trustee, dated as of the applicable Closing Time, addressed to you and in form and scope satisfactory to your counsel, to the effect that: (i) The Trustee is a national banking association, duly authorized and validly existing in good standing under the laws of the United States, and has all requisite power and authority to enter into the Pooling and Servicing Agreement and to perform its obligations thereunder. (ii) To the knowledge of such counsel, there is no action, suit, proceeding or investigation pending or threatened against the Trustee that could materially adversely affect the ability of the Trustee to perform its obligations under the Pooling and Servicing Agreement. (iii) The Trustee has duly authorized, executed and delivered the applicable Pooling and Servicing Agreement and such Pooling and Servicing Agreement will constitute the legal, valid and binding obligation of the Trustee. -13- (iv) The Trustee has full power and authority to execute and deliver the applicable Pooling and Servicing Agreement and to perform its obligations thereunder. (v) No consent, approval or authorization of, or registration, declaration or filing with, any court or governmental agency or body of the jurisdiction of its organization is required for the execution, delivery or performance by the Trustee of the Pooling and Servicing Agreement. (vi) The performance by the Trustee of its duties pursuant to the Pooling and Servicing Agreement does not conflict with or result in a breach or violation of any term or provision of, or constitute a default under, any statute or regulation currently governing the Trustee. In rendering such opinion, such counsel may rely, as to matters of fact, to the extent deemed proper and stated therein, on certificates of responsible officers of the Trustee or public officials. (3) The favorable opinion of counsel to the Servicer, dated as of the applicable Closing Time, addressed to you and in form and scope satisfactory to your counsel, to the effect that: (i) The Servicer is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation. (ii) The execution and delivery by the Servicer of the applicable Pooling and Servicing Agreement is within the corporate power of the Servicer and has been duly authorized by all necessary corporate action on the part of the Servicer; and to the knowledge of such counsel, neither the execution and delivery of such instrument, nor the consummation of the transactions provided for therein, nor compliance with the provisions thereof, will conflict with or constitute a breach of, or default under, any contract, indenture, mortgage, loan agreement, note, lease, deed of trust, or other instrument to which the Servicer is a party or by which it may be bound, nor will such action result in any violation of the provisions of the charter or by-laws of the Servicer or to the knowledge of such counsel, any law, administrative regulation or administrative or court decree. (iii) The applicable Pooling and Servicing Agreement has been duly executed and delivered by the Servicer and constitutes a valid and binding obligation of the Servicer enforceable against the Servicer in accordance with its terms, except that such enforceability thereof may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and subject, as to enforceability, to general principles of -14- equity (regardless whether enforcement is sought in a proceeding in equity or at law). (iv) To the knowledge of such counsel, the execution, delivery and performance by the Servicer of the applicable Pooling and Servicing Agreement do not require the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of any federal, state or other governmental agency or authority which has not previously been effected. (v) To the knowledge of such counsel, there is no action, suit or proceeding of which such counsel is aware before or by any court or governmental agency or body, domestic or foreign, now pending or threatened against the Servicer which might materially and adversely affect the performance by the Servicer under, or the validity or enforceability of, the applicable Pooling and Servicing Agreement. (vi) The description of the Servicer in the applicable Prospectus Supplement is true and correct in all material respects. (4) The favorable opinion or opinions, dated as of the applicable Closing Time, of counsel for the Underwriters, acceptable to the Underwriters. (c) At the applicable Closing Time you shall have received a certificate of the President or a Vice President and the Treasurer or the Secretary of the Company, dated as of such Closing Time, to the effect that the representations and warranties of the Company contained in Section 1 are true and correct with the same force and effect as though such Closing Time were a Representation Date and that the Company has complied with all agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Closing Time. (d) You shall have received from Price Waterhouse LLP, or other independent certified public accountants acceptable to you, letters, dated as of the date of the applicable Terms Agreement and as of the applicable Closing Time, delivered at such times, in the form and substance reasonably satisfactory to you. (e) At the applicable Closing Time, with respect to a Series of Certificates, each of the representations and warranties of the Servicer set forth in the related Pooling and Servicing Agreement will be true and correct and you shall have received a Certificate of an Executive Vice President, Senior Vice President or Vice President of the Servicer, dated as of such Closing Time, to such effect. -15- (f) At the applicable Closing Time, with respect to a Series of Certificates, the Certificates shall have received the certificate rating or ratings specified in the related Terms Agreement. (g) At the applicable Closing Time, counsel for the Underwriters shall have been furnished with such other documents and opinions as they may reasonably require for the purpose of enabling them to pass upon the issuance and sale of the Certificates as herein contemplated and related proceedings or in order to evidence the accuracy and completeness of any of the representations and warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Certificates as herein contemplated shall be reasonably satisfactory in form and substance to you and counsel for the Underwriters. If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, the applicable Terms Agreement may be terminated by you by notice to the Company at any time at or prior to the applicable Closing Time, and such termination shall be without liability of any party to any other party except as provided in Section 5. SECTION 5. Payment of Expenses. The Company covenants and agrees with the Underwriters that the Company will pay or cause to be paid all expenses incident to the performance of its obligations under this Agreement, including without limitation: (i) expenses related to the preparation and filing of the Registration Statement and all amendments thereto, (ii) the cost of printing and delivery to the Underwriters, in such quantities as you may reasonably request, of copies of this Agreement, each Terms Agreement, any agreements among Underwriters and selling agreement and the Underwriters' questionnaires and powers of attorney, (iii) the cost of preparation, issuance and delivery of the Certificates to the Underwriters, (iv) the fees and disbursements of the Company's counsel and accountants for the Company, (v) all expenses (other than legal fees) in connection with the qualification of the Certificates under securities and Blue Sky laws and the determination of the eligibility of the Certificates for investment in accordance with the provisions of Section 3(f), including filing fees, (vi) the cost of printing and delivery to the Underwriters, in such quantities as you may reasonably request, hereinabove stated, of copies of the Registration Statement and Prospectus and all amendments and supplements thereto, and of any Blue Sky survey and legal investment survey, (vii) the cost of printing and delivery to the Underwriters, in such quantities as you may reasonably request, of copies of each Pooling and Servicing Agreement, (viii) the fees charged by not more than two investment rating agencies for rating the Certificates, (ix) the fees and expenses, if any, incurred in connection with the listing of the Certificates on any national securities exchange, (x) any filing fees and expenses incident to any required review by the National Association of Securities Dealers, Inc., and (xi) the fees and expenses of the Trustee and its counsel. It is understood, however, that except as provided in this Section and Section 6 hereof, the Underwriters will pay all of their own costs and expenses, including the fees of counsel, transfer taxes on resale of any of the Certificates by them and any advertising expenses connected with any offers they may make. -16- If a Terms Agreement is terminated by you in accordance with the provisions of Section 4 or Section 8(i), the Company shall reimburse you for all reasonable out-of-pocket expenses, including the reasonable fees and disbursements of counsel for the Underwriters. SECTION 6. Indemnification. (a) The Company will indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which such Underwriter or such controlling person may become subject, under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto) or the Prospectus (or any amendment or supplement thereto), or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in each case in respect of the relevant Certificates, and will reimburse each Underwriter and each such controlling person for any legal or other expenses reasonably incurred by such Underwriter or controlling person in connection with investigating or defending any such action or claim; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any such document in reliance upon and in conformity with written information furnished to the Company by any Underwriter expressly for use therein. This indemnity agreement will be in addition to any liability which the Company may otherwise have. (b) [Underwriter] will indemnify and hold harmless the Company, each of its officers who signed the Registration Statement, its respective directors, and any person controlling the Company within the meaning of the 1933 Act against any losses, claims, damages or liabilities to which the Company or any such officer, director or controlling person may become subject, under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto) or the Prospectus (or any amendment or supplement thereto), or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by or on behalf of [Underwriter] expressly for use therein and will reimburse the Company or any such director, officer or controlling person for any legal or other expenses reasonably incurred by the Company, any such officer, director or controlling person in connection with -17- investigating or defending any such action or claim. This indemnity agreement is in addition to any liability which [Underwriter] may otherwise have. The Company acknowledges that, unless otherwise set forth in the applicable Terms Agreement, the statements set forth [in the last paragraph of the cover page, the first and second sentences of the third paragraph under the caption "Underwriting" and in the third to last paragraph of the cover page relating to [Underwriter]'s intention to create a secondary market], each as included in the applicable Prospectus Supplement relating to a Series of Certificates, together with the [Underwriter] Information (as defined in Section 10 hereof) relating to a Series of Certificates constitute the only information furnished in writing by or on behalf of [Underwriter] expressly for use in the Registration Statement relating to such Series of Certificates as originally filed or in any amendment thereof, any related preliminary prospectus or the Prospectus or in any amendment thereof or supplement thereto, as the case may be. (c) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party under this Section, notify such indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under this Section. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party); and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. Notwithstanding the foregoing, the indemnified party or parties shall have the right to employ its or their own counsel in any such case and the fees and expenses of such counsel shall be at the expense of the indemnifying party if (i) the employment of such counsel shall have been authorized in writing by the indemnifying party in connection with the defense of such action, (ii) the indemnifying party shall not have employed counsel to have charge of the defense of such action within a reasonable time after notice of commencement of the action, or (iii) the indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them and/or other indemnified parties which are different from or additional to those available to the indemnifying party (in which case the indemnifying party shall not have the right to direct the defense of such action on behalf of the indemnified party). Anything in this subsection to the contrary notwithstanding, an indemnifying party shall not be liable for any settlement of any claim or action effected without its written consent; provided, however, that such consent was not unreasonably withheld. -18- (d) If the indemnification provided for in this Section 6 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the offering of the Certificates to which such loss, claim, damage or liability (or actions in respect thereof) relates. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from such offering (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions (or in the case of a public offering in negotiated transactions, the difference between the proceeds to the Company and the aggregate price received from the public) received by such Underwriters. The relative fault of the Company on the one hand and the Underwriters on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or such Underwriters on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Notwithstanding anything to the contrary in this Section 6(d), if the losses, claims, damages or liabilities (or actions in respect thereof) referred to in this Section 6(d) arise out of an untrue statement or alleged untrue statement of a material fact contained in any [Underwriter] 8-K (as such term is defined in Section 10 hereof) then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Underwriters on the other (determined in accordance with the preceding sentence) in connection with the statements or omissions in such [Underwriter] 8-K which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other equitable considerations. The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation even if the Underwriters were treated as one entity for such purpose or by any other method of allocation which does not take account of the equitable considerations referred to in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigation or defending any such action or claim. Notwithstanding the provisions of this subsection (d), no Underwriter -19- shall be required to contribute any amount in excess of the amount by which the total price at which the Certificates underwritten by it and distributed to the public were sold to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The obligations of the Underwriters to contribute pursuant to this subsection (d) are several in proportion to their respective underwriting obligations with respect to such Certificates and not joint. SECTION 7. Representations, Warranties, and Agreements to Survive Delivery. All representations, warranties and agreements contained in this Agreement, or contained in certificates of officers of the Company submitted pursuant hereto, shall remain operative and in full force and effect, regardless of any termination of this Agreement, or the applicable Terms Agreement or any investigation made by or on behalf of the Underwriters or any controlling person thereof, or by or on behalf of the Company, its officers or directors and shall survive delivery of any Certificates to the Underwriters. SECTION 8. Termination of Agreement. This Agreement may be terminated for any reason at any time by either the Company or you upon the giving of thirty days' notice of such termination to the other party hereto; provided, however, that if a Terms Agreement has been entered into with respect to a particular transaction, this Agreement and the Terms Agreement may not be terminated in the manner set forth in this sentence with respect to such particular transaction. You, as Representative of the Underwriters named in any Terms Agreement may also terminate such Terms Agreement, immediately upon notice to the Company, at any time at or prior to the applicable Closing Time (i) if there has been, since the date of such Terms Agreement or since the respective dates as of which information is given in the Registration Statement or Prospectus, any change, or any development involving a prospective change, in or affecting the condition, financial or otherwise, earnings, affairs or business of the Company, whether or not arising in the ordinary course of business, which in your judgment would materially impair the market for, or the investment quality of, the Certificates, or (ii) if there has occurred any material outbreak or escalation of hostilities or other calamity or crisis the effect of which on the financial markets of the United States is such as to make it, in your reasonable judgment, impracticable to market the Certificates or enforce contracts for the sale of the Certificates, or (iii) if trading in securities generally on either the New York Stock Exchange or the American Stock Exchange has been suspended or any setting of minimum prices shall have been established, or (iv) if a general moratorium of commercial banking activities has been declared by either Federal or New York State authorities. In the event of any such termination, (A) the covenants set forth in Section 3 with respect to any offering of Certificates shall remain in effect so long as the Underwriters own any such Certificates purchased from the Company pursuant to the applicable -20- Terms Agreement and (B) the covenant set forth in Section 3(c), the provisions of Section 5, the indemnity agreement and contribution provisions set forth in Section 6, and the provisions of Sections 7 and 12 shall remain in effect. SECTION 9. Default by One or More of the Underwriters. (a) If one or more of the Underwriters participating in an offering of Certificates shall fail at the applicable Closing Time to purchase the Certificates which it or they are obligated to purchase hereunder and under the applicable Terms Agreement (the "Defaulted Certificates"), then such of you as are named therein may in your discretion arrange for you or another party or other parties to purchase the Defaulted Certificates upon the terms contained herein. If within thirty-six hours after such default by any Underwriter you do not arrange for the purchase of such Defaulted Certificates, then the Company shall be entitled to a further period of thirty-six hours within which to procure another party or other parties satisfactory to you to purchase such Defaulted Certificates on the terms contained herein. In the event that, within the respective prescribed periods, you notify the Company that you have so arranged for the purchase of such Defaulted Certificates, or the Company notifies you that it has so arranged for the purchase of such Defaulted Certificates, you or the Company shall have the right to postpone the Closing Time for a period of not more than seven days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus, or in any other documents or arrangements, and the Company agrees to file promptly any amendments to the Registration Statement or the Prospectus which in your opinion may thereby be made necessary. The term "Underwriter" as used in this Agreement shall include any person substituted under this Section with like effect as if such person had originally been party to this Agreement with respect to the Certificate. (b) If, after giving effect to any arrangements for the purchase of Defaulted Certificates of a defaulting Underwriter or Underwriters by you and the Company as provided in subsection (a) above, the aggregate principal amount of such Defaulted Certificates which remains unpurchased does not exceed __% of the aggregate principal amount of the Certificates to be purchased pursuant to the applicable Terms Agreement, then the Company shall have the right to require each non-defaulting Underwriter to purchase the principal amount of Certificates which such Underwriter agreed to purchase hereunder and, in addition, to require each non-defaulting Underwriter to purchase its pro rata share (based on the principal amount of Certificates which such Underwriter agreed to purchase pursuant to the applicable Terms Agreement) of the Defaulted Certificates of the defaulting Underwriter or Underwriters for which such arrangements have not been made; but nothing herein shall relieve a defaulting Underwriter from liability for its default. (c) If, after giving effect to any arrangements for the purchase of the Defaulted Certificates of the defaulting Underwriter or -21- Underwriters by you and the Company as provided in subsection (a) above, the aggregate principal amount of such Defaulted Certificates which remains unpurchased exceeds __% of the aggregate principal amount of the Certificates to be purchased pursuant to the applicable Terms Agreement, or if the Company shall not exercise the right described in subsection (b) above to require non-defaulting Underwriters to purchase Defaulted Certificates of a defaulting Underwriter or Underwriters, then this Agreement shall thereupon terminate, without liability on the part of any non-defaulting Underwriter or the Company, except for the expenses to be borne by the Company and the Underwriters as provided in Section 5 hereof and the indemnity agreement and contribution provisions in Section 6 hereof; but nothing herein shall relieve a defaulting Underwriter from liability for its default. SECTION 10. Computational Materials and ABS Term Sheets. (a) The parties acknowledge that, subsequent to the date on which the Registration Statement became effective and up to and including the date on which the Prospectus Supplement and Prospectus with respect to a Series of Certificates is first made available to the Underwriters, the Underwriters may furnish to various potential investors in such Series of Certificates, in writing: (i) "Computational Materials", as defined in a no-action letter (the "Kidder No-Action Letter") issued by the staff of the Commission on May 20, 1994 to Kidder, Peabody Acceptance Corporation I, et al., as modified by a no-action letter (the "First PSA No-Action Letter") issued by the staff of the Commission on May 27, 1994 to the Public Securities Association (the "PSA") and as further modified by a no-action letter (the "Second PSA No-Action Letter", and together with the Kidder No-Action Letter and the First PSA No-Action Letter, the "No-Action Letters") issued by the staff of the Commission on February 17, 1995 to the PSA; (ii) "Structural Term Sheets" as defined in the Second PSA No-Action Letter; and/or (iii) "Collateral Term Sheets" as defined in the Second PSA No-Action Letter. (b) In connection with each Series of Certificates, [Underwriter] shall furnish to the Company, at least one (1) business day prior to the time of filing of the Prospectus pursuant to Rule 424 under the 1933 Act, all Computational Materials used by [Underwriter] and required to be filed with the Commission in order for [Underwriter] to avail itself of the relief granted in the No-Action Letters (such Computational Materials, the "[Underwriter] Furnished Computational Materials"). (c) In connection with each Series of Certificates, [Underwriter] shall furnish to the Company, at least one (1) business day prior to the time of filing of the Prospectus pursuant to Rule 424 under the Act, all Structural Term Sheets used by [Underwriter] and required to be filed with the Commission in order for [Underwriter] to avail itself of the relief granted in the No-Action Letters (such Structural Term Sheets, the "[Underwriter] Furnished Structural Term Sheets"). -22- (d) In connection with each Series of Certificates, [Underwriter] shall furnish to the Company, within one (1) business day after the first use thereof, all Collateral Term Sheets used by [Underwriter] and required to be filed with the Commission in order for [Underwriter] to avail itself of the relief granted in the No-Action Letters (such Collateral Term Sheets, the "[Underwriter] Furnished Collateral Term Sheets") and shall advise the Company of the date on which each such Collateral Term Sheet was first used. (e) [Underwriter] covenants to prepare for signature by the Company and filing and (following signature by the Company) cause to be delivered for filing to the Commission one or more current reports on Form 8-K (collectively, together with any amendments and supplements thereto, the "[Underwriter] 8-K," and each a "[Underwriter] 8-K") such that [Underwriter] may avail itself of the relief granted in the No-Action Letters. In particular, [Underwriter] covenants to cause to be filed with the Commission (i) all [Underwriter] Furnished Computational Materials and all [Underwriter] Furnished Structural Term Sheets on a [Underwriter] 8-K concurrently with the filing of the Prospectus Supplement and Prospectus with respect to the related Series of Certificates pursuant to Rule 424 under the 1933 Act; and (ii) all [Underwriter] Furnished Collateral Term Sheets on a [Underwriter] 8-K not later than two (2) business days after the first use thereof. Any [Underwriter] 8-K containing Furnished Structural Term Sheets and/or Furnished Collateral Term Sheets shall be filed electronically via EDGAR. Any [Underwriter] 8-K containing Furnished Computational Materials shall be filed in paper under cover of Form SE in accordance with Rule 311(i) of Resolution S-T. (f) [Underwriter] shall cooperate with the Company and with Price Waterhouse LLP in obtaining a letter, in form and substance satisfactory to the Company and [Underwriter], of Price Waterhouse LLP regarding the information in any [Underwriter] 8-K consisting of [Underwriter] Furnished Computational Materials and/or [Underwriter] Furnished Structural Term Sheets. Any such letter shall be obtained prior to the filing of any such [Underwriter] 8- K with the Commission at [Underwriter]'s sole expense. (g) [Underwriter] represents and warrants to, and covenants with, the Company that as presented in the [Underwriter] 8-K, the [Underwriter] Information (defined below) is not misleading and not inaccurate in any material respect and that any Pool Information (defined below) contained in any [Underwriter] 8-K which is not otherwise inaccurate in any material respect is not presented in the [Underwriter] 8-K in a way that is either misleading or inaccurate in any material respect. [Underwriter] further covenants with the Company that if any Computational Materials or ABS Term Sheets (as such term is defined in the Second PSA No-Action Letter) contained in any [Underwriter] 8-K are found to include any information that is misleading or inaccurate in any material respect, [Underwriter] promptly shall inform the Company of such finding, provide the Company with revised and/or corrected Computational Materials or ABS Term Sheets, as the case may be, and promptly prepare for signature by the -23- Company and filing and (following signature by the Company) cause to be delivered for filing to the Commission in accordance herewith, revised and/or corrected Computational Materials or ABS Term Sheets, as the case may be. (h) [Underwriter] covenants that all Computational Materials and ABS Term Sheets used by it shall contain a legend substantially in the form of the following legend: "THIS INFORMATION IS FURNISHED TO YOU SOLELY BY [THE UNDERWRITER] AND NOT BY CHASE MANHATTAN ACCEPTANCE CORPORATION ("CMAC") OR ANY OF ITS AFFILIATES. [THE UNDERWRITER] IS NOT ACTING AS CMAC'S AGENT." (i) [Underwriter] covenants that all Collateral Term Sheets used by it shall contain the following additional legend: "THE INFORMATION CONTAINED HEREIN WILL BE SUPERSEDED BY THE DESCRIPTION OF THE MORTGAGE LOANS CONTAINED IN THE PROSPECTUS SUPPLEMENT." (j) [Underwriter] covenants that all Collateral Term Sheets (other than the initial Collateral Term Sheet) shall contain the following additional legend: "THE INFORMATION CONTAINED HEREIN SUPERSEDES THE INFORMATION IN ALL PRIOR COLLATERAL TERM SHEETS, IF ANY." (k) [Underwriter] shall deliver to the Company a copy of each [Underwriter] 8-K (including written evidence of filing) promptly upon filing the same with the Commission (but in any event not later than the earlier to occur of (i) the second business day after filing and (ii) the Closing Time). (l) For purposes of this Agreement, the term "[Underwriter] Information" means such portion, if any, of the information contained in the [Underwriter] 8-K that is not Pool Information. "Pool Information" means the information furnished to the Underwriters by the Company regarding the Mortgage Loans; provided, however, that if any information that would otherwise constitute Pool Information is presented in the [Underwriter] 8-K in a way that is either inaccurate or misleading in any material respect, such information shall not be Pool Information. SECTION 11. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed, delivered, telexed, or telegraphed and confirmed or transmitted by any standard form of telecommunication. Notices to the Underwriters shall be directed to you at the respective addresses set forth on the first page hereof, to the attention of [the General Counsel]. Notices to the Company shall be directed to Chase -24- Manhattan Acceptance Corporation, c/o Chase Manhattan Mortgage Corporation, 300 Tice Boulevard, Woodcliff Lake, New Jersey 07645, Attention: Michael D. Katz. SECTION 12. Parties. This Agreement shall be binding upon and inure solely to the benefit of you and the Company and to the extent provided in Section 6 hereof, the officers and directors of the Company and each person who controls the Company or any Underwriter and their respective heirs, executors, administrators, successors and assigns and any Terms Agreement shall be binding upon and inure solely to the benefit of the Company and any Underwriter who becomes a party to a Terms Agreement and to the extent provided in Section 6 hereof, the officers and directors of the Company and each person who controls the Company or any Underwriter and their respective heirs, executors, administrators, successors and assigns. Nothing expressed or mentioned in this Agreement or a Terms Agreement is intended or shall be construed to give any person, firm or corporation, other than the parties hereto or thereto and their respective successors and the controlling person and officers and directors referred to in Section 6 hereof and their heirs any legal or equitable right, remedy or claim under or with respect to this Agreement or a Terms Agreement or any provision herein or therein contained. SECTION 13. Governing Law and Time. This Agreement and each Terms Agreement shall be governed by and construed in accordance with the laws of the State of New York. Specified times of day refer to New York City time. SECTION 14. Counterparts. This Agreement and any Terms Agreement may be executed in any number of counterparts (which execution may take the form of an exchange of any standard form of written telecommunication between you and the Company), each of which shall constitute an original of any party whose signature appears on it, and all of which shall together constitute a single instrument. [SIGNATURES COMMENCE ON FOLLOWING PAGE] -25- If the foregoing is in accordance with your understanding of our agreement, please sign and return to us a counterpart hereof, whereupon this instrument along with all counterparts will become a binding agreement between you and the Company in accordance with its terms. Very truly yours, CHASE MANHATTAN ACCEPTANCE CORPORATION By:________________________ Name: Title: CONFIRMED AND ACCEPTED, as of the date first above written: [UNDERWRITER] By:_______________________________ Name: Title: -26- EXHIBIT A PASS-THROUGH CERTIFICATES CHASE MANHATTAN ACCEPTANCE CORPORATION, SELLER TERMS AGREEMENT --------------- Dated: _________, 19__ To: Chase Manhattan Acceptance Corporation Re: Underwriting Agreement, dated as of [DATE] (the "Underwriting Agreement") Ladies and Gentlemen: The undersigned (being herein called the "Underwriters"), understand that Chase Manhattan Acceptance Corporation, a Delaware corporation (the "Company"), proposes to issue and sell $_________ original principal amount of Pass-Through Certificates described below (the "Certificates"). The Certificates will be issued under a Pooling and Servicing Agreement dated as of _______________ among the Company, as seller, _______________, as servicer and _____________ as trustee. The terms of the Certificates are summarized below and are more fully described in the Company's Prospectus supplement prepared with respect to the Certificates. All the provisions (including defined terms) contained in the Underwriting Agreement are incorporated by reference herein in their entirety and shall be deemed to be part of this Terms Agreement to the same extent as if such provisions had been set forth in full herein. The Closing Time referred to in Section 2 of the Underwriting Agreement shall be _______ a.m., New York City time, on _____________. Subject to the terms and conditions set forth or incorporated by reference herein, the Company hereby agrees to sell and the Underwriters agree to purchase [, severally and not jointly,] the [respective] original principal amount[ s] of Certificates set forth opposite [its] [their] name[s] in Exhibit I hereto at the purchase price set forth below. The Underwriters will offer the Certificates for sale upon the terms and conditions set forth in the Prospectus. Subject to the terms and conditions set forth or incorporated by reference herein, the Underwriters will pay for the Certificates at the time and place and in the manner set forth in the Underwriting Agreement. Series Designation: ____________ -1- Terms of the Certificates and Underwriting Compensation: - -------------------------------------------------------- Original Principal Remittance Price to Classes Amount* Rate Public - ------- --------- ---------- -------- ** * Approximate. Subject to permitted variance in each case of plus or minus __%. ** The [Class A] Certificates are being offered by the Underwriter from time to time in negotiated transactions or otherwise at varying prices to be determined, in each case, at the time of sale. Certificate Rating: - ------------------- _____ by [Rating Agency] _____ by [Rating Agency] REMIC Election: - --------------- The Company [does not] intend[s] to cause the Mortgage Pool to be treated as a REMIC. Credit Enhancement: - ------------------- Cut-off Date: - ------------- The Cut-off Date is ___________, 19__. -2- Remittance Date: - ---------------- The ____ day of each month (or, if such ____ day is not a business day, the business day immediately following) commencing __________, 19__. Purchase Price: - --------------- The purchase price payable by the Underwriter for the [Class A] Certificates is ___% of the aggregate principal balance of the [Class A] Certificates as of the Closing Date plus accrued interest at the per annum rate of ___% from __________, 19__ up to but not including the Closing Date. Underwriting Commission: - ------------------------ Notwithstanding anything to the contrary in the Underwriting Agreement, no additional underwriting commission shall be payable by the Company to the Underwriter in connection with the purchase of the Certificates. Information Provided by Underwriter: - ------------------------------------ Closing Date and Location: - -------------------------- __________ 19__ at the offices of Morgan, Lewis & Bockius LLP. -3- Please confirm your agreement by having an authorized Officer sign a copy of this Agreement in the space set forth below and returning a signed copy to us. [UNDERWRITER] By:_______________________ Name: Title: ACCEPTED: CHASE MANHATTAN ACCEPTANCE CORPORATION By:___________________________________ Name: Title: -4- Exhibit I --------- Original Principal Amount of Name Certificates - ---- ------------ Total ============== -5- EX-4.1 4 FORM OF POOLING AND SERVICING AGREEMENT FOR CFI ================================================================================ CHASE FUNDING, INC. Company, [ADVANTA MORTGAGE CORP, USA] Servicer, THE CHASE MANHATTAN BANK Certificate Administrator and ------------------------------------- Trustee POOLING AND SERVICING AGREEMENT Dated as of [DATE] $________________ (Approximate) Multi-Class Mortgage Pass-Through Certificates Series [___] ================================================================================ TABLE OF CONTENTS ARTICLE I DEFINITIONS..................................................................... Section 1.01 Certain Defined Terms.................................... Section 1.02 Provisions of General Application........................ ARTICLE II CONVEYANCE OF MORTGAGE LOANS; TRUST FUND........................................ Section 2.01 Conveyance of Mortgage Loans............................. Section 2.02 Acceptance by Trustee of the Trust Fund; Certain Substitutions; Certification by Trustee.................. Section 2.03. Trust Fund; Authentication of Certificates............... Section 2.04. REMIC Election........................................... ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE MASTER SERVICER; REPURCHASE OF MORTGAGE LOANS Section 3.01 Representations and Warranties of the Company with respect to the Mortgage Loans........................ Section 3.02 [Reserved]............................................... Section 3.03 [Reserved]............................................... Section 3.04 Representations of the Servicer.......................... Section 3.05 Purchase and Substitution................................ ARTICLE IV THE CERTIFICATES................................................................ Section 4.01 The Certificates......................................... Section 4.02 Registration of Transfer and Exchange of Certificates.... Section 4.03 Mutilated, Destroyed, Lost or Stolen Certificates........ Section 4.04 Persons Deemed Owners.................................... - i - Section 4.05 Establishment of Certificate Accounts; Deposit in Certificate Accounts.......................... Section 4.06 Permitted Withdrawals from the Certificate Accounts...... Section 4.07 Appointment of Paying Agent; Paying Agent Account........ Section 4.08. Authenticating Agents.................................... ARTICLE V ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS Section 5.01 Appointment of the Servicer.............................. Section 5.02 Subservicing Agreements Between the Servicer and Subservicers........................... Section 5.03 Collection of Certain Mortgage Loan Payments; Collection Account.................................................. Section 5.04 Permitted Withdrawals from the Collection Account........ Section 5.05 Payment of Taxes, Insurance and other Charges............ Section 5.06 The Maintenance of Casualty Insurance.................... Section 5.07 Maintenance of Mortgage Impairment Insurance Policy...... Section 5.08 Fidelity Bond; Errors and Omissions Policy............... Section 5.09 Collection of Taxes, Assessments and Other Items; Servicing Account ....................................... Section 5.10 Enforcement of Due-on-Sale Clauses, Assumption Agreements Section 5.11 Realization upon Defaulted Mortgage Loans................ Section 5.12 Trustee to Cooperate; Release of Mortgage Files.......... Section 5.13 Servicing Fee; Servicing Compensation.................... Section 5.14 Reports to the Trustee and Certificate Administration; Collection Account Statements............................ Section 5.15 Annual Statement as to Compliance........................ Section 5.16 Annual Independent Public Accountants' Servicing Report.. Section 5.17 Optional Purchase of Defaulted Mortgage Loans............ Section 5.18 Reports to be Provided by the Servicer................... Section 5.19 Adjustment of Servicing Compensation in Respect of Prepaid Mortgage Loans................................... Section 5.20 Periodic Advances........................................ Section 5.21 [Reserved]............................................... Section 5.22 Maintenance of Corporate Existence and Licenses; Merger or Consolidation of the Servicer......................... Section 5.23 Assignment of Agreement by Servicer, Servicer Not to Resign................................................... - ii - Section 5.24 Information Reports to be Filed by the Servicer.......... Section 5.25. REMIC Related Covenants.................................. ARTICLE VI DISTRIBUTIONS AND PAYMENTS...................................................... Section 6.01 Collection of Money...................................... Section 6.02 The Certificate Insurance Policy......................... Section 6.03 Distributions............................................ Section 6.04 Reports by Certificate Administrator..................... Section 6.05 Compensating Interest.................................... Section 6.06 Effect of Payments by the Certificate Insurer; Subrogation.............................................. Section 6.07 Allocation of Liquidated Loan Losses..................... ARTICLE VII REPORTS TO BE PREPARED BY CERTIFICATE ADMINISTRATOR............................. Section 7.01 Certificate Administrator Shall Provide Information as Reasonably Required....................... Section 7.02 Tax and Information Returns and Reports to Certificateholders ...................................... ARTICLE VIII THE COMPANY, THE SERVICER AND THE CERTIFICATE ADMINISTRATOR Section 8.01 Liability of the Servicer................................ Section 8.02 Merger or Consolidation of the Servicer; Transfer of Servicing ............................................... Section 8.03 Limitation on Liability of the Servicer and Others....... Section 8.04 Liability of the Company and the Certificate Administrator ........................................... Section 8.05 Merger or Consolidation of the Company or the Certificate Administrator............................................ Section 8.06 Limitation on Liability of the Company, the Certificate Administrator, the Trustee and Others.................... Section 8.07 Company and Certificate Administrator Not to Resign...... Section 8.08 Compensation to the Certificate Administrator............ Section 8.09 Successor to the Servicer. ............................. Section 8.10 Maintenance of Ratings................................... - iii - ARTICLE IX DEFAULT......................................................................... Section 9.01 Events of Default........................................ Section 9.02 Trustee to Act; Appointment of Successor................. Section 9.03 Waiver of Defaults....................................... Section 9.04 Mortgage Loans, Trust Fund and Accounts Held for Benefit of the Certificate Insurer............................... ARTICLE X CONCERNING THE TRUSTEE.......................................................... Section 10.01 Duties of Trustee........................................ Section 10.02 Certain Matters Affecting the Trustee.................... Section 10.03 Trustee Not Liable for Certificates or Mortgage Loans.... Section 10.04 Trustee May Own Certificates............................. Section 10.05 Fees and Expenses........................................ Section 10.06 Eligibility Requirements for Trustee..................... Section 10.07 Resignation and Removal of the Trustee................... Section 10.08 Successor Trustee........................................ Section 10.09 Merger or Consolidation of Trustee....................... Section 10.10 Appointment of Co-Trustee or Separate Trustee............ Section 10.11 Appointment of Office or Agency.......................... ARTICLE XI TERMINATION..................................................................... Section 11.01 Termination.............................................. Section 11.02 Additional Termination Requirements...................... Section 11.03 Accounting Upon Termination of Servicer.................. ARTICLE XII MISCELLANEOUS PROVISIONS........................................................ Section 12.01 Severability of Provisions............................... - iv - Section 12.02 Limitation on Rights of Certificateholders............... Section 12.03 Amendment................................................ Section 12.04 Counterparts............................................. Section 12.05 Duration of Agreement.................................... Section 12.06 Governing Law............................................ Section 12.07 Notices.................................................. Section 12.08 The Certificate Insurer Default.......................... Section 12.09 Third Party Beneficiary.................................. Section 12.10 Intent of the Parties.................................... EXHIBIT A FORM OF CERTIFICATES..................................... EXHIBIT B [RESERVED]............................................... EXHIBIT C [RESERVED]............................................... EXHIBIT D FORM OF CLASS R CERTIFICATE.............................. EXHIBIT E [RESERVED]............................................... EXHIBIT F MORTGAGE LOAN SCHEDULE................................... EXHIBIT G [RESERVED]............................................... EXHIBIT H FORM OF TRUSTEE CERTIFICATION............................ EXHIBIT I FORM OF TRANSFEREE'S LETTER AND AFFIDAVIT................ EXHIBIT J FORM OF TRANSFEROR CERTIFICATE........................... EXHIBIT K FORM OF INVESTMENT LETTER................................ EXHIBIT L FORM OF RULE 144A LETTER................................. EXHIBIT M REQUEST FOR RELEASE...................................... - v - This Pooling and Servicing Agreement, dated as of [DATE], is executed among Chase Funding , Inc., as depositor, [Advanta Mortgage Corp. USA], as servicer, The Chase Manhattan Bank, as certificate administrator and _____________________________________________, as trustee. In consideration of the mutual agreements herein contained, the Company, the Servicer, the Certificate Administrator and the Trustee agree as follows: ARTICLE I DEFINITIONS Section 1.01 Certain Defined Terms. Whenever used herein, the following words and phrases, unless the context otherwise requires, shall have the following meanings. "Accepted Servicing Practices": The Servicer's normal servicing practices, which in general will conform to the mortgage servicing practices of prudent mortgage lending institutions which service for their own account mortgage loans of the same type as the Mortgage Loans in the jurisdictions in which the related Mortgaged Properties are located. "Account": Any Eligible Account established pursuant to Sections 4.05, 4.07, 5.03 or 6.02 hereof. "Accrual Period": With respect to (i) the Group I Certificates and any Distribution Date other than the first Distribution Date, the period commencing on the Distribution Date immediately preceding the month in which such Distribution Date occurs and ending on the calendar day immediately preceding such Distribution Date, and with respect to the first Distribution Date, the period commencing on [DATE] and ending on [DATE] and (ii) the Group II Certificates and any Distribution Date, the prior calendar month. "Advanta": Advanta Mortgage Corp. USA, a Delaware corporation. "Affiliate": With respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, -1- whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agreement": This Pooling and Servicing Agreement, including the Exhibits hereto, and all amendments hereof and supplements hereto. "Amortized Group I Subordinated Amount Requirement": As of any Distribution Date, the product of (i) _____% and (ii) the aggregate outstanding Group I Certificate Principal Balance immediately preceding such Distribution Date. "Amortized Group II Subordinated Amount Requirement": As of any Distribution Date, the product of (i) _____% and (ii) the aggregate outstanding Group II Certificate Principal Balance immediately preceding such Distribution Date. "Appraised Value": As to any Mortgaged Property, the lesser of (i) the appraised value of such Mortgaged Property based upon the appraisal made at the time of the origination of the related Mortgage Loan, and (ii) the sales price of the Mortgaged Property at such time of origination, except in the case of a Mortgaged Property securing a refinanced or modified Mortgage Loan as to which it is the lesser of the appraised value determined above or the appraised value determined in an appraisal at the time of refinancing or modification, as the case may be. "Assignment of Mortgage": With respect to each Mortgage Loan, an assignment of the Mortgage, notice of transfer or equivalent instrument, in recordable form, sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to reflect of record the sale of the Mortgage to the Trustee for the benefit of the Certificateholders. "Authorized Denominations": With respect to each class of Class A Certificates, the minimum Percentage Interest corresponding to a minimum denomination of $25,000 and integral multiples of $1 in excess thereof. With respect to each class of Class S Certificates and Class R Certificates, a minimum Percentage Interest of 10.00% and integral multiples of 0.01 % in excess thereof. "Available Funds Shortfall": With respect to the Group I Loans and any Distribution Date, an amount equal to the sum of (a) the Group I Class A Interest Distribution Amount minus the Group I Available Funds for such Distribution Date and (b) the Group I -2- Subordination Deficit. With respect to the Group II Loans and any Distribution Date, an amount equal to the sum of (a) the Group II Class A Interest Distribution Amount minus the Group II Available Funds for such Distribution Date and (b) the Group II Subordination Deficit. "Balloon Mortgage Loan": Any Mortgage Loan that provided on the date of origination for an amortization schedule extending beyond its stated maturity date. "Balloon Payment": With respect to any Balloon Mortgage Loan, as of any date of determination, the Monthly Payment payable on the stated maturity date of such Mortgage Loan. "Business Day": Any day other than (a) a Saturday or Sunday, or (b) a day on which banking institutions in the State of California, the State of New York or the state where the Trustee's corporate trust office is located are authorized or obligated by law or executive order to be closed. "Certificate": Any Class A Certificate, Class S Certificate or Class R Certificate executed by the Trustee on behalf of the Trust Fund and authenticated by the Trustee. "Certificate Account": The Group I Certificate Account or the Group II Certificate Account, as applicable. "Certificate Administration Fee": As to any Mortgage Loan and any Distribution Date, the fee payable to the Certificate Administrator in respect of its services as Certificate Administrator that accrues monthly at a rate equal to 1/12 of ____% of the Principal Balance of such Mortgage Loan as of the immediately preceding Due Date. "Certificate Administrator": The Chase Manhattan Bank, a New York State banking corporation, or its successor in interest or permitted assigns. "Certificateholder or Holder": The Person in whose name a Certificate is registered in the Certificate Register, except that, neither a Disqualified Organization nor a Non-United States Person shall be a Holder of a Class R Certificate for any purposes hereof and, solely for the purposes of giving any consent (except any consent required to be obtained pursuant to Section 12.03), waiver, request or demand pursuant to this Agreement, any Certificate registered in the name of the Company, the Servicer or the Certificate Administrator -3- or any Affiliate thereof shall be deemed not to be outstanding and the rights to which it is entitled shall not be taken into account in determining whether the requisite percentage of rights necessary to effect any such consent has been obtained, except as otherwise provided in Section 12.03. The Trustee shall be entitled to rely upon a certification of the Company, the Servicer or the Certificate Administrator in determining if any Certificates are registered in the name of a respective Affiliate. Any Certificates on which payments are made under the Certificate Insurance Policy shall be deemed to be outstanding and held by the Certificate Insurer to the extent of such payment. "Certificate Insurance Payments Account": The Certificate Insurance Payments Account established in accordance with Section 6.02(c) hereof and maintained by the Trustee. "Certificate Insurance Policy": As the context requires, either (i) the Group I Certificate Insurance Policy and the Group II Certificate Insurance Policy together or (ii) the Group I Certificate Insurance Policy or the Group II Certificate Insurance Policy, as applicable. "Certificate Insurer": [Certificate Insurer], a [stock insurance company organized and created under the laws of the State of New York], and any successors thereto. "Certificate Insurer Default": The failure by the Certificate Insurer to make a payment required under either of the Group I or Group II Certificate Insurance Policies in accordance with its terms. "Certificate Owner": Any Person who is the beneficial owner of a Class A Certificate registered in the name of the Depository or its nominee. "Certificate Principal Balance": With respect to each class of Class A Certificates, as determined separately, as of any time of determination, the related Original Certificate Principal Balance less any amounts distributed in reduction of the Certificate Principal Balance thereof pursuant to Section 6.03 on all prior Distribution Dates. With respect to each class of Class S Certificates, as determined separately, as of any date of determination, the related Original Certificate Principal Balance, plus the portion of the related Class S Interest Distribution Amount added to the Certificate Principal Balance thereof on each Distribution Date prior to such date pursuant to Section 6.03, plus the related Subordination Increase Amount added to the Certificate Principal Balance thereof on each Distribution Date prior to such date pursuant to Section 6.03, less any amounts distributed in reduction of the Certificate Principal -4- Balance thereof pursuant to Section 6.03 on all prior Distribution Dates and less any losses allocated thereto pursuant to Section 6.09. The Class R Certificates do not have a "Certificate Principal Balance". "Certificate Register": As described in Section 4.02(a). "Civil Relief Act": The Soldiers' and Sailors' Civil Relief Act of 1940, as amended. "Civil Relief Act Interest Shortfall": With respect to any Distribution Date, for any Mortgage Loan as to which there has been a reduction in the amount of interest collectible thereon for the most recently ended Due Period as a result of the application of the Civil Relief Act, the amount, if any, by which (a) interest collectible on such Mortgage Loan during the most recently ended calendar month is less than (b) interest accrued for the related Accrual Period on the Principal Balance of such Mortgage Loan, calculated at a rate equal to the sum of (A)(1) with respect to a Group I Loan, the Class IA Pass-Through Rate on the Class IA Certificates or (2) with respect to a Group II Loan, the weighted average of the Class IIA Pass-Through Rates on the Class IIA Certificates, weighted on the basis of the Certificate Principal Balances of such Certificates, in each case for such Distribution Date and (B) the per annum rates at which the related Servicing Fee, the Certificate Administration Fee and Trustee Fee accrue and the related Premium Percentage. "Chase": The Chase Manhattan Bank, a New York banking corporation. "Class A Certificate": Any of the Class IA-1 Certificates, Class IIA-1 Certificates, Class IIA-2 Certificates, Class IIA-3 Certificates, Class IIA-4 Certificates or Class IIA-5 Certificates. "Class A Certificateholder": A Holder of a Class A Certificate. "Class IA Available Funds Pass-Through Rate": As of any Distribution Date, a per annum rate, expressed as a percentage, equal to the weighted average of the Net Mortgage Interest Rates on the Group I Loans. -5- "Class IIA Available Funds Pass-Through Rate": As of any Distribution Date, a per annum rate, expressed as a percentage, equal to the weighted average of the Net Mortgage Interest Rates on the Group II Loans. "Class IA Carry-Forward Amount": As of any Distribution Date, the sum of (a) the amount, if any, by which (1) the Group I Insured Distribution Amount as of the immediately preceding Distribution Date exceeded (ii) the amount actually distributed to the Holders of the Class IA Certificates on such Distribution Date in respect thereof (including, without limitation, any Insured Payments paid to the Holders of the Class IA Certificates by the Certificate Insurer as described in Sections 6.02 and 6.03 hereof) and (b) interest accrued for the related Accrual Period on the amount described in clause (a), calculated at an interest rate equal to the Class IA Pass-Through Rate on the Class IA Certificates applicable to such Distribution Date. Any Class IA Carry-Forward Amount shall be deemed to be allocated first to any related Group I Subordination Deficit and second to any related Class IA Interest Distribution Amount. "Class IIA Carry-Forward Amount": As of any Distribution Date, the sum of (a) the amount, if any, by which (i) the Group II Insured Distribution Amount as of the immediately preceding Distribution Date exceeded (ii) the amount actually distributed to the Holders of the Class IIA Certificates on such Distribution Date in respect thereof (including, without limitation, any Insured Payments paid to the Holders of the Class IIA Certificates by the Certificate Insurer as described in Sections 6.02 and 6.03 hereof) and (b) interest accrued for the related Accrual Period on the amount described in clause (a), calculated at an interest rate equal to the weighted average of the Class IIA Pass-Through Rate applicable to such Distribution Date, weighted on the basis of the Certificate Principal Balances of such Certificates. Any Class IIA Carry-Forward Amount shall be deemed to be allocated first to any related Group II Subordination Deficit and second to any related Class IIA Interest Distribution Amount. "Class IA Certificates": The Class IA-1 Certificates. "Class IIA Certificates": Collectively, the Class IIA-1 Certificates, the Class IIA-2 Certificates, the Class IIA-3 Certificates, the Class IIA-4 Certificates and the Class IIA-5 Certificates. "Class IA Interest Distribution Amount": With respect to the Class IA Certificates for any Distribution Date the sum of (i) (a) the aggregate amount of interest accrued for the related Accrual Period on the related Certificate Principal Balance immediately prior to -6- such Distribution Date at the related Class IA Pass-Through Rate (based on a 360-day year and the actual number of days in the prior calendar month if clause (i) of the definition of Class IA Pass-Through Rate is used with respect to such Distribution Date, or a 360-day year and a 30-day month if clause (ii) of the definition of Class IA Pass-Through Rate is used with respect to such Distribution Date) minus (b) the aggregate related Mortgage Loan Interest Shortfall for such Distribution Date and (ii) the portion of any related Class IA Carry-Forward Amount which relates to a shortfall (other than a related Mortgage Loan Interest Shortfall) in a distribution of a Class IA Interest Distribution Amount in respect of such Class IA Certificates, in each case as of such Distribution Date. "Class IIA Interest Distribution Amount": With respect to each class of Group II Class A Certificates for any Distribution Date the sum of (i) (a) the aggregate amount of interest accrued for the related Accrual Period on the related Certificate Principal Balance immediately prior- to such Distribution Date at the related Class A Pass-Through Rate (based on a 360-day year and a 30-day month) minus (b) the aggregate related Mortgage Loan Interest Shortfall for such Distribution Date with all such reductions allocated among the Class IIA-1 Certificates, Class IIA-2 Certificates, Class IIA-3 Certificates, Class IIA-4 Certificates and Class IIA-5 Certificates in proportion to their respective amount of Class IIA Interest Distribution Amount which would have resulted absent such reductions and (ii) the portion of any related Class IIA, Carry-Forward Amount which relates to a shortfall (other than a related Mortgage Loan Interest Shortfall) in a distribution of a Class IIA Interest Distribution Amount in respect of such Class IIA Certificates, in each case as of such Distribution Date. "Class IA Pass-Through Rate": With respect to any Distribution Date and the Class IA-1 Certificates, the per annum rate equal to the lesser of: (i) with respect to (a) any Distribution Date which occurs on or prior to the date on which the Pool Principal Balance is less than 10% of the Original Pool Principal Balance, [One-Month LIBOR] plus ____% and (b) any Distribution Date thereafter [One-Month LIBOR] plus ____%; and (ii) the Class IA Available Funds Pass-Through Rate for such Distribution Date. -7- "Class IIA Pass-Through Rate": With respect to any Distribution Date, [the lesser of] ____% per annum [and the Class IIA Available Funds Pass-Through Rate.] "Class IA Principal Distribution Amount": With respect to the Class IA Certificates for any Distribution Date, the lesser of: (a) excess of (i) the sum, as of such Distribution Date, of (A) the Group I Available Funds and (B) any related Insured Payment over (ii) the Class IA Interest Distribution Amount; and (b) the sum, without duplication, of: (i) the portion of any Class IA Carry-Forward Amount which relates to a shortfall in a distribution of a Group I Subordination Deficit, (ii) all scheduled installments of principal in respect of the Group I Loans received or advanced during the related Due Period, together with all unscheduled recoveries of principal in respect of the Group I Loans received by the Servicer during the prior calendar month, (iii) the Principal Balance of each Group I Loan that was repurchased by the Seller during the prior calendar month, (iv) any Substitution Adjustments delivered by the Seller on the related Servicer Remittance Date in connection with a substitution of a Group I Loan, (v) the Net Liquidation Proceeds collected by the Servicer of all Group I Loans during the related Due Period (to the extent such Net Liquidation Proceeds related to principal), (vi) the amount of any Group I Subordination Deficit for such Distribution Date, -8- (vii) the proceeds received by the Trustee with respect to the Group I Loans from any termination of the Trust Fund (to the extent such proceeds are related to principal), and (viii) the amount of any Group I Subordination Increase Amount for such Distribution Date; minus (ix) the amount of any Group I Subordination Reduction Amount for such Distribution Date. "Class IIA Principal Distribution Amount": With respect to the Class IIA Certificates for any Distribution Date, the lesser of: (a) the excess of (i) the sum, as of such Distribution Date, of (A) the Group II Available Funds and (B) any related Insured Payment over (ii) the Class IIA Interest Distribution Amount; and (b) the sum, without duplication, of: (i) the portion of any Class IIA Carry-Forward Amount which relates to a shortfall in a distribution of a Group II Subordination Deficit, (ii) all scheduled installments of principal in respect of the Group II Loans received or advanced during the related Due Period, together with all unscheduled recoveries of principal in respect of the Group II Loans received by the Servicer during the prior calendar month, (iii) the Principal Balance of each Group II Loan that either was repurchased by the Seller during the prior calendar month, (iv) any Substitution Adjustments delivered by the Seller on the related Servicer Remittance Date in connection with a substitution of a Group II Loan, -9- (v) the Net Liquidation Proceeds collected by the Servicer of all Group II Loans during the related Due Period (to the extent such Net Liquidation Proceeds related to principal), (vi) the amount of any Subordination Deficit for such Distribution Date, (vii) the proceeds received by the Trustee with respect to the Group II Loans of any termination of the Trust Fund (to the extent such proceeds are related to principal), and (viii) the amount of any Group II Subordination Increase Amount for such Distribution Date; minus (ix) the amount of any Group II Subordination Reduction Amount for such Distribution Date. "Class IA-1 Certificate": Any Certificate designated as a "Class IA-1 Certificate" on the face thereof, in the form of Exhibit B-1 hereto, and authenticated by the Trustee in accordance with the procedures set forth herein. "Class IIA-1 Certificate": Any Certificate designated as a "Class IIA-1 Certificate" on the face thereof, in the form of Exhibit B-1 hereto, and authenticated by the Trustee in accordance with the procedures set forth herein. "Class IIA-2 Certificate": Any Certificate designated as a "Class IIA-2 Certificate" on the face thereof, in the form of Exhibit B-1 hereto, and authenticated by the Trustee in accordance with the procedures set forth herein. "Class IIA-3 Certificate": Any Certificate designated as a "Class IIA-3 Certificate" on the face thereof, in the form of Exhibit B-1 hereto, and authenticated by the Trustee in accordance with the procedures set forth herein. -10- "Class IIA-4 Certificate": Any Certificate designated as a "Class IIA-4 Certificate" on the face thereof, in the form of Exhibit B-1 hereto, and authenticated by the Trustee in accordance with the procedures set forth herein. "Class IIA-5 Certificate": Any Certificate designated as a "Class IIA-5 Certificate" on the face thereof, in the form of Exhibit B-1 hereto, and authenticated by the Trustee in accordance with the procedures set forth herein. "Class I S Certificate": Any Certificate designated as a "Class I S Certificate" on the face thereof, in the form of Exhibit B-1 hereto, and authenticated by the Trustee in accordance with the procedures set forth herein. "Class II S Certificate": Any Certificate designated as a "Class II S Certificate" on the face thereof, in the form of Exhibit B-1 hereto, and authenticated by the Trustee in accordance with the procedures set forth herein. "Class R Certificate": Any one of the Class R Certificates executed by the Trustee and authenticated by the Certificate Registrar substantially in the form annexed hereto as Exhibit B-2, subordinate to the Class A Certificates in right of payment to the extent set forth herein and evidencing an interest designated as a "residual interest" in the REMIC for purposes of the REMIC Provisions. "Class R Certificateholder": A Holder of a Class R Certificate. "Class S Certificate": Any of the Class I S or Class II S Certificates. "Class S Certificateholder": A Holder of a Class S Certificate. "Class S Interest Distribution Amount": With respect to each class of Class S Certificates for any Distribution Date, the aggregate amount of interest accrued for the related Accrual Period on the related Notional Amount immediately prior to such Distribution Date at the related Class S Pass-Through Rate (based on a 360-day year and the actual number of days in the prior calendar month in the case of the Class I S Certificates and a 360-day year and a 30-day month in the case of the Class II S Certificates. -11- "Class S Pass-Through Rate": With respect to the Class I S Certificates and any Distribution Date, a rate equal to the weighted average, expressed as a percentage, of the related Pool Strip Rates of all of the Group I Loans in the Trust Fund as of the Due Date in the month immediately preceding the month in which such Distribution Date occurs, weighted on the basis of the respective Principal Balances of such Mortgage Loans at the beginning of the related Due Period. With respect to the Class II S Certificates and any Distribution Date, a rate equal to the weighted average, expressed as a percentage, of the related Pool Strip Rates of all of the Group II Loans in the Trust Fund as of the Due Date in the month immediately preceding the month in which such Distribution Date occurs, weighted on the basis of the respective Principal Balances of such Mortgage Loans at the beginning of the related Due Period. "Closing Date": [DATE]. "Code": The Internal Revenue Code of 1986, as amended. "Collection Account": The Eligible Account established and maintained by the Servicer pursuant to Section 5.03. "Combined Loan-to-Value Ratio": With respect to any Mortgage Loan secured by a second lien on the related Mortgaged Property, as of any date, the fraction, expressed as a percentage, the numerator of which is the sum of (i) the current principal balance of such Mortgage Loan and (ii) the current aggregate principal balance of the related Senior Mortgage Loans (if any) at the date of determination, and the denominator of which is the Appraised Value of the related Mortgaged Property. "Company": Chase Funding, Inc., a New York corporation, and any successor thereto. "Compensating Interest": As defined in Section 6.05 hereof. "Corporate Trust Office": The principal office of the Trustee at which at any particular time its corporate trust business shall be administered, which office at the date of execution of this instrument is located at _____________________________________________________________________ ________________________________________________________________. -12- "Curtailment": With respect to a Mortgage Loan, any payment of principal received during a Due Period as part of a payment that is in excess of the amount of the Monthly Payment due for such Due Period and which is not intended to satisfy the Mortgage Loan in full, nor is intended to cure a delinquency. "Cut-off Date": [DATE]. "DCR": Duff & Phelps Credit Rating Co., or its successor in interest. "Debt Service Reduction": With respect to any Mortgage Loan, a reduction by a court of competent jurisdiction of the Monthly Payment due on such Mortgage Loan in a proceeding under the United States Bankruptcy Code, except such a reduction that constitutes a Deficient Valuation or a permanent forgiveness of principal. "Deficient Valuation": With respect to any Mortgage Loan, a valuation of the related Mortgaged Property by a court of competent jurisdiction in an amount less than the then outstanding principal balance of such Mortgage Loan, which valuation results from a proceeding initiated under the United States Bankruptcy Code. "Deleted Mortgage Loan": A Mortgage Loan replaced by or to be replaced by a Qualified Substitute Mortgage Loan. "Delinquent": A Mortgage Loan is "delinquent" if any payment due thereon is not made by the close of business on the day such payment is scheduled to be due. A Mortgage Loan is "30 days delinquent" if such payment has not been received by the close of business on the corresponding day of the month immediately succeeding the month in which such payment was due, or, if there is no such corresponding day (e.g., as when a 30-day month follows a 31-day month in which a payment was due on the 31st day of such month) then on the last day of such immediately succeeding month. Similarly for "60 days delinquent," "90 days delinquent" and so on. "Depository": The Depository Trust Company, 55 Water Street, New York, New York 10041 and any successor Depository hereafter named. The nominee of the initial Depository for purposes of registering those Certificates that are to be Class A Certificates is Cede & Co. The Depository shall at all times be a "clearing corporation" as defined in Section 8-102(3) of the Uniform Commercial Code of the State of New York and a "clearing agency" -13- registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. "Depository Participant": Any broker-dealer, bank or other financial institution for which the Depository holds Class A Certificates from time to time as a securities depositary. "Disqualified Organization": Any of (i) the United States, any State or political subdivision thereof, any possession of the United States, or any agency or instrumentality of any of the foregoing (other than an instrumentality which is a corporation if all of its activities are subject to tax and, except for the FHLMC, a majority of its board of directors is not selected by such governmental unit), (ii) any foreign government, any international organization, or any agency or instrumentality of any of the foregoing, (iii) any organization (other than certain farmers' cooperatives described in Section 521 of the Code) which is exempt from the tax imposed by Chapter 1 of the Code (unless such organization is subject to the tax imposed by Section 511 of the Code on unrelated business taxable income). or rural electric and telephone cooperatives described in Section 1381(a)(2)(C) of the Code and (iv) any other Person so designated by the Trustee based upon an Opinion of Counsel provided to the Trustee that the holding of an ownership interest in a Class R Certificate by such Person may cause the REMIC or any Person having an ownership interest in any Class of Certificates (other than such Person) to incur liability for any federal tax imposed under the Code that would not otherwise be imposed but for the transfer of an ownership interest in the Class R Certificate to such Person. The terms "United States", "State" and "international organization" shall have the meanings set forth in Section 7701 of the Code. "Distribution Date": The 25th day of any month or if such 25th day is not a Business Day, the first Business Day immediately following, commencing on [DATE]. "Due Date": The first day of each calendar month. "Due Period": With respect to each Distribution Date, the period beginning on the opening of business on the second day of the calendar month preceding the calendar month in which such Distribution Date occurs, and ending at the close of business on the first day of the calendar month in which such Distribution Date occurs. "Eligible Account": Either (A) an account or accounts maintained with an institution (which may include the Trustee, provided such institution otherwise meets these -14- requirements) whose deposits are insured by the FDIC, the unsecured and uncollateralized debt obligations of which institution shall be rated AA or better by S&P and DCR and Aa2 or better by Moody's and in the highest short term rating by the Rating Agencies, and which is (i) a federal savings and loan association duly organized, validly existing and in good standing under the federal banking laws, (ii) an institution duly organized, validly existing and in good standing under the applicable banking laws of any state, (iii) a national banking association (including the Trustee) duly organized, validly existing and in good standing under the federal banking laws, (iv) a principal subsidiary of a bank holding company, or (v) approved in writing by the Certificate Insurer and the Rating Agencies or (B) a trust account or accounts maintained with the corporate trust department of a federal or state chartered depository institution acceptable to each Rating Agency and the Certificate Insurer (Chase shall be deemed acceptable, provided that Chase otherwise meets these requirements), having capital and surplus of not less than $50,000,000, acting in its fiduciary capacity. "ERISA": The Employee Retirement Income Security Act of 1974, as amended. "Event Of Default": One or more of the events described in Section 9.01 hereof. "FDIC": The Federal Deposit Insurance Corporation and any successor thereto. "FHLMC": The Federal Home Loan Mortgage Corporation and any successor thereto. "FNMA": The Federal National Mortgage Association and any successor thereto. "Foreclosure Profits": As to any Distribution Date, (i) Net Liquidation Proceeds in respect of each Mortgage Loan that became a Liquidated Mortgage Loan during the month immediately preceding the month of such Distribution Date minus (ii) the sum of the unpaid principal balance of each such Liquidated Mortgage Loan plus accrued and unpaid interest at the applicable Mortgage Interest Rate on the unpaid principal balance thereof from the Due Date to which interest was last paid by the Mortgagor (or, in the case of a Liquidated Mortgagee Loan that had been an REO Mortgage Loan, from the Due Date to which interest was last deemed to have been paid pursuant to Section 5.11) to the first day of the month following the month in which such Mortgage Loan became a Liquidated Mortgage Loan. -15- "Fund": The VISTA U.S. Government Money Market Fund and the VISTA Prime Money Market Fund, referred to collectively. The Servicer shall instruct the Trustee regarding the voting of any proxies with respect to the Fund. "GAAP": Generally accepted accounting principles. "Gross Margin": As to each Group I Loan, the fixed percentage set forth in the related Mortgage Note and indicated in the related Mortgage Loan Schedules as the 'Gross Margin, " which percentage is added to the related Index on each Rate Adjustment Date to determine (subject to rounding, the Periodic Cap, Lifetime Floor and the Lifetime Cap) the Mortgage Interest Rate on such Mortgage Loan until the next Rate Adjustment Date. "Group I Available Funds": As defined in Section 6.02(a). "Group II Available Funds": As defined in Section 6.02(a). "Group I Certificate Account": The Certificate Account established with respect to the Group I Certificates in accordance with Section 4.05 hereof and maintained by the Trustee. "Group II Certificate Account": The Certificate Account established with respect to the Group II Certificates in accordance with Section 4.05 hereof and maintained by the Trustee. "Group I Certificate Insurance Policy": The certificate guaranty insurance policy No. _____, and all endorsements thereto dated the Closing Date, issued by the Certificate Insurer for the benefit of the Group I Certificateholders, a copy of which is attached hereto as Exhibit A-1. "Group II Certificate Insurance Policy": The certificate guaranty insurance policy No. _____, and all endorsements thereto dated the Closing Date, issued by the Certificate Insurer for the benefit of the Group II Certificateholders, a copy of which is attached hereto as Exhibit A-2. "Group I Certificates": Collectively, the Class IA-1 Certificates, the Class I S Certificates and the Class R Certificates. -16- "Group II Certificates": Collectively, the Class IIA Certificates, the Class II S Certificates and the Class R Certificates. "Group I Excess Subordinated Amount": With respect to any Distribution Date, the difference, if any, between (a) the Group I Subordinated Amount that would exist on such Distribution Date after taking into account all distributions to be made on such Distribution Date (exclusive of any reductions thereto attributable to Group I Subordination Reduction Amounts on such Distribution Date) and (b) the Group I Required Subordinated Amount for such Distribution Date. "Group II Excess Subordinated Amount": With respect to any Distribution Date, the difference, if any, between (a) the Group II Subordinated Amount that would exist on such Distribution Date after taking into account all distributions to be made on such Distribution Date (exclusive of any reductions thereto attributable to Group II Subordination Reduction Amounts on such Distribution Date) and (b) the Group II Required Subordinated Amount for such Distribution Date. "Group I Insured Distribution Amount": With respect to any Distribution Date, the sum of (a) the Class IA Interest Distribution Amount with respect to such Distribution Date and (b) the Group I Subordination Deficit, if any, as of such Distribution Date. "Group II Insured Distribution Amount": With respect to any Distribution Date, the sum of (a) the Class IIA Interest Distribution Amount with respect to such Distribution Date and (b) the Group II Subordination Deficit, if any, as of such Distribution Date. "Group I Loans" or "Loan Group I": The group of Mortgage Loans identified on Exhibit D- I from time to time. "Group II Loans"or "Loan Group II": The group of Mortgage Loans identified on Exhibit D-2 from time to time. "Group I Net Monthly Excess Cashflow": As of any Distribution Date, an amount equal to (x) the Group I Available Funds minus (y) the sum of (1) the sum of the Class IA Interest Distribution Amount and the amount described in clause (b) of the definition of Class IA Principal Distribution Amount (calculated for this purpose without regard to any Group IA -17- Subordination Increase Amount or portion thereof included therein) and (ii) the Group I Reimbursement Amount, if any, for such Distribution Date. "Group II Net Monthly Excess Cashflow": As of any Distribution Date, an amount equal to (x) the Group II Available Funds minus (y) the sum of (i) sum of the Class IIA Interest Distribution Amount and the amount described in clause (b) of the definition of Class IIA Principal Distribution Amount (calculated for this purpose without regard to any Group II Subordination Increase Amount or portion thereof included therein) and (ii) the Group II Reimbursement Amount, if any, for such Distribution Date. "Group I Pool Principal Balance": The aggregate Principal Balances of the Group I Loans as of any date of determination. "Group II Pool Principal Balance": The aggregate Principal Balances of the Group II Loans as of any date of determination. "Group I Principal Remittance Amount": As of any Distribution Date, the sum, without duplication, of the amounts specified in clauses (b)(ii) through (v), (vii) and (viii) of the definition of Class IA Principal Distribution Amount. "Group II Principal Remittance Amount": As of any Distribution Date, the sum, without duplication, of the amounts specified in clauses (b)(1) through (v), (vii) and (viii) of the definition of Class IIA Principal Distribution Amount. "Group I Reimbursement Amount": As of any Distribution Date, the sum of (a)(i) all Group I Insured Payments (as defined in the Group I Certificate Insurance Policy) previously paid by the Certificate Insurer and in each case not previously repaid to the Certificate Insurer pursuant to Sections 6.03(b) or 6.03(c) hereof plus (ii) interest accrued on each such Group I Insured Payment and Group I Preference Payments not previously repaid calculated at the Class IA Pass-Through Rate from the date such Group I Insured Payment or Group I Preference Amount was made and (b)(i) any amounts then due and owing to the Certificate Insurer under the Insurance Agreement, as certified to the Trustee by the Certificate Insurer plus (ii) interest on such amounts at the Late Payment Rate (as defined in the Insurance Agreement), The Certificate Insurer shall notify the Trustee, the Certificate Administrator and the Company of the amount of any Group I Reimbursement Amount. -18- "Group II Reimbursement Amount": As of any Distribution Date, the sum of (a)(i) all Group II Insured Payments (as defined in the Group II Certificate Insurance Policy) previously paid by the Certificate Insurer and in each case not previously repaid to the Certificate Insurer pursuant to Sections 6.03(b) or 6.03(c) hereof plus (ii) interest accrued on each such Group II Insured Payment and Group II Preference Payments not previously repaid calculated at the Class IIA Pass-Through Rate from the date such Group II Insured Payment or Group II Preference Amount was made and (b)(i) any amounts then due and owing to the Certificate Insurer under the Insurance Agreement, as certified to the Trustee by the Certificate Insurer plus (ii) interest on such amounts at the Late Payment Rate (as defined in the Insurance Agreement). The Certificate Insurer shall notify the Trustee, the Certificate Administrator and the Company of the amount of any Group II Reimbursement Amount. "Group I Required Subordinated Amount": For each Distribution Date, the amount determined as follows: (a) for any Distribution Date occurring during the period commencing on the Closing Date and ending on the later of (x) the date upon which principal payments on the Group I Loans equal to one-half of the Original Group I Pool Principal Balance have been received and (y) the thirtieth Distribution Date following the Closing Date, the greater of the following: (i) the Initial Group I Specified Subordinated Amount; and (ii) two times an amount equal to (x) one-half of the aggregate Principal Balances of all Group I Loans which are 91 or more days Delinquent (including REO Properties) minus (y) three times the Group I Net Monthly Excess Cashflow for such Distribution Date; and (b) for any Distribution Date occurring after the end of the period in clause (a) above, the greatest of the following: (i) the lesser of (A) the Initial Group I Specified Subordinated Amount and (B) two times the Amortized Group I Subordinated Amount Requirement, -19- (ii) two times the difference of (A) one-half of the aggregate Principal Balances of all Group I Loans which are 91 or more days Delinquent (including REO Properties) and (B) three times the Group I Net Monthly Excess Cashflow for such Distribution Date, (iii) an amount equal to 0.50% of the Original Group I Pool Principal Balance and (iv) the sum of the outstanding Principal Balances of the Group I Loans with the four largest outstanding Principal Balances. Notwithstanding anything to the contrary set forth in clauses (a) or (b) above, on or after any Distribution Date on which a Group I Insured Payment is made, or any Distribution Date on which an Event of Default has occurred and is continuing, the Group I Required Subordinated Amount shall be equal to the Group I Required Subordinated Amount as of the Distribution Date immediately prior to the Distribution Date on which either such event occurred. "Group II Required Subordinated Amount": For each Distribution Date, the amount determined as follows: (a) for any Distribution Date occurring during the period commencing on the Closing Date and ending on the later of (x) the date upon which principal payments on the Group II Loans equal to one-half of the Original Group II Pool Principal Balance have been received and (y) the thirtieth Distribution Date following the Closing Date, the greater of the following: (i) the Initial Group II Specified Subordinated Amount; and (ii) two times an amount equal to (x) one-half of the aggregate Principal Balances of all Group II Loans which are 91 or more days Delinquent (including REO Properties) minus (y) three times the Group II Net Monthly Excess Cashflow for such Distribution Date; and (b) or any Distribution Date occurring after the end of the period in clause (a) above, the greatest of the following: -20- (i) the lesser of (A) the Initial Group II Specified Subordinated Amount and (B) two times the Amortized Group II Subordinated Amount Requirement, (ii) two times the difference of (A) one-half of the aggregate Principal Balances of all Group II Loans which are 91 or more days Delinquent (including REO Properties) and (B) three times the Group II Net Monthly Excess Cashflow for such Distribution Date, (iii) an amount equal to 0.50% of the Original Group II Pool Principal Balance and (iv) the sum of the then outstanding Principal Balances of the Group II Loans with the four largest outstanding Principal Balances. Notwithstanding anything to the contrary set forth in clauses (a) or (b) above, on or after any Distribution Date on which a Group II Insured Payment is made, or any Distribution Date on which an Event of Default has occurred and is continuing, the Group II Required Subordinated Amount shall be equal to the Group II Required Subordinated Amount as of the Distribution Date immediately prior to the Distribution Date on which either such event occurred. "Group I Subordinated Amount": As of any Distribution Date, the difference, if any, between (a) the Group I Pool Principal Balance as of the close of business on the last day of the related Due Period and (b) the aggregate Certificate Principal Balance of the Class IA Certificates as of such Distribution Date (after taking into account the payment of the Group I Principal Remittance Amount on such Distribution Date); provided, however, that such amount shall not be less than zero. "Group II Subordinated Amount": As of any Distribution Date, the difference, if any, between (a) the Group II Pool Principal Balance as of the close of business on the last day of the related Due Period and (b) the aggregate Certificate Principal Balance of the Class IIA Certificates as of such Distribution Date (after taking into account the payment of the Group II Principal Remittance Amount on such Distribution Date); provided, however, that such amount shall not be less than zero. -21- "Group I Subordination Deficiency Amount": With respect to any Distribution Date, the amount, if any, by which (a) the Group I Required Subordinated Amount applicable to such Distribution Date exceeds (b) the Group I Subordinated Amount applicable to such Distribution Date prior to taking into account the payment of any related Group I Subordination Increase Amounts on such Distribution Date. "Group II Subordination Deficiency Amount": With respect to any Distribution Date, the amount, if any, by which (a) the Group II Required Subordinated Amount applicable to such Distribution Date exceeds (b) the Group II Subordinated Amount applicable to such Distribution Date prior to taking into account the payment of any related Group II Subordination Increase Amounts on such Distribution Date. "Group I Subordination Deficit": As of any Distribution Date, the amount, if any, by which (a) the aggregate Certificate Principal Balance of the Class IA Certificates (after taking into account the payment of the Class IA Principal Distribution Amount (other than payments in respect thereof under the Group I Certificate Insurance Policy)) on such date exceeds (b) the Group I Pool Principal Balance determined as of the end of the immediately preceding Due Period. "Group II Subordination Deficit": As of any Distribution Date, the amount, if any, by which (a) the aggregate Certificate Principal Balance of the Class IIA Certificates (after taking into account the payment of the Class IIA Principal Distribution Amount (other than payments in respect thereof under the Group II Certificate Insurance Policy)) on such date exceeds (b) the Group II Pool Principal Balance determined as of the end of the immediately preceding Due Period. "Group I Subordination Increase Amount": With respect to any Distribution Date, the lesser of (a) the Group I Subordination Deficiency Amount as of such Distribution Date (after taking into account the payment of the Class IA Principal Distribution Amount on such Distribution Date (other than clause (viii) thereof)) and (b) the amount of Group I Net Monthly Excess Cashflow on such Distribution Date. "Group II Subordination Increase Amount": With respect to any Distribution Date, the lesser of (a) the Group II Subordination Deficiency Amount as of such Distribution -22- Date (after taking into account the payment of the Class IIA Principal Distribution Amount on such Distribution Date (other than clause (viii) thereof)) and (b) the amount of Group II Net Monthly Excess Cashflow on such Distribution Date. "Group I Subordination Reduction Amount": With respect to any Distribution Date, an amount equal to the lesser of (a) the Group I Excess Subordinated Amount for such Distribution Date and (b) the Group I Principal Remittance Amount for the prior Due Period. "Group II Subordination Reduction Amount": With respect to any Distribution Date, an amount equal to the lesser of (a) the Group II Excess Subordinated Amount for such Distribution Date and (b) the Group II Principal Remittance Amount for the prior Due Period. "Index": As to any Group I Loan, a rate per annum equal to the average of the interbank offered rates for six month United States dollar deposits in the London market as published in the Western Edition of The Wall Street Journal, as most recently available as of the first business day forty-five, thirty or five days prior to any Rate Adjustment Date, as specified in the related Mortgage Note. "Indirect Participant": Any financial institution for whom any Depository Participant holds an interest in a Class A Certificate. "Initial Group I Specified Subordinated Amount": An amount equal to ____% of the Original Group I Pool Principal Balance. "Initial Group II Specified Subordinated Amount": An amount equal to ____% of the Original Group II Pool Principal Balance. "Insurance Agreement": The Insurance Agreement dated as of [DATE] among the Certificate Insurer, the Company, the Servicer, the Certificate Administrator and the Trustee and attached hereto as Exhibit R, as such agreement may be amended or supplemented in accordance with the provisions thereof. "Insurance Proceeds": Proceeds paid by any insurer pursuant to any insurance policy covering a Mortgage Loan to the extent such proceeds are not applied to the restoration of the related Mortgaged Property or released to the related Mortgagor in accordance with Accepted Servicing Practices. "Insurance Proceeds" do not include "Insured Payments." -23- "Insured Payment": As determined separately for the Group I and Group II Class A Certificates, the sum of (i) with respect to each Distribution Date, the related Available Funds Shortfall and (ii) any related unpaid Preference Amount. "Interest Determination Date": With respect to any Accrual Period, the second London Business Day preceding the commencement of such Accrual Period. "Lifetime Cap": As to any Mortgage Loan in Loan Group I, the maximum Mortgage Interest Rate set forth in the related Mortgage Note and indicated in the Mortgage Loan Schedule, which rate may be applicable to such Mortgage Loan at any time during the life of such Mortgage Loan. "Lifetime Floor": As to any Mortgage Loan in Loan Group I, the minimum Mortgage Interest Rate set forth in the related Mortgage Note and indicated in the Mortgage Loan Schedule, which rate may be applicable to such Mortgage Loan at any time during the life of such Mortgage Loan. "Liquidated Loan Loss": With respect to any Distribution Date, the aggregate of the amount of losses with respect to each Mortgage Loan which became a Liquidated Mortgage Loan during the Due Period preceding such Distribution Date, equal to (i) the unpaid principal balance of each such Liquidated Mortgage Loan, plus accrued interest thereon in accordance with the amortization schedule at the time applicable thereto at the applicable Mortgage Interest Rate from the Due Date as to which interest was last paid with respect thereto through the last day of the month in which such Mortgage Loan became a Liquidated Mortgage Loan, minus (ii) Net Liquidation Proceeds with respect to such Liquidated Mortgage Loan. "Liquidated Mortgage Loan": A Mortgage Loan with respect to which the related Mortgaged Property has been acquired, liquidated or foreclosed and with respect to which the Servicer determines that all Liquidation Proceeds which it expects to recover have been recovered. "Liquidation Expenses": Expenses incurred by the Servicer or any Subservicer in connection with the liquidation of any defaulted Mortgage Loan or property acquired in respect thereof (including, without limitation, legal fees and expenses, committee or referee fees, and, if applicable, brokerage commissions and conveyance taxes), any unreimbursed amount expended by the Servicer pursuant to Sections 5.05, 5.06 and 5.11 respecting the related Mortgage Loan -24- and any unreimbursed expenditures for real property taxes or for property restoration or preservation of the related Mortgaged Property. Liquidation Expenses shall not include any previously incurred expenses in respect of an PEO Mortgage Loan which have been netted against related REO Proceeds. "Liquidation Proceeds": Amounts received by the Servicer (including Insurance Proceeds) in connection with the liquidation of defaulted Mortgage Loans or property acquired in respect thereof, whether through foreclosure, sale or otherwise, including payments in connection with such Mortgage loans received from the Mortgagor, other than amounts required to be paid to the Mortgagor pursuant to the terms of the applicable Mortgage or to be applied otherwise pursuant to law. "Loan-to-Value Ratio or LTV": With respect to any Mortgage Loan, the fraction, expressed as a percentage, the numerator of which is the principal balance of such Mortgage Loan, as of the date of origination of the Mortgage Loan, divided by the Appraised Value of the related Mortgaged Property. "London Business Day": Any day in which banks in the City of London, England are open and conducting transactions in United States dollars. "Majority Certificateholders": With respect to each Loan Group, the Holder or Holders of Class A Certificates evidencing Percentage Interests in excess of 51 % in the aggregate. "Monthly Payment": As to any Mortgage Loan (including any REO Mortgage Loan) and any Due Date, the scheduled payment of principal and interest due thereon for such Due Date (after adjustment for any Curtailments and Deficient Valuations occurring prior to such Due Date but before any adjustment to such amortization schedule by reason of any bankruptcy, other than Deficient Valuations or similar proceeding or any moratorium or similar waiver or grace period). "Moody's": Moody's Investors Service, Inc., or any successor thereto. "Mortgage": The mortgage, deed of trust or other instrument creating a first lien or second lien on the Mortgaged Property. -25- "Mortgage File": The mortgage documents listed in Exhibit C attached hereto pertaining to a particular Mortgage Loan and any additional documents required to be added to the Mortgage File pursuant to this Agreement; provided that whenever the term "Mortgage File" is used to refer to documents actually received by the Trustee, such term shall not be deemed to include such additional documents required to be added unless they are actually so added. "Mortgage Impairment Insurance Policy": As defined in Section 5.07. "Mortgage Interest Rate": As to any Group I Loan, the per annum rate at which interest accrues on the unpaid principal balance thereof, as adjusted from time to time in accordance with the provisions of the related Mortgage Note, which rate is (a) prior to the first related Rate Adjustment Date occurring after the Cut-off Date, the initial Mortgage Interest Rate for such Mortgage Loan indicated on the Mortgage Loan Schedule and (b) from and after such first Rate Adjustment Date, the sum of the related Index applicable to the most recent Rate Adjustment Date, and the Gross Margin, rounded as set forth in such Mortgage Note, subject to the Periodic Cap, the Lifetime Cap and Lifetime Floor set forth in the related Mortgage Note that may be applicable to such Mortgage Loan at any time during the life of such Mortgage Loan. As to any Group II Loan, the fixed per annum rate at which interest accrued on the unpaid principal balance thereof, which rate is the Mortgage Interest Rate for such Group II Loan indicated on the related Mortgage Loan Schedule. "Mortgage Loan": An individual mortgage loan which is assigned and transferred to the Trustee pursuant to this Agreement, together with the rights and obligations of a holder thereof and payments thereon and proceeds therefrom (other than payments of interest that accrued on each Mortgage Loan up to and including the Due Date therefor occurring, with respect to the Mortgage Loans prior to the Cut-off Date), the Mortgage Loans originally subject to this Agreement being identified on the Mortgage Loan Schedule. As applicable, Mortgage Loan shall be deemed to refer to the related REO Property. "Mortgage Loan Group": The Group I Loans or Group II Loans. References herein to "Mortgage Loan Group" when used with respect to any Certificate shall mean (i) Group I Loans, in the case of the Group I Certificates, and (ii) Group II Loans, in the case of the Group II Certificates. "Mortgage Loan Interest Shortfall": With respect to any Distribution Date, as to the Mortgage Loans in either Loan Group, the sum of (a) any Civil Relief Act Interest Shortfalls -26- in respect of such Mortgage Loans for such Distribution Date and (b) any related Servicer Default Prepayment Interest Shortfall. A "Servicer Default Prepayment Interest Shortfall" will only exist on a Distribution Date with respect to which the Servicer has defaulted on its obligations under Sections 5.19 and 6.05 with respect to Prepayment Interest Shortfalls and on such a Distribution Date will equal, for Loan Groups I and II in the aggregate, the excess of (i) the aggregate maximum amount of Compensating Interest required pursuant to Sections 5.19 and 6.05 to have been paid by the Servicer or a Subservicer or netted against the Servicer's aggregate Servicing Fee for such Distribution Date over (ii) the amount of Compensating Interest actually paid by the Servicer or a Subservicer or actually netted against the Servicer's aggregate Servicing Fee for such Distribution Date. "Mortgage Loan Schedule": The lists of the Mortgage Loans transferred to the Trustee on or before the Closing Date as part of the Trust Fund and attached hereto as Exhibits D-1 and D-2 and delivered in computer readable format, which list shall set forth at a minimum the following information as to each Mortgage Loan: (i) the Mortgage loan identifying number, (ii) the city, state and zip code of the Mortgaged Property; (iii) the type of property; (iv) the current Monthly Payment as of the Cut-off Date; (v) the original number of months to maturity; (vi) the scheduled maturity date; (vii) the Principal Balance as of the Cut-off Date; (viii) the Loan-to-Value Ratio or Combined Loan-to-Value Ratio at origination; (ix) the Mortgage Interest Rate as of the Cut-off Date; (x) the Mortgage Interest Rate at origination; -27- (xi) the Gross Margin (with respect to Group I Loans) and the frequency of the adjustment thereof; (xii) the first Rate Adjustment Date (with respect to Group I Loans) after the Cut-off Date; (xiii) the first Rate Adjustment Date after origination and the frequency of adjustment (with respect to Group I Loans); (xiv) the Lifetime Cap (with respect to Group I Loans); (xv) the Lifetime Floor (with respect to Group I Loans); (xvi) the Appraised Value; (xvii) the stated purpose of the loan at origination; (xviii) the type of occupancy at origination; (xix) the documentation type (as described in the Underwriting Guidelines), (xx) the Periodic Cap (with respect to Group I Loans); (xxi) the loan classification (as described in the Underwriting Guidelines), (xxii) the related Index (with respect to Group I Loans) and the look-back period for such Mortgage Loan; (xxiii) the Servicing Fee with respect to such Mortgage Loan, expressed as a rate per annum; and (xxiv) whether such Mortgage Loan is secured by a first lien or second lien. Such schedule may consist of multiple reports that collectively set forth all of the information required. -28- "Mortgage Note": The original, executed note or other evidence of indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan. "Mortgaged Property": The underlying property securing a Mortgage Loan, consisting of a fee simple estate in a single parcel of land improved by a Residential Dwelling. "Mortgagor": The obligor on a Mortgage Note. "Net Foreclosure Profits": As to any Distribution Date, an amount equal to (i) the aggregate Foreclosure Profits with respect to such Distribution Date minus (ii) Liquidated Loan Losses with respect to such Distribution Date. "Net Liquidation Proceeds": As to any Liquidated Mortgage Loan, Liquidation Proceeds net of Liquidation Expenses and net of any unreimbursed Periodic Advances and unreimbursed Servicing Advances made by the Servicer. For all purposes of this Agreement, Net Liquidation Proceeds shall be allocated first to accrued and unpaid interest on the related Mortgage Loan and then to the unpaid principal balance thereof. "Net Mortgage Interest Rate": With respect to each Mortgage Loan at any time of determination, a rate equal to (i) the Mortgage Interest Rate on such Mortgage Loan minus (ii) the sum of the per annum rates used to determine the related Servicing Fee and Certificate Administration Fee and the Premium Percentage. Any regular monthly computation of interest at such rate shall be based upon annual interest at such rate on the applicable amount divided by twelve. "Net REO Proceeds": As to any REO Mortgage Loan, REO Proceeds net of any related expenses of the Servicer. "Nonrecoverable Advances": With respect to any Mortgage Loan, (a) any Periodic Advance or Servicing Advance previously made and not reimbursed from late collections pursuant to Section 5.04(b), or (b) a Periodic Advance or Servicing Advance proposed to be made in respect of a Mortgage Loan or REO Property either of which, in the good faith business judgment of the Servicer, as evidenced by an Officer's Certificate delivered to the Certificate Insurer and the Trustee would not be ultimately recoverable pursuant to Section 5.04. "Non-United States Person": Any Person other than a United States Person. -29- "Notional Amount": As of any Distribution Date, with respect to the Class I S Certificates, an amount equal to the aggregate Principal Balance of the Group I Loans immediately prior to such date. As of any Distribution Date, with respect to the Class II S Certificates, an amount equal to the aggregate Principal Balance of the Group II Loans immediately prior to such date. "Officer's Certificate": A certificate signed by the Chairman of the Board, the President or a Vice President and the Treasurer, the Secretary or one of the Assistant Treasurers or Assistant Secretaries of the Seller and/or the Servicer, or the Company, as required by this Agreement. "One-Month LIBOR": With respect to any Accrual Period, the rate determined by the Trustee on the related Interest Determination Date on the basis of the offered rates of the Reference Banks for one-month United States dollar deposits, as such rates appear on the Reuters Screen LIBO Page, as of 11:00 a.m. (London time) on such Interest Determination Date. On each Interest Determination Date, One-Month LIBOR for the related Accrual Period will be established by the Trustee as follows: (i) If on such Interest Determination Date two or more Reference Banks provide such offered quotations, One-month LIBOR for the related Accrual Period shall be the arithmetic mean of such offered quotations (rounded upwards if necessary to the nearest whole multiple of 1/16%). (ii) If on such Interest Determination Date fewer than two Reference Banks provide such offered quotations, One-Month LIBOR for the related Accrual Period shall be the higher of (1) One-Month LIBOR as determined on the previous Interest Determination Date and (2) the Reserve Interest Rate. "Opinion of Counsel": A written opinion of counsel, who may, without limitation, be counsel for the Seller, the Servicer, the Certificate Administrator, the Trustee, a Certificateholder or a Certificateholder's prospective transferee or the Certificate Insurer (including except as otherwise provided herein, in-house counsel) reasonably acceptable to each addressee of such opinion and experienced in matters relating to the subject of such opinion; except that any opinion of counsel relating to (a) the qualification of the Trust Fund as a REMIC or (b) compliance with the REMIC Provisions must be an opinion of counsel who (i) is in fact -30- independent of the Seller, the Servicer, the Certificate Administrator and the Trustee, (ii) does not have any direct financial interest or any material indirect financial interest in the Seller, the Servicer, the Certificate Administrator or the Trustee or in an Affiliate thereof, (iii) is not connected with the Seller, the Servicer, the Certificate Administrator or the Trustee as an officer, employee, director or person performing similar functions and (iv) is reasonably acceptable to the Certificate Insurer, "Original Group I Pool Principal Balance": The Group I Pool Principal Balance as of the Cut-off Date, which is $_____________. "Original Group II Pool Principal Balance": The Group II Pool Principal Balance as of the Cut-off Date, which is $_____________. "Original Certificate Principal Balance": As of the Startup Day and as to the Class IA-1 Certificates, $_____________, as to the Class IIA-1 Certificates, $_____________, as to the Class IIA-2 Certificates, $_____________, as to the Class IIA-3 Certificates, $_____________, as to the Class IIA-4 Certificates, $____________, as to the Class IIA-5 Certificates, $____________, and as to the each class of Class S Certificates, $0.00. The Class R Certificates do not have an Original Certificate Principal Balance. "Original Pool Principal Balance": The Pool Principal Balance as of the Cut-off