EXECUTION COPY FANNIE MAE Issuer and Trustee TRUST AGREEMENT Dated as of August 1, 2002 for GUARANTEED REMIC PASS-THROUGH CERTIFICATES FANNIE MAE REMIC TRUST 2002-W9 evidencing beneficial interests in FIRST LIEN FHA-INSURED OR VA-GUARANTEED RESIDENTIAL MORTGAGE LOANS Authorized by Title III of the National Housing Act, 12 U.S.C. 1719(d)
Table of Contents Page ARTICLE I DEFINED TERMS Section 1.01. General Definitions...2 ARTICLE II TRANSFER OF MORTGAGE LOANS; THE TRUSTS; REMIC DECLARATIONS Section 2.01. Transfer of Mortgage Loans...10 Section 2.02. The Lower Tier REMIC...10 Section 2.03. Representations and Warranties...11 Section 2.04. Distributions from Certificate-LT Account; Fannie Mae Guaranty of Lower Tier Distribution Amounts...11 Section 2.05. The Trust Fund...11 Section 2.06. REMIC Declarations; Other REMIC Matters...12 ARTICLE III THE TRUST FUND CERTIFICATES Section 3.01. Classes of Trust Fund Certificates...13 Section 3.02. Distributions...13 Section 3.03. Issuance of Certificates...14 Section 3.04. Distributions on Trust Fund Certificates; Fannie Mae Guaranty...14 Section 3.05. Information to Certificateholders...14 ARTICLE IV SERVICING OF MORTGAGE LOANS, ACCOUNTS; DISTRIBUTIONS Section 4.01. General...16 Section 4.02. Transfers of Mortgaged Property...16 Section 4.03. Accounting Records...17 Section 4.04. Servicing Compensation: Payment of Certain Expenses by Fannie Mae...17 Section 4.05. Certificate-LT Account; Distributions...17 Section 4.06. Certificate Account; Distributions...18 Section 4.07. Investments...18 Section 4.08. Trustee s Responsibilities Regarding Foreclosed Properties...19
ARTICLE V RESIDUAL CERTIFICATES Section 5.01. Execution, Authentication, Availability and Dating of the Residual Certificates...20 Section 5.02. Registration and Registration of Transfer of the Residual Certificates...20 Section 5.03. Mutilated, Destroyed, Lost or Stolen Residual Certificates...22 Section 5.04. Person Deemed Owner of the Residual Certificates...22 Section 5.05. Maintenance of Office or Agency for the Residual Certificates...22 Section 5.06. Reference in the Residual Certificates to Supplemental Agreements...23 Section 5.07. Amendment Relating to Transfers to Disqualified Organizations...23 Section 5.08. Demands, Notices, Communications...23 ARTICLE VI LIMITATION OF LIABILITY Section 6.01. General Limitation...24 Section 6.02. Measure of Liability...24 ARTICLE VII FANNIE MAE Section 7.01. Resignation...25 Section 7.02. Merger or Consolidation...25 Section 7.03. Succession upon Default...25 Section 7.04. Fannie Mae as Holder...27 ARTICLE VIII TERMINATION Section 8.01. Termination...28 ARTICLE IX SUPPLEMENTAL AGREEMENTS Section 9.01. Permissible Without Action by Certificateholders...30 Section 9.02. Waivers and Supplemental Agreements with Consent of Holders...30 ii
ARTICLE X MISCELLANEOUS Section 10.01. Holders...32 Section 10.02. Governing Law...32 Section 10.03. Demands, Notices, Communications...32 Section 10.04. Severability of Provisions...32 EXHIBITS A SCHEDULE OF MORTGAGE LOANS B-1 FORM OF R CLASS REMIC CERTIFICATE B-2 FORM OF RL CLASS REMIC CERTIFICATE B-3 FORM OF REGULAR CERTIFICATE C FORM OF [R] [RL] CLASS TAX MATTERS TRANSFER AFFIDAVIT D 2002-W9 LOWER TIER REMIC STRUCTURE E PROSPECTUS DATED AUGUST 5, 2002 iii
FANNIE MAE GUARANTEED REMIC PASS-THROUGH SECURITIES PROGRAM TRUST AGREEMENT THIS TRUST AGREEMENT made, executed and published as of the first day of August, 2002, at Washington, D.C. by the Fannie Mae, a body corporate organized and existing under the laws of the United States, in its corporate capacity and in its capacity as trustee: W I T N E S S E T H : WHEREAS, Fannie Mae is authorized pursuant to Section 304(d) of Title III of the National Housing Act (12 U.S.C. 1719(d)) to set aside mortgage loans held by it under such Section 304 and to issue and sell securities based upon the mortgage loans so set aside; WHEREAS, Fannie Mae has purchased the fixed rate, first lien residential mortgage loans identified in Exhibit A hereto and intends to set aside in the Lower Tier REMIC (as defined herein) such mortgage loans; and WHEREAS, such mortgage loans will be serviced pursuant to the Sale and Servicing Agreement (as defined herein); and WHEREAS, Fannie Mae intends to issue the Lower Tier Interests (as defined herein) evidencing the entire beneficial ownership interest in the Lower Tier REMIC; and WHEREAS, Fannie Mae intends to establish the Trust Fund (as defined herein) and set aside therein the Lower Tier Regular Interests (as defined herein); and WHEREAS, Fannie Mae will elect to treat each of the Lower Tier REMIC and the Trust Fund as a real estate mortgage investment conduit ( REMIC ) within the meaning of Section 860D of the Internal Revenue Code of 1986, as amended; and WHEREAS, Fannie Mae intends to issue the Trust Fund Certificates which evidence the entire beneficial ownership interest in the Trust Fund; NOW THEREFORE, the parties to this Trust Agreement, in the several capacities hereinabove set forth, do hereby declare and establish this Trust Agreement and do hereby undertake and otherwise agree as follows:
ARTICLE I DEFINED TERMS Section 1.01. General Definitions. Whenever used in this Trust Agreement, the following words and phrases shall have the following meanings: Aggregate Stated Principal Balance: With respect to any Distribution Date, the aggregate of the Stated Principal Balances immediately prior to such Distribution Date of all Mortgage Loans which were Outstanding Mortgage Loans as of such Distribution Date. Authorized Officer: The Chairman of the Board, the President or any Executive Vice President, Senior Vice President or Vice President of Fannie Mae. Business Day: Any day other than (i) a Saturday or a Sunday, or (ii) a day on which either the Federal Reserve Bank of New York or Boston authorizes banking institutions in the Second or First Federal Reserve District, respectively, to be closed. Cash Flow Distribution Amount: As to any calendar month, the aggregate amount of principal distributable in respect of the Mortgage Loans in such calendar month. Category 2 Loans: As specified in the Prospectus. Certificate or REMIC Certificate: Any one of the Guaranteed REMIC Pass-Through Certificates issued pursuant to this Trust Agreement, including the Residual Certificates, and referenced in Section 3.01. The term Certificate or REMIC Certificate does not include the Lower Tier Regular Interests. Certificate Account: The account created and maintained pursuant to Section 4.06 hereof. Certificate Balance: As to any Certificate (other than the Residual Certificates) prior to the initial Distribution Date, the denomination thereof and, as to any such Certificate subsequent to such initial Distribution Date, the denomination thereof multiplied by the then applicable Class Factor. Certificate Distribution Amount: As to any calendar month, the sum of: (i) all interest accrued on the interest-bearing Trust Fund Certificates for the Interest Accrual Period immediately preceding such calendar month, and (ii) the Principal Distribution Amount for such calendar month. Certificate LT Account: The account created and maintained pursuant to Section 4.05 hereof. Certificate Register: The register maintained pursuant to Section 5.02 hereof. 2
Certificate Registrar: The registrar and Transfer Agent appointed pursuant to Section 5.02 hereof. Certificateholder: As to any Certificate other than the Residual Certificates, the entity acting as nominee for the Depository. As to any of the Residual Certificates, the registered owner in the Certificate Register maintained by the Certificate Registrar pursuant to Section 5.02 hereof. Charter Act: The Federal National Mortgage Association Charter Act (12 U.S.C. 1716 et seq.), as amended and in effect from time to time. Class: As to the Certificates, all Certificates with the same terms. As to the Lower Tier Regular Interests, all Lower Tier Regular Interests issued with the same designation. Class Balance: With respect to any Class of Certificates at any time (other than the Residual Certificates), the aggregate of the Certificate Balances of all Certificates of such Class. As to any Class of Lower Tier Regular Interests as of any date of determination, the original principal balance thereof as set forth in the Lower Tier Schedule, less the aggregate amount of all Lower Tier Principal Distribution Amounts allocable to such Class in accordance with Section 2.02 hereof prior to such date of determination. Class Factor: As to any date of determination and any Class of Certificates, (other than the Interest Only Certificates and the Residual Certificates) a fraction the numerator of which is (a) the aggregate of the denominations of all Certificates of such Class less (b) the aggregate amount of all Principal Distribution Amounts, if any, prior to such date of determination and the denominator of which is the aggregate of the denominations of all Certificates of such Class. As to any date of determination and the IO Class, a fraction, the numerator of which is the sum of the percentages of the balances specified for the IO-1 Component and the IO-2 Component balance, in each case as specified under Reference Sheet Notional Class in the Prospectus, and the denominator of which is the original Class Balance thereof. Code: The Internal Revenue Code of 1986, as amended, including any successor or amendatory provisions. Companion Class or Companion Component: With respect to each Lower Tier Regular Interest, any Class of Trust Fund Certificates or any Component, as applicable, appearing opposite such Lower Tier Regular Interest in the Lower Tier Schedule. Components: As specified in the Prospectus. Corporate Trust Office: With respect to the presentation and surrender of the Certificates for the final distribution thereon, and with respect to the presentation and surrender of any Residual Certificate for any distribution thereon on the final Distribution Date for the Certificates, the office of the New York Presenting Agent or the principal corporate trust office of the Paying Agent and the Certificate Registrar located at 225 Franklin Street, Boston, Massachusetts 02110; with respect to notices to the Paying Agent and the Certificate Registrar, the foregoing address; and for all other purposes, either the office of the New York Presenting Agent or the foregoing address or such other address or addresses as Fannie Mae may designate 3
from time to time by notice to the Holders of Certificates, provided that there shall at all times be a New York Presenting Agent. Depository: The Depository Trust Company, a New York chartered limited purpose trust company, or any successor depository selected or approved by Fannie Mae. Disqualified Organization: A disqualified organization as defined in Section 860E(e)(5) of the Code. Distribution Date: The 25th day (or, if such 25th day is not a Business Day, the Business Day immediately following the 25th day) of each month, beginning in September 2002. Due Period: With respect to any Distribution Date, the calendar month prior to the month in which such Distribution Date occurs. Eligible Depository: Any Reserve Bank or any depository institution or trust company incorporated under the laws of the United States of America or any state thereof and subject to supervision and examination by federal or state banking authorities, so long as at the time of determination of eligibility the commercial paper or other short-term debt obligations of such depository institution or trust company (or, in the case of a depository institution that is the principal subsidiary of a holding company, the commercial paper or other short-term debt obligations of such holding company) have the Highest Credit Rating Available from at least one Rating Agency. Eligible Investments: Any one or more of the following obligations or securities denominated in United States dollars: A. direct obligations of, and obligations fully guaranteed by, the United States of America, Fannie Mae, the Federal Home Loan Banks, or any agency or instrumentality of the United States of America the obligations of which are backed by the full faith and credit of the United States of America; B. demand and time deposits in, certificates of deposit of, or bankers acceptances issued by, any depository institution or trust 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 or contractual commitment providing for such investment the commercial paper or other unsecured short-term debt obligations of such depository institution or trust company (or, in the case of a depository institution which is the principal subsidiary of a holding company, the commercial paper or other unsecured short-term debt obligations of such holding company) have the Highest Credit Rating Available from a Rating Agency; C. repurchase obligations with respect to any security described in clause A above entered into with a depository institution or trust company (acting as principal) described in clause B; D. commercial paper (including both non-interest-bearing discount obligations and interest-bearing obligations payable on demand or on a specified date not more than 4