Date, which is $______________. "Outstanding Mortgage Loan": As to any Due Date, a Mortgage Loan (including an REO Mortgage Loan) which was not the subject of a Principal Prepayment in Full prior to such Due Date, which did not become a Liquidated Mortgage Loan prior to such Due Date, which was not repurchased by the Seller prior to such Due Date pursuant to Section 2.02 and which was not repurchased by an Affiliate of the Seller pursuant to Section 5.17. "Ownership Interest": As to any Certificate, any ownership or security 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, as owner or as pledgee. "Owner-Occupied Mortgaged Property": A Residential Dwelling as to which (a) the related Mortgagor represented an intent to occupy as such Mortgagor's primary, secondary or -31- vacation residence at the origination of the Mortgage Loan, and (b) the Seller has no actual knowledge that such Residential Dwelling is not so occupied. "Paying Agent": The Person appointed by the Trustee as Paying Agent pursuant to Section 4.07. "Paying Agent Account": The account created and maintained pursuant to Section 4.07. "Percentage Interest": With respect to a Class A Certificate and any date of determination, the portion evidenced by such Certificate, expressed as a percentage rounded to four decimal places, equal to a fraction the numerator of which is the initial Authorized Denomination represented by such Certificate and the denominator of which is the Original Certificate Principal Balance of such Certificate. With respect to a Class S or Class R Certificate and any date of determination, the portion evidenced thereby as stated on the face of such Certificate. "Periodic Advance": The aggregate of the advances with respect to Mortgage Loans and REO Properties required to be made by the Servicer on any Servicer Remittance Date pursuant to Section 5.20 hereof, the amount of any such advances being equal to the sum of: (i) with respect to the Mortgage Loans (other than Balloon Mortgage Loans with delinquent Balloon Payments as described in clause (iii) below and other than REO Properties as described in clauses (ii) and (iv) below), all Monthly Payments (net of the related Servicing Fee) on such Mortgage loans that were delinquent as of the close of business on the Business Day preceding the related Servicer Remittance Date, plus (ii) with respect to each REO Property (other than any REO Property relating to a Balloon Mortgage Loan with a delinquent Balloon Payment as described in clause (iv) below), which REO Property was acquired during or prior to the related Due Period and as to which an REO Disposition did not occur during the related Due Period, an amount equal to the Monthly Payment (net of the related Servicing Fee) for the most recently ended Due Period for the related Mortgage Loan minus the net income from such REO Property transferred to the related Certificate Account for such Distribution Date, plus (iii) with respect to each Balloon Mortgage Loan with a delinquent Balloon Payment (other than any related REO Property as described in clause (iv) below), an amount equal to the assumed monthly principal and interest payment (net of the related Servicing Fee) that would have been due on the related Due Date based on the original principal amortization schedule for such Balloon Mortgage Loan, plus (iv) with respect to each REO Property relating to a Balloon Mortgage Loan with a -32- delinquent Balloon Payment, which REO Property was acquired during or prior to the related Due Period and as to which an REO Disposition did not occur during the related Due Period, an amount equal to the assumed monthly principal and interest payment (net of the related Servicing Fee) that would have been due on the related Due Date based on the original principal amortization schedule for the related Balloon Mortgage Loan minus the net income from such REO Property transferred to the related Certificate Account for such Distribution Date, minus (v) the amount of any advance otherwise required for such Distribution Date pursuant to clauses (i) through (iv) above which the Servicer has determined to be a Nonrecoverable Advance. "Periodic Cap": With respect to each Group I Loan, the provision in the related Mortgage Note that provides for an absolute maximum amount by which the Mortgage Interest Rate therein may increase or decrease on a Rate Adjustment Date above or below the Mortgage Interest Rate previously in effect. "Permitted Investments:" One or more of the following: (i) obligations of, or guaranteed as to principal and interest by, the United States or obligations of any agency or instrumentality thereof when such obligations are backed by the full faith and credit of the United States; provided that any such obligation held as a "cash flow investment" within the meaning of Section 860G(a)(6) of the Code shall not have a remaining maturity of more than 45 days; (ii) repurchase agreements on obligations specified in clause (i) maturing not more than two months from the date of acquisition thereof, provided that the long-term unsecured obligations of the party agreeing to repurchase such obligations are at the time rated by each Rating Agency in one of its two highest rating categories and the short-term debt obligations of the party agreeing to repurchase are rated A-1 by S&P and Prime-1 by Moody's; (iii) federal funds, certificates of deposit, time deposits and bankers' acceptances (which shall each have an original maturity of not more than 60 days and, in the case of bankers' acceptances, shall in no event have an original maturity of more than 365 days) of any United States depository institution or trust company incorporated under the laws of the United States or any state, provided that the long-term unsecured debt obligations of such depository institution or trust company at the date of acquisition thereof have been rated by each Rating Agency in one of its two highest rating categories -33- and the short-term obligations of such depository institution or trust company are rated A-1 by S&P and Prime-1 by Moody's; (iv) commercial paper (having original maturities of not more than 365 days) of any corporation incorporated under the laws of the United States or any state thereof which on the date of acquisition has been rated by each Rating Agency in its highest short-term unsecured commercial paper rating category; provided that such commercial paper shall have a remaining maturity of not more than 45 days; (v) the Fund unless S&P or Moody's notifies the Servicer in writing that investment in the Fund would result in a reduction or withdrawal of the rating of any of the Class A or Class M Certificates; and (vi) other obligations or securities that are "permitted investments" within the meaning of Section 860G(a)(5) of the Code and acceptable to each Rating Agency and S&P rating the Certificates as an Eligible Investment hereunder and will not result in a reduction or withdrawal in the then current rating of any Class of Certificates, as evidenced by a letter to such effect from each Rating Agency; provided that no such instrument shall be a Permitted Investment if such instrument evidences either (a) a right to receive only interest payments with respect to the obligations underlying such instrument, or (b) both principal and interest payments derived from obligations underlying such instrument where the interest and principal payments with respect to such instrument provide a yield to maturity of greater than 120% of the yield to maturity at par of such underlying obligations. "Permitted Transferee": Any transferee of a Class R Certificate other than a Non-United States Person or Disqualified Organization. "Person": Any individual, corporation, partnership, Joint venture, association, joint-stock company, trust, national banking association, unincorporated organization or government or any agency or political subdivision thereof. "Plan": As defined in Section 4.02(d). -34- "Policy Business Day": A Business Day as defined in the Certificate Insurance Policy. "Pool Principal Balance": The sum of the Group I Pool Principal Balance and the Group II Pool Principal Balance as of any date of determination. "Pool Strip Rate": With respect to the Class I S Certificates and the Group I Loans, a per annum rate equal to the weighted average of the related Net Mortgage Interest Rates, weighted on the basis of the related Principal Balances of such Mortgage Loans at the beginning of the related Due Period, minus the Class IA Pass Through Rate. With respect to the Class II S Certificates and the Group II Loans, a per annum rate equal to the related Net Mortgage Interest Rate minus the Class IIA Pass-Through Rate. The Pool Strip Rates are also designated on the related Mortgage Loan Schedule as the "Class I S Strip" or the "Class II S Strip" as applicable for such Mortgage Loan and the related Class S Certificates. "Preference Amount": Any amount previously distributed to a Class A Certificateholder that is recoverable and sought to be recovered as a voidable preference by a trustee in bankruptcy pursuant to the United States Bankruptcy Code as amended from time to time, in accordance with a final nonappealable order of a court having competent jurisdiction. "Preference Claim": As defined in Section 6.02(f). "Premium Amount": The product of 1/12 of the Premium Percentage and the Certificate Principal Balance for the related Distribution Date. "Premium Percentage": With respect to any Group I Loan or Group II Loan, the fixed percentage per annum set forth in the Insurance Agreement. "Prepayment Interest Shortfall": With respect to any Distribution Date, for each Mortgage Loan that was the subject during the related Due Period of a Principal Prepayment in Full or Curtailment, an amount equal to (a) 30 days' interest on the Principal Balance of such Mortgage Loan at a per annum rate equal to the Mortgage Interest Rate (or at such lower rate as may be in effect for such Mortgage Loan pursuant to application of the Civil Relief Act, any Deficient Valuation and/or any Debt Service Reduction) minus the rate at which the Servicing Fee is calculated minus (b) the amount of interest actually remitted by the Mortgagor in -35- connection with such Principal Prepayment in Full or Curtailment less the Servicing Fee for such Mortgage Loan in such month. "Principal Balance": As to any Mortgage Loan and Distribution Date, the principal balance of such Mortgage Loan as of the Due Date preceding such date of determination as specified for such Due Date in the amortization schedule (before any adjustment to such amortization schedule by reason of any bankruptcy (other than Deficient Valuations) or similar proceeding or any moratorium or similar waiver or grace period) after giving effect to Principal Prepayments in Full or Curtailments received prior to such Due Date, Deficient Valuations incurred prior to such Due Date, to any Curtailments applied by the Servicer in reduction of the unpaid principal balance of such Mortgage Loan as of such Due Date and to the payment of principal due on such Due Date and irrespective of any delinquency in payment by the related Mortgagor. The Principal Balance of a Mortgage Loan which becomes a Liquidated Mortgage Loan prior to such Due Date shall be zero. "Principal Prepayment in Full": Any payment or other recovery of principal on a Mortgage Loan equal to the outstanding principal balance thereof, received in advance of the final scheduled Due Date which is not intended as an advance payment of a scheduled Monthly Payment. "Purchase Price": With respect to any Mortgage Loan required to be purchased on any date pursuant to Section 2.02, 3.01, 5.17 or 11.01, an amount equal to the sum of (a) 100% of the Principal Balance thereof, (b) unpaid accrued interest at the Mortgage Rate thereon from the Due Date on which interest was lade paid by the Mortgagor or Advanced by the Servicer to the Due Date next following the date of repurchase and (c) the aggregate of any unreimbursed Advances. "Qualified Mortgage": "Qualified Mortgage" shall have the meaning set forth from time to time in the definition thereof at Section 860(G)(a)(3) of the Code (or any successor statute thereto). "Qualified Substitute Mortgage Loan": A mortgage loan or mortgage loans substituted for a Deleted Mortgage Loan pursuant to Section 2.02 or 3.05 hereof, which (a)(i) with respect to a Group I Loan, has or have the same interest rate index, a margin over such index and a maximum interest rate at least equal to those applicable to the Deleted Mortgage Loan and (ii) with respect to a Group II Loan, has the same or greater interest rate, (b) relates or -36- relate to a detached one-family residence or to the same type of Residential Dwelling as the Deleted Mortgage Loan and in each case has or have the same or a better lien priority as the Deleted Mortgage Loan and has the same occupancy status or is an Owner Occupied Mortgaged Property, (c) matures or mature no later than (and not more than one year earlier than) the Deleted Mortgage Loan (except during the first 90 days after the Cut-Off Date), (d) has or have a Loan-to-Value Ratio or Loan-to-Value Ratios (or Combined Loan-to-Value Ratio or Combined Loan-to-Value Ratios, with respect to a Second Mortgage Loan) at the time of such substitution no higher than the Loan-to-Value Ratio (or Combined Loan-to-Value Ratio, with respect to a Second Mortgage Loan) of the Deleted Mortgage Loan, (e) has or have a principal balance or principal balances (after application of all payments received on or prior to the date of substitution) not substantially less and not more than the Principal Balance of the Deleted Mortgage Loan as of such date, (f) satisfies or satisfy the criteria set forth from time to time in the definition of "qualified replacement mortgage" at Section 860G(a)(4) of the Code (or any successor statute thereto) and (g) complies or comply as of the date of substitution with each representation and warranty set forth in Section 3.01(b). "Rate Adjustment Date": The date on which the Mortgage Interest Rate is adjusted with respect to each Group I Loan. The first Rate Adjustment Date for each Group I Loan is set forth on the Mortgage Loan Schedule. "Rating Agency": S&P, DCR or Moody's. "Record Date": With respect to any Distribution Date, the close of business on the last Business Day of the month immediately preceding the month of such Distribution Date. "Reference Banks": ____________________, ____________________ and ___________________; provided that if any of the foregoing banks are not suitable to serve as a Reference Bank, then any leading banks selected by the Trustee which are engaged in transactions in Eurodollar deposits in the international Eurocurrency market (i) with an established place of business in London, (ii) not controlling, under the control of or under common control with the Company or any affiliate thereof, (iii) whose quotations appear on the Reuters Screen LIBO Page on the relevant Interest Determination Date and (iv) which have been designated as such by the Certificate Administrator. -37- "REMIC": A "real estate mortgage investment conduit" within the meaning of Section 860D of the Code. "REMIC Provisions": Provisions of the federal income tax law relating to real estate mortgage investment conduits, which appear at Sections 860A through 86OG of Subchapter M of Chapter I of the Code, and related provisions, and temporary and final regulations promulgated thereunder and published rulings, notices and announcements, as the foregoing may be in effect from time to time. "Remittance Report": As defined in Section 6.04. "REO Acquisition": The acquisition of any REO Property pursuant to Section 5.11. "REO Disposition": The final sale by the Servicer of a Mortgaged Property acquired by the Servicer in foreclosure or by deed in lieu of foreclosure. "REO Mortgage Loan": Any Mortgage Loan which is not a Liquidated Mortgage Loan and as to which the indebtedness evidenced by the related Mortgage Note is discharged and the related Mortgaged Property is held as part of the Trust Fund. "REO Proceeds": Proceeds received in respect of any REO Mortgage Loan ('including, without limitations, proceeds from the rental of the related Mortgaged Property). "REO Property": As described in Section 5.11. "Representation Letter": Letters to, or agreements with, the Depository to effectuate a book entry system with respect to the Class A Certificates registered in the Certificate Register under the nominee name of the Depository. "Request for Release": A request for release in substantially the form attached as Exhibit H hereto. "Reserve Interest Rate": With respect to any Interest Determination Date, the rate per annum that the Certificate Administrator determines to be either (i) the arithmetic mean (rounded upwards if necessary to the nearest whole multiple of 1/16%) of the three-month United -38- States dollar lending rates which New York City banks selected by the Certificate Administrator are quoting on the relevant Interest Determination Date to the principal London offices of leading banks in the London interbank market or (ii) in the event that the Certificate Administrator can determine no such arithmetic mean, the lowest three-month United States dollar lending rate which New York City banks selected by the Certificate Administrator are quoting on such Interest Determination Date to leading European banks. "Residential Dwelling": A one- to four-family dwelling, a unit in a planned unit development, a unit in a condominium development, a townhouse or a manufactured housing unit which is non-mobile. "Residual Interest": The Interest of the Trust Fund represented by: (i) the amounts, if any, remaining in the Certificate Account following the termination of the Trust Fund after payments to the Class A and Class S Certificateholders and (ii) all other amounts distributable to the Class R Certificates pursuant to this Agreement. The Residual Interest is represented by the Class R Certificates. "Responsible Officer": When used with respect to the Trustee, any officer assigned to the Corporate Trust Division (or any successor thereto), including any Vice President, Senior Trust Officer, Trust Officer, Assistant Trust Officer, 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 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. When used with respect to the Seller, the Certificate Administrator or the Servicer, the President or any Vice President, Assistant Vice President, or any Secretary or Assistant Secretary. "Sale Agreement": The Mortgage Loan Sale Agreement, dated as of the date hereof, between the Seller and the Company relating to the sale of the Mortgage Loans to the Company. "S&P": Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. or any successor thereto. "Second Mortgage Loan": Any Mortgage Loan secured by a second lien on the related Mortgaged Property. -39- "Seller": Chase Manhattan Mortgage Corporation, or its successor. "Senior Mortgage Loan": With respect to any Second Mortgage Loan, a mortgage loan on the related Mortgaged Property that is senior to the lien provided by such Second Mortgage Loan. "Servicer": [Advanta Mortgage Corp. USA,] a Delaware corporation, or any successor appointed as herein provided. "Servicer Remittance Amount": With respect to any Servicer Remittance Date and each Loan Group, an amount equal to the sum of (i) all unscheduled collections of principal and interest on the Mortgage Loans in the related Loan Group (including Principal Prepayments in Full and Curtailments, Net REO Proceeds and Net Liquidation Proceeds, if any) collected by the Servicer during the prior calendar month and all scheduled Monthly Payments due on the related Due Date and received on or prior to the Business Day preceding such Servicer Remittance Date, (ii) all Periodic Advances made by the Servicer with respect to payments due to be received on the Mortgage Loans in the related Loan Group on the related Due Date and (iii) any other amounts required to be placed in the Collection Account by the Servicer pursuant to this Agreement but excluding the following: (a) amounts received on particular Mortgage Loans as late payments of principal or interest and respecting which the Servicer has previously made an unreimbursed Periodic Advance; (b) those portions of each payment of interest on a particular Mortgage Loan which represent the Servicing Fee; (c) that portion of Liquidation Proceeds and REO Proceeds which represents any unpaid Servicing Fee; (d) all income from Permitted Investments that is held in the Collection Account for the account of the Servicer; (e) all amounts in respect of late fees, assumption fees, prepayment fees and similar fees; -40- (f) certain other amounts which are reimbursable to the Servicer, as provided in this Agreement; and (g) Net Foreclosure Profits. "Servicer Remittance Date": With respect to any Distribution Date, the [18th] of the month in which such Distribution Date occurs, or if such [18th] day is not a Business Day, the Business Day preceding such [18th] day. "Servicing Account": The account created and maintained pursuant to Section 5.09. "Servicing Advances": All reasonable and customary "out-of-pocket" costs and expenses relating to a borrower default or delinquency or other unanticipated event incur-red by the Servicer in the performance of its servicing obligations, including, but not limited to, the cost of (a) the preservation, restoration and protection of the Mortgaged Property including, without limitation, taxes and insurance costs, (b) any enforcement or judicial proceedings, including foreclosures, (c) the management and liquidation of the REO Property, including reasonable fees paid to any independent contractor in connection therewith, (d) compliance with the obligations under Sections 5.02 (limited solely to the reasonable and customary out-of-pocket expenses of the subservicer), 5.05, 5.07 or 5.09, all of which reasonable and customary out-of-pocket costs and expenses are reimbursable to the Servicer to the extent provided in Section 5.04(a). "Servicing Compensation": The Servicing Fee and other amounts to which the Servicer is entitled pursuant to Section 5.13. "Servicing Fee": As to each Mortgage Loan, the annual fee payable to the Servicer and the related Subservicer, if any, as indicated on the related Mortgage Loan Schedule. Such fee shall not be in excess of ____% per annum. Such fee shall be calculated and payable monthly only from the amounts received in respect of interest on such Mortgage Loan and shall be computed on the basis of the same principal amount and for the period respecting which any related interest payment on a Mortgage Loan is computed. The Servicing Fee includes any servicing fees owed or payable to any Subservicer. "Servicing Officer": Any officer of the Servicer involved in, or responsible for, the administration and servicing of the Mortgage Loans whose name and specimen signature -41- appear on a list of servicing officers furnished to the Trustee and the Certificate Insurer by the Servicer, as such list may from time to time be amended. "Startup Day": The day designated as such pursuant to Section 2.04(a) hereof. "Subservicer": Any Person with whom the Servicer has entered into a Subservicing Agreement and who satisfies the requirements set forth in Section 5.02(a) hereof in respect of the qualification of a Subservicer. "Subservicing Agreement": Any agreement between the Servicer and any Subservicer relating to subservicing and/or administration of certain Mortgage Loans as provided in Section 5.02, a copy of which shall be delivered, along with any modifications thereto, to the Trustee and the Certificate Insurer. "Substitution Adjustment": As to any date on which a substitution occurs pursuant to Section 2.02 or 3.05, the amount (if any) by which the aggregate principal balances (after application of principal payments received on or before the date of substitution of any Qualified Substitute Mortgage Loans as of the date of substitution), are less than the aggregate of the Principal Balances of the related Deleted Mortgage Loans. "Tax Return": The federal income tax return on Internal Revenue Service Form 1066, "U.S. Real Estate Mortgage Investment Conduit Income Tax Return," including Schedule Q thereto, Quarterly Notice to Residual Interest Holders of REMIC Taxable Income or Net Loss Allocation, or any successor forms, to be filed on behalf of the Trust Fund due to its classification as a REMIC under the REMIC Provisions, together with any and all other information reports or returns that may be required to be furnished to the Certificateholders or filed with the Internal Revenue Service or any other governmental taxing authority under any applicable provision of federal, state or local tax laws in connection with the Trust Fund. "Transfer": Any direct or indirect transfer, sale, pledge, hypothecation or other form of assignment of any Ownership Interest in a Certificate. "Transferee": Any Person who is acquiring by Transfer any Ownership Interest in a Certificate. -42- "Transferor": Any Person who is disposing by Transfer any Ownership Interest in a Certificate. "Trustee": _____________________, or its successor in interest, or any successor trustee appointed as herein provided. "Trust Fund": The segregated pool of assets subject hereto, constituting the trust created hereby and to be administered hereunder, consisting of: (a) such Mortgage Loans as from time to time are subject to this Agreement, together with the Mortgage Files relating thereto and all collections thereon and proceeds thereof after the Cut-off Date, (b) such assets as from time to time are identified as deposited in the Certificate Accounts, (c) such assets as from time to time are identified as REO Property and collections thereon and proceeds thereof, assets that are deposited in the Accounts, including amounts on deposit in the Accounts and invested in Permitted Investments, (d) the Trustee's rights with respect to the Mortgage Loans under all insurance policies required to be maintained pursuant to this Agreement (including the Certificate Insurance Policy) and any Insurance Proceeds (and any proceeds of the Certificate Insurance Policy), (e) Liquidation Proceeds, (f) Released Mortgaged Property Proceeds and (g) the representations and warranties of the Seller pursuant to the Sale Agreement. "12 Month Loss Amount": With respect to any Distribution Date, an amount equal to the aggregate of all Liquidation Loan Losses on the Mortgage Loans which became Liquidated Mortgage Loans during the 12 preceding Due Periods. "UCC": The Uniform Commercial Code in effect in the applicable jurisdiction. "UCC Financing Statement": A financing statement executed and filed pursuant to the UCC. "Underwriter": ______________________. "Underwriting Guidelines": The underwriting guidelines of the Seller. "United States Person": A citizen or resident of the United States, a corporation, partnership or other entity created or organized in, or under the laws of, the United States or any political subdivision thereof, or an estate or trust whose income from sources without the United -43- 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. "Unpaid REO Amortization": As to any REO Mortgage Loan and any month, the aggregate of the installments of principal and accrued interest (adjusted to the related Net Mortgage Interest Rate) deemed to be due in such month and in any prior months that remain unpaid, calculated in accordance with Section 5.11. Section 1.02 Provisions of General Application. (a) All accounting terms not specifically defined herein shall be construed in accordance with GAAP. (b) The terms defined in this Article include the plural as well as the singular. (c) The words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole. All references to Articles and Sections shall be deemed to refer to Articles and Sections of this Agreement. (d) Reference to statutes are to be construed as including all statutory provisions consolidating, amending or replacing the statute to which reference is made and all regulations promulgated pursuant to such statutes. (e) All calculations of interest (other than with respect to the Mortgage Loans, or as otherwise specifically set forth herein) provided for herein shall be made on the basis of a 360-day year and the actual number of days elapsed in the related period. All calculations of interest with respect to any Mortgage Loan provided for herein shall be made in accordance with the terms of the related Mortgage Note and Mortgage or, if such documents do not specify the basis upon which interest accrues thereon, on the basis of a 360-day year and the actual number of days elapsed in the related period, to the extent permitted by applicable law. (f) Any Mortgage Loan payment is deemed to be received on the date such payment is actually received by the Servicer, provided, however, that for purposes of calculating distributions on the Certificates, prepayments with respect to any Mortgage Loan are deemed to be received on the date they are applied in accordance with customary servicing practices consistent with the terms of the related Mortgage Note and Mortgage to reduce the outstanding principal balance of such Mortgage Loan on which interest accrues. -44- ARTICLE II CONVEYANCE OF MORTGAGE LOANS; TRUST FUND Section 2.01. Conveyance of Mortgage Loans. The Company, concurrently with the execution and delivery hereof, does hereby sell, transfer, assign, set over and convey to the Trustee without recourse all the right, title and interest of the Company in and to the Mortgage Loans, including all interest and principal received on or with respect to the Mortgage Loans on or after the Cut-off Date (other than Monthly Payments due on the Mortgage Loans on or before the Cut-off Date). In connection with such assignment, the Company does hereby deliver to, and deposit with, the Trustee the Certificate Insurance Policy and each of the following documents or instruments with respect to each Mortgage Loan so assigned: (A)(I) Original Mortgage Note (or a lost note affidavit (including a copy of the original Mortgage Note)) or (II) original Consolidation, Extension and Modification Agreement (or a lost note affidavit (including a copy of the original Consolidation, Extension and Modification Agreement), in either case endorsed (by facsimile if so authorized by the Company), "Pay to the order of ___________________, as trustee, under that certain Pooling and Servicing Agreement dated as of [DATE] for Multi-Class Mortgage Pass-Through Certificates, Series ______ (Chase Funding, Inc.) without recourse" and signed in the name of the Seller by an authorized person and showing a complete chain of endorsement from the originator to the Seller. (B) Original (or a court-certified copy of the original) recorded Mortgage with evidence of recording thereon, or if such original has been delivered to the appropriate public recording office, a certified copy thereof certified true and complete by the Seller, with the original thereof with evidence of recording thereon to be delivered by the Company within 270 days of the Closing Date. (C) Original Assignment of Mortgage (or copy thereof) by the Seller or its agent in recordable form to "___________________, as trustee." Subject to the foregoing, such assignments may, if permitted by law, be by blanket assignments for Mortgage Loans covering Mortgaged Properties situated within the same county. If the -45- Assignment of Mortgage is in blanket form, a copy of the Assignment of Mortgage shall be included in the related individual Mortgage File. (D) Original (or a court-certified copy of the original) recorded Assignments of Mortgage (or copies thereof) showing a complete chain of assignment from the originator of the related Mortgage Loan to the Seller, and, if copies are delivered, with the original thereof with evidence of recording thereon to be delivered by the Company within 270 days of the Closing Date. (E) Originals (or lost note affidavit, including copies of the originals) of all assumption, consolidation and modification agreements, with evidence of recording thereon, to the extent required by applicable law, relating to the Mortgage or the Mortgage Note, if any, or, if such original has been delivered to the appropriate public recording office, a certified copy thereof certified true and complete by the applicable Seller, with the original thereof with evidence of recording thereon to be delivered by the Company within 270 days of the Closing Date. (F) The original title policy or, in the event such original title policy is unavailable, a certified true copy of the related policy binder or commitment for title certified true and complete by the title insurance policy company, with the original title policy to be delivered by the Company within 270 days of the Closing Date. (G) Copy of Primary Insurance Policy, if any. If in connection with any Mortgage Loan the Company cannot deliver the Mortgage, Assignments of Mortgage or assumption, consolidation or modification, as the case may be, with evidence of recording thereon concurrently with the execution and delivery of this Agreement, or within the 270 days permitted in (B), (D) and (E) above, solely because of a delay caused by the public recording office where such Mortgage, Assignments of Mortgage or assumption, consolidation or modification, as the case may be, has been delivered for recordation, the Company shall deliver or cause to be delivered to the Trustee written notice stating that such Mortgage, Assignments of Mortgage or assumption, consolidation or modification, as the case may be, has been delivered to the appropriate public recording office for recordation. Thereafter, the Seller shall cause to be delivered to the Trustee such Mortgage, Assignments of Mortgage or assumption, consolidation or modification, as the case may be, with evidence of recording indicated thereon upon receipt thereof from the public recording office. In -46- any event, the Seller shall use all reasonable efforts to cause each original Mortgage, Assignments of Mortgage or assumption, consolidation or modification, as the case may be, with evidence of recording thereon to be delivered to the Trustee within 300 days of the Closing Date. The Seller shall cause to be recorded in the appropriate public recording office for real property records each Assignment of Mortgage referred to in this Section 2.01 as soon as practicable. While each Assignment of Mortgage to be recorded is being recorded, the Seller shall deliver to the Trustee a photocopy of such document. If any such Assignment of Mortgage is returned unrecorded to the Seller because of any defect therein, the Seller shall cause such defect to be cured and such document to be recorded in accordance with this paragraph. The Seller shall deliver or cause to be delivered each original recorded Assignment of Mortgage and intermediate assignment to the Trustee within 270 days of the Closing Date or shall deliver to the Trustee on or before such date an Officer's Certificate stating that such document has been delivered to the appropriate public recording office for recordation, but has not been returned solely because of a delay caused by such recording office. In any event, the Seller shall use all reasonable efforts to cause each such document with evidence of recording thereon to be delivered to the Trustee within 300 days of the Closing Date. The ownership of each Mortgage Note, the Mortgage and the contents of the related Mortgage File is vested in the Trustee. Neither the Company nor the Servicer shall take any action inconsistent with such ownership and shall not claim any ownership interest therein. The Company and the Servicer shall respond to any third party inquiries with respect to ownership of the Mortgage Loans by stating that such ownership is held by the Trustee on behalf of the Certificateholders. Mortgage documents relating to the Mortgage Loans not delivered to the Trustee are and shall be held in trust by the Servicer or any Sub-Servicer, for the benefit of the Trustee as the owner thereof, and the Servicer's or such Sub-Servicer's possession of the contents of each Mortgage File so retained is for the sole purpose of servicing the related Mortgage Loan, and such retention and possession by the Servicer or such Sub-Servicer is in a custodial capacity only. The Company agrees to take no action inconsistent with the Trustee's ownership of the Mortgage Loans, to promptly indicate to all inquiring parties that the Mortgage Loans have been sold and to claim no ownership interest in the Mortgage Loans. Each Mortgage File and the mortgage documents relating to the Mortgage Loans contain proprietary business information of the Seller and its customers. The Trustee and the Servicer agree that they will not use such information for business purposes without the express written consent of the Seller and that all such information shall be kept strictly confidential. -47- It is the intention of this Agreement that the conveyance of the Company's right, title and interest in and to the Trust Fund pursuant to this Agreement shall constitute a purchase and sale and not a loan. If a conveyance of Mortgage Loans from the Seller to the Company is characterized as a pledge and not a sale, then the Company shall be deemed to have transferred to the Trustee all of the Company's right, title and interest in, to and under the obligations of the Seller deemed to be secured by said pledge; and it is the intention of this Agreement that the Company shall also be deemed to have granted to the Trustee a first priority security interest in all of the Company's right, title, and interest in, to and under the obligations of the Seller to the Company deemed to be secured by said pledge and that the Trustee shall be deemed to be an independent custodian for purposes of perfection of the security interest granted to the Company. If the conveyance of the Mortgage Loans from the Company to the Trustee is characterized as a pledge, it is the intention of this Agreement that this Agreement shall constitute a security agreement under applicable law, and that the Company shall be deemed to have granted to the Trustee a first priority security interest in all of the Company's right, title and interest in, to and under the Mortgage Loans, all payments of principal of or interest on such Mortgage Loans, all other rights relating to and payments made in respect of the Trust Fund, and all proceeds of any thereof. If the trust created by this Agreement terminates prior to the satisfaction of the claims of any Person in any Certificates, the security interest created hereby shall continue in full force and effect and the Trustee shall be deemed to be the collateral agent for the benefit of such Person. In addition to the conveyance made in the first paragraph of this Section 2.01, the Company does hereby convey, assign and set over to the Trustee all of its right, title and interest in that portion of the Trust Fund described in items (b), (c), (d), (e), (f) and (g) of the definition thereof and further assigns to the Trustee for the benefit of the Certificateholders those representations and warranties of the Seller contained in the Sale Agreement and described in Section 3.01 hereof and the benefit of the repurchase obligations of the Seller described in Sections 2.02 and 3.01 hereof and the obligations of the Seller contained in the Sale Agreement to take, at the request of the Company or the Trustee, all action on its part which is reasonably necessary to ensure the enforceability of a Mortgage Loan. Section 2.02 Acceptance by Trustee of the Trust Fund; Certain Substitutions; Certification by Trustee. (a) The Trustee agrees to execute and deliver to the Company, the Certificate Insurer, the Servicer, the Certificate Administrator and the Seller on or prior to the Closing Date an acknowledgment of receipt of the Certificate Insurance Policy and, with respect to each Mortgage Loan, on or prior to the Closing Date, an acknowledgment of receipt of the original Mortgage Note (with any exceptions noted), in the form attached as Exhibit E hereto and -48- declares that it will hold such documents and any amendments, replacements or supplements thereto, as well as any other assets included in the definition of Trust Fund and delivered to the Trustee, as Trustee in trust upon and subject to the conditions set forth herein for the benefit of the Certificateholders and the Certificate Insurer. The Trustee agrees, for the benefit of the Certificateholders and the Certificate Insurer, to review (or cause to be reviewed) each Mortgage File within __ Business Days after the Closing Date (with respect to the Mortgage Loans), and to deliver to the Seller, the Servicer, the Company, the Certificate Administrator and the Certificate Insurer a certification in the form attached hereto as Exhibit F to effect that, as to each Mortgage Loan listed in the related Mortgage Loan Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan specifically identified in such certification as not covered by such certification), (i) all documents required to be delivered to it pursuant to Section 2.01 are in its possession, (ii) each such document has been reviewed by it and has not been mutilated, damaged, torn or otherwise physically altered (handwritten additions, changes or corrections shall not constitute physical alteration if initialed by the Mortgagor), appears regular on its face and relates to such Mortgage Loan, and (iii) based on its examination and only as to the foregoing documents, the information set forth on the Mortgage Loan Schedule as to the information set forth in (i), (ii), (v), (vi), (x), (xi), (xiii), (xiv), (xv), (xx) and (xxii) of the definition of "Mortgage Loan Schedule" set forth herein accurately reflects the information set forth in the Mortgage File delivered on such date. The Trustee makes no representations as to and shall not be responsible to verify (i) the validity, legality, enforceability, sufficiency, due authorization, recordability or to verify genuineness of any of the documents contained in each Mortgage File or of any of the Mortgage Loans or (ii) the collectability, insurability, effectiveness or suitability of any such Mortgage Loan. By [DATE], the Trustee shall deliver (or cause to be delivered) to the Servicer, the Seller, the Company and the Certificate Insurer a final certification in the form attached hereto as Exhibit G to the effect that, as to each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan specifically identified in such certification as not covered by such certification), (1) all documents required to be delivered to it pursuant to Section 2.01 are in its possession, (ii) each such document has been reviewed by it and has not been mutilated, damaged, tom or otherwise physically altered (handwritten additions, changes or corrections shall not constitute physical alteration if initialed by the Mortgagor), appears regular on its face and relates to such Mortgage Loan, and (iii) based on its examination and only as to the foregoing documents, the information set forth in (i), (ii), (v), (vi), (x), (xi), (xiii), (xiv), (xv), (xx) and (xx) of the definition of "Mortgage Loan Schedule" set forth herein accurately reflects the information set forth in the Mortgage File delivered on such date. -49- (b) If the Certificate Insurer or the Trustee during the process of reviewing the Mortgage Files finds any document constituting a part of a Mortgage File which is not executed, has not been received, Is unrelated to the Mortgage Loan identified in the related Mortgage Loan Schedule, or does not conform to the requirements of Section 2.01 or the description thereof as set forth in the related Mortgage Loan Schedule, the Trustee or the Certificate Insurer, as applicable, shall promptly so notify the Servicer, the Seller, the Certificate Insurer, the Certificate Administrator and the Trustee. In performing any such review, the Trustee may conclusively rely on the Seller as to the purported genuineness of any such document and any signature thereon, It is understood that the scope of the Trustee's review of the Mortgage Files is limited solely to confirming that the documents listed in Section 2.01 have been executed and received and relate to the Mortgage Files identified in the related Mortgage Loan Schedule and such documents conform to the standard set forth in clause (ii) of the paragraph directly above. The Trustee shall request that the Seller cure any such defect within 60 days from the date on which the Seller was notified of such defect, and if the Seller does not cure such defect in all material respects during such period, request that the Seller (i) substitute in lieu of such Mortgage Loan a Qualified Substitute Mortgage Loan in the manner and subject to the conditions set forth in Section 3.05 or (ii) purchase such Mortgage Loan on the next succeeding Servicer Remittance Date at a purchase price equal to the Purchase Price, which purchase price shall be deposited in the Collection Account on the same Business Day, after deducting therefrom any amounts received in respect of such repurchased Mortgage Loan or Loans and being held in the Collection Account for future distribution to the extent such amounts have not yet been applied to principal or interest on such Mortgage Loan. It is understood and agreed that the obligation of the Seller to so cure, substitute for or purchase any Mortgage Loan as to which a material defect in or omission of a constituent document exists shall constitute the sole remedy respecting such defect or omission available to Certificateholders or the Trustee on behalf of Certificateholders. In addition, it is understood and agreed that the Company has assigned to the Trustee all of its rights under the Sale Agreement and the right to enforce any remedy against the Seller as provided in Section 2.01 of the Sale Agreement. For purposes of calculating the amount the Servicer is required to remit on the Servicer Remittance Date following such repurchase or substitution, any Purchase Price or Substitution Adjustment that is paid and deposited in the related Collection Account as provided above shall be deemed to have been deposited in the related Collection Account in the Due Period preceding such Servicer Remittance Date. (c) Upon receipt by the Trustee of a certification of a Servicing Officer of such substitution or purchase and, in the case of a substitution, upon receipt of the related Mortgage File, and the deposit of the amounts described above in the Collection Account (which -50- certification shall be in the form of Exhibit H hereto), the Trustee shall release to the Servicer for release to the Seller the related Mortgage File and shall execute, without recourse, and deliver such instruments of transfer furnished by the Seller as may be necessary to transfer such Mortgage Loan to the Seller. The Trustee shall notify the Certificate Insurer if the Seller fails to repurchase or substitute for a Mortgage Loan in accordance with the foregoing. Section 2.03. Trust Fund; Authentication of Certificates. The Trustee acknowledges and accepts the assignment to it of the Trust Fund created pursuant to this Agreement in trust for the use and benefit of all present and future Certificateholders. The Trustee acknowledges the assignment to it for the benefit of the Trust Fund of the Mortgage Loans and has caused to be authenticated and delivered to or upon the order of the Company, in exchange for the Mortgage Loans, Certificates duly authenticated by the Authenticating Agent in authorized denominations evidencing ownership of the entire Trust Fund. Section 2.04. REMIC Election. (a) The Company hereby instructs and authorizes the Trustee to make an appropriate election to treat the Trust Fund as a REMIC. This Agreement shall be construed so as to carry out the intention of the parties that the Trust Fund be treated as a REMIC at all times prior to the date on which the Trust Fund is terminated. The Closing Date is hereby designated as the "startup day" of the REMIC within the meaning of Section 860G(a)(9) of the Code. The "regular interests" (within the meaning of Section 860G(a)(1) of the Code) in the REMIC shall consist of the Class A Certificates and the Class S Certificates and the "residual interest" (within the meaning of Section 860G(a)(2) of the Code) in the REMIC shall consist of the Residual Interest, and all such interests shall be designated as such on the startup day. (b) The principal amount of the regular interests in the REMIC is equal to the sum of the aggregate Original Certificate Principal Balance of the Class A and Class S Certificates. (c) Solely for the purposes of Section 1.860G-1(a)(4)(iii) of the Treasury regulations, the "latest possible maturity date" of any regular interest in the REMIC is [DATE], which is the Remittance Date immediately following the latest scheduled maturity of any Mortgage Loan. -51- ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE MASTER SERVICER; REPURCHASE OF MORTGAGE LOANS Section 3.01. Representations and Warranties of the Company with respect to the Mortgage Loans. The Company hereby represents and warrants to the Trustee and the Certificate Insurer that on the Closing Date it has entered into the Purchase Agreement with respect to the Mortgage Loans with the Seller, that the Seller has made the following representations and warranties in such Purchase Agreement as of the Closing Date, which representations and warranties run to and are for the benefit of the Company and the Trustee, and as to which the Company has assigned to the Trustee, pursuant to Section 2.01 hereof, the right to cause the Seller to repurchase a Mortgage Loan as to which there has occurred an uncured breach of representations and warranties in accordance with the provisions of the Sale Agreement. References in this Section to percentages of Mortgage Loans refer in each case to the percentage of the aggregate principal balance of the Mortgage Loans as of the Cut-off Date, based on the outstanding balances of the Mortgage Loans as of the Cut-off Date, and giving effect to scheduled Monthly Payments due on or prior to the Cut-off Date, whether or not received. References to percentages of Mortgaged Properties refer, in each case, to the percentages of expected aggregate principal balances of the related Mortgage Loans (determined as described in the preceding sentence). (a) With respect to the Seller: (i) The Seller is a corporation validly existing and in good standing under the laws of the State of New York; (ii) The Seller has the full power and authority to hold each Mortgage Loan, to sell each Mortgage Loan and to execute, deliver and perform, and to enter into and consummate all transactions contemplated by the Purchase Agreement and to conduct its business as presently conducted, has duly authorized the execution, delivery and performance of the Purchase Agreement, has duly executed and delivered the Purchase Agreement, and the Purchase Agreement and each Assignment of Mortgage to the Company constitutes a legal, valid and binding obligation of the Seller, enforceable against it in accordance with its terms; -52- (iii) None of the execution and delivery of the Purchase Agreement, the acquisition of the Mortgage Loans by the Seller, the sale of the Mortgage Loans to the Company, the consummation of the transactions contemplated thereby or the fulfillment of or compliance with the terms and conditions of the Purchase Agreement will conflict with any of the terms, conditions or provisions of the Seller's charter or by-laws or materially conflict with or result in a material breach of any of the terms, conditions or provisions of any legal restriction or any agreement or instrument to which the Seller is now a party or by which it is bound, or constitute a default or result in an acceleration under any of the foregoing, or result in the material violation of any law, rule, regulation, order, judgment or decree to which the Seller or its property is subject; (iv) Each Mortgage Note, each Mortgage, each Assignment of Mortgage and any other documents required pursuant to the Purchase Agreement to be delivered to the Company or its assignee for each Mortgage Loan have been, on or before the Closing Date, delivered to the Company or its assignee, except for such documents as are noted in the Exception Report; (v) There is no litigation pending or threatened with respect to the Seller which is reasonably likely to have a material adverse effect on the sale of the Mortgage Loans or which is reasonably likely to have a material adverse effect on the financial condition of the Seller; (vi) No consent, approval, authorization or order of any court or governmental agency or body is required for the execution, delivery and performance by the Seller of or compliance by the Seller with the Purchase Agreement, the sale of the Mortgage Loans or the consummation of the transactions contemplated by the Purchase Agreement except for consents, approvals, authorizations and orders which have been obtained; (vii) The consummation of the transactions contemplated by the Purchase Agreement is in the ordinary course of business of the Seller, and the transfer, assignment and conveyance of the Mortgage Notes and the Mortgages by the Seller pursuant to the Purchase Agreement are not subject to bulk transfer or any similar statutory provisions in effect in any applicable jurisdiction; -53- (viii) The origination and collection practices used by the Seller with respect to each Mortgage Note and Mortgage have been in all material respects legal, proper and prudent in the mortgage origination and servicing business. With respect to escrow deposits and payments that the Seller collects, all such payments are in the possession of, or under the control of, the Seller, and there exist no deficiencies in connection therewith for which customary arrangements for repayment thereof have not been made. No escrow deposits or other charges or payments due under the Mortgage Note have been capitalized under any Mortgage or the related Mortgage Note; and (ix) The Seller will treat the sale of the Mortgage Loans to the Company as a sale for reporting and accounting purposes and, to the extent appropriate, for federal income tax purposes. (b) With respect to the Mortgage Loans: (i) The information set forth in the Mortgage Loan Schedule is complete, true and correct; (ii) Unless otherwise specified on the Mortgage Loan Schedule, no Monthly Payment required under the Mortgage Loan has been delinquent for more than 30 days more than once in the 12 months preceding the Closing Date; as of the Closing Date, no more than approximately ____% and ____% of the Group I and Group II Mortgage Loans, respectively will be 30-59 days delinquent in payment of principal or interest; and as of the Closing Date, [no] Mortgage Loan is sixty (60) or more days delinquent in payment of principal or interest; (iii) There are no defaults in complying with the terms of the Mortgage, and all taxes, governmental assessments, insurance premiums, water, sewer and municipal charges, leasehold payments or ground rents which previously became due and owing have been paid, or an escrow of funds has been established in an amount sufficient to pay for every such item which remains unpaid and which has been assessed but is not yet due and payable, except that the Mortgage Loans may be delinquent by 30 days or less. The Seller has not advanced funds, or induced, solicited or knowingly received any advance of funds by a party other than the Mortgagor, directly or indirectly, for the payment of any amount required under -54- the Mortgage Loan, except for interest accruing from the date of the Mortgage Note or date of disbursement of the Mortgage Loan proceeds, whichever is earlier, to the day which precedes by one month the Due Date of the first Monthly Payment; (iv) The terms of the Mortgage Note and Mortgage have not been impaired, waived, altered or modified in any respect, except by a written instrument which has been recorded, if necessary, to protect the interests of the Trustee on behalf of the Certificateholders and the Certificate Insurer and which has been delivered to the Trustee. The substance of any such waiver, alteration or modification has been approved by the title insurer, to the extent required by the policy, and its terms are reflected on the Mortgage Loan Schedule. No Mortgagor has been released, in whole or in part, except in connection with an assumption agreement approved by the title insurer, to the extent required by the policy, and which assumption agreement is part of the Mortgage File delivered to the Trustee and the terms of which are reflected in the Mortgage Loan Schedule; (v) The Mortgage Loan is not subject to any right of rescission, set-off, counterclaim or defense, including, without limitation, the defense of usury, nor will the operation of any of the terms of the Mortgage Note or the Mortgage, or the exercise of any right thereunder, render either the Mortgage Note or the Mortgage unenforceable, in whole or in part, or subject to any right of rescission, set-off, recoupment, counterclaim or defense, including, without limitation, the defense of usury, and no such right of rescission, set-off, recoupment, counterclaim or defense has been asserted with respect thereto, and no Mortgagor was a debtor in any state or federal bankruptcy or insolvency proceeding at the time the Mortgage Loan was originated; (vi) Pursuant to the terms of the Mortgage, all improvements upon the Mortgaged Property are insured by an insurer acceptable to FNMA against loss by fire and such other risks as are usually insured against in the broad form of extended coverage hazard insurance available in the locale where the Mortgaged Property is located, including flood hazards if upon origination of the Mortgage Loan, the Mortgaged Property was in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards (and if flood insurance was required by federal regulation and such flood -55- insurance has been made available in the locate where the Mortgaged Property is located). All such insurance policies (collectively, the "hazard insurance policy") meet the requirements of the current guidelines of the Federal Insurance Administration, conform to the requirements of the FNMA Sellers' Guide and the FNMA Servicers' Guide, and are a standard policy of insurance for the locale where the Mortgaged Property is located. The amount of the hazard insurance is at least in the amount of the maximum amount available under federal law in the locale where the Mortgaged Property is located and the unpaid balance of the Mortgage Loan, whichever is less. The hazard insurance policy names (and will name) the Mortgagor as the insured and contains a standard mortgagee loss payable clause in favor of the original seller, and its successors and assigns. The Mortgage obligates the Mortgagor thereunder to maintain the hazard insurance policy at the Mortgagor's cost and expense, and on the Mortgagor's failure to do so, authorizes the holder of the Mortgage to obtain and maintain such insurance at such Mortgagor's cost and expense, and to seek reimbursement therefor from the Mortgagor. Where required by state law or regulation, the Mortgagor has been given an opportunity to choose the carrier of the required hazard insurance, provided the policy is not a "master" or "blanket" hazard insurance policy covering a condominium or the common facilities of a planned unit development. The hazard insurance policy is the valid and binding obligation of the insurer, is in full force and effect, and will be in full force and effect and inure to the benefit of the Trustee upon the consummation of the transactions contemplated by this Agreement. The Seller has not engaged in, and has no knowledge of the Mortgagor's or any subservicer's having engaged in, any act or omission which would impair the coverage of any such policy, the benefits of the endorsement provided for herein, or the validity and binding effect of either. In connection with the issuance of the hazard insurance policy, no unlawful fee, commission, kickback or other unlawful compensation or value of any kind has been or will be received, retained or realized by any attorney, firm or other person or entity to the Seller's knowledge, and no such unlawful items have been received, retained or realized by the Seller; (vii) Any and all requirements of any federal, state or local law, including, without limitation, usury, truth-in-lending, real estate settlement procedures, consumer credit protection, equal credit opportunity or disclosure laws applicable to the Mortgage Loan have been complied with and the -56- consummation of the transactions contemplated hereby will not involve the violation of any such laws; (viii) The Mortgage has not been satisfied, canceled, subordinated or rescinded, in whole or in part, and the Mortgaged Property has not been released from the lien of the Mortgage, in whole or in part, nor has any instrument been executed that would effect any such release, cancellation, subordination or rescission. The Seller has not waived the performance by the Mortgagor of any action, if the Mortgagor's failure to perform such action would cause the Mortgage Loan to be in default, nor has the Seller waived any default resulting from any action or inaction by the Mortgagor; (ix) The Mortgaged Property is located in the state identified in the Mortgage Loan Schedule and consists of a single parcel of real property with a detached single family residence erected thereon, or a two- to four-family dwelling, or an individual condominium unit in a low-rise or high-rise condominium project, or an individual unit in a planned unit development or a manufactured dwelling (non-mobile); provided, however, that no more than ____% and ____% of the Group I and Group II Loans, respectively, are secured by condominiums, townhouses or planned unit developments and, provided, however, that any manufactured home meets the requirements of Section 25(e)(10) of the Internal Revenue Code of 1986 by having a minimum of 400 square feet of living space and a minimum width in excess of 102 inches and is of a kind customarily used in a fixed location. No more than _____% and ____% of the Group I and Group II Loans, respectively, are secured by investor-owned properties. The Mortgaged Property is either a fee simple estate or a long-term residential lease. If the Mortgage Loan is secured by a long-term residential lease, (1) the terms of such lease expressly permit the mortgaging of the leasehold estate, the assignment of the lease without the lessor's consent and the acquisition by the holder of the Mortgage of the rights of the lessee upon foreclosure or assignment in lieu of foreclosure or provide the holder of the Mortgage with substantially similar protections; (2) the terms of such lease do not (A) allow the termination thereof upon the lessee's default without the holder of the Mortgage being entitled to receive written notice of, and opportunity to cure, such default, (B) allow the termination of the lease in the event of damage or destruction as long as the Mortgage is in existence or (C) prohibit the holder of the Mortgage -57- from being insured under the hazard insurance policy relating to the Mortgaged Property; (3) the original term of such lease is not less than 15 years; (4) the term of such lease (including any term for which such lease may be renewed) does not terminate earlier than five years after the maturity date of the Mortgage Note; and (5) the Mortgaged Property is located in a jurisdiction in which the use of leasehold estates for residential properties is an accepted practice; (x) The Mortgage is a valid, subsisting, enforceable and perfected first lien or second lien on the Mortgaged Property, including all buildings on the Mortgaged Property and all installations and mechanical, electrical, plumbing, hearing and air conditioning systems located in or annexed to such buildings, and all additions, alterations and replacements made at any time with respect to the foregoing. The lien of the Mortgage is subject only to: (1) The lien of current real property taxes and assessments not yet due and payable; (2) covenants, conditions and restrictions, rights of way, easements and other matters of the public record as of the date of recording acceptable to prudent mortgage lending institutions generally and specifically referred to in the lender's title insurance policy delivered to the originator of the Mortgage Loan and referred to or otherwise considered in the appraisal made for the originator of the Mortgage Loan; and (3) other matters to which like properties are commonly subject which do not materially interfere with the benefits of the security intended to be provided by the Mortgage or the use, enjoyment, value or marketability of the related Mortgaged Property as a residential property. Any security agreement, chattel mortgage or equivalent document related to and delivered in connection with the Mortgage Loan establishes and creates a valid, subsisting and enforceable first lien or second lien and first or second priority security interest on the collateral described therein and the Seller has full right to sell and assign the same to the Company. The Mortgaged Property was not, as of the date of origination of the Mortgage Loan, subject to a mortgage, deed of trust, -58- deed to secure debt or other security instrument creating a lien subordinate to the lien of the Mortgage; (xi) The Mortgage Note and the Mortgage and every other agreement, if any, executed and delivered by the Mortgagor in connection with the Mortgage Loan are genuine, and each is the legal, valid and binding obligation of the maker thereof enforceable in accordance with its terms. All parties to the Mortgage Note and the Mortgage and any other related agreement had legal capacity to enter into the Mortgage Loan and to execute and deliver the Mortgage Note, the Mortgage and such other related agreements, and the Mortgage Note and the Mortgage and such other related agreements have been duly and properly executed by such parties; (xii) The Mortgage Loan has been closed and the proceeds of the Mortgage Loan have been fully disbursed and there is no requirement for future advances thereunder, and any and all requirements as to completion of any on-site or off-site improvement and as to disbursements of any escrow funds therefor have been complied with. All costs, fees and expenses incurred in making or closing the Mortgagee Loan and the recording of the Mortgage were paid, and the Mortgagor is not entitled to any refund of any amounts paid or due under the Mortgage Note or Mortgage; (xiii) Immediately prior to the sale of the Mortgage Loan to the Company under this Agreement, (1) the Seller was the sole owner an holder of the Mortgage Loan, (2) the Mortgage Loan was not assigned or pledged, (3) the Seller had good, indefeasible and marketable title thereto, (4) the Seller had full right to transfer and sell the Mortgage Loan to the Company free and clear of any encumbrance, equity interest, participation interest, lien, pledge, charge, claim or security interest, and (5) the Seller had full right and authority subject to no interest or participation of, or agreement with, any other party, to sell and assign each Mortgage Loan to the Company under this Agreement, and following the sale of each Mortgage Loan, the Company will own such Mortgage Loan free and clear of any encumbrance, equity interest, participation interest, lien, pledge, charge, claim or security interest; -59- (xiv) All parties which had any interest in the Mortgage Loan, whether as mortgagee, assignee, pledgee or otherwise, and including, without limitation, the Seller, to the best knowledge of the Seller, are (or, during the period in which they held and disposed of such interest, were) (1) in compliance with any and all applicable licensing requirements of the laws of the state wherein the Mortgaged Property is located and (2)(a) organized under the laws of such state, or (b) qualified to do business in such state, or (c) federal savings and loan associations, savings banks, or national banks having principal offices in such state, or (d) not doing business in such state; (xv) The Group I Loans have an original LTV equal to or less than 90.00% and the Group II Loans have an original LTV (or Combined Loan-to- Value Ratio in the case of Second Mortgage Loans) equal to or less than 95.00%; (xvi) The Mortgage Loan is covered by either (i) an attorney's opinion of title and abstract of title the form and stance of which is acceptable to FNMA or (ii) an ALTA lender's title insurance policy or other generally acceptable form of policy of insurance issued by a title insurer qualified to do business in the jurisdiction where the Mortgaged Property is located, or a commitment or binder to issue such a policy insuring the Seller, its successors and assigns, as to the first priority lien or second priority lien of the Mortgage in the original principal amount of the Mortgage Loan, and subject only to the exceptions contained in clauses (1), (2) and (3) of paragraph (j) above and against any loss by reason of the invalidity or unenforceability of the lien resulting from the provisions of the Mortgage providing for adjustment in the Mortgage Interest Rate and Monthly Payment. Where required by state law or regulation, the Mortgagor has been given the opportunity to choose the carrier of the required mortgage title insurance. Additionally, such lender's title insurance policy affirmatively insured ingress and egress, and against encroachments by or upon the Mortgaged Property or any interest therein. Immediately prior to the sale of the Mortgage Loan to the Company under the terms of this Agreement, the Seller, its successors and assigns were the sole insureds of such lender's title policy. Such lender's title insurance policy is in full force and effect and will be in force and effect upon the consummation of the transactions contemplated by this Agreement. No claims have been made under such lender's title insurance policy, and no prior holder of the Mortgage, including the Seller, has done, by act or omission, anything which -60- would impair the coverage of such lender's title insurance policy. In connection with the issuance of such lender's title insurance policy, no unlawful fee, commission, kickback or other unlawful compensation or value of any kind has been or will be received, retained or realized by any attorney, firm or other person or entity to the knowledge of the Seller, and no such unlawful items have been received, retained or realized by the Seller; (xvii) There is no default, breach, violation or event of acceleration existing under the Mortgage or the Mortgage Note and no event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration, and neither the Seller nor its predecessors have waived any default, breach, violation or event of acceleration, except that the Mortgage Loans may be delinquent by 30 days or less; (xviii) To the Seller's knowledge, there are no mechanics' or similar liens or claims which have been filed for work, labor or material (and no rights are outstanding that under the law could give rise to such liens) affecting the related Mortgaged Property which are or may be liens prior to, or equal or coordinate with, the lien of the related Mortgage; (xix) All improvements which were considered in determining the Appraised Value of the Mortgaged Property lay wholly within the boundaries and building restriction lines of the Mortgaged Property and no improvements on adjoining properties encroach upon the Mortgaged Property. No improvement located on or being part of the Mortgaged Property is in violation of any applicable zoning law or regulation; provided, that in no event shall a legal nonconforming use of the Mortgaged Property be considered a violation of any such zoning law or regulation; (xx) The Mortgage Interest Rate and Monthly Payment are adjusted in accordance with the terms of the Mortgage Note. All required notices of interest rate and payment amount adjustments have been sent to the Mortgagor on a timely basis and the computations of such adjustments were properly calculated. Installments of interest are subject to change due to the adjustments to the Mortgage Interest Rate on each Rate Adjustment Date, with interest calculated -61- and payable in arrears and on each Rate Adjustment Date the Monthly Payment will be adjusted to an amount, and pay interest at the Mortgage Interest Rate as so adjusted, sufficient to amortize the Mortgage Loan fully by the stated maturity date (except with respect to __ Mortgage Loans, representing approximately ____% of the Cut-Off Date Aggregate Principal Balance of the Group II Loans, which are balloon loans). All Mortgage Interest Rate adjustments have been made in strict compliance with state and federal law and the terms of the related Mortgage Note. Unless otherwise specified in the Mortgage Loan Schedule, any interest required to be paid by a Mortgagor pursuant to state and local law has been properly paid and credited; (xxi) The Mortgage contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the Mortgaged Property of the benefits of the security provided thereby, including, (A) in the case of a Mortgage designated as a deed of trust, by trustee's sale, and (B) otherwise by judicial foreclosure. There is no homestead or other exemption available to the Mortgagor which would interfere with the right to sell the Mortgaged Property at a trustee's sale or the right to foreclose the Mortgage subject to applicable federal and state laws and judicial precedent with respect to bankruptcy and right of redemption; (xxii) All inspections, licenses and certificates required to be made are issued with respect to the use and occupancy of all occupied portions of the Mortgaged Property and, with respect to the use and occupancy of the same, including, but not limited to, certificates of occupancy and fire underwriting certificates, have been made or obtained from the appropriate authorities; (xxiii) The Mortgage Note is not and has not been secured by any collateral except the lien of the corresponding Mortgage and the security interest of any applicable security agreement or chattel mortgage referred to in (x) above; (xxiv) In the event the Mortgage constitutes a deed of trust, a trustee, authorized and duly qualified under applicable law to serve as such, has been properly designated and currently so serves and is named in the Mortgage, and no fees or expenses are or will become payable by the Trustee to the trustee under the deed of trust, except in connection with a trustee's sale after default by the -62- Mortgagor, provided that this representation and warranty shall in no way obligate the Trustee to pay any such amounts; (xxv) The Mortgage Note, the Mortgage, the related assignment of Mortgage and any other documents required to be delivered by the Seller have been delivered to the Trustee as and to the extent required to be delivered by this Agreement; (xxvi) The Mortgage contains a provision for the acceleration of the payment of the unpaid principal balance of the Mortgage Loan in the event that the Mortgaged Property is sold or transferred without the prior written consent of the Mortgagee thereunder, at the option of the Mortgagee. This provision provides that the Mortgagee cannot exercise its option if the exercise of such option is prohibited by federal law; (xxvii) Each of the Mortgage and the assignment of Mortgage is in recordable form and is acceptable for recording under the laws of the jurisdiction in which the Mortgaged Property is located; (xxviii) The Mortgage Loan does not contain provisions pursuant to which Monthly Payments are paid or partially paid with funds deposited in any separate account established by the Seller, the Mortgagor or anyone on behalf of the Mortgagor, or paid by any source other than the Mortgagor, nor does it contain any other similar provisions currently in effect which may constitute a "buydown" provision. The Mortgage Loan is not a graduated payment mortgage loan and the Mortgage Loan does not have a shared appreciation or other contingent interest feature; (xxix) Any future advances made prior to the Cut-Off Date have been consolidated with the outstanding principal amount secured by the Mortgage, and the secured principal amount, as consolidated, bears a single interest rate and single repayment term. The lien of the Mortgage securing the consolidated principal amount is expressly insured as having first lien priority by a title insurance policy, an endorsement to the policy insuring the mortgagee's consolidated interest or by other title evidence acceptable to FNMA and FHLMC. -63- The consolidated principal amount does not exceed the original principal amount of the Mortgage Loan; (xxx) There is no proceeding pending or to the Seller's knowledge threatened for the total or partial condemnation of the Mortgaged Property. The Mortgaged Property is undamaged by waste, fire, earthquake or earth movement, windstorm, flood, tornado, other types of water damage or other casualty so as to materially adversely affect the value of the Mortgaged Property as security for the Mortgage Loan or the use for which the premises were intended and each Mortgaged Property is in good repair; (xxxi) The origination and collection practices used with respect to the Mortgage Loan have been in accordance with Accepted Servicing Practices, and in all respects in compliance with all applicable laws and regulations. With respect to escrow deposits and any escrow payments, all such payments collected are in the possession of the Servicer and there exist no deficiencies in connection therewith for which customary arrangements for repayment thereof have not bee made. All escrow payments have been collected in full compliance with state and federal law. Unless prohibited by applicable law, an escrow of funds has been established, if required, in an amount sufficient to pay for every item which remains unpaid and which has been assessed by is not yet due and payable. No escrow deposits or escrow payments or other charges or payments due with respect to the Mortgage Loans, other than origination points, fees and expenses, have been capitalized under the Mortgage or Mortgage Note; (xxxii) The Mortgage File contains an appraisal of the related Mortgage Property signed prior to the approval of the Mortgage Loan application by a Qualified Appraiser; (xxxiii) The Mortgagor has not notified the Seller, and the Seller has no knowledge, of any relief requested or allowed to the Mortgagor under the Soldiers' and Sailors' Civil Relief Act of 1940; (xxxiv) To the Seller's knowledge, there exists no violation of any local, state, or federal environmental law, rule or regulation in respect of the Mortgaged Property which violation has or could have a material adverse effect on the market -64- value of such Mortgaged Property. The Seller has no knowledge of any pending action or proceeding directly involving the related Mortgaged Property in which compliance with any environmental law, rule or regulation is in issue; and, to the best of the Seller's knowledge, nothing further remains to be done to satisfy in full all requirements of each such law, rule or regulation constituting a prerequisite to the use and employment of such Mortgaged Property; (xxxv) No Mortgage Loan was made in connection with (1) the construction or rehabilitation of a Mortgaged Property or (2) facilitating the trade-in or exchange of a Mortgaged Property; (xxxvi) Any and all requirements of any federal, state or local law, including, without limitation, usury, truth-in-lending, real estate settlement procedures, consumer credit protection, equal credit opportunity or disclosure laws, applicable to the Mortgage Loan have been complied with, and the Seller has and shall maintain in its possession, available for the Trustee's inspection, and shall deliver to the Trustee upon demand, evidence of compliance with all such requirements; (xxxvii) All information regarding the Mortgage Loans which could reasonably be expected to adversely affect the value or the marketability of any Mortgaged Property or Mortgage Loan and of which the Seller is aware has been provided by the Seller to the Company and the Certificate Insurer; (xxxviii) The Mortgage Note, the Mortgage and all other documents contained in the Mortgage File are on FNMA or FHLMC uniform instruments or are on forms acceptable to FNMA or FHLMC. The documents, instruments and agreements submitted for loan underwriting were not falsified by the Seller and contain no untrue statement of material fact by the Seller and do not omit to state a material fact required to be stated by the Seller therein or necessary to make the statements therein not misleading. The Seller has not made any representations to the Mortgagor that are inconsistent with the mortgage instruments used. The Mortgage Loans are representative of the Seller's portfolio of fixed rate or adjustable rate mortgage loans, and the Seller used no selection procedures that identified the Mortgage Loans as being less desirable or valuable than other comparable mortgage loans originated or acquired by the Seller; -65- (xxxix) All Monthly Payment amounts, with respect to the Mortgage Loan, received after the Cut-Off Date and to which the Seller is not entitled, have been deposited into the Certificate Account; (xl) To the Seller's knowledge there is no delinquent tax or assessment lien on the Mortgaged Property; (xli) The Seller has performed or directed the Servicer to perform any and all acts required to be performed to preserve the rights and remedies of the Trustee in any insurance policies applicable to the Mortgage Loan, including, without limitation, any necessary notification of insurers, assignments of policies or interests therein, and establishment of co-insurer, joint loan payer and mortgagee rights in favor of the Trustee; (xlii) The Mortgage Loan conforms, and all of the Mortgage Loans in the aggregate conform, to the description thereof set forth in the Prospectus Supplement, including Appendix C; (xliii) As of the Cut-Off Date, no more than approximately 1.53% and 0.96% of the Group I and Group II Loans, respectively, by aggregate principal balance as of the Cut-Off Date, will be secured by Mortgaged Properties located within any single zip code area; (xliv) Each Mortgage Loan constitutes a qualified mortgage under Section 860G(a)(3)(A) of the Internal Revenue Code of 1986 and Treasury Regulations Section 1.860G-2(a)(1); (xlv) With respect to each Mortgaged Property situated in the 39 counties of California which were declared federal disaster areas on March 21, 1995 due to flooding, none of the Mortgagors residing in such Mortgaged Properties have contacted the Seller with any reports of damage of any kind or requests for forbearance of any payments as a result of such flood damage; (xlvi) Each Mortgage Loan contains a customary due-on-sale clause; -66- (xlvii) Except as previously disclosed in writing to the Trustee and the Certificate Insurer, with respect to each Mortgage Loan, there is only one originally executed Mortgage Note not stamped as a duplicate; (xlviii) The aggregate loan balance of all Group I and Group II Loans, as of the Cut-Off Date is $_____________ and $_____________, respectively; (xlviv) Each Mortgage Loan is being serviced by the Servicer or by an entity within the control of the Servicer which is qualified to service mortgage loans; (l)The Mortgage Note related to each fixed-rate Mortgage Loan bears a fixed coupon rate of at least _____% per annum and the Mortgage Note related to each adjustable rate Mortgage Loan bears a current coupon rate of at least _____% as of the Cut-Off Date; (li) No funds provided to a borrower from a Second Mortgage Loan were concurrently used as a down payment for a First Mortgage Loan; (lii) With respect to each Second Mortgage Loan, the maturity date of the Mortgage Loan is prior to the maturity date of the related prior lien if such prior lien provides for a balloon payment; (liii) With respect to each Second Mortgage Loan, the Seller has not received, and is not aware of, a notice of default of any senior mortgage loan which has not been cured; (liv) The first date on which the applicable Mortgagor must make a payment on each Mortgage Loan is due no later than [DATE]; (lv) No property securing a Mortgage Loan is a cooperative or mobile home or constitutes other than real property under applicable state law; (lvi) The Mortgage Loans are not being transferred with any intent to hinder, delay or defraud any creditors; -67- (lvii) With respect to each Second Mortgage Loan, the related prior lien does not provide for negative amortization; (lviii) The margin for the adjustable rate Mortgage Loans (which margin, when added to the applicable current index, establishes the interest rate paid applicable to the Mortgage Loan) range from ____% to ____%; (lix) No Mortgage Loan has a remaining term in excess of 360 months; and (lx) Each Mortgage Loan is secured by a property having an appraised values of less than $____________. The Purchase Agreement provides that the representations and warranties described in this Section 3.01 shall survive the delivery of the respective Mortgage Files to the Trustee and shall be continuing as long as any Certificate shall be outstanding or this Agreement has not been terminated. Upon discovery by any of the Company, the Servicer, the Certificate Insurer or the Trustee of a breach of any of the foregoing representations and warranties, irrespective of any limitation in such representation or warranty regarding the knowledge of the Seller, which materially and adversely affects the value of a Mortgage Loan or the interest of the Certificateholders (or which materially and adversely affects the interests of the Certificateholders in the related Mortgage Loan in the case of a representation and warranty relating to a particular Mortgage Loan), the party discovering such breach shall give prompt written notice to the other parties and to the Seller, which notice shall specify the date of discovery. The Servicer shall in any event notify the Seller of such breach, which notice shall also specify the date of discovery. Pursuant to the Sale Agreement, the Seller shall within 90 days from the earlier of (i) the date specified in the notice as the date of discovery of such breach or (ii) the date the Seller otherwise discovers such breach, cure such breach, substitute a Mortgage Loan pursuant to the provisions of Section 3.05 or, if the breach relates to a particular Mortgage Loan, purchase such Mortgage Loan from the Trustee at the Purchase Price or, if the breach relates to a representation or warranty regarding the Mortgage Loans as a whole, repurchase Mortgage Loans selected by the Company such that the representations and warranties with respect to the Mortgage Loans are materially correct (without using any selection procedures to identify Mortgage Loans to remain in the Trust Fund as being less valuable than -68- the Mortgage Loans to be repurchased, but, in the case of a repurchase of any obligation pursuant to a breach of a representation or warranty relating to the Mortgage Loans as a whole, using selection procedures to identify loans to be repurchased that will not give rise to the tax imposed by Section 860F(a)(1) of the Code either because no net income would be recognized or because, as set forth in an Opinion of Counsel, which shall not be an expense of the Trust Fund, delivered by the Seller to the Servicer, the transaction is not a "prohibited transaction" within the meaning of Section 860F(a)(2) of the Code). The Purchase Price for the purchased Mortgage Loan shall be paid to the Servicer and shall be deposited by the Servicer in the Collection Account promptly upon receipt and, upon receipt by the Trustee of written notification of such deposit signed by a Servicing Officer, the Trustee shall promptly release to the Seller the related Mortgage File and the Trustee shall execute and deliver such instruments of transfer or assignment as may be provided to it by the Servicer, without recourse, as shall be necessary to vest in the Seller or its designee, as the case may be, any Mortgage Loan released pursuant hereto, and the Trustee shall have no further responsibility with regard to such Mortgage Loan. It is understood and agreed that the obligation of the Seller to cure, substitute or purchase any Mortgage Loan as to which such a breach has occurred shall constitute the sole remedy respecting such breach available to Certificateholders, the Certificate Insurer or the Trustee on behalf of Certificateholders. The Trustee shall notify each Rating Agency of any repurchase or substitution of a Mortgage Loan pursuant to this Section 3.01. Section 3.02. [Reserved] Section 3.03. [Reserved] Section 3.04 Representations of the Servicer. The Servicer hereby represents and warrants to the Trustee, the Company, the Certificate Insurer and the Certificateholders as of the Closing Date: (a) The Servicer is a Delaware corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and is in compliance with the laws of each state in which any Mortgaged Property is located to the extent necessary to enable it to perform its obligations under the terms of this Agreement; the Servicer has the full corporate power and authority to execute and deliver this Agreement and to perform in accordance herewith; the execution, delivery and performance of this Agreement by the Servicer and the consummation of the transactions contemplated hereby have been duly and validly authorized; this Agreement evidences the valid, -69- binding and enforceable obligation of the Servicer; and all requisite corporate action has been taken by the Servicer to make this Agreement valid and binding upon the Servicer in accordance with its terms, (b) Neither the execution and delivery of this Agreement, nor the fulfillment of or compliance with the terms and conditions of this Agreement, will conflict with or result in a breach of any of the terms, conditions or provisions of the Servicer's charter or by-laws or any legal restriction or any agreement or instrument to which the Servicer is now a party or by which it is bound, or constitute a default or result in an acceleration under any of the foregoing, or result in the violation of any law, rule, regulation. order, judgment or decree to which the Servicer or its property is subject, or impair the ability of the Trustee (or the Servicer as the agent of the Trustee) to realize on the Mortgage Loans, or impair the value of the Mortgage Loans; (c) The Servicer is an approved seller/servicer of conventional residential mortgage loans for FNMA and FHLMC, (d) There is no action, suit, proceeding or investigation pending or, to the knowledge of the Servicer, threatened against the Servicer which, either in any one instance or in the aggregate, may result in any material adverse change in the business, operations, financial condition, properties or assets of the Servicer, or in any material impairment of the right or ability of the Servicer to carry on its business substantially as now conducted, or of any action taken or to be taken in connection with the obligations of the Servicer contemplated herein, or which would materially impair the ability of the Servicer to perform under the terms of this Agreement; (e) No consent, approval, authorization or order of any court or governmental agency or body is required for the execution, delivery and performance by the Servicer of or compliance by the Servicer with this Agreement or the Mortgage Loans or the consummation of the transactions contemplated by this Agreement, or if required, such approval has been obtained prior to the Closing Date; and (f) Neither this Agreement nor any statement, report or other document furnished by the Servicer pursuant to this Agreement or in connection with the transactions contemplated hereby contains any untrue statement of material fact regarding -70- the Servicer or omits to state a material fact necessary to make the statements regarding the Servicer contained herein or therein not misleading. It is understood and agreed that the representations and warranties set forth in this Section 3.04 shall survive the delivery of the respective Mortgage Files to the Trustee or to a custodian, as the case may be, and inure to the benefit of the Trustee, the Certificateholders and the Certificate Insurer. Section 3.05 Purchase and Substitution. It is understood and agreed that the representations and warranties set forth in Section 2.01 of the Sale Agreement shall survive delivery of the Certificates to the Certificateholders. Pursuant to the Sale Agreement, with respect to any representation or warranty contained in Section 2.01 of the Sale Agreement that is made to the best of the Seller's knowledge, if it is discovered by the Servicer, any Subservicer, the Trustee, the Certificate Insurer or any Certificateholder that the substance of such representation and warranty was inaccurate as of the Closing Date and such inaccuracy materially and adversely affects the value of the related Mortgage Loan, then notwithstanding the Seller's lack of knowledge with respect to the inaccuracy at the time the representation or warranty was made, such inaccuracy shall be deemed a breach of the applicable representation or warranty. Upon discovery by the Seller, the Servicer, any Subservicer, the Trustee or the Certificate Insurer of a breach of any of such representations and warranties which materially and adversely affects the value of the Mortgage Loans or the interest of the Certificateholders or the Certificate Insurer, or which materially and adversely affects the interests of the Certificate Insurer or the Certificateholders in the related Mortgage Loan in the case of a representation and warranty relating to a particular Mortgage Loan (notwithstanding that such representation and warranty was made to the Seller's best knowledge), the party discovering such breach shall give prompt written notice to the others. Subject to the last paragraph of this Section 3.05, within 60 days of the earlier of its discovery or its receipt of notice of any breach of a representation or warranty, pursuant to the Sale Agreement, the Seller shall be required to (a) promptly cure such breach in all material respects, or (b) purchase such Mortgage Loan on the next succeeding Servicer Remittance Date, in the manner and at the price specified in Section 2.02(b), or (c) remove such Mortgage Loan from the Trust Fund (in which case it shall become a Deleted Mortgage Loan) and substitute one or more Qualified Substitute Mortgage Loans; provided, that, such substitution is effected not later than the date which is two years after the Startup Day or at such later date, if the Trustee and the Certificate Insurer receive an Opinion of Counsel to the effect set forth below in this Section. Pursuant to the Sale Agreement, any such substitution shall -71- be accompanied by payment by the Seller of the Substitution Adjustment, if any, to be deposited in the Collection Account. (b) As to any Deleted Mortgage Loan for which the Seller substitutes a Qualified Substitute Mortgage Loan or Loans, the Seller shall be required to effect such substitution by delivering to the Trustee a certification in the form attached hereto as Exhibit H, executed by a Servicing Officer and the documents described in Sections 2.01 for such Qualified Substitute Mortgage Loan or Loans. (c) The Servicer shall deposit in the Collection Account all payments received in connection with such Qualified Substitute Mortgage Loan or Loans after the date of such substitution. Monthly Payments received with respect to Qualified Substitute Mortgage Loans on or before the date of substitution will be retained by the Seller. The Trust Fund will own all payments received on the Deleted Mortgage Loan on or before the date of substitution, and the Seller shall thereafter be entitled to retain all amounts subsequently received in respect of such Deleted Mortgage Loan. The Servicer shall give written notice to the Trustee and the Certificate Insurer that such substitution has taken place and shall amend the Mortgage Loan Schedule to reflect the removal of such Deleted Mortgage Loan from the terms of this Agreement and the substitution of the Qualified Substitute Mortgage Loan. Upon such substitution, such Qualified Substitute Mortgage Loan or Loans shall be subject to the terms of this Agreement in all respects. (d) It is understood and agreed that the obligations of the Seller set forth in Sections 2.02 and 2.03 of the Sale Agreement to cure, purchase or substitute for a defective Mortgage Loan as provided in Sections 2.02 and 2.03 constitute the sole remedies of the Trustee, the Certificate Insurer and the Certificateholders respecting a breach of the representations and warranties of the Seller set forth in Section 2.01 of the Sale Agreement. In addition, it is understood and agreed that the Company has assigned to the Trustee all of its rights under the Sale Agreement and the right to enforce any remedy against the Seller as provided in Section 2.01 of the Sale Agreement. The Trustee shall give prompt written notice to the Certificate Insurer and the Rating Agencies of any repurchase or substitution made pursuant to this Section 3.03 or Section 2.02(b). (e) Upon discovery by the Servicer, the Trustee, the Certificate Insurer or any Certificateholder that any Mortgage Loan does not constitute a Qualified Mortgage, the party discovering such fact shall promptly (and in any event within five days of the discovery) give -72- written notice thereof to the other parties. In connection therewith, the Seller shall be required to repurchase or substitute a Qualified Substitute Mortgage Loan for the affected Mortgage Loan within 90 days of the earlier of such discovery by an, of the foregoing parties, or the Trustee's or the Seller's receipt of notice, in the same manner as it would a Mortgage Loan for a breach of representation or warranty contained in Section 2.01 of the Sale Agreement. The Trustee shall 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 2.01 of the Sale Agreement. ARTICLE IV THE CERTIFICATES Section 4.01. The Certificates. (a) The Class A, Class S and Class R Certificates shall be substantially in the forms thereof included within Exhibits C and D and shall, on original issue, be executed by the Company and authenticated by the Trustee upon receipt by the Trustee of the documents specified in Section 2.01, delivered to or upon the order of the Company. (b) The Depository, the Company and the Trustee have entered into a Depository Agreement dated as of [DATE] (the "Depository Agreement"). Except as provided in paragraph (c) below, the Class A Certificates shall at all times remain registered in the name of the Depository or its nominee and at all times: (i) registration of the Class A Certificates may not be transferred by the Trustee except to a successor to the Depository; (ii) ownership and transfers of registration of the Class A Certificates on the books of the Depository shall be governed by applicable rules established by the Depository; (iii) the Depository may collect its usual and customary fees, charges and expenses from its Depository Participants; (iv) the Trustee shall deal with the Depository, Depository Participants and Indirect Participants as representatives of the Certificate Owners of the Class A Certificates for purposes of exercising the rights of such 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 (v) 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 Participants and persons shown on the books of such Indirect Participants as direct or indirect Certificate Owners. The Depository Agreement provides that the Depository shall maintain Class A records with respect to the Certificate Owners and with respect to ownership and transfers of such Certificates. -73- All transfers by Certificate Owners of Class A Certificates shall be made in accordance with the procedures established by the Depository Participant or brokerage firm representing such Certificate Owners. Each Depository Participant shall only transfer Class A Certificates of Certificate Owners it represents or of brokerage firms for which it acts as agent in accordance with the Depository's normal procedures. (c) If (i)(A) the Company advises the Trustee in writing that the Depository is no longer willing or able to properly discharge its responsibilities as Depository and (B) the Trustee or the Company are unable after exercise of their reasonable best efforts to locate a qualified successor or (ii) the Company at its option advises the Trustee in writing that it elects to terminate the Class A system through the Depository, 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 Class A Certificates by the Depository for registration and receipt by the Trustee of an adequate supply of certificates from the Company, the Trustee shall issue the Definitive Certificates. Neither the Company, the Servicer, the Certificate Administrator nor the Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. (d) The Certificates shall be issuable in the minimum original dollar denominations (and integral multiples of $1,000 in excess of such amount) and aggregate original dollar denominations per Class as set forth in the following table (except that one Certificate of each Class may be issued in a different denomination). -74- Aggregate Original Certificate Minimum Principal Balance of all Original Certificates of the CUSIP Class Denomination Indicated Class Number - ----- ------------ ------------------------------- ------ IA-1 $ $ IIA-2 $ $ IIA-3 $ $ IIA-4 $ $ IIA-5 $ $ I S $ $ II S $ $ R(1) (1) (1) N/A - --------------- (1) The Class R Certificate represents the Residual Interest and has no Certificate Principal Balance. The Certificates shall be signed by manual or facsimile signature on behalf of the Company by its President or one of its Vice Presidents. Certificates bearing the manual or facsimile signatures of individuals who were at the time of signature proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Certificate or did not hold such offices at the date of such Certificates. No Certificate shall be entitled to any benefit under this Agreement, or be valid for any purpose, unless there appears on such Certificate a manual authentication by a Responsible Officer of the Trustee and such authentication upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly authenticated and delivered hereunder. All Certificates shall be dated the date of their authentication. Section 4.02. Registration of Transfer and Exchange of Certificates. (a) The Trustee shall cause to be kept at its Corporate Trust Office, or at the office of its designated -75- agent, a Certificate Register in which, subject 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. The Trustee will notify the Paying Agent within five Business Days after each Record Date of any transfer of Certificates on or prior to such Record Date. (b) Upon surrender for registration of transfer of any Certificate at any office or agency of the Trustee maintained for such purpose, the Company shall execute and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, a Certificate of a like Class and aggregate Percentage Interest and dated the date of authentication by the Trustee. (c) No transfer of a Class S Certificate shall be made unless such transfer is made pursuant to an effective registration statement or otherwise in accordance with the requirements under the Securities Act of 1933, as amended. If such a transfer is to be made in reliance upon an exemption from said Act, (i) the Trustee or the Company shall require (except if the transferee executes a certificate substantially in the form of Exhibit J-1 hereto) a written opinion of independent counsel acceptable to and in form and substance satisfactory to the Trustee and the Company that such transfer may be made pursuant to an exemption, describing the applicable exemption and the basis therefor, from said Act and laws or is being made pursuant to said Act and laws, which opinion of counsel shall not be an expense of the Trust Fund, the Trustee, the Company or the Servicer, and (ii) the Trustee shall require the transferee to execute a certification substantially in the form of Exhibit J or Exhibit J-1. (d) No transfer of a Class S Certificate shall be made to any employee benefit plan subject to Section 406 of ERISA (a "Plan"), nor a person acting on behalf of such plan or using the assets of such plan. No transfer of a Class S Certificate shall be made unless the Trustee shall have received either (i) a representation letter from the transferee of such Certificate or interest, acceptable to and in form and substance satisfactory to the Trustee and the Company, to the effect that (A) such transferee is not an employee benefit plan subject to Section 406 of ERISA, nor a person acting on behalf of any such plan or using the assets of such plan, or, alternatively, in the case of an insurance company, the assets of any separate accounts to effect such acquisition, or alternatively, (B) the source of funds for the purchase of such Certificate is an "insurance company general account" within the meaning of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60"), 60 Fed. Reg. 35925 (July 12, 1995), and the conditions set forth in Section I and III of PTCE 95-60 are satisfied with respect to the purchase and holding of such Certificate, which representation letter shall not be an expense of the Trustee, the Company, -76- the Certificate Administrator or the Servicer, or (ii) in the case of a Class S Certificate presented for registration in the name of an employee benefit plan subject to ERISA or Section 4975 of the Code (or comparable provisions of any subsequent enactments) or a trustee of any such plan or any other Person who is using the assets of any such plan to effect such acquisition, an Opinion of Counsel satisfactory to the Trustee and the Company to the effect that the purchase or holding of such Class S Certificate will not result in the assets of the Trust Fund being deemed to be "plan assets" pursuant to the Department of Labor Plan Asset Regulations set forth in 29 C.F.R. ss.2510.3-101 and subject to the fiduciary responsibility provisions of ERISA or the prohibited transaction provisions of the Code, will not constitute or result in a prohibited transaction within the meaning of Section 406 or Section 407 of ERISA or Section 4975 of the Code, and will not subject the Trustee, the Company, the Certificate Administrator or the Servicer to any obligation in addition to those undertaken in this Agreement, which opinion of counsel shall not be an expense of the Trustee, the Company, the Certificate Administrator or the Servicer. (e) At the option of a Certificateholder, a Certificate may be exchanged for another Certificate or Certificates of authorized denominations of a like Class, upon surrender of the Certificate to be exchanged at any office or agency of the Trustee maintained for such purpose. Whenever the Certificate is so surrendered for exchange, the Company shall execute and the Trustee shall authenticate and deliver, the Certificate which the Certificateholder making the exchange is entitled to receive. Every Certificate presented or surrendered for transfer or exchange shall (if so required by the Trustee) be duly endorsed by, or be accompanied by a written instrument of transfer in the form satisfactory to the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing. (f) No service charge shall be made to the Holder for any transfer or exchange of a Certificate, but the Trustee may require payment by the Certificateholders of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of such Certificate. (g) All Certificates surrendered for transfer or exchange shall be destroyed by the Trustee in accordance with the Trustee's standard procedures. (h) [Reserved] (i) A Disqualified Organization is prohibited from acquiring beneficial ownership of a Class R Certificate. Notwithstanding anything to the contrary contained herein, -77- unless and until the Certificate Administrator shall have received an Opinion of Counsel, satisfactory in form and substance to the Certificate Administrator, to the effect that the absence of the conditions contained in this Section 4.02(i) would not result in the imposition of federal tax upon the REMIC or cause the REMIC to fail to qualify as a REMIC, no transfer, sale or other disposition of the Class R Certificate (including for purposes of this Section any beneficial interest therein) may be made without the express written consent of the Certificate Administrator, which consent is to be granted in the sole discretion of the Certificate Administrator and a copy of which written consent shall be supplied to the Trustee. As a condition to the granting of the consent referred to in this Section 4.02(i), prior to the transfer, sale, pledge, hypothecation or other disposition of the Class R Certificate or any interest therein, the Certificate Administrator shall require that the proposed transferee deliver to the Certificate Administrator and the Trustee its taxpayer identification number and state, under penalties of perjury that such number is the social security number of the transferee or an affidavit under penalties of perjury stating that as of the date of such transfer such transferee is not and has no intention of becoming a Disqualified Organization, and, in either case, an affidavit stating (i) that such transferee is not acquiring such Class R Certificate as an agent, broker, nominee, or middleman for a Disqualified Organization, (ii) if the Residual Interest is a "non-economic residual interest" within the meaning of Treas. Reg. ss.1.860E-1(c)(2),(I) that no purpose of the acquisition of the Class R Certificate is to avoid or impede the assessment or collection of tax, (II) that such transferee has historically paid its debts as they came due and will continue to pay its debts as they come due and (III) that such transferee represents that it understands that, as the holder of the non-economic residual interest, the transferee may incur tax liabilities in excess of any cash flows generated by the interest and that the transferee intends to pay taxes associated with holding the residual interest and (iii) unless the Certificate Administrator consents to the transfer of the Class R Certificate to a Person who is not a U.S. Person, that it is a U.S. Person. The Certificate Administrator shall not grant the consent referred to in this Section 4.02(i) if it has actual knowledge that any statement made in the affidavit issued pursuant to the preceding sentence is not true. Notwithstanding any purported transfer, sale or other disposition of the Class R Certificate to a Disqualified Organization, such transfer, sale or other disposition shall be deemed to be of no legal force or effect whatsoever and such Disqualified Organization shall not be deemed to be a Class R Certificateholder for any purpose hereunder, including, but not limited to, the receipt of distributions on such Class R Certificate. If any purported transfer shall be in violation of the provisions of this Section 4.02(i) then the prior holder of the Class R Certificate shall, upon discovery that the transfer of such Class R Certificate was not in fact permitted by this Section -78- 4.02(i), be restored to all rights as a Holder thereof retroactive to the date of the purported transfer of such Class R Certificate. The Trustee and the Certificate Administrator shall be under no liability to any Person for any registration or transfer of a Class R Certificate that is not permitted by this Section 4.02(i) or for making payments due on such Class R Certificate to the purported Holder thereof or taking any other action with respect to such purported Holder under the provisions of this Agreement so long as the transfer was not registered under the written certification of the Certificate Administrator as described in this Section 4.02(i). The prior Holder shall be entitled to recover from any purported Holder of a Class R Certificate that was in fact not a permitted purported transferee under this Section 4.02(i) at the time it became a purported Holder all payments made to such purported Holder on such Class R Certificate; provided that the Certificate Administrator shall not be responsible for such recovery. Each Class R Certificateholder, by the acceptance of the Class R Certificate, shall be deemed for all purposes to have consented to the provisions of this Section 4.02(i) and to any amendment to this Agreement deemed necessary by counsel of the Certificate Administrator to ensure that the Class R Certificate is not transferred to a Disqualified Organization and that any transfer of such Class R Certificate will not cause the imposition of a tax upon the REMIC or cause the Trust Fund to fail to qualify as a REMIC. The restrictions on transfer of the Class R Certificate will cease to apply and be void upon receipt by the Trustee of a certificate of the Certificate Administrator stating that the Certificate Administrator has received an Opinion of Counsel to the effect that such restrictions on transfer are no longer necessary to avoid the risk of material federal taxation to the REMIC or prevent the Trust Fund from qualifying as a REMIC. Section 4.03. 