one year after the date of issuance thereof) having the Highest Credit Rating Available from a Rating Agency at the time of such investment and maturing no later than the date prescribed in Section 4.07; E. certificates or receipts representing direct ownership interests in future interest or principal payments on obligations of the United States of America or its agencies or instrumentalities (which obligations are backed by the full faith and credit of the United States of America) held by a custodian on behalf of the holders of such receipts; and F. federal funds invested with depository institutions with a rating of C or better by Thomson Bankwatch, or a comparable rating by other bankwatch services. Event of Default: As defined in Section 7.03 hereof. Fannie Mae: Fannie Mae, a body corporate organized and existing under the laws of the United States, or its successor in interest or any successor appointed as herein provided. Unless the context requires otherwise, the term Fannie Mae shall be deemed to refer to Fannie Mae acting in its corporate capacity and not in its capacity as Trustee hereunder. Final Distribution Date: The Distribution Date in August 2042. Highest Credit Rating Available: The highest rating category (disregarding any plus or minus or any numerical or other subcategory) of any Rating Agency. Holders: With respect to the Trust Fund, all of the Certificateholders of Trust Fund Certificates. With respect to the Lower Tier REMIC, the RL Class Certificateholder and the Trustee, as the case may be, as holders of the Lower Tier Interests. Interest Accrual Period: With respect to each Class of Trust Fund Certificates, as specified in the Prospectus. With respect to each Lower Tier Regular Interest and each Distribution Date, the calendar month prior to the month in which such Distribution Date occurs. Interest Only Certificates: As specified in the Prospectus. Interest Rate: With respect to each Class of interest-bearing Certificates, the rate per annum specified or determined as provided in the Prospectus. With respect to each interestbearing Lower Tier Regular Interest, the applicable per annum rate specified in the Lower Tier Schedule. Issue Date: August 1, 2002. Issue Date Aggregate Principal Balance: The aggregate of the Issue Date Principal Balances of all Mortgage Loans transferred and assigned to the Lower Tier REMIC. Issue Date Principal Balance: The principal balance of a Mortgage Loan as reflected in the Mortgage Loan Schedule. 5
Liquidated Mortgage Loan: Any Mortgage Loan (i) with respect to which cash is received in connection with the liquidation of such Mortgage Loan, whether through insurance or guaranty proceeds, condemnation awards, proceeds of any sale of the Mortgaged Property or otherwise (and whether or not such cash is equal to the unpaid principal amount thereof and all interest accrued thereon) in an amount determined by Fannie Mae in its reasonable judgment to be the full amount finally recoverable on account of such Mortgage Loan, or (ii) which is purchased from the Trust pursuant to Section 2.03 hereof. Lower Tier Interests: The Lower Tier Regular Interests and the RL Class Certificate. Lower Tier Distribution Amount: With respect to the Lower Tier REMIC and any Distribution Date, an amount equal to the sum of (i) the Lower Tier Interest Distribution Amount for such Distribution Date and (ii) the Lower Tier Principal Distribution Amount for such Distribution Date. Lower Tier Interest Distribution Amount: With respect to the Lower Tier REMIC and any Distribution Date, the aggregate of one month s interest on the Class Balance of each Class of Lower Tier Regular Interests at the respective Interest Rate therefor. Lower Tier Principal Distribution Amount: With respect to each Lower Tier Regular Interest and any Distribution Date, the sum of the following amounts, without duplication: (i) the monthly payment of principal due on each Mortgage Loan during the related Due Period, (ii) the Stated Principal Balance of each Mortgage Loan that Fannie Mae repurchases during the related Due Period, (iii) the Stated Principal Balance of each Mortgage Loan reported as having become a Liquidated Loan during the related Due Period and (iv) each partial or full principal prepayment reported as having been received during the related Due Period from the borrower on any Mortgage Loan. Lower Tier Regular Interests: The Lower Tier Interests specified in the Lower Tier Schedule other than the RL Class Certificate. Lower Tier REMIC: The corpus of one of the REMICs established by this Trust Agreement, consisting of (i) the Mortgage Loans and all proceeds thereof and (ii) the Certificate- LT Account and all amounts held therein or credited thereto, as to which a REMIC election will have been made. Lower Tier Schedule: The schedule attached hereto as Exhibit D. Mortgage: The mortgage, deed of trust or other instrument creating a first lien on the real property securing a Mortgage Note. 6
Mortgage Interest Rate: The annual interest rate required to be paid by a Mortgagor under the terms of the related Mortgage Note. Mortgage Loan: Each of the mortgage loans identified in the Mortgage Loan Schedule attached hereto as from time to time is held as a part of the Lower Tier REMIC. Mortgage Loan Schedule: The schedule of Mortgage Loans attached hereto as Exhibit A. Mortgage Note: The note or other evidence of indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan. Mortgaged Property: The real property and all improvements thereon and appurtenant thereto which secure a Mortgage Loan. Mortgagor: The obligor on a Mortgage Note. Net Mortgage Rate: With respect to any Mortgage Loan, a per annum rate equal to the Mortgage Interest Rate less the percentage with respect to such Mortgage Loan identified on the Mortgage Loan Schedule. New York Presenting Agent: State Street Bank and Trust Company, N.A., with its offices at 61 Broadway, New York, New York or such other office within the Borough of Manhattan, City of New York, State of New York, as Fannie Mae may appoint by notice to the Trustee. Officer s Certificate: A certificate signed by the Chairman of the Board, the President or any Executive Vice President, Senior Vice President or Vice President of Fannie Mae. Opinion of Counsel: A written opinion of counsel, who may be counsel for Fannie Mae. Outstanding Mortgage Loan: With respect to any Distribution Date, any Mortgage Loan which was not paid in full prior to the preceding Due Period and which did not become a Liquidated Mortgage Loan prior to such preceding Due Period. Paying Agent: State Street Bank and Trust Company, a Massachusetts banking corporation, until a successor Person shall be appointed by Fannie Mae. Person: Any legal person, including any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or any political subdivision thereof. Principal Distribution Amount: With respect to a particular calendar month, an amount equal to the aggregate amount of principal distributable in respect of the Mortgage Loans in such calendar month. Prospectus: The Prospectus, dated August 5, 2002, relating to the Guaranteed REMIC Pass-Through Certificates, Fannie Mae REMIC Trust 2002-W9, a copy of which is attached hereto as Exhibit E. 7
Purchase Price: With respect to any Mortgage Loan purchased from the Lower Tier REMIC pursuant to Section 2.03 hereof, an amount equal to the Stated Principal Balance thereof immediately prior to the Distribution Date upon which the proceeds of such repurchase are to be distributed, together with accrued and unpaid interest thereon at the applicable Net Mortgage Rate to the end of the Due Period preceding such Distribution Date. R Class Certificate and RL Class Certificate: The Certificates designated as such and issued hereunder. Rating Agency: A nationally recognized statistical rating organization. Record Date: As to any Distribution Date, the last day of the month preceding the month of such Distribution Date, or in the case of the initial Distribution Date, on the Settlement Date. Regulations: The Treasury regulations issued on December 23, 1992, relating to REMICs. 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 REMICs, which appear at Sections 860A through 860G of Subchapter M of Chapter 1 of the Code, and related provisions, and regulations (either proposed, temporary or final) and rulings promulgated thereunder, as the foregoing may be in effect from time to time. REMIC Trust: Either the Lower Tier REMIC or the Trust Fund, as the context requires. Reserve Bank: Any Federal Reserve Bank, including its branches. Residual Certificate: The R Class Certificate or the RL Class Certificate, as the context requires. Sale and Servicing Agreement: The Sale and Servicing Agreement with respect to the Mortgage Loans, dated as of August 1, 2002, by and between Fannie Mae, as Purchaser, and Lehman Capital, A Division of Lehman Brothers Holdings Inc., as Seller and Purchaser. Servicer: Lehman Capital, A Division of Lehman Brothers Holdings Inc., a Delaware corporation, or any successor. Settlement Date: August 30, 2002. Stated Principal Balance: As specified in the Prospectus. Supplemental Agreement: Any supplemental agreement entered into pursuant to Article IX. Transfer Agent: State Street Bank and Trust Company, a Massachusetts banking corporation, until a successor Person shall be appointed by Fannie Mae. 8
Trust Agreement: This Trust Agreement, dated as of August 1, 2002, by and between Fannie Mae, in its corporate capacity, and Fannie Mae, in its capacity as Trustee, as the same is originally executed, or as modified, amended or supplemented in accordance with the applicable provisions hereof. Trust Fund: The corpus of one of the trusts created by this Trust Agreement, consisting of (i) the Lower Tier Regular Interests and all proceeds thereof and (ii) the Certificate Account and all amounts held therein or credited thereto. Trust Fund Certificates: All Certificates evidencing beneficial ownership interests in the Trust Fund. Trustee: Fannie Mae, in its capacity as trustee of each REMIC Trust formed hereunder, or its successor in interest in such capacity, or any successor trustee appointed as herein provided. Code. U.S. Person: A United States person within the meaning of section 7701(a)(30) of the 9
ARTICLE II TRANSFER OF MORTGAGE LOANS; THE TRUSTS; REMIC DECLARATIONS Section 2.01. Transfer of Mortgage Loans. Fannie Mae, acting in its corporate capacity, does hereby transfer, assign, set over and otherwise convey to Fannie Mae, acting in its capacity as Trustee for the Holders of Certificates evidencing beneficial ownership interests in the Lower Tier REMIC established hereby, all of Fannie Mae s right, title and interest in and to the Mortgage Loans identified in the Mortgage Loan Schedule attached hereto, including all payments of principal and interest thereon received on and after the Issue Date (other than the portion of any payment representing interest for a period prior to the Issue Date and other than any installments of principal due in respect of a Mortgage Loan on the Issue Date). Section 2.02. The Lower Tier REMIC. The beneficial ownership interest of the Lower Tier REMIC shall be evidenced by the interests having the designations, original Class Balances, Interest Rates and Final Distribution Dates set forth on the Lower Tier Schedule. The Lower Tier Regular Interests shall be issued as non-certificated interests and recorded on the records of the Lower Tier REMIC as being issued to and held by Fannie Mae in its capacity as Trustee of the Trust Fund. The RL Class Certificate shall be issued as a single fully registered certificate substantially in the form of Exhibit B-2 hereto. The RL Class Certificate may be transferred and is otherwise subject to the provisions of Article V hereof. The aggregate amount of principal and interest distributable in respect of the Lower Tier Regular Interests during any calendar month shall equal the Lower Tier Distribution