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 Trustee such security or indemnity as may be required by it to save it harmless, then, in the absence of notice to the Trustee that such Certificate has been acquired by a bona fide purchaser, the Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like tenor and Class. Upon the issuance of any new Certificate under this Section, the Trustee may require of the Certificateholder 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 connected therewith. Any replacement Certificate of any Class issued pursuant to this Section shall constitute complete and indefeasible evidence of ownership of the Percentage Interest in the distributions to which the Certificateholders of such Class are entitled, as if originally issued, whether or not the mutilated, destroyed, lost or stolen -79- Certificate shall be found at any time, and such mutilated, destroyed, lost or stolen Certificate shall be of no force or effect under this Agreement, to the extent permitted by law. Section 4.04. Persons Deemed Owners. Prior to due presentation of a Certificate of any Class for registration of transfer, the Company, the Certificate Administrator and the Trustee may treat the person in whose name any Certificate is registered on the Record Date as the owner of such Certificate and the Percentage Interest in the distributions to which the Certificateholders of such Class are entitled on the relevant date as the Holder of such Certificate and the Percentage Interest represented by such Certificate for the purpose of receiving remittances pursuant to Section 6.01 and for all other purposes whatsoever, and neither the Company, the Certificate Administrator nor the Trustee shall be affected by notice to the contrary. Section 4.05. Establishment of Certificate Accounts; Deposit in Certificate Accounts. (a) The Certificate Administrator shall establish and maintain two separate Certificate Accounts for the benefit of the Certificateholders (each, a "Certificate Account", and collectively, the "Certificate Account") which are Eligible Accounts, in the form of a trust account, in the name of "[Trustee], in trust for and for the benefit of the Certificateholders of Multi-Class Mortgage Pass-Through Certificates, Chase Funding, Inc. Series ____-__- [Group I] [Group II] Certificate Account." Each Certificate Account shall be established with a commercial bank, a savings bank or a savings and loan association. (b) On each Servicer Remittance Date, the Servicer shall cause to be deposited in the applicable Certificate Account, from funds on deposit in the Collection Account, an amount equal to the related Servicer Remittance Amount with respect to Loan Group I and Loan Group II, respectively. Upon becoming aware of any failure of the Servicer to make any such required deposit, the Certificate Administrator shall promptly give written notice of such failure to the Servicer. (c) The Certificate Administrator may invest, or cause the institution maintaining the Certificate Accounts to invest, moneys in the Certificate Account in Permitted Investments, which shall mature not later than the Business Day next preceding the Distribution Date next following the date of such investment (except that if such Permitted Investment is an obligation of the institution that maintains the related Certificate Account, then, subject to Section 4.07, such Permitted Investment shall mature not later than the related Distribution Date) and shall not be sold or disposed of prior to its maturity. All such Permitted Investments shall be made in the -80- name of the Trustee and shall be held by the Trustee or its agent. All income and gain realized from any such investment shall be for the benefit of the Certificate Administrator as additional compensation and shall be subject to its withdrawal or order from time to time. The amount of any losses incurred in respect of any such investments (to the extent not offset by income from other such investments) shall be deposited in the related Certificate Account by the Certificate Administrator out of its own funds immediately as realized. The creation of each Certificate Account shall be evidenced by a certification or letter agreement in the form of Exhibit H or Exhibit I, respectively. A copy of such certification or letter agreement shall be furnished to the Trustee. Section 4.06. Permitted Withdrawals from the Certificate Accounts. The Certificate Administrator may, from time to time, make withdrawals from the Certificate Accounts for the following purposes: (i) to reimburse itself for expenses incurred by it and reimbursable pursuant to Section 8.06 and to reimburse the Company for expenses incurred by it and reimbursable pursuant to Section 8.06; (ii) to pay to the Seller with respect to each Mortgage Loan or property acquired in respect thereof that has been repurchased or replaced pursuant to Section 2.02 or 3.01 or to pay to the Servicer with respect to each Mortgage Loan or property acquired in respect thereof that has been purchased pursuant to Section 11.01 all amounts received thereon and not required to be distributed as of the date on which the related Repurchase Price was determined; (iii) to reimburse the Servicer for unreimbursed Periodic Advances and Servicing Advances made by it with respect to previous Distribution Dates, to the extent such reimbursement is permitted to be made from the Collection Account pursuant to Section 5.04(a) and only if such reimbursement has not been made from the Collection Account; (iv) to make deposits to the Paying Agent Account in the amounts and in the manner provided for herein; (v) to pay itself any interest earned on or investment income earned with respect to funds in the Certificate Accounts; -81- (vi) to return to the Collection Account any amount deposited in either Certificate Account that was not required to be deposited therein; (vii) to pay itself the Certificate Administration Fee in accordance with Section 8.08; and (viii) to clear and terminate the Certificate Accounts pursuant to Section 11.01. The Certificate Administrator shall keep and maintain a separate accounting for each Mortgage Loan for the purpose of accounting for withdrawals from the Certificate Accounts pursuant to each of the subparagraphs listed above. Section 4.07. Appointment of Paying Agent; Paying Agent Account. The Trustee may appoint a Paying Agent hereunder, which Paying Agent shall not be the Company, the Seller, or an affiliate of the Company or the Seller unless such Paying Agent is the Corporate Trust Department of Chase and is rated at least Baa3 or P-3 by Moody's at the time of such appointment and at all times thereafter. In the event of any such appointment, on the Business Day prior to each Distribution Date, the Certificate Administrator shall deposit or cause to be deposited with the Paying Agent from funds on deposit in the Certificate Account a sum sufficient to make the payments to Certificateholders and the Certificate Insurer in the amounts and in the manner provided for in Section 6.03, such sum to be held in trust for the benefit of Certificateholders in a segregated account (the "Paying Agent Account") which shall be an Permitted Account in the name of "[Trustee], as Trustee, in trust for and for the benefit of the Certificateholders of Multi-Class Mortgage Pass-Through Certificates, Chase Funding, Inc. Series ____-__ - Paying Agent Account". The Certificate Administrator shall cause the Paying Agent to perform each of the obligations of the Paying Agent set forth herein and shall be liable to the Trustee and the Certificateholders for failure of the Paying Agent to perform such obligations. If the Paying Agent is a party other than the Trustee, the Trustee shall have no liability in connection with the performance or failure of performance of the Paying Agent. The Trustee designates the Corporate Trust Department of Chase as the initial Paying Agent. The Trustee may withdraw funds from the Paying Agent Account, although it is recognized and understood that for purposes of administrative efficiency, in the ordinary course the Paying Agent and not the Trustee will make all withdrawals from the Paying Agent Account necessary to make payments to Certificateholders. -82- If, on any Remittance Date, the Paying Agent fails to distribute to Certificateholders the amounts then on deposit in the Paying Agent Account for the purposes specified herein, the Trustee shall be obligated promptly upon its knowledge thereof to distribute such amounts to Certificateholders in the manner and in such amounts based upon information provided by the Certificate Administrator; provided that in no event shall the Trustee be obligated for purposes of this paragraph to distribute to Certificateholders any amounts other than those on deposit in the Paying Agent Account. The Certificate Administrator shall cause each Paying Agent other than the Trustee to execute and deliver to the Certificate Administrator and the Trustee on the Closing Date or, if subsequently appointed, on the date of appointment, a written instrument executed by an officer of the Paying Agent in which such Paying Agent shall agree with the Certificate Administrator and the Trustee that such Paying Agent will hold all sums held by it for the payment to Certificateholders in trust for the benefit of the Certificateholders entitled thereto until such sums shall be paid to such Certificateholders. Section 4.08. Authenticating Agents. (a) The Trustee may appoint one or more Authenticating Agents (each, an "Authenticating Agent") which shall be authorized to act on behalf of the Trustee in authenticating the Certificates. Wherever reference is made in this Agreement to the authentication of Certificates by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent must be a corporation organized and doing business under the laws of the United States of America or of any state, having a combined capital and surplus of at least $15,000,000, authorized under such laws to do a trust business and subject to supervision or examination by federal or state authorities. The Trustee hereby appoints Chase as Authenticating Agent. (b) Any Person into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which any Authenticating Agent shall be a party, or any Person succeeding to the corporate agency business of any Authenticating Agent, shall continue to be the Authenticating Agent without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. -83- (c) Any Authenticating Agent may at any time resign by giving at least 30 days' advance written notice of resignation to the Trustee and the Company. The Trustee may at any time terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and the Company. Upon receiving a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be permitted in accordance within the provisions of this Section 4.08, the Trustee may appoint a successor Authenticating Agent, shall give written notice of such appointment to the Company and shall mail notice of such appointment to all Holders of Certificates. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers, duties and responsibilities of its predecessor hereunder, with like effect as if originally named as Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section 4.08. No Authenticating Agent shall have responsibility or liability for any action taken by it as such at the direction of the Trustee. Any Authenticating Agent shall be entitled to reasonable compensation for its services and any such compensation shall be payable solely by the Trustee, without any right of reimbursement from the Company, the Servicer, the Certificate Administrator or the Trust Fund. ARTICLE V ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS Section 5.01 Appointment of the Servicer. (a) [ Advanta Mortgage Corp. USA] agrees to act as the Servicer and to perform all servicing duties under this Agreement subject to the terms hereof. (b) The Servicer shall service and administer the Mortgage Loans on behalf of the Trustee and shall have full power and authority, acting alone or through one or more Subservicers, to do any and all things in connection with such servicing and administration which it may deem necessary or desirable. Without limiting the generality of the foregoing, the Servicer, in its own name or the name of a Subservicer, may, and is hereby authorized and empowered by the Trustee to, execute and deliver, on behalf of itself, the Certificateholders and the Trustee 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, the insurance policies and accounts related thereto and the properties subject to the Mortgages. Upon the execution and delivery of this Agreement, and from time to time as may be -84- required thereafter, the Trustee shall execute for the Servicer or its Subservicers any powers of attorney and such other documents as may be necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties hereunder. In servicing and administering the Mortgage Loans, the Servicer shall employ procedures consistent with Accepted Servicing Practices and in a manner consistent with recovery under any insurance policy required to be maintained by the Servicer pursuant to this Agreement. The Servicer shall make Mortgage Interest Rate and Monthly Payment adjustments on each Rate Adjustment Date in compliance with applicable regulatory adjustable mortgage loan requirements and the Mortgage Notes with respect to each Group I Loan. The Servicer shall establish procedures to monitor the Rate Adjustment Dates and the Index in order to assure that it uses the correct Index in determining an interest rate change, and it will comply with those procedures. In the event the Index is no longer available, the Servicer shall choose a new comparable Index in accordance with the provisions hereof, of the applicable Mortgage Note and of Accepted Servicing Practices, and shall provide the Mortgagor and the Trustee with notice of the new Index sufficient under law and the Mortgage Loan Documents. The Servicer shall execute and deliver all appropriate notices required by the applicable adjustable mortgage loan laws and regulations and the Mortgage Loan Documents regarding such Mortgage Interest Rate adjustments and payment adjustments. Each adjustment in the Mortgage Interest Rate shall result in an adjustment to the related Monthly Payment. If the Servicer fails to make a timely Mortgage Interest Rate or Monthly Payment adjustment, the Servicer shall use its own funds to satisfy any shortage in the Mortgagor's remittance so long as such shortage shall continue; any such amount paid by the Servicer shall be reimbursable to it from any subsequent amounts collected on account of the related Mortgage Loan with respect to such adjustments. Costs incurred by the Servicer in effectuating the timely payment of taxes and assessments on the property securing a Mortgage Note and foreclosure costs may be added by the Servicer to the amount owing under such Mortgage Note where the terms of such Mortgage Note so permit; provided, however, that the addition of any such cost shall not be taken into account for purposes of calculating the principal amount of the Mortgage Note and Mortgage Loan, the Monthly Payments on the Mortgage Note and Mortgage Loan or distributions to be made to Certificateholders. Such costs shall be recoverable by the Servicer pursuant to Section 5.04. -85- (c) Subject to Section 5.12, the Servicer is hereby authorized and empowered to execute and deliver on behalf of the Trustee and each Certificateholder, all instruments of satisfaction or cancellation, or of partial or full release, discharge and all other comparable instruments, with respect to the Mortgage Loans and with respect to the Mortgaged Properties. If reasonably required by the Servicer, each Certificateholder and the Trustee shall execute any powers of attorney furnished to the Trustee by the Servicer and other documents necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties under this Agreement. (d) On and after such time as the Trustee receives the resignation of, or notice of the removal of, the Servicer from its rights and obligations under this Agreement, and with respect to resignation pursuant to Section 5.23, after receipt by the Trustee and the Certificate Insurer of the Opinion of Counsel required pursuant to Section 5.23, the Trustee or its designee approved by the Certificate Insurer (which approval shall not be unreasonably withheld) shall assume all of the rights and obligations of the Servicer, subject to Section 8.09 hereof. The Servicer shall, upon request of the Trustee but at the expense of the Servicer, deliver to the Trustee all documents and records relating to the Mortgage Loans and an accounting of amounts collected and held by the Servicer and otherwise use its best efforts to effect the orderly and efficient transfer of servicing rights and obligations to the assuming party. (e) If the Mortgage relating to a Mortgage Loan did not have a lien senior on the related Mortgaged Property as of the Cut-Off Date, then the Servicer, in such capacity, may not consent to the placing of a lien senior to that of the Mortgage on the related Mortgaged Property. If the Mortgage relating to a Mortgage Loan had a lien senior to the Mortgage Loan on the related Mortgaged Property as of the Cut-Off Date, then the Servicer, in such capacity, may consent to the refinancing of such senior lien; provided that (i) the resulting Combined Loan-to-Value Ratio of such Mortgage Loan is no higher than the Combined Loan-to-Value Ratio prior to such refinancing and (ii) the interest rate for the loan evidencing the refinanced senior lien on the date of such refinancing is no higher than the interest rate on the loan evidencing the existing senior lien immediately prior to the date of such refinancing. (f) The Servicer shall deliver a list of Servicing Officers to the Certificate Administrator, the Trustee and the Certificate Insurer on or before the Closing Date. Section 5.02 Subservicing Agreements Between the Servicer and Subservicers. (a) The Servicer may, subject to the prior written approval of the Certificate insurer, enter into -86- Subservicing Agreements with Subservicers for the servicing and administration of the Mortgage Loans and for the performance of any and all other activities of the Servicer hereunder. Each Subservicer shall be either (i) a depository institution the accounts of which are insured by the FDIC or (ii) another entity that engages in the business of originating, acquiring or servicing loans, and in either case shall be authorized to transact business in the state or states where the related Mortgaged Properties it is to service are situated and in either case shall be a FNMA-approved mortgage servicer. In addition, each Subservicer will obtain and preserve its qualifications 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, the Certificates or any of the Mortgage Loans and to perform or cause to be performed its duties under the related Subservicing Agreement. Each Subservicing Agreement shall provide that the Subservicer's rights shall automatically terminate at the option of the successor Servicer and without a termination fee upon the termination, resignation or other removal of the Servicer under this Agreement. (b) Notwithstanding any Subservicing Agreement, any of the provisions of this Agreement relating to agreements or arrangements between the Servicer and a Subservicer or reference to actions taken through a Subservicer or otherwise, the Servicer shall remain obligated and primarily liable to the Trustee, Certificateholders and the Certificate Insurer for the servicing and administering 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 Servicer alone were servicing and administering the Mortgage Loans. For purposes of this Agreement, the Servicer shall be deemed to have received payments on Mortgage Loans when the Subservicer has received such payments. In the event the Servicer shall for any reason no longer be the Servicer (including, by reason of an Event of Default), the Trustee or its designee may, at its option, either (i) notwithstanding the last sentence of Section 5.02(a), assume all of the rights and obligations of the Servicer under each Subservicing Agreement that the Servicer may have entered into or (ii) notwithstanding anything to the contrary contained in each such Subservicing Agreement, terminate the related Subservicer without being required to pay any fee in connection therewith. Section 5.03 Collection of Certain Mortgage Loan Payments; Collection Account. (a) The Servicer shall make reasonable efforts to collect all payments called for under the terms and provisions of the Mortgage Loans, and shall, to the extent such procedures shall be -87- consistent with this Agreement and any applicable primary mortgage insurance policy, follow such collection procedures as shall constitute Accepted Servicing Practices. Consistent with the foregoing, the Servicer may in its discretion (i) waive any prepayment charge, assumption fee, late payment charge or other charge in connection with a Mortgage Loan, and (ii) arrange a schedule, running for no more than 180 days after the Due Date for payment of any installment on any Mortgage Note, for the liquidation of delinquent items. Any provision of this agreement to the contrary notwithstanding, the Servicer shall not agree to the modification or waiver of any provision of a Mortgage Loan at a time when such Mortgage Loan is not in default or such default is not reasonably foreseeable, if such modification or waiver would be treated as a taxable exchange under Section 1001 of the Code, unless such exchange would not be considered a "prohibited transaction" under the REMIC Provisions. The Servicer shall establish and maintain in the name of the Trustee the Collection Account, in trust for the benefit of the Certificateholders and the Certificate Insurer. The Collection Account shall be established and maintained as an Eligible Account. The Servicer shall deposit in the Collection Account (i) any amounts representing Monthly Payments on the Mortgage Loans due or to be applied as of a date after the Cut-off Date, (ii) any amounts representing Monthly Payments due or to be applied as of a date on or before the Cut-off Date (except for any interest accrued prior to [DATE] and except for any principal received by the Company prior to the Cut-off Date the receipt of which is reflected on the Mortgage Loan Schedule) and (iii) thereafter, on a daily basis within two Business Days of receipt (except as otherwise permitted herein), the following payments and collections received or made by it (other than any amounts in respect of principal of or interest on the Mortgage Loans which, under clauses (i) and (ii) above, are not required to be deposited in the Collection Account): (i) all payments received after the Cut-off Date on account of principal on the Mortgage Loans and all Principal Prepayments in Full, Curtailments and all Net REO Proceeds collected after the Cut-off Date; (ii) all payments received after the Cut-off Date on account of interest on the Mortgage Loans (other than payments of interest that accrued on each Mortgage Loan up to and including the Cut-off Date; (iii) all Net Liquidation Proceeds; -88- (iv) all Insurance Proceeds; (v) all Released Mortgaged Property Proceeds; (vi) any amounts payable in connection with the repurchase of any Mortgage Loan and the amount of any Substitution Adjustment pursuant to Sections 2.02 and 3.05; and (vii) any amount expressly required to be deposited in the Collection Account in accordance with certain provisions of this Agreement, including, without limitation Sections 2.02, 3.01, 5.06, 5.07 and 5.17 of this Agreement; provided, however, that the Servicer shall be entitled, at its election, either (a) to withhold and to pay to itself the applicable Servicing Fee from any payment on account of interest or other recovery (including Net REO Proceeds) as received and prior to deposit of such payments in the Collection Account or (b) to withdraw the applicable Servicing Fee from the Collection Account after the entire payment or recovery has been deposited therein; provided, further, that with respect to any payment of interest received by the Servicer in respect of a Mortgage Loan (whether paid by the Mortgagor or received as Liquidation Proceeds, Insurance Proceeds or otherwise) which is less than the full amount of interest then due with respect to such Mortgage Loan, only that portion of such payment that bears the same relationship to the total amount of such payment of interest as the rate used to determine the Servicing Fee bears to the Mortgage Interest Rate borne by such Mortgage Loan shall be allocated to the Servicing Fee with respect to such Mortgage Loan. All other amounts shall be deposited in the Collection Account not later than the second Business Day following the day of receipt and posting by the Servicer. The Servicer may invest the funds in the Collection Account only in Permitted Investments. No Permitted Investment shall be sold or disposed of at a gain prior to maturity unless the Servicer has obtained an Opinion of Counsel (at the Servicer's expense) that such sale or disposition will not cause the Trust Fund to be subject to the tax on income from prohibited transactions imposed by Section 860F(a)(i) of the Code, otherwise subject the Trust Fund to tax or cause the Trust Fund to fail to qualify as a REMIC. All income (other than any gain from a sale or disposition of the type referred to in the preceding sentence) realized from any such Permitted Investment shall be for the benefit of the Servicer as additional servicing compensation. The amount of any losses incurred in respect of any such investments shall be deposited in the Collection Account by the Servicer out of its own funds immediately as realized. -89- The foregoing requirements for deposit in the Collection Account shall be exclusive, it being understood and agreed that, without limiting the generality of the foregoing, payments in the nature of those described in the last paragraph of Section 5.13 and payments in the nature of prepayment charges, late payment charges or assumption fees need not be deposited by the Servicer in the Collection Account. If the Servicer deposits in the Collection Account any amount not required to be deposited therein, it may at any time withdraw such amount from the Collection Account, any provision herein to the contrary notwithstanding. All funds deposited by the Servicer in the Collection Account shall be held in the Collection Account for the account of the Trustee in trust for the Certificateholders until disbursed in accordance with Section 6.03 or withdrawn in accordance with Section 5.04. (b) Prior to the time of their required deposit in the Collection Account, all amounts required to be deposited therein may be deposited in an account in the name of Servicer, provided that such account is an Eligible Account. All such funds shall be held by the Servicer in trust for the benefit of the Certificateholders and the Certificate Insurer pursuant to the terms hereof. (c) The Collection Account may, upon written notice by the Trustee to the Certificate Insurer, be transferred to a different depository so long as such transfer is to an Eligible Account. Section 5.04 Permitted Withdrawals from the Collection Account. The Servicer may, from time to time, make withdrawals from the Collection Account for the following purposes: (a) to reimburse itself for any accrued unpaid Servicing Fees and for unreimbursed Periodic Advances and Servicing Advances. The Servicer's right to reimbursement for unpaid Servicing Fees and unreimbursed Servicing Advances shall be limited to late collections on the related Mortgage Loan, including Liquidation Proceeds, Released Mortgaged Property Proceeds, Insurance Proceeds and such other amounts as may be collected by the Servicer from the related Mortgagor or otherwise relating to the Mortgage Loan in respect of which such unreimbursed amounts are owed. The Servicer's right to reimbursement for unreimbursed Periodic Advances shall be limited to late collections of interest on any Mortgage Loan and to Liquidation Proceeds and Insurance Proceeds on related Mortgage Loans; -90- (b) to reimburse itself for any Periodic Advances or Servicing Advances determined in good faith to have become Nonrecoverable Advances, such reimbursement to be made from any funds in the Collection Account; (c) to withdraw any amount received from a Mortgagor that is recoverable and sought to be recovered as a voidable preference by a trustee in bankruptcy pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court having competent jurisdiction; (d) to withdraw any funds deposited in the Collection Account that were not required to be deposited therein; (e) to pay itself Servicing Compensation pursuant to Section 5.13 hereof to the extent not retained or paid pursuant to Section 5.03, 5.04 or 5.13; (f) to pay to the Seller with respect to each Mortgage Loan or property acquired in respect thereof that has been repurchased or replaced pursuant to Section 2.02 or 3.01 or to pay to itself with respect to each Mortgage Loan or property acquired in respect thereof that has been purchased pursuant to Section 11.01 all amounts received thereon and not required to be distributed as of the date on which the related repurchase or purchase price or Principal Balance, as the case may be, was determined; (g) to pay to the Seller with respect to each Mortgage Loan the amount of interest accrued and unpaid on such Mortgage Loan on the Cut-off Date; (h) to make deposits to the Certificate Accounts (which shall include the Certificate Administration Fee and the Trustee Fee) in the amounts and in the manner provided for herein; (i) to pay itself any interest earned on or investment income earned with respect to funds in the Collection Account; (j) to reimburse itself for expenses incurred by it and reimbursable pursuant to Section 8.03; and -91- (k) to clear and terminate the Collection Account upon the termination of this Agreement. The Servicer shall keep and maintain a separate accounting for each Mortgage Loan for the purpose of accounting for withdrawals from the Collection Account pursuant to subclause (a). Section 5.05 Payment of Taxes, Insurance and other Charges. With respect to each Mortgage Loan, the Servicer shall maintain accurate records reflecting casualty insurance coverage. With respect to each Mortgage Loan as to which the Servicer maintains escrow accounts, the Servicer shall maintain accurate records reflecting the status of ground rents, taxes, assessments, water rates and other charges which are or may become a lien upon the Mortgaged Property and the status of primary mortgage guaranty insurance premiums, if any, and casualty insurance coverage and shall obtain, from time to time, all bills for the payment of such charges (including renewal premiums) and shall effect payment thereof prior to the applicable penalty or termination date and at a time appropriate for securing maximum discounts allowable, employing for such purpose deposits of the Mortgagor in any escrow account which shall have been estimated and accumulated by the Servicer in amounts sufficient for such purposes, as allowed under the terms of the Mortgage. To the extent that a Mortgage does not provide for escrow payments, the Servicer shall, if it has received notice of a default or deficiency, monitor such payments to determine if they are made by the Mortgagor. Section 5.06 The Maintenance of Casualty Insurance. The Servicer shall cause to be maintained for each Mortgage Loan a casualty insurance policy with extended coverage issued by a generally acceptable insurer in an amount which is not less than the full insurable value of the Mortgaged Property securing such Mortgage Loan or the unpaid principal balance of such Mortgage Loan, whichever is less; provided, however, that such insurance may not be less than the minimum amount required to fully compensate for any loss or damage on a replacement cost basis. If, upon origination of the Mortgage Loan, the improvements on the Mortgaged Property were in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards (and such flood insurance has been made available) the Servicer will cause to be maintained a flood insurance policy meeting the requirements of the current guidelines of the Federal Insurance Administration with a generally -92- acceptable insurance carrier, in an amount representing coverage not less than the least of (i) the unpaid principal balance of the Mortgage Loan, (ii) the full insurable value and (iii) the maximum amount of insurance which was available under the Flood Disaster Protection Act of 1973. The Servicer shall also maintain similar fire insurance coverage and, if applicable, flood insurance on property acquired upon foreclosure, or by deed in lieu of foreclosure, of any Mortgage Loan in an amount which is at least equal to the lesser of (i) the full insurable value of the improvements which are a part of such property and (ii) the principal balance owing on such Mortgage Loan at the time of such foreclosure or grant of deed in lieu of foreclosure; provided, however, that such insurance may not be less than the minimum amount required to fully compensate for any loss or damage on a replacement cost basis. It is understood and agreed that such insurance shall be with insurers approved by the Servicer and that no earthquake or other additional insurance is to be required of any Mortgagor, other than pursuant to such applicable laws and regulations as shall at any time be in force and as shall require such additional insurance. Pursuant to Section 5.03, any amounts collected by the Servicer under any insurance policies maintained pursuant to this Section 5.06 (other than amounts to be applied to the restoration or repair of the related Mortgaged Property or released to the Mortgagor In accordance with Accepted Servicing Practices) shall be deposited into the Collection Account, subject to withdrawal pursuant to Section 5.04. Any cost incurred by the Servicer in maintaining any such Insurance shall be added to the amount owing under the Mortgage Loan where the terms of the Mortgage Loan so permit; provided, however, that the addition of any such cost shall not be taken into account for purposes of calculating the principal amount of the Mortgage Note or Mortgage Loan, the Monthly Payments on the Mortgage Note or the distributions to be made to the Certificateholders. Such costs shall be recoverable by the Servicer pursuant to Section 5.04. In the event that the Servicer shall obtain and maintain a blanket policy issued by an insurer that is acceptable to FNMA or FHLMC, insuring against hazard losses on all of the Mortgage Loans, it shall conclusively be deemed to have satisfied its obligation as set forth in the first sentence of this Section 5.06, it being understood and agreed that such policy may contain a deductible clause, in which case the Servicer shall, in the event that there shall not have been maintained on the related mortgaged or acquired property an insurance policy complying with the first sentence of this Section 5.06 and there shall have been a loss which would have been covered by such a policy had it been maintained, be required to deposit from its own funds into the Collection Account the amount not otherwise payable under the blanket policy because of such deductible clause. Section 5.07 Maintenance of Mortgage Impairment Insurance Policy. In the event that the Servicer shall obtain and maintain a blanket policy (the "Mortgage Impairment Insurance -93- Policy") with an insurer either (i) having a General Policy rating of A:VIII or better in Best's Key Rating Guide or (ii) approved in writing by the Certificate Insurer, such approval not to be unreasonably withheld, insuring against fire and hazards of extended coverage on all of the Mortgage Loans, then, to the extent such policy names the Servicer as loss payee and provides coverage in an amount equal to the aggregate unpaid principal balance on the Mortgage Loans without co-insurance, and otherwise complies with the requirements of Section 5.06, the Servicer shall be deemed conclusively to have satisfied its obligations with respect to fire and hazard insurance coverage under Section 5.06, it being understood and agreed that such blanket policy may contain a deductible clause, in which case the Servicer shall, in the event that there shall not have been maintained on the related Mortgaged Property a policy complying with Section 5.06, and there shall have been a loss which would have been covered by such policy, deposit in the Collection Account the difference, if any, between the amount that would have been payable under a policy complying with Section 5.06 and the amount paid under such blanket policy. Upon the request of the Certificate Insurer, the Trustee or any Certificateholder, the Servicer shall cause to be delivered to the Certificate Insurer, the Trustee or such Certificateholder, as the case may be, a certified true copy of such policy. The Servicer agrees to prepare and present, on behalf of itself, the Trustee, the Certificate Insurer and Certificateholders, claims under any such policy in a timely fashion in accordance with the terms of such policy. Section 5.08 Fidelity Bond; Errors and Omissions Policy. (a) The Servicer shall maintain with a responsible company, and at its own expense, a blanket fidelity bond (a "Fidelity Bond") and an errors and omissions insurance policy (an "Errors and Omissions Policy"), in a minimum amount acceptable to FNMA or FHLMC or, if [Advanta] is the Servicer or if the Trustee is the successor Servicer, in an amount generally maintained by prudent mortgage loan servicers having servicing portfolios of a similar size. (b) The Servicer shall be deemed to have complied with this provision if one of its respective Affiliates has such a Fidelity Bond and Errors and Omissions Policy and, by the terms of such fidelity bond and errors and omission policy, the coverage afforded thereunder extends to the Servicer. The Servicer shall cause each and every Subservicer for it to maintain a policy of insurance covering errors and omissions and a fidelity bond which would meet the requirements of Section 5.08(a). If [Advanta] is not the Servicer and the Trustee is not the successor Servicer, any such Fidelity Bond and Errors and Omissions Policy shall not be canceled or modified in a materially adverse manner without 10 days prior written notice to the Certificate Insurer. -94- Section 5.09 Collection of Taxes, Assessments and Other Items; Servicing Account. In addition to the Collection Account, the Servicer shall establish and maintain a Servicing Account, which shall be an Eligible Account, and shall deposit therein all payments by Mortgagors for taxes, assessments, primary mortgage or hazard insurance premiums or comparable items. Withdrawals from the Servicing Account may be made to effect payment of taxes, assessments, primary mortgage or hazard insurance premiums or comparable items, to reimburse the Servicer out of related collections for any advances made in the nature of any of the foregoing, to refund to any Mortgagors any sums determined to be overages, or to pay any interest owed to Mortgagors on such account to the extent required by law or to clear and terminate the Servicing Account at the termination of this Agreement upon the termination of the Trust Fund. The Servicer shall advance the payments referred to in the first sentence of this Section 5.09 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 Servicer shall be required to so advance only to the extent that such advances, in the good faith judgment of the Servicer, will be recoverable by the Servicer pursuant to Section 5.04 out of Liquidation Proceeds, Insurance Proceeds or otherwise. Section 5.10 Enforcement of Due-on-Sale Clauses, Assumption Agreements. In any case in which a Mortgaged Property is about to be conveyed by the Mortgagor (whether by absolute conveyance or by contract of sale, and whether or not the Mortgagor remains liable thereon) and the Servicer has knowledge of such prospective conveyance, the Servicer shall effect assumptions in accordance with the terms of any due-on-sale provision contained in the related Mortgage Note or Mortgage. The Servicer shall enforce any due-on-sale provision contained in such Mortgage Note or Mortgage to the extent the requirements thereunder for an assumption of the Mortgage Loan have not been satisfied to the extent permitted under the terms of the related Mortgage Note, unless such provision is not exercisable under applicable law and governmental regulations or in the Servicer's judgment, such exercise is reasonably likely to result in legal action by the Mortgagor, or such conveyance is in connection with a permitted assumption of the related Mortgage Loan. Subject to the foregoing, the Servicer is authorized to take or enter into an assumption agreement from or with the Person to whom such property is about to be conveyed, pursuant to which such person becomes liable under the related Mortgage Note and, unless prohibited by applicable state law, the Mortgagor remains liable thereon, provided that the Mortgage Interest Rate with respect to such Mortgage Loan shall remain unchanged. The Servicer is also authorized, to release the original Mortgagor from liability upon the Mortgage Loan and substitute the new Mortgagor as obligor thereon. In connection with such -95- assumption or substitution, the Servicer shall apply such underwriting standards and follow such practices and procedures as shall be normal and usual for mortgage loans similar to the Mortgage Loans and as it applies to mortgage loans owned solely by it. The Servicer shall notify the Trustee that any such assumption or substitution agreement has been completed by forwarding to the Trustee the original copy of such assumption or substitution agreement, which copy shall be added by the Trustee 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. In connection with any such assumption or substitution agreement, the Mortgage Interest Rate of the related Mortgage Note and the payment terms shall not be changed. Any fee collected by the Servicer for entering into an assumption or substitution of liability agreement will be retained by the Servicer as servicing compensation. Notwithstanding the foregoing paragraph or any other provision of this Agreement, the Servicer shall not be deemed to be in default, breach or any other violation of its obligations hereunder by reason of any conveyance by the Mortgagor of the property subject to the Mortgage or any assumption of a Mortgage Loan by operation of law which the Servicer in good faith determines it may be restricted by law from preventing, for any reason whatsoever, or if the exercise of such right would impair or threaten to impair any recovery under any applicable insurance policy or, in the Servicer's judgment, be reasonably likely to result in legal action by the Mortgagor. Section 5.11 Realization upon Defaulted Mortgage Loans. (a) Except as provided in the last two paragraphs of this Section 5.11(a), the Servicer shall 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 pursuant to Section 5.03. In connection with such foreclosure or other conversion, the Servicer shall follow Accepted Servicing Practices. The foregoing is subject to the proviso that the Servicer shall not be required to expend its own funds in connection with any foreclosure or to restore any damaged property unless it shall determine that (i) such foreclosure and/or restoration will increase the proceeds of liquidation of the Mortgage Loan to Certificateholders after reimbursement to itself for such expenses and (ii) such expenses will be recoverable to it through Liquidation Proceeds (respecting which it shall have priority for purposes of withdrawal from the Collection Account pursuant to Section 5.04) or otherwise. The Servicer shall be entitled to reimbursement of the -96- Servicing Fee and other amounts due it, if any, to the extent, but only to the extent, that withdrawals from the Collection Account with respect thereto are permitted under Section 5.04. The Servicer may foreclose against the Mortgaged Property securing a defaulted Mortgage Loan either by foreclosure, by sale or by strict foreclosure, and in the event a deficiency judgment is available against the Mortgagor or any other person, may proceed for the deficiency. In the event that title to any Mortgaged Property is acquired in foreclosure or by deed in lieu of foreclosure (an "REO Property"), the deed or certificate of sale shall be issued to the Servicer on behalf of the Trustee in the name of the Trustee on behalf of the Certificateholders. Notwithstanding any such acquisition of title and cancellation of the related Mortgage Loan, such Mortgage Loan shall be considered to be a Mortgage Loan held in the Trust Fund until such time as the related Mortgaged Property shall be sold and such Mortgage Loan becomes a Liquidated Mortgage Loan. Consistent with the foregoing, for purposes of all calculations hereunder, so long as such Mortgage Loan shall be considered to be an Outstanding Mortgage Loan: (i) It shall be assumed that, notwithstanding that the indebtedness evidenced by the related Mortgage Note shall have been discharged, such Mortgage Note and the related amortization schedule in effect at the time of any such acquisition of title (after giving effect to any previous Curtailments and before any adjustment thereto by reason of any bankruptcy or similar proceeding or any moratorium or similar waiver or grace period) remain in effect, except that such schedule shall be adjusted to reflect the application of Net REO Proceeds received in any month pursuant to the succeeding clause. (ii) Net REO Proceeds received in any month shall be deemed to have been received first in payment of the accrued interest that remained unpaid on the date that such Mortgage Loan became an REO Mortgage Loan, with the excess thereof, if any, being deemed to have been received in respect of the delinquent principal installments that remained unpaid on such date. Thereafter, Net REO Proceeds received in any month shall be applied to the payment of installments of principal and accrued interest on such Mortgage Loan deemed to be due and payable in accordance with the terms of such Mortgage Note and such amortization schedule. If such Net REO Proceeds exceed the then Unpaid REO -97- Amortization, the excess shall be treated as a Curtailment received in respect of such Mortgage Loan. (iii) Only that portion of Net REO Proceeds allocable to interest that bears the same relationship to the total amount of Net REO Proceeds allocable to interest as the rate of the Servicing Fee bears to the Mortgage Interest Rate borne by such Mortgage Loan shall be allocated to the Servicing Fee with respect thereto. In the event that the Trust Fund acquires any Mortgaged Property as aforesaid or otherwise in connection with a default or reasonably foreseeable default on a Mortgage Loan, such Mortgaged Property shall be disposed of by or on behalf of the Trust Fund within two years after its acquisition by the Trust Fund unless (a) the Servicer shall have provided to the Trustee an Opinion of Counsel (at the expense of the Trust Fund) to the effect that the holding by the Trust Fund of such Mortgaged Property subsequent to two years after its acquisition (and specifying the period beyond such two-year period for which the Mortgaged Property may be held) will not cause the Trust Fund to be subject to the tax on prohibited transactions imposed by Section 860F(a)(i) of the Code, otherwise subject the Trust Fund to tax or cause the Trust Fund to fail to qualify as a REMIC at any time that any Certificates are outstanding, or (b) the Servicer (at the Trust Fund's expense) shall have applied for, at least 60 days prior to the expiration of such two-year period, an extension of such two-year period in the manner contemplated by Section 856(e)(3) of the Code, in which case the two-year period shall be extended by the applicable period. The Servicer shall further ensure that the Mortgaged Property is administered so that it constitutes "foreclosure property" within the meaning of Section 860G(a)(8) of the Code at all times, that the sale of such property does not result in the receipt by the Trust Fund of any income from non-permitted assets as described in Section 860F(a)(2)(B) of the Code, and that the Trust Fund does not derive any "net income from foreclosure property" within the meaning of Section 860G(c)(2) of the Code with respect to such property. Any REO Disposition shall be for cash only (unless changes in the REMIC Provisions made subsequent to the Startup Day allow a sale for other consideration). In lieu of foreclosing upon any defaulted Mortgage Loan, the Servicer may, in its discretion, permit the assumption of such Mortgage Loan if, in the Servicer's judgment, such default is unlikely to be cured and if the assuming borrower satisfies the Servicer's underwriting guidelines with respect to mortgage loans owned by the Servicer. In connection with any such -98- assumption, the Mortgage Interest Rate of the related Mortgage Note and the payment terms shall not be changed. Any fee collected by the Servicer for entering into an assumption agreement will be retained by the Servicer as servicing compensation. Alternatively, the Servicer may encourage the refinancing of any defaulted Mortgage Loan by the Mortgagor. Notwithstanding the foregoing, prior to instituting foreclosure proceedings or accepting a deed-in-lieu of foreclosure with respect to any Mortgaged Property, the Servicer shall make, or cause to be made, inspection of the Mortgaged Property in accordance with the Accepted Servicing Practices and, with respect to environmental hazards, such procedures are as required by the provisions of the Federal National Mortgage Association's selling and servicing guide applicable to single-family homes and in effect on the date hereof. The Servicer shall be entitled to rely upon the results of any such inspection made by others. In cases where the inspection reveals that such Mortgaged Property is potentially contaminated with or affected by hazardous wastes or hazardous substances, the Servicer shall promptly give written notice of such fact to the Certificate Insurer, the Trustee and each Class A Certificateholder. The Servicer shall not commence foreclosure proceedings or accept a deed-in-lieu of foreclosure for Mortgaged Property with respect to this paragraph without obtaining the written consent of the Certificate Insurer. (b) Promptly after the Closing Date, the Servicer shall, with respect to each Mortgage Loan for which the Mortgage provides a second lien on the related Mortgaged Property, cause to be recorded in the appropriate public office for real property records, where permitted by applicable law and where applicable law does not require that a second mortgagee be named as a party defendant in foreclosure or comparable proceedings in order to foreclose or otherwise preempt such mortgagee's equity of redemption, a request for notice of any action by or on behalf of any mortgagee under a Senior Mortgage Loan. The Servicer also shall promptly provide written notice to each mortgagee under a Senior Mortgage Loan of the existence of the related Mortgage Loan and request notification of any action taken or to be taken against the related Mortgagor or Mortgaged Property by or on behalf of such mortgagee in respect of such Senior Mortgage Loan. (c) Upon becoming aware that a Senior Mortgage Loan has come into default or of any action that the related mortgagee has taken or may take in respect thereof, the Servicer shall, consistent with the REMIC Provisions, take such actions as it shall deem necessary or advisable, as shall be normal and usual in its general mortgage servicing activities and as shall be required or permitted by Accepted Servicing Practices. In taking such actions, the Servicer may -99- advance such funds as are necessary to cure such default, maintain such Senior Mortgage Loan, acquire the related mortgagee's interest therein or redeem the related Mortgaged Property. The Servicer, however, shall not be required to expend its own funds in connection therewith unless it shall determine that such expense will be recoverable to it. All such expenses shall be included as Liquidation Expenses pursuant to the definition thereof, and shall be reimbursable from the related Liquidation Proceeds in accordance with Section 5.04. Section 5.12 Trustee to Cooperate; Release of Mortgage Files. Upon the payment in full of any Mortgage Loan, or the receipt by the Servicer of a notification that payment in full will be escrowed in a manner customary for such purposes, the Servicer shall immediately notify the Trustee in the form of a Request for Release in the form attached hereto as Exhibit H (which request shall include a statement to the effect that all amounts received in connection with such payment which are required to be deposited in the Collection Account pursuant to Section 5.03 have been or shall be so deposited) of a Servicing Officer and shall request delivery to it of the Mortgage File. Upon receipt of such Request for Release, the Trustee, or the Custodian on its behalf, shall promptly release the related Mortgage File to the Servicer. Upon any such payment in full, the Servicer is authorized to give, as agent for the Trustee and the mortgagee under the Mortgage which secured the Mortgage Loan, an instrument of satisfaction (or assignment of mortgage without recourse) regarding the property subject to such Mortgage, which instrument of satisfaction or assignment, as the case may be, shall be delivered to the Person or Persons entitled thereto against receipt therefor of such payment, it being understood and agreed that no expenses incurred in connection with such instrument of satisfaction or assignment, as the case may be, shall be chargeable to the Collection Account. In connection therewith, the Trustee shall execute and return to the Servicer any required power of attorney provided to the Trustee by the Servicer and other required documentation in accordance with Section 5.01(c). From time to time and as appropriate for the servicing or foreclosure of any Mortgage Loan and in accordance with Accepted Servicing Practices, the Trustee shall, upon request of the Servicer and delivery to the Trustee of a Request for Release signed by a Servicing Officer, release, or cause the Custodian to release, the related Mortgage File to the Servicer and shall execute such documents as shall be necessary to the prosecution of any such proceedings. Such Request for Release shall obligate the Servicer to return the Mortgage File to the Trustee when the need therefor by the Servicer no longer exists unless the Mortgage Loan shall be liquidated, in which case, upon receipt of a certificate of a Servicing Officer similar to the Request for Release hereinabove specified, the Mortgage File shall be delivered by the Trustee to the Servicer. -100- Section 5.13 Servicing Fee; Servicing Compensation. The Servicer shall be entitled, at its election, either (a) to pay itself the Servicing Fee out of any Mortgagor payment on account of interest or Net REO Proceeds prior to the deposit of such payment in the Collection Account or (b) to withdraw from the Collection Account such Servicing Fee pursuant to Section 5.04. The Servicer shall also be entitled, at its election, either (a) to pay itself the Servicing Fee in respect of each delinquent Mortgage Loan out of Liquidation Proceeds in respect of such Mortgage Loan or other recoveries with respect thereto to the extent permitted in Section 5.03(a) to withdraw from the Collection Account the Servicing Fee in respect of each such Mortgage Loan to the extent of such Liquidation Proceeds or other recoveries, to the extent permitted by Section 5.04(a). Servicing compensation in the form of Net Foreclosure Profits, assumption fees, late payment charges, tax service fees, fees for statement of account or payoff of the Mortgage Loan (to the extent permitted by applicable law) or otherwise shall be retained by the Servicer and are not required to be deposited in the Collection Account. The aggregate Servicing Fee is reserved for the administration of the Trust Fund and, in the event of replacement of the Servicer as servicer of the Mortgage Loans, for the payment of other expenses related to such replacement. The aggregate Servicing Fee shall be offset as provided in Section 5.19. The Servicer shall be required to pay all expenses incurred by it in connection with its servicing activities hereunder (including maintenance of the hazard insurance required by Section 5.05) and shall not be entitled to reimbursement therefor except as specifically provided herein. Section 5.14 Reports to the Trustee and the Certificate Administrator; Collection Account Statements. Not later than 15 days after each Distribution Date, the Servicer shall provide to the Trustee and the Certificate Administrator a statement, certified by a Servicing Officer, setting forth the status of the Collection Account as of the close of business on the last day of the immediately preceding calendar month, stating that all distributions required by this Agreement to be made by the Servicer on behalf of the Trustee have been made (or if any required distribution has not been made by the Servicer, specifying the nature and status thereof) and showing, for the period covered by such statement, the aggregate of deposits into and withdrawals from the Collection Account for each category of deposit specified in Section 5.03 and each category of withdrawal specified in Section 5.04 and the aggregate of deposits into the Certificate Accounts as specified in Section 4.05(b). Such statement shall also state the aggregate unpaid principal balance of all the Mortgage Loans as of the close of business on the last day of the month preceding the month in which such Distribution Date occurs. Copies of such statement shall be provided by the Trustee to any Certificateholder upon request. The Servicer shall -101- provide to the Certificate Administrator such information as is required for the Certificate Administrator to prepare the reports or additional information specified in Section 6.04. Section 5.15 Annual Statement as to Compliance. The Servicer will deliver to the Trustee, the Certificate Administrator, the Certificate Insurer and the Rating Agencies on or before June 30th of each year, beginning with June 30, 1997, an Officers' Certificate stating as to each signer thereof, that (i) a review of the activities of the Servicer during the preceding calendar year and of its performance under this Agreement has been made under such officer's supervision, and (ii) to the best of such officer's knowledge, based on such review, the Servicer has fulfilled all 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. Such Officers' Certificate shall be accompanied by the statement described in Section 5.16 of this Agreement. Copies of such statement shall, upon request, be provided to any Certificateholder by the Servicer, or by the Trustee at the Servicer's expense if the Servicer shall fail to provide such copies. Section 5.16 Annual Independent Public Accountants' Servicing Report. On or before March 30th of every year, beginning with March 30, 1997, the Servicer, at its expense, shall cause a firm of nationally recognized independent public accountants to furnish a statement to the Trustee, the Certificate Administrator, the Certificate Insurer and the Rating Agencies to the effect that, on the basis of an examination of certain documents and records relating to the servicing of the mortgage loans being serviced by the Servicer under pooling and servicing agreements similar to this Agreement, conducted substantially in compliance with the Uniform Single Attestation Program for Mortgage Bankers, such firm is of the opinion that such servicing has been conducted in compliance with this Agreement. Copies of such statement shall, upon request, be provided to Certificateholders by the Servicer, or by the Trustee at the Servicer's expense if the Servicer shall fail to provide such copies. For purposes of such statement, such firm may conclusively presume that any pooling and servicing agreement which governs mortgage pass-through certificates offered by the Company (or any predecessor or successor thereto) in a registration statement under the Securities Act of 1933, as amended, is similar to this Agreement, unless such other pooling and servicing agreement expressly states otherwise. Section 5.17 Optional Purchase of Defaulted Mortgage Loans. Any Affiliate of the Seller, in its sole discretion, shall have the right to elect (by written notice sent to the Servicer, the Trustee, the Certificate Administrator and the Certificate Insurer), but shall not be obligated, to purchase for its own account from the Trust Fund any Mortgage Loan which is 90 -102- days or more delinquent in the manner and at the price specified in Section 2.02. The purchase price for any Mortgage Loan purchased hereunder shall be deposited in the Collection Account and the Trustee, upon receipt of such deposit, 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 5.18 Reports to be Provided by the Servicer. The Servicer agrees to make available on a reasonable basis to the Certificate Insurer a knowledgeable financial or accounting officer for the purpose of answering reasonable questions respecting recent developments affecting the Servicer or the financial statements of the Servicer and to permit the Certificate Insurer to inspect the Servicer's servicing facilities during normal business hours for the purpose of satisfying the Certificate Insurer that the Servicer has the ability to service the Mortgage Loans in accordance with this Agreement. Section 5.19 Adjustment of Servicing Compensation in Respect of Prepaid Mortgage Loans. The aggregate amount of the Servicing Fees that the Servicer and any Subservicer shall be entitled to receive with respect to all of the Mortgage Loans and each Distribution Date shall be offset on such Distribution Date by an amount equal to the aggregate Prepayment Interest Shortfall with respect to all Mortgage Loans which were subjects of Principal Prepayments in Full or Curtailments during the month preceding the month of such Distribution Date. The amount of any offset against the aggregate Servicing Fee with respect to any Distribution Date under this Section 5.19 shall be limited to the aggregate amount of the Servicing Fees otherwise payable to the Servicer and any Subservicer (without adjustment on account of Prepayment Interest Shortfalls) with respect to (i) scheduled payments having the Due Date occurring in the month of such Distribution Date received by the Servicer or any Subservicer prior to the Servicer Remittance Date, and (ii) Principal Prepayments in Full, Curtailments and Liquidation Proceeds received in the month preceding the month in which such Distribution Date occurs, and the rights of the Certificateholders to the offset of the aggregate Prepayment Interest Shortfalls shall not be cumulative. -103- Section 5.20 Periodic Advances. If, on any Servicer Remittance Date, the Servicer determines that any Monthly Payments due on the Due Date immediately preceding such Servicer Remittance Date have not been received as of the close of business on the Business Day preceding such Servicer Remittance Date, the Servicer shall determine the amount of any Periodic Advance required to be made with respect to the related Distribution Date. The Servicer shall, on the Servicer Remittance Date, deliver in a computer-readable form (including electronic transmission) to the Certificate Administrator indicating the payment status of each Mortgage Loan as of the Business Day prior to such Servicer Remittance Date. The Servicer shall include in the amount to be deposited in the related Certificate Account on such Servicer Remittance Date an amount equal to the Periodic Advance, if any, which deposit may be made in whole or in part from funds in the Collection Account being held for future distribution or withdrawal on or in connection with Distribution Dates in subsequent months. Any funds being held for future distribution to Certificateholders and so used shall be replaced by the Servicer from its own funds by deposit in the related Certificate Account on or before the Business Day preceding any such future Servicer Remittance Date to the extent that funds in the related Certificate Account on such Servicer Remittance Date shall be less than payments to Certificateholders required to be made on such date. The Servicer shall designate on its records the specific Mortgage Loans and related installments (or portions thereof) as to which such Periodic Advance shall be deemed to have been made, such determination being conclusive for purposes of withdrawals from the Collection Account pursuant to Section 5.04. Section 5.21 [Reserved] Section 5.22 Maintenance of Corporate Existence and Licenses; Merger or Consolidation of the Servicer. (a) The Servicer will keep in full effect its existence, rights and franchises as a corporation, will obtain and preserve its qualification to do business as a foreign corporation in each jurisdiction necessary to protect the validity and enforceability of this Agreement or any of the Mortgage Loans and to perform its duties under this Agreement and will otherwise operate its business so as to cause the representations and warranties under Section 3.01 to be true and correct at all times under this Agreement. (b) Any Person into which the Servicer may be merged or consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Servicer shall be a party, or any Person succeeding to the business of the Servicer, shall be an established -104- mortgage loan servicing institution acceptable to the Certificate Insurer that has a net worth of at least $15,000,000, and in all events shall be the successor of the Servicer without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. The Servicer shall send notice of any such merger or consolidation to the Trustee and the Certificate Insurer. Section 5.23 Assignment of Agreement by Servicer, Servicer Not to Resign. The Servicer shall not assign this Agreement or resign from the obligations and duties hereby imposed on it except by mutual consent of the Certificate Insurer, the Certificate Administrator and the Trustee or upon the determination that the Servicer's duties hereunder are no longer permissible under applicable law and that such incapacity cannot be cured by the Servicer without incurring, in the reasonable judgment of the Certificate Insurer, unreasonable expense. Any such determination that the Servicer's duties hereunder are no longer permissible under applicable law permitting the resignation of the Servicer shall be evidenced by a written Opinion of Counsel (who may be counsel for the Servicer) to such effect delivered to the Trustee, the Seller, the Company, the Certificate Administrator and the Certificate Insurer. No such resignation shall become effective until the Trustee or a successor appointed in accordance with the terms of this Agreement has assumed the Servicer's responsibilities and obligations hereunder in accordance with Section 8.09. The Servicer shall provide the Trustee, the Rating Agencies, the Certificate Administrator and the Certificate Insurer with 30 days prior written notice of its intention to resign pursuant to this Section 5.23. In the case of any assignment and delegation of rights, duties and obligations under this Agreement pursuant to this Section 5.23, the Servicer shall be released from its duties and obligations under this Agreement, except that the Servicer shall remain liable for all liabilities and obligations incurred by it as Servicer hereunder prior to the satisfaction of the conditions to such assignment and delegation set forth in the preceding paragraph. Section 5.24 Information Reports to be Filed by the Servicer. The Servicer shall file (or cause any Subservicers to file) information returns with respect to the receipt of mortgage interest received in a trade or business, reports of foreclosures and abandonments of any Mortgaged Property and cancellation of indebtedness income with respect to any Mortgaged Property as required by Sections 6050H, 6050J and 6050P of the Code, respectively. -105- Section 5.25. REMIC-Related Covenants. For as long as the Trust Fund shall exist, the Servicer, the Certificate Administrator and the Trustee shall act in accordance herewith to assure continuing treatment of the Trust Fund as a REMIC. In particular: (a) Neither the Servicer nor the Certificate Administrator shall create, or permit the creation of, any "interests" in the Trust Fund within the meaning of Section 860G(a) of the Code other than the "regular interests" in the REMIC designated as such in Section 2.04(a) and the Residual Interest; (b) As of all times as may be required by the Code, the Servicer and the Certificate Administrator will ensure that substantially all of the assets of the Trust Fund will consist of Qualified Mortgages and "permitted investments" as defined in Section 860G(a)(5) of the Code. The Certificate Administrator and the Trustee, upon the direction of the Certificate Administrator, also will maintain records that are sufficient to indicate the Trust Fund's compliance with applicable requirements of the Code (and applicable Proposed, Temporary or final Treasury Regulations) relating to the assets held by the Trust Fund. Further, the Servicer shall not permit and the Trustee shall not accept the transfer or substitution of any Mortgage Loan other than pursuant to Section 3.05 of this Agreement and the Servicer shall, in any case, not permit substitution later than two years from the Closing Date unless the Servicer and the Trustee have received an Opinion of Counsel, which will not be an expense of the Trust Fund, that such transfer or substitution would not adversely affect the REMIC status of the Trust Fund or would not otherwise be prohibited by this Agreement; (c) The Servicer and the Certificate Administrator each shall ensure that the Trust Fund does not receive a fee or other compensation for services and that the Trust Fund does not receive any income from assets other than Qualified Mortgages or "permitted investments" within the meaning of Section 860G(a)(5) of the Code, and shall take whatever action it deems necessary to avoid any material tax imposed by the Code on the Trust Fund; provided, however, that the Trust Fund shall not be prohibited from recognizing its "net income from foreclosure property," as provided in Section 860G(c) of the Code with respect to any Mortgage Loan foreclosed upon as provided in Section 5.10; (d) The Trustee shall not sell or permit the sale of all or any portion of the Mortgage Loans or of any Eligible Investment unless such sale is as a result of a repurchase of the Mortgage Loans pursuant to this Agreement or the Trustee has received an Opinion of Counsel, which will not be an expense of the Trust Fund, to the effect that such sale (i) is pursuant to a -106- "qualified liquidation" as defined in Section 860F(a)(4) of the Code and as described in Section 11.01 hereof, or (ii) would not be treated as a "prohibited transaction" within the meaning of Section 860F(a)(2) of the Code that results in the realization of a material amount of gain or loss for federal income tax purposes; (e) The Trustee shall not accept any contribution to the Trust Fund after the Startup Day without an Opinion of Counsel that such contribution is included within the exceptions provided in Section 860G(d)(2) of the Code and, therefore, will not be subject to the tax imposed by Section 860G(d)(1) of the Code; and (f) Notwithstanding anything to the contrary in this Agreement, the Certificate Administrator and the Trustee, at the direction of the Certificate Administrator, shall take any other action or refuse to take any action otherwise required (including adjusting the Purchase Price for any Mortgage Loan) where the Certificate Administrator deems such action or inaction reasonably necessary to ensure the REMIC status of the Trust Fund under the Code and applicable regulations or to avoid the imposition of any material tax liability on the Trust Fund that will affect amounts distributable to the Certificateholders. -107- ARTICLE VI DISTRIBUTIONS AND PAYMENTS Section 6.01 Collection of Money. Except as otherwise expressly provided herein, the Trustee may demand payment or delivery of all money and other property payable to or receivable by the Trustee pursuant to this Agreement, including (a) all payments due on the Mortgage Loans in accordance with the respective terms and conditions of such Mortgage Loans and required to be paid over to the Trustee by the Servicer or by any Subservicer and (b) Insured Payments. The Trustee shall hold all such money and property received by it, as part of the Trust Fund and shall apply it as provided in this Agreement. Section 6.02 The Certificate Insurance Policy. (a) Within two Business Days after each Servicer Remittance Date the Certificate Administrator shall determine with respect to the immediately following Distribution Date the amount to be on deposit in the Certificate Accounts on such Distribution Date as a result of the Servicer's remittance of the Servicer Remittance Amount on the related Servicer Remittance Date, less the amounts described in clause (i) of Section 6.03(b) or (c) for the related Distribution Date, and not including the amount of any Insured Payment which is required to be deposited in the related Certificate Account for such Distribution Date. The amounts described in the preceding sentence, as determined separately with respect to the Group I Loans, and Group II Loans, with respect to each Distribution Date are the "Group I Available Funds" and "Group II Available Funds" for such Distribution Date. (b) If on any Distribution Date there is an Available Funds Shortfall, the Certificate Administrator shall complete a Notice in the form of Exhibit A to the related Certificate Insurance Policy and submit such notice to the Certificate Insurer no later than 12:00 noon New York City time on the second Policy Business Day preceding such Distribution Date as a claim for an Insured Payment in an amount equal to such Available Funds Shortfall. (c) The Trustee shall establish a separate Eligible Account for the benefit of Holders of the Certificates and the Certificate Insurer referred to herein as the "Certificate Insurance Payments Account" over which the Trustee shall have exclusive control and sole right of withdrawal. The Trustee shall deposit upon receipt any amount paid under the Certificate Insurance Policy in the Certificate Insurance Payments Account and distribute such amount only for purposes of payment to Certificateholders of the Group I Insured Distribution Amount or -108- Group II Insured Distribution Amount for which a claim was made and such amount may not be applied to satisfy any costs, expenses or liabilities of the Servicer, the Certificate Administrator, the Trustee or the Trust Fund. Amounts paid under the Certificate Insurance Policy, to the extent needed to pay the Group I Insured Distribution Amount or Group II Insured Distribution Amount shall be transferred by the Trustee from the Certificate Insurance Payments Account to the related Certificate Account on the related Distribution Date and disbursed by the Paying Agent to Certificateholders in accordance with Section 6.03. It shall not be necessary for payments made under the Certificate Insurance Policy to be made by checks or wire transfers separate from other amounts distributed pursuant to Section 6.03. However, the amount of any payment of principal or of interest on the Certificates to be paid from funds transferred from the Certificate Insurance Payments Account shall be noted as provided in paragraph (d) below. Funds held in the Certificate Insurance Payments Account shall not be invested. Any funds remaining in the Certificate Insurance Payments Account on the first Policy Business Day following a Distribution Date shall be returned to the Certificate Insurer pursuant to the written instructions of the Certificate Insurer by the end of such Policy Business Day. (d) The Remittance Report shall indicate the amount of interest and principal paid in respect of the Group I Class A Certificates and the Group II Class A Certificates from moneys received under the Certificate Insurance Policy. (e) In the event that the Trustee has received a certified copy of an order of the appropriate court that any Insured Payment has been voided in whole or in part as a preference payment under applicable bankruptcy law, the Trustee shall so notify the Certificate Insurer, shall comply with the provisions of the Certificate Insurance Policy to obtain payment by the Certificate Insurer of such voided Insured Payment, and shall, at the time it provides notice to the Certificate Insurer, notify, by mail to Certificateholders of the affected Certificates that, in the event any Certificateholder's Insured Payment is so recovered, such Certificateholder will be entitled to payment pursuant to the Certificate Insurance Policy, a copy of which shall be made available through the Trustee, the Certificate Insurer or the Certificate Insurer's fiscal agent if any, and the Trustee shall furnish to the Certificate Insurer or its fiscal agent, if any, agent, its records evidencing the payments which have been made by the Trustee and subsequently recovered from Certificateholders, and dates on which such payments were made. (f) The Trustee shall promptly notify the Certificate Insurer of any proceeding or the institution of any action, of which a Responsible Officer of the Trustee has actual knowledge, seeking the avoidance as a preferential transfer under applicable bankruptcy, -109- insolvency, receivership or similar law (a "Preference Claim") of any distribution made with respect to the Certificates. Each Certificateholder, by its purchase of Certificates, the Servicer, the Certificate Administrator and the Trustee agree that, the Certificate Insurer (so long as no Certificate Insurer Default exists) 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 such 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, the Certificate Insurer shall be subrogated to, and each Certificateholder, the Servicer, the Certificate Administrator and the Trustee hereby delegate and assign to the Certificate Insurer, to the fullest extent permitted by law, the rights of the Servicer, the Certificate Administrator, the Trustee and each Certificateholder in the conduct of any such Preference Claim, including, without limitation, all rights of any party to any adversary proceeding or action with respect to any court order issued in connection with any such Preference Claim. Section 6.03 Distributions. (a) No later than 12:00 noon California time on each Servicer Remittance Date, the Servicer shall deliver to the Certificate Administrator a report in computer-readable form (including electronic transmission, provided that a portion of such report relating to certain delinquency information may be delivered in hard copy form rather than computer-readable form) containing such information as to each Mortgage Loan as of such date and such other information as the Certificate Administrator shall reasonably require. (b) With respect to funds deposited in the Group I Certificate Account, on each Distribution Date, the Paying Agent shall make the following allocations, disbursements and transfers in the following order of priority, and each such allocation, transfer and disbursement shall be treated as having occurred only after all preceding allocations, transfers and disbursements have occurred: (i) to the Certificate Insurer, the Premium Amount with respect to the Group I Loans; (ii) to the Certificate Insurer the lesser of (x) an amount equal to (A) the amount then on deposit in the Group I Certificate Account remaining after the distributions in (i) minus (B) the Group I Insured Distribution Amount for such Distribution Date and (y) the outstanding Group I Reimbursement Amounts, if any, as of such Distribution Date; -110- (iii) from amounts then on deposit in the Group I Certificate Account (including any Group I Insured Payments), to the Class IA Certificateholders an amount equal to the Class IA Interest Distribution Amount; (iv) from amounts then on deposit in the Group I Certificate Account (including any Group I Insured Payments), to the Class IA Certificateholders an amount equal to the lesser of (a) the Class IA Principal Distribution Amount (to the extent not covered by payments to be made pursuant to Section 6.03(c)(v) below) and (b) the amount remaining in the Group I Certificate Account after distributions pursuant to clauses (i) through (iii) above, in the manner described below; (v) from amounts then on deposit in the Group I Certificate Account, to the Class IIA Certificateholders, on any Distribution Date where a Group II Subordination Deficit exists, an amount equal to such Group II Subordination Deficit; (vi) from amounts then on deposit in the Group I Certificate Account, to the Class IIA Certificateholders, on any Distribution Date when, following distributions to be made on such date, the Group II Subordinated Amount would be less than the Group II Required Subordinated Amount, an amount equal to such difference; (vii) from amounts then on deposit in the Group I Certificate Account, to the Certificate Insurer, an amount equal to the outstanding Group II Reimbursement Amount remaining unpaid following any distributions made on such Distribution Date pursuant to Section 6.03(c)(ii); (viii) from amounts then on deposit in the Group I Certificate Account, to the Class I S Certificateholders an amount equal to the related Class S Interest Distribution Amount to the extent not added to the Certificate Principal Balance thereof as described below; (ix) from amounts then on deposit in the Group I Certificate Account, to the Class I S Certificateholders the amount remaining on such Distribution Date, if any, until the Certificate Principal Balance thereof is reduced to zero; and -111- (x) from amounts then on deposit in the Group I Certificate Account, to the Holders of the Class R Certificates, the amount remaining on such Distribution Date, if any. Notwithstanding clause (iv) above, the aggregate amounts distributed on all Distribution Dates to the Holders of the Class IA Certificates on account of the Class IA Principal Distribution Amount shall not exceed the Original Certificate Principal Balance of the Class IA Certificates. Distributions of the Class IA Principal Distribution Amount and amounts allocated pursuant to Section 6.03(c)(v) and (vi) will be allocated to the Class IA Certificates in reduction of the Certificate Principal Balance thereof, until the Certificate Principal Balance thereof has been reduced to zero. On each Distribution Date, an amount equal to the Group I Subordination Increase Amount for such Distribution Date will be added to the Certificate Principal Balance of the Class I S Certificates. (c) With respect to funds deposited in the Group II Certificate Account, on each Distribution Date, the Paying Agent shall make the following allocations, disbursements and transfers in the following order of priority, and each such allocation, transfer and disbursement shall be treated as having occurred only after all preceding allocations, transfers and disbursements have occurred: (i) to the Certificate Insurer, the Premium Amount with respect to the Group II Loans; (ii) to the Certificate Insurer the lesser of (x) an amount equal to (A) the amount then on deposit in the Group II Certificate Account remaining after the distributions in (i) above minus (B) the Group II Insured Distribution Amount for such Distribution Date and (y) the outstanding Group II Reimbursement Amounts, if any, as of such Distribution Date; (iii) from amounts then on deposit in the Group II Certificate Account (including any Group II Insured Payments), to the Class IIA-1 Certificateholders, Class IIA-2 Certificateholders, Class IIA-3 Certificateholders, and Class IIA-4 Certificateholders, on a pro rata basis in proportion to the related Class IIA -112- Interest Distribution Amount payable thereon, an amount equal to the Class IIA Interest Distribution Amount; (iv) from amounts then on deposit in the Group II Certificate Account (including any Group II Insured Payments), to the Class IIA Certificateholders an amount equal to the lesser of (a) the Class IIA Principal Distribution Amount (to the extent not covered by payments to be made pursuant to Section 6.03(b)(v) above) and (b) the amount remaining in the Group II Certificate Account after distributions pursuant to clauses (i) through (iii) above, in the manner described below; (v) from amounts then on deposit in the Group II Certificate Account, to the Class IA Certificateholders, on any Distribution Date where a Group I Subordination Deficit exists, an amount equal to such Group I Subordination Deficit; (vi) from amounts then on deposit in the Group II Certificate Account, to the Class IA Certificateholders, on any Distribution Date when, following distributions to be made on such date, the Group I Subordinated Amount would be less than the Group I Required Subordinated Amount, an amount equal to such difference; (vii) from amounts then on deposit in the Group II Certificate Account, to the Certificate Insurer, an amount equal to the outstanding Group I Reimbursement Amount remaining unpaid following any distributions made on such Distribution Date pursuant to Section 6.03(b)(ii); (viii) from amounts then on deposit in the Group II Certificate Account, to the Class II S Certificateholders, an amount equal to the related Class S Interest Distribution Amount to the extent not added to the Certificate Principal Balance thereof as described below; (ix) from amounts then on deposit in the Group II Certificate Account, to the Class II S Certificateholders, the amount remaining on such Distribution Date, if any, until the Certificate Principal Balance thereof is reduced to zero; and -113- (x) from amounts then on deposit in the Group II Certificate Account, to the Holders of the Class R Certificates, the amount remaining on such Distribution Date, if any. Notwithstanding clause (iv) above, the aggregate amounts distributed on all Distribution Dates to the Holders of the Class IIA Certificates on account of the Class IIA Principal Distribution Amount shall not exceed the Original Certificate Principal Balance of the Class IIA Certificates. Distributions of the Class IIA Principal Distribution Amount and amounts allocated pursuant to Section 6.03(b)(v) and (vi) will be allocated first to the Class IIA-1 Certificates, second to the Class IIA-2 Certificates, third to the Class IIA-3 Certificateholders, and fourth, to the Class IIA-4 Certificates, in each case until the Certificate Principal Balance thereof has been reduced to zero. On each Distribution Date, an amount equal to the Group II Subordination Increase Amount for such Distribution Date will be added to the Certificate Principal Balance of the Class II S Certificates. Section 6.04 Reports by Certificate Administrator. (a) On each Distribution Date the Certificate Administrator shall provide to each Holder, to the Trustee, to the Servicer, to the Certificate Insurer, to the Underwriter, to the Company and to each Rating Agency a written report (the "Remittance Report"), setting forth information including, without limitation, the following information: (i) the amount of the distribution with respect to each class of the Class A Certificates, Class S Certificates and Class R Certificates; (ii) the amount of such distributions allocable to principal, separately identifying the aggregate amount of any Prepayments in Full and Curtailments or other unscheduled recoveries of principal included therein and separately identifying any Subordination Increase Amounts; (iii) the amount of such distributions allocable to interest and the calculation thereof; -114- (iv) the Certificate Principal Balance of each class of the Class A Certificates and Class S Certificates as of such Distribution Date, together with the principal amount of each class of the Class A Certificates and Class S Certificates (based on a Certificate in an original principal amount of $1,000) then outstanding, in each case after giving effect to any payment of principal on such Distribution Date; (v) the amount of any Insured Payment included in the amounts distributed to the Class A Certificateholders on such Distribution Date; (vi) the Group I Required Subordinated Amount, the Group II Required Subordinated Amount, the Group I Subordinated Amount and the Group II Subordinated Amount as of such Distribution Date; (vii) the amounts, if any, of any Liquidation Loan Losses for the related Due Period and the cumulative amount of Liquidated Loan Losses from the Closing Date; and (viii) the applicable Pass-Through Rate for each class of Class A Certificates and Class S Certificates for such distribution. Items (i), (ii) and (iii) above shall, with respect to the Class A Certificates, be presented on the basis of a Certificate having a $1,000 denomination. In addition, by January 31 of each calendar year following any year during which the Certificates are outstanding, the Certificate Administrator shall furnish a report to each Holder of record if so requested in writing at any time during each calendar year as to the aggregate of amounts reported pursuant to (i), (ii) and (iii) with respect to the Certificates for such calendar year. (b) All distributions made to the Class A Certificateholders, Class S Certificateholders and the Class R Certificateholders as a Class on each Distribution Date will be made on a pro rata basis among the Certificateholders of such Class on the next preceding Record Date based on the Percentage Interest represented by their respective Certificates, and shall be made by wire transfer of immediately available funds to the account of such Certificateholder at a bank or other entity having appropriate facilities therefor, if, in the case of a Class A Certificateholder, such Certificateholder shall own of record Certificates of the same Class which have denominations aggregating at least $10,000,000 appearing in the Certificate -115- Register and shall have provided complete wiring instructions by the Record Date, and otherwise by check mailed to the address of such Certificateholder appearing in the Certificate Register. (c) In addition, on each Distribution Date the Certificate Administrator will distribute to each Holder, to the Trustee, to the Certificate Insurer, to the Underwriter, to the Servicer, to the Company and to each Rating Agency, together with the information described in subsection (a) preceding, the following information with respect to the Group I Loans and the Group II Loans as of the close of business on the last Business Day of the prior calendar month, which is hereby required to be prepared by the Servicer and furnished to the Certificate Administrator for such purpose on or prior to the related Servicer Remittance Date (such information to be provided for the Group I Loans and the Group II Loans separately): (i) the total number of Mortgage Loans and the aggregate Principal Balances thereof, together with the number and aggregate principal balances of such Mortgage Loans and the percentage (based on the aggregate Principal Balances of the Mortgage Loans) of the aggregate Principal Balances of such Mortgage Loans to the aggregate Principal Balance of all Mortgage Loans (A) 30-59 days Delinquent, (B) 60-89 days Delinquent and (C) 90 or more days Delinquent; (ii) the number and aggregate Principal Balances of all Mortgage Loans and percentage (based on the aggregate Principal Balances of the Mortgage Loans) of the aggregate Principal Balances of such Mortgage Loans to the aggregate Principal Balance of all Mortgage Loans in foreclosure proceedings and the number and aggregate Principal Balances of all Mortgage Loans and percentage (based on the aggregate Principal Balances of the Mortgage Loans) of any such Mortgage Loans which are also included in any of the statistics described in the foregoing clauses (i)(A), (i)(B) and (i)(C); (iii) the number and aggregate Principal Balances of all Mortgage Loans and percentage (based on the aggregate Principal Balances of the Mortgage Loans) of the aggregate Principal Balances of such Mortgage Loans to the aggregate Principal Balance of all Mortgage Loans relating to Mortgagors in bankruptcy proceedings and the number and aggregate Principal Balances of all Mortgage Loans and percentage (based on the aggregate Principal Balances of the -116- Mortgage loans) of any such Mortgage Loans which are also included in any of the statistics described in the foregoing clauses (i)(A), (i)(B) and (i)(C); (iv) the number and aggregate Principal Balances of all Mortgage Loans and percentage (based on the aggregate Principal Balances of the Mortgage Loans) of the aggregate Principal Balances of such Mortgage Loans to the aggregate Principal Balance of all Mortgage Loans relating to REO Properties and the number and aggregate Principal Balances of all Mortgage Loans and percentage (based on the aggregate Principal Balances of the Mortgage Loans) of any such Mortgage Loans which are also included in any of the statistics described in the foregoing clause (i)(A), (i)(B) and (i)(C); (v) the weighted average Mortgage Interest Rate as of the Due Date occurring in the Due Period related to such Distribution Date; (vi) weighted average remaining term to stated maturity of all Mortgage Loans; and (vii) book value of any REO Property. Section 6.05 Compensating Interest. Not later than the close of business on the third Business Day prior to the Distribution Date, the Servicer or any Subservicer shall deposit into the related Certificate Account an amount equal to the lesser of (a) the aggregate of the Prepayment Interest Shortfalls for the related Distribution Date resulting from Principal Prepayments in Full and Curtailments during the related Due Period and (b) its aggregate Servicing Fees payable in the related Due Period and shall not have the right to reimbursement therefor ("Compensating Interest"). Section 6.06 Effect of Payments by the Certificate Insurer; Subrogation. Anything herein to the contrary notwithstanding, any payment with respect to principal of or interest on the Class A Certificates which is made with moneys received pursuant to the terms of the Certificate Insurance Policy shall not be considered payment of the Certificates from the Trust Fund. The Company, the Servicer, the Certificate Administrator and the Trustee acknowledge, and each Holder by its acceptance of a Certificate agrees, that without the need for any further action on the part of the Certificate Insurer, the Company, the Servicer, the Certificate Administrator, the Trustee or the Certificate Registrar (a) to the extent the Certificate -117- Insurer makes payments, directly or indirectly, on account of principal of or interest on the Class A Certificates to the Holders of such Certificates, the Certificate Insurer will be fully subrogated to, and each Certificateholder, the Servicer, the Certificate Administrator and the Trustee hereby delegate and assign to the Certificate Insurer, to the fullest extent permitted by law, the rights of such Holders to receive such principal and interest from the Trust Fund, including, without limitation, any amounts due to the Certificateholders in respect of securities law violations arising from the offer and sale of the Class A Certificates, and (b) the Certificate Insurer shall be paid such amounts but only from the sources and in the manner provided herein for the payment of such amounts. The Trustee, the Certificate Administrator and the Servicer shall cooperate in all respects with any reasonable request by the Certificate Insurer for action to preserve or enforce the Certificate Insurer's rights or interests under this Agreement without limiting the rights or affecting the interests of the Holders as otherwise set forth herein. Section 6.07 Allocation of Liquidated Loan Losses. Prior to each Distribution Date the Servicer shall determine the total amount of related Liquidated Loan Losses, if any, that occurred during the related Due Period with respect to the Group I Loans and the Group II Loans. The amount of such Liquidated Loan Losses shall be evidenced by an Officer's Certificate to be delivered to the Certificate Administrator not later than the Servicer Remittance Date. On each Distribution Date, the principal portion of all Liquidated Loan Losses on the Mortgage Loans in Loan Group I shall be allocated in reduction of the Certificate Principal Balance of the Class I S Certificates, until the Certificate Principal Balance thereof has been reduced to zero, and then in reduction of the Certificate Principal Balance of the Class II S Certificates, until the Certificate Principal Balance thereof has been reduced to zero. On each Distribution Date, the principal portion of all Liquidated Loan Losses on the Mortgage Loans in Loan Group II shall be allocated in reduction of the Certificate Principal Balance of the Class II S Certificates, until the Certificate Principal Balance thereof has been reduced to zero, and then in reduction of the Certificate Principal Balance of the Class IS Certificates, until the Certificate Principal Balance thereof has been reduced to zero. In each case above, Liquidated Loan Losses after the Certificate Principal Balances of the Certificates described above have been reduced to zero shall not be allocated to any specific class of related Certificates, but shall increase the Group I Subordination Deficit or Group II Subordination Deficit, as applicable, in the manner described in this Agreement. -118- ARTICLE VII REPORTS TO BE PREPARED BY CERTIFICATE ADMINISTRATOR Section 7.01. Certificate Administrator Shall Provide Information as Reasonably Required. The Certificate Administrator shall furnish to the Trustee, during the term of this Agreement, such periodic, special, or other reports or information, whether or not provided for herein, as shall be necessary, reasonable, or appropriate in respect to the Trustee, or otherwise in respect to the purposes of this Agreement, all such reports or information to be as provided by and in accordance with such applicable instructions and directions as the Trustee may reasonably require. Section 7.02. Tax and Information Returns and Reports to Certificateholders. (a) For Federal income tax purposes, the taxable year of the Trust Fund shall be a calendar year and the Certificate Administrator shall maintain or cause the maintenance of the books of the Trust Fund on the accrual method of accounting. (b) The Certificate Administrator shall prepare and file or cause to be filed with the Internal Revenue Service and applicable state or local tax authorities, federal and state or local tax or information returns, respectively, with respect to the Trust Fund and the Certificates containing such information and at the times and in the manner as may be required by the Code or applicable Treasury regulations or corresponding provisions of state or local law, and shall furnish to each Holder of Certificates at any time during the calendar year for which such returns or reports are made such statements or information at the times and in the manner as may be required thereby. Without limitation on any other requirement of this Section 7.02, the Certificate Administrator shall make available the information necessary for the application of Section 860E(e) of the Code within 60 days of such request. With respect to the Class R Certificate, the Certificate Administrator shall provide such information or cause such information to be provided to (i) the Internal Revenue Service, (ii) the transferor of a Class R Certificate to a Disqualified Organization and (iii) a Pass-Thru Entity that holds a Class R Certificate with one or more record holders that are Disqualified Organizations. The Certificate Administrator also shall provide or cause to be provided promptly the above described computation and information relating to the tax on transfers to Disqualified Organizations or holdings by Pass-Thru Entities within 60 days after becoming aware of the transfer to a Disqualified Organization or Pass-Thru Entity with one or more Disqualified Organization -119- owners, as the case may be. In addition, except as may be provided in Treasury Regulations, any person holding an interest in a Pass-Thru Entity as a nominee for another will, with respect to such interest, be treated as a Pass-Thru Entity. In connection with the foregoing, the Certificate Administrator shall provide the name, address and telephone number of the person who can be contacted to obtain information required to be reported to the holders of regular interests in the REMIC (the "REMIC Reporting Agent") as required by IRS Form 8811. The Trustee hereby designates [NAME] to serve as the REMIC Reporting Agent. The Certificate Administrator shall indicate the election to treat the Trust Fund as a REMIC (which election shall apply to the taxable period ending December 31, 1996 and each calendar year thereafter) in such manner as the Code or applicable Treasury regulations may prescribe. The Trustee shall sign all tax and information returns filed pursuant to this Section 7.02 and any other returns as may be required by the Code or any state or local law, and in doing so shall rely entirely upon, and shall have no liability for information provided by, or calculations provided by, the Certificate Administrator. The Certificate Administrator is hereby designated as the "tax matters person" (within the meaning of Treas. Reg. ss.1.860F-4(d)) for the Trust Fund. Any Holder of a Class R Certificate will by acceptance thereof so appoint the Certificate Administrator as agent and attorney-in-fact for the purpose of acting as tax matters person. In the event that the Code or applicable Treasury Regulations prohibit the Trustee from signing tax or information returns or other statements, or the Certificate Administrator from acting as tax matters person (as an agent or otherwise), the Trustee or the Certificate Administrator, as the case may be, shall take whatever action that in its sole good faith judgment is necessary for the proper filing of such information returns or for the provision of a tax matters person, including designation of the Holder of a Class R Certificate to sign such returns or act as tax matters person. Each Holder of a Class R Certificate shall be bound by this Section 7.02 by virtue of its acceptance of a Class R Certificate. [End of Article VII] ARTICLE VIII THE COMPANY, THE SERVICER AND THE CERTIFICATE ADMINISTRATOR Section 8.01. Liability of the Servicer. The Servicer shall be liable in accordance herewith only to the extent of the obligations specifically imposed upon and undertaken by the Servicer herein. If the Servicer delegates any of its duties hereunder to one or more Sub-Servicers, the Servicer shall not be relieved thereby of its liability with respect thereto. -120- Section 8.02 Merger or Consolidation of the Servicer. Any person into which the Servicer may be merged or consolidated, or any Person resulting from any merger, conversion or consolidation to which the Servicer shall be a party, or any Person succeeding to the business of the Servicer, shall be the successor of the Servicer 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 any such successor or resulting person shall be qualified to service mortgage loans for FNMA and FHLMC and shall have a net worth of not less than $15,000,000. Section 8.03. Limitation on Liability of the Servicer and Others. Neither the Servicer nor any of its directors, officers, employees or agents, shall be under any liability to the Trust Fund or the Certificateholders for any action taken or for refraining from the taking of any action in good faith pursuant to this Agreement, or for errors in judgment; provided, however, that this provision shall not protect the Servicer or any such person against breach of warranties or representations made herein, or for failure to perform its obligations in strict compliance with this Agreement or any liability which would otherwise be imposed by reason of willful misfeasance, bad faith or negligence in the performance of his or its duties or by reason of reckless disregard of his or its obligations and duties hereunder. The Servicer and any of its directors, officers, employees or agents, 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 Servicer and each of its directors, officers, employees or agents, shall be indemnified and held harmless by the Trust Fund against any loss, liability or expense incurred in connection with any legal action relating to this Agreement or the Certificates, other than any loss, liability or expense related to the Servicer's servicing obligations with respect to any specific Mortgage Loan or Mortgage Loans (except as any such loss, liability or expense shall be otherwise reimbursable pursuant to this Agreement) or related to the Servicer's obligations under this Agreement or any loss, liability or expense incurred by reason of willful misfeasance, bad faith or negligence in the performance of his or its duties hereunder or by reason of reckless disregard of his or its obligations and duties hereunder. Neither the Servicer nor any subservicer shall be under any obligation to appear in, prosecute or defend any legal action which is not incidental to its duties under this Agreement and that in its opinion may involve any expense or liability; provided, however, that the Servicer may in its discretion undertake any such action which it may deem necessary or desirable in respect of this Agreement and the rights and duties of the parties hereto and the interest of the Certificateholders hereunder. In such event, the legal expenses and costs of such action, if previously approved in writing by the Certificate Insurer, which approval shall not be unreasonably withheld, and any liability resulting therefrom shall be -121- expenses, costs and liabilities of the Trust Fund, and the Servicer shall be entitled to be reimbursed therefor out of the Collection Account as provided by Section 5.04, and such amounts shall, on the following Distribution Date or Distribution Dates, be allocated in reduction of distributions on the Certificates in the same manner as Liquidated Loan Losses are allocated hereunder. Section 8.04. Liability of the Company and the Certificate Administrator. The Company and the Certificate Administrator shall each be liable in accordance herewith only to the extent of the obligations specifically imposed by this Agreement and undertaken hereunder by the Company and the Certificate Administrator herein. Section 8.05 Merger or Consolidation of the Company or the Certificate Administrator. The Company and the Certificate Administrator will each keep in full effect its existence, rights and franchises as a corporation, and will obtain and preserve its qualification to do business as a foreign corporation in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Agreement, the Certificates or any of the Mortgage Loans and to perform its duties under this Agreement. Any person into which the Company or the Certificate Administrator may be merged or consolidated, or to whom the Company or the Certificate Administrator has sold substantially all of its assets, or any corporation resulting from any merger, conversion or consolidation to which the Company or the Certificate Administrator shall be a party, or any Person succeeding to the business of the Company or the Certificate Administrator, shall be the successor of the Company or the Certificate Administrator 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. Notwithstanding anything else in this Section 8.05 and Section 8.07 to the contrary, the Certificate Administrator may assign its rights and delegate its duties and obligations under this Agreement; provided that the Person accepting such assignment or delegation shall execute and deliver to the Company and the Trustee an agreement, in form and substance reasonably satisfactory to the Company and the Trustee, which contains an assumption by such Person of the due and punctual performance and observance of each covenant and condition to be performed or observed by the Certificate Administrator under this Agreement; provided further that each Rating Agency's rating of any of the Classes of Certificates that have been rated in effect immediately prior to such assignment and delegation will not be qualified or -122- reduced or withdrawn as a result of such assignment and delegation. In the case of any such assignment and delegation, the Certificate Administrator shall be released from its obligations as Certificate Administrator under this Agreement, except that the Certificate Administrator shall remain liable for all liabilities and obligations incurred by it as Certificate Administrator hereunder prior to the satisfaction of the conditions to such assignment and delegation set forth in the next preceding sentence. Section 8.06 Limitation on Liability of the Company, the Certificate Administrator, the Trustee and Others. Neither the Company, the Certificate Administrator nor any of the directors, officers, employees or agents of the Company or the Certificate Administrator shall be under any liability to the Trustee or the Certificateholders for any action taken, or for refraining from the taking of any action, in good faith pursuant to this Agreement, or for errors in judgment; provided, however, that this provision shall not protect the Company or the Certificate Administrator against any breach of warranties or representations made herein, or failure to perform its obligations in strict compliance with this Agreement, or any liability which would otherwise be imposed by reason of any breach of the terms and conditions of this Agreement. The Company, the Certificate Administrator, the Trustee, and any director, officer, employee or agent of the Company, the Certificate Administrator or the Trustee 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. Neither the Company, the Trustee nor the Certificate Administrator shall be under any obligation to appear in, prosecute or defend any legal action which is not incidental to its respective duties to service the Mortgage Loans in accordance with this Agreement and which in its opinion may cause it to incur any expenses or liability; provided, however, that the Company, the Trustee or the Certificate Administrator may in its discretion undertake any such action which it may deem necessary or desirable with respect to this Agreement and the rights and duties of the parties hereto and the interest of the Certificateholders hereunder. In such event, the legal expenses and costs of such action and any liability resulting therefrom shall be expenses, costs and liabilities payable from the Certificate Account and the Company or the Certificate Administrator shall be entitled to be reimbursed therefor out of the Certificate Account as provided by Section 4.06 and such amounts shall, on the following Distribution Date or Distribution Dates, be allocated in the same manner as Liquidated Loan Losses are allocated hereunder. Section 8.07 Company and Certificate Administrator Not to Resign. Except as described in Section 8.05, neither the Company nor the Certificate Administrator shall assign this Agreement or resign from the obligations and duties hereby imposed on it except by mutual -123- consent of the Company, the Certificate Administrator and all of the Certificateholders unless the determination is made that its duties hereunder are no longer permissible under applicable law and such incapacity cannot be cured by the Company or the Certificate Administrator. Any such determination permitting the resignation of the Company or the Certificate Administrator shall be evidenced by an opinion of independent counsel to such effect delivered to the Trustee which opinion of counsel shall be in form and substance acceptable to the Trustee. Upon any such assignment or resignation, the Company or the Certificate Administrator, as appropriate, shall send notice to the Certificate Insurer and all Certificateholders of the effect of such assignment or resignation upon the then current rating of the Class of Certificates by each Rating Agency whose rating on such Class is then in effect. No such resignation shall become effective until a successor shall have assumed the Company's or the Certificate Administrator's responsibilities and obligations hereunder in the manner provided in Section 8.05. Any purported assignment or resignation which does not comply with the requirements of this Section shall be of no effect. Section 8.08 Compensation to the Certificate Administrator. The Certificate Administrator shall be entitled to receive the Certificate Administration Fee as compensation for services rendered by the Certificate Administrator under this Agreement. The Certificate Administrator shall pay itself such Certificate Administration Fee monthly from amounts on deposit in the Certificate Account. Section 8.09 Successor to the Servicer. In connection with the termination of the Servicer's responsibilities and duties under this Agreement pursuant to Section 5.23 or 9.01, the Trustee shall (i) succeed to and assume all of the Servicer's responsibilities, rights, duties and obligations as Servicer (but not in any other capacity) under this Agreement (except that the Trustee shall not be obligated to make Periodic Advances if prohibited by applicable law nor to effectuate repurchases or substitutions of Mortgage Loans pursuant to Section 2.02 and except that the Trustee makes no representations and warranties pursuant to Section 3.04). Prior to the termination of the Servicer's responsibilities, duties and liabilities under this Agreement, the Trustee may appoint a successor having a net worth of not less than $15,000,000 and which is a FNMA or FHLMC approved seller/servicer in good standing and which shall succeed to all rights and assume all of the responsibilities, duties and liabilities of the Servicer under this Agreement, except as aforesaid, if the Trustee receives a letter from each Rating Agency that such appointment would not result in a reduction or withdrawal of the current rating of any Class of Certificates that is rated by a Rating Agency. If the Trustee has become the successor to the Servicer in accordance with this Section or Section 9.02, then notwithstanding the above, the Trustee may, if it shall be unwilling to so act, or shall, if it is unable to so act, appoint, or petition -124- a court of competent jurisdiction to appoint, any established housing and home finance institution having a net worth of not less than $15,000,000 and which is a FNMA or FHLMC approved seller/servicer in good standing as the successor to the Servicer hereunder in the assumption of all of the responsibilities, duties or liabilities of the Servicer hereunder. In connection with any 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 or such court shall determine; provided, however, that no such compensation shall be in excess of that permitted under this Agreement without the consent of all of the Certificateholders. If the Servicer's duties, responsibilities and liabilities under this Agreement should be terminated pursuant to Section 5.23, 8.02 or 9.01, the Servicer shall discharge such duties and responsibilities during the period from the date it acquires knowledge of such termination until the effective date thereof with the same degree of diligence and prudence which it is obligated to exercise under this Agreement, and shall take no action whatsoever that might impair or prejudice the rights or financial condition of its successor or the Trust Fund. The resignation or removal of the Servicer pursuant to Section 5.23, 8.02 or 9.01 shall not become effective until a successor shall be appointed pursuant to this Section and shall in no event relieve the Servicer of liability for breach of the representations and warranties made pursuant to Section 3.04. Any successor appointed as provided herein shall execute, acknowledge and deliver to the Servicer and to the Trustee an instrument accepting such appointment, whereupon such successor shall become fully vested with all the rights, powers, duties, responsibilities, obligations and liabilities of the Servicer, with like effect as if originally named as a party to this Agreement and the Certificates. Any termination or resignation of the Servicer or this Agreement pursuant to Section 5.23, 8.02, 9.01 or 11.01 shall not affect any claims that the Trustee may have against the Servicer for events or actions taken or not taken by the Servicer arising prior to any such termination or resignation. The Servicer shall timely deliver to the successor the funds that were, or were required to be, in the Collection Account and the Servicing Account, if any, and all Mortgage Files and related documents, statements and recordkeeping held by it hereunder and the Servicer shall account for all funds and shall execute and deliver such instruments and do such other things as may reasonably be required to more fully and definitely vest and confirm in the successor all such rights, powers, duties, responsibilities, obligations and liabilities of the Servicer. -125- Upon a successor's acceptance of appointment as such, the Servicer shall notify in writing the Trustee, the Certificate Insurer, the Certificateholders, the Certificate Administrator and each Rating Agency of such appointment. Section 8.10 Maintenance of Ratings. The Servicer shall cooperate with the Company and the Certificate Administrator and take any action that may be reasonably necessary to maintain the current rating or ratings on the Certificates. [End of Article VIII] ARTICLE IX DEFAULT Section 9.01 Events of Default. (a) "Event of Default", wherever used herein, means any one of the following events: (i) any failure by the Servicer to make any deposit into the Certificate Account required by Section 4.05 which continues unremedied for one Business Day after the date upon which such deposit was required to be made; (ii) the failure by the Servicer to make any required Servicing Advance which failure continues unremedied for a period of 30 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer by the Trustee or to the Servicer and the Trustee by any Certificateholder or the Certificate Insurer, (iii) any failure on the part of the Servicer duly to observe or perform in any material respect any other of the covenants or agreements on the part of the Servicer contained in this Agreement, or the failure of any representation and warranty made pursuant to Section 3.01 to be true and correct which continues unremedied for a period of 30 days (or 15 days in the case of a failure to pay the premium for any insurance policy which is required to be maintained under this Agreement) after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer, as the case may be, by -126- the Company or the Trustee or to the Servicer and the Trustee by any Certificateholder or the Certificate Insurer; (iv) a decree or order of a court or agency or supervisory authority having jurisdiction in an involuntary case under any present or future federal or state bankruptcy, insolvency or similar law or for the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Servicer and such decree or order shall have remained in force, undischarged or unstayed for a period of 60 days; (v) the Servicer shall consent to the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings of or relating to the Servicer or of or relating to all or substantially all of the Servicer's property, (vi) the Servicer shall admit in writing its inability to pay its debts as they become due, file a petition to take advantage of any applicable insolvency or reorganization statute, make an assignment for the benefit of its creditors, or voluntarily suspend payment of its obligations" (vii) on any Distribution Date the average Sixty-Day Delinquency Ratio, for each of the three (or one or two, in the case of the first and second Distribution Dates) immediately preceding Due Periods, exceeds 13%. The Sixty-Day Delinquency Ratio with respect to any Distribution Date means a fraction, expressed as a percentage, (a) the numerator of which is the aggregate Principal Balances of all Mortgage Loans that are 60 or more days Delinquent, in foreclosure or converted to REO Property as of the last day of the related Due Period and (b) the denominator of which is the Pool Principal Balance as of the last day of the related Due Period; (viii) if on any Distribution Date occurring in [MONTH] of any year, commencing in [MONTH/YEAR], the 12 Month Loss Amount exceeds 1.05% of the average Pool Principal Balance as of the close of business on the last day of each of the twelve preceding Due Periods; or -127- (ix) if (a) on any Distribution Date occurring before_____ 1, [YEAR], the aggregate Liquidated Loan Losses since the Cut-off Date exceed ____% of the Original Pool Principal Balance, (b) on any Distribution Date on or after ____ 1,[YEAR] and before ____ 1,[YEAR], the aggregate Liquidated Loan Losses since the Cut-off Date exceed ____% of the Original Pool Principal Balance, (c) on any Distribution Date on or after ____ 1,[YEAR] and before ____ 1,[YEAR], the aggregate Liquidated Loan Losses since the Cut-off Date exceed ____% of the Original Pool Principal Balance, (d) on any Distribution Date on or after ____ 1,[YEAR] and before ____ 1,[YEAR], the aggregate Liquidated Loan Losses since the Cut-off Date exceed ____% of the Original Pool Principal Balance, or (e) on any Distribution Date on or after ____ 1,[YEAR], the aggregate Liquidated Loan Losses since the Cut-off Date exceed ____% of the Original Pool Principal Balance. (b) If an Event of Default described in this Section shall occur, then, and in each and every such case, so long as such Event of Default shall not have been remedied: with respect to clauses (i), (ii), (iii), (iv), (v) and (vi) above, the Trustee shall, but only at the direction of the Certificate Insurer or the Majority Certificateholders and with the prior written consent of the Certificate Insurer, by notice in writing to the Servicer and a Responsible Officer of the Trustee, and in addition to whatever rights such Certificateholders may have at law or equity to damages, including injunctive relief and specific performance, terminate all the rights and obligations of the Servicer under this Agreement and in and to the Mortgage Loans and the proceeds thereof, as servicer; and with respect to clauses (vii)-(ix) above, the Trustee shall, but only at the direction of the Certificate Insurer, after notice in writing to the Servicer and a Responsible Officer of the Trustee, terminate all the rights and obligations of the Servicer under this Agreement and in and to the Mortgage Loans and the proceeds thereof, as servicer. Upon receipt by the Servicer of such written notice, all authority and power of the Servicer under this Agreement, whether with respect to the Mortgage Loans or otherwise, shall, subject to Section 9.02, pass to and be vested in the Trustee or its designee approved by the Certificate Insurer and the Trustee is hereby authorized and empowered to execute and deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, at the expense of the Servicer, any and all documents and other instruments and do or cause to be done all other acts or things necessary or appropriate to effect the purposes of such notice of termination, including, but not limited to, the transfer and endorsement or assignment of the Mortgage Loans and related documents. The Servicer agrees to cooperate (and pay any related costs and expenses) with the Trustee in effecting the termination of the Servicer's responsibilities and rights hereunder, including, without limitation, the transfer -128- to the Trustee or its designee for administration by it of all amounts which shall at the time be credited by the Servicer to the Collection Account or thereafter received with respect to the Mortgage Loans. The Trustee shall promptly notify the Certificate Insurer and the Rating Agencies of the occurrence of an Event of Default. Section 9.02 Trustee to Act; Appointment of Successor. On and after the time the Servicer receives a notice of termination pursuant to Section 9.01, the Trustee or its appointed agent shall be the successor in all respects to the Servicer to the extent provided in Section 8.09. Section 9.03 Waiver of Defaults. The Majority Certificateholders may, on behalf of all Certificateholders, and subject to the consent of the Certificate Insurer, waive any events permitting removal of the Servicer as servicer pursuant to this Article IX; provided, however, that the Majority Certificateholders may not waive a default in making a required distribution on a Certificate without the consent of the holder of such Certificate. Upon any waiver of a past default, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been remedied for every purpose of this Agreement. No such waiver shall extend to any subsequent or other default or impair any right consequent thereto except to the extent expressly so waived. Notice of any such waiver shall be given by the Trustee to the Rating Agencies. Section 9.04 Mortgage Loans, Trust Fund and Accounts Held for Benefit of the Certificate Insurer. (a) The Trustee shall hold the Trust Fund and the Mortgage Files for the benefit of the Certificateholders and the Certificate Insurer and all references in this Agreement and in the Certificates to the benefit of Holders of the Certificates shall be deemed to include the Certificate Insurer. The Trustee shall cooperate in all reasonable respects with any reasonable request by the Certificate Insurer for action to preserve or enforce the Certificate Insurer's rights or interests under this Agreement and the Certificates unless, as stated in an Opinion of Counsel addressed to the Trustee and the Certificate Insurer, such action is adverse to the interests of the Certificateholders or diminishes the rights of the Certificateholders or imposes additional burdens or restrictions on the Certificateholders. (b) The Servicer hereby acknowledges and agrees that it shall service the Mortgage Loans for the benefit of the Certificateholders and for the benefit of the Certificate Insurer, and all references in this Agreement to the benefit of or actions on behalf of the Certificateholders shall be deemed to include the Certificate Insurer. -129- ARTICLE X CONCERNING THE TRUSTEE Section 10.01 Duties of Trustee. The Trustee, prior to the occurrence of an Event of Default and after the curing or waiver of all Events of Default which may have occurred, undertakes to, and is empowered to, perform such duties and only such duties as are specifically set forth in this Agreement. Any permissive right of the Trustee as enumerated in this Agreement shall not be construed as a duty; provided that in case an Event of Default has occurred (which has not been cured or waived), 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 man would exercise or use under the circumstances in the conduct of such man's own affairs unless the Trustee is acting as Servicer pursuant to Section 9.03, in which case it shall use the same degree of skill in case (when acting as Servicer) as the Servicer hereunder. 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 misconduct, and, if the Trustee is acting as the successor Servicer pursuant to Section 8.09 or 9.02, its own willful misconduct with respect to its servicing obligations; provided, however, that: (i) Prior to the occurrence of an Event of Default, and after the curing or waiver of all such Events of Default which may have occurred, the duties and obligations of the Trustee shall be determined solely by the express provisions of this Agreement, the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Agreement, no implied covenants or obligations shall be read into this Agreement against the Trustee and, in the absence of bad faith on the part of the Trustee, 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; (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 proved that the Trustee was negligent in ascertaining the pertinent facts; and (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 Certificateholders of -130- any Class holding Certificates which evidence, as to such Class, Percentage Interests aggregating not less than 25% as 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. Section 10.02 Certain Matters Affecting the Trustee. Except as otherwise provided in Section 10.01: (a) The Trustee may 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; (b) The Trustee may consult with counsel and any advice or 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 advice or Opinion of Counsel; (c) The Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Agreement or to institute, conduct or defend any litigation hereunder or in relation hereto at the request, order or direction of any of the Certificateholders, pursuant to the provisions of this Agreement, unless such Certificateholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby; nothing contained herein shall, however, relieve the Trustee of the obligation, upon the occurrence of an Event of Default (which has not been cured or waived), to exercise such of the rights and powers vested in it by this Agreement, and to use the same degree of care and skill in their exercise as a prudent man would exercise or use under the circumstances in the conduct of such man's own affairs; (d) Neither the Trustee nor any of its directors, officers, employees or agents shall be personally liable for any action taken, suffered or omitted by it in good faith and believed by it or any of them to be authorized or within the discretion or rights or powers conferred upon the Trustee by this Agreement; -131- (e) Prior to the occurrence of an Event of Default hereunder and after the curing of all Events of Default which may have occurred, the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond or other paper or document, unless requested in writing to do so by Holders of Certificates of any Class evidencing, as to such Class, Percentage Interests aggregating not less than 25% (in the case of conflicting requests by two or more 25% or greater Percentage Interests, the Trustee shall act in accordance with the first such request); provided, however, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Agreement, the Trustee may require reasonable indemnity against such expense or liability as a condition to such proceeding. The reasonable expense of every such examination shall be paid by the Servicer, if an Event of Default shall have occurred and is continuing, and otherwise by the Certificateholder requesting the investigation; (f) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys; and (g) Nothing in this Agreement shall be construed to require the Trustee (acting in its capacity as Trustee) to expend its own funds. Section 10.03 Trustee Not Liable for Certificates or Mortgage Loans. The recitals contained herein and in the Certificates (other than the authentication of the Certificates by an authorized signatory of the Trustee) shall be taken as the statements of the Company, the Certificate Administrator or the Servicer, as the case may be, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations or warranties as to the validity or sufficiency of this Agreement or of the Certificates (except that the Certificates shall be duly and validly authenticated by it) or of any Mortgage Loan or related document. The Trustee shall not be accountable for the use or application by the Company, the Certificate Administrator or the Servicer of any of the Certificates or of the proceeds of such Certificates, or for the use or application of any funds paid to the Company, the Certificate Administrator or the Servicer in respect of the Mortgage Loans or deposited in or withdrawn from the Collection Account or the Certificate Account by the Company, the Certificate Administrator or the -132- Servicer. The Trustee, in its capacity as trustee hereunder, shall have no responsibility for the timeliness or the amount of payments made by the Paying Agent to the Certificateholders. Section 10.04 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 it would have if it were not Trustee. Section 10.05 Fees and Expenses. The Certificate Administrator covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, reasonable compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) for all services rendered by it in the execution of the trust hereby created and in the exercise and performance of any of the powers and duties hereunder of the Trustee, and the Certificate Administrator will pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Agreement (including the reasonable compensation and the expenses and disbursements of its counsel and of all persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence or bad faith. Notwithstanding anything to the contrary in this Agreement, this Section shall survive the termination of this Agreement. Section 10.06 Eligibility Requirements for Trustee. The Trustee hereunder shall at all times be a corporation having its principal office in a state and city acceptable to the Company and organized and doing business under the laws of such 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 and subject to supervision or examination by federal or state authority. The Trustee shall not be an affiliate of the Seller, the Certificate Administrator or the Company. If such corporation 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, the combined capital and surplus of such corporation 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, the Trustee shall resign immediately in the manner and with the effect specified in Section 10.07. Section 10.07 Resignation and Removal of the Trustee. The Trustee, and any co-trustee may at any time resign and be discharged from the trusts hereby created by giving written -133- notice thereof to the Company, the Servicer, the Certificate Administrator and each Rating Agency. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee or co-trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee; provided that such appointment does not result in a reduction or withdrawal of the rating of any of the Classes of Certificates that have been rated. If no successor trustee shall have been so appointed and have accepted appointment within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee. If at any time, the Trustee shall cease to be eligible in accordance with the provisions of Section 10.06 and shall fail to resign after written request therefor by the Company, or if at any time the Trustee shall become incapable of acting, or shall be adjudged 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, then the Company may remove the Trustee and appoint a successor trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee. The Holders of Certificates evidencing in the aggregate more than 50% of Percentage Interest 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 to the Company, one complete set to the Trustee so removed and one complete set to the successor so appointed. Any resignation or removal of the Trustee or any resignation of any co-trustee and appointment of a successor trustee or co-trustee pursuant to any of the provisions of this Section shall become effective upon acceptance of appointment by the successor trustee as provided in Section 10.08, or upon acceptance of appointment by a co-trustee, as applicable, unless with respect to a co-trustee, the Trustee receives written notice from each Rating Agency that the failure to appoint a successor co-trustee would not result in a withdrawal or reduction of the rating of any of the Classes of Certificates that have been rated, in which case the resignation of any co-trustee shall be effective upon receipt of such written notice. Any co-trustee may not be removed unless the Company and the Trustee each receive written notice from each Rating Agency that such removal would not result in a withdrawal or reduction of the rating of any of -134- the Classes of Certificates that have been rated, in which case the removal of any co-trustee shall be effective upon receipt of such written notice. Section 10.08 Successor Trustee. Any successor trustee appointed as provided in Section 10.07 shall execute, acknowledge and deliver to the Company and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee shall become effective and such successor 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 predecessor trustee shall deliver to the successor trustee all Mortgage Files and related documents and statements held by it hereunder, and the Company, the Servicer, the Certificate Administrator and the predecessor trustee shall execute and deliver such instruments and do such other things as may reasonably be required for more fully and certainly vesting and confirming in the successor trustee all such rights, powers, duties and obligations. No successor trustee shall accept appointment as provided in this Section unless at the time of such acceptance such successor trustee shall be eligible under the provisions of Section 10.06. Prior to the appointment of any successor trustee becoming effective, the Company shall have received from each Rating Agency written confirmation that such appointment would not result in a reduction or withdrawal of the rating of the Certificates. Upon acceptance of appointment by a successor trustee as provided in this Section, the Certificate Administrator shall mail notice of the succession of such trustee hereunder to all Holders of Certificates at their addresses as shown in the Certificate Register, to the Servicer, any Sub-Servicer and to each Rating Agency. If the Certificate Administrator 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 Certificate Administrator. Section 10.09 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 such corporation shall be eligible under the provisions of Section 10.06, -135- 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. Section 10.10 Appointment of Co-Trustee or Separate Trustee. 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 the same may at the time be located, the Company 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, of any part of the Trust Fund, and to vest in such Person or Persons, in such capacity, such title to the Trust Fund, or any part thereof, and, subject to the other provisions of this Section 10.10, such powers, duties, obligations, rights and trusts as the Company and the Trustee may consider necessary or desirable. If the Company shall not have joined in such appointment within 15 days after the receipt by it of a request so to do, or in case an Event of Default shall have occurred and be continuing, the Trustee 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 10.06 hereunder and no notice to Holders of Certificates of the appointment of co-trustee(s) or separate trustee(s) shall be required under Section 10.08 hereof. In the case of any appointment of a co-trustee or separate trustee pursuant to this Section 10.10 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 and severally, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed (whether as Trustee hereunder or as successor to the Servicer hereunder), the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust Fund or any portion thereof in any such jurisdiction) shall be exercised and performed by such separate trustee or co-trustee at the direction of the Trustee. Every instrument appointing any separate trustee or co-trustee shall refer to this Agreement and the conditions of this Article X. 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. -136- 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. Section 10.11 Appointment of Office or Agency. The Trustee may appoint an office or agency in The City of New York where Certificates may be surrendered for registration of transfer or exchange. The Trustee will maintain an office at the address stated in Section 12.07 hereof where notices and demands to or upon the Trustee in respect of the Certificates may be served. [End of Article X] -137- ARTICLE XI TERMINATION Section 11.01 Termination. (a) Subject to Section 11.02, this Agreement shall terminate upon notice to the Trustee of either: (i) the disposition of all funds with respect to the last Mortgage Loan and the remittance of all funds due hereunder and the payment of all amounts due and payable to the Certificate Insurer and the Trustee or (it) mutual consent of the Servicer, the Certificate Insurer and all Certificateholders in writing; provided, however, that in no event shall the Trust established by this Agreement terminate later than twenty-one years after the death of the last surviving lineal descendant of Joseph P. Kennedy, late Ambassador of the United States to the Court of St. James's, alive as of the date hereof. (b) In addition, subject to Section 11.02, the Holder of a 50.01% Percentage Interest or greater of the Class R Certificates or the Servicer (or the Certificate Insurer, if [Advanta Mortgage Corp. USA] is removed as Servicer) may, at its option and at its sole cost and expense, terminate this Agreement on any date on which the related Pool Principal Balance is less than 10%, if the holder of the Class R Certificates exercises this option, or is less than 5%, if the Servicer or the Certificate Insurer exercises this option, of the aggregate of the Principal Balances of the Mortgage Loans on the Cut-off Date, by purchasing, on the next succeeding Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a price (the "Termination Price") equal to the sum of (i) 100% of the Principal Balance of each such outstanding Mortgage Loan and each REO Property, (ii) the aggregate amount of accrued and unpaid interest on such Mortgage Loans through the related due period and 30 days' interest on such Mortgage Loans at a rate equal to the related Mortgage Interest Rate (net of the Servicing Fee if the Servicer exercises this option) with respect to such Mortgage Loan, (iii) any unreimbursed amounts due to the Certificate Insurer under this Agreement or the Insurance Agreement and (iv) any excess of the actual stated principal balance of each such Mortgage Loan and REO Property over the Principal Balance thereof, the aggregate amount of accrued and unpaid interest on such excess through the related due period and 30 days' interest on such excess at a rate equal to the related Mortgage Interest Rate with respect to each related Mortgage Loan. Any such purchase shall be accomplished by deposit into the related Certificate Account of the Termination Price. From the Termination Price so deposited, the Trustee shall reimburse the Servicer for the amount of any unpaid Servicing Fees, unreimbursed Periodic Advances and unreimbursed Servicing Advances made by the Servicer with respect to the related Mortgage Loans. No such termination is permitted without the prior written consent of the Certificate -138- Insurer (i) if it would result in a draw on the Certificate Insurance Policy or (ii) unless the Servicer shall have delivered to the Certificate Insurer an opinion of counsel reasonably satisfactory to the Certificate Insurer stating that no amounts paid hereunder are subject to recapture as preferential transfers under the United States Bankruptcy Code, 11 U.S.C. ss.ss. 101 et seq., as amended. (c) If on any Distribution Date, the Servicer determines that there are no outstanding Mortgage Loans and no other funds or assets in the Trust Fund other than funds in the related Certificate Account, the Servicer shall send a final distribution notice promptly to the related Certificateholders in accordance with paragraph (d) below. (d) Notice of any termination, specifying the Distribution Date upon which the Trust Fund will terminate and that the Certificateholders shall surrender their Certificates to the Trustee for payment of the final distribution and cancellation, shall be given promptly by the Servicer by letter to the Certificateholders mailed during the month of such final distribution before the Servicer Remittance Date in such month, specifying (i) the Distribution Date upon which final payment of the Certificates will be made upon presentation and surrender of the Certificates at the office of the Trustee therein designated, (ii) the amount of any such final payment and (iii) that the Record Date otherwise applicable to such Distribution Date is not applicable, payments being made only upon presentation and surrender of the Certificates at the office of the Trustee therein specified. The Servicer shall give such notice to the Trustee therein specified. The Servicer shall give such notice to the Trustee at the time such notice is given to the Certificateholders. The obligations of the Certificate Insurer hereunder shall terminate upon the deposit by the Servicer with the Trustee of a sum sufficient to purchase all of the Mortgage Loans and REO Properties in the Trust Fund as set forth above and when the aggregate Certificate Principal Balance of the Certificates has been reduced to zero. (e) In the event that all Certificateholders do not surrender their Certificates for cancellation within six months after the time specified in the above-mentioned written notice, the Servicer 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 of the 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 subject hereto. If within nine months after the second notice all the Certificates shall not have been surrendered for -139- cancellation, the Class R Certificateholders shall be entitled to all unclaimed funds and other assets which remain subject hereto and the Trustee upon transfer of such funds shall be discharged of any responsibility for such funds and the Certificateholders shall look only to such Class R Certificateholders for payment. Such funds shall remain uninvested. Section 11.02 Additional Termination Requirements. (a) In the event that the Holder of a 50.01% Percentage Interest or greater of the Class R Certificates, Servicer or Certificate Insurer (any of which, an "Exercising Party") exercises its purchase option with respect to the Trust Fund as provided in Section 11.01, the Trust Fund shall be terminated in accordance with the following additional requirements, unless the Trustee has been furnished with an Opinion of Counsel to the effect that the failure of the Trust Fund to comply with the requirements of this Section 11.02 will not (i) result in the imposition of taxes on "prohibited transactions" of the Trust Fund as defined in Section 860F of the Code or (ii) cause the Trust Fund to fall to qualify as a REMIC at any time that any Class A Certificates or Class S Certificates are outstanding: (i) The Trustee shall establish a 90-day liquidation period for the Trust Fund and specify the first day of such period in a statement attached to the Trust Fund's final Tax Return pursuant to Treasury Regulation Section 1.860F-1. The Trustee shall satisfy all the requirements of a qualified liquidation under Section 860F of the Code and any regulations thereunder, as evidenced by an Opinion of Counsel obtained at the expense of the Exercising Party; (ii) During such 90-day liquidation period, and at or prior to the time of making of the final payment on the Certificates, the Trustee shall sell all of the assets of the Trust Fund for cash; and (iii) At the time of the making of the final payment on the Certificates, the Trustee shall distribute or credit, or cause to be distributed or credited, to the Holders of the Class R Certificates all cash on hand in the Trust Fund (other than cash retained to meet claims), and the REMIC shall terminate at that time. (b) By their acceptance of the Class R Certificates, the Holders thereof hereby agree to authorize the Trustee to specify the 90-day liquidation period for the Trust Fund, which authorization shall be binding upon all successor Class R Certificateholders. -140- Section 11.03 Accounting Upon Termination of Servicer. Upon termination of the Servicer, the Servicer shall, at its expense: (a) deliver to its successor or, if none shall yet have been appointed, to the Trustee, the funds in any Account; (b) deliver to its successor or, if none shall yet have been appointed, to the Trustee all of the Mortgage Files and related documents and statements held by it hereunder and a Mortgage Loan portfolio computer tape; (c) deliver to its successor or, if none shall yet have been appointed, to the Trustee and, upon request, to the Certificateholders a full accounting of all funds, including a statement showing the Monthly Payments collected by it and a statement of monies held in trust by it for the payments or charges with respect to the Mortgage Loans; and (d) execute and deliver such instruments and perform all acts reasonably requested in order to effect the orderly and efficient transfer of servicing of the Mortgage Loans to its successor and to more fully and definitively vest in such successor all rights, powers, duties, responsibilities, obligations and liabilities of the "Servicer" under this Agreement. ARTICLE XII MISCELLANEOUS PROVISIONS Section 12.01 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. Section 12.02 Limitation on Rights of Certificateholders. The death or incapacity of any Certificateholder shall not operate to terminate this Agreement or the Trust Fund, nor entitle such Certificateholder's legal representatives or heirs to claim an accounting or to take any action or proceeding in any court for a partition or winding-up of the Trust Fund, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. -141- No Certificateholder shall have any right to vote (except as expressly 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 person 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 of any provision 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 default and of the continuance thereof, as hereinbefore provided, and the Holders of Certificates of any Class evidencing in the aggregate not less than 25% of the Percentage Interests of such Class shall have made written request upon the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder (in the case of conflicting requests by two or more 25% or greater Percentage Interests, the Trustee shall act in accordance with the first such request) and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee, for 60 days after its receipt of such notice, request and offer of indemnity, shall have neglected or refused to institute any such action, suit or proceeding; it being understood and intended, and being expressly covenanted by each Certificateholder with every other Certificateholder and the Trustee, that no one or more Holders of Certificates of any Class shall have any right in any manner whatever by virtue of any provision of this Agreement to affect, disturb or prejudice the rights of the Holders of any other of such Certificates of such Class or any other Class, 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 Certificateholders of such Class or all Classes, as the case may be. For the protection and enforcement of the provisions of this Section, each and every Certificateholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. Section 12.03 Amendment. This Agreement may be amended from time to time by the Company, the Servicer, the Certificate Administrator and the Trustee, without the consent of any of the Certificateholders, to cure any ambiguity, to correct or supplement any provisions herein which may be inconsistent with any other provisions herein, to ensure continuing treatment of the Trust Fund as a REMIC, or to make any other provisions with respect to matters -142- or questions arising under this Agreement which shall not be materially inconsistent with the provisions of this Agreement, provided that such actions shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of any Certificateholder of a Class having an outstanding Certificate Principal Balance of greater than zero. This Agreement may also be amended from time to time by the Company, the Servicer, the Certificate Administrator and the Trustee with the consent of the Holders of Certificates evidencing in the aggregate not less than 66% of the Percentage Interest of each Class of Certificates having an Outstanding Certificate Principal Balance greater than zero and affected thereby for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Holders of Certificates of such Class; provided, however, that no such amendment shall (i) reduce in any manner the amount of, or delay the timing of, payments received on Mortgage Loans which are required to be distributed on any Certificate without the consent of the Holder of such Certificate, (ii) reduce the aforesaid percentage of Certificates of any class the Holders of which are required to consent to any such amendment or (iii) change the percentage specified in clause (ii) of the first paragraph of Section 11.01, without the consent of the Holders of all Certificates of such Class then outstanding. Promptly after the execution of any such amendment the Trustee shall furnish written notification of the substance of such amendment to each Certificateholder and each Rating Agency. It shall not be necessary for the consent of Certificateholders under this Section 12.03 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. Section 12.04 Counterparts. This Agreement may be executed 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 12.05 Duration of Agreement. This Agreement shall continue in existence and effect until terminated as herein provided. -143- Section 12.06 Governing Law. This Agreement shall be construed in accordance with the laws of the State of New York and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws. Section 12.07 Notices. All demands, notices and communications hereunder shall be in writing and shall be deemed to have been duly given if personally delivered at or mailed by first class or registered mail, postage prepaid, to (i) in the case of the Company, Chase Funding, Inc., 343 Thornall Street, Edison, New Jersey 08843, Attention: President, (ii) in the case of Chase, The Chase Manhattan Bank, 450 West 33rd Street, New York New York 10001, Attention: _______________, (iv) in the case of the Trustee, ____________________________________________________________________, (v) in the case of Moody's, Moody's Investors Service, Inc., 99 Church Street, Fourth Floor, New York, New York, 10007, Attention: Residential Pass-Through Surveillance, (vi) in the case of S&P, Standard & Poor's Corporation, 25 Broadway, New York, New York 10004, (vii) in the case of the Certificate Insurer, ________________________________________, and (viii) in the case of any of the foregoing persons, such other addresses as may hereafter be furnished by any such persons to the other parties to this Agreement. Section 12.08 The Certificate Insurer Default. Any right conferred to the Certificate Insurer shall be suspended during any period in which a Certificate Insurer Default exists. At such time as the Certificates are no longer outstanding hereunder, and no amounts owed to the Certificate Insurer hereunder remain unpaid, the Certificate Insurer's rights hereunder shall terminate. Section 12.09 Third Party Beneficiary. The parties agree that each of the Seller and the Certificate Insurer are intended and shall have all rights of a third-party beneficiary of this Agreement. Section 12.10 Intent of the Parties. It is the intent of the Company and Certificateholders that, for federal income taxes, state and local income or franchise taxes and other taxes imposed on or measured by income, the Certificates will be treated as evidencing beneficial ownership interests in a REMIC. The parties to this Agreement and the holder of each Certificate, by acceptance of its Certificate, and each beneficial owner thereof, agree to treat, and to take no action inconsistent with the treatment of, the Certificates in accordance with the preceding sentence for purposes of federal income taxes, state and local income and franchise taxes and other taxes imposed on or measured by income. -144- IN WITNESS WHEREOF, the Company, the Servicer, the Certificate Administrator and the Trustee have caused their officers thereunto duly authorized as of the day and year first above written. CHASE FUNDING, INC., as Company By:___________________________________ Name: Title: [ADVANTA MORTGAGE CORP. USA], as Servicer By:___________________________________ Name: Title: THE CHASE MANHATTAN BANK, as Certificate Administrator By:___________________________________ Name: Title: ___________________________, as Trustee By:___________________________________ Name: Title: -145- EXHIBIT A SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN CHASE FUNDING, INC. ("CHASE FUNDING"), THE MASTER SERVICER, THE SUBSERVICER OR THE TRUSTEE REFERRED TO BELOW OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE, THE REMIC REGULAR INTEREST REPRESENTED HEREBY NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED OR INSURED BY CHASE FUNDING, CHASE MANHATTAN MORTGAGE CORPORATION, ADVANTA MORTGAGE CORP., USA THE TRUSTEE OR BY ANY OF THEIR AFFILIATES OR BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY. FOLLOWING THE INITIAL ISSUANCE OF THE CERTIFICATES, THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE DIFFERENT FROM THE ORIGINAL DENOMINATION SHOWN BELOW. ANYONE ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT PRINCIPAL BALANCE BY INQUIRY OF THE MASTER SERVICER. CLASS IA-1 CERTIFICATE Number 99- -1 Original Denomination $ Cut-off Date: [DATE] Final Scheduled Distribution Date: First Distribution Date: Aggregate Initial Certificate [Date] Balance of all Class IA-1 Certificates: $ Pass-Through Rate: CUSIP: MORTGAGE LOAN ASSET-BACKED CERTIFICATE Series [______] evidencing an ownership interest in distributions allocable to the Class IA-1-1 Certificates with respect to a pool of conventional, sub-prime mortgage loans formed and sold by CHASE FUNDING, INC. Unless this Certificate is presented by an authorized representative of the Depository Trust Company, a New York corporation ("DTC"), to the Trustee for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co. has an interest herein. This certifies that CEDE & CO. is the registered owner of the ownership interest (the "Ownership Interest") evidenced by this Certificate (obtained by dividing the Original Denomination of this Certificate by the aggregate Original Denomination of all Class IA-1 Certificates) in certain distributions with respect to a pool of conventional, sub-prime mortgage loans (the "Mortgage Loans") formed and sold by Chase Funding, Inc. (hereinafter called the "Depositor"), and certain other property held in trust for the benefit of Certificateholders (collectively, the "Trust Fund"). The Mortgage Loans are serviced by Advanta Mortgage Corp., USA (the "Subservicer") and are secured by first mortgages on Mortgaged Properties. The Trust Fund was created pursuant to a Pooling and Servicing Agreement (the "Agreement"), dated as of [Date] among the Depositor, the Subservicer, Chase Manhattan Mortgage Corporation (the "Master Servicer") and Citibank, N.A., as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is one of a duly authorized issue of Certificates, designated as Mortgage Loan Asset-Backed Certificates, Series ______, Class IA-1 (the "Class IA-1 Certificates") and is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which Agreement such Holder is bound. Also issued under the Agreement are Certificates designated as Mortgage Loan Asset-Backed Certificates, Series ______, Class IA-2, Class IA-3, Class IA-4, Class IA-5 and Class IA-6 Certificates (collectively, with the Class IA-1 Certificates, the "Group I Class A Certificates"), Class IIA-1 Certificates (the "Group II Class A Certificates"), Class IM-1 and Class IM-2 Certificates (the "Mezzanine Group I Certificates"), Class IIM-1 and Class IIM-2 Certificates (together the "Mezzanine Group II Certificates"), Class IB Certificates (the "Class IB Certificates") and Class IIB Certificates (the "Class IIB Certificates"). The Group I Class A Certificates, the Group II Class A Certificates, the Mezzanine Group I Certificates, the Mezzanine Group II Certificates, the Class IB Certificates and the Class IIB Certificates are collectively referred to herein as the "Certificates". Pursuant to the terms of the Agreement, the Master Servicer will distribute from funds in the Distribution Account the amount as described on the reverse hereof on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (the "Distribution Date"), commencing on [Date] Such distributions will be made to the Person in whose name this Certificate is registered at the close of business on the last Business Day of the month preceding the month in which such payment is made, or if such last day is not a Business Day, the Business Day immediately preceding such last day. Distributions on this Certificate will be made either by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, or by wire transfer in immediately available funds to the account of such Holder at a bank or other financial or depository institution having appropriate facilities therefor, if such Holder has so notified the Master Servicer in writing at least 5 Business Days prior to the first Distribution Date for which distribution by wire transfer is to be made, and such Holder's Certificates evidence an aggregate original principal balance of not less than $1,000,000 or such Holder holds a 100% Percentage Interest of such Class. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Master Servicer, of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office of the Master Servicer or at such other office as may be designated by such notice of final distribution. The Master Servicer will maintain or cause to be maintained a Certificate Register in which, subject to such reasonable regulations as it may prescribe, the Master Servicer will provide for the registration of Certificates and of transfers and exchanges of Certificates. Upon surrender for registration of transfer of any Certificate at any office or agency of the Master Servicer, or, if an Authenticating Agent has been appointed under the Agreement, the Authenticating Agent, maintained for such purpose, the Master Servicer, or, if an Authenticating Agent has been appointed under the Agreement, the Authenticating Agent, will, subject to the limitations set forth in the Agreement, authenticate and deliver, in the name of the designated transferee or transferees, a Certificate of a like class and dated the date of authentication by the Authenticating Agent. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Master Servicer, of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency appointed by the Master Servicer, for that purpose and specified in such notice of final distribution. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication has been executed by the Authenticating Agent, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Depositor has caused this Certificate to be duly executed. Dated: [Date] CHASE FUNDING, INC. By: Authorized Officer CERTIFICATE OF AUTHENTICATION This is one of the Class IA-1 Certificates referred to in the within-mentioned Agreement. THE CHASE MANHATTAN BANK as Authenticating Agent By: Authorized Signatory REVERSE OF CERTIFICATE MORTGAGE LOAN ASSET-BACKED CERTIFICATE SERIES ________ This Certificate is one of a duly authorized issue of Certificates, designated as Chase Funding Mortgage Loan Asset-Backed Certificates, Series _________, issued in [six] Classes of Group I Class A Certificates, [one] Class of Group II Class A Certificates, [two] Classes of Mezzanine Group I Certificates, [two] Classes of Mezzanine Group II Certificates, [one] Class of Class IB Certificates and [one] Class of Class IIB Certificates, each evidencing an interest in certain distributions with respect to a pool of conventional, sub-prime Mortgage Loans formed and sold by the Depositor and certain other property conveyed by the Depositor to the Trustee. Following the initial issuance of the Certificates, the Principal Balance of this Certificate will be different from the Original Denomination shown above. Anyone acquiring this Certificate may ascertain its current Principal Balance by inquiry of the Master Servicer. The Holder, by its acceptance of this Certificate, agrees that it will look solely to the Trust Fund and certain amounts resulting from credit enhancements for payment hereunder and that the Trustee is not liable to the Holders for any amount payable under this Certificate or the Agreement or, except as expressly provided in the Agreement, subject to any liability under the Agreement. This Certificate does not purport to summarize the Agreement and reference is made to the Agreement for the interests, rights and limitations of rights, benefits, obligations and duties evidenced hereby, and the rights, duties and immunities of the Trustee. The Master Servicer will maintain or cause to be maintained a Certificate Register in which, subject to such reasonable regulations as it may prescribe, the Master Servicer will provide for the registration of Certificates and of transfers and exchanges of Certificates. Upon surrender for registration of transfer of any Certificate at any office or agency of the Master Servicer, or, if an Authenticating Agent has been appointed under the Agreement, the Authenticating Agent, maintained for such purpose, the Master Servicer, or, if an Authenticating Agent has been appointed under Section 5.10, the Authenticating Agent, will, subject to the limitations set forth in the Agreement, authenticate and deliver, in the name of the designated transferee or transferees, a Certificate of a like class and dated the date of authentication by the Authenticating Agent. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Master Servicer of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office of the Master Servicer or at such other office as may be designated by such notice of final distribution. No service charge will be made to the Holder for any transfer or exchange of the Certificate, but the Master Servicer may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of the Certificate. Prior to due presentation of a Certificate for registration of transfer, the Depositor, the Subservicer, the Master Servicer and the Trustee may treat the person in whose name any Certificate is registered as the owner of such Certificate and the Percentage Interest in the Trust Fund evidenced thereby for the purpose of receiving distributions pursuant to the Agreement and for all other purposes whatsoever, and neither the Depositor, the Subservicer, the Master Servicer nor the Trustee will be affected by notice to the contrary. The Agreement may be amended from time to time by the Depositor, the Subservicer, the Master Servicer and the Trustee, without the consent of any of the Certificateholders, to cure any ambiguity, to correct or supplement any provisions therein which may be inconsistent with the other provisions therein, to ensure continuing treatment of the Trust Fund as a REMIC, or to make any other provisions with respect to matters or questions arising under the Agreement which are not materially inconsistent with the provisions of the Agreement, provided that such action does not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of any Certificateholder. The Agreement may also be amended from time to time by the Depositor, the Subservicer, the Master Servicer and the Trustee with the consent of the Holders of Certificates evidencing in the aggregate not less than 66 2/3% of the Percentage Interests of each Class of Certificates affected thereby for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Agreement or of modifying in any manner the rights of the Holders of Certificates of such Class; provided, however, that no such amendment may (i) reduce in any manner the amount of, or delay the timing of, payments received on Mortgage Loans which are 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 66 2/3% or more of the Voting Rights of such Class or (iii) change the percentage specified in clause (ii) of the third paragraph of Section 10.01 of the Agreement, without the consent of the Holders of all Certificates of such Class then outstanding. For federal income tax purposes, the Trust Fund includes two segregated asset pools. The Depositor intends to make an election to treat each as a "real estate mortgage investment conduit" (a "REMIC"). As described more fully herein and in the Prospectus, the Certificates, other than the Residual Certificates, will constitute "regular interests" in the Master REMIC. The Residual Certificates will represent the sole class of "residual interests" in both the Master REMIC and the Subsidiary REMIC. The respective obligations and responsibilities of the Depositor, the Subservicer, the Master Servicer and the Trustee under the Agreement will terminate upon (i) the later of the final payment or other liquidation (or any Advance with respect thereto) of the last Mortgage Loan or the disposition of all property acquired upon the foreclosure or deed in lieu of foreclosure of any Mortgage Loan and the remittance of all funds due thereunder; or (ii) at the option of the Master Servicer, on any Distribution Date on which the aggregate Stated Principal Balances of the Mortgage Loans in such Loan Group is equal to or less than 10% of the aggregate Initial Certificate Principal Balance of the Certificates in such Mortgage Loan Group, so long as the Master Servicer deposits or causes to be deposited in the Distribution Account during the Principal Prepayment Period related to such Distribution Date an amount equal to the sum of (i) 100% of the Stated Principal Balance of each Mortgage Loan in such Loan Group (other than in respect of REO Property), (ii) accrued interest thereon at the applicable Mortgage Rate, (iii) the appraised value of any REO Property in such Loan Group (up to the Stated Principal Balance of the related Mortgage Loan), such appraisal to be conducted by an appraiser mutually agreed upon by the Depositor and the Trustee and (iv) any unreimbursed Servicing Fees, Advances and Servicing Advances, and the principal portion of any unreimbursed Advances, made on the Mortgage Loans in such Loan Group prior to such Distribution Date; provided, however, that in no event shall the trust created hereby continue beyond the earlier of (i) the expiration of 21 years from the death of the last survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James's, living on the date hereof or (ii) the Latest Possible Maturity Date. [FORM OF ASSIGNMENT] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto (PLEASE INSERT SOCIAL SECURITY* OR TAXPAYER IDENTIFICATION NUMBER OF ASSIGNEE) - ------------------------------------------ - ------------------------------------------------------------- (Please Print or Type Name and Address of Assignee) _____________________________________________________________ the within Certificate, and all rights thereunder, and hereby does irrevocably constitute and appoint __________________________________________________ Attorney to transfer the within Certificate on the books kept for the registration thereof, with full power of substitution in the premises. Dated: (Signature guaranty) _______________________________ NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Certificate in every particular, without alteration or enlargement or any change whatever. (*This information, which is voluntary, is being requested to ensure that the assignee will not be subject to backup withholding under Section 3406 of the Code.) EXHIBIT B [RESERVED] EXHIBIT C [RESERVED] EXHIBIT D FORM OF CLASS R CERTIFICATE SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "RESIDUAL INTEREST" IN EACH OF TWO "REAL ESTATE MORTGAGE INVESTMENT CONDUITS," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN CHASE FUNDING, INC. ("CHASE FUNDING"), THE SUBSERVICER OR THE TRUSTEE REFERRED TO BELOW OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE, THE REMIC REGULAR INTEREST REPRESENTED HEREBY NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED OR INSURED BY CHASE FUNDING, CHASE MANHATTAN MORTGAGE CORPORATION, ADVANTA MORTGAGE CORP.,USA, THE TRUSTEE OR BY ANY OF THEIR AFFILIATES OR BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY. THIS CLASS R CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION UNDER SUCH ACT OR UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN. NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE TRUSTEE SHALL HAVE RECEIVED EITHER (i) A REPRESENTATION LETTER FROM THE TRANSFEREE OF THIS CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE EITHER (A) IS NOT AN EMPLOYEE BENEFIT PLAN (A "PLAN") WITHIN THE MEANING OF SECTION 406 OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), AND IS NOT DIRECTLY OR INDIRECTLY PURCHASING ANY CERTIFICATE ON BEHALF OF, AS INVESTMENT MANAGER OF, AS NAMED FIDUCIARY OF, AS TRUSTEE OF OR WITH ASSETS OF A PLAN OR, IN THE CASE OF AN INSURANCE COMPANY, THE ASSETS OF ANY SEPARATE ACCOUNTS TO EFFECT SUCH ACQUISITION OR (B) THE SOURCE OF FUNDS FOR THE PURCHASE OF THE CERTIFICATES IS AN "INSURANCE COMPANY GENERAL ACCOUNT" WITHIN THE MEANING OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60"), 60 FED. REG. 35925 (JULY 12, 1995), AND THE CONDITIONS SET FORTH IN SECTION I AND SECTION III OF PTCE 95-60 ARE SATISFIED WITH RESPECT TO THE PURCHASE AND HOLDING OF THE CERTIFICATES, OR (ii) IF THIS CERTIFICATE IS PRESENTED FOR REGISTRATION IN THE NAME OF A PLAN SUBJECT TO TITLE I OF ERISA, OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (OR COMPARABLE PROVISIONS OF ANY SUBSEQUENT ENACTMENTS), OR A TRUSTEE OF ANY SUCH PLAN, OR ANY OTHER PERSON WHO IS USING THE ASSETS OF ANY SUCH PLAN TO EFFECT SUCH ACQUISITION, AN OPINION OF COUNSEL TO THE EFFECT THAT THE PURCHASE OR HOLDING OF THIS CERTIFICATE WILL NOT RESULT IN THE ASSETS OF THE TRUST FUND BEING DEEMED TO BE "PLAN ASSETS" PURSUANT TO THE DEPARTMENT OF LABOR PLAN ASSET REGULATIONS SET FORTH IN 29 C.F.R. ss.2510.3-101 AND TO BE SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF ERISA OR THE PROHIBITED TRANSACTION PROVISIONS OF THE CODE, WILL NOT CONSTITUTE OR RESULT IN A PROHIBITED TRANSACTION WITHIN THE MEANING OF SECTION 406 OR SECTION 407 OF ERISA OR SECTION 4975 OF THE CODE, AND WILL NOT SUBJECT THE TRUSTEE, THE SUBSERVICER, THE COMPANY OR ANY OF THEIR AFFILIATES TO ANY OBLIGATION OR LIABILITY (INCLUDING OBLIGATIONS OR LIABILITIES UNDER ERISA OR SECTION 4975 OF THE CODE) RELATING TO THE CERTIFICATES. CLASS R CERTIFICATE Number 99- -1 Percentage Interest: 100% Cut-off Date: [Date] Pass-Through Rate: Variable First Distribution Date: [Date] MORTGAGE LOAN ASSET-BACKED CERTIFICATE Series _________ evidencing an ownership interest in distributions allocable to the Class R certificates with respect to a pool of conventional one- to four-family mortgage loans formed and sold by CHASE FUNDING, INC. This certifies that CHASE HOME MORTGAGE CORPORATION OF THE SOUTHEAST is the registered owner of the ownership interest (the "Ownership Interest") evidenced by this Certificate (obtained by dividing the Original Denomination of this Certificate by the aggregate Original Denomination of all Class R Certificates) in certain distributions with respect to a pool of conventional, sub-prime mortgage loans (the "Mortgage Loans") formed and sold by Chase Funding, Inc. (hereinafter called the "Depositor"), and certain other property held in trust for the benefit of Certificateholders (collectively, the "Trust Fund"). The Mortgage Loans are serviced by Chase Manhattan Mortgage Corporation (the "Master Servicer") and are secured by first mortgages on Mortgaged Properties. The Trust Fund was created pursuant to a Pooling and Servicing Agreement (the "Agreement"), dated as of September 1, 1999 among the Depositor, Advanta Mortgage Corp., USA, as Subservicer (the "Subservicer"), the Master Servicer and Citibank, N.A., as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is one of a duly authorized issue of Certificates, designated as Chase Funding Mortgage Loan Asset-Backed Certificates, Series _________, Class R (the "Class R Certificates") and is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which Agreement such Holder is bound. Also issued under the Agreement are Certificates designated as Mortgage Loan Asset-Backed Certificates, Series _________, Class IA-1, Class IA-2, Class IA-3, Class IA-4, Class IA-5 and Class IA-6 Certificates (collectively, the "Group I Class A Certificates"), Class IIA-1 Certificates (the Group II Class A Certificates"), Class IM-1 and Class IM-2 Certificates (together, the "Mezzanine Group I Certificates"), Class IIM-1 and Class IIM-2 Certificates (together, the "Mezzanine Group II Certificates"), Class IB Certificates (the "Class IB Certificates") and Class IIB Certificates (the "Class IIB Certificates"). The Group I Class A Certificates, Group II Class A Certificates, Mezzanine Group I Certificates, Mezzanine Group II Certificates, Class IB Certificates and Class IIB Certificates are collectively referred to herein as the "Certificates") Pursuant to the terms of the Agreement, the Master Servicer will distribute from funds in the Distribution Account the amount as described on the reverse hereof on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (the "Distribution Date"), commencing on [Date]. Such distributions will be made to the Person in whose name this Certificate is registered at the close of business on the last Business Day of the month preceding the month in which such payment is made, or if such last day is not a Business Day, the Business Day immediately preceding such last day. Distributions on this Certificate will be made either by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, or by wire transfer in immediately available funds to the account of such Holder at a bank or other financial or depository institution having appropriate facilities therefor, if such Holder has so notified the Paying Agent in writing at least 5 Business Days prior to the first Distribution Date for which distribution by wire transfer is to be made, and such Holder's Certificates evidence an aggregate original principal balance of not less than $1,000,000 or such Holder holds a 100% Percentage Interest of such Class. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Master Servicer of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office of the Master Servicer or at such other office as may be designated by such notice of final distribution. The Master Servicer will maintain or cause to be maintained a Certificate Register in which, subject to such reasonable regulations as it may prescribe, the Master Servicer will provide for the registration of Certificates and of transfers and exchanges of Certificates. Upon surrender for registration of transfer of any Certificate at any office or agency of the Master Servicer, or, if an Authenticating has been appointed under the Agreement, the Authenticating Agent, maintained for such purpose, the Master Servicer, or, if an Authenticating Agent has been appointed under the Agreement, the Authenticating Agent, will, subject to the limitations set forth in the Agreement, authenticate and deliver, in the name of the designated transferee or transferees, a Certificate of a like class and dated the date of authentication by the Authenticating Agent. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Master Servicer of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency appointed by the Master Servicer, for that purpose and specified in such notice of final distribution. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication has been executed by the Authenticating Agent, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Depositor has caused this Certificate to be duly executed. Dated: [Date] CHASE FUNDING, INC. By: Name: Authorized Officer CERTIFICATE OF AUTHENTICATION This is one of the Class R Certificates referred to in the within-mentioned Agreement. THE CHASE MANHATTAN BANK as Authenticating Agent By: Authorized Signatory REVERSE OF CERTIFICATE MORTGAGE LOAN ASSET-BACKED CERTIFICATE SERIES _________ This Certificate is one of a duly authorized issue of Certificates, designated as Chase Funding Mortgage Loan Asset-Backed Certificates, Series ________, issued in [six] Classes of Group I Class A Certificates, [one] Class of Group II Class A Certificates, [two] Classes of Mezzanine Group I Certificates, [two] Classes of Mezzanine Group II Certificates, [one] Class of Class IB Certificates and [one] Class of Class IIB Certificates, each evidencing an interest in certain Distributions with respect to a pool of conventional, sub-prime Mortgage Loans formed and sold by the Depositor and certain other property conveyed by the Depositor to the Trustee. The Holder, by its acceptance of this Certificate, agrees that it will look solely to the Trust Fund and certain amounts resulting from credit enhancements for payment hereunder and that the Trustee is not liable to the Holders for any amount payable under this Certificate or the Agreement or, except as expressly provided in the Agreement, subject to any liability under the Agreement. This Certificate does not purport to summarize the Agreement and reference is made to the Agreement for the interests, rights and limitations of rights, benefits, obligations and duties evidenced hereby, and the rights, duties and immunities of the Trustee. The Master Servicer will maintain or cause to be maintained a Certificate Register in which, subject to such reasonable regulations as it may prescribe, the Master Servicer will provide for the registration of Certificates and of transfers and exchanges of Certificates. Upon surrender for registration of transfer of any Certificate at any office or agency of the Master Servicer, or, if an Authenticating Agent has been appointed under the Agreement, the Authenticating Agent, maintained for such purpose, the Master Servicer, or, if an Authenticating Agent has been appointed under the Agreement, the Authenticating Agent, will, subject to the limitations set forth in the Agreement, authenticate and deliver, in the name of the designated transferee or transferees, a Certificate of a like class and dated the date of authentication by the Authenticating Agent. Notwithstanding the above, the final Distribution on this Certificate will be made after due notice by the Master Servicer of the pendency of such Distribution and only upon presentation and surrender of this Certificate at the office of the Master Servicer or at such other office as may be designated by such notice of final Distribution. No service charge will be made to the Holder for any transfer or exchange of the Certificate, but the Trustee, or, or, if an Authenticating Agent has been appointed under the Agreement, the Authenticating Agent, may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of the Certificate. Prior to due presentation of a Certificate for registration of transfer, the Depositor, the Subservicer, the Master Servicer and the Trustee may treat the person in whose name any Certificate is registered as the owner of such Certificate and the Percentage Interest in the Trust Fund evidenced thereby for the purpose of receiving distributions pursuant to the Agreement and for all other purposes whatsoever, and neither the Depositor, the Master Servicer, the Subservicer, the Authenticating Agent nor the Trustee will be affected by notice to the contrary. The Agreement may be amended from time to time by the Depositor, the Master Servicer, the Subservicer and the Trustee, without the consent of any of the Certificateholders, to cure any ambiguity, to correct or supplement any provisions therein which may be inconsistent with the other provisions therein, to ensure continuing treatment of the Trust Fund as a REMIC, or to make any other provisions with respect to matters or questions arising under the Agreement which are not materially inconsistent with the provisions of the Agreement, provided that such action does not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of any Certificateholder. The Agreement may also be amended from time to time by the Depositor, the Subservicer, the Master Servicer and the Trustee with the consent of the Holders of Certificates evidencing in the aggregate not less than 66 2/3% of the Percentage Interests of each Class of Certificates affected thereby for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Agreement or of modifying in any manner the rights of the Holders of Certificates of such Class; provided, however, that no such amendment may (i) reduce in any manner the amount of, or delay the timing of, payments received on Mortgage Loans which are 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 66 2/3% or more of the Voting Rights of such Class or (iii) change the percentage specified in clause (ii) of the third paragraph of Section 10.01 of the Agreement, without the consent of the Holders of all Certificates of such Class then outstanding. For federal income tax purposes, the Trust Fund includes two segregated asset pools. The Depositor intends to make an election to treat each as a "real estate mortgage investment conduit" (a "REMIC"). The Certificates, other than the Residual Certificates, will constitute "regular interests" in the Master REMIC. The Residual Certificates will represent the sole class of "residual interests" in both the Master REMIC and the Subsidiary REMIC. The respective obligations and responsibilities of the Depositor, the Subservicer, the Master Servicer and the Trustee under the Agreement will terminate upon (i) the later of the final payment or other liquidation (or any Advance with respect thereto) of the last Mortgage Loan or the disposition of all property acquired upon the foreclosure or deed in lieu of foreclosure of any Mortgage Loan and the remittance of all funds due thereunder; or (ii) at the option of the Master Servicer, on any Distribution Date on which the aggregate Stated Principal Balances of the Mortgage Loans in such Loan Group is equal to or less than 10% of the initial Certificate Principal Balance of the Certificates in such Mortgage Loan Group, so long as the Master Servicer deposits or causes to be deposited in the Distribution Account during the Principal Prepayment Period related to such Distribution Date an amount equal to the sum of (i) 100% of the Stated Principal Balance of each Mortgage Loan in such Loan Group (other than in respect of REO Property), (ii) accrued interest thereon at the applicable Mortgage Rate, (iii) the appraised value of any REO Property in such Loan Group (up to the Stated Principal Balance of the related Mortgage Loan), such appraisal to be conducted by an appraiser mutually agreed upon by the Depositor and the Trustee and (iv) any unreimbursed Servicing Fees, Advances and Servicing Advances, and the principal portion of any unreimbursed Advances, made on the Mortgage Loans in such Loan Group prior to such termination; provided, however, that in no event shall the trust created hereby continue beyond the earlier of (i) the expiration of 21 years from the death of the last survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James's, living on the date hereof or (ii) 32 years after the Closing Date. [FORM OF ASSIGNMENT] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto (PLEASE INSERT SOCIAL SECURITY* OR TAXPAYER IDENTIFICATION NUMBER OF ASSIGNEE) - ------------------------------------------ - ------------------------------------------------------------- (Please Print or Type Name and Address of Assignee) _____________________________________________________________ the within Certificate, and all rights thereunder, and hereby does irrevocably constitute and appoint __________________________________________________ Attorney to transfer the within Certificate on the books kept for the registration thereof, with full power of substitution in the premises. Dated: (Signature guaranty) _______________________________ NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Certificate in every particular, without alteration or enlargement or any change whatever. (*This information, which is voluntary, is being requested to ensure that the assignee will not be subject to backup withholding under Section 3406 of the Code.) EXHIBIT E [RESERVED] EXHIBIT F SCHEDULE OF MORTGAGE LOANS EXHIBIT H FORM OF TRUSTEE CERTIFICATION [DATE] Chase Funding, Inc. 300 Tice Boulevard, 3rd Floor North Woodcliff Lake, New Jersey 07675 Re: Pooling and Servicing Agreement dated as of [Date] among Chase Funding, Inc. as depositor, Advanta Mortgage Corp. USA, as subservicer, Chase Manhattan Mortgage Corporation, as master servicer and Citibank, N.A., as trustee, Chase Funding, Inc., Chase Funding Mortgage Loan Asset-Backed Certificates, Series Ladies and Gentlemen: In accordance with Section 2.02 of the above-captioned Pooling and Servicing Agreement, the undersigned, as Trustee, hereby certifies that [, except as set forth in Schedule A hereto,] as to each Mortgage Loan listed in the Mortgage Loan Schedule attached hereto (other than any Mortgage Loan paid in full or listed on the attachment hereto) it has reviewed the Mortgage File and the Mortgage Loan Schedule and has determined that: (i) All documents in the Mortgage File required to be delivered to the Trustee pursuant to Section 2.01 of the Pooling and Servicing Agreement are in its possession; (ii) In connection with each Mortgage Loan or Assignment thereof as to which documentary evidence of recording was not received on the Closing Date, it has received evidence of such recording; and (iii) Such documents have been reviewed by it and such documents do not contain any material omissions or defects within the meaning of Section 2.01 or 2.02. The Trustee further certifies that as to each Mortgage Loan, the Trustee holds the Mortgage Note without any Responsible Officer of the Trustee having received written notice (a) of any adverse claims, liens or encumbrances, (b) that any Mortgage Note was overdue or has been dishonored, (c) of evidence on the face of any Mortgage Note or Mortgage of any security interest therein, or (d) of any defense against or claim to the Mortgage Note by any other party. The Trustee has made no independent examination of any documents contained in each Mortgage File beyond confirming (i) that the Mortgage Loan number and the name of the Mortgagor in each Mortgage File conform to the respective Mortgage Loan number and name listed on the Mortgage Loan Schedule and (ii) the existence in each Mortgage File of each of the documents listed in subparagraphs (i)(A) through (G), inclusive, of Section 2.01 in the Agreement. The Trustee makes no representations or warranties as to the validity, legality, sufficiency, enforceability or genuineness of any of the documents contained in each Mortgage Loan or the collectibility, insurability, effectiveness or suitability of any such Mortgage Loan. Capitalized words and phrases used herein shall have the respective meanings assigned to them in the above-captioned Pooling and Servicing Agreement. CITIBANK, N.A., as Trustee By: _____________________________ Name: _______________________ Title: ______________________ EXHIBIT I FORM OF TRANSFEREE'S LETTER CHASE FUNDING, INC., CHASE FUNDING MORTGAGE LOAN ASSET-BACKED CERTIFICATES, SERIES ________ [DATE] Chase Funding, Inc. 300 Tice Boulevard, 3rd Floor North Woodcliff Lake, New Jersey 07675 Ladies and Gentlemen: We propose to purchase Chase Funding, Inc., Chase Funding Mortgage Loan Asset-Backed Certificates, Series ________, Class R, described in the Prospectus Supplement, dated [Date], and Prospectus, dated [Date]. 1. We certify that (a) we are not a disqualified organization and (b) we are not purchasing such Class R Certificates on behalf of a disqualified organization; for this purpose the term "disqualified organization" means the United States, any state or political subdivision thereof, any foreign government, any international organization, any agency or instrumentality of any of the foregoing (except any entity treated as other than an instrumentality of the foregoing for purposes of Section 168(h)(2)(D) of the Internal Revenue Code of 1986, as amended (the "Code")), any organization (other than a cooperative described in Section 521 of the Code) that is exempt from taxation under the Code (unless such organization is subject to tax on excess inclusions) and any organization that is described in Section 1381(a)(2)(C) of the Code. We understand that any breach by us of this certification may cause us to be liable for an excise tax imposed upon transfers to disqualified organizations. 2. We certify that (a) we have historically paid our debts as they became due, (b) we intend, and believe that we will be able, to continue to pay our debts as they become due in the future, (c) we understand that, as beneficial owner of the Class R Certificates, we may incur tax liabilities in excess of any cash flows generated by the Class R Certificates, and (d) we intend to pay any taxes associated with holding the Class R Certificates as they become due. 3. We acknowledge that we will be the beneficial owner of the Class R Certificates and:1/ ______ The Class R Certificates will be registered in our name. ______ The Class R Certificates will be held in the name of our nominee, _________________, which is not a disqualified organization. 4. Unless Chase Funding, Inc. ("Chase Funding") has consented to the transfer to us by executing the form of Consent affixed hereto as Appendix B, we certify that we are a U.S. person; for this purpose the term "U.S. person" means a citizen or resident of the United States, a corporation, or partnership (unless, in the case of a partnership, Treasury regulations are adopted that provide otherwise) created or organized in or under the laws of the United States, any State thereof or the District of Columbia, including an entity treated as a corporation or partnership for federal income tax purposes, an estate whose income is subject to United States federal income tax regardless of the source of its income, or a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more such U.S. persons have the authority to control all substantial decisions of the trust (or, to the extent provided in applicable Treasury regulations, certain trusts in existence on August 20, 1996 which are eligible to elect to be treated as U.S. Persons. We agree that any breach by us of this certification shall render the transfer of any interest in the Class R Certificates to us absolutely null and void and shall cause no rights in the Class R Certificates to vest in us. 5. We agree that in the event that at some future time we wish to transfer any interest in the Class R Certificates, we will transfer such interest in the Class R Certificates only (a) to a transferee that (i) is not a disqualified organization and is not purchasing such interest in the Class R Certificates on behalf of a disqualified organization, (ii) is a U.S. person and (iii) has delivered to Chase Funding a letter in the form of this letter (including the affidavit appended hereto) and, if requested by Chase Funding, an opinion of counsel (in a form acceptable to Chase Funding) that the proposed transfer will not cause the interest in the Class R Certificates to be held by a disqualified organization or a person who is not a U.S. person or (b) with the written consent of Chase Funding. - -------------------- 1/ Check appropriate box and if necessary fill in the name of the Transferee's nominee. 6. We hereby designate Chase Manhattan Mortgage Corporation as our fiduciary to act as the tax matters person for the Chase Funding, Inc., Chase Funding Mortgage Loan Asset-Backed Certificates, Series ________ REMIC. Very truly yours, [PURCHASER] By: Name: Title: Accepted as of __________ __, 199_ CHASE FUNDING, INC. By: Name: Title: APPENDIX A Affidavit pursuant to (i) Section 860E(e)(4) of the Internal Revenue Code of 1986, as amended, and (ii) certain provisions of the Pooling and Servicing Agreement Under penalties of perjury, the undersigned declares that the following is true: (1) He or she is an officer of _________________________ (the "Transferee"), (2) the Transferee's Employee Identification number is __________, (3) the Transferee is not a "disqualified organization" (as defined below), has no plan or intention of becoming a disqualified organization, and is not acquiring any of its interest in the Chase Funding, Inc., Chase Funding Mortgage Loan Asset-Backed Certificates, Series 1999-3, Class R on behalf of a disqualified organization or any other entity, (4) unless Chase Funding, Inc. ("Chase Funding") has consented to the transfer to the Transferee by executing the form of Consent affixed as Appendix B to the Transferee's Letter to which this Certificate is affixed as Appendix A, the Transferee is a "U.S. person" (as defined below), (5) that no purpose of the transfer is to avoid or impede the assessment or collection of tax, (6) the Transferee has historically paid its debts as they became due, (7) the Transferee intends, and believes that it will be able, to continue to pay its debts as they become due in the future, (8) the Transferee understands that, as beneficial owner of the Class R Certificates, it may incur tax liabilities in excess of any cash flows generated by the Class R Certificates, (9) the Transferee intends to pay any taxes associated with holding the Class R Certificates as they become due, and (10) the Transferee consents to any amendment of the Pooling and Servicing Agreement that shall be deemed necessary by Chase Funding (upon advice of counsel) to constitute a reasonable arrangement to ensure that the Class R Certificates will not be owned directly or indirectly by a disqualified organization; For purpose of this affidavit, the term "disqualified organization" means the United States, any state or political subdivision thereof, any foreign government, any international organization, any agency or instrumentality of any of the foregoing (except any entity treated as other than an instrumentality of the foregoing for purposes of Section 168(h)(2)(D) of the Internal Revenue Code of 1986, as amended (the "Code")), any organization (other than a cooperative described in Section 521 of the Code) that is exempt from taxation under the Code (unless such organization is subject to tax on excess inclusions) and any organization that is described in Section 1381(a)(2)(C) of the Code and the term "U.S. Person" means a citizen or resident of the United States, a corporation or partnership (unless, in the case of a partnership, Treasury regulations are adopted that provide otherwise) created or organized in or under the laws of the United States, any state thereof or the District of Columbia, including an entity treated as a corporation or partnership for federal income tax purposes, an estate whose income is subject to Unites States federal income tax regardless of its source, or a trust if a court within the United States is able to exercise primary supervision over the administration of such trust, and one or more such U.S. Persons have the authority to control all substantial decisions of such trust, (or, to the extent provided in applicable Treasury regulations, certain trusts in existence on August 20, 1996 which are eligible to elect to be treated as U.S. Persons). --------------------------------- By: ---------------------------------- --------------------------------- Address of Investor for receipt of distribution: Address of Investor for receipt of tax information: (Corporate Seal) Attest: ---------------------------------- ________________________, Secretary Personally appeared before me the above-named ______________, known or proved to me to be the same person who executed the foregoing instrument and to be the _______ of the Investor, and acknowledged to me that he executed the same as his free act and deed and the free act and deed of the Investor. Subscribed and sworn before me this day of , 19 . Notary Public County of ______ State of _______ My commission expires the _____day of________ By: __________________________ Name: ___________________ Title: ___________________ Dated: _____________ APPENDIX B CONSENT _________________________ (Transferee) _________________________ _________________________ Ladies and Gentlemen: Chase Funding, Inc. ("Chase Funding") hereby consents to the transfer to, and registration in the name of, the Transferee (or, if applicable, registration in the name of such Transferee's nominee of the Chase Funding Inc., Chase Funding Mortgage Loan Asset-Backed Certificates, Series _______, Class R described in the Transferee's Letter to which this Consent is appended, notwithstanding Chase Funding's knowledge that the Transferee is not a U.S. person (as defined in such Transferee's Letter). CHASE FUNDING, INC. Dated: By: EXHIBIT J FORM OF TRANSFEROR CERTIFICATE FOR CLASS R CERTIFICATES Chase Funding, Inc. 300 Tice Boulevard Woodcliff Lake, NJ 07675 Citibank, N.A., as Trustee 111 Wall Street 5th Floor, Zone 1 New York, NY 10043 RE: Chase Funding, Inc., Chase Funding Mortgage Loan Asset-Backed Certificates, Series _________ Ladies and Gentlemen: In connection with our disposition of the Class R Certificates, we certify that (a) we understand that the Certificates have not been registered under the Securities Act of 1933, as amended (the "Act"), and are being disposed by us in a transaction that is exempt from the registration requirements of the Act, (b) we have not offered or sold any Certificates to, or solicited offers to buy any Certificates from, any person, or otherwise approached or negotiated with any person with respect thereto, in a manner that would be deemed, or taken any other action that would result in, a violation of Section 5 of the Act and (c) if we are disposing of a Class R Certificate, we have no knowledge the Transferee is not a Permitted Transferee. All capitalized terms used herein but not defined herein shall have the meanings assigned to them in the Pooling and Servicing Agreement dated as of September 1, 1999, among Chase Funding, Inc., as Depositor, Advanta Mortgage Corp. USA as Subservicer, Chase Manhattan Mortgage Corporation as Master Servicer and Citibank, N.A., as Trustee. Very truly yours, Name of Transferor By: Name: Title EXHIBIT K FORM OF INVESTMENT LETTER (Accredited Investor) [DATE] Chase Funding, Inc. 300 Tice Boulevard, 3rd Floor North Woodcliff Lake, New Jersey 07675 Re: Pooling and Servicing Agreement dated as of [Date] among Chase Funding, Inc. as depositor, Advanta Mortgage Corp. USA, as subservicer, Chase Manhattan Mortgage Corporation, as master servicer and Citibank, N.A., as trustee, Chase Funding, Inc., Chase Funding Mortgage Loan Asset-Backed Certificates, Series [Class B-] Ladies and Gentlemen: ______________ (the "Purchaser") intends to purchase from ________________ (the "Transferor") $_______ by original principal balance (the "Transferred Certificates") of Mortgage Loan Asset-Backed Certificates, Series ________, [Class B-] (the "Certificates"), issued pursuant to a pooling and servicing agreement, dated as of [Date] (the "Pooling and Servicing Agreement"), among Chase Funding, Inc. as depositor (the "Depositor"), Advanta Mortgage Corp. USA as subservicer (the "Subservicer"), Chase Manhattan Mortgage Corporation, as master servicer (the "Master Servicer") and Citibank, N.A., as trustee (the "Trustee"). [The Purchaser intends to register the Transferred Certificate in the name of ____________________, as nominee for _________________.] All terms used and not otherwise defined herein shall have the meanings set forth in the Pooling and Servicing Agreement. For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Purchaser certifies, represents and warrants to, and covenants with, the Depositor and the Trustee that: 1. The Purchaser understands that (a) the Certificates have not been registered or qualified under the Securities Act of 1933, as amended (the "Securities Act"), or the securities laws of any state, (b) neither the Depositor nor the Trustee is required, and neither of them intends, to so register or qualify the Certificates, (c) the Certificates cannot be resold unless (i) they are registered and qualified under the Securities Act and the applicable state securities laws or (ii) an exemption from registration and qualification is available and (d) the Pooling and Servicing Agreement contains restrictions regarding the transfer of the Certificates. 2. The Certificates will bear a legend to the following effect: THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE "1940 ACT") OR ANY STATE SECURITIES OR "BLUE SKY" LAWS, AND MAY NOT, DIRECTLY OR INDIRECTLY, BE SOLD OR OTHERWISE TRANSFERRED, OR OFFERED FOR SALE, UNLESS SUCH TRANSFER IS NOT SUBJECT TO REGISTRATION UNDER THE ACT, THE 1940 ACT AND ANY APPLICABLE STATE SECURITIES LAWS AND SUCH TRANSFER ALSO COMPLIES WITH THE OTHER PROVISIONS OF SECTION 5.02 OF THE POOLING AND SERVICING AGREEMENT. NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE MASTER SERVICER SHALL HAVE RECEIVED, IN FORM AND SUBSTANCE SATISFACTORY TO THE MASTER SERVICER (A) AN INVESTMENT LETTER FROM THE PROSPECTIVE INVESTOR; AND (B) REPRESENTATIONS FROM THE TRANSFEROR REGARDING THE OFFERING AND SALE OF THE CERTIFICATES. NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE DEPOSITOR SHALL HAVE RECEIVED EITHER (i) A REPRESENTATION LETTER FROM THE TRANSFEREE OF THIS CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE EITHER (A) IS NOT AN EMPLOYEE BENEFIT PLAN (A "PLAN") WITHIN THE MEANING OF SECTION 406 OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), AND IS NOT DIRECTLY OR INDIRECTLY PURCHASING ANY CERTIFICATE ON BEHALF OF, AS INVESTMENT MANAGER OF, AS NAMED FIDUCIARY OF, AS TRUSTEE OF OR WITH ASSETS OF A PLAN OR, IN THE CASE OF AN INSURANCE COMPANY, THE ASSETS OF ANY SEPARATE ACCOUNTS TO EFFECT SUCH ACQUISITION OR (B) THE SOURCE OF FUNDS FOR THE PURCHASE OF THE CERTIFICATES IS AN "INSURANCE COMPANY GENERAL ACCOUNT" WITHIN THE MEANING OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60"), 60 FED. REG. 35925 (JULY 12, 1995), AND THE CONDITIONS SET FORTH IN SECTION I AND SECTION III OF PTCE 95-60 ARE SATISFIED WITH RESPECT TO THE PURCHASE AND HOLDING OF THE CERTIFICATES, OR (ii) IF THIS CERTIFICATE IS PRESENTED FOR REGISTRATION IN THE NAME OF A PLAN SUBJECT TO TITLE I OF ERISA, OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (OR COMPARABLE PROVISIONS OF ANY SUBSEQUENT ENACTMENTS), OR A TRUSTEE OF ANY SUCH PLAN, OR ANY OTHER PERSON WHO IS USING THE ASSETS OF ANY SUCH PLAN TO EFFECT SUCH ACQUISITION, AN OPINION OF COUNSEL TO THE EFFECT THAT THE PURCHASE OR HOLDING OF THIS CERTIFICATE WILL NOT RESULT IN THE ASSETS OF THE TRUST FUND BEING DEEMED TO BE "PLAN ASSETS" PURSUANT TO THE DEPARTMENT OF LABOR PLAN ASSET REGULATIONS SET FORTH IN 29 CFR ss.2510.3-101 AND TO BE SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF ERISA OR THE PROHIBITED TRANSACTION PROVISIONS OF THE CODE, WILL NOT CONSTITUTE OR RESULT IN A PROHIBITED TRANSACTION WITHIN THE MEANING OF SECTION 406 OR SECTION 407 OF ERISA OR SECTION 4975 OF THE CODE, AND WILL NOT SUBJECT THE TRUSTEE, THE SUBSERVICER, THE MASTER SERVICER, THE DEPOSITOR OR ANY OF THEIR AFFILIATES TO ANY OBLIGATION OR LIABILITY (INCLUDING OBLIGATIONS OR LIABILITIES UNDER ERISA OR SECTION 4975 OF THE CODE) RELATING TO THE CERTIFICATES. 3. The Purchaser is acquiring the Transferred Certificates for its own account [for investment only]**/ and not with a view to or for sale or other transfer in connection with any distribution of the Transferred Certificates in any manner that would violate the Securities Act or any applicable state securities laws, subject, nevertheless, to the understanding that disposition of the Purchaser's property shall at all times be and remain within its control. 4. The Purchaser (a) is a substantial, sophisticated institutional investor having such knowledge and experience in financial and business matters, and in particular in such matters related to securities similar to the Certificates, such that it is capable of evaluating the merits and risks of investment in the Certificates, (b) is able to bear the economic risks of such an investment and (c) is an "accredited investor" within the meaning of Rule 501(a) promulgated pursuant to the Securities Act. 5. The Purchaser will not nor has it authorized nor will it authorize any person to (a) offer, pledge, sell, dispose of or otherwise transfer any Certificate, any interest in any Certificate or any other similar security to any person in any manner, (b) solicit any offer to buy or to accept a pledge, disposition or other transfer of any Certificate, any interest in any Certificate or any other similar security from any person in any manner, (c) otherwise approach or negotiate with respect to any Certificate, any interest in any Certificate or any other similar security with any person in any manner, (d) make any general solicitation by means of general advertising or in any other manner, or (e) take any other action, that would constitute a distribution of any Certificate under the Securities Act or the Investment Company Act of 1940, as amended (the "1940 Act"), that would render the disposition of any Certificate a violation of Section 5 of the Securities Act or any state securities law, or that would require registration or qualification pursuant thereto. Neither the Purchaser nor anyone acting on its behalf has offered the Certificates for sale or made any general solicitation by means of general advertising or in any other manner with respect to the Certificates. The Purchaser will not sell or otherwise transfer any of the Certificates, except in compliance with the provisions of the Pooling and Servicing Agreement. - -------------------- **/ Not required of a broker/dealer purchaser. 6. [This paragraph may be deleted if the Purchaser provides the Opinion of Counsel referred to in clause (ii) of Section 5.02(b) of the Pooling and Servicing Agreement.] The Purchaser either (A) is not an employee benefit plan within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or a plan within the meaning of Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code") (each, a "Plan"), and is not directly or indirectly purchasing any Certificate on behalf of, as investment manager of, as named fiduciary of, as trustee of or with assets of a Plan or directly or indirectly purchasing any certificates with the assets of any insurance company separate account or of any Plan or (B) is an insurance company and the source of funds for the purchase of the certificates is an "insurance company general account" within the meaning of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60"), 60 Fed. Reg. 35925 (July 12, 1995), and the conditions set forth in Section I and III of PTCE 95-60 are satisfied with respect to the purchase and holding of the Certificates. 7. Prior to the sale or transfer by the Purchaser of any of the Certificates, the Purchaser will obtain from any subsequent purchaser substantially the same certifications, representations, warranties and covenants contained in the foregoing paragraphs and in this letter or a letter substantially in the form of Exhibit L to the Pooling and Servicing Agreement. 8. The Purchaser agrees to indemnify the Trustee, the Master Servicer, the Subservicer and the Depositor against any liability that may result from any misrepresentation made herein. Very truly yours, [PURCHASER] By: Name: Title: EXHIBIT L FORM OF RULE 144A INVESTMENT LETTER (Qualified Institutional Buyer) [DATE] Chase Funding, Inc. 300 Tice Boulevard, 3rd Floor North Woodcliff Lake, New Jersey 07675 Chase Manhattan Mortgage Corporation c/o The Chase Manhattan Bank Global Trust Services 450 West 33rd Street, 15th Floor New York, New York 10001 Re: Pooling and Servicing Agreement dated as of [Date] among Chase Funding, Inc. as depositor, Advanta Mortgage Corp., USA, as subservicer, Chase Manhattan Mortgage Corporation, as master servicer and Citibank, N.A., as trustee, Chase Funding, Inc., Chase Funding Mortgage Loan Asset-Backed Certificates, Series [Class B-] Ladies and Gentlemen: ______________ (the "Purchaser") intends to purchase from ________________ (the "Transferor") $_______ by original principal balance (the "Transferred Certificates") of Asset-Backed Certificates, Series ______, [Class B-] (the "Certificates"), issued pursuant to a pooling and servicing agreement, dated as of [Date] (the "Pooling and Servicing Agreement"), among Chase Funding, Inc. as depositor (the "Depositor"), Advanta Mortgage Corp., USA, as subservicer (the "Subservicer"), Chase Manhattan Mortgage Corporation, as master servicer (AMaster Servicer@), and Citibank, N.A., as trustee (the "Trustee"). [The Purchaser intends to register the Transferred Certificate in the name of ____________________, as nominee for __________________.] All terms used and not otherwise defined herein shall have the meanings set forth in the Trust Agreement. For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Purchaser certifies, represents and warrants to, and covenants with, the Depositor and the Trustee that: In connection with our acquisition of the above Transferred Certificates we certify that (a) we understand that the Certificates are not being registered under the Securities Act of 1933, as amended (the "Act"), or any state securities laws and are being transferred to us in a transaction that is exempt from the registration requirements of the Act and any such laws, (b) we have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of investments in the Certificates, (c) we have had the opportunity to ask questions of and receive answers from the Depositor concerning the purchase of the Transferred Certificates and all matters relating thereto or any additional information deemed necessary to our decision to purchase the Transferred Certificates, (d) we are not an employee benefit plan within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, or a plan within the meaning of Section 4975 of the Internal Revenue Code of 1986, as amended (each, a "Plan"), nor are we directly or indirectly purchasing any Certificate on behalf of, as investment manager of, as named fiduciary of, as trustee of or with assets of a Plan or directly or indirectly purchasing any certificates with the assets of any insurance company separate account or of any Plan [or alternatively, in the case of an insurance company, is an insurance company and the source of funds for the purchase of the certificates] is an "insurance company general account" within the meaning of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60"), 50 Fed. Reg. 35925 (July 12, 1995), and the conditions set forth in Section I and Section III of PTCE 95-60 are satisfied with respect to the purchase and holding of the Certificates, (e) we have not, nor has anyone acting on our behalf offered, transferred, pledged, sold or otherwise disposed of the Certificates, any interest in the Certificates or any other similar security to, or solicited any offer to buy or accept a transfer, pledge or other disposition of the Certificates, any interest in the Certificates or any other similar security from, or otherwise approached or negotiated with respect to the Certificates, any interest in the Certificates or any other similar security with, any person in any manner, or made any general solicitation by means of general advertising or in any other manner, or taken any other action, that would constitute a distribution of the Certificates under the Securities Act or that would render the disposition of the Certificates a violation of Section 5 of the Securities Act or require registration pursuant thereto, nor will act, nor has authorized or will authorize any person to act, in such manner with respect to the Certificates, (f) we are a "qualified institutional buyer" as that term is defined in Rule 144A under the Securities Act and have completed one of the forms of certification to that effect attached hereto as Annex 1 or Annex 2. We are aware that the sale of the Transferred Certificates to us is being made in reliance on Rule 144A. We are acquiring the Transferred Certificates for our own account or for resale pursuant to Rule 144A and further understand that such Certificates may be resold, pledged or transferred only (i) to a person reasonably believed by us, based upon certifications of such purchaser or information we have in our possession, to be a qualified institutional buyer that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that the resale, pledge or transfer is being made in reliance on Rule 144A, or (ii) pursuant to another exemption from registration under the Securities Act. We agree to indemnify the Trustee, the Master Servicer, the Subservicer and the Depositor against any liability that may result from any misrepresentation made herein. Very truly yours, [PURCHASER] By: Name: Title: ANNEX 1 QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A [For Transferees Other Than Registered Investment Companies] The undersigned (the "Buyer") hereby certifies as follows to the parties listed in the Rule 144A Transferee Certificate to which this certification relates with respect to the Certificates described therein: 1. As indicated below, the undersigned is the President, Chief Financial Officer, Senior Vice President or other executive officer of the Buyer. 