Amount for such calendar month. On each Distribution Date, the portion of the Lower Tier Distribution Amount distributable thereon shall be applied first to the distribution of interest accrued on each applicable Class of Lower Tier Regular Interests during the preceding Interest Accrual Period at the per annum rate specified on the Lower Tier Schedule and second to the principal thereof as described below. On each Distribution Date, the Lower Tier Principal Distribution Amount shall be applied as principal of particular Lower Tier Regular Interests in amounts corresponding to the respective amounts required to be applied as principal of their related Companion Classes or Companion Components, as applicable, from the Principal Distribution Amount as provided herein. All computations of interest accrued on the Lower Tier Regular Interests shall be made as if each year consisted of 12 months of 30 days each. Distributions on the Lower Tier Regular Interests shall be made to the Trustee of the Trust Fund by transfer of immediately available funds to the Certificate Account. No distribution will be made on the RL Class Certificate, except that any distribution of the proceeds of the final remaining assets of the Lower Tier REMIC shall be distributed to the Holder thereof upon presentation and surrender of the RL Class Certificate at the Corporate Trust Office or such other office or address as may be specified in the notice of such final distribution 10
from Fannie Mae. Fannie Mae hereby initially appoints State Street Bank and Trust Company at its corporate trust office as Paying Agent for the purpose of making distributions on the RL Class Certificate as provided herein. Fannie Mae will distribute to the Holder of the RL Class Certificate the proceeds of the remaining assets of the Lower Tier REMIC, if any, after the Class Balances of the Lower Tier Regular Interests have been reduced to zero. Interest accrued on each Class of Lower Tier Regular Interests for the related Interest Accrual Period at the applicable Interest Rate shall be distributed on each applicable Distribution Date. The total amount of interest to be distributed with respect to any Lower Tier Regular Interest on any Distribution Date shall be equal to interest at the applicable Interest Rate on the Class Balance of such Lower Tier Regular Interest prior to such Distribution Date. Section 2.03. Representations and Warranties. In connection with the Mortgage Loans transferred and assigned hereunder, Fannie Mae may, at its option, elect either to repurchase any Mortgage Loan as to which there shall have occurred (i) a material breach of any representation and warranty made (including, for this purpose, any eligibility requirement) under the Sale and Servicing Agreement and (ii) the failure by any responsible party to take appropriate action with respect thereto pursuant to the Sale and Servicing Agreement. The Trustee agrees to release any Mortgage Loan from the Lower Tier REMIC upon payment of the Purchase Price therefor in the event that such Mortgage Loan is the subject of a breach of a representation and warranty and an election has been made to repurchase the Mortgage Loan. In connection with such transfer of each Mortgage Loan, Fannie Mae shall have taken possession of the related Mortgage Note endorsed in blank by the Servicer under the Sale and Servicing Agreement, together with such other related documents as Fannie Mae shall have deemed necessary. In the event that Fannie Mae shall discover subsequent to the transfer and assignment of a Mortgage Loan to the Trustee that the actual principal balance of such Mortgage Loan at the date such Mortgage Loan s principal balance was calculated was different from such Mortgage Loan s Issue Date Principal Balance as specified in the Mortgage Loan Schedule, Fannie Mae may make such adjustments as shall be necessary to bring such actual balance and specified principal balance into agreement. Section 2.04. Distributions from Certificate-LT Account; Fannie Mae Guaranty of Lower Tier Distribution Amounts. On or before each Distribution Date, Fannie Mae shall calculate the Lower Tier Distribution Amount for the current calendar month. On each Distribution Date, Fannie Mae shall withdraw funds from the Certificate-LT Account and shall make the distributions to the Holder of the related Lower Tier Regular Interests in the respective amounts and in the applicable manner determined pursuant to Section 2.02. In the event that the amount on deposit in the Certificate-LT Account on any Distribution Date shall be less than the applicable portion of the Lower Tier Distribution Amount distributable thereon, Fannie Mae shall provide from its own funds the amount of any such insufficiency to remedy such shortfall. Section 2.05. The Trust Fund. Fannie Mae, acting in its capacity as Trustee for the Lower Tier REMIC, does hereby transfer, assign, set over and otherwise convey to Fannie Mae, acting in its capacity as Trustee of the Trust Fund established hereby, all of Fannie Mae s right, 11
title and interest in and to the Lower Tier Regular Interests, including all payments of principal and interest thereon received after the month of the Issue Date. Section 2.06. REMIC Declarations; Other REMIC Matters. Fannie Mae hereby declares its intent that each REMIC Trust formed hereunder shall constitute, and the affairs of each REMIC Trust shall be conducted so as to qualify as, a REMIC pursuant to Section 860D of Subchapter M of Chapter 1 of the Code. The RL Class Certificate is hereby designated as the sole residual interest in the REMIC constituted by the Lower Tier REMIC within the meaning of Section 860G(a)(2) of the Code, and the Lower Tier Regular Interests are hereby designated as regular interests in such REMIC within the meaning of Section 860G(a)(1) of the Code. The R Class Certificate is hereby designated as the sole residual interest in the REMIC constituted by the Trust Fund within the meaning of Section 860G(a)(2) of the Code, and each remaining Class of Trust Fund Certificates is hereby designated as the regular interests in such REMIC within the meaning of Section 860G(a)(1) of the Code. The date designated as the startup day of each REMIC Trust within the meaning of Section 860G(a)(9) of the Code shall