2. In connection with the purchases by the Buyer, the Buyer is a "qualified institutional buyer" as that term is defined in Rule 144A under the Securities Act of 1933, as amended ("Rule 144A") because (i) the Buyer owned and/or invested on a discretionary basis $____________*/ in securities (except for the excluded securities referred to below) as of the end of the Buyer's most recent fiscal year (such amount being calculated in accordance with Rule 144A) and (ii) the Buyer satisfies the criteria in the category marked below. ____ Corporation, etc. The Buyer is a corporation (other than a bank, savings and loan association or similar institution), Massachusetts or similar business trust, partnership, or charitable organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended. ____ Bank. The Buyer (a) is a national bank or banking institution organized under the laws of any State, territory or the District of Columbia, the business of which is substantially confined to banking and is supervised by Federal, State or territorial banking commission or similar official or is a foreign bank or equivalent institution, and (b) has an audited net worth of at least $25,000,000 as demonstrated in its latest annual financial statements, a copy of which is attached hereto. - -------------------- * Buyer must own and/or invest on a discretionary basis at least $100,000,000 in securities unless Buyer is a dealer, and, in that case, Buyer must own and/or invest on a discretionary basis at least $10,000,000 in securities. ____ Savings and Loan. The Buyer (a) is a savings and loan association, building and loan association, cooperative bank, homestead association or similar institution, which is supervised and examined by a State or Federal authority having supervision over such institution or is a foreign savings and loan association or equivalent institution and (b) has an audited net worth of at least $25,000,000 as demonstrated in its latest annual financial statements, a copy of which is attached hereto. ____ Broker-dealer. The Buyer is a dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended. ____ Insurance Company. The Buyer is an insurance company whose primary and predominant business activity is the writing of insurance or the reinsuring of risks underwritten by insurance companies and which is subject to supervision by the insurance commissioner or a similar official or agency of the State, territory or the District of Columbia. ____ State or Local Plan. The Buyer is a plan established and maintained by a State, its political subdivisions, or any agency or instrumentality of the State or its political subdivisions, for the benefit of its employees. ____ ERISA Plan. The Buyer is an employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974, as amended. ____ Investment Advisor. The Buyer is an investment advisor registered under the Investment Advisors Act of 1940, as amended. ____ Small Business Investment Company. Buyer is a small business investment company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958, as amended. ____ Business Development Company. Buyer is a business development company as defined in Section 202(a)(22) of the Investment Advisors Act of 1940, as amended. 3. The term "securities" as used for purposes of the calculation of the dollar amount in paragraph 2 excludes: (i) securities of issuers that are affiliated with the Buyer, (ii) securities that are part of an unsold allotment to or subscription by the Buyer, if the Buyer is a dealer, (iii) securities issued or guaranteed by the U.S. or any instrumentality thereof, (iv) bank deposit notes and certificates of deposit, (v) loan participations, (vi) repurchase agreements, (vii) securities owned but subject to a repurchase agreement and (viii) currency, interest rate and commodity swaps. 4. For purposes of determining the aggregate amount of securities owned and/or invested on a discretionary basis by the Buyer, the Buyer used the cost of such securities to the Buyer and did not include any of the securities referred to in the preceding paragraph, except (i) where the Buyer reports its securities holdings in its financial statements on the basis of their market value, and (ii) no current information with respect to the cost of those securities has been published. If clause (ii) in the preceding sentence applies, the securities may be valued at market. Further, in determining such aggregate amount, the Buyer may have included securities owned by subsidiaries of the Buyer, but only if such subsidiaries are consolidated with the Buyer in its financial statements prepared in accordance with generally accepted accounting principles and if the investments of such subsidiaries are managed under the Buyer's direction. However, such securities were not included if the Buyer is a majority-owned, consolidated subsidiary of another enterprise and the Buyer is not itself a reporting company under the Securities Exchange Act of 1934, as amended. 5. The Buyer acknowledges that it is familiar with Rule 144A and understands that the seller to it and other parties related to the Certificates are relying and will continue to rely on the statements made herein because one or more sales to the Buyer may be in reliance on Rule 144A. 6. Until the date of purchase of the Rule 144A Securities, the Buyer will notify each of the parties to which this certification is made of any changes in the information and conclusions herein. Until such notice is given, the Buyer's purchase of the Certificates will constitute a reaffirmation of this certification as of the date of such purchase. In addition, if the Buyer is a bank or savings and loan as provided above, the Buyer agrees that it will furnish to such parties updated annual financial statements promptly after they become available. By: Name: Title: Date: ANNEX 2 QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A [For Transferees That are Registered Investment Companies] The undersigned (the "Buyer") hereby certifies as follows to the parties listed in the Rule 144A Transferee Certificate to which this certification relates with respect to the Certificates described therein: 1. As indicated below, the undersigned is the President, Chief Financial Officer or Senior Vice President of the Buyer or, if the Buyer is a "qualified institutional buyer" as that term is defined in Rule 144A under the Securities Act of 1933, as amended ("Rule 144A"), because Buyer is part of a Family of Investment Companies (as defined below), is such an officer of the Adviser. 2. In connection with purchases by Buyer, the Buyer is a "qualified institutional buyer" as defined in Rule 144A because (i) the Buyer is an investment company registered under the Investment Company Act of 1940, as amended and (ii) as marked below, the Buyer alone, or the Buyer's Family of Investment Companies, owned at least $100,000,000 in securities (other than the excluded securities referred to below) as of the end of the Buyer's most recent fiscal year. For purposes of determining the amount of securities owned by the Buyer or the Buyer's Family of Investment Companies, the cost of such securities was used, except (i) where the Buyer or the Buyer's Family of Investment Companies reports its securities holdings in its financial statements on the basis of their market value, and (ii) no current information with respect to the cost of those securities has been published. If clause (ii) in the preceding sentence applies, the securities may be valued at market. ____ The Buyer owned $___________ in securities (other than the excluded securities referred to below) as of the end of the Buyer's most recent fiscal year (such amount being calculated in accordance with Rule 144A). ____ The Buyer is part of a Family of Investment Companies which owned in the aggregate $__________ in securities (other than the excluded securities referred to below) as of the end of the Buyer's most recent fiscal year (such amount being calculated in accordance with Rule 144A). 3. The term "Family of Investment Companies" as used herein means two or more registered investment companies (or series thereof) that have the same investment adviser or investment advisers that are affiliated (by virtue of being majority owned subsidiaries of the same parent or because one investment adviser is a majority owned subsidiary of the other). 4. The term "securities" as used herein does not include (i) securities of issuers that are affiliated with the Buyer or are part of the Buyer's Family of Investment Companies, (ii) securities issued or guaranteed by the U.S. or any instrumentality thereof, (iii) bank deposit notes and certificates of deposit, (iv) loan participations, (v) repurchase agreements, (vi) securities owned but subject to a repurchase agreement and (vii) currency, interest rate and commodity swaps. 5. The Buyer is familiar with Rule 144A and understands that the parties listed in the Rule 144A Transferee Certificate to which this certification relates are relying and will continue to rely on the statements made herein because one or more sales to the Buyer will be in reliance on Rule 144A. In addition, the Buyer will only purchase for the Buyer's own account. 6. Until the date of purchase of the Certificates, the undersigned will notify the parties listed in the Rule 144A Transferee Certificate to which this certification relates of any changes in the information and conclusions herein. Until such notice is given, the Buyer's purchase of the Certificates will constitute a reaffirmation of this certification by the undersigned as of the date of such purchase. By: Name: Title: IF AN ADVISER: Print Name of Buyer Date: EXHIBIT M REQUEST FOR RELEASE OF DOCUMENTS To: Citibank, N.A. 111 Wall Street 5th Floor, Zone 1 New York, NY 10043 Citibank, N.A. [and/or its designee] Re: In connection with the administration of the Mortgage Loans held by you, as Trustee, pursuant to the above-captioned Pooling and Servicing Agreement, we request the release, and hereby acknowledge receipt, of the Mortgage File for the Mortgage Loan described below, for the reason indicated. Mortgage Loan Number: Mortgagor Name, Address & Zip Code: Reason for Requesting Documents (check one): _______ 1. Mortgage Loan Paid in Full (Subservicer hereby certifies that all amounts received in connection therewith have been credited to the Collection Account) _______ 2. Mortgage Loan Liquidated (Subservicer hereby certifies that all proceeds of foreclosure, insurance or other liquidation have been received and credited to the Collection Account _______ 3. Mortgage Loan Repurchased pursuant to Section 2.03(c) of the Pooling and Servicing Agreement _______ 4. Mortgage Loan in Foreclosure _______ 5. Mortgage Loan Repurchased or Substituted pursuant to the terms of the Pooling and Servicing Agreement (Subservicer hereby certifies that the Purchase Price or Substitution Adjustment Amount has credited to the Collection Account) _______ 6. Other Reason: By: (authorized signer) Address: Date: If box 1 or 2 above is checked, and if all or part of the Mortgage File was previously released to us, please release to us our previous receipt on file with you, as well as any additional documents in your possession relating to the above specified Mortgage Loan. If box 3, 4, 5 or 6 above is checked, upon our return of all of the above documents to you as Trustee [or Trustee's designee], please acknowledge your receipt by signing in the space indicated below, and returning this form. Trustee Citibank, N.A. Please acknowledge the execution of the above request by your signature and date below: Signature Date Documents returned to Trustee: Trustee Date EX-4.2 5 POOLING AND SERVICING AGREEMENT FOR CMAC CHASE MANHATTAN ACCEPTANCE CORPORATION, DEPOSITOR, CHASE MANHATTAN MORTGAGE CORPORATION, SERVICER and [TRUSTEE] TRUSTEE POOLING AND SERVICING AGREEMENT Dated as of [DATE] $---------------- Multi-Class Mortgage Pass-Through Certificates Series [ ] TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS.................................................................................................... ARTICLE II CONVEYANCE OF MORTGAGE LOANS; TRUST FUND....................................................................... Section 2.01. Conveyance of Mortgage Loans............................................................ Section 2.02. Acceptance by Trustee................................................................... Section 2.03. Trust Fund; Authentication of Certificates.............................................. Section 2.04. REMIC Election.......................................................................... ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR AND THE SERVICER; REPURCHASE OF MORTGAGE LOANS..................................................................... Section 3.01. Representations and Warranties of the Depositor with respect to the Mortgage Loans.......................................................................... Section 3.02. Representations and Warranties of the Servicer.......................................... Section 3.03. Option to Substitute.................................................................... ARTICLE IV THE CERTIFICATES............................................................................................... Section 4.01. The Certificates........................................................................ Section 4.02. Registration of Transfer and Exchange of Certificates................................... Section 4.03. Mutilated, Destroyed, Lost or Stolen Certificates....................................... Section 4.04. Persons Deemed Owners................................................................... Section 4.05. Appointment of Paying Agent; Certificate Account........................................ Section 4.06. Authenticating Agents................................................................... ARTICLE V ADMINISTRATION AND SERVICING OF MORTGAGE LOANS................................................................. Section 5.01. Servicer to Service Mortgage Loans...................................................... Section 5.02. Sub-Servicing Agreements Between Servicer and Sub-Servicers; Enforcement of Sub-Servicer's Obligations............................................... Section 5.03. Successor Sub-Servicers................................................................. Section 5.04. Liability of the Servicer............................................................... Section 5.05. No Contractual Relationship Between Sub-Servicer and Trustee or Certificateholders...................................................................... Section 5.06. Termination of Sub-Servicing Agreement.................................................. Section 5.07. Collection of Mortgage Loan Payments.................................................... Section 5.08. Establishment of Collection Account; Deposit in Collection Account......................
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Section 5.09. Permitted Withdrawals from the Collection Account....................................... Section 5.10. Establishment of Escrow Account; Deposits in Escrow Account............................. Section 5.11. Permitted Withdrawals from Escrow Account............................................... Section 5.12. Payment of Taxes, Insurance and Other Charges........................................... Section 5.13. Transfer of Accounts.................................................................... Section 5.14. [Reserved].............................................................................. Section 5.15. Maintenance of the Primary Insurance Policies........................................... Section 5.16. Maintenance of Standard Hazard Policies................................................. Section 5.17. [Reserved].............................................................................. Section 5.18. [Reserved].............................................................................. Section 5.19. Fidelity Bond and Errors and Omissions Insurance........................................ Section 5.20. Collections under Insurance Policies; Enforcement of Due-On-Sale Clauses; Assumption Agreements.......................................................... Section 5.21. Income and Realization from Defaulted Mortgage Loans.................................... Section 5.22. Trustee to Cooperate; Release of Mortgage Files......................................... Section 5.23. Servicing and Other Compensation........................................................ Section 5.24. 1934 Act Reports........................................................................ Section 5.25. Annual Statement as to Compliance....................................................... Section 5.26. Annual Independent Public Accountants' Servicing Report................................. Section 5.27. Access to Certain Documentation; Rights of the Depositor in Respect of the Servicer............................................................................ Section 5.28. REMIC-Related Covenants................................................................. ARTICLE VI PAYMENTS TO THE CERTIFICATEHOLDERS............................................................................. Section 6.01. Distributions........................................................................... Section 6.02. Statements to the Certificateholders.................................................... Section 6.03. Advances by the Servicer................................................................ Section 6.04. Allocation of Realized Losses........................................................... Section 6.05. Compensating Interest; Allocation of Certain Interest Shortfalls........................ Section 6.06. Subordination........................................................................... Section 6.07. Determination of LIBOR.................................................................. ARTICLE VII REPORTS TO BE PREPARED BY THE SERVICER......................................................................... Section 7.01. Servicer Shall Provide Information as Reasonably Required.................................. Section 7.02. Federal Information Returns and Reports to Certificateholders.............................. ARTICLE VIII THE DEPOSITOR AND THE SERVICER................................................................................. Section 8.01. Indemnification; Third Party Claims..................................................... Section 8.02. Merger or Consolidation of the Depositor or the Servicer................................
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Section 8.03. Limitation on Liability of the Depositor, the Servicer, the Trustee and Others.................................................................................. Section 8.04. Depositor and Servicer Not to Resign.................................................... Section 8.05. Successor to the Servicer............................................................... Section 8.06. Maintenance of Ratings.................................................................. ARTICLE IX DEFAULT........................................................................................................ Section 9.01. Events of Default....................................................................... Section 9.02. Waiver of Defaults...................................................................... Section 9.03. Trustee to Act; Appointment of Successor................................................ Section 9.04. Notification to Certificateholders and the Rating Agencies.............................. ARTICLE X CONCERNING THE TRUSTEE......................................................................................... Section 10.01. Duties of Trustee....................................................................... Section 10.02. Certain Matters Affecting the Trustee................................................... Section 10.03. Trustee Not Liable for Certificates or Mortgage Loans................................... Section 10.04. Trustee May Own Certificates............................................................ Section 10.05. Fees and Expenses....................................................................... Section 10.06. Eligibility Requirements for Trustee.................................................... Section 10.07. Resignation and Removal of the Trustee.................................................. Section 10.08. Successor Trustee....................................................................... Section 10.09. Merger or Consolidation of Trustee...................................................... Section 10.10. Appointment of Co-Trustee or Separate Trustee........................................... Section 10.11. Appointment of Office or Agency......................................................... ARTICLE XI TERMINATION.................................................................................................... Section 11.01. Termination............................................................................. ARTICLE XII MISCELLANEOUS PROVISIONS....................................................................................... Section 12.01. Severability of Provisions.............................................................. Section 12.02. Limitation on Rights of Certificateholders.............................................. Section 12.03. Amendment............................................................................... Section 12.04. Counterparts............................................................................ Section 12.05. Duration of Agreement................................................................... Section 12.06. Governing Law........................................................................... Section 12.07. Notices.................................................................................
iii EXHIBIT A MORTGAGE LOAN SCHEDULE EXHIBIT B CONTENTS OF MORTGAGE FILE EXHIBIT C FORMS OF CLASS A CERTIFICATES EXHIBIT D FORM OF CLASS M CERTIFICATE EXHIBIT E FORMS OF CLASS B CERTIFICATES EXHIBIT F FORM OF CLASS A-R CERTIFICATE EXHIBIT G FORM OF TRUSTEE CERTIFICATION EXHIBIT H FORM OF INVESTMENT LETTER EXHIBIT I FORM OF RULE 144A INVESTMENT LETTER EXHIBIT J FORM OF SPECIAL SERVICING AGREEMENT EXHIBIT K FORM OF CLASS A-R TRANSFER LETTER EXHIBIT L REQUEST FOR RELEASE iv This Pooling and Servicing Agreement, dated as of [DATE], is executed among Chase Manhattan Acceptance Corporation, as depositor (together with its permitted successors and assigns, the "Depositor"), Chase Manhattan Mortgage Corporation, as servicer (together with its permitted successors and assigns, the "Servicer") and [TRUSTEE], as trustee (together with its permitted successors and assigns, the "Trustee"). In consideration of the premises and the mutual agreements hereinafter set forth, the Depositor, the Servicer and the Trustee agree as follows: ARTICLE I DEFINITIONS Whenever used herein, the following words and phrases, unless the context otherwise requires, shall have the following meanings: ACCEPTED SERVICING PRACTICES: With respect to any Mortgage Loan, those mortgage servicing practices (including collection procedures) of prudent mortgage banking institutions which service mortgage loans of the same type as such Mortgage Loan in the jurisdiction where the related Mortgaged Property is located, and which are in accordance with FNMA servicing practices and procedures, for MBS pool mortgages, as defined in the FNMA Guides including future updates. ADJUSTED LOCK-OUT PERCENTAGE: Equals (i) for any Distribution Date prior to the Distribution Date in [MONTH/YEAR], 0% and (ii) for any Distribution Date on or after the Distribution Date in [MONTH/YEAR], the Lock-out Percentage. ADVANCE: The aggregate of the advances made by the Servicer with respect to a particular Distribution Date pursuant to Section 6.03. AGGREGATE CLASS A INTEREST ACCRUAL AMOUNT: On any Distribution Date, an amount equal to the sum of the Class A-1 Interest Accrual Amount, the Class A-2 Interest Accrual Amount, the Class A-3 Interest Accrual Amount, the Class A-4 Interest Accrual Amount, the Class A-5 Interest Accrual Amount, the Class A-6 Interest Accrual Amount, the Class A-7 Interest Accrual Amount, the Class A-R Interest Accrual Amount and the Class A-X Interest Accrual Amount. AGGREGATE CLASS A INTEREST SHORTFALL: On any Distribution Date, an amount equal to the sum of the Class A-1 Shortfall, the Class A-2 Shortfall, the Class A-3 Shortfall, the Class A-4 Shortfall, the Class A-5 Shortfall, the Class A-6 Shortfall, the Class A-7 Shortfall, the Class A-R Shortfall and the Class A-X Shortfall. AGREEMENT: This Pooling and Servicing Agreement and all amendments hereof and supplements hereto. APPRAISED VALUE: The value set forth in an appraisal made in connection with the origination of the related Mortgage Loan as the value of the Mortgaged Property. ASSIGNMENT OF MORTGAGE: An assignment of the Mortgage, notice of transfer or equivalent instrument, in recordable form, sufficient under the laws of the jurisdiction where the related Mortgaged Property is located to reflect of record the sale and assignment of the Mortgage Loan to the Trustee, which assignment, notice of transfer or equivalent instrument may, if permitted by law, be in the form of one or more blanket assignments covering Mortgages secured by Mortgaged Properties located in the same county. AUTHENTICATING AGENT: The meaning specified in Section 4.06. AVAILABLE DISTRIBUTION AMOUNT: On any Distribution Date, an amount equal to the amount on deposit in the Certificate Account as of the close of business on the related Determination Date except: (a) amounts received on particular Mortgage Loans as late payments or other recoveries of principal or interest (including Liquidation Proceeds, Insurance Proceeds and condemnation awards) and respecting which the Servicer previously made an unreimbursed Advance of such amounts; (b) reimbursement for Nonrecoverable Advances and other amounts permitted to be withdrawn by the Servicer pursuant to Section 5.09 from, or not required to be deposited in, the Collection Account; (c) amounts representing the Servicing Fee with respect to such Distribution Date; (d) amounts representing all or part of a Monthly Payment due (i) after the related Due Period or (ii) on or prior to the Cut-off Date; (e) all Repurchase Proceeds, Principal Prepayments, Liquidation Proceeds, Insurance Proceeds and condemnation awards with respect to Mortgage Loans received after the related Principal Prepayment Period, and all related payments of interest representing interest for any period of time after the last day of the related Due Period for such Mortgage Loans; and (f) all income from Eligible Investments held in the Collection Account for the account of the Servicer. 2 BANKRUPTCY AMOUNT: As of any date of determination, $_________ minus all Bankruptcy Losses on the Mortgage Loans, if any, previously allocated to the Certificates in accordance with Section 6.04. BANKRUPTCY LOSS: With respect to any Mortgage Loan, a Realized Loss resulting from a Deficient Valuation or Debt Service Reduction. BOOK-ENTRY CERTIFICATES: The Class A Certificates (other than the Class A-R and Class A-X Certificates), referred to collectively. BUSINESS DAY: Any day other than (a) a Saturday or Sunday, (b) a legal holiday in the State of New York or (c) a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to be closed. CARRY-OVER SUBORDINATED PRINCIPAL AMOUNT: As of any Distribution Date, with respect to any Class of Subordinated Certificates, an amount, if any, equal to the amount of principal distributable to such Class on any prior Distribution Date that has not been so distributed. CASH LIQUIDATION: Recovery of all cash proceeds by the Servicer with respect to the liquidation of any Mortgage Loan, including Insurance Proceeds and other payments or recoveries (whether made at one time or over a period of time) which the Servicer deems to be finally recoverable, in connection with the sale, assignment or satisfaction of such Mortgage Loan, trustee's sale, foreclosure sale or otherwise, but only if title to the related Mortgaged Property was not acquired by foreclosure or deed in lieu of foreclosure by the Servicer pursuant to Section 5.21. CERTIFICATE: Any Class A, Class M or Class B Certificate. CERTIFICATE ACCOUNT: The account created and maintained pursuant to Section 4.05. CERTIFICATEHOLDER or HOLDER: The person in whose name a Certificate is registered in the Certificate Register, except that, solely for the purposes of giving any consent, waiver, request or demand pursuant to this Agreement, any Certificate registered in the name of the Depositor, the Servicer, any Sub-Servicer, or any of their respective affiliates shall be disregarded and the undivided Percentage Interest evidenced thereby shall not be taken into account in determining whether the requisite amount of Percentage Interests necessary to effect any such consent, waiver, request or demand has been obtained. The Trustee shall be entitled to conclusively rely upon the certificate of the Depositor or the Servicer as to the determination of which Certificates are registered in the name of such affiliates. 3 CERTIFICATE OWNER: Any Person who is the beneficial owner of a Book-Entry Certificate registered in the name of the Depository or its nominee. CERTIFICATE RATE: The per annum rate of interest borne by each Class of Certificates (other than the Class A-P Certificates), which rate shall equal ___% with respect to the Class A-1, Class A-2, Class A-3, Class A-4, Class A-7, Class A-R, Class M, Class B-1, Class B-2, Class B-3, Class B-4 and Class B-5 Certificates. In the case of the Class A-5 Certificates, the Certificate Rate shall equal _____% with respect to the [DATE] Distribution Date, and with respect to any Distribution Date thereafter, the Certificate Rate with respect to the Class A-5 Certificates shall equal the lesser of (i) ____% plus LIBOR and (ii) _____%. In the case of the Class A-6 Certificates, the Certificate Rate shall equal _______% with respect to the [DATE] Distribution Date, and with respect to any Distribution Date thereafter, the Certificate Rate with respect to the Class A-6 Certificates shall equal____% minus the product of (i) 3.000 and (ii) LIBOR, but not less than _____%. In the case of the Class A-X Certificates, the Certificate Rate shall equal, with respect to any Distribution Date, the weighted average, expressed as a percentage, of the Stripped Interest Rate on each Mortgage Loan having a Stripped Interest Rate exceeding zero as of the Due Date in the month immediately preceding the month in which such Distribution Date occurs, weighted on the basis of the respective Principal Balances of the Mortgage Loans, which Principal Balances shall be the Principal Balances of the Mortgage Loans at the close of business on the immediately preceding Distribution Date after giving effect to distributions thereon allocable to principal (or, in the case of the Certificate Rate for the initial Distribution Date, at the close of business on the Cut-off Date). With respect to any Distribution Date, (i) interest will accrue on each Class of Certificates (other than the Class A-5 and Class A-6 Certificates) from the first day of the calendar month preceding the month in which such Distribution Date occurs through the last day of the month preceding the month in which such Distribution Date occurs and (ii) interest will accrue on the Class A-5 and Class A-6 Certificates from the 25th day of the month preceding the month in which such Distribution Date occurs through the 24th day of the month in which such Distribution Date occurs (except that with respect to the [DATE] Distribution Date, interest will accrue on the Class A-5 and Class A-6 Certificates from [DATE] through [DATE]). Interest with respect to each Class of Certificates (other than the Class A-P Certificates) at the Certificate Rate shall be calculated based on a year of 360 days comprised of twelve 30-day months. CERTIFICATE REGISTER: The register maintained pursuant to Section 4.02. CHASE: The Chase Manhattan Bank, a New York State banking corporation, or its successor in interest. CLASS: Pertaining to the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class A-P, Class A-R, Class A-X, Class M, Class B-1, Class B-2, Class B-3, Class B-4 or Class B-5 Certificates, as the case may be. 4 CLASS A, CLASS M OR CLASS B: Pertaining to Class A Certificates, Class M Certificates or Class B Certificates, as the case may be. CLASS A-P AMOUNT: With respect to any Distribution Date, the applicable PO Percentage of (i) all principal received on or in respect of each Discount Mortgage Loan (exclusive of any amounts in respect of any Monthly Payment) during the related Principal Prepayment Period and (ii) all principal received as part of a Monthly Payment on or in respect of a Discount Mortgage Loan during the related Due Period. CLASS A CERTIFICATES: The Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class A-P, Class A-R and Class A-X Certificates, referred to collectively. CLASS A-1 CERTIFICATE: Any one of the Class A-1 Certificates, executed by the Trustee and authenticated by the Trustee, senior in right of payment to the Class M and Class B Certificates, substantially in the form of the Class A Certificate set forth in Exhibit C hereto. CLASS A-2 CERTIFICATE: Any one of the Class A-2 Certificates, executed by the Trustee and authenticated by the Trustee, senior in right of payment to the Class M and Class B Certificates, substantially in the form of the Class A Certificate set forth in Exhibit C hereto. CLASS A-3 CERTIFICATE: Any one of the Class A-3 Certificates, executed by the Trustee and authenticated by the Trustee, senior in right of payment to the Class M and Class B Certificates, substantially in the form of the Class A Certificate set forth in Exhibit C hereto. CLASS A-4 CERTIFICATE: Any one of the Class A-4 Certificates, executed by the Trustee and authenticated by the Trustee, senior in right of payment to the Class M and Class B Certificates, substantially in the form of the Class A Certificate set forth in Exhibit C hereto. CLASS A-5 CERTIFICATE: Any one of the Class A-5 Certificates, executed by the Trustee and authenticated by the Trustee, senior in right of payment to the Class M and Class B Certificates, substantially in the form of the Class A Certificate set forth in Exhibit C hereto. CLASS A-6 CERTIFICATE: Any one of the Class A-6 Certificates, executed by the Trustee and authenticated by the Trustee, senior in right of payment to the Class M and Class B Certificates, substantially in the form of the Class A Certificate set forth in Exhibit C hereto. CLASS A-7 CERTIFICATE: Any one of the Class A-7 Certificates, executed by the Trustee and authenticated by the Trustee, senior in right of payment to the Class M and Class B Certificates, substantially in the form of the Class A Certificate set forth in Exhibit C hereto. 5 CLASS A-P CERTIFICATE: Any one of the Class A-P Certificates, executed by the Trustee and authenticated by the Trustee, senior in right of payment to the Class M and Class B Certificates, substantially in the form of the Class A Certificate set forth in Exhibit C hereto. CLASS A-R CERTIFICATE: The Class A-R Certificate executed by the Trustee and authenticated by the Trustee, which represents the Residual Interest, substantially in the form of the Class A-R Certificate set forth in Exhibit F hereto. CLASS A-X CERTIFICATE: Any one of the Class A-X Certificates executed by the Trustee and authenticated by the Trustee, senior in right of payment to the Class M and Class B Certificates, substantially in the form of the Class A Certificate set forth in Exhibit C hereto. CLASS A-P DISTRIBUTION AMOUNT: With respect to any Distribution Date, the amounts distributed to the Class A-P Certificates pursuant to Sections 6.01(b)(ii) and 6.01(b)(iii). CLASS A-1 INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date, one month's interest at the Certificate Rate on the Outstanding Certificate Principal Balance of the Class A-1 Certificates minus (i) any Compensating Interest Shortfall allocated to the Class A-1 Certificates on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall allocated to the Class A-1 Certificates on such Distribution Date pursuant to Section 6.05(c). CLASS A-2 INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date, one month's interest at the Certificate Rate on the Outstanding Certificate Principal Balance of the Class A-2 Certificates minus (i) any Compensating Interest Shortfall allocated to the Class A-2 Certificates on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall allocated to the Class A-2 Certificates on such Distribution Date pursuant to Section 6.05(c). CLASS A-3 INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date, one month's interest at the Certificate Rate on the Outstanding Certificate Principal Balance of the Class A-3 Certificates minus (i) any Compensating Interest Shortfall allocated to the Class A-3 Certificates on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall allocated to the Class A-3 Certificates on such Distribution Date pursuant to Section 6.05(c). CLASS A-4 INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date, one month's interest at the Certificate Rate on the Outstanding Certificate Principal Balance of the Class A-4 Certificates minus (i) any Compensating Interest Shortfall allocated to the Class A-4 Certificates on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall allocated to the Class A-4 Certificates on such Distribution Date pursuant to Section 6.05(c). 6 CLASS A-5 INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date, one month's interest at the Certificate Rate on the Outstanding Certificate Principal Balance of the Class A-5 Certificates minus (i) any Compensating Interest Shortfall allocated to the Class A-5 Certificates on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall allocated to the Class A-5 Certificates on such Distribution Date pursuant to Section 6.05(c). CLASS A-6 INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date, one month's interest at the Certificate Rate on the Outstanding Certificate Principal Balance of the Class A-6 Certificates minus (i) any Compensating Interest Shortfall allocated to the Class A-6 Certificates on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall allocated to the Class A-6 Certificates on such Distribution Date pursuant to Section 6.05(c). CLASS A-7 INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date, one month's interest at the Certificate Rate on the Outstanding Certificate Principal Balance of the Class A-7 Certificates minus (i) any Compensating Interest Shortfall allocated to the Class A-7 Certificates on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall allocated to the Class A-7 Certificates on such Distribution Date pursuant to Section 6.05(c). CLASS A-R INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date, one month's interest at the Certificate Rate on the Outstanding Certificate Principal Balance of the Class A-R Certificates minus (i) any Compensating Interest Shortfall allocated to the Class A-R Certificates on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall allocated to the Class A-R Certificates on such Distribution Date pursuant to Section 6.05(c). CLASS A-X INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date, one month's interest at the Certificate Rate on the Class A-X Notional Balance minus (i) any Compensating Interest Shortfall allocated to the Class A-X Certificates on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall allocated to the Class A-X Certificates on such Distribution Date pursuant to Section 6.05(c). CLASS A-X NOTIONAL BALANCE: With respect to any Distribution Date, an amount equal to the aggregate Scheduled Principal Balance of the Non-Discount Mortgage Loans. CLASS A PERCENTAGE: As of any Distribution Date, the percentage obtained by dividing the Class A Principal Balance by the Mortgage Pool Principal Balance, but not more than 100%. 7 CLASS A PRINCIPAL BALANCE: As of any Distribution Date, (a) the Class A Principal Balance for the immediately preceding Distribution Date less (b) amounts distributed to the Class A Certificateholders on such preceding Distribution Date allocable to principal (including the principal portion of Advances of the Servicer made pursuant to Section 6.03 and Realized Losses allocated to the Class A Certificates pursuant to Section 6.04); provided that the Class A Principal Balance on the first Distribution Date shall be the Original Class A Principal Balance. CLASS A-1 SHORTFALL: With respect to any Distribution Date, the amount equal to the excess, if any, of the Class A-1 Interest Accrual Amount over the amount actually distributed to the Class A-1 Certificateholders on such Distribution Date pursuant to Section 6.01(b)(i)(A). CLASS A-2 SHORTFALL: With respect to any Distribution Date, the amount equal to the excess, if any, of the Class A-2 Interest Accrual Amount over the amount actually distributed to the Class A-2 Certificateholders on such Distribution Date pursuant to Section 6.01(b)(i)(B). CLASS A-3 SHORTFALL: With respect to any Distribution Date, the amount equal to the excess, if any, of the Class A-3 Interest Accrual Amount over the amount actually distributed to the Class A-3 Certificateholders on such Distribution Date pursuant to Section 6.01(b)(i)(C). CLASS A-4 SHORTFALL: With respect to any Distribution Date, the amount equal to the excess, if any, of the Class A-4 Interest Accrual Amount over the amount actually distributed to the Class A-4 Certificateholders on such Distribution Date pursuant to Section 6.01(b)(i)(D). CLASS A-5 SHORTFALL: With respect to any Distribution Date, the amount equal to the excess, if any, of the Class A-5 Interest Accrual Amount over the amount actually distributed to the Class A-5 Certificateholders on such Distribution Date pursuant to Section 6.01(b)(i)(E). CLASS A-6 SHORTFALL: With respect to any Distribution Date, the amount equal to the excess, if any, of the Class A-6 Interest Accrual Amount over the amount actually distributed to the Class A-6 Certificateholders on such Distribution Date pursuant to Section 6.01(b)(i)(F). CLASS A-7 SHORTFALL: With respect to any Distribution Date, the amount equal to the excess, if any, of the Class A-7 Interest Accrual Amount over the amount actually distributed to the Class A-7 Certificateholders on such Distribution Date pursuant to Section 6.01(b)(i)(G). 8 CLASS A-R SHORTFALL: With respect to any Distribution Date, the amount equal to the excess, if any, of the Class A-R Interest Accrual Amount over the amount actually distributed to the Class A-R Certificateholders on such Distribution Date pursuant to Section 6.01(b)(i)(H). CLASS A-X SHORTFALL: With respect to any Distribution Date, the amount equal to the excess, if any, of the Class A-X Interest Accrual Amount over the amount actually distributed to the Class A-X Certificates on such Distribution Date pursuant to Section 6.01(b)(i)(I). CLASS A-P SHORTFALL AMOUNT: With respect to any Distribution Date prior to and including the Credit Support Depletion Date, to the extent of amounts available to pay the Subordinated Optimal Principal Amount (without regard to clause (b)(2) of the definition of such term), an amount equal to the sum of (i) the applicable PO Percentage of any Realized Loss (other than an Excess Loss) with respect to a Discount Mortgage Loan and (ii) the sum of amounts, if any, by which the amounts specified in clause (i) with respect to each prior Distribution Date exceeded the amount actually distributed in respect thereof on such prior Distribution Date and not subsequently distributed to the Class A-P Certificateholders. CLASS B CERTIFICATES: The Class B-1, Class B-2, Class B-3, Class B-4 and Class B-5 Certificates, referred to collectively. CLASS B-1 CERTIFICATE: Any one of the Class B-1 Certificates executed by the Trustee and authenticated by the Trustee, subordinated in right of payment to the Class A and Class M Certificates, substantially in the form of the Class B Certificate set forth in Exhibit E hereto. CLASS B-2 CERTIFICATE: Any one of the Class B-2 Certificates executed by the Trustee and authenticated by the Trustee, subordinated in right of payment to the Class A, Class M and Class B-1 Certificates, substantially in the form of the Class B Certificate set forth in Exhibit E hereto. CLASS B-3 CERTIFICATE: Any one of the Class B-3 Certificates executed by the Trustee and authenticated by the Trustee, subordinated in right of payment to the Class A, Class M, Class B-1 and Class B-2 Certificates, substantially in the form of the Class B Certificate set forth in Exhibit E hereto. CLASS B-4 CERTIFICATE: Any one of the Class B-4 Certificates executed by the Trustee and authenticated by the Trustee, subordinated in right of payment to the Class A, Class M, Class B-1, Class B-2 and Class B-3 Certificates, substantially in the form of the Class B Certificate set forth in Exhibit E hereto. 9 CLASS B-5 CERTIFICATE: Any one of the Class B-5 Certificates executed by the Trustee and authenticated by the Trustee, subordinated in right of payment to the Class A, Class M, Class B-1, Class B-2, Class B-3 and Class B-4 Certificates, substantially in the form of the Class B Certificate set forth in Exhibit E hereto. CLASS B-1 INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date, one month's interest at the Certificate Rate on the Outstanding Certificate Principal Balance of the Class B-1 Certificates minus (i) any Compensating Interest Shortfall allocated to the Class B-1 Certificates on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall allocated to the Class B-1 Certificates on such Distribution Date pursuant to Section 6.05(c). CLASS B-2 INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date, one month's interest at the Certificate Rate on the Outstanding Certificate Principal Balance of the Class B-2 Certificates minus (i) any Compensating Interest Shortfall allocated to the Class B-2 Certificates on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall allocated to the Class B-2 Certificates on such Distribution Date pursuant to Section 6.05(c). CLASS B-3 INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date, one month's interest at the Certificate Rate on the Outstanding Certificate Principal Balance of the Class B-3 Certificates minus (i) any Compensating Interest Shortfall allocated to the Class B-3 Certificates on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall allocated to the Class B-3 Certificates on such Distribution Date pursuant to Section 6.05(c). CLASS B-4 INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date, one month's interest at the Certificate Rate on the Outstanding Certificate Principal Balance of the Class B-4 Certificates minus (i) any Compensating Interest Shortfall allocated to the Class B-4 Certificates on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall allocated to the Class B-4 Certificates on such Distribution Date pursuant to Section 6.05(c). CLASS B-5 INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date, one month's interest at the Certificate Rate on the Outstanding Certificate Principal Balance of the Class B-5 Certificates minus (i) any Compensating Interest Shortfall allocated to the Class B-5 Certificates on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall allocated to the Class B-5 Certificates on such Distribution Date pursuant to Section 6.05(c). CLASS B-1 SHORTFALL: With respect to any Distribution Date, the amount equal to the excess, if any, of the Class B-1 Interest Accrual Amount over the amount actually 10 distributed to the Class B-1 Certificates on such Distribution Date pursuant to Section 6.01(d)(i)(1) (A) and (B). CLASS B-2 SHORTFALL: With respect to any Distribution Date, the amount equal to the excess, if any, of the Class B-2 Interest Accrual Amount over the amount actually distributed to the Class B-2 Certificates on such Distribution Date pursuant to Section 6.01(d)(i)(2) (A) and (B). CLASS B-3 SHORTFALL: With respect to any Distribution Date, the amount equal to the excess, if any, of the Class B-3 Interest Accrual Amount over the amount actually distributed to the Class B-3 Certificates on such Distribution Date pursuant to Section 6.01(d)(i)(3) (A) and (B). CLASS B-4 SHORTFALL: With respect to any Distribution Date, the amount equal to the excess, if any, of the Class B-4 Interest Accrual Amount over the amount actually distributed to the Class B-4 Certificates on such Distribution Date pursuant to Section 6.01(d)(i)(4) (A) and (B). CLASS B-5 SHORTFALL: With respect to any Distribution Date, the amount equal to the excess, if any, of the Class B-5 Interest Accrual Amount over the amount actually distributed to the Class B-5 Certificates on such Distribution Date pursuant to Section 6.01(d)(i)(5) (A) and (B). CLASS B PERCENTAGE: As of any Distribution Date, the difference between 100% and the sum of (i) the Class A Percentage and (ii) the Class M Percentage for such Distribution Date. CLASS B PRINCIPAL BALANCE: As of any Distribution Date, the excess of the Mortgage Pool Principal Balance (together with the principal portion of any Monthly Payment due but not paid with respect to which an Advance has not been made) over the sum of (i) the Class A Principal Balance and (ii) the Class M Principal Balance. CLASS M CERTIFICATE: Any one of the Class M Certificates executed by the Trustee and authenticated by the Trustee, subordinated in right of payment to the Class A Certificates, substantially in the form of the Class M Certificate set forth in Exhibit D hereto. CLASS M INTEREST ACCRUAL AMOUNT: With respect to any Distribution Date, one month's interest at the Certificate Rate on the Outstanding Certificate Principal Balance of the Class M Certificates minus (i) any Compensating Interest Shortfall allocated to the Class M Certificates on such Distribution Date pursuant to Section 6.05(b) and (ii) any Realized Loss Interest Shortfall allocated to the Class M Certificates on such Distribution Date pursuant to Section 6.05(c). 11 CLASS M PERCENTAGE: As of any Distribution Date, the percentage obtained by dividing the Class M Principal Balance by the Mortgage Pool Principal Balance, but not more than 100%; provided, however, that on any Distribution Date on which the Class B Percentage equals 0%, the Class M Percentage shall equal 100% minus the Class A Percentage. CLASS M PRINCIPAL BALANCE: As of any Distribution Date, (a) the Class M Principal Balance for the immediately preceding Distribution Date less (b) amounts distributed to the Class M Certificateholders on such preceding Distribution Date allocable to principal (including the principal portion of Advances of the Servicer made pursuant to Section 6.03 and Realized Losses allocated to the Class M Certificates pursuant to Section 6.04); provided that the Class M Principal Balance on the first Distribution Date shall be the Original Class M Principal Balance, and provided further that if the aggregate Outstanding Certificate Principal Balance of the Class B Certificates has been reduced to zero, as of any Distribution Date, the Class M Principal Balance will equal the excess of the Mortgage Pool Principal Balance (together with the portion of any Monthly Payment due but not paid with respect to which an Advance has not been made) over the Class A Principal Balance. CLASS M SHORTFALL: With respect to any Distribution Date, the amount equal to the excess, if any, of the Class M Interest Accrual Amount over the amount actually distributed to the Class M Certificateholders on such Distribution Date pursuant to Section 6.01(c)(i) (A) and (B). CLOSING DATE: [DATE]. CMMC: Chase Manhattan Mortgage Corporation, a New Jersey corporation, or its successor in interest. CODE: The Internal Revenue Code of 1986, as amended from time to time, and any successor statutes thereto, and applicable U.S. Department of Treasury temporary or final regulations promulgated thereunder. COLLECTION ACCOUNT: The account created and maintained pursuant to Section 5.08. COMPENSATING INTEREST: The meaning specified in Section 6.05(a). COMPENSATING INTEREST SHORTFALL: The meaning specified in Section 6.05(b). CORPORATE TRUST OFFICE: The principal office of the Trustee at which at any particular time its corporate trust business shall be administered, which office at the date of execution of this instrument is located at [ADDRESS] 12 CREDIT SUPPORT: With respect to each Class of Subordinated Certificates (other than the Class B-5 Certificates), the level of credit support supporting such Class, expressed as a percentage of the aggregate Outstanding Certificate Principal Balance of all Classes of Certificates (other than the Class A-P Certificates). With respect to each Distribution Date, Credit Support for each such Class will equal in each case the percentage, rounded to two decimal places, obtained by dividing the aggregate Outstanding Certificate Principal Balances immediately prior to such Distribution Date of all Classes of Subordinated Certificates having higher numerical class designations than such Class (for this purpose, each Class of Class M Certificates shall be deemed to have a lower numerical class designation than each Class of Class B Certificates) by the aggregate Outstanding Certificate Principal Balance of all Classes of Certificates (other than the Class A-P Certificates) immediately prior to such Distribution Date. CREDIT SUPPORT DEPLETION DATE: The first Distribution Date on which the aggregate outstanding principal balance of the Subordinated Certificates has been or will be reduced to zero. CUT-OFF DATE: [DATE]. DCR: Duff & Phelps Credit Rating Co. or its successor in interest. DEBT SERVICE REDUCTION: With respect to any Mortgage Loan, a reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of competent jurisdiction in a proceeding under the Bankruptcy Code, other than such a reduction resulting from a Deficient Valuation. DEFICIENT VALUATION: With respect to any Mortgage Loan, a valuation of the related Mortgaged Property by a court of competent jurisdiction in an amount less than the then outstanding principal balance of the Mortgage Loan, which valuation results from a proceeding initiated under the Bankruptcy Code. DEFINITIVE CERTIFICATES: The Certificates referred to in Section 4.01(c). DEPOSITOR: Chase Manhattan Acceptance Corporation, a Delaware corporation, or its successor in interest or any successor under this Agreement appointed as herein provided. DEPOSITORY: The Depository Trust Company, the nominee of which is Cede & Co. DEPOSITORY AGREEMENT: The agreement referred to in Section 4.01(b). 13 DEPOSITORY PARTICIPANT: A broker, dealer, bank or other financial institution or other Person for whom from time to time the Depository effects book-entry transfers and pledges of securities deposited with the Depository. DETERMINATION DATE: The sixteenth day of the month in which the related Distribution Date occurs (or, if such sixteenth day is not a Business Day, the preceding Business Day). DISCOUNT MORTGAGE LOAN: Any Mortgage Loan having a Net Mortgage Rate less than the Remittance Rate. DISQUALIFIED ORGANIZATION: An organization referred to in section 860E(e)(5) of the Code. DISTRIBUTION DATE: The 25th day of any month, or if such 25th day is not a Business Day, the first Business Day immediately following, beginning with [DATE]. DUE DATE: The first day of each month, being the day of the month on which each Monthly Payment is due on a Mortgage Loan, exclusive of any days of grace. DUE PERIOD: With respect to any Distribution Date, the period from the second day of the month preceding the month in which such Distribution Date occurs through the first day of the month in which such Distribution Date occurs. ELIGIBLE ACCOUNT: An account that is (i) maintained with a depository institution the long-term unsecured debt obligations of which are rated by each Rating Agency in one of its two highest rating categories, or (ii) maintained with the corporate trust department of a national bank which has a rating of at least BBB- or A-2 by S&P, or (iii) an account or accounts the deposits in which are fully insured by the FDIC, or (iv) an account or accounts in a depository institution in which such accounts are insured by the FDIC (to the limit established by the FDIC), the uninsured deposits in which accounts are otherwise secured such that, as evidenced by an Opinion of Counsel delivered to and acceptable to the Trustee and each Rating Agency, the Certificateholders have a claim with respect to the funds in such account and a perfected first security interest against any collateral (which shall be limited to Eligible Investments) securing such funds that is superior to claims of any other depositors or creditors of the depository institution with which such account is maintained, or (v) otherwise acceptable to each Rating Agency without reduction or withdrawal of the rating of any Class of Certificates, as evidenced by a letter from each Rating Agency. ELIGIBLE INVESTMENTS: One or more of the following: (i) obligations of, or guaranteed as to principal and interest by, the United States or obligations of any agency or instrumentality thereof when such obligations are 14 backed by the full faith and credit of the United States; provided that any such obligation held as a "cash flow investment" within the meaning of section 860G(a)(6) of the Code shall not have a remaining maturity of more than 45 days; (ii) repurchase agreements on obligations specified in clause (i) maturing not more than two months from the date of acquisition thereof, provided that the long-term unsecured obligations of the party agreeing to repurchase such obligations are at the time rated by each Rating Agency in one of its two highest rating categories and the short-term debt obligations of the party agreeing to repurchase are rated A-1 by S&P and D-1 by DCR if rated by DCR; (iii) federal funds, certificates of deposit, time deposits and bankers' acceptances (which shall each have an original maturity of not more than 60 days and, in the case of bankers' acceptances, shall in no event have an original maturity of more than 365 days) of any United States depository institution or trust company incorporated under the laws of the United States or any state, provided that the long-term unsecured debt obligations of such depository institution or trust company at the date of acquisition thereof have been rated by each Rating Agency in one of its two highest rating categories and the short-term obligations of such depository institution or trust company are rated A-1 by S&P and D-1 by DCR if rated by DCR; (iv) commercial paper (having original maturities of not more than 365 days) of any corporation incorporated under the laws of the United States or any state thereof which on the date of acquisition has been rated by each Rating Agency in its highest short-term unsecured commercial paper rating category; provided that such commercial paper shall have a remaining maturity of not more than 45 days; (v) units of taxable money market funds (including those for which the Trustee or the Servicer or any affiliate thereof receives compensation with respect to such investment) which funds have been rated by each Rating Agency in its highest rating category or which have been designated in writing by each Rating Agency as Eligible Investments with respect to this definition; (vi) other obligations or securities that are "permitted investments" within the meaning of Section 860G(a)(5) of the Code and acceptable to each Rating Agency rating the Certificates as an Eligible Investment hereunder and will not result in a reduction or withdrawal in the then current rating of any Class of Certificates, as evidenced by a letter to such effect from each Rating Agency. provided that no such instrument shall be an Eligible Investment if such instrument evidences either (a) a right to receive only interest payments with respect to the obligations underlying such instrument, or (b) both principal and interest payments derived from obligations underlying such instrument where the interest and principal payments with respect to such instrument provide a 15 yield to maturity of greater than 120% of the yield to maturity at par of such underlying obligations. ERISA: The Employee Retirement Income Security Act of 1974, as amended. ESCROW ACCOUNT: The account or accounts created and maintained pursuant to Section 5.10. ESCROW PAYMENTS: The amounts constituting applicable ground rents, taxes, assessments, water rates, Standard Hazard Policy premiums and other payments required to be escrowed by the Mortgagor with the mortgagee pursuant to a Mortgage Loan. EVENT OF DEFAULT: Any of the events specified in Section 9.01. EXCEPTION REPORT: The report of the Trustee referred to in Section 2.02. EXCESS BANKRUPTCY LOSS: Any Bankruptcy Loss, or portion thereof, which exceeds the then applicable Bankruptcy Amount. EXCESS FRAUD LOSS: Any Fraud Loss, or portion thereof, which exceeds the then applicable Fraud Loss Amount. EXCESS LOSSES: Excess Bankruptcy Losses, Excess Fraud Losses and Excess Special Hazard Losses, referred to collectively. EXCESS PROCEEDS: All amounts (net of the related Servicing Advances) received on any Mortgage Loan (whether as regular principal payments, Principal Prepayments, Repurchase Proceeds, Liquidation Proceeds, Insurance Proceeds, condemnation awards, or with respect to a disposition of a Mortgaged Property which has been acquired by foreclosure or deed in lieu of foreclosure or otherwise) in excess of the Principal Balance at the Cut-off Date of such Mortgage Loan and accrued interest thereon at its Mortgage Rate to the Due Date immediately succeeding the date of prepayment, repurchase or liquidation, as the case may be. EXCESS SPECIAL HAZARD LOSS: Any Special Hazard Loss, or portion thereof, that exceeds the then applicable Special Hazard Amount. FDIC: The Federal Deposit Insurance Corporation or any successor organization. FHLMC: The Federal Home Loan Mortgage Corporation or any successor organization. FIDELITY BOND: A fidelity bond and errors and omissions insurance to be maintained by the Servicer pursuant to Section 5.19. 16 FNMA: The Federal National Mortgage Association, or any successor organization. FNMA GUIDES: The FNMA Sellers' Guide and the FNMA Servicers' Guide, and all amendments or additions thereto. FRAUD LOSS: Any Realized Loss or portion thereof sustained by reason of a default arising from fraud, dishonesty or misrepresentation in connection with the related Mortgage Loan, including by reason of the denial of coverage under any related Primary Insurance Policy. FRAUD LOSS AMOUNT: As of any date of determination after the Cut-off Date, an amount equal to: (X) prior to the first anniversary of the Cut-off Date,____% (initially, $___________) of the aggregate outstanding principal balance of all of the Mortgage Loans as of the Cut-off Date minus the aggregate amount of Fraud Loss on the Mortgage Loans allocated to the Certificates in accordance with Section 6.04 since the Cut-off Date up to such date of determination and (Y) from the first to the fifth anniversary of the Cut-off Date, (1) ______% 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 allocated to the Certificates in accordance with Section 6.04 since the most recent anniversary of the Cut-off Date up to such date of determination. On and after the fifth anniversary of the Cut-off Date, the Fraud Loss Amount shall be zero. INDIRECT PARTICIPANT: A broker, dealer, bank or other financial institution or other Person that clears through or maintains a custodial relationship with a Depository Participant. INSURANCE PROCEEDS: Proceeds paid by any insurer pursuant to any insurance policy covering a Mortgage Loan, net of costs of collecting such proceeds and net of amounts released to the Mortgagor or applied to the restoration of the Mortgaged Property. INSURED EXPENSES: Expenses covered by any insurance policy. INTEREST ACCRUAL PERIOD: With respect to any Distribution Date and the Class A-5 and Class A-6 Certificates, the period from the 25th day of the month preceding the month in which such Distribution Date occurs through the 24th day of the month in which such Distribution Date occurs. LATE COLLECTIONS: With respect to any Mortgage Loan, all amounts received during any Due Period, whether as late payments of Monthly Payments or as Liquidation Proceeds, condemnation proceeds, Insurance Proceeds, or with respect to a disposition of a Mortgaged Property which has been acquired by foreclosure or deed in lieu of 17 foreclosure or otherwise, which represent late payments or collections of Monthly Payments due but delinquent for a previous Due Period and not previously recovered. LIBOR: With respect to any Distribution Date and the Certificate Rates on the Class A-5 and Class A-6 Certificates, LIBOR as determined in accordance with Section 6.07. LIBOR BUSINESS DAY: Any day other than (i) a Saturday or a Sunday or (ii) a day on which banking institutions in the city of London, England are required or authorized by law to be closed. LIQUIDATED MORTGAGE LOAN: Any Mortgage Loan (a) as to which the Servicer has determined that all amounts which it expects to recover from or on account of such Mortgage Loan or property acquired in respect thereof have been recovered, (b) as to which a Cash Liquidation has taken place or (c) with respect to which the Mortgaged Property has been acquired by foreclosure or deed in lieu of foreclosure and a disposition (the term disposition shall include, for purposes of a repurchase pursuant to Section 11.01, any repurchase of a Mortgaged Property pursuant to such Section) of such Mortgaged Property has occurred. LIQUIDATION EXPENSES: Expenses which are incurred by the Servicer or any Sub-Servicer in connection with the liquidation of any defaulted Mortgage Loan or property acquired in respect thereof including, without limitation, legal fees and expenses, any unreimbursed amount expended by the Servicer pursuant to Sections 5.16 and 5.21 respecting the related Mortgage Loan and any related and unreimbursed expenditures for real estate property taxes or for property restoration or preservation. LIQUIDATION PRINCIPAL: With respect to any Distribution Date, the principal portion of Net Liquidation Proceeds received with respect to each Mortgage Loan which became a Liquidated Mortgage Loan (but not in excess of the Principal Balance thereof) during the calendar month preceding the month of such Distribution Date, exclusive of the portion thereof attributable to the Class A-P Amount. LIQUIDATION PROCEEDS: Cash (including Insurance Proceeds) received by the Servicer in connection with the liquidation of any Mortgage Loan or Mortgaged Property acquired in respect thereof, whether through the sale or assignment of such Mortgage Loan (other than pursuant to Section 5.21), trustee's sale, foreclosure sale or otherwise, or the sale of the Mortgaged Property if the Mortgaged Property is acquired in satisfaction of the Mortgage Loan other than amounts required to be paid to the Mortgagor pursuant to law or the terms of the applicable Mortgage Note. LOAN-TO-VALUE RATIO: The fraction, expressed as a percentage, the numerator of which is the outstanding principal amount of the related Mortgage Loan at the time of origination (or, (i) for purposes of Section 5.15, at the time of determination and (ii) for purposes of a Mortgage Loan with respect to which a conversion from adjustable rate to fixed 18 rate has occurred, at the time of initial origination) and the denominator of which is the appraised value of the related Mortgaged Property at the time of origination or, in the case of a Mortgage Loan financing the acquisition of the Mortgaged Property, the sales price of the Mortgaged Property, if such sales price is less than such appraised value. LOCK-OUT LIQUIDATION AMOUNT: With respect to any Distribution Date, the aggregate, for each Mortgage Loan which became a Liquidated Mortgage Loan during the calendar month preceding the month of such Distribution Date, of the lesser of (i) the Lock-out Percentage of the PO Percentage of such Mortgage Loan and (ii) the Lock-out Percentage on any Distribution Date occurring prior to the fifth anniversary of the first Distribution Date, and the Lock-out Prepayment Percentage on any Distribution Date thereafter, in each case, of the Net Liquidation Proceeds with respect to such Mortgage Loan. LOCK-OUT PERCENTAGE: With respect to any Distribution Date, the outstanding principal balance of the Class A-7 Certificates divided by the aggregate outstanding principal balance of the Certificates (other than the Class A-P Certificates), in each case immediately prior to the Distribution Date. LOCK-OUT PREPAYMENT PERCENTAGE: The product of (a) the Lock-out Percentage and (b) the Step Down Percentage. LOCK-OUT PRINCIPAL DISTRIBUTION AMOUNT: With respect to any Distribution Date, the sum of (i) the Adjusted Lock-out Percentage of the principal portion of Monthly Payments, whether or not received, which were due on the related Due Date on outstanding Mortgage Loans as of such Due Date, (ii) the Lock-out Prepayment Percentage of the applicable Non-PO Percentage of the principal portion of Principal Prepayments, Insurance Proceeds, condemnation awards and other cash proceeds from sources other than Mortgagors, and Repurchase Proceeds, in each case received during the related Principal Prepayment Period and (iii) the Lock-out Liquidation Amount. MODIFIED MORTGAGE LOAN: Any Mortgage Loan which the Servicer has modified pursuant to Section 5.01. MONTHLY PAYMENT: The minimum required monthly payment of principal and interest due on a Mortgage Loan as specified in the Mortgage Note for any Due Date (before any adjustment to such scheduled amount by reason of any bankruptcy or similar proceeding or any moratorium or similar waiver or grace period). Monthly Payments shall be deemed due on an Outstanding Mortgage Loan until such time as it becomes a Liquidated Mortgage Loan. MORTGAGE: The mortgage, deed of trust or other instrument creating a first lien or a first priority ownership interest in an estate in fee simple in real property securing a Mortgage Note. 19 MORTGAGE FILE: As to each Mortgage Loan, the items referred to in Exhibit B annexed hereto. MORTGAGE LOAN: An individual mortgage loan and all rights with respect thereto, evidenced by a Mortgage and a Mortgage Note, sold and assigned by the Depositor to the Trustee and which is subject to this Agreement and included in the Trust Fund. The Mortgage Loans originally sold and subject to this Agreement are identified on the Mortgage Loan Schedule. MORTGAGE LOAN SCHEDULE: The schedule of Mortgage Loans attached hereto as Exhibit A as it may be amended in accordance with Section 3.03, setting forth the following information as to each Mortgage Loan: (i) the Mortgage Loan identifying number; (ii) the street address of the Mortgaged Property including the zip code; (iii) an indication of whether the Mortgaged Property is owner-occupied; (iv) the property type of the Mortgaged Property; (v) the original number of months to stated maturity; (vi) the number of months remaining to stated maturity from the Cut-off Date; (vii) the original Loan-to-Value Ratio; (viii) the original principal balance of the Mortgage Loan; (ix) the unpaid principal balance of the Mortgage Loan as of the close of business on the Cut-off Date; (x) the Mortgage Rate; (xi) the amount of the current Monthly Payment; and (xii) the PO Percentage with respect to such Mortgage Loan. MORTGAGE NOTE: The note or other evidence of the indebtedness of a Mortgagor secured by a Mortgage. MORTGAGE POOL: The pool of Mortgage Loans held in the Trust Fund. MORTGAGE POOL PRINCIPAL BALANCE: As of any date of determination, the aggregate of the Principal Balances of each Outstanding Mortgage Loan on such date of determination less the principal portion of any Monthly Payment due but not paid with respect to which an Advance has not been made. MORTGAGED PROPERTY: The property securing a Mortgage Note. MORTGAGE RATE: With respect to each Mortgage Loan, the per annum rate of interest borne by the Mortgage Loan, as specified in the Mortgage Note. MORTGAGOR: The obligor on a Mortgage Note. NET LIQUIDATION PROCEEDS: As to any Liquidated Mortgage Loan, Liquidation Proceeds net of Liquidation Expenses. NET MORTGAGE RATE: With respect to each Mortgage Loan, a per annum rate of interest for the applicable period equal to the Mortgage Rate less the Servicing Fee. 20 NON-DISCOUNT MORTGAGE LOANS: The Mortgage Loans having Net Mortgage Rates in excess of the Remittance Rate. NON-PO ALLOCATED AMOUNT: At the time of any determination, the amount derived by (i) multiplying the Principal Balance of each Mortgage Loan on such date of determination by the Non-PO Percentage with respect to such Mortgage Loan and (ii) summing the results. NON-PO CLASS A CERTIFICATES: The Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class A-R and Class A-X Certificates, referred to collectively. NON-PO CLASS A OPTIMAL PRINCIPAL AMOUNT: With respect to any Distribution Date, the lesser of (a) the Non-PO Class A Principal Balance and (b) the sum of: (i) the Non-PO Class A Percentage of the applicable Non-PO Percentage of the principal portion of all Monthly Payments, whether or not received, which were due during the related Due Period on Mortgage Loans which were outstanding during such Due Period; (ii) the Non-PO Class A Prepayment Percentage of the applicable Non-PO Percentage of all Principal Prepayments made on any Mortgage Loan during the related Principal Prepayment Period; (iii) with respect to each Mortgage Loan not described in (iv) below, the Non-PO Class A Percentage of the applicable Non-PO Percentage of the principal portion of all Insurance Proceeds, condemnation awards and any other cash proceeds from a source other than the applicable Mortgagor, to the extent required to be deposited in the Collection Account pursuant to Section 5.08(iv) and (v), which were received during the related Principal Prepayment Period, net of related unreimbursed Servicing Advances and net of any portion thereof which, as to any such Mortgage Loan, constitutes Late Collections that have been the subject of an Advance on any prior Distribution Date; (iv) with respect to each Mortgage Loan which has become a Liquidated Mortgage Loan during the related Principal Prepayment Period, the lesser of (A) the Non-PO Class A Percentage of applicable Non-PO Percentage of an amount equal to the Principal Balance of such Liquidated Mortgage Loan as of the Due Date immediately preceding the date on which it became a Liquidated Mortgage Loan and (B) the Non-PO Class A Prepayment Percentage of the applicable Non-PO Percentage of the Net Liquidation Proceeds with respect to such liquidated Mortgage Loan (net of any unreimbursed Advances); 21 (v) with respect to each Mortgage Loan repurchased during the related Principal Prepayment Period pursuant to Section 2.02, 3.01, 5.21 or 11.01, an amount equal to the Non-PO Class A Prepayment Percentage of the applicable Non-PO Percentage of the principal portion of the Purchase Price (net of amounts with respect to which a distribution of principal has previously been made to the Non-PO Class A Certificateholders); and (vi) on or after the Credit Support Depletion Date, the excess of the Non-PO Class A Principal Balance (calculated after giving effect to reductions thereof on such Distribution Date with respect to the amounts described in (i) - (v) above) over the Non-PO Allocated Amount, if any, as of the preceding Distribution Date. NON-PO CLASS A PERCENTAGE: As of any Distribution Date, the fraction, expressed as a percentage (which shall never exceed 100%), the numerator of which is the Non-PO Class A Principal Balance and the denominator of which is the Non-PO Allocated Amount as of the immediately preceding Due Date. NON-PO CLASS A PREPAYMENT PERCENTAGE: As of any Distribution Date up to and including the Step-down Date, 100%; as of any Distribution Date during the first year thereafter, the Non-PO Class A Percentage plus 70% of the Subordinated Percentage for such Distribution Date; as of any Distribution Date during the second year thereafter, the Non-PO Class A Percentage plus 60% of the Subordinated Percentage for such Distribution Date; as of any Distribution Date during the third year thereafter, the Non-PO Class A Percentage plus 40% of the Subordinated Percentage for such Distribution Date; as of any Distribution Date during the fourth year thereafter, the Non-PO Class A Percentage plus 20% of the Subordinated Percentage for such Distribution Date; and as of any Distribution Date after the fourth year thereafter, the Non-PO Class A Percentage; provided that if the Non-PO Class A Percentage as of any such Distribution Date is greater than the Non-PO Class A Percentage on the first Distribution Date, the Non-PO Class A Prepayment Percentage shall be 100%; and provided further that whenever the Non-PO Class A Percentage equals 0%, the Non-PO Class A Prepayment Percentage shall equal 0%. NON-PO CLASS A PRINCIPAL BALANCE: As of any Distribution Date, (a) the Non-PO Class A Principal Balance for the immediately preceding Distribution Date less (b) amounts distributed (or deemed distributed) to the Non-PO Class A Certificateholders on such preceding Distribution Date allocable to principal (including the principal portion of Advances of the Servicer made pursuant to Section 6.03 and Realized Losses allocated to the Non-PO Class A Certificates pursuant to Section 6.04); provided that the Non-PO Class A Principal Balance on the first Distribution Date shall be the Original Non-PO Class A Principal Balance. NON-PO CLASS A PRINCIPAL PAYMENT RULES: [Describe payment methodology] 22 NON-PO PERCENTAGE: With respect to each Mortgage Loan, the fraction, expressed as a percentage (but not greater than 100%), the numerator of which equals the applicable Net Mortgage Rate and the denominator of which equals the Remittance Rate. NONRECOVERABLE ADVANCE: Any Advance previously made or proposed to be made in respect of a Mortgage Loan by the Servicer pursuant to Section 6.03 which, in the good faith judgment of the Servicer, will not or, in the case of a proposed Advance, would not, ultimately be recoverable by the Servicer from Late Collections or otherwise. The determination by the Servicer that it has made, or would be making, a Nonrecoverable Advance shall be evidenced by a certificate of a Servicing Officer of the Servicer delivered to the Trustee, any co-trustee and the Depositor and detailing the reasons for such determination. OFFICERS' CERTIFICATE: A certificate signed by two of the Chairman of the Board, the Vice Chairman of the Board, the President or a Vice President, the Treasurer or the Secretary or one of the Assistant Treasurers or Assistant Secretaries or any other duly authorized officer of the Depositor or the Servicer, and delivered to the Trustee. OPINION OF COUNSEL: A written opinion of counsel, who may be counsel for the Depositor or the Servicer and who is reasonably acceptable to the Trustee. ORIGINAL CERTIFICATE PRINCIPAL BALANCE: With respect to any Class of Certificates, the amount specified for such Class in Section 4.01(d). ORIGINAL CLASS A PRINCIPAL BALANCE: $_____________ ORIGINAL CLASS M PRINCIPAL BALANCE: $_____________ ORIGINAL CLASS B PRINCIPAL BALANCE: $_____________ ORIGINAL NON-PO CLASS A PRINCIPAL BALANCE $_____________ ORIGINAL CREDIT SUPPORT: With respect to any Class of Subordinated Certificates (other than the Class B-5 Certificates), the level of Credit Support indicated below: Class M: % Class B-1: % Class B-2: % Class B-3: % Class B-4: % OUTSTANDING CERTIFICATE PRINCIPAL BALANCE: With respect to any Class (other than the Class A-X Certificates) of Certificates and any Distribution Date, the 23 Original Certificate Principal Balance of such Class minus the sum of (i) any distributions of principal made on such Class prior to such Distribution Date and (ii) any Realized Losses allocated to such Class prior to such Distribution Date; provided, however, that (I) with respect to the Class of Class B Certificates then outstanding having the highest numerical class designation, the Outstanding Certificate Principal Balance of such Class shall equal the excess of the Mortgage Pool Principal Balance (together with the principal portion of any Monthly Payment due but not paid with respect to which an Advance has not been made) over the sum of the Outstanding Certificate Principal Balances of all Classes of Certificates (other than the Class of Class B Certificates then outstanding having the highest numerical class designation); and (II) during such time as the Outstanding Certificate Principal Balance of the Class B-1 Certificates equals zero, with respect to the Class M Certificates, the Outstanding Certificate Principal Balance of such Class shall equal the excess of the Mortgage Pool Principal Balance (together with the principal portion of any Monthly Payment due but not paid with respect to which an Advance has not been made) over the Class A Principal Balance. OUTSTANDING MORTGAGE LOAN: As to any Distribution Date, a Mortgage Loan which was not paid in full during the related or any previous Principal Prepayment Period, which did not become a Liquidated Mortgage Loan during the related or any previous Principal Prepayment Period and which was not repurchased under Section 2.02, 3.01, 5.21 or 11.01 during the related or any previous Principal Prepayment Period. PASS-THRU ENTITY: A "Pass-Thru Entity" as defined in Section 860E(e)(6) of the Code. PAYING AGENT: The Person appointed by the Trustee as Paying Agent pursuant to Section 4.05. PERCENTAGE INTEREST: As to any Certificate (other than a Class A-X Certificate), the percentage interest evidenced thereby in distributions required to be made hereunder, such percentage interest being equal, with respect to any Class, to the percentage obtained by dividing the denomination of such Certificate by the aggregate of the denominations of all the Certificates of such Class and with respect to all Certificates, the percentage obtained by dividing the denomination of such Certificate by the aggregate of the denominations of all the Certificates. With respect to any Class A-X Certificate, the percentage interest specified on the face of such Certificate. PERSON: Any individual, corporation, partnership, limited liability company, limited liability partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. PO PERCENTAGE: The PO Percentage with respect to each Mortgage Loan as identified on the Mortgage Loan Schedule, such percentage being equal to the fraction, expressed as a percentage (but not less than 0%), the numerator of which equals the excess of the 24 Remittance Rate over the applicable Net Mortgage Rate and the denominator of which equals the Remittance Rate. PRIMARY INSURANCE POLICY: Each primary policy of mortgage guaranty insurance or any replacement policy therefor referred to in Section 5.15 hereof. PRINCIPAL BALANCE: At the time of any determination, the principal balance of a Mortgage Loan remaining to be paid at the close of business on the Cut-off Date (after deduction of all principal payments due on or before the Cut-off Date whether or not paid) (or, in the case of a substitute Mortgage Loan included in the Trust Fund pursuant to Section 3.04, the close of business as of the date of substitution) reduced by all amounts previously distributed to Certificateholders that are allocable to payments of principal on such Mortgage Loan (including the principal portion of Advances of the Servicer made pursuant to Section 6.03). PRINCIPAL PREPAYMENT: Any payment or other recovery of principal on a Mortgage Loan (other than Late Collections) which is received other than as part of a Monthly Payment; provided, however, that the term Principal Prepayment does not include Insurance Proceeds, Liquidation Proceeds, condemnation awards or other cash proceeds from a source other than the applicable Mortgagor. PRINCIPAL PREPAYMENT PERIOD: With respect to any Distribution Date, the period beginning on the first day of the month preceding the month in which such Distribution Date occurs and ending on the last day of such month. PURCHASE PRICE: With respect to any Mortgage Loan required to be purchased on any date pursuant to Section 2.02, 3.01, 5.01, 5.21 or 11.01, an amount equal to the sum of (a) 100% of the Principal Balance thereof, (b) unpaid accrued interest at the Mortgage Rate thereon from the Due Date on which interest was last paid by the Mortgagor or Advanced by the Servicer to the Due Date next following the date of repurchase and (c) the aggregate of any unreimbursed Advances. QUALIFIED INSURER: An insurance company duly qualified as such under the laws of the states in which the Mortgaged Properties are located, duly authorized and licensed in such states to transact the applicable insurance business and to write the insurance provided, approved as an insurer by FNMA and FHLMC and whose claims-paying ability is rated in the two highest rating categories by S&P, Moody's and Fitch with respect to primary mortgage insurance and in the two highest rating categories for general policyholder rating and financial performance index rating by Best's with respect to hazard and flood insurance. RATE ADJUSTMENT DATE: The LIBOR Business Day prior to the first day of each Interest Accrual Period after the initial Interest Accrual Period. 25 RATING AGENCY: Any nationally recognized statistical rating organization, or its successor, that rated one or more Classes of Certificates at the request of the Depositor at the time of the initial issuance of the Certificates. If such organization or a successor is no longer in existence, "Rating Agency" shall be such nationally recognized statistical rating organization, or other comparable Person, designated by the Depositor, notice of which designation shall be given to the Trustee and the Servicer. References herein to the two highest long-term debt rating categories of a Rating Agency shall mean AA or better. REALIZED LOSS: With respect to (i) a Liquidated Mortgage Loan, the amount, if any, by which the unpaid Principal Balance and accrued interest thereon at a rate equal to the Net Mortgage Rate exceeds the amount actually recovered by the Servicer with respect thereto (net of reimbursement of Advances and Servicing Advances) at the time such Mortgage Loan became a Liquidated Mortgage Loan or (ii) with respect to a Mortgage Loan which is not a Liquidated Mortgage Loan, any amount of principal that the Mortgagor is no longer legally required to pay (except for the extinguishment of debt that results from the exercise of remedies due to default by the Mortgagor). REALIZED LOSS INTEREST SHORTFALL: The meaning specified in Section 6.05(c). RECORD DATE: The close of business of the last Business Day of the month preceding the month of the related Distribution Date. REFERENCE BANK RATE: As of 11:00 A.M. London time, on the day that is one LIBOR Business Day prior to the immediately preceding Distribution Date, the rate at which deposits are offered by the reference banks (which shall be three major banks engaged in transactions in the London interbank market, selected by the Servicer) to prime banks in the London interbank market for a period of one month in amounts approximately equal to the aggregate Outstanding Certificate Principal Balance of the Class A-5 and Class A-6 Certificates in accordance with the following procedures. The Servicer will request the principal London office of each of the reference banks to provide a quotation of its rate. If at least two such quotations are provided, the rate will be the arithmetic mean of the quotations. If on such date fewer than two quotations are provided as requested, the rate will be the arithmetic mean of the rates quoted by one or more major banks in New York City, selected by the Servicer as of 11:00 A.M., New York City time, on such date for loans in U.S. Dollars to leading European banks for a period of one month in amounts approximately equal to the aggregate Outstanding Certificate Principal Balance of the Class A-5 and Class-6 Certificates. In the event no such quotations can be obtained, the rate will be LIBOR for the prior Distribution Date, or in the case of the first Rate Adjustment Date, _________%. RELEVANT MORTGAGE LOAN: The meaning specified in Section 5.01. 26 REMIC: A "real estate mortgage investment conduit," as such term is defined in Section 860D of the Code. References herein to "the REMIC" shall mean the REMIC created hereunder. REMIC PROVISIONS: Provisions of the federal income tax law relating to REMICs which appear at Sections 860A through 860G of Part IV of Subchapter M of Chapter 1 of Subtitle A of the Code, and related provisions, and U.S. Department of the Treasury temporary, proposed or final regulations and rulings promulgated thereunder, as the foregoing are in effect (or with respect to proposed regulations, are proposed to be in effect) from time to time. REMITTANCE RATE: ___% per annum. REPURCHASE PROCEEDS: All proceeds of any Mortgage Loan or property acquired in respect thereof repurchased pursuant to Section 2.02, 3.01, 5.01, 5.21 or 11.01. RESIDUAL INTEREST: The interest in the Trust Fund represented by amounts, if any, remaining in the Collection Account following termination of the Trust Fund after payments to the Class A Certificateholders (other than the Class A-R Certificateholders), the Class M Certificateholders and the Class B Certificateholders. RESPONSIBLE OFFICER: When used with respect to the Trustee, any Senior Vice President, any Vice President, any Assistant Vice President, any Senior Trust Officer, any Trust Officer or any other officer of the Trustee in its Corporate Trust Office customarily performing functions similar to those performed by any of the above designated officers and also, with respect to a particular matter, any other officer in its Corporate Trust Office to whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject. S&P: Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. or its successor in interest. SALE AGREEMENT: The Mortgage Loan Sale Agreement dated as of [DATE] between the Depositor and CMMC. SCHEDULED PRINCIPAL BALANCE: With respect to any Mortgage Loan as of any Distribution Date, the unpaid principal balance of such Mortgage Loan as specified in the amortization schedule at the time relating thereto (before any adjustment to such schedule by reason of bankruptcy or similar proceeding or any moratorium or similar waiver or grace period) as of the Due Date in the month preceding the month of such Distribution Date, or as the Cut-off Date, with respect to the first Distribution Date, after giving effect to any previously applied prepayments, the payment of principal due on such first day of the month and any reduction of 27 the principal balance of such Mortgage Loan by a bankruptcy court, irrespective of any delinquency in payment by the related Mortgagor. SELLER: [CMMC]. SERVICER: [CMMC] or any successor under this Agreement as herein provided. SERVICING ADVANCES: All customary, reasonable and necessary "out of pocket" costs and expenses incurred in the performance by the Servicer of its servicing obligations and which are "unanticipated expenses" of the REMIC, as defined in the REMIC Provisions, including, but not limited to, the cost of (i) the preservation, restoration and protection of the Mortgaged Property, (ii) any enforcement or judicial proceedings, including foreclosures, (iii) the management and liquidation of the Mortgaged Property if the Mortgaged Property is acquired in satisfaction of the Mortgage, (iv) taxes and assessments on the Mortgaged Properties subject to the Mortgage Loans and (v) compliance with the obligations under Section 5.21. SERVICING FEE: The amount of the monthly fee paid for the servicing of the Mortgage Loans, equal to, as of any Distribution Date, the total of, with respect to each Mortgage Loan, one-twelfth of ______% per annum of the Principal Balance thereof as of the Determination Date in the preceding month, subject to adjustment as provided in Section 6.05. The Servicing Fee shall be payable only at the time of and with respect to those Mortgage Loans for which payment is in fact made of the entire amount of the Monthly Payments that shall have come due and only at the time such Monthly Payment shall be made. The right to receive the Servicing Fee is limited to, and the Servicing Fee is payable solely from, the interest portion of such Monthly Payments (or the interest portion of any Principal Prepayment in full) collected by the Servicer, or as otherwise provided under Section 5.09 or 5.23. SERVICING OFFICER: Any officer of the Servicer or any Sub-servicer involved in, or responsible for, the administration and servicing of the Mortgage Loans whose name appears on a written certificate listing servicing officers furnished to the Trustee by the Servicer on or prior to the Closing Date, and signed on behalf of the Servicer or any Sub-servicer by its President, any Vice President or its Treasurer, as such certificate may from time to time be amended. SINGLE CERTIFICATE: A Certificate of any Class that evidences the smallest permissible original denomination for such Class of Certificates as specified in Section 4.01(d). SPECIAL HAZARD AMOUNT: Initially, $__________. As of the first anniversary of the Cut-off Date, the Special Hazard Amount shall be reduced, but not increased, to the lesser of (i) the initial Special Hazard Amount less the sum of all amounts allocated to the Subordinated Certificates in respect of Special Hazard Losses on the Mortgage Loans during 28 such year or (ii) the Adjustment Amount for such anniversary. As of each subsequent anniversary of the Cut-off Date, the Special Hazard Amount on the immediately preceding anniversary of the Cut-off Date less the sum of all amounts allocated to the Subordinated Certificates in respect of Special Hazard Losses on the Mortgage Loans during such year and (ii) the Adjustment Amount for such anniversary. The "Adjustment Amount" with respect to each anniversary of the Cut-off Date will be equal to the greatest of (i) ___% multiplied by the aggregate outstanding principal balance of the Mortgage Loans, (ii) the aggregate outstanding principal balance of the Mortgage Loans secured by Mortgaged Properties located in the California postal zip code area in which the highest percentage of Mortgage Loans by Principal Balance are located and (iii) twice the outstanding principal balance of the Mortgage Loan having the largest outstanding principal balance. SPECIAL HAZARD LOSS: Any Realized Loss or portion thereof resulting from direct physical loss or damage to the Mortgaged Property, which is not insured against under the Standard Hazard Policy required to be maintained hereunder. STANDARD HAZARD POLICY: Each standard hazard insurance policy or replacement therefor referred to in Section 5.16. STARTUP DAY: The meaning specified in Section 2.04(a). STEP-DOWN DATE: The earliest of the Distribution Date in [MONTH/YEAR] or any succeeding Distribution Date on which the following conditions are satisfied as of the last day of the month preceding such Distribution Date: (a) the aggregate outstanding Principal Balance of Outstanding Mortgage Loans 60 days or more delinquent (including loans in foreclosure and with respect to owned real estate) does not exceed 50% of the aggregate Outstanding Certificate Balance of the Subordinated Certificates as of such date; and (b) Realized Losses through the last day of the month preceding such Distribution Date (including Nonrecoverable Advances) do not exceed the following thresholds: (i) if such Distribution Date occurs between and including [MONTH/YEAR] and [MONTH/YEAR], 30% of the Subordinated Percentage of the Mortgage Pool Principal Balance as of the Cut-off Date; (ii) if such Distribution Date occurs between and including [MONTH/YEAR] and [MONTH/YEAR], 35% of the Subordinated Percentage of the Mortgage Pool Principal Balance as of the Cut-off Date; 29 (iii) if such Distribution Date occurs between and including [MONTH/YEAR] and [MONTH/YEAR], 40% of the Subordinated Percentage of the Mortgage Pool Principal Balance as of the Cut-off Date; (iv) if such Distribution Date occurs between and including [MONTH/YEAR] and [MONTH/YEAR], 45% of the Subordinated Percentage of the Mortgage Pool Principal Balance as of the Cut-off Date; and (v) if such Distribution Date occurs after [MONTH/YEAR], 50% of the Subordinated Percentage of the Mortgage Pool Principal Balance as of the Cut-off Date. STEP DOWN PERCENTAGE: With respect to any Distribution Date, the percentage indicated below: Distribution Date Occurring in Step Down Percentage ------------------------------ -------------------- MONTH/DATE through MONTH DATE........................ % STRIPPED INTEREST RATE: For each Mortgage Loan, the excess, if any, of the Net Mortgage Rate for such Mortgage Loan over the Remittance Rate. SUBORDINATED CERTIFICATES: The Class M and Class B Certificates, referred to collectively. SUBORDINATED OPTIMAL PRINCIPAL AMOUNT: With respect to any Distribution Date, the lesser of (a) the aggregate Outstanding Certificate Principal Balance of the Subordinated Certificates (before giving effect to any distributions of principal on such Distribution Date) and (b)(1) the sum of: (i) the Subordinated Percentage of the applicable Non-PO Percentage of the principal portion of all Monthly Payments, whether or not received, which were due during the related Due Period on Mortgage Loans which were outstanding during such Due Period; (ii) the Subordinated Prepayment Percentage of the applicable Non-PO Percentage of all Principal Prepayments made on any Mortgage Loan during the related Principal Prepayment Period; (iii) with respect to each Mortgage Loan not described in (iv) below, the Subordinated Percentage of the applicable Non-PO Percentage of the principal portion of all Insurance Proceeds, condemnation awards and any other cash proceeds from a source other than the applicable Mortgagor, to the extent required to be deposited in the Collection Account pursuant to Section 5.08(iv) and (v), which were received during the related Principal 30 Prepayment Period, net of related unreimbursed Servicing Advances and net of any portion thereof which, as to any such Mortgage Loan, constitutes Late Collections that have been the subject of an Advance on any prior Distribution Date; (iv) with respect to each Mortgage Loan which has become a Liquidated Mortgage Loan during the related Principal Prepayment Period, an amount equal to the portion (if any) of the Net Liquidation Proceeds with respect to such liquidated Mortgage Loan (net of any unreimbursed Advances) that was not included in the Class A-P Amount or the Non-PO Class A Optimal Principal Amount with respect to such Distribution Date; and (v) with respect to each Mortgage Loan repurchased during the related Principal Prepayment Period pursuant to Section 2.02, 3.01, 5.21 or 11.01, an amount equal to the Subordinated Prepayment Percentage of the applicable Non-PO Percentage of the principal portion of the Purchase Price (net of amounts with respect to which a distribution of principal has previously been made to the Subordinated Certificateholders) minus (2) the Class A-P Shortfall Amount with respect to such Distribution Date. SUBORDINATED PERCENTAGE: As of any Distribution Date, the difference between 100% and the Non-PO Class A Percentage. SUBORDINATED PREPAYMENT PERCENTAGE: As of any Distribution Date, the difference between 100% and the Non-PO Class A Prepayment Percentage. SUB-SERVICER: Any Person with whom the Servicer enters into a Sub-Servicing Agreement. SUB-SERVICING AGREEMENT: Any agreement between the Servicer and any Sub-Servicer, relating to servicing or administration of certain Mortgage Loans as provided in Section 5.02, in such form as has been approved by the Servicer and the Depositor. SUBSTITUTE EXCESS INTEREST: As defined in Section 3.04. TELERATE SCREEN PAGE 3750: The display designated as page 3750 on the Dow Jones Telerate Service or such other page as may replace page 3750 on that service for the purpose of displaying London interbank offered rates of major banks. TRUST: The Trust created pursuant to this Agreement. TRUST FUND: The corpus of the Trust consisting of (i) the Mortgage Loans, (ii) such assets as shall from time to time be identified as deposited in the Collection Account and the Certificate Account, (iii) property which secured a Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure, (iv) Standard Hazard Policies and any other insurance policies, and the proceeds thereof and (v) any proceeds of any of the foregoing. TRUSTEE: [TRUSTEE], a ___________ and its successors and any corporation resulting from or surviving any consolidation or merger to which it or its successors may be a 31 party, and any successor trustee at the time serving as successor trustee hereunder, appointed as herein provided. U.S. PERSON: A "United States Person" as defined in Section 7701(a)(30) of the Code. [End of Article I] ARTICLE II CONVEYANCE OF MORTGAGE LOANS; TRUST FUND Section 2.01. Conveyance of Mortgage Loans. The Depositor, concurrently with the execution and delivery hereof, does hereby sell, transfer, assign, set over and convey to the Trustee without recourse all the right, title and interest of the Depositor in and to the Mortgage Loans, including all interest and principal received on or with respect to the Mortgage Loans on or after the Cut-off Date (other than Monthly Payments due on the Mortgage Loans on or before the Cut-off Date). In connection with such assignment, the Depositor does hereby deliver to, and deposit with, the Trustee the following documents or instruments with respect to each Mortgage Loan so assigned: (A) (I) Original Mortgage Note (or a lost note affidavit (including a copy of the original Mortgage Note)) or (II) original Consolidation, Extension and Modification Agreement (or a lost note affidavit (including a copy of the original Consolidation, Extension and Modification Agreement), in either case endorsed, "Pay to the order of [TRUSTEE], as trustee, without recourse." (B) The original Mortgage (including all riders thereto) with evidence of recording thereon, or a copy thereof certified by the public recording office in which such mortgage has been recorded or, if the original Mortgage has not been returned from the applicable public recording office, a true certified copy, certified by the Seller, of the original Mortgage together with a certificate of the Seller certifying that the original Mortgage has been delivered for recording in the appropriate public recording office of the jurisdiction in which the Mortgaged Property is located. (C) The original Assignment of Mortgage to "[TRUSTEE], as trustee," which assignment shall be in form and substance acceptable for recording, or a copy certified by the Seller as a true and correct copy of the original Assignment which has been sent for recordation. Subject to the foregoing, such assignments may, if permitted by law, be by blanket assignments for Mortgage Loans covering Mortgaged Properties situated within 32 the same county. If the Assignment of Mortgage is in blanket form, a copy of the Assignment of Mortgage shall be included in the related individual Mortgage File. (D) The original policy of title insurance, including riders and endorsements thereto, or if the policy has not yet been issued, a written commitment or interim binder or preliminary report of title issued by the title insurance or escrow company. (E) Originals of all recorded intervening Assignments of Mortgage, or copies thereof, certified by the public recording office in which such Assignments or Mortgage have been recorded showing a complete chain of title from the originator to the Depositor, with evidence of recording, thereon, or a copy thereof certified by the public recording office in which such Assignment of Mortgage has been recorded or, if the original Assignment of Mortgage has not been returned from the applicable public recording office, a true certified copy, certified by the Seller of the original Assignment of Mortgage together with a certificate of the Seller certifying that the original Assignment of Mortgage has been delivered for recording in the appropriate public recording office of the jurisdiction in which the Mortgaged Property is located. (F) Originals, or copies thereof certified by the public recording office in which such documents have been recorded, of each assumption, extension, modification, written assurance or substitution agreements, if applicable, or if the original of such document has not been returned from the applicable public recording office, a true certified copy, certified by the Seller, of such original document together with certificate of Seller certifying the original of such document has been delivered for recording in the appropriate recording office of the jurisdiction in which the Mortgaged Property is located. (G) If the Mortgaged Note or Mortgage or any other material document or instrument relating to the Mortgaged Loan has been signed by a person on behalf of the Mortgagor, the original power of attorney or other instrument that authorized and empowered such person to sign bearing evidence that such instrument has been recorded, if so required in the appropriate jurisdiction where the Mortgaged Property is located (or, in lieu thereof, a duplicate or conformed copy of such instrument, together with a certificate of receipt from the recording office, certifying that such copy represents a true and complete copy of the original and that such original has been or is currently submitted to be recorded in the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located), or if the original power of attorney or other such instrument has been delivered for recording in the appropriate public recording office of the jurisdiction in which the Mortgaged Property is located. If in connection with any Mortgage Loan the Depositor cannot deliver the Mortgage, Assignments of Mortgage or assumption, consolidation or modification, as the case may be, with evidence of recording thereon concurrently with the execution and delivery of this 33 Agreement solely because of a delay caused by the public recording office where such Mortgage, Assignments of Mortgage or assumption, consolidation or modification, as the case may be, has been delivered for recordation, the Depositor shall deliver or cause to be delivered to the Trustee written notice stating that such Mortgage, Assignments of Mortgage or assumption, consolidation or modification, as the case may be, has been delivered to the appropriate public recording office for recordation. Thereafter, the Depositor shall deliver or cause to be delivered to the Trustee such Mortgage, Assignments of Mortgage or assumption, consolidation or modification, as the case may be, with evidence of recording indicated thereon upon receipt thereof from the public recording office. The Servicer shall cause to be recorded in the appropriate public recording office for real property records each Assignment of Mortgage referred to in this Section 2.01 as soon as practicable. While each Assignment of Mortgage to be recorded is being recorded, the Servicer shall deliver to the Trustee a photocopy of such document. If any such Assignment of Mortgage is returned unrecorded to the Servicer because of any defect therein, the Servicer shall cause such defect to be cured and such document to be recorded in accordance with this paragraph. The Depositor shall deliver or cause to be delivered each original recorded Assignment of Mortgage and intermediate assignment to the Trustee within 270 days of the Closing Date or shall deliver to the Trustee on or before such date an Officer's Certificate stating that such document has been delivered to the appropriate public recording office for recordation, but has not been returned solely because of a delay caused by such recording office. In any event, the Depositor shall use all reasonable efforts to cause each such document with evidence of recording thereon to be delivered to the Trustee within 300 days of the Closing Date. The ownership of each Mortgage Note, the Mortgage and the contents of the related Mortgage File is vested in the Trustee. Neither the Depositor nor the Servicer shall take any action inconsistent with such ownership and shall not claim any ownership interest therein. The Depositor and the Servicer shall respond to any third party inquiries with respect to ownership of the Mortgage Loans by stating that such ownership is held by the Trustee on behalf of the Certificateholders. Mortgage documents relating to the Mortgage Loans not delivered to the Trustee are and shall be held in trust by the Servicer or any Sub-Servicer, for the benefit of the Trustee as the owner thereof, and the Servicer's or such Sub-Servicer's possession of the contents of each Mortgage File so retained is for the sole purpose of servicing the related Mortgage Loan, and such retention and possession by the Servicer or such Sub-Servicer is in a custodial capacity only. The Depositor agrees to take no action inconsistent with the Trustee's ownership of the Mortgage Loans, to promptly indicate to all inquiring parties that the Mortgage Loans have been sold and to claim no ownership interest in the Mortgage Loans. Each Mortgage File and the mortgage documents relating to the Mortgage Loans contain proprietary business information of the Servicer and its customers. The Trustee and the Depositor agree that they will not use such information for business purposes without the express written consent of the Servicer and that all such information shall be kept strictly confidential. 34 It is the intention of this Agreement that the conveyance of the Depositor's right, title and interest in and to the Trust Fund pursuant to this Agreement shall constitute a purchase and sale and not a loan. If a conveyance of Mortgage Loans from the Seller to the Depositor is characterized as a pledge and not a sale, then the Depositor shall be deemed to have transferred to the Trustee all of the Depositor's right, title and interest in, to and under the obligations of the Seller deemed to be secured by said pledge; and it is the intention of this Agreement that the Depositor shall also be deemed to have granted to the Trustee a first priority security interest in all of the Depositor's right, title, and interest in, to and under the obligations of the Seller to the Depositor deemed to be secured by said pledge and that the Trustee shall be deemed to be an independent custodian for purposes of perfection of the security interest granted to the Depositor. If the conveyance of the Mortgage Loans from the Depositor to the Trustee is characterized as a pledge, it is the intention of this Agreement that this Agreement shall constitute a security agreement under applicable law, and that the Depositor shall be deemed to have granted to the Trustee a first priority security interest in all of the Depositor's right, title and interest in, to and under the Mortgage Loans, all payments of principal of or interest on such Mortgage Loans, all other rights relating to and payments made in respect of the Trust Fund, and all proceeds of any thereof. If the trust created by this Agreement terminates prior to the satisfaction of the claims of any Person in any Certificates, the security interest created hereby shall continue in full force and effect and the Trustee shall be deemed to be the collateral agent for the benefit of such Person. In addition to the conveyance made in the first paragraph of this Section 2.01, the Depositor does hereby convey, assign and set over to the Trustee all of its right, title and interest in that portion of the Trust Fund described in items (ii), (iii), (iv) and (v) of the definition thereof and further assigns to the Trustee for the benefit of the Certificateholders those representations and warranties of the Seller contained in the Sale Agreement and described in Section 3.01 hereof and the benefit of the repurchase obligations of the Seller described in Sections 2.02 and 3.01 hereof and the obligations of the Seller contained in the Sale Agreement to take, at the request of the Depositor or the Trustee, all action on its part which is reasonably necessary to ensure the enforceability of a Mortgage Loan. Section 2.02. Acceptance by Trustee. Except as set forth in the Exception Report delivered contemporaneously herewith (the "Exception Report"), the Trustee acknowledges receipt of the Mortgage Note for each Mortgage Loan and delivery of a Mortgage File (but does not acknowledge receipt of all documents required to be included in such Mortgage File) with respect to each Mortgage Loan and declares that it holds and will hold such documents and any other documents constituting a part of the Mortgage Files delivered to it in trust for the use and benefit of all present and future Certificateholders. The Depositor will cause the Seller to repurchase any Mortgage Loans to which an exception was taken in the Exception Report unless such exception is cured to the satisfaction of the Trustee within 45 Business Days of the Closing Date. The Trustee agrees, for the benefit of Certificateholders, to review each Mortgage File delivered to it within 270 days after the Closing Date to ascertain that all documents 35 required by Section 2.01 have been executed and received, and that such documents relate to the Mortgage Loans identified in Exhibit A that have been conveyed to it. If the Trustee finds any document or documents constituting a part of a Mortgage File to be missing or defective (that is, mutilated, damaged, defaced or unexecuted) in any material respect, the Trustee shall promptly (and in any event within no more than five Business Days) after such finding so notify the Servicer, the Seller and the Depositor. In addition, the Trustee shall also notify the Servicer, the Seller and the Depositor, if (a) in examining the Mortgage Files, the documentation shows on its face (i) any adverse claim, lien or encumbrance, (ii) that any Mortgage Note was overdue or had been dishonored, (iii) any evidence on the face of any Mortgage Note or Mortgage of any security interest or other right or interest therein, or (iv) any defense against or claim to the Mortgage Note by any party or (b) the original Mortgage with evidence of recording thereon with respect to a Mortgage Loan is not received within 270 days of the Closing Date. The Trustee shall request that the Seller correct or cure such omission, defect or other irregularity, or substitute a Mortgage Loan pursuant to the provisions of Section 3.03, within 60 days from the date the Seller was notified of such omission or defect and, if the Seller does not correct or cure such omission or defect within such period, that the Seller purchase such Mortgage Loan from the Trustee within 90 days from the date the Trustee notified the Seller of such omission, defect or other irregularity at the Purchase Price of such Mortgage Loan. The Purchase Price for any Mortgage Loan purchased pursuant to this Section 2.02 shall be paid to the Servicer and deposited by the Servicer in the Collection Account promptly upon receipt, and, upon receipt by the Trustee of written notification of such deposit signed by a Servicing Officer, the Trustee shall promptly release to the Seller the related Mortgage File and the Trustee shall execute and deliver such instruments of transfer or assignment, without recourse, as shall be necessary to vest in the Seller or its designee, as the case may be, any Mortgage Loan released pursuant hereto, and the Trustee shall have no further responsibility with regard to such Mortgage Loan. It is understood and agreed that the obligation of the Seller to purchase, cure or substitute any Mortgage Loan as to which a material defect in or omission of a constituent document exists shall constitute the sole remedy respecting such defect or omission available to the Trustee on behalf of Certificateholders. The Trustee shall be under no duty or obligation to inspect, review and examine such documents, instruments, certificates or other papers to determine that they are genuine, enforceable or appropriate to the represented purpose, or that they have actually been recorded, or that they are other than what they purport to be on their face. The Trustee shall keep confidential the name of each Mortgagor and shall not solicit any such Mortgagor for the purpose of refinancing the related Mortgage Loan. Within 280 days of the Closing Date, the Trustee shall deliver to the Depositor and the Servicer the Trustee's Certification, substantially in the form of Exhibit G attached hereto, setting forth the status of the Mortgage Files as of such date. Section 2.03. Trust Fund; Authentication of Certificates. The Trustee acknowledges and accepts the assignment to it of the Trust Fund created pursuant to this Agreement in trust for the use and benefit of all present and future Certificateholders. The Trustee acknowledges the assignment to it for the benefit of the Trust Fund of the Mortgage 36 Loans and has caused to be authenticated and delivered to or upon the order of the Depositor, in exchange for the Mortgage Loans, Certificates duly authenticated by the Trustee or, if an Authenticating Agent has been appointed pursuant to Section 4.06, the Authenticating Agent in authorized denominations evidencing ownership of the entire Trust Fund. Section 2.04. REMIC Election. (a) The Depositor hereby instructs and authorizes the Trustee to make an appropriate election to treat the Trust Fund as a REMIC. This Agreement shall be construed so as to carry out the intention of the parties that the Trust Fund be treated as a REMIC at all times prior to the date on which the Trust Fund is terminated. The Closing Date is hereby designated as the "startup day" of the REMIC within the meaning of Section 860G(a)(9) of the Code. The "regular interests" (within the meaning of Section 860G(a)(1) of the Code) in the REMIC shall consist of the Class A Certificates (exclusive of the Class A-R Certificates), the Class M Certificates and the Class B Certificates, and the "residual interest" (within the meaning of Section 860G(a)(2) of the Code) in the REMIC shall consist of the Residual Interest, and all such interests shall be designated as such on the Startup Day. (b) The principal amount of the regular interests in the REMIC is equal to the sum of the Original Class A Principal Balance, the Original Class M Principal Balance and the Original Class B Principal Balance. (c) Solely for the purposes of Section 1.860G-1(a)(4)(iii) of the Treasury regulations, the "latest possible maturity date" by which the Outstanding Certificate Principal Balance of each Class of Certificates representing a regular interest in the REMIC would be reduced to zero is [DATE], which is the Distribution Date immediately following the latest scheduled maturity of any Mortgage Loan. (d) The "tax matters person" with respect to the Trust Fund for purposes of the REMIC provisions shall be the beneficial owner of the Class A-R Certificate; provided, however, that the Holder of a Class A-R Certificate, by its acceptance thereof, irrevocably appoints the Servicer as its agent and attorney-in-fact to act as "tax matters person" with respect to the Trust Fund for purposes of the REMIC provisions. (e) It is intended that the Trust Fund shall constitute, and that the affairs of the Trust Fund shall be conducted so as to qualify the Trust Fund as, a "real estate mortgage investment conduit" as defined in and in accordance with the REMIC Provisions. In furtherance of such intention, the Servicer covenants and agrees that it shall act as agent (and the Servicer is hereby appointed to act as agent) on behalf of the Trust Fund and the respective Holders of the Class A-R Certificates and that in such capacity it shall: (i) prepare and file, or cause to be prepared and filed, in a timely manner, a U.S. Real Estate Mortgage Investment Conduit Income Tax Return (Form 37 1066) 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 the Trust Fund, using the calendar year as the taxable year and the accrual method of accounting, 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 shall 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; (ii) within thirty days of the Closing Date, shall furnish or cause to be furnished to the Internal Revenue Service, on Form 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 (and the Servicer shall act as the representative of the Trust Fund for this purpose), together with such additional information as may be required by such Form, and shall update such information at the time or times in the manner required by the Code; (iii) make or cause to be made an election, on behalf of the Trust Fund, to be treated as a REMIC, and make the appropriate designations, if applicable, in accordance with this Section 2.04 on the federal tax return of the Trust Fund for its first taxable year (and, if necessary, under applicable state law); (iv) 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 or reports, or furnish or cause to be furnished by telephone, mail, publication or other appropriate method such information, 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; (v) provide information necessary for the computation of tax imposed on the transfer of the Class A-R Certificate to a Disqualified Organization, or an agent (including a broker, nominee or other middleman) of a Disqualified Organization, or a pass-through entity in which a Disqualified Organization 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); (vi) 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; and (vii) maintain such records relating to the Trust Fund, as may be required by the Code and, as may be necessary to prepare the foregoing returns, schedules, statements or information. [End of Article II] 38 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR AND THE SERVICER; REPURCHASE OF MORTGAGE LOANS Section 3.01. Representations and Warranties of the Depositor with respect to the Mortgage Loans. The Depositor hereby represents and warrants to the Trustee for the benefit of the Certificateholders that on the Closing Date it has entered into the Sale Agreement with CMMC as Seller, that the Seller has made the following representations and warranties with respect to each Mortgage Loan in such Sale Agreement as of the Closing Date, which representations and warranties run to and are for the benefit of the Depositor and the Trustee for the benefit of the Certificateholders, and as to which the Depositor has assigned to the Trustee for the benefit of the Certificateholders, pursuant to Section 2.01 hereof, the right to cause the Seller to repurchase a Mortgage Loan as to which there has occurred an uncured breach of representations and warranties in accordance with the provisions of the Sale Agreement. (a) The information set forth in the Mortgage Loan Schedule is complete, true and correct in all material respects; (b) The Mortgage creates a first lien or a first priority ownership interest in an estate in fee simple in real property securing the related Mortgage Note; (c) All payments due prior to the Cut-off Date for such Mortgage Loan have been made as of the Closing Date, the Mortgage Loan is not delinquent in payment more than 30 days and has not been dishonored; to the best of the Seller's knowledge, there are no material defaults under the terms of the Mortgage Loan; the Seller has not advanced funds, or induced, solicited or knowingly received any advance of funds from a party other than the owner of the Mortgaged Property subject to the Mortgage, directly or indirectly, for the payment of any amount required by the Mortgage Loan; there has been no more than one delinquency in excess of 30 days during the preceding twelve-month period; (d) To the best of the Seller's knowledge, all taxes, governmental assessments, insurance premiums, water, sewer and municipal charges, leasehold payments or ground rents which previously became due and owing have been paid, or escrow funds have been established in an amount sufficient to pay for every such escrowed item which remains unpaid and which has been assessed but is not yet due and payable; (e) The terms of the Mortgage Note and the Mortgage have not been impaired, waived, altered or modified in any respect, except by written instruments. No Mortgagor has been released, in whole or in part, from the terms thereof except in connection 39 with an assumption agreement and which assumption agreement is part of the Mortgage File and the terms of which are reflected in the Mortgage Loan Schedule; (f) The Mortgage Note and the Mortgage are not subject to any right of rescission, set-off, counterclaim or defense, including, without limitation, the defense of usury, nor will the operation of any of the terms of the Mortgage Note or Mortgage, or the exercise of any right thereunder, render the Mortgage Note or Mortgage unenforceable, in whole or in part, or subject to any right of rescission, set-off, counterclaim or defense, including the defense of usury, and no such right of rescission, set-off, counterclaim or defense has been asserted with respect thereto, and the Mortgagor was not a debtor in any state or federal bankruptcy or insolvency proceeding at the time the Mortgage Loan was originated; (g) All buildings or other customarily insured improvements upon the Mortgaged Property are insured by an insurer acceptable under the FNMA Guides against loss by fire, hazards of extended coverage and such other hazards as are provided for in the FNMA Guides or by FHLMC. All such standard hazard policies are in full force and effect and on the date of origination contained a standard mortgagee clause naming the Seller and its successors in interest and assigns as loss payee and such clause is still in effect and all premiums due thereon have been paid. If required by the Flood Disaster Protection Act of 1973, as amended, the Mortgage Loan is covered by a flood insurance policy meeting the requirements of the current guidelines of the Federal Insurance Administration which policy conforms to FNMA and FHLMC requirements. The Mortgage obligates the Mortgagor thereunder to maintain all such insurance at the Mortgagor's cost and expense, and on the Mortgagor's failure to do so, authorizes the holder of the Mortgage to maintain such insurance at the Mortgagor's cost and expense and to seek reimbursement therefor from the Mortgagor; (h) Any and all requirements of any federal, state or local law including, without limitation, usury, truth-in-lending, real estate settlement procedures, consumer credit protection, equal credit opportunity or disclosure laws applicable to the Mortgage Loan have been complied with in all material respects; (i) The Mortgage has not been satisfied, canceled or subordinated, in whole or in part, or rescinded, and the Mortgaged Property has not been released from the lien of the Mortgage, in whole or in part nor has any instrument been executed that would effect any such release, cancellation, subordination or rescission; (j) The Mortgage is a valid, subsisting, enforceable and perfected first lien on the Mortgaged Property, including, all buildings on the Mortgaged Property and all installations and mechanical, electrical, plumbing, heating and air conditioning systems affixed to such buildings, and all additions, alterations and replacements made at any time with respect to the foregoing securing the Mortgage Note's original principal balance. The Mortgage and the Mortgage Note do not contain any evidence of any security interest or other interest or right thereto. Such lien is free and clear of all adverse claims, liens and encumbrances having priority 40 over the first lien of the Mortgage subject only to (1) the lien of non-delinquent current real property taxes and assessments not yet due and payable, (2) covenants, conditions and restrictions, rights of way, easements and other matters of the public record as of the date of recording which are acceptable to mortgage lending institutions generally and either (A) which are referred to or otherwise considered in the appraisal made for the originator of the Mortgage Loan, or (B) which do not adversely affect the appraised value of the Mortgaged Property as set forth in such appraisal, and (3) other matters to which like properties are commonly subject which do not materially interfere with the benefits of the security intended to be provided by the Mortgage or the use, enjoyment, value or marketability of the related Mortgaged Property. Any security agreement, chattel mortgage or equivalent document related to and delivered in connection with the Mortgage Loan establishes and creates a valid, subsisting, enforceable and perfected first lien and first priority security interest on the property described therein, and the Depositor has the full right to sell and assign the same to the Trustee for the benefit of the Certificateholders; (k) The Mortgage Note and the related Mortgage are original and genuine and each is the legal, valid and binding obligation of the maker thereof, enforceable in all respects in accordance with its terms subject to bankruptcy, insolvency and other laws of general application affecting the rights of creditors and the Depositor has taken all action necessary to transfer such rights of enforceability to the Trustee for the benefit of the Certificateholders. All parties to the Mortgage Note and the Mortgage had the legal capacity to enter into the Mortgage Loan and to execute and deliver the Mortgage Note and the Mortgage. The Mortgage Note and the Mortgage have been duly and property executed by such parties. The proceeds of the Mortgage Loan have been fully disbursed and there is no requirement for future advances thereunder, and any and all requirements as to completion of any on-site or off-site improvements and as to disbursements of any escrow funds therefor have been complied with; (1) The Depositor is the sole owner of record and holder of the Mortgage Loan and the indebtedness evidenced by the Mortgage Note, except for the Assignments of Mortgage which have been sent for recording, and upon recordation the Depositor will be the owner of record of the Mortgage and the indebtedness evidenced by the Mortgage Note, and upon the sale of the Mortgage Loan to the Trust for the benefit of the Certificateholders, the Depositor will retain the Mortgage File or any part thereof with respect thereto not delivered to the Trust for the benefit of the Certificateholders or its designee in trust only for the purpose of servicing and supervising the servicing of the Mortgage Loan. Immediately prior to the transfer and assignment to the Trust for the benefit of the Certificateholders, the Mortgage Loan, including the Mortgage Note and the Mortgage, were not subject to an assignment or pledge, and the Depositor had good and marketable title to and was the sole owner thereof and had full right to transfer and sell the Mortgage Loan to the Trustee for the benefit of the Certificateholders free and clear of any encumbrance, equity, lien, pledge, charge, claim or security interest and has the full right and authority subject to no interest or participation of, or agreement with, any other party, to sell and assign the Mortgage Loan pursuant to this Agreement and following the sale of the Mortgagee Loan, the Trustee for the benefit of the Certificateholders will own such Mortgage 41 Loan free and clear of any encumbrance, equity, participation interest, lien, pledge, charge, claim or security interest; (m) The Mortgage Loan is covered by an ALTA lender's title insurance policy or other generally acceptable form of policy or insurance acceptable to FNMA or FHLMC, issued by a title insurer acceptable to FNMA or FHLMC and qualified to do business in the jurisdiction where the Mortgaged Property is located, insuring (subject to the exceptions contained in (j) (1), (2) and (3) above) the Seller, its successors and assigns, as to the first priority lien of the Mortgage in the original principal amount of the Mortgage Loan. Such lender's title insurance policy insures ingress and egress by or upon the Mortgaged Property or any interest therein. Where required by state law or regulation, the Mortgagor has been given the opportunity to choose the carrier of the required mortgage title insurance. The Seller, its successors and assigns, are the sole insureds of such lender's title insurance policy, such title insurance policy has been duly and validly endorsed to the Trustee for the benefit of the Certificateholders or the assignment to the Trustee for the benefit of the Certificateholders of the Seller's interest therein does not require the consent of or notification to the insurer and such lender's title insurance policy is in full force and effect and will be in full force and effect upon the consummation of the transactions contemplated by this Agreement. No claims have been made under such lender's title insurance policy, and no prior holder of the related Mortgage, including the Seller, has done, by act or omission, anything which would impair the coverage of such lender's title insurance policy; (n) There is no default, breach, violation or event of acceleration existent, under the Mortgage or the related Mortgage Note and no event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event permitting acceleration; and neither the Seller nor any prior mortgagee has waived any default, breach, violation or event permitting acceleration; (o) There are no mechanics', or similar liens or claims which have been filed for work, labor or material (and no rights are outstanding that under law could give rise to such liens) affecting the related Mortgaged Property which are or may be liens prior to or equal to the lien of the related Mortgage; (p) All improvements subject to the Mortgage which were considered in determining the Appraised Value of the Mortgaged Property lie wholly within the boundaries and building restriction lines of the Mortgaged Property (and wholly within the project with respect to a condominium unit) and no improvements on adjoining properties encroach upon the Mortgaged Property except those which are insured against by the title insurance policy referred to in clause (m) above and all improvements on the property comply with all applicable zoning and subdivision laws and ordinances; the Mortgaged Property is lawfully occupied under applicable law; 42 (q) The Mortgage Loan complies in all material respects with all the terms, conditions and requirements of the Seller's underwriting standards in effect at the time of origination of such Mortgage Loan. The Mortgage Notes and Mortgages (exclusive of any riders) are on forms generally acceptable to FNMA or FHLMC. Monthly Payments under the Mortgage Note are due and payable on the first day of each month. The Mortgage contains the usual and enforceable provisions of the originator at the time of origination for the acceleration of the payment of the unpaid principal amount of the Mortgage Loan if the related Mortgaged Property is sold without the prior consent of the mortgagee thereunder; (r) To the best of the Seller's knowledge, the Mortgaged Property is not subject to any material damage by waste, fire, earthquake, windstorm, flood or other casualty. To the best of the Seller's knowledge, at origination of the Mortgage Loan there was, and there currently is, no proceeding pending for the total or partial condemnation of the Mortgaged Property; (s) The related Mortgage contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the Mortgaged Property of the benefits of the security provided thereby, including, (l) in the case of a Mortgage designated as a deed of trust, by trustee's sale, and (2) otherwise by judicial foreclosure. There is no homestead or other exemption available to the Mortgagor which would interfere with the right to sell the Mortgaged Property at a trustee's sale or the right to foreclose the Mortgage; (t) If the Mortgage constitutes a deed of trust, a trustee, authorized and duly qualified if required under applicable law to act as such, has been properly designated and currently so serves and is named in the Mortgage, and no fees or expenses, except as may be required by local law, are or will become payable by, the Purchaser to the trustee under the deed of trust, except in connection with a trustee's sale or attempted sale after default by the Mortgagor; (u) The Mortgage File contains an appraisal of the related Mortgaged Property signed prior to the final approval of the mortgage loan application by an appraiser approved by the Seller who had no interest, direct or indirect, in the Mortgaged Property or in any loan made on the security thereof, and whose compensation is not affected by the approval or disapproval of the Mortgage Loan. The appraisal is in a form acceptable to FNMA or FHLMC; (v) All parties which have had any interest in the Mortgage, whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period in which they held and disposed of such interest, were) (A) in substantial compliance with any and all applicable licensing requirements of the laws of the state wherein the Mortgaged Property is located, and (B) (1) organized under the laws of such state, or (2) qualified to do business in such state, or (3) federal savings and loan associations or national banks or a Federal Home Loan Bank or savings bank having principal offices in such state, or (4) not doing business in such state; 43 (w) The related Mortgage Note is not and has not been secured by any collateral except the lien of the corresponding Mortgage and the security interest of any applicable security interest of any applicable agreement or chattel mortgage referred to above and such collateral does not serve as security for any other obligation; (x) The Mortgagor has received all disclosure materials required by applicable law with respect to the making of such mortgage loans; (y) The Mortgage Loan does not contain "graduated payment" features; (z) The Mortgagor is not in bankruptcy and, to the best of the Seller's knowledge, the Mortgagor is not insolvent; (aa) The Mortgage Loans are fixed rate mortgage loans. The Mortgage Loans have an original term to maturity of not more than thirty (30) years, with interest payable in arrears on the first day of each month. Each Mortgage Note is payable in equal monthly installments of principal and interest which is sufficient to amortize the Mortgage Loan fully by the stated maturity date. No Mortgage Loan contains terms or provisions which would result in negative amortization; (bb) Each Mortgage Note, each Mortgage, each Assignment of Mortgage and any other documents required pursuant to this Agreement to be delivered to the Trustee on behalf of the Certificateholders or its designee, or its assignee for each Mortgage Loan, have been, on or before the Closing Date, delivered to the Trustee on behalf of the Certificateholders or its designee, or its assignee; (cc) All escrow payments have been collected in full compliance with state and federal law and the provisions of the related Mortgage Note and Mortgage. As to any Mortgage Loan that is the subject of an escrow, escrow of funds is not prohibited by applicable law and has been established in an amount sufficient to pay for every escrowed item that remains unpaid and has been assessed but is not yet due and payable. No escrow deposits or other charges or payments due under the Mortgage Note have been capitalized under any Mortgage or the related Mortgage Note. Any interest required to be paid pursuant to state, federal and local law has been properly paid and credited; (dd) [Reserved]; (ee) In the event the Mortgage Loan has a Loan-to-Value Ratio greater than 80%, the excess of the principal balance of the Mortgage Loan over 75% of the Appraised Value, with respect to a refinanced Mortgage Loan, or the lesser of the Appraised Value or the purchase price of the Mortgaged Property, with respect to a purchase money Mortgage Loan, is and will be insured as to payment defaults by a Primary Insurance Policy issued by a Qualified Insurer. All provisions of such Primary Insurance Policy have been and are being complied with such policy 44 is in full force and effect, and all premiums due thereunder have been paid. No action, inaction, or event has occurred and no state of facts exists that has, or will result in the exclusion from, denial of, or defense to coverage. Any Mortgage Loan subject to a Primary Insurance Policy obligates the Mortgagor thereunder to maintain the Primary Insurance Policy and to pay all premiums and charges in connection therewith. The Mortgage Rate for the Mortgage Loan as set forth on the Mortgage Loan Schedule is net of any such insurance premium; (ff) The assignment of Mortgage is in recordable form and is acceptable for recording under the laws of the jurisdiction in which the Mortgaged Property is located; (gg) As to Mortgage Loans that are not secured by an interest in a leasehold estate, the Mortgaged Property is located in the state identified in the Mortgage Loan Schedule and consists of a single parcel of real property with a detached single family residence erected thereon, or a two-to four-family dwelling, or an individual condominium unit in a condominium project, or an individual unit in an attached planned unit development or a detached planned unit development, provided, however, that no residence or dwelling is a single parcel of real property with a mobile home thereon. As of the date of origination, no portion of the Mortgaged Property was used for commercial purposes, and since the date of origination, to the best of the Seller's knowledge, no portion of the Mortgaged Property is used for commercial purposes; (hh) If the Mortgaged Property is a condominium unit or a planned unit development (other than a de minimis planned unit development) such condominium or planned unit development project meets the Seller's eligibility requirements, as set forth in the Seller's underwriting guidelines; (ii) To the best of the Seller's knowledge, there is no pending action or proceeding directly involving the Mortgaged Property in which compliance with any environmental law, rule or regulation is an issue; (jj) The Mortgagor has not notified the Seller, and the Depositor has no knowledge of any relief requested or allowed to the Mortgagor under the Soldiers' and Sailors' Civil Relief Act of 1940; (kk) No Mortgage Loan was made in connection with the construction or rehabilitation of a Mortgaged Property or facilitating the trade-in or exchange of a Mortgaged Property; (ll) No action has been taken or failed to be taken by Depositor, on or prior to the Closing Date which has resulted or will result in an exclusion from, denial of, or defense to coverage under any Primary Insurance Policy (including, without limitation, any exclusions, denials or defenses which would limit or reduce the availability of the timely payment of the full amount of the loss otherwise due thereunder to the insured) whether arising out of actions, 45 representations, errors, omissions, negligence, or fraud of the Depositor, or for any other reason under such coverage; (mm) The Mortgage Loan was originated by a mortgagee approved by the Secretary of Housing and Urban Development pursuant to Sections 203 and 211 of the Act, a savings and loan association, a savings bank, a commercial bank, credit union, insurance company or similar institution which is supervised and examined by a federal or state authority; (nn) Principal payments on the Mortgage Loan commenced no more than sixty (60) days after funds were disbursed in connection with the Mortgage Loan. The Mortgage Note is payable on the first day of each month in equal monthly installments of principal and interest, with interest calculated and payable in arrears, sufficient to amortize the Mortgage Loan fully by the stated maturity date, over an original term of not more than thirty years from commencement of amortization; and (oo) The Mortgage Loan is a "qualified mortgage" within the meaning of Section 860G(a)(3) of the Code (without regard to Treasury Regulations ss. 1.860G-2(f) or any similar rule that provides that a defective obligation is a qualified mortgage for a temporary period); Upon discovery by any of the Depositor, the Servicer or the Trustee of a breach of any of the foregoing representations and warranties which materially and adversely affects the value of a Mortgage Loan or the interest of the Certificateholders (or which materially and adversely affects the interests of the Certificateholders in the related Mortgage Loan in the case of a representation and warranty relating to a particular Mortgage Loan), the party discovering such breach shall give prompt written notice to the other parties and to the Seller, which notice shall specify the date of discovery. Pursuant to the Sale Agreement, the Seller shall within 90 days from the earlier of (i) the date specified in the notice as the date of discovery of such breach or (ii) the date the Seller otherwise discovers such breach, cure such breach, substitute a Mortgage Loan pursuant to the provisions of Section 3.03 or, if the breach relates to a particular Mortgage Loan, purchase such Mortgage Loan from the Trustee at the Purchase Price. The Purchase Price for the purchased Mortgage Loan shall be paid to the Servicer and shall be deposited by the Servicer in the Collection Account promptly upon receipt, and, upon receipt by the Trustee of written notification of such deposit signed by a Servicing Officer, the Trustee shall promptly release to the Seller the related Mortgage File, and the Trustee shall execute and deliver such instruments of transfer or assignment as may be provided to it by the Servicer, without recourse, as shall be necessary to vest in the Seller or its designee, as the case may be, any Mortgage Loan released pursuant hereto, and the Trustee shall have no further responsibility with regard to such Mortgage Loan. It is understood and agreed that the obligation of the Seller to cure, substitute or purchase any Mortgage Loan as to which such a breach has occurred shall constitute the sole remedy respecting such breach available to Certificateholders or the Trustee on behalf of Certificateholders. 46 Section 3.02. Representations and Warranties of the Servicer. The Servicer represents and warrants to, and covenants with, the Trustee for the benefit of the Certificateholders that as of the Closing Date: (a) The Servicer is a corporation duly chartered and validly existing in good standing under the laws of the State of New Jersey, and the Servicer is duly qualified or registered as a foreign corporation in good standing in each jurisdiction in which the ownership or lease or its properties or the conduct of its business requires such qualification; (b) The execution and delivery of this Agreement by the Servicer and its performance and compliance with the terms of this Agreement will not violate the Servicer's corporate charter or by-laws or constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or result in the breach of, any material contract, agreement or other instrument to which the Servicer is a party or which may be applicable to the Servicer or any of its assets; (c) This Agreement, assuming due authorization, execution and delivery by the Trustee and the Depositor, constitutes a valid, legal and binding obligation of the Servicer, enforceable against it in accordance with the terms hereof subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors' rights generally and to general principles of equity, regardless of whether such enforcement is considered in a proceeding in equity or at law; (d) The Servicer is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or governmental agency, which default might have consequences that would materially and adversely affect the condition (financial or other) or operations of the Servicer or its properties or might have consequences that would affect its performance hereunder; and (e) No litigation is pending or, to the best of the Servicer's knowledge, threatened against the Servicer which would prohibit its entering into this Agreement or performing its obligations under this Agreement. It is understood and agreed that the representations and warranties set forth in this Section 3.02 shall survive the issuance and delivery of the Certificates and shall be continuing as long as any Certificate shall be outstanding or this Agreement has been terminated. Section 3.03. Option to Substitute. If the Seller is required to repurchase any Mortgage Loan pursuant to Section 2.02 or 3.01, the Seller may, at its option, within two years from the Closing Date, remove such defective Mortgage Loan from the terms of this Agreement and substitute another mortgage loan for such defective Mortgage Loan, in lieu of repurchasing such defective Mortgage Loan. Any substitute Mortgage Loan shall (a) have a Principal Balance 47 at the time of substitution not in excess of the Principal Balance of the removed Mortgage Loan (the amount of any difference, plus one month's interest thereon at the Mortgage Rate borne by the removed Mortgage Loan, being paid by the Seller and deemed to be a Principal Prepayment to be deposited by the Servicer in the Collection Account), (b) have a Mortgage Rate not less than, and not more than one percentage point greater than, the Mortgage Rate of the removed Mortgage Loan (provided, however, that if the Mortgage Rate on the substitute Mortgage Loan exceeds the Mortgage Rate on the removed Mortgage Loan, the amount of that excess interest (the "Substitute Excess Interest") shall be payable to the Residual Interest), (c) have a remaining term to stated maturity not later than, and not more than one year less than, the remaining term to stated maturity of the removed Mortgage Loan, (d) be, in the reasonable determination of the Servicer, of the same type, quality and character (including location of the Mortgaged Property) as the removed Mortgage Loan as if the breach had not occurred, (e) have a Loan-to-Value Ratio at origination no greater than that of the removed Mortgage Loan and (f) be, in the reasonable determination of the Servicer, in material compliance with the representations and warranties contained in the Sale Agreement and described in Section 3.01, as of the date of substitution. The Servicer shall amend the Mortgage Loan Schedule to reflect the withdrawal of the removed Mortgage Loan from this Agreement and the substitution of such substitute Mortgage Loan therefor and shall send a copy of such amended Mortgage Loan Schedule to the Trustee. The Sale Agreement provides that upon such amendment the Seller shall be deemed to have made as to such substitute Mortgage Loan the representations and warranties set forth in Section 3.01 as of the date of such substitution, which shall be continuing as long as any Certificate shall be outstanding or this Agreement has not been terminated, and the remedies for breach of any such representation or warranty shall be as set forth in Section 3.01. Upon such amendment, the Trustee shall review the Mortgage File delivered to it relating to the substitute Mortgage Loan, within the time and in the manner and with the remedies specified in Section 2.02, except that for purposes of this Section 3.03 (other than the two-year period specified in the first sentence of this Section), such time shall be measured from the date of the applicable substitution. In the event of such a substitution, accrued interest on the substitute Mortgage Loan for the month in which the substitution occurs and any Principal Prepayments made thereon during such month shall be the property of the Trust Fund, and accrued interest for such month on the Mortgage Loan for which the substitution is made and any Principal Prepayments made thereon during such month shall be the property of the Seller. The principal payment on a substitute Mortgage Loan due on the Due Date in the month of substitution shall be the property of the Seller, and the principal payment on the Mortgage Loan for which the substitution is made due on such date shall be the property of the Trust Fund. [End of Article III] 48 ARTICLE IV THE CERTIFICATES Section 4.01. The Certificates. (a) The Class A, Class M and Class B Certificates shall be substantially in the forms thereof included within Exhibits C, D, E and F and shall, on original issue, be executed by the Depositor and authenticated by the Trustee (or, if an Authenticating Agent has been appointed pursuant to Section 4.06, the Authenticating Agent) upon receipt by the Trustee of the documents specified in Section 2.01, delivered to or upon the order of the Depositor. (b) The Depository, the Depositor, the Paying Agent and the Trustee have entered into a Depository Agreement dated as of [DATE] (the "Depository Agreement"). Except as provided in paragraph (c) below, the Book-Entry Certificates shall at all times remain registered in the name of the Depository or its nominee and at all times: (i) registration of the Book-Entry Certificates may not be transferred as provided in Section 4.02 except to a successor to the Depository; (ii) 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; (iii) the Depository may collect its usual and customary fees, charges and expenses from its Depository Participants; (iv) the Trustee shall deal with the Depository, Depository Participants and Indirect Participants as representatives of the Certificate Owners of the Book-Entry Certificates for purposes of exercising the rights of such 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 (v) 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 Participants and persons shown on the books of such Indirect Participants as direct or indirect Certificate Owners. The Depository Agreement provides that the Depository shall maintain book-entry records with respect to the Certificate Owners and with respect to ownership and transfers of such Certificates. 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 Owners. Each Depository Participant shall only transfer Book-Entry Certificates of Certificate Owners it represents or of brokerage firms for which it acts as agent in accordance with the Depository's normal procedures. (c) If (i)(A) the Depositor advises the Depositor, the Paying Agent or the Trustee in writing that the Depository is no longer willing or able to properly discharge its responsibilities as Depository and (B) the Trustee, the Paying Agent or the Depositor are unable after exercise of their reasonable best efforts to locate a qualified successor or (ii) the Depositor at its option advises the Trustee in writing that it elects to terminate the book-entry system through the Depository, the Trustee or, if a Paying Agent has been appointed under Section 4.05, 49 the Paying Agent, 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 or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, of the Book-Entry Certificates by the Depository for registration and receipt by the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, of an adequate supply of certificates from the Depositor, the Trustee or if the Paying Agent is appointed under Section 4.05, the Paying Agent shall issue the Definitive Certificates based on information received from the Depository. Neither the Depositor, the Servicer, the Paying Agent nor the Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. (d) The Certificates shall be issuable in the minimum original dollar denominations (and integral multiples of $1,000 in excess of such amount) and aggregate original dollar denominations per Class as set forth in the following table (except that one Certificate of each of [Class A-5, Class A-6, Class A-P and Class M and each of the Class B] Certificates may be issued in a different denomination).
Aggregate Original Certificate Minimum Principal Balance of all Original Certificates of the CUSIP Class Denomination Indicated Class Number ----- ------------ ------------------------------ ------ A-1 A-2 A-3 A-4 A-5 A-6 A-7 A-P A-R(1) A-X(2) (2) (2) M B-1 B-2 B-3 B-4 B-5
- --------------- (1) The Class A-R Certificate represents the Residual Interest. (2) The Class A-X Certificates have no Principal Balance, but accrue interest on the Class A-X Notional Balance (initially, $________________). 50 The Certificates shall be signed by manual or facsimile signature on behalf of the Depositor by an officer of the Depositor. Certificates bearing the manual or facsimile signatures of individuals who were at the time of signature officers of the Depositor shall bind the Depositor, notwithstanding that such individuals or any of them have ceased to be an officer prior to the authentication and delivery of such Certificate or did not hold such offices at the date of such Certificates. No Certificate shall be entitled to any benefit under this Agreement, or be valid for any purpose, unless there appears on such Certificate a manual authentication by an officer of the Depositor and such authentication upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly authenticated and delivered hereunder. All Certificates shall be dated the date of their authentication. Section 4.02. Registration of Transfer and Exchange of Certificates. (a) The Trustee or, if a Paying Agent has been appointed hereunder pursuant to Section 4.05, the Paying Agent, shall cause to be kept a Certificate Register in which, subject 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. (b) Upon surrender for registration of transfer of any Certificate at any office or agency of the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, maintained for such purpose, the Depositor shall execute and the Trustee or if an Authenticating Agent is appointed under Section 4.06, the Authenticating Agent shall authenticate and deliver, in the name of the designated transferee or transferees, a Certificate of a like Class and aggregate Percentage Interest and dated the date of authentication by the Authenticating Agent. (c) No transfer of a Class A-X, Class B-3, Class B-4 or Class B-5 Certificate shall be made unless such transfer is made pursuant to an effective registration statement or otherwise in accordance with the requirements under the Securities Act of 1933, as amended. If such a transfer is to be made in reliance upon an exemption from said Act, (i) the Depositor may require (except with respect to the initial transfer of a Class B-3, Class B-4 or Class B-5 Certificate from Credit Suisse First Boston Corporation and except if the transferee executes a certificate substantially in the form of Exhibit I hereto) a written opinion of independent counsel acceptable to and in form and substance satisfactory to the Depositor that such transfer may be made pursuant to an exemption, describing the applicable exemption and the basis therefor, from said Act and laws or is being made pursuant to said Act and laws, which opinion of counsel shall not be an expense of the Trust Fund, the Trustee, the Depositor or the Servicer, and (ii) the Depositor shall require the transferee to execute a certification substantially in the form of Exhibit H or Exhibit I. 51 (d) No transfer of a Subordinated Certificate shall be made to any employee benefit plan subject to Section 406 of ERISA or Section 4975 of the Code, nor a person acting on behalf of such plan or using the assets of such plan. No transfer of a Subordinated Certificate shall be made unless the Depositor shall have received either (i) a representation letter from the transferee of such Certificate acceptable to and in form and substance satisfactory to the Depositor, to the effect that (A) such transferee is not an employee benefit plan subject to Section 406 of ERISA or Section 4975 of the Code, nor a person acting on behalf of any such plan or using the assets of such plan, or, alternatively, in the case of an insurance company, the assets of any separate accounts to effect such acquisition, or alternatively, (B) the source of funds for the purchase of such Certificate is an "insurance company general account" within the meaning of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60"), 60 Fed. Reg. 35925 (July 12, 1995), and the conditions set forth in Section I and III of PTCE 95-60 are satisfied with respect to the purchase and holding of such Certificate, which representation letter shall not be an expense of the Trustee, the Depositor or the Servicer, or (ii) in the case of a Subordinated Certificate presented for registration in the name of an employee benefit plan subject to ERISA or Section 4975 of the Code (or comparable provisions of any subsequent enactments) or a trustee of any such plan or any other Person who is using the assets of any such plan to effect such acquisition, an Opinion of Counsel satisfactory to the Depositor to the effect that the purchase or holding of such Subordinated Certificate will not result in the assets of the Trust Fund being deemed to be "plan assets" pursuant to the Department of Labor Plan Asset Regulations set forth in 29 C.F.R. ss.2510.3-101 and subject to the fiduciary responsibility provisions of ERISA or the prohibited transaction provisions of the Code, will not constitute or result in a prohibited transaction within the meaning of Section 406 or Section 407 of ERISA or Section 4975 of the Code, and will not subject the Trustee, the Depositor or the Servicer to any obligation in addition to those undertaken in this Agreement, which opinion of counsel shall not be an expense of the Trustee, the Depositor or the Servicer. (e) At the option of a Certificateholder, a Certificate may be exchanged for another Certificate or Certificates of authorized denominations of a like Class, upon surrender of the Certificate to be exchanged at any office or agency of the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, maintained for such purpose. Whenever the Certificate is so surrendered for exchange, the Depositor shall execute and the Authenticating Agent shall authenticate and deliver, the Certificate which the Certificateholder making the exchange is entitled to receive. Every Certificate presented or surrendered for transfer or exchange shall (if so required by the Authenticating Agent) be duly endorsed by, or be accompanied by a written instrument of transfer in the form satisfactory to the Authenticating Agent duly executed by, the Holder thereof or his attorney duly authorized in writing. (f) No service charge shall be made to the Holder for any transfer or exchange of a Certificate, but the Servicer may require payment by the Certificateholders of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of such Certificate. 52 (g) All Certificates surrendered for transfer or exchange shall be destroyed by the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, in accordance with the Trustee's or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent's, standard procedures. (h) [Reserved]. (i) A Disqualified Organization is prohibited from acquiring beneficial ownership of a Class A-R Certificate. Notwithstanding anything to the contrary contained herein, unless and until the Servicer shall have received an Opinion of Counsel, satisfactory to it in form and substance, to the effect that the absence of the conditions contained in this Section 4.02(i) would not result in the imposition of federal tax upon the Trust Fund or cause the Trust Fund to fail to qualify as a REMIC, no transfer, sale or other disposition of the Class A-R Certificate (including for purposes of this section any beneficial interest therein) may be made without the express written consent of the Servicer, which consent is to be granted by the Servicer only upon compliance with the requirements of this Section and a copy of which written consent shall be supplied to the Servicer. As a condition to granting its consent to a transfer of a Class A-R Certificate, the Servicer shall require the proposed transferee of such Certificate (including, in the case of the initial issuance of the Class A-R Certificate, the initial Holder thereof) to execute a letter and affidavit substantially in the form attached hereto as Exhibit K. As a condition to the granting of the consent referred to in this Section 4.02(i), prior to the transfer, sale, pledge, hypothecation or other disposition of the Class A-R Certificate or any interest therein, the Servicer shall require that the proposed transferee deliver to it (1) its taxpayer identification number and state, under penalties of perjury that such number is the social security or employee identification number, as the case may be, of the transferee or provide an affidavit under penalties of perjury stating that as of the date of such transfer such transferee is not and has no intention of becoming a Disqualified Organization, (2) an affidavit stating (i) that such transferee is not acquiring such Class A-R Certificate as an agent, broker, nominee, or middleman for a Disqualified Organization, (ii) if the Residual Interest is a "non-economic residual interest" within the meaning of Treas. Reg. ss.1.860E-1(c)(2), (X) that no purpose of the acquisition of the Class A-R Certificate is to avoid or impede the assessment or collection of tax, (Y) that such transferee has historically paid its debts as they came due and will continue to pay its debts as they come due, and (Z) that such transferee represents that it understands that, as the holder of the non-economic residual interest, the transferee may incur tax liabilities in excess of any cash flows generated by the interest and that the transferee intends to pay taxes associated with holding the residual interest, and (iii) unless the Servicer consents to the transfer of the Class A-R Certificate to a Person who is not a U.S. Person and who has furnished a duly completed and effective Form 4224, that it is a U.S. Person, and (3) the transferor deliver to the Servicer a written certification that as of the date of such transfer it has no knowledge and no reason to know that the affirmations described in clauses (1) and (2) were false. The Servicer shall not grant the consent referred to in this Section 4.02(i) if it has actual knowledge that any statement made in the affidavit issued pursuant to the preceding sentence is not true. 53 Notwithstanding any purported transfer, sale or other disposition of the Class A-R Certificate to a Disqualified Organization, such transfer, sale or other disposition shall be deemed to be of no legal force or effect whatsoever and such Disqualified Organization shall not be deemed to be a Class A-R Certificateholder for any purpose hereunder, including, but not limited to, the receipt of distributions on such Class A-R Certificate. If any purported transfer shall be in violation of the provisions of this Section 4.02(i) then the prior holder of the Class A-R Certificate shall, upon discovery that the transfer of such Class A-R Certificate was not in fact permitted by this Section 4.02(i), be restored to all rights as a Holder thereof retroactive to the date of the purported transfer of such Class A-R Certificate. The Trustee and the Servicer shall be under no liability to any Person for any registration or transfer of a Class A-R Certificate that is not permitted by this Section 4.02(i) or for making payments due on such Class A-R Certificate to the purported Holder thereof or taking any other action with respect to such purported Holder under the provisions of this Agreement so long as the transfer was not registered under the written certification of the Servicer as described in this Section 4.02(i). The prior Holder shall be entitled to recover from any purported Holder of a Class A-R Certificate that was in fact not a permitted purported transferee under this Section 4.02(i) at the time it became a purported Holder all payments made to such purported Holder on such Class A-R Certificate; provided that the Servicer shall not be responsible for such recovery. Each Class A-R Certificateholder, by the acceptance of the Class A-R Certificate, shall be deemed for all purposes to have consented to the provisions of this Section 4.02(i) and to any amendment to this Agreement deemed necessary by counsel of the Trustee or the Servicer to ensure that the Class A-R Certificate is not transferred to a Disqualified Organization and that any transfer of such Class A-R Certificate will not cause the imposition of a tax upon the Trust Fund or cause the Trust Fund to fail to qualify as a REMIC. The restrictions on transfer of the Class A-R Certificate will cease to apply and be void upon receipt by the Servicer of an Opinion of Counsel to the effect that such restrictions on transfer are no longer necessary to avoid the risk of material federal taxation to the Trust Fund or prevent the Trust Fund from qualifying as a REMIC. (j) The Servicer shall make available upon written request to each Holder and each proposed transferee of a Class A-X, Class B-3, Class B-4 or Class B-5 Certificate such information as may be required to permit the proposed transfer to be effected pursuant to Rule 144A under the Securities Act of 1933. Section 4.03. Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any mutilated Certificate is surrendered to the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, or the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, receives evidence to its satisfaction of the destruction, loss or theft of any Certificate, and (b) there is delivered to the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, such security or indemnity as may be required by it to save it harmless, then, in the absence of notice to the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, that such Certificate has been acquired by a bona fide purchaser, the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, shall authenticate and deliver, in exchange for or in lieu of any such mutilated, 54 destroyed, lost or stolen Certificate, a new Certificate of like tenor and Class. Upon the issuance of any new Certificate under this Section, the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, may require of the Certificateholder 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 connected therewith. Any replacement Certificate of any Class issued pursuant to this Section shall constitute complete and indefeasible evidence of ownership of the Percentage Interest in the distributions to which the Certificateholders of such Class are entitled, as if originally issued, whether or not the mutilated, destroyed, lost or stolen Certificate shall be found at any time, and such mutilated, destroyed, lost or stolen Certificate shall be of no force or effect under this Agreement, to the extent permitted by law. Section 4.04. Persons Deemed Owners. Prior to due presentation of a Certificate of any Class for registration of transfer, the Depositor, the Servicer, the Paying Agent and the Trustee may treat the person in whose name any Certificate is registered on the Record Date as the owner of such Certificate and the Percentage Interest in the distributions to which the Certificateholders of such Class are entitled on the relevant date as the Holder of such Certificate and the Percentage Interest represented by such Certificate for the purpose of receiving remittances pursuant to Section 6.01 and for all other purposes whatsoever, and neither the Depositor, the Servicer nor the Trustee shall be affected by notice to the contrary. Section 4.05. Appointment of Paying Agent; Certificate Account. The Trustee may appoint a Paying Agent hereunder, which Paying Agent shall not be Depositor, the Seller, or an affiliate of the Depositor or the Seller unless such Paying Agent is the Corporate Trust Department of Chase. In the event of any such appointment, on the Business Day prior to each Distribution Date, the Servicer shall deposit or cause to be deposited with the Paying Agent from funds on deposit in the Collection Account a sum up to the Available Distribution Amount, such sum to be held in trust for the benefit of Certificateholders in a segregated account (the "Certificate Account") which shall be an Eligible Account in the name of "[TRUSTEE], as Trustee, in trust for and for the benefit of the Certificateholders of Multi-Class Mortgage Pass-Through Certificates, Chase Manhattan Acceptance Corporation, Series [ ] - Certificate Account". The Servicer shall cause the Paying Agent to perform each of the obligations of the Paying Agent set forth herein and shall be liable to the Trustee and the Certificateholders for failure of the Paying Agent to perform such obligations. If the Paying Agent is a party other than the Trustee, the Trustee shall have no liability in connection with the performance or failure of performance of the Paying Agent. The Trustee designates the Corporate Trust Department of Chase as the initial Paying Agent. Only the Trustee may remove the Paying Agent, and may do so at will. If, on any Distribution Date, the Paying Agent fails to distribute to Certificateholders the amounts then on deposit in the Certificate Account for the purposes specified herein, the Trustee shall be obligated promptly upon its knowledge thereof to distribute such amounts to Certificateholders in the manner and in such amounts based upon information provided by the Servicer; provided that in no event shall the Trustee be obligated for purposes of 55 this paragraph to distribute to Certificateholders any amounts other than those on deposit in the Certificate Account or expend any funds not reimbursable pursuant to Section 10.05 hereof, except as otherwise provided herein. Notwithstanding anything in this Agreement to the contrary, the Trustee shall be liable to the Servicer and the Certificateholders only for its negligence in connection with the withdrawal of funds from the Certificate Account by the Trustee and the distribution of such funds by the Trustee to Certificateholders pursuant to this paragraph. The Servicer shall cause each Paying Agent other than the Trustee to execute and deliver to the Servicer and the Trustee on the Closing Date or, if subsequently appointed, on the date of appointment, a written instrument executed by an officer of the Paying Agent in which such Paying Agent shall agree with the Servicer and the Trustee that such Paying Agent will hold all sums held by it for the payment to Certificateholders in trust for the benefit of the Certificateholders entitled thereto until such sums shall be paid to such Certificateholders. Section 4.06. Authenticating Agents. (a) The Trustee may appoint one or more Authenticating Agents (each, an "Authenticating Agent") which shall be authorized to act on behalf of the Trustee in authenticating the Certificates. Wherever reference is made in this Agreement to the authentication of Certificates by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent must be an entity organized and doing business under the laws of the United States of America or of any state, having a combined capital and surplus of at least $15,000,000, authorized under such laws to do a trust business and subject to supervision or examination by federal or state authorities. If the Authenticating Agent is a party other than the Trustee, the Trustee shall have no liability in connection with the performance or failure of performance of the Authenticating Agent. [The Trustee hereby appoints Chase as the initial Authenticating Agent.] (b) Any Person into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which any Authenticating Agent shall be a party, or any Person succeeding to the corporate agency business of any Authenticating Agent, shall continue to be the Authenticating Agent without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. (c) Any Authenticating Agent may at any time resign by giving at least 30 days' advance written notice of resignation to the Trustee and the Depositor. The Trustee may at any time terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and the Depositor. Upon receiving a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible in accordance within the provisions of this Section 4.06, the Trustee may appoint a successor Authenticating Agent, shall give written notice of such appointment to the Depositor and shall 56 mail notice of such appointment to all Holders of Certificates. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers, duties and responsibilities of its predecessor hereunder, with like effect as if originally named as Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section 4.06. No Authenticating Agent shall have responsibility or liability for any action taken by it as such at the direction of the Trustee. Any Authenticating Agent shall be entitled to reasonable compensation for its services and any such compensation shall be payable solely by the Trustee, without any right of reimbursement from the Depositor, the Servicer or the Trust Fund. [End of Article IV] 57 ARTICLE V ADMINISTRATION AND SERVICING OF MORTGAGE LOANS Section 5.01. Servicer to Service Mortgage Loans. The Servicer shall service and administer the Mortgage Loans and shall have full power and authority, acting alone or through Sub-Servicers as provided in Section 5.02, to do any and all things which it may deem necessary or desirable in connection with such servicing and administration, all in accordance with Accepted Servicing Practices. Without limiting the generality of the foregoing, the Servicer in its own name or in the name of a Sub-Servicer shall, pursuant to a power of attorney granted hereby by the Trustee for such purposes, when the Servicer or the Sub-Servicer, as the case may be, believes it appropriate in its best judgment, to execute and deliver, on behalf of the Certificateholders and the Trustee 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; provided, however, that subject to the provisions of this paragraph, the Servicer may allow a modification with respect to a Mortgage Loan if the Servicer would take such action in the ordinary course of its business if it were the owner of the Mortgage Loan. The Servicer may agree to a modification of any Mortgage Loan (the "Relevant Mortgage Loan") upon the request of the related Mortgagor, provided that (i) the modification is in lieu of a refinancing and the Mortgage Rate on the Relevant Mortgage Loan, as modified, is approximately a prevailing market rate of newly-originated mortgage loans having similar terms, (ii) the aggregate of the adjusted bases of all Modified Mortgage Loans (including the Relevant Mortgage Loans) plus the aggregate adjusted bases of any assets that are not qualified mortgages or permitted investments under Section 860G(a) of the Code that are assets of the Trust Fund established hereunder at all times on any day is less than one percent of the aggregate of the adjusted bases of all assets of the Trust Fund (including such Modified Mortgage Loans) on such day, and (iii) the Servicer purchases the Relevant Mortgage Loan from the Trust Fund as described below. Effective immediately after such modification, and, in any event, on the same Business Day on which the modification occurs, all right, title and interest of the Trustee in and to the Modified Mortgage Loan shall automatically be deemed transferred and assigned to the Servicer and all benefits and burdens of ownership thereof, including without limitation the right to accrued interest thereon from and including the date of modification and the risk of default thereon, shall pass to the Servicer. To confirm such transfer and assignment, the Servicer, as servicer hereunder, as soon as practicable shall execute an instrument of assignment of the Modified Mortgage Loan without recourse in customary form to the Servicer in its individual capacity. The Servicer shall deposit the Purchase Price for any Modified Mortgage Loan in the Collection Account pursuant to Section 5.08. Upon receipt by the Trustee of written notification of any such deposit signed by a Servicing Officer, the Trustee shall release to the Servicer the related Mortgage File and shall execute and deliver such instruments of transfer or assignment, in each case without recourse, as shall be necessary more fully to vest in the Servicer any Modified Mortgage Loan previously transferred and assigned pursuant thereto. 58 The Servicer shall furnish to the Trustee for execution and redelivery to the Servicer or, at the request of the Servicer, a Sub-Servicer, such documents necessary or appropriate to enable the Servicer to service and administer the Mortgage Loans and the Trustee shall not be responsible for the Servicer's application thereof. The Servicer agrees to remain eligible as either a FNMA or FHLMC seller/servicer, or both, for so long as it is Servicer. All Servicing Advances made by the Servicer in effecting the timely payment of taxes, insurance and assessments on the properties subject to the Mortgage Loans shall not, for the purpose of calculating monthly distributions to Certificateholders, be added to the amount owing under the related Mortgage Loans, notwithstanding that the terms of such Mortgage Loan so permit, and such Servicing Advances shall be recoverable by the Servicer to the extent permitted by Sections 5.09 and 5.23. Section 5.02. Sub-Servicing Agreements Between Servicer and Sub-Servicers; Enforcement of Sub-Servicer's Obligations. (a) The Servicer may enter into Sub-Servicing Agreements with Sub-Servicers for the servicing and administration of all or part of the Mortgage Loans. References in this Agreement to actions taken or to be taken by the Servicer in servicing the Mortgage Loans include actions taken or to be taken by a Sub-Servicer on behalf of the Servicer. Each Sub-Servicing Agreement will be upon such terms and conditions as are not inconsistent with this Agreement and as the Servicer and the Sub-Servicer have agreed. The Servicer shall notify the Trustee in writing promptly upon the appointment of any Sub-Servicer. For purposes of this Agreement, the receipt by the Sub-Servicer of any amount with respect to a Mortgage Loan (other than amounts representing servicing compensation or reimbursement for an advance) shall be treated as the receipt by the Servicer of such amount. The Sub-Servicer shall deposit all such funds in an Eligible Account. (b) As part of its servicing activities hereunder, the Servicer, for the benefit of the Trustee and the Certificateholders, shall enforce the obligations of each Sub-Servicer under the related Sub-Servicing Agreement. Such enforcement, including, without limitation, the legal prosecution of claims, termination of Sub-Servicing Agreements as appropriate, and the pursuit of other remedies, shall be in such form and carried out to such an extent and at such time as the Servicer, in its good faith business judgment, would require were it the owner of the related Mortgage Loans. The Servicer shall pay the costs of such enforcement at its own expense but shall be reimbursed therefor only (i) from a general recovery resulting from such enforcement only to the extent, if any, that such recovery exceeds all amounts due in respect of the related Mortgage Loans or (ii) from a specific recovery of costs, expenses or attorneys' fees against the party against whom such enforcement is directed. Section 5.03. Successor Sub-Servicers. The Servicer shall be entitled to terminate any Sub-Servicing Agreement that may exist in accordance with the terms and conditions of such Sub-Servicing Agreement and without any limitation by virtue of this Agreement. 59 Section 5.04. Liability of the Servicer. Notwithstanding any Sub-Servicing Agreement, any of the provisions of this Agreement relating to agreements or arrangements between the Servicer and a Sub-Servicer or reference to actions taken through a Sub-Servicer or otherwise, the Servicer shall remain obligated and liable to the Trustee and Certificateholders for the servicing and administering of the Mortgage Loans in accordance with the provisions of this Agreement without diminution of such obligation or liability by virtue of such Sub-Servicing Agreements or arrangements or by virtue of indemnification from the Sub-Servicer and to the same extent and under the same terms and conditions as if the Servicer alone were servicing and administering the Mortgage Loans. The Servicer shall be entitled to enter into any agreement with a Sub-Servicer for indemnification of the Servicer and nothing contained in this Agreement shall be deemed to limit or modify such indemnification. Section 5.05. No Contractual Relationship Between Sub-Servicer and Trustee or Certificateholders. Any Sub-Servicing Agreement that may be entered into and any other transactions or services relating to the Mortgage Loans involving a Sub-Servicer in its capacity as such and not as an originator shall be deemed to be between the Sub-Servicer and the Servicer alone, and the Trustee and Certificateholders shall not be deemed parties thereto and shall have no claims, rights, obligations, duties or liabilities with respect to the Sub-Servicer. Section 5.06. Termination of Sub-Servicing Agreement. If the Servicer shall for any reason no longer be the Servicer hereunder (including by reason of any Event of Default), the Servicer shall thereupon terminate each Sub-Servicing Agreement that may have been entered into, and the Trustee, its designee or the successor servicer and the Trustee shall not be deemed to have assumed any of the Servicer's interest therein or to have replaced the Servicer as a party to any such Sub-Servicing Agreement. Section 5.07. Collection of Mortgage Loan Payments. Continuously from the date hereof until the principal and interest on all Mortgage Loans are paid in full, the Servicer will proceed diligently to collect all payments due under each of the Mortgage Loans when the same shall become due and payable and shall, to the extent such procedures shall be consistent with this Agreement, follow such collection procedures as it follows with respect to conventional mortgage loans held in its own portfolio. Any such arrangements shall not diminish or otherwise affect the Servicer's obligation to make Advances pursuant to Section 6.03. Section 5.08. Establishment of Collection Account; Deposit in Collection Account. With respect to all of the Mortgage Loans, the Servicer shall segregate and hold all funds collected and received pursuant to a Mortgage Loan separate and apart from any of its own funds and general assets and shall establish and maintain one or more Collection Accounts for the benefit of the Certificateholders (collectively, the "Collection Account") which are Eligible Accounts, in the form of a trust account, in the name of "[TRUSTEE], as Trustee, in trust for and for the benefit of the Certificateholders of Multi-Class Mortgage Pass-Through Certificates, Chase Manhattan Acceptance Corporation, Series [ ] - Collection Account." Such Collection Account shall be established with a commercial bank, a savings bank or a savings and loan 60 association. The Servicer may invest, or cause the institution maintaining the Collection Account to invest, moneys in the Collection Account in Eligible Investments, which shall mature not later than the Business Day next preceding the Distribution Date next following the date of such investment and shall not be sold or disposed of prior to its maturity. All income and gain realized from any such investment shall be for the benefit of the Servicer as additional compensation and shall be subject to its withdrawal or order from time to time. The amount of any losses incurred in respect of any such investments (to the extent not offset by income from other such investments) shall be deposited in the Collection Account by the Servicer out of its own funds immediately as realized; provided, however, that if the Trustee becomes Servicer, the Trustee shall not be required to deposit the amount of any loss incurred prior to it becoming Servicer. The Servicer shall deposit or cause to be deposited in the Collection Account on a daily basis (and not later than the second Business Day following receipt), and retain therein: (i) All payments which were received after the Cut-off Date on account of principal of the Mortgage Loans (other than the principal portion of Monthly Payments due on or before the Cut-off Date), and all Principal Prepayments collected on or after the Cut-off Date; (ii) All payments which were received after the Cut-off Date on account of interest on the Mortgage Loans (net of the Servicing Fee)(other than the interest portion of Monthly Payments due on or before the Cut-off Date); (iii) Net Liquidation Proceeds; (iv) All Insurance Proceeds received by the Servicer under any title, hazard or other insurance policy, including amounts required to be deposited pursuant to Sections 5.16 and 5.20, other than proceeds to be held in the Escrow Account or applied to the restoration or repair of the Mortgaged Property or released to the Mortgagor in accordance with the Servicer's normal servicing procedures or otherwise applied or held as required by applicable law; (v) All awards or settlements in respect of condemnation proceedings affecting any Mortgaged Property which are not released to the Mortgagor in accordance with the Servicer's normal servicing procedures; (vi) All Repurchase Proceeds; (vii) All Advances made by the Servicer pursuant to Section 6.03; (viii) All amounts representing revenues under the insurance provided pursuant to Section 5.19 to the extent of any losses borne by any Certificateholder; 61 (ix) All revenues from any Mortgaged Property acquired by the Servicer by foreclosure or deed in lieu of foreclosure net of any Servicing Advances with respect to such Mortgaged Property; and (x) Any other amounts required to be deposited therein pursuant to this Agreement. The Servicer shall maintain accounting records on a loan-by-loan basis with respect to the Collection Account. The Servicer shall give notice to the Trustee and the Depositor and each Rating Agency of any change in the location of the Collection Account, prior to the use thereof. Notwithstanding anything to the contrary herein, no Monthly Payment or any portion thereof shall be permitted to remain in the Collection Account for more than 12 months. Any Monthly Payment or any portion thereof that has remained in the Collection Account for 12 months shall be deemed a Principal Prepayment and distributed to Certificateholders pursuant to the provisions of this Agreement on the Distribution Date immediately following the end of such 12 month period. Section 5.09. Permitted Withdrawals from the Collection Account. The Servicer may, from time to time, withdraw funds from the Collection Account for the following purposes: (i) to reimburse itself for Advances made pursuant to Section 6.03 (including amounts to reimburse the related Sub-Servicer for advances made pursuant to the applicable Sub-Servicing Agreement), the Servicer's and the Sub-Servicer's right to receive reimbursement pursuant to this subclause (i) being limited to amounts received on particular Mortgage Loans which represent Late Collections (net of the Servicing Fees) with respect to those particular Mortgage Loans; (ii) to pay itself the Servicing Fee; (iii) to reimburse itself for unreimbursed Servicing Advances, or to pay the related Sub-Servicer any unreimbursed Servicing Advances, the Servicer's right to receive reimbursement or make payments to the Sub-Servicer pursuant to this subclause (iii) with respect to any Mortgage Loan being limited to related Liquidation Proceeds, Insurance Proceeds, and condemnation awards; (iv) to reimburse itself (or the related Sub-Servicer) or the Depositor for expenses incurred by and recoverable by or reimbursable to it pursuant to Section 5.01 or 5.16; (v) to reimburse itself (or the related Sub-Servicer) for any Nonrecoverable Advances; 62 (vi) to pay to itself (or the related Sub-Servicer) income earned on the investment of funds deposited in the Collection Account; (vii) to make deposits into the Certificate Account in the amounts and in the manner provided for herein; (viii) to make payments to itself or others pursuant to any provision of this Agreement, and to clear and terminate the Collection Account upon the termination of this Agreement; and (ix) to withdraw amounts deposited in error. Section 5.10. Establishment of Escrow Account; Deposits in Escrow Account. With respect to those Mortgage Loans on which the Servicer or any Sub-Servicer collects Escrow Payments, if any, the Servicer shall, and shall cause the Sub-Servicer to, segregate and hold all funds collected and received pursuant to each such Mortgage Loan which constitute Escrow Payments separate and apart from any of its own funds and general assets and shall establish and maintain one or more Escrow Accounts, in the form of trust accounts. Such Escrow Accounts shall be established with a commercial bank, a mutual savings bank or a savings and loan association the deposits of which are insured by the FDIC in a manner which shall provide maximum available insurance thereunder, and which may be drawn on by the Servicer. The Servicer shall give notice to the Trustee of the location of any Escrow Account, and of any change thereof, prior to the use thereof. Nothing in this paragraph shall be deemed to require the Servicer to collect Escrow Payments in the absence of a provision in the related Mortgage requiring such collection. The Servicer shall deposit, or cause to be deposited, in any Escrow Account or Accounts on a daily basis, and retain therein, (i) all Escrow Payments collected on account of any Mortgage Loans, for the purpose of effecting timely payment of any such items as required under the terms of this Agreement and (ii) all amounts representing proceeds of any hazard insurance policy which are to be applied to the restoration or repair of any Mortgaged Property. The Servicer shall make withdrawals therefrom only to effect such payments as are required under this Agreement, and for such other purposes as are set forth in Section 5.11. The Servicer shall be entitled to retain any interest paid on funds deposited in the Escrow Account by the depository institution other than interest on escrowed funds required by law to be paid to the related Mortgagor and, to the extent required by law, the Servicer shall pay interest on escrowed funds to the related Mortgagor notwithstanding that the Escrow Account is non-interest-bearing or that interest paid thereon is insufficient for such purposes. Section 5.11. Permitted Withdrawals from Escrow Account. Withdrawals from any Escrow Account or Accounts may be made by the Servicer only (i) to effect timely payments of ground rents, taxes, assessments, water rates, Standard Hazard Policy premiums, or other items constituting Escrow Payments for the related Mortgage, (ii) to reimburse the Servicer for 63 any Servicing Advance made by the Servicer, with respect to a related Mortgage Loan but only from amounts received on the related Mortgage Loan which represent late payments or collections of Escrow Payments thereunder, (iii) to refund to any Mortgagor any funds found to be in excess of the amounts required under the terms of the related Mortgage Loan or under applicable law, (iv) for application to restoration or repair of the property subject to the related Mortgage, (v) to pay to the Servicer, or to the Mortgagor to the extent required by law, any interest paid on the funds deposited in the Escrow Account, (vi) to clear and terminate the Escrow Account on the termination of this Agreement or (vii) to withdraw amounts deposited in error. Section 5.12. Payment of Taxes, Insurance and Other Charges. With respect to each Mortgage Loan, the Servicer shall maintain, or cause to be maintained, accurate records reflecting any delinquencies or nonpayments with regard to taxes, assessments and Standard Hazard Policy premiums. The Servicer assumes full responsibility for ensuring the payment of all such bills and shall effect payments of all such bills irrespective of each Mortgagor's faithful performance in the payment of same or the making of the Escrow Payments and shall make advances from its own funds to effect such payments. Section 5.13. Transfer of Accounts. The Servicer may transfer the Collection Account or Escrow Account to an Eligible Account maintained with a different depository institution from time to time. Section 5.14. [Reserved]. Section 5.15. Maintenance of the Primary Insurance Policies. The Servicer shall not take, or permit any Sub-Servicer to 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 Servicer or Sub-Servicer, would have been covered thereunder. Except as otherwise required by applicable law, to the extent coverage is available and until the Loan-to-Value Ratio of the related Mortgage Loan is reduced to 80%, the Servicer shall keep or cause to be kept in full force and effect each such Primary Insurance Policy in an amount equal to the amount by which the unpaid principal balance of the related Mortgage Loan exceeds 75% of the value (as described in the definition of Loan-to-Value Ratio) of the related Mortgaged Property. The Servicer shall not cancel or refuse to renew any such Primary Insurance Policy or consent to any Sub-Servicer canceling or refusing to renew any such Primary Insurance Policy applicable to a Mortgage Loan subserviced by it, 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 an insurer whose claims-paying ability is rated at least as high as the original insurer or is acceptable to each Rating Agency as confirmed in writing by each such Rating Agency, unless otherwise required by law. Section 5.16. Maintenance of Standard Hazard Policies. (a) The Servicer shall cause to be maintained for each Mortgage Loan a Standard Hazard Policy with extended 64 coverage as is prudent in the area where the Mortgaged Property is located in an amount which is equal to the greater of (i) the lesser of (A) 100% of the maximum insurable value of the improvements securing such Mortgage Loan or (B) the principal balance owing on such Mortgage Loan, or (ii) such amount required to prevent the Mortgagor or mortgagee from becoming a co-insurer. If the Mortgaged Property is in an area identified at the time of origination in the Federal Register by the Federal Emergency Management Agency as having special flood hazards (and such flood insurance has been made available) the Servicer will cause to be maintained a flood insurance policy meeting the requirements of the current guidelines of the Federal Insurance Administration with a generally acceptable insurance carrier, in an amount representing coverage not less than the least of (i) the outstanding Principal Balance of the Mortgage Loan, (ii) the full insurable value or (iii) the maximum amount of insurance which is available under the Flood Disaster Protection Act of 1973. The Servicer shall also maintain on property acquired upon foreclosure, or by deed in lieu of foreclosure, of any Mortgage Loan, fire and hazard insurance with extended coverage in an amount which is not less than the lesser of (i) the outstanding principal balance of the Mortgage Loan or (ii) the maximum insurable value of the improvements which are a part of such property, liability insurance, and, to the extent available, flood insurance in an amount as provided above. Any amounts collected by the Servicer under any such policies (other than amounts to be applied to the restoration or repair of the property subject to the related Mortgage or property acquired in liquidation of the Mortgage Loan, or released to the Mortgagor in accordance with the Servicer's normal servicing procedures) shall be deposited, subject to applicable law, in the Collection Account. It is understood and agreed that no earthquake or other additional insurance need be required by the Servicer of any Mortgagor or maintained on property acquired in respect of a Mortgage Loan, other than pursuant to such applicable laws and regulations as shall at any time be in force and as shall require such additional insurance. All such Standard Hazard Policies and other policies shall be endorsed with standard mortgagee clauses with loss payable to the Servicer or its designee. Any such Standard Hazard Policies or other policies may be in the form of blanket policies; provided, however, that in the event of any claim arising in connection with a hazard loss the Servicer shall be obligated, in the case of blanket insurance policies, to deposit in the Collection Account any amount not payable under such blanket policy because of a deductible clause in such policy and not otherwise payable under an individual policy. The Servicer shall not interfere with the Mortgagor's freedom of choice in selecting either his insurance carrier or agent; provided, however, that the Servicer shall not accept any such insurance policies from insurance companies unless such companies are acceptable insurers in the discretion of the Servicer. (b) Any cost incurred by the Servicer in maintaining any of the foregoing insurance shall not, for the purpose of calculating monthly distributions to Certificateholders, be added to the amount owing under the Mortgage Loan, notwithstanding that the terms of the Mortgage Loan so permit. Such costs (other than the costs of maintaining a blanket hazard insurance policy not attributable to a specific Mortgaged Property) shall be recoverable by the Servicer from the Mortgagor or out of Insurance Proceeds or Liquidation Proceeds or to the extent permitted by Section 5.09. 65 Section 5.17. [Reserved]. Section 5.18. [Reserved] Section 5.19. Fidelity Bond and Errors and Omissions Insurance. The Servicer shall maintain, at its own expense, a blanket fidelity bond and an errors and omissions insurance policy, with broad coverage with responsible companies on all officers, employees or other persons acting on behalf of the Servicer in any capacity with regard to the Mortgage Loans to handle funds, money, documents and papers relating to the Mortgage Loans. Any such fidelity bond and errors and omissions insurance shall protect and insure the Servicer against losses, including forgery, theft, embezzlement, fraud, errors and omissions and negligent acts of such persons and shall be maintained at a level acceptable to FNMA. No provision of this Section 5.19 requiring such fidelity bond and errors and omissions insurance shall diminish or relieve the Servicer from its duties and obligations as set forth in this Agreement. Upon request of the Trustee, the Servicer shall cause to be delivered to the Trustee a certification evidencing coverage under such fidelity bond and insurance policy. Promptly upon receipt of any notice from the surety or the insurer that such fidelity bond or insurance policy has been terminated or modified in a materially adverse manner, the Servicer shall notify the Trustee and each Rating Agency of any such termination or modification. Section 5.20. Collections under Insurance Policies; Enforcement of Due-On-Sale Clauses; Assumption Agreements. (a) In connection with its activities as administrator and servicer of the Mortgage Loans, the Servicer agrees to present, on behalf of itself, the Trustee and the Certificateholders, claims to the insurer under any Standard Hazard Policies and, in this regard, to take such reasonable action as shall be necessary to permit recovery under any insurance policies. Pursuant to Section 5.08, the Servicer shall deposit Insurance Proceeds in the Collection Account. (b) When any Mortgaged Property is conveyed by the Mortgagor, the Servicer shall enforce any due-on-sale clause contained in any Mortgage Note or Mortgage, to the extent permitted by such Mortgage Note or Mortgage, applicable law and governmental regulations. Subject to the foregoing, the Servicer is authorized to take or enter into an assumption or substitution agreement from or with the Person to whom such property has been or is about to be conveyed. In connection with such assumption or substitution, the Servicer shall apply such underwriting standards and follow such practices and procedures as shall be normal and usual and as it applies to mortgage loans owned solely by it. Notwithstanding the foregoing paragraph or any other provision of this Agreement, the Servicer shall not be deemed to be in default, breach or any other violation of its obligations hereunder by reason of any conveyance by the Mortgagor of the Mortgaged Property or any assumption of a Mortgage Loan by operation of law which the Servicer in good faith determines it may be restricted by law from preventing, for any reason whatsoever. 66 (c) Subject to the Servicer's duty to enforce any due-on-sale clause to the effect set forth in Section 5.20(b), in any case in which a Mortgaged Property is to be 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, the Servicer shall so notify the Trustee by forwarding to the Trustee the original copy of such assumption or substitution agreement, which copy shall be added by the Trustee 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. In connection with any such assumption, modification agreement or substitution agreement, the interest rate of the related Mortgage Note shall not be changed, the principal amount of the Mortgage Note shall not be increased or decreased and the maturity of the Mortgage Note shall not be extended, nor shall it be shortened by more than one year. Any fee collected by the Servicer for entering into an assumption or substitution of liability agreement with respect to such Mortgage Loan shall be retained by the Servicer as additional servicing compensation. Section 5.21. Income and Realization from Defaulted Mortgage Loans. The Servicer, on behalf of the Trustee, shall foreclose upon or otherwise comparably convert the ownership of Mortgaged 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 pursuant to Section 5.07, shall manage, conserve, protect and operate such Mortgaged Properties for the purposes of their prompt disposition and sale, and shall dispose of such Mortgaged Properties on such terms and conditions as it deems in the best interests of the Certificateholders. The Servicer shall sell such property prior to the close of the third calendar year beginning after the year in which such foreclosure or conversion occurs or such longer period as would not prevent such Mortgaged Property from constituting "foreclosure property" within the meaning of Section 860G(a)(8) of the Code. In connection with such activities, the Servicer shall follow such practices and procedures as it shall deem necessary or advisable, as shall be normal and usual in its general mortgage servicing activities, including its management of foreclosed properties for a temporary period as contemplated herein. The foregoing is subject to the provisions of Section 5.28 of this Agreement and to the proviso that the Servicer shall not be required to expend its own funds in connection with any management, foreclosure or towards the restoration of any property unless it shall determine that such management, restoration or foreclosure will increase the Liquidation Proceeds of the Mortgage Loan to Certificateholders after reimbursement to itself for such expenses (respecting which it shall have priority for purposes of withdrawals from the Collection Account pursuant to Section 5.09). The Servicer shall be permitted to earn income with respect to any Mortgaged Properties, provided such income does not constitute "net income from foreclosure property" within the meaning of Section 860G(c) of the Code. The income earned from the management of such Mortgaged Properties, net of reimbursement to the Servicer for expenses (including any taxes) incurred in connection with such management, shall be applied to the payment of principal of and interest on the related defaulted Mortgage Loans (with interest accruing and principal amortizing 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 67 Notes and shall be deposited into the Collection Account. To the extent the income received is in excess of the amount attributable to amortizing principal and accrued interest at the Net Mortgage Rate on the related Mortgage Loan, such excess shall be deposited in the Collection Account. The Servicer shall take into account the existence of any hazardous substances, hazardous wastes or solid wastes, as such terms are defined in the Comprehensive Environmental Response Compensation and Liability Act, the Resources Conservation and Recovery Act of 1976, or other federal, state or local environmental legislation, on a Mortgaged Property in determining whether to foreclose upon or otherwise comparably convert the ownership of such property. To the extent that the Servicer has actual knowledge of any such substance or waste, it shall consult with the Trustee regarding the appropriate course of action. The Servicer shall not institute foreclosure actions with respect to a property containing substance or waste as described above if it reasonably believes that such action would not be consistent with its servicing standards, and in no event shall the Servicer manage, operate or take any other action with respect thereto which the Servicer in good faith believes will result in "clean-up" or other liability under applicable law. The net income from the rental or sale of a REO Property shall be deposited in the Collection Account within two (2) Business Days after receipt thereof by the Servicer. The Servicer may enter into a special servicing agreement with an unaffiliated holder of 100% Percentage Interest of a Class B Certificate or a holder of a class of securities representing interests in such Class B Certificate and/or other subordinate mortgage pass-through certificates, such agreement to be (i) substantially in the form of Exhibit J hereto or (ii) subject to each Rating Agency's acknowledgment that the ratings of the Certificates in effect immediately prior to the entering into of such agreement would not be qualified, downgraded or withdrawn and the Certificates wold not be placed on credit review status (except for possible upgrading) as a result of such agreement. Any such agreement may contain provisions whereby such holder may instruct the Servicer to commence or delay foreclosure proceedings with respect to delinquent Mortgage Loans and will contain provisions for the deposit of cash by the holder that would be available for distribution to Certificateholders if Liquidation Proceeds are less than they otherwise may have been had the Servicer acted in accordance with its normal procedures. Section 5.22. Trustee to Cooperate; Release of Mortgage Files. (a) Upon becoming aware of the payment in full of any Mortgage Loan, or upon the receipt by the Servicer of a notification that payment in full will be made in a manner customary for such purposes, the Servicer shall immediately notify the Trustee (if the Trustee holds the related Mortgage File) by a certification (which certification shall include a statement to the effect that all amounts received or to be received in connection with such payment which are required to be deposited in the Collection Account pursuant to Section 5.08 have been or will be so deposited) of a Servicing Officer and shall request delivery to it of the Mortgage File. Upon receipt of such certification and request, within five Business Days the Trustee shall release the related Mortgage File to the Servicer and execute and deliver to the Servicer the request for reconveyance, deed of 68 reconveyance or release or satisfaction of mortgage or such other instruments releasing the lien of the Mortgage as have been provided by the Servicer to the Trustee, together with the Mortgage Note with written evidence of cancellation thereon, and the Trustee shall have no further responsibility with respect to said Mortgage File. Upon any such payment in full, or the receipt of such notification, the Servicer is authorized to procure from the Trustee under the deed of trust which secured the Mortgage Note, if any, a deed of full reconveyance covering the property encumbered by such deed of trust, which assignment of deed of trust, except as otherwise provided by any applicable law, shall be recorded by the Servicer in the appropriate land records in the jurisdiction in which the assignment of deed of trust is recorded, or, as the case may be, to procure from the Trustee an instrument of satisfaction or, if the Mortgagor so requests, an assignment without recourse, which deed of reconveyance, instrument of satisfaction or assignment shall be delivered by the Servicer to the Person or Persons entitled thereto. No expenses incurred in connection with any instrument of satisfaction or deed of reconveyance shall be chargeable to the Collection Account or to the Trustee. (b) From time to time as is appropriate for the servicing or foreclosure of any Mortgage Loan, the Servicer shall deliver to the Trustee a certificate of a Servicing Officer requesting that possession of the Mortgage File be released to the Servicer and certifying as to the reason for such release and that such release will not invalidate any insurance coverage provided in respect of the Mortgage Loan under any of the insurance policies required by this Agreement. With such certificate, the Servicer shall require that the Trustee release the Mortgage File, and, within five Business Days, the Trustee shall deliver the Mortgage File or any document therein to the Servicer. The Servicer shall cause each Mortgage File so released to be returned to the Trustee when the need therefor by the Servicer no longer exists, unless (i) the Mortgage Loan has been liquidated and the Net Liquidation Proceeds relating to the Mortgage Loan have been deposited in the Collection Account or (ii) the Mortgage File has been delivered to an attorney, or to a public trustee or other public official as required by law, for purposes of initiating or pursuing legal action or other proceedings for the foreclosure of the Mortgaged Property either judicially or non-judicially, and the Servicer has delivered to the Trustee a certificate of a Servicing Officer in the form of Exhibit L hereto certifying as to the name and address of the Person to which such Mortgage File was delivered and the purpose or purposes of such delivery. (c) Upon written request of the Servicer, the Trustee shall execute and deliver to the Servicer any court pleadings, requests for trustee's sale or other documents prepared by and delivered by the Servicer to the Trustee necessary to the foreclosure or trustee's sale in respect of a Mortgaged Property or to any legal action brought to obtain judgment against any Mortgagor on the Mortgage Note or Mortgage or to obtain a deficiency judgment, or to enforce any other remedies or rights provided by the Mortgage Note or Mortgage or otherwise available at law or in equity. Together with such documents or pleadings, the Servicer shall deliver to the Trustee a certificate of a Servicing Officer requesting that such pleadings or documents be executed by the Trustee and certifying as to the reason such documents or pleadings are required and that the execution and delivery thereof by the Trustee will not invalidate any insurance coverage under 69 the insurance policies required under this Agreement or invalidate or otherwise affect the lien of the Mortgage, except for the termination of such a lien upon completion of the foreclosure or trustee's sale. Section 5.23. Servicing and Other Compensation. The Servicer, as compensation for its activities hereunder, shall be entitled to receive, on or prior to each Distribution Date, the amounts provided for as the Servicing Fee and as reimbursement for Nonrecoverable Advances, Servicing Advances and reimbursement for Advances, all as specified by Section 5.09. The amount of compensation or reimbursement provided for shall be accounted for on a Mortgage Loan-by-Mortgage Loan basis. Additional servicing compensation in the form of assumption fees, prepayment fees and late payment charges shall be retained by the Servicer, to the extent permitted by applicable law. The Servicer shall be required to pay all expenses incurred by it in connection with its servicing activities hereunder (including the fees and expenses of the Trustee and any Sub-Servicer) and shall not be entitled to reimbursement therefor except as specifically provided in Sections 5.09 and 5.21. Section 5.24. 