be the Settlement Date. In furtherance of the intentions expressed in the foregoing paragraph, Fannie Mae covenants and agrees that it shall: (a) prepare, sign and file, or arrange to be prepared, signed and filed, a federal income tax return using a calendar year as the taxable year for each REMIC Trust when and as required by the Code, on which a REMIC election shall be made with respect to each REMIC Trust, (b) conduct the affairs of each REMIC Trust so as to maintain the status thereof as a REMIC under the Code, (c) not knowingly or intentionally take any action or omit to take any action that would cause the termination of the REMIC status of each REMIC Trust, and (d) hold harmless and indemnify the Holder of any Residual Certificate against any liability on account of any federal income tax (including interest and penalties) imposed on the related REMIC Trust, to the extent that any such tax shall be paid or payable by it; provided, however, that in no event shall the preceding provide indemnification to any Holder of any Residual Certificate for any tax penalty or interest imposed on such Holder as a result of the Holder s acquisition, ownership or disposition of the Residual Certificate. Fannie Mae, as Trustee of each REMIC Trust, will prepare, sign and file each annual federal income tax return for the related Trust and such information returns as are required by the Regulations. In addition, Fannie Mae will act as the tax matters person for each REMIC Trust in a fiduciary capacity, in the case of the Trust Fund, for the Holder of the R Class Certificate and, in the case of the Lower Tier REMIC, for the Holder of the RL Class Certificate. In addition, Fannie Mae will provide to each Holder of a Certificate any information or reports regarding the Certificates that may be required under the Code. In addition, Fannie Mae will provide to the Internal Revenue Service and to persons described in Section 860E(e)(3) and (6) of the Code the information described in Section 1.860D-l(b)(5)(ii) of the Regulations, or any successor regulation thereto. Such information will be provided in the manner described in Section 1.860E-2(a)(5) of the Regulations, or any successor regulation thereto. Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Regulations, the latest possible maturity date for each Class of the Certificates is the Final Distribution Date. 12
ARTICLE III THE TRUST FUND CERTIFICATES Section 3.01. Classes of Trust Fund Certificates. The Trust Fund Certificates authorized by this Trust Agreement shall be divided into the Classes of Certificates having the terms and provisions hereinafter set forth. The Class designations and original Class Balances shall be as follows: Original Class Class Balance A1A... $ 40,000,000 A1B... 124,689,580 A2... 105,949,419 A3... 80,887,809 A4... 160,354,352 PO... 2,516,687 IO... 511,881,160(1) R... 0 RL... 0 (1) Notional balances. This Class is an Interest Only Class. Section 3.02. Distributions. The aggregate amount of principal of and interest distributable on the Trust Fund Certificates on any Distribution Date shall be equal to the Certificate Distribution Amount on such Distribution Date with the principal component of such amount being equal to the Principal Distribution Amount. Distributions of the Principal Distribution Amount shall be made in the order and in the amounts as among Classes and Components, as applicable, as provided in the Prospectus. All distributions of principal for any such Distribution Date which are made with respect to a particular Class of Trust Fund Certificates shall be made pro rata among all Certificates of such Class in proportion to their respective Certificate Balances, with no preference or priority of any kind. All distributions made with respect to any Certificate on any Distribution Date shall be applied first to the interest distributable thereon on such Distribution Date and then to the principal thereof. All computations of interest accrued on the Certificates of any Class shall be made as if each year consisted of 12 months of 30 days each. Distributions on the Trust Fund Certificates on any Distribution Date shall be made to Holders of record thereof on the previous Record Date. Interest on each interest-bearing Class of Trust Fund Certificates for the related Interest Accrual Period at the applicable Interest Rate shall be distributable on each Distribution Date. The total amount of interest distributed or added to the Certificate Balance in respect of any Trust Fund Certificate on any Distribution Date shall be equal to one month s interest at the applicable Interest Rate on the Certificate Balance thereof immediately prior to such Distribution Date. 13
On each Distribution Date, distributions in reduction of the Certificate Balances of the Trust Fund Certificates of any Class (other than the Interest Only Class) shall be made in an amount equal to the Principal Distribution Amount and shall be distributed in the amounts and in the priorities specified in the Prospectus. Fannie Mae will initially act as Paying Agent for the purpose of making distributions in the Certificates as provided herein. Section 3.03. Issuance of Certificates. Each Class of Trust Fund Certificates (other than the R and RL Classes) shall be represented by a global certificate substantially in the form of Exhibit B-3 hereto, and shall be registered at all times in the name of the nominee of the Depository and maintained, transferred, and exchanged on the book-entry records of the Depository in minimum denominations of $1,000 and integral multiples of $1 in excess thereof through its book-entry facilities. No Person acquiring a beneficial ownership interest in any Class of Trust Fund Certificates (other than the R and RL Class) shall be entitled to receive a physical certificate representing such ownership interest. Each distribution of principal and interest on any Class of Trust Fund Certificates shall be distributed by the Paying Agent to the Depository in immediately available funds. The final distribution in respect of any Class of Trust Fund Certificates shall only be made upon presentation and surrender thereof at the office of the Paying Agent specified to the Depository. The Depository shall be responsible for crediting the amount of such distributions to the accounts of the applicable Depository participants entitled thereof, in accordance with the Depository s normal procedures. The execution and authentication of the certificates evidencing Classes of Trust Fund Certificates shall be governed by the provisions of Section 5.01 hereof to the same extent as the Residual Certificates specifically covered thereby. The R Class Certificate and the RL Class Certificate shall be issued in certificated, fully registered form in substantially the form of Exhibit B-1 or Exhibit B-2, respectively. The Residual Certificates only may be transferred subject to the provisions of Article V hereof. Section 3.04. Distributions on Trust Fund Certificates; Fannie Mae Guaranty. On each Distribution Date, Fannie Mae shall withdraw from the Certificate Account and shall make the distributions to the Holders of each Class of Trust Fund Certificates in the respective amounts and in the applicable manner determined pursuant to Section 3.02. In the event that the amount on deposit in the Certificate Account shall be less than the Certificate Distribution Amount for such Distribution Date, then Fannie Mae shall provide from its own funds the amount of any insufficiency. In addition, in the event that on any Distribution Date that is a Final Distribution Date for a Class of Trust Fund Certificates (other than an Interest Only Class), the applicable portion of the Certificate Account will not be sufficient to reduce the Class Balance of such Class to zero on such Final Distribution Date, then Fannie Mae shall apply its own funds to remedy the same. Section 3.05. Information to Certificateholders. As soon as practicable following the eleventh calendar day of each month, Fannie Mae will make available the Class Factor (carried to eight decimal places) for each Class of Certificates after giving effect to the distribution of the Principal Distribution Amount on the following Distribution Date. Fannie Mae will also furnish 14
to each Person who was a Certificateholder at any time during a calendar year such statements and information as shall be required to be furnished by the Code. 15
ARTICLE IV SERVICING OF MORTGAGE LOANS, ACCOUNTS; DISTRIBUTIONS Section 4.01. General. Fannie Mae shall service the Mortgage Loans and shall have full power and authority to do or cause to be done any and all things in connection therewith as it may deem necessary or appropriate in its sole discretion, in its own name and right, and without disclosure of the existence or terms of this Trust Agreement. Fannie Mae in its discretion shall foreclose upon or otherwise comparably convert the ownership of the Mortgaged Property securing any Mortgage Loan as to which a default occurs. Subject to Section 4.02 and to the extent consistent with then-current policies of Fannie Mae respecting comparable mortgage loans held in its own portfolio, Fannie Mae in its discretion may enforce or waive enforcement of any of the terms of any Mortgage Loan or enter into an agreement for the modification of any of the terms of any Mortgage Loan (other than a reduction in the Mortgage Interest Rate or an extension of the final maturity other than those extensions contemplated by the Sale and Servicing Agreement), or take any action or refrain from taking any action in servicing any Mortgage Loan; provided, however, that no such action or refraining from taking action shall be inconsistent with any related practice or policy respecting similar mortgage loans held by Fannie Mae in is own portfolio. In such connection, Fannie Mae may waive any prepayment charge, assumption fee or late payment charge. Fannie Mae in its discretion may conduct such servicing through the facilities of agents or independent contractors but shall not thereby be released from any of its duties or responsibilities hereunder. Any servicing contract, including the servicing provisions of the Sale and Servicing Agreement, and any other transactions or services relating to the Mortgage Loans involving an entity performing servicing functions on behalf of Fannie Mae shall be deemed to be between such entity and Fannie Mae 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 any such entity. Section 4.02. Transfers of Mortgaged Property. In connection with the transfer, or prospective transfer, of title to a Mortgaged Property, Fannie Mae shall accelerate the maturity of the related Mortgage Loan where such Mortgage Loan contains a due-on-sale clause permitting acceleration under such a circumstance; provided, however, that Fannie Mae shall not be required to accelerate the maturity of the Mortgage Loan pursuant to the due-on-sale clause if Fannie Mae is restricted, or reasonably believes that it is restricted, by law from accelerating such Mortgage Loan, for any reason whatever. In the event that, for any reason, Fannie Mae cannot accelerate the maturity of a Mortgage Loan upon the transfer, or prospective transfer, of title to the underlying Mortgaged Property, Fannie Mae may enter into a transaction by which the obligor is released from liability on the related Mortgage Loan and the transferee assumes such liability; provided, however, that no such transaction shall (i) be entered into which would not have been entered into had the Mortgage Loan been held in Fannie Mae s own portfolio or (ii) provide for reduction of the Mortgage Interest Rate. 16