1934 Act Reports. (a) The Servicer shall, on behalf of the Trust, make all filings ("Periodic Reports") required to be made by the Depositor or the Trust (other than the filings relating to the closing of this transaction) with respect to the Class A Certificates, the Class M Certificates, the Class B-1 Certificates and the Class B-2 Certificates pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules and regulations of the Securities and Exchange Commission (the "Commission") thereunder. (b) Within 30 days after the beginning of the first fiscal year during which the Trust's obligation to file Periodic Reports pursuant to the Exchange Act shall have been suspended, the Servicer shall prepare, or cause to be prepared, a notice on Commission Form 15 ("Form 15") and is hereby authorized to and shall execute such Form 15 on the Trust's behalf; provided, however, that the Servicer shall be under no obligation to prepare such notice if the number of Certificateholders exceeds 300. The Servicer shall file any notice on Form 15 with the Commission in accordance with the provisions of Rule 15d-6 under the Exchange Act. Section 5.25. Annual Statement as to Compliance. The Servicer will deliver to the Depositor and the Trustee on or before April 15 of each year, beginning with April 15 in the year which begins not less than three months after the Closing Date, an Officers' Certificate stating, as to each signer thereof, that (i) a review of the activities of the Servicer during the preceding calendar year and of performance under this Agreement has been made under such officer's supervision, (ii) to the best of such officer's knowledge, based on such review, the 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 70 and (iii) to the best of such officer's knowledge, each Sub-Servicer has fulfilled its obligations under its Sub-Servicing Agreement in all material respects, or if there has been a material default in the fulfillment of such obligations, specifying such default known to such officers and the nature and status thereof. Copies of such statement shall be provided to each Rating Agency by the Servicer. Copies of such statement shall also be provided by the Servicer to any Certificateholder upon request. If the Servicer shall fail to provide such copies and a Responsible Officer of the Trustee is aware that the Servicer has not so provided copies, the Trustee shall provide such copies at the Servicer's expense if the Trustee has received such statement. Section 5.26. Annual Independent Public Accountants' Servicing Report. On or before April 15 of each year, beginning with April 15 in the year which begins not less than three months after the Closing Date, the Servicer at its expense shall cause a firm of independent public accountants which is a member of the American Institute of Certified Public Accountants to furnish a statement to the Depositor and the Trustee to the effect that such firm has examined certain documents and records relating to the servicing of the Mortgage Loans and that, on the basis of such examination conducted substantially in compliance with the Uniform Single Audit Program for Mortgage Bankers, such servicing has been conducted in compliance with the manner of servicing set forth in pooling and servicing agreements substantially similar to this Agreement, except for (i) such exceptions as such firm shall believe to be immaterial and (ii) such other exceptions as shall be set forth in such statement. Copies of such statement shall be provided to each Rating Agency, and, upon request, to the Certificateholders, by the Servicer, or by the Trustee at the Servicer's expense if the Trustee has received such statement and the Servicer shall fail to provide such copies and the Trustee is aware that the Servicer has not so provided copies. Section 5.27. Access to Certain Documentation; Rights of the Depositor in Respect of the Servicer. The Servicer shall provide access to the Trustee, Certificateholders which are savings and loan associations, banks or insurance companies or examiners of any federal or state banking or insurance regulatory authority to the documentation regarding the Mortgage Loans if so required by applicable regulations of any regulatory authority, such access to be afforded subject to reimbursement for expenses without charge but only upon reasonable request and during normal business hours at the offices of the Servicer designated by it. The Depositor may, but is not obligated to, enforce the obligations of the Servicer under this Agreement and may, but is not obligated to, appoint and cause a designee to perform, any defaulted obligations of the Servicer hereunder or exercise the rights of the Servicer hereunder; provided that the Servicer shall not be relieved of any of its obligations hereunder by virtue of the appointment of a designee by the Depositor or its designee. The Depositor shall not assume any responsibility or liability for any action or failure to take action by the Servicer and is not obligated to supervise the performance of the Servicer under this Agreement or otherwise. 71 Section 5.28. REMIC-Related Covenants. For as long as the Trust Fund shall exist, the Servicer and the Trustee shall act in accordance herewith to assure continuing treatment of the Trust Fund as a REMIC. In particular: (a) The Servicer shall not create, or permit the creation of, any "interests" in the REMIC within the meaning of Section 860G(a) of the Code other than the "regular interests" in the REMIC designated as such in Section 2.04(a) and the Residual Interest; (b) As of all times as may be required by the Code, the Servicer will ensure that substantially all of the assets of the Trust Fund will consist of "qualified mortgages" as defined in section 860G(a)(3) of the Code and "permitted investments" as defined in section 860G(a)(5) of the Code. The Servicer and the Trustee, upon the direction of the Servicer, also will maintain records that are sufficient to indicate the Trust Fund's compliance with applicable requirements of the Code (and applicable Proposed, Temporary or final Treasury Regulations) relating to the assets held by the Trust Fund. Further, the Servicer shall not permit and the Trustee shall not accept the transfer or substitution of any Mortgage Loan other than pursuant to Section 3.03, 5.01 or 5.21 of this Agreement, and the Servicer shall, in any case, not permit substitution later than two years from the Closing Date unless the Servicer and the Trustee have received an Opinion of Counsel, which will not be an expense of the Trust Fund, that such transfer or substitution would not adversely affect the REMIC status of the Trust Fund or would not otherwise be prohibited by this Agreement; (c) The Servicer shall ensure that the Trust Fund does not receive a fee or other compensation for services and that the Trust Fund does not receive any income from assets other than "qualified mortgages" within the meaning of section 860G(a)(3) of the Code or "permitted investments" within the meaning of section 860G(a)(5) of the Code, and shall take whatever action it deems necessary to avoid any material tax imposed by the Code on the Trust Fund; (d) The Trustee shall not sell or permit the sale of all or any portion of the Mortgage Loans or of any Eligible Investment unless such sale is as a result of a repurchase of the Mortgage Loans pursuant to this Agreement or the Trustee has received an Opinion of Counsel, which will not be an expense of the Trust Fund or the Trustee, to the effect that such sale (i) is pursuant to a "qualified liquidation" as defined in section 860F(a)(4) of the Code and as described in Section 11.01 hereof, or (ii) would not be treated as a "prohibited transaction" within the meaning of section 860F(a)(2) of the Code that results in the realization of a material amount of gain or loss for federal income tax purposes; (e) The Trustee shall not accept any contribution to the Trust Fund after the Startup Day without an Opinion of Counsel (which shall not be an expense of the Trustee) that such contribution is included within the exceptions provided in Section 860G(d)(2) of the Code and, therefore, will not be subject to the tax imposed by Section 860G(d)(1) of the Code; and 72 (f) Notwithstanding anything to the contrary in this Agreement, the Servicer and the Trustee, at the direction of the Servicer, shall take any other action or refuse to take any action otherwise required (including adjusting the Purchase Price for any Mortgage Loan) where the Servicer deems such action or inaction reasonably necessary to ensure the REMIC status of the Trust Fund under the Code and applicable regulations or to avoid the imposition of any material tax liability on the Trust Fund that will affect amounts distributable to the Certificateholders. (g) In the event that any applicable federal, state or local tax, including interest, penalties or assessments, additional amounts or additions to tax, is imposed on the Trust Fund, such tax shall be treated in the same manner as a Realized Loss and shall be charged against amounts otherwise distributable to the Holders of the Certificates, except as provided in the last sentence of this Section 5.28 (g). The Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent shall withdraw from the Collection Account sufficient funds to pay or provide for the payment of, and to actually pay, such tax as is estimated to be legally owed by (but such authorization shall not prevent the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent from contesting, at the expense of the Trust Fund (other than as a consequence of a breach of its obligations under this Agreement), any such tax in appropriate proceedings, and withholding payment of such tax, if permitted by law, pending the outcome of such proceedings). The Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent is hereby authorized to and shall segregate, into a separate non-interest bearing account, the net income from any "prohibited transaction" under Code Section 860F(a), the amount of any taxable contribution to the Trust Fund after the Startup Day that is subject to tax under Code Section 860G(d), and 35% of any estimated "net income from foreclosure property" under Section 860G(c) and use such income or amount, to the extent necessary, to pay such tax. To the extent that any such tax is paid to the Internal Revenue Service or applicable state or local tax authorities, the Trustee or a Paying Agent has been appointed under Section 4.05, the Paying Agent shall retain an equal amount from future amounts otherwise distributable to the Holder of the Class A-R Certificate and shall distribute such retained amounts to the Holders of the other Classes of Certificates, to the extent they remain outstanding, until they are fully reimbursed for any amount of such taxes previously charged to the then Holder of the Class R Certificate. Neither the Trustee nor the Servicer shall be responsible for any taxes imposed on the Trust Fund except to the extent such taxes arise as a consequence of a breach of their respective obligations under this Agreement. [End of Article V] 73 ARTICLE VI PAYMENTS TO THE CERTIFICATEHOLDERS Section 6.01. Distributions. (a) On each Distribution Date, the Paying Agent shall apply an amount equal to the Available Distribution Amount in the following order of priority: (i) to the Non-PO Class A Certificateholders, all distributable amounts up to the sum of (A) the Aggregate Class A Interest Accrual Amount and (B) the Aggregate Class A Interest Shortfall; (ii) the balance, if any, of the Available Distribution Amount shall be allocated, first, pro rata (in accordance with the maximum amounts distributable in accordance with this clause (ii)) between (A) the Non-PO Class A Certificateholders, the amounts distributable pursuant to (b)(ii)(A) below, up to the Non-PO Class A Optimal Principal Amount and (B) the Class A-P Certificateholders, the Class A-P Amount, in accordance with (b)(ii)(B) below and second, to the Class A-P Certificateholders, the Class A-P Shortfall Amount, in accordance with (b)(iii) below; (iii) to the Class M Certificateholders, the balance, if any, of the Available Distribution Amount after making the distributions provided for in paragraphs (i) and (ii) above, in accordance with, and up to the amount calculated pursuant to, Section 6.01(c) below; (iv) to the Class B Certificateholders, the balance, if any, of the Available Distribution Amount after making the distributions provided for in paragraphs (i) through (iii) above, in accordance with, and up to the amounts calculated pursuant to, Section 6.01(d) below; and (v) to the Class A-R Certificateholders the balance, if any, of the Available Distribution Amount remaining after the distributions provided for in paragraphs (i) through (iv) above. (b) Amounts payable to the Class A Certificateholders on any Distribution Date shall be distributed as follows: (i) to the extent the amount available for distribution pursuant to (a)(i) is sufficient: (A) to the Class A-1 Certificateholders, (1) the Class A-1 Interest Accrual Amount plus (2) the Class A-1 Shortfall from the preceding Distribution Date; 74 (B) to the Class A-2 Certificateholders, (1) the Class A-2 Interest Accrual Amount plus (2) the Class A-2 Shortfall from the preceding Distribution Date; (C) to the Class A-3 Certificateholders, (1) the Class A-3 Interest Accrual Amount plus (2) the Class A-3 Shortfall from the preceding Distribution Date; (D) to the Class A-4 Certificateholders, (1) the Class A-4 Interest Accrual Amount plus (2) the Class A-4 Shortfall from the preceding Distribution Date; (E) to the Class A-5 Certificateholders, (1) the Class A-5 Interest Accrual Amount plus (2) the Class A-5 Shortfall from the preceding Distribution Date; (F) to the Class A-6 Certificateholders, (1) the Class A-6 Interest Accrual Amount plus (2) the Class A-6 Shortfall from the preceding Distribution Date; (G) to the Class A-7 Certificateholders, (1) the Class A-7 Interest Accrual Amount plus (2) the Class A-7 Shortfall from the preceding Distribution Date; (H) to the Class A-R Certificateholder, (1) the Class A-R Interest Accrual Amount plus (2) the Class A-R Shortfall from the preceding Distribution Date; and (I) to the Class A-X Certificateholders, (1) the Class A-X Interest Accrual Amount plus (2) the Class A-X Shortfall from the preceding Distribution Date; (ii) concurrently, (A) to the Non-PO Class A Certificateholders, up to the Non-PO Class A Optimal Principal Amount, allocated among the Non-PO Class A Certificates in accordance with the Non-PO Class A Principal Payment Rules and (B) to the Class A-P Certificateholders, the Class A-P Amount; (iii) to the Class A-P Certificateholders, the Class A-P Shortfall Amount; provided, however, that any amounts distributed pursuant to this Section 6.01(b)(iii) shall not cause a further reduction in the Outstanding Certificate Principal Balance of the Class A-P Certificates. 75 (iv) If the Available Distribution Amount is insufficient to make the distributions set forth in (b)(i) above, the Paying Agent shall distribute the Available Distribution Amount to the Non-PO Class A Certificateholders pro rata in accordance with the amounts otherwise distributable to them pursuant to (b)(i)(A)-(I) above. (c) Amounts payable on any Distribution Date to the Class M Certificateholders shall be distributed up to an amount equal to (A) the Class M Interest Accrual Amount plus (B) the Class M Shortfall from the preceding Distribution Date plus (C) the portion of the Subordinated Optimal Principal Amount allocable (pursuant to Section 6.01(e)) to the Class M Certificates plus (D) any Carry-over Subordinated Principal Amounts with respect to the Class M Certificates. (d) Amounts payable on any Distribution Date to the Class B Certificateholders pursuant to Section 6.01(a)(iv) shall be distributed in the following priority: (1) first, to the Class B-1 Certificateholders, up to an amount equal to (A) the Class B-1 Interest Accrual Amount plus (B) the Class B-1 Shortfall from the preceding Distribution Date plus (C) the pro rata portion, if any, of the Subordinated Optimal Principal Amount allocable to the Class B-1 Certificates in accordance with Section 6.01(e) plus (D) any Carry-over Subordinated Principal Amounts with respect to the Class B-1 Certificates plus (E) any portion of the Subordinated Optimal Principal Amount allocated to the Class M Certificates in excess of the Outstanding Certificate Principal Balance of such Class; (2) second, to the Class B-2 Certificateholders, up to an amount equal to (A) the Class B-2 Interest Accrual Amount plus (B) the Class B-2 Shortfall from the preceding Distribution Date plus (C) the pro rata portion, if any, of the Subordinated Optimal Principal Amount allocable to the Class B-2 Certificates in accordance with Section 6.01(e) plus (D) any Carry-over Subordinated Principal Amounts with respect to the Class B-2 Certificates plus (E) any portion of the Subordinated Optimal Principal Amount allocated to the Class B-1 Certificates in excess of the Outstanding Certificate Principal Balance of such Class; (3) third, to the Class B-3 Certificateholders, up to an amount equal to (A) the Class B-3 Interest Accrual Amount plus (B) the Class B-3 Shortfall from the preceding Distribution Date plus (C) the pro rata portion, if any, of the Subordinated Optimal Principal Amount allocable to the Class B-3 Certificates in accordance with Section 6.01(e) plus (D) any Carry-over Subordinated Principal Amounts with respect to the Class B-3 Certificates plus (E) any portion of the Subordinated Optimal Principal Amount allocated to the Class B-2 Certificates in excess of the Outstanding Certificate Principal Balance of such Class; (4) fourth, to the Class B-4 Certificateholders, up to an amount equal to (A) the Class B-4 Interest Accrual Amount plus (B) the Class B-4 Shortfall from the preceding Distribution Date plus (C) the pro rata portion, if any, of the Subordinated Optimal Principal Amount allocable to the Class B-4 Certificates in accordance with Section 6.01(e) plus (D) any 76 Carry-over Subordinated Principal Amounts with respect to the Class B-4 Certificates plus (E) any portion of the Subordinated Optimal Principal Amount allocated to the Class B-3 Certificates in excess of the Outstanding Certificate Principal Balance of such Class; and (5) fifth, to the Class B-5 Certificateholders, up to an amount equal to (A) the Class B-5 Interest Accrual Amount plus (B) the Class B-5 Shortfall from the preceding Distribution Date plus (C) the pro rata portion, if any, of the Subordinated Optimal Principal Amount allocable to the Class B-5 Certificates in accordance with Section 6.01(e) plus (D) any Carry-over Subordinated Principal Amounts with respect to the Class B-5 Certificates plus (E) any portion of the Subordinated Optimal Principal Amount allocated to the Class B-4 Certificates in excess of the Outstanding Certificate Principal Balance of such Class. (e) On each Distribution Date, the Subordinated Optimal Principal Amount shall be allocated among the Classes of Subordinated Certificates entitled, pursuant to the next succeeding sentence, to an allocation of principal on such Distribution Date, pro rata based upon the Outstanding Certificate Principal Balances of all such Classes so entitled. With respect to the Subordinated Certificates, on each Distribution Date, principal shall be distributable to (1) any Class of Subordinated Certificates which has current Credit Support (before giving effect to any distribution of principal and any Realized Losses allocable on such Distribution Date) greater than or equal to the Original Credit Support for such Class; (2) the Class having the lowest numerical class designation of any outstanding Class of Subordinated Certificates which does not meet the criteria in (1) above; and (3) the Class B-5 Certificates if all other outstanding Classes of Subordinated Certificates meet the criteria in (1) above or if no other Class of Subordinated Certificates is outstanding; provided, however, that no Class of Subordinated Certificates shall receive any distributions of principal if any Class of Subordinated Certificates having a lower numerical class designation than such Class fails to meet the criteria in (1) above. For purposes of this paragraph, the Class M Certificates shall be deemed to have a lower numerical class designation than each Class of Class B Certificates. (f) The Servicer shall make all calculations necessary to make the distributions described in this Section 6.01. All distributions made to Certificateholders of any Class on each Distribution Date will be made to the Certificateholders of the respective Class of record on the next preceding Record Date, except that the final distribution with respect to each Class shall be made as provided in the forms of Certificates. All distributions made to Certificateholders shall be based on the Percentage Interest of the Class represented by their respective Certificates, and shall be made either by transfer in immediately available funds to the account of such Holder at a bank or other financial or depository institution having appropriate facilities therefor, if such Holder has so notified the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, in writing at least 10 Business Days prior to the first Distribution Date for which distribution by wire transfer is to be made and such Holder's Certificates of such Class in the aggregate evidence an original denomination of not less than $5,000,000 or such Holder holds a 100% Percentage Interest of such Class or, if not, by check mailed to the address of the Person entitled thereto as it appears on the Certificate Register, 77 except that the final distribution in retirement of the Certificates will be made only upon presentation and surrender of the Certificates at the office specified in the final Distribution Notice. If on any Determination Date, the Servicer determines that there are no Mortgage Loans outstanding and no other funds or assets in the Trust Fund other than the funds in the Certificate Account, the Trustee or if a Paying Agent has been appointed under Section 4.05, the Paying Agent shall promptly send the final distribution notice to each Certificateholder specifying the manner in which the final distribution will be made. Section 6.02. Statements to the Certificateholders. (a) Not later than the second Business Day prior to each Distribution Date, the Servicer shall send to the Paying Agent and the Trustee the relevant information for purposes of this Section 6.02. Not later than each Distribution Date, the Paying Agent shall send to each Certificateholder, the Depositor, the Trustee (if other than the Paying Agent), the Servicer, any co-trustee, and each Rating Agency a statement setting forth the following information, after giving effect to the distributions to be made by the Paying Agent pursuant to Section 6.01 on or as of such Distribution Date: (i) with respect to each Class of Certificates the amount of such distribution to Holders of such Class allocable to principal; (ii) with respect to each Class of Certificates the amount of such distribution to Holders of such Class allocable to interest; (iii) the aggregate amount of any Principal Prepayments and Repurchase Proceeds included in the distributions to Certificateholders; (iv) the aggregate amount of any Advances by the Servicer pursuant to Section 6.03; (v) the number of Outstanding Mortgage Loans and the Mortgage Pool Principal Balance as of the close of business as of the end of the related Principal Prepayment Period; (vi) the related amount of the Servicing Fees (as adjusted pursuant to Section 6.05) retained or withdrawn from the Collection Account by the Servicer; (vii) the number and aggregate principal amounts of Mortgage Loans (A) delinquent (1) one Monthly Payment, (2) two Monthly Payments and (3) three or more Monthly Payments and (B) in foreclosure, in each case, as of the end of the related Principal Prepayment Period; (viii) the number and the principal balance of Mortgage Loans with respect to any real estate acquired through foreclosure or grant of a deed in lieu of foreclosure; 78 (ix) the aggregate amount of all Advances recovered during the related Due Period; (x) with respect to the following Distribution Date, the Class A Percentage, the Class M Percentage, the Class B Percentage, the Class A Principal Balance, the Class M Principal Balance, the Class B Principal Balance, the Non-PO Class A Percentage, the Non-PO Class A Prepayment Percentage, and the level of Credit Support, if any, with respect to each class of Subordinated Certificates; (xi) the aggregate amount of Realized Losses during the related Due Period and the aggregate amount of Realized Losses since the Cut-off Date; (xii) the allocation to each Class of Certificates of any Realized Losses during the related Due Period; (xiii) the Outstanding Certificate Principal Balance of each Class of Certificates after giving effect to the distributions to each Class on such Distribution Date; and (xiv) the amount of any Compensating Interest Shortfalls on such Distribution Date. The Paying Agent's responsibility for sending the above information to the Certificateholders is limited to the availability, timeliness and accuracy of the information derived from the Servicer. Upon reasonable advance notice in writing if required by federal regulation, the Servicer will provide to each Certificateholder which is a savings and loan association, bank or insurance company certain reports and access during business hours to information and documentation regarding the Mortgage Loans sufficient to permit such Certificateholder to comply with applicable regulations of regulatory authorities with respect to investment in the Certificates; provided, that the Servicer shall be entitled to be reimbursed by each such Certificateholder for the Servicer's actual expenses incurred in providing such reports and access. (b) The Servicer shall cause to be prepared, and the Servicer or the Trustee, as required by applicable law, shall file, any and all tax returns, information statements or other filings required to be delivered to Certificateholders and any governmental taxing authority pursuant to any applicable law with respect to the Trust Fund and the transactions contemplated hereby (the Servicer or the Trustee may, at its option but with the consent of the other, which consent shall not be unreasonably withheld, appoint an organization which regularly engages in the preparation and filing of such documents on a continuous basis for profit and which represents itself to be expert in such matters) and the Servicer shall maintain a record of the information necessary for the application of Section 860E(e) of the Code and shall make such information available as required by Section 860D(a)(6) of the Code; provided, however, that the 79 Servicer shall notify the Trustee of the Trustee's obligation to make any such filings and that any fees of the organization appointed as provided above shall be paid by the Servicer; and provided further that if an organization is employed, as described above, to prepare and file any such filings, neither the Trustee nor the Servicer shall be liable for any errors by such organization. Section 6.03. Advances by the Servicer. If, on any Determination Date, the Servicer determines that any Monthly Payments due on the immediately preceding Due Date have not been received, the Servicer shall, unless it determines in its sole discretion that such amounts will not be recoverable from Late Collections, Liquidation Proceeds or otherwise, make an Advance on or before the related Distribution Date in an amount equal to the amount of such delinquent Monthly Payments, after adjustment of any delinquent interest payment for the Servicing Fee. For purposes of this Section 6.03, the delinquent Monthly Payments referred to in the preceding sentence shall be deemed to include an amount equal to the Monthly Payments that would have been due on Mortgage Loans which have been foreclosed or otherwise terminated and in connection with which the Servicer acquired and continues to own the Mortgaged Properties on behalf of the Certificateholders. If the Servicer makes an Advance, it shall on or prior to such Distribution Date either (i) deposit in the Collection Account an amount equal to such Advance, (ii) cause to be made an appropriate entry in the records of the Collection Account that funds in such account being held for future distribution or withdrawal have been, as permitted by this Section 6.03, used by the Servicer to make such Advance or (iii) make Advances in the form of any combination of clauses (i) and (ii) aggregating the amount of such Advance. Any funds being held in the Collection Account for future distribution to Certificateholders and so used pursuant to clause (ii) or (iii) above shall be replaced by the Servicer from its own funds by deposit into the Collection Account on or before any subsequent Distribution Date to the extent that funds in the Collection Account on such Distribution Date shall be less than the amount of payments required to be made to Certificateholders on such Distribution Date. Any such Advance shall be included with the distribution to the Certificateholders on the related Distribution Date. If the Servicer determines not to make a Nonrecoverable Advance, it shall on the related Determination Date furnish to the Trustee, any co-trustee, and each Rating Agency notice of such determination. The Servicer shall be entitled to be reimbursed from the Collection Account for all Advances and Nonrecoverable Advances as provided in Section 5.09. Section 6.04. Allocation of Realized Losses. (a) Prior to each Determination Date, the Servicer shall determine (i) the total amount of Realized Losses, if any, incurred during the related Principal Prepayment Period; (ii) whether and to what extent such Realized Losses constitute Excess Losses; and (iii) the respective portions of such Realized Losses allocable to interest and to principal. (b) The principal portion of any Realized Losses other than Excess Losses shall be allocated as follows: first, to the Class B-5 Certificates until the Outstanding Certificate Principal Balance of the Class B-5 Certificates has been reduced to zero; second, to the Class B-4 Certificates until the Outstanding Certificate Principal Balance of the Class B-4 Certificates has 80 been reduced to zero; third, to Class B-3 Certificates until the Outstanding Certificate Principal Balance of the Class B-3 Certificates has been reduced to zero; fourth, to the Class B-2 Certificates until the Outstanding Certificate Principal Balance of the Class B-2 Certificates has been reduced to zero; fifth, to the Class B-1 Certificates until the Outstanding Certificate Principal Balance of the Class B-1 Certificates has been reduced to zero; sixth, to the Class M Certificates until the Outstanding Certificate Principal Balance of the Class M Certificates has been reduced to zero; and seventh, to the Non-PO Class A Certificates on a pro rata basis until the Outstanding Certificate Principal Balance of the Non-PO Class A Certificates has been reduced to zero; provided, however, that if a Realized Loss occurs with respect to a Discount Mortgage Loan (A) the amount of such Realized Loss equal to the product of (i) the amount of such Realized Loss and (ii) the PO Percentage with respect to such Discount Mortgage Loan will be allocated to the Class A-P Certificates and (B) the remainder of such Realized Loss will be allocated as described above. The principal portion of any Excess Losses shall be allocated among all Classes of Certificates on a pro rata basis; provided, however, that the applicable PO Percentage of any Excess Losses on the Discount Mortgage Loans shall be allocated to the Class A-P Certificates. (c) As used herein, an allocation of a Realized Loss on a "pro rata basis" among two or more specified Classes of Certificates means an allocation on a pro rata basis, among the various Classes so specified, to each such Class of Certificates on the basis of their then Outstanding Certificate Principal Balances, prior to giving effect to distributions to be made on such Distribution Date. All Realized Losses and all other losses allocated to a Class of Certificates hereunder will be allocated among the Certificates of such Class in proportion to the Percentage Interests evidenced thereby. (d) In the event that a recovery is made with respect to any Realized Loss, the amount of such recovery shall be distributed on the next Distribution Date first to the Class A Certificateholders, up to the amount to which such Realized Loss was allocated to the Class A Certificateholders; second to the Class M Certificateholders, up to the amount to which such Realized Loss was allocated to the Class M Certificateholders; third to the Class B-1 Certificateholders, up to the amount to which such Realized Loss was allocated to the Class B-1 Certificateholders; fourth to the Class B-2 Certificateholders, up to the amount to which such Realized Loss was allocated to the Class B-2 Certificateholders; fifth to the Class B-3 Certificateholders, up to the amount to which such Realized Loss was allocated to the Class B-3 Certificateholders; sixth to the Class B-4 Certificateholders, up to the amount to which such Realized Loss was allocated to the Class B-4 Certificateholders; and seventh to the Class B-5 Certificateholders, up to the amount to which such Realized Loss was allocated to the Class B-5 Certificateholders. 81 Section 6.05. Compensating Interest; Allocation of Certain Interest Shortfalls. (a) Upon a Principal Prepayment of a Mortgage Loan, the Servicer shall deposit into the Collection Account from its own funds, as a reduction of its servicing compensation hereunder, an amount, if any, by which the amount of the interest that would otherwise accrue with respect to such Mortgage Loan from the date of prepayment to the Due Date in the related Due Period at the Net Mortgage Rate exceeds the amount of the interest (adjusted to the Net Mortgage Rate) collected from the Mortgagor with respect to such period (such amount, "Compensating Interest"); provided, however, that with respect to any Distribution Date, the Servicer's obligation to deposit any such amount is limited to an amount equal to the product of (i) one-twelfth of 0.125% and (ii) the aggregate Scheduled Principal Balance of the Mortgage loans with respect to such Distribution Date. (b) On any Distribution Date, the excess, if any, of (X) Compensating Interest with respect to such Distribution Date over (Y) the amount deposited in the Collection Account pursuant to (a) above for such Distribution Date shall equal the "Compensating Interest Shortfall" with respect to such Distribution Date. On any Distribution Date, the Compensating Interest Shortfall shall be allocated pro rata among the outstanding Classes of Class A, Class M and Class B Certificates based on the amount of interest to which each such Class would otherwise be paid on such Distribution Date had there been no such Compensating Interest Shortfall. (c) The interest portion of any Realized Losses ("Realized Loss Interest Shortfall") shall be allocated as follows: first, to the Class B-5 Certificates, second, to the Class B-4 Certificates, third, to the Class B-3 Certificates, fourth, to the Class B-2 Certificates, fifth, to the Class B-1 Certificates, sixth, to the Class M Certificates, in each case until the Outstanding Certificate Principal Balance thereof has been reduced to zero, and seventh, the remainder thereof shall be allocated to the Non-PO Class A Certificates pro rata among the outstanding Classes of Non-PO Class A Certificates based on the amount of interest to which each such Class would otherwise be paid on such Distribution Date had there been no such Realized Loss Interest Shortfall. Section 6.06. Subordination. The rights of the Class B Certificateholders to receive distributions in respect of the Class B Certificates on any Distribution Date shall be subordinated to the rights of the Class A and Class M Certificateholders to receive distributions in respect of the Class A and Class M Certificates. The rights of the Class M Certificateholders to receive distributions in respect of the Class M Certificates on any Distribution Date shall be subordinated to the rights of the Class A Certificateholders to receive distributions in respect of the Class A Certificates. The rights of the Class B-1 Certificateholders to receive distributions in respect of the Class B-1 Certificates on any Distribution Date shall be subordinate to the rights of the Class A and Class M Certificateholders to receive distributions in respect of such Class A and Class M Certificates. Each Class of Class B Certificates (other than the Class B-1 Certificates) is subordinated to the Class A Certificates, the Class M Certificates and each Class 82 of Class B Certificates having a lower numerical class designation than such Class of Class B Certificates. The rights of the Servicer, as servicer, to receive funds from the Collection Account, pursuant to Section 5.09, on account of the Servicing Fee (except as provided in Section 6.05) in respect of each Mortgage Loan, assumption fees, late payment charges and other mortgagor charges, reimbursement of Advances and expenses or otherwise, shall not be subordinated to the rights of the Class A, Class M or Class B Certificateholders. Amounts held by the Servicer or the Trustee for future distribution to the Class M or Class B Certificateholders, including, without limitation, in the Collection Account, shall not be distributed in respect of the Class M or Class B Certificates except in accordance with the terms of this Agreement. The Class B Certificateholders are deemed to have granted a security interest in such amounts to the Class A and Class M Certificateholders to secure the rights of the Class A and Class M Certificateholders to receive distributions in priority over the Class B Certificateholders. The Class M Certificateholders are deemed to have granted a security interest in such amounts to the Class A Certificateholders to secure the rights of the Class A Certificateholders to receive distributions in priority over the Class A Certificateholders. Section 6.07. Determination of LIBOR. LIBOR applicable to the calculation of the Certificate Rates on the Class A-5 and Class A-6 Certificates for any Interest Accrual Period (other than the initial Interest Accrual Period) will be determined by the Servicer on each Rate Adjustment Date as follows: For any Interest Accrual Period other than the first Interest Accrual Period, the rate for United States dollar deposits for one month which appears on the Telerate Screen Page 3750 as of 11:00 A.M., London, England time, on the LIBOR Business Day prior to the first day of such Interest Accrual Period. For the first Interest Accrual Period, LIBOR shall equal _________% with respect to the Class A-5 and Class A-6 Certificates. If such rate does not appear on such page (or such other page as may replace that page on that service, or if such service is no longer offered, such other service for displaying LIBOR or comparable rates as may be reasonably selected by the Servicer), the rate will be the Reference Bank Rate. If no such quotations can be obtained and no Reference Bank Rate is available, LIBOR will be LIBOR applicable to the preceding Distribution Date. The establishment of LIBOR by the Servicer on any Rate Adjustment Date on the Servicer's subsequent calculation of the Certificate Rates applicable to the Class A-5 and Class A-6 Certificates for the relevant Interest Accrual Period, in the absence of manifest error, will be final and binding. [End of Article VI] 83 ARTICLE VII REPORTS TO BE PREPARED BY THE SERVICER Section 7.01. Servicer Shall Provide Information as Reasonably Required. The Servicer shall furnish to the Trustee, during the term of this Agreement, such periodic, special, or other reports or information, whether or not provided for herein, as shall be necessary, reasonable, or appropriate in respect to the Trustee, or otherwise in respect to the purposes of this Agreement, all such reports or information to be as provided by and in accordance with such applicable instructions and directions as the Trustee may reasonably require. Section 7.02. Federal Information Returns and Reports to Certificateholders. (a) For Federal income tax purposes, the taxable year of the Trust Fund shall be a calendar year and the Servicer shall maintain or cause the maintenance of the books of the Trust Fund on the accrual method of accounting. (b) The Servicer shall prepare and file or cause to be filed with the Internal Revenue Service federal tax or information returns with respect to the Trust Fund and the Certificates containing such information and at the times and in the manner as may be required by the Code or applicable Treasury regulations, and shall furnish to each Certificateholder at any time during the calendar year for which such returns or reports are made such statements or information at the times and in the manner as may be required thereby. Without limitation on any other requirement of this Section 7.02, the Servicer shall make available the information necessary for the application of Section 860E(e) of the Code within 60 days of such request. With respect to the Class A-R Certificate, the Servicer shall provide such information or cause such information to be provided to (i) the Internal Revenue Service, (ii) the transferor of a Class A-R Certificate to a Disqualified Organization and (iii) a Pass-Thru Entity that holds a Class A-R Certificate with one or more record holders that are Disqualified Organizations. The Servicer also shall provide or cause to be provided promptly the above described computation and information relating to the tax on transfers to Disqualified Organizations or holdings by Pass-Thru Entities within 60 days after becoming aware of the transfer to a Disqualified Organization or Pass-Thru Entity with one or more Disqualified Organization owners, as the case may be. In addition, except as may be provided in Treasury Regulations, any person holding an interest in a Pass-Thru Entity as a nominee for another will, with respect to such interest, be treated as a Pass-Thru Entity. In connection with the foregoing, the Servicer shall provide the name, address and telephone number of the person who can be contacted to obtain information required to be reported to the holders of regular interests in the REMIC (the "REMIC Reporting Agent") as required by IRS Form 8811. The Trustee hereby designates [NAME] to serve as the REMIC Reporting Agent. The Servicer shall indicate the election to treat the Trust Fund as a REMIC (which election shall apply to the taxable period ending [DATE] and each calendar year thereafter) in such manner as the Code or applicable Treasury regulations may prescribe. The Trustee shall sign all tax information returns filed pursuant to this Section 7.02 and any other 84 returns as may be required by the Code, and in doing so shall rely entirely upon, and shall have no liability for information provided by, or calculations provided by, the Servicer. The Servicer is hereby designated as the "tax matters person" (within the meaning of Treas. Reg. ss.1.860F-4(d)) for the Trust Fund. Any Holder of a Class A-R Certificate will by acceptance thereof so appoint the Servicer as agent and attorney-in-fact for the purpose of acting as tax matters person. In the event that the Code or applicable Treasury Regulations prohibit the Trustee from signing tax or information returns or other statements, or the Servicer from acting as tax matters person (as an agent or otherwise), the Trustee or the Servicer, as the case may be, shall take whatever action that in its sole good faith judgment is necessary for the proper filing of such information returns or for the provision of a tax matters person, including designation of the Holder of a Class A-R Certificate to sign such returns or act as tax matters person. Each Holder of a Class A-R Certificate shall be bound by this Section 7.02 by virtue of its acceptance of a Class A-R Certificate. [End of Article VII] 85 ARTICLE VIII THE DEPOSITOR AND THE SERVICER Section 8.01. Indemnification; Third Party Claims. The Servicer agrees to indemnify the Depositor and the Trustee and hold the Depositor and the Trustee, their officers, directors, employees and agents harmless against any and all claims, losses, penalties, fines, forfeitures, legal fees and related costs, judgments, and any other costs, fees and expenses that the Depositor or the Trustee may sustain in any way related to failure of the Servicer to perform its duties and service the Mortgage Loans in compliance with the terms of this Agreement; provided that no such indemnification shall be required with respect to acts of a prior Servicer. The Servicer shall immediately notify the Depositor and the Trustee if a claim is made by a third party with respect to this Agreement or the Mortgage Loans, assume (with the consent of the Depositor and the Trustee) the defense of any such claim and pay all expenses in connection therewith, including counsel fees, and promptly pay, discharge and satisfy any judgment or decree which may be entered against it, the Depositor or the Trustee in respect of such claim. This right to indemnification shall survive the termination of this Agreement. Section 8.02. Merger or Consolidation of the Depositor or the Servicer. The Depositor and the Servicer will each keep in full effect its existence, rights and franchises as a corporation, and will obtain and preserve its qualification to do business as a foreign corporation in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Agreement, the Certificates or any of the Mortgage Loans and to perform its duties under this Agreement. The Servicer will not sell all or substantially all of its assets without the prior written consent of the Depositor and the Trustee. Any person into which the Depositor or the Servicer may be merged or consolidated, or to whom the Depositor or the Servicer has sold substantially all of its assets, or any corporation resulting from any merger, conversion or consolidation to which the Depositor or the Servicer shall be a party, or any Person succeeding to the business of the Depositor or the Servicer, shall be the successor of the Depositor or the Servicer 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 Servicer shall satisfy the requirements of Section 8.05 with respect to the qualifications of a successor to the Servicer. Notwithstanding anything else in this Section 8.02 and Section 8.04 to the contrary, the Servicer may assign its rights and delegate its duties and obligations under this Agreement; provided that the Person accepting such assignment or delegation shall be a Person which is qualified to service mortgage loans on behalf of FNMA or FHLMC, is approved in advance in writing by the Trustee and the Depositor, is willing to service the Mortgage Loans and executes and delivers to the Depositor and the Trustee an agreement, in form and substance reasonably satisfactory to the Depositor and the Trustee, which contains an assumption by such 86 Person of the due and punctual performance and observance of each covenant and condition to be performed or observed by the Servicer under this Agreement; provided further that each Rating Agency's rating of any of the Classes of Certificates that have been rated in effect immediately prior to such assignment and delegation will not be qualified or reduced or withdrawn as a result of such assignment and delegation. In the case of any such assignment and delegation, the Servicer shall be released from its obligations as Servicer under this Agreement, except that the Servicer shall remain liable for all liabilities and obligations incurred by it as Servicer hereunder prior to the satisfaction of the conditions to such assignment and delegation set forth in the next preceding sentence. Section 8.03. Limitation on Liability of the Depositor, the Servicer, the Trustee and Others. Neither the Depositor, the Servicer nor any of the directors, officers, employees or agents of the Depositor or the Servicer shall be under any liability to the Trustee or the Certificateholders for any action taken, or for refraining from the taking of any action, in good faith pursuant to this Agreement, or for errors in judgment; provided, however, that this provision shall not protect the Depositor or the Servicer against any breach of warranties or representations made herein, or failure to perform its obligations in strict compliance with this Agreement, or any liability which would otherwise be imposed by reason of any breach of the terms and conditions of this Agreement. The Depositor, the Servicer, the Trustee, and any director, officer, employee or agent of the Depositor, the Servicer or the Trustee 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. Neither the Depositor, the Trustee nor the Servicer shall be under any obligation to appear in, prosecute or defend any legal action which is not incidental to its respective duties to service the Mortgage Loans in accordance with this Agreement and which in its opinion may cause it to incur any expenses or liability; provided, however, that the Depositor, the Trustee or the Servicer may in its discretion (and, in the case of the Depositor or the Servicer, with the consent of the Trustee, which consent shall not be unreasonably withheld) undertake any such action which it may deem necessary or desirable with respect to this Agreement and the rights and duties of the parties hereto. In such event, the legal expenses and costs of such action and any liability resulting therefrom shall be expenses, costs and liabilities payable from the Collection Account and the Depositor, the Servicer or the Trustee shall be entitled to be reimbursed therefor out of the Collection Account as provided by Section 4.06; provided that no such right of reimbursement shall exist with respect to the Servicer when such claim relates to the failure of the Servicer to service the Mortgage Loans in strict compliance with the terms of this Agreement or to a breach of a representation or warranty made by the Servicer hereunder. Section 8.04. Depositor and Servicer Not to Resign. Except as described in Section 8.02, neither the Depositor nor the Servicer shall assign this Agreement or resign from the obligations and duties hereby imposed on it except by mutual consent of the Depositor, the Servicer and all of the Certificateholders unless the determination is made that its duties hereunder are no longer permissible under applicable law and such incapacity cannot be cured by the Depositor or the Servicer. Any such determination permitting the resignation of the 87 Depositor or the Servicer shall be evidenced by an opinion of independent counsel to such effect delivered to the Trustee which opinion of counsel shall be in form and substance acceptable to the Trustee. Upon any such assignment or resignation, the Depositor or the Servicer, as appropriate, shall send notice to all Certificateholders of the effect of such assignment or resignation upon the then current rating of the Class of Certificates by each Rating Agency whose rating on such Class is then in effect. No such resignation shall become effective until a successor shall have assumed the Depositor's or the Servicer's responsibilities and obligations hereunder in the manner provided in Section 8.05. Any purported assignment or resignation which does not comply with the requirements of this Section shall be of no effect. Section 8.05. Successor to the Servicer. In connection with the termination of the Servicer's responsibilities and duties under this Agreement pursuant to Section 8.04 or 9.01, the Trustee shall (i) succeed to and assume all of the Servicer's responsibilities, rights, duties and obligations as Servicer (but not in any other capacity) under this Agreement (except that the Trustee shall not be obligated to make Advances if prohibited by applicable law nor to effectuate repurchases or substitutions of Mortgage Loans pursuant to Section 2.02 and except that the Trustee makes no representations and warranties pursuant to Sections 3.01 and 3.02). Prior to the termination of the Servicer's responsibilities, duties and liabilities under this Agreement, the Trustee may appoint a successor having a net worth of not less than $15,000,000 and which is a FNMA or FHLMC approved seller/servicer in good standing and which shall succeed to all rights and assume all of the responsibilities, duties and liabilities of the Servicer under this Agreement, except as aforesaid, if the Trustee receives a letter from each Rating Agency that such appointment would not result in a reduction or withdrawal of the current rating of any Class of Certificates that is rated by a Rating Agency. Any co-trustee appointed pursuant to Section 10.10 for purposes of this Section 8.05 shall have an obligation to make Advances pursuant to Section 6.03 during such time as the Trustee is the Servicer, which obligation shall be joint and several with that of the Trustee as Servicer. If the Trustee has become the successor to the Servicer in accordance with this Section or Section 9.03, then notwithstanding the above, the Trustee may, if it shall be unwilling to so act, or shall, if it is unable to so act, appoint, or petition a court of competent jurisdiction to appoint, any established housing and home finance institution having a net worth of not less than $15,000,000 and which is a FNMA or FHLMC approved seller/servicer in good standing as the successor to the Servicer hereunder in the assumption of all of the responsibilities, duties or liabilities of the Servicer hereunder. In connection with any 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 or such court shall determine; provided, however, that no such compensation shall be in excess of that permitted under this Agreement without the consent of all of the Certificateholders. If the Servicer's duties, responsibilities and liabilities under this Agreement should be terminated pursuant to Section 8.02, 8.04 or 9.01, the Servicer shall discharge such duties and responsibilities during the period from the date it acquires knowledge of such termination until the effective date thereof with the same degree of diligence and prudence which it is obligated to exercise under this Agreement, and shall take no action whatsoever that might impair or prejudice the rights or financial condition of its successor or the 88 Trust Fund. The resignation or removal of the Servicer pursuant to Section 8.02, 8.04 or 9.01 shall not become effective until a successor shall be appointed pursuant to this Section and shall in no event relieve the Servicer of liability for breach of the representations and warranties made pursuant to Section 3.03. Any successor appointed as provided herein shall execute, acknowledge and deliver to the Servicer and to the Trustee an instrument accepting such appointment, whereupon such successor shall become fully vested with all the rights, powers, duties, responsibilities, obligations and liabilities of the Servicer, with like effect as if originally named as a party to this Agreement and the Certificates. Any termination or resignation of the Servicer or this Agreement pursuant to Section 8.02, 8.04, 9.01 or 11.01 shall not affect any claims that the Trustee may have against the Servicer for events or actions taken or not taken by the Servicer arising prior to any such termination or resignation. The Servicer shall timely deliver to the successor the funds that were, or were required to be, in the Collection Account and the Escrow Account, if any, and all Mortgage Files and related documents, statements and recordkeeping held by it hereunder and the Servicer shall account for all funds and shall execute and deliver such instruments and do such other things as may reasonably be required to more fully and definitely vest and confirm in the successor all such rights, powers, duties, responsibilities, obligations and liabilities of the Servicer. Upon a successor's acceptance of appointment as such, the Servicer shall notify, in writing, the Trustee, the Certificateholders and each Rating Agency of such appointment. Section 8.06. Maintenance of Ratings. The Servicer shall cooperate with the Depositor and take any action that may be reasonably necessary to maintain the current rating or ratings on the Certificates. [End of Article VIII] 89 ARTICLE IX DEFAULT Section 9.01. Events of Default. If one or more of the following Events of Default shall occur and be continuing, that is to say: (i) any failure by the Servicer to remit any payment required to be made or distributed under the terms of this Agreement which continues unremedied for a period of three Business Days after the date upon which written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer by the Trustee or the Depositor or to the Servicer, the Trustee and the Depositor by the Holders of Certificates of any Class evidencing, as to such Class, Percentage Interests aggregating not less than 25%; or (ii) a breach by the Servicer in a material respect of any representation or warranty set forth in Section 3.02, or failure on the part of the Servicer duly to observe or perform in any material respect any other of the covenants or agreements on the part of the Servicer set forth in this Agreement, which continues unremedied for a period of 60 days after the date on which written notice of such breach or failure, requiring the same to be remedied, shall have been given to the Servicer by the Trustee or the Depositor or to the Servicer, the Trustee and the Depositor by the Holders of Certificates of any Class evidencing, as to such Class, Percentage Interests aggregating not less than 25%; or (iii) the Servicer shall notify the Trustee in writing that it is unable to make an Advance required to be made in accordance with Section 6.03; or; (iv) a decree or order of a court or agency or supervisory authority having jurisdiction for the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Servicer and such decree or order shall have remained in force undischarged or unstayed for a period of 60 days; or (v) the Servicer shall consent to the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to the Servicer or of or relating to all or substantially all of the Servicer's property; or (vi) the Servicer shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency or reorganization statute, make an assignment for the benefit of its creditors, or voluntarily suspend payment of its obligations. 90 then, and in each and every such case, so long as an Event of Default shall not have been remedied, the Trustee shall notify the Certificateholders and each Rating Agency of such Event of Default. The Trustee may, and at the written direction of the Holders of Certificates evidencing Percentage Interests aggregating more than 50%, shall, by notice in writing to the Servicer, terminate all the rights and obligations of the Servicer under this Agreement and in and to the Mortgage Loans and the proceeds thereof. On or after the receipt by the Servicer of such written notice, all authority and power of the Servicer under this Agreement, whether with respect to the Mortgage Loans or otherwise, shall pass to and be vested in the successor appointed pursuant to Section 8.05. Upon written request from the Trustee, the Servicer shall prepare, execute and deliver, any and all documents and other instruments, place in such successor's possession all Mortgage Files, and 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, at the Servicer's sole expense. The Servicer agrees to cooperate with the Trustee and any co-trustee in effecting the termination of the Servicer's responsibilities and rights hereunder, including, without limitation, the transfer to such successor for administration by it of all cash amounts which shall at the time be credited or should have been credited by the Servicer to the Collection Account or Escrow Account or thereafter received with respect to the Mortgage Loans. The Trustee will have no obligation to take any action or institute, conduct or defend any litigation under this Agreement at the request, order or direction of any of the Holders of Certificates unless such Certificateholders have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which the Trustee may incur. Section 9.02. Waiver of Defaults. The Trustee may waive any default by the Servicer in the performance of its obligations hereunder and its consequences, except that a default in the making of any required distribution on any of the Certificates may only be waived by the holders of a majority of the Percentage Interests of the affected Certificateholders. Upon any such waiver of a past default, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been remedied for every purpose of this Agreement. No such waiver shall extend to any subsequent or other default or impair any right consequent thereon except to the extent expressly so waived. Section 9.03. Trustee to Act; Appointment of Successor. On and after the time the Servicer receives a notice of termination pursuant to Section 9.01, the Trustee or its appointed agent shall be the successor in all respects to the Servicer to the extent provided in Section 8.05. Section 9.04. Notification to Certificateholders and the Rating Agencies. (a) Upon any such termination pursuant to Section 9.01, the Trustee shall give prompt written notice thereof to Certificateholders at their respective addresses appearing in the Certificate Register and to each Rating Agency. 91 (b) Within 60 days of a Responsible Officer of the Trustee having received written notice of the occurrence of any Event of Default, the Trustee shall transmit by mail to all Holders of Certificates notice of each such Event of Default hereunder known to the Trustee, unless such Event of Default shall have been cured or waived. [End of Article IX] 92 ARTICLE X CONCERNING THE TRUSTEE Section 10.01. Duties of Trustee. The Trustee, prior to the occurrence of an Event of Default and after the curing of all Events of Default which may have occurred, undertakes to, and is empowered to, perform such duties and only such duties as are specifically set forth in this Agreement. Any permissive right of the Trustee as enumerated in this Agreement shall not be construed as a duty; provided that in case an Event of Default has occurred (which has not been cured), 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 man would exercise or use under the circumstances in the conduct of such man's own affairs. 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, and, if the Trustee is acting as the successor Servicer pursuant to Section 8.05 or 9.03, its own willful misconduct with respect to its servicing obligations; provided, however, that: (i) Prior to the occurrence of an Event of Default, and after the curing of all such Events of Default which may have occurred, the duties and obligations of the Trustee shall be determined solely by the express provisions of this Agreement, the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Agreement, no implied covenants or obligations shall be read into this Agreement against the Trustee and, in the absence of bad faith on the part of the Trustee, 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; (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 proved that the Trustee was negligent in ascertaining the pertinent facts; and (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 Certificateholders of any Class holding Certificates which evidence, as to such Class, Percentage Interests aggregating not less than 25% as 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. Section 10.02. Certain Matters Affecting the Trustee. Except as otherwise provided in Section 10.01: 93 (a) The Trustee may 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; (b) The Trustee may consult with counsel, and any advice or 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 advice or Opinion of Counsel; (c) The Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Agreement or to institute, conduct or defend any litigation hereunder or in relation hereto at the request, order or direction of any of the Certificateholders, pursuant to the provisions of this Agreement, unless such Certificateholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby; nothing contained herein shall, however, relieve the Trustee of the obligation, upon the occurrence of an Event of Default (which has not been cured), to exercise such of the rights and powers vested in it by this Agreement, and to use the same degree of care and skill in their exercise as a prudent man would exercise or use under the circumstances in the conduct of such man's own affairs; (d) Neither the Trustee nor any of its directors, officers, employees or agents shall be personally liable for any action taken, suffered or omitted by it in good faith and believed by it or any of them to be authorized or within the discretion or rights or powers conferred upon the Trustee by this Agreement; (e) Prior to the occurrence of an Event of Default hereunder and after the curing of all Events of Default which may have occurred, the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond or other paper or document, unless requested in writing to do so by Holders of Certificates of any Class evidencing, as to such Class, Percentage Interests aggregating not less than 25% (in the case of conflicting requests by two or more 25% or greater Percentage Interests, the Trustee shall act in accordance with the first such request); provided, however, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Agreement, the Trustee may require reasonable indemnity against such expense or liability as a condition to such proceeding. The reasonable expense of every such examination shall be paid by the Servicer, if an Event of Default 94 shall have occurred and is continuing, and otherwise by the Certificateholder requesting the investigation; (f) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, subcontractors or attorneys; and (g) Nothing in this Agreement shall be construed to require the Trustee (acting in its capacity as Trustee) to expend its own funds. Section 10.03. Trustee Not Liable for Certificates or Mortgage Loans. The recitals contained herein and in the Certificates (other than the authentication of the Certificates by an authorized signatory of the Trustee) shall be taken as the statements of the Depositor or the Servicer, as the case may be, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations or warranties as to the validity or sufficiency of this Agreement or of the Certificates (except that (except as set forth herein) the Certificates shall be duly and validly executed and authenticated by it) or of any Mortgage Loan or related document. The Trustee shall not be accountable for the use or application by the Depositor or the Servicer of any of the Certificates or of the proceeds of such Certificates, or for the use or application of any funds paid to the Depositor or the Servicer in respect of the Mortgage Loans or deposited in or withdrawn from the Collection Account by the Depositor or the Servicer. The Trustee, in its capacity as trustee hereunder, shall have no responsibility for the timeliness or the amount of payments made by the Paying Agent to the Certificateholders. Section 10.04. 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 it would have if it were not Trustee. Section 10.05. Fees and Expenses. The Servicer covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, reasonable compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) for all services rendered by it in the execution of the trust hereby created and in the exercise and performance of any of the powers and duties hereunder of the Trustee, and the Servicer will pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Agreement (including the reasonable compensation and the expenses and disbursements of its counsel and of all persons not regularly in its employ, and the expenses incurred by the Trustee in connection with the appointment of an office or agency pursuant to Section 10.11) except any such expense, disbursement or advance as may arise from its negligence or bad faith. Notwithstanding anything to the contrary in this Agreement, this Section shall survive the termination of this Agreement. 95 Section 10.06. Eligibility Requirements for Trustee. The Trustee hereunder shall at all times be an entity having its principal office in a state and city acceptable to the Depositor and organized and doing business under the laws of such 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 and subject to supervision or examination by federal or state authority. The Trustee shall not be an affiliate of either Seller or the Depositor. If such entity 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, the combined capital and surplus of such corporation 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, the Trustee shall resign immediately in the manner and with the effect specified in Section 10.07. Section 10.07. Resignation and Removal of the Trustee. The Trustee, and any co-trustee may at any time resign and be discharged from the trusts hereby created by giving written notice thereof to the Depositor, the Servicer and each Rating Agency. Upon receiving such notice of resignation, the Depositor shall promptly appoint a successor trustee or co-trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee; provided that such appointment does not result in a reduction or withdrawal of the rating of any of the Classes of Certificates that have been rated. If no successor trustee shall have been so appointed and have accepted appointment within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee. If at any time, the Trustee shall cease to be eligible in accordance with the provisions of Section 10.06 and shall fail to resign after written request therefor by the Depositor, or if at any time the Trustee shall become incapable of acting, or shall be adjudged 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, then the Depositor may remove the Trustee and appoint a successor trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee. The Holders of Certificates evidencing in the aggregate more than 50% of Percentage Interest 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 to the Depositor, one complete set to the Trustee so removed and one complete set to the successor so appointed. Any resignation or removal of the Trustee or any resignation of any co-trustee and appointment of a successor trustee or co-trustee pursuant to any of the provisions of this Section shall become effective upon acceptance of appointment by the successor trustee as provided in Section 10.08, or upon acceptance of appointment by a co-trustee, as applicable, unless with 96 respect to a co-trustee, the Trustee receives written notice from each Rating Agency that the failure to appoint a successor co-trustee would not result in a withdrawal or reduction of the rating of any of the Classes of Certificates that have been rated, in which case the resignation of any co-trustee shall be effective upon receipt of such written notice. Any co-trustee may not be removed unless the Depositor and the Trustee each receive written notice from each Rating Agency that such removal would not result in a withdrawal or reduction of the rating of any of the Classes of Certificates that have been rated, in which case the removal of any co-trustee shall be effective upon receipt of such written notice. Section 10.08. Successor Trustee. Any successor trustee appointed as provided in Section 10.07 shall execute, acknowledge and deliver to the Depositor and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee shall become effective, and such successor 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 predecessor trustee shall deliver to the successor trustee all Mortgage Files and related documents and statements held by it hereunder, and the Depositor, the Servicer and the predecessor trustee shall execute and deliver such instruments and do such other things as may reasonably be required for more fully and certainly vesting and confirming in the successor trustee all such rights, powers, duties and obligations. No successor trustee shall accept appointment as provided in this Section unless at the time of such acceptance such successor trustee shall be eligible under the provisions of Section 10.06. Prior to the appointment of any successor trustee becoming effective, the Depositor shall have received from each Rating Agency written confirmation that such appointment would not result in a reduction of the rating of the Class A or Class M Certificates. Upon acceptance of appointment by a successor trustee as provided in this Section, the Depositor shall mail notice of the succession of such trustee hereunder to all Holders of Certificates at their addresses as shown in the Certificate Register, to the Servicer, any Sub-Servicer and to each Rating Agency. 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 10.09. Merger or Consolidation of Trustee. Any entity into which the Trustee may be merged or converted or with which it may be consolidated or any entity resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any entity succeeding to the business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be eligible under the provisions of Section 10.06, 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. 97 Section 10.10. Appointment of Co-Trustee or Separate Trustee. 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 the same may at the time be located, the Depositor and the Trustee acting jointly shall have the power and shall execute and deliver all instruments to appoint one or more Persons approved by the Trustee to act as co-trustee or co-trustees, jointly with the Trustee, of any part of the Trust Fund, and to vest in such Person or Persons, in such capacity, such title to the Trust Fund, or any part thereof, and, subject to the other provisions of this Section 10.10, such powers, duties, obligations, rights and trusts as the Depositor and the Trustee may consider necessary or desirable. If the Depositor shall not have joined in such appointment within 15 days after the receipt by it of a request so to do, or in case an Event of Default shall have occurred and be continuing, the Trustee 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 10.06, hereunder, and no notice to Holders of Certificates of the appointment of co-trustee(s) or separate trustee(s) shall be required under Section 10.08 hereof. In the case of any appointment of a co-trustee or separate trustee pursuant to this Section 10.10, 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 and severally, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed (whether as Trustee hereunder or as successor to the Servicer hereunder), the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust Fund or any portion thereof in any such jurisdiction) shall be exercised and performed by such separate trustee or co-trustee at the direction of the Trustee. Every instrument appointing any separate trustee or co-trustee shall refer to this Agreement and the conditions of this Article X. 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. 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. Section 10.11. Appointment of Office or Agency. The Trustee may appoint an office or agency in The City of New York where Certificates may be surrendered for registration of transfer or exchange. The Trustee will maintain an office at the address stated in Section 12.07 hereof where notices and demands to or upon the Trustee in respect of the Certificates may be served. [End of Article X] 98 ARTICLE XI TERMINATION Section 11.01. Termination. The respective obligations and responsibilities of the Depositor, the Servicer (except the duty to pay the Trustee's fees and expenses and indemnification hereunder) and the Trustee shall terminate upon (i) the later of the final payment or other liquidation (or any Advance with respect thereto) of the last Mortgage Loan or the disposition of all property acquired upon foreclosure or deed in lieu of foreclosure of any Mortgage Loan and the remittance of all funds due hereunder; or (ii) at the option of the Servicer, on any Distribution Date which occurs in the month next following a Due Date on which the aggregate unpaid Principal Balance of all Outstanding Mortgage Loans is less than 10% of the aggregate unpaid Principal Balance of the Mortgage Loans on the Cut-off Date, so long as the Servicer deposits or causes to be deposited in the Collection Account during the Principal Prepayment Period related to such Distribution Date (and provides notice to the Trustee of its intention to so deposit on or before the 20th day of such Principal Prepayment Period) an amount equal to the Purchase Price for each Outstanding Mortgage Loan, less any unreimbursed Advances made with respect to any Mortgage Loan (which amount shall offset completely any unreimbursed Advances for which the Servicer is otherwise entitled to reimbursement), and, with respect to all property acquired in respect of any Mortgage Loan remaining in the Trust Fund, an amount equal to the fair market value of such property, as determined by an appraisal to be conducted by an appraiser selected by the Trustee, less unreimbursed Advances made with respect to any Mortgage Loan with respect to which property has been acquired; provided, however, that in no event shall the trust created hereby continue beyond the expiration of 21 years from the death of the last survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James's, living on the date hereof. Notwithstanding the foregoing, a termination may be effected by the making of such optional repurchases only if the termination of the Trust Fund satisfies the requirement for a "qualified liquidation" of the Trust Fund within the meaning of Section 860F(a)(4) of the Code and that the purchases of the Outstanding Mortgage Loans pursuant to the Section 11.01 will not constitute "prohibited transactions" within the meaning of Section 860F(a)(2) of the Code. Notice of any termination, specifying the Distribution Date upon which all Certificateholders may surrender their Certificates to the Trustee or, if a Paying Agent has been appointed pursuant to Section 4.05, the Paying Agent for payment and cancellation, shall be given promptly by the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, (upon direction by the Depositor 10 days prior to the date such notice is to be mailed) by signed letter to Certificateholders and each Rating Agency mailed no later than the 25th day of the month preceding the month of such final distribution specifying (i) the Distribution Date upon which final payment on the Certificates will be made upon presentation and surrender of Certificates at the office or agency of the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, therein designated and (ii) that the Record Date otherwise applicable to such Distribution Date is not applicable, payments being made only upon 99 presentation and surrender of the Certificates at the office or agency of the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, therein specified. The Servicer shall indicate the date of adoption of the plan of qualified liquidation in a statement attached to the final federal income tax return of the Trust Fund. After giving such notice, the Trustee or if a Paying Agent has been appointed under Section 4.05, the Paying Agent shall not register the transfer or exchange of any Certificates. If such notice is given in connection with the Servicer's election to purchase the Outstanding Mortgage Loans, the Servicer shall deposit in the Collection Account after adoption of the plan during the applicable Principal Prepayment Period an amount equal to the purchase price as determined as provided in clause (ii) of the preceding paragraph and on the Distribution Date on which such termination is to occur, Certificateholders will be entitled to the amount of such purchase price but not amounts in excess thereof, all as provided herein. Upon presentation and surrender of the Certificates, the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, shall notify the Servicer and the Servicer shall cause to be distributed to Certificateholders an amount equal to (a) the amount otherwise distributable on such Distribution Date, if not in connection with a purchase; or (b) if the Servicer elected to so purchase, the purchase price determined as provided in clause (ii) of the preceding paragraph. Following such final deposit the Trustee shall promptly release to the Servicer the Mortgage Files for the remaining Mortgage Loans, and the Trustee shall execute all assignments, endorsements and other instruments necessary to effectuate such transfer and shall have no further responsibility with regard to said Mortgage Files. If all of the Certificateholders shall not surrender their Certificates for cancellation within three months after the time specified in the above-mentioned written notice, at the close of the 90 day period beginning after the written notice is given, each remaining Certificateholder will be credited with an amount that would have been otherwise distributed to such Certificateholder, and the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, 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 three months after the second notice all the Certificates shall not have been surrendered for cancellation, the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, shall appoint an agent to take appropriate and reasonable 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 in the Trust Fund hereunder. [End of Article XI] 100 ARTICLE XII MISCELLANEOUS PROVISIONS Section 12.01. 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. Section 12.02. Limitation on Rights of Certificateholders. The death or incapacity of any Certificateholder shall not operate to terminate this Agreement or the Trust Fund, nor entitle such Certificateholder's legal representatives or heirs to claim an accounting or to take any action or proceeding in any court for a partition or winding-up of the Trust Fund, nor 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 expressly 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 person 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 of any provision 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 default and of the continuance thereof, as hereinbefore provided, and the Holders of Certificates of any Class evidencing in the aggregate not less than 25% of the Percentage Interests of such Class shall have made written request upon the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder (in the case of conflicting requests by two or more 25% or greater Percentage Interests, the Trustee shall act in accordance with the first such request) and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee, for 60 days after its receipt of such notice, request and offer of indemnity, shall have neglected or refused to institute any such action, suit or proceeding; it being understood and intended, and being expressly covenanted by each Certificateholder with every other Certificateholder and the Trustee, that no one or more Holders of Certificates of any Class shall have any right in any manner whatever by virtue of any provision of this Agreement to affect, disturb or prejudice the rights of the Holders of any other of such Certificates of such Class or any other Class, 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 Certificateholders of such Class or all Classes, as the case may be. 101 For the protection and enforcement of the provisions of this Section, each and every Certificateholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. Section 12.03. Amendment. This Agreement may be amended from time to time by the Depositor, the Servicer and the Trustee, without the consent of any of the Certificateholders, to cure any ambiguity, to correct or supplement any provisions herein which may be inconsistent with any other provisions herein, to ensure continuing treatment of the Trust Fund as a REMIC to avoid or minimize the risk of imposition of any tax on the Trust Fund pursuant to the Code, or to make any other provisions with respect to matters or questions arising under this Agreement which shall not be materially inconsistent with the provisions of this Agreement, provided that such actions shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of any Certificateholder of a Class having an Outstanding Certificate Principal Balance of greater than zero or cause the Trust Fund to fail to qualify as a REMIC. This Agreement may also be amended from time to time by the Depositor, the Servicer and the Trustee with the consent of the Holders of Certificates evidencing in the aggregate not less than 66-2/3% of the Percentage Interest of each Class of Certificates having an Outstanding Certificate Principal Balance greater than zero and affected thereby for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Holders of Certificates of such Class; provided, however, that no such amendment shall (i) reduce in any manner the amount of, or delay the timing of, payments received on Mortgage Loans which are required to be distributed on any Certificate without the consent of the Holder of such Certificate, (ii) reduce the aforesaid percentage of Certificates of any class the Holders of which are required to consent to any such amendment or (iii) change the percentage specified in clause (ii) of the first paragraph of Section 11.01, without the consent of the Holders of all Certificates of such Class then outstanding. Promptly after the execution of any such amendment the Trustee shall furnish written notification of the substance of such amendment to each Certificateholder and each Rating Agency. It shall not be necessary for the consent of Certificateholders under this Section 12.03 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. Section 12.04. Counterparts. This Agreement may be executed 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. 102 Section 12.05. Duration of Agreement. This Agreement shall continue in existence and effect until terminated as herein provided. Section 12.06. Governing Law. This Agreement shall be construed in accordance with the laws of the State of New York and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws. Section 12.07. Notices. All demands, notices and communications hereunder shall be in writing and shall be deemed to have been duly given if personally delivered at or mailed by first class or registered mail, postage prepaid, to (i) in the case of the Depositor, Chase Manhattan Acceptance Corporation, 300 Tice Boulevard, 3rd Floor North, Woodcliff Lake, New Jersey 07675, Attention: Structured Finance, (ii) in the case of the Servicer, Chase Manhattan Mortgage Corporation, 3415 Vision Drive, Columbus, Ohio 43219, Attention: Investor Accounting (with a copy to Chase Manhattan Mortgage Corporation, 343 Thornall Street, Edison, New Jersey 08837, Attention: Structured Finance), (iii) in the case of the Trustee, [TRUSTEE], [ADDRESS], Attention: Corporate Trust Department, (iv) in the case of [Rating Agency], [ADDRESS], (v) in the case of [Rating Agency], [ADDRESS], and (vi) in the case of any of the foregoing persons, such other addresses as may hereafter be furnished by any such persons to the other parties to this Agreement. [End of Article XII] 103 IN WITNESS WHEREOF, the Depositor, the Servicer and the Trustee have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the day and year first above written. CHASE MORTGAGE FINANCE CORPORATION By:________________________________ Name: Title: CHASE MANHATTAN MORTGAGE CORPORATION By:________________________________ Name: Title: [TRUSTEE], as Trustee By:________________________________ Name: Title: 104 EXHIBIT A MORTGAGE LOAN SCHEDULE EXHIBIT B CONTENTS OF MORTGAGE FILE (A) (I) Original Mortgage Note (or a lost note affidavit (including a copy of the original Mortgage Note)) or (II) original Consolidation, Extension and Modification Agreement (or a lost note affidavit (including a copy of the original Consolidation, Extension and Modification Agreement), in either case endorsed, "Pay to the order of [TRUSTEE], as trustee, without recourse." (B) The original Mortgage (including all riders thereto) with evidence of recording thereon, or a copy thereof certified by the public recording office in which such mortgage has been recorded or, if the original Mortgage has not been returned from the applicable public recording office, a true certified copy, certified by the Seller, of the original Mortgage together with a certificate of the Seller certifying that the original Mortgage has been delivered for recording in the appropriate public recording office of the jurisdiction in which the Mortgaged Property is located. (C) The original Assignment of Mortgage to "[TRUSTEE], as trustee," which assignment shall be in form and substance acceptable for recording, or a copy certified by the Seller as a true and correct copy of the original Assignment which has been sent for recordation. Subject to the foregoing, such assignments may, if permitted by law, be by blanket assignments for Mortgage Loans covering Mortgaged Properties situated within the same county. If the Assignment of Mortgage is in blanket form, a copy of the Assignment of Mortgage shall be included in the related individual Mortgage File. (D) The original policy of title insurance, including riders and endorsements thereto, or if the policy has not yet been issued, a written commitment or interim binder or preliminary report of title issued by the title insurance or escrow company. (E) Originals of all recorded intervening Assignments of Mortgage, or copies thereof, certified by the public recording office in which such Assignments or Mortgage have been recorded showing a complete chain of title from the originator to the Depositor, with evidence of recording, thereon, or a copy thereof certified by the public recording office in which such Assignment of Mortgage has been recorded or, if the original Assignment of Mortgage has not been returned from the applicable public recording office, a true certified copy, certified by the Seller of the original Assignment of Mortgage together with a certificate of the Seller certifying that the original Assignment of Mortgage has been delivered for recording in the appropriate public recording office of the jurisdiction in which the Mortgaged Property is located. (F) Originals, or copies thereof certified by the public recording office in which such documents have been recorded, of each assumption, extension, modification, written assurance or substitution agreements, if applicable, or if the original of such document has not been returned from the applicable public recording office, a true certified copy, certified by the Seller, of such original document together with certificate of Seller certifying the original of such document has been delivered for recording in the appropriate recording office of the jurisdiction in which the Mortgaged Property is located. (G) If the Mortgaged Note or Mortgage or any other material document or instrument relating to the Mortgaged Loan has been signed by a person on behalf of the Mortgagor, the original power of attorney or other instrument that authorized and empowered such person to sign bearing evidence that such instrument has been recorded, if so required in the appropriate jurisdiction where the Mortgaged Property is located (or, in lieu thereof, a duplicate or conformed copy of such instrument, together with a certificate of receipt from the recording office, certifying that such copy represents a true and complete copy of the original and that such original has been or is currently submitted to be recorded in the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located), or if the original power of attorney or other such instrument has been delivered for recording in the appropriate public recording office of the jurisdiction in which the Mortgaged Property is located. EXHIBIT C FORMS OF CLASS A CERTIFICATES SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN Chase Manhattan Acceptance Corporation, THE SERVICER OR THE TRUSTEE REFERRED TO BELOW OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE, THE REMIC REGULAR INTEREST REPRESENTED HEREBY NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED OR INSURED BY Chase Manhattan Acceptance Corporation, CHASE MANHATTAN MORTGAGE CORPORATION, THE TRUSTEE OR BY ANY OF THEIR AFFILIATES OR BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY. MORTGAGE PASS-THROUGH CERTIFICATE Series [ ] CLASS A-1 Number 98-[ ]-A-1 Original Denomination: $-------------- Cut-off Date: [DATE] Final Scheduled Distribution Date: __________________ First Distribution Date: [DATE] Approximate Aggregate Original Denomination of all Class A-1 Certificate Rate: ___% Certificates: $______________ evidencing an interest in distributions allocable to the Class A-1 Certificates with respect to a pool of conventional one- to four-family mortgage loans formed and sold by Chase Manhattan Acceptance Corporation CUSIP: ______________ Unless this Certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the Trustee for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. This certifies that Cede & Co. is the registered owner of the ownership interest evidenced by this Certificate (obtained by dividing the Original Denomination of this Certificate by the aggregate Original Denomination of all Class A-1 Certificates) in certain monthly distributions with respect to a pool (the "Mortgage Pool") of conventional one- to four-family adjustable rate mortgage loans (the "Mortgage Loans") formed and sold by Chase Manhattan Acceptance Corporation (the "Company"), which Mortgage Loans are secured by Mortgaged Properties, and in certain other property held in trust for the benefit of the Certificate holders (collectively, the "Trust Fund"). The Mortgage Loans are serviced by Chase Manhattan Mortgage Corporation (in such capacity, the "Servicer"). The Trust Fund was created pursuant to a Pooling and Servicing Agreement dated as of [DATE] (the "Agreement") among the Company, the Servicer and [TRUSTEE], as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth below. To the extent not defined herein, the capitalized terms used herein shall have the meanings assigned in the Agreement. This Certificate is one of a duly authorized issue of Certificates, designated as Multi-Class Mortgage Pass-Through Certificates, Series [ ], Class A (the "Class A Certificates") and is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. Also issued under the Agreement are Certificates designated as Multi-Class Mortgage Pass-Through Certificates, Series [ ], Class M (the "Class M Certificates") and Class B (the "Class B Certificates"). The Class A Certificates, the Class M Certificates and the Class B Certificates are collectively referred to as the "Certificates". Pursuant to the terms of the Agreement, the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, will distribute from funds in the Certificate Account the amount as described on the reverse hereof on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (the "Distribution Date"), commencing on [DATE]. Such distributions will be made to the Person in whose name this Certificate is registered at the close of business on the last Business Day of the month preceding the month in which such payment is made, or if such last day is not a Business Day, the Business Day immediately preceding such last day (the "Record Date"). Distributions on this Certificate will be made either by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, or by wire transfer in immediately available funds to the account of such Holder at a bank or other financial or depository institution having appropriate facilities therefor, if such Holder has so notified the Paying Agent in writing at least 10 Business Days prior to the first Distribution Date for which distribution by wire transfer is to be made, and such Holder's Certificates evidence an aggregate original principal balance of not less than $5,000,000 or such Holder holds a 100% Percentage Interest of such Class. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office of the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, or agency appointed by the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, for the purpose and specified in such notice of final distribution. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Authenticating Agent, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Company has caused this Certificate to be duly executed. Dated: [DATE] CHASE MORTGAGE FINANCE CORPORATION By:_______________________ Certificate of Authentication This is one of the Class A-1 Certificates referred to in the within-mentioned Agreement. [TRUSTEE, as Trustee or] THE CHASE MANHATTAN BANK as Authenticating Agent By: __________________________ Authorized Signatory REVERSE OF CERTIFICATE MORTGAGE PASS-THROUGH CERTIFICATE Series [ ] This Certificate is one of a duly authorized issue of Certificates, designated as Multi-Class Mortgage Pass-Through Certificates, Series [ ], issued in ten Classes of Class A Certificates, one Class of Class M Certificates and five Classes of Class B Certificates, each evidencing an interest in certain distributions with respect to a pool of adjustable rate one- to four-family first Mortgage Loans formed and sold by the Company and certain other property conveyed by the Company to the Trustee. The Class A Certificates evidence in the aggregate the Class A Percentage of distributions relating to repayments of principal and interest on such Mortgage Loans. The Class M Certificates evidence in the aggregate the Class M Percentage of distributions relating to repayments of principal and interest on such Mortgage Loans. Following the initial issuance of the Certificates, the Principal Balance of this Certificate will be different from the Original Denomination shown above. Anyone acquiring this Certificate may ascertain its current Principal Balance by inquiry of the Trustee. The Holder, by its acceptance of this Certificate, agrees that it will look solely to the Trust Fund and certain amounts resulting from credit enhancements for payment hereunder and that the Trustee is not liable to the Holders for any amount payable under this Certificate or the Agreement or, except as expressly provided in the Agreement, subject to any liability under the Agreement. This Certificate does not purport to summarize the Agreement and reference is made to the Agreement for the interests, rights and limitations of rights, benefits, obligations and duties evidenced hereby, and the rights, duties and immunities of the Trustee. The Trustee will cause to be kept at its Corporate Trust Office in New York, New York, or at the office of any Paying Agent appointed under the Agreement, a Certificate Register in which, subject to such reasonable regulations as it may prescribe, the Trustee (or any Paying Agent, as the case may be) will provide for the registration of Certificates and of transfers and exchanges of Certificates. Upon surrender for registration of transfer of any Certificate at any office or agency of the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, maintained for such purpose, the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, will, subject to the limitations set forth in the Agreement, authenticate and deliver, in the name of the designated transferee or transferees, a Certificate of a like Class and dated the date of authentication by the Authenticating Agent. No service charge will be made to the Holder for any transfer or exchange of the Certificate, but the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of the Certificate. Prior to due presentation of a Certificate for registration of transfer, the Company, the Servicer, the Paying Agent and the Trustee may treat the person in whose name any Certificate is registered as the owner of such Certificate and the Percentage Interest in the Trust Fund evidenced thereby for the purpose of receiving distributions pursuant to the Agreement and for all other purposes whatsoever, and neither the Company, the Servicer, the Paying Agent nor the Trustee will be affected by notice to the contrary. The Agreement may be amended from time to time by the Company, the Servicer and the Trustee, without the consent of any of the Certificateholders, to cure any ambiguity, to correct or supplement any provisions therein which may be inconsistent with the other provisions therein, to ensure continuing treatment of the Trust Fund as a REMIC, or to make any other provisions with respect to matters or questions arising under the Agreement which are not materially inconsistent with the provisions of the Agreement, provided that such action does not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of any Certificateholder. The Agreement may also be amended from time to time by the Company, the Servicer and the Trustee with the consent of the Holders of Certificates evidencing in the aggregate not less than 66-2/3% of the Percentage Interests of each Class of Certificates affected thereby for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Agreement or of modifying in any manner the rights of the Holders of Certificates of such Class; provided, however, that no such amendment may (i) reduce in any manner the amount of, or delay the timing of, payments received on Mortgage Loans which are required to be distributed on any Certificate without the consent of the Holder of such Certificate, (ii) reduce the aforesaid percentage of Certificates of any Class the Holders of which are required to consent to any such amendment or (iii) change the percentage specified in clause (ii) of the first paragraph of Section 11.01 of the Agreement, without the consent of the Holders of all Certificates of such Class then outstanding. The respective obligations and responsibilities of the Company, the Servicer and the Trustee under the Agreement will terminate upon (i) the later of the final payment or other liquidation (or any Advance with respect thereto) of the last Mortgage Loan or the disposition of all property acquired upon the foreclosure or deed in lieu of foreclosure of any Mortgage Loan and the remittance of all funds due thereunder; or (ii) at the option of the Servicer, on any Distribution Date which occurs in the month following a Due Date on which the aggregate unpaid Principal Balance of the Outstanding Mortgage Loans is less than 10% of the aggregate unpaid Principal Balance of the Mortgage Loans on the Cut-off Date, so long as the Servicer deposits or causes to be deposited in the Collection Account during the Principal Prepayment Period related to such Distribution Date an amount equal to the Purchase Price for each Mortgage Loan, less any unreimbursed Advances made with respect to any Mortgage Loan, and with respect to all property acquired in respect of any Mortgage Loan remaining in the Trust Fund, an amount equal to the fair market value of such property, as determined by an appraisal to be conducted by an appraiser selected by the Trustee, less unreimbursed Advances made with respect to the Mortgage Loan with respect to which property has been acquired; provided, however, that in no event shall the trust created hereby continue beyond the earlier of (i) 32 years after the Closing Date and (ii) the expiration of 21 years from the death of the last survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James's, living on the date hereof. [FORM OF ASSIGNMENT] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto (PLEASE INSERT SOCIAL SECURITY* OR TAXPAYER IDENTIFICATION NUMBER OF ASSIGNEE) - ------------------ - ------------------ - ------------------------------------------------------------- (Please Print or Type Name and Address of Assignee) - ------------------------------------------------------------- the within Certificate, and all rights thereunder, and hereby does irrevocably constitute and appoint __________________________________________________ Attorney to transfer the within Certificate on the books kept for the registration thereof, with full power of substitution in the premises. Dated: (Signature guaranty) _______________________________ NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Certificate in every particular, without alteration or enlargement or any change whatever. (*This information, which is voluntary, is being requested to ensure that the assignee will not be subject to backup withholding under Section 3406 of the Code.) EXHIBIT D FORM OF CLASS M CERTIFICATE THIS CLASS M CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A CERTIFICATES AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN. SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE COMPANY SHALL HAVE RECEIVED EITHER (i) A REPRESENTATION LETTER FROM THE TRANSFEREE OF THIS CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE EITHER (A) IS NOT AN EMPLOYEE BENEFIT PLAN (A "PLAN") WITHIN THE MEANING OF SECTION 406 OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), AND IS NOT DIRECTLY OR INDIRECTLY PURCHASING ANY CERTIFICATE ON BEHALF OF, AS INVESTMENT MANAGER OF, AS NAMED FIDUCIARY OF, AS TRUSTEE OF OR WITH ASSETS OF A PLAN OR, IN THE CASE OF AN INSURANCE COMPANY, THE ASSETS OF ANY SEPARATE ACCOUNTS TO EFFECT SUCH ACQUISITION OR (B) THE SOURCE OF FUNDS FOR THE PURCHASE OF THE CERTIFICATES IS AN "INSURANCE COMPANY GENERAL ACCOUNT" WITHIN THE MEANING OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60"), 60 FED. REG. 35925 (JULY 12, 1995), AND THE CONDITIONS SET FORTH IN SECTION I AND SECTION III OF PTCE 95-60 ARE SATISFIED WITH RESPECT TO THE PURCHASE AND HOLDING OF THE CERTIFICATES, OR (ii) IF THIS CERTIFICATE IS PRESENTED FOR REGISTRATION IN THE NAME OF A PLAN SUBJECT TO TITLE I OF ERISA, OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (OR COMPARABLE PROVISIONS OF ANY SUBSEQUENT ENACTMENTS), OR A TRUSTEE OF ANY SUCH PLAN, OR ANY OTHER PERSON WHO IS USING THE ASSETS OF ANY SUCH PLAN TO EFFECT SUCH ACQUISITION, AN OPINION OF COUNSEL TO THE EFFECT THAT THE PURCHASE OR HOLDING OF THIS CERTIFICATE WILL NOT RESULT IN THE ASSETS OF THE TRUST FUND BEING DEEMED TO BE "PLAN ASSETS" PURSUANT TO THE DEPARTMENT OF LABOR PLAN ASSET REGULATIONS SET FORTH IN 29 C.F.R. ss.2510.3-101 AND TO BE SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF ERISA OR THE PROHIBITED TRANSACTION PROVISIONS OF THE CODE, WILL NOT CONSTITUTE OR RESULT IN A PROHIBITED TRANSACTION WITHIN THE MEANING OF SECTION 406 OR SECTION 407 OF ERISA OR SECTION 4975 OF THE CODE, AND WILL NOT SUBJECT THE TRUSTEE, THE SERVICER, THE COMPANY OR ANY OF THEIR AFFILIATES TO ANY OBLIGATION OR LIABILITY (INCLUDING OBLIGATIONS OR LIABILITIES UNDER ERISA OR SECTION 4975 OF THE CODE) RELATING TO THE CERTIFICATES. THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN Chase Manhattan Acceptance Corporation, THE SERVICER OR THE TRUSTEE REFERRED TO BELOW OR ANY OF THEIR AFFILIATES. NEITHER THIS CERTIFICATE, THE REMIC REGULAR INTEREST REPRESENTED HEREBY NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED OR INSURED BY Chase Manhattan Acceptance Corporation, CHASE MANHATTAN MORTGAGE CORPORATION, THE TRUSTEE OR BY ANY OF THEIR AFFILIATES OR BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY. MORTGAGE PASS-THROUGH CERTIFICATE Series [ ], CLASS M Number 98-[ ]-M-1 Original Denomination $_____________________ Cut-off Date: [DATE] Final Scheduled Distribution Date: _________________ First Distribution Date: [DATE] Approximate Aggregate Original Denomination of all Class M Certificate Rate: ___% Certificates: $_______________ evidencing an interest in distributions allocable to the Class M Certificates with respect to a pool of conventional one- to four-family mortgage loans formed and sold by Chase Manhattan Acceptance Corporation CUSIP: ____________ This certifies that _______________________________ is the registered owner of the ownership interest evidenced by this Certificate (obtained by dividing the Original Denomination of this Certificate by the aggregate Original Denomination of all Class M Certificates) in certain monthly distributions with respect to a pool (the "Mortgage Pool") of conventional one- to four-family adjustable rate mortgage loans (the "Mortgage Loans") formed and sold by Chase Manhattan Acceptance Corporation (the "Company"), which Mortgage Loans are secured by Mortgaged Properties, and in certain other property held in trust for the benefit of the Certificate holders (collectively, the "Trust Fund"). The Mortgage Loans are serviced by Chase Manhattan Mortgage Corporation (in such capacity, the "Servicer"). The Trust Fund was created pursuant to a Pooling and Servicing Agreement dated as of [DATE] (the "Agreement") among the Company, the Servicer and [TRUSTEE], as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth below. To the extent not defined herein, the capitalized terms used herein shall have the meanings assigned in the Agreement. This Certificate is one of a duly authorized issue of Certificates, designated as Multi-Class Mortgage Pass-Through Certificates, Series [ ], Class M (the "Class M Certificates") and is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which such Holder is bound. Also issued under the Agreement are Certificates designated as Multi-Class Mortgage Pass-Through Certificates, Series [ ], Class A (the "Class A Certificates") and Class B (the "Class B Certificates"). The Class A Certificates are senior to, and the Class B Certificates are subordinate to, the Class M Certificates in right of payment to the extent described herein and in the Agreement. The Class A Certificates, Class M Certificates and Class B Certificates are collectively referred to as the "Certificates". Pursuant to the terms of the Agreement, the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, will distribute from funds in the Certificate Account the amount as described on the reverse hereof on the 25th day of each month or, if such 25th day is not a Business Day, the Business Day immediately following (the "Distribution Date"), commencing on [DATE]. Such distributions will be made to the Person in whose name this Certificate is registered at the close of business on the last Business Day of the month preceding the month in which such payment is made, or if such last day is not a Business Day, the Business Day immediately preceding such last day (the "Record Date"). Distributions on this Certificate will be made either by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, or by wire transfer in immediately available funds to the account of such Holder at a bank or other financial or depository institution having appropriate facilities therefor, if such Holder has so notified the Paying Agent in writing at least 10 Business Days prior to the first Distribution Date for which distribution by wire transfer is to be made, and such Holder's Certificates evidence an aggregate original principal balance of not less than $5,000,000 or such Holder holds a 100% Percentage Interest of such Class. Notwithstanding the above, the final distribution on this Certificate will be made after due notice by the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office of the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, or agency appointed by the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, for the purpose and specified in such notice of final distribution. Reference is hereby made to the further provisions of this Certificate set forth on the reverse hereof which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Authenticating Agent, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Company has caused this Certificate to be duly executed. Dated: [DATE] CHASE MORTGAGE FINANCE CORPORATION By: ___________________________ Certificate of Authentication This is one of the Class M Certificates referred to in the within-mentioned Agreement. [TRUSTEE, as Trustee or] THE CHASE MANHATTAN BANK as Authenticating Agent By: _____________________________ Authorized Signatory REVERSE OF CERTIFICATE MORTGAGE PASS-THROUGH CERTIFICATE Series [ ] This Certificate is one of a duly authorized issue of Certificates, designated as Multi-Class Mortgage Pass-Through Certificates, Series [ ], issued in ten Classes of Class A Certificates, one Class of Class M Certificates and five Classes of Class B Certificates, each evidencing an interest in certain distributions with respect to a pool of adjustable rate one- to four-family first Mortgage Loans formed and sold by the Company and certain other property conveyed by the Company to the Trustee. The Class A Certificates evidence in the aggregate the Class A Percentage of distributions relating to repayments of principal and interest on such Mortgage Loans. The Class M Certificates evidence in the aggregate the Class M Percentage of distributions relating to repayments of principal and interest on such Mortgage Loans. Following the initial issuance of the Certificates, the Principal Balance of this Certificate will be different from the Original Denomination shown above. Anyone acquiring this Certificate may ascertain its current Principal Balance by inquiry of the Trustee. The Holder, by its acceptance of this Certificate, agrees that it will look solely to the Trust Fund and certain amounts resulting from credit enhancements for payment hereunder and that the Trustee is not liable to the Holders for any amount payable under this Certificate or the Agreement or, except as expressly provided in the Agreement, subject to any liability under the Agreement. This Certificate does not purport to summarize the Agreement and reference is made to the Agreement for the interests, rights and limitations of rights, benefits, obligations and duties evidenced hereby, and the rights, duties and immunities of the Trustee. The Trustee will cause to be kept at its Corporate Trust Office in New York, New York, or at the office of any Paying Agent appointed under the Agreement, a Certificate Register in which, subject to such reasonable regulations as it may prescribe, the Trustee (or any Paying Agent, as the case may be) will provide for the registration of Certificates and of transfers and exchanges of Certificates. Upon surrender for registration of transfer of any Certificate at any office or agency of the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, maintained for such purpose, the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, will, subject to the limitations set forth in the Agreement, authenticate and deliver, in the name of the designated transferee or transferees, a Certificate of a like Class and dated the date of authentication by the Authenticating Agent. No service charge will be made to the Holder for any transfer or exchange of the Certificate, but the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of the Certificate. Prior to due presentation of a Certificate for registration of transfer, the Company, the Servicer and the Trustee may treat the person in whose name any Certificate is registered as the owner of such Certificate and the Percentage Interest in the Trust Fund evidenced thereby for the purpose of receiving distributions pursuant to the Agreement and for all other purposes whatsoever, and neither the Company, the Servicer, the Paying Agent nor the Trustee will be affected by notice to the contrary. The Agreement may be amended from time to time by the Company, the Servicer and the Trustee, without the consent of any of the Certificateholders, to cure any ambiguity, to correct or supplement any provisions therein which may be inconsistent with the other provisions therein, to ensure continuing treatment of the Trust Fund as a REMIC, or to make any other provisions with respect to matters or questions arising under the Agreement which are not materially inconsistent with the provisions of the Agreement, provided that such action does not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of any Certificateholder. The Agreement may also be amended from time to time by the Company, the Servicer and the Trustee with the consent of the Holders of Certificates evidencing in the aggregate not less than 66-2/3% of the Percentage Interests of each Class of Certificates affected thereby for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Agreement or of modifying in any manner the rights of the Holders of Certificates of such Class; provided, however, that no such amendment may (i) reduce in any manner the amount of, or delay the timing of, payments received on Mortgage Loans which are required to be distributed on any Certificate without the consent of the Holder of such Certificate, (ii) reduce the aforesaid percentage of Certificates of any Class the Holders of which are required to consent to any such amendment or (iii) change the percentage specified in clause (ii) of the first paragraph of Section 11.01 of the Agreement, without the consent of the Holders of all Certificates of such Class then outstanding. The respective obligations and responsibilities of the Company, the Servicer and the Trustee under the Agreement will terminate upon (i) the later of the final payment or other liquidation (or any Advance with respect thereto) of the last Mortgage Loan or the disposition of all property acquired upon the foreclosure or deed in lieu of foreclosure of any Mortgage Loan and the remittance of all funds due thereunder; or (ii) at the option of the Servicer, on any Distribution Date which occurs in the month following a Due Date on which the aggregate unpaid Principal Balance of the Outstanding Mortgage Loans is less than 10% of the aggregate unpaid Principal Balance of the Mortgage Loans on the Cut-off Date, so long as the Servicer deposits or causes to be deposited in the Collection Account during the Principal Prepayment Period related to such Distribution Date an amount equal to the Purchase Price for each Mortgage Loan, less any unreimbursed Advances made with respect to any Mortgage Loan, and with respect to all property acquired in respect of any Mortgage Loan remaining in the Trust Fund, an amount equal to the fair market value of such property, as determined by an appraisal to be conducted by an appraiser selected by the Trustee, less unreimbursed Advances made with respect to the Mortgage Loan with respect to which property has been acquired; provided, however, that in no event shall the trust created hereby continue beyond the earlier of (i) 32 years after the Closing Date and (ii) the expiration of 21 years from the death of the last survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James's, living on the date hereof. [FORM OF ASSIGNMENT] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto (PLEASE INSERT SOCIAL SECURITY* OR TAXPAYER IDENTIFICATION NUMBER OF ASSIGNEE) - ------------------ - ------------------ - ------------------------------------------------------------- (Please Print or Type Name and Address of Assignee) - ------------------------------------------------------------- the within Certificate, and all rights thereunder, and hereby does irrevocably constitute and appoint __________________________________________________ Attorney to transfer the within Certificate on the books kept for the registration thereof, with full power of substitution in the premises. Dated: (Signature guaranty) _______________________________ NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Certificate in every particular, without alteration or enlargement or any change whatever. (*This information, which is voluntary, is being requested to ensure that the assignee will not be subject to backup withholding under Section 3406 of the Code.) EXHIBIT E FORMS OF CLASS B CERTIFICATES THIS CLASS B-1 CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A CERTIFICATES AND THE CLASS M CERTIFICATES AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN. SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. THIS CLASS B-1 CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION UNDER SUCH ACT OR UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 4.02 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN. CLASS B-1 CERTIFICATE Original Denomination $___________________ Aggregate Original Principal Balance of all Class B-1 Certificates: $____________ Cut-off Date: [DATE] Number 98-[ ]-B-1-1 First Distribution Date: [DATE] Certificate Rate: ___% MULTI-CLASS MORTGAGE PASS-THROUGH CERTIFICATE Series [ ] evidencing an ownership interest in distributions allocable to a pool of conventional one- to four-family mortgage loans formed and sold by Chase Manhattan Acceptance Corporation This Certificate does not represent an obligation of or interest in Chase Manhattan Acceptance Corporation ("CMAC" or the "Depositor"), the Servicer or the Trustee referred to below or any of their affiliates. Neither this Certificate, the REMIC regular interest represented hereby nor the underlying Mortgage Loans are guaranteed or insured by CMAC, Chase Manhattan Mortgage Corporation, the Trustee or by any of their affiliates or by any governmental agency or instrumentality. FOLLOWING THE INITIAL ISSUANCE OF THE CERTIFICATES, THE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE DIFFERENT FROM THE ORIGINAL DENOMINATION SHOWN ABOVE. ANYONE ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT PRINCIPAL BALANCE BY INQUIRY OF THE TRUSTEE. NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE COMPANY SHALL HAVE RECEIVED EITHER (i) A REPRESENTATION LETTER FROM THE TRANSFEREE OF THIS CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE EITHER (A) IS NOT AN EMPLOYEE BENEFIT PLAN (A "PLAN") WITHIN THE MEANING OF SECTION 406 OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), AND IS NOT DIRECTLY OR INDIRECTLY PURCHASING ANY CERTIFICATE ON BEHALF OF, AS INVESTMENT MANAGER OF, AS NAMED FIDUCIARY OF, AS TRUSTEE OF OR WITH ASSETS OF A PLAN OR, IN THE CASE OF AN INSURANCE COMPANY, THE ASSETS OF ANY SEPARATE ACCOUNTS TO EFFECT SUCH ACQUISITION OR (B) THE SOURCE OF FUNDS FOR THE PURCHASE OF THE CERTIFICATES IS AN "INSURANCE COMPANY GENERAL ACCOUNT" WITHIN THE MEANING OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60"), 60 FED. REG. 35925 (JULY 12, 1995), AND THE CONDITIONS SET FORTH IN SECTION I AND SECTION III OF PTCE 95-60 ARE SATISFIED WITH RESPECT TO THE PURCHASE AND HOLDING OF THE CERTIFICATES, OR (ii) IF THIS CERTIFICATE IS PRESENTED FOR REGISTRATION IN THE NAME OF A PLAN SUBJECT TO TITLE I OF ERISA, OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (OR COMPARABLE PROVISIONS OF ANY SUBSEQUENT ENACTMENTS), OR A TRUSTEE OF ANY SUCH PLAN, OR ANY OTHER PERSON WHO IS USING THE ASSETS OF ANY SUCH PLAN TO EFFECT SUCH ACQUISITION, AN OPINION OF COUNSEL TO THE EFFECT THAT THE PURCHASE OR HOLDING OF THIS CERTIFICATE WILL NOT RESULT IN THE ASSETS OF THE TRUST FUND BEING DEEMED TO BE "PLAN ASSETS" PURSUANT TO THE DEPARTMENT OF LABOR PLAN ASSET REGULATIONS SET FORTH IN 29 C.F.R. ss.2510.3-101 AND TO BE SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF ERISA OR THE PROHIBITED TRANSACTION PROVISIONS OF THE CODE, WILL NOT CONSTITUTE OR RESULT IN A PROHIBITED TRANSACTION WITHIN THE MEANING OF SECTION 406 OR SECTION 407 OF ERISA OR SECTION 4975 OF THE CODE, AND WILL NOT SUBJECT THE TRUSTEE, THE SERVICER, THE COMPANY OR ANY OF THEIR AFFILIATES TO ANY OBLIGATION OR LIABILITY (INCLUDING OBLIGATIONS OR LIABILITIES UNDER ERISA OR SECTION 4975 OF THE CODE) RELATING TO THE CERTIFICATES. This certifies that _____________________________ is the registered owner of the ownership interest (the "Ownership Interest") evidenced by this Certificate (obtained by dividing the Original Denomination of this Certificate by the aggregate Original Denomination of all Class B-1 Certificates) in certain distributions with respect to a pool of conventional one-to four-family first mortgage loans (the "Mortgage Loans") formed and sold by Chase Manhattan Acceptance Corporation (hereinafter called the "Depositor"), and certain other property held in trust for the benefit of Certificate holders (collectively, the "Trust Fund"). The Mortgage Loans are serviced by Chase Manhattan Mortgage Corporation (the "Servicer") and are secured by first mortgages on Mortgaged Properties. The Trust Fund was created pursuant to a Pooling and Servicing Agreement (the "Agreement"), dated as of [DATE] among the Depositor, the Servicer and [TRUSTEE], as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is one of a duly authorized issue of Certificates, designated as Multi-Class Mortgage Pass-Through Certificates, Series [ ], Class B-1 (the "Class B-1 Certificate") and is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which Agreement such Holder is bound. Distributions on this Certificate will be made either by check mailed to the address of the Person entitled thereto, as such name and address shall appear on the Certificate Register, or by wire transfer in immediately available funds to the account of such Holder at a bank or other financial or depository institution having appropriate facilities therefor, if such Holder has so notified the Paying Agent in writing at least 10 Business Days prior to the first Distribution Date for which distribution by wire transfer is to be made, and such Holder's Certificates evidence an aggregate original principal balance of not less than $5,000,000 or such Holder holds a 100% Percentage Interest of such Class. The rights of the Class B Certificateholders to receive distributions in respect of the Class B Certificates on any Distribution Date are subordinated to the rights of the Class A and Class M Certificateholders and the holders of any Class or Classes of Class B Certificates having a lower numerical class designation to receive distributions in respect of the Class A and Class M Certificates and such Class B Certificates to the extent, and only to the extent, set forth in the Agreement. Amounts properly distributed to the Class B Certificateholders pursuant to the Agreement will be deemed released from the Trust Fund, and the Class B Certificateholders will not in any event be required to refund any such distributed amounts. The final distribution on this Certificate will be made after due notice by the Trustee of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency appointed by the Trustee for that purpose and specified in such notice of final distribution. The Trustee will cause to be kept at its Corporate Trust Office in New York, New York, or at the office of any Paying Agent appointed under the Agreement, a Certificate Register in which, subject to such reasonable regulations as it may prescribe, the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, will provide for the registration of Certificates and of transfers and exchanges of Certificates. Upon surrender for registration of transfer of any Certificate at any office or agency of the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, maintained for such purpose, the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, will, subject to the limitations set forth in the Agreement, authenticate and deliver, in the name of the designated transferee or transferees, a Certificate of a like class and dated the date of authentication by the Authenticating Agent. No service charge will be made to the Holder for any transfer or exchange of the Certificate, but the Trustee may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of the Certificate. Prior to due presentation of a Certificate for registration of transfer, the Depositor, the Servicer, the Paying Agent and the Trustee may treat the person in whose name any Certificate is registered as the owner of such Certificate and the Ownership Interest in the Trust Fund evidenced thereby for the purpose of receiving distributions pursuant to the Agreement and for all other purposes whatsoever, and neither the Depositor, the Servicer nor the Trustee will be affected by notice to the contrary. The Agreement may be amended from time to time by the Depositor, the Servicer and the Trustee, without the consent of any of the Certificateholders, to cure any ambiguity, to correct or supplement any provisions therein, which may be inconsistent with any other provisions therein, to ensure continuing treatment of the Trust Fund or its assets as a REMIC and to avoid the imposition of certain tax liabilities, or to make any other provisions with respect to matters or questions arising under the Agreement which are not materially inconsistent with the provisions of the Agreement, provided that such action does not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of any Certificateholder. The Agreement may also be amended from time to time by the Depositor, the Servicer and the Trustee with the consent of the Holders of Certificates evidencing in the aggregate not less than 66% of the Percentage Interest of each Class of Certificates affected thereby for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Agreement or of modifying in any manner the rights of the Holders of Certificates of such Class; provided, however, that no such amendment may (i) reduce in any manner the amount of, or delay the timing of, payments received on the Mortgage Loans which are required to be distributed on any Certificate without the consent of the Holder of such Certificate, (ii) reduce the aforesaid percentage of Certificates of any Class the Holders of which are required to consent to any such amendment or (iii) change the percentage specified in clause (ii) of the first paragraph of Section 11.01 of the Agreement, without the consent of the Holders of all Certificates of such Class then outstanding. The respective obligations and responsibilities of the Depositor, the Servicer and the Trustee under the Agreement will terminate upon: (i) the later of the final payment or other liquidation (or any Advance with respect thereto) of the last Mortgage Loan or the disposition of all property acquired upon foreclosure or deed in lieu of foreclosure of any Mortgage Loan and the remittance of all funds due thereunder; or (ii) at the option of the Servicer, on any Distribution Date which occurs in the month next following a Due Date on which the aggregate unpaid Principal Balance of the Outstanding Mortgage Loans is less than 10% of the aggregate unpaid Principal Balance of the Mortgage Loans on the Cut-off Date, so long as the Servicer deposits or causes to be deposited in the Collection Account during the Principal Prepayment Period related to such Distribution Date an amount equal to the Purchase Price for each Mortgage Loan, less any unreimbursed Advances made with respect to any Mortgage Loan and, with respect to all property acquired in respect of any Mortgage Loan remaining in the Trust Fund, an amount equal to the fair market value of such property, as determined by an appraisal to be conducted by an appraiser selected by the Trustee, less unreimbursed Advances made with respect to the Mortgage Loan with respect to which property has been acquired; provided, however, that in no event shall the trust created hereby continue beyond the earlier of (i) 32 years after the Closing Date and (ii) the expiration of 21 years from the death of the last survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James's, living on the date hereof. IN WITNESS WHEREOF, the Depositor has caused this Certificate to be duly executed. Dated: [DATE] CHASE MORTGAGE FINANCE CORPORATION By: __________________________ Authorized Officer This is one of the Class B-1 Certificates referred to in the within-mentioned Agreement. [TRUSTEE, as Trustee or] THE CHASE MANHATTAN BANK as Authenticating Agent By: ________________________ Authorized Signatory [FORM OF ASSIGNMENT] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto (PLEASE INSERT SOCIAL SECURITY* OR TAXPAYER IDENTIFICATION NUMBER OF ASSIGNEE) - ---------------- - ---------------- - ------------------------------------------------------------- (Please Print or Type Name and Address of Assignee) - ------------------------------------------------------------- the within Certificate, and all rights thereunder, and hereby does irrevocably constitute and appoint __________________________________________________ Attorney to transfer the within Certificate on the books kept for the registration thereof, with full power of substitution in the premises. Dated: (Signature guaranty) _______________________________ NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Certificate in every particular, without alteration or enlargement or any change whatever. (*This information, which is voluntary, is being requested to ensure that the assignee will not be subject to backup withholding under Section 3406 of the Code.) EXHIBIT F FORM OF CLASS A-R CERTIFICATE AS MORE FULLY PROVIDED BY SECTION 4.02(i) OF THE AGREEMENT, CERTAIN SPECIFIED ENTITIES INCLUDING (A) THE UNITED STATES, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, OR ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE FOREGOING (OTHER THAN AN INSTRUMENTALITY THAT IS A CORPORATION ALL OF WHOSE ACTIVITIES ARE SUBJECT TO TAX UNDER CHAPTER 1 OF SUBTITLE A OF THE CODE AND (EXCEPT IN THE CASE OF FHLMC) A MAJORITY OF WHOSE BOARD OF DIRECTORS IS NOT SELECTED BY THE UNITED STATES, OR ANY STATE OR POLITICAL SUBDIVISION THEREOF), (B) ANY ORGANIZATION THAT IS EXEMPT FROM TAX IMPOSED BY CHAPTER 1 OF SUBTITLE A OF THE CODE, OTHER THAN (X) A TAX-EXEMPT FARMERS' COOPERATIVE WITHIN THE MEANING OF SECTION 521 OF THE CODE OR (Y) AN ORGANIZATION THAT IS SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE CODE ON "UNRELATED BUSINESS INCOME", (C) A CORPORATION OPERATING ON A COOPERATIVE BASIS THAT IS ENGAGED IN FURNISHING ELECTRIC ENERGY OR PROVIDING TELEPHONE SERVICE TO PERSONS IN RURAL AREAS (WITHIN THE MEANING OF SECTION 1381(a)(2)(C) OF THE CODE) AND (D) CERTAIN FOREIGN PERSONS ARE PROHIBITED FROM ACQUIRING BENEFICIAL OWNERSHIP OF A CLASS A-R CERTIFICATE. CLASS A-R CERTIFICATE Cut-off Date: [DATE] Original Denomination $------- First Distribution Date: Aggregate Original Principal [DATE] Balance of all Class A-R Certificates: $________ Cut-off Date: [DATE] Number 98-[ ]-A-R-1 Certificate Rate: ___% MULTI-CLASS MORTGAGE PASS-THROUGH CERTIFICATE Series [ ] evidencing an ownership interest in distributions allocable to the Residual Interest Certificates with respect to a pool of conventional one- to four-family first mortgage loans formed and sold by Chase Manhattan Acceptance Corporation This Certificate does not represent an obligation of or interest in Chase Manhattan Acceptance Corporation, the Servicer or the Trustee referred to below or any of their affiliates. Neither this Certificate nor the underlying Mortgage Loans are guaranteed or insured by Chase Manhattan Acceptance Corporation, Chase Manhattan Mortgage Corporation, the Trustee or by any of their affiliates or by any governmental agency or instrumentality. NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE DEPOSITOR SHALL HAVE RECEIVED EITHER (i) A REPRESENTATION LETTER FROM THE TRANSFEREE OF THIS CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE EITHER (A) IS NOT AN EMPLOYEE BENEFIT PLAN (A "PLAN") WITHIN THE MEANING OF SECTION 406 OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), AND IS NOT DIRECTLY OR INDIRECTLY PURCHASING ANY CERTIFICATE ON BEHALF OF, AS INVESTMENT MANAGER OF, AS NAMED FIDUCIARY OF, AS TRUSTEE OF OR WITH ASSETS OF A PLAN OR, IN THE CASE OF AN INSURANCE COMPANY, THE ASSETS OF ANY SEPARATE ACCOUNTS TO EFFECT SUCH ACQUISITION OR (B) THE SOURCE OF FUNDS FOR THE PURCHASE OF THE CERTIFICATES IS AN "INSURANCE COMPANY GENERAL ACCOUNT" WITHIN THE MEANING OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60"), 60 FED. REG. 35925 (JULY 12, 1995), AND THE CONDITIONS SET FORTH IN SECTION I AND SECTION III OF PTCE 95-60 ARE SATISFIED WITH RESPECT TO THE PURCHASE AND HOLDING OF THE CERTIFICATES, OR (ii) IF THIS CERTIFICATE IS PRESENTED FOR REGISTRATION IN THE NAME OF A PLAN SUBJECT TO TITLE I OF ERISA, OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (OR COMPARABLE PROVISIONS OF ANY SUBSEQUENT ENACTMENTS), OR A TRUSTEE OF ANY SUCH PLAN, OR ANY OTHER PERSON WHO IS USING THE ASSETS OF ANY SUCH PLAN TO EFFECT SUCH ACQUISITION, AN OPINION OF COUNSEL TO THE EFFECT THAT THE PURCHASE OR HOLDING OF THIS CERTIFICATE WILL NOT RESULT IN THE ASSETS OF THE TRUST FUND BEING DEEMED TO BE "PLAN ASSETS" PURSUANT TO THE DEPARTMENT OF LABOR PLAN ASSET REGULATIONS SET FORTH IN 29 C.F.R. ss.2510.3-101 AND TO BE SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF ERISA OR THE PROHIBITED TRANSACTION PROVISIONS OF THE CODE, WILL NOT CONSTITUTE OR RESULT IN A PROHIBITED TRANSACTION WITHIN THE MEANING OF SECTION 406 OR SECTION 407 OF ERISA OR SECTION 4975 OF THE CODE, AND WILL NOT SUBJECT THE TRUSTEE, THE SERVICER, THE COMPANY OR ANY OF THEIR AFFILIATES TO ANY OBLIGATION OR LIABILITY (INCLUDING OBLIGATIONS OR LIABILITIES UNDER ERISA OR SECTION 4975 OF THE CODE) RELATING TO THE CERTIFICATES. This certifies that ____________________ is the registered owner of an undivided interest in certain monthly distributions with respect to a pool (the "Mortgage Pool) of conventional one- to four-family first mortgage loans (the "Mortgage Loans") formed and sold by Chase Manhattan Acceptance Corporation (hereinafter called the "Depositor", which term includes any successor entity under the Agreement referred to below) and certain other property held in trust for the benefit of Certificateholders (collectively, the "Trust Fund"). The Mortgage Loans are serviced by Chase Manhattan Mortgage Corporation (the "Servicer") and are secured by first mortgages on Mortgaged Properties. The Trust Fund was created pursuant to a Pooling and Servicing Agreement (the "Agreement") dated as of [DATE] among the Depositor, the Servicer and [TRUSTEE], as trustee (the "Trustee"), a summary of certain of the pertinent provisions of which is set forth hereafter. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Certificate is one of a duly authorized issue of Certificates, designated as Multi-Class Mortgage Pass-Through Certificates, Series [ ], Class A-R (the "Class A-R Certificate") and is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the Holder of this Certificate by virtue of the acceptance hereof assents and by which Agreement such Holder is bound. All payments made under this Certificate will be made in accordance with the terms of the Agreement. Also issued under the Agreement are Certificates designated as Multi-Class Mortgage Pass-Through Certificates Series [ ], Class A, Class M, Class B-1, Class B-2, Class B-3, Class B-4 and Class B-5 Certificates. The Class A Certificates, the Class M Certificates, the Class B Certificates and the Class A-R Certificates are collectively referred to as the "Certificates". The final distribution on this Certificate will be made after due notice by the Trustee of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency appointed by the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, for that purpose and specified in such notice of final distribution. The Trustee will cause to be kept at its Corporate Trust Office in New York, New York, or at the office of any Paying Agent appointed under the Agreement, a Certificate Register in which, subject to such reasonable regulations as it may prescribe, the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, will provide for the registration of Certificates and of transfers and exchanges of Certificates. Upon surrender for registration of transfer of any Certificate at any office or agency of the Trustee or, if a Paying Agent has been appointed under Section 4.05, the Paying Agent, maintained for such purpose, the Trustee will, subject to the limitations set forth in the Agreement, authenticate and deliver, in the name of the designated transferee or transferees, a Certificate of a like class and dated the date of authentication by the Trustee. No service charge will be made to the Holder for any transfer or exchange of the Certificate, but the Trustee may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of the Certificate. Prior to due presentation of a Certificate for registration of transfer, the Depositor, the Servicer, the Paying Agent and the Trustee may treat the person in whose name any Certificate is registered as the owner of such Certificate and the Ownership Interest in the Trust Fund evidenced thereby for the purpose of receiving distributions pursuant to the Agreement and for all other purposes whatsoever, and neither the Depositor, the Servicer, the Paying Agent nor the Trustee will be affected by notice to the contrary. The Agreement may be amended from time to time by the Depositor, the Servicer and the Trustee, without the consent of any of the Certificateholders, to cure any ambiguity, to correct or supplement any provisions therein, which may be inconsistent with any other provisions therein, to ensure continuing treatment of the Trust Fund or its assets as a REMIC and to avoid the imposition of certain tax liabilities, or to make any other provisions with respect to matters or questions arising under the Agreement which are not materially inconsistent with the provisions of the Agreement, provided that such action does not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of any Certificateholder. The Agreement may also be amended from time to time by the Depositor, the Servicer and the Trustee with the consent of the Holders of Certificates evidencing in the aggregate not less than 66-2/3% of the Percentage Interest of each Class of Certificates affected thereby for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Agreement or of modifying in any manner the rights of the Holders of Certificates of such Class; provided, however, that no such amendment may (i) reduce in any manner the amount of, or delay the timing of, payments received on the Mortgage Loans which are required to be distributed on any Certificate without the consent of the Holder of such Certificate, (ii) reduce the aforesaid percentage of Certificates of any Class the Holders of which are required to consent to any such amendment or (iii) change the percentage specified in clause (ii) of the first paragraph of Section 11.01 of the Agreement, without the consent of the Holders of all Certificates of such Class then outstanding. An election will be made to treat the Trust Fund as a REMIC for federal income tax purposes. The Class A Certificates, the Class M Certificates, the Class B Certificates will represent regular interests in the REMIC. The Class A-R Certificate constitutes the Residual Interest in the REMIC. The respective obligations and responsibilities of the Depositor, the Servicer and the Trustee under the Agreement will terminate upon: (i) the later of the final payment or other liquidation (or any Advance with respect thereto) of the last Mortgage Loan or the disposition of all property acquired upon foreclosure or deed in lieu of foreclosure of any Mortgage Loan and the remittance of all funds due thereunder; or (ii) at the option of the Servicer, on any Distribution Date which occurs in the month next following a Due Date on which the aggregate unpaid Principal Balance of all Outstanding Mortgage Loans is less than 10% of the aggregate unpaid Principal Balance of the Mortgage Loans on the Cut-off Date, so long as the Servicer deposits or causes to be deposited in the Collection Account during the Principal Prepayment Period related to such Distribution Date an amount equal to the Purchase Price for each Mortgage Loan, less unreimbursed Advances made with respect to any Mortgage Loan and, with respect to all property acquired in respect of any Mortgage Loan remaining in the Trust Fund, an amount equal to the fair market value of such property, as determined by an appraisal to be conducted by an appraiser selected by the Trustee, less any Advances made with respect to the Mortgage Loan with respect to which property has been acquired; provided, however, that in no event shall the trust created hereby continue beyond the earlier of (i) 32 years after the Closing Date and (ii) the expiration of 21 years from the death of the last survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James's, living on the date hereof. IN WITNESS WHEREOF, the Depositor has caused this Certificate to be duly executed. Dated: [DATE] CHASE MORTGAGE FINANCE CORPORATION By: __________________________ Authorized Officer This is the Class A-R Certificate referred to in the within-mentioned Agreement. [TRUSTEE, as Trustee or] THE CHASE MANHATTAN BANK as Authenticating Agent By: ________________________ Authorized Signatory [FORM OF ASSIGNMENT] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto (PLEASE INSERT SOCIAL SECURITY* OR TAXPAYER IDENTIFICATION NUMBER OF ASSIGNEE) - ----------------- - ----------------- - ------------------------------------------------------------- (Please Print or Type Name and Address of Assignee) - ------------------------------------------------------------- the within Certificate, and all rights thereunder, and hereby does irrevocably constitute and appoint __________________________________________________ Attorney to transfer the within Certificate on the books kept for the registration thereof, with full power of substitution in the premises. Dated: (Signature guaranty) _______________________________ NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Certificate in every particular, without alteration or enlargement or any change whatever. (*This information, which is voluntary, is being requested to ensure that the assignee will not be subject to backup withholding under Section 3406 of the Code.) EXHIBIT G FORM OF TRUSTEE CERTIFICATION [DATE] Chase Manhattan Acceptance Corporation 300 Tice Boulevard Woodcliff Lake, NJ 07675 Re: Pooling and Servicing Agreement dated as of [DATE] among Chase Manhattan Acceptance Corporation, Chase Manhattan Mortgage Corporation as servicer and [TRUSTEE], as trustee, Multi-Class Mortgage Pass-Through Certificates, Series [ ] Ladies and Gentlemen: In accordance with Section 2.02 of the above-captioned Pooling and Servicing Agreement, the undersigned, as Trustee, hereby certifies that [, except as set forth in Schedule A hereto,] as to each Mortgage Loan listed in the Mortgage Loan Schedule attached hereto (other than any Mortgage Loan paid in full or listed on the attachment hereto) it has reviewed the Mortgage File and the Mortgage Loan Schedule and has determined that: (i) All documents in the Mortgage File required to be delivered to the Trustee pursuant to Section 2.01 of the Pooling and Servicing Agreement are in its possession; (ii) In connection with each Mortgage Loan or Assignment thereof as to which documentary evidence of recording was not received on the Closing Date, it has received evidence of such recording; and (iii) Such documents have been reviewed by it and such documents do not contain any material omissions or defects within the meaning of Section 2.01 or 2.02. The Trustee further certifies that as to each Mortgage Loan, the Trustee holds the Mortgage Note without any Responsible Officer of the Trustee having received written notice (a) of any adverse claims, liens or encumbrances, (b) that any Mortgage Note was overdue or has been dishonored, (c) of evidence on the face of any Mortgage Note or Mortgage of any security interest therein, or (d) of any defense against or claim to the Mortgage Note by any other party. The Trustee has made no independent examination of any documents contained in each Mortgage File beyond confirming (i) that the Mortgage Loan number and the name of the Mortgagor in each Mortgage File conform to the respective Mortgage Loan number and name listed on the Mortgage Loan Schedule and (ii) the existence in each Mortgage File of each of the documents listed in subparagraphs (i)(A) through (G), inclusive, of Section 2.01 in the Agreement. The Trustee makes no representations or warranties as to the validity, legality, sufficiency, enforceability or genuineness of any of the documents contained in each Mortgage Loan or the collectibility, insurability, effectiveness or suitability of any such Mortgage Loan. Capitalized words and phrases used herein shall have the respective meanings assigned to them in the above-captioned Pooling and Servicing Agreement. [TRUSTEE], as Trustee By: ______________________________ Name: _______________________ Title: ________________________ EXHIBIT H FORM OF INVESTMENT LETTER (Accredited Investor) [DATE] Chase Manhattan Mortgage Corporation 343 Thornall Street Edison, NJ 08834 Re: Chase Manhattan Acceptance Corporation Multi-Class Mortgage Pass-Through Certificates, Series [ ], [Class B- ] Ladies and Gentlemen: ______________ (the "Purchaser") intends to purchase from _________________________ (the "Transferor") $_______ by original principal balance (the "Transferred Certificates") of Multi-Class Mortgage Pass-Through Certificates, Series [ ], [Class B- ] (the "Certificates"), issued pursuant to a pooling and servicing agreement, dated as of [DATE] (the "Pooling and Servicing Agreement"), among Chase Manhattan Acceptance Corporation (the "Depositor"), Chase Manhattan Mortgage Corporation, as Servicer (the "Servicer"), and [TRUSTEE], as trustee (the "Trustee"). [The Purchaser intends to register the Transferred Certificate in the name of ____________________, as nominee for __________________.] All terms used and not otherwise defined herein shall have the meanings set forth in the Pooling and Servicing Agreement. For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Purchaser certifies, represents and warrants to, and covenants with, the Depositor and the Trustee that: 1. The Purchaser understands that (a) the Certificates have not been registered or qualified under the Securities Act of 1933, as amended (the "Securities Act"), or the securities laws of any state, (b) neither the Depositor nor the Trustee is required, and neither of them intends, to so register or qualify the Certificates, (c) the Certificates cannot be resold unless (i) they are registered and qualified under the Securities Act and the applicable state securities laws or (ii) an exemption from registration and qualification is available and (d) the Pooling and Servicing Agreement contains restrictions regarding the transfer of the Certificates. 2. The Certificates will bear a legend to the following effect: THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE "1940 ACT") OR ANY STATE SECURITIES OR "BLUE SKY" LAWS, AND MAY NOT, DIRECTLY OR INDIRECTLY, BE SOLD OR OTHERWISE TRANSFERRED, OR OFFERED FOR SALE, UNLESS SUCH TRANSFER IS NOT SUBJECT TO REGISTRATION UNDER THE ACT, THE 1940 ACT AND ANY APPLICABLE STATE SECURITIES LAWS AND SUCH TRANSFER ALSO COMPLIES WITH THE OTHER PROVISIONS OF SECTION 4.02 OF THE POOLING AND SERVICING AGREEMENT. NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE TRUSTEE SHALL HAVE RECEIVED, IN FORM AND SUBSTANCE SATISFACTORY TO THE SERVICER AND THE TRUSTEE (A) AN INVESTMENT LETTER FROM THE PROSPECTIVE INVESTOR; AND (B) REPRESENTATIONS FROM THE TRANSFEROR REGARDING THE OFFERING AND SALE OF THE CERTIFICATES. NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE DEPOSITOR SHALL HAVE RECEIVED EITHER (i) A REPRESENTATION LETTER FROM THE TRANSFEREE OF THIS CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE EITHER (A) IS NOT AN EMPLOYEE BENEFIT PLAN (A "PLAN") WITHIN THE MEANING OF SECTION 406 OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), AND IS NOT DIRECTLY OR INDIRECTLY PURCHASING ANY CERTIFICATE ON BEHALF OF, AS INVESTMENT MANAGER OF, AS NAMED FIDUCIARY OF, AS TRUSTEE OF OR WITH ASSETS OF A PLAN OR, IN THE CASE OF AN INSURANCE COMPANY, THE ASSETS OF ANY SEPARATE ACCOUNTS TO EFFECT SUCH ACQUISITION OR (B) THE SOURCE OF FUNDS FOR THE PURCHASE OF THE CERTIFICATES IS AN "INSURANCE COMPANY GENERAL ACCOUNT" WITHIN THE MEANING OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60"), 60 FED. REG. 35925 (JULY 12, 1995), AND THE CONDITIONS SET FORTH IN SECTION I AND SECTION III OF PTCE 95-60 ARE SATISFIED WITH RESPECT TO THE PURCHASE AND HOLDING OF THE CERTIFICATES, OR (ii) IF THIS CERTIFICATE IS PRESENTED FOR REGISTRATION IN THE NAME OF A PLAN SUBJECT TO TITLE I OF ERISA, OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (OR COMPARABLE PROVISIONS OF ANY SUBSEQUENT ENACTMENTS), OR A TRUSTEE OF ANY SUCH PLAN, OR ANY OTHER PERSON WHO IS USING THE ASSETS OF ANY SUCH PLAN TO EFFECT SUCH ACQUISITION, AN OPINION OF COUNSEL TO THE EFFECT THAT THE PURCHASE OR HOLDING OF THIS CERTIFICATE WILL NOT RESULT IN THE ASSETS OF THE TRUST FUND BEING DEEMED TO BE "PLAN ASSETS" PURSUANT TO THE DEPARTMENT OF LABOR PLAN ASSET REGULATIONS SET FORTH IN 29 C.F.R. ss.2510.3-101 AND TO BE SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF ERISA OR THE PROHIBITED TRANSACTION PROVISIONS OF THE CODE, WILL NOT CONSTITUTE OR RESULT IN A PROHIBITED TRANSACTION WITHIN THE MEANING OF SECTION 406 OR SECTION 407 OF ERISA OR SECTION 4975 OF THE CODE, AND WILL NOT SUBJECT THE TRUSTEE, THE SERVICER, THE COMPANY OR ANY OF THEIR AFFILIATES TO ANY OBLIGATION OR LIABILITY (INCLUDING OBLIGATIONS OR LIABILITIES UNDER ERISA OR SECTION 4975 OF THE CODE) RELATING TO THE CERTIFICATES. 3. The Purchaser is acquiring the Transferred Certificates for its own account [for investment only]*/ and not with a view to or for sale or other transfer in connection with any distribution of the Transferred Certificates in any manner that would violate the Securities Act or any applicable state securities laws, subject, nevertheless, to the understanding that disposition of the Purchaser's property shall at all times be and remain within its control. 4. The Purchaser (a) is a substantial, sophisticated institutional investor having such knowledge and experience in financial and business matters, and in particular in such matters related to securities similar to the Certificates, such that it is capable of evaluating the merits and risks of investment in the Certificates, (b) is able to bear the economic risks of such an investment and (c) is an "accredited investor" within the meaning of Rule 501(a) promulgated pursuant to the Securities Act. 5. The Purchaser will not nor has it authorized nor will it authorize any person to (a) offer, pledge, sell, dispose of or otherwise transfer any Certificate, any interest in any Certificate or any other similar security to any person in any manner, (b) solicit any offer to buy or to accept a pledge, disposition or other transfer of any Certificate, any interest in any Certificate or any other similar security from any person in any manner, (c) otherwise approach or negotiate with respect to any Certificate, any interest in any Certificate or any other similar security with any person in any manner, (d) make any general solicitation by means of general advertising or in any other manner, or (e) take any other action, that would constitute a distribution of any Certificate under the Securities Act or the Investment Company Act of 1940, as amended (the "1940 Act"), that would render the disposition of any Certificate a violation of Section 5 of the Securities Act or any state securities law, or that would require registration or qualification pursuant thereto. Neither the Purchaser nor anyone acting on its behalf has offered the Certificates for sale or made any general solicitation by means of general advertising or in - -------- */ Not required of a broker/dealer purchaser. any other manner with respect to the Certificates. The Purchaser will not sell or otherwise transfer any of the Certificates, except in compliance with the provisions of the Pooling and Servicing Agreement. 6. [This paragraph may be deleted if the Purchaser provides the Opinion of Counsel referred to in clause (ii) of Section 4.02(d) of the Pooling and Servicing Agreement.] The Purchaser either (A) is not an employee benefit plan within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or a plan within the meaning of Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code") (each, a "Plan"), and is not directly or indirectly purchasing any Certificate on behalf of, as investment manager of, as named fiduciary of, as trustee of or with assets of a Plan or directly or indirectly purchasing any certificates with the assets of any insurance company separate account or of any Plan or (B) is an insurance company and the source of funds for the purchase of the certificates is an "insurance company general account" within the meaning of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60"), 60 Fed. Reg. 35925 (July 12, 1995), and the conditions set forth in Section I and III of PTCE 95-60 are satisfied with respect to the purchase and holding of the Certificates. 7. Prior to the sale or transfer by the Purchaser of any of the Certificates, the Purchaser will obtain from any subsequent purchaser substantially the same certifications, representations, warranties and covenants contained in the foregoing paragraphs and in this letter or a letter substantially in the form of Exhibit I to the Pooling and Servicing Agreement. 8. The Purchaser agrees to indemnify the Trustee, the Servicer and the Depositor against any liability that may result from any misrepresentation made herein. Very truly yours, [PURCHASER] By:________________________ Name: Title: EXHIBIT I FORM OF RULE 144A INVESTMENT LETTER (Qualified Institutional Buyer) [DATE] Chase Manhattan Mortgage Corporation 343 Thornall Street Edison, NJ 08834 The Chase Manhattan Bank Global Trust Services 15th Floor 450 West 33rd Street New York, NY 10001 Re: Chase Manhattan Acceptance Corporation, Multi-Class Mortgage Pass-Through Certificates, Series [ ], [Class B- ] Ladies and Gentlemen: ______________ (the "Purchaser") intends to purchase from _________________________ (the "Transferor") $_______ by original principal balance (the "Transferred Certificates") of Multi-Class Mortgage Pass-Through Certificates, Series [ ], [Class B-] (the "Certificates"), issued pursuant to a pooling and servicing agreement, dated as of [DATE] (the "Pooling and Servicing Agreement"), among Chase Manhattan Acceptance Corporation (the "Depositor"), Chase Manhattan Mortgage Corporation, as Servicer (the "Servicer"), and [TRUSTEE], as trustee (the "Trustee"). [The Purchaser intends to register the Transferred Certificate in the name of ____________________, as nominee for __________________.] All terms used and not otherwise defined herein shall have the meanings set forth in the Trust Agreement. For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Purchaser certifies, represents and warrants to, and covenants with, the Depositor and the Trustee that: In connection with our acquisition of the above Transferred Certificates we certify that (a) we understand that the Certificates are not being registered under the Securities Act of Chase Manhattan Mortgage Corporation [TRUSTEE] [DATE] Page 2 1933, as amended (the "Act"), or any state securities laws and are being transferred to us in a transaction that is exempt from the registration requirements of the Act and any such laws, (b) we have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of investments in the Certificates, (c) we have had the opportunity to ask questions of and receive answers from the Depositor concerning the purchase of the Transferred Certificates and all matters relating thereto or any additional information deemed necessary to our decision to purchase the Transferred Certificates, (d) we are not an employee benefit plan within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, or a plan within the meaning of Section 4975 of the Internal Revenue Code of 1986, as amended (each, a "Plan"), nor are we directly or indirectly purchasing any Certificate on behalf of, as investment manager of, as named fiduciary of, as trustee of or with assets of a Plan or directly or indirectly purchasing any certificates with the assets of any insurance company separate account or of any Plan [or alternatively, in the case of an insurance company, is an insurance company and the source of funds for the purchase of the certificates] is an "insurance company general account" within the meaning of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60"), 50 Fed. Reg. 35925 (July 12, 1995), and the conditions set forth in Section I and Section III of PTCE 95-60 are satisfied with respect to the purchase and holding of the Certificates, (e) we have not, nor has anyone acting on our behalf offered, transferred, pledged, sold or otherwise disposed of the Certificates, any interest in the Certificates or any other similar security to, or solicited any offer to buy or accept a transfer, pledge or other disposition of the Certificates, any interest in the Certificates or any other similar security from, or otherwise approached or negotiated with respect to the Certificates, any interest in the Certificates or any other similar security with, any person in any manner, or made any general solicitation by means of general advertising or in any other manner, or taken any other action, that would constitute a distribution of the Certificates under the Securities Act or that would render the disposition of the Certificates a violation of Section 5 of the Securities Act or require registration pursuant thereto, nor will act, nor has authorized or will authorize any person to act, in such manner with respect to the Certificates, (f) we are a "qualified institutional buyer" as that term is defined in Rule 144A under the Securities Act and have completed one of the forms of certification to that effect attached hereto as Annex 1 or Annex 2. We are aware that the sale of the Transferred Certificates to us is being made in reliance on Rule 144A. We are acquiring the Transferred Certificates for our own account or for resale pursuant to Rule 144A and further understand that such Certificates may be resold, pledged or transferred only (i) to a person reasonably believed by us, based upon certifications of such purchaser or information we have in our possession, to be a qualified institutional buyer that purchases for its own account or Chase Manhattan Mortgage Corporation [TRUSTEE] [DATE] Page 3 for the account of a qualified institutional buyer to whom notice is given that the resale, pledge or transfer is being made in reliance on Rule 144A, or (ii) pursuant to another exemption from registration under the Securities Act. We agree to indemnify the Trustee, the Servicer and the Depositor against any liability that may result from any misrepresentation made herein. Very truly yours, [PURCHASER] By:_____________________ Name: Title: ANNEX 1 QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A [For Transferees Other Than Registered Investment Companies] The undersigned (the "Buyer") hereby certifies as follows to the parties listed in the Rule 144A Transferee Certificate to which this certification relates with respect to the Certificates described therein: 1. As indicated below, the undersigned is the President, Chief Financial Officer, Senior Vice President or other executive officer of the Buyer. 2. In connection with the purchases by the Buyer, the Buyer is a "qualified institutional buyer" as that term is defined in Rule 144A under the Securities Act of 1933, as amended ("Rule 144A") because (i) the Buyer owned and/or invested on a discretionary basis $____________*/ in securities (except for the excluded securities referred to below) as of the end of the Buyer's most recent fiscal year (such amount being calculated in accordance with Rule 144A) and (ii) the Buyer satisfies the criteria in the category marked below. ____ Corporation, etc. The Buyer is a corporation (other than a bank, savings and loan association or similar institution), Massachusetts or similar business trust, partnership, or charitable organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended. ____ Bank. The Buyer (a) is a national bank or banking institution organized under the laws of any State, territory or the District of Columbia, the business of which is substantially confined to banking and is supervised by Federal, State or territorial banking commission or similar official or is a foreign bank or equivalent institution, and (b) has an audited net worth of at least $25,000,000 as demonstrated in its latest annual financial statements, a copy of which is attached hereto. ____ Savings and Loan. The Buyer (a) is a savings and loan association, building and loan association, cooperative bank, homestead association or similar institution, which is supervised and examined by a State or Federal authority having supervision over such institution or is a foreign savings and loan association or equivalent institution and (b) has an audited net - -------- * Buyer must own and/or invest on a discretionary basis at least $100,000,000 in securities unless Buyer is a dealer, and, in that case, Buyer must own and/or invest on a discretionary basis at least $10,000,000 in securities. worth of at least $25,000,000 as demonstrated in its latest annual financial statements, a copy of which is attached hereto. ____ Broker-dealer. The Buyer is a dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended. ____ Insurance Company. The Buyer is an insurance company whose primary and predominant business activity is the writing of insurance or the reinsuring of risks underwritten by insurance companies and which is subject to supervision by the insurance commissioner or a similar official or agency of the State, territory or the District of Columbia. ____ State or Local Plan. The Buyer is a plan established and maintained by a State, its political subdivisions, or any agency or instrumentality of the State or its political subdivisions, for the benefit of its employees. ____ ERISA Plan. The Buyer is an employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974, as amended. ____ Investment Advisor. The Buyer is an investment advisor registered under the Investment Advisors Act of 1940, as amended. ____ Small Business Investment Company. Buyer is a small business investment company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958, as amended. ____ Business Development Company. Buyer is a business development company as defined in Section 202(a)(22) of the Investment Advisors Act of 1940, as amended. 3. The term "securities" as used for purposes of the calculation of the dollar amount in paragraph 2 excludes: (i) securities of issuers that are affiliated with the Buyer, (ii) securities that are part of an unsold allotment to or subscription by the Buyer, if the Buyer is a dealer, (iii) securities issued or guaranteed by the U.S. or any instrumentality thereof, (iv) bank deposit notes and certificates of deposit, (v) loan participations, (vi) repurchase agreements, (vii) securities owned but subject to a repurchase agreement and (viii) currency, interest rate and commodity swaps. 4. For purposes of determining the aggregate amount of securities owned and/or invested on a discretionary basis by the Buyer, the Buyer used the cost of such securities to the Buyer and did not include any of the securities referred to in the preceding paragraph, except (i) where the Buyer reports its securities holdings in its financial statements on the basis of their market value, and (ii) no current information with respect to the cost of those securities has been published. If clause (ii) in the preceding sentence applies, the securities may be valued at market. Further, in determining such aggregate amount, the Buyer may have included securities owned by subsidiaries of the Buyer, but only if such subsidiaries are consolidated with the Buyer in its financial statements prepared in accordance with generally accepted accounting principles and if the investments of such subsidiaries are managed under the Buyer's direction. However, such securities were not included if the Buyer is a majority-owned, consolidated subsidiary of another enterprise and the Buyer is not itself a reporting company under the Securities Exchange Act of 1934, as amended. 5. The Buyer acknowledges that it is familiar with Rule 144A and understands that the seller to it and other parties related to the Certificates are relying and will continue to rely on the statements made herein because one or more sales to the Buyer may be in reliance on Rule 144A. 6. Until the date of purchase of the Rule 144A Securities, the Buyer will notify each of the parties to which this certification is made of any changes in the information and conclusions herein. Until such notice is given, the Buyer's purchase of the Certificates will constitute a reaffirmation of this certification as of the date of such purchase. In addition, if the Buyer is a bank or savings and loan as provided above, the Buyer agrees that it will furnish to such parties updated annual financial statements promptly after they become available. By:____________________ Name: Title: Date:__________________ ANNEX 2 QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A [For Transferees That are Registered Investment Companies] The undersigned (the "Buyer") hereby certifies as follows to the parties listed in the Rule 144A Transferee Certificate to which this certification relates with respect to the Certificates described therein: 1. As indicated below, the undersigned is the President, Chief Financial Officer or Senior Vice President of the Buyer or, if the Buyer is a "qualified institutional buyer" as that term is defined in Rule 144A under the Securities Act of 1933, as amended ("Rule 144A"), because Buyer is part of a Family of Investment Companies (as defined below), is such an officer of the Adviser. 2. In connection with purchases by Buyer, the Buyer is a "qualified institutional buyer" as defined in Rule 144A because (i) the Buyer is an investment company registered under the Investment Company Act of 1940, as amended and (ii) as marked below, the Buyer alone, or the Buyer's Family of Investment Companies, owned at least $100,000,000 in securities (other than the excluded securities referred to below) as of the end of the Buyer's most recent fiscal year. For purposes of determining the amount of securities owned by the Buyer or the Buyer's Family of Investment Companies, the cost of such securities was used, except (i) where the Buyer or the Buyer's Family of Investment Companies reports its securities holdings in its financial statements on the basis of their market value, and (ii) no current information with respect to the cost of those securities has been published. If clause (ii) in the preceding sentence applies, the securities may be valued at market. ____ The Buyer owned $___________ in securities (other than the excluded securities referred to below) as of the end of the Buyer's most recent fiscal year (such amount being calculated in accordance with Rule 144A). ____ The Buyer is part of a Family of Investment Companies which owned in the aggregate $__________ in securities (other than the excluded securities referred to below) as of the end of the Buyer's most recent fiscal year (such amount being calculated in accordance with Rule 144A). 3. The term "Family of Investment Companies" as used herein means two or more registered investment companies (or series thereof) that have the same investment adviser or investment advisers that are affiliated (by virtue of being majority owned subsidiaries of the same parent or because one investment adviser is a majority owned subsidiary of the other). 4. The term "securities" as used herein does not include (i) securities of issuers that are affiliated with the Buyer or are part of the Buyer's Family of Investment Companies, (ii) securities issued or guaranteed by the U.S. or any instrumentality thereof, (iii) bank deposit notes and certificates of deposit, (iv) loan participations, (v) repurchase agreements, (vi) securities owned but subject to a repurchase agreement and (vii) currency, interest rate and commodity swaps. 5. The Buyer is familiar with Rule 144A and understands that the parties listed in the Rule 144A Transferee Certificate to which this certification relates are relying and will continue to rely on the statements made herein because one or more sales to the Buyer will be in reliance on Rule 144A. In addition, the Buyer will only purchase for the Buyer's own account. 6. Until the date of purchase of the Certificates, the undersigned will notify the parties listed in the Rule 144A Transferee Certificate to which this certification relates of any changes in the information and conclusions herein. Until such notice is given, the Buyer's purchase of the Certificates will constitute a reaffirmation of this certification by the undersigned as of the date of such purchase. By:_______________________ Name: Title: IF AN ADVISER: _________________________________ Print Name of Buyer Date:_____________________ EXHIBIT J FORM OF SPECIAL SERVICING AND COLLATERAL FUND AGREEMENT This SPECIAL SERVICING AND COLLATERAL FUND AGREEMENT (the "Agreement") is made and entered into as of [DATE], between Chase Manhattan Mortgage Corporation, (the "Company") and _____________________ (the "Purchaser"). PRELIMINARY STATEMENT __________________ (the "Owner") is the holder of the entire interest in Chase Manhattan Acceptance Corporation Multi-Class Mortgage Pass-Through Certificates, Series [ ], Class B-5 (the "Class B-5 Certificates"). The Class B-5 Certificates were issued pursuant to a Pooling and Servicing Agreement (the "Pooling and Servicing Agreement") among Chase Manhattan Acceptance Corporation, (the "Company"), Chase Manhattan Mortgage Corporation as servicer thereunder (the "Servicer") and [TRUSTEE], as trustee (the "Trustee"). The Owner intends to resell all of the Class B-5 Certificates directly to the Purchaser on or promptly after the date hereof. In connection with such sale, the parties hereto have agreed that the Company, as Servicer, will engage in certain special servicing procedures relating to foreclosures for benefit of the Purchaser, and that the Purchaser will deposit funds in a collateral fund to cover any losses attributable to such procedures as well as all advances and costs in connection therewith, as set forth herein. In consideration of the mutual agreements herein contained, the receipt and sufficiency of which are hereby acknowledged, the Company and the Purchaser agree to the following: ARTICLE I. DEFINITIONS Section 1.01. Defined Terms. Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings: Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a day on which banking institutions in the State of New York are required or authorized by law or executive order to be closed. Collateral Fund: The fund established and maintained pursuant to Section 3.01 hereof. Collateral Fund Permitted Investments: Either: (i) obligations of, or obligations fully guaranteed as to principal and interest by, the United States, or any agency or instrumentality thereof, provided such obligations are backed by the full faith and credit of the United States, (ii) a money market fund rated in the highest rating category by a nationally recognized rating agency selected by the Company, (iii) cash, (iv) mortgage pass-through certificates issued or guaranteed by GNMA, FNMA or FHLMC, (v) commercial paper (including both non-interest bearing discount obligations and interest bearing obligations payable on demand or on a specified date), the issuer of which may be an affiliate of the Company, having at the time of such investment a rating of at least A-1 by Standard and Poor's Corporation ("S&P") or at least D-1 by Duff & Phelps Credit Rating Co. ("DCR") and (vi) demand and time deposits in, certificates of deposit of, any depository institution or trust company (which may be an affiliate of the Company) incorporated under the laws of the United States of America or any state thereof and subject to supervision and examination by federal and/or state banking authorities, so long as at the time of such investment either (x) the long-term debt obligations of such depository institution or trust company have a rating of at least AA by S&P or DCR or (y) the certificate of deposit or other unsecured short-term debt obligations of such depository institution or trust company have a rating of at least D-1 by DCR or A-1 by S&P and, for each of the preceding clauses (i), (iv), (v) and (vi), the maturity thereof shall be not later than the earlier to occur of (A) 30 days from the date of the related investment and (B) the next succeeding Distribution Date. Commencement of Foreclosure: The first official action required under local law in order to commence foreclosure proceedings or to schedule a trustee's sale under a deed of trust, including (i) in the case of a mortgage, any filing or service of process necessary to commence an action to foreclose, or (ii) in the case of a deed of trust, the posting, publishing, filing or delivery of a notice of sale, but not including in either case (x) any notice of default, notice of intent to foreclose or sell or any other action prerequisite to the actions specified in (i) or (ii) above and upon the consent of the Purchaser which will be deemed given unless expressly withheld within two Business Days of notification, (y) the acceptance of a deed-in-lieu of foreclosure (whether in connection with a sale of the related property or otherwise) or (z) initiation and completion of a short pay-off. Current Appraisal: With respect to any Mortgage Loan as to which the Purchaser has made an Election to Delay Foreclosure, an appraisal of the related Mortgaged Property obtained by the Purchaser at its expense from an appraiser (which shall not be an affiliate of the Purchaser) acceptable to the Company as nearly contemporaneously as practicable to the time of the Purchaser's election, prepared based on the Company's customary requirements for such appraisals. Election to Delay Foreclosure: Any election by the Purchaser to delay the Commencement of Foreclosure, made in accordance with Section 2.02(b). Election to Foreclose: Any election by the Purchaser to proceed with the Commencement of Foreclosure, made in accordance with Section 2.03(a). Required Collateral Fund Balance: As of any date of determination, an amount equal to the aggregate of all amounts previously required to be deposited in the Collateral Fund pursuant to Section 2.02(d) (after adjustment for all withdrawals and deposits pursuant to Section 2.02(e)) and Section 2.03(b) (after adjustment for all withdrawals and deposits pursuant to Section 2.03(c)) and Section 3.02 to be reduced by all withdrawals therefrom pursuant to Section 2.02(g) and Section 2.03(d). Section 1.02. Definitions Incorporated by Reference. All capitalized terms not otherwise defined in this Agreement shall have the meanings assigned in the Pooling and Servicing Agreement. ARTICLE II. SPECIAL SERVICING PROCEDURES Section 2.01. Reports and Notices. (a) In connection with the performance of its duties under the Pooling and Servicing Agreement relating to the realization upon defaulted Mortgage Loans, the Company, as Servicer, shall provide to the Purchaser the following notices and reports: (i) Within five Business Days after each Distribution Date (or included in or with the monthly statement to Certificateholders pursuant to the Pooling and Servicing Agreement), the Company shall provide to the Purchaser a report indicating for the Trust the number of Mortgage Loans that are (A) thirty days, (B) sixty days, (C) ninety days or more delinquent or (D) in foreclosure, and indicating for each such Mortgage Loan the outstanding principal balance. (ii) Prior to the Commencement of Foreclosure in connection with any Mortgage Loan, the Company shall provide the Purchaser with a notice (sent by telecopier) of such proposed and imminent foreclosure, stating the loan number and the aggregate amount owing under the Mortgage Loan. (b) If requested by the Purchaser, the Company shall make its servicing personnel available (during their normal business hours) to respond to reasonable inquiries by the Purchaser in connection with any Mortgage Loan identified in a report under subsection (a)(i)(B), (a)(i)(C), (a)(i)(D) or (a)(ii) which has been given to the Purchaser; provided, that (1) the Company shall only be required to provide information that is readily accessible to its servicing personnel and is non-confidential and (2) the Company shall not be required to provide any written information under this subsection. (c) In addition to the foregoing, the Company shall provide to the Purchaser such information as the Purchaser may reasonably request concerning each Mortgage Loan that is at least sixty days delinquent and each Mortgage Loan which has become real estate owned, through the final liquidation thereof; provided that the Company shall only be required to provide information that is readily accessible to its servicing personnel and is non-confidential. (d) With respect to all Mortgage Loans which are serviced at any time by the Company through a Subservicer, the Company shall be entitled to rely for all purposes hereunder, including for purposes of fulfilling its reporting obligations under this Section 2.01 on the accuracy and completeness of any information provided to it by the applicable Subservicer. Section 2.02. Purchaser's Election to Delay Foreclosure Proceedings. (a) The Purchaser directs the Company that in the event that the Company does not receive written notice of the Purchaser's election pursuant to subsection (b) below within 24 hours (exclusive of any intervening non-Business Days) of transmission of the notice provided by the Company under Section 2.01(a)(ii), subject to extension as set forth in Section 2.02(b), the Company shall proceed with the Commencement of Foreclosure in respect of such Mortgage Loan in accordance with its normal foreclosure policies without further notice to the Purchaser. Any foreclosure that has been initiated may be discontinued (i) without notice to the Purchaser, if the Mortgage Loan has been brought current or if a refinancing or prepayment occurs with respect to the Mortgage Loan (including by means of a short payoff approved by the Company) (ii) with notice to the Purchaser if the Company has reached the terms of a forbearance agreement with the borrower. In such latter case the Company may complete such forbearance agreement unless instructed otherwise by the Purchaser within one Business Day of notification. (b) In connection with any Mortgage Loan with respect to which a notice under Section 2.01(a)(ii) has been given to the Purchaser, the Purchaser may elect, for reasonable cause as determined by the Purchaser, to instruct the Company to delay the Commencement of Foreclosure until such term as the Purchaser determines that the Company may proceed with the Commencement of Foreclosure. Such election must be evidenced by written notice received within 24 hours (exclusive of any intervening non-Business Days) of transmission of the notice provided by the Company under Section 2.01(a)(ii). Such 24 hour period shall be extended for no longer than an additional four Business Days after the receipt of the information if the Purchaser requests additional information related to such foreclosure; provided, however that the Purchaser will have at least one Business Day to respond to any requested additional information. Any such additional information shall (i) not be confidential in nature and (ii) be obtainable by the Company from existing reports, certificates or statements or otherwise be readily accessible to its servicing personnel. The Purchaser agrees that it has no right to deal with the mortgagor. If the Company's normal foreclosure policy includes acceptance of a deed-in-lieu of foreclosure or short payoff, the Purchaser will be notified and given one Business Day to respond. (c) With respect to any Mortgage Loan as to which the Purchaser has made an Election to Delay Foreclosure, the Purchaser shall obtain a Current Appraisal as soon as practicable, and shall provide the Company with a copy of such Current Appraisal. (d) Within two Business Days of making any Election to Delay Foreclosure, the Purchaser shall remit by wire transfer to the Company, for deposit in the Collateral Fund, an amount, as calculated by the Company, equal to the sum of (i) 125% of the greater of the outstanding Principal Balance of the Mortgage Loan and the value shown in the Current Appraisal referred to in subsection (c) above (or, if such Current Appraisal has not yet been obtained, the Company's estimate thereof, in which case the required deposit under this subsection shall be adjusted upon obtaining of such Current Appraisal), and (ii) three months' interest on the Mortgage Loan at the applicable Mortgage Rate. If any Election to Delay Foreclosure extends for a period in excess of three months (such excess period being referred to herein as the "Excess Period"), the Purchaser shall remit by wire transfer in advance to the Company for deposit in the Collateral Fund the amount, as calculated by the Company, equal to interest on the Mortgage Loan at the applicable Mortgage Rate for the Excess Period. The terms of this Agreement shall no longer apply to the servicing of any Mortgage Loan upon the failure of the Purchaser to deposit the above amounts relating to the Mortgage Loan within two Business Days of the Election to Delay Foreclosure. (e) With respect to any Mortgage Loan as to which the Purchaser has made an Election to Delay Foreclosure, the Company may withdraw from the Collateral Fund from time to time amounts necessary to reimburse the Company for all Advances and Liquidation Expenses thereafter made by the Company as Servicer in accordance with the Pooling and Servicing Agreement. To the extent that the amount of any such Liquidation Expense is determined by the Company based on estimated costs, and the actual costs are subsequently determined to be higher, the Company may withdraw the additional amount from the Collateral Fund. In the event that the Mortgage Loan is brought current by the Mortgagor and the foreclosure action is discontinued, the amounts so withdrawn from the Collateral Fund shall be redeposited therein as and to the extent that reimbursement therefor from amounts paid by the Mortgagor is not prohibited pursuant to the Pooling and Servicing Agreement. Except as provided in the preceding sentence, amounts withdrawn from the Collateral Fund to cover Advances and Liquidation Expenses shall not be redeposited therein or otherwise reimbursed to the Purchaser. If and when any such Mortgage Loan is brought current by the Mortgagor, all amounts remaining in the Collateral Fund in respect of such Mortgage Loan (after adjustment for all withdrawals and deposits pursuant to this subsection) shall be released to the Purchaser. (f) With respect to any Mortgage Loan as to which the Purchaser has made an Election to Delay Foreclosure, the Company shall continue to service the Mortgage Loan in accordance with its customary procedures (other than the delay in Commencement of Foreclosure as provided herein). If and when the Purchaser shall notify the Company that it believes that it is appropriate to do so, the Company shall proceed with the Commencement of Foreclosure. In any event, if the Mortgage Loan is not brought current by the mortgagor by the time the loan becomes 6 months delinquent, the Purchaser's election shall no longer be effective and at the Purchaser's option, either (i) the Purchaser shall purchase the Mortgage Loan from the Trust Fund at a purchase price equal to the fair market value as shown on the Current Appraisal, to be paid by (x) applying any balance in the Collateral Fund to such purchase price, and (y) to the extent of any deficiency, by wire transfer of immediately available funds to the Company or Trustee; or (ii) the Company shall proceed with the Commencement of Foreclosure. (g) Upon the occurrence of a liquidation with respect to any Mortgage Loan as to which the Purchaser made an Election to Delay Foreclosure and as to which the Company proceeded with the Commencement of Foreclosure in accordance with subsection (f) above, the Company shall calculate the amount, if any, by which the value shown on the Current Appraisal obtained under subsection (c) exceeds the actual sales price obtained for the related Mortgaged Property (net of Liquidation Expenses and accrued interest related to the extended foreclosure period), and the Company shall withdraw the amount of such excess from the Collateral Fund, shall remit the same to the Trust Fund and in its capacity as Servicer shall apply such amount as additional Liquidation Proceeds pursuant to the Pooling and Servicing Agreement. After making such withdrawal, all amounts remaining in the Collateral Fund in respect of such Mortgage Loan (after adjustment for all withdrawals and deposits pursuant to subsection (e)) shall be released to the Purchaser. Section 2.03. Purchaser's Election to Commence Foreclosure Proceedings. (a) In connection with any Mortgage Loan identified in a report under Section 2.01(a)(i)(B), the Purchaser may elect, for reasonable cause as determined by the Purchaser, to instruct the Company to proceed with the Commencement of Foreclosure as soon as practicable. Such election must be evidenced by written notice received by the Company by 5:00 p.m., New York City time, on the third Business Day following the delivery of such report under Section 2.01(a)(i). (b) Within two Business Days of making any Election to Foreclose, the Purchaser shall remit to the Company, for deposit in the Collateral Fund, an amount, as calculated by the Company, equal to 125% of the current Principal Balance of the Mortgage Loan and three months' interest on the Mortgage Loan at the applicable Mortgage Rate. If and when any such Mortgage Loan is brought current by the Mortgagor, all amounts in the Collateral Fund in respect of such Mortgage Loan shall be released to the Purchaser. The terms of this Agreement shall no longer apply to the servicing of any Mortgage Loan upon the failure of the Purchaser to deposit the above amounts relating to the Mortgage Loans within two Business Days at the Election to Foreclose. (c) With respect to any Mortgage Loan as to which the Purchaser has made an Election to Foreclose, the Company shall continue to service the Mortgage Loan in accordance with its customary procedures (other than to proceed with the Commencement of Foreclosure as provided herein). In connection therewith, the Company shall have the same rights to make withdrawals for Advances and Liquidation Expenses from the Collateral Fund as are provided under Section 2.02(e), and the Company shall make reimbursements thereto to the limited extent provided under such subsection. The Company shall not be required to proceed with the Commencement of Foreclosure if (i) the same is stayed as a result of the Mortgagor's bankruptcy or is otherwise barred by applicable law, or to the extent that all legal conditions precedent thereto have not yet been complied with or (ii) the Company believes there is a breach of representation or warranties by the Company, which may result in a repurchase or substitution of such Mortgage Loan, or (iii) the Company reasonably believes the Mortgaged Property may be contaminated with or affected by hazardous wastes or hazardous substances (and the Company supplies the Purchaser with information supporting such belief). The Company will repurchase or substitute a Mortgage Loan pursuant to the preceding clause (ii) within the time period specified in the Pooling and Servicing Agreement. Any foreclosure that has been initiated may be discontinued (i) without notice to the Purchaser if the Mortgage Loan has been brought current or if a refinancing or prepayment occurs with respect to the Mortgage Loan (including by means of a short payoff approved by the Company), or (ii) with notice to the Purchaser if the Company has reached the terms of a forbearance agreement unless instructed otherwise by the Purchaser within two Business Days of notification. (d) Upon the occurrence of a liquidation with respect to any Mortgage Loan as to which the Purchaser made an Election to Foreclose and as to which the Company proceeded with the Commencement of Foreclosure in accordance with subsection (c) above, the Company shall calculate the amount, if any, by which the Principal Balance of the Mortgage Loan at the time of liquidation (plus all unreimbursed Advances and Liquidation Expenses in connection therewith other than those paid from the Collateral Fund) exceeds the actual sales price obtained for the related Mortgaged Property, and the Company shall withdraw the amount of such excess from the Collateral Fund, shall remit the same to the Trust Fund and in its capacity as Servicer shall apply such amount as additional Liquidation Proceeds pursuant to the Pooling and Servicing Agreement. After making such withdrawal, all amounts remaining in the Collateral Fund (after adjustment for all withdrawals and deposits pursuant to subsection (c)) in respect of such Mortgage Loan shall be released to the Purchaser. Section 2.04. Termination. (a) With respect to all Mortgage Loans included in the Trust Fund, the Purchaser's rights to make any Election to Delay Foreclosure or any Election to Foreclose and the Company's obligations under Section 2.01 shall terminate (i) at such time as the Certificate Principal Balance of the Class B-5 Certificates has been reduced to zero, (ii) if the greater of (x) 43% (or such lower or higher percentages that represents the Company's actual historical loss experience with respect to the Mortgage Loans in the related pool) of the aggregate principal balance of all Mortgage Loans that are in foreclosure or are more than 90 days delinquent on a contractual basis and REO properties or if the aggregate amount that the Company estimates will be required to be withdrawn from the Collateral Fund with respect to Mortgage Loans as to which the Purchaser has made an Election to Delay Foreclosure or an Election to Foreclose exceeds (z) the Outstanding Certificate Principal Balance of the Class B-5 Certificates, or (iii) upon any transfer by the Purchaser of any interest (other than the minority interest therein, but only if the transferee provides written acknowledgment to the Company of the Purchaser's right hereunder and that such transferee will have no rights hereunder) in the Class B-5 Certificates (whether or not such transfer is registered under the Pooling and Servicing Agreement), including any such transfer in connection with a termination of the Trust Fund. Except as set forth above, this Agreement and the respective rights, obligations and responsibilities of the Purchaser and the Company hereunder shall terminate upon the later to occur of (i) the final liquidation of the last Mortgage Loan as to which the Purchaser made any Election to Delay Foreclosure or any Election to Foreclose and the withdrawal of all remaining amounts in the Collateral Fund as provided herein and (ii) ten (10) Business Day's notice. (b) Purchaser's rights pursuant to Section 2.02 or 2.03 of this Agreement shall terminate with respect to a Mortgage loan as to which the Purchaser has exercised its rights under Section 2.02 or 2.03 hereof, upon Purchaser's failure to deposit any amounts required pursuant to Section 2.02(d) or 2.03(b). (c) Neither the Servicer nor any of its directors, officers, employees or agents shall be under any liability 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 Servicer or any such Person against any liability which would otherwise be imposed by reason 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 Servicer and any director, officer, employee or agent thereof may rely in good faith on any document of any kind prima facie properly executed and submitted by an Person respecting any matters arising hereunder. ARTICLE III. COLLATERAL FUND; SECURITY INTEREST Section 3.01. Collateral Fund. Upon receipt from the Purchaser of the initial amount required to be deposited in the Collateral Fund pursuant to Article 11, the Company shall establish and maintain with itself as a segregated account on its books and records an account (the "Collateral Fund"), entitled "Chase Manhattan Mortgage Corporation, as Servicer, for the benefit of registered holders of Chase Manhattan Acceptance Corporation Multi-Class Mortgage Pass-Through Certificates, Series [ ], Class B-5." Amounts in the Collateral Fund shall continue to be the property of the Purchaser, subject to the first priority security interest granted hereunder for the benefit of the Certificate holders, until withdrawn from the Collateral Fund pursuant to Section 2.02 or 2.03 hereof. Upon the termination of this Agreement and the liquidation of all Mortgage Loans as to which the Purchaser has made any Election to Delay Foreclosure or any Election to Foreclose pursuant to Section 2.04 hereof, the Company shall distribute to the Purchaser all amounts remaining in the Collateral Fund together with any investment earnings thereon. The Collateral Fund shall be an "outside reserve fund" within the meaning of the REMIC Provisions, beneficially owned by the Purchaser. In no event shall the Purchaser (i) take or cause the Trustee or the Company to take any action that could cause any REMIC established under the Trust Agreement to fail to qualify as a REMIC or cause the imposition on any such REMIC of any "prohibited transaction" or "prohibited contribution" taxes or (ii) cause the Trustee or the Company to fail to take any action necessary to maintain the status of any such REMIC as a REMIC. Section 3.02. Collateral Fund Permitted Investments. The Company shall, at the written direction of the Purchaser invest the funds in the Collateral Fund in Collateral Fund Permitted Investments. Such direction shall not be changed more frequently than quarterly. In the absence of any direction, the Company shall select such investments in accordance with the definition of Collateral Fund Permitted Investments in its discretion. All income and gain realized from any investment as well as any interest earned on deposits in the Collateral Fund (net of any losses on such investments) and any payments of principal made in respect of any Collateral Fund Permitted Investment shall be deposited in the Collateral Fund upon receipt. All costs and realized losses associated with the purchase and sale of Collateral Fund Permitted Investments shall be borne by the Purchaser and the amount of net realized losses shall be deposited by the Purchaser in the Collateral Fund. The Company shall periodically (but not more frequently than monthly) distribute to the Purchaser upon request an amount of cash, to the extent cash is available therefor in the Collateral Fund, equal to the amount by which the balance of the Collateral Fund, after giving effect to all other distributions to be made from the Collateral Fund on such date, exceeds the Required Collateral Fund Balance. Any amounts so distributed shall be released from the lien and security interest of this Agreement. Section 3.03. Grant of Security Interest. The Purchaser grants to the Company and the Trustee for the benefit of the Certificateholders a security interest in and lien on all of the Purchaser's right, title and interest, whether now owned or hereafter acquired, in and to: (1) the Collateral Fund, (2) all amounts deposited in the Collateral Fund and Collateral Fund Permitted Investments in which such amounts are invested (and the distributions and proceeds of such investments) and (3) all cash and non-cash proceeds of any of the foregoing, including proceeds of the voluntary or involuntary conversion thereof (all of the foregoing collectively, the "Collateral"). The Purchaser acknowledges the lien on and security interest in the Collateral for the benefit of the Certificateholders. The Purchaser shall take all actions requested by the Company or the Trustee as may be reasonably necessary to perfect the security interest created under this Agreement in the Collateral and cause it to be prior to all other security interests and liens, including the execution and delivery to the Company for filing of appropriate financing statements in accordance with applicable law. The Company shall file appropriate continuation statements, or appoint an agent on its behalf to file such statements, in accordance with applicable law. Section 3.04. Collateral Shortfalls. In the event that amounts on deposit in the Collateral Fund at any time are insufficient to cover any withdrawals therefrom that the Company or the Trustee is then entitled to make hereunder, the Purchaser shall be obligated to pay such amounts to the Company or the Trustee immediately upon demand. Such obligation shall constitute a general corporate obligation of the Purchaser. ARTICLE IV. MISCELLANEOUS PROVISIONS Section 4.01. Amendment. This Agreement may be amended from time to time by the Company and the Purchaser by written agreement signed by the Company and the Purchaser. Section 4.02. Counterparts. This Agreement may be executed 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 4.03. Governing Law. This Agreement shall be construed in accordance with the laws of the State of New York and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws. Section 4.04. Notices. All demands, notices and direction hereunder shall be in writing or by telecopy and shall be deemed effective upon receipt to: (a) in the case of the Company, Chase Manhattan Mortgage Corporation 343 Thornall Street Edison, NJ 08834 or such other address as may hereafter be furnished in writing by the Company, or (b) in the case of the Purchaser, with respect to notices pursuant to Section 2.01, [PURCHASER] [ADDRESS] Attn: ________________ Phone: _______________ Fax: ________________ with respect to all other notices pursuant to this Agreement, --------------------------- [ADDRESS] Attn: _________________ Phone: ________________ Fax: _________________ or such other address as may hereafter be furnished in writing by the Purchaser. Section 4.05. Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever, including regulatory, 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. Section 4.06. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the parties hereto, and all such provisions shall inure to the benefit of the Certificateholders; provided, however, that the rights under this Agreement cannot be assigned by the Purchaser without the consent of the Company. Section 4.07. Article and Section Headings. The article and section headings herein are for convenience of reference only, and shall not limit or otherwise affect the meaning hereof. Section 4.08. Confidentiality. The Purchaser agrees that all information supplied by or on behalf of the Company pursuant to Sections 2.01 or 2.02, including individual account information, is the property of the Company and the Purchaser agrees to hold such information confidential and not to disclose such information. IN WITNESS WHEREOF, the Company and the Purchaser have caused their names to be signed hereto by their respective officers thereunto duly authorized, all as of the day and year first above written. CHASE MANHATTAN MORTGAGE CORPORATION By:_____________________ Name:___________________ Title:__________________ ______________________ By:_____________________ Name:___________________ Title:__________________ EXHIBIT K FORM OF TRANSFEREE'S LETTER Chase Manhattan Acceptance Corporation Series [ ] [DATE] Chase Manhattan Acceptance Corporation 300 Tice Boulevard Woodcliff Lake, NJ 07675 Ladies and Gentlemen: We propose to purchase Chase Manhattan Acceptance Corporation's Multi-Class Mortgage Pass-Through Certificates, Series [ ], Class A-R, described in the Prospectus Supplement, dated [DATE], and Prospectus, dated [DATE]. 1. We certify that (a) we are not a disqualified organization and (b) we are not purchasing such Class A-R Certificates on behalf of a disqualified organization; for this purpose the term "disqualified organization" means the United States, any state or political subdivision thereof, any foreign government, any international organization, any agency or instrumentality of any of the foregoing (except any entity treated as other than an instrumentality of the foregoing for purposes of Section 168(h)(2)(D) of the Internal Revenue Code of 1986, as amended (the "Code")), any organization (other than a cooperative described in Section 521 of the Code) that is exempt from taxation under the Code (unless such organization is subject to tax on excess inclusions) and any organization that is described in Section 1381(a)(2)(C) of the Code. We understand that any breach by us of this certification may cause us to be liable for an excise tax imposed upon transfers to disqualified organizations. 2. We certify that (a) we have historically paid our debts as they became due, (b) we intend, and believe that we will be able, to continue to pay our debts as they become due in the future, (c) we understand that, as beneficial owner of the Class A-R Certificates, we may incur tax liabilities in excess of any cash flows generated by the Class A-R Certificates, and (d) we intend to pay any taxes associated with holding the Class A-R Certificates as they become due. 3. We acknowledge that we will be the beneficial owner of the Class A-R Certificates and:*/ - -------- */ Check appropriate box and if necessary fill in the name of the Transferee's nominee. ______ The Class A-R Certificates will be registered in our name. ______ The Class A-R Certificates will be held in the name of our nominee, ____________________, which is not a disqualified organization. 4. Unless Chase Manhattan Acceptance Corporation ("CMAC") has consented to the transfer to us by executing the form of Consent affixed hereto as Appendix B, we certify that we are a U.S. person; for this purpose the term "U.S. person" means a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof, an estate that is subject to United States federal income tax regardless of the source of its income, or any 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 fiduciaries have the authority to control all sunstantial decisions of the trust. We agree that any breach by us of this certification shall render the transfer of any interest in the Class A-R Certificates to us absolutely null and void and shall cause no rights in the Class A-R Certificates to vest in us. 5. We agree that in the event that at some future time we wish to transfer any interest in the Class A-R Certificates, we will transfer such interest in the Class A-R Certificates only (a) to a transferee that (i) is not a disqualified organization and is not purchasing such interest in the Class A-R Certificates on behalf of a disqualified organization, (ii) is a U.S. person and (iii) has delivered to CMAC a letter in the form of this letter (including the affidavit appended hereto) and, if requested by CMAC, an opinion of counsel (in a form acceptable to CMAC) that the proposed transfer will not cause the interest in the Class A-R Certificates to be held by a disqualified organization or a person who is not a U.S. person or (b) with the written consent of CMAC. 6. We hereby designate Chase Manhattan Mortgage Corporation as our fiduciary to act as the tax matters person for the Series [ ] REMIC. Very truly yours, [PURCHASER] By: ________________________ Name: Title: Accepted as of __________ __, 199_ Chase Manhattan Acceptance Corporation By: _________________________________ Name: Title: APPENDIX A Affidavit pursuant to (i) Section 860E(e)(4) of the Internal Revenue Code of 1986, as amended, and (ii) certain provisions of the Pooling and Servicing Agreement Under penalties of perjury, the undersigned declares that the following is true: (1) He or she is an officer of ____________________________ (the "Transferee"), (2) the Transferee's Employee Identification number is __________, (3) the Transferee is not a "disqualified organization" (as defined below), has no plan or intention of becoming a disqualified organization, and is not acquiring any of its interest in the Chase Manhattan Acceptance Corporation, Multiclass Mortgage Pass-Through Certificates, Series [ ], Class A-R on behalf of a disqualified organization or any other entity, (4) unless Chase Manhattan Acceptance Corporation ("CMAC") has consented to the transfer to the Transferee by executing the form of Consent affixed as Appendix B to the Transferee's Letter to which this Certificate is affixed as Appendix A, the Transferee is a "U.S. person" (as defined below), (5) that no purpose of the transfer is to avoid or impede the assessment or collection of tax, (6) the Transferee has historically paid its debts as they became due, (7) the Transferee intends, and believes that it will be able, to continue to pay its debts as they become due in the future, (8) the Transferee understands that, as beneficial owner of the Class A-R Certificates, it may incur tax liabilities in excess of any cash flows generated by the Class A-R Certificates, (9) the Transferee intends to pay any taxes associated with holding the Class A-R Certificates as they become due, and (10) The Transferee consents to any amendment of the Pooling and Servicing Agreement that shall be deemed necessary by CMAC (upon advice of counsel) to constitute a reasonable arrangement to ensure that the Class A-R Certificates will not be owned directly or indirectly by a disqualified organization; For purpose of this affidavit, the term "disqualified organization" means the United States, any state or political subdivision thereof, any foreign government, any international organization, any agency or instrumentality of any of the foregoing (except any entity treated as other than an instrumentality of the foregoing for purposes of Section 168(h)(2)(D) of the Internal Revenue Code of 1986, as amended (the "Code")), any organization (other than a cooperative described in Section 521 of the Code) that is exempt from taxation under the Code (unless such organization is subject to tax on excess inclusions) and any organization that is described in Section 1381(a)(2)(C) of the Code and the term "U.S. person" means a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof, an estate that is subject to United States federal income tax regardless of the source of its income, or any 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 fiduciaries have the authority to control all sunstantial decisions of the trust _______________________________ By:____________________ _______________________________ Address of Investor for receipt of distribution: Address of Investor for receipt of tax information: (Corporate Seal) Attest: _____________________ ________________________, Secretary Personally appeared before me the above-named ______________, known or proved to me to be the same person who executed the foregoing instrument and to be the _______ of the Investor, and acknowledged to me that he executed the same as his free act and deed and the free act and deed of the Investor. Subscribed and sworn before me this _______ day of ______ _______, 19__. ____________________ Notary Public County of ______ State of _______ My commission expires the __________ day of _______ By: __________________________ Name: ___________________ Title: ____________________ Dated: _____________ APPENDIX B CONSENT _________________________ (Transferee) _________________________ _________________________ Ladies and Gentlemen: Chase Manhattan Acceptance Corporation ("CMAC") hereby consents to the transfer to, and registration in the name of, the Transferee (or, if applicable, registration in the name of such Transferee's nominee of the Multiclass Mortgage Pass-Through Certificates, Series [ ], Class A-R described in the Transferee's Letter to which this Consent is appended, notwithstanding CMAC's knowledge that the Transferee is not a U.S. person (as defined in such Transferee's Letter). Chase Manhattan Acceptance Corporation Dated: _______________ By: __________________________________ EXHIBIT L REQUEST FOR RELEASE OF DOCUMENTS To: [TRUSTEE] [ADDRESS] Re: In connection with the administration of the Mortgage Loans held by you, as Trustee, pursuant to the above-captioned Pooling and Servicing Agreement, we request the release, and hereby acknowledge receipt, of the Mortgage File for the Mortgage Loan described below, for the reason indicated. Mortgage Loan Number: Mortgagor Name, Address & Zip Code: Reason for Requesting Documents (check one): _______ 1. Mortgage Paid in Full _______ 2. Foreclosure _______ 3. Substitution _______ 4. Other Liquidation _______ 5. Nonliquidation Reason: __________________________ By: _____________________________ (authorized signer) Issuer: __________________________ Address: __________________________ __________________________ Date: _____________________________ Trustee [TRUSTEE] Please acknowledge the execution of the above request by your signature and date below: ____________________________ _________________ Signature Date Documents returned to Trustee: ____________________________ _________________ Trustee Date EX-5.1 6 OPINION RE: LEGALITY October 19, 1999 Chase Funding, Inc. Chase Manhattan Acceptance Corporation 343 Thornall Street Edison, NJ 08837 Ladies and Gentlemen: We have acted as counsel to Chase Funding, Inc., a New York corporation, and Chase Manhattan Acceptance Corporation, a Delaware corporation, (each, a "Seller") in connection with the Registration Statement on Form S-3 (the "Registration Statement") filed on October 18, 1999 with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the "Act") in respect of Mortgage Pass-Through Certificates ("Certificates") which the Sellers plan to offer in series, each series to be issued under a separate pooling and servicing agreement (a "Pooling and Servicing Agreement"), in all material respects relevant hereto substantially in the form of Exhibit 4.1 to the Registration Statement, among a Seller, Chase Manhattan Mortgage Corporation or another servicer to be identified in the prospectus supplement for such series of Certificates (the "Servicer" for such series), and a bank, trust company or other entity with trust powers, to be identified in the prospectus supplement for such series of Certificates, as trustee (the "Trustee" for such series). We have examined originals or copies certified or otherwise identified to our satisfaction of such documents and records of each Seller, and such public documents and records, as we have deemed necessary as a basis for the opinions hereinafter expressed. Based on the foregoing and having regard for such legal considerations as we have deemed relevant, we are of the opinion that: 1. When, in respect of a series of Certificates, a Pooling and Servicing Agreement has been duly authorized by all necessary action and duly executed and delivered by a Seller, the Servicer and the Trustee for such series, such Pooling and Servicing Agreement will be a legal and valid obligation of such Seller; and Chase Funding, Inc. Chase Manhattan Acceptance Corporation October 19, 1999 Page 2 2. When a Pooling and Servicing Agreement for a series of Certificates has been duly authorized by all necessary action and duly executed and delivered by a Seller, the Servicer and the Trustee for such series, and when the certificates of such series of Certificates have been duly executed, countersigned, issued and sold as contemplated in the Registration Statement and the prospectus delivered pursuant to Section 5 of the Act in connection therewith, such Certificates will be legally and validly issued, fully paid and nonassessable, and the holders of such Certificates will be entitled to the benefits of such Pooling and Servicing Agreement. The form of Pooling and Servicing Agreement indicates that it is governed by the laws of the State of New York. We express no opinion as to the law of any jurisdiction other than the law of the State of New York, the General Corporation Law of the State of Delaware and the federal law of the United States of America. We hereby consent to the filing of this opinion as an Exhibit to the Registration Statement and to the reference to this firm in the Registration Statement and the related prospectus under the heading "Legal Matters", without admitting that we are "experts" within the meaning of the Act or the rules and regulations of the Securities and Exchange Commission issued thereunder with respect to any part of the Registration Statement including this Exhibit. Very truly yours, MORGAN, LEWIS & BOCKIUS LLP EX-8.1 7 OPINION RE: TAX MATTERS October 19, 1998 Chase Funding, Inc. Chase Manhattan Acceptance Corporation 343 Thornall Street Edison, NJ 08837 Ladies and Gentlemen: We have acted as counsel to Chase Funding, Inc., a New York corporation, and Chase Manhattan Acceptance Corporation, a Delaware corporation, (each, a "Seller") in connection with the Registration Statement on Form S-3 (the "Registration Statement") filed with the Securities and Exchange Commission on October 18, 1999, pursuant to the Securities Act of 1933, as amended (the "Act") in respect of Mortgage Pass-Through Certificates ("Certificates") that the Sellers plan to offer in series. We hereby confirm that the discussion of federal income tax consequences appearing in the Prospectus under the heading "Federal Income Tax Consequences" and in the Prospectus Supplement under the headings "Terms of the Certificates -- Federal Income Tax Consequences" and "Federal Income Tax Consequences" is our opinion as to the material federal income tax consequences of purchasing, owning and disposing of Certificates and we adopt it as such. Our opinion is based upon existing federal income tax laws, regulations, administrative pronouncements and judicial decisions. All such authorities are subject to change, either prospectively or retroactively. No assurance can be provided as to the effect of any such change upon our opinion. In addition, our opinion is based on the facts and circumstances set forth in the Prospectus and the Prospectus Supplement and in the other documents reviewed by us. Our opinion as to the matters set forth herein could change with respect to a particular Series of Certificates as a result of changes in facts and circumstances, changes in the terms of the documents reviewed by us, or changes in the law subsequent to the date hereof. As the Registration Statement contemplates Series of Certificates with numerous different characteristics, the particular characteristics of each Series of Certificates must be considered in determining the applicability of this opinion to a particular Series of Certificates. The opinion contained in each Prospectus Supplement and Prospectus prepared pursuant to the Registration Statement is, accordingly, deemed to be incorporated herein. Chase Funding, Inc. Chase Manhattan Acceptance Finance Corporation October 19, 1999 Page 2 The opinion set forth herein has no binding effect on the Internal Revenue Service or any court. No assurance can be given that, if the matter were contested, a court would agree with the opinion set forth herein. In giving the foregoing opinion, we express no opinion other than as to the federal income tax law. We hereby consent to the filing of this letter as an Exhibit to the Registration Statement and to the reference to this firm in the Registration Statement under the heading "Federal Income Tax Consequences", without admitting that we are "experts" within the meaning of the Act or the rules and regulations of the Securities and Exchange Commission issued thereunder. Very truly yours, MORGAN, LEWIS & BOCKIUS LLP -----END PRIVACY-ENHANCED MESSAGE-----