Section 4.03. Accounting Records. Fannie Mae shall establish and maintain, as to each Trust created hereby, including the Trust Fund and the Lower Tier REMIC, accounting records in which proceeds of the Mortgage Loans and distributions to Certificateholders shall be recorded and in which a record of fully prepaid Mortgage Loans and Liquidated Mortgage Loans shall be kept. At any particular time the aggregate of the amount of proceeds of the Mortgage Loans entered into the accounting records (as reduced by any distributions made in respect of and from such proceeds) shall be considered to be held by Fannie Mae for Certificateholders, it being understood, however, that Fannie Mae shall have no liability to Certificateholders for the payment of interest on any such amounts so held by it for their account and that, so long as an Event of Default shall not have occurred and be continuing, Fannie Mae s obligation to remit any such amount to Certificateholders shall be through monthly distributions in amounts computed in accordance with this Trust Agreement. Section 4.04. Servicing Compensation: Payment of Certain Expenses by Fannie Mae. As compensation for its activities and obligations hereunder, Fannie Mae shall be entitled to the amounts provided for in the Sale and Servicing Agreement. Fannie Mae shall pay all expenses incurred by it hereunder in connection with its servicing activities and shall not be entitled to reimbursement therefor out of proceeds of the Mortgage Loans. Additional servicing compensation in the form of prepayment charges, assumption fees, late payment charges or otherwise shall be retained by Fannie Mae. Section 4.05. Certificate-LT Account; Distributions. On or before the issuance of the Lower Tier Interests, Fannie Mae shall either (i) open with an Eligible Depository one or more trust accounts in the name of the Trustee of the Lower Tier REMIC that shall collectively be the Certificate-LT Account, (ii) in lieu of maintaining any such account or accounts, maintain the Certificate-LT Account by means of appropriate entries on its books and records designating all amounts credited thereto in respect of the Mortgage Loans and all investments of any such amounts as being held by it in its capacity as Trustee for the benefit of the Holders of the Lower Tier Interests or (iii) maintain the Certificate-LT Account in the form of any combination of accounts or book entries described in clauses (i) and (ii) above. Any manner or manners in which the Certificate-LT Account is maintained may at any time be changed (but must comply with clauses (i), (ii) or (iii)) without notice to, or the approval of, Holders of the Lower Tier Interests so long as funds held in the Lower Tier REMIC by, or for the account of, the Trustee shall at all times be identified. To the extent that the Certificate-LT Account is maintained by the Trustee in the manner provided for in clause (ii) above, all references herein to deposits and withdrawals from the Certificate-LT Account shall be deemed to refer to credits and debits to the related books of the Trustee. Fannie Mae shall deposit in the Certificate-LT Account all Mortgage Loan proceeds received by it as Trustee hereunder and under the Sale and Servicing Agreement or any other servicing contract or arrangement. All proceeds deposited from time to time in the Certificate- LT Account and all investments made with such moneys, including all income or other gain from such investments, shall be held by the Trustee in the Certificate-LT Account as part of the Lower 17
Tier REMIC as herein provided, subject to withdrawal by Fannie Mae for the purposes set forth in Section 4.06. Section 4.06. Certificate Account; Distributions. On or before the issuance of the Trust Fund Certificates, Fannie Mae shall either (i) open with an Eligible Depository one or more trust accounts in the name of the Trustee of the Trust Fund that shall collectively be the Certificate Account, (ii) in lieu of maintaining any such account or accounts, maintain the Certificate Account by means of appropriate entries on its books and records designating all amounts credited thereto in respect of the Lower Tier Regular Interests and all investments of any such amounts as being held by it in its capacity as Trustee for the benefit of the Holders of the Trust Fund Certificates or (iii) maintain the Certificate Account in the form of any combination of accounts or book entries described in clauses (i) and (ii) above. Any manner or manners in which the Certificate Account is maintained may at any time be changed without notice to, or the approval of, Holders of the Trust Fund Certificates so long as funds held in the Trust Fund by, or for the account of, the Trustee shall at all times be identified. To the extent that the Certificate Account is maintained by the Trustee in the manner provided for in clause (ii) above, all references herein to deposits and withdrawals from the Certificate Account shall be deemed to refer to credits and debits to the related books of the Trustee. Fannie Mae shall deposit in the Certificate Account all distributions on the Lower Tier Regular Interests received by it as Trustee of the Trust Fund. All proceeds deposited from time to time in the Certificate Account and all investments made with such moneys, including all income or other gains from such investments, shall be held by the Trustee in the Certificate Account as part of the Trust Fund as herein provided, subject to withdrawal by Fannie Mae for the purposes set forth in Section 3.02. Section 4.07. Investments. All or a portion of amounts in the Certificate-LT Account or the Certificate Account maintained with an Eligible Depository pursuant to clause (i) in Section 4.05 or Section 4.06, as applicable, shall be invested and reinvested at the discretion and direction of Fannie Mae in one or more Eligible Investments bearing interest or sold at a discount. Any investments in obligations of Fannie Mae shall be made on a basis substantially comparable to that available in an arm s length transaction. No investment shall mature later than the Business Day immediately preceding the Distribution Date upon which the related amounts are required to be applied to distributions pursuant hereto, except that any investment in the federal funds market or on which the Eligible Depository, in its commercial capacity, or Fannie Mae is the obligor may mature on the related Distribution Date. No Eligible Investment may be sold while in the Certificate-LT or the Certificate Account except to the extent that Fannie Mae believes that a sale of an Eligible Investment is desirable because of the possibility of a default by the obligor thereon or because such sale will not otherwise give rise to a tax under Section 860F(a)(5) of the Code. All amounts held by the Trustee pursuant to clause (ii) of Section 4.05 or Section 4.06, as applicable, may be commingled with other funds at any time held by Fannie Mae and applied, subject to its obligations herein contained, in its normal business operations or otherwise. Under no circumstance shall Fannie Mae be accountable to the Trust for interest in respect of any amounts so commingled